Mon Cheri Bridals, Inc. v. Wen Wu ( 2010 )

  •                                                NOT PRECEDENTIAL
                         FOR THE THIRD CIRCUIT
                            Nos. 09-1239 and 09-1321
                         MON CHERI BRIDALS, INC.
          WEN WU, individually; WEN WU d/b/a JACQUELIN BRIDALS;
                   ABC COMPANIES 1-10, fictitious designations;
                        Wen Wu, individually, and Formosa Sunrise Corporation,
                        and MDTW and United Wu Enterprises, Inc.,
                                             Appellants in No. 09-1239
                        Mon Cheri Bridals, Inc.,
                                             Appellant in No. 09-1321
                  On Appeal from the United States District Court
                           for the District of New Jersey
                       (D.C. Civil No. 3-04-cv-01739 and
                          D.C. Civil No. 3-05-cv-05934)
                     District Judge: Hon. Anne E. Thompson
                              Argued April 14, 2010
                        BEFORE: FISHER, and COWEN, Circuit Judges,
                               and DITTER*, District Judge
                                         (Filed: June 4, 2010)
    Craig S. Hilliard, Esq. (Argued)
    Stark & Stark
    P.O. Box 5315
    Princeton, NJ 08543
    Counsel for Mon Cheri Bridals, Inc.
    Joseph F. Posillico, Esq. (Argued)
    Fox Rothschild
    2000 Market Street, 20 th Floor
    Philadelphia, PA 19103
    Counsel for Wen Wu, individually,
    and Formosa Sunrise Corporation,
    and MDTW and United Wu Enterprises, Inc.
    COWEN, Circuit Judge
           Mon Cheri Bridals, Inc. (“Mon Cheri”) designs and sells wedding and special
    occasion dresses, for which it has obtained various copyrights and trademarks. Mon
    * Honorable J. William Ditter, Senior United States District Judge for the Eastern District
    of Pennsylvania, sitting by designation.
    Cheri had reason to believe that Wen Wu, through various entities that he controlled
    (collectively, the “Wu defendants”), had copied certain dresses and sold them as Mon
    Cheri dresses. Mon Cheri filed an action against the Wu defendants seeking damages and
    injunctive relief for copyright and trade dress infringement, unfair competition, and
    breach of contract. (Civil Action No. 04-1739 (AET)). Subsequently, Mon Cheri
    discovered facts that led it to believe that Wu and another retailer, Bernie Kaitz, had
    conspired to copy an entire line of Mon Cheri dresses, Mon Cheri’s Montage line. Mon
    Cheri filed a second action against Kaitz and the company that Kaitz controlled, Mirage
    Collection, Inc. (collectively, the “Mirage defendants”), and the Wu defendants seeking
    damages and injunctive relief for unlawful passing off of its Montage dress line. (Civil
    Action No. 05-5934 (AET)). The District Court consolidated the two actions.
           Ultimately, Mon Cheri settled with the Mirage defendants (the “Agreement”) and
    electronically filed a stipulation of dismissal. Mon Cheri then proceeded in a jury trial
    against the Wu defendants on its breach of contract, copyright infringement, and passing
    off claims. The jury returned a verdict in Mon Cheri’s favor on each claim, awarding
    Mon Cheri $324,000 in compensatory damages and $375,000 in punitive damages. At
    the conclusion of the trial, the District Court vacated the award for punitive damages,
    denied Mon Cheri’s request for treble damages under the Lanham Act and New Jersey
    law, and denied Mon Cheri’s request for attorneys’ fees.
           On appeal, the Wu defendants assert that: (1) there is insufficient evidence to
    establish the validity of the copyrights at issue, (2) there is insufficient evidence of
    copyright infringement, (3) the District Court erred in denying their request to stay the
    trial until Mon Cheri produced documents from its dress designer, (4) the District Court
    erred in permitting Mon Cheri to conceal the terms of the Agreement from the jury, yet
    permitting Mon Cheri to link the Wu defendants to the Mirage defendants, (5) there is
    insufficient evidence to support the passing off claim against the Wu defendants when
    improperly admitted hearsay evidence is struck from the record, and (6) there is
    insufficient evidence to establish the damages awarded. Mon Cheri asserts that the
    District Court erred in: (1) vacating the award of punitive damages, (2) denying
    attorneys’ fees, and (3) denying treble damages on the passing off claim. For the reasons
    set forth below, we will affirm the District Court in all respects.
    A.     Copyright Infringement
           “To establish a claim of copyright infringement, a plaintiff must establish:
    (1) ownership of a valid copyright; and (2) unauthorized copying of original elements of
    the plaintiff’s work.” Kay Berry, Inc. v. Taylor Gifts, Inc., 
    421 F.3d 199
    , 203 (3d Cir.
    2005) (quoting Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, Inc., 
    307 F.3d 197
    , 206 (3d Cir. 2002)). The Wu defendants contend that Mon Cheri did not
    establish either prong of their copyright infringement claims.
           1.      Copyright Validity
           The introduction of a certificate of registration from the Copyright Office is prima
    facie evidence of validity. See 17 U.S.C. § 410(c) (“In any judicial proceedings the
    certificate of a registration . . . shall constitute prima facie evidence of the validity of the
    copyright . . . .”); accord Williams Elecs., Inc. v. Arctic Int’l, Inc., 
    685 F.2d 870
    , 873 (3d
    Cir. 1982). Moreover, “[p]ossession of a registration certificate creates a rebuttable
    presumption that the work in question is copyrightable.” Whimsicality, Inc. v. Rubie’s
    Costume Co., 
    891 F.2d 452
    , 455 (2d Cir. 1989). The parties do not dispute that Mon
    Cheri introduced twenty-nine certificates of registration into evidence, thereby
    establishing prima facie validity with respect to those copyrights. The burden shifted to
    the Wu defendants to show why the copyright claims were invalid. The Wu defendants
    contend that the copyrights are invalid because Mon Cheri committed fraud on the
    Copyright Office and because the copyrighted material lacks originality.
                   a.     Fraud on the Copyright Office
           Fraud on the Copyright Office is an affirmative defense to claims of copyright
    infringement. To establish this defense, a defendant must show that in applying for the
    copyright at issue the applicant knowingly or intentionally failed to disclose a material
    fact. See Fonar Corp. v. Domenick, 
    105 F.3d 99
    , 105 (2d Cir. 1997) (explaining that with
    respect to the affirmative defense of fraud upon the Copyright Office, “the presumption
    [of validity] may be overcome only by ‘proof of deliberate misrepresentation’”) (quoting
    Whimsicality, Inc., 891 F.2d at 455); accord Midway Mfg. Co. v. Bandai-America, Inc.,
    546 F. Supp. 125
    , 142-43 (D.N.J. 1982). The omission must be intentional. See
    Whimsicality, 891 F.2d at 456 (“It is the law of this Circuit that the knowing failure to
    advise the Copyright Office of facts which might have occasioned a rejection of the
    application constitutes reason for holding the registration invalid . . . .”) (internal
    quotation marks omitted). An applicant’s “mere inadvertence” is insufficient to establish
    this defense. Id. at 455 (explaining that the presumption of validity “generally is not
    overcome by an ‘innocent misstatement’”); accord Raquel v. Educ. Mgmt. Corp., 
    196 F.3d 171
    , 177 (3d Cir. 1999) (“[A]n inadvertent and immaterial misstatement will not
    invalidate a copyright registration, a proposition on which there is broad consensus in the
    federal courts.” (citations omitted)); Imperial Laces Inc. v. Westchester Lace Inc., 95-
    CV-5353 (BSJ), 
    1998 WL 830630
    , *2 n.4 (S.D.N.Y. Nov. 30, 1998) (rejecting fraud on
    the Copyright Office because the omission “appears to have been the result of mere
    inadvertence rather than fraud”).
           At trial, the Wu defendants asserted this defense, contending that Mon Cheri failed
    to disclose that its works were derivative rather than original, as required in the
    application, and that this omission constituted fraud on the Copyright Office. In
    particular, they pointed to testimony from Mon Cheri’s designer, Ivonne Dome, that one
    of the flower and vine motifs incorporated into the embroidery and bead work for dress
    number 21917 was not her original work.1 The Wu defendants contend that Mon Cheri’s
    failure to disclose this information constituted fraud.
           There is no evidence that Mon Cheri knowingly or intentionally omitted this
    information. Yolanda Carita, Mon Cheri’s Director of International Sales, assisted Mon
    Cheri’s attorneys with preparation of copyright applications and signed those applications
    as Mon Cheri’s agent. Carita testified about the standard processes in place for the
    creation of new Mon Cheri dress designs. Dome created embroidery or bead patterns and
    dress styles and then presented them to Carita, Mon Cheri’s owner Steven Lang, and
    others, who then together collaborated on the final design. Dome created numerous
    original designs and worked on her initial designs independently, sometimes sketching
    until three or four in the morning. No one directly supervised Dome when she sketched.
    Thus, no one observed Dome incorporating public elements into her designs and Dome
    never indicated that she had. Dome’s final work product (the embroidery or bead patterns
    plus style of dress) always had a distinct look such that it could be distinguished from
    dresses from other designers. Carita relied on this process for her basis for attesting to the
    originality of Dome’s work. (Mar. 25, 2008 Tr. at 112, 122-23, 126.)
           Lang, the founder and owner of Mon Cheri, also signed the copyright applications.
    He testified that the Montage dress line, designed exclusively by Dome, had a very
            The Wu defendants assail several of Mon Cheri’s copyrights; however, they focus
    their attention on the copyright for the embroidery pattern on dress number 21917.
    specific and identifiable look. (Mar. 26, 2008 Tr. at 13.) Lang’s testimony regarding the
    design process confirmed Carita’s testimony and he specifically testified about the design
    of dress number 21917.    (Id. at 30-36.) Dome modified the embroidery and bead
    patterns several times before the design team accepted the final product. She changed the
    thread color and type several times as well.   (Id. at 32; Apr. 1, 2008 Tr. at 35.) Lang
    observed her create the basic sketch for the embroidery and bead patterns and the
    modifications were based on this first sketch.2    (Mar. 26, 2008 Tr. at 32-35.) None of
    the design team had seen an embroidery and bead pattern of that nature prior to Dome’s
            On appeal, the Wu defendants seek a new trial on the ground that the District
    Court’s denial of their discovery motion regarding Dome’s sketches resulted in an unfair
    trial. This challenge lacks merit.
            It appears that neither of the parties engaged in much discovery until
    approximately two months before trial. Both parties then filed discovery-related motions,
    including the motion now at issue on appeal. The parties stipulated to a discovery
    schedule (including depositions of key witnesses, such as Wu, Lang, and Dome) and to
    the voluntary withdrawal of their motions. (A-I at 916-19.) The Wu defendants
    discovered that Dome created sketches during their deposition of her, which occurred just
    two weeks before trial. Dome stated that no one from Mon Cheri had asked her to
    produce the sketches but that Mon Cheri would have duplicates of anything in her
    possession. Dome indicated that most of her records were kept in her basement and were
    destroyed by flooding. Under these circumstances, we will not fault the District Court for
    determining that no discovery violation occurred. Moreover, the Wu defendants did not
    raise this discovery issue with the District Court until their post-trial motion for a new
           The Wu defendants argue that Mon Cheri ignored a document request served on
    June 3, 2006. It is unclear whether this request was actually served on that date. The
    document is dated May 3, 2006, and was not filed with the District Court until March 23,
    creation. (Apr. 1, 2008 Tr. at 38.) Mon Cheri received industry awards for dress number
             Dome testified that her embroidery and bead patterns are inspired by observing her
    surroundings, including natural objects such as the sediment patterns on a rock. (Mar. 27,
    2008 Tr. at 194.)3 Additionally, she sometimes found inspiration from public use
    elements. (Id. at 212.) She then used those elements and others to create the patterns on
