Bitmanagement Software Gmbh v. United States

United States Court of Appeals
for the Federal Circuit
______________________
BITMANAGEMENT SOFTWARE GMBH,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2023-1506
______________________
Appeal from the United States Court of Federal Claims
in No. 1:16-cv-00840-EJD, Senior Judge Edward J.
Damich.
______________________
Decided: January 7, 2025
______________________
MARK CHRISTOPHER F LEMING, Wilmer Cutler Pickering
Hale and Dorr LLP, Boston, MA, argued for plaintiff-
appellant. Also represented by ZAKI ANWAR; BRENT
G URNEY , Washington, DC.
SCOTT D AVID B OLDEN, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, argued for defendant-appellee. Also
represented by BRIAN M. BOYNTON, G ARY L EE H AUSKEN;
P ATRICK C. HOLVEY , Criminal Division, United States
Attorney's Office for the District of Columbia, United
States Department of Justice, Washington, DC; SHIVAUN
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BITMANAGEMENT SOFTWARE GMBH v. US 2
WHITE, Naval Facilities Engineering Systems Command,
United States Navy, Washington, DC.
______________________
Before D YK, STOLL , and STARK, Circuit Judges.
STARK, Circuit Judge.
Bitmanagement Software GmBH (“Bitmanagement”)
appeals the damages judgment it received in the United
States Court of Federal Claims as compensation for
copyright infringement committed by the United States
Navy (“Navy”). The Court of Federal Claims determined
that a hypothetical negotiation between the parties would
have resulted in a license to Bitmanagement’s software at
a cost of $154,400, which it ordered the Navy to pay
Bitmanagement. Finding no abuse of discretion, we affirm.
I
Bitmanagement “develops software for rendering
three-dimensional graphics.” Bitmanagement Software
GmBH v. United States, 989 F.3d 938, 941 (Fed. Cir. 2021)
(“Bit II”). At issue in this case is Bitmanagement’s “BS
Contact Geo” software, which is useful in conjunction with
a Navy software platform called SPIDERS 3D. Used
together, BS Contact Geo and SPIDERS 3D create a virtual
reality environment in which Navy employees can view
images of Naval installations, bases, and facilities in three
dimensions.
In 2008, Bitmanagement, through a third-party
reseller, provided the Navy with 100 “seat licenses” (also
known as “PC licenses”) for BS Contact Geo. A “seat
license” allows only “one installation of the software onto
one computer per license.” Id. Hence, with 100 seat
licenses, the Navy was permitted to install BS Contact Geo
on 100 specific computers.
In 2012, the parties switched the Navy from seat
licenses to a “floating license.” A “floating license” allows
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BITMANAGEMENT SOFTWARE GMBH v. US 3
the licensed user to access the software on a wide range of
computers, so long as measures are taken to limit the
simultaneous usage of the program to only the number of
individual users permitted by the license. See id. at 943.
The Navy’s first floating license with Bitmanagement
allowed the Navy to install BS Contact Geo on as many
computers as it wished but capped the maximum usage at
20 users at any one time. To ensure the Navy adhered to
the cap in the floating license, Bitmanagement and the
Navy agreed that the Navy would use a tracking
application, called “Flexera.” As we explained when this
case was before us previously:
Flexera is a server-based program used to limit the
number of simultaneous users of a “Flexera
enabled” – or “FlexWrapped” – software based on
the number of available licenses. When a user
opens a FlexWrapped program, the program alerts
the Flexera tracking server that the program is in
use. The FlexWrapped program sends a similar
alert when the program is no longer in use. The
Flexera license manager thus limits the number of
users of FlexWrapped software to the number of
licenses that a user owns.
Id. In other words, Flexera “would limit the number of
simultaneous users” by “allowing the program [i.e., BS
Contact Geo] to run only if the number of persons using the
program is less than the number of available licenses.” J.A.
3-4.
In 2013, the Navy began to deploy BS Contact Geo
widely throughout the organization. Eventually, it was
accessible on more than 429,000 Navy computers. Flexera,
however, failed to operate as intended; it did not restrict
the number of simultaneous users of BS Contact Geo to the
number of licenses the Navy had purchased from
Bitmanagement.
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BITMANAGEMENT SOFTWARE GMBH v. US 4
In July 2016, Bitmanagement sued the United States
(“government”) in the Court of Federal Claims, alleging
that the Navy had infringed its copyright on BS Contact
Geo. In preparation for trial, Bitmanagement moved in
limine to exclude the government’s damages expert, David
Kennedy, arguing he had used the wrong legal test by
calculating damages based on the amount of usage of BS
Contact Geo by Navy personnel rather than the number of
copies the Navy had made of the software. The Court of
Federal Claims granted the motion and excluded Mr.
Kennedy’s testimony. Following trial, the court granted
judgment for the government, finding that the Navy had
no liability for copyright infringement.
Bitmanagement appealed. We agreed with the Court
of Federal Claims that the Navy had an implied license to
make copies of BS Contact Geo. But we further held that
the Navy’s agreement to use Flexera to limit the number of
simultaneous users of BS Contact Geo was a material
condition of the implied license, a condition the Navy had
breached. We explained that “the Navy’s failure to abide
by the Flexera condition of that license renders its copying
of the program copyright infringement.” Bit II, 989 F.3d at
951.
We remanded the case to the Court of Federal Claims
for it to calculate the damages the government owed
Bitmanagement. In doing so, we stated the following in
footnote 5 of our opinion:
Because Bitmanagement’s action is against the
government, it is entitled only to “reasonable and
entire compensation as damages . . . , including the
minimum statutory damages as set forth in section
504(c) of title 17, United States Code.” 28 U.S.C.
§ 1498(b). . . . Contrary to Bitmanagement’s
argument, see J.A. 10002 ¶ 5, it is not entitled to
recover the cost of a seat license for each
installation. If Bitmanagement chooses not to
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BITMANAGEMENT SOFTWARE GMBH v. US 5
pursue statutory damages, the proper measure of
damages shall be determined by the Navy’s actual
usage of BS Contact Geo in excess of the limited
usage contemplated by the parties’ implied license.
That analysis should take the form of a
hypothetical negotiation. See Gaylord v. United
States, 777 F.3d 1363, 1368-72 (Fed. Cir. 2015)
[(“Gaylord III”)]; Gaylord [v. United States], 678
F.3d [1339,] 1342-45 [(Fed. Cir. 2012) (“Gaylord
II”)1]. As the party who breached the Flexera
requirement in the implied license, the Navy bears
the burden of proving its actual usage of the BS
Contact Geo software and the extent to which any
of it fell within the bounds of any existing license.
Id. at 951 n.5.
On remand, the Court of Federal Claims
determined that footnote 5 was part of our mandate,
leaving the trial court no choice but to follow it. J.A. 20-21
(“[T]he Federal Circuit has mandated that Plaintiff is not
entitled to damages based on the ‘cost of a seat license for
each installation.’”). The court ordered the parties to
submit supplemental briefing on damages, granted the
government’s motion to reconsider its prior exclusion of Mr.
Kennedy, and reopened the record to permit him to testify.
The court also offered Bitmanagement the opportunity to
present additional damages-related evidence of its own,
though Bitmanagement declined to do so.
1 In Bit II, 989 F.3d at 951 n.5, we referred to
Gaylord v. United States, 678 F.3d 1339 (Fed. Cir. 2012),
as “Gaylord I.” In our opinion today, for simplicity, we
instead adopt the nomenclature employed by the Court of
Federal Claims in the judgment we are reviewing (see, e.g.,
J.A. 1) and refer to our 2012 Gaylord decision as “Gaylord
II.”
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BITMANAGEMENT SOFTWARE GMBH v. US 6
In a post-trial opinion, the Court of Federal Claims
awarded Bitmanagement $154,400 in damages, plus delay
costs (which are not at issue in this appeal).
Bitmanagement timely appealed. We have jurisdiction
under 28 U.S.C. § 1295(a)(3).
II
We review damages awarded by the Court of Federal
Claims for an abuse of discretion. See Hi-Shear Tech. Corp.
v. United States, 356 F.3d 1372, 1377 (Fed. Cir. 2004). “A
court abuses its discretion when (1) the court’s decision is
clearly unreasonable, arbitrary or fanciful; (2) the decision
is based upon an erroneous construction of the law; (3) the
trial court’s factual findings are clearly erroneous; or (4)
the record contains no evidence upon which the court could
have rationally based its decision.” Id. at 1377-78 (internal
quotation marks and citation omitted).
We review the Court of Federal Claims’ legal
conclusions de novo and its factual findings for clear error.
See Gaylord II, 678 F.3d at 1342. “A finding is ‘clearly
erroneous’ when[,] although there is evidence to support it,
the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been
committed.” United States v. U.S. Gypsum Co., 333 U.S.
364, 395 (1948).
