United States Court of Appeals For the First Circuit
Nos. 21-1645, 21-1691
D'PERGO CUSTOM GUITARS, INC.,
Plaintiff, Appellant, Cross-Appellee,
v.
SWEETWATER SOUND, INC.,
Defendant, Appellee, Cross-Appellant.
APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Landya B. McCafferty, U.S. District Judge]
Before
Kayatta and Howard, Circuit Judges, and Walker, District Judge.*
Robert E. Allen, with whom Lawrence M. Hadley, Thomas P. Burke Jr., and Glaser Weil Fink Howard Avchen & Shapiro, LLP were on brief, for appellant/cross-appellee. Edward J. Sackman, with whom Richard C. Gagliuso, Lauren M. Pritchard, and Bernstein, Shur, Sawyer & Nelson, P.A. were on brief, for appellee/cross-appellant.
July 30, 2024
* Of the District of Maine, sitting by designation. HOWARD, Circuit Judge. This appeal stems from a lawsuit
brought by D'Pergo Custom Guitars, Inc., against Sweetwater Sound,
Inc., over a photo that Sweetwater used on its website. D'Pergo
brought claims alleging, in relevant part, copyright infringement
under the Copyright Act, trademark infringement under the Lanham
Act, and a violation of the New Hampshire Consumer Protection Act
("CPA"). On cross-motions for summary judgment, the district court
granted summary judgment to Sweetwater on the trademark claim and
to D'Pergo on the copyright claim. The district court then held
a simultaneous bench and jury trial, where the court found in favor
of Sweetwater on the CPA claim and a jury determined that, on the
copyright claim, D'Pergo was entitled to approximately $75,000 in
compensatory damages. The jury based its damages award on findings
that D'Pergo could recover the actual damages it suffered but could
not recover the portion of Sweetwater's profits that D'Pergo
claimed were earned by virtue of the infringement.
The parties now bring a medley of challenges to the
proceedings below. D'Pergo appeals the district court's grant of
summary judgment to Sweetwater on the trademark claim and the
district court's bench trial ruling in favor of Sweetwater on the
CPA claim. Further, D'Pergo contends that erroneous jury
instructions warrant the reversal of the jury's finding that
D'Pergo was not entitled to recover any of Sweetwater's profits.
According to D'Pergo, the district court's instructions
- 2 - (1) misstated D'Pergo's burden of proof and (2) should have
included a "commingling" instruction. Sweetwater's cross-appeal
also takes issue with the copyright damages, which, in Sweetwater's
view, rest on inadmissible expert testimony.1
We affirm in part, reverse in part, and remand in part.
Specifically, we affirm the district court's ruling in favor of
Sweetwater on D'Pergo's CPA claim. But we reverse its grant of
summary judgment to Sweetwater on D'Pergo's trademark claim.
Furthermore, we remand for a new jury trial on the issue of
infringing profits for the copyright claim; although the district
court correctly denied D'Pergo's requested "commingling"
instruction and did not err in admitting the testimony of D'Pergo's
expert witness, we think its instruction did not accurately state
D'Pergo's burden of proof. Our reasoning follows.
I. BACKGROUND
Because the district court's orders in this case set
forth a clear and comprehensive background of the relevant facts,
we present only a summary here. See D'Pergo Custom Guitars, Inc.
v. Sweetwater Sound, Inc., 433 F. Supp. 3d 227, 230 (D.N.H. 2020)
1 In its opening brief, Sweetwater also challenged the district court's denial of Sweetwater's motion in limine seeking to limit D'Pergo's recoverable profits to the three-year period preceding the filing of this lawsuit. But after the Supreme Court's decision in Warner Chappell Music, Inc. v. Nealy, 601 U.S. ___, 144 S. Ct. 1135 (2024), Sweetwater notified the court that it "withdraws the portion of its cross-appeal seeking to limit the infringing profits period in the event of a new trial."
- 3 - ("D'Pergo I"); D'Pergo Custom Guitars, Inc. v. Sweetwater Sound,
Inc., 561 F. Supp. 3d 114, 117-20 (D.N.H. 2021) ("D'Pergo II").
D'Pergo makes and sells customized electric guitars. In
2003, Stephan Dapergolas, D'Pergo's owner, posted a photograph,
which he took, of D'Pergo's guitar necks and headstocks to
D'Pergo's website.2 The website displayed Dapergolas's photo from
2003 until 2007, when D'Pergo uploaded a professional photo in its
place.
Sweetwater sells guitars on its website. Although
Sweetwater does not sell D'Pergo guitars, Dapergolas's photo of
the D'Pergo guitar necks and headstocks was uploaded to
Sweetwater's website in 2004. The photograph appeared on a page
of Sweetwater's website titled "Electric Guitar Buying Guide" in
a section titled "Guitar necks explained." At the end of the
guide, a heading titled "Shop for Electric Guitars" links back to
Sweetwater's main website, and a section titled "Check Out These
Great Products" advertises certain guitars for sale.
In January 2015, Dapergolas discovered that Sweetwater's
guide used his photo. He then applied for and received a copyright
registration for the photo. In January 2016, he told Sweetwater
that the photo on its website was his, and Sweetwater immediately
2A guitar's "headstock" is located at the top of the guitar's neck and connects the guitar's tuning keys to its strings.
