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Ninth Circuit:
Jury Verdict Against Disney Is Revived in Copyright Challenge
Opinion Says Judge Wrongly Granted Judgment as Matter of Law After Jurors Found Company Vicariously Liable for Infringement by Special Effects Company Hired to Help Produce Live-Action Remake of 1990s Cartoon Hit
By Kimber Cooley, associate editor
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Above is a poster promoting Walt Disney Picture’s “Beauty and the Beast,” released in theaters in 2017. The Ninth U.S. Circuit Court of Appeals yesterday reversed an order granting judgment as a matter of law in favor of the company, reviving a jury verdict finding it to be vicariously liable for copyright infringement committed by the special effects company it hired to perform facial capture technology in the live-action remake. |
A trial judge improperly granted judgment as a matter of law to Walt Disney Pictures after a jury found the entertainment company vicariously liable for copyright infringement committed by the special effects company it hired to perform facial capture services to animate one of the title characters in the 2017 live-action movie “Beauty and the Beast,” the Ninth U.S. Circuit Court of Appeals held yesterday.
The decision revives a jury verdict of nearly $600,000 against Disney in a lawsuit filed by Rearden LLC, a technology company formed by innovator Steve Perlman, alleging that the movie-maker was responsible for the actions of the special effects company that the plaintiff claims stole its facial capture technology.
Saying that District Court Judge Jon S. Tigar of the Northern District of California had wrongly found that Rearden failed to prove that Disney had the requisite influence over the contractor to justify vicarious liability, the court declared that the plaintiff had introduced legally sufficient evidence at trial for the jury to conclude that the media company had the practical ability to stop or limit the infringing conduct.
Yesterday’s opinion, authored by Circuit Judge Lucy H. Koh, also resolves a matter of first impression for the Circuit—whether the Copyright Act provides a statutory right to a jury trial on the disgorgement of profits remedy provided for in 17 U.S.C. §504(b), which provides that “[t]he copyright owner is entitled to recover…any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.”
Koh noted that case law has established that there is no accompanying constitutional right relating to the remedy, which is equitable in nature, and declared that “[b]ecause ‘[n]othing in the language of’ the Copyright Act ‘or its legislative history implies any congressional intent’ to provide a jury trial right on the profits remedy, we ultimately conclude” that no such entitlement exists.
Facial Capture System
At issue is MOVA Contour Reality Capture, a system that utilizes physical components—such as lights, cameras, and makeup—as well as a unique software program to record acting performances and translate facial movements into digital files used to animate computer-generated characters like the Beast.
Rearden developed the technology in the early 2000s and launched the product at a trade show in 2006. Over time, the company secured various intellectual property protections over MOVA, including a copyright on the MOVA software registered in February 2016.
In 2013, the MOVA assets were transferred to a newly formed company called MO2 LLC, which was under the control of Gregory LaSalle, who had operated the system for Rearden on multiple movie projects.
According to Rearden, LaSalle surreptitiously organized a sale of the assets from MO2 to Shenzhenshi Haitiecheng Science & Technology Co. (“SHST”) before accepting a job at an affiliated company, Digital Domain 3.0 (“DD3”). Disney contracted with DD3 for the visual effects work on “Beauty and the Beast” in March 2015 under an agreement that gave the media giant broad control over the process.
In its July 2017 complaint against Disney, Reardon alleged:
“[I]n all of the…media accolades about the record-breaking success of Beauty and the Beast,…nowhere is it mentioned that the patented and copyright-protected MOVA Contour technology was stolen from its inventor and developer….Nowhere is it mentioned that…Disney had previously contracted with Rearden LLC and its controlled entities on four previous major motion pictures to use MOVA Contour….Disney nonetheless contracted with the thieves to use the stolen MOVA Contour system. And, nowhere is it mentioned that after Rearden…[was] in widely-reported litigation against the thieves, Disney secretly used MOVA Contour in Beauty and the Beast.”
In August 2017, a court determined that MO2’s sale of the MOVA assets was ineffective and DD3 never had the right to use the technology.
