Summary
In Sebring Pottery Co. v. Steubenville Pottery Co., 9 F. Supp. 384 (N.D.Ohio 1934), the yardstick damages (at one dollar a copy) for violating plaintiff's copyright in an advertising card or circular would have been over $39,000.
Summary of this case from Davis v. E.I. DuPont de Nemours CompanyOpinion
No. 3955.
December 11, 1934.
Byrnes, Stebbins Blenko, of Pittsburgh, Pa., Tolles, Hogsett Ginn, of Cleveland, Ohio, for plaintiff.
Smith, Francis Irvine, of Steubenville, Ohio, and Fay, Oberlin Fay, of Cleveland, Ohio, for defendants.
In Equity. Suit by the Sebring Pottery Company against the Steubenville Pottery Company and another, in which exceptions were made to the report of the special master in respect of accounting, award of damages, and counsel fees.
Exceptions overruled, except as to allowance of counsel fees as to which court awarded judgment.
See, also, 9 F. Supp. 383.
The report of Special Master Wm. B. Woods is as follows:
Statement of Proceedings.
This case comes before the master for an accounting following the decree of the District Court entered June 14, 1932, in favor of the plaintiff in an action involving a copyright infringement.
From the opinion of his honor, Judge Jones (D.C.) 9 F. Supp. 383, it appears that Merle H. Walker and defendant Donald G. Agnew, while employees of the plaintiff, conceived and produced the "Customers' Record Card" which was copyrighted. The court said that while the card may not be a work of pretentious merit, it was of sufficient originality to secure the copyright.
Thereafter, Agnew became associated with the Steubenville Pottery Company and they proceeded to use a card which was found by the court to be an infringement in that the defendants had substantially copied and appropriated the plaintiff's copyrighted card. Following that judgment, to this master was referred the question of accounting for damages and profits, actual or statutory, to which plaintiff was entitled by such infringement.
Accounting Difficulties in Copyright Cases.
Copyrights, like patents, are monopolies for a limited time, granted by the federal government, and accountings in copyright cases are comparable to accountings in patent cases except that under the Copyright Law a plaintiff is entitled not only to the profits of defendants, but also an amount equivalent to the damage it has suffered. Another important distinction under the Copyright Law is that the court may, in its discretion, allow the plaintiff to recover for an arbitrary amount fixed by the federal statute in lieu of actual profits and damages.
The copyrighted work here involved is known as a customers' record card (Plaintiff's Exhibit No. 2 attached to petition), and is designed to be used by merchants to promote the sales of sets of dishes.
The particular copyrighted work is essentially an advertisement, and under the copyright classification it is a book. Physically, however, it is an advertising card forming an essential part of an original distributing plan. Being in the nature of an advertisement, it is not bought or sold for its intrinsic worth like the ordinary book, but, like other copyrighted advertisements, is used to promote the sale of wares.
Since this copyrighted work is in the nature of an advertisement, its worth lies not in its intrinsic value but in the value which it possesses to promote sales, in this particular case, of dishes, and it is difficult to reach an adequate measure of actual profit or damage arising out of defendants' appropriation of the copyrighted material. Thus it is far more difficult to arrive at any definite measure of damage or profit than in a case where a book is involved which is bought for its intrinsic worth.
Being in the nature of an advertisement, the copyrighted work itself is distributed free to the customers of merchants, and is not sold over the counter of any book store. It is like a trade-mark, where the actual goods in connection with which the mark is used are what the purchaser really pays his money for, while the trade-mark is merely the instrument or emblem through which the purchaser is influenced to secure wares or commodities of one producer in preference to those of another. Thus the worth of a trade-mark apart from any business is fugitive, but, as attached to a particular business, it may be worth more than all the physical assets and equipment of the manufacturer who owns it. A familiar instance is the name "Ivory" used in connection with soap, which has an advertising value of intrinsic worth because this name is the instrument through which the transaction of sale is made between the purchaser and the producer. So the copyrighted work in the present case has the same intangible quality and is the instrument through which the manufacturer of dishes is enabled to profitably sell his wares.
