Silicon Knights, Inc. v. Epic Games, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2489
SILICON KNIGHTS, INC., an Ontario (Canada) Corporation,
Plaintiff-Appellant,
v.
EPIC GAMES, INC., a Maryland Corporation,
Defendant-Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh. James C. Dever, III,
Chief District Judge. (5:07−cv−00275−D)
Argued: December 11, 2013 Decided: January 6, 2014
Before AGEE, KEENAN, and FLOYD, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Christopher T. Holland, KRIEG KELLER SLOAN REILLEY &
ROMAN LLP, San Francisco, California, for Appellant. Michael
Randolph Shebelskie, HUNTON & WILLIAMS, LLP, Richmond, Virginia,
for Appellee. ON BRIEF: Kenneth E. Keller, KRIEG KELLER SLOAN
REILLEY & ROMAN LLP, San Francisco, California; Hayden J.
Silver, III, WOMBLE CARLYLE SANDRIDGE & RICE, PLLC, Raleigh,
North Carolina, for Appellant. Douglas W. Kenyon, R. Dennis
Fairbanks, Raleigh, North Carolina, Cassandra C. Collins, HUNTON
& WILLIAMS LLP, Richmond, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Silicon Knights, Inc. (“Silicon Knights”) appeals from the
district court’s grant of judgment as a matter of law in favor
of Epic Games, Inc. (“Epic”) on Silicon Knights’ fraud and
fraud-related claims against Epic. Silicon Knights also appeals
from the district court’s denial of its request for judgment as
a matter of law on Epic’s copyright infringement and
misappropriation of trade secrets counterclaims against it, both
of which proceeded to trial and resulted in a jury verdict
against Silicon Knights. Silicon Knights additionally raises a
number of evidentiary issues and challenges the district court’s
grant of several remedies in favor of Epic. For the reasons set
forth below, we affirm the judgment of the district court.
I
The facts of this case are known by the parties. We repeat
them below only as necessary to reach our conclusion. We have
jurisdiction under 28 U.S.C. § 1291.
We review a district court’s decision to grant or deny
judgment as a matter of law de novo. Sales v. Grant, 158 F.3d
768, 775 (4th Cir. 1998). We review a district court’s
evidentiary rulings and its rulings on remedies for an abuse of
discretion. Anderson v. Westinghouse Savannah River Co., 406
F.3d 248, 260 (4th Cir. 2005) (evidentiary rulings); Cline v.
2
Wal-Mart Stores, Inc., 144 F.3d 294, 305 (4th Cir. 1999) (denial
of motion to set aside damages verdict); Diamond Star Bldg.
Corp. v. Freed, 30 F.3d 503, 506 (4th Cir. 1994) (award of
attorneys’ fees).
II
Silicon Knights raises four main issues on appeal. 1 First,
Silicon Knights contends that the district court wrongly entered
judgment as a matter of law in favor of Epic on Silicon Knights’
fraud claim. Second, Silicon Knights argues that the district
court wrongly denied its request for judgment as a matter of law
on Epic’s copyright infringement and trade secrets
counterclaims. Third, Silicon Knights contends that the district
court abused its discretion in excluding certain evidence
offered by Silicon Knights. And fourth, Silicon Knights asserts
that the district court abused its discretion in awarding
certain remedies to Epic.
A
With respect to Silicon Knights’ fraud, negligent
misrepresentation, and unfair competition claims, Silicon
1
Silicon Knights listed nine separate issues presented for
review, but these can all be consolidated in the four general
categories listed here.
3
Knights provides argument on appeal regarding only its fraud
claim. 2 Its appeal of the district court’s entry of judgment on
its negligent misrepresentation and unfair competition claims is
therefore waived. See Snyder v. Phelps, 580 F.3d 206, 216 (4th
Cir. 2009); see also Fed. R. App. P. 28(a)(8)(A) (providing that
an appellant’s brief must contain “appellant’s contentions and
the reasons for them”). Thus, we address only Silicon Knights’
fraud argument.
