Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-01540/USCOURTS-azd-2_06-cv-01540-0/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:501 Copyright Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Societe Civile Succession Richard Guino,

Plaintiff, 

vs.

International Foundation for Anticancer

Drug Discovery, and Arizona corporation;

Deborah Lindquist; Marcia Karen Horn, 

Defendants. 

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No. CV 06-01540-PHX-NVW

ORDER

Pending before the court are Plaintiff's Amended Complaint (Doc. # 12), Defendants'

Motion to Dismiss (Doc. # 13), Plaintiff's Response (Doc. # 15), Defendants' Reply (Doc.

# 16), Plaintiff's Motion for Rehearing and Consideration of Supplemental Memorandum of

Points and Authorities (Doc. # 24), and Defendants' Opposition to Plaintiff's Motion for

Rehearing and Response to Questions Raised During Oral Argument (Doc. # 28).

I. Background

Plaintiff Societe Civile Succession Richard Guino (“Societe”) is a French trust formed

to preserve the rights of the Guino family in a set of bronze sculptures created in the early

1900s by Richard Guino and Pierre-Auguste Renoir. Defendants are the International

Foundation for Anticancer Drug Discovery (“International Foundation”), an Arizona

corporation; Marcia Karen Horn (“Horn”), an Arizona resident and the President and Chief

Case 2:06-cv-01540-NVW Document 29 Filed 11/03/06 Page 1 of 12
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Executive Officer of International Foundation; and Arizona resident Deborah Lindquist

(“Lindquist”). 

In October 2003, International Foundation held a “Jewels of the Sea” ball to raise

money for its anti-cancer programs. International Foundation permitted Beseder, Inc., a local

art gallery, to display and sell several replicas of the Guino-Renoir sculptures at the event.

Lindquist, who was in attendance, purchased a replica of a work entitled “La Laveuse.” 

Plaintiff alleges that it obtained a valid copyright for “La Laveuse” on June 11, 1984,

and holds the exclusive right to control the production of replicas. On this basis, it argues

that International Foundation's unauthorized display and sale of the work in 2003 constitutes

both contributory and vicarious copyright infringement under the Copyright Act. Plaintiff

further alleges vicarious infringement against Defendant Horn on the theory that she had the

right and ability to supervise International Foundation's sale of “La Laveuse” and received

direct financial benefit from that transaction (Count II). Plaintiff seeks as remedies actual

damages, lost profits, statutory damages, attorneys' fees, and the impoundment of the

infringing sculpture (Count III). Defendants move to dismiss under Federal Rule of Civil

Procedure 12(b)(1), arguing that the court lacks subject matter jurisdiction under 17 U.S.C.

§ 411. Defendants also move to dismiss under Federal Rule of Civil Procedure 12(b)(6) for

failure to state a claim. This order will address the Motion under Rule 12(b)(1), and under

Rule 12(b)(6) on Counts I and II. Count III will be addressed in a separate order. 

II. Standard of Review

Federal Rule of Civil Procedure 12(b)(1) authorizes a party to seek dismissal of an

action for lack of subject matter jurisdiction. “When subject matter jurisdiction is challenged

under Federal Rule of Civil Procedure 12(b)(1), the plaintiff has the burden of proving

jurisdiction in order to survive the motion.” Tosco Corp. v. Communities for a Better Env't,

236 F.3d 495, 499 (9th Cir. 2001) (citations omitted). “A plaintiff suing in a federal court

must show in his pleading, affirmatively and distinctly, the existence of whatever is essential

to federal jurisdiction, and, if he does not do so, the court, on having the defect called to its

attention or on discovering the same, must dismiss the case, unless the defect can be

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corrected by amendment.” Id. (citations and internal quotations omitted). The court is not

limited to the pleadings and may properly consider extrinsic evidence. Ass'n of Med.

Colleges v. United States, 217 F.3d 770, 778 (9th Cir. 2000). 

Under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss should not be

granted “unless it appears beyond doubt that the plaintiff can prove no set of facts in support

of his claims which would entitle him to relief.” Barnett v. Centoni, 31 F.3d 813, 816 (9th

Cir. 1994) (citations and internal quotation marks omitted). When analyzing a complaint for

failure to state a claim, all factual allegations are taken as true and construed in the light most

favorable to the nonmoving party. Iolab Corp. v. Seaboard Sur. Co., 15 F.3d 1500, 1504

(9th Cir. 1994). All reasonable inferences are to be drawn in favor of the plaintiff. Jacobsen

v. Hughes Aircraft, 105 F.3d 1288, 1296 (9th Cir. 1997). “If a complaint is accompanied by

attached documents, the court is not limited by the allegations contained in the complaint.

These documents are part of the complaint and may be considered in determining whether

the plaintiff can prove any set of facts in support of the claim.” Durning v. First Boston

Corp., 815 F.2d 1265, 1267 (9th Cir. 1987). 

When the complaint is dismissed for failure to state a claim, “leave to amend should

be granted unless the court determines that the allegation of other facts consistent with the

challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. ServWell Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986) (citations omitted). Leave to amend

is properly denied “where the amendment would be futile.” DeSoto v. Yellow Freight Sys.,

957 F.2d 655, 658 (9th Cir. 1992) (citations omitted).

III. Analysis

A. Subject Matter Jurisdiction

The court first addresses Defendants' argument that, under 17 U.S.C. § 411, Societe's

fraudulent copyright registration precludes subject matter jurisdiction over the instant action.

Whether an action arises under federal copyright law, and hence confers subject matter

jurisdiction, is determined “by reference to the well-pleaded complaint rule.” Vestron, Inc.

v. Home Box Office Inc., 839 F.2d 1380, 1381 (9th Cir. 1988). Jurisdiction exists over a

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copyright infringement claim “if and only if the complaint is for a remedy expressly granted

by the [Copyright] Act . . . or asserts a claim requiring construction of the Act . . . or, at the

very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act

requires that federal principles control the disposition of the claim.” Id. 

Applying Vestron, the court finds that subject matter jurisdiction exists. The

Amended Complaint seeks the impoundment of the allegedly infringing sculpture, Doc. # 12

at ¶ 20; attorney's fees, id. at ¶ 22; and statutory damages, id. at ¶ A. All of these remedies

are “expressly granted” by the Copyright Act. See 17 U.S.C. §§ 503(a), 504(c), and 505.

The meaning and construction of the Act, moreover, will largely determine whether the

activity alleged in Counts I and II constitutes actionable infringement. On its face, Plaintiff's

Amended Complaint clearly raises questions of federal law which the court has jurisdiction

to adjudicate. 

The allegedly fraudulent basis for Plaintiff's copyright registration does not destroy

jurisdiction. “Proper registration is a condition precedent to a suit, as required under 17

U.S.C. § 411(a), but the arguable failure to satisfy a condition precedent does not affect the

court's subject matter jurisdiction.” Batesville Servs., Inc. v. Funeral Depot, Inc., 2004 U.S.

Dist. LEXIS 24336, at *6-7 (S.D. Ind. Nov. 10, 2004). A contrary approach would operate

in tension with provisions in the Copyright Act that permit a plaintiff to sue even in the

absence of valid copyright registration. See, e.g., 17 U.S.C. § 411(a) (permitting a copyright

applicant to sue for infringement even when her application has been refused); 17 U.S.C. §

411(b) (permitting plaintiffs to institute infringement actions even before they have secured

copyright); see also Shady Records, Inc. v. Source Enters., Inc., 2004 U.S. Dist. LEXIS

26143, at *26 (S.D.N.Y. Dec. 30, 2004) (“[Defendants] have cited no authority suggesting

that the validity of [a] copyright registration[] must first be determined before the Court can

exercise its jurisdiction over the infringement suit, and in fact, any such argument would run

counter to the statutory scheme, which permits even rejected registration applications to

confer standing to sue.”). 

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Defendants' contention that fraudulent registration precludes federal jurisdiction also

overlooks 17 U.S.C. § 411(a)'s separate references to the “institution” of an infringement

action and a court's “jurisdiction” to hear such an action. Id. While improper registration

may preclude a lawsuit in the sense that it deprives a plaintiff of a meritorious claim, it has

no logical effect on federal jurisdiction, since, regardless of the merits of the plaintiff's claim,

that claim may still “arise under” the subject matter of the Copyright Act. Defendants'

contrary position conflates the meaning of two separately employed terms and ignores the

rule of statutory construction that different words appearing in the same statute

presumptively have different meanings. See Boise Cascade Corp. v. EPA, 942 F.2d 1427,

1432 (9th Cir. 1991).

The cases cited by Defendants fail to support their position. Urantia Foundation v.

Maaherra, 114 F.3d 955, 963 (9th Cir. 1997), and Express, LLC v. Fetish Group, Inc., 424

F. Supp. 2d 1211, 1222 (C.D. Cal. 2006), merely explain that defective registration precludes

successful infringement actions. Neither case holds or even implies that valid registration

is a prerequisite to subject matter jurisdiction, or that the court's subject matter jurisdiction

hinges on a plaintiff's individual ability to bring suit. 

