Video Trip Corp. v. Lightning Video, Inc.

• Decision Date: 20 January 1989
• Docket Number: No. 471,471
• Citation: 866 F.2d 50
• Parties: 1989 Copr.L.Dec. P 26,412, 9 U.S.P.Q.2d 1670 The VIDEO TRIP CORPORATION, Plaintiff-Appellee, v. LIGHTNING VIDEO, INC., and Vestron, Inc., Defendants, Vestron, Inc., Defendant-Appellant. VESTRON PROMOTIONS, INC., Successor to Lightning Video, Inc., Counterclaim- Plaintiff-Appellant, v. BEST FILM & VIDEO CORPORATION and The Video Trip Corporation, Counterclaim- Defendants-Appellees. Docket 88-7736,
• Court: U.S. Court of Appeals — Second Circuit

Page 50

866 F.2d 50

1989 Copr.L.Dec. P 26,412, 9 U.S.P.Q.2d 1670

The VIDEO TRIP CORPORATION, Plaintiff-Appellee, v. LIGHTNING VIDEO, INC., and Vestron, Inc., Defendants, Vestron, Inc., Defendant-Appellant.

VESTRON PROMOTIONS, INC., Successor to Lightning Video, Inc., Counterclaim- Plaintiff-Appellant, v. BEST FILM & VIDEO CORPORATION and The Video Trip

Corporation, Counterclaim- Defendants-Appellees.

Docket 88-7736, No. 471.

United States Court of Appeals Second Circuit.

Argued Dec. 2, 1988.

Decided Jan. 20, 1989.

Darrell K. Fennell, Fennell & Minkoff, New York City (Ronald C. Minkoff, of counsel) for defendant-appellant and counterclaim-plaintiff-appellant.

Jeffrey E. Jacobson, Jacobson & Colfin, New York City (Bruce Colfin, of counsel) for counterclaim-defendant-appellee Best Film & Video Corp.

Garry C. Davenport, Goetz Fitzpatrick & Flynn, New York City, for plaintiff-appellee and counterclaim-defendant-appellee The Video Trip Corp.

Before WINTER and MAHONEY, Circuit Judges, and METZNER, District Judge. ^*

METZNER, Senior District Judge:

Vestron Promotions, Inc. ("Lightning") appeals from an order denying its motion for a preliminary injunction barring The Video Trip Corporation ("VTC") and Best Film & Video Corporation ("Best") from producing and distributing certain travel video cassettes ("video").

On January 28, 1986, VTC entered into a written agreement with Lightning which granted Lightning the "exclusive rights to market, manufacture and promote" certain videos. The agreement also provided that Lightning had an exclusive license in the copyrights of the videos for the eight-year term of the agreement. The agreement further required Lightning to furnish VTC with monthly reports as to income and expenses incurred by Lightning in connection with the venture.

In the latter part of 1987 the parties experienced difficulties with the arrangement and agreed to amend the existing contract. The amendment was executed on November 4, 1987, and provided that Lightning was granted a ninety-day sell-off period within which it was to dispose of all existing inventory and collect all receivables connected with the sale of videos. The ninety-day period ended on February 3, 1988. Within thirty days of the expiration of the sell-off period, which was March 5, 1988, Lightning was to furnish VTC with a final accounting accompanied by a list of accounts receivable. If the accounting showed that VTC owed Lightning any money, VTC was required to make payment within ten days after the receipt of the accounting.

All distribution rights in the property were to revert to VTC upon execution of the agreement, but such reversion "shall be revocable immediately and without further notice upon VTC's failure to make" payment to Lightning of moneys found due Lightning by the accounting. On December 1, 1987, when ownership of the copyrights was in VTC pursuant to the amended contract, VTC entered into an agreement with Best to distribute the videos. By the time of the filing of the counterclaims, Best was marketing these videos.

On March 22, 1988, VTC sent a long letter to Lightning in which, among other complaints, it pointed out the failure of Lightning to comply with the terms of the amended agreement in failing to file an accounting, in failing to furnish a list of accounts receivable, and in failing to return "masters of the property" and art work. Two days later, on March 24, 1988, Lightning furnished the accounting 19 days late. It showed that VTC owed Lightning $168,835. There is no indication that either the list of the accounts receivable or the masters and art work were ever turned over to VTC.

Within a week of receiving the accounting, VTC claimed that the figures were inaccurate and that, in fact, Lightning owed VTC at least $399,000. Two weeks thereafter VTC instituted suit against Lightning for copyright infringement, accounting and damages. Two months later counterclaims were filed by Lightning for copyright infringement and an injunction and for damages of $168,835.

Lightning then sought a preliminary injunction on the ground that, pursuant to the terms of the amended contract, ownership of the copyrights had reverted to it upon the failure of VTC to pay the amount that Lightning determined was due. It argues that the court below was in error in denying the application under the law applicable to copyright infringement cases.

The law is clearly set forth in Hasbro Bradley, Inc. v. Sparkle Toys, Inc., 780 F.2d 189, 192 (2d Cir.1985). An applicant for a preliminary injunction must first show irreparable injury. In a copyright action the existence of irreparable injury is presumed upon a showing of a prima facie case of copyright infringement. The existence of a prima facie case depends in the first instance on proof by the movant that it is the valid owner of a copyright. 3 Nimmer on Copyright Sec. 13.01 (1988).

In this case there is a serious dispute involving the very provision of the contract which it is claimed supports the transfer of the copyrights to Lightning. In addition, there are the...