Andrew Leonard v. Stemtech International Inc

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
Nos. 15-3198 & 15-3247
______________
ANDREW PAUL LEONARD,
d/b/a APL Microscopic
Appellant in No. 15-3247
v.
STEMTECH INTERNATIONAL INC;
STEMTECH HEALTHSCIENCES, INC.;
JOHN DOES 1-100, Inclusive,
Stemtech International Inc and
Stemtech HealthSciences, Inc,
Appellants in No. 15-3198
______________
ON APPEAL FROM THE UNITED STATES DISTRICT
COURT
FOR THE DISTRICT OF DELAWARE
(D.C. Nos. 1-08-cv-00067, 1-12-cv-00086)
District Judge: Honorable Leonard P. Stark
______________
Argued July 12, 2016
______________
Before: FUENTES, SHWARTZ, and RESTREPO, Circuit
Judges.
(Filed: August 24, 2016)
Kathleen M. Kushi Carter, Esq [ARGUED]
Christine R. Arnold, Esq.
Hollins Law
2601 Main Street
Suite 1300
Irvine, CA 92614
Thomas P. Leff, Esq.
Casarino Christman Shalk Ransom & Doss
405 North King Street
Suite 300, P.O. Box 1276
Wilmington, DE 19899
Counsel for Appellants/Cross-Appellees
Jan I. Berlage, Esq. [ARGUED]
Gohn Hankey Stichel & Berlage
201 North Charles Street
Suite 2101
Baltimore, MD 21201
James S. Green, Sr., Esq.
Jared Green, Esq.
Seitz Van Ogtrop & Green
222 Delaware Avenue
Suite 1500, P.O. Box 68
Wilmington, DE 19899
Counsel for Appellee/Cross-Appellant
______________
2
OPINION OF THE COURT
______________
SHWARTZ, Circuit Judge.
Andrew Leonard, a stem cell photographer, and
Stemtech International, Inc., a company that sells nutritional
supplements through independent distributors, cross appeal
various rulings in the copyright infringement lawsuit Leonard
brought against Stemtech in the District of Delaware. For the
reasons discussed herein, we will affirm the District Court’s
pretrial, trial, and post-trial rulings, except the order denying
prejudgment interest to Leonard, which we will vacate and
remand.
I
A. Andrew Leonard’s Images
Leonard takes photographs of stem cells using electron
microscopes. Only a few photographers engage in this highly
technical type of photography. Leonard obtains cell samples
from doctors, scientists, and researchers and pays a scientific
research institution to use an electron microscope to
photograph the cells. The images first appear in black and
white, and Leonard uses his “artistic judgment” to enhance
the photos in color. J.A. 822-23.
Leonard created the images at issue in this case in the
1990s. Below are the two photographs at issue in this case.1
1
Leonard created these images in 1996 but did not
register them with the U.S. Copyright Office until 2007, when
he planned to bring this lawsuit.
3
The image on the left will be referred to as Image 3 and the
right as Image 4.
Leonard markets his photographs through his business,
APL Microscopic, and, during the relevant time period, used
a stock photography agency known as Photo Researchers,
Inc., to license his images.2 He only allows limited licenses
of his images because, in his view, unlimited usage licenses
decrease the value of his work.
The licensing fee Leonard charges varies depending on
whether his images are used for commercial, editorial, or
educational purposes. Licensing fees are also impacted by
the size, color, and the medium in which the images will
appear.
During the 1990s and through the period at issue in
this case, stem cell images were rare. At that time, Leonard’s
images were unique and sought after because there were very
2
Photo Researchers, Inc., is now known as Science
Source.
4
few photographers who had the technical skill necessary to
produce such work. Even Stemtech’s Chief Scientific
Officer, Christian Drapeau, testified that Leonard’s images
were “extremely valuable.” J.A. 1544.
In licensing his stem cell photographs, Leonard has
received a range of fees, including a $4,000 fee for a non-
exclusive license to use his image at trade shows for one year,
$6,500 for a one-time, non-exclusive license to use one of his
images on a university website for four years, and $1,325 for
a one-time, non-exclusive license to use his image in a
brochure with a print run of 5,000. He also received $1,500
from Time magazine, which featured one of his images of a
human bone marrow stem cell on its August 7, 2006 cover.3
Between 2007 and 2012, Photo Researchers licensed
Leonard’s images for fees ranging from less than $100 to
several thousand dollars.
B. Stemtech and its Distributors
Stemtech “formulates” and sells nutritional supplement
products through thousands of distributors, J.A. 1387, who
form the backbone of the company. Each distributor signs an
agreement and is subject to Stemtech’s policies and
procedures manual. According to the manual, distributors are
required to use only Stemtech marketing materials and its
self-replicated websites. Specifically, the manual provides:
3
Image 4 appeared on the cover of Time, albeit in a
different pink and green color scheme. Because a feature on
the cover of Time meant worldwide exposure of his work,
Leonard charged a reduced fee for this editorial use.
5
To promote both the products and the
tremendous opportunity STEMTech offers,
distributors must use the Marketing Materials
and support materials produced by STEMTech.
. . . Because the Internet recognizes no
geographic borders (Domestic or Foreign),
information on the Internet may be legal in one
State or Country and illegal in another.
Therefore, Distributors desiring to utilize an
Internet web page to promote his/her
distributorship must do so through the
Company’s official website, using official
STEMTech replicated templates.
J.A. 2173-74 (emphasis and capitalization in original).
Stemtech owns the domain and sub-domains of at least some
of its distributors’ websites, and Stemtech’s vendor operates
the server that hosts the Stemtech-supplied sites. Distributors
who purchase a website from Stemtech may customize the
site only to provide the distributor’s name, phone number,
email address, and a biography.
C. Leonard and Stemtech’s Initial Discussions
In May 2006, Stemtech contacted Leonard about using
Image 4 for the “company[’s] internal magazine,” J.A. 869-
70, and for use on its website. After discussing usage and
color terms, Leonard provided Stemtech with a quote of $950
for a “one-year usage” of Image 4 in two places in Stemtech’s
HealthSpan magazine and a separate quote of $300 for a
“one-year usage” of the image on the HealthSpan website.
J.A. 871; 2120. Stemtech declined to license the image for
website use because “the price was too high,” J.A. 872, but
chose to use the image twice in its magazine.
6
Leonard sent Stemtech an invoice for $950 for the two
magazine placements, but was only paid $500. After multiple
unsuccessful attempts to collect the $450 balance, Leonard
abandoned his collection effort. Not only did Stemtech fail to
pay Leonard in full, but it used his images without a license in
its other promotional materials.
The images appeared on Stemtech websites, its
distributors’ websites, marketing DVDs, and other
promotional and recruitment materials. Several Stemtech
officials and employees explained that using these images
was important to Stemtech’s business. Chief Scientific
Officer Drapeau explained: “If you talk about stem cells, you
need [ ] support for the discussion, so you . . . show a cell
showing what it’s about . . . . It’s a marketing thing. I
understand [Leonard’s images’] value totally. I mean, it’s a
good representation.” J.A. 1539, 1544. George Antarr,
Stemtech’s Director of North American Sales, produced the
DVD in which one of Leonard’s images appeared, and
explained the importance of a visual depiction of a stem cell
in the video: “[W]e talked about stem cells in the product
movie, so [ ] it would be good to show that, what one looks
like . . . [b]ecause [a] visual [is] part of every sentence. A
picture tells a thousand words.” J.A. 1510. Thus, as Antarr
noted, using a photograph was important to Stemtech’s
marketing efforts.
D. Stemtech’s Unauthorized Use
To make sure his images were not used for
unauthorized purposes, Leonard “periodically” conducted
internet searches for images of stem cells. J.A. 879-80. In
October 2007, Leonard discovered his images on numerous
7
Stemtech and Stemtech-affiliated websites. He took
screenshots of and archived the webpages on which his
images appeared and retained copies of emails he sent to the
contacts on various sites.
For example, Leonard found his images on
“yourstems.com,” a website selling a Stemtech product called
Stem Enhance and in a Stemtech e-book featured on the
website. J.A. 881, 889. He contacted the site operator,
informed him of the infringing uses, requested an accounting
of how long the operator used the images, and sought
payment for their use. The website operator informed
Leonard that he and other distributors were using materials
received from Stemtech. Thereafter, Leonard contacted
Stemtech’s Chief Compliance Officer, Donna Serritella,
requesting that Stemtech stop using his images. Serritella
told Leonard that she thought that one of the images “was on
the cover of a major publication, and that made it public for
usage.” J.A. 898.
Despite being on notice of Leonard’s claim that
Stemtech and its distributors were using his images without
permission, Stemtech did not notify its distributors of his
assertion, which it could have done via company-wide email,
its weekly newsletter, or monthly communications. In fact,
Leonard continued to discover and document unauthorized
uses of his photographs on Stemtech-affiliated websites and
in its materials. For example, in May 2008, Leonard’s friend
ordered a Stemtech sales kit from a distributor. The sales kit,
intended for marketing the Stemtech product and training
distributors, included DVDs with covers featuring one of
Leonard’s images, and videos of “The Stemtech Story” and
“Stem Cells and Stem Enhance with Christian Drapeau,”
which also contained one of the images. J.A. 905-10, 161.
