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4 UNITED STATES DISTRICT COURT

5 NORTHERN DISTRICT OF CALIFORNIA

7 REARDEN LLC, et al., Case No. 17-cv-04006-JST

Plaintiffs,
8
ORDER GRANTING IN PART AND
v. DENYING IN PART DEFENDANTS’
9
MOTION FOR SUMMARY
10 THE WALT DISNEY COMPANY, et al., JUDGMENT
Defendants. Re: ECF No. 421
11

12
Northern District of California
United States District Court

13 Before the Court is the motion for summary judgment of Defendants The Walt Disney

14 Company; Walt Disney Motion Pictures Group, Inc.; Walt Disney Pictures; Buena Vista Home

15 Entertainment, Inc.; Marvel Studios LLC; Mandeville Films, Inc.; Infinity Productions LLC; and

16 Assembled Productions II LLC (collectively, “Disney”). ECF No. 421. The Court will grant the

17 motion in part and deny it in part.

18 I. BACKGROUND

19 The factual and procedural background of this case are summarized in greater detail in this

20 Court’s prior orders. ECF Nos. 60, 85, 297. In short, Plaintiff Rearden LLC developed and owns

21 MOVA Contour Reality Capture (“MOVA”)—a program for capturing the human face to create

22 computer graphics (“CG”) characters in motion pictures. MOVA has been used in the production

23 of various motion pictures, including The Curious Case of Benjamin Button (Paramount Pictures

24 2008); Harry Potter and the Deathly Hallows, Part I (Warner Bros. Pictures 2010), and Pirates of

25 the Caribbean: on Stranger Tides (Walt Disney Pictures 2011). ECF No. 315 ¶¶ 38, 60.

26 This Court initially adjudicated a dispute between Rearden LLC and Shenzhenshi

27 Haitiecheng Science and Technology Company (“SHST”) concerning the ownership of equipment

28 and intellectual property associated with MOVA (“Ownership Litigation”). SHST is a Chinese
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1 entity associated with Digital Domain 3.0, Inc. (“DD3”), a visual effects company with whom

2 Disney contracted to perform facial capture services for several of its motion pictures. ECF No.

3 315 ¶¶ 98–124; see Shenzhenshi Haitiecheng Sci. and Tech. Co., LTD. v. Rearden LLC (“SHST”),

4 No. 15-cv-00797-JST, 2017 WL 3446585 at *2, *7. (N.D. Cal. Aug. 11, 2017). The facts of that

5 case pertinent to the dispute at hand are as follows:

6 Steve Perlman has founded a series of entities under the Rearden

name that act as technology incubators by developing new
7 technologies, assigning them to subsidiaries, and – if the
technologies are successful – spinning the subsidiaries off as
8 separate companies. In 2007, Perlman transferred the MOVA
technology to OnLive, Inc., another one of Perlman's incubated
9 companies. OnLive then began providing MOVA services to
customers.
10
In August 2012, OnLive went through an assignment for the benefit
11 of creditors. As part of that process, OnLive was shut down and
reborn as a new company called OL2. On February 11, 2013, OL2
12 transferred ownership of the MOVA Assets to MO2, LLC – an
Northern District of California
United States District Court

entity owned by Rearden LLC. At that time, Greg LaSalle, who had
13 been involved with the development of MOVA and had at various
times worked for Rearden and OnLive, was in the process of
14 negotiating the sale of MOVA assets to DD3. Ultimately, LaSalle
sold the assets to SHST rather than DD3, in an attempt to insulate
15 DD3 from liability. The sale closed on May 8, 2013. DD3 then
licensed the assets from SHST.
16

17 Rearden LLC v. Crystal Dynamics, Inc., No. 17-cv-04187-JST, 2019 WL 8275254, at *2 (N.D.

18 Cal. July 12, 2019) (citations omitted).

19 The Court issued a preliminary injunction prohibiting the sale, use, movement,

20 concealment, transfer or disposal of MOVA Assets by SHST or Virtual Global Holdings

21 Limited—a subsidiary of Digital Domain Holdings Limited. See Virtue Glob. Holdings Ltd. v.

22 Rearden LLC, No. 15-cv-00797-JST, 2016 WL 9045855, at *2, *10 (N.D. Cal. June 17, 2016).

23 After a bench trial, the Court dissolved the injunction and held that “Rearden, not . . . DD3, owns

24 and at all relevant times has owned the MOVA Assets.” SHST, 2017 WL 3446585, at *9. The

25 Court found that LaSalle never owned the MOVA assets or possessed the authority to sell them

26 such that the transfer of the assets to SHST was invalid. Id. The Court further ordered the return

27 of those assets to Rearden, which included “MOVA Software, Source code, and Output files.”

28 Order Regarding the Return of MOVA Assets 1, SHST, No. 15-cv-00797-JST (N.D. Cal. Oct. 2,
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1 2017), ECF No. 449. The Court also “retain[ed] jurisdiction to enforce its Orders regarding the

2 return of MOVA Assets to Rearden.” Judgment 2, SHST, No. 15-cv-00797-JST (N.D. Cal. Aug.

3 28, 2018), ECF No. 493. Additionally, the Court appointed a special master to “adjudicate all

4 post-trial disputes related to the enforcement of the Court’s judgment and orders regarding the

5 return of MOVA Assets to Rearden, . . . including the identification, preservation, and return to

6 Rearden of any and all MOVA Assets.” Order Appointing Hon. Edward A. Infante (Ret.) as

7 Special Master Pursuant to Federal Rule of Civil Procedure 53, at 1, SHST, No. 15-cv-00797-JST

8 (N.D. Cal. June 17, 2019), ECF No. 529.