Defendants here have apparently taken the position that the original idea of the particular distributing plan which was copyrighted could not be so protected. The weakness of this defense is that the defendant has utilized the plot or plan, as it may be called, or the particular expression of the advertisement which the court held was copyrighted and infringed, and which has become identified with the business and is the property of this plaintiff as a prior owner. So the decree of the court is, in this case as in any copyright case, not merely that the defendants have used a similar plot or plan, but that the defendants have used the plaintiff's language or expression of plot or plan. They have copied almost verbatim, resorting to paraphrasing here and there, in an attempt to appropriate to themselves the value of the plaintiff's property.
In cases of this nature where the trade-mark or the copyright has no intrinsic value, but merely such intangible value as it may possess by reason of its being an instrument through which the sale of a commodity is effected, to ascertain and apportion the damages and profits is most difficult. Thus it is difficult to ascertain to what extent dishes would have been sold had not infringement been committed, and so to determine how much damage the plaintiff has suffered by this invasion of its rights.
Aside from the direct loss of sales through the competition of the defendants, there are elements of intangible damage. The success of the premium plan in the sale of dishes depends largely on its novelty (Walker, R. 96). Thus if one jobber sold a certain premium plan in a community, no other jobber in that community, in that line of business, would take the same plan. So in any territory where defendants have made a sale, such territory is ruined for any other, including the plaintiff. There could no longer be an exclusive plan, because of the prior invasion of the territory by the defendants with the same plan that plaintiff's salesmen might offer.
Another element of difficulty in gauging damage is that a plan of this kind was new and required missionary work by plaintiff's salesmen to acquaint jobbers with its advantages. Thus defendants profited by the work done by plaintiff, and put plaintiff to greater expense by reason of the competition offered, for defendants profited by closing contracts where plaintiff has expended sales effort. Other fugitive elements of damage to plaintiff and profit to defendant inherent in a premium plan for acquiring dishes are: Direct communications with the producing pottery for replacements, which is a very definite source of business and has a definite advertising value to the manufacturer (Walker, R. 5, 95). Such inquiries direct to the pottery establish a repeat business (Walker, R. 96); and, as stores using these premium plans often do not sell chinaware, the use of the plan permits the display of pottery in such stores, which is of value to the manufacturer.
In view of these many difficulties of accounting, plaintiff urges that in this proceeding particularly the actual damages and profits cannot be accurately determined, that the award should be made on the rule of statutory damages authorized in the Copyright Act. The proof offered at the hearings as to actual damages or profits will be considered before passing to any consideration of statutory damages.
Proof as to Plaintiff's Actual Damage and Profits.
Answering the master's summons, defendants herein filed their "Statement of Defendants" in the nature of an account showing that 59,340 of the infringing cards were printed; that 39,680 cards were used; that none of said cards were sold; that said cards were distributed with merchandise sold to customers as appears in the statement; that there were no gains or profits realized by defendant Steubenville Pottery Company, and that defendant Agnew made no sales on his own account; that there were sold 488 50-piece sets of chinaware and 149 62-piece sets of chinaware, a total of 637 sets of chinaware sold from use of the copyrighted customers' card; and that Exhibits C and D taken from the books of account of the company show the expense of such sales as $11,086.51, and that the receipts were $10,157.28, so that there was a loss of $929.23.
Following cross-examination of defendants as to allocation of expense items, Agnew's commissions and other charges, plaintiff urges that defendants' proof itself shows a profit to defendants of not less than $2,690.56 or not more than $5,010.63. So that from the statement of defendants, which they claim shows a loss of $929.23, plaintiff urges, after cross-examining and relocating items, that defendants had a profit of not more than $5,010.65.
The proof offered by plaintiff is that if 39,680 copyrighted cards were distributed, they estimated that there were probably sold 7,936 sets of dishes, for Walker (R. 99) says that it was his experience that for every 100 cards distributed, 20 sets of dishes were sold. There is no other testimony on the possible sales per cards distributed, except, of course, the testimony offered by defendants, who report that they sold only 637 sets of chinaware. Walker also said that it was his experience that average profit it was $2.99 per set, so on this basis plaintiff urges that its actual loss of profit was $23,728.64, representing the reasonable expected business of which plaintiff was deprived by defendants' infringement. To this sum plaintiff urges that there should be added the profit by way of salary of Agnew, $1,400, profit to Agnew out of commissions, $1,193.39, and profit to the Steubenville Pottery Company based on 20 per cent. as a reasonable profit, $2,031.45, which, added to the estimate of lost sales, makes the sum of $28,353.48 total profits and damages claimed by plaintiff.
On this state of the evidence as to actual damages and profits lost, the court is confronted with the question: Is this such an instance as the statute contemplates where, in lieu of actual damages and profits, "the court may, in its discretion, allow the amounts as hereinafter stated?"
Statutory Damages.
The copyrighted work in the present case is classified as a book, for the purpose of the copyright statute. All original writings, be they an advertisement, a short poem, a direction sheet for a card game, or an item appearing in a column of a newspaper, as well as the newspaper itself, are classified as books. The term "book" is a general term which distinguishes writings from such other copyrightable subjects as pictures, paintings, music, motion picture films, and the like.
The Act of Congress pertaining to copyrights which plaintiff urges is applicable here is as follows (17 USCA § 25):
" Infringement. If any person shall infringe the copyright in any work protected under the copyright laws of the United States such person shall be liable:
"(a) Injunction. (a) To an injunction restraining such infringement;
"(b) Damages and Profits; Amount; Other Remedies. (b) To pay to the copyright proprietor such damages as the copyright proprietor may have suffered due to the infringement, as well as all the profits which the infringer shall have made from such infringement, and in proving profits the plaintiff shall be required to prove sales only and the defendant shall be required to prove every element of cost which he claims, or in lieu of actual damages and profits such damages as to the court shall appear to be just, and in assessing such damages the court may, in its discretion, allow the amounts as hereinafter stated, but in case of a newspaper reproduction of a copyrighted photograph such damages shall not exceed the sum of $200 nor be less than the sum of $50, and in the case of the infringement of an undramatized or nondramatic work by means of motion pictures, where the infringer shall show that he was not aware that he was infringing, and that such infringement could not have been reasonably foreseen, such damages shall not exceed the sum of $100; and in the case of an infringement of a copyrighted dramatic or dramatico-musical work by a maker of motion pictures and his agencies for distribution thereof to exhibitors, where such infringer shows that he was not aware that he was infringing a copyrighted work, and that such infringements could not reasonably have been foreseen, the entire sum of such damages recoverable by the copyright proprietor from such infringing maker and his agencies for the distribution to exhibitors of such infringing motion picture shall not exceed the sum of $5,000 nor be less than $250, and such damages shall in no other case exceed the sum of $5,000 nor be less than the sum of $250, and shall not be regarded as a penalty. But the foregoing exceptions shall not deprive the copyright proprietor of any other remedy given him under this law, nor shall the limitation as to the amount of recovery apply to infringements occurring after the actual notice to a defendant, either by service of process in a suit or other written notice served upon him.
"First. In the case of a painting, statue, or sculpture, $10 for every infringing copy made or sold by or found in the possession of the infringer or his agents or employees;
"Second. In the case of any work enumerated in section 5 of this title, except a painting, statue, or sculpture, $1 for every infringing copy made or sold by or found in the possession of the infringer or his agents or employees;
"Third. In the case of a lecture, sermon, or address, $50 for every infringing delivery;
"Fourth. In the case of a dramatic or dramatico-musical or a choral or orchestral composition, $100 for the first and $50 for every subsequent infringing performance; in the case of other musical compositions $10 for every infringing performance."
Thus from the statute it appears that the assessments of statutory damages shall be within the discretion of the court. Such damages may be assessed against all copies made, not merely those distributed. The legislative history of its enactment, the writings since, and the decisions of the courts show that this provision was embodied in the law because of the difficulties which stand in the way of determining actual profit and damages.
Court Decisions on Statutory Damages.
Section 25, 17 USCA (Copyright Act), was enacted by Congress to provide (1) relief by injunction, and (2) relief by way of damages declared not to be penal. In providing for recovery of a sum within the prescribed limits, in lieu of actual damages, Congress recognized the character of the actual damage done and provides that when actual damages are proven which cannot be measured in dollars and cents, then the court may, in the exercise of its sound discretion, award a sum within the maximum and minimum limits. That is, this law obviates the strict necessity of proving the exact amount of damage without negativing the necessity of proof of some real damage done.
The leading case is Westermann Co. v. Dispatch Printing Co. (1919) 249 U.S. 100 at pages 106, 107, 39 S. Ct. 194, 195, 63 L. Ed. 499, in which the Supreme Court reversed the Court of Appeals of the Sixth Circuit, discussed the statutory damage provision of the act, approved the application of statutory damages, and Mr. Justice Van Devanter said: "Both parties recognize that under the proofs the damages must be assessed under the alternative provision requiring the infringer, in lieu of actual damages and profits, to pay such damages as to the court shall appear to be just, etc. The fact that these damages are to be `in lieu of actual damages' shows that something other than actual damages is intended — that another measure is to be applied in making the assessment. There is no uncertainty as to what that measure is or as to its limitations. The statute says, first, that the damages are to be such as to the court shall appear to be just; next, that the court may, in its discretion, allow the amounts named in the appended schedule, and finally, that in no case shall they be more than $5,000 nor less than $250, except that for a newspaper reproduction of a copyrighted photograph they shall not be more than $200 nor less than $50. In other words, the court's conception of what is just in the particular case, considering the nature of the copyright, the circumstances of the infringement and the like, is made the measure of the damages to be paid, but with the express qualification that in every case the assessment must be within the prescribed limitations, that is to say, neither more than the maximum nor less than the minimum. Within these limitations the court's discretion and sense of justice are controlling, but it has no discretion when proceeding under this provision to go outside of them."
In that case the record did not show the amount of actual damages for it was undisputed that the damages could not be estimated, and the Circuit Court of Appeals below had said (233 F. 609, 613): "the plaintiff's damages rested in the injury to his Morehouse contract and in the discouragement of and the tendency to destroy his system of business. To make any accurate proof of actual damages was obviously impossible."
The plaintiff contends that in the case at bar the competition of these defendants was likewise to destroy plaintiff's "system of business."
In the Westermann Case, supra, the infringements were committed without notice, and, as plaintiff here observes, if notice had been an element, the maximum of $5,000 was not applicable and not even there considered, for where defendant had notice of the copyright, the statutory maximum of $5,000 does not apply. Such was the holding in Schellberg v. Empringham, 36 F.2d 991 (D.C.N.Y. 1929), where Judge Knox allowed statutory damages of $8,000 for 8,000 copies of infringing health circulars or pamphlets, and, in addition, a counsel fee of $2,500.
An early case applying the statute as interpreted in the Westermann Case, supra, is Hendricks Co. v. Thomas Publishing Co., 242 F. 37 (C.C.A. 2, 1917), where Judge Hough approved the award of $2,500 statutory damages and $2,500 attorney fee, where the infringing work was a commercial register, of which 2,800 copies were distributed. The court said, page 41 of 242 F.: "As is well known, the language of this section is a growth of years, resulting from the efforts of Congress to avoid that strictness of construction which historically attaches to any statute inflicting penalties, and to confer upon an injured copyright owner some pecuniary solace, even when the rules of law render it difficult, if not impossible (as it often is), to prove damages or discover profits. * * * `The whole course of copyright law shows a recognition of the difficulty of making legal proof of damages and in substituting for rigid penalties the discretionary power of the court, we must assume that a plaintiff should not fail for lack of proof.' On appeal from that construction of the statute, this court approved the method pursued. * * * There may be circumstances under which discretion revolts from any award, by reason of the trivial nature of the thing copyrighted, or the slight success of attempted infringement; but the facts of this case present no such problem. That keeping plaintiff out of a possible market for 2,800 copies of its own publication, by the issuance of a book competitive in every sense of the word, works some considerable injury, is a matter too plain to require more than statement. That assessment of damages or ascertainment of profits under the facts hereinabove recited would be not only difficult but expensive is similarly obvious. We entertain no doubt that it was the intention of Congress (1) to preserve the right of a plaintiff to pursue damages and profits by the historic methods of equity if he chooses so to do; and (2) to give the new right of application to the court for such damages as shall `appear to be just,' in lieu of actual damages."
Where the amount of the copying was comparatively small and plaintiff offered no proof of actual damage, the court considered as a proper award that the statutory damages should be $1,000, together with all costs, and $1,000 attorney fees. Warren v. White Wyckoff Mfg. Co. (D.C.) 39 F.2d 922.
Where plaintiff made road maps for free distribution by gasoline stations and the infringements were copies, in General Drafting Co. v. Andrews, 37 F.2d 54 (C.C.A. 2, 1930), and plaintiff had waived an accounting asking statutory damage, the court awarded $2,000 damages and $4,000 counsel fees.
