* This order and judgment is not binding precedent, e xcept under the

doctrines of law of the case, res judicata, and col lateral estoppel. The court generally disfavors the citation of orders and judg ments; nevertheless, an order and judgment may be cited under the terms and condi tions of 10th Cir. R. 36.3. 

## F I L E D United States Court of Appeals Tenth Circuit 

### APR 2 1999 

### PATRICK FISHER Clerk UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

NATIONAL CORRECTIVE TRAINING INSTITUTE, INC., a foreign corporation, doing business as National Curriculum and Training Institute, Plaintiff-CounterDefendant-Appellee,

v. GEORGE NELSON, an individual; CLIME INTERNATIONAL, INC., a Utah corporation; MITCHELL VORON, doing business as Positive Solutions Associates, also known as P.S.I., also known as P.S.A.,

Defendants-CounterClaimants-Appellants. No. 98-4058 (D.C. No. 95-CV-1095-C) (D. Utah)

ORDER AND JUDGMENT *

Before BALDOCK , BARRETT , and HENRY , Circuit Judges.-2-

After examining the briefs and appellate record, th is panel has determined unanimously to grant the parties’ request for a dec ision on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This appeal is taken from the district court’s deni al of attorney’s fees to defendants-appellants George Nelson, Clime Internat ional, Inc. (Clime), and Mitchell Voron, d/b/a Positive Solutions Associates . The court entered judgment for defendants, following a bench trial, on plainti ff-appellee National Corrective Training Institute, Inc. (NCTI)’s copyright infring ement action. NCTI did not appeal the merits of the case. We exercise jurisdi ction under 28 U.S.C. § 1291 and affirm. We review the district court’s denial of attorney’s fees for abuse of discretion. See 17 U.S.C. § 505 (court may award reasonable attorn ey’s fees to prevailing party); Fogerty v. Fantasy, Inc. , 510 U.S. 517, 524 n.11 (1994) (“[D]istrict courts are to use their discretion in awarding attorney’s fees and costs to the prevailing party.”). In Fogerty , the Court rejected the Ninth Circuit’s dual standard of generally awarding attorney’s fees in i nfringement suits to prevailing plaintiffs (while requiring prevailing defendants t o show the original suit was frivolous or brought in bad faith) in favor of an “ ‘evenhanded’ approach in which-3-

no distinction is made between prevailing plaintiff s and prevailing defendants.” See id. at 520-21; 534. In addition, the Court rejected arguments for the British Rule (awarding attorney’s fees to prevailing party as a matter of course, absent exceptional circumstances). “The automatic awardin g of attorney’s fees to the prevailing party would pretermit the exercise of th at discretion [allowed by § 505].” Id. at 533. The Fogerty Court agreed with the Third Circuit’s use of sever al nonexclusive factors in considering attorney’s fees awards, including “‘frivolousness, motivation, objective unreasonable ness (both in the factual and the legal components of the case) and the need in p articular circumstances to advance considerations of compensation and deterrence.’ Lieb v. Topstone Industries, Inc. , 788 F.2d 151, 156 (1986).” See 510 U.S. at 534 n.19. These “factors may be used to guide courts’ discretion, s o long as such factors are faithful to the purposes of the Copyright Act and are applied to prevailing plaintiffs and defendants in an evenhanded manner.” Id. Here, in denying attorney’s fees to defendants, the district court considered the Fogerty factors. See Appellant’s App. Vol. III, at 534-35; 539-40.

The underlying infringement action was commenced byNCTI, seeking damages and injunctive relief for alleged infringem ent of NCTI’s copyrights in1 Matrixx and Colors are instruments used to assess and teach personality

types or temperaments. See Appellant’s Br. at 2. Crossroads is a cognitive s kills workbook created for incarcerated adult felons for purposes of rehabilitation by helping them align or realign their behavior with their attitudes and values. See id. at 4.

2 Nelson is president, sole employee, and owner of Cl ime. Voron, doing business as Positive Solutions Associates, is the m ain distributor of Clime products. Appellant’s App. Vol. III at 517. Nelso n was first an independent contractor with NCTI, then an employee. See id. at 518. After terminating his employment with NCTI, Nelson continued his associat ion with NCTI, briefly, again as an independent contractor. See id. at 521-22. -4- three works--Crossroads Adult Workbook (Crossroads) , REAL Colors Personalty Typing System-Adult Card Set (REAL Colors), and Matrixx. 1 The Matrixx claim was dismissed, by stipulation, at trial. See Appellants’ App. Vol. III at 516 n.1. Defendants 2asserted that NCTI did not have valid copyrights i n the Crossroads and REAL Colors or, alternatively, that Nelson is aco-owner of the copyrights and therefore could not have infringed on his own copyright interests. See id. at 517. Following a bench trial, the district court enteredjudgment for defendants, finding that Nelson was the primary author of the a lleged infringed works and that he had never conveyed or transferred the copyr ight interests he held in any works. The court concluded that as to Crossroads, NCTI had failed to establish by a preponderance of the evidence that Nelson had copied any protected components of Crossroads (as opposed to Nelson’s own preexisting work) or3 The court assumed, apparently without deciding, that NCTI held a valid

copyright in Crossroads.

