JAMES C. DEVER III, Chief Judge.
On May 30, 2012, after an eleven-day trial and one day of deliberations, a jury returned a verdict against Silicon Knights, Inc. ("Silicon Knights" or "plaintiff") [D.E. 802]. The jury found that Silicon Knights failed to prove its breach of contract claim, and that Epic Games, Inc. ("Epic Games" or "defendant") had proven its breach of contract, copyright infringement, and trade secret misappropriation counterclaims. Id. 1-3. The jury awarded Epic Games $2,650,000.00 for its breach of contract counterclaim, and $1,800,000.00 for
On June 13, 2012, Silicon Knights moved to stay execution and enforcement of the judgment. See Pl.'s Mot. Stay [D.E. 808]. On June 20, 2012, Epic Games responded in opposition. See Def.'s Mem. Opp'n Mot. Stay [D.E. 811]. On July 6, 2012, Silicon Knights replied. See Pl.'s Reply Mot. Stay [D.E. 827].
On July 2, 2012, Epic Games moved for costs. See Def.'s Mot. Costs [D.E. 813]. On August 1, 2012, Silicon Knights moved to disallow Epic Games's costs, see Pl.'s Mot. Disallow Costs [D.E. 838], and filed a supporting memorandum. See Pl.'s Mem. Supp. Mot. Disallow Costs [D.E. 839]. On August 16, 2012, Epic Games replied. See Def.'s Reply Mot. Costs [D.E. 842].
On July 2, 2012, Epic Games moved for an award of attorney's fees, see Def.'s Mot. Attorney's Fees [D.E. 814], and filed a supporting memorandum. See Def.'s Mem. Supp. Mot. Attorney's Fees [D.E. 815]. On August 1, 2012, Silicon Knights responded in opposition. See Pl.'s Mem. Opp'n Mot. Attorney's Fees [D.E. 837]. On August 16, 2012, Epic Games replied. See Def.'s Reply Mot. Attorney's Fees [D.E. 843].
On July 2, 2012, Epic Games moved to amend the judgment, see Def.'s Mot. Amend J. [D.E. 816], and filed a supporting memorandum. See Def.'s Mem. Supp. Mot. Amend J. [D.E. 817]. On August 1, 2012, Silicon Knights responded in opposition. See Pl.'s Mem. Opp'n Mot. Amend J. [D.E. 835]. On August 16, 2012, Epic Games replied. See Def.'s Reply Mot. Amend J. [D.E. 841].
On July 2, 2012, Silicon Knights moved to alter the judgment by remittitur, see Pl.'s Mot. Remittitur [D.E. 818], and filed a supporting memorandum. See Pl.'s Mem. Supp. Mot. Remittitur [D.E. 819]. On August 1, 2012, Epic Games responded in opposition. See Def.'s Mem. Opp'n Mot. Remittitur [D.E. 830]. On August 16, 2012, Silicon Knights replied. See Pl.'s Reply Mot. Remittitur [D.E. 845].
On July 2, 2012, Epic Games moved for a permanent injunction, see Def.'s Mot. Inj. [D.E. 820], filed a supporting memorandum, see Def.'s Mem. Supp. Mot. Inj. [D.E. 821], filed a proposed sealed exhibit in support of its motion for a permanent injunction [D.E. 822], and moved to seal the proposed sealed exhibit [D.E. 823]. On August 1, 2012, Silicon Knights responded in opposition. See Pl.'s Mem. Opp'n Mot. Inj. [D.E. 836]. On August 16, 2012, Epic Games replied. See Def.'s Reply Mot. Inj. [D.E. 844].
On July 2, 2012, Silicon Knights moved for judgment as a matter of law, see Pl.'s Mot. J. as Matter of Law [D.E. 824], and filed a supporting memorandum. See Pl.'s Mem. Supp. Mot. J. as Matter of Law [D.E. 825]. On August 1, 2012, Epic Games responded in opposition, see Def.'s Mem. Opp'n Mot. J. as Matter of Law [D.E. 831], and moved to seal the response and first two attached exhibits [D.E. 833]. On August 16, 2012, Silicon Knights replied. See Pl.'s Reply Mot. J. as Matter of Law [D.E. 846].
On July 25, 2012, Epic Games moved to compel complete responses to its post-judgment interrogatories and requests for production, see Def.'s Mot. Compel [D.E. 828], and filed a supporting memorandum. See Def.'s Mem. Supp. Mot. Compel [D.E. 829]. On August 8, 2012, Silicon Knights responded in opposition. See Pl.'s Mem. Opp'n Mot. Compel [D.E. 840].
Silicon Knights asks the court to stay the execution and enforcement of the judgment until the parties have submitted, and the court has considered, all post-trial motions. See Pl.'s Mot. Stay 2-3. The deadline for submitting post-trial motions, responses, and replies has passed. See [D.E. 806, 810]. All post-trial motions and the parties' arguments supporting and opposing those motions are ripe, and this order resolves the pending motions. Thus, the court denies as moot Silicon Knights's motion to stay.
As for Epic Games's motion for costs, Epic Games seeks an award of $280,910.24. See Def.'s Mot. Costs 1. Federal Rule of Civil Procedure 54(d)(1) governs a post-judgment motion for an award of costs. See Fed.R.Civ.P. 54(d)(1). Rule 54(d)(1) provides that "costs — other than attorney's fees — should be allowed to the prevailing party." Id. A "prevailing party" is "a party in whose favor a judgment is rendered" or "one who has been awarded some relief by the court." Buckhannon Bd. & Care Home, Inc. v. W.Va. Dep't of Health & Human Res., 532 U.S. 598, 603, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) (quotation and alteration omitted). "[T]he rule gives a presumption in favor of an award of costs to the prevailing party." Teague v. Bakker, 35 F.3d 978, 996 (4th Cir.1994); see Delta Air Lines, Inc. v. August, 450 U.S. 346, 352, 101 S.Ct. 1146, 67 L.Ed.2d 287 (1981). However, a district court has discretion to award or deny costs to the prevailing party. See Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441-42, 107 S.Ct. 2494, 96 L.Ed.2d 385 (1987), superseded on other grounds by statute, 42 U.S.C. § 1988; Couram v. S.C. Dep't of Motor Vehicles, Civil Action No. 3:10-00001-MBS, 2011 WL 6115509 at *2 (D.S.C. Dec. 8, 2011) (unpublished). A court "must justify its decision to deny costs by articulating some good reason for doing so." Cherry v. Champion Int'l Corp., 186 F.3d 442, 446 (4th Cir.1999) (quotation and citations omitted); see Teague, 35 F.3d at 996. A losing party's good faith is insufficient, standing alone, to justify denying costs to a prevailing party. Cherry, 186 F.3d at 446. Instead, a losing party's good faith is a "virtual prerequisite" to a denial of costs in favor of the prevailing party. Id. Upon a finding of the losing party's good faith, the court may deny an award of costs when "there would be an element of injustice in a presumptive cost award." Id.; see Delta Air Lines, 450 U.S. at 355 n. 14, 101 S.Ct. 1146. The factors that a court should consider to determine whether such an element of injustice would arise from an award of costs are: "(1) misconduct by the prevailing party; (2) the unsuccessful party's
When an award of costs to the prevailing party is appropriate, the court looks to federal law to determine the scope of the award. See Crawford Fitting, 482 U.S. at 441-43, 107 S.Ct. 2494. Section 1920 of Title 28 of the United States Code lists taxable costs. 28 U.S.C. § 1920; see Crawford Fitting, 482 U.S. at 441, 107 S.Ct. 2494 ("[Section] 1920 defines the term `costs' as used in Rule 54(d).").
A court's local rules also may impact a party's ability to recover costs. Pursuant to Federal Rule of Civil Procedure 83, "a district court ... may adopt and amend rules governing its practice." See Fed.R.Civ.P. 83(a)(1). Local rules promulgated pursuant to Rule 83 "have the force and effect of law, and are binding upon the parties and the court which promulgated them." Jackson v. Beard, 828 F.2d 1077, 1078 (4th Cir.1987) (quotation omitted). District courts have "broad discretion to interpret their local rules [and][o]nly in rare cases will [appellate courts] question the exercise of discretion in connection with the application of ... local rules." Qualls v. Blue Cross of Cal., Inc., 22 F.3d 839, 842 n. 2 (9th Cir.1994) (quotations and citations omitted); see AM Props. v. Town of Chapel Hill, 202 F.Supp.2d 451, 453-54 (M.D.N.C.2002). District courts routinely apply local rules regulating the nature of recoverable costs. See, e.g., Couram, 2011 WL 6115509, at *1; Bland v. Fairfax Cnty., No. 1:10-CV-1030, 2011 WL 5330782, at *5 (E.D.Va. Nov. 7, 2011) (unpublished). This court has promulgated a local rule governing the recovery of costs. See Local Civil Rule 54.1.
Silicon Knights concedes that Epic Games was the prevailing party and may recover costs. See Pl.'s Mot. Disallow Costs 1-2; Pl.'s Mem. Supp. Mot. Disallow Costs 26; see also [D.E. 802, 804]. Nonetheless, Silicon Knights challenges three specific categories of costs, which it claims Epic Games may not recover. The court examines each category seriatim.
First, Silicon Knights argues that Epic Games may not recover the $33,749.04 that Epic Games seeks for audiovisual recordings Epic Games made of depositions taken in this case. Pl.'s Mem. Supp. Mot. Disallow Costs 2-3; see [D.E. 813-2] 2-4. Silicon Knights asserts that the depositions were recorded by both audiovisual and stenographic means, that the audiovisual recordings were not necessary to preserve testimony for or present testimony at trial, and therefore that Epic Games may recover its costs for the stenographic transcription only. Pl.'s Mem. Supp. Mot. Disallow Costs 2-3.
Section 1920(2) permits a party to recover costs for videotaping a deposition and costs for transcribing a videotaped deposition. See Cherry, 186 F.3d at 448-49. Typically, a party may not recover costs for both unless the party proves that both audiovisual and stenographic recordings were necessary. Id. at 449; see Local Civil Rule 54.1(c)(2)(b). However, "when a party notices a deposition to be recorded by nonstenographic means, or by both stenographic and nonstenographic means, and no objection is raised at that time by the other party to the method of record[ing] pursuant to Federal Rule of Civil Procedure 26(c), it is appropriate under [section] 1920 to award the cost of conducting the deposition in the manner noticed." Morrison v. Reichhold Chems., Inc., 97 F.3d 460, 465 (11th Cir.1996) (per curiam) (footnote omitted); accord Cherry, 186 F.3d at 449; Tilton v. Capital Cities/ABC, Inc., 115 F.3d 1471, 1477 (10th Cir.1997). Here, Epic Games provided Silicon Knights notice that the depositions would be recorded by both audiovisual videotaping and stenographic transcription. See, e.g., [D.E. 842-1] ¶ 4; cf. [D.E. 813-2] 2-4. Silicon Knights did not object. See [D.E. 842-1] ¶ 4. Moreover, the court finds that transcribing and videotaping the depositions were "necessarily obtained for use in the case." 28 U.S.C. § 1920(2). Thus, pursuant to section 1920, the court awards Epic Games the $33,749.04 it paid to record the depositions by audiovisual videotaping, as well as the $55,411.41 Epic Games paid to record the depositions by stenographic means. See Tilton, 115 F.3d at 1477; Morrison, 97 F.3d at 464-65; see also [D.E. 813-2] 2-4.
Second, Silicon Knights argues that Local Civil Rule 54.1(c)(2)(a) prohibits Epic
Third, Silicon Knights argues that Epic Games is not entitled to recover certain costs for imaging electronic information produced in discovery in this case, or certain costs for creating four demonstrative exhibits used during Epic Games's closing argument. Pl.'s Mem. Supp. Mot. Disallow Costs 4-5. As for the costs associated with imaging electronic information for document production in this case, Epic Games seeks to recover $150,687.00 for imaging electronic information, plus an additional $2,152.34 for purchasing hard drives as part of that production process. See [D.E. 813-5] 1. In opposition, Silicon Knights asserts that such costs are not recoverable under section 1920(4). Pl.'s Mem. Supp. Mot. Disallow Costs 4-5. Alternatively, Silicon Knights argues that the costs are not properly documented. Id.
A prevailing party may recover "[f]ees for exemplification and the costs of making copies of any materials when the copies are necessarily obtained for use in the case." 28 U.S.C. § 1920(4). Courts of appeals have held that certain costs for imaging electronic information for production in discovery can be recoverable under section 1920(4). See Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 674 F.3d 158, 16768, 171 (3d Cir.), cert. denied, ___ U.S. ___, 133 S.Ct. 233, 184 L.Ed.2d 43 (2012); In re Ricoh Co., Ltd. Patent Litig., 661 F.3d 1361, 1365 (Fed.Cir.2011); Hecker v. Deere & Co., 556 F.3d 575, 591 (7th Cir.2009); BDT Prods., Inc. v. Lexmark Int'l, Inc., 405 F.3d 415, 420 (6th Cir.2005), abrogated on other grounds by Taniguchi v. Kan Pac. Saipan, Ltd., ___ U.S. ___, 132 S.Ct. 1997, 182 L.Ed.2d 903 (2012). The Fourth Circuit has not considered whether costs of imaging electronic information for production in discovery can be recoverable under section 1920(4). However, district courts within the Fourth Circuit generally have held that a party may recover such costs where the record shows that the costs are the "costs of making copies" for production in discovery. See Farrar & Farrar Dairy, Inc. v. Miller-St. Nazianz, Inc., No. 5:06-CV-160-D, 2012 WL 776945, at *4-5 (E.D.N.C. Mar. 8, 2012) (unpublished); Mann v. Heckler & Koch Def., Inc., No. 1:08cv611 (JCC), 2011 WL 1599580, at *8 (E.D.Va. Apr. 28, 2011) (unpublished); Francisco v. Verizon S., Inc., 272 F.R.D. 436, 445-46 (E.D.Va.2011). Furthermore, district courts outside the
Here, discovery was unusually extensive and Epic Games incurred $150,687.00 in costs in imaging electronic information for document production. See [D.E. 813-5] 1. The court finds that those costs fall within "the costs of making copies of any materials" and were "necessarily obtained for use in the case." 28 U.S.C. § 1920(4).
"[N]o litigation costs should be awarded in the absence of adequate documentation...." Trimper v. City of Norfolk, 58 F.3d 68, 77 (4th Cir.1995). Here, Epic Games has provided adequate documentation to support its request for $150,687.00 in costs associated with imaging electronic information for document production. See [D.E. 813-5]. However, the court declines to award Epic Games the additional $2,152.34 in costs it incurred to purchase hard drives for document production. See [D.E. 813-5] 1. The hard drives are reusable. Such costs are properly considered overhead and are not recoverable. Accordingly, the court awards Epic Games $150,687.00 in costs associated with imaging electronic information produced in discovery. See 28 U.S.C. § 1920(4).
As for the costs associated with producing four demonstrative exhibits Epic Games used in its closing argument. Epic Games seeks $1,050.42 it paid to create a timeline spanning two large, dry-erase boards ("timeline demonstratives"), one enlarged copy of defendant's exhibit 2383A, and one enlarged copy of defendant's exhibit 2389B. See [D.E. 813-5] 1; Def.'s Reply Mot. Costs 6. Silicon Knights argues that Epic Games cannot recover these costs. First, Silicon Knights argues that Epic Games has not identified the specific exhibits created and has not indicated whether the exhibits were actually used at trial. Pl.'s Mem. Supp. Mot. Disallow Costs 5. This argument fails. Epic Games's bill of costs indicates that the four demonstrative exhibits created were "36x48 Dry Erase Demonstrative [Exhibits] for Closing." [D.E. 813-5] 1. Only four such demonstrative exhibits were used during the closing argument — two timeline demonstratives, one enlarged copy of defendant's exhibit 2383A, and one enlarged copy of defendant's exhibit 2389B.
Here, both timeline demonstratives were "necessarily obtained for use in the case." 28 U.S.C. § 1920(4). Epic Games (through counsel) used the timeline demonstratives to illustrate for the jury the sequence of events referenced in Epic Games's closing argument regarding Silicon Knights's breach of contract claim and Epic Games's breach of contract counterclaim. See Epic Games Closing Tr. May 29, 2012 AM [D.E. 860] at 143-67. Such framing was necessary. During its closing argument, Epic Games repeatedly referenced the key dates and events (especially video game industry tradeshows and conferences unfamiliar to lay jurors) central to the disputed issues concerning the May 10, 2005 license agreement ("License Agreement"). Epic Games repeatedly recounted much of the relevant trial testimony and displayed and discussed many trial exhibits relating to those dates and events. See id. Without the timeline demonstratives, Epic Games's closing argument may have overwhelmed the jurors, who did not possess the same intimate knowledge and command of the record that Epic Games's counsel did. With the timeline demonstratives, however, the jurors possessed the necessary framework within which to synthesize the evidence and evaluate Epic Games's arguments. Furthermore, the presentation of facts in Epic Games's closing argument was not always chronological. Epic Games periodically moved forward and backward in time as its argument and the supporting evidence dictated. The timeline demonstratives helped the jury to keep pace.
