Tattoo Art, Inc. v. Tat International, LLC et al, No. 2:2010cv00323 - Document 134 (E.D. Va. 2012)

Court Description: OPINION AND ORDER - the Court GRANTS IN PART and DENIES IN PART Plaintiff's Motion to Show Cause and hereby FINDS Defendants and Third Parties to be in contempt of the Court's May 18, 2011 and June 29, 2011 Orders. Upon a finding of contem pt, the Court has broad discretion to fashion an appropriate remedyto coerce compliance with the terms of the permanent injunction. As a reminder that this Court's permanent injunction, issued June 29, 2011 and incorporated into the Court' s August 23, 2011 Final Order and Judgment, enjoins Third Parties John Pehrson and Tatstore, LLC, the entity that now ownsand controls Tattoo Art's assets, the Court is attaching to this Opinion the two above referenced Orders, which comprise th e injunction in this case. Additionally, Defendant and Third Parties are further ORDERED to: (1) Maintain and preserve the business records of Tat International, LLC until finalresolution of all litigation in this matter or further Court Order; (2) R emove all J.D. Crowe derived images (including any images currently blocked from public access) from any and all computers in Defendants' or Third Parties' custody, possession or control, including but not limited to the web server, and pla ce those images on a disk, a copy of which should be provided to both Plaintiff's counsel and Defendants' counsel within 14 days of entry of this Order; (3) Submit an affidavit from Mr. Knapp regarding the status and disposition of all prod ucts derived from Plaintiff's artwork; and (4) Allow one designated representative of Plaintiff to monitor Tatstore's cloaked MVProom on its website, from now until the conclusion of the appeal pending before the Fourth Circuit. Signed by District Judge Mark S. Davis and filed on 9/7/12. (Attachments: # 1 6/29/11 Order, # 2 8/23/11 Order)(jcow, )

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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF VIRGINIA Norfolk Division TATTOO ART, INC., A Virginia Stock Corporation, Plaintiff, v# TAT Civil Action No. INTERNATIONAL, 2:10cv323 LLC, A Michigan Limited Liability Company, and Kirk A. Knapp, Individually, Defendants. FINDINGS OF FACT AND CONCLUSIONS OF LAW Pursuant 28, 2011, issue to this of proposed available to international, collectively motion granted trial, the for an was only, findings from Court's matter damages conclusion of weeks this on fact date them. with tried and that TAT, extension of such motion on to make same of law filed made their respective filings on March 28, and to the At the to file within two were made defendants Knapp such date, as the parties 2011, A. February 2011. transcripts 24, Kirk dated Court, 2, "defendants") time that and trial and the the conclusions March ("TAT") 1 Order instructed the On and before March the Court of LLC Opinion ("Knapp" an filing. and, unopposed The the parties 2011. TAT Court timely Pursuant to on-the-record 2011 to in conclusions those telephonic address addressed of file a response no legal eve until Court issues close of 3, 2011, held on June were not findings filed the was that proposed of dated June conference Plaintiff the defendants this parties' law. on of status certain the issues allowed an Order of a fact on to plaintiff's memorandum, June but and regarding conference; business 17, adequately memorandum status an the 21, Court 2011 defendants to filed response. After at consideration of trial, their conclusions of conference, Court of judgment has respective law, evidence offered by the parties proposed findings of fact and their arguments during the telephonic status as well as the record of this matter as a whole, now makes law. the The in issued the Court following also details favor of plaintiff a Final findings Order on is of fact herein to be the and conclusions manner entered after plaintiff's request the for in which the Court attorney's fees. I. This Court the instant and Order, previously matter see PROCEDURAL in Docket partially reiterate recounted detail No. HISTORY 48 in at its the procedural February 6-8, that history herein. the second lawsuit plaintiff Tattoo Art, and 28, will The Inc. history 2011 of Opinion therefore only instant matter ("Tattoo Art") is has filed against defendants TAT first lawsuit in this Court, 7, 2009. basis and Plaintiff Civil Action No. filed 2:09cv314, the on July Defendants thereafter filed a motion to dismiss on the of a mandatory mediation agreement between the parties, on December 21, and Knapp. 2009, Order dated prejudice. The mediation, provision in the license and after briefing and a hearing this Court granted that motion by Opinion May 14, 2010, parties dismissing thereafter the submitted case the without matter to but were unable to resolve their dispute. Plaintiff filed its complaint in the instant matter on July 2, 2010, action alleging for (as breach it of the copyright infringement, costs, and a this Opinion 11, plaintiff's parties' on filed a motion held Order dated submitted March 28, 1 proposed 2011. causes agreement attorney's of and fees, answered and February on 28, 2011, findings May of 2011, 5, 2011, 11, this noted, as the this and on 2011. Court to By granted matter was to the issue of damages and fact fully briefed, February previously 2, summary judgment as which was hearing As On license for partial 2010, a motion. March lawsuit) Defendants consequently tried before the Court, only, prior 2010. Court and its injunction. liability on December 10, which in and requesting damages, permanent complaint on August Plaintiff had and the parties conclusions plaintiff filed thereafter of a law on renewed motion for a defendants' As permanent infringing materials. detailed above, was held injunction on 17, 2011, filed a memorandum on June II. A. To extent between resolution reached of on the plaintiff's affords found the personal as 1 As to there disputes of The owner, Court in it great deposition which plaintiff and times evasive, history, noted above, at factual fact trial Knapp the conclusion of sole implausiblyof his own contradictory ultimately the damages the Court {TAT's and matters and the of been accordingly irreconcilably issues, were have self-serving, issues below testimony contrast, of Court's credibility- to and By testimony and material the factual the general credible, factual several of DuFresne, to both material professional matter, findings herein. trial unresolved following M. weight and the this found Joseph consistent, existed in the Court to have been at as with conference 2011. parties basis straightforward, vague status FINDINGS OF FACT1 that the such determinations. member) 16, of filed no response. telephonic connection impoundment The Court's Credibility Determinations the disputes in the Defendants an on-the-record June and trial less on March 2, 2 011, the Court requested that the parties file detailed proposed findings of fact and conclusions of law. Trial Tr. vol. 2, 233:7-11 & 284:18-288:12, Mar. 2, 2011. Because neither of the submissions contained sufficient factual findings to stand alone and be entered by the Court, the Court has made such findings herein. credible than that of substance of Knapp's DuFresne. Consequently, testimony DuFresne. less weight In particular, than Dealers (the Regulatory Authority, Exchange Commission stock broker, Exs. 4 & 5, 176:9-13, not bear it directly certainly on Court the 1, Vanderwel found no testimony Wolfe, have and and been reason to further very of testimony that the Industry Securities prior 134:8-141:13 career and as a Compare Pl.'s (Knapp Test.) & testimony obviously did Court's in the instant matter, assessment of the testimony. reason to doubt trial Christine the trial found Mr. generally Knapp's Financial his issues doubt at the in Kelly admitted ultimately Wolfe's and to disputed deposition testimony admitted at Mark testimony than forthcoming. vol. Knapp's found no the found Mr. with Although figured credibility of Mr. The connection 2011. to the Court affords and the United States with Trial Tr. 1, the with the National Association of to have been less Mar. trial, does predecessor Inc.) in it the Court about his disciplinary history, Securities on testimony and the Court's close observation of Knapp's demeanor while testifying at his based credible. The credibility Wolfe's with credibility of the from former TAT employees Knapp. from consistent the TAT Thus, of the employee live his Court deposition Benjamin testimony at deposition the testimony substantial weight herein. Court likewise trial Lee to testimony, affords Mr. B. 1. Plaintiff creating, is The Parties a Virginia corporation in the business of copyrighting, licensing, and selling "tattoo flash" and creator of artwork designs. 2. DuFresne artwork, and Trial Tr. 1, and under 56:1-25 Defendants stencils plaintiff's operates vol. 3. is other the owner the professional name "J.D. its Crowe." (DuFresne Test.). are in the business products for use Michigan limited in of creating and selling applying airbrush body art. 4. TAT is a principal place of business 5. TAT, Knapp, a in Grand Rapids, citizen of Michigan, company with its Michigan. is the sole member of and controls TAT's activities. C. Plaintiff's Method of Copyrighting His Tattoo Designs 6. DuFresne organized copyright registration "Books"), each of liability which consisting sheets, in Trial Tr. vol. 7. DuFresne did as & contain not or tattoo into fifty 18:23-21:9 compilations (DuFresne Test.) sale, of turn, images. thereof, and his books "tattoo a number both for {hereinafter, the flash of the derivative Books, works. sheets," individual (DuFresne Test.) register 52:18-53:25. designs, each tattoo & 51:5-12. or Id. any portions 20:16 21:22 8. Instead, register DuFresne the Books registration, as explained individual each flash sheet. elaborated in 50 to 50 those that sheets Id. the to just decision to stop or [he] at was "were the cheaper" cost of call it a intent under a than to single separately Test.). for He sale "it in on later and a copyright created and that his tattoo designs together were created," and was images (DuFresne put "[t]hey 50 it the individual help with that sheets it 20:24-21:6 Books copyrights," flash copyright "[m]ostly because registering each flash sheet that done compared the just was book." order a random Id^ of 51:5-52:7 (DuFresne Test.). 9. DuFresne organized thematically, discretion purposes as of Test.). an He or artist copyright consistently did, explicitly also a Id. 10. sells ways, he putting that that single 52:10-17 variety of 19:8-12 (DuFresne Test.). his including on the "exercised together registration." some didn't." DuFresne that in denied reflected denied the theme, Id. Books [any] [his] artistic books 50:11-52:9 individual were for (DuFresne flash that indicating sheets K[s]ome (DuFresne Test.). copyrighted an tattoo individual designs image basis. in a Id. D. 11. The Terms of the Parties' On DuFresne, December and TAT, 29, through written license agreement 12. The Agreement the sixteen pages "Property") offer sale, distribution (the of "Licensed sole member granted TAT the the airbrush stencils Articles"). See entered exclusive Agreement right tattoo "for owner into derived Ex. a use (the manufacture, shipment, from A to designs the promotion, Compl. its See Compl. Ex. A.2 copyrighted advertisement, through Knapp, {the "Agreement"). to sale, of" its plaintiff, plaintiff's attached for 2005, License Agreement the fSt and Property 1.01, 1.02 & 2.01. 13. The designs, of Property which 212 registered Books. 1 24. The designs 14. either 2 After its However, in party gave extensive February Agreement constituted 28, 48 at do for not of analysis, nonrenewal this Opinion to plaintiff's definitive contract 8 plaintiff's Exs. Property the Tr. were dispute 1; that to a all claim 711 of at 1. was 36 months, 12-month or tattoo periods plaintiff gave to be until notice Court previously concluded in and 23. 42 of Ex. subject term consecutive 24 Pl.'s in "were initial attached the 1; See Docket No. notice 2011 at individual from contained Property Agreement's automatically Docket No. the 711 drawn 42 defendants by plaintiff. The renewed designs of were See Docket No. contained copyright" designs remaining unregistered. consisted Order that the copy of the complaint as Exhibit A between the parties. See of termination due to a breach of the Agreement by TAT. id. 5 2.02. 15. The provide a Agreement link from [TAT]'s www.tattoo-art.com," link to relieve further but website also www, tattoo-art. com [TAT] of allowed to provided for any any obligation(s) defendant TAT [plaintiff's that TAT's reason under . this "to website,] "inability . . shall Agreement." to not Id. 1 2.03. 16. The Agreement royalties in Agreement defined Articles includes and the amount as other Id. packages was expressly price the entire of invoiced StSl sold 1.06 to & "be TAT "[o]n or January The before ... knowledgeable Gross during Agreement price TAT, 3.01. for "less The calculated Sales the Quarter') . " the a 25th full officer of required all and as of accurate, to based 9 upon for showing and July, to also tax for the the 9[ sales cost months of 1.06. plaintiff certified distributed and such October, the the Licensed sales Id. statement, calendar 3.03. all provide April, Articles three which sale price diminution TAT accurate Licensed preceding Id^ g[ day plaintiff Sales," any other components contained in the package." 