United States Court of Appeals
For the First Circuit
Nos. 02-1452
02-1533
JOHN G. DANIELSON, INC.
Plaintiff, Appellee, Cross-Appellant,
v.
WINCHESTER-CONANT PROPERTIES, INC.;
THE WILLOWS AT WINCHESTER, LLC,
Defendants, Appellants, Cross-Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, Chief U.S. District Judge]
Before
Lynch, Circuit Judge,
Stahl, Senior Circuit Judge,
and Howard, Circuit Judge.
Gary S. Matsko, with whom Paul L. Feldman, Judith
Ashton, and Davis, Malm & D'Agostine, P.C. were on brief for
appellants and cross-appellees
Anthony E. Battelle, with whom Construction Law
Services, Charles R. Heuer, and Heuer Law Group were on brief for
appellee and cross-appellant.
March 6, 2003
LYNCH, Circuit Judge. This copyright case involves
unusual facts, many dating to the mid-1980s, which greatly
influence its result. A real estate developer acquired a parcel of
land covered by a 30-year restrictive covenant to which a previous
owner had agreed. The covenant required that any residential
development conform with site plans submitted by the previous
owner. The new owner tried to modify these restrictions; when it
failed to do so it built a condominium subdivision that adhered to
the site plans in the covenant. The architectural firm that had
earlier designed those plans then sued for copyright infringement
and unfair competition, and eventually won a jury verdict and a
judgment in the district court for over $1.3 million -- essentially
all the profits from the now-complete condominium project.
The corporation that built the condominiums, Winchester-
Conant Properties, Inc. ("WCP"), appeals the dismissal of most of
its affirmative defenses. We affirm these dismissals, although in
some instances our reasons for affirmance differ significantly from
the district court's rationale. The plaintiff architectural firm,
John G. Danielson, Inc. ("Danielson") appeals some of the court's
rulings dismissing its unfair competition claims. We affirm these
rulings as well. Finally, both parties appeal aspects of the
damages award. WCP argues that the district court gave erroneous
instructions to the jury concerning the apportionment of profits
between the infringing design and other aspects of the development.
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We agree, vacate the damage award, and remand for a determination
of damages using the correct standards.
I. Background
A. Facts
In the mid-1980s, Louis Farese was co-trustee of a trust
that owned a 7.4 acre parcel of land in Winchester, Massachusetts
(the "site"). Danielson had worked on other projects for Farese,
and Farese hired Danielson to develop plans for the site.
Danielson in turn retained Donald Tellalian, of Tellalian
Associates Architects and Planners ("Tellalian Associates"), as a
subcontractor to assist it in its work on Farese's project.
Danielson, Tellalian Associates, and Farese consulted
with each other, Winchester town officials, and residents who lived
near the site to determine the best course for developing the land.
They settled on a condominium development, and showed some early
drafts of their plans to these stakeholders, some of whom suggested
various changes. This process culminated in the production of
seven drawings, dated June 11, 1987, depicting a 70-unit
condominium development with four residential buildings and a
"clubhouse" for community activities.
Four of these drawings are subjects of Danielson's
infringement claims. Three are site plans (labeled SP-1, SP-2, and
SP-3) which show the layout of the site from a bird's eye view,
including footprints of buildings, roads, parking, and green
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spaces; they bear the logos of both Danielson and Tellalian
Associates. The fourth is an unlabelled artist's rendering of the
buildings (designated A-3). None of these drawings had a copyright
notice on them.
At the time, the site was not zoned for residential
development and was covered by a restrictive covenant between a
previous owner and the Town of Winchester (the "Town"). The
condominium plan could only be completed if both the zoning and the
covenant were amended, and only the Winchester Town Meeting could
approve either change. On June 11, 1987 -- the same date that is
on the seven drawings -- the Winchester Planning Board voted to
recommend that the Town Meeting amend the site's zoning to allow
residential development. The Board also entered into a new
restrictive covenant with Farese, subject to Town Meeting approval.
This covenant would run with the land for 30 years, could be
altered only by a two-thirds vote of the Town Meeting, and required
that any residential development be in accordance with the seven
drawings. (These drawings are therefore referred to by the
litigants as the "covenant drawings.") At the Town Meeting on June
15, 1987, Tellalian showed several of the covenant drawings on an
overhead projector as part of his presentation; some were also
displayed on easels in the lobby. The Town Meeting followed the
Board's recommendations and approved both the rezoning and the
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replacement of the previous covenant with the restrictive covenant
signed by Farese and his co-trustee.
Having cleared this obstacle, Farese and Danielson signed
a written contract for the project on June 29, 1987. The document
is a standard form contract furnished by the American Institute of
Architects (AIA), with some modifications made by the parties. The
contract specifies that all plans remain Danielson's property, that
plans are not to be used on other projects or by other parties
without Danielson's written consent, and that "[s]ubmission or
distribution to meet official regulatory requirements . . . is not
to be construed as publication in derogation of the Architect's
rights."
As work continued, Danielson created numerous
construction drawings; four of these, labeled C-1, C-3, C-4, and L-
1, are also subjects of this litigation. These four drawings are
marked with several revision dates in 1987 and 1988; they depict
the site layout with some modifications and additions, particularly
engineering details. They all bear logos of both Danielson and
Tellalian Associates but lack copyright notice; two of them also
include the logo of another Danielson subcontractor, Medford
Engineering ("Medford").
Soon after construction began in 1988, Farese encountered
serious financial difficulties. The project was abandoned and lay
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dormant until 1994. Danielson has never collected over $226,000
that Farese owes it for work completed under the contract.
In 1993, Robert Pace became interested in buying and
developing the site. He formed WCP and acquired the site in a
foreclosure sale in April 1994.1 Over the next few months, WCP
considered a range of possible development options, including
townhouses, single-family homes, and housing for the elderly.
Several versions of a condominium plan like the one Farese had
pursued were also "on the table." Representatives of WCP met three
times in mid-1994 with Edmond Danielson, by then the only full-time
architect at the Danielson firm, to discuss ideas for the site. At
Edmond Danielson's suggestion, Donald Tellalian joined the second
and third of these meetings. The WCP representatives brought the
disputed drawings to these meetings and the participants looked at
them, but WCP expressed concern that Farese's plan would not be
profitable. WCP commissioned Danielson and Tellalian Associates to
draft a proposed design for the elderly housing concept. By August
1994, WCP chose to pursue a townhouse plan designed by another
architect instead.
1
Pace later formed a subsidiary of WCP, The Willows at
Winchester, LLC, and transferred ownership of the site to that
entity, which Danielson also named as a defendant. In addition,
the condominiums were marketed by WCP under the brand name of an
affiliated company, Starter Sales. We refer to all of these
entities collectively as "WCP."
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WCP did not have the same luck as Farese in removing
preexisting covenants, however. After failing in several attempts
to persuade the Town to alter the covenant established with Farese,
WCP decided in mid-1995 to develop the site according to the
covenant specifications after all. WCP provided its architects and
engineers (including some, like Medford, who had worked for
Danielson on the earlier project) with construction drawings that
are the subject of this lawsuit. These agents removed the
Danielson and Tellalian Associates logos and produced plans very
similar to the drawings Danielson claims were infringed. These
copied drawings were in turn used to obtain permit approval from
the town in December 1995. WCP included a simplified site plan in
a sales brochure, and also placed a copy of the artist's rendering,
covenant drawing A-3, on its signs. Construction began on the
development, called "The Willows at Winchester," in 1996, and was
finished in 2000.
The parties disagree about some aspects of their
communication at this juncture, but clearly they stopped doing
business together after the elderly housing design was rejected in
August 1994. Sometime in late 1995 or early 1996, a representative
of WCP telephoned Donald Tellalian and told him that the company
now planned to use the site layout embodied in the covenant.
Neither WCP nor Tellalian informed Danielson; WCP says it thought
that Tellalian spoke for Danielson. In any event, Edmond Danielson
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says he was unaware of WCP's intent to use the old design until
August 1997, when one of the firm's former employees happened to
drive past the site, noticed the buildings under construction, and
informed him. Danielson swiftly contacted attorneys, who sent a
letter to WCP stating Danielson's claim. Danielson also registered
the covenant drawings and construction drawings for copyright in
1999. Finally, Danielson requested and received from Tellalian
written statements indicating that Tellalian Associates made no
claim on the copyright interests in the drawings.2
B. Procedural History
After settlement discussions yielded no fruit, Danielson
filed a complaint in the U.S. District Court for the District of
Massachusetts in May 2000. The suit asserted a claim of copyright
infringement under 17 U.S.C. § 501 (2000). It also asserted three
unfair competition claims: conversion under state law; false
designation of origin under the Lanham Act, 15 U.S.C. § 1125(a)
(2000); and unfair and deceptive trade practices under Mass. Gen.
