JCW Investments Inc v. Novelty Incorporated

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-2498
JCW INVESTMENTS, INC., d/b/a Tekky Toys,
Plaintiff-Appellee,
v.
NOVELTY, INC.,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 02 C 4950—Robert W. Gettleman, Judge.
____________
ARGUED FEBRUARY 21, 2006—DECIDED MARCH 20, 2007
____________
Before MANION, WOOD, and EVANS, Circuit Judges.
WOOD, Circuit Judge. Meet Pull My Finger® Fred. He
is a white, middle-aged, overweight man with black hair
and a receding hairline, sitting in an armchair wearing
a white tank top and blue pants. Fred is a plush doll
and when one squeezes Fred’s extended finger on his
right hand, he farts. He also makes somewhat crude,
somewhat funny statements about the bodily noises he
emits, such as “Did somebody step on a duck?” or “Silent
but deadly.”
Fartman could be Fred’s twin. Fartman, also a plush
doll, is a white, middle-aged, overweight man with black
hair and a receding hairline, sitting in an armchair
2 No. 05-2498
wearing a white tank top and blue pants. Fartman (as his
name suggests) also farts when one squeezes his extended
finger; he too cracks jokes about the bodily function. Two
of Fartman’s seven jokes are the same as two of the 10
spoken by Fred. Needless to say, Tekky Toys, which
manufactures Fred, was not happy when Novelty, Inc.,
began producing Fartman, nor about Novelty’s produc-
tion of a farting Santa doll sold under the name Pull-My-
Finger Santa.
Tekky sued for copyright infringement, trademark
infringement, and unfair competition and eventually won
on all claims. The district court awarded $116,000 based
on lost profits resulting from the copyright infringement,
$125,000 in lost profits attributable to trademark infringe-
ment, and $50,000 in punitive damages based on state
unfair competition law. The district court then awarded
Tekky $575,099.82 in attorneys’ fees. On appeal, Novelty
offers a number of arguments for why it should not be
held liable for copyright infringement, argues that Illi-
nois’s punitive damages remedy for unfair competition is
preempted by federal law, and contends that the attor-
neys’ fees awarded by the district court should have been
capped according to Tekky’s contingent-fee arrangement
with its attorneys. For the reasons set forth below, we
affirm.
I
Somewhat to our surprise, it turns out that there is a
niche market for farting dolls, and it is quite lucrative.
Tekky Toys, an Illinois corporation, designs and sells a
whole line of them. Fred was just the beginning. Fred’s
creators, Jamie Wirt and Geoff Bevington, began working
on Fred in 1997, and had a finished doll in 1999. They
applied for a copyright registration on Fred as a “plush toy
with sound,” and received a certificate of copyright on
No. 05-2498 3
February 5, 2001; later, they assigned the certificate to
Tekky. In the meantime, Tekky sent out its first Fred dolls
to distributors in 1999. By the time this case arose, in
addition to Fred, Tekky’s line of farting plush toys had
expanded to Pull My Finger® Frankie (Fred’s blonde,
motorcycle-riding cousin), Santa, Freddy Jr., Count
Fartula (purple, like the Count on Sesame Street), and Fat
Bastard (character licensed from New Line Cinema’s
“Austin Powers” movies), among others. By March 2004,
Tekky had sold more than 400,000 farting dolls.
Novelty, a privately held Indiana corporation, is owned
by Todd Green, its president. Green testified in his
deposition, “any time we’d create an item, okay, we try to
copy—or try to think of some relevant ideas.” Novelty
personnel go to trade shows and take pictures of other
companies’ products, seeking “ideas” for their own. In early
2001, Green visited the Hong Kong showroom of TL Toys,
a manufacturer of Tekky’s Fred doll, and he spotted Fred.
