OPINION AND ORDER
JOAN HUMPHREY LEFKOW, District Judge.
Plaintiff, Michael Bergt ("Bergt"), filed suit against defendants, McDougal Littell, a division of Houghton Mifflin Company ("McDougal"), and R.R. Donnelley & Sons Company ("Donnelley") (together, "defendants") for copyright infringement and fraud.
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). To determine whether any genuine fact exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Id. While the court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), where a claim or defense is factually unsupported, it should be disposed of on summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Id. at 323, 106 S.Ct. 2548. In response, the nonmoving party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324, 106 S.Ct. 2548; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir.2000).
Bergt is a professional painter and sculptor who resides in New Mexico. He created the painting Primavera ("the painting") in 1995 and registered it with the U.S. Copyright Office as #VA 1-340-751 in 2006. McDougal is a textbook publisher with its principal place of business in Evanston, Illinois. Donnelley is a full-service printer with its global headquarters in Chicago, Illinois.
The painting can be found on page 669 of the textbook, accompanying the story "Daughter of Invention" by Julia Alvarez. It is a full-page, color reproduction. Additionally, the painting is reproduced on a portion of page 669 of the teacher's edition and is the subject of a mini-lesson on the same page.
As of August 6, 1998, more than 272,000 copies of the 1997 edition of The Language of Literature, Grade 9 had been printed. Around this time, McDougal had forecasted that the textbook would sell approximately 310,000 copies. Defendants have printed and distributed over 1.3 million copies of the student and teacher editions of the textbook containing the painting. Bergt received notice of the fact that McDougal continued to reproduce his painting in the textbook in early 2006 when contacted by his current attorney, Mr. Chris Seidman, who inquired about Bergt's license with McDougal as part of research for a similar case. Bergt filed this case shortly thereafter.
I. Bergt's Motion for Partial Summary Judgment on McDougal's and Donnelley's Liability for Copyright Infringement
Under the Copyright Act of 1976, codified at 17 U.S.C. § 101 et seq., "the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: (1) to reproduce the copyrighted work in copies or phonorecords... (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending." 17 U.S.C. § 106. "Anyone who violates any of the exclusive rights of the copyright owner as provided by section 106 ... is an infringer of the copyright or right of the author, as the case may be." Id. § 501.
It is undisputed that Bergt owns the copyright for the painting, which is registered with the U.S. Copyright Office as # VA 1-340-751. Ex. 3 to Pl.'s L.R. 56.1 Stmt. All parties agree that McDougal received a license to reproduce the painting, although they disagree on whether it was limited or not. If the license was indeed limited to 40,000 copies, as Bergt claims, defendants have infringed Bergt's copyright as they have printed and distributed over 1.3 million copies of the textbook containing the painting. If the license was not limited, no copyright infringement has occurred. As discussed below, because the scope of the license remains in dispute, granting summary judgment on the issue of liability is inappropriate.
Bergt alleges that he provided McDougal with an oral license, limited to a print run of 40,000, during a telephone conversation with an unidentified McDougal employee. He further claims that the exchange of letters between McDougal and DC Moore limited the license in the same manner.
A. Oral License
To support his argument that the license was limited in scope during a telephone conversation with an unidentified McDougal employee, Bergt relies on a portion of his own deposition testimony. In his deposition, Bergt stated that McDougal "told [him] the print run was 40,000.... That was in the telephone conversation" with the unidentified McDougal employee. Ex. 1 to Pl.'s L.R. 56.1 Stmt at 114:20-22, hereinafter "Bergt Dep."; id. at 94:14-20. This is the only evidence Bergt presents with respect to the occurrence and details of this conversation.
Defendants counter Bergt's evidence with other portions of his deposition relating to the same phone conversation.
Id. at 82:22-83:2. Bergt did not recall the McDougal employee having said anything else. Id. at 83:3-4. Bergt agreed to the use. Id. at 83:6-8 ("I said, you know, `If it is a textbook for kids, it sounds like a good source for me.' I said, `It seems like a good application.'"). Bergt recalled having a conversation about the format McDougal needed for reproduction purposes and referring the McDougal employee to DC Moore, id. at 83:10-84:5, 84:15-85:9, but when asked if the McDougal employee said anything else about the use of the painting, he stated "Not that I recall." Id. at 83:3-4.
Only later in the deposition, after defendants' attorney specifically mentioned the 40,000 figure in relation to Bergt's initial conversations with his attorney, did Bergt state that the 40,000 print run term was part of the oral agreement:
Id. at 94:14-95:4.
