On April 1, 2002, the Court entered an Amended Final Judgment, in which Compaq (the accused copyright infringer) was awarded $2,765,026.90 in attorney's fees, the largest attorneys fees award ever in a copyright case. It was, however, far from being just a copyright case. It included other claims against Compaq, including unfair competition, misappropriation, unjust enrichment, quantum meruit and fraud, all of which were either dropped by the Defendants before trial or dismissed on summary judgment. The case also included the following unusual and extraordinary actions by the Defendants: a claim of damages in excess of $800 million, which the Court found to be unsupported in fact or law; three petitions for writ of mandamus to the Fifth Circuit Court of Appeals, all of which were denied; a motion for the judge to recuse herself; a motion to refer Compaq's counsel and its Board of Directors to the U. S. attorney for investigation under the Hobbs Act for alleged extortion; and refusals to comply with orders to provide discovery, leading to a separate award of sanctions during the litigation in the amount of $36,000. Many or all of these extraordinary actions by the Defendants also led the Court to award $101,822.75 in attorneys' fees of the $2,765,026.90 to Compaq against the Defendants' former counsel because of their "unreasonable and vexatious conduct."
BACKGROUND OF THE CASE
In 1992, Stephanie Brown, a concert pianist, and her husband Thomas Mowrey became aware of many claims of repetitive stress injuries (RSI) from persons alleging that those injuries were a result of keyboarding at a computer. They saw an opportunity to write a book which would allegedly help prevent those injuries, sell it to various companies, including computer manufacturers, and make a lot of money. Ms. Brown had been teaching proper posture at a piano for years, and believed that she could apply those teachings to keyboarding. She therefore undertook to write her book, which later became titled The HANDBook. It was completed in about mid 1993 and consisted of 100 pages and 88 pictures. Four of those pictures were actual photographs of Ms. Brown's hands on a keyboard in an incorrect position and in a correct position, both from a bird's-eye and a side view. The bird's-eye view, incorrect photograph included the legend: "Angled-wrist position-No." The bird's-eye view, correct position included the legend: "The Natural Line-Yes."
Mr. Mowrey started marketing The HANDBook in late 1993. As part of that effort, he provided multiple copies to an industry group of which Compaq was a member. One of those copies was forwarded to Cynthia Purvis, the head of Compaq's Human Factors Group in Houston, a group that ran studies on and investigated various posture-related issues. In late 1993 or early 1994, Ms. Purvis reviewed The HANDBook and liked it for a variety of reasons, including the fact that it included big, illustrative pictures and showed some of the concepts that she had thought about including in Compaq's already existing manual, Creating a Comfortable Work Environment, which had been included in the box with each computer that Compaq sold since 1991.
In early 1994 Compaq decided that it wanted to update its manual Creating a Comfortable Work Environment. Because of her position at Compaq and background in these issues, Ms. Purvis was assigned the primary responsibility for updating the existing manual. As a part of her effort, she met with another Compaq employee and explained the concepts that she wanted depicted, which included bird's eye and side view depictions of hands on a keyboard in the incorrect and correct positions. Illustrations were prepared by a Compaq employee who claimed that she had not seen The HANDBook and that she independently developed her depictions using the same style of CAD drawings, not photographs, that had appeared in Compaq's Creating a Comfortable Work Environment.
During the layout and drafting stages, Ms. Purvis prepared two memos, which became the centerpieces of the Defendants' claim of copyright infringement. In each of these memos, Ms. Purvis included notations to the effect of "Insert Illustrations 14,15, 16 and 17." Ms. Purvis acknowledged that she was referring to the bird's-eye and side view depictions in The HANDBook, but testified that these were not instructions to lift the actual photographs from The HANDBook, but rather was a reference to the concepts that she wanted to include in Compaq's new manual, which was given the name Safety & Comfort Guide. The legends for Compaq's CAD bird's-eye depictions were "Angled-wrist position-Incorrect" and "The Natural Line-Correct." No one from Compaq could explain the similarity in the legends in The HANDBook, nor did anyone remember having written those legends.
Another part of Mr. Mowrey's marketing effort was to contact all the major computer companies to pursue a license or sales of The HANDBook. He contacted Compaq in early February 1994 by phone and was referred to Ms. Purvis. They had a conversation that lasted for several minutes in the same general time frame that Ms. Purvis was working on the new drafts for the Safety & Comfort Guide. Mr. Mowrey claimed that Ms. Purvis asked for a licensing proposal, something that Ms. Purvis categorically denied. Mr. Mowrey followed up that conversation with a letter, in which he laid out a proposal to sell copies of The HANDBook to Compaq for $7.95 per copy in large quantities; the normal retail price was $19.95. Ms. Purvis dismissed the letter and never responded, because of the price and because Mr. Mowrey had provided no scientific research to support the claims made in The HANDBook, something that Ms. Purvis had specifically requested from Mr. Mowrey.
During 1994, Ms. Brown and Mr. Mowrey recognized that the book version was not commercially viable and therefore worked on developing a software version which would include many of the same concepts and photographs in The HANDBook. In the fall, Mr. Mowrey started marketing that software version, which was titled KeyMoves. One of the companies he contacted was Compaq. Compaq permitted Mr. Mowrey and Ms. Brown to come to Compaq in late 1994 and again in early 1995 to make a presentation about KeyMoves. On the first visit, Ms. Purvis gave Ms. Brown a copy of the yet-to-be-distributed Safety & Comfort Guide, because Ms. Purvis had included a reference to The HANDBook in the back under a section for more information. During the meeting, Ms. Brown saw the Compaq depictions and legends, immediately felt that there was infringement, became very upset, but said nothing. In fact, no claim was made against Compaq until late 1996, at which time Compaq had distributed literally tens of millions of the Safety & Comfort Guide. These facts led to a holding by the Court in the Amended Final Judgment that Compaq faced no liability, even if there had been infringement, under the defenses of laches and equitable estoppel.