8
Leonard continued to take screenshots of the websites and
infringing materials, connecting them to Stemtech via website
addresses, Stemtech-branded materials such as videos and
PowerPoint presentations, distributor ID numbers, and even
references and links encouraging website visitors to join the
Stemtech distribution team. Additionally, Leonard
discovered his images on Stemtech’s website system,
stemtechbiz.com, which involved “websites that Stemtech
owned and operated,” as well as websites of individual
distributors. J.A. 945-46.
E. The Civil Suit
Leonard demanded that Stemtech and several of its
distributors pay him for the unauthorized use of his images.
When Stemtech refused, Leonard filed the instant action,
alleging numerous claims of copyright infringement.
Following discovery and motion practice, a jury trial
commenced on Leonard’s claims against Stemtech for direct,
vicarious, and contributory infringement.4 The jury heard
testimony from Leonard, a Photo Researchers employee, and
Stemtech officials and distributors.
In addition, the jury heard testimony from Leonard’s
damages expert, Jeffrey Sedlik. Sedlik estimated the fair
market value of a license to use the images. To this end, he
contacted two of the largest stock photo agencies and two
agencies that specialize in scientific images to ascertain the
4
Stemtech does not appeal the jury’s verdict finding it
liable for direct copyright infringement and Leonard does not
appeal the order granting summary judgment to Stemtech on
his claims for statutory damages and alleged infringement of
other images.
9
fair market value of microscopic photography images when
licensed for various forms of media comparable to those
Stemtech used in its marketing materials. From the quotes
provided by these agencies, he generated a benchmark
licensing fee of between $1,277.10 and $2,569.46. He then
applied the average of these fees to the 92 infringing uses
identified at trial, which yielded a fee of $215,767.66.
Sedlik then adjusted this figure upward to account for
the “scarcity or rarity” of Leonard’s images. J.A. 1315-17.
In other words, Sedlik attempted to capture “the market value
of stem cell photographs in general, and then the scarcity or
rarity of particular stem cell images, [which] is a factor that is
considered in licensing.”5 J.A. 1313. Sedlik recommended a
premium of three to five times the benchmark to reflect the
scarcity of the images.6 In addition, he adjusted the
benchmark figure for “exclusivity,” which accounts for
“overuse or broad use” of an image, which diminishes the
value of other uses, by adding a premium of 3.75 to 8.75
times the benchmark. J.A. 1317-19. After adding the
adjustments together, he opined that the appropriate damages
5
On the rarity point, Sedlik noted that “[s]tem cell
[photographs] [are] not Sasquatch; however, every
photographer, everybody in the industry that saw that 2006
cover of Time, that was kind of a turning point where people
realized that microscopy can be an art form,” J.A. 1313, and
“in 2006 and before, there were fewer images available.”
J.A. 1314.
6
Sedlik testified that the multipliers were not applied
as punishment for Stemtech’s unauthorized use of the images.
J.A. 1307 (noting “in actual damages, the damages that
[Sedlik] come[s] up with can’t be of a kind that punish the
defendant”).
10
would range from $1.4 million to nearly $3 million.
Stemtech neither cross-examined Sedlik about his use of
these premiums nor presented its own expert, and asserted
that Leonard’s past licensing history supported an award of
only $1,804.
The jury returned a $1.6 million verdict in Leonard’s
favor on his direct, vicarious, and contributory infringement
claims against Stemtech. The District Court denied
Stemtech’s motion for a new trial on contributory and
vicarious liability and damages.
In these cross appeals, we are asked to review whether
the District Court abused its discretion in denying Stemtech’s
motion for a new trial by finding that the jury’s contributory
and vicarious infringement findings were supported by
substantial evidence, and affirming the jury’s damages award,
which Stemtech contends is unconstitutionally and grossly
excessive. We are also asked to review the District Court’s
ruling that Leonard’s counsel’s conduct and certain
evidentiary rulings did not warrant a new trial. In addition,
we are asked to consider whether the District Court abused its
discretion in declining to award Leonard prejudgment
interest, erred in not permitting the jury to consider awarding
Leonard infringer’s profits under 17 U.S.C. § 504(b), and
correctly decided two fee awards.
II7
A. New Trial Standard
7
The District Court had jurisdiction pursuant to 28
U.S.C. §§ 1331, 1332, and 1338(a), and 17 U.S.C. § 101, et
seq. We have appellate jurisdiction under 28 U.S.C. § 1291.
11
We will first address Stemtech’s appeal of the order
denying it a new trial. While a court may grant a new trial
under Rule 59 “for any reason for which a new trial has
heretofore been granted in an action at law in federal court,”
Fed. R. Civ. P. 59(a)(1)(A), it should do so only when “the
great weight of the evidence cuts against the verdict and . . .
[ ] a miscarriage of justice would result if the verdict were to
stand,” Springer v. Henry, 435 F.3d 268, 274 (3d Cir. 2006)
(internal quotation marks omitted); see Williamson v. Consol.
Rail Corp., 926 F.2d 1344, 1352-53 (3d Cir. 1991) (new trial
should be granted only where the verdict “cries out to be
overturned” or “shocks [the] conscience”). A district court’s
power to grant a new trial is limited “to ensure that [it] does
not substitute its judgment of the facts and the credibility of
the witnesses for that of the jury.” Delli Santi v. CNA Ins.
Cos., 88 F.3d 192, 201 (3d Cir. 1996) (internal quotation
marks omitted). Our power is similarly limited and we
review the grant or denial of a motion for a new trial for
abuse of discretion. Olefins Trading, Inc. v. Han Yang Chem.
Corp., 9 F.3d 282, 289 (3d Cir. 1993).
To demonstrate that the District Court erred in
declining to grant it a new trial because the verdict was
against the weight of the evidence, Stemtech must establish
that (1) the jury reached an unreasonable result, and (2) the
District Court abused its broad discretion in not setting the
verdict aside. See ZF Meritor, LLC v. Eaton Corp., 696 F.3d
254, 268 (3d Cir. 2012) (noting that while we exercise
plenary review of “questions of law underlying a jury
verdict,” putting those questions aside, a “‘jury verdict will
not be overturned unless the record is critically deficient of
that quantum of evidence from which a jury could have
12
rationally reached its verdict.’” (quoting Swineford v. Snyder
Cty., 15 F.3d 1258, 1265 (3d Cir. 1994))).
B. Secondary Liability
Stemtech argues that a new trial is warranted because
the jury’s contributory and vicarious infringement findings
are not supported by substantial evidence. Contributory and
vicarious infringement are theories of secondary liability for
copyright infringement that “emerged from common law
principles and are well established in the law.”8 Metro-
Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913,
930 (2005). “Secondary liability for copyright infringement
does not exist in the absence of direct infringement by a third
party.” A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004,
1013 n.2 (9th Cir. 2001). Thus, to prove a claim of
contributory or vicarious infringement, a plaintiff must first
show direct infringement by a third party. To prove direct
infringement, a plaintiff must show that (1) it owns a valid
copyright; (2) another party copied elements of its work
without authorization; and (3) that party engaged in volitional
conduct. Kay Berry, Inc. v. Taylor Gifts, Inc., 421 F.3d 199,
203 (3d Cir. 2005); CoStar Grp., Inc. v. LoopNet, Inc., 373
8
While “the lines between direct infringement,
contributory infringement and vicarious liability are not
clearly drawn,” Metro-Goldwyn-Mayer Studios Inc. v.
Grokster, Ltd., 545 U.S. 913, 930 n.9 (2005), “in general,
contributory liability is based on the defendant’s failure to
stop its own actions which facilitate third-party infringement,
while vicarious liability is based on the defendant’s failure to
cause a third party to stop its directly infringing activities.”
Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1175
(9th Cir. 2007).
13
F.3d 544, 551 (4th Cir. 2004). Volitional conduct occurs
when a party engages in “the act constituting infringement.”
CoStar Group, 373 F.3d at 551 (distinguishing between
internet entities that serve as conduits for transmission of
copyrighted material and those who have an “interest in the
copy itself”).
Leonard proved direct infringement by Stemtech
distributors. He demonstrated that he owned the copyrights
to the infringed images, and that he did not authorize or
license the use of his images in Stemtech’s advertising,
marketing, and training materials. The materials containing
his images ranged from webpages and PDFs to videos and a
PowerPoint presentation promoting Stemtech products.9 This
evidence provided a sufficient basis for a jury to reasonably
conclude that the distributors directly infringed Leonard’s
copyrights.
Having determined that there was sufficient evidence
to establish the predicate for secondary liability, we now turn
to the claims against Stemtech for contributory and vicarious
infringement.
1. Contributory Infringement
“One infringes contributorily by intentionally inducing
or encouraging direct infringement.” Grokster, 545 U.S. at
930. To establish a claim of contributory infringement, a
plaintiff must show: (1) a third party directly infringed the
9
Stemtech’s argument that Leonard failed to prove
that Photo Researchers, his licensing agent at the time, did not
license the images to Stemtech and/or its distributors, is, as
the District Court noted, an improper attempt to shift the
burden of an unproven defense of authorization.
