D’Pergo Custom Guitars, Inc v. P Sweetwater Sound, Inc.

2021 DNH 026

• Court: District Court, D. New Hampshire
• Decided: January 28, 2021
• Docket: 17-cv-747-LM
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

D’Pergo Custom Guitars, Inc

v. Civil No. 17-cv-747-LM Opinion No. 2021 DNH 026 P Sweetwater Sound, Inc.

ORDER

D’Pergo Custom Guitars, Inc. (“D’Pergo”) sues Sweetwater Sound, Inc.

(“Sweetwater”) for copyright infringement and violations of the New Hampshire

Consumer Protection Act, RSA ch. 358-A. D’Pergo alleges that Sweetwater used a

copyrighted photograph of D’Pergo’s trademarked custom guitar necks and

headstock to promote and sell Sweetwater products on its website.

Presently before the court are the parties’ competing jury instructions (doc.

nos. 162 and 165), which put at issue the proper interpretation of the damages

provision of the Copyright Act, 17 U.S.C. § 504. Also pending are three motions in

limine, filed by Sweetwater, to admit or exclude evidence (doc. nos. 159, 160, and

161). The court resolves these motions, and the jury instructions issue, as outlined

below.

BACKGROUND

The following facts, drawn from the court’s order on the parties’ cross-

motions for summary judgment (doc. no. 139), are recited for the limited purpose of

providing the reader with necessary context. D’Pergo manufactures and sells custom guitars. In 2003, Stephan

Dapergolas, D’Pergo’s owner, created a photograph showcasing a number of

D’Pergo’s unique guitar necks and headstock (the “Photograph”), which D’Pergo

published to its website. D’Pergo used the Photograph on its website from 2003

until 2006.

Sweetwater is a retailer that sells musical instruments, including guitars,

through its website. In 2004, Sweetwater copied the Photograph and published it

on its website. More specifically, Sweetwater used the photograph in its “Electric

Guitar Buying Guide” (the “Buying Guide”), in a section titled “Guitar necks

explained.” The end of the Buying Guide features several guitars from various

manufacturers for purchase—none of which are D’Pergo guitars—as well as a

hyperlink to “Shop for Electric Guitars.”

In January 2015, Dapergolas learned that Sweetwater was using the

Photograph in the Buying Guide. D’Pergo later applied for and was granted a

copyright registration for the Photograph from the Copyright Office. In January

2016, D’Pergo contacted Sweetwater about the Photograph. Sweetwater then

removed the Photograph from its website. D’Pergo subsequently trademarked its

headstock design depicted in the Photograph. In December 2017, D’Pergo brought

the instant lawsuit.

2 DISCUSSION

The parties submit competing jury instructions (doc. nos. 162 and 165) on the

issue of whether D’Pergo must establish a causal nexus between Sweetwater’s

“gross revenue” and its copyright infringement in order to obtain an award of

profits. 17 U.S.C. § 504(b). In addition, Sweetwater moves in limine: (A) to exclude

all evidence of Sweetwater’s “indirect” profits (doc. no. 161); (B) or alternatively, to

exclude evidence of Sweetwater’s profits from more than three years before D’Pergo

commenced this action (doc. no. 160); and (C) to admit evidence of the parties’

respective conduct after they learned of the Photograph’s presence on Sweetwater’s

website (doc. no. 159).

The court addresses these matters in turn, beginning with the jury

instructions issue.

I. Jury Instructions (Causal Nexus)

The court has previously determined that D’Pergo is entitled to judgment as

a matter of law on its copyright infringement claim (doc. no. 139). The only issue

left for the jury to decide is the extent to which D’Pergo is entitled to damages.

The damages provision of the Copyright Act is found at 17 U.S.C. § 504.

Subsection (a) of that statute provides that a copyright infringer is liable for “the

copyright owner’s actual damages and any additional profits of the infringer, as

provided in subsection (b).” 17 U.S.C. § 504(a). Subsection (b) consists of two

sentences. The first sentence states that the copyright owner may recover actual

3 damages resulting from the infringement plus “any profits of the infringer that are

attributable to the infringement and are not taken into account in computing the

actual damages.” 17 U.S.C. § 504(b). The second sentence states: “In establishing

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.” Id.

A “highly literal interpretation” of § 504(b)’s second sentence, considered in

isolation from its first sentence, would permit recovery of all an infringer’s gross

revenue, even those portions that are not attributable to the infringement. On

Davis v. The Gap, Inc., 246 F.3d 152, 160 (2d Cir. 2001). For example, under such

an interpretation, a “plaintiff in a copyright action against a multidivision, multi-

product company such as General Mills, would need to do nothing more than offer

an overall gross revenue number—like $11.5 billion—and sit back.” Polar Bear

Prods., Inc. v. Timex Corp., 384 F.3d 700, 711 (9th Cir. 2004).

Seizing on this highly literal interpretation, D’Pergo seeks to instruct the jury

that, in order for it to obtain a disgorgement of profits, it need only present evidence

of Sweetwater’s gross revenues, which triggers a rebuttable presumption that all of

those gross revenues are entirely attributable to the infringement. Although

D’Pergo defends its position by emphasizing its fidelity to the statutory text,

D’Pergo’s requested instruction would allow the jury to award profits without

finding that any of Sweetwater’s profits are “attributable to the infringement.” 17

4 U.S.C. § 504(b). By contrast, Sweetwater vies for an instruction that would require

D’Pergo to prove a causal relationship between the infringement and the gross

revenue number it presents in order to obtain an award of profits.