We review the trial court’s interpretation of our prior
mandate de novo. See Retractable Techs., Inc. v. Becton
Dickinson & Co., 757 F.3d 1366, 1369 (Fed. Cir. 2014).
III
Bitmanagement appeals the Court of Federal Claims’
judgment awarding it only $154,400 as damages for the
Navy’s infringement of its copyrighted software, BS
Contact Geo. Bitmanagement contends it is entitled to a
judgment several orders of magnitude larger – specifically,
$85,913,400 – and asks that we direct entry of judgment in
that amount. Bitmanagement’s principal argument is that
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BITMANAGEMENT SOFTWARE GMBH v. US 7
the Court of Federal Claims erred as a matter of law by
failing to award damages for every copy of BS Contact Geo
the Navy made. The trial court instead awarded damages
based only on the use to which the Navy put the software,
which in Bitmanagement’s view is improper.
Bitmanagement finds further error in the court’s
admission of Mr. Kennedy’s testimony, its placement of the
burden of showing the amount of Navy usage on
Bitmanagement, and its failure to account for the fact that
the Navy produced only incomplete documentation in
discovery. We find no error in the Court of Federal Claims’
judgment.
A
1
Bitmanagement argues that the Court of Federal
Claims erred by awarding damages based on the number
of copies of BS Contact Geo that were used by the Navy,
rather than for every copy of the software the Navy made.
See, e.g., Open. Br. 2-3 (arguing that Copyright Act
“requires compensation for each infringing copy, as the
other circuits to consider the issue have uniformly
concluded”); id. at 28 (“The Court of Federal Claims
erroneously failed to award damages for every infringing
copy that the Navy made of Bitmanagement’s software.”);
id. at 32 (“The Court of Federal Claims misapplied
copyright law by awarding damages only for BS Contact
Geo copies that were accessed, rather than for every
infringing copy that the Navy made.”). Bitmanagement
contends it should receive a per-copy payment of $200 for
each of the 429,567 copies made by the Navy, for a total
amount of damages of $85,913,400. We disagree. The law
does not compel such a result where the hypothetical
negotiation would have proceeded on a primarily per-use
(floating license) basis, and the trial court’s rejection of a
per-copy approach based on the record developed in this
case is not clearly erroneous.
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BITMANAGEMENT SOFTWARE GMBH v. US 8
The law does not require that every award of copyright
damages be on a per-copy basis. Title 28 of the United
States Code, § 1498(b) provides:
[W]henever the copyright in any work protected
under the copyright laws of the United States shall
be infringed by the United States, . . . the exclusive
action which may be brought for such infringement
shall be an action by the copyright owner against
the United States in the Court of Federal Claims
for the recovery of his reasonable and entire
compensation as damages for such infringement,
including the minimal statutory damages as set
forth in [17 U.S.C. § 504(c)] . . . .
28 U.S.C. § 1498(b) (emphasis added).2
We held in Gaylord II, 678 F.3d at 1343, that when the
government is the infringer, and a claim is brought under
§ 1498(b), “the methods used to determine ‘actual damages’
under the copyright damages statute, 17 U.S.C. § 504, are
appropriate for measuring the copyright owner’s loss.”
Notably, § 504(b) requires the copyright owner to prove
“the actual damages suffered by him or her as a result of
the infringement” (emphasis added).
We further explained in Gaylord II that the
“reasonable and entire compensation” provided for by
§ 1498(b) “entitles copyright owners to compensatory
damages, . . . but not to non-compensatory damages.” 678
F.3d at 1343. We went on to observe that the focus for
calculating damages is on “the copyright owner’s loss,” as
opposed to the value obtained by the government. Id.; see
also id. (“[C]ourts must determine just compensation for
2 Statutory damages permitted by § 504(c) are “not
less than $750 or more than $30,000.” Statutory damages
are not at issue here as Bitmanagement sought actual
damages.
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BITMANAGEMENT SOFTWARE GMBH v. US 9
the plaintiff’s loss when the government takes what is
essentially a compulsory, non-exclusive license on the
plaintiff’s copyright.”); On Davis v. The Gap, Inc., 246 F.3d
152, 159 (2d Cir. 2001) (“The award of the owner’s actual
damages looks at the facts from the point of view of the[]
copyright owner; it undertakes to compensate the owner for
any harm he suffered by reason of the infringer’s illegal
act.”). The statutory requirement to show actual damages
that are the consequence of, and thus are caused by, the
government’s infringement cannot be squared with
Bitmanagement’s insistence that it is entitled to recover
per-copy damages, even where the parties’ past dealings
support the factfinder’s determination that these parties
would have adopted a different approach in a hypothetical
negotiation.
