Court Opinion

ID: 3044905
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:15:00.970454+00
Date Added: 2024-06-11T10:06:00.131864
License: Public Domain

Opinions of the United
2009 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

6-5-2009

William A Graham Com v. Thomas Haughey
Precedential or Non-Precedential: Precedential

Docket No. 08-2007

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2009

Recommended Citation
"William A Graham Com v. Thomas Haughey" (2009). 2009 Decisions. Paper 1105.
http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1105

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2009 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
                                            PRECEDENTIAL

        UNITED STATES COURT OF APPEALS
             FOR THE THIRD CIRCUIT

                       No. 08-2007

          WILLIAM A. GRAHAM COMPANY,
             d/b/a The Graham Company,
                                 Appellant
                          v.

   THOMAS P. HAUGHEY; USI MIDATLANTIC, INC.

                       No. 08-2111

          WILLIAM A. GRAHAM COMPANY,
              d/b/a The Graham Company

                             v.

   THOMAS P. HAUGHEY; USI MIDATLANTIC, INC.,
                              Appellant

      On Appeal from the United States District Court
         for the Eastern District of Pennsylvania
                  (D.C. No. 05-cv-00612)
       District Judge: Honorable Harvey Bartle, III

                  Argued March 3, 2009

Before: SCIRICA, Chief Judge, SLOVITER, and HARDIMAN,
                      Circuit Judges

                   (Filed: June 5, 2009 )
                             ____

Aleksander J. Goranin
Matthew A. Pearson
David J. Wolfsohn (Argued)
Woodcock Washburn
Philadelphia, PA l9l04

      Attorneys for Appellant in No. 08-2007
      Appellee in No. 08-2111

Floyd Abrams (Argued)
Katherine Vogele
Cahill, Gordon & Reindel
New York, NY 10005

Thomas E. Zemaitis
Pepper Hamilton
Philadelphia, PA l9l03

      Attorneys for Appellee in No. 08-2007
      Appellant in No. 08-2111

Jason R. Heller
Cahill, Gordon & Reindel
New York, NY 10005

Matthew R. Skolnik
Bazelon, Less & Feldman
Philadelphia, PA l9l02

      Attorneys for Appellant in No. 08-2111

                 OPINION OF THE COURT

                              2
SLOVITER, Circuit Judge.

       We face an issue of first impression for this
court–whether the discovery rule or the injury rule governs the
accrual of claims under the Copyright Act, which has a three-
year statute of limitations for civil actions, 17 U.S.C. § 507(b).

        Under the injury rule, a claim accrues, and the statute of
limitations begins to run, when the plaintiff suffers a legally
cognizable injury. Therefore, if the injury rule applies in this
case, appellant/cross-appellee William A. Graham Company
(“Graham”) cannot recover on its claims that appellees/cross-
appellants USI MidAtlantic, Inc. and Thomas P. Haughey
(collectively, “USI”) infringed its copyrights more than three
years before Graham filed suit. Conversely, if the discovery rule
applies, then Graham’s cause of action for each act of
infringement did not accrue until Graham discovered, or with
reasonable diligence should have discovered, the injury
underlying its claim. Thus, if the discovery rule applies, Graham
may be able to recover on acts of infringement that occurred
more than three years before it filed suit.

        The District Court concluded that the discovery rule
applied to civil actions under the Copyright Act and the case
proceeded to a jury trial. The jury found that Graham was not on
notice of USI’s infringement prior to February 9, 2002–leading
to its conclusion that none of Graham’s infringement claims was
time-barred. That jury entered a verdict in Graham’s favor in the
amount of $16,561,230 against USI MidAtlantic and $2,297,397
against Haughey. However, the District Court set aside the
jury’s finding and ultimately held that Graham was time-barred
from recovering for acts of infringement that occurred more than
three years before it filed suit in light of certain “storm
warnings” of those earlier acts of infringement.

       The case then proceeded to a second jury trial on the issue
of damages for the three year period preceding Graham’s filing;
the second jury entered a verdict for Graham in the amount of
$1.4 million against USI MidAtlantic and $268,000 against
Haughey. Thus, if we determine that the District Court correctly

                                 3
held that the discovery rule governs the accrual of claims under
the Copyright Act, we must then decide whether the Court
correctly applied that rule to the facts of this case.

       Finally, USI cross-appeals and renews its contention,
rejected by the District Court, that Graham cannot recover on
any of its claims because it failed to prove a legally sufficient
causal nexus between the infringement and USI’s profits
awarded to Graham as compensation for the infringement.

                                 I.

                        BACKGROUND

       A. Facts

        Graham is an insurance brokerage firm that provides
property and casualty insurance services to businesses. Haughey
worked for Graham as a producer (salesperson) from January
1985 through September 1991. Producers serve as
intermediaries between their clients and insurance companies.
Graham’s producers solicit clients by first preparing a risk
assessment study, called a survey and analysis, that evaluates the
client’s needs. In order to prepare the survey and analysis, a
producer generally must spend a significant amount of time
learning the client’s business, assessing its insurance needs, and
reviewing its current policies. The producer then prepares a
written proposal that contains recommendations addressing the
client’s needs as identified in the survey and analysis. If the
client agrees to Graham’s proposal, it places the client with an
insurance company that actually writes the insurance. Graham
receives a commission from the insurance company which issues
the policy and in addition receives a service fee from its client.

      In the 1980s, Graham’s president, William Graham,
developed form language called the Standard Paragraphs to be
used by Graham’s producers to prepare survey and analysis
documents and coverage proposals. The Standard Paragraphs
were not copyrighted.

                                 4
        Sometime in 1990, Graham began to prepare the Standard
Survey and Analysis and the Standard Proposal (collectively, the
“Standard Works” or the “Works”). The Standard Works, which
were each hundreds of pages long, included some language from
the Standard Paragraphs as well as new material. After draft
versions of the Standard Works were distributed to Graham’s
eight producers, including Haughey, the first edition of the
Standard Survey was completed around March or April 1991 and
it was then copyrighted. The first edition of the Standard
Proposal was completed in the fall of 1991 and it also was
copyrighted. Graham placed copyright notices on client
documents that incorporated the Standard Works and registered
certain portions of the Works with the Copyright Office.

        Graham’s producers use the Standard Works as templates
for client-specific proposals. The Standard Works include plain
English explanations of insurance policies and concepts that
Graham’s producers can copy into client-specific materials and
that clients can easily understand. The Standard Works also
serve as reference materials to guide Graham’s producers in the
development of client-specific materials. Graham’s president
testified that the Standard Works are “absolutely essential” to
Graham’s business “[b]ecause they are probably the most
important way that we can establish creditability [sic] with a
perspective [sic] client.” App. at 371.