While the court is not prepared, at this time, to inform the parties of the

precise jury instruction on this issue that it will use at trial, it is clear that § 504(b)

must be interpreted as requiring D’Pergo to show that the gross revenue figure it

presents has “a legally significant relationship to the infringement.” Real View,

LLC v. 20-20 Techs., Inc. 811 F. Supp. 2d 553, 560-61 (D. Mass. 2011) (quoting

Polar Bear, 384 F.3d at 711). The jury will be instructed, in some fashion, that, in

order to award D’Pergo profits, it must conclude that D’Pergo established a causal

nexus between Sweetwater’s infringement and the gross revenue figure D’Pergo

presents.

Such an instruction is compelled by the sheer weight of authority. The First,

Second, Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, and Federal Circuits

have all concluded, in some form, that a copyright owner must show a causal

relationship between the infringement and the gross revenue figure presented.

See Jane Doe No. 1 v. Backpage.com, LLC, 817 F.3d 12, 28-29 (1st Cir. 2016)

(complaint failed to plausibly allege entitlement to infringer’s profits under § 504(b)

because it failed to “link” the infringement “to some discrete portion of the

publisher/infringer’s profits”); On Davis, 246 F.3d at 160 (“[T]he term ‘gross

revenue’ under the statute means gross revenue reasonably related to the

infringement, not unrelated revenues.”); William A. Graham Co. v. Haughey, 646

5 F.3d 138, 141 (3d Cir. 2011) (to succeed on claim for infringer’s profits, “a plaintiff is

first required to prove the defendants’ gross revenues over the course of the relevant

time period, and then to establish a causal nexus between the infringement and the

profits sought”); Bonner v. Dawson, 404 F.3d 290, 294 (4th Cir. 2005) (explaining

that “‘gross revenue’ refers only to revenue reasonably related to the infringement”);

Powell v. Penhollow, 260 Fed. Appx. 683, 686 (5th Cir. 2007) (“As the copyright

owner, Powell bears the burden of putting on evidence of Defendants’ gross revenue

attributable to the infringement. The burden then shifts to Defendants to produce

evidence of deductible expenses.” (citations omitted)); Thoroughbred Software Int’l

v. Dice Corp., 488 F.3d 352, 360 (6th Cir. 2007) (“To assess the infringer’s profits,

the copyright owner must first show evidence of the infringer’s gross revenue

attributable to the infringement. Then the burden shifts to the defendant . . . . ”

(citations omitted)); Taylor v. Meirick, 712 F.2d 1112, 1122 (7th Cir. 1983)

(explaining that “gross revenue” in § 504(b) means “gross revenues from the sale of

the infringing” product); Andreas v. Volkswagen of Am., Inc., 336 F.3d 789, (8th Cir.

2003) (“The plaintiff has the burden to demonstrate a nexus between the

infringement and the . . . profits before apportionment can occur.” (quotation and

brackets omitted)); Polar Bear, 384 F.3d at 711 (“[A] copyright owner is required to

do more initially than toss up an undifferentiated gross revenue number; the

revenue stream must bear a legally significant relationship to the infringement.”);

Univ. of Colo. Found., Inc. v. Am. Cyanimid Co., 196 F.3d 1366, 1375 (Fed. Cir.

6 1999) (copyright owner has the burden to show that infringer’s gross revenues had a

“connection” to the infringement).

Despite the crushing weight of this authority, D’Pergo supports its requested

jury instruction by asserting that the First Circuit swims upstream. Specifically,

D’Pergo contends that the First Circuit’s opinions in John G. Danielson, Inc. v.

Winchester-Conant Properties, Inc., 322 F.3d 26 (1st Cir. 2003), Bruce v. Weekly

World News, Inc., 310 F.3d 25 (1st Cir. 2002), and Data General Corp. v. Grumman

System Support Corp., 36 F.3d 1147 (1st Cir. 1994), abrogated on other grounds by

Reed Elsevier, Inc. v. Muchnik, 559 U.S. 154 (2010), compel an instruction that does

not require the jury to find a causal link between the “gross revenue” figure and

Sweetwater’s infringement. D’Pergo is incorrect.

Although Bruce contains language arguably supporting D’Pergo’s

interpretation of § 504(b), D’Pergo extrapolates too much from the case’s holding.

There, the district court refused to award the plaintiff a share of the defendant’s

revenue streams because the plaintiff failed to present sufficient evidence of

revenue. See Bruce, 310 F.3d at 30-31. Although the plaintiff argued on appeal

that this was due to the defendant’s failure to produce discovery on its revenues, the

First Circuit found the plaintiff’s contentions “baseless” because he “made no

earnest attempt during discovery to obtain all the available evidence relating to [the

defendant’s] gross revenues.” Id. at 31. In other words, the Bruce panel merely

affirmed the district court’s conclusion that the plaintiff had failed to present

sufficient evidence of the defendant’s gross revenues. See id. at 30-31. Bruce does

7 not stand for the proposition that a plaintiff need do no more than present an

undifferentiated gross revenue figure to obtain a presumption that the revenue

figure presented is attributable to the infringement.

As for Grumman, while that case states that a plaintiff must only satisfy a

“minimal burden” to trigger apportionment, it does not stand for the proposition

that a plaintiff has no burden on causation. Grumman, 36 F.3d at 1173 (emphasis

added). Rather, in describing a plaintiff’s “minimal burden,” Grumman merely

quotes the language of § 504(b) that, “[i]n establishing the infringer’s profits, the

copyright owner is required to present proof only of the infringer’s gross revenue.”

Id. (quoting § 504(b)). As already discussed, no Court of Appeals—including the

First Circuit—interprets that language in the manner D’Pergo urges. See, e.g.,

Backpage.com, 817 F.3d at 28-29. And while Grumman found that the plaintiff in

that case had met its minimal burden, the Grumman plaintiff supplied a connection

between the infringement and the revenue figure it presented. See Grumman, 36

F.3d at 1152-54, 1174.

