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UNICOLORS, INC. V. H&M HENNES & MAURITZ, LP

On remand from the Supreme Court in this copyright-infringement action brought by Unicolors, Inc., against H&M Hennes & Mauritz, L.P., the panel affirmed the district court's judgment in general, save that it vacated and remanded with instructions to grant a new trial, limited only to damages, if Unicolors rejects the remittitur amount of $116,975.23.

Unicolors, which creates designs for use on textiles and garments, alleged that a design it created in 2011 (the EH101 design) is remarkably similar to a design printed on garments that H&M began selling in 2015 (the Xue Xu design). The Supreme Court held that lack of either factual or legal knowledge on the part of a copyright holder can excuse an inaccuracy in a copyright registration under the Copyright Act's safe-harbor provision, 17 U.S.C. § 411(b)(1). Accordingly, the panel reviewed anew the threshold issue whether Unicolors holds a valid copyright in registration No. VA-1-770-400 (the '400 Registration), and concluded that under the correct standard, the '400 Registration is valid because the factual inaccuracies in the application are excused by the cited safe-harbor provision. 

The panel held that a party seeking to invalidate a copyright registration under § 411(b) must demonstrate that (1) the registrant submitted a resignation application containing inaccuracies, (2) the registrant knew that the application failed to comply with the requisite legal requirements, and (3) the inaccuracies in question were material to the registration decision by the Register of Copyrights. The panel concluded that Unicolors's '400 Registration contained an inaccuracy, but that the district court's finding that Unicolors did not have the requisite knowledge of its application's inaccuracy per § 411(b)(1)(A) is not clearly erroneous. This lack of knowledge means that the '400 Registration falls within the ambit of the safe-harbor provision's protection, notwithstanding its failure to comply with the "single unit" requirement, and that Unicolors's copyright is valid. Unicolors can therefore maintain its infringement action against H&M over the EH101 design, which is covered by that registration.

Concerning H&M's pretrial challenges, the panel held (1) H&M forfeited any claim of error on appeal based on a claim that Unicolors's President Nader Pazirandeh's statements constituted impermissible, undesignated expert opinion; (2) the district court did not abuse its discretion when it excluded H&M's proffered expert testimony of Robin Lake on the issue of substantial similarity of the EH101 and Xue Xu designs; and (3) the district court did not abuse its discretion in excluding H&M's proffered expert testimony of Justin Lewis on the issue of damages.

The panel then addressed H&M's at-trial challenges. 

First, H&M argued that the district court erred in refusing to instruct the jury that the Xue Xu design was presumptively independently created on account of a judicially noticed Chinese copyright in that design. Reviewing the Berne Convention and its protection of foreign copyrights in domestic infringement suits, the panel held that the district court did not err in rejecting H&M's first requested instruction regarding the parties' evidentiary burdens, because that requested instruction was duplicative; and that any error that subsisted in the district court's decision to reject H&M's requested instruction on presumptive validity was harmless.

Second, H&M argued that the district court erred by refusing to admit into evidence Shaoxing County DOMO Apparel Co., Ltd.'s U.S. copyright registration of the Xue Xu design. The panel held that the district court's exclusion of the evidence as prejudicial was not an abuse of discretion, so any error the district court made in determining the certificate's relevance was harmless. 

Third, H&M argued that the district court erred by admitting into evidence a previously unproduced, physical exemplar bearing a black-and-white (rather than color) version of EH101. The panel held that H&M forfeited this challenge. 

The panel then addressed H&M's post-trial challenges.

H&M challenged the district court's denial of its renewed motion for judgment as a matter of law (RJMOL).

The panel rejected the first basis for H&M's challenge because, as previously discussed, Unicolors has a valid copyright in the '400 Registration. Rejecting H&M's second challenge regarding the RJMOL, the panel held that because there was sufficient evidence to substantiate the jury's finding of striking similarity, Unicolors also presented sufficient evidence to prove the copying element of its infringement claim. Rejecting the third basis, the panel saw no reason to disturb the jury's willfulness determination.

In its final challenge regarding the RJMOL, H&M argued that the district court erred by impermissibly inflating Unicolors's post-remittitur damages. The district court’s remittitur calculation involved profit-disgorgement damages and lost-profit damages. The panel agreed with H&M that the district court’s profit-disgorgement remittitur calculation of $247,675.33 was an abuse of discretion, as that amount cannot be sustained using the jury’s findings of what Unicolors actually proved at trial. The jury used H&M’s gross profit per piece, not its average gross sales price per piece. Explaining the maximum recovery rule, the panel wrote that the purpose of remittitur is to maintain the jury’s verdict while lopping off an excrescence. The panel wrote that a profit-disgorgement figure of $98,441.23 removes the excrescence of profits from extraterritorial sales and the use of average gross sales price rather than the gross profit multiplier, while sustaining the remainder of the jury’s verdict. As for lost profits, the district court calculated the maximum amount that Unicolors could have incurred as a result of H&M’s infringement to be $18,534, after removing international sales from the jury’s calculation. Finding no reversible error with respect to the district court's lost-profit damages calculation, the panel held that H&M forfeited any challenge related to the admissibility of lost-profits evidence. The panel therefore concluded that the proper remittitur amount to take the place of the jury verdict’s damages should have been $116,975.23, which is the sum of the proper profit-disgorgement award of $98,441.23 and a lost-profits award of $18,534.00. The panel instructed the district court on remand to grant H&M’s request for a new trial if Unicolors rejects this new remittitur amount, but the new trial must be limited only to the issue of damages.

The panel held that the district court did not abuse its discretion in awarding attorneys’ fees to Unicolors.

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