In his deposition, Green testified that he might have
photographed Fred since “[i]t wouldn’t be unusual for us
to photograph everything we see.” Green admits that his
idea for Fartman was based on Fred and that he described
his idea to Mary Burkhart, Novelty’s art director, who
prepared a drawing based on Green’s description. Accord-
ing to Burkhart, Green wanted “a plush doll that
would . . . fart and shake. . . . And make a sound . . . a
hillbilly-type guy, sitting in a chair that would fart and
be activated by actually pulling his finger.” Typically,
Novelty would assign the job of drawing a new product
to an artist, such as Burkhart, and the artist would
then take her drawing to Green for his approval. That
was the procedure it followed for Fartman. Novelty be-
gan to manufacture plush farting dolls around October 8,
2001; the first doll it released was the one it called Pull-
My-Finger Santa. Fartman hit the stores one month later,
on November 5, 2001.
4 No. 05-2498
Tekky first learned of Fartman in March 2002; three
months later it filed this suit. In September 2002, the
district court granted a preliminary injunction, halting
Novelty’s sales of Fartman and his smaller relative
Fartboy. After the parties filed cross-motions for partial
summary judgment, the district court granted Tekky’s
motion and found that Novelty had infringed Tekky’s
copyright when it copied Fred in order to create Fartman.
The case then went to trial on several issues: damages for
the copyright infringement, liability and damages for
trademark infringement, and related state law claims. The
jury found Novelty liable for trademark infringement for
using the phrase “Pull My Finger” to sell the farting Santa
dolls and found that Novelty’s conduct was willful and
wanton, justifying an award of punitive damages under
Illinois’s unfair competition law. The jury awarded
$116,000 in damages for the copyright infringement,
$125,000 for the trademark infringement, and $50,000 in
punitive damages under state unfair competition law. On
post-trial motions, the district court granted Tekky’s
request for prejudgment interest and ruled that Tekky was
entitled to “its full attorneys’ fees.” After the filing of
Tekky’s fee petition and prior to the filing of a notice of
appeal, the district court tolled the period for filing a
notice of appeal in this case, following the procedure
outlined in Federal Rule of Civil Procedure 58(c)(2) and
Federal Rule of Appellate Procedure 4(a)(4)(A)(iii). See
Wikol ex rel. Wikol v. Birmingham Public Schools Bd. of
Educ., 360 F.3d 604, 607-08 (6th Cir. 2004). The district
court also appointed a special master to deal with the
litigation over attorneys’ fees, and that special master
recommended awarding $596,399.82 to Tekky. Novelty
objected, and the district court ultimately awarded
$575,099.82. Following the award of attorneys’ fees,
Novelty filed a timely notice of appeal.
No. 05-2498 5
II
A
We begin with the district court’s finding that Novelty
violated Tekky’s copyright when it created Fartman. As
with any grant of summary judgment, partial or otherwise,
we review the district court’s decision de novo, viewing
the facts in the light most favorable to the nonmoving
party. See Valentine v. City of Chicago, 452 F.3d 670, 677
(7th Cir. 2006).
To establish copyright infringement, one must prove two
elements: “(1) ownership of a valid copyright, and (2)
copying of constituent elements of the work that are
original.” Feist Publications, Inc. v. Rural Telephone
Service Co., Inc., 499 U.S. 340, 361 (1991). What is re-
quired for copyright protection is “some minimal degree of
creativity,” or “the existence of . . . intellectual production,
of thought, and conception.” Id. at 362 (quoting Bur-
row-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 59-60
(1884)). Generally, copyright protection begins at the
moment of creation of “original works of authorship fixed
in any tangible medium of expression,” including “pictorial,
graphic, and sculptural” works and sound recordings. 17
U.S.C. § 102(a). A work is “fixed” in a tangible medium of
expression “when its embodiment in a copy . . . is suffi-
ciently permanent or stable to permit it to be perceived,
reproduced, or otherwise communicated for a period of
more than transitory duration.” 17 U.S.C. § 101. See Toney
v. L’Oreal USA, Inc., 406 F.3d 905, 909 (7th Cir. 2005).
The owner of a copyright may obtain a certificate of
copyright, which is “prima facie evidence” of its validity. 17
U.S.C. § 410(c). See Wildlife Express Corp. v. Carol Wright
Sales, Inc., 18 F.3d 502, 507 (7th Cir. 1994).