14
plaintiff’s copyright; (2) the defendant knew that the third
party was directly infringing; and (3) the defendant materially
contributed to or induced the infringement. See Gershwin
Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159,
1162 (2d Cir. 1971) (“[O]ne who, with knowledge of the
infringing activity, induces, causes or materially contributes
to the infringing conduct of another, may be held liable as a
‘contributory’ infringer.”); see also Perfect 10, 508 F.3d at
1171 (explaining that, “under Grokster, an actor may be
contributorily liable for intentionally encouraging direct
infringement if the actor knowingly takes steps that are
substantially certain to result in such direct infringement”).
The District Court appropriately denied Stemtech’s
motion for a new trial on Leonard’s contributory infringement
claim. As discussed above, there was sufficient evidence
from which a jury could conclude that third parties, namely
Stemtech’s distributors, directly infringed Leonard’s
copyrights. Furthermore, the evidence shows that Stemtech
knew of the distributors’ infringing activity. Stemtech itself
created the materials containing Leonard’s images, provided
the materials to its distributors, and required the distributors
to use the materials. Thus, Stemtech knew of its distributors’
infringing activities and plainly took “steps that [we]re
substantially certain to result in such direct infringement.”
Perfect 10, 508 F.3d at 1171-72.
We also note that the jury had a basis to conclude that
Stemtech knew that the images it provided to its distributors
were copyrighted. The jury heard evidence that Stemtech had
negotiated with Leonard for a limited-use license of one of
his images in the HealthSpan magazine. From this evidence,
the jury could infer that, despite knowing that Leonard’s
images were copyrighted, Stemtech required its distributors to
15
use the images Leonard owned to promote Stemtech’s
products and thereby materially contributed to or induced
their infringement.10
For these reasons, the District Court did not abuse its
discretion in concluding that the jury’s contributory
infringement verdict in favor of Leonard was not against the
weight of the evidence and hence properly denied Stemtech’s
motion for a new trial on Leonard’s contributory infringement
claim.
2. Vicarious Infringement
The District Court also correctly denied the motion for
a new trial on Leonard’s vicarious infringement claim.
Vicarious infringement occurs when one “profit[s] from
direct infringement while declining to exercise a right to stop
or limit it.” Grokster, 545 U.S. at 930. To establish vicarious
infringement, a plaintiff must prove that the defendant had (1)
the right and ability to supervise or control the infringing
activity; and (2) a direct financial interest in such activities.
Grokster, 545 U.S. at 930 & n.9; Am. Tel. and Tel. Co. v.
Winback and Conserve Program, 42 F.3d 1421, 1441 (3d Cir.
1994) (reciting similar standard).
The requirement that a defendant have the right to
supervise or control is not limited to traditional agency
10
Stemtech’s sole defense to its use was its
compliance officer’s belief that the image was in the public
domain because it appeared on the cover of Time. Even if her
ignorance of the law were excusable, the fact that Stemtech
entered into negotiations for a limited use of the images belies
such ignorance.
16
relationships such as master-servant or employer-employee.
Indeed, vicarious infringement liability has been imposed on
a person or entity “even in the absence of an employer-
employee relationship . . . if [the person or entity] has the
right and ability to supervise the infringing activity.”
Gershwin, 443 F.2d at 1162; Shapiro, Bernstein & Co. v. H.
L. Green Co., 316 F.2d 304, 308 (2d Cir. 1963); see Napster,
239 F.3d at 1022 (affirming extension, in copyright context,
of vicarious liability beyond employer-employee
relationship); see also Winback and Conserve Program, 42
F.3d at 1441 (citing Gershwin and Shapiro, Bernstein). Nor
does the control element require the existence of a formal
contract between the defendant and the infringer. Rather, this
element is satisfied where a “defendant’s ‘pervasive
participation in the formation and direction’ of the direct
infringer[’s]” activity supports a finding that “defendants
were in a position to police the direct infringers.” Fonovisa,
Inc. v. Cherry Auction, Inc., 76 F.3d 259, 262-63 (9th Cir.
1996) (defendant flea market operator had right to exclude
vendors and “controlled and patrolled” the premises) (quoting
Gershwin, 443 F.2d at 1163)); see Gershwin, 443 F.2d at
1163 (imposing vicarious liability even where defendant
lacked contractual ability to control direct infringer); Shapiro,
Bernstein, 316 F.2d at 306 (imposing vicarious liability where
parties had licensing agreement).
Cases from other circuits provide examples of conduct
sufficient to demonstrate control. In Shapiro, Bernstein, for
example, the Court of Appeals for the Second Circuit held a
chain store company liable for the sale of infringing bootleg
records by its licensee, who operated “the phonograph record
department in . . . its stores,” because the company “retained
the ultimate right of supervision over the conduct of the
record concession and its employees.” 316 F.2d at 306, 308.
17
The court compared the situation to the numerous cases
holding a “dance hall proprietor liable for the infringement of
copyright resulting from the performance of a musical
composition by a band or orchestra whose activities provide
the proprietor with a source of customers and enhanced
income[,] . . . whether the bandleader is considered, as a
technical matter, an employee or an independent contractor.”
Id. at 307 (collecting cases). In Napster, the Court of Appeals
for the Ninth Circuit observed that the defendant, a file
sharing program operator, “ha[d] the ability to locate
infringing material listed on its search indices, and the right to
terminate users’ access to the system.” 239 F.3d at 1024. At
the other end of the “spectrum” is the example of a landlord-
tenant case in which a “landlord leas[es] his property at a
fixed rental to a tenant who engages in copyright-infringing
conduct on the leased premises” and who generally does not
have an obligation to police infringing conduct. Shapiro,
Bernstein, 316 F.2d at 307-08.
Like the chain store, dance-hall proprietor, and file-
sharing program operator, Stemtech had the right and ability
to control the infringing activities of its distributors.
Stemtech created and provided marketing materials to its
distributors, and required their use. It also had the contractual
right to impose a range of disciplinary sanctions on
distributors who violated its policies or engaged in illegal
behavior, ranging from withholding compensation to
terminating a distributorship agreement. Additionally,
Stemtech required its distributors to use “official STEMTech
replicated templates” and websites that it controlled. J.A.
2139. To the extent infringements occurred on what
Stemtech asserts were unauthorized, independent websites,
Stemtech still had the ability to induce compliance by
distributors operating these websites by withholding
18
compensation and access to back office support.11 Stemtech
thus had the “practical ability to police the third-party
[distributors’] infringing conduct.” Perfect 10, 508 F.3d at
1174. The evidence of this contractual and financial
relationship between Stemtech and its distributors provided a
basis for the jury to conclude that Leonard satisfied the right
and ability to supervise or control element.
Besides demonstrating control, a plaintiff must also
show financial benefit to the defendant to prevail on a
vicarious infringement claim. Shapiro, Bernstein, 316 F.2d at
307 (courts should consider the interplay between the two
elements). “Financial benefit exists where the availability of
infringing material acts as a draw for customers.” Ellison v.
Robertson, 357 F.3d 1072, 1078, 1079 (9th Cir. 2004)
(internal quotation marks omitted). “There is no requirement
that the draw be substantial.” Id. (internal quotation marks
omitted).
The jury could reasonably have credited the testimony
from Stemtech officials indicating that images of stem cells
lend legitimacy to products that purportedly enhance stem
cell production and from this infer that the images could have
drawn customers to buy the product, which would financially
benefit Stemtech. Thus, there was sufficient evidence from
which the jury could find that the financial benefit element
was met. Because the verdict was not against the weight of
the evidence, the District Court did not abuse its discretion in
denying Stemtech’s motion for a new trial on Leonard’s
vicarious infringement claim.
11
Stemtech’s ability to control its distributors is further
reflected by the fact that when it asked a distributor to stop
using the images, the distributor complied.
19
C. Damages
1. The Jury Award
Stemtech argues that the jury’s $1.6 million actual
damages award was unconstitutionally and grossly excessive,
and therefore should be reduced or vacated and remanded for
a new damages trial. We will first discuss the methods for
calculating actual damages under the Copyright Act, then
review the District Court’s decision to permit Leonard’s
damages expert to testify, and finally examine whether the
award here was unconstitutionally or grossly excessive.
a. Actual Damages under § 504(b)
Section 504 of the Copyright Act authorizes recovery
of “the actual damages suffered by [the copyright owner] as a
result of the infringement.” 17 U.S.C. § 504(b). Although
the Act does not define “actual damages,” our sister circuits
have explained that an actual damages award “looks at the
facts from the point of view of the[] copyright owners; it
undertakes to compensate the owner for any harm he suffered
by reason of the infringer’s illegal act.” On Davis v. The
Gap, Inc., 246 F.3d 152, 159 (2d Cir. 2001). These damages
“are usually determined by the loss in the fair market value of
the copyright, measured by the profits lost due to the
infringement or by the value of the use of the copyrighted
work to the infringer.” McRoberts Software, Inc. v. Media
100, Inc., 329 F.3d 557, 566 (7th Cir. 2003); see Fitzgerald
Publ’g Co. v. Baylor Publ’g Co., 807 F.2d 1110, 1118 (2d
Cir. 1986) (“[T]he primary measure of recovery is the extent
to which the market value of the copyrighted work at the time
of the infringement has been injured or destroyed by the
20
infringement.”) (citing 3 Nimmer on Copyright § 14.02 at 14-
6); Dash v. Mayweather, 731 F.3d 303, 312 (4th Cir. 2013)
(quoting Fitzgerald, supra). Because the Act “should be
broadly construed to favor victims of infringement,” On
Davis, 246 F.3d at 164, “uncertainty will not preclude a
recovery of actual damages if the uncertainty is as to amount,
but not as to the fact that actual damages are attributable to
the infringement,” 4 Nimmer on Copyright § 14.02[A], at 12-
14; see, e.g., On Davis, 246 F.3d at 166 (explaining that the
jury’s calculation of actual damages may not be based on
“undue speculation” (internal quotation marks omitted));
Sygma Photo News, Inc. v. High Soc. Magazine, Inc., 778
F.2d 89, 95 (2d Cir. 1985) (“Confronted with imprecision in
the computation of expenses, the court should err on the side
of guaranteeing the plaintiff a full recovery.”). Some
uncertainty stems from the fact that the Copyright Act does
not specify how damages should be calculated. See
Mayweather, 731 F.3d at 312. Case law, however, describes
the permissible methods for determining damages.
