Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 1 of 10 PageID #: 900
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF INDIANA
`INDIANAPOLIS DIVISION
`
`
`MICHAEL J. HEBENSTREIT Trustee of
`the Bankruptcy Estate for Richard N.
`Bell,
`
`
`Plaintiff,
`
`
`
`v.
`
`
`MERCHANTS BANK OF INDIANA,
`
`
`Defendant.
`
`
`
`Bankruptcy Trustee Michael J
`Hebenstreit MICHAEL J. HEBENSTREIT,
`TRUSTEE OF THE BANKRUPTCY
`ESTATE OF RICHARD N. BELL
` agent TRUSTEE OF THE
`BANKRUPTCY ESTATE OF RICHARD N.
`BELL,
`
`
`Trustee.
`
`No. 1:18-cv-00056-JPH-DLP
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`FINDINGS OF FACT & CONCLUSIONS OF LAW UNDER FEDERAL RULE OF
`CIVIL PROCEDURE 52
`
`After granting Richard Bell1 summary judgment on his copyright
`
`infringement claims against Merchants Bank of Indiana, dkt. 98, the Court
`
`held a bench trial on damages. The parties have submitted proposed findings
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`of fact and conclusions of law. Dkt. 141; dkt. 142. The Court sets forth its
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`findings of fact and conclusions of law below.
`
`
`1 Shortly before trial, Michael Hebenstreit was substituted as Plaintiff in this case because of a
`pending bankruptcy action filed by Mr. Bell. Dkt. 138.
`1
`
`
`
`
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF INDIANA
`INDIANAPOLIS DIVISION
`
`
`MICHAEL J. HEBENSTREIT Trustee of
`the Bankruptcy Estate for Richard N.
`Bell,
`
`
`Plaintiff,
`
`
`
`v.
`
`
`MERCHANTS BANK OF INDIANA,
`
`
`Defendant.
`
`
`
`Bankruptcy Trustee Michael J
`Hebenstreit MICHAEL J. HEBENSTREIT,
`TRUSTEE OF THE BANKRUPTCY
`ESTATE OF RICHARD N. BELL
` agent TRUSTEE OF THE
`BANKRUPTCY ESTATE OF RICHARD N.
`BELL,
`
`
`Trustee.
`
`No. 1:18-cv-00056-JPH-DLP
`
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`
`
`FINDINGS OF FACT & CONCLUSIONS OF LAW UNDER FEDERAL RULE OF
`CIVIL PROCEDURE 52
`
`After granting Richard Bell1 summary judgment on his copyright
`
`infringement claims against Merchants Bank of Indiana, dkt. 98, the Court
`
`held a bench trial on damages. The parties have submitted proposed findings
`
`of fact and conclusions of law. Dkt. 141; dkt. 142. The Court sets forth its
`
`findings of fact and conclusions of law below.
`
`
`1 Shortly before trial, Michael Hebenstreit was substituted as Plaintiff in this case because of a
`pending bankruptcy action filed by Mr. Bell. Dkt. 138.
`1
`
`
`
`
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 2 of 10 PageID #: 901
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`I.
`Findings of Fact
`
`Except where otherwise noted, the following facts are based on testimony
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`
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`from the February 9, 2021 bench trial.
`
`Mr. Bell owns the copyright to the Indianapolis Nighttime Photo ("the
`
`Photo"). In 2004, Mr. Bell began selling licenses for use of the Photo, charging
`
`a $25 fee for a private individual license and a $200 fee for a commercial
`
`license. Mr. Bell has earned a total of $825 from selling licenses for the Photo.
`
`Mr. Bell has also received a total of $135,200 for settlements of copyright-
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`violation claims associated with the Photo.
`
`In September 2014, Merchants entered into a written agreement with
`
`Sonar Studios ("Sonar") to develop a new website for the bank. Rebecca Marsh,
`
`Merchants' Vice President of Marketing & Communications, was the Merchants
`
`employee who worked with Sonar on the website project. Only Ms. Marsh and
`
`Sonar had access to the website while it was being developed.
`
`Sonar created a content management system ("CMS") which allowed
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`Sonar and Ms. Marsh to add, edit, and remove content from the website.
