Continental Casualty Company v. Beardsley

• Decision Date: 04 April 1957
• Citation: 151 F. Supp. 28
• Parties: CONTINENTAL CASUALTY COMPANY, Plaintiff, v. Hulbert T. E. BEARDSLEY and H. T. E. Beardsley, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

151 F. Supp. 28

CONTINENTAL CASUALTY COMPANY, Plaintiff, v. Hulbert T. E. BEARDSLEY and H. T. E. Beardsley, Inc., Defendants.

United States District Court S. D. New York.

April 4, 1957.

COPYRIGHT MATERIAL OMITTED

Watson, Leavenworth, Kelton & Taggart, New York City, for plaintiff. Leslie D. Taggart and Robert C. Nicander, New York City, John Rex Allen, Paul L. Latham, Chicago, Ill., of counsel.

Sprague & Peck, New York City, for defendants. Stuart Sprague and Robert P. Weil, New York City, of counsel.

PALMIERI, District Judge.

Continental Casualty Company (Continental), an Illinois corporation, seeks a declaratory judgment¹ that the defendants' copyright is invalid and not infringed, damages for unfair competition and for violation of the antitrust laws because of alleged misuse of the claimed copyright, and injunctive relief. The defendants seek damages on the ground of copyright infringement, unfair competition, and the inducement of breaches of implied contracts and confidential disclosures, and injunctive relief. The case was tried without a jury.

Essentially, the litigation stems from the defendant H. T. E. Beardsley's (Beardsley)² claim that he is the originator of a plan called the "Beardsley Plan" and that the elements of this plan were validly copyrighted when he published a book entitled: "The Replacement of Lost Securities by the Beardsley Plan," on September 30, 1939, with notice of copyright.³ This book, better described as a pamphlet, consists of six pages, less than three of them explanatory matter, and the rest taken up by three insurance forms designed to provide blanket indemnity protection.

The problem of replacing lost stock certificates was one which vexed corporations having large numbers of stockholders. Because the stockholder as well as the corporation often had to do tedious and protracted paper work, in the event of stock certificate losses, the use of the blanket indemnity bond offered a convenient solution. Beardsley's plan was, in essence, an adaptation of the blanket indemnity bond device to the exigencies of the situations requiring the replacement of corporate securities which became lost or were stolen. Whether or not defendant was the sole originator of his plan is disputed. It is, however, clear that he popularized blanket protection in this field and in the related fields of losses of stock sent through the mail and of transfer of stock in waiver of probate proceedings.

The narrative part of the publication referred to was largely an exposition of the reasons of convenience and economy which should impel the use of the attached indemnity insurance forms both by corporations and their stockholders. On the first page of the narrative explanation and over the name of H. T. E. Beardsley appears the following:

"The Beardsley Plan originated and developed by me, though appearing simple, required months of labor to perfect. There is no charge for the plan but if adopted I would naturally expect to be permitted to arrange the bond."

It was conceded that the publication was distributed gratis, that many large corporations adopted the use of the forms, or substantially similar forms, and that Beardsley derived a considerable income from the commissions paid to him by the surety companies designated by these corporations as indemnitors.

Continental, which has its principal place of business in Chicago, does an extensive surety business. As part of that business, it has provided for the issuance of "Blanket Loss Original Instrument Bonds" which serve substantially the same purpose as the ones promoted by Beardsley in his business as broker. It has also underwritten coverage for losses of stock sent through the mails, and for transfers of stock in waiver of probate proceedings.

The business interests of the plaintiff and Beardsley have been in conflict for a number of years, and at least since 1948. In that year, in a letter to Continental, Beardsley charged Continental with infringement of his forms, and suggested that he could add plaintiff "to my list" and that he would "cooperate with them in getting for them a share of the business."⁴ Presumably, this was to be in exchange for his being recompensed by Continental as broker on all such coverage handled by Continental.⁵ Beardsley also stated, in the same letter, that he claimed no copyright "on a Bond" and that he had not sued and had no intention of suing anyone for infringement; but he also stated he had assurances from his attorneys that he had a good copyright on "my forms."