Laws ch. 93A (2001).
The parties both submitted summary judgment motions. WCP
sought dismissal of the case. Danielson sought summary judgment as
to liability on three of its claims, but not as to the conversion
claim or damages issues. On February 8, 2002, shortly before
2
The authorship and ownership of copyright in the plans
had been an issue at earlier stages in this litigation, but WCP
foregoes these arguments on appeal.
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trial, the district court issued an order disposing of these
motions and shaping the case for trial. The district court later
issued a published opinion elaborating on its numerous holdings.
John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 186 F.
Supp. 2d 1 (D. Mass. 2002).
In these pretrial rulings, the court held that there was
no genuine factual dispute that WCP had infringed Danielson's
copyright. Id. at 4, 14. It dismissed five of WCP's affirmative
defenses, which asserted that Danielson's copyright was invalid
because of: (1) publication without statutorily required notice,
(2) disclosure in the covenant which placed the plans in the public
domain, (3) implied license, (4) merger doctrine, and (5)
abandonment. Id. at 14-24. The court also ruled that Danielson's
state-law unfair trade practices claim was preempted by federal
copyright law. Id. at 29. The other motions were denied.
The trial lasted through six days of testimony from
February 19-27, 2002. After plaintiff rested, WCP moved for
directed verdict; the court granted the motion as to Danielson's
conversion claim, but allowed the copyright and false designation
of origin claims to go forward. At the close of all the evidence,
the district court rejected renewed motions for directed verdict on
these matters, but granted Danielson's motion for directed verdict
against WCP's estoppel and waiver defenses.
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Taken together, these rulings considerably narrowed the
questions left for the jury to decide. Two issues often at the
heart of copyright cases, copyrightability and infringement, were
already determined as a matter of law. On the copyright claim, the
jury considered only the two remaining affirmative defenses,
concerning the statute of limitations and coauthorship. The jury
found for Danielson on both of these defenses and neither of these
verdicts is appealed. It awarded damages on the copyright claim of
$1,464,950. The jury also found that Danielson's Lanham Act claim
of false designation of origin was within the statute of
limitations and that WCP was liable under that claim for $120,000
in damages. The jury's total damages award represented essentially
all of the profit WCP made from the development.
The district court disposed of post-trial motions from
the bench at a hearing on March 27, 2002. It denied WCP's motion
for a new trial under Fed. R. Civ. P. 59. The court granted WCP's
renewed motion for judgment as a matter of law under Fed. R. Civ.
P. 59(b) as to the Lanham Act claim, however, because it held there
was no basis in the evidence for the $120,000 in damages the jury
had awarded. The court also reduced the damages under the
copyright claim by $120,000, stating from the bench that it was
"clear to the Court that the $120,000 was simply added onto the
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base damages the plaintiff otherwise is entitled to."3 Finally,
the court dealt with Danielson's petition for attorneys' fees,
prejudgment interest, and costs. Danielson was not entitled to
attorneys' fees under the Copyright Act because the drawings were
not registered at the time of infringement. 17 U.S.C. § 412.
Because the Lanham Act verdict was vacated, the district court
ruled that Danielson could not get attorneys' fees from that source
either, but entered a provisional award of fees in case the Lanham
Act dismissal were to be reversed on appeal. Finally, the court
denied prejudgment interest and awarded costs. Judgment for
Danielson was then entered in the amount of $1,344,950. These
cross-appeals followed.
WCP appeals the pretrial dismissal on summary judgment of
four of its affirmative defenses, as well as the directed verdict
against its estoppel and waiver defenses during trial. WCP also
pursues its objections to the jury instructions concerning the
calculation of damages and to the exclusion of certain expert
testimony concerning damages that it attempted to offer at trial.
Finally, WCP appeals the denial of its motion for a new trial.
Danielson appeals the dismissal of its unfair trade practices claim
and its Lanham Act false designation of origin claim, as well as
the denial of attorneys' fees and prejudgment interest.
3
As an alternative, in the event that the decision to
reduce the jury's copyright damages award were later reversed, the
district court also ordered a remittitur of the same amount.
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II. Affirmative Defenses
Because copyrightability and infringement are not in
serious dispute, WCP's only real hope to avoid liability lies in
its affirmative defenses. It does not appeal those affirmative
defenses rejected by the jury, or its abandonment defense. It does
appeal four affirmative defenses dismissed on summary judgment. We
review such rulings de novo, including when summary judgment is
granted, as here, on cross-motions. Segrets, Inc. v. Gillman
Knitwear Co., 207 F.3d 56, 61 (1st Cir. 2000). In addition, WCP
appeals the dismissal of its estoppel and waiver defenses during
trial. We review this grant of a motion for judgment as a matter
of law under Rule 50(a) de novo, giving inferences to the nonmovant
and affirming only if no reasonable jury could have found in the
nonmovant's favor. Espada v. Lugo, 312 F.3d 1, 2 (1st Cir. 2002).
A. Publication
WCP first argues that Danielson's handling of the
covenant drawings during efforts to secure the zoning change in
1987 constituted their "publication," a term of art under copyright
law. WCP argues that, because copyright law at that time required
notice to accompany publication, and the drawings lacked notice,
Danielson forfeited any copyright it had.
We emphasize at the outset that the relevant events,
which occurred in 1987, fall within a short period between two
major revisions of applicable federal copyright law. The Copyright
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Act of 1976, Pub. L. No. 94-553, 90 Stat. 2541 ("1976 Act"), which
became effective on January 1, 1978, included a statutory
definition of publication for the first time.4 See 17 U.S.C. §
101. The Berne Convention Implementation Act, Pub. L. No. 100-568,
102 Stat. 2853 (1988) ("Berne Act"), which became effective on
March 1, 1989, made notice optional rather than mandatory, while
retaining incentives to encourage notice. See 17 U.S.C. § 401.
The overlap of the 1976 Act's publication definition (which remains
in force today) and mandatory notice (now optional) lasted only for
the period between these enactments. If the same facts arose
today, they would not present a significant issue.5
The law in 1987 required that, when works were published,
they include formal notice or lose their copyright. See 17 U.S.C.
§ 401(a) (1982) (amended 1988) ("[A] notice of copyright shall be
placed on all publicly distributed copies"). Sufficient notice
required three elements: a declaration of copyright such as the
4
The 1976 Act also reduced the importance of publication.
Previously, the publication of a work had marked the point at which
its federal copyright protection began, but after the 1976 Act,
federal copyright attached at the moment a work was first created.
See 17 U.S.C. § 301(a) (setting preemption at point when work is
"fixed in a tangible medium"). Copyright attached to the drawings
at issue here when they were first drafted -- in the parlance of
copyright, when they were first "fixed" on paper. See id. at §
101.
5
This case is also not covered by the Architectural Works
Copyright Protection Act of 1990, because the drawings were created
before the statute's effective date. See Pub. L. No. 101-650, §
706, 104 Stat. 5089, 5134 (1990).
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"©" symbol, the year of publication, and an identification of the
copyright holder. Id. at § 401(b). It is undisputed that the
drawings at issue here did not satisfy these requirements.
Although the 1976 Act added some provisions to cure or disregard
the omission of notice at the time of publication, see id. at §§
405-406, it is also undisputed that none of them applies to this
case. See generally Donald Frederick Evans & Assocs. v. Cont'l
Homes, Inc., 785 F.2d 897, 905-12 (11th Cir. 1986) (analyzing
curative provisions from 1976 Act). Congress recognized in 1976
that the penalties for publishing without notice might be unduly
harsh. See H.R. Rep. No. 94-1476, at 143-44 (1976) [hereinafter
"House Report"] ("One of the strongest arguments for revision of
the present statute has been the need to avoid the arbitrary and
unjust forfeitures now resulting from unintentional or relatively
unimportant omissions or errors in the copyright notice."). But it
was not until passage of the Berne Act that this requirement was
eliminated.
Because it is clear that the drawings did not satisfy the
applicable notice requirements, WCP's argument depends on whether
there was a "publication" of the drawings so that notice was
mandated. The statutory definition of publication reads in full:
"Publication" is the distribution of copies or
phonorecords of a work to the public by sale or other
transfer of ownership, or by rental, lease, or lending.
The offering to distribute copies or phonorecords to a
group of persons for purposes of further distribution,
public performance, or public display, constitutes
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publication. A public performance or display of a work
does not of itself constitute publication.
17 U.S.C. § 101.
WCP points to several uses of the covenant drawings to
support its argument that they were published under this
definition. The drawings were shown to neighborhood groups and
town officials during the planning process. At the Town Meeting,
they were displayed on easels and projected onto a screen. The
Town Meeting was videotaped, and the tape was broadcast on local
cable television and placed in the Winchester Public Library. The
plans were filed with the Town as exhibits to the covenant, and
could be copied from those files by anyone. In addition, some
drawings were later shared with Danielson's subcontractors.
The district court granted summary judgment against this
defense by relying on an aspect of the doctrine of "limited
publication." See Danielson, 186 F. Supp. 2d at 15-18. The
statutory definition of publication quoted above "in general
constitutes a codification of the definition evolved by case law"
before the 1976 Act. 1 M.B. Nimmer & D. Nimmer, Nimmer on
Copyright § 4.04, at 4-20 (2001) [hereinafter "Nimmer"]. That case
law includes judicially crafted exceptions for limited publication:
restricted distribution of the work that does not qualify as
publication or trigger the notice requirement. Limited publication
"occurs when tangible copies of the work are distributed, but to a
limited class of persons and for a limited purpose." Burke v. NBC,
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598 F.2d 688, 692 (1st Cir. 1979) (explaining and applying law
before 1976 Act) (citing White v. Kimmel, 193 F.2d 744, 746-47 (9th
Cir. 1952)).
Numerous cases have applied the limited publication
exception to the submission of architectural plans to municipal
authorities for approval, either because the law required this
submission for a limited purpose or because doing so did not
constitute a distribution. See, e.g., Codespoti & Assocs. v.
Bartlett, 51 F. Supp. 2d 125, 128 (D. Conn. 1999); East/West
Venture v. Wurmfeld Assocs., 722 F. Supp. 1064, 1066 (S.D.N.Y.
1989); Edgar H. Wood Assocs. v. Skene, 197 N.E.2d 886, 893-94
(Mass. 1964) (common-law copyright); see also 1 Nimmer, supra, §
4.10, at 4-52 (under 1976 Act, "placing a work in a public file .
. . clearly does not constitute an act of publication"). But see
Certified Eng'g, Inc. v. First Fid. Bank, 849 F. Supp. 318, 323-24
(D.N.J. 1994) (drawings for subdivision published by submission to
authorities, but holding made in context of denying preliminary
injunction). Similarly, the circulation of plans to contractors
for purposes of working on the project has been found a limited
publication. See, e.g., Kunycia v. Melville Realty Co., 755 F.
Supp. 566, 574 (S.D.N.Y. 1990).
At least some of the activities that WCP characterizes as
publication are covered by these limited publication exceptions.
For example, once the covenant was approved and submitted to the
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Town, state law required that the drawings be available as public
records. See Mass. Gen. Laws ch. 66, § 10(a) (2001); Hull Mun.
Lighting Plant v. Mass. Mun. Wholesale Elec. Co., 609 N.E.2d 460,
463-64 (Mass. 1993) (broad definition of public records subject to
disclosure). The exception also covers copies provided to
Danielson's subcontractors or consultants, including Medford, for
work on the project.
Nonetheless, other activities went beyond such limited
groups and limited purposes. The neighborhood meetings and the
Town Meeting were open to the general public, and the broadcast and
videotape of the Town Meeting could also be viewed by a broad group
of people.
The district court responded to this problem by
erroneously extending the boundaries of the exception. It pointed
out that this access to the plans was "helpful" in obtaining
approval of the zoning change, Danielson, 186 F. Supp. 2d at 16
n.2, and "in furtherance of the Town's obligation under state law
to solicit input from the community and make findings regarding the
desirability" of the project, id. at 17. However, the cases cited
by the court concerned putative publications that were required by
law or were otherwise made for narrow purposes. Extending the
exception to everything that is "helpful" in lobbying for municipal
approval of a zoning change, including dissemination to the general
public, effectively removes the "limited" from limited publication.
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Nevertheless, this court may affirm a district court's
grant of summary judgment on any basis that is manifest in the
record. See Burns v. State Police Ass'n, 230 F.3d 8, 9 (1st Cir.
2000). Here, the district court's expansion of the limited
publication doctrine was unnecessary to its result, because the
record indicates that the remaining alleged publications were not
covered by the statutory definition. Rather, Danielson merely
"displayed" the drawings within the meaning of the Act. The
Copyright Act states outright, "A public performance or display of
a work does not of itself constitute publication." 17 U.S.C. §
101.
WCP's own submission of undisputed facts in support of
summary judgment demonstrates that the uses of the drawings at the
neighborhood meeting and the Town Meeting do not qualify as
publications:
In 1986 and early 1987, the Covenant Drawings and
earlier versions thereof were shown to many individuals
and groups by Danielson and Tellalian. They were shown
to neighbors of the Site at several neighborhood meetings
at which representatives of Tellalian and/or Danielson
were present. They were shown to Farese as well. . . .
Numerous meetings were also held with the Town of
Winchester Planning Board by representatives of Farese,
Danielson, and Tellalian. Copies of the Covenant
Drawings and earlier versions thereof were shown to
Planning Board members. . . .
Four of the seven Covenant Drawings were shown to
all present [at the Town Meeting] on a large screen
placed at the front of [the] meeting by D. Tellalian. .
. . [The] drawings were also all placed in public view
on easels in the lobby of the building.
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(Emphasis added). In addition, one of Danielson's architects said
at his deposition that the plans were only shown, not distributed.
When asked whether those in attendance at neighborhood meetings
could have copied the drawings they were shown, he replied "No. .
. . They were in our possession. They would have to have
permission to copy them."
At most, Danielson or Tellalian "showed" plans to others;
that did not constitute publication under the explicit terms of the
statute. "[A] sine qua non of publication should be the
acquisition by members of the public of a possessory interest in
tangible copies of the work in question." 1 Nimmer, supra, § 4.07,
at 4-42.
The broadcast of the Town Meeting on local cable
television does not constitute publication under the definition in
the 1976 Act either. The definition "makes plain that any form
[of] dissemination in which a material object does not change hands
-- performances or displays on television, for example -- is not a
publication no matter how many people are exposed to the work."
House Report at 138; see Burke, 598 F.2d at 693 ("Publication did
not occur merely because the film was shown [on television] to the
general public."); 1 P. Goldstein, Copyright § 3.3, at 3:31 (2d ed.
1996) (mere broadcast probably not publication, even if home
videotaping would be possible).
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That leaves the fact that the public library held a
videotape of the meeting that patrons could borrow. After viewing
a copy of this video provided by WCP, we are not confident that the
often unfocused image of a blurry projection on a screen in the
high school auditorium actually qualifies as a publication of the
covenant drawings themselves. We put that factual question to one
side, however, because of the absence of any evidence that
Danielson or Tellalian knew that the tape of the Town Meeting would
be loaned at the library, rather than merely broadcast on local
cable television. Publication requires the consent of the
copyright owner. See 1 Nimmer, supra, § 4.04, at 4-20 to 4-21 &
n.8; Goldstein, supra, § 3.3.1, at 3:33 & nn. 19-20. While this
condition is implicit in the publication definition, it is
reiterated explicitly in the notice requirement. See 17 U.S.C. §
401(a) (requiring notice on works published "by authority of the
copyright owner"). Unlike the other actions alleged to be
publication, WCP has not shown that this one was authorized by
Danielson.
On appeal, WCP also argues that the requirements of the
definition of "publication" are fulfilled because it includes the
"offering to distribute copies . . . to a group of persons for
purposes of . . . public display." 17 U.S.C. § 101. According to
this argument, Danielson offered the covenant drawings to Farese
and his associates, and they in turn displayed them. The facts in
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the record do not support this interpretation either. Only
architects working for Danielson or for Tellalian Associates
displayed the plans; there is no indication that Farese or his
agents did so instead. Indeed, WCP's summary judgment submission
noted the plans were "shown to Farese," suggesting he may not even
have possessed copies of them until later.