During 1995 and 1996, Mr. Mowrey had sporadic contact with Compaq in an effort to market KeyMoves. By late 1996 Mr. Mowrey felt that he was not going to sell or license KeyMoves to Compaq and therefore sent a letter to Ms. Purvis, claiming that Compaq had misappropriated Ergonome's property. This was followed up by a letter from Ergonome's original counsel, asserting that Compaq was liable to Ergonome for at least $80,000,000 for copyright infringement. Based upon that assertion, Compaq initiated a declaratory judgment action in Houston against Brown and Ergonome, seeking a ruling that there was no infringement. Ergonome and Brown followed suit three days later by bringing an action for copyright infringement in New York City. That case was later transferred to Houston and consolidated with Compaq's action.
THE LITIGATION
In the Houston action, Brown and Ergonome brought a motion to dismiss for lack of personal jurisdiction. After discovery and briefing, the Court concluded that Ergonome was subject to jurisdiction in Houston, but that Brown was not. However, Brown had refused to provide discovery on Compaq's theory of alter ego jurisdiction, so the Court permitted Compaq additional discovery on that issue. Brown and Ergonome refused that discovery for almost two years, which eventually led to the $36,000 sanction against them and their former counsel. Mowrey was later added to the case on the same theory, and this became the basis for the award of attorney's fees against both Brown and Mowrey, individually and together with Ergonome.
Early in the litigation, Ms. Brown was told by Compaq's counsel that she might be liable for attorney's fees. This became the basis of the Defendants' motion to refer Compaq's counsel and Board of Directors to the U. S. Attorney for investigation under the Hobbs Act for extortion. Their theory was that Compaq and its counsel were trying to frighten Ms. Brown into improperly settling the case and thereby giving up her Constitutional right to a trial by jury. The Court made short shrift of this motion.
The Defendants also brought a motion to have the judge recuse herself. Their motion was based upon the fact that the judge's children held some Intel stock in a trust fund. The Defendants claimed that Intel and Compaq stock followed each other in the market and that a huge award against Compaq would adversely affect Intel stock. The Court also made short shrift of this motion, as did the Fifth Circuit in one of the three petitions for writ of mandamus brought by the Defendants.
The Defendants added various claims to the case, in addition to the claim for copyright infringement, including the claim for fraud. Their assertion was based upon a statement in an affidavit by Ms. Purvis during the jurisdictional phase of the case to the effect that she never had any interest in entering into a license with Ergonome. Ergonome claimed that this was contrary to what they had perceived, that they believed that Compaq had shown interest by asking for a proposal regarding The HANDBook, letting them demonstrate KeyMoves and talk with various Compaq employees, and that they had been strung along during the years 1994 through 1996. The fraud claim was dismissed on summary judgment just before trial, because Ergonome could not demonstrate two important elements of that cause of action: a material misrepresentation of fact by Compaq and justifiable reliance by Ergonome.
The Defendants' damage claim leading up to trial was for at least $845,928,410. It was based upon the assertion that Compaq had distributed over 46 million copies of the Safety & Comfort Guide and that they were entitled to $18.20 for each such distribution (retail price of The HANDBook, minus the printing cost.) Ergonome also claimed that it was entitled to Compaq's gross revenues (or at least profits) from the sale of the computers which included a copy of the Safety & Comfort Guide. This claim totaled in the billions of dollars. Compaq brought motions to exclude those theories of damages, on the bases that they were not supported in fact or law and that they were speculative. Compaq argued that it never would have taken a license at the retail price or even the discount price, and that Ergonome therefore could not have sold a copy of The HANDBook for each copy of the Safety & Comfort Guide that was distributed. Compaq also argued that consumers do not buy a computer because the Safety & Comfort Guide was included in the box, and that therefore Ergonome was not entitled to its revenues or profits from the sale of computers. The Court granted these motions on the eve of trial, leaving the Defendants to only a claim for statutory damages, which they disavowed during trial.
Trial began on July 2, 2001 and concluded on July 12, 2001. Among the many witnesses, Ms. Brown testified about how she had developed The HANDBook and the similarities between The HANDBook and Compaq's Safety & Comfort Guide; Ms. Purvis testified about her memos, how she had developed the Safety & Comfort Guide and all the prior works that included similar depictions and phrases at issue; Mr. Mowrey testified about his dealings with Compaq; and Compaq's CAD artist testified about how she had developed the Compaq illustrations.
The jury was asked to decide four primary issues: (1) had Compaq copied from The HANDBook; (2) were portions of Compaq's Safety & Comfort Guide substantially similar to protectable portions of The HANDBook; (3) was any copying minimal so as to avoid liability; and (4) did any copying constitute fair use because of the nature of the works and the minimal copying at issue. The jury decided that Compaq had copied, that portions of the works were substantially similar, but that the similarity was minimal and that Compaq was entitled to the fair use defense. Based upon the jury's verdict, the Court immediately entered a final judgment that the Defendants take nothing and that Compaq had not committed copyright infringement. The parties brought various post-trial motions, including Compaq's motion for attorneys' fees. That motion was granted in its entirety, the Court ruling that Compaq's counsel's time and fees were both appropriate and reasonable under the circumstances.