Allied Marketing Group, Inc. v. CDL Marketing, Inc.

Citation878 F.2d 806
Decision Date13 July 1989
Docket NumberNo. 88-1747,88-1747
Parties1989 Copr.L.Dec. P 26,449, 14 Fed.R.Serv.3d 1086, 11 U.S.P.Q.2d 1605 ALLIED MARKETING GROUP, INC., d/b/a Sweepstakes Clearinghouse, Plaintiff-Appellee, v. CDL MARKETING, INC., Carl D. Landon and S & H Marketing Group, Inc., Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Bruce Longenecker, Dallas, Tex., for CDL & Landon.

Richard L. Schwartz, Glaser, Griggs & Schwartz, Dallas, Tex., for S & H.

P. Weston Musselman, William M. Parrish, Jenkins & Gilchrist, Dallas, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before WISDOM, KING and WILLIAMS, Circuit Judges.

KING, Circuit Judge:

S & H Marketing appeals from the order of the district court granting a preliminary injunction which precludes them from using promotional post card mailers which are "confusingly similar" to the copyrighted mailers of plaintiff Allied Marketing. For the reasons set forth below, we remand the case to the district court but leave the preliminary injunction in place on the condition that the district court issues a supplementary opinion explaining more fully its reasons for granting the preliminary injunction.

I.

Plaintiff-appellee Allied Marketing Group, Inc. ("Allied") sued defendants-appellants CDL Marketing, Inc., Carl D. Landon, and S & H Marketing Group, Inc. (collectively "S & H") in the Federal District Court for the Northern District of Texas, alleging copyright infringement, unfair competition under the Lanham Act, common law unfair competition, and civil conspiracy.

Both Allied and S & H are engaged in mail order retail sales and have used postcard mailers to notify consumers that particular goods are available for purchase. Stevan Hammond, the president of Allied asserted that he conceived and developed the promotional postcard mailer at issue here and first used a similar mailer in 1985. On February 17, 1987, Allied registered its copyright in the postcard format. It began using the copyrighted version in January of 1987.

S & H, on the other hand, claims that it conceived the postcard format in February of 1987. S & H began mailing its postcards in June, 1987.

The allegedly infringing postcards mailed by S & H used a format which the district court found to be "virtually identical" to that used by Allied. Allied and S & H have both printed their cards on different colors of paper.

Allied requested and was granted a preliminary injunction prohibiting S & H from using the allegedly infringing postcard mailer. The district court issued a memorandum opinion and order granting the preliminary injunction on July 11, 1988. The preliminary injunction was issued on July 15, 1988, to remain in effect until plaintiff's application for a permanent injunction could be heard by the court. S & H subsequently moved to "alter, amend, and/or supplement" the preliminary injunction pursuant to Rules 52 and 59 and to stay the injunction pending appeal pursuant to Rule 62. In its motion, S & H argued that the district court had failed to address the validity of Allied's copyright or the protectability of its trade dress and asked the court to clarify the grounds of its memorandum opinion of July 11, 1988. On September 21, 1988, the district court amended the preliminary injunction to clarify the scope of prohibited activity, but declined to alter its memorandum opinion. The district court also refused to stay the injunction pending appeal. S & H timely filed a notice of appeal from the original and amended orders.

II.

A preliminary injunction may be granted only if the moving party establishes each of the following four factors: (1) a substantial likelihood of success on the merits; (2) a substantial threat that failure to grant the injunction will result in irreparable injury; (3) that the threatened injury outweighs any damage that the injunction may cause the opposing party; and (4) that the injunction will not disserve the public interest. Blue Bell Bio-Medical v. Cin-Bad, Inc., 864 F.2d 1253, 1256 (5th Cir.1989); Mississippi Power & Light Co. v. United Gas Pipe Line, 760 F.2d 618, 621 (5th Cir.1985); Dallas Cowboys Cheerleaders v. Scoreboard Posters, 600 F.2d 1184, 1187 (5th Cir.1979). A preliminary injunction is an extraordinary remedy and should be granted only if the movant has clearly carried the burden of persuasion with respect to all four factors. Mississippi Power & Light, 760 F.2d at 621; Apple Barrel Productions, Inc. v. Beard, 730 F.2d 384, 389 (5th Cir.1984).

