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holding that the plaintiffs failed to demonstrate irreparable harm because defendant "called for the creation of new masters that excluded the Song Trailer from each of the seven movies on which it appeared," "directed [BVHE] personnel that no further distribution be made," and "directed the BVHE customer service representatives to cease selling product containing the Song"
Summary of this case from Vargas v. Viacom International, Inc.Opinion
No. 02 Civ. 6400 (LTS)(DFE)
March 3, 2003
Alan L. Shulman, Esq., and Scott L. Baker, Esq., SILVERMAN SHULMAN BAKER, Attorneys for Plaintiffs.
Sanford M. Litvack, Esq., and Joanna R. Swomley, Esq., QUINN, EMANUEL URQUHART, OLIVER HEDGES, L.L.P., Attorneys for Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiffs Beebe Bourne, doing business as Bourne Co. ("Bourne"), and Margaret Whiting, doing business as Ship Lollipop Publishing ("Plaintiffs") seek a preliminary injunction against Defendants The Walt Disney Company, Buena Vista Home Entertainment, Inc. ("BVHE"), The Disney Store, Inc., The Disney Store Harlem, LLC, Walt Disney World Parks and Resorts, LLC, Walt Disney World Co., Disney Direct Marketing Services, Inc., The Walt Disney Catalog, Inc., Disney Enterprises, Inc., and ABC, Inc. (all such Defendants, collectively, "Disney") enjoining Disney from reproducing, distributing or offering for sale unauthorized videocassettes, DVDs or other videograms that embody a recorded performance of the musical composition, "On the Good Ship Lollipop." For the following reasons, Plaintiffs' motion is denied.
These defendants refer to themselves collectively as "Disney" in their papers opposing the motion; the Court uses the same nomenclature here for convenience.
Plaintiffs commenced this litigation on August 12, 2002, with the filing of the complaint. On August 27, 2002, Plaintiffs filed the instant motion. The motion was fully briefed by October 10, 2002. The Court ordered further factual submissions from the parties on December 20, 2002, which were completed on January 17, 2003.
The Court has considered thoroughly the parties' submissions, arguments and proffers. This Opinion constitutes the Court's findings of fact and conclusions of law for purposes of Rule 52 of the Federal Rules of Civil Procedure. For the reasons set forth below, Plaintiffs' motion for a preliminary injunction is denied.
BACKGROUND
The following facts are largely undisputed.
Plaintiffs own the copyright to the musical composition, "On the Good Ship Lollipop," composed by Sidney Clare and Richard A. Whiting (the "Song"). Plaintiff Bourne obtained the rights to the composition from Sidney Clare's widow and Margaret Whiting, who is Richard Whiting's daughter. (Declaration of Beebe Bourne "Bourne Decl." ¶ 5; Declaration of Margaret Whiting "Whiting Decl." ¶¶ 2-3.)
In October 2000, Touchstone Television Productions ("Touchstone"), a subsidiary of The Walt Disney Company, sought permission to use the Song in a made for television movie called "Child Star — the Shirley Temple Story." (Bourne Decl. ¶ 12.) Bourne agreed to license the Song, but limited use of the Song to specific conditions. (Id. ¶¶ 13-14.) The license agreement entered into between Bourne and Touchstone permitted Touchstone to use the Song in the television movie and contained an option for Touchstone to use the Song in the television movie on videocassettes, videodiscs and DVDs for home use. (Id. ¶ 15.) The option, however, excluded use of the Song in connection with promotion of the videocassettes, videodiscs or DVDs. (Id.) The license further limited use of the Song to television purposes only; excluded any right to exhibit the television movie over the Internet or any other media not specifically authorized in the license; and excluded any right to use recordings of the Song as part of a "fixation" of the television movie on videodiscs, videocassettes or other audio-visual devices, except as provided in the home video option. (See Television Synchronization License Agreement, Ex. 5 to Bourne Decl.)
Bourne also agreed to permit ABC to prepare and broadcast a commercial for the television movie using the Song. (Bourne Decl. ¶ 16.) The videocassette commercial license limited use of the Song to a period of three weeks, from April 18, 2001 through May 14, 2001, over the ABC television network and its affiliates; prohibited use of the Song apart from the soundtrack of the commercial; and prohibited assignment of the rights granted to ABC. (See Commercial Synchronization License, Ex. 6, Bourne Decl.)
In connection with the licensing of the Song, Disney advised Plaintiffs that it desired to revise the lyrics to the Song and hired Hinton Battle to revise the lyrics. Disney asserts that Plaintiffs refused to grant a license for any use of the Song unless Disney caused Mr. Battle to assign any rights he had in the creation of the derivative work to Plaintiff. Battle's rights in the new lyrics ultimately were so assigned. (See Ex. D to Affidavit of Sanford Litvack.)
In or about January 2002, Bourne discovered that the Song had been included in a trailer promoting the television movie and that the trailer was included in a videocassette of the Disney movie, "The Princess Diaries." (Bourne Decl. ¶ 17.) Bourne subsequently notified Touchstone of its objection to the unauthorized use. (Id. ¶ 18.) Touchstone forwarded Bourne's letter to Disney, which acknowledged it had inadvertently manufactured over 10,000,000 home videos containing the trailer with the unauthorized use of the Song. Bourne subsequently discovered that videocassettes containing the trailer using the Song were for sale on Disney Company's website, at the Disney Store in New York City, and at other outlets owned by Disney Company. Plaintiffs' representative purchased such videos from the Disney Company website and from Disney store outlets, as well as from an apparently unaffiliated Internet source, in June 2002. (Declaration of Patricia Bassily dated August 23, 2002 ¶¶ 2-9.) The instant litigation was commenced in August 2002.
In September and October 2002, Plaintiffs' representatives purchased copies of videocassettes containing the trailer from a "Consumer Relations" representative of BVHE and from the non-Disney owned retail establishments K-Mart, fye, Blockbuster, Bestbuy.com, BN.com and Amazon.com. (See Reply Declaration of Patricia Bassily dated October 8, 2002 at ¶ 8 and Reply Declaration of Jayne Ramirez dated October 8, 2002 at ¶ 2.)
In opposition to Plaintiffs' motion and in response to the Court's request for further submissions, Disney has proffered, inter alia, the affidavits of Kristin McQueen, BVHE's Vice President, Legal Affairs, and Chelsea Maull, a Contract Administrator in the BVHE's Legal Department.
McQueen asserts that, as of the January 2002 date on which Plaintiffs first complained, approximately 10 million units containing the offending trailer had been manufactured and that BVHE had distribute approximately 9 million of those units to "wholesalers and retailers throughout the United States, including retail outlets owned by . . . [Disney], as well as others such as Walmart, K-Mart, Target, etc." (Affidavit of Kristin McQueen, sworn to September 18, 2002 "McQueen Aff." at ¶ 10.) The McQueen Affidavit further represents that, as of September 2002, there were approximately 2.4 million of the offending units in BVHE's inventory (including approximately 1 million returns) and that BVHE will not distribute those units. (Id. ¶ 11.) The approximately 38,000 units remaining in Disney-owned retail outlets as of that time were directed withdrawn. (Id. ¶ 12.) McQueen estimates that more than 80% of the 9 million units that were in distribution as of January 2002 had been sold by September 2002. (Id.)
McQueen further represents that, pursuant to her directions, no further videocassettes containing the trailer have been manufactured since January 2002, and that no further DVDs containing the trailer have been manufactured since April 2002, McQueen having directed that "run changes" be made in each of the works to exclude the offending trailer. Distribution of the offending products in Disney's inventory ceased by July 2002. (Affidavit of Kristin McQueen, sworn to January 7, 2003 "January 7 McQueen Aff." ¶¶ 1-6.) McQueen also asserts that Disney-owned retail outlets had only approximately 38,000 units of the product remaining for sale when this action was filed, and that those units were thereafter withdrawn from the outlets. McQueen further represents that, after learning of the September 2002 sale to Plaintiffs' representative through Consumer Relations, she directed the third-party customer service agency to cease selling the videos with the trailer. According to McQueen, this entity appears only to have sold the offending products to Plaintiffs' representatives and to a Disney employee. (Id. ¶¶ 7-9.)
Plaintiffs have objected to the proffer of McQueen's affidavits, which purport to be based on McQueen's personal knowledge as to her own actions and on business records and internal investigations as to other matters, on hearsay grounds, and have offered no evidence of ongoing sales by Disney of the subject video products other than the above-mentioned Bassily and Ramirez declarations.
The content of the McQueen affidavits, and Plaintiffs' arguments with respect thereto, are discussed in further detail infra.
DISCUSSION
In this Circuit, a grant of preliminary injunctive relief is generally appropriate only upon the movant's showing of (1) irreparable harm in the absence of the injunction and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor. Random House, Inc. v. Rosetta Books, LLC, 283 F.3d 490, 491 (2d Cir. 2002); Zervos v. Verizon New York, Inc., 252 F.3d 163, 172 (2d Cir. 2001). The moving party has the burden of establishing entitlement to injunctive relief, including the prospect of irreparable harm. See International Brotherhood of Teamsters v. Local Union, No. 810, 19 F.3d 786, 789 (2d Cir. 1994).
