886 F.2d 1545
58 USLW 2242, 1989 Copr.L.Dec. P 26,475,
12 U.S.P.Q.2d 1412

FRANK MUSIC CORP.; Robert Wright; George Forrest; Anne Lederer as Executrix of the Last Will of Charles Lederer; Luther Davis; Edwin Lester, Plaintiffs-Appellants-Cross-Appellees,
v.
METRO-GOLDWYN-MAYER INC., et al., Defendants-Appellees-Cross-Appellants.

Nos. 87-6257, 87-6321.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted May 4, 1989.
Decided Sept. 27, 1989.

[1547] David H. Kornblum, Los Angeles, Cal., for plaintiffs-appellants-cross-appellees.

Charles M. Stern, Wyman, Bautzer, Kuchel & Silbert, Los Angeles, Cal., for defendants-appellees-cross-appellants.

Appeal from the United States District Court for the Central District of California.

Before FLETCHER, BOOCHEVER and REINHARDT, Circuit Judges.

FLETCHER, Circuit Judge:

In Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505 (9th Cir. 1985) (Frank Music I), we affirmed the district court's holding that defendants infringed plaintiffs' copyright in the dramatico-musical play Kismet, but remanded for reconsideration of the amount of profits attributable to the infringement and for consideration of whether defendants Donn Arden and Metro-Goldwyn-Mayer, Inc. (MGM, Inc.) should be liable in addition to MGM Grand Hotel, Inc. (MGM Grand). On remand, the district court awarded plaintiffs $343,724 against MGM Grand, dismissed the action against MGM, Inc. and Arden, and awarded plaintiffs $115,000 in attorney's fees. Plaintiffs appeal and defendants cross-appeal. We affirm in part, reverse in part, and remand.

I. FACTS

The facts are fully set out in Frank Music I, 772 F.2d at 509-11. We reiterate only selectively. Plaintiffs are the copyright owners and authors of Kismet, a dramatico-musical work. MGM, Inc. under license produced a musical motion picture version of Kismet. Beginning April 26, 1974, MGM Grand presented a musical revue entitled Hallelujah Hollywood in the [1548] hotel's Ziegfeld Theatre. Hallelujah Hollywood was largely created by an employee of MGM Grand, Donn Arden,^[1] who also staged, produced and directed the show. The show comprised ten acts, four billed as "tributes" to MGM motion pictures. Act IV was entitled "Kismet", and was a tribute to the MGM movie of that name. It was based almost entirely on music from Kismet, and used characters and settings from that musical. Act IV "Kismet" was performed approximately 1700 times, until July 16, 1976, when, under pressure resulting from this litigation, MGM Grand substituted a new Act IV.

Plaintiffs filed suit, alleging copyright infringement, unfair competition, and breach of contract. In Frank Music I, we affirmed the district court's conclusion that the use of Kismet in Hallelujah Hollywood was beyond the scope of MGM Grand's ASCAP license and infringed plaintiffs' copyright. In this appeal, the parties focus on the adequacy of damages and attorney's fees.

II. DISCUSSION

A. Apportionment of Profits

1. Direct Profits

In Frank Music I, 772 F.2d at 514, we upheld the district court's conclusion that the plaintiffs failed to prove actual damages arising from the infringement, but vacated the district court's award of $22,000 in apportioned profits as "grossly inadequate," id. at 518, and remanded to the district court for reconsideration.

On remand, the district court calculated MGM Grand's net profit from Hallelujah Hollywood at $6,131,606, by deducting from its gross revenues the direct costs MGM Grand proved it had incurred. Neither party challenges this calculation.

In apportioning the profits between Act IV and the other acts in the show, the district court made the following finding:

Act IV of "Hallelujah Hollywood" was one of ten acts, approximately a ten minute segment of a 100 minute revue. On this basis, the Court concludes that ten percent of the profits of "Hallelujah Hollywood" are attributable to Act IV.

Memorandum of Decision and Order (Decision II) at 4.

Plaintiffs assert that this finding is in error in several respects. First, they point out that on Saturdays Hallelujah Hollywood contained only eight acts, not ten, and that on Saturdays the show ran only 75 minutes, not 100. Frank Music I, 772 F.2d at 510. Second, Act IV was approximately eleven and a half minutes long, not ten. Id. Because the show was performed three times on Saturdays, and twice a night on the other evenings of the week, id., the district court substantially underestimated the running time of Act IV in relation to the rest of the show.^[2]

If the district court relied exclusively on a quantitative comparison and failed to consider the relative quality or drawing power of the show's various component parts, it erred. See ABKCO Music, Inc. v. Harrisongs Music, Ltd., 508 F.Supp. 798, 800 (S.D.N.Y. 1981), modified on other grounds, 722 F.2d 988 (2d Cir. 1983); Lottie Joplin Thomas Trust v. Crown Publishers, 456 F.Supp. 531, 538 (S.D.N.Y. 1977), aff'd, 592 F.2d 651 (2d Cir. 1978). However, the district court's apportionment based on comparative durations would be appropriate if the district court implicitly concluded that all the acts of the show were of roughly equal value. Cf. Frank Music I, 772 F.2d at 518 ("Each element contributed significantly to the show's success, but no one element was the sole or overriding reason for that success.") While a more precise statement of the district court's reasons [1549] would have been desirable, we find support in the record for the conclusion that all the acts in the show were of substantially equal value.

The district court went on to apportion the parties' relative contributions to Act IV itself:

The infringing musical material was only one of several elements contributing to the segment. A portion of the profits attributable to Act IV must be allocated to other elements, including the creative talent of the producer and director, the talents of performers, composers, choreographers, costume designers and others who participated in creating Act IV, and the attraction of the unique Ziegfeld Theatre with its elaborate stage effects. . . . While no precise mathematical formula can be applied, the Court concludes that . . . a fair approximation of the value of the infringing work to Act IV is twenty-five percent.

Decision II at 4-5.

The district court was correct in probing into the parties' relative contributions to Act IV. Where a defendant alters infringing material to suit its own unique purposes, those alterations and the creativity behind them should be taken into account in apportioning the profits of the infringing work. Cf. Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45, 49-51 (2d Cir. 1939), aff'd, 309 U.S. 390, 60 S.Ct. 681, 84 L.Ed. 825 (1940); see also Comment: An Improved Framework for Music Plagiarism Litigation, 76 Calif.L.Rev. 421, 454-55 (1988). However, the district court appears to have ignored its finding in its previous decision that defendants used not only the plaintiffs' music, but also their lyrics, characters, settings, and costume designs, recreating to a substantial extent the look and sound of the licensed movie version of Kismet. Memorandum of Decision and Order (Decision I) at 10-11.

While it was not inappropriate to consider the creativity of producers, performers and others involved in staging and adapting excerpts from Kismet for use in Hallelujah Hollywood, the district court erred in weighing these contributions so heavily. In performing the apportionment, the benefit of the doubt must always be given to the plaintiff, not the defendant. Sheldon, 106 F.2d at 51. And while the apportionment may take into account the role of uncopyrightable elements of a work in generating that work's profits, see Sheldon, 106 F.2d at 50-51 (considering role of movie's actors, scenery, producers and directors); cf. McCulloch v. Albert E. Price, Inc., 823 F.2d 316, 320 (9th Cir. 1987) (substantial similarity analysis can include examination of uncopyrightable elements), the apportionment should not place too high a value on the defendants' staging of the work, at the expense of undervaluing the plaintiffs' more substantive creative contributions. See Comment: An Improved Framework, supra, at 454-56. Production contributions involving expensive costumes and lavish sets will largely be taken into account when deducting the defendants' costs. Indeed, defendants concede that had they produced Kismet in toto, it would have been proper for the district court to award 100% of their profits, despite their own creative efforts in staging such a production.

The district court found that defendants' staging of the Kismet excerpts was highly significant to Act IV's success. While we believe that a defendant's efforts in staging an infringing production will generally not support more than a de minimis deduction from the plaintiff's share of the profits, we cannot say the district court's conclusion that the defendants' contributions were substantial in this case is clearly erroneous. We recognize that there will be shows in which the attraction of the costumes, scenery or performers outweighs the attraction of the music or dialogue. On the other hand, a producer's ability to stage a lavish presentation, or a performer's ability to fill a hall from the drawing power of her name alone, is not a license to use freely the copyrighted works of others.

We conclude that apportioning 75% of Act IV to the defendants grossly undervalues the importance of the plaintiffs' contributions. Act IV was essentially Kismet, [1550] with contributions by the defendants; it was not essentially a new work incidentally plagiarizing elements of Kismet. A fairer apportionment, giving due regard to the district court's findings, attributes 75% of Act IV to elements taken from the plaintiffs and 25% to the defendants' contributions.^[3]

2. Indirect Profits

In Frank Music I, we held that the plaintiffs were entitled to recover, in addition to direct profits, a proportion of ascertainable indirect profits from defendants' hotel and gaming operations attributable to the promotional value of Hallelujah Hollywood. The district court considered the relative contributions of Hallelujah Hollywood and other factors contributing to the hotel's profits, including the hotel's guest accommodations, restaurants, cocktail lounges, star entertainment in the "Celebrity" room, the movie theater, Jai Alai, the casino itself, convention and banquet facilities, tennis courts, swimming pools, gym and sauna, and also the role of advertising and general promotional activities in bringing customers to the hotel. The district court concluded that two percent of MGM Grand's indirect profit was attributable to Hallelujah Hollywood. In light of the general promotion and the wide variety of attractions available at MGM Grand, this conclusion is not clearly erroneous.^[4]

B. Prejudgment Interest

The district court, without comment, declined to award prejudgment interest. The availability of prejudgment interest under the Copyright Act of 1909 is an issue of first impression in this circuit.

The 1909 Act does not mention prejudgment interest. Nevertheless, courts may allow prejudgment interest even though the governing statute is silent. Rodgers v. United States, 332 U.S. 371, 373, 68 S.Ct. 5, 7, 92 L.Ed. 3 (1947). "[A] persuasive consideration . . . is the relative equities between the beneficiaries of the obligation and those upon whom it has been imposed." Id. The goal of compensating the injured party fairly for the loss caused by the defendant's breach of the statutory obligation should be kept in mind. Id.; see also Loeffler v. Frank, 486 U.S. 549, 108 S.Ct. 1965, 1970-71, 100 L.Ed.2d 549 (1988). Prejudgment interest compensates the injured party for the loss of the use of money he would otherwise have had. General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-56, 103 S.Ct. 2058, 2062-63, 76 L.Ed.2d 211 (1983); Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282, 1299-1300 (9th Cir. 1984).

Defendants argue that Congress did not intend for prejudgment interest to be available under the 1909 Act. They ask us to infer this from the inclusion of prejudgment interest in the Patent Act, 35 U.S.C. Sec. 284 (1982),^[5] and the omission of reference to prejudgment interest in either the 1909 Act or the Copyright Act of 1976. Because the Patent and Copyright Acts are similar statutes with similar purposes, defendants argue that differences between the two Acts with respect to prejudgment interest are intentional. Cf. Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 435, 439, 104 S.Ct. 774, 787, 78 L.Ed.2d 574 (1984) (patent law appropriate source of guidance for novel copyright issues, but noting that doctrine of contributory infringement [1551] applies in copyright cases, where the statute is silent, as well as in patent cases, where the statute specifically refers to contributory infringers); Harris v. Emus Records Corp., 734 F.2d 1329, 1333 (9th Cir. 1984).

Examination of the history of prejudgment interest in the patent context suggests this argument is flawed. Before Congress enacted 35 U.S.C. Sec. 284, prejudgment interest was generally available in patent infringement cases from the date damages were liquidated, and in exceptional cases from the date of infringement. See, e.g., Duplate Corp. v. Triplex Safety Glass Co., 298 U.S. 448, 459, 56 S.Ct. 792, 797, 80 L.Ed. 1274 (1936); Tilghman v. Proctor, 125 U.S. 136, 160, 8 S.Ct. 894, 906, 31 L.Ed. 664 (1888). Such a remedy was available despite the fact that the patent laws then in effect made no mention of prejudgment interest.^[6] Indeed, the wording of the relevant patent statute was similar to that of Sec. 101(b) of the 1909 Copyright Act.^[7]

Thus, interpreting the 1909 Act in light of patent law doctrine existing at the time of its enactment and during much of its effective period, we cannot conclude that Congress intended from its silence that prejudgment interest would not be available under the 1909 Act.^[8] Just as courts awarded prejudgment interest in order to provide adequate compensation to patent holders before the enactment of 35 U.S.C. Sec. 284, this same remedy should be available to copyright owners for the same purpose. See also Fishman v. Estate of Wirtz, 807 F.2d 520, 584 (7th Cir. 1986) ("The denial of prejudgment interest systematically undercompensates victims and underdeters putative offenders.") (Easterbrook, dissenting).

We therefore hold that prejudgment interest is an available remedy under the 1909 Act. Whether the circumstances of this case warrant the remedy is a separate question. The common-law rule during much of the effective period of the 1909 Act awarded prejudgment interest only on [1552] damages that were liquidated or readily ascertainable by mathematical computations and did not rely on opinion or discretion. See, e.g., General Motors, 461 U.S. at 651-52 & n. 5, 103 S.Ct. at 2060-61 & n. 2 (discussing history of common law rule). But even where damages were not liquidated or readily ascertainable, courts had the power to award prejudgment interest on unliquidated damages when necessary to compensate the plaintiff fairly. Miller v. Robertson, 266 U.S. 243, 258, 45 S.Ct. 73, 79, 69 L.Ed. 265 (1924).

Because the 1909 Act allows plaintiffs to recover only the greater of the defendant's profits or the plaintiff's actual damages, see Frank Music I, 772 F.2d at 512; Sid & Marty Krofft Television Productions, Inc. v. McDonald's Corp., 562 F.2d 1157, 1176 (9th Cir. 1977), an award of profits or damages under the 1909 Act will not necessarily be adequate to compensate a prevailing copyright owner.^[9] Accordingly, we conclude prejudgment interest ordinarily should be awarded.

Awarding prejudgment interest on the apportioned share of defendant's profits is consistent with the purposes underlying the profits remedy. Profits are awarded to the plaintiff not only to compensate for the plaintiff's injury, but also and primarily to prevent the defendant from being unjustly enriched by its infringing use of the plaintiff's property. See Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390, 399, 60 S.Ct. 681, 684, 84 L.Ed. 825 (1940); D. Dobbs, Handbook on the Law of Remedies 1 (1973). For the restitutionary purpose of this remedy to be served fully, the defendant generally should be required to turn over to the plaintiff not only the profits made from the use of his property, but also the interest on these profits, which can well exceed the profits themselves. See D. Dobbs, supra, at 169-70; Fishman, 807 F.2d at 583-84 (giving examples of the effect of compound interest to demonstrate how "the time value of money works in defendants' favor.") (Easterbrook, dissenting). Indeed, one way to view this interest is as another form of indirect profit accruing from the infringement, which should be turned over to the copyright owner along with other forms of indirect profit. It would be anomalous to hold that a plaintiff can recover, for example, profits derived from the promotional use of its copyrighted material, but not for the value of the use of the revenue generated by the infringement.^[10]

We accordingly remand to the district court to enter an award of prejudgment interest.^[11] The award should be based on the fifty-two week Treasury bill rate, unless the district court concludes that the equities demand a different rate. See In re Bloom, 875 F.2d 224, 228 (9th Cir. 1989); [1553] Columbia Brick Works, Inc. v. Royal Ins. Co., 768 F.2d 1066, 1071 (9th Cir. 1985).^[12]

C. Liability of MGM, Inc.

In Frank Music I, we remanded to the district court to determine whether MGM, Inc., MGM Grand's parent corporation, should be liable for the infringement. We held that "[a] parent corporation cannot be held liable for the infringing actions of its subsidiary unless there is a substantial and continuing connection between the two with respect to the infringing acts." Frank Music I, 772 F.2d at 519-20.

