Ninth Circuit upholds validity of Unicolors’ copyright registration on remand, but H&M scores big in rebate calculations

“A recording is invalid under § 411(b) if the holder has committed fraud against the Copyright Office by knowingly misrepresenting material facts.” – Ninth circuit

On November 10, the United States Court of Appeals for the Ninth Circuit ruled in Unicolors, Inc. v. H&M Hennes & Mauritz, LP following a reference from the U.S. Supreme Court, which earlier this year clarified the standard of knowledge required to invalidate copyright registrations due to inaccuracies in the application for registration. In light of this ruling, the Ninth Circuit upheld Unicolors’ ability to pursue its copyright infringement action against H&M because the plaintiff lacked the requisite knowledge of the legal inaccuracy of its copyright claim. ‘record to invalidate the record. While the Ninth Circuit dismissed most of H&M’s pretrial defense arguments, the appeals court agreed with H&M that the district court’s post-removal damages were miscalculated, resulting in a significant reduction in the amount awarded to Unicolors in the deal.

Supreme Court unicolours Decision overturns Ninth Circuit gold value Decision

The Ninth Circuit’s decision follows the Supreme Court’s February ruling in which the Court found that Unicolors’ legal error in filing a single copyright claim for 31 textile designs, violating the requirement of single unit of publication for such registration, satisfied the safe harbor provisions under 17 USC § 411. Section 411(a) provides that no civil infringement action may be sustained without a valid registration of the copyright, and Section 411(b)(1)(A) provides that a certificate of registration meets this requirement, regardless of the inaccurate information, unless the inaccuracy was provided “in knowing that it was inaccurate”. Judge Stephen Breyer’s opinion called Unicolors’ inaccuracy a “mislabelling” and found no difference in the standard of knowledge required to invalidate legal errors or factual errors in a recording.

In discussing the Supreme Court’s analysis, the Ninth Circuit noted that SCOTUS’ decision effectively repeals its own 2019 decision in Gold Value International Textile vs. Sanctuary Clothing. In gold valuethe Ninth Circuit parted ways with other Circuit Courts of Appeals in holding that Section 411, as amended by the Intellectual Property Resource Prioritization and Organization Act of 2008 (PRO-IP), did not codify a doctrine of “fraud against the Copyright Office” because “knowledge” is used in the language of Section 411 rather than “fraud”.

“[W]We could only distinguish between fraud and knowledge by concluding that the law required knowledge of factual errors only, regardless of a party’s knowledge of the law: a registrant could have knowledge of the inaccuracy by knowing the facts without intending to defraud the Copyright Office by presuming – wrongly – that those facts complied with the relevant legal requirements…However, as we now know that Section 411(b) requires the knowledge of both legal and factual errors, there is no daylight between a court’s decision that a party was aware of the legal and factual inaccuracies and a finding that the party had committed fraud at the Copyright Office. »

Ninth Circuit finds no misrepresentation of material facts by Unicolors

After acknowledging the Supreme Court’s repeal of gold valuethe Ninth Circuit followed the test established by the Eleventh Circuit in Roberts vs. Gordy (2017) for parties seeking to invalidate a copyright registration for factual or legal inaccuracies. These parties must demonstrate that an application for registration was filed with inaccuracies, that the applicant knew that the application did not comply with legal requirements, and that the inaccuracies in question were material to the registration decision. “In other words, a recording is invalid under Section 411(b) if the holder has committed fraud against the Copyright Office by knowingly misrepresenting material facts,” the Ninth Circuit wrote.

In assessing whether Unicolors possessed the requisite knowledge of the legal inaccuracy in its application for registration, the Ninth Circuit noted that the district court expressly found that H&M failed to demonstrate that Unicolors intended to defraud the Copyright Office. While willful blindness could support a finding of actual knowledge, the Ninth Circuit acknowledged that it was “not unreasonable” to conclude that Unicolors could not have knowingly violated the appeals court’s definition of the requirement. of “single publishing unit” when the first binding precedent on that definition came in the Ninth Circuit’s first ruling on H&M’s appeal.

