The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
EXPRESS LIEN, INC. CIVIL ACTION
VERSUS NO: 19-10156
HANDLE, INC. ET AL. SECTION: “H”
ORDER AND REASONS
Before the Court is Defendants Handle, Inc. and Jeffrey Nadolny’s
Motion for Partial Summary Judgment (Doc. 191). Oral argument on
Defendants’ Motion was heard on June 4, 2021. For the following reasons, the
Motion is GRANTED IN PART and DENIED IN PART.
BACKGROUND
Plaintiff Express Lien d/b/a Levelset (“Express Lien”) is a New Orleans-
based construction payment and document management software platform for
parties in construction. Plaintiff distributes content and transacts business
through an online platform (the “Levelset Platform”) found at the URLs
“zlien.com” and “levelset.com.” Through the Levelset Platform, “construction
participants can monitor, exchange, file or record, and request hard-copy and
electronic information and documents related to construction payment and
construction projects generally, as well as exert[] and maintain[] control over
their security rights.”1 Visitors to the website can also purchase “self-help”
informational resources on construction-related topics. Plaintiff contends that
1 Doc. 1 at 3.
much of its downloadable content is registered for copyright protection and
that the website’s users are required to create an online account and agree to
the website’s Terms of Use (the “Terms”) before accessing its content.
Defendant Handle, Inc. (“Handle”) is a similar and competing
construction technology company headquartered in California. Plaintiff alleges
that Handle’s employee, Defendant Jeffrey Nadolny (“Nadolny”), created
multiple fictitious accounts with the Levelset Platform to improperly gain
access to Express Lien’s content. Plaintiff alleges that Nadolny then copied and
reverse engineered its Levelset Platform for Handle’s benefit and in derogation
of the Terms of Use. On May 7, 2019, Plaintiff filed this suit against Handle
and Nadolny (collectively “Defendants”) for breach of contract, fraud, violation
of the Louisiana Unfair Trade Practices and Consumer Protection Law
(“LUTPA”),2 copyright infringement, and trade dress infringement. On May 3,
2021, Plaintiff voluntarily dismissed its claim for trade dress infringement.
Trial on Plaintiff’s remaining claims is set for June 21, 2021.
Now before the Court is Defendants’ Motion for Summary Judgment
wherein Defendants ask this Court to dismiss various aspects of Plaintiff’s
claims for fraud, LUTPA violations, copyright, and damages. Plaintiff opposes
the Motion.
LEGAL STANDARD
“The court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.”3 “As to materiality . . . [o]nly disputes over
facts that might affect the outcome of the suit under the governing law will
2 LA. REV. STAT. § 51:1401, et seq.
3 FED. R. CIV. P. 56.
properly preclude the entry of summary judgment.”4 Nevertheless, a dispute
about a material fact is “genuine” such that summary judgment is
inappropriate “if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.”5
In determining whether the movant is entitled to summary judgment,
the Court views facts in the light most favorable to the non-movant and draws
all reasonable inferences in his favor.6 “If the moving party meets the initial
burden of showing that there is no genuine issue of material fact, the burden
shifts to the non-moving party to produce evidence or designate specific facts
showing the existence of a genuine issue for trial.”7 Summary judgment is
appropriate if the non-movant “fails to make a showing sufficient to establish
the existence of an element essential to that party’s case.”8
“In response to a properly supported motion for summary judgment, the
nonmovant must identify specific evidence in the record and articulate the
manner in which that evidence supports that party’s claim, and such evidence
must be sufficient to sustain a finding in favor of the nonmovant on all issues
as to which the nonmovant would bear the burden of proof at trial.”9 The Court
does “not . . . in the absence of any proof, assume that the nonmoving party
could or would prove the necessary facts.”10 Additionally, “[t]he mere argued
existence of a factual dispute will not defeat an otherwise properly supported
motion.”11
4 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
5 Id. at 248.
6 Coleman v. Hous. Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997).
7 Engstrom v. First Nat’l Bank, 47 F.3d 1459, 1462 (5th Cir. 1995).
8 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
9 Johnson v. Deep E. Tex. Reg. Narcotics Trafficking Task Force, 379 F.3d 293, 301 (5th Cir.
2004) (internal citations omitted).