 Morgan, Inc. v. White Rock Distilleries, Inc., 230 F. Supp. 2d 104 (D. Me. 2002),

Jefferson Airplane v. Berkeley Sys., Inc., 886 F. Supp. 713 (N.D. Cal. 1994), and Foraste v.

Brown University, 248 F. Supp. 2d 71 (D.R.I. 2003), are similarly unhelpful. In Morgan, the

court dismissed the plaintiff's infringement action because he never actually alleged a valid

copyright registration in his own complaint. Id. at 109. Plaintiff, by contrast, has alleged

valid registration. See Doc. # 12 at ¶¶ 8-10. In Jefferson Airplane, the court lacked

jurisdiction solely because the plaintiff failed altogether to register its disputed work, not

because a submitted registration was allegedly fraudulent or otherwise invalid. Unlike the

plaintiff in Jefferson Airplane, Plaintiff Societe has submitted an application for registration

that expressly describes the disputed work. See Doc. # 12 at Exhibit 1. Finally, in Foraste,

the court stated that registration is a “condition precedent and a jurisdictional prerequisite,”

248 F. Supp. 2d at 76, but it ultimately concluded that registration occurs “on the day the

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Copyright Office receives all of the necessary application materials,” id. at 77. Under this

approach, registration of Plaintiff's copyright has already occurred for jurisdictional purposes

because Plaintiff submitted all of the requisite materials, see Doc. # 12 at Exhibit 1, and

Foraste does not make jurisdiction contingent upon the ultimate validity of the application,

see 248 F. Supp. 2d at 77 n.10 (concurring with the view that a pending application for

registration is sufficient to confer federal jurisdiction). 

Subject matter jurisdiction therefore exists. Defendants' Motion to Dismiss under

Rule 12(b)(1) will be denied. 

B. Sufficiency of Plaintiff's Claims Under Rule 12(b)(6)

Defendants argue that the Amended Complaint should be dismissed under Federal

Rule of Civil Procedure 12(b)(6) because it fails to allege sufficient facts in support of

Plaintiff's claims for contributory and vicarious copyright infringement. 

On a motion to dismiss under Rule 12(b)(6), the court “must apply the notice pleading

requirements of [Federal Rule of Civil Procedure] 8(a)(2).” Gionorio v. Gomez, 322 F. Supp.

2d 153, 159 (D.P.R. 2004); see also Segal Co. v. Amazon.com, 280 F. Supp. 2d 1229, 1232

(W.D. Wash. 2003). Rule 8(a)(2) requires that a complaint contain “a short and plain

statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).

Complaints are construed liberally in deciding whether Rule 8(a)(2) has been satisfied. See

Fed. R. Civ. P. 8(f); Yamaguchi v. United States, 109 F.3d 1475, 1480 (9th Cir. 1997). Thus,

there is no requirement that the plaintiff plead facts establishing a prima facie case. See id.

at 1481 (“Our system of notice pleading 'does not require a claimant to set out in detail the

facts upon which he bases his claim.'”) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).

Whether the factual allegations in the complaint are sufficient hinges instead on whether they

provide the defendant with “fair notice of what the plaintiff's claim is and the grounds upon

which it rests.” Conley, 355 U.S. at 47. 

Castillo v. Norton, 219 F.R.D. 155 (D. Ariz. 2003), illustrates how the Rule is to be

applied. In that case, a federal employee brought suit against the Department of the Interior

for unlawful discrimination under Title VII. The defendant moved to dismiss for failure to

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satisfy the pleading requirements of Rule 8(a)(2). The court, however, denied the defendant's

motion. While recognizing that the plaintiff put forth only “general” allegations of

discrimination and failed to allege who, when, and where the discrimination occurred, id. at

158, the court found that the complaint clearly stated the cause of action and was therefore

sufficient under Rule 8(a), id. at 163-64. Crucial to the court's holding was the fact that the

complaint provided sufficient information for the defendant to “answer the charges and

initiate a defense.” Id. at 164. 

The court now assesses Counts I and II in light of these principles. 

1. Count I: Contributory Infringement

Contributory copyright infringement occurs when “[o]ne who, with knowledge of [an]

infringing activity, induces, causes or materially contributes to the infringing conduct of

another.” Ellison v. Robertson, 357 F.3d 1072, 1078 (9th Cir. 2004). The first requirement

of knowledge is satisfied when the defendant has either “actual knowledge” or “reason to

know” of direct infringement. Id. The second requirement of material contribution may be

satisfied by a defendant's “provision of site and facilities for infringement followed by a

failure to stop specific instances of infringement once knowledge of those infringements is

acquired.” MGM Studios, Inc. v. Grokster Ltd., 380 F.3d 1154, 1163 (9th Cir. 2004), vacated

on other grounds, 125 S. Ct. 2764 (2005). 

The Amended Complaint's allegation of contributory copyright infringement by

International Foundation does not survive the Motion to Dismiss. Count I identifies the

cause of action and applies each element of that cause of action to International Foundation's

conduct. To satisfy the requirement of knowledge, Plaintiff alleges that “International

Foundation knew or should have known that displaying, selling, and related activities would

infringe the rights of the holder of the copyrights to the Renoir-Guino sculptures.” Doc. #12

at ¶ 12. To satisfy the requirement of material contribution, Plaintiff alleges that

“International Foundation materially contributed to the infringement of [Plaintiff's]

copyrights by permitting the display and sale of several infringing replicas of the GuinoRenoir sculptures at its 'Jewels of the Sea' Ball in October of 2003.” Doc. # 12 at ¶ 12. 

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However, at oral argument, Plaintiff explained that, despite the conclusory language

of the Amended Complaint, Count I is not based on an allegation that International

Foundation had actual knowledge of Beseder, Inc.'s direct infringement. Rather, Count I

relies exclusively on the allegation that International Foundation should have known of the

direct infringement. The basis for this allegation, Plaintiff further explained, is the media

coverage about Plaintiff's separate lawsuit against Beseder, Inc. 

As Plaintiff frames the allegations, Count I fails to state a claim upon which relief may

be granted. No case has held that the knowledge requirement for contributory liability may

be satisfied by the mere existence of public information about a possible direct infringement.

Rather, where it has been found that the defendant “should have known” of a direct

infringement, it has been because the defendant disregarded known evidence of an obvious

direct infringement. In Ellison, for example, the defendant internet service provider “should

have known” of a direct infringement occurring on its server because (1) it failed to update

an email address previously used by customers to notify it of such infringements, and (2) a

subscriber telephoned the defendant to report the existence of unauthorized copies of works

on its server. See 357 F.3d at 1077. 

Plaintiff's allegations, as clarified at oral argument, fall far short of the circumstances

that justified liability in Ellison. Media coverage concerning an obscure copyright lawsuit

in which International Foundation was not a party provides no basis for concluding that the

Foundation should have known about a direct infringement. At the time of the ball in

October 2003, it was not clear that Beseder, Inc. was directly liable, and the Foundation had

no reason to assume Beseder's liability simply because Plaintiff had initiated an action

against that company. Moreover, Defendant is an organization focused on advancing anticancer programs; it has little reason to follow news concerning copyright litigation. Count

I will be dismissed. Plaintiff will be granted leave to amend and, if possible, allege facts in

support of its claim.

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2. Count II: Vicarious Infringement

A defendant is vicariously liable for copyright infringement “if he [1] enjoys a direct

financial benefit from another's infringing activity and [2] 'has the right and ability to

supervise' the infringing activity.” Ellison, 357 F.3d at 1076 (quoting A&M Records v.

Napster, Inc., 239 F.3d 1004, 1022 (9th Cir. 2001)). “The essential aspect of the 'direct

financial benefit' inquiry is whether there is a causal relationship between the infringing

activity and any financial benefit a defendant reaps, regardless of how substantial the benefit

is in proportion to a defendant's overall profits.” Id. at 1079. 

Even under the lenient test articulated in Ellison, Count II of the Amended Complaint

does not contain sufficient allegations to survive the Motion to Dismiss with respect to either

Defendant International Foundation or Defendant Horn. Plaintiff clearly avers that Horn and

International Foundation both enjoyed a direct financial benefit as a result of the sale of “at

least one bronze replica on display at the 'Jewels of the Sea' Ball in October 2003.” See Doc.

#12 at ¶¶ 14-15. Count II nevertheless fails in two respects. 

First, Count II does not sufficiently allege that Defendants had the right and ability

to supervise the activity of Beseder, Inc., the allegedly directly infringing entity. The

Amended Complaint never mentions anything about the supervisory authority of

International Foundation. Moreover, while Plaintiff alleges that Horn had the ability to

“supervise International Foundation's activities,” Doc. # 12 at ¶ 14, the right to supervision

necessary to sustain a claim of vicarious infringement must exist between the vicariously

infringing defendant and the direct infringer, not between two defendants that are at best

secondarily liable. See Grokster Ltd., 380 F.3d at 1164 (explaining that the “right and ability

to supervise” describes the relationship “between the defendant and the direct infringer”).

