IP Law Daily Jury access to extraneous information taints copyright infringement verdict
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Monday, September 14, 2020

Jury access to extraneous information taints copyright infringement verdict

By Pamela C. Maloney, J.D.

A jury’s receipt of extraneous information regarding an engineer’s annual salary and refusal of a settlement offer necessitated the setting aside of a jury’s copyright infringement verdict in favor of Dassault Systèmes.

A jury verdict in favor of the developer of an automotive 3D design software system was set aside by the U.S. Court of Appeals for the Sixth Circuit because the jury access to extraneous information about the annual income earned by an engineer who operated a school that provided instruction in the use of the software, as well as his refusal to accept a settlement offer. However, the appellate court refused to set aside the jury’s finding that the school and its owner had not infringed on the developer’s trademark (Dassault Systèmes, SA v. Childress, September 10, 2020, Gibbons, J.).

Dassault Systèmes developed a computer software design program known as CATIA (Computer Aided Three Dimensional Interactive Application), which was used by industrial manufacturers engaged in automotive design and engineering. The company held a registered trademark on its CATIA mark since 1984 and a registered copyright in its CATIA Version 5 since 2003. Childress, an automotive design and engineering professional, operated a for-profit school in the Detroit area that provided instruction in CATIA software. In order to operate the CATIA software, Childress purchased two IBM workstations containing CATIA V4 software with permanent licenses from an IBM Business Partner that Dassault partially owned. The school also accepted and purchased a limited CATIA V5 software license and continued to pay paid the annual fee for that license until 2009 when Dassault filed a lawsuit against Childress and the school, alleging that Childress had copied the software from his original CATIA V5 license onto other school computers thereby infringing on Dassault’s copyright. Dassault also alleged that Childress had engaged in unfair competition and had infringed on its CATIA trademark. Childress countered with a number of affirmative defenses and counterclaims, including requests for declaratory judgments based on fair use and trademark ownership, abuse of process, and Sherman Act violations. Following trial, the jury found Childress liable for copyright infringement but not trademark infringement.

Childress moved for a new trial after learning that during deliberations, the jury had received extraneous information that Childress had turned down a settlement offer and that Childress made $750,000 per year and could afford to withstand a verdict against him on one of the two claims. The district court refused to hold an evidentiary hearing on Childress’s argument that the verdict had been affected by the extraneous information and denied his motion for a new trial. Childress appealed on the ground that the district court had erred in denying his motion for reconsideration of the ruling denying an evidentiary hearing and new trail based on the jury’s alleged receipt of extraneous information and in dismissing his abuse of process claim. Dassault filed a cross-appeal, arguing that the jury’s decision on the trademark infringement claim was against the weight of the evidence and challenging the district court’s denial of Dassault’s motion for judgment as a matter of law as to the trademark infringement claim.

Abuse of process. According to Childress, Dassault had improperly used both a complaint filed with the Department of Justice accusing the school of infringing on its CATIA copyright, which led to a grand jury investigation, and the threat of a copyright infringement lawsuit to coerce Childress into joining Dassault’s own Education Partner Program (EPP). In response, Dassault argued that Childress had not raised the EPP-coercion theory in response to the motion to dismiss the abuse of process claim but instead had claimed that Dassault’s actions were intended to put Childress out of business, which was not a cognizable "ulterior purpose" justifying an abuse of process claim. The Sixth Circuit found that a liberal reading of the complaint revealed that Dassault’s DOJ complaint and threat of a copyright claim set forth a distinct claim for coercion even if couched in terms that the alleged coercive actions were tantamount to an attempt to put the school out of business. In addition, Childress offered evidence that Dassault improperly had obtained secret grand jury information, improperly served a subpoena on the FBI without notice to Childress or court authorization, had misled the court about the materials it sought and obtained from the FBI, and had misled the court about how and when it learned of Childress’s alleged infringement. Taking together, the allegations and supporting evidence were adequate to show that of Dassault’s improper acts were directed at the collateral, ulterior objective necessary to support an abuse of discretion claim.

Extraneous information. The Sixth Circuit rejected the district court’s finding that there was no probability that the extraneous information regarding Childress’s rejection of a settlement and the amount of his annual salary had influenced the jury’s deliberations or verdict.A declaration by the juror who revealed that the jury had extraneous received information regarding Childress’s income stated that the juror who had obtained this information relied on it in concluding that splitting the verdict between the copyright and trademark claims would not have significant financial impact on Childress. Although juries could speculate as to a litigant’s ability to pay, the juror’s allegation that the extraneous information had affected at least one juror’s decision warranted an evidentiary hearing.

The Sixth Circuit also found that allegations that an entire jury had received extraneous evidence of settlement negotiations presented an obvious potential for improperly influencing the jury. According to the appellate court, it was hard to see how evidence of a settlement offer could be prohibited under the Federal Rules of Evidence but could be deemed non-prejudicial if leaked to a jury during deliberations. Thus, the district court erred in not granted a new trial on this issue.

Trademark infringement. Dassault’s trademark infringement claim was based on allegations that Childress had impermissibly used Dassault’s CATIA trademark as part of his website’s domain or URL—www.practicalcatia.com—and in the name of its business, which was presented on its website. On appeal, Dassault argued that the district court erred in dismissing its motion for judgment as a matter of law on this claim by focusing only on Childress’s use of CATIA as part of his business name instead of also considering its use as part of the domain name. According to Dassault, the domain name appeared whenever someone search CATIA in Google, which constituted a type of initial interest confusion that supported an infringement claim. However, Dassault failed to explain how any initial confusion would not be instantly dissipated without any harm once the consumer clicked on the domain name link and entered the website, which contained numerous indicators and a disclaimer that clarified the domain was not affiliated with Dassault and that CATIA was a registered trademark of Dassault. Thus, the district court did not err in denying Dassault’s motion for judgment as a matter of law on the trademark infringement claim, the Sixth Circuit ruled.

This case is Nos. 17-217517-2239 and 17-2416.

Attorneys: Glenn E. Forbis (Harness, Dickey & Pierce, P.L.C) for Dassault Systemes S.A. Mark Roy Bendure (Bendure & Thomas) for Keith Childress, d\b\a Practical Catia Training.

Companies: Dassault Systemes S.A.; Practical Catia Training

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