         Haughey’s employment with Graham was terminated in
September 1991, apparently because Haughey’s clients were
primarily smaller, family-run businesses and Graham sought at
that time to attract larger businesses as clients. Haughey testified
at trial that he left Graham on amicable terms and he received a
thirty-thousand dollar severance package payable over three
months. Graham and Haughey also entered into a termination
agreement in which Haughey reaffirmed his promise in his
employment contract to keep company information confidential
and to turn over all of Graham’s “papers and the information
contained therein” in Haughey’s possession upon termination of
his employment. App. at 1987. Nonetheless, following his
termination Haughey retained binders that contained at least part
of the Standard Works.

                                 5
        Shortly thereafter, Haughey got a job at a smaller
insurance brokerage firm, Flanigan, O’Hara & Gentry (“FOG”).
At about the same time that Haughey joined FOG, Haughey
solicited certain of Graham’s clients in violation of his
termination agreement. Graham’s executive vice president
(Judith Dooling) sent Haughey a letter memorializing a
conversation in which Haughey agreed to cease such solicitation
pending negotiation of an agreement to sell FOG and Haughey
certain accounts.1

       In November 1991, Graham, FOG and Haughey entered
into an agreement in which Graham sold FOG six of Haughey’s
prior accounts. Graham provided FOG and Haughey with
materials related to those six accounts, including proposals made
to those clients in the current and prior year which included
Graham’s copyrighted materials. Haughey also specifically
promised to hold all “knowledge and information concerning”
the Standard Works “in trust [and] in confidence for the sole
benefit of Graham,” to return all “papers and information”
obtained from Graham other than information related to the
accounts sold, app. at 2084, and not to “use, divulge, or
otherwise disclose” any of Graham’s confidential information,
app. at 2082.

       Notwithstanding his promise, Haughey subsequently
infringed Graham’s copyrighted material in the Standard Works
by including it in proposals to FOG’s clients. Haughey first
included Graham’s copyrighted material in a proposal to a client
in July 1992.2 It is unclear whether Haughey copied this

       1
          This letter was not presented in evidence before the first
jury, which, as previously stated, concluded that Graham was not
time-barred from recovering for acts of infringement occurring
more than three years prior to Graham’s filing of the instant case.
However, the District Court relied in part on Haughey’s improper
solicitation of Graham’s clients as evidence that Graham was on
notice of USI’s copyright infringement as early as the fall of 1991.
       2
         USI contends that Haughey’s testimony supports an
inference that his infringement began immediately after his arrival

                                 6
material from his own copy of the Standard Works or whether he
used a copy of the 1992 version of the Standard Works (which
Haughey had not obtained before the termination of his
employment with Graham) brought to FOG by another former
Graham employee, Don Boresen, in the spring of 1992. In any
event, at some time in 1994 or 1995, FOG copied the entire 1992
version of the Standard Works into its word processing system;
paper copies were also distributed to FOG’s employees.

      In 1995, FOG was acquired by USI Holdings and
subsequently merged with two other entities to form USI
MidAtlantic. The Standard Works were made available to USI
employees.

        According to Graham’s expert, Haughey and USI copied
Graham’s copyrighted language from the Standard Works into at
least 857 proposals over thirteen years (1992 through 2005).
USI personnel testified that its written proposals to clients
(including, presumably, those with infringing language) were an
important part of the sales process–in fact, Haughey even
testified that some clients were convinced to purchase insurance
through USI on the basis of the proposals–and that it was USI’s
practice to review the proposal’s contents “page by page” with
the client. App. at 571. Moreover, FOG had nothing
comparable to the Standard Works when Haughey first arrived

at FOG in November 1991, but the portions of his testimony relied
upon by USI do not establish a date of infringement. USI also
notes that, during opening arguments to the jury, Graham made
statements that USI’s improper use of the Standard Works began
in 1991, and contends that Graham should be held to these
statements. However, this court has held that a “judicial
admission[ ] must be unequivocal” to be effective, Glick v. White
Motor Co., 458 F.2d 1287, 1291 (3d Cir. 1972), and Graham’s
statements do not unequivocally state that an act of infringement
(as opposed to possession of the Works) occurred in 1991.
Moreover, Graham had the burden to prove that acts of
infringement occurred, and its evidence established a date of first
infringement in July 1992.

                                7
and, as noted above, FOG and USI made electronic and paper
copies of the Standard Works available to their employees and
encouraged them to use the Standard Works when developing
client-specific materials. On the other hand, most of USI’s
proposals during this period did not include infringing language,
and even those that did include infringing language did so only
on a few pages.

       It was USI’s practice to keep proposals to clients
confidential, and Graham did not discover USI’s infringement
until November 2004, when a client showed one of Graham’s
producers a copy of a USI proposal to the client.

       B. Procedural History

        Graham filed this action on February 8, 2005, asserting
claims for copyright infringement against USI and Haughey as
well as a breach of contract claim against Haughey. USI moved
for partial summary judgment, contending that any infringement
that occurred more than three years prior to filing of the
complaint was time-barred under the Copyright Act’s three-year
statute of limitations for civil actions. The District Court denied
the motion, holding that the discovery rule applied to
infringement claims under the Copyright Act and that therefore
Graham was entitled to present evidence to demonstrate that it
could not have reasonably discovered USI’s infringement before
it actually did so.3

       The case proceeded to a jury trial.4 After Graham
voluntarily dismissed the breach of contract claim that it had
asserted against Haughey, the jury reached a verdict in favor of

       3
        The District Judge who initially heard this matter and who
ruled on the statute of limitations motion died in 2005. The
successor District Judge reaffirmed that ruling.
       4
         We note that the District Court provided the jury with a
spoliation instruction because USI destroyed certain client
proposals after the Court had ordered production of such
documents.

                                 8
Graham on the copyright claim in the amount of $16,561,230
against USI and $2,297,397 against Haughey.5 The District
Court presented the jury with several interrogatories, including,
as relevant here, whether Graham should have discovered that
USI was infringing its copyrights prior to February 9, 2002.
Because the jury answered in the negative, Graham’s claims
were not time-barred under the discovery rule.

        Following the jury verdict, USI moved for a new trial on
the statute of limitations issue, and the District Court granted the
motion. According to the Court, the jury’s answer to the statute
of limitations interrogatory “was against the great weight of the
evidence” because the District Court concluded that Graham
knew or should have known of certain storm warnings that
Haughey would infringe as early as the fall of 1991.6 William A.