Finally, the presentation of the timeline as two large, dry-erase demonstrative exhibits was necessary. The courtroom in which this trial occurred is equipped with technology allowing parties to publish exhibits on individual monitors provided in the jury box to each juror. The courtroom technology also permits a party to highlight on, underline on, write on, circle portions of, enlarge portions of, and otherwise manipulate trial exhibits when presenting evidence or arguments to a jury. Nevertheless, the courtroom technology did not provide an adequate means of displaying Epic Games's timeline. After a brief introduction, Epic Games set up its timeline demonstratives at the beginning of its main argument on the parties' breach of contract claims, presenting both timeline demonstratives simultaneously. See id. at 143-44. Using both timeline demonstratives, Epic Games then reviewed with the jury the relevant chronology and made
The enlarged copies of defendant's exhibits 2383A and 2389B, however, were not "necessarily obtained for use in the case." Id. Unlike counsel's constant use of the timeline demonstratives to frame its argument relating to the parties' breach of contract claims, Epic Games made only passing references to defendant's exhibits 2383A and 2389B to support specific parts of its argument regarding its copyright infringement and trade secret misappropriation counterclaims. As for defendant's exhibit 2383A, Epic Games displayed the enlarged copy to the jury, explained in one sentence the exhibit's importance to Epic Games's copyright infringement counterclaim, and then moved on to the next exhibit. See Epic Games Closing Tr. May 29, 2012 AM at 172-73. As for Epic Games's use of the enlarged copy of defendant's exhibit 2389B, Epic Games enlarged only the first page of the 348-page exhibit, briefly explained why defendant's exhibit 2389B supported Epic Games's trade secret misappropriation counterclaim, and then asked the jury to "read [defendant's exhibit 2389B] yourself." Id. at 167-68. For Epic Games's limited use of defendant's exhibits 2383A and 2389B, the courtroom technology would have sufficed. These two demonstrative exhibits were not necessary, and Epic Games may not recover the costs associated with them. See 28 U.S.C. § 1920(4).
Epic Games's bill of costs indicates that one demonstrative exhibit cost $281.82 to create, and that the other three cost $256.20 each to create. See [D.E. 813-5] 1, 5-6. The bill of costs does not indicate which demonstrative exhibit cost what. See id. Accordingly, the court assumes that the timeline demonstratives cost $256.20 each to create. Thus, the court awards Epic Games $512.40 in costs related to the demonstrative exhibits Epic Games used in its closing arguments.
In sum, the court awards Epic Games $277,852.13 in costs.
Epic Games seeks $2,201,813.51 in attorney's fees and $1,088,337.29 for the cost of Epic Games's testifying experts. See Def.'s Mot. Attorney's Fees 1. As for Epic Games's request for attorney's fees, Federal Rule of Civil Procedure 54(d)(2) requires a party to make "[a] claim for attorney's fees and related nontaxable expenses... by motion unless the substantive law requires those fees to be proved at trial as an element of damages." Fed.R.Civ.P. 54(d)(2)(A). A motion for attorney's fees must (1) "be filed no later than 14 days after the entry of the judgment[,]" (2) "specify the judgment and the statute, rule, or other grounds entitling the movant to the award[,]" (3) "state the amount sought or provide a fair estimate of it[,]" and (4) "disclose, if the court so orders, the terms of any agreement about fees for the services for which the claim is made." Fed.R.Civ.P. 54(d)(2)(B).
Epic Games timely moved for attorney's fees and argues that paragraph 2(e)(iii) of the License Agreement, 17 U.S.C. § 505, and North Carolina General Statute § 66-154(d) support an award of $2,201,813.51 in attorney's fees. Def.'s Mem. Supp. Mot. Attorney's Fees 1-6; Def.'s Reply Mot. Attorney's Fees 1-8.
Under North Carolina law, "a successful litigant may not recover attorneys' fees, whether as costs or as an item of damages, unless such a recovery is expressly authorized by statute." Stillwell Enters., Inc. v. Interstate Equip. Co., 300 N.C. 286, 289, 266 S.E.2d 812, 814 (1980); see Nucor Corp. v. Gen. Bearing Corp., 333 N.C. 148, 154, 423 S.E.2d 747, 751 (1992); Hicks v. Albertson, 284 N.C. 236, 238, 200 S.E.2d 40, 42 (1973). A contractual provision obligating one party to pay another party's attorney's fees is not enforceable absent a statutory basis for an award of attorney's fees. Stillwell, 300 N.C. at 289, 266 S.E.2d at 814-15. There are certain equitable exceptions to this rule. See Ehrenhaus v. Baker, 717 S.E.2d 9, 32-35 (N.C.Ct.App.2011). Epic Games does not contend that its request for attorney's fees falls into one of these exceptions. See Def.'s Mem. Supp. Mot. Attorney's Fees 2; Def.'s Reply Mot. Attorney's Fees 7-8.
Epic Games seeks attorney's fees for its breach of contract counterclaim based on paragraph 2(e)(iii) of the License Agreement. See Def.'s Mem. Supp. Mot. Attorney's Fees 2; Def.'s Reply Mot. Attorney's Fees 7-8. Epic Games cites no statute authorizing such an award, see Def.'s Mem. Supp. Mot. Attorney's Fees 2; Def.'s Reply Mot. Attorney's Fees 7-8, and the court has found none.
Epic Games next seeks attorney's fees for its copyright infringement counterclaim based on 17 U.S.C. § 505. See Def.'s Mem. Supp. Mot. Attorney's Fees 3-5; Def.'s Reply Mot. Attorney's Fees 1-3. Section 505 provides that "[i]n any civil action under [the federal Copyright Act],... the court may ... award a reasonable attorney's fee to the prevailing party." 17 U.S.C. § 505. Whether to award attorney's fees pursuant to section 505 is within
As for the parties' motivation, willful infringement or bad faith by the infringing party is not required, but a court may consider it. See Rosciszewski, 1 F.3d at 234; ABC, Inc. v. Primetime 24, Joint Venture, 67 F.Supp.2d 558, 563 (M.D.N.C.1999), aff'd, 232 F.3d 886, 2000 WL 1648875 (4th Cir.2000) (per curiam) (unpublished table decision). The parties' motivation is significant in this case. Despite Silicon Knights's contrary argument, see Pl.'s Mem. Opp'n Mot. Attorney's Fees 8, the evidence presented at trial overwhelmingly demonstrated that Silicon Knights willfully infringed Epic Games's copyrights. Over a prolonged time period, Silicon Knights repeatedly and deliberately copied Epic Games's copyrighted code into Silicon Knights's video game and game engine code. See, e.g., Def.'s Exs. 2383, 2383A, 2383D, 2384, 2387, 2387A, 2388, 2501. Silicon Knights's copying included not only Epic Games's functional code, see Def.'s Exs. 2388, 2501, but also non-functional, internal comments Epic Games's programmers had left for themselves. See Def.'s Exs. 2383D, 2388, 2501. Silicon Knights even failed to remove or correct typographical errors Epic Games's programmers had made in those comments. See Def.'s Ex. 2383D.
Once Silicon Knights had copied Epic Games's copyrighted code into Silicon Knights's video game and game engine code, Silicon Knights initiated a prolonged coverup, removing Epic Games's copyright notices and disguising Epic Games's copyrighted code as Silicon Knights's own. See, e.g., Def.'s Exs. 2387, 2387A, 2400-01, 2507. Silicon Knights then covered up its cover-up, until Silicon Knights's wrongdoing was revealed at trial through Epic Games's cross-examination and the court's own inquiries. See, e.g., Young Tr. May 25, 2012 PM (sealed) [D.E. 849-1] at 43-91; Tr. May 25, 2012 PM [D.E. 859-1] at 50-54; Tr. May 29, 2012 AM [D.E. 860] at 2-31. In short, Silicon Knights's infringement of Epic Games's copyrights was willful and in bad faith.
As for the objective reasonableness of the legal and factual positions the parties advanced regarding Epic Games's copyright infringement counterclaim, the court should consider "whether the positions advanced by the parties were frivolous... or well-grounded in law and fact." Rosciszewski, 1 F.3d at 234; see Primetime 24, 67 F.Supp.2d at 563. Furthermore, the court should consider whether the claim presented complex or novel legal and factual issues. Primetime 24, 67 F.Supp.2d at 563. "Ordinarily an award of attorney's fees is not appropriate in copyright cases involving novel, complex, or unsettled issues of law and fact." Id.
