Digital Drilling Data Systems v. Petrolink Service

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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-20116 July 2, 2020
Lyle W. Cayce
DIGITAL DRILLING DATA SYSTEMS, L.L.C., Clerk
Plaintiff - Appellant Cross-Appellee
v.
PETROLINK SERVICES, INCORPORATED,
Defendant - Appellee Cross-Appellant
Appeals from the United States District Court
for the Southern District of Texas
Before BARKSDALE, HIGGINSON, and DUNCAN, Circuit Judges.
STUART KYLE DUNCAN, Circuit Judge:
Digital Drilling Data Systems, L.L.C. (“Digidrill”), a company that
provides software used in oil drilling operations, sued its competitor, Petrolink
Services, Inc. (“Petrolink”), alleging Petrolink hacked into its software at
various oil drilling sites in order to “scrape” valuable drilling data in real time.
The district court granted Petrolink’s motion for summary judgment on
Digidrill’s copyright claims, but allowed Digidrill’s unjust enrichment claim to
proceed to trial, where a jury ultimately returned a verdict in Digidrill’s favor.
Both parties appealed. We affirm in part, vacate in part, and remand for
further proceedings.
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I.
A.
When oil and gas exploration companies (“operators”) drill below the
Earth’s surface, they often engage directional drilling companies to steer drill
bits into specific targets deep underground—a process known as “geosteering.”
To assist with this process, the directional drillers in turn hire “measurement
while drilling” (“MWD”) companies who attach specialized tools near the end
of the drill pipe just above the drill bit. These MWD tools send “downhole” data
up to the surface, including raw data about the location and orientation of the
drill bit and about the characteristics of the surrounding geological formation.
MWD companies then rely on other companies who furnish data logging and
visualization services—hardware and software packages at the surface that
collect and store the data from the MWD tools, and also display the data on
computer screens in real-time to assist with the geosteering process.
Digidrill is one such data logging and visualization service provider.
Digidrill’s initial commercial product, a software program called “DataLogger,”
was designed to be installed on an MWD company’s computer to collect raw
data from downhole instruments, filter and correct the raw data (based partly
on calibration inputs provided by the MWD company), and then log both the
raw and corrected data to a database. To prevent unauthorized use of
DataLogger, Digidrill designed the program to run only when a USB security
dongle is plugged into the laptop.
At the filtering and correction stage, DataLogger applies certain
algorithms and scaling factors to account for the context of the raw data. For
example, DataLogger applies a formula to raw gamma data received from the
downhole gamma ray sensor, scaling and correcting for factors such as gamma
ray absorption by drill components located near the sensor. DataLogger
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similarly corrects the raw depth measurement values received from the drill
bit.
At the logging stage, the data—both raw and corrected—is written to a
computer database consisting of 27 interrelated data tables encompassing a
total of 433 columns worth of data. For instance, the corrected gamma data is
written in a field called “API” in a table called “GAMMA.” Although Digidrill
designed the relational structure of the database—i.e., its “schema”—Digidrill
did not write the database program itself. Instead, Digidrill developed
DataLogger to incorporate an open source database application called Firebird,
allowing users to use off-the-shelf programs to access and query the database. 1
But Digidrill did change the file extension for the database files created by
DataLogger from “.fdb” (the default extension for Firebird database files) to
“.ddb” (for “Digidrill Database”). Digidrill also ensured that the database was
protected by an internal password, but left the username and password set to
the publicly available Firebird defaults. 2
1Digidrill asserts that users can only access and query data from the DataLogger
database by going through the program’s own “Interface Process,” which requires the
presence of the USB dongle. But this assertion is contradicted by language regarding
DataLogger that appeared on Digidrill’s website, which stated: “All data generated by the
Digidrill system is stored in an open database file to give the user the ability to query the
data using off-the-shelf software products.” At the summary judgment stage, the district
court acknowledged this by concluding “it was established and known that the DataLogger
data files were stored in the Firebird shared library which could be accessed independently
from the DataLogger software.” Thus, although Digidrill may have intended for
unsophisticated users to access and query the database only through DataLogger’s Interface
Process, the company left open—and acknowledged—the possibility that sophisticated users
could access the data directly by other means. Indeed, Digidrill acknowledges that only after
it discovered Petrolink’s “hack” did the company implement an additional measure “to kill
third-party connections to the DataLogger Application.”
2DataLogger users never enter the username and password themselves—the
credentials are internal to the program. Whenever DataLogger itself queries its own
database, DataLogger is programed to send the proper credentials to the Firebird database
server.
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Meanwhile, in addition to writing to the database, DataLogger forwards
the continuous stream of raw MWD data—but not the corrected data—to the
drilling rig’s electronic data recorder (“EDR”) in a standardized feed called
Wellsite Information Transfer Specification (“WITS”) for use by other entities
at the site.
The DataLogger program itself does not offer real-time visualization of
the data it collects or manipulates, although it does allow the data to be
exported—after the fact or at intervals—in a standardized report format
(“.las”) or as PDF files. To provide real-time visualization, Digidrill developed
a second product called LiveLog. LiveLog provides real-time, off-site
visualization of filtered and corrected data transmitted out of DataLogger. The
corrected data is pushed out from DataLogger to the internet in a proprietary
format developed by Digidrill and can then be viewed using the company’s
CommandCenter application.
B.
Petrolink competes with Digidrill as, among other things, a visualization
services provider. Petrolink developed a program called “PowerCollect” to take
raw MWD data, such as that forwarded from DataLogger to the EDR, filter the
raw data to some extent, and transmit the filtered data to another Petrolink
program called “PetroVault” for real-time visualization. However,
PowerCollect’s reliance on raw data and its inability to provide corrected data
in real time resulted in unreliable visualizations, to the frustration of some
operators using the program.
When Petrolink learned that one of its largest customers, EOG
Resources (“EOG”), might switch over to Digidrill’s visualization service,
Petrolink took action. Instead of paying Digidrill for access to the corrected
drilling data via LiveLog, Petrolink obtained a laptop running DataLogger—
along with the corresponding USB security dongle—and then, after realizing
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DataLogger used an open source Firebird database, managed to gain access to
the database by using Firebird’s default administrator username and
password. Armed with this access, Petrolink developed a program named “RIG
WITSML” (dubbed “the scraper” or “the hack”) that could be installed on an
MWD company’s computer running DataLogger in order to—in real time—
query corrected drilling data from the DataLogger database and transfer that
information to PetroVault for visualization. Petrolink then began installing
this RIG WITSML program on MWD computers running DataLogger at more
than 300 well sites. The parties agree that Petrolink never sought permission
from Digidrill to copy the data or the database schema from the DataLogger
databases.
To be sure, RIG WITSML did not scrape all the data from the
DataLogger database. Out of 433 columns across 27 tables, RIG WITSML read
data from 22 columns across 5 tables, and selected data from an even smaller
subset: 17 columns across 4 tables. With respect to these portions of the
database, however, the RIG WITSML program not only scraped data from the
database, it also copied the relevant portions of the database schema, e.g., the
table names and the names of certain columns within those tables. These
portions of the database schema were copied into the host computer’s RAM and
RIG WITSML’s own memory each time the program queried the DataLogger
database (at ten second intervals), and were also copied in the RIG WITSML
source code itself. 3
3 It is true that the schema of Petrolink’s own database, into which the scraped data
was ultimately copied, was completely different from the schema of DataLogger’s database.