       5
         This amount represented the profits that USI and Haughey
earned as a result of the infringement. Under the Copyright Act, 17
U.S.C. § 504(b), Graham bore the burden of establishing the
defendants’ gross revenue from infringement; Graham presented
evidence that USI’s gross commissions from clients who received
an infringing proposal were approximately $32 million and that
Haughey’s gross commissions were approximately $12 million.
The defendants then bore the burden of proving that certain
expenses should be subtracted from the gross revenue figure and
to apportion the revenues between their infringing and non-
infringing conduct. Id. Here, the evidence showed that twenty-five
percent of the gross revenue was paid to producers as a salary
expense, leaving a total net commission for the defendants of
approximately $27 million. The jury’s ultimate award was
approximately seventy percent of that net commission, implying
that the jury concluded that thirty percent of the net commission
was attributable to factors other than the infringement.
       6
        In reaching this conclusion, the District Court considered
evidence regarding Haughey’s obligations to Graham under his
employment and termination contracts even though the Court
excluded those contracts from the jury because it had held that
those contracts were superseded by the November 1991 agreement
between Graham, FOG and Haughey.

                                 9
Graham Co. v. Haughey, No. 05-612, 2006 WL 3386672, at *15
(E.D. Pa. Nov. 21, 2006). Specifically, the Court concluded that
Graham should have known: that Haughey retained a copy of the
Standard Works in violation of his employment and termination
agreements with Graham as well as the November 1991
agreement that sold FOG certain of Haughey’s client accounts;
that he was working as a producer for another insurance
brokerage firm; and that, given these facts, “it was quite
possible, if not likely, that Haughey and FOG would copy [the
Standard Works] into client proposals, for that was the only
reason for Haughey and FOG to retain [them].” Id. at *14.
Thus, the District Court concluded that “Graham had
information upon Haughey’s departure [in the fall of 1991] that
would cause a person, in the exercise of reasonable diligence, to
inquire of Haughey and FOG about the possession, use and
copying of the [Standard Works].” Id. Therefore, the District
Court ordered a new trial as to the application of the Copyright
Act’s statute of limitations and the calculation of Graham’s
damages.

        Because the District Court granted USI’s motion for a
new trial on the statute of limitations issue, it did not reach USI’s
motion for a new trial on the grounds that the jury’s
apportionment of USI’s profits (i.e., whether the profits were
attributable to infringement or some other non-infringing cause)
was against the weight of the evidence and/or that the verdict
was excessive.

        USI also moved for judgment as a matter of law on the
ground that Graham failed to prove a legally sufficient causal
connection between any copyright infringement and USI’s
profits. The District Court denied that motion, holding that
Graham met its burden on this issue because Graham sought to
recover USI’s profits only as to USI’s clients who received
infringing proposals, demonstrated that the written proposals
were an important part of USI’s sales process, and demonstrated
that USI pervasively used language from the Standard Works.

      Following subsequent cross-motions for summary
judgment on the statute of limitations issue, the District Court

                                 10
held that as a matter of law Graham could not recover on any
acts of infringement that occurred prior to February 9, 2002.
William A. Graham Co. v. Haughey, 484 F. Supp. 2d 324, 336-
37 (E.D. Pa. 2007). The Court concluded that sufficient storm
warnings existed to put Graham on notice of Haughey’s (and
thus USI’s) infringement in the fall of 1991, i.e., shortly after
Haughey left Graham. The Court noted that Graham was or
should have been aware: that Haughey retained possession of a
copy of the Standard Works when he left Graham; that the only
value of the Standard Works to Haughey was to copy them into
client proposals; that Haughey went to work for a competing
insurance broker; and that Haughey was “not a person of his
word” because he engaged in improper competitive behavior by
violating the non-compete clause of his employment and
termination contracts. Id. at 336.

        The District Court rejected Graham’s argument that “the
circumstances this court has identified” as storm warnings could
not have put Graham on notice of the defendants’ infringement
because those storm warnings were related to Haughey’s
“departure from Graham in the fall of 1991, before the first
evidence of an infringing proposal prepared by Haughey in July,
1992.” Id. at 334. The Court conceded that “it would be
nonsensical for a statute of limitations to begin running before
the actual injury had occurred,” but concluded that “we see no
reason why the clock on Graham’s claims should not have
started to run at the time when Haughey first began to infringe,
since there is no sign that any of the storm warnings had abated
by that point.” Id.

        The case proceeded to a second jury trial on the issue of
damages for acts of infringement occurring on or after February
8, 2002. The jury again returned a verdict for Graham, this time
in the amount of $1.4 million against USI and $268,000 against
Haughey. Graham timely appealed on April 2, 2008 and USI
timely cross-appealed on April 15, 2008.7

       7
        The District Court had jurisdiction pursuant to 28 U.S.C.
§§ 1331 and 1338(a). This court has jurisdiction under 28 U.S.C.

                                11
                                II.

                         DISCUSSION

       A. Statute of Limitations

        The Copyright Act provides that “[n]o civil action shall
be maintained under the provisions of this title unless it is
commenced within three years after the claim accrued.” 17
U.S.C. § 507(b). Because Graham filed this action on February
8, 2005, the accrual of Graham’s claims must be evaluated as of
February 9, 2002. However, in continuing infringement cases
such as this, “[e]ach act of infringement is a distinct harm giving
rise to an independent claim for relief.” Stone v. Williams, 970
F.2d 1043, 1049 (2d Cir. 1992) (citing Mount v. Book-of-the-
Month Club, Inc., 555 F.2d 1108 (2d Cir. 1977)). Thus, as the
District Court correctly held, Graham was not time-barred from
recovering for any acts of infringement that occurred on or after
February 9, 2002, regardless of whether the injury or discovery
rule applies to determine the accrual of claims under the
Copyright Act. That is not in dispute. Instead, the parties differ
on whether Graham may also recover for any acts of
infringement that occurred prior to February 9, 2002.

1. Claim Accrual Rule

       The question of whether the discovery rule or the injury
rule applies to determine when a civil cause of action accrues
under the Copyright Act is a legal one. Under the discovery rule,
a “cause of action accrues ‘when the plaintiff discovers, or with
due diligence should have discovered, the injury that forms the
basis for the claim.’” Disabled in Action of Pennsylvania v. Se.
Pennsylvania Transp. Auth., 539 F.3d 199, 209 (3d Cir. 2008)
(quoting Romero v. Allstate Corp., 404 F.3d 212, 222 (3d Cir.
2005)). Under the injury rule, a cause of action accrues at the
time of the injury. In this case, if the injury rule were to apply,
Graham would be time barred from recovery on any acts of

§ 1291.

                                12
infringement that occurred prior to February 9, 2002.