The decision whether to grant a preliminary injunction is within the discretion of the district court. Accordingly, we may reverse the district court's decision only if it constitutes an abuse of discretion. Blue Bell Bio-Medical, 864 F.2d at 1256; Mississippi Power & Light, 760 F.2d at 621. In reviewing the district court's decision for abuse of discretion, we will not disturb its findings of fact unless they are clearly erroneous. Blue Bell Bio-Medical, 864 F.2d at 1256; Apple Barrel Productions, 730 F.2d at 386. The district court's determinations will not, however, be entitled to the deferential standard of review provided by Rule 52(a) if the trial court has not properly applied the governing legal standards. Falcon Rice Mill, Inc. v. Community Rice Mill, Inc., 725 F.2d 336, 344 (5th Cir.1984); Chevron Chemical Co. v. Voluntary Purchasing Groups, 659 F.2d 695, 703 (5th Cir.1981), cert. denied, 457 U.S. 1126, 102 S.Ct. 2947, 73 L.Ed.2d 1342 (1982).

In the instant case, the district court properly applied the four-pronged test for determining whether a preliminary injunction is appropriate. S & H contends, however, that the district court committed a number of legal errors in reaching its conclusions under each of the factors. In particular, S & H maintains that the district court erred in holding that there was a substantial likelihood that Allied would prevail on its copyright and unfair competition claims. 1 S & H has asserted a number of defenses to Allied's claims which could preclude Allied from prevailing on the merits. The district court's memorandum opinion fails, however, to discuss most of these contentions.

Rule 52(a) requires that in granting or refusing a preliminary injunction, the district court must "set forth the findings of fact and conclusions of law which constitute the grounds of its action." Fed.R.Civ.P. 52(a); Commerce Park at DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 342 (5th Cir.1984); Inverness Corp. v. Whitehall Laboratories, 819 F.2d 48, 50 (2d Cir.1987). This requirement is intended in part to ensure that the district court explains its reasoning with sufficient particularity to provide a basis for appellate review.

While the district court in this case did set forth findings of fact and conclusions of law, its failure to address the defenses asserted by S & H impedes our ability to determine whether the district court erred in its decision to grant the preliminary injunction.

A. Copyright Infringement Claim

Allied's first claim is that S & H infringed Allied's copyright in the format of its postcard mailers. To establish the infringement of a copyright, the plaintiff must prove "ownership" of the copyrighted material and "copying" by the defendant. Apple Barrel Productions, 730 F.2d at 387; Ferguson v. National Broadcasting Co., 584 F.2d 111, 113 (5th Cir.1978). "Ownership" is established by proving the originality and copyrightability of the material and compliance with "statutory formalities." Apple Barrel Productions, 730 F.2d at 387. "Copying" is generally established by proving that the defendant had access to the copyrighted material and that there is a "substantial similarity" between the two works. Id. at 387 n. 3; Ferguson, 584 F.2d at 113.

In the instant case, the district court found that Allied's certificate of registration established a prima facie case of "ownership" of the postcard. The district court also found that Allied had established a "substantial likelihood" that S & H "copied" the postcard. The district court noted that "S & H stipulated that it received at least one version of Allied's postcard as early as August 1986" and found that "[t]he record also indicates that each of the defendants had access to and was specifically aware of Allied's postcard promotions prior to the alleged conception" of the S & H postcard. The district court further found that the two post cards were "substantially--indeed, strikingly--similar." The district court concluded that Allied had therefore demonstrated a substantial likelihood that it would prevail on the merits of the copyright infringement claim.

S & H, however, raised numerous defenses to the copyright claim, none of which was addressed by the district court. Most significantly, 2 S & H contends that Allied was not the original author of the post card mailer and that a substantial number of Allied's postcards--over one million--were mailed without any copyright notice affixed to them. 3

S & H maintains that the postcard mailer at issue here was first developed, but not copyrighted, by Burke & Co. and was disseminated to two million consumers at least six months before the Allied mailers were first distributed. S & H argues that the Allied postcard is strikingly similar to the Burke card, compelling a finding that Allied copied the Burke card and is therefore entitled to no copyright in the cards. Donald v. Zack Meyer's T.V. Sales & Service, 426 F.2d 1027, 1029 (5th Cir.1970). S & H asserts that Allied's copyright in the card is therefore unenforceable against S & H.

Allied, on the other hand, claims that the pre-existing Burke postcard was not substantially similar to its postcard and that although Burke did subsequently mail a postcard substantially similar to the Allied card, the second Burke card was a copy of Allied's card. Although the district court made no finding on this point, Allied...

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