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`Merchants' contract with Sonar included a $1,000 fee for images and the
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`loading of images onto the website. Sonar provided stock images2 by uploading
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`digital image files to the CMS's Media Library. Merchants did not direct or
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`request Sonar to provide any specific stock image.
`
`
`2 Ms. Marsh explained that a stock image is "a collection of photography that someone else has
`taken . . . [that is] offered up for a fee through a stock photography manager."
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`
`
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`2
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`
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 3 of 10 PageID #: 902
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`The Photo was in the initial set of stock images that Sonar uploaded to
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`the Media Library. It is undisputed that Sonar uploaded the Photo to the
`
`Media Library.
`
`Ms. Marsh is familiar with the custom and practice of website developers,
`
`and has been involved in the development of approximately ten websites. She
`
`selected Sonar for the project based on her past experience working with them.
`
`Ms. Marsh testified that it is industry custom for website developers,
`
`such as Sonar, to upload stock images that they either own, have a license to
`
`use, or otherwise have permission to use. It was Ms. Marsh's understanding
`
`that, as part of their contract pricing, Sonar would purchase any required
`
`licensing for the stock images it supplied. Ms. Marsh's expectation therefore
`
`was that Sonar had permission to use any image it uploaded.
`
`Sonar supplied Ms. Marsh drafts of webpages containing images pulled
`
`from the Media Library, all of which had watermarks.3 None of the images in
`
`the Media Library contained watermarks after the website went live. This
`
`signified to Ms. Marsh that Sonar had obtained licenses for the photos in the
`
`Media Library.
`
`In March 2017, Ms. Marsh created a blog post to recruit potential
`
`employees. To make the post more attractive, Ms. Marsh selected the Photo
`
`from the CMS's Media Library. Merchants included its standard copyright
`
`language at the bottom of the webpage: "Copyright 2017 Merchants Bank. All
`
`
`3 As Ms. Marsh explained, a watermark is "a transparent image . . . that lays over the top of the
`image so that it is very recognizable that the image is not available for public use [ ] [a]nd not
`licensed."
`
`
`
`3
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`
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 4 of 10 PageID #: 903
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`Rights Reserved." Merchants included this language on every webpage on the
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`website. No copyright language appeared on the Photo. See dkt. 23-2.
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`On December 15, 2017, Ms. Marsh received an email from Mr. Bell
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`stating that Merchants was not authorized to use the Photo and demanding
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`that Merchants immediately take down the Photo and pay him $5,000. See
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`Defendant Exhibit 204. It is undisputed that the sole reason for Mr. Bell's
`
`demand was that he saw the Photo on Merchants' website. As soon as Ms.
`
`Marsh read the email, she immediately removed the Photo and deleted it from
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`the Media Library.
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`Less than one month later, Mr. Bell filed a lawsuit for copyright
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`infringement against Merchants without checking to see if Merchants took
`
`down the Photo. Dkt. 1. On August 11, 2017, before conducting any
`
`discovery, Mr. Bell filed a motion for summary judgment seeking damages of
`
`$150,000. Dkt. 56. In his deposition, Mr. Bell admitted that he increased his
`
`damages from $5,000 to $150,000 because of Merchant's "obstinance."
`
`Mr. Bell amended his complaint to add Sonar as a defendant. In
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`November 2019, Mr. Bell settled with Sonar, which paid him $2,000 for a
`
`release and dismissal with prejudice from the action. See dkt. 92; dkt. 93.
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`On April 27, 2020, this Court granted Mr. Bell summary judgment on the
`
`issue of copyright infringement and granted Merchants summary judgment as
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`to willfulness. Dkt. 98.
`
`
`
`4
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`
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 5 of 10 PageID #: 904
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`II.
`Conclusions of Law
`
`A. Statutory Damages
`
`A "copyright owner may elect . . . to recover, instead of actual damages
`
`
`
`
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`and profits, an award of statutory damages . . . in a sum of not less than $750
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`or more than $30,000 as the court considers just." 17 U.S.C. § 504(c)(1). Mr.
`
`Bell elected to recover statutory damages. Dkt. 111 at 2.
`
`The Court has broad discretion to assess damages within the statutory
`
`limits. See F.E.L. Publ'ns, Ltd. v. Catholic Bishop of Chi., 754 F.2d 216, 219
`
`(7th Cir. 1985). In exercising this discretion, the Court considers several
`
`factors including: "(1) the infringer's state of mind; (2) the expenses saved, and
`
`profits earned, by the infringer; (3) the revenue lost by the copyright holder; (4)
`
`the deterrent effect on the infringer and third parties; (5) the infringer's
`
`cooperation in providing evidence concerning the value of the infringing
`
`material; and (6) the conduct and attitude of the parties." Bell v.
`
`DiamondIndyLimo.com, No. 1:13–cv–00035, 2014 WL 2747578, at *1 (S.D. Ind.
`
`June 17, 2014) (citing Bryant v. Media Right Prods., Inc., 603 F.3d 135, 144 (2d
`
`Cir. 2010)). Statutory damages thus "serve a dual purpose" of compensating a
`
`plaintiff for actual damages that are not easily ascertainable and deterring
`
`future copyright infringement. Malibu Media, LLC v. Julien, No. 1:12-cv-1730-
`
`TWP-MJD, 2013 WL 5274262, at *2 (S.D. Ind. Sept. 17, 2013) (citations
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`omitted).
`
`
`
`5
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 6 of 10 PageID #: 905
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`With respect to Merchants' state of mind, there is no evidence that
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`Merchants intended to infringe on Mr. Bell's copyright. Sonar uploaded the
`
`Photo to the Media Library and Ms. Marsh testified that she would have used
`
`one of Merchants' stock images or purchased a similar image if she had known
`
`that Mr. Bell owned the Photo. Ms. Marsh relied on Sonar to properly license
`
`the photos that it uploaded to the Media Library.
`
`Mr. Bell argues that Merchants acted objectively reckless by failing to
`
`confirm that the Photo was not copyright protected and by including its
`
`copyright notice under the Photo. However, the record demonstrates that Ms.
`
`Marsh was not aware and had no reason to believe that her actions constituted
`
`infringement. There was no copyright watermark on the Photo and Ms. Marsh
`
`had a credible, good faith belief—based on her experience with Sonar and
`
`working with other website developers—that Sonar had the right to use images
`
`that it put in the Media Library. And although Merchants included copyright
`
`language on the website, it appeared on the bottom of every webpage, never on
`
`the Photo. Considered in context, Merchants' use of the copyright language
`
`conveyed Merchants' asserted copyright over the content of the website rather
`
`than the Photo. Regardless, as discussed below, the record demonstrates that
`
`the infringement was innocent and Merchants' use of the copyright claim on its
`
`website does not support a finding of objective recklessness.
`
`Merchants did not save considerable expenses or earn any profits from
`
`its use of the Photo. Ms. Marsh testified that Merchants did not sell or profit
`
`from the Photo. She also testified that the purpose of the blog post was to
`
`
`
`6
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 7 of 10 PageID #: 906
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`attract employees, not to generate profit or attract new business. Finally, Ms.
`
`Marsh testified that she could have used a free stock image or purchased a
`
`similar image for between $2–5. Had Merchants paid Mr. Bell his going rate for
`
`the Photo, it would have cost $200. Merchants thus saved, at most, $200 by
`
`using the Photo.
`
`Mr. Bell lost minimal, if any, revenue from Merchants' infringement. Mr.
`
`Bell admitted that, at most, $200 is "all [he] ha[s] lost in this case," because
`
`that is what Merchants could have paid to use the Photo. And if Merchants
`
`would have chosen to use a different photo, as Ms. Marsh testified, then Mr.
`
`Bell lost no revenue.
`
`The need to deter future copyright infringement does not weigh in Mr.
`
`Bell's favor. The record demonstrates that Merchants was not aware and had
`
`no reason to believe that its acts constituted copyright infringement. Thus, the
`
`need for deterrence here is minimal.4
`
`Regarding the conduct and attitude of the parties, Mr. Bell admitted that
`
`the only reason he increased his damages demand from $5,000 to $150,000
`
`because of Merchants' "obstinance." He also admitted that he increased his
`
`damages demand even though the facts as he understood them had not
`
`changed since he filed his initial claim.