        Although we have not previously addressed this issue,
eight of our sister courts of appeals have applied the discovery
rule to civil actions under the Copyright Act. See Warren
Freedenfeld Assocs., Inc. v. McTigue, 531 F.3d 38, 44-46 (1st
Cir. 2008); Comcast v. Multi-Vision Elecs., Inc., 491 F.3d 938,
944 (8th Cir. 2007); Roger Miller Music, Inc. v. Sony/ATV
Publ’g, LLC, 477 F.3d 383, 390 (6th Cir. 2007); Polar Bear
Prods., Inc. v. Timex Corp., 384 F.3d 700, 705-07 (9th Cir.
2004); Gaiman v. McFarlane, 360 F.3d 644, 653 (7th Cir. 2004);
Lyons P’ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 796
(4th Cir. 2001); Daboub v. Gibbons, 42 F.3d 285, 291 (5th Cir.
1995); Stone v. Williams, 970 F.2d 1043, 1048 (2d Cir. 1992).

       USI contends that these precedents are not persuasive
because the question of whether the injury or discovery rule
applied was not squarely raised in most of them and, more
importantly, they fail to address the Supreme Court’s decision in
TRW Inc. v. Andrews, 534 U.S. 19 (2001).

        The TRW case did not arise under the Copyright Act but
under the Fair Credit Reporting Act (“FCRA”). In reaching the
statute of limitations issue, the Ninth Circuit held that, because
Congress had not “‘expressly legislated otherwise,’” the
discovery rule applied to claims under the FCRA. Id. at 26
(quoting Andrews v. TRW Inc., 225 F.3d 1063, 1067 (9th Cir.
2000)). The Supreme Court rejected that approach and held that
the discovery rule did not apply to actions under the FCRA
because “the text and structure of [the FCRA] evince Congress’
intent to preclude judicial implication of a discovery rule.” Id. at
28. Specifically, the Court reasoned that because the FCRA
provided that the “statute of limitations runs from ‘the date on
which the liability arises,’ subject to a single [statutory]
exception for cases involving a defendant’s willful
misrepresentation of material information,” the “most natural
reading of [the FCRA] is that Congress implicitly excluded a
general discovery rule by explicitly including a more limited
one.” Id. (quoting 15 U.S.C. § 1681p).

                                13
        This court had the occasion to interpret and apply TRW
when it was faced with the issue of the statute of limitations
applicable to the Americans with Disabilities Act and the
Rehabilitation Act. Disabled in Action, 539 F.3d at 208-09.
Because neither act included an express statute of limitations, we
applied the two-year state statute of limitations. Id. at 208. In
reaching the “more difficult question” of when the two year
statute begins to run, id., we interpreted TRW to require the
following inquiry to determine the applicable accrual rule for
federal causes of action. First, “[w]here Congress has specified
an accrual date by ‘explicit command’ or ‘by implication from
the structure and text of the statute,’ we defer to its directive.”
Id. at 209 (quoting TRW, 534 U.S. at 27-28). Second, “‘[i]n the
absence of a contrary directive from Congress,’ we apply the
‘federal discovery rule.’” Id. (quoting Romero, 404 F.3d at 222).

       USI would have us set aside that analysis, applied by this
court less than a year ago, in favor of a single district court
decision in another circuit which used the injury rule to
determine when claims accrue under the Copyright Act. See
Auscape Int’l v. Nat’l Geographic Soc’y, 409 F. Supp. 2d 235,
247 (S.D.N.Y. 2004). We decline to do so. Even the court in
Auscape conceded that “the text and structure of the [Copyright
Act] lend no guidance” as to “Congress’ intent with regard to
when an infringement claim accrues.” Id. at 244. This
concession answers in the negative the first question raised in
Disabled in Action: whether “Congress has specified an accrual
date by ‘explicit command’ or ‘by implication from the structure
and text of the statute.’” 539 F.3d at 209 (quoting TRW, 534
U.S. at 27-28).

       Further, the text and structure of the Copyright Act
actually favor use of the discovery rule. As noted by Graham,
criminal actions under the Copyright Act must be “commenced
within 5 years after the cause of action arose.” 17 U.S.C. §
507(a) (emphasis added). Just six years prior to the amendment
to the Copyright Act that added the civil limitations period now
codified at 17 U.S.C. § 507(b), the Supreme Court interpreted
language similar to § 507(a)’s criminal limitations period in the
Admiralty Act (“cause of action arises”) to embody the injury

                                14
rule. McMahon v. United States, 342 U.S. 25-26, 27 (1951); see
also TRW, 534 U.S. at 32 (noting that petitioner “offer[ed] a
strong argument” that use of the word “arise” in a statute of
limitations provision signals congressional intent to adopt the
injury rule (citing McMahon, 342 U.S. 25)). Significantly,
Congress used different language in the civil limitations
provision (“after the claim accrued”), which the Supreme Court
had previously interpreted as embodying the discovery rule. See
Urie v. Thompson, 337 U.S. 163, 169-170 (1949) (construing
“cause of action accrued” in Federal Employers’ Liability Act
and holding that statute of limitations was not triggered until
injured employee should have known of injury). Given the
maxim of statutory construction that “when the legislature uses
certain language in one part of the statute and different language
in another, the court assumes different meanings were intended,”
Sosa v. Alvarez-Machain, 542 U.S. 692, 711 n.9 (2004)
(quotation omitted), Graham persuasively argues that the
criminal and civil limitations periods embody different claim
accrual rules and that § 507(b) should be interpreted to embody
the discovery rule.

        USI, once again pointing to Auscape, interprets the
legislative history of the Copyright Act’s statute of limitations
provision as evidence of congressional intent to adopt the injury
rule for civil claims brought pursuant to the Copyright Act.
However, Congress provided no “directive” mandating use of
the injury rule in that legislative history. Disabled in Action, 539
F.3d at 209.

        For example, until the statute of limitations provision now
codified at 17 U.S.C. § 507(b) was enacted in 1957, the
Copyright Act lacked a statute of limitations period for civil
actions and courts borrowed state statutes of limitation for
analogous claims. See S. Rep. No. 85-1014 (1957), as reprinted
in 1957 U.S.C.C.A.N. 1961, 1961-62. USI notes several
instances in the legislative history of § 507(b) in which
congresspersons and witnesses argued that § 507(b) was
necessary to provide a “uniform” or “fixed” limitations period.
However, these statements reflected dissatisfaction with the use
of state statutes of limitations, which ranged from one to eight

                                15
years and therefore encouraged forum-shopping. See id. at
1962; see also Copyrights–Statute of Limitations: Hearing on
H.R. 781 Before H. Comm. on the Judiciary, 84th Cong. 9, 35,
40 (1955) (hereafter “Hearing”). None of these statements
addressed the separate issue of when a claim would accrue under
the new federal three-year statute of limitations.