9 Contemporaneously, Rearden filed a series of lawsuits, including the instant suit against

10 Disney, bringing copyright and trademark infringement claims against several motion picture

11 studios that allegedly used MOVA in producing motion pictures and video games. See Rearden

12 LLC v. Walt Disney Company, 293 F. Supp. 3d. 963, 967–68 (N.D. Cal. 2018). In 2022, Rearden
Northern District of California
United States District Court

13 filed an additional lawsuit against Disney, bringing copyright and patent infringement claims for

14 Disney’s alleged use of MOVA in the films Avengers: Infinity War (2018) and Avengers:

15 Endgame (2019). See Rearden LLC v. TWDC Enters. 18 Corp., No. 22-cv-02464-JST, 2023 WL

16 3579324, at *1–2 (N.D. Cal. Feb. 21, 2023). Proceedings in all of these cases are ongoing. See

17 Case Nos. 17-cv-04006-JST, 17-cv-04187-JST, 17-cv-04191-JST, 17-cv-04192-JST, 22-cv-

18 02464-JST.

19 In this case, Plaintiffs Rearden LLC and MOVA LLC (collectively, “Rearden”) bring

20 claims for contributory copyright infringement, vicarious copyright infringement, and trademark

21 infringement against Disney. Rearden alleges that each time DD3 used MOVA, “the computers

22 made a copy of the . . . program in their CPU’s RAM without authorization from Rearden,” thus

23 infringing on Rearden’s copyright. ECF No. 315 ¶ 120. Rearden further alleges that Disney is

24 secondarily liable for this infringing conduct because Disney contracted with DD3 for DD3 to

25 provide facial capture services using MOVA in order to create CG characters in the motion

26 pictures Guardians of the Galaxy (2014), Avengers: Age of Ultron (2015), and Beauty and the

27 Beast (2017). ECF No. 315 ¶¶ 98–124.

28 The Court previously granted summary judgment to Disney as to Rearden’s copyright

3
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1 infringement claims predicated on Guardians of the Galaxy and Avengers: Age of Ultron on the

2 ground that Rearden failed to identify evidence showing a causal nexus between Disney’s alleged

3 infringement and the gross revenue generated by the films. See Rearden LLC v. Walt Disney Co.,

4 Case Nos. 17-cv-04006-JST & 17-cv-04191-JST, 2021 WL 4099622, at *5 n.4 (N.D. Cal. Aug.

5 17, 2021); Rearden LLC v. Walt Disney Co., Case Nos. 17-cv-04006-JST & 17-cv-04191-JST,

6 2022 WL 2064976, at *3–4 (N.D. Cal. June 8, 2022).

7 Prior to filing the instant motion, Disney moved to preclude Rearden from presenting

8 evidence or argument based on the copying of various script lines in Maya files (“Maya Scripts”).

9 ECF No. 395. The Court granted the motion on the ground that Rearden did not timely disclose

10 its reliance on Maya Scripts evidence, and its lack of timely disclosure was neither substantially

11 justified nor harmless. ECF No. 482.

12 Disney now moves for summary judgment as to all of Rearden’s claims predicated on
Northern District of California
United States District Court

13 Beauty and the Beast, for which DD3 used MOVA to create the CG face of the Beast, performed

14 by actor Dan Stevens. ECF No. 315 ¶¶ 2, 117–24. The parties concurrently moved to exclude

15 portions of the expert reports and/or testimonies of Alberto Menache, Cindy Ievers, Phillip Fier,

16 Dr. Stephen Lane, and Robert Wunderlich. ECF Nos. 422, 424, 425, 429, 431. The Court

17 excluded the testimony of Cindy Ievers, 553; excluded the testimony of Philip Fier on the issues of

18 apportionment, issues of law, and causal nexus, ECF No. 539; denied the motion to exclude portions

19 of the testimony of Dr. Stephen Lane, ECF No. 541; and denied the motion to exclude portions of

20 the testimony of Robert Wunderlich, ECF No. 526.1 Having determined what evidence is properly

21 before the Court on this motion, the Court now turns to the motion itself.

22 II. JURISDICTION

23 The Court has jurisdiction under 28 U.S.C. § 1331.

24 III. LEGAL STANDARD

25 Summary judgment is proper when a “movant shows that there is no genuine dispute as to

26 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

27

28 1
The motion to exclude the testimony of Alberto Menache is still under submission.
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1 56(a). “A fact is ‘material’ only if it might affect the outcome of the case, and a dispute is

2 ‘genuine’ only if a reasonable trier of fact could resolve the issue in the non-movant’s

3 favor.” Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir.

4 2014). The court must consider all evidence in the light most favorable to the non-moving

5 party. Isbell v. City of San Diego, 258 F.3d 1108, 1112 (9th Cir. 2001).

6 Where the party moving for summary judgment would not bear the burden of proof at trial,

7 that party “bears both the initial burden of production and the ultimate burden of persuasion on a

8 motion for summary judgment.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099,

9 1102 (9th Cir. 2000). In order to carry its initial burden of production, the moving party “must

10 either produce evidence negating an essential element of the nonmoving party’s claim or defense

11 or show that the nonmoving party does not have enough evidence of an essential element to carry

12 its ultimate burden of persuasion at trial.” Id. In order to carry its ultimate burden of persuasion,
Northern District of California
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13 “the moving party must persuade the court that there is no genuine issue of material fact.” Id.

14 If the moving party satisfies its initial burden of production, the nonmoving party “must

15 produce evidence to support its claim or defense.” Id. at 1103. The nonmoving party must

16 “identify with reasonable particularity the evidence that precludes summary judgment.” Keenan v.

17 Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) (quoting Richards v. Combined Ins. Co., 55 F.3d 247,

18 251 (7th Cir. 1995)). It is not the duty of the court “to scour the record in search of a genuine

19 issue of triable fact.” Id. (quoting Richards, 55 F.3d at 251). “[A] mere ‘scintilla’ of evidence

20 will not be sufficient to defeat a properly supported motion for summary judgment; rather, the

21 nonmoving party must introduce some ‘significant probative evidence tending to support the

22 complaint.’” Summers v. Teichert & Son, Inc., 127 F.3d 1150, 1152 (9th Cir. 1997) (quoting

23 Anderson v. Liberty Lobby, 477 U.S. 242, 252, 249 (1986)). If the nonmoving party fails to make

24 this showing, the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477

25 U.S. 317, 322–23 (1986).

26
27

28
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1 IV. DISCUSSION

2 A. Copyright Claims

3 1. Contributory Copyright Infringement

4 “To establish secondary [copyright] infringement,” Rearden “must first demonstrate direct

5 infringement.” MDY Indus., LLC v. Blizzard Ent., Inc., 629 F.3d 928, 937 (9th Cir. 2010). Disney

6 does not dispute that DD3 copied MOVA software code into RAM without authorization from

7 Rearden, ECF No. 421, and that “the loading of software into RAM creates a copy under the

8 Copyright Act,” MAI Sys. Corp. v. Peak Comput., Inc., 991 F.2d 511, 519 (9th Cir. 1993).

9 Accordingly, DD3’s conduct violated Rearden’s “exclusive reproduction right.” Disney Enters.,

10 Inc. v. VidAngel, Inc., 869 F.3d 848, 857 (9th Cir. 2017).

11 “Contributory liability requires that a party ‘(1) has knowledge of another’s infringement

12 and (2) either (a) materially contributes to or (b) induces that infringement.’” VHT, Inc. v. Zillow
Northern District of California
United States District Court

13 Grp., 918 F.3d 723, 745 (9th Cir. 2019) (quoting Perfect 10, Inc. v. Visa Int’l Serv., Ass’n, 494

14 F.3d 788, 795 (9th Cir. 2007)). The first element is satisfied where “the secondary infringer

15 know[s] or has reason to know of direct infringement,”2 Louis Vuitton Malletier, S.A. v. Akanoc

16 Sols., Inc., 658 F.3d 936, 943 (9th Cir. 2011) (quoting A&M Records, Inc. v. Napster, Inc., 239

17
2
18 The parties dispute whether actual knowledge of direct infringement is required. Compare ECF
No. 421 at 14 with ECF No. 451 at 9. Earlier Ninth Circuit cases, such as Louis Vuitton Malletier,
19 articulated the standard as one in which actual or constructive knowledge is sufficient. 658 F.3d at
943; see also Ellison v Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004). In a later case, Luvdarts,
20 LLC v. AT & T Mobility, LLC, the Ninth Circuit wrote that “‘actual knowledge of specific acts of
infringement’ is required for contributory infringement liability.” 710 F.3d 1068, 1072 (9th Cir.
21 2013) (quoting A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1021 (9th Cir. 2001)). This
Court previously found it “dubious . . . that the three judge-panel in Luvdarts sub silentio
22 overruled an entire line of Ninth Circuit cases.” Rearden LLC v. Crystal Dynamics, Inc., No. 17-
cv-04187-JST, 2019 WL 8275254, at *9 n.9 (N.D. Cal. July 12, 2019). Further, the Ninth Circuit
23 more recently acknowledged that contributory trademark infringement occurs where a party
“‘continues to supply its product to one whom it knows or has reason to know is engaging in
24 trademark infringement,’” and wrote that the standard for contributory trademark infringement is
“at least as demanding as” as the standard for contributory copyright infringement. Y.Y.G.M. SA v.
25 Redbubble, Inc., Nos. 21-56150 & 21-56236, 2023 WL 4697350, at *4 (9th Cir. July 24, 2023)
(quoting Inwood Lab’ys, Inc. v. Ives Lab’ys, Inc., 456 U.S. 844, 854, (1982) (emphasis added)). If
26 the standard for contributory trademark infringement is at least as demanding as the standard for
contributory copyright infringement, and the former permits a showing of either actual or
27 constructive knowledge, then the latter must as well. However, the Ninth Circuit has not
expressly resolved this tension in the caselaw, see Erickson Prods., Inc. v. Kast, 921 F.3d 822, 832
28 (9th Cir. 2019), and the Court need not because the outcome here is the same under either
formulation of the standard.
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1 F.3d 1004, 1020 (9th Cir. 2001)), but “requires more than a generalized knowledge . . . of the

2 possibility of infringement,” Luvdarts, LLC v. AT & T Mobility, LLC, 710 F.3d 1068, 1072 (9th

3 Cir. 2013).

4 Disney argues that Rearden cannot satisfy the “knowledge” element of contributory

5 infringement because Disney could not have known that DD3’s conduct was infringing until this

6 Court held in SHST that Rearden owns the MOVA assets, which occurred after Beauty and the

7 Beast was released in theaters. Rearden argues that this argument is “a red herring,” and identifies

8 evidence that it argues demonstrates actual or constructive knowledge. ECF No. 451 at 14.

9 The evidence Rearden identifies includes meetings in 2008 between Steve Perlman and

10 Disney executives in which Perlman presented PowerPoint slides that described MOVA as one of

11 the “[s]ister [c]ompanies in [the] Rearden incubator,” ECF No. 448-8 at 6; see ECF No. 448-5 at

12 4–20; Disney’s, Marvel’s, and 20th Century Fox’s work with Rearden on six films between 2008
Northern District of California
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13 and 2012, three of which included MOVA in their screen credits, ECF No. 451-3 at 2; ECF No.

14 451-29 at 2; ECF No. 451-30 at 2; a 2012 e-mail chain in which Disney executives discussed an e-

15 mail from the CEO of OnLive inquiring as to whether Disney would be interested in purchasing

16 MOVA, ECF No. 448-9; Greg LaSalle’s testimony in the SHST litigation that he gave Disney a

17 copy of a 2013 letter from Rearden’s attorneys informing him that he did not own MOVA, which

18 caused Disney to back out of discussions with LaSalle about acquiring MOVA from Rearden,

19 ECF No. 451-11 at 2–5; and a February 6, 2015 article in the Hollywood Reporter that quotes

20 Perlman as saying he “never granted Digital Domain a license,” ECF No. 451-14 at 3. Rearden

21 also argues that Disney should have performed intellectual property due diligence investigations

22 consistent with the Motion Picture Association of America’s best practices guidelines, which

23 would have apprised Disney of Rearden’s claim to ownership of the MOVA assets. See ECF No.

24 451-4 at 2–3; 451-7 at 2–6.

25 All of the foregoing interactions involving Disney pre-date LaSalle’s May 8, 2013 sale of

26 the MOVA assets to SHST and are thus “not probative as to whether [Disney] knew in [2015] that

27 DD3, which had licensed the MOVA assets from SHST, was not authorized to use MOVA

28 technology.” Crystal Dynamics, 2019 WL 8275254, at *10. More to the point, Disney entered
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1 into its contract with DD3 on March 31, 2015. ECF No. 448-11 at 2. Beauty and the Beast

2 opened on March 17, 2017, and this Court did not hold that Rearden owned MOVA until August

3 11, 2017, nearly five months after the film opened. ECF No. 315 ¶ 1; ECF No. 419-10 at 48. As

4 this Court previously observed, the resolution of the ownership dispute turned on “intensely

5 factual issues,” that centered around the question of whether LaSalle had the actual or apparent

6 authority to transfer the MOVA assets to SHST. Crystal Dynamics, 2019 WL 8275254, at *10;

7 see generally SHST, 2017 WL 3446585, at *8–10. As revealed at trial, those factual issues

8 spanned a short but intricate history as to which no party’s testimony was entirely credible, SHST,

9 2017 WL 3446585, at *1 n.3, and included the terms of agreements LaSalle signed at the onset of

10 his employment; the character of the conduct of Perlman, LaSalle, and others throughout the

11 relevant time period; and the circumstances surrounding the transfer of MOVA to SHST. Thus,

12 even if Disney learned of the SHST litigation on February 23, 2016, see ECF No. 448-10 at 11,
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13 saw the Hollywood Reporter article, or conducted a due diligence investigation and learned of the

14 contested ownership of the MOVA assets, Rearden’s claim that it owned the MOVA assets was

15 “anything but readily verifiable” because the underlying ownership issue “turn[ed] on complex

16 analysis of” circumstances that “require[d] resolution by a trier of fact.” Faulkner v. Nat’l

17 Geographic Soc’y, 211 F. Supp. 2d 450, 47475 (S.D.N.Y. 2002). Disney, as a nonparty to the

18 SHST litigation, was not adequately positioned to ascertain the veracity of Rearden’s ownership

19 claim. Cf. Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 907 F. Supp. 1361, 1374

20 (N.D. Cal. 1995). Moreover, the instant infringement claim is a step removed from the ownership

21 claim that Rearden asserted in the SHST litigation. Accordingly, Disney’s knowledge of

22 Rearden’s ownership claim equates to, at best, an insufficient “generalized knowledge . . . of the

23 possibility of infringement” by DD3. Luvdarts, 710 F.3d at 1072. Disney is therefore entitled to

24 summary judgment as to Rearden’s contributory infringement claim.

25 2. Vicarious Copyright Infringement

26 To establish various copyright infringement, “[Rearden] must prove [Disney] has (1) the

27 right and ability to supervise the infringing conduct and (2) a direct financial interest in the

28 infringing activity.” VHT, 918 F.3d 723 (quoting Perfect 10, Inc. v. Giganews, Inc., 847 F.3d 657,
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1 673 (9th Cir. 2017)). “A vicarious infringer ‘exercises control over a direct infringer when he has

2 both a legal right to stop or limit the directly infringing conduct, as well as the practical ability to

3 do so.’” Williams v. Gaye, 895 F.3d 1106, 1132 (9th Cir. 2010) (quoting Perfect 10, Inc. v.

4 Amazon.com, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007)).

5 The Court finds that there is a genuine issue of material fact as to whether Disney had the

6 practical ability to stop or limit the infringing conduct for two reasons. First, the contract between

7 DD3 and Disney secures for Disney considerable control over DD3’s services such that it is

8 possible that Disney could have, as a practical matter, taken affirmative steps to stop or limit

9 DD3’s use of MOVA. The contract entitled Disney “

10 ,” ECF No. 448-11 at 2;

11

12 id. at 3;
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13

14 ECF No. 448-11 at 4;

15 entitled Disney id. at 5; retained for Disney

16 “

17 ,” id. at 6;

18 warranted that

19

20

21 ” id. at 11; and reserved for Disney

22 , id. at 9.

23 A reasonable trier of fact could conclude that Disney’s ability to

24

25

26 , afforded Disney the practical ability to supervise, limit, or stop DD3’s use

27 of MOVA. See Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259, 262 (9th Cir. 1996) (holding

28 that a company’s ability “to police its vendors under [the company’s] . . . broad contract with its
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1 vendors[ ]was sufficient to satisfy the control requirement”); Napster, 239 F.3d at 1023–24

2 (holding that Napster had the ability to police infringing conduct because it had “the ability to

3 locate infringing material listed on its search indices, and the right to terminate users’ access to the

4 system”).

5 Disney protests that, under the Ninth Circuit’s holding in Perfect 10, Inc. v. Amazon.com, a

6 contractual relationship goes to the question of the legal right to control, not the practical ability to

7 do so. See ECF No. 462 at 9. Disney misstates the holding of that case. The Ninth Circuit held

8 that Google’s right to terminate advertising partnerships with third-party websites did not give

9 Google the legal right to stop infringement because terminating the partnerships would not inhibit

10 the websites from “reproduc[ing], display[ing], and distribut[ing]” the content at issue.

11 Amazon.com, 508 F.3d at 1174. The Ninth Circuit further held that Google lacked the practical

12 ability to police this conduct because “Google’s supervisory power [wa]s limited” because it
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13 lacked “image-recognition technology” that would have allowed it to identify the conduct at issue.

14 Nothing in the Ninth Circuit’s opinion suggest that a party’s practical ability to police the

15 infringing conduct of another party cannot arise from a contractual relationship between the two.

16 And unlike Google’s contract with third-party websites on the internet, Disney’s contract with

17 DD3 affords Disney considerable supervisory power over DD3’s conduct in connection with

18 Beauty and the Beast.

19 Second, evidence in the record creates a genuine dispute of material fact as to whether

20 Disney could have limited or stopped DD3’s use of MOVA during the production process. One of

21 Disney’s representatives on the set of Beauty and the Beast, Steve Gaub, participated in the

22 decision to use facial motion capture in the film, ECF No. 448-15 at 7, oversaw the visual effects

23 vendors and supervised the visual effects supervisors on the project, id. at 3, and attended the

24 MOVA facial capture sessions, id. at 7. Additionally, Disney hired Bill Condon to direct the film

25 pursuant to a contract that requires Condon to furnish his services “

26 ECF No. 448-14 at 5. Condon also attended the MOVA facial performance capture sessions, ECF

27 No. 448-15 at 9, and he participated in selecting shots for further processing using the MOVA

28 software, id. at 12; see ECF No. 448-16 at 2. The MOVA software was copied into RAM when
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1 MOVA was used on a computer. ECF No. 448-2 at 8–9, see id. at 11–12. And according to

2 Disney’s own expert, the MOVA software was used to “control[] the hardware’s video recording

3 operations” during a facial performance capture session and thereafter “process[] the captured data

4 into output files . . . in the form of a ‘tracked mesh’” by “track[ing] points on the face across

5 multiple frames of captured motion data.” ECF No. 420-8 at 18.

6 If running the software makes a copy in a computer’s RAM, and the software was used

7 both during and after the capture sessions, then a reasonable trier of fact could conclude that

8 Gaub’s and Condon’s involvement in the production process afforded Disney the practical ability

9 to limit or stop DD3’s use of MOVA in connection with the film. In view of the contract between

10 Disney and DD3, Disney, through these individuals, could simply have declined to proceed with

11 the MOVA facial motion capture sessions altogether, instructed DD3 to use an alternative, or

12 instructed DD3 not to process the captured data into output files.
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13 For each of these two reasons, the Court concludes that there is a genuine issue of material

14 fact as to whether Disney had the practical ability to control DD3’s conduct.

15 Disney sets forth three arguments to the contrary. First, Disney argues that it lacked a

16 practical ability because it could not “directly observe” DD3’s “copying of MOVA into RAM.”

17 ECF No. 421 at 19. This argument ignores the evidence that Disney, through its representatives,

18 did, in fact, directly observe DD3’s conduct when the MOVA software was used during facial

19 capture sessions. Further, this argument seeks to impose a requirement of direct observation that

20 is absent from the caselaw. While Disney discusses a number of cases in which courts have found

21 a practical ability where the vicarious infringer could directly observe the conduct, none of those

22 cases imposed direct observation as a requirement. Rather, the vicarious infringer must have the

23 practical ability to “supervise” the infringer. VHT, 918 F.3d 723 (quoting Giganews, Inc., 847

24 F.3d at 673). As a matter of common sense, a party can supervise another party without directly

25 observing that party at all times. Disney’s receipt of weekly progress reports from DD3, discussed

26 above, is one such example.

27 Second, Disney argues that it did not have the ability to recognize that DD3 was infringing.

28 As the Supreme Court has observed, however, “vicarious liability . . . allows imposition of
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1 liability . . . even if the defendant initially lacks knowledge of the infringement.” Metro-Goldwyn-

2 Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 n.9 (2005); see Shapiro, Bernstein & Co.

3 v. H.L. Green Co., 316 F.2d 304, 308 (2d Cir. 1963) (“The imposition of [vicarious] liability . . . ,

4 even in the absence of an intention to infringe or knowledge of infringement, is not unusual.”);

5 Crystal Dynamics, 2019 WL 8275254, at *7 (“Because ‘vicarious infringement’s roots lie in the

6 agency principles of respondeat superior,’ it does not matter ‘whether or not the person [with

7 supervisory authority] knew of the infringement.’” (alteration in original) (citations omitted) (first

8 quoting Visa Int’l Serv. Ass’n, 494 F.3d at 802; and then quoting In re Barboza, 545 F.3d 702, 709

9 (9th Cir. 2008))).

10 Third, Disney argues that it was impractical to supervise DD3’s use of MOVA because

11 DD3 was “one of four visual effects companies and over a hundred vendors that [Disney]

12 contracted with on [Beauty and the Beast]” and “used over 20 different software tools other than
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13 MOVA just for its work on the Beast’s face.” ECF No. 419-3 at 20. Whether this task would, in

14 fact, be impractical for a company of Disney’s size and wherewithal is something a jury must

15 decide.

16 In the alternative, Disney argues that it did not have a direct financial interest in DD3’s use

17 of MOVA after this Court’s issuance of the preliminary injunction in the SHST litigation because

18 Disney did not use in the film any shots prepared by DD3 using MOVA after that point. See ECF

19 No. 421-14 at 3, 4–5; ECF No. 420-8 at 64–65. Rearden does not offer any argument in

20 opposition, nor does it identify any evidence to the contrary. Therefore, the Court concludes that

21 Rearden has failed to carry its burden to create a dispute of material fact as Disney’s financial

22 benefit in connection with DD3’s post-injunction use of MOVA. See Erickson Prods., Inc. v.

23 Kast, 921 F.3d 822, 829 (9th Cir. 2019) (“The essential aspect of the direct financial benefit

24 inquiry is whether there is a causal relationship between the infringing activity and any financial

25 benefit a defendant reaps . . . .” (quoting Ellison v. Robertson, 357 F.3d 1072, 1079 (9th Cir.

26 2004))). Accordingly, Disney is not entitled to summary judgment as to Rearden’s vicarious

27 infringement claim for DD3’s pre-injunction use of MOVA, but Disney is entitled to summary

28 judgment as to Rearden’s claim for DD3’s post-injunction use of MOVA.

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1 3. Actual Damages

2 Disney argues that it is entitled to summary adjudication on Rearden’s claim for actual

3 damages. Concurrently with its motion for summary judgment, Rearden moved to exclude the

4 expert testimony of Cindy Ievers—Rearden LLC’s Vice President of Finance—as to Rearden’s

5 actual damages. See ECF No. 424. Disney argues that, without Ms. Ievers’s opinions, Rearden

6 fails to create a genuine dispute of material fact as to actual damages. Rearden concedes that its

7 claim for actual damages is dependent on the outcome of that separate motion. ECF No. 451 at 27

8 (“If Disney’s motion to exclude Ms. Ievers’s testimony is denied, then its motion for summary

9 judgment on Rearden’s actual damages fails.”). The Court granted Disney’s motion on the ground

10 that Ms. Ievers’s testimony was irrelevant to the question of the fair market value of the MOVA

11 software. Namely, Ms. Ievers failed to consider the amount that a hypothetical willing buyer

12 would pay to use the MOVA software in a manner akin to that of DD3. See Frank Music Corp. v.
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13 Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 512 (9th Cir. 1985). The Court has excluded Ms.

