Lucky Break Wishbone Corporati v. Sears Roebuck and Co

FILED
NOT FOR PUBLICATION APR 07 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S . CO U RT OF AP PE A LS
FOR THE NINTH CIRCUIT
LUCKY BREAK WISHBONE No. 08-35933
CORPORATION,
D.C. No. 2:06-cv-00312-TSZ
Plaintiff - Appellee,
v. MEMORANDUM *
SEARS ROEBUCK AND CO, a New
Yorµ corporation; YOUNG & RUBICAM
INC, a Delaware corporation,
Defendants - Appellants.
LUCKY BREAK WISHBONE No. 08-35985
CORPORATION,
D.C. No. 2:06-cv-00312-TSZ
Plaintiff - Appellant,
v.
SEARS ROEBUCK AND CO, a New
Yorµ corporation; YOUNG & RUBICAM
INC, a Delaware corporation,
Defendants - Appellees.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Appeal from the United States District Court
for the Western District of Washington
Thomas S. Zilly, Senior District Judge, Presiding
Argued and Submitted February 3, 2010
Seattle, Washington
Before: ALARCMN, W. FLETCHER and RAWLINSON, Circuit Judges.
Appellants Sears, Roebucµ and Co. and Young & Rubicam, Inc. (hereinafter
'Sears') appeal the judgment entered for Appellee Lucµy Breaµ Wishbone Corp.
('Lucµy Breaµ') following a jury trial. Lucµy Breaµ cross-appeals from the
district court's order preventing it from presenting evidence on a part of its indirect
profits claim. We have jurisdiction pursuant to 28 U.S.C. y 1291 and we affirm.
I
'To establish copyright infringement, the holder of the copyright must prove
both valid ownership of the copyright and infringement of that copyright by the
alleged infringer.' Entm't Research v. Genesis Creative Group, 122 F.3d 1211,
1217 (9th Cir. 1997).
Sears contends that the district court erred in ruling on summary judgment
that Lucµy Breaµ's wishbone was protectable under the Copyright Act. 'To
qualify for copyright protection, a worµ must be original to the author. Original, as
the term is used in copyright, means only that the worµ was independently created
2
by the author (as opposed to copied from other worµs), and that it possesses at least
some minimal degree of creativity.' Feist Pubs., Inc. v. Rural Tel. Serv. Co., Inc.,
499 U.S. 340, 345 (1991). Purely functional, utilitarian, or mechanical aspects of a
sculptural worµ may not receive copyright protection. 17 U.S.C. y 101; Lamps
Plus, Inc. v. Seattle Lighting Fixture Co., 34 F.3d 1140, 1146 (9th Cir. 2003).
Lucµy Breaµ met this standard on summary judgment. In his deposition testimony
and declaration, Dale Hillesland explained that he manipulated the graphite
electrodes by hand to maµe the wishbone 'all nice and round and smooth,' or as he
later explained it, 'more attractive and sleeµ looµing.' He sanded down 'sharp
areas,' rounded the head of the wishbone, and 'thinned . . .up' the arms. Dr.
Steadman testified in his deposition that the Lucµy Breaµ wishbone had a number
of elements that distinguished it from a natural wishbone and did not serve any
functional purpose. On summary judgment, it was undisputed that these multiple
variations were the intentional product of Hillesland's creativity and aesthetic
design. They went beyond mere copying and did not serve a functional purpose;
they were therefore sufficient to constitute original expression. Accordingly, the
district court correctly concluded on summary judgment that Lucµy Breaµ had a
valid copyright in the Lucµy Breaµ wishbone.
3
During trial, Sears sought reconsideration of this order. The district court
did not abuse its discretion in denying Sears's motion for reconsideration. The
new evidence presented on reconsideration did not undermine the district court's
earlier conclusion that the Lucµy Breaµ wishbone was original. Sears did not
conclusively establish the origin of the 'Cimtech file' or the date it was first
provided to Sears. Nor did the file itself create a genuine issue of material fact as
to originality, given the existence of significant differences between the natural and
Lucµy Breaµ wishbone that Sears's theory of the Lucµy Breaµ wishbone's creation
cannot explain. Accordingly, we affirm the district court's grant of summary
judgment to Lucµy Breaµ on the question of originality.
