A furniture manufacturer, found liable for infringement of copyrights in furniture designs, has been ordered to pay the owner of those copyrights the entire gross revenues from sales of the infringing furniture. On February 12, 2009, a United States District Judge sitting in the Middle District of North Carolina, home to the world’s largest and most prestigious furniture market, ordered the infringer to pay more than eleven million dollars to the copyright owner, represented by Kilpatrick Stockton, after determining that the infringer had failed to carry its burden of proving deductible expenses from its gross revenues and/or that such revenues were attributable to factors other than the infringement. Universal Furniture Int’l, Inc. v. Collezione Europa USA, Inc., 2009 WL 367538 (M.D.N.C. 2009).

The United States District Court for the Middle District of North Carolina had previously determined that Defendant Collezione Europa USA, Inc. (“Collezione”) was liable to Plaintiff Universal Furniture International, Inc. (“Universal”) for, among other things, infringement of Universal’s copyright in two of its furniture collections. Universal Furniture Int’l, Inc. v. Collezione Europe USA, Inc., 2007 WL 2712926 (M.D.N.C. 2007). The Court entered a permanent injunction, and later held a series of hearings to determine the appropriate monetary award.

Under the Copyright Act, the copyright owner is entitled to recover, in addition to actual damages, “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). Universal sought to recover Collezione’s profits, rather than Universal’s actual damages, and was therefore required “to present proof only of the infringer’s gross revenue.Id. The Court held that Universal had satisfied its statutory burden by presenting calculations of Collezione’s gross revenues at trial. The burden then shifted to Collezione “to prove [its] deductible expenses and the elements of profit attributable to factors other than the copyrighted work.” Id.

The Court held that Collezione failed to meet either burden. As to apportionment, all gross revenues are presumed to be profit attributable to the infringement, subject to the infringer’s ability to prove otherwise. In this case, the Court found that Collezione had failed to establish that any portion of its gross revenues from the infringing items were attributable to factors other than the copyrighted work. Accordingly, all profits were deemed attributable to Collezione’s infringement.

The Court then turned to Collezione’s deductible expenses. Calling Collezione’s multiple methods of attempting to present its costs “confusing, unreliable, and internally inconsistent,” the Court noted that “Collezione’s inexplicable obfuscation of the deductible costs began during discovery.” The Court found that, despite multiple opportunities to offer testimony or evidence of deductible expenses, Collezione was “unable or unwilling to furnish a reasonably reliable method of reviewing and calculating deductible costs . . . .” Moreover, because the Court found Collezione to be a willful infringer, the Court closely scrutinized Collezione’s evidence of deductible expenses, with “any doubts resulting from an infringer’s failure to present adequate proof of its costs [being] resolved in favor of the copyright holder.”

This decision confirms that substantial monetary awards, in addition to injunctive relief, are available for copyright infringement in the furniture industry. Copyright owners should carefully weigh their options for monetary recovery early, and consider the relative difficulties of proving their actual damages versus proving the infringer’s profits. Those accused of copyright infringement, on the other hand, are advised to keep current, consistent, and competent records of deductible expenses, and to consider whether to develop testimony (whether through experts or otherwise) that would attribute some or all of the gross revenues to factors other than the copyrighted work, if that approach is factually supported. When willful infringement is found, the defendant’s apportionment theories and costs calculations will undergo even greater scrutiny.