Also in Gaylord II, we set out the framework for
determining damages:
When, as in this case, the plaintiff cannot show lost
sales, lost opportunities to license, or diminution in
the value of the copyright, many circuits award
actual damages based on the fair market value of a
license covering the defendant’s use. The value of
this license should be calculated based on a
hypothetical, arms-length negotiation between the
parties.
678 F.3d at 1343 (internal quotation marks and
citations omitted); see also Bit II, 989 F.3d at 951 n.5
(reiterating applicability of Gaylord II framework). In
determining the fair market value of such a license, a trial
court “must consider all evidence relevant to a hypothetical
negotiation,” including both parties’ past licensing
practices and their goals in the negotiation. Gaylord II,
678 F.3d at 1344.
No case that we or the parties have identified, in this
or any other circuit, requires that an award of copyright
damages invariably be on a per-copy basis. In fact, in
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BITMANAGEMENT SOFTWARE GMBH v. US 10
Gaylord II, we relied on several of the cases that
Bitmanagement now, unpersuasively, argues require
reversal of the Court of Federal Claims. See 678 F.3d at
1343 (citing, e.g., On Davis, 246 F.3d at 152, 164, 172;
Thoroughbred Software Int’l, Inc. v. Dice Corp., 488 F.3d
352, 359-60 (6th Cir. 2007)). We have also expressly
confirmed that our holding in Gaylord II – that “actual
damages for copyright infringement may be based on a
reasonable royalty representing the fair market value of a
license covering the defendant’s use” – is “[c]onsistent with
the conclusions of other circuits that have considered the
issue.” Gaylord III, 777 F.3d at 1367 (internal quotation
marks omitted).
In On Davis, on which Bitmanagement relies heavily,
the Second Circuit repeatedly described the pertinent
analysis as aimed at determining “a fair market value for
a license to use” the copyrighted work. 246 F.3d at 161
(emphasis added); see also id. (“[A] jury could reasonably
find that Davis established a fair market value of at least
$50 as a fee for the use of an image of his copyrighted
design.”) (emphasis added); id. at 164 (making additional
references to “license to make such use of the work”)
(emphasis added). That case involved the number of copies
actually used in print circulation. The Second Circuit also
criticized the plaintiff’s per-copy damages request of $2.5
million as “wildly inflated.” Id. at 161. Nowhere did the
Second Circuit suggest that a per-copy approach should be
applied even when the number of copies made does not
reflect actual use.
Bitmanagement is correct that in another case it
presses before us, Thoroughbred Software, 488 F.3d at 352,
the Sixth Circuit reversed a district court’s damages award
that was found to have been wrongly based solely on the
infringing copies of software that had been actually used.
In requiring that the copyright owner also be compensated
for unused infringing copies, the Sixth Circuit relied on
explicit provisions in the applicable license agreement,
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BITMANAGEMENT SOFTWARE GMBH v. US 11
which provided that “a license fee is due for each copy of
the software purchased” and “the licensee cannot make
additional copies.” Id. at 359; see also Wall Data Inc.
v. L.A. Cnty. Sheriff’s Dep’t, 447 F.3d 769, 775-76 n.5 (9th
Cir. 2006) (in another case relied on by Bitmanagement, a
jury’s lump-sum award was upheld where it was based, in
part, on license terms specifically establishing a seat
license, effectively prohibiting copying of the software).
Here, by contrast, where the parties’ commercial history
included licensed sales based on the number of
simultaneous users, there is no basis to read such a
provision into the parties’ implied license.
Fundamentally, nothing in Thoroughbred Software,
nor any other case we have identified, supports the
proposition that a copyright owner is entitled to
compensation based on each copy made by an infringer
when the hypothetical negotiation would proceed on a
different basis. Instead, every case, including this one,
requires consideration of the particular facts and
circumstances, as demonstrated by the record. And, in a
case like this one, damages are measured by the fair
market value of a license the government would have
obtained in a hypothetical negotiation at the start of its
infringement, as we explained in Gaylord II.
2
On remand, the Court of Federal Claims faithfully and
carefully applied the Gaylord II framework, ultimately
finding – based on the record before it – that the parties
would have agreed to a primarily usage-based licensing
scheme. J.A. 1 (“The Federal Circuit directed this Court to
look at the Gaylord line of cases as a guide.”); see also J.A.