Construing Bergt's deposition testimony in the light most favorable to defendants, the non-moving party, and drawing all reasonable inferences in their favor, the court is left with inconsistent versions of the telephone conversation, one of which would negate defendants' liability for copyright infringement. Determining which version of Bergt's testimony to credit is not the role of the court at the summary judgment stage. Anderson, 477 U.S. at 255, 106 S.Ct. 2505 ("Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for a directed verdict."); Payne v. Pauley, 337 F.3d 767, 770 (7th Cir.2003) ("On summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder."). Thus, a genuine issue of material fact remains as to whether the license agreed to by Bergt and an unidentified McDougal employee limited use of the painting to only 40,000 copies.
B. Exchange of Letter and Invoice Between McDougal and DC Moore
Bergt also relies on the August 6, 1998 letter from Fantasia to Paci, which requested rights "for a print run of 40,000" to support his claim that the license was limited in scope. See August 6 Letter. Although DC Moore's invoice did not contain this language, Bergt states that it
In attempting to demonstrate that the DC Moore invoice included the 40,000 copy limitation, Bergt relies heavily on this court's order in ruling on an earlier motion to dismiss. See Bergt v. McDougal Littell, No. 06 C 4645, 2006 WL 3782919 (N.D.Ill. Dec. 21, 2006). The court found that "since there is nothing in the [invoice] that manifests an intention other than to accept McDougal's offer as stated in its letter, DC Moore's [invoice] can only be fairly interpreted at this stage of the proceedings as an unequivocal acceptance." Id. at *3.
Reliance on this court's decision on a motion to dismiss is inappropriate at the summary judgment stage. Different standards apply to a Rule 12(b)(6) motion to dismiss and a Rule 56(c) motion for summary judgment. See McMillan v. Collection Profls, Inc., 455 F.3d 754, 760 (7th Cir.2006) (summary judgment standard is "a different and significantly more demanding standard than the Rule 12(b)(6) standard"). In deciding a Rule 12(b)(6) motion, the court accepts as true all wellpleaded facts alleged in the complaint and draws all reasonable inferences from those facts in favor of the plaintiff. Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir.1999). By contrast, in considering a Rule 56(c) motion for summary judgment, the court must construe all facts in a light most favorable to the non-moving party, in this case, defendants, and draw all reasonable inferences in their favor. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. Thus, the court must now reexamine whether DC Moore's invoice included the 40,000 print run limitation using the appropriate summary judgment standard.
Bergt relies on McDougal's request letter and Responses to Plaintiff's First Requests for Admissions as evidence that the license included the 40,000 print run limitation. Exs. 4 and 5 to Pl's L.R. 56.1 Stmt. Defendants do not dispute that McDougal's letter contained the words "print run of 40,000." Defs.' Resp. to Pl.'s L.R. 56.1 Stmt. ¶ 11-12. Instead, they argue that the DC Moore invoice, which does not contain any print run limitation, confirmed the oral license that Bergt and the unidentified McDougal employee had already agreed to. It was not, therefore, an acceptance of the terms contained in the August 6 letter. Id. ¶ 14. Bergt did not testify to having communicated the 40,000 print run limit to DC Moore:
Bergt Dep. 86:24-87:4, 87:10-18. Bergt does allege, however, that Ms. Paci's letter "confirm[ed] Plaintiff's grant of rights to reproduce the painting that McDougal had requested." Pl.'s Mem. in Support of Mot. for Partial Summary Judgment at 3. Taking
As the court cannot conclude at this stage in the proceedings whether the oral license was limited in scope, defendants' reliance on the invoice's lack of mention of a print run limitation similarly cannot be disregarded. The issue of whether reproduction of the painting was limited in scope to 40,000 copies based on the exchange of letters remains in dispute.
II. McDougal's Motion for Partial Summary Judgment
A. Bergt's Fraud Claim
McDougal seeks summary judgment on Bergt's state law claim for fraud. McDougal bases its motion on several theories: (1) there is no genuine issue of material fact as to Bergt's alleged reliance, McDougal's knowledge that the misrepresentation was false, and damages due to the fraud; (2) Bergt's fraud claim is preempted by the Copyright Act; and (3) Bergt's fraud claim is time-barred.
Under Illinois law, to establish fraud, a plaintiff must show "(1) a false statement of material fact; (2) known or believed to be false by the party making it; (3) intent to induce the other party to act; (4) action by the other party in justifiable reliance on the truth of the statement; and (5) damage to the other party resulting from such reliance." Hefferman v. Bd. of Trs. of Ill. Cmty. Coll. Dist. 508, 310 F.3d 522, 525 (7th Cir.2002) (citation omitted) (internal quotation marks omitted). A plaintiff must prove the elements of fraud by clear and convincing evidence. See Extra Equipamentos E Exportacao Ltda. v. Case Corp., 541 F.3d 719, 724 (7th Cir. 2008) (collecting Illinois fraud cases).
