Energy Intelligence Group, Inc. et al v. Kayne Anderson Capital Advisors, LP et al

Filing 136

MEMORANDUM OPINION AND ORDER denying #101 MOTION for Summary Judgment Defendants' Motion for Partial Summary Judgment, granting in part and denying in part #105 Sealed Event, granting in part and denying in part #129 MOTION for Protective Order (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

United States District Court
Southern District of Texas

ENTERED
January 24, 2017

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

ENERGY INTELLIGENCE GROUP, INC.
and ENERGY INTELLIGENCE GROUP
(UK) LIMITED,

§
§
§
§
§
§
§
§
§
§
§
§
§

Plaintiffs,
v.

KAYNE ANDERSON CAPITAL
ADVISORS, LP and KA FUND
ADVISORS, LLC,
Defendants.

David J. Bradley, Clerk

CIVIL ACTION NO. H-14-1903

MEMORANDUM OPINION AND ORDER

Energy Intelligence Group, Inc. and Energy Intelligence Group
(UK)

Limited

(together,

"Plaintiffs"

or "EIG")

have sued Kayne

Anderson Capital Advisors, LP and KA Fund Advisors, LLC (together,
"Defendants"
before

the

Judgment

or

"Kayne")

court

are

for

copyright

Defendants'

(Docket Entry No.

101),

infringement.

Motion

for

Plaintiffs'

Partial

Pending
Summary

Motion for Partial

Summary Judgment on Defendants' Affirmative Defenses ("Plaintiffs'
MPSJ")

(Docket

Entry

No.

105) ,

and

Plaintiffs'

Protective Order (Docket Entry No. 129).
below,
denied,

Defendants'
Plaintiffs'

Motion

for

a

For the reasons stated

Motion for Partial Summary Judgment will be
Motion

for

Partial

Summary

Judgment

on

Defendants' Affirmative Defenses will be granted in part and denied

in part,

and Plaintiffs'

Motion for a

Protective Order will be

granted in part and denied in part.
I.

Background

A detailed history of the parties' business relationship as it
relates to the present litigation is provided in a prior opinion. 1
In short, EIG alleges that Kayne copied and distributed Oil Daily,
a subscription newsletter published by EIG, in violation of their
subscription agreements.

Since at least 2004 Kayne purchased a

single annual subscription to Oil Daily for an employee, Jim Baker.
That subscription was routinely forwarded to Kayne employees and
others who were not subscribers.
In 2007 an EIG employee received a forwarded email chain from
Diana Lerma, Baker's assistant, indicating that someone named "Ron"
was unable to access Baker's subscription.
account representative with EIG,

Peter Buttrick,

an

then contacted Lerma to discuss

purchasing additional subscriptions and alluded to the severity of
copyright infringement.
that

In a subsequent email Lerma advised Baker

Buttrick mentioned charging

infringement.

subscribers

retroactively

for

In the last recorded correspondence resulting from

that exchange, Buttrick attempted to set up a meeting with Baker.
Around that time Baker switched to receiving Oil Daily solely via
email rather than via web-access.

1

Memorandum Opinion and Order, Docket Entry No. 68.
-2-

In 2013 Kayne entered a multi-user license agreement with EIG,
paying for five Kayne employees to receive Oil Daily.
that until at least May 21,

2014,

EIG alleges

Kayne continued to distribute

unauthorized copies of Oil Daily.

EIG filed this action against

Kayne for copyright infringement on July 8, 2014. 2

Kayne filed a

motion for partial summary judgment based on the three-year statute
of

limitations

on copyright

actions,

3

which the

court denied. 4

Kayne renews that motion on the basis of new evidence and also
seeks

summary

judgment

allegedly infringed.

on

the

issue

of

the

number

of

works

EIG seeks summary judgment on a number of

Kayne's affirmative defenses and a protective order.

Each of the

motions is considered in turn below.
II.

Standard of Review

Summary judgment is appropriate if the movant establishes that
there is no genuine dispute about any material fact and the movant
is entitled to judgment as a matter of law.

Fed. R. Civ. P. 56(a).

Disputes about material facts are genuine "if the evidence is such
that a reasonable jury could return a verdict for the nonmoving
party."

Anderson v.

Liberty Lobby,

(1986).

The moving party is entitled to judgment as a matter of

2

Inc.,

Complaint for Copyright Infringement
Entry No. 1.

106 S.

Ct.

2505,

("Complaint") ,

2510

Docket

3

Defendants' Motion for Partial Summary Judgment, Docket Entry
No. 39, p. 2.
4

Memorandum Opinion and Order, Docket Entry No. 68, p. 25.
-3-

law if "the nonmoving party has failed to make a sufficient showing
on an essential element of her case with respect to which she has
the burden of proof."