21 (“[T]he essence of the damages’ inquiry is how much
would the Navy agree to a license covering this usage.”). In
our view, whether or not footnote 5 in Bit II is binding, the
facts found by the Court of Federal Claims – none of which
are clearly erroneous – permit no other conclusion than
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BITMANAGEMENT SOFTWARE GMBH v. US 12
that the parties would have adopted a primarily usage-
based approach in a hypothetical negotiation.3 As required
by Gaylord II, the trial court evaluated the totality of the
evidence before it and made findings as to the value of a
license the parties would have hypothetically negotiated at
the time the Navy started to infringe. J.A. 1 (trial court
explaining it “was tasked with determining damages
taking the form of a hypothetical negotiation”). The court
“look[ed] at the evidence presented by both sides to
determine the fair market value of a license to which the
parties would have agreed.” Gaylord II, 678 F.3d at 1343;
see also Gaylord III, 777 F.3d at 1367-68 (noting need to
use “objective considerations in the determination of a
copyrighted work’s market value”) (internal quotation
marks and citations omitted). Its factual findings are not
clearly erroneous and its damages award is not, in any
respect, an abuse of its discretion.
3 We acknowledge that the court suggested it may
have awarded Bitmanagement greater damages had it not
viewed itself as bound to follow footnote 5. J.A. 21 (“In the
usual copyright case, recovery is for infringing copies.
Here, however, the Federal Circuit has mandated that . . .
damages cannot be based on number of copies made.”); see
also J.A. 9 (suggesting “[o]rdinarily” the court would not
consider whether copies were used but must do so here due
to “the Federal Circuit’s remand”). We take this to mean
that if the trial court applied a different approach – i.e.,
awarding damages on a per-copy, rather than actual use,
basis – it would have reached a different damages award.
See J.A. 21 n.18. None of this affects the proper disposition
of this appeal because, regardless of its reasons for doing
so, the trial court correctly followed our binding precedent
of Gaylord II in determining the results of a hypothetical
negotiation. Thus, we need not address the question of
whether footnote 5 was a mandate or dicta.
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BITMANAGEMENT SOFTWARE GMBH v. US 13
In particular, the Court of Federal Claims carefully
reviewed the “objective considerations,” including the
parties’ actual discussions, their licensing histories, and
the leverage each would have been able to exert at the
hypothetical negotiating table. See J.A. 7-23. The court
also evaluated the competing opinions of the parties’
experts, finding the government’s expert, Mr. Kennedy,
“more reliable,” for reasons including that he appeared to
have considered the entire record, whereas
Bitmanagement’s Mr. Graff overlooked record evidence,
J.A. 20, choosing instead to focus on urging the court to
award damages on a per-copy, rather than usage, basis.
Considering all of the evidence, the Court of Federal
Claims determined that, as a result of a hypothetical,
arms-length negotiation, “the parties would have
considered the types of licenses that would have best fit the
Navy’s anticipated use of BS Contact Geo” and then would
have agreed on a combination of unique-user seat licenses
and a floating license. J.A. 22. Specifically, after setting
out in detail how many computers the Navy installed BS
Contact Geo on, and reviewing the usage logs to see how
many unique users accessed the software during the
damages period, the court found that the Navy would have
needed 597 additional seat licenses, for which it would
have paid $200 each (Mr. Graff proposed $259, Mr.
Kennedy proposed $200).4 It further found, based in part
4 The experts’ cost estimates were based, in part, on
what the Navy had paid Bitmanagement prior to the
infringement. As we summarized in Bit II, 989 F.3d at 941,
“the Navy purchased copies of the Bitmanagement BS
Contact Geo system, through intermediary Planet 9, on
three occasions: one copy purchased in 2006 for $990, 100
copies purchased in 2008 for $30,000 [i.e., an average price
of $300 per license], and 18 copies purchased in 2012 for
$5,490 [an average of $305 per license].”
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BITMANAGEMENT SOFTWARE GMBH v. US 14
on discussions Bitmanagement and the Navy held between
2013 and 2015 – in which both parties expressed hope that
wider distribution of the software would lead to increases
in its use – that the Navy would have agreed to another
100 floating licenses, at $350 each. It is undisputed that
doing the necessary math using these numbers results in a
total cost of $154,400.
There is no clear error in any of the Court of Federal
Claims’ findings and we discern no abuse of discretion in
its damages judgment. Indeed, many of the findings on
which the Court of Federal Claims based its damages
award are not (and cannot be) challenged: they were
findings originally made in connection with the first trial
and were before us – but not disturbed by us – in Bit II.