17. pay Licensed Articles by package without would "Gross sale include items" costs." that 12.5% which shipping of of the "packages [sic] provided quantity and/or and by a and sold (xCalendar 18. "[o]n The or January Agreement before . . . the any also 25th required day royalties of due TAT to April, and pay July, payable to plaintiff October, with respect sales occurring during the preceding Calendar Quarter." 19. the "pay was The Agreement provisions a discussed minimum to "be further annual paid on 20. account The Agreement and records royalties, in before preceding calendar year." that, regarding above royalty or provided the Id. and required TAT covering number further which will all Licensed Articles." 21. Upon required be used Id. would $6,000," which 25 each year for to "keep accurate books transactions relating to" TAT to "designate exclusively in a symbol connection the or termination of the Agreement, TAT or in process at the time of such expiration or termination, payments due with in accordance with VI. However, Agreement finished Licensed Articles months respect made to the thereafter, that twelve terms" that provision did not [was] or with "dispose of (12) the S[ 5.01. expiration twelve of to which plaintiff would have was permitted to a period of the f 3.04. Property and/or Licensed Articles, access, Id. TAT of of to notwithstanding amount January and terminated by of any term or condition of of [plaintiff] [the] 10 provided all (12) "[i]n due Agreement." to Id. for further month period the Agreement. apply on hand id. the event [TAT's] are art. [the] breach 22. In its failure of the [the] the Agreement, ... Licensed TAT Articles upon would to agreed continuously, advertise, in the 24. 2005' TAT on also each Agreement id. agreed sheet termination or to expiration temporary of and f 7.01. and distribute, the Licensed Articles." that sale or distribution plaintiff id. diligently promote, the entitle permanent injunctive relief, TAT "acknowledge[d] to cease the manufacture, Agreement" 23. explicitly "to use competitively inventory, art. its and best efforts design, supply sell, each of VIII. that it containing would the "apply Licensed %© J.D. Crowe Articles." Id. f 11.02. 25. have The been shall Agreement accepted be that, in agree[d] States and construed Commonwealth of in District signed in to Court of Virginia," dispute. The It Virginia laws "consent[ed] venue in District on of to and the further provided the the of "the Circuit Court depending deemed and United Virginia, for nature the City of the Id. 26. Beach, Eastern or the TAT and "be Beach, XIII. mediation, the Virginia" would with jurisdiction for it Virginia IcL_ art. located in Norfolk, Virginia in mandatory personam that accordance Virginia." addition to provided multiple Agreement counterparts," provided that and "[transmission that 11 it could "be of signed in signatures by facsimile shall be valid recipient of the facsimile." E. of TAT terms of Gross three initially the Sales Calendar 28. Quarters & of each in statements and royalty accounting or upon by the XVII. Sales plaintiff. and See 34:1-39:5 117:7-10 173:3; Articles, in January and vol. failed and 1, despite sales the first 54:15-55:25 accountings have shown claims recent omitted & 77; preceding Trial (VanderWel royalties of "assorted due Tr. to vol. Test.), 169:21- provided sales for & TAT's demonstrated accounting, several 2006 completeness Plaintiff (Wolfe Dep. 12 of 148:7-149:7 Test.). packs any actually 54-57 the those underreporting 109:24-112:6 account performed litigation, indeed, 132:16-133:23, 191:21-194:1 for 1, with statements each 50-52, most with royalties the 47, of conformity vol. prior their inaccurate, 2011, to the matter {Wolfe Dep. the in {Knapp Test.). Test.), Test.), even sales Trial Tr. Exs. that Tr. payments-and, been (DuFresne 188:19-190:16 defendants Trial with underpaying Tr. (Knapp trial package have perform successive instant accountings, accuracy to Gross the connection the at relied royalty payments 2006. of and 1, be providing plaintiff 121:25-122:17 However, defendants to corresponding mediation, and art. appeared Agreement, and (DuFresne Test.) by Id. may TAT's Performance and Initial Breach of the Agreement 27. the and of due on Licensed certain stencils." Test.); by PL's Exs. See 6- 8 & Trial Tr. vol. 1, 169:21-173:12 13 & Trial Tr. vol. 2, 241:9-257:8 29. Although Articles to TAT during the provide pursuant to continued with the royalty payment paragraph before January 126:15 to make sales statement for of TAT statements minimum of that the Id^ thereafter of Gross annual of 9- Licensed TAT Gross failed Sales and Quarter, which, was Agreement, 58:3-5 of 2006, Calendar on due or payments due 58:6-7 Test.); plaintiff royalty before plaintiff IcL_ (DuFresne provided Sales royalty the Agreement, defendants. 2007. Ex. no or (Knapp Test.). 30. 25, 3.03 Pl.'s (Wolfe Test.). fourth Calendar Quarter of plaintiff corresponding {Knapp Test.); payments, pursuant to 124:5- further including paragraph the 3.04 instituted litigation against (DuFresne Test.) & 117:7-10 {Knapp Test.). F. 31. TAT Receives a Bankruptcy Notice In late March or early April a bankruptcy notice dated March Bankruptcy to a TAT Crowe, also known the Eastern Glen Allen, as Dale Crowe (Knapp (Knapp Test.), See Defs.' Test.) Mar. 2, & or Trial defendants from of Virginia Dale Ex. 123:5-24; 2011. 13 2007 District from notice"). 119:17-120:3 273:7-16 for customer "bankruptcy 1, Court 29, 2007, received the United States Virginia named James 39; James Dailey Crowe Trial Trial relating Tr. Tr. vol. (the vol. 2, 32. Knapp testified at the notice, he advertisement Tr. vol. 1, 33. own that, accessed plaintiff's on plaintiff's 117:17-19 Knapp's Exhibit trial testimony 12, which website website (Knapp Test.) in shows had weeks Ex. after 12 at Test.) & other this defendants 21; accord 120:4-14 as received Trial there {colloquy the was as TAT's removed. Trial undercut still May 26, his link a by on the 1, 2007, several notice. bankruptcy vol. of saw that albeit one that apparently late Tr. been regard was that links, and & 120:19-121:24. plaintiff's website to TAT's website, alternated with shortly after receiving Defs.' 117:20-118:24 Court with (Knapp plaintiff's counsel). 34. removal Knapp of testified TAT's indicative of a that he advertisement change of control interpreted from this plaintiff's at plaintiff. claimed website id. as 121-21:24 {Knapp Test.). 35. legal In determining how to proceed, advice bankruptcy experience 277:17 in connection notice, with but filing with instead bankruptcy. Knapp did not defendants' relied Trial on receipt his Tr. own vol. 2, seek any of the personal 27 6:15- (Knapp Test.). 36. Knapp testified, both in deposition and at trial, that he believed the bankruptcy notice actually related to plaintiff, due to the similarity of the 14 debtor's name to DuFresne's professional name, (Knapp Test.), 37. J.D. Crowe. 118:25-119:16, Knapp also never [he] contact could that bankruptcy." call Knapp testified, TAT stopped royalty bankruptcy The bankruptcy 1, 117:11-14 defendants' "policy and "to that he think if check "didn't he filed had 128:19-21. both in his deposition and at trial, required by IcL_ notice, was (Knapp Test.), the notice. it again," providing payments vol. received a bankruptcy notice to DuFresne Id^ 121:12-15 38. that that [they] individual legally" Tr. 120:19-121:11. testified at TAT International when Trial statements the Gross Agreement 117:11-14, however, of because 118:25-119:16, did not Sales stop of and the 120:19-24. defendants from continuing to sell the Licensed Articles. 39. Knapp's testimony in this regard is manifestly incredible. The bankruptcy notice was dated March 29, two after the the fourth months payment for Compare Defs.' 29, statement Trial Ex. of Calendar 39 at 1 Gross Quarter Sales of 2007-over and 2006 royalty were (bankruptcy notice dated March 2007 relating to a bankruptcy case filed on March 28, Trial Tr. vol. 2, 119:17-120:3 272:20-273:16 (defendants' counsel bankruptcy notice quarter {Knapp report & Test.) representing "was was Test.) (Knapp to 123:5-2, with the received at or about due in '07"), 15 due. and Trial Trial Tr. Court the 2007), 118:25-119:16 63:1-7 that time Tr. the the first (Knapp Dep. Test.) ("'the royalties factual only because is reason of matter, the that the [Knapp bankruptcy bankruptcy reason why TAT breached its said he] stopped notice'"). notice could obligations not under paying Thus, have as a been the the Agreement for the fourth Calendar Quarter of 2006.3 40. further Knapp's testimony invalidated prior testimony. Knapp agreed said he] by Trial Tr. at his that the reason," but "not Id. and 1, contradicted M1the At notice reason" only [was] 119:12-13. the connection 118:25-119:16 royalties the required sales Instead, knew] it was proceeded omissions. statements was it that bankruptcy all that this was why TAT reports that [he of because only own (Knapp Test.). reason trial, his was the however, "part stopped Knapp of the providing and royalty payments. 117:11-16. 41. [he Id^ in fact vol. paying bankruptcy notice.'" claimed trial deposition stopped plaintiff with the at Knapp more to First, of removed Gross from claimed than offer that that," "there id. additional was 120:24-25 a context (Knapp justifications and Test.), for TAT's Knapp claimed that TAT withheld the required Sales Tattoo and royalty payments because TAT's Art's site." id. 117:17-19 "ad (Knapp 3 The Court will discuss in its Conclusions of Law below the withholding statements reasons why the bankruptcy subsequent notice corresponding royalty payments. 16 also provided of Gross no basis Sales for and Test.). on However, plaintiff's even if placement website was manifestly was not-that a link of term a of to TAT's link the to TAT's website Agreement-which website, as it noted above, was still present and active on plaintiff's website months after the statement of Gross Sales and royalty payment for the fourth Calendar Quarter of accord Trial Tr. 2006 vol. were 1, due. See 117:20-118:24 Defs.' Ex. (Knapp Test.) 12 at 21; & 120:4-14 (colloquy of the Court with plaintiff's counsel). Consequently, the website from whatsoever for claimed plaintiff's removal website of the provides link no to TAT's justification TAT's omissions under the Agreement. 42. Knapp responsible for then testified bringing attention, but respect the statement the to fourth Test.), 276:2. Calendar 126:10-22, The disbelieves true, that she of Gross Quarter need of Sales 2006. particular determine excuse Agreement in this G. 43. defendants failed to do was to so his with and royalty payment 122:18-123:4 272:20-273:6 whether because, it would in no way alter the fact Knapp obligations Id_^ 133:9-134:5, not Kelly contractual inexplicably 127:5-9, Court this such that it even & for (Knapp 275:23- believes if it or were of TAT's breach of the connection. TAT Alters Plaintiff's Copyrighted Tattoo Designs At an claim indeterminate it to be point sometime 17 prior during to 2008, May see 14, 2009- Trial Tr. vol. 2, 260:1-4 project that {Wolfe Test.) "took the artwork derivative works by copyrighted tattoo designs] posters up & 265:22-25-defendants undertook a provided changing the by Tattoo colors electronically, [of 188:3-8 called (Wolfe Original Dep. Collection." Test.); accord re-laying out the and printing Trial id. made plaintiff's [of plaintiff's copyrighted tattoo designs] posters Art, Tr. vol. 153:13-163:22 1, (Knapp Test.). 44. Knapp testified that defendants undertook the Original Collection recoloring project because the images of plaintiff's copyrighted stencils tattoo derived designs from complex coloration, recreate using Test.) Test.). Sc the were them, which due at Knapp airbrush 159:12-14; not Trial But see Trial Tr. effectively least claimed medium. Tr. vol. to part be to the their difficult to Id^ 153:13-156:18 (Knapp 2, 273:17-274:5 (Knapp vol. 1, in selling 65:21-66:13 (DuFresne Test.) (DuFresne denying that needle and ink necessarily allow artists to create more detailed tattoo images than airbrush). 45. derived Knapp testified at trial that, the plaintiff's the stencil proprietary Original copyrighted silhouettes "Ray Brandt" Collection tattoo of not designs, such style 18 to that end, from but designs, of defendants the images instead only from TAT's own employing coloration instead of of the original coloration of plaintiff's designs. id. 154:19-157:12 knew at the time when (Knapp Test.). 46. they Knapp testified that defendants created derived the Original Collection Crowe [they] from J.D. and have to pay royalties on them." 47. Knapp's testimony by fact however, the stencils knew [they] Id^ 165:20-23 in that this TAT that were "were going to (Knapp Test.). connection never they is contacted belied, plaintiff regarding the development or sale of Original Collection artwork or stencils, 282:8-283:1 as id^ 102:1-5 (Knapp Test.) previously noted, Collection-related (DuFresne & 283:16-284:10 paid sales Test.); no Trial Tr. vol. (DuFresne Test.), royalties before plaintiff for any instituted 2, and, Original litigation against defendants. 