One method involves calculating the fair market value
of the licensing fees “the owner was entitled to charge for
such use.” On Davis, 246 F.3d at 165 (explaining that “[i]f a
copier of protected work, instead of obtaining permission and
paying the fee, proceeds without permission and without
compensating the owner . . . the owner has suffered damages
to the extent of the infringer’s taking without paying what the
owner was legally entitled to exact a fee for”). Fair market
value is often described as “the reasonable licensing fee on
which a willing buyer and a willing seller would have agreed
for the use taken by the infringer.” Id. at 167; see Jarvis v.
K2 Inc., 486 F.3d 526, 534 (9th Cir. 2007) (applying
standard); Mackie v. Rieser, 296 F.3d 909, 917 (9th Cir.
2002) (noting that the “market value approach is an objective,
21
not a subjective, analysis”). Another method for calculating
damages focuses on the plaintiff’s own past licensing fees.
See, e.g., Jarvis, 486 F.3d at 534 (noting district court
calculated damages using plaintiff’s past license). Stemtech
asks us to use the past licensing fee method but cites no
authority requiring the use of this method as opposed to the
fair market value approach, and case law on this subject
supports using the fair market value. See On Davis, 246 F.3d
at 166 (“The question is not what the owner would have
charged, but rather what is the fair market value.”);
Mayweather, 731 F.3d at 312 (describing both calculation
methods and noting “general[ ] accept[ance]” of fair market
value approach). Because the jury was instructed about both
methods for determining actual damages, and had an
evidentiary basis for applying the fair market value through
Sedlik’s expert testimony, there was no error in allowing the
jury to consider evidence about damages based on the fair
market value approach.
b. Admission of Sedlik’s Expert Opinion
Stemtech challenges the denial of its Daubert motion
to exclude Sedlik’s testimony on various grounds, including,
as relevant here, the basis for his opinions. In denying the
motion, the District Court determined that Sedlik’s method
for calculating Leonard’s actual damages using fair market
value, as opposed to Leonard’s past licensing history, was
reliable, as there is no requirement that actual damages be
calculated based on a plaintiff’s own history of licensing fees.
It also concluded that Sedlik had a factual basis for his
calculation based upon the quotes he received for other
photographs. Finally, the District Court concluded that there
was a fit between the facts of the case and Sedlik’s damages
calculation, and that challenges to the fit and reliability of the
22
fair market value method could be pursued via cross-
examination.12
Stemtech argues that the District Court erred in
denying its Daubert motion, claiming that Leonard failed to
lay a foundation for Sedlik’s lump sum damages figure
because Sedlik’s testimony revealed “he relied on unverified
information from Leonard’s counsel and did not make an
independent determination of usages or infringements or
calculate separate fees for the 92 alleged infringements.”
Appellant’s Br. 57 (citing J.A. 1304-05, 1307-09, 1310-11,
1316, 1320). We review the admission or exclusion of expert
testimony for abuse of discretion. Pineda v. Ford Motor Co.,
520 F.3d 237, 243 (3d Cir. 2008). “It is an abuse of
discretion to admit expert testimony which is based on
assumptions lacking any factual foundation in the record.”
Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d 408, 414
(3d Cir. 2002).
Sedlik adopted the recognized fair market value
approach for calculating damages. To enable him to estimate
the fair market value, he collected quotes from Getty Images
and other photo licensing agencies and obtained a range of
licensing fees for various uses similar to those involved in the
case, averaged them, and then applied the average to the 92
alleged instances of infringement. Stemtech’s disagreement
with the calculation methodology and the underlying
assumptions Sedlik made about which images and uses were
similar to those in this case goes to the weight given to his
testimony, rather than admissibility. See Breidor v. Sears,
12
We note that Stemtech failed to file objections to the
Magistrate Judge’s memorandum order denying Stemtech’s
Daubert motion.
23
Roebuck & Co., 722 F.2d 1134, 1138-39 (3d Cir. 1983)
(“Where there is a logical basis for an expert’s opinion
testimony, the credibility and weight of that testimony is to be
determined by the jury, not the trial judge.”). Thus, the
District Court appropriately denied the Daubert motion, and
the jury was properly permitted to consider Sedlik’s
testimony about damages.
c. Excessiveness
Because we are deferential to a jury’s damages verdict,
that verdict may be disturbed only if it is so grossly excessive
that it shocks the judicial conscience, William A. Graham Co.
v. Haughey, 646 F.3d 138, 142 (3d Cir. 2011) (Graham II), or
if it is unconstitutionally excessive because it is predicated on
an impermissible basis, Cortez v. Trans Union, LLC, 617
F.3d 688, 715-18 (3d Cir. 2010). With respect to a claim that
a damage award is grossly excessive, our review is
“exceedingly narrow” and our “responsibility [is] to review a
damage award to determine if it is rationally based.” Id. at
718. This standard “exists to ensure that a district court does
not substitute its judgment of the facts and the credibility of
the witnesses for that of the jury,” and is “even more pressing
at the appellate level, where the judges have not had the
opportunity to observe the trial.” Graham II, 646 F.3d at 143
(internal quotation marks omitted). Thus, although we view
the facts “in the light most favorable to” the defendant,
Cortez, 617 F.3d at 719, “[a] jury’s damages award will not
be upset so long as there exists sufficient evidence on the
record, which if accepted by the jury, would sustain the
award,” Thabault v. Chait, 541 F.3d 512, 532 (3d Cir. 2008).
If a court determines that “the amount of the award is
inconsistent with the evidence in a case,” it “must offer a new
trial as a[] [conditional] alternative to a reduction in the award
24
in order to avoid depriving the plaintiff of his/her Seventh
Amendment right to a jury trial.” Cortez, 617 F.3d at 716.
Of course, the award must also be consistent with the
governing law. The Copyright Act sets forth the available
damages for a prevailing plaintiff. Stemtech correctly notes
that the Act does not authorize recovery of punitive damages.
See 17 U.S.C. § 504. Stemtech, however, wrongly asserts
that the $1.6 million award includes punitive damages. To
understand why, we will examine Sedlik’s expert damages
opinion.
As recounted above, Leonard’s expert, Sedlik,
surveyed four stock photo agencies to obtain image licensing
rates for uses similar to the infringing uses, and averaged the
quotes to arrive at a per-use licensing fee of between
$1,277.10 and $2,569.46. These fees factored in the image
size, form of media, size of audience, geographical scope,
placement, number of appearances, and length of the license.
Sedlik selected a figure within this range, multiplied it by the
92 infringements presented at trial, and arrived at a
“benchmark” fair market value calculation of $215,767.65.
In Sedlik’s opinion, this figure did not account for
scarcity—the rarity of stem cell images—or exclusivity—that
is, how Stemtech’s extensive use would be akin to an
exclusive license that would eliminate or reduce licensing
revenue from other sources and/or decrease the value of
Leonard’s work. Sedlik testified that a “premium” or
multiplier of three to five times the benchmark figure was
warranted to account for the scarcity, and a multiplier of 3.75
to 8.75 times the benchmark was appropriate to account for
the exclusivity of Leonard’s images during the infringement
period, which yielded a total estimated range of actual
25
damages of approximately $1.4 million to nearly $3 million.
In addition to explaining that the benchmark figure needed to
be enhanced because it did not capture the rarity or
exclusivity of Leonard’s images, Sedlik informed the jury that
“the damages that [he] come[s] up with can’t be of a kind that
punish[es] the defendant.” J.A. 1307.
Despite this comment, Stemtech claims the multipliers
Sedlik applied are actually an impermissible penalty “akin to
punitive damages, which are not recoverable under § 504(b)
of the Copyright Act.”13 Grant Heilman Photography, 115 F.
