724 F.2d 1044 (2nd Cir. 1983), 522, Consumers Union of United States, Inc. v. General Signal Corp.

Docket Nº:522, 541, Docket 83-7855.
Citation:724 F.2d 1044
Party Name:610 CONSUMERS UNION OF UNITED STATES, INC., Plaintiff-Appellee, v. GENERAL SIGNAL CORP. and Grey Advertising, Inc., Defendants-Appellants.
Case Date:December 06, 1983
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 1044

724 F.2d 1044 (2nd Cir. 1983)

610

CONSUMERS UNION OF UNITED STATES, INC., Plaintiff-Appellee,

v.

GENERAL SIGNAL CORP. and Grey Advertising, Inc.,

Defendants-Appellants.

Nos. 522, 541, Docket 83-7855.

United States Court of Appeals, Second Circuit

December 6, 1983

Argued Nov. 3, 1983.

Rehearing and Rehearing En Banc Denied Feb. 14, 1984.

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[Copyrighted Material Omitted]

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Bruce D. Sokler, Washington, D.C. (Charles D. Ferris, Cameron F. Kerry, and Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Washington, D.C.; Jules P. Kirsch, and Cooper, Dunham, Clark, Griffin & Moran, New York City, Joseph M. Burke, and Davis & Gilbert, New York City, on the brief), for defendants-appellants.

Michael N. Pollet, New York City (Marshall Beil, Carol A. Schrager, and Karpatkin Pollet Perlmutter & Beil, New York City, on the brief), for plaintiff-appellee.

Before TIMBERS, NEWMAN and CARDAMONE, Circuit Judges.

TIMBERS, Circuit Judge:

Appellants General Signal Corporation and Grey Advertising, Incorporated, appeal from a preliminary injunction, entered on October 13, 1983 in the Southern District of New York, Henry F. Werker, District Judge, enjoining their broadcast of two television commercials for Regina lightweight vacuum cleaners which quoted from an issue of CONSUMER REPORTS published by appellee Consumers Union of United States, Inc. (Consumers Union or CU). The appeal presents important issues with respect to the interplay of the First Amendment commercial speech doctrine and the fair use defense to a claim of copyright infringement. Issues of trademark, privacy, and state law also are involved.

After a full review, we hold that a preliminary injunction should not have issued. Since we find that Consumers Union has established neither a probability of success on the merits of its copyright, trademark, or state privacy law infringement claims, nor a balance of hardships tipping decidedly in its favor, we vacate the injunction. 1

I.

CU publishes a monthly magazine, known as CONSUMER REPORTS, which summarizes its independent evaluations of various consumer products. CONSUMER REPORTS prints the following notice in each copy:

"Consumers Union accepts no advertising or product samples and is not beholden in any way to any commercial interest. Its Ratings and product reports are solely for the use of readers of CONSUMER REPORTS. Neither the Ratings nor the reports may be used in advertising or for any commercial purpose. CU will take all steps open to it to prevent such uses of its material, its name, or the name of CONSUMER REPORTS."

In its July 1983 issue, CONSUMER REPORTS evaluated lightweight vacuum cleaners. The Regina Powerteam was "check-rated" and effusively praised in the article. Models are check-rated when CU judges the product tested to be of high overall quality, low price, and appreciable superiority to the non-check-rated models examined. CONSUMER REPORTS' comments regarding this product included:

--"Regina Power Team--far ahead of the pack in cleaning ability."

--

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"[O]nly one model, the check-rated Regina Power Team, was an adequate substitute for a full-sized vacuum."

--"Only the Regina Power Team vacuumed the floor thoroughly."

--"The Regina Power Team also stood out in our carpet-cleaning test. It alone left the carpet presentable after only one sweep, pristine after two sweeps."

In addition to publication of this information in its magazine, CU distributed news reports summarizing its test results to between 300 and 400 newspapers, and broadcast it in a "Report to Consumers" over the CBS radio network.

The Regina Powerteam lightweight vacuum cleaner is marketed by the Regina Company (Regina), a division of appellant General Signal Corporation's wholly-owned subsidiary, the General Signal Appliance Corporation. As part of its marketing strategy, Regina and its outside advertising agency, Gray-North, Inc., a division of appellant Grey Advertising, Inc., prepared three half-minute commercial messages for broadcast on television. The first does not mention CONSUMER REPORTS and is not challenged in this litigation.

