659 F.2d 963 (9th Cir. 1981), 79-3683, Universal City Studios, Inc. v. Sony Corp. of America

Docket Nº:79-3683, 79-3735 and 79-3762.
Citation:659 F.2d 963
Party Name:UNIVERSAL CITY STUDIOS, INC. a corporation, dba Universal Television and Universal Pictures, and Walt Disney Productions, a corporation, Appellants and Cross-Appellees, v. SONY CORPORATION OF AMERICA, a corporation, The Sony Corporation, a corporation, Carter Hawley Hale Stores, Inc., a corporation, Associated Dry Goods Corporation, a corporation,
Case Date:October 19, 1981
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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659 F.2d 963 (9th Cir. 1981)

UNIVERSAL CITY STUDIOS, INC. a corporation, dba Universal

Television and Universal Pictures, and Walt Disney

Productions, a corporation, Appellants

and Cross-Appellees,

v.

SONY CORPORATION OF AMERICA, a corporation, The Sony

Corporation, a corporation, Carter Hawley Hale Stores, Inc.,

a corporation, Associated Dry Goods Corporation, a

corporation, Federated Department Stores, Inc., a

corporation, Henry's Camera Corporation, a corporation,

Doyle Dane Bernbach, Inc., a corporation, and William

Griffiths, Appellees and Cross-Appellants.

Nos. 79-3683, 79-3735 and 79-3762.

United States Court of Appeals, Ninth Circuit

October 19, 1981

Argued and Submitted Feb. 6, 1981.

Rehearing and Rehearing In Banc Denied Jan. 12, 1982.

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Stephen A. Kroft (on brief), John G. Davies and Sondra E. Beechim Rosenfeld, Meyer & Susman, Beverly Hills, Cal., argued, for Universal Studios and Walt Disney.

Dean C. Dunlavey, Gibson, Dunn & Crutcher, Los Angeles, Cal., for Sony, Sony America, Doyle, Dane, Bembach.

Appeal from the United States District Court Central District of California.

Before KILKENNY and CANBY, Circuit Judges, and EAST, District Judge. [*]

KILKENNY, Circuit Judge:

Appellants, Universal City Studios, Inc. (Universal) and Walt Disney Productions (Disney), producers and copyright owners of audiovisual materials, some of which they choose to telecast over the public airwaves, brought this copyright infringement claim against Sony Corporation (Sony), the manufacturer of the Betamax, a videotape recorder (VTR), and Betamax tapes, Sony Corporation of America (Sonam) (the American distributor of the Betamax), four retail establishments that sell the Betamax, Doyle Dane Bernbach, Inc. (DDBI) (the advertising agency retained by Sonam to promote the Betamax), and one individual (William Griffiths), who is an owner and user of the Betamax.

Appellants argue that home video recording of their copyrighted works constitutes copyright infringement and that the corporate defendants are liable as direct, contributory and/or vicarious infringers. Additionally, appellants contend that the retail defendants violated the copyright laws when they recorded portions of appellants' programs to demonstrate the Betamax to a prospective purchaser. Likewise, appellants presented additional claims arising under state law and sought broad injunctive relief, as well as profits and damages. The district court, after three years of litigation and a five week nonjury trial, in the reported case of Universal City Studios, Inc. v. Sony Corp. of America, 480 F.Supp. 429 (C.D.Cal.1979), entered judgment for appellees and held:

(1) that copyright holders of audiovisual materials, some of which are sold for telecast over public airwaves, did not have monopoly power over off-the-air copying of those materials by owners of a videotape recorder in their homes for private, non-commercial use;

(2) the retailer did not infringe upon the copyrights where it did not compete with nor profit from materials and intended only to demonstrate the recorder;

(3) even if home-use copyrighting constituted an infringement, neither manufacturers, distributors, retailers, nor advertisers were liable under theories of direct or contributory infringement, or vicarious liability;

(4) that even if the appellees were deemed liable, injunctive relief was not available where they did not unfairly compete with owners of copyrighted materials, nor interfere with their advantageous business relations.

FACTUAL BACKGROUND

The district court in its elaborate, painstaking, and thoughtful opinion, Universal City Studios v. Sony Corp. of America, supra, at 432, 442, carefully outlined the facts and the parties' contentions. In our view it would be a complete waste of judicial time and effort and of no benefit to the Bench or Bar to here repeat those facts and contentions.