Congress has provided the courts with an explicit
definition of publication in the 1976 Act that seeks to prevent
much of the litigation and confusion that had previously surrounded
the undefined term. The facts here allow us to apply that
definition without venturing to create any new doctrine about the
murky boundaries of limited publication.
B. Covenant Drawings as "Laws"
WCP next argues that the covenant drawings, by virtue of
their inclusion in the restrictive covenant approved at the Town
Meeting, have become "laws" which are in the public domain and
uncopyrightable.
It is well-established that judicial decisions and
statutes are in the public domain. Bldg. Officials & Code Admin.
Int'l, Inc. v. Code Tech., Inc. ("BOCA"), 628 F.2d 730, 733-34 (1st
Cir. 1980) (reviewing case law); see Banks v. Manchester, 128 U.S.
244 (1888) (judicial opinions are in public domain); Wheaton v.
Peters, 33 U.S. 591 (1834) (judicial opinions are not
copyrightable). This straightforward general rule has proven
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difficult to apply when the material in question does not fall
neatly into the categories of statutes or judicial opinions. A
number of appellate courts have reached arguably inconsistent
results in such cases. See Veeck v. S. Bldg. Code Cong. Int'l,
Inc., 293 F.3d 791, 793 (5th Cir. 2002) (en banc) (model code
enters public domain when legislatively adopted as law of a
jurisdiction), petition for cert. filed, Sept. 4, 2002 (No. 02-
355); Practice Mgmt. Info. Corp. v. Am. Med. Ass'n, 121 F.3d 516,
518-20 (9th Cir. 1997) (incorporation of classification system for
medical procedures in Medicare and Medicaid regulations does not
make them uncopyrightable); CCC Info. Servs., Inc. v. Maclean
Hunter Mkt. Reports, Inc., 44 F.3d 61, 73-74 (2d Cir. 1994)
(incorporation of used-car valuations in insurance statutes and
regulations does not make them uncopyrightable).
The First Circuit faced such a question when it vacated
a preliminary injunction against printing state regulations; the
regulations incorporated material written by a private party, which
was purportedly copyrighted and licensed to the state. BOCA, 628
F.2d at 736. While the court leaned strongly toward a conclusion
that the copyright was invalid, it emphasized just as strongly that
it declined to reach a definitive conclusion. Id. BOCA did not
resolve the issue and this court has not done so since.
WCP cites BOCA and urges us to adopt the rule suggested
there and apply it to the covenant drawings. The district court,
-22-
after noting that BOCA was not binding on it, Danielson, 186 F.
Supp. 2d at 21, adopted the opposite rule. Id. at 23 ("[O]therwise
copyrightable works . . . do not lose copyright protection when
they are adopted by government bodies or incorporated by reference
into public enactments."). We reject both courses of action. We
do not need to consider the broad question we reserved in BOCA,
because the facts here do not present it.
The restrictive covenant is distinct from the zoning law.
The Town Meeting debated and voted on two different measures
concerning the site, which had two different effects. The first
vote changed the zoning law so that the site was zoned for
residential development. We need not consider here whether or not
the zoning law is within the public domain, such that any potential
intellectual property rights to its content would be overridden,
because that law simply sets parameters for the development
permissible in different zones, and designates the site as
belonging to a particular zone. See generally 18A D.A. Randall &
D.E. Franklin, Massachusetts Practice: Municipal Law & Practice,
chs. 17-18 (4th ed. 1993).
The second vote at the Town Meeting approved the
restrictive covenant, which is nothing more than an agreement
between the Town of Winchester and Farese (and his successors in
ownership) concerning the site. A restrictive covenant is "[a]
private agreement, usu[ally] in a deed or lease, that restricts the
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use or occupancy of real property." Black's Law Dictionary 371
(7th ed. 1999) (emphasis added); see Randall & Franklin, supra, §
570, at 18 (change in overall zoning law does not remove conditions
of covenant recorded in deed for particular land). The restrictive
covenant in this case displays the hallmarks of a private contract.
It notes consideration given to Farese and his co-trustee by the
Town and includes notarized signatures of both the trustees and
Town officials. It is this document which incorporates, by
reference, the seven drawings that Danielson provided to Farese.
Farese could just as easily have entered into an
agreement with the site's neighbors to limit development; its
embodiment in a restrictive covenant, recorded as part of the deed,
would not convert such a private contract or easement into a "law"
and thrust it into the public domain. It would not bind the public
at large, but only the parties and their successors in interest.
The fact that the Town was a party to the restrictive covenant here
does not change the analysis.
WCP argues that the Planning Board and Town Meeting
changed the zoning only because they knew the covenant would be
enforced, and that adoption of the two "in tandem" makes them part
of the same "legislative scheme." The logical extension of this
argument, however, is that any undertakings on which lawmakers rely
in passing a statute would become part of the "legislative scheme"
and the public domain. If Farese and the neighbors had entered
-24-
into a private covenant, and the Planning Board and Town Meeting
changed the zoning only because they knew of this contract and it
satisfied their concerns about the site, there would be no argument
that the covenant was thereby part of the public domain.
Similarly, references to the covenant drawings or their features in
the Planning Board's decision and speeches at the Town Meeting do
not thrust the drawings themselves into the public domain, any more
than quoting a poem on the Senate floor would strip the poet's
copyright.
There are compelling arguments on both sides of the
question we reserved in BOCA. They implicate the proper scope of
the public domain and the best means to encourage private
involvement and expertise in lawmaking. But contracts entered into
by government entities do not raise these weighty issues, and we
need not resolve the question we left open in BOCA in order to rule
on this case. Because the covenant drawings were not incorporated
into any generally applicable laws, we affirm the district court's
grant of summary judgment against this defense.
C. Implied License
Usually transfers of copyright must be made in writing,
17 U.S.C. § 204(a), but this requirement does not apply to
nonexclusive licenses where ownership of the copyright is not
transferred, see id. at § 101. A copyright owner may grant such
nonexclusive licenses orally, or they may be implied from conduct
-25-
which indicates the owner's intent to allow a licensee to use the
work. See Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d
1147, 1167 n.35 (1st Cir. 1994); 3 Nimmer, supra, § 10.03(A)(7), at
10-42. Uses of the copyrighted work that stay within the scope of
a nonexclusive license are immunized from infringement suits. See
Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998).
The burden of proving the existence of such a license is
on the party claiming its protection, the licensee. Bourne v. Walt
Disney Co., 68 F.3d 621, 631 (2d Cir. 1995). Implied licenses are
found only in narrow circumstances. See SmithKline Beecham
Consumer Healthcare, L.P. v. Watson Pharms., Inc., 211 F.3d 21, 25
(2d Cir. 2000) (citing Effects Assocs., Inc. v. Cohen, 908 F.2d
555, 558 (9th Cir. 1990)). WCP argues that it has met this burden
and shown that Danielson granted a nonexclusive license to future
owners of the site to use the disputed drawings. It did so, argues
WCP, by permitting the incorporation of the covenant drawings in a
restrictive covenant running with the land.
At least four other circuits have resolved cases in which
an architect sued for copyright infringement and the defendant
answered that it had a nonexclusive license to use the architect's
plans. See Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d
505, 514-16 (4th Cir. 2002); Foad Consulting Group v. Musil Govan
Azzalino, 270 F.3d 821, 828-32 (9th Cir. 2001); Johnson v. Jones,
149 F.3d 494, 500-02 (6th Cir. 1998); I.A.E., Inc. v. Shaver, 74
-26-
F.3d 768, 775-76 (7th Cir. 1996). These cases reached different
results on their individual facts: Foad Consulting and I.A.E.
found licenses while Nelson-Salabes and Johnson did not. But they
all applied a similar analytical framework, and we will follow
their lead.
The touchstone for finding an implied license, according
to this framework, is intent. See Nelson-Salabes, 284 F.3d at 515
(calling intent "determinative question"); Johnson, 149 F.3d at 502
("Without intent, there can be no implied license."); see also Data
Gen., 36 F.3d at 1167 n.35 (license is found from copyright owner's
grant of "permission to use"). Two of the cases begin their
analysis with a three-part test originally derived from Effects
Associates, 908 F.2d at 558-59, which requires that the licensee
request the creation of the work, the licensor create and deliver
the work, and the licensor intend that the licensee distribute the
work. See Nelson-Salabes, 284 F.3d at 514-15; I.A.E., 74 F.3d at
776.6 But they quickly pass over the "request" and "delivery"
issues to focus on manifestations of the architects' intent that
plans may be used on a project without their involvement. See
6
Foad Consulting bases its very similar framework on
principles of California contract law, because it holds that state
law governed the interpretation of the contract there. 270 F.3d at
826-28. The author of Effects Associates, writing separately,
criticizes this rationale. Id. at 832-34 (Kozinski, J.,
concurring). The circumstances of that case are different from the
one at hand, and we need not delve into this aspect of the
analysis.