Supp. 3d at 527. In response, Leonard argues that these
multipliers are not punitive but rather comprise elements of
the fair market value of his images, and that the $215,767
13
In our view, there is a question as to whether
Stemtech waived its challenge to Leonard’s use of a
multiplier as part of his damages proof. Sedlik disclosed his
reliance on a multiplier for scarcity and mentioned exclusivity
as an additional relevant factor in his report, but Stemtech
never challenged either factor in its Daubert motion.
Moreover, it did not cross-examine Sedlik at trial on this topic
and raised the multiplier issue for the first time in its motion
for a new trial. Leonard, however, does not argue waiver, so
he arguably “waived” his right to oppose Stemtech’s
challenge to the jury award on this basis. See Freeman v.
Pittsburgh Glass Works, LLC, 709 F.3d 240, 250 (3d Cir.
2013) (“The doctrine of appellate waiver is not somehow
exempt from itself. This means that a party can waive a
waiver argument by not making the argument below or in its
briefs.” (internal citation omitted)). Because the District
Court had an opportunity to address the issue, and Leonard
has not asserted waiver, we will address Stemtech’s challenge
to Leonard’s use of a multiplier for scarcity and exclusivity.
26
benchmark was not the complete fair market value sum
because Sedlik had not yet accounted for scarcity and
exclusivity.
The few district courts to consider the use of punitive
multipliers have concluded that such use is improper under
the Copyright Act because “[t]he value of what was illegally
taken is not determined by multiplying it.” Stehrenberger v.
R.J. Reynolds Tobacco Holdings, Inc., 335 F. Supp. 2d 466,
469 (S.D.N.Y. 2004) (internal quotation marks omitted);
Grant Heilman Photography, 115 F. Supp. 3d at 526-27;
Faulkner v. Nat’l Geographic Soc’y, 576 F. Supp. 2d 609,
617 (S.D.N.Y. 2008) (rejecting use of punitive multiplier for
unauthorized use to calculate “actual damages” under §
504(b)); Straus v. DVC Worldwide, Inc., 484 F. Supp. 2d
620, 648-49 (S.D. Tex. 2007) (crediting testimony of
defendant’s expert Jeff Sedlik, who stated that “multipliers
are used only when the parties include them in licensing
agreements and are enforced as part of the contract,” but “are
not used to determine the fair market value of a license at the
time infringement occurs,” and noting that use of a multiplier
would be punitive in that case).14 These courts rejected the
use of a multiplier or “‘fee for unauthorized usage’” over and
above what “would otherwise represent a fair and reasonable
licensing fee for the infringed material” as a component of the
actual damages calculation. Stehrenberger, 335 F. Supp. 2d
at 467. We agree with the reasoning of these district courts
that, under the Copyright Act, an actual damages award may
not include such a punitive component. We also agree with
14
Cf. Bruce v. Weekly World News, Inc., 310 F.3d 25,
27 n.1 (1st Cir. 2002) (permitting multiplier for unauthorized
use in a § 504(b) case where the parties agreed on the use of a
multiplier).
27
Leonard that this case does not involve the use of a multiplier
to penalize unauthorized use. Rather, the record demonstrates
that the multiplier here was used to calculate fair market
value.
The jury had sufficient evidence to credit Sedlik’s
opinion and conclude that the sum calculated from the stock
photo agency rates did not represent a full calculation of the
fair market value of Leonard’s images because the rates did
not account for scarcity and exclusivity. Put differently,
Sedlik’s fair market value calculation in this case had two
components: the stock agency quotes and the adjustments to
reflect the uniqueness of the images and the impact of
Stemtech’s usage. The multipliers here reflected a premium
that, according to Sedlik, the market would find acceptable
given the scarcity and exclusivity of the images as compared
to the images for which he had secured rates for comparative
purposes. The unrebutted evidence here showed that the fair
market value calculation was complete only after these
additional factors were applied.
Since Stemtech presented no evidence or methodology
to cast doubt on the use of multipliers to account for factors
relevant to a final fair market value, neither the District Court
nor the jury had any basis to discount this aspect of Sedlik’s
testimony. Because there is no evidence that the scarcity and
exclusivity multipliers were punitive rather than valid factors
for calculating fair market value, we cannot say that the
verdict is based upon an improper consideration.15
15
Stemtech also argues that the jury award was
unconstitutionally excessive under the Due Process Clause.
Ordinarily, Due Process challenges are appropriately directed
at punitive damages awards, which are intended to punish
28
Nor is the verdict grossly excessive. As noted above,
courts are loath to substitute their judgment for that of the
jury. While the award here was quite high, and perhaps
surprising, we cannot say it lacked an evidentiary basis such
that it “shock[s] the judicial conscience.” Graham II, 646
F.3d at 143. The jury heard unrebutted expert testimony that
provided it with the basis for the fair market value assigned to
the images, which included both a benchmark for similar but
less unique images and a range for a premium to reflect the
rarity of Leonard’s image and its unusually widespread use in
Stemtech’s materials. Sedlik provided a multiplier of three to
five times the benchmark for scarcity and 3.75 to 8.75 times
for exclusivity, and opined that the fair market value for use
of the images would be determined by multiplying these
figures by the benchmark sum of $215,767.65. The jury
returned a verdict of $1.6 million, which represents a final
sum at the lower end of Sedlik’s proposed range.
The damages award was tethered to the record, which
the jury was entitled to credit, and the jury was presented with
no evidence that provided an alternative calculation. See
Thabault, 541 F.3d at 532-33 (reviewing testimony of
defendants, rather than at compensatory damages awards,
which are simply intended to redress a plaintiff’s loss. See
Cooper Indus. v. Leatherman Toll Grp., Inc., 532 U.S. 424,
432 (2001) (discussing distinction between punitive and
compensatory awards for Due Process purposes); United
States ex rel. Drakeford v. Tuomey, 792 F.3d 364, 387 (4th
Cir. 2015) (“[T]he Due Process Clause does not apply to
compensatory damage awards.”). Here, our conclusion that
the damages award did not include a punitive component is
fatal to Stemtech’s constitutional excessiveness claim.
29
damages expert, noting defendant’s attempts to discredit
expert at trial, and concluding that “it is clear that if the jury
accepted his calculation there was sufficient evidence to
sustain [the award] as detailed by his testimony”). In light of
our deferential standard of review, we conclude that the
District Court did not abuse its discretion in denying a new
trial on the basis of a grossly excessive jury verdict.
2. Infringer’s Profits
In addition to authorizing recovery of actual damages,
the Copyright Act allows a plaintiff to recover “any profits of
the infringer that are attributable to the infringement and are
not taken into account in computing the actual damages.” 17
U.S.C. § 504(b). These are “profits earned not by selling an
infringing product, but rather earned from the infringer’s
operations that were enhanced by the infringement.”16
William A. Graham Co. v. Haughey, 568 F.3d 425, 442 (3d
Cir. 2009) (Graham I). Under the Act, to “establish[] the
infringer’s profits, the copyright owner is required to present
proof only of the infringer’s gross revenue, and the infringer
is required to prove his or her deductible expenses and the
elements of profit attributable to factors other than the
copyrighted work.” 17 U.S.C. § 504(b). Though the Act
16
Direct profits may also constitute infringer’s profits
where, for example, a defendant sells an infringing product.
To the extent Leonard claims that the District Court failed to
consider his evidence of direct profits from Stemtech’s sale of
DVDs containing his images, this claim is waived as he
conceded in his opposition to Stemtech’s summary judgment
motion that he was not seeking such direct profits. Moreover,
Leonard presented no evidence of any profits Stemtech made
from DVD sales.
30
requires a copyright owner to present proof of the infringer’s
“gross revenue” to support its initial burden, courts interpret
the term to mean the gross revenue that is “reasonably related
to the infringement.” Graham I, 568 F.3d at 443 (quoting On
Davis, 246 F.3d at 160); see Polar Bear Prods., Inc. v. Timex
Corp., 384 F.3d 700, 711-12 (9th Cir. 2004) (noting it would
“make little practical or legal sense” to conclude a plaintiff
satisfies his burden simply by “offer[ing] an overall gross
revenue number . . . and sit[ting] back”); Taylor v. Meirick,
712 F.2d 1112, 1122 (7th Cir. 1983) (“If General Motors
were to steal your copyright and put it in a sales brochure,
you could not just put a copy of General Motors’ corporate
income tax return in the record and rest your case for an
award of infringer’s profits.”).
Under § 504(b), we use a “‘two-step framework for
recovery of indirect profits.” Graham I, 568 F.3d at 442.
First, the plaintiff must demonstrate a “causal nexus between
the infringement and the [infringer’s] gross revenue,” or put
differently, show that the infringement contributed to the
infringer’s profits. Id. (alteration in original). Second, “once
the ca[usal] nexus is shown, the infringer bears the burden of
apportioning the profits that were not the result of
infringement” and may adduce evidence of offsets permitted
by the statute. Id. (internal quotation marks and citation
omitted)
The District Court granted Stemtech’s motion for
summary judgment on Leonard’s request for infringer’s
profits, concluding that the evidence he presented was too
speculative for a jury to find that he was entitled to infringer’s
31
profits.17 To support his request for infringer’s profits,
Leonard submitted proof of Stemtech’s total gross revenues.