The district court found that plaintiffs failed to establish such a substantial and continuing connection. According to the district court, the only evidence of a connection between MGM, Inc. and MGM Grand was MGM Grand's use of MGM Inc.'s studio facilities for planning the production prior to the opening of MGM Grand. The district court also noted, as a fact it believed favorable to MGM, Inc., that MGM Grand paid rent for the facilities and bore all the costs associated with the production of Hallelujah Hollywood.

The district court apparently did not consider several other important pieces of evidence. During the time of the infringing performances, MGM Grand was wholly owned by MGM, Inc. [R.T. 456] MGM, Inc.'s legal counsel responded to inquiries about the use of Kismet in Hallelujah Hollywood. [R.T. 488] Donn Arden's office was at MGM, Inc. [R.T. 209], and he was selected for the job with MGM Grand by a representative of MGM, Inc. [R.T. 217]. In addition to drawing patrons to the hotel and casino, Hallelujah Hollywood had another purpose: to promote MGM, Inc. and its "Leo the Lion" symbol. [R.T. 228, 242] Only material that had been used in MGM, Inc. films was used in the tribute segments of the show. [R.T. 359-60] Arden actively consulted with personnel from MGM, Inc. in preparing the show. [R.T. 232] MGM, Inc. made its movie version of Kismet available to Arden and Marvin Laird, who viewed it in a production room at MGM, Inc. [R.T. 243, 380] Arden and Laird got clearances for the material they wanted to use in Hallelujah Hollywood, including a clearance to use Kismet, from MGM, Inc. [R.T. 269, 271, 394] Laird, who worked on the music to Act IV, used material and was assisted by employees from MGM Inc.'s music library. [R.T. 301, 386]

The district court clearly erred in not finding that MGM, Inc. and MGM Grand had a substantial and continuing relationship with respect to the infringing activities. See Peter Pan Fabrics, Inc. v. Acadia Co., 173 F.Supp. 292, 298-99 (S.D.N.Y. 1959) (substantial and continuing connection between defendant and company which actually sold infringing fabric where, inter alia, both had same president, defendant owned 70% of the seller's stock and defendant responded to notice of infringement). Therefore, we conclude that MGM, Inc. is jointly and severally liable for the judgment against MGM Grand.

Plaintiffs also argue that MGM, Inc. should be liable additionally for an award of its own profits or, in lieu of such an award, for statutory damages. We disagree. Our conclusion that MGM, Inc. had a substantial and continuing relationship with MGM Grand with respect to the infringement permits us to treat the two corporate entities as the same for purposes of imposing an award of profits. Nevertheless, the downstream corporate benefits to MGM, Inc. from the infringement are simply too attenuated and too speculative to support a further award from an apportionment of its corporate profits. The question of whether specific profits were made from an infringement is similar to that of proximate cause in the tort context: just as there comes a point beyond which effects cannot legally be attributed to an initial tortious action, so too there comes a point beyond which an infringer's profits, from its enterprises as a whole, cannot legally be attributed to a particular act of infringement. The profits of a hotel may well, as here, have a sufficient nexus with an infringing performance in the hotel's showroom to justify attributing some percentage [1554] of the hotel's profits to the infringement.^[13] The profits of MGM, Inc. from its own interests and activities other than the MGM Grand lack such a nexus. Although MGM, Inc. may have reaped some marginal benefit from the infringement, for example from a slight increase in movie revenue as a result of the advertising value of the MGM Grand, or from a rise in stock value attributable in part to the success of the hotel, the percentage of such profits attributable to the infringing material in Act IV of Hallelujah Hollywood is too speculative and the relationship between such profits and the infringement too attenuated to justify the award of additional damages based on any profits received by MGM, Inc.

Plaintiffs argue that, if MGM, Inc.'s profits from the infringement are too speculative, MGM, Inc. must be liable for an award of statutory damages. See Frank Music I, 772 F.2d at 520; Russell v. Price, 612 F.2d 1123, 1130 (9th Cir. 1979) (statutory damages mandatory if neither profits nor damages can be ascertained). This presents a question we declined to reach in Frank Music I: whether an award of statutory damages is mandatory against an infringer whose profits are not ascertainable when the profits of another infringer are ascertainable. See Frank Music I, 772 F.2d at 520 n. 12. Generally, if either profits or actual damages can be ascertained, an award of statutory damages is discretionary, although the latter type of damages should be awarded if profits or actual damages would be inadequate. Krofft, 562 F.2d at 1178.^[14]

Statutory damages are available in order to effectuate two purposes underlying the remedial provisions of the Copyright Act: to provide adequate compensation to the copyright holder and to deter infringement. Frank Music I, 772 F.2d at 520; F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 232-33, 73 S.Ct. 222, 225, 97 L.Ed. 276 (1952). Where, as here, no actual damages have been proved and both defendants have been held jointly and severally liable for the profits earned by the primary infringer, we conclude the court should exercise its discretion to award statutory damages in lieu of profits only if they would exceed the profits for which the defendants are jointly liable. In that case, both the defendants should be held jointly and severally liable for the award of statutory damages. See MCA, Inc. v. Wilson, 677 F.2d 180, 187-88 (2d Cir. 1981). Here we find the award of an aliquot share of MGM Grand's profits plus prejudgment interest adequately compensates plaintiffs for their injuries. Thus, statutory damages are not appropriate in the case of either defendant. The rule we follow serves the purpose of compensation because the plaintiffs are assured an adequate recovery, and it serves the purpose of deterrence because each defendant is jointly and severally liable for the award. An award of mandatory statutory damages against MGM, Inc. effectively would grant [1555] plaintiffs a windfall.^[15]

D. Liability of Donn Arden

In Frank Music I, we held that Donn Arden could not be held jointly and severally liable for MGM Grand's profits unless he acted as a partner or practically a partner of MGM Grand, rather than as an employee or independent contractor. 772 F.2d at 519. On remand the district court concluded that Arden was an employee of MGM Grand, and that his entire involvement with Hallelujah Hollywood fell within the course and scope of his employment. This finding was not clearly erroneous.

In Frank Music I, we opined that if the district court concluded that Arden was an employee, he nonetheless could be held severally liable for any profits he himself earned in connection with Hallelujah Hollywood. Id. Amounts paid to Arden in salary, however, were not to be considered as profits. Id. Although the district court on remand failed to make a factual finding as to whether Arden earned royalties or other profits from Hallelujah Hollywood, the record is clear that Arden received only a weekly salary, and did not receive royalties based on the revenues or profits from the show. See MCA, 677 F.2d at 186.

Plaintiffs argue that if Arden is not liable for an award of profits, he should be subject to an award of statutory damages. Although statutory damages may be awarded against a defendant who is not jointly liable with other defendants where there would otherwise be no award against that defendant, such an award is not mandatory. In this case it would be inappropriate, because the plaintiffs have been awarded ample compensation from MGM Grand and MGM, Inc., and deterrence would not be furthered by imposing statutory damages against Arden.

Arden consulted MGM, Inc. as to whether he could use material from Kismet. He was assured he could. There is no evidence Arden knew or should have known MGM, Inc.'s assurance was incorrect. Whether his use of this material was permissible depended on the content and interpretation of contracts and license agreements within the knowledge of MGM, Inc. and MGM Grand. The error of those defendants in concluding that MGM Grand's ASCAP license permitted the use they and Arden made of Kismet was not Arden's fault and Arden received no benefit from the infringement.^[16] In these circumstances, no purpose would be served by sanctioning Arden by an award of statutory damages against him. Cf. Bradbury v. Columbia Broadcasting System, Inc., 287 F.2d 478, 485 (9th Cir. 1961); compare Universal Pictures Co. v. Harold Lloyd Corp., 162 F.2d 354, 365 (9th Cir. 1947) (greater blameworthiness where employee contributed material to infringing movie, knowing it to have been used previously in plaintiff's copyrighted movie).^[17]

E. Pendent Claims

In addition to their copyright claims, plaintiffs asserted pendent state law claims against MGM, Inc. for breach of contract and breach of the implied covenant of good [1556] faith and fair dealing. The district court, in its first decision, dismissed these claims based on its factual finding that MGM, Inc. had little or no involvement in the production of Hallelujah Hollywood. In Frank Music I, we considered plaintiffs' due process challenge to this dismissal.^[18] We concluded that the district court did not err in dismissing the plaintiffs' contract claims. Frank Music I, 772 F.2d at 521. At the same time, we remanded to the district court to determine whether there was a substantial and continuing connection between MGM, Inc. and MGM Grand, as a component of the plaintiffs' copyright claims. Id. at 520.

Our determination that a substantial and continuing connection exists between MGM, Inc. and MGM Grand in regard to the copyright infringement requires us to conclude that the plaintiffs' pendent claims should not have been dismissed on the ground of a lack of such a relationship.^[19] However, we nonetheless affirm the dismissal of the pendent claims. Any recovery available to plaintiffs under their contract and breach of implied covenant theories would either duplicate the profits awarded on their copyright infringement claim or, if based on actual damages, be precluded by our affirmance in Frank Music I of the district court's finding that plaintiffs failed to prove actual damages from the infringement. Frank Music I, 772 F.2d at 513.

F. Attorney's Fees

Both parties appeal from the district court's award of attorney's fees to the plaintiffs. The plaintiffs argue that the district court awarded them too small a fee. The defendants argue that the plaintiffs are not entitled to a fee at all, and even if they are, the fee awarded was too high.

The decision to award fees, and the amount of fees awarded, are both reviewed for abuse of discretion.^[20] Moore v. Jas. H. Matthews & Co., 682 F.2d 830, 838 (9th Cir. 1982); Russell v. Price, 612 F.2d 1123, 1132 (9th Cir. 1979). Plaintiffs in copyright actions may be awarded attorney's fees simply by virtue of prevailing in the action: no other precondition need be met, although the fee awarded must be reasonable. McCulloch v. Albert E. Price, Inc., 823 F.2d 316, 323 (9th Cir. 1987) ("fees are generally awarded to a prevailing plaintiff"); Original Appalachian Artworks, Inc. v. Toy Loft, Inc., 684 F.2d 821, 832 (11th Cir. 1982); cf. Russell, 612 F.2d at 1132. The district court correctly noted that such awards to prevailing plaintiffs serve the purpose of encouraging private enforcement and deterring infringements. The district court did not abuse its discretion in determining that the plaintiffs are entitled to an award of attorney's fees.

We conclude, however, that the district court erred in failing to explain the basis for the amount awarded. Plaintiffs' counsel did not provide the district court with contemporaneous time records. His "reconstructed records" claim 1707.5 hours spent on this case from 1975 through mid-May 1980. This reconstruction is memorialized in an itemized list. In addition, he estimated that he expended another 3500 hours on the case from mid-May 1980 to the summer of 1987, listing the services performed during that period but not allocating his time among the various services. Counsel sought compensation at the rate of [1557] $250 per hour. Counsel's only explanation for his failure to keep track of seven years of his work was that he "got out of the habit of keeping time on the case."

The district court found that counsel expended much unwarranted time—as much as 300 hours of work where only a single hour was necessary. The court found the facts simple, but noted that complicated legal issues relating to damages were presented. As additional reasons for reducing the amount of the fees award, the court remarked that plaintiffs prevailed on only one of three claims, and that "both sides engendered numerous delays and petty discovery disputes, resulting in the inordinate length of time necessary to resolve this case." The court, "[i]n view of all these factors," concluded that a reasonable attorney's fee was $115,000. The district court made no specific findings either as to the number of hours reasonably spent or what was a reasonable hourly rate.

The trial court correctly refused to accept uncritically plaintiffs' counsel's representations concerning the time expended. Sealy, Inc. v. Easy Living, Inc., 743 F.2d 1378, 1385 (9th Cir. 1984). Plaintiffs bear the burden of showing the time spent and that it was reasonably necessary to the successful prosecution of their copyright claims. The lack of contemporaneous records does not justify an automatic reduction in the hours claimed, but such hours should be credited only if reasonable under the circumstances and supported by other evidence such as testimony or secondary documentation. Johnson v. University College, 706 F.2d 1205, 1207 (11th Cir. 1983). Time spent by plaintiffs' counsel responding to motions or actions by the defendants should not be excluded from the fee award. "[A]lthough [defendants] had the right to play hardball in contesting [plaintiffs'] claims, it is also appropriate that [defendants] bear the cost of their obstructionist strategy." Burgess v. Premier Corp., 727 F.2d 826, 841 (9th Cir. 1984). The district court blamed both sides for delays and petty discovery disputes, without differentiating those delays and disputes properly the fault of the plaintiffs from those properly the fault of the defendants. See Moore, 682 F.2d at 839 n. 10 (no reduction in fee where marginally useful work was necessary response to motions and defenses of the defendants).

In setting a reasonable attorney's fee, the district court should make specific findings of the rate and hours it has determined to be reasonable. Sealy, 743 F.2d at 1385. In Moore, the district court reduced counsels' fee request because, in the district court's opinion, they "were . . . inclined to produce a large volume of less than useful material." 682 F.2d at 837 (ellipsis in original). We reversed and remanded that award, holding that the district court abused its discretion by reducing counsels' claimed hours by half and allowing less than half their normal billing rate solely on the ground that some of their work was less than useful. Id. at 839. Plaintiffs' counsel's inadequate showing has invited substantial discounting of his fee. Still, he is entitled to a reasonable amount. Before determining the appropriate fee, the district court should make a more detailed analysis of the time records presented and a finding as to the reasonable hourly rate. See Sealy, 743 F.2d at 1385. We accordingly remand to the district court to reconsider its award and to substantiate whatever fee it awards. In its discretion, it can require the parties to supplement the record.

III. CONCLUSION

We vacate the damages award. We conclude that the proper apportionment entitles plaintiffs to 9% of the direct profits from Hallelujah Hollywood. We affirm the district court's finding as to the percentage of indirect profits attributable to Hallelujah Hollywood. We correct the award however for a mathematical error. Accordingly, plaintiffs are entitled to $551,844.54 as their share of direct profits and $699,963.10 as their share of indirect profits. We conclude that prejudgment interest should have been awarded, and remand for a calculation of the appropriate amount. We reverse the district court's finding that MGM, Inc. lacked a substantial and continuing [1558] connection with MGM Grand with respect to the infringement, and hold MGM, Inc. jointly and severally liable for the award of profits and prejudgment interest against MGM Grand. We affirm the district court's finding that Donn Arden is not jointly liable for the infringement, and decline to hold him severally liable for a separate award of profits or statutory damages. We affirm the district court's dismissal of plaintiffs' pendent claims. We vacate the award of attorney's fees so that the district court may make the necesary findings and recompute the amount to be awarded. We remand to the district court for further proceedings consistent with this opinion.

AFFIRMED in part, REVERSED in part, and REMANDED with directions.

[1] The basis for finding Donn Arden to be an employee of MGM Grand is discussed infra.

[2] There were twelve shows weekly which ran for 100 minutes, plus three on Saturdays which ran 75, totalling 1425 minutes per week. Act IV remained constant throughout the week, for a total of approximately 173 minutes. Accordingly, Act IV comprised 12% of the total weekly running time of Hallelujah Hollywood. Because the district court's findings differ from those previously found and affirmed in Frank Music I, we substitute 12% as the appropriate figure on which we base our subsequent calculations.

[3] Based on this allocation, plaintiffs are entitled to $551,844.54 as direct profits from the infringement.

[4] We do, however, need to correct an error in calculation or typography noted by the plaintiffs. In subtracting MGM Grand's direct profits of $6,131,606 from its total net profit of approximately $395,000,000, the district court arrived at the figure of $380,868,394. The correct figure is $388,868,394. Plaintiffs are entitled to 9% (75% of 12%) of 2% of this figure, or $699,963.10.

