* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 06-10760

THOMAS ALLEN POWELL, doing business as Architecture Unlimited

Plaintiff-Appellant

v.

STEVEN J PENHOLLOW; PENHOLLOW CUSTOM HOMES LLC

Defendants-Appellees

Appeal from the United States District Court

for the Northern District of Texas

USDC No. 3:04-CV-1744

Before REAVLEY, BARKSDALE, and PRADO, Circuit Judges.

PER CURIAM:*

Before us is an appeal by the plaintiff in a successful copyright

infringement suit of the magistrate judge’s award of damages. At issue is

whether the magistrate judge erred by admitting evidence of the defendants’

allocated overhead expenses, apportioning only 1% of the defendants’ profits as

damages, concluding that the plaintiff suffered no actual damages, and failing

to award prejudgmentinterest. Because the magistrate judge’s admission of the

defendants’ evidence of overhead expenses was improper under the Federal

United States Court of Appeals

Fifth Circuit

F I L E D

December 21, 2007

Charles R. Fulbruge III

Clerk
No. 06-10760

2

Rules of Evidence, we VACATE a portion of the award of damages and

REMAND for a new trial on damages consistent with this opinion.

I. FACTUAL BACKGROUND

Plaintiff-Appellant Thomas Allen Powell (“Powell”) is a licensed architect

in Texas who has done architectural work in the past for Defendant-Appellee

Penhollow Custom Homes, L.L.C. (“Penhollow”). Penhollow is owned in part by

Defendant-Appellee Steven J. Penhollow (“Steven Penhollow”) (collectively,

“Defendants”). In late 2003, Steven Penhollow contacted Powell about preparing

plans for a house for a couple by the name of Brooks based on a house previously

designed by Powell. Powell prepared several drafts of plans for the Brookses and

submitted them to Defendants. In January 2004, after sending his most recent

architectural drawings to Defendants, Powell took a vacation and never heard

from Defendants regarding the plans again. At that time, the plans were not yet

complete and required more work before a house could be built from them.

As determined by the magistrate judge in the bench trial of this matter,

Steven Penhollow took the plans prepared by Powell, sketched them out as his

own, and gave them to Roberto Castanheira (“Castanheira”), a different

architect, who completed them. The final design was substantially similar to the

plans prepared by Powell. Defendants then built the Brooks residence based on

the plans completed by Castanheira. These findings, which form the basis of the

magistrate judge’s conclusion that Defendants infringed Powell’s copyright in his

drawings, have not been challenged by Defendants on appeal.

Unaware that Defendants were constructing the Brooks residence using

substantially similar plans, Powell sent Defendants an invoice in May 2004 for

$1900 for the services Powell had performed in drafting the preliminary plans.

Powell had already received a $1000 retainer from Defendants, bringing the

total amount Powell charged the Defendants for his work to $2900. Defendants

did not respond to the payment demand. In June 2004, Powell visited the
No. 06-10760

3

Brooks residence and noticed the similarity between the house and his

architectural drawings. Powell then filed a suit in small claims court to recover

the unpaid fees from Defendants and ultimately obtained a defaultjudgmentfor

$1900, which Defendants have since satisfied. Powell also applied for and

received a copyright on his drawings in July 2004. 

II. PROCEDURAL HISTORY

Powell filed the instant copyright infringement suit against Defendants

in the Northern District of Texas on August 11, 2004, seeking damages for the

infringement of his copyright as well as an injunction to prevent Defendants

from using the plans in the future. The parties agreed to a bench trial before a

magistrate judge, which occurred on April 18, 2006. The magistrate judge issued

written findings of fact and conclusions of law on June 1, 2006, in which he

found that Defendants had infringed Powell’s copyright and that Powell was

entitled to damages of $564.40, which was less than what Powell requested but

greater than what Defendants had urged. The magistrate judge entered a

judgment to that effect, and Powell appealed. We have jurisdiction pursuant to

28 U.S.C. § 1291 (2000), as a final judgment has been entered.

III. DISCUSSION

On appeal, Powell argues that the magistrate judge erred in several

respects by only awarding $564.40 in damages. Damages for copyright

infringement are governed by 17 U.S.C. § 504. Subsection (b), which is the

applicable damages provision in this case, states as follows:

The copyright owner is entitled to recover the actual damages

suffered by him or her as a result of the infringement, and any

profits ofthe infringer that are attributable to the infringement and

are not taken into account in computing the actual damages. In

establishing the infringer’s profits, the copyright owner is required

to present proof only of the infringer’s gross revenue, and the

infringer is required to prove his or her deductible expenses and the

elements of profit attributable to factors other than the copyrighted

work.
No. 06-10760

1 Direct Costs are the costs directly associated with building the Brooks residence, such

as costs for materials and labor. 

2 Direct Overhead expenses are those overhead expenses directly associated with the

Brooks residence, while Allocated Overhead is a percentage of Penhollow’s general overhead

expenses that are not directly associated with any particular building project.

4

17 U.S.C. § 504(b). Powell’s damages, thus, consist of his actual damages plus

the amount of profits Defendants received that are attributable to the

infringement.

In this case, the magistrate judge determined that Powell had not proved

any actual damages. The magistrate judge also ruled that the profits of

Defendants that were attributable to their infringement of Powell’s copyright

amounted to $564.40. Powell challenges these rulings, as well as the magistrate

judge’s failure to award him any prejudgment interest. 

A. Profits Attributable to the Infringement

Powell’s initial arguments on appeal are that the magistrate judge erred

in determining Defendants’ Net Profits and in apportioning only 1% of those

profits to Powell’s work. In deciding what profits were attributable to

Defendants’ infringement, the magistrate judge did not describe his

methodology; however, the parties agree on the general two-step formula for

determining the profits. First, the parties calculate the amount of net profits

realized on the Brooks residence, and second, the parties apportion the net

profits between those profits that were due to the infringement and those profits

that were not.

Beginning with the calculation of net profits, the formula used by the

parties is fairly simple. The parties take the Total Revenue for the Brooks

residence and subtract the Direct Costs in order to come up with the Gross

Profits.1 From the Gross Profits, the parties subtract the Direct Overhead and

the Allocated Overhead to arrive at the Net Profits.2 As the copyright owner,

Powell bears the burden of putting on evidence of Defendants’ gross revenue
No. 06-10760

5

attributable to the infringement. See Thoroughbred Software Int’l, Inc. v. Dice

Corp., 488 F.3d 352, 360 (6th Cir. 2007); Bonner v. Dawson, 404 F.3d 290, 294

(4th Cir. 2005). The burden then shifts to Defendants to produce evidence of

deductible expenses. See Thoroughbred, 488 F.3d at 360; Bonner, 404 F.3d at

294. Thus, Defendants bear the burden of showing the amounts that may be

deducted from the Total Revenue.

Here, the parties agree that the Total Revenue was $950,660.41—the

amount Defendants received for the Brooks residence. However, the parties

disagree about the remaining numbers. Defendants assert that their Direct

Costs were $837,672.15, leading to a Gross Profit of $112,788.26. Defendants

then claim that their Direct Overhead expenses were $41,280.76 and their

Allocated Overhead expenses were $56,810.85, resulting in a Net Profit of

$14,696.65. Powell, on the other hand, presented David Pugh (“Pugh”) as an

expert witness to testify that Defendants were duplicating some of their

expenses in their Direct Costs and Direct Overhead. Therefore, at trial, Powell

urged the magistrate judge to conclude that Direct Costs were $806,390.05,

Direct Overhead was $31,019.89, and Allocated Overhead was $56,810.85.

These amounts give a Gross Profit of $144,270.36 and a Net Profit of $56,439.62.

On appeal, Powell further asserts that there should have been no deduction of

Allocated Overhead because the evidence of Allocated Overhead was

inadmissible. If Allocated Overhead is not included in Powell’s calculation, the

Net Profits become $113,250.47.