Likelihood of Success on the Merits
To demonstrate likelihood of success on the merits, Plaintiffs must establish prima facie an infringement of copyright by showing that they own a valid copyright and that Disney engaged in unauthorized copying. ABKCO Music Inc. v. Stellar Records, Inc., 96 F.3d 60, 64 (2d Cir. 1996); Hasbro Bradley, Inc. v. Sparkle Toys, Inc., 780 F.2d 189, 192 (2d Cir. 1985). There is no dispute, and the Court finds, that Plaintiffs own the copyright to the Song and that Disney used the Song outside the scope of the licensing agreements that it entered into with Plaintiffs.
Disney contends, however, that Plaintiffs are not entitled to enforce their copyright in this action because they used their Song copyright improperly by requiring Hinton Battle to assign to Plaintiff his rights in the new lyrics. The alleged improper conduct is, thus, asserted as a defense to Plaintiffs' claims.
The defense of copyright misuse is based upon the principle that copyright holders may not leverage their copyright monopoly to allow them to control of areas outside the monopoly. See A M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1026 (9th Cir. 2001) (citing Lasercomb America v. Reynolds, 911 F.2d 970, 976-77 (4th Cir. 1990)). There is no evidence here that Plaintiffs seek to control areas outside of their grant of monopoly. Rather, it appears that Plaintiffs, in requiring Mr. Battle to assign his rights in a derivative version of the Song, were seeking to control reproduction and distribution of their copyrighted work. See UMG Recordings, Inc. v. MP3.Com. Inc., 92 F. Supp.2d 349, 352 (S.D.N.Y. 2000) ("A [copyright holder's] `exclusive' rights, derived from the Constitution and the Copyright Act, include the right, within broad limits, to curb the development of such a derivative market by refusing to license a copyrighted work or by doing so only on terms the copyright owner finds acceptable.").
In light of the foregoing, the Court finds that Disney is not likely to prevail in its assertion of the defense of copyright misuse. Accordingly, the Court finds that Plaintiffs have demonstrated a likelihood of success on the merits of this action with respect to their copyright infringement claim.
Irreparable Harm
The prospect of harm to copyright, trademark and trade dress interests is generally presumed to be irreparable. See Richard Feiner and Co. v. Turner Ent. Co., MGM/UA, 98 F.3d 33, 34 (2d Cir. 1996). Disney argues that injunctive relief should nonetheless be refused because Plaintiffs delayed unreasonably the commencement of this action and because the request for injunctive relief has been mooted.
Delay
Disney argues that Plaintiffs delayed in the bringing the lawsuit and that the delay rebuts the presumption of irreparable harm.
Generally, the court should generally consider delay in assessing irreparable harm. See Tom Doherty Associates, Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 39 (2d Cir. 1995) (citations omitted). Delay has been held to defeat the presumption of irreparable harm in cases where the owner of intellectual property appears first to have concluded that the challenged activity did not constitute infringement, but subsequently sued in response to commercial competition. See Majorica S.A. v. R.H. Macy Co., 762 F.2d 7, 8 (2d Cir. 1985); Citibank, N.A. v. Citytrust, 756 F.2d 273, 277 (2d Cir. 1985) (plaintiff waited more than ten weeks after learning directly, and nine months after learning through the press, of defendant bank's plans to open a branch in its territory). As the Second Circuit pointed out in Tom Doherty: "In these cases, it appeared indisputable that the trademark or copyright owners were well aware of their rights and had concluded that they were not violated." Tom Doherty, 60 F.3d at 39.
In the context of copyright infringement cases, courts in the Second Circuit have recognized that a delay in filing suit will not, however, rebut the presumption of irreparable harm if the plaintiff does not know how severe the infringement is during the period in question. See Clifford Ross Co. v. Nelvana, Ltd., 710 F. Supp. 517, 521 (S.D.N.Y. 1989), aff'd, 883 F.2d 1022 (2d Cir. 1989). Similarly, a delay caused by a plaintiff's good faith efforts to investigate an infringement does not rebut the presumption of irreparable harm. See King v. Innovation Books, 976 F.2d 824, 831 (2d Cir. 1992).
In this case it appears that Plaintiffs complained of the use of the Song in the trailer promptly after they discovered Disney's unauthorized use of the Song. Thus, there is no basis for an inference that Plaintiffs believed Disney had a right to use the Song in the video trailers and later sued only to gain commercial advantage or for other reasons warranting an adverse inference. Furthermore, it is clear from both sides' submissions that discussions and negotiations regarding rights to use the Song went on, albeit sporadically, for a substantial period of time following the January 2002 complaint. Accordingly, the Court concludes that, in the circumstances of this case, any delay in bringing this action does not rebut the presumption of irreparable harm.