Silicon Knights contends that "discovery was extensive, contentious, and culminated in a 12-day trial," and that "[e]ven Epic [Games] admits that its [copyright infringement claim was] difficult and expensive to prove and that substantial work by Epic [Games] and its experts were [sic] required to develop the facts needed to prove the counterclaim[]." Pl.'s Mem.
The court rejects Silicon Knights's argument. Uncovering Silicon Knights's copyright infringement was undoubtedly arduous and expensive. Epic Games's experts had to comb through millions of lines of code that Silicon Knights had meticulously sought to "clean" in order to remove Epic Games's copyright notices and to disguise Epic Games's copyrighted code as Silicon Knights's own. In other words, Silicon Knights's code cleanup effort made discovery of Silicon Knights's wrongdoing more difficult than it otherwise would have been. But that does not somehow render Epic Games's copyright infringement counterclaim factually complex. Likewise, Epic Games's copyright infringement counterclaim presented no complex, novel, or unsettled legal issues. The counterclaim instead presented a straightforward copyright infringement claim supported by a mountain of direct and indirect evidence. Thus, the objective reasonableness of the parties' legal and factual positions supports an award of attorney's fees for Epic Games's copyright infringement counterclaim.
As for the need for compensation and deterrence, both weigh heavily in favor of awarding attorney's fees to Epic Games. As explained, over a prolonged time period, Silicon Knights deliberately and repeatedly copied thousands of lines of Epic Games's copyrighted code, and then attempted to conceal its wrongdoing by removing Epic Games's copyright notices and by disguising Epic Games's copyrighted code as Silicon Knights's own. Silicon Knights's coverup forced Epic Games's attorneys, working with Epic Games's experts, to engage in significant discovery, pouring over millions of lines of code and thousands of pages of documents to uncover Silicon Knights's wrongdoing. Epic Games's attorneys then took significant pains to create trial exhibits and elicit trial testimony that clearly demonstrated Silicon Knights's copyright infringement to the jury. Epic Games's attorneys also made significant efforts to reveal at trial the breadth and scope of Silicon Knights's coverup. Silicon Knights's wrongdoing unnecessarily raised Epic Games's legal fees. Moreover, Silicon Knights must be deterred from taking the same wrongful actions. Thus, the need for compensation and deterrence heavily favors awarding Epic Games attorney's fees for its copyright infringement counterclaim.
In sum, the record overwhelmingly supports an award of attorney's fees on the copyright infringement counterclaim. Accordingly, pursuant to section 505, the court awards Epic Games its reasonable attorney's fees for its copyright infringement counterclaim.
Third, Epic Games seeks attorney's fees for its trade secret misappropriation counterclaim based on North Carolina General Statute § 66-154(d). See Def.'s Mem. Supp. Mot. Attorney's Fees 6; Def.'s Reply Mot. Attorney's Fees 3-7. Section 66-154(d) provides that "if willful and malicious misappropriation exists, the court may award reasonable attorneys' fees to the prevailing party." N.C. Gen. Stat. § 66-154(d). "Willful means intentionally.... Willful is used in contradistinction to accidental or unavoidably." In re Pierce, 163 N.C. 247, 79 S.E. 507, 508 (1913); see Yancey v. Lea, 354 N.C. 48, 52, 550 S.E.2d 155, 157 (2001); Foster v. Hyman, 197 N.C. 189, 148 S.E. 36, 37 (1929); Allstate Ins. Co. v. Lahoud, 167 N.C. App. 205, 208-09, 605 S.E.2d 180, 183 (2004).
Silicon Knights willfully misappropriated Epic Games's trade secrets. Silicon Knights misappropriated 333 of Epic Games's trade secrets over the course of several years and in connection with several projects. See, e.g., Joint Amended Pretrial Order Part II.B ¶ 61; [D.E. 532-3] 32-34 & Ex. C; Def.'s Exs. 2391-92, 2394, 2508 (sealed), 2509 (sealed), 2510 (sealed); see also Def.'s Reply Mot. Attorney's Fees 67. Silicon Knights copied many of the trade secrets verbatim from Epic Games's code and transplanted them into Silicon Knights's code. See, e.g., Def.'s Exs. 2508 (sealed) (describing, in a comment left by a Silicon Knights employee, a particular Epic Games trade secret as being "ripped directly from Unreal"), 2509 (sealed) (same). Such extensive, repeated, and blatant misappropriation cannot be described as accidental or unavoidable. See Yancey, 354 N.C. at 52, 550 S.E.2d at 157; Allstate Ins., 167 N.C.App. at 208-09, 605 S.E.2d at 183. Rather, it was willful.
Silicon Knights's misappropriation also was malicious. Silicon Knights knew that Epic Games's Unreal Engine 3 ("UE3") code contained trade secrets. See, e.g., Pl.'s Ex. 1005 ¶ 6(b); Def.'s Ex. 2001 ¶ 6(b). Despite this knowledge, Silicon Knights repeatedly and deliberately copied significant portions of Epic Games's code containing trade secrets. Silicon Knights never bothered determining whether the code it copied represented an Epic Games trade secret. Silicon Knights simply "ripped" the code and the 333 trade secrets it encompassed "directly from [the] Unreal [Engine 3]," Def.'s Exs. 2508 (sealed), 2509 (sealed), and used it to create a competing product, Silicon Knights's own game engine. Conveniently, the trade secrets Silicon Knights misappropriated comprised the very code that Silicon Knights could not figure out how to write on its own. Silicon Knights's actions demonstrate "a reckless and wanton disregard of [Epic Games's] rights," and were therefore malicious. Moore, 345 N.C. at 371, 481 S.E.2d at 24.
Having determined that Epic Games should not receive attorney's fees for its breach of contract counterclaim, and that Epic Games should receive reasonable attorney's fees for its copyright infringement and trade secret misappropriation counterclaims, the court must now determine a reasonable amount of attorney's fees to award Epic Games. When calculating attorney's fees, courts must "determine a lodestar figure by multiplying the number of reasonable hours expended times a reasonable rate." Brodziak v. Runyon, 145 F.3d 194, 196 (4th Cir.1998) (quotations and alteration omitted); see Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 243-44 (4th Cir.2009); Grissom v. Mills Corp., 549 F.3d 313, 320-21
The Johnson/Barber factors include:
Grissom, 549 F.3d at 321 (quotation omitted). Although the Johnson/Barber factors often are subsumed in the district court's determination of the lodestar figure, the court also may consider those factors in evaluating whether the lodestar figure is reasonable. Hensley, 461 U.S. at 434 n. 9, 103 S.Ct. 1933. However, a court need not list each Johnson/Barber factor or comment on those factors that do not apply. See, e.g., Bergstrom v. Dalkon Shield Claimants Trust (In re A.H. Robins Co.), 86 F.3d 364, 376 (4th Cir.1996).
As to the reasonableness of Epic Games's attorney's fees, Silicon Knights argues that "Epic [Games] asserted 1,442 trade secrets against [Silicon Knights]," but that "shortly before trial, Epic [Games] ... claimed only 288 [sic] as misappropriated." Pl.'s Mem. Opp'n Mot. Attorney's Fees 13. Silicon Knights requests that it not be held responsible for Epic Games's attorney's fees associated with the 1,154 allegedly unasserted trade secrets. Id.
The court rejects Silicon Knights's argument. On October 24, 2007, Silicon Knights asked Epic Games, via interrogatory, to "[i]dentify each and every trade secret that [Epic Games] contend[s] is contained in, and/or encompassed by, any aspect of the Licensed Technology [(the UE3)] provided to Silicon Knights." [D.E. 78] 12 (sealed). In response, Epic Games argued that the interrogatory's broad scope was unduly burdensome, but stated that Epic Games would nonetheless "prepar[e] a list of its trade secrets and their respective locations that are relevant to this action." Id. 19 (sealed). Epic Games then prepared and provided a thirty-seven-page document listing the alleged trade secrets contained in the UE3's code. See [D.E. 106] 12. Silicon Knights, however, believed that the list was insufficiently detailed, and obtained a court order compelling Epic Games to disclose each specific trade secret, describe each trade secret in detail, and identify the location of each trade secret in the UE3's code. Id. 12-15. Complying with the court's order, Epic Games, its attorneys, and its experts specifically disclosed 1,442 alleged trade secrets, along with a description and location of each. See Pl.'s Mem. Opp'n Mot. Attorney's Fees 13; Def.'s Reply Mot. Attorney's Fees 7. By its broadly worded interrogatory for a detailed list of "each and every trade secret" contained in "any aspect
Silicon Knights does not otherwise challenge the reasonableness of Epic Games's requested attorney's fees. See Pl.'s Mem. Opp'n Mot. Attorney's Fees 1-14. Thus, the court now turns to the lodestar and Johnson/Barber analysis to determine the proper attorney's fees award.