In his findings of fact and conclusions of law, the magistrate judge

determined that Defendants’ Gross Profits amounted to $112,788.26, which is

the amount set forth by Defendants. Although the magistrate judge did not

state an amount of Net Profits, using the parties’ logic and reversing the

calculations from the ultimate damages award,the magistrate judge apparently
No. 06-10760

3 By using Defendants’ calculation of Gross Profits and Pugh’s calculation of Net

Profits, the magistrate judge’s award appears inconsistent. Use of those amounts means that

the magistrate judge implicitly found that the Direct and Allocated Overhead expenses

amounted to $56,348.64, which is not an amount that either party argued was appropriate.

6

determined that there were Net Profits of $56,439.62, which is in line with

Pugh’s calculations.3

Once the Net Profits are calculated, the second step is to determine what

portion of the Net Profits are attributable to Defendants’ infringement. Here,

the magistrate judge apparently apportioned 1% of Defendants’ Net Profits as

attributable to the infringement, resulting in an award of $564.40. Although the

magistrate judge never stated that he was using a 1% apportionment, it was the

method suggested by Defendants at trial. In short, Powell testified that he

would normally charge $10,151.25 for his architecture services ($1.25 per square

foot), which is approximately 1% of the Total Revenue for the Brooks residence.

As urged by Defendants, if 1% of the Total Revenue goes toward architecture

services, then 1% of the Net Profits is due to Defendants’ infringement of

Powell’s architectural work. One percent of $56,439.62 is $564.40—the amount

of damages awarded by the magistrate judge.

On appeal, Powell argues that the magistrate judge erred at both steps of

the analysis—first, by admitting evidence of Defendants’ Allocated Overhead,

and second, by using only a 1% apportionment. We will address each argument

in turn.
No. 06-10760

7

1. Admissibility of Allocated Overhead Evidence

Powell’s first argument on appeal is thatthe magistrate judge erroneously

admitted evidence of Defendants’ Allocated Overhead expenses. At issue is a

spreadsheet contained in the last two pages of Exhibit 43 that details

Defendants’ Allocated Overhead. Powell claims that this evidence is an

inadmissible summary under Rule 1006 of the Federal Rules of Evidence,

improper opinion testimony, and inadmissible hearsay. We review the

admission of evidence for an abuse of discretion. Triple Tee Golf, Inc. v. Nike,

Inc., 485 F.3d 253, 265 (5th Cir. 2007). If an abuse of discretion has occurred,

we apply the harmless error doctrine to determine if a substantial right of the

complaining party was affected. Id.

Exhibit 43, which contains the spreadsheet at issue, is a multi-page

document that was produced by Defendants. The first page shows Defendants’

calculation of Net Profits by using the Total Revenue, Direct Costs, Gross

Profits, Direct Overhead, and Allocated Overhead. Following the first page,

Defendants attached Penhollow’s check register, which shows the amounts and

recipients of all of the checks written for the Brooks residence. The sum of the

checks in the check register is approximately the amount Defendants claim as

their Direct Costs. The last two pages of Exhibit 43 contain a spreadsheet that

shows the Direct and Allocated Overhead expenses. 

The magistrate judge admitted Exhibit 43 over the objection of Powell,

based on testimony by Steven Penhollow. Steven Penhollow testified that

Exhibit 43 was prepared by his father, who was retired but kept the books for

Penhollow. According to Steven Penhollow, the Allocated Overhead was an

estimate of Penhollow’s annual overhead divided by the number of projects on

which Penhollow was working. He also stated that the spreadsheet was

essentially something printed out of a computer, based on numbers that had

previously been entered. The magistrate judge admitted Exhibit 43, but stated
No. 06-10760

8

that “[t]he court will give it such credit as it deserves in the way of accuracy and

so forth.”

Powell asserts that the Allocated Overhead spreadsheet included on the

last two pages of Exhibit 43 is an inadmissible summary of Allocated Overhead

evidence under Rule 1006 of the Federal Rules of Evidence. Rule 1006, which

governs the admission of summary evidence, states as follows:

The contents of voluminous writings, recordings, or photographs

which cannot conveniently be examined in court may be presented

in the form of a chart, summary, or calculation. The originals, or

duplicates, shall be made available for examination or copying, or

both, by other parties at [a] reasonable time and place. The court

may order that they be produced in court.