Hence, as the trial court recognized, these findings cannot
be challenged at this stage. See generally Dow Chem. Co.
v. Nova Chems. Corp. (Can.), 803 F.3d 620, 627 (Fed. Cir.
2015) (describing “doctrine of law of the case” and
explaining that “successive litigation of an issue of fact or
law already litigated and resolved in valid court
determination essential to prior judgment” is barred)
(internal quotation marks, citations, and emphasis
omitted). Such findings include:
• In 2013, at the start of the Navy’s infringement and,
therefore, the date of the hypothetical negotiation,
“Bitmanagement’s yearly operating revenue was
declining by approximately 50%,” and the company
“was only completing a few licenses per year with
respect to BS Contact Geo.” J.A. 4.
• In 2013, “potential customers for BS Contact Geo
were also considering the use of X3DOM – a free
open-source framework for 3D graphics,” including
for X3D (Extensible Three-Dimensional) graphics.
J.A. 5.
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BITMANAGEMENT SOFTWARE GMBH v. US 15
• Bitmanagement offered licensees discounts as the
number of licenses the licensees purchased
increased. J.A. 5.
• “In trying to sell BS Contact Geo, Bitmanagement
told potential customers that its website licenses
allowed for unlimited downloads, installations,
and/or use of its software in connection with the
website.” J.A. 5. “None of Bitmanagement’s
website licenses restricted the number of
downloads.” J.A. 6.
On remand, in addition to reiterating the findings that
were undisturbed by the prior appeal, the Court of Federal
Claims made numerous additional, pertinent findings.
These include:
• “[I]n July 2013, Bitmanagement was in poor
financial condition,” as the “market for BS Contact
Geo was limited” and “Bitmanagement was only
completing a few licenses per year, at a low total
dollar rate.” J.A. 13-14.
• While BS Contact Geo “was the only available
product to work in conjunction with SPIDERS 3D,”
there were also “other X3D viewers available in
2005” that “did not require meshing with SPIDERS
3D.” J.A. 14.
• “[T]he Navy was one of Bitmanagement’s most
important customers for BS Contact Geo,” and
“Bitmanagement touted its work with the Navy in
its advertising and presentations to potential
customers.” J.A. 13.
• Bitmanagement had executed licenses with foreign
governments and other entities for amounts
between approximately €6,000 and €45,000, which
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BITMANAGEMENT SOFTWARE GMBH v. US 16
corroborated the Navy’s damages contentions
($115,800 to $235,000) far better than
Bitmanagement’s requested damages ($85,913,400
to $155,400,000).
• “The Navy would have been in a stronger
bargaining position than Bitmanagement during
the hypothetical negotiation.” J.A. 13.
Again, each of these findings is grounded in the record
and is not clearly erroneous. Accordingly, the trial court
did not abuse its discretion in determining that the amount
of damages Bitmanagement suffered as a result of the
Navy’s copyright infringement was $154,400.
3
Bitmanagement’s arguments against the findings
made by Court of Federal Claims do not demonstrate any
clear error or abuse of discretion by the trial court. The
court rationally based its decision on the evidence in the
record.
Bitmanagement asserts that the record is devoid of
evidence that it ever agreed to a per-use license. See Oral
Argument at 7:16-59, available at https://oralarguments.
cafc.uscourts.gov/default.aspx?fl=23-1506_09032024.mp3.
To the contrary, the floating license agreement negotiated
with the Navy was, as we have explained, a form of a per-
use license.
Bitmanagement also suggests that the Court of
Federal Claims failed to adequately consider the
convenience benefit to the Navy of having
Bitmanagement’s software accessible on nearly half a
million computers. This is incorrect. After noting that it
was “attracted to the ‘convenience factor’ argument,” the
trial court added that Bitmanagement had “yet again,
. . . failed to provide the cost of convenience in its damages’
calculations.” J.A. 19 n.17. Because Bitmanagement had
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BITMANAGEMENT SOFTWARE GMBH v. US 17
not attempted to quantitatively value the convenience
factor and had instead insisted on a per-copy damages
theory, it gave the court no reliable way to account for the
value of convenience to the Navy.
Bitmanagement also attempts to dissect the royalty
base the Court of Federal Claims used, which was “429,567
copies of BS Contact Geo 8.001 with 597 unique users and
100 additional simultaneous-use licenses.” J.A. 17.
