After Danish Plaintiff had created and copyrighted “Good Luck Troll” dolls, their sale without copyright notice invalidated Plaintiff’s registration until Uruguay Round Agreements Act restored Plaintiff’s copyright so that Defendant’s marketing of such dolls before URAA’s enactment did not make Defendant “reliance party” to whom URAA would have accorded one year to clear its inventory of infringing dolls


After Danish Plaintiff had created and copyrighted “Good Luck Troll” dolls, their sale without copyright notice invalidated Plaintiff’s registration until Uruguay Round Agreements Act restored Plaintiff’s copyright so that Defendant’s marketing of such dolls before URAA’s enactment did not make Defendant “reliance party” to whom URAA would have accorded one year to clear its inventory of infringing dolls


In the late 1950s, Thomas Dam, a Danish wood carver, created a troll doll with an oversized head, big grin, potbelly, and frizzy hair, calling it a “Good Luck Troll.” Dam began selling his doll in the United States in 1961. In 1962, Dam founded “Dam Things Establishment (DTE) ,” and listed it as the creator of the dolls on his U.S. copyright registration. As some dolls had been sold in the U.S. without the proper copyright notice, the copyright was invalidated in 1962 on the grounds that the dolls had entered the public domain. Many companies then began marketing the dolls in the U.S.

In 1963‑64, DTE licensed Uneeda Doll Co., Inc. (UDCI), Defendant’s predecessor, to distribute troll dolls. From time to time, UDCI sold a line of troll dolls under the name “Wish‑Niks” between 1965 and 1984, and, according to UDCI’s chairman, probably as late as 1996. In that year, UDCI sold all of its assets, including its copyrights and other intellectual property rights, to Uneeda (Defendant).

After Thomas Dam died in 1989, his heirs granted Troll Co. (Plaintiff), a Danish company, the exclusive right to exploit and license the dolls. The Copyright Act, 17 U.S.C. Section 104A, enacted as part of the Uruguay Round Agreements Act (URAA), Pub. L. No. 103‑465, 108 Stat. 4809 (1994), restored the Good Luck Troll copyright on January 1, 1996. After Plaintiff had obtained a registration certificate in 2000, it set about enforcing its restored copyright.

In August 2005, Plaintiff was getting ready for a major re‑launch of its troll dolls, when it found out that Defendant was selling newly produced Wish‑niks to Wal‑Mart bearing copyright notices in Defendant’s name. After Plaintiff informed Wal‑Mart that the dolls infringed Plaintiff’s copyright, Wal‑Mart withdrew the dolls.

After bringing this copyright infringement action against Defendant in a New York federal court on October 7, 2005, Plaintiff obtained a preliminary injunction enjoining Defendant from manufacturing, distributing, or selling Wish‑nik dolls pending resolution of the case. Defendant appealed the preliminary injunction based on its contention that Plaintiff is unlikely to succeed on the merits of its infringement claim.

On appeal, Defendant made two supporting arguments. The first was that Plaintiff has not shown that it owns the restored copyright. The second was that Defendant qualifies as a “reliance party” within the meaning of Section 104A of the Copyright Act. This entitled it to sell off its inventory of Wish‑niks for one year following Plaintiff’s service of a notice of intent to enforce the restored copyright. The U. S. Court of Appeals for the Second Circuit, however, affirms.

The Court rejects Defendant’s first argument, finding that, under the URAA, Plaintiff would likely be able to establish ownership of the restored copyright. “First, Uneeda points out, the original 1965 registration certificate listed [DTE] not Dam himself, as the ‘author’ of the Good Luck Trolls. Consequently, Uneeda argues, [Plaintiff] must establish a chain of ownership from [DTE] but not from Dam through his heirs, as [Plaintiff] argued in the District Court.”

“But the URAA specifies that authorship is to be determined by reference to the source country’s law, not by reference to U.S. copyright registration. See 17 U.S. C. Section 104A(b); see, e.g., Alameda Films S A v. Authors Rights Restoration Corp., 331 F.3d 472, 477 (5th Cir. 2003) (applying Mexican law). Neither party submitted evidence of Danish law to the District Court [Editorial Note: see Fed. R. Civ. Proc . 44.1.]



In any event, to obtain a preliminary injunction, [Plaintiff] needed to show only that it was likely to prove ownership, and it seems likely that Danish law would consider Dam to be the ‘author’ of the troll dolls since he created the dolls several years before he established [DTE].” [155].

After pointing out that the URAA restored copyrights as of January 1, 1996, the Court lays out the relevant categories of reliance parties. “Much of 17 U.S.C. Section 104A concerns the enforcement of restored copyrights against parties that were legitimately exploiting works in reliance on their public domain status. The statute creates a category of prior exploiters called ‘reliance parties,’ who may continue to exploit the work until the owner of the restored copyright makes known its intent to enforce its copyright. The Second Circuit then determines that the court below had incorrectly determined the date on which Denmark became an eligible country, and hence whether Defendant was a reliance party by having acted prior to that date.

