Case: 23-20188 Document: 104-1 Page: 1 Date Filed: 09/18/2024
United States Court of Appeals
for the Fifth Circuit
____________ United States Court of Appeals
Fifth Circuit
No. 23-20188
FILED
September 18, 2024
____________
Lyle W. Cayce
Michel Keck, Clerk
Plaintiff—Appellant/Cross-Appellee,
Mathew Kidman Higbee; Higbee & Associates,
Cross-Appellees,
versus
Mix Creative Learning Center, L.L.C.; Jacqueline P.
Kenneally; Does 1 through 10 inclusive,
Defendants—Appellees/Cross-Appellants.
______________________________
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:21-CV-430
______________________________
Before Jones, Smith, and Ho, Circuit Judges.
Edith H. Jones, Circuit Judge:
Defendant–Appellee Mix Creative Learning Center is an art studio
that offers art lessons to children. In 2020, Mix Creative began selling “art
kits” online so students could learn at home during the pandemic. One of
these kits reproduced artworks from Plaintiff–Appellant Michel Keck’s Dog
Art series. Keck sued Mix Creative and its proprietor for copyright and
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trademark infringement and sought enhanced statutory damages for willful
infringement. The district court found that the fair use defense to copyright
infringement applied and granted summary judgment to Mix Creative on the
copyright claim. It also granted summary judgment to Mix Creative on the
trademark claim, although Mix Creative had not sought summary judgment
on that claim. Following summary judgment, the district court awarded fees
and costs to Mix Creative under 17 U.S.C. § 505, but it declined to hold
Keck’s trial counsel jointly and severally liable for the fee award under
28
U.S.C. § 1927.
We conclude that (i) the fair use defense to copyright infringement
applies since Mix Creative’s use was transformative and unlikely to cause
harm to markets for Keck’s copyrighted works; (ii) any error in the district
court’s sua sponte grant of summary judgment on the trademark claim was
harmless; and (iii) the district court did not abuse its discretion in either fee
ruling. The district court’s judgment is AFFIRMED.
I. Background
Michel Keck is a multi-media artist who has registered the works from
her Dog Art series with the United States Copyright Office. She has also
registered her name, “Michel Keck,” with the United States Patent and
Trademark Office.
Defendant Jacqueline Kenneally is the sole proprietor of Mix Creative
Learning Center. Mix Creative is an art studio in Houston, Texas, that has
offered children’s art lessons since 2005. In 2020, Mix Creative began selling
art kits online for at-home learning during the pandemic. These kits included
printed-out PowerPoint slides featuring an artist’s biography and artwork
samples, along with a lesson plan and supplies for students to make their own
art in the artist’s style. Students also had the opportunity to join a Zoom call
with Kenneally to create art under her guidance.
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Keck was one of the artists whose work was featured in Mix Creative’s
art kits. Kenneally discovered Keck’s dog-themed artwork online after
searching Google images for “paintings of dogs.” She decided the artwork
would interest her students and copied images from the internet for the kits.
The Keck-inspired kits included printed-out slides with full images of Keck’s
artwork (in addition to a slide with Keck’s biography); supplies such as paint,
paint brushes, and collage paper; and a lesson plan with a Zoom link. Only
six Keck-inspired kits were purchased, for a total of $240. Two of the purchases were made by Keck herself, who thereafter sued Mix Creative and
Kenneally.
When Defendants were notified of Keck’s lawsuit, they immediately
stopped selling the Keck-inspired kits and removed the category of art kits
from Mix Creative’s website.
Keck’s complaint asserted copyright and trademark claims and sought
enhanced statutory damages for willful infringement. After discovery, the
parties filed cross-motions for summary judgment, neither of which briefed
the trademark claims. At a hearing on the motions, the district court granted
summary judgment to Defendants on the issue of enhanced damages, finding
no evidence of willful infringement, but also granted summary judgment to
Keck on all affirmative defenses apart from fair use and innocent infringement. In a written order that followed, the district court granted summary
judgment to Defendants on copyright fair use as well as trademark fair use.
