Collezione Europa U.S.A. v. Hillsdale House, Ltd.

Decision Date06 February 2003
Docket NumberNo. 1:01-CV-00853.,1:01-CV-00853.
Citation243 F.Supp.2d 444
CourtU.S. District Court — Middle District of North Carolina
PartiesCOLLEZIONE EUROPA U.S.A.,INC., Plaintiff, v. HILLSDALE HOUSE, LTD., Defendant.

Teresa Raquel Robinson, Peter Joseph Juran, Blanco Tackabery Combs & Matamoros, P.A., Winston-Salem, NC, for Plaintiff.

Richard M. McDermott, Jason M. Sneed, Alston & Bird, LLP, Charlotte, NC, for Defendant.

MEMORANDUM OPINION and ORDER

OSTEEN, District Judge.

Plaintiff Collezione Europa U.S.A., Inc. ("Collezione") instituted this action against its competitor, Defendant Hillsdale House, Ltd. ("Hillsdale") on September 7, 2001. Collezione seeks a declaratory judgment determining that its marketing and sale of certain items of furniture does not infringe or violate any of Hillsdale's rights. Hillsdale has filed a counterclaim alleging that Collezione's marketing and sale of the furniture does violate Hillsdale's rights under the Copyright Act, 17 U.S.C. § 101 et seq., and also asserting claims for unfair competition and unjust enrichment under North Carolina law.

The matter is now before the court on Collezione's motion to dismiss the second and third counts of Hillsdale's counterclaim, motion to amend Collezione's answer to Hillsdale's counterclaim, and motion for summary judgment, as well as Hillsdale's motion for summary judgment on each of its counterclaims. For the reasons set forth herein, Collezione's motion to dismiss the second and third counts of Hillsdale's counterclaim will be granted. Hillsdale's motion for summary judgment on the remaining count, copyright infringement, will be granted. Collezione's motion to amend its answer will be denied. Collezione's motion for summary judgment will be denied.

I. BACKGROUND

Collezione and Hillsdale are competitors engaged in the production and sale of furniture to retailers. Collezione is a New Jersey corporation; Hillsdale is a Kentucky corporation. Both companies have exhibited their lines at the international furniture show held twice each year in High Point, North Carolina.1

Collezione "freely acknowledges that many of its designs are based on designs originated by others which Collezione sees, likes, and produces similar designs and `knocks off or copies." (Pl.'s Br. Opp'n Defs Mot. Summ. J. at 1-2.) Its agents search furniture markets and showrooms for items they believe can be reproduced and sold at lower prices. Collezione purchases items and ships them to China for wholesale copying and reproduction. It then imports the finished product from China and offers it for sale to furniture retailers in the United States under the Collezione name.

In October 1999, Hillsdale developed a line of furniture known as the "Bordeaux Collection." The line includes a dinette table and chairs, baker's rack, and bar stools, among other pieces.2 (Defs Mem. Supp. Mot. Summ. J. Ex. D.) Each of the pieces in the collection features decorative sculpted leaves made out of a pewter-look material, which are incorporated into the design of the furniture. A sculpted "triple-leaf figure, consisting of one leaf pointing upward and two flanking leaves pointing downward, adorns the back of the chair and bar stool and the top of the baker's rack. A different pattern of three overlapping leaves pointing downward embellishes the legs of the glass-topped dinette table and baker's rack. Hillsdale first sold items from the Bordeaux Collection in April 2000, and has continued to market the items for sale since that date.

In January 2001, Hillsdale applied to the United States Copyright Office to register the items in the Bordeaux Collection for copyright protection.3 The Register of Copyrights issued a Certificate of Registration on March 28, 2001,4 and again on May 2, 2001, for the sculptural features of the collection. (Defs Mem. Supp. Summ. J. Exs. A, B.)

Sometime after April 2000, Collezione's president, Mr. Leonard Frankel, purchased a set of furniture at a furniture showroom and sent it to a manufacturer in China with instructions to copy it in time for the April 2001 High Point Furniture Market.5 No modifications were ordered. The resulting pieces became what is known by the parties as Collezione's 6985 Group,6 which has been on the market since its April 2001 debut. The two lines of furniture appear nearly identical to a casual observer, as evident from Attachments A and B. Mr. Frankel has stipulated that the T-6985 Group and the Bordeaux Collection are "substantially similar." (Frankel Dep. at 42-43.)

