Opinion ID: 782788
Heading Depth: 1
Heading Rank: 3

Heading: Award of Audi's Profits

Text: 14 The district court granted Audi's motion for JAML and vacated the jury's $570,000 award representing Audi's profits generated by the illegal copyright infringement. The court found that the award was too speculative because Andreas failed to prove a causal connection between the infringement and Audi's profits from the TT coupe. The award equaled 10% of Audi's after-tax profits on the TT coupe sales during the time the commercial aired. We review a district court's ruling on a motion for JAML de novo, applying the same standard utilized by the district court. 15 [T]he law places a high standard on overturning a jury verdict because of the danger that the jury's rightful province will be invaded when judgment as a matter of law is misused. Where conflicting inferences reasonably can be drawn from the evidence, it is the role of the jury, not the court, to determine which inference shall be drawn. Only where all of the evidence points in one direction and is susceptible to no reasonable interpretation supporting the jury verdict should the grant of a motion for judgment as a matter of law be affirmed. Thus, it is improper to overturn a jury verdict unless, after giving the nonmoving party the benefit of all reasonable inferences and resolving all conflicts in the evidence in the nonmoving party's favor, there still exists a complete absence of probative facts to support the conclusion reached so that no reasonable juror could have found for the nonmoving party. 16 First Nat'l of Omaha v. Three Dimension Sys. Prods., Inc., 289 F.3d 542, 544 (8th Cir.2002) (internal quotations omitted); see also White v. Pence, 961 F.2d 776, 779 (8th Cir.1992) ([T]o sustain a motion for j.n.o.v., all the evidence must point one way and be susceptible of no reasonable inference sustaining the position of the nonmoving party.). 17 The Copyright Act provides that a copyright holder is entitled to recover his actual damages as well as any profits of the infringer that are attributable to the infringement and are not taken into account in computing actual damages. 17 U.S.C. § 504(b) (2000). The infringer's profits are awarded to the copyright holder to prevent the infringer from unfairly benefiting from a wrongful act. H.R.Rep. No. 94-1476, § 504, at 161 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5777. 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.  § 504(b) (emphasis added). [W]here some of the defendant's profits result from the infringement and other profits are caused by different factors,... the burden of proof is on the defendant ... [to] prove not only `his or her deductible expenses' but also `the element of the profit attributable to factors other than the copyrighted work.' H.R.Rep. No. 94-1476, § 504, at 161 (quoting § 504(b)). Any doubt as to the computation of costs or profits is to be resolved in favor of the plaintiff. If the infringing defendant does not meet its burden of proving costs, the gross figure stands as the defendant's profits. Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 514 (9th Cir.1985) ( Frank Music I ) (internal citations omitted). 18 Audi does not dispute the jury's finding of copyright infringement, but argues only that Andreas failed to establish a causal connection between the infringement and its gross revenues from the sale of the TT coupe. The district court noted that generally a rebuttable presumption that the defendant's revenues are entirely attributable to the infringement arises, and the burden then shifts to the defendant to demonstrate what portion of the profits are not traceable to the infringement. (Order at 6.) The court applied a less strict standard, however, because this case involves indirect profits as opposed to direct profits: the infringers did not sell the copyrighted work, but used the copyrighted work to sell another product, the TT coupe. The court found that Andreas's proffered evidence of a connection between the infringement and Audi's revenues from the sale of the TT coupe during the time the commercial aired was too speculative to support the jury's award. 19 Although cases distinguish between direct and indirect profits, the statute does not. See, e.g., Mackie v. Rieser, 296 F.3d 909, 914 (9th Cir.2002) (On its face, § 504(b) does not differentiate between `direct profits' ... and `indirect profits'....), cert. denied, ___ U.S. ___, 123 S.Ct. 1259, 154 L.Ed.2d 1022 (2003). We agree that in an indirect profits case the profits attributable to the infringement are more difficult to quantify. But that difficulty does not change the burden of proof established by the statute. The burden of establishing that profits are attributable to the infringed work often gets confused with the burden of apportioning profits between various factors contributing to the profits. [T]he plaintiff has the `burden' to demonstrate a nexus between the infringement and the indirect profits before apportionment can