4 NCTI argued that it had obtained copyrights on thes e works (as both author and copyright claimant) and that Nelson had on some occasions signed certain documents, as director or shareholder of NCTI, whic h reflected either that Nelson did not have any right in NCTI’s copyrights or thatNCTI held all copyright interests. -5- work in the public domain. 3 The court further determined that REAL Colors was a joint work with the result that “authors of a joi nt work are coowners of copyright in the work.” See 17 U.S.C. § 201(a). The court also rejected NCTI’ s claims that if Nelson had any copyright interests i n these works, he had given up the right to rely on those copyright interests, either by waiver or estoppel. 4 The issue of when Crossroads was created was hotly contested at trial. See Appellants’ App. Vol. III at 519-20. The court fou nd by a preponderance of the evidence that the first version of Crossroads was c reated while Nelson was an independent contractor before becoming an employee of NCTI. Although the parties disagreed about the amount of original cont ent in the Crossroads work, the Court found that Crossroads “was created almost exc lusively from the materials in Nelson’s specialized [and preexisting] workbooks” and contained very little original material. See id. at 520. The court also determined that the other work, REAL Colors, was a collaborative work created between Nelson and NCTI after Nelson had resigned his position with NCTI and was once again an independent contractor. See id. at5 In order to prove copyright infringement, a plainti ff must show both “‘(1)

ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.’” See Autoskill Inc. v. National Educ. Support Sys., Inc. , 994 F.2d 1476, 1487 (10th Cir. 1993) (quoting Feist Publications, Inc. v. Rural Tel. Serv. Co. , 499 U.S. 340, 361 (1991)).

6 The question of infringement turns on whether Nelso n’s product is substantially similar to the protectable elements o f NCTI’s product. The abstraction-filtration comparison test first separates the ideas and basic utilitarian functions, which are not protectable, from the work ’s particular expression. The nonprotectable components of the product are then f iltered out from the original expression. Finally, the remaining protected eleme nts are compared to the allegedly copied work to determine if the two works are substantially similar. See Country Kids ‘n City Slicks, Inc. v. Sheen , 77 F.3d 1280, 1284-85 (10th Cir. 1996). “Ultimately, to prove factual copying, the plaintiff must come forward with sufficient evidence that a reasonable factfind er, taking together the evidence of access and the similarities between the [product s], could find that the second work was copied from the first.” Gates Rubber Co. v. Bando Chem. Indus., Ltd. , 9 F.3d 823, 833 (10th Cir. 1993) (footnotes omitted ). -6- 522. However, there was some dispute as to who didwhich proportion of the work and even some testimony (disbelieved by the co urt) that Nelson was not involved in the creation of REAL Colors. See id. at 522-23. Ultimately, NCTI’s cause of action failed for want of proof. 5 NCTI failed to produce competent evidence demonstrating that it s contribution to Crossroads was “original and distinct from Nelson’s specialized workbooks.” See id. at 528. Nor was it possible to determine how much original material appeared in the version of Crossroads NCTI claimed had been infring ed because that version was not produced at trial. Because NCTI had failed to offer competent evidence under the abstraction-filtration comparison test, 6the court determined there was a lack-7-

of a preponderance of the evidence that Nelson had infringed the version of Crossroads in question. See id. at 530. The court further concluded that both NCTI and Nels on had intended for REAL Colors to be a joint work and that, “absent a proper conveyance, Nelson at least shares an undivided interest in the REAL Colo rs copyright with NCTI.” See id. at 532. Finally, the court found the doctrines of estoppel and waiver inapplicable. See id. at 534. In support of the request for attorney’s fees, defe ndants claim NCTI’s motivation in initiating the lawsuit was improper b ecause of NCTI’s president’s willingness to pursue people “he thought would viol ate his rights and tie them up in court,” See Appellants’ App. Vol. V at 774-75, and because of inadequate investigation prior to the commencement of the acti on. The court found, however, that “NCTI was motivated by a reasonable b elief, albeit mistaken, that this action was appropriate and necessary to protec t its copyright interests,” Appellants’ App. Vol. III at 535, and disagreed with defendants’ contention that NCTI’s primary objective was to “‘impoverish its mo st capable competitor, George Nelson.’” See id. (further citation omitted). The court also determined that the action was neith er objectively unreasonable nor frivolous, noting that NCTI was infact the record holder of the copyrights at issue and that on numerous occasions defendant Nelson had7 The court also noted that because NCTI’s current ow ners may have relied

on Nelson’s representations that NCTI was the sole owner of the copyrights in Crossroads and REAL Colors that NCTI “might be able to state a claim for fraud, breach of contract, or negligent representation” ev en though unable to state an action under the copyright statute. See Appellants’ App. Vol. III at 534 n.7. -8- represented in written documents that NCTI owned the copyrights. See id. at 540. The court carefully considered the parties’ arguments in determining that under the facts of the case, equitable considerations req uire the parties to bear their own costs and attorney’s fees. It should be noted that this cause was not decided on summary judgment (except that summary judgment was granted on defend ants’ counterclaims), but after a four-day bench trial. 7Merely because defendants were ultimately successful in defending against the infringement cl aim does not automatically entitle them to attorney’s fees. See Fogerty , 510 U.S. at 534. In sum, the district court adequately considered the Fogerty factors. Defendants have failed to establish that the court abused its discretion in d eclining to award attorney’s fees. Accordingly, the district court’s denial of defendants’ request for attorney’s fees is AFFIRMED.-9- Entered for the Court

James E. Barrett Senior Circuit Judge