Alfred Bell & Co. v. Catalda Fine Arts

Decision Date18 July 1949
Citation86 F. Supp. 399
PartiesALFRED BELL & CO., LIMITED, v. CATALDA FINE ARTS, Inc. et al.
CourtU.S. District Court — Southern District of New York

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Eugene Untermyer (of Guggenheimer & Untermyer), New York City, for plaintiff.

Edmund F. Lamb (of Purdy & Lamb), New York City, for Catalda.

James G. Holland (of Ehrich, Royall, Wheeler & Holland), New York City, for U. S. Printing etc.

SMITH, District Judge.

This is an action by a British corporation for infringement, of eight separate copyrights, of plaintiff's mezzotint engravings in color, by the defendants, alleged to have wrongfully reproduced photolithographs thereof. The Court, in an Interlocutory Judgment and Order of Reference dated December 5, 1947, 74 F.Supp. 973, found infringement; enjoined the defendants from further infringement and from further sale or disposal of any or all of the infringing photolithographs in their possession or under their control; and decreed that the plaintiff recover from the defendants jointly as joint tort-feasors, damages, profits, and attorneys' fees to the plaintiff for the services of their attorneys except so much of said services as were rendered upon certain discovery proceedings.

The Interlocutory judgment further ordered that the defendants be taxed with the allowance of the Special Master, the cost of the reference, and costs and disbursements of the suit, but decreed that defendant United States Printing & Lithograph Company should recover on its cross-claim against defendant Catalda Fine Arts, Inc., any portion of the plaintiff's recovery paid by it.

The Order of Reference charged the Special Master to "take evidence and compute and pass upon an accounting of defendants' profits and plaintiff's damages, and the plaintiff's attorneys' fees to the extent heretofore directed * * *", reporting separately also the reasonable value of the services of plaintiff's counsel in certain discovery proceedings abroad.

Thereafter hearings were held before the Special Master from April 7, 1948 through May 4, 1948. The report of the Special Master, filed October 20, 1948, awarded $2,199.77 profits against United States Printing & Lithograph Company (hereinafter called Lithograph); $8,955.53 profits against Catalda Fine Arts, Inc. (hereinafter called Catalda Company); and $1,268.20 profits against defendant Michael F. Catalda, individually. The Special Master determined that plaintiff was entitled to an award for its counsel fees of $7,500.00, and found in addition, in accord with the Court's decree, that the reasonable value of plaintiff's counsel fees for the services in connection with depositions abroad should be set at $1,500.00.

The action is presently before the Court on cross-motions for review of the Special Master's report and the objections thereto.

Defendant Lithograph has filed seventeen objections, and defendants Catalda Company and Catalda individually have filed forty-nine objections to the report. The plaintiff has moved for confirmation of the report, subject to two objections, and for final judgment.

The Court, by its Interlocutory Judgment, ordered the Special Master to determine both damages and profits. The plaintiff by its counsel abandoned any claim to damages, but seeks profits as defined and regulated by the copyright statute. Absent any claim for, or proof of, damages, and in view of plaintiff's affirmative disclaimer, the Interlocutory Judgment may be amended and the Court finds the plaintiff entitled only to profits, injunctive relief, costs and attorneys' fees as defined in the Interlocutory Judgment.

Had the plaintiff attempted to prove damages, it is clear that the defendants, as indicated in the earlier ruling, would be jointly and severally liable for the damages resulting therefrom. Gross et al. v. Van Dyke Gravure Co., 2 Cir., 1916, 230 F. 412. But the plaintiff here has proved only profits. Originating in equity, accountability for profits is peculiarly personal, the presupposition being that the infringer has gotten something which it is unreasonable for him to keep. The defendants here are not jointly accountable but individually accountable for the profits which each received, not being held for the profits which may have been received by a co-infringer. Sammons et al. v. Colonial Press, Inc., et al., 1 Cir., 1942, 126 F. 2d 341. The responsibility for costs and attorneys' fees under the statute is, however, joint as well as several.

