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U.S. Court of Appeals Affirms $5.1M Copyright Infringement Judgment in Favor of Software Developer

| Sep 22, 2008 | IP and Technology

The United States Court of Appeals for the Fourth Circuit recently affirmed the Judgment of the District Court for the District of Maryland in favor of Juan Pizzorno for $5.1 million in copyright infringement damages.  The Judgment had been entered against Defendants L-Soft International, Inc. and Eric Thomas, jointly and severally.

Pizzorno is a software developer who created a mailing software program capable of quickly sending a large number of e-mail messages.  Pizzorno registered his copyright in the program prior to filing suit.

The Judgment is based on a jury verdict returned after a two week trial in August 2006.  Pizzorno presented evidence that L-Soft breached their agreement and license by failing to pay royalties due to Pizzorno and that Pizzorno terminated the agreement.  Pizzorno’s primary legal claim was that the post-termination sales of licenses of his software and sales of services using his software constituted copyright infringement by L-Soft and Thomas.  Gorman & Williams was co-counsel with Fisher & Winner.

The strongly-contested litigation and trial raised interesting questions: personal jurisdiction in the United States over a controlling person even though most of his work was performed from Sweden; failure to produce in electronic format voluminous discovery documents; unsuccessful Daubert challenges to a first-time testifying, CPA expert witnesses and her opinions and testimony on damages; a work for hire defense against which the Court allowed into evidence, as a Rule 807 hearsay exception, a joint Declaration by a German attorney and a computer research supervisor; and the effect of a contracting party’s election to continue the contract despite an alleged material breach while, at the same time, refusing to perform its obligations under the contract.

On appeal, L-Soft and Thomas contended that (1) Pizzorno did not unequivocally and unconditionally terminate the agreement, and (2) the inclusion of a non-competition covenant in the agreement and license constituted misuse of copyright that precludes the recovery of damages for infringement under the Fourth Circuit’s decision in Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990).  Judge Roger L. Gregory wrote the decision of the three-judge appellate panel affirming the Judgment for Pizzorno.   Pizzorno v. L-Soft International, et al., 2008 WL5082105, 2008 Copr.L.Dec. P 29,665, 30 Fed.Appx. 148 (4 Cir. 2008).

The Court of Appeals rejected the arguments of L-Soft and Thomas.  The Court held the legal standard for contract termination permits the jury to consider written communications, the conduct of the parties, and the surrounding circumstances.  Under that standard, the jury’s finding that the agreement and license had been terminated was supported by the evidence.  As to the copyright misuse argument, the Court noted that L-Soft did not carry its burden to show anti-competitive consequences resulting from the non-competition covenant.  In addition, the Court held that Pizzorno’s termination purged and dissipated any anti-competitive  consequences.

The litigation also included two suits by Pizzorno against L-Soft’s insurer.

Frank Gorman, Michael Yang, Charles Simmons, and others at the firm worked on the case over its lifetime, i.e., 2002 to 2009. Posted September 9, 2009.