Once it is established that a party has a valid copyright,
whether registered or not, the next question is whether
another person has copied the protected work. Copying
6 No. 05-2498
may be proven by direct evidence, but that is often hard to
come by. In the alternative, copying may be inferred
“where the defendant had access to the copyrighted work
and the accused work is substantially similar to the
copyrighted work.” Susan Wakeen Doll Co., Inc. v. Ashton
Drake Galleries, 272 F.3d 441, 450 (7th Cir. 2001) (quoting
Atari, Inc. v. N. Am. Philips Consumer Elecs. Corp., 672
F.2d 607, 614 (7th Cir. 1982)). See also Ty, Inc. v. GMA
Accessories, Inc., 132 F.3d 1167, 1169-70 (7th Cir. 1997). It
is not essential to prove access, however. If the “two works
are so similar as to make it highly probable that the later
one is a copy of the earlier one, the issue of access need not
be addressed separately, since if the later work was a copy
its creator must have had access to the original.” Ty, Inc.,
132 F.3d at 1170. “The more a work is both like an already
copyrighted work and—for this is equally
important—unlike anything that is in the public domain,
the less likely it is to be an independent creation.” Id. at
1169 (emphasis in original). If the inference of copying is
drawn from proof of access and substantial similarity, it
can be rebutted if the alleged copier can show that she
instead “independently created” the allegedly infringing
work. Susan Wakeen Doll Co., 272 F.3d at 450. “A defen-
dant independently created a work if it created its own
work without copying anything or if it copied something
other than the plaintiff ’s copyrighted work.” Id. (citing 3
MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON
COPYRIGHT § 12.11[D], at 12-175 (2001)).
Novelty contends that the district court protected too
much of Tekky’s toy—not just the expression but the
idea or common elements known as scènes à faire, which
we defined in Atari as “incidents, characters or settings
which are as a practical matter indispensable or at least
standard, in the treatment of a given topic.” 672 F.2d at
616. Novelty also takes issue with the district court’s
finding that it had access to Fred, that Burkhart copied
No. 05-2498 7
rather than independently created Fartman, and that
Fred and Fartman were substantially similar. As we
explain below, we are unpersuaded. Tekky had a valid
copyright in Fred, Novelty (the company) indisputably did
have access to Fred, and the two dolls are so similar
that the inference of copying even without access is ir-
resistible.
Novelty does not argue that Tekky lacks a valid copy-
right in Fred or that Fred is so lacking in creativity that
a copyright could not attach. Indeed, Fred is a far cry
from a noncreative compilation of facts such as the tele-
phone book in Feist. Here, we have a creative doll and a
valid copyright registration. There is no doubt that there
is a valid copyright. How much creativity Fred reflects
and what ideas he embodies (as opposed to the way he
expresses those ideas) merely help us to decide whether
we can infer copying from substantial similarity.
It is notable that Green, Novelty’s president, admits that
he saw and perhaps photographed Fred, and that Fred
gave him the idea for Fartman. While Burkhart denies
having seen Fred or even a picture of him, she drew the
model for Fartman at Green’s direction. Moreover, Fred
was already on the market in the United States at the
time Fartman was created. In Moore v. Columbia Pictures
Industries, Inc., 972 F.2d 939, 942 (8th Cir. 1992), the
Eighth Circuit found that a “reasonable possibility of
access can be established under the ‘corporate receipt
doctrine,’ ” under which:
if the defendant is a corporation, the fact that one
employee of the corporation has possession of plain-
tiff ’s work should warrant a finding that another
employee (who composed defendant’s work) had access
to plaintiff ’s work, where by reason of the physical
propinquity between the employees the latter has the
opportunity to view the work in the possession of the
former.
8 No. 05-2498
Id. (quoting 3 NIMMER ON COPYRIGHT § 13.02[A]). In this
case, Novelty’s president saw Fred, directed that the
artist draw a figure that looks like Fred, and from that
drawing approved the manufacture of Fartman. On those
facts, the corporate receipt doctrine may just be icing on
the cake; the fact that Green directed Burkhart as she
created the drawing, rather than taking pencil in hand
and sketching it himself, is immaterial. Novelty plainly
had access to Fred and used that access in the manufac-
ture of Fartman.
Even if access existed, Tekky had to show substantial
similarity between the two items in order to support an
inference of copying. The test for substantial similarity
is an objective one. See Incredible Technologies, Inc. v.
Virtual Technologies, Inc., 400 F.3d 1007, 1011 (7th Cir.
2005) (noting that we look at “whether the accused work
is so similar to the plaintiff ’s work that an ordinary
reasonable person would conclude that the defendant
unlawfully appropriated the plaintiff ’s protectable expres-
sion by taking material of substance and value”). We
look at the dolls themselves to determine substantial
similarity; to give the reader some idea of what the dispute
is about, we have attached as an Appendix to this opinion
a photograph from the record that depicts Fred, Fartman,
and Fartboy. The pictures show that the similarities
between Fred and Fartman go far beyond the fact that
both are plush dolls of middle-aged men sitting in arm-
chairs that fart and tell jokes. Both have crooked smiles
that show their teeth, balding heads with a fringe of
black hair, a rather large protruding nose, blue pants that
are identical colors, and white tank tops. On the other
hand, Fartman has his name emblazoned in red across his
chest, his shoes are a different color from Fred’s, as is his
chair, and Fartman wears a hat. In the end, despite the
small cosmetic differences, the two dolls give off more than
a similar air. The problem is not that both Fred and
No. 05-2498 9
Fartman have black hair or white tank tops or any other
single detail; the problem is that the execution and
combination of features on both dolls would lead an
objective observer to think they were the same. See Mattel,
Inc. v. Goldberger Doll Mfg. Co., 365 F.3d 133, 136-37 (2d
Cir. 2004). We conclude that no objective person would find
these dolls to be more than minimally distinguishable. To
the contrary, they are substantially similar. That, in
combination with Green’s access, compels an inference of
copying. Indeed, the dolls are so similar that an inference
of copying could be drawn even without the evidence of
access. See Bucklew v. Hawkins, Ash, Baptie & Co., LLP,
329 F.3d 923, 926 (7th Cir. 2003).
Novelty contends that rather than copy, it merely made
a similar doll based on the same comic archetype, that of
“a typical man wearing jeans and a T-shirt in a chair doing
the ‘pull my finger’ joke.” That, Novelty argues, is the
idea, not the expression, and the reason that the two
dolls are similar is they are both based on that idea. The
district court found that Novelty tried to shoehorn too
much into the “idea” and that the only idea here is that of
a “plush doll that makes a farting sound and articulates
jokes when its finger is activated.” As the district court
put it:
Fred—a smiling, black-haired balding Caucasian male,
wearing a white tank top and blue pants, reclining
in a green armchair, who makes a farting sound,
vibrates and utters phrases such as “Did somebody
step on a duck?” and “Silent but deadly” after the
protruding finger on his right hand is pinched—is
plaintiff ’s expression of that idea.
It is, of course, a fundamental tenet of copyright law that
the idea is not protected, but the original expression of the
idea is. See Feist, 499 U.S. at 348-49. Although it is not
always easy to distinguish idea from expression, by the
same token the task is not always hard. Novelty urges
10 No. 05-2498
that the similarity of the two dolls reflects the fact that
Fred himself is only minimally creative, representing a
combination of elements that were in the public domain or
were scènes à faire. The problem with this argument is
that the very combination of these elements as well as the
expression that is Fred himself are creative.
Novelty wants us to take the entity that is Fred, subtract
each element that it contends is common, and then con-
sider whether Novelty copied whatever leftover compo-
nents are creative. But this ignores the fact that the
details—such as the appearance of Fred’s face or even his
chair—represent creative expression. It is not the idea
of a farting, crude man that is protected, but this particu-
lar embodiment of that concept. Novelty could have created
another plush doll of a middle-aged farting man that would
seem nothing like Fred. He could, for example, have a
blond mullet and wear flannel, have a nose that is drawn
on rather than protruding substantially from the rest of
the head, be standing rather than ensconced in an arm-
chair, and be wearing shorts rather than blue pants. To
see how easy this would be, one need look no further than
Tekky’s Frankie doll, which is also a plush doll, but differs
in numerous details: he is not sitting, and he has blond
hair, a tattoo, and a red-and-white striped tank. Frankie
is not a copy of Fred. Fartman is. We have no trouble
concluding that the district court properly granted partial
summary judgment to Tekky on the issue of liability for
copyright infringement.
B
The jury found Novelty liable for trademark infringe-
ment because Novelty used the words “Pull My Finger” to
sell its farting Santa dolls, and this use infringed Novelty’s
mark for those words as related to plush dolls. The jury
found that action to be willful, justifying the award of
No. 05-2498 11
$50,000 in punitive damages under Illinois common law.
On appeal, Novelty contends that the Lanham Act pre-
empts the state law provision permitting punitive dam-
ages, although it admits that such a holding would be “an
extension of the law.”
Whether federal law preempts state law is a question
we review de novo. See Toney, 406 F.3d at 907-08. In 1992,
this court in Zazú Designs v. L’Oréal, S.A., 979 F.2d 499
(7th Cir. 1992), expressed concern about the award of
punitive damages in a trademark suit:
Punitive damages are problematic because the
Lanham Act, although providing for the trebling of
compensatory damages, forbids other penalties. The
district court found a punitive award authorized by
the laws of Illinois without explaining where one
finds such authorization. The parties have been of no
greater assistance. Because some old cases say that
Illinois law supports punitive damages in trademark
cases, and L’Oréal has not asked us to revisit the
subject, we press forward.
Id. at 507 (internal citations omitted). In Zelinski v.
Columbia 300, Inc., 335 F.3d 633, 641 (7th Cir. 2003), we
assumed that punitive damages were available under
Illinois law but found that the defendant there had not
acted willfully so as to merit them. The magistrate judge
in this case noted that this remained an “issue of first
impression” because “[o]ther courts have upheld awards of
punitive damages for unfair competition when a compensa-
tory award was also given under the Lanham Act, but
none of the courts discussed whether punitive damages
should be available.”
Federal law preempts state law in three situations: (1)
when the federal statute explicitly provides for preemp-
tion; (2) when Congress intended to occupy the field
12 No. 05-2498
completely; and (3) “where state law stands as an obstacle
to the accomplishment and execution of the full purposes
and objectives of Congress.” Sprietsma v. Mercury Marine,
537 U.S. 51, 64-65 (2002) (internal quotation marks and
citations omitted). In this case, only the third option is
applicable. The Lanham Act provides:
When a violation of any right of the registrant of a
mark registered in the Patent and Trademark Office,
a violation under section 1125(a) or (d) of this title, or
a willful violation under section 1125(c) of this title,
shall have been established in any civil action arising
under this chapter, the plaintiff shall be entitled,
subject to the provisions of sections 1111 and 1114 of
this title, and subject to the principles of equity, to
recover (1) defendant’s profits, (2) any damages sus-
tained by the plaintiff, and (3) the costs of the action.
The court shall assess such profits and damages or
cause the same to be assessed under its direction. In
assessing profits the plaintiff shall be required to
prove defendant’s sales only; defendant must prove
all elements of cost or deduction claimed. In assessing
damages the court may enter judgment, according to
the circumstances of the case, for any sum above the
amount found as actual damages, not exceeding three
times such amount. If the court shall find that the
amount of the recovery based on profits is either
inadequate or excessive the court may in its discretion
enter judgment for such sum as the court shall find
to be just, according to the circumstances of the case.
Such sum in either of the above circumstances shall
constitute compensation and not a penalty.
15 U.S.C. § 1117(a) (emphasis added). One could imagine
characterizing the punitive damages permitted by state
law as a means of reaching a “just sum,” but we are not
willing to strain the language this far. In reality punitive
damages are intended to be a penalty. Thus federal law
No. 05-2498 13
permits compensation, or a just sum, and not a penalty
such as punitive damages. But it also does not expressly
forbid punitive damages in a way that would preempt the
state law remedy, and it is not clear from this passage that
punitive damages would stand “as an obstacle to the
accomplishment and execution of the full purposes and
objectives of Congress.” Indeed, punitive damages might
be another useful tool in reaching those objectives. Com-
pare California v. ARC America Corp., 490 U.S. 93, 105
(1989) (holding that state antitrust suits on behalf of
indirect purchasers are not preempted despite greatly
increased exposure to damages, and commenting that
“[o]rdinarily, state causes of action are not pre-empted
solely because they impose liability over and above that
authorized by federal law”).