However, the district court correctly noted that this does not undermine the fact that
Petrolink copied DataLogger’s database schema in the source code for RIG WITSML and in
the program’s memory each time RIG WITSML ran a query.
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C.
After learning about RIG WITSML, Digidrill sued Petrolink and its
president, Lee Geiser, asserting claims of copyright infringement, violation of
the Digital Millennium Copyright Act (“DMCA”), unfair competition, unjust
enrichment, and various other claims for computer fraud and trademark
dilution. Although Digidrill averred that Petrolink’s conduct violated the terms
of DataLogger’s license agreement, which prohibits unauthorized linking of
third-party devices to computers running DataLogger, Digidrill did not sue the
DataLogger licensees themselves (the MWD companies using the software). 4
Early in the litigation, Petrolink agreed to a preliminary injunction and
stopped using RIG WITSML. Digidrill subsequently abandoned all but its
claims for copyright infringement, violations of the DMCA, and unjust
enrichment. The parties then cross-moved for summary judgment.
The district court granted summary judgment for Petrolink on Digidrill’s
copyright infringement and DMCA claims, but allowed Digidrill’s unjust
enrichment claim to proceed to trial. As to copyright infringement, the court
first concluded that while the corrected data values generated by DataLogger
and written to its database were “mere facts” and therefore not copyrightable,
the schema of the database itself—its creative arrangement of tables and
columns—was covered by the DataLogger copyright as a non-literal element of
DataLogger’s source code. However, the district court held that no copyright
infringement occurred because even though Petrolink directly and identically
copied aspects of DataLogger’s database schema, Digidrill failed to meet its
burden to show substantial similarity between the original work and the copied
4 The DataLogger license agreement prohibits licensees from linking “any Customer
Machine using [DataLogger] with a Machine that is not a Customer Machine” without “prior
written consent of [Digidrill.]”
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work. As to the DMCA claim, the court ruled that the “Interface Process” and
the USB security dongle were not measures that effectively controlled access
to the DataLogger database and, further, that although an internal password
was in place to guard access to the database, Petrolink did not “circumvent”
that measure when it gained access via the publicly available default Firebird
password.
As for Digidrill’s state law unjust enrichment claim, the district court
rejected Petrolink’s contentions that the claim was preempted by federal
copyright law and that, as a matter of law, the claim could not be proven. The
court found no preemption because “the data at issue is factual” and therefore
“does not fall within the subject matter of copyright.” Finding that a genuine
dispute of material fact remained as to whether unjust enrichment occurred,
the court denied Petrolink’s motion for summary judgment on the issue.
Before trial, Digidrill settled with Mr. Geiser, leaving Petrolink as the
sole defendant. During the ensuing trial, the jury was presented with evidence
that EOG was one of Petrolink’s biggest customers, that Petrolink received
$2.4 million in revenues from EOG during the time RIG WITSML was being
used at various EOG well sites, that Petrolink attributed $414,940 of that
revenue to RIG WITSML, and that—at the time of trial—Digidrill, not
Petrolink, was providing visualization services to EOG San Antonio. Although
Petrolink produced a list showing RIG WITSML had been installed at 307 well
sites (270 of which belonged to EOG), Digidrill countered with evidence
suggesting that number was underinclusive.
At trial, Petrolink twice moved for judgment as a matter of law (JMOL)
under Federal Rule of Civil Procedure 50(a), arguing once again that Digidrill’s
unjust enrichment claim was preempted by copyright law and that Digidrill
had presented insufficient evidence to support liability for unjust enrichment
or monetary recovery. The district court orally denied Petrolink’s motions. The
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jury then awarded Digidrill $414,940—the exact amount of EOG revenue
Petrolink attributed to its RIG WITSML program. After the jury returned its
verdict, Petrolink moved for JMOL a third time, which the court summarily
denied. The court also denied Petrolink’s motion for $1,001,385 in attorneys’
fees and costs as the prevailing party under the Copyright Act and DMCA,
explaining only that “costs and fees will not be assessed against either party
as both prevailed on different issues.”
Digidrill and Petrolink each filed timely notices of appeal. Digidrill
appeals the district court’s grant of Petrolink’s motion for summary judgment
as to the copyright infringement and DMCA claims. Petrolink cross-appeals
the district court’s denial of its motions for JMOL and for attorneys’ fees.
II.
“We review a grant of summary judgment de novo, applying the same
standard as the district court.” Alliance for Good Gov’t v. Coalition for Better
Gov’t, 901 F.3d 498, 504 (5th Cir. 2018). “Summary judgment is proper where
the pleadings and record materials show no genuine dispute as to any material
fact, entitling the movant to judgment as a matter of law.” Id. (citing FED. R.
CIV. P. 56(a)). “We must view the evidence in the light most favorable to the
non-moving party, drawing all justifiable inferences in the non-movant’s
favor.” Id. at 505.
“We review de novo the district court’s denial of a motion for judgment
as a matter of law, applying the same standards as the district court.”
Abraham v. Alpha Chi Omega, 708 F.3d 614, 620 (5th Cir. 2013). “Judgment
as a matter of law is proper if a party has been fully heard on an issue during
a jury trial and a reasonable jury would not have a legally sufficient
evidentiary basis to find for the party on that issue.” Williams v. Manitowoc
Cranes, L.L.C., 898 F.3d 607, 614 (5th Cir. 2018) (cleaned up) (quoting FED. R.
CIV. P. 50(a)). This court “cannot reverse a denial of a motion for judgment as
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a matter of law unless the jury’s factual findings are not supported by
substantial evidence, or if the legal conclusions implied from the jury’s verdict
cannot in law be supported by those findings.” Id. (quoting OneBeacon Ins. Co.
v. T. Wade Welch & Assocs., 841 F.3d 669, 676 (5th Cir. 2016)). “Although our
review is de novo, after a jury trial, the standard of review is especially
deferential.” Id. (cleaned up) (quoting Abraham, 708 F.3d at 620).
“This court reviews a district court’s refusal to award attorney’s fees in
a copyright infringement case for an abuse of discretion.” Virgin Records Am.,
Inc. v. Thompson, 512 F.3d 724, 725 (5th Cir. 2008) (per curiam). “A trial court
abuses its discretion in awarding or refusing to award attorney’s fees when its
ruling is based on an erroneous view of the law or a clearly erroneous
assessment of the evidence.” Id. (citation omitted).
III.
A.
We begin with Digidrill’s claim that the district court erred in granting
Petrolink’s motion for summary judgment as to copyright infringement. “To
prove copyright infringement, a plaintiff must establish (1) ownership of a
valid copyright; (2) factual copying; and (3) substantial similarity.” Nola Spice
Designs, L.L.C. v. Haydel Enters., Inc., 783 F.3d 527, 549 (5th Cir. 2015)
(quoting Armour v. Knowles, 512 F.3d 147, 152 (5th Cir. 2007) (per curiam)).
The parties do not dispute the first two elements, i.e., that Digidrill
owned a valid copyright in the DataLogger program, including its database
schema, and that Petrolink copied portions of that schema in its RIG WITSML
program. Instead, the dispute centers on the “substantial similarity” prong. 5
Digidrill argues that the district court erred in granting summary judgment
5On appeal, Digidrill does not challenge the district court’s holding that the drilling
data scraped from DataLogger’s database constituted uncopyrightable facts.
