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Eyal R.D. Corp. v. Jewelex New York

September 17, 2008

EYAL R.D. CORP., PLAINTIFF,
v.
JEWELEX NEW YORK, LTD., DEFENDANT.



The opinion of the court was delivered by: Charles S. Haight, Jr., Senior District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Eyal R.D. Corp. ("Eyal") filed this action pursuant to the Copyright Act of 1976, 17 U.S.C. §§ 101 et seq., alleging that defendant Jewelex New York Ltd. ("Jewelex New York" or sometimes "Jewelex") is manufacturing and selling jewelry which infringes on Eyal's copyrighted jewelry design. Following discovery, Jewelex moves for summary judgment pursuant to Federal Rule of Civil Procedure 56.

I. PARTIES AND JURISDICTION

Plaintiff Eyal is a family-owned New York corporation engaged in the business of developing, manufacturing and selling jewelry. Pl.'s Compl. ¶ 7. Albert Kallati founded Eyal in 1984 and is the corporation's sole shareholder. Reout Kallati, Albert's daughter, and Shoshana Kallati, Albert's wife, also work in the business. In her declaration, Reout Kallati described her responsibilities at Eyal:

Recently we laid off all our employees and now the New York office is my responsibility in every aspect. Presently, I manage the accounts payable and receivable, sales to current and new clients, as well as shipping and handling, invoicing, and other general office work. I also review and draft contracts and file copyright registrations.

Reout Kallati (hereinafter "R. Kall.") Decl. ¶ 7. Reout also states that her mother Shoshana Kallati "helped [her] father build the company and is very active in the business." R. Kall. Decl. ¶ 4.

Defendant Jewelex New York is a New York corporation engaged in the business of designing, creating, manufacturing, marketing and selling gold and diamond jewelry. It is affiliated with Jewelex India Pvt. Ltd. ("Jewelex India"), a corporation existing under the laws of the Republic of India, which designs jewelry for sale by Jewelex New York. Declaration of Afshan Adlakha ("Adlakha Decl.") ¶ 1.

Subject matter jurisdiction over the case is conferred by 28 U.S.C. § 1338(a), which gives federal courts original jurisdiction over civil actions arising under the Copyright Act and 28 U.S.C. § 1367(a), granting district courts supplemental jurisdiction over state and common law claims that form part of the same case or controversy as the underlying federal action. This Court unquestionably has personal jurisdiction over defendant Jewelex New York. Venue lies in the Southern District of New York under 28 U.S.C. §§ 1391(b) and (c), because the defendant resides therein and a substantial part of the events giving rise to this action occurred in this district.

II. BACKGROUND

Eyal states that it obtained a Certificate of Registration VA 1-386-584 ("the 584 registration") for a collection comprised of 12 jewelry designs, "each piece having been created and designed by Eyal, through employees creating the designs as a work for hire under the supervision of Albert Kallati...." Pl.'s Mem. in Opp'n at 2. The individual pieces comprising the collection were chosen by Reout Kallati, "each design bearing the Floating BIG LOOK concept." R. Kall. Decl. ¶ 10.

A copy of the 584 registration is attached to plaintiff's complaint. It identifies 2006 as the "year in which the creation of this work was completed" and identifies the author as Eyal. The "date and nation of first publication" is listed as "September 30, 2006" and "USA," respectively. The sections concerning derivative work have been left blank; no pre - existing materials were identified and the section concerning "material added to this work" was left blank. The 584 registration certificate is dated December 1, 2006. A deposit copy page is attached to it. The deposit copy page depicts 12 pieces of jewelry designs. Eyal asserts through the declarations and depositions of its witnesses that each piece was created and designed by Eyal, through employees creating the designs for hire. Ten of the 12 pieces depicted on the deposit copy page are rings. The other two appear to be a pendant and an earring. Eyal's claim against Jewelex for infringement relates solely to a single band ring depicted in the lower right hand corner of the deposit cover page ("the Eyal Single Band Ring" or "the Eyal Ring"). The Eyal Single Band Ring is depicted on the deposit copy page in close proximity to a wider ring with a large centered set stone, which the briefs for Jewelex refer to as "the Eyal Engagement Ring." Jewelex suggests that the Eyal Single Band Ring and the Eyal Engagement Ring form part of a set that Eyal sold together. Eyal asserts that the Eyal Single Band Ring is not sold as part of a two-piece set.