A leading treatise on trademark law, McCarthy on
Trademarks, assumes that such damages are permitted:
“While Lanham Act § 35 does not authorize an additional
award of punitive damages for willful infringement of a
registered trademark or for a violation of § 43(a), punitive
damages are still available for accompanying state,
non-federal causes of action for trademark infringement.”
J. THOMAS MCCARTHY, 5 MCCARTHY ON TRADEMARKS
AND UNFAIR COMPETITION § 30:97 (4th ed. 2005).
The First Circuit recently analyzed preemption of state
law remedies by the Lanham Act in Attrezzi, LLC v.
Maytag Corp., 436 F.3d 32 (1st Cir. 2006). In that case, the
remedies at issue were attorneys’ fees and double dam-
ages. Under the Lanham Act, attorneys’ fees are awarded
only in “exceptional cases” and enhanced damages are
awarded “subject to principles of equity.” 15 U.S.C.
§ 1117(a). In contrast, New Hampshire law awards attor-
neys’ fees automatically and “offers enhanced damages
automatically upon a showing that the violation was
willful or knowing.” 436 F.3d at 40-41. The First Circuit
described the question as “whether New Hampshire’s
14 No. 05-2498
laxer standard for an award of attorneys’ fees or its
mandatory award of enhanced damages undermines the
policy of the federal statute.” Id. at 41. The court acknowl-
edged that the state law “does create a stronger incentive
for plaintiffs to bring unfair competition suits against
trademark infringers,” and that Congress intentionally
used a “less favorable incentive structure for federal suits.”
Id. Nonetheless, the court pointed out, “Congress did not
prohibit state unfair competition statutes that might
have substantive terms somewhat more favorable to
plaintiffs than the Lanham Act.” Id. at 42 (emphasis
in original). In the case before it, New Hampshire’s law
was substantively the same as the federal law, but the
remedial structure was more generous. The court was
unpersuaded that Congress meant to permit the former
and forbid the latter: “to complain in this case about the
modest deviation in remedial benefits favorable to plain-
tiffs is to swallow the camel but strain at the gnat.” Id.
Contrasting the Lanham Act, which “primarily provides
a federal forum for what is in substance a traditional
common-law claim,” with other more complete federal
regulatory regimes, it concluded that the state law reme-
dies survive. See also Tonka Corp. v. Tonk-A-Phone, Inc.,
805 F.2d 793 (8th Cir. 1986) (per curiam) (holding the
same for a conflicting attorneys’ fees provision).
Punitive damages are not the same as attorneys’ fees,
but we find the logic reflected in Attrezzi equally applicable
here. Even the portion of the Lanham Act indicating
that the compensation under federal law shall not consti-
tute a “penalty” does not, either expressly or by necessary
implication, mean that state laws permitting punitive
damages under defined conditions are preempted. We
agree with the First Circuit that, to the extent that state
substantive law survives and is coterminous with federal
law in this area, state law remedies should survive as well.
In the area of trademark law, preemption is the excep-
No. 05-2498 15
tion rather than the rule. For example, when Congress
amended the federal trademark laws to deal with
cybersquatting, it left the state law regimes (including
damages rules) in place. See Sporty’s Farm L.L.C. v.
Sportsman’s Market, Inc., 202 F.3d 489, 500-01 (2d Cir.
2000) (citing a legislative report indicating that the
law was not designed to preempt state law remedies). In
light of the fact that the Lanham Act has not been inter-
preted as a statute with broad preemptive reach, we
conclude that Congress would have acted more clearly if
it had intended to displace state punitive damage reme-
dies. Aside from preemption, there is no other reason to
refrain from affirming the jury’s award of punitive dam-
ages in this case.
C
Lastly, Novelty contends the attorneys’ fees that the
district court awarded, $575,099.82, were too high. The
Copyright Act permits a district court to award attorneys’
fees “in its discretion.” 17 U.S.C. § 505. Similarly, “[a]
decision to award attorneys’ fees under the Lanham Act
is firmly committed to the district court’s discretion.”
BASF Corp. v. Old World Trading Co., Inc., 41 F.3d 1081,
1099 (7th Cir. 1994). This court reviews attorneys’ fees
decisions for abuse of discretion.
