Dream Games of Arizona, Inc. v. Pc Onsite
| Decision Date | 02 April 2009 |
| Docket Number | No. 07-15847.,No. 07-15919.,07-15847.,07-15919. |
| Citation | 561 F.3d 983 |
| Parties | DREAM GAMES OF ARIZONA, INC.; American Software Development Company, Inc., Plaintiffs-Appellees, v. PC ONSITE; Casey Hagon, Defendants-Appellants, and Affordable Video Systems, Ltd.; Garland Pierce; Frank Diana City Entertainment, Defendants, v. Paul Perez, Third-party-defendant. Dream Games of Arizona, Inc.; American Software Development Company, Inc., Plaintiffs-Appellants, v. PC Onsite; Casey Hagon, Defendants-Appellees, and Affordable Video Systems, Ltd.; Garland Pierce; Frank Diana City Entertainment, Defendants, v. Paul Perez, Third-party-defendant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Ray K. Harris, Esq., Fennemore Craig, P.C., Phoenix, AZ, for defendants-appellants/appellees PC Onsite.
Marvin A. Glazer, Esq., Cahill, Von Hellens & Glazer P.L.C., Phoenix, AZ, for plaintiffs-appellees/appellants Dream Games of Arizona, Inc.
Appeal from the United States District Court for the District of Arizona, Roslyn O. Silver, District Judge, Presiding. D.C. No. CV-03-00433-PHX-ROS.
Before: WILLIAM C. CANBY, JR. and KIM McLANE WARDLAW, Circuit Judges, and RICHARD MILLS,* District Judge.
Dream Games of Arizona ("Dream Games") prevailed in its lawsuit against PC Onsite for copyright infringement of "Fast Action Bingo," an electronic video bingo game, and was awarded statutory damages. We must decide whether (1) the district court properly allowed the jury to see unprotectable elements of the game without identifying the protectable elements; (2) the jury should have been allowed to hear evidence that Fast Action Bingo was operated illegally in two states; (3) statutory damages were available to Dream Games despite the illegal operation; and (4) the district court erred in dismissing claims against PC Onsite's majority owner for lack of evidence of direct infringement. We have jurisdiction, 28 U.S.C. § 1291, and we affirm the district court's rulings.
Dream Games, a corporation that creates, designs, develops, licenses, and sells electronic video bingo games, developed an electronic video game called Fast Action Bingo. In March 2002, Dream Games entered negotiations with PC Onsite, a company that licenses, distributes, and sells computer hardware and software, regarding the possibility of PC Onsite performing software upgrade work on Fast Action Bingo. When PC Onsite was given the original source code for Fast Action Bingo, the two companies signed a third party source code nondisclosure agreement, which listed Dream Games as the licensor and PC Onsite as the licensee, and provided that Dream Games would retain all intellectual property rights in the proprietary information provided to PC Onsite. The agreement prohibited PC Onsite from assigning, selling, distributing, licensing, or otherwise transferring the proprietary information.
PC Onsite created a new version of Fast Action Bingo, called "Fast Action Bingo II." In a September 2002 meeting attended by PC Onsite representatives Casey Hagon, president, and Garland Pierce, co-founder and majority owner, PC Onsite presented Fast Action Bingo II to Dream Games. Negotiations broke down at the meeting, and though the parties made continued attempts at negotiation, the futility of further efforts soon became clear to PC Onsite. Immediately after the breakdown of negotiations, PC Onsite created "Quick Play Bingo I"—an electronic video bingo game that would compete with Fast Action Bingo—on the basis of the product that PC Onsite developed for Dream Games. On November 27, 2002, Dream Games registered a copyright, No. TX 5-622-656, for the Fast Action Bingo I source code.
In December 2002, Pierce and Hagon jointly presented a demonstration of Quick Play Bingo I to City Entertainment, a company that operates bingo parlors. PC Onsite and City agreed to install and operate Quick Play Bingo I in two bingo parlors in Utah and three bingo parlors in Wyoming. City had previously offered Fast Action Bingo at the two Utah parlors, and at one of the Wyoming parlors. Thus, Fast Action Bingo and Quick Play Bingo directly competed with each other in City's bingo parlors between January 2003 and March 2003.
Dream Games and American Software Development Company, a licensor of Fast Action Bingo, filed a complaint in the United States District Court for the District of Arizona, alleging copyright infringement under 17 U.S.C. § 501, common law breach of contract, and unjust enrichment, and seeking injunctive relief and damages. Specifically, Dream Games alleged that PC Onsite, Casey Hagon, and Garland Piece (collectively, "PC Onsite"),1 "having full knowledge of the copyright rights of Dream Games, have infringed Dream Games' copyrights by manufacturing, displaying, distributing, ... selling, [and] licensing ... an electronic video bingo game known as `Quick Play Bingo.'" Dream Games obtained a preliminary injunction against PC Onsite, enjoining it from infringing Dream Games's copyright.
A six day jury trial began on November 7, 2006. During trial, PC Onsite moved for Judgment as a Matter of Law ("JMOL"), arguing that Garland Pierce was not liable for copyright infringement because he did not directly distribute Quick Play Bingo to the public or participate in its development, and that Dream Games was not entitled to damages because Fast Action Bingo was operated illegally. During oral argument on the motion, Dream Games argued for the first time that Garland Pierce was secondarily liable for infringement. The district court granted judgment as a matter of law in favor of Pierce and dismissed him from the case. The court further ruled that Dream Games could not recover actual damages for Fast Action Bingo's lost profits because the game was offered illegally in Utah and Wyoming, but that Dream Games was entitled to recover statutory damages to be determined by the jury.
The jury found PC Onsite and Hagon liable for willful copyright infringement. It awarded $25,000 to Dream Games in statutory damages. Final judgment was entered on March 30, 2007, in favor of Dream Games. Dream Games subsequently moved to amend the judgment for an error correction and to enter a permanent injunction. It also filed a motion for a new trial on Pierce's liability for inducement. On May 2, 2007, the district court amended its judgment to correct the clerical error and to order a permanent injunction, and denied Dream Games's motion for a partial new trial.
PC Onsite timely appeals. Dream Games and Affordable Video Systems cross-appeal the district court's denial of Dream Games's motion for a partial new trial on Pierce's liability.
The district court's jurisdiction was based on 28 U.S.C. §§ 1331, 1338(a) and 1367(a). We have jurisdiction under 28 U.S.C. § 1291 from a final judgment that disposes of all claims with respect to all parties.2
We review a district court's evidentiary ruling for abuse of discretion. See Tritchler v. County of Lake, 358 F.3d 1150, 1155 (9th Cir.2004). Appellant must also show "that the error was prejudicial." Id. "We review a district court's formulation of civil jury instructions for an abuse of discretion," and "[w]e review de novo whether a jury instruction misstates the law." Wall Data Inc. v. L.A. County Sheriff's Dep't, 447 F.3d 769, 784 (9th Cir.2006). A denial and a grant of a motion for a judgment as a matter of law are both reviewed de novo. See Quiksilver, Inc. v. Kymsta Corp., 466 F.3d 749, 755(9th Cir.2006).
Because "copyright protects only an author's expression of an idea," Data E. USA, Inc. v. Epyx, Inc., 862 F.2d 204, 207 (9th Cir.1988), "elements of expression that necessarily follow from an idea, or ... expressions that are as a practical matter, indispensable or at least standard in the treatment of a given idea" are not protected, id. at 208(alteration and internal quotation marks omitted). We have held, however, that a claim of copyright infringement can be based on infringement of a combination of unprotected elements. See Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1446(9th Cir.1994). "It is well settled that a jury may find a combination of unprotect[a]ble elements to be protect[a]ble ... because `the over-all impact and effect indicate substantial appropriation.'" Three Boys Music Corp. v. Bolton, 212 F.3d 477, 485 (9th Cir.2000) (quoting Sid & Marty Krofft Television Prods., Inc. v. McDonald's Corp., 562 F.2d 1157, 1169(9th Cir.1977), superseded on other grounds by 17 U.S.C. § 504(b)). To allow the possibility of such a finding, the jury must be allowed to see the complete work. Apple Computer and its progeny do, however, require that the unprotected elements be identified to the jury. See, e.g., Apple Computer, 35 F.3d at 1446("[T]he unprotectable elements have to be identified, or filtered, before the works can be considered as a whole.").
PC Onsite argues that the district court abused its discretion in allowing the jury to see the unprotectable elements of Fast Action Bingo.3 Unprotectable elements such as Bingo cards and game function buttons, i.e., "Log Out," were introduced into evidence as part of the complete printouts of Fast Action Bingo screen displays. Because it is appropriate for the jury to see unprotected elements of a copyrighted work so that it may assess whether the combination of such elements warrants protection, the district court did not abuse its discretion in allowing into evidence complete Fast Action Bingo screen displays that include unprotectable elements.
PC Onsite argues that the district court erred by failing to identify in the jury instructions the specific elements of Fast...
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