Silicon Knights argues that Epic made certain false oral
representations regarding the functionality of its video game
engine, Unreal Engine 3, which Silicon Knights had licensed from
Epic for use in the development of a single video game, Too
Human. The parties, though, had entered into a written license
agreement that expressly disclaimed any warranty “that the
functions performed by [the video game engine] will meet
[Silicon Knights’] requirements,” (J.A. 1759), and further
disclaimed “any and all other warranties, conditions, or
representations (express or implied, oral or written), with
respect to the [video game engine] or any part thereof,” (J.A.
1760). Moreover, Silicon Knights does not dispute that it knew
2
Although the district court did not explain its reasoning
for granting Epic’s motion for judgment as a matter of law, we
may affirm “on any basis fairly supported by the record.”
Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 222 (4th Cir.
2002).
4
Unreal Engine 3 was a work in progress when Epic made its
alleged false representations. Because warranties “cannot be
asserted by parol” and promissory representations that look to
the future “do not generally constitute legal fraud,” American
Laundry Machine Co. v. Skinner, 34 S.E.2d 190, 192–94 (N.C.
1945), 3 Silicon Knights has presented no set of circumstances
under which it could have prevailed on its fraud claim against
Epic. The district court therefore properly granted judgment as
a matter of law in favor of Epic.
B
Silicon Knights argues that Epic failed to prove that it
held a valid copyright in Unreal Engine 3 because Epic failed to
introduce into evidence the portions of that work deposited with
The United States Copyright Office. However, a copyright
registration is sufficient evidence of a valid copyright, and a
copyright holder need not place into evidence “certified or
deposit copies of . . . the compositions” at issue to prove that
it holds a valid copyright. Banco Popular De P.R. v. Asociación
3
The written license agreement provides that “[t]he
validity, construction and performance of this Agreement, and
the legal relations among the parties to this Agreement shall be
governed in all respects by the laws of the State of North
Carolina.” (J.A. 1766.) We therefore apply North Carolina law.
See Volvo Constr. Equip. N.A., Inc. v. CLM Equip. Co., 386 F.3d
581, 601 (4th Cir. 2004) (enforcing a choice-of-law provision in
a written contract).
5
De Compositores Y Editores De Música Latinoamericana (ACEMLA),
678 F.3d 102, 111 (1st Cir. 2012). Silicon Knights’ argument is
without merit.
Silicon Knights also argues that its copying was de minimis
as a matter of law. Yet Silicon Knights admits in its briefing
that over 20% of the code in its game engine was copied from
Unreal Engine 3, (see Reply Br. 11), and Silicon Knights does
not dispute that it copied Unreal Engine 3 in toto when it began
development on The Box, a use that was not authorized under the
parties’ written license agreement. Thus, it is clear that the
jury had “a legally sufficient evidentiary basis to find for”
Epic. Fed. R. Civ. P. 50(a)(1).
C
Silicon Knights separately contends that the district court
abused its discretion by excluding expert testimony on its
pending contract damages claim. Because Silicon Knights does not
appeal the jury’s verdict in favor of Epic on its breach of
contract claim, we do not reach a decision on the district
court’s exclusion of Silicon Knights’ expert testimony on
damages. See Deadwyler v. Volkswagen of Am., Inc., 884 F.2d 779,
784 (4th Cir. 1989) (“Evidentiary errors regarding damages are
harmless where special verdict questions regarding liability are
determined in a defendant’s favor.”).
6
Silicon Knights also contends that the district court
abused its discretion by excluding evidence of certain third-
party complaints relating to the functionality of Unreal Engine
3. Yet the district court excluded this evidence as inadmissible
hearsay and as likely to cause confusion under Rule 403. Because
Silicon Knights provides argument regarding only relevance, it
leaves unchallenged the district court’s alternate decision to
exclude the evidence on the basis of hearsay and has “waive[d]
. . . any claim of error with respect to the court’s decision on
that issue.” Maher v. City of Chi., 547 F.3d 817, 821 (7th Cir.
2008) (holding that an assertion of error is waived when the
appellant fails to challenge one of two independent grounds).
D
Silicon Knights further argues that the district court
abused its discretion by allowing Epic to achieve a double
recovery of damages, but we find no double recovery on the facts
of this case. Epic pursued compensatory expectation damages
under a contract theory (based on the license agreement) and
disgorgement damages under a copyright infringement theory. The
damages awarded to Epic on its breach of contract counterclaim
represented only Epic’s actual damages, the unpaid licensing
fees due to Epic under the parties’ written license agreement.