Celotex Corp. v. Catrett, 106 S. Ct. 2548,

2552 (1986) .
A party moving for summary judgment "must

'demonstrate the

absence of a genuine issue of material fact,' but need not negate
the elements of the nonmovant' s case."
37 F.3d 1069, 1075 (5th Cir. 1994)
Celotex, 106 S. Ct. at 2553).

Little v. Liquid Air Corp. ,

(en bane)

(per curiam)

(quoting

"If the moving party fails to meet

this initial burden, the motion must be denied, regardless of the
nonmovant's response."
this burden,

Id.

If, however, the moving party meets

"the nonmovant must go beyond the pleadings"

and

produce evidence of specific facts demonstrating there is a genuine
issue for trial.

Id.

nonmovant

do

"must

(citing Celotex, 106 S. Ct. at 2553-54).
more

than

simply

show

that

metaphysical doubt as to the material facts."

there

is

The
some

Matsushita Electric

Industrial Co., Ltd. v. Zenith Radio Corp., 106 S. Ct. 1348, 1356
(1986).
"In order

to

avoid

summary

judgment,

the

nonmovant

must

identify specific facts within the record that demonstrate the
existence of a genuine issue of material fact."
Mining Company,
party

must

also

L.P.,

565 F.3d 268,

articulate

the

273

precise

CO, Inc. v. TXU

(5th Cir.
manner

2009).
which

the

submitted or identified evidence supports his or her claim."

Id.

(internal quotation marks and citation omitted).
-4-

in

"The

"When evidence

exists in the summary judgment record but the nonmovant fails even
to refer to it in the response to the motion for summary judgment,
that evidence is not properly before the district court."

Id.

(same).
In reviewing the evidence "the court must draw all reasonable
inferences in favor of the nonmoving party,
credibility determinations

or weigh

Sanderson Plumbing Products,

Inc.,

the

and it may not make

evidence."

Reeves

120 S. Ct. 2097, 2110

v.

(2000).

The court resolves factual controversies in favor of the nonmovant,
"but only when there is an actual controversy, that is, when both
parties have submitted evidence of contradictory facts."

Little,

37 F.3d at 1075.
III.

Defendants' Motion for Summary Judgment

Kayne moves for summary judgment on the issues of the number
of works infringed and limitations.

For the reasons stated below,

summary judgment will be denied.
A.

Number of Works

Kayne

argues

that

(approximately 250 issues)
Copyright Act .

a

5

annual

subscription

compilation

to

Oil

Daily

constitutes a single "work" under the

The collected issues,

considered a compilation.
of

an

Kayne

argues,

should be

Under the Copyright Act, "all the parts
constitute

5

one

work."

17

u.s.c.

Plaintiffs' Memorandum in Opposition to Defendants' Motion
for Partial Summary Judgment, Docket Entry No. 120, p. 5.
-5-

§

504 (c) (1).

In support of its argument Kayne cites Cullum v.

Diamond A Hunting,

Inc.,

484 F. App'x 1000

(5th Cir.

2012)

(per

curiam), and Bryant v. Media Right Productions, Inc., 603 F.3d 135
(2d Cir. 2010).

In Cullum the Fifth Circuit upheld the district

court's

judgment

summary

comprised a compilation.
Cullum

( 1)

ruling

that

a

series

484 F. App'x at 1002.

registered the photographs at

copyright registration number,

of

photographs

The plaintiff in

issue under a

single

(2) marked the disc that he filed

with the United States Copyright Office as "Set Number 1," and
( 3)

referred to

"collection."

the photographs

Id.

in the

record on appeal as a

In Bryant the Second Circuit held that "[a]n

album is a collection of preexisting materials -- songs -- that are
selected and arranged by the author in a way that results in an
original work of authorship -- the album."

603 F.3d at 140-41.

The court in Bryant also contrasted the issuance of an album with
the episodic release of a season of a television show, which the
Second Circuit had previously held was not a compilation.
141

(citing

Twin

Peaks

Productions,

Inc.

v.

Id. at

Publications

International, Ltd., 996 F.2d 1366, 1381 (2d Cir. 1993)).
EIG argues

that a

daily newspaper purchased by an annual

subscription is not a "compilation."

EIG states that Oil Daily

issues are registered as separate works in batches of approximately
twenty

issues

under

registration of newsletters. 6

6

regulations

federal

See 37 C.F.R.

Id. at 8.
-6-

permitting
§

group

202.3 (b) (9);

see

also 17 U.S.C.

§

408(c) (2)

(authorizing "regulations specifically

permitting a single registration for a group of works by the same
individual

author") .