On August 10, 2001, Hillsdale's attorneys wrote to Collezione demanding that it cease selling and/or offering for sale its T-6985 Group because the items in that group, specifically, the sculptural features, were substantially similar to those of the Bordeaux Collection. Notwithstanding Hillsdale's demand, Collezione continued to place orders for tables and chairs with its manufacturer in China and to offer the items for sale, leading to this lawsuit.

II. DISCUSSION
A. Collezione's Motion to Dismiss Counterclaims
1. Preemption/Standard of Review

Collezione has moved to dismiss Hillsdale's second and third counterclaims, which are, respectively, claims for unfair competition and unjust enrichment under North Carolina law. Collezione argues that these claims should be dismissed under Federal Rule of Civil Procedure 12(b)(6) because they are preempted by the Copyright Act.

Congress has specifically preempted all state law rights that are equivalent to those protected under federal copyright law. See 17 U.S.C. § 301(a). For preemption to apply, three conditions must be met: (1) the work at issue must be of the type protected by the copyright laws, (2) the right claimed must be equivalent to a right protected under federal copyright law, and (3) the cause of action must not have arisen before January 1, 1978. See Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F.Supp. 1523, 1531 (S.D.N.Y.1985).

This suit clearly satisfies the first and third conditions. Copyright law applies to "original works of authorship fixed in any tangible medium of expression," including "pictorial, graphic and sculptural works." Id. at 1532 (quoting 17 U.S.C. § 102(a)). Because Hillsdale asserts that Collezione has violated its copyright of the sculptural features of the Bordeaux Collection, there can be little argument that the works at issue are within the subject matter of the copyright laws. Moreover, the cause of action meets the January 1, 1978, cut-off date.

The remaining condition, that of the nature of the right asserted, is a more complex issue. The court must determine whether the causes of action in Hillsdale's counterclaim, unfair and deceptive trade practices, in violation of North Carolina General Statute § 75-1.1, and unjust enrichment, as defined by North Carolina common law, are being asserted to protect rights that are equivalent to the rights protected by federal copyright law.

In this inquiry, the court will apply Nimmer's oft-cited "extra-element" test for preemption:

[A] right which is `equivalent to copyright' is one which is infringed by the mere act of reproduction, performance, distribution or display. ... If under state law the act of reproduction, performance, distribution or display, ... will in itself infringe the state created right, then such right is preempted. But if other elements are required, in addition to or instead of, the acts of reproduction, performance, distribution or display, in order to constitute a state created cause of action, then the right does not lie `within the general scope of copyright,' and there is no preemption.

Id. at 1535 (quoting 1 M. Nimmer, The Law of Copyright § 1.01[B][3] (emphasis added)). The extra element "must be one which changes the nature of the action so that it is qualitatively different from a copyright infringement claim." Id. If the purportedly extra element is not qualitatively different, the state law action is preempted.

2. Unfair Trade Practices

Count Two of Hillsdale's counterclaim, unfair trade practices under North Carolina General Statute § 75-1.1, alleges that Collezione has intentionally deceived consumers by marketing and selling its furniture as if it contained its own original designs when the designs are in fact those of Hillsdale. Hillsdale asserts that these acts on the part of Collezione "are more than mere copyright infringement; they are immoral, unethical, unscrupulous and substantially injurious to consumers." (Def.'s Ans. and Counterclaims ¶ 33.)

In support of its argument that its unfair trade practices claim states a qualitatively different element than copyright infringement alone, Hillsdale relies on Baldine v. Furniture Comfort Corp., 956 F.Supp. 580 (M.D.N.C.1996), in which the court held that the plaintiffs state law claims for unfair trade practices were not preempted. However, the plaintiff in Baldine alleged that the defendant had falsely promised to pay the plaintiff in exchange for the use of her design, and then failed to make such payment once the design had been obtained. Accordingly, the court held that the claim was not preempted because it was based on the defendant's intentional misrepresentation to the plaintiff. In that situation, "the fraud and not the actual copyright violation would be the gravamen of the claim." 956 F.Supp. at 587.

Here, by contrast, Hillsdale has alleged no fraud; no relationship existed between the parties prior to the acts constituting the alleged infringement. The copyright violation remains the gravamen of the claim.

Moreover, the court notes that Hillsdale has not alleged that Collezione deceptively "palmed off its furniture as the Bordeaux Collection, such that consumers believed that the T-6985 Group was actually the Bordeaux Collection. See Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. 234, 238, 84 S.Ct. 779, 782, 11 L.Ed.2d 669 (1964) (recognizing tort of "palming off even where article at...

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