Reout Kallati, who prepared and submitted the 584 Registration, asserts that she selected 12 specific pieces for what she called "the Floating BIG LOOK collection" for sale by Fred Meyer Jewelers, a jewelry retailer. Eyal claims that the collection was completed in 2006, and that is why 2006 is the date listed on the 584 registration.

In support of its opposition to Jewelex's motion, Eyal submits the declaration of Albert Kallati, Eyal's founder. Kallati states that in 1995 he designed a channel setting band ring for Eyal which juxtaposes princess-cut and baguette-cut diamonds in an alternating pattern. This was the Eyal Single Band Ring. See Albert Kallati (A. Kall.) Decl. ¶ 3-5. As noted, the Eyal Single Band Ring is one of the jewelry designs included in the 584 registration. The name "Kallati" or the initials "E.Y." and the gold quantity are engraved on the inner surface of the band.

In 2006, Albert Kallati visited a Fred Meyer Jewelers retail store that sells the Eyal Single Band Ring. There he claims that he saw for the first time Jewelex rings "directly adjacent" to the Eyal band ring, which he says "targeted the Eyal ring, not only in design, but also in price." A. Kall. Decl. ¶ 11. He alleges that Jewelex's rings are "substantially similar, if not identical to the Eyal Ring, and were priced at exactly half the price of each of the corresponding weight varieties of the Eyal Ring." Id. Eyal claims Jewelex intentionally copied the Eyal Single Band Ring "for the sole purpose of maximizing its profits and beating out its smaller competitor, Eyal." Pl.'s Mem. in Opp'n at 3.

Counsel for Eyal contacted Fred Meyer Jewelers and Whitehall Jewelers, another jewelry retailer, by letters dated on or about January 5, 2007and June 14, 2007 demanding that they cease and desist from selling the alleged infringing Jewelex rings. Jewelex claims that Albert and Reout Kallati visited the offices of Fred Meyer Jewelers and threatened Fred Meyer Jewelers buyers with a lawsuit for infringement of the copyright in suit if they did not stop selling the Jewelex rings. Jewelex claims that Fred Meyer returned the alleged infringing Jewelex rings it had previously purchased after receipt of the cease and desist letter and alleged threats. See Atul Kothari Affirmation ¶¶ 7- 13.

In support of its motion for summary judgment, Jewelex New York submits the declaration of Afshan Adlakha, Jewelex India's Director of Product Development. Adlakha states that Jewelex India employees created the Jewelex ring that is the subject of this litigation under her direction and supervision in 1999 and delivered the ring to Jewelex New York on February 20, 2000. Adlakha Decl. ¶ 7. Adlakha identifies Exhibit H of the Rozsa declaration*fn1 as a "true and correct copy of a design printout showing that the Jewelex rings were created in 1999." Id. Adlakha states that she "was not aware of any comparable ring sold by Eyal or any other company in the world at the time of creation of the jewelry designs which Eyal is accusing of infringing its copyright." Adlakha Decl. ¶ 5.

Adlakha further asserts that the creation of the Jewelex ring was "simply a natural evolution of the channel bands that had been created and developed for Jewelex dating back to 1995." She states:

Attached as Exhibit N to the Rozsa [declaration] is a printout showing development of Jewelex Rings with a channel round series launched in 1997, the channel princess series launched in 1998, the channel baguette series launched in 1997, the round baguette series launched in 1999, and the princess baguette series launched in 1999. The second page shows further development of anniversary bands with numerous variations of combinations of channels sets, including princess baguette settings and various types of designs and combinations.

Adlakha Decl. ¶ 12.

