United States District Court, Southern District of New York
March 31, 2003
HENRI SILBERMAN AND WIZARD & GENIUS-IDEALDECOR, AG, PLAINTIFFS,
INNOVATION LUGGAGE, INC., AND PETER LOMBARDI, DEFENDANTS.
The opinion of the court was delivered by: Gerard E. Lynch, United States District Judge.
This action involves claims under the Copyright Act of 1976, 17 U.S.C. § 501 ("Copyright Act"), the Visual Artists Rights Act of 1990, 17 U.S.C. § 106A ("VARA"), and the New York common law of unfair competition,*fn1
concerning a black and white photograph of the Manhattan skyline at dusk. Plaintiffs are the photographer, Henri Silberman, and his licensee, Wizard & Genius Idealdecor, AG ("Wizard"), who claim that defendants violated their intellectual property rights by using an unauthorized reproduction of a portion of the photograph in the interior decoration of the defendants' retail luggage stores in and around New York City for some weeks or months starting in November 2000.
Plaintiffs seek a permanent injunction prohibiting further infringement; delivery to plaintiffs of all infringing articles; attorney's fees and statutory damages of at least $150,000 under 17 U.S.C. § 504 (c) and 505; actual damages and infringing profits under 17 U.S.C. § 504 (b); and punitive damages under VARA and the Copyright Act.
The parties have filed a barrage of motions. Plaintiffs have moved for partial summary judgment on their claims under the Copyright Act and VARA. Defendants have moved to dismiss the VARA claims, and cross-moved for summary judgment on the copyright infringement claims. In addition to these dispositive motions, each side has moved for sanctions against the other under Rule 11 of the Federal Rules of Civil Procedure, and the defendants have moved to strike Plaintiffs' Memorandum of Law in Opposition to Defendants' Cross-Motion for Summary Judgment as well as Plaintiffs' Response to Defendants' Statement of Undisputed Material Facts.
For the reasons set forth below, defendants' motion to dismiss is granted as to the VARA claims and all of plaintiff Wizard's claims. Plaintiff Silberman's motion for summary judgment on the copyright infringement claims is granted as to liability. However, because the infringing actions occurred prior to registration of the copyright, all claims for attorney's fees and statutory damages under the Copyright Act are dismissed, as are all claims for punitive damages. The computation of actual damages and infringing profits, and the extent of any injunctive relief, are reserved for trial. Defendants' motion to strike is denied, as is plaintiffs' motion for sanctions. Defendants' motion for sanctions, however, is granted, to the extent stated below.
The following facts are taken from the record submitted by the parties on their respective motions. As might be suspected from the submission multiple affidavits and briefs, including statements of allegedly undisputed material facts that have been followed by counter-statements, replies and even motions to strike statements of allegedly undisputed facts, the parties do not agree on every detail. However, the essential facts are not in dispute. Given the procedural posture of the case, the following do not constitute findings of fact; rather, we simply outline the largely undisputed facts regarding the nature and history of the dispute, as a context for resolving the legal issues at hand.
Plaintiff Silberman is a professional photographer living in New York City, who makes his living by selling photographic works that he creates. Plaintiff Wizard is a Swiss company located in Switzerland that holds the exclusive license to manufacture and sell poster reproductions in certain sizes of the photograph created by Silberman that has become the subject of this litigation — a black and white photograph of the lower Manhattan skyline and the Brooklyn Bridge, taken at dusk from a vantage point in Brooklyn (the "Skyline Photograph").*fn2
Silberman created the Skyline Photograph in 1982. (Defs.' R. 56.1 Stmt. at ¶ 1.) At some point, Silberman created 200 high-quality numbered and signed prints of the Skyline Photograph, a small number of which were sold as artworks. (Pls.' Mem. Supp. Summ. J. and Opp. to Defs.' Mot. Dismiss, at 6.)
In 1989, Silberman entered into an exclusive license agreement with Wizard to reproduce the Skyline Photograph as posters of various sizes. In the license agreements in effect at the time of the alleged infringement (the "License Agreements"), Wizard received the "sole exclusive right to copy, print, reproduce, publish and sell" the Skyline Photograph "throughout the world" in the form of posters of the following sizes: 90 by 120 centimeters (approximately 35.5 by 47.2 inches); 60 by 80 centimeters (approximately 23.6 by 31.5 inches); "small format"; and "wall murals." (License Agreements dated February 5, 2000 and March 18, 2000, attached as Ex. B. to Am. Cmplt.) In exchange for granting the exclusive license to Wizard, Silberman received a licensing fee, as well as royalties from the sale of Wizard's products based on the Skyline Photograph.
Wizard subsequently manufactured, marketed and sold a wall mural-sized poster (12 feet 7 inches by 8 feet 8 inches) reproduction of the Skyline Photograph (the "Skyline Wall Mural") which consisted of essentially the entire photograph, slightly cropped. (Pls.' Mem. Opp. Defs.' Mot. Partial Summ. J. and Supp. Pls.' Mot. Summ. J. at 15.) In order to market its products, Wizard produces a catalogue containing pictures of the posters it manufactures. A picture of the Skyline Wall Mural (the "Skyline Catalogue Picture") was included as image number 262 in a Wizard catalogue ("Wizard Catalogue") that was distributed to Wizard's wholesale customers. (Catalogue Picture attached as Ex. A to Defs.' R. 56.1 Counterstmt.)
