Filed: Dec. 17, 2007
Latest Update: Mar. 28, 2017
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 06-2260 PHOENIX RENOVATION CORPORATION, a/k/a Plumbing Express, a/k/a Phoenix Construction, Incorporated, Plaintiff - Appellant, versus PETER RODRIGUEZ; RADEK KOCI; ATLANTIC REPLUMBING, LLC, Defendants - Appellees. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. James C. Cacheris, Senior District Judge. (1:05-cv-01196-JCC) Argued: November 1, 2007 Decided: December 17, 2007 Bef
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 06-2260 PHOENIX RENOVATION CORPORATION, a/k/a Plumbing Express, a/k/a Phoenix Construction, Incorporated, Plaintiff - Appellant, versus PETER RODRIGUEZ; RADEK KOCI; ATLANTIC REPLUMBING, LLC, Defendants - Appellees. Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. James C. Cacheris, Senior District Judge. (1:05-cv-01196-JCC) Argued: November 1, 2007 Decided: December 17, 2007 Befo..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 06-2260
PHOENIX RENOVATION CORPORATION, a/k/a Plumbing
Express, a/k/a Phoenix Construction,
Incorporated,
Plaintiff - Appellant,
versus
PETER RODRIGUEZ; RADEK KOCI; ATLANTIC
REPLUMBING, LLC,
Defendants - Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. James C. Cacheris, Senior
District Judge. (1:05-cv-01196-JCC)
Argued: November 1, 2007 Decided: December 17, 2007
Before WILLIAMS, Chief Judge, and TRAXLER and KING, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: David Glenn Barger, WILLIAMS MULLEN MAUPIN TAYLOR, McLean,
Virginia, for Appellant. Lawrence J. McClafferty, MCCLANDISH &
LILLARD, Leesburg, Virginia, for Appellees. ON BRIEF: David H.
Bruns, Kathleen J. L. Holmes, Thomas J. McKee, Jr., WILLIAMS MULLEN
MAUPIN TAYLOR, McLean, Virginia, for Appellant.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Phoenix Renovation Corp. (“Phoenix”) appeals the district
court’s order finding Peter Rodriguez, Radek Koci, and Atlantic Re-
Plumbing, LLC (“Atlantic”) (collectively “Appellees”) not liable
for damages for copyright infringement and entering judgment in
favor of Appellees on Phoenix’s tort and contract claims under
Virginia law. Phoenix argues that the district court erroneously
failed to shift the burden of proof on its copyright claim to
Appellees pursuant to 17 U.S.C.A. § 504(b) (West 2000 & Supp.
2006), resulting in the mistaken conclusion that none of Atlantic’s
revenue was attributable to the copyright infringement. Phoenix
further contends that the district court erred in finding that
Rodriguez and Koci did not breach their Independent Contractor
Agreements with Phoenix by using their memories of the locations at
which they had performed work for Phoenix in marketing their
competing business and did not violate Virginia’s Business
Conspiracy Statute, Va. Code Ann. § 18.2-499 (2004 & Supp. 2007) by
infringing the copyrighted contract. For the following reasons, we
affirm.
I.
The parties do not dispute the relevant facts, which are as
follows:
2
A. Phoenix’s Business
Phoenix specializes in providing polybutylene (“PB”)
replacement services. PB replacement represents a niche business
within the plumbing industry that arose after it was discovered
that PB pipes are defective and can leak. The market for PB
replacement services is finite because once a house’s PB pipes have
been replaced, there will never be further need for such services
in that house.
Phoenix developed and continues to maintain records of the
names and addresses of its former customers in a proprietary
database. Phoenix considers the addresses contained in the
database to be valuable confidential information, because there are
no public records identifying buildings that contain PB pipes.
Houses with PB pipes, however, are often found on the same street
or in the same neighborhoods as other houses with PB. As a result,
a company that learns of the existence of PB pipes in one house can
often accurately predict that nearby houses also contain PB.
Phoenix has therefore developed a system of targeted direct mailing
that uses the homes of former customers as “center points” given to
direct mail vendors, who then send solicitations to all addresses
within defined radii. (J.A. at 340.)
B. Appellees’ Employment/Contracts with Phoenix
Phoenix hired both Rodriguez and Koci as employees in 1995.
Rodriguez performed drywall work, and Koci was a licensed master
3
plumber. During the course of their employment with Phoenix, both
Rodriguez and Koci asked to be treated as independent contractors
rather than employees, and Phoenix agreed. Koci entered into a
written Subcontractor Agreement with Phoenix on February 25, 2000,
and Rodriguez signed a nearly identical Subcontractor Agreement on
March 23, 2000.
The Subcontractor Agreements contained a provision entitled
“Disclosure of Trade Secrets and Confidential and Proprietary
Information,” which provides as follows:
The Subcontractor shall not, during or at any time after
termination of the subcontract, without prior written
authorization of the Company, disclose to, or make use
of, any trade secret or confidential or proprietary
information of the Company or its affiliates. Trade
Secrets and confidential or proprietary information
include, but are not limited to: customer lists, price
lists, insurance and other third party contracts,
marketing and sales plans and concepts, identity of key
customer or client personnel and their phone numbers, the
identity and requirements of customers and clients,
bidding and pricing information, personnel policies and
procedures, compensation and fringe benefit programs and
offer sales, business plans and methods, computer
programs and copyrightable work (models, processes,
designs, drawings, plans, prototypes, inventions,
devices, parts, improvements and other physical and
intellectual property), that were disclosed to the
Subcontractor or known by the Subcontractor as a
consequence of the subcontract and/or used by the
Subcontractor to carry out its duties under this
Agreement. . . .
(J.A. at 25.)1
1
The Subcontractor Agreements also contained a provision
entitled “Non-Solicitation and Covenant Not to Compete,” which
formed the basis of some of Phoenix’s claims before the district
court, but is not relevant on appeal.
4
While still working for Phoenix, Rodriguez and his then-
roommate, Kenneth Cocolin began to discuss forming a new PB
replacement business to compete with Phoenix.2 They recruited Koci
to join their venture. In early June 2003, prior to terminating
their subcontractor relationship with Phoenix, Rodriguez and Koci
performed several PB replacement jobs in neighborhoods in which
they had previously done PB replacement work for Phoenix. Also in
June 2003, they took steps to organize their business, which they
named “Atlantic Re-Plumbing.” (J.A. at 346.) On or about June 18,
2003, Rodriguez and Koci terminated their subcontractor agreements
with Phoenix.
C. Appellees’ Use of Information Gained from Their Employment
with Phoenix
Rodriguez and Koci initially marketed Atlantic’s services
primarily through the distribution of fliers on the same streets
and neighborhoods in which they had performed PB replacement work
for Phoenix. In determining which areas to target, Rodriguez and
Koci relied on their own memories; neither ever had access to
Phoenix’s database of customer information.3
2
Cocolin and Rodriguez soon disagreed about the nature and
scope of Cocolin’s duties, causing Cocolin to terminate his
relationship with the business after approximately two months.
3
Phoenix did provide Rodriguez and Koci with “job worksheets”
containing the address to which they were to report for each job
they did for Phoenix, but neither Rodriguez nor Koci retained any
of these job worksheets after forming Atlantic, and at no point did
they use the job worksheets to compete with Phoenix.
5
Rodriguez and Koci eventually began to market Atlantic’s
services through targeted direct mailing. They compiled mailing
lists based on “center points,” which were generally locations at
which they had performed PB replacement work for Phoenix.
In addition to using their prior knowledge of PB replacement
sites to market their services in competition with Phoenix,
Rodriguez and Koci also used their knowledge of Phoenix’s pricing
structure to gain a competitive advantage. Rodriguez had learned
of Phoenix’s pricing structure for PB replacement services during
his employment and subcontractor relationship with Phoenix. He
used this knowledge in an attempt to offer Atlantic’s services at
a lower rate than Phoenix’s. Rodriguez and Koci also relied on
their memories of what Phoenix had paid them as subcontractors in
determining what to pay Atlantic’s subcontractors and employees.
Although Koci did come across a Phoenix “pay sheet” while moving
Atlantic into a new office, neither he nor Rodriguez used or
purposefully retained a Phoenix “pay sheet” for use in competition
with Phoenix.
D. Appellee’s Use of Phoenix’s 2002 Interior Re-Pipe Agreement
In its PB replacement business, Phoenix uses a consumer
contract known as the “2002 Interior Re-Pipe Agreement.” While
Rodriguez and Koci worked with Phoenix, the 2002 Interior Re-Pipe
Agreement was neither marked as copyrighted nor kept hidden from
6
independent contractors, and Rodriguez and Koci were not advised
that it was confidential or protected by copyright.
Rodriguez and Koci retained a copy of the 2002 Interior Re-
Pipe Agreement after terminating their Subcontractor Agreements
with Phoenix. In or about June 2003, they retained an attorney to
determine whether they could use the 2002 Interior Re-Pipe
Agreement in their new business. The attorney advised Rodriguez
and Koci that they were entitled to use the document, which was not
subject to copyright protection. Nevertheless, Rodriguez and Koci
requested that Pugh draft a new consumer contract for Atlantic’s
use. Pugh drafted the new contract (hereinafter “the Infringing
Contract”) by making minor revisions to the 2002 Interior Re-Pipe
Agreement.
Appellees first used the Infringing Contract on August 30,
2003. They then used the Infringing Contract intermittently until
mid-to-late October 2005, at which point they began to use the
Infringing Contract on virtually all of their PB replacement jobs.
Prior to that time, Appellees had been using a form contract
purchased from an office supply store to serve the same ends. The
switch to the Infringing Contract reflected Rodriguez and Koci’s
belief that “it looked more professional” than the form contract
they had been using. (J.A. at 114.)
Generally, execution of the written agreement with a customer
was the final step before Atlantic began work. First, Atlantic
7
visited the potential work site, performed an estimate of the cost
of its services, and quoted the proposed price to the customer. If
a customer accepted the proposal, Atlantic scheduled a work date.
Atlantic never sent the Infringing Contract to a customer until
after the customer had accepted its proposal and scheduled a work
date. In many cases, Atlantic did not send the Infringing Contract
to the customer until the customer had paid a deposit equal to one-
third of the estimated price.
