Page 107 - Intellectual Property Disputes

that because it could not determine how many individuals subscribed because of the artist’s work, any
claim for indirect profit was speculative and unsupported. fn 6

In Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., the Ninth Circuit Court of Appeals addressed the
issue of indirect profits of the infringer. fn 7 In that case, the court determined that the MGM Grand Hotel
had infringed on a music copyright belonging to Frank Music. The music was part of MGM’s musical
revue entitled, "Hallelujah Hollywood," and was heavily promoted to the public as a lead attraction of
MGM. After calculating actual damages for infringement, the court determined that the copyright owner
was entitled to indirect profits, and the court awarded the copyright owner a portion of MGM’s total
profits. However, before indirect profits may be awarded, the court "must conduct a threshold inquiry
into whether there is a legally sufficient causal link between the infringement and the subsequent
indirect profits." fn 8

In Amy Lee Sullivan v. Flora, Inc. the district court in the Western District of Wisconsin noted that
Seventh Circuit cases require "a copyright infringement plaintiff to put forth evidence of causation in the
case of indirect profits beyond simply limiting the revenue basis to the indirect sales implicated by
infringing advertising... Absent some evidence tying defendant’s revenues from the promoted product
lines to the infringing videos, much less to plaintiff’s copyrighted illustrations in those videos, a
reasonable jury had no basis to award damages based on defendant’s profits. Accordingly, the court
excluded that damages theory." fn 9

Revenues to be included in an unjust enrichment measure of damages may need to be apportioned to
accurately reflect the value of the infringed intellectual property as opposed to non-infringing features. If
more than simply the copyrighted or trademarked work is included in revenues, an apportionment of the
resulting profit to the infringement may be necessary, and it is typically the defendant’s burden to prove
such an apportionment. (See the section "Apportionment.")

Costs in Unjust Enrichment Claims

As indicated previously, profits from unjust enrichment, as well as for lost profits, are generally
calculated as sales from the units in question, less costs associated with producing and selling the
additional units. In both lost profits and unjust enrichment claims, the burden to prove the affected
revenue stream falls on the plaintiff. The burden to prove costs, however, falls on the defendant in unjust
enrichment claims, although it remains with the plaintiff in claims of lost profits. To prove unjust
enrichment, once the fact of damages has been proven, the plaintiff bears only the responsibility to prove
the quantum of sales, although the plaintiff may rebut the testimony of the defendant on cost issues.

In Johnson v. Jones, the court determined that once the plaintiff in a copyright infringement suit had met
the burden of establishing infringer’s gross revenue, the burden then shifted to the infringer to prove
expenses to deduct from that amount. In the absence of such proof, the plaintiff was entitled to recover
the infringer’s gross revenue from the infringement. It was not enough that the infringer testified about

fn 6 Id.

fn 7 Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 886 F.2d 1545, 1551 (9th Cir. 1989).

fn 8 Mackie, 296 F.3d 909.

fn 9 Amy Lee Sullivan v. Flora, Inc., 2017 WL 1487624 (W.D. Wisconsin 2017).

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