DeliverMed Holdings, LLC v. Michael Schaltenbrand
734 F.3d 616
7th Cir.2013Background
- In 2005 Swift, Schaltenbrand, and Siddle formed an oral general partnership to operate a mail-order pharmacy; profits were to be split by agreed percentages and costs reimbursed.
- The venture lost money overall (net loss ~ $400k from 2005–2009) but partners took nearly $4 million in distributions; partners commingled reimbursements and excessive withdrawals.
- Swift hired Deeter Associates to procure a logo; independent designer Kovin created the "house and pestle." No written copyright transfer to DeliverMed existed when DeliverMed applied for registration.
- In 2009–2010 partnership relations collapsed; Swift caused trademark and later copyright litigation to be filed, and in 2011 DeliverMed (at Swift’s direction) applied for copyright registration asserting a written transfer from Linda Deeter that did not yet exist.
- The district court, after a 14-day bench trial, found Swift knowingly misrepresented material facts in the copyright application, invalidated DeliverMed’s registration, awarded defendants attorneys’ fees, and rejected Swift’s breach-of-contract and numerous fraud claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Copyright-registration invalidation under 17 U.S.C. § 411(b) | DeliverMed: court erred invalidating registration; Swift did not knowingly misrepresent authorship or transfer | Defendants: Swift knowingly misrepresented ownership/transfer; registration should be invalidated | Reversed: district court erred by invalidating without requesting Register of Copyrights’ advisory opinion under § 411(b)(2); remanded for Register input |
| Attorneys’ fees under 17 U.S.C. § 505 | DeliverMed: award improper | Defendants: prevailing infringement defendants presumptively entitled; Swift’s deception supports fee award | Affirmed: no abuse of discretion; strong presumption for prevailing defendant and deterrence supports fees |
| Breach-of-contract claim for unpaid distributions | Swift: he was underpaid and entitled to additional distributions (alternative accounting methods) | Defendants: distributions matched agreement based on partnership profits; accounting Swift offers is unreliable | Affirmed: clear-error review supports district court finding Swift failed to prove deficiency or present reliable accounting evidence |
| Fraud claims omitted from final pretrial order | Swift: district court should have considered additional fraud theories | Defendants: pretrial order governs the issues for trial; omitted theories waived | Affirmed: claims not in final pretrial order were waived and properly excluded |
Key Cases Cited
- Johnson v. West, 218 F.3d 725 (7th Cir. 2000) (standard of review for legal conclusions from bench trial)
- Furry v. United States, 712 F.3d 988 (7th Cir. 2013) (clear-error standard for factual findings)
- Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (Sup. Ct. 2010) (registration prerequisite discussion)
- Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (fraud-related registration invalidation principles)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (Sup. Ct. 1994) (factors for awarding attorneys’ fees in copyright cases)
- JCW Invs., Inc. v. Novelty, Inc., 482 F.3d 910 (7th Cir. 2007) (abuse-of-discretion review of fee awards)