Nor does Danielson compel the court to adopt D’Pergo’s requested jury

instruction. At one point in the opinion, Danielson paraphrases the second sentence

of § 504(b). See Danielson, 322 F.3d at 47. But, as discussed, no court interprets

that sentence in a vacuum. In addition, whether the Danielson plaintiff met its

burden of establishing the infringer’s gross revenues was not at issue in that case,

as the parties stipulated to the relevant gross revenue figure and the only dispute

8 on appeal was whether a certain commissions figure was a deductible expense. See

id.

Even if these cases supported D’Pergo’s requested jury instruction—and they

do not—more recent First Circuit authority makes clear that a plaintiff in an

infringement action must establish a “link” between the infringement and the gross

revenue figure presented. Backpage.com, 817 F.3d at 28. In Backpage.com, the

First Circuit upheld the dismissal under Rule 12(b)(6) of a claim for copyright

infringement. See id. The First Circuit upheld dismissal because the complaint

failed to plausibly allege entitlement to any relief, including “profits attributable to

the infringement.” Id. at 28. Specifically, the complaint contained only “generalized

assertion[s]” that could not “plausibly be said to link” the alleged infringement “to

some discrete portion of the publisher/infringer’s profits.” Id. In so reasoning,

Backpage.com makes clear that the First Circuit stands shoulder-to-shoulder with

the majority of other circuits in requiring infringement plaintiffs to “link” the

infringement complained of to at least a “discrete portion” of the infringer’s profits

in order to obtain an award thereof. Id.

Interpreting § 504(b) to require plaintiffs to establish a causal nexus between

the defendant’s gross revenues and its infringement harmonizes the subsection’s

two sentences. See King v. St. Vincent’s Hosp., 502 U.S. 215, 221 (1991) (noting the

“cardinal rule that a statute is to be read as a whole, since the meaning of statutory

language, plain or not, depends on context” (citation omitted)). The first sentence of

§ 504(b) states that, in addition to actual damages, a copyright owner may recover

9 “any profits of the infringer that are attributable to the infringement.” 17 U.S.C.

§ 504(b) (emphasis added). Although the statute goes on to state that, to establish

the infringer’s profits, the plaintiff is “required to present proof only of the

infringer’s gross revenue,” if that phrase were interpreted in a vacuum a copyright

owner could obtain profits that are not attributable to the infringement. See

Complex Sys., Inc. v. ABN Ambro Bank N.V., No. 08 Civ. 7497 (KBF), 2013 WL

5970065, at *3 (S.D.N.Y. Nov. 8, 2013) (noting that requiring plaintiffs to

demonstrate a causal nexus between revenue and infringement “is rooted in the

text of the statute itself”); see also Andreas, 336 F.3d at 796 (“The burden of

establishing that profits are attributable to the infringed work often gets confused

with the burden of apportioning profits between various factors contributing to the

profits.”).

The better interpretation of § 504(b)’s second sentence is as limited by its

first sentence: a plaintiff can only obtain profits that are attributable to the

defendant’s infringement, but the plaintiff need not distinguish the defendant’s

profits from its gross revenue. Assuming the plaintiff establishes a causal nexus

between the gross revenue figure it presents and the infringement, the plaintiff

obtains a presumption that the gross revenues are the defendant’s “profits . . .

attributable to the infringement . . . 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.” § 504(b); see Andreas, 336 F.3d at 796.

10 This interpretation not only best harmonizes the text of the statute: it makes

common sense. To paraphrase Judge Posner, if General Motors steals your

copyright and puts it in an advertisement which runs a single time, you should not

be able to simply put GM’s corporate tax return in the record in order to obtain the

entirety of the company’s gross revenue—billions of dollars—virtually all of which

would be unrelated to GM’s infringement. See Meirick, 712 F.2d at 1122. Rather,

the “common sense” approach requires “a demonstration that the infringing acts

had an effect on profits before the parties can wrangle about apportionment.”

Mackie v. Reiser, 296 F.3d 909, 915 (9th Cir. 2002). “To do otherwise would be

inconsistent with . . . rudimentary principles of tort law, to which copyright law is

often analogized . . . .” Id.

For these reasons, the court concludes that, in order to obtain an award of

profits, D’Pergo must show a causal nexus between Sweetwater’s infringement and

the gross revenue figure D’Pergo presents. Then, if a causal nexus is shown,

Sweetwater bears the burden of proving the appropriate apportionment. See 17

U.S.C. § 504(b). The jury will be instructed along these lines.

II. Sweetwater’s Motions in Limine

As noted, Sweetwater moves in limine: (A) to exclude all evidence of

Sweetwater’s “indirect” profits (doc. no. 161); (B) to exclude evidence of

Sweetwater’s profits from more than three years before D’Pergo commenced this

action (doc. no. 160); and (C) to admit evidence of the parties’ respective conduct

11 after they learned of the Photograph’s presence on Sweetwater’s website (doc. no.

159). The court addresses these motions in turn below.

A. Motion to Exclude All Evidence of Indirect Profits (doc. no. 161)

Sweetwater moves in limine to exclude all evidence of “indirect” profits, i.e.,

profits Sweetwater generated from using D’Pergo’s copyright to promote the sales of

other products. Arguing that “the connection between Sweetwater’s profits and the

infringement is highly speculative,” doc. no. 161 at 1, Sweetwater contends that

D’Pergo should be precluded from introducing evidence of any such connection.

