CORDON HOLDING C.B. v. NORTHWEST PUBLISHING CORPORATION
CORDON HOLDING C.B., CORDON ART B.V., THE M.C. ESCHER FOUNDATION and PROLIFIC ART GALLERIES, LTD., Plaintiffs, -against- NORTHWEST PUBLISHING CORPORATION and PAUL ANISH, Defendants.
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
2005 WL 5899405
March 9, 2005, Decided
March 11, 2005, Filed
COUNSEL: For Cordon Holding B.V., Cordon Art B.V., The M.C. Escher Foundation, Prolific Art Galleries, LTD, Plaintiffs: Karen Shatzkin, Shatzkin & Mayer, P.C., New York, NY.
For Cordon Holding B.V., Cordon Art B.V., The M.C. Escher Foundation, Prolific Art Galleries, LTD, Counter Defendants: Karen Shatzkin, Shatzkin & Mayer, P.C., New York, NY.
JUDGES: KEVIN NATHANIEL FOX, UNITED STATES MAGISTRATE JUDGE.
OPINIONBY: KEVIN NATHANIEL FOX
OPINION: OPINION and ORDER
KEVIN NATHANIEL FOX
UNITED STATES MAGISTRATE JUDGE
In this action, the plaintiffs alleged, inter alia, that the defendants reproduced and distributed works of art by M.C. Escher ("Escher"), the Dutch graphic artist, in violation of the Copyright Act of 1976 ("Copyright Act"), as amended, 17 U.S.C. §§ 101, et seq. The plaintiffs seek to recover damages for the defendants' misconduct. 1
The plaintiffs made an application for partial summary judgment, pursuant to Fed. R. Civ. P. 56(c), on their claim that the defendants infringed the plaintiffs' copyrights when they reproduced and distributed Escher's artwork. That application was granted by the district judge to whom this case was previously assigned. That judge found that Escher's artwork, although not in the public domain in his native land, the Kingdom of the Netherlands, fell into the public domain in the United States. This came about because Escher failed to comply with formalities imposed by United States copyright law. Specifically, no copyright notice was attached to Escher's artwork, as was required by the Copyright Act of 1909. However, the district judge also found that Escher's works constituted restored works, as that phrase is defined in 17 U.S.C. § 104A(h)(6)(C)(i). Therefore, he determined that the defendants were liable for damages to the plaintiffs, commencing from January 1, 1996, the date on which the plaintiffs' copyrights were restored to the Escher artwork that is the subject of this action. 2
Pursuant to 28 U.S.C. § 636(c), the parties consented to having a non-jury trial, presided over by a United States magistrate judge, concerning the damages, if any, that might be awarded to the plaintiffs based upon their successful motion for partial summary judgment. Following a one day trial, the parties made post-trial submissions to the Court including proposed findings of fact and conclusions of law. 3 The Court has considered the parties' respective submissions and has reviewed the record generated during the trial. The following are the Court's findings of fact and conclusions of law made pursuant to Fed. R. Civ. P. 52(a).
Findings of Fact
Plaintiffs Cordon Holding B.V. ("Cordon Holding") and Cordon Art B.V. ("Cordon Art") are Dutch corporations. In 1984, Cordon Art was established by Escher's heirs as the exclusive worldwide representative of the heirs and of the plaintiff M.C. Escher Foundation ("Foundation"). The Foundation is a charitable entity existing under the laws of the Kingdom of the Netherlands. It was founded by Escher in 1968.
In 1987, Cordon Holding was assigned all copyrights for Escher's artwork. Thereafter, Cordon Holding granted to Cordon Art exclusive exploitation rights for Escher's artwork. In January 1993, Cordon Art entered into a license agreement with plaintiff Prolific Art Galleries Ltd. ("Prolific"), a New York corporation. Through that license agreement, Prolific became the exclusive distributor, in the United States and Canada, of Cordon Arts' reproductions, prints and posters of Escher's artwork, including five works of art that are at the heart of the instant action: "Hand with Reflecting Sphere;" "Day and Night;" "Reptiles;" "Hands;" and "Waterfall."
In October 1995, a Prolific sales representative spotted a 16" x 20" poster of the Escher work "Reptiles" for sale at Boston University. The poster was unlike any that Prolific distributed for sale, in part, because it was of a size that Cordon Art did not manufacture. Prolific's president, Erol Liguori ("Liguori"), was advised of the sighting, and Liguori directed Prolific's sales representative to acquire the poster and to forward it to him. When Liguori received and examined the poster, he observed a credit line on the poster that identified its source as Northwest Publishing Corporation ("Northwest"). Liguori informed Cordon Art of Prolific's discovery of the Northwest poster depicting Escher's artwork.
