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Live Face On Web, LLC v. Integrity Solutions Group, Inc.

United States District Court, D. Colorado

September 30, 2019

LIVE FACE ON WEB, LLC, a Pennsylvania company, Plaintiff,
v.
INTEGRITY SOLUTIONS GROUP, INC., Defendant.

          ORDER ON POST TRIAL MOTIONS ## 222, 225, 284, 285, 295

          CHRISTINE M. ARGUELLO JUDGE.

         This matter is before the Court on six post-trial motions, three filed by Defendant Integrity Solutions Group, Inc.-(1) Renewed Motion Under Fed.R.Civ.P. 50(b) to Set Aside or Vacate the Judgment (Doc. # 284), (2) Motion Under Fed.R.Civ.P. 59 for a New Trial or for Remittitur (Doc. # 285), and (3) Motion for Protective Order (Doc. # 295)-and two filed by Plaintiff Live Face On Web, LLC-(4) Motion for Prejudgment Interest (Doc. # 222) and Plaintiff's Motion for Fees and Full Costs (Doc. # 225). The Court addresses each motion in turn.

         I. PROCEDURAL BACKGROUND

         Plaintiff Live Face on Web, LLC (“LFOW” or “Plaintiff”), develops and licenses computer software that allows websites to display a video of a walking, talking spokesperson (“Virtual Greeter Video”). At issue in this case was Version 7.0.0 of LFOW's software (“LFOW Code”), which is computer code producing the Virtual Greeter Video on webpages when persons visit a website that uses the LFOW Code. Plaintiff asserted that its registered copyright # TXu001610441 protects the LFOW Code.

         Defendant Integrity Solutions Group, Inc. (“Integrity” or “Defendant”) is a Colorado corporation that develops private document sharing sites for use in construction projects. It maintains a website at programnetinc.com and uses a web developer, Speaking Analytics, Inc./10 Pound Gorilla to develop and manage its website. The web developer recommended that Defendant purchase a virtual greeter video to display in its website from another company, Tweople/Yakking Heads. Tweople/Yakking Heads created the video and gave the web developer software that enabled the virtual greeter video to appear on Integrity's website. Defendant asserts that it paid Tweople $159.00 for these services. Defendant's web developer implemented Tweople/Yakking Heads' software on Integrity's website.

         On June 24, 2016, Plaintiff initiated this action and asserted one claim of copyright infringement under 17 U.S.C. § 501 against Defendant, alleging that Defendant used and distributed an infringing version of its LFOW Code that is protected by a copyright. (Doc. # 1.) It sought to recover actual damages, any profits of Integrity, and attorneys' fees and costs. (Id. at 52-54.)

         Throughout this litigation, Integrity has denied infringement and asserted that Plaintiff did not have a valid copyright for the LFOW Code, that Plaintiff cannot demonstrate infringement, that Plaintiff cannot prove it suffered damages, and that Plaintiff cannot recover Integrity's profits as damages.

         The Court held a five-day jury trial on October 1-5, 2018. (Doc. ## 199, 201, 202, 209, 210.) At the close of Plaintiff's case, Defendant moved for judgment as a matter of law under Federal Rule of Civil Procedure 50(a), which the Court denied. (Doc. # 202.) On October 5, 2018, the Jury returned a verdict in favor of Plaintiff on its copyright infringement claim, awarding Plaintiff $262, 197.00 for the copyright infringement claim. (Doc. ## 215, 216.)

         On October 5, 2018, the Court entered final judgment in favor of Plaintiff and against Defendant (Doc. # 217), and on October 19, 2018, the Clerk of the Court taxed Defendant with $8, 763.75 in costs (Doc. # 226).

         II. DEFENDANT'S RENEWED MOTION UNDER FED. R. CIV. P. 50(b)

         The Court first addresses Defendant's Renewed Motion Under Fed.R.Civ.P. 50(b) (Doc. # 284), filed on November 9, 2018, and fully briefed by December 7, 2019. Therein, Defendant argues that it is entitled to judgment as a matter of law on Plaintiff's copyright infringement claim because Plaintiff: (1) failed to introduce evidence of copying; (2) failed to introduce evidence of distribution; and (3) failed to prove damages based on Defendant's actual use of LFOW Code. (Id.) For the following reasons, none of these arguments entitle Defendant to judgment as a matter of law.

         A. LEGAL STANDARD

         Under Rule 50(b), a party may make a renewed motion for judgment as a matter of law within 28 days of the entry of judgment. See Fed. R. Civ. Proc. 50(b). In evaluating a motion brought under Rule 50(b), the Court examines all the evidence admitted at trial, construes that evidence and the inferences from it in the light most favorable to the non-moving party, and refrains from making its own credibility determinations, re-weighing the evidence, or substituting its conclusions for those of the jury. See Tyler v. RE/MAX Mountain States, Inc., 232 F.3d 808, 812 (10th Cir. 2000); see also Thunder Basin Coal Co. v. Sw. Pub. Serv. Co., 104 F.3d 1205, 1212 (10th Cir. 1997) (“The jury ... has the exclusive function of appraising credibility, determining the weight to be given to the testimony, drawing inferences from the facts established, resolving conflicts in the evidence, and reaching ultimate conclusions of fact.”).

         Instead, the Court has the narrow task of determining only whether the jury verdict is supported by substantial evidence when the record is viewed most favorably to the prevailing party. Webco Indus., Inc. v. Thermatool Corp., 278 F.3d 1120, 1128 (10th Cir. 2002). Substantial evidence is “something less than the weight of the evidence, and is defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if different conclusions also might be supported by the evidence.” Id. Judgment as a matter of law is appropriate “only if the evidence points but one way and is susceptible to no reasonable inferences which may support the opposing party's position.” Finley v. United States, 82 F.3d 966, 968 (10th Cir. 1996).

         To preserve issues under Rule 50(b), a party must have moved for judgment as a matter of law under Rule 50(a) at trial. United Int'l Holdings, Inc. v. Wharf (Holdings) Ltd., 210 F.3d 1207, 1228 (10th Cir. 2000). Motions under Rule 50(a) must “specify the judgment sought and the law and the facts on which the moving party is entitled to the judgment.” Fed.R.Civ.P. 50(a)(2). A party may not circumvent Rule 50(a) by raising for the first time in a post-trial motion issues not raised in an earlier motion for directed verdict. United Int'l Holdings, 210 F.3d at 1228.

         B. EVIDENCE OF COPYING

         Defendant first argues that the judgment should be vacated because Plaintiff presented no evidence of direct infringement and, in particular, no evidence that Defendant itself copied the LFOW Code. (Doc. # 284 at 2.) Defendant contends that the evidence showed only that Integrity owner Michael Kirschbaum “received a link to download the alleged infringing files, ” that he never “clicked on the link or downloaded the files[, ]” and that he merely “forwarded the link to his outside web developer 10 Pound Gorilla.” (Id. at 6-7.) According to Defendant, as a matter of law, Mr. Kirschbaum's conduct did not constitute “copying” sufficient to establish Plaintiff's infringement claim. (Id. at 3.)

         Plaintiff responds that evidence showing “actual copying” by Integrity was not legally required to establish its copyright infringement claim. (Doc. # 299 at 4-5.) Plaintiff contends that it satisfied the copying element of its copyright infringement claim by submitting evidence that Defendant had access to the LFOW Code and there were substantial similarities between Defendant's work and the original elements of the LFOW Code. (Id. at 5.) Plaintiff also directs the Court's attention to evidence showing that Defendant directed its web design consultant to assist in copying the LFOW Code, which also establishes the copying element. (Id. at 6-7.)

         Defendant replied that Plaintiff was required to furnish evidence of Integrity's direct copying of the LFOW Code to permit a reasonable jury to find that Plaintiff proved the copying element. (Doc. # 313 at 3-5.) Additionally, Defendant avers that the evidence adduced at trial was a misplaced attempt to prove vicarious infringement as opposed to Plaintiff's copyright infringement claim. (Id. at 2, 5.)

         For purposes of resolving Defendant's renewed Rule 50(b) Motion, the first element of Plaintiff's copyright infringement claim is not in dispute. Defendant's first argument addresses the second element of Plaintiff's copyright infringement claim-that is whether Defendant copied original expression from Plaintiff's copyrighted work. With respect to this element, the jury was instructed as follows:

Plaintiff may show that Defendant copied its work by proving by a preponderance of the evidence that (a) Defendant had access to its copyrighted work, and (b) there was substantial similarities between Defendant's work and original elements of Plaintiff's work. You may find Defendant had access to Plaintiff's work if Defendant or whoever created Defendant's work for Defendant had a reasonable opportunity to view, read, or copy Plaintiff's work before Defendant's work was created. There is no bright line rule as to what amount of similarity is permitted before it is substantially similar. If, however, the similarity is only as to nonessential matters and is quantitatively small, then a finding of no substantial similarity should result. This is referred to as de minimis similarity.