EIG

also

states

that

it

never

created,

published, marketed, sold, or distributed a year-end compilation of
preexisting issues, a fact that Kayne does not dispute. 7
The court is not persuaded by Kayne's arguments.
of a work involves creation, not mere accumulation.

Authorship
The decision

to sell works by subscription does not combine several works into
one any more than allowing payment in installments divides one work
into several.

A compilation is, as the court in Bryant held, the

product of selecting and arranging preexisting materials to create
an original work; it is not the mere byproduct of choosing a sales
or distribution model.

An

issue

of

Oil

Daily

is

created by

selecting and arranging existing articles into a single work that
is then distributed to subscribers. 8
annual subscription,

by contrast,

The works that comprise an

are merely a byproduct of the

repeated creation of individual issues.
Moreover,
EIG' s

annual

unlike

the photographer's

subscriptions

registration number.

are

Nor are

not

collection

registered

they filed on a

similar medium or marked as a distinct set.

in Cullum,

under

a

single

single disc

or

Nor has EIG referred

to an annual subscription as anything analogous to a collection or

7

Id. at 9-10.

-7-

album.

Kayne has not shown that EIG's annual subscriptions are the

product of selection and arrangement resulting in an original work
of authorship.

Kayne is not entitled to summary judgment on this

issue. 9
B.

Statute of Limitations

Kayne

seeks

limitations.

partial

summary

judgment

on

the

issue

of

Although the court previously denied summary judgment

on this issue, Kayne moves the court to reconsider on the basis of
new

evidence. 10

Because

the

court

has

already

given

careful

consideration to the evidence presented in Kayne's previous motion
for summary judgment,
evidence

to

the court will focus on the newly offered

determine

whether

it

satisfies

Kayne's

independently or sheds new light on existing evidence.

burden

Kayne has

9

The parties dispute whether the individual issues have
"independent economic value."
Because the court determines that
the issues are distinct works for other reasons, it does not reach
that argument.
10

EIG objects to the characterization of recent depositions as
"new evidence" because Kayne was aware of the potential witnesses
prior to the previous motion and asks that the court deny the
motion outright.
" [B] ecause the denial of a motion for summary
judgment is an interlocutory order, the court is free to reconsider
and reverse its decision for any reason it deems sufficient, even
in the absence of new evidence or an intervening change in or
clarification of the law."
Smith v. H. E. Butt Grocery Co., 992
F.2d 324 (5th Cir. 1993) (citing Lavespere v. Niagara Mach. & Tool
Works, Inc., 910 F.2d 167, 184-85 (5th Cir. 1990); Bon Air Hotel v.
Time, Inc., 426 F.2d 858, 862 (5th Cir. 1970); Fed. R. Civ. P.
54(b)). Regardless of the proper characterization of the evidence
now before the court, the court will consider the motion in the
interests of a "just, speedy, and inexpensive determination" of
this action.
Fed. R. Civ. P. 1.
-8-

offered

no

new

infringement.

evidence

that

EIG

had

actual

knowledge

of

Kayne's new evidence addresses the issue of whether

EIG had notice of facts which,

in the exercise of due diligence,

would have led to actual knowledge.
F.2d 600, 606 {5th Cir. 1988)

See Jensen v. Snellings, 841

{discussing when limitations periods

commence under federal law) .
Since filing the prior motion for partial summary judgment,
Kayne has conducted depositions of several people employed by EIG
at the time of the 2007 email from Lerma and subsequent exchange,
including Thomas Wallin,

Mark Hoff,

and Peter Buttrick.

Kayne

alleges that Wallin's declaration 11 prompted the depositions on
which Kayne now relies.

Specifically, Kayne refers to the follow-

ing assertion in Wallin's Declaration:
In 2007, account representatives had every incentive to
pursue the issue where a customer discloses that
unauthorized copying of EIG's publications is occurring,
as any potential exposure to liability for unauthorized
copying creates leverage for EIG's sales staff to sell a
multi-copy license to the subscriber, which in turn
results in higher commissions for them. 12
Wallin's

statement

representatives,
incentivized

in

led

and
cases

Kayne

to

inquire

specifically
like

Kayne's.

into

Buttrick,
Kayne

whether
were
argues

account
in
that

fact
the

deposition testimony shows that Buttrick lacked incentive and, as
a result, failed to diligently investigate.

11

Declaration of Thomas Evans Wallin {"Wallin Declaration"),
attached to Plaintiffs' Memorandum in Opposition to Defendants'
Motion for Partial Summary Judgment, Docket Entry No. 50-3.
12

Id.

~

16.
-9-

Kayne

cites

the

following

exchanges

from

Buttrick's

deposition:
Q.

So let's say you caught someone with their hand in
the cookie jar -

A.

Uh-hum.

Q.

-- and they were -- let's say they're sharing with
five people.

A.

Uh-huh.

Q.

You followed up with them and had the talk -

A.

Uh-huh.

Q.

where you said you didn't have any trouble
getting aggressive with people and letting them
know
that
they
should
buy
the
additional
subscriptions -

A.

Uh-huh.

Q.

-- and they said, No thank you.

A.

Uh-huh.

Q.

And I said, what was the next step?

A.

So if -- if it was five subscriptions, I probably
wouldn't do anything; because to your earlier
point,
the cost benefit of chasing down an
additional four subscriptions for me, I'd probably
move on.
If it was a hundred, then I would not let that go.

Q.

And that's because of your bonus?

A.

Yeah.
And I might as well spend more of my time
trying to chase down either new business or a
larger deal.

Q.

So safe to say you were more diligent with larger
customers than smaller customers?

A.

Yes.
-10-

Q.

Is this single user the kind of account that you
said you wouldn't press very hard because it wasn't
worth it from a commission standpoint?

A.

Yes. 13

Kayne argues that these exchanges prove that EIG did not exercise
reasonable

diligence

to

discover

the

alleged

"Generally,

the reasonableness of plaintiffs'

infringement. 14

actions,

including

the reasonableness of inquiring or failing to inquire,

is a fact

question for the jury."
WL 459770, at *8

Dodson v. Hillcrest Securities Corp., 1996

(5th Cir. 1996)

(citing Corwin v. Marney, Orton

Investments, 843 F.2d 194, 198 (5th Cir. 1988)

(discussing federal

discovery rule)) .

The hypothetical scenario presented to Buttrick

does

the

not

resolve

reasonable diligence
infringement.

factual
in his

There

is

no

question of whether he exercised
investigation of
dispute

that

Kayne's

Buttrick

suspected

initiated a

dialogue with Lerma about potential infringement, only as to the
content of the exchange and what happened afterwards.
Assuming arguendo that the deposition testimony showed that
EIG was

less

diligent

when

investigating

smaller

cases, summary judgment would still not be appropriate.
not relative, reasonableness is the standard.

infringement
Objective,

The evidence before

13

Buttrick Deposition Transcript, Exhibit K to Defendants'
Brief in Support of Their Motion for Partial Summary Judgment
("Defendants' Brief"), Docket Entry No. 103-12, pp. 40:15-41:18,
74:10-13.
14

Defendants' Brief, Docket Entry No. 103, pp. 18-19.
-11-

the

court would permit a

reasonable

fact-finder

to

infer that

Buttrick exercised due diligence in light of the facts known to him
at the time, and the court must draw such inferences in favor of
the non-movant. 15

IV.

Summary judgment will be denied on this issue.

Plaintiffs' Motion for Summary Judgment

i

I

EIG

moves

affirmative

for

summary

defenses . 16

For

judgment
the

on

reasons

several

of

Kayne's

stated below,

summary

I
I

judgment will be granted as to all defenses except for failure to
mitigate.

I
I
A.

Equitable Estoppel

Kayne asserts the affirmative defense of equitable estoppel.
EIG argues that Kayne has shown no sufficient evidence on any of

I
I
i
!

the elements of equitable estoppel.

Kayne responds that Buttrick's

admonition to Lerma that other subscribers had been required to pay
for retroactive subscriptions as a result of infringement estops
EIG from claiming any additional damages.

i

i

I

I
I

I
I
I

I

I

15

The parties also dispute whether EIG had the right to audit
Kayne and whether Kayne fraudulently concealed their infringement.
Because the fact issues identified above are sufficient to preclude
summary judgment, the court will not address these arguments.
16

A threshold issue in this case is what body of law should
govern equitable defenses.
See generally John T. Cross, The Erie
Doctrine in Equity, 60 La. L. Rev. 173 (1999). EIG cites to Texas
law.
Kayne has not argued for the application of any other law.
The court will apply Texas law at this stage absent any objection
or substantive briefing by the parties. See Sprint Solutions, Inc.
v. Precise Wireless International Inc., Civil Action No. H-15-0032,
2015 WL 2359519, at *3 (S.D. Tex. May 15, 2015).

I
I

I

I

I
I

'
~
~

~

~

~
~

i
"

H

-12-

t

[

~
g

I

In order to establish the defense of equitable estoppel,
copyright defendant must prove that:
facts of the defendant's
intended

that

its

(1)

the plaintiff knew the

infringing conduct;

conduct

be

acted

on

(2)

or

so

the plaintiff

acted

that

defendant had a right to believe that it was so intended;
defendant was ignorant of the true facts;

and

relied on the plaintiff's conduct to its injury.
Inc.,

344 F.3d 446,

Nimmer

&

453

David Nimmer,

(5th Cir.

