F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
APR 2 1999
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
NATIONAL CORRECTIVE
TRAINING INSTITUTE, INC., a
foreign corporation, doing business as
National Curriculum and Training
Institute, No. 98-4058
(D.C. No. 95-CV-1095-C)
Plaintiff-Counter- (D. Utah)
Defendant-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-Counter-
Claimants-Appellants.
ORDER AND JUDGMENT *
Before BALDOCK , BARRETT , and HENRY , Circuit Judges.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision 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 denial of attorney’s fees to
defendants-appellants George Nelson, Clime International, Inc. (Clime), and
Mitchell Voron, d/b/a Positive Solutions Associates. The court entered judgment
for defendants, following a bench trial, on plaintiff-appellee National Corrective
Training Institute, Inc. (NCTI)’s copyright infringement action. NCTI did not
appeal the merits of the case. We exercise jurisdiction 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 attorney’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 infringement suits to prevailing
plaintiffs (while requiring prevailing defendants to show the original suit was
frivolous or brought in bad faith) in favor of an “‘evenhanded’ approach in which
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no distinction is made between prevailing plaintiffs 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 awarding of attorney’s fees to the
prevailing party would pretermit the exercise of that discretion [allowed by §
505].” Id. at 533.
The Fogerty Court agreed with the Third Circuit’s use of several
nonexclusive factors in considering attorney’s fees awards, including
“‘frivolousness, motivation, objective unreasonableness (both in the factual and
the legal components of the case) and the need in particular 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, so 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 by NCTI, seeking
damages and injunctive relief for alleged infringement of NCTI’s copyrights in
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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 2
asserted that NCTI did not have valid copyrights in the Crossroads
and REAL Colors or, alternatively, that Nelson is a co-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 entered judgment for defendants,
finding that Nelson was the primary author of the alleged infringed works and
that he had never conveyed or transferred the copyright 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) or
1
Matrixx and Colors are instruments used to assess and teach personality
types or temperaments. See Appellant’s Br. at 2. Crossroads is a cognitive skills
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 Clime. Voron, doing
business as Positive Solutions Associates, is the main distributor of Clime
products. Appellant’s App. Vol. III at 517. Nelson was first an independent
contractor with NCTI, then an employee. See id. at 518. After terminating his
employment with NCTI, Nelson continued his association with NCTI, briefly,
again as an independent contractor. See id. at 521-22.
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work in the public domain. 3
The court further determined that REAL Colors was
a joint work with the result that “authors of a joint 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 in 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 found by a preponderance of the
evidence that the first version of Crossroads was created while Nelson was an
independent contractor before becoming an employee of NCTI. Although the
parties disagreed about the amount of original content in the Crossroads work, the
Court found that Crossroads “was created almost exclusively 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. at
3
The court assumed, apparently without deciding, that NCTI held a valid
copyright in Crossroads.
4
NCTI argued that it had obtained copyrights on these works (as both author
and copyright claimant) and that Nelson had on some occasions signed certain
documents, as director or shareholder of NCTI, which reflected either that Nelson
did not have any right in NCTI’s copyrights or that NCTI held all copyright
interests.
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522. However, there was some dispute as to who did which proportion of the
work and even some testimony (disbelieved by the court) 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 its 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 infringed because that version was
not produced at trial. Because NCTI had failed to offer competent evidence under
the abstraction-filtration comparison test, 6
the court determined there was a lack
5
In order to prove copyright infringement, a plaintiff 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 Nelson’s product is
substantially similar to the protectable elements of 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 filtered out from the original
expression. Finally, the remaining protected elements 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 factfinder, taking together the evidence
of access and the similarities between the [products], 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).
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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 Nelson 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 Colors 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, defendants claim NCTI’s
motivation in initiating the lawsuit was improper because of NCTI’s president’s
willingness to pursue people “he thought would violate 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 action. The court found,
however, that “NCTI was motivated by a reasonable belief, albeit mistaken, that
this action was appropriate and necessary to protect its copyright interests,”
Appellants’ App. Vol. III at 535, and disagreed with defendants’ contention that
NCTI’s primary objective was to “‘impoverish its most capable competitor,
George Nelson.’” See id. (further citation omitted).
The court also determined that the action was neither objectively
unreasonable nor frivolous, noting that NCTI was in fact the record holder of the
copyrights at issue and that on numerous occasions defendant Nelson had
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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 require 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 defendants’ counterclaims), but
after a four-day bench trial. 7
Merely because defendants were ultimately
successful in defending against the infringement claim 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 declining to award attorney’s fees.
Accordingly, the district court’s denial of defendants’ request for attorney’s
fees is AFFIRMED.
7
The court also noted that because NCTI’s current owners 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” even though unable to state an
action under the copyright statute. See Appellants’ App. Vol. III at 534 n.7.
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Entered for the Court
James E. Barrett
Senior Circuit Judge
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