John Wiley & Sons, Inc. v. Book Dog Books, LLC

• Citation: 327 F.Supp.3d 606
• Decision Date: 17 August 2018
• Docket Number: 13cv816,16cv7123
• Parties: JOHN WILEY & SONS, INC., et al., Plaintiffs, v. BOOK DOG BOOKS, LLC, et al., Defendants. Cengage Learning, Inc., et al., Plaintiffs, v. Book Dog Books, LLC, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

327 F.Supp.3d 606

JOHN WILEY & SONS, INC., et al., Plaintiffs,

v.BOOK DOG BOOKS, LLC, et al., Defendants.

Cengage Learning, Inc., et al., Plaintiffs,

v.Book Dog Books, LLC, et al., Defendants.

13cv816

16cv7123

United States District Court, S.D. New York.

Signed August 17, 2018

Jeffrey M. Gould, Julie Clocker Chen, Corey Michael Sclar Miller Matthew Jan Oppenheim, Oppenheim Zebrak, LLP, Washington, DC, for Plaintiffs.

Evan Mandel, Robert Allen Glunt, Alyssa L. Vickers, Rishi Bhandari, Mandel Bhandari, L.L.P., New York, NY, for Defendants.

OPINION & ORDER

WILLIAM H. PAULEY III, Senior United States District Judge:

On April 5, 2018, a nine-person jury found Defendants liable on Plaintiffs' trademark infringement, copyright infringement, and breach of contract claims and awarded Plaintiffs $34.2 million in statutory damages. In the wake of that verdict, the parties filed a plethora of motions. Defendants move for: (1) renewed judgment as a matter of law, (2) a new trial, (3) remittitur, and (4) a stay of enforcement of any judgment pending appeal. Plaintiffs move for: (1) entry of a partial final judgment, (2) prejudgment interest, (3) a permanent injunction, (4) disposition of infringing materials, and (5) attorneys' fees and costs. For the reasons that follow, Defendants' motions are denied. Plaintiffs' motion for partial final judgment is denied as moot. Plaintiffs' motion for prejudgment interest is denied. Plaintiffs' motions for a permanent injunction, disposition of infringing materials, and attorneys' fees and costs are granted in part and denied in part.

BACKGROUND

The April 2018 verdict was the dénouement of a decade of litigation between the parties. Plaintiffs are a consortium of textbook publishers: John Wiley & Sons, Cengage Learning, Pearson Education, and McGraw–Hill Global Education. Defendants are used book sellers owned and operated by Philip Smyres. (See Trial Tr. 765:3–767:14.)

In 2007, Plaintiffs sued Defendants for copyright infringement and trademark infringement. (See Second Amended Complaint, No. 13-cv-816 ("BDB I"), ECF No. 263 ("BDB I SAC"), ¶ 3.) The parties settled that action with an agreement that Defendants would cease importing and selling counterfeit books. (See PX127 ("Settlement Agreement").) In 2011, Plaintiffs discovered that Defendants were selling counterfeit books once again. (BDB I SAC, ¶ 4.) This time, settlement negotiations failed, and Defendants filed a preemptive federal action against Plaintiffs in the Southern District of Ohio seeking a declaration that Defendants were not violating Plaintiffs' rights under the Copyright Act. See Book Dog Books, LLC v. Cengage Learning, Inc., No. 12-cv-1165 (S.D. Ohio) (the "Ohio Action"). Plaintiffs responded by filing the first action in this proceeding ("Book Dog Books I"), asserting trademark infringement, copyright infringement, breach of the Settlement Agreement, and related claims. In 2013, the Ohio Action was transferred to this Court, and the parties stipulated to dismiss it. (See Order, No. 13-cv-6413, ECF No. 89.) In 2016, Plaintiffs filed Book Dog Books II, which identified additional works that Plaintiffs claimed Defendants infringed during the pendency of Book Dog Books I. (See Plaintiffs' Second Amended Complaint, No. 16-cv-7123 ("BDB II"), ECF No. 30.) This Court consolidated both cases for trial. (See Scheduling Order, BDB II, ECF No. 28.)

Scorched-earth litigation ensued, including numerous discovery motions, followed by appeals of determinations made by the Magistrate Judge, and multiple motions for summary judgment (followed by motions for reconsideration). As the trial date loomed, the parties filed nearly twenty motions in limine and five Daubert motions. The docket sheet for each case approaches 500 entries. And on the eve of trial, Plaintiffs discovered that Defendants had concealed certain business entities and profit distributions, prompting further litigation over sanctions and adverse inference instructions.

Trial began on March 19, 2018 and spanned three weeks. The parties presented hundreds of textbooks to the jury. Plaintiffs argued that this was "a case about a bookseller swarming in counterfeits ... who was caught, sued, and settled, [but] ignored the settlement and ignored the law." (Trial Tr. 40:11:14.) They averred that Defendants "knowingly purchased counterfeits from known counterfeit suppliers," "failed to maintain the kinds of records that would allow anybody to track ... what they did," and "destroy[ed] evidence when they thought that it might be useful." (Trial Tr. 40:16–24.) Plaintiffs offered evidence that Smyres knew or should have known that he was importing and selling counterfeits, but continued to do so with reckless abandon. (See, e.g., Trial Tr. 891:23–892:2.) Plaintiffs' financial expert testified that from 2012 to 2016, Defendants earned more than $53 million in profits and generated $783 million in revenue, and that from 2008 to 2016 Smyres personally received over $47 million. (Trial Tr. 1948:16–1950:19, 1975:23–1976:2.)

