D'Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc.

• Citation: 516 F.Supp.3d 121
• Decision Date: 28 January 2021
• Docket Number: Civil No. 17-cv-747-LM
• Court: U.S. District Court — District of New Hampshire
• Parties: D'PERGO CUSTOM GUITARS, INC v. SWEETWATER SOUND, INC.

516 F.Supp.3d 121

D'PERGO CUSTOM GUITARS, INC

v.SWEETWATER SOUND, INC.

Civil No. 17-cv-747-LM

United States District Court, D. New Hampshire.

Signed January 28, 2021

Brendan Michael Shortell, Pro Hac Vice, Lambert & Associates, Gary Ervery Lambert, Lambert & Associates, Juliet DeFrancisco, Pro Hac Vice, Lambert Shortell and Connaughton, Boston, MA, Robert Allen, Pro Hac Vice, Pierce Bainbridge Beck Price & Hecht LLP, Thomas Patrick Burke, Jr., Glaser Weil Fink Howard Avchen & Shapiro LLP, Los Angeles, CA, Robert J. Steiner, Steiner Law Office PLLC, Concord, NH, for D'Pergo Custom Guitars, Inc.

Edward J. Sackman, Hilary Holmes Rheaume, Lauren Pritchard, Matthew John Saldana, Bernstein Shur PA, Manchester, NH, Larry Barnard, Pro Hac Vice, Carson LLP, Fort Wayne, IN, Richard C. Gagliuso, Gagliuso & Gagliuso PA, Merrimack, NH, for Sweetwater Sound, Inc.

ORDER

Landya McCafferty, United States District Judge D'Pergo Custom Guitars, Inc. ("D'Pergo") sues Sweetwater Sound, Inc. ("Sweetwater") for copyright infringement and violations of the New Hampshire Consumer Protection Act, RSA ch. 358-A. D'Pergo alleges that Sweetwater used a copyrighted photograph of D'Pergo’s trademarked custom guitar necks and headstock to promote and sell Sweetwater products on its website.

Presently before the court are the parties’ competing jury instructions (doc. nos. 162 and 165), which put at issue the proper interpretation of the damages provision of the Copyright Act, 17 U.S.C. § 504. Also pending are three motions in limine, filed by Sweetwater, to admit or exclude evidence (doc. nos. 159, 160, and 161). The court resolves these motions, and the jury instructions issue, as outlined below.

BACKGROUND

The following facts, drawn from the court's order on the parties’ cross-motions for summary judgment (doc. no. 139), are recited for the limited purpose of providing the reader with necessary context.

D'Pergo manufactures and sells custom guitars. In 2003, Stephan Dapergolas, D'Pergo’s owner, created a photograph showcasing a number of D'Pergo’s unique guitar necks and headstock (the "Photograph"), which D'Pergo published to its website. D'Pergo used the Photograph on its website from 2003 until 2006.

Sweetwater is a retailer that sells musical instruments, including guitars, through its website. In 2004, Sweetwater copied the Photograph and published it on its website. More specifically, Sweetwater used the photograph in its "Electric Guitar Buying Guide" (the "Buying Guide"), in a section titled "Guitar necks explained." The end of the Buying Guide features several guitars from various manufacturers for purchase—none of which are D'Pergo guitars—as well as a hyperlink to "Shop for Electric Guitars."

In January 2015, Dapergolas learned that Sweetwater was using the Photograph in the Buying Guide. D'Pergo later applied for and was granted a copyright registration for the Photograph from the Copyright Office. In January 2016, D'Pergo contacted Sweetwater about the Photograph. Sweetwater then removed the Photograph from its website. D'Pergo subsequently trademarked its headstock design depicted in the Photograph. In December 2017, D'Pergo brought the instant lawsuit.

DISCUSSION

The parties submit competing jury instructions (doc. nos. 162 and 165) on the issue of whether D'Pergo must establish a causal nexus between Sweetwater's "gross revenue" and its copyright infringement in order to obtain an award of profits. 17 U.S.C. § 504(b). In addition, Sweetwater moves in limine: (A) to exclude all evidence of Sweetwater's "indirect" profits (doc. no. 161); (B) or alternatively, to exclude evidence of Sweetwater's profits from more than three years before D'Pergo commenced this action (doc. no. 160); and (C) to admit evidence of the parties’ respective conduct after they learned of the Photograph's presence on Sweetwater's website (doc. no. 159).

The court addresses these matters in turn, beginning with the jury instructions issue.

I. Jury Instructions (Causal Nexus)

The court has previously determined that D'Pergo is entitled to judgment as a matter of law on its copyright infringement claim (doc. no. 139). The only issue left for the jury to decide is the extent to which D'Pergo is entitled to damages.

