Bucklew, Stephen L. v. Hawkins Ash Baptie ( 2003 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 02-2244, 02-2299
STEPHEN L. BUCKLEW,
Plaintiff-Appellee,
Cross-Appellant,
v.
HAWKINS, ASH, BAPTIE & CO., LLP,
and HAB, INC.,
Defendants-Appellants,
Cross-Appellees.
____________
Appeals from the United States District Court
for the Western District of Wisconsin.
No. 01-C-47-S—John C. Shabaz, Judge.
____________
ARGUED APRIL 4, 2003—DECIDED MAY 27, 2003
____________
Before POSNER, EASTERBROOK, and ROVNER, Circuit Judges.
POSNER, Circuit Judge. Stephen Bucklew brought this
suit in a federal district court in Wisconsin against two
affiliated companies that we’ll call “HAB.” The suit charges
copyright infringement, fraud, conversion, and violation
of RICO. The district judge dismissed all but the copy-
right claim, which was tried to a jury, resulting in a verdict
for Bucklew of $660,000, which the judge cut down to
2 Nos. 02-2244, 02-2299
$395,000. HAB appeals; Bucklew cross-appeals, challenging
the dismissal of his noncopyright claims.
Local housing authorities that want grants from the
federal department of Housing and Urban Development
have to complete forms prescribed by HUD. The forms
require not only specific basic data such as salaries and
other categories of proposed expenditure by the grant
applicant but also simple arithmetical transformations of
the data, such as adding the numbers in particular cells
in the table of basic data. Bucklew developed and copy-
righted software, intended to be used in conjunction with
standard spreadsheet applications such as Lotus 1-2-3
and Excel, for doing these transformations and displaying
them in tables. The essential transformation involves
entering the basic data in an electronic copy of the HUD-
prescribed form and applying to those data an algorithm
that picks out the relevant cells and performs the relevant
operation (namely addition) on them and displays the
results in tabular form. Standard spreadsheet applications
make this transformation relatively easy to program because
they include functions such as DSUM, a simple command
for adding up the numbers in the cells identified by a
criterion specified by the programmer and displaying the
results of the addition. Bucklew does not claim copyright in
either the spreadsheet applications or DSUM. But there is
more, though not a great deal more, to his product than
these programs. Decisions have to be made regarding
choice and size of font, the size of cells and columns, wheth-
er and where to use color, the wording of labels and head-
ings (other than those prescribed by the HUD forms), and
whether to use boldface or italics for column headings.
These decisions were made by Bucklew. The ones we
have named all involve the appearance of the forms, but
software that is read only by the computer and not by its
Nos. 02-2244, 02-2299 3
human user is also copyrightable, and Bucklew does claim
copyright in the “construction” as well as display of his
forms; but it is unexplained what he means by this or
whether it has been infringed.
The trial focused on one of the four forms (as the parties
refer to the conversion of a prescribed HUD form into
an electronic form that computes and displays the arith-
metic manipulations that HUD requires) copyrighted by
Bucklew that he claimed were copied by HAB. This form
is a transformation of HUD form 52566, which requires
salary data; the other three forms require data for other
categories of expenditure. HAB grudgingly concedes that
the evidence compels an inference that it copied Bucklew’s
form 52566 to create its own form 52566. Some similar-
ities between a copyrighted work and a work alleged to
infringe it are consistent with an inference of independent
creation, and in that case evidence that the alleged infringer
had access to (that is, saw or at least could have seen) the
copyrighted work is indispensable. Ty, Inc. v. GMA Accesso-
ries, Inc., 132 F.3d 1167, 1169-70 (7th Cir. 1997). But when
the similarities concern details of such an arbitrary char-
acter that the probability that the infringer had duplicated
them independently is remote, an inference of copying
may be drawn without any additional evidence. Id.; Selle v.
Gibb, 741 F.2d 896, 901, 903-05 (7th Cir. 1984); Gaste v.
Kaiserman, 863 F.2d 1061, 1067-68 (2d Cir. 1988); Bouchat v.