The court is very familiar with this case and has reviewed parties' submissions concerning Epic Games's motion for attorney's fees. The court also has independently calculated a lodestar figure and applied the relevant Johnson/Barber factors. The court finds that Epic Games's initial request for $2,201,813.51 would have been reasonable had Epic Games been able to recover its attorney's fees for all of its counterclaims.
Epic Games's breach of contract counterclaim (standing alone) was not a major focus of this case. Instead, Silicon Knights's affirmative claims, Epic Games's defenses to those claims, Epic Games's copyright infringement counterclaim, and Epic Games's trade secret misappropriation counterclaim dominated the case, including the parties' discovery, pretrial motions, and trial. In context, the parties spent relatively little time investigating, proving, or arguing about Silicon Knights's breach of the License Agreement. After reviewing the record (including the Kenyon declaration and all of the time records), the court finds that a five percent reduction in Epic Games's attorney's fees request is appropriate. In doing so, the court notes that the case has been pending for five years, that there are over 800 docket entries, and that this court is very familiar with the entire record. Cf. Fox, 131 S.Ct. at 2216 (noting a district court's superior understanding of the litigation). Accordingly, $2,091,722.83 represents a reasonable attorney's fees award in this case, and the court awards Epic Games that amount. In reaching this figure, the court has considered the time and labor expended, the difficulty of the questions raised, the skill required, the customary fees for like work, the amount in controversy, and the results obtained. The other Johnson/Barber factors are not particularly relevant in this case.
As for Epic Games's request for expert fees, Federal Rule of Civil Procedure
In support, Epic Games first contends that paragraph 2(e)(iii) of the License Agreement permits the expert witness fees sought. Def.'s Mem. Supp. Mot. Attorney's Fees 2; Def.'s Reply Mot. Attorney's Fees 7-8. But the language of paragraph 2(e)(iii) belies Epic Games's argument. Under North Carolina law, interpreting a written and unambiguous contract is a question of law for the court. Briggs v. Am. & Efird Mills, Inc., 251 N.C. 642, 644, 111 S.E.2d 841, 843 (1960). When construing contractual terms, a contract's plain language controls. See, e.g., State v. Philip Morris USA Inc., 363 N.C. 623, 631-32, 685 S.E.2d 85, 90-91 (2009); Hodgin v. Brighton, 196 N.C. App. 126, 128-29, 674 S.E.2d 444, 446 (2009); Hemric v. Groce, 169 N.C. App. 69, 76, 609 S.E.2d 276, 282 (2005). Paragraph 2(e)(iii) states that Silicon Knights "hereby agrees to indemnify and hold harmless Epic [Games] from and against any expenses (including ... reasonable fees of ... expert witnesses) ... suffered by Epic [Games] arising out of [Silicon Knights's] responsibility under" section 2 of the License Agreement. Pl.'s Ex. 1005 ¶ 2(e)(iii); Def.'s Ex. 2001 ¶ 2(e)(iii). The explicit references to "indemnify" and "hold harmless" unambiguously demonstrate that paragraph 2(e)(iii) is merely an indemnity clause. See N.C. Mut. Life Ins. Co. v. McKinley Fin. Servs. Inc., No. 1:03CV00911, 2005 WL 3527050, at *9-10 (M.D.N.C. Dec. 22, 2005) (unpublished); Dixie Container Corp. v. Dale, 273 N.C. 624, 627-28, 160 S.E.2d 708, 711 (1968); Atl. Contracting & Material Co. v. Adcock, 161 N.C. App. 273, 280, 588 S.E.2d 36, 41 (2003); Smith v. Carolina Coach Co., 120 N.C. App. 106, 113-14, 461 S.E.2d 362, 366-67 (1995).
The express references to "indemnify" and "hold harmless" likewise reveal the scope of paragraph 2(e)(iii)'s protections. "As in the construction of any contract, the court's primary purpose in construing [the scope of an indemnity clause] is to ascertain and give effect to the intention of the parties, and the ordinary rules of construction apply." Dixie Container, 273 N.C. at 627, 160 S.E.2d at 711; see Atl. Contracting, 161 N.C.App. at 280, 588 S.E.2d at 41. Paragraph 2(e)(iii)'s use of "indemnify" and "hold harmless" shows that Silicon Knights and Epic Games intended paragraph 2(e)(iii) to shield Epic Games from losses or obligations incurred to third parties only. See Dixie Container, 273 N.C. at 627-28, 160 S.E.2d at 711; Atl. Contracting, 161 N.C.App. at 280, 588 S.E.2d at 41; Smith, 120 N.C.App. at 113-14, 461 S.E.2d at 366-67. As such, paragraph 2(e)(iii) cannot support awarding expert witness fees to Epic Games in this case.
Opposing this conclusion, Epic Games argues that "the broad, unqualified scope of [paragraph] 2(e)(iii) ... distinguishes" that paragraph from a typical indemnity clause. Def.'s Reply Mot. Attorney's Fees 8. Epic Games's references to breadth, however, cannot erase the plain language of paragraph 2(e)(iii). See Atl. Contracting, 161 N.C.App. at 279-80, 588 S.E.2d at 41. Furthermore, paragraph 2(e)(iii) is materially indistinguishable from the provision at issue in North Carolina Mutual Life Insurance Co. The indemnity clause in that case stated,
N.C. Mut. Life Ins., 2005 WL 3527050, at *9 (second alteration in original). Similarly, paragraph 2(e)(iii) states that Silicon Knights
Pl.'s Ex. 1005 ¶ 2(e)(iii); Def.'s Ex. 2001 ¶ 2(e)(iii). The wording of the two indemnity clauses differs, but not materially. Paragraph 2(e)(iii) is an indemnity clause insulating Epic Games from a loss or obligation incurred to a third party only. See N.C. Mut. Life Ins., 2005 WL 3527050, at *9-10. Thus, paragraph 2(e)(iii) does not permit Epic Games to recover its requested expert witness fees.
Second, Epic Games contends that 17 U.S.C. § 505 authorizes the court to award expert witness fees exceeding those provided in 28 U.S.C. § 1821(b). See Def.'s Mem. Supp. Mot. Attorney's Fees 3. Section 505 provides that "[i]n any civil action under [the federal Copyright Act], the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof." 17 U.S.C. § 505. Circuit courts are split on whether section 505 authorizes an expert witness fees award in excess of the $40.00 per diem limit provided in section 1821(b). Compare Artisan Contractors Ass'n of Am., Inc. v. Frontier Ins. Co., 275 F.3d 1038, 1038-40 (11th Cir. 2001) (per curiam) (not authorized), and Pinkham v. Camex, Inc., 84 F.3d 292, 295 (8th Cir.1996) (per curiam) (same), with Twentieth Century Fox Film Corp. v. Entm't Distrib., 429 F.3d 869, 885 (9th Cir.2005) (authorized).
In Crawford Fitting, the Supreme Court explained that
In short, Epic Games is not entitled to recoup expert witness fees in excess of those permitted under 28 U.S.C. §§ 1821(b) and 1920. Epic Games did not specify the amount of expert witness fees it claims under sections 1821(b) and 1920. Based on the information Epic Games provided, the court finds that, conservatively, Epic Games may recover $680.00 in expert witness fees, and awards Epic Games that amount in expert witness fees. See [D.E. 815-2] 256, 272, 288-89, 310.
Epic Games requests that the court amend the judgment under Federal Rule of Civil Procedure 59(e) to include $3,554,578.46 in prejudgment interest on Epic Games's breach of contract counterclaim. Def.'s Mot. Amend J. 1. Initially, Silicon Knights suggests that Rule 59(e) cannot be used to amend a judgment to include prejudgment interest. Pl.'s Mem. Opp'n Mot. Amend J. 1-2. However, Epic Games's request for prejudgment interest is properly classified as a request to amend the court's judgment, and is governed by Rule 59(e). See Kosnoski v. Howley, 33 F.3d 376, 378 (4th Cir.1994); see also Osterneck v. Ernst & Whinney, 489 U.S. 169, 175, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989) ("[U]nlike attorney's fees, which at common law were regarded as an element of costs and therefore not part of the merits judgment, ... interest traditionally has been considered part of the compensation due plaintiff."); Hexion Specialty Chems., Inc. v. Oak-Bark Corp., No. 7:09-CV-105-D, 2012 WL 2458638, at *1 (E.D.N.C. June 27, 2012) (unpublished). Accordingly, the court rejects Silicon Knights's contrary suggestion and addresses Epic Games's request for prejudgment interest.