10 Badon v. R J R Nabisco, Inc., 224 F.3d 382, 393–94 (5th Cir. 2000) (quoting Little v. Liquid
Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994)).
11 Boudreaux v. Banctec, Inc., 366 F. Supp. 2d 425, 430 (E.D. La. 2005).
LAW AND ANALYSIS
In Defendants’ Motion for Partial Summary Judgment, Defendants
Handle and Nadolny ask this Court to dismiss five of Plaintiff’s alleged claims
against them. Specifically, Defendants ask that this Court dismiss: (1) claims
for fraud and LUTPA violations arising from Nadolny’s creation of fraudulent
accounts with the Levelset Platform; (2) claims for fraud and violations of
LUTPA and the Lanham Act arising from Handle’s misrepresentations to its
investors; (3) claims for liquidated or stipulated damages pursuant to the
Terms of Use; (4) claims for “actual damages” arising from Defendants’ alleged
“unfair benefit” and Plaintiff’s market value decline, and (5) claims against
Defendants for copyright infringement. The Court will address each argument
in turn.
I. Claims for Fraud and Violations of LUTPA Arising from
Nadolny’s Express Lien Accounts
In Plaintiff’s First Amended Complaint, Plaintiff alleges that Defendant
Nadolny, through and for the benefit of Handle, committed fraud and violated
LUTPA when he created multiple false accounts with deceptive and misleading
information to improperly gain access to Plaintiff’s products and services.
Specifically, Plaintiff alleges that Nadolny created two fraudulent accounts
with the Levelset Platform posing as (1) “JBN Supplier” with an address in
Arizona and (2) “Abbott Construction” with an address in North Carolina.
Under the guise of these companies, Plaintiff contends that Defendants created
various “transactions” with Plaintiff for allegedly fake projects in order to
access and copy Plaintiff’s material. In the instant Motion for Summary
Judgment, Defendants ask this Court to dismiss these claims against them as
Plaintiff cannot prove that Nadolny’s submissions to the Levelset Platform
constitute fraud or LUTPA violations.
A. Fraud
Under Louisiana Civil Code Article 1953, “[f]raud is a misrepresentation
or a suppression of the truth made with the intention either to obtain an unjust
advantage for one part or to cause a loss or inconvenience to the other.” To
succeed on a claim for fraud under this Article, the plaintiff must prove: (1) a
misrepresentation, suppression, or omission of true information; (2) the intent
to obtain an unjust advantage or to cause damage or inconvenience to another;
and (3) the error induced by a fraudulent act must relate to a circumstance
substantially influencing the victim’s consent to (a cause of) the contract.12 As
to the third element, the plaintiff “must at least be able to say that had he
known the truth, he would not have acted as he did to his detriment. Whether
this element is labeled reliance, inducement, or causation, it is an element of
plaintiff’s case for fraud.”13
Defendants contend that summary judgment should be granted as to
Plaintiff’s fraud claim because Plaintiff cannot prove that it relied upon the
alleged fraudulent account information. Plaintiff seems to concede that it does
not screen the visitors to its website and therefore could not have relied upon
the false user information in granting Defendants access to its platform. The
Court thus agrees with Defendants that Plaintiff cannot prove that, “if
Nadolny had consistently used truthful information at all times, Plaintiff
would have blocked Defendants’ access to the areas of Plaintiff’s website that
contain . . . protected and/or proprietary products.”14 To the extent that
Plaintiff’s fraud claim is based solely on Nadolny’s creation of the fraudulent
12 Koerner v. CMR Constr. & Roofing, L.L.C., 910 F.3d 221, 228 (5th Cir. 2018) (quoting
Shelton v. Standard/700 Associates, 798 So.2d 60, 64 (La. 2001) (internal quotations
omitted)).