[5] 35 U.S.C. Sec. 284 provides:

Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.

This section has been interpreted to require that prejudgment interest "ordinarily be awarded where necessary to afford the plaintiff full compensation for the infringement." General Motors, 461 U.S. at 654, 103 S.Ct. at 2062.

[6] Rev.Stat. Sec. 4921, as amended, 42 Stat. 392, 35 U.S.C. Sec. 70, provided in pertinent part:

[T]he complainant shall be entitled to recover, in addition to the profits to be accounted for by the defendant, the damages the complainant has sustained thereby.

40 Stat. 704-05, 28 U.S.C. Sec. 1498 (1982), provides for a remedy in cases of patent or copyright infringement by the United States. Section 1498 allows the prevailing plaintiff "recovery of his reasonable and entire compensation," which the Supreme Court construed in Waite v. United States, 282 U.S. 508, 509, 51 S.Ct. 227, 75 L.Ed. 494 (1931), to include prejudgment interest on the profits the plaintiff would have made but for the infringement.

[7] 17 U.S.C. Sec. 101(b) (1970) provides, in pertinent part:

[The copyright proprietor shall be entitled to recover] such damages as the copyright proprietor may have suffered due to the infringement, as well as all the profits which the infringer shall have made from such infringement. . . .

[8] Nor do we suggest that Congress's continuing silence on this issue in the 1976 Act necessarily should be interpreted as an express disavowal of prejudgment interest. "Ordinarily, 'Congress' silence is just that—silence.'" Community for Creative Non-Violence v. Reid, — U.S. —, 109 S.Ct. 2166, 2177, 104 L.Ed.2d 811 (1989), quoting Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 686, 107 S.Ct. 1476, 1481, 94 L.Ed.2d 661 (1987).

Only one circuit has considered the availability of prejudgment interest in a copyright infringement action, and that case construed the 1976 Act, not the 1909 Act. In Robert R. Jones Assocs. v. Nino Homes, 858 F.2d 274, 282 (6th Cir. 1988), the Sixth Circuit vacated the district court's decision to award prejudgment interest under the 1976 Act. Finding that the district court's purpose in granting prejudgment interest was "to provide an effective sanction against copyright infringement," id., the court held that such a remedy was unnecessary to deter infringements in light of the availability under the 1976 Act of an award of profits and damages, as well as costs and attorneys' fees. Id.; see 17 U.S.C. Secs. 504(b), 505 (1982).

The Sixth Circuit's decision is of limited utility in determining whether prejudgment interest should be allowed under the 1909 Act. Deterrence of infringement is not the only purpose of the copyright law: Congress also intended the damages provisions of the 1909 Act to provide adequate compensation to the copyright holder. F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 232-33, 73 S.Ct. 222, 225, 97 L.Ed. 276 (1952).

The Second Circuit has affirmed an award under the 1909 Act which included prejudgment interest without discussing the issue. Lottie Joplin Thomas Trust v. Crown Publishers, 592 F.2d 651, 656 (2d Cir. 1978). It does not appear that the propriety of that award was argued to the appellate court.

[9] Prior to 1946, the patent law, like the 1976 Copyright Act, allowed recovery of both profits and damages. Rev.Stat. Sec. 4921, as amended, 42 Stat. 392, 35 U.S.C. Sec. 70; Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 505, 84 S.Ct. 1526, 1542, 12 L.Ed.2d 457 (1964). In 1946 Congress eliminated recovery of the patent infringer's profits, while at the same time making it easier for a patent holder to recover prejudgment interest, in order to ensure the patent holder full compensation. See H.R.Rep. No. 1587, 79th Cong., 2d Sess., 1-2 (1946); S.Rep. No. 1503, 79th Cong., 2d Sess., 2 (1946), U.S.Code Cong.Serv. 1946, p. 1386; 92 Cong.Rec. 9188 (1946); see also General Motors, 461 U.S. at 654-55, 103 S.Ct. at 2061-62. Although congressional intent in enacting the 1946 amendment to the patent law cannot shed light on congressional intent in enacting the 1909 Copyright Act, the provision of generally available prejudgment interest as a quid pro quo for the unavailability of profits in the patent context suggests the suitability of making prejudgment interest generally available under the 1909 Act where the copyright holder is limited to recovering only profits or damages, but not both. We do not, however, mean to suggest that this analogy should be dispositive in determining whether and when prejudgment interest should be awarded under the 1976 Copyright Act, issues on which we express no opinion.

[10] Prejudgment interest will, of course, be available on both the direct and indirect profits earned by MGM Grand, since both forms of profit are equally attributable to the infringement. Frank Music I, 772 F.2d at 517.

[11] Plaintiffs requested prejudgment interest only from the date of the last infringing performance. This is an acceptable date from which to start the running of interest. We need not decide in this case whether an award of prejudgment interest from some earlier point in time, such as the first infringement or date of notice, would be appropriate.

[12] This is the same rate on which postjudgment interest is based. See 28 U.S.C. Sec. 1961 (1982).

[13] Thus, the result would be the same in this case even if the showroom where Hallelujah Hollywood was performed were a distinct corporate entity from the hotel as a whole, provided there was the requisite relationship between the two with respect to the infringement. See generally Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 307 (2d Cir. 1963) ("When the right and ability to supervise coalesce with an obvious and direct financial interest in the exploitation of copyrighted materials—even in the absence of knowledge [of the infringement]—the purposes of copyright law may be best effectuated by the imposition of liability upon the beneficiary of that exploitation." [Citations omitted]. Similarly, had MGM, Inc. received a more definite, ascertainable financial benefit from the infringement, beyond the profits received by its hotel subsidiary, an award reaching those profits would be entirely proper. Joint liability for profits among interrelated corporate defendants serves the purpose of giving a successful copyright plaintiff its due reward without subjecting that award to the vagaries of corporate structures which, in the context of the particular infringement, should in fairness be ignored.

[14] If statutory damages are awarded, the amount must be in excess of the provable profits or actual damages. Krofft, 562 F.2d at 1178. This rule is a logical corollary of this circuit's rule that under the 1909 Act a plaintiff is limited to recovering only the greater of the infringer's profits or actual damages, but not both.

[15] Our rationale would not preclude an award of statutory damages against a defendant whose profits are not ascertainable and who is not jointly liable for an award of actual damages, statutory damages awarded in lieu of actual damages, or a co-defendant's profits. Because such a defendant has presumably received a benefit from the infringement distinct from that of its co-defendants, an award of statutory damages in lieu of profits would not necessarily give plaintiffs a windfall. At the same time, the absence of joint liability means that the severally liable defendant's conduct would not generally be deterred absent an award of damages.

[16] Because part of Arden's task was to create tributes to MGM movies, he acted well within the expectations of his employer in creating Act IV with heavy reliance on material from Kismet. His situation is thus different from that of a hypothetical employee who eases the demands of his job by plagiarizing the work of others, and therefore could be deemed to have received a benefit from the infringement even if his only financial benefit was in the form of salary.

[17] An award in the amount of profits actually earned by the employee would be appropriate in any event. Such profits, received through the use of the plaintiff's copyrighted material, should properly be turned over to the copyright owner.

[18] Although the district court had indicated at the outset of trial that it would not exercise pendent jurisdiction over these claims, it subsequently reversed course and permitted plaintiffs to make an evidentiary showing in respect to their pendent claims during the period of post-trial briefing. Plaintiffs did not make a proffer of additional evidence at that time.

[19] Defendants argue that the law of the case should preclude us from reexamining this question. Although issues previously decided by the same court in the same case will not ordinarily be subject to reexamination, considerations of fundamental fairness may in an appropriate case dictate an exception to this rule. Moore v. Jas. H. Matthews & Co., 682 F.2d 830, 833-34 (9th Cir. 1982); White v. Murtha, 377 F.2d 428, 431-32 (5th Cir. 1967).

[20] 17 U.S.C. Sec. 116 (1909 Act) provides: "the court may award to the prevailing party a reasonable attorney's fee as part of the costs." 17 U.S.C. Sec. 505 (1976 Act) provides for attorney's fees in virtually identical language.

94 F.3d 553
65 USLW 2164, 1996 Copr.L.Dec. P 27,557,
39 U.S.P.Q.2d 1933,
96 Cal. Daily Op. Serv. 6324,
96 Daily Journal D.A.R. 10,385

FANTASY, INC., Plaintiff-Appellant, Cross-Appellee,
v.
John C. FOGERTY, Defendant-Appellee, Cross-Appellant.

Nos. 95-16040, 95-16138.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted July 10, 1996.
Decided Aug. 26, 1996.

[555] Albert M. Bendich and Paul N. Halvonik, Berkeley, California, for plaintiff-appellant-cross-appellee.

Kenneth I. Sidle, Gipson, Hoffman & Pancione, Los Angeles, California, for defendant-appellee-cross-appellant.

Appeals from the United States District Court for the Northern District of California, Samuel Conti, District Judge, Presiding. D.C. No. CV-85-04929-SC.

Before: WOOD, Jr.,^[*] CANBY, and RYMER, Circuit Judges.

RYMER, Circuit Judge:

This appeal requires us to consider the scope of a district court's discretion to award a reasonable attorney's fee to a prevailing defendant in a copyright infringement action, and in particular, to decide whether a court must find some "culpability" on the part of the plaintiff in pursuing the suit before it can award a fee to a prevailing defendant whose victory on the merits furthers the purposes of the Copyright Act.

John Fogerty, former lead singer and songwriter for "Creedence Clearwater Revival," recognized as one of the greatest American rock and roll bands, successfully defended a copyright infringement action in which Fantasy, Inc., alleged that Fogerty had copied the music from one of his earlier songs which Fantasy now owned, changed the lyrics, and released it as a new song. After concluding that Fogerty's victory on the merits vindicated his right (and the right of others) to continue composing music in the distinctive "Swamp Rock" style and genre and therefore furthered the purposes of the Copyright Act, the district court awarded Fogerty $1,347,519.15 in attorney's fees. Fantasy appeals the award mainly on the ground that the court had no discretion to award Fogerty any attorney's fees inasmuch as its conduct in bringing and maintaining the lawsuit was "faultless."

We hold that, after Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994), an award of attorney's fees to a prevailing defendant that furthers the underlying purposes of the Copyright Act is reposed in the sound discretion of the district courts, and that such discretion is not cabined by a requirement of culpability on the part of the losing party. As we agree with the district court that Fogerty's victory on the merits furthered the purposes of the Copyright Act, and as we cannot say that the district court abused its discretion by awarding fees under the circumstances of this case, we affirm the award. We also uphold the district court's exercise of discretion not to award interest on Fogerty's fee award.

I

This action began July 26, 1985, when Fantasy sued Fogerty for copyright infringement, [556] alleging that Fogerty's song "The Old Man Down the Road" infringed the copyright on another of his songs, "Run Through the Jungle," which Fantasy owned. About three years later, on November 7, 1988, the jury disagreed, returning a verdict in favor of Fogerty.

Fogerty moved for a reasonable attorney's fee pursuant to 17 U.S.C. § 505.^[1] The district court denied the request on the ground that Fantasy's lawsuit was neither frivolous nor prosecuted in bad faith and our then-existing precedent precluded an award of fees in the absence of one or the other. See Cooling Systems & Flexibles, Inc. v. Stuart Radiator, Inc., 777 F.2d 485, 493 (9th Cir. 1985). We affirmed for the same reason, Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1533 (9th Cir. 1993) [Fogerty I], but the Supreme Court reversed and remanded in Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994) [Fogerty II]. We then remanded to the district court for further proceedings consistent with Fogerty II. Fantasy, Inc. v. Fogerty, 21 F.3d 354 (9th Cir. 1994) [Fogerty III].

On remand, the district court granted Fogerty's motion and, after reviewing extensive billing records, awarded $1,347,519.15. Its decision was based on several factors. First, Fogerty's vindication of his copyright in "The Old Man Down the Road" secured the public's access to an original work of authorship and paved the way for future original compositions — by Fogerty and others — in the same distinctive "Swamp Rock" style and genre. Thus, the district court reasoned, Fogerty's defense was the type of defense that furthers the purposes underlying the Copyright Act and therefore should be encouraged through a fee award. Further, the district court found that a fee award was appropriate to help restore to Fogerty some of the lost value of the copyright he was forced to defend. In addition, Fogerty was a defendant author and prevailed on the merits rather than on a technical defense, such as the statute of limitations, laches, or the copyright registration requirements. Finally, the benefit conferred by Fogerty's successful defense was not slight or insubstantial relative to the costs of litigation, nor would the fee award have too great a chilling effect or impose an inequitable burden on Fantasy, which was not an impecunious plaintiff.

Fogerty also sought interest to account for the lost use of the money paid to his lawyers over the years. While the district court awarded Fogerty almost all of what he asked for in fees, it declined to award interest. Fantasy timely appeals the fee award; Fogerty timely cross-appeals the refusal to award interest.

II

We review the district court's decision to award attorney's fees under the Copyright Act for an abuse of discretion, Maljack Productions v. GoodTimes Home Video Corp., 81 F.3d 881, 889 (9th Cir. 1996), but "any elements of legal analysis and statutory interpretation which figure in the district court's decision are reviewable de novo," Hall v. Bolger, 768 F.2d 1148, 1150 (9th Cir. 1985). "A district court's fee award does not constitute an abuse of discretion unless it is based on an inaccurate view of the law or a clearly erroneous finding of fact." Schwarz v. Secretary of Health & Human Serv., 73 F.3d 895, 900 (9th Cir. 1995) (internal quotations and citation omitted).

III

Fantasy contends that the district court had no discretion to award fees to Fogerty because Fantasy conducted a "good faith" and "faultless" lawsuit upon reasonable factual and legal grounds, or to put it somewhat differently, because Fantasy was "blameless." According to Fantasy, once the district court could find no fault in the way Fantasy conducted this case, that should have been the end of the matter. To award fees nevertheless, Fantasy contends, is incompatible with Fogerty II 's rule of evenhandedness, [557] as evenhandedness cannot be achieved by rewarding each side for qualities that adhere only to that side. To do so, as Fantasy contends the district court did here, is tantamount to the British Rule's automatic fee award to the victor — which Fogerty II rejected. Rather, it submits, the court's discretion may only be informed by factors having to do with culpability that are capable of being applied equally to prevailing plaintiffs and prevailing defendants.

Fogerty, on the other hand, contends that Fogerty II focuses a district court's discretion on whether the prevailing party has furthered the purposes of the Copyright Act in litigating the action to a successful conclusion; under that standard, the district court was well within its discretion in finding that his successful defense of this action served important copyright policies. He also argues that the evenhanded approach does not mean that only "neutral" factors may be considered in the exercise of the court's discretion since, contrary to Fantasy's view, the Court itself recognized that somewhat different policies of the Copyright Act may be furthered when either plaintiffs or defendants prevail. Fogerty points out that the Court specifically observed that his successful defense of this action "increased public exposure to a musical work that could, as a result, lead to further creative pieces," Fogerty II, 510 U.S. at 527, 114 S.Ct. at 1030, and maintains that the fact that this factor happened to tip in Fogerty's favor as a prevailing defendant in this case should not prevent it from being considered at all.

