Case 15-50044-KG Doc 199 Filed 04/04/16 Page 1 of 20
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`IN THE UNITED STATES BANKRUPTCY COURT
` FOR THE DISTRICT OF DELAWARE
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`Chapter 11
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`In re:
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`Case No. 13-10546(KG)
`SUPERMEDIA LLC,
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`Reorganized Debtor.
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`____________________________________)
`SUPERMEDIA LLC,
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`Plaintiff,
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`v.
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`YELLOW PAGES PHOTOS, INC.,
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`Defendant.
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`____________________________________)
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`Adv. Proc. No. 15-50044(KG)
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`Re: Dkt Nos. 171 & 180
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`OPINION
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` In this tumultuous case and adversary proceeding, the time has come for a final
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`decision on the merits following trial. As explained below, matters took a serious turn
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`based upon facts discovered and arguments made by new lead counsel for SuperMedia
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`LLC (“SuperMedia”) – facts and arguments which changed the complexion of the issues
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`for the Court to decide and the outcome of the case.
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`BACKGROUND1
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`On November 12, 2001, Yellow Pages Photos, Inc., (“Former YPPI”), now known
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`as AdMedia Systems, Inc. (“AdMedia”), and Verizon Directories Corp. (“Verizon
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`1 A number of facts in this Opinion are repetition of the facts which appeared in the Court’s
`Memorandum Opinion, dated December 29, 2014 (Lead Case - D.I. 220) and the Memorandum Opinion on
`the cross-motions for summary judgment, dated October 27, 2015 (Adv. - D.I. 115).
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`Case 15-50044-KG Doc 199 Filed 04/04/16 Page 2 of 20
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`Directories”) entered into a Service Contractor Agreement (the “Agreement”).2 AdMedia
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`agreed to provide Verizon Directories with 100 CD’s each containing 50 images (the
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`“Licensed Images”) for Verizon Directories’ use in accordance with an End User License
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`Agreement (the “License”) which was attached to the Agreement.3 Verizon Directories
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`paid AdMedia $660,000 for the delivered Licensed Images.4 The Agreement contains,
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`inter alia, an anti-assignment clause providing that Former YPPI, now AdMedia, could
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`not “assign its rights or delegate its duties “without Verizon Directories’ prior written
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`consent.5
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`In 2006, Verizon Directories changed its name to “Idearc Media Corp.” (“Idearc”).6
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`On November 3, 2006, former YPPI changed its name to “AdMedia Systems, Inc.” Trent
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`Moore, AdMedia’s principal, incorporated a new Florida corporation named “Yellow
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`Pages Photos, Inc.”7 In 2007, YPPI received from the Register of Copyrights copyright
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`registrations for the Licensed Images.8 AdMedia assigned its copyrights in the Licensed
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`Images to YPPI.9
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`2 Pretrial Order (“PTO”), dated November 6, 2015 ¶ 2. Adv. - D.I. 138.
`3 Id., ¶ 3.
`4 Id., ¶ 5.
`5 Id., ¶ 6.
`6 Id., ¶ 8.
`7 The Court will refer to the new company named “Yellow Pages Photos, Inc.” as “YPPI.” It should
`be noted that although YPPI made reference to the change in a footnote to the brief following the Liability
`Trial, the Court did not appreciate the significance of the change and in its Memorandum Opinion on
`Yellow Pages Photos’ Inc.’s Amended Motion for Allowance and Payment of Administrative Expense, the
`Court’s references to YPPI were actually to Former YPPI. See the Memorandum Opinion which
`accompanies this Opinion in which the Court denies YPPI’s motion to amend its proof of claim to add
`AdMedia.
`8 PTO, ¶ 13, Ex. 1.
`9 Id., ¶ 12.
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`Case 15-50044-KG Doc 199 Filed 04/04/16 Page 3 of 20
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`On March 31, 2009, Idearc filed a voluntary Chapter 11 petition in the Bankruptcy
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`Court for the Northern District of Texas.10 Then, on April 21, 2009, Idearc’s claims and
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`noticing agent served YPPI with notice of the bar date for claims of August 10, 2009.11
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`Thereafter, on September 21, 2009, the noticing and claims agent sent a second notice to
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`YPPI that it was a party to an executory contract with Idearc, that the contract was being
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`assumed and how the cure amount could be found.12 The proposed cure amount for
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`YPPI was $0.00, and YPPI did not object.13 The bankruptcy court confirmed Idearc’s plan
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`on December 22, 2009, including a provision that the cure amount was binding.14 Idearc
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`emerged from bankruptcy as SuperMedia, LLC.
