Opinion ID: 2959785
Heading Depth: 3
Heading Rank: 2

Heading: Uneeda’s Claim to Reliance Party Status

Text: Uneeda contends that its predecessor, UDCI, was a reliance party under subsection 104A(h)(4)(A) because UDCI continued to engage in infringing acts after Denmark became an eligible country upon the URAA’s enactment, and under subsection 104A(h)(4)(B) because UDCI made at least one copy of the troll doll before the URAA’s enactment. -13- Accordingly, Uneeda further contends, it is a reliance party under subsection 104A(h)(4)(C) because it is UDCI’s successor, and it is therefore entitled to the URAA’s twelve-month sell-off period. Uneeda’s subsection 104A(h)(4)(A) contention. Because subsection 104A(h)(4)(A) confers reliance party status on a person who “continues” to engage in infringing acts after December 8, 1994, Uneeda’s subsection (A) contention requires us to construe the term “continues,” which is, as far as we are aware, a task courts have not previously undertaken.11 Troll Co. argues that the provision contains a “continuing acts requirement” and that resuming sales after nine or ten years, as Uneeda did, does not satisfy this requirement. Uneeda responds that the language of subsection (A) does not require the infringing activity to be uninterrupted and that the periodic renewal of cyclical exploitation “continues” such exploitation. The text of the statute is ambiguous and could support either 11 Uneeda cites two cases in which courts concluded that defendants were entitled to reliance party status notwithstanding several-year gaps between the first exploitation or acquisition and postrestoration exploitation. See Peliculas y Videos Internacionales, S.A. v. Harriscope of Los Angeles, Inc., 302 F. Supp. 2d 1131 (C.D. Cal. 2004); Hoepker v. Kruger, 200 F. Supp. 2d 340 (S.D.N.Y. 2002). However, it does not appear that the plaintiffs in those cases argued that gaps in exploitation precluded reliance party status. Because these cases did not expressly consider this issue, they provide little value to our analysis here. -14- interpretation. Given the statute’s ambiguity, it is appropriate to consider the legislative history. See Rombro v. Dufrayne (In re Med Diversified, Inc.), 461 F.3d 251, 255 (2d Cir. 2006). The Chairman of the House Subcommittee on Intellectual Property and Judicial Administration stated: A key to the reliance party status under this provision is the requirement that the person have continued to engage in the described conduct. This requirement incorporates the continuing infringement doctrine and is also relevant to section 104A(4) concerning statutory damages and attorney’s fees.[12] Under this doctrine and section 104A, the defendant must have engaged in an ongoing series of acts. Cessation of that activity for an appreciable period of time will deprive one of reliance party status. 140 Cong. Rec. E2263, E2264 (Oct. 8, 1994) (statement of Rep. Hughes). The Chairman’s reference to statutory damages and attorney’s fees indicates that he understood the “continuing infringement doctrine” as the principle that “infringement ‘commences’ for the purposes of [determining whether infringement commences before a copyright’s registration] when the first act in a series of acts constituting continuing infringement occurs.” Johnson v. Jones, 149 F.3d 494, 506 (6th Cir. 1998). Under 17 U.S.C. § 412, a plaintiff may not recover statutory 12 Section 104A(4) does not exist. The Chairman presumably meant to refer to section 104A(d)(4), which states that, for purposes of 17 U.S.C. § 412 (discussed below), “infringement shall be deemed to have commenced before registration when acts which would have constituted infringement had the restored work been subject to copyright were commenced before the date of restoration.” -15- damages or attorney’s fees for any infringement “commenced” before the effective date of a copyright’s registration. The courts have held, based on the provision’s text, legislative history, and purpose, that a plaintiff may not recover statutory damages and attorney’s fees for infringement occurring after registration if that infringement is part of an ongoing series of infringing acts and the first act occurred before registration. See, e.g., id. at 505-06 (holding that the purposes of section 412 “would be thwarted by holding that infringement is ‘commenced’ for the purposes of § 412 each time an infringer commits another in an ongoing series of infringing acts,” and citing cases); Singh v. Famous Overseas, Inc., 680 F. Supp. 533, 535 (E.D.N.Y. 1988) (“That verb [commenced] generally presupposes as a subject some kind of activity that begins at one time and continues or reoccurs thereafter.”). 