United States Naval Institute v. Charter Communications, Inc.

Tom Clancy, the author of The Hunt for Red October, assigned his copyright for the book to the United States Naval Institute (Naval) (plaintiff). Naval entered into an agreement with Charter Communications (Charter) and Berkley (defendants) that granted Berkley an exclusive license to publish a paperback edition of the book “not sooner than October 1985.” Berkley planned to ship the books early, and Naval filed suit for breach of contract, seeking to enjoin the early shipments. The claim was dismissed after a trial. Berkley shipped the books so early that retailers began selling the books by September 15. Naval claimed this harmed hardcover sales. Naval appealed the dismissal of its complaint, and the United States Court of Appeals for the Second Circuit reversed on the ground that Naval was entitled to damages for breach of contract. The case was remanded for a calculation of the award amount. Naval sought damages for copyright infringement, which included all of Berkley's profits from the early sales, prejudgment interest, costs, and attorney's fees. Naval estimated Berkley’s profits at $724,300. Berkley argued that Naval had no right to infringement damages and had disclaimed its breach claim. The trial court calculated Naval's actual damages as the profits Naval would have earned from hardcover sales in September 1985 if the competing paperback edition had not been offered for sale and awarded $35,380.50, plus $15,319.27 in prejudgment interest. The court also awarded $7,760.12 for Berkley’s profits, but denied interest on the profits or attorney’s fees. Both parties appealed back to the court of appeals; Naval challenged the damage amount and Berkley the verdict.