A

In Fogerty II, the Supreme Court granted certiorari to resolve a conflict among the circuits concerning "what standards should inform a court's decision to award attorney's fees to a prevailing defendant in a copyright infringement action. . . ." Id. at 519, 114 S.Ct. at 1026. The Court rejected both the "dual" standard that we had followed and applied in Fogerty I — whereby prevailing plaintiffs generally were awarded attorney's fees as a matter of course, while prevailing defendants had to show that the original lawsuit was frivolous or brought in bad faith — and the "British Rule" for which Fogerty argued — whereby the prevailing party (whether plaintiff or defendant) automatically receives fees. The Court instead adopted the "evenhanded" approach exemplified by the Third Circuit's opinion in Lieb v. Topstone Indus., Inc., 788 F.2d 151 (3d Cir. 1986).^[2] The Court held that

Prevailing plaintiffs and prevailing defendants are to be treated alike, but attorney's fees are to be awarded to prevailing parties only as a matter of the court's discretion. "There is no precise rule or formula for making these determinations," but instead equitable discretion should be exercised "in light of the considerations we have identified."

Fogerty II, 510 U.S. at 534, 114 S.Ct. at 1033 (quoting Hensley v. Eckerhart, 461 U.S. 424, 436-437, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983). Considerations discussed by the Court include the Copyright Act's primary objective, "to encourage the production of original literary, artistic, and musical expression for the good of the public," id. at 524, 114 S.Ct. at 1028; the fact that defendants as well as plaintiffs may hold copyrights, id. at 525-527, 114 S.Ct. at 1029, and "run the gamut from corporate behemoths to starving artists," id. at 524, 114 S.Ct. at 1028 (internal quotations and citation omitted); the need to encourage "defendants who seek to advance a variety of meritorious copyright defenses . . . to litigate them to the same extent that [558] plaintiffs are encouraged to litigate meritorious claims of infringement," id. at 527, 114 S.Ct. at 1030; and the fact that "a successful defense of a copyright infringement action may further the policies of the Copyright Act every bit as much as a successful prosecution of an infringement claim by the holder of a copyright," id.

The district court's decision was informed by these considerations, but Fantasy argues that it failed to appreciate the culpability underpinnings of the evenhanded rule and to apply the Lieb factors, which Fantasy contends are fault-based and were embraced by the Supreme Court in Fogerty II. However, neither Lieb nor the Court's discussion of the evenhanded rule and the Lieb factors in Fogerty II suggests that discretion to award fees to prevailing defendants is constrained by the plaintiff's culpability, or is limited to the specific factors identified in Lieb. As the Court's discussion in footnote 19 indicates, courts following the evenhanded standard have suggested several "nonexclusive factors to guide courts' discretion." Id. at 534 n. 19, 114 S.Ct. at 1033 n. 19. By way of example, footnote 19 refers to the factors listed by the Third Circuit in Lieb (frivolousness, motivation, objective unreasonableness, and considerations of compensation and deterrence),^[3] and says of them: "We agree that such factors may be used to guide courts' discretion, so long as such factors are faithful to the purposes of the Copyright Act and are applied to prevailing plaintiffs and defendants in an evenhanded manner." Id. Thus, while courts may take the Lieb factors into account, they are "nonexclusive." Even so, courts may not rely on the Lieb factors if they are not "faithful to the purposes of the Copyright Act." Id. Faithfulness to the purposes of the Copyright Act is, therefore, the pivotal criterion.

By the same token, a court's discretion may be influenced by the plaintiff's culpability in bringing or pursuing the action, but blameworthiness is not a prerequisite to awarding fees to a prevailing defendant. Fantasy made a similar argument in the Supreme Court, asserting that Congress must have intended attorney's fees for prevailing defendants only when the plaintiff's claim was frivolous or brought with a vexatious purpose because that was the clearly established law when § 505 was enacted. Id. at 527-529, 114 S.Ct. at 1030. The Court disagreed. In doing so, it singled out the statement in Breffort v. I Had a Ball Co., 271 F.Supp. 623 (S.D.N.Y. 1967), that "if an award is to be made at all [to a prevailing defendant], it represents a penalty imposed upon the plaintiff for institution of a baseless, frivolous, or unreasonable suit, or one instituted in bad faith," id. at 627, as "too narrow a view of the purposes of the Copyright Act because it fails to adequately consider the important role played by copyright defendants," Fogerty II, 510 U.S. at 532-533 n. 18, 114 S.Ct. at 1032 n. 18. In the face of this declaration, we cannot fault the district court for awarding fees to Fogerty as a prevailing defendant without first finding that Fantasy as the plaintiff was blameworthy.

Although we have not squarely addressed this question before, our post-Fogerty II opinions have recognized that a plaintiff's culpability is no longer required, that the Lieb factors may be considered but are not exclusive and need not all be met, and that attorney's fee awards to prevailing defendants are within the district court's discretion if they further the purposes of the Copyright Act and are evenhandedly applied. In Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435 (9th Cir. 1994), cert. denied, — U.S. —, 115 S.Ct. 1176, 130 L.Ed.2d 1129 (1995), for instance, we affirmed summary judgment for the defendants but remanded for the district court to reconsider its refusal to award attorney's fees in light of Fogerty II, explaining that "the district court now has greater discretion to award attorney's fees to prevailing defendants." Id. at 1448. We rejected the plaintiff's contention that "remand is unnecessary because the district court also made findings that require the denial of attorney's fees under the criteria set forth in Lieb," concluding that "[t]he district court clearly indicated that it might be inclined to award attorney's fees if a finding of bad faith or frivolousness were no longer required, and it invited [the defendants] to [559] renew their motions should the law in this circuit change." Id; see also Smith v. Jackson, 84 F.3d 1213, 1221 (9th Cir. 1996) (award upheld even though district court found no frivolousness but weighed many relevant considerations and didn't commit clear error of judgment). In Jackson v. Axton, 25 F.3d 884 (9th Cir. 1994), we affirmed a summary judgment for the defendant and remanded for reconsideration of the refusal to award fees under Fogerty II, explaining that under Fogerty II, courts deciding whether to grant attorney's fees to a prevailing party are to exercise "equitable discretion" in light of the considerations the Court identified, the degree of success obtained, the Lieb factors, and the purposes of the Copyright Act; and are to apply such factors in an evenhanded manner. Id. at 890. We have been careful to indicate that such factors are only "some" of the factors to consider, and that courts are not limited to considering them. See Maljack Productions, Inc., 81 F.3d at 889; Jackson, 25 F.3d at 890. And in Historical Research v. Cabral, 80 F.3d 377 (9th Cir. 1996), we concluded that, under Fogerty II, "'exceptional circumstances' are not a prerequisite to an award of attorneys fees; district courts may freely award fees, as long as they treat prevailing plaintiffs and prevailing defendants alike and seek to promote the Copyright Act's objectives." Id. at 378 (citations omitted); see also Magnuson v. Video Yesteryear, 85 F.3d 1424, 1432 (9th Cir. 1996) (reiterating importance of promoting the Copyright Act's objectives in considering attorney's fee awards).

We also have not previously been asked to decide whether the factors relied upon by a district court in awarding fees to a prevailing copyright defendant must be exactly capable of being applied to a prevailing plaintiff in order to satisfy the evenhanded rule. However, Fogerty II has already answered this question. Fantasy argues that the point of evenhandedness is to eliminate as the premise for any fee award any factor which cannot occur on both sides of the litigation equation. But we believe this asks more of "evenhandedness" than Fogerty II expects. Fantasy's argument is just another way of making two points rejected by the Supreme Court — that for a prevailing defendant to qualify for fees the plaintiff must be blameworthy because whenever a plaintiff prevails the defendant, by definition, is blameworthy; and that to award fees when the plaintiff isn't blameworthy chills enforcement of the copyright laws. Of the latter the Court states:

[T]he argument is flawed because it expresses a one-sided view of the purposes of the Copyright Act. While it is true that one of the goals of the Copyright Act is to discourage infringement, it is by no means the only goal of that Act. In the first place, it is by no means always the case that the plaintiff in an infringement action is the only holder of a copyright; often times, defendants hold copyrights too, as exemplified in the case at hand.

More importantly, the policies served by the Copyright Act are more complex, more measured, than simply maximizing the number of meritorious suits for copyright infringement.

Fogerty II, 510 U.S. at 526, 114 S.Ct. at 1029 (internal citation omitted). And of the former, the Court says, speaking directly to this case:

In the case before us, the successful defense of "The Old Man Down the Road" increased public exposure to a musical work that could, as a result, lead to further creative pieces. Thus a successful defense of a copyright infringement action may further the policies of the Copyright Act every bit as much as a successful prosecution of an infringement claim by the holder of a copyright.

Id. at 527, 114 S.Ct. at 1030. We cannot, therefore, say that the district court erred by relying on factors identified by the Supreme Court which in this case led it to conclude that Fogerty's defense sufficiently furthered the purposes of the Copyright Act to warrant an award of attorney's fees.

Nor do we agree with Fantasy that the district court's award of fees imported the British Rule through the back door. The British Rule requires an award of attorney's fees to every prevailing party, regardless of the circumstances; nothing is left for the court to decide except how much. However, [560] Fogerty II makes clear that attorney's fees are within the courts' discretion. The district court recognized this point and, as it concluded, the reasoning upon which it relied does not lead to compulsory fee awards to prevailing copyright defendants: copyright claims do not always involve defendant authors, let alone defendant authors accused of plagiarizing themselves, and do not always implicate the ultimate interests of copyright; copyright defendants do not always reach the merits, prevailing instead on technical defenses; defenses may be slight or insubstantial relative to the costs of litigation; the chilling effect of attorney's fees may be too great or impose an inequitable burden on an impecunious plaintiff; and each case will turn on its own particular facts and equities.

In sum, evenhandedness means that courts should begin their consideration of attorney's fees in a copyright action with an evenly balanced scale, without regard to whether the plaintiff or defendant prevails, and thereafter determine entitlement without weighting the scales in advance one way or the other. Courts may look to the nonexclusive Lieb factors as guides and may apply them so long as they are consistent with the purposes of the Copyright Act and are applied evenly to prevailing plaintiffs and defendants; a finding of bad faith, frivolous or vexatious conduct is no longer required; and awarding attorney's fees to a prevailing defendant is within the sound discretion of the district court informed by the policies of the Copyright Act.

Since the reasons given by the district court in this case are well-founded in the record and are in keeping with the purposes of the Copyright Act, the court acted within its discretion in awarding a reasonable attorney's fee to Fogerty.

B

Fantasy alternatively contends that the district court impermissibly based its award on a factual finding or assumption prohibited by Rule 49(a) of the Federal Rules of Civil Procedure^[4] — that the defense verdict was tantamount to a finding that similarities between "Run Through the Jungle" (Fogerty's earlier work which Fantasy now owns) and "Old Man Down the Road" were attributable to the uncopyrightable elements of the "Swamp Rock" genre and Fogerty's style of songwriting1because Fantasy had requested a special verdict which it says would have addressed this question had it not been turned down. For this proposition Fantasy relies on McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298 (5th Cir. 1993), which holds that "by requesting the submission of a special issue, a party prevents an adverse Rule 49(a) 'deemed finding' by the court." Id. at 306 (emphasis added).

We don't see how Rule 49(a) has anything to do with the district court's own observations in the exercise of its equitable discretion. Unlike the court in McDaniel, the court here declined to submit special verdicts, and Rule 49(a) isn't even implicated. Regardless, Fantasy's proffered explanation for a non-infringement verdict not based on the lack of substantial similarity — independent creation — still furthers the purposes of the Copyright Act and would in any event support the award of fees to Fogerty.

C

Fantasy also argues that never before has a faultless copyright litigant been [561] ordered to pay the fees of an opponent. It says that the amount awarded is three times larger than any other award Fantasy has seen, and that if (contrary to its view) Fogerty II changed the standard this dramatically for awarding fees to prevailing defendants, it came years after Fantasy filed its case against Fogerty and is thus inequitable as applied to it.

If Fantasy intends by this argument to challenge the court's decision to award any attorney's fees that are not fault-based, we reject it for the reasons we have already explained. If, on the other hand, Fantasy seeks to attack only the amount of fees awarded, we also reject it but for different reasons. Because Fantasy does not identify any specific hours expended or hourly rates that are unreasonable, we have no basis for altering the amount awarded. Regardless, Fantasy's comparisons to fee awards in other cases are largely irrelevant, and certainly not determinative, inasmuch as the reasonableness of a particular fee award depends on a case-by-case analysis. Finally, that the standard for awarding fees changed after Fantasy filed its suit is a matter left to the district court's discretion and, as evidenced by Fogerty II and our post-Fogerty II remands, does not preclude an award of fees.

IV

On cross-appeal, Fogerty argues that the district court erred by improperly concluding that it did not have authority to award interest on his fees. However, as we read its order, the court recognized that it could award interest, but after surveying reported decisions, concluded that it isn't the normal practice to do so. On that basis, the court chose not to award interest under the circumstances of this case. This is consistent with the court's discretion and we will not disturb it. Cf. Burgess v. Premier Corp., 727 F.2d 826 (9th Cir. 1984) (no abuse of discretion in awarding fees based on current rather than historical hourly rates).

V

Fogerty requests attorney's fees for this appeal pursuant to 17 U.S.C. § 505 and FRAP 38. While we see no basis for awarding attorney's fees under FRAP 38, we conclude that fees are warranted under § 505 inasmuch as it served the purposes of the Copyright Act for Fogerty to defend an appeal so that the district court's fee award would not be taken away from him. We therefore award Fogerty the attorney's fees he incurred in defending this appeal and we remand to the district court for calculation of the amount.

AFFIRMED AND REMANDED.

[*] Hon. Harlington Wood, Jr., Senior Circuit Judge for the Seventh Circuit Court of Appeals, sitting by designation.

[1] Section 505 provides in full:

In any civil action under [the Copyright Act], the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs.

[2] In Lieb, the defendant won on summary judgment and requested attorney's fees, contending that the copyright infringement claim was filed in bad faith, was frivolous, and should not have been brought after reasonable investigation. The district court denied the request without discussion. The Third Circuit remanded for a statement of reasons, but in doing so explained that "we do not require bad faith, nor do we mandate an allowance of fees as a concomitant of prevailing in every case, but we do favor an evenhanded approach." Id. at 156. The court went on to identify a number of factors which should play a part in the district courts' discretion, including "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence," but expressly declined to limit the factors to those mentioned. Id.

[3] See note 2, supra.

[4] Rule 49(a) provides in full:

(a) Special Verdicts. The court may require a jury to return only a special verdict in the form of a special written finding upon each issue of fact. In that event the court may submit to the jury written questions susceptible of categorical or other brief answer or may submit written forms of the several special findings which might properly be made under the pleadings and evidence; or it may use such other method of submitting the issues and requiring the written findings thereon as it deems most appropriate. The court shall give to the jury such explanation and instruction concerning the matter thus submitted as may be necessary to enable the jury to make its findings upon each issue. If in so doing the court omits any issue of fact raised by the pleadings or by the evidence, each party waives the right to a trial by jury of the issue so omitted unless before the jury retires the party demands its submission to the jury. As to an issue omitted without such demand the court may make a finding; or, if it fails to do so, it shall be deemed to have made a finding in accord with the judgment on the special verdict.

Fed.R.Civ.Proc. 49(a) (emphasis added).

[70] Marcia Beth Paul, Davis Wright Tremaine LLP, New York, NY, for Plaintiffs-Appellees.

Edward H. Rosenthal (Maura J. Wogan, Jessie F. Beeber, Cameron A. Myler, Marisa Sarig, on the brief), Frankfurt Kurnit Klein & Selz P.C., New York, NY, for Defendants-Appellants.

David E. Kendall, Thomas G. Hentoff, Kannon K. Shanmugam, Hannah M. Stott-Bumsted, Scott K. Dasovich, Williams & Connolly LLP, Washington, DC, for Amicus Curiae Motion Picture Association of America, Inc. in support of Plaintiffs-Appellees.