Although H&M made a pair of arguments claiming that Unicolors knowingly misrepresented a material fact to the Copyright Office, the Ninth Circuit was unconvinced. Although Unicolors was aware that it had combined public designs and others kept confidential for certain customers into a single recording, the Ninth Circuit held that this did not reflect Unicolors’ knowledge of the legal requirements of its application for registration at the time it was filed. Further, while testimony from Unicolors Chairman Nazir Pazirandeh indicated that designs were registered through a single app to save money, the Ninth Circuit held that the lack of a definition of “unit single publication”, coupled with other testimony from Pazirandeh regarding Unicolors’ registration practices for consolidating design collections into a single application, led to a reasonable inference that Pazirandeh assessed several plausible legal interpretations of the rule of the single unit and chose the cheapest option, “as any profit-driven businessman would do,” the Ninth Circuit wrote.

Most of H&M’s arguments fail, except district court error in rebate calculations

After deciding the preliminary issue that Unicolors possessed a valid copyright registration to sustain its infringement action, the Ninth Circuit then struck down ten separate arguments raised by H&M challenging district court rulings at various stages of the litigation. . With respect to H&M’s pretrial challenges, the Ninth Circuit ruled that H&M lost its argument that Pazirandeh’s testimony constituted unnamed expert opinion, and found that the district court failed to abused its discretion by excluding H&M’s testimony on issues of substantial similarity and damages. Regarding H&M’s challenges to the trial, the Ninth Circuit found that H&M had waived its challenge to the evidence of the district court’s admission into evidence of a black-and-white version of the copyright registration. author of Unicolors, and found harmless error in the district court’s denial of H&M’s proposed jury instruction and documentary evidence regarding Chinese copyright in H&M’s own accused design. Regarding H&M’s post-trial challenges, the Ninth Circuit dismissed H&M’s renewed validity challenge against Unicolors’ copyright registration as well as its challenges to the jury’s findings of striking similarity and will. Finally, the Ninth Circuit found no abuse of power in the district court’s award of attorney’s fees to Unicolors.

However, H&M succeeded in getting the Ninth Circuit to significantly reduce the district court’s listing of post-dismissal damages after the appeals court found an abuse of discretion in calculating damages. -interest for return of district court profits. Although the district court granted H&M’s new motion for judgment as a matter of law (RJMOL), limiting Unicolors’ compensation to damages on H&M’s U.S. sales and not all international sales, the District Court relied on average gross selling price per piece rather than gross profit per piece based on its interpretation of the maximum recoupment rule for rebate calculations.

The rebate should reflect a maximum “sustainable to the test” recovery

While the maximum recoupment rule requires that the rebate reflect the maximum amount supportable by the evidence, the Ninth Circuit concluded that Unicolors’ evidence presented at trial only supported a profit attribution indexed to H&M’s gross profit by exhibit, which the jury used in its calculation of damages. . The Ninth Circuit held that the district court should have started by evaluating the jury’s calculations to determine the maximum award to lasting Unicolors per evidence.

“Although we have not said it in so many words, this interpretation of the maximum clawback rule is well entrenched in law…As the Supreme Court explained, the purpose of remittitur is to maintain the jury’s verdict while ‘removing a growth…’ And this is best achieved by ‘minimiz[ing] the extent of judicial interference in a case that is otherwise within the domain of the jury.

Using the appropriate gross margin rate per piece, the Ninth Circuit found a profit restitution award based on H&M’s U.S. sales totaling $98,441.23, well below the district court’s finding that H&M owed $247. $675.33 based on average gross selling price per piece. While H&M also challenged the jury’s award of $18,534 in lost profits, the Ninth Circuit found that H&M failed to timely object to Pazirandeh’s testimony at the lost profits trial. Adding the lost earnings and the profit disgorgement awards, the Ninth Circuit found that the correct calculation of the rebate resulted in damages of $116,975.23 awarded to Unicolor. If Unicolors rejected that amount, the district court was responsible for granting H&M’s motion for a new trial, but limited only to the issue of damages.

Image Source: Depot Photos
Image ID: 211210396
Author: Andrei Popov

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