2003)

a

(4)

the

(3) the

the defendant

Carson v. Dynegy,

(citing 4 Melville B.

Nimmer on Copyright

§

collecting cases applying this four-part test) .

13. 07

( 2002)

and

Analysis "focuses

on what the defendant has been led to reasonably believe from the
plaintiff's

conduct."

A.C.

Aukerman

Co.

v.

R.L.

Chaides

Construction Co., 960 F.2d 1020, 1034 (Fed. Cir. 1992).

Estoppel

in

patentee

the

analogous

patent

context

requires

that

the

communicate "that the accused infringer will not be disturbed by
the plaintiff patentee in the activities in which the former is
currently engaged."
entirely,

estoppel

sparingly."

Id. at 1042.
is

Because it typically bars suit

"a drastic

Keane Dealer Services,

remedy and must
Inc. v. Harts,

be

utilized

968 F. Supp.

944, 948 (S.D.N.Y. 1997).
Kayne argues that EIG's warning about what had happened to
other infringing subscribers indicates that EIG knew of Kayne's
alleged infringement.

Kayne then alleges that EIG intended for

Kayne to act in response to the warning by purchasing additional
subscriptions.

Kayne alleges that it was ignorant of the fact that
-13-

EIG intended to pursue relief beyond retroactive subscription fees.
Finally,

Kayne

allegedly

relied

upon

EIG's

representation

to

continue in its course of conduct to its detriment.
In sum, Kayne argues that it continued infringing because EIG
led

them

to

believe

that

it

would

not

pursue

damages

retroactive subscription fees for prior infringement.

beyond

Kayne would

have the court hold that Buttrick's passing reference to one way of
resolving infringement is sufficient to show that EIG effectively
abandoned its right to statutory damages or other relief.

Kayne

cites no cases holding that such conduct would support the drastic
remedy

of

equitable

estoppel.

Moreover,

even

assuming

that

Buttrick's warning was misleading, Kayne offers no evidence that it
acted in reliance on the warning, reasonably or otherwise.

Summary

judgment will be granted as to this defense.
B.

Implied License

Kayne asserts

the affirmative defense of

Although an exclusive license must be
nonexclusive

license

may

arise

implied license.

in writing,

"' [w]hen

the

an implied,

totality

of

the

parties' conduct indicates an intent to grant such permission.'"
Lulirama Ltd.,
872,

879

Inc. v. Axcess Broadcast Services, Inc., 128 F.3d

(5th Cir.

1997)

(quoting 3 Melville B.

Nimmer, Nimmer on Copyright§ 10.03[A]
omitted)).

Nimmer

&

David

(1997), at 10-41 (footnotes

EIG argues that Kayne has offered no evidence showing

that EIG intended to grant an implied license.
-14-

EIG further argues

that the existence of an express contract precludes the formation
of an implied contract.
Kayne
agreement

argues

that

the

existence

of

an

implied

license

"is not in dispute," 17 citing the following deposition

testimony from Wallin:
Q:

Paragraph 18 of the declaration, you reference
"EIG's
long-standing
policy
that
access
by
assistants for the purpose of sending a publication
to their supervisor is not an unauthorized use,
provided that their supervisor is a subscriber."
Can you tell me where that policy is recorded?

A:

I don't believe it is recorded.

Q:

So would you
then?

A:

Yes. I would say it's an unwritten policy, because
I don't know that it's recorded.

Q:

And how is
subscribers?

A:

I don't think it's communicated to the subscribers,
per se.

Q:

Continuing to read that sentence, it says, "Except
as otherwise noted in Section l(c), no content from
EIG services may be downloaded,
transmitted,
broadcast, transferred, assigned, reproduced, or in
any other way used or disseminated in any form to
any person not specifically identified herein as
an" -- excuse me, "as an authorized user without
the explicit written consent of Energy Intelligence
in each instance."

say

that

that

it's

policy

an unwritten policy

communicated

to

your

Did I read that correctly?

17

Defendants' Response to Plaintiffs' Motion for Partial
Summary Judgment on Defendants' Affirmative Defenses, Docket Entry
No. 118, p. 15.
-15-

A:

I think you did.

Q:

Is that a
statement of
subscribers?

A:

I think that's correct.

Q:

But that's not a true statement, correct?

A:

In what sense?