48. of the Knapp testified Original that Collection he believed defendants' was obligation under Article VIII of efforts sell, of to continuously, advertise, promote, 1, 49. in the Agreement diligently and distribute, the Licensed Articles." vol. permissible Compl. light of A art. TAT's "to use its best competitively inventory, Ex. creation design, and supply each VIII; Trial legal advice Tr. 159:6-163:4. However, connection with defendants the did not development 19 or seek sale of any Original in Collection artwork and stencils. Trial Tr. vol. 2, 282:8-283:1 50. Instead, conversation he Agreement in Knapp of vol. 1, 160:6-16 that DuFresne prior they discussed plaintiff's relied the to that tattoo signing "it Test.). Although DuFresne acknowledged in his discussed flatly his denied Tr. vol. method that of they 2, about his tattoo copyright, all. Id^ 283:16-284:10 "that of a the unique made 282:12-20 his (Knapp testimony that he with discussed designs, on the coloration ever copyrightable at was designs copyrightable." DuFresne Trial he artwork had previously (Knapp Test.); (Knapp Test.). testified had with which colorization" Trial Tr. or the (DuFresne Knapp, what subject Test.). was of The Court credits DuFresne's characterization of the nature of their discussion, 51. rather than Knapp's characterization. TAT began banners depicting website during affiliates ultimately 261:19 26:6-9 Collection first only its "Most Valuable the general (Wolfe Test.) 52. absent Original Original 2008, and to offering Plaintiff's public. to Collection artwork its for sale Tr. & 267:7-268:24; see also PL's Ex. copyright from the Original (DuFresne Test.), (Kelly Knapp Dep. information Collection artwork. 151:19-152:5 Test.). 20 (Knapp was on its to ("MVP"), vol. and then affiliates, Partners" Trial stencils 2, and 258:1215. conspicuously Trial Tr. vol. Test.) 183:7-7 & 1, H. DuFresne Contacts Defendants about Their Breaches 53. DuFresne 2009, and saw plaintiff's derived accessed that TAT copyrighted from the TAT's was still tattoo Property website for in early displaying the February images of designs and offering stencils sale. ld_^ 25:9-14 (DuFresne Test.). 54. 9, DuFresne contacted defendants by telephone on February 2009 to inquire about TAT's provide plaintiff payments. 64:2, Trial statements Tr. vol. 1, failure, of since January 2007, Gross 24:11-21 Sales and to royalty (DuFresne Test.), 63:22- 66:14-21 & 74:23-75:5. 55. Knapp believed, based bankrupt, claimed which Test.); until 25:5-8 a telephone bankruptcy conversation that notice, denied. 62:7-64:2, report 66:21-23 57. that Id^ that plaintiff 24:22-25:2 he was (DuFresne 66:14-67:20. Knapp then told DuFresne that "within a week he'd have [DuFresne] Test.), the DuFresne 58:15-18, 56. payment on in Knapp indeed, plaintiff royalties." Id^ 25:3-4 (DuFresne & 67:19-20. However, and, and provided never instituted no such communicated report with litigation against {DuFresne Test.). 21 or royalty plaintiff again defendants. id. I. 58. Plaintiff Terminates the Agreement Three or four weeks after the aforementioned telephone conversations, discovered DuFresne that the again images accessed of TAT's plaintiff's website, copyrighted and tattoo designs had been removed from the website and replaced with the Original Collection 73:18-74:10 (Wolfe counsel based cf^ sent TAT a TAT's tattoo Trial [TAT's] Tr. vol. that, designs (DuFresne Test.), 2, his to were 211:21-213:18 recollection, taken down Tr. vol. letter date. defendants Inc., Tr. "to Ex. at plaintiff's direction, letter immediately terminating (the possession, Tattoo Art, 2009, "failure royalties" termination to "will be pay the "termination 1, TAT minimum in May the Agreement Tr. (DuFresne to plaintiff's royalties letter"). 26:13-15 directed Ex. and/or 42; Test.). "return any see The artwork in custody or control pertaining to or owned by along with a complete accounting of all 42. The termination letter immediately cease and desist artwork owned by Tattoo Art, use Trial testifying copyrighted On May 14, on report to (Wolfe ld_^ 25:15-26:5 around the time the termination letter was received). 59. also 78:18-24; Test.) plaintiff's 2009, & artwork. considered further notified any further use of Inc.," warning defendants copyright infringement, penalties and damages as provided by law." 22 Id. sales" that such subject to 60. By ("ISP") letter dated defendants' to May 29, to defendants' take ISP 2009, internet plaintiff's down the pages on that displayed Original Collection images. Trial Tr. vol. J. 1, 27:1-6 service counsel provider instructed defendants' Tr. Ex. 43; website see also (DuFresne Test.). TAT's Actions after Receiving the Termination Letter 61. id. Despite defendants' 153:7-12 artwork, receipt of the termination letter, (Knapp Test.), provide a complete they did not return plaintiff's accounting of Gross Sales, or provide any of the royalty payments due to plaintiff pursuant to the Agreement in response to the termination letter. 62. Defendants inaccessible the Collection also pages artwork. did on not TAT's remove or website Instead, otherwise displaying defendants render Original actually made additional pages of Original Collection artwork on TAT's website accessible to the general public, derived from plaintiff's (DuFresne Test.) & and continued selling stencils Property. Trial Tr. vol. Tr. vol. 2, 27:7-23; Trial did attempt 1, 26:16-25 261:20-264:1 (Wolfe Test.). 63. TAT's Defendants website inaccessible plaintiff to not displaying the the public until filed its initial render Original July 2009, lawsuit 23 to against the pages Collection of artwork within weeks after defendants. Trial Tr. 2, vol. 1, 77:6-78:24 213:23-215:1 64. attempt see also Trial Tr. vol. (Wolfe Test.). Defendants to (DuFresne Test.); render subsequently discovered the Original Collection that their initial artwork-and possibly plaintiff's original copyrighted tattoo designs-inaccessible was unsuccessful, means 2, of because the search 215:2-216:22 the rendering However, access to Id. Defendants' contained copyrighted access to from accessed Trial Id^ Tr. by vol. thereafter corrected containing the images 216:24-217:24 actually the website; 264:2-5 they remove (Wolfe the pages simply restricted (Wolfe Test.). website, even to designs, designs pages did not be website. the public. references tattoo those to still Defendants the defendants images them. 65. still the could function on TAT's entirely inaccessible containing images (Wolfe Test.). oversight, Test.). the as of "J.D. a cloaked date Crowe" and that of TAT's suggesting on the website. trial, plaintiff's MVPs Pl.'s Defendants claim that such references are erroneous, Ex. have 14. and that no one could actually access those designs as of the date of trial. Trial Tr. vol. 66. By represented promptly 2, 264:6-265:8 letter to return (Wolfe Test.), dated July plaintiff that all artwork, 29, 2009, 24 defendants' defendants and provide 270:10-25. a were counsel "willing complete to accounting of all sales under the License Agreement, Tr. Ex. 46; 67. Trial Tr. vol. However, 33:9-13 defendants copyrighted artwork, 5, 1, 68. not Tr. Ex. Trial Tr. selling Test.); pendency of Trial (estimating gross the Tr. instant vol. revenue of Article and Original vol. 1, 33:18-34:15 stencils derived albeit allegedly inadvertently, pendency of plaintiff's initial lawsuit, {Knapp plaintiff's 47. continued plaintiff's Property, the return and the accounting they provided on August Defendants during 2009." (DuFresne Test.). did 2009 proved to be inaccurate. (DuFresne Test.); up to May 14, 2, during the the mediation, matter. id. 232:6-233:24 "around $4,500" Collection sales made from and even 174:23-175:3 (Wolfe from all Test.) Licensed after May 14, 2009, including approximately $500 in sales during August 2009). 69. Defendants accountings omitted 39:5 the of sales claimed Gross of (DuFresne provided Sales, each plaintiff of Licensed Articles. Test.). amount of with which was Trial Tr. Over the course of sales of Licensed multiple found vol. these to 1, have 34:19- accountings, Articles for which royalties were due nearly tripled in comparison with the amount claimed in TAT's initial accounting. Test.). 25 id^ 38:11-39:5 (DuFresne K. 70. Tr. vol. 1, 175:4-25 TAT's Trial (Knapp Test.). gross revenues for 2007 were $1,278,421. Id. revenues for 2008 were $1,474,839. Id_^ $865,232. Id^ {Knapp Test.). 72. 176:3-4 Profits, and Expenses TAT's gross revenues for 2006 were $1,425,370. 71. 176:1-2 TAT's Gross Revenues, TAT's gross (Knapp Test.). 73. 176:5-6 TAT's gross revenues for 2009 were {Knapp Test.). 74. TAT's profits from approximately $1,876,000. 75. Defendants contractual 2006 through Id^ 188:15-18 described relationship 2008 totaled (Wolfe Dep. Test.). the business with plaintiff derived from 2006 from TAT's through 2009 as being "very small bordering on insignificant," Trial Tr. vol. 2, 208:2-11 of TAT's and (Wolfe Test.), total product constituting constituting "a very small component" offering, only "about [defendants'] overall sales." generally id. 206:19-210:16 76. portion beyond However, of total preparation 257:11-258:11 id^ 207:10-13 one half of Id^ 275:23-25 {Wolfe Test.), one percent of (Knapp Test.); see (Wolfe Test.). defendants made "no attempt to determine" the sales of attributable TAT's profit (Wolfe Test.). 26 to and plaintiff's loss Property statement. 77. Defendants developed complete vol. 1, "at and indicated that considerable cost[ing] 153:15-23 expense," [defendants] A. Subject-matter upon federal the 1338, § that a $27,500." year Trial to Tr. jurisdiction in this matter is properly "federal question" pursuant to the statute conferring exclusive jurisdiction courts in copyright infringement suits, citizenship among the parties pursuant and to 1332. Section part about "over Jurisdiction and Venue complete diversity of 28 U.S.C. taking Collection was CONCLUSIONS OF LAW based on the existence of both a § Original (Knapp Test.). III. 28 U.S.C. the 411(a) of the Copyright Act provides "no civil action for infringement of in relevant the copyright in any United States work shall be instituted until preregistration or registration of accordance with this United States the copyright title." Court of 17 claim U.S.C. Appeals § for has been 411(a). the made in Although the Fourth Circuit historically interpreted this statute to mean that "[c]opyright registration bringing action States Xoom, cert, for is a jurisdictional infringement Supreme Court has Inc. v. denied, under the Copyright recently decided to Imageline, 540 U.S. prerequisite 879 Inc., 323 (2003), 27 F.3d to Act," the United the contrary. 279, 285 (4th an See Cir.), abrogated on other grounds by Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237, 1241 (2010) {"Section 411(a)'s registration requirement is a precondition to filing a claim that does not restrict a federal court's subjectmatter jurisdiction."). subject-matter infringement Consequently, jurisdiction claims for both over its this Court properly has plaintiff's registered and copyright unregistered images. The parties have further stipulated that this Court has personal jurisdiction this District. B. over them, and that venue Collection-i.e., Agreement, in Plaintiff's Copyright Infringement Claim Order that defendants' the designs-was proper See Compl. Ex. A art. XIII & Docket No. 42 at 1. This Court determined in its February 28, minimum, is and development and marketing of the Original their recolored silhouettes of beyond 2011 Opinion and the scope therefore images plaintiff's of the constituted derived from, at copyrighted license granted copyright a tattoo by the infringement, both before and after defendant received the termination letter. Docket No. 48 at 14-15. There remain, however, substantive issues that affect the measure and exact calculation of damages for defendants' infringement. The Court will address each such issue in turn. 1. The Measure of Damages for Copyright Infringement The Copyright Act of of the United States 1976, Code, codified as provides 28 in amended in Title 17 relevant part that "an infringer of copyright is liable for either owner's actual infringer 504(a). and damages ... or and ... any . . additional statutory . the copyright profits damages." 17 of the U.S.C. § Plaintiff has included in its proposed findings of fact conclusions respect to its unregistered requests an of law calculations registered images, and award of images on the statutory for and statutory damages actual basis of damages those damages in for with its calculations, the amount of $2,000,000.00. The U.S.C. statutory § 504(c)(l), [T]he final damages provision of the Copyright Act, 17 provides: copyright owner judgment is may elect, rendered, to at any recover, time before instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers 17 U.S.C. § 504{c)(l). just. The foregoing range of statutory damages is, however, subject to two relevant statutory caveats: In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more no reason to believe than $150,000. In a case where the infringer sustains the burden of proving, and the court finds, that such infringer was not aware and had that his or an infringement of copyright, discretion may reduce the award to a sum of not less than $200. 29 her acts constituted the court in its of statutory damages 17 U.S.C. In § 504(c)(2). calculating further provides derivative work "Compilation" collection that the are defined The § as as A "a work, encyclopedia, in the one of a 17 as a a periodical number separate and independent works in includes in of § or such by data a way that original work turn, is issue, contributions, in themselves, statutorily anthology, other are assembled into one or more preexisting works, such musical arrangement, dramatization, transformed, form or in which adapted. a A work work may be recast, consisting editorial revisions, annotations, elaborations, other modifications which, as a whole, represent original work of authorship, is a "derivative work". Id. 30 or constituting fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, any of "collective works." A "derivative work" is statutorily defined as: or the of id. a work based upon as a translation, or 504(c)(l). formed materials an 504(c)(l) compilation work arranged "collective work," a § U.S.C. "a constitutes "compilation" which a collective whole." or U.S.C. of preexisting whole such as 17 parts work." coordinated, term 101. damages, statutorily assembling resulting work U.S.C. "all defined selected, authorship. 17 that constitute is and statutory of or an 2. The Court's Calculation of Statutory Damages a. This Order Court that Willful or Unwitting Infringement indicated "whether in or its February 28, not defendants' 2011 Opinion and infringement committed willfully is not a question of liability, a to matter Docket of No. Costumes, statutory 48 damages at Inc., 15. 243 F.3d 789, pursuant (citing Lyons 799-800 Fourth Circuit explained in Lyons, be willful defendant actions for purposes of constituted Court totality of Plaintiff's the from the reviewed, evidence evidence appropriately, defendants' has at in actions innocent Lyons, an and v. 504." Morris 2001)). statutory As damages knowledge recklessly the when that a his disregarded painstakingly cast it in unfavorable end of in this the weighed, this defendants' plaintiff unwitting § a 243 F.3d at 799. extremely vis-a-vis or or before trial L.P. (4th Cir. constructive infringement copyright holder's rights. This or P'ship, U.S.C. instead infringement has been held to enhanced acted with actual 17 but was the connection. actions, quite light, and matter are spectrum. far Thus, reduced statutory damages would be inappropriate in this matter. However, neither confidence can sufficient this Court to justify conclude, enhanced with an statutory amount damages, that defendants willfully infringed plaintiff's copyrights. 31 of i. The Plaintiff's Claimed Business Justification business justification defendants offered for their development and marketing of the Original Collection artwork and stencils was certainly a plausible one. It may well have been the case that the original coloration of plaintiff's ink artwork was, in many cases, rendering that too intricate for the airbrush medium, artwork ineffective in marketing the thus stencils, because many airbrush artists would be incapable of creating an airbrush tattoo with plaintiff's such a the artwork. business overshadowed by stencil However, any justification the that would potential might is telling developed the providing plaintiff Original payments contacted legitimacy had that was entirely in which The very name chosen by for their derivative artwork-the Original Collection- particularly royalty resemble the circumstances illegitimacy of have the Original Collection was developed. defendants actually this Collection with required plaintiff, in or the by connection. long after statements the of Agreement. consulted an Defendants they Gross had stopped Sales Defendants attorney, and never regarding development or marketing of the Original Collection. the Defendants never paid plaintiff any royalties on Original Collection sales prior to the instant litigation-not when DuFresne contacted them by telephone, letter. and not Indeed, it even when was not they until 32 received plaintiff the termination actually sued defendants that obligations defendants under the offered Agreement, to make and the good on TAT's accounting that defendants initially provided to plaintiff proved to be woefullyinaccurate. ii. In the same defendants' notice, the if related third an no received fulfilling conclude-though the opportunistically for their Court bankruptcy own would have their need not advantage to continued and notice so what an profit, that, actually uninvolved or required obligations to one could easily here-that they his the Defendants that to Instead, of reinforce justified do bankruptcy proposition contractual appropriate use the to opposed the Agreement. took the bankruptcy as believed actions. for DuFresne, had of serve a cease to Court receipt only support receipt plaintiff pursuant the defendants' such to plaintiff's would legal or if their of had party, defendants nature plaintiff to on explanation Court they even premised questionable offered even vein, excuse such highly The Bankruptcy Notice Excuse defendants believed copyrighted without any to be artwork regard to the continued validity of the Agreement between them. iii. the Tipping defendants' best The Agreement's "Best Efforts" Clause scales claimed efforts to slightly reliance on continuously, 33 in TAT's the other obligation diligently and direction to use is "its competitively design . . . the Agreement. Compl. determined Article Licensed Articles" in its VIII, interpreted Ex. a entirely inconceivable an had this since not defaulted rewarded counsel in on most royalties. a about the of not 48 at were to consult permissibility the in motivated, its best at their not and it course, more had to already least to or not seek be legal Collection rule the part, design the plaintiff Original in long under should cannot such plausible pay developing efforts is believed, plaintiff Court defendants, use of the Of certainly be of obligations obligation that reasonably actually other the Court Order 13-14, TAT of this development which defendants failure that Collection, its VIII and considerably in the Nevertheless, possibility been context Moreover, to No. defendants have many their obligation could defendants' that notably for project. law, Docket would arisen Agreement, Opinion legally flawed interpretation. interpretation it see Article Although 2011 of authorizing Collection, VIII. 28, matter Original relied on, art. February as as A under out Original by the the TAT's Licensed Articles.4 4 This Court explained in its February 28, 2011 Opinion and Order that TAT's authority to "design" contemplated by Article VIII of the Agreement "would extend to, for example, the material out of which the stencils [i.e., the Licensed Articles] were constructed, and not designs themselves." to the coloring Docket No. of 48 at 14. 34 plaintiff's copyrighted iv. insufficient Evidence to Establish Willfulness On the basis there to be establish of the foregoing observations, insufficient evidence affirmatively constructive Original conclude has definitively record defendants that However Collection the that knowledge infringement. in their ill-advised proven that undertaken with knowledge, in such actual the Court before had the development to or constituted development hindsight, it actual actions the finds of Court was or constructive, the cannot consciously that it would constitute infringement. In matter TAT's the the same could easily be contractual Court cannot reckless vein, although characterized obligations conclude disregard of Collection occurred respects to by entirely who under actions in Agreement, undertaken copyrights. context of a this disregarding the were the development Defendants appropriated unbeknownst contractual that the recklessly plaintiff such actions of In in this the Original licensor-licensee albeit one that had already been breached in other defendants. plaintiff as plaintiff's the Court notes in to that connection, relationship, defendants' to and him. relationship with them were not re-sold Instead, plaintiff, plaintiff provided with, and DuFresne's copyrighted tattoo designs. 35 complete strangers DuFresne's artwork defendants pursuant authorized their had to a which use of, Defendants' do not by reckless that innocent, range not considers less just." is of Court how than though establish numerous, the copyrights. requisite Consequently, actions were neither award damages within the $30,000 as $750 U.S.C. many Agreement, plaintiff's shall 17 the necessarily defendants' the "of under themselves disregard finding course, defaults or § separate more than 504(c)(l). works of willful The next plaintiff nor standard the court question, of were infringed infringed upon by defendants. b. Plaintiff total of Tattoo The Number of Works claims that 708 Works which were Art," of which registered with the also Exs. 1, 80. Tr. statutory damages for 23. Plaintiff statutory damages by defendants independent images works." each because "not Docket No. Defendants constitute contends economic were 212 such 59 argue "collective at it should of and the is as . at elected registered "[e]ach registered "has Id. registered Works." that value Works Office." Plaintiff a to a claim of copyright by individual Copyright the for Defendants subject "212 U.S. at "[t]he Infringed 17-18; to an or see receive No. 59 award of upon images separately," compilations were infringed individual sold . Docket receive image . has and the derivative 17. in response works" as 36 that that term plaintiff's is defined Books in 17 U.S.C. § 101, plaintiff's and that Books, damages awards, since the plaintiff is Property was only drawn entitled to 16 of the (citing 1116 of statutory damages Copyright Bryant v. of statutory one per sheet from each such Book. "The question of whether a work constitutes a for purposes from 16 Act is a mixed Media Right Prods., Gamma Audio (1st Cir. & cert, to question Inc., Video, 1993)), pursuant 'compilation' Section of law 603 F.3d 135, Inc. v. denied, Ct. and 140 Ean-Chea, 131 S. 504(c)(l) 11 fact." (2d Cir.) F.3d 656 1106, (2010). The United States Courts of Appeals have employed divergent modes analysis in "one work" determining what "compilation" and/or The "Independent Economic Value" Test The United example, applicable States has Court Office," works of historically "regulations Copyright multiple a for purposes of statutory damages. i. for constitutes of may looked promulgated which be Appeals in by provide registered for a First this the that on the Circuit, connection [United "the single to States] copyrights form, and in thus considered one work for the purposes of registration while still qualifying as separate statutory damages." F.3d 1106, 1117 202.3(b) (3) [ (i)] (A) . 37 C.F.R. § Gamma (1st That 202.3(b)(4)(i), "works" for purposes Audio & Video, Inc. Cir. 1993) regulation, provides 37 (citing which is of v. awarding Ean-Chea, 37 now in relevant part: C.F.R. 11 § codified at For the purpose single of registration application and upon [of copyright] payment of a on a single registration fee, the following shall be considered a single work: (A) In the case of published works: all copyrightable elements that are otherwise recognizable as self-contained works, that are included in a single unit of publication, and in which the copyright claimant 37 C.F.R. is the same. § 202.3 (b) (4) (i) . Relying on this language, Circuit in Gamma applied a "functional test on whether each value and is, expression in itself, ii. . . . viable." has . an . . the First with the focus independent economic Id. The Alternative Plain-Language Test Although several also adopted this other United States "independent Courts economic value" of Appeals have test, the United States Court of Appeals for the Second Circuit declined to adopt that test in a recent published opinion. at 140-42 as Gamma and Eleventh, and (2010). (2d Cir.) In D.C. "Act compilation a value, exception." Circuits), the be Id. part and at damages. of the a decisions Circuit one work This 142. 38 will the 131 F.3d all for not Ct. 656 that the parts the language that Ninth, S. emphasized that compilation Court from denied, states as 603 own prior decisions as well cert, Second treated statutory for published specifically must calculating economic similar Bryant, Copyright exception (discussing its See Bryant, has of a purpose of provides no independent create such an In rejecting Bryant, the the Second Circuit Robert Stigwood Group, Cir. 1976). because could each Bryant, 05) copyrighted 603 be song that, in to the separate statutory separate,'" subject n.7 it one-award 530 prior separate [its] own been Act award under restriction 1909, 'for the Second for compilations 1976, was 1104- explained damages provided of each award F.2d at infringement Act (2d life.'" statutory which each Copyright statutory Circuit in Christ copyright "awarding of 1105 Jesus 530 in decision "held that musical a The test F.2d 1096, (quoting Stigwood, had damage not its the of xlive Copyright and from original). Stigwood, pursuant "[t]he 142 in O'Reilly, value" the Second Circuit had could F.3d at (alteration v. song the economic distinguished Ltd. In Stigwood, separately Superstar "independent for that in a was which introduced." Id. Bryant decisions also on the reviewed contours other, of the court had historically copyright unit," holder-issued and issued their defendants to had Id. that, issue their 141. "compilation," works in separately, those works combined at recent "focused on whether its infringed who compilation. chose explaining a more cases, works By contrast, songs as albums 39 that the plaintiff-the together the plaintiffs and into it the the plaintiffs instead Circuit emphasizing or separately, those Second of was as a had the infringing in Bryant individually. The Second language Circuit of the held that Copyright w[i]n Act this limits situation, the copyright statutory damage award to one for each Album." iii. The 285. Indeed, in Bryant 603 F.3d for the it in at 141 of n.6. eligible its separate n.8, position Xoom that does it not may statutory See correctly determination of F.3d at Bryant, cites the damages Xoom number awards is of not see xoom, 323 F.3d at support plaintiff's categorically recover 323 holding. determined by the number of registrations, 285 side with cited by the Second Circuit "one-award" the to See Xoom, Although plaintiff that for holders' id. in Xoom appears is among the cases proposition "works" decision approach in Bryant. support plain Fourth Circuit Position Fourth Circuit's the Second Circuit's the statutory damages for each individual infringed image on each sheet of tattoo flash. In Xoom, the defendant/counterclaim plaintiff alleged infringement of its copyrighted collections of computer clip-art images, "premis[ing] infringement were not part of and its damages calculation," registered despite individually, F. in part on the fact but two separate compilations named "Imageline Master Gallery". 