This week, the Court considers the requirements of the Robinson-Patman Price Discrimination Act and whether copyright registration of a derivative work registers elements of the work derived from an earlier, unregistered work.U.S. WHOLESALE OUTLET & DISTRIBUTION, INC. V. INNOVATION VENTURES, LLC
The Court affirms a judgment that wholesaler plaintiffs in a price-discrimination case failed to prove injury to competition, but vacates a judgment that plaintiffs failed to prove that they were in competition with another buyer.
The panel: Judges Gilman (6th Cir.), Ikuta, and Miller, with Judge Miller writing Parts I and II of the opinion, Judge Ikuta writing Part III of the opinion, Judge Gilman concurring in part and dissenting in part, and Judge Miller dissenting in part.
Key highlight: “The Wholesalers’ position appears to be that when the plaintiff has the burden of proving an element of its case, a district court should decline to instruct the jury on that element if the court determines the plaintiff has proved it too convincingly. We are unaware of any authority for that proposition. To the contrary, our cases that have rejected proposed jury instructions have done so because the party bearing the burden presented too little evidence to justify the instruction, not too much. If the Wholesalers believed that their evidence conclusively established liability, the appropriate course of action would have been to move for judgment as a matter of law. . . . The Wholesalers may not bypass that procedure by challenging a jury instruction on an element of their prima facie case.” (citations omitted).
Background: Defendant Living Essentials, LLC sold an energy drink, 5-hour Energy, to two sets of purchasers: Costco Wholesale Corporation and plaintiffs. Plaintiffs are wholesale businesses that buy 5-hour Energy for resale to grocery and convenience stores. Plaintiffs alleged that defendant offered them less favorable pricing, discounts, and reimbursements, in violation of the Robinson-Patman Price Discrimination Act.
Section 2(a) of the Act prohibits secondary-line price discrimination—giving one purchaser a better price than another. To show a section 2(a) violation, a plaintiff must show (1) that the challenged sales were made in interstate commerce; (2) that the items sold were of like grade and quality; (3) that the seller discriminated in price among purchasers; and (4) injury to competition to the advantage of the favored purchaser.
Section 2(d) of the Act prohibits a seller from paying anything of value to or for the benefit of a customer in connection with the sale of a product, unless the payment is available on proportionally equal terms to all other customers competing in the distribution of this product. To prevail on a section 2(d) claim, a plaintiff must show it is in competition with the favored buyer.
After a jury trial, the jury returned a verdict for defendant on the section 2(a) claim, finding there was no injury to competition. The district court reasoned that by this verdict, the jury implicitly found that no competition existed between Costco and plaintiffs, and accordingly dismissed the section 2(d) claim.
Result: The Ninth Circuit affirmed in part and vacated and reversed in part.
The Court affirmed the judgment dismissing the 2(a) claim. Plaintiffs challenged two of the district court’s jury instructions: (1) the instruction that plaintiffs had to show “reasonably contemporaneous” sales to plaintiffs and Costco; and (2) the instruction that plaintiffs had to prove any price differences were not “functional discounts” to compensate Costco for marketing or promoting. Plaintiffs did not dispute these instructions accurately stated the law—that is, they agreed that a section 2(a) claim requires “reasonably contemporaneous sales” and that “functional discounts” cannot support a finding of price discrimination. They merely argued that there was insufficient evidence to support either instruction. The Court rejected both arguments. “Whether there is sufficient evidence to support an instruction is reviewed for abuse of discretion.” That standard is a deferential one: sufficient evidence requires only some evidence, not convincing or even strong evidence. Here, there was sufficient evidence to support both instructions.
As to “contemporaneous sales,” the Court rejected plaintiffs’ argument that an instruction was unnecessary because plaintiffs’ evidence of contemporaneous sales was so strong. Rather, if plaintiffs “believed that their evidence conclusively established liability, the appropriate course of action would have been to move for judgment as a matter of law.” They could “not bypass that procedure by challenging a jury instruction on an element of their prima facie case,” not matter how strong their evidence was. Even if it could be error to instruct on an element on which there is no factual dispute, plaintiffs’ “proof” was not as obvious as they contended: the possibility that sales were not reasonably contemporaneous had “some foundation in the evidence.”
As to the functional-discount doctrine, the Court rejected plaintiffs’ arguments (1) that purchasers at the same level are not permitted to receive different functional discounts if they perform different functions and (2) that in any event there was no evidence of performing different functions. The Court explained that if Costco performed marketing functions and plaintiffs did not, then defendant could provide Costco with a reimbursement for those functions. And here, there was evidence that Costco performed a number of functions that plaintiffs did not and for which defendant compensated Costco.
The Court then vacated the 2(d) ruling. Again, a section 2(d) claim requires that the favored and disfavored buyer be “competing” with each other “at the same functional level of distribution”—i.e., for the same group of buyers. The Court emphasized that (contrary to Judge Miller’s dissent) mere “operational differences” are not relevant to this question. It then concluded that the district court legally and factually erred in finding that Costco and plaintiff wholesalers operated at different functional levels. First, it legally erred in concluding that the jury’s section 2(a) verdict decided the competition question, because the jury did not necessarily find that the Wholesalers and Costco were not competing. Second, the court’s finding that Costco was a retailer rather than a wholesaler was unsupported by the record.