Awarding prejudgment interest is a "matter within the district court's discretion." Maksymchuk v. Frank, 987 F.2d 1072, 1077 (4th Cir.1993); United States v. Gregory, 818 F.2d 1114, 1118 (4th Cir. 1987). A court should award prejudgment interest when doing so "serves the legitimate goals of making a party whole, or compensating the injured party for the loss of the use of money he would otherwise have had." Marlen C. Robb & Son Boatyard & Marina, Inc. v. Vessel Bristol, 893 F.Supp. 526, 540 (E.D.N.C.1994); see EEOC v. Liggett & Myers, Inc., 690 F.2d 1072, 1074 (4th Cir.1982). Because North Carolina law governs Epic Games's breach of contract counterclaim, the court looks to North Carolina law to determine whether to award prejudgment interest to Epic
North Carolina General Statute § 24-5 provides that "[i]n an action for breach of contract ... the amount awarded on the contract bears interest from the date of breach." N.C. Gen.Stat. § 24-5(a). "If the parties have agreed in the contract that the contract rate shall apply after judgment, then interest on an award in a contract action shall be at the contract rate after judgment; otherwise, it shall be at the legal rate." Id. "The legal rate of interest [is] eight percent (8%) per annum for such time as interest may accrue, and no more." N.C. Gen.Stat. § 24-1; see Barrett Kays & Assocs., P.A. v. Colonial Bldg. Co., Inc. of Raleigh, 129 N.C. App. 525, 529, 500 S.E.2d 108, 111-12 (1998). A party is "entitled to interest from the date of the breach as a matter of law" only after "breach is established." Cap Care Grp., Inc. v. McDonald, 149 N.C. App. 817, 824, 561 S.E.2d 578, 583 (2002).
Opposing Epic Games's request for prejudgment interest, Silicon Knights argues that Epic Games has not, and cannot, identify reasonably certain dates on which Silicon Knights breached the License Agreement. Pl.'s Mem. Opp'n Mot. Amend J. 2-3; see also Def.'s Mem. Supp. Mot. Amend J. 45; Def.'s Reply Mot. Amend J. 3-4. A party prevailing on its breach of contract claim is entitled to interest from the date of breach. Thomas M. McInnis & Assocs., Inc. v. Hall, 318 N.C. 421, 431, 349 S.E.2d 552, 558 (1986). If the parties do not submit the issue to a jury, the court may determine the date of breach. Sockwell & Assocs., Inc. v. Sykes Enters. Inc., 127 N.C. App. 139, 143, 487 S.E.2d 795, 798 (1997); Metromont Materials Corp. v. R.B.R. & S.T., 120 N.C. App. 616, 618, 463 S.E.2d 305, 307 (1995). In doing so, the court may, but does not have to, select "the latest [date] on which breach could have been found." Taha v. Thompson, 120 N.C. App. 697, 703, 463 S.E.2d 553, 557 (1995); see Sockwell & Assocs., 127 N.C.App. at 143, 487 S.E.2d at 798. Evidence in the record must support the court's finding as to the date of breach. See Sockwell & Assocs., 127 N.C.App. at 143, 487 S.E.2d at 798.
The jury found that Silicon Knights breached the License Agreement by failing to pay licensing fees for The Box/Ritualyst The Sandman, X-Men: Destiny, and Siren in the Maelstrom. See [D.E. 802] 2 (finding that Silicon Knights was liable to Epic Games for $2,650,000.00 in damages, an amount equating to the unpaid licensing fees Silicon Knights owed Epic Games under the License Agreement for The Box/Ritualyst, The Sandman, X-Men: Destiny, and Siren in the Maelstrom); see also Pl.'s Ex. 1005, Ex. A; Def.'s Ex. 2001, Ex. A. The jury did not determine the specific date on which Silicon Knights breached the License Agreement with respect to each of those games. See [D.E. 802] 2. Thus, for each game, the court must determine the date on which the breach occurred. See Sockwell & Assocs., 127 N.C.App. at 143, 487 S.E.2d at 798; Metromont Materials, 120 N.C.App. at 618, 463 S.E.2d at 307. In doing so, the court has reviewed the record. Being conservative, the court relies on the dates provided in defendant's exhibit 2384 and the evidence that supports those dates. That evidence demonstrates that (1) on July 29, 2008, The Box/Ritualyst contained 20,259 lines of Epic Games's UE3 code, (2) on July 29, 2008, The Sandman contained 20,259 lines of Epic Games's UE3 code, (3) on November 11, 2008, X-Men: Destiny contained 16,065 lines of Epic Games's UE3 code, and, (4) on September 17, 2009, Siren in the Maelstrom contained 535 lines of Epic Games's UE3 code. See, e.g.,
The parties disagree on how to calculate prejudgment interest. The parties agree that the applicable interest rate is 1.5 percent per month. See Def.'s Mem. Supp. Mot. Amend J. 3; Pl.'s Mem. Opp'n Mot. Amend J. 4; accord Pl.'s Ex. 1005, Ex. A; Def.'s Ex. 2001, Ex. A. Epic Games, however, argues that the License Agreement requires compound interest. Def.'s Mem. Supp. Mot. Amend J. 3; Def.'s Reply Mot. Amend J. 56. Silicon Knights contends that the License Agreement requires simple interest. Pl.'s Mem. Opp'n Mot. Amend J. 3-4.
Typically, compound interest is not permitted unless otherwise specified by statute or by contract. See Cherokee Nation v. United States, 270 U.S. 476, 490, 46 S.Ct. 428, 70 L.Ed. 694 (1926) (collecting cases); Ronald J. & Dana Cohen Family Ltd. P'ship v. City of Capitals, Inc., 829 F.2d 36, 1987 WL 44680, at *1 (4th Cir.1987) (per curiam) (unpublished) (collecting cases). Here, the "Payment Terms" provision in Exhibit A of the License Agreement provides that "[i]nterest shall accrue on all amounts not paid at a rate, calculated upon the unpaid balance, of the lesser of: (i) one and one-half percent (1.5%) per month; or (ii) the highest rate allowed by law." Pl.'s Ex. 1005, Ex. A; Def.'s Ex. 2001, Ex. A. Interest on "all amounts" and on "the unpaid balance" is considered compound interest. See Exxon Corp. v. Crosby-Miss. Res., Ltd., 40 F.3d 1474, 1488-89 (5th Cir.1995) (per curiam); Texon Energy Corp. v. Dow Chem. Co., 733 S.W.2d 328, 331 (Tex.App.1987); Fishburne v. Hartsfield Loan & Sav. Co., 38 Ga.App. 784, 145 S.E. 495, 495-96 (1928); cf. Ronald J. & Dana Cohen Family, 1987 WL 44680, at *1-2. Thus, for its breach of contract counterclaim, Epic Games is entitled to 1.5 percent interest, compounded monthly from the date of breach for The Box/Ritualyst, The Sandman, X-Men: Destiny, and Siren in the Maelstrom. Accordingly, the court awards Epic Games a total of $2,302,147.96 in prejudgment interest on its breach of contract counterclaim, and will amend the judgment accordingly.
In its motion for remittitur, Silicon Knights contends that Epic Games cannot recover damages for both its breach of contract counterclaim and its copyright infringement and trade secret misappropriation counterclaims. Pl.'s Mem. Supp. Mot. Remittitur 3-4. Specifically, Silicon Knights argues that the damages the jury awarded to Epic Games constitute double recovery, that Epic Games is entitled only to the damages awarded on
In opposition to Silicon Knights's remittitur motion, Epic Games argues that the damages awarded for its breach of contract counterclaim did not overlap with the damages awarded for its copyright infringement and trade secret misappropriation counterclaims. Def.'s Mem. Opp'n Mot. Remittitur 1-3; see Epic Games Closing Tr. May 29, 2012 AM at 170-78. Specifically, Epic Games contends that, for its breach of contract counterclaim, the jury awarded only the unpaid licensing fees for The Box/Ritualyst, X-Men: Destiny, The Sandman, and Siren in the Maelstrom. See Def.'s Mem. Opp'n Mot. Remittitur 1-3. In contrast, for its copyright infringement and trade secret misappropriation counterclaims, Epic Games argues that the jury awarded only the ill-gotten profits Silicon Knights reaped from its copyright infringement and trade secret misappropriation as to The Box/Ritualyst, X-Men: Destiny, The Sandman, and Siren in the Maelstrom. Id. Because the damages Epic Games sought and received for its breach of contract counterclaim did not overlap with those it sought and received for its copyright infringement and trade secret misappropriation counterclaims, and because governing law permits the recovery of these distinct damages, Epic Games argues that remittitur is not appropriate. See id.