Anthony T. Falzone, Julie A. Ahrens, Sarah H. Pearson, Stanford Law School, Center for Internet & Society, Stanford, CA; Rebecca Tushnet, Georgetown University Law Center, Washington, DC; Jennifer M. Urban, Samuelson Law, Technology & Public Policy Clinic, University of California, Berkeley, School of Law, Berkeley, CA, for Amici Curiae American Library Association, Association of Research Libraries, Association of College and Research Libraries, The Organization for Transformative Works and the Right to Write Fund in support of Defendants-Appellants.

George Freeman, Itai Maytal, The New York Times Company, Legal Department, New York, NY, (Barbara W. Wall, Gannett Co., Inc., McLean, VA; Karen Flax, Tribune Company, Chicago, IL, of counsel), for Amici Curiae The New York Times Company, Gannett Co., Inc., and Tribune Company in support of Defendants-Appellants.

Deepak Gupta, Gregory A. Beck, Public Citizen Litigation Group, Washington, DC; Dan Hunter, New York Law School, New York, NY, for Amicus Curiae Public Citizen, Inc.

Before: CALABRESI, CABRANES, HALL, Circuit Judges.

CALABRESI, Circuit Judge:

Defendants-Appellants Fredrik Colting, Windupbird Publishing Ltd., Nicotext A.B., and ABP, Inc. appeal from an order of the United States District Court for the Southern District of New York (Deborah A. Batts, Judge) granting Plaintiff-Appellee J.D. Salinger's^[1] motion for a preliminary injunction. The District Court's judgment is VACATED and REMANDED.

Salinger published The Catcher in the Rye (hereinafter “Catcher”) in 1951. Catcher is a coming-of-age story about a disaffected sixteen-year-old boy, Holden Caulfield, who after being expelled from [71] prep school wanders around New York City for several days before returning home. The story is told from Holden's perspective and in his “own strange, wonderful, language.” Nash Burger, Books of the Times, N.Y. Times, July 16, 1951. Holden's adventures highlight the contrast between his cynical portrait of a world full of “phonies” and “crooks” and his love of family, particularly his younger sister Phoebe and his deceased younger brother Allie, along with his developing romantic interest in a childhood friend, Jane Gallagher. While his affection for these individuals pushes him throughout the novel toward human contact, his disillusionment with humanity inclines him toward removing himself from society and living out his days as a recluse. He ultimately abandons his decision to live as recluse when Phoebe insists on accompanying him on his self-imposed exile.

Catcher was an instant success. It was on the New York Times best-seller list for over seven months and sold more than one million copies in its first ten years. Polly Morrice, Descended from Salinger, N.Y. Times, March 23, 2008. To date it has sold over 35 million copies, Westberg Aff. ¶ 2, influenced dozens of literary works, and been the subject of “literally reams of criticism and comment,” Appellees' Br. 5. Literary critic Louis Menand has identified Catcher “rewrites” as a “literary genre all its own.”^[2] Holden at Fifty: “The Catcher in the Rye” and What It Spawned, The New Yorker, Oct. 1, 2001. The Holden character in particular has become a cultural icon of “adolescent alienation and rebellion,” Appellants' Br. 7, a “moral genius” “who refuses to be socialized.” Menand, Holden at Fifty, supra.

Inseparable from the Catcher mystique is the lifestyle of its author, Salinger.^[3] Shortly after publishing Catcher, Salinger did what Holden did not do: he removed himself from society. Salinger has not published since 1965 and has never authorized any new narrative involving Holden or any work derivative of Catcher. Westberg Aff. ¶¶ 15, 16. Other than a 1949 film adaptation of one of his early short stories, Salinger has never permitted, and has explicitly instructed his lawyers not to allow, adaptations of his works. Id. ¶ 16. He has, however, remained in the public spotlight through a series of legal actions to protect his intellectual property. Id. ¶ 19. Salinger has registered and duly renewed his copyright in Catcher with the U.S. Copyright Office.

Defendant-Appellant Fredrik Colting wrote 60 Years Later: Coming Through the Rye (hereinafter “ 60 Years Later”) under the pen name “John David California.” Colting published 60 Years Later with his own publishing company, Defendant-Appellant Windupbird Publishing, Ltd., in England on May 9, 2009. Copies were originally scheduled to be available in the United States on September 15, 2009. Westberg Aff. ¶ 2. Colting did not seek Salinger's permission to publish 60 Years Later. Id. ¶ 3.

60 Years Later tells the story of a 76-year-old Holden Caulfield, referred to as “Mr. C,” in a world that includes Mr. C's 90-year-old author, a “fictionalized Salinger.”[72]^[4] The novel's premise is that Salinger has been haunted by his creation and now wishes to bring him back to life in order to kill him. Unsurprisingly, this task is easier said than done. As the story progresses, Mr. C becomes increasingly self-aware and able to act in ways contrary to the will of Salinger. After a series of misadventures, Mr. C travels to Cornish, New Hampshire, where he meets Salinger in his home. Salinger finds he is unable to kill Mr. C and instead decides to set him free. The novel concludes with Mr. C reuniting with his younger sister, Phoebe, and an estranged son, Daniel.

In bringing this suit, Salinger underscores the extensive similarities between 60 Years Later and Catcher. First, Mr. C is Holden Caulfield. Mr. C narrates like Holden, references events that happened to Holden, and shares many of Holden's notable eccentricities. Appellees' Br. 8. Also, Mr. C's adventures parallel those of Holden. Both characters leave an institution, wander around New York City for several days, reconnect with old friends, find happiness with Phoebe, and ultimately return to a different institution. Finally, within these broader structural similarities, the novels contain similar scenes, such as a climactic carousel scene. Id. 9-10.

Salinger also cites Defendants' efforts to market 60 Years Later as a sequel to Catcher. The back cover of the United Kingdom edition describes the novel as “a marvelous sequel to one of our most beloved classics.” Westberg Aff. ¶ 32. In a 2009 interview in the Guardian, Colting describes 60 Years Later as “[j]ust like the first novel.... He's still Holden Caulfield, and has a particular view on things.” Alison Flood, Catcher in the Rye Sequel Published, but Not by Salinger, Guardian, May 14, 2009.

Colting responds that 60 Years Later is not, and was never intended to be, a sequel to Catcher. Rather, Colting claims that it is a “critical examination of the character Holden and the way he is portrayed in [ Catcher], the relationship between Salinger and his iconic creation, and the life of a particular author as he grows old but remains imprisoned by the literary character he created.” Appellants' Br. 9-10. In support of this claim, Colting first emphasizes that a main character in 60 Years Later-Salinger himself, who narrates portions of the novel-does not appear in Catcher. Next, he explains how the Mr. C character evolves from a two-dimensional and absurd version of a sixteen-year-old Holden into a real person with a rich life completely apart from Catcher. Finally, he relies upon the declarations of two literary experts. Martha Woodmansee, a professor of English and law at Case Western Reserve University, described 60 Years Later as a “work of meta-commentary” that “pursues critical reflection on J.D. Salinger and his masterpiece [ Catcher] just as do the articles that literary scholars conventionally write and publish in scholarly journals, but it casts its commentary in an innovative ‘post modern’ form, specifically, that of a novel.” Woodmansee Decl. ¶ 9. Robert Spoo, a professor at the University of Tulsa College of Law, found 60 Years Later to be a “sustained commentary on and critique of Catcher, revisiting and analyzing the attitudes and assumptions of the teenaged Holden Caulfield. In this respect, [ 60 Years Later] is similar to a work of literary criticism.” Spoo Decl. ¶ 7.

On July 1, 2009, the District Court granted Salinger's motion for a preliminary injunction, barring Defendants from “manufacturing, publishing, distributing, shipping, advertising, promoting, selling, or otherwise disseminating any copy of [60 Years Later], or any portion thereof, in or to the United States.” Salinger v. Colting, 641 F.Supp.2d 250, 269 (S.D.N.Y.2009). In doing so, it found that (1) Salinger has a valid copyright in Catcher and the Holden Caulfield character, (2) absent a successful fair use defense, Defendants have infringed Salinger's copyright in both Catcher and the Holden Caulfield character, (3) Defendants' fair use defense is likely to fail, and (4) a preliminary injunction should issue.

The District Court disposed of the first two issues in its decision's introduction. Defendants did not contest that Salinger has a valid copyright in Catcher. And regarding the Holden character, the Court stated that the character is “sufficiently delineated so that a claim for infringement will lie.” Id. at 254. The Court elaborated on this finding in a June 17, 2009 hearing:

Holden Caulfield is quite delineated by word. It is a portrait by words. It is something that is obviously seen to be of value since the effort is made [by defendants] to recall everything that the character in the book does.... It is difficult, in fact, to separate Holden Caulfield from the book

Special App. 8 (Hr'g Tr. 24). Having found a valid copyright in both Catcher and the Holden character, the Court concluded that “there is substantial similarity between Catcher and [ 60 Years Later], as well as between the character Holden Caulfield from Catcher, and the character Mr. C from [ 60 Years Later], such that it was an unauthorized infringement of Plaintiff's copyright.” Salinger,641 F.Supp.2d at 254.

The District Court next concluded that Defendants' fair use defense is likely to fail and that therefore Salinger has established a prima facie case of copyright infringement. In its consideration of the four statutory factors, the Court found that not one supports Defendants' claim of fair use. Id. at 255.

Regarding the first factor, the “purpose and character of the use,” 17 U.S.C. § 107(1), the Court held that 60 Years Later is not sufficiently “transformative” of Catcher, the Holden character, or Salinger, id. at 256 (quoting Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994)). One recognized form of transformative value, the Court noted, is parody, which requires a “reasonably discernable rejoinder or specific criticism of any character or theme.” Id. at 258. The Court found that 60 Years Later does not parody Catcher or the Holden character, and although it might parody Salinger, that is insufficient because according to the Supreme Court's decision in Campbell, 510 U.S. at 580, 114 S.Ct. 1164, parody must critique or comment on the work itself, Salinger, 641 F.Supp.2d at 256-57.

The District Court similarly concluded that 60 Years Later does not have sufficient nonparodic transformative value. Although 60 Years Later's comment on Salinger himself “has some transformative value,” id. at 262, the Court found that it is insufficient to render the work as a whole transformative for three reasons. First, according to Colting's public statements, his purpose for writing 60 Years Later was not to comment on Salinger but to write a Catcher sequel. Id. at 259-60 & n. 3 Second, Salinger is a “minor or supporting character” in 60 Years Later. Id. at 262. And third, the ratio of borrowed [74] to transformative elements in Catcher is too high to render the entire work transformative. Id. at 262-63. Finally, the Court observed that 60 Years Later's commercial nature further cuts against Defendants on the “purpose and character of the use” factor. Id. at 263.

Addressing the second and third factors, see 17 U.S.C. § 107(2)-(3), the District Court held with respect to the “nature of the copyrighted work” that Catcher is a “‘creative expression for public dissemination [that] falls within the core of the copyright's protective purposes.’” Id. at 263 (quoting Campbell, 510 U.S. at 586, 114 S.Ct. 1164). It then found as to “the amount and substantiality of the portion used in relation to the copyrighted work as a whole” that Colting took “well more from Catcher, in both substance and style, than is necessary for the alleged transformative purpose of criticizing Salinger and his attitudes and behavior.” Id.

The District Court went on to conclude that the fourth factor, “the effect of the use upon the potential market for or value of the copyrighted work,” 17 U.S.C. § 107(4), weighs “slightly” in Salinger's favor, Salinger, 641 F.Supp.2d at 267-68. The Court acknowledged that 60 Years Later is unlikely to impact the sales of Catcher itself, but it found that an unauthorized sequel might undermine the potential market for an authorized Catcher sequel, whether through loss of the novelty of a sequel or through confusion as to which of the sequels is the authorized one. Although the Court recognized that Salinger has publicly disclaimed any intention of authorizing a sequel, the Court noted that Salinger has the right to change his mind and, even if he has no intention of changing his mind, there is value in the right not to authorize derivative works. Id.

Having made this determination, the District Court turned to whether a preliminary injunction should issue. According to the Court:

Under Rule 65, to obtain a preliminary injunction a party must demonstrate: (1) that it will be irreparably harmed if an injunction is not granted, and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation, and a balance of hardships tipping decidedly in its favor.

Id. at 254 (quotation marks and alterations omitted). Given its findings, the Court deemed the only remaining question to be whether Salinger had shown that he would be irreparably harmed if an injunction was not granted. Because Salinger had established a prima facie case of copyright infringement, and in light of how the District Court, understandably, viewed this Court's precedents, the District Court presumed irreparable harm without discussion. Id. at 268 (citing ABKCO Music, Inc. v. Stellar Records, Inc.,96 F.3d 60, 66 (2d Cir.1996)). In a footnote, the Court stated:

Although Defendants contend that eBay, Inc. v. MercExchange, 547 U.S. 388, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006), undermines the validity of this presumption, that case dealt only with the presumption of irreparable harm in the patent law context, and thus is not controlling in the absence of Second Circuit precedent applying it in the copyright context.

Id.at 268 n. 6.

We hold that, although the District Court applied our Circuit's longstanding standard for preliminary injunctions in copyright cases, our Circuit's standard is inconsistent with the “test historically employed [75] by courts of equity” and has, therefore, been abrogated by eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 390, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006).

The Copyright Act of 1976 authorizes courts to “grant temporary and final injunctions on such terms as [they] may deem reasonable to prevent or restrain infringement of a copyright.” 17 U.S.C. § 502(a). And, as the District Court stated, this Court has long issued preliminary injunctions in copyright cases upon a finding of (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief. See, e.g., NXIVM Corp. v. Ross Inst., 364 F.3d 471, 476 (2d Cir.2004); ABKCO Music, Inc. v. Stellar Records, Inc., 96 F.3d 60, 64 (2d Cir.1996); Video Trip Corp. v. Lightning Video, Inc., 866 F.2d 50, 52 (2d Cir.1989); Wainwright Sec., Inc. v. Wall St. Transcript Corp., 558 F.2d 91, 94 (2d Cir.1977).^[5]

Thus, once a plaintiff establishes a likelihood of success on the merits, the only additional requirement is a showing that the plaintiff will be irreparably harmed if the preliminary injunction does not issue. And traditionally, this Court has presumed that a plaintiff likely to prevail on the merits of a copyright claim is also likely to suffer irreparable harm if an injunction does not issue. See, e.g., Richard Feiner & Co., Inc. v. Turner Entm't Co., 98 F.3d 33, 34 (2d Cir.1996); ABKCO Music, 96 F.3d at 64; Hasbro Bradley, Inc. v. Sparkle Toys, Inc., 780 F.2d 189, 192 (2d Cir.1985).

This Court has applied this presumption in several ways. Some decisions have interpreted the presumption to mean that a plaintiff likely to prevail on the merits does not need to make a detailed showing of irreparable harm. See, e.g., Wainwright, 558 F.2d at 94 (“In copyright cases, ... if probable success-a prima facie case of copyright infringement-can be shown, the allegations of irreparable injury need not be very detailed, because such injury can normally be presumed when a copyright is infringed.”); Robert Stigwood Group Ltd. v. Sperber, 457 F.2d 50, 55 (2d Cir.1972); Am. Metro. Enters. of N.Y. v. Warner Bros. Records, Inc., 389 F.2d 903, 905 (2d Cir.1968); Rushton v. Vitale, 218 F.2d 434, 436 (2d Cir.1955). Other cases have discussed the presumption as though it applies automatically and is irrebuttable. See, e.g., Rice v. Am. Program Bureau, 446 F.2d 685, 688 (2d Cir.1971) (“It is likewise well settled that when a prima facie case is made out a preliminary injunction should issue without the showing of irreparable injury....”); Am.Code Co. v. Bensinger, 282 F. 829, 834 (2d Cir.1922) (“In cases of infringement of copyright, an injunction has always been recognized as a proper remedy, because of the inadequacy of the legal remedy.”). A few decisions, by contrast, have found the presumption rebuttable where the plaintiff delayed in bringing the action seeking an injunction. See Richard Feiner, 98 F.3d at 34; Fisher-Price, Inc. v. Well-Made Toy Mfg. Corp., 25 F.3d 119, 124 (2d Cir.1994); [76] Bourne Co. v. Tower Records, Inc., 976 F.2d 99, 101 (2d Cir.1992).

