Gener-Villar v. Adcom Group, Inc., 04-2194.

• Decision Date: 04 August 2005
• Docket Number: No. 04-2194.,No. 04-2212.,04-2194.,04-2212.
• Citation: 417 F.3d 201
• Parties: Frank GENER-VILLAR, d/b/a Gener Advertising, Plaintiff, Appellant, v. ADCOM GROUP, INC.; Debbie Alonso; Supermercados Mr. Special, Inc.; Santos Alonso-Maldonado, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

417 F.3d 201

Frank GENER-VILLAR, d/b/a Gener Advertising, Plaintiff, Appellant, v. ADCOM GROUP, INC.; Debbie Alonso; Supermercados Mr. Special, Inc.; Santos Alonso-Maldonado, Defendants, Appellees.

No. 04-2194.

No. 04-2212.

United States Court of Appeals, First Circuit.

Heard March 10, 2005.

Decided August 4, 2005.

Edelmiro Salas González, with whom José Luis Ramírez de León was on brief, for appellant.

Ramon L. Walker Merino, with whom Walker Merino Law Office was on brief, for appellees.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and LIPEZ, Circuit Judge.

PER CURIAM.

These appeals involve a copyright infringement claim stemming from a dispute over commercial graphic images produced by appellant under a contract with appellee Adcom. The parties had litigated the ownership of the images themselves in the Puerto Rico Circuit Court of Appeals. That court held that, as a matter of Puerto Rico law, the actual images belonged to Adcom. Appellant then obtained a copyright to the images and brought this federal action. The district court found that, under the doctrine of res judicata, the federal action was precluded by the earlier Puerto Rico court judgment, and granted summary judgment for the defendant. That ruling was erroneous. Res judicata does not apply because the Puerto Rico court did not have (and did not purport to have) jurisdiction over any potential federal copyright claims. We therefore vacate the judgment.

We also address an issue concerning our local appellate rules relating to the need for English translations of the Puerto Rico court decisions relied upon by the parties. While those rules were not complied with in this case, we find that sanctions are not appropriate given all the circumstances of the proceedings.

I.

Frank Gener-Villar ("Gener") is a graphic artist. He contracted with Adcom, an advertising agency, to prepare images and advertising and promotional materials to use in Adcom's ads for its clients, including Supermercados Mr. Special. The photographs and digital images were stored on computers owned by Gener but located at Adcom facilities. The contract did not specify who retained the copyright to the images.

On February 22, 2000, Adcom terminated the contract and demanded that Gener turn over the images. He refused, and Adcom seized his computers. Gener then filed a "grievance" before a magistrate in the Investigations section of the San Juan Judiciary Center, seeking a provisional adjudication of the dispute under 32 P.R. Laws Ann. §§ 2871-2877 (authorizing magistrates to provisionally decide certain controversies). The court ordered that the disputed images be removed from Gener's computers, copied to diskettes, and deposited with the court under seal pending litigation over the ownership of the images.

Adcom filed an action in the Puerto Rico Court of First Instance, seeking, inter alia, a declaration that it was the owner of the works contained on the disk on the basis of its contract with Gener. Adcom also argued that it held the copyright to the images under the doctrine of a "work made for hire." See 17 U.S.C. §§ 101, 201(b).¹ Gener responded that Adcom's claim was for economic rights deriving from the images, and thus the Puerto Rico law claim was preempted by federal copyright law and the Puerto Rico court lacked jurisdiction. See 17 U.S.C. § 301(a) (preemption); 28 U.S.C. § 1338(a) (exclusive federal jurisdiction).

We pause to explain this jurisdictional issue because it is central to understanding both how the Puerto Rico courts viewed the case and how we apply the doctrine of res judicata. If an action "aris[es] under" federal copyright law, the federal courts have exclusive jurisdiction. 28 U.S.C. § 1338(a). Determining precisely which actions "arise under" copyright law, and therefore fall within exclusive federal jurisdiction, "poses among the knottiest procedural problems in copyright jurisprudence." 3-12 M. Nimmer & D. Nimmer, Nimmer on Copyright § 12.01[A] (2001). In Royal v. Leading Edge Prods., Inc., 833 F.2d 1 (1st Cir.1987), we explained:

It is settled beyond peradventure that an action does not "arise under" the federal copyright laws merely because it relates to a product that is the subject of a copyright. The question of whether the suit "arises under" the copyright law is considerably more sophisticated. The most frequently cited test is that formulated by the Second Circuit, along the lines that:

an action "arises under" the Copyright Act if and only if the complaint is for a remedy expressly granted by the Act, e.g., a suit for infringement. . ., or asserts a claim requiring construction of the Act, . . ., or, at the very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim. The general interest that copyrights, like all other forms of property, should be enjoyed by their true owner is not enough to meet this last test.