We have previously held thatthe failure to make the original or duplicate copies

of the evidence underlying a summary available for inspection renders the

summary inadmissible. See Hackett v. Housing Auth., 750 F.2d 1308, 1312 (5th

Cir. 1985). Other circuit courts follow the same rule. See United States v.

Miller, 771 F.2d 1219, 1238 (9th Cir. 1985); United States v. Kim, 595 F.2d 755,

764 (D.C. Cir. 1979) (“When the underlying documents are not subject to

examination by the opposing parties, the summary should not be admitted into

evidence.”) (internal citations omitted). 

Powell asserts that the portion of the spreadsheet concerning Allocated

Overhead is an inadmissible summary because Defendants never produced the

documents underlying the amounts on the spreadsheet despite Powell’s request.

Review of the transcript and history of the case shows that the only document

Defendants produced to substantiate their Allocated Overhead is the

spreadsheet contained in Exhibit 43. There is no evidence in the record that any

other documentation was ever produced by Defendants. Thus, while it appears

that Defendants produced some documentation to back up their claims regarding

Direct Costs and Direct Overhead, there is no underlying documentation to

support their Allocated Overhead claims. Consequently, under Rule 1006, the
No. 06-10760

4

It is also unclear whether Defendants laid the proper predicate for the admission of

a summary under Rule 1006. See United States v. Duncan, 919 F.2d 981, 988 (5th Cir. 1990)

(requiring a showing that the documents underlying a summary are voluminous and that incourt examination would be inconvenient before summary evidence is admissible). Because

the evidence was improperly admitted for other reasons, we need not address this issue.

5 Because the spreadsheet was inadmissible under Rule 1006, we do not need to decide

whether the spreadsheet constituted improper opinion testimony or inadmissible hearsay.

9

spreadsheet that summarized Defendants’ Allocated Overhead expenses was

inadmissible and the magistrate judge abused his discretion in admitting it.4

Because the admission ofthe spreadsheet was improper, we must consider

whether the error was harmless. See Triple Tee Golf, 485 F.3d at 265. The

spreadsheet was the only evidence presented by Defendants of their $56,810.85

in Allocated Overhead expenses. Consequently, the admission of the

spreadsheet clearly prejudiced Powell, as the Net Profits calculation would have

been much higher if the Allocated Overhead expenses had not been considered.

Therefore, we must vacate the portion of the damages award concerning

Defendants’ profits and remand this case for a new trial on damages consistent

with this opinion.5

2. Apportionment of Profits

Although we are partially vacating the award of damages and remanding

for a new trial, we will briefly address Powell’s other contentions on appeal in an

effort to clarify any remaining legal issues prior to the new trial. Powell next

argues that the district court erred in determining the amount of Defendants’

Net Profits attributable to the infringement of Powell’s copyright. Specifically,

Powell contends that the magistrate judge should not have apportioned 1% of

Defendants’ Net Profits to Powell’s work, but instead should have awarded

Powell the entire amount of Net Profits because Defendants did not meet their

burden of showing that a 1% apportionment was proper. See Nelson-Salabes,

Inc. v. Morningside Dev., L.L.C., 284 F.3d 505, 511-12 n.9 (4th Cir. 2002) (stating
No. 06-10760

6 Again, to obtain the 1% figure, the magistrate judge apparently reasoned that

because the cost of the architectural work was 1% of the Total Revenue, then the amount of

profits attributable to Powell’s work (and Defendants’ infringement of it) is 1% of Net Profits.

10

that“all gross revenue is presumed to be profit‘attributable to the infringement,’

unless the infringer is able to demonstrate otherwise”). 

This court reviews legal conclusions underlying an award of damages de

novo and findings of fact regarding damages for clear error. Nat’l Hispanic

Circus, Inc. v. Rex Trucking, Inc., 414 F.3d 546, 552 (5th Cir. 2005). Absent an

error of law, if the damages award is plausible in light of the record, we will not

reverse the award, even if we would have come to a different conclusion.

Dresser-Rand Co. v. Virtual Automation, Inc., 361 F.3d 831, 843 (5th Cir. 2004);

see also Bruce v. Weekly World News, Inc., 310 F.3d 25, 32 (1st Cir. 2002)

(reviewing damages apportionment for abuse of discretion). As described earlier,

17 U.S.C. § 504(b) puts the burden on Defendants to prove the “elements of

profit attributable to factors other than the copyrighted work.” Powell claims

that Defendants failed to introduce evidence that a 1% apportionment was

appropriate.6

The Supreme Courtin Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S.

390, 400-06 (1940), held that apportionment is appropriate when the evidence

shows that not all of the infringer’s profits are the result of the infringement.

The Court elaborated, though, that mathematical exactness when apportioning

profits was not required, but that only a reasonable approximation was

necessary. Id. at 408. However, the Court did state that “[w]here there is a

commingling of gains,[the infringer] must abide the consequences, unless he can

make a separation of the profits so as to assure to the injured party all that

justly belongs to him,” id. at 406, which indicates that the infringer must meet

some burden of establishing a just apportionment. 
No. 06-10760

11

This court has not addressed the Supreme Court’s holding in Sheldon or

apportionment in general. Other courts have emphasized the role of equity and

fairness in making an apportionment decision. See Data Gen. Corp. v. Grumman

Sys. Support Corp., 36 F.3d 1147, 1176 (1st Cir. 1994) (“[Apportionment] is

ultimately a delicate exercise informed by considerations of fairness and public

policy . . . .”); see also Sheldon, 390 U.S. at 408 (“Equity is concerned with

making a fair apportionment . . . .”). The Eighth Circuit has also held that it is

improper to rely exclusively on a quantitative analysis without considering other

factors that play a role in the relative importance of the infringement. See

Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 886 F.2d 1545, 1548 (8th Cir.

1989). In Frank Music Corp., the Eighth Circuit considered an award of 10% of

profits as damages when one act of a ten-act performance constituted

infringement. Id. The court determined that the 10% award was reasonable,

not because one of the ten acts was an infringement, but because the district

court implicitly concluded that all portions of the show were of equal value and

that, therefore, a 10% award was appropriate. Id. at 1548-49. 

In this case, there was testimony that work unrelated to Defendants’

infringement went into building the Brooks residence. As noted by both sides,

Powell’s drawings were incomplete and required further revisions before a

building permit could even be obtained. Therefore, not all of Defendants’ Net

Profits are attributable to the infringement. However, while Defendants may

have shown that apportionment is required, Powell questions how much of the

Net Profits should be apportioned and whether Defendants met their burden in

that regard.

Without knowing what prompted the magistrate judge to choose a 1%

apportionment, it is unclear to us whether the magistrate judge weighed the

facts and equity in this case or simply defaulted to the simple mathematical

calculation proposed by Defendants without reference to other important factors.
No. 06-10760

12

It is entirely possible that the facts do support a 1% apportionment; however,

because the magistrate judge will be retrying the issue of Defendants’ profits, it

will be appropriate for him to revisit the apportionment issue as well and

perhaps more fully explain his reasoning.

B. Actual Damages

Powell next asserts that the magistrate judge erred when he found that

Powell was not entitled to actual damages because Powell had already received

full payment for his work. As noted earlier, we review legal conclusions

underlying an award of damages de novo and findings of fact regarding damages

for clear error. Nat’l Hispanic Circus, 414 F.3d at 552.

Here, the magistrate judge referenced Powell’s receipt of $2900 for his

work and specifically found that “Powell suffered no actual damages because

Powell sued for and recovered the fair market value of [his architectural

drawings].” Powell, however, claims that the district court should have awarded

him an additional $7,251.25 in actual damages, which is the difference between

the amount Powell testified he would have received for the plans for the Brooks

residence had he been able to complete them ($10,151.25) and the amount he

was already paid ($2900).

