UNIVERSAL CITY STUDIOS v. SONY CORP. OF AMERICA At the outset, it is necessary to make a couple of observations about the district court's analysis. The court relied heavily on a "staple item of commerce" 15 theory in rejecting appellants' claims. The district court stated that “Selling of a staple article of commerce-e g., a typewriter, a recorder, a camera, a photocopying machinetechnically contributes to any infringing use subsequently made thereof, but this kind of 'contribution,' if deemed sufficient as a basis for liability, would expand the theory beyond precedent and arguably be yond judicial management." 480 F.Supp. at 461 This reliance on the “staple article of commerce" theory was inappropriate. Appellees' analogy of videotape records to cameras or photocopying machines may have substantial benefit for some purposes, but does not even remotely raise copyright problems. Videotape recorders are manufactured, advertised, and sold for the primary purpose of reproducing television programming. Virtually all television programming is copyrighted material. 16 Therefore, videotape recorders are not "suitable for substantial noninfringing use." See 3 Nimmer supra, § 1204[A] at 12-39, 12-40. That some copyright owners choose, for one reason or another, not to enforce their rights does not preclude those who legitimately choose to do so from protecting theirs. A second observation about the district court's analysis is in order. The court found that the corporate appellees' knowledge was insufficient to make them contributory infringers. This was based, in part, on the court's assertion that “defendants here could not know what copyright law required. Before this lawsuit, that issue had not been determined." 480 F.Supp. at 460. It is not necessary that an alleged contributory infringer have actual knowedge that activity which he makes possible 15. See 35 U.S.C. §'271(c) (defining contributory infringement in patent context and providing for exception for "a staple article or commodity of commerce suitable for substantial noninfringing use"); Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476, 488–89, 84 S.CL. 1526, 153334, 12 L.Ed.2d 457 (1964). 975 constitutes a copyright infringement. A We First, the knowledge element is clearly satisfied. The corporate appellees “know” that the Betamax will be used to reproduce copyrighted materials. In fact, that is the most conspicuous use of the product. That use is intended, expected, encouraged, and the source of the product's consumer appeal. The record establishes that appellees knew and expected that Betamax's major use would be to record copyrighted programs off-the-air. Second, there is no doubt that appellees have met the other 16. For examples, see Nimmer, supra, § 12.04(A) at 12-39-40. 17. 3 Nimmer, supra, § 13.08. This discussion of "llability" obviously only pertains to civil. not criminal, liability. 976 639 FEDERAL REPORTER, 2d SERIES requirements for contributory infringement -inducing, causing, or materially contributing to the infringing conduct of another. The corporate appellees are sufficiently engaged in the enterprise to be held accountable. See generally 66 Va.L.Rev. at 1021-24; 31 Stan.L. Rev. at 257-260; 52 S.Cal.L.Rev. at 601-607; 81 W.Va.L.Rev. at 247-49. III. RELIEF Because we have found that home vid eorecording constitutes copyright infringe ment and that appellees are liable for such use, the district court's judgment must be reversed and the case remanded for a consideration of the appropriate relief. The relief question is exceedingly complex, and the difficulty in fashioning relief may well have influenced the district court's evaluation of the liability issue. The difficulty of fashioning relief cannot, however, dissuade the federal courts from affording appropriate relief to those whose rights have been infringed. Appellants stated at oral argument that they were seeking a remand to the district court so that the district court could fashion the appropriate relief. This approach makes a good deal of sanse; a district court is in a better position to resolve, in an appropriate fashion, the relief question. There are a number of possibilities that the district court may want to consider. Because of the difficulty of proving the precise nature of the harm to appellants, statutory damages may be appropriate. 17 U.S.C. § 504(c). The district court also has a broad range of equitable remedies from which to choose. Section 502(a) provides that the court "may grant temporary ... 18. "Ordinarily it would be improper, and even an abuse of discretion for a court to deny a permanent injunction where liability and a threat of continuing infringement have both been established. But if one looks to other areas of property law it is clear that a property owner may be denied a permanent injunc tion against further violations of his property right where such an injunction would work a substantial injury to the public interest as well as to that of the particular defendant. and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." The district court determined that an injunction would not be an appropriate remedy. 480 F.Supp. 463-69. The court should reconsider this action. We note that, as a general rule, a copyright plaintiff is entitled to a permanent injunction when liability has been established and there is a threat of continuing violations. Indeed. Nimmer states that "Generally, it would appear to be an abuse of discretion to deny a permanent injunc tion where liability has been established and there is a threat of continuing infringement." 3 Nimmer, supra, § 14.06[B] at 14-53-14-54. In discussing the analogous photocopying area, Nimmer suggests that when great public injury would result from an injunction, a court could award damages or a continuing royalty. This may very well be an acceptable resolution in this context. In fashioning relief, the district court should not be overly concerned with the prospective harm to appellees. A defendant has no right to expect a return on investment from activities which violate the copyright laws. Once a determination has been made that an infringement is .nvolved, the continued profitability of appellees' businesses is of secondary concern. IV. RETAIL STORE USE We find no error with the district court's discussion of the fair use question in regard to the retail store use. Therefore, we affirm that portion of the decision. In such circumstances the property owner may be awarded, in lieu of an injunction, a reasonable royalty for the further use of his property. The courts might well conclude that photocopying practices for private use. particularly in the area of scientific writings. involve just such a public interest, so that a judicially created compulsory license as a substitute for injunctive relief could be found appropriate." 3 Nimmer, supra, § 13.. 05[E][4][e] at 13-91. (Emphasis added.] UNIVERSAL CITY STUDIOS v. SONY CORP. OF AMERICA V. UNFAIR COMPETITION CLAIMS In light of our previous discussion, we have decided to vacate the district court's earlier disposition of the unfair competition claims and remand for reconsideration. We express no view on the merits of these claims. VI. CROSS-APPEAL The appellees below, have cross-appealed because of the district court's failure to receive evidence on three affirmative defenses: (1) laches and estoppel, (2) copyright invalidity, and (3) unclean hands/copyright enforceability. On this appeal, we reverse and remand. The district court should give appellees an opportunity to establish these defenses. CONCLUSION We find no Congressional intent to create a blanket home use exception to copyright protection and that home videorecording does not constitute fair use. In addition, the appellees are legally responsible for the infringing activity. The district court's decision must be reversed and the case remanded for appropriate proceedings. The court should consider the unfair competition ciaims and the affirmative defenses. If appellants prevail on the defenses, the district court should fashion appropriate relief. The judgment of the district court is reversed in part, affirmed in part, and the case remanded for appropriate proceedings. IT IS SO ORDERED. LEY RUMBER SYSTEM 977 |