93 claim Supp. by 2d 688, Xoom, 691 Inc., (E.D. 323 XOOM, Va. F.3d 40 per-image, that instead such per- images collectively as "PicturePak SuperBundle" Inc. 1999), at a 279. v. aff'd The Imageline, in part Inc., & rev'd district court rejected instead U.S.C. the counterclaim after § a brief 504 statutory infringements or images." at 565, Id. 569-70 appeal, part the "decline[d] clip-art to the of Master court's a were Gallery, of v. to that which statutory found that the be only should regardless products of the and of of number of infringing Powell, 897 F.2d reversed Fourth The and Circuit whether the registered Master simply Gallery." found to Id. "that district had "created or derivative question of could court one award the number of of the at 283. Imageline's sufficient to the underlying preexisting works compilations separate individual through and Master Gallery was Imageline damages containing 17 award the SuperBundle works, underlying works which those products encompassed." Turning of one in part decision. Circuit SuperBundle both only containing affirmed effectively SuperBundle noting be application regardless determination copyright protection each," should concluding 1990)). Fourth registration of literal products Fourth Circuit make of of a position, (citing Walt Disney Co. Cir. the there number 693 that registration district registrations provide per images Instead, "that the {D.C. On in analysis dictated damages plaintiff's be had the number awarded, "incorrectly statutory 41 images.'" and the works for Id. of Fourth held damages infringements infringing the per or Id. and Circuit that * there registration the at number 285 of n.8 (quoting XOOM, instead Gallery are irrelevant to concluded Master in contained since song either in 504(c)(l), purposes the total only two analysis registered songs, in analysis not and only the 42 xoom owned can be the in Second court and the works under and (one Master for each work)" Id. largely two at and awards 285. consistent There, albums, as concluded damages Circuit is Circuit classified Bryant. their ("The copyright," maximum of is 141 action, SuperBundle a single copyright derivative receive which preexisting works or at of and SuperBundle statutory of are [that] also in Fourth for copyright infringement." Circuit's individual of compilation Circuit's Second Imageline registrations a of underlying determining Imageline may certain the of works," w[t]herefore, statutory damages the works F.3d Although award SuperBundle separate derivative of had a Circuit one they 603 Gallery registration plaintiffs Bryant, and Master of the and which or constitute the because received for entirety SuperBundle Section with not have to derivative purposes their Fourth or Fourth because covered, for The entitled infringed also The registration "that, of is analysis."). compilations Gallery 693) . "Imageline's therein "both see may this that at compilations Id. ; Gallery products work copyrights, registrations." each 2d "Imageline per holds that Supp. that damages Imageline fact F. explained statutory Master 93 but assumed the also for purposes of its copyrighted above, each to compilation at the song irrelevant Id. 603 Second may F.3d 138 only a on & a of the 140 indicated received analysis" justifying song at Circuit have [the] "each n.4. that separate whether single Albums As was noted "[t]he fact copyright an album statutory is is damage a award. 141. iv. Application of Bryant The foregoing method by which existence of a that separately." however, that decision analysis the work "compilation" for suggests copyright separate copyrighted and Xoom to holder copyrights is purposes of that neither registers for dispositive the Instant Matter each of work constituent the statutory his the work's precise nor element status damages. the of as Instead, a as the Second Circuit explained in Bryant: An album is songs that a way the that album. therefore, only one 603 F.3d at As sought even collection selected results Based preexisting arranged original plain of work reading an by album materials- the of of author in authorship the should statute, result in award. 140-41. emphasize for implicit an a infringement detailed above to in on of and statutory damage "random," sheets a are in in in manner copyright the Court's his in testimony which he registration DuFresne's findings testimony 43 at trial organized and that sale. he of fact, the his arbitrary, tattoo Although created DuFresne the flash it was various tattoo flash Trial Tr. appear sheets vol. from separate, 1, that economically comprising each 51:24-52:4 testimony meaningful Book (DuFresne that he way i.e., sheet-by-sheet or for DuFresne individual images, he also testified and done in cost of a (DuFresne Int'l, v. sale copyright Test.),- Ltd., RTV Commc' n indicated compared 50 to cf. Twin F.2d 996 1366, Peaks Inc. , 445 or that to sheets copyrights." Productions, Inc. 1993); 538, 541 was plaintiff's to Xoom above in tattoo and statutory also its images Bryant, damage adopted award Findings leads that per of 1; Tr. Fact, registered Books. Exs. 1-24. the Court Book is to of of the the 51:10-12 As 711 Publ'ns Cir. 2006) . that such the sale to Court images Consequently, plaintiff twenty-four separate statutory damage awards. 44 42 at 1; is one noted contained the Agreement were drawn from 24 See Docket No. of pursuant entitled the Corp. for purposes conclude, only infringed. 212 with v. the fact purposes plaintiff in the Property attached to plaintiff's for as sells WB Music (2d a put Id. F.3d any "were help (2d Cir. in sometimes just copyright registration is not dispositive, organization not Although, Although plaintiff's manner of organizing the Books of does licensing on he the see sheets basis. that times, it those sale sheets 50 1381 Grp. , Test.), image-by-image noted, for different issued previously together at of PL's Ex. entitled to The Court statutory damage declined to willful award. innocent, to above willful of end award in the upper and analysis, the of 3. Supreme as the of innocent end. "independent awards. a In statutory and amount limit will of of the economic light lower its Court defendants would have the matter, In to The infringement-much this the total closer per than in just. consideration considers $20,000 in any amount falls the has to have been it considers into damage Court Court conduct Circuit, statutory the damages such faced of the damages closer $750-is consequently to just award $480,000. Plaintiff's References to Actual Damages Although plaintiff's of references of feels to Court's proposed findings law only seek recovery of also entitlement this each since impose defendants' than of in this matter takes $30,000 in statutory damages therefore may Court the amount limit infringement Court amount above, conduct spectrum separate conclusions noted the had it concluded that appropriate pleading that applied in of foregoing the the that, test hundreds As the observation also notes determine $30,000 per infringement, connection, value" also find defendants' or from $750 this must entitlement plaintiff's compelled actual recent fact and statutory damages, such to unregistered to damages. decision address As noted actual damages designs. The plaintiff's above, in Muchnick, 45 of this in Court claim light Court for of of the does not lack subject-matter claim against registered existence suffice monetary this defendants and of to subject-matter establish juncture. in in As part copyright for noted above, civil United entitlement 17 preregistration or registration of made in accordance Although the Supreme jurisdictional whether § in to enforce sponte this Court nature, 411(a)'s precondition sua with it suit that by . appears that . dismissing involving unregistered works." It . the to by itself, provides infringement be 17 such § not "decline[d] is courts to a in the until claim has language district of instituted U.S.C. requirement been 411(a). to be address mandatory or should infringement copyright Circuit a 411(a) copyright Muchnick, Fourth § shall expressly registration not, the at title." found However, of for the its recovery U.S.C. work both unregistered designs its action States does copyright of designs. jurisdiction plaintiff's "no plaintiff's infringement tattoo connection with that any over their unregistered damages relevant jurisdiction may claims 130 S. Ct. at 1249. has not yet addressed this issue in the wake of the Supreme Court's recent decision in Muchnick. Fourth Circuit infringement appropriate, Mabry, However, have claims several applied relating other district Muchnick to 3:10-2641-CMC-JRM, 46 within analyzing unregistered have dismissed such claims. C/A No. in courts See, works e.g., 2010 WL 5349863, at the copyright and, where Ferguson v. *1 (D.S.C. Dec. 21, 2010) (noting for that matter, relief Action No. 2010) to infringement," suit"); CCB-09-1825, of creation, requirements of at the v. author must Copyright (D. UPI Holdings, at *3-7 June comply Act to Civ. West, Md. ttremain[s] No. 25, (or, 2010) as Inc., a Civ. {D. Md. July 1, in an original work exists Staggs v. *2-3 registration is not required to seek 2010 WL 2651304, the infringement."); 2670979, "prior registration Edgerton ("Although copyright moment although contemporaneous notice) for alleged prerequisite that with from the the bring a statutory suit PJM 08-0728, ("while for 2010 WL the bar to a federal court's ability to hear such infringement claims is not jurisdictional, [in Muchnick] that a the Supreme Court nevertheless has acknowledged that copyright § 411(a) must imposes be the statutory precondition registered before the copyright infringement claim is filed"). To date, plaintiff registration, the various law, Property interest that defendants in both the the absence of the or the nearly 500 were registered Books. that offered preregistration, registration of any of in has have not it drawn is not stipulated Court even no proof application tattoo designs from one enough, to of of for contained plaintiff's under plaintiff's applicable copyright registered and unregistered designs. such proof, plaintiff may not maintain a In claim for actual damages with respect to the unregistered designs, 47 its the proof of defendants' notwithstanding, entitled to infringement the Court award an and of actual notwithstanding its cannot of agree that for such damages disclaimer such that it designs plaintiff is infringement, seeks no recovery stemming from such entitlement. Neither many of the raised by 17 U.S.C. tattoo § 411(a) designs any party in nor the contained this matter unregistered nature in the prior Property to trial. was of ever Moreover, plaintiff's original and amended complaints make no reference to § 411(a)'s registration make reference the subject added), proposed does not of "the more this findings § of that is fact w[u]nlike require a However, 640 Docket procedural copyright No. of bar, 59 at 32. because Inc. v. to that two case Photo acknowledges-on mere 15 register are {emphasis Plaintiff's law the that also fail curiously Copyright its to Act copyright as or profits." Docket This claim by plaintiff is particularly confusing the very Linn complaints instead damages, owner I incorrect. a prerequisite to recovering actual damages No. 49 conclusions statutory both registered images factually and 411(a)'s that than action," an allegation acknowledge claiming to requirement. the sentences "registration that plaintiff Co., 23 very same away is from F.3d 1345, page the required 48 cites 1349 cited sentence under for by it, (8th Plan Mills, Cir. plaintiff, quoted section by 1994), and a plaintiff 411 of the Copyright F.3d at Act in by counsel telephonic 411(a) status constituted an defendants. required bring to raise pre- § considered proof prevail for on and that a of must relief again compelled larger that infringement." as an 23 by a to address damages award. they § were various courts preregistration claim. the of noting by to be