Court Opinion

ID: 2959785
Source: CourtListenerOpinion
Date Created: 2015-09-17 17:33:06.965224+00
Date Added: 2024-06-11T11:42:12.941432
License: Public Domain

05-6487-cv
Troll Co. v. Uneeda Doll Co.

                               UNITED STATES COURT OF APPEALS

                                   FOR THE SECOND CIRCUIT

                                      August Term 2006

Heard: December 22, 2006                      Decided: April 13, 2007)

                                   Docket No. 05-6487-cv

- - - - - - - - - - - - - - - - -
TROLL COMPANY,
          Plaintiff-Appellee,

                          v.

UNEEDA DOLL COMPANY,
          Defendant-Appellant.
- - - - - - - - - - - - - - - - -

Before: MESKILL, NEWMAN, and HALL, Circuit Judges.

        Appeal from the November 28, 2005, Order of the United States

District Court for the Southern District of New York (Richard Owen,

District Judge), granting a preliminary injunction against Defendant

for infringing a copyright restored pursuant to section 104A of the

Copyright Act, 17 U.S.C. § 104A.

        Affirmed.

                                      Barry G. Magidoff, Greenberg Traurig, LLP,
                                        New York, N.Y., for Defendant-Appellant.

                                      Craig S. Mende, New York, N.Y. (Michael
                                        Chiappetta, Fross Zelnick Lehrman &
                                        Zissu, P.C., New York, N.Y., on the
                                        brief), for Plaintiff-Appellee.

JON O. NEWMAN, Circuit Judge.

        This appeal, concerning so-called “restored” copyrights, requires

the Court to construe for the first time section 104A of the Copyright

Act, 17 U.S.C. § 104A, which was enacted in its present form as part
of the Uruguay Round Agreements Act (“URAA”), Pub. L. No. 103-465, 108

Stat.   4809   (1994).       The    Defendant-Appellant,          Uneeda    Doll   Co.

(“Uneeda”), appeals from the November 28, 2005, order of the District

Court for the Southern District of New York (Richard Owen, District

Judge),      preliminarily      enjoining     Uneeda       from     manufacturing,

distributing, or selling “Wish-nik” troll dolls, which are alleged to

infringe a restored copyright owned by the Plaintiff-Appellee, Troll

Co.     On   appeal,   Uneeda      contends   that   (1)    Troll     Co.    has   not

demonstrated that it owns the restored copyright, and (2) it is a

“reliance party” within the meaning of section 104A and is thus

entitled to sell its existing inventory of Wish-nik dolls during a

one-year sell-off period.          We conclude that Troll Co. is likely to

succeed in proving ownership of the restored copyright and that Uneeda

is not a reliance party.            We therefore affirm the order of the

District Court.

                                    Background

      A brief history of troll dolls. This case involves the copyright

to troll dolls, “those ugly but somehow endearing” plastic dolls with

oversized heads, big grins, pot bellies, and frizzy hair. See EFS

Marketing, Inc. v. Russ Berrie & Co., 76 F.3d 487, 489 (2d Cir. 1996).

The troll doll was first created in the late 1950s by a Danish

woodcarver, Thomas Dam.      Dam called his doll a “Good Luck Troll.”               By

1961, Dam was selling his troll dolls in the United States.

      In 1962, Dam founded a cleverly named Danish company, Dam Things

Establishment, through which he marketed his dolls.                   In 1965, Dam

Things Establishment obtained a U.S. copyright for the troll doll.

                                       -2-
The copyright registration listed Dam Things Establishment as the

author of the dolls and 1961 as the year of first publication.       That

same year, however, the copyright was invalidated because some dolls

had been sold in the United States without the proper copyright

notice, and the dolls thereby entered the public domain. See Scandia

House Enterprises, Inc. v. Dam Things Establishment, 243 F. Supp. 450,

454 (D.D.C. 1965).        The Good Luck Troll is still protected by

copyright in Denmark.

     After the troll dolls entered the public domain, numerous

companies began marketing the dolls in the United States. See EFS

Marketing, 76 F.3d at 489.      The market for troll dolls was somewhat

cyclical, as the dolls’ popularity surged every decade or so.         The

most recent surge in popularity occurred in the early 1990s. See id.

     Thomas Dam died in 1989.         Following Dam’s death, his heirs

granted Troll Co., a Danish company, the exclusive right to exploit

and license the troll dolls.

     The restoration of the Good Luck Trolls copyright. Congress

enacted the URAA on December 8, 1994.       Among other things, the URAA

amended1 section 104A of the Copyright Act to bring the United States

into compliance with the Berne Convention,2 which it had joined in

     1
         Congress had enacted section 104A one year earlier to comply with

the North American Free Trade Agreement. See Dam Things from Denmark

v. Russ Berrie & Co., 290 F.3d 548, 554 (3d Cir. 2002). The URAA

supplanted that previous version of section 104A. See id.
     2
         Berne Convention for the Protection of Literary and Artistic

                                     -3-
1989. See Dam Things from Denmark v. Russ Berrie & Co., 290 F.3d 548,

554 (3d Cir. 2002). Section 104A restores copyrights for a wide range

of foreign works that had previously entered the public domain in the

United States because of noncompliance with certain formalities,

primarily notice of copyright, imposed by United States copyright law.

See 17 U.S.C. § 104A(h)(6); see also Dam Things from Denmark, 290 F.3d

at 554-55.

     The parties do not dispute that the Good Luck Troll copyright was

automatically restored pursuant to the URAA on January 1, 1996. Upon

learning of the restoration, Troll Co. applied for, and was granted,

a registration certificate in 2000. The registration lists Thomas Dam

as the author and Troll Co. as the owner of the copyright, and it

states 1957 as the date of first publication.         After receiving the

registration, Troll Co. began enforcing its restored copyright.

     Uneeda’s manufacture and marketing of Wish-nik dolls. In 1963 or

1964,   Dam   Things   Establishment   licensed   Uneeda   Doll   Co.,   Inc.

(“UDCI”), Uneeda’s predecessor, to produce and distribute a line of

troll dolls under the name “Wish-niks.”       The record shows that UDCI

sold Wish-niks periodically between 1965 and 1984.            According to

UDCI’s chairman, however, UDCI also sold Wish-niks “at least through

1994 and probably up to 1996.”    In 1996, UDCI sold all of its assets,

including its copyrights, other intellectual property rights, and

goodwill, to Uneeda.

Works, Sept. 9, 1886 (Paris Text 1971), S. Treaty Doc. No. 99-27

(“Berne Convention”).

                                   -4-
     In 2001 and 2004, Troll Co.’s president met Wilson Lee, a manager

of Uneeda’s Hong Kong affiliate, at a toy fair in Germany.          On both

occasions, Lee allegedly informed him that Uneeda was no longer

manufacturing or selling troll dolls and had no intention of doing so

in the future.    Notwithstanding these discussions, just as Troll Co.

was planning a major relaunch of its troll dolls, it learned in August

2005 that Uneeda was selling newly produced Wish-niks to Walmart. The

Wish-niks contained copyright notices in Uneeda’s name.             Walmart

withdrew the dolls after Troll Co. informed it that the dolls

infringed its copyright.

     The     District   Court   proceeding.   Troll   Co.    commenced   this

copyright infringement action in the U.S. District Court for the

Southern District of New York on October 7, 2005.3          Troll Co. served

Uneeda with written notice of its intent to enforce the copyright (a

procedure sometimes required under section 104A, as discussed below)

on October 18, 2005.       After a hearing, the District Judge granted

Troll Co.’s motion for a preliminary injunction in an order entered

November 28, 2005. See Troll Co. v. Uneeda Doll Co., 400 F. Supp. 2d

601 (S.D.N.Y. 2005). Finding “direct evidence of actual copying,” the

District Judge concluded that Uneeda’s sales of Wish-niks threatened

irreparable harm to Troll Co. See id. at 603.     He also concluded that

     3
         Several days earlier, Uneeda had filed a declaratory judgment

action against Troll Co. and its licensee in the U.S. District Court

for the Central District of California, No. 2:05-cv-07185.               That

action was later transferred to the Southern District of New York.