    her dresses, which could involve rearranging elements, changing their size, style, and
    quantity, adding elements, and other design techniques. (Id. at 211-13.) She was not
    involved with the copyright application process, though she knew that Mon Cheri
    protected her work.
             Against this evidence, the Wu defendants failed to present any evidence of Carita’s
    or Lang’s intent to commit fraud on the Copyright Office. Nor was there any evidence of
    concealment generally. Further, the omission likely was not material, as the Copyright
    Office grants copyrights for derivative work. See Imperial Laces, 
    1998 WL 830630
    , at
    *2 n.4 (“Although required to do so, Imperial failed to identify lace design No. 8191 as a
    derivative work on its copyright application. As this appears to have been the result of
    mere inadvertence rather than fraud, however, this omission in no way invalidates
    Imperial’s copyright registration.”).
            Dome was in China working for Mon Cheri on a new dress line during the trial.
    The parties presented her deposition testimony to the jury. The citations above refer to
    that testimony as presented during trial.
                  b.     Sufficient Originality
           “The sine qua non of copyright is originality.” Feist Publ’ns, Inc. v. Rural Tel.
    Serv. Co., Inc., 
    499 U.S. 340
    , 345 (1991). “Original, as the term is used in copyright,
    means only that the work was independently created by the author (as opposed to copied
    from other works), and that it possesses at least some minimal degree of creativity.” Id.
    (citing 1 M. Nimmer & D. Nimmer, Copyright §§ 2.01[A], [B] (1990)). The “requisite
    level of creativity is extremely low; even a slight amount will suffice.” Id.; see also Folio
    Impressions, Inc. v. Byer California, 
    937 F.2d 759
    , 765 (2d Cir. 1991) (explaining that
    “only an ‘unmistakable dash of originality need be demonstrated, high standards of
    uniqueness in creativity are dispensed with’”) (quoting Weissmann v. Freeman, 
    868 F.2d 1313
    , 1321 (2d Cir. 1989)). Further, “the mere borrowing of elements from previous
    works will not defeat copyrightability as long as the author has devised a new version of
    the work or has otherwise rearranged or transformed it so as to have made an original
    contribution.” CMM Cable Rep, Inc. v. Ocean Coast Props., Inc., 
    97 F.3d 1504
    , 1518
    (1st Cir. 1996).
           The jury properly concluded that the works for which Mon Cheri sought
    copyrights were sufficiently original. According to Dome, she found inspiration from
    many sources and in the case of dress number 21917, she was inspired by a particular
    flower and vine drawing. She used these two common elements, but rearranged them,
    changed their size, color, and frequency, and created an embroidery and bead pattern that
    she considered to be her original work. This work is sufficiently original under copyright
    law. See Folio, 937 F.2d at 764-65 (holding that a fabric design that consisted of roses
    that were available in the public domain, but were rearranged for the particular fabric
    design at issue “required little creative input” but still was “original work and, as such,
    copyrightable”); Imperial Laces, 
    1998 WL 830630
    , at *2 (holding that a lace design that
    incorporated a prior lace design within it, but that included a heavy liner, thereby giving
    the overall pattern a “reticulated or squiggly appearance” was sufficiently original). The
    testimony from Carita and Lang confirmed Dome’s description of her design process.
    Moreover, the Wu defendants’ own expert witnesses, two dress designers, stated that they
    designed their dresses in the same manner and considered them to be original. (Mar. 27,
    2008 Tr. at 173-75; Mar. 31, 2008 Tr. at 166-68.)
           The cases that the Wu defendants rely upon are distinguishable. The copyright
    applicant in Garner v. Sawgrass Mills Ltd. Partnership, Civ. No. 3-94-307, 
    1994 WL 829978
    , *8-9 (D. Minn. Dec. 22, 1994), had first-hand knowledge of the prior work and
    failed to disclose it. Id. (invalidating for lack of originality as the applicant, who had a
    copy of the incorporated prior work in his possession, failed to disclose the incorporation
    of that prior work). Neither Carita nor Lang had any knowledge of the common elements
    that Dome incorporated. Further, in Towle Manufacturing Co. v. Godinger Silver Art
    612 F. Supp. 986
    , 991 (S.D.N.Y. 1985), the court invalidated a copyright for a baby
    bottle that consisted of five glass etchings, all of which were prior work widely available
    on the market, to which the applicant made no modifications. Dome testified that the
    patterns that she created, which incorporated public use elements, were entirely original,
    as were her bead and thread color choices. These modifications are sufficient to support a
    finding of originality. See Folio, 937 F.2d at 764-65.
           2.     Unauthorized Copying
           A plaintiff establishes unauthorized copying by showing that the defendant “had
    access to a copyrighted work” and “that there are substantial similarities between the two
    works.” Dam Things from Denmark v. Russ Berrie & Co., 
    290 F.3d 548
    , 561 (3d Cir.
    2002). There is ample evidence to establish both access to the copyrighted work and
    substantial similarity between Mon Cheri’s copyrighted work and the embroidery patterns
    and dress styles of the Mirage dresses. The Wu defendants had access to the copyrighted
    material—the embroidery patterns applied to various Montage dresses—through many
    public sources, such as Mon Cheri’s website, Mon Cheri’s catalogues, wedding
    magazines, national advertisements, trade shows, and dresses on display at national award
    ceremonies. (See Pl. Supp. App’x. Ex. O at 35-36; Ex. R at 18; Ex. S at 181-82.) In fact,
    Wu admitted that if he wanted to copy the dresses of other manufacturers he could,
    although he disclaimed doing so. (See Pl. Supp. App’x. Ex. P at 43-44.) Moreover, there
    is evidence that Wu obtained Montage catalogues and used them for this particular
    purpose. (See Pl. Supp. App’x. Ex. Q at 43-44.) With respect to similarities between the
    dresses and the applied embroidery patterns, several witnesses testified that the Montage
