IP Law Daily, COPYRIGHT—W.D.N.C.: $4M DMCA and CFAA verdict against TEC upheld; post-trial relief denied, (Apr 16, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

The court found sufficient evidence linking unauthorized access to profits and damages; rejected challenges to causation, attribution, and mitigation.

A federal district court in North Carolina has denied a post-trial motion filed by TEC Holdings, Inc. and its principals seeking judgment as a matter of law, a new trial, or alteration of judgment, and upheld a jury verdict awarding over $4 million to Philips Medical Systems Nederland B.V. for violations of the Digital Millennium Copyright Act (DMCA) and the Computer Fraud and Abuse Act (CFAA). The court held that the plaintiff presented sufficient evidence for a reasonable jury to find that TEC and its related defendants engaged in repeated circumvention of technological protections and unauthorized access to protected systems, and that the resulting damages—including disgorgement of profits and investigative costs—were legally supported. It rejected the defendants’ arguments on causation, damages attribution, and mitigation (Philips Medical Systems Nederland B.V. v. TEC Holdings, Inc., No. 3:20-cv-21-MOC-DSC (W.D.N.C. Apr. 13, 2026)).

Background. The plaintiff, Philips Medical Systems Nederland B.V. and its affiliated entities (collectively, “Philips”), manufacture and service advanced interventional medical imaging systems used in hospitals. TEC Holdings, Inc., formerly known as Transtate Equipment Company, Inc., along with its founders, including Robert A. Wheeler (collectively, “TEC” or “defendants”), operated as independent service organizations providing third-party repair and maintenance services for such systems.

The copyrighted materials at issue formed part of Philips’s Customer Service Intellectual Property (CSIP), which included proprietary diagnostic software, servicing tools, and technical documentation embedded within Philips’s imaging systems. These works were protected by technological measures, including encrypted keys and tiered access levels. According to Philips, TEC developed and deployed a software tool known as “FD Service,” which enabled unauthorized access to restricted portions of Philips’s systems. The accused conduct involved repeated circumvention of these protections and the use of Philips’s protected software in servicing customer equipment.

Philips filed the action alleging that TEC and its principals engaged in a coordinated scheme to access and exploit its proprietary systems and software. The complaint asserted claims under the DMCA and CFAA, along with trade secret and related causes of action. Earlier in the proceedings, the court granted summary judgment in favor of Philips on liability under the DMCA and CFAA, leaving damages for trial. Following a four-week jury trial, the jury found that the defendants committed 941 DMCA violations and awarded Philips over $4 million in damages, including actual damages and disgorgement of profits. TEC subsequently moved post-trial to set aside the verdict, arguing that Philips failed to present sufficient evidence to support the award.

Disgorgement of profits. The defendants argued that Philips failed to prove a causal nexus between the alleged violations and the profits awarded, particularly with respect to individual defendants such as Robert Wheeler. The court rejected this argument, holding that Philips met its burden by presenting expert testimony and documentary evidence linking service contracts and revenues to instances of unauthorized system access. Citing Bonner v. Dawson, 404 F.3d 290 (4th Cir. 2005), and Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514 (4th Cir. 2003), the court reiterated that while a causal connection is required, it need not be established with mathematical precision.

The court further held that joint and several liability for profits was appropriate under the “practical partnership” doctrine set out in Nelson-Salabes, Inc. v. Morningside Dev., LLC, 284 F.3d 505 (4th Cir. 2002). It found that Wheeler and other individual defendants were “principal architects” of the infringing scheme, exercised control over the conduct, and had a financial interest tied to the performance of TEC and its related entities. Accordingly, both the corporate defendant and its principals could be held jointly liable for profits derived from the infringing activity.

The court also rejected TEC’s contention that profits were attributable only to a successor entity, noting that the evidence showed widespread use of the infringing software during the period when TEC itself was operational.

Actual damages under the DMCA. TEC contended that the jury improperly awarded investigative costs as “actual damages” under the DMCA. The court disagreed, holding that such costs may be recoverable if causally linked to the infringement. Relying on Dash v. Mayweather, 731 F.3d 303 (4th Cir. 2013), and other district court decisions, the court concluded that investigation and remediation costs incurred in response to unauthorized access could constitute compensable losses.

Here, Philips presented evidence that it incurred substantial costs investigating and addressing unauthorized access to its systems. The court found that this evidence supported the jury’s award of $512,096 in actual damages.

Statutory damages and evidentiary challenges. Although Philips elected to recover actual damages and profits, the court addressed the defendants’ challenge to statutory damages. TEC argued that Philips failed to attribute specific violations to particular defendants and that the internal monitoring data was unreliable. The court rejected both arguments, noting that the evidence—including system monitoring reports—was sufficient for the jury to attribute violations to TEC and its principals.

The court further held that joint and several liability for statutory damages is permissible where defendants act in concert, citing Sony Computer Entertainment America, Inc. v. Divineo, Inc., 457 F. Supp. 2d 957 (N.D. Cal. 2006).

CFAA loss requirement. The defendants also argued that Philips failed to establish a recoverable “loss” under the CFAA. The court rejected this contention, relying on A.V. ex rel. Vanderhye v. iParadigms, LLC, 562 F.3d 630 (4th Cir. 2009). It held that investigative and remediation costs incurred in response to unauthorized access qualify as recoverable losses, particularly where the conduct impairs system integrity.

The evidence showed that TEC’s use of the FD Service modified system files and left Philips’s systems vulnerable to further unauthorized access. The court therefore upheld the jury’s finding that Philips suffered compensable loss under the CFAA.

Mitigation and remittitur. Finally, TEC argued that the damages should be reduced because Philips failed to mitigate its losses by implementing a relatively inexpensive software fix. The court declined to disturb the award, noting that the jury had been instructed on mitigation and nonetheless found in Philips’s favor.

Conclusion. Thus, the court concluded that TEC and its co-defendants failed to meet the stringent standards required for post-trial relief. Viewing the evidence in the light most favorable to Philips, the court found a legally sufficient basis for the jury’s verdict and upheld the full damages award.

The Case is No. 3:20-cv-21-MOC-DSC.

Judge: Cogburn, Jr., M.

Attorneys: Adaline Hilgard (Reed Smith LLP) for Philips Medical Systems Nederland B.V. Charles E. Raynal, IV (Parker Poe Adams & Bernstein, LLP) for TEC Holdings, Inc.

Companies: Philips Medical Systems Nederland B.V.; TEC Holdings, Inc.

Cases: Copyright NorthCarolinaNews GCNNews