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Nelson-Salabes, 284 F.3d at 515; Johnson, 149 F.3d at 501; I.A.E.,
74 F.3d at 776. We will do the same here, while noting that it was
actually Farese, not WCP, who requested the work and received
delivery of it.
The most recent of the four cases distilled its
predecessors to yield this succinct summary:
Our analysis of these decisions . . . suggests that the
existence of an implied nonexclusive license in a
particular situation turns on at least three factors: (1)
whether the parties were engaged in a short-term discrete
transaction as opposed to an ongoing relationship; (2)
whether the creator utilized written contracts, such as
the standard AIA contract, providing that copyrighted
materials could only be used with the creator's future
involvement or express permission; and (3) whether the
creator's conduct during the creation or delivery of the
copyrighted material indicated that use of the material
without the creator's involvement or consent was
permissible.
Nelson-Salabes, 284 F.3d at 516. This is not an exhaustive list of
factors to consider, but it provides useful guidance in determining
the crucial question of intent.
Here, the first two considerations point away from a
license, because they both suggest Danielson's intent to remain
involved in the job. Danielson was in a long-term relationship
with Farese working on development of the site, not a one-time
arrangement, unlike the architects in I.A.E. and Foad Consulting.
See Nelson-Salabes, 284 F.3d at 516 (comparing cases). This intent
was also manifested by the standard AIA contract signed by Farese
and Danielson, which specifically provided that plans "shall not be
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used . . . for other projects, for additions to this Project, or
for completion of this Project by others . . . except by agreement
in writing and with appropriate compensation." See Nelson-Salabes,
284 F.3d at 516 (architect asked client to sign AIA contract);
Johnson, 149 F.3d at 500 (same). While this contract was signed
after the date on the covenant drawings, Danielson says that the
contract retroactively included the work done on those drawings as
part of its schematic design phase.7 In any event, we are looking
to the contract for evidence about overall intent, not for an
interpretation of its binding terms -- WCP was not a party to the
contract. See Foad Consulting, 270 F.3d at 834 (Kozinski, J.,
concurring) (noting that contract can be evidence of a relationship
giving rise to implied copyright license, even if the license is
not derived from the contract itself); Johnson, 149 F.3d at 500
(using unsigned contract as evidence of intent). That evidence
strongly suggests that Danielson granted no permission to others to
use the plans.
To evaluate the third, more general consideration, these
cases also look to whether the supposed infringer obtained the
plans directly from the supposed licensor, which would suggest
7
Farese had previously paid Danielson for services
rendered through June 5, 1987. Activity from that date until July
3, including completion of the covenant drawings on June 11, was
billed in the first invoice under the contract, dated July 15,
1987. The contract describes the schematic design phase, which
amounted to 15 percent of the contract price, as including site
plans like the covenant drawings.
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permission to use them. See, e.g., Johnson, 149 F.3d at 501;
I.A.E., 74 F.3d at 777. WCP got its copies of the plans from the
foreclosure sale and from Medford, not from Danielson. See
Danielson, 186 F. Supp. 2d at 20.
Danielson's acquiescence to the use of its plans as the
basis for the covenant may indeed point in the other direction, as
WCP argues. It could be seen as evidence that others were allowed
to use the plans, although it is also possible that Danielson never
contemplated the risk that Farese would fail to complete the
development himself. Whatever its import, we do not think this one
fact outweighs all the other indications that no implied license
was intended. See Nelson-Salabes, 284 F.3d at 516 (weighing
factors pointing in both directions and concluding that no license
was granted). Furthermore, giving undue weight to the filing of
plans with the local government could vitiate our earlier holding,
and the majority position among courts, that such filing alone does
not undermine the copyright.
WCP also argues that intent of the grantor is the wrong
standard for determining the existence of an implied nonexclusive
license. This argument misunderstands the intent benchmark as a
subjective inquiry into the mind of the putative licensor. Rather,
it is an objective inquiry into facts that manifest such
contractual intent. See I.A.E., 74 F.3d at 777 (Relevant intent
"is not the parties' subjective intent but their outward
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manifestation of it"). This is a typical task in contract law.
See, e.g., 1 E.A. Farnsworth, Farnsworth on Contracts § 3.13 (2d
ed. 1998) (inferring contractual acceptance from conduct); id. at
§ 8.5 (inferring waiver of condition from conduct). If an
architect worked on a short-term assignment with no outward signs
of expecting to continue involvement with the larger project, and
handed over the requested plans to a client without a contract or
other limitations, it would not matter if he or she harbored
private hopes of working on the next phase of the project. See
I.A.E., 74 F.3d at 777. But that is not what happened here.
Finally, WCP's suggestion that the appropriate standard
is the effect of the architect's behavior on the subjective
perception of the supposed licensee has no basis. It conflates the
affirmative defense of implied license with the affirmative defense
of estoppel, which we consider below. And the argument that our
refusal to find a license would restrain alienation is misplaced;
it is the covenant itself, not Danielson's copyright, that
encumbered the site, and WCP does not challenge the validity of the
covenant.
D. Merger
It is axiomatic that, while "[n]o author may copyright
his ideas or the facts he narrates," an author may copyright the
expression of those ideas. Harper & Row Publishers, Inc. v. Nation
Enters., 471 U.S. 539, 556 (1985); see 17 U.S.C. § 102(b).
-31-
Sometimes, however, an idea can be expressed in so few ways that it
"merges" with its expression, and the expression become
uncopyrightable.
When the uncopyrightable subject matter is very narrow,
so that the topic necessarily requires, if not only one
form of expression, at best only a limited number . . .
the subject matter would be appropriated by permitting
the copyrighting of its expression. We cannot recognize
copyright as a game of chess in which the public can be
checkmated.
Morrissey v. Procter & Gamble Co., 379 F.2d 675, 678-79 (1st Cir.
1967) (internal quotations and citations omitted); see Concrete
Mach. Co. v. Classic Lawn Ornaments Inc., 843 F.2d 600, 606-07 (1st
Cir. 1988). For example, we have held that this doctrine of merger
foreclosed copyright on rules for a sweepstakes contest which could
be effectively communicated using only a limited number of verbal
formulations, Morrissey, 379 F.2d at 679, and on pictures of fruits
and flowers used on labels to indicate the scent of candles, Yankee
Candle Co. v. Bridgewater Candle Co., 259 F.3d 25, 35 (1st Cir.
2001).
WCP argues that the restrictive covenant means there is
only one way to build on the land, and that the covenant drawings
merge with that idea. This contention distorts the purpose of the
merger doctrine. The doctrine aims to prevent the monopolization
of facts or ideas that are present in nature; where ownership of
the expression would remove such facts or ideas from the public
domain, the doctrine disallows copyright. See Yankee Candle, 259
-32-
F.3d at 36 ("In general, the merger doctrine is most applicable
where the idea and the expression are of items found in nature, or
are found commonly in everyday life."). Here, the restrictive
covenant made one method of developing the site legally easier and
cheaper than others, but it did not transform the covenant drawings
into the only physically possible means to express ideas for such
development. WCP's pursuit of several alternative designs
demonstrates the availability of alternatives here -- as does an
expert report proffered by WCP on damages issues, wherein WCP's
expert says an appropriate layout for the site "can be achieved in
many different ways."
WCP relies on Kern River Gas Transmission Co. v. Coastal
Corp., 899 F.2d 1458 (5th Cir 1990), to support its position. In
that case, regulators had given environmental approval to a
proposed 1,000 mile route for a gas pipeline. The company that had
plotted the route claimed copyright over documents depicting it;
these were merely publicly available maps on which the company had
added a line tracing the route. The court denied copyright
protection based on merger. In WCP's view, Kern River based its
merger finding on the fact that regulatory approval limited the
available options for building a pipeline, and the map merged with
the "idea" of an approved route. If that were the only reasoning
in the case, we are not sure the decision would be correct.
However, we think the regulatory approval was, at most, a secondary
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consideration; merger applied, more simply, because the map
markings were "the only effective way to convey the idea of the
proposed location of a pipeline." Id. at 1464. Even if there had
been no regulatory decision in the case, it should have come out
the same way, because the underlying idea was no more than a linked
series of geographical points found in nature, and a line on a map
the only practical method to express that idea. The covenant
drawings, in contrast, express just one of many possible detailed
and complex visions for developing the site. Kern River is
inapposite.
E. Estoppel and Waiver
WCP argues that Danielson is estopped from an
infringement action because it participated in the three 1994
meetings where WCP displayed some of the drawings and indicated
that it might pursue a similar plan for the site. Principles of
equitable estoppel from other areas of the law apply to copyright
actions. See Hampton v. Paramount Pictures Corp., 279 F.2d 100,
104 (9th Cir. 1960); Cherry River Music Co. v. Simitar Entm't,
Inc., 38 F. Supp. 2d 310, 318 (S.D.N.Y. 1999). The district court
granted judgment as a matter of law against this affirmative
defense at the close of evidence at the trial, because it found the
evidence insufficient to give the issue to the jury.
The first element required to show estoppel is that the
plaintiff knew of the defendant's potential infringement. See
-34-
Plumley v. S. Container, Inc., 303 F.3d 364, 374 (1st Cir. 2002)
(party to be estopped must "know the facts"); Hampton, 279 F.2d at
104 (same, applied to copyright). Danielson argues that the
meetings established only that WCP possessed copies of the plans
and considered possibly using them. WCP appeared more enthusiastic
about other alternatives, however, and pursued them for a year.
Indeed, a WCP employee who attended the meetings testified at trial
that WCP expressed serious reservations about the economic
viability of the condominium concept, given the changes in the
market in the seven years since Farese had suspended construction.
Moreover, there was no indication at these exploratory meetings
that WCP would proceed with the Farese plan without Danielson's
participation. When WCP reversed course and began working from the
disputed drawings, it informed Tellalian of this fact, but never
Danielson. In August 1997, when Danielson learned of actual
infringement, it acted promptly to assert its claim.
We agree with the district court that the evidence about
these meetings did not establish the type of knowledge necessary to
estop Danielson from pursuing its claim. We also note that this
conclusion is consistent with the jury's subsequent verdict on the
statute of limitations defense, which necessarily involved a
rejection of the claim that Danielson knew or should have known of
infringing activity before May 1997. Cf. Heinrich v. Sweet, 308
F.3d 48, 69 (1st Cir. 2002) (looking to necessary implications of
-35-
jury verdict on one issue as support for conclusions on a different
but related issue).
WCP advances an arguably distinct waiver defense based on
the same arguments. A waiver must be voluntary and knowing,
however. See Med. Air Tech. Corp. v. Marwan Inv., Inc., 303 F.3d
11, 19 & n.4 (1st Cir. 2002). Since the facts do not support
knowledge sufficient for estoppel, waiver is a fortiori
unsupportable.
III. Unfair Competition Claims
Danielson appeals the summary judgment ruling against its
claim of unfair and deceptive trade practices under Mass. Gen. Laws
ch. 93A, and the post-trial judgment as a matter of law against it
on the Lanham Act false designation of origin claim.
A. Preemption of Chapter 93A Claim
Federal copyright law preempts rights under state law
when they are the equivalent of those granted under the Copyright
Act. 17 U.S.C. § 301(a). The district court granted summary
judgment against Danielson's chapter 93A claim, finding it
preempted by this provision. Danielson, 186 F. Supp. 2d at 29. As
noted earlier, we review summary judgment de novo. See Segrets,
207 F.3d at 61.
WCP first invoked preemption as an affirmative defense in
its answer to Danielson's complaint. Danielson essentially
conceded in its briefs to us that it advanced only cursory legal
-36-
arguments against preemption at the time of summary judgment. The
behavior on which Danielson based its state-law claim is the same
behavior that Danielson alleged gave rise to copyright liability.
The state claim is therefore preempted. See Data Gen., 36 F.3d at
1164-65.8
B. Lanham Act
The district court ruled post-verdict against Danielson's
Lanham Act false designation of origin claim because the damages
found by the jury when it found liability on the claim were too
speculative. On appeal, Danielson argues that the removal of its
logo from the infringed drawings violated the Lanham Act, and that
its contract with Farese provided a basis for the jury to reach the
$120,000 figure. In response, WCP argues not only that the amount
of damages was unproven, but that Danielson failed to demonstrate
any cognizable harm at all. It also argues that other showings
8
Danielson attempts to augment its arguments on appeal by
alleging that the element of "rascality" in a chapter 93A claim
adds enough to escape preemption. Normally, we will not entertain
an argument on appeal of summary judgment that was not raised
before the district court. See Ortiz v. Gaston County Dyeing Mach.
Co., 277 F.3d 594, 597 (1st Cir. 2002). In any event, a label such
as "rascality" is a dubious basis for the extra element required to
survive preemption. See Data Gen., 36 F.3d at 1165 (citing Mayer
v. Josiah Wedgwood & Sons, Ltd., 601 F. Supp. 1523, 1535 (S.D.N.Y.
1985)).
-37-
required by the Lanham Act were inadequate, including the
involvement of interstate commerce.9
Section 43(a) of the Lanham Act creates a federal cause
of action for any person "who believes that he or she is likely to
be damaged" by "any false designation of origin" used "in commerce"
which "is likely to cause confusion, or to cause mistake, or to
deceive." 15 U.S.C. § 1125(a) (2000). A typical scenario involves
"passing off," where a defendant sells its own goods or services
while falsely representing that they come from the plaintiff; this
claim is a "close cousin" of other trademark infringement actions,
except that it is available to those with unregistered marks. See
PHC, Inc. v. Pioneer Healthcare, Inc., 75 F.3d 75, 78 (1st Cir.
1996). Danielson's claim is closer to so-called "reverse passing
off," where the defendant falsely attributes the plaintiff's
product to itself or a third party. See Waldman Publ'g Corp. v.
Landoll, Inc., 43 F.3d 775, 780-81 (2d Cir. 1994). The First
Circuit has not recognized this claim under section 43(a) of the
Lanham Act, although other courts have done so. See, e.g., id.;
Smith v. Montoro, 648 F.2d 602, 605-07 (9th Cir. 1981). See
9
Danielson argues that WCP has waived these arguments by
failing to discuss them in its opening brief to us. But these are
cross-appeals, and WCP was the prevailing party on the Lanham Act
issue before the district court. The onus is not on WCP to seek to
have its victory re-examined on the grounds that the district court
awarded it on too narrow a basis. Rather Danielson, in its
capacity as cross-appellant, challenged the district court ruling.
WCP then replied, having attacked the Lanham Act claim under Rule
50 both during and after trial.
-38-
generally J.T. Cross, Giving Credit Where Credit is Due, 72 Wash.
L. Rev. 709, 716-19 & n.46 (1997) (collecting cases and tracing
history); id. at 736-42 (criticizing recognition of reverse passing
off claims under section 43(a)). We will not decide here whether
we recognize such a claim, but will assume for purposes of this
appeal that we would do so.
Danielson's arguments on the Lanham Act before the
district court, and indeed the jury, were frequently cursory. At
summary judgment, the district court said that it would refrain
from entering judgment on the Lanham Act claim because "the parties
have not adequately briefed the issue, and ought [to] be given an
opportunity further to hone their arguments at trial." Danielson,
186 F. Supp. 2d at 27. But Danielson did little honing at trial;
for example, it did not mention the claim in its closing argument
to the jury (although WCP did).
For the most part, the argument that was made suggested
that Danielson had been damaged by the alleged Lanham Act violation
because it lost the contract value of the drawings as a result.
But there is an insuperable causation problem with that argument.
Danielson has insisted in other contexts that the only possible use
for the infringed drawings was in connection with the site. Surely
the reason that WCP did not hire Danielson for the job, or buy out
the Farese contract, was not that it was deceived by the
misattribution. We do not see how the miscreant and the only
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potential lost customer can be one and the same; WCP would need to
have confused itself. False designation of origin did not cause
this harm.
Danielson notes that others who came in contact with the
drawings would have been misled about its origins as well. Since
exposure to subcontractors, planning officials, and the like would
be good for business, one might expect that Danielson lost an
opportunity to enhance its professional reputation. See Johnson,
149 F.3d at 502 (reverse passing off found where defendant replaced
plaintiff's logo with its own on architectural drawings and
circulated them), quoted in Danielson, 186 F. Supp. 2d at 27; cf.