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because fact issues remained as to the substantial similarity between
DataLogger’s schema and Petrolink’s copies of that schema. Specifically,
Digidrill contends that even though Petrolink copied only 5% of DataLogger’s
copyrighted schema, a reasonable trier of fact might nevertheless have found
substantial similarity due to the “qualitative importance” of that small copied
portion. Petrolink argues that Digidrill waived this “qualitative importance”
argument by not raising it until Digidrill’s motion for reconsideration, filed
after the district court granted summary judgment. Digidrill responds that the
argument is not waived because it relates to an issue the district court decided
sua sponte. According to Digidrill, Petrolink moved for summary judgment
based on the lack of substantial similarity between the DataLogger database
schema and Petrolink’s own PetroVault database schema, but the court
instead addressed the similarity between the DataLogger schema and the RIG
WITSML program.
We hold that Digidrill likely waived its “qualitative importance”
argument but, even if not, the argument fails on the merits. “[W]e generally do
not consider an issue or a new argument raised for the first time in a motion
for reconsideration in the district court.” Davidson v. Fairchild Controls Corp.,
882 F.3d 180, 185 (5th Cir. 2018) (internal quotation marks and citation
omitted). Digidrill is mistaken when it states the district court addressed the
similarity between DataLogger’s schema and RIG WITSML sua sponte, since
it was Digidrill itself that directed the court to make that comparison both in
Digidrill’s own motion for summary judgment on copyright infringement and
in its response to Petrolink’s cross-motion. And yet, despite directing the
court’s focus to these two works, Digidrill only argued that the works were
substantially similar because “Petrolink’s hack made exact copies of the
DataLogger schema.” Thus, we are inclined to agree with Petrolink that
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Digidrill waived its argument that the two works were substantially similar
because of the qualitative importance of the copied schema.
Even so, we need not rely on waiver because Digidrill’s qualitative
importance argument fails on the merits insofar as Digidrill points to no
summary judgment evidence establishing the importance of the copied schema
to the DataLogger program as a whole. “While the question of substantial
similarity typically should be left to the factfinder, summary judgment may be
appropriate if the court can conclude . . . that no reasonable juror could find
substantial similarity.” Nola Spice, 783 F.3d at 550 (internal quotation marks
and citation omitted). In determining substantial similarity, we consider, inter
alia, “the qualitative and quantitative importance of the copied material to the
plaintiff’s work as a whole.” Id. at 552 (emphasis added). The summary
judgment evidence to which Digidrill points shows, at most, that (1) the copied
data were important for effective geosteering and (2) copying certain portions
of DataLogger’s schema was essential to RIG WITSML’s effectiveness at
obtaining that data. What the evidence does not show is how the copied
portions of the schema were qualitatively important to Digidrill’s work itself,
i.e., to DataLogger. 6 Digidrill conflates the importance of the database schema
with the importance of the corrected data stored in the database, but the
importance of the corrected data is beside the point, since that data is
unprotected by copyright law. As for the schema itself, the district court
correctly observed that DataLogger’s tables and fields could have been
arranged in countless different ways.
6 Digidrill argues that “without the schema at issue, DataLogger could not populate
its databases with the information ultimately used by the MWD companies and operators to
geosteer their wells.” But this claim is unsupported by any evidence—Digidrill never shows
why the DataLogger database required the particular relational structure at issue, as opposed
to countless other conceivable arrangements of the MWD data into tables and fields.
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At oral argument, counsel for Digidrill attempted to describe
DataLogger’s schema as a “living roadmap” to the database, but that further
reveals Digidrill’s miscomprehension of the issue. DataLogger’s schema
consists of the relationships between the various tables and fields in the
database, not the “roadmap” of that relational structure. While an accurate
roadmap is essential for querying any database, it has nothing to do with the
qualitative importance of the underlying relational structure itself. For
example, in order to successfully query data from DataLogger’s API field, one
needs to know the API field is found in DataLogger’s GAMMA table rather
than in DataLogger’s DRILLSTREAM table. But that hardly explains, let
alone even addresses, the qualitative importance of the API field being in the
GAMMA table in the first place, as opposed to some other table. Digidrill fails
to show that its chosen relational structure for DataLogger was anything more
than arbitrary, let alone qualitatively important.
In sum, we affirm the district court’s ruling on copyright infringement
because, even if Digidrill’s qualitative importance argument is not waived, no
reasonable jury could find substantial similarity based on the qualitative
importance of the copied schema to DataLogger as a whole.
B.
Next, we consider Digidrill’s claim that the district court erred in
granting Petrolink’s motion for summary judgment as to the alleged DMCA
violations. The DMCA provides: “No person shall circumvent a technological
measure that effectively controls access to a work protected under this title.”
17 U.S.C. § 1201(a)(1)(A). “[T]o ‘circumvent a technological measure’ means to
descramble a scrambled work, to decrypt an encrypted work, or otherwise to
avoid, bypass, remove, deactivate, or impair a technological measure, without
the authority of the copyright owner.” Id. § 1201(a)(3)(A). “A technological
measure ‘effectively controls access to a work’ if the measure, in the ordinary
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course of its operation, requires the application of information, or a process or
a treatment, with the authority of the copyright owner, to gain access to the
work.” Id. § 1201(a)(3)(B).
Digidrill argues that the district court committed reversible error by
concluding that DataLogger’s USB dongle and Interface Process did not
“effectively control” access to DataLogger’s protected work. Digidrill relies
chiefly on Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294
(S.D.N.Y. 2000), aff’d sub nom. Universal City Studios, Inc. v. Corley, 273 F.3d
429 (2d Cir. 2001), for the proposition that what matters is whether a
technological measure functions to prevent access to the copyrighted work, not
whether it provides a strong means of protection. According to Digidrill, the
fact that Petrolink was able to access DataLogger’s database directly, without
using the USB dongle or Interface Process, merely shows that an alternative
means of access existed, and the existence of an alternative means of access
does not render a technological measure ineffective. 7 Petrolink responds that
the USB dongle and Interface Process did not effectively control access to the
protected database schema because access to the database itself was available
via third party programs without ever encountering those measures and, in
any event, Petrolink did not circumvent those measures. Borrowing from a
Sixth Circuit opinion, Petrolink likens this to a house with a lock on the back
door but none on the front. Cf. Lexmark Int’l, Inc. v. Static Control Components,
Inc., 387 F.3d 522, 547 (6th Cir. 2004).
We agree with Petrolink—and the district court—that no DMCA
violation occurred. While the USB dongle and Interface Process may have
7 Notably, Digidrill does not appeal the district court’s conclusion that even if
Datalogger’s internal-facing database password was a technological measure that controlled
access to the protected work, Petrolink did not circumvent that measure when it entered the
commonly-known Firebird default credentials.
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effectively restricted certain unauthorized uses of the DataLogger software—
for example, by preventing MWD companies from duplicating and running the
program on laptops at other drilling sites without purchasing additional
licenses—these security measures did not effectively control and indeed were
not designed to control access to the protected database schema, as evidenced
by Digidrill’s public acknowledgement that the data was stored in an open
database file to allow users to query the database using off-the-shelf products.
The database—including its schema—was protected only by an internal-facing
password, and Digidrill does not appeal the district court’s holding that
Petrolink did not circumvent that measure when Petrolink employed the
commonly-known Firebird default credentials.
Digidrill’s reliance on Reimerdes is misplaced. In Reimerdes, hackers
wrote a computer program “solely for the purpose of decrypting CSS”—a 40-bit
encryption technology designed to prevent would-be infringers from
duplicating motion picture DVDs. 111 F. Supp. 2d at 317–19 (quoted portion
at 319). The hacker program at issue in Reimerdes—dubbed “DeCSS”—was
developed by “reverse engineer[ing] a licensed DVD player and discover[ing]
the CSS encryption algorithm and keys.” Id. at 311. The defendants argued
that CSS, insofar as it was “based on a 40-bit encryption key” was “a weak
cipher that d[id] not ‘effectively control’ access to plaintiffs’ copyrighted works.”
