Consumers Union of US, Inc. v. New Regina Corp.

• Decision Date: 23 June 1987
• Docket Number: No. 83 Civ. 7209(RJW).,83 Civ. 7209(RJW).
• Citation: 664 F. Supp. 753
• Parties: CONSUMERS UNION OF UNITED STATES, INC., Plaintiff, v. The NEW REGINA CORPORATION and Grey Advertising, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

664 F. Supp. 753

CONSUMERS UNION OF UNITED STATES, INC., Plaintiff, v. The NEW REGINA CORPORATION and Grey Advertising, Inc., Defendants.

No. 83 Civ. 7209(RJW).

United States District Court, S.D. New York.

June 23, 1987.

COPYRIGHT MATERIAL OMITTED

Esanu, Katsky, Korins & Siger, New York City, for plaintiff; Michael N. Pollet, Thomas M. Lopez, Thomas M. Slahta, of counsel.

Cooper, Dunham, Clark, Griffin & Moran, New York City, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., Washington, D.C., for defendant The New Regina Corp.; Jules P. Kirsch, Peter D. Murray, New York City, and Charles D. Ferris, Bruce D. Sokler, Cameron F. Kerry, Washington, D.C., of counsel.

Davis & Gilbert, New York City, for defendant Grey Advertising; Howard J. Rubin, of counsel.

OPINION

ROBERT J. WARD, District Judge.

Plaintiff Consumers Union of the United States, Inc. ("CU") originally filed this action against defendants the New Regina Corporation ("Regina") and Grey Advertising Inc. ("Grey") seeking injunctive relief and compensatory and punitive damages arising out of the broadcast of television commercials which quoted verbatim from a copyrighted article published in its periodical Consumer Reports. CU alleges that defendants' quotation of its evaluations and attribution of the evaluations to CU violated its federal copyright and trademark rights and constituted as well false and misleading advertising and unlawful use of its name under New York State law. Defendants now move for summary judgment under Rule 56, Fed.R.Civ.P., or, in the alternative, for an order restraining plaintiff from introducing consumer research surveys that have been conducted on its behalf. For the reasons to follow, the Court denies both motions.

BACKGROUND

A. Factual Background.

CU is a New York not-for-profit corporation organized in 1936. CU's primary purpose is independently to test consumer products and to publish the test results and evaluations in its monthly magazine Consumer Reports. Circulation of Consumer Reports exceeds three million copies per month. CU copyrights each issue of Consumer Reports.¹

CU alleges that it has gained a reputation over the past fifty years for impartial and objective testing of and reporting on consumer products. To foster and maintain its reputation for objectivity, CU follows a non-commercialization policy. Under that policy the organization accepts no outside advertising in any of its publications and has steadfastly refused to grant permission to others to use its name or copyrighted materials in advertisements.² CU contends that this arms-length relationship with manufacturers distinguishes it from other testing organizations and publishers which provide consumer advice. CU further asserts that were manufacturers routinely permitted to utilize its published evaluations and to associate its name with their products in advertising campaigns, the public would lose confidence in CU's neutrality.

The July 1983 issue of Consumer Reports contained an article that evaluated and compared eighteen different models of lightweight vacuum cleaners. Defendant Regina manufactured four of the models tested. The article judged Regina's Elictrikbroom Powerteam HB 6910 ("Powerteam 6910") to be the best of all models tested. CU check-rated the model, signifying that the model was of high quality and appreciably superior to the other models that had not been check-rated. CU rated the three other Regina models from fair to poor.

On June 28, 1983, counsel for Regina requested permission from Consumers Union to quote the favorable evaluation of the Powerteam 6910 in an advertising campaign. Through counsel, CU denied permission. Sometime between July and September, 1983, Regina hired Grey Advertising to create a series of television commercials for the Powerteam 6910. Two of the commercials were eventually broadcast on network television. On September 27, 1983, Regina notified Consumers Union that it had begun airing the television commercials which quoted verbatim from the evaluation of the Powerteam 6910.³ The first commercial, entitled "Squid," featured a voice over announcer who states that the Powerteam 6910 is "the only lightweight that Consumer Reports says was an adequate substitute for a full size vacuum." While the announcer is speaking, a disclaimer appears on the screen noting that "Consumer Reports is not affiliated with Regina and does not endorse products." The second commercial, entitled "Consumer Reports," includes several verbatim quotations from the evaluation of the Powerteam 6910. These quotations flash on the screen as the announcer reads them. Each time the announcer mentions Consumer Reports, the same disclaimer used in Squid appears on the screen.