Attia v. Soc'y of N.Y. Hosp., 201 F.3d 50, 58-60 (2d Cir. 1999)
(considering similar claim and rejecting it because plan at issue
was too general to be protectable). Here, however, Danielson did
nothing whatsoever at trial to show how the misattribution might
have cost it other potential work. We see no evidence in the
record that Danielson even operated outside Massachusetts at this
time, in order to establish the necessary interstate commerce nexus
for the market in which business was allegedly lost. Cf. Johnson,
149 F.3d at 502 (record established that plaintiff was licensed in
three states and did work in all of them). Danielson also admitted
at trial that, in its diminished capacity in the 1990s, the firm
was no longer able to do a job of the type or scale of the Willows
at Winchester. Thus a developer of a similar project who saw
-40-
Danielson's logo on the drawings and considered hiring it would
have been unable to do so anyway.
Perhaps the meager showings of commerce and harm that
Danielson did offer might have been enough to justify nonmonetary
relief in a different case. See Cashmere & Camel Hair Mfrs. Inst.
v. Saks Fifth Ave., 284 F.3d 302, 311 (1st Cir. 2002) (under Lanham
Act, "a plaintiff seeking damages must show actual harm to its
business"); Web Printing Controls Co. v. Oxy-Dry Corp., 906 F.2d
1202, 1204 (7th Cir. 1990) (reversing dismissal of claim for
failure to show harm when injunctive relief was requested). Here,
however, Danielson claimed only money damages and failed to carry
its burden of proof. On the facts of record in this case we
therefore affirm the dismissal of the claim. As a result, we also
affirm the denial of attorneys' fees, because Danielson was not the
"prevailing party" as required by the statute. 15 U.S.C. §
1117(a).
IV. Damages
WCP appeals from the jury instructions on damages, while
Danielson appeals the district court's reduction of copyright
damages and denial of prejudgment interest.
A. Infringer's Profits
The principal damages in this case, on which the parties
focus the most attention, are profits from selling condominium
units in the Willows at Winchester. Damages for copyright
-41-
infringement include "any profits of the infringer that are
attributable to the infringement." 17 U.S.C. § 504(b). The
copyright owner needs only to present evidence of the infringer's
gross revenues; the burden is then on the defendant to show how
much of its revenues are profits, and what "elements of profit
[are] attributable to factors other than the copyrighted work."
Id.
In this case, stipulations by the parties settled many of
these issues. The parties agreed that the gross revenues from the
sale of all 70 condominium units totaled $19,867,684. They also
stipulated that WCP incurred at least $18,136,667 in deductible
expenses. They disagreed about whether an additional amount of up
to $386,067 for commissions to real estate brokers was also
deductible, a question of fact that was left to the jury and is not
directly before us on appeal. Therefore, depending on the outcome
of that dispute, the total pool of profits from which the jury
could calculate damages was between $1,344,950 and $1,731,017. The
jury awarded Danielson $1,464,950. This figure suggests that the
jury apportioned, at most, a negligible amount of the profits and
awarded all or almost all of WCP's profits to Danielson.10 WCP
10
If the district court was correct that the jury's
copyright damages included $120,000 of actual damages, then it
appears that the jury deducted the full amount for real estate
commissions and did no apportionment at all.
-42-
argues that some apportionment is required by law, and that faulty
instructions led the jury not to do the necessary apportionment.
The caselaw is clear on this point: there must be a
rational apportionment of profits. The division of profits between
those portions attributable to the infringement and those
attributable to other sources does not require "mathematical
exactness." Abend v. MCA, Inc., 863 F.2d 1465, 1480 (9th Cir.
1988) (apportionment required where film "Rear Window" infringed
underlying short story, but also earned profit from reputations and
creative contributions of many others, including Grace Kelly, James
Stewart, and Alfred Hitchcock). The Supreme Court held in 1940
that a "reasonable approximation" was enough if it allowed "a
rational separation of the net profits so that neither party may
have what rightfully belongs to the other." Sheldon v. Metro-
Goldwyn Pictures Corp., 309 U.S. 390, 404 (1940) (internal
quotations omitted) (requiring apportionment where movie infringed
parts of play, but added other content, as well as costumes,
scenery, and the like).
In Data General, this court found some apportionment
required as a matter of law because the defendant showed that,
apart from its infringing activity, customers purchased its
services for reasons such as the price, quality, and breadth of its
service. 36 F.3d at 1174, 1177. We agree with WCP that Data
General controls this case. See also Bruce v. Weekly World News,
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Inc., 310 F.3d 25, 31-32 (1st Cir. 2002) (50-50 apportionment of
profits from sales of T-shirts featuring infringed "generic" photo
of President Clinton shaking hands, retouched to depict him
greeting an alien); Sygma Photo News, Inc. v. High Soc'y Magazine,
Inc., 778 F.2d 89, 96 (2d Cir. 1985) (reducing district court's
apportionment of profits for infringing photo of Raquel Welch on
cover of "Celebrity Skin" magazine because of failure to account
for cover's list of other celebrities pictured inside); Frank Music
Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 518 (9th Cir.
1985) (one percent apportionment for infringing use of songs in Las
Vegas revue was clear error because evidence indicated the songs
were more important to the revue's success); ABKCO Music, Inc. v.
Harrisongs Music, Ltd., 508 F. Supp. 798, 801-02 (S.D.N.Y. 1981)
(apportioning song's profits between infringing melody,
noninfringing lyrics, and fame and appeal of singer George
Harrison).
At trial, WCP presented evidence concerning many
contributing factors that helped the Willows at Winchester turn a
profit besides Danielson's skeletal site plans. It pointed to five
volumes of subsequent and more detailed architectural drawings
necessary to complete the project. Other evidence concerned the
extensive efforts WCP made to coordinate logistics, supervise
subcontractors, choose and install various amenities, market the
development, and sell the condominium units. WCP also argued that
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aspects of Danielson's site plans, such as the placement of garages
and parking areas, actually might have detracted from the
development's appeal. WCP supported many of these contentions with
testimony from two experts: David Barsky, an architect, and Sue
Hawkes, a condominium marketing consultant.11
"[T]he defendant may show that the existence and amount
of its profits are not the natural and probable consequences of the
infringement alone, but are also the result of other factors which
either add intrinsic value to the product or have independent
promotional value." Data Gen., 36 F.3d at 1175. Where such a
showing is made, apportionment is required. Id. at 1177; Cream
Records, Inc. v. Jos. Schlitz Brewing Co., 754 F.2d 826, 828 (9th
Cir. 1985) ("[W]here it is clear . . . that not all of the profits
are attributable to the infringing material, the copyright owner is
11
On appeal, Danielson challenges the district court's
decision to allow these experts to testify at trial. We review for
abuse of discretion. See Kumho Tire Co. v. Carmichael, 526 U.S.
137, 152 (1999). We find no such abuse; Barsky and Hawkes are both
experienced professionals with relevant expertise. Meanwhile, WCP
appeals the district court's decision to exclude certain parts of
the testimony it wanted to elicit from Hawkes, especially her
estimate that the contribution of a site plan to a condominium
project is no more than 10-15 percent of its total appeal. Given
the lack of foundation offered for this particular number, we think
the district court was within its discretion to limit Hawkes's
testimony in this manner. At a second trial, if one is required,
see infra Part IV.C, WCP might do a better job of establishing the
basis for this opinion, or might offer other experts or evidence to
support it. More importantly, when the jury is given the proper
standard rather than instructed to look for mathematical exactness,
it will be less important for WCP to produce a precise numerical
figure.
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not entitled to recover all of those profits merely because the
infringer fails to establish with certainty the portion
attributable to the non-infringing elements."); Orgel v. Clark
Boardman Co., 301 F.2d 119, 121 (2d Cir. 1962) ("[W]here an
infringer's profits are not entirely due to the infringement, and
the evidence suggests some division which may rationally be used as
a springboard it is the duty of the court to make some
apportionment."). Many of the noninfringing elements that
triggered apportionment in the cases we have cited here -- such as
the popularity of a celebrity, the quality of a finished product,
or marketing efforts -- were inchoate. We hold that WCP has
likewise made enough of a showing to require some apportionment as
a matter of law. See Data Gen., 36 F.3d at 1177.