- 4 - removed it from its website.3 D'Pergo also trademarked its
headstock design depicted in the photo later that year.
In December 2017, D'Pergo brought this lawsuit. Ruling
on the parties' cross-motions for summary judgment, the district
court granted summary judgment to Sweetwater on the trademark claim
and to D'Pergo on the copyright claim. D'Pergo I, 433 F. Supp. 3d
at 235, 237. The court then held a jury trial on the copyright
damages and, simultaneously, a bench trial on D'Pergo's CPA claim.
The jury awarded $74,360 in actual damages to D'Pergo but did not
award any infringing profits, and the district court found in favor
of Sweetwater on the CPA claim. D'Pergo II, 561 F. Supp. 3d at
116-17 & n.1.
These appeals followed.
II. D'PERGO'S APPEAL
A. CPA Claim
D'Pergo first appeals the district court's judgment in
favor of Sweetwater on D'Pergo's CPA claim following the conclusion
of a bench trial. "Where a district court conducts a bench trial
and serves as the factfinder, we review its factual findings for
clear error." Sawyer Bros., Inc. v. Island Transporter, LLC, 887
F.3d 23, 29 (1st Cir. 2018). We review its legal determinations
3 Upon investigation, Sweetwater discovered that a former employee had put the photo into the guide, but it was unable to determine the identity of that employee or why the employee had used the photo in the guide.
- 5 - de novo. N. Ins. Co. of N.Y. v. Point Judith Marina, LLC, 579
F.3d 61, 67 (1st Cir. 2009).
The CPA provides that it is "unlawful" to use "any unfair
method of competition or any unfair or deceptive act or practice
in the conduct of any trade or commerce within" New Hampshire.
N.H. Rev. Stat. Ann. § 358-A:2. The statute sets forth a
non-exclusive list of such methods, acts, and practices. See id.
In addition, a plaintiff making a CPA claim must show that the
defendant's conduct involved "a degree of knowledge or intent."
Kelton v. Hollis Ranch, LLC, 927 A.2d 1243, 1246 (N.H. 2007).
D'Pergo alleged that Sweetwater violated section
358-A:2, V. See D'Pergo II, 561 F. Supp. 3d at 121. That
subsection provides that an unfair method of competition or
deceptive act or practice can include "[r]epresenting that goods
or services have sponsorship, [or] approval . . . that they do not
have" or that "a person has a sponsorship, approval . . . or
connection that such person does not have." § 358-A:2, V; see
also § 358-A:1, I (defining "[p]erson" to include "corporations").
Here, D'Pergo alleged that Sweetwater's use of the photo
misrepresented that Sweetwater was affiliated with D'Pergo.
D'Pergo II, 561 F. Supp. 3d at 121.
The district court found that D'Pergo had not proved its
CPA claim because (1) reasonable consumers would not understand
Sweetwater's use of the photo to indicate an affiliation with
- 6 - D'Pergo; and (2) even if they would, Sweetwater had not acted with
the intent required by the CPA. Id. at 122. Because we conclude
that the second finding was supported by the evidence and not based
on any mistake of law, we do not examine the district court's first
finding.
A plaintiff can meet the section 358-A:2, V intent
requirement by showing that the defendant made the representation
at issue with "actual knowledge of its falsity or reckless
disregard for its truth, with the intent to induce [consumers]" to
enter into a transaction. Brace v. Rite Aid Corp., No. 10-cv-290,
2011 WL 635299, at *3 (D.N.H. Feb. 14, 2011). By contrast,
defendants who made a "good faith mistake" are not liable under
the CPA. Kelton, 927 A.2d at 1246.
The district court found that Sweetwater did not intend
to mislead consumers with the photograph; rather, its use of the
photo was "largely inadvertent." D'Pergo II, 561 F. Supp. 3d at
122. The employee who posted the photo, the court determined,
merely "wanted a photograph of guitar necks for the Guide." Id.
at 123. And no one else at Sweetwater had realized the photo was
D'Pergo's until D'Pergo contacted Sweetwater in January 2016, at
which point Sweetwater immediately removed the photo. Id. at
122-23.
D'Pergo asserts that the district court "overstated"
the CPA's intent requirement when it held that D'Pergo failed to
- 7 - prove that Sweetwater acted with the intent required for a CPA
violation. But the court made no such mistake. It concluded that
Sweetwater's use of the photo was "largely inadvertent," id. at
122, and thus D'Pergo did not show that Sweetwater acted with
"reckless disregard" for the truth, id. (citation omitted). The
only countervailing evidence to which D'Pergo points is the
testimony from its photography expert, Jeffrey Sedlik, that
Sweetwater "made numerous changes to the [photo] and failed to
provide proper attribution, which in [Sedlik's] professional
opinion confirmed that Sweetwater['s] copying . . . was
intentional." Sedlik's testimony, however, concerned the unknown
employee's actions and does not contradict the district court's
conclusions. The court reasonably concluded that the employee
simply wanted a photo of guitar necks and that, other than a lone
employee, no one at Sweetwater was aware of the photograph's true
origin until D'Pergo alerted Sweetwater. Id. at 122-23. We thus
affirm the district court's judgment in favor of Sweetwater on
D'Pergo's CPA claim.
B. Trademark Claim
D'Pergo next challenges the district court's grant of
summary judgment to Sweetwater on D'Pergo's trademark claim. We
review a district court's grant of summary judgment de novo.
