Worldwide Church v. Philadelphia Church of God

Citation227 F.3d 1110
Decision Date18 September 2000
Docket Number99-55934,99-56005,Nos. 99-558503,99-56489,s. 99-558503
Parties(9th Cir. 2000) WORLDWIDE CHURCH OF GOD, a California Corporation, Plaintiff-Counter-Defendant-Appellant, v. PHILADELPHIA CHURCH OF GOD, INC., an Oklahoma Corporation, Defendant-Counter-Claimant-Appellee
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Allan Browne, Brown & Woods, LLP, Beverly Hills, California, for the plaintiff/counter-defendant-appellant.

Mark B. Helm, Munger, Tolles & Olson, LLP, Los Angeles, California, and Kelly M. Klaus, Munger, Tolles & Olson, LLP, San Francisco, California, for the Defendant/counter-claimant-appellee.

Appeal from the United States District Court Central District of California. J. Spencer Letts, District Judge Presiding. D.C. NO. CV-98-00167-JK

Before: Melvin Brunetti and A. Wallace Tashima, Circuit Judges, William W Schwarzer,*

SCHWARZER, Senior District Judge:

Appellant Worldwide Church of God ("WCG") is a nonprofit religious organization whose late Pastor General, Herbert W. Armstrong, wrote a 380-page book entitled Mystery of the Ages ("MOA"), the copyright to which is held by WCG. After Armstrong's death, WCG retired MOA from distribution and use. Appellee Philadelphia Church of God ("PCG"), also a nonprofit religious organization, then appropriated MOA for use in its religious observance, copying it in its entirety and distributing large numbers of copies to its members and the public. We must decide whether PCG's copying and dissemination of MOA constitutes fair use under the Copyright Statute. 17 U.S.C. 107.

FACTUAL BACKGROUND

Herbert Armstrong founded the Radio Church of God, later renamed Worldwide Church of God, in 1934. He held the title of "Pastor General with the spiritual rank of Apostle" and was its undisputed spiritual and temporal leader until his death in 1986. Armstrong was a prolific writer, producing over three thousand articles for the church's magazine The Plain Truth, all of which were copyrighted in the name of WCG, or its affiliate teaching arm, Ambassador College.

Armstrong wrote MOA, his final work, between 1984 and 1985. He completed it when he was ninety-two years old, shortly before his death. He copyrighted it in the name of WCG and published it in serial form in The Plain Truth magazine, distributed free of charge to approximately eight million people. In addition, WCG distributed over 1.24 million copies free of charge to employees and to viewers of WCG telecasts. In all, WCG put over nine million free copies of MOA into circulation.

Two years after Armstrong's death, WCG decided to discontinue distribution of MOA for several reasons, including the fact that the Church's positions on various doctrines such as divorce, remarriage, and divine healing had changed. The Church hoped to "prevent a transgression of conscience by proclaiming what the Church considered to be ecclesiastical error" espoused in MOA and it considered that Armstrong, who was ninety-two when he wrote MOA, conveyed outdated views that were racist in nature. Its Advisory Council of Elders indicated that the Church stopped distributing MOA because of "cultural standards of social sensitivity" and to avoid racial conflict. The Council noted, "Insensitivity in this area is contrary to the doctrinal program of WCG to promote racial healing and reconciliation among the races. " WCG disposed of excess inventory copies of MOA and stopped distribution, but retained archival and research copies. WCG never sought to withdraw or destroy personal copies or copies held by public institutions or any public library, nor did it request that its members destroy their copies. WCG has indicated an interest in publishing an annotated MOA sometime in the future but has not yet begun work on it.

In 1989, two former WCG ministers, Gerald Flurry and John Amos, founded a new religious organization, PCG. The new church grew to over six thousand members by 1996 and claims strictly to follow the teachings of Herbert Armstrong. PCG asserts that MOA is central to its religious practice and required reading for all members hoping to be baptized into PCG. Until January 1997, PCG relied on existing copies of MOA but it then began copying MOA for its own use. It is undisputed that PCG never requested permission from WCG to print MOA. It is also undisputed that PCG copied MOA verbatim, deleting only WCG from the copyright page and substituting Herbert Armstrong in its place, and deleting a "Suggested Reading" page and a warning against reproduction without permission. PCG has distributed approximately thirty thousand copies of its MOA in English text, in addition to foreign-language versions. It has advertised its version in newspapers and periodicals and has received substantial contributions from persons who have received its MOA.

When PCG ignored WCG's demand that it cease infringing its copyright and continued distribution of its MOA, this action followed.

PROCEDURAL BACKGROUND

In its complaint, WCG alleged that PCG, by reproducing, distributing, promoting, advertising and offering unlawful and unauthorized copies of MOA, has been infringing WCG's copyright. PCG answered, denying WCG's ownership of the copyright and asserting that WCG's claim was barred by the Free Exercise Clause of the First Amendment, the Religious Freedom Restoration Act ("RFRA"), 42 U.S.C.SS 2000bb2000bb-4, and the fair use doctrine, 17 U.S.C. 107, and counterclaimed seeking a declaration of its right to reproduce and distribute MOA.1

WCG moved for partial summary judgment and for a preliminary injunction to restrain PCG from printing or distributing any materials copyrighted by WCG, including MOA. PCG filed a cross-motion for summary adjudication. The district court denied WCG's motions and granted PCG's motion for summary adjudication. It concluded that Armstrong was the author of MOA and that it was not a work for hire, implying that WCG did not own the copyright, and that PCG's use of MOA is statutorily protected "fair use" of the work under 17 U.S.C. 107.

WCG appeals the order granting summary judgment to PCG (No. 99-55934), the denial of its motion for a preliminary injunction (No. 99-55850), and the denial of its motion to amend the judgment (No. 99-56005). On June 30, 1999, this court granted the motions to consolidate these three appeals. On July 23, 1999, the district court entered judgment for PCG on WCG's complaint pursuant to Federal Rule of Civil Procedure 54(b). WCG filed a notice of appeal with respect to that judgment (No. 99-56489), and this court granted appellee's motion to consolidate that appeal as well. Because all of the district court's orders are merged into the final judgment, we have jurisdiction pursuant to 28 U.S.C. 1291. We review a grant of summary judgment de novo. See Balint v. Carson City, Nevada, 180 F.3d 1047, 1050 (9th Cir. 1999) (en banc).

DISCUSSION
I. OWNERSHIP OF THE COPYRIGHT

PCG disputes WCG's ownership of the MOA copyright, contending that Armstrong, not WCG, had the right to control MOA's creation and that therefore WCG cannot claim either authorship or ownership of MOA through the "work-for-hire" doctrine under 17 U.S.C. 201(b), and the district court so found. We need not address this hotly disputed issue, however, for it is undisputed that Armstrong, who owned the copyright, bequeathed his entire estate to WCG. His Will left all of his real and personal property to WCG. The Will was admitted to probate and was not challenged. The Superior Court entered an order of final distribution providing that "preliminary distribution having . . . been made,. . . all other property belonging to said estate . . . be and is hereby distributed to Worldwide Church of God." Because the ownership of a copyright may, under 17 U.S.C. 201(d),"be bequeathed by will," WCG is now the owner.

PCG responds that "Armstrong granted a nonexclusive, implied license for MOA to be disseminated by those who value its religious message." As a result, it argues, WCG took any copyright subject to this preexisting license. The existence of a license creates an affirmative defense to a claim of copyright infringement. I.A.E., Inc. v. Shaver , 74 F.3d 768, 775 (7th Cir. 1996), citing Effects Assoc., Inc. v. Cohen, 908 F.2d 555, 559 (9th Cir. 1990). PCG did not plead this defense in its answer (or otherwise raise it in the district court) as required by Federal Rule of Civil Procedure 8(c) ("In pleading to a preceding pleading, a party shall set forth affirmatively [the affirmative defense of] . . . license."). Accordingly, the issue is not properly before us. See Magana v. Commonwealth of the N. Mariana Islands, 107 F.3d 1436, 1446 (9th Cir. 1997). In any event, the argument is without merit. An implied license may be granted orally or be implied from conduct. See Effects, 908 F.2d at 558. PCG does not contend that Armstrong granted it a license, but only that he wished MOA to have the largest audience possible. It has offered no evidence that Armstrong created MOA for dissemination by third parties, much less that he intended to license PCG to reprint the entire book and use it for its own church. We conclude that Armstrong's copyright passed to WCG through his Will and that WCG is the owner of the copyright in MOA.

II. THE "FAIR USE" DEFENSE
A.

The district court concluded that the facts "support a finding that PCG's use of MOA is a statutorily protected `fair use' of the work." In reaching this conclusion, it found that PCG uses MOA "for non-profit religious and educational purposes," that copying a complete religious text "is reasonable in relation to that use," that WCG presented no evidence that it lost members due to PCG's distribution, that a potential annotated MOA produced by WCG would not compete against PCG's copies of MOA, and that MOA's being out of print provided additional justification for PCG's production of...

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