Platt & Munk Co. v. Republic Graphics, Inc.

• Citation: 315 F.2d 847
• Decision Date: 21 March 1963
• Docket Number: No. 221,241,27904.,Dockets 27867,221
• Parties: The PLATT & MUNK CO., Inc., Plaintiff-Appellee, v. REPUBLIC GRAPHICS, INC., Defendant-Appellant. The PLATT & MUNK CO., Inc., Plaintiff-Appellee, v. PLAYMORE, INC., Lederer Industries, Inc. and J. C. Boyan Associates, Inc., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

315 F.2d 847 (1963)

The PLATT & MUNK CO., Inc., Plaintiff-Appellee, v. REPUBLIC GRAPHICS, INC., Defendant-Appellant.

The PLATT & MUNK CO., Inc., Plaintiff-Appellee, v. PLAYMORE, INC., Lederer Industries, Inc. and J. C. Boyan Associates, Inc., Defendants-Appellants.

Nos. 221, 241, Dockets 27867, 27904.

United States Court of Appeals Second Circuit.

Argued January 23, 1963.

Decided March 21, 1963.

On Rehearing April 3, 1963.

Donald A. Jelinek, George P. Monaghan, New York City, for defendant-appellant Republic Graphics, Inc.

Martin C. Greene, Aberman & Greene, New York City (Arnold L. Fein, New York City, of counsel), for defendant-appellant Playmore, Inc.

Perry Gottlieb, New York City, for defendant-appellant Lederer Industries, Inc.

John A. Wiener, Greenbaum, Wolff & Ernst, New York City (Julia Perles, New York City, of counsel), for plaintiff-appellee.

Before FRIENDLY, KAUFMAN and MARSHALL, Circuit Judges.

FRIENDLY, Circuit Judge.

The question is whether an unpaid manufacturer of copyrighted goods, which are alleged to be defective by the copyright proprietor who has ordered them, may sell them in satisfaction of his claim for the contract price without infringing the "exclusive right" of the proprietor to "publish * * * and vend the copyrighted work," 17 U.S.C. § 1(a); there is a related question as to the rights of persons who have already purchased some of the goods from the manufacturer. It seems exceedingly strange that these questions should arise for the first time, as is apparently the case, one hundred and seventy-three years after the initial grant of copyright protection by Congress, 1 Stat. 124 (1790), and two hundred and fifty-four after the Statute of Anne, 8 Anne, c. 19 (1709). Whether the lack of precedent is attributable to an unusually high standard of dealing, and of solvency, on the part of copyright proprietors and those manufacturing for them, or to an unaccustomed and unexpressed previous consensus in the profession as to the applicable rule of law, it is none the less remarkable.

The issue has arisen in this manner. Plaintiff, The Platt & Munk Co., Inc., a publisher and distributor of educational toys, entered into four contracts with defendant Republic Graphics, Inc., for Republic to manufacture for Platt & Munk 25,000 sets of a United States map puzzle, 50,000 sets of the "Blackboard Library," including the "Blackboard Book of Numbers" and the "Blackboard Book of Letters," together with 40,000 slip-cover cases (this item having been the subject of two different orders), and 50,000 sets of another toy called "I Can Print." The map puzzle, the two Blackboard Books, and "I Can Print" were all protected by registered copyrights of which Platt & Munk was the sole proprietor. The contracts were simple letter agreements with no provisions expressly relating to the copyrighted nature of the toys. However, Republic was well aware of Platt & Munk's copyright protection, as is evidenced by, among other things, a letter from it confirming "that we have served, at your instructions, and have been or will be paid an agreed fee for design services in connection with the following titles and/or the contents, jackets, or box wraps thereof," "that with reference to each and all of the above-named works our Company acted in the capacity of an employee for hire of the publisher, The Platt & Munk Co., Inc., as that term is used in the United States Copyright Law (17 U.S.Code)",¹ and that Platt & Munk "is the sole proprietor of each and all of the above-named works and all rights therein and thereto throughout the world forever including but not by way of limitation the manuscripts, illustrations, and designs thereof, and that no component element created for any of the above-named works will be used by this Company, its assigns or heirs without specific agreement with the publisher and owner thereof, The Platt & Munk Co., Inc."²