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 subsection 104A(h)(4)(A).13 We therefore construe subsection 104A(h)(4)(A) to 13 See also 6 Patry § 24:40 (“There is no definition of ‘continue’ because Congress wanted the doctrine of continuing infringement -16- 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.14 Applying this standard to this case, we first observe that UDCI initially may have been a reliance party under subsection 104A(h)(4)(A) following the URAA’s enactment. According to the evidence before the District Court, UDCI “sold Wish-nik dolls beginning in 1992 and continuing into the mid-1990s, at least through developed by the courts to apply. . . . Without setting an outside limit, a cessation of one year is beyond that permitted under the section.”). 14 We express no opinion on whether an exploiter of seasonal, as opposed to cyclical, goods, e.g., a seller of holiday merchandise, could qualify as a reliance party. -17- 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 UDCI could not have been a reliance party. However, as explained above, the critical date for assessing reliance party status is December 8, 1994. If the District Court were to credit Uneeda’s evidence and find that UDCI sold Wish-niks in 1995, UDCI would have been a reliance party under subsection 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 UDCI’s claim to reliance party status. Even if we assume that UDCI was a reliance party for some period of time, UDCI and Uneeda, 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, Uneeda’s renewed manufacture and sale of Wish-niks after a nine- or ten-year hiatus is not a continuation of infringement under subsection 104A(h)(4)(A). Accordingly, Uneeda cannot claim protection as a reliance party under this provision. Uneeda’s subsection 104A(h)(4)(B) contention. In the alternative, Uneeda claims that UDCI qualified as a reliance party under subsection 104A(h)(4)(B) because it made or acquired at least one copy of the troll doll before the URAA’s enactment. The parties urge competing interpretations of subsection 104A(h)(4)(B). According to Uneeda, the provision allows anyone who made or acquired a copy of a work before the URAA’s enactment to manufacture additional copies after restoration. Under this interpretation, Uneeda would be able to -18- manufacture new Wish-niks after the copyright’s restoration because UDCI made Wish-niks before the URAA’s enactment. Troll Co. argues for a narrower interpretation that would permit a party who acquired or made one or more copies of a work before the URAA’s enactment only to dispose of those particular copies. Under this interpretation of subsection 104A(h)(4)(B), UDCI and Uneeda, as its successor, could sell Wish-niks manufactured before the URAA’s enactment, but they could not manufacture new Wish-niks. The text of subsection 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. See, e.g., Frank G. v. Board of Education, 459 F.3d 356, 368 (2d Cir. 2006). Uneeda’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.15 Conferring reliance party status on such entities would be incompatible with the URAA’s 15 See also 6 Patry § 24:40 (distinguishing between subsections (A) and (B) on the ground that (A) “focuses on particular infringing acts, whereas . . . (B) focuses on particular copies”); 3 Nimmer § 9A.04[C][1][a] (advocating the narrow interpretation of this provision because the broader interpretation would “qualif[y] even a casual book collector with an old volume languishing on the shelf”). -19- dual goals of restoring copyright protection and safeguarding legitimate reliance interests. Because we must interpret the statute to avoid such an absurd result, we conclude that Congress intended to limit the benefit of reliance party status under subsection 104A(h)(4)(B) only to those copies made or acquired before the URAA’s enactment. Because Uneeda intends to sell recently manufactured Wish-niks and does not claim to be disposing of Wish-niks made by UDCI before the URAA’s enactment, it is not entitled to reliance party status as UDCI’s successor under subsections 104A(h)(4)(B)-(C).