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`On February 16, 2010, YPPI brought a lawsuit in the United States District Court
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`for the Middle District of Florida against User-Friendly Phone Book, LLC and ASEC
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`Group LLC. In the course of the lawsuit, YPPI learned that ASEC received copies of the
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`Licensed Images from SuperMedia. Therefore, on September 24, 2010, YPPI sent a letter
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`to Super Media regarding SuperMedia’s breaches and infringements.15
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`On March 18, 2013, SuperMedia and affiliates filed for bankruptcy under chapter
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`11 in the Court. YPPI immediately sought discovery under Rule 2004. On May 30, 2013,
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`after SuperMedia had emerged from its prepackaged bankruptcy, YPPI filed its proof of
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`claim, as later amended, and Motion for Allowance and Payment of Administrative
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`10 Id., ¶ 15.
`11 Trial., Ex. 563, ¶ 10.
`12 Id., ¶ 14.
`13 Id., ¶¶ 14, 18, 20.
`14 Id., ¶ 21.
`15 Trial, Ex. 27.
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`Expense Claim,16 YPPI alleged that SuperMedia violated the transfer restriction in the
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`License and infringed YPPI’s copyrights.
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`The Court conducted a trial on the Motion for Administrative Expense on April 9,
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`10 and 11, 2014 (the “Liability Trial”).17 Because of YPPI’s concern that SuperMedia had
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`neglected to provide all of the discovery YPPI had requested, YPPI asked the Court to
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`bifurcate trial18, which request the Court granted, trying only liability in the Liability
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`Trial.
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`The Liability Post-Trial Opinion
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`On December 29, 2014, the Court issued its Post-Trial Opinion on Yellow Pages
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`Photos, Inc.’s Amended Motion for Allowance and Payment of Administrative Expense
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`(the “Liability Opinion”).19 The Liability Opinion made it clear that the Court fully
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`accepted YPPI’s evidence at the trial that Super Media had breached the License pre-
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`Petition. The Court found that SuperMedia was not entitled to transfer YPPI’s images
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`and had done so, but because the transfers were accomplished pre-Petition, the Court
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`had to deny the administrative claim. In the Liability Opinion, the Court discussed the
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`breaches of the License and the copyright infringement at length and concluded that the
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`breaches and infringement had occurred pre-Petition. Specifically, the Court found that
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`SuperMedia had wrongfully transferred the Licensed Images to Tata, ASEC, AMDOCS,
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`MPS, ASEC Asia and ASEC India.20 The Court found further breaches by transfers from
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`16 Case 13-10545 - D.I. 213.
`17 Lead Case – D.I. 116, 134-136.
`18 Lead Case – D.I. 93.
`19 Adv. - D.I. 220.
`20 Liability Opinion, page 35.
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`SuperMedia to Web.com, Hostopia, Facebook and Google+.21 The Court found that the
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`transfers were willful.22
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`However, as SuperMedia made clear in its Motion to Amend (discussed below),
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`the pre-Petition period was not at issue in the Liability Trial. What was at issue was the
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`administrative claim period, i.e., the 43 days between the date of SuperMedia’s
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`bankruptcy petition (March 18, 2013) and the effective date of its confirmed plan (April
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`30, 2013). The Court therefore concluded that its rulings on pre-petition actions were not
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`binding.
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`SuperMedia Adversary Proceeding
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`SuperMedia commenced an adversary proceeding on January 12, 2015. In the
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`adversary proceeding, SuperMedia sought a declaration that in the pre-Petition period
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`SuperMedia had neither breached the License nor infringed the copyrights.23
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`Then, on September 4, 2015, SuperMedia filed a Second Amended Complaint24
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`reflecting the following allegations:
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`1.
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` Former YPPI changed its name to AdMedia, and Mr. Moore
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`formed a new company, YPPI. AdMedia assigned its copyrights to the
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`Licensed Images to the newly formed YPPI.25
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`21 Liability Opinion, pages 37-39.
`22 Liability Opinion, pages 45-46.
`23 Adv. – D.I. 1.
`24 Adv. – D.I. 80.
`25 Second Amended Complaint, ¶ 8.
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`2.
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`AdMedia and SuperMedia executed Amendment Number
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`One in mid-2007 to the License to include contractors as authorized users
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`of the Licensed Images.26
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`3.
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`The users of the Licensed Images, namely, Tata, AMDOCs,
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`ASEC International, MPS, Hostopia, Web.com and bieMedia were
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`authorized under the Amended License to use the Licensed Images.27
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`4.
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`The Idearc bankruptcy discharged YPPI’s claim, as of
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`December 31, 2009 for breach of contract or copyright infringement.28
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`On SuperMedia’s motion29, the Court found that the testimony at trial by Trent
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`Moore was sanctionable as it related to bieMedia and ASEC and held that the Court
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`would not accept damages evidence relating to bieMedia and ASEC.30 The Court also
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`granted SuperMedia fees and expenses in bringing its Rule 60(b) motion.31
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`Summary Judgment Motions
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`YPPI and SuperMedia cross-moved for summary judgment.32 On the motions, the
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`Court issued a Memorandum Opinion33 holding that:
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`1.
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`Summary judgment was granted in favor of SuperMedia on
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`the number of works involved, finding there was a single work.
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`26 Second Amended Complaint, ¶¶ 16-19.
`27 Second Amended Complaint, ¶ 24.
`28 Second Amended Complaint, ¶ 28.
`29 Second Amended Complaint, ¶¶ 8, 25.
`30 Lead Case – D.I. 315.
`31 Lead Case – D.I. 366, Memorandum Opinion page 12.
`32 Adv. – D.I. 70, 71.
`33 Adv. – D.I. 115.
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`2.
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`SuperMedia’s motion for summary judgment was denied on
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`the issue of whether the Idearc bankruptcy discharged YPPI’s claim. The
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`Court instead found that the confirmation order in the Idearc bankruptcy
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`did not discharge YPPI’s claim.
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`3.
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`There was a factual issue on the existence of YPPI and
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`AdMedia and whether YPPI became the “Contractor” based on the
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`Amendment.
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`4. Whether the statute of limitations impedes YPPI’s claims was
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`a disputed factual issue preserved for trial.
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`5.
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`Because YPPI did not dispute the 2005 and 2006 transfers to
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`AMDOCS and ASEC, YPPI was foreclosed from statutory damages on
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`those transfers.
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`Thereafter, YPPI moved for reconsideration of the Court’s decision on summary
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`judgment. As a result, the Court recognized its mistake on the “single work” and held
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`that 100 works were involved. The Court also found that YPPI did in fact contest the 2005
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`and 2006 transfers and ruled that when the transfers to AMDOCS and ASEC occurred
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`would be determined at trial.34
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`DISCUSSION
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`The parties vigorously challenged one another during the three days of trial and
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`then both briefed the trial results and on February 18, 2016, the Court heard post-trial
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`34 Order on the Motion for Reconsideration, dated November 10, 2015, ¶¶ 1 and 2. Adv. - D.I. 137.
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`arguments. In addition, the Court heard extensive argument on YPPI’s Motion for
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`Sanctions. YPPI argued that the Court should make adverse inferences and hold that
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`because of its non-compliance with discovery requests and Orders, the Court should hold
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`that SuperMedia illegally transferred all 5,000 works multiple times. The Court will now
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`describe and explain its rulings.
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`Copyright Infringement
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`YPPI registered its copyrights in 2007.35 The Court finds that SuperMedia has met
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`its burden of establishing that transfers to AMDOCS and ASEC (also recognizing that
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`YPPI withdrew its request for statutory damages on the ASEC transfer) occurred in 2005
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`and 2006, prior to the registration by YPPI of its copyrights. The Court accepts the
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`testimony of Valerie Dale, a program manager for SuperMedia. Ms. Dale testified at trial
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`that Verizon (SuperMedia’s predecessor) began outsourcing its services in 2005. Ms. Dale
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`testified that the program known as “APPL 1” was a project with AMDOCS and its
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`partner, Office Tiger, LLC, that occurred in late 2005 or early 2006.36 Ms. Dale instructed
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`other SuperMedia employees to deliver the YPPI images to Office Tiger on their trip to
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`Chennai, India.37 Ms. Dale’s testimony is supported by documentary evidence. There is
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`the APPL1 project plan38 and the Statement of Work39.
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`35 PTO, ¶ 13. Adv. - D.I. 138.
`36 11/16/15 Tr., 78:8-22, 84:22-25.
`37 11/16/15 Tr., 78:8-17, 99:15-17
`38 Trial Ex. 433, 11/16/15 Tr., 86:17-21
`39 Trial Ex. 451
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`Mr. Dale testified as follows:
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`Q. Ms. Dale, is there any doubt in your mind that the Verizon
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`sent its print art library to Office Tiger in late 2005, early 2006?
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`A.
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`No.40
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`Ms. Dale’s unequivocal testimony is also supported by the record of the case
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`showing that Office Tiger began producing finished ads for SuperMedia in 2006 and
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`could not have done so without holding a copy of the art library.41
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`APPL2 followed APLL 1. It started in early 2006.42 Under APLL 2, Verizon
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`transferred the YPPI images to ASEC International.43 Documents support the testimony
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`provided by Ms. Dale. Again, Ms. Dale prepared APLL 244 and Statement of Work.45
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`The evidence supports SuperMedia’s position that transfers occurred before YPPI
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`registered the copyrights. Therefore, YPPI cannot seek statutory damages or attorneys’
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`fees under the Copyright Act.46
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`Statute of Limitations
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`SuperMedia contends that YPPI’s copyright claims are barred by the applicable
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`statute of limitations. The Copyright Act provides for a three year statute of limitations.47
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`Texas has a four year limitations period which is tolled until plaintiff knew or should
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`40 11/16/15 Tr., 78:8-22.
`41 Id., 99:5-17.
`42 Id., 94:21-95:6
`43 Id., 94:21-95:6, 95:7-10, 96:8-19
`44 Trial Ex. 434
`45 Trial Ex. 462
`46 See Leonard v. Stemtech Health Sciences, Inc., 08-067-LPS-CJB, 2011 WL 6046701, at *12 (D. Del Dec.
`5, 2011), adopted at 2012 WL 1133185 (D. Del. Mar. 28, 2012); and 17 U.S.C. § 412(2).
`47 17 U.S.C. § 507.
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`have known of a claim.48 SuperMedia points to other licensees, User Friendly and
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`ZipLocal, who YPPI sued in 2009 for outsourcing and production.49
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`The Court finds that YPPI first learned that SuperMedia was doing business with
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`an outsourcer in the fall of 2010, and filed its proof of claim on May 30, 2013.50 Mr.
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`Moore’s knowledge of the transfers at issue was acquired within the three year statute of
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`limitations.
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`SuperMedia points to several events which it claims put YPPI on notice of the acts
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`of infringement. As examples, SuperMedia points to:
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`1.
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`SuperMedia in 2007 asked YPPI to amend the License to add
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`third-party contractors as authorized users of the Licensed Images51;
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`2.
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`On October 6, 2009, SuperMedia announced it would be
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`engaging Tata to provide ad production services.52
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`3.
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`Further, SuperMedia released a Form 8-K disclosing
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`outsourcing services.53 There is, however, no evidence that YPPI knew
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`about the events or considered them in context.
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`These are modest events which did not put YPPI on notice of its claim. Accordingly, the
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`Court finds that YPPI filed within the statutory period of three years.
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`1992).
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`48 Tex. Civ. Prac. & Rem. 15 Code Ann. § 16.004; Hoover v. Gregory, 835 S.W. 2d 668, 674 (Tex. App.
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`49 11/18/15 Tr., 23:13-24:9
`50 11/18/15, 242:1-20, 246:8-247:4, 247:15-248:5, 248:16-249:23, Tr. Ex. 20
`51 Trial Ex. 55.
