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Copyright Infringement - Breach of Contract

August 23, 2004


Breach of Contract


CASE/NUMBER: Guild, Inc. v. J.C. Penney Corporation Inc. / CV033001RGK.

COURT/DATE: USDC Central / May 21, 2004.

JUDGE: Hon. Gary Klausner.

ATTORNEYS: Plaintiff - Mark B. Wilson (Klein & Wilson, Newport Beach).

Defendant - Nicholas A. O'Kelly (J.C. Penney Corporation, Plano, Texas); Valerie Goo (Pillsbury Winthrop, Los Angeles).

TECHNICAL EXPERTS: Plaintiff - Don Gusarson, CPA, Capitola.

Defendant - John Tomlinson, Ph.D.

FACTS: The plaintiff is a clothing designer and manufacturer. The defendant is one of the largest retailers in the country. The parties had done business for over 50 years. The plaintiff claimed that each season, the defendant asked the plaintiff to design clothing for various clothing designs and that if the defendant liked the lines, it would award the plaintiff a contract to manufacture the clothing.

The plaintiff alleged that the defendant asked the plaintiff to design a tank top line for the summer 2001 Arizona Jean Company label. The plaintiff designed various tank tops and initially the defendant said it liked them. Then, the defendant told the plaintiff it would not be awarded the manufacturing contract.

Approximately six months later, the plaintiff discovered that the defendant was selling tank tops with the plaintiff's designs on them.

PLAINTIFF CONTENTIONS: The plaintiff contended there was an implied contract that if the defendant liked the plaintiff's designs, it would award the plaintiff a manufacturing contract. The plaintiff also contended it had copyrights on the designs at issue.

DEFENDANT CONTENTIONS: The defendant argued that the plaintiff's president had given the defendant permission to use the designs. The defendant also contended that the plaintiff had filed the contract claim beyond the two-year statute of limitation. The defendant argued that the breach of contract claim was preempted by the Copyright Act.

The defendant also contended that plaintiff had several quality and manufacturing issues which rendered the plaintiff unable to perform the manufacturing contract up to the defendant's expectations.

JURY TRIAL: Length, three days; poll, unanimous; deliberation, three hours.

SETTLEMENT DISCUSSIONS: The defendant offered $25,000.

THE RESULT: The jury awarded the plaintiff $632,711 on the breach of contract claim and $965,714 on the copyright claim. The court determined that the jury had awarded duplicate damages on the copyright claim and reduced it to $600,332. The total judgment was for $1,233,044 plus prejudgment interest on the contract claim in the amount of $177,153 for a total of $1,410,197 plus costs.

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Klein & Wilson

Klein & Wilson
4770 Von Karman Avenue
Newport Beach, CA 92660

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