WCP argues that the district court's instructions to the
jury foreordained its refusal to apportion, because they
erroneously stated an extremely high standard to show that an
element of profit was not attributable to the infringement. We
overturn a jury instruction only if it prejudices a party's
substantial rights because it misleads the jury or misstates or
unduly complicates the correct legal standard. See Faigin v.
Kelly, 184 F.3d 67, 87 (1st Cir. 1999). The instructions on
apportionment did all three.
WCP proposed jury instructions that reflected the
precedents reasonably accurately. Parties are entitled to jury
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instructions that reflect the correct legal standards, but not, of
course, the exact phrasing they desire. See Luson Int'l Distribs.,
Inc. v. Fabricating & Prod. Mach., Inc., 966 F.2d 9, 13 (1st Cir.
1992). Here, however, the district court's instructions on
apportionment were misleading and inconsistent with the applicable
law:
[WCP argues it is] entitled to apportion those net
revenues, and if there are portions of those revenues
which were earned completely free of what the site plan
drawings which were infringed were used for, then they
shouldn't have to pay those net revenues over to
Danielson. . . . [This portion] had nothing to do with
the infringement.
Well, they say that. The [WCP] folks have to
prove that, and again by a fair preponderance of the
evidence. So you consider things. Were the design
features wholly separate from the site plan drawings[?]
Was there a marketing plan wholly separate[?] You
consider those aspects, but they have to be wholly
separate.
WCP objected at the end of the instructions: "[W]hen you
defined the burden on apportionment of damages, twice you used the
phrase that the apportionment has to be 'wholly separate,'
'completely free.' . . . That's an overstatement of what we have
to show in the case." We could put it no better ourselves. These
instructions required mathematical exactness and complete
separability to allow apportionment, but the law imposes no such
requirements. In objecting, WCP also referred the court to several
cases that supported its position and were contrary to the
instructions, including ABKCO Music and Sygma News. The trial
judge interrupted, saying "I'm satisfied with the charge."
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The jury, apparently, was less satisfied. After several
hours of deliberation, it sent a note to the judge asking for
clarification:
Trying to understand apportionment. Author writes story.
Movie studio infringes story and turns it into a movie.
Movie makes a hundred million profit. Obviously there
were many added aspects to make movie. Does author
recover a hundred million since story underlies the whole
[movie]? There is [sic] clear creative contributions by
many others. Can this have an impact on the award? We
need more understanding of the law of apportionment with
respect to copyright infringement.
The court responded with a further charge that largely reiterated
its prior one:
In order to prove apportionment [WCP] has to prove by a
fair preponderance of the evidence that some aspect or
aspects of the net revenues are the result of something
other than the copyright infringement. If it's all
intertwined and there can be no separately identifiable
amount, and to give your example, the authors, the book
authors underlies [sic] the entire movie, then there's no
apportionment. But if there is a portion of those net
revenues, net profits, which are apart from, separate
from, identifiably separate from the copyright
infringement, and [WCP] has proved that by a fair
preponderance of the evidence, then it's only fair that
that be apportioned out because that part of it was not
permitted, was not enhanced or allowed or undergirded by
the copyright infringement. . . . If you are going to
apportion you see if [WCP] has identified a separable
amount, and then you deduct that amount or that portion
and the Danielson folks get the remainder.
The judge's response to the jury's hypothetical was
inconsistent with two leading cases presenting similar facts,
Sheldon, 309 U.S. at 404, and Abend, 863 F.2d at 1478-80.
Otherwise, the second charge merely echoed the court's original
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error, albeit without some of the intensifying adverbs, and it did
nothing to undo the damage.12 WCP did not need to prove that its
noninfringing contributions to the development were "wholly
separate" from Danielson's plans, as the first instruction
repeatedly said. It is also wrong to state, as did the second
instruction, that apportionment is unavailable where the final
product was "enhanced or allowed or undergirded by the copyright
infringement."13
In light of these erroneous instructions on
apportionment, we must vacate the copyright damages.14 See Data
Gen., 36 F.3d at 1177 (citing Allen v. Chance Mfg. Co., 873 F.2d
12
Danielson argues that WCP waived this issue by failing to
object again to the reiterated instruction. Given that WCP offered
an instruction on apportionment, objected to the original charge,
and raised this issue again in its post-verdict motion for a new
trial, we will consider it preserved for appeal. Even if there
were waiver, it would simply limit our review to clear error, and
that standard would be satisfied here.
13
We are unpersuaded by Danielson's argument that
apportionment is not appropriate because the entire development was
"intertwined" with the infringed site plans. Danielson cites only
one case to us in support of this notion, Business Trends Analysts,
Inc. v. Freedonia Group, 700 F. Supp. 1213, 1241 (S.D.N.Y. 1988),
aff'd 887 F.2d 399 (2d Cir. 1989). That case is simply
inapplicable: the court there found the record "absolutely bereft
of any proof" from defendants on apportionment. Id. Its reference
to intertwining referred to the lack of any evidence that would
"sensibly and responsibly extricate the gold from the dross." Id.
In contrast, the evidence in the case before us allows a sensible
and responsible apportionment.
14
This finding obviates the need for us to consider
separately WCP's appeal of the denial of its motion for a new
trial, which was predicated on damages issues; our holding has the
same effect.
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465, 470 (1st Cir. 1989)). Apportionment is "ultimately a delicate
exercise informed by considerations of fairness and public policy,
as well as fact." Data Gen., 36 F.3d at 1176. The instructions
here did not fulfill these goals, and the jury's verdict was
distorted as a result.
B. Other Damages Issues
In addition to profits based on the infringement,
Danielson is also entitled to any actual damages it suffered. 17
U.S.C. § 504(b). If, for example, Danielson demonstrated the
amount of compensation that it might have obtained from WCP, but
had lost because WCP unlawfully copied the drawings instead, that
sum would serve as a good measure of actual damages. The district
court determined that the jury had added $120,000 to its award of
copyright damages and that this amount was overly speculative, and
so the court reduced the award commensurately. Danielson appeals
this decision. We are concerned that the court's response may
itself have depended on speculation, but by vacating the damages
award we have eliminated the need to decide this question. We also
vacate the district court's alternative order of remittur.
Danielson may offer evidence to show actual damages in any further
proceedings to calculate damages.
Finally, Danielson appeals the district court's denial of
prejudgment interest. We review this decision for abuse of
discretion. Hogan v. Bangor & Aroostook R.R., 61 F.3d 1034, 1038
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(1st Cir. 1995). In ruling from the bench, the district court
stated that it relied on Murray v. Shaw Industries, Inc., 990 F.
Supp. 46 (D. Mass. 1997). That case found that prejudgment
interest was inappropriate where the entire damages award was
composed of disgorged profits from an infringer, because, unlike
actual damages, the plaintiff never had those funds and so deserved
no compensation for the lost use of the money while the case was
pending. Id. at 48. This reasoning is sound and not an abuse of
discretion. Danielson offers no support for its assertion that the
standards for awarding prejudgment interest and attorneys' fees are
the same, and we find none. We do note, however, that after
further proceedings Danielson's award may include some actual
damages. If so, the district court may, in its discretion, choose
to revisit this issue.
C. Remand
We hope that damages can now be resolved without
requiring the empanelment of another jury for a new proceeding. As
we did in Data General, 36 F.3d at 1177 n.52, we offer some
thoughts to assist the district court in the conduct of further
proceedings. First and foremost, now that WCP's liability is
established and every underlying legal issue is resolved, we urge
the parties to renew their efforts to settle the case.
Alternatively, the parties could agree to allow the district court
to determine damages on the basis of the evidence already presented
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at trial. See 4 Nimmer, supra, § 14.03(D), at 14-41 (parties may
consent to bench trial). The district court might also accept some
further briefing or evidence before ruling on damages. Finally, if
the parties decline all of these invitations, we encourage the
district court to consider, in its discretion, ordering a
remittitur. Data Gen., 36 F.3d at 1177 n.52. Fifteen years have
passed since the drawings at the center of this case were produced.
There is no advantage to prolonging the litigation any further.
V. Conclusion
For the reasons stated in this opinion, the district
court's decisions dismissing WCP's affirmative defenses and
Danielson's unfair competition claims are affirmed. The damages
award is vacated and the case is remanded for proceedings to
calculate damages consistent with this opinion.
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John G. Danielson, Inc. v. Winchester-Conant Properties, Inc.
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