Epic Games's argument comports with the evidence, arguments, and legal principles in this case. In connection with Epic Games's breach of contract counterclaim, the court instructed the jury that Epic Games had to prove (1) that Silicon Knights and Epic Games entered into the May 10, 2005 license agreement, (2) that Silicon Knights breached either paragraph 2(a) or paragraph 2(g), or both, and (3) that Epic Games suffered damages as a proximate result of Silicon Knights's breach of paragraph 2(a) or paragraph 2(g), or both. See [D.E. 860-1] at 36. The breach of contract counterclaim concerned the unpaid licensing fees for The Box/Ritualyst, X-Men: Destiny, The Sandman, and Siren in the Maelstrom. As for damages on the breach of contract counterclaim, the court instructed the jury as to both nominal and actual damages. Id. at 38-39.
In connection with the copyright infringement counterclaim under the federal Copyright Act, the court instructed the jury (1) that Epic Games had to prove that Epic Games is the owner of a valid copyright or valid copyrights and (2) that Silicon Knights copied original elements from a version or versions of the Unreal Engine 3's computer code in which Epic Games owns a valid copyright. See id. at 39-40. The court then gave extensive instructions expounding on these two elements. See id. at 40-49. As for the trade secret misappropriation counterclaim under North Carolina's Trade Secrets Protection Act, the court instructed the jury that Epic Games had to prove (1) that Epic Games's proprietary information in the Unreal Engine 3's computer code constitutes a trade secret or trade secrets; (2) that Silicon Knights misappropriated Epic Games's trade secret or trade secrets, and (3) that Silicon Knights's misappropriation of Epic Games's trade secret or trade secrets resulted in the unjust enrichment of Silicon Knights. See id. at 49. The court then gave extensive instructions expounding on these elements. Id. at 49-55.
As for damages on the copyright infringement counterclaim and trade secret misappropriation counterclaim, the court instructed the jury:
See id. at 52-55. In addition, the court instructed the jury that Epic Games was not entitled to double recovery on the copyright infringement counterclaim and the trade secret misappropriation counterclaim.
Id.
Under the federal Copyright Act, Epic Games could have sought "to recover the actual damages suffered by [it] 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. § 504(b); Walker v. Forbes, Inc., 28 F.3d 409, 412 (4th Cir.1994). Epic Games, however, only sought Silicon Knights's ill-gotten profits. See [D.E. 860-1] at 39-49, 52-55. Likewise, under the North Carolina Trade Secrets Protection Act, Epic Games only sought "the unjust enrichment caused by misappropriation of a trade secret." N.C. Gen.Stat. § 66-154(b).
As noted, the jury awarded Epic Games $2,650,000.00 in actual damages on the breach of contract counterclaim and $1,800,000.00 on the copyright infringement and trade secret misappropriation counterclaims. See [D.E. 802]. The recovery on the breach of contract counterclaim served a different interest and was not based on the same conduct or proof as the conduct and proof giving rise to the recovery on the copyright infringement and trade secret misappropriation counterclaims. The breach of contract counterclaim only made Silicon Knights pay the licensing fee due to Epic Games under the May 10, 2005 licensing agreement for The Box/Ritualyst, X-Men: Destiny, The Sandman, and Siren in the Maelstrom. In contrast, Epic Games's copyright infringement and trade secret misappropriation counterclaim only stripped Silicon Knights of the "profit generated as a result of the use of the infringed [code and misappropriated trade secrets]." Walker, 28 F.3d at 412. "By stripping the infringer... of the profit generated as a result of the use of the infringed item, [17 U.S.C. § 504(b)] makes clear that there is no gain to be made from taking someone else's intellectual property without their consent." Id.; see McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 566-70 (7th Cir.2003). Moreover, this court's conclusion that there is no double recovery in this case not only comports with 17 U.S.C. § 504(b), but also with North Carolina law. See, e.g., United Labs., Inc. v. Kuykendall, 335 N.C. 183, 191-94, 437 S.E.2d 374, 379-81 (1993). Finally, the court has reviewed the cases that Silicon Knights cited in its memorandum and reply and finds that the cited cases are distinguishable from the evidence, argument, and legal principles at issue in this case. Cf. Walker, 28 F.3d at 412 ("[G]iven the remarkable breadth of works eligible for copyright protection, and the numerosity of variables involved in determining loss and gain under each scenario, the experience of copyright damages has been one of case-by-case assessment of the factors involved, rather than application of hard and fast rules."). Accordingly, the court denies Silicon Knights's motion for remittitur.
In its motion for a permanent injunction, Epic Games seeks to require Silicon Knights to remove from its systems all of Epic Games's copyrighted material and trade secrets, to enjoin Silicon Knights from distributing any product that contains Epic Games's copyrighted material or trade secrets, and to enjoin Silicon Knights from creating any product using Epic Games's copyrighted material or trade secrets. See Def.'s Mot. Inj. 13; Def.'s Mem. Supp. Mot. Inj. 12. North Carolina General Statute § 66-154(a) provides that "actual ... misappropriation of a trade secret ... shall be permanently enjoined upon judgment finding misappropriation for the period that the trade secret exists plus an additional period as the court may deem necessary under the circumstances to eliminate any inequitable or unjust advantage arising from the misappropriation." N.C. Gen.Stat. § 66-154(a). The federal Copyright Act similarly permits a court to grant a permanent injunction "on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U.S.C. § 502(a); Christopher Phelps & Assocs., LLC v. Galloway, 492 F.3d 532, 546-47 (4th Cir.2007). Such an injunction may include "the destruction or other reasonable disposition of all copies ... found to have been made or used in violation of the copyright owner's exclusive rights, and of all ... articles by means of which such copies ... may be reproduced." 17 U.S.C. § 503(b).
Epic Games and Silicon Knights agree that a permanent injunction is authorized and appropriate in this case. See Def.'s Mem. Supp. Mot. Inj. 6; Pl.'s Mem. Opp'n Mot. Inj. 1-5 (disputing the most reasonable scope of a permanent injunction, but failing to argue that a permanent injunction is altogether improper in this case). The parties, however, dispute the scope of the injunction. See Def.'s Mem. Supp. Mot. Inj. 6-8; Pl.'s Mem. Opp'n Mot. Inj. 2-5; Def.'s Reply Mot. Inj. 14.
The court has reviewed the parties' arguments, reviewed the entire record (including the License Agreement), and reflected on the nature and extent of Silicon Knights's copyright infringement and trade secret misappropriation. The court also has reflected on Silicon Knights's "code cleanup" effort and considered the nature of the video game and game engine industries. The court finds that injunctive relief is appropriate. Such relief prevents Silicon Knights from benefitting from its wrongdoing and continuing the irreparable harm to Epic Games. Such relief also comports with the balance of hardships between Epic Games and Silicon Knights and is in the public interest. Thus, the court orders the following injunctive relief:
As for Silicon Knights's motion for judgment as a matter of law, Federal Rule of Civil Procedure 50 permits a court to grant a motion for judgment as a matter of law "after a party has been fully heard on an issue only if there is no legally sufficient evidentiary basis for a reasonable jury to have found for that party with respect to that issue." Robinson, 560 F.3d at 240 (quotations omitted); see Fed. R.Civ.P. 50(a)(b); Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 149-51, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000); Brown v. CSX Transp., Inc., 18 F.3d 245, 248 (4th Cir.1994). When considering a motion under Rule 50, a court must review the entire record and examine the evidence in the light most favorable to the non-moving party. See, e.g., Reeves, 530 U.S. at 149-51, 120 S.Ct. 2097; Brown, 18 F.3d at 248.
The court listened to the testimony and reviewed exhibits as Silicon Knights presented its affirmative case on and Epic Games defended against Silicon Knights's breach of contract claim. The court paid equally close attention to the testimony
In connection with Silicon Knights's renewed motion and the parties' corresponding filings, the court has again reviewed and reflected on the evidence and arguments presented. Viewing the record in the light most favorable to Epic Games under Rule 50, overwhelming evidence establishes and supports Epic Games's copyright infringement and trade secret misappropriation counterclaims. Silicon Knights's arguments to the contrary are baseless. Accordingly, the court denies Silicon Knights's motion for judgment as a matter of law.