Id. at 317. The district court rejected that argument, holding that because CSS
prevented access to the protected work on a DVD without the required
decryption keys, and because those keys could not be lawfully obtained in the
absence of a license, “CSS ‘effectively controls access’ to copyrighted DVD
movies.” Id. at 317–18.
At most, the portion of Reimerdes relied on by Digidrill stands for the
rule that a technological measure need not be impenetrable in order to be
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“effective” under the DMCA. 8 See Corley, 273 F.3d at 441–42. But here the
issue is not whether the USB dongle and Interface Process were effective; it is
whether they controlled access to the database schema at all. On this point, the
Sixth Circuit’s reasoning in Lexmark is instructive. In that case, Lexmark
argued that its “authentication sequence” effectively controlled access to its
Printer Engine Program—a copyrighted work installed on Lexmark printers—
because the measure controlled consumers’ ability to make use of the program.
See Lexmark, 387 F.3d at 546. The Sixth Circuit disagreed, holding that
although the measure restricted users’ ability to make use of the Printer
Engine Program, it did not restrict access to the program itself, i.e., to its
source code. Id. (“Anyone who buys a Lexmark printer may read the literal
code of the Printer Engine Program directly from the printer memory, with or
without the benefit of the authentication sequence . . . .”). 9 Precisely the same
is true here: Although the USB dongle and Interface Process limited MWD
companies’ ability to make use of DataLogger, these measures did not control
access to program’s database itself, including its protected schema.
Accordingly, we affirm the district court’s disposition of Digidrill’s DMCA
claim. Because we affirm on the basis that the USB dongle and Interface
Process did not effectively control access to the database schema, we need not
address whether Petrolink circumvented those technological measures.
8 Such a rule is little more than a tautology anyway, since there could never be a
DMCA violation for circumventing a technological measure if the only “effective”
technological measures recognized by the DMCA were those that could never be
circumvented. Cf. Lexmark, 387 F.3d at 549 (recognizing that if “a precondition for DMCA
liability is . . . the creation of an impervious shield to the copyrighted work . . . the DMCA
would apply only when it is not needed”).
9The Sixth Circuit added: “[O]ur reasoning does not turn on the degree to which a
measure controls access to a work. It turns on the textual requirement that the challenged
circumvention device must indeed circumvent something, which did not happen with the
Printer Engine Program.” Id. at 549.
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C.
Turning to Petrolink’s cross-appeal, we first consider Petrolink’s claim
that the district court erred by denying Petrolink’s motions for JMOL.
Specifically, Petrolink argues that the Copyright Act preempts Digidrill’s state
law unjust enrichment claim and, even if not, Digidrill’s claim must fail
because (1) there is no legally sufficient evidence to support liability for unjust
enrichment and (2) there is no legally sufficient evidence to value the benefit
Petrolink allegedly received from Digidrill. We consider each aspect of
Petrolink’s argument in turn, beginning with preemption.
1.
“Section 301 of the Copyright Act preempts state law claims that fall
within the general scope of federal copyright law.” Ultraflo Corp. v. Pelican
Tank Parts, Inc., 845 F.3d 652, 655 (5th Cir. 2017). Consistent with the text of
the statute, we employ a two-prong test to determine whether the Act preempts
a state law cause of action. 10 Id. First, we examine the state claim “to
determine whether it falls ‘within the subject matter of copyright’ as defined
by 17 U.S.C. § 102.” Spear Mktg., Inc. v. BancorpSouth Bank, 791 F.3d 586,
594 (5th Cir. 2015). If so, we then consider the state cause of action “to
determine if it protects rights that are ‘equivalent’ to any of the exclusive rights
of a federal copyright, as defined in 17 U.S.C. § 106.” Id. We ask, “[i]n other
words, is state law protecting the same rights that the Copyright Act seeks to
10 17 U.S.C. § 301(a) reads:
On and after January 1, 1978, all legal or equitable rights that are equivalent
to any of the exclusive rights within the general scope of copyright as specified
by section 106 in works of authorship that are fixed in a tangible medium of
expression and come within the subject matter of copyright as specified by
sections 102 and 103, whether created before or after that date and whether
published or unpublished, are governed exclusively by this title. Thereafter, no
person is entitled to any such right or equivalent right in any such work under
the common law or statutes of any State.
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vindicate, or is it protecting against different types of interference?”
GlobeRanger Corp. v. Software AG United States of Am., Inc., 836 F.3d 477,
484 (5th Cir. 2016). We evaluate the equivalency of the protected rights by
applying the “extra element” test: Preemption does not occur if the state law
claim requires “one or more qualitatively different elements.” Alcatel USA, Inc.
v. DGI Techs., Inc., 166 F.3d 772, 787 (5th Cir. 1999). The party arguing
against preemption must show “the presence of any element that renders
different in kind its rights under state and federal law.” Id. at 789.
The district court, when it denied Petrolink’s motions for JMOL, did not
give reasons why it rejected Petrolink’s preemption argument. At the summary
judgment stage, however, the court denied Petrolink’s motion on the basis of
the first prong of the preemption test, holding that the drilling data at issue,
being factual, did not fall within the subject matter of copyright. Petrolink
disagrees, maintaining that even though the drilling data is not entitled to
copyright protection, the data nevertheless falls within the subject matter of
copyright. Cf. Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345, 359
(1991) (holding “it is beyond dispute that compilations of facts are within the
subject matter of copyright” even though “copyright protects only the author’s
original contributions—not the facts or information conveyed”). Indeed, we
have recognized that “the Copyright Act preempts more than it protects” and
“can preempt a state law claim even if the intellectual property lands in one of
§ 102(b)’s exclusions.” Motion Medical Techs., L.L.C. v. Thermotek, Inc., 875
F.3d 765, 773 (5th Cir. 2017) (citations omitted). This is because “Congress
intended the Copyright Act to protect some expressions but not others, and it
wrote § 301(a) to ensure that the states did not undo this decision.” Spear, 791
F.3d at 596. In any event, Digidrill does not attempt to defend the district
court’s reasoning as to prong one, presumably because to argue the drilling
data is not within the subject matter of copyright would undermine Digidrill’s
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Copyright Act and DMCA claims. Accordingly, for purposes of this appeal, we
assume without deciding that prong one is satisfied, and proceed to prong two.
Our court has not previously decided whether an unjust enrichment
claim under Texas law satisfies the extra element test. Petrolink argues
Digidrill’s unjust enrichment claim is preempted by copyright law because the
conduct at issue centers on wrongful copying, which is within the scope of
copyright law. Digidrill responds that its unjust enrichment claim is not
preempted because the extra element test is satisfied: To prevail on a Texas
unjust enrichment claim requires showing that one party has obtained a
benefit by fraud, duress, or the taking of an undue advantage.
Before addressing the parties’ dispute, we pause to summarize our recent
cases applying the extra element test to other Texas tort claims. Four years
ago in GlobeRanger, we held the Copyright Act did not preempt a Texas
misappropriation-of-trade-secrets claim. 836 F.3d at 488. GlobeRanger, a
software maker, alleged that a competitor had accessed its data, manuals, and
software while working on a project for GlobeRanger’s former client, the U.S.