`
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`4 In reaching its decision, the Court gives minimal weight to Plaintiff's Exhibit 005 (Order &
`Final Judgment in Bell v. Texas Haus Investments, LLC). That case involved different facts and
`Plaintiff's claim that Merchants "knew [it] had not obtained the rights to publish the photo" is
`not supported by the record. In sum, Texas Haus does not compel or counsel in favor of the
`result urged by Plaintiff.
`
`
`
`7
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`
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 8 of 10 PageID #: 907
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`Here, having weighed the evidence and considered the relevant factors,
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`the Court concludes that minimal statutory damages would adequately
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`compensate Mr. Bell.
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`
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`B. Innocent Infringement
`
`The Court may, in its discretion, reduce statutory damages to a
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`minimum of $200 if "the infringer sustains the burden of proving, and the
`
`court finds, that such infringer was not aware and had no reason to believe
`
`that his or her acts constituted an infringement of copyright." 17 U.S.C.
`
`§ 504(c)(2).
`
`Merchants contends that it was neither aware that Mr. Bell held the
`
`copyright for the Photo nor had any reason to believe that its use on
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`Merchants' website constituted copyright infringement. Dkt. 141 at 11; dkt.
`
`110 at 3. Mr. Bell argues that Merchants' conduct was "objectively reckless,"
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`and that Merchants failed to meet its burden of showing that it was an
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`innocent infringer. Dkt. 142 at 4–6.
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`Ms. Marsh testified that Merchants relied on Sonar to have permission to
`
`use the photos that it uploaded to the website for Merchants' use; she has been
`
`involved in the development of about ten websites, including one with Sonar; it
`
`is industry standard for website developers like Sonar to have a license or
`
`otherwise have permission to use images that they present to a client for use
`
`on a website; during the development stage, all photos in the Media Library
`
`had watermarks; when the website went live, none of the photos in the Media
`
`
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`8
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 9 of 10 PageID #: 908
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`Library had watermarks; and her expectation was that Sonar was authorized to
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`use all images selected for the website.
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`The Court concludes that Merchants did not know or have reason to
`
`know that the Photo was copyright protected. Therefore, the Court concludes
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`that Merchants was an innocent infringer and reduces the damages to $200,
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`the statutory minimum.
`
`C. Sonar's Settlement
`
`"It is generally agreed that when a plaintiff settles with one of several
`
`joint tortfeasors, the nonsettling defendants are entitled to a credit for that
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`settlement." McDermott, Inc. v. AmClyde, 511 U.S. 202, 208 (1994). Plaintiff
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`agrees that Merchants is entitled to a credit of $2,000 because of the
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`settlement amount between Mr. Bell and Sonar. Dkt. 142 at 8 ("Merchant's is
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`entitled to a credit of $2,000 for the amount Sonar paid to Bell because of their
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`settlement."); see dkt. 141 at 11–12. Because the Court has limited Plaintiff's
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`statutory damages to $200, Plaintiff is not entitled to recover any additional
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`damages from Merchants.
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`III.
`Conclusion
`
`The Court requests that the magistrate judge confer with the parties to
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`
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`determine whether, considering the Court's findings of fact and conclusions of
`
`law, the parties can resolve Plaintiff's request for reasonable attorneys' fees. If
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`they are not able to do so, the magistrate judge is asked to set a briefing
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`schedule. Final judgment will issue by separate entry.
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`9
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`
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`Case 1:18-cv-00056-JPH-DLP Document 144 Filed 08/26/21 Page 10 of 10 PageID #: 909
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`SO ORDERED.
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`Distribution:
`
`Magistrate Judge Doris L. Pryor
`
`Richard N. Bell
`BELL LAW FIRM
`richbell@comcast.net
`
`Michael Joseph Hebenstreit
`LEWIS & KAPPES PC
`mhebenstreit@lewis-kappes.com
`
`Maura K. Kennedy
`THE LAW OFFICE OF MAURA K. KENNEDY, LLC
`attorneymaurakennedy@gmail.com
`
`David W. Patton
`DINSMORE & SHOHL LLP (Indianapolis)
`David.Patton@dinsmore.com
`
`John D. Waller
`WOODEN & MCLAUGHLIN LLP (Indianapolis)
`john.waller@woodenlawyers.com
`
`
`
`
`10
`
`Date: 8/26/2021
`
`
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