Baltimore Ravens, Inc., 241 F.3d 350, 355-56 (4th Cir. 2001).
These cases say that access can be inferred from a suffi-
ciently striking similarity between the two works, and that
is true; but as the Fifth Circuit suggested in Ferguson v.
National Broadcasting Co., 584 F.2d 111, 113 (5th Cir. 1978), it
is more straightforward to say that in some cases proof
of access isn’t required.
It is in order to avoid having to prove access that
mapmakers will sometimes include a fictitious geograph-
4 Nos. 02-2244, 02-2299
ical feature in their maps; if that feature (what is called in
the trade a “copyright trap”) is duplicated in someone
else’s map, the inference of copying is compelling. Rockford
Map Publishers, Inc. v. Directory Service Co. of Colorado, Inc.,
768 F.2d 145, 147 (7th Cir. 1985); Melville B. Nimmer &
David Nimmer, Nimmer on Copyright, vol. 4, § 13.03[C], pp.
13-75 to 13-77 (2002); see also General Drafting Co. v. An-
drews, 37 F.2d 54, 56 (2d Cir. 1930) (errors as distinct from
deliberately set traps). And that is the case with regard
to form 52566. Bucklew’s version contains an arbitrary
pattern of boldfacing of cells; HAB’s duplicates it exactly.
Bucklew’s form also contains an “output range,” an interme-
diate table that he carried over from a previous spread-
sheet program but that has no function in his current
program—or in HAB’s. Had HAB written its program
from scratch, it would have had no reason to include
an output range—yet it did. And in another intermediate
table, one that contains the identical data as the form 52566
itself (the starting point for the transformation), HAB’s
version uses the identical headings as Bucklew’s corre-
sponding intermediate table, rather than the headings in
the form 52566 with which HAB had begun. (For unex-
plained reasons, that form had different headings from
the form from which Bucklew had begun.) And HAB’s
program like Bucklew’s used a font (Swiss font) that was
not available in the version of the Windows operating
system that HAB used to develop its software. This is
further evidence that rather than creating its own form
using the software available to it on Windows, HAB had
copied Bucklew’s form.
The evidence of copying with regard to the other three
forms is scanty. Indeed, they were barely mentioned at
trial. HAB complains that they were smuggled into the
trial and that the jury should not have been permitted to
Nos. 02-2244, 02-2299 5
consider them. Before trial the district judge, in conformity
with his established practice (though we cannot find it
stated in writing in the rules of his court or anywhere
else), explained to the parties that any objections to exhibits,
other than objections based on relevance, had to be made
before trial and any exhibit not objected to before trial
would become a part of the trial record. The exception for
relevance was presumably intended for the situation in
which, because of the course the trial might take, a docu-
ment that had seemed relevant to the issues in the case
before trial no longer was. HAB did not object before trial
to the introduction into evidence of any of the four forms
of Bucklew’s that were alleged to be infringed. But it ar-
gues that it assumed that the forms would be discussed
at trial rather than just being handed to the jury, along
with the other exhibits that had not been ruled inadmis-
sible, when the jury retired to deliberate.
There was no basis for the assumption. Admissible
documents are evidence, just like testimony. They do not
require sponsorship. The procedure followed by the dis-
trict judge is common and sensible. It saves trial time. The
Federal Rules of Civil Procedure encourage judges to
resolve evidentiary disputes so far as possible before trial
in order to shorten trials and minimize interruptions, Fed.
R. Civ. P. 16, 26(a)(3)—an especially important consider-
ation in jury trials. Evidently Bucklew was content, hav-
ing established that HAB had copied his form 52566 to
make its form 52566, to let the jury make up its own mind
about the other forms. He testified that he believed his
other three forms had been copied as well, and his ex-
pert’s reports, which though hearsay were admitted into
evidence without objection, said the same thing though
without elaboration. Had HAB wanted to challenge the
inference of copying with evidence of its own, there was
nothing to stop it from doing so. Maybe it held back be-
cause it thought that the jury would be unlikely to find
6 Nos. 02-2244, 02-2299
infringement of the other three forms when the plaintiff
had presented so little evidence about them and there was
no evidence that HAB had had access to Bucklew’s versions
of those forms, though this is irrelevant because Bucklew’s
claim is that HAB’s versions of those forms were copied
from Bucklew’s form 52566, to which HAB did have access.