Bergt's amended complaint specifically alleges that, in its August 6, 1988 letter to DC Moore, McDougal falsely represented that it sought to use the painting in the textbook for a print run of 40,000, when it knew at the time that its actual use would greatly exceed that number. The amended complaint further alleges that McDougal intended to induce Bergt to accept the
McDougal argues that, with discovery complete, Bergt cannot demonstrate by clear and convincing evidence the required elements of fraud based on any alleged statement in the August 6, 1998 letter. Specifically, McDougal focuses on Bergt's inability to demonstrate McDougal's state of mind in making the misrepresentation, Bergt's reliance on the truth of the statement, and damages resulting from Bergt's reliance. Bergt, however, responds to McDougal's motion with a new theory of fraud. He alleges that, during the telephone conversation Bergt had with an unidentified McDougal employee before August 6, 1998, McDougal made a false statement with respect to the intended print run, intending to induce Bergt's reliance, and that Bergt in fact relied on this statement in agreeing to the $200 fee. Pl.'s Resp. to McDougal's L.R. 56.1 Stmt. ¶ 1-10. The facts needed to establish this claim surfaced at Bergt's deposition, during which, as discussed in Section II.A, Bergt testified inconsistently as to whether the conversation included limiting use of the painting to a print run of 40,000.
Bergt's new attempt to base his fraud claim on the conversation he had with an unidentified McDougal employee fails. Allegations of fraud are subject to the heightened pleading standard of Rule 9(b), which requires a plaintiff to "state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). This means that Bergt must be able to aver the "who, what, when, where, and how: the first paragraph of any newspaper story." DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990). While his recollection of the conversation may be specific enough to establish an oral contract, Bergt cannot meet the heightened standards required to make out a fraud claim. He has not specifically identified the McDougal employee with whom he had the conversation or when the conversation took place. See Pl.'s Resp. to McDougal's L.R. 56.1 Stmt. ¶ 1 ("In 1998, Plaintiff received a phone call from a McDougal employee....") Bergt did, however, meet the Rule 9(b) requirement for fraud with respect to the August 6, 1998 letter. Bergt, 2006 WL 3782919, at *4. As a result, this court will consider whether summary judgment is appropriate based on the particulars pleaded in the amended complaint.
With regard to the framework alleged in the amended complaint, McDougal has established, and Bergt has not countered, that Bergt could not have justifiably relied on the August 6, 1998 letter in deciding to grant McDougal a license for $200. Bergt did not see the August 6, 1998 letter containing the representation that McDougal would use the image for a print run of 40,000 until after litigation in this case had begun. Pl.'s Resp. to McDougal's L.R. 56.1 Stmt. ¶ 41 ("Plaintiff admits he did not receive license documents from DC Moore Gallery and did not see McDougal's request letter August 6, 1998 until it was produced in litigation...."); Bergt Dep. 86:18-23 ("Q. Did DC Moore send you copies of the invoice? / A. No, they didn't. / Q. Did DC Moore send you copies of any other correspondence between them and McDougal Littell? / A. No, they didn't."); id. at 88:15-89:21 ("Q. The first time you saw [the letter was] in preparation for the litigation here? / A. That's correct. / Q. Did you see it at the time in 1998? / A. I did
Even viewing the facts in a light most favorable to Bergt, his admission to not seeing the August 6, 1998 letter until years after the license was given establishes that Bergt could not have relied on the 40,000 print run term in agreeing to the licensing fee. No genuine issue of fact remains with respect to Bergt's reliance on the statement. Even assuming the other elements for fraud are met, Bergt's claim fails because he cannot establish this essential element of a fraud claim. Thus, summary judgment is appropriate on Bergt's fraud claim and McDougal's motion will be granted.
B. Bergt's Request for Punitive Damages
In his amended complaint, Bergt seeks punitive damages against McDougal. Punitive damages are not available in copyright infringement suits. Bucklew v. Hawkins, Ash, Baptie & Co., 329 F.3d 923, 931 (7th Cir.2003); 4-14 Nimmer on Copyright § 14.02[C] ("The cases are clear that exemplary or punitive damages should not be awarded in a statutory copyright infringement action."). Thus, Bergt would be entitled to recover punitive damages only if he prevailed on his fraud claim. As McDougal's motion for summary judgment on Bergt's fraud claim has been granted, this form of recovery is foreclosed. Accordingly, McDougal's motion for summary judgment on Bergt's request for punitive damages will be granted.