13 Sun Drilling Prod. Corp. v. Rayborn, 2000-1884 (La. App. 4 Cir. 10/3/01), 798 So. 2d 1141,
1153, writ denied, 2001-2939 (La. 2002), 807 So. 2d 840 (citing In re Ford Motor Company
Vehicle Paint Litigation, 1997 WL 539665 (E.D. La.8/27/97)).
14 Doc. 41 at 19.
accounts and Plaintiff’s reliance on the information therein, Defendants’
Motion is granted.
Plaintiff, however, has alternatively asserted that Defendants also
committed fraud when they accepted the Terms of Use as part of a plan to copy
Express Lien’s content. Plaintiff explains that Defendants represented,
through their acceptance of the Terms of Use, that they would not use
Plaintiff’s material for certain purposes and that Plaintiff relied upon these
representations in allowing Defendants access to certain proprietary
information.15
Although “[f]raud . . . cannot be predicated on unfulfilled promises or
statements as to future events,”16 “[f]raud may be predicated on promises made
with the intention not to perform at the time the promise is made.”17 “It is this
present intention [not to perform] that avoids turning every breach of contract
into a fraud claim.”18 The Court finds that Plaintiff has presented sufficient
evidence that Nadolny registered fraudulent accounts to gain access to Express
Lien’s website, and this evidence in turn is sufficient to create a genuine issue
of material fact as to whether Nadolny intended to violate the Terms of Use at
the time he agreed to them. Defendants’ Motion as to Plaintiff’s fraud claim on
these grounds is therefore denied.
15 At oral argument, counsel for Defendants argued that Plaintiff had not sufficiently alleged
a claim for fraud premised upon Nadolny’s acceptance of the Terms of Use. The Court,
however, finds that Plaintiff’s First Amended Complaint sufficiently alleges law and facts to
support this additional fraud theory. See Doc. 41 at 19 (“Plaintiff justifiably relied on the
information and assurances presented to it by Defendants . . . Specifically, before accessing
certain content on Plaintiff’s website, on multiple occasions Nadolny agreed to abide by the
Terms governing access certain [sic] of the website’s content, products, and materials.”
16 Sun Drilling Prod. Corp, 798 So. 2d at 1152.
17 Id. (citing Dutton and Vaughan, Inc. v. Spurney, 600 So.2d 693, 698 (La. App. 4 Cir.
3/26/92)).
18 Keenan v. Donaldson, Lufkin & Jenrette, Inc., 575 F.3d 483, 490 (5th Cir. 2009) (citing
Automatic Coin Enters. v. Vend–Tronics, Inc., 433 So.2d 766, 767–68 (La. App. 5 Cir. 1983)
(emphasis added)).
B. LUTPA
LUTPA provides a private right of action to any person injured by “unfair
methods of competition and unfair or deceptive acts or practices in the conduct
of any trade or commerce.”19 To sustain a cause of action under LUTPA, the
claimant must satisfy a two-prong test: “(1) the person must suffer an
ascertainable loss; and (2) the loss must result from another’s use of unfair
methods of competition and unfair or deceptive acts or practices.”20 “A practice
is ‘unfair’ when it offends established public policy and when the practice is
unethical, oppressive, unscrupulous or substantially injurious.”21 Thus, “‘the
‘range of prohibited practices under LUTPA is extremely narrow, and there is
‘a great deal of daylight between a breach of contract claim and the egregious
behavior the statute proscribes.’”22
Defendants argue that “[j]ust as Plaintiff cannot prove justified reliance,
it also cannot prove that it suffered any loss ‘as a result of the use or
employment by’ Nadolny’s submissions of information to its website.”23
Actionable conduct under LUTPA, however, is not necessarily coextensive with
fraudulent conduct.24 “Louisiana courts have described a trade practice as
deceptive [under LUTPA] when it amounts to ‘fraud, deceit or
19 LA. REV. STAT. §§ 51:1409A, 51:1405A.
20 Id. at 450 (citing Cheramie Serv., Inc. v. Shell Deepwater Prod., Inc. 35 So.3d 1053, 1057
(La. 2010).
