## Facts

- Hamil America, Inc. designed and sold printed fabrics; Tabitha Kim created an original floral textile design for Hamil in 1993, designated Pattern No. 96, and transferred her copyright rights to Hamil.
- Hamil sold Pattern No. 96 in multiple color combinations; one (colorway 575) featured clusters of small white and yellow flowers with blue centers on a red background.
- SGS Studio, Inc., a garment manufacturer, obtained samples of Pattern No. 96 (including colorway 575) and presented them to J.C. Penney Company, Inc., a retailer.
- J.C. Penney selected Pattern No. 96 (colorway 575) among patterns to be used for garments.
- SGS later substituted fabric supplied by GFI (a division of Goldtex, Inc.) using GFI’s Pattern No. 330, instead of Hamil’s Pattern No. 96.
- Hamil sued GFI, SGS, and J.C. Penney for copyright infringement, alleging GFI copied Pattern No. 96 and that SGS and J.C. Penney manufactured and sold garments using the infringing fabric.
- After a bench trial, the district court found substantial similarity and willful infringement, awarded actual damages plus infringer’s profits, accepted evidence of GFI’s gross revenue, and refused to deduct any overhead in calculating GFI’s profits.
- The district court declined to award Hamil additional damages for alleged lost sales to other customers, finding the proof too speculative.
- Defendants appealed liability and damages; Hamil cross-appealed the denial of additional lost-profit damages.

## Issues

1. Whether Hamil’s copyright registration for Pattern No. 96 was valid notwithstanding alleged defects related to amendments.
2. Whether the record supported findings of copying and substantial similarity in protectable expression between Hamil’s Pattern No. 96 and GFI’s Pattern No. 330.
3. Whether, under 17 U.S.C. § 504(b), the district court erred by categorically disallowing all overhead deductions when computing GFI’s profits from infringement.
4. Whether Hamil proved entitlement to additional actual damages for lost profits from sales allegedly diverted to GFI beyond the infringing transactions at issue.

## Decision

- The Second Circuit affirmed the judgment as to copyright validity, ownership, and infringement, including the district court’s finding of substantial similarity and willfulness.
- The court held that a copyright registration certificate provided prima facie evidence of validity and that amendments to the registration did not invalidate it.
- The court reversed in part on damages, holding the district court erred by refusing to permit any overhead deductions in calculating GFI’s profits.
- The court remanded for recalculation of GFI’s profits, permitting deduction of overhead expenses that bear a sufficiently direct and proximate relationship to the infringing sales and that are reasonably allocated.
- The court affirmed the denial of Hamil’s requested additional lost-profit damages as too speculative.

## Legal Principles

- A copyright registration certificate constitutes prima facie evidence of valid ownership and validity; alleged defects in amendments do not necessarily defeat validity absent a showing sufficient to overcome that presumption.
- Infringement may be shown through evidence of access and substantial similarity in protectable expression; in textile designs, similarity may be assessed by the overall visual impression, including the arrangement and combination of motifs and colors.
- Under 17 U.S.C. § 504(b), the copyright owner bears the burden to prove the infringer’s gross revenue attributable to infringement; the infringer bears the burden to prove deductible expenses and apportionment to non-infringing factors.
- Overhead may be deductible in computing an infringer’s profits only if (1) the overhead category has a sufficiently direct and proximate relationship to producing or selling the infringing product, and (2) the infringer proves a fair and reasonable allocation of that overhead to the infringing activity.
- Claims for additional actual damages in the form of lost profits require non-speculative proof of causation and amount; counterfactual claims about what other customers would have purchased may be rejected if inadequately supported.

## Conclusion

The Second Circuit sustained findings that defendants willfully infringed Hamil’s copyrighted floral fabric design, but required a new profits calculation because the district court wrongly barred any overhead deduction; on remand, GFI could deduct properly related and reasonably allocated overhead under § 504(b), while Hamil’s claimed additional lost profits remained unrecoverable for lack of reliable proof.


Hamil Am., Inc. v. GFI, 193 F.3d 92 (2d Cir. 1999)