Taylor Corp. v. Four Seasons Greetings, LLC

• Decision Date: 11 April 2005
• Docket Number: No. 04-1088.,04-1088.
• Parties: TAYLOR CORPORATION, Appellee, v. FOUR SEASONS GREETINGS, LLC, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

403 F.3d 958

TAYLOR CORPORATION, Appellee, v. FOUR SEASONS GREETINGS, LLC, Appellant.

No. 04-1088.

United States Court of Appeals, Eighth Circuit.

Submitted: December 17, 2004.

Filed: April 11, 2005.

COPYRIGHT MATERIAL OMITTED

Robert Mark Halligan, argued, Chicago, IL (James Brian Sheehy, Minneapolis, MN, on the brief), for appellant.

Laura J. Hein, Minneapolis, MN (Dean C. Eyler, on the brief), for appellee.

Before LOKEN, Chief Judge, MORRIS SHEPPARD ARNOLD and RILEY, Circuit Judges.

RILEY, Circuit Judge.

This appeal is primarily governed by the standard of review. We directly address a challenge to the appropriate standard for reviewing a district court's findings of substantial similarity in copyright law cases. We adopt the standard from the majority of other circuits and review the district court's fact findings concerning substantial similarity for clear error.

In this copyright infringement action, Taylor Corporation (Taylor), a greeting card manufacturer, claims Four Seasons Greetings, LLC (Four Seasons), a competing greeting card company, infringed Taylor's copyrights in six greeting card designs. Following a bifurcated trial, the district court¹ concluded Taylor owns the copyrights in the six greeting card designs at issue, and Four Seasons's card designs infringe Taylor's copyrights. The district court issued a permanent injunction against Four Seasons, directing Four Seasons to stop copying, selling, or distributing the six greeting card designs. Four Seasons appeals, arguing the district court erred: (1) in holding Four Seasons liable for copyright infringement, and (2) in issuing a permanent injunction. We affirm.

I. BACKGROUND

This case involves claims of illegal copying of six holiday greeting card designs. Creative Card Company (Creative Card) employed Frank Stockmal (Stockmal), Bernard Granger (Granger), Michael Shelton (Shelton), and Aleta Brunettin (Brunettin) to design greeting cards. While working for Creative Card, these artists created the six card designs disputed in this case: Colored Presents, Ribbon of Flags Around Globe, Three Worlds of Thanks Globe Ornament, Pencil Sketch Farm, Thanksgiving Cart, and Wreath with Verse. Because the artists were employed by Creative Card when the artists created the card designs, Creative Card is considered the author and the original copyright owner of the six designs.² At the time Creative Card authored the six card designs, Creative Card was a wholly owned subsidiary of AP & P Manufacturing, Inc. (AP & P).

In 1999, Creative Card's president left Creative Card and formed Four Seasons. Three of Creative Card's artists-Stockmal, Shelton, and Brunettin-resigned from Creative Card and went to work for Four Seasons. While employed by Four Seasons, Stockmal, Shelton, and Brunettin created six card designs Taylor contends are similar to six card designs the artists and Granger previously created for Creative Card.

AP & P later filed for bankruptcy. In April 2000, AP & P and Taylor entered into an Asset Purchase Agreement (Agreement), in which AP & P agreed to sell certain assets to Taylor, including AP & P's assets "used in the operation of [AP & P's] Business." The Agreement defines "business" as "the business of designing and publishing greeting cards, ... as currently conducted by the Creative Card division of [AP & P]." AP & P also agreed to transfer to Taylor "[a]ll intellectual property of the Business, including ... copyrights, ... artwork, designs and other intangible property of the Business, ... including without limitation the Intellectual Property listed in Schedule 1.1(d)." Schedule 1.1(d) identifies hundreds of greeting card designs, including the six card designs authored by Creative Card. On April 28, 2000, the United States Bankruptcy Court for the District of Delaware approved the sale of AP & P's assets to Taylor.

In June and August 2001, Taylor registered the six card designs at issue in this case with the United States Copyright Office. The original copyright registrations misidentified Taylor as the author of each card design. In August 2003, Taylor filed supplementary registrations correctly identifying Creative Card as the author of each work. The supplementary registrations listed Taylor as the copyright claimant. The registration form requires the copyright claimant, if different from the author, to give a brief explanation as to how the claimant obtained ownership of the copyright. In response to that direction, each supplementary registration contains the statement "Bill of Sale and Assignment from [AP & P] to Taylor ... dated May 9, 2000."

Taylor sued Four Seasons for copyright infringement under the 1976 Copyright Act, 17 U.S.C. §§ 101-1332, for "copying, manufacturing, producing, publishing, selling, promoting and/or advertising ... greeting cards bearing designs ... substantially similar to [Taylor's] Works." The district court preliminarily enjoined Four Seasons from further sale or distribution of the six cards in question. This court affirmed the preliminary injunction. Taylor Corp. v. Four Seasons Greetings, LLC, 315 F.3d 1039, 1041 (8th Cir.2003) (Taylor I).

Before trial, Four Seasons stipulated it earned a profit of $45,976.95 from sales of the six card designs. Despite Four Seasons's stipulation of damages, Taylor filed a "Notice of Election of Remedies and Withdrawal of Jury Demand," wherein Taylor sought only injunctive relief at trial. The district court bifurcated Taylor's action into two separate trials. First, the parties tried Taylor's infringement claim to the court and to an advisory jury. The advisory jury unanimously found Four Seasons's cards infringed Taylor's copyrights. Second, the parties tried Taylor's claim that it owns the copyrights at issue to the district court, which concluded "[Taylor] is the legal owner of the copyrights pertaining to the [six card designs]." After deciding Four Seasons infringed Taylor's copyrights, the district court entered judgment in favor of Taylor and issued a permanent injunction against Four Seasons, prohibiting Four Seasons "from any further copying, manufacture, production, reproduction, publication, display, distribution, promotion, sale or offering for sale of the six Four Seasons designs."

Four Seasons challenges the district court's judgment, contending the district court erred: (1) in concluding Taylor owns the copyrights in the six card designs; (2) in "failing to identify what constituent elements of the Taylor cards were original, protectable expression that was copied by Four Seasons"; (3) in failing to find Four Seasons's cards were independently created; (4) in granting injunctive relief after Taylor elected not to accept monetary damages; and (5) in depriving Four Seasons of its right to a jury in the ownership phase of the trial.

II. DISCUSSION

A. Copyright Infringement

Copyright law grants the copyright owner a limited monopoly to exploit his creation. This limited monopoly "is intended to motivate the creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired." Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). To prevail on its copyright infringement claim, Taylor must prove "ownership of a valid copyright and copying of original elements of the work." Mulcahy v. Cheetah Learning, LLC, 386 F.3d 849, 852 (8th Cir.2004).

On appeal, Four Seasons claims Taylor failed to prove copyright infringement. First, Four Seasons argues Taylor failed to prove it owns the copyrights in the six card designs. Second, Four Seasons contends Taylor failed to prove Four Seasons copied any original, protectable elements of Taylor's card designs. Finally, Four Seasons maintains it independently created its card designs.

1. Ownership

Copyrights, like other property rights, may be transferred from the owner to another entity. See 17 U.S.C. § 201(d). The Copyright Act sets forth the requirements of a transfer: "A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent." 17 U.S.C. § 204(a).

It is uncontested Creative Card, the author of the card designs, originally owned the copyrights. The parties further agree Creative Card did not execute a writing expressly transferring or assigning its copyrights to AP & P or to Taylor. However, Taylor contends the bankruptcy court's order effected the transfer of Creative Card's copyrights to Taylor. Accordingly, the question is whether Taylor proved a transfer of copyright ownership "by operation of law."

Section 204(a) of the Copyright Act does not define the phrase "by operation of law," and sparse case law addresses the transfer of copyright "by operation of law." Brooks v. Bates, 781 F.Supp. 202, 205 (S.D.N.Y.1991). In Brooks, one of the few cases to address the meaning of "by operation of law," the court relied on the late Professor Melville B. Nimmer's renowned copyright treatise to interpret "by operation of law" to mean transfers by bequest, bankruptcy, mortgage foreclosures, and the like. Id. at 205 (citing Melville B. Nimmer & David Nimmer, 3 Nimmer on Copyright § 10.03[A] at 10-42 (1991)). The court then concluded, "[t]he lessons to be drawn from Professor Nimmer are that transfers of copyrights by operation of law are limited in number, and depend upon circumstances which establish the author's express or implied consent." Id. One example of a transfer "by operation of law" is a "transfer[ ] of ownership pursuant to proceedings in bankruptcy ..., since in such cases the author, by his overt conduct in filing in bankruptcy, ... has consented to such a transfer." Id. (quoting supra, § 10.06[A], 10-42). Al...