order in While statutory 17, defense, plaintiff to this might ultimate request damages, the Court because plaintiff issue to parlay an entitlement statutory that since plaintiff's limited June had to be raised denied decisions proven to that or the applicability affirmative infringement is during the defense registration be copyright seemingly seeks position post-Muchnick for monetary feels the counsel seem like an academic point, that, suit conference 411(a) have element took Defendants' both a a affirmative that an to 1349. Plaintiff's 2011 order to actual damages into Therefore, the Court notes on the basis of its discussion of relevant case law above, it agrees with defendants' position in this regard. Plaintiff's June 17, counsel 2011 status requesting infringed any by of defendants. counsel conference that took the position during conference that plaintiff was not, award plaintiff's further damages Docket correctly the for the 74 pointed out during damages at request for 49 in fact, unregistered No. at 1-2. the images Although that the status end of plaintiff's proposed characterized the infringement as the 212 No. 59 damages at for 34, of the 496 and for conclusions defendant's of law copyright to less than $10,000.00 for each of registered the fact requested "amount[ing] infringed compensation findings works, infringed position without factoring unregistered articulated in that in any works," Docket portion of the document is confusing in light of the prior references discussed above, as well as additional references in plaintiff's proposed findings of fact and conclusions of law. For example, elsewhere in that conclusion that attributable plaintiff's document to the remaining iTd^ at 23 that Court adopt damages that the expressly Court adopt proposed the legal "Tattoo Art is entitled to recover TAT's profits Works." the counsel 5 calculation 47. a approximately Plaintiff's detailed-and for plaintiff's was premised on the notion that, 500 counsel highly non-registered further proposed speculative-actual unregistered designs, which in the absence of any proof by defendants of TAT's expenses or profits attributable to products other than plaintiff's substantially all at 23-24 55 designs, of TAT's profits 43-53; see also plaintiff from 2006 id. at Plaintiff's counsel specifically claimed, 17 U.S.C. profits § 411(a), reasonably that plaintiff attributable 50 to 21 is entitled through 2009. 55 26-27, to Id. 31-32. without any mention of "is entitled to recover TAT's the non-registered Works in the amount of $1,918,700.00," judgment against TAT and severally, profits in for that International, the attributable damages and aggregate to it entitled LLC and Kirk Knapp, amount of non-registered registered works." "is Id^ at 24 jointly $3,918,700.00 works ff and 51, to for statutory 53 {emphasis added). These legal proposed that it is true conclusions, the Court that are plaintiff may occurred a adopt, that infringed work or works, a lawsuit, lawsuit, until let the preregistered. 17 infringement be to sought see is 686 certainly sought less Ct. recover to actual Although damages registration actually § recovered works are 411(a). of the by in true other still lawsuit and until e.g., Cosmetic 619 plaintiff's explained for each that of 51 the such 212 23 F.3d Inc. v. cert, Again, damages award words, registration Ideas, ultimate or but such Plan Mills, (9th Cir.), a constitutes after (post-Muchnick decision). that $10,000.00 in a such registered In registration for sought recovery may not be 606 F.3d 612, (2010) $2,000,000 than simply inaccurate. the infringed works. also, IAC/lnteractivecorp, 131 S. alone U.S.C. or preregistration of 1349; a affirmatively and can still merit an eventual recovery, recovery cannot at such infringed prior infringement, plaintiff prior infringements filing which denied, while it request "amount[ed] infringed to registered works, without factoring in any compensation infringed unregistered works," Docket No. was informed, assertions. that, as actual whether intended Therefore, indicated damages unregistered above, for tattoo considered any the Court defendants' 59 at 34, not, feels plaintiff designs. such or not of the to to entitled infringement entitlement these compelled is the 496 such request by Furthermore, asserted for other clarify to any plaintiff's Court actual has not damages in its statutory damages award calculations. C. 1. Plaintiff's Breach of Contract Claim The Nature of Defendants' Breaches of the Agreement Turning to plaintiff's breach of contract claim, previously noted in its February 28, defendants under do not paragraph plaintiff with dispute 3.03 the of that the requisite this Court 2011 Opinion and Order that TAT breached Agreement by statements its obligations failing of Gross to Sales corresponding royalty payments starting in January 2007. No. 48 with at that above 22. The testimony concession. establish several offered Moreover, at trial the Court's additional ways was and Docket consistent findings in which provide of fact TAT breached its obligations under the Agreement: ¢ TAT's statements of Gross Sales and corresponding royalty payments for the first three Calendar Quarters of 2006 were inaccurate to the detriment of plaintiff, thus breaching TAT's obligations under paragraph 3.03 of the Agreement. 52 ¢ TAT breached paragraph 3.04 of the Agreement by failing, during the entire term of the Agreement, to pay the minimum royalties required by it. ¢ The consistently inaccurate nature of TAT's successive accountings prepared in connection with the instant litigation clearly demonstrate that TAT breached paragraph 5.01 of the Agreement, which required TAT to maintain accurate books Articles. ¢ and records relating to the Licensed The testimony at trial also established that TAT breached paragraph 5.01 by failing to designate-or, at least, to use consistently-exclusive symbols or numbers in its books and records for plaintiff's designs that would "facilitate the examination of [TAT]'s any amount due." 103:22-115:9 Knapp Dep. books Compl. (VanderWel Test.); Ex. and A f Dep. Trial records 5.01; Test.); Tr. vol. with respect see Trial Tr. vol to 1, 178:21-182:24 2, (Kelly 227:2-228:12 (Wolfe Test.). ¢ The testimony at trial further established that TAT breached paragraph 11.02 of the Agreement by failing to "apply '© J.d. Crowe 2005' on each sheet containing the Licensed Articles," and affirmatively removing plaintiff's copyright from the Original Collection artwork. Compl. Ex. A 31 11.02; Trial Tr. vol. 1, at 173:14-174:4 (Knapp Test.), 183:7-17 ¢ (Kelly Knapp Dep. Test.). TAT's infringements of plaintiff's copyrights in developing and marketing the Original Collection exceeded the scope of the license granted by the Agreement, and thus constituted additional breaches of the Agreement. 2. The fact that regard been Gross to the The Irrelevance of the Bankruptcy Notice Court has already defendants' the Sales claimed bankruptcy reason and Calendar Quarter concluded for TAT's notice failure corresponding of 2006. case To above of they 53 its mistaken received to provide royalty the in payment extent that findings identity could the not with have statement for the defendants of of fourth claim that the bankruptcy statements subsequent Court notice of notes that to Gross both failed consistently was the Sales for withholding and royalty payments, defendants' suggest reason counsel any basis and the Knapp have for their whatsoever position that the filing of a bankruptcy petition automatically stays the However, contractual even correct, it if obligations defendants' would not plaintiff who was authority for their bankruptcy for an apply the position in this bankrupt. position filer's in that that third party a somehow were it was provide mistaking debtors. regard matter because Defendants uninvolved suspend defendants' of no not legal notice of operated to obligations to plaintiff under the Agreement in such a way as to prevent such suspension from constituting a breach. 3. The Measure of Damages for Breach of the Agreement This Court Opinion law, and Order pursuant contained breach of obligation previously determined that to the valid, therein. contract of the Under Agreement its is February Virginia to are law, (1) tt([t]he a and elements legally Wright, 54 671 of a enforceable (2) the defendant's (3) injury or damage to the plaintiff caused by the breach of obligation.'" LLC v. 2011 governed by Virginia a plaintiff; violation or breach of that obligation; Continuing Care, 28, enforceable choice-of-law provision action a defendant in S.E.2d 132, 136 Sunrise (Va. 2009) (quoting Filak v. George. respect to burden of contract, the reasonable certainty 594 S.E.2d 610, proof plaintiff which they resulted; the 191 (Va. 524 (Va. 2003)); S.E.2d 83, 2009) 85-86 damages has "the amount of caused 'burden damages accord Isle of does burden remains reasonable "Damages certainty cannot contingencies, "[t]he failure warrants be proving the of with cause not then with the shift the measure recovered if establish from 675 S.E.2d 574 S.E.2d 514, v. to Nogiec, the ("When a defendant. to damages derived 704 the burden of proof plaintiff of damages Farrar, 671 S.E.2d at 137 or speculation," SunTrust, to breach County Wight 2011); Sunrise, regarding damages proof of a with Davis, plaintiff has proved a breach of contract, of 2004)). by and SunTrust Bank v. (quoting Shepherd v. (Va. (Va. speculation and conjecture cannot form the basis of the recovery.'" 187, for 614 from prove The with sustained."). uncertainties, 675 S.E.2d at 191, with reasonable the dismissal of a breach of contract claim." and certainty Nogiec, 704 S.E.2d at 86. 4. The Court's Calculations of Breach of Contract Damages In the absence of any accurate accounting of TAT's sales of products relating to plaintiff's Property, plaintiff engages in speculative calculations to reach the conclusion that $1,000,000 of TAT's Property, revenues each year and that plaintiff were is 55 attributable due royalties to plaintiff's in the amount of $437,500.00. See address detail in plaintiff's are under certainty. Docket the calculations calculations burden Docket No. far See, are based; to No. 59 at accounting, it is impossible attributed to should be impossible royalty to be ("Because exact payments."). as suffice it to TAT's with at Works. how much TAT defendants which such reasonable 191; see also system of to how much revenue Art's Although not plaintiff's unreliable as will upon satisfy S.E.2d to be exact to Court to say that damages 675 of Tattoo The assumptions prove SunTrust, 14 10-16. speculative law e.g., at numerous too Virginia 59 As it is Tattoo owes such, Art in certainly should not be rewarded for maintaining such manifestly inadequate books and records, neither calculation. in Instead, defendants' aforementioned Wolfe's good may the indulge in speculative in light of the amount of sales reflected January 2011 credibility faith Court efforts accounting, determination in preparing and with it, the respect the Court that the minimum royalties required by the Agreement the appropriate award thereof. Thus, damages the Court will for award TAT's Court's various damages in the to Mr. believes constitute breaches amount of $20,250.00 in that connection. D. This temporary Court and is final Permanent expressly Injunction authorized injunctions 56 on such by statute terms as it to "grant may deem reasonable 17 U.S.C. to prevent § 502(a). or restrain infringement of a copyright." As the Supreme Court has explained: [A] plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay Inc. accord 2756 MercExchange, Monsanto (2010) Winter v. Ct. v. 365, As Co. (quoting Natural 374 Geertson the Res. above Def. 547 Seed U.S. Farms, language Council, 388, 130 from Inc., 391 S. Ct. eBay); 555 above in "acknowledge[d] manufacture, the Court's that its 7, expiration of ... of Ex. A 5 TAT from opposing Instead, also 129 fact, to cease S. 7.01. Although this [the] Agreement" injunctive plaintiff's the Court must still the would entitle Compl. acknowledgment might well preclude the award of establish TAT the Licensed Articles upon plaintiff to temporary and permanent injunctive relief. itself, 2743, see U.S. findings failure sale or distribution of the termination or by (2006); (2008). noted explicitly v. L.L.C., entitlement consider forth in eBay. 57 relief, the to it does such four-factor not, relief. test set 1. Irreparable Harm and the Adequacy of Remedies at Law "Irreparable copyright injury violations, often which deprive intangible exclusive rights." v. Galloway, Music, 492 F.3d 532, Inc. v. White, 68 (E.D. Va. "inevitably overlaps legal remedies. Supp. 2d 556, Supp. 582 (E.D. nature of holder of the Va. 2007); 2d 497, L.L.C. as v. In LLC accord EMI Apr. (E.D. va. Supp. for inquiry 2007). 510 727 F. inquiry MercExchange, findings of fact herein, allowing (4th Cir. The with" the copyright the Bannco Corp., 2010). from Christopher Phelps & Assocs., 544 618 F. see also Splitfish AG v. derives 2009); 2d 461, 467- irreparable to the eBay, light harm adequacy Inc., of the 500 of F. Court's the Court concludes that: defendants to continue to distribute [plaintiff's copyrighted tattoo designs or their derivative Original Collection images]-particularly when the record reflects that plaintiff[] [has] not licensed the [development and marketing of the Original Collection]-would significantly diminish the intangible value of the [Property] to plaintiff[] in a manner that could not be cured by damages alone. Splitfish, remedy the derivative 544. two 727 F. Supp. continuing Original Thus, it 2d at existence Collection appears 467. of" images. that plaintiff factors. 