In this court, HAB’s principal argument about the admis-
sibility of the three forms is that they confused the jury.
Just as a document that seemed admissible before trial
might be objected to at trial as lacking relevance, so it
might be objected to as confusing because it had not been
the subject of testimony and without testimony could not
be comprehended by a lay person. But there was testi-
mony about the forms—elicited indeed by HAB itself, on
cross-examination—enough to justify the judge in over-
ruling the objection.
HAB remains free to argue that there was a failure of
proof with respect to the three forms. Bucklew, however,
testified without contradiction to certain similarities that
indicated copying (though, to repeat, from Bucklew’s form
52566, not from Bucklew’s versions of the three other
forms), notably a missing vertical line where a line would
otherwise be expected, explicable only as a trace of the dele-
tion of the unneeded output range that HAB had copied
from Bucklew’s form. (A cell to the left of the deleted
area had a box around it; apparently when an HAB pro-
grammer deleted material to the right of that cell, he
stripped the box around the cell of its right-hand side
vertical border.) What is true is that there are more differ-
ences between HAB’s version of the other three forms and
form 52566, and this may be relevant to infringement, as we
are about to see; but it does not rebut an inference of
copying. To return to the map example, the presence of a
fictitious geographical feature in the alleged infringer’s map
Nos. 02-2244, 02-2299 7
might be conclusive proof of copying even though the
copier had changed the colors or other features of the
map, so that at a glance the two maps appeared quite dif-
ferent.
With respect to all four forms HAB argues that even
if there was copying there was no infringement. It ap-
peals primarily to the copyright doctrines of merger and
scènes à faire. The first of these confusing labels refers to
the situation in which there is only one feasible way of
expressing an idea, so that if the expression were copy-
rightable it would mean that the idea was copyrightable,
and ideas are not copyrightable. E.g., Ets-Hokin v. Skyy
Spirits, Inc., 225 F.3d 1068, 1082 (9th Cir. 2000); Kregos v.
Associated Press, 937 F.2d 700, 705 (2d Cir. 1991); Kern River
Gas Transmission Co. v. Coastal Corp., 899 F.2d 1458, 1459,
1463-64 (5th Cir. 1990). The standard citation remains
Baker v. Selden, 101 U.S. 99 (1879). Selden had published
(and copyrighted) a book describing a bookkeeping sys-
tem that he had invented, and he illustrated the book
with blank bookkeeping forms. Baker copied the forms,
rearranging columns and using different headings, and
sold them to people who wanted to use Selden’s system.
This was held not to be copyright infringement, even
though Baker had copied part of a copyrighted work, since
otherwise Selden would have had a monopoly over his
bookkeeping system (which was an idea, and hence not
copyrightable) that he could have exploited by insisting
that anyone wanting to use the system buy the forms
necessary for using it from him. If Bucklew were claiming
copyright in the tabular presentation of the summary data
required by HUD, this case would be governed by Baker v.
Selden. But he is not. He is claiming copyright in tables
configured in an optional way, tables that are the product
of format choices that are not unavoidable, for which in-
8 Nos. 02-2244, 02-2299
deed there were an immense number of alternative combi-
nations any one of which HAB was free to use in lieu of
Bucklew’s. See, e.g., Mason v. Montgomery Data, Inc., 967
F.2d 135, 138-41 (5th Cir. 1992); Kregos v. Associated Press,
supra, 937 F.2d at 706-07.