Q:

Well, earlier you testified about an unwritten
policy that
allows
someone,
other
than
the
authorized user, to both download and do other
things with the publication.

A:

Yeah.
agent,
user.

Q:

And where does it say that in this agreement that
an authorized agent can take -

A:

I don't think it says it. It doesn't say it.

Q:

So but this agreement says that nobody can do those
things without explicit written consent -

A:

Right.

Q:

How is a subscriber supposed to know when it is
authorized versus when it's unauthorized to take
these actions regarding Oil Daily?

A:

I think this agreement is
stipulates
authorized and what's not authorized.

Q:

But it's in contradiction to the unwritten informal
agreement -

A:

Yeah.

Q:

that allows certain people that are not
authorized users to download and use the Oil Daily?

to

you, is that a fairly clear
the authority granted to your

That would be someone who's acting as an
assistant, or whatever to the authorized

-16-

what's

Right, right. 18

A:

Wallin's testimony merely articulates the common-sense reality
of ordinary business practices.
such

routine

tasks

as

Assistants are often employed for

retrieving

subscriptions.

If

Baker's

assistant logged in to EIG's website using his credentials for the
sole purpose of retrieving his subscription for his use under the
terms of the subscription license, no reasonable juror could find
that activity infringing, and therefore no license was necessary.
Assuming

arguendo

that

the

policy

could

give

rise

to

a

nonexclusive license, there is no indication that Kayne's conduct
was based upon the supposed existence of such an implied license or
that EIG' s policy was communicated to Kayne in any way.

"[A]

nonexclusive implied license need not be evidenced by a writing"
and

instead

Dynegy,

"may be

implied

344 F.3d at 451 n.S

from

conduct

or

(citing Lulirama,

granted orally."
128 F.3d at 879).

But there must be some conduct or expression from which a license
could be

implied.

Because

Kayne

offers

no

evidence

conduct, the defense fails as a matter of law.

of

such

Summary judgment

will be granted as to this defense.
C.

Failure to Mitigate

Kayne

asserts

affirmative defense.

EIG's

failure

to

mitigate

damages

as

an

The failure to mitigate is an affirmative

18

Wallin Deposition Transcript, Exhibit G to Defendants'
Response, Docket Entry No. 118-8, pp. 71:18-72:8, 88:13, 89:23,
91:1-13.
-17-

defense to infringement.

See Interplan Architects,

Thomas,

Inc.,

*47-*48

(S.D. Tex. Oct. 27, 2010)

that

Kayne

Civil Action No.

offers

"no

4:08-3181,

Inc. v. C.L.

WL 4366990,

2010

(collecting cases)

evidence

as

to

when

[EIG]

at

EIG argues
should have

'mitigated' damages, what actions should have been taken, how such
actions might have mitigated damages or the amount by which [EIG's]
damages would have been mitigated." 19
Although Kayne has not proven that EIG knew of the alleged
infringement as a matter of law for limitations purposes,

Kayne

faces a significantly lessened burden as a non-movant under the
summary judgment standard.
inferences

in

Kayne's

The court must draw all reasonable

favor

as

the

non-movant.

Because

a

reasonable fact-finder could infer EIG's actual or constructive
knowledge

from

the

available

evidence and

that

the

subsequent

alleged infringement could have been avoided, Kayne's mitigation
defense survives summary judgment.
D.

Unclean Hands/"Entrapment"

Kayne

asserts

the

defense

of

"unclean

hands"

and

or

"entrapment," arguing that "[EIG], by design, set a trap for Kayne
in an attempt to augment their purported damages. " 20
defense

is

recognized

only

rarely,

when

the

"[S]uch a
plaintiff's

transgression is of serious proportions and relates directly to the

19

Plaintiffs' MPSJ, Docket Entry No. 105, p. 23.

20

Defendants' Response, Docket Entry No. 118, p. 18.
-18-

4 Melville B. Nimmer &

subject matter of the infringement action."
David Nimmer, Nimmer on Copyright§ 13.09[B]
Ed.).

(Matthew Bender, Rev.

"The maxim of unclean hands is not applied where plaintiff's

misconduct is not directly related to the merits of the controversy
between the parties," but rather where plaintiff's wrongful acts "in
some measure affect the equitable relations between the parties in
respect of something brought before the court for adjudication."
Mitchell Bros. Film Group v. Cinema Adult Theater, 604 F.2d 852, 863
(5th Cir. 1979) (internal quotation marks omitted)

(quoting Keystone

Driller Co. v. General Excavator Co., 54 S. Ct. 146, 148 (1933).
Kayne does not argue that its infringement was innocent or
that it was enticed into infringing.