Murray v. Kendred Nursing Ctrs. W. LLC, 789 F.3d 20, 25 (1st Cir.
2015).
- 8 - In granting Sweetwater's summary-judgment motion, the
district court reasoned that, because the D’Pergo headstocks were
protectable as trade dress, they were not protectable as a
trademark and that D'Pergo had waived any trade-dress claim. See
D'Pergo I, 433 F. Supp. 3d at 234-35. On appeal, D'Pergo does not
dispute that it waived any trade-dress claim but contends that the
court erred in holding that D'Pergo's registered headstock shape
was only protectable as trade dress -- in other words, that the
court erred in holding that a viable claim of trade dress precludes
a claim of trademark.
Notably, Sweetwater does not defend the district court's
rationale on appeal.4 And, indeed, there is at least some overlap
between trade-dress and trademark protections. Generally
speaking, "trade dress" refers to the packaging of a product or to
any combination of elements by which "a product or service is
presented to the buyer." J. Thomas McCarthy, McCarthy on
Trademarks and Unfair Competition § 8.1 (5th ed. 2024). But an
item can be protectable as a trademark even if it is also
protectable as trade dress. See In re Forney Indus., Inc., 955
F.3d 940, 945 (Fed. Cir. 2020) ("Trade dress is registrable as a
trademark if it serves the same source-identifying function as a
That is not to say, however, that Sweetwater waived this 4
argument. Because Sweetwater is the appellee, it need not raise all possible grounds for affirmance in its briefs. See Ms. S. v. Reg'l Sch. Unit 72, 916 F.3d 41, 48-49 (1st Cir. 2019).
- 9 - trademark."); McCarthy, supra, § 8.7, n.1. Thus, the district
court was wrong to rely on that ground to reject D'Pergo's
trademark claim.
Nevertheless, Sweetwater contends that the district
court was correct to reject D'Pergo's trademark claim because
D'Pergo itself "invited" the error. See Orenstein v. United
States, 191 F.2d 184, 193 (1st Cir. 1951) ("An appellant will not
ordinarily be permitted to complain of an error which he himself
invited . . . ."). But D'Pergo did not invite any such error.
Sweetwater points to only one discovery response, in which D'Pergo
resisted Sweetwater's requests for evidence of the headstock's
"secondary meaning" by stating that the trademark claims were "not
trade dress claims." That statement is not an assertion that
whatever is protectable as trade dress is not protectable as
trademark. For example, a plaintiff might explain that it is
asserting a due process claim under the U.S. Constitution and not
under the relevant state constitution. By doing so, the plaintiff
does not invite the defendant to argue that, because the plaintiff
makes out a viable state due process claim, the federal due process
claim fails.
Sweetwater also advances an alternative ground for
affirmance. Even if the district court's analysis was faulty,
Sweetwater argues, a reasonable jury still could not have ruled
- 10 - for D'Pergo on the trademark claim.5 To prevail on a trademark
claim, a plaintiff must show that (1) "its mark is entitled to
trademark protection"; and (2) "the allegedly infringing use is
likely to cause consumer confusion." Bos. Duck Tours, LP v. Super
Duck Tours, LLC, 531 F.3d 1, 12 (1st Cir. 2008). And, according
to Sweetwater, D'Pergo did not establish a genuine issue of fact
on either element. We disagree.
Because it presents a more straightforward question, we
begin with the second element. "Likely confusion" is "more than
the theoretical possibility of confusion." Id. (quoting Int'l
Ass'n of Machinists & Aerospace Workers v. Winship Green Nursing
Ctr., 103 F.3d 196, 200 (1st Cir. 1996)). To determine if that
standard is met, courts examine "the similarity of the marks; the
similarity of the goods; the relationship between the parties'
channels of trade; the relationship between the parties'
advertising; the classes of prospective purchasers; evidence of
actual confusion; the defendant['s] intent in adopting its mark;
and the strength of the plaintiff's mark." Pignons S.A. de
5 Although Sweetwater purports to root this argument in the harmless-error doctrine, we think it is most persuasively understood as a request to exercise our discretion to "affirm . . . on any independently sufficient ground supported by the record." Ward v. Schaefer, 91 F.4th 538, 544 n.3 (1st Cir. 2024) (quoting United States v. Nivica, 887 F.2d 1110, 1127 (1st Cir. 1996)). But the framing of Sweetwater's argument is ultimately immaterial because, for the following reasons, a reasonable jury could find for D'Pergo on the trademark claim.
- 11 - Mecanique de Precision v. Polaroid Corp., 657 F.2d 482, 487 (1st
Cir. 1981). Of those factors, "evidence of actual confusion is
'often deemed the best evidence of possible future confusion.'"
Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, 120
(1st Cir. 2006) (quoting Attrezzi, LLC v. Maytag Corp., 436 F.3d
32, 40 (1st Cir. 2006)).
Here, there was testimony at trial that at least three
people -- Kamran Khan, Jesse Lee Guanyu, and an audience member at
Julien Kasper's concert -- were confused when they saw D'Pergo's
photograph on Sweetwater's website. D'Pergo II, 561 F. Supp. 3d
at 118-19 & n.4. The district court discredited such
testimony -- either explicitly or implicitly -- for valid reasons
when ruling on D'Pergo's CPA claim. See id. at 118-19, 121. But
a reasonable jury may not have done the same. Thus, D'Pergo's
evidence creates a genuine issue on the first element.
That leaves us with the more difficult question of
whether a reasonable jury could find that D'Pergo's mark was
entitled to trademark protection. "A mark is entitled to trademark
protection if it is capable of functioning as a source-identifier
of goods." Bos. Duck Tours, 531 F.3d at 12. Trademark law has
traditionally grouped marks into one of five categories based on
their degree of capability in that regard. Id. Those categories
are, from least to most distinctive: (1) generic marks, (2)
descriptive marks, (3) suggestive marks, (4) arbitrary marks, and
- 12 - (5) fanciful marks. Id. Generic marks never receive trademark
protection. Id. at 13-14. Descriptive marks are entitled to
trademark protection when a plaintiff shows that they have some
"secondary meaning" -- that is, when "a substantial portion of the
consuming public associates [the trademark] specifically with [the
plaintiff's] business." Flynn v. AK Peters, Ltd., 377 F.3d 13, 20
(1st Cir. 2004) (quoting Bos. Beer Co. v. Slesar Bros. Brewing
Co., 9 F.3d 175, 182 (1st Cir. 1993)). Suggestive, arbitrary, and
fanciful marks are "inherently distinctive," and a plaintiff does
not need to prove that those marks have some secondary meaning.
Bos. Duck Tours, 531 F.3d at 12-13.
Nevertheless, several courts have observed that the five
categories of distinctiveness are not particularly useful for
non-word designations, like D'Pergo's headstock design. See
McCarthy, supra, § 11:2, n.19 (collecting cases). And the parties
dispute whether D'Pergo's trademark is inherently distinctive or
is instead a product design that always requires proof of secondary
meaning. See Wal-Mart Stores, Inc. v. Samara Bros., 529 U.S. 205,
216 (2000).
For present purposes, we can assume, without deciding,
that D'Pergo was required to prove secondary meaning because its
proof narrowly creates a genuine issue on that score. D'Pergo
correctly points out that actual confusion is evidence of secondary
meaning. See Am. Sci. Chem., Inc. v. Am. Hosp. Supply Corp., 690
- 13 - F.2d 791, 793 (9th Cir. 1982). And, as mentioned above, D'Pergo
introduced testimony from at least three people who were confused
by Sweetwater's use of D'Pergo's headstock design. See D'Pergo
II, 561 F. Supp. 3d at 118-19 & n.4. Further, although the district
court concluded that non-D'Pergo guitars and D'Pergo guitars had
"substantially similar shapes, curvatures, and size, among other
characteristics," it noted that "several of D'Pergo's witnesses
testified that a person with knowledge of guitars can discern a
guitar's brand merely by the shape of its headstock." Id. 121-22.
Sweetwater urges us to follow our 2004 decision in Flynn
v. AK Peters, Ltd., which it claims establishes that evidence of
a few people in a field recognizing a mark is not enough to create
a material issue about a mark's secondary meaning. See 377 F.3d
at 22. In Flynn, an author asserted a trademark claim based on
the use of her name on a book without her consent. Id. at 18. At
summary judgment, she had submitted a curriculum vitae and an
affidavit in which she stated that she had worked in the robotics
field since 1985, had given 70 invited talks, had written 29 papers
in the field, and had founded a company designing micro robots.
Id. at 18, 20-21. But we discounted such evidence, noting that
testimony by a party is self-serving and does not speak to whether
an average consumer of the book at issue would be aware of her
name. Id. at 21. She had also stated in her affidavit that "a
handful of strangers" had approached her and told her that they
- 14 - recognized her from a talk or that they had read her book; and her
nephew in an affidavit said that a robotics graduate student told
to him that his aunt was "famous." Id. But we concluded that
"such limited anecdotal evidence" at most showed that "a handful
of individuals in the [robotics] field have recognized her name
and face," but not that "the relevant consumers have associated
her name with a product." Id. at 21-22.
Here, although we agree with Sweetwater that D'Pergo's
showing of secondary meaning was minimal, D'Pergo's evidence was
more relevant than the author's in Flynn. D'Pergo put forth the
testimony of three consumers from the relevant market, who had
been on Sweetwater's website and seen the photo containing the
headstock design. That was enough (if barely) to create a genuine
issue as to whether D'Pergo's mark was entitled to trademark
protection. Accordingly, we reverse the court's grant of summary
judgment to Sweetwater on D'Pergo's trademark claim, albeit with
some reluctance given the wispiness of the evidence that D'Pergo
advanced in the district court.
C. Infringing Profits: Burden of Proof
D'Pergo next challenges the substantive content of the
district court's jury instruction concerning D'Pergo's burden of
proof to recover infringing profits for Sweetwater's copyright
infringement.
In reviewing a challenge to a jury instruction, we
- 15 - "consider[] the big picture, asking whether the charge in its
entirety -- and in the context of the evidence -- presented the
relevant issues to the jury fairly and adequately." Goodman v.
Bowdoin Coll., 380 F.3d 33, 47 (1st Cir. 2004). We generally
review the instruction de novo, with certain exceptions not
relevant here. See id. "An erroneous jury instruction warrants
a new trial if 'the preserved error . . . can fairly be said to
have prejudiced the objecting party.'" Id. (quoting Levinsky's,
Inc. v. Wal–Mart Stores, Inc., 127 F.3d 122, 135 (1st Cir. 1997)).