Although neither party’s motion had addressed the trademark claim, the
court stated its understanding that, during the motion hearing, both parties
“expressed that their arguments [on the copyright claims] also appl[ied] to
Plaintiff’s trademark claims.”
After prevailing on summary judgment, Defendants moved for fees
and costs under 17 U.S.C. § 505 (the copyright fee-shifting provision), 28
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U.S.C. § 1927, Rule 26(g) of the Federal Rules of Civil Procedure, and the
court’s inherent power to sanction bad faith or vexatious litigants. The district court found that fee-shifting was appropriate under § 505 and awarded
$102,404 in fees and $165.72 in costs against Keck and in favor of Defendants. However, the court declined to hold Keck’s attorneys jointly and severally liable for the award.
On appeal, Keck contends that the district court erred by granting
summary judgment to Defendants on copyright fair use and by granting summary judgment sua sponte without prior notice on her trademark claim. She
also challenges the fee award to Defendants. Defendants cross-appeal, arguing that the district court erred by refusing to hold Keck’s attorneys jointly
and severally liability for fees and costs.
II. Discussion
We address copyright fair use before turning to the trademark claim
and fee award.
A. Copyright Fair Use
The district court granted summary judgment in favor of Defendants
based on the affirmative defense of copyright fair use. Summary judgment
rulings are reviewed de novo by this court. Baker v. Am. Airlines, Inc., 430
F.3d 750, 753 (5th Cir. 2005). Keck argues that the district court erred in
weighing the fair use factors, particularly the first and fourth. We disagree.
The fair use doctrine is an “equitable rule of reason which permits
courts to avoid rigid application of the copyright statute when, on occasion,
it would stifle the very creativity which that law is designed to foster.” Stewart v. Abend, 495 U.S. 207, 236,
110 S. Ct. 1750, 1768 (1990) (citations and
internal quotation marks omitted). It is codified as an affirmative defense to
copyright infringement at
17 U.S.C. § 107. The statute lists several examples
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of fair use of a copyrighted work, including “criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship,
or research.” It then lists four factors for determining “whether the use
made of a work in any particular case is a fair use”:
(1) the purpose and character of the use, including whether
such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation
to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value
of the copyrighted work.
17 U.S.C. § 107. All four factors “are to be explored, and the results weighed
together, in light of the purposes of copyright.” Campbell v. Acuff-Rose Music,
Inc.,
510 U.S. 569, 578,
114 S. Ct. 1164, 1171 (1994). The factors are not exclusive, however, and “[a] fair-use defense can succeed even if one or more
factors favor the claimant.” Bell v. Eagle Mountain Saginaw Indep. Sch. Dist.,
27 F.4th 313, 321 (5th Cir. 2022). “Courts typically give particular attention
to factors one and four (the purpose and market effect of the use).”
Id.
The district court found that the first and fourth factors favored Defendants, whereas the second and third factors favored Keck. 1 As the parties
do, we focus our discussion on the first and fourth factors.
_____________________
1
According to the district court, the second factor (the nature of the copyrighted
work) and the third factor (the amount and substantiality of the portion used) favored Keck
because her copyrighted work was expressive, not merely factual, in nature, and Mix
Creative copied six complete pieces of her art from the internet. We agree with the district
court’s analysis of these two factors.
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1.
The “central question” of the first factor, the “purpose and character
of the use,” is “whether the new work merely supersede[s] the objects of the
original creation . . . (supplanting the original), or instead adds something
new, with a further purpose or different character.” Andy Warhol Found. for
the Visual Arts, Inc. v. Goldsmith, 598 U.S. 508, 527-528,
143 S. Ct. 1258, 1274
(2023) (internal quotation marks omitted) (quoting Campbell,
510 U.S. at
579,
114 S. Ct. at 1171). This factor “relates to the problem of substitution—
copyright’s bête noire.” Id. at 528. A use that has a purpose or character
similar to that of the original copyrighted work is more likely to serve as a
substitute for the original; the same is not true of a use that has a further purpose or different character. Id.
