D'Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc.
| Decision Date | 19 July 2021 |
| Docket Number | Civil No. 17-cv-747-LM |
| Citation | 561 F.Supp.3d 114 |
| Parties | D'PERGO CUSTOM GUITARS, INC. v. SWEETWATER SOUND, INC. |
| Court | U.S. District Court — District of New Hampshire |
Robert Allen, Pro Hac Vice, Pierce Bainbridge Beck Price & Hecht LLP, Lawrence Hadley, 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.
Plaintiff D'Pergo Custom Guitars, Inc. ("D'Pergo") brought suit against defendant Sweetwater Sound, Inc. ("Sweetwater"), alleging that Sweetwater's unauthorized use of one of D'Pergo's photographs violated the New Hampshire Consumer Protection Act ("the CPA"), RSA ch. 358-A. The court held a bench trial on D'Pergo's CPA claim in June 2021.1 For the reasons discussed below, the court finds and rules that D'Pergo failed to prove that Sweetwater engaged in an unfair or deceptive act as required by the CPA. See RSA 358-A:2. This order details the court's findings of fact and rulings of law. See Fed. R. Civ. P. 52(a).
D'Pergo manufactures and sells high-end, custom electric guitars. Unlike some other guitar manufacturers, D'Pergo manufactures nearly all its own parts and harvests many of the raw materials required for its guitars’ construction. D'Pergo relies on the meticulous nature of its guitars’ construction to generate sales—the company does little advertising, preferring instead to sell directly to consumers through positive word-of-mouth reviews. D'Pergo guitars generally sell for between $10,000 and $18,000. In 2017, the company sold approximately twenty guitars for total revenues of around $250,000.
Sweetwater is a large music and audio equipment retailer. In 2015, its revenues exceeded $430 million. Although Sweetwater exclusively sold professional audio equipment for a time, it began offering electric guitars for sale in the early 2000s. Unlike D'Pergo, Sweetwater does not manufacture its own guitars—it is a third-party retailer that sells guitars made by other companies. Sweetwater focuses on selling established and well-recognized guitars from brands like Fender and Gibson. It does not carry guitars made by small manufacturers like D'Pergo.
Both D'Pergo and Sweetwater operate their own websites. In 2003, D'Pergo's owner, Stefan Dapergolas, took a photograph of eight unfinished guitar necks and headstocks ("the Photo") and posted it on D'Pergo's website.2 Dapergolas testified that an electric guitar's neck is the instrument's most important aspect to guitar players. He further testified that guitar manufacturers use a unique, easily identifiable shape for their headstocks.
In the Photo, the necks are displayed lying face-up on a black surface. Seven necks are arranged in a semi-circle, and an additional neck lies horizontally just beneath the other seven. Many of the necks are made from different woods and are different colors. Neither the necks nor the headstocks bear the D'Pergo logo.
In 2004, Sweetwater copied the Photo from D'Pergo's website and began using it on a page of its own website called the "Electric Guitar Buying Guide" ("the Guide").3 Although the Guide contained a hyperlink to "Shop for Electric Guitars" at the bottom of the page, its primary purpose was to inform aspiring guitar players of the different components of electric guitars and how those components affect the instrument's sound, quality, and playing style. The Photo appeared in a section of the Guide titled "Guitar necks explained," which is approximately halfway through the Guide. This section contains information on the common types of wood used in electric guitar necks, the three primary methods for attaching the neck to the body of the guitar, and three standard neck "profiles" or shapes.
The Photo was relatively small in comparison to the rest of the Guide. It took up approximately a third of the Guide's width and was not much bigger than a thumbnail-sized image. The image quality was low—the necks were blurry and it was difficult to tell whether anything was written on the headstocks, such as a logo.
The Photo remained on the Guide from 2004 until January 2016. At trial, D'Pergo called two witnesses who testified to viewing the Photo on Sweetwater's website during this time: Jesse Lee Guanyu and Kamran Khan.
Guanyu first developed an interest in guitars in 2005, when he was around fifteen years old. In researching guitars on the internet, he learned that D'Pergo made high-quality, handmade, custom guitars. Guanyu testified that, when he later came upon Sweetwater's website and saw the Photo in the Guide, he "immediately" recognized the necks and headstocks in the Photo as being D'Pergo's. Guanyu further testified that, although he frequently used Sweetwater's website to obtain reliable information about electric guitars, the Photo's presence on Sweetwater's website caused him to completely lose interest in purchasing a D'Pergo guitar. Even though he knew Sweetwater did not sell D'Pergo guitars, Guanyu testified that the Photo caused him to infer Sweetwater and D'Pergo had a business affiliation.
