ENERGY INTELLIGENCE GROUP, INCORPORATED;ENERGY INTELLIGENCE GROUP (UK) LIMITED, Plaintiffs-Appellants Cross-Appellees
KAYNE ANDERSON CAPITAL ADVISORS, L.P.; K.A.FUND ADVISORS, L.L.C., Defendants-Appellees Cross-Appellants ENERGY INTELLIGENCE GROUP, INCORPORATED;ENERGY INTELLIGENCE GROUP (UK) LIMITED, Plaintiffs - Appellants
KAYNE ANDERSON CAPITAL ADVISORS, L.P.; K.A. FUND ADVISORS, L.L.C., Defendants-Appellees
Appeals from the United States District Court for the
Southern District of Texas
KING, HIGGINSON, and DUNCAN, Circuit Judges.
STEPHEN A. HIGGINSON, CIRCUIT JUDGE
Energy Intelligence Group, Inc. and Energy Intelligence Group
(UK) Limited ("EIG") collectively publish
information and news relevant to the global energy industry.
One of EIG's publications is Oil Daily, a daily
newsletter that provides news and analysis about the North
American petroleum industry.
Kayne Anderson Capital Advisors, LP and Kayne Anderson Fund
Advisors, LLC ("KA") collectively are a boutique
investment firm. Energy securities make up a substantial part
of KA's business. In 2004, KA began purchasing an annual
Oil Daily subscription for KA partner James Baker.
Between 2004 and 2014, Baker routinely shared his Oil
Daily access with fellow KA employees and other third
parties in violation of his subscription agreements and
copyright law. KA attempted to keep EIG from discovering
these activities, including by saving and sending Oil
Daily as a file named "123."
2014, EIG filed suit alleging numerous instances of copyright
infringement and violations of the Digital Millennium
Copyright Act ("DMCA"). As relevant to this appeal,
KA's defense rested on two theories: (1) EIG learned of
KA's infringement in 2007 but did nothing to investigate
or dissuade KA; and (2) EIG knew that many of its subscribers
improperly distributed its newsletters but consciously
declined to crack down on such sharing because litigating
copyright claims against large clients was more profitable.
The district court rejected KA's equitable estoppel and
unclean hands defenses at summary judgment but allowed KA to
proceed with a mitigation defense. The district court held
that "a reasonable fact-finder could infer . . . that
the subsequent alleged infringement could have been
March 2017, EIG confirmed to KA that it would seek statutory
damages on all claims. EIG then filed a pretrial memorandum
arguing that KA could not invoke mitigation as a complete
defense-in other words, regardless of whether EIG could
reasonably have avoided or prevented KA's acts, EIG
should receive damages within the mandated ranges for each
infringed work and each DMCA violation. On December 6,
2017, during trial, the district court orally overruled
EIG's argument. In May 2017, KA moved for referral to the
Copyright Office, alleging that EIG's copyright
registrations were based on inaccurate applications. In July
2017, the district court denied KA's referral motion
after finding no inaccuracies in EIG's applications.
trial in December 2017, KA persuaded the jury that EIG could
reasonably have avoided almost all the copyright and DMCA
violations at issue. EIG took nothing for those violations
and received $15, 000 in statutory damages for 39 infringed
works, which amounted to approximately half a million
dollars. Based on the Copyright Act's and DMCA's
fee-shifting provisions, as well as KA's Rule 68 motion,
the district court awarded EIG $2.6 million in attorney's
fees and $21, 000 in costs. Both parties timely filed notices
of appeal and their appeals were consolidated.
issue presented in EIG's appeal is one of first
impression: whether failure to mitigate is a complete defense
to liability for statutory damages under the Copyright Act
and the DMCA. The parties agree that EIG's failure to
mitigate is a relevant factor in deciding what statutory
damages ought to be imposed, but they disagree over whether
failure to mitigate can preclude liability altogether. EIG
says it cannot and urges the court to instate an award of
$25, 752, 500 ($15, 000 for each of 1, 646 works infringed
plus $2, 500 for each of 425 DMCA violations) in EIG's
favor. KA counters that mitigation is a complete defense to
liability and that the district court's award of $585,
000 in statutory damages was appropriate.
other issues are raised in KA's appeal. First, KA
contends that the district court erred in denying its §
411 motion for referral to the Copyright Register. Second, KA
argues that it should have received post-offer attorney's
fees under Rule 68.
that failure to mitigate is not a complete defense to
copyright or DMCA claims for statutory damages; the district
court properly denied KA's referral motion; and the
district court properly denied KA's post-offer
attorney's fees under Rule 68. Remand is necessary to
determine copyright damages because we cannot determine
whether the jury intended to award EIG $15, 000 per infringed
work. Remand is also necessary to re-calculate appropriate
awards, attorney's fees, and costs. If total damages
ultimately amount to more than $5 million (KA's Rule 68
offer), KA may no longer be eligible to recover post-offer
AFFIRM the district court's denial of KA's §
411(b) referral motion. We VACATE the judgment in full and
instate an award of $1, 062, 500 for EIG's DMCA claims.