Appellees did not use the Infringing Contract to market
Atlantic’s services. Rather, they obtained business through
fliers, signs, and postcards, as well as through neighborhood
referrals, the Long & Foster Home Service Connection, and their own
website. Customers selected Atlantic for a variety of reasons,
including experience and price. No customer ever told Rodriguez or
Koci that he or she selected Atlantic based on the Infringing
Contract.
On several occasions, Appellees relied on the Infringing
Contract to collect balances owed by customers. Specifically,
Atlantic issued written correspondence citing specific provisions
of the Infringing Contract to five customers: Oakley, Polk, Bennet,
Quagliata, and Neal. Oakley remitted a sum fully satisfying the
unpaid balance, accompanied by a note stating that he paid because
he was pleased with Atlantic’s work. Polk failed to pay in full,
and Atlantic spent approximately $1,500 in legal fees to collect
8
the $1,606 owed. Bennet did not respond to two attempts at
collecting payment, and Atlantic eschewed further efforts to
collect the $400 owed, concluding that it would have been more
costly to enforce the contract than to collect the unpaid balance.
Atlantic spent approximately $7,000 in legal fees to collect the
balance of $3,618 owed by Quagliata. Atlantic also spent between
$1,000 and $1,500 in legal fees trying to enforce the Infringing
Contract against Neal, but failed to collect any of the funds he
owed to Atlantic.
On August 4, 2005, Phoenix registered the 2002 Interior Re-
Pipe Agreement with the United States Copyright Office. In
September 2005, Appellees’ counsel informed Rodriguez and Koci that
they were not entitled to use the Infringing Contract. Appellees
then paid counsel $2,711 to draft a new contract. Nevertheless,
Appellees continued to use the Infringing Contract consistently
until December 12, 2005, and then intermittently until January
2006, when, after 626 total uses, they ceased using the Infringing
Contract altogether.
E. The Present Litigation
On October 14, 2005, Phoenix filed a nine-count complaint
against Appellees in the United States District Court for the
Eastern District of Virginia, alleging: Copyright Infringement
against Atlantic, Koci, and Rodriguez (Count I); Breach of
Subcontractor Agreement against Koci and Rodriguez (Counts II-III);
9
Tortious Interference with Contract & Business Expectancy claims
against Atlantic, Koci, and Rodriguez (Counts IV-VI); Violation of
Virginia’s Business Conspiracy Statute against Atlantic, Koci, and
Rodriguez (Count VII); Unfair Competition against Atlantic, Koci,
and Rodriguez (Count VIII); and Common Law Conspiracy against
Atlantic, Koci, and Rodriguez (Count IX).4
Appellants filed a Motion to Dismiss the complaint. On
December 8, 2006, the district court denied the motion with respect
to Counts I-VII and Count IX, but granted the motion with respect
to Count VIII (unfair competition).
Thereafter, the parties filed cross-motions for partial
summary judgment. In addressing the motions, the district court
found that as of August 5, 2005, the date the United States
Copyright Office registered the 2002 Interior Re-Pipe Agreement as
an original work authored by Phoenix, Phoenix possessed a valid,
registered copyright. Accordingly, the district court granted
summary judgment in favor of Phoenix on the issue of liability on
Count I. It denied Appellees’ motion for partial summary judgment
on the issue of damages for the copyright infringement, reserving
the question for trial. The court also held that the covenant not
to compete contained in the Subcontractor Agreements was invalid
4
Phoenix had previously filed a state court action against
Appellants on August 27, 2003. Phoenix voluntarily nonsuited that
action, however, in order to bring a copyright claim in federal
court.
10
under Virginia law and therefore granted Appellees’ motion for
partial summary judgment to the extent that it sought dismissal of
the claims based on that provision.
A three-day bench trial took place in July 2006. Thereafter,
on October 25, 2006, the district court entered judgment in favor
of Phoenix on the copyright claim (Count I), and in favor of
Appellees on the remaining counts. The district court enjoined
Appellees from further infringement of the copyrighted 2002
Interior Re-Pipe Agreement, but found that Appellees were not
liable for any damages.
Phoenix noted a timely appeal, and we have jurisdiction
pursuant to 28 U.S.C.A. § 1291 (West 2006) (providing for appellate
jurisdiction over “final decisions” of the district courts).
II.
We review de novo the district court’s legal conclusions.
Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d 505, 512
(4th Cir. 2002). We review factual findings for clear error,
meaning that we “may only set aside such a finding when we are left
with the definite and firm conviction that a mistake has been made,
and we may not do so simply because we might have found to the
contrary.” Id. In considering mixed questions of law and fact,
“we review the factual portion of the inquiry for clear error and
the legal conclusions de novo.” Id.
11
Phoenix raises three principal issues on appeal, arguing that
the district court erred in finding: (1) that Phoenix was not
entitled to damages for Appellees’ infringement of its copyrighted
contract, (2) that Koci and Rodriguez did not violate their
Subcontractor Agreements in marketing Atlantic; and (3) that
Appellees’ copyright infringement did not violate Virginia’s
Business Conspiracy statute. We address each argument in turn.
