Sygma Photo News, Inc. v. High Soc. Magazine, Inc.

• Decision Date: 25 November 1985
• Docket Number: 174,D,Nos. 27,s. 27
• Citation: 778 F.2d 89
• Parties: , 1986 Copr.L.Dec. P 25,867, 3 Fed.R.Serv.3d 1023 SYGMA PHOTO NEWS, INC., Plaintiff-Appellee-Cross-Appellant, v. HIGH SOCIETY MAGAZINE, INC., Drake Publishers, Inc. and Dorjam Publications, Inc., Defendants, Drake Publishers, Inc. and Dorjam Publications, Inc., Defendants-Appellants-Cross-Appellees. ockets 85-7128, 85-7196.
• Court: U.S. Court of Appeals — Second Circuit

Page 89

778 F.2d 89

228 U.S.P.Q. 580, 1986 Copr.L.Dec. P 25,867,

3 Fed.R.Serv.3d 1023

SYGMA PHOTO NEWS, INC., Plaintiff-Appellee-Cross-Appellant, v. HIGH SOCIETY MAGAZINE, INC., Drake Publishers, Inc. and Dorjam Publications, Inc., Defendants Drake Publishers, Inc. and Dorjam Publications, Inc. Defendants-Appellants-Cross-Appellees.

Nos. 27, 174, Dockets 85-7128, 85-7196.

United States Court of Appeals Second Circuit.

Argued Sept. 19, 1985.

Decided Nov. 25, 1985.

Norman S. Beier, New York City (Abelman Frayne Rezac & Schwab, Lawrence E. Abelman, Marianne F. Murray, New York City, of counsel), for defendants-appellants-cross-appellees.

Ben C. Friedman, P.C., New York City, for plaintiff-appellee-cross-appellant.

Before LUMBARD, OAKES, and NEWMAN, Circuit Judges.

OAKES, Circuit Judge:

One of the challenging socio-legal questions raised by this copyright infringement case involves the extent to which the buyers of men's "sophisticate" magazines are motivated to purchase a particular magazine by the cover photo. The question is no less difficult when the photo is, as it is here, one of Raquel Welch in the buff (modestly covering herself in the nature of September Morn). The United States District Court for the Southern District of New York, Robert W. Sweet, Judge, in assessing damages against the publishers of "Superstars of Celebrity Skin, Special No. 6" ("Celebrity Skin"), thought, and hence found, that the photo--retouched from its original appearance in "Paris Match"--produced 75% of the magazine's sales. Judge Sweet declared the figure of 75% appropriate "based on the nature of the Photograph, the reputation and fame of Ms. Welch, the absence of any established readership for the publication and its intermittent publication schedule." Restrained as we are now by amended Rule 52(a), Fed.R.Civ.P., we nevertheless believe the finding of 75% must be modified because it is clearly erroneous. We also make some other modifications on the basis of the evidence and the record so as to reduce the judgment in amount while affirming the responsibility of all the named defendants for the judgment.

The Raquel Welch photo in question was taken in 1978 by one Tony Kent, who assigned the copyright to Playboy Enterprises. Playboy Enterprises, in accordance with a contract which it had earlier entered into with Ms. Welch and Raquel Welch Productions, Inc., then assigned her corporation the copyright. The photo subsequently appeared on the cover of the September 4, 1981, issue of "Paris Match" magazine with the title " 'Je veux etre la plus belle grand-mere du monde,' Les secrets d'un corps parfait, a 42 ans." On May 31, 1983, Raquel Welch Productions, Inc., assigned the copyright on the photo to Sygma Photo News, Inc., appellee here. All the assignments were duly registered with the copyright office.

A retouched version of the photograph--one that understandably omitted references to "Paris Match" and to Ms. Welch's professed desire to be the world's most beautiful grandmother--was subsequently used as the cover of the magazine "Celebrity Skin" without authorization. The cover logo refers to the "Superstars of Celebrity Skin in the Nude" and mentions the names not only of Raquel Welch but of other famous women such as Farrah Fawcett, Morgan Fairchild, Jodie Foster, Linda Evans, inevitably Marilyn Monroe, Sophia Loren, Nastassja Kinski, Angie Dickinson, Ursula Andress, Valerie Perrine, "And All Your All-Time Favorites!" The cover also contained a subhead "The Definitive Collector's Edition from High Society, Special No. 6."

"Celebrity Skin" was published in the name of Dorjam Publications, Inc., which has no paid employees and is a shell corporation of Drake Publishers. Drake, the successor in interest to High Society Magazine, Inc., which terminated its business in 1979, publishes "High Society," a monthly men's sophisticate magazine. According to the deposition testimony of Ira Kirschenbaum, who is Dorjam's nominal vice president as well as the vice president and CEO of Drake Publishers, Drake administered the publication of "Celebrity Skin" on behalf of Dorjam and Celebrity Skin. Drake's employees gathered the photographs used in the magazine, kept the books, wrote all the checks, prepared the print order for "Celebrity Skin, Special No. 6," filed Dorjam's tax returns, and performed other administrative tasks.