The fact that Bucklew’s formatting choices do not re-
flect a high degree of originality is irrelevant. When as in
this case a work in which copyright is claimed is based
on work in the public domain, the only “originality” re-
quired for the new work to be copyrightable (the very term
is a misnomer) is enough expressive variation from public-
domain or other existing works to enable the new work
to be readily distinguished from its predecessors. Alfred
Bell & Co. v. Catalda Fine Arts, Inc., 191 F.2d 99, 102-03
(2d Cir. 1951). “Originality in this context means little
more than a prohibition of actual copying.” Id. at 103(internal quotation marks deleted); Three Boys Music Corp.
v. Bolton, 212 F.3d 477, 489 (9th Cir. 2000). That undemand-
ing requirement is satisfied in this case; any more demand-
ing requirement would be burdensome to enforce and
would involve judges in making aesthetic judgments, which
few judges are competent to make.
The doctrine of scènes à faire (another confusing label,
literally “scenes for action,” which the Oxford English
Dictionary tells us is a theatrical term meaning “the most
important scene in a play or opera, made inevitable by the
action which leads up to it”—which is not the legal doc-
trine at all) teaches, sensibly enough, that a copyright
owner can’t prove infringement by pointing to features of
his work that are found in the defendant’s work as well but
that are so rudimentary, commonplace, standard, or un-
avoidable that they do not serve to distinguish one work
within a class of works from another. Reed-Union Corp. v.
Turtle Wax, Inc., 77 F.3d 909, 913-14 (7th Cir. 1996); Atari, Inc.
Nos. 02-2244, 02-2299 9
v. North American Philips Consumer Electronics Corp., 672 F.2d
607, 616-17 (7th Cir. 1982); Williams v. Crichton, 84 F.3d
581, 587-89 (2d Cir. 1996). Every expressive work can be
decomposed into elements not themselves copyright-
able—the cars in a car chase, the kiss in a love scene, the
dive bombers in a movie about Pearl Harbor, or for that
matter the letters of the alphabet in any written work. The
presence of such elements obviously does not forfeit
copyright protection of the work as a whole, but infringe-
ment cannot be found on the basis of such elements alone;
it is the combination of elements, or particular novel twists
given to them, that supply the minimal originality re-
quired for copyright protection.
A more fundamental limitation on the scope of copy-
right infringement is that copyright protects only expres-
sion and not what is expressed, the “idea,” which in the
case of fiction is more likely to be a plot or situation than,
as in Baker v. Selden, an algorithm or other abstraction.
Suppose one wanted to prove that the Tom Hanks-Meg
Ryan movie You’ve Got Mail infringed the Jimmy Stewart-
Margaret Sullavan movie The Shop Around the Corner. You
could point to the fact that in both movies the hero falls in
love with the heroine on the basis of correspondence (letters
in the earlier movie, email in the later) without having met
her and without realizing that it is someone he knows—and
dislikes (and the feeling is reciprocated)—though every-
thing comes right in the end. But it would not be evidence
of infringement that both movies were love stories, or that
they were comedies, or that the lead actors were a man and
a woman. These are generic characteristics, obtained by
abstracting the commonest features of the specific work;
they do not indicate uniqueness. They are at the opposite
extreme from the arbitrary details, such as the pattern of
boldfacing in Bucklew’s form 52566, that contribute such
10 Nos. 02-2244, 02-2299
originality as a new expressive work may have. The format
choices that Bucklew made were not generic. It is not as
if everyone who writes programs of this sort uses Swiss
font or displays an output range or uses a particular pattern
of boldfacing.
Nor is it important that after copying Bucklew’s form
52566 and using it as the template for the other three
forms, HAB introduced a number of variations in its version
of form 52566. Variants that result from tinkering with a
copied form are derivative works from that form, and it
is a copyright infringement to make or sell a derivative
work without a license from the owner of the copyright on
the work from which the derivative work is derived. Pickett
v. Prince, 207 F.3d 402, 405-407 (7th Cir. 2000); Nimmer &
Nimmer, supra, vol. 1, § 3.06, pp. 3-34.24 to 3-34.26; Mark A.