A.
The district court granted summary judgment to Phoenix on the
issue of liability for infringement of the copyrighted 2002
Interior Re-Pipe Agreement, a determination Appellees do not
appeal. A finding of liability, however, does not, without more,
establish an entitlement to damages. Under Section 504(b) of the
Copyright Act, a copyright owner “is entitled to recover the actual
damages suffered by him or her as a result of the infringement, and
any profits of the infringer that are attributable to the
infringement and are not taken into account in computing the actual
damages.” 17 U.S.C.A. § 504(b). In this case, Phoenix did not
seek actual damages, limiting its claim to so-called “infringer’s
profits.”5
5
Phoenix also recognized that it could not seek statutory
damages under 17 U.S.C.A. § 504(c) (West 2000 & Supp. 2006) because
the infringement commenced prior to the effective date of the
copyright registration. 17 U.S.C.A. § 412 (West 2005); Bouchat v.
The Bon-Ton Dep’t Stores, Inc., --- F.3d ---, 03-2173 slip op. at
30-34 (4th Cir. Oct. 17, 2007) (explaining that a copyright
plaintiff is not entitled to statutory damages for continuing
12
Section 504(b) contains a burden shifting provision which
provides that, “[i]n establishing the infringer’s profits, the
copyright owner is required to present proof only of the
infringer’s gross revenue, and the infringer is required to prove
his or her deductible expenses and the elements of profit
attributable to factors other than the copyrighted work.” 17
U.S.C.A. § 504(b). Thus, “§ 504(b) creates an initial presumption
that the infringer’s profits attributable to the infringement are
equal to its gross revenue.” Bonner v. Dawson, 404 F.3d 290, 294
(2005) (internal quotation marks and alteration omitted). Once the
copyright holder establishes the infringer’s gross revenue, “the
burden shifts to the infringer to prove either that part or all of
those revenues are ‘deductible expenses’ (i.e., are not profits),
or that they are attributable to factors other than the copyrighted
work.” Bouchat v. Baltimore Ravens Football Club, Inc.,
346 F.3d
514, 520 (4th Cir. 2003) (internal quotation marks omitted).
In Bouchat, we established that because the phrase “gross
revenue” in § 504(b) refers only to revenue reasonably related to
the infringement, “a copyright holder must show more than the
infringer’s total gross revenue from all of its revenue streams” in
order to meet its initial burden under the statute. Bonner, 404
F.3d at 294. Accordingly, before the burden-shifting provision of
§ 504(b) is triggered, the copyright owner must “demonstrat[e] some
infringement commenced before registration).
13
causal link between the infringement and the particular profit
stream.” Id.
Here, in denying Appellees’ Partial Motion for Summary
Judgment as to damages for the copyright infringement, the district
court found that Phoenix had met its initial burden of proof.
First, the district court noted that Phoenix did not
indiscriminately seek the totality of Appellees’ profits without
regard to the source, but rather “anticipate[d] presenting evidence
at trial that [Appellees’] use of Phoenix’s Interior Repipe
Agreement enabled [them] to enter into 626 transactions in which
they received approximately $2.6 million in revenue.” (J.A. at
68.)6 Next, the district court identified three factors
demonstrating a causal connection between the use of the Infringing
Contract and the claimed revenue: (1) Virginia law required
Atlantic to have a written contract to engage in residential
contracting, a requirement Atlantic met through use of the
Infringing Contract; (2) use of the Infringing Contract allowed
Appellees to market Atlantic as a less expensive version of Phoenix
and to appear polished and professional, thereby generating more
customers and more revenue for Atlantic; and (3) the Infringing
Contract had a “revenue-saving effect” because Atlantic used it to
6
The district court also stated that it might well have been
appropriate for Phoenix to offer the totality of Atlantic’s profits
as “gross revenue” because Atlantic had only one revenue stream –-
income from PB replacement services.
14
collect payments from customers with overdue balances. (J.A. at
71-73.) Finally, the district court stated that Phoenix had
provided non-speculative evidence of a causal connection and
determined that “[b]ecause the claimed revenue ha[d] a reasonable
relation to the infringement, . . . summary judgment for
[Appellees] would be inappropriate.” (J.A. at 73.)
Following the bench trial, however, the district court changed
course, finding Appellees not liable for damages. The court found
that Phoenix failed to provide evidence supporting each of its
three purported causal links. With regard to Phoenix’s theory that
the contract assisted Atlantic in marketing itself to customers,
the district court concluded that Appellees had presented credible
evidence establishing that customers hired Atlantic for reasons
such as its experience and price, not the appearance of its
contract, while “Phoenix ha[d] not presented any evidence that
supports this particular causation theory.” (J.A. at 358.) It
therefore deemed the “purported causal link . . . mere
speculation.” (J.A. at 358.) The district court further concluded
that although use of the Infringing Contract allowed Atlantic to
comply with Virginia’s requirement that residential contractors
make use of written contracts for a time without incurring the
expense necessary to do so, any cost avoidance was temporary and
did not permanently contribute to Atlantic’s revenues because
Atlantic later paid an attorney to draft a new contract. Finally,
15
the district court found that none of Atlantic’s revenue was
attributable to its use of the Infringing Contract in collecting
balances owed because Atlantic only collected more money than it
cost to enforce the terms of the contract on one occasion, and the
proceeds from that collection effort were more than offset by the
$7,000 Atlantic spent to collect $3,618 owed on another occasion.