Under any of these articulations, however, this Court has nearly always issued injunctions in copyright cases as a matter of course upon a finding of likelihood of success on the merits. Cf. Mark A. Lemley & Eugene Volokh, Freedom of Speech and Injunctions in Intellectual Property Cases, 48 Duke L.J. 147, 159 (1998) (“The ostensibly four-factor test collapses ... to a simple inquiry into likelihood of success on the merits. If that can be demonstrated, a preliminary injunction is the expected remedy.” (footnotes omitted)). But see Am. Visuals Corp. v. Holland, 219 F.2d 223 (2d Cir.1955) (affirming denial of injunction because, among other reasons, plaintiff failed to show that money damages would be inadequate).

Defendants do not claim that the District Court failed to apply this Circuit's longstanding preliminary injunction standard. Rather, they argue both that this standard is an unconstitutional prior restraint on speech and that it is in conflict with the Supreme Court's decision in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006). We agree that eBay abrogated parts of this Court's preliminary injunction standard in copyright cases, and accordingly, this case must be remanded to the District Court to reevaluate Salinger's preliminary injunction motion. In light of that holding, we need not decide whether the preliminary injunction issued by the District Court constituted an unconstitutional prior restraint on speech.

eBay involved the propriety of a permanent injunction after a finding of patent infringement. The United States District Court for the Eastern District of Virginia had ostensibly applied the traditional four-factor test for determining whether a permanent injunction should issue:

Issuance of injunctive relief against [the defendants] is governed by traditional equitable principles, which require consideration of (i) whether the plaintiff would face irreparable injury if the injunction did not issue, (ii) whether the plaintiff has an adequate remedy at law, (iii) whether granting the injunction is in the public interest, and (iv) whether the balance of the hardships tips in the plaintiff's favor.

MercExchange, L.L.C. v. eBay, Inc., 275 F.Supp.2d 695, 711 (E.D.Va.2003) (quotation marks omitted). In its application of this test, however, the district court “appeared to adopt certain expansive principles suggesting that injunctive relief could not issue in a broad swath of cases.” eBay, 547 U.S. at 393, 126 S.Ct. 1837. Specifically, the district court found that “the evidence of the plaintiff's willingness to license its patents, its lack of commercial activity in practicing the patents, and its comments to the media as to its intent with respect to enforcement of its patent rights, are sufficient to rebut the presumption that it will suffer irreparable harm if an injunction does not issue.” eBay, 275 F.Supp.2d at 712. The Federal Circuit reversed on appeal, applying a “general rule ... that a permanent injunction will issue once infringement and validity have been adjudged.” MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1338 (Fed.Cir.2005). The court cited for this rule Richardson v. Suzuki Motor Co, which equates the “general rule” with a rule that “[i]n matters involving patent rights, irreparable harm has been presumed when a clear showing has been made of patent validity and infringement.” 868 F.2d 1226, 1246-47 (Fed.Cir.1989) (quoting H.H. Robertson Co. v. United Steel Deck, Inc.,820 F.2d 384, 390 (Fed.Cir.1987)).

[77] Writing for a unanimous Court, Justice Thomas held that neither the district court nor the Federal Circuit correctly applied the equitable factors:

According to well-established principles of equity, 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, 547 U.S. at 391, 126 S.Ct. 1837. Although the courts below had articulated the correct standard, they had both, albeit in different ways, applied “broad classifications” that were inconsistent with traditional equitable principles. Id.at 393, 126 S.Ct. 1837.

This Court has not directly addressed the scope of eBay.^[6] And district courts in our Circuit have split on eBay's reach. Compare, e.g., Lennon v. Premise Media Corp., 556 F.Supp.2d 310, 319-20 n. 1 (S.D.N.Y.2008) (holding that eBay only applies to permanent injunctions in patent cases), with Microsoft Corp. v. AGA Solutions, Inc., 589 F.Supp.2d 195, 204 (E.D.N.Y.2008) (applying eBay in a permanent injunction trademark case). Two district court decisions have noted that the scope of eBay remains an open question in this Circuit and have decided the cases before them without determining whether the eBay or pre- eBay standard applied. See Gayle Martz, Inc. v. Sherpa Pet Group, L.L. C., 651 F.Supp.2d 72, 85 (S.D.N.Y.2009); Warner Bros. Entm't Inc. v. RDR Books, 575 F.Supp.2d 513, 552 (S.D.N.Y.2008).

We hold today that eBay applies with equal force (a) to preliminary injunctions (b) that are issued for alleged copyright infringement. First, nothing in the text or the logic of eBay suggests that its rule is [78] limited to patent cases. On the contrary, eBay strongly indicates that the traditional principles of equity it employed are the presumptive standard for injunctions in any context.^[7] Significantly, after laying out the four-factor test quoted above, eBay cites two cases: Weinberger v. Romero-Barcelo, 456 U.S. 305, 311-13, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982), which involved a permanent injunction after a finding that the defendant violated the Federal Water Pollution Control Act, and Amoco Production Co. v. Village of Gambell, 480 U.S. 531, 542, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987), which involved a preliminary injunction in which the plaintiff alleged that the defendant was violating § 810 of the Alaska National Interest Lands Conservation Act, eBay, 547 U.S. at 391, 126 S.Ct. 1837. The Court then looked to whether the logic of these cases should apply in the patent context. Reasoning that “‘a major departure from the long tradition of equity practice should not be lightly implied,’” id. at 391, 126 S.Ct. 1837 (quoting Weinberger, 456 U.S. at 320, 102 S.Ct. 1798), the Court concluded that “[t]hese familiar principles apply with equal force to disputes arising under the Patent Act,” id.

Moreover, the Court expressly relied upon copyright cases in reaching its conclusion. In response to the Federal Circuit's reasoning that the Patent Act's right to exclude justifies the preference for injunctive relief, the Court stated that “the creation of a right is distinct from the provision of remedies for violations of that right.” Id. at 392. In support of this distinction, it noted that “[l]ike a patent owner, a copyright holder possesses the right to exclude others from using his property.” Id. (quotation marks omitted). It further noted that “[l]ike the Patent Act, the Copyright Act provides that courts ‘may’ grant injunctive relief ‘on such terms as it may deem reasonable to prevent or restrain infringement of copyright.’” Id. (quoting 17 U.S.C. § 502(a)). Because of these similarities, the Court emphasized that it “has consistently rejected invitations to replace traditional equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed.” Id. at 392-93, 102 S.Ct. 1798 (citing N.Y. Times Co. v. Tasini, 533 U.S. 483, 505, 121 S.Ct. 2381, 150 L.Ed.2d 500 (2001); Campbell, 510 U.S. at 578 n. 10, 114 S.Ct. 1164; Dun v. Lumbermen's Credit Ass'n., 209 U.S. 20, 23-24, 28 S.Ct. 335, 52 L.Ed. 663 (1908)). Whatever the underlying issues and particular circumstances of the cases cited by the Court in eBay, it seems clear that the Supreme Court did not view patent and copyright injunctions as different in kind, or as requiring different standards.

Nor does eBay, as reinforced by the Supreme Court's very recent decision in Winter v. Natural Resources Defense Council, --- U.S. ----, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008), permit an easier grant of a preliminary than of a permanent injunction. First, as mentioned above, one of the two cases eBay relied upon in stating the traditional equitable test involved a preliminary injunction. See Amoco Prod., 480 U.S. at 542, 107 S.Ct. 1396; see also [79] id. at 546 n. 12, 107 S.Ct. 1396 (“The standard for a preliminary injunction is essentially the same as for a permanent injunction with the exception that the plaintiff must show a likelihood of success on the merits rather than actual success.”). Second, in Winter, the Supreme Court in fact applied eBay in a case involving a preliminary injunction. Reversing the Ninth Circuit, which had preliminarily enjoined the Navy's use of sonar in training exercises based on a “strong” likelihood of success on the merits and a “possibility” of irreparable harm, the Court stated: “Issuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent with our characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter, 129 S.Ct. at 375-76. And using broad, unqualified language, the Court discussed the preliminary injunction standard as follows:

A preliminary injunction is an extraordinary remedy never awarded as of right. In each case, courts must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief. In exercising their sound discretion, courts of equity should pay particular regard for the public consequences in employing the extraordinary remedy of injunction.

Id. at 376-77 (quotation marks and citations omitted) (citing Munaf v. Geren, 553 U.S. 674, 128 S.Ct. 2207, 2218-19, 171 L.Ed.2d 1 (2008); Amoco Prod., 480 U.S. at 542, 107 S.Ct. 1396; Weinberger,456 U.S. at 312, 102 S.Ct. 1798).

This Court's pre- eBay standard for when preliminary injunctions may issue in copyright cases is inconsistent with the principles of equity set forth in eBay. The Supreme Court's decision in Winter tells us that, at minimum, we must consider whether “irreparable injury is likely in the absence of an injunction,” we must “‘balance the competing claims of injury,’” and we must “‘pay particular regard for the public consequences in employing the extraordinary remedy of injunction.’”^[8]. 129 S.Ct. at 375-77 (quoting Amoco, 480 U.S. at 542, 107 S.Ct. 1396; Weinberger, 456 U.S. at 312, 102 S.Ct. 1798). Therefore, in light of Winter and eBay, we hold that a district court must undertake the following inquiry in determining whether to grant a plaintiff's motion for a preliminary injunction in a copyright case. First, as in most other kinds of cases in our Circuit, a court may issue a preliminary injunction in a copyright case only if the plaintiff has demonstrated “either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the [plaintiff]' s favor.” NXIVM Corp., 364 F.3d at 476; see also, e.g., Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110, 116 (2d Cir.2009). Second, the [80] court may issue the injunction only if the plaintiff has demonstrated “that he is likely to suffer irreparable injury in the absence of an injunction.” Winter, 129 S.Ct. at 374. The court must not adopt a “categorical” or “general” rule or presume that the plaintiff will suffer irreparable harm (unless such a “departure from the long tradition of equity practice” was intended by Congress). eBay, 547 U.S. at 391, 393-94, 126 S.Ct. 1837. Instead, the court must actually consider the injury the plaintiff will suffer if he or she loses on the preliminary injunction but ultimately prevails on the merits, paying particular attention to whether the “remedies available at law, such as monetary damages, are inadequate to compensate for that injury.” eBay, 547 U.S. at 391, 126 S.Ct. 1837; see also Winter, 129 S.Ct. at 375 (quoting 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2948.1 (2d ed.1995), for the proposition that an applicant for a preliminary injunction “must demonstrate that in the absence of a preliminary injunction, ‘the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered’”). Third, a court must consider the balance of hardships between the plaintiff and defendant and issue the injunction only if the balance of hardships tips in the plaintiff's favor. Winter, 129 S.Ct. at 374; eBay, 547 U.S. at 391, 126 S.Ct. 1837. Finally, the court must ensure that the “public interest would not be disserved” by the issuance of a preliminary injunction. eBay, 547 U.S. at 391, 126 S.Ct. 1837; accord Winter, 129 S.Ct. at 374.

Second, the court may issue the injunction only if the plaintiff has demonstrated “that he is likely to suffer irreparable injury in the absence of an injunction.” Winter, 129 S.Ct. at 374. The court must not adopt a “categorical” or “general” rule or presume that the plaintiff will suffer irreparable harm (unless such a “departure from the long tradition of equity practice” was intended by Congress). eBay, 547 U.S. at 391, 393-94, 126 S.Ct. 1837. Instead, the court must actually consider the injury the plaintiff will suffer if he or she loses on the preliminary injunction but ultimately prevails on the merits, paying particular attention to whether the “remedies available at law, such as monetary damages, are inadequate to compensate for that injury.” eBay, 547 U.S. at 391, 126 S.Ct. 1837; see also Winter, 129 S.Ct. at 375 (quoting 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2948.1 (2d ed.1995), for the proposition that an applicant for a preliminary injunction “must demonstrate that in the absence of a preliminary injunction, ‘the applicant is likely to suffer irreparable harm before a decision on the merits can be rendered’”). Third, a court must consider the balance of hardships between the plaintiff and defendant and issue the injunction only if the balance of hardships tips in the plaintiff's favor. Winter, 129 S.Ct. at 374; eBay, 547 U.S. at 391, 126 S.Ct. 1837. Finally, the court must ensure that the “public interest would not be disserved” by the issuance of a preliminary injunction. eBay, 547 U.S. at 391, 126 S.Ct. 1837; accord Winter, 129 S.Ct. at 374.

The first consideration in the preliminary injunction analysis is the probability of success on the merits. In gauging this, we emphasize that courts should be particularly cognizant of the difficulty of predicting the merits of a copyright claim at a preliminary injunction hearing. See Lemley & Volokh, supra, at 201-02 (“[When deciding whether to grant a TRO or a preliminary injunction,] the judge has limited time for contemplation. The parties have limited time for briefing. Preparation[81] for a typical copyright trial, even a bench trial, generally takes many months; the arguments about why one work isn't substantially similar in its expression to another, or about why it's a fair use of another, are often sophisticated and fact-intensive, and must be crafted with a good deal of thought and effort.”). This difficulty is compounded significantly when a defendant raises a colorable fair use defense. “Whether [a] taking[ ] will pass the fair use test is difficult to predict. It depends on widely varying perceptions held by different judges.” Pierre N. Leval, Toward a Fair Use Standard, 103 Harv. L.Rev. 1105, 1132 (1990); see also Campbell, 510 U.S. at 578 n. 10, 114 S.Ct. 1164 (noting that “the fair use enquiry often requires close questions of judgment”).

Next, the court must consider whether the plaintiff will suffer irreparable harm in the absence of a preliminary injunction, and the court must assess the balance of hardships between the plaintiff and defendant. Those two items, both of which consider the harm to the parties, are related. The relevant harm is the harm that (a) occurs to the parties' legal^[9] interests and (b) cannot be remedied after a final adjudication, whether by damages or a permanent injunction. The plaintiff's interest is, principally, a property interest in the copyrighted material. See Wheaton v. Peters, 33 U.S. (8 Pet.) 591, 661, 8 L.Ed. 1055 (1834). But as the Supreme Court has suggested, a copyright holder might also have a First Amendment interest in not speaking. See Harper & Row Publishers, Inc. v. Nation Enters., 471 U.S. 539, 559, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985). The defendant to a copyright suit likewise has a property interest in his or her work to the extent that work does not infringe the plaintiff's copyright. And a defendant also has a core First Amendment interest in the freedom to express him or herself, so long as that expression does not infringe the plaintiff's copyright.

But the above-identified interests are relevant only to the extent that they are not remediable after a final adjudication. Harm might be irremediable, or irreparable, for many reasons, including that a loss is difficult to replace or difficult to measure, or that it is a loss that one should not be expected to suffer. In the context of copyright infringement cases, the harm to the plaintiff's property interest has often been characterized as irreparable in light of possible market confusion. See Merkos L'Inyonei Chinuch, Inc. v. Otsar Sifrei Lubavitch, Inc., 312 F.3d 94, 96-97 (2d Cir.2002). And courts have tended to issue injunctions in this context because “to prove the loss of sales due to infringement is ... notoriously difficult.” Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190, 1195 (2d Cir.1971) (Friendly, C.J.). Additionally, “[t]he loss of First Amendment freedoms,” and hence infringement of the right not to speak, “for even minimal periods of time, unquestionably constitutes irreparable injury.” Elrod v. Burns, 427 U.S. 347, 373, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976).^[10]

[82] After eBay, however, courts must not simply presume irreparable harm. See eBay, 547 U.S. at 393, 126 S.Ct. 1837. Rather, plaintiffs must show that, on the facts of their case, the failure to issue an injunction would actually cause irreparable harm. This is not to say that most copyright plaintiffs who have shown a likelihood of success on the merits would not be irreparably harmed absent preliminary injunctive relief. As an empirical matter, that may well be the case, and the historical tendency to issue preliminary injunctions readily in copyright cases may reflect just that. See H. Tomás Gómez-Arostegui, What History Teaches Us About Copyright Injunctions and the Inadequate-Remedy-at-Law Requirement, 81 S. Cal. L.Rev. 1197, 1201 (2008) (concluding, after a thorough historical analysis, that “the historical record suggests that in copyright cases, legal remedies were deemed categorically inadequate”). As Chief Justice Roberts noted, concurring in eBay:

From at least the early 19th century, courts have granted injunctive relief upon a finding of infringement in the vast majority of patent cases. This “long tradition of equity practice” is not surprising, given the difficulty of protecting a right to exclude through monetary remedies.... This historical practice, as the Court holds, does not entitle a patentee to [an] ... injunction or justify a general rule that such injunctions should issue.... At the same time, there is a difference between exercising equitable discretion pursuant to the established four-factor test and writing on an entirely clean slate.... When it comes to discerning and applying those standards, in this area as others, a page of history is worth a volume of logic.

547 U.S. at 395, 126 S.Ct. 1837 (quotation marks omitted).

But by anchoring the injunction standard to equitable principles, albeit with one eye on historical tendencies, courts are able to keep pace with innovation in this rapidly changing technological area. Justice Kennedy, responding to Justice Roberts, made this very point as to patent injunctions in his eBay concurrence. Although the “lesson of the historical practice ... is most helpful and instructive when the circumstances of a case bear substantial parallels to litigation the courts have confronted before[,] ... in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier cases.” Id. at 396, 126 S.Ct. 1837. Justice Kennedy concluded that changes in the way parties use patents may now mean that “legal damages [are] sufficient to compensate for the infringement.” Id.

Finally, courts must consider the public's interest. The object of copyright law is to promote the store of knowledge available to the public. But to the extent it accomplishes this end by providing individuals a financial incentive to contribute to the store of knowledge, the public's interest may well be already accounted for by the plaintiff's interest.

The public's interest in free expression, however, is significant and is distinct from the parties' speech interests. See Pac. Gas & Elec. Co. v. Pub. Utils. Comm'n of Cal., 475 U.S. 1, 8, 106 S.Ct. 903, 89 L.Ed.2d 1 (1986). “By protecting those who wish to enter the marketplace of ideas from government attack, the First Amendment protects the public's interest in receiving information.” Id. Every injunction issued before a final adjudication on the merits risks enjoining speech protected by the First Amendment. Some [83] uses, however, will so patently infringe another's copyright, without giving rise to an even colorable fair use defense, that the likely First Amendment value in the use is virtually nonexistent.

Because the District Court considered only the first of the four factors that, under eBay and our holding today, must be considered before issuing a preliminary injunction, we vacate and remand the case. But in the interest of judicial economy, we note that there is no reason to disturb the District Court's conclusion as to the factor it did consider-namely, that Salinger is likely to succeed on the merits of his copyright infringement claim.

Most of the matters relevant to Salinger's likelihood of success on the merits are either undisputed or readily established in his favor. Thus, Defendants do not contest either that Salinger owns a valid copyright in Catcher or that they had actual access to Catcher. And while they argue only that 60 Years Later and Catcher are not substantially similar, that contention is manifestly meritless.^[11] “In considering substantial similarity between two items, we review the district court's findings de novo-not on the clearly erroneous standard-because what is required is only a visual comparison of the works, rather than credibility, which we are in as good a position to decide as was the district court.” Folio Impressions, Inc. v. Byer Cal., 937 F.2d 759, 766 (2d Cir.1991). And for largely the same reasons as the District Court, we affirm the District Court's finding that Catcher and 60 Years Later are substantially similar.

More serious is Defendants' assertion of a fair use defense. And at this preliminary stage, we agree with the District Court that Defendants will not likely be able to make out such a defense. The District Court in its discussion of fair use focused on the first statutory factor: the “purpose and character of the use.” 17 U.S.C. § 107(1). In doing this, the Court found that “[i]t is simply not credible for Defendant Colting to assert now that his primary purpose was to critique Salinger and his persona, while he and his agents' previous statements regarding the book discuss no such critique, and in fact reference various other purposes behind the book.” Salinger, 641 F.Supp.2d at 262. Such a finding is not clear error. See Anderson v. Bessemer City, 470 U.S. 564, 575, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985) (a district court's findings regarding witness credibility are to be reviewed for clear error). It may be that a court can find that the fair use factor favors a defendant even when the defendant and his work lack a transformative purpose. We need not decide that issue here, however, for when we consider the District Court's credibility finding together with all the other facts in this case, we conclude, with the District Court, that Defendants are not likely to prevail in their fair use defense.^[12]

In this preliminary injunction case, the District Court erred by not applying the equitable standard outlined by the Supreme Court in eBay, Inc. v. MercExchange, L.L. C. and Winter v. Natural Resources Defense Council. Accordingly, we vacate and remand for further proceedings consistent with this opinion. The preliminary injunction will stay in place for ten days following the issuance of the mandate so that Appellees will have an opportunity to apply for a temporary restraining order pending the rehearing of the motion for a preliminary injunction.

[1] We note that Plaintiff-Appellee J.D. Salinger died during the pendency of this appeal. In a February 18, 2010 order, we granted the motion of Colleen M. Salinger and Matthew R. Salinger, trustees of the J.D. Salinger Literary Trust, to be substituted for Salinger as Appellees. For reasons of convenience, however, we will continue to refer to Salinger as “Plaintiff” or “Appellee” in this opinion.

[2] Menand includes among Catcher “rewrites” Sylvia Plath's The Bell Jar (1963), Hunter S. Thompson's Fear and Loathing in Las Vegas (1971), Jay McInerney's Bright Lights, Big City (1984), and Dave Eggers's A Heartbreaking Work of Staggering Genius (2000).

[3] Salinger has conceded that Catcher is “sort of” autobiographical. Paul Alexander, Salinger: A Biography 177-78 (1999).

[4] Appellants concede that Mr. C is Holden Caulfield and that the unnamed author living in Cornish, New Hampshire is a “fictionalized Salinger.” Special App. 6-7 (Hr'g Tr. 16-17, June 17, 2009); Appellants' Br. 10.

[5] The overwhelming majority of decisions addressing injunction motions have focused solely on whether the plaintiff has shown a likelihood of success on the merits and irreparable harm, rather than on balancing the hardships. But see Random House, Inc. v. Rosetta Books L.L. C., 283 F.3d 490, 492 (2d Cir.2002) (considering the balance of hardships but finding the standard unsatisfied); Consumers Union of U.S., Inc. v. Gen. Signal Corp., 724 F.2d 1044, 1054 (2d Cir.1983) (same).

[6] In Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 162 (2d Cir.2007), this Court applied the pre- eBay standard where the plaintiff sought a preliminary injunction claiming false advertising under the Lanham Act. But whether eBay affected that standard was neither raised by the parties nor discussed by either the district court or this Court on appeal. Accordingly, Time Warner Cable is not binding precedent on this issue. See Webster v. Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 69 L.Ed. 411 (1924). Similarly, the Federal Circuit has, without discussion, applied a pre- eBay standard in one post- eBay copyright case involving a preliminary injunction. Jacobsen v. Katzer, 535 F.3d 1373, 1378 (Fed.Cir.2008) (applying the Ninth Circuit's pre- eBay standard); see also Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629, 633 (9th Cir.2007) (applying the pre- eBay standard, without discussion, in a preliminary injunction trademark case). By contrast, the First, Eleventh, and Fourth Circuits have applied eBay in copyright cases. See CoxCom, Inc. v. Chaffee, 536 F.3d 101, 112 (1st Cir.2008); Peter Letterese & Assocs. v. World Inst. of Scientology Enters. Int'l, 533 F.3d 1287, 1323 (11th Cir.2008); Christopher Phelps & Assocs. v. Galloway, 492 F.3d 532, 543 (4th Cir.2007) (“The Supreme Court [in eBay] reaffirmed the traditional showing that a plaintiff must make to obtain a permanent injunction in any type of case, including a patent or copyright case[.]”); see also Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F.Supp.2d 1197, 1208-10 (C.D.Cal.2007) (extensively discussing the issue and concluding that eBay applies in the permanent injunction copyright context). See generally Voile Mfg. Corp. v. Dandurand, 551 F.Supp.2d 1301, 1306 (D.Utah 2008) (collecting cases and summarizing that “[d]espite the lack of clear direction from the Federal Circuit, the majority of district courts to directly analyze the issue have held that eBay did away with the presumption of irreparable harm in preliminary injunction cases involving patents”).

[7] Indeed, although our holding here is limited to preliminary injunctions in the context of copyright cases, eBay's central lesson is that, unless Congress intended a “major departure from the long tradition of equity practice,” a court deciding whether to issue an injunction must not adopt “categorical” or “general” rules or presume that a party has met an element of the injunction standard. 547 U.S. at 391-94, 126 S.Ct. 1837 (quotation marks omitted). Therefore, although today we are not called upon to extend eBay beyond the context of copyright cases, we see no reason that eBay would not apply with equal force to an injunction in any type of case.

[8] This Court has rarely considered the public's interest before deciding whether an injunction should issue. Although decisions have referenced the public's interest in passing, see Silverstein v. Penguin Putnam, Inc., 368 F.3d 77, 84 (2d Cir.2004) (quoting 4 Nimmer on Copyright § 14.06 for the proposition that “where great public injury would be worked by an injunction ... the courts could ... award damages or a continuing royalty instead of an injunction”); New Era Publ'ns Int'l., ApS v. Henry Holt, Co., 884 F.2d 659, 664 (2d Cir.1989) (Newman, J., dissenting from denial of rehearing in banc) (“[T]he public interest is always a relevant consideration for a court deciding whether to issue an injunction.”), the public's interest has not in the past been a formal factor in this Court's standard for when to issue copyright injunctions.

[9] As Judge Leval noted in New Era Publications International, ApS v. Henry Holt & Co., “the justification of the copyright law is the protection of the commercial interest of the artist/author. It is not to coddle artistic vanity or to protect secrecy, but to stimulate creation by protecting its rewards.” 695 F.Supp. 1493, 1526 (S.D.N.Y.1988).

[10] But cf. Freedman v. Maryland, 380 U.S. 51, 59, 85 S.Ct. 734, 13 L.Ed.2d 649 (1965) (finding permissible pre-adjudication restraint where, among other things, the time between the restraint and the final adjudication is brief).

[11] We find it unnecessary to decide whether Salinger owns a valid copyright in the character Holden Caulfield.

[12] As noted above, since the commencement of these proceedings, Plaintiff-Appellee J.D. Salinger has died. On remand, nothing precludes the District Court from considering that or any other additional evidence that may bear on the legal issues to be determined with respect to the preliminary injunction and the final merits. Moreover, while we are remanding for further consideration of a preliminary injunction, we wish to make clear that nothing we have said is intended to preclude the District Court on remand from consolidating its further consideration of the preliminary injunction application with the trial on the merits. See Fed.R.Civ.P. 65(a)(2).

[1047] Michael P. Norris, Asst. U.S. Atty., Omaha, Neb., for U.S.

Richard J. Dinsmore, Omaha, Neb., for Dennis Moran.

MEMORANDUM AND ORDER

RICHARD G. KOPF, United States Magistrate Judge.

The parties have consented to try this misdemeanor case before me. Trial was held on January 15, 1991, and briefs were received on January 23, 1991. I now find that the defendant is not guilty of the alleged willful infringement of a copyrighted video cassette in violation of 17 U.S.C. § 506(a).

I. FACTS

Dennis Moran (Moran), the defendant, is a full-time Omaha, Nebraska, police officer and the owner of a "mom-and-pop" movie rental business which rents video cassettes of copyrighted motion pictures to the public. On April 14, 1989, agents of the Federal Bureau of Investigation (FBI) executed a court-ordered search warrant on the premises of Moran's business. The FBI seized various video cassettes appearing to be unauthorized copies of copyrighted motion pictures, including "Bat 21," "Big," "Crocodile Dundee II," "The Fourth Protocol," "Hell-Bound: Hellraiser II," and "Mystic Pizza." The parties have stipulated that these six motion pictures are validly copyrighted motion pictures. The parties have further stipulated that each of the six motion pictures was distributed to Moran, with the permission of the copyright holder, between February 1, 1989, and April 14, 1989. The parties have further stipulated that at least one of the movies identified was reproduced by Moran onto a video cassette, without the authorization of the copyright holder, placed into inventory for rental, and subsequently rented.

At the time the FBI executed the search warrant, Moran was fully cooperative. He told the FBI agents he put the "duped" copies out for rental and held the "originals" back because he feared the "original" motion pictures would be stolen or damaged. Moran told the FBI agents at the time they executed the warrant that he believed this practice was legal as long as he had purchased and was in possession of the "original" motion picture. Moran further advised the FBI agents that he would affix to the "duped" copies title labels for the copyrighted motion pictures and a copy of the FBI copyright warning label commonly found on video cassette tapes. Moran [1048] advised the FBI agents that he put the title labels and FBI warning on the tapes to stop customers from stealing or duplicating the tapes.

Moran testified at trial. He indicated that he had been employed as an Omaha, Nebraska, police officer for approximately twenty-two-and-a-half years, including service as a narcotics investigator and as a bodyguard to the mayor of the City of Omaha. Moran has a reputation for honesty among his associates.

Moran testified that he began to "insure" copyrighted video cassettes, meaning that he duplicated copyrighted video cassettes which he had validly purchased from distributors, when he realized copyrighted tapes were being vandalized. Moran testified he was under the impression that "insuring" tapes was legal whereas "pirating" tapes was not. For practical purposes, Moran defined "insuring" versus "pirating" as meaning that he could duplicate a copyrighted tape provided he had purchased the copyrighted tape and did not endeavor to rent both the copyrighted tape and the duplicate he had made. Moran testified that he formulated his belief about "insuring" versus "pirating" when talking with various colleagues in the business and from reading trade publications. However, Moran was not able to specifically identify the source of his information.

There was no persuasive evidence that Moran made multiple copies of each authorized version of the copyrighted material. The evidence indicates that Moran purchased more than one copyrighted tape of the same movie, but the persuasive evidence also reveals that Moran made only one copy of each copyrighted tape he purchased. There was no persuasive evidence that Moran endeavored to rent both the copyrighted tape and the duplicate. When Moran made the unauthorized copy, he put the unauthorized copy in a package made to resemble as closely as possible the package containing the original copyrighted motion picture Moran had purchased from an authorized distributor.

II. LAW

Moran makes two arguments. First, Moran argues that the government must prove that he had the specific intent to violate the law, that is, he knew that what he was doing was illegal and he committed the act nevertheless. Secondly, Moran argues that he did not have the specific intent to violate the law and, as a consequence, should be found not guilty.

In pertinent part 17 U.S.C. § 506(a) punishes as a criminal any "person who infringes a copyright willfully and for purposes of commercial advantage or private financial gain." Pursuant to 17 U.S.C. § 106(3), the owner of a copyright has the exclusive right to "distribute copies . . . of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending." The "exclusive right" of the owner of a copyright is subject to a variety of exceptions. See 17 U.S.C. §§ 107-118.

A.