“A use that has a further purpose or different character is said to be
‘transformative.’” Id. at 529, 143 S. Ct. at 1275 (quoting Campbell, 510 U.S.
at 579,
114 S. Ct. at 1171). “‘[T]ransformativeness’ is a matter of degree.”
Id. The more different the purpose or character of the use is, “the more likely
the first factor weighs in favor of fair use.”
Id. Yet not all transformations of
an original work are “transformative” in the fair use sense. Copyright holders also have the exclusive right “to prepare derivative works” of their copyrighted material.
17 U.S.C. § 106(2). These are works “based upon one or
more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version . . . , or any other form in
which a work may be recast, transformed, or adapted.”
Id. § 101 (emphasis
added). To preserve the right of copyright holders to prepare derivative
works, “the degree of transformation required to make ‘transformative’ use
of an original [in the fair use sense] must go beyond that required to qualify
as derivative.” Warhol, 598 U.S. at 529, 143 S. Ct. at 1275.
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An “additional ‘element of the first factor’” is whether the use is
commercial or nonprofit in nature. Id. at 531, 143 S. Ct. at 1276 (quoting
Campbell, 510 U.S. at 584,
114 S. Ct. at 1174). Although the commercial nature of a use disfavors finding for defendants on the first factor, it is “not
dispositive.”
Id. Instead, “it is to be weighed against the degree to which
the use has a further purpose or different character.”
Id. The “justification
for the use” is also a relevant consideration.
Id. “In a broad sense, a use that
has a distinct purpose is justified because it furthers the goal of copyright,
namely, to promote the progress of science and the arts, without diminishing
the incentive to create.”
Id. A use may also be justified in a “narrower
sense,” when “copying is reasonably necessary to achieve the user’s new
purpose,” as with a parody of an original work. Id. at 532, 143 S. Ct. at 1276.
The district court correctly found that the first factor weighed in Defendants’ favor. Although Mix Creative is a commercial enterprise, its use
of Keck’s copyrighted works was transformative, as the art kits had an educational purpose that was significantly different from the original, decorative
purpose of Keck’s dog-themed artworks. Along with printed images of the
artworks, the kits included lesson plans, PowerPoint slides with Keck’s biographical information, and materials for students to create their own art, inspired by Keck’s. As the district court observed, Mix Creative “drew on
Plaintiff’s art not for its inherent expressive value but for what it, accompanied by materials and instruction in art theory and history, could teach students.” Mix Creative is, after all, a learning center, not a gallery or print
shop. Moreover, because Mix Creative’s art kits were designed and sold to
inspire students to create their own art, its use of Keck’s artwork was also
“justified” in the broad sense mentioned above. See id.
Keck argues that the Supreme Court’s recent decision in Andy Warhol
Foundation v. Goldsmith shows that Mix Creative’s use was in fact not transformative. We disagree. In Warhol, photographer Lynn Goldsmith took a
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black and white portrait photograph of Prince in 1981 for Newsweek magazine, which she registered with the Copyright Office and subsequently licensed to other magazines. She alleged that the Andy Warhol Foundation
infringed her copyright in 2016 by licensing Andy Warhol’s silkscreen adaptation of her photograph (titled “Orange Prince”) to Condé Nast for a special
edition magazine following Prince’s death. Id. at 516–19, 143 S. Ct. at 1266–
69. As Keck notes, the Warhol Court focused on the Foundation’s “specific
use” of Goldsmith’s photograph in analyzing whether the use was transformative, and ultimately concluded it was not. See id. at 526, 143 S. Ct. at 1273.