`52 Trial Ex. 468.
`53 Trial Exs. 449 and 459.
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`YPPI’s Participation in the License Agreement
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`YPPI is not a party to the License Agreement and the Court has ruled in a separate
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`Memorandum Opinion that it will deny YPPI’s motion to amend the proof of claim to
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`add AdMedia. Therefore, as a non-party, AdMedia does not have standing to enforce
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`the License Agreement. YPPI cannot enforce the License Agreement, including the right
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`to attorneys’ fees.54
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`The Idearc Bankruptcy
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`The Court previously ruled that YPPI’s claims were not subject to discharge under
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`the Idearc bankruptcy Confirmation Order. SuperMedia insists that “YPPI is bound by
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`the $0.00 cure amount provided in Idearc’s executory contract schedules.”55 SuperMedia
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`argues that YPPI received notice of the $0.00 cure about but took no action and therefore
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`YPPI is barred from asserting claims for damages from transfers which occurred before
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`December 31, 2009, the effective date of Idearc’s Confirmation Order.
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`The Court’s reasons for denying the application of discharge because of the
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`Confirmation Order are the same for the cure amount arguments by SuperMedia. By
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`providing a cure amount of $0.00, Idearc told YPPI that it had not breached the License
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`Agreement – an executory contract – or committed patent infringement, which YPPI only
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`discovered later. As the Court knows now, the executory contract was not with YPPI but
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`with AdMedia; and AdMedia is not a claimant. Accordingly, whether the Idearc
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`Confirmation Order discharged the damages to AdMedia or not is of no moment. What
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`54 Arlington Home, Inc. v. Peak Envtl. Consultants, Inc., 361 S.W. 3d 733, 783 (Tex. App. 2012).
`55 SuperMedia LLC’s Post-Trial Brief, p. 35. Adv. Case D.I. 171.
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`matters is that the copyright infringement claim was neither discharged nor, for that
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`matter, addressed in the notice. The unknown copyright infringement merely survived
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`the Idearc bankruptcy.
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`Damages
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`The Court has ruled that statutory damages are not available because the first
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`transfer of the copyrighted Licensed Images pre-dated the registration of the copyrights.
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`Therefore, the Court must determine YPPI’s actual damages.
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`YPPI, supported by the expert testimony of Steven Oscher, claims that it is entitled
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`to $132 per image which SuperMedia transferred. YPPI argues that the $132 amount is
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`what a reasonable license fee for the infringing use would be56. Mr. Oscher, a certified
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`public accountant and economist,57 opined that the most reliable measure was the
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`amount SuperMedia paid to license the Licensed Images, which was $132 per image. Mr.
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`Oscher focused on transactions involving SuperMedia (2001 - $132 per image), SBC
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`Services, Inc. (2003 - $100 per image) and AT&T (2007 - $100 per image and 2008 - $195
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`per image).58 All were large companies with large market penetration.59 The $132 per
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`licensed image would translate to total actual damages of $2,668,248 without an adverse
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`inference60 and $5,940,000 with an adverse inference.
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`56 On Davis v. The Gap, Inc., 246 F.3d 152, 164 (2d Cir. 2001) (courts favor granting the copyright
`owner a full recovery); Leonard v. Stemtech Health Sciences, Inc., 2013 WL 5311295, *6 (D. Del. Sept. 23,
`2013) (actual damages are based on the fair market value that a plaintiff would obtain for use of the item).
`57 11/18/15 Tr., 28:14-287:6.
`58 11/18/15 Tr., 303:24-306:22, Tr. Exs. 55, 509 and 519.
`59 11/18/15 Tr., 265:21-266:21.
`60 See pages 18-19, below.