D'Pergo proposed an instruction reading: "Once D'Pergo
presents evidence of Sweetwater's gross revenues, there is a
rebuttable presumption that all of those gross revenues are
entirely attributable to the infringement, and the burden shifts
to Sweetwater to establish what portion of its gross revenues were
attributable to factors other than the photograph." The district
court rejected that instruction, and instructed the jury instead
as follows:
You may make an award of the defendant's profits only if you find that the plaintiff showed a causal relationship between the defendant's infringement and the defendant's revenues that are attributable to the infringement. If you conclude that the plaintiff has not shown a causal relationship between the defendant's infringement and the defendant's revenues, you may not award any of the defendant's profits to the plaintiff.
The plaintiff can establish the required causal relationship by showing that the
- 16 - defendant profited from the use of the photograph. In other words, the plaintiff can seek to establish that the photograph helped the defendant sell its products, and that the defendant did sell its products as a result of the photograph. The plaintiff need not establish that any particular consumer bought a guitar because of the infringing photograph.
D'Pergo contends that requiring it to demonstrate a
"causal relationship" overstated its burden and is inconsistent
with our precedent. We agree.
The Copyright Act provides that
[t]he copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. 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.
17 U.S.C. § 504(b). Courts have rejected a "highly literal
interpretation" of § 504(b), On Davis v. The Gap, Inc., 246 F.3d
152, 160 (2d Cir. 2001), because, read literally, "[a] plaintiff
in a copyright action against a multi[-]division, 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). Thus, many circuits have concluded that a
- 17 - plaintiff must show some relationship between the infringement and
the revenue figure presented but have described that relationship
using different terminology. See On Davis, 246 F.3d at 160
("reasonably related"); William A. Graham Co. v. Haughey, 646 F.3d
138, 141 (3d Cir. 2011) ("causal nexus"); Bonner v. Dawson, 404
F.3d 290, 294 (4th Cir. 2005) ("reasonably related"); Powell v.
Penhollow, 260 F. App'x 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.");
Thoroughbred Software Int'l, Inc. v. Dice Corp., 488 F.3d 352, 360
(6th Cir. 2007) (same); Andreas v. Volkswagen of Am., Inc., 336
F.3d 789, 796 (8th Cir. 2003) ("nexus"); Polar Bear, 384 F.3d at
711 ("legally significant relationship"); Univ. of Colo. Found.,
Inc. v. Am. Cyanamid Co., 196 F.3d 1366, 1375 (Fed. Cir.
1999) ("connection").
Sweetwater contends that these different standards are,
in essence, the same. That may be true as to some. But we discern
a real difference between requiring a "causal relationship," as
the district court did here, and requiring, for example, a
"reasonable relationship."
We are not starting from scratch in determining what
standard we should apply. In Data General Corp. v. Grumman Systems
- 18 - Support Corp., 36 F.3d 1147 (1st Cir. 1994),6 we explained that
"the plaintiff must meet only a minimal burden of proof in order
to trigger a rebuttable presumption that the defendant's revenues
are entirely attributable to the infringement" and that "the burden
then shifts to the defendant to demonstrate what portion of its
revenues represent profits, and what portion of its profits are
not traceable to the infringement." Id. at 1173 (emphasis added).
Thus, we noted that the plaintiff there had met its burden by
demonstrating "that, of [the defendant's] gross revenue" from the
relevant time period, "$5.4 million consisted of business
eliminated from the calculation of [plaintiff's] lost profits."
Id. at 1152, 1155, 1174. And we further stated that the
"rebuttable presumption of causation" is a presumption as to
"cause-in-fact and proximate cause" and that "[t]he 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 claimed by the
plaintiff." Id. at 1175.
It would be odd to describe the plaintiff's burden as
"minimal" and the defendant's burden as one of disproving a
presumption of causation if in fact that minimal burden was to
demonstrate a causal relationship between gross revenues and the
6Data General was abrogated on other grounds by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010).
- 19 - infringement. Instead, we hold that "the minimal burden" described
in Data General is akin to proof of a "reasonable relationship."
That standard is more consistent with § 504(b), which, as noted,
read literally, only requires that the profits be attributable to
the infringement.7
Accordingly, the district court's jury instruction
conflicted with our precedent. We must remand, then, if the
instructional error "may have unfairly affected the jury's
7 Nor do we agree with Sweetwater that we implicitly overruled Data General in Jane Doe No. 1 v. Backpage.com, LLC, 817 F.3d. 12 (1st Cir. 2016). There, a sex-trafficking victim sued an owner of a website selling online classified advertisements for infringement of her photograph, which had been posted on the website by her trafficker. Id. at 16-17, 28. We affirmed the dismissal of her complaint, noting that "a generalized assertion that a publisher/infringer profits from providing customers with the option to display photographs in advertisements, standing alone, [could not] plausibly be said to link the display of a particular image to some discrete portion of the publisher/infringer's profits." Id. at 28. Sweetwater points to language in Backpage describing the plaintiff's burden as a burden to demonstrate a "link," and to our citation to Mackie v. Rieser, a case decided by the Ninth Circuit, which requires a "causal link" between the revenues and the infringement element. Backpage, 817 F.3d at 28-29 (citing Mackie v. Rieser, 296 F.3d 909, 914-16 (9th Cir. 2002)). But the plaintiff in Backpage would not have satisfied any of the standards at issue -- whether the "reasonable relationship" or "causal relationship" standard, or another -- and thus the precise version of that test was not relevant to the disposition of the case. Moreover, although we used the word "link," we did not use the phrase "causal link," and we cited parenthetically to Mackie because of its analogous facts; it, too, had involved an infringing photograph in an advertising brochure. See id. at 28-29 (describing parenthetically Mackie's analogous facts and disposition). Thus, Backpage did not implicitly overrule Data General.