We REMAND as to copyright damages, attorney's fees, and
costs, with the clarification that non-prevailing copyright
and DMCA defendants may not recover post-offer attorney's
fees under Rule 68.
Pre-Suit Factual Background
started working for KA in 2004 and began subscribing to
Oil Daily shortly thereafter. At the time,
approximately four other professionals worked in Baker's
office. Baker initially accessed Oil Daily by
logging in to EIG's website with a username and password,
which he shared with his co-workers so that they could also
access the publication.
Daily was always marked with copyright notices and
warnings compliant with the notice requirements of 17 U.S.C.
§ 401. Each newsletter contained a copyright notice on
the front cover and masthead.
January 2007, KA employee Ron Logan had trouble accessing
Baker's EIG account. On January 3, 2007, Baker's
assistant Diana Lerma emailed EIG representative Deborah
Brown for assistance, forwarding a KA internal email stating,
"Ron . . . was not able to access your [Baker's] oil
daily." Brown noticed the reference to "Ron"
accessing Baker's account. She testified in her
deposition that this "would send up a red flag that more
than the authorized user was accessing it" and recalled
that she "probably escalated the issue" to her
supervisors at EIG.
few hours later that day, EIG employee Peter Buttrick called
Lerma to discuss KA's subscription. After the call,
Buttrick indicated by email to Mark Hoff, EIG's Vice
President of Sales, that he had just spoken with Lerma
"[o]n the copyright issue - I discussed the severity of
the issue and advised her to schedule a call with her boss,
Jim Baker[, ] . . . and I as soon as possible to discuss
options." On KA's side, Lerma emailed Baker:
One hiccup: they want to know how many users we have. They
said that we need to confirm that you'd be the only
[sic] accessing the information; otherwise we would
be "sharing" and that is against their policy. Each
additional user is $1554 annually. They have recently found
multiple users on one account and then gone back to charge
that company for the excess. So they want to give us a heads
up to avoid this happening to us. What do you propose? Say 3
users so that you can continue your access and then add
myself and Ron? Or just you and I and just tell the others
not to go online to avoid tracking anything back to us via
the email addresses.
instructed Lerma to "[h]ave them [EIG] email the
document to me on a daily basis. No web-based access. Please
forward the document to the rest of the group."
Thereafter, Baker began receiving Oil Daily as an
emailed PDF, which his assistants regularly forwarded to
other KA employees.
upgraded its subscription in 2013 to allow five authorized
users and continued subscribing to Oil Daily through
2014. However, the number of KA employees accessing Oil
Daily far exceeded five. By 2014, 20 people in the
office regularly received the newsletter.
sharing Oil Daily internally within KA, Baker's
assistants also sometimes forwarded Oil Daily to
third party non-subscribers. For example, KA employee
Jennifer Rodgers regularly emailed copies of Oil
Daily to a company called Crestwood Midstream Partners.
In doing so, she named each file "123," seemingly
at both Lerma's instruction and Crestwood's request
to avoid detection by EIG. By contrast, when EIG emails Oil
Daily as a PDF to its subscribers, the PDF is named in
the format "DE" followed by the date in YYMMDD
format. At trial, EIG identified 425 instances where KA had
sent Oil Daily files named "123" to other
February 5, 2014, in response to a request for information by
EIG, KA employee Ana Pope ingenuously informed EIG Account
Manager Derrick Dent,
The Oil Daily is sent to one person in the office, Jim Baker.
He usually gets it the night before it is published for and
forwards it to me that night. When I get into the office that
next morning the first thing I do, around 7:40am, is email it
out to the 20 or so people in the office who have elected to
receive the oil daily every morning.
not immediately reply. On February 21, 2014, Pope emailed
Dent again, requesting, "Would you mind sending the oil
daily that usually goes to James Baker directly to me today?