Lemley, “The Economics of Improvement in Intellectual
Property Law,” 75 Tex. L. Rev. 989, 992 (1997). In some cases
a work, though derivative in a literal sense, is so utterly
transformed as to bear no traces of the original; and then
there is no infringement. Castle Rock Entertainment, Inc.
v. Carol Publishing Group, Inc., 150 F.3d 132, 143 n. 9 (2d
Cir. 1998). Such cases are in fact common, though they are
rarely litigated. Suppose one copied a long passage from
a copyrighted work and then edited it to produce a para-
phrase so loose that it would not be similar enough to the
original to constitute an infringement. The fact that the
paraphrase had been “derived” in a genetic sense from a
copyrighted original would not make it infringing. Pickett
v. Prince, supra, 207 F.3d at 407 (“works only loosely con-
nected with some ancestral work claimed to be their
original”). Similarly, if the original expression added by the
unauthorized preparer of a derivative work is clearly
detachable from the original work itself, so that no con-
fusion, or disruption of the copyright owner’s plans for
Nos. 02-2244, 02-2299 11
the exploitation of his work, would be created by allow-
ing the unauthorized preparer to copyright his original
expression, the unauthorized preparer might be allowed
to do so, Williams v. Broadus, 60 U.S.P.Q.2d 1051, 1055
(S.D.N.Y. 2001); Paul Goldstein, Copyright, vol. 1, § 2.16,
p. 2:209 and n. 11 (2d ed. 2003), though this principle may
be limited to compilations, where “the infringing por-
tion would be easily severable and the scope of the com-
pilation author’s own work… would be easily ascertain-
able.” Anderson v. Stallone, 11 U.S.P.Q.2d 1161, 1167-69 (C.D.
Cal. 1989). But HAB does not argue that its alterations of
the copied form went so far as to bring it within the scope
of either of these qualifications of the general rule concern-
ing derivative works.
The analysis to this point sufficiently establishes that
HAB’s version of form 52566 infringed Bucklew’s version.
But that leaves the other three forms, where there are fewer
traces of borrowing from Bucklew’s form. The principal
traces are the captions “input range” and “criteria range,”
the use of “crit1,” “crit2,” etc. to designate specific criteria,
and the designation of each category of data as a “type.”
These are good examples of scènes à faire—standard
expressions, like language itself, without which the would-
be author of an expressive work would be speechless. The
only other residue of a borrowed-from-Bucklew feature in
the three forms was that telltale missing vertical line—the
tipoff that HAB had indeed copied Bucklew’s form 52566 in
creating its own version of the other three forms and had
then deleted the superfluous output range. But a nonexis-
tent line has no expressive content, except possibly in
the most advanced modern art. (Cf. Georges Perec, La
Disparation (1969)—a 300-page novel written without the
letter e.) The only element of an expressive work that is
infringed by copying is an expressive element; what
remains from the copying in the case of the three forms
12 Nos. 02-2244, 02-2299
under consideration either were scènes à faire or weren’t
expressive elements at all.
So the jury verdict on infringement can stand only with
respect to the first of the four allegedly infringing forms.
This has obvious implications for the damages award,
but before getting to those let us consider HAB’s chal-
lenges to that award that are independent of any doubts
about liability. After the judge reduced the jury’s award
by granting a remittitur that Bucklew accepted, the award
consisted of four items: $100,000 for Bucklew’s lost profits;
$125,000 for HAB’s profits from the infringing forms;
$70,000 for a savings in time that HAB obtained as a re-
sult of the infringement; and $100,000 for profits obtained
by HAB on separate products by virtue of its being able
to offer its customers “one-stop shopping,” i.e., a complete
line of HUD financial software, including the copied forms.
A copyright owner can sue for his losses or for the in-
fringer’s profits, but not for the sum of the two amounts.
17 U.S.C. § 504(b); Deltak, Inc. v. Advanced Systems, Inc., 767
F.2d 357, 363 (7th Cir. 1985); Taylor v. Meirick, 712 F.2d 1112,
1120 (7th Cir. 1983); Hamil America, Inc. v. GFI, 193 F.3d 92,
108 n. 7 (2d Cir. 1999); Nimmer & Nimmer, supra, vol. 4,
§ 14.01[A], pp. 14-5 to 14-6. That would be double counting.