Judge Gilman concurred in part and dissented in part. He would have reversed and remanded for a new trial on the section 2(a) claim because the district court abused its discretion in giving the “reasonably contemporaneous” instruction. On his view of the evidence, there was no justification for characterizing the sales in this case as anything other than reasonably contemporaneous.
Judge Miller dissented in part. He would have held that the district court correctly rejected the section 2(d) claim because there was no evidence plaintiffs and Costco were competing for the same group of buyers.ENTERPRISE MANAGEMENT LIMITED, INC. v. CONSTRUX SOFTWARE BUILDERS, INC.
The Court holds that copyright registration of a derivative work serves to register elements of that work derived from an earlier, unregistered work.
The panel: Judges Fletcher, Clifton, and Ikuta, with Judge Ikuta writing the opinion.
Key highlight: “Because the owner can register the original work at any time and the registration applies to all the material deposited that constitutes copyrightable subject matter, we conclude that when a derivative work includes copyrightable elements of the unregistered original work, the owner’s registration of the derivative work also registers the included elements of the original work.” (Internal quotation marks, citations, and alterations omitted.)
Background: Plaintiff Mary Lippitt is an expert in effecting organizational change. In the 1980s, she created a chart titled “Managing Complex Change,” which illustrates the prerequisites for successful organizational change. Lippitt included the chart in a collection of presentation materials that she submitted to the Copyright Office for registration in 1987. The Register of Copyright registered this material and issued a corresponding registration certificate (the 202 registration certificate). Neither the Copyright Office nor Lippitt retained a copy of the materials covered by the 202 certificate.
In 2000, Lippitt submitted another set of presentation materials to the Copyright Office. These contained a slightly updated version of the Managing Complex Change chart, now titled “Aligning for Success.” Lippitt’s 2000 registration application indicated that presentation materials were not derived from any preexisting work. The Copyright Office registered this material, issuing the 226 registration certificate. In 2003, Lippitt submitted yet another set of presentation materials, which also contained the Aligning for Success chart. This registration application indicated that the materials were a derivative work of the 1987 presentation materials. Again, the Copyright Office registered the materials and issued a registration certification (the 350 registration certificate).
Defendant Steve McConnell saw Lippitt’s chart in an Auburn School District presentation, which attributed the chart to a 1991 presentation by Dr. Tim Knoster. McConnell included a somewhat modified version of the chart in his own presentations and a book.
When Lippitt became aware of McConnell’s use of the chart, she sued him for copyright infringement of both the Managing Complex Change and Aligning for Success charts. The district court granted partial summary judgment for McConnell, holding that Lippitt had failed to show that the Managing Complex Change chart was registered (as required to bring an infringement action) because Lippitt had not shown that it was included in the materials covered by the 202 certificate. The district court also prohibited Lippitt from arguing that McConnell infringed the Aligning for Success chart by copying elements of the Managing Complex Change chart.
At trial, Lippitt argued McConnell infringed the Aligning for Success chart by copying the chart he had seen in the Auburn School District presentation. McConnell responded that this evidence could not show that he had copied the Aligning for Success chart because the Auburn School District attributed its chart to Knoster’s 1991 presentation, which predated the Aligning for Success Chart’s 2003 creation. The district court instructed the jury that Lippitt could not show infringement based on evidence that McConnell had copied a work other than the Aligning for Success chart. The jury returned a verdict for McConnell, and the district court granted his motion for attorneys’ fees.
Result: The Ninth Circuit reversed the partial grant of summary judgment, vacated the jury verdict and award of attorneys’ fees, and remanded. It held that Lippitt’s detailed and internally consistent testimony created a material issue of fact whether the Managing Complex Change chart was included in the 1987 presentation materials covered by the 202 certificate.
In the alternative, it held that elements of the Managing Complex Change chart included in the Aligning for Success chart were covered by the 226 and 350 certificates. Joining every other circuit to consider the question, the Court held that when a copyright owner creates an original work, but does not register it, then subsequently creates and registers a derivative work based on the original work, the registration of the derivative work registers elements derived from the original work. This conclusion followed from the fact that a registration applies to all copyrightable subject matter in the material submitted to the Copyright Office and can be obtained at any time after the creation of the original work. So, regardless of whether or not the Managing Complex Change chart was covered by the 202 certificate, Lippitt could argue that elements of that chart included in the Aligning for Success chart were covered by the 226 and 350 certificates.
The Court rejected McConnell’s argument that the Aligning for Success chart could not have registered the Managing Complex Change chart because Lippitt’s 2000 application failed to indicate that the submitted materials were a derivative work. Any error in the application was irrelevant because the Copyright Act creates a safe harbor for unwitting mistakes of fact or law in a registration application. And in any event, Lippitt’s 2003 application accurately indicated that it sought registration of a derivative work.
The Court also held that the district court’s jury instructions erroneously indicated that McConnell could not infringe by copying a work other than the registered work. To the contrary, Ninth Circuit precedent held that a defendant may infringe a registered work by copying a third-party’s work that in turn copied the original work.