- 20 - conclusion[]." Allen v. Chance Mfg. Co., 873 F.2d 465, 470 (1st
Cir. 1989) (emphasis added).
Although we suspect that the instruction would not have
made a difference in this case, we cannot be sure. Some customers
testified that they purchased guitars from Sweetwater after first
viewing the guide containing the photo. A reasonable juror, then,
could have viewed revenue from Sweetwater's online sales of
electric guitars and guitar accessories (which D'Pergo's expert
purported to further narrow to represent only those sales made to
customers who had viewed the guide before making their purchases)
as reasonably related to the infringing use of D'Pergo's photo.
And, on this record, it is not clear whether the jury awarded
D'Pergo zero infringing profits because it concluded that D'Pergo
had not proved a causal relationship -- which, for the reasons
explained above, would be problematic -- or because it concluded
that Sweetwater's net profits discussed at trial were attributable
to factors other than the infringement. Therefore, despite our
doubts that the jury will reach a different result, we remand for
a new trial as to infringing profits with an instruction reflecting
Data General's reasonable-relationship requirement.8
8 We note, for purposes of remand, that we nevertheless believe that the district court was correct to refuse to give the jury instruction that D'Pergo had proposed, which erroneously suggested that the plaintiff need not show any relationship at all between revenues and the infringement and is therefore also inconsistent with our caselaw.
- 21 - D. Infringing Profits: Commingling
D'Pergo also contends that the district court erred in
refusing to give its requested instruction on "commingling." That
instruction read as follows:
To recover defendant's profits when the defendant has combined infringing and noninfringing elements into one work, the plaintiff need demonstrate only a reasonable relationship between the work as a whole and defendant's profit, not between the specific infringed element and defendant's profit.
Where the district court refuses to give an instruction,
"we review that issue de novo . . . reversing only if the rejected
instruction was [1] substantively correct, [2] essential to an
important issue in the case, and [3] not substantially covered in
the charge given." Rodríguez v. Señor Frog's de la Isla, Inc.,
642 F.3d 28, 36 (1st Cir. 2011) (citations omitted).
Because we conclude that D'Pergo's requested instruction
was not substantively correct and that, in any event, the correct
law was substantially covered in the charge given, we affirm the
district court's refusal to give the requested instruction.
In Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390
(1940), the Supreme Court clarified that "[w]here there is a
commingling of gains" -- that is, where some but not all of the
profits were due to the infringement -- "[the infringer] must abide
the consequences, unless [it] can make a separation of the profits
so as to assure . . . the injured party all that justly belongs to
- 22 - him." Id. at 406 (emphasis added). D'Pergo claims that, under
Sheldon, it needed only to show a relationship between the guide
and the revenues, rather than between the infringing photo and the
revenues. Thus, it argues, the district court's instruction that
the jury needed to find a relationship between the photograph and
the revenues was not sufficient. But that argument misconstrues
Sheldon. The commingling referred to in Sheldon was the
commingling of infringing and non-infringing profits -- not
infringing and non-infringing elements of the offending work --
and refers to the defendant's burden to apportion such profits.
Sheldon referred to a "commingling of gains," id., and Data General
likewise explained that the burden-shifting rule is "an equitable
response to an infringer who has frustrated the task of
apportionment by co-mingling profits," 36 F.3d at 1176.
The plaintiff's burden, on the other hand, is to
establish a relationship between the infringing element (here, the
photograph) and the gross revenue figure it offers. Thus,
D'Pergo's instruction, which stated that it only needed to
demonstrate a relationship between the guide and the defendant's
profits, is substantively incorrect.
And in any event, the charge given sufficiently covered
Sweetwater's burden. Specifically, the district court addressed
Sweetwater's burden by instructing the jury that "[t]he defendant
has the burden of proving its non-infringing revenue by a
- 23 - preponderance of the evidence"; that the defendant has "the burden
of proving its expenses by a preponderance of the evidence"; and
that the jury should "subtract non-infringing revenue[s]" which
the court defined as "all the revenue defendant made from factors
other than the infringement," and should "deduct expenses from the
defendant's gross revenue that have a connection to the sale of
products associated with the infringement." Those instructions
accurately conveyed the concept of commingling gains to the jury.
The cases D'Pergo cites do not support its requested
instruction. In Andreas v. Volkswagen of America, Inc., 336 F.3d
789 (8th Cir. 2003), the Eighth Circuit concluded that the jury
had "enough circumstantial evidence to find that [a] commercial
[for the TT coupe]" -- in which the copyrighted phrase of the
plaintiff appeared -- "contributed to the profitable introduction
of the TT coupe," and that the burden had then shifted to Audi to
show "what effect other factors had on its profits." Id. at 791,
797. But the court in Andreas specifically found that the
plaintiff had "met his burden of establishing a nexus between the
infringement and Audi's sale of TT coupes." Id. at 798 (emphasis
added). Thus, it is not true that the Eighth Circuit in Andreas
only required the plaintiff to prove that the commercial, rather
than the copyrighted phrase, contributed to the profitable
introduction of the TT coupe.