The Need For Injunctive Relief
As noted above, Disney asserts that it has taken steps to remove the videocassettes containing the song from its retail outlets and it has ceased to distribute the units containing the trailer in question. In light of these steps, Disney asserts that Plaintiffs' request for injunctive relief is moot because the offending conduct has ceased. (Defendants' Memo of Law in Opposition, at 17, n. 7.) Disney further asserts that it has taken steps to assure that no further copies of the videocassettes or DVDs will be available.
Plaintiffs point out that their representative purchased unauthorized works in September or October 2002 from BVHE's representative and from non-Disney retail outlets, and seek preliminary injunctive relief enjoining Disney from manufacturing, distributing, or offering for sale the videocassettes and DVDs containing the unauthorized use of the Song. Plaintiffs contend that there is no evidence that Disney has ceased to sell videocassettes and DVDs containing the unauthorized use of the Song and thus, that they are entitled to injunctive relief.
For the following reasons, the Court finds that Plaintiffs have failed to carry their burden of demonstrating that injunctive relief is necessary to prevent irreparable harm. The Court further finds that, because Disney's uncontroverted evidence proffered in opposition to this motion is sufficient to establish that it has agreed to cease distribution of the offending material and has taken appropriate steps to effect that cessation, any need for injunctive relief that may have existed is now moot. Cf. American Express Travel Related Services Co. v. Mastercard International, Inc., 776 F. Supp. 787, 791 (S.D.N.Y. 1991) (citing Consumers Union of United States, Inc. v. General Signal Corp., 724 F.2d 1044, 1052 and n. 11 (2d Cir. 1983), cert. denied, 469 U.S. 823 (1984)).
In response to the Court's December 20, 2002, order directing Disney to file further submissions in the form of admissible evidence concerning the status of the manufacture, distribution and sales of product containing the Song, Disney served and filed the January 7 McQueen Affidavit. Plaintiffs' objected, on evidentiary grounds, to the Court's consideration of the affidavit, but offered no further factual material in response, and at a February 6, 2002 pretrial conference, confirmed that they rest on the evidence submitted with their initial moving and reply papers.
In the January 7 Affidavit McQueen asserts that: "no videocassettes were manufactured with the Song Trailer after mid-January, 2002" (January 7 McQueen Aff. ¶ 3); no DVDs containing the Song Trailer were manufactured after mid-April 2002 (id. ¶ 4.); she directed BVHE to cease distribution of product containing the Song Trailer (id. ¶ 6.); and that "BVHE records indicate that any such distribution ceased by July, 2002." (Id.) She states further that Disney-owned outlets had approximately 38,000 units of the product containing the Song when the instant action was commenced and that BVHE directed that those units be withdrawn from the Disney-owned outlets. McQueen asserts, to the best of her knowledge and belief, that the product has been removed. (Id. ¶ 7.) McQueen disclaims knowledge of the status of Plaintiffs' communications with non-Disney owned retailers. McQueen also addresses Plaintiffs' assertion that a paralegal purchased product containing the Song in October 2002 from customer service representatives employed by Disney. McQueen asserts that customer service functions are outsourced to third parties, and states that, after learning of the sale to Plaintiffs' representatives, she directed the customer service representatives to cease selling product containing the Song. (Id. ¶ 9.)
The injunction sought here is directed to such non-Disney outlets only to the extent they would be acting in concert with the named defendants. Cf. Fed.R.Civ.P. 65. Plaintiff has proffered no evidence of such action in concert.
Plaintiffs urge the Court to reject the McQueen affidavit as hearsay or as an inferior substitute for "best evidence" consisting of the business records McQueen purports to have consulted in formulating her statements regarding the status of Disney's distribution activities. Plaintiffs argue that McQueen has no personal knowledge of the manufacture and distribution of the product containing the Song, and assert that the Court should on that basis disregard McQueen's statements concerning the status of the manufacture of the product, the current distribution status of the product, the number of units left in Disney-controlled inventory, compliance with instructions to withdraw the subject units from distribution, and the customer relations outfit's compliance with the direction to cease distribution of the products. (See Plaintiffs' Response to Defendants' Submission to the Court's December 18, 2002 Order, at 2-3.)