According to Mark Veldhuysen, Director of Cordon Art, Cordon Art "exercises tight control over all reproductions, prints and posters" depicting Escher's artwork, to: (a) ensure that only the highest quality images and merchandise are sold; (b) maintain Escher's legacy; and (c) protect and foster the goodwill that has come to be associated with merchandise bearing Escher's name and artwork. Therefore, as a result of the information Cordon Art received from Liguori pertaining to Prolific's acquisition of Northwest's unauthorized poster of Escher's Reptiles, Cordon Art's United States counsel, John Carl Thomas, Esq. ("Thomas"), sent a letter to Northwest dated December 19, 1995. In that letter, Thomas advised Northwest that his clients, Cordon Art and the Foundation, owned and controlled the Escher "copyrights and certain related trademarks and goodwill." Thomas advised Northwest that it had come to his clients' attention that Northwest had produced and distributed a poster "that reproduces the copyrighted work by . . . Escher entitled Reptiles." Thomas informed Northwest that its actions constituted "violations of the Copyright Act of 1976." Through his letter, Thomas demanded, among other things, that Northwest "cease and desist immediately" advertising, marketing, selling, distributing, or exploiting commercially the above-noted poster. In addition, Thomas demanded that Northwest pay to his clients all profits it received from the commercial exploitation of the poster and disclose certain information, including the number of such posters Northwest had manufactured and sold.
Thomas did not receive a response to his December 19, 1995 letter. Therefore, on February 1, 1996, he sent another letter to Northwest, via facsimile. In that letter, Thomas indicated that his clients were still awaiting a response to the December 19, 1995 letter. Thomas recalled that, shortly after the facsimile transmission was completed, he received a telephone call from defendant Paul Anish ("Anish"). During that telephone conversation, Anish identified himself to Thomas as the president of Northwest. At the trial, Anish acknowledged that he is an experienced art publisher. Anish advised Thomas that Northwest's initial printing run of Escher's work, "Reptiles," was limited, since it was a "prototype" for a customer. During the trial, Anish at first denied having made such a statement to Thomas. However, Anish later conceded that, in fact, he had told Thomas that the number of reproductions of "Reptiles" that Northwest had made was limited. Thomas testified that Anish claimed that Northwest's run of "Reptiles" reproductions was limited to 50.
Thomas also recalled that he explained to Anish explicitly the bases upon which his clients contended that Escher's artwork was protected under United States copyright law. Anish maintained at the trial that he asked Thomas if Thomas' clients had a copyright registration certificate that Anish could review. According to Anish, Thomas admitted that his clients did not have a copyright registration. That information confirmed information Northwest had learned through a copyright registration search it had made regarding Escher's artwork at the United States Copyright Office ("Copyright Office") in 1995. According to Anish, it is Northwest's wont to investigate "the copyright ownership rights of all artwork it is interested in reproducing and selling." When possible, Northwest makes inquiries of the artist or the artist's representative. In other instances, Northwest "contacts the Artists' Rights Society in New York" to ascertain "what information that organization has on the artist and the work" or causes a registration search to be made at the Copyright Office.
Anish recalled that, during the February 1996 telephone conversation, Thomas merely asserted, without elaborating, that his clients' copyrights were protected in some way other than through copyright registration. Anish remembered telling Thomas that Northwest had investigated the matter and determined that Escher's works were in the public domain. Therefore, Anish contended, he told Thomas that he did not agree that Escher's artwork was protected in the United States. Furthermore, Anish testified that he invited Thomas to share with Northwest, immediately, any information to the contrary, which Thomas felt established that Escher's artwork was protected in the United States. Anish believed that Northwest's position, that Escher's artwork was in the public domain and could be copied legally, was supported by Thomas' admission that his clients did not have a copyright registration[s].
During the February 1, 1996 telephone conversation, Anish did not disclose to Thomas that, on the proceeding day, January 31, 1996, Northwest had sold 100 copies of its reproduction of "Reptiles," 100 copies of Escher's "Waterfall" and 100 copies of Escher's "Hand Drawing Hand." During the trial, Anish explained that Thomas never asked him about Northwest's reproductions of Escher's artwork other than "Reptiles," and he determined not to volunteer any information concerning the other Escher artwork that Northwest had reproduced and sold.
According to Thomas, during their February 1, 1996 telephone conversation, Anish indicated that Northwest would cease manufacturing and selling posters depicting Escher's artwork until it obtained a license to do so. However, Northwest never sought a license from the plaintiffs and, between February and August 1996, Northwest's invoices show that it sold 5,600 posters depicting Escher's works.