        USI also relies on a statement in the Senate Report that
“due to the nature of publication of works of art . . . generally the
person injured receives reasonably prompt notice or can easily
ascertain any infringement of his rights. The committee agrees
that 3 years is an appropriate period for a uniform statute of
limitations for civil copyright actions and that it would provide
an adequate opportunity for the injured party to commence his
action.” S. Rep. No. 85-1014 (1957), as reprinted in 1957
U.S.C.C.A.N. 1961, 1962. Again, this statement does not speak
directly to the accrual of actions, but rather seeks to support the
three-year limitations period adopted by Congress. Moreover,
the fact that Congress believed that infringement was
“generally” a public act does not necessarily imply that, in cases
in which infringement was not public, Congress intended to
reject application of the discovery rule. Indeed, the quoted
passage speaks of whether the injured party has “reasonably
prompt notice” of infringement–an inquiry consistent with the
discovery rule.

        USI next points to what we view as an unenlightening
exchange between Representative Shepard J. Crumpacker and a
lobbyist for the motion picture industry during a House
committee hearing. Representative Crumpacker was concerned
that a movie company could make a movie that infringed on a
writer’s script, secretly show that movie in a small town, sit on
the movie until the statute of limitations passed, and then release
the movie generally while claiming that the writer was barred
from enforcing his or her rights. Hearing at 47. The lobbyist
responded that each performance of the film would constitute a
separate act of infringement. Id. at 48. This exchange is not
illustrative of Congressional intent regarding when copyright
claims accrue, but is cited by USI because the lobbyist also
stated that “if [an act of infringement] occurred three years ago .

                                 16
. . [, then it] would be barred in three years.” Id. That single
statement by a witness at a congressional hearing, which no
congressperson commented on or agreed with, signifies nothing
and is hardly a basis to conclude that Congress intended to apply
the injury rule.

        USI also notes that Congress considered including certain
express provisions to permit tolling of the statute of limitations,
including where the infringer was guilty of fraudulent
concealment, and it argues that the consideration of these
exceptions would have been unnecessary had Congress intended
to apply the discovery rule to claims under the Copyright Act.
Of course, had Congress included those limited exceptions
within § 507(b), the holding in TRW might well have inclined us
to reject the discovery rule here. But the important fact is that
Congress rejected inclusion of any statutory exceptions to the
statute of limitations period, and did so because “the Federal
district courts, generally, would recognize these equitable
defenses anyway.” H. Rep. No. 84-2419, at 2 (1956).

       Moreover, the legislative history makes clear that
Congress intended the Copyright Act’s statute of limitations to
apply “to the remedy of the person affected thereby, and not to
his substantive rights,” id., by which Congress meant that
“[e]quitable considerations are available to prolong the time for
bringing suit,” id. at 3. Further, Congress feared that inclusion
of specific statutory exceptions to the three-year limitations
period “might result in unfairness to some persons.” S. Rep. No.
85-1014 (1957), as reprinted in 1957 U.S.C.C.A.N. 1961, 1963.
Thus, this case actually presents the opposite situation as TRW:
Congress considered, but rejected, inclusion of specific statutory
exceptions to the Copyright Act’s statute of limitations in order
to ensure that the courts could consider any equitable
circumstances sufficient to excuse a plaintiff’s failure to sue
within the three-year limitations period.8

       8
         USI correctly notes that the legislative history regarding
the rejected statutory exceptions to the Copyright Act’s three-year
limitations period was directed toward equitable tolling rather than

                                17
        Finally, USI argues that use of the discovery rule would
be inappropriate as a matter of policy. USI notes that in TRW
the Supreme Court stated that it has “recognized a prevailing
discovery rule . . . in two contexts, latent disease and medical
malpractice, ‘where the cry for such a rule is loudest.’” TRW,
534 U.S. at 27 (quoting Rotella v. Wood, 528 U.S. 549, 555
(2000)). USI would distinguish copyright infringement, arguing
that “there is nothing intrinsically ‘hidden’ or ‘latent’ about
copyright infringement because it is by its nature a public act
that is only very rarely hidden from the copyright owner.” USI’s
Reply Br. at 16. That may be true in some instances but not in
all. Technological advances such as personal computing and the
internet have “ma[de] it more difficult for rights holders to
stridently police and protect their copyrights.” John Ramirez,
Note, Discovering Injury? The Confused State of the Statute of
Limitations for Federal Copyright Infringement, 17 Fordham
Intell. Prop. Media & Ent. L.J. 1125, 1158 (2007) (concluding
that discovery rule is appropriate for copyright actions).

        In sum, Congress provided no directive mandating use of
the injury rule to govern the accrual of claims under the
Copyright Act. We conclude that use of the discovery rule
comports with the text, structure, legislative history and

the discovery rule, and that these doctrines are distinct. However,
as discussed above, the legislative history demonstrates that
Congress rejected the inclusion of specific exceptions to the
Copyright Act’s statute of limitations in order to allow the courts
to consider any equitable considerations necessary to ensure that
copyright holders’ rights were fairly protected. As we have
explained, the “discovery rule originated as an equitable doctrine
to extend the period during which victims of latent injuries could
seek recovery.” Disabled in Action, 539 F.3d at 216 n.16
(emphasis omitted). As this case demonstrates, there are certain
infringements which, like latent injuries, a plaintiff cannot
reasonably be expected to discover at the time it occurred. Thus,
we believe that Congress’ expressed intent to allow the courts to
consider equitable circumstances to extend the time for filing an
infringement action is consistent with use of the discovery rule.

                                18
underlying policies of the Copyright Act. Thus, consistent with
Disabled in Action and in agreement with our sister courts of
appeals, we hold that the federal discovery rule governs the
accrual of civil claims brought under the Copyright Act.

2. Application of the Discovery Rule

        The first jury proceeded to calculate damages having been
instructed to use the discovery rule in light of the District
Court’s rejection of USI’s arguments in favor of the injury rule.
Nonetheless, despite the jury’s finding to the contrary, the
District Court overturned the jury’s determination and ruled that,
under the discovery rule, Graham’s cause of action for copyright
infringement accrued in the fall of 1991 after Haughey left
Graham to work at USI’s predecessor company. Accordingly,
the District Court granted USI’s motion for a new trial. After
cross-motions for summary judgment, the Court granted USI
judgment as a matter of law as to Graham’s infringement claims
for acts of infringement that occurred before February 9, 2002.
According to the District Court, “storm warnings or suspicious
circumstances about possible infringement were compelling long
before February 9, 2002, but Graham ignored them.” Graham,
484 F. Supp. 2d. at 336. Therefore, Graham could recover only
for acts of infringement that occurred within the three year
period prior to its filing of the instant action (i.e., acts occurring
on or after February 9, 2002).

        In reviewing the District Court’s decision to grant a new
trial, we apply an abuse of discretion standard. Fineman v.
Armstrong World Indus., Inc., 980 F.2d 171, 206 (3d Cir. 1992).
Where, as here, a district court grants a motion for a new trial
because it determines that the jury verdict was against the weight
of the evidence, it is “‘the duty of the appellate tribunal to
exercise a closer degree of scrutiny and supervision than is the
case where a new trial is granted because of some undesirable or
pernicious influence obtruding into the trial’” in order to protect
the jury’s fact-finding role. Id. at 211 (quoting Lind v. Schenley
Indus. Inc., 278 F.2d 79, 90 (3d Cir. 1960) (en banc)). As to the
District Court’s grant of summary judgment, our review is
plenary. Northview Motors, Inc. v. Chrysler Motors Corp., 227

                                 19
F.3d 78, 88 (3d Cir. 2000).

        Graham challenges both the District Court’s ruling that
USI was entitled to a new trial on the statute of limitations and
its subsequent grant of summary judgment to USI on that issue.
That is, Graham argues that the evidence was sufficient to
support the first jury’s finding that Graham was not chargeable
with knowledge of USI’s infringement prior to February 9, 2002.
Accordingly, Graham contends that we should reinstate the first
jury’s verdict in favor of Graham in the amount of $16,561,230
against USI and $2,297,397 against Haughey.

3. Storm Warnings

        We reiterate that, under the discovery rule, a cause of
action accrues “‘when the plaintiff discovers, or with due
diligence should have discovered, the injury that forms the basis
for the claim.’” Disabled in Action, 539 F.3d at 209 (quoting
Romero, 404 F.3d at 222). Applying that precept here, we ask
whether Graham “should have known of the basis for [its]
claims [, which] depends on whether [it] had sufficient
information of possible wrongdoing to place [it] on inquiry
notice or to excite storm warnings of culpable activity.” Benak
ex rel. Alliance Premier Growth Fund v. Alliance Capital Mgmt.
L.P., 435 F.3d 396, 400 (3d Cir. 2006) (quoting In re NAHC,
Inc. Sec. Litig., 306 F.3d 1314, 1325 (3d Cir. 2002)) (internal
quotation marks omitted). USI and Haughey bear the burden of
demonstrating such storm warnings and, if they do so, “the
burden shifts to [Graham] to show that [it] exercised reasonable
due diligence and yet [was] unable to discover [its] injuries.” Id.
(quoting Mathews v. Kidder, Peabody & Co., Inc., 260 F.3d 239,
252 (3d Cir. 2001)).

       Graham first contends that the District Court erred
because the storm warnings relied upon by the District Court
predated the first act of infringement. As we have previously
explained, “[b]ecause a potential plaintiff cannot discover his
injury before it has occurred, the discovery rule only postpones
the accrual date of a claim where the plaintiff is unaware of the
injury. It does not accelerate the accrual date when the plaintiff

                                20
becomes aware that he will suffer injury in the future.” Disabled
in Action, 539 F.3d at 214 (quotations, alterations, and internal
citation omitted). Thus, “the first step in applying the discovery
rule . . . is to establish when the injurious . . . act defined by the
statute actually occurred.” Id. Next, we must “determine
whether that injury was immediately discoverable, or whether
the accrual date will be postponed until it is reasonable to expect
the plaintiff to discover the injury.” Id.

        Although the District Court recognized that the statute of
limitations could not have begun to run until the first act of
infringement occurred in July 1992, the Court concluded that it
saw “no reason why the clock on Graham’s claims should not
have started to run at the time when Haughey first began to
infringe, since there is no sign that any of the storm warnings
had abated by that point. Graham is incorrect in its contention
that storm warnings must warn of an actual injury that has
already taken place. . . . A copyright owner has the duty to
investigate indications that infringement is in the offing, even if,
in the course of the investigation, it learns that infringement has
not yet occurred.” Graham, 484 F. Supp. 2d at 334 (citing
Benak, 435 F.3d at 400-01; Mathews, 260 F.3d at 251-52).

       We do not agree that the discovery rule operates in the
manner suggested by the District Court. Significantly, neither of
our precedents relied upon by the District Court for the
proposition that a copyright owner has a duty to investigate
infringement “in the offing” supports such a rule. In both cases,
which dealt with a securities action and RICO action, not
copyright infringement, we held that the plaintiffs’ claims were
untimely under the discovery rule because storm warnings of the
alleged wrongs put the plaintiffs on inquiry notice before the
relevant date. In fact, the storm warnings arose after the alleged
wrongs. Benak, 435 F.3d at 398-99, 403; Mathews, 260 F.3d at
244, 253-54. Thus, Benak and Mathews do not stand for the
proposition that prospective plaintiffs have a duty to inquire into
future wrongdoing. Rather, they dealt with the time at which
inquiry notice arose for past wrongs.

       Indeed, we have rejected the proposition that the

                                 21
discovery rule places a duty on prospective plaintiffs to inquire
into possible future wrongful conduct. For example, in CGB
Occupational Therapy, Inc. v. RHA Health Servs. Inc., 357 F.3d
375, 384 (3d Cir. 2004), we held that several claims for tortious
interference of contract did not accrue “until, at least, the
plaintiff suffer[ed] injury . . . as a result of the defendant’s
conduct.” We rejected the defendant’s argument that “mere
notice of termination [of the plaintiff’s contracts] triggered the
claim” because the plaintiff did not suffer a legally cognizable
injury until the contracts were actually terminated. Id. We
stated: “Sunrise [the defendant] attempts to take that
unremarkable proposition–that the statute of limitations should
be postponed where the victim is unaware of the injury–and
reverse it, so as to mandate that the statute of limitations
accelerates when the victim becomes aware that he will suffer
injury in the future. That is logically fallacious.” Id. Further,
we analogized CGB to a case in which one person tells another
“that, in three months, he intends to trespass. The tort of
trespass has not occurred until the victim’s property is entered by
the tortfeasor. That the victim was informed in advance of the
inevitable does not alter the accrual of his damages action for
trespass.” Id. at 384 n.9. USI’s argument is no different than the
one we rejected in CGB.

        The District Court also saw storm warnings in Haughey’s
departure from Graham, even though that departure was ten
months before Haughey began to infringe. That departure in
itself cannot be considered a storm warning because a copyright
owner does not have a duty to ferret out potential acts of
infringement before they occur. Cf. MacLean Assocs., Inc. v.
Wm. M. Mercer-Meidinger-Hansen, Inc., 952 F.2d 769, 780 (3d
Cir. 1991) (rejecting argument that a copyright infringement
claim was barred by laches because “the district court’s laches
rationale would have put [plaintiff] under a never ending
obligation to discover whether anyone to whom he ever supplied
his software would copy it,” an obligation that the “Copyright
Act does not recognize”). The District Court feared that, if a
copyright owner did not have a duty to investigate infringement
in the offing, then “Haughey could have told Graham on day one
that he was anticipating infringing on day two, and because he

                                22
was not infringing on day one, the statute of limitations would
have been tolled for years without the need for any further action
on the part of Graham.” Graham, 484 F. Supp. 2d at 334. That
hypothetical is simply not our case.