James is out of town on the Pacific coast and probably
won't wake up for another few hours." Dent then
According to Kayne Anderson's site license agreement,
only five employees are granted access to Oil Daily
as Authorized Users. The agreement states that it is not
permissible to forward our publications to anyone who is not
an Authorized user. This kind of activity is in violation of
our license agreements and of our copyrights.
continued its normal practice of sharing Oil Daily
until May 2014, when EIG formally sent KA's general
counsel a letter complaining of infringement.
Relevant Pre-Trial Motions
filed suit against KA for copyright infringement on July 8,
2014. After filing suit and obtaining discovery, EIG learned
of KA's practice of sending Oil Daily as a file
named "123" to third parties. EIG amended its
complaint in October 2015 to add allegations that KA had
altered Oil Daily's "copyright management
information" ("CMI") in violation of the DMCA,
17 U.S.C. § 1202(b).
answer to the operative complaint asserted various
affirmative defenses, including that EIG's claims were
barred in whole or in part by its failure to mitigate
damages, equitable estoppel, and unclean hands or entrapment.
In January 2017, the district court granted EIG summary
judgment on KA's defenses of equitable estoppel and
unclean hands/entrapment, but denied EIG summary judgment on
KA's mitigation defense. KA does not directly appeal the
dismissal of its other defenses.
each defensive theory, KA argued that EIG pursued a litigious
business strategy of waiting for infringements to pile up and
then seeking outsized statutory damages. The district court
concluded that such conduct could support an affirmative
defense of mitigation, but not of equitable estoppel or
March 2017, EIG confirmed to KA that it would seek statutory
damages on all claims. In April 2017, EIG filed a pretrial
memorandum arguing that KA could not rely on mitigation as a
complete defense. As jury instructions were being finalized,
EIG conceded that mitigation could be a "limiting
factor" in assessing statutory damages, but continued to
argue that mitigation should not be submitted as an
"absolute defense" to liability for statutory
damages. The district court orally overruled EIG's
objection and decided that the verdict form would include
questions about whether EIG had failed to mitigate its
damages, and if so, how many acts of infringement EIG could
of a copyright is a prerequisite to obtaining statutory
damages for infringement. 17 U.S.C. §§ 411(a), 412.
EIG's original and amended complaints attached the
copyright registrations for the Oil Daily works at
issue. In April 2017, after being notified by email of
EIG's intent to seek statutory damages, KA stipulated to
the validity of EIG's copyright registrations in the
parties' joint pretrial order. However, in May
2017-nearly three years after EIG filed suit, one week before
the final pretrial hearing scheduled for May 11, 2017, and
six weeks prior to the June 19, 2017 trial date-KA moved for
a referral to the Copyright Office and a stay of district
court proceedings, arguing under § 411(b) that EIG's
copyright registrations were invalid. The district court
postponed trial to consider the motion. Relying on
DeliverMed Holdings, LLC v. Schaltenbrand, 734 F.3d
616, 625 (7th Cir. 2013), the district court found no
referral was needed because KA failed to establish that EIG
knowingly included inaccurate information in its registration
district court presided over a four-day jury trial from
December 4 to 7, 2017. In its opening statement, EIG argued
that KA had a "systematic" practice of sharing
Oil Daily internally and with other companies, and
had wrongfully shared at least 1, 646 separate issues.
KA's opening conceded that KA had improperly shared
Oil Daily and concealed its sharing from EIG. But,
over the course of trial, KA argued that EIG had a
"wait, don't warn" business model. KA argued
that EIG knew in January 2007 that Baker was sharing his EIG
credentials, yet sat on its hands by conducting no
investigation and by failing to warn Baker of the Copyright
Act's hefty statutory damages provision. KA admitted
evidence that made it difficult for EIG witnesses to dispute
that copyright litigation is an important component of
EIG's overall business strategy. For example, KA elicited
an admission from EIG's Director for Sales and Marketing
that he had written in 2014, "My number one priority
[is] contributing to litigation efforts."
close of trial, the district court instructed the jury to set
statutory damages in light of factors including (1) benefits
obtained by KA from infringement, (2) EIG's lost
revenues, (3) the difficulty of proving EIG's actual
damages, (4) the circumstances of KA's infringement, (5)
deterrence, and (6) the actions taken by EIG to mitigate
their damages. Separately, the district court instructed the
jury that EIG had a duty "to use reasonable diligence to
mitigate its damages, that is, to avoid or minimize those
damages," and could "not recover for any item of
damage that they could have avoided through reasonable
jury was presented with a special verdict form consisting of
fifteen questions. The key takeaways from the jury verdict
(1) KA infringed 1, 646 individual Oil Daily works
between December 29, 2004 and July 8, 2014 and should pay
$15, 000 in statutory ...