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FILMS BY JOVE, INC. v. BEROV

November 5, 2004.

FILMS BY JOVE, INC., and SOYUZMULTFILM STUDIOS, Plaintiffs,
v.
JOSEPH BEROV, NATASHA ORLOVA, THE RIGMA AMERICA CORPORATION, and SAINT PETERSBURG PUBLISHING HOUSE AND GROUP, Defendants. FEDERAL STATE UNITARIAN ENTERPRISE SOYUZMULTFILM STUDIO, Third Party Plaintiff, v. FILMS BY JOVE, INC. and SOYUZMULTFILM STUDIOS, Third Party Defendants.



The opinion of the court was delivered by: DAVID TRAGER, District Judge

MEMORANDUM & ORDER

This is a motion pursuant to Rule 60(b), Fed.R. Civ. P., to vacate or modify this court's memoranda and orders of August 27, 2001 and April 16, 2003 (amended May 8, 2003) as well as the judgments of November 26, 2003 and December 2, 2003 for the plaintiff Films by Jove, Inc. ("Films by Jove"). The instant motion, dated May 21, 2004, is founded on Russian Federation Directive No. 1882-r, dated December 24, 2003 (the "December 24, 2003 Directive"). Defendants Joseph Berov, the Rigma American Corporation d/b/a Saint Petersburg Publishing House and Group, and Third-Party Plaintiff Federal State Unitarian Enterprise Soyuzmultfilm Studio ("FSUESMS") (collectively, "defendants") allege that the December 24, 2003 Directive constitutes a basis for reconsideration under Rule 60(b) clauses (2), (5) or (6) as newly-discovered evidence clarifying the appropriate interpretation of the law or, alternatively, as a retroactive change in the law.

Background

  The facts of this case were fully described in the court's initial opinion, Films by Jove v. Berov, 154 F. Supp. 2d 432 (E.D.N.Y. 2001) ("Films by Jove I") (granting the plaintiff Films by Jove's motion for summary judgment). The developments in the case were further discussed and analyzed in a second opinion, Films by Jove v. Berov, 250 F. Supp. 2d 156 (E.D.N.Y. 2003) ("Films by Jove II"), denying the defendants' first motion pursuant to rule 60(b). Therefore, only a brief summary of the facts will be given here.

  (1)

  The main issue in this case is the validity of an exclusive copyright license for worldwide distribution outside of the former Soviet Union of approximately 1500 Russian animated films produced by the state-owned Soviet film studio Soyzmultfilm ("State Film Studio"). In 1992, a licensing agreement was signed between the plaintiff Films by Jove, a California corporation, and Soyuzmultfilm Studio, a lease enterprise, (the "Lease Enterprise"),*fn1 which was the legal successor to the State Film Studio. This licensing agreement gave Films by Jove an exclusive right to distribute the animated films internationally, but explicitly excluded the territory of the former Soviet Union from its scope. Relying on the licensing agreement, Films by Jove invested more than three million dollars to restore, update and revoice the Soyuzmultfilm film library.

  In 1998, Films By Jove began this action against Joseph Berov for copyright infringement. Berov did not seriously dispute the issue of copyright infringement; instead Berov relied on a state-owned Russian company, the Federal State Unitarian Enterprise Soyuzmultfilm Studio ("FSUESMS"), which intervened as a third-party plaintiff and alleged that plaintiff Soyuzmultfilm Studios ("SMS")*fn2 as well as the Lease Enterprise was not the legal successor of the State Film Studio and had never possessed the right to license the copyrights. Therefore, defendants argued that the licensing agreement was invalid. FSUESMS claimed to be the legal successor to the State Film Studio and the true owner of the copyrights.

  On August 27, 2001, summary judgment was granted in favor of plaintiff based on the factual evidence, submissions of the parties' Soviet law experts, Russian government documents and, partly, on the interpretations of the law provided by a series of decisions by the commercial courts of the Russian Federation that supported the plaintiff's position. This court determined that under Soviet law the copyrights in the film library were the State Film Studio's property and were never that of the Soviet Government and, furthermore, that they passed to the Lease Enterprise by operation of law. Therefore, the Lease Enterprise lawfully gave Films by Jove an exclusive copyright license.

  The defendants' interpretation of the Soviet and Russian laws at issue is dramatically different. According to their position, the copyrights always belonged to the state, not to the State Film Studio, and therefore could not have been transferred to the Lease Enterprise, which received only the tangible property of the State Film Studio in a ten-year lease. Alternatively, defendants argued that even if the State Film Studio held the copyrights, the state enterprise went into a period of "suspended animation" during the ten-year term of the lease. Accordingly, as the State Film Studio continued to exist, the copyrights were not transferred as a matter of law to the Lease Enterprise. See Films by Jove II, 250 F. Supp. 2d at 181 (citing Maggs 2d Supp. Decl. ¶ 11). According to defendants, therefore, in 1999, when the term of the lease expired and FSUESMS filed its charter claiming to be the legal succesor to the State Film Studio, it allegedly acquired the copyrights directly from the State Film Studio.

  However, the defendants' version was not supported by the evidence. It is an incontestable fact that there was not the slightest indication of the State Film Studio's existence between 1989 and 1999. Furthermore, although the license was public knowledge, neither the State Film Studio — which presumably continued to exist — nor any other state agency challenged the Lease Enterprise's 1992 distribution agreement with Films by Jove until this copyright infringement action was filed in 1998. Therefore, this court concluded that these undisputed facts as well as Russian law belie FSUESMS's and defendants's arguments. (2)

  Subsequently, defendants filed a motion pursuant to Rule 60(b)(2) for reconsideration of this court's August 27, 2001 decision based on the opinion by the Presidium of the High Arbitrazh Court of the Russian Federation, issued on December 18, 2001. The High Arbitrazh Court overruled two lower court opinions relied upon by this court in reaching its interpretation of Russian law. The December 18, 2001 decision undermined an important premise raised by plaintiff that the State Film Studio ceased to exist upon the execution of the Lease Agreement between the State Film Studio and Goskino. Goskino, translated literally from Russian, means "government film" and is a shorthand for the State Committee on Cinematography, the government ministry that, during the Soviet era, was generally responsible for overseeing all aspects of film production and internal distribition.

  This court, while acknowledging that the opinion of the High Arbitrazh Court undermined one of the premises of its decision, denied the defendants' motion for reconsideration for two reasons. First, there were strong grounds for questioning the accuracy of the December 18, 2001 decision with regard to its interpretation of Russian law. The opinion did not offer any explanation as to what happened to the State Film Studio during the ten-year lease term. Furthermore, the High Arbitrazh Court did not directly discuss the critical premise relied on by this court in its initial decision that under Soviet law the initial ownership in copyrights remained with the State Film Studio as opposed to the state, which meant that the state was not in a position to grant any copyrights to FSUESMS. Second, there was persuasive evidence that the decision was the coordinated result of the efforts on the part of the Russian government to improperly use the courts to recapture property rights lost during privatization in Russia, and thereby expropriate without compensation the plaintiff's property rights in the lease and concomitantly cause the loss of the plaintiff's multi-million-dollar investment. Under these circumstances, this court denied the motion for reconsideration.

  (3)

  This second motion pursuant to Rule 60(b) is filed by the defendants in reliance on Russian Federation Directive No. 1882-r, dated December 24, 2003 (the "December 24, 2003 Directive"). The December 24, 2003 Directive was issued several weeks after this court's judgment of December 2, 2003 in favor of Films by Jove admittedly in response to that decision and judgment. The Directive allegedly constitutes a "clarification" of the provision of Part I of the Government of Russian Federation Directive No. 1038-r, dated June 30, 1999 (the "June 30, 1999 Directive"), which purported to transfer the state property leased by the Lease Enterprise to a newly-formed state unitarian enterprise, FSUESMS, upon the expiration of the lease, but was silent regarding the issue of the transfer of copyrights.

  The December 24, 2003 Directive states that its purpose is to establish "the uniform interpretation and application in practice" of the June 30, 1999 Directive. It then goes on to substitute the phrase "property system" for the word "property" and thus for the first time explicitly added copyrights to the picture.

  The term "property system" is defined by Article 132 of the Russian Civil Code to include intangible property: "The composition of an enterprise as a property system includes all types of property designated for its activity, including land parcels, buildings, structures . . . and also rights to designations individualizing the enterprise, its products, work, and service (firm name, trademarks, service marks), and other exclusive rights, unless otherwise provided by a statute or contract." (Maggs 10th Supp. Decl. ¶ 8). The following phrase was also added at the end of the December 24, 2003 Directive: "having established the legal succession of the latter [FSUESMS] to the exclusive rights to the use of the audiovisual works filmed at the film studio from the time of creation up to the transfer to leasing relations." Taken together, these changes purport to establish that the government of the Russian Federation transferred the copyrights in the films to FSUESMS in 1999.

  Discussion

  (1)

  Validity and Relevance of the December ...


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