Navy. Id. at 482. We explained that prong two of the preemption test “is met
when the conduct for which the plaintiff is seeking protection under state law
amounts to the copying that copyright law also proscribes.” Id. at 484. We
added that “[w]hether a claim is equivalent requires looking to the actual
alleged misconduct and not merely the elements of the state cause of action.”
Id. at 485 (citing Alcatel, 166 F.3d at 788). After carefully considering the
allegations, we found them to “go beyond . . . copying, communicating, and
transmitting.” Id. at 486. In particular, we highlighted allegations that the
defendant induced a former GlobeRanger employee to violate his nondisclosure
agreement and, further, that the defendant knew from technical manuals it
obtained that end user agreements prohibited disclosure of their contents. Id.
Moreover, we emphasized that a Texas misappropriation-of-trade-secrets
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claim requires establishing “that the protected information was taken via
improper means or breach of a confidential relationship.” Id. at 488.
Accordingly, we concluded that “the state tort provides substantially different
protection than copyright law” and “is not preempted.” Id.; accord Computer
Mgmt. Assistance Co. v. Robert F. DeCastro, Inc., 220 F.3d 396, 404 (5th Cir.
2000) (holding state law claim not preempted “[b]ecause a cause of action under
the Louisiana Unfair Trade Practices Act requires proof of fraud,
misrepresentation or other unethical conduct”).
Shortly after GlobeRanger, we decided Motion Medical, where a different
Texas business tort was at issue: unfair competition by misappropriation. 875
F.3d at 772–73. In finding the plaintiff’s state law claim preempted by the
Copyright Act, we focused on the required elements of the tort, which, as the
parties conceded, did not include an “improper means” element. Id. at 775.
Similarly, we observed that “the jury instruction never mentioned ‘improper
means,’ nor did it condition liability on a defendant’s ‘wrongful conduct beyond
mere reproduction.’” Id. (quoting GlobeRanger, 836 F.3d at 488). The plaintiff
attempted to avoid preemption by arguing that even though wrongful conduct
was not an element of the asserted unfair competition claim, the “discrete
facts” of the case showed wrongful conduct. Id. at 776. We rejected that
argument as self-defeating, clarifying that a litigant “cannot escape copyright’s
clutches” merely by asserting misconduct above and beyond that required by
the cause of action the litigant chose to assert. Id.
Applying these cases to Digidrill’s unjust enrichment claim, we hold
Digidrill’s claim is not preempted by copyright because—like the claim in
GlobeRanger—it requires establishing that Petrolink engaged in wrongful
conduct beyond mere reproduction: namely, the taking of an undue advantage.
Under Texas law an unjust enrichment claim requires showing that one party
“has obtained a benefit from another by fraud, duress, or the taking of an
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undue advantage.” 11 Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d
39, 41 (Tex. 1992) (citing Pope v. Garrett, 147 Tex. 18, 21, 24 (Tex. 1948)).
Digidrill does not allege fraud or duress, but instead contends Petrolink
obtained a benefit by taking undue advantage when it surreptitiously installed
RIG WITSML on various MWD companies’ laptop computers, causing those
MWD companies to violate the terms of their DataLogger licenses. This is the
claim Digidrill put to the jury. Like the alleged misappropriation-of-trade-
secrets claim in GlobeRanger, which required establishing improper means or
breach of a confidential relationship, Digidrill’s alleged unjust enrichment
claim requires establishing wrongful conduct—i.e., inducing the MWD
companies to violate the express terms of their DataLogger licenses—that goes
beyond mere copying.
To be sure, some Texas courts have stated that “recovery under unjust
enrichment is an equitable right and is not dependent on the existence of a
wrong” and “[u]njust enrichment occurs when the person sought to be charged
has wrongfully secured a benefit or has passively received one which it would
be unconscionable to retain.” Villarreal v. Grant Geophysical, Inc., 136 S.W.3d
265, 270 (Tex. App.—San Antonio 2004, pet. denied) (cleaned up) (emphasis
added). Faced with this language, some observers—including Petrolink—have
suggested Texas law actually recognizes two theories or species of unjust
enrichment: one for passive receipt of a benefit that would be unconscionable
11 There is some tension in the Texas courts as to whether unjust enrichment is a
cause of action or merely a theory of recovery. Compare Mowbray v. Avery, 76 S.W.3d 663,
679 (Tex. App.—Corpus Christi 2002, pet. denied) (“[U]njust enrichment is not a distinct
independent cause of action but simply a theory of recovery.”), with HECI Expl. Co. v. Neel,
982 S.W.2d 881, 891 (Tex. 1998) (treating unjust enrichment as a cause of action). We have
noted this tension before but have held—as we do again here—that “a party may still recover
under the unjust enrichment theory . . . as long as it proves that [the opposing party] obtained
a benefit . . . by fraud, duress, or the taking of an undue advantage.” Midwestern Cattle Mktg.,
L.L.C. v. Legend Bank, N. A., 800 F. App’x 239, 245 n.14 (5th Cir. 2020) (per curiam) (cleaned
up).
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to retain, and another for wrongfully securing a benefit. See George P. Roach,
Unjust Enrichment in Texas: Is It a Floor Wax or a Dessert Topping?, 65
BAYLOR L. REV. 153, 226–28 (2013). But whatever species of unjust enrichment
claims might theoretically be available in Texas, the proper object of our extra
element test is the unjust enrichment claim actually alleged. See Alcatel, 166
F.3d at 787; see also RDG Ltd. P’ship v. Gexa Corp., No. 14-04-00679-CV, 2005
WL 949171, at *4 (Tex. App.—Houston [14th Dist.] Apr. 26, 2005, no pet.)
(identifying the wrongful conduct and passive receipt theories of unjust
enrichment, but holding “they are fully compatible, and any determination on
unjust enrichment will necessarily depend upon the evidence presented in the
case”). Here, there is no dispute that the claim Digidrill put to the jury required
Digidrill to establish active unjust enrichment by means of wrongful conduct,
i.e., that Petrolink took an undue advantage when it caused Digidrill’s MWD
customers to violate their DataLogger license agreements.
Focusing the extra element test on the state law claim as actually alleged
also helps explain why courts sometimes reach different results about
copyright preemption for state-law claims of the same name. See 1 NIMMER ON
COPYRIGHT § 1.15 (2020) [hereinafter NIMMER] (“The label by which a state
statute or common law accords rights is not determinative.”). Indeed, several
of our sister circuits have held various unjust enrichment claims preempted by
the Copyright Act where the elements of the unjust enrichment claim at issue
differed from the elements under Texas law. See, e.g., Briarpatch Ltd., L.P. v.
Phoenix Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004) (New York unjust
enrichment claim preempted); Del Madera Props. v. Rhodes & Gardner, Inc.,
820 F.2d 973, 977 (9th Cir. 1987) (California unjust enrichment claim
preempted), overruled on other grounds by Fogerty v. Fantasy, Inc., 510 U.S.
517 (1994); Ehat v. Tanner, 780 F.2d 876, 878 (10th Cir. 1985) (Utah unjust
enrichment claim preempted). Unlike the present case, the unjust enrichment
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claims in these cases did not turn on active wrongful conduct such as fraud,
duress, or the taking of an undue advantage. 12
In Del Madera, for example, plaintiffs claimed that a real estate
developer was unjustly enriched when it violated an implied promise not to use
plaintiffs’ copyrighted map to develop a new subdivision. 820 F.2d at 975. The
Ninth Circuit held this claim preempted because “an implied promise not to
use or copy materials within the subject matter of copyright is equivalent to
the protection provided by section 106 of the Copyright Act.” Id. at 977. No
element in the plaintiffs’ California unjust enrichment claim required wrongful
conduct beyond unauthorized reproduction.
