May 26, 2020
Authored and Edited by Jessica L. Hannah; Margaret A. Esquenet
The Eighth Circuit upheld a jury verdict of copyright infringement and a damage award of $11.2 million against DatabaseUSA.com LLC for copying a competitor’s database of business information.
Years before the lawsuit began, Vinod Gupta founded Infogroup, Inc., as a company that compiled a database of business information. Gupta later entered a separation agreement with Infogroup, which contained non-disparagement, confidentiality, and non-compete provisions and provided Gupta with $10 million and other benefits. Within two years of leaving Infogroup, Gupta founded DatabaseUSA, which compiled a database of business information. Infogroup reviewed a sample of DatabaseUSA’s database and found—in DatabaseUSA’s database—nine pieces of fake data that Infogroup had created and included in its own database to detect copying by others. Infogroup then sued DatabaseUSA for copyright infringement, among other claims, and Gupta for breach of contract.
In the district court, the jury found that DatabaseUSA had infringed Infogroup’s copyright in its database. The jury awarded Infogroup $11.2 million against DatabaseUSA for copyright infringement and $10 million against Gupta for breaching the separation agreement. DatabaseUSA and Gupta sought judgment as a matter of law or a new trial, but the district court denied both. On appeal, the Eighth Circuit affirmed the district court’s judgment.
To establish copyright infringement, Infogroup needed prove (1) ownership of a valid copyright and (2) copying of original elements of the work. To prove ownership of a valid copyright, Infogroup submitted the Certificate of Registration of its 2011 database, which protected the “text, Compilation” of its database. Certificates of Registration are entitled to a rebuttable presumption of the validity of the copyright, and DatabaseUSA did not submit any evidence rebutting the validity. The court noted that although copyright in a factual compilation like Infogroup’s database is thin, copyright protection is available for the selection and arrangement of facts, “so long as they are made independently by the compiler and entail a minimum degree of creativity.”
The district court credited testimony from Infogroup executives that described Infogroup’s “merge/purge” process of selecting certain data to include in the database. Specifically, employees used multiple sources to gather business information, such as business names, business addresses, phone numbers, and names and titles of officers. Employees verified the records for each business by calling the business itself or comparing against numerous other data sources compiled during the process. Through verification, employees paired business names and addresses with additional data and purged inaccurate or outdated information, selecting which business records were reliable and could therefore be included in the database. Infogroup verified its business record information on a regular basis to ensure that its data remained accurate.
Infogroup executives also described how Infogroup created its own data points by using models to generate estimates of office space square footage, credit scores, company revenues, and number of employees. Infogroup would then include these generated data points with its verified data in its business records database. In Infogroup’s database, a business record for a single business contained 371 data points. The district court cited testimony that Infogroup’s database was its “interpretation” of the information its employees had gathered and decided how to represent in the database. The district court determined that “[t]hose interpretations and determinations necessarily involve some level of discretion, and in turn, some level of creativity[,]” which supported the validity of Infogroup’s copyright.
The Eighth Circuit also considered the “merge/purge” process when analyzing the validity of Infogroup’s copyright. Because Infogroup employees gathered overlapping and conflicting data and used their judgment to delete inaccurate data, the Eighth Circuit concluded that the process “entail[ed] a minimal degree of creativity.” The court cited to a Ninth Circuit case, Experian Info. Sols., Inc. v. Nationwide Mktg. Servs., Inc., 893 F.3d 1176 (9th Cir. 2018), which upheld copyright protection for a database where employees used their judgment to select data from multiple and sometimes conflicting sources. The Eighth Circuit agreed that a reasonable juror could concluded that Infogroup possessed a valid copyright in its database, considering Infogroup’s Certificate of Registration and evidence of the data selection and deletion process.
Under the second requirement of copyright infringement, Infogroup needed to prove that DatabaseUSA copied original elements of its work. In the Eighth Circuit, copying may be established (1) by direct evidence or (2) by showing that the defendants had access to the copyrighted materials and showing that substantial similarity of ideas and expression existed between the alleged infringing materials and the copyrighted materials. For factual compilations like Infogroup’s database, proving infringement requires “virtually extensive verbatim copying.”
At trial, Infogroup had presented direct evidence of DatabaseUSA’s copying. A salesperson who had worked for both companies testified that top DatabaseUSA executives told him that “[n]othing has changed” between Infogroup’s data and DatabaseUSA’s data. The Eighth Circuit also pointed to Infogroup’s fake seed data found in the DatabaseUSA database. Although the Eighth Circuit did not discuss it, Infogroup had submitted evidence at trial that DatabaseUSA’s database had a 95% match percentage to the information in Infogroup’s database.
The Eighth Circuit also considered the district court’s spoliation instruction to the jury. After Infogroup filed suit and alleged that DatabaseUSA’s 2014 database infringed Infogroup’s 2011 database, DatabaseUSA deleted its 2014 database. DatabaseUSA’s spoliation of its accused database prevented a side-by-side comparison of the two databases to confirm whether DatabaseUSA’s database contained the original elements from Infogroup’s database. The district court, not convinced that the database destruction happened innocently, instructed the jury that it could “infer . . . that the contents of the database were unfavorable” to DatabaseUSA if the jury found that DatabaseUSA destroyed the database knowing that the evidence would be relevant to the case. For the Eighth Circuit, Infogroup’s direct evidence, along with the spoliation instruction, permitted the jury to infer that DatabaseUSA’s database contained the original, copyrightable elements of Infogroup’s database.
Finally, the panel rejected DatabaseUSA’s argument that the damages award for copyright infringement should be reduced. Under the Copyright Act, the copyright owner is required only to present proof of the infringer’s gross revenue to establish the infringer’s profits, and the infringer can then prove his or her deductible expenses and any elements of profit attributable to factors other than the copyrighted work. Although Infogroup presented evidence of DatabaseUSA’s gross revenue from the sales division that used the infringing database, DatabaseUSA did not present any evidence at trial that its gross revenue was attributable to facts unrelated to infringement. The Eighth Circuit therefore affirmed the $11.2 million award for copyright infringement. The court also affirmed the $10 million judgment against Mr. Gupta individually for breaching his separation agreement, in part because the jury reasonably found that he used Infogroup’s customer lists and made disparaging comments about Infogroup to a reporter.
The case is Infogroup, Inc. v. DatabaseUSA.com LLC, No. 18-3723 (8th Cir. Apr. 27, 2020).
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