To further support her claim that Jewelex India was selling channel bands since 1995 and that Jewelex India's employees created sketches of "princess baguette combination and channels" under Adlkha's "direction and control" in 1999, Adlakha points to the following evidence in the record: copies of "invoices and accompanying pictures reflecting jewelry that was shipped from Jewelex India to Jewelex from 1995 to 1997," Rozsa Decl. Ex. I; "copies of the actual designs themselves showing rings with channels set with stones, including round, square, and princess baguette stones," Rozsa Decl. Ex. J; "copies of scans of the original design sketches of [round] channel bands" which "were made by [Jewelex India] employees in 1998," Rozsa Decl. Ex. K; and "copies of design sketches made by Jewelex India employees showing the round/baguette, princess baguette styles created in 1999," Rozsa Decl. Ex. L. See Adlakha Decl. ¶¶ 8-10.

Adlakha concludes her declaration with the assertion that the "concept of having channel set diamonds (round, princess, baguette) is very old in the art and dates back to the 1800's." Adlakha Decl. ¶ 13. Her declaration proffers "photographs of styles of old pieces auctioned by Sotheby's and Christie's" which she purports prove that "the channel setting has been done from the 1800's in princess rounds and baguettes and also in combination of different colored stones." See Adlakha Decl. Ex. 2.

On January 3, 2007, Eyal filed a one-count complaint against Jewelex alleging that Jewelex's sale of certain diamond rings constitutes copyright infringement of the 584 registration. On February 5, 2007, Jewelex answered the complaint, denying all of the substantive allegations set forth therein, and asserting affirmative defenses and counterclaims alleging invalidity of copyright and non-infringement of copyright.

Jewelex filed an amended answer and counterclaims on September 27, 2007. The counterclaims comprise Counts I-X. Count I seeks a declaration of copyright invalidity. Count II seeks a declaration of non-infringement of copyright. Count III is a claim for independent derivation. Count IV states a claim for intentional interference with current and prospective business advantage. Count V states a claim for negligent interference with current and prospective business advantage.

Count VI alleges unfair competition. Count VII states a claim for common law damage to business reputation. Court VIII seeks injunctive relief under New York General Business Law § 360-l. Count IX states a claim for injurious falsehood. Count X alleges interference with contractual relations.

Jewex now moves under Rule 56 for summary judgment dismissing Eyal's complaint, asserting in the alternative that (1) Eyal's copyright registration is invalid; (2) Jewelex did not have access to Eyal's ring and the Jewelex rings are not substantially similar to the Eyal Ring; and (3) Eyal's copyright registration is unenforceable because of Eyal's unreasonable delay in commencing this action.

Eyal cross-moves under Rule 12(c) for judgment on the pleadings dismissing Counts IV-X. That motion is decided in a separate opinion filed concurrently with this one, which resolves Jewelex's motion for summary judgment.

III. STANDARD OF REVIEW

Under Federal Rule of Civil Procedure 56(c), a moving party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994) ("[T]he burden is on the moving party to demonstrate that no genuine issue respecting any material fact exists." (citing Heyman v. Commerce & Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975))). A fact is "material" within the meaning of Rule 56 when its resolution "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is "genuine" when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. In determining whether an issue is genuine, "[t]he inferences to be drawn from the underlying affidavits, exhibits, interrogatory answers, and depositions must be viewed in the light most favorable to the party opposing the motion." Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir. 1995) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam)), and Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989)).

Once the moving party has met its burden, "the nonmoving party must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis omitted) (quoting Fed. R. Civ. P. 56(e)). Although all facts and inferences therefrom are to be construed in favor of the party oppposing the motion, Harlen Assocs. v. Village of Mineola, 273 F.3d 494, 498 (2d Cir. 2001), that party must raise more than just a "metaphysical doubt" as to a meterial fact. Matsushita, 475 U.S. at 586. "[M]ere speculation and conjecture is insufficient to preclude the granting of the motion." Harlen, 273 F.3d at 499. Accordingly, if the "evidence favoring the nonmoving party is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50 (citations omitted). See also Gallo, 22 F.3d at 1223-24 (summary judgment is proper when the moving party can show that "little or no evidence may be found in support of the nonmoving party's case.") (citations omitted).