The Act of Copying
Defendant Innovation Luggage, Inc. ("Innovation") is a Delaware corporation with its principal place of business in Secaucus, New Jersey, which owns or operates at least seven retail luggage stores in New York City, and other stores in Connecticut, New Jersey, Massachusetts and New Hampshire. (Defs.' Revised Responses to Pls.' First Notice to Admit, Req. Nos. 13, 17.) Defendant Peter Lombardi was the manager of visual displays for Innovation for 22 years until he retired in late 2001. (Deposition of Peter Lombardi dated June 3, 2002 ("Lombardi Tr.") at 5.)
Sometime in November 2000, in the course of his employment at Innovation, Lombardi received a copy of a Wizard catalogue from a paint store, and used a computer scanner to copy a portion of the Skyline Catalogue Picture from the center of the Picture. (Lombardi Tr. 17, 19, 26-27, 43.) The portion scanned depicts a section of the skyline (about six to seven buildings). (Ex. B to Defs.' R. 56.1 Counterstmt.) The computer-scanned image was enlarged and turned into black and white posters sized 30 by 40 inches (the "Innovation Posters"). (Defs.' R. 56.1 Stmt. ¶ 8) (Innovation Poster attached as Ex. C to Defs.' R. 56.1 Counterstmt.) Some of those posters were tinted green. (Defs.' R. 56.1 Counterstmt. ¶ 4.) Innovation also copied a smaller portion of the scanned image (two buildings) onto pricing cards sized 8.5 by 11 inches ("Pricing Cards"). (Defs.' R. 56.1 Stmt. ¶ 10) (Pricing Card attached as Ex. D to Defs.' R. 56.1 Counterstmt.) At no time did defendants seek or receive permission from Wizard or Silberman to create reproductions of the Catalogue Picture. (Defs.' Revised Responses to Pls.' First Notice to Admit, Req. No. 3.)
In November and December 2000, Innovation displayed the items it had made from the Skyline Photograph in all of its retail stores. (Defs.' Revised Responses to Pls.' First Notice to Admit, Req. No. 12.) Silberman discovered that a reproduction of part of his Skyline Photograph was on display in the Innovation stores quite by chance: While walking on Sixth Avenue in Manhattan, he recognized his own work in the window of an Innovation Luggage store. (Deposition of Henri Silberman dated Feb. 4. 2002 ("Silberman Tr."), at 19-23.) Silberman contacted the defendants in mid-December 2000 and claimed that they had infringed his copyright. (Am. Cmplt. ¶ 36.) Silberman's attorney renewed that claim in a letter to the defendants dated January 5, 2001. (Am. Cmplt. ¶ 37, Ex. E thereto.)
There is some dispute as to how long the Innovation Posters and Pricing Cards were on display. Defendants claim that the posters were on display for 6 weeks, and that all posters were removed by December 27, 2000, following Silberman's phone call to Innovation claiming copyright infringement. (Defs.' R. 56.1 Stmt. ¶ 12, Lombardi Tr. 54.) Silberman claims that the use of the Innovation Posters and Pricing Cards at the East 34th Street Innovation store continued for at least four months after he requested that Innovation cease using the image. (Decl. of Henri Silberman, dated June 25, 2002, at 3.) Defendants, in response, claim that Innovation was not responsible for the East 34th Street commercial space during those months because Innovation had closed that store and lost the lease as of December 28, 2000. (Supp. Decl. of Peter Lombardi, dated October 4, 2002, at ¶ 7.)
Copyright Registration and Commencement of Litigation
Silberman registered his copyright for the Skyline Photograph with the U.S. Copyright Office after he discovered the allegedly infringing use by defendants. (Am. Cmplt. ¶ 12, Silberman Tr. 66.) The effective date of Silberman's copyright registration is January 8, 2001. (Copyright Registration No. VA 1-080-021, attached as Ex. B to Am. Cmplt.) Wizard has not registered a copyright for its rights to the Skyline Photograph under the License Agreement.
The original complaint in this action was filed on August 2, 2001, by Silberman against Innovation. An amended complaint was filed on April 4, 2002, by Silberman and Wizard against Innovation and Lombardi.
I. Silberman's Claim for Violation of Moral Rights
In Count IV of the Amended Complaint, Silberman claims that defendants' copying of a portion of the Skyline Catalogue Picture violates his moral rights to attribution and integrity of the artwork under the Visual Artists Rights Act of 1990. Defendants move under Fed.R.Civ.P. 12(b)(6) for dismissal of the VARA claim for failure to state a cause of action, and Silberman moves for summary judgment on the VARA claim under Fed.R.Civ.P. 56. For the reasons stated below, defendants' motion to dismiss is granted and plaintiffs' motion for summary judgment is denied.
A. Standard for Dismissal under Federal Rule of Civil Procedure 12(b)(6)
In the context of a motion to dismiss, the Court accepts "as true the facts alleged in the complaint," Jackson Nat'l Life Ins. Co. v. Merrill Lynch & Co., 32 F.3d 697, 699-700 (2d Cir. 1994), and may grant the motion only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Thomas v. City of New York, 143 F.3d 31, 36 (2d Cir. 1998) (internal citations omitted). The "issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996) (internal quotation marks and citations omitted).
B. Protections under the Visual Artists Rights Act of 1990
The term "moral rights" originates in continental European law, and "is meant to capture those rights of a spiritual, non-economic and personal nature. The rights spring from a belief that an artist in the process of creation injects his spirit into the work and that the artist's personality, as well as the integrity of the work, should therefore be protected and preserved." Carter v. Helmsley Spear, Inc., 71 F.3d 77, 81 (2d. Cir. 1995) (internal references omitted).*fn3
Section 106A of VARA provides, in relevant part, that:
[T]he author of a work of visual art —
(1) shall have the right —
(A) to claim authorship of that work, and . . .
(3) . . . shall have the right —
(A) to prevent any intentional distortion,
mutilation, or other modification of that work which
would be prejudicial to his or her honor or
reputation, and any intentional distortion,
mutilation, or modification of that work is a
violation of that right . . .
17 U.S.C. § 106A.
A "work of visual art" is defined in 17 U.S.C. § 101 as, inter alia, "(2) a still photographic image produced for exhibition purposes only, existing in a single copy that is signed by the author, or in a limited edition of 200 copies or fewer that are signed and consecutively numbered by the author." In contrast, "[a] work of visual art does not include — (A)(i) any poster . . . [or] (ii) any merchandising item or advertising . . . [or] (iii) any portion or part of any item described in clause (i) or (ii)." Id.
Under the plain meaning of the statute, Silberman does not state a claim, because the Innovation Posters and Pricing Cards were not signed originals of Silberman's "photographic image," but rather were reproductions of reproductions of the original artwork. Plaintiff uses the vague word "image" to describe every manifestation of the photograph, as if there were no legal or practical distinction between an original photograph, a poster reproduction of that photograph, a catalogue picture of that poster, and a computer scan of that catalogue picture. However, the existence of rights under VARA depends on precisely these distinctions between an original artwork and various reproductions of it. Congress made just such distinctions when it defined works protected by VARA, and the plaintiff cannot evade the consequences by using imprecise language.
VARA does not protect posters or advertising items. It is undisputed that the item defendants copied was a picture in a marketing catalogue of a mass-produced poster. That item is thus expressly excluded from VARA protection. While Silberman's signed and numbered prints may be protected under VARA, first and second generation reproductions of the photograph clearly are not.
Taking all the facts alleged as true, that is, that defendants did enlarge, tint, distort and otherwise mutilate computer-scanned reproductions they had made of the catalogue's version of the poster reproduction of the Skyline Photograph, Silberman has not stated a claim under VARA.
This reading of the statute not only follows from its language, but also makes common sense in light of the statute's purposes. Under the plaintiffs' reading of VARA, a legitimate purchaser of a licensed "Manhattan Skyline" wall mural from Wizard's catalogue would potentially violate federal law by cutting the poster in sections and hanging the segments on separate walls. Such a result would not further the congressional goal of protecting artists' moral rights; there is no indication that in passing VARA Congress meant to penalize purchasers of mass-produced posters who treated them with less than the respect due to original works of art.
II. Silberman's Claim for Violation of Copyright Under the Copyright Act of 1976
Because VARA and the Copyright Act protect different rights, the dismissal of the VARA claim has no bearing on Silberman's claim under the Copyright Act. In Count I of the Amended Complaint, Silberman claims that defendants infringed his copyright in the Skyline Photograph by creating and displaying unauthorized reproductions of portions of the photograph from a catalogue picture of an authorized poster reproduction. Silberman moves for summary judgment on the infringement issue, and defendants have cross-moved for summary judgment dismissing that Count. For the reasons stated below, summary judgment on liability is granted for Silberman on that claim. However, since statutory damages and attorney's fees are barred under the statute, plaintiffs' claims for such relief are dismissed.
A. Standard for Summary Judgment
Summary judgment is appropriate when there are no genuine issues of material fact in dispute and when, viewing the evidence in the light most favorable to the nonmoving party, no reasonable trier of fact could disagree as to the outcome of the case. Nabisco, Inc. v. Warner-Lambert Co., 220 F.3d 43, 45 (2d Cir. 2000); see generally Celotex Corp. v. Catrett, 477 U.S. 317 (1986). While all ambiguities in the evidentiary record must be resolved in favor of the nonmoving party, "the nonmoving party may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). In addition, "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments." Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996). Summary judgment is then appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
Where, as here, both parties seek summary judgment, the court must "evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Abrams v. United States, 797 F.2d 100, 103 (2d Cir. 1986) (quoting Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 314 (2d Cir. 1981)).
B. Ownership of Rights under Copyright
The threshold issue in a copyright case is the determination of ownership of the rights alleged to have been infringed. Rights ownership is relevant to standing to sue for infringement, as well as to the merits of an infringement claim.
United States law permits suit only by "the legal or beneficial owner of an exclusive right under a copyright." 17 U.S.C. § 501 (b). While a valid copyright registration made within five years of the first publication of the work constitutes prima facie evidence of copyright ownership. in this case the weight accorded to the registration certificate is within the Court's discretion because Silberman registered his copyright more than five years after publication of the work. 17 U.S.C. § 410 (c). Defendants have presented no evidence disputing that Silberman is the owner of the underlying copyright to the Skyline Photograph.
As the owner of the underlying copyright, Silberman has the exclusive right to reproduce the photograph and to authorize the reproduction of the photograph. 17 U.S.C. § 106 (1). This is not the end of the standing inquiry, however, because in order to sue for copyright infringement for unauthorized reproduction, a plaintiff must also show that he was the "legal or beneficial owner" of the exclusive right that was allegedly infringed by the Innovation Posters and Pricing Cards at the time of the infringement. 17 U.S.C. § 501 (b).*fn4 There is no dispute that the allegedly infringing works consist of a reproduction of a small portion of(a reproduction of) the Skyline Photograph. Determining the legal or beneficial ownership of the right to reproduce the underlying work requires an interpretation of the contracts whereby Silberman granted certain exclusive rights to Wizard to manufacture and distribute poster reproductions of the photograph.
Under the License Agreements, Silberman granted Wizard the sole exclusive license to "reproduce . . . the work in the form of KG 90x120 cm & KG 60x80 cm & small format" for a period of six years commencing on January 20, 2000. (License Agreement dated February 5, 2000, at ¶ 4, Ex. B to Am. Cmplt.), and to reproduce the work as "Wall Murals." (License Agreement dated March 18, 2000, Ex. B to Am. Cmplt.) According to the definitional section in the License Agreements, "the work consist(s) of the  original artwork created by [Silberman called] MANHATTAN SKYLINE." (Id., at ¶ 3.) The explicit contractual terms grant Wizard the exclusive right to reproduce the photograph (not portions of the photograph) at certain specific sizes. Because Silberman did not grant Wizard the right to reproduce portions of the Skyline Photograph, Silberman retained legal ownership of that right and thus has standing to sue for infringements of that right.*fn5
Under 17 U.S.C. § 411 (a), no action for copyright infringement may be brought until an application is made to register the subject work in the Copyright Office. Here, there is no dispute that Silberman registered his copyright in the photograph before bringing this action. Therefore, because the allegedly infringing items reproduce portions of the photograph, because Silberman is the legal owner of the right to make such reproductions, and because this action was commenced after registration of the copyright, Silberman has standing to sue for infringement.
C. Illegal Copying
To establish copyright infringement, "two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Feist Pub., Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). As explained above, Silberman owns a valid copyright to the Skyline Photograph, including the right to license the reproduction of portions of it. The next step of the analysis is the determination of whether illegal copying occurred.
Two separate elements underlie proof of copying. A plaintiff with a valid copyright must prove that (1) defendant in fact used plaintiff's work as a model for its own work; and (2) there is a substantial similarity between the protectable material in the plaintiff's work and the defendant's work. See Fisher-Price, Inc. v. Well-Made Toy Mfg. Corp., 25 F.3d 119, 122-23 (2d Cir. 1994).
It is undisputed that defendants did in fact deliberately copy the plaintiffs' photograph. Lombardi specifically admitted it. The first element of copying is thus concededly met. Even in a case such as this, however, where there is no dispute that defendants did in fact copy a portion of plaintiffs' work, plaintiffs must show that the copying is "quantitatively and qualitatively sufficient to support the legal conclusion that infringement (actionable copying) has occurred." Ringgold v. Black Entertainment Television, Inc., 126 F.3d 70, 75 (2d Cir. 1997). Summary judgment "will be denied when the question of substantial similarity is one on which reasonable minds could differ." Rogers v. Koons, 960 F.2d 301, 307 (2d Cir. 1992), citing Twentieth Century-Fox Film Corp. v. MCA, Inc., 715 F.2d 1327, 1329 (9th Cir. 1983).
The inquiry regarding substantial similarity is "whether an average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work." Rogers, 960 F.2d at 307, citing Ideal Toy Corp. v. Fab-Lu Ltd., 360 F.2d 1021, 1022 (2d Cir. 1966). Defendants argue that they copied such a small portion of the photograph for use in their posters and pricing cards that a lay observer would not recognize the similarity, and indeed that the portion used is so small that the use is de minimis. By relying on the principle of de minimis non curat lex, defendants argue that the actual copying was so trivial that the law will not impose consequences for it. See Davis v. The Gap, Inc., 246 F.3d 152, 172-73 (2d Cir. 2001).
The Second Circuit has noted that while courts often look to the amount of the copyrighted work that was copied in determining whether the allegedly infringing work falls below the quantitative threshold of substantial similarity, there are no bright line rules for what constitutes substantial similarity, and the issue must be decided case by case. See Sandoval v. New Line Cinema Corp., 147 F.3d 215 (2d Cir. 1998) (upholding district court's dismissal on summary judgment of an infringement claim where the copyrighted work — a photograph — was seen blurred for a few seconds in the background of a film scene, and was nearly unrecognizable).*fn6
Defendants' argument must fail because even though only a relatively small portion of the photograph was copied, that portion is a central and significant element of the copyrighted work. The copied portion consists of six or seven buildings from the central part of the skyline in the center of the photograph. While only a portion of Silberman's photograph, the copied material is central to the photograph's composition. Unlike Sandoval, where the copyrighted work was out of focus in the background of a film scene and virtually unintelligible to the "average lay observer," here the unauthorized reproduction is clearly visible to any observer of the Innovation Posters and Pricing Cards. Defendants claim that the technology used to copy the Catalogue Picture resulted in grainy texture and reduced tonality from the original photograph. While this may be the case (and in fact plaintiffs agree with this assessment of the unauthorized reproduction), that does not diminish the observable similarities between the copyrighted work, and the unauthorized partial copying here. A lay observer, if confronted with the Innovation material and the Skyline Photograph, would have little trouble recognizing the source of the copy. Moreover, the similarity involves protectable elements of Silberman's copyrighted work, since it reproduces the very angle of view and compositional elements he selected in making his photograph, and not merely its subject matter.