Effective August 30, 1996, the plaintiffs' notice of intent to enforce their restored copyrights in the Escher artwork at issue here was published in the Federal Register. That publication provided constructive notice under the Copyright Act to the defendants that the plaintiffs intended to enforce restored copyrights in those works of art. Copyright certificates for the relevant Escher works were registered in the Copyright Office effective September 16, 1996.
Notwithstanding the defendants' receipt of constructive notice that the plaintiffs intended to enforce the restored copyrights in Escher's artwork and the information communicated directly to Northwest's president by the plaintiffs' counsel, i.e., that Escher's artwork was protected by United States copyright law, the defendants continued to produce and to distribute copies of the protected Escher artwork.
In the Spring of 1997, Prolific learned from some of its distributor customers, including an entity known as Picture Plus, that Northwest was selling posters depicting Escher's artwork. Prolific reported this information to Cordon Art. Thomas testified that, as a result of receiving this information, he contacted Anish via telephone on May 1, 1997; Anish denies this. Thomas maintains that, during that telephone conversation, he advised Anish that he was prepared to send Northwest another "cease and desist" letter based upon the new information his clients had received from Prolific.
Thomas recalled that, during the telephone conversation, Anish reported that, after their February 1996 telephone conversation, Anish had been advised by his counsel that Escher's artwork was in the public domain and, as a consequence, Northwest could reproduce it. Thomas challenged the legal advice Anish had received from his counsel. He then sought to disabuse Anish of the notion that Escher's artwork was in the public domain by advising him that the "cease and desist" letter that Thomas was prepared to send to Anish would be accompanied by copyright registrations and a federal court decision holding that the Escher copyrights were protected under United States copyright law.
Thomas testified further that he explained to Anish that, inasmuch as Escher's artwork was registered with the Copyright Office, his clients would seek statutory damages up to $ 100,000 per infringement and attorney's fees if they were compelled to commence litigation against Northwest. According to Thomas, this information caused Anish to express a willingness to: (a) cooperate with the plaintiffs; (b) provide an accounting to them; and (c) make a payment to the plaintiffs for having reproduced Escher's artwork without authorization. On May 1, 1997, Thomas sent Anish the "cease and desist" letter he mentioned during their telephone conversation on that date. Northwest's invoices that were received in evidence at the trial show that four days later, on May 5, 1997, the defendants sold 4,000 reproductions of Escher's artwork.
On May 6, 1997, Thomas received a telephone call from Northwest's attorney, Leonard Lesser, Esq. ("Lesser"). Lesser represented to Thomas that Northwest was prepared to cooperate with the plaintiffs by, inter alia, providing the accounting which Thomas had requested of Northwest in the two letters he had sent previously to the defendants. Several weeks later, Thomas received an affidavit dated June 5, 1997, that Anish had prepared. Through the affidavit, Anish reported that Northwest had produced 40,586 copies of Escher's artwork and had sold 35,616 of those items to eight customers based in three states in this country and to one Canadian-based-customer. Anish's affidavit indicated that Northwest's sales of Escher prints totaled $ 11,744.23.
However, Thomas noted that when a schedule attached to Anish's affidavit was scrutinized closely, it revealed that Northwest's gross revenues, from sales of Escher's artwork occurring on or after January 1, 1996, were actually $ 11,762.50. The defendants do not contest this assertion. Moreover, the plaintiffs discovered that the list of Northwest's customers to whom it had furnished reproductions of Escher's artwork, that was provided to the plaintiffs by Anish as an attachment to his affidavit, omitted mention of two additional Canadian-based customers to whom, the plaintiffs knew, the defendants had furnished copies of Escher's artwork: Le Grenier D'Art, located in Montreal and Picture Plus, located in Ottawa.
Both of these entities had been Prolific's customers. However, according to Liguori, as a result of Northwest's unauthorized reproductions and sales of posters depicting Escher's artwork, Northwest has "usurped Prolific's entire market with Le Grenier D'Art for [such] posters." Furthermore, commencing in or about April 1997, Picture Plus ceased ordering posters depicting Escher's artwork from Prolific, although, according to Liguori, posters depicting the five Escher works that are at the center of this litigation "had always been bestsellers." Liguori maintained that prior to Northwest's sales of posters of Escher's works, Escher posters sold at a premium price. However, Prolific's customers now question its price structure for posters depicting Escher's artwork and Prolific's sales volume of Escher's works has decreased. Liguori was unable to state, with any degree of specificity, what Prolific's volume of sales of Escher's artwork was in any particular year. Moreover, no documentary evidence corroborating Liguori's claims respecting Prolific's declining sales volume for Escher works is in the trial record. Irrespective of this, Liguori clung steadfastly to the view that Prolific's sales of Escher posters had decreased significantly. Liguori attributed that decrease in sales to Northwest's unauthorized sales of Escher's artwork.
