Films by Jove, Inc. v. Berov, CIV. A. 98-CV-7674 (DGT).

• Decision Date: 27 August 2001
• Docket Number: No. CIV. A. 98-CV-7674 (DGT).,CIV. A. 98-CV-7674 (DGT).
• Citation: 154 F.Supp.2d 432
• Parties: FILMS BY JOVE, INC., and Soyuzmultfilm Studios, Plaintiffs, v. Joseph BEROV, Natasha Orlova, The Rigma America Corporation, Saint Petersburg Publishing House and Group, Defendants.
• Court: U.S. District Court — Eastern District of New York

Page 432

154 F.Supp.2d 432

FILMS BY JOVE, INC., and Soyuzmultfilm Studios, Plaintiffs, v. Joseph BEROV, Natasha Orlova, The Rigma America Corporation, Saint Petersburg Publishing House and Group, Defendants.

No. CIV. A. 98-CV-7674 (DGT).

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

August 27, 2001.

Julian H. Lowenfeld, New York City.

Kenneth A. Feinswog, Los Angeles, CA.

Paul R. Levenson, Kaplan, Gottbetter & Levenson, LLP, New York City.

Robert W. Clarida, Cowan, Liebowitz & Latman, P.C., New York City.

MEMORANDUM AND ORDER

TRAGER, District Judge.

In December of 1998, plaintiffs Films by Jove ("FBJ") and Soyuzmultfilm Studio ("SMS"¹) (collectively, "the plaintiffs" or "the third party defendants") brought this action for copyright infringement, breach of contract, unfair competition and RICO violations against Joseph Berov, Natasha Orlova, Rigma America Corporation and the St. Petersburg Publishing House and Group (collectively, "the defendants"). On May 4, 1999, this court issued a preliminary injunction on consent of the defendants restraining them from reproduction of any motion picture in which plaintiffs own the copyright. On August 10, 2000, plaintiffs moved to hold the defendants in contempt for violating and continuing to violate the court's injunction by selling copyrighted material allegedly belonging to the plaintiffs² out of their St. Petersburg Publishing House retail stores in Brooklyn. A hearing on that motion was held on August 17 and August 18, 2000, but the issue was left undecided, and the hearing was adjourned until October 10, 2000 after it became apparent that a third party, the Federal State Unitarian Enterprise Soyuzmultfilm Studio ("FSUESMS" or "the third party plaintiff"), would be intervening in the lawsuit as a third party plaintiff, seeking declaratory and injunctive relief necessary to secure its right of operative management³ of the copyrights to the films at issue, which, it claimed, were owned, strictly speaking, by the Russian government.⁴ On October 10, 2000, the contempt hearing was continued. The defendants, at that time, conceded a violation of the injunction in the event that the plaintiffs do, in fact, possess the copyrights to the animated films sold by the defendants.

This same question of copyright ownership is now before the court. The plaintiffs have moved for summary judgment on this issue, and FSUESMS has cross-moved for summary judgment on its own claims to the copyrights.⁵ The final resolution of the plaintiffs' contempt motion hinges on the disposition of the question of copyright ownership.

Background

(1)

The parties agree that in 1936, the Soviet government expropriated from the Russian Orthodox Church the premises of the Church of St. Nicholas the Enlightener in Moscow, Russia and founded there a state enterprise⁶ called Soyuzmultfilm Studio which, from 1936 until the present, created about 1500 animated motion picture films, many of which became extremely popular.⁷ See Mem. Law. Supp. Pls.' Mot. Dis. 3D Party Compl. Pursuant to FRCP 12(b)(6) [hereinafter "Pls.' Mot. Dis."] at 2; Notice of Mot. to Dismiss 3D Party Compl. Pursuant to FRCP 12(b)(6) [hereinafter "Pls.' Not. Mot. Dis."] at 2. From 1936 to 1989, Soyuzmultfilm Studio, like virtually all enterprises in the Soviet Union, operated as a state enterprise. See Pls.' Mot. Dis. at 2. Unfortunately, as far as the history of Soyuzmultfilm Studio goes, the parties agree on little else, although their disagreements, as the patient reader will discover, are either disputes as to issues of law or disputes about facts that are not dispositive on any of the issues resolved in this opinion.⁸

According to plaintiffs, on December 20, 1989, as part of the ownership liberalization trend that accompanied Glasnost and Perestroika, Soyuzmultfilm Studio became a "lease enterprise" or "rent entity."⁹ See id. at 2-3. "Many state companies became rent enterprises in the late 1980s and 1990s. In accordance with law, they stopped to be `state-owned', but having in mind a further transition to privately held companies, they acquired another legal status, taking on lease only state buildings and equipment, but keeping their income and products for themselves and thus they received freedom from the state." Pls.' Ex. 15, Decl. of Mila Straupe [hereinafter "Straupe Decl."] ¶ 11. The lease enterprise, operating under a ten-year lease agreement concluded with the Soviet State Film Committee known as Goskino,¹⁰ paid rent to the state for facilities and equipment, while the copyrights to the films, which, in the plaintiffs' version of the story, originally belonged to the state enterprise, passed by operation of law from the no-longer-existent state enterprise Soyuzmultfilm Studio to the identically-named rent enterprise that took its place. See id. at 3; Pls.' Response to Def.'s and Third Party Pls.' Jnt. Statement Pursuant to Local Rule 56.1 [hereinafter "Pls.' 56.1 Resp."] ¶ 32; Straupe Decl. ¶ 12.