Several years later, however, the Ninth Circuit held a different unjust
enrichment claim not preempted by copyright. In G.S. Rasmussen &
Associates, Inc. v. Kalitta Flying Service, Inc., 958 F.2d 896 (9th Cir. 1992), an
aeronautical engineer claimed that a cargo carrier was unjustly enriched by
“free-riding” on his effort to obtain a “Supplemental Type Certificate” (“STC”)
for a particular airplane. Id. at 899–900. The engineer alleged that the carrier
declined to license the STC and instead submitted a copy of the unlicensed STC
with the carrier’s application for an airworthiness certificate. Id. at 899–901.
In reversing the district court’s finding of preemption, the Ninth Circuit
12 Similarly, some courts have held Texas unjust enrichment claims preempted by the
Copyright Act, but only where the plaintiffs’ allegations were premised solely on wrongful
copying and use. See, e.g., BHL Boresight, Inc. v. Geo-Steering Sols., Inc., No. 4:15-CV-00627,
2017 WL 2730739, at *12 (S.D. Tex. June 26, 2017) (claim preempted where allegations were
“expressly based on [d]efendants ‘access, possession, and use’ of [plaintiff’s] software and
data”); McArdle v. Mattel Inc., 456 F. Supp. 2d 769, 755, 779 (E.D. Tex. 2006) (claim
preempted where author alleged Mattel copied author’s concepts and ideas in Barbie product
line); Tavormina v. Evening Star Prods., Inc., 10 F. Supp. 2d 729, 734 (S.D. Tex. 1998) (claim
preempted where homeowners alleged movie studio replicated their house without
permission or compensation); Butler v. Cont’l Airlines, Inc., 31 S.W.3d 642, 651 (Tex. App.—
Houston [1st Dist.] 2000, pet. denied) (claim preempted where programmer alleged employer
adopted and copied his macro computer programs without compensation).
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explained that the engineer was not claiming an exclusive right to copy the
STC, but rather a “right to use the STC as a basis for obtaining an
airworthiness certificate.” Id. at 904. The court held that because “violation of
the state right is predicated upon an act incorporating elements beyond mere
reproduction or the like, there is no preemption.” Id. (citation omitted).
What matters, then, is the nature of the unjust enrichment claim
actually alleged. Cf. 1 NIMMER § 1.15[F][4] (“As always . . . it is the underlying
reality, rather than the label, that is decisive.”). 13 Returning to the present
case, Digidrill’s unjust enrichment claim is more like the claim in G.S.
Rasmussen than like the one in Del Madera. Had Digidrill merely alleged that
Petrolink obtained a benefit at Digidrill’s expense by engaging in unauthorized
copying, Digidrill’s claim might well have been preempted by copyright law.
But instead, Digidrill premised its unjust enrichment claim on a further
element: that Petrolink’s benefit was obtained by “the taking of an undue
advantage,” i.e., by causing Digidrill’s MWD customers to violate the terms of
their DataLogger licenses. Because Digidrill’s unjust enrichment claim, as
alleged, incorporates an element beyond mere unauthorized copying, the claim
is not preempted.
The upshot is that our holding on the issue of copyright preemption is
limited to the particular state-law allegations presented in this case. We leave
open the possibility that other unjust enrichment claims—even those brought
13 We recognize the Nimmer treatise teaches that, generally speaking, “a state-law
cause of action for unjust enrichment or quasi contract should be regarded as an ‘equivalent
right’ and, hence, preempted insofar as it applies to copyright subject matter.” 1 NIMMER
§ 1.15[G]. The treatise properly critiques courts that have regarded a defendant’s “accepting”
the benefit of copying a protected work as sufficient to constitute the extra element necessary
to avoid preemption. Id. Yet the treatise acknowledges that some unjust enrichment claims,
such as those premised on deception, may not be preempted. Id. The same can be said for a
Texas unjust enrichment claim premised on “fraud, duress, or the taking of an undue
advantage,” like Digidrill’s claim sub judice.
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under Texas law—might indeed be preempted by the Copyright Act. Digidrill’s,
though, is not.
2.
Having determined that Digidrill’s unjust enrichment claim is not
preempted by the Copyright Act, we next consider Petrolink’s assertion that
Digidrill’s claim fails as a matter of state law. Petrolink argues that under
Texas law there can be no “taking of an undue advantage” against a competitor
where the defendant acts within its legal rights, as Petrolink claims to have
done here. Petrolink relies chiefly on our holding in Harris County Texas v.
MERSCORP Inc., 791 F.3d 545 (5th Cir. 2015), which Petrolink interprets as
saying that compliance with the law is “dispositive” against an unjust
enrichment claim. In response, Digidrill submits that the taking of an undue
advantage does not require the violation of a law or legal duty. Digidrill, for its
part, attempts to walk a fine line in its briefing. On the one hand, Digidrill
unequivocally asserts a theory of unjust enrichment that requires wrongful
conduct, i.e., “fraud, duress, or the taking of an undue advantage,” because
without such an element Digidrill’s state law claim is almost certainly
preempted. On the other hand, Digidrill is committed to the view that an
unjust enrichment claim does not require the violation of a law or legal duty,
since to say otherwise would sink Digidrill on the issue of liability.
We hold that the available Texas authorities do not foreclose the
possibility that a litigant may show the taking of an undue advantage without
showing the violation of a law or legal duty; therefore, the district court did not
err in denying Petrolink’s motions for JMOL. To be sure, the phrase “taking of
an undue advantage” is not well-defined in Texas law. Courts have found an
undue advantage where the offending party took advantage of a position of
trust. See, e.g., Chesapeake La., L.P. v. Buffco Prod., Inc., No. 2:10-CV-359
(JRG), 2012 WL 2505574, at *5 (E.D. Tex. June 28, 2012), aff’d in part, vacated
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in part, 564 F. App’x 751 (5th Cir. 2014). Courts have also found “undue
advantage” where the offending party did not pay for delivered goods and
services. See, e.g., Team Healthcare/Diagnostic Corp. v. Blue Cross & Blue
Shield of Tex., No. 3:10-CV-1441-BH, 2012 WL 1617087, at *7 (N.D. Tex. May
7, 2012). More to the point, some courts appear to have denied recovery under
an unjust enrichment theory just because the defendant did not violate a law
or legal duty. See, e.g., MERSCORP, 791 F.3d at 561; Shin v. Sharif, No. 2-08-
347-CV, 2009 WL 1565028, at *7 (Tex. App.—Fort Worth 2009, no pet.);
Villarreal, 136 S.W.3d at 270. But while MERSCORP, Shin, and Villarreal can
be read as suggesting that the absence of a violation of law or a legal duty can
sometimes be fatal to a Texas claim for unjust enrichment, e.g., where the
violation is the only wrongful conduct alleged, these cases do not stand for a
rule that “the taking of an undue advantage” always requires a violation of law
or a legal duty.
In MERSCORP, several Texas counties alleged that mortgage lenders
such as Bank of America were unjustly enriched when they avoided certain
filing fees associated with recording deeds of trust by using MERS, an
electronic registry enabling member institutions to transfer promissory notes
without the need for a new deed of trust. 791 F.3d at 561. Despite plaintiffs’
arguments to the contrary, we concluded that Texas law did not impose a duty
to record assignments of promissory notes or deeds of trust. Id. at 556. Based
on that holding, we rejected plaintiffs’ unjust enrichment claim, tied as it was
to plaintiffs’ view that Texas law imposed a duty to record deeds of trusts and
assignments. Id. at 561.