Because Plaintiff never alleges that International Foundation is directly liable for copyright

infringement, Horn's ability to supervise International Foundation cannot support a claim of

vicarious infringement against her.

Second, Count II fails because Plaintiff's allegation of direct financial benefit to Horn

as a result of the infringing sale is no more than a bare legal conclusion. “[C]onclusory

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allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.”

Epstein v. Washington Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996). Financial benefit is

defined broadly in the context of vicarious infringement, see Fonovisa, Inc. v. Cherry

Auction, Inc., 76 F.3d 259, 263 (9th Cir. 1996) (explaining that financial benefit may exist

where infringing activity “enhances the attractiveness” of a defendant's venue to third

parties), but Plaintiff's claim against Horn is both unsupported by a single factual allegation

and on its face contrary to the allegation that “International Foundation received

compensation” for the infringing sale, Doc. # 12 at ¶ 15. Plaintiff even conceded at oral

argument that the direct infringement did not affect Horn's income or otherwise confer upon

her a cognizable financial benefit. 

Plaintiff argues in its Brief of Supplemental Memorandum of Points and Authorities

that a corporate officer's salary may constitute a “direct financial benefit” sufficient to trigger

vicarious liability. However, the Amended Complaint does not even allege that Horn

receives a salary from International Foundation. Moreover, even if Plaintiff were to allege

such a benefit, none of the cited cases establish that an executive salary unaffected by a

company's infringing activity can alone satisfy the requirement of direct financial benefit.

In Meadowgreen Music Co. v. Voice in the Wilderness Broadcasting, Inc., 789 F. Supp. 823

(E.D. Tex. 1992), for example, the company president received a salary from the directly

infringing defendant and owned all of its outstanding stock. Id. at 826. It was only an

aggregation of these assets that warranted a finding of direct financial benefit. Id. Likewise,

in Symantec Corp. v. CD Micro, Inc., 286 F. Supp. 2d 1265 (D. Ore. 2003), the corporate officer

was found vicariously liable, but only because he both received a salary and owned a

majority of the infringing company's stock. Id. at 1275. It does not appear on the face of

the Amended Complaint that Horn has received similar benefits. 

For these reasons, Count II will be dismissed with respect to both Defendant Horn and

Defendant International Foundation. Plaintiff will be granted leave to amend. 

By separate order filed herewith, Count III for impoundment will be dismissed with

prejudice for failure to state a claim upon which relief may be granted. 

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IV. Order to Show Cause

The court takes judicial notice that in other proceedings on November 2, 2006, in Case

No. CV 03-1310-PHX-MHM, Plaintiff obtained a verdict against Beseder, Inc., in the

amount of $5,000.00 for copyright infringement in connection with the same reproduction

and sale of “La Laveuse” that is the basis of this action against these Defendants. That

verdict will be reduced to judgment and will be either (1) paid, (2) appealed, superseded,

affirmed, and paid out of the supersedeas bond, or (3) appealed and reversed based on

Beseder’s contention of invalidity of the copyright. In short, either the copyright will be

found invalid or the adjudication of $5,000.00 liability against Beseder will be paid.

It appears that the adjudication of damages against one of several persons allegedly

jointly and severally liable for the same liability may preclude further proceedings to seek

a higher damage adjudication or multiple recovery against other persons for the same

damage. Therefore, if Plaintiff elects to file an amended complaint as permitted by this

order, the court will call for briefing on why the amended complaint and this action should

not be dismissed as precluded by the adjudication in Case No. CV 03-1310-PHX-MHM and

the certainty that that judgment has been or will be paid by Beseder, if affirmed, or the

copyright invalidated.

IT IS THEREFORE ORDERED that Defendants' Motion to Dismiss (Doc. #13) is

GRANTED.

IT IS FURTHER ORDERED that Count III of Plaintiff’s complaint is dismissed with

prejudice and that Counts I and II of Plaintiff’s complaint are dismissed with leave to amend

by November 17, 2006. If Plaintiff elects not to file an amended complaint, this action will

be dismissed with prejudice for failure to state a claim upon which relief can be granted.

IT IS FURTHER ORDERED that, if Plaintiff files an amended complaint as permitted

by this order, Plaintiff show cause by November 17, 2006, why the amended complaint and

this action should not be dismissed as precluded by the adjudication in Case No. CV 03-

1310-PHX-MHM. Defendants may file a response to Plaintiff’s memorandum, which may

be joined with any other motion Defendants wish to file, by December 7, 2006.

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IT IS FURTHER ORDERED that Plaintiff's Motion for Rehearing (Docs. # 22 and

24) is DENIED. 

DATED this 3rd day of November 2006.

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