Troll Co. v. Uneeda Doll Co.

• Decision Date: 13 April 2007
• Docket Number: Docket No. 05-6487-CV.
• Citation: 483 F.3d 150
• Parties: TROLL COMPANY, Plaintiff-Appellee, v. UNEEDA DOLL COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

483 F.3d 150

TROLL COMPANY, Plaintiff-Appellee, v. UNEEDA DOLL COMPANY, Defendant-Appellant.

Docket No. 05-6487-CV.

United States Court of Appeals, Second Circuit.

Heard: December 22, 2006.

Decided: April 13, 2007.

Barry G. Magidoff, Greenberg Traurig, LLP, New York, N.Y., for Defendant-Appellant.

Craig S. Mende, New York, N.Y. (Michael Chiappetta, Fross Zelnick Lehrman & Zissu, P.C., New York, N.Y., on the brief), for Plaintiff-Appellee.

Before MESKILL, NEWMAN, and HALL, Circuit Judges.

NEWMAN, Circuit Judge.

This appeal, concerning so-called "restored" copyrights, requires the Court to construe for the first time section 104A of the Copyright Act, 17 U.S.C. § 104A, which was enacted in its present form as part of the Uruguay Round Agreements Act ("URAA"), Pub.L. No. 103-465, 108 Stat. 4809 (1994). The Defendant-Appellant, Uneeda Doll Co. ("Uneeda"), appeals from the November 28, 2005, order of the District Court for the Southern District of New York (Richard Owen, District Judge), preliminarily enjoining Uneeda from manufacturing, distributing, or selling "Wish-nik" troll dolls, which are alleged to infringe a restored copyright owned by the Plaintiff-Appellee, Troll Co. On appeal, Uneeda contends that (1) Troll Co. has not demonstrated that it owns the restored copyright, and (2) it is a "reliance party" within the meaning of section 104A and is thus entitled to sell its existing inventory of Wish-nik dolls during a one-year sell-off period. We conclude that Troll Co. is likely to succeed in proving ownership of the restored copyright and that Uneeda is not a reliance party. We therefore affirm the order of the District Court.

Background

A brief history of troll dolls. This case involves the copyright to troll dolls, "those ugly but somehow endearing" plastic dolls with oversized heads, big grins, pot bellies, and frizzy hair. See EFS Marketing, Inc. v. Russ Berrie & Co., 76 F.3d 487, 489 (2d Cir.1996). The troll doll was first created in the late 1950s by a Danish woodcarver, Thomas Dam. Dam called his doll a "Good Luck Troll." By 1961, Dam was selling his troll dolls in the United States.

In 1962, Dam founded a cleverly named Danish company, Dam Things Establishment, through which he marketed his dolls. In 1965, Dam Things Establishment obtained a U.S. copyright for the troll doll. The copyright registration listed Dam Things Establishment as the author of the dolls and 1961 as the year of first publication. That same year, however, the copyright was invalidated because some dolls had been sold in the United States without the proper copyright notice, and the dolls thereby entered the public domain. See Scandia House Enterprises, Inc. v. Dam Things Establishment, 243 F.Supp. 450, 454 (D.D.C.1965). The Good Luck Troll is still protected by copyright in Denmark.

After the troll dolls entered the public domain, numerous companies began marketing the dolls in the United States. See EFS Marketing, 76 F.3d at 489. The market for troll dolls was somewhat cyclical, as the dolls' popularity surged every decade or so. The most recent surge in popularity occurred in the early 1990s. See id.

Thomas Dam died in 1989. Following Dam's death, his heirs granted Troll Co., a Danish company, the exclusive right to exploit and license the troll dolls.

The restoration of the Good Luck Trolls copyright. Congress enacted the URAA on December 8, 1994. Among other things, the URAA amended¹ section 104A of the Copyright Act to bring the United States into compliance with the Berne Convention,² which it had joined in 1989. See Dam Things from Denmark v. Russ Berrie & Co., 290 F.3d 548, 554 (3d Cir.2002). Section 104A restores copyrights for a wide range of foreign works that had previously entered the public domain in the United States because of noncompliance with certain formalities, primarily notice of copyright, imposed by United States copyright law. See 17 U.S.C. § 104A (h)(6); see also Dam Things from Denmark, 290 F.3d at 554-55.

The parties do not dispute that the Good Luck Troll copyright was automatically restored pursuant to the URAA on January 1, 1996. Upon learning of the restoration, Troll Co. applied for, and was granted, a registration certificate in 2000. The registration lists Thomas Dam as the author and Troll Co. as the owner of the copyright, and it states 1957 as the date of first publication. After receiving the registration, Troll Co. began enforcing its restored copyright.