(Doc. # 211 at 15 (first emphasis in original) (second emphasis added).) Regarding the copying element, Defendant argues only that, because Integrity did not have access to the LFOW Code, it cannot be liable for direct infringement regardless of whether YakkingHeads or 10 Pound Gorilla had access to the LFOW Code.

         The Court finds that, viewing the record in the light most favorable to the prevailing party, substantial evidence supports Plaintiff's position and the jury's verdict. Webco Indus., Inc., 278 F.3d at 1128. With respect to access, at trial, Defendant's CEO Mr. Kirschbaum testified that Defendant ordered a third-party company, 10 Pound Gorilla, to develop Defendant's website. (Doc. # 300-4 at 3.) As part of that development, Mr. Kirschbaum admitted that Defendant hired 10 Pound Gorilla to incorporate a “virtual spokesperson technology” or “talker overlay” (virtual greeter video) in Defendant's website. (Id. at 6-7.) Indeed, Defendant purchased that virtual greeter video software from YakkingHeads, provided the software to 10 Pound Gorilla, and told 10 Pound Gorilla to install the software on Defendant's website so that the virtual greeter video would “play” on the Integrity website. (Id. at 7.)

         Additionally, the jury heard testimony from Plaintiff's owner and CEO Mr. Shcherbakov, who authored the LFOW Code at dispute. (Doc. # 300-1 at 3-24.) Mr. Shcherbakov testified that when YakkingHeads signed up as an affiliate for LFOW, YakkingHeads gained access to the LFOW Code, and as a result, its Virtual Greeter Video. (Doc. # 300-2 at 14.) In fact, Mr. Shcherbakov located a near-identical copy of the LFOW Code on YakkingHeads' server from 2013. (Id. at 14-15.) The LFOW Code from the Yakking Heads' server was also within the source code that operated the Virtual Greeter Video playing on Defendant's website. See (id. at 3-5.) Drawing all reasonable inferences in favor of Plaintiff from this testimony, the Court finds that there was sufficient evidence to support finding that Defendant or whoever created Defendant's work for Defendant, i.e., 10 Pound Gorilla, had access to the LFOW Code through its dealings with YakkingHeads and 10 Pound Gorilla.

         Because this evidence is sufficient to support the jury's verdict as to the copying element, the Court denies Defendant's request for judgment as a matter of law on Plaintiff's direct infringement claim.[1]

         C. EVIDENCE OF DISTRIBUTION

         Next, Defendant argues that, because Plaintiff failed to offer any evidence of Defendant's “volitional conduct” or that Defendant intentionally distributed the LFOW Code, there was no sufficient evidence upon which the jury could have found that Plaintiff established its direct infringement claim. (Doc. # 284 at 4-6.) Simply put, Defendant belatedly contends that, for Plaintiff to establish its direct infringement claim, it must “demonstrate volitional conduct” as an “element of direct liability.” (Id. at 8-10.) Plaintiff asserts that Defendant “agreed to the Court's jury instructions that do not require a separate finding of volition, ” rendering Defendant's argument “moot and untimely.” (Doc. # 299 at 8.) The Court agrees.

         As a preliminary matter, the Jury was neither instructed that Plaintiff “must demonstrate volitional conduct to prove liability for distribution” nor that volitional conduct or distribution were requisite elements of Plaintiff's direct infringement claim. (Doc. # 211 at 15.) Defendant's distribution argument, thus, has no relevance as to whether the jury verdict is supported by substantial evidence.

         Moreover, Defendant's reliance on non-binding case law is misplaced and, as a result, Plaintiff was not required to prove “volitional conduct” was part of its direct infringement claim. In support of its argument, Defendant cites two circuit court decisions and a District of Kansas opinion for the proposition that Plaintiff “must demonstrate volitional conduct to prove liability for distribution.” (Doc. # 284 at 8 (citing Cartoon Network LP, LLLP v. CSC Holdings, Inc., 536 F.3d 121, 131 (2d Cir. 2008); Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1162 (9th Cir. 2017); Tomelleri v. Zazzle, Inc., No. 13-CV-02576-EFM-TJJ, 2015 WL 8375083, at *19 (D. Kan. Dec. 9, 2015)).) However, these cases are distinguishable from the instant case because they involve internet or cable service providers with a platform which customers and users utilize to infringe on copyrighted material. Unlike “most copyright disputes” where the “allegedly infringing act and the identity of the infringer are never in doubt, ” those cases turn on whether defendant can be liable for direct infringement through their customers' conduct. Cartoon Network LP, 536 F.3d at 130.

         To illustrate, in the Second Circuit's Cartoon Network decision, the court addressed whether a cable provider that furnished customers with access to a digital video recorder (“DVR”) could be directly liable for unauthorized copying and distribution committed by customers who used the DVR to illegally copy and distribute copyrighted TV programming. Id. at 130-32. In these types of cases, “the core of the dispute” is over the authorship of the infringing conduct.” Id. at 124-26, 131. With respect to cases in which a “defendant's system is merely used to create a copy by a third party, ” “there should still be some element of volition or causation” even though the Copyright Act is a strict liability statute. Id. at 130 (citing Religious Tech. Ctr. v. Netcom On-Line Comm. Servs., 907 F.Supp. 1361 (N.D. Cal. 1995)). The Second Circuit's comparison of the cable company's provision of DVR to a copy machine is instructive. Id. at 132. “[B]y selling access to a system that automatically produces copies on command, [the cable provider] more closely resembles a store proprietor who charges customers to use a photocopier on his premises, and it seems incorrect to say, without more, that such a proprietor ‘makes' any copies when his machines are actually operated by his customers.” Id. at 132. As such, the Second Circuit recognizes that, for these cases, “volitional conduct” is an important element of direct liability. Id. at 131-32.[2]

         The instant case did not involve the core question of who was responsible for the infringing conduct. Additionally, Defendant is neither an internet nor cable service provider that promoted a platform or service that permitted third party users or customers to use such a platform or service to engage in the infringing conduct. Instead, as previously discussed, the evidence showed that Defendant hired 10 Pound Gorilla, who had access to the infringing software, to install the infringing software on Defendant's website. Therefore, because the cases cited by Defendant are neither binding on this Court nor analogous to the instant action, the Court did not err in omitting “volitional conduct” as an element in the direct infringement jury instruction.

         Accordingly, the Court finds Defendant's distribution argument unavailing and denies Defendant's request for judgment as a matter of law.

         D. EVIDENCE OF DAMAGES

         Finally, Defendant argues that the judgment should be vacated because Plaintiff failed to prove damages based on Defendant's “actual use of the LFOW Code” in accordance with the Court's jury instructions. (Doc. # 284 at 10-11); (Doc. # 211 at 18.) However, as Plaintiff correctly points out in its Response (Doc. # 299 at 11), Defendant failed to raise this issue in its Rule 50(a) Motion. (Doc. # 329 at 7.) Indeed, the words “actual use” were never uttered during Defendant's Rule 50(a) Motion. Although Defendant raised the issue of whether Plaintiff sufficiently proved it was entitled to “profits” attributable to Defendant's infringement, the law to which Defendant cites in its Renewed Rule 50(b) Motion relates to Jury Instruction No. 16 as opposed to Jury Instruction No. 17-the law governing Defendant's profits argument set forth during its Rule 50(a) Motion. (Id. at 7 at 1); (Doc. # 211 at 19.) Because Defendant failed to preserve its “actual use” damages argument during its Rule 50(a) Motion, Defendant's belated attempt to now raise the issue is legally improper. United Int'l Holdings, Inc., 210 F.3d at 1228; Fed.R.Civ.P. 50(a)(2), 50(b). Accordingly, the Court declines to consider Defendant's “actual cost” argument in ruling upon the instant Motion.

         Therefore, Defendant's Renewed Motion Under Fed.R.Civ.P. 50(b) (Doc. # 284) is DENIED.

         III. DEFENDANT'S MOTION FOR NEW TRIAL

         The Court next addresses Defendant's Motion under Fed.R.Civ.P. 59 for a New Trial, or for Remittitur (Doc. # 285) in which Defendant argues that it is entitled to a new trial because (1) the Court excluded Defendant's technical expert Nancy Miracle's demonstrative exhibit “showing code that LFOW copied from the internet[;]” (2) the Court improperly excluded evidence of Plaintiff's patent application; and (3) the Court erroneously admitted internet archive printouts. (Id. at 2, 5.) Moreover, Defendant argues that the Court should exercise remittitur to reduce the damages award from $262, 197.00 to $259.00 because Plaintiff offered insufficient evidence of “actual use” to support the damages award. (Id. at 7-10.)

