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Virtual Studios, Inc. v. Beaulieu Group, LLC

United States District Court, E.D. Tennessee

December 17, 2013

VIRTUAL STUDIOS, INC., Plaintiff,
v.
BEAULIEU GROUP, LLC, Defendant

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[Copyrighted Material Omitted]

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For Virtual Studios, Inc., Plaintiff: McKinley S Lundy, Jr, Michael A Anderson, Patrick, Beard, Schulman & Jacoway, PC, Chattanooga, TN.

For Beaulieu Group, LLC, Defendant, Counter Claimant: Katherine Smallwood, Stephanie G. Stella, LEAD ATTORNEYS, PRO HAC VICE, Sutherland, Asbill & Brennan LLP, Atlanta, GA; Ann G. Fort, Peter N Farley, PRO HAC VICE, Sutherland, Asbill & Brennan LLP, Atlanta, GA.

For Virtual Studios, Inc., Counter Defendant: McKinley S Lundy, Jr, Michael A Anderson, LEAD ATTORNEYS, Patrick, Beard, Schulman & Jacoway, PC, Chattanooga, TN.

OPINION

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MEMORANDUM

CURTIS L. COLLIER, UNITED STATES DISTRICT JUDGE.

Plaintiff Virtual Studios, Inc. (" Plaintiff" or " Virtual" ) alleged Defendant Beaulieu Group, LLC (" Defendant" or " Beaulieu" ) violated the United States Copyright Act of 1976, 17 U.S.C. § § 101 et seq. Beaulieu also filed a counterclaim against Virtual and sought, inter alia, a declaratory judgment pursuant to 28 U.S.C. § § 2201 and 2202 (and damages for breach of contract under state law). On June 13, 2013, a jury found in favor of Virtual and against Beaulieu.

Now at issue before the Court is Beaulieu's motion for judgment as a matter of law (Court File No. 153) and Virtual's request for a permanent injunction against Beaulieu. With respect to the motion for judgment as a matter of law, the Court will DENY Beaulieu's motion (Court File No. 153).

With respect to the permanent injunction, prior to the trial, the parties submitted proposed findings of fact and conclusions of law, some of which dealt with the injunction. Subsequent to the trial, the parties supplemented these filings to account for the jury verdict and submitted additional briefing on the injunction issue (Court File Nos. 136, 141, 142, 146, 150). The Court held a hearing regarding the permanent injunction on August 15, 2013 at which the parties provided argument and evidence.

For the following reasons, the Court will GRANT Virtual's request for an injunction. The Court will issue an injunction against Beaulieu prohibiting future infringement. The Court will not, however, require Beaulieu to obtain and impound possibly infringing materials from its customers. The Court will require Beaulieu to submit a letter to customers Beaulieu reasonably believes purchased or received any product containing the infringing images identified by the jury, notifying these customers of the jury's verdict and the possibility they may be in possession of infringing materials. The letter should attach copies of the images found by the jury to be infringing and inform the customer the use of any such image should be discontinued. The injunction will list those customers Beaulieu has already identified as likely recipients of these materials. If, in the course of complying with the Court's order Beaulieu identifies other customers to whom these images were likely sent,

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Beaulieu must also send such a letter to the newly identified customer.

The Court must also decide whether to award attorney's fees to Virtual. Considering the circumstances of this case, the Court in its discretion will DENY Virtual's request for attorney's fees (Court File No. 145).

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The Court previously discussed the facts in this case in its memorandum and order granting in part and denying in part Beaulieu's motion for summary judgment (Court File Nos. 83, 84). On December 1, 2011, Virtual brought suit against Beaulieu in the Eastern District of Tennessee (Court File No. 1). Virtual's primary allegation was copyright infringement, brought under the U.S. Copyright Act of 1976 as amended, 17 U.S.C. § § 101 et seq. The remaining counts of the complaint-that is, breach of contract, unjust enrichment, and misrepresentation-were state law claims. The Court, however, dismissed Virtual's state law claims when it granted in part and denied in part Beaulieu's motion for summary judgment. Thus, the only claim that went to trial was Virtual's federal Copyright Act claim.

On February 21, 2012, Beaulieu filed a counterclaim against Virtual. Beaulieu sought a declaratory judgment from this Court that (1) Beaulieu has not breached any agreement pertaining to room scene images; (2) Beaulieu has a license to use the images; and (3) Beaulieu's continued use of the images purchased from Beaulieu will not infringe upon any right held by Virtual or breach any agreement. Beaulieu sought compensatory, consequential, and punitive damages, as well as attorney's fees and costs.

After trial on these claims, the jury found in favor of Virtual. The verdict form contained a number of interrogatories on both Virtual's copyright claim and Beaulieu's counterclaim. With respect to Virtual's copyright claim, the jury found the following:

1. Virtual proved it had valid copyrights in the room scene images.
2. Virtual proved the room scene images were original.
3. Virtual was the employer of the photographers that took the room scene images.
4. Virtual proved its certificates of registration were valid.
5. Virtual proved it had a one year license with Beaulieu permitting use of the room scene images for one year.
6. Virtual proved Beaulieu used the room scene photographs beyond the one year permitted by the license.
7. Virtual proved it had a license with Beaulieu that prohibited Beaulieu from manipulating or allowing others to manipulate the room scene images after one year.
8. Virtual proved Beaulieu manipulated or allowed others to manipulate the images after one year.
9. Virtual proved that Beaulieu induced, caused, or intentionally contributed to a third party infringing Virtual's room scene images.
10. Virtual proved Beaulieu took Virtual's work directly or indirectly, intentionally or unintentionally.
11. Accordingly, the jury found Virtual proved its claim of copyright infringement by a preponderance of the evidence.

With respect to Beaulieu's affirmative defenses, the jury found the following:

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1. Beaulieu did not prove Virtual abandoned its copyright rights in the room scene images.
2. Beaulieu did not prove Virtual granted Beaulieu an express or implied ...

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