Rearden LLC et al v. The Walt Disney Company et al

Filing 758

ORDER GRANTING DEFENDANT'S MOTION FOR JUDGMENT AS A MATTER OF LAW by Judge Jon S. Tigar granting 739 Motion. (dms, COURT STAFF) (Filed on 8/26/2024)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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REARDEN LLC, et al.,

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Plaintiffs,

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v.

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THE WALT DISNEY COMPANY, et al.,

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Defendants.

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United States District Court
Northern District of California

Case No. 17-cv-04006-JST
ORDER GRANTING DEFENDANT'S
MOTION FOR JUDGMENT AS A
MATTER OF LAW
Re: ECF Nos. 682, 739

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Pending before the Court is Defendant Walt Disney Pictures’ (“Disney”) renewed motion

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for judgment as a matter of law under Federal Rule of Civil Procedure 50(b). ECF No. 739. The

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Court will grant the motion.

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I.

BACKGROUND

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The factual and procedural background of this case is summarized in greater detail in the

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Court’s prior orders. ECF Nos. 60, 85, 297, 555. In short, Plaintiff Rearden LLC developed and

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owns MOVA Contour Reality Capture (“MOVA”)—a program for capturing the human face to

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create computer graphics (“CG”) characters in motion pictures. MOVA has been used in the

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production of various motion pictures, including The Curious Case of Benjamin Button

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(Paramount Pictures 2008); Harry Potter and the Deathly Hallows, Part I (Warner Bros. Pictures

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2010), and Pirates of the Caribbean: on Stranger Tides (Walt Disney Pictures 2011). ECF No.

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315 ¶¶ 38, 60.

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The Court initially adjudicated a dispute between Rearden LLC and Shenzhenshi

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Haitiecheng Science and Technology Company (“SHST”) concerning the ownership of equipment

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and intellectual property associated with MOVA (“Ownership Litigation”). SHST is a Chinese

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entity associated with Digital Domain 3.0, Inc. (“DD3”), a visual effects company with whom

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Disney contracted to perform facial capture services for several of its motion pictures. ECF No.

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315 ¶¶ 98–124; see Shenzhenshi Haitiecheng Sci. and Tech. Co., LTD. v. Rearden LLC (“SHST”),

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No. 15-cv-00797-JST, 2017 WL 3446585 at *2, *7. (N.D. Cal. Aug. 11, 2017). The facts of that

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case pertinent to the dispute at hand are as follows:

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United States District Court
Northern District of California

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Steve Perlman has founded a series of entities under the Rearden
name that act as technology incubators by developing new
technologies, assigning them to subsidiaries, and – if the
technologies are successful – spinning the subsidiaries off as
separate companies. In 2007, Perlman transferred the MOVA
technology to OnLive, Inc., another one of Perlman’s incubated
companies. OnLive then began providing MOVA services to
customers.
In August 2012, OnLive went through an assignment for the benefit
of creditors. As part of that process, OnLive was shut down and
reborn as a new company called OL2. On February 11, 2013, OL2
transferred ownership of the MOVA Assets to MO2, LLC – an
entity owned by Rearden LLC. At that time, Greg LaSalle, who had
been involved with the development of MOVA and had at various
times worked for Rearden and OnLive, was in the process of
negotiating the sale of MOVA assets to DD3. Ultimately, LaSalle
sold the assets to SHST rather than DD3, in an attempt to insulate
DD3 from liability. The sale closed on May 8, 2013. DD3 then
licensed the assets from SHST.

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Rearden LLC v. Crystal Dynamics, Inc., No. 17-cv-04187-JST, 2019 WL 8275254, at *2 (N.D.

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Cal. July 12, 2019) (citations omitted).

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After a bench trial, however, the Court held that “Rearden, not . . . DD3, owns and at all

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relevant times has owned the MOVA Assets.” SHST, 2017 WL 3446585, at *9. The Court found

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that LaSalle never owned the MOVA assets or possessed the authority to sell them such that the

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transfer of the assets to SHST was invalid. Id. The Court further ordered the return of those assets

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to Rearden, and appointed a special master to oversee the process and adjudicate all post-trial

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disputes. Order Regarding the Return of MOVA Assets 1, SHST, No. 15-cv-00797-JST (N.D.

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Cal. Oct. 2, 2017), ECF No. 449; Order Appointing Hon. Edward A. Infante (Ret.) as Special

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Master Pursuant to Federal Rule of Civil Procedure 53, at 1, SHST, No. 15-cv-00797-JST (N.D.

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Cal. June 17, 2019), ECF No. 529.