In the copyright infringement context, “direct profits” refer to profits “that

are generated by selling an infringing product.” Mackie, 296 F.3d at 914. By

contrast, indirect profits are those that have a “nexus” to the infringement, but

which are not generated directly from sales of an infringing product. Id.; see also,

e.g., Andreas, 336 F.3d at 796 (noting that the case at bar involved indirect profits

because “the infringers did not sell the copyrighted work, but used the copyrighted

work to sell another product”).

As discussed, an infringement victim is entitled to its actual damages as well

as “any profits of the infringer that are attributable to the infringement” and are

not factored into the computation of actual damages. 17 U.S.C. § 504(b). Because

the statute does not differentiate between direct and indirect profits, courts have

held that a plaintiff may seek an award of either. See, e.g., Mackie, 296 F.3d at 914.

12 Here, the Photograph is the copyrighted work. Sweetwater did not sell the

Photograph or the Buying Guide where it appeared on Sweetwater’s website. Thus,

if any of Sweetwater’s profits “are attributable to the infringement,” 17 U.S.C.

§ 504(b), they are only indirectly attributable. See Mackie, 296 F.3d at 914.

In an indirect profits case, the “district court must conduct a threshold

inquiry into whether there is a legally sufficient causal link between the

infringement and subsequent indirect profits.” Id. at 915. “It is not enough to show

an infringement and then seek all of the defendant’s profits, from whatever source.”

Andreas, 336 F.3d at 799. The plaintiff has the burden of demonstrating a causal

link. Am. Cyanimid Co., 196 F.3d at 1375. The court may exclude evidence of

indirect profits if the causal link proffered by the plaintiff is “too speculative.”

Mackie, 296 F.3d at 915 (quoting Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc.,

772 F.2d 505, 513 (9th Cir. 1985)); see Andreas, 336 F.3d at 799-800 (upholding

evidentiary decision precluding admission of infringer’s profits from sale of all car

models where infringement only related to a particular car model); Complex Sys.,

2013 WL 5970065, at *13-*14 (granting motion in limine to exclude evidence of

indirect profits where plaintiff “fail[ed] to provide any evidence in support of” a

causal link between those profits and the infringement).

Sweetwater argues that D’Pergo must be precluded from introducing

evidence of indirect profits because D’Pergo “has failed to identify any specific

transaction that is connected to the appearance of the Photograph” in the Buying

Guide. Doc. no. 161-1 at 7. Sweetwater contends that, because “the Photograph

13 was one of thousands of images that appeared on Sweetwater’s website,” any causal

link is so “attenuated” that D’Pergo cannot be permitted to present evidence of such

a link to the jury. Id. at 8.

Granting Sweetwater’s motion to exclude all evidence of indirect profits

would be tantamount to ruling that Sweetwater is entitled to judgment as a matter

of law on the issue of indirect profits. See Andreas, 336 F.3d at 799-800. However,

the court has already determined, in its order on the parties’ cross-motions for

summary judgment, that Sweetwater is not entitled to judgment as a matter of law

on D’Pergo’s profits claim. See D’Pergo Custom Guitars, Inc. v. Sweetwater Sound,

Inc., 433 F. Supp. 3d 227, 232-33 (D.N.H. 2020) (doc. no. 139). In that decision, the

court found that a reasonable jury could conclude that D’Pergo’s evidence

establishes a causal nexus between Sweetwater’s use of the Photograph and its

gross revenues sufficient to trigger Sweetwater’s burden of apportionment. See id.

This ruling was based on D’Pergo’s anticipated evidence on profits: expert testimony

from Dr. Michael Einhorn, Ph. D., regarding “profits Sweetwater purportedly

derived from customers who purchased electric guitars online after viewing the

Buying Guide, which contained the photograph.” 1 Id. at 232.

1 In a separate order issued the same day as the order on the parties’ cross-

motions for summary judgment, the court denied Sweetwater’s motion to exclude Einhorn’s testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). See D’Pergo Custom Guitars, Inc. v. Sweetwater Sound, Inc., No. 17-cv- 747-LM, 2020 WL 60351, at *1-4 (D.N.H. Jan. 6, 2020) (doc. no. 138). The court denied Sweetwater’s motion while recognizing that, if Sweetwater carried its burden of apportionment at trial, “it may be that Dr. Einhorn’s opinion is of limited or no value” to the jury. Id. at *3. However, because “it is Sweetwater’s burden—

14 Although a plaintiff’s evidence of profits cannot be “unduly speculative,”

Bruce, 310 F.3d at 31 (quotation omitted), the First Circuit has stated that a

plaintiff bears only a “minimal burden” in presenting such evidence. Grumman, 36

F.3d at 1173. Polar Bear, a Ninth Circuit case, illustrates the plaintiff’s minimal

burden. There, the defendant contracted with the plaintiff to sponsor the plaintiff’s

production of a film. See Polar Bear, 384 F.3d at 703-04. The defendant’s products

were featured prominently in the film, and the defendant was granted a one-year

license to use the film in its promotional materials. See id. at 704. However, the

defendant infringed the plaintiff’s copyright when it continued showing the film at

trade shows after the one-year license expired. See id. at 704-05. In the litigation

that followed, the jury awarded indirect profits, and the defendant challenged that

award on appeal. See id. at 712.

The plaintiff in Polar Bear presented evidence of the defendant’s profits

attributable to the infringement in the form of expert testimony. See id. The expert

“reviewed [the defendant’s] sales records from the twelve trade shows where it

showed the unauthorized . . . materials.” Id. The expert calculated that the

defendant “yielded an average of $30,000 in sales per show, for a total of $360,000

in gross revenue.” Id. “Based on his experience evaluating trade shows, he

concluded that approximately 10% to 25% of trade show sales are the result of . . .

not D’Pergo’s or Dr. Einhorn’s—to separate Sweetwater’s profits gained as a result of its use of the Photograph from those which were not,” the fact that Einhorn failed to parse the Photograph’s impact on Sweetwater’s sales from the overall impact of the Buying Guide on Sweetwater’s sales was not a basis to exclude his opinion. Id. 15 the booth promotion, of which the [infringing] materials were a substantial part.”

Id. The Ninth Circuit held that this “testimony established the requisite causal

connection between the category of profits sought—revenue from trade booth

sales—and the infringement.” Id.

Here, Einhorn has prepared an expert report on D’Pergo’s behalf. See doc.

no. 161-3. Einhorn’s report estimates the amount of revenue Sweetwater earned

from the sale of electric guitars and guitar accessories from persons who navigated

to Sweetwater’s retail shop page after viewing the Buying Guide. Based on sales

data for Sweetwater’s product transactions from 2004-2016 (the years the

Photograph appeared in the Buying Guide), Einhorn determined that Sweetwater

generated approximately $91 million in revenue from online sales of guitars during

those years, and from sales of guitar accessories to persons who had previously

bought a guitar during those years. Based on additional data provided by

Sweetwater, Einhorn determined that approximately 5.25 million unique viewers

came to shop on Sweetwater’s online retail sales page, and approximately 500,000

viewed the Buying Guide, for a proportion of 9.4%. Recognizing that the

approximately $91 million in revenue in online sales cannot be entirely attributed

to the Buying Guide, Einhorn calculates Sweetwater’s gross revenue attributable to

the infringement to be approximately $8.5 million (which is 9.4% of the

approximately $91 million in total revenue from online sales of guitars and

accessories during the infringing period).

16 Although loosely connected at best, this evidence of indirect profits is not so

“unduly speculative” that it must be kept from the jury. Bruce, 310 F.3d at 31

(quotation omitted). As in Polar Bear, the plaintiff’s anticipated evidence provides a

link between the infringement and the gross revenue figure it submits: customers

purchased Sweetwater’s guitars and guitar accessories after viewing infringing

promotional materials featuring the Photograph.

Einhorn’s anticipated testimony on indirect profits is minimally sufficient to

permit D’Pergo to present the argument to the jury. A reasonable jury may well

conclude, however, that the mere fact that the Photograph appeared in a sales

publication that generated revenue is insufficient to establish a causal link. This is

particularly true where the Photograph is one of several in the Buyer’s Guide, and

the Photograph depicts D’Pergo guitar necks—which Sweetwater does not sell.

Under such circumstances, it may be difficult for D’Pergo to persuade a jury

on causation without a witness who can testify that the Photograph caused him to

be more interested in Sweetwater’s guitars and guitar accessories. See Complex

Sys., 2013 WL 5970065, at *3 (observing that § 504(b) requires a “causal nexus,”

rather than merely “some non-causal connection”). Alternatively, the jury might

reasonably conclude that, even if Einhorn’s testimony satisfies D’Pergo’s initial

burden of showing a causal nexus, Sweetwater adduced sufficient evidence to rebut

that causal showing. See Grumman, 36 F.3d at 1175 (“The defendant’s burden

under the apportionment provision of Section 504(b) is primarily to demonstrate the

absence of a causal link between the infringement and all or part of the profits

17 claimed by the plaintiff.”). Nonetheless, D’Pergo’s evidence of a causal nexus is

minimally sufficient to survive this challenge. See Polar Bear, 384 F.3d at 712; see

also IvyMedia Corp. v. ILIKEBUS, Inc., No. 15-11918-NMG, 2017 U.S. Dist. LEXIS

80547, at *2 (D. Mass. May 25, 2017) (denying judgment as a matter of law to

defendant on claim for infringement profits even though the “evidence of damages

and causation is tenuous at best”). And, while Sweetwater may believe that

Einhorn deployed a faulty methodology in concluding that a causal relationship

exists, “any purported flaws in [Einhorn’s] methodology or the evidence he relied

upon in reaching his opinion” do not justify keeping it from the jury; rather, they

“are matters for cross-examination and argument.” Gray v. Perry, No. 2:15-cv-

05642-CAS (JCx), 2019 WL 2992007, at *19 (C.D. Cal. July 5, 2019) (denying

Daubert motion to exclude Einhorn’s testimony on defendant’s net profits in

infringement case); accord D’Pergo, 2020 WL 60351, at *3 (doc. no. 138).

In sum, a plaintiff’s burden for a claim of infringer’s profits under § 504(b) is

“minimal.” Grumman, 36 F.3d at 1173. The plaintiff is required only to present

evidence that the defendant profited at all from the infringement; apportioning the

extent to which the profits are attributable to the infringement is the defendant’s

burden. See 17 U.S.C. § 504(b); Grumman, 36 F.3d at 1173-75; Andreas, 336 F.3d

at 796 (noting that the copyright owner has the burden of proving that the

defendant “profited from the infringing [material] at all,” and the defendant has the

burden regarding “the extent [to which] it profited from the infringement”). Thus,

contrary to Sweetwater’s argument, the fact that Einhorn’s report does not connect

18 any particular transaction to the use of the photograph in the Buying Guide does

not render D’Pergo’s indirect profits claim so speculative that D’Pergo may present

no evidence of indirect profits. See Andreas, 336 at 797 (“[W]e reject the notion that

[the plaintiff] was required to put a . . . buyer on the stand to testify that she

bought the car because of the commercial in order to meet his burden of a causal

connection.”).

For these reasons, the court denies Sweetwater’s motion in limine to exclude

all evidence of indirect profits (doc. no. 161).