To bolster their argument of de minimis copying, defendants attack the copyrightability of the Skyline Photograph itself by contending that it is due little protection under copyright law because it is a photograph of a very familiar cityscape. (Defs.' Mem. Opp. Partial Summ. J. and Supp. Cross-Mot. Summ. J. at 7.) That argument, too, must fail. Admittedly, plaintiffs cannot lay claim to the underlying idea of the Skyline Photograph (the lower Manhattan skyline photographed at dusk from Brooklyn). See Kisch v. Ammirati & Puns, Inc., 657 F. Supp. 380, 382 (S.D.N.Y. 1987), citing Int'l Biotical Corp. v. Associated Mills, Inc., 239 F. Supp. 511, 514 (N.D.Ill. 1964) (noting that copyright protects the particular photographic expression, but not the underlying idea of the photograph). However, plaintiffs' claim is not that defendants copied the concept of Silberman's photograph by sending a photographer to Brooklyn to recreate the conditions of that photograph. Rather, plaintiffs argue that defendants appropriated Silberman's particular means of expressing the skyline concept by digitally reproducing Silberman's photograph itslef, precisely as he composed and created it.
While the subject of the photograph may be so familiar as to have reached iconic status, novelty of subject matter is not required for copyright protection. Rather, plaintiff must show that the copyrighted work is an original creation, and the Second Circuit has noted that "[t]he quantity of originality that need be shown is modest — only a dash of it will do." Rogers, 960 F.2d at 307, citing Feist, 499 U.S. at 345. The dash of originality in a photograph may include the positioning of the subject, the lighting, angle, and selection of film and camera, "and almost any other variant involved" in the creation of the photograph. Rogers, 960 F.2d. at 307, citing Burrow-Giles Lithographic Co. v. Sarony, 111 U.S. 53, 60 (1884). Here, enough such elements are present in Silberman's professional precision photograph to justify copyright protection, and, as noted above, those elements are precisely reproduced, albeit in enlarged format, in defendants' images.
Viewing the evidence in the light most favorable to the defendants on the copyright claim, the Court concludes that a reasonable jury could only find that the Innovation copies are actual copies of a portion of the Skyline Photograph, and that there is substantial similarity between those unauthorized reproductions and the original copyrighted work. It can come as no surprise to Innovation, and it is fundamental to the economic rights protected by copyright, that if it wished to decorate its store not simply with images of the Manhattan skyline, but with actual enlargements of Silberman's copyrighted photograph, it was required to license the right to do so from the photographer. Because the copies made by Innovation are not de minimis as a matter of law, summary judgment is awarded to Silberman on the issue of liability for infringement of his exclusive right to reproduce or authorize reproductions of portions of the Skyline Photograph.
Silberman demands statutory damages for the infringement, and attorney's fees, pursuant to §§ 504 and 505 of the Copyright Act. Under § 412(b)(2) of that Act, however, in actions such as this one, "no award of statutory damages or of attorney's fees, as provided by sections 504 and 505, shall be made for any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work." Here, there is no dispute that (a) the infringement commenced in November or December 2000; (b) Silberman registered the copyright in January, 2001, with an effective date of January 8, 2001; and (c) the work was first published years before the infringement began.
There is some dispute as to when the infringement ended. See p. 6 above. The factual dispute over termination of the infringement, however, is not relevant to the issue of statutory damages and attorney's fees because, under 17 U.S.C. § 412, as long as infringement commenced before the date of registration, statutory damages and attorney's fees are barred even if infringement continued after the date of registration. See Innovative Networks, Inc. v. Young, 978 F. Supp. 167, 175 (S.D.N.Y. 1997), aff'd without opinion, 152 F.3d 918, 1998 WL 352964 (2d Cir. 1998). Because infringement here commenced before the date of registration, the demands for statutory damages and attorney's fees are denied.
Silberman also demands punitive damages under the Copyright Act. As a general matter punitive damages. are not awarded in a statutory copyright infringement action because the purpose of punitive damages — to punish and prevent malicious conduct — is generally achieved by statutory damages available under the Copyright Act. See Davis, 246 F.3d at 172. While no statutory damages are available here, there is still no reason to deviate from this principle in a case where, as here, no malice or ill will towards the plaintiffs has been alleged.
Silberman also argues that defendants are liable for any actual damages that he has sustained as a result of the infringement, as well as for any profits the gained from the infringement, pursuant to 17 U.S.C. § 504 (b). Because statutory damages are not available here, defendant is not precluded from claiming actual damages and profits. See 17 U.S.C. § 504 (a) (providing that copyright infringers may be liable for actual damages or statutory damages, but not both).
The Second Circuit has recently considered how actual damages should be determined when a defendant copies protected work without permission and without compensating the owner, and concluded that "Section 504(b) permits a copyright owner to recover actual damages . . . for the fair market value of a license covering the defendant's infringing use." Davis, 246 F.3d at 172. The determination of reasonable license fees for such use as Innovation made of the Skyline Photograph requires a factual showing as to the price a willing buyer would pay a willing seller for use of the photograph. While it is doubtful whether a license fee for a relatively standard image of the New York skyline would be very substantial, calculation of the appropriate fee is for a finder of fact at trial, and not for the Court on summary judgment.