Anish's June 5, 1997 affidavit indicated that Northwest had not sold any prints of Escher's "Day and Night." However, Northwest's invoices received in evidence at the trial show that one month before Anish executed the affidavit, Northwest sold 300 "Day and Night" posters to its customers. No explanation for the discrepancy between the information contained in Anish's June 5, 1997 affidavit and Northwest's May 1997 invoices was provided to the Court. The record before the Court establishes that the defendants stopped producing prints of Escher's artwork in October 1996 and ceased selling them in June 1997.
Conclusions of Law
As noted earlier in this writing, the district judge to whom this case was previously assigned found that the defendants infringed the plaintiffs' copyrights applicable to the five Escher works identified above and that they are liable to the plaintiffs for damages commencing from January 1, 1996. The Copyright Act states, in pertinent part that "an infringer of copyright is liable for either – (1) the copyright owner's actual damages and any additional profits of the infringer, as provided by [17 U.S.C. § 504(b)]; or (2) statutory damages, as provided by subsection [17 U.S.C. § 504(c)]." 17 U.S.C. § 504(a).
Actual damages are primarily measured by "the extent to which the market value of the copyrighted work at the time of the infringement has been injured or destroyed by the infringement." See Fitzgerald Publishing Co., Inc. v. Baylor Publishing Co., Inc., 807 F.2d 1110, 1118 (2d Cir. 1986). In addition to actual damages, a copyright owner electing to seek damages under 17 U.S.C. § 504(b) is entitled to recover "any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages." 17 U.S.C. § 504(b). The statute provides further "in establishing the infringer's profits, 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." Id. For the purposes of 17 U.S.C. § 504(b), "gross revenues" include only "gross revenues reasonably related to the infringement, not unrelated revenues." Davis v. Gap, Inc., 246 F.3d 152, 160 (2d Cir. 2001).
In the case at bar, the record is devoid of competent evidence upon which the Court might rely in determining the actual damages suffered by the Dutch plaintiffs as a result of the defendants' infringement of the Escher copyrights that are at issue in this action. With respect to Prolific, the defendants elicited testimony from Liguori, on cross-examination, that Prolific would have made a gross profit of $ 1.10 on each of the unauthorized Escher posters that Northwest sold. The defendants elicited this information after arguing to the Court, successfully, that a similar statement by Liguori should be stricken from the affidavit containing his direct trial testimony. Nevertheless, the Court does not credit Liguori's testimony on this point.
Much of Liguori's testimony, on matters pertinent to this action and specific to Prolific, was vague or grounded on surmise and conjecture. For example, when Liguori was asked to reveal the basis for his contention that Northwest's sales of Escher artwork, which ceased in June 1997, was still having a damaging impact on Prolific's annual sales of Escher's works, he stated that his contention was based on an "assumption" premised upon his "gut instincts." Furthermore, when Liguori was asked to state the number of Escher works Prolific sold in 1996, a period during which he claimed that Prolific's sales were injured by Northwest's sales of Escher works, Liguori conceded that he did not know his company's sales volume for that period. Moreover, although the affidavit containing Liguori's direct trial testimony indicates that "since January 1, 1996, the defendants sold 32,908 infringing posters," at the trial Liguori could neither confirm that this number was accurate nor state definitively the source from which he obtained the number.
Given that the injury, if any, to Prolific's annual sales of Escher artwork occasioned by Northwest's conduct would likely be an area explored with Liguori at the trial, because of assertions he made in the affidavit that contains his direct trial testimony, Liguori's inability to answer questions about Prolific's sales, with certainty, makes his credibility suspect. It also undermines any confidence that could be placed in his assertion that, if Northwest had been an authorized distributor of Escher's artwork, Prolific would have earned $ 1.10 for each of the posters depicting Escher's artwork that the record establishes Northwest sold. Therefore, the Court finds that it would not be reasonable and appropriate to adopt, as the plaintiffs urge, $ 1.10 as the fair market value of each copyrighted poster, at the time of the defendants' infringement, in determining the damage to Prolific from the defendants' infringing conduct. Since speculation should play no role in determining the amount of actual damages suffered, see Abeshouse v. Ultragraphics, Inc., 754 F.2d 467, 470 (2d Cir. 1985), and, as no other record evidence provides a basis for establishing the fair market value of any copyrighted poster, the Court cannot quantify the actual damages suffered by Prolific.