In addition, Leonard pointed to: (1) the regular use of his
images in Stemtech marketing and training materials; (2) the
requirement that Stemtech distributors use Stemtech’s
replicated websites and marketing materials; and (3) his
expert’s conclusion that “Stemtech’s many usages of
Leonard’s photographs conclusively demonstrates that
Stemtech exploited Leonard’s photograph[s] to promote its
brand, to promote understanding of its company and products,
to train and recruit distributors and to provide those
distributors with tools which were used to maximize
Stemtech’s profits.” J.A. 336 (internal quotation marks and
emphasis omitted).
None of this evidence shows how or why Leonard’s
images, as opposed to other aspects of Stemtech’s marketing
materials, influenced profits. As the District Court correctly
found, this evidence did not “link customer decisions to
purchase [Stemtech]’s product with [Stemtech]’s use of his
[i]mages on its website, or in its videos, HealthSpan
publication or other marketing materials, as opposed to any
other reason why a customer might purchase those products.”
J.A. 337. We agree with these observations and with the
conclusion that, while “it is conceivable that the presence of
the [i]mages in [Stemtech]’s materials added an air of
17
We review the District Court’s grant of summary
judgment de novo, Alcoa, Inc. v. United States, 509 F.3d 173,
175 (3d Cir. 2007), applying the same standard as the District
Court and viewing facts and making reasonable inferences in
the non-movant’s favor. Hugh v. Butler Cty. Family YMCA,
418 F.3d 265, 266-67 (3d Cir. 2005).
32
legitimacy to [Stemtech]’s product that might not have
otherwise existed, and that the [i]mages could possibly have
had some impact, whether consciously or subconsciously, on
consumer purchasing decisions . . . [m]ere conceivability . . .
is not enough. Instead, Plaintiff must identify evidence
showing that the infringing use was ‘reasonably related to the
infringement,’” and the evidence cited above amounted to
mere speculation regarding the causal connection.18 J.A. 334.
18
For examples discussing infringer’s profits, see
Mackie, 296 F.3d at 916 (insufficient evidence of causal
nexus between “the Symphony’s infringing use of [artwork
called] ‘The Tango’ and any Pops series revenues generated
through the inclusion of the collage in the direct-mail
literature,” in part due to the “virtually endless permutations
to account for an individual’s decision to subscribe to the
Pops series, reasons that have nothing to do with the artwork
in question”); cf. Graham I, 568 F.3d at 442 (sufficient
evidence of causal nexus in a case where the copyrighted
materials were sample insurance proposals, and where
plaintiff’s expert “identified client proposals issued by USI
that included infringing language and then calculated the
revenues obtained by USI from those clients [who had
received] infringing proposal[s]” and USI personnel testified
“that the written proposals . . . were an important part of the
sales process . . . that . . . convinced [some clients] to
purchase insurance through USI”); Polar Bear Prods., 384
F.3d at 700, 712 (sufficient evidence of causal nexus where
expert calculated revenue from trade shows at which Timex
used unauthorized “PaddleQuest” materials to promote its
Expedition line of watches to outdoor sports enthusiasts,
including a continuous-loop extreme-kayaking film produced
by plaintiff, where expert “concluded that approximately 10%
to 25% of trade show sales are the result of excitement
33
There was no evidence upon which a reasonable juror could
have calculated infringer’s profits. Because none of
Leonard’s evidence “create[d] a triable issue regarding
whether the infringement at least partially caused the profits
that the infringer generated as the result of the infringement,”
Mackie, 296 F.3d at 911, we will affirm the District Court’s
order granting summary judgment in Stemtech’s favor on
Leonard’s request for infringer’s profits.
3. Prejudgment Interest
Leonard argues that the District Court abused its
discretion in denying his motion for prejudgment interest. An
award of actual damages under the Copyright Act alone “does
not mitigate harm caused by delay in making reparations—a
harm the remedy of prejudgment interest is uniquely tailored
to address. Simply put, prejudgment interest is a different
remedy for a different harm.” Polar Bear Prods., 384 F.3d at
718 (cited with approval in Graham II, 646 F.3d at 144-45).
Prejudgment interest “mak[es] the claimant whole and
prevent[s] unjust enrichment.” Graham II, 646 F.3d at 145.
As we noted in Graham II, we “favor[ ] permitting
prejudgment interest awards” to make a plaintiff whole in
copyright cases, id. at 144 (emphasis omitted), because “as
between a copyright owner and an infringer, the former has
the stronger equitable claim to the time-value of income
created by the booth promotion, of which the . . . materials
were a substantial part”); Andreas v. Volkswagen of Am.,
Inc., 336 F.3d 789, 791-97 (8th Cir. 2003) (sufficient nexus
between Audi’s use of a copyrighted poem in a commercial
and profits from the ad campaign, where evidence showed
that the “infringement was the centerpiece of [the]
commercial”).
34
derived from his creation,” id. at 145; see Booker v. Taylor
Milk Co., 64 F.3d 860, 868 (3d Cir. 1995) (describing general
presumption in favor of prejudgment interest awards). For
this reason, our Court subscribes to “our usual rule,” Graham
II, 646 F.3d at 145, that “a monetary award does not fully
compensate for injury unless it includes an interest
component,” Kansas v. Colorado, 533 U.S. 1, 10 (2001).
Accordingly, “prejudgment interest is available in
copyright cases at the District Court’s discretion, exercised in
light of ‘considerations of fairness.’” Graham II, 646 F.3d at
145-46 (affirming District Court’s grant of nearly $5 million
in prejudgment interest) (quoting Pignataro v. Port Auth. of
N.Y. and N.J., 593 F.3d 265, 274 (3d Cir. 2010)). In Booker,
our Court ruled that it is an abuse of discretion for a district
court to deny an award for prejudgment interest based on the
conclusion that the actual damages award “alone wholly
compensated Plaintiff, and that, because Plaintiff’s conduct
contributed to an inflated [damages] claim, the equities
weighed against prejudgment interest.” 64 F.3d at 868-69
(emphasis in original) (awarding prejudgment interest on a
back pay award). A district court “may exercise its discretion
to depart from th[e] presumption [of awarding interest] only
when it provides a justification that reasonably supports the
departure.” Id. at 868. In other words, “[i]f prejudgment
interest is denied, the District Court must explain why the
usual equities in favor of such interest are not applicable.”
Pignataro, 593 F.3d at 274.
The District Court here denied prejudgment interest,
explaining that it viewed such an award in this case as
“inequitable and unfair” because the verdict “sufficiently
compensated” Leonard “for the misappropriated value of his
property” and “the award of interest would constitute a
35
windfall to Leonard.” J.A. 1737-38 (internal quotation marks
omitted). In this regard, the District Court observed that the
verdict represented a per-use licensing fee far greater than the
per-use fees Leonard previously received for use of the
infringed images. It also noted that awarding “sums on top of
the $1.6 million already awarded is not necessary to ensure
that . . . [Stemtech] is adequately deterred,” J.A. 1739, and
emphasized that there was no jury finding of willful conduct
on Stemtech’s part. As an additional ground for denying
prejudgment interest, the District Court cited the difficulty of
calculating the “appropriate amount” of interest due to
numerous infringements. J.A. 1739.
As in Booker, the District Court here was concerned
with the high jury award and denied Leonard’s motion for
prejudgment interest because it deemed the $1.6 million
actual damages award sufficient to compensate him.
However, prejudgment interest serves a different purpose and
Leonard was “entitled” to recompense “for the loss of the use
of the amount” of actual damages. Booker, 64 F.3d at 869;
see Graham II, 646 F.3d at 145 (emphasizing that
“recoup[ment] [of] the time-value of [a plaintiff’s] loss . . . is
not . . . confined to the provision of just compensation,” but
also prevents a “losing defendant” from “retain[ing] . . . a
windfall in the form of an interest-free loan”). Therefore,
denying prejudgment interest on the ground that the damages
award sufficiently compensated Leonard constitutes legal
error.
Moreover, while we are not unmindful of the
challenges related to calculating prejudgment interest in this
case, with the 92 separate infringements that occurred on
different dates, difficulty in calculating prejudgment interest
is generally not a basis to deny an interest award. See, e.g.,
36
Hutchison v. Amateur Elec. Supply, Inc., 42 F.3d 1037, 1047
(7th Cir. 1994) (holding that “uncertainty” in calculating
prejudgment interest does not “defeat the presumption in
favor of prejudgment interest” and “[i]t is not within the
district court’s discretion to deny the whole award of interest
because of . . . calculational ambiguities”); Williamson v.
Handy Button Mach. Co., 817 F.2d 1290, 1299 (7th Cir.
1987) (“No purpose would be served by allowing the
wrongdoer to keep the entire time value of the money, just
because the exact amount is subject to fair dispute. Once we
know that [damages are] at least some minimum, it is safe to
award interest on that amount.”). We note that a prevailing
party moving for an award of prejudgment interest must
provide the district court with sufficient information to
calculate the interest or inform the court of the evidence it
needs (such as information within the other party’s control) to
make its application. Where a prevailing party fails to
provide the district court with this information, such an award
may be denied.19
19
An award may also be denied if the prevailing party
engages in dilatory tactics during litigation or unnecessarily
protracts the proceedings. Cf. City of Milwaukee v. Cement
Div., Nat’l Gypsum Co., 515 U.S. 189, 196 (1995) (citing
“undue delay” as “the most obvious example” justifying the
denial of prejudgment interest (internal quotation marks
omitted)); Gen. Motors Corp. v. Devex Corp., 461 U.S. 648,
656-57 (explaining that in the patent infringement context, “it
may be appropriate to limit prejudgment interest, or perhaps
even deny it altogether, where the patent owner has been
responsible for undue delay in prosecuting the lawsuit”).