It bears repetition that Plaintiffs have the burden of demonstrating their entitlement to the extraordinary remedy of injunctive relief, including that such relief is necessary to prevent irreparable harm. See International Brotherhood of Teamsters v. Local Union, No. 810, 19 F.3d at 789. "The element of irreparable harm `cannot be met absent a showing of real or immediate threat that the plaintiff will be wronged again.'" Greilsheimer v. Ferber, Chan Esser, No. 98 Civ. 2553, 1998 WL 547092, at *2 (S.D.N.Y. Aug. 27, 1998) (quoting Schroedel v. New York Univ. Med. Ctr., 885 F. Supp. 594, 598 (S.D.N.Y. 1995)). Thus, Plaintiffs must establish the likelihood that the harm will occur in the future absent the injunction.
Other than their evidence of purchases on one occasion through the BVHE-affiliated consumer relations outlet after commencement of this litigation and assertions that its representatives purchased offending videocassettes through non-Disney owned outlets between August and October 2002, Plaintiffs offer no evidence that Disney continues to manufacture or distribute the product in question. Rather, they speculate that Disney may be continuing to distribute the videocassettes and the Song, and criticize Disney's proffered evidence as hearsay. Plaintiffs' evidence, of one set of purchases several months ago through one outlet affiliated with or controlled by a Defendant might, in the absence of any indication from Disney that it has already desisted from the offending conduct, be sufficient to meet Plaintiffs' burden as proponent of the motion.
However, even if the Court were to accept Plaintiffs' invitation to disregard certain aspects of the McQueen affidavits, the affidavits include relevant, uncontroverted statements clearly made on the deponent's own personal knowledge that confirm that Disney has already taken appropriate steps to prevent further infringing conduct.
McQueen states in her affidavit, sworn to September 18, 2002, that she is Vice President, Business and Legal Affairs of BVHE, and that she is primarily responsible for overseeing legal issues relating to the distribution of home video product by BVHE. (McQueen Aff. ¶ 1.) She states that she has knowledge of the facts set forth in her affidavit based on her "tenure at BVHE, as well [her] review of the records kept by BVHE in the ordinary course of its business." Id. The January 7 McQueen Affidavit incorporates her references to her qualifications as stated in the September 18, 2002 affidavit and includes the following statements concerning actions that were taken personally by McQueen: Upon learning that the Song had been included in trailers for certain movies, she directed a "run change" that "called for the creation of new masters that excluded the Song Trailer from each of the seven movies on which it appeared" (January 7 Aff. ¶ 3); "With respect to inventory, in mid-January, 2002 I directed [BVHE] personnel that no further distribution be made." (Id. ¶ 6.) She further states that she directed the BVHE customer service representatives to cease selling product containing the Song. (Id. ¶ 9.) In addition, McQueen states that BVHE business records reflect that distribution of the DVDs containing the Song ceased by July 2002. (Id. ¶ 6).
Federal Rule of Evidence 803(6) excepts business records kept in the ordinary course of business from the prohibition on hearsay evidence.
Furthermore, insofar as the foregoing evidence shows that Disney has taken appropriate steps to cease and desist from the infringing conduct and that there is "no reasonable expectation that it will resume," Plaintiffs' request for injunctive relief is moot. See American Express Travel Related Services Co., 776 F. Supp. at 790-791 (citations omitted). The motion is accordingly, denied.
The cases cited by Plaintiffs in opposition to Disney's mootness argument are not to the contrary. City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289 n. 10 (1982), addressed principally the effect of voluntary cessation of offending conduct on a court's power to determine the legality of the conduct, holding that the cessation did not deprive the court of such power, the court noted that "it is still open to [the defendants] . . . to show . . . that the likelihood of further violations is sufficiently remote to make injunctive relief unnecessary." In Dodge v. County of Orange, 208 F.R.D.79, 85, 97 (S.D.N.Y. 2002), a judge of this District found that there were factual issues warranting grant of the plaintiff's request for an evidentiary hearing as to whether defendants had changed the challenged policy and were currently in compliance with applicable law, noting that if defendants were successful in so demonstrating, "then a preliminary injunction ordering them to do just that would not be appropriate." RCA Records v. All-Fast Systems, Inc., 594 F. Supp. 335 (S.D.N.Y. 1984), involved a less than comprehensive representation by the defendant as to cessation of the conduct.
CONCLUSION
Because Plaintiffs have failed to show the necessity of injunctive relief, the record reflects that Disney's infringing conduct has ceased, and there is no reasonable expectation that it will resume, there is no basis for the Court to conclude that Plaintiffs will suffer irreparable harm in the absence of a preliminary injunction. Accordingly, Plaintiffs' motion for a preliminary injunction is denied.
IT IS SO ORDERED.