As for determining the amount of infringing profits, § 504(b) states that "the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work." In a case such as this, where defendants used the infringing items as interior decor of their luggage stores, and did not sell the infringing items, it may well be that profits from the infringement are not great. However, plaintiffs are entitled to recover infringing profits to the extent any such profits can be demonstrated, and that calculation is also reserved for a trier of fact and is not appropriate for summary judgment.
III. Wizard's Claim for Violation of Copyright
Apart from Silberman's copyright claims, Wizard claims that its rights in the copyrighted work were violated by defendants' unauthorized copying of a portion of the Catalogue Picture of the authorized Skyline Wall Mural. Wizard claims rights to the work both under U.S. copyright law, stemming from its exclusive license to certain rights in the copyrighted work, and under Swiss copyright law. For the reasons explained below, Wizard's claims are dismissed.
A. Wizard's Exclusive License
The Second Circuit has noted that exclusive licensees are treated as copyright owners of the rights thus licensed for purposes of 17 U.S.C. § 201 (d)(2), which provides that "[t]he owner of any particular exclusive right is entitled, to the extent of that right, to all of the protection and remedies accorded to the copyright owner by this title." See Morris v. Business Concepts, Inc., 259 F.3d 65, 69-71 (2d Cir. 2001). Therefore, in order for Wizard to have standing to sue for copyright infringement, the copying must have infringed one of the rights exclusively licensed to Wizard at the time of infringement. The Court concludes that Wizard does not have standing to sue for infringement because (1) its exclusive license does not include the right to reproduce portions of the image; and (2) Wizard's option to purchase the exclusive license to reproduce as posters any present or future Silberman works does not confer upon Wizard the status of legal or beneficial owner in the copyrighted work required for standing under 17 U.S.C. § 501 (b).
Under Paragraph 4 of both License Agreements governing Wizard's license to Silberman's work, Wizard has the sole exclusive license to publish the work defined in Paragraph 3 of the contract as Manhattan Skyline, in the form of posters in certain specific sizes, and as wall murals. (License Agreements attached as Ex. B to Am. Cmplt.) The license agreement does not grant Wizard the sole exclusive license, or indeed any right at all, to publish portions of the photograph known as Manhattan Skyline. See pp. 12-13 above. of course, the parties could have easily contracted to confer such a right on Wizard if they had so intended.
Under Paragraph 14 of the License Agreements, Wizard was granted "first option for publishing any existing or future works not covered in this agreement as posters or prints under the same conditions." Wizard cannot find standing to sue the defendants under this contractual term, either, because under this clause Wizard does not have an option to purchase an exclusive license to reproduce portions of a Silberman work. Furthermore, even if Wizard did have an option to purchase the exclusive license to reproduce such portions of a Silberman work as defendants used, there is authority to suggest that holders of unexercised options do not have standing to sue for infringement under § 501(b). See Cavallo, Ruffalo & Fargnoli v. Torres, et al., Civ. No. 88-046375VW (EX), 1988 WL 161313, at *1.2 (C.D. Cal. Dec. 12, 1988). For the foregoing reasons, the Court finds that as the Wizard does not have standing to sue for copyright infringement under 17 U.S.C. § 501 (b) as the holder of an unexercised option.
B. Wizard's Swiss Copyright
In addition to its claims as an exclusive licensee, Wizard also argues that Wizard is the owner of two Swiss copyrights that were infringed by defendants' copying: a Swiss derivative copyright in the Skyline Wall Mural, and a Swiss compilation copyright in the Wizard Catalogue as a whole. (Pls.' Mem. Opp. Defs.' Mot. Partial Summ. J. at 8.) For the reasons explained below, those claims are dismissed.
In cases of international copyright infringement, United States standing rules still apply. See Itar-Tass Russian News Agency v. Russian Kurier, Inc., 153 F.3d 82, 91 (2d Cir. 1998). Because United States law only permits suit by owners of "an exclusive right under copyright," 17 U.S.C. § 501 (b), the Court must first determine whether Wizard owns an exclusive right. In such transnational disputes, however, the "ownership and essential nature of the copyrights alleged to have been infringed" is determined by the law of the country with the most significant relationship to the property and parties, although "United States law determines whether those copyrights have been infringed in the United States and, if so, what remedies are available." Id., at 84. Here, the Skyline Wall Mural and the Wizard Catalogue to which Wizard claims copyright were manufactured in Switzerland, and Wizard is a Swiss company. Therefore, Swiss law applies to the issue of copyright ownership.
Determining foreign law is a question of law for the Court, and the Court may consider any relevant materials, including testimony, whether or not submitted by a party. Fed.R.Civ.P. 44.1. In support of Wizard's Swiss copyright claims, plaintiffs offer the report of a Swiss attorney, Dr. Mark A. Reutter, dated July 10, 2002 (Ex. A to Pls.' Mem. Opp. Partial Summ. J. and Supp. Pls.' Mot. Summ. J.) ("Reutter Report"), as well as a general exposition of Swiss copyright law published on the Swiss Copyright Institute's website in English, and portions of the Swiss Copyright Law (Urheberrechtsgesetz) in German. (App. 1 to Pls.' Mem. Supp. Summ. J. and Opp. to Mot. Dismiss.)*fn7 Defendants, in response, offer the deposition testimony of Dr. Reutter (Deposition of Oct. 29, 2002 ("Reutter Tr.")) and the expert report of another Swiss attorney, Dr. Thierry J. Calame, dated October 3, 2002 ("Calame Report").
