Business Trends Analysts v. Freedonia Group, Inc.

• Decision Date: 27 December 1988
• Docket Number: No. 86 Civ. 3540 (KC).,86 Civ. 3540 (KC).
• Citation: 700 F. Supp. 1213
• Parties: BUSINESS TRENDS ANALYSTS, INC., Plaintiff, v. The FREEDONIA GROUP, INC. and the Freedonia Group, Incorporated, Defendants.
• Court: U.S. District Court — Southern District of New York

700 F. Supp. 1213

BUSINESS TRENDS ANALYSTS, INC., Plaintiff, v. The FREEDONIA GROUP, INC. and the Freedonia Group, Incorporated, Defendants.

No. 86 Civ. 3540 (KC).

United States District Court, S.D. New York.

October 19, 1988.

As Corrected October 27, 1988.

Opinion On Motion to Amend December 27, 1988.

COPYRIGHT MATERIAL OMITTED

Michael Cornacchia and John Ciarelli, Ciarelli, Dempsey & Cornacchia, Melville, N.Y., for plaintiff.

James L. Stengel and Jeff Conciatoni, Donovan, Leisure, Newton & Irvine, New York City, for defendants.

JUDGMENT AND ORDER^*

CONBOY, District Judge:

Plaintiff in this case complains that its copyrighted study on the Robotics Industry has been infringed by defendants, who published a study of the same industry. Plaintiff also claims that its customer list, asserted to be a trade secret, was unlawfully appropriated and used by defendants; that defendants in violation of the Lanham Act, palmed off their studies of various industries as being connected with, related to or derived from plaintiff's predecessor in interest; and that defendants engaged in unfair competition under New York common law, in that they engaged in certain predatory practices designed to deceive potential customers about the source of their studies.

With respect to the principal claim of copyright infringement, defendants concede access to plaintiff's report, but deny any substantial similarity as to protected expression. Defendants deny the non-copyright claims. The late Honorable Edward Weinfeld denied plaintiff's motion for a preliminary injunction and granted defendants' motion for dismissal of certain other claims on January 5, 1987. Business Trends Analysts, Inc. v. The Freedonia Group, Inc., 650 F.Supp. 1452 (S.D.N.Y. 1987). This Court conducted a nonjury trial which concluded on March 21, 1988 and post-trial briefs were submitted on June 10, 1988. The following constitutes the Court's findings of fact and conclusions of law.

I. BACKGROUND

Plaintiff Business Trend Analysts, Inc. ("BTA"), suing herein as Business Trends Analysts, Inc., is a New York Corporation with its principal place of business in Commack, New York. Since its formation, BTA has been a marketing and research firm engaged primarily in the business of publishing reports on industries or selected groups of industries. Tr. 495; DX SSS (Ritchie Deposition Excerpts) at 14.

The Freedonia Group, Inc. and The Freedonia Group, Incorporated ("Defendants") are Ohio corporations. The Freedonia Group, Inc. is not presently an active corporation, having been dissolved several years ago. Tr. 344. The Freedonia Group, Incorporated ("TFG") was incorporated on April 25, 1985 and has its principal place of business in Cleveland Heights, Ohio. Tr. 66; Answer, ¶ 3. TFG is engaged, among other things, in the business of creating and marketing comprehensive economic and marketing research reports on various industries ("industry studies").

Since the early 1960s and until January 1, 1985, Predicasts, Inc., an Ohio company with its principal place of business in Cleveland, Ohio ("Predicasts"), was engaged in the business of publishing industry studies. Tr. 21-22. By agreement effective January 1, 1985 ("the Agency Agreement") (PX 3), Predicasts licensed BTA to be its exclusive sales representative through 1989 for approximately 90 specified industry studies previously published by Predicasts. Pursuant to the Agency Agreement, BTA acquired Predicasts' existing inventory of those studies along with the right to market them under the Predicasts name. The titles of the studies licensed to BTA were set forth on Schedule A to the Agency Agreement. One of the included studies is the Predicasts report on the robotics industry. BTA did not receive rights in any studies other than those specified in Schedule A, nor did it acquire rights in any other Predicasts' product line. Tr. 42. BTA paid Predicasts $300,000 for the license and agreed to pay Predicasts a royalty based upon sales of the licensed studies. PX 17; Tr. 498.

As required by the terms of the Agency Agreement, Predicasts notified its customers by letter dated March 27, 1985 that BTA had been appointed to be the exclusive worldwide distributor of Predicasts' industry studies, and that BTA would handle the fulfillment of all orders, answer all research questions and provide any additional information about those studies. DX R; Tr. 514.