Broad Control
After a two-week trial on the sole claim for vicarious copyright liability in December 2023, the jury found for the plaintiff in the amount of $250,638 in actual damages and issued an advisory verdict that Disney’s profits attributable to infringement were $345,098.
Tigar adopted the advisory verdict and judgment was entered in favor of Rearden. However, the following August, the judge granted Disney’s motion for judgment as a matter of law (“JMOL”), saying:
“[I]n order for a defendant to have the practical ability to limit or stop infringing conduct, it must have the practical ability to observe the conduct and recognize when that conduct is infringing. In other words, in order to control infringing conduct, one must be able to identify the infringing conduct.”
He added:
“[D]ue diligence would only confirm that the vendor in question could claim to have the right to operate its software and/or hardware.”
Yesterday’s opinion, joined in by Circuit Judges Consuelo M. Callahan and Bridget S. Bade, reverses the ensuing defense judgment. Koh noted that “[t]o prevail on a claim of vicarious liability for copyright infringement, a plaintiff must establish that the defendant has ‘[] the right and ability to supervise the infringing conduct…’ ” such that the entity has both the legal entitlement and the practical ability to stop or limit the challenged activities.
Identify Infringement
Saying that Tigar’s ruling that a defendant must be able to identify the infringing conduct in order to control it “is not without some support in our case law,” the jurist said:
“We need not and do not resolve the legal question of whether vicarious liability always requires proof that the defendant has the practical ability to ‘identify’ or ‘recognize’ specific conduct as infringing.….A narrow focus on the defendant’s ability to identify specific acts of infringement is in some tension with the historical roots of vicarious liability, as respondeat superior liability is premised on the relationship between the defendant and the tortfeasor, rather than the relationship between the defendant and the tort.”
She added “[e]ven assuming arguendo that such a showing is required, we conclude that Disney is not entitled to JMOL in this case.”
Disney argued that it lacked the practical ability to stop the infringement because studios do not have the bandwidth to police the ownership of every piece of software used by vendors in making films and, even if had confirmed that DD3 did not have the rights to MOVA, there was no way for it to recognize what uses would be impermissible given the then-ongoing litigation between Rearden and SHST.
Unpersuaded, Koh wrote “[b]ased on the evidence presented at trial, however, the jury could have reasonably…concluded that Disney had the practical ability to identify DD3’s use of MOVA as potentially infringing,” saying:
“Disney used only four visual effects vendors on [the film], of which DD3 was one of the two largest. Disney paid DD3 $31 million for its services, almost half of the film’s visual effects budget. Additionally, Rearden introduced evidence at trial showing that other motion picture studios had contacted Perlman in the past to conduct due diligence and confirm that their vendors had all necessary rights to operate the MOVA software.”
General Ability
She added that “the jury need not have relied only on Disney’s general practical ability to supervise and police its vendors,” pointing out that there was evidence presented of a February 2015 piece in the Hollywood Reporter covering the dispute over MOVA ownership and saying:
“Rearden introduced evidence at trial that a click through Rearden copyright notice appeared on computer screens that were used to process data during the MOVA capture sessions attended by [the film’s director Bill] Condon….It is true that…Condon testified that [he] did not actually see Rearden’s copyright notice and only reviewed footage that had this copyright notice removed. However, the jury could have found this testimony not credible.”
Addressing Disney’s claim that it could not have recognized the use as infringement because the underlying MOVA ownership dispute was not resolved until after the final use of MOVA on “Beauty and the Beast,” she remarked that “vicarious liability does not require actual or even constructive knowledge of infringement.” The jurist said:
“To limit vicarious liability to situations where infringement can be identified with certainty would effectively preclude vicarious liability in any situation where copyright ownership is actively disputed or where the direct infringer has a nontrivial fair use defense. We are not persuaded that copyright infringement liability is so limited.”
The case is Rearden LLC v. Walt Disney Pictures, 24-3970.
“Beauty and the Beast” earned more than $200 million in profits.
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