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Contemporaneously, Plaintiffs Rearden LLC and Rearden MOVA LLC (collectively,
“Rearden”) filed a series of lawsuits, including the instant suit against Disney, bringing copyright
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United States District Court
Northern District of California

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and trademark infringement claims against several motion picture studios that allegedly used

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MOVA in producing motion pictures and video games. See Rearden LLC v. Walt Disney

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Company, 293 F. Supp. 3d. 963, 967–68 (N.D. Cal. 2018). In this case, Rearden brought claims

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for contributory copyright infringement, vicarious copyright infringement, trademark

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infringement, and patent infringement against Disney. See ECF No. 63. Rearden alleged that

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each time DD3 used MOVA, “the computers made a copy of the . . . program in their CPU’s RAM

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without authorization from Rearden,” thus infringing on Rearden’s copyright. ECF No. 63 ¶ 120.

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Rearden then alleged that Disney was contributorily and vicariously liable for this infringing

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conduct because Disney contracted with DD3 for DD3 to provide facial capture services using

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MOVA in order to create CG characters in Guardians of the Galaxy (2014), Avengers: Age of

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Ultron (2015), and Beauty and the Beast (2017) (“BATB”). Id. ¶¶ 96–185.
Early in the case, Disney moved for summary judgment as to whether the profits from its

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films were available as a remedy for copyright infringement, arguing that Rearden could not show

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the required causal nexus between Disney’s alleged infringement and the profits from its films

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under 17 U.S.C. § 504(b). See ECF No. 249. The Court ultimately granted Disney summary

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judgment as to Rearden’s copyright infringement claims predicated on Guardians of the Galaxy

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and Avengers: Age of Ultron on the ground that Rearden failed to identify evidence showing a

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causal nexus between DD3’s alleged infringement and the gross revenue generated by those films.

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See ECF Nos. 297, 304. However, the Court found that Rearden had identified non-speculative

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evidence sufficient to create a triable issue of fact as to whether there was a causal nexus between

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the infringement of its copyright and the revenue generated by BATB, and thus denied Disney’s

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summary judgment motion on those claims predicated on BATB. See ECF No. 297. The case thus

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proceeded with Rearden’s trademark infringement claims, and its BATB copyright infringement

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claims.1
After the close of discovery, Disney filed a second motion for summary judgment, this

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time seeking summary judgment on all of Rearden’s remaining claims. See ECF No. 421. The

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Rearden’s patent infringement claim was dismissed with prejudice. See ECF No. 85.
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United States District Court
Northern District of California

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Court granted summary judgment to Disney as to Rearden’s claims for contributory copyright

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infringement and trademark infringement. See ECF No. 555 at 6–8, 15–20. As to Rearden’s

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remaining claim of vicarious copyright infringement, the Court denied Disney’s motion for

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summary judgment, finding that there was a genuine issue of material fact as to whether Disney

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had both the right and ability to control the infringing conduct and a direct financial interest in the

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infringing activity. See id. at 8–12. However, the Court granted Disney’s motion as to any

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liability for DD3’s use of MOVA after this Court’s issuance of the preliminary injunction in the

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SHST litigation, on the ground that Rearden had failed to identify any evidence of direct financial

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benefit in connection with DD3’s post-injunction use of MOVA. See id. at 12. The Court also

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granted summary judgment as to Rearden’s claim to indirect profits from Disney’s sale of BATB

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merchandise and music, finding no evidence of a causal nexus between such profits and DD3’s

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infringement of the MOVA copyright. See id. at 13–15. Finally, the Court also initially granted

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Disney summary judgment as to the issue of actual damages, on the ground that the opinion of

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Rearden’s expert witness Cindy Ievers was inadmissible under Daubert v. Merrell Dow Pharms.,

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Inc., 509 U.S. 579 (1993). See id. at 13. However, upon reconsideration the Court reversed that

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exclusion as well as the grant of summary judgment as to actual damages. See ECF No. 609.

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This case proceeded to a jury trial on Rearden’s sole remaining claim—that Disney was

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vicariously liable for DD3’s copyright infringement when it used MOVA to animate the Beast

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character, played by actor Dan Stevens, in BATB. After a two-week trial, the jury returned a

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verdict finding that: (1) Rearden owned the copyright in the MOVA Contour software program

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during the time DD3 used that software in connection with the Beast character in BATB; and (2)

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that Disney was vicariously liable for DD3’s infringement of the copyright in the MOVA software

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program. See ECF No. 691. The jury awarded Rearden actual damages in an amount of $250,638

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and returned an advisory verdict that Disney’s profits attributable to the infringement amounted to

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$345,098. See id. Consistent with that verdict, the Court then issued Findings of Fact and

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Conclusions of Law awarding Rearden $345,098 of Disney’s profits attributable to the

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infringement. See ECF No. 726.

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Prior to the jury’s verdict, Disney filed a motion for judgment as a matter of law under
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Federal Rule of Civil Procedure 50(a). See ECF No. 682. In that motion, Disney sought judgment

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as a matter of law on the ground that Rearden had not presented legally sufficient evidence that a

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reasonable jury could find that: (1) Rearden owned the MOVA copyright at any point during

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DD3’s alleged infringement in this case; (2) Disney had the practical ability to control DD3’s

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alleged infringement; (3) Disney directly financially benefited from DD3’s alleged infringement;

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(4) there was a causal nexus between DD3’s alleged infringement and Disney’s revenue from

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BATB; and (5) Rearden suffered any actual damages as a result of the infringement. See id. at 5.

