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In view of the importance of the question involved, being one of first impression in the application of the copyright law, the Supreme Court granted certiorari and rendered an opinion March 25, 1940, 44 USPQ 607, delivered by Chief Justice Hughes, affirming the judgment of the Circuit Court of Appeals. The Court based its conclusions primarily upon the language of the statute itself, pointing out that the provision for recovery of “all the profits” was plainly qualified by the words “which the infringer shall have made from such infringement”, this being in purpose cognate to that of the recovery of "such damages as the copyright proprietor may have suffered due to the infringement". The purpose, said the Court, “is thus to provide just compensation for the wrong, not to impose a penalty by giving to the copyright proprietor profits which are not attributable to the infringement.”
In applying the principle of apportionment of profits, the Supreme Court found persuasive analogy in cases of patent infringement where the plaintiff's patent covers only a part of a machine and creates only a part of the profits; and in the case decided took cognizance of the fact that the profits had been derived, not from the mere performance of a copyrighted play, but from the exhibition of a motion picture which had its distinctive profitmaking features apart from the use of any infringing material, by reason of the expert and creative operations involved in its production and direction. The Court called particular attention to the fact that the picture did not bear the title of the copyrighted play and that it was not presented or advertised as having any connection with the play.
In analogous patent cases, the courts long ago found a way out of the difficulty by applying the "reasonable royalty rule," and this practice has since been made law (35 U.S.C. 70). “In Lieu” Clause
It might be wondered why the court in these cases did not apply the "in lieu" clause and award the statutory damages. The reason is that the invocation of this clause is not a matter of discretion with the court or the plaintiff. The phraseology of the statute was adopted “to avoid the strictness of construction incident to a law imposing penalties, and to give the owner of a copyright some recompense for injury done him in a case where the rules of law render difficult or impossible proof of damages or discovery of profits.” Douglas v. Cunningham, 294 U.S. 209, 24 USPQ 153 (1935).
In the Sheldon case, supra, while actual damages were not ascertainable, the profits were, and this was held enough by the Circuit Court of Appeals to prevent the application of the "in lieu" clause; the real problem being the elements of cost allowable for deduction to the defendants from the gross profits. So, in Davilla v. Brunswick, 36 USPQ 398 (CCA 2, 1938), the appellate court also found that the evidence as to the profits from the defendant's sales of records of the song in question was sufficient to establish definitely ascertainable profits, and that therefore the lower court was in error in awarding statutory damages.
Where this "in lieu" clause is applicable, as usually for unauthorized performance of a musical composition, the court must, in the absence of proof of actual damages or profits, allow at least a minimum of $250, even if there be but one such performance. The statutory "yardstick”, prescribed further on in the section, of $10 “for each infringing performance”, merely affords a basis for assessing additional damages if more than 25 performances are proved. Jewell-La Salle Co. v. Buck, 283 U.S. 202, 9 USPQ 22 (1931).
Observe that in applying the “in lieu" clause in the case of a newspaper reproduction of a copyright photograph, "such damages shall not exceed the sum of $200 nor be less than the sum of $50”. The term "newspaper" in this connection has been held not to include a magazine, notwithstanding that under section 3 periodicals include newspapers. Cory v. Physical Culture Hotel, 30 USPQ 353 (1936).
The employment of the "yardstick" in proper cases and within the limits set ($250-$5000) is committed by the Act solely to the court which hears the case, and this fact takes the matter out of the ordinary rule with respect to abuse of discretion, and the court's assessment is not subject to review. Douglas v. Cunningham, supra. The maximum limit, however, does not apply to “infringements occurring after actual notice to a defendant either by service of process in a suit or other written notice served upon him.” Section 25(b) of Act; see Turner v. Crowley, 252 F. 749 (CCA 9, 1918).
Subsection (e) of section 25 deals only with the subject of liability for infringement of the mechanical rights set forth in section 1 (e). The clause, “then in case of infringement of such copyright by the unauthorized manufacture, use, or sale of interchangeable parts, such as disks, rolls, etc.,' refers here only to such as would have been authorized if the user had been a licensee of the mechanical rights, and does not include the use of such disks, etc., for the purpose of public performance for profit. Hence the liability for such performance is not governed by this subsection but by the general provisions of section 25 immediately preceding this subsection (e). See Berlin v. Daigle, 31 F.2d 832 (CCA 5, 1929).
Joinder of Causes
In Hurn v. Oursler, 289 U.S. 238, 17 USPQ 195 (1933), the Supreme Court laid down the rule, applicable alike to copyright, patent and trade mark cases, that a federal court cannot entertain a cause of action not within its jurisdiction merely because it has been joined in the complaint with another cause which is within its jurisdiction, overruling a multitude of cases in the lower federal courts.
The complaint in this case alleged infringement of copyright and also unfair competition, but both claims resulted from the same set of circumstances. The trial court found no infringement of copyright and concluded that the court was accordingly without jurisdiction to entertain the allegation of unfair competition, the parties being citizens of the same state. The Circuit Court of Appeals affirmed the decree of dismissal, but the Supreme Court held that while the court was right in dismissing the bill as to unfair competition, it was wrong in dismissing it for want of jurisdiction; that it should have been dismissed upon the merits as was the copyright infringement claim.
The Supreme Court here made a distinction between a case where two distinct grounds in support of a single cause of action are alleged, only one of which presents a federal question, and a case where two separate and distinct causes of action are alleged, only one of which is federal in character. In the former, where a substantial federal question is raised, the federal court may retain and dispose of the case upon the nonfederal ground even though the federal ground be not established; but in the latter case it may not do so upon the nonfederal cause of action. See also White v. Beach, 40 USPQ 249 (1939); and Warner Publications, Inc. v. Popular Publications, Inc., 32 USPQ 523 (1937).
If the parties in such case had been citizens of different states, the federal court could have retained jurisdiction to dispose of the claim of unfair competition even though based upon an entirely different set of circumstances, resulting in a distinct cause of action; this by virtue of Article III, section 2, of the Constitution and U. S. Code, Title 28, section 41.
While Rule 18 of the new Federal Rules of Civil Procedure allows the plaintiff or defendant to join as many claims, legal or equitable, as he may have against the opposing party, this must be read in conjunction with Rule 82 to the effect that these rules shall not be construed to extend the jurisdiction of the district courts.
Joinder of Parties
The licensee of a particular right embraced in copyright must generally join the owner of the legal title as a party plaintiff, since the latter holds in trust for the former. But aside from this, there has heretofore been considerable diversity of practice in applying the rule as to misjoinder or nonjoinder of parties in copyright actions. See for example Buck v. Elm Lodge, Inc., 24 USPQ 390 (CCA 2, 1936); Buck v. Kloeppel, 26 USPQ 9 (1935). The new Rules of Civil Procedure may bring about greater uniformity of practice in this respect. See Rules 19, 20, 21, 22 and 23, and note particularly that misjoinder or nonjoinder of parties is no longer ground for dismissal of an action, but parties may be dropped or added by the court on motion or of its own accord (Rule 21). This is in line with Rule 1, declaring the purpose of the new rules: "to secure the just, speedy and inexpensive determination of every action ... in all suits of a civil nature whether cognizable as cases at law or in equity.”
Bill of Complaint
The courts have also been at variance as to how far the bill must allege specific acts necessary to show compliance with the copyright law. Some judges stick to the old rigid rules of pleading and require that the bill set forth affirmatively all the acts done and necessary to constitute a full compliance with the terms of the Act, e.g., Foreign & Domestic Music Co. v. Twentieth Century Fox Film Corp., 34 USPQ 109 (SD NY 1937); while others are less insistent in this respect, having regard to the evidentiary value of the certificate of registration as establishing prima facie a valid copyright in the plaintiff, anything to the contrary being matter of affirmative defense. Witmark v. Calloway, 22 F.2d 412 (ED Tenn. 1927); Chautauqua School v. National School, 211 F. 1014 (WD NY 1914), citing section 55 of the Copyright Act. In Bobrecker v. Denebeim, 39 USPQ 336 (WD Mo. 1938), the court took occasion to review the various conflicting opinions in copyright cases and reached the conclusion that in view of the modern tendency toward simplicity in pleading, the cumbersome historical method in copyright as well as in patent cases is no longer appropriate, and that it is sufficient if the petition alleges that plaintiff is the proprietor of the copyrighted work and that it has been infringed by defendant, since the issue of the plaintiff's rights can be raised by appropriate answer. The same rule in favor of the short bill was laid down by the Supreme Court in the patent case of Mumm v. Decker, 301 U.S. 168, 33 USPQ 247 (1937), overruling eight of the Circuit Courts of Appeals in this respect.
Where in a suit for copyright infringement the two works or summaries thereof are before the court by stipulation of counsel and there is no desire to dispute access but only unfair use of the copyrighted work, the works themselves supersede and control any allegations or conclusions of fact about them or descriptions of them in the complaint, since the court deals with the actualities of the situation before it rather than interested comments thereon. Shipman v. R.K.O. Radio Pictures, Inc., 35 USPQ 242 (1937).
In Dellar v. Golden, 42 USPQ 164 (CCA 2, 1939), the appellate court discouraged the practice of disposing of a copyright suit summarily by comparison of the two works by the trial judge, because the decision does not dispose of the case unless it goes against the plaintiff; if he wins, the issue of copying remains to be tried.