21 NOLA 180 v. Treasure Chest Casino, LLC, 11-853 91 So. 3d 446, 449 (La. App. 5 Cir.
3/27/12), writ denied, 90 So. 3d 1066 (La. 2010) (citing Hernaez v. Mothe Life Ins. Co., 28
So.3d 454, 458 (La. App. 5 Cir. 2009); Risk Management Services, LLC v. Moss, 40 So.3d 176,
185 (La. App. 5 Cir. 2010)).
22 Cargill, Inc. v. Degesch Am., Inc., 875 F. Supp. 2d 667, 676 (E.D. La. 2012) (quoting
Cheramie, 35 So.3d at 1060; Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir. 1993).
23 Doc. 191-1 at 8.
24 See House of Raeford Farms of Louisiana LLC v. Poole, No. CV 19-271, 2021 WL 1081837,
at *8 (W.D. La. Mar. 18, 2021) (finding that Plaintiff failed to state a claim for fraud but that
Plaintiff sufficiently stated a claim under LUTPA) (“[Defendants] made no effort to
acknowledge the jurisprudence that holds that unfair practices are sufficient under LUTPA
and that fraud is not a necessary element of a LUTPA claim.”).
misrepresentation.’ Thus, it is clear that LUTPA claims are not limited solely
to allegations of fraud, but may be independently premised on a range of non-
fraudulent conduct.”25 The reasons for dismissing Plaintiff’s fraud claim as to
the fraudulent accounts do not necessarily justify dismissing Plaintiff’s related
LUTPA claim.
Moreover, the Court does not read Plaintiff’s First Amended Complaint
as alleging that Nadolny’s creation of the fake accounts alone constitutes a
LUTPA violation. Rather, Plaintiff alleges that Defendants violated LUTPA by
copying Express Lien’s content and misrepresenting its source to users and
investors.26 Although Plaintiff looks to the fraudulent accounts as evidence of
intent and the existence of an overall scheme, the accounts themselves are not
the core of Plaintiff’s LUTPA claim. For these reasons, Defendants’ Motion is
denied.
II. Claims Arising from Handle’s Alleged Misrepresentations to Its
Investors
As part of Plaintiff’s claim against Defendants for fraud and LUTPA
violations, Plaintiff alleges that Defendants made material misrepresentations
to their investors and consumers as to the original authorship of Handle’s
content and the capabilities of Handle’s software. Defendants ask the Court
to dismiss Plaintiff’s fraud and LUTPA claims to the extent they are premised
upon these alleged investor misrepresentations.27
25 Mabile v. BP, p.l.c., No. CV 11-1783, 2016 WL 5231839, at *25 (E.D. La. Sept. 22, 2016)
(citing Pinero v. Jackson Hewitt Tax Serv. Inc., 594 F. Supp. 2d 710, 720–21 (E.D. La. 2009);
Jefferson v. Chevron U.S.A. Inc., 713 So.2d 785, 792 (La. Ct. App. 1998)).
26 See Doc. 41 at 20–21 (Plaintiff’s listing of Defendants’ alleged actions that violate LUTPA).
27 Defendants also ask that the Court dismiss Plaintiff’s Lanham Act claim on these same
grounds. In a footnote, however, Defendants dispute that Plaintiff has even stated a claim
for unfair trade practices under the Lanham Act. Plaintiff responds, also in a footnote, that
it “has asserted a claim for unfair trade practices under LUTPA and the Lanham Act on a
false advertising theory . . .” See Doc. 14 n.21. To address whether Plaintiff’s investor-related
Lanham Act claims survive summary judgment, the Court would first need to address
whether Plaintiff has stated a claim under the Lanham Act. Provided the lack of briefing, the
Defendants first argue that Plaintiff’s investor-related fraud claim
should be dismissed as Plaintiff cannot prove that it justifiably relied upon
Handle’s statements to its investors. In response, Plaintiff clarifies that it “does
not contend that the misrepresentations to investors, standing alone,
represented actionable fraud against Express Lien. But it was part of the fraud
inflicted on Express Lien.”28 As it is undisputed that Plaintiff did not rely upon
Handle’s statements to its investors, the Court grants summary judgment on
Plaintiff’s fraud claim to the extent it is premised upon these representations.