The damages provision of the Copyright Act is found at 17 U.S.C. § 504. Subsection (a) of that statute provides that a copyright infringer is liable for "the copyright owner's actual damages and any additional profits of the infringer, as provided in subsection (b)." 17 U.S.C. § 504(a). Subsection (b) consists of two sentences. The first sentence states that the copyright owner may recover actual damages resulting from the infringement plus "any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages." 17 U.S.C. § 504(b). The second sentence states: "In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work." Id.

A "highly literal interpretation" of § 504(b) ’s second sentence, considered in isolation from its first sentence, would permit recovery of all an infringer's gross revenue, even those portions that are not attributable to the infringement. On Davis v. The Gap, Inc., 246 F.3d 152, 160 (2d Cir. 2001). For example, under such an interpretation, a "plaintiff in a copyright action against a multidivision, multi-product company such as General Mills, would need to do nothing more than offer an overall gross revenue number—like $11.5 billion—and sit back." Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 711 (9th Cir. 2004).

Seizing on this highly literal interpretation, D'Pergo seeks to instruct the jury that, in order for it to obtain a disgorgement of profits, it need only present evidence of Sweetwater's gross revenues, which triggers a rebuttable presumption that all of those gross revenues are entirely attributable to the infringement. Although D'Pergo defends its position by emphasizing its fidelity to the statutory text, D'Pergo’s requested instruction would allow the jury to award profits without finding that any of Sweetwater's profits are "attributable to the infringement." 17 U.S.C. § 504(b). By contrast, Sweetwater vies for an instruction that would require D'Pergo to prove a causal relationship between the infringement and the gross revenue number it presents in order to obtain an award of profits.

While the court is not prepared, at this time, to inform the parties of the precise jury instruction on this issue that it will use at trial, it is clear that § 504(b) must be interpreted as requiring D'Pergo to show that the gross revenue figure it presents has "a legally significant relationship to the infringement."

Real View, LLC v. 20-20 Techs., Inc. 811 F. Supp. 2d 553, 560-61 (D. Mass. 2011) (quoting Polar Bear, 384 F.3d at 711 ). The jury will be instructed, in some fashion, that, in order to award D'Pergo profits, it must conclude that D'Pergo established a causal nexus between Sweetwater's infringement and the gross revenue figure D'Pergo presents.

Such an instruction is compelled by the sheer weight of authority. The First, Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, and Federal Circuits have all concluded, in some form, that a copyright owner must show a causal relationship between the infringement and the gross revenue figure presented. See Jane Doe No. 1 v. Backpage.com, LLC, 817 F.3d 12, 28-29 (1st Cir. 2016) (complaint failed to plausibly allege entitlement to infringer's profits under § 504(b) because it failed to "link" the infringement "to some discrete portion of the publisher/infringer's profits"); On Davis, 246 F.3d at 160 ("[T]he term ‘gross revenue’ under the statute means gross revenue reasonably related to the infringement, not unrelated revenues."); William A. Graham Co. v. Haughey, 646 F.3d 138, 141 (3d Cir. 2011) (to succeed on claim for infringer's profits, "a plaintiff is first required to prove the defendants’ gross revenues over the course of the relevant time period, and then to establish a causal nexus between the infringement and the profits sought"); Bonner v. Dawson, 404 F.3d 290, 294 (4th Cir. 2005) (explaining that " ‘gross revenue’ refers only to revenue reasonably related to the infringement"); Powell v. Penhollow, 260 Fed. Appx. 683, 686 (5th Cir. 2007) ("As the copyright owner, Powell bears the burden of putting on evidence of Defendants’ gross revenue attributable to the infringement. The burden then shifts to Defendants to produce evidence of deductible expenses." (citations omitted)); Thoroughbred Software Int'l v. Dice Corp., 488 F.3d 352, 360 (6th Cir. 2007) ("To assess the infringer's profits, the copyright owner must first show evidence of the infringer's gross revenue attributable to the infringement. Then the burden shifts to the defendant...." (citations omitted)); Taylor v. Meirick, 712 F.2d 1112, 1122 (7th Cir. 1983) (explaining that "gross revenue" in § 504(b) means "gross revenues from the sale of the infringing" product); Andreas v. Volkswagen of Am., Inc., 336 F.3d 789, (8th Cir. 2003) ("The plaintiff has the burden to demonstrate a nexus between the infringement and the ... profits before apportionment can occur." (quotation and brackets omitted)); Polar Bear, 384 F.3d at 711 ("[A] copyright owner is required to do more initially than toss up an undifferentiated gross revenue number; the revenue stream must bear a legally significant relationship to the infringement."); Univ. of Colo. Found., Inc. v. Am. Cyanamid Co., 196 F.3d 1366, 1375 (Fed. Cir. 1999) (copyright owner has the burden to show that infringer's gross revenues had a "connection" to the infringement).

Despite the crushing weight of this authority, D'Pergo supports its requested jury instruction by asserting...