Moreover, Atlantic had proven unsuccessful in other collection
attempts. The district court therefore concluded that “Phoenix
ha[d] not proven the existence of a causal link between
[Appellee’s] infringement of the Re-Pipe Agreement and their gross
revenue from polybutylene replacement jobs where the Infringing
Contract was used.” (J.A. at 360.) Accordingly, it determined
that “the burden-shifting provisions of § 504(b) [were]
inapplicable to this case” and Phoenix was not entitled to damages.
(J.A. at 360.)
Phoenix argues that the district court’s about face improperly
denied it the benefit of § 504(b)'s burden shifting provision,
depriving it of damages to which it is entitled. Phoenix claims to
have met its minimal initial burden of demonstrating some causal
link between the infringement and the revenue stream by showing
that (1) customers’ obligation to pay Atlantic arose out of the
Infringing Contract, and (2) Atlantic benefitted from the use of
the contract, which allowed it to appear more professional, conduct
its business in accordance with Virginia law, and collect payment
16
from reluctant customers.7 Appellees counter that the district
court correctly applied our holding in Bouchat that a defendant
should prevail if either (1) there exists no conceivable casual
connection between the infringement and a particular revenue
stream, or (2) despite the existence of a conceivable connection,
the copyright holder offers only speculation as to the existence of
a causal link between the infringement and the claimed revenues.
Bouchat, 346 F.3d at 522-23.
As an initial matter, we agree with Phoenix that the district
court erred in failing to shift the burden of proof to Appellees
pursuant to § 504(b). Although Bouchat held that copyright
plaintiffs may not meet their initial burden under the statute
simply by submitting evidence of an infringer’s gross profits from
all of its revenue streams, in requiring proof of a causal link
between the infringement and a particular profit stream or streams,
we did not purport to saddle plaintiffs with an onerous evidentiary
burden.
Bouchat involved a suit for “infringer’s profits” by the
author of an original drawing that became the basis for the
7
Phoenix also argues that the district court’s conclusions in
its summary judgment order represent the “law of the case,” that
could not be altered by subsequent orders of the district court.
Because Phoenix does not suggest that we are similarly bound by the
district court’s initial conclusions, we need not address this
argument. We thus limit our review to the correctness of the
district court’s judgment, not its consistency with any earlier
(non-final and unappealable) orders.
17
Baltimore Ravens football team’s logo. The Ravens obtained revenue
from a variety of sources, including a subset of merchandise sales,
“minimum guarantee” shortfalls and “free merchandise” requirements
established by the Ravens’s licensing agent (National Football
League Properties, Inc.), that could not fluctuate in response to
consumer behavior. We held that Bouchat had not met his initial
burden of proof under § 504(b) only with regard to those sources
because Bouchat could not establish a conceivable connection
between the revenue from the “minimum guarantee” shortfalls and
“free merchandise” requirement and the copyright infringement.
Bouchat, 346 F.3d at 524.
Our subsequent decision in Bonner clarified the extent of the
causal connection required under Bouchat. There, we distinguished
Bouchat on the ground that Bonner was not seeking all gross
revenues from a defendant with multiple streams of income, but
rather only the revenue derived from the leasing arrangements of an
infringing building. We concluded that because “[t]he building
generating the funds was designed based upon Bonner’s copyright,”
Bonner had satisfied Bouchat’s requirement of a causal connection
between the infringement and the revenue stream. Bonner, 404 F.3d
at 294. We reversed the district court’s conclusion to the
contrary, holding that the district court had “misinterpreted the
level of connection between infringement and profits that is
required under Bouchat” when it determined that Bonner had not met
18
his initial burden because it was not clear that the building’s
design formed the basis of the profits from the lease. Id.; see
also Konor Enter. Inc. v. Eagle Publ’ns Inc., 878 F.2d 138, 140
(4th Cir. 1989) (holding that where a defendant’s only product was
a military telephone directory that infringed on a plaintiff’s
copyright, the burden of proof shifted to the defendant pursuant to
§ 504(b), because “[i]t [wa]s plausible, absent proof to the
contrary, that all profits were a direct result of [the]
infringement of [the] copyright”).
In this case, the district court’s summary judgment order
correctly followed Bouchat and Bonner to conclude that Phoenix had
met its initial burden under § 504(b) of demonstrating a
conceivable connection between the copyright infringement and the
revenue obtained from jobs on which Appellees used the Infringing
Contract. Such a connection exists because customers’ obligation
to pay arose out of their contract with Atlantic and because it is
conceivable that the Infringing Contract generated revenue by: (1)
enabling Atlantic to attract customers by looking like a less
expensive version of Phoenix; (2) comply with state law governing
its business; and (3) collect past due balances. The district
court erred in concluding to the contrary in the opinion and order
entering the final judgment.
Nevertheless, we agree with Appellees that this flaw in the
district court’s analysis did not affect the outcome of the case.
19
A review of the record compels the conclusion that the district
court’s finding that Phoenix was not entitled to damages ultimately
was based on its finding that the evidence was entirely one-sided,
not on its allocation of the burden of proof. The court credited
Appellees’ evidence that none of Atlantic’s revenue was
attributable to the Infringing Contract and found that Phoenix had
offered only speculation to the contrary. Thus, the district
court’s finding that Phoenix failed to supply any non-speculative
evidence to counter Appellees’ showing that Atlantic’s revenue
stemmed from sources other than the copyright infringement, if
correct, compels the conclusion that Phoenix was not entitled to
damages.8
8
Phoenix argues that its satisfaction of its initial burden of
proof under § 504(b) established its entitlement to damages. It
claims that the district court might find that Atlantic has met its
burden of proving some of its revenue attributable to sources other
than the Infringing Contract and apportion damages accordingly, but
that it cannot properly determine that none of Atlantic’s revenue
was attributable to the Infringing Contract. This contention
contradicts our precedent, which plainly provides that a defendant
may prove that no portion of its revenue derives from its
infringement of a plaintiff’s copyrighted work. In Bouchat v.
Baltimore Ravens Football Club, Inc., 346 F.3d 514 (4th Cir. 2003),
although Bouchat had met his initial burden of proof by
establishing a conceivable connection between infringement of his
copyrighted drawing and the Ravens’ revenue from sources other than
merchandise sales, we upheld a grant of summary judgment to the
Ravens on the issue of damages related to those sources. We
concluded that Bouchat’s speculation that the alleged connection in
fact existed was insufficient to overcome the Ravens’ proof that
the non-merchandise revenue was attributable to sources other than
the infringement because “[a] party opposing a properly supported
motion for summary judgment may not rest upon the mere allegations
or denials of [his] pleadings,” but rather must set forth specific
facts showing that there is a genuine issue for trial.” Id. at 525
20
With regard to Phoenix’s argument that the Infringing Contract
aided Atlantic in attracting customers, the district court found
that “Phoenix ha[d] not presented any evidence that supports this
particular causation theory.” (J.A. at 358.) In contrast, it
credited Appellees’ evidence that customers chose Atlantic for
reasons such as experience and price and that the contract merely
reflected the final step in entering into an agreement with
customers that had already decided to do business with Atlantic.
Phoenix argues that Koci’s testimony that some customers “didn’t
like” or “even refused to sign” the Infringing Contract shows that
Atlantic’s use of the Infringing Contract did affect its revenues.
(Appellant’s Br. at 32.) That some customers may have been turned
off by the Infringing Contract, however, does not demonstrate that
others employed Atlantic because of it. The record contains no
evidence that a single customer chose Atlantic due to the
Infringing Contract or that any customer declined to do business
with Atlantic based on the form contract it first used or the non-
infringing contract it developed in 2005. Accordingly, we can find
no basis to overturn the district court’s finding that Phoenix
(internal quotation marks omitted). Similarly, in Bonner v.
Dawson, 404 F.3d 290 (2005), we concluded that a plaintiff that was
erroneously deprived of the benefit of § 504(b)’s burden-shifting
scheme was not entitled to judgment as a matter of law after a jury
failed to award any damages because the defendants had presented
sufficient evidence for a jury to conclude that they had met their
burden of proving that none of their profits in fact stemmed from
the infringement. Bonner, 404 F.3d at 294-95.
21
presented no evidence in support of its theory that the Infringing
Contract assisted Appellees in attracting customers.
The district court’s conclusion concerning Appellee’s use of
the Infringing Contract to satisfy the requirements of Virginia law
is likewise well-founded. Because Appellees presented evidence
that they paid a lawyer to draft a new contract, the district court
found that any cost savings the Infringing Contract provided
Appellees in meeting Virginia’s statutory requirement that licensed
residential contractors “make use of a legible written contract
clearly specifying the terms and conditions of the work to be
performed” was merely temporary. 18 Va. Admin. Code § 50-22-
260(b)(8) (2007). Indeed, Appellees’ use of the Infringing
Contract may have caused them to spend more money than they
otherwise would have because they first paid an attorney to consult
with them and draft the Infringing Contract and were later obliged
to pay a different attorney for another contract. Moreover,
Appellees demonstrated that before they began using the Infringing
Contract, they were able to comply with applicable law through the
use of a form contract from an office supply store.
Turning to the issue of whether use of the Infringing Contract
enabled Atlantic to obtain revenue from customers who otherwise
would not have paid, we first note that Phoenix does not contest
the district court’s finding that although Atlantic relied on
“revenue-saving” language in the Infringing Contract to collect
22
payments on five occasions, the cost of collection outweighed the
revenue received. Rather, Phoenix contends that the district court
arbitrarily selected for discussion a handful of cases, ignoring
that they did not represent the only instances in which Appellees
quoted or referred to the Infringing Contract when dealing with
customers. We cannot, however, characterize the district court’s
focus on the five occasions as arbitrary. The district court
discussed in its opinion those contracts that Phoenix discussed at
trial; after trial, Phoenix submitted to the judge’s clerk boxes of
documents containing 600 additional job files that it had not
specifically addressed in its arguments to the district court.
