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Jury will decide if Disney & Fox must pay for using stolen tech in hit films

A technology firm may be entitled to a portion of profits from films that used a stolen version of software that turns actors’ real-life facial expressions into lifelike animations.

OAKLAND, Calif. (CN) — A jury must decide if the use of stolen animation technology in three hit films made by Disney and Twentieth Century Fox obligates the studios to surrender a portion of their movie profits, a federal judge ruled Tuesday.

Rearden LLC sued Disney and Fox in July 2017, claiming the studios knowingly contracted with a Chinese company that stole its patented MOVA Contour technology to create realistic animated characters for top-grossing films.

The MOVA Contour technology uses phosphorescent makeup on actors’ faces and synchronized cameras and software to transform the curves, expressions and movements of human faces into lifelike animations.

The film studios argued there was no causal link between the use of that technology and profits earned from movies such as the 2017 film “Beauty and the Beast,” which earned more than $500 million in U.S. box office receipts and over $1 billion globally. The studios asked U.S. District Judge Jon Tigar to issue summary judgment in their favor based on those arguments.

In a 14-page ruling released Tuesday, Tigar granted the studios’ motion for summary judgment on profits obtained from four films — “Terminator: Genisys” (2015),  “Avengers: Age of Ultron” (2015), “Night at the Museum: Secret of the Tomb” (2014) and “Fantastic Four” (2015). The judge found Rearden presented no evidence to show a connection between the infringement of its technology and profits earned from those movies.

However, the judge concluded Rearden may be entitled to a portion of profits from two Disney films — “Beauty and the Beast” and “Guardians of the Galaxy” (2014) — and one Fox film, 2016's “Deadpool."

Tigar found Rearden “met its evidentiary burden” for those films by presenting proof that the studios promoted the use of MOVA technology in trailers and advertising for the movies. Rearden also cited references to the technology in media interviews with “Beauty and the Beast” actors Dan Stevens and Emma Watson.

Rearden further argued its technology enabled Disney to create a lifelike, animated “Beast” that captured the subtleties of the actor's facial expressions and invoked audience empathy for the character. Rearden’s expert witness, Dr. Angela Tinwell, testified that the technology created a “Beast” character that viewers could “believe in, empathize with, and believe that Belle could plausibly romantically love.”

Additionally, Rearden said that by using its stolen technology, the studios saved significant money by avoiding the expensive costs of hand animation.

“This nonspeculative evidence supports Rearden’s theory of a causal nexus between the infringement and profits from ‘Beauty and the Beast,’ ‘Guardians of the Galaxy,’ and ‘Deadpool,’” Tigar wrote. “As to these films, it would be reasonable for the jury to infer from Rearden’s evidence that Defendants advertised their use of MOVA and used MOVA-based clips in the film trailer in order to drive interest in the films and thereby increase film profits.”

The judge also rejected the studios’ argument that the law does not entitle Rearden to obtain indirect profits from those films because paying moviegoers never saw the copyrighted software itself. Tigar found Judge Alsup’s May 2016 decision in Oracle v. Google did not support the notion that indirect profits are unavailable when the use of unauthorized copyrighted material in a product is not plainly visible to consumers.

Tigar’s summary judgment ruling means the case can now advance to a jury trial, where Rearden will have to prove a sufficient connection between the use of its technology and profits obtained from the three films.

Previously Tigar denied Rearden’s request to control distribution rights for films that used a stolen version of its technology. He found that because human beings perform the “lion’s share” of creative work to make hit films successful, Rearden could not claim ownership of those films.

The judge also rejected the studios' previous attempts to dismiss Rearden’s lawsuits, finding it plausible that the film production companies knew they were using stolen technology and that they directly benefited from that use.

Disney and Fox contracted with a China- and India-owned company called Digital Domain 3, or DD3, to use what Rearden claims was a stolen version of its patented animation software. DD3 was granted an exclusive license to the MOVA patents by a Chinese company, which acquired the technology from a former Rearden employee who allegedly sold the intellectual property without permission in 2012.

Last year, the Ninth Circuit affirmed Judge Tigar’s decision upholding Rearden’s reacquisition of the technology in 2016, despite arguments that Rearden’s owner used fraud and deceit to clinch a deal in which Rearden repurchased MOVA patents at a lower price.

Attorneys for Rearden, Disney and Twentieth Century Fox did not immediately return emails requesting comment Tuesday.

Rearden is represented by Mark Carlson and Rio Pierce of Hagens Berman Sobol Shapiro.

Kelly Klaus of Munger Tolles & Olson represents Disney and Fox.

Follow Nicholas Iovino on Twitter.

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