20TH Century Fox Film v. Enter Distributing
| Decision Date | 18 November 2005 |
| Docket Number | No. 04-55410.,No. 03-57234.,No. 03-57052.,03-57052.,04-55410.,03-57234. |
| Citation | 429 F.3d 869 |
| Court | U.S. Court of Appeals — Ninth Circuit |
| Parties | TWENTIETH CENTURY FOX FILM CORPORATION, a Delaware Corporation; SFM Entertainment LLC, a Delaware limited liability company; New Line Home Video Inc., a New York Corporation, Plaintiffs-Counter-Defendants-Appellees, v. ENTERTAINMENT DISTRIBUTING, an Oregon Corporation; Marathon Music & Video, an Oregon Corporation, Defendants-Appellants, Dastar Corporation, an Oregon Corporation, Defendant-Counter-Claimant-Appellant, Random House, Inc., sued as Doubleday, a division of Bantam Doubleday Dell Publishing Group, Inc., Counter-Defendant-Appellee. Twentieth Century Fox Film Corporation, a Delaware Corporation; SFM Entertainment LLC, a Delaware limited liability company; New Line Home Video Inc., a New York Corporation, Plaintiffs-Counter-Defendants-Appellees, v. Entertainment Distributing, an Oregon Corporation; Marathon Music & Video, an Oregon Corporation, Defendants-Appellants, Dastar Corporation, an Oregon Corporation, Defendant-Counter-Claimant-Appellant, Random House, Inc., sued as Doubleday, a division of Bantam Doubleday Dell Publishing Group, Inc., Counter-Defendant-Appellee. Twentieth Century Fox Film Corporation, a Delaware Corporation; SFM Entertainment LLC, a Delaware limited liability company; New Line Home Video Inc., a New York Corporation, Plaintiffs-Counter-Defendants-Appellees, v. Entertainment Distributing, an Oregon Corporation; Marathon Music & Video, an Oregon Corporation, Defendants-Appellants, Dastar Corporation, an Oregon Corporation, Defendant-Counter-Claimant-Appellant, Random House, Inc., sued as Doubleday, a division of Bantam Doubleday Dell Publishing Group, Inc., Counter-Defendant-Appellee. |
David A. Gerber, Oxnard, CA, for the defendant-counter-claimant-appellant.
Jonathan D. Hacker, O'Melveny & Myers, Washington, DC, Stephen G. Contopulos, Sidley Austin Brown & Wood, Los Angeles, CA, for the plaintiffs-counter-defendants-appellees.
Appeal from the United States District Court for the Central District of California; Florence Marie Cooper, District Judge, Presiding. D.C. No. CV-98-07189-FMC.
Before FARRIS, NELSON, and TALLMAN, Circuit Judges.
General Dwight D. Eisenhower's fascinating written account of World War II is the subject of a more mundane, present day battle over the copyright to that now famous book, Crusade in Europe. Dastar Corporation ("Dastar") appeals the district court's judgment in favor of Twentieth Century Fox Film Corporation ("Fox"), SFM Entertainment LLC, and New Line Home Video, Inc., (collectively, "Twentieth Century Fox Parties"), finding that Dastar infringed protected copyrights to Crusade in Europe, and the court's subsequent award of attorneys' fees and costs to Twentieth Century Fox Parties. We affirm.
The district court entered judgment following a bench trial, and we set forth the pertinent facts in the light most favorable to the prevailing parties.
General Eisenhower served as Supreme Commander of the Allied Expeditionary Forces during World War II, following his service as Commander of the U.S. troops in Europe. Upon the surrender of the German military forces in 1945, numerous publishers approached General Eisenhower, offering him the opportunity to publish his memoirs about the war. General Eisenhower, however, spurned all such offers until Doubleday president Douglas Black and The New York Herald Tribune ("Tribune") vice-president William Robinson convinced him otherwise. General Eisenhower explained:
[M]any months before I left the Army, I was approached by representatives of various publishing houses, each with a different reason for wanting to publish my memoirs of the war. To all these proposals I turned a deaf ear.
...
But finally two men, Douglas M. Black of Doubleday and William Robinson, of The New York Herald Tribune, came to me with a different kind of argument. Roughly it went like this:
Historians, they said, are often inclined to use contemporary accounts as source materials.... They showed me, or reminded me of, a number of books which had been written hurriedly, so as not to "miss the market." Certain of these books on the African and European campaigns were riddled with inaccuracies. They contained conclusions that had slight basis in fact and were the hasty conceptions or misconceptions of authors who had a flair for writing rapidly and fluently. Mr. Black and Mr. Robinson, who were functioning partners for the proposal, pointed out errors in these publications and said that since these were written during my lifetime and were not denied or corrected by me, the historians of the future might give them a high degree of credibility.