Defendants' objections were for the most part repetitious and cumulative in effect. Some are of general nature, some relate only to single items. Two of the more general matters in dispute which may be said to depend on the degree of fault of the infringers are (1) whether the defendants should be required to pay plaintiff's attorneys' fees in the amount found to be reasonable by the Master and (2) whether in the computation of profits, the income taxes paid upon the profits for the years in which they were earned should be allowed the defendants as deductions from their gross profits in determining the amount of profits payable by the defendants to the plaintiff. There are some cases in which an innocent infringer has been excused from the payment of any substantial attorneys' fees and, on the other hand, there are cases in which deliberate or willful infringers have been held not entitled to deduct income tax payments from the gross profits in arriving at the recovery of profits by the victim of the infringement.

The infringers in this case were not innocent of knowledge of the claimed copyright by the plaintiff of the subjects in suit. On the other hand, their villainy is not of the deepest dye in that the copying was open, with no attempt at concealment, under a good-faith claim of a right to copy because of the claimed invalidity of the plaintiff's copyright.

All the defendants appear readily to have disclosed, for the determination of the issues raised in this action, all the facts with regard to the copying of the subjects in suit and to the nature of the process used in so doing. This was in marked contrast to the difficulties encountered by the defendants in their efforts to develop the facts as to the nature of the mezzotint engraving process used by the plaintiff's artists, for its bearing on the issue of copyrightability, and on the nature of the makeup and contracts of the Fine Arts Trade Guild for their bearing on the issue of violation of the anti-trust laws by the plaintiff.

The nature of defendants' acts is, of course, darkened somewhat by the use of a false copyright label, by sales after notice, and by the defendant Lithograph's apparent unconcern over the validity of the plaintiff's copyright so long as defendants Catalda Company and Catalda individually were willing to indemnify Lithograph.

Under these circumstances there would appear to be no question but that, in all fairness, the defendants should be required to pay the plaintiff a substantial allowance for attorneys' fees since the defendants deliberately brought about this court test of the validity of the plaintiff's copyrights, knowing that, by so doing, they would, if unsuccessful, incur liability for plaintiff's attorneys' fees as well as an accountability for any profits realized by them in the process.

The matter of disallowance of income tax deduction stands upon a slightly different footing. It appears to be a severe additional penalty imposed because of the gravity of the offense of pirating in any case. Since the Court has found that the copying here, although done with knowledge of the existence of the plaintiff's copyrights, was done under a good-faith claim of a defense of invalidity of the copyrights, it would not appear that the offense is of sufficient gravity to assess the additional penalty of disallowance of the income tax deduction here. Compare Stromberg Motor Devices Co. v. Zenith-Detroit Corporation, 2 Cir., 1934, 73 F.2d 62-65.

However, defendants' present claim of deduction for income tax is excessive in amount. Defendants' claim that income tax should be credited at the highest rate paid, while it has some plausibility, runs counter to the general scheme of accounting adopted as the measure of profits whose retention by the infringer would be unfair.

Often the infringer, if the infringement be considered the last business of the accounting period, might be considered already to have earned and written off his general overhead on his non-infringing business, so that the rate of profit on the infringement would greatly exceed the average rate for the accounting period. But as we shall see, the courts have considered it only fair to charge against the infringement as well as the non-infringing business the overhead expenses of a general nature incurred for the benefit of the business as a whole, including both types.

So also it would appear consistent and equitable to consider the infringements a part of the mass of business which produced the profits taxed from the bottom to the top of the scale of taxation, and credit that part with its proportion of the tax paid at each of the rates that go to make up the entire tax.

As to the amounts of the two items, the $7,500.00 assessed as reasonable attorneys' fees for the work of the plaintiff's attorneys, aside from that work involved in the discovery proceedings which was excluded by the Court from the consideration of the Master, appears to be within reasonable limits and not clearly erroneous. Some addition should be made for counsel's services on these objections. The amount of the income tax allowance also appears to be computed by the Master upon the proper formula.

So far as the profits of the individual Catalda are concerned, the Master has included both salary and commissions. The proportion of the commissions applicable to the scale of the infringing lithographs may well be considered a profit within the meaning of the statute. With...

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  • USM Corp. v. Marson Fastener Corp.
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    ...question might be answered by the way in which the recoverable profits themselves are determined. See Alfred Bell & Co. v. Catalda Fine Arts, Inc., 86 F.Supp. 399, 404 (S.D.N.Y.1949), aff'd as modified, 191 F.2d 99 (2d Cir.1951).7 If the wrongdoer is an "innocent" one or one who acted in go......
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