Magnuson v. Video Yesteryear

• Decision Date: 11 June 1996
• Docket Number: Nos. 94-16787,94-17019 and 95-15369,s. 94-16787
• Citation: 85 F.3d 1424
• Parties: , 1996 Copr.L.Dec. P 27,538, 34 Fed.R.Serv.3d 1455, 39 U.S.P.Q.2d 1018, 96 Cal. Daily Op. Serv. 4132, 96 Daily Journal D.A.R. 6699 John MAGNUSON, d/b/a John Magnuson Associates, Plaintiff-Appellee-Cross-Appellant, v. VIDEO YESTERYEAR, Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1424

85 F.3d 1424

65 USLW 2027, 1996 Copr.L.Dec. P 27,538,

34 Fed.R.Serv.3d 1455,

39 U.S.P.Q.2d 1018, 96 Cal. Daily Op. Serv. 4132,

96 Daily Journal D.A.R. 6699

John MAGNUSON, d/b/a John Magnuson Associates, Plaintiff-Appellee-Cross-Appellant, v. VIDEO YESTERYEAR, Defendant-Appellant-Cross-Appellee.

Nos. 94-16787, 94-17019 and 95-15369.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 9, 1996.

Decided June 11, 1996.

Allen Hyman, Law Offices of Allen Hyman, Studio City, California, for defendant-appellant-cross-appellee.

Thomas A. Cohen, Law Offices of Thomas A. Cohen, San Francisco, California, for plaintiff-appellee-cross-appellant.

Appeals from the United States District Court for the Northern District of California, D. Lowell Jensen, District Judge, Presiding. D.C. No. CV-92-04049-DLJ.

Before: FERGUSON, D.W. NELSON, and FERNANDEZ, Circuit Judges.

Opinion by Judge D.W. NELSON; Dissent by Judge FERNANDEZ.

D.W. NELSON, Circuit Judge:

OVERVIEW

Video Yesteryear ("VY") appeals the district court's holding in favor of John Magnuson d/b/a John Magnuson Associates for copyright infringement under the Copyright Act of 1909. Act of March 4, 1909, ch. 320, 35 Stat. 1075 (codified as amended at 17 U.S.C. § 1 et seq.). VY contends that Magnuson lacks standing to sue for copyright infringement because he does not own the rights to the work at issue, a film entitled "Lenny Bruce." VY also argues that the district court erred in refusing to award attorney's fees as part of post-offer costs under Fed.R.Civ.P. 68. Under Rule 68, a party that rejects a settlement offer made at least ten days prior to trial must pay post-offer costs of the offeror if damages awarded do not exceed the amount of the offer. Magnuson cross-appeals the district court's refusal to award him attorney's fees under 17 U.S.C. § 505, which permits the district court to award costs and attorney's fees "in its discretion." He also asserts that VY is not entitled to costs under Rule 68 because the offer was defectively served.

We affirm the decision of the district court with respect to Magnuson's copyright infringement claim and the denial of VY's request for attorney's fees pursuant to Rule 68. We reverse the district court's award of VY's costs. We remand for reconsideration on the question of whether Magnuson should have been awarded attorney's fees pursuant to 17 U.S.C. § 505.

FACTUAL AND PROCEDURAL BACKGROUND

This appeal involves the rights to "Lenny Bruce," a black-and-white film created by John Magnuson and the American satirist Lenny Bruce. In the film, which was shot in a New York night club in 1965, Magnuson and Bruce sought to convey Bruce's version of the events that gave rise to his arrest and conviction for obscenity. The film was produced by the California corporation, Imagination, Inc. ("Imagination"), of which Magnuson was the chief executive officer. Imagination paid the production and post-production expenses and employed the camera and sound crews for the film, while Bruce was the sole author of the material used in the film. There is no existing written agreement between Bruce, Magnuson or Imagination concerning rights to the film.

Following a suggestion made by Bruce, Magnuson set up a corporation, Columbus Productions, Inc. ("Columbus"), for the purpose of owning the film. Columbus was created on October 10, 1966, subsequent to Lenny Bruce's death. At the time of its creation, Magnuson was sole shareholder and chief executive officer of Columbus. On October 17, 1966, Magnuson held a public screening of the film in San Francisco in order to secure copyright protection under the Copyright Act of 1909. Columbus then applied for copyright registration for the film, listing itself as the "author" and "owner" of the film, and secured copyright registration in March, 1968.