William Weiss is the co-founder and president of TFG. From 1964 to the spring of 1982, Mr. Weiss was employed at Predicasts, and from 1964 to 1980, he was its Executive Vice-President with responsibility for research products (including industry studies) and marketing. In November of 1980, Predicasts was acquired by Thyssen-Bornemisza ("TB"), at which time Mr. Weiss entered into a five-year employment agreement with TB. Tr. 954-55. In late 1981, he assumed the position of President of the Predicasts Research Group, and as such was responsible for the preparation of Predicasts' industry studies. In the spring of 1982, Mr. Weiss terminated his employment relationship with Predicasts. Tr. 954.

In or about October 1984, the Predicasts Research Group withdrew from the industry study business. T. Kevin Swift and Robert Baumgartner, employees, left the firm shortly thereafter.

When Mr. Swift resigned his employment with Predicasts, he took with him a computer printout listing of customers for a Predicasts' publication called the "Predicasts Composite Forecast Service." He obtained this list (PX 9) from the Predicasts systems division. Tr. 380, 586. At his "exit interview," he discussed the list with Mike Janovic, then Vice-President of Predicasts' Research Service, and Thomas Bergess, the Director of Employee Relations. Messrs. Janovic and Burgess were both aware that Mr. Swift had a copy of this list, that he would be taking it with him when he left Predicasts, and that he intended to seek employment with a competitor of Predicasts. Predicasts apparently placed no restriction on Mr. Swift's use of the list, nor did it request that he return it to the company. Tr. 881-82.

On or about December 18, 1984, Predicasts published an industry study entitled 3547 Robotics (Markets and Competitors) ("the Predicasts Robotics Study" or "plaintiff's study") (PX 1) the allegedly infringed study herein. Neil Digeronimo, a Predicasts employee, was the author of this work. Predicasts applied to the United States Copyright Office for federal copyright registration on the Predicasts Robotics Study on November 25, 1985. A certificate of registration was issued bearing the effective date of November 25, 1985 (TX 1-699-835) (PX 2). Pursuant to the Agency Agreement, BTA was licensed to distribute the Predicasts Robotics Study. A memorandum setting forth this license, executed by Richard M. Harris, President of Predicasts, on March 14, 1986, was recorded in the Copyright Office on March 27, 1986. PX 4.

In early 1985, Mr. Weiss, and Messrs. Swift and Baumgartner formed TFG market industry studies. It began operations on or about May 20, 1985. Tr. 605; DX RRR (Baumgartner Deposition Excerpts) at 23-27. TFG hired several former employees of the Predicasts Research Group, one of whom, Ms. Andrea Fetsko-Louie, was an active employee of Predicasts at the time that she was hired by TFG.

In or about August 1985, TFG first offered for sale an industry study entitled Industry Study 113: Robotics ("the TFG Robotics Study" or "defendants' study") (PX 5), the allegedly infringing work herein. It was principally authored by Mr. Swift, Tr. 756, who was TFG's Vice-President of Research. Tr. 703. He was assisted in the preparation of this study by Ms. Fetsko-Louie. Tr. 677.

Mr. Swift and Ms. Fetsko-Louie both had access to and referred to the Predicasts Robotics Study in the course of their work on TFG's study. Mr. Swift referred to plaintiff's study in August 1985, while he was researching the background of the robotics industry for his study. Tr. 623-27, 672-73. Ms. Fetsko-Louie also used the Predicasts Robotics Study in connection with the preparation of the TFG Robotics Study. Tr. 534-35.

In November 1985, TFG sent out a mailing piece announcing that it was accepting orders for 15 completed studies, including the "TFG Robotics Study," and 11 other works in progress. The price of each of those studies was $1,500. PX 14.

The average price of a TFG industry study is approximately $1500, Tr. 399; PX 14, the same average price for a Predicasts' industry study. Tr. 23.

In January 1986, in order to enhance its competitive position, TFG mailed out a promotional brochure introducing a special, limited offer of three studies for $150 each. PX 16. The studies covered three subjects: robotics, plastic pipe and biotechnology. The purpose of this special introductory discount was to improve TFG's customer base by getting TFG industry studies into the hands of qualified buyers. Tr. 417. This discount was available for two or three months, at which time the price of those studies was returned to $1500, the price of the other studies offered for sale in the TFG catalogue. Tr. 417-19.

Industry studies are typically sold by telephone or mail order and not over-the-counter. As a result, potential purchasers do not actually see the studies themselves until after purchase, and the appearance of the studies themselves are generally not a factor in purchasing decisions. Even if it were, however, the "trade dress" of TFG's industry studies is and at all relevant times has been different and distinct from that of the Predicasts' industry studies sold by BTA. See, e.g., PX 1; PX 5. Since 1982, BTA's Predicasts industry studies have been marketed in brown leatherette covers. In addition, the "Predicasts" logo has appeared on every page of the studies. In contrast, the TFG industry studies have been and continue to be marketed in grey plastic covers with the company name, business address and distinctive "TFG" logo prominently...