The same is true of Frank Music Corp. v. Metro-Goldwyn-
- 24 - Mayer, Inc., 772 F.2d 505 (9th Cir. 1985). D'Pergo contends that,
in Frank, the Ninth Circuit discussed the "promotional value of
the musical" -- which included five infringing songs of the
plaintiff -- on hotel and gaming revenues, not "the promotional
value of the songs to those revenues." But, in fact, it discussed
at length why the songs themselves "contributed" to such revenues.
See id. at 518.
In summary, we conclude that D'Pergo's proposed
instruction was incorrect and that "commingling" properly
understood was already covered by the other instructions.
Accordingly, we affirm the district court's refusal to give the
instruction.9
III. SWEETWATER'S CROSS-APPEAL
We turn now to Sweetwater's cross-appeal on damages.
Sweetwater asks us to vacate the actual damages awarded to D'Pergo
for Sweetwater's copyright infringement because, in its view, that
award rested on testimony of D'Pergo's photography expert, Sedlik,
9 In response to a question from the jury as to whether they could substitute the word "[g]uide" for the word "photograph" in the "causal relationship" instruction, the district court told the jury that it must follow the instructions as given. D'Pergo, however, does not allege error on that basis alone; it points to the question as evidence that the commingling instruction was not covered by the other instructions. But because the district court was not obligated to provide the proposed commingling instruction here, we conclude that the court's response to the jury's question was substantively correct.
- 25 - that the district court erroneously admitted.10
We review a district court's decision to admit expert
testimony for abuse of discretion. First Marblehead Corp. v.
House, 541 F.3d 36, 40 (1st Cir. 2008). The admissibility of such
testimony is governed by Federal Rule of Evidence 702, which states
that:
A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.
Fed. R. Evid. 702 (2011) (amended 2023).11 In applying Rule 702,
10Although Sweetwater challenges the damages award, it asks that we do not order a new trial on damages because such a proceeding is "unnecessary." This request implicates weighty Seventh Amendment concerns. See Bisbal-Ramos v. City of Mayaguez, 467 F.3d 16, 26 (1st Cir. 2006) ("With regard to compensatory damages, an order entering 'judgment for a lesser amount than that determined by the jury without allowing petitioner the option of a new trial, cannot be squared with the Seventh Amendment.'" (quoting Hetzel v. Prince William Cnty., 523 U.S. 208, 211, (1998) (per curiam))). Yet, we do not address those concerns today because, for the following reasons, Sweetwater's cross-appeal fails on its merits. 11In December 2023, two years after the trial, Rule 702 was amended. In evaluating Sweetwater's claim of error, we apply the version of Rule 702 in effect at the time of the bench trial. See
- 26 - a district court must principally determine whether the "expert's
proffered testimony both rests on a reliable foundation and is
relevant to the task at hand." Carrozza v. CVS Pharm., Inc., 992
F.3d 44, 56 (1st Cir. 2021) (cleaned up) (quoting Samaan v. St.
Joseph Hosp., 670 F.3d 21, 31 (1st Cir. 2012)).
As summarized by Sweetwater, Sedlik testified that,
based on his survey of images from stock photography licensing
websites, an appropriate base license fee for the uses that
Sweetwater made of the photo amounted to $31,669. However, he
testified that that fee should be multiplied three to five times
to account for the "scarcity" of the photograph, and then by five
to ten times to account for the "competitive use" of the
photograph.12 When asked about his calculations, he at one point
testified that he determined that the photo was scarce because
"Sweetwater or its employee or contractor selected this photo for
In re Onglyza (Saxagliptin) & Kombiglyze (Saxagliptin & Metformin) Prods. Liab. Litig., 93 F.4th 339, 345 n.4 (6th Cir. 2024); In re Cooper Tire & Rubber Co., 568 F.3d 1180, 1186 n.4 (10th Cir. 2009). But we note that the 2023 amendments do not meaningfully affect our analysis. See Fed. R. Evid. 702 advisory committee's note to 2023 amendment. While we understand that Sedlik’s multipliers for scarcity 12
and competitive use are intended to calculate the fair market value of a hypothetical license fee, we question whether Sedlik offered an adequate basis to substantiate the multipliers. For example, Sedlik offered no explanation -- beyond his own experience -- as to why the licensing fee of a scarce image should be multiplied three to five times, as opposed to some other numerical range. But because Sweetwater has not advanced this challenge to Sedlik’s testimony, we do not address it.
- 27 - a reason." He also testified as to scarcity that "Sweetwater's
own selection and use of the photograph demonstrates the quality
of the photograph." As to the competitive-use multiplier, he
explained that he asked whether "[w]hen Mr. Dapergolas and
Sweetwater are sitting at that negotiating table, [it would] be
reasonable for Mr. Dapergolas to expect that he would be paid more
because it's a competitive use than he would if it was a
noncompetitive use." And he concluded that "in [his] opinion and
in all of [his] experience, the answer is yes and that's entirely
reasonable."