Second, Defendants ask this Court to dismiss Plaintiff’s investor-related
LUTPA claim, contending that Handle’s misrepresentations to investors do not
qualify as “trade” or “commerce” and thus do not fall within LUTPA’s scope.
Again, LUTPA creates a private right of action to any person who suffers an
“ascertainable loss” as the result of “[u]nfair methods of competition and unfair
or deceptive acts or practices in the conduct of any trade or commerce.”29
Although LUTPA prohibits suits brought in a “representative capacity,”30
“LUTPA is not limited to misconduct committed ‘on behalf of the [plaintiff] or
in the course of [the plaintiff’s] commercial activities.’” Rather, LUTPA “covers
unfair ‘acts or practices in the conduct of any trade or commerce.” Further,
“LUTPA defines trade or commerce broadly” as:
. . . the advertising, offering for sale, sale, or distribution of any
services and any property, corporeal or incorporeal, immovable or
movable, and any other article, commodity, or thing of value
wherever situated, and includes any trade or commerce directly or
indirectly affecting the people of the state.
Court specifically declines to address the validity of Plaintiff’s purported Lanham Act claims
at this time.
28 Doc. 237-7 at 15.
29 LA. REV. STAT. §§ 51:1405(A); 51:1409(A); IberiaBank v. Broussard, 907 F.3d 826, 839 (5th
Cir. 2018).
30 LA. REV. STAT. 6 51:1402(10); IberiaBank, 907 F.3d at 840.
Here, the Court finds that Handle’s misrepresentations to its investors
fall within LUTPA’s scope as they are effectively an “advertising” or “offering
for sale” of Handle’s equities. Further, at least one of Plaintiff’s experts opines
as to the direct effect that Handle’s increased investments had upon Express
Lien’s revenue.31 Plaintiff has thus presented a genuine issue of material fact
as to whether it suffered an “ascertainable loss” because of Handle’s
misrepresentations to its investors.
III. Claims for Liquidated or Stipulated Damages Pursuant to
Plaintiff’s Terms of Use
Defendants next ask this Court to declare unenforceable the stipulated
damages clauses in the Terms of Use. Defendants argue that the stipulated
damages provisions do not approximate the actual damages suffered and are
thus unenforceable penalties under Louisiana law.32 Specifically, Defendants
take issue with the following stipulated damages: (1) $15,000 per “Free Form”
violation; $1,000,000 per instance of reverse engineering; and $30,000 for non-
willful copying and $150,000 for willful copying of Express Lien’s content.
Under Louisiana Civil Code Article 2005, “[p]arties may stipulate the
damages to be recovered in case of nonperformance, defective performance, or
delay in performance of an obligation.” Where parties have agreed to stipulated
damages, the court may not modify said damages unless “they are so
manifestly unreasonable as to be contrary to public policy.”33 “An obligee who
avails himself of a stipulated damages clause need not prove the actual
31 Doc. 237-10 at 10 (Report of Vanessa Claiborne).
32 Defendants also argue that the Terms of Use constitute a contract of adhesion as they were
not negotiated and are only posted to Plaintiff’s website. Defendants, however, provide no
law or evidence in support of this argument. Further, for the reasons already stated in
relation to Plaintiff’s Motion for Partial Summary Judgment, the Court finds that Nadolny
sufficiently accepted Plaintiff’s Terms of Use.
33 LA. CIV. CODE art. 2012.
damage” incurred.34 Nevertheless, “stipulated damages should reasonably
approximate the damages suffered by the obligee and not be penal.”35 Thus, a
party may provide evidence of actual damages, or the lack thereof, to
demonstrate that the stipulated damages are so unreasonably high as to be
contrary to public policy.36 Stipulated damages clauses are presumed
reasonable; thus, the party asserting unenforceability bears the burden of
proving that the clause is against public policy.37
Here, Defendants ask this Court to find that many of the stipulated
damages provisions in the Terms of Use are manifestly unreasonable and
contrary to public policy. Specifically, Defendants argue that the provisions are
against public policy because they are (1) ambiguous and thus set a “trap for
the unsuspecting visitor” and (2) “outside the bounds of any approximation of
reasonable damages.”38
Defendants first argue that the “Free Forms” and “Reverse Engineering”
stipulated damages provisions are so ambiguous as to constitute a per se
violation of public policy. With regards to the unauthorized use of “Free
Forms,” the stipulated damages provision provides that:
By using the Free Forms, you hereby agree to the following: 1)
That the Free Forms are provided solely for personal use as a
resource and/or a template; 2) As a resource and/or template the
Free Forms should not be mailed, filed, recorded, or otherwise used
in any other manner related to a construction or other project; 3)
The Free Forms may not be used in any commercial manner,
including reselling, or otherwise distributing . . .
Defendants argue that this provision is unfair and deceptive because the
34 LA. CIV. CODE art. 2009.
35 Mobley v. Mobley, 852 So. 2d 1136, 1139 (La. App. 2 Cir. 2003).
36 See id.
37 Util. Constructors, Inc. v. Perez, No. CV 15-4675, 2016 WL 5801363, at *5–6 (E.D. La. Oct.
5, 2016) (citing James Const. Grp., L.L.C. v. State ex rel. Dep’t of Transp. & Dev., 977 So. 2d
989, 998 (La. App. 1 Cir. 2007)).
38 Doc. 191 at 15, 16.
second restriction—prohibiting mailing, filing, etc.—contradicts elsewhere on
the website that encourages usage of the forms “as the user sees fit.”
Defendants disregard, however, that it is not the second restriction, but the
third—prohibiting commercial use of the forms—that is implicated in this case.
Thus, the Court need not decide whether allegedly “innocent” conduct
warrants $15,000 in stipulated damages as such conduct is not at issue here.39
Defendants further argue that the stipulated damages provision for
reverse engineering does not provide a fair and clear warning to users that it
also proscribes reverse engineering the website’s “navigational flow” or
“framework.” The Terms of Use, however, clearly state that:
You hereby explicitly agree you will not reverse engineer,
decompile, disassemble or otherwise attempt to derive the source
code, techniques, processes, algorithms, know how or other
information from the Company’s services, technology, products,
code, etc. (collectively, “Reverse Engineering”) or permit or induce
the foregoing. . . . Any information supplied to or obtained by you
under this section is confidential information of the Company . . .
and will not be disclosed to any third party or used to create any
software which is substantially similar to the expression of the
Company’s technology.40
The Court finds that the above language clearly prohibits reverse engineering
the Levelset Platform’s navigational flow to create a competing website.
Defendants’ Motion is accordingly denied on these grounds.41
39 Philippi v. Viguerie, 606 So. 2d 577, 579 (La. App. 5 Cir. 1992), writ denied, 609 So. 2d 226
(La. 1992) (“However, art. 2012 grants the court power to modify stipulated damages if those
damages are so manifestly unreasonable as to be contrary to public policy. As correctly stated
by appellant, the court’s sole inquiry in this matter is whether the stipulated damages of
$1,000.00 per violation of the non-competitive agreement is so manifestly unreasonable as to
be contrary to public policy.”).
40 Doc. 191-10 at 9.
41 Defendants also provide case law explaining that reverse engineering alone is a permissible
practice amongst competitors. Defendants, however, have not provided the Court with any
case law suggesting that this otherwise-permissible conduct cannot be proscribed by contract.
Second, Defendants contend that the stipulated damages for reverse
engineering, copying, or improperly using the Free Forms section of the
website do not approximate actual damages, are penal in nature, and are
therefore contrary to public policy. The Court finds, however, that there is a
genuine issue of fact as to the actual damages Plaintiff has or could be expected
to sustain as result of these violations. Indeed, Plaintiff’s expert, David
Blackburn, has opined that the stipulated damages “are reasonable and
consistent with the types of harm that would be expected to be suffered by
Express Lien.”42 This Court therefore defers to trial its ruling on the validity
of the at-issue stipulated damages.
The Court does agree with Defendants, however, that the enhanced
damages for willfully copying Express Lien’s content as opposed to non-
willfully copying content amount to an unenforceable penalty. Under the
section of the Terms of Use entitled “Intellectual Property Information,” the
Terms state, in relevant part, that:
By viewing the zlien website, the LienPilot web application, or any
other location of the Company’s information, data, or resources,
you specifically agree that if you violate this paragraph of these
Terms of Use, by making data extracted from the databases,
websites, or any other location of the information or resources,
available to third parties, or by including the extracted data in a
new database, website or compilation, you agree to pay zlien, Inc.
stipulated and liquidated damages in the amount of $30,000.00 for
each individual non-willful violation, and $150,000 for each
individual willful violation, as establishing actual damages from
the violation will be difficult or impossible to do accurately.
42 See Doc. 237-8 at 15 (Blackburn Report) (“[T]he harm from these types of damages can be
widespread and often includes, among other things, devaluation of the intellectual property
itself, devaluation of their business, lost value of customer relationships, damage to
reputation, business disruption, increases in capital costs, and increases in operational
costs.”).
Clearly, the discrepancy in stipulated damages for willful and non-willful
violations was not intended to approximate actual damages. Indeed, the Court
cannot discern how the intent of the user alters the actual damage to Plaintiff.
Plaintiff contends that “by drawing a distinction between willful and non-
willful conduct, the liquidated damages criteria set forth in the Terms of Use
accounts for other non-punitive purposes such as deterrence.”43 Plaintiff,
however, does not provide any legal support for this distinction, and the Court
cannot find any. Accordingly, the Court finds that $150,000 in damages for
willfully copying Plaintiff’s material is penal in nature and thus contrary to
public policy under Louisiana law. As to the $30,000 in stipulated damages for
non-willful conduct, the Court defers its ruling on the reasonableness of this
provision to trial.
IV. Claims for Actual Damages, Defendants’ Unfair Benefit, and the
Alleged Diminishment in Plaintiff’s Hypothetical Market Value
Finally, Defendants argue that the only evidence of damages presented
by Plaintiff is that of Defendants’ unfair benefit and Plaintiff’s diminished
market value. Moreover, Defendants assert that any alleged unfair benefit and
diminished market value do not qualify as “actual damages” and are therefore
unrecoverable under any of Plaintiff’s alleged causes of action. In response,
Plaintiff argues that such damages are consistent with the “flexible approach
to the computation of damages in intellectual property cases” taken by the
Fifth Circuit.44
After considering the parties’ submissions, the Court does not find these
issues sufficiently briefed so as to allow the Court to make the relevant rulings
at this time. As trial is set to begin in this matter shortly, the Court resolves
to defers its ruling on these issues to trial.
43 Doc. 237-7 at 16.
44 Id.
V. Claims for Copyright Infringement
Finally, Defendants assert that Plaintiff cannot bring claims for
copyright infringement for the duplication of unregistered material. In its
Opposition, Plaintiff clarifies that its copyright claim is limited only to that
material which is federally registered. Thus, to the extent that Plaintiffs
original and subsequent complaints can be read as bringing a copyright claim
for unregistered material, Defendants’ Motion is granted.
CONCLUSION
For the foregoing reasons, Defendants’ Motion for Partial Summary
Judgment (Doc. 191) is DENIED IN PART and GRANTED IN PART as
explained herein.
Signed in New Orleans, Louisiana this 18th day of June, 2021.
Sf TRICHE iy.
UNITED STATES DISTRICT JUDGE
15