The profits that HAB obtained from selling forms copied
from Bucklew came at his expense; his loss was HAB’s gain.
If the infringer is a more efficient producer, his gain may
exceed the copyright owner’s loss. If he is not more efficient,
his gain is likely to be less than the copyright owner’s loss
because competition will tend to force price down to cost,
minimizing the infringer’s profits but depriving the copy-
right owner of the supracompetitive return that he en-
joyed before he faced competition from the seller of an
exact substitute for his product. The copyright owner is
allowed to waive damages (lost profits) and sue for the
Nos. 02-2244, 02-2299 13
infringer’s gain. Copyright infringement unlike patent
infringement is an intentional tort, and by forcing the
infringer to disgorge his profit should it exceed the copy-
right owner’s loss the law discourages infringement
and encourages the would-be infringer to transact with
the copyright owner rather than “steal” the copyrighted
work. Taylor v. Meirick, supra, 712 F.2d at 1120. But there
is no basis in the law for requiring the infringer to give up
more than his gain when it exceeds the copyright own-
ers’ loss. Such a requirement would add a punitive as
distinct from a restitutionary element to copyright dam-
ages, and while the copyright statute does authorize
statutory damages unrelated to losses or gains, see 17 U.S.C.
§ 504(c), these were not sought here and—a point to which
we shall return—the statute contains no provision for
punitive damages. But, astonishingly, HAB has failed to
complain about double counting, and so it has booted
away a winning issue.
HAB argues that Bucklew’s lost profits were due not
to the infringement but simply to the fact that HAB was
competing with him. Remember that Bucklew had no
copyright in the database programs that he used (Lotus
and Excel) or in the spreadsheet formula (DSUM) that
transformed the raw data into the data required by HUD.
HAB could have designed its own, noninfringing program
that would have duplicated the essential—and noncopy-
righted—features of Bucklew’s. Since it would have been
producing a close substitute, it would have taken sales
from Bucklew, reducing Bucklew’s profits.
The essential distinction at which this argument ges-
tures is between infringer’s profits that are due to the
infringer’s being a more efficient producer than the plain-
tiff, which the copyright owner can sue for in order to
discourage infringement, and infringer’s profits that are
14 Nos. 02-2244, 02-2299
due to features of his work that do not infringe; those prof-
its belong to him and not the copyright owner. But there
is a difference between an infringer’s adding expressive
features to what he has copied, and a copier who adds
no expressive features but argues that since the copied
work contains mainly public-domain material, damages
should be limited to the perhaps trivial commercial value
attributable to the expressive features that the author of
that work added to the public-domain materials with which
he began. The argued distinction is artificial. The value of
an expressive work is the result of the operation of the
author’s creativity on public-domain materials, ideas,
and so forth; partitioning the two sources of the value,
the public domain and the author’s creative transforma-
tion of it, would not be practical. The apportionment
that the law permits is not between the creative and the
derived features of the plaintiff’s work, but between the
infringing and the noninfringing features of the defen-
dant’s work.
Once the plaintiff proves his losses, or the defendant’s
profits, from the defendant’s sale of an infringing work, the
burden shifts to the defendant to apportion the profits
or losses between the infringing and noninfringing fea-
tures of the defendant’s work. 17 U.S.C. § 504(b); Ty, Inc.
v. Publications Int’l Ltd., 292 F.3d 512, 523-24 (7th Cir.
2002), and cases cited there. HAB failed to do that.
The item of damages for time savings is not duplicative of
the other damages that were awarded, though it was
improper on another ground. The savings are in the time
that HAB takes to service its customers, the local housing
authorities, and do not show up in the profits that HAB
makes from the sale of the infringing products and so the
loss that Bucklew suffered from the infringement. But
HAB argues compellingly that any savings in time could not
Nos. 02-2244, 02-2299 15
have reflected the copyrighted features of Bucklew’s forms,
because those features—the formatting choices—do not
reduce the amount of time that is required to process data,
using the spreadsheets with their built-in DSUM function.