On July 1, 1999, shortly before the lease was due to expire, the rent entity Soyuzmultfilm Studio was again reorganized, this time into a private joint stock company.¹¹ See Straupe Decl. ¶ 12. That corporation, still named Soyuzmultfilm Studio, became the lawful successor to all of the rights and obligations of its predecessor, including, according to plaintiffs, all copyrights and trademarks. See id. The joint stock company, however, did not incorporate into its institutive capital the state-owned material assets, e.g., premises, equipment, furniture, etc., that had been leased to the rent enterprise by Goskino, and those state-owned assets reverted to the state upon the expiration of the lease term. See id. Accordingly, the joint stock company relocated in 1999 from its old offices in the Church of St. Nicholas the Enlightener to a new office in Krasnogorsk, a Moscow suburb. See id.

From the early nineties on, the lease enterprise and SMS, its successor, have had "to put up with a fight in Russia once spearheaded by Goskino and now [Soveksportfilm] and the State Property Ministry to take control of the films produced by the studios of Russia during the USSR." See Sept. 22 Borsten Decl. ¶ 6. The rights of the lease enterprise Soyuzmultfilm Studio and its successor, the joint stock company SMS, among other studios, were vindicated in various court decisions, see Decl. of Rimma Erokhina, Ex. 6, attached to Decl. of Julian Lowenfeld, most definitively in a June 19, 1996 decision of the Commercial Court of Paris, which ruled for Soyuzmultfilm Studio, Mosfilm Studio, Lenfilm Studio and Films by Jove and against Soveksportfilm, finding that economic legislation passed by the USSR in 1986 and thereafter had put an end to the state monopoly on foreign trade, and Soveksportfilm could no longer license films produced by Russian film studios without the agreement of the studios, which were the rightful copyright holders. See Ex. 14, attached to Decl. of Julian Lowenfeld. The French court noted a series of under-the-table transactions that Soveksportfilm had engaged in in order to transfer to itself, without consent, rights to 125 films owned by the studios.¹² See id.

Around the same time that SMS was leaving its Church of St. Nicholas the Enlightener location, then-Prime Minister Sergei Stepashin, responding to the demands of Goskino and a faction of approximately fifty people displeased with the leadership of a certain Mr. Skuliabin (spelled elsewhere as "Sculabin"), the director of the lease enterprise Soyuzmultfilm Studio as of 1993,¹³ issued a decree recommending the creation of a new state enterprise for the exploitation of the Church of St. Nicholas facilities vacated by the joint stock company. See Pls.' Mot. Dis. at 5; Pls.' Ex. 17 (hereinafter "Stephashin Order"); Tr. of Hearing on Aug. 17, 2000 at 20; Decl. of Vitoslav Shilobreev attached to FSUESMS's Order to Show Cause.¹⁴ On October 11, 1999, that faction of SMS officers who had been unsuccessful in their attempts to be elected to SMS's governing board proceeded to register the newly-organized "Federal State Unitarian Enterprise Soyuzmultfilm Studio."¹⁵ See id.

Meanwhile, the Russian Orthodox Church had initiated a lawsuit to reclaim the property that had been expropriated from it in 1936. See id. According to the plaintiffs—and, it should be reiterated, everything discussed heretofore and postdating the creation of the lease enterprise is the plaintiffs' version of the facts— FSUESMS, faced, by virtue of the Church's claims, with the loss of its only assets, viz., the premises and their facilities, decided to make a unilateral claim that it, and not the joint stock company SMS, was the "real" Soyuzmultfilm Studio. See id. To accomplish this end, FSUESMS, working closely with Goskino and the State Ministry of Property, see Sept. 22 Borsten Decl., advanced the contention that the lease enterprise Soyuzmultfilm Studio either had never existed or, at the very least, had not taken possession of anything other than the material assets of the state enterprise Soyuzmultfilm Studio and further, that the state enterprise had continued to exist in a latent, non-functioning form during the entire pendency of the lease (1989-1999). See Straupe Decl. ¶ 15. FSUESMS then, instead of attempting to register as a new company, requested to register as an amended form of the non-existent state enterprise Soyuzmultfilm Studio. It proceeded to request to register amendments to the extinguished charter of the state enterprise Soyuzmultfilm Studio, which had ceased to exist in 1989. See id. ¶ 16. These amendments were mistakenly and illegally registered by the Moscow City Registration Chamber in October of 1999. See id. ¶ 17. Thus, by the close of 1999, two independent enterprises, SMS and FSUESS, were both registered by the government and both claimed to be the rightful heirs of the state enterprise Soyuzmultfilm Studio and its extensive film library.

So much for the plaintiffs'...