14 Ievers’s testimony, and Rearden has otherwise failed to identify any evidence as to what a willing

15 buyer would pay. Accordingly, Disney is entitled to summary adjudication as to Rearden’s claim

16 for actual damages.

17 4. Maya Scripts

18 The parties dispute whether evidence that DD3 copied Maya Scripts constitutes evidence

19 of copyright infringement. Because the Court previously issued an order excluding evidence of

20 Maya Scripts infringement on the ground that Rearden did not timely disclose its reliance on Maya

21 Scripts evidence, ECF No. 482, Disney is entitled to summary adjudication as to Rearden’s

22 vicarious infringement claim to the extent that it is predicated on this theory.

23 5. Indirect Profits and Causal Nexus

24 Rearden seeks Disney’s allegedly wrongful profits from Disney’s sale of Beauty and the

25 Beast merchandise and music. “[T]o survive summary judgment on a demand for indirect profits

26 pursuant to [17 U.S.C.] § 504(b), a copyright holder must proffer sufficient non-speculative

27 evidence to support a causal relationship between the infringement and the profits generated

28 indirectly from such an infringement.” Mackie v. Rieser, 296 F.3d 909, 915–16 (9th Cir. 2002).
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1 “[A] copyright owner is required to do more initially than toss up an undifferentiated gross

2 revenue number; the revenue stream must bear a legally significant relationship to the

3 infringement.” Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 711 (9th Cir. 2004). This

4 principle requires that “a plaintiff seeking to recover indirect profits must ‘formulate the initial

5 evidence of gross revenue duly apportioned to relate to the infringement.’” Id. (quoting 4 Nimmer

6 on Copyright § 14.03, 14–34). Accordingly, “[w]hen an infringer’s profits are only remotely and

7 speculatively attributable to infringement, courts will deny recovery to the copyright owner.” Id.

8 (quoting 4 Nimmer on Copyright § 14.03, 14–34).

9 Disney argues that Rearden lacks evidence showing a causal nexus between DD3’s

10 infringement of the MOVA copyright and revenues from merchandise and music related to Beauty

11 and the Beast. Rearden argues that it has offered evidence “in the form of [Philip] Fier’s [expert]

12 opinion and Disney’s internal accounting practice of allocating consumer product and music
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13 revenue to Beauty and the Beast.” ECF No. 447-3 at 27.

14 The Court has excluded Mr. Fier’s opinion as to the portion of Disney’s motion picture

15 profits attributable to DD3’s infringing use of MOVA because Mr. Fier failed to ground his

16 analysis in any coherent methodology. Evidence as to Disney’s internal allocations of

17 merchandise and music revenue to Beauty and the Beast is not “initial evidence of gross revenue

18 duly apportioned to relate to the infringement.” Polar Bear Prods., 384 F.3d at 711 (emphasis

19 added) (quoting 4 Nimmer on Copyright § 14.03, 14–34). The evidence in the record establishes

20 that MOVA was not entirely responsible for the creation of the Beast’s face and that MOVA was

21 not used in all of the shots in which the Beast appeared. See, e.g., ECF No. 420-8 at 28–47, 48–

22 50; ECF No. 420-34 at 3; ECF No. 420-33 at 3. Rearden’s invocation of Disney’s internal

23 allocations, without more, does not translate the percentage of the process of creating the Beast’s

24 face attributable to MOVA in the shots where MOVA was used into any particular portion of

25 those allocations. Put differently, even if the merchandise and music revenue are attributable to

26 the film in some way, the Court can “surmise virtually endless permutations to account for an

27 individual’s decision” to make those purchases on the basis of the film. Mackie, 916 F.3d at 916.

28 Disney’s internal allocations are thus too speculative to establish a causal link, and Rearden cites
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1 no case to the contrary. Cf. Polar Bear Prods., 384 F.3d at 711 (holding that evidence of a causal

2 link was “woefully insufficient” where there were “too many question marks remain[ing] between

3 the” infringing conduct and the increase in sales). Rearden has thus failed to create a dispute of

4 material fact as to the existence of a causal nexus, and Disney is therefore entitled to summary

5 adjudication as to indirect profits from Disney’s merchandise and music sales.

6 B. Trademark Claims

7 1. Trademark Infringement

8 Disney argues that it engaged in a nominative fair use of the MOVA trademark under the

9 inquiry articulated by the Ninth Circuit in New Kids on the Block v. News America Publishing,

10 Inc., 971 F.2d 302 (9th Cir. 1992). Rearden argues that the defense is inapplicable and, that the

11 applicable test is set forth by the Ninth Circuit in AMF Inc v. Sleekcraft Boats, 599 F.2d 341 (9th

12 Cir. 1979), and that there is a likelihood of confusion under that test.
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13 Nominative fair use “protects a defendant ‘where the use of the trademark does not attempt

14 to capitalize on consumer confusion or to appropriate the cachet of one product for a different

15 one.’” Adobe Sys. Inc. v. Christenson, 809 F.3d 1071, 1081 (9th Cir. 2015) (quoting New Kids,

16 971 F.2d at 308). “This principle recognizes the proposition that ‘[t]rademark law generally does

17 not reach the sale of genuine goods bearing a true mark even though such sale is without the

18 owner’s consent.’” Id. (alteration) (quoting Am. Circuit Breaker Corp. v. Oregon Breakers Inc.,

19 406 F.3d 577, 585 (9th Cir. 2005)). The nominative fair use inquiry “replaces the usual Sleekcraft

20 test as the proper measure of consumer confusion when a defendant uses the mark to refer to the

21 trademarked good itself.” Id.