In Shin, the buyer of a tire business alleged the seller was unjustly
enriched when he transferred inventory to his competing tire business and
deposited checks made out to the buyer in his own account. 2009 WL 1565028,
at *7. The Texas appellate court understood the unjust enrichment claim to
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“rel[y] on” breach of a “territorial exclusivity agreement” and/or conversion of
the checks. Id. Because the court found no valid, enforceable territorial
agreement and no evidence of conversion by the seller, the court concluded
there was no evidence of “fraud, duress, or the taking of an undue advantage.”
Id. Accordingly, the court rejected the buyer’s unjust enrichment claim. Id.
Finally, in Villarreal, owners of a mineral estate sued two seismic
surveyors, claiming the surveyors trespassed on their mineral estate when
conducting 3-D seismic surveys nearby, and that in doing so the surveyors
acquired data about the mineral estate. 136 S.W.3d at 267. The state court
held that, because the surveyors did not physically invade the surface estate
above the mineral estate, there was no geophysical trespass. Id. at 270. The
court then rejected the owners’ unjust enrichment claim, stating that “since a
trespass did not occur under current Texas law, [the surveyors] did not
wrongfully secure a benefit.” Id.
Taken together, these decisions demonstrate that where a plaintiff’s
unjust enrichment claim is premised on allegations of illegal conduct, a finding
that no illegal conduct occurred necessarily dooms the unjust enrichment
claim. Yet these cases, in which the courts focused on the facts before them
rather than offering a larger rule about legal violations, do not establish that
all undue advantage claims must be premised on illegal conduct. These
authorities leave open the possibility that litigants may elect to premise their
unjust enrichment claims on conduct that, while not illegal, is nevertheless
wrongful, unethical, or otherwise unjust. Here, Digidrill did exactly that.
Digidrill’s unjust enrichment claim turns on its contention that when Petrolink
installed RIG WITSML on various MWD companies’ computers, it
wrongfully—but not illegally—induced those companies to violate the terms of
their DataLogger licenses. Indeed, the district court specifically instructed the
jury that Digidrill, in its unjust enrichment claim, was not accusing Petrolink
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of violating any statute or committing any criminal act. In other words, the
jury was asked to find that Petrolink engaged in wrongful conduct—the taking
of an undue advantage—even though Petrolink did not violate a law or legal
duty. Nothing in Petrolink’s cited authorities prohibited the jury from making
such a finding. Thus, the district court did not err in denying Petrolink’s
motions for JMOL on the question of liability.
3.
That brings us to Petrolink’s further argument that the district court
nevertheless erred in denying its motions for JMOL because Digidrill
presented insufficient evidence to support monetary recovery for its unjust
enrichment claim. In Texas “[a]n action for unjust enrichment is based upon
the equitable principle that a person receiving benefits which were unjust for
him to retain ought to make restitution.” Nationscredit Corp. v. CSSI, Support
Grp., Inc., No. 05-99-01612-CV, 2001 WL 200147, at *6 (Tex. App.—Dallas
Mar. 1, 2001, no pet.). As noted, “[a] party may recover under the unjust
enrichment theory when one person has obtained a benefit from another by
fraud, duress, or the taking of an undue advantage.” Heldenfels, 832 S.W.2d at
41 (emphasis added). At trial on Digidrill’s unjust enrichment claim, Question
3 of the verdict form asked the jury: “What is the value of the benefit, if any,
you find that Defendant Petrolink obtained from Plaintiff Digital Drilling as a
result of [the taking of an undue advantage]?” The jury answered:
“$414,940.00”—the amount of revenue from EOG that Petrolink attributed to
its RIG WITSML program.
Petrolink argues that the district court erred in denying Petrolink’s
motion for JMOL because there was no legally sufficient evidence of the value
of the benefit Petrolink obtained from Digidrill. According to Petrolink, the
only benefit it received from Digidrill was the corrected drilling data itself, not
the revenues for its PetroVault visualization service, which included many
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other features. Moreover, Petrolink claims that Digidrill was required to
adduce evidence of Petrolink’s profits from PetroVault, not merely its revenues.
Digidrill responds that while the benefit Petrolink obtained was indeed the
corrected drilling data, the value of that benefit was the revenue generated by
PetroVault. Further, Digidrill contends that even if PetroVault included “other
bells and whistles,” the jury’s choice to ignore such evidence does not merit
reversal since this court should uphold the jury’s finding if it is supported by
any legally sufficient evidence.
We agree with Digidrill that the jury’s damages award should be
affirmed because it is supported by some evidence. At trial, the jury heard
testimony that Petrolink installed RIG WITSML at hundreds of well sites
operated by EOG, one of Petrolink’s biggest customers. Evidence also indicated
that after Petrolink was enjoined from using RIG WITSML, EOG switched
over to Digidrill for visualization services. Therefore, the jury was entitled to
find that the value of the benefit Petrolink received from its taking of an undue
advantage was equivalent to the revenue Petrolink received from selling its
PetroVault visualization service during the period when Petrolink was
installing RIG WITSML at well sites operated by EOG and others. And in any
event, the $414,940 from which the jury derived its award did not represent
Petrolink’s total revenue from selling its PetroVault visualization services to
EOG, but rather the small fraction of that revenue—which totaled some $2.8
million—Petrolink itself attributed specifically to the RIG WITSML program.
Petrolink makes much of Digidrill’s failure to adduce evidence of
Petrolink’s expenses, arguing that a plaintiff has the burden to do so “where
profits is the measure of damages.” But Petrolink cites no authority
establishing that, under Texas law, damages for unjust enrichment are to be
measured in terms of lost profits. To the contrary, the theory of recovery in an
unjust enrichment claim is not that a defendant interfered with plaintiff’s
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profits, but that a defendant received a benefit from plaintiff for which the
defendant ought in good conscience to have paid. See Nationscredit Corp., 2001
WL 200147, at *6 (“Recovery [on an unjust enrichment claim] is based on
fundamental principles of justice or equity and good conscience which give rise
to an implied or quasi-contract to repay the party from which the benefit was
received.”).
Moreover, even if the jury should have deducted Petrolink’s expenses in
calculating unjust enrichment damages, the total award is nevertheless
supported by at least some evidence. Materials presented at trial suggested
Petrolink may have underreported the total number of well sites where it
installed RIG WITSML. And, even on Petrolink’s reported list, 37 of the listed
well sites were not operated by EOG. In other words, there was some evidence
that the benefit Petrolink received from taking an undue advantage exceeded
the EOG revenues Petrolink attributed to its RIG WITSML program. “[T]he
issue is not how the jury arrived at its exact amount of damages; rather, the
issue is whether the jury’s amount is supported by some evidence.” Helm v.
Landry Serv. Co., No. 01-94-00348-CV, 1995 WL 319014, at *6 (Tex. App.—
Houston [1st Dist.] May 25, 1995, writ denied) (affirming unjust enrichment
award equivalent to amount paid for business, even though defendants
represented only 3 of 12 shareholders, because evidence showed other unjust
profits before sale).
In sum, because there is at least some evidence supporting the award of
$414,940, we affirm the district court’s denial of Petrolink’s JMOL on the issue
of whether Digidrill adduced sufficient evidence of the benefit Petrolink
obtained from Digidrill.