58 "Damages at defendants' Galloway, has law will not unauthorized 492 F.3d satisfied the at first 2. The Court hardships The Balance of Hardships must between next the consider parties injunction against defendants supports defendants. case would prevent stock of stencils defendants' obviously in own recognizes developing the the Original in-house or ordering very conception expense the of of defendants and permanent remaining The allegedly either corresponding stencils. Original of Property Collection. Collection the a their plaintiff's Original balance injunction in this from disposing from the granting A permanent derived derivative whether Collection or Court incurred manufacturing However, was the without plaintiff's consent and beyond the scope of the license granted by the Agreement. defendants to Furthermore, incur the plaintiff expenses in no way encouraged relating to the Original Collection. With respect original artwork, required to royalties noted that plaintiff's stencils defendants on sales defendants' original directly derived from plaintiff's had long since thereof. testimony artwork was stopped paying Moreover, at trial it the should suggested be that largely ineffective in selling the stencils. Consequently, permanent the injunction them expenses that is hardship to relatively defendants minor, should never have been 59 and resulting would from only incurred in the a cost first place. On the other hand, marketing the unauthorized, constitute a severe allowing defendants to continue derivative Original Collection would hardship to plaintiff, who would then conceivably be forced to compete with products derived from his own copyrighted tattoo designs. 3. Finally, Public Interest plaintiff must also show that the public interest would not be disserved by granting a permanent injunction. "it is easy to understand that the public interest reflected in the constitutional protection enactment of permanent injunction place." the White, of Copyright that plaintiff has Act, where 618 F. copyright, Supp. is the enhanced copyright 2d at and Congressional by issuance infringement 511. Therefore, also satisfied the public has of a taken it appears interest prong of the injunction test. 4. As proof The Permissible Scope of the Injunction noted above, plaintiff of registration, has provided preregistration, or the Court with no even application for registration of the unregistered tattoo designs contained in the Property. Although jurisdiction over the herein authority to Court plaintiff's unregistered designs, has the to encompass does not claim the Court must still extend both the any subject-matter relating to such determine whether it permanent registered 60 lack injunction and the granted unregistered designs. During the June 17, defendants' counsel discretion to plaintiff's unregistered conceded enjoin that it defendants' tattoo must nevertheless examine determine the both 2011 telephonic status conference, the was within conduct designs. applicable permissibility this with respect However, case and Court's this to Court law for itself appropriateness to of ordering such injunctive relief. The Second Circuit addressed that was subsequently reversed, by the Supreme Court this in Muchnick. See Databases Copyright Litig., rev'd on grounds, Muchnick, Second Circuit explained in in its United States Courts of Appeals decision 509 In re Literary Works F.3d 130 116 (2d Cir. Ct. at S. decision in 2007), 1237. The several that other "have enjoined the infringement of unregistered copyrights when at least one of copyrights-in-suit id. was the on related but distinct grounds, Elec. other issue registered." the plaintiff's at 123 (citing decisions by the United States Courts of Appeals for the Eighth, Ninth, that it and had infringement Eleventh "never of Circuits). held Id. a unregistered underlying action arises same party." that The It Second district copyrights Circuit court so may explained enjoin long as the the from a registered copyright held by the further stated: [E]ven if injunctive relief against infringement of an unregistered copyright is available, that relief is properly limited to situations . . . where a defendant 61 has engaged in a pattern of infringement of a plaintiff's registered copyrights and can be expected to continue to infringe new copyrighted material emanating in the future from the plaintiff. That sort of prophylactic relief furthers the purposes of the Copyright Act generally and does not undermine the intended effect of section 411(a). ^ (citing Plan Mills, Inc. v. 2002) Hoffmann, Inc., 23 F.3d at 1349); 220 F. Supp. see also Walker Mfg., 2d 1024, 1039-40 United States Court of Appeals for the has articulated an even more expansive standard, rejected Supreme Re follow in Inc., 10, Inc. Circuit, Muchnick. 508 F.3d 509 a Perfect [the Ninth preliminary at 10, 123 Perfect (wTo lack[ed] to addressed the 10, v. with extent that we decline the 508 is to a But section 411 can grant. Rather, enforces F.3d at broad court generally a jurisdictional suit for copyright infringement. does not the limit the Copyright remedies Act gives a court courts authority to issue injunctive relief. Once a has jurisdiction over an action for copyright infringement under section 411, the court may grant injunctive relief to restrain infringement of any copyright, whether registered or unregistered. 62 over it The Ninth Circuit explained: Registration prerequisite to defendants jurisdiction extent Inc., the 2007), the of by Inc. 10, (9th Cir. one Circuit albeit one that exception, Inc., Circuit] not Ninth Perfect n.l broader injunction copyrights." 1154 F.3d suggests and Compare 1146, In that unregistered Second Works, it."). "arguetd] n.l. the Literary Perfect the by Court Amazon.com, In Iowa (discussing and applying Plan Mills). The was (N.D. 1154 Because at least some covers of unregistered the Perfect 10 images at issue were registered, the district court did not err in determining that it could issue an order that jurisdiction over order. works. the Therefore, district court's we decision have and id. On the other hand, registration injunctive is a several prerequisite relief. See, e.g., Clay Realtors Angel Fire, abrogated by copyright Med. *2 owner Centers, {E.D. Inc. Tex. 130 having v. Sept. damages."); La S. both Resolana Ct. 28, No. to (»A filing Inc. v. at ("Every remedy copyright."); 2007 for INFOSoft 2006 WL 2850356, *5 v. 2005), copyright suit PA is conditioned upon 4:07cv67, 2007) and {10th Cir. 1237 the damages Architects, 1204 at registered Weiss, TVI, 4:06CV00697JCH, seeking including injunctions, correctly registered prior or to 416 F.3d 1195, Muchnick, outlined in Title 17, a other courts have concluded that WL 2900598, claim Mo. be relief Inc., Sept. at must injunctive Techs., (E.D. Leiand 29, No. 2006) (pre-Muchnick decision denying motion for preliminary injunction with respect to jurisdiction); Inc., 360 F. unregistered Boyds Supp. works Collection, 655, 659 for Ltd. (M.D. v. Pa. copyright registration permits its marketing the without added); Abbott subject v. designs Tyson, No. 63 lack subject-matter Bearington Collection, 2005) owner Civ.A. of to ("Once enjoin approved, others permission.") 01-0111-CV-S, a from (emphasis 2001 WL 228169, at *1 (S.D. of "[s]ection requirements actions Feb. 16, 411(a) 2001) make[] {noting no that the distinction between for injunctive relief and actions for damages," and that H[n]othing relief Ala. in are 411 (a)"). reached § 502(a) exempt from However, that implies the actions which seeking registration it must be noted conclusion jurisprudence, that on considered § requirement that many of the injunctive basis these of 411(a)'s of § courts pre-Muchnick requirement to be jurisdictional in nature. At this least one question, though Supreme Court's Inc. v. Union 2009 WL 1675707, the court [a] provides decision Bank & at under no independent § . cause § . "grant of 501, temporary see also Balzer, Va. to must and also Balzer 15, an an final copyright injunctions." 64 In Balzer, action at *3. 17 under § § 502(a) infringement n[a]ny this U.S.C. Of course, for copyright as there emphasized that action arising under 2009 WL 1675707, Assocs., injunction register its for the 3:09CV273-HEH, and instead only authorizes a civil addressed & 2009). maintain obtain has issued before Action No. first action District See June "[t]o and . Civ. The court having jurisdiction of to Co., (E.D. 501 this Muchnick. that 411(a). of in *3-4 in decision was Trust [p]laintiff required by § court that reasoned infringement 502, other § court title" 502(a); in light of Muchnick, the jurisdictional language in § 502(a) is no longer an absolute bar to the availability of injunctive relief. As did noted not address unregistered Circuit above, ruled after Muchnick. the sole plaintiff the works, has the Supreme availability and on it this does unpublished not respect of to unregistered works, and concludes, issue, either the *4 decision this Court {noting that In manifests contained light a in and defendants' counsel plaintiff's copyrights, finds it of the the Property were defendants' pattern copyrights, Court the the absence majority of notwithstanding that the defendants see appropriate Trial to will Tr. exercise 65 conduct disregard registered, infringement both the registered and unregistered tattoo designs which by in light of the fact that at least some of the authority to enjoin defendants' In or that have considered this that Property. Fourth before cited follows designs the for subject-matter jurisdiction with plaintiff's it has relief that at Muchnick and in light of Muchnick's the United States Courts of Appeals issue, injunctive unregistered works). the existence of in appear Circuit of binding precedent to the contrary, recognition of decision 2009 WL 1675707, Fourth involve of particular See Balzer, did not Court's in for contained in this vol. its further 2, case, plaintiff's representations not of infringe 287:19-23, authority by in the this matter, and will therefore enjoin defendants in the manner and to the extent requested by plaintiff. E. Pre- and Postjudgment Interest The Supreme Court has explained: Although Congress has award of enacted a statute governing the postjudgment interest in federal court litigation . . . there is no comparable legislation regarding prejudgment interest. Far from indicating a legislative determination that prejudgment interest should not be awarded, however, the absence of a statute merely indicates that the question is governed by traditional judge-made principles. City of 189, 194 also Milwaukee (1995) Rodgers (explaining v. Cement Div., (8-0 decision) v. that United "the Gypsum (internal States, failure Nat'l to 332 Co., 515 citation omitted); U.S. mention 371, 373 interest in U.S. see (1947) statutes which create obligations has not been interpreted by this Court as manifesting an unequivocal congressional purpose that the obligation shall not bear interest," but that "in the absence of an unequivocal fashioned rules statutory prohibition which obligations of interest granted or by an denied appraisal . . . this interest of the Court has on particular congressional purpose in imposing them and in the light of general principles deemed relevant by the Court") v. United States, 308 U.S. & Bd. of Comm'rs of Jackson Cntv. 343, 352 (1939) ("interest is not recovered according to a rigid theory of compensation for money 66 withheld, but is given in response to considerations of fairness" and "denied when its exaction would be inequitable"). With award regard of F.3d See, 614, contract that plaintiff's prejudgment discretion. 