The expert report submitted by plaintiffs is a general statement of Swiss law of copyright, and does not address the specific facts and claims asserted in plaintiffs' complaint. It thus provides scant illumination to the Court on the application of the relevant tenets of Swiss law to the dispute at hand.*fn8 Furthermore, Dr. Reutter wrote the report without having been shown the allegedly infringing works. (Reutter Tr. 10-11.) The deposition testimony, however, reveals Dr. Reutter's expert opinion on the application of Swiss law to the facts in this case.
First, in response to the question whether Wizard has a derivative copyright to its works based on the Skyline Photograph, Reutter answered "no, [Wizard is] not the author of a new work. They're not author of a derivative work." (Id., at 17.) Thus, the testimony of plaintiffs' own expert on Swiss law supports the conclusion that, contrary to Wizard's claims, Wizard does not have a derivative copyright under Swiss law to the works it manufactures based on the Skyline Photograph. This conclusion is further supported by the opinion of defendants' expert, Dr. Calame, who flatly states that Wizard's poster "doesn't qualify for separate protection under Swiss copyright law." (Calame Report at 4, ¶ IV.B.3.)
Second, both Dr. Reuter and Dr. Calame are of the opinion, or at least assume, that Wizard does have a Swiss compilation copyright in the entire catalogue. (Reutter Tr. 19-20; Calame Report at 5, ¶ IV.C.3.) When asked to define the limits of that copyright, Dr. Reutter agreed that the compilation copyright "protect[s] the selection and arrangement of the materials in the catalogue" (Id.., at 20.) Dr. Calame agrees. (Calame Report at 5, ¶ IV.C.4.) The Court, accordingly, concludes that Wizard possess a Swiss compilation copyright to its catalogue. Thus, under 17 U.S.C. § 501 (b), Wizard has standing to sue for an infringement of the Swiss compilation copyright to its catalogue.
The determinative question, therefore, is whether Wizard's Swiss compilation copyright was infringed under American law by defendants' copying. The answer is no. In this case, the infringement of the Swiss compilation copyright under United States law depends upon the contours of that right under Swiss law. See Itar-Tass, 153 F.3d at 91 (noting that in some cases the issue of ownership is closely related to the nature of the interest.) Again, the expert testimony, including the deposition testimony of plaintiffs' own expert, is entirely contrary to Wizard's argument. Dr. Reutter states that under Swiss law, copying of an element in a compilation does not violate the compilation copyright, thus indicating that a Swiss compilation copyright extends to the compilation as a whole, and not to individual elements within it. (Reutter Tr. 20-21.) Dr. Calame agrees that "a copyright in a compilation is limited to . . . the creativity in selection and arrangement of the works in the compilation. The copyright in a compilation is only infringed if the selection or arrangement of its contents is copied." (Calame Report at 5, ¶ IV.C.4.) The basic principle appears to be the same as that under the United States Copyright Act § 103(b), which extends compilation copyright protection only to the material contributed by the compilation author. See also Feist, 499 U.S. at 358 (copyright in a compilation is limited to the compiler's original "selection, coordination and arrangement"). There is no dispute here that only a portion of one picture in the Wizard Catalogue was copied. Plaintiffs do not allege that defendants copied any catalogue elements contributed by Wizard. Thus, Wizard's claim under Swiss copyright law must also fail.
IV. New York Common Law Claims
Plaintiffs' claims under New York common law for unfair competition are deemed abandoned because neither plaintiffs nor defendants have ever addressed those claims in any briefs or legal argument before this Court. At any rate, an unfair competition claim grounded solely in the copying of a plaintiffs protected work, which would appear to be the claim advanced in the Amended Complaint, is preempted by § 301 of the Copyright Act.*fn9 See Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 717 (2d Cir. 1992).
V. Motion to Strike
Defendants have moved to strike Plaintiffs' Memorandum of Law in Opposition to Defendants' Cross-Motion for Summary Judgment as an unauthorized sur-reply, and to strike Plaintiffs' Response to Defendants' Statement of Undisputed Material Facts because it is untimely. This satellite litigation about procedural technicalities has extended the already Byzantine briefing of this case without adding any substance. While it appears that the plaintiffs' submissions were unauthorized and untimely and thus should not have been filed, the Court prefers to decide disputes on the merits and is inclined to permit additional submissions, with a right of response if necessary to prevent prejudice to the opposing party, if the additional papers illuminate the discussion of the merits. Because nothing in the plaintiffs' submissions alters the analysis set forth above, and because defendants had the opportunity to respond to those submissions in their motion to strike, the motion to strike is denied as unnecessary and essentially moot.
VI. Motions for Rule 11 Sanctions
Both parties have moved for Rule 11 sanctions against the opposing party's counsel. The purpose of sanctions is to deter lawyers from bringing frivolous, harassing or extortionate lawsuits by imposing monetary sanctions to compensate for the opposing party's attorney's fees or other expenses incurred by the misconduct. See MAI Photo News Agency, Inc. v. Am. Broad, Co., Inc., 97 Civ. 8908, 2001 WL 180020, at *7 (S.D.N.Y. Feb. 22, 2001). Attorneys are prohibited from bringing claims unless they have formed a belief, based on a reasonable inquiry, that "the claims . . . are warranted by existing law or by a nonfrivolous argument for the extension, modification or reversal of existing law or the establishment of new law." Fed.R.Civ. P.11(b)(2).