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Disney now renews that motion pursuant to Federal Rule of Civil Procedure 50(b). See ECF No.

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739.

United States District Court
Northern District of California

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II.

LEGAL STANDARD

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A court may grant a motion for judgment as a matter of law against a party on a claim or

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issue where the party has been “fully heard on [that] issue during a jury trial” and the court finds

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that a “reasonable jury would not have a legally sufficient evidentiary basis” to find for that party.

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Fed. R. Civ. P. 50(a). Judgment as a matter of law is appropriate where “the evidence, construed

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in the light most favorable to the nonmoving party, permits only one reasonable conclusion, and

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that conclusion is contrary to that of the jury.” White v. Ford Motor Co., 312 F.3d 998, 1010 (9th

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Cir. 2002); see also Lakeside-Scott v. Multnomah Cnty., 556 F.3d 797, 803 (9th Cir. 2009)

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(“JMOL is appropriate when the jury could have relied only on speculation to reach its verdict.”).

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“A jury’s verdict must be upheld if it is supported by substantial evidence. Substantial evidence is

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evidence adequate to support the jury’s conclusion, even if it is also possible to draw a contrary

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conclusion from the same evidence.” Johnson v. Paradise Valley Unified Sch. Dist., 251 F.3d

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1222, 1227 (9th Cir. 2001) (citation omitted).

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A motion for judgment as a matter of law made under Rule 50(a) may be renewed after the

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jury returns a verdict against the moving party. Fed. R. Civ. P. 50(b). A “proper post-verdict Rule

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50(b) motion is limited to the grounds asserted in the pre-deliberation Rule 50(a) motion” and “a

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party cannot properly ‘raise arguments in its post-trial motion for judgment as a matter of law

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under Rule 50(b) that it did not raise in its pre-verdict Rule 50(a) motion.’ ” EEOC v. Go Daddy

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Software, Inc., 581 F.3d 951, 961 (9th Cir. 2009) (quoting Freund v. Nycomed Amersham, 347
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F.3d 752, 761 (9th Cir. 2003)).

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III.

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A.

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A requisite element of any claim for copyright infringement is ownership of the copyright

Copyright Ownership

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at the time of the alleged infringement. See Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S.

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340, 361 (1991). Disney argues that Rearden failed to introduce legally sufficient evidence at trial

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for a reasonable jury to find that Rearden owned the MOVA copyright at the time of DD3’s

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alleged infringement. See ECF No. 739 at 7–9.

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United States District Court
Northern District of California

DISCUSSION

The Court disagrees. It is undisputed that between August 17, 2012 and February 11,

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2013, ownership of all of the MOVA assets, including the copyright in the MOVA software, was

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held by OL2, Inc. (“OL2”), in which Rearden had no ownership interest. See ECF No. 679 at 20

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(stipulated facts in jury instructions); Tr. 1176:11–20 (instructing the jury). It is likewise

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undisputed that in February 2013, OL2 transferred that copyright, along with all of the MOVA

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assets, to MO2, LLC (“MO2”). See ECF No. 679 at 20; Tr. 1176:11–20. Thus, the only dispute

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between the parties at trial related to whether MO2 was formed as a Rearden subsidiary, and that

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therefore, Rearden acquired ownership of the MOVA copyright when it was transferred from OL2

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to MO2 in February 2013.

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Disney argues that Rearden presented no evidence to support this theory. However, at

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trial, Rearden’s CEO Steve Perlman testified that he instructed Greg LaSalle to form MO2 as a

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Rearden subsidiary. Perlman testified that Rearden formed MO2 for the purpose of reacquiring

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the MOVA assets (including the MOVA copyright) from OL2, and that he instructed his

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employee, Greg LaSalle, to work with Rearden’s attorney Alan Kalin to form MO2 and complete

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the acquisition. Tr. at 566:6–571:18. Perlman further testified that Rearden paid all of Kalin’s

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legal fees arising from MO2’s formation and its acquisition of the MOVA assets. Id. at 568:2–23.

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Similarly, Rearden’s Vice President of Finance, Cindy Ievers, testified that Rearden paid for

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LaSalle’s expenses in connection with the transfer of assets from OL2 to MO2, including

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maintenance fees, corporate fees and taxes, insurance costs, and patent prosecution fees. Id. at

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792:22–795:24. Both Ievers and Perlman testified that these actions were done with the intention
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and mutual understanding that MO2 was formed as a Rearden subsidiary to acquire ownership of

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the MOVA assets.

