Opinion
No. 00 Civ. 4866 (RWS).
August 14, 2001
PERKINS DUNNEGAN Attorney for Plaintiff By: WILLIAM DUNNEGAN, ESQ. ANN MARIE CROSWELL, ESQ. Of counsel.
MARSHALL MELHORN Attorney for Defendants By: MICHAEL S. SCALZO, ESQ. JENNIFER J. DAWSON, ESQ. Of Counsel.
OPINION
Plaintiff Mattel, Inc. ("Mattel") has moved for summary judgment on its remaining claims as well as damages in this trademark and copyright infringement action. Defendants Robarb's, Inc. ("Robarb's"), Robert R. Carpenter, Robert E. Carpenter, Barbara Carpenter, and Rollin K. Carpenter (collectively "the defendants") have opposed the motion and cross-moved for summary judgment on their counterclaim for breach of a business relationship. For the reasons set forth below, the motions will be granted in part and denied in part.
Procedural History
The parties, facts, and background to this litigation have been set forth in detail in a prior opinion of this Court, familiarity with which is assumed. See Mattel Inc. v. Robarb's, Inc., 139 F. Supp.2d 487 ("Robarb's I"), reconsideration granted in part, No. 00 Civ. 4866 (RWS), 2001 WL 797478 (S.D.N.Y. July 12, 2001) ("Robarb's II").
Briefly, this action seeks a permanent injunction and damages for copyright and trademark infringement as a result of Robarb's' use of Mattel's well-known flame design in Robarb's' toy car display cases. The Honorable Sidney H. Stein entered a preliminary injunction on August 25, 2000 enjoining the defendants from infringing on Mattel's copyright or trademark. Robarb's I then denied the defendants' motion to transfer venue or dismiss for forum non conveniens, and held that the defendants' use of blister pack inserts containing the Mattel flame design caused actual consumer confusion, but that trademark damages were not appropriate because the infringement was not willful. 139 F. Supp.2d at 493-94. The Court also denied defendants' motion for judgment on the pleadings on the copyright claim because, although Mattel had no copyright on the specific vehicle that accompanied the Mattel flame depicted in the Robarb's inserts, the flame design was "a distinctive and recognizable element of Mattel's registered copyright [that Robarb's had used without authorization] in-a substantially similar derivative work." Id., 139 F. Supp.2d at 497.
Mattel filed this summary judgment motion on May 15, 2001, seeking (1) a permanent injunction restraining the defendants from engaging in further acts of trademark infringement and dilution, and (2) copyright infringement; (3) actual damages in the amount of fourteen percent of the defendants' profits from infringing products; (4) to hold the individual defendants jointly and severally liable for Robarb's' acts of copyright infringement; and (5) to dismiss the counterclaim for unfair competition. On June 4, 2001, the defendants filed a brief opposing Mattel's motion on the grounds that (1) they did not copy a work registered with the Copyright Office; (2) the copyright Mattel does have is invalid; and (3) defendant's use of the flame was "fair" use; (4) actual damages for copyright infringement are unwarranted because the claim is untimely and inconsistent with the law of the case; and that (5) joint and several liability is unwarranted. The defendants also cross-moved for summary judgment on their counterclaim of breach of their business relationship with Toys R Us. Discussion I. Summary Judgment Standard
Although the defendants' brief is styled "Opposition of Defendants to Plaintiff's Motion for Summary Judgment as to the Remaining Claims and Defendants' Cross Motion for Summary Judgment," defendants have failed to file a notice of motion or Rule 56.1 statement as required by the Federal Rules of Civil Procedure and Local Civil Rules.
