Victor Stanley, Inc. v. Creative Pipe, Inc.
| Decision Date | 30 September 2011 |
| Docket Number | CIVIL ACTION NO. MJG-06-2662 |
| Parties | VICTOR STANLEY, INC. Plaintiff v. CREATIVE PIPE, INC., et al. Defendants |
| Court | U.S. District Court — District of Maryland |
VICTOR STANLEY, INC. Plaintiff
v.
CREATIVE PIPE, INC., et al. Defendants
CIVIL ACTION NO. MJG-06-2662
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
Dated: September 30, 2011
The Court has conducted a bench trial in the instant case. The Court has heard the evidence presented, reviewed the exhibits, considered the materials submitted by the parties, and had the benefit of the arguments of counsel. The Court now issues this Memorandum of Decision as its findings of fact and conclusions of law in compliance with Rule 52(a) of the Federal Rules of Civil Procedure. The Court finds the facts stated herein based upon its evaluation of the evidence, including the credibility of witnesses, and the inferences that the Court has found reasonable to draw from the evidence.
I. INTRODUCTION
A. VICTOR STANLEY INC. ("VSI")
VSI is a Maryland company that has, since 1962, been manufacturing site furnishings such as litter receptacles,
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benches, tables, chairs, ash urns, planters, tree guards, seats, bike racks, and bollards made from steel, cast ductile iron, wood, and recycled plastic.
VSI has two manufacturing facilities in Maryland and has invested millions of dollars in the design and development of new site furnishing products. VSI has invested in advanced technology such as computerized welding robots, the development and installation of state-of-the-art powder coating systems, and the purchase of advanced automated metalworking and woodworking equipment. In the 1990s, VSI developed a break-through powder-coating process that provides a superior weather-resistant, durable finish, which is highly desirable for outdoor site furniture. The innovative process was named and trademarked PublicoteTM.
VSI has also invested millions of dollars in the creation, maintenance, upgrading, and dissemination of technical drawings and product graphics. It has a dedicated department employing about half a dozen people who create informative and detailed computer assisted design ("CAD") drawings of VSI products. These drawings are used in the manufacturing process as well as in the sales process, and they have substantial economic value. VSI created an on-line product library that contains these CAD drawings, specifications, and product images, accessible by
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customers, architects, and designers, for specific use in project design and purchasing activities such as presentations and bid documents.
In its 49 years of operations, VSI has developed a highly competitive American-made site furnishings business with a reputation for high quality.
B. MARK PAPPAS ("PAPPAS") AND CREATIVE PIPE, INC. ("CPI") 1 In 2004, Pappas2 and his controlled and solely-owned company, CPI, both based in California,3 sought to enter the site furnishings business. Pappas initially tried to design site furnishings for sale in the United States but was unsuccessful, selling only about two dozen furnishings. Pappas attempted to get a foothold in the site furnishings market by claiming falsely to represent VSI. Pappas and CPI also directly competed with VSI by copying VSI's products and selling the copies under the trade name, "FUVISTA," a name selected by Pappas as a targeted insult to VSI. As Pappas puts it, the name "Fuvista" stands for "F--- You Victor Stanley."4
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As discussed herein, Pappas and CPI unfairly competed with VSI, infringed VSI's rights in copyright protected design drawings, and infringed a VSI design patent.
C. PROCEDURAL SETTING
VSI filed the instant lawsuit against Pappas,5 CPI, and Mrs. Pappas (who has been dismissed as a Defendant). The Complaint contained twelve Counts that have been "pruned" to four Counts asserted against Pappas and CPI that have proceeded to trial:
1. Count I - Copyright Infringement
2. Count II - Unfair Competition
3. Count VII - False Advertising; and
4. Count VIII - Patent Infringement.
In the course of the instant litigation, the Defendants engaged in a massive degree of spoliation of evidence detailed in Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497, 506 (D. Md. 2010). See the Memorandum, Order and Recommendation of Magistrate Judge Grimm [Document 377). By the Order Re: Sanctions Motion [Document 381], the Court adopted the decision of Magistrate Judge Grimm, awarded VSI attorneys' fees and costs and a default judgment as to liability on Count I (Copyright Infringement).
