M & A ASSOCIATES, INC. v. VCX, INC.

• Decision Date: 08 April 1987
• Docket Number: No. 82-CV-4924-DT.,82-CV-4924-DT.
• Citation: 657 F. Supp. 454
• Parties: M & A ASSOCIATES, INC., a/k/a M & A, Inc., Plaintiff, v. VCX, INC., Defendant.
• Court: U.S. District Court — Western District of Michigan

657 F. Supp. 454

M & A ASSOCIATES, INC., a/k/a M & A, Inc., Plaintiff, v. VCX, INC., Defendant.

No. 82-CV-4924-DT.

United States District Court, E.D. Michigan, S.D.

April 8, 1987.

COPYRIGHT MATERIAL OMITTED

Simcha Shapiro, Spilkin & Shapiro, Southfield, Mich., for plaintiff.

Marietta S. Robinson, Sommers, Schwartz, Silver & Schwartz, Southfield, Mich., for defendant.

MEMORANDUM OPINION AND ORDER

WOODS, District Judge.

M & A Associates, Inc. (M & A) agreed to sell VCX, Inc. (VCX) an exclusive right to make video cassette copies of a motion picture entitled "Debbie Does Dallas." M & A was to receive royalties of ten dollars for each copy sold by VCX. M & A claims that VCX breached its obligation to pay royalties. VCX, on the other hand, claims that its performance is excused because of M & A's failure to protect the film under the Copyright Act of 1976, 17 U.S.C. § 101, et seq.

The Court, having conducted a trial and having heard arguments by counsel, submits the following findings of fact and conclusions of law:

FINDINGS OF FACT

1. M & A Associates, Inc., is an assumed name under which its president, Arthur Weisberg, conducts business in Michigan. Weisberg was a Michigan resident when the complaint was filed.

2. VCX, Inc., is a California corporation with its principal place of business in California. At all times pertinent to this action VCX manufactured video tapes for sale and/or distribution.

3. Norman Arno is the president of VCX.

4. "Debbie Does Dallas" was purportedly produced in 1978 by Schoolday Productions, Inc., a New York corporation.

5. The film was created through the cooperative efforts of David Buckley and other individuals. Buckley served as the writer, director, and producer. The other individuals were independent contractors of Schoolday.

6. Buckley, as the sole officer, director, and shareholder of Schoolday, exercised complete control over Schoolday and made all decisions concerning the film.

7. Although there was no contract by which the rights to the film were transferred from Schoolday to Buckley, the written minutes and records of Schoolday recited such a conveyance.

8. Buckley never copyrighted the film.

9. The film opened in October of 1978 at the Pussycat Theatre in New York City.

10. From that time until the present, the film continued to be theatrically shown without a copyright notice.

11. In December of 1978, Buckley conveyed all right, title, and interest in the film to M & A.

12. On or about February 13, 1979, M & A assigned to VCX the right to make video cassette copies of the film. The contract stated in pertinent part as follows:

This agreement is for the sale of the exclusive video tape, video disc, and any other future, prerecorded video systems rights.

M and A, Inc.... hereby warrants that it is the sole owner of the motion picture, "Debbie Does Dallas" and is authorized to sell the exclusive video rights. Seller further warrants that it has not given said rights to any other entity, and will refrain, upon the completion of this agreement, from selling said rights or authorizing any other entity to distribute said video rights including M and A, Inc.

....

The video rights given to VCX by M & A are exclusive for world wide distribution.

M & A indemnifies VCX for any claims by others that VCX through this Agreement does not have the sole video rights to said motion picture, and agrees to pay the costs of any litigation, including attorney's fees, that arise from claims by others of ownership of this motion picture or ownership of the video rights of "Debbie Does Dallas."

13. The contract assigned only the video cassette rights in the film; M & A retained all theatrical rights in the film.

14. The contract is silent as to choice of law.

15. The contract became effective when signed by both parties in Michigan.

16. The contract does not specify the place of performance.

17. M & A's offices were located in Michigan, where VCX was to send its royalty payments and where M & A's performance presumably was to occur. VCX had an office in California. No acts by VCX relating to the manufacture, duplication, or sale of cassettes were expected to be performed in Michigan.

18. Arthur Weisberg knew that VCX entered into different types of contracts depending upon the type of rights VCX was acquiring, and that VCX and other companies would pay different amounts depending on whether they were obtaining exclusive or non-exclusive rights.