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`SuperMedia proffered Ellen Broughn as its expert witness. Ms. Broughn spent 40
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`years working in the stock photo industry61 and has licensed in excess of one hundred
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`thousand stock photos.62 Ms. Broughn has a wide range of former customers including
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`advertising agencies, magazines and phone directories companies.63 Ms. Broughn
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`testified that the fair-market value of a new royalty-free license for the Licensed Images
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`– all 5,000 - is between $1,729 and $25,935,64 which may show how market conditions
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`have radically changed since 2001. It has become a “buyers’ market” because of
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`inexpensive digital cameras, broadband internet and companies such as Shutterstock.65
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`Ms. Broughn testified that more than 3,000 of the Licensed Images were not marketable66
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`and that of the 1,729 remaining photos, the fair market value of a royalty free license was
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`between $1 and $15, or $1,729 to $25,935.67
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`Mr. Moore’s testimony at trial was also revealing. Mr. Moore testified that no one
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`ever told him that they would not purchase the Licensed Images from YPPI because they
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`had already been published or obtained elsewhere.68 He has not sold a new license for
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`his images since 2008.69 He also testified that AT&T purchased 157 images for $195 each,
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`for a total of $30,000.70
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`61 11/17/15 Tr., 113:20-23.
`62 Id., 124:21-24.
`63 Id., 125:2-9.
`64 Id., 132:18-133:2, 175:9-21.
`65 Id., 133:3-13, 139:18-140:11.
`66 Id., 169:9-12, 172:9-16.
`67 Id., 174:20-175:21. In 2001, SuperMedia entered into a new license agreement with a company
`that was not YPPI. SuperMedia paid $2 per image. Id., 65:2-10, 66:11-24, Trial Ex. 436.
`68 11/18/15 Tr., 79:19-23.
`69 Id., 223:12-20.
`70 Id., 273:19-24.
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`The law in the Court’s mind is clear that the proper focus is on the fair market
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`value of the Licensed Images, and not on lost sales or opportunities. Thus, in On Davis
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`the Second Circuit allowed the fair market value of the copyrighted material to control.71
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`See also Deltak, Inc. v. Advanced Systems Inc.,72 wherein the Seventh Circuit held likewise.
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`Ms. Boughn’s testimony, in summary, was that the price per image for a license
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`from YPPI was between $4.50 and $8, regardless of a transfer restriction or not.73 Ms.
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`Broughn also testified that the hypothetical license fee for a new license to all 5,000 of the
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`Licensed Images would be between $1,729 and $25,935, which equates to $1 to $15 per
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`image.74 Mr. Oscher for YPPI testified that the Licensed Images had a value of $132 per
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`image, the price SuperMedia paid at the outset.
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`Neither expert fully satisfied the reality of the situation. Mr. Oscher’s valuation of
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`$132 per image fails to take into account the market changes discussed above and the
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`$132 per Licensed Image is more of a default than a value. Ms. Boughn over-emphasized
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`the quality of the images.75 Ms. Boughn also valued the images as of 2010,76 ignoring the
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`years from 2001 to 2009.
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`71 On Davis, 246 F.3d at 166.
`72 767 F.2d 357, 260 (7th Cir. 1985).
`73 11/17/15 Tr., 131:7-132:2.
`74 Id., 175:9-14, 199:7-9.
`75 The Licensed Images which Ms. Boughn reviewed were not in the same format that YPPI
`(Former YPPI) sold to SuperMedia. The Court will also ignore Ms. Boughn’s valuation reduction on the
`basis that the Licensed Images did not bear releases, a fact not proven. Therefore, all 5,000 images are in
`play.
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`76 11/17/15 Tr., 179:17-183:1.
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`Case 15-50044-KG Doc 199 Filed 04/04/16 Page 15 of 20
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`The experts help is therefore limited.77 The $132 figure is unreasonably high given
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`the realities of the stock image business. In fact, despite repeated efforts by YPPI,
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`SuperMedia rejected any further purchases after the Agreement in 2001.78 Moreover, Mr.
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`Oscher was not a strong expert and his testimony must be discounted. Mr. Oscher has
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`no experience in the stock imaging business.79 Mr. Oscher also selected comparables
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`which were skewed in favor of a high value.80 His opinion was essentially mathematical
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`– he took the price of the Licensed Images that Verizon paid and multiplied that dollar
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`amount ($132) by the 5,000 images for the transfers.
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`The Court was, however, impressed with Ms. Boughn’s expertise and testimony.