But in Warhol the purpose of the Foundation’s “specific use” was, according
to the Court, “substantially the same” as the purpose of the original photograph. Both the original and the adaptation that the Foundation licensed to
Condé Nast were “portraits of Prince used in magazines to illustrate stories
about Prince.” Id. at 535, 143 S. Ct. at 1278. The Foundation’s “licensing
of the Orange Prince image thus . . . shared the objectives [] of Goldsmith’s
photograph.” Id. Not so here. As noted, the art kits had educational objectives, while the original works had aesthetic or decorative objectives. The
purpose of Mix Creative’s specific use thus was not “substantially the same”
as that of the original works, and there was little threat that the art kits would
serve as substitutes for the originals.
In arguing otherwise, Keck attempts to frame the specific use by Mix
Creative as “the online, e-commerce sales of Keck’s entire works.” This
framing oversimplifies Warhol’s inquiry into objectives and fails to distinguish the commercial-nature inquiry from the more nuanced inquiry into
whether a secondary use has a further purpose or different character. Keck
also contends that the district court’s interpretation of the purpose of the art
kits as educational was subjective rather than objective. See id. at 544, 143 S.
Ct. at 1284 (stating that “the subjective intent of the user (or the subjective
interpretation of a court) [does not] determine the purpose of the use”). But
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there is no issue of subjective interpretation here. Purely objective considerations of Mix Creative’s business model and the materials in the art kits are
enough to discern their distinct, educational purpose.
The first factor favors Defendants.
2.
The fourth factor considers “the effect of the use upon the potential
market for or value of the copyrighted work.” 17 U.S.C. § 107(4). In assessing this factor, courts look to “the amount of money that the copyright
owner might lose,” Google LLC v. Oracle Am., Inc.,
593 U.S. 1, 35,
141 S. Ct.
1183, 1206 (2021), and also, “more broadly, whether widespread use of the
work in the same infringing fashion ‘would result in a substantially adverse
impact on the potential market’ for the original work and any derivative,”
Bell,
27 F.4th at 324 (quoting Campbell,
510 U.S. at 590,
114 S. Ct. at 1177).
“This last factor is undoubtedly the single most important element of fair
use.” Harper & Row Publishers, Inc. v. Nation Enterprises,
471 U.S. 539, 566,
105 S. Ct. 2218, 2233 (1985).
As the district court correctly found, the fourth factor favors Defendants. We share the district court’s difficulty in imagining “how the use of
Plaintiff’s art for children’s art lessons devalues her pieces’ market worth.
The widespread use of Plaintiff’s art for educational lessons would likely, if
anything, increase her name recognition and commercial value.” This court
came to a similar conclusion in Bell v. Eagle Mountain, 27 F.4th at 325 (“If
anything, the properly attributed quotation of a short passage from Winning
Isn’t Normal might bolster interest in the book; it is free advertising.”). The
transformative nature of Mix Creative’s use also supports a conclusion
against market harm. As the Warhol Court observed, “A secondary use that
is more different in purpose and character is less likely to usurp demand for
the original work or its derivatives.” 598 U.S. at 536 n.12, 143 S. Ct. at 1279
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n.12; see also Campbell, 510 U.S. at 591,
114 S. Ct. at 1177 (“[W]hen . . . the
second use is transformative, market substitution is at least less certain, and
market harm may not be so readily inferred.”).
Keck contends that Defendants failed to adduce sufficient evidence
about relevant markets to satisfy their burden of proof on this factor. This is
incorrect. Kenneally’s sworn declaration attests that Defendants are “not in
the business of selling art works or reproductions of art by well-known artists” and that Mix Creative uses artists’ works for educational purposes only.
This evidence simply confirms what is obvious from Defendants’ business
model, that Mix Creative does not participate in the same markets as Keck.