Epic Games seeks to compel complete responses to its post-judgment interrogatories and requests for production regarding Silicon Knights's past and present assets and finances. See Def.'s Mot. Compel 1-2; [D.E. 828-1] (providing the disputed interrogatories and requests for production, and Silicon Knights's responses to them). Federal Rule of Civil Procedure 37(a)(1) provides that a party may move to compel answers to interrogatories and responses to requests for production. See Fed.R.Civ.P. 37(a)(3)(B). Before a court may consider such a motion, the parties must meet and confer regarding the discovery requests and attempt in good faith to resolve the discovery dispute without court action. See Fed.R.Civ.P. 37(a)(1); Local Civil Rule 7.1(c). Silicon Knights contends that Epic Games failed to comply with Rule 37(a)(1) and Local Civil Rule 7.1(c). Pl.'s Mem. Opp'n Mot. Compel 2-3. The court has reviewed Silicon Knights's arguments and the corresponding exhibits. The court finds that Epic Games complied with its obligation to meet and confer and to attempt in good faith to resolve the discovery disputes at issue. Silicon Knights and Epic Games have simply reached an impasse as to the appropriate scope of post-judgment discovery regarding Silicon Knights's past and present assets and finances. Thus, the court addresses the merits of Epic Games's motion to compel.
Pursuant to Federal Rule of Civil Procedure 26(b)(1),
Fed.R.Civ.P. 26(b)(1). Federal Rule of Civil Procedure 69(a)(2) provides that "[i]n aid of the judgment or execution, the judgment creditor ... may obtain discovery from any person — including the judgment debtor — as provided in these rules." Fed. R.Civ.P. 69(a)(2).
"[D]iscovery rules are to be accorded a broad and liberal treatment to effect their purpose of adequately informing the litigants in civil trials." Herbert v. Lando, 441 U.S. 153, 177, 99 S.Ct. 1635, 60 L.Ed.2d 115 (1979); see Hickman v. Taylor, 329 U.S. 495, 507, 67 S.Ct. 385, 91 L.Ed. 451 (1947). Accordingly, "[d]iscovery under the Federal Rules of Civil Procedure is ... freely permitted." Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 402 (4th Cir.2003). A litigant, however, is not entitled to conduct discovery that is intended to harass, annoy, embarrass, or oppress, or that causes undue burden or expense to the opposing party. See Fed.R.Civ.P. 26(c). Nevertheless, the party opposing a motion to compel must demonstrate why discovery should not be granted. SAS Inst. Inc. v. Akin Gump Strauss Hauer & Feld, LLP, No. 5:10-CV-101-H, 2011 WL 6370482, at *2 (E.D.N.C. Dec. 20, 2011) (unpublished); Mainstreet Collection, Inc. v. Kirkland's, Inc., 270 F.R.D. 238, 240 (E.D.N.C.2010). When evaluating a motion to compel discovery, the court enjoys broad discretion. See Carefirst of Md., 334 F.3d at 402; Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922, 929 (4th Cir.1995); Erdmann v. Preferred Research, Inc., 852 F.2d 788, 792 (4th Cir. 1988); LaRouche v. Nat'l Broad., Co., Inc., 780 F.2d 1134, 1139 (4th Cir.1986).
On June 20, 2012, Epic Games served on Silicon Knights fourteen interrogatories and sixteen requests for production. See Def.'s Mot. Compel 2; Def.'s Mem. Supp. Mot. Compel 2; cf. [D.E. 828-1]. Epic Games's interrogatories and requests for production seek information and documents concerning Silicon Knights's assets and finances from July 18, 2007, to the present. See [D.E. 828-1]. On July 20, 2012, Silicon Knights responded. See Def.'s Mot. Compel 2; Def.'s Mem. Supp. Mot. Compel 2; cf. [D.E. 828-1]. Silicon Knights's responses to Epic Games's interrogatories and requests for production comprise nothing but a laundry list of boilerplate objections. See [D.E. 828-1]. Silicon Knights has failed to articulate any specific objection to any particular interrogatory or request for production, and therefore has waived any legitimate objection it otherwise could have raised. See McLeod, Alexander, Powel & Apffel, P.C. v. Quarles, 894 F.2d 1482, 1484-85 (5th Cir.1990); Panola Land Buyers Ass'n v. Shuman, 762 F.2d 1550, 1558-59 (11th Cir. 1985); Josephs v. Harris Corp., 677 F.2d 985, 991-92 (3d Cir.1982); Mainstreet Collection, 270 F.R.D. at 240; Kinetic Concepts, Inc. v. ConvaTec Inc., 268 F.R.D. 226, 247 (M.D.N.C.2010) (collecting cases); Hy-Ko Prods. Co. v. Hillman Grp., Inc., No. 5:09-MC-00032, 2009 WL 3258603, at *12 (E.D.N.C. Oct. 8, 2009) (unpublished).
In addition to boilerplate objections, Silicon Knights also added specious responses to some discovery requests. For example, in response to Epic Games's eighth and ninth requests for production, Silicon Knights stated that, "[s]ubject to and without waiving any of [its] objections..., [Silicon Knights] will endeavor to identify and produce appropriately responsive documents." [D.E. 828-1] 41, 43. This vague, open-ended response merely "state[s] an intention to make some production
Alternatively, even assuming Silicon Knights's objections to Epic Games's interrogatories and requests for production rise above the level of specious, boilerplate objections, those objections fail. Silicon Knights contends that Epic Games's interrogatories and requests for production are overly broad and unduly burdensome because they seek information and documents pertaining to Silicon Knights's assets and finances before May 30, 2012, the date of judgment, rather than information and documents pertaining exclusively to Silicon Knights's current assets and finances. See Pl.'s Mem. Opp'n Mot. Compel 3-4.
Essentially, Silicon Knights makes a relevance objection. The standard for relevance during discovery differs from that during trial. See Fed.R.Civ.P. 26(b)(1). To be relevant during discovery, "information need not be admissible at the trial." Id. The requested information must simply be "reasonably calculated to lead to the discovery of admissible evidence." Id. Accordingly, relevance during discovery is "construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on, any issue that is or may be in the case." Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 351, 98 S.Ct. 2380, 57 L.Ed.2d 253 (1978). The party opposing discovery bears the burden of showing that the requested information is not relevant.
Silicon Knights has not met its burden. Information and documents pertaining to Silicon Knights's prejudgment assets and finances is relevant to determining whether Silicon Knights has, in preparation for a possible judgment, secreted, hidden, wasted, or otherwise improperly disposed of assets. See Caisson Corp. v. Cnty. West Bldg. Corp., 62 F.R.D. 331, 334 (E.D.Pa.1974); Monticello Tobacco Co. v. Am. Tobacco Co., 12 F.R.D. 344, 345 (S.D.N.Y.1952). "In aid of the judgment or execution," Epic Games may discover this information. Fed.R.Civ.P. 69(a)(2). Accordingly, the court grants Epic Games's motion to compel complete responses to its interrogatories and requests for production. Silicon Knights shall provide complete responses to the requested discovery not later than December 3, 2012.
In sum, the court DENIES Silicon Knights's motion to stay [D.E. 808]. The court GRANTS IN PART and DENIES IN PART Epic Games's motion for costs [D.E. 813], GRANTS IN PART and DENIES IN PART Silicon Knights's motion to disallow costs [D.E. 838], and awards Epic Games $277,852.13 in costs. The court GRANTS IN PART and DENIES IN PART Epic Games's motion for attorney's fees and expert witness fees [D.E. 814], awards Epic Games $2,091,722.83 in attorney's fees, and awards Epic Games $680.00 in expert witness fees. The court GRANTS IN PART and DENIES IN PART Epic Games's motion to amend the judgment [D.E. 816] and amends the judgment [D.E. 804] to reflect $2,302,147.96 in prejudgment interest on Epic Games's breach of contract counterclaim. The court DENIES Silicon Knights's motion to alter the judgment by remittitur [D.E. 818]. The court GRANTS IN PART and DENIES IN PART Epic Games's motion for a permanent injunction [D.E. 820] and
28 U.S.C. § 1920.
Local Civil Rule 54.1(c)(1). Local Civil Rule 54.1(c) also identifies items "normally not taxed, without limitation" as
Local Civil Rule 54.1(c)(2).