In Campbell v. Wireback (1920) 269 F. 372, the Circuit Court of Appeals of the Fourth Circuit applied the rule of the Westermann Case, supra, and allowed $1 per copy on each of 4,000 infringing advertising circulars which were in the nature of mailing pieces for a mail order shoe business. Judge Knapp said, page 375 of 269 F.: "This is claimed to show that damages were assessed at $4,000, not in the exercise of discretion, but merely on the basis of the number of catalogues which defendants had printed, and therefore that it is not an award of `such damages as to the court shall appear to be just,' as the statute provides. We do not so construe the award. The language is perhaps a little ambiguous, but the meaning and intent are not uncertain. The court is presumed to know the provisions of the Copyright Act, and to have exercised the discretion which that act enjoins, and the award must therefore be accepted, unless the contrary distinctly appears, as expressing its deliberate judgment of what is just under the facts and circumstances developed at the trial. In such a case as this, where the damages are indirect and not capable of ascertainment, the compensation which the copyright proprietor shall receive for the injuries caused by the infringer is committed to the discretion of the trial judge."
The rule that where infringement has been disclosed and there is no proof of actual damages the court may, in its discretion, fix the damage as authorized by the statute, has been generally followed. It was questioned as to the amount of damages for each performance in the case of copyrighted musical composition, and the statute is again discussed in Jewell-La Salle Realty Co. v. Buck (1931) 283 U.S. 202, 51 S. Ct. 407, 75 L. Ed. 978, where the Supreme Court again applied the rule, although it was contended that such rule, as applied to musical performances, was burdensome and unreasonable. As the footnote to that case states, page 205 of 283 U.S. 51 S. Ct. 408, occasionally where the statutory measure of damages appeared burdensome under the circumstances, courts have reduced or refused to allow counsel fees. Fred Fisher, Inc., v. Dillingham, 298 F. 145, 152 (D.C.N Y 1924); Cravens v. Retail Credit Men's Ass'n, 26 F.2d 833, 836 (D.C. Tenn. 1924). But see M. Witmark Sons v. Calloway, 22 F.2d 412, 415 (D.C. Tenn. 1927).
Defendants urge that upon the authority of the decisions that this case is one for the court to exercise its discretion in the application of the rule of statutory damages. The copyrighted book being in the nature of an advertisement was only the instrument through which the distribution of dishes, having an intrinsic worth, was to be effected by the copyright owner to his profit. Analogous to this was the use of the catalogue in the Wireback Case, supra, for here the copyrighted book was distributed gratis and not sold for its intrinsic worth. On such grounds plaintiff urges the difficulty of measuring damages and profits, and appeals to the court to use its discretion in the assessment of statutory damages.
The maximum of the claim for statutory damages would be on the basis of the total number of the infringing cards printed, that is, 59,340, and of these plaintiff claims only for 39,680, waiving any claim for the 19,660 copies which were subsequently destroyed.
Infringement Was Deliberate and Continued After Notice.
While defendants appeared before the master without counsel at the hearings when testimony was taken, they were represented by competent counsel in the proceeding in the District Court and had counsel here at the time their statement of defense was filed. This fact of appearing without counsel should not move the court to sympathy in their behalf, for apparently the infringement in the first instance was deliberate. Defendant Agnew originated the copyright work upon which this suit was based, and also took part in securing the copyright, as appears from the record in the District Court.
After plaintiff gave notice, defendant Steubenville Pottery Company wrote on June 18, 1931 (Plaintiff's Exhibit 4), that "from now on anything that we use will not conflict with the copyright registered." Thereafter, in order to stop the infringement, plaintiff filed its bill of complaint in this suit on September 12, 1931. In the meantime, during the month of July, defendants organized the so-called "Sales Promotion Department," using a new card, and defendant Agnew admitted (R. 61) that "this new card has the same composition," that is, the same list of premiums in the same order. Neither the statement of defendants nor their testimony gives any basis upon which may be differentiated the amount of business derived from the use of the old card and the expenses incurred by the use of the alleged new and different card. Such burden was upon the defendants and has not been sustained.
