MCA Television Ltd. v. Public Interest Corp., 98-2006

• Decision Date: 06 April 1999
• Docket Number: No. 98-2006,98-2006
• Citation: 171 F.3d 1265
• Parties: 1999-1 Trade Cases P 72,492, 254 Copr.L.Dec. P 27,889, 50 U.S.P.Q.2d 1321, 12 Fla. L. Weekly Fed. C 694 MCA TELEVISION LIMITED, a Delaware Corporation, Plaintiff-Counter-Defendant-Appellee-Cross-Appellant, v. PUBLIC INTEREST CORPORATION, a Florida Corporation, Defendant-Counter-Claimant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1265

171 F.3d 1265

1999-1 Trade Cases P 72,492, 254 Copr.L.Dec.

P 27,889,

50 U.S.P.Q.2d 1321, 12 Fla. L. Weekly Fed. C 694

MCA TELEVISION LIMITED, a Delaware Corporation Plaintiff-Counter-Defendant-Appellee-Cross-Appellant, v. PUBLIC INTEREST CORPORATION, a Florida Corporation Defendant-Counter-Claimant-Appellant-Cross-Appellee.

No. 98-2006.

United States Court of Appeals Eleventh Circuit.

April 6, 1999.

Rehearing and Rehearing En Banc Denied May 28, 1999.

David B. Krouk, St. Petersburg, FL, for Public Interest Corporation.

Hala A. Sandridge, Tampa, FL, for Public Interest Corporation in Docket No. 98-2006.

Christopher K. Kay, Michael J. Beaudine, Orlando, FL, for MCA Television Limited.

Appeals from the United States District Court for the Middle District of Florida.

Before DUBINA and BARKETT, Circuit Judges, and JONES ^*, Senior Circuit Judge.

BARKETT, Circuit Judge:

Public Interest Corporation ("PIC") appeals from a $1.8 million judgment entered in favor of MCA Television Ltd. ("MCA") following a non-jury trial on MCA's breach of contract and copyright infringement claims. The district court found that PIC breached its licensing contracts with MCA and violated MCA's copyright of several television shows by airing them after MCA revoked its broadcast licenses following PIC's breach of contract. In addition, MCA appeals the district court's ruling in favor of PIC's antitrust claim. PIC had alleged that MCA's conditioning of its licensing to PIC of several ¹ first-run television shows for barter on the willingness of PIC to license a further first-run series called Harry and the Hendersons for cash as well as barter constituted an illegal tying arrangement in violation of the Sherman Act. The district court agreed, but found that PIC failed to prove "antitrust injury" and thus merited no damages on its antitrust claim. We affirm in part and reverse in part.

FACTS

At the time of the events giving rise to this action, PIC was a Florida corporation that owned and operated television station WTMV-TV in Lakeland, Florida. MCA owns and licenses syndicated television programs. In 1990, the parties entered into a licensing contract with respect to several first-run television shows. With respect to all but one of these shows, MCA exchanged the licenses on a "barter" basis for advertising time on WTMV. However, MCA conditioned this exchange on PIC's agreeing to license the remaining show, Harry and the Hendersons ("Harry"), for cash as well as for barter. PIC agreed to this arrangement, although it would not have chosen to license Harry if it did not have to do so in order to secure the licenses for the other shows. Both parties signed an interim contract reflecting these arrangements. In the following years, the parties entered into new contracts licensing four other MCA shows to PIC. ²

The contracts under which the parties operated contained the following language:

When signed by [PIC] and MCA, this document shall constitute a valid and binding Agreement and shall be deemed to include the standard terms and conditions known as "Additional Provisions" which are contained in MCA's standard series syndication Licensing Agreement. Copies of the "Additional Provisions" are available on request and will be fully set forth in a long-form contract.

Each Licensing Agreement, under the heading "Additional Provisions of the Agreement," established a payment schedule and stated that any late payment constituted a default which gave MCA the right to terminate the license. The "Additional Provisions" portion of the licensing contracts also contained a waiver to the effect that "[a]cceptance of any payment after its due date shall not constitute a waiver by Licensor of any of its rights except as to payment," and an accelerated damages clause. The accelerated damages clause provided MCA, in the event of a default by PIC, with both damages equivalent to the full value of the contract in the event of a breach and the right to revoke PIC's broadcast licenses and to pursue any "legal and equitable remedies that are available to [MCA]" as a consequence of their doing so.

From the beginning, PIC's payments were consistently two to nine months behind schedule. This pattern of late payment continued for over two years without objection by MCA.