The district court, 596 F.Supp. 28, awarded summary judgment against Dorjam and Drake as infringers of the copyright of the photograph. The parties then avoided a damages trial by stipulating to the facts necessary for the court to determine damages. Noting that once gross revenues from the infringing work were established the burden rested upon the infringer to prove those expenses that should be deducted to establish profit, see Lottie Joplin Thomas Trust v. Crown Publishers, Inc., 592 F.2d 651, 657 (2d Cir.1978), Judge Sweet made an award of $59,283 under section 504(b) of the Copyright Act of 1976, 17 U.S.C. Sec. 504(b) (1982), for actual damages. In calculating expenses, the court decided that all printing, laminating, wrapping and binding costs, a total of $165,070, should be deducted. On a cross-appeal Sygma claims that only 52% of that amount is properly deductible because only that percentage of copies printed were sold. Sygma also urges that the infringer should not be permitted to deduct any expenses related to the photograph and that the district court should not have deducted $42,882, the entire cost of separations, a procedure whereby color is broken down for printing purposes into separate films, each in a basic color. Drake Publishers and Dorjam Publications maintain on appeal that the chain of title to the photograph was unclear and that the district court therefore erred in granting summary judgment against Dorjam. They also contend that there was insufficient evidence to support a determination on summary judgment that Drake was a contributory infringer. Finally, they argue that, if they are found guilty of infringement, then damages should be recalculated. They claim that certain expenses not allowed by the district court, such as those for retouching, were properly deductible. In particular, they maintain that the district court determination that 75% of the magazine's profits were attributable to Ms. Welch's photograph was clearly erroneous.

We have little trouble upholding the summary judgment against both Drake and Dorjam. Appellants contend that the grant of summary judgment was inappropriate because there was insufficient evidence to rebut their assertion that Sygma either never had a valid copyright or that the copyright was forfeited by virtue of the French publication. The evidence before the district court, however, shows that plaintiff is entitled to bring this suit for infringement of its copyright. An unchallenged affidavit showed that Tony Kent was the photographer who had executed an assignment to Playboy. The line of copyright assignment after the picture was taken is clear in the record; there is nothing to indicate that Sygma fraudulently procured its copyright registration, or that the photograph might have been published without a copyright notice. Moreover, under 17 U.S.C. Sec. 410(c) (1982) a certificate of copyright registration procured within five years after first publication of the work is prima facie evidence of the validity of a copyright and of the facts stated in the certificate. That presumption of validity and of compliance with all formalities applies to an assignee, such as Sygma, who makes the first registration of a claim of statutory copyright in his name. 3 M. Nimmer, Nimmer on Copyright Sec. 12.11[C], at 12-80, 81 (1985). Appellants therefore bear the burden of proof, and they have failed to satisfy it. The record thus clearly established that Dorjam had infringed on a valid copyright.

That Drake is guilty of infringement is equally clear. All persons and corporations who participate in, exercise control over, or benefit from the infringement are jointly and severally liable as copyright infringers. See, e.g., Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 308-09 (2d Cir.1963); 3 M. Nimmer, Nimmer on Copyright Sec. 12.04[A], at 12-34 (1985). At the very least, Drake exercised control over the infringement: Drake employees, Drake capital, and Drake labor produced "Celebrity Skin." Cf. Ann-Margaret v. High Society Magazine, Inc., 498 F.Supp. 401 (S.D.N.Y.1980) (court states that High Society Magazine, Inc., the predecessor in interest of Drake, and Dorjam published "High Society Celebrity Skin"). That a shell corporation was the nominal publisher of the magazine is irrelevant. Infringers may not shield themselves from liability by dummy corporations such as Dorjam, see Shapiro, Bernstein, 316 F.2d at 308-09.

We come then to the damages. We reject Sygma's claim that the total printing cost allocable to the 48% of the copies that went unsold, i.e., $79,234, should not be deducted. All the expert witnesses, including Sygma's witness Ronald Scott, a magazine publishing consultant, testified that it is necessary in the skin magazine business to print approximately twice as many copies as will be sold in order to obtain proper distribution. Indeed, if a publisher cuts his print order to match anticipated sales, he will succeed only in reducing his sales by the same percentage as the percentage cut in the print order. Since issues not sold are ultimately destroyed, the entire printing expense is a cost of doing business. The cases relied upon by Sygma disallowing the deduction for unsold copies involved books and lithographic prints that remained unsold but were held in inventory and intended for sale, Smith v. Little, Brown & Co., 273 F.Supp. 870, 874 (S.D.N.Y.1967), aff'd, 396 F.2d 150 (2d Cir.1968); Alfred Bell & Co. v. Catalda Fine Arts, Inc., 86 F.Supp. 399, 413 (S.D.N.Y.1949), modified, 191 F.2d 99 (2d Cir.1951). In the present...