    and Mirage dresses were “exactly” alike or the same (see Pl. Supp. App’x. Ex. A; Ex. D
    at 44-45) and witnesses for the Wu defendants, including Wu himself, testified that they
    were “a lot alike” or substantially similar (see Pl. Supp. App’x. Ex. C; Ex. F).
    B.     Agreement
           The Agreement includes a release stating that:
                  Lang and Mon Cheri . . . release and forever discharge Kaitz
                  and Mirage and any of their heirs, subsidiaries and affiliated
                  companies, successors, assigns, predecessors, parents,
                  divisions, members, shareholders, officers, directors,
                  employees, insurers, attorneys, agents and representatives
                  from any and all claims, actions . . . arising out of . . . the
                  [consolidated actions] . . . .
    (A-II 277-78.) Additionally, the parties attached an affidavit from Kaitz to the
    Agreement (“Kaitz Affidavit”), in which Kaitz stated that he was the “sole owner of
    Mirage” and that “[n]either Wen Wu nor any entities Mr. Wu owns or controls has any
    ownership interest in Mirage.” (A-II at 284-85.)
           The Wu defendants contend that Mon Cheri’s strategy with respect to the passing
    off claim—linking the Wu defendants to Mirage—is incompatible with the general
    release contained in the Agreement and statements in the Kaitz Affidavit. They argue that
    the District Court erred in not ordering Mon Cheri to produce the document to them pre-
    trial. Additionally, they argue that the District Court erred in denying their motion for a
    new trial after Mon Cheri linked them to Mirage, but concealed the general disclosure and
    the Kaitz Affidavit from the jury.
           Despite their contentions, the existence of the Agreement was not hidden from the
    Wu defendants. Mon Cheri and Mirage reached a settlement in principal at a settlement
    conference with the court in November 2006, which the Wu defendants attended. The
    Wu defendants did not pursue any discovery related to the terms of the finalized
    agreement.4 On July 3, 2007, nine months before the parties tried this case, Mon Cheri
    filed a Stipulation of Dismissal, indicating that it had settled with the Mirage defendants.
    (A-I at 807.) Again, the Wu defendants did not pursue the finalized agreement through
    discovery requests. The parties filed a Joint Pretrial Order on January 15, 2008, in which
    Mon Cheri disclosed that it intended to establish that the Wu defendants created the
    Mirage dress line. (A-I at 877-911.) The Wu defendants did not seek a copy of the
    Agreement at the final pre-trial conference, despite Mon Cheri’s disclosure.
           The first documented request from the Wu defendants for the Agreement was an
    email to Mon Cheri’s counsel on the eve of trial. (A-III at 688-89.) Mon Cheri did not
    object, but informed the Wu defendants’ counsel that the Agreement contained a
    confidentiality clause and that the Wu defendants would need to obtain consent from
    Kaitz or a court order directing Mon Cheri to produce it. Kaitz refused to consent.
            The Wu defendants contend that they requested the Agreement in their document
    request served on May 3, 2006. This document request predates the settlement by nearly
    six months. The Wu defendants contend that they made several requests in 2007, both in
    writing and orally, but they did not support this assertion with any documentation. The
    first documented request for the Agreement is in the form of an email sent from counsel
    for the Wu defendants to Mon Cheri’s counsel on the eve of trial. (A-III at 688-89.)
           The parties disagree over what transpired next. Mon Cheri contends that the Wu
    defendants did not pursue the issue any further until its motion for a new trial after Mon
    Cheri’s closing argument. The Wu defendants assert that they raised this issue with the
    court in a pre-trial teleconference held on March 20, 2008. (A-II at 338-39.) There is no
    transcript from this conference. The Wu defendants assert that the District Court denied
    their request on the ground that liability could be apportioned through a reduction in
    damages. The Wu defendants assert that they registered an ongoing objection to this
    ruling because they felt that the Agreement could affect Mon Cheri’s substantive case, not
    just damages. In the opinion denying the Wu defendants’ motion for a new trial, the
    District Court referred to the March 20, 2008 conference, but did not mention or explain
    its pre-trial denial of their request. (A-I at 17-18.)
           The Wu defendants did not pursue this issue again until the charging conference
    held on April 1, 2008. (Apr. 1, 2008 Tr. at 85-86.) At that time, the District Court
    ordered Mon Cheri to produce the Agreement the following day. On April 2, 2008, the
    District Court continued the charging conference; however, Mon Cheri did not produce
    the Agreement and the Wu defendants did not raise the issue. The District Court charged
    the jury on April 3, 2008, and the parties gave their closing arguments. Mon Cheri finally
    produced the Agreement on April 4, 2008, for in camera review. The District Court
    indicated that the Agreement and, in particular, the Kaitz Affidavit presented “a real
    problem.” (Apr. 4, 2008 Tr. at 2-3.) The District Court ordered the parties to make
    supplemental closing arguments to the jury to clarify which dresses were at issue for each
    claim. (Id. at 8.) Additionally, the District Court ordered Mon Cheri to produce the
    Agreement to the Wu defendants.
           Upon reviewing the agreement, the Wu defendants argued that the general release
    applied to them thereby barring Mon Cheri’s claims against them because testimony Mon
    Cheri solicited indicated that the Wu defendants were either an affiliate or an agent of
    Mirage, both of which were released under the Agreement. Secondly, the Wu defendants
    argued that the Kaitz Affidavit was contrary to the facts that Mon Cheri established at
    trial with respect to the relationship between Mirage and the Wu defendants. The Wu
    defendants requested a new trial in the event that the jury returned a verdict in Mon
    Cheri’s favor. The District Court reserved judgment on that issue and permitted the
    parties to make their supplemental closing statements. (Id. at 16.)
           The Wu defendants were not diligent in pursuing the Agreement and the evidence