For two and a half years following the original contracts, PIC broadcast Harry, paying MCA with three minutes of advertising time per episode pursuant to the barter provisions of the contract. In September of 1993, before payments for the cash portion of the Harry contract were scheduled to begin, PIC informed MCA that it did not believe it was obligated under that portion of the contract. In April 1994, MCA demanded payment from PIC for Harry, as well as for the four other programs PIC had subsequently purchased. At that time, the combined amount PIC owed on these contracts was $175,000. PIC responded by reiterating that it was not obligated to perform the cash portion of the Harry contract, and that, according to the delayed payment schedule that MCA had accepted without protest until that point, it was not behind in its payments for the other four programs.

In May of 1994, MCA gave PIC written notice of the termination of its broadcast rights. PIC requested an extension, which MCA granted through June 1, 1994. Negotiations continued through that date, but eventually fell apart. In a letter dated June 29, 1994, MCA suspended PIC's broadcast rights for all of its shows, and stated that "[a]ny telecasts of MCA programming by WTMV-TV on or after June 1, 1994, will be deemed unauthorized and shall constitute an infringement of MCA's copyrights in and to those programs." PIC nonetheless continued broadcasting MCA's programs, with the exception of Harry.

On July 1, 1994, MCA filed suit against PIC alleging copyright infringement and breach of contract. It also sought and obtained a preliminary injunction to prevent PIC from further broadcasts of its television shows. PIC filed a counterclaim, contending that MCA's actions were themselves in breach of contract and violated federal antitrust law, ³ and continued its broadcasts of MCA programming until just before the district court enjoined it from so doing.

After a bench trial, the district court found that PIC had breached its licensing contracts with MCA prior to June 1, 1994, and that PIC's 106 broadcasts of MCA programs after that date constituted willful copyright infringement. For damages on these claims, the district court awarded MCA $804,538.65 for breach of contract, and $1,060,000.00 for copyright infringement. As for PIC's antitrust counterclaim, the district court found that the licensing contract for Harry was an illegal tying contract in violation of the Sherman Act and was therefore not enforceable. However, it concluded that PIC had failed to prove "antitrust injury" and that PIC was therefore entitled to no damages for MCA's antitrust violation.

PIC now appeals the district court's order on MCA's breach of contract and copyright infringement claims and on the issue of damages for the antitrust violation. MCA cross-appeals the district court's determination that its conditioning of the initial contracts on PIC's licensing of Harry constituted an antitrust violation.

DISCUSSION

I

As a threshold matter, PIC argues that this case is primarily a common law contract dispute with a merely incidental copyright claim and therefore that the federal courts have no subject matter jurisdiction to hear this case. In MCA Television Ltd. v. Feltner, 89 F.3d 766 (11th Cir.1996), the defendant argued, on virtually identical facts, that the district court lacked subject matter jurisdiction because the case did not "arise under" the Copyright Act, 17 U.S.C. § 501 et seq, and was merely a breach of contract claim. We disagreed, and held that the federal courts had subject matter jurisdiction to hear the case. See id. at 768.

However, PIC points out that Feltner offers no reason to support its conclusion, and argues that the standard adopted by Sullivan v. Naturalis, Inc., 5 F.3d 1410, 1413 (11th Cir.1993), the case on which Feltner relies, points to the opposite result. In Sullivan, we cited with approval Judge Friendly's articulation of the standard for jurisdiction under 28 U.S.C. § 1338, which grants federal courts original jurisdiction to hear cases relating to copyright: "[A]n 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." Sullivan, 5 F.3d at 1412 (citing T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir.1964) (opinion of Friendly, J.)).

PIC argues that because it stipulated that MCA owned the copyright to the programs at issue, the copyright issue is only incidental to the disposition of the case. As the Harms standard clearly states, however, an action "arises under" the Copyright Act where the complaint "is for a remedy expressly granted by the Act, e.g., a suit for infringement." Harms, 339 F.2d at 828. In its complaint, MCA sought both a preliminary injunction and damages under the Copyright Act. The suit therefore "arises under" the Act according to the standard this Court adopted in Sullivan and applied in Feltner. ⁴

II

The district court held that PIC had been in breach of the contract when MCA revoked its broadcast licenses. It based this judgment on the fact that in June 1994, at the time of the revocation of its licenses, PIC was current in the payment of its bills to MCA only through October of 1993.

PIC, however, argues that, according to the late payment schedule it had followed for the two years since it had committed to cash payment for MCA's shows, it had not...