Uneeda's manufacture and marketing of Wish-nik dolls. In 1963 or 1964, Dam Things Establishment licensed Uneeda Doll Co., Inc. ("UDCI"), Uneeda's predecessor, to produce and distribute a line of troll dolls under the name "Wish-niks." The record shows that UDCI sold Wish-niks periodically between 1965 and 1984. According to UDCI's chairman, however, UDCI also sold Wish-niks "at least through 1994 and probably up to 1996." In 1996, UDCI sold all of its assets, including its copyrights, other intellectual property rights, and goodwill, to Uneeda.

In 2001 and 2004, Troll Co.'s president met Wilson Lee, a manager of Uneeda's Hong Kong affiliate, at a toy fair in Germany. On both occasions, Lee allegedly informed him that Uneeda was no longer manufacturing or selling troll dolls and had no intention of doing so in the future. Notwithstanding these discussions, just as Troll Co. was planning a major relaunch of its troll dolls, it learned in August 2005 that Uneeda was selling newly produced Wish-niks to Walmart. The Wish-niks contained copyright notices in Uneeda's name. Walmart withdrew the dolls after Troll Co. informed it that the dolls infringed its copyright.

The District Court proceeding. Troll Co. commenced this copyright infringement action in the U.S. District Court for the Southern District of New York on October 7, 2005.³ Troll Co. served Uneeda with written notice of its intent to enforce the copyright (a procedure sometimes required under section 104A, as discussed below) on October 18, 2005. After a hearing, the District Judge granted Troll Co.'s motion for a preliminary injunction in an order entered November 28, 2005. See Troll Co. v. Uneeda Doll Co., 400 F.Supp.2d 601 (S.D.N.Y.2005). Finding "direct evidence of actual copying," the District Judge concluded that Uneeda's sales of Wish-niks threatened irreparable harm to Troll Co. See id. at 603. He also concluded that Troll Co. was likely to succeed on the merits of its copyright infringement claim, rejecting Uneeda's claim to protection as a "reliance party" under the URAA. See id. at 603-04. Accordingly, he preliminarily enjoined Uneeda from manufacturing, distributing, or selling Wish-nik dolls pending resolution of the case. See id. at 604.

Discussion

The standards for obtaining a preliminary injunction and for appellate review of the grant of such an injunction are well known and need not be repeated. See Forest City Daly Housing, Inc. v. Town of North Hempstead, 175 F.3d 144, 149 (2d Cir.1999) (preliminary injunction standards); Nicholson v. Scoppetta, 344 F.3d 154, 165 (2d Cir.2003) (appellate review standard).

Uneeda does not challenge the District Court's conclusion that Troll Co. would suffer irreparable harm without a preliminary injunction. The issue on appeal is whether Troll Co. is likely to succeed on the merits of its infringement claim. Uneeda argues that Troll Co. is unlikely to succeed because (1) Troll Co. has not established that it owns the restored copyright, and (2) Uneeda is a reliance party within the meaning of section 104A, entitling it to sell off its inventory of Wish-niks for one year following Troll Co.'s service of a notice of intent to enforce the restored copyright.

I. Ownership of the Restored Copyright

Uneeda contends preliminarily that the District Court erred in determining that Troll Co. owns the restored copyright.⁴ We conclude that Troll Co. is likely to succeed in proving ownership because evidence submitted to the District Court supports a determination that Troll Co. owns the restored copyright. Troll Co.'s president testified that, after Dam's death in 1989, Dam's heirs transferred Dam's rights to the troll dolls to Troll Co. In addition, the 2000 copyright registration lists Troll Co. as the owner.⁵

According to Uneeda, Troll Co.'s trial court evidence contradicts evidence submitted to the Copyright Office and the U.S. District Court for the District of New Jersey. First, Uneeda points out, the original 1965 registration certificate listed Dam Things Establishment, not Dam himself, as the "author" of the Good Luck Trolls. Consequently, Uneeda argues, Troll Co. must establish a chain of ownership from Dam Things Establishment, not from Dam through his heirs, as Troll Co. argued in the District Court. But the URAA specifies that authorship is to be determined by reference to the source country's law, not by reference to U.S. copyright registration. See 17 U.S.C. § 104A(b); see, e.g., Alameda Films S A v. Authors Rights Restoration Corp., 331 F.3d 472, 477 (5th Cir.2003) (applying Mexican law). Neither party submitted evidence of Danish law to the District Court. In any event, to obtain a preliminary injunction, Troll Co. needed to show only that it was likely to prove ownership, and it seems likely that Danish law would consider Dam to be the "author" of the troll dolls since he created the dolls several years before he established Dam Things Establishment.⁶

Second, Uneeda contends that Troll Co. is estopped from arguing that it acquired rights to the troll dolls from Dam's heirs because it represented to the U.S. District Court for the District of New Jersey in another action that it acquired those rights from Dam Things Establishment. See Dam Things from Denmark, 290 F.3d at 553 n. 3. The doctrine of judicial estoppel does not prevent Troll Co. from asserting a different theory of ownership in this case.⁷ In any event, even if it is unclear whether Troll Co. obtained ownership of the copyright from Dam...