occur. Mackie, 296 F.3d at 915 (citing Univ. of Colo. Found. v. Am. Cyanamid Co., 196 F.3d 1366, 1375 (Fed.Cir.1999), cert. denied, 529 U.S. 1130, 120 S.Ct. 2005, 146 L.Ed.2d 956 (2000)). The nexus requirement exists in both direct and indirect profits cases. See, e.g., Taylor v. Meirick, 712 F.2d 1112, 1122 (7th Cir.1983) (holding in direct profits case that plaintiff could not meet its burden of establishing defendant's gross revenue attributable to infringement by showing gross revenues from everything defendant sold; plaintiff should have established revenues from the sale of the infringing product). Once that nexus is established in either a direct or indirect profits case, if an infringer's profits are attributable to factors in addition to use of plaintiff's work, an apportionment of profits is proper. The burden of proving apportionment (i.e., the contribution to profits of elements other than the infringed property), is the defendant's. Frank Music I, 772 F.2d at 518 (internal citations omitted) (holding that infringing use of music in one of ten acts of Las Vegas casino musical revue entitled copyright holder to portion of casino's hotel and gaming operations based on revue's promotional nature). 20 The district court here concluded that the uncertainties in the evidence went to whether Audi profited from the infringing commercial at all-for which Andreas carried the burden of proof-rather than the extent that it profited from the infringement-for which Audi carried the burden of proof-because Andreas failed to prove that the infringed words resulted in the sale of any TT coupe. (Order at 9 (While most people believe that advertising contributes somehow to the sales of motor vehicles, it is not sufficient for a plaintiff to rely on such intuitive notions as proof of causation.).) However, in ruling on a motion for JAML, the evidence is to be read to support the verdict if at all reasonable. Andreas introduced more than mere speculation that the Wake Up commercial contributed to sales of the TT coupe. The infringement was the centerpiece of a commercial that essentially showed nothing but the TT coupe. The evidence established that Audi enthusiastically presented the commercial to its dealers as an important and integral part of its launch of the TT coupe into the U.S. market; sales of the TT coupe during the period that the commercial aired were above Audi's projections; the three commercials received high ratings on the Allison-Fischer surveys that rated consumer recall of the commercials; and Audi paid M & S a substantial bonus based on the success of the commercials. Reading this evidence in the light most favorable to the verdict, the commercial did more than merely contribute[] somehow, id., to sales of the TT coupe. See Frank Music I, 772 F.2d at 517 (holding that statement in MGM's annual report that its gaming operations were materially enhanced by the popularity of the hotel's entertainment[, including] `Hallelujah Hollywood,' the spectacularly successful production revue provided sufficient evidence that the infringing use of six minutes worth of music in one of ten acts in the revue contributed to MGM's gaming profits, making an award proper if ascertainable). We conclude the jury had enough circumstantial evidence to find that the commercial contributed to the profitable introduction of the TT coupe, which shifted the burden to Audi of showing what effect other factors had on its profits. 21 Audi argues that numerous unknown elements other than the commercial, let alone the infringing words contained in the commercial, contributed to sales of the TT coupe, and that therefore the award was based on speculation. We recognize that the offending commercial probably did not contribute to every purchase of a TT coupe during the relevant time period. Undoubtedly, some buyer somewhere bought a TT coupe without having seen the commercial despite Audi's extensive use of it. But we reject the notion that Andreas was required to put a TT buyer on the stand to testify that she bought the car because of the commercial in order to meet his burden of a causal connection. Once a nexus was shown as established above, Andreas was required under the statute only to establish Audi's gross revenue from the TT coupe. Audi then bore the burden of establishing that its profit was attributable to factors other than the infringing words: the other two commercials that did not contain the infringed words, other parts of the Wake Up commercial, customer loyalty, brand recognition, etc. See id. (holding that infringing defendant had burden of establishing that gaming profits derived from factors other than infringing use of music in promotional production and remanding for new damages calculation where original calculation did not include any of defendant's indirect profits). Any doubt as to the computation of costs or profits is to be resolved in favor of the plaintiff. If the infringing defendant does not meet its burden of proving costs, the gross figure stands as the defendant's profits. Id. at 514 (internal citations omitted). 