Instead, it argues that EIG

strategically delayed litigation in order to augment damages. 21
Kayne cites no examples, and the court can find none, of strategic
delay providing the basis for an unclean hands defense.

Whatever

increased damages may result from EIG' s alleged litigation strategy
are adequately addressed by other defenses,
of limitations and failure to mitigate.

including the statute

The court sees neither

need nor basis in the law to limit EIG's damages in this case on
the basis of unclean hands.

Summary judgment will be granted for

EIG as to this defense.
E.

Comparative Fault

Kayne argues that "[a] ny injury suffered by [EIG] was a result
of [EIG's] own conduct and/or failure to comply with the terms of
21

Id. at 18-19.
-19-

any relevant and applicable contract(s) or law(s)

II

22

Kayne offers

no factual basis for this defense, and does not respond to EIG's
arguments.

EIG

responsibility"

characterizes
or

the

"comparative

fault"

contrary characterization by Kayne,
defense

is

not

applicable

defense

to

a

"comparative

defense. 23

Absent

the court concurs.

copyright

Interplan, 2010 WL 4366990, at *48.

as

any

But that

infringement

claims.

Moreover, however the defense

is characterized, summary judgment will be granted for EIG because
there is no summary judgment evidence before the court to raise a
genuine issue of material fact as to this defense.
V.

Plaintiffs' Motion for A Protective Order

EIG moves

for

a

protective

Rule 30(b) (6) deposition notice.

order

in

response

to

Kayne's

EIG objects to several of Kayne's

proposed topics.
A.

Topic No. 1

Kayne seeks testimony relating to the details of settlement
agreements from prior litigation ("Topic No.

1") .

EIG asks the

court to strike the topic as irrelevant and not proportional to the
needs of the case. 24

District courts routinely exclude settlement

22

Defendants' Answer to Second Amended Complaint, Docket Entry
No. 91, p. 10 ~ 2.
23

24

Plaintiffs' MPSJ, Docket Entry No. 105, p. 27.

Plaintiffs'
No. 129, pp. 8-9.

Motion

for

a

Protective

-20-

Order,

Docket

Entry

licenses when their probative value is substantially outweighed by
the dangers of "unfair prejudice, confusing the issues, misleading
the

jury,

undue

delay,

cumulative evidence."
Ltd.

v.

have,

time,

or needlessly presenting

Fed. R. Civ. P. 403; see Fenner Investments,

Hewlett-Packard

WL 1727916, at *2
Courts

wasting

Co.,

Civil

Action

(E.D. Tex. April 28,

however,

No.

2010)

2010

(collecting cases).

relied on settlement

provide the most reliable licenses available.

6:08-273,

licenses

when they

ResQNet.com, Inc. v.

Lansa, Inc., 594 F. 3d 860, 872 (Fed. Cir. 2010)

(observing that a

settlement

the

license

was

the

most

reliable

on

record while

acknowledging the distorting effect of litigation) .
Kayne

argues

that

testimony on Topic No.

1

is

needed to

calculate damages on the basis of a hypothetical license fee.

25

The

court sees no such need given the availability of actual license
fees

from previous dealings between the parties and comparable

licenses

that did not arise

from

litigation. 26

As

EIG notes,

license fees arising in settlement are the result of a compromise
between parties faced with, or in the midst of, costly litigation. 27

25

Defendants' Response to Plaintiffs' Motion for a Protective
Order ("Defendants' Response-Protective Order"), Docket Entry
No. 131, pp. 4-9.
"Moreover,
[EIG has] produced a substantial amount of
information concerning [EIG' s] licensing practices during the
period of alleged infringement, including pricing, discounts and
all licensing options for [Oil Daily]. (see, e.g., Abbott Decl.,
Ex. C - H.)"
Plaintiffs' Reply in Support of Their Motion for a
Protective Order ("Plaintiffs' Reply in Support"), Docket Entry
No. 134, p. 9.
26

27

Id. at 10-11.
-21-

Courts have recognized the limited value of such agreements when
determining what

fee

the parties would have negotiated in the

ordinary course of business and only resort to such evidence when
settlements

provide

the

most

reliable

licenses.

See,

e.g.,

LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 77 (Fed.
Cir.

2012)

("license

environment

of

fees

patent

reasonable royalty").

that

are

litigation

are

tainted

by

unsuitable

the
to

coercive
prove

a

EIG has published subscription fees and has

negotiated licenses and discounts from which Kayne can calculate a
hypothetical license fee for its proposed damages model.

Because

the court concludes that the prior settlements are not the most
reliable licenses available in this case and that any probative
value therein is substantially outweighed by the balancing concerns
identified in Rule 403,
Topic No. 1.

the court will grant EIG's motion as to

Kayne will not be permitted to seek evidence on the

details of prior settlements arising out of litigation including
the publications infringed and the duration of infringement.