“Thus, subsections (A) and (B) make the status of a reliance party turn on whether a person took certain actions with respect to a work prior to the date that the source country of that work became an eligible country. And, for purposes of subsections (A) and (B), a source country that was a member of the Berne Convention for the Protection of Literary and Artistic Works of 1886 [as revised and amended, in effect for U. S., March 1, 1989, Sen. Treaty Doc. No. 99‑27] when the URAA was enacted (as well as Danish legislation) Denmark became an eligible country on the date of the URAA’s enactment, December 8, 1994. See id. Section 104A(h)(3)(B) [Cites].”

“The District Court mistakenly looked to the date of copyright restoration, January 1, 1996, rather than the date of the URAA’s enactment, to determine the date when Denmark became an eligible country and hence whether [Defendant] or its predecessor was a reliance party by reason of having acted with respect to the troll dolls prior to that date. [Cite]” [157]

Finding the text of Section 104(h)(4)(A) ambiguous as to its use of “continues,” the court looks to the legislative history. “The legislative history of Section 104A suggests that Congress understood Section 412 to mean that a post‑registration act of infringement will not be deemed to have commenced before registration if the infringing activity ceased for an appreciable period of time. In such a case, the copyright owner could recover statutory damages and attorney’s fees for that new, post‑registration act of infringement.”

“By using the word ‘continues,’ Congress must have intended to incorporate this same principle into Section 104A (h)(4)(A). We therefore construe this subsection ... to confer reliance party status only on persons whose infringement is ongoing and without more than trivial interruption. This limitation is consistent with the purpose of the URAA’s reliance provisions.” “A party that has invested time and resources into ongoing exploitation of a work in reliance on the work’s public domain status would incur substantial harm from the sudden inability to engage in that business; the URAA therefore requires owners of restored copyrights to notify such parties of their intent to enforce and gives those parties a year after notification to sell off their inventories.”


“By contrast, a party that has voluntarily ceased exploitation for a non‑trivial period of time, here, nine or ten years – even where such exploitation was episodic due to the cyclical nature of consumers’ interest in the product – has a less substantial interest in being able to resume that exploitation after restoration.” [158‑59].

Applying this standard to Defendant, the court concludes that, although Defendant’s predecessor UDCI may have initially been a reliance party, Defendant’s nine or ten‑year hiatus precluded Defendant from claiming that status. “... [W]e first observe that [Defendant] initially may have been a reliance party under Section 104A(h)(4)(A) following the URAA’s enactment. According to the evidence before the District Court, [Defendant] ‘sold Wish‑nik dolls beginning in 1992 and continuing into the mid‑1990s, at least through 1994 and probably up to 1996.’ Because the District Court mistakenly deemed reliance party status to turn on the date of restoration, January 1, 1996, it concluded that [Defendant] could not have been a reliance party.”

“However, ... the critical date for assessing reliance party status is December 8, 1994. If the District Court were to credit [Defendant’s] evidence and find that [Defendant] sold Wish‑niks in 1995, [Defendant] would have been a reliance party under Section 104A (h)(4)(A) because it would have continued to engage in infringing acts after December 8, 1994.”

“Notwithstanding this observation, we need not remand the case for reexamination of [Defendant’s’ claim to reliance party status. Even if we assume that [Defendant] was a reliance party for some period of time, UDCI and [Defendant ]as its successor, would have retained that status only to the extent that they continued to engage in such infringing acts. For the reasons set forth above, [Defendant’s] renewed manufacture and sale of Wish‑niks after a nine‑ or ten‑year hiatus is not a continuation of infringement under Section 104A (h)(4)(A). Accordingly, [Defendant] cannot claim protection as a reliance party under this provision.” [159‑60].

The Court also rejects Defendant’s reliance‑party claim under Section 104 (h)(4)(B), construing the statutory language so as to avoid results that would be not only absurd but also incompatible with the URAA’s goals. “The text of Section 104A(h)(4)(B) is ambiguous on this point, and there is no legislative history clarifying Congress’s intent. However, it is an elemental principle of statutory construction that an ambiguous statute must be construed to avoid absurd results. [Cite].”

“[Defendant’s] proposed interpretation would render the statute absurdly broad: any entity that purchased even one Wish‑nik doll many years ago while the troll dolls were in the public domain could decide to begin manufacturing troll dolls after the restoration of the copyright and thereby become a reliance party. Conferring reliance party status on such entities would be incompatible with the URAA’s dual goals of restoring copyright protection and safeguarding legitimate reliance interests. ... [W]e conclude that Congress intended to limit the benefit of reliance party status under Section 104A (h)(4)(B) only to those copies made or acquired before the URAA’s enactment.”

“Because [Defendant] intends to sell recently manufactured Wish‑niks and does not claim to be disposing of Wish‑niks made by [Defendant] before the URAA’s enactment, it is not entitled to reliance party status as UDC’s successor under Sections 104A(h)(4)(B)‑( c).”

Citation: Troll Co. v. Uneeda Doll Co., 483 F.3d 150 (2nd Cir. 2007).
 


**** Terik Hashmi is a business consultant serving businesses in the marketing realm. Among his clients are a medical service provider and an Online Reputation Management company. - Attorney Website at: https://terikhashmiattorney.com/ - Attorney Profile at: https://solomonlawguild.com/terik-hashmi%2C-esq# - Attorney News at https://attorneygazette.com/terik-hashmi%2C-consultant#eec97f53-49a0-4c94-869a-4847514cb694

Terik Hashmi, Attorney at Law, Legal Commentary

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