Bitmanagement emphasizes that the Navy only produced
usage logs for years two and three of the damages period,
and only for usage of BS Contact Geo with SPIDERS 3D
and not with any other platform. Open. Br. 53-58; see also
J.A. 10087 (government admitting: “The Navy has not
tracked whether Navy personnel have used BS Contact
Geo to view X3D files outside the context of SPIDERS 3D,
and, thus, cannot identify whether such uses occurred or
each such use.”). These holes in the record were plugged in
a reasonable manner. For year one usage, “the missing
year,” the Court of Federal Claims used “the highest year
of users, 224 users for September 2014 – August 2015,”
rejecting Mr. Kennedy’s proposal to take an average of the
year two and year three figures (which would have resulted
in an even smaller damages award). J.A. 17. With respect
to non-SPIDERS 3D usage, multiple witnesses testified
that, outside the SPIDERS 3D platform, they were
unaware of any need for BS Contact Geo, and
Bitmanagement did not pursue further discovery that
might have allowed it to quantify any potential non-
SPIDERS 3D usage. See, e.g., J.A. 1866 (government
witness testifying that he was “not aware of any other
demand for BS Contact Geo” outside of SPIDERS 3D); J.A.
1905 (another government witness testifying to same); see
also J.A. 2132 (same government witness testifying that
“[p]rior to SPIDERS 3D, it would be a handful [of users]”
who were interested in this type of 3D capability).
Finally, Bitmanagement points to language in Bit II to
suggest that the Court of Federal Claims understated the
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BITMANAGEMENT SOFTWARE GMBH v. US 18
damages Bitmanagement suffered. Bitmanagement
highlights two sentences from our prior opinion:
This condition [i.e., the requirement to use Flexera
to track usage] rendered reasonable the otherwise
objectively unreasonable decision of
Bitmanagement to allow the Navy to make
unlimited copies of its commercial product. . . .
This is one of the rare circumstances where the
record as a whole reflects that the only feasible
explanation for Bitmanagement allowing mass
copying of its software, free of charge, was the use
of Flexera at the time of copying.
Bit II, 989 F.3d at 950. These statements explain our
conclusion that the Flexera provision in the license
agreement is an enforceable condition of the agreement
between the parties – rendering the Navy’s conduct
copyright infringement – and not “merely a covenant such
that any grievance raised by Bitmanagement necessarily
sounds in contract.” Id. These statements concern
liability, not the amount of damages needed to
appropriately compensate Bitmanagement for the Navy’s
infringement. Nothing in the sentences excerpted above,
or any other part of Bit II, constrained the trial court’s
freedom to find, on the facts before it, whatever amount of
damages was supported by the evidence.
Thus, again, we conclude that the Court of Federal
Claims’ damages analysis is not clearly erroneous and the
court did not abuse its discretion.
B
Bitmanagement’s further procedural attacks on the
Court of Federal Claims’ judgment are largely dependent
on its contention, which we have now rejected, that a
proper damages calculation must be based on each
unauthorized copy the Navy made of the software, rather
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BITMANAGEMENT SOFTWARE GMBH v. US 19
than the use the Navy made of those copies. Therefore, we
may dispose of these arguments with little discussion.
Bitmanagement insists that the Court of Federal
Claims erred by requiring it, instead of the Navy, to prove
the amount of use the Navy made of BS Contact Geo.
Pointing to footnote 5 in our prior opinion, Bitmanagement
contends that the trial court was required to place this
burden on the Navy, but failed to do so. See Bit II, 989 F.3d
at 951 n.5 (“As the party who breached the Flexera
requirement in the implied license, the Navy bears the
burden of proving its actual usage of the BS Contact Geo
software and the extent to which any of it fell within the
bounds of any existing license.”). The government counters
that Bitmanagement, as the party seeking to prevail on an
infringement claim, bears the burden of proving its
damages, notwithstanding whatever this court may have
meant by footnote 5.
For at least two reasons, we find it unnecessary to
determine which party should have borne the burden of
showing the Navy’s usage. First, the Court of Federal
Claims did, in fact, place this burden on the Navy. J.A. 15
(“[T]he Defendant has the burden of proof (according to the
Federal Circuit) . . . .”). Therefore, the basic premise of
Bitmanagement’s argument is unsupported. The court
never shifted this burden to Bitmanagement. At most, the
court merely mentioned – in the course of rejecting Mr.
