GFI (defendant) infringed on the copyright of Hamil America, Inc. (Hamil) (plaintiff) on a floral fabric pattern. Hamil’s fabric with this pattern was sold at a higher price than GFI’s fabric with the same pattern. GFI provided the fabric to SGS Studio, Inc. (SGS) (defendant), which manufactured garments using the fabric. The garments were then sold by J.C. Penney (defendant). Hamil sued GFI, SGS, and J.C. Penney for the copyright infringement and prevailed at trial. The trial court found that the copyright infringement was willful. Hamil elected to recover actual damages and profits as opposed to statutory damages. The trial court accepted Hamil’s proof of GFI’s gross revenue and refused to deduct any overhead expenses in calculating GFI’s profits from the copyright infringement. GFI appealed to the United States Court of Appeals for the Second Circuit.