The district court found that Columbus often performed business as John Magnuson Associates and that Magnuson changed the name of Columbus to John Magnuson Associates in the 1970s. Aside from Magnuson, Columbus never had any regular employees. In the seventies, Magnuson licensed the Lenny Bruce film to a number of distributors, including Time/Life Films, Kino International, Virgin Video, EEN and Rhino Home Video. He also made an agreement concerning the division of royalties with the Bruce estate in 1975. These agreements were made under the name of John Magnuson Associates. On October 1, 1979, Columbus was suspended for failure to pay California corporate In 1979, VY purchased a copy of the Lenny Bruce film which did not include a copyright notice. VY conducted a search with the U.S. Copyright Office to determine whether any film entitled "Lenny Bruce in Concert" had been registered, although the film in question has never gone by that title. The search produced no results, and VY, concluding that the Lenny Bruce film was in the public domain, began marketing the film on video tape in 1979. The video was not authorized by Magnuson and contains a copyright notice claiming a 1983 copyright belonging to VY.

                franchise taxes.   On March 3, 1993, a Memorandum of Assignment of Rights from Columbus Productions, Inc. to John Magnuson was recorded with the U.S. Copyright Office
                

Magnuson filed an action for copyright infringement against VY and trial was scheduled to begin on March 7, 1994, with a pretrial conference set for March 2, 1994. On February 22, 1994, VY sent by Federal Express and by facsimile ("fax") an offer of judgment pursuant to Fed.R.Civ.P. 68 for $3,000. Magnuson's attorney rejected the offer because it was untimely, having been served less than ten court days before the scheduled trial date. The district court held in favor of Magnuson on the copyright claim and awarded $375 in damages. It rejected Magnuson's request for attorney's fees pursuant to 17 U.S.C. § 505. It also rejected VY's request for attorney's fees pursuant to Fed.R.Civ.P. 68, but awarded costs under that rule, finding that the offer had been timely. VY appeals the district court's holding with respect to copyright infringement and its denial of VY's request for attorney's fees. On cross-appeal, Magnuson challenges the district court's award of costs to VY and the denial of its request for attorney's fees.

STANDARD OF REVIEW

We review the district court's findings of fact following a bench trial for clear error and its conclusions of law de novo. Fed.R.Civ.P. 52(a); Price v. United States Navy, 39 F.3d 1011, 1021 (9th Cir.1994). We review de novo the district court's construction of Rule 68. Herrington v. County of Sonoma, 12 F.3d 901, 906 (9th Cir.1993). The district court's decision as to whether to award attorney's fees under the Copyright Act is reviewed for abuse of discretion. Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1532 (9th Cir.1993), rev'd on other grounds, 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994).

ANALYSIS

I. Magnuson's Right to Sue for Copyright Infringement

VY argues that the district court erred in finding that Magnuson is the owner of the copyright to the Lenny Bruce film and that he therefore has standing to sue for copyright infringement. VY contends that (1) there was not a valid transfer of copyright from Lenny Bruce to Columbus; and (2) even if there was a valid transfer from Lenny Bruce to Columbus, there was not a valid transfer from Columbus to John Magnuson Associates. VY's argument is without merit.

A. Transfer from Lenny Bruce to Columbus

VY argues that Lenny Bruce alone was the author of the Lenny Bruce film and that Imagination never shared ownership of the copyright to the film as a coauthor. Even if Imagination did hold a copyright to the film, VY asserts, it did not transfer that copyright to Columbus prior to the film's publication on October 17, 1966.

The district court correctly held that the Copyright Act of 1909 is the applicable law in this case because the copyright was secured in 1968, prior to the adoption of the 1976 Act. See Lone Ranger Television v. Program Radio Corp., 740 F.2d 718, 719-20 (9th Cir.1984) (applying the 1909 Act where the original copyright dated back to 1954 and the alleged infringement took place in 1979). Under the 1909 Act, a common law copyright vested in the author or authors of a work at the time of its creation. Copyright Act of 1909, § 2, reprinted in 5 Nimmer on Copyright (hereinafter Nimmer ) Appendix 6; see 1 Nimmer § 2.02 at 2-18.1. A party that commissioned and paid for the production of the work was considered an author and held common law copyright to the work. Lin- Brook Builders Hardware v. Gertler, 352 F.2d 298, 300 (9th Cir.1965).

Here, the district court found that Imagination and Bruce made a mutual decision to create the film, that Bruce took "clear initiative in directing and undertaking" the filming, and that Magnuson (the owner of Imagination) produced the film and paid for the crews and equipment used in its production. Because these findings are not clearly erroneous, the district court properly held that both Bruce and Imagination held the original common law copyright in the film as commissioning parties.

The district court also found that Lenny Bruce transferred his interest in the film to Imagination and that subsequently, Imagination transferred the common law copyright to Columbus. "Common law copyrights could be transferred either orally, or by implication from the conduct of the parties." 1 Nimmer § 5.03[B] at 5-46 (citing Real Estate Data, Inc. v. Sidwell Co., 809 F.2d 366, 374 (7th Cir.1987)). The district court concluded that in suggesting that Magnuson create a new corporation for the purpose of owning the film, Bruce indicated his intent to transfer his rights to Imagination. In addition, it held that by creating such a corporation (Columbus) and transferring the film to the books of the new corporate entity, Imagination effected a valid transfer of the common law copyright to Columbus.

The district court found that after the...