Fonovisa, Inc. v. Cherry Auction, Inc.
| Decision Date | 21 March 1994 |
| Docket Number | No. CV-F-93-5116-REC.,CV-F-93-5116-REC. |
| Citation | 847 F. Supp. 1492 |
| Court | U.S. District Court — Eastern District of California |
| Parties | FONOVISA, INC., Plaintiff, v. CHERRY AUCTION, INC., Richard Pilegard, W.D. Mitchell, and Margaret Mitchell, Defendants. |
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Jeffrey M. Thompson and Craig E. Lindberg, Callahan and Gauntlett, Irvine, CA, for plaintiff.
Stephen Roy Cornwell, McCormick Barstow Sheppard Wayte and Carruth, Fresno, CA, for defendants.
On October 25, 1993, this Court heard defendants' motion for dismissal of the complaint pursuant to Fed.R.Civ. 12(b)(6). Upon consideration of the written and oral arguments of the parties and the record set forth herein, the motion is granted for the following reasons.
Defendants operate the Cherry Auction swap meet where independent vendors set up booths that sell Latin music tapes, among other things. Plaintiff Fonovisa alleges that many of these tapes are counterfeits of phonorecordings to which it has copyright and trademark rights. Plaintiff therefore sues, not the vendors themselves, but Cherry Auction and its three owners/operators, Pilegard and the Mitchells, for direct and indirect copyright and trademark infringement. The complaint names five counts, entitled (1) "copyright infringement;" (2) "contributory copyright infringement;" (3) "vicarious copyright infringement;" (4) "contributory and vicarious trademark infringement;" and (5) "vicarious liability of the owners, operators, directors, and officers of Cherry Auction."
The complaint recounts the history of events to show defendants' awareness of the vendors' infringing sales, and their failure to do anything about it. On December 12, 1991, the Fresno County Sheriff's Department raided Cherry Auction and seized 38,014 counterfeit tapes, confiscated 12 vehicles, and made 27 arrests. Not only were defendants notified of the raid and its results, but the raid was publicized in the Fresno Bee ten days later.
On October 19, 1992, Sergeant Michael Mosier of the Fresno County Sheriff's Department wrote to general manager Pilegard to memorialize his visit to the swap meet six days earlier. His letter observed that several casual vendors of Latin audio music tapes had abandoned their booths upon his arrival, and that Pilegard had admitted that these vendors did not ordinarily carry a required State Board of Equalization form, nor did they usually reserve spaces that require more identification. Sgt. Mosier finally reminded Pilegard of his promise to get the name, address, vehicle license number, and State Board of Equalization identification of prospective renters. Defendants have done nothing to comply with these "simple remedial" steps.
On January 9, 1993, Fonovisa's investigator revisited Cherry Auction and observed the same infringing sales. Counterfeit Fonovisa cassette tapes sold for $2.00 or three for $5.00 — an impossibly low price for legitimate music products.
On April 9, 1993, Fonovisa served defendants with the First Amended Complaint in this action. The next day, Fonovisa's investigator again saw ten of fifteen vendors selling counterfeits at tellingly low prices. He saw twelve of seventeen booths doing the same a few days later.
On June 21, 1993, over a year and a half after the initial raid, and two months after this lawsuit was filed, defendant Pilegard wrote a letter to the Fresno County Sheriff's Department to report the possible sale of illegal tapes at the swap meet, assuring them that "we want to do whatever we can on our part ... to put a stop to this activity." The Sheriff's Department responded to this letter by suggesting that defendants should stop renting spaces to counterfeit tape vendors and offered examination techniques to detect illegal cassette tapes. Defendants never implemented these "simple procedures," for Fonovisa's investigators witnessed between nine and twelve vendors selling counterfeits on three more occasions.
Plaintiff alleges generally that defendants have the right and ability to supervise the infringing activities occurring upon its premises and also possess a direct financial interest in their success. However, plaintiff couches neither this supervisory role, nor the financial interest, in factual allegations.