         A. STANDARD OF REVIEW

         Under Federal Rule of Civil Procedure 59(a)(1)(A), the Court may, “on motion, grant a new trial on all or some of the issues . . . after a jury trial, for any reason for which a new trial heretofore been granted in an action at law in federal court.” A motion for a new trial “is not regarded with favor and should only be granted with great caution[, ]”United States v. Kelley, 929 F.2d 582, 586 (10th Cir. 1991), and “to correct manifest errors of law or to present newly discovered evidence[, ]” Elm Ridge Exploration Co., LLC v. Engle, 721 F.3d 1199, 1216 (10th Cir. 2013). The decision whether to grant a new trial is committed to the sound and broad discretion of the trial court. Kelley, 929 F.2d at 586; McHargue v. Stokes Div. of Pennwalt Corp., 912 F.2d 394, 396 (10th Cir. 1990). The trial court judge “has the obligation or duty to ensure that justice is done, and, when justice so requires, [the judge] has the authority to set aside the jury's verdict.” McHargue, 912 F.2d at 936.

         To “secure a new trial based on an allegedly improper evidentiary ruling, the movant must show that the court's evidentiary rulings were clearly erroneous and that they were prejudicial such that ‘it can be reasonably concluded that with or without such evidence, there would have been a contrary result.'” Jackson v. Potter, 587 F.Supp.2d 1179, 1182 (D. Colo. 2008) (quoting Hinds v. Gen. Motors Corp., 988 F.2d 1039, 1049 (10th Cir. 1993)). Even then, an erroneous evidentiary ruling cannot be “grounds for granting a new trial unless the error or defect affects the substantial rights of the parties.” Stewart v. S. Kan. and Okla. RR., Inc., 36 F.Supp.2d 919, 920 (D. Kan. 1999).

         B. EXCLUSION OF MS. MIRACLE'S DEMONSTRATIVE EXHIBIT

         Defendant argues that it is entitled to a new trial because the Court excluded “Defendant's technical expert, Nancy Miracle's demonstrative exhibit showing code that LFOW copied from the Internet[.]” (Doc. # 285 at 2.) Plaintiff responds that the demonstrative exhibit was properly excluded because Ms. Miracle's demonstrative purported to compare the LFOW Code to internet code allegedly from 2004 (“2004 Internet Code”) where several lines of the internet code could not be date-verified from 2004 and Ms. Miracle altered the 2004 Internet Code and the LFOW Code to make the two sets of code appear similar. (Doc. # 298 at 10-11.) Defendant replied that the Jury was entitled to consider Ms. Miracle's demonstrative as evidence because a side-by-side comparison “must be made between the original and a copy to determine whether a layman would view the two works as substantially similar” and that any alterations made to either code was harmless because the alterations were made merely to improve readability of the codes. (Doc. # 314 at 5-6 (citing Eng'g Dynamics, Inc. v. Structural Software, Inc., 26 F.3d 1335, 1341 (5th Cir. 1994)).) Additionally, Defendant asserts that the fact that the Jury asked one question about Ms. Miracle's demonstrative during deliberation evinces that Defendant was prejudiced by the Jury's inability to consider Ms. Miracle's demonstrative exhibit. (Id. at 6.) For the following reasons, the Court disagrees with Defendant.

         This Court, generally, does not admit expert reports or portions of those reports into evidence due to the fact that they are rife with hearsay. The Court admitted Dr. Goldberg's demonstrative exhibit only because it contained side-by-side comparisons of already admitted photograph-exhibits of the LFOW and Integrity codes and the Court found such comparisons would be helpful to the jury. (Doc. # 245 at 30-34.) In contrast, the demonstrative exhibits Defendant sought to admit from Ms. Miracle's report did not reflect accurately any exhibits which had been admitted into evidence. The modifications Ms. Miracle made to the actual codes caused the depictions to be inaccurate depictions of each code as it existed in 2004, [3] and such inaccuracy would have served only to mislead and confuse the jury.[4] Although the Court did not admit the demonstrative into evidence, the Court did permit Ms. Miracle to testify extensively as to her demonstrative exhibits, because her testimony was subject to cross examination.

         Accordingly, the Court is unconvinced that its exercise of discretion in excluding Ms. Miracle's demonstratives from evidence was clearly erroneous or entitles Defendant to a new trial.[5]

         C. EXCLUSION OF EVIDENCE RELATED ...


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