Although my entertainment practice focuses on transactions and not litigation, I do read many court opinions from entertainment and intellectual property lawsuits as research for my books and just as a means of keeping up-to-date on the changing legal landscape. While it’s likely true that transactional attorneys prefer to negotiate rather than sue, there are just some lawsuits that are lose-lose all around and do not need to reach any courtroom.
Case in point. I was perusing the court opinion in Webloyalty.com,Inc. v. Consumer Innovations, LLC, a 2005 case from a Delaware federal court. Both the plaintiff, Webloyalty, and the defendant, Consumer Innovations, operate similar membership discount
program businesses that they advertise online. Consumer Innovations (CI) used a promotional sell page and an online banner that were clearly copied from Webloyalty (one of CI’s drafts of the sell sheet still had Webloyalty’s phone number in the text). That’s copyright infringement. But CI refused to come clean and instead “lied
about using the Webloyalty material in their depositions and at trial”.
Judges aren’t fond of liars in their courtrooms. For that reason, CI not only lost the case but was also ordered to pay statutory damages as well as Webloyalty’s attorney fees and costs. But Webloyalty still ended up in the “hole” financially. Here’s why: