Pfanenstiel Architects, Inc. v. Chouteau Petroleum Co.

• Decision Date: 29 October 1992
• Docket Number: No. 91-3230,91-3230
• Citation: 978 F.2d 430
• Parties: 1992 Copr.L.Dec. P 27,003, 24 U.S.P.Q.2d 1691 PFANENSTIEL ARCHITECTS, INC., Appellant, v. CHOUTEAU PETROLEUM COMPANY; Norbert L. Smith; Earl C. McCamis; Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 430

978 F.2d 430

1992 Copr.L.Dec. P 27,003, 24 U.S.P.Q.2d 1691

PFANENSTIEL ARCHITECTS, INC., Appellant, v. CHOUTEAU PETROLEUM COMPANY; Norbert L. Smith; Earl C McCamis; Appellees.

No. 91-3230.

United States Court of Appeals Eighth Circuit.

Submitted Apr. 14, 1992.

Decided Oct. 29, 1992.

Richard L. Martin, Kansas City, Mo., argued, for appellant.

Dennis James Owens, Kansas City, Mo., argued, for appellees.

Before RICHARD S. ARNOLD, Chief Judge, ROSS, Senior Circuit Judge, and LOKEN, Circuit Judge.

LOKEN, Circuit Judge.

In this copyright case, Pfanenstiel Architects, Inc. ("PAI"), appeals the district court's ¹ refusal to award actual damages, in addition to the infringer's profits, against competing architects who infringed PAI's drawings. PAI claims that it is entitled to that award because the defendant architects are jointly and severally liable for actual damages that the district court did award against a codefendant who defaulted. The district court's finding that PAI failed to prove its actual damages against the nondefaulting defendants is neither clearly erroneous nor precluded by the inconsistent judgment entered against the defaulting defendant. Accordingly, we affirm.

I.

In 1986, Dallas-based PAI developed architectural drawings for "fast lube" automobile service shops in Texas and St. Louis for American Ten-Minute Oil Change, Inc. ("AmeriTen"). PAI billed AmeriTen $110,000 for this work but only received a retainer of $500. PAI reserved all rights in the drawings but did not register its copyright until September 1988. AmeriTen kept a set of the drawings, ostensibly for use in attracting financial backers.

In late 1986 or 1987, AmeriTen entered into a contract with defendant Chouteau Petroleum Company in which Chouteau agreed to construct and lease to AmeriTen two fast lube shops in greater Kansas City. Chouteau retained Kansas City-based McCamis & Smith Architects ("M & S") for this project. ² AmeriTen supplied M & S with AmeriTen's "standard prototype architectural drawings." The drawings were "complete and ready for construction," but they bore no copyright symbol and the architect's title block was blank. As was his practice, Smith asked Ralph Kauffmann of AmeriTen if he had permission to use the drawings. Kauffmann replied, "these are drawings that I developed in California and that we had some help on to draw them up in Dallas, just like we want you to do for us." Kauffman never answered Smith's question as to who drew the plans but did state in a July 1987 letter:

Although I did not draw the original plans or plans that reflect how we had evolved, the concept and changes in design are at my direction.... I designed and constructed the second oil change unit some 12 years ago in the pacific Northwest and American holds the rights to these plans and specifications.

After modifying the drawings to meet local building code conditions and affixing its own architectural seal, M & S submitted the revised drawings to Chouteau and construction began on the two lube shops. PAI learned of the new buildings and asked M & S for a copy of the architectural plans used. After receiving an independent architect's opinion that the M & S drawings were copies of PAI's earlier work for AmeriTen, PAI brought this action for copyright infringement against Smith, his partner Earl McCamis, and Chouteau. ³ PAI sought to recover damages of $30,996--the $10,996 M & S had billed Chouteau plus $20,000 in actual damages--and attorney's fees.

Chouteau defaulted but McCamis and Smith defended the suit pro se. After a bench trial at which McCamis, Smith, and Walter Pfanenstiel of PAI testified, the district court entered a default judgment for $30,996 plus attorney's fees of $7,935.45 against Chouteau pursuant to Fed.R.Civ.P. 55. It held McCamis and Smith liable for their net profit from the drawings, which it found to be $3,000, but not liable for PAI's actual damages nor its attorney's fees. In denying PAI's Rule 59 motion to amend this judgment, the district court explained:

Plaintiff's motion argues that the court should not have found that defendants were innocent infringers under 17 U.S.C. § 405(b). This is a non-issue because the court did not specifically find that defendants McCamis and Smith were innocent infringers. The court found that they had infringed on plaintiff's copyright, but that the only damages which were proven to the court's satisfaction was the amount of $3,000.00 in lost profits. The other damages sought by plaintiff were too speculative to award.

On appeal, PAI argues that the district court erred in failing to hold McCamis and Smith liable for PAI's actual damages of $20,000.

II.

Under § 504(b) of the Copyright Act, 17 U.S.C. § 504(b), "[t]he copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages." The district court found that the evidence supporting PAI's claim for $20,000 in actual damages was "too speculative" to support an award against McCamis and Smith. We review such a damage finding under the clearly erroneous standard. See Jackson v. United States, 750 F.2d 55, 56 (8th Cir.1984).

The Copyright Act allows recovery of actual damages, in addition to the infringer's profits, in recognition that some types of infringement inflict more harm to the copyright owner than the benefit reaped by the infringer, for example, where the infringer's minimal use forecloses a broader market, see Cream Records, Inc. v. Jos. Schlitz Brewing Co., 754 F.2d 826, 827-28 (9th Cir.1985), or where the copyright owner's provable profit margin is greater than the infringer's, see Robert R. Jones Assocs., Inc. v. Nino Homes, 858 F.2d 274, 281 (6th Cir.1988). Here, there was no evidence that M & S's infringing use of PAI's drawings in Kansas City deprived PAI of any business other than the infringing use itself--the furnishing of the drawings to Chouteau for the architect's fee on the projects. Therefore, to be awarded actual damages, PAI must prove that its profit on this business would have been greater than M & S's profit of $3,000, which the district court awarded. See Abeshouse v. Ultragraphics, Inc., 754 F.2d 467, 469-71 (2d Cir.1985). ⁴

Walter Pfanenstiel testified that the $20,000 figure represented the architectural fee he would have charged "to build the two buildings here in Kansas City and also to design and draw a third building which was not built." The figure was "based on the average of the units we did there, how much we had spent on the ones we had done in Dallas, and the ones we had done in St. Louis." There was no evidence establishing PAI's normal profit margin for comparable work or even demonstrating that the $20,000 represented profit and not gross revenue. There was no evidence that Chouteau would have paid such a fee, when M & S's entire architectural fee for this work had been less than $11,000. There was no evidence demonstrating that the $20,000 figure did not include a portion of the unpaid PAI fees previously billed to AmeriTen, which would not be allowable damages for M & S's infringement. Based upon this barren record, we agree with the district court that PAI's claim of actual damages over and above the...