Opinion ID: 457915
Heading Depth: 3
Heading Rank: 3

Heading: Apportionment of Profits

Text: 39 How to apportion profits between the infringers and the plaintiffs is a complex issue in this case. Apportionment of direct profits from the production as well as indirect profits from the hotel and casino operations are involved here, although the district court addressed only the former at the first trial. 40 When an infringer's profits are attributable to factors in addition to use of plaintiff's work, an apportionment of profits is proper. Sheldon v. Metro-Goldwyn Pictures, Inc., 309 U.S. 390, 405-06, 60 S.Ct. 681, 686-87, 84 L.Ed. 825 (1939) (Sheldon II ); Universal Pictures Co. v. Harold Lloyd Corp., 162 F.2d at 377. The burden of proving apportionment, (i.e., the contribution to profits of elements other than the infringed property), is the defendant's. Lottie Joplin Thomas Trust v. Crown Publishers, Inc., 592 F.2d 651, 657 (2d Cir.1978). We will not reverse a district court's findings regarding apportionment unless they are clearly erroneous. See Shapiro, Bernstein & Co. v. 4636 S. Vermont Ave., Inc., 367 F.2d at 241-42. 41 After finding that the net profit earned by Hallelujah Hollywood was approximately $2,500,000, the district court offered the following explanation of apportionment: 42 While no precise mathematical formula can be applied, the court concludes in light of the evidence presented at trial and the entire record in this case, a fair approximation of the profits of Act IV attributable to the infringement is $22,000. 43 The district court was correct that mathematical exactness is not required. However, a reasonable and just apportionment of profits is required. Sheldon II, 309 U.S. at 408, 60 S.Ct. at 688; Universal Pictures Co. v. Harold Lloyd Corp., 162 F.2d at 377. 44 Arriving at a proper method of apportionment and determining a specific amount to award is largely a factual exercise. Defendants understandably argue that the facts support the district court's award. They claim that the infringing material, six minutes of music in Act IV, was an unimportant part of the whole show, that the unique features of the Ziegfield Theater contributed more to the show's success than any other factor. This is proved, they argue, by the fact that when the music from Kismet was removed from Hallelujah Hollywood in 1976, the show suffered no decline in attendance and the hotel received no complaints. 45 Other evidence contradicts defendants' position. For instance, defendant Donn Arden testified that Kismet was a very important part of the show and [he] hated to see it go. Moreover, while other acts were deleted from the shortened Saturday night versions of the show, Act IV Kismet never was. 46 We reject defendants' contention that the relative unimportance of the Kismet music was proved by its omission and the show's continued success thereafter. Hallelujah Hollywood was a revue, comprised of many different entertainment elements. Each element contributed significantly to the show's success, but no one element was the sole or overriding reason for that success. Just because one element could be omitted and the show goes on does not prove that the element was not important in the first instance and did not contribute to establishing the show's initial popularity. 47 The difficulty in this case is that the district court has not provided us with any reasoned explanation of or formula for its apportionment. We know only the district court's bottom line: that the plaintiffs are entitled to $22,000. Given the nature of the infringement, the character of the infringed property, the success of defendants' show, and the magnitude of the defendants' profits, the amount seems to be grossly inadequate. It amounts to less than one percent of MGM Grand's profits from the show, or roughly $13 for each of the 1700 infringing performances. 11 48 On remand, the district court should reconsider its apportionment of profits, and should fully explain on the record its reasons and the resulting method of apportionment it uses. Apportionment of indirect profits may be a part of the calculus. If the court finds that a reasonable, nonspeculative formula cannot be derived, or that the amount of profits a reasonable formula yields is insufficient to serve the purposes underlying the statute, then the court should award statutory damages. See infra Part II.B.5.