166 to interest e.g., 632-33 action "[w]hether [Virginia discretion of Cir. the § the a district is a within should court"). In a breach awarded within light Court's of sound TAT's long of Court appropriate. absence of rate, at award request Court will an annual Commonwealth of Va. Code Ann. § § regard Court notes reference text of to by plaintiff award rate 6.2-302 to, of be for a prejudgment six (2010), (6%), the the interest as which detailed is the interest rate, judgment and In particular interest percent standard the Agreement, see postjudgment interest is and at the interest rate provided by, 1961. With the interest Virginia's also awarded pursuant 28 U.S.C. of any the below an under the history of non-compliance with the terms finds of jurisdiction, be matter the Signet Bank, in diversity claim, the Corp. v. (noting, under interest 8.01-382 contract matter 1999) court prejudgment Code] is of Hitachi Credit Am. {4th before breach to the the to plaintiff's that, despite availability Copyright Act, copyright the of infringement absence prejudgment several United of any explicit interest States claim, in Courts the of Appeals have determined that prejudgment interest may be awarded 67 on copyright Co. May v. infringement Haughev, 16, F.3d 2011) holding (relying that claims. , See, 2011 WL on, inter alia, is statute's policy goals in fairness'") 593 (3d Cir. 2010)); n.7 Cir. F.3d 265, App'x 683, decision) 274 691 & (collecting discretion of Timex Corp., (5th of and the court below); (3d Cir. in and v. "in copyright light Penhollow, the 260 per matter 2004) F. curiam to the Inc. Polar Bear Productions, (9th Cir. of Port Auth., (unpublished remanding 716-18 in to be exercised "with Powell 2007) Graham Milwaukee (quoting Pignitaro v. cases 384 F.3d 700, *4-6 available mind" 'considerations of at City cases at the District Court's discretion," the William A. 1833238, interest "prejudgment e.g., v. ("prejudgment interest may be necessary at times to effectuate the legislative purpose of incentives Inc. v. making for copyright copyright Media 100, Inc., holders infringement"); 329 F.3d 557, whole and McRoberts 572 removing Software, (7th Cir. 2003) (noting that prejudgment interest, especially in cases involving willful is copyright infringement, "necessary to make the plaintiff whole and discourage delay by the defendant in making reparations"); F.2d 1036, Kleier Adver., 1040-42 (10th Inc. Cir. v. 1990) Premier Pontiac, ("prejudgment available to plaintiffs under the Copyright Act"); Nimmer & David (Matthew Bender, Nimmer, Rev. Ed.) Nimmer ("the 68 on Copyright Inc., interest 921 is 4 Melville B. § 14.02[C][l] trend may currently be towards awards of (internal prejudgment citations Executives 64957, decision Jr. of *[t]he omitted); Unlimited at *4 & n.6 interest" and Court, Act of that generally see Durham, retired Supreme Copyright of (4th Cir. including the interest also U.S. Inc., 1991) in federal Payphone, 931 F.2d v. 1991 888, Justice Lewis sitting by designation) does "[s]everal Inc. WL (unpublished per curiam table Associate 1976 courts") not provide courts have F. Powell, (noting for that prejudgment refused to grant prejudgment interest in cases arising under the Copyright Act of 1976," but "recogniz[ing] legislative direction, a that, court even may further a statute's purposes" and, a universal rule," "the award to [the concluding without that, if any, for its loss, was any intentional, purpose."); 1017, 1030 cf. (4th Cir. mandate discretionary Danielson, 51 (1st with Inc. Cir. v. 2003) 1993) for the the and, the it absence of if necessary to "intending] that of its additional Quesinberry v. specifically provide statutory in will [the copyright holder] not award [the copyright holder] infringer]'s profits, in particular matter, actual damages plus sufficiently compensate since the infringement sanction Life Ins. to state Co. would of N. Am., serve 987 no F.2d (noting that although "ERISA does not pre-judgment interest award of trial court"). pre-judgment Winchester-Conant Props., (holding that 69 . district But Inc., court . . absent interest see 322 did John a is G. F.3d 26, not abuse its discretion by failing to award prejudgment interest) ; R. Jones Cir. Assocs., 1988) (holding authorization, Copyright United Inc. v. Nino that, prejudgment Act). This States in the interest Court Courts Homes, F.2d absence is will of 858 not follow 274, of 282 any under majority Appeals-including (6th statutory available the Robert the the of the apparent implication of the Fourth Circuit's unpublished decision in U.S. Payphones in holding available connection with plaintiff's copyright to whether in that an award of prejudgment interest is infringement claim. Turning of prejudgment of notes that telephonic interest on available, of is status argued facts this the Congressional and that intent such in in light award was intent, the of claim not warranted by to this arguments of counsel, and instead concludes instant matter of the prejudgment interest previously noted, at the 6% defendants' 70 rate further Act. the record of circumstances disagrees with merit an discussed development 17, be Copyright the Court June would be necessary the the prejudgment review of defendants' case, an award and would not manifest award during infringement an an matter this agreed that copyright in such Congressional counsel conference matter, of appropriate defendants' the question fairness plaintiff's but of separate interest considerations Court 2011 the and Upon the that the award of above. As continued marketing of receiving the facts, not for that close willful enough in this expressed and whole. in the delay The Court will U.S.C. § to, Plaintiff for an falls this in statutory light of defendants' defendants' conduct vis-a-vis relationship, characterized consistent Act, infringers also with including by to in deter making both the the delay interest Congressional at in intent, infringement copyright award postjudgment and at damages holders interest in this interest rate provided by, 28 1961. A. Federal matter in an award of prejudgment IV. Docket other enhanced been Copyright by connection pursuant has be among interest would hardly be unfair entire Thus, matter would also itself merit Thus, their virtually every step. as to Moreover, Court, after plaintiff, from even the spectrum than the innocent end, infringement. throughout Collection, conduct an award of prejudgment plaintiff this letter end of or inequitable to them. lawsuits Original defendants' the willful quite conduct, infringing termination shows closer to if the No. 59 Rules Plaintiff's Request for Attorney's Fees has at of award of attaching all CONCLUSION requested an award 35. Pursuant Civil Procedure, attorney's invoices, fees to 71 Rule attorney's fees. 54 (d) (2) (B) (i) plaintiff in indicia of of shall connection with file this the reasonableness of of a See the motion matter, the fee request and the relevant supporting documents, entry these of Pursuant request to for law, attorney's fees under 4 (a) (4) a Rule run from the Court in any detailed the under of time to file of entry of B. Counsel file with these prior the and counsel Ex. 48. shall made In TAT Fact "Joint (i.e., as addition and fact same appeal in Court's and for effect Procedure of this Final Civil matter Order on coordinate to fees. Awards of Damages within fourteen and TAT that to the date such have by of total of the accepted by plaintiff 72 or total a or of joint amount been of received plaintiff's See, the Joint on which each prior entry Law already filing. amount, after of plaintiff its to days Conclusions deposited) of (14) Stipulation") by indicate the dates by of Rules are hereby ORDERED payments from TAT Law. plaintiff's Appellate all parties of (the accepted this of Breach of the Agreement Court Findings royalty the Federal an after plaintiff Defendants' for stipulation of the by have Rules 59 days that findings filed shall Federal required Conclusions proposed above, other (14) ORDERS motion plaintiff's motion for attorney's 1. and Rule the date its and fourteen the and extending than Fact fees of timely motion Procedure, to as rates, of 58(e), attorney's of later Findings Rule conclusions as no market e.g., Tr. Stipulation royalty payment was plaintiff's counsel, the amount of each such payment, such payment related, and, to calendar years, multiple in the calendar year the a case of to which each a payment breakdown of that which related portions of such payment related to which calendar years. On the basis conclusions of law after of of this for entry attorney's against the TAT total Stipulation, under the $6,000 as to herein, the Final enter judgment prior royalty minimum This total period from on in amount January and DIRECTED, request plaintiff $20,250.00, listed from less in the plaintiff amount Joint consists and 2008, 2009 and to TAT 2007, 1, is of of principal 2006, fact plaintiff's favor due of Clerk payments royalties the calendar years the Order principal Agreement. for findings total of for each for $2,250 Court's the amount Court's contained fees, in the through of as well May 14, 2009. The annual Court also rate of six percent total principal ¢ From awards amount January plaintiff (6%) on prejudgment the interest following portions at of an the from the following dates: 25, 2007 as to $6,000.00 of the total principal amount less the total amount of any prior royalty payments listed in the Joint Stipulation that were paid by TAT during 2006; ¢ From January principal payments 25, amount listed TAT during 2008 less in the as to total the Joint 2 007; 73 $6,000.00 amount of Stipulation of the total any prior royalty that were paid by ¢ From January 25, 2009 as to $6,000.00 of the total principal amount less the total amount of any prior royalty payments listed in the Joint Stipulation that were paid by TAT during 2008; ¢ From May 14, amount less listed in and 2009 the as to total the $2,250.00 amount Joint of of any Stipulation the total prior that principal royalty payments were paid by TAT during 2009. For purposes of calculating royalty payments by TAT and December accepted 31, relating to (i.e., from 2009 each deducted the further listed amount U.S.C. § plaintiff be year from the postjudgment and at Stipulation or deducted relating to, Joint in from reverse 2008, counsel after amounts chronological relating so on the interest prior were paid principal and interest the the any that plaintiff's $2,250.00 to interest, to 2009, on). The total rate order then Court principal provided by, 28 1961. 2. Defendants' On the conclusions DIRECTED, Knapp, the calendar first pursuant judgment shall $6,000.00 awards by in prejudgment basis of also in law after favor jointly $480,000.00 plaintiff's of and Infringement of Plaintiff's Copyrights of the Court's contained entry of herein, the and severally, in in statutory damages statutory damages in Court's plaintiff registered findings Final against the Clerk of 74 $20,000.00 is Order, principal designs. fact defendants for defendants' tattoo the amount the of and further to enter TAT and amount of infringement of This constitutes for each of the 24 registered Books defendants an from were drawn. annual rate of interest provided by, 28 U.S.C. percent Court conclusions also of in copyright infringement, suffered inadequate to hardships" weighs plaintiff, and are by interest May 14, the at that the interest to such or 7.01 findings well of 2009 injury," of an public interest injunction." hereby ORDERS PERMANENTLY tattoo otherwise designs distributing, by, without copying, deriving any artwork or product from that at and rate 547 remedy be from reproducing, "are of for disserved at TAT 391. and infringing registered plaintiff's limitation, that balance defendants from such designs. 75 "the U.S. designs, and explicit awarded would not that fact defendants' equitable ENJOINED violating TAT's hereby eBay, Court of Agreement, injury" damages favor as the the in copyrighted unregistered, as that for "the its irreparable that heavily hereby plaintiff's an compensate permanent Consequently, selling, from to herein, paragraph "has rights prejudgment and pursuant contained plaintiff Knapp to, infringed 1961. finds, law acknowledgments a awards (6%) pursuant § designs Permanent Injunction against Future Infringement The by tattoo The Court six postjudgment C. which or exclusive manufacturing, or otherwise D. The entry Disposition of Court of also this ORDERS Court's attorney's fees, infringing materials indirect any ownership the Court within the made form of under in either that defendants' contingent such possession account conveyance, for, of in any such accounted during period for from certification. Any connection this in notice matter to all any or or through filed 76 operate to materials or shall also transfer, gift, manner other 2009 1746, any other January § which notice sale, in potential, plaintiff's shall file with U.S.C. over appeal of defendant declaration, infringing materials, defendants' 1, 28 or contingent unsworn Such to direct or future, disposal, August or control, detail, delivery accurately with included infringing all such delivery a notice, current, in counsel further ORDERED to interest. destruction, disposition the any for any potential, pursuant or which after motion defendants' affidavit delivery days plaintiff's over after perjury ownership explicitly included of (30) plaintiff's in or are days sworn possessed defendant nature future, (7) a penalty certifying to Defendants seven thirty on control, current, interest. Order any or within deliver defendants possession possesses that, Final of Infringing Materials than counsel 2011 the by of those and/or accounting, date of such defendants stay in defendants' obligations of delivery pending resolution of E. Court matter shall purposes on Pursuant Court of Local a the June admitted Federal Clerk IS enforcing is and all the section parties obligations including without Personal in imposed limitation Identifiers unopposed motion defendants' status conference, the deadline for the evidence at trial into Rules of therein, to Law to parties and to review redact in accordance Procedure Civil to July 1, DIRECTED telephonic by 2011 contained of over 17, extends and Conclusions IT this imposed upon defendants. timely Civil Rule 7{C), The Fact to identifiers the of Redaction of hereby exhibits personal 5.2 during jurisdiction the parties, injunction F. all retain for the permanent the under such appeal. the Court herein by counsel certification Jurisdiction Retained for Enforcement Purposes This this and and with this any Rule Court's 2011. send a counsel copy for of these Findings of the parties. SO ORDERED. /s/ Mark S. United States June 28, Norfolk, 2011 Virginia 77 Davis District Judge

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