(See J.A. 1217–18.) In contrast, the damages awarded to Epic on
7
its copyright infringement counterclaim represented only the
“profit [Silicon Knights] generated as a result of the use of
the infringed [code].” Walker v. Forbes, Inc., 28 F.3d 409, 412
(4th Cir. 1994); (see J.A. 1226–27). Under the Copyright Act,
Epic was entitled “to recover [both] the actual damages suffered
by [it] as a result of the infringement, and 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); Walker, 28 F.3d at 412. That Epic chose to pursue its
actual damages under a contract theory and disgorgement damages
under a copyright infringement theory makes no difference. As
aptly put by the district court, “[t]he recovery on the breach
of contract counterclaim served a different interest and was not
based on the same conduct or proof as the conduct and proof
giving rise to the recovery on the copyright infringement
[counterclaim].” 4 (J.A. 1731.)
4
To the extent that Silicon Knights attempts to argue that
Epic’s trade secrets damages duplicate its copyright
infringement damages, that argument fails. The district court
clearly instructed the jury that “the damages for copyright
infringement and trade secret misappropriation are coextensive”
and that, if the jury found in favor of Epic on these
counterclaims, Epic would be “entitled to recover damages for
either Silicon Knights’ infringement of that copyrighted
material or Silicon Knights’ misappropriation of that trade
secret, but not for both.” (J.A. 1227.) And the jury’s verdict
form awarded Epic a single measure of damages based upon Silicon
Knights’ copyright infringement and misappropriation of Epic’s
trade secrets. (J.A. 1231.) There is therefore no evidence that
(Continued)
8
Silicon Knights next argues that the district court abused
its discretion by awarding Epic attorneys’ fees on its copyright
infringement and trade secrets counterclaims. Silicon Knights’
argument rests mainly on the fact that the jury did not make a
finding of bad faith upon which to base the district court’s
award of attorneys’ fees. Yet the district court reviewed the
record and made an independent finding that “Silicon Knights’s
infringement of Epic Games’s copyrights was willful and in bad
faith.” (J.A. 1712.) Silicon Knights provides no authority
suggesting that a finding of bad faith supporting an award of
attorneys’ fees must be made by a jury, and we conclude that the
district court’s finding is adequately supported by the record.
Last, Silicon Knights argues that the district court abused
its discretion by granting a permanent injunction in favor of
Epic. Silicon Knights fails to sufficiently address this issue
for appellate review by raising it only in a short footnote on
the final page of its Opening Brief. See Wahi v. Charleston Area
Med. Ctr., Inc., 562 F.3d 599, 607 (4th Cir. 2009) (holding that
an issue raised only in a footnote and addressed with only
declarative sentences is waived). Although Silicon Knights
develops its argument in its Reply Brief, it raises entirely new
Epic was awarded duplicative damages on its copyright
infringement and trade secrets counterclaims.
9
arguments in support of its position, depriving Epic of an
opportunity to respond to those arguments. See Hunt v. Nuth, 57
F.3d 1327, 1338 (4th Cir. 1995) (holding that “appellate courts
generally will not address new arguments raised in a reply brief
because it would be unfair to the appellee and would risk an
improvident or ill-advised opinion on the legal issues raised”).
The challenge to the district court’s grant of a permanent
injunction in favor of Epic is therefore waived.
E
Silicon Knights raises a number of other issues on appeal
that lack merit and do not warrant a full discussion. Among
other things, Silicon Knights raises a number of arguments
relating to Epic’s trade secrets counterclaim under N.C. Gen.
Stat. § 66-153. Because copyright infringement damages and
damages under N.C. Gen. Stat. § 66-153 are coextensive, see
Celeritas Techs., Ltd. v. Rockwell Int’l Corp., 150 F.3d 1354,
1362 (Fed. Cir. 1998), and because we affirm the district
court’s judgment with respect to Epic’s copyright infringement
counterclaim, we need not address those arguments. See In re
Rare Earth Minerals, 445 F.3d 359, 363 (4th Cir. 2006) (holding
that a claim should be dismissed as moot when “the court has no
remedy that it can fashion even if it would have determined the
issues differently”).
10
III
For all the foregoing reasons, the judgment of the district
court is
AFFIRMED.
11