In this case, Tekky entered into a contingent-fee agree-
ment with its attorneys, the terms of which are not be-
fore us. Novelty assumes that the fee agreement contains
a standard clause under which two-thirds of the amount
recovered would go to Tekky and one-third to the attor-
neys. It argues in essence this agreement caps the amount
that Tekky’s attorneys may recover. In Novelty’s view, at
the high end, we should take the jury’s award of $291,000
as the two-thirds and add one more third on top of that, or
$145,000, making the total award $436,000. The district
16 No. 05-2498
court rejected the idea that it could award only contractual
fees to Tekky’s lawyers and opted instead to use the
traditional lodestar approach, under which it began with
the hours that Tekky’s attorneys worked, the tasks they
performed, and their hourly rates, to come up with a
preliminary total. Because the fee petition was hotly
disputed, the district court appointed a special master
to resolve these ancillary disputes. The master issued
a 54-page report recommending a total award of
$596,399.82. The court commented that “the case took on
a life of its own unnecessarily and litigiously,” observing
that Novelty unnecessarily increased the fees sought by
“contesting practically every issue.” In addition, the
court noted, “without proof that plaintiff ’s attorneys
fabricated time records or padded them in an inappro-
priate matter, there is simply no reason to reduce the
fees generated by time that was so obviously well-spent
from plaintiff ’s perspective.” The special master did reduce
several items from Tekky Toys’ fee request, reductions
the district court found to be reasonable. The district
court also reduced the amount awarded for expenses
between the two fee petitions from $80,000 to $60,000 and
reduced the reimbursement for some foam boards.
Novelty’s argument for replacing the lodestar with the
fee agreement is based on City of Burlington v. Dague, 505
U.S. 557 (1992), in which the Court rejected a “contingency
enhancement” under fee-shifting statutes where the
prevailing party sought more than the lodestar as a reward
for the risk of obtaining nothing had the party not pre-
vailed. The Court found that awarding more than the
lodestar was not permitted under two environmental laws
and more generally under federal statutes that permit the
“prevailing party” to collect fees: “The ‘lodestar’ figure has,
as its name suggests, become the guiding light of our
fee-shifting jurisprudence. We have established a ‘strong
presumption’ that the lodestar represents the ‘reasonable’
fee, and have placed upon the fee applicant who seeks
No. 05-2498 17
more than that the burden of showing that ‘such an
adjustment is necessary to the determination of a reason-
able fee.’ ” Id. at 562 (internal citations omitted) (em-
phasis in original).
What Novelty fails to appreciate, however, is that the
Supreme Court held in Blanchard v. Bergeron, 489 U.S. 87
(1989), that an attorney’s fee allowed under 42 U.S.C.
§ 1988 is not limited to the amount provided in a
contingent-fee arrangement. The Court later held, in
Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994), that prevail-
ing plaintiffs and prevailing defendants in copyright cases
must be treated alike, for purposes of fee awards; thus, the
rules articulated in Blanchard for computing fees for the
prevailing party apply with equal force to copyright cases.
Nothing in Dague, which dealt with an enhancement above
the lodestar, suggests a retreat from the holding in
Blanchard. In Blanchard, as here, the lodestar method
led to an award greater than the contingent-fee arrange-
ment would have yielded. In Assessment Technologies of
WI, LLC v. WIREdata, Inc., 361 F.3d 434 (7th Cir. 2004),
although we commented that usually attorney’s fee
contracts are given “controlling weight” for purposes of
assigning value to a lawyer’s work, id. at 438, we recog-
nized that contingent-fee contracts are different. In the
case of contingent-fee arrangements, “were it not for the
expectation of an additional, court-ordered award if the
suit was successful but yielded little in the way of dam-
ages, the plaintiff might not have been able to interest
a lawyer in taking the case in the first place. So the
percentage specified in the contract should not cap such
awards.” Id. at 439 (emphasis added).
That is enough to resolve the case before us. Although
the fees here were high—roughly double the damages—our
review of the special master’s report and the district court
decision reveals no abuse of discretion.
We AFFIRM the judgment of the district court.
18 No. 05-2498
APPENDIX
No. 05-2498 19
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—3-20-07