Opinion ID: 1434840
Heading Depth: 3
Heading Rank: 2

Heading: Exclusion of Willfulness Evidence (Issue 2)

Text: The district court properly precluded defendants from offering as evidence, during the liability phase of the trial, defendants' post-litigation settlement offers, which defendants argue constitute evidence that they did not infringe willfully. Under the federal Copyright Act, a plaintiff may receive up to $150,000 in statutory damages if the infringement was committed willfully. 17 U.S.C. § 504(c)(2). [5] Under New York law, punitive damages for common law copyright infringement and unfair competition are available where a wrong is aggravated by recklessness or willfulness. Roy Export Co. v. CBS, Inc., 672 F.2d 1095, 1106 (2d Cir.1982). The jury ultimately found that defendants' infringement was willful. Defendants' evidence of post-litigation settlement attempts was inadmissible under Federal Rule of Evidence 408. Rule 408 provides that settlement offers are not admissible to prove liability for or invalidity of the claim or its amount but does not require exclusion when the evidence is offered for another purpose. Fed.R.Evid. 408 (2005). The district court held that defendants' evidence fell within the exclusion clause of Rule 408 and that the another purpose clause did not apply because the other purpose for which [the evidence] is offered is not appropriate. Further, in a post-trial order denying defendants' Motion for Mistrial or Modification of Verdict with respect to the admissibility of settlement evidence, the district court noted, Defendants were permitted to introduce such evidence during the punitive damages phase of the trial, and the jury nevertheless awarded punitive damages. Defendants were also permitted to introduce evidence regarding the Peterer pre-litigation letters at the liability phase of the trial. The district court's exclusion of defendants' evidence under Rule 408 was not an abuse of discretion, United States v. Perry, 438 F.3d 642, 647 (6th Cir.2006), because the evidence was not relevant to the issue of liability. [6] One of the principal justifications for Rule 408 is that evidence of settlement offers is irrelevant. See Fed. R.Evid. 408 (Advisory Committee Notes); Urseth v. City of Dayton, 680 F.Supp. 1084, 1098 (S.D.Ohio 1987) ([A] settlement offer or the fact of settlement negotiations is not direct evidence regarding the factual issues in a case.). Here, the only issue to which the evidence of settlement offers might have been relevant was to show that defendants did not act reprehensibly, and that plaintiffs were thus not entitled to a large punitive damages award. However, the fact that defendants offered to settle a lawsuit already brought by plaintiffs for past acts of infringement is not at all probative of whether defendants infringed willfully, and such a fact, therefore, was not relevant. Defendants' arguments for why the district court erred are unpersuasive. First, defendants argue that evidence of settlement offers does not in this case contravene Rule 408 or its spirit because the goal of Rule 408 is to encourage settlement offers (and here, the offerors were the parties seeking to admit the offers). However, there is an alternative goal of Rule 408, discussed above, which is to exclude evidence that is frequently irrelevant. Second, Defendants argue that the evidence of settlement offers was offered for another purpose, namely, to rebut plaintiffs' evidence of willfulness. Although rebutting evidence that another party introduces may be an acceptable other purpose under Rule 408, defendants' evidence here did nothing to rebut plaintiffs' evidence. Whereas plaintiffs' evidence of its pre-litigation settlement offers was probative of the fact that defendants had knowledge of, but disregarded, the infringement, defendants' evidence was not relevant to knowledge of the infringement. Instead, defendants' evidence purported to demonstrate that defendants did not have a malicious state of mind. This was not relevant to the issue of whether defendants infringed willfully. In addition, the district court did not prohibit defendants from rebutting plaintiffs' willfulness allegations with relevant evidence, such as evidence of how defendants responded to the Peterer letters. See J.A. 114. Furthermore, the district court permitted defendants to offer their evidence of settlement offers during the punitive phase of the trial, where that evidence actually might have been relevant. Because the evidence that defendants sought to have admitted was not relevant to any issue that the jury needed to decide, the district court's alternative holding that the evidence would confuse the jury, and thus was inadmissible under Federal Rule of Evidence 403, was also not an abuse of discretion. The evidence might, as the district court concluded, have improperly confused the jury, as it pertained to collateral and irrelevant events. Also, given the evidence's lack of probative value, the risk of unfair prejudice substantially outweighed the evidence's probative value. Finally, even if the district court erred by excluding defendants' evidence, such error would have been harmless. During the punitive damages phase of the trial, defendants introduced the evidence that was excluded from the liability phase, yet the jury still awarded Westbound $3.5 million in punitive damages. If the excluded evidence would have made a difference with respect to the jury's determination that defendants acted willfully, surely the jury would not have awarded such a large amount of punitive damages (so large, in fact, that defendants argue it violated due process) after hearing the evidence.