Defendants countered that their companies used robust procedures and training to detect counterfeit books, but, like all booksellers, were unable to stop counterfeits from slipping through the cracks. (See, e.g., Trial Tr. 3021:8–3022:25.) Defendants also argued that Plaintiffs failed to prove that some or all counterfeits at issue originated from the Defendants.

At the end of Plaintiffs' case-in-chief, Defendants moved for judgment as a matter of law. (Trial Tr. 2079:2–2084:5.) This Court reserved decision. (Trial Tr. 2088:18.) During its charge, this Court gave adverse inference instructions concerning the scope of Defendants' business and profits, and their failure to maintain records. (Trial Tr. 3123:6–3124:3.) The jury found that Defendants' infringement was willful and chose to award Plaintiffs the maximum statutory damages of $2 million for each of their 10 trademark claims, as well as $100,000 for each of their 142 copyright claims. The jury also determined that Defendants breached the Settlement Agreement.

DISCUSSION

I. Judgment as a Matter of Law

A. Legal Standard

Under Federal Rule of Civil Procedure 50, within 28 days of a verdict, a party "may file a renewed motion for judgment as a matter of law and may include an alternative or joint request for a new trial under Rule 59." Fed. R. Civ. P. 50(b). The movant must demonstrate that "the evidence, drawing all inferences in favor of the non-moving party and giving deference to all credibility determinations of the jury, is insufficient to permit a reasonable juror to find in [the opposing party's] favor." Lavin-McEleney v. Marist Coll., 239 F.3d 476, 479 (2d Cir. 2001). There must be "such a complete absence of evidence supporting the verdict that the jury's findings could only have been the result of sheer surmise and conjecture ... or pure guesswork." Provost v. City of Newburgh, 262 F.3d 146, 156 (2d Cir. 2001) (citations and quotation marks omitted). The movant's burden is "particularly heavy." Cash v. Cty. of Erie, 654 F.3d 324, 333 (2d Cir. 2011) (citation omitted). The court may not "assess the weight of conflicting evidence, pass on the credibility of the witnesses, or substitute its judgment for that of the jury." Black v. Finantra Capital, Inc., 418 F.3d 203, 208 (2d Cir. 2005) (citation omitted).

B. Distribution

Defendants contend that Plaintiffs failed to show evidence of distribution for 116 works, meaning Plaintiffs did not establish that Defendants sold at least one counterfeit copy of those works. This contention undergirded an earlier summary judgment motion. (See Mot. for Partial Summ. J. by Defs., BDB I, ECF No. 266; Report & Recommendation, BDB I, ECF No. 308.) This Court declined to adopt that portion of a Report and Recommendation that had concluded that Plaintiffs failed to show distribution for certain works. See John Wiley & Sons, Inc. v. Book Dog Books, LLC, 2016 WL 11468565, at *1, *4–5 (S.D.N.Y. Mar. 29, 2016). Noting that copyright infringement can be proven by circumstantial evidence, this Court held that "a reasonable jury could find that Book Dog's purchases from suppliers accused of dealing in counterfeit textbooks, failure to keep accurate records, and destruction of potentially infringing textbooks—combined with the counterfeit exemplars uncovered by the Publishers—support the inference that Book Dog sold the counterfeit textbooks." John Wiley & Sons, 2016 WL 11468565, at *5.

Defendants now resurrect that argument, contending that no reasonable jury could find sufficient evidence of distribution for 116 works. But "direct proof of actual dissemination is not required under the Copyright Act." Capitol Records, Inc. v. Thomas, 579 F.Supp.2d 1210, 1225 (D. Minn. 2008) (emphasis omitted). Indeed, in a case where there was no "direct proof" that the defendant had infringed, the Second Circuit determined that there was "a significant amount of circumstantial evidence that support[ed] the district court's ... finding of liability," including defendant's (1) failure to keep adequate records, (2) failure "to adequately check the authenticity of the goods it purchased," (3) failure "to adequately inquire" about the authenticity and sources of the goods purchased, and (4) return of merchandise after being sued. Fendi Adele, S.R.L. v. Ashley Reed Trading, Inc., 507 F. App'x 26 (2d Cir. 2013) (summary order).

Aside from direct evidence of distribution, the circumstantial evidence against Defendants was legion and harmonizes with the indicia of liability described in Fendi. Defendants admitted they sold at least some of the works. (Trial Tr. 3044:3–22.) The jury saw "counterfeit exemplars," or counterfeit works returned to Plaintiffs from Defendants' customers or found in Defendants' warehouses. (See Trial Tr. 315:11–13.) Plaintiffs presented emails in which Smyres and his staff recognized that they might have been buying counterfeits and had counterfeits in their inventory. (Trial Tr....