This reasoning impressed me. After I thought it over for a time, they came back and I said, "I'm ready to undertake this task but on one condition only: it seems to me that every time the subject is brought up, people talk about all the various kinds of publishing rights and so on and I don't want to be bothered with such things. Now if you people can come up with a single package to cover the whole affair so that I don't have to argue with too many people, I will probably undertake something.
DWIGHT D. EISENHOWER, AT EASE 324-25 (Doubleday & Company, Inc. 1967) (1967).
The evidence showed that despite General Eisenhower's initial reluctance, the thought of penning a personal account of his war experiences had previously crossed his mind. According to General Eisenhower, he had "tried to draft a bit of narrative just to satisfy [him]self that[he] had something to say that was worth hearing." But ultimately, General Eisenhower explained that he had "not convinced [him]self of this at all," and any work was merely an "experiment" "more as a protection to [him]self in the event [he] ever did want to write." He did not definitively decide to write and publish his memoirs, however, until approached by Messrs. Black and Robinson.
After hearing their initial pitch, General Eisenhower and his attorney met with representatives from Tribune and Doubleday in Washington, D.C., on December 30, 1947. Doubleday made General Eisenhower an attractive offer to publish his memoirs and he accepted the terms with a handshake. General Eisenhower wrote the next day that "all is settled on a `gentleman's agreement' basis," further explaining that the matter had reached a "definite conclusion."
Prior to the December 30, 1947, meeting, Doubleday suggested to General Eisenhower that he could potentially avoid having the publishing deal taxed as ordinary income, and instead obtain more favorable capital gains treatment. General Eisenhower contacted the Internal Revenue Service ("IRS") and explained his situation. He asked the IRS for an opinion as to how the sale of the book and publication would be treated for tax purposes. The IRS explained that under 26 U.S.C. § 117 (since repealed) it could treat him as a nonprofessional, first-time writer, and if he adhered to a specific set of restrictions, the proceeds could be taxed as capital gains, instead of as salary. Specifically, the IRS explained that if General Eisenhower sold "all [his] right, title and interest" in the book after having held the completed manuscript for a period of six months, the proceeds of his deal would qualify for long-term capital gains treatment.
General Eisenhower explained to Doubleday that he would have to structure the transaction as his advisors directed, including specifically the need to account for the IRS' opinion that any written agreement could only be in the form of an option to purchase the manuscript in six months, in order to obtain the favorable tax treatment. Just after reaching the "handshake" agreement, General Eisenhower wrote to a friend that his lawyer "[wa]s collaborating with the Treasury Department and with the Doubleday people to see how a tentative instrument [could] be drawn up that can in no wise be interpreted either as a bona fide sale or as a `contract for services.'" He later explained to Doubleday that although they could not have a formal contract in place, "at any time subsequent to six months, after my completion of the manuscript, I shall be prepared to enter into a contract with [Doubleday] without regard to what any other publishing house might propose in the interim." Thus, the district court determined as a matter of fact that Doubleday understood that General Eisenhower could not have put their agreement into writing until six months after the completion of his first draft without jeopardizing favorable long-term capital gains treatment.
The district court further found that General Eisenhower began writing the book manuscript after he reached the agreement with Doubleday on December 30, 1947. The writing process took on almost mythic proportions. General Eisenhower typically worked approximately sixteen hours a day, dictating text in the morning and revising and editing drafts in the afternoon. Doubleday, for its part, not only supplied round-the-clock secretarial staff, researchers, and stenographers, but also supervised much of the work, and paid for the creation of maps and photos for inclusion in the book. Additionally, the Doubleday editorial board met with General Eisenhower in person on numerous occasions, and provided extensive comments and notes on the work in progress.
General Eisenhower completed the first draft of the manuscript on March 24, 1948. Just over six months later, as required by the IRS for favorable tax treatment, General Eisenhower memorialized the December 1947 "handshake agreement" in an October 1, 1948, written contract. The document signed by General Eisenhower stated that:
In consideration of the sum of [REDACTED] to me in hand paid, the receipt of which is hereby acknowledged, I do hereby sell, assign, transfer and set over unto Doubleday &...
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