Moreover, the district court could properly differentiate
between instances when Atlantic enforced specific contractual
provisions against customers that refused to comply with the
agreement from occasions in which Atlantic simply quoted or
referenced the contract when it sent out a bill for services
rendered. In the latter case, there is no indication that the
customer would not have returned payment but for the specific
“revenue saving” language in the Infringing Contract. Indeed, one
of the instances on which Phoenix focuses seems to undermine its
argument that Atlantic successfully used the Infringing Contract’s
“revenue-saving” provision to collect full payment while avoiding
responsibility for certain types of property damage claims.
Phoenix supplied documents from the “Baer case” as an example of
23
the particular effectiveness of the Infringing Contract. In that
case, however, the Baers paid for Atlantic’s work, but then lodged
a complaint with the Better Business Bureau because they believed
that a reduction in the price was warranted due to delays and
inconvenience caused by Atlantic. Ultimately, Atlantic sent the
Baers a $400 “monetary settlement” despite its belief that it was
not required to do so under the contract. (J.A. at 495.) We
therefore conclude that the district court’s finding that the
Infringing Contract’s “revenue-saving” language “did not, in
actuality, contribute to [Appellees’] gross revenue,” (J.A. at
360), was not clearly erroneous.
In light of the district court’s findings that Appellees’ use
of the Infringing Contract to comply with 18 Va. Admin. Code § 50-
22-260(b)(8) and to collect balances owed from reluctant customers
did not augment its revenues and Phoenix’s failure to provide more
than speculation that the Infringing Contract aided Appellees in
marketing Atlantic’s services, we conclude that the district court
did not err in finding Appellees not liable for damages for
copyright infringement.
B.
We next address Phoenix’s breach of contract claim. Under
Virginia law, when the terms of a contract are clear and
unambiguous, the interpretation of those terms presents a question
of law. Musselman v. Glass Works, L.L.C., 533 S.E.2d 919, 921 (Va.
24
2000). Whether a contractual provision is ambiguous is also a
question of law. Id.9
The confidentiality agreement contained in Rodriguez’s and
Koci’s Subcontractor Agreements prohibited the use or disclosure of
“any trade secret or confidential or proprietary information of
[Phoenix],” including, among other things, “the identity and
requirements of customers and clients.” (J.A. at 25.) The
district court found that Rodriguez and Koci used knowledge gained
from their work for Phoenix in conducting their business. It then
concluded that this information could not properly be characterized
as trade secrets, confidential information, or proprietary
information. The district court further concluded that the
contractual provision prohibiting disclosure of customers’
identity, on its face, did not prohibit the use or disclosure of
9
Under Virginia law, an agreement in restraint of trade must
be strictly construed against the drafter. Simmons v. Miller, 544
S.E.2d 666, 678 (Va. 2001). Although Virginia courts have not
directly addressed the issue, a number of other state courts have
construed confidentiality provisions that operate to restrict
competition as contracts in restraint of trade. See, e.g.,
Carolina Chem. Equip. Co. v. Muckenfuss,
471 S.E.2d 721, 723-24
(S.C. 1996) (stating that an agreement not to divulge trade secrets
will be judged by the same criteria as a covenant not to compete
when the former has the same effect as the latter). The district
court treated the confidentiality provision contained in the
subcontractor agreements as a restraint on trade and strictly
construed the provision against Phoenix. Because the language of
the contract is plain, the same result would obtain whether or not
it were strictly construed against Phoenix. Accordingly, we need
not address this issue on appeal.
25
the addresses of customers for whom Phoenix had previously done
work.
Phoenix contends that the district court erred in its
interpretation of the contract. Phoenix’s arguments rest primarily
on the fact, acknowledged by the district court, that knowledge of
the addresses of houses with PB pipes can represent valuable
information because it enables a PB replacement business to target
its marketing to areas in which people will have a need for their
services. The mere fact that Koci’s and Rodriguez’s memories of
the addresses proved useful in marketing or valuable to their
competing business, however, does not establish that the knowledge
is covered by the specific provisions of the Subcontractor
Agreement or properly recognized as a trade secret under Virginia
law.
The confidentiality agreement’s reference to the “identity and
requirements of customers,” given its ordinary and plain meaning,
unambiguously refers to who Phoenix’s customers are and what they
need. See Twardy v. Twardy, 419 S.E.2d 848, 855 (Va. Ct. App.
1984) (“Where there is no ambiguity in the terms of a contract, we
must construe it as written, and give the terms their plain and
ordinary meaning.” (internal quotation marks and alteration
omitted)). It cannot logically be read as inclusive of the
addresses of former customers. Phoenix easily could have included
a specific reference to the addresses in the agreement, but did
26
not, and we must construe the contract as written, not as Phoenix
wishes it had been drafted. See Wilson v. Holyfield, 313 S.E. 396,
398 (Va. 1992) (explaining that “courts are bound to say that the
parties intended what the written instrument plainly declares” and
“cannot read into contracts language which will add to or take away
from the meaning of the words already contained therein” (internal
quotation marks omitted)).