22 The parties’ disagreement as to the applicability of the nominative fair use inquiry stems

23 from their competing characterizations of the complaint. Disney characterizes the complaint as

24 bringing a trademark claim based on Disney’s use of the MOVA mark, whereas Rearden contends

25 that the complaint “makes clear that Rearden used the CONTOUR trademark,” not the MOVA

26 trademark, “to identify the technology” itself. ECF No. 451 at 28 (emphasis in original).

27 Contrary to Rearden’s characterization, Rearden’s trademark claim is predicated on

28 Rearden’s allegation that “[w]ithout authorization, Disney . . . used Rearden’s MOVA mark in
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1 commerce in connection with commercial advertising and promotion of its . . . Beauty and the

2 Beast film[], including press kits, press releases, press conferences, and other advertising and

3 promotional activities.” ECF No. 315 ¶ 76 (emphasis added). In connection with its trademark

4 claim, Rearden refers explicitly and exclusively to the MOVA mark, id. ¶¶ 188–201, and alleges

5 that the “MOVA mark has acquired secondary meaning indicating that Rearden is the exclusive

6 origin of the MOVA Contour performance capture technology and services,” id. ¶ 191 (emphasis

7 added). Thus, per Rearden’s own allegations, the MOVA mark identifies the technology, and

8 Rearden identifies no probative evidence to the contrary. See Hakopian v. Mukasey, 551 F.3d 843,

9 846 (9th Cir. 2008) (“Allegations in a complaint are considered judicial admissions.”). Because

10 Disney featured the MOVA mark in connection with a film featuring shots created in part using

11 the facial capture technology, it follows that Disney “use[d] the [MOVA] mark to refer to the

12 trademarked good itself” such that “the Sleekcraft analysis does not apply.” Toyota Motor Sales,
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13 U.S.A., Inc. v. Tabari, 610 F.3d 1171, 1175 (9th Cir. 2010); see id. (“The Tabaris are using the

14 term Lexus to describe their business of brokering Lexus automobiles; when they say Lexus, they

15 mean Lexus.”); Adobe Sys., 809 F.3d at 10782 (“The bottom line is that Christenson’s nominal use

16 of the marks was to identify the products themselves. . . .”).

17 To determine whether Disney’s nominative use of the MOVA mark was fair, the Court

18 asks “whether (1) the product was ‘readily identifiable’ without use of the mark; (2) defendant

19 used more of the mark than necessary; or (3) defendant falsely suggested [it] was sponsored or

20 endorsed by the trademark holder.” Toyota Motor Sales, 610 F.3d at 1175–76 (quoting Playboy

21 Enters., Inc. v. Welles, 279 F.3d 796, 801 (9th Cir. 2002)). The inquiry focuses on the “reasonably

22 prudent consumer in the marketplace.” Id. at 1176 (quoting Dreamwerks Prod. Grp., Inc. v. SKG

23 Studio, 142 F.3d 1127, 1129 (9th Cir. 1988)).

24 Here, the parties agree that the relevant marketplace is the “movie, game, and visual effects

25 studios in the market for facial motion capture services.” ECF No. 421 at 30; ECF No. 451 at 31

26 (quoting ECF No. 421 at 30). Disney argues that it satisfies this inquiry because Rearden has no

27 evidence that MOVA was readily identifiable without the mark, that Disney used more of the

28 MOVA mark than necessary, or that Disney falsely suggested it was sponsored by Rearden.
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1 Rearden argues that Disney cannot satisfy the first prong because MOVA “was already known to

2 the VFX industry as CONTOUR,” and that Disney cannot satisfy the third prong because

3 “Disney’s use of the MOVA mark . . . inherently implies sponsorship or endorsement by

4 Rearden.” ECF No. 451 at 29. Rearden does not challenge Disney’s argument as to the second

5 prong. Accordingly, the second prong is satisfied. See Toyota Motor Sales, 610 F.3d at 1182–83;

6 Nissan Fire, 210 F.3d at 1102–03.

7 As to the first prong, Rearden’s argument is repetitive of its argument as to why the

8 nominative fair use defense is inapplicable. Rearden neither argues nor identifies evidence

9 showing that the trademarked facial capture technology was readily identifiable without the use of

10 the MOVA mark. Nor does Rearden identify any evidence in support of its assertion that MOVA

11 was already known to the industry as CONTOUR. Instead, Rearden points to an allegation in the

12 operative complaint, see ECF No. 451 at 29 (citing ECF No. 315 ¶ 48), but “[a]ssertions in
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13 pleadings are not facts,” United States ex rel. Reagan v. Carolina Liquid Chemistries Corp., No.

14 13-cv-01497-JST, 2022 WL 19975389, at *3 n.1 (N.D. Cal. Dec. 20, 2022) (quoting Dozier v.

15 Maispace, No. C-05-1761 PVT, 2007 WL 518622, at *2 (N.D. Cal. Feb. 13, 2007)). In the

16 absence of any evidence to the contrary, the Court concludes that the first prong is satisfied.

17 As to the third prong, Rearden’s argument is simply without merit. Rearden does not

18 elaborate as to why the use of the MOVA mark would inherently imply Rearden’s sponsorship or

19 endorsement. It cannot be that the mere use of a mark, without more, inherently implies a holder’s

20 sponsorship or endorsement. Such a principle would, in every case, “require that the defendant

21 make an affirmative statement that their product is not sponsored [or endorsed] by the plaintiff,”

22 but the Ninth Circuit has expressly rejected that notion. Mattel, Inc. v. Walking Mountain Prods.,

23 353 F.3d 792, 811 (9th Cir. 2003).

