Andrew Leonard v. Stemtech International Inc, 834 F.3d 376

Background

Photographer Andrew Leonard owns copyrights to rare colored electron-microscope "stem cell" images, licensed selectively through an agency; he discovered widespread unauthorized uses beginning in 2007.
Stemtech, a supplement company selling through thousands of independent distributors, produced and provided marketing materials and company-hosted website templates that incorporated Leonard’s images and required distributors to use them.
Leonard negotiated a limited one-year magazine license for one image (Stemtech paid part but not all), then found his images on Stemtech websites, distributor sites, DVDs, videos, and other recruitment/marketing materials.
Leonard sued Stemtech for direct, contributory, and vicarious copyright infringement; a jury returned $1.6 million in actual damages for Leonard on direct and secondary liability theories.
District Court denied Leonard prejudgment interest and denied his request for infringer’s profits; it awarded some discovery-related fees to Leonard and denied Stemtech fees in a later suit; parties cross-appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Contributory infringement	Leonard argued Stemtech knew of distributor infringements and materially contributed by creating/providing infringing materials and requiring their use	Stemtech contended there was insufficient evidence of knowledge and material contribution	Affirmed: substantial evidence of distributor direct infringement, Stemtech knowledge, and material contribution supported contributory liability
Vicarious infringement	Leonard argued Stemtech had the right/ability to control distributors and financially benefited from use of images	Stemtech argued lack of control/right to police and no causal financial benefit	Affirmed: Stemtech’s contractual controls, website hosting, and financial relationship satisfied control and financial-benefit elements
Actual damages calculation	Leonard relied on expert Sedlik’s fair-market approach: benchmark licensing rates adjusted by scarcity/exclusivity multipliers to reach $1.4–$3M range	Stemtech argued multipliers were punitive, methodology unreliable, and past licensing history showed much lower value	Affirmed: Sedlik’s testimony admissible; multipliers treated as market-premium factors, jury award ($1.6M) within range and not grossly or constitutionally excessive
Infringer’s profits (§504(b))	Leonard sought profits based on Stemtech’s revenues and pervasive use of images	Stemtech argued no causal nexus tying profits to the images; evidence speculative	Affirmed summary judgment for Stemtech: plaintiff failed to show a reasonably related causal link to Stemtech’s gross revenue
Prejudgment interest	Leonard argued prejudgment interest is customary to make plaintiff whole and prevent unjust enrichment	Stemtech and District Court said $1.6M already compensated and calculating interest across many accrual dates is difficult	Reversed/Remanded: denial was an abuse of discretion; prejudgment interest must be considered and awarded unless explained reasons justify departure
Fee awards & discovery sanctions	Leonard sought fees for proving admissions; Stemtech sought fees as prevailing party in a later suit	Stemtech claimed delays and lack of importance; Leonard showed Rule 36 denials were wrongful; Stemtech argued second-suit fees warranted	Affirmed: District Court properly awarded partial Rule 37(c)(2) expenses to Leonard; denied Stemtech §505 fees for the second suit as filing was not objectively unreasonable

Key Cases Cited

Metro-Goldwyn-Mayer Studios Inc. v. Grokster, 545 U.S. 913 (secondary liability doctrines: contributory and vicarious infringement)
A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir.) (secondary liability requires predicate direct infringement)
Kay Berry, Inc. v. Taylor Gifts, Inc., 421 F.3d 199 (3d Cir.) (elements for direct infringement and volitional conduct)
CoStar Group, Inc. v. LoopNet, Inc., 373 F.3d 544 (4th Cir.) (volitional conduct and intermediary liability distinctions)
On Davis v. The Gap, Inc., 246 F.3d 152 (2d Cir.) (actual damages: fair market licensing value approach)
Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir.) (knowledge and ability to police for secondary liability)
Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159 (2d Cir.) (contributory liability standards)
William A. Graham Co. v. Haughey, 568 F.3d 425 (3d Cir.) (framework for infringer’s profits under §504(b))
Graham v. Haughey (Graham II), 646 F.3d 138 (3d Cir.) (prejudgment interest in copyright cases; equities favor award)
Fogerty v. Fantasy, Inc., 510 U.S. 517 (attorney’s fees discretionary in copyright cases)
Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979 (Supreme Court on discretionary fee awards and objective unreasonableness factor)
Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700 (9th Cir.) ("gross revenue reasonably related to the infringement" for infringer’s profits)