Rule 56(c) of the Federal Rules of Civil Procedure provides that a motion for summary judgment may be granted when "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The Second Circuit has repeatedly noted that "as a general rule, all ambiguities and inferences to be drawn from the underlying facts should be resolved in favor of the party opposing the motion, and all doubts as to the existence of a genuine issue for trial should be resolved against the moving party." Brady v. Town of Colchester, 863 F.2d 205, 210 (2d Cir. 1988) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 330 n. 2, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (Brennan, J., dissenting)); see Tomka v. Seiler Corp., 66 F.3d 1295, 1304 (2d Cir. 1995); Burrell v. City Univ., 894 F. Supp. 750, 757 (S.D.N.Y. 1995). If, when viewing the evidence produced in the light most favorable to the nonmovant, there is no genuine issue of material fact, then the entry of summary judgment is appropriate. See Burrell, 894 F. Supp. at 758 (citing Binder v. Long Island Lighting Co., 933 F.2d 187, 191 (2d Cir. 1991)).
Materiality is defined by the governing substantive law. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted."Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "[T]he mere existence of factual issues — where those issues are not material to the claims before the court — will not suffice to defeat a motion for summary judgment." Ouarles v. General Motors Corp., 758 F.2d 839, 840 (2d Cir. 1985). For a dispute to be genuine, there must be more than "metaphysical doubt." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505 (citations omitted).
II. Permanent Injunction Against Further Trademark Violations
This Court has already held that "[t]he evidence presented unquestionably establishes actual confusion" of Robarb's' product with Mattel's "famous and distinctive" trademark. Robarb's I., 139 F. Supp.2d at 493; Stein Op. at 12 n. 2, which establishes trademark infringement under the standard set forth in 15 U.S.C. § 1125(a)(1)(A). See George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992) (holding that actual confusion establishes violation of the Lanham Act). Irreparable injury is presumed from a finding of a violation. See Hasbro Inc. v. Lanard Toys Ltd., 858 F.2d 70, 73 (2d Cir. 1988).
Under § 34 of the Lanham Act, district courts have the power to grant injunctions "according to the principles of equity and upon such terms as the court may deem reasonable." 15 U.S.C. § 1125(c)(1). "[P]ermanent injunctive relief will be granted only upon proof of the likelihood that purchasers of the product may be misled in the future."Starter Corp. v. Converse, Inc., 170 F.3d 286, 299 (2d Cir. 1999) (quoting Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767, 772-73 (2d Cir. 1984)). Injunctive relief is the only available remedy where, as here, the plaintiff has not demonstrated that the infringement was willful. See 15 U.S.C. § 1125(c)(2); Robarb's I, 139 F. Supp.2d at 494 (holding that plaintiff had failed to show that the defendants' infringement was willful).
In opposing the entry of a permanent injunction, defendants merely repeat the arguments they made in opposition to the entry of the preliminary trademark infringement injunction. (Def. Br. at 2-3.) Although the defendants have ceased their infringing behavior, the Court is entitled to consider this fact skeptically given that Robarb's' has already infringed, continues to contest the lawfulness of its actions, and ceased its infringing conduct only after the initiation of this lawsuit. If not enjoined, Robarb's would have little incentive not to employ Mattel trademarks in advertising its product in the future. See Blisscraft of Hollywood v. United Plastics Co., 294 F.2d 694 (2d Cir. 1961) (injunction issued even though defendant had ceased infringing plaintiff's trademark, but infringement had actually occurred and defendant continued to contest validity of plaintiff's mark); National Geographic Soc'y v. Conde Nast Publications Inc., 687 F. Supp. 106 (S.D.N.Y. 1988) (injunction issued where defendant's agreement to cease trademark infringement after initiation of lawsuit, but actual infringement had already occurred).
Moreover, the difficulty of promoting Robarb's' product (which is specifically designed to encase Mattel toy cars) without infringing on Mattel's protected mark, distinguishes this case from those in which courts have found that the termination of infringing behavior in itself eviscerates the likelihood of future harm. Cf. American Express Travel Related Servs. Co., Inc. v. Mastercard Int'l Inc., 776 F. Supp. 787, 790 (S.D.N.Y. 1991) (finding injunction moot once defendant ceased showing infringed television commercial and had already filmed a noninfringing replacement); Greilsheimer v. Ferber Chan Essner, No. 98 Civ. 2553 (LMM), 1998 WL 547092, *2-*3 (S.D.N.Y. Aug. 27, 1998) (injunction against trademark infringement not necessary where defendants had not only agreed to stop using plaintiff's name on firm's sign and stationery, but had already ordered new, noninfringing sign and stationery).
Summary judgment for a permanent injunction against future trademark violations is granted in favor of the plaintiff.
III. Copyright Infringement A. Defendants Infringed on Mattel's Valid Copyright
A plaintiff must prove two elements in order to establish copyright infringement: "(1) ownership of a valid copyright, and (2) copying of constituent elements of that work that are original." Feist Publications Inc. v. Rural Telephone Service Co. 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991); See also Laureyssens v. Idea Group Inc., 964 F.2d 131, 129 (2d Cir. 1992). "The Copyright Act makes a certificate of registration from the U.S. Register of Copyrights prima facie evidence of the valid ownership of a copyright, See 17 U.S.C. § 410(c), though that presumption of ownership may be rebutted." Rogers v. Koons, 960 F.2d 301, 306 (2d Cir. 1992).
1. Mattel's Copyright is Valid
Defendants contend that the registration #VA-445024 for the Hot Wheels T-Bird Stocker is invalid because Mattel fraudulently failed to inform the Copyright Office that the proposed Hot Wheels copyright was derivative of another work Mattel had previously registered. (Id. at 6-8; Dunnegan Decl. Ex. C). A plaintiff's "knowing failure to advise the Copyright Office of facts which might have occasioned a rejection of the application constitute[s] reason for holding the registration invalid and thus incapable of supporting an infringement action." Eckes v. Card Prices Update, 736 F.2d 859, 861-62 (2d Cir. 1984) (citation omitted).
However, "[a] party seeking to establish a fraud on the Copyright Office . . . bears a heavy burden. The party asserting a fraud must establish that the application for copyright registration is factually inaccurate, that the inaccuracies were willful or deliberate, and that the Copyright Office relied on those registrations." Lennon v. Seaman, 84 F. Supp.2d 522, 525 (S.D.N.Y. 2000) (citations omitted). See also Whimsicality Inc. v. Rubie's Costume Co., Inc., 891 F.2d 452, 455 (2d Cir. 1989) (presumption of registration's validity not overcome by an "innocent misstatement," but may be rebutted by "proof of deliberate misrepresentation."). Some courts have also required defendants asserting a fraud on the Copyright Office defense to show that the fraud prejudiced or damaged them. See Lennon, 84 F. Supp.2d at 525 (citing cases).
Aside from submitting the actual copyright registration application, the defendants have submitted no proof on this issue, and therefore have not met their burden to show that any inaccuracies in the application were either willful or deliberate, or that the Copyright Office would have denied the application if it had knowledge of the prior art. Where, as here, the prior art was in fact registered by the same party seeking to register a derivative work, a defendant must do more than merely allege fraud in order to sustain such a defense. See Original Appalachian Artworks Inc. v. Cradle Creations Inc., No. C81-1906A, 1983 WL 669 (N.D. Ga. 1983). Therefore, the copyright is valid, and summary judgment on the defendants' fraud on the Copyright Office defense is hereby granted in favor of the plaintiff.
2. Defendants Copied Mattel's Original Registered Work
To make out the second required element of a copyright infringement claim, Mattel must demonstrate that (1) Robarb's actually copied Mattel's Hot Wheels copyright; and (2) the copying was unlawful because there was a "substantial similarity" between the protected elements of Mattel's copyright and Robarb's' inserts. Nihon Keizai Shimbun Inc. v. Compline Business Data Inc., 166 F.3d 65, 69-70 (2d Cir. 1999).
The defendants have acknowledged copying Mattel's copyrighted work to make their display case inserts. (Dunnegan Decl. Ex. D at 55-58.) Moreover, this Court has already found that the defendants' "use of the registered flame in a design that is substantially similar to Mattel's registered packaging constitutes the production of a derivative work" and therefore was subject to a copyright infringement action. Robarb's I, 139 F. Supp.2d at 497.
Defendants' argument that the flame itself was not copyrighted has previously been considered and rejected. See id., 139 F. Supp.2d at 497-98. As they did not move for reconsideration of that holding, the defendants' duplicative argument will not be addressed here.
B. Defendants' Use of the Copyright Was Not Fair Use
Fair use is "a privilege in others than the owner of a copyright to use the copyrighted material in a reasonable manner without his consent."Harper Row Publishers Inc. v. Nation Enterprises, 471 U.S. 539, 549 (1985). Title 17, United States Code section 107 provides that the otherwise unlawful reproduction of a copyrighted work does not constitute infringement in cases of "fair use."
Alleged infringers have the burden of proving fair use. See Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104, 107 (2d Cir. 1998); Robinson v. Random House Inc., 877 F. Supp. 830 (S.D.N.Y. 1995). Factors to consider in determining fair use include: "(1) the purpose and character of the use. . .; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) and the effect of the use upon the potential market for or value of the copyrighted work." 17 U.S.C. § 107 (1)-(4). See Castle Rock Entertainment v. Carol Publishing Group Inc., 150 F.3d 132, 141 (2d Cir. 1998).
Defendants' contend that two primary factors demonstrate fair use: (1) their product increases, rather than decreases, consumer incentive to purchase Mattel toy cars; and (2) Robarb's' inserts had only a limited, informational purpose and "are intended to be, and almost certainly are, removed and discarded by consumers after purchase" (Def. Br. at 10). These arguments are unavailing.
Although both of these grounds would weigh strongly in favor of fair use if appropriately supported, the defendants have introduced no evidence to suggest either that the inserts increase consumers' interest in purchasing Mattel toy cars, or that consumers discard the inserts after purchasing the Robarb's display cases. Even if the latter proposition were assumed to be true, Mattel's expert study revealing a 94% actual confusion rate renders it irrelevant. In other words, because the inserts lead most consumers to believe that Mattel, rather than Robarb's, has marketed the display case, discarding those same inserts will not lessen the unfair effect of the infringement. The actual confusion evidence leads to the conclusion that the inserts did not transform Mattel's copyrighted flame into a substantially new product that merits protection. See Campbell v. Acuff-Rose Music Inc., 510 U.S. 569, 579, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994) (holding that although work need not be "transformative" to be fair use, "[s]uch [transformative] works . . . lie at the heart of the fair use doctrine's guarantee of breathing space. . . ."); On Davis v. The Gap Inc., 246 F.3d 152, 174 (2d Cir. 2001) (finding no fair use where the "ad shows [plaintiff's copyrighted eyeglasses] being worn . . . in the manner it was made to be worn — looking much like an ad [the plaintiff] himself might have sponsored for his copyrighted design.").
See Dunnegan Decl. Ex. B (Marylander Report) (analyzed at greater length in Robarb's I, 130 F. Supp.2d at 493).
In short, the defendants have not met their burden of proof in establishing a fair use defense. As Judge Stein held, Robarb's' inserts "far exceed the bounds of fair use." (Stein Op. at 5.) Summary judgment on the fair use issue is therefore granted in favor of Mattel. See Stewart v. Abend, 495 U.S. 207, 110 S.Ct. 1750, 109 L.Ed.2d 184 (1990) (summary judgment granted for plaintiff upon finding of no fair use);Rogers v. Koons, 960 F.2d 301, 307 (2d Cir.) (same), cert. denied, 506 U.S. 934, 113 S.Ct. 365, 121 L.Ed.2d 278 (1992).
C. A Permanent Injunction Will Be Entered
As Mattel has succeeded on the merits of its copyright claim, a permanent injunction may be issued pursuant to 17 U.S.C. § 502(a) if Mattel can demonstrate a likelihood of future infringements. See Hard Rock Cafe Int'l (USA) Inc. v. Morton, 1999 WL 701388, at *4 (S.D.N.Y. 1999).
Although the defendants have ceased their infringing behavior, the Court is entitled to consider this fact skeptically. See Walt Disney Co. v. Powell, 897 F.2d 565, 568 (D.C. Cir. 1990) For the same reasons set forth above, if not enjoined, Robarb's would have little incentive not to employ Mattel copyrights in advertising its product in the future. Cf. American Express Travel, 776 F. Supp. at 790 (finding injunction moot once defendant ceased showing infringed television commercial and had filmed a noninfringing replacement); Dolori Fabrics Inc. v. Limited Inc., 662 F. Supp. 1347 (S.D.N.Y. 1987) (same holding where defendant had ceased infringing plaintiff's copyright and would not sell previously produced infringing fabric).
Mattel's summary judgment motion for entry of a permanent injunction against future copyright infringements is therefore granted.
D. Damages Will Be Awarded
The owner of a registered copyright that has been infringed may'.recover either actual damages or statutory damages. 17 U.S.C. § 504(a)(1)-(2), 504(c). Unlike trademark cases, a showing of willful infringement is not necessary for a plaintiff to recover an actual damage award for a copyright infringement. Compare 15 U.S.C. § 1125(c)(2) (trademark damages under §§ 1117(a) and 1118 not available if plaintiff fails to demonstrate willful infringement) with 17 U.S.C. § 504(b) (not requiring a showing of willfulness for award of copyright damages).
Mattel has moved for summary judgment to recover actual damages in the amount of a fourteen percent royalty on Robarb's' net sales of infringing products, and seeks to impose joint and several liability on the individual defendants to cover any eventual award.
1. Actual Damages May Be Awarded in the Amount of a Reasonable Royalty
Title 17, United States Code section 504(b) entitles a copyright owner "to recover the actual damages suffered . . . as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages." 17 U.S.C. § 504(b). Actual damages under § 504(b) may be awarded, "in appropriate circumstances, for the fair market value of a license covering the defendant's infringing use." On Davis 246 F.3d at 163.
This measure of damages is appropriate where it appears that the plaintiff would have negotiated with the infringing defendants for a "reasonable royalty" if given the opportunity to do so. Id., 246 F.3d at 163, 172. While such a finding "may involve some uncertainty," On Davis, 246 F.3d at 166, it may not be premised upon "undue speculation."Abeshouse v. Ultragraphics, Inc., 754 F.2d 467, 470 (2d Cir. 1985). Rather, "[t]he question is not what the owner would have charged, but rather what is the fair market value" of the copied item. On Davis, 246 F.3d at 166. Courts should consider the infringer's use of the item rather than the plaintiff's most valuable use of it when making this determination. Id., 246 F.3d at n. 5.
Mattel has submitted evidence demonstrating that the Hot Wheels copyright commands a royalty rate of at least fourteen percent of a licensee's net sales, or a 12% base royalty plus a 2% advertising allowance. (Wagner Decl. ¶ 4, Exs. A-P.) In certain cases, Mattel accepts a lower rate, but categorically would not do so for a potential licensee such as Robarb's "which did not have an established distribution system [to major retailers] for the product to be licensed." (Wagner Decl. ¶ 5.) This unrebutted evidence demonstrates that Robarb's' infringement caused Mattel an actual financial loss.
2. The Royalty Request is Not Untimely, Barred, or Unreasonable
The defendants have not disputed the reasonableness of the fourteen percent figure but do contest the award of any damages on the grounds that (1) the request is untimely; and (2) barred by the law of the case. Mattel placed the defendants on notice of the fact that it was seeking damages on the day it filed its complaint, which sought "damages, or alternatively statutory damages" as a remedy for alleged copyright violations, in paragraph 36. The amended complaint sought the same relief in paragraph 45. Mattel's answers to interrogatories also specified that it sought a reasonably royalty. (See Dunnegan Decl. Exs. 5, 6.)
Copyright damages are not barred by the law of the case because this Court has previously addressed the availability of actual damages under the Lanham act, not the Copyright Act. See Robarb's 139 F. Supp.2d at 492-96. Damages for copyright infringement may be awarded although none will be awarded for the trademark infringement. The award of damages under the Lanham Act, 15 U.S.C. § 1117, was not appropriate because that statute is intended to deter willful infringers, See Vuitton Et Fils S.A. v. Crown Handbags, 492 F. Supp. 1071 (S.D.N.Y. 1979) aff'd, 622 F.2d 577 (2d Cir. 1980) (table), whereas the Copyright Act provides for the award of actual damages for non-willful infringers such as the defendants in this case. Compare 17 U.S.C. § 504(b) (successful copyright plaintiffs are entitled to actual damages) with 17 U.S.C. § 504(c)(2) (providing for trebled statutory damages if plaintiff demonstrates that copyright infringement was willful).
The defendants allege that the Court has found that the infringement was innocent, and that they should therefore not have to pay actual damages. However, § 504(b) does not require a showing of intent before damages are awarded, and even if it did, this Court's holding was not that the infringement was "innocent," but rather that it was "not willful." Robarb's I, 139 F. Supp.2d at 494-95. Photocopying Mattel's copyrighted work and inserting it in Robarb's' display case as a means of increasing Robarb's' sales was by no means an "innocent" violation of the Copyright Act. Relying on an attorney's representation that the inserts "were possibly a case of first impression" or that he had "not found a case on point" (Dunnegan Decl. Ex. F at 35) does not relieve Robarb's of responsibility for its infringing actions.
The defendants' net sales of infringing products totaled $2,561,441 from 1997-1999. Based upon these undisputed sales, a fourteen percent royalty equals $358,601. As the defendants have not disputed the reasonableness of a fourteen percent royalty, Mattel is hereby awarded actual damages in the amount of $358,601.
That the defendants are of "modest means" does not bear on the reasonableness of a fourteen percent royalty, because the "fair market value" is the determining factor for reasonableness. On Davis, 246 F.3d at 166-67. Nonetheless, the financial impact on the individual defendants is an equitable concern underlying the exercise of other discretionary monetary awards.
2. No Prejudgment Interest Shall Be Awarded
Mattel also seeks the imposition of prejudgment interest at a rate of five percent since June 30, 2000, when this action was filed pursuant to 17 U.S.C. § 505. However, setting aside the unsettled nature of the law on such prejudgment interest in this Circuit, see Independent Living Aids Inc. v. Maxi-Aids Inc., 25 F. Supp.2d 127, 134-35 (E.D.N.Y. 1998);Antenna Television A.E. v. Aegean Video Inc., No. 95-CV-2328 ERK, 1996 WL 298252, at *14-15 (E.D.N.Y. Apr. 23, 1996), the Court declines, in its discretion, to award such interest. See Design v. K-Mart Apparel Corp., 13 F.3d 559, 569 (2d Cir. 1994), abrogated on other grounds by Fogerty v. Fantasy Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994);Antenna Television, 1996 WL 298252, at *15.
3. No Attorneys' Fees Shall be Awarded
Next, Mattel seeks attorneys' fees and costs pursuant to 17 U.S.C. § 505. Such an award is entirely within the Court's discretion. Alderman v. Pan Am World Airways, 169 F.3d 99, 102 (2d Cir. 1999). Given the relative economic standing of the parties, no fees will be awarded to Mattel.
4. Joint and Several Liability
Finally, Mattel seeks to hold the individual defendants jointly and severally liable for Robarb's' copyright infringement damages. A corporate employee can be held personally liable for copyright infringement "if the officer is a moving, active, conscious force behind [the defendant corporation's] infringement." Monsanto Co. v. Haskel Trading Inc., 13 F. Supp.2d 349, 354 (E.D.N.Y. 1998); See also Abeshouse v. Ultragraphics Inc., 754 F.2d 467, 472 (2d Cir. 1985) (holding printer-defendant was jointly and severally liable for actual damages with a distributor for producing a poster infringing on the plaintiff's copyright).
Of all the individual defendants, only Robert R. Carpenter, the President of Robarb's, meets this test. As President of Robarb's, Robert R. Carpenter took an active role in preparing the inserts for the market, including conceiving of the product and the design of the inserts, conferring with sales associates and outside professionals, and consulting with an attorney. (Dunnegan Decl. Ex. D at 43-63, Ex. H at 22.) In contrast, Rollin K. Carpenter is a Key Account Sales Person, and is neither an officer, director, nor shareholder. (Dunnegan Decl. Ex. H at 26.) Robert B. Carpenter is in charge of production and shipping. (Dunnegan Decl. Ex. G at 5-7.) Mattel has agreed to drop its claims against Barbara Carpenter if the motion for copyright damages is granted. (Pltf. Br. at 13 n. 1.)