ISSUES

I. Does off-the-air copying of copyrighted audiovisual materials by owners of a

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videotape recorder in their homes for private noncommercial use constitute an infringement?

II. Are the corporate appellees liable for infringement under any of the theories advanced?

III. If appellants are entitled to prevail, the nature of the relief to be granted.

IV. Retail store use of the copyrighted material.

V. Unfair competition claims under 15 U.S.C. § 1125(a) and state law.

I.

Our comments under this issue include:

(a) whether the district court committed error in finding an implied video recording exception in the applicable legislation, and

(b) whether home video recording constitutes fair use.

Article I, § 8, cl. 8 of the United States Constitution empowers the Congress: "To promote the progress of science and useful arts, by securing, for limited times, to authors and inventors, the exclusive right to their respective writings and discoveries." In commenting on this clause of the Constitution, our Supreme Court has said that "The economic philosophy behind the clause empowering Congress to grant patents and copyrights is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors in 'Science and useful Arts.' " Mazer v. Stein, 347 U.S. 201, 219, 74 S.Ct. 460, 471, 98 L.Ed. 630 (1954). Despite what is said in some of the authorities that the author's interest in securing an economic reward for his labors is "a secondary consideration," it is clear that the real purpose of the copyright scheme is to encourage works of the intellect, and that this purpose is to be achieved by reliance on the economic incentives granted to authors and inventors by the copyright scheme. This scheme relies on the author to promote the progress of science by permitting him to control the cost of and access to his novelty. It is based on the premise that the exclusive right granted by the copyright laws "will not impose unacceptable costs to society in terms of limiting access to published works or pricing them too high." The district court relied heavily on its conclusion that the Copyright Act of 1976, providing that copyright holders have monopoly power over all productions of their works, did not include reproduction of sound recordings for home use. See 17 U.S.C. §§ 106(1), (4), (5) and 107. In arriving at this conclusion, the court compared the Copyright Act of 1909, which created the fair-use doctrine to immunize some forms of copying from the literal implications of the Act. 17 U.S.C. (1970 Ed.) § 1 with the language of 17 U.S.C. § 106 of the New Act which provides:

"Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following :

(1) to reproduce the copyrighted work in copies or phonorecords;

(2) to prepare derivative works based upon the copyrighted work;

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture of other audiovisual work, to display the copyrighted work publicly." (Emphasis added.)

"The approach of the (statute) is to set forth the copyright owner's exclusive rights in broad terms in section 106, and then to provide various limitations, qualifications, or exemptions in the 12 sections that follow. Thus, everything in section 106 is made 'subject to sections 107 through 118,' and must be read in conjunction with those provisions." H.R. No. 94-1476, p. 61 Sept. 3,

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1976, reprinted 1976 U.S.Code Cong. & Admin.News, 5659 at 5674, 94th Congress, 2d Sess.

The statutory framework is unambiguous; the grant of exclusive rights is only limited by the statutory exceptions. Elementary principles of statutory construction would indicate that the judiciary should not disturb this carefully constructed statutory scheme in the absence of compelling reasons to do so. That is, we should not, absent a clear direction from Congress, disrupt this framework by carving out exceptions to the broad grant of rights apart from those in the statute itself. It is the duty of the courts to give faithful meaning to the language Congress adopted in the light of the evident legislative purpose in enacting the law in question. Southeastern Community College v. Davis, 442 U.S. 397, 99 S.Ct. 2361, 60 L.Ed.2d 980 (1979); Chapman v. Houston Welfare Rights Organization, 441 U.S. 600, 99 S.Ct. 1905, 60 L.Ed.2d 508 (1979); United States v. Bornstein, 423 U.S. 303, 96 S.Ct. 523, 46 L.Ed.2d 514 (1976); Commissioner v. Bilder, 369 U.S. 499, 82 S.Ct. 881, 8 L.Ed.2d 65 (1962); Church of Scientology of California v. U. S. Dept. of Justice, 612 F.2d 417 (C.A.9 1979).

Our study of the record and analysis of the legislation convinces us that the district court inadvertently bypassed the statutory framework of the 1976 legislation and, in particular, § 106 of the new Act. In commenting on the "broad language" of the new Act, the district court expressed the belief that despite the monopoly power over all reproductions of their works granted by § 106, nonetheless, the legislative history indicated to the contrary. We quote from its opinion:

"The broad language of the New Act suggests that copyright holders have monopoly...

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