Id. at 2 (quoting T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir.1964) (Friendly, J.)) (citation omitted; alterations in original).

The Court of First Instance hypothesized that if Adcom indeed held the copyright to the images pursuant to the "work made for hire" doctrine, Adcom's copyright-based ownership claim would arise under copyright law and the entire case would be outside the jurisdiction of the Puerto Rico courts. Conversely, if Adcom did not hold the copyright to the images under that doctrine, the contractual claim over the images themselves would not be preempted and the court would have jurisdiction to decide it. See Adcom Group, Inc. v. Gener, No. KPE-00-0640, slip op. at 7-8, 14 (P.R. Ct. of First Instance May 4, 2000) (certified translation) ("Adcom I").

Thus, the Puerto Rico trial court began its analysis by determining whether Adcom held the copyright under the "work made for hire" doctrine. The court concluded that, because Gener was an independent contractor and the images at issue did not fall into certain specific categories, the images did not constitute "work made for hire" under federal copyright law. See Adcom I at 12-14.² It did, however, credit Adcom's contractual argument, and held that "all the graphic artworks commissioned by [Adcom] from [Gener] during the effective period of the contract belong to [Adcom]." Id. at 22.

The court was careful to emphasize the limited nature of its holding. In response to Gener's argument that Adcom's claim fell within exclusive federal jurisdiction, the court explained that the action (as narrowed and construed by the court) did not arise under federal copyright law because it was "not based on a claim for an author's economic rights, but on the delivery of a computer disk over which[] [Adcom] alleges having an ownership right due to having paid for the information contained in it." Id. at 19. The court emphasized this point again towards the end of its opinion:

[W]e are not adjudicating the possible intellectual original ownership which [Gener] may have with regard to the works in controversy.... What we are saying is that [Gener], by means of a contract, transmitted to [Adcom] the graphic artworks requested in exchange for a payment, with [Adcom] then becoming the owner of the same.

Id. at 23.

Gener appealed to the Puerto Rico Circuit Court of Appeals. That court largely repeated the trial court's reasoning. See Adcom Group, Inc. v. Gener, No. KLAN-00-00775 (P.R. Ct.App. Mar. 30, 2001) (certified translation) ("Adcom II"). After an extensive analysis, it concluded that the "work made for hire" doctrine did not apply, and that the Puerto Rico courts had jurisdiction over the suit. See id. at 10-11. It agreed with the trial court's analysis that the suit concerned ownership of the actual images, not intellectual property rights:

As was correctly pointed out by the judge from the [trial court], we don't have before us a claim for an author's patrimonial rights, but a claim for the delivery of a computer diskette over which [Adcom] alleges having rights due to having paid for the information contained in it.

Id. at 13. Finally, it affirmed the trial court's ultimate determination that "the work performed by [Gener], by virtue of his contract with [Adcom], belongs to the latter." Id. at 14.³

That summer, Gener applied for a copyright to the images. In March 2003, he filed a federal copyright infringement action in the United States District Court for the District of Puerto Rico against Adcom, Supermercados Mr. Special, and their respective presidents.⁴ The defendants asserted a long list of affirmative defenses, most notably res judicata, and moved for summary judgment on numerous grounds, focusing mainly on res judicata. Gener responded, in part, that the Puerto Rico and federal claims lacked sufficient identity because the Puerto Rico courts could not (and did not purport to) resolve any federal copyright questions. In Gener's view, the Puerto Rico court's discussion of the "work made for hire" doctrine was solely for the purpose of determining whether its jurisdiction was preempted or not.

The district court granted the motion for summary judgment on the grounds of res judicata. It noted Gener's argument that the Puerto Rico court lacked jurisdiction to determine who had the copyright to the images, but explained:

[T]he state court did properly exercise its authority to interpret the terms of the contract and determine that the suit did not involve copyright law. In fact, the state court described at length why it did not believe copyright law applied to Plaintiff's claims. Thus, the state court was able to establish jurisdiction and determine the ownership issue relying solely on the contract between the parties.

Gener-Villar v. Adcom Group, Inc., No. 03-1306, slip op. at 3 (D.P.R. June 29, 2004). It dismissed the action with prejudice. Gener moved to alter or amend the judgment under Fed.R.Civ.P. 59(e), repeating his...