Video Views, Inc. v. Studio 21, Ltd.
| Decision Date | 16 April 1991 |
| Docket Number | 89-2799,Nos. 89-2798,s. 89-2798 |
| Parties | , 1991 Copr.L.Dec. P 26,686, 17 U.S.P.Q.2d 1753 VIDEO VIEWS, INC., Plaintiff-Appellant-Cross-Appellee, v. STUDIO 21, LTD., and Joseph Sclafani, Defendants-Appellees-Cross-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Michael J. Kralovec, Feiwell, Galper & Lasky, David A. Axelrod, Chicago, Ill., for plaintiff-appellee.
Robert M. Ward, Stephen F. Sherry, Allegretti & Witcoff, Chicago, Ill., for defendants-appellants.
Joseph Sclafani, Addison, Ill., pro se.
Before CUMMINGS, COFFEY, Circuit Judges, and GORDON, Senior District Judge. *
Video Views, Inc., the appellant and cross-appellee, is a corporation engaged in the business of sub-licensing "adult films" for video arcade exhibition on the premises of "adult entertainment businesses." The appellees and cross-appellants (who will be referred to collectively as "Studio 21") are Studio 21, Ltd., and its principal shareholder, Joseph Sclafani.
Video Views brought this action under the Copyright Act of 1976, 17 U.S.C. Sec. 101 et seq., alleging that Studio 21 had been infringing its exclusive right to perform certain adult films publicly. After a six-day trial, the jury returned a verdict finding that Studio 21 had willfully infringed Video Views' copyrights in two of the seven adult films involved in the action. The district court granted Studio 21's motion for a judgment notwithstanding the verdict on the issue of willfulness, but awarded Video Views statutory damages in the amount of $5,000 for each infringement. Both parties raise a number of issues on their respective appeal and cross-appeal. We affirm.
Video Views is engaged solely in the business of licensing what have come to be known as "adult films" for display in video arcades at "adult entertainment businesses," enterprises commonly referred to as "adult book stores." Video Views does not create adult films; it enters into sub-licensing agreements with adult book stores, such as Studio 21, which provide their customers with the opportunity to view adult films in viewing rooms located on premises. Video Views must first obtain from the respective copyright owners the exclusive right to perform those films publicly in video arcades. See 17 U.S.C. Secs. 101, 106(4). Video Views obtains that particular strand in the bundle of property rights designated by the Copyright Act by entering into licensing agreements with the respective copyright owners (typically the producers of the films). In effect, the copyright owners grant Video Views a limited exclusive right to sub-license the video arcade exhibition of particular adult films, in video cassette format, on business premises.
Studio 21 operates an "adult entertainment business" in Addison, Illinois. It provides video facilities of the type that Video Views would ordinarily sub-license. During the time period relevant to this action, Joseph Sclafani was the owner of all shares in Studio 21. He served as its president, and, along with his wife, Theresa, discharged other responsibilities vital to the operation of Studio 21, such as ordering goods, bookkeeping, and making personal decisions. Studio 21 built six "video arcade booths" on its premises wherein customers view adult films (such as those that had been licensed to Video Views) by the use of video arcade equipment operated by tokens. Customers could purchase tokens, for one dollar each, which would entitle them to view five minutes of selected adult films. At the time the customers purchase the tokens, they also notify the responsible Studio 21 employee of the film they would like to view. Studio 21 has a large inventory of these films, which are also available for home rental or purchase. Apparently, Studio 21 is aware of the scope of the copyright laws: on occasion, it learns from the owner of the exclusive public performance right that it has no authority to perform a particular video cassette in its video booths. As to such films, Studio 21 places a prominent "for sale or rental only" sticker on the video cassette to alert its employees. The alternative would be for Studio 21 to enter into a sub-licensing agreement to acquire that aspect of the public performance right from its owner.
When Video Views came to suspect that Studio 21 was providing its customers with the opportunity to view on its premises films that had been licensed to Video Views, Jerry Greenberger, Video Views' president, approached Mr. Sclafani, seeking to enter into a sub-licensing agreement with Studio 21. Studio 21 declined to do so. The filing of this action followed, initially resulting in the entry of a preliminary injunction barring Studio 21 from infringing Video Views' exclusive rights.