Consistent with Devex, we note that “[t]here may be other
circumstances in which it may be appropriate not to award
37
Here, the District Court stated that Leonard did not
adequately address Stemtech’s assertion that the interest
should be calculated based on “perhaps 92 different accrual
dates and interest rates.” J.A. 1739. However, Leonard in
fact offered to provide information on this topic if the Court
deemed his proposed approach to use a single infringement
date inadequate. Thus, Leonard was apparently ready to
provide the information, including the dates on which he
discovered each infringement. The District Court seems to
have overlooked this offer, and therefore its views about the
difficulty in calculation may have been misplaced.
Because the District Court denied prejudgment interest
based upon its view that Leonard was sufficiently
compensated, its order “rest[ed] upon . . . errant
conclusion[s] of law.” Pineda v. Ford Motor Co., 520 F.3d
237, 243 (3d Cir. 2008). Moreover, because it found that
calculating the interest was too difficult without fully
considering the material Leonard was prepared to provide, its
order rested on an erroneous finding of fact. We therefore
will vacate the order denying an award of prejudgment
interest and remand for the District Court to award
prejudgment interest in the amount it deems appropriate
under the governing law.20
prejudgment interest,” but “[w]e need not delineate those
circumstances in this case.” 461 U.S. at 657.
20
The District Court has discretion in selecting the
appropriate interest rate and date(s) of infringement from
which the interest begins to accrue. See Graham II, 646 F.3d
at 146-51 (holding that prejudgment interest “may be
awarded in appropriate cases from the initial accrual date” but
leaving open the possibility that other cases may warrant
38
D. Trial Issues
Stemtech also asserts that it is entitled to a new trial
based upon alleged improper conduct by Leonard’s counsel
and the erroneous admission of certain evidence. We will
address these contentions in turn.
1. Counsel’s Conduct
Stemtech complains that Leonard’s counsel made
comments during the trial that so prejudiced the jury that the
District Court should have granted a new trial. Counsel’s
conduct “constitutes reversible error” only where he or she
engaged in “argument injecting prejudicial extraneous
evidence,” Fineman v. Armstrong World Indus., Inc., 980
F.2d 171, 210 (3d Cir. 1992), such that the “improper
statements . . . so pervade[d] the trial as to render the verdict a
product of prejudice,” Draper v. Airco, Inc., 580 F.2d 91, 96
(3d Cir. 1978). “Because the trial judge was present and able
to judge the impact of counsel’s remarks, we defer to his
assessment of the prejudicial impact.” Fineman, 980 F.2d at
207; Draper, 580 F.2d at 94 (recognizing that the trial judge
has “considerable discretion in determining whether conduct
by counsel is so prejudicial as to require a new trial”). We
thus review the decision to grant or deny a motion for a new
trial based upon counsel’s conduct for abuse of discretion.
Fineman, 980 F.2d at 206.
alternate approaches); see also Kansas, 533 U.S. at 11
(concluding special master did not err in determining that
“considerations of fairness . . . supported the award of at least
some prejudgment interest” (emphasis added) (internal
quotation marks omitted)).
39
Stemtech first argues that Leonard’s counsel
“repeatedly referred to Stemtech as an international,
multinational or global corporation” to highlight the financial
disparity between Leonard and Stemtech. Appellant’s Br. 45
(emphasis omitted). Contrary to Stemtech’s assertions,
reference to Stemtech’s international status was not a
prominent “theme” throughout the trial, and thus even if
improper, these isolated references do not constitute
“argument injecting prejudicial extraneous evidence.”21
Fineman, 980 F.2d at 210.
Stemtech next argues that Leonard’s counsel used the
wrong damages standard in his closing statement, but it did
not object to these arguments during closing, and so the
argument is waived.22 See Dunn v. HOVIC, 1 F.3d 1371,
1377 (3d Cir. 1993) (failure to make timely objection to
statements of counsel during closing argument is a waiver to
challenging them on appeal).
21
Similarly, Stemtech’s claim that Leonard’s counsel
improperly insinuated that the company operated as a
pyramid scheme is not a basis for a new trial. Not only were
these references sporadic, but they also accurately describe
Stemtech’s top-down business structure. In any event, the
“pyramid” references do not make it “reasonably probable”
that the jury’s verdict was influenced by these statements,
Fineman, 980 F.2d at 207, and therefore do not warrant a new
trial.
22
To the extent Stemtech’s arguments on this point
merely repeat its attack on Sedlik’s expert testimony, such
arguments fail as we have determined that his testimony was
properly admitted.
40
Finally, Stemtech complains of “occasions that
[Leonard’s counsel] argued unsupported issues[, which] are
too numerous to discuss.” Appellant’s Br. 53. This broad
statement does not suffice to preserve a claim of error on
appeal. See Santomenno ex rel. John Hancock Trust v. John
Hancock Life Ins. Co. (U.S.A), 768 F.3d 284, 292 n.3 (3d
Cir. 2014) (discussing an issue in a single sentence may result
in waiver); Long Hao Li v. Att’y Gen., 633 F.3d 136, 140 n.3
(3d Cir. 2011) (“stray references” result in waiver); John
Wyeth & Brother Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070,
1076 n.6 (3d Cir. 1997) (raising an issue “in passing” without
“squarely argu[ing it]” results in waiver).23
To the extent Stemtech has provided any details
concerning such alleged misconduct, none provides a basis
for granting a new trial. Stemtech’s contention that
Leonard’s counsel improperly argued that Stemtech profited
from the infringements “despite the absence of any such
evidence,” Appellant’s Br. 54, is meritless because there was
sufficient evidence to permit counsel to argue that Stemtech
profited from the use of the images, including the testimony
23
Similarly, Stemtech’s argument that a new trial is
warranted due to counsel’s “additional unsupported and
improper statements and arguments,” Appellant’s Br. 55
(capitalization omitted), that amounted to “pleas of pure
passion . . . [and] blatant appeals to bias and prejudice,”
Draper, 580 F.2d at 95, has been waived. Stemtech did not
object to any of the summation statements it claims were
directed to bias and passion. See Dunn, 1 F.3d at 1377. Even
if Stemtech had preserved these claims of error, “at least for
civil trials, improper comments during closing arguments
rarely rise to the level of reversible error.” Id. (quotation
marks, citation, and alteration omitted).
41
from Stemtech employees that depicting stem cells was
important to selling products that purportedly enhanced stem
cell production.
Stemtech’s assertion that Leonard’s counsel
improperly argued that the evidence of infringement
presented at trial was “only the tip of the iceberg” also does
not provide a basis for a new trial. According to Stemtech,
Leonard, his counsel, and Sedlik each used language at the
trial that suggested that there were likely additional acts of
infringement by Stemtech and its distributors that were not
presented at trial. To the extent Stemtech makes claims about
what Leonard and Sedlik said during their testimony, this is
not conduct of counsel and is irrelevant. To the extent
Stemtech complains about counsel’s use of the phrase during
his argument, such a stray remark does not make it
“reasonably probable” that the verdict was influenced by
these statements and thus does not warrant a new trial.
Fineman, 980 F.2d at 207.24
24
The District Court excluded as speculative Sedlik’s
opinion that the 92 infringing examples that would be
presented at trial were only the “tip of the iceberg.” J.A. 638-
40 (order granting motion in limine in part and barring “tip of
the iceberg” statement and opinion regarding licensing fees
for images not at issue in the case). To the extent Stemtech
argues Sedlik’s testimony that “looking for usages on the
internet is . . . an endless field of haystacks” violated this
ruling, Stemtech objected and the District Court sustained the
objection. J.A. 1381. Moreover, the District Court instructed
the jury at the outset of trial that it should disregard evidence
to which an objection was lodged when the objection is
sustained, J.A. 766 (“If [an] objection is sustained, ignore the
question.”), and jurors are presumed “to follow their
42
For these reasons, the District Court did not abuse its
discretion in determining that none of Leonard’s counsel’s
conduct warrants a new trial.
2. Evidentiary Rulings
The final basis for Stemtech’s motion for a new trial is
that the District Court erred in admitting certain evidence.
Under Fed. R. Evid. 103 and Fed. R. Civ. P. 61, “a finding of
reversible error may not be predicated upon a ruling which
admits or excludes evidence unless a substantial right of the
party is affected.” Becker v. ARCO Chem. Co., 207 F.3d
176, 180 (3d Cir. 2000) (internal quotation marks omitted);
Goodman v. Pa. Tpk. Comm’n, 293 F.3d 655, 676 (3d Cir.