Platt & Munk's complaint against Republic was filed in the District Court for the Southern District of New York on March 1, 1962, and asserted federal jurisdiction under 28 U.S.C. §§ 1338 and 1400, the provisions of the Judicial Code which govern claims arising under the Copyright Act. It alleged that after Republic began delivery of the Blackboard Books, plaintiff found that a substantial proportion of the contents was damaged in that the chalk and eraser boxes were improperly glued to the covers so that the chalk arrived scattered and broken, and that many of the slip-cover cases also were improperly glued. The complaint further alleged that deliveries of "I Can Print" demonstrated that a plastic type and type face used by Republic, and previously warranted as being adequate to the task, did not and could not produce a satisfactory impression on paper, and that plaintiff was consequently obliged to withdraw the sets from sale to protect its reputation. The complaint also said that about January 19, 1962, Republic attempted to deliver all the items it had manufactured but Platt & Munk refused to accept delivery because large numbers of the Blackboard items were defective and the "I Can Print" items were useless; that Republic asserted an intention to protect itself by selling the manufactured merchandise; and that such a sale would infringe plaintiff's copyrights. The complaint sought damages for the alleged breach of contract and an injunction against the threatened sales by Republic; plaintiff obtained a temporary order restraining Republic from sales pending the determination of a motion for an injunction.

On March 28, 1962, Platt & Munk filed a second complaint in the Southern District of New York, this time against appellants Playmore, Inc., Lederer Industries, Inc., and J.C. Boyan Associates, Inc. This complaint repeated many of the allegations of the complaint against Republic, including the jurisdictional ones, and claimed in addition that Republic had actually "disposed of a large part" of the goods manufactured for plaintiff and that defendants (Boyan Associates being alleged to be a wholly owned subsidiary or an affiliate of Republic) had purchased some of them and were selling them; an injunction and damages for copyright infringement were demanded. In this second case too, a temporary restraining order was issued in favor of Platt & Munk.

The motions for preliminary injunctions in both actions were adjourned from time to time, initially by consent because of settlement discussions; they ultimately came on for disposition in September, 1962, on the basis of affidavits. Platt & Munk's moving affidavit in the action against Republic challenged Republic's right to make bulk deliveries, claiming that Republic was bound to store the United States map puzzles and the Blackboard Books until Platt & Munk called for them, and supplemented the allegations of the complaint as to the defective character of some of the goods, although it expressed willingness to accept the map puzzles if delivered on requisition rather than in bulk, as it did also with respect to so many of the Blackboard Books as were in salable condition. Republic's opposing affidavit alleged that all deliveries were intended to be made prior to Christmas in 1961, so that Platt & Munk could not properly complain over the bulk delivery in January, 1962, and challenged plaintiff's claim as to defects in the goods. The affidavits in the second action added nothing material.

Judge Cooper granted preliminary injunctions restraining the defendants in both actions "from taking any steps to manufacture or to effectuate any sale" of the copyrighted merchandise; the orders were silent as to the duration of the injunctions or as to the further proceedings contemplated. Republic, Playmore and Lederer have appealed, 28 U.S.C. § 1292(a) (1).

We put to one side a theory, not discussed in the district judge's opinion but urged to some extent on the argument, that the injunctions may be supported on the basis of injury to plaintiff's reputation through the sale of defective goods bearing its name. It is clear enough that the district court here had jurisdiction of this claim as "pendent" to plaintiff's suit for copyright infringement, since this was a colorable "claim of unfair competition * * * joined with a substantial and related claim under the copyright * * * laws." 28 U.S.C. § 1338(b); cf. Champion Spark Plug Co. v. Sanders, 331 U.S. 125, 67 S.Ct. 1136, 91 L.Ed. 1386 (1947); American Law Institute, Restatement of Torts, § 714. But the judge, although referring to the issue in a rather generalized manner in his findings of fact, reached no conclusion of law in regard to it; as to the map puzzles and at least some of the Blackboard items, moreover, the uncontroverted fact that plaintiff itself continued to sell the merchandise received from Republic and its willingness to receive more would undermine or at least restrict the application of such a theory. The judge apparently rested his decision solely on the ground of copyright infringement, and we shall so consider it.

Although defendants have been "vending" copyrighted works without any express license from the copyright proprietor, it is contended that, despite the exclusive right to vend granted to the proprietor by § 1(a) of the Copyright Act, 17 U.S.C. § 1(a), they are entitled to do this because of § 27 of the Act, especially its final clause. Section 27 provides:

"The copyright is distinct from the property in the material object copyrighted, and the sale or conveyance, by gift or otherwise, of the material object shall not of itself constitute a transfer of the copyright, nor shall the assignment of the copyright constitute a transfer of the title to the material object; but nothing in this title shall be deemed to forbid, prevent or restrict the transfer of any copy of a copyrighted work the possession of which has been lawfully obtained."

Since Republic's possession of the goods was "lawfully obtained" under its contract with Platt & Munk...