In 2013, while at a friend's house, Guanyu happened upon a D'Pergo guitar. He testified that, after playing the instrument, he was "haunted" by the feel of its neck for weeks. Since that time, Guanyu has spent close to $200,000 on D'Pergo guitars. And, although Guanyu has seemingly had a personal relationship with Dapergolas since around the time he began purchasing his guitars in 2013, he did not tell Dapergolas until 2018—after this litigation began—that the Photo's presence on Sweetwater's website dissuaded him from buying D'Pergo guitars for several years.
Guanyu's testimony was not credible. First, Guanyu—who testified remotely via videoconferencing software—was clearly reading from notes or a script during his direct examination. Rather than looking directly into the camera when he answered questions, he consistently fixed his gaze on the left portion of his computer screen each time he began his answer. Second, Guanyu testified that he operates a small business purchasing and reselling boutique guitars, that he struggles to make a profit on guitars other than D'Pergo's, and that he resells D'Pergo's guitars with the company's blessing. His resale operation depends on remaining in D'Pergo's good graces, and the fact that he did not tell Dapergolas about his viewing of the Photo until after this lawsuit began strongly suggests his testimony was motivated by a desire to please Dapergolas. Third, Guanyu's testimony was internally inconsistent in certain respects. For example, given that Guanyu knew Sweetwater did not sell D'Pergo guitars, necks, or headstocks, his testimony that he was confused as to whether D'Pergo had a business affiliation with Sweetwater was not credible.
Like Guanyu, Kamran Khan had a close relationship with Dapergolas at the time of his trial testimony. Khan testified that he first became interested in guitars as a teenager in the 1970s. Since that time, he has owned over 150 guitars. Khan testified that he has purchased guitars from virtually every boutique guitar manufacturer in the U.S. and Europe. He constantly scours the internet—including Sweetwater's website—for information about high-end guitars.
Khan first learned about D'Pergo in 2008 while researching guitars online. Khan said that D'Pergo had an overall reputation for excellence among the online guitar community. However, Khan testified that he did not purchase a D'Pergo for several years largely because, in 2009, he saw the Photo on Sweetwater's website. He said that viewing the Photo on the Guide made him think that Sweetwater was selling D'Pergo guitars and necks, and that this supposed business arrangement between D'Pergo and a big-box retailer like Sweetwater caused him to question the quality of D'Pergo's guitars.
Like Guanyu, Khan contacted Dapergolas to purchase a guitar after happening upon a used D'Pergo in 2014. Khan currently owns three D'Pergo guitars and has commissioned a fourth. Since 2014, Khan has spent $80,000 on D'Pergo guitars. He has also stayed overnight at Dapergolas's New Hampshire home.
Khan's testimony—that the Photo's presence on Sweetwater's website made him think Sweetwater was selling D'Pergo necks—was not believable. Khan testified that he conducts extensive online research on guitars and that he has purchased over 150 guitars. He also testified to regularly viewing Sweetwater's website. Given Khan's voracious appetite for online information about guitars, the notion that he would simply assume Sweetwater was selling D'Pergo necks without reviewing Sweetwater's website to confirm or deny that assumption is implausible. Moreover, Khan is a repeat and high-spending D'Pergo customer who has a clear motivation to offer favorable testimony. He also has a personal relationship with Dapergolas, the company's owner.
In addition to Guanyu and Khan, D'Pergo called Julien Kasper to testify at trial. Like Guanyu and Khan, Kasper had a personal relationship with Dapergolas. Kasper is a friend of Dapergolas and a professor at Berklee College of Music. He first met Dapergolas in 2001 at a music festival in New Hampshire, where Dapergolas asked him to test and give feedback on D'Pergo's guitars. Kasper has tested, analyzed, and given extensive feedback on several D'Pergo guitars over the years. In exchange, Dapergolas has given him at least one guitar valued at approximately $12,000. One of D'Pergo's guitar models is named after Kasper – the "JK Classic."
In December 2014, Kasper was playing a D'Pergo guitar at a performance. Kasper testified that an audience member approached him while...
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