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IP/Entertainment Case Law Updates

Flowserve Corp. v. Hallmark Pump Co., Inc.

Court grants summary judgment in favor of plaintiffs, on claims that defendant’s use of two copyrighted images of plaintiffs’ products on its website constituted both willful copyright infringement and willful false advertising.

Plaintiffs Flowserve Corp. and Flowserve Management Company, manufacturers and sellers of industrial pumps, valves and related products, filed suit against defendant Hallmark Pump Company, a distributor of competing products, alleging copyright infringement and false advertising for defendant’s use of three images of plaintiffs’ products over which plaintiffs claimed copyright ownership. Plaintiffs sought statutory damages under the Copyright Act, a permanent injunction, and costs and attorney’s fees. Plaintiffs later withdrew their claims as to one image and sought summary judgment on their claims with respect to the other two. Defendant, unrepresented after previous counsel withdrew, did not reply to the summary judgment motion.

The court granted summary judgment in favor of plaintiffs, finding that defendant’s use of the two copyrighted images on its website constituted both willful copyright infringement and willful false advertising. The court awarded plaintiffs statutory damages, enjoined defendant from displaying images of plaintiffs’ products in its advertising, including on its website, and awarded attorney’s fees to plaintiffs as the prevailing party.

Defendant’s website was created by a web designer (third-party defendant in the case that was dismissed prior to summary judgment) who, among other things, uploaded a product brochure provided by defendant that contained the three images of plaintiffs’ products. The website was approved by two members of defendant’s management and published to the public. Within two months, plaintiff sent a cease-and-desist letter to defendant, demanding that they remove the images. Defendant did not act until after the lawsuit was filed and, in fact, did not completely remove the images, removing only the link to the brochure but not the brochure itself from the site.

The court found that plaintiffs had established both copyright ownership of the two images, based on unchallenged copyright registration certificates, and actionable copying of those images by defendant.

To establish actionable copying under the Copyright Act, plaintiffs must establish the defendant actually copied the copyrighted material and that “substantial similarity” exists between the copyrighted work and the allegedly infringing work.” In the absence of actual evidence of copying, plaintiffs must establish factual copying of the work, either by evidence of access to the copyrighted work before alleged infringement and probative similarity or, without a showing of access, that the works are so “strikingly similar” that they could not have been created independently.

The court found that there was no question that defendant had engaged in factual copying under either formula. The images were so “strikingly similar” (one pair was virtually identical and the other differed only in the color of highlighting on the images) that the court had “no doubt” that defendant had copied the images. The court also noted that defendant had access to the copyrighted images – they were available to the public since the registration of copyright, on plaintiffs’ website and in “widely distributed” marketing materials such as catalogs – and the striking similarity between the copyrighted images and those on the defendant’s website established probative similarity.

Under the Copyright Act, an instance of copying is legally actionable when a substantial similarity exists between the copyrighted work and the allegedly infringing work – a side-by-side comparison between the original and the copy to determine whether a layman would view the two works as “substantially similