Warner Bros. Inc. v. Dae Rim Trading, Inc.

• Decision Date: 12 June 1989
• Docket Number: D,Nos. 550,557,s. 550
• Citation: 877 F.2d 1120
• Parties: , 1989 Copr.L.Dec. P 26,433, 14 Fed.R.Serv.3d 1270, 11 U.S.P.Q.2d 1272 WARNER BROS. INC., Plaintiff-Appellant, J. Joseph Bainton, Esquire, Appellant, v. DAE RIM TRADING, INC., and Yun Yon Cho, Defendants-Appellees. ockets 88-7730, 88-7732.
• Court: U.S. Court of Appeals — Second Circuit

Page 1120

877 F.2d 1120

58 USLW 2042, 1989 Copr.L.Dec. P 26,433,

14 Fed.R.Serv.3d 1270,

11 U.S.P.Q.2d 1272

WARNER BROS. INC., Plaintiff-AppellantJ. Joseph Bainton, Esquire, Appellant, v.DAE RIM TRADING, INC., and Yun Yon Cho, Defendants-Appellees.

Nos. 550, 557, Dockets 88-7730, 88-7732.

United States Court of Appeals Second Circuit.

Argued Dec. 14, 1988.

Decided June 12, 1989.

J. Joseph Bainton, New York City(Reboul, MacMurray, Hewitt, Maynard & Kristol, William Dunnegan, Bradley J. Andreozzi and Catherine J. Crowley, New York City, of counsel), for plaintiff-appellant.

Pasquale A. Razzano, New York City(Curtis, Morris & Safford, P.C. and James A. Killerlane, New York, New York, of counsel), for defendants-appellees.

Before VAN GRAAFEILAND, MESKILL and MINER, Circuit Judges.

VAN GRAAFEILAND, Circuit Judge:

Warner Bros. Inc.("Warner") appeals from so much of the final judgment of the United States District Court for the Southern District of New York(Wyatt, J.) as awarded it only $100 in statutory damages in this copyright infringement action, denied its claim for attorneys' fees and awarded defendants-appellees attorneys' fees in the amount of $38,498.61.J. Joseph Bainton, Warner's attorney, appeals from so much of the opinion of Judge Wyatt, 677 F.Supp. 740(S.D.N.Y.1988), as finds that he violated Fed.R.Civ.P. 11.We affirm the award of $100 and the denial of fees for plaintiff-appellant's attorneys.We reverse and vacate the award of $38,498.61 to defendants-appellees' attorneys.We dismiss the appeal of Attorney Bainton with double costs and damages.

Sung Pil Cho, his wife, Yun Yon Cho, and their two children immigrated to the United States from Korea in 1978.During the six years that elapsed between their arrival in this Country and the start of the instant litigation on July 2, 1984, Mr. and Mrs. Cho acquired only a rudimentary grasp of English.Their testimony at trial was given with the aid of an interpreter.Despite this communication handicap, the Chos opened a small variety store on West 30th Street in New York City in 1982, where they sold inexpensive merchandise such as combs, wallets and mirrors.Although the business bore the impressive name Dae Rim Trading, Inc., it was a typical "mom and pop" operation, both of the Chos working twelve to fourteen hours a day, seven days a week.

In June 1984, Mrs. Cho purchased twelve small plastic dolls from a wholesaler.Unknown to her, these dolls were similar to a copyrighted character called "Gizmo" in a Warner movie.The Chos were not familiar with either the movie or the characters.On June 27, 1984, a private investigator for Warner visited the store and purchased six of these small figures for $15.Although Warner suffered no provable damage as a result of this almost-insignificant transaction, the Chos have been involved in litigation with Warner ever since--this, despite the fact that on November 2, 1984, the Chos offered to stipulate to the granting of a permanent injunction as demanded in Warner's complaint and an award of statutory damages in the amount of $250.See17 U.S.C. Sec. 504(c).The conceded reason why Warner has pressed this extended litigation was to secure a substantial award of statutory damages and attorneys' fees as a lesson and warning to defendants and other copyright infringers.

Although Warner's appeal is of necessity directed to the district court's judgment, the main thrust of its briefs is against Judge Wyatt's criticisms of the high-handed methods by which Warner pursued its claim of copyright infringement.Thirty-two pages of Warner's main brief and eight pages of its reply brief are devoted to this issue alone.In the paragraphs that follow, we state why, in the main at least, Judge Wyatt's criticisms were justified.

When Warner's investigator returned with news of his purchase, Warner's attorneys promptly prepared a complaint against Dae Rim and "John Doe", together with motion papers for what was designated a "Temporary Restraining Order, Seizure and Impoundment Order and Order to Show Cause for Preliminary Injunction and Accelerated Discovery."The complaint alleged that Warner owns copyrights for two characters in its movie "Gremlins", one called "Gizmo", the other called "Stripe", and that the defendants willfully and knowingly offered for sale, distributed and publicly displayed "various products" bearing the likenesses of both characters.The fact of the matter is that the only Gremlin characters possessed by the defendants were the twelve "Gizmo" dolls purchased in June 1984, six of which were returned to the wholesaler after the defendants were informed of Warner's copyright.Judge Wyatt stated in his opinion that the certificate of plaintiff's attorney was not made after "reasonable inquiry" and was not "well grounded in fact" as required by Fed.R.Civ.P. 11. 677 F.Supp. at 765.However, Judge Wyatt made no award and imposed no sanctions as permitted by the Rule.Id. at 774.

The affidavit submitted by Warner's attorney in support of his proposed order evidenced a similar disregard of the facts.Mr. Bainton stated under oath that defendants were offering for sale and selling merchandise similar, if not identical, to both the copyrighted characters, that the infringing merchandise was "inferior" and its wrongful misappropriation had "irreparably damaged" Warner.Judge Sofaer, to whom Warner's application was submitted, was entitled to expect a more accurate statement of the facts from an officer of his court.

The order which Judge Sofaer was induced to sign directed the United States Marshal for the Southern District of New York, or one or more of his deputies, or "The Stonegate Agency, Inc., a private investigatory firm, through one or more of its employees" to "search defendants' business premises" and "seize forthwith and deliver to plaintiff's counsel pending further order of this Court" the infringing materials, their labels, wrappers, packages, plates, molds, matrices, etc., together with "all books, records, correspondence and other documents in defendants' possession, custody or control" which relate thereto or may provide information respecting vendors or purchasers thereof.Judge Wyatt held that these provisions violated copyright law, copyright rules and the Constitution.677 F.Supp. at 767.Because we agree that Warner's attorney ran roughshod over the applicable statutes and rules, we follow standard practice in not reaching the issue of constitutionality.

Section 25 of the 1909 Copyright Act, Pub.L. No. 349,35 Stat. 1075, 1081, which preceded the present Act, Pub.L. No. 553, 90 Stat. 2541(1976), provided that a copyright infringer should be liable "[t]o an injunction restraining such infringement"(subd. a) and "[t]o deliver up on oath, to be impounded during the pendency of the action, upon such terms and conditions as the court may prescribe, all articles alleged to infringe a copyright...."(subd. c).The word "impound", as thus used, has a well-settled meaning in the law.It means to "take or retain in 'the custody of the law.' "United States v. Louisiana, 446 U.S. 253, 264, 100 S.Ct. 1618, 1625, 64 L.Ed.2d 196(1980)(quoting Black's Law Dictionary 681 (5th ed. 1979); Bouvier's Law Dictionary 1515 (8th ed. 1914));seeUnited States v. Birrell, 242 F.Supp. 191, 202-04(S.D.N.Y.1965).

It is not surprising, therefore, that, when the Supreme Court enacted a set of copyright rules, The Rules of Practice, as it was authorized to do by section 25(e) of the 1909 Act, 35 Stat.at 1082, it provided in Rule 4 that a writ for seizure of infringing articles should be "directed to the marshal of the district where the said infringing copies, plates, records, molds, matrices, etc., or other means of making such infringing copies shall be stated in said affidavit to be located, and generally to any marshal of the United States, directing the said marshal to forthwith seize and hold the same subject to the order of the court issuing said writ, or of the court of the district in which the seizure shall be made."Rule 5 directs the marshal to seize the articles"using such force as may be reasonably necessary in the premises," and to "make immediate return of such seizure, or attempted seizure, to the court."Rule 6 provides that "[a] marshal who has seized alleged infringing articles, shall retain them in his possession, keeping them in a secure place, subject to the order of the court."

Section 503(a) of the 1976 Copyright Act,90 Stat.at 2585, codified assection 503(a) of Title 17 of the United States Code, provides that the "court may order the impounding, on such terms as it may deem reasonable, of all copies or phonorecords claimed to have been made or used in violation of the copyright owner's exclusive rights, and of all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies or phonorecords may be reproduced."As Attorney Bainton interprets this section, it authorizes a court to direct a private person employed by the plaintiff's attorney to "search" an alleged infringer's premises, seize the materials specified in section 503(a), and deliver them to the attorney.The private person, says Bainton, also may be directed to seize and deliver to plaintiff's attorney all books, records, correspondence or other documents related to the alleged infringing materials or which may provide information respecting the vendors or purchasers of the said materials.Plaintiff's attorney describes this portion of the order as an "accelerated discovery."

Bainton argues in support of these contentions that the Supreme Court's Rules of Practice are "void" and "no longer in effect."However, neither the Supreme Court nor Congress has said so.When section 25(e) of the 1909 Act was repealed in 1948, Pub.L. No. 773,62 Stat. 869, 996, the 1948 Act specifically provided that it did not repeal any rules of procedure theretofore prescribed by ...