The basic legal issue is whether Fonovisa can state a copyright or trademark claim against a swap meet and its owners for infringing activities of vendors who rent booths from them. All defendants contend that no claim exists, and move for Rule 12(b)(6) dismissal of the entire complaint.
Fonovisa's complaint falls to the ground if it fails to state a claim upon which relief can be granted. Fed.R.Civ.Proc. 12(b)(6). Dismissal is proper where there is either a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). "A complaint cannot be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957).
The Court accepts as true all material allegations in the complaint, no matter how improbable, as well as reasonable inferences to be drawn from them. NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986). However, the Court accepts as true neither conclusory allegations nor unreasonable inferences or unwarranted deductions of fact. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981).
A claim for copyright violation must allege (1) the specific original work that is the subject of the copyright claim; (2) that the plaintiff owns the copyright on the work; (3) that the work in question has been registered in compliance with the statute; and (4) by what acts and during what time the defendant has infringed the copyright. Klinger v. Weekly World News, Inc., 747 F.Supp. 1477 (S.D.Fla.1990) (emphasis added).
A factual allegation to support the fourth element of a direct infringement action is notably missing, and cannot be inferred from Fonovisa's chronology. It is the vendors who directly infringed Fonovisa's copyrights and trademarks by selling the counterfeits, not defendants. No where does Fonovisa suggest that Cherry Auction and its operators reproduced, prepared, or distributed its copyrighted works in violation of 17 U.S.C. §§ 106 and 501. At most, defendants "aided and abetted" the vendors in direct infringement by the latter, and thus exposed themselves to potential liability for indirect infringement, as discussed below. The first claim thus falls to the ground.
One may be liable for copyright infringement without himself having performed the protected composition. Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (2d Cir. 1971). One brand of indirect liability is contributory liability, predicated upon the common law doctrine of joint tortfeasorship.1
Contributory liability for copyright infringement requires two elements: (1) knowledge of the copyright infringing activity, and (2) substantial participation, i.e., inducement, cause, or material contribution, to the infringing conduct of another. Id. at 1162. For example, a sponsor who arranges audiences may be contributorily liable for an artist's illegal performance of copyrighted compositions. See Gershwin Publishing Corp., 443 F.2d at 1159. This liability arises, not from formal power, but from the sponsor's knowledge of the violations, direction of the programming, and position to police the infringing conduct.
The complaint plainly alleges the first element, knowledge. However, unless the complaint also alleges that defendants exercised any control over the vendors, there can be no contributory infringement. Demetriades v. Kaufmann, 690 F.Supp. 289 (S.D.N.Y.1988) () (citing Restatement (Second) of Torts § 876(b) (1977)). At most, one can infer from the complaint that defendants provided a safe haven and clientele seeking "bargain basement" prices. Contrary to plaintiff's argument, nothing in the complaint suggests that defendants promoted, advertised, and encouraged the sale of counterfeit products, or protected the identity of the infringers. Although they did not affirmatively cooperate with the police, defendants did not prevent enforcement actions from taking place, as plaintiff argues.
Merely renting booth space is not "substantial participation" in the vendors' infringement activities. Defendants were not in the business of directing vendors' actions by telling them, or even suggesting to them, what and when and how and to whom to sell. Cherry Auction's so-called "role" would have been the same if vendors rented the space to just sit on. There is no way to infer from the complaint that Cherry Auction acted in concert with the vendors to accomplish the common purpose or plan of selling counterfeits. Any "participation" was passive, at most, and not nearly "substantial" enough to warrant defendants the label of joint tortfeasors.
The second claim for contributory copy-right infringement thus falls to the ground.
The other brand of indirect copyright infringement is vicarious liability which springs from the agency rule of respondeat superior, holding an employer liable for infringement by a servant within his scope of employment. Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304 (2d Cir.1963). Vicarious liability depends on two things: (1) a financial interest in the infringing entity and (2) the extent of one's right and ability to supervise the infringing activity. Gershwin Publishing Corp., ...
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