        We have previously recognized that the aggregate “‘mix
of information’ may constitute a storm warning.” Mathews, 260
F.3d at 252. Before determining whether this is such a case, we
must first address each of the District Court’s purported storm
warnings separately. High on the District Court’s list of reasons
for its conclusion that there were ample storm warnings was its
focus on Haughey’s retention of a copy of the Standard Works
when he left Graham in September 1991. However, as the
District Court recognized, possession of a copy of a work alone
does not constitute copyright infringement or a storm warning
thereof. Graham, 484 F. Supp. 2d at 331; see also 17 U.S.C. §
106 (enumerating exclusive rights of copyright owner).
Nonetheless, the District Court concluded that a storm warning
existed here because Graham was on notice that the “only real
use Haughey would have for the Works was to copy them in
violation of Graham’s copyright.” 484 F. Supp. 2d at 336. That
was a jury argument and the record before the first jury did not
compel that inference.

       Although the jury heard evidence that the Works were
valuable because they could be easily copied to provide
consistent and accurate explanations of coverage, the jury also
heard evidence that producers at both Graham and USI used the
Works as reference materials (without directly copying any text)
because they included instructions and checklists for producers
to use when creating proposals for clients.

        The mere fact that a copyright owner has notice that
another person also possessed its copyrighted material and may
find it useful to copy should not and does not by itself constitute
a storm warning of possible infringement. Cf. Warren
Freedenfeld Assocs., 531 F.3d at 45 (“There is no presumption
that failed business relationships inevitably will give rise either
to tortious conduct or disregard of proprietary rights. That a
relationship between an architect and a client has become frayed

                                23
and the client has decided to forge ahead with the project by
engaging some other architect does not, in and of itself, serve as
a harbinger of an intention to violate the original architect’s
copyright protection.”).

        The District Court (in its summary judgment decision)
also concluded that Graham had a storm warning of Haughey’s
(yet-to-occur) infringement based upon Haughey’s improper
solicitation of Graham’s clients, in violation of his employment
and termination agreements. However, improper solicitation of
business, if it in fact occurred, is a far cry from copyright
infringement. In In re Merck & Co., Inc. Secs., Derivative &
“ERISA” Litig., 543 F.3d 150 (3d Cir. 2008), we dealt with
application of the discovery rule to allegations of securities
fraud. We held that “simply stating that a smattering of evidence
hinted at the possibility of some type of fraud does not answer
the question whether there was ‘sufficient information of
possible wrongdoing . . . to excite storm warnings of culpable
activity’ under the securities laws.” Id. at 164 (quoting Benak,
435 F.3d at 400) (emphasis omitted) (alteration in original).
Thus, we concluded that the FDA’s public allegations of
misrepresentations by Merck in its consumer advertisements
were not a storm warning of the securities fraud alleged. Id. at
169-72.

        Similarly, even if Graham knew that Haughey had
improperly solicited certain of Graham’s clients, that
wrongdoing did not put Graham on notice of Haughey’s
copyright infringement. The District Court stated that this
conduct was a storm warning of infringement because a “person
who had breached an agreement with Graham in this regard is
likely to infringe the copyright on its Works.” Graham, 484 F.
Supp. 2d at 336. However, inquiry notice demands more than
evidence that a person is a bad actor in some general sense
before a court can conclude that a storm warning exists as to a
specific cause of action.

       Moreover, after Graham discovered Haughey’s alleged
improper solicitation of clients in October 1991, it got Haughey
to agree to stop and, significantly, in November 1991, just a

                                24
month later, sold Haughey and FOG six of Haughey’s old client
accounts. Thus, by the time of the first act of infringement in
July 1992, Haughey’s alleged solicitation of clients was an old
problem that the parties had resolved, not a storm warning of
Haughey’s infringement.

        Indeed, Graham’s course of conduct at the time of
Haughey’s separation from Graham demonstrates that Graham
diligently sought to protect its rights in the Standard Works. In
his employment and termination agreements, as well as in the
November 1991 agreement selling certain client accounts to
FOG, Haughey repeatedly agreed to respect Graham’s rights to
its intellectual property, including specifically the Standard
Works. The District Court downplayed the significance of
Graham’s copyright notices, stating: “Graham obviously did not
deem the copyrights on the Works in and of themselves to be a
sufficient deterrent to infringement. Otherwise, it would not
have needed to negotiate a reaffirmation of Haughey’s obligation
to turn over the binders [containing the Works] upon his
departure . . . .” Graham, 484 F. Supp. 2d at 333. That is, the
District Court seemed to suggest that the fact that Graham
sought to buttress its statutory rights under the Copyright Act
with contractual obligations implied that Graham was on notice
of Haughey’s (yet-to-occur) infringement. The jury was entitled
to make the opposite inference, i.e., that Graham was diligently
protecting its rights.

       The evidence before the jury was sufficient to support its
conclusion that Graham was not on notice of Haughey’s (and
USI’s) infringement prior to February 9, 2002. There is no
evidence to suggest that Graham had actual knowledge of any
infringement until 2004. Even if Graham was or should have
been aware that Haughey possessed a copy of the Standard
Works when he left Graham, the jury heard testimony that
Haughey was aware that the Standard Works were confidential
information and that Graham had copyrighted them. The jury
also heard evidence that Haughey promised (in the November
1991 agreement) to hold Graham’s proprietary information,
including specifically the Standard Works, “in trust . . . [and]
confidence,” app. at 2084, and agreed not to “use, divulge, or

                                25
otherwise disclose” such information, id. Finally, the jury knew
that after Haughey and USI infringed the copyrighted material in
the Standard Works in a number of client proposals, these
proposals were kept confidential by USI.

        To summarize, USI was not entitled to judgment as a
matter of law on the statute of limitations issue (and therefore
the District Court erred in granting USI summary judgment)
because the evidence before the first jury was clearly sufficient
to support its finding that Graham was not on inquiry notice of
Haughey’s and USI’s infringement before February 9, 2002 (and
therefore the District Court abused its discretion in granting
USI’s motion for a new trial). Our conclusion should lead us to
reinstate the first jury’s verdict, but, relying on its ruling with
respect to the statute of limitations issue, the District Court
declined to reach USI’s alternative arguments for a new trial.
First, USI preserved its argument that the jury’s apportionment
of the defendants’ profits between those that were attributable to
infringement (and thus recoverable by Graham) and those that
were attributable to other factors (and thus not properly part of
the damages calculation) was against the weight of the evidence.
Second, USI argued that the verdict was excessive. We will
therefore remand the case to the District Court to allow it to
consider these issues in the first instance.