II
Sears challenges on several grounds the conclusion that it infringed Lucµy
Breaµ's copyright. First, Sears contends that the district court erred in denying
Sears's motion for summary judgment on the issue of infringement. Because the
case proceeded to trial and verdict on that issue, we may not review this
determination on appeal. See Affordable Housing Dev. Corp. v. City of Fresno,
433 F.3d 1182, 1193 (9th Cir. 2006); De Saracho v. Custom Food Machinery, Inc.,
206 F.3d 874, 877-78 (9th Cir. 2000).
4
Second, Sears contends that the district court abused its discretion in
refusing to preclude plaintiff's expert, Dr. Steadman, from testifying about virtual
identity. To prevail, Sears must show that the district court abused its discretion in
admitting the testimony and that the error was prejudicial. Dream Games of Ariz.,
Inc. v. PC Onsite, 561 F.3d 983, 987-88 (9th Cir. 2009). Sears has not made such a
showing. '[A] witness may properly be called upon to aid the jury in
understanding the facts in evidence even though reference to those facts is couched
in legal terms,' Hangarter v. Provident Life & Accident Ins. Co., 373 F.3d 998,
1017 (9th Cir. 2004), and 'a district court does not abuse its discretion in allowing
experts to use legal terminology,' Nationwide Transp. Fin. v. Cass Info. Sys., Inc.,
523 F.3d 1051, 1059 (9th Cir. 2008). Dr. Steadman's testimony about the
differences between the Lucµy Breaµ production wishbone and natural turµey
wishbones was relevant and helpful to the jury. Steadman's testimony as to
whether the two plastic wishbones were 'virtually identical' aided the jury in
understanding the significance of the features that Steadman identified and the
extent to which they made the wishbones the same. Moreover, Sears cannot show
that allowing the question was prejudicial in light of the rest of the admissible
testimony. Dr. Steadman had already testified about the distinguishing features of
the Lucµy Breaµ wishbone, that the Sears wishbone possessed these features, and
5
that the Sears wishbone was a copy of the Lucµy Breaµ wishbone. The testimony
to which Sears objected added little of significance to what Dr. Steadman's
testimony had already established. Accordingly, the district court did not abuse its
discretion in permitting the testimony.
Third, Sears renews its objection to jury instructions concerning
infringement and authorship. We review a district court's formulation of civil jury
instructions for abuse of discretion, and review de novo whether a jury instruction
misstates the law. Dream Games, 561 F.3d at 988. Sears's objections are without
merit. The district court made clear in Instruction 15 that proving infringement
required copying of original elements, and the court therefore acted within its
discretion not to include a redundant statement that copying of 'unoriginal
elements' is not infringement. Instruction 15A made clear Lucµy Breaµ's need to
demonstrate 'independent[]' creation plus 'at least some minimal creativity,'
employing language virtually synonymous with that requested by Sears.
Instruction 15E defined virtual identity at length and stated in mandatory language
that the jury had to find virtual identity; adding the term 'thin copyright' would
have been redundant. As to authorship, Instruction 15B adequately distinguished
between an 'author' and other 'contributor[s]' to a worµ and made clear that the
'author' was Dale Hillesland; together with Instruction 15A, Instruction 15B made
6
clear that the original, protectable elements of the Lucµy Breaµ wishbone were
those created independently by the worµ's author. Viewing these instructions
together, we hold that the district court properly instructed the jury, neither
misstating the law nor abusing its discretion.
Fourth and finally, Sears contends that the jury's verdict was not supported
by substantial evidence. We conclude that the record contained sufficient evidence
to support the jury's verdict. Lucµy Breaµ met its burden on the issues of
ownership and originality as a result of the summary judgment ruling. The parties'
stipulations established that Cimtech scanned a real turµey wishbone and provided
the scanned data to Lucµy Breaµ; that a computer model was created from the
scanned data; that Hillesland used the model to maµe graphite electrodes; that
Hillesland finished the graphite electrodes by hand; and that Hillesland used the
finished graphite electrodes to create a mold cavity for the Lucµy Breaµ
wishbones. Ahroni testified that he instructed Cimtech only to create a 3D copy of
the natural wishbone and not to maµe any alterations to it, and that he met with
Hillesland, showed him the natural wishbone, gave him a copy of the Cimtech
data, and asµed him to create a mold. Steadman testified that the prototype
wishbone contained features that distinguished it from natural turµey wishbones.
There was also physical evidence of the graphite electrodes, molding cavity,
7
computer models, the natural wishbone used as a model, Lucµy Breaµ wishbones,
and third party plastic wishbones that did not contain the same distinguishing
features.
This was sufficient circumstantial evidence from which a jury could have
determined that the identification of certain elements in the Lucµy Breaµ wishbone
that did not exist in natural wishbones meant that the Lucµy Breaµ wishbone could
not have been created simply by scanning the natural wishbone; that Hillesland had
to have introduced the identified, unique features through the model and mold-
maµing process; that these unique features were therefore original, protectable
elements of the wishbone; and that the Sears wishbones infringed these original
features. Accordingly, we conclude that based upon the district court's summary
judgment ruling on originality, and the stipulations, testimony, and physical
evidence presented at trial, the jury's verdict was supported by substantial
evidence.
III
Sears argues that the jury's award of actual damages for infringement of the
wishbone and product warning was not supported by substantial evidence. 'Actual
damages are usually determined by the loss in fair marµet value of the copyright,
measured by the profits lost due to the infringement or by the value of the use of
8
the copyrighted worµ to the infringer.' Polar Bear Prods., Inc. v. Timex Corp.,
384 F.3d 700, 708 (9th Cir. 2004). Sears contends that actual damages should be
measured by Lucµy Breaµ's lost profits, and that the jury failed to deduct the cost
of manufacturing the wishbones in computing profits. The jury is not restricted,
however, to awarding lost profits. See id. Even if it were so restricted, Lucµy
Breaµ quoted a price of 32.9 cents to Sears per individually pacµaged wishbone
with a warning similar to the µind Sears eventually used, amounting to a total of
ü329,263.20 for 1,000,800 wishbones. This amount is substantially higher than the
jury's awards of ü190,152 in actual damages for infringement of the wishbone and
ü30,024 in actual damages for infringement of the warning. We cannot conclude,
therefore, that the jury failed to taµe the cost of manufacturing into account in
determining lost profits or what the fair marµet value of a lost license fee would
have been. The jury was not asµed to explain its reasoning and was properly
instructed. Because the total damages award was reasonable based upon the
evidence presented at trial, we uphold the jury's award of actual damages as
supported by substantial evidence.
As for indirect profits, Sears objects that the jury failed to properly deduct
expenses and apportion Sears's profits in awarding damages. To recover indirect
profits, a copyright holder must demonstrate a 'causal relationship between the
9
infringement and the profits generated indirectly from such an infringement.'
Macµie v. Rieser, 296 F.3d 909, 915-916 (9th Cir. 2002). Lucµy Breaµ introduced
evidence sufficient to establish causation, specifically that the wishbone coupon
was redeemed at a rate 42.7û higher than the average rate of bounce-bacµ coupons
distributed in December.
The burden is on the copyright holder 'to present proof only of the
infringer's gross revenue.' 17 U.S.C. y 504(b). In presenting proof of gross
revenue, Lucµy Breaµ needed to demonstrate 'the revenue stream . . . [that] bear[s]
a legally significant relationship to the infringement,' but was not required 'to
separate the gross profits resulting from the infringement from the profits resulting
from other sources.' Polar Bear, 384 F.3d at 711-12. Lucµy Breaµ met this
burden by introducing evidence that Sears tooµ in ü5,150,045 in revenue during
sales in which coupons were actually redeemed.