22 The district court's error was in placing the detriment of any speculation on Andreas rather than on Audi. 2 The question of allocating an infringer's profits between the infringement and other factors, for which the defendant infringer carries the burden, is highly fact-specific, Estate of Vane v. The Fair, Inc., 849 F.2d 186, 190 (5th Cir.1988), cert. denied, 488 U.S. 1008, 109 S.Ct. 792, 102 L.Ed.2d 783 (1989), and should have been left to the jury. See also Frank Music Corp. v. Metro-Goldwyn-Mayer Inc., 886 F.2d 1545, 1550 & n. 4 (9th Cir.1989) ( Frank Music II ) (awarding nearly $700,000 of infringer's indirect profits in appeal from remand of Frank I based on district court's finding that 2% of MGM's indirect profits were attributable to infringement, which finding court of appeals held was not clearly erroneous where district court, sitting as fact finder, considered other factors attributing to total profits), cert. denied, 494 U.S. 1017, 110 S.Ct. 1321, 108 L.Ed.2d 496 (1990). 23 Having concluded that Andreas met his burden of establishing a nexus between the infringement and Audi's sale of TT coupes, we also believe that the jury's award was not overly speculative. The total profit upon which the jury based its award was limited to Audi's profit generated only by the sale of the TT coupe, and only during the time that the Wake Up commercial aired. The evidence established that Audi sold 5,384 TT coupes in 1999, but that number was reduced to account for the 238 pre-ordered vehicles, leaving 5,146 TT coupe sales between May and the end of the year that were potentially related to the infringing commercial. Audi realized $153,700,000 gross revenue on the sale of the limited number of TT coupes and an after-tax profit of $5,700,000. (Appellant's App. at 493-94.) The jury awarded Andreas $570,000, or 10% of that profit generated by the sale of the TT coupe during the time period that the commercial aired as the profit attributable to Audi's infringing use of Andreas's copyrighted work. Conversely, the jury impliedly found that 90% of Audi's profit was attributable to factors other than the infringement. As we have held, Audi bore the burden of establishing the portion of its profit attributable to factors other than the infringement. This evidence provides a nonspeculative basis for the jury's award, and it is precisely the jury's function as the factfinder to do so. See, e.g., Frank Music II, 886 F.2d at 1550 (affirming district court's factual finding that 2% of casino's gaming and hotel profits were attributable to promotional value of music revue). 24 This evidence also distinguishes this case from many of the cases relied upon by Audi, where the plaintiffs failed to establish any nexus at all between the infringement and the profits the plaintiff sought. See, e.g., Univ. of Colo., 196 F.3d at 1375 (holding that the plaintiff failed to establish connection between use of infringed work in patent application and later sale of patented product; use of infringing material in patent application contributed to receipt of patent, but no evidence tied infringement to sale of end product); Bus. Trends Analysts, Inc. v. Freedonia Group, Inc., 887 F.2d 399, 404 (2d Cir.1989) (noting difficulty in establishing connection between use of infringed work and increased goodwill and market enhancement as opposed to direct revenues); Rainey v. Wayne State Univ., 26 F.Supp.2d 963, 971 (E.D.Mich.1998) (holding no causal connection established between artist's work in brochure, distributed at car show where no cars were sold, and defendant's increased goodwill); Mackie, 296 F.3d at 916 (finding evidence of connection too speculative where infringement was limited to one page of multipage brochure advertising a series of concerts and plaintiff based its claim for 1.5% of Symphony's total revenues on Symphony's goal of generating 1.5% response rate to brochure as a whole). 25 We recognize that it is difficult to establish the portion of profits attributable to an infringement in cases where the infringed material is used in an advertisement for another product, but Congress put the burden of establishing elements of profit attributable to factors other than the copyright work on the defendant. Further, Congress did not distinguish between direct and indirect profits cases in allocating the burden of proof between establishing the fact that an infringement contributed to a defendant's profits and the extent to which the infringement contributed to the profits. We hold that the jury's conclusion that Andreas established a nexus between Audi's infringing use of his copyrighted work and Audi's profits from the sales of the TT coupe is sufficiently supported by the evidence so as to defeat a motion for JAML. The district court erroneously placed the burden of establishing the extent that the infringement contributed to Audi's profits on Andreas rather than on Audi as the infringing defendant.