2002) (“A motion for a new trial should be granted where
substantial errors occurred in admission or rejection of
evidence.”). In the context of evidentiary issues raised in
support of a request for a new trial, “particular deference is
appropriate where the decision to grant or deny a new trial
rested on the district court’s evidentiary ruling that itself was
entrusted to the trial court’s discretion.” Becker, 207 F.3d at
180 (internal quotation marks omitted).
We review preserved evidentiary objections for abuse
of discretion. McKenna v. City of Phila., 582 F.3d 447, 460
(3d Cir. 2009). Where, however, a party failed to object to
the admission of evidence before the District Court, we deem
that objection waived on appeal. See Lloyd v. HOVENSA,
LLC, 369 F.3d 263, 272-73 (3d Cir. 2004) (observing that “it
is inappropriate for an appellate court to consider a contention
instructions.” Richardson v. Marsh, 481 U.S. 200, 211
(1987).
43
raised on appeal that was not initially presented to the district
court”) (internal quotation marks omitted); Waldorf v. Shuta,
142 F.3d 601, 629 (3d Cir. 1998) (failure to object at trial
results in waiver).
Stemtech argues that the District Court abused its
discretion in admitting numerous exhibits and testimony,
which it claims warrant granting a new trial. To the extent
Stemtech argues that the District Court erred in admitting
certain evidence that lacked a proper foundation, Stemtech
has waived such an objection because the District Court
clearly ruled that foundation objections needed to be raised
when the allegedly objectionable exhibits were offered at
trial, and Stemtech failed to lodge a contemporaneous
objection.
As for the 92 exhibits depicting infringing uses of
Leonard’s images, Stemtech objected to the admission of
these exhibits on relevance and foundation grounds. The
District Court properly overruled the foundation objections,
as a foundation for the documents was laid. First, Leonard
explained how he found the items and identified the indicia
within the items that showed their connection to Stemtech.
Second, Leonard testified that he contacted certain website
owners and learned they were Stemtech distributors. Third,
Stemtech failed to provide a basis to question whether the
websites embodied in the screenshots were connected to the
Stemtech enterprise. In addition to the fact that the contents
of the screenshots showed their connections with Stemtech,
Dr. Rivka Rachel, a Stemtech distributor, testified about
several Stemtech websites that were captured in the
Leonard’s screenshots.
44
Furthermore, the exhibits were relevant because, as the
District Court stated, they are “part of what is at issue in
terms of the allegations of infringement,” since they reflect
the infringements Leonard discovered online. J.A. 850. For
these reasons, the District Court properly admitted the
documents embodying the infringing images.
We have reviewed all of Stemtech’s other arguments
concerning its evidentiary objections and conclude that the
arguments have either been waived or are meritless because
the admission of the evidence about which Stemtech
complains did not affect its substantial rights.
For these reasons, none of Stemtech’s evidentiary
arguments warrants a new trial.
E. Fee Disputes
Finally, we address the two attorneys’ fees disputes:
one arising from a discovery-related award and the second
stemming from the second lawsuit Leonard filed against
Stemtech.
1. Discovery Violation Award
Stemtech challenges the District Court’s order granting
Leonard fees and costs incurred in taking a Stemtech
employee’s deposition.25 Fed. R. Civ. P. 37(c)(2) provides:
If a party fails to admit what is requested under
Rule 36 and if the requesting party later proves .
25
We review the decision to impose sanctions for
abuse of discretion. Bowers v. Nat’l Collegiate Athletic
Ass’n, 475 F.3d 524, 538 (3d Cir. 2007).
45
. . the matter true, the requesting party may
move that the party who failed to admit pay the
reasonable expenses, including attorney’s fees,
incurred in making that proof. The court must
so order unless:
(A) the request was held objectionable
under Rule 36(a);
(B) the admission sought was of no
substantial importance;
(C) the party failing to admit had a
reasonable ground to believe that it might
prevail on the matter; or
(D) there was other good reason for the
failure to admit.
Fed. R. Civ. P. 37(c)(2).
Leonard sought to prove that Stemtech controlled its
distributors through, among other things, the use of Requests
for Admission under Fed. R. Civ. P. 36.26 To this end,
Leonard sent Requests for Admission to Stemtech “seeking
Stemtech’s admission that it provided its independent
distributors with internet sub-domains to the official Stemtech
owned domain.” Appellee’s Br. 65 (citing J.A. 351-69).
Stemtech denied these requests.
Leonard later deposed George Tashjian, Stemtech’s
Information Technology Director. Tashjian testified that (1)
he had never seen the requests for admission, nor had he been
asked for his input into the answers; (2) Stemtech provided
26
Rule 36 provides a tool to streamline the proof of
controverted facts. See Fed. R. Civ. P. 36.
46
distributors with internet sub-domains associated with
Stemtech’s parent website, stemtechbiz.com; and (3) the
requests for admission concerning Stemtech’s ownership of
the domain that Stemtech denied were, in fact, true and
should have been admitted. Tashjian’s testimony therefore
established that Stemtech wrongly denied certain requests for
admissions.
Nearly two years later, Leonard moved for an award of
fees and costs incurred in taking Tashjian’s deposition. See
Fed. R. Civ. P. 37(c)(2). The District Court granted the
motion in part, awarding 50% of the $3,048.30 requested,
because only a portion of the deposition pertained to the
control issue.
Stemtech’s conduct falls within the ambit of Rule
37(c)(2) and, despite Stemtech’s argument that the sanctions
motion was not expeditiously filed and the requested
admission pertained to a matter of no substantial importance
under Rule 37(c)(2)(B), this exception to the mandatory
imposition of sanctions does not apply. Leonard sought the
admission of facts concerning Stemtech’s control over its
distributors’ websites, which was a crucial component of
Leonard’s vicarious and contributory infringement claims.
Because this issue was central to Leonard’s secondary
infringement claims, Stemtech had no factual basis for
denying the request, and Leonard incurred expenses to prove
these facts during Tashjian’s deposition, the District Court did
not abuse its discretion in awarding sanctions to Leonard.
See Yoder & Frey Auctioneers, Inc. v. EquipmentFacts, LLC,
774 F.3d 1065, 1074-75 (6th Cir. 2014) (holding that the
district court did not abuse its discretion in awarding nominal
Rule 37(c)(2) sanctions and costs where withholding party
47
“did not have reasonable grounds to believe it might
prevail”).
2. Stemtech’s Prevailing Party Fee Request
We are also asked to review a fee ruling arising from
Leonard’s second lawsuit against Stemtech, alleging new
infringing uses he discovered while this case was pending.
The District Court granted Stemtech’s motion for summary
judgment in the second case. As the prevailing party in the
second suit, Stemtech moved for an award of attorney’s fees
pursuant to 17 U.S.C. § 505. The District Court denied the
motion.
The Copyright Act permits a discretionary award of
attorneys’ fees to the prevailing party in a copyright lawsuit.
17 U.S.C. § 505; Fogerty v. Fantasy, Inc., 510 U.S. 517, 533
(1994) (noting § 505 “clearly connotes discretion” and a
district court may not “award[] attorney’s fees as a matter of
course”). Several factors guide the exercise of discretion in
this context, including “frivolousness, motivation, objective
unreasonableness (both in the factual and legal components of
the case) and the need in particular circumstances to advance
considerations of compensation and deterrence.” Id. at 534
n.19 (quoting Lieb. v. Topstone Indus., Inc., 788 F.2d 151,
156 (3d Cir. 1986)). The Supreme Court recently reaffirmed
that § 505 fee awards are discretionary and placed extra, but
not controlling, weight on the “objective unreasonableness”
factor, and reminded courts to consider the totality of the
circumstances and make a “particularized, case-by-case
assessment.” Kirtsaeng v. John Wiley & Sons, Inc., 136 S.
Ct. 1979, 1985 (2016) (quoting Fogerty, 510 U.S. at 527, 534
n.19).
48
The District Court did not abuse its discretion when it
denied Stemtech’s fee motion in the second suit. The District
Court applied the Fogerty factors and determined that there
was no evidence that Leonard’s decision to file the second
suit was objectively unreasonable, frivolous, or in bad faith
because “Leonard ha[d] reason to believe Stemtech was
engaged in ongoing and new infringement, that was not the
subject of [the first suit],” and accordingly “had a non-
sanctionable, non-frivolous basis to file [the second suit].”
J.A. 40. Despite the temporal proximity between the filing of
the second suit and unfavorable rulings in this case, where
Leonard was denied leave to amend his complaint and the
ability to seek infringer’s profits and statutory damages, the
District Court appropriately adopted the Magistrate Judge’s
findings that “the filing of [the second suit] was not an end-
run around” these adverse rulings in the first suit but rather
stemmed from Leonard’s belief that Stemtech continued to
engage in new infringing activity, and thus was not “a bad
faith attempt to re-litigate issues that have been decided
[against Leonard] in [the first suit].” J.A. 40-41 (internal
quotation marks omitted). Because it had a factual basis for
concluding that the filing of the second suit was objectively
reasonable, the District Court acted within its discretion in
denying Stemtech’s fee motion.
III
For the foregoing reasons, we will affirm the District
Court’s rulings on all issues except for its order denying
Leonard’s motion for prejudgment interest, which we will
vacate and remand for further proceedings.
49