Fm Industries, Inc. v. Citicorp Credit Services, Inc.

614 F.3d 335 (2010)

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Nature of the Case

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Facts

P licensed its software to D. “TUCANS” was designed to help lawyers collect debts and let lenders monitor how the lawyers were doing. P published and licensed the software prior to filing its copyright registration. P sued D for copyright infringement claiming that D did not pay the agreed price and that D also induced its outside debt collection lawyers to continue using the program after the license expired. The suit also named the Law Offices of Ross Gelfand, LLC (D1) contending it continued using the software after D dropped its license and told outside lawyers to stop using the software. The district court dismissed D's request for damages because it failed to register the copyright until 2007. 'Statutory damages' are available only for infringement after registration, and then only if the registration occurred within three months of the work's publication (2004 for this version of TUCANS). Ds also contend that Michael Friedman (D's president and principal shareholder) owns the copyright as the recipient of assets from Ware Industries, Inc. when it dissolved in 2004. This would imply that the suit must be dismissed under Fed. R. Civ. P. 17(a), because not filed in the name of the real party in interest. Ds also maintained that no infringement was ongoing or in prospect. P never did produce a contemporaneous document showing a transfer of ownership to itself, and the district judge was understandably suspicious of an affidavit that Friedman executed while this suit, and his bankruptcy, were underway. Local rules require the parties to cooperate to produce a pretrial order. Rhine, the principal counsel for P, did not complete this task on time. When produced, it was egregiously non-compliant. Rhine allowed Friedman, a non-lawyer, to draft many of the papers that were filed over Rhine's name. Rhine allegedly reviewed and edited the documents before filing them. Rhine, who resumed legal practice in 2006 after 24 years as a judge bears the responsibility for amateurish and absurd filings. Rhine was warned to do his duties and that failure to do so would lead to dismissal for want of prosecution. After numerous attempts to get things fixed, the judge gave up and dismissed the remaining claims for want of prosecution. P moved for reconsideration and when the judge denied the motion to reinstate the dismissed claims, Rhine still had not submitted a draft for the pretrial order. Rhine's failure to act even with the benefit of this additional time was the district judge's main reason for denying the motion. The court ordered P to pay defendants' legal fees under 17 U.S.C. § 505. The judge also concluded that Rhine had vexatiously multiplied the proceedings and is liable for attorneys' fees under 28 U.S.C. § 1927. The judge made a further award under § 1927 against McGrath, a copyright specialist who Rhine had engaged to assist him. McGrath had signed only five of D's plentiful filings, but the judge deemed him fully responsible--perhaps more so than Rhine, a newcomer to copyright litigation. D was ordered to pay approximately $750,000 in attorneys' fees and the two lawyers were held jointly and severally responsible for $ 35,000. Ps appealed.