                                     -5-
Troll Co. was likely to succeed on the merits of its copyright

infringement claim, rejecting Uneeda’s claim to protection as a

“reliance party” under the URAA. See id. at 603-04.              Accordingly, he

preliminarily enjoined Uneeda from manufacturing, distributing, or

selling Wish-nik dolls pending resolution of the case. See id. at 604.

                                   Discussion

     The standards for obtaining a preliminary injunction and for

appellate review of the grant of such an injunction are well known and

need not be repeated.       See Forest City Daly Housing, Inc. v. Town of

North Hempstead, 175 F.3d 144, 149 (2d Cir. 1999) (preliminary

injunction standards); Nicholson v. Scoppetta, 344 F.3d 154, 165 (2d

Cir. 2003) (appellate review standard).

     Uneeda does not challenge the District Court’s conclusion that

Troll     Co.   would   suffer   irreparable    harm   without    a   preliminary

injunction.      The issue on appeal is whether Troll Co. is likely to

succeed on the merits of its infringement claim.           Uneeda argues that

Troll Co. is unlikely to succeed because (1) Troll Co. has not

established that it owns the restored copyright, and (2) Uneeda is a

reliance party within the meaning of section 104A, entitling it to

sell off its inventory of Wish-niks for one year following Troll Co.’s

service of a notice of intent to enforce the restored copyright.

I. Ownership of the Restored Copyright

     Uneeda contends preliminarily that the District Court erred in

determining that Troll Co. owns the restored copyright.4              We conclude

     4
         Although this argument was advanced in the District Court, Judge

                                      -6-
that Troll Co. is likely to succeed in proving ownership because

evidence submitted to the District Court supports a determination that

Troll     Co.    owns   the   restored   copyright.     Troll   Co.’s   president

testified that, after Dam’s death in 1989, Dam’s heirs transferred

Dam’s rights to the troll dolls to Troll Co.             In addition, the 2000

copyright registration lists Troll Co. as the owner.5

     According to Uneeda, Troll Co.’s trial court evidence contradicts

evidence submitted to the Copyright Office and the U.S. District Court

for the District of New Jersey.                First, Uneeda points out, the

original        1965    registration      certificate    listed    Dam     Things

Establishment, not Dam himself, as the “author” of the Good Luck

Trolls. Consequently, Uneeda argues, Troll Co. must establish a chain

of ownership from Dam Things Establishment, not from Dam through his

heirs, as Troll Co. argued in the District Court.                 But the URAA

specifies that authorship is to be determined by reference to the

source country’s law, not by reference to U.S. copyright registration.

Owen did not explicitly discuss Uneeda’s ownership argument in his

opinion.        However, a determination that Troll Co. owns the restored

copyright is implicit in the District Court’s opinion.
     5
         We recognize that the registration is not prima facie evidence

of ownership because it was made more than five years after the first

publication. See 17 U.S.C. § 410(c).           Nevertheless, it may carry some

evidentiary weight. See id. (“The evidentiary weight to be accorded

the certificate of a registration made thereafter shall be within the

discretion of the court.”).

                                         -7-
See 17 U.S.C. § 104A(b); see, e.g., Alameda Films S A v. Authors

Rights Restoration Corp., 331 F.3d 472, 477 (5th Cir. 2003) (applying

Mexican law).     Neither party submitted evidence of Danish law to the

District Court.     In any event, to obtain a preliminary injunction,

Troll Co. needed to show only that it was likely to prove ownership,

and it seems likely that Danish law would consider Dam to be the

“author” of the troll dolls since he created the dolls several years

before he established Dam Things Establishment.6

     Second, Uneeda contends that Troll Co. is estopped from arguing

that it acquired rights to the troll dolls from Dam’s heirs because it

     6
         Section 104A(b) does not explicitly state that ownership vests

in an author’s heirs if the author is deceased.     Nor does it explain

what, if any, effect should be given to an author’s pre-restoration

transfer of his ownership rights. Cf. 6 William F. Patry, Patry on

Copyright § 24:31 (2007) (stating that “where the author is dead on

the date of restoration, ownership of the restored copyright will be

determined by the law of successorship of the source country,” but

that transferees of an initial author must pursue a state court

contract action to secure rights to a restored copyright); 3 Melville

B. Nimmer & David Nimmer, Nimmer on Copyright § 9A.04[B][2][b] (2006)

(discussing the ambiguity of this provision).      Because the parties

have not raised these issues, we will assume, as the District Court

apparently did, that the restored copyright vests in the author’s

heirs and that courts can give effect to heirs’ pre-restoration

transfer of rights.