    does not suggest that Mon Cheri intended to conceal it from the Wu defendants.
    Therefore, the case relied upon by the Wu defendants is distinguishable. In Vernon
    Duane Daniel v. Penrod Drilling Co., 
    393 F. Supp. 1056
     (E.D. La. 1975), the court
    granted a motion for a new trial because the plaintiff made a secret agreement with one of
    the defendants to drop its case against that defendant at the conclusion of the trial if that
    defendant refrained from attacking the plaintiff’s case during trial and from informing the
    other defendants of the agreement. Id. at 1059-61. In this case, all parties were aware of
    the Agreement and the Wu defendants had ample opportunity to obtain a copy of it in
    advance of trial. The District Court denied the Wu defendants’ request to compel made
    during a teleconference held on March 20, 2008, noting that counsel delayed pursuit of
    this document until four days before trial. This ruling was reasonable in light of the
    parties’ delay in pursuing discovery.
           Second, it was clear from the Joint Pretrial Order that Mon Cheri intended to link
    the Mirage dress line to the Wu defendants; yet the Wu defendants did not object to those
    assertions in preparing the Order, and did not object at the final pretrial conference.
    Excerpts from the Order indicate that Mon Cheri intended to establish that:
                    Defendants’ breaches and infringements included the
                    formation of a separate company, Mirage Collection, Inc.,
                    which was formed for the purpose of selling a line of dresses
                    intentionally copied from Mon Cheri’s flagship dress line,
                    Defendant selected the name “Mirage” because the name
                    sounded very much like “Montage,” and they intended to and
                    did in fact confuse the consuming public into thinking that the
                    Mirage dresses were in fact Mon Cheri dresses.
    (A-I at 880.)
           Finally, the terms of the Agreement do not prohibit litigation of Mon Cheri’s
    claims against the Wu defendants. “The general rule is that a release of one tortfeasor
    will not release others who may also be liable to plaintiff for his harm unless the release is
    so intended or the plaintiff receives as a result thereof either full satisfaction or
    satisfaction intended as such.” Great Northern Ins. Co. v. Leontarakis, 
    387 N.J. Super. 583
    , 594 (App. Div. 2006) (internal quotation marks omitted). There is no evidence that
    Mon Cheri or Kaitz intended to release the Wu defendants. To the contrary, the Kaitz
    Affidavit makes it clear that the Wu defendants did not own or control Mirage or receive
    any profits or income from Mirage. Mon Cheri and Kaitz likely included these statements
    to counter any defense of release by the Wu defendants. Further, Wu testified that he had
    no involvement with Mirage.
           Mon Cheri pleaded theories of direct, contributory, and vicarious liability against
    the Wu defendants. The District Court charged the jury on these different theories of
    liability without objection from the Wu defendants. Finally, there is no support for any
    argument that the Agreement intended to cover Mon Cheri’s breach claim against the Wu
    defendants, which arose out of an earlier contract exclusively between Mon Cheri and the
    Wu defendants.
    C.     Jury Instructions
           The Wu defendants contend that the jury instructions on the breach of contract,
    copyright infringement, and passing off claims unfairly tainted the deliberation process on
    the grounds that the instructions (1) failed to specify which claims pertained to which
    dresses, (2) permitted consideration of LaBelle and Mirage dresses, interchangeably, and
    (3) permitted consideration of the Mirage dresses, even though Wu was released by the
    Agreement. They contend that these erroneous instructions merit a new trial.
           The Wu defendants failed to preserve this issue for appeal. They did not raise this
    issue at the charging conference and did not object during the jury charge. They first
    raised this issue in their post-trial motion. Under Rule 51 of the Federal Rules of Civil
    Procedure, a party must object or submit competing jury instructions to preserve that issue
    for appeal. See Fed. R. Civ. P. 51(d)(1) (“A party may assign as error: (A) an error in an
    instruction actually given, if that party properly objected; or (B) a failure to give an
    instruction, if that party properly requested it and—unless the court rejected the request in
    a definitive ruling on the record—also properly objected.”). Otherwise, that party is not
    entitled to a new trial unless the instruction given was in plain error. See Fed. R. Civ. P.
    51(d)(2) (“A court may consider a plain error in the instructions that has not been
    preserved as required by Rule 51(d)(1) if the error affects substantial rights.”). We see no
    such error here.
           Moreover, the jury instructions do not suffer from the alleged infirmities. The jury
    instructions informed the jurors that Mon Cheri settled with Mirage. (Apr. 3, 2008 Tr. at
    38.) Notably, the jury instruction on the passing off claim states: “Plaintiff’s claims in
    connection with ‘Passing Off’ are limited to the Mirage dresses and do not include the
    sale of dresses under the Labelle Fashion label.” (A-I at 863.) Further, the District Court
    directed the parties to make supplemental closing arguments on this precise issue to
    provide additional clarity for the jury.
    D.     Challenge to Admission of Hearsay Evidence
           At trial, Beverly Martin, a wedding dress retailer, testified about an incident in
    which an individual named “Dominic” entered her store and encouraged her to pass off
    Mirage dresses as Montage dresses. Mon Cheri sought to introduce her testimony on
    Dominic’s out of court statements as the admissions of a party opponent under Rule
    801(d)(2)(D) of the Federal Rules of Evidence, contending that Dominic was the Wu
    defendants’ agent. The District Court permitted Martin to testify and informed the jury
    that they should only consider her testimony if they first determined that Dominic was an
    agent. The Wu defendants assert that the District Court erred in sending the agency
    finding to the jury, that there was insufficient evidence to establish agency, and that the