The burden then shifts to the infringer to demonstrate its 'deductible
expenses and the elements of profit attributable to factors other than the
copyrighted worµ.' 17 U.S.C. y 504(b). Sears introduced evidence of expenses
and also contended that the increased rate of redemption and sales was fully or
partially attributable to factors other than the infringing wishbone. The jury
awarded ü1,479,404, demonstrating that it credited some, but not all, of Sears's
10
evidence and arguments. Because 'the jury did not delineate the individual
components of its total indirect profits award, it is impossible to tell whether the . .
. award . . . was duly apportioned. . . . In the absence of evidence to the contrary,
we presume that the jury fulfilled its duty to apportion profits.' Polar Bear, 384
F.3d at 713. The jury awarded only a portion of Sears's gross revenue for the
relevant period, and was not asµed to specify what expenses it chose to deduct and
how it chose to apportion profits. The gross revenue figure presented by Lucµy
Breaµ was limited to transactions in which the coupon was redeemed, and an
award of just under 30û of the gross revenue for those transactions was reasonable
based upon the evidence presented at trial. Moreover, the burden was on Sears to
demonstrate otherwise, and '[a]ny doubt as to the computation of costs or profits is
to be resolved in favor of the plaintiff.' Franµ Music Corp. v. Metro-Goldwyn-
Mayer, Inc., 772 F.2d 505, 514 (9th Cir. 1985). Accordingly, we conclude that the
indirect profits award was supported by substantial evidence.
IV
Young & Rubicam, Inc. contends that the district court abused its discretion
by not awarding it the full amount of its claim for attorney's fees and costs.
Recovery of attorneys' fees for a prevailing party is not automatic under the
Copyright Act; the district court has 'wide latitude to exercise 'equitable
11
discretion'' in determining whether an award would further the underlying
purposes of the Act. Entm't Research, 122 F.3d at 1229; see 17 U.S.C. y 505;
Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994). Here, the district court
thoroughly reviewed the billing statements and concluded that a limited award of
attorney's fees and costs was warranted in light of the 'very limited favorable
result' that Young & Rubicam achieved. It apportioned the hours between worµ
for which fees were and were not recoverable as best as possible in light of the
limited information available, and then awarded those hours at the requested rates.
We hold that the district court did not abuse its discretion in doing so.
V
On cross-appeal, Lucµy Breaµ contends that the district court wrongly
excluded Dr. Belch's testimony and improperly dismissed its indirect profits claim
for Sears's profits made on November 19, 2005. We disagree. Prior to excluding
Dr. Belch's testimony, the district court held extensive oral argument, during
which Lucµy Breaµ had difficulty providing a satisfactory response to the court's
probing questions about how Dr. Belch determined what portion of Sears's
revenue on November 19, 2005 was related to the infringement. The district court
acted within its discretion in excluding Dr. Belch's testimony as excessively
speculative.
12
Lucµy Breaµ also complains that the district court engaged in procedural
irregularities when it prevented Lucµy Breaµ from presenting its claim for profits
made on November 19. The district court, however, provided Lucµy Breaµ the
opportunity to be heard on whether Dr. Belch's testimony should be excluded, and
after excluding his testimony gave Lucµy Breaµ the opportunity to proffer
additional evidence. The district court considered the proffer and issued a ruling
determining that there was insufficient non-speculative evidence for Lucµy Breaµ
to go to the jury on this claim. This ruling was not an abuse of discretion. Because
Lucµy Breaµ was given an adequate opportunity to be heard, any procedural
irregularities were harmless.
AFFIRMED.
13
FILED
APR 07 2010
Lucµy Breaµ Wishbone Corp. v. Sears, Case Nos. 08-35933 and 08-35985
Rawlinson, Circuit Judge, concurring: MOLLY C. DWYER, CLERK
U.S . CO U RT OF AP PE A LS
I concur in the result.