Philips Medical Systems Nederland B.V. v. TEC Holdings, Inc.

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION

3:20-cv-21-MOC-DCK

PHILIPS MEDICAL SYSTEMS, )

NEDERLAND, B.V., et al., )

)

Plaintiffs, )

)

vs. ) ORDER

)

TEC HOLDINGS, INC., et al., )

)

Defendants. )

___________________________________ )

THIS MATTER is before the Court on a Motion for an Award of Pre- and Post-

judgment Interest (the “Motion”), filed by Plaintiffs Philips Medical Systems Nederland B.V.,

Philips North America LLC, and Philips India Ltd. (collectively, “Philips”). (Doc. No. 806).

I. BACKGROUND

Plaintiff Philips filed this lawsuit on July 28, 2017, seeking damages from Defendants for

violations of the Computer Fraud and Abuse Act (“CFAA”) and the Digital Millennium

Copyright Act (“DMCA”), among other causes of action. This Court granted summary judgment

to Philips on its CFAA and DMCA claims, leaving the amount of Philips’ damages for trial.

(Doc. No. 641).

At trial, the jury returned a verdict awarding Philips $512,096.00 in actual damages for

Defendants’ violations of the CFAA and DMCA, and $3,656,034.90 in Defendants’ profits for

Defendants’ violations of the DMCA.1 (Doc. No. 776). Because Philips would not seek

1 The jury also awarded Philips $1,176,250.00 in statutory damages for Defendants’ violations of

the DMCA, but Philips has elected to recover the jury’s award of Philips’ actual damages and

Defendants’ profits, subject to the outcome of post-trial motions, appeals, new trials, or

1

duplicative awards of actual damages, the total amount of the judgment based on the jury’s

verdict would be $4,168,130.90. Philips now moves for pre-judgment and post-judgment interest

on the jury’s award. According to Philips, North Carolina’s 8% interest rate should be applied to

the full amount of Philips’ award over a 10-year period (from November 2013 through the date

that judgment is entered), resulting in a pre-judgment interest award of $3.2 million. (Doc. No.

807 at 2–3).

Philips further contends that it is entitled to post-judgment interest on the entire amount

of the $4,168,130.90 judgment, plus any pre-judgment interest awarded, any attorney’s fees

awarded, and any costs awarded. Philips therefore requests that the Court award post-judgment

interest in an amount to be determined once Philips’ damages, fees, costs, and pre-judgment

interest have been determined.

In response to the motion, Defendants do not oppose Philips’ request for post-judgment

interest. However, Defendants oppose Philips’ request for prejudgment interest.

II. DISCUSSION

The Court will grant Philips’ motion as to post-judgment interest. However, the Court

denies the motion for pre-judgment interest, as it would be inappropriate to award pre-judgment

interest under the circumstances of this case. First, “[t]he essential rationale for awarding

prejudgment interest is to ensure that an injured party is fully compensated for its loss.” City of

Milwaukee v. Cement Division, Nat’l Gypsum Co., 515 U.S. 189, 195 (1995). Accordingly,

there is no basis to award prejudgment interest on a jury award, such as the award here, that is

based primarily on Defendants’ disgorged profits. See John G. Danielson, Inc. v. Winchester-

otherwise. (Doc. No. 784).

2

Conant Props., Inc., 322 F.3d 26, 51 (1st Cir. 2003) (affirming as “sound” district court’s denial

of prejudgment interest based on disgorged profits “because, unlike actual damages, the plaintiff

never had those funds and so deserved no compensation for the lost use of the money while the

case was pending”). Indeed, in enacting the similar remedial scheme under § 504(b) of the

Copyright Act, Congress explained that allowing recovery of both damages and profits

“recognizes the different purposes served by awards of damages and profits.” H.R. Rep. No. 94-

1476, at 161 (1976). “Damages are awarded to compensate the copyright owner for losses from

the infringement, and profits are awarded to prevent the infringer from unfairly benefiting from a

wrongful act.” Id. Moreover, as the U.S. Supreme Court has instructed, “interest is not recovered

according to a rigid theory of compensation for money withheld, but is given in response to

considerations of fairness” and “denied when its exaction would be inequitable.” Board of

Comm’rs of Jackson Cnty. v. U.S., 308 U.S. 343, 352 (1939); see also Cotter v. E. Conference of

Teamsters Retirement Plan, 898 F.2d 424, 429 (4th Cir.1990) (“Prejudgment interest is not

intended to be punitive in nature.”).

As Defendants note, neither the DMCA nor the CFAA expressly allows prejudgment

interest. Nor does the Copyright Act of 1976. See, e.g., U.S. Payphone, Inc. v. Executives

Unlimited of Durham, Inc., 931 F.2d 888, 1991 WL 64957, at *4 (Apr. 29, 1991) (per curiam)

(unpublished). Defendants note that the U.S. Supreme Court has not ruled on whether

prejudgment interest is available under these statutes. At least for the Copyright Act, the Federal

Courts of Appeal are split on the availability of prejudgment interest. Cf., e.g., Robert R. Jones

Assocs., Inc. v. Nino Homes, 858 F.2d 274, 282 (6th Cir. 1988) (holding that prejudgment

interest is not available under the Copyright Act); with, e.g., William A. Graham Co. v.

Haughey, 646 F.3d 138, 151 (3d Cir. 2011) (reaching the opposite conclusion).

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In U.S. Payphone, Inc. v. Executives Unlimited of Durham, Inc., the Fourth Circuit

affirmed the denial of a pre-judgment interest request in a Copyright Act case. U.S. Payphone,

1991 WL 64957, at *4. The court observed that the purpose of Section 504(b) of the Copyright

Act (which is nearly identical to Section 1203(c)(2), its DMCA counterpart) “is to compensate

the copyright owner and to discourage the infringer by disgorging his profits.” Id. Thus, while

the court declined to articulate a “universal rule,” it held that, because the plaintiff had been

awarded both actual damages and profits, the award would “sufficiently compensate [the

plaintiff] for its loss” and “any additional sanction would serve no purpose.” Id.; see also id., n.6

(commenting that “[s]everal courts have refused to grant prejudgment interest in cases arising

under the Copyright Act of 1976” and collecting cases); In Design v. K-Mart Apparel Corp., 13

F.3d 559, 569 (2d Cir. 1994) (affirming denial of prejudgment interest in copyright case because

of plaintiff’s “sizable damage award”).

Here, the Court agrees with Defendants that it would not be fair to award Philips its

requested $3.2 million in prejudgment interest on top of a $4.1 million jury award. As

Defendants note, there has been no finding of actual copyright infringement. Indeed, Philips

voluntarily withdrew any such claim with prejudice before trial. Like the plaintiff in U.S.

Payphone, Philips has been adequately compensated by the jury’s award. See U.S. Payphone,

1991 WL 64957, at *4. “[A]ny additional sanction would serve no purpose.” Id. Thus, the Court

denies Philips’ motion to the extent that it requests pre-judgment interest.

III. CONCLUSION

Philips’ Motion for an Award of Pre- and Post-judgment Interest is GRANTED in

PART and DENIED in PART. That is, Philips is entitled to post-judgment interest, to be

determined when the final judgment is entered. Philips is not entitled to pre-judgment interest.

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IT IS, THEREFORE, ORDERED that:

Philips’ Motion for an Award of Pre- and Post-judgment Interest (the “Motion’”), (Doc.

No. 806), is GRANTED in PART and DENIED in PART.

agen

Max O. Cogburn i &

United States District Judge Felgen