IP Law Daily Warner Bros. $2.5M infringement award affirmed
Wednesday, November 2, 2016

Warner Bros. $2.5M infringement award affirmed

By Greg Hammond, J.D.

An award of more than $2.5 million in damages for the unauthorized use of Warner Bros.’ copyrighted images from various films was not clearly erroneous, the U.S. Court of Appeals in St. Louis has concluded. In affirming the damages award, the appellate court concluded that the lower court had properly considered a substantial damages award necessary to deter future infringement and provide sufficient restitution to Warner Bros. because the infringer did not cease the infringing activity during the decade-long course of the litigation, and the amount awarded—$10,000 per infringement—was well within the statutory range of $750 to $30,000 (Warner Bros. Entertainment, Inc. v. X One X Productions, November 1, 2016, Gruender, R.).

X One X Productions, AVELA, Inc., and Art-Nostalgia.com, Inc. (collectively, AVELA), appealed a permanent injunction prohibiting them from licensing images from the films "Gone with the Wind" and "The Wizard of Oz," as well as the short films "Tom and Jerry." AVELA licensed images from these films for use on a variety of consumer products. The district court granted statutory damages under the Copyright Act in the amount of $10,000 per infringed copyright, amounting to a total award of $2.57 million. In addition, the district court granted summary judgment on the trademark infringement and unfair competition claims, finding that Warner held registered trademarks in words and phrases from the films and common law trademark in the film characters. AVELA appealed.

Statutory damages. AVELA argued that the $2.57 million statutory damages award was disproportionate to the offense, insufficiently reasoned, and in violation of the appellate court’s previous appeal. The appellate court rejected these arguments, first finding that the award of $10,000 per infringed work was not clearly erroneous. Over the decade-long course of this litigation, AVELA did not cease the infringing activity at any time. The appellate court consequently concluded that the district court was not clearly erroneous in considering a substantial damages award necessary to deter future infringement and provide sufficient restitution to the copyright holder. The amount awarded was also well within the statutory range of $750 to $30,000.

The district court also did not contravene the appellate court’s earlier decision by awarding damages on a per work basis. The appellate court had affirmed in the prior appeal that AVELA infringed each of Warner’s copyrights in the films.

Judicial admission, estoppel. AVELA next argued that Warner made a judicial admission that it would not need to pursue its trademark and unfair competition claims if it prevailed on its copyright claims, and that judicial estoppel applied to this statement. However, this statement did not admit anything, according to the appellate court, much less add anything of evidentiary value. Instead, the statement made a conditional prediction that if the district court rendered final judgment on its copyright claims and the Eighth Circuit affirmed that judgment, then it could prevent the courts from having to consider the trademark claims because Warner would not need to pursue them to obtain the relief it wanted. The doctrine of judicial admission therefore did not apply.

In addition, the statement did not fulfill the criteria for judicial estoppel, because: (1) Warner’s current position was not clearly inconsistent with its prior statement; (2) the statement was not an argument it persuaded the district court to accept; and (3) Warner derived no unfair advantage and imparted no unfair detriment by pursuing its trademark claims.

Functionality, fair use. AVELA also contended that Warner could not maintain a viable trademark claim because either the key elements of the trademark were functional, or AVELA’s use of the marks constituted fair use. These defenses, however, were never raised in the trial court and were therefore waived.

Likelihood of confusion. The appellate court rejected AVELA’s argument that summary judgment was erroneously granted because the likelihood of confusion factors were quintessential jury questions. AVELA challenged the strength of the marks and actual confusion. However, its argument regarding the strength of the marks was largely self-defeating, according to the appellate court, because AVELA asserted that the film titles and images were descriptive because they immediately alerted the purchaser to the nature of the product. This aptly described a strong trademark, the court concluded. Further, given the strength of the other factors the district court considered in favor of Warner, the lack of evidence of actual confusion did not even approach tilting the entire balance in favor of reversal, the court determined.

The case is No. 15-3728.

Attorneys: Frederick J. Sperling (Schiff Hardin LLP) and Nick E. Williamson (Bryan Cave LLP) for Warner Bros. Entertainment, Inc., Warner Bros. Consumer Products, Inc., and Turner Entertainment Co. Michael E. Bub (Paule, Camazine & Blumenthal, PC) for X One X Productions, AVELA, Inc., and Art-Nostalgia.Com, Inc.

Companies: Warner Bros. Entertainment, Inc.; Warner Bros. Consumer Products, Inc.; Turner Entertainment Co.; X One X Productions; AVELA, Inc.; Art-Nostalgia.Com, Inc.

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