19. Weisberg testified that the matter of a copyright was neither mentioned nor considered by the parties prior to the time they entered into the contract. Arno testified, however, that he received a print of the film from Weisberg approximately one month after they entered into the contract. According to Arno, he asked Weisberg for "copyright protection" immediately after he received the print.

20. In April of 1979, Arno became aware of unauthorized copying of the film.

21. Arno, through VCX, retained attorneys John Lappen and Peter Berger for the purpose of bringing civil actions against "dupers" of his video cassettes. "Dupers" are individuals who, without authority from an owner, make duplicate copies of video cassettes.

22. Before VCX could commence litigation against dupers, VCX was required to make sure that reasonable efforts were taken to add copyright notices to all of the motion pictures and cassettes being published. VCX also had to file a copyright registration with the copyright office.

23. It was impossible for VCX to complete an application for a copyright registration without first obtaining information from Weisberg.

24. VCX could not protect the rights in the work "Debbie Does Dallas" by merely placing a copyright notice on the video cassettes. In order for there to be proper copyright notice, notice had to be added to both the video cassettes and the movie version shown in theatres.

25. In January of 1981, Berger informed Weisberg of the need to add copyright notice to the prints of the picture that had been sent to various theatres. Berger testified that copyright notice was needed to cure the fact that prints had been widely distributed without proper notice prior to that time.

26. The addition of a copyright notice to the prints of a picture is common in the movie industry and simple to accomplish.

27. Prints of a movie are distributed by making a negative, and then striking prints from that negative.

28. Motion picture prints of the picture are kept at print depots. When a booking is made, the print depot sends the print to the theatre.

29. Cineffects Color Laboratory, Inc., made the negative for "Debbie Does Dallas." Weisberg never asked Cineffects to insert a copyright notice on the movie.

30. Berger had several conversations with Weisberg in the months after their initial conversation in January of 1981. Berger repeatedly requested that Weisberg insert a copyright notice in the movie version of the picture. Weisberg refused to do so. To this day, the movie version of the picture does not contain a copyright notice.

31. In addition to communicating with Weisberg, Berger communicated with David Kravis, who worked for Weisberg. Berger advised Kravis that M & A needed a copyright notice inserted in the movie version of the film. Kravis also received the same advice from John Lappen. Despite receiving that advice, Kravis never inserted a copyright notice in the film.

32. At the time of the conversation between Berger and Weisberg in January of 1981, Weisberg and Arno both knew the legal significance of the omission of the copyright notice, and that such omission prevented Weisberg from having the ability to transfer exclusive video cassette rights to the film. The parties understood that such rights would be lost if reasonable efforts were not made to add the copyright notice to both the video cassettes and the movie version.

33. Weisberg also was told that if he continued to refuse to insert the copyright notice in the movie version of the film, M & A would be without any legal recourse against dupers.

34. In late 1981, Lappen and Berger determined that, under the Copyright Act, the copyright to the film was irretrievably lost since "reasonable efforts" had not been made.

35. Although VCX brought numerous civil actions against dupers of its video cassettes, the lack of a copyright notice in "Debbie Does Dallas" made it impossible for VCX to bring civil actions against dupers of that film.

36. VCX lost sales as a result of its inability to enforce its "exclusive" rights to sell video cassette copies of the film.

37. VCX nevertheless continues to the present time producing and selling copies of the film.

38. In exchange for the "exclusive" right to sell video cassette copies of the film, VCX agreed to pay a $10.00 royalty for each video cassette copy sold, along with an advance payment of $25,000.00. A rider to the agreement permitted VCX to deduct $2,500.00 each month from the $25,000.00 deposit and credit that amount to the first 10 monthly royalty payments.

39. VCX made royalty payments to M & A until March of 1982.

40. The payments totaled $235,440.00.

41. The market value of non-exclusive video cassette rights to the film is $10,000.00.

42. The parties terminated the contract on November 19, 1982.

CONCLUSIONS OF LAW

1. Both parties assume that the Court may assert jurisdiction over this case on the basis of diversity of citizenship. 28 U.S.C. § 1332(a). The allegations in "plaintiff" M & A's complaint and VCX's counterclaim, however, are jurisdictionally defective in that M & A is merely an assumed name and lacks capacity to bring or defend this action. F.R.Civ.P. 9(a). Nonetheless, the failure to name Arthur Weisberg as plaintiff and counter-defendant is at most a formal irregularity, which does not affect the diversity jurisdiction of this Court. See Blanchard v. Terry & Wright, Inc., 331 F.2d 467 (6th Cir.), cert. denied, 379 U.S. 831, 85 S.Ct. 62, 13 L.Ed.2d 40 (1964)....