D.
Finally, we tackle Petrolink’s claim that the district court abused its
discretion by denying Petrolink’s motion for attorneys’ fees under the
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Copyright Act and DMCA. The Copyright Act and DMCA give courts discretion
to award “reasonable” attorneys’ fees to the “prevailing party” in cases brought
under either Act. 17 U.S.C. §§ 505, 1203(b)(5). Such fee awards encourage the
types of lawsuits that promote the statutes’ purposes, i.e., “encouraging and
rewarding authors’ creations while also enabling others to build on that work.”
Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979, 1986 (2016).
The Supreme Court has recognized that § 505 gives “broad leeway” to
courts, and does so without specifying any “guideposts” to use. Id. at 1984–85.
Nevertheless, the Court has set forth several criteria and principles for courts
to follow. See id. In Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), the Court
imposed two restrictions on courts’ broad discretion. First, courts must not
simply award fees to the prevailing party as a matter of course. Id. at 533.
Second, courts must treat prevailing plaintiffs and prevailing defendants alike,
rather than holding defendants to a more stringent standard. Id. at 534–35. In
addition, the Court listed “several nonexclusive factors to guide courts’
discretion,” including “frivolousness, motivation, objective unreasonableness
(both in the factual and in the legal components of the case) and the need in
particular circumstances to advance considerations of compensation and
deterrence.” 14 Id. at 534 n.19 (citation omitted). More recently, the Supreme
Court counseled that courts “should give substantial weight to the objective
reasonableness of the losing party’s position.” Kirtsaeng, 136 S. Ct. at 1983.
That said, the Court emphasized that “objective reasonableness can be only an
important factor in assessing fee applications—not the controlling one.” Id. at
14 Although Fogerty concerned an award of fees under § 505 of the Copyright Act,
courts have treated Fogerty’s standards as equally relevant to the DMCA. See, e.g., Energy
Intelligence Grp., Inc. v. Kayne Anderson Capital Advisors, L.P., No. CV H-14-1903, 2018 WL
2048896, at *12–16 (S.D. Tex. May 2, 2018), vacated on other grounds, 948 F.3d 261 (5th Cir.
2020).
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1988; see also id. at 1989 (cautioning against “turning ‘substantial’ into more
nearly ‘dispositive’ weight”).
We have not yet had occasion to apply Kirtsaeng. However, even against
the backdrop of Fogerty’s admonition that fees should not be awarded to
prevailing parties as a matter of course, we have repeatedly stated that “an
award of attorney’s fees to the prevailing party in a copyright action is the rule
rather than the exception and should be awarded routinely.” Virgin Records,
512 F.3d at 726 (internal quotation marks and citation omitted); see also Hunn
v. Dan Wilson Homes, Inc., 789 F.3d 573, 588–89 (5th Cir. 2015).
Petrolink argues that even though Digidrill prevailed on its unjust
enrichment claim, “Petrolink won a complete victory on the copyright and
DMCA claims” and was therefore the “prevailing party” under §§ 505 and
1203(b). 15 Petrolink submits that whether Digidrill prevailed on any non-
copyright claim is irrelevant to the prevailing party analysis under the
Copyright Act and DMCA.
We agree with Petrolink. In denying Petrolink’s post-trial motion for
attorneys’ fees, the district court stated only that “costs and fees will not be
assessed against either party as both prevailed on different issues.” It is
difficult to make sense of this language in light of the fact that Petrolink only
sought fees related to Digidrill’s copyright and DMCA claims, on which
Petrolink clearly and solely prevailed. It matters not whether Digidrill
ultimately prevailed on its state law unjust enrichment claim. See Balsley v.
LFP, Inc., 691 F.3d 747, 772–74 (6th Cir. 2012) (affirming fee award to party
who prevailed on one copyright claim, agreed to dismiss two other copyright
15Petrolink did not move for attorneys’ fees related to Digidrill’s other claims, but
rather only for the work Petrolink did on the copyright and DMCA claims up until the district
court granted summary judgment.
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claims without prejudice, and lost on four state law claims). The failure of
Petrolink’s copyright preemption argument does not undermine this result, but
rather confirms that the sole claim on which Digidrill prevailed—unjust
enrichment—was not a copyright infringement claim. Cf. Bridgeport Music,
Inc. v. Diamond Time, Ltd., 371 F.3d 883, 893 (6th Cir. 2004) (affirming fee
award because “when a defendant succeeds in having summary judgment
entered in its favor on the copyright infringement claims asserted against it,
that defendant can only be described as having ‘prevailed’” regardless of
separate copyright preemption issue). Besides, a litigant may be a prevailing
party under § 505 even if the party fails to prevail “in full” on its copyright
claims. See Thoroughbred Software Int’l, Inc. v. Dice Corp., 488 F.3d 352, 362
(6th Cir. 2007); see also 4 NIMMER § 14.10[B][3].
Not only did the district court erroneously treat Petrolink as though it
was not the sole prevailing party on the copyright claims, the court also failed
to apply the correct legal standard set forth in Fogerty. We have on occasion
affirmed a district court’s refusal to award fees to the prevailing party in a
copyright case, but only where the district court laid out the Fogerty factors
and “then applied those factors to the facts of th[e] case and determined that
they weighed against awarding attorney’s fees.” Virgin Records, 512 F.3d at
726; see also Baisden v. I’m Ready Prods., Inc., 693 F.3d 491, 510 (5th Cir.
2012); Positive Black Talk Inc. v. Cash Money Records Inc., 394 F.3d 357, 381–
82 (5th Cir. 2004), abrogated on other grounds by Reed Elsevier, Inc. v.
Muchnick, 559 U.S. 154 (2010); Creations Unltd., Inc. v. McCain, 112 F.3d 814,
817 (5th Cir. 1997) (per curiam). On the other hand, we have vacated and
remanded a fee award where “[t]he district court did not consider any of the
four factors set forth in Fogerty.” Galiano v. Harrah’s Operating Co., 416 F.3d
411, 423 (5th Cir. 2005). Here, as noted, the district court failed to cite or
acknowledge the correct legal standard announced in Fogerty, let alone apply
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any of the Fogerty factors to the facts of the case. The district court’s failure to
identify or apply the correct legal standard—on an issue worth nearly three
times the value of the jury award—constitutes an abuse of discretion. See
Virgin Records, 512 F.3d at 725.
Because the district court both failed to treat Petrolink as the prevailing
party under the statutes and failed to apply the correct legal standard from
Fogerty, we vacate the district court’s denial of Petrolink’s motion for fees and
remand for the district court to properly analyze the motion. 16 Although the
district court may, on remand, exercise its discretion to deny Petrolink’s motion
for fees, “[t]he district court should provide a Fogerty analysis in its ensuing
opinion so that its ruling can, if needed, be reviewed on appeal.” Galiano, 416
F.3d at 423.
***
For the foregoing reasons, we AFFIRM the district court’s summary
judgment as to Digidrill’s copyright and DMCA claims. We also AFFIRM the
district court’s denial of Petrolink’s motions for JMOL. However, we VACATE
the district court’s order denying Petrolink’s motion for attorneys’ fees under
the Copyright Act and DMCA, and REMAND for the district court to reconsider
that motion in light of this opinion.
16 Because we remand for the district court to reconsider Petrolink’s motion for
attorneys’ fees under the Copyright Act and DMCA, we need not reach Petrolink’s further
argument that Digidrill’s copyright claims were objectively unreasonable. We express no view
on that issue.
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