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