The opinion of the court was delivered by: Michael W. Fitzgerald United States District Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This matter came on for trial before the Court sitting without a jury on December 18, December 19, December 20, December 21, 2012, and January 3, 2013. Following the presentation of evidence and argument, the parties filed supplemental briefs, after which the matter was taken under submission.
Having carefully reviewed the record and the arguments of counsel, as presented at the hearing and in their written submissions, the Court now makes the following findings of fact and reaches the following conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.
1. Plaintiff and Counterdefendant Jean Sprengel is an individual and citizen of the state of California, currently residing in Redlands, California.
2. Defendant and Counterclaimant Lanette Sprengel Mohr is an individual and a citizen of the state of Tennessee, currently residing in Clarksville, Tennessee.
3. Purposeful Press LLC ("Purposeful Press") is a limited liability company organized and existing under the laws of the state of California.
4. Sprengel is a licensed anesthesiologist practicing in California.
5. Sprengel is the President of Purposeful Press and Mohr is the Chief Operating Officer.
A. Sprengel Creates the Original Work
6. Sprengel wrote Kaye's Chemo Book when her sister, Kaye Whitney, suffered from a cancer recurrence in 2007 and underwent chemotherapy treatment. Sprengel, and Sprengel alone, drafted the text of the Kaye's Chemo Book. Kaye's Chemo Book included information and advice for approaching and handling chemotherapy treatment. Kaye's Chemo Book also contained photographs taken from the Internet without permission and was therefore not publishable in its initial form. Based on friends' reactions to Kaye's Chemo Book, Sprengel considered self-publication.
7. In December 2007 and early 2008, Sprengel further developed Kaye's Chemo Book into a manuscript titled "Chemo Companion -- A Pocket Guide" (collectively with Kaye's Chemo Book, the "Original Work"). (Exs. 246, 247, 349, 489). Other than the title, the entirety of the Original Work was Sprengel's creation, and Sprengel was the sole author of the Original Work. The Original Work was not created at the request of any person or entity.
8. Mohr saw a copy of the Original Work while visiting Whitney (who is both Sprengel's sister and Mohr's cousin) and the parties discussed Sprengel's plans to publish the Original Work. (Ex. 491).
9. On March 17, 2008, Mohr wrote to Sprengel, proposing that she and Sprengel form a business to commercialize the Original Work. (Ex. 350). Mohr's initial proposal stated that Sprengel would retain all creative control. (Id. at 2). Although others approached Sprengel regarding development of the Original Work, Sprengel decided to partner with Mohr. (Ex. 352).
10. Mohr created an agenda of immediate business decisions while Sprengel worked on the book. (Id.; Ex. 355). In commenting on the agenda of business decisions, Sprengel stated, "I guess that my general idea was that if I could put in the money and the time to finish the book and you could put in the time to get it printed and marketed, then we could split the profit after saving some for development and business expense." (Ex. 355 at 2). Sprengel acknowledged that Mohr would not receive money from Purposeful Press for an extended period of time.
B. Creation and Marketing of Derivative Works
11. Mohr marketed the Original Work to various potential buyers. She secured a deal with Merck Pharmaceuticals ("Merck") through its agent, Artcraft Health ("Artcraft"), in December of 2008. (See Ex. 321). The deal was based solely on the Original Work with the understanding that Purposeful Press would produce a commercialized product for distribution.
12. Sprengel and Mohr worked together throughout the remainder of 2008 and
2009 to create a marketable product based on the Original Work.
13. Mohr handled the day-to-day aspects of product development, business management, and marketing. Mohr found a printer. Mohr located editors, graphic designers, and an accountant. She corresponded with editors, graphic designers, and other contributors and relayed information to and from Sprengel. Mohr worked with companies whose products were featured in the Original Work and suggested occasional replacements. Mohr exchanged over 3,000 e-mails with graphic designer Kristie Severn. Mohr suggested inclusion of a forward. Mohr also adjusted formatting of titles, text, and photographs. Mohr suggested ideas for content, which she discussed with Sprengel, and which Sprengel eventually wrote if Sprengel agreed to their inclusion. Mohr chose a single picture for inclusion into the work, at Sprengel's request. Mohr also wrote an acknowledgement paragraph, suggested inclusion of a "Laughter" section, suggested and devised chapter titles/headings, selected fonts, and proposed changes to the order of certain chapters. (See, e.g., Ex. 197).