There is an analogy to the principle of “antitrust injury.”
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486-
88 (1977); Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S.
328, 337, 339 (1990); Dial A Car, Inc. v. Transportation, Inc., 82
F.3d 484, 486-87 (D.C. Cir. 1996). If two competing firms
merge in violation of antitrust law, but the merger’s effect
on the market price from eliminating competition between
the merging firms is dominated by its effect in reducing
the costs of the firm resulting from the merger below those
of the two predecessor firms, and in consequence the
firm reduces its price below the old competitive price, the
remaining firms in the market will have to lower their
price in order to remain competitive and so they are in-
jured by the merger. But the injury is not actionable; it is
not “antitrust injury” (that is, injury for which antitrust
law provides a remedy) because it is not the sort of injury
that antitrust law is concerned with preventing or remedy-
ing. Likewise here, HAB may have obtained cost savings
by copying Bucklew’s form, but insofar as those cost sav-
ings reflected not the appropriation of the expressive
features of Bucklew’s form but the appropriation merely of
the idea of using spreadsheet programs with the DSUM
function to expedite the preparation of grant applications
to HUD, they were not the fruit of conduct for which
copyright law is intended to provide a remedy.
What is true, and is the basis of Bucklew’s claim of
conversion, of which more shortly, is that HAB did not buy
Bucklew’s form; it borrowed and, without authorization,
copied it. The unauthorized copying was an infringement,
but the only damages to which it can give rise are the price
16 Nos. 02-2244, 02-2299
of the form, not the value of the ideas in the form because
the ideas are not protected by copyright law.
There was also a failure of proof with regard to the “one-
stop shopping” damages. HAB argues that damages can
never be obtained that are based on the profits that the
infringer made from the sale of a product that did not
infringe the copyright. That is incorrect. Business Trends
Analysts, Inc. v. Freedonia Group, Inc., 887 F.2d 399, 404, 407
(2d Cir. 1989); Frank Music Corp. v. Metro-Goldwyn-Mayer,
Inc., 772 F.2d 505, 516-17 (9th Cir. 1985). Remember that the
purpose of allowing suit for the infringer’s lost profits is
to make infringement worthless to the infringer. This will
sometimes require tracing those profits into another prod-
uct, as where it is bundled with the infringing product.
Suppose a defendant had copied a copyrighted book
verbatim and he then offered to sell copies of the book for
nothing to anyone who would pay him $25 for a bookmark
that had cost him 10 cents and had a market value of 50
cents. To hold in such a case that the defendant’s profits
from infringement were zero would approve a formula for
evading copyright law. Cf. Jefferson Parish Hospital District
No. 2 v. Hyde, 466 U.S. 2, 13 n. 19 (1984); United States
v. Microsoft Corp., 253 F.3d 34, 86 (D.C. Cir. 2001) (en
banc) (per curiam); Howard P. Marvel, “The Resale Price
Maintenance Controversy: Beyond The Conventional
Wisdom,”63 Antitrust L.J. 59, 63-64 (1994).
But Bucklew’s evidence that HAB shifted profits from the
infringing forms to a separate, noninfringing financial
software package (“HMS for Windows”) was too specula-
tive to sustain an award of damages. His theory is that the
prospect of one-stop shopping attracted customers who
might otherwise have gone to a competitor, and so in-
creased HAB’s revenue and presumably its profits. One
of HAB’s employees testified that the infringing forms
Nos. 02-2244, 02-2299 17
would indeed help with the sale of HMS for Windows, but
no evidence was presented that would have enabled the
market value of this “help” to be gauged. The testimony by
an expert witness for the plaintiff that 10 percent of the
profits on HAB’s sales of HMS for Windows were due to
the buyers’ being able to buy the infringing forms from
HAB had no factual basis whatsoever, and we repeat
previous reminders to the bench and bar of this circuit
that proof of damages requires—proof. CSC Holdings, Inc.
v. Redisi, 309 F.3d 988, 995 (7th Cir. 2002); MindGames, Inc.
v. Western Publishing Co., 218 F.3d 652, 658 (7th Cir. 2000);
Harbor House Condominium Ass’n v. Massachusetts Bay Ins.