It must first be determined whether the word "willfully," as used in 17 U.S.C. § 506(a), requires a showing of "bad purpose" or "evil motive" in the sense that there was an "intentional violation of a known legal duty." Adopting the research of the Motion Picture Association of America, the government argues that the term "willful" means only "an intent to copy and not to infringe." Letter Brief of Government at 4 (citing United States v. Backer, 134 F.2d 533, 535 (2nd Cir. 1943); United States v. Taxe, 380 F.Supp. 1010 (C.D.Cal. 1974), aff'd, 540 F.2d 961 (9th Cir. 1976)). On the other hand, Moran argues that the use of the word "willful" implies the kind of specific intent required to be proven in federal tax cases, which is to say, a voluntary, intentional violation of a known legal duty. Defendant's Memorandum Brief at 1 (citing United States v. Cross, 816 F.2d 297, 300-01 (7th Cir. 1987); United States v. Heilman, 614 F.2d 1133, 1137-38 (7th Cir.), cert. denied, 447 U.S. 922, 100 S.Ct. 3014, 65 L.Ed.2d 1114 (1980); United States v. Wise, 550 F.2d 1180, 1194 (9th [1049] Cir.), cert. denied, 434 U.S. 929, 98 S.Ct. 416, 54 L.Ed.2d 290 (1977)).

The general rule is, of course, that ignorance of the law or mistake of the law is no defense to a criminal prosecution. However, when the term "willfully" is used in complex statutory schemes, such as federal criminal tax statutes, the term "willfull" means a "voluntary, intentional violation of a known legal duty." Cheek v. United States, ___ U.S. ___, 111 S.Ct. 604, 610, 112 L.Ed.2d 617 (1991) (holding in a criminal tax prosecution that a good faith misunderstanding of the law or a good faith belief that one is not violating the law negates willfulness, whether or not the claimed belief or misunderstanding is objectively reasonable).^[1] As the Court recognized in Cheek, id. at ___, 111 S.Ct. at 609-611, in United States v. Murdock, 290 U.S. 389, 396, 54 S.Ct. 223, 226, 78 L.Ed. 381 (1933), the Supreme Court said that:

Congress did not intend that a person, by reason of a bona fide misunderstanding as to his liability for the tax, as to his duty to make a return, or as to the adequacy of the records he maintained, should become a criminal by his mere failure to measure up to the prescribed standard of conduct.

This was evidently so because "the proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax law." Cheek, ___ U.S. at ___, 111 S.Ct. at 609.

Apparently no case has compared and analyzed the competing arguments, i.e., whether the word "willfully" requires either a showing of specific intent, as suggested by Moran, or the more generalized intent suggested by the government. Indeed, a leading text writer acknowledges that there are two divergent lines of cases, one of which requires specific intent and another which does not. 3 M. Nimmer & D. Nimmer, Nimmer on Copyright, § 15.01 at 15-5 n. 13 (1990) (hereinafter Nimmer). As pointed out by the government, some courts have suggested that "willful" only means an intent to copy, not to infringe. Backer, 134 F.2d at 535; Taxe, 380 F.Supp. at 1017. On the other hand, as suggested by Moran, other courts have seemingly required evidence of specific intent. Heilman, 614 F.2d at 1137-38; Wise, 550 F.2d at 1194. At least two courts have specifically approved jury instructions essentially stating that an act of infringement done "willfully" means an act voluntarily and purposely done with specific intent to do that which the law forbids, that is to say, with bad purpose either to disobey or disregard the law. Cross, 816 F.2d at 300-01; United States v. Rose, 149 U.S.P.Q. 820 (S.D.N.Y. 1966) (quoted in Nimmer, supra, § 15.01 at 15-6 n. 13). None of the cases recognize that there are divergent lines of cases on this point, and none of the cases endeavor to explain why one line of cases is more compelling than the other.

I am persuaded that under 17 U.S.C. § 506(a) "willfully" means that in order to be criminal the infringement must have been a "voluntary, intentional violation of a known legal duty." Cheek, ___ U.S. at ___, 111 S.Ct. at 610. I am so persuaded because I believe that in using the word "willful" Congress intended to soften the impact of the common-law presumption that ignorance of the law or mistake of the law is no defense to a criminal prosecution by making specific intent to violate the law an element of federal criminal copyright offenses. I came to this conclusion after examining the use of the word "willful" in the civil copyright infringement context and applying that use to the criminal statute.^[2] Wise, 550 F.2d at 1188 n. 14 (There is [1050] a general principle in copyright law of looking to civil authority for guidance in criminal cases).

In the civil context there is "strict liability" for infringement, even where the infringement was "innocent." United States v. Bily, 406 F.Supp. 726, 733 (E.D.Pa. 1975) (comparing civil and criminal copyright law). In this connection, a plaintiff in a civil case need not prove actual damages, but rather may seek what are called statutory damages. The term "willful" is used in the context of statutory damages, and it is instructive to compare the definition of the term "willful," as used in the civil context regarding statutory damages, with the definition of the term "willful" used in the criminal context.

In the statutory damage context, a civil plaintiff is generally entitled to recover no less than $250.00 nor more than $10,000.00 per act of infringement. 17 U.S.C. § 504(c)(1). But where the infringement is committed "willfully," the court in its discretion may increase the award of statutory damages up to a maximum of $50,000.00 per act of infringement. 17 U.S.C. § 504(c)(2). On the other hand, in the case of "innocent infringement," if the defendant sustains the burden of proving he/she was not aware, and had no reason to believe, that his/her acts constituted an infringement of the copyright, and the court so finds, the court may in its discretion reduce the applicable minimum to $100.00 per act of infringement. 17 U.S.C. § 504(c)(2). See H.R.Rep. No. 1476, 94th Cong., 2d Sess. at 162-163, reprinted in 1976 U.S.Code Cong. & Admin.News 5659, 5778-79.

As noted text writers have concluded, the meaning of the term "willful," used in 17 U.S.C. § 504, must mean that the infringement was with knowledge that the defendant's conduct constituted copyright infringement. Nimmer, supra p. 6, § 14.04B3 at 14-40.3-14-40.4 (citations omitted). Otherwise, there would be no point in providing specially for the reduction of awards to the $100.00 level in the case of "innocent" infringement since any infringement which was nonwillful would necessarily be innocent.

The circuit courts of appeal which have considered the issue have all adopted Nimmer's formulation with regard to the meaning of the word "willful" for purposes of 17 U.S.C. § 504(c)(2) and statutory civil damages. Cable/Home Communication v. Network Productions, 902 F.2d 829, 851 (11th Cir. 1990); Broadcast Music, Inc. v. Xanthas, Inc., 855 F.2d 233, 236 (5th Cir. 1988); RCA/Ariola Int'l, Inc. v. Thomas & Grayston Co., 845 F.2d 773, 779 (8th Cir. 1988); Fitzgerald Publishing Co., Inc. v. Baylor Publishing Co., Inc., 807 F.2d 1110, 1115 (2d Cir. 1986). In other words, the term "willful," when used in the civil statutory damage statute, has consistently been interpreted to mean that the infringement must be "with knowledge that the defendant's conduct constitutes copyright infringement." Nimmer, supra p. 6, § 14.04B3 at 14-40.3-14-40.4.

There is nothing in the text of the criminal copyright statute, the overall scheme of the copyright laws, or the legislative history to suggest that Congress intended the word "willful," when used in the criminal statute, to mean simply, as the government suggests, an intent to copy. Rather, since Congress used "willful" in the civil damage copyright context to mean that the infringement must take place with the defendant being knowledgeable that his/her conduct constituted copyright infringement, there is no compelling reason to adopt a less stringent requirement in the criminal copyright context. Accordingly, I find that "willfully," when used in 17 U.S.C. § 506(a), means a "voluntary, intentional [1051] violation of a known legal duty."^[3] Cheek, ___ U.S. at ___, 111 S.Ct. at 610.

B.

Having determined that the standard enunciated by the Supreme Court in Cheek, ___ U.S. ___, 111 S.Ct. 604, applies, it is important to recognize that the rule does not require that a defendant's belief that his conduct is lawful be judged by an objective standard. Rather, the test is whether Moran truly believed that the copyright laws did not prohibit him from making one copy of a video cassette he had purchased in order to "insure" against vandalism. In other words, the test is not whether Moran's view was objectively reasonable, but rather, whether Moran truly believed that the law did not proscribe his conduct. Cheek, ___ U.S. ___, 111 S.Ct. at ___. Of course, the more unreasonable the asserted belief or misunderstanding, the more likely it is that the finder of fact will consider the asserted belief or misunderstanding to be nothing more than simple disagreement with known legal duties imposed by the law, and will find that the government has carried its burden of proving knowledge. Id. at ___, 111 S.Ct. at ___.

Most of the government's argument that it proved beyond a reasonable doubt that Moran violated the criminal copyright statute, even if the word "willfully" is defined as Moran suggests, is based upon the assumption that Moran's beliefs must be "objectively" reasonable. As indicated above, Moran's beliefs need not have been objectively reasonable; rather, if Moran truly believed that he was not subject to the copyright laws, then his subjective belief would defeat a finding that he "willfully" violated the statute.

First, I note that I had an opportunity to observe Moran when he testified. Moran struck me as an honest, albeit naive, person. I was left with the definite impression that Moran was befuddled and bewildered by the criminal prosecution.

Second, although Moran is a local police officer of long standing, there is nothing in his background to suggest any particular sophistication about business matters, and there is no evidence to suggest that he has any particular knowledge about the intricacies of the copyright laws. When confronted by FBI agents upon the execution of the search warrant, Moran was entirely cooperative. On the day the search warrant was executed, he told his story in the same way he now tells his story.

Third, Moran said he had heard from others and read in various publications that it was legally appropriate to engage in the practice he called "insuring." Moran could not cite the specific source of his information. In this regard, I note that the copyright laws permit libraries and archives to replace a copyrighted article that is damaged, deteriorated, lost, or stolen, if the library or archives have, after reasonable effort, determined that an unused replacement cannot be obtained at a fair price. 17 U.S.C. § 108(c). While Moran obviously did not operate his business as a library or archives, the government's assertion that the practice of "insuring" is patently unreasonable is belied by the recognition that under certain circumstances certain users of copyrighted materials may lawfully engage in copying activity which is similar to Moran's conduct.

Fourth, Moran testified that he made only one copy of the original motion picture purchased from the authorized distributor. The government doubts his testimony, but offers no persuasive evidence to contradict [1052] it. Moreover, Moran testified that he never rented both the original copyrighted version of the video cassette purchased from the authorized distributor and the copy he made. Instead, he testified that he always held back the original motion picture. Once again, the government doubts this testimony in its brief, but offers no persuasive evidence to the contrary. Furthermore, the evidence indicates that Moran purchased more than one authorized cassette of a particular motion picture, but made only one duplicate for each authorized cassette purchased.

This evidence suggests that Moran was not acting with a willful intention to violate the copyright laws because if he had such an intention it would make absolutely no sense to purchase multiple authorized video cassettes and then make only one duplicate of each authorized cassette. It would have been far simpler, and certainly more lucrative, for Moran to purchase one authorized cassette of a particular motion picture and make multiple copies from the authorized version. In this way Moran would have had to pay only one fee. The fact that Moran seems to have consistently followed the practice of buying an authorized version, but making only one copy of it, suggests that he was acting in accordance with his belief that to duplicate an authorized version in order to "insure it" was lawful so long as only one copy was made and the authorized version and copy were not both rented.

Fifth, the government argues that Moran must have known that what he was doing constituted a copyright infringement because he had before him the FBI warning label and in fact affixed such labels to the unauthorized copies he made. In pertinent part, the FBI warning states, "Federal law provides severe civil and criminal penalties for the unauthorized reproduction, distribution or exhibition of copyrighted motion pictures and video tapes" (emphasis added). Moran explained that he thought these warning labels applied to the renting public, not to him. The use of the word "unauthorized" on the warning label suggested to Moran that vendors who had purchased an authorized version were not subject to the legal restrictions expressed in the warning to the extent that the practice of "insuring" was legal. As Moran suggests, the FBI warning label does not specifically address the claim of legality professed by Moran. Accordingly, Moran's failure to heed the warning label is not determinative.

Sixth, the government further argues that Moran's effort to place the unauthorized copy into a video cassette package displaying a label on its spine and an FBI warning label suggests a sinister motivation. I disagree. Moran's testimony, as I understood it, indicated that when he made a copy he endeavored to make the duplicate look like the original in all respects. After all, the whole purpose of the practice of "insuring" was to use the unauthorized copy in lieu of the original when renting to the public. It was perfectly consistent with Moran's view of the law to make the unauthorized copy look as nearly as possible like the authorized version.

In summary, when Moran's actions were viewed from the totality of the circumstances, the government failed to convince me beyond a reasonable doubt that Moran acted willfully. Moran is a long-time street cop who was fully cooperative with law enforcement authorities. He is obviously not sophisticated and, at least from the record, his business operation of renting movies to the public was not large or sophisticated. Rather, Moran's business appears to have been of the "mom-and-pop" variety. Moran's practice of "insuring," while obviously shifting the risk of loss from Moran to the copyright holder, was conducted in such a way as not to maximize profits, which one assumes would have been his purpose if he had acted willfully. For example, Moran purchased multiple authorized copies of the same movie, but he made only one unauthorized copy for each authorized version purchased. This suggests that Moran truly believed that what he was doing was in fact legal. I therefore find Moran not guilty.^[4]

[1053] IT IS ORDERED that the Clerk of the United States District Court for the District of Nebraska shall, pursuant to Federal Rule of Criminal Procedure 32(b)(1), enter judgment in favor of the defendant, Dennis Moran, and against the United States of America on the court's finding that the defendant is not guilty.

[1] In other circumstances, the Supreme Court has also derived from the word "willfully" a requirement of specific intent. Screws v. United States, 325 U.S. 91, 101, 65 S.Ct. 1031, 1035, 89 L.Ed. 1495 (1945) (construing 18 U.S.C. § 242, dealing with violations of civil rights, as requiring specific intent in a federal criminal prosecution of local law enforcement officers who arrested a black for a state offense and then wrongfully beat him to death).

[2] The legislative history regarding the use of the word "willful" in the statutes criminalizing copyright infringement is not helpful. It has been a criminal offense to willfully infringe a copyright for profit since at least 1909. Copyright Act of 1909, ch. 320, 35 Stat. 1082 at § 28. With the exception of inserting the phrase "for purposes of commercial advantage or private financial gain" for the word "profit," a change thought not to be material, Nimmer, supra p. 6, § 15.01 at 15-1 n. 1, the present statute is nearly identical to the 1909 statute. 17 U.S.C. § 506(a) (1976). The legislative history of the 1976 revision of the criminal statute does not explain what Congress meant by the use of the word "willful." H.R.Rep. No. 1476, 94th Cong., 2d Sess. at 163-164, reprinted in 1976 U.S.Code Cong. & Admin.News 5659, 5779-80.

[3] The Manual of Model Criminal Jury Instructions for the District Courts of the Eighth Circuit, Instruction 7.02 at 291 (1989 Revised Edition) (West 1990) (hereinafter Manual), suggests that no instructions are recommended regarding the term "willfully" except in criminal tax cases and odometer fraud cases. The reason for this suggestion is that in most cases, as the Manual suggests, the words "voluntarily and intentionally" replace the word "willfully." Id. The Manual recognizes that in tax cases and odometer fraud cases "willfully" should be defined as, "An act is done 'willfully' if done voluntarily and intentionally with the purpose of violating a known legal duty." Id. (citations omitted). However, as the committee comments to the Manual suggest, there may be other statutes in which "willfully" requires specific intent. Id. This is one of those cases.

[4] At the close of the government's case, Moran moved for judgment of acquittal. I took his motion under advisement. Moran then offered evidence. Based upon the evidence submitted by the government and the evidence submitted by Moran, I find Moran not guilty in my capacity as a finder of fact. Therefore, I need not rule, and do not decide, whether the motion for acquittal should have been granted.