There can be no question that the defendants' business has been built up upon the representations that the "Beardsley Plan" was Beardsley's own, validly copyrighted, and consequently, the proper subject for its exclusive exploitation by him. Except for the narrative portion of the publication, plaintiff urges that Beardsley had nothing to copyright and that his assertions of exclusive rights of exploitation to the "Beardsley Plan" and to the documents implementing the plan have no legal basis. At the very threshold of the case, therefore, I must consider whether the defendants have a valid copyright.

I—Copyrightability

The general purposes of copyright protection are to afford authors the right to reap the fruits of their expression and to promote the store of information and objects of culture available for public enjoyment and application.⁶ Usually these two purposes are not inconsistent. Where, however, an author's monopoly threatens to infringe unduly on public use of the ideas or objects of that expression,⁷ the courts have demonstrated flexibility in adjusting the conflicting theories.⁸ Thus copyrightability may be altogether denied,⁹ or, if copyright is upheld, restrictively protected by requiring almost verbatim copying to constitute infringement.¹⁰ In other situations, the subject and purpose of copyright may be explicitly defined so as not to authorize an over-generalized monopoly which would restrict fair use of the disclosed information or objects.¹¹

The overreaching of a legitimate monopoly of expression has often arisen in connection with legal forms.¹² The classic situation is the creation, by dint of labor and inventiveness, and publication of a novel arrangement which greatly simplifies the problems incident to a particular legal task. Copyright protection is, of course, afforded the author as against copying disseminators of this information.¹³ The monopoly the author really covets, however,—the right to exact royalties from all who use the forms—is generally denied to him.¹⁴ Thus, in Baker v. Selden,¹⁵ the Supreme Court denied protection as against one who appeared to have copied an arrangement of columns for handling accounts. And in Dorsey v. Old Surety Life Ins. Co.,¹⁶ protection was denied as against a user of insurance forms probably very similar to those of the copyright owner, the decision being based on alternative holdings of non-infringement and lack of copyrightability.

There is sound policy to support this position. Where infringement is accomplished by one who seeks to disseminate information, the situation is not different from those where expressions of novelists, poets, and artists are given liberal protection. However, where the putative infringement is accomplished by one who uses the legal form for the function for which it was designed, different considerations become important.¹⁷

Skill in drafting legal instruments necessitates familiarity with the applicable forms and with the apposite jurisprudence. It follows that time tested terminology lends itself to repetitive use, given similar needs for its employment. The essence of good drafting is to free the client as much as possible from the danger of litigation, and the chances of controversy are generally attenuated when words with a history of settled meaning or of accepted usage are found and utilized. While this practice in other fields might be termed plagiarism, among lawyers its propriety is unquestioned.

One might urge that the propriety should be recognized if the putative infringer demonstrates that he has labored independently of the purportedly copyrighted document, as, for example, testing the original language and modifying, rejecting or retaining it as the independent researches suggest. However, the argument would run, if there appears to be merely a copying from the original—an unmistakable profiting solely from the labors of another—the copyright should be given effect. Although this position appears at first blush to be a just one, its adoption would create a mischievous precedent. A legal draftsman should not feel encumbered by copyright dangers vindicable only by court proofs of independent efforts, for such vindication in litigation is the exact evil his labors seek to avert. His skill should not lie in threading through jargon in a maze of forms, each one copyrightable because of a unique manner of expression even though all are on the same subject matter. Furthermore, the originator of a legal writing should have little to fear from one whose talents compel him to copy verbatim. The skill of a lawyer is commensurate with his ability to adapt present exigencies to foreseeable legal consequences. Such skill cannot be copied and the originator has nothing to fear from the slavish imitator.

In the instant case, Beardsley has copyrighted and published, I will assume for this argument, a booklet of explanation with forms entitled the "Beardsley Plan." There is no question that the booklet is copyrightable, and Continental so admits. There is also no question that Beardsley's arrangement of contents in his proposed bond, however novel that arrangement may be, is not copyrightable, for the novelty of the arrangement is the key concept in the plan, and ideas and plans fall outside the copyright laws.¹⁸ While Beardsley's statements and actions before and during trial suggest a claim of copyright that would include the arrangement,...