United States District Court
Northern District of California

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Disney argues that “Rearden’s theory that MO2 from its creation was a Rearden subsidiary

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had no contemporaneous documentary support, and the documents that did exist contradicted that

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theory.” ECF No. 739 at 9. However, a lack of contemporaneous documentary evidence does not

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mean that Rearden produced no legally sufficient evidence. Perlman’s and Ievers’s testimony was

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evidence. The lack of corroborating, contemporary documentary evidence might weigh against

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the credibility of that testimony, but the Court “may not make credibility determinations or weigh

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the evidence” on a motion for judgment as a matter of law. Reeves v. Sanderson Plumbing Prod.,

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Inc., 530 U.S. 133, 150 (2000). Such determinations, “and the drawing of legitimate inferences

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from the facts are jury functions, not those of a judge.” Id. at 150–51 (citing Anderson v. Liberty

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Lobby, Inc., 477 U.S. 242, 255 (1986)). Here, the jury was presented with, and considered, the

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evidence at trial and credited Rearden’s evidence in concluding that Rearden owned the MOVA

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copyright during the relevant time period. Disney gives the Court no reason to second-guess the

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jury’s conclusion on this motion.

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B.

Vicarious Copyright Infringement

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For Rearden to prevail on its claim for vicarious copyright infringement, the jury must

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have had legally sufficient evidence to find “that the defendant exercise[d] the requisite control

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over the direct infringer and that the defendant derive[d] a direct financial benefit from the direct

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infringement.” Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007). Disney

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argues that Rearden failed to introduce legally sufficient evidence at trial for either element.

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1.

Right and Ability to Control Infringement

Under Ninth Circuit law, “a defendant exercises control over a direct infringer when he has

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both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to

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do so.” Perfect 10, 508 F.3d at 1173. Disney does not dispute that there was sufficient evidence

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at trial to establish its legal right to stop or limit DD3’s infringing conduct, but argues that

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Rearden failed to introduce evidence sufficient for a reasonable jury to find that it had the practical

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ability to do so. ECF No. 739 at 10–14.
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ability to limit or stop infringing conduct, it must have the practical ability to observe the conduct

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and recognize when that conduct is infringing. In other words, in order to control infringing

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conduct, one must be able to identify the infringing conduct. Rearden argues that this principle is

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unsupported by the case law. See ECF No. 746 at 8.

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United States District Court
Northern District of California

Disney’s position rests on the argument that in order for a defendant to have the practical

The Court finds merit in Disney’s argument, and support for its position in Ninth Circuit

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case law. In A&M Recs., Inc. v. Napster, Inc. (“Napster”), 239 F.3d 1004 (9th Cir. 2001), as

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amended (Apr. 3, 2001), aff’d sub nom. A&M Recs., Inc. v. Napster, Inc., 284 F.3d 1091 (9th Cir.

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2002), and aff’d sub nom. A&M Recs., Inc. v. Napster, Inc., 284 F.3d 1091 (9th Cir. 2002), for

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example, the Ninth Circuit affirmed the district court’s holding on a preliminary injunction that the

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defendant Napster likely had the right and ability to control infringing conduct by its users because

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it “ha[d] the ability to locate infringing material listed on its search indices, and the right to

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terminate users’ access to the system.” Napster, 239 F.3d at 1024. However, the Napster court

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admonished the district court for “fail[ing] to recognize that the boundaries of the premises that

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Napster ‘controls and patrols’ are limited.” Id. at 1023. The court found that “Napster’s reserved

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‘right and ability’ to police is cabined by the system’s current architecture[,]” which only had the

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ability to search through file name indices, and “does not ‘read’ the content of indexed files, other

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than to check that they are in the proper MP3 format.” Id. at 1024. Accordingly, because

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“Napster may be vicariously liable when it fails to affirmatively use its ability to patrol its system

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and preclude access to potentially infringing files listed in its search index[,]” the court remanded

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to the district court to narrow the injunction, with recognition “that Napster’s system does not

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currently appear to allow Napster access to users’ MP3 files.” Id. at 1027. In so doing, the

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Napster court approved the proposition that the scope of vicarious liability for copyright

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infringement, and corresponding injunctive relief available to a plaintiff, must be “cabined” by

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considerations of defendants’ ability to identify infringing materials and/or conduct. See also id.

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at 1023 (“Turning a blind eye to detectable acts of infringement for the sake of profit gives rise to

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[vicarious copyright] liability.” (emphasis added)).

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Subsequent Ninth Circuit cases accord with this principle. In Perfect 10, again on a
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United States District Court
Northern District of California

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preliminary injunction, the Ninth Circuit affirmed the district court’s finding that plaintiff would

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not likely prevail on its vicarious infringement claim. 508 F.3d at 1173–74. In evaluating the

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defendant’s right and ability to control infringing conduct, the Ninth Circuit found no error with

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the district court’s reasoning that Google “lack[ed] the practical ability to police the third-party

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websites’ infringing conduct” because “Google’s software lacks the ability to analyze every image

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on the Internet, compare each image to all the other copyrighted images that exist in the world . . .

