Facts

Star Fabrics Inc., a Los Angeles based textile converter, found garments for sale at Target stores bearing one of its proprietary textile designs. It learned that the garments were made from fabric supplied by another textile company, Morex Enterprises Inc., which had registered the design as its own with the U.S. Copyright Office.

Morex printed close to 200,000 yards of infringing fabric, all of which was manufactured into garments sold to Target. Specific sales and profitability information is covered by a protective order.

PLAINTIFF'S CONTENTIONS:
Star Fabrics claimed that Morex violated Star Fabric's copyright by printing fabric with Star's proprietary artwork for use on the garments sold to Target. Plaintiff sought a finding that Morex willfully violated plaintiff's rights, and further sought the disgorgement of all profits earned from the infringement of its design.

DEFENDANTS' CONTENTIONS:
Kandy Kiss (the garment manufacturer) claimed that it only purchased fabric with Star Fabric's design through Morex because Morex signed an indemnification agreement warranting that Morex owned the design.

Morex believed it did in fact own the design, because it purchased the design from a company in China who claimed they owned all rights to the design. During the lawsuit, Morex requested proof of ownership from its Chinese supplier, but no proof was provided. Morex learned that it apparently did not own the design. However, Morex also claimed that Star Fabrics sends its designs to overseas fabric printing mills in China, and Star Fabrics admits that it does not know the names of these companies. Morex argued that Star injects its own designs into the foreign markets without protection and with knowledge that they will be copied, sold, and redistributed.

Defendants also asserted that Star Fabric was not entitled to disgorge all of the profits from Target and/or Kandy Kiss, in part, because they sold dresses without knowledge of the infringement, and any profits from the sales of dresses attributable to the fabric design were negligible.

Settlement Discussions

The parties previously held two confidential meditations before magistrate Judge Rosenberg, but no settlement was reached.

Result

The case settled on the first day of trial for $1.1 million, including a personal guarantee of the President of Morex for $217,000.

Other Information

Prior to trial, plaintiff successfully established liability of all defendants through a motion for partial summary judgment. In granting this motion, the court rejected the affirmative defenses of Morex concerning its allegations that plaintiff misused its copyrights. The court also denied a separate motion for partial summary judgment by defendants seeking a finding that the profits of Target and Kandy Kiss were not causally related to the infringement. The court stated that the causal relationship was "obvious" where, as here, Target and Kandy Kiss earned profits from the sale of dresses with Star Fabrics' design. FILING DATE: Oct. 22, 2010.