14. Mohr specifically instructed Severn and editor Martha Craig not to initiate direct communications with Sprengel out of respect for Sprengel's time. (Exs. 343, 344). As a result, Mohr was the point of contact for independent contractors on the project.
15. Mohr describes her contributions as adding to the look, feel, and tone of the finished product.
16. Sprengel approved of each of Mohr's suggestions before they were acted upon. (See Exs. 461, 462, 600).
17. Mohr spent hundreds of hours transforming the Original Work into a commercialized product suitable for publication.
18. Sprengel and Mohr spent many hours discussing Mohr's suggestions and Severn and Craig's contributions.
19. Sprengel revised chapters from the Original Work and wrote additional chapters. Sprengel also spent nights, weekends, and evenings reviewing Mohr's daily progress.
20. Sprengel had final say concerning all aspects of the finished product and nothing went into the work without Sprengel's ultimate approval.
21. The resulting products were the ChemoCompanion Care Guide (Ex. 161) and the ChemoCompanion Pocket Guide (collectively "Derivative Works"). (Ex.162).
22. Mohr did not write substantive (non-heading) text in the Derivative Works that differed from the Original Work. (Exs. 518, 551 at 1 ("Though I didn't personally write the changes, I am confident that had I not been directing this entire project, most of the editing and other changes would not have happened.)).
23. Mohr and those with whom she communicated regularly and consistently referred to Sprengel as the author in communications about the Derivative Works. There is no evidence that Mohr ever referred to herself as the author or an author until litigation commenced. (See, e.g., Exs. 201, 202, 203, 204, 206, 208, 209, 210, 211, 212, 213, 214, 217, 218, 220, 221).
C. Formation of Purposeful Press
24. Sprengel and Mohr formed Purposeful Press to market the Derivative Works and create and sell additional derivative works based on the Original Work.
25. Sprengel and Mohr understood at the formation of Purposeful Press that Mohr would handle day-to-day management of the company but would not make major business decisions without Sprengel's knowledge and consent.
26. Sprengel and Mohr retained Kenneth Stream, a friend of Sprengel, as counsel to assist with the formation of Purposeful Press and to advise them with respect to intellectual property rights.
27. Mohr prepared a book overview outline for her first meeting with Stream. (Ex. 282).
28. Mohr met with Stream on April 8, 2008 and discussed intellectual property rights to the Original Work and the Derivative Works. During that meeting, Stream asked Mohr whether Sprengel wanted compensation for assigning her copyright in the Original Work to Purposeful Press. (See Exs. 139, 360). Mohr and Stream also discussed the possibility for a total of six additional derivative works. (See id.). Stream did not have a background in copyright law, and it was his understanding that Purposeful Press would have intellectual property rights to the products that it was established to sell.
29. Mohr handled a majority of the administrative tasks associated with formation of Purposeful Press.
30. Mohr advised Sprengel that Stream would charge Purposeful Press for future copyright and trademark work in excess of his charges for drafting and advising on an operating agreement. (Ex. 358).
31. Stream discussed intellectual property rights again with Mohr on April 21, 2008. (See Ex. 364).
32. Stream prepared and Mohr signed Articles of Organization for Purposeful Press, which Sprengel saw only after they were filed on August 8, 2008. (See Ex. 369). The Articles of Organization indicate that Purposeful Press is to be managed by one manager. Mohr and Stream did not discuss whether the document indicated or should indicate management by Mohr to Sprengel's exclusion. Sprengel did not raise concerns about the Articles of Organization, although she did not understand the Articles of Organization to vest Mohr with sole managerial control of Purposeful Press.
33. In entering the business relationship with Mohr, Sprengel understood that Mohr promised to offer time and expertise while Sprengel promised to offer the raw product and initial capital. (See, e.g., Ex. 420).
34. Stream similarly understood that Sprengel provided use of the Original Work, which Mohr was going to revamp and market.
35. At Sprengel and Mohr's request, Stream drafted the Operating Agreement and sent it to Sprengel and Mohr for review. Sprengel and Mohr met with Stream on April 1, 2009 to discuss the Operating Agreement and copyright registration of the Derivative Works. (See Exs. 106, 381).
36. In early April 2009, the parties discussed possible compensation in terms of hourly rates, but no formal ...