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and determine whether a certain image on the web infringes someone’s copyright.” 508 F.3d at

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1174 (quotation and citation omitted). Accordingly, the Ninth Circuit agreed that “[w]ithout

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image-recognition technology, Google lacks the practical ability to police the infringing activities

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of third-party websites.” Id. As in Napster, the Perfect 10 court expressly adopted the reasoning

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that, where a defendant lacks the ability to practically recognize infringing conduct or infringing

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material, it cannot be found to have the practical ability to police or control such conduct.

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More recently, in VHT, Inc. v. Zillow Grp., Inc., the Ninth Circuit affirmed a summary

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judgment for a defendant on vicarious copyright infringement, again because the defendant lacked

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the practical ability to identify, and therefore police, its users’ infringing conduct. 918 F.3d 723,

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746 (9th Cir. 2019). There, the court specifically referenced an inability to identify the infringing

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conduct, reasoning that “there was insufficient evidence that [defendant] had the technical ability

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to screen out or identify infringing VHT photos among the many photos that users saved or

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uploaded daily to” the direct infringer’s platform. Id.; see also UMG Recordings, Inc. v. Shelter

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Cap. Partners LLC, 718 F.3d 1006, 1030 (9th Cir. 2013) (stating, in dicta, that the “vicarious

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liability standard applied in Napster can be met by merely having the general ability to locate

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infringing material and terminate users’ access . . . .” (emphasis added)); Atari Interactive, Inc. v.

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Redbubble, Inc., 515 F. Supp. 3d 1089, 1116 (N.D. Cal. 2021), aff’d in part, appeal dismissed in

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part, No. 21-17062, 2023 WL 4704891 (9th Cir. July 24, 2023) (“Read together, the [Ninth

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Circuit] cases require a relatively close relationship between the means for finding infringement

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(music index, image URL, etc.) and the infringing content.”).

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Rearden counters that this principle is contradicted by established case law (and this
Court’s prior summary judgment order) holding that vicarious copyright liability applies
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regardless of knowledge or intention on the part of the defendant. See, e.g., Metro-Goldwyn-

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Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 n.9 (2005) (stating that vicarious

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infringement “allows imposition of liability . . . even if the defendant initially lacks knowledge of

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the infringement”). This argument conflates actual knowledge of infringement, as required for

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contributory infringement, with the practical ability to identify, and therefore police, the infringing

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conduct. A defendant may be vicariously liable because it is able to locate and police infringing

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conduct—but does not do so—without having actual knowledge of infringement.

United States District Court
Northern District of California

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Applying the case law here, the Court considers whether Rearden introduced at trial

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sufficient evidence that Disney had the ability to identify, and therefore police, DD3’s infringing

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conduct in using MOVA. Rearden argues that it did, pointing to (1) “the DD3/Disney contract,

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which designated three Disney representatives to supervise DD3’s work and vested them with the

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authority to represent Disney in all matters related [to] the agreement[;]” (2) “testimony from DD3

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and Disney witnesses confirming that they understood Disney had these rights[;]” (3) “evidence of

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the film’s director Bill Condon and Visual Effects Supervisor Steve Gaub’s involvement in the

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MOVA Contour facial performance capture process.” ECF No. 746 at 9–10. Upon review, the

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Court concludes that this evidence is legally insufficient to prove Disney’s ability to identify

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infringing conduct such as DD3’s use of the MOVA software.

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First, although evidence of the DD3/Disney contract (and Disney’s understanding of that

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contract) demonstrates that Disney had both the legal right and practical ability to terminate its

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contract with DD3, a contractual right to terminate in the event of copyright infringement is not

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enough to satisfy the “requisite control” element of vicarious liability. Without the practical

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ability to learn of infringement, Disney would have no reason to exercise its right to terminate.

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Rearden argues that Disney’s practical ability to control was shown by Disney’s legal right

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to review and approve DD3’s work in progress, and Bill Condon and Steve Gaub’s actual

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involvement in the MOVA facial motion capture process. ECF No. 746 at 9–10. But the evidence

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introduced at trial only demonstrated that Disney’s agents such as Condon and Gaub were

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involved in making creative decisions such as directing Dan Stevens’ performance of the Beast

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during MOVA capture sessions, and selecting captured shots for further animation work. See ECF
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United States District Court
Northern District of California

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No. 684-1 at 2–13 (Condon); 56–59 (Gaub). Rearden introduced no evidence to show that

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Condon or Gaub—or any other Disney representative—was involved in the actual animation

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process using the MOVA software, such that these individuals would have been in a position to

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identify infringement of the kind that DD3 engaged in here—using software without a copyright

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owner’s permission. Nor would such infringing conduct be apparent on any of the weekly reports

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or shots in progress that Disney was contractually entitled to receive from DD3. As in Napster,

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Disney’s “reserved ‘right and ability’ to police is cabined by” the supervisory role of its agents,

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and the evidence introduced at trial is insufficient to show that Condon or Gaub had any ability to

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identify DD3’s use of MOVA Contour as infringing Rearden’s copyright during the relevant time

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period. Napster, 239 F.3d at 1023–24. And similar to the defendant in Perfect 10, Disney’s

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“supervisory power is limited” because the evidence at trial showed that its agents “lack[] the

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ability” to review every piece of hardware or software that its vendors use, investigate whether

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there might be competing ownership claims in the underlying intellectual property, and determine

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whether a certain software infringes someone’s copyright. 508 F.3d at 1174.

