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Hamil America_ Inc. v. GFI


									Sheldon v. MGM, 309 U.S. 390, 1940 Can a court apportion damages in a copyright infringement suit? Issue Reasoning
The “in lieu” clause is not applicable since profits have been proved. o The purpose is to provide just compensation for the wrong, not to impose a penalty by giving profits not attributable to the infringement. The court to exercise its equity jurisdiction upon accounting to determine the profits which the infringer shall have made from the infringement. The result to be accomplished is a rational separation of the net profits so that neither party may have what rightfully belongs to the other. No trustee by virtue of wrongdoing. When such an apportionment has been fairly made, the copyright proprietor receives all the profits which have been gained through the use of the infringing material and that is all that the statute authorizes and equity sanctions. The Movie had distinctive profit-making features, apart from use of any infringing material: expert and creative operations involved in the production and direction. Testimony shows that in motion pictures success attributes to: o talent and popularity of stars and o their main drawing power; o artistic conceptions, o experts provision, and direction. The court can make an apportionment was untitled to avail itself of the experience of expert witnesses in the field.


Copyright act: Copyright proprietor gets: o actual damages suffered due to infringement plus profits made from the infringement, or o In lieu of actual damages as the court shall appear to be just Callaghan: when the copyrighted portions are so intermingled with the rest of the piratical work "that they cannot well be distinguished from it," the entire profits realized by the Δs will be given to П. Profits will be apportioned where it is clear that all the profits are not due to the use of copyrighted material. - Mathematical exactness is not required in apportionment. o Reasonable approximation to gain through testimony. Where there is a commingling of gains, a copyright infringer must abide the consequences, o unless he can make a separation of the profits so as to assure to the injured party all that justly belongs to him. Equity is concerned with making a fair apportionment so that neither party will have what justly belongs to the other.

MGM’s very profitable movie deliberately infringed Sheldon’s copyrighted play. Earlier licensing negotiations at a price of $30K had failed. Expert witnesses agreed that the portion of the profits attributable to the use of the copyrighted play was very small. The trial court awarded all net profits made from showing the movie amounting to $587.5K. The appeals court said there should be apportionment of profits and awarded 20% of net profits.

Held Proc Sheldon MGM

DC: Punitive and unjust award all net profits to Sheldon. o He’d be awarded the profits that the stars made by their dramatic talent and drawing power and what directors’ work contributes. o MGM should be credited with such factor they bought and paid for: actors, scenery, producers, directors, general overhead - No apportionment in copyright infringement cases. - This is a case of deliberate plagiarism: should account for profits as trustee. Price set for the picture rights lost $30,000.

Hamil America, Inc. v. GFI, 193 F.3d 92, 1999 What categories of expenses can be excluded when calculating an infringer’s profits? Issue Reasoning
Hamil can recover actual damages suffered and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. Overhead category: Entertainment expenses o Country club dues will not be singled out Reject infringer’s allocation based on % of net sales. Infringer has the BoP a sufficient nexus b/w each expense claimed and the sales of the unlawful goods. A willful infringer should not be allowed to subsidize the sale of legitimate goods with the sale of infringing goods. o A rule of liability which merely takes away profits from an infringement would offer little discouragement. No lost profits (too speculative) unless Hamil has convincing evidence of volume of lost sales.


The copyright owner can elect to recover either “actual damages and profits” or “statutory damages” Copyright owner BoP: infringer’s gross revenue Infringer BoP: o deductible expenses and o elements of profits attributable To factors other than the copyrighted work. Infringer's profits = gross sales of infringing goods – costs the infringer proves are attributable to the production and sales of those goods. Overhead, which does not assist in the production of the infringement should not be credited to the infringer; that which does, should be. Certain categories of general overhead expenses, relating to creating and maintaining a supervising staff and organization, should appropriately be deducted from a gross revenue. 2 step procedure for deducting overhead expenses from infringer’s profits: 1) Determine what overhead expense categories are actually implicated by the production of the infringing product. o Sufficient nexus b/w the category and production o Single items within category will not be singled out. o Rule to be applied with particular rigor in cases of willful infringement. o Extra scrutiny (Strong nexus) is given to the categories: each category is directly and validly connected to sale and production. 2) Fair, accurate, and practical method of allocating the implicating overhead to the infringement. (Infringer has BoP) o Presumptions drawn against infringer.

GFI copied Hamil’s copyrighted floral pattern and sold it at a much cheaper price to some common customers (like JC Penny). Hamil submitted proof of gross revenue. GFI submitted schedule of its deductible expenses o including country club dues.

Held Proc

Trial court erred in imposing a blanket prohibition. GFI must demonstrate a direct and valid nexus. Trial: Hamil wins – GFI deliberately copied the pattern. o Court rejected GFI’s schedule of overhead expenses: GFI would have overhead expenses anyways (Subsidy argument – see above) o the court asked GFI for the actual cost of the goods: what it actually cost GFI to manufacture the specific items o Lost profits too hypothetical. Will award only actual profits from sales. Entitled to damages for lost profits: The shared customers did not buy from Hamil when GFI’s lower cost fabric become available. The court erred in excluding in allocation of general overhead expenses in the calculation of profits Should not be entitled to lost profits: shared customers would not have purchased at Hamil’s above market prices.

Hamil GFI

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