24 The user of a mark may suggest sponsorship or endorsement where the user takes

25 particular action “in conjunction with the mark,” New Kids, 971 F.2d at 308, where the user “uses

26 an unnecessary trademark,” Toyota, 610 F.3d at 1176, or where use of the mark entails a “claim”

27 to that effect, Cairns v. Franklin Mint Co., 292 F.3d 1139, 1155 (9th Cir. 2002). Rearden

28 identifies no evidence in support of its argument, let alone the requisite evidence suggesting that
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1 any aspect of Disney’s use of MOVA in its press materials and at its press conferences suggested

2 Rearden’s sponsorship or endorsement. The uncontested evidence Disney identifies in its motion

3 includes a brief five-paragraph discussion of “MOVA facial capture technology” in a 44-page

4 press kit, ECF No. 421–1 at 32–33, and mentions of the technology by the cast in press

5 conferences, see ECF No. 419-10 at 36–42. This evidence establishes that Disney’s “nominal use

6 of the [MOVA] mark[] was to identify the [facial motion capture technology itself] and not to

7 ‘inspire a mistaken belief on the part of the consumer that [Disney] is sponsored or endorsed by

8 [Rearden].’” Adobe Sys., 809 F.3d at 1081 (quoting Toyota Motor Sales, 610 F.3d at 1176). The

9 Court concludes that the third prong is satisfied. Disney is therefore entitled to summary

10 judgment as to Rearden’s trademark infringement claim.

11 2. Dilution by Blurring

12 To establish dilution, “a plaintiff must show that (1) the mark is famous and distinctive; (2)
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13 the defendant is making use of the mark in commerce; (3) the defendant’s use began after the

14 mark became famous; and (4) the defendant’s use of the mark is likely to cause dilution by

15 blurring or dilution by tarnishment.” Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 634 (9th Cir.

16 2008). Dilution by blurring “occurs when a mark previously associated with one product also

17 becomes associated with a second.” Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 633

18 F.3d 1158, 1169 (9th Cir. 2011) (quoting Visa Int’l Serv. Ass’n v. JSL Corp., 610 F.3d 1088, 1090

19 (9th Cir. 2010)). 15 U.S.C. § 1125(c)(2)(B) sets forth six factors for courts to consider in

20 determining whether a mark is likely to cause dilution by blurring: (1) “[t]he degree of similarity

21 between the mark or trade name and the famous mark,” (2) [t]he degree of inherent or acquired

22 distinctiveness of the famous mark,” (3) “[t]he extent to which the owner of the famous mark is

23 engaging in substantially exclusive use of the mark,” (4) “[t]he degree of recognition of the

24 famous mark,” (5) “[w]hether the user of the mark . . . intended to create an association with the

25 famous mark,” and (6) “[a]ny actual association between the mark . . . and the famous mark.”

26 Disney argues that Rearden cannot show that the MOVA mark is famous to the general

27 public. Rearden argues that the mark “was made famous” in its “business-to-business” market

28 “when the Academy for Motion Picture Arts and Sciences awarded MOVA’s Contour a Technical
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1 Achievement award on February 7, 2015.” ECF No. 451 at 32.

2 As a preliminary matter, Rearden’s argument focuses on the wrong market. The statute

3 provides that “a mark is famous if it is widely recognized by the general consuming public of the

4 United States as a designation of source of the goods or services of the mark’s owner.” 15 U.S.C.

5 § 1125(c)(2)(A) (emphasis added). Accordingly, “the requisite level of fame [i]s that of ‘a

6 household name.’” Blumenthal Distrib., Inc. v. Herman Miller, Inc., 693 F.3d 859, 870 (9th Cir.

7 2020) (quoting Thane Int’l., Inc. v. Trek Bicycle Corp., 305 F.3d 894, 911 (9th Cir. 2020),

8 superseded by statute, Trademark Dilution Revision Act of 2006, Pub. L. No. 109-312, 120 Stat.

9 1730 (codified at 15 U.S.C. § 1125)).

10 The Technical Achievement award cited by Rearden appeared in the February 6, 2015

11 Hollywood Reporter article discussed above, but Rearden provides no evidence as to the “extent[]

12 and geographic reach” of this publicity, 15 U.S.C. § 1125(c)(2)(A)(i). And Rearden does not
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13 identify any other evidence as to “[t]he duration, extent, and geographic reach of advertising and

14 publicity of the mark,” or “[t]he extent of the actual recognition of the mark.” Id.

15 § 1125(c)(2)(A)(i), (iii). Without more, no reasonable trier of fact could conclude that a single

16 article in the Hollywood Reporter resulted in the mark’s wide recognition by the general

17 consuming public. See Blumenthal Distrib., 963 F.3d at 871 (holding that Herman Miller’s

18 EAMES trade dresses are not famous although Herman Miller “spent, on average, $550,000 per

19 year on advertising the Eames chairs from 2004 through 2015 . . . ; the Eames chairs appeared in

20 obscure publications . . . ; at the time of trial in 2016, [Herman Miller] had, at the very most,

21 around 875,000 unique followers on Facebook Twitter, and Instagram combined; most of the

22 Eames chairs are sold through a distribution channel consisting of only around 45 independently

23 owned dealers with 130 locations across the country; and the Eames chairs were ‘very heavily’

24 featured in the TV show Mad Men, have appeared in other TV shows and movies, and have been

25 exhibited at several American museums, including the Museum of Modern Art and the Henry

26 Ford Museum”); cf. Jada Toys, 518 F.3d at 635 (holding that the HOT WHEELS mark is famous

27 because “it has been in use for over thirty-seven years; 350 million dollars have been expended in

28 advertising its mark; three billion HOT WHEELS units have been sold since the inception of the
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1 mark; and HOT WHEELS are sold in all fifty states and throughout the world”). Rearden has thus

2 failed to create a dispute of material fact as to whether the MOVA mark is famous, and Disney is

3 entitled to summary judgment as to Rearden’s dilution-by-blurring claim.

4 CONCLUSION

5 For the above reasons, Disney’s motion is granted in part and denied in part. The motion

6 is granted as to Rearden’s claims for contributory infringement, Rearden’s claim for vicarious

7 infringement to the extent Rearden’s claim is predicated on DD3’s post-injunction use of MOVA

8 and on the Maya Scripts theory, actual damages, indirect profits from Beauty and the Beast

9 merchandise and music, and trademark infringement. The motion is otherwise denied as to

10 Rearden’s claim for vicarious infringement.

11 IT IS SO ORDERED.

12 Dated: October 23, 2023

Northern District of California
United States District Court

_________ ____________________________
13
JON S. TIGAR
14 United States District Judge

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