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Rearden argues, now and at trial, that Disney could have just conducted “due diligence”

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and confirmed whether DD3 owned the rights to MOVA. See ECF No. 746 at 10–11. Perlman

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testified that movie studios contacted Rearden several times asking to confirm Rearden’s

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ownership of its MOVA rights, including by reviewing patent and trademark registrations. Tr. at

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488:13–489:15. Rearden contends that because Disney could have made the same inquiries of its

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vendors, it had the legal right and ability to control DD3’s infringement. However, this argument

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conflates Disney’s ability to confirm a claim of ownership of intellectual property with its ability

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to identify and control infringement. Even if Disney had conducted with DD3 the kind of due

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diligence that Perlman described, Disney still would not have identified any indication that DD3

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might be infringing Rearden’s copyright through its use of MOVA; at best, such due diligence

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would only confirm that the vendor in question could claim to have the right to operate its

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software and/or hardware. It also fails as a matter of practicality. To uncover direct infringement

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such as DD3’s use of MOVA would require a movie studio to identify each piece of proprietary

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software and/or hardware its vendors use, even when those vendors number in the hundreds, and
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then identify and follow up on any possible claim to ownership in any intellectual property that

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might be used in that software/hardware. Such a task would be “beyond hunting for a needle in a

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haystack.” VHT, 918 F.3d at 746.

United States District Court
Northern District of California

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Rearden argues that this conclusion runs contrary to the Court’s prior order denying

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Disney’s summary judgment motion. “Once the case proceeds to trial, the full record developed

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in court supersedes the record existing at the time of the summary-judgment motion.” Ortiz v.

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Jordan, 562 U.S. 180, 184 (2011). The Court’s prior order on summary judgment was based on

8

Rearden’s representations as to what evidence it could present at trial, much of which was

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substantially narrowed at trial. This order considers the evidence that was actually introduced and

10

admitted at trial, and whether that evidence is sufficient to support the jury’s verdict. In doing so,

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the Court finds that Rearden failed to introduce legally sufficient evidence at trial that Disney had

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the practical ability to identify, and therefore supervise or control, whether its vendors such as

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DD3 were infringing copyright through the use of proprietary software and/or hardware.

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Accordingly, the evidence, even construed in the light most favorable to Rearden as the non-

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moving party, is insufficient for a reasonable jury to find that Disney had both the legal right and

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practical ability to control such infringing conduct, and therefore Disney cannot be liable for

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vicarious copyright infringement as a matter of law.

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19

2.

Direct Financial Benefit

Disney also moves for judgment as a matter of law as to the second element of vicarious

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infringement—that it derived a direct financial benefit from DD3’s direct infringement. See ECF

21

No. 739 at 14–17. Disney argues that there was no evidence of a causal relationship between the

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infringing activity in question—DD3’s usage of the MOVA software (and therefore copying the

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code into RAM)—and any direct financial benefit to Disney. See id.

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The Court is not persuaded. At trial, Rearden introduced ample evidence that DD3’s use

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of MOVA created a more realistic looking Beast, including Disney’s own press kit and interviews

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with Bill Condon, Dan Stevens, and Emma Watson promoting the benefits of using MOVA to

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capture and animate the Beast’s face. See TX 247 at 31–32 (“To create a realistic looking Beast in

28

a real-world environment while maintaining Dan Stevens’ performance, a combination of physical
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United States District Court
Northern District of California

1

performance capture and MOVA facial capture technology was used.”); TX142; TX148; TX 363.

2

Rearden also introduced evidence that MOVA enabled DD3 to create a more realistic and

3

believable character for the Beast. See, e.g., ECF No. 684-1 at 53–54 (Gaub testifying that facial

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motion capture such as MOVA enabled something more lifelike than traditional animation); 95

5

(Taritero testifying as to the “unique” value of DD3’s MOVA Contour and Direct Drive

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capabilities); 109 (Stevens testifying that the ability to interact with Emma Watson during MOVA

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capture sessions aided his performance of the Beast). Rearden introduced testimony from Condon

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that MOVA was used to animate the Beast’s face in nine of the eleven clips of the Beast’s face in

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BATB’s theatrical trailer. See id. at 2–14. And Rearden introduced evidence from multiple

10

witnesses as to the importance of visual effects and theatrical trailers in driving audience interest

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in a movie, and thereby driving ticket sales. See Tr. at 831:7-15 (Hoberman), 983:11–984:19

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(Menache), 1602:4–19 (Fier). A reasonable jury, considering this evidence, could have found that

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DD3’s infringing use of the MOVA software had a direct financial benefit to Disney, by driving

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more ticket sales for BATB at the box office.