After defendant Agnew severed his connection with plaintiff and thus became associated with defendant Steubenville Pottery Company, the customer's card was prepared, which the court has found to be an infringement on the copyright of plaintiff's card. Such conduct has not been explained, nor is the proof as to the new card satisfactory, so these can only be considered as a deliberate and willful appropriation of the property of the plaintiff. Both defendants have admittedly worked together in this infringement, and under the decree of the court are enjoined and stand together as joint tort-feasors. No extenuating circumstances have appeared in this case so the court is well within its powers in making an award in an amount which will make the plaintiff whole.
Recommendations.
Coming now to fix the award, the court has before it the proof as to actual damages and loss of profits suffered, which is quite unsatisfactory. Obviously, from this record the defendants have failed to comply with that provision of the Copyright Act (17 USCA § 25) that "the defendant shall be required to prove every element of cost which he claims."
The claims of the parties vary, from that of plaintiff claiming damages of some $28,000 down to the defendants' claim of a loss of nearly $1,000. In between is the claim of plaintiff that on defendants' own statement there was a profit of at least $2,600 if not more than $5,000.
If in lieu of actual damages and profits the court is to adopt the rule of statutory damages because of the notice defendants had that they were infringing, plaintiff urges that the maximum limitation of $5,000 at the rate of $1 per infringement has no application, and that, strictly, plaintiff would be entitled to recover $1 for each infringement, there being some 39,000 copies of the copyrighted work printed. At the other extreme, under statutory damages, is the $250 as the minimum limitation.
The proof of actual damages and profits being thus unsatisfactory, the court, in lieu thereof, adopts the view that this is a case for assessing damages within its discretion as restricted by the statutory limits. Also it is recognized by the statute, and has the possibility of permitting an award of $1 for every infringing copy made or sold by, or found in the possession of, the infringer, so that the court is not to be restricted by the $5,000 limitation.
Evidence as to efforts to settle a controversy are ordinarily not admissible, but in this case plaintiff saw fit to introduce such proof. The record shows that before the accounting, plaintiff proposed to settle the case on the basis that defendants pay the expenses, including attorney fees, incurred before the accounting proceeding began, and in return waive any claim for damages and profits, which offer defendants refused (R. 99, 105). While amounts mentioned in considering a settlement should not determine the amount of the award, such offer having been voluntarily placed in the record, this cannot be overlooked, and has been considered in fixing the amount of the award.
The recommendation is that the offense of the infringers has been such that the award to the plaintiff should be and is fixed in the sum of $2,500, in addition to which plaintiff should be paid costs and counsel fees.
Attorney Fees.
Plaintiff in a copyright infringement case is entitled to a full bill of costs, and, in addition to the award of a sum as damages, the court may award reasonable attorney's fees to the prevailing party. Section 40, 17 USCA (Copyright Act), provides: "In all actions, suits, or proceedings under this title, except when brought by or against the United States or any officer thereof, full costs shall be allowed, and the court may award to the prevailing party a reasonable attorney's fee as part of the costs."
While no mention of attorney's fees is to be found in the order of reference, the order is for the master to ascertain and report to the court damages, statutory and otherwise, which the plaintiff has sustained by reason of said infringement, and it would seem that a recommendation as to attorney's fees should properly be included.
Counsel fees have been allowed in this circuit by Judge Hicks in the Court of Appeals when sitting in the Tennessee District Court. M. Whitmark Sons v. Calloway, 22 F.2d 412 (1927); Cravens v. Retail Credit Men's Ass'n, 26 F.2d 833 (D.C. 1924).
In this case the proof showed plaintiff's counsel fees of $2,152.81 before this case came before the master, and the request of $2,500, as plaintiff's counsel fees, does not seem unreasonable, and such will be the recommendation.
The master therefore recommends an allowance of damages in the amount of $2,500, with counsel fees to plaintiff of $2,500.
Upon due consideration, the exceptions to the report of the special master in respect of accounting, award of damages, and counsel fees will be overruled, except as to the allowance of counsel fees. The recommended allowance for a case of the proportions of this one seems to me to be in excess of an amount which a court might reasonably allow. To avoid any question of irregularity in respect of the master's consideration and recommendation of counsel fees, it is the independent judgment of this court that the sum of $1,800 represents a reasonable attorney's fee to be allowed the plaintiff.
Report of master in other respects approved and confirmed.