Defendants here charge that the plaintiffs' attorney brought claims for tortious misappropriation of goodwill and VARA claims when he had reason to know those claims would be rejected based on precedent and plain reading of the statute, respectively. (Defs.' Mem. Supp. Mot. for Sanctions, at 2-3.) In addition, defendants claim that the plaintiffs' disorganized and ultimately self-defeating presentation of Swiss law demonstrates that plaintiffs' attorney had no reason to believe that the claims under Swiss copyright law were well founded, because the plaintiffs' own expert did not support those claims. Defendants request, at a minimum, that their costs and attorney's fees relating to Swiss law be paid by plaintiffs' counsel. (Letter from Kevin A. Ainsworth to the Court dated November 4, 2002.)
Because the claims for tortious misappropriation of goodwill were voluntarily dismissed in July, 2002 (after the defendants' motion for Rule 11 sanctions was filed), the Court will not consider the amenability of those claims to sanctions. Moreover, while plaintiffs' VARA claim is, as noted above, inconsistent with the plain language of the statute, Silberman's argument on this issue is not entirely frivolous.
However, plaintiffs' counsel's slovenly approach to the Swiss law issues in this case occasions grave concern. After initially stating a straightforward, meritorious copyright claim (albeit one that was unpromising in terms of potential damages) on behalf of Silberman, counsel proceeded to amend that complaint to add a Swiss law claim on behalf of Wizard. The fact that plaintiffs' own expert was induced to present a generalized opinion that superficially might appear to support Wizard's claims, without having been adequately briefed on the facts, and then at his deposition, when confronted with the facts, testified diametrically in opposition to plaintiffs' position, speaks ill — to say the least — of the adequacy of counsel's investigation before filing the Amended Complaint. Moreover, the addition of unfounded claims under foreign law both put defendants to the burden and considerable expense of retaining a Swiss law expert of their own and preparing for and conducting the deposition of Dr. Reutter, and significantly delayed the processing of Silberman's own meritorious claim.
Rule 11 requires that sanctions be imposed where counsel fails to make a reasonable inquiry into the basis for a pleading. See Int'l Shipping Co., S.A. v. Hydra Offshore Inc., 875 F.2d 388, 390 (2d Cir. 1989). The Second Circuit has noted that the Rule "explicitly and unambiguously imposes an affirmative duty on each attorney to conduct a reasonable inquiry into the viability of a pleading before it is signed." Id., quoting Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 253 (2d Cir. 1985).
The Court recognizes that researching foreign law is difficult for an American lawyer untrained in foreign legal systems. At the same time, once a competent foreign lawyer has been identified and retained as an expert, elementary principles of investigation require that the expert be given the facts and asked to opine on the matter in question before counsel undertakes to introduce a new plaintiff and a new claim that will predictably increase the expense of the litigation to all parties. There is no justification for the failure of plaintiffs' counsel to conduct a reasonable inquiry into the Swiss law claims before filing the amended complaint.
Plaintiffs' counsel is not unfamiliar with the requirements of Rule 11, and has previously been sanctioned by courts in this circuit and state. See Ernst Haas Studio v. Palm Press, Inc., 164 F.3d 110 (2d Cir. 1999); MAI Photo News Agency, 2001 WL 180020; In re Matter of Stephen A. Weingrad, 196 A.D.2d 300 (1st Dep't), aff'd, 83 N.Y.2d 756 (1994). His conduct here is inexcusable, and his failure to present the slightest evidence of the validity of the foreign law claims (the basis for which was essentially disavowed by his own expert), compels the conclusion that the Swiss law claim was presented without adequate investigation and in bad faith. Accordingly, defendants' motion for sanctions is granted, to the extent that plaintiffs' counsel is directed to pay the expenses incurred by the defendants in responding to this claim. The defendants are directed to submit, by April 30, 2003, appropriate documentation of such expenses, and the case will be referred to the Magistrate Judge for a determination of the appropriate amount of the sanction.
Plaintiffs' cross-motion for Rule 11 sanctions, in contrast, is completely frivolous. The argument that defendants' counsel offered affirmative defenses in bad faith is unsupported, and the attempt to rehash discovery disputes that have already consumed an excessive amount of the time of the Magistrate Judge and of this Court is likewise unconvincing. The motion appears to have been submitted principally in retaliation for defendants' well-founded sanctions motion, and it is denied.
Defendants' motion to strike Plaintiffs' Memorandum of Law in Opposition to Defendants' Cross-Motion for Summary Judgment and Plaintiffs' Response to Defendants' Statement of Undisputed Material Facts is denied. Plaintiff Silberman's motion for summary judgment on liability is granted as to his copyright claim, and denied in all other respects. Plaintiff Wizard's motion for summary judgment is denied. Defendants' motion to dismiss is granted as to Silberman's claims under VARA and under New York unfair competition law. Defendants' cross-motion for summary judgment is granted with respect to plaintiffs' claims for statutory damages, attorneys fees, and punitive damages, and denied as to Silberman's claim for actual damages for copyright infringement. Defendants' motion for summary judgment dismissing Wizard's claims for copyright infringement under Swiss law and United States law is granted. Defendants' motion for sanctions is granted to the extent that plaintiffs' counsel is directed to pay defendants' expenses, including attorney's fees, incurred in responding to Wizard's Swiss law claims, and the matter is referred to the Magistrate Judge for determination of the appropriate amount of the sanction. Plaintiffs' motion for sanctions is denied.