                                   -8-
represented to the U.S. District Court for the District of New Jersey

in another action that it acquired those rights from Dam Things

Establishment. See Dam Things from Denmark, 290 F.3d at 553 n.3.                   The

doctrine        of   judicial    estoppel    does   not   prevent   Troll   Co.   from

asserting a different theory of ownership in this case.7 In any event,

even if it is unclear whether Troll Co. obtained ownership of the

copyright from Dam Things Establishment, as the Third Circuit stated,

or from Dam’s heirs, as Troll Co. claims here, Troll Co. is likely to

prove ownership one way or the other.

     7
         “The    doctrine   of    judicial    estoppel    prevents   a   party    from

asserting a factual position in one legal proceeding that is contrary

to a position that it successfully advanced in another proceeding.”

Rodal v. Anesthesia Group of Onondaga, P.C., 369 F.3d 113, 118 (2d

Cir. 2004).          A party invoking judicial estoppel must show that (1)

another party advanced an inconsistent position in another proceeding

and (2) the first tribunal adopted that position in some manner. See

id. Even if Troll Co.’s theories of ownership are factual positions,

and even if the Third Circuit or the New Jersey district court adopted

Troll Co.’s theory of ownership, the two theories of ownership are not

necessarily contrary to one another. The district court in Dam Things

from Denmark also mentioned a 1989 agreement between Dam’s heirs and

Troll Co. confirming Troll Co.’s exclusive rights to the Good Luck

Troll designs. See Dam Things from Denmark v. Russ Berrie & Co., 173

F. Supp. 2d 277, 280 (D.N.J. 2001), rev’d on other grounds, 290 F.3d

548 (3d Cir. 2002).

                                            -9-
II. Whether Uneeda Is a Reliance Party

      Uneeda’s primary argument on appeal is that Troll Co. cannot

bring an action at this time to enjoin Uneeda’s sales because Uneeda,

as a reliance party under the URAA, is entitled to a one-year sell-off

period.      To understand this argument, it is necessary to review the

URAA’s provisions in some detail.

      A. The URAA

      Congress enacted the URAA on December 8, 1994, to bring the

United States into compliance with the Berne Convention’s Rule of

Retroactivity.8 See Dam Things from Denmark, 290 F.3d at 554; see also

6 William F. Patry, Patry on Copyright § 24:18 (2007) (“Patry”); 3

Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 9A.02 (2006)

(“Nimmer”). The URAA restored copyright protection for foreign works

that had fallen into the public domain for technical reasons unrelated

to   expiration    of   the   copyright   term.   Congress’s   intention   in

restoring such protection to foreign copyrights was to secure similar

protection for American copyright holders abroad. See Dam Things from

Denmark, 290 F.3d at 554.

      The URAA restores copyrights as of January 1, 1996,9 for original

      8
          See Berne Convention art. 18.
      9
          The date of restoration, as specified by Congress in 1997, see

Pub. L. No. 105-80, 111 Stat. 1529 (1997), is January 1, 1996, if the

source country of the work was an adherent to the Berne Convention or

a World Trade Organization member on that date. See 17 U.S.C. §

104A(h)(2)(A).      A leading commentator contends that the restoration

                                     -10-
works that (1) are not in the public domain of their source countries

through expiration of their copyright terms, (2) are in the public

domain in the United States because of noncompliance with legal

formalities, (3) have at least one author who was a national or

domiciliary of an eligible country,10 and (4) were first published in

an eligible country and were not published in the United States within

thirty days of first publication. See 17 U.S.C. § 104A(h)(6). A

copyright restored under section 104A “vests initially in the author

. . . of the work as determined by the law of the source country of

the work.” Id. § 104A(b).       The parties do not dispute that the

invalidated troll doll copyright qualifies for restoration under these

provisions.