Phoenix contends that even if the specific reference to the
“identity and requirements of customers” does not extend to the
addresses of former customers, the addresses are nevertheless
covered by the confidentiality agreement’s generalized reference to
“trade secret[s] or confidential or proprietary information.”
Under Virginia law, however, Rodriguez’s and Koci’s knowledge of
Phoenix’s customers and their addresses was neither a trade secret
nor confidential or proprietary information belonging to Phoenix.
See Peace v. Conway, 435 S.E.2d 133, 135 (Va. 1993) (holding that
former employees who formed a competing business and used a list
compiled solely from their memories to solicit their former
employer’s customers had not misused confidential information,
because they “did not . . . utilize any property that belonged to
[their former employer] when contacting his customers”). Rodriguez
and Koci did not use Phoenix’s proprietary database in conducting
their marketing campaign. And, although their memory of the
addresses represented valuable information, it was neither secret
27
nor solely in Phoenix’s possession because the customers (and
possibly their neighbors and friends) knew who they were. We
therefore conclude that Koci and Rodriguez did not breach their
Subcontractor Agreements by relying on their memories of addresses
at which they had done work for Phoenix in marketing Atlantic’s
services. Cf. Plains Cotton Coop. Ass’n v. Goodpasture Computer
Serv., Inc., 807 F.2d 1256, 1263 (5th Cir. 1987) (“While an
employee owes a duty to his employer not to disclose any knowledge
of that employer's trade secrets, the employee, upon terminating
his employment relationship with his employer, is entitled to take
with him the experience, knowledge, memory, and skill, which he
gained while there employed.” (internal quotation marks and
alteration omitted)).
C.
Finally, we consider Phoenix’s statutory conspiracy claim.
Virginia’s Business Conspiracy statute makes it unlawful for two or
more persons to “combine, associate, agree, mutually undertake or
concert together for the purpose of . . . willfully and maliciously
injuring another in his reputation, trade, business or profession
. . . .” Va. Code Ann. § 18.2-499. Phoenix claimed that Appellees
violated the statute by conspiring to infringe on their copyright.
The district court granted judgment in favor of Appellees,
reasoning that the claim failed for a number of reasons. First,
there could have been no conspiracy to infringe upon the copyright
28
in 2003 because the 2002 Interior Re-Pipe Agreement was not
copyrighted at that time. Second, the requirement that two or more
persons act in concert was not met because, under the
Intracorporate Immunity doctrine, a corporate entity, which acts
only through its agents, cannot conspire with itself, so a
conspiracy could not exist if Rodriguez and Koci were both agents
of Atlantic and were acting within the scope of their agency.
Third, the infringement occurring after the copyright was
registered was not willful or malicious.
Phoenix challenges each basis for the district court’s
decision, arguing that (1) it was irrelevant that the copyright was
not actually registered until 2005; (2) the doctrine of
intracorporate immunity does not apply because Rodriguez and Koci
began conspiring to infringe on the copyright while they were still
subcontractors of Phoenix, before they formed Atlantic; and (3)
Appellees acted willfully and maliciously in using the contract
over Phoenix’s objection. Because the question of intracorporate
immunity is dispositive, we address only that issue.
Under Virginia law, a corporation cannot conspire with its
agents, nor can agents of a corporation, acting within the scope of
their agency, conspire together. Such a “conspiracy” is a legal
impossibility because the actors are not separate persons for
purposes of the conspiracy statute, but rather form part of a
single entity, the corporation, which cannot conspire with itself.
29
See Charles E. Brauer Co. v. NationsBank of Va., N.A., 466 S.E.2d
382, 386-87 (Va. 1996); Fox v. Deese,
362 S.E.2d 699, 708 (Va.
1987).
Phoenix’s assertion that Rodriguez and Koci conspired to use
the 2002 Interior Re-Pipe Agreement before forming Atlantic is
unsupported by the record. Rodriguez and Koci formed Atlantic in
June 2003, and there is no evidence that, prior to June 2003, they
agreed to use the 2002 Interior Re-Pipe Agreement in their new
business. To the contrary, Appellees used a form contract from an
office supply store on their initial jobs and did not use the
Infringing Contract until August 30, 2003, after requesting that an
attorney draft them a contract for use in their business.
Accordingly, we conclude that the doctrine of intracorporate
immunity applies, and because Phoenix cannot establish concerted
activity by two or more persons, its statutory conspiracy claim
must fail.
III.
In sum, we conclude that although the district court erred
in concluding that Phoenix failed to meet its initial burden of
proof under § 504(b) of the Copyright Act, its judgment in favor of
Appellees was nevertheless sound because it correctly concluded
that there was no evidence that Appellees’ infringement of
Phoenix’s copyright contributed to Atlantic’s revenues. We further
30
conclude that the district court did not err in entering judgment
in favor of Appellees on Phoenix’s claims under Virginia law
because the Subcontractor Agreements do not prohibit the use of
Rodriguez’s and Koci’s memories of addresses at which they
performed work for Phoenix in targeting Atlantic’s marketing and
because the doctrine of intracorporate immunity bars the statutory
conspiracy claim. Accordingly, the judgment of the district court
is
AFFIRMED.
31