       B. Causation

        We turn to USI’s cross-appeal. USI contends that
Graham cannot recover on any of its infringement claims
because it failed to prove a legally sufficient causal connection
between the copyright infringement at issue and the profits of
USI and Haughey that the jury awarded to Graham as
compensation for that infringement. The District Court rejected
that argument in USI’s post-trial motion for judgment as a matter
of law.9

       9
         We exercise plenary review of that denial. Lightning Lube,
Inc. v. Witco Corp., 4 F.3d 1153, 1166 (3d Cir. 1993).

                                26
         As relevant here, the Copyright Act provides that the
“copyright owner is entitled to recover . . . any profits of the
infringer that are attributable to the infringement . . . . 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.” 17 U.S.C. § 504(b). Graham’s
theory of recovery was that it was entitled to USI’s and
Haughey’s commissions as “indirect profits” of infringement
(i.e., profits earned not by selling an infringing product, but
rather earned from the infringer’s operations that were enhanced
by the infringement). As explained by the Ninth Circuit, “§
504(b) creates a two-step framework for recovery of indirect
profits: 1) the copyright claimant must first show a causal nexus
between the infringement and the [infringer’s] gross revenue;
and 2) once the casual nexus is shown, the infringer bears the
burden of apportioning the profits that were not the result of
infringement.” Polar Bear Prods., 384 F.3d at 711.

        USI contends that Graham failed to satisfy its burden
because Graham lacked any evidence connecting “the
infringement–that is to say, the use of Graham’s copyrighted
language–and the decision of the client to purchase insurance
through USI.” USI’s Br. at 66. However, Graham’s expert
identified client proposals issued by USI that included infringing
language and then calculated the revenues obtained by USI from
those clients after the client had received an infringing proposal.
The jury also heard testimony from USI personnel that the
written proposals (including, presumably, those with infringing
language) were an important part of the sales process–in fact,
Haughey even testified that some clients were convinced to
purchase insurance through USI on the basis of the
proposals–and that it was USI’s practice to review the proposal’s
contents “page by page” with the client. Moreover, Graham
introduced evidence that the Standard Works were valuable in
part because they could be easily copied to provide consistent
and accurate explanations of coverage comprehensible to lay
people. Graham also introduced evidence that FOG had nothing
like the Standard Works when Haughey first arrived; that FOG

                                27
and USI made electronic and paper copies of the Standard
Works available to their employees; and that FOG and USI
encouraged their producers to use the Standard Works. Finally,
the District Court instructed the jury that it could draw an
inference against USI based on USI’s destruction of evidence
relevant to infringement (certain client proposals).

        We agree with the District Court that a reasonable jury
could conclude from this evidence that Graham met its initial
burden to demonstrate that the infringement contributed to USI’s
profits. The opinion of the Court of Appeals for the Eighth
Circuit in Andreas v. Volkswagen of America, Inc., 336 F.3d 789
(8th Cir. 2003), is instructive. There, Volkswagen (d/b/a Audi)
infringed Andreas’ copyrighted poem by including text from the
poem in one commercial that was part of a three-commercial ad
campaign for the Audi TT automobile. Id. at 791-92. After the
jury awarded Andreas a portion of Audi’s profits for the Audi
TT during the period of infringement, the district court granted
Audi judgment as a matter of law. Id. The Court of Appeals
reversed, holding that Andreas only bore the burden of proving
“whether Audi profited from the infringing commercial at all.”
Id. at 796. It concluded that Audi did so in light of evidence that
the “infringement was the centerpiece of [the] commercial;” that
“Audi enthusiastically presented the commercial to its dealers;”
that sales of the Audi TT exceeded projections; that the ad
campaign received high ratings; and that Audi paid its
advertising consultant a bonus based on the success of the
campaign. Id. at 796-97.

       Similarly, Graham appropriately sought to recover only
USI’s and Haughey’s commissions from their clients that were
provided with infringing proposals. Graham also showed that
the written proposals were important to USI’s clients, that the
infringed language from the Standard Works contributed to the
success of those proposals, and that USI urged its employees to
use the Standard Works.

      In Andreas, the Eighth Circuit also rejected Audi’s
argument that Andreas was required to provide testimony that
purchasing decisions were influenced by the commercial,

                                28
reasoning that “[o]nce a nexus was shown . . . [and] Andreas
establish[ed] Audi’s gross revenue . . . [,]Audi then bore the
burden of establishing that its profit was attributable to factors
other than the infringing words: the other two commercials[,] . . .
customer loyalty, brand recognition, etc.” 336 F.3d at 797.
Similarly, as noted by Graham, USI’s contention that Graham
was required to show that the infringement was “an essential and
integral key” to its clients’ decisions to purchase insurance
through USI misconstrues the parties’ burdens of proof under 17
U.S.C. § 504(b). USI’s Br. at 68. This argument relates to the
apportionment of USI’s profits between USI’s infringing and
non-infringing conduct, a matter over which USI bore the burden
of proof.10 In order to satisfy its initial burden of proof, Graham
was required to prove only that the profits it sought to recover
were “reasonably related to the infringement,” On Davis v. Gap,
Inc., 246 F.3d 152, 160 (2d Cir. 2001), and Graham did so here.

       In sum, the District Court correctly rejected USI’s motion
for judgment as a matter of law on the issue of causation after
finding that Graham had satisfied its burden of proof under 17
U.S.C. § 504(b). On remand, USI may renew its related
contentions that the jury’s apportionment of its profits was
against the weight of the evidence and that the verdict was
excessive.

                               III.

                        CONCLUSION

        We will affirm the District Court’s rejection of USI’s
motion for judgment as a matter of law with respect to the
causation issue. Although we agree with the District Court’s
ruling that the discovery rule applies to copyright infringement

       10
          Indeed, at trial, USI presented evidence on the issue of
apportionment and devoted a significant portion of its closing
argument to the issue, and the jury ultimately reduced Graham’s
requested profits by thirty percent to account for the contribution
of USI’s non-infringing conduct to its revenues.

                                29
claims, we will reverse the District Court’s orders granting USI’s
motions for a new trial and summary judgment with respect to
accrual of the statute of limitations issue. We remand only so
that the District Court may decide defendants’ arguments
concerning apportionment and excessiveness of the verdict. If
the District Court rejects these arguments, it shall reinstate the
verdict of the first jury and undertake any necessary further
proceedings consistent with this opinion.

                               30