After viewing the commercials, CU demanded that Regina withdraw them immediately. Regina refused. The company did, however, alter the disclaimer to read that "Consumer Reports is not affiliated with Regina and does not endorse Regina products or any other products."

B. Procedural Background.

CU then filed suit, alleging three causes of action. First, CU contends that New Regina's unauthorized verbatim quotation from Consumer Reports infringed its copyright. See 17 U.S.C. § 101 et seq. Second, CU alleges that New Regina's use of the copyrighted material was intended to confuse and deceive the public in violation of the Lanham Act. See 15 U.S.C. §§ 1114(1), 1125. Finally, CU argues that defendants violated New York State statutes concerning deceptive business practices, false advertising, and the unauthorized use of the name of a not-for-profit organization. See N.Y.Gen.Bus.Law §§ 349, 350, 350-a, 368-d, 397.

By order to show cause, CU sought to prevent defendants from continuing to air the commercials. On October 3, 1983, Judge Henry Werker granted CU a temporary restraining order preventing Regina from airing the commercials. After hearing argument, but without taking testimony, he issued a preliminary injunction October 14, 1983 on the ground that Regina had violated CU's copyright. In entering the injunction, the district court rejected defendants' fair use and First Amendment defenses and held that CU need not make a detailed showing of irreparable injury once it had established the elements of copyright infringement.

The Second Circuit vacated the preliminary injunction. Consumers Union of United States, Inc. v. General Signal Corp. 724 F.2d 1044 (2d Cir.1983), reh'g. and reh'g. en banc denied, 730 F.2d 47 (2d Cir.1984) (Oakes, J. dissenting), cert. denied, 469 U.S. 823, 105 S.Ct. 100, 83 L.Ed.2d 45 (1984). Specifically, the circuit panel held that CU had failed to establish the likelihood of success on the merits of any of its claims. Id. at 1051. Because defendants rely heavily on that decision in support of the present motion for summary judgment, for convenience the Court will briefly summarize relevant aspects of it here.

The panel first examined CU's claimed likelihood of success on the merits of the copyright claim. Although defendants had challenged whether CU could copyright the factual references they had made use of in the commercials, the court proceeded immediately to evaluate defendants' assertion of a fair use defense to the alleged copyright infringement.⁴ On the first factor, the panel noted the undoubtedly commercial use defendants had made of CU's material, but held that that fact alone did not defeat a fair use defense. "Regardless of motive, the `character' of Regina's ads includes the conveyance to consumers of useful information which is protected by the First Amendment." 724 F.2d at 1049. In examining the second factor, the court stated that since the nature of Consumer Reports is primarily informational rather than creative, and because the "risk of restraining the free flow of information is more significant with information work, the scope of permissible fair use is greater," and concluded that defendants had used CU's own words in its favorable evaluation in the interests of accuracy not piracy.⁵ On the third point, the court concluded that both commercials had made relatively insubstantial use of CU's work. On the fourth factor, the effect of the use upon the potential market for or value of the copyrighted work, the panel expressly rejected Judge Werker's analysis that Regina's commercial use of the Consumer Reports evaluation would cause consumers to lose confidence in CU and would signal the organization's eventual demise.

We believe that this conclusion is based on a faulty premise. The Copyright Act was not designed to prevent such indirect negative effects of copying. The fourth factor is aimed at the copier who attempts to usurp the demand for the original work. The copyright laws are intended to prevent copiers from taking the owner's intellectual property, and are not aimed at recompensing damages which may flow indirectly from copying.

* * * * * *

Not only are we faced with a claim of injury which does not stem from competition between the copyright owner and the copier, but the owner does not even allege injury to any work currently copyrighted. Rather, it is the value of possible future issues of Consumer Reports which CU seeks to protect. This clearly does not involve the fourth factor which focuses upon the effect of the use upon the potential market for or value of the copyrighted work.

Id. at 1050-51 (citations omitted, emphasis in the original). On the basis of its analysis of the four fair use factors, the panel concluded that CU had not established its likelihood of success on the merits to justify the injunction.

Although Judge Werker had relied solely on CU's copyright claim, the panel next considered whether either the Lanham Act or CU's state law claims of false advertising might justify injunctive relief. While explicitly recognizing that the Lanham Act or corresponding state law claims might be an appropriate form of relief when the quotation of copyrighted evaluations could produce...