Sheldon v. Metro-Goldwyn Pictures Corp.
60 S. Ct. 681, 309 U.S. 390, 1940 U.S. LEXIS 1246 (1940)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When an infringer's profits from a copyrighted work are attributable to both the infringing material and the infringer's own separate, value-adding contributions, a court may apportion the profits, awarding the copyright holder only the share of profits causally related to the infringement.
Facts:
- Petitioners Edward Sheldon and Margaret Ayer Barnes authored a play titled 'Dishonored Lady,' which was based on the historical 1857 trial of Madeleine Smith in Scotland.
- The play 'Dishonored Lady' was copyrighted as an unpublished work in 1930.
- Respondents Metro-Goldwyn Pictures Corp. (MGM) produced a motion picture titled 'Letty Lynton,' which was based on a novel of the same name that was also inspired by the Madeleine Smith trial.
- Prior to producing their film, MGM had entered into unsuccessful negotiations to purchase the motion picture rights to 'Dishonored Lady' for a price of $30,000.
- In producing 'Letty Lynton,' MGM deliberately plagiarized substantial protected elements from the play 'Dishonored Lady,' going beyond the basic plot which was in the public domain.
- MGM's film was a major commercial success due in large part to contributions it made, including the casting of popular actors, the creation of scenery, and the work of expert producers and directors.
- The film 'Letty Lynton' was not marketed or advertised as having any connection to the play 'Dishonored Lady.'
Procedural Posture:
- Petitioners sued Respondents in the U.S. District Court, charging copyright infringement and seeking an injunction and an accounting of profits.
- The District Court's initial finding for the Respondents was reversed by the Circuit Court of Appeals, which found infringement and remanded the case for an accounting of profits.
- On remand, a special master at the District Court awarded Petitioners all of Respondents' net profits from the film, totaling $587,604.37, and the District Court confirmed this award.
- Respondents, as appellants, appealed to the Circuit Court of Appeals, which is an intermediate appellate court.
- The Circuit Court of Appeals reversed the District Court's award, holding that profits should be apportioned and fixed Petitioners' share at one-fifth of the net profits.
- The U.S. Supreme Court granted certiorari to review the appellate court's decision regarding the apportionment of profits.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the Copyright Act permit an apportionment of profits in an infringement action where the infringer proves that a significant portion of the profits resulted from their own non-infringing contributions, such as famous actors and expert production?
Opinions:
Majority - Mr. Chief Justice Hughes
Yes, the Copyright Act permits an apportionment of profits. The Act provides for the recovery of profits 'which the infringer shall have made from such infringement,' which qualifies the award to only those profits attributable to the infringing material. The purpose of this provision is to provide just compensation for the wrong, not to impose a penalty by giving the copyright proprietor profits that are not attributable to the infringement. Drawing a strong analogy to patent law, where apportionment is well-established, the Court reasoned that if an infringer adds valuable, non-infringing improvements that contribute to profits, the copyright owner is only entitled to the share of profits generated by their original work. When an infringer, who is treated as a trustee 'ex maleficio,' commingles profits, they bear the burden of separating the gains. If they can provide evidence for a 'reasonable approximation' of the separate contributions—through expert testimony or other means—a court of equity can and should apportion the profits to avoid the manifest injustice of awarding the plaintiff a windfall from elements they did not create.
Analysis:
This landmark decision established the doctrine of profit apportionment in copyright law, bringing it in line with the established principles of patent law. It clarifies that a deliberate infringer is not automatically liable for 100% of their net profits if they can successfully prove that their own contributions were a source of those profits. This ruling shifts the focus of copyright damages from a purely punitive approach to one of equitable compensation, preventing a copyright holder from receiving a windfall for value they did not create, such as the star power of an actor. The case sanctions the use of expert testimony to divide profits in complex creative works, setting a precedent for how damages are calculated in future media infringement cases where multiple creative elements are combined.