The plaintiffs are entitled to recover "any profits of the infringer that are attributable to the infringement and are not taken into account in computing actual damages." 17 U.S.C. § 504(b). In this case, it is uncontested that the plaintiffs established that Northwest's gross revenues on the sale of the infringing artwork was $ 11,762.50. The defendants did not prove any amount of deductible expenses. Therefore, the Court awards the plaintiffs $ 11,762.50 collectively.
A copyright owner is free to elect, at any time before a final judgment is rendered, to recover from an infringer statutory damages in lieu of actual damages. 4 See 17 U.S.C. § 504(a); (c). For actions commenced prior to December 9, 1999, such as the instant action, a copyright owner may obtain "an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, . . . of not less than $ 500 or more than $ 20,000 as the court considers just." 17 U.S.C. § 504(c)(1)(1996). In addition, where a copyright owner establishes that the infringing conduct was committed willfully, a court has the discretion to increase the award of statutory damages "to a sum of not more than $ 100,000." 5 17 U.S.C. § 504(a)(2)(1996).
In any action under this title, other than an action brought for a violation of the rights of the author under section 106A(a) or an action instituted under Section 411(b), no award of statutory damages or of attorney's fees, as provided by sections 504 and 505, shall be made for —
* * *
(2) any infringement of copyright commenced after first publication of the work and before the effective date of such registration, unless such registration is made within three months after the first publication of the work.
17 U.S.C. § 412(2).
Therefore, in order to recover statutory damages, costs and attorney fees in this case, the plaintiffs must have registered the five Escher works with the Copyright Office prior to the commencement of the defendants' infringing conduct. "Commencement," as used here, encompasses the first act of infringement and all such acts that continue or reoccur thereafter. See Fournier v. Erickson, 202 F. Supp. 2d 290, 297-98 (S.D.N.Y. 2002); Singh v. Famous Overseas, Inc., 680 F. Supp. 533, 535 (E.D.N.Y. 1988).
The Escher works that are germane to this action were first published in the years indicated below:
|Hand with Reflecting Sphere – 1935||
Drawing Hands – 1948
Day and Night – 1938
Waterfall – 1961
Reptiles – 1943
The record evidence shows that the effective date of registration with the Copyright Office for each of these works is September 16, 1996. It is clear that that date is more than three months after each work's first publication and is approximately nine months after January 1, 1996, the effective date upon which copyrights were restored to the five Escher works. In this action, it is uncontested that the defendants' infringing conduct commenced well after the first publication of each of the five Escher works noted above. Furthermore, the record evidence shows that the defendants' unauthorized exploitation of the Escher works continued to 1997.
Based on these facts, the defendants maintain that 17 U.S.C. § 412 bars the plaintiffs from recovering statutory damages in this action because they failed to comply with the registration requirement found in that statute. The Court agrees. By its express terms, 17 U.S.C. § 412 allows no room for discretion. It bars an award to the plaintiffs in this action because the copyright registrations pertinent here were not effected within the three-month grace period provided by 17 U.S.C. § 412(2). See Innovative Networks, Inc. v. Young, 978 F. Supp. 167, 175 (S.D.N.Y. 1997); Johnson v. University of Virginia, 606 F. Supp. 321, 324-25 (W.D. Va. 1985). Therefore, the Court finds that, based on the record before it, it is constrained to award plaintiffs nothing more than the gross revenues derived by Northwest through its sales of the infringing artwork.
For the reasons set forth above, the plaintiffs are awarded $ 11,762.50, an amount for which the defendants are jointly and severally liable.
Dated: New York, New York
March 9, 2005
KEVIN NATHANIEL FOX
UNITED STATES MAGISTRATE JUDGE
1 — Although the plaintiffs also asserted a claim for breach of contract in this action, in their joint pretrial order, the parties advised the Court that the only issue that remained to be tried was the amount of damages, if any, to be awarded to the plaintiffs under the Copyright Act.
2 — Throughout this writing, the copyright owner is referred to as "the plaintiffs."
3 —Each witness' direct trial testimony was presented through an affidavit. Witnesses were cross-examined, based upon their affidavits at the trial.
4 — The plaintiffs have determined to delay making their election until the Court assesses the amount of actual and statutory damages that should be awarded in this action. See e.g., Dumas v. Dagl, 1990 U.S. Dist. LEXIS 18145, No. 88 Civ. 2293, 1990 WL 258343 at *2 (S.D.N.Y. May 22, 1990).
5 — 17 U.S.C. § 505 permits a court to award a prevailing copyright owner full costs and a reasonable attorney's fee.