As Robert R. Carpenter was the only officer who can fairly be described as a "moving, active, conscious force behind" the use of the infringing inserts, only he will be jointly and severally liable with Robarb's for the damage award.
IV. The Counterclaim for Breach of a Business Relationship
Finally, Mattel has moved for summary judgment to dismiss the defendants' counterclaim, which alleges that Mattel breached their business relationship with Toys R Us by telling it not to stock Robarb's' products. The defendants have cross-moved for summary judgment on this claim. The elements of this cause of action, otherwise known as tortious interference with business relations, are: (1) the existence of a valid contract or business relationship between the plaintiff and a third party; (2) defendant's knowledge of that relationship; (3) defendant's intentional procurement of the third-party's breach of the contract or termination of the relationship; (4) without justification; (5) actual breach of the relationship; and (6) damages resulting therefrom. Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424, 668 N.E.2d 1370, 1375, 646 N.Y.S.2d 76, 81 (N.Y. 1996).
Robarb's has submitted deposition testimony from Rollin K. Carpenter and Robert R. Carpenter, as well as an affidavit from its employee, Jennifer Carter ("Carter"), in support of its motion. In sum and substance, this evidence suggests that Toys R Us buyer, Ron Rycek (Rycek), told Carter on October 17, 2000 that Mattel notified the legal department at Toys R Us that Mattel had a problem with Robarb's' displays, and instructed Toys R Us to remove them from its shelves. (Carter Aff. ¶ 4.) Later the same day, Rollin K. Carpenter called Rycek to discuss his concerns, and Rycek informed him that the Toys R Us Vice President of Sales ordered all existing inventory of Robarb's Collectible Car Displays be sold. (Dunnegan Decl. Ex. H (Rollin K. Carpenter Dep.) at 5.) Robert R. Carpenter alleges that counsel for Mattel, Mr. Dunnegan, told him that Mattel intended to go to Robarb's' customers to have them remove any Collectible Car Displays because Mattel wanted to use their shelf space. (Dunnegan Decl. Ex. D (Robert R. Carpenter Dep.) at 140, 148.)
To raise an issue of fact, affidavits submitted in connection with a summary judgment motion must be admissible or contain evidence that will be admissible at trial. See Santos v. Murdock, 243 F.3d 681, 683 (2d Cir. 2001). "[H]earsay testimony that would not be admissible if testified to at the trial may not properly be set forth in [an] affidavit." H. Sand Co. v. Airtemp Corp., 934 F.2d 450, 454-55 (2d Cir. 1991). See also Albert v. Loksen, 239 F.3d 256, 266 (2d Cir. 2001) (movant's affidavit did not create genuine issue of fact because it was based on inadmissible hearsay); Sarno v. Douglas Elliman-Gibbons Ives, Inc., 183 F.3d 155, 160 (2d Cir. 1999) (holding that hearsay statement "did not constitute competent evidence" and thus could not be considered in opposition to motion for summary judgment). As all of the aforementioned evidence is based solely on inadmissible hearsay, it is insufficient to create an issue of material fact.
The defendants are left only with the fact that Toys R Us has not ordered any new Collectible Car Displays from Robarb's since their discussions with Rycek, despite the fact that Toys R Us had placed a total of over $200,000 in orders with them in the previous eight months. (Id. at 147-48, 160.) Mattel explains this by noting that Toys R Us changed its buyer after the initial order with Robarb's. (Dunnegan Decl. Ex. H (Kevin Carpenter Dep.) at 14-17.)
No competent evidence, of breach of Robarb's' business relationship with Toys R Us having been presented, summary judgment is granted for Mattel on this counterclaim.
Conclusion
For the foregoing reasons, the motions for summary judgment are granted in part and denied in part. Submit proposed permanent injunction order on notice.
It is so ordered.