15

Disney does not dispute that this evidence was introduced at trial, but argues that a

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reasonable jury could not have found a causal connection between the infringing conduct and any

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financial benefit, because “the evidence was undisputed that more than half the shots of the Beast

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in the movie were created without the use of MOVA output data, and those shots were

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indistinguishable from shots created with MOVA data.” See ECF 739 at 15. The Court is not

20

convinced. Just because other software could have been (and was) used to accomplish the effect

21

of animating a realistic Beast does not mean that DD3’s use of the MOVA software had no effect

22

in driving consumer interest and ticket sales. To the contrary, it merely spotlights that DD3 had

23

non-infringing alternatives available, but concluded they weren’t as good as MOVA for those

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shots. At trial, the jury was presented with evidence that a realistic and empathetic Beast would

25

likely have increased consumer interest in BATB, and that MOVA enabled DD3 to animate the

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Beast in a more realistic and believable way. This evidence, viewed in a light most favorable to

27

Rearden, is legally sufficient for it to prevail on this element of vicarious copyright infringement.

28

Disney also argues that Rearden must have introduced evidence that audiences were drawn
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United States District Court
Northern District of California

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to BATB “because DD3 copied MOVA Contour software into computer RAM” and “[i]t was

2

undisputed that no consumer ever saw (or could see) the ephemeral copies of MOVA Contour

3

software residing in RAM.” See ECF No. 739 at 15. This Court finds no support in the case law

4

for such a strict requirement to prove vicarious infringement. As the Ninth Circuit has stated, “[a]

5

defendant is vicariously liable for copyright infringement if he enjoys a direct financial benefit

6

from another’s infringing activity and ‘has the right and ability to supervise’ the infringing

7

activity.” Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004) (citing Napster, 239 F.3d at

8

1022) (emphasis omitted). There is no dispute here that DD3’s use of MOVA was “infringing

9

activity” and thus the only question under this element is whether Rearden introduced evidence

10

sufficient for a reasonable jury to find that Disney “enjoy[ed] a direct financial benefit” from that

11

activity. As stated above, the Court finds sufficient evidence for a reasonable jury to find that it

12

has. Disney’s position, that a copyright plaintiff must prove that consumers were able to observe

13

the infringing conduct or material, would effectively preclude any software copyright owner from

14

ever prevailing on vicarious copyright infringement.

15

C.

16

Disney also moves for judgment as a matter of law as to both of Rearden’s damages

17

theories that it presented at trial: actual damages it suffered as a result of the infringement, and the

18

portion of Disney’s profits from BATB attributable to the infringing conduct.

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20

Remedies

1.

Actual Damages

Disney argues that Rearden also failed to introduce legally sufficient, non-speculative

21

evidence to support the jury’s award of actual damages. Such an award “must be upheld if it is

22

supported by substantial evidence.” Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 708

23

(9th Cir. 2004), as amended on denial of reh’g and reh’g en banc (Oct. 25, 2004), opinion

24

amended on denial of reh’g, No. 03-35188, 2004 WL 2376507 (9th Cir. Oct. 25, 2004).

25

Accordingly, for Disney to prevail on its motion, it must prove that the evidence introduced at

26

trial, when viewed in the light most favorable to Rearden, “permits only one reasonable

27

conclusion, and that conclusion is contrary to the jury verdict[.]” Id.

28

Rearden’s evidence of actual damages comes primarily from Ievers, who testified in her
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United States District Court
Northern District of California

1

capacity as an expert witness that Rearden would have incurred costs of approximately $2.9

2

million to provide MOVA services for BATB. Tr. at 1103:23–25. Ievers opined that Rearden

3

would have charged an additional 20% profit on top of those costs, which amounted to

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approximately $581,611. Id. at 1104:1–8. On cross-examination, Ievers admitted that while

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Rearden’s spinoff OnLive was operating the MOVA business, it never made a profit. Id. at

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1125:12–14. She further admitted that the most Rearden had ever charged for any MOVA project

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was $386,746, which was for Harry Potter and the Deathly Hallows, Part I and Part II. Id. at

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1113:17–1114:2. Finally, Ievers testified that the discrepancy between Rearden’s historical

9

charges for MOVA services and its hypothetical charge for BATB could be explained by the

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increased recognition and acclaim that MOVA had acquired since the Harry Potter films (id. at

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1129:7–25) and the fact that BATB would be the first time Rearden had charged for continuous

12

capture using MOVA, which she testified to be up to ten times as costly as traditional FACS

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captures (id. at 1130:1–18).

14

Having considered this evidence, the jury awarded Rearden actual damages of $250,638.

15

See ECF No. 691. Disney argues that this award is speculative and unsupported by the evidence

16

presented at trial. Disney also argues that Ievers’ opinion cannot sustain the damages award as it

17

was unduly speculative.