C. Bergt's Request for Disgorgement of McDougal's Profits
17 U.S.C. § 504(b) allows a copyright owner to recover, in addition to actual damages, any profits of the infringer attributable to the infringement and not accounted for in the computation of actual damages. In determining the infringer's profits, "the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work." 17 U.S.C. § 504(b). Read literally, this section appears to require only that a plaintiff prove the defendant's gross revenue before the burden shifts to the defendant. It has been interpreted, however, to require the plaintiff to show a reasonable relationship or causal nexus between gross revenue and the infringement. Taylor v. Meirick, 712 F.2d 1112, 1122 (7th Cir. 1983); Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 712 (9th Cir.2004); On Davis v. Gap, Inc., 246 F.3d 152, 160 (2d Cir.2001). This showing is required regardless of whether the case is one for direct or indirect profits, although some circuits have required a more extensive showing in indirect profit cases. See Andreas v. Volkswagen of Am., Inc., 336 F.3d 789, 796 (8th Cir.2003).
Direct profits are "those that are generated by selling an infringing product." Mackie v. Rieser, 296 F.3d 909, 914 (9th Cir.2002). Direct profit cases include those where the copyrighted work is sold as a whole, see Taylor, 712 F.2d 1112
Bergt's request for disgorgement of profits is one for direct profits. While McDougal attempts to characterize this case as one for indirect profits because Bergt cannot demonstrate that the textbook was purchased solely because the painting was included in it, this is not the proper test for distinguishing between direct and indirect profits. Instead, the court must determine whether the profits derived from the sale of a product containing the copyrighted work or from the use of the copyrighted work to promote sales of another product. Here, the painting was not used separately in an attempt to promote the sale of the textbook, but instead forms an integrated component of the textbook. As such, this case is more comparable to the infringing use of a poem in an anthology, On Davis, 246 F.3d at 160, and copyrighted songs as part of a larger musical revue, Frank Music Corp., 772 F.2d 505, than the infringing use of copyrighted text or images to promote the sale of a car, Andreas, 336 F.3d 789, or season tickets for the symphony. Mackie, 296 F.3d 909.
The Seventh Circuit has required only a minimal connection between revenue and infringement in direct profit cases. Taylor, 712 F.2d at 1122.
Bergt has undisputedly done so. McDougal's Resp. to Pl.'s L.R. 56.1 Addl. Stmt. ¶ 22. Thus, summary judgment is only appropriate if no genuine issue of material fact exists as to what portion of McDougal's gross revenue is attributable to factors other than the use of the painting in the textbook. McDougal claims that no reasonable jury could conclude that the revenue generated from the sale of the textbook is in any way attributable to the painting. McDougal's Mem. in Supp. of Mot. for Partial Summary Judgment at 17, hereinafter McDougal Mem. It marshals as evidence the fact that the painting comprises only one of the approximately 1250 pages of the textbook and less than a page of the teacher's edition. McDougal's L.R. 56.1 Stmt. ¶¶ 49-50. As the textbook's focus is language, not visual, arts, McDougal uses expert testimony to demonstrate that the inclusion of the painting could not have formed the basis for the decision to buy the textbook, McDougal Mem. at 17-18. McDougal's expert on textbook selection, Dr. Don Hooper, stated that he has "never known an instance where anyone made a decision to select a textbook based upon a particular photograph, illustration, or even a particular collection of photographs." Ex. 16 to McDougal's L.R. 56.1 Stmt. at ¶ 8. Bergt's retained expert on the subject, Mr. Lance Fuhrer, testified that his "experience has shown that one single image has never chosen one book or another." Ex. 18 to McDougal's L.R. 56.1 Stmt. at 109:24-110:1, hereinafter "Fuhrer Dep." The decision to exclude the painting from the eedition of the textbook allegedly further demonstrates the "low independent value of images to language arts programs" and that the painting itself was a "fungible element" of the textbook. McDougal Mem. at 19.
Bergt disputes McDougal's claims, providing evidence from which a reasonable jury could find that the inclusion of the painting in the textbook, when viewed in conjunction with other elements of the textbook, played a role, however minimal, in generating revenue for McDougal. Despite stating that no one image has been the deciding factor in textbook selection in his experience, Mr. Fuhrer noted that "photographs, images, illustrations are a basis for a selection process, they're one of several things that ... would be a basis for selection." Fuhrer Dep. 109:7-10. He stated:
Ex. 1 to Pl.'s Resp. to McDougal's L.R. 56.1 Stmt. at ¶ 11. McDougal's Rule 30(b)(6) representative, Mr. Donald Lankiewicz, stated that selling a book without images "would put [McDougal] at a competitive disadvantage since [its] competitors would be more highly illustrated." Ex. 6 to Pl.'s L.R. 56.1 Addl. Stmt. at 171:21-172:6. Fantasia, the McDougal employee who sent the August 6, 1998 letter to DC Moore, testified that "[t]here was a heavy emphasis on fine art" (into which category Fantasia placed the painting) in choosing images for the textbook, as "teaching of art history" was a desired part of the textbook program. Ex. 3 to Pl.'s L.R. 56.1 Addl. Stmt. at 14:20-15:6, 29:7-20. McDougal's contention that the painting added no value to the textbook is undermined by the fact that the painting formed the basis of a mini-lesson in the teacher's handbook. Ex. 14 to McDougal's L.R. 56.1 Stmt. Further, if the painting added no value to the textbook, McDougal would not have paid the $200 licensing fee for its use. This evidence, taken as a whole, creates a genuine issue of material fact with regard to the apportionment of McDougal's gross revenue due to the use of Bergt's painting in the textbook and other factors.
Because apportionment is a highly factspecific inquiry, Andreas, 336 F.3d at 798, and McDougal has not presented uncontroverted evidence that none of the revenue it received from the sale of the textbook was due to the use of Bergt's painting, the determination of profits attributable to the alleged infringement should be left to the jury. Accordingly, McDougal's motion for summary judgment on Bergt's request for disgorgement of profits will be denied.
III. Donnelley's Motion for Partial Summary Judgment on Bergt's Request for Disgorgement of Donnelley's Profits
Like McDougal, Donnelley argues that the causal nexus required in order for Bergt to recover any portion of its profits is missing. Donnelley incorporates McDougal's arguments and facts on the issue in support of its motion. Donnelley further argues that no causal nexus exists because it "did not participate in the selection, or arrangement, of the materials included in [the textbook]," "was not aware of anything regarding the licenses used to acquire the materials in [the textbook]," "did not sell or market [the textbook]," and earned profits "solely on the invoices McDougal paid, and not from purchasers of [the textbook]." Donnelley's Mem. in Supp. of Mot. for Partial Summary Judgment at 2, hereinafter "Donnelley Mem."
As with McDougal's revenue derived from infringement, Bergt has established a causal nexus between Donnelley's printing of the textbook that contained his painting and the revenue Donnelley earned from printing the textbook. The evidence as to Donnelley's gross revenue derived from printing the textbook is uncontroverted. Donnelley's Resp. to Pl.'s L.R. 56.1 Addl. Stmt. ¶ 1. It does not make a difference that the revenue came from printing charges that McDougal paid in connection with the textbook. The causal nexus between the revenue and the inclusion of the painting in the textbook is established by the fact that the revenue derives from the printing itself, and not the distribution of the textbook. Thus, Bergt has met his burden under § 504(b), leaving Donnelley to demonstrate that all of its revenue is attributable to factors besides the inclusion of the painting in the textbook for summary judgment to be granted in its favor. Donnelley has failed to do so here. In addition to the evidence cited by McDougal in support of its motion for partial summary judgment on this issue, see supra Section II.C, Donnelley alleges that it would have earned the same revenue whether the textbook included the image or not because its revenue came from invoices paid by McDougal and not from purchasers of the textbook. Donnelley Mem. at 2-3. Donnelley, however, does not explain how orders were placed, instead noting that Bergt "has not adduced any evidence regarding the ordering procedures McDougal employed, and therefore there is no evidence regarding when McDougal placed orders with Donnelley in relation to actual sales." Id. at 3. This assertion is not enough to establish that Donnelley's profits were in no way due to the inclusion of the painting in the textbook, as § 504(b) places the burden on Donnelley, and not Bergt, to present evidence to establish apportionment. Bergt has presented sufficient evidence, as discussed in Section II.C, to create a genuine issue of material fact as to the apportionment of profits between the inclusion of the painting in the textbook and other factors, such as McDougal's ordering procedures. Consequently, Donnelley's motion for summary judgment on Bergt's request for disgorgement of profits will be denied.
CONCLUSION AND ORDER
For the foregoing reasons, Bergt's motion for partial summary judgment against defendants for copyright infringement [# 70] is denied. McDougal's motion for partial summary judgment on Bergt's fraud claim and request for punitive damages [# 71] is granted. McDougal's motion for partial summary judgment on Bergt's request for disgorgement of McDougal's profits [# 71] is denied. Donnelley's
This case will be called for a status hearing on October 8, 2009 at 9:30 a.m. The parties are instructed to engage in a sincere effort to resolve this litigation and to report on these efforts at the status hearing.