IV. DISCUSSION

A. Validity of Plaintiff's Copyright Registration

Jewelex contends that Eyal's 584 registration is invalid, a proposition which if sound would deprive this court of subject matter jurisdiction over the case.

Jewelex asserts several grounds for invalidity. I will examine them in turn. Preliminarily, it should be noted that to establish a copyright infringement cause of action a plaintiff must establish both (1) ownership of a valid copyright and (2) infringement of the copyright on the part of the defendant, Yurman Design Inc. V. PAJ, Inc., 262 F.3d 101, 109 (2d Cir. 2001); and in the absence of a valid copyright registration the Court lacks subject matter jurisdiction over an action for infringement. See Morris v. Business Concepts, Inc., 259 F.3d 65, 68 (2d Cir. 2001); Yurman Design Inc. v. Chaindom Enter., Inc., No. 99 Civ 9037 (JFK), 1999 WL 1075942, at *5 (S.D.N.Y. Nov. 29, 1999) (quoting Tuff-n-Rumble Management, Inc. v. Sugarhill Music Publ'g Inc., 49 F. Supp. 2d 673, 677 (S.D.N.Y. 1999)). That lack of subject matter jurisdiction flows from the provision in 17 U.S.C. § 411(a) that "no action for infringement of the copyright in any work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title."

I turn to the several bases Jewelex asserts to support the proposition that Eyal's copyright registration is invalid.

1. Whether the Eyal Band Ring is a Derivative Work or an Individual Work Within a Group Registration

Jewelex argues that Eyal improperly characterized the Eyal Single Band Ring and another jewelry design Jewelex designates "the Eyal engagement ring" as a derivative work in its application for registration of the copyright. Eyal responds that it has categorized the Eyal Single Band Ring as an individual work within a group registration, not as a derivative work.

The Copyright Act defines a derivative work as: a work based upon one or more pre-existing works, such as a translation, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship .... 17 U.S.C. § 101. Thus, "a derivative work must incorporate a substantial element of a pre-existing work of authorship and recast, transform, or adapt those elements." SHL Imaging, Inc. v. Artisan House, Inc., 117 F. Supp. 2d 301, 305 (S.D.N.Y. 2000). Jewelex argues that the mere two-ring combination depicted on the deposit copy page attached to the 584 registration cannot qualify as a derivative work. See Rosza Decl. Ex. A.

As noted, Eyal acknowledges that the Eyal Single Band ring is not a derivative work and states that it did not intend to fit the ring within that category. It also rejects Jewelex's claim that the Eyal Ring is part of a two-ring combination. Rather, Eyal claims it is an individual design that is part of a group registration. In its opposition brief, Eyal insists that it "is not claiming to have created a derivative work of the Eyal ring by combining it with another ring, is not seeking copyright protection for these two rings as a combination, and is not relying on any protection afforded the supposed two-ring combination for protection of the individual ring." Pl.'s Mem. in Opp'n at 14. Instead, Eyal states that it is "seeking to enforce the exclusive copyright protection afforded to the Eyal ring" as an individual work within a group registration, id., which is permissible under the law. See Carell v. The Shubert Org., 104 F.Supp. 2d 236, 248 (S.D.N.Y. 2000) (holding that group registration does not prevent a copyright owner from bringing a claim for infringement as to individual designs within the group); see also Woods v. Universal City Studios, Inc., 920 F. Supp. 62, 64 (S.D.N.Y. 1996) (registration of copyright for collective work satisfies requirements of 17 U.S.C. § 411(a) to bring copyright infringement action based on constituent parts where owner of copyright for collective work also owns constituent parts).

Jewelex seems to be arguing that the close positioning of the rings on the deposit copy page provides sufficient evidence to support its claim that Eyal intended to characterize the ring pair as a derivative work. However, it provides no authority in support of that position andthe Court's research reveals no support for it. In any event, a review of the 584 registration as a whole supports Eyal's basic contention: the Eyal Single Band Ring is an individual design that is part of a group registration. While the Eyal Ring appears to be paired with the Eyal engagement ring on the deposit copy, other jewelry designs were also included on the page. Furthermore, Reout Kallati testified that there was no specific reason why ...


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