Keck also argues that she presented evidence of harm to markets for
derivatives of her works, but the proffered evidence is nothing more than
“Defendants’ own sales for derivative uses of Keck’s artwork.” This court
has written that “we cannot recognize a ‘theoretical market for licensing the
very use at bar.’” Bell, 27 F.4th at 325 (quoting Swatch Group Mgmt. Services
Ltd. v. Bloomberg L.P.,
756 F.3d 73, 91 (2d Cir. 2014)). We instead consider
whether there is a “‘traditional, reasonable, or likely to be developed market[
]’ for licensing the kind of use at issue.”
Id. (internal citation omitted). Keck
offered no evidence that such a market exists or could reasonably be expected
to develop. As Defendants put it, “There is no evidence in the record that
Ms. Keck has any licensees for her artwork at issue for purposes of providing
interactive ‘teaching tool’ products for art lessons to children, or any similar
products . . . .” This court found a similar argument persuasive in Bell.
Id.
(“Bell is unable to allege that anyone has ever purchased a license before
posting the WIN Passage on social media . . . .”).
Finally, Keck contends that the district court failed to consider
whether hypothetical “widespread use of the work in the same infringing
fashion” as that of Mix Creative would harm the relevant markets. This
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argument fails, too. Widespread use cannot have an impact on markets that
do not exist and are unlikely to be developed, as is the case with derivative
“teaching tool” products here, for the reasons just stated. Keck’s further
contention that Mix Creative’s use, if widespread, would harm the market
for reproductions of her artwork defies common sense. Kenneally, through
Mix Creative, allegedly infringed Keck’s copyrights by simply copying online
images of Keck’s artworks and printing them on paper for inclusion in the
kits. It is implausible that printing publicly available images in this manner
would negatively impact the market for professional reproductions of an artist’s work.
The fourth factor favors Defendants. Accordingly, because the two
most important statutory factors governing fair use favor Defendants, the district court correctly rejected Keck’s copyright claim.
B. Trademark Claim
Neither party briefed the trademark claim below, but the district court
sua sponte granted summary judgment to Defendants after it evidently concluded from an exchange during the motion hearing that the parties agreed
that their arguments on copyright fair use applied to the trademark claim as
well. Although trademark and copyright claims are governed by different
standards, 2 Keck did not emphasize this in the district court but rather conceded that the trademark and copyright claims were interchangeable. We
accordingly hold that any error in the district court’s sua sponte grant of summary judgment without notice was harmless.
_____________________
2
“[T]rademark fair use and copyright fair use are distinct defenses for distinct
claims.” Warner Bros. Entm’t, Inc. v. X One X Productions, 840 F.3d 971, 980 (8th Cir.
2016).
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“While district courts may grant summary judgment sua sponte they
must first give the parties ‘notice and a reasonable time to respond.’” D’Onofrio v. Vacation Publications, Inc., 888 F.3d 197, 210 (5th Cir. 2018) (first citing Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit,
28
F.3d 1388, 1397 (5th Cir. 1994), then quoting Fed. R. Civ. P. 56(f)). This
court “strictly enforce[s]” the notice requirement but also recognizes that
“the harmless error doctrine applies to lack of notice required by rule 56[f].”
Id. (citing Leatherman, 28 F.3d at 1397–98). Under the harmless error doctrine, an appellate court may affirm sua sponte dismissal without notice “if
the nonmoving party admits that he has no additional evidence anyway” or
if “the appellate court evaluates all of the nonmoving party’s additional evidence and finds no genuine issue of material fact.”
Id. (citation omitted).
At the summary judgment hearing on the parties’ cross-motions, the
district court asked counsel for each side about the trademark claim. Counsel
for Defendants responded that he had “presume[d]” that the trademark and
copyright claims were one and the same because, in his understanding, the
trademark was “embedded” in the copyrighted art. The court asked counsel
for Keck, “Is that how you see it?” to which counsel responded, “Yes your
honor.” Keck’s counsel then confirmed that the court did not “need to deal
with something for the trademark.”
