Adventure Creative Group, Inc. v. CVSL, Inc.

Background

Adventure Creative Group, Inc. sued several business organizations, including Your Inspiration at Home Pty Ltd (YIAH), in a copyright-infringement case. Adventure said it was an advertising agency in the Twin Cities and that it had entered into a marketing-services agreement with YIAH effective June 19, 2012. Under that agreement, Adventure was to provide services including consulting, creative design, copywriting, packaging design, public relations, social media, and strategic planning. YIAH was required to pay Adventure five percent of YIAH’s gross sales, including sales by affiliates or subsidiaries selling or marketing the same or similar products.

The agreement addressed ownership of the work Adventure created. It stated that the work product—including written copy, photographs, images, graphics, audio, video, designs, and derivative works—would be Adventure’s property, subject to a license and conditions concerning later transfer of ownership to YIAH.

Adventure identified two registered works: a “Your Inspiration At Home” product and recruiting catalog, registered under Number TX0007766577, and a “Your Inspiration At Home” consultant recruitment video, registered under Number PA0001865255. Adventure alleged that YIAH stopped paying under the agreement, did not allow an independent audit of its gross sales, and continued using Adventure’s works to promote and generate business. Adventure sought default judgment for up to $16,350,000, calculated by multiplying 109 alleged infringements by the maximum statutory award of $150,000 for willful infringement.

Adventure’s separate breach-of-contract claim was not at issue in this motion because that claim had been resolved separately. The court had previously dismissed that claim based on the doctrine requiring litigation in a more appropriate forum, and a later proceeding resulted in a default judgment concerning delinquent licensing fees and related attorneys’ fees and costs.

Default judgment and copyright infringement

A default judgment is a judgment entered when a party fails to defend. The court explained that, after default, the factual allegations in the complaint—other than allegations about the amount of damages—are treated as true. The court must still determine whether those facts establish a valid legal claim, because default does not admit legal conclusions automatically.

The court found that Adventure’s allegations established a valid copyright-infringement claim. Copyright infringement requires ownership of a valid copyright and copying of original elements of the copyrighted work. Adventure identified two registered works, alleged facts supporting its ownership, and alleged that YIAH copied and used all or selected portions of those works.

Statutory damages

The Copyright Act permits a copyright owner to choose statutory damages instead of actual damages and additional profits. The ordinary statutory-damages range is $750 to $30,000 for each infringed work. If infringement is willful, the maximum increases to $150,000 per infringed copyright.

The court rejected Adventure’s argument that each of the 109 images and pieces of text should count as a separate work. Adventure identified registrations for the catalog and the video, but the record did not show registrations for each individual image or piece of text. The court explained that registration is generally required before pursuing an infringement claim in court. It also stated that when separate portions of a work are protected under one copyright, statutory damages are not multiplied based on the number of copied portions. Under the circumstances presented, the law allowed an award for the two registered works—the catalog and video—not for the 109 separate images and pieces of text.

The court found that YIAH’s infringement was willful. It cited the alleged widespread infringement, YIAH’s continued use after Adventure made numerous demands to stop, YIAH’s failure to continue defending the case, the withdrawal of YIAH’s attorneys, its failure to obtain new representation by the court-ordered deadline, and its failure to answer Adventure’s discovery requests. The licensing fees paid under the agreement also supported a significant award. The court awarded $150,000 for each of the two infringed copyrights, for a total of $300,000.

Attorneys’ fees and costs

The Copyright Act allows a court to award attorneys’ fees and costs to a prevailing party. Adventure requested only the fees and costs incurred in bringing the default-judgment motion, totaling $8,369.50. The request included documentation of the work performed, time spent, and fees charged. The court found the request reasonable and supported, noting the legal and factual issues, the thorough submissions, the evidentiary hearing, and the reasonableness of counsel’s hourly rate.

Disposition

Judge Eric C. Tostrud ordered that: