Opinion ID: 524058
Heading Depth: 2
Heading Rank: 2

Heading: The Present Action and the Trial Court's Decision

Text: 10 Dissatisfied with Berkley's proposed compromise, Naval commenced the present action on August 26, 1985, seeking, inter alia, a preliminary injunction prohibiting Berkley from shipping, distributing, selling or offering to distribute copies of the Book prior to October 1, 1985. After limited expedited discovery, the district court denied the preliminary injunction motion on September 3, 1985, finding, inter alia, that the Agreement did not unambiguously prohibit shipments of the paperback edition prior to October, that Berkley would suffer harm if the motion were granted, and that Naval had failed to establish irreparable injury to itself from the limited retail sales that were anticipated prior to October, even if such sales would constitute a breach of the Agreement. 11 As soon as the preliminary injunction was denied, Berkley began shipping all copies of the paperback previously held in warehouses. By mid-September, thousands of copies of the paperback version of Red October were available for retail sale in hundreds of stores, and by September 23, Berkley had sold nearly 1,400,000 copies of the paperback, some 40 percent of which went directly to retail outlets. At trial, Naval introduced Berkley's internal reports of the bestseller lists at the major national bookstore chains, which showed that by mid-September Berkley's paperback edition of Red October was already near the top of each of these lists. For the week ending September 20, the Waldenbook and B. Dalton chains reported to Berkley that Red October was their second and third largest volume paperback seller respectively, based on the aggregate sales of 836 Walden stores and 679 B. Dalton stores.... During the following week the book reached an additional 57 Walden stores and 48 Dalton stores; and sales increased substantially. 687 F.Supp. at 118. 12 By late September 1985, Berkley had earned more than $3.1 million on its sales of the paperback edition of the Book. These sales cut sharply into sales of the hardcover edition. For the six months preceding September 1985, hardcover sales had averaged approximately 46,000 copies per month; after the paperback appeared in September, sales of the hardcover edition immediately declined by more than 80 percent, and during the next six months hardcover sales averaged only some 3,000 copies per month. 13 Berkley's position in the litigation, presented principally through the testimony of its president and of senior officers of unaffiliated publishing houses, was that its scheduling of the shipment and sale of its paperback edition was in accordance with the trade usage of the term publish and with industry custom concerning the scheduling of the shipment and sale of books. 14 The trial court agreed with Berkley's contentions. Though it did not make a finding as to the precise meaning of the term publish, it found that  'publication date' is uniformly understood in the industry to refer to the time when the concentrated selling effort begins, and not the time of shipment to outlets. 687 F.Supp. at 117. It found that industry practice was to ship a book three-to-six weeks prior to the date of publication and that Berkley's shipping dates, both in general and with respect to Red October, conformed to industry practice and were not inconsistent with a publication date of October 1, 1985. Though Naval argued that it was unaware of such custom and trade usage, the court stated that whether plaintiff did or did not in fact know of the industry practice is irrelevant, id. at 120; having operated as a publisher for a century, Naval must be presumed to have knowledge of these customs and practices. 15 The court concluded that Berkley's conduct with respect to its publication of the paperback edition of Red October was neither copyright infringement nor a breach of the Agreement. Having concluded that Berkley's shipments did not breach the contract, the court did not discuss the question of whether the Agreement was breached by the pre-October retail sales. 16 Naval's complaint was dismissed, and this appeal followed.