B. Motion to Exclude Evidence of Profits Generated More Than Three Years Before D’Pergo Filed Suit (doc. no. 160)

As an alternative to its motion to exclude all evidence of indirect profits,

Sweetwater moves in limine to preclude evidence of profits it generated more than

three years before D’Pergo filed suit. Relying upon the United States Supreme

Court’s opinion in Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (2014), and

the Second Circuit’s recent application of it in Sohm v. Scholastic, Inc., 959 F.3d 39

(2d Cir. 2020), Sweetwater asserts such evidence is irrelevant under Federal Rule of

Evidence 401 because the relief available in an infringement suit is limited to a

three-year lookback period from the time the suit is filed.

The Copyright Act provides that a civil action asserting an infringement

claim must be “commenced within three years after the claim accrued.” 17 U.S.C.

§ 507(b); accord Warren Freedenfeld Assocs., Inc. v. McTigue, 531 F.3d 38, 44 (1st

Cir. 2008). Courts use one of two methods for determining when an infringement

19 claim accrues: the injury rule or the discovery rule. See 6 Patry on Copyright §§

20:17, 20:18. Under the “injury rule,” a claim accrues at the time of the injury, i.e.,

at the time of the infringement. See William A. Graham Co. v. Haughey, 567 F.3d

425, 433 (3d Cir. 2009). Thus, under this rule, an infringement claim must be

brought within three years of the infringement’s occurrence, regardless of when the

plaintiff became aware of the infringement. See id.; § 507(b). Under the “discovery

rule,” a claim accrues at the time the plaintiff discovers or reasonably could have

discovered the infringing conduct. See McTigue, 531 F.3d at 44. Thus, under this

rule, an infringement claim must be brought within three years of when the

plaintiff discovered or reasonably could have discovered the infringing conduct. See

id.; § 507(b). Most courts—including the First Circuit—use the discovery rule

rather than the injury rule for purposes of § 507(b). See Petrella, 572 U.S. at 670

n.4; McTigue, 531 F.3d at 44.

Here, the parties do not dispute that the discovery rule applies or that

D’Pergo’s suit is timely. Indeed, as previously noted, the court has already

determined as a matter of law that Sweetwater infringed D’Pergo’s copyright.

Instead, Sweetwater contends that Petrella imposes a three-year damages bar for

infringement claims even if those claims are timely brought.

This is not the first time Sweetwater has so argued in this litigation. In its

objection to D’Pergo’s motion to compel discovery (doc. no. 63), Sweetwater argued

that Petrella limits Sweetwater’s liability for infringement to the three years prior

to the date D’Pergo filed this action. Both then and now, Sweetwater cites language

20 from Petrella observing that § 507(b) provides for “retrospective relief running only

three years back from the date the complaint was filed.” Petrella, 572 U.S. at 672.

This court has already rejected Sweetwater’s argument in a written order, and

ruled that D’Pergo was entitled to discovery pertaining to Sweetwater’s liability for

copyright infringement “beyond the three-year limitations period in” § 507(b)

because “the three-year lookback rule for damages” cited in Petrella does not apply

to claims that are timely under the discovery rule. Doc. no. 76 at 7-8. Although

Petrella referenced a three-year lookback rule, it did so in the context of explaining

why a plaintiff cannot recover for claims that are not timely; Petrella did not

articulate a freestanding limit on damages for otherwise timely claims. See id.

Sweetwater first argues that this court’s prior ruling is not controlling on the

admissibility of evidence of its profits from outside the three-year window because it

was rendered in the context of resolving a discovery dispute. It is of course true

that evidence need not be admissible to be discoverable. See Fed. R. Civ. P. 26(b)(1).

The court does not agree, however, that the procedural context of its prior ruling

renders it inapplicable to this evidentiary issue. Evidence of Sweetwater’s profits

from the sale of electric guitars in the years prior to 2014 is relevant—and therefore

discoverable—because D’Pergo can seek disgorgement of those profits

notwithstanding the three-year statute of limitations. See 17 U.S.C. § 504(b).

Sweetwater argues that the Second Circuit’s recent decision in Sohm should

cause this court to revisit its prior ruling. Because Sohm interprets Petrella, it is

helpful to review Petrella before considering Sohm. See Sohm, 959 F.3d at 51-52.

21 In 1991, the Petrella plaintiff gained ownership over the copyright for the

1963 screenplay for “Raging Bull.” See Petrella, 572 U.S. at 673-74. In 2009, the

plaintiff sued MGM, who had previously been assigned the rights to the screenplay.

See id. The plaintiff alleged that the company’s continued distribution of the film

violated her copyright. See id. at 674-75. Although MGM committed arguably

infringing acts from the time the plaintiff gained the copyright in 1991, she “sought

relief only for acts of infringement occurring on or after January 6, 2006,” i.e.,

within three years of when she filed suit. Id.

Because the plaintiff did not seek to hold MGM liable for infringements

occurring more than three years before she filed suit, whether she could have done

so under the discovery rule was not at issue in Petrella. 2 Instead, the primary issue

was whether the Ninth Circuit erred by holding that the equitable defense of laches

barred the plaintiff’s claims even though they were brought within three years of

accrual. See id. at 676-77.

The Court began its analysis by explaining when a “claim ordinarily accrues.”

Id. at 670. It stated that, under the injury rule, copyright claims generally accrue

“when an infringing act occurs.” Id. at 670 & n.4. In addition, the Court observed

that, although it had “not passed on the question, nine Courts of Appeals have

adopted, as an alternative to [this] rule, a ‘discovery rule,’ which starts the

2 Indeed, the plaintiff conceded that she knew of MGM’s reproductions and

distributions of the film at the time she obtained the copyright but waited to file because the film was mired in debt and she thought it unlikely she’d recover anything. See id. at 682. 22 limitations period when ‘the plaintiff discovers, or with due diligence should have

discovered, the injury that forms the basis for the claim.’” Id. at 670 n.4 (quoting

Haughey, 567 F.3d at 433).

The Court then explained “the separate-accrual rule that [also] attends the

copyright statute of limitations.” Id. at 671. The Court stated that, under the

separate-accrual rule, “each time an infringing work is reproduced or distributed,

the infringer commits a new wrong,” and “[e]ach wrong gives rise to a discrete

claim.” Id. (internal quotation marks omitted). Furthermore, “each infringing act

starts a new limitations period.” Id.

Synthesizing the injury rule and the separate-accrual rule as they bore on the

facts of the case at hand, the Court stated that: (1) under § 507(b) and the injury

rule, “an infringement is actionable within three years, and only three years of its

occurrence”; and (2), because each infringement gives rise to a discrete claim, “the

infringer is insulated from liability for earlier infringements of the same work.” Id.

In other words, although the plaintiff’s pre-2006 claims were barred because they

were outside the limitations period, that did not prevent her from pursuing

infringement claims for conduct occurring within three years of when she filed suit

because “the statute of limitations runs separately from each violation.” Id.

Because it was undisputed that the plaintiff’s post-2006 claims were timely under

the statute, the Court held that the Ninth Circuit erred in concluding that

“infringing acts occurring before January 6, 2006, bar all relief . . . for infringement

occurring on or after that date.” Id. at 677.

23 Petrella does, however, contain statements which, read in isolation, suggest

that an infringement plaintiff cannot recover profits generated more than three

years before commencement of the action even if her claims are timely. 3 For

example, the Court stated that § 507(b) allows for “retrospective relief only three

years back from the time of the suit. No recovery may be had for infringement in

earlier years. Profits made in those years remain the defendant’s to keep.” Id. at

677. Although the Petrella Court stated that “[n]o recovery may be had for

infringement in earlier years,” and that “the infringer is insulated from liability

from earlier infringements of the same work,” these statements and others like

them must be read in context. The reason “[n]o recovery may be had” for

infringements that occur more than three years prior to the commencement of the

action is because, if—as in Petrella— the injury rule applies, such infringements

are outside the limitations period. Id. at 671, 677.

In Sohm, the Second Circuit interpreted Petrella to have “explicitly delimited

damages to the three years prior to the commencement of a copyright infringement

action” regardless of the action’s timeliness. Sohm, 959 F.3d at 51. The Second

Circuit noted that the Supreme Court “explicitly asserted that ‘a successful plaintiff

can gain retrospective relief only three years back from the time of suit’ and that ‘no

recovery may be had for infringement in earlier years.’” Id. at 52 (brackets omitted)

3 As this court noted in its prior discovery order, infringement defendants seized on this and similar language from the opinion, arguing that the Supreme Court had established a three-year limit on damages independent of, and in addition to, § 507(b)’s timeliness requirement. See doc. no. 76 at 6-7. 24 (quoting Petrella, 572 U.S. 677). Because the Second Circuit concluded that such

statements were not dicta, it held that Petrella requires courts to use the discovery

rule to determine a claim’s timeliness while simultaneously requiring courts to use

“a three-year lookback period from the time a suit is filed to determine the extent of

the relief available.” Id. After conducting another close reading of Petrella in light

of Sohm, this court respectfully disagrees with the Second Circuit’s interpretation.

As discussed, when viewed in context, this court does not agree that Petrella

is best understood as “limiting damages to the three years prior to when the suit is

filed” regardless of whether the suit is timely. Sohm, 959 F.3d at 52. The reason

that the Petrella plaintiff could not obtain relief for infringements occurring more

than three years before she filed suit was because any claim based on those

infringements would not have been timely. See Petrella, 572 U.S. at 671, 674-75.

When, as in Petrella, the injury rule applies, a plaintiff cannot recover for

infringements occurring more than three years before the commencement of its

action because such infringements are outside the limitations period. When, as

here, the discovery rule applies, recovery may be had for an infringement that

occurs more than three years prior to the commencement of the action. So long as

the action is commenced within three years after the plaintiff discovered or

reasonably could have discovered the infringement, the action is timely under

§ 507(b) and the plaintiff may seek all remedies to which it is entitled under

§ 504(b).

25 This court is not alone in its interpretation of Petrella. Most district courts to

have considered the issue have held that the limitations on damages discussed in

Petrella do not apply to claims that are timely pursuant to the discovery rule. See

Mitchell v. Capitol Records, LLC, 287 F. Supp. 3d 673, 678 (W.D. Ky. 2017) (noting

that the “relevant date . . . has always been the date of accrual,” and that, “[w]hile

Petrella uses language that suggests that no damages may be recovered for acts of

infringement which occurred more than three years prior to the initiation of the

suit, these statements cannot be isolated from the Court’s initial statement fixing

accrual at the date of occurrence”); Menzel v. Scholastic, Inc., No. 17-cv-05499-EMC,

2019 WL 6896145, at *6-*7 (N.D. Cal. Dec. 18, 2019) (rejecting argument that

Petrella created a three-year damages bar independent of the three-year limitations

period and faulting the defendant for “isolat[ing] language used in Petrella from the

broader context of the case”); Design Basics, LLC v. McNaughton Co., No. 3:17-cv-

258, 2017 WL 11068761, at *4-*5 (M.D. Pa. Nov. 15, 2017) (joining those courts that

have “rejected the notion that § 507(b) serves dual purpose as a time limit for civil

actions and a contrarily interpreted limitation on damages”); Oracle USA, Inc. v.

Rimini Street, Inc., No. 2:10-CV-00106-LRH-PAL, 2015 WL 5089779, at *6 (D. Nev.

Aug. 27, 2015) (denying motion in limine to exclude evidence of infringement

damages incurred more than three years before filing of suit because plaintiffs’

claims were timely under the discovery rule and “Petrella expressly declined to

reject the discovery rule”); Panoramic Stock Images, Ltd. v. McGraw-Hill Global

Educ. Holdings, LLC, No. 12-C-9881, 2015 WL 393381, at *1-*2 (N.D. Ill. Jan. 27,

26 2015) (holding that Petrella did not require application of a three-year damages rule

to a claim that was timely under the discovery rule). But see Navarro v. Procter &

Gamble Co., No. 1:17-cv-406, 2021 WL 184591, at *31-33 (S.D. Ohio Jan. 19, 2021)

(agreeing with Sohm that Petrella “seems to adopt a three-year lookback for

damages” independent of the statute of limitations).

For all of these reasons, and after careful consideration of Sohm and a close

review of Petrella, the court adheres to its prior ruling that the limitations on

damages discussed in Petrella do not apply to claims that are timely under the

discovery rule. Because the parties do not dispute that D’Pergo’s infringement

claim is timely under that rule, Petrella does not bar D’Pergo from recovering

profits generated more than three years before D’Pergo filed suit.

Finally, Sweetwater argues that, because it cannot be liable for profits

attributable to its infringement which arose more than three years before this

action commenced, evidence of such profits is irrelevant under Rule 401 and should

be excluded under Rule 403. However, for the reasons already explained,

Sweetwater may be held liable for such profits. Any evidence of such profits is

therefore relevant.

For these reasons, the court denies Sweetwater’s motion in limine to exclude

evidence of profits it generated more than three years before D’Pergo filed suit (doc.

no. 160).

27 C. Sweetwater’s Motion to Admit Evidence of the Parties’ Respective Conduct Upon Learning of the Infringement (doc. no. 159)

Sweetwater next moves in limine to admit evidence of the parties’ respective

conduct after learning that D’Pergo’s photograph appeared on Sweetwater’s

website. Sweetwater claims that, when D’Pergo’s owner, Stephan Dapergolas,

learned that a photograph of his guitar necks appeared on Sweetwater’s website, he

“did not immediately alert Sweetwater, but instead promptly retained a damages

consultant.” Doc. no. 159-1 at 2. Sweetwater contends that Dapergolas then

worked with this consultant for nearly a year before finally contacting Sweetwater.

By contrast, Sweetwater states that when it learned of the Photograph’s presence

on its website, Sweetwater “immediately removed [it] and apologized for its use.”

Id. Sweetwater claims that D’Pergo then waited almost another year before

bringing this lawsuit.

D’Pergo agrees that evidence of its conduct and Dapergolas’s conduct is

admissible. However, D’Pergo contends evidence of Sweetwater’s conduct is

inadmissible. Sweetwater counters that the evidence of both parties’ conduct is

admissible to provide context to D’Pergo’s infringement claim. See Faigin v. Kelly,

184 F.3d 67, 81 (1st Cir. 1999) (noting the “well-settled” proposition that “context

evidence is generally admissible”).

The court agrees with Sweetwater. Although the jury will only decide the

extent of Sweetwater’s liability for copyright infringement, evidence of both parties’

conduct surrounding the infringement is “admissible to ‘paint the backdrop’ of the

case.” Bartlett v. Mut. Pharm. Co., Inc., No. 08-cv-00358-JL, 2010 WL 3210724, at

28 *1 (D.N.H. Aug. 10, 2010) (brackets omitted) (quoting Faigin, 184 F.3d at 81).

Providing the jury with this case’s “relevant background information” will allow

them “to stitch together an appropriate context” to assess evidence of Sweetwater’s

liability for copyright infringement. United States v. McKeeve, 131 F.3d 1, 13 (1st

Cir. 1997) (noting that trials are “meaty affairs,” and “courts should not insist that

all taste be extracted from a piece of evidence before a jury can chew on it”).

D’Pergo next contends that, even if evidence of Sweetwater’s conduct is

relevant to provide context, its probative value is substantially outweighed by the

danger of unfair prejudice. See Fed. R. Ev. 403. D’Pergo states its belief that

Sweetwater may inappropriately argue from this evidence “that it was an innocent,

inadvertent infringer of D’Pergo’s copyright.” Doc. no. 185 at 4. Though the court

expresses no opinion on whether such argument would be appropriate, the

possibility that Sweetwater may make an inappropriate argument to the jury does

not constitute a basis to exclude Sweetwater’s post-notification conduct under Rule

403. To the extent D’Pergo finds Sweetwater’s arguments at trial objectionable, it is

free to object to those arguments at the time they are made.

For these reasons, the court grants Sweetwater’s motion in limine to

admit evidence of the parties’ respective conduct after learning of the

Photograph’s presence on Sweetwater’s website (doc. no. 159).

29 CONCLUSION

The jury will be instructed, in some fashion, that D’Pergo must prove a

causal nexus between Sweetwater’s infringement and the gross revenue

figure D’Pergo presents. Sweetwater’s motion in limine to exclude evidence

of indirect profits (doc. no. 161) is denied, as is its motion to exclude evidence

of profits generated more than three years before D’Pergo filed suit (doc. no.

160). Sweetwater’s motion to admit evidence of the parties’ respective

conduct after learning of the Photograph’s presence on Sweetwater’s website

(doc. no. 159) is granted.

SO ORDERED.

__________________________ Landya McCafferty United States District Judge

January 28, 2021

cc: Counsel of Record.