    jury’s consideration of the hearsay statements was highly prejudicial.
           It is unnecessary to determine whether it was improper to send the agency issue to
    the jury as the evidence overwhelmingly supported a finding that Dominic was an agent
    for the Wu defendants. Martin testified that Dominic identified himself as a sales
    representative of various dress lines sold by the Wu defendants. (Pl. Supp. App’x. Ex. V
    at 48.) Martin purchased approximately twenty dresses from Dominic. Dominic filled
    out the purchase order, which was a form for dresses to be ordered from “Jacqueline
    Bridals, Mirage, Tiffany, The Private Collection, Christina Wu and La Belle.” (Id. at 56-
    57.) There is no dispute that the non-Mirage brands mentioned are brands created by and
    sold exclusively by the Wu defendants. All of the dresses ordered (including the Mirage
    dresses), were shipped from the Wu defendants’ warehouse in Fort Myers, Florida. (Id. at
    60.) Other sales representatives identified Dominic as a sales agent for Wu. (Pl. Supp.
    App’x. Ex. X at 27-28.) Indeed, several of the Wu defendants’ witnesses, including Wu
    himself, admitted that Dominic worked as a sales representative for the Wu defendants
    for several years and that his sales territory covered Martin’s store. (Pl. Supp. App’x. Ex.
    W at 22-24; Ex. Y at 135.) Sending this evidentiary issue to the jury was a harmless error
    at most as Martin’s testimony regarding her conversation with Dominic was admissible as
    a party-admission under Rule 801(d)(2)(D).
    E.     Damages
           The Wu defendants contend that there is insufficient evidence to support the jury’s
    award of compensatory damages. Mon Cheri cross-appeals the District Court’s grant of
    the Wu defendants’ motion to vacate the jury’s award of punitive damages, as well as the
    denial of Mon Cheri’s motion for augmented damages under the Lanham Act.
           1.     Damages for Breach of Contract
           The jury awarded Mon Cheri $107,000 for its breach of contract claim. The Wu
    defendants contend that Mon Cheri failed to establish actual damages and therefore, is
    only entitled to an award of nominal damages. We disagree. Generally, “a breach of
    contract without pecuniary harm entitles the non-breaching party to no more than nominal
    damages.” Coca-Cola Bottling Co. v. Coca-Cola Co., 
    988 F.2d 386
    , 409 (3d Cir. 1993).
    However, when the defendant’s profits better define the harm suffered, it is appropriate to
    use a defendant’s profits as the measure of damages. See U.S. Naval Inst. v. Charter
    Comms., Inc., 
    936 F.2d 692
    , 696 (2d Cir. 1991) (explaining that a defendant’s profits will
    support a damages award “when those profits tend to define the plaintiff’s loss”). Wu
    testified as to the dresses that he sold and the profits that he accumulated, which
    supported the jury’s award under this alternative theory of damages.
           2.        Damages for Copyright Infringement
           An infringer of a copyright is liable either for the copyright holder’s actual
    damages or for statutory damages. See 17 U.S.C. § 504(a). Mon Cheri elected the
    former. “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). “Any doubt as to the computation of costs or
    profits is to be resolved in favor of the plaintiff.” Frank Music Corp. v. Metro-Goldwyn-
    Mayer, Inc., 
    772 F.2d 505
    , 514 (9th Cir. 1985). Further, “[i]f the infringing defendant
    does not meet its burden of proving costs, the gross figure stands as the defendant’s
    profits. ” Id.
           In the instant action, the jury awarded Mon Cheri $107,000 on Mon Cheri’s
    copyright infringement claim. Mon Cheri established the number of dresses sold and the
    price, thereby meeting its prima facie burden. Wu testified regarding the net profits and
    costs associated with these sales. The Wu defendants did not present any additional
    evidence on costs, such as purchase orders or bills. The jury instructions properly
    informed the jurors of the burdens of proof for both sides. (A-I at 862-63.) The jury
    considered the evidence presented and likely discredited Wu’s testimony on costs in
    reaching its award, which is permitted under the Copyright Act.
           3.     Damages for Passing Off
           The jury awarded Mon Cheri $110,000 in damages on its passing off claim. The
    Wu defendants attack this award on the grounds that (1) the jury improperly based its
    award on the Mirage dresses, and all liability stemming from those dresses was released
    in the Agreement, and (2) Mon Cheri cannot base its award for both its copyright
    infringement and passing off claims on the same profits. Both contentions lack merit. 5
    First, as discussed above, the Agreement does not release the Wu defendants. Second,
    Mon Cheri did not receive a double recovery. The jury awarded $107,000 on the
    copyright infringement claim for infringement related to the LaBelle dresses. The jury
    awarded $110,000 on the passing off claim related to the Mirage dresses. These awards
    reflect harm suffered under separate statutory schemes for separate facts and the jury
    instructions specified which dresses applied to which claims.
           Mon Cheri cross-appealed the District Court’s denial of its request for treble
         Judge Ditter while agreeing with the rest of the opinion believes that the passing off
    claim did not have sufficient evidence to prove the claim which justified sending the issue
    to the jury. Because he believes the issue should never have been presented to the jury,
    he would limit the plaintiff’s recovery to the balance of the damages.
    damages on this claim under the Lanham Act and New Jersey law on unfair competition.
    The Wu defendants failed to respond to this issue in their reply brief. As an appellate
    court, we review a district court’s decision with respect to treble damages for abuse of
    discretion. See Burger King Corp. v. Mason, 
    855 F.2d 779
    , 782-83 (11th Cir. 1979).
    Both the Lanham Act and New Jersey unfair competition law give courts the power to
    treble damages. See 15 U.S.C. § 1117(a); N.J. Stat. Ann. § 56:4-2. However, if the court
    finds an intentional or willful violation of the Lanham Act, “the court shall, unless the
    court finds extenuating circumstances, enter judgment for three times such profits or
    damages . . . .” 15 U.S.C. § 1117(b). As one circuit has explained:
                  The interplay of these provisions demonstrates that a showing
                  of intent or bad faith is unnecessary to establish a violation of
                  [the Lanham Act], or to seek remedies pursuant to § 1117(a).
                  But where, as here, a registrant seeks the mandatory treble
                  damages and attorneys’ fees provided for in § 1117(b), the
                  plaintiff must prove the defendants’ intent to infringe.
    Chanel, Inc. v. Italian Activewear of Fl., Inc., 
    931 F.2d 1472
    , 1476 (11th Cir. 1991).
           In the instant action, it is unclear whether Mon Cheri sought trebling under
    discretionary § 1117(a) or mandatory § 1117(b). The District Court denied Mon Cheri’s
    request for trebled damages explaining that “[t]he circumstances of this case, the claims
    involved, and the verdict returned by the jury awarding damages, do not warrant
    augmented damages.” (A 13.) Mon Cheri has not persuaded us to disturb this ruling
    whether it was made under either provision.
           4.     Punitive Damages
           The jury awarded Mon Cheri $375,000 in punitive damages, in addition to a total
    award of $324,000 in compensatory damages. The District Court vacated the jury’s
    award of punitive damages, which Mon Cheri now appeals. This circuit reviews de novo
    the constitutionality of an award of punitive damages; however, the court must accept
    findings of fact by the district court, unless those findings are clearly erroneous. See
    Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 
    532 U.S. 424
    , 440 n.14 (2001).
           “The Due Process Clause of the Fourteenth Amendment prohibits the imposition
    of grossly excessive or arbitrary punishments on a tortfeasor.” State Farm Mut. Auto. Ins.
    Co. v. Campbell, 
    538 U.S. 408
    , 416 (2003). To determine whether an award of punitive
    damages comports with due process, courts must “consider three guideposts: (1) the
    degree of reprehensibility of the defendant’s misconduct; (2) the disparity between the
    actual or potential harm suffered by the plaintiff and the punitive damages award; and
    (3) the difference between the punitive damages awarded by the jury and the civil
    penalties authorized or imposed in comparable cases.” Id. (citing BMW of N. Am. Inc. v.
    517 U.S. 559
    , 575 (1996)). “The Supreme Court has recognized that the degree of
    reprehensibility of the defendant’s conduct is ‘the most important indicium of the
    reasonableness of a punitive damages award.’” CGB Occ. Therapy, Inc. v. RHA Health
    Servs., Inc., 
    499 F.3d 184
    , 190 (3d Cir. 2007) (quoting Campbell, 538 U.S. at 419). To
    evaluate the degree of reprehensibility, courts consider whether: “(1) the harm caused
    was physical as opposed to economic, (2) the tortious conduct evinced an indifference to
    or reckless disregard of the health or safety of others, (3) the target of the conduct had
    financial vulnerability, (4) the conduct involved repeated actions or was an isolated
    incident, and (5) the harm was the result of intentional malice, trickery, or deceit, or mere
    accident.” Id. (citing Campbell, 538 U.S. at 419).
           Mon Cheri challenges the District Court’s finding with respect to the fourth and
    fifth reprehensibility factors.6 The District Court found the fourth factor in the Wu
    defendants’ favor explaining that in this circuit, “the ‘repeated conduct’ factor will
    necessarily have ‘less force’ where the defendant’s misconduct did not extend beyond his
    dealings with the plaintiff.” (A-I at 9 (quoting CGB Occ., 499 F.3d at 191).) The District
    Court recognized that there were numerous dresses involved and repetitive conduct, but
    gave this factor less weight because the Wu defendants’ reprehensible conduct was
    limited to their dealings with Mon Cheri. (A-I at 10.) The District Court’s adherence to
    this Court’s precedent was not improper.
           With respect to the fifth factor—intent—the District Court concluded that “based
    on the nature of [Mon Cheri’s] passing off claims . . . [whether] . . . the harm was the
    result of intentional malice, [or] trickery, is unclear and uncertain.” (A-I at 10.) The
    District Court indicated that the only claim for which punitive damages was available was
          The District Court found the first three factors in favor of the Wu defendants,
    which is supported by the record and not challenged on appeal. Accordingly, we will not
    address the District Court’s analysis with respect to these factors.
    the passing off claim. The District Court noted that the evidence of the Wu defendants’
    involvement consisted of their agent Dominic’s attempt to pass off Mirage dresses, which
    was too attenuated to support punitive damages. Mon Cheri has not persuaded us to
    disturb this finding, which is dispositive on the issue of punitive damages.
    F.     Attorneys’ Fees
           The District Court denied Mon Cheri’s motion for attorneys’ fees, which Mon
    Cheri appeals, contending that it is entitled to fees under both the Lanham and Copyright
    Acts. Courts have the power to award attorneys’ fees under both the Lanham and
    Copyright Acts. See 15 U.S.C. § 1117(a) (“The court in exceptional cases may award
    reasonable attorney fees to the prevailing party.”); see also 17 U.S.C. § 505 (“In any civil
    action under this title, the court in its discretion may allow the recovery of full costs . . .
    [and] . . . the court may also award a reasonable attorney’s fee to the prevailing party as
    part of the costs.”). This circuit reviews such decisions for abuse of discretion. See
    Acumed LLC v. Advanced Surgical Servs., Inc., 
    561 F.3d 199
    , 211 (3d Cir. 2009); see
    also Securacomm Consulting, Inc. v. Securacomm Inc., 
    224 F.3d 273
    , 279 (3d Cir. 2000).
           In the instant action, the District Court denied Mon Cheri’s request for attorneys’
    fees under the Lanham Act. Under the totality of the circumstances of this case, we do
    not find the District Court’s denial an abuse of discretion. Moreover, because the
    standards for awarding fees under both acts are substantially similar, we decline to
    remand the issue of whether to award fees under the Copyright Act as a denial under this
    Act would be appropriate as well.
           For the reasons set forth above, we will affirm the judgment of the District Court
    in all respects.

Document Info

DocketNumber: 09-1239

Filed Date: 6/4/2010

Precedential Status: Non-Precedential

Modified Date: 12/21/2014

Authorities (25)

Feist Publications, Inc. v. Rural Telephone Service Co. , 499 U.S. 340 ( 1991 )

BMW of North America, Inc. v. Gore , 517 U.S. 559 ( 1996 )

Cooper Industries, Inc. v. Leatherman Tool Group, Inc. , 532 U.S. 424 ( 2001 )

State Farm Mut. Automobile Ins. Co. v. Campbell , 538 U.S. 408 ( 2003 )

Williams Electronics, Inc. v. Artic International, Inc. , 685 F.2d 870 ( 1982 )

frank-music-corporation-robert-wright-george-forrest-anne-lederer-as-of , 772 F.2d 505 ( 1985 )

Heidi S. Weissmann, M.D., Cross-Appellee v. Leonard M. ... , 868 F.2d 1313 ( 1989 )

Whimsicality, Inc., Cross-Appellee v. Rubie's Costume Co., ... , 891 F.2d 452 ( 1989 )

chanel-inc-v-italian-activewear-of-florida-inc-dba-italian-designer , 931 F.2d 1472 ( 1991 )

united-states-naval-institute-plaintiff-appellant-cross-appellee-v , 936 F.2d 692 ( 1991 )

Folio Impressions, Inc. v. Byer California MacY New York, ... , 937 F.2d 759 ( 1991 )

coca-cola-bottling-company-of-elizabethtown-inc-jackson-coca-cola , 988 F.2d 386 ( 1993 )

cmm-cable-rep-inc-dba-creative-media-management-inc-v-ocean-coast , 97 F.3d 1504 ( 1996 )

Fonar Corporation, Plaintiff-Counter-Defendant-Appellant v. ... , 105 F.3d 99 ( 1997 )

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securacomm-consulting-inc-v-securacom-incorporated-kuwam-corporation , 224 F.3d 273 ( 2000 )

Dam Things From Denmark, A/K/A Troll Company Aps v. Russ ... , 290 F.3d 548 ( 2002 )

dun-bradstreet-software-services-inc-geac-computer-systems-inc-v , 307 F.3d 197 ( 2002 )

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CGB Occupational Therapy v. RHA Health Services , 499 F.3d 184 ( 2007 )

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