Kennedy’s estimate of the Navy’s use of BS Contact Geo
during the first year of infringement – that
Bitmanagement, like the government, had failed to
produce evidence on this point. J.A. 17 (noting
Bitmanagement “has not provided any calculations that
would capture this year”). Bitmanagement’s evidentiary
failings on numerous points were worthy of note, and the
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BITMANAGEMENT SOFTWARE GMBH v. US 20
trial court emphasized this reality.5 The Court of Federal
Claims was obligated to make findings based on the record
the parties did, and did not, create, and that is precisely
what the court did. But at no point did the Court of Federal
Claims shift the burden of proof to Bitmanagement on the
issue of the amount of infringing use.
Second, the Navy did produce evidence of its use,
indeed the best available evidence, including whatever
usage logs it had in its possession and witnesses to testify
about that usage. See, e.g., J.A. 16-17. “[I]f actual damages
can not be ascertained with precision because the evidence
available from the infringer is inadequate, damages may
be estimated on the best available evidence, taking
cognizance of the reason for the inadequacy of proof and
resolving doubt against the infringer.” Sensonics, Inc.
v. Aerosonic Corp., 81 F.3d 1566, 1572 (Fed. Cir. 1996)
(emphasis added). The trial court proceeded in a manner
consistent with this directive, which permitted it, in its role
as factfinder, to credit the government’s best available
5 Indeed, on many points, Bitmanagement simply
did not present competing evidence, instead limiting its
efforts “to only undermining Mr. Kennedy” and his theory
that Bitmanagement did not suffer from unused copies of
BS Contact Geo being installed on Navy computers. J.A.
19; see also id. (“The Court is attracted to the ‘convenience
factor’ argument [made by Bitmanagement]. However, yet
again, the Plaintiff has failed to provide the cost of
convenience in its damages’ calculations.”); id. at 22-23
(“Furthermore, the Court has no other concrete figure
because Plaintiff’s calculations were based only on per-seat
licenses and were determined without examining objective
considerations.”).
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BITMANAGEMENT SOFTWARE GMBH v. US 21
evidence over Bitmanagement’s failure to offer contrary
evidence.6
As a final challenge to the Court of Federal Claims
decision, Bitmanagement argues that it abused its
discretion in admitting the testimony of Mr. Kennedy. The
principal basis for Bitmanagement’s contention is its
characterization of Mr. Kennedy’s opinion as legally
erroneous. Because we have now held there was no error
in awarding damages here based primarily on use rather
than copies, this cannot be a ground for excluding the
testimony. Bitmanagement additionally argues that Mr.
Kennedy’s opinions are unreliable because he failed to
accurately account for the Navy’s usage of BS Contact Geo
within the SPIDERS 3D platform in year one and failed to
account for any usage outside of the SPIDERS 3D platform.
We discussed above how these holes in the record do not
undermine the trial court’s judgment; neither do they
provide a meritorious basis to exclude Mr. Kennedy’s
testimony. At most, these matters could have impacted the
6 The record is devoid of any indication that
Bitmanagement attempted to develop a damages theory
that may have supported per-use damages for more than
597 unique user licenses and 100 additional simultaneous-
use licenses. On remand, instead of filing a motion to
compel further damages-related discovery, and instead of
presenting affirmative damages evidence at the new trial,
Bitmanagement contented itself with cross-examining the
government’s expert, Mr. Kennedy, and trying to persuade
the court to award damages for every copy the Navy made
of BS Contact Geo. See J.A. 21-22 (“Plaintiff has been
persistent in focusing on a per-copy license . . . . At [the
second] trial, Plaintiff did not call a rebuttal witness,
although this Court gave Plaintiff the opportunity.”).
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BITMANAGEMENT SOFTWARE GMBH v. US 22
weight the court gave to his opinions – but they do not
make his testimony inadmissible. See generally Summit 6,
LLC v. Samsung Elecs. Co., Ltd., 802 F.3d 1283, 1299 (Fed.
Cir. 2015) (finding that even when expert’s “credibility,
data, or factual assumptions have flaws, these flaws go to
the weight of the evidence, not to its admissibility”); see
also Liquid Dynamics Corp. v. Vaughan Co., Inc., 449 F.3d
1209, 1221 (Fed. Cir. 2006) (“The identification of such
flaws in generally reliable scientific evidence is precisely
the role of cross-examination.”) (internal quotation marks
omitted).
Thus, again, we have no basis to reverse the Court of
Federal Claims.
IV
We have considered Bitmanagement’s remaining
arguments and find them unpersuasive. Because the
Court of Federal Claims’ damages award was not an abuse
of discretion, we affirm.
AFFIRMED
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