18

While it is unclear how the jury reached its ultimate number of $250,638, that fact in itself

19

does not mean that the award is unduly speculative. An award of actual damages may be rejected

20

if the fact of damages is uncertain or speculative, but uncertainty as to the amount of damages will

21

not preclude recovery. See Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 513

22

(9th Cir. 1985). Here, Ievers testified that the cost to Rearden to provide MOVA services for

23

BATB would have been $2.9 million, whereas Disney’s expert opined that cost would have been

24

$250,000. See Tr. 1191:1–7. Applying a 20% profit margin would result in a range of profits

25

from approximately $50,000 to $581,611. With these opinions in mind, the jury’s award of

26

$250,638 was within an acceptable range of the evidence, and not so speculative as to warrant

27

judgment as a matter of law. See Wall Data Inc. v. Los Angeles Cnty. Sheriff's Dep’t, 447 F.3d

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769, 787 (9th Cir. 2006) (affirming actual damages award that was within an acceptable range of
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United States District Court
Northern District of California

2

expert opinion, even if “it is not clear how the jury calculated [the] award[.]”).
Disney argues that Ievers’ testimony does not adequately support the verdict, because

3

Ievers did not consider the fair market value of the copyrighted work, and instead merely opined

4

as to what Rearden hoped to have charged for its services. This repeats the argument Disney made

5

in seeking to exclude Ievers’ testimony, a motion Disney ultimately lost. See ECF No. 609; see

6

also Polar Bear, 384 F.3d at 708 (“Actual damages are usually determined by the loss in the fair

7

market value of the copyright, measured by the profits lost due to the infringement . . . .”); Dash v.

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Mayweather, 731 F.3d 303, 312 (4th Cir. 2013) (“The first possible measure [of actual damages]

9

is the amount of revenue that the copyright holder lost as a result of infringement, such as his own

10

lost sales of the work.”). As evidence of the revenue Rearden lost as a result of DD3’s

11

infringement, Ievers was entitled to testify as to her opinion as to the costs Rearden would have

12

incurred to provide MOVA services for BATB, and the reasonable profit margin it would have

13

charged in addition to those costs.

14

Disney objects that the fair market value of the copyright must be measured by what a

15

willing buyer would have paid a willing seller for the right to the copyrighted material.

16

Substantial evidence was presented at trial as to that measure. The jury heard evidence from

17

Ievers as to her opinion of what Rearden would have charged for MOVA services, and also heard

18

evidence of Rearden’s historical revenues and profits from providing MOVA services in the past.

19

Disney’s own expert also provided his competing opinion of what costs Rearden would have

20

incurred to provide MOVA services for BATB. Having considered all of this evidence, the jury

21

came to its own conclusion of what profits Rearden would hypothetically have gained if it had

22

provided MOVA services for BATB, and therefore suffered as a result of DD3’s infringement.

23

Disney’s criticisms of Ievers’ opinion go to her credibility, but again, that is not a factor the Court

24

considers on a motion for judgment as a matter of law. Reeves, 530 U.S. at 150; see also Polar

25

Bear, 384 F.3d at 709 (“the jury was presented with a panoply of evidence and arguments, not all

26

of them congruent or consistent. The jury was not required to adopt Timex’s view, nor do we

27

substitute our view for the jury’s verdict where the award is supported by substantial evidence”).

28

Accordingly, Disney’s motion is denied as to the award of actual damages.
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United States District Court
Northern District of California

1

2.

Defendants’ Profits/Causal Nexus

2

Disney also argues that it is entitled to judgment as a matter of law on the award of

3

defendants’ profits, because there was insufficient non-speculative evidence for the Court to find a

4

causal nexus between DD3’s infringement and its profits from BATB. See ECF No. 739 at 17–19.

5

Disney’s motion is denied as to this issue, which was tried as a bench trial by the Court. Federal

6

Rule of Civil Procedure 50 only permits a motion for judgment as a matter of law on issues that “a

7

party has been fully heard on . . . during a jury trial” and where the court finds “that a reasonable

8

jury would not have a legally sufficient evidentiary basis to find for the party on that issue[.]”

9

Fed. R. Civ. P. 50(a) (emphasis added). Rule 50 therefore does not apply to the issue of causal

10

nexus or the award of defendant’s profits, which were equitable issues tried to the Court. See

11

Sullins v. Exxon/Mobil Corp., No. 08-04927 CW, 2011 WL 8077086, at *2 (N.D. Cal. Jan. 26,

12

2011) (“Because the claims at issue here are equitable and have been tried to the Court in a bench

13

trial, Rule 50, which applies to jury trials, is not applicable. Therefore, Defendant’s Rule 50

14

motion is denied.”). Disney’s motion is denied as to the issue of causal nexus and the award of

15

defendant’s profits.

CONCLUSION

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17

Because the Court finds that Rearden has failed to introduce legally sufficient evidence for

18

a reasonable jury to find in its favor as to vicarious copyright infringement, the Court grants

19

Disney’s motion for judgment as a matter of law.

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23

IT IS SO ORDERED.
Dated: August 26, 2024
______________________________________
JON S. TIGAR
United States District Judge

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