The second message, entitled "Squid", emphasizes the lightweight convenience of the Regina Powerteam compared to full size vacuums. During one of the many different visual portions of the message, the voice-over announcer states that the Regina Powerteam "is the only lightweight that Consumer Reports says, Quote, was an adequate substitute for a full-sized vacuum." The statement "Consumer Reports is not affiliated with Regina and does not endorse products" is superimposed on the screen the entire time the CONSUMER REPORTS quotation is mentioned. "Squid" was broadcast on ABC, CBS, and NBC, starting September 27, 1983.

The third message, entitled "Consumer Reports", includes several quotations from CONSUMER REPORTS visually displayed on the screen as they are read by the announcer. 2 As with "Squid", each time material from CONSUMER REPORTS is mentioned, there appears the statement that it is not affiliated with Regina and does not endorse products. This disclaimer appears on the screen for a total of 14 seconds out of the 29.5 second duration of the commercial. The print size used for the disclaimer is comparable with normal television advertising practice for required disclosures and remains on the screen for a longer period of time than is normal for such disclosures. This commercial was never actually broadcast.

Regina notified CU that it planned to broadcast these commercials. It offered to provide copies to CU and to meet to discuss the matter. On the morning of September 30, 1983, Regina received a mailgram from CU demanding that Regina cease and desist from airing its commercials and established a deadline of 3:00 P.M. that day. Counsel for Regina responded but was told that CU already had commenced the instant action. CU's complaint alleged violations of the Copyright Act, 17 U.S.C. Sec. 101 et seq. (1982); of the Lanham Act, 15 U.S.C. Secs. 1114(1) and 1125(a) (1982); of state law, N.Y.Gen.Bus.Law Secs. 349, 350, 350-a, 350-d, 368-d, 397 (McKinney 1968 & Supp.1982); and of common law. 3 CU demanded temporary and permanent injunctive relief, compensatory damages of not less than $5 million, and punitive damages of not less than $5 million.

On October 3, 1983, CU applied for a temporary restraining order. In its papers in support of this application, CU alleged

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that specific defects in the commercials had a misleading effect. The court granted the T.R.O. over Regina's objections.

Upon receiving CU's motion papers, Regina changed the commercials' disclaimer to state "Consumer Reports is not affiliated with Regina and does not endorse Regina products or any other products". This was to allay CU's concern that the initial wording of the disclaimer might convey the impression that, while CU generally did not endorse products, it had made an exception in Regina's case. Responding to CU's complaint, Regina also revised the voice-over of the "Squid" commercial to insert the word "unquote" at the end of the quotation attributed to CU, and changed the last visual of that message to eliminate pictures of Regina models other than the Powerteam.

On October 7, a hearing was held on the motion for a preliminary injunction. The court heard approximately one-half hour of argument. No testimony was taken. On October 14, the court entered a preliminary injunction enjoining the use of both Regina messages and other advertising which copied from CONSUMER REPORTS. In its opinion, the court reached only the copyright issues. It did not address the Lanham Act or state law claims. It summarily denied appellants' First Amendment defense and rejected the fair use defense after weighing the four statutory factors referred to below. The court held that a detailed showing of irreparable injury was unnecessary once the elements of copyright infringement had been established. This expedited appeal followed.

Appellants argue, first, that the commercials are a fair use of copyrighted material and that many of the references to CONSUMER REPORTS are facts not protected by copyright; second, that neither the Lanham Act nor state law provides a basis for enjoining a truthful and accurate report of CU's article; and, third, that Regina will sustain irreparable injury if the injunction remains in effect, that CU has proven no irreparable injury, and that the public interest is adversely affected by the injunction. We shall consider each of these arguments seriatim.

II.

Since the district court reached its decision solely on the pleadings, briefs, affidavits, and counsels' arguments--without taking testimony--we have undertaken a full review to determine whether injunctive relief is appropriate. Jack Kahn Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 758 (2 Cir.1979).

A preliminary injunction will issue only where the moving party "establishes possible irreparable injury and either (1) probable success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor." Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 206-07 (2 Cir.1979).

We shall consider first CU's claimed likelihood of success on the merits.

A.

CU's copyright on the July 1983 issue of CONSUMER REPORTS has not been challenged. Some copying of copyrighted material, however, without the owner's consent is permitted. The fair use doctrine "balances the public interest in the free flow...

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