Fantastic Fakes, Inc. v. Pickwick Intern., Inc., 80-7294

Decision Date16 November 1981
Docket NumberNo. 80-7294,80-7294
Citation661 F.2d 479
Parties, 1981 Copr.L.Dec. P 25,332 FANTASTIC FAKES, INC., Plaintiff-Appellant, v. PICKWICK INTERNATIONAL, INC., Defendant-Appellee. . Unit B *
CourtU.S. Court of Appeals — Fifth Circuit

Gort, Rabiner, Joffe & Joffe, Craig J. Rabiner, Atlanta, Ga., for plaintiff-appellant.

Herbert D. Shellhouse, Robert L. Pennington, Atlanta, Ga., for defendant-appellee.

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

Before MORGAN, TJOFLAT and ANDERSON, Circuit Judges.

LEWIS R. MORGAN, Circuit Judge:

This appeal presents dual questions of contract interpretation and the proper application of the 1909 and 1976 Copyright Acts. 1 The underlying controversy stems from the breach of a licensing agreement under which plaintiff, as copyright owner, authorized the distribution of certain of its copyrighted material by defendant. As a basis for two counts in its complaint, plaintiff asserts that defendant's failure to affix proper copyright notice to the licensed material specifically defendant's representation of itself as copyright proprietor in the copyright notice was a breach of a condition to the contract rendering defendant's actions unauthorized and therefore those of an infringer. Granting defendant's motion for summary judgment, the court below held that defendant's negligent designation of itself as copyright owner did not make it an infringer subject to claims under either copyright act. For the reasons stated below, we affirm.

I. FACTUAL BACKGROUND

Plaintiff-appellant, Fantastic Fakes, Inc., (hereinafter "Fantastic"), is in the business of producing "soundalikes," rerecordings of "hit singles," which are then sold or licensed to distributors. Defendant-appellee, Pickwick International, Inc., (hereinafter "Pickwick"), is a worldwide record distribution company. On April 27, 1976, Fantastic entered into a two-year, non-exclusive "Licensing Agreement" with Pickwick. The agreement, which was drafted by Fantastic, granted Pickwick the right to distribute copies produced from master sound recordings made and copyrighted by Fantastic. Of particular importance to this appeal is section 2 of the licensing agreement which provides in relevant part

2. Grant of Rights. "LICENSOR" hereby grants to "LICENSEE" a nontransferable, nonassignable and nonexclusive License for a period of 2(TWO) years from the date hereof, to use the "ORIGINAL MASTER RECORDINGS" listed and identified on the schedule incorporated by reference herewith, and subject to and in accordance with the following:

(a) This License Agreement affords only to "LICENSEE" the rights embodied herein including the right to make sound recordings, including cartridge tapes, which are to be sold and distributed to the public, and said "ORIGINAL MASTER RECORDINGS" or derivatives therefrom shall not be sold, distributed, assigned, licensed or sublicensed by "LICENSEE" so that other sound recordings may be made therefrom by anyone other than "LICENSEE" or so that anyone other than "LICENSEE" may exercise any of the rights embodied herein.

(b) "LICENSEE" shall cause to appear on all sound recordings, including cartridge tapes, produced from "ORIGINAL MASTER RECORDINGS" a copyright notice such that said notice appears on the surface of the copies of the recording or on the label or container, in such a manner and location as to give reasonable notice of the claim of copyright. The copyright notice for said sound recordings, including cartridge tapes, shall be in the name of "LICENSOR" who is copyright owner, and shall be in the following form:

"P 1973 (or year first registered) by "FANTASTIC-F, INC."

Additionally, section 9 of the agreement sets forth a choice of law provision requiring that the contract be "construed and enforced in accordance with the laws of the State of Georgia."

Pursuant to the licensing agreement Fantastic sent Pickwick numerous "master recordings." Pickwick in turn made recording "derivatives", copies of which were included in Pickwick's catalogs and sold to the public as part of its regular inventory. Appearing on all such copies of Fantastic's copyrighted material was the following copyright notice

P-Pickwick International, Inc. WARNING: Unauthorized reproduction of this recording is prohibited by federal law and subject to criminal prosecution.

In October 1977, some of the phonorecords bearing the incorrect copyright notice were discovered by Fantastic in Atlanta area retail stores. Approximately ten months later, in August 1978, Fantastic filed the instant action in the District Court for the Northern District of Georgia. Fantastic's amended complaint contained six counts upon which were based claims for injunctive relief and damages. In issue on this appeal are only Counts I and III in which Fantastic alleged that Pickwick's failure to affix the proper notice of copyright to products distributed under the licensing agreement constituted an infringement of copyright.

After lengthy discovery proceedings Pickwick filed a motion for partial summary judgment on five counts of Fantastic's complaint including Counts I and III. The motion was granted by the trial court on February 20, 1980, and final judgment was entered pursuant to Fed.R. of Civ. P. 54(b).

II. OPINION

Having carefully read Counts I and III of the complaint and Fantastic's brief in opposition to Pickwick's motion for summary judgment, we find that review of the lower court's grant of partial summary judgment requires resolution of three questions. First, was the language in the licensing agreement, requiring affixation of notice of Fantastic's copyright ownership, properly interpreted by the district court as being merely a covenant independent of the other obligations in the contract? Second, under the 1909 Copyright Act, is there an implied condition to the parties' licensing agreement making authorized distribution of Fantastic's copyrighted material dependent upon effective notice of copyright? Third, if either an expressed or implied condition to the licensing agreement exists, was it breached by Pickwick's negligent designation of itself as copyright owner in the affixed copyright notice?

A. Relationship Between Georgia Rules of Construction and Federal Copyright Law.

Important to the proper resolution of these questions is an understanding of the extent to which Georgia law applies versus the scope of application and influence of the provisions and policies of the 1909 and 1976 Copyright Acts. Although the parties stipulated in the licensing agreement that Georgia law would govern the construction and enforcement of their contractual obligations, this does not mean that all rights and obligations created by the copyright acts are superseded by Georgia law. In Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 229, 84 S.Ct. 784, 787, 11 L.Ed.2d 661 (1964), the Court stated that federal patent and copyright law "like other laws of the United States enacted pursuant to constitutional authority, are the supreme law of the land .... When state law touches upon the area of these federal statutes, it is 'familiar doctrine' that the federal policy 'may not be set at naught, or its benefits denied' by the state law." (citations omitted). Under the 1976 Copyright Act, 17 U.S.C. § 101 et seq., the scope of federal copyright protection was expanded and its preemptive nature codified. 17 U.S.C. § 301. A choice of law provision, therefore, merely designates the state whose law is to be applied to the extent its use is not preempted by nor contrary to the policies of the 1909 and 1976 Copyright Acts.

The only state "laws" applied by the court below were Georgia rules of contract construction. While the context of copyright law in which the agreement exists cannot be overlooked, application of Georgia rules to determine parties' contractual intent is not preempted by either copyright act nor does their application violate federal copyright policy. See Bartsch v. Metro-Goldwyn-Mayer, Inc., 391 F.2d 150, 153 (2d Cir.), cert. denied, 393 U.S. 826, 89 S.Ct. 86, 21 L.Ed.2d 96 (1968); Kingsrow Enterprises, Inc. v. Metromedia, Inc., 397 F.Supp. 879, 881 (S.D.N.Y.1975). Cf. Aronson v. Quick Point Pencil Co., 440 U.S. 257, 99 S.Ct. 1096, 59 L.Ed.2d 296 (1979) (state law is not displaced merely because contract relates to intellectual property). 2 It is possible to hypothesize situations where application of particular state rules of construction would so alter rights granted by the copyright statutes as to invade the scope of copyright law or violate its policies. We need not, however, set forth these extreme situations for it is clear that the application of Georgia rules of construction in the case at bar is not one of them.

Georgia law is not controlling of the second and third questions delineated above. Defendant did not argue to the court below, and the court did not sua sponte decide, whether under Georgia rules of construction the mere inclusion of a covenant setting forth the form of the correct copyright notice negated any implied conditions. We seriously doubt that Georgia rules of contract construction would have required this conclusion had the issue been raised. Additionally, such an interpretation would have made conflict between the application of state law and the 1909 Copyright Act a much more immediate concern.

B. Contract Interpretation.

Defendant, Pickwick, does not dispute that in section 2(b) of the licensing agreement it promised to place the notice of Fantastic's copyright as spelled out in the provision on each recording sold. The question emphasized by Pickwick and focused on by the trial court was whether conformance with section 2(b) was a condition of Fantastic's obligations under the licensing agreement or merely a covenant. Both parties agree that if a breach of a condition precedent is found then the authority to manufacture and distribute copyrighted...

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