     Much of     section 104A concerns the enforcement of restored

copyrights against parties that were legitimately exploiting works in

reliance on their public domain status.        The statute creates a

category of prior exploiters called “reliance parties,” who may

continue to exploit the work until the owner of the restored copyright

makes known its intent to enforce its copyright. The statute creates

three categories of reliance parties:

date, which he equates with what he contends is the effective date, is

January 1, 1995. See 6 Patry §§ 24:26-24:28.   We take no position on

this controversy, which has no bearing on our decision.
     10
          Eligible countries include World Trade Organization member

countries and adherents to the Berne Convention. See 17 U.S.C. §

104A(h)(3).

                                  -11-
      (A) [any person who,] with respect to a particular work,
      engages in acts, before the source country of that work
      becomes an eligible country, which would have violated
      section 106 if the restored work had been subject to
      copyright protection, and who, after the source country
      becomes an eligible country, continues to engage in such
      acts;

      (B) [any person who,] before the source country of a
      particular work becomes an eligible country, makes or
      acquires 1 or more copies . . . of that work; or

      (C) [any person who,] as the result of the sale or other
      disposition of . . . significant assets of a person
      described in subparagraph (A) or (B), is a successor,
      assignee, or licensee of that person.

17 U.S.C. § 104A(h)(4). Thus, subsections (A) and (B) make the status

of a reliance party turn on whether a person took certain actions with

respect to a work prior to the date that the source country of that

work became an eligible country. And, for purposes of subsections (A)

and (B), a source country that was a member of the Berne Convention

when the URAA was enacted (including Denmark) became an eligible

country on the date of the URAA’s enactment, December 8, 1994.           See

id. § 104A(h)(3)(B); Hoepker v. Kruger, 200 F. Supp. 2d 340, 345-46

n.5   (S.D.N.Y.   2002);   see   also    6   Patry   §   24:39;   3   Nimmer

§ 9A.04[C][1][b][i]-[ii]. The District Court mistakenly looked to the

date of copyright restoration, January 1, 1996, rather than the date

of the URAA’s enactment, to determine the date when Denmark became an

eligible country and hence whether Uneeda or its predecessor was a

reliance party by reason of having acted with respect to the troll

dolls prior to that date. See Troll Co., 400 F. Supp. 2d at 603. This

error was understandable, as several other courts have also tied

reliance party status to the date of copyright restoration. See

                                  -12-
Peliculas y Videos Internacionales, S.A. v. Harriscope of Los Angeles,

Inc., 302 F. Supp. 2d 1131, 1137 (C.D. Cal. 2004); Dam Things from

Denmark v. Russ Berrie & Co., 173 F. Supp. 2d 277, 285 n.9 (D.N.J.

2001), rev’d on other grounds, 290 F.3d 548 (3d Cir. 2002).

     An owner of a restored copyright may not enforce its copyright

against   a   reliance   party    without   first   giving   notice,   either

constructive or actual, of its intent to enforce the copyright. Until

January 1, 1998, an owner of a restored copyright could file a notice

of intent to enforce its copyright with the Copyright Office, thereby

putting all reliance parties on constructive notice of its intent. See

17 U.S.C. § 104A(e)(1).          Troll Co. did not file such a notice.

Alternatively, at any time, a copyright owner may serve a notice of

intent directly on a reliance party. See id. § 104A(e)(2).         Troll Co.

served a notice of intent on Uneeda on October 18, 2005.               After

receiving actual or constructive notice of intent to enforce, a

reliance party must cease making copies of the protected work. See id.

§ 104A(d)(2)(A)(ii)(III), (B)(ii)(III).        However, the reliance party

is entitled to a twelve-month grace period in which to sell off its

already existing copies. See id. § 104A(d)(2)(A)(ii)(I), (B)(ii)(I);

see also Dam Things from Denmark, 290 F.3d at 555.

     B. Uneeda’s Claim to Reliance Party Status

     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    post-

restoration 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).

                                  Conclusion

       For the foregoing reasons, the District Court’s order granting

preliminary injunctive relief to Troll Co. is affirmed.

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