The above exchange amounts to a concession by Keck that the trademark and copyright claims were interchangeable. Counsel may not now, on
appeal, abandon that concession on which the district court relied. Cf. Smith
v. United States, 328 F.3d 760, 770 (5th Cir. 2003) (“A party’s concession of
an issue means the issue is waived and may not be revived.”). Given the
concession, moreover, we conclude that any failure by the district court to
expressly notify Keck that it would rule on the trademark claim in its forthcoming order was harmless. This is essentially identical to one of the situations in which this court has found harmless error in the past, i.e., when “the
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nonmoving party admits that he has no additional evidence anyway.” See
Leatherman, 28 F.3d at 1398.
C. Fees
Finally, the district court awarded $102,404 in fees to Defendants under 17 U.S.C. § 505, but refused to hold Keck’s counsel, Higbee & Associates, jointly and severally liable for the fee award under
28 U.S.C. § 1927.
Keck argues that the district court committed several errors contravening the
Supreme Court’s decision in Fogerty v. Fantasy, Inc.,
510 U.S. 517,
114 S. Ct.
1023 (1994), in granting fees to Defendants; misapplied the factors provided
by the Fogerty opinion,
id. at 534 n.19, 114 S. Ct. at 1033 n.19; and failed to
reduce fees for time spent on motions and issues that Keck prevailed on in
the trial court. In their cross-appeal, Defendants argue that the district court
erred by refusing to hold Keck’s trial counsel jointly and severally liable for
the fee award.
This court reviews fee awards under the deferential abuse of discretion standard. Virgin Records Am., Inc. v. Thompson, 512 F.3d 724, 725 (5th
Cir. 2008). “A trial court abuses its discretion in awarding or refusing to
award attorney’s fees when its ruling is based on an erroneous view of the law
or a clearly erroneous assessment of the evidence.”
Id. (citation omitted).
The district court did not abuse its discretion in awarding fees to Defendants under § 505. In this circuit, “an award of attorney’s fees to the prevailing party in a copyright action is the rule rather than the exception and
should be awarded routinely.” Hunn v. Dan Wilson Homes, Inc., 789 F.3d
573, 588–89 (5th Cir. 2015) (citation omitted). Contrary to Keck’s arguments, the language in the district court’s fee order does not contradict any
of the holdings of Fogerty,
510 U.S. 517,
114 S. Ct. 1023, nor did the district
court misapply the factors listed in that opinion, which in any event are nonexclusive. And given that fair use is a complete defense to copyright
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infringement, and Keck lost on fair use, the district court did not err in refusing to reduce fees for time Keck spent on non-dispositive motions and issues.
Although this issue is closer, neither did the district court abuse its
discretion by refusing to hold Higbee & Associates jointly and severally liable
for the fee award under 28 U.S.C. § 1927. Before imposing sanctions under
§ 1927, “a court must ensure that, pursuant to the plain terms of § 1927, the
offending attorney’s multiplication of the proceedings was both ‘unreasonable’ and ‘vexatious’; evidence of recklessness, bad faith, or improper motive
must be present.” Travelers Ins. Co. v. St. Jude Hosp. of Kenner, La., Inc.,
38
F.3d 1414, 1416–17 (5th Cir. 1994) (citations omitted). It is troubling that
Keck alone will be liable for the high fees incurred by Defendants largely because of Higbee & Associates’ overly aggressive litigation strategy. From our
review of the record, the law firm lacked a firm evidentiary basis to pursue
hundreds of thousands of dollars in statutory damages against Defendants for
willful infringement. Nevertheless, we cannot say, on an abuse of discretion
standard, that the district court erred by determining that there was insufficient evidence that the firm’s conduct was both unreasonable and vexatious.
The trial court was in the best position to assess the firm’s motivation and
tactics. But we warn Higbee & Associates that future conduct of this nature
may well warrant sanctions, and nothing in this opinion prevents Higbee &
Associates from compensating its client, if appropriate, for the fees that she
is now obliged to pay Defendants.
III. Conclusion
The judgment of the district court is AFFIRMED.
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