Sweetwater contends that Sedlik's testimony should have
been excluded for two reasons. First, Sweetwater argues that
Sedlik based his determination that the photo was scarce and used
competitively on his "subjective belief or unsupported
speculation." Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579,
590 (1993). Second, Sweetwater argues that the testimony
impermissibly relied on the parties' identities. By allowing
testimony based on the parties' identities, Sweetwater claims, the
court misapplied the so-called hypothetical transaction test.
Under that test, damages for copyright infringement are measured
by what a hypothetical, willing buyer and seller would have paid
for a license. See On Davis, 246 F.3d at 170-72. "The question
is not what the owner would have charged, but rather what . . .
the fair market value [is]." Id. at 166. Sweetwater also asserts
- 28 - that these erroneous identity references must have prejudiced the
jury because the damages verdict of $74,360 was exactly five times
Sedlik's base license fee of $14,872 for use of the photograph on
a corporate website, meaning that the jury accounted for either
scarcity or competitive use.
But neither the multipliers nor the references to the
parties' identities require us to vacate the damages award. First,
in explaining the methodology underlying the scarcity multiplier,
he testified that he searched for images showing multiple guitar
necks and found "none that showed [] the variety of guitar necks
that are shown in [the photo]." He also found no other images
showing "the variety of woods and designs of necks"; from there,
he concluded that there "was no suitable alternative." Thus, he
determined that the photo was a "rare or scarce image in the
marketplace" and that "[r]are photographs typically demand
somewhere between three and five times what a generic photograph
would command for the exact same usage." In light of such
explanations, the district court did not abuse its discretion in
concluding that Sedlik's testimony was based upon "'sufficient
facts or data' that result[ed] from the application of 'reliable
principles and methods,'" First Marblehead Corp., 541 F.3d at 41
(quoting Fed. R. Evid. 702), and that Sweetwater's contentions to
the contrary went to the weight of the evidence, rather than to
its admissibility.
- 29 - Our conclusion is bolstered by the fact that the Third
Circuit has refused to overturn a jury award of actual damages
under § 504(b) that encompassed Sedlik's multipliers under similar
circumstances, concluding that Sedlik's multipliers were not
punitive, but rather, were used to "calculate fair market value."
See Leonard v. Stemtech Int’l Inc., 834 F.3d 376, 393 (3d Cir.
2016). Sweetwater attempts to distinguish Leonard on the basis
that, there, the parties did not expressly challenge Sedlik's use
of multipliers. The Third Circuit, however, did not rest its
decision on waiver grounds; it merely noted that "there is a
question" whether they had waived such a challenge. Id. at 392
n.13. Indeed, the Leonard court reasoned that because neither
party had "asserted waiver," it would nevertheless "address [the]
challenge to [his] use of a multiplier for scarcity and
exclusivity." Id.
Second, the district court acted within its considerable
discretion in determining that Sedlik did not impermissibly rely
on the parties' identities because the hypothetical seller/buyer
test permits some consideration of the relative positions of the
parties. For example, in Jarvis v. K2 Inc., 486 F.3d 526 (9th
Cir. 2007), the Ninth Circuit noted that "objective considerations
of market value" included the testimony of a senior executive of
the defendant company as to how much he would pay for images for
different uses. Id. at 534. And in Bruce v. Weekly World News,
- 30 - Inc., 310 F.3d 25 (1st Cir. 2002), we noted that "proof of industry
practice" is crucial to the estimation of "actual damages," and
credited the testimony of the defendant's expert that "Bruce almost
surely would not have been able to negotiate with World News for
anything other than a single, lump-sum, up-front licensing fee."
Id. at 29-30.
Moreover, we think that the more reasonable reading of
the testimony to which Sweetwater points is that Sedlik was using
the parties' names as stand-ins for the hypothetical seller and
buyer negotiating from a competitive standpoint. That is
underscored by Sedlik's testimony, in general terms, about why
counterparties might charge more for a license to a competitor, in
which he gave as an analogy two rival shoe stores across the street
from each other where "one shoe company wants to license the shoe
photographs of its competitor." Indeed, Sedlik clarified that he
was "not talking about the [parties'] specific identit[ies]" but
was instead referring to "similarly situated entities."
Having looked at the photo and the seemingly small role
it played on Sweetwater's website, it does seem rather mind
boggling that anyone would pay $31,669 merely to license it, much
less $74,360. Sedlik cites no example of any remotely similar
market transaction, nor does he explain why a purchaser intending
such an inconsequential use as here would consider paying that
much for the photo rather than arranging and photographing on its
- 31 - own a picture of guitar necks. These concerns, however, are not
developed enough on this record to have required the trial court
to exercise its Rule 702 gatekeeping duty by barring the testimony.
Thus, Sweetwater has identified no error in the denial
of its motion to exclude Sedlik's testimony and, subsequently, we
affirm the actual damages awarded to D'Pergo on his copyright
claim.
IV. CONCLUSION
For the foregoing reasons, we affirm in part, reverse in
part, and remand in part. Specifically, we reverse the district
court's grant of summary judgment on trademark infringement, and
reverse and order a new trial on the issue of infringing profits
for Sweetwater's copyright infringement. As to all other issues,
we affirm the district court. The parties shall bear their own
costs of appeal.
- 32 -