Co., 915 F.2d 316, 318-19 (7th Cir. 1990); see also Hillside
Enterprises v. Carlisle Corp., 69 F.3d 1410, 1414 (8th Cir. 1995).
Besides all these problems with the computation of
damages, it will be necessary on remand to apportion
damages between the infringing form and what we have
determined to be the three noninfringing forms.
The cross-appeal need not detain us for long. Bucklew
seeks punitive damages for fraud and conversion under
Wisconsin law. He argues that HAB obtained a computer
disk containing his copyrighted program by falsely repre-
senting that it wanted merely to evaluate the program with
a view toward possibly licensing it from Bucklew, and
having thus obtained the program by false pretenses then
copied it, with the consequences described earlier. We may
assume that this is a good claim under Wisconsin law. But
Bucklew is not asking to have the disk returned, or for
damages equal to the value of the disk plus punitive
damages proportioned to that value. The compensatory
damages that it seeks for the fraud and conversion are
identical to the damages that it seeks for copyright infringe-
ment, so that its request for punitive damages is in fact a
request for punitive damages for copyright infringement.
18 Nos. 02-2244, 02-2299
The copyright statute does not authorize such damages,
as we have noted, and the statute’s preemption clause
forbids states to add sanctions for a wrongful act that is
identical to a violation of the statute. See 17 U.S.C. § 301(a);
Baltimore Orioles, Inc. v. Major League Baseball Players Ass’n,
805 F.2d 663, 674, 676-77 (7th Cir. 1986), and with specific
reference to punitive damages Budget Cinema, Inc. v.
Watertower Associates, 81 F.3d 729, 733 (7th Cir. 1996); Hays
v. Sony Corp. of America, 847 F.2d 412, 415 (7th Cir. 1988); On
Davis v. The Gap, Inc., 246 F.3d 152, 172 (2d Cir. 2001);
Nimmer & Nimmer, supra, vol. 4, § 14.02[B], p. 14-28.
The RICO claim is another loser. RICO provides a remedy
against conducting the activities of an enterprise through
a pattern of racketeering activity, and the definition of
racketeering includes criminal copyright infringement. But
apart from whether Bucklew could show that HAB has
engaged in a pattern of such crimes, the RICO claim fails
because the enterprise alleged to have been conducted
through a pattern of racketeering activity (defendant HAB,
Inc.) is a wholly owned subsidiary of the alleged racketeer
(the other defendant, Hawkins, Ash, Baptie & Co.). The
claim is that the parent stole the software and gave it to
the subsidiary to market. A parent and its wholly owned
subsidiaries no more have sufficient distinctness to trigger
RICO liability than to trigger liability for conspiring in
violation of the Sherman Act, see Copperweld Corp. v.
Independence Tube Corp., 467 U.S. 752, 777 (1984), unless the
enterprise’s decision to operate through subsidiaries rather
than divisions somehow facilitated its unlawful activity,
which has not been shown here. Bachman v. Bear, Stearns
& Co., 178 F.3d 930, 932 (7th Cir. 1999); Emery v. American
General Finance, Inc., 134 F.3d 1321, 1324 (7th Cir. 1998);
Fitzgerald v. Chrysler Corp., 116 F.3d 225, 226-28 (7th Cir.
1997); Bessette v. Avco Financial Services, Inc., 230 F.3d 439,
Nos. 02-2244, 02-2299 19
448-49 (1st Cir. 2000); Brannon v. Boatmen’s First National
Bank of Oklahoma, 153 F.3d 1144, 1147-49 (10th Cir. 1998).
To summarize, the judgment on liability is affirmed in
part and reversed in part, and the case is remanded for
a redetermination of the damages to which the plaintiff
is entitled.
AFFIRMED IN PART, REVERSED IN PART,
AND REMANDED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—5-27-03