Powell relies on Eales v. Environmental Lifestyles, Inc. for the proposition

that actual damages are “what a willing buyer would have been reasonably

required to pay a willing seller” for the infringed work. 958 F.2d 876, 880 (9th

Cir. 1992) (internal quotation marks omitted). In Eales,the defendantinfringed

the plaintiff-architect’s plans that she had completed for another company. Id.

at 878. The architect received an amount equal to the worth of her completed

drawings as actual damages. Id. at 880. Thus, in Eales, the architect had

actually completed her architectural drawings when they were infringed by a

third company who had never paid for any of her work. Here, Powell had only

completed a few preliminary drafts, and another architect was required to finish
No. 06-10760

13

the drawings before they could be used to build a house. Indeed, it is undisputed

that Powell has been paid in full for the amount of work he did in making the

preliminary drafts for the Brooks residence.

Although Powell testified as to what a willing buyer might have paid him

for completed plans, Powell has not presented evidence of what a willing buyer

would have been reasonably required to pay a willing seller for his incomplete

plans, other than his testimony that he charged $2900 for his work.

Consequently, we cannot say that the magistrate judge erred when he declined

to award any actual damages.

C. Prejudgment Interest

Finally, Powell claims that the magistrate judge erred when he did not

award prejudgment interest on Powell’s damages. The decision of whether to

award prejudgment interest is reviewed under an abuse of discretion standard.

Jauch v. Nautical Servs., Inc., 470 F.3d 207, 214 (5th Cir. 2006) (per curiam).

When a cause of action arises out of a federal statute, federal law governs

the award of prejudgment interest—both as to its allowance and its rate.

Carpenters Dist. Council v. Dillard Dep’t Stores, Inc., 15 F.3d 1275, 1288 (5th

Cir. 1994). The determination of whether prejudgment interest should be

awarded is a two-step analysis: “does the federal act creating the cause of action

preclude an award of prejudgment interest, and if not, does an award of

prejudgment interest further the congressional policies of the federal act.” Id.

If prejudgment interest can be awarded under this analysis, whether such

interest is awarded in any given case is within the district court’s discretion. Id.

Here, the Copyright Act does not contain any reference to prejudgment

interest. See 17 U.S.C. § 504. Consequently, prejudgment interest is not

precluded, and we may proceed to the second step in the analysis—whether an

award of prejudgment interest would further the congressional policies behind
No. 06-10760

7 The First Circuit has held that it is not an abuse of discretion for a district court to fail

to award prejudgment interest in a copyright infringement case, and the Sixth Circuit has

ruled that prejudgment interest is not available under the Copyright Act. John G. Danielson,

Inc. v. Winchester-Conant Props., Inc., 322 F.3d 26, 51 (1st Cir. 2003); Robert R. Jones Assocs.,

Inc. v. Nino Homes, 858 F.2d 274, 282 (6th Cir. 1988). The Seventh, Ninth, and Tenth

Circuits, however, have all determined that the Copyright Act permits an award of

prejudgment interest. Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 716-18 (9th Cir.

2004); McRobertsSoftware, Inc. v. Media 100, Inc., 329 F.3d 557, 572-73 (7th Cir. 2003); Kleier

Adver., Inc. v. Premier Pontiac, Inc., 921 F.2d 1036, 1041-42 (10th Cir. 1990).

14

the Copyright Act. Other circuit courts have split on this issue,7 but we need not

reach it today. Instead, we believe it best to allow the magistrate judge to have

another opportunity to address the issue during the retrial of the damages issues

identified above. Once the facts and damages are properly determined, the

magistrate judge may use his discretion to determine whether an award of

prejudgment interest is appropriate.

IV. CONCLUSION

Because the magistrate judge erred in admitting evidence of Defendants’

Allocated Overhead expenses, we VACATE the portion of the damages award

concerning Defendants’ profits attributable to the infringement, as well as the

award of no prejudgment interest. We REMAND this case for a new trial on

damages consistent with this opinion.

VACATED as to damages and REMANDED.