B.

Topic No. 12

Kayne seeks testimony on" [EIG's] decisions to take action, or
not take action,

in response to any suspected infringers of its

publications." 28

EIG objects to this topic but concedes that "if

questions

remain

about

[EIG's]

actual

policies

and

practices

regarding copyright enforcement, and the court limits Topic No. 12

28

Notice cited in Plaintiffs' Motion for a Protective Order,
Docket Entry No. 129, p. 11.
-22-

to

that

subject,

[EIG]

will

designate

a

corporate

witness

to

testify as to [EIG's] actual policies and practices for enforcing
[its] copyrights." 29

EIG's concession is reasonable.

Because the

court recognizes that testimony on this topic may be relevant to
Kayne's mitigation defense,

Kayne may inquire into EIG's actual

policies and practices for enforcing their copyrights.

But the

court will not extend the current deadlines to allow for additional
depositions or further discovery.
date

as

April

soon as

14,

The court intends to set a trial

possible after docket

2017.

The

parties

are

call,

advised

to

which

is

set

prioritize

for

their

schedules in late April and May accordingly.

C.

Topic Nos. 14 & 15
Kayne

seeks

testimony

Mr. Mark Wellman and Mr.

regarding

"[t]he

compensation

of

John Hitchcock and any other personnel

that are involved in enforcing [EIG's] copyrights"
and "[d]etails regarding the expenses

[EIG]

(Topic No. 14)

incur[s]

to run its

business including without limitation employee and executive and
owner compensation"

(Topic No. 15).

Kayne states that the parties

have come to agreement on these topics. 30
an agreement. 31

But EIG denies reaching

Kayne's evidence of "agreement" consists of emails

I

29

Plaintiffs' Reply in Support, Docket Entry No. 134, p. 14.

30

Defendants' Response-Protective Order, Docket Entry No. 131,

31

I

Plaintiffs' Reply in Support, Docket Entry No. 134, p. 15 &

p. 3.

I

<

n.S.
-23-

'
I

I

from EIG acknowledging Kayne's offer to "limit the scope of their
examination" on these topics to questions on documents that have
already been produced and EIG's request for Kayne to identify the
documents by Bates number. 32

EIG alleges that Kayne never followed

through by amending its Notice of Deposition or identifying the
documents. 33

Because these topics as presented are neither relevant

nor proportional

to

the needs

of

the

case,

Kayne will

not be

permitted to inquire into them.

D.

Topic No. 17
Kayne seeks testimony as to "[t] he amount of statutory damages

[EIG] demand[s] for all alleged infringements in this case, and if
[EIG] refuse[s] to make a specific demand then an amount that [EIG]
believe[s] is a fair amount and the facts to support any amount or
demand. " 34

The

court

agrees

with EIG that

this

impermissible request for a settlement demand.

amounts

to an

Kayne will not be

permitted to seek testimony on this topic.

VI.

Conclusions and Order

For the reasons discussed above, the court concludes that each
issue

of

Oil

Daily constitutes

a

single

work

and

that

annual

32

Emails from Stephen Ankrom, Exhibits A & B to Docket Entry
No. 131.
33

Plaintiffs'

Reply in Support,

Docket Entry No.

134, p.

15

n.8.
34

Rule 30 (b) (6) notice cited in Plaintiffs'
Protective Order, Docket Entry No. 129, p. 14.
-24-

Motion

for

a

subscriptions to a newsletter are not compilations under copyright
law.

The court further concludes that genuine issues of material

fact remain as to when the statute of limitations accrued for EIG's
copyright infringement claims arising more than three years before
EIG filed this action.

Accordingly, Defendants' Motion for Partial

Summary Judgment (Docket Entry No. 101) is DENIED.
The court concludes that summary judgment is warranted on the
defenses of equitable estoppel, implied license, unclean hands, and
comparative fault.
of

the

material
damages.

alleged
fact

Because the factual question of when EIG knew

infringement

remain as

Accordingly,

is

unresolved,

genuine

issues

of

to whether EIG failed to mitigate its
Plaintiffs'

Motion

for

Partial

Summary

Judgment on Defendants' Affirmative Defenses (Docket Entry No. 105)
is GRANTED in part and DENIED in part.
Plaintiffs'
No.

12 9)

Motion

for

a

Protective

Order

(Docket

Entry

is GRANTED in part and DENIED in part subject to the

limitations stated above.
SIGNED at Houston, Texas, on this 24th day of January, 2017.

UNITED STATES DISTRICT JUDGE

-25-