At trial, Video Views sought money damages for Studio 21's alleged willful infringement of the following films: Nothing to Hide, Baby Cakes, Black on White, Women in Love, Chocolate Candy, Doctor Desire, and Our Major is Sex. It sought statutory damages, an option available to it under the Copyright Act, see 17 U.S.C. Sec. 504(c), instead of electing to prove and recover actual damages and Studio 21's profits, see 17 U.S.C. Sec. 504(b). It also made a motion to strike Studio 21's demand for a jury trial, which was denied. The issues of liability and willfulness were tried to a jury. During the trial, William Mahr, a private investigator hired by Video Views, testified that he had viewed the films Nothing to Hide and Baby Cakes in a video arcade booth at Studio 21 on April 12, 1984. Mr. Greenberger also testified that he had visited Studio 21 on April 5, 1985, when he purchased 35-40 tokens and viewed the other five films involved in this action (coincidentally, the ones that Mr. Mahr had not). Although Theresa Sclafani testified that she saw Mr. Greenberger at Studio 21, another Studio 21 employee, Noble Butler, testified that he had been working that day but that he had never seen anyone purchase that many tokens.
The jury found that Studio 21 had willfully infringed the films Nothing to Hide and Baby Cakes, but had not infringed the other five films. Based upon the jury verdict, the district court assessed statutory damages pursuant to Sec. 504(c)(1) ($5,000 per infringement) and increased statutory damages pursuant to Sec. 504(c)(2) ($10,000 per infringement). The court ordered the entry of judgment in the total amount of $30,000. However, upon Studio 21's motion for judgment notwithstanding the verdict, the district court found the jury's verdict on the issue of willfulness to be unsupported by the evidence and vacated the award of any increased statutory damages. The district court also concluded that neither party had "prevailed" and declined to award either litigant costs and attorney's fees. This appeal followed.
Section 504 of the Copyright Act, 17 U.S.C. Sec. 504, provides the copyright owner with an election between two forms of monetary recovery from a copyright infringer. As in ordinary tort cases, the copyright owner is entitled to prove and recover its actual damages and profits, pursuant to Sec. 504(b). In addition, Sec. 504(c) grants an alternative form of recovery available to the copyright owner:
(1) Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum not less than $250 [$500] or more than $10,000 [$20,000] as the court considers just....
(2) In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $50,000 [$100,000]. In a case where the infringer sustains the burden of proving, and the court finds, that such infringer was not aware of and had no reason to believe that his or her acts constituted an infringement of copyright, the court it [sic] its discretion may reduce the award of statutory damages to a sum of not less than $100 [$200]....
17 U.S.C. Sec. 504(c) (1976) ().
On its appeal, Video Views challenges the granting of a jury trial, contending that the entire action should have been tried without a jury because it sought only statutory damages. Studio 21 urges that the seventh amendment to the Constitution required a jury trial in this copyright infringement action, despite the fact that Video Views sought statutory instead of actual damages.
This question has been the subject of some conflict among (and within) the circuit courts of appeal that have touched upon it, complicated by the fact that these decisions have been under both the Copyright Act of 1976 and the now-repealed Copyright Act of 1909. See, e.g., Chappell & Co. v. Palermo Cafe, 249 F.2d 77 (1st Cir.1957) (); Mail & Express Co. v. Life Publishing Co., 192 F. 899 (2d Cir.1912) (); Oboler v. Goldin, 714 F.2d 211 (2d Cir.1983) (per curiam) (); Gnossos Music v. Mitken, Inc., 653 F.2d 117 (4th Cir.1981) (); Twentieth Century Music Corp. v. Frith, 645 F.2d 6, 7 (5th Cir.1981) (per curiam) (); National Football League v. McBee & Bruno's, Inc., 792 F.2d 726, 729 n. 4 (8th Cir.1986) (); Sid & Marty Krofft Television Productions, Inc. v. McDonald's Corp., 562 F.2d...
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