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The case has proceeded to trial on the damages to be awarded on VSI's claims for copyright infringement, and on VSI's claims for unfair competition, false advertising, and patent infringement.
II. DISCUSSION
A. COPYRIGHT INFRINGEMENT6
1. Acts of Infringement
VSI maintained a library of detailed design drawings of its products that were original pictorial or graphic works protected by copyright. 17 U.S.C. § 102(a)(5). VSI provided access to the library through its website for the convenience of bidders on projects that would include VSI products. A person seeking to bid on a project using a VSI product could obtain access to the library and permission to download VSI designs by providing identification, representing that access was sought for a permitted purpose, and accepting the terms of a licensing agreement. The bidder could then include the downloaded
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drawings on bids and would, if the bids were accepted, purchase the VSI products shown in the drawings for the project.
Pappas (acting for CPI) obtained access to the VSI library by falsely identifying himself - using the alias "Fred Bass" and other pseudonyms - and falsely representing his purpose. Pappas downloaded VSI's copyright protected drawings, copied them, had the identity of CPI substituted for that of VSI, and left the remainder of the drawings unchanged from the original copyright protected drawings. Pappas then proceeded to make additional copies of the infringing altered drawings, without authority from VSI (the copyright owner), and used the altered drawings in the course of CPI's business. Thus, infringing drawings derived from unauthorized copies of VSI drawings were included with bids submitted by CPI for the sale of CPI (Fuvista) products. Also, unauthorized copies were sent to contractors - largely in China - that produced products bearing the CPI (Fuvista) label based on the drawings.
VSI seeks monetary damages based on the profits of the infringer7 with interest and injunctive relief.
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2. Damages
VSI is seeking damages for Defendants' acts of copyright infringement, consisting of the unauthorized copying of VSI's copyright protected technical drawings, the production of infringing altered drawings (i.e., with false identification as CPI drawings) and copying of the infringing altered drawings.8
a. Drawings and Physical Items Distinguished
VSI's technical drawings are original pictorial or graphic works protected by 17 U.S.C. § 102(a)(5). As a copyright owner, VSI has the exclusive right to reproduce, prepare derivative works, distribute copies, and display the copyrighted work. 17 U.S.C. § 106. VSI does not, however, have the right to exclude others from using the copyrighted work, since "use" rights are governed by the Patent Act, 35 U.S.C. § 271.
Copyright protection does not "extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such a work." 17 U.S.C. § 102(b). Further, the Copyright Act "does not afford, to the owner of copyright in a work that portrays a useful article as such, any greater or lesser rights with respect to
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the making, distribution, or display of the useful article so portrayed than those afforded to such works under the law." 17 U.S.C. § 113(b).
VSI's copyright in a technical drawing of a useful article does not preclude the Defendants from manufacturing and marketing the article itself. Gusler v. Fischer, 580 F. Supp. 2d 309, 315 (S.D.N.Y. 2008)("Ownership of a copyright in a pictorial representation of a useful article does not vest the owner of the picture with a derivative copyright in the useful article itself.")(citations omitted). Indeed, to allow the act of manufacturing a non-architectural useful item by using a copyright protected drawing of that item to constitute copyright infringement would be to elevate the copyright to a patent. Forest River, Inc. v. Heartland Recreational Vehicles, LLC, 753 F. Supp. 2d 753, 759 (N.D. Ind. 2010).
Thus, anyone - including Defendants - would not be committing copyright infringement by reverse engineering a VSI product. Of course, there could be debatable issues presented if the Defendants had merely used without copying a copyright protected drawing to manufacture products.9 However, this is not such a case.
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VSI's technical drawings are works that are eligible for copyright protection. 17 U.S.C. § 102(a)(5). When a protected drawing is copied, there is copyright infringement. See Forest River, 753 F. Supp. 2d at 760 (finding that the complaint alleging that the defendant created derivative technical drawings stated a claim for copyright infringement as to the copies, distinct from the useful articles).
VSI has proven that Defendants, without...
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