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`As noted earlier, Ms. Boughn has worked for 40 years in the stock photograph industry,
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`having worked at eight stock photography companies.81 She has reviewed more than
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`four million stock photos to determine whether such photos had commercial appeal for
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`use in advertising.82 She has licensed more than one hundred thousand stock photos.83
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`Ms. Boughn opined that the fair market value of a royalty free license for the Licensed
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`Images was between $1 and $15 each.84 Ms. Boughn did not give her opinion of the value
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`or values prior to 2010.
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`77 The Court will not take notice of Figure 2 in SuperMedia’s brief, as it references facts which were
`not in evidence at the trial. Figure 2 contains YPPI licenses to other parties.
`78 11/18/15 Tr., 36:20-37:2, 39:18-43:8, 43:13-21. 274:3-25.
`79 In Banker v. Urban Outfitters, Inc., 254 F. Supp. 2d 346, 352-354 (S.D.N.V. 2003), the court struck
`the testimony of an expert because she did not have “knowledge, skill, experience, training or education in
`the licensing of stock photography to qualify as an expert in that area.”
`80 Mr. Oscher focused on the Verizon license, the SBC license and the AT&T license. 11/18/15 Tr.,
`304:3-305:5. Mr. Oscher failed to focus on other licenses at lower prices.
`81 11/17/15 Tr., 113:20-23, 114:12-122:22.
`82 Id., 118:2-21.
`83 Id., 124:21-24.
`84 Id., 174:20-175:21.
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`Case 15-50044-KG Doc 199 Filed 04/04/16 Page 16 of 20
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`Given the facts of the case and that in 2011 SuperMedia contracted for stock images
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`for $20,000, or approximately $2 per image85, the Court concludes that it will use $15 per
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`image as the fair market value for the Licensed Images throughout the period from 2001
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`to 2011 when SuperMedia removed the Licensed Images from its print library.86 The $15
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`per image price is the top of Ms. Broughn’s range, and more than accounts for the pre-
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`2010 period for which Ms. Broughn did not express an opinion.
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`
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`What remains for the Court to determine is how many copies of the Licensed
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`Images SuperMedia infringed upon. This is a difficult formulation, as discussed below.
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`It is further complicated by the YPPI request for an “adverse inference” based on
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`SuperMedia’s alleged discovery violations.
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`
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`The Court will begin the discussion of the number of infringements with its
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`decision on the “adverse inference” request. In early 2011, YPPI learned that SuperMedia
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`had transferred the Licensed Images to third parties.87 YPPI then wrote to SuperMedia,
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`asking SuperMedia to identify transferees and take steps to have the Licensed Images
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`returned or destroyed.88
`
`
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`On April 18, 2013, YPPI filed a Rule 2004 request in SuperMedia’s bankruptcy case.
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`On May 30, 2013, YPPI filed its Motion for Allowance and Payment of Administrative
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`Expense Claim.89 On December 30, 2013, YPPI served its first document request.90
`
`
`85 11/16/15 Tr., 65:2-10, Trial Ex. 436.
`86 April 10, 2014 Tr., 73:6-16.
`87 11/18/15 Tr., 959:16-962:16
`88 Trial Exs. 20 and 22.
`89 Case 13-10545 - D.I. 213.
`90 Adv. - D.I. 30, 31.
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`Case 15-50044-KG Doc 199 Filed 04/04/16 Page 17 of 20
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`SuperMedia failed to produce anything related to digital advertising. The Court
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`thereafter ordered SuperMedia to produce such discovery.91 On February 12, 2014, the
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`Court sanctioned SuperMedia for its failure.92 The Court compelled SuperMedia to
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`comply with its prior orders and allowed YPPI to make application for fees and expenses
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`on the effort to compel SuperMedia’s compliance.
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`
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`On May 29, 2015, SuperMedia filed a letter with the Court offering to retain a third-
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`party vendor to search for Licensed Images through SuperMedia’s existing digital ads.
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`The Court thereafter held a telephone conference and at the conclusion held that if
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`SuperMedia performed the search, there would not be additional sanctions.93
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`
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`SuperMedia then performed the search through Idée, Inc. (“TinEye”) at its cost
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`(reported to be approximately $70,000). TinEye found 57 Licensed Images out of over
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`one million images searched on SuperMedia websites, or 0.0053% of the images used in
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`SuperMedia’s websites.
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`
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`The results of the TinEye search could not have been news to YPPI. Its expert,
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`Adam Sharp, had been searching the Internet regularly since 2012 for the Licensed
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`Images.94 Mr. Sharp at regular intervals searched for all 5,000 Licensed Images using a
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`reverse image platform.95 Mr. Sharp, despite his years of searching, found no evidence
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`that SuperMedia published more than 60 images to the Internet.96
`
`
`91 1/29/14 Tr., 12:4-18.
`92 2/12/14 Tr., 29:23-30:12
`93 6/9/15 Tr., 31:4-10.
`94 Sharp Dep. Tr., 78:15-18, 83:16-23.
`95 Id., 57:23-58:6, 78:10-14.
`96 11/18/15 Tr., 152:22-153:9.
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`Case 15-50044-KG Doc 199 Filed 04/04/16 Page 18 of 20
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`
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`YPPI has asked the Court for an adverse inference against SuperMedia – that all
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`5,000 Licensed Images were unlawfully used by or on behalf of third parties. An adverse
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`inference is an extreme remedy.97 A party must show: “(1) the evidence was in the party’s
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`control, (2) the evidence is relevant, (3) there was withholding of the evidence, and (4) the
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`duty to preserve evidence was forseeable.”98 In turn, “control” means that a party has
`
`“the legal right, authority, or practical ability” to obtain evidence because of its
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`relationship with the party who possesses the evidence.99 SuperMedia did not and does
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`not have the authority to obtain the documents. Indeed, if SuperMedia had the capacity
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`to obtain digital ads documents, it would not have had to hire TinEye at great cost.
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`
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`Similarly, YPPI failed to convince the Court that SuperMedia’s conduct amounted
`
`to fraud or an intentional action. Such bad faith is critical to gaining the adverse
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`inference.100 SuperMedia did not have a duty or ability to preserve the digital documents.
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`The very few Licensed Images discovered by TinEye or Mr. Sharp makes the effort
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`unsustainable. Lastly, there was a lack of evidence – concrete evidence – that the alleged
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`spoliation of evidence would have been useful or helpful.101
`
`
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`The Court therefore has determined that it will not adversely infer that
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`SuperMedia transferred the Licensed Images to Web.com, Hostopia, Facebook, Google+,
`
`
`97 McAdams v. United States, 297 F. App’x 183, 187 (3d Cir. 2006).
`98 Bell v. United Parcel Serv., Inc., 665 F.3d 73 (3d Cir. 2012).
`99 R.F.M.A.S., Inc. v. Mimi SO, 271 F.R.D. 13, 24 (S.D.N.Y.) opinion adopted, 271 F.R.D. 55 (S.D.N.Y.
`
`2010).
`
`100 Bull, 665 F.3d at 79. See also In re Hechinger Inv. Co. of Delaware, Inc., 489 F.3d 568, 579 (3d Cir.
`2007) (no evidence of intentional destruction of documents, therefore no spoliation); United States v. Nelson,
`481 F. App’x 40, 42 (3d Cir. 2012) (spoliation instruction improper without showing that evidence is
`destroyed).
`101 In re Adams Golf, Inc., Sec. Litig., 618 G. Supp. 2d 343 (D. Del 2009) (need concrete evidence which
`suggests that the lost documents would have been favorable).
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`Case 15-50044-KG Doc 199 Filed 04/04/16 Page 19 of 20
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`SuperMedia’s customers and the general public. Web.com and Hostopia confirmed that
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`SuperMedia never transferred the Licensed Images to them.102 TinEye found only seven
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`Licensed Images on Facebook, six on Google+ and 57 over all of SuperMedia’s digital
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`products.103 It would be foolish to adversely infer the transfer of 5,000 Licensed Images
`
`multiple times on these facts.
`
`
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`Having rejected YPPI’s claim for adverse inference, the Court must now decide
`
`how many of the Licensed Images were actually transferred and therefore subject to the
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`$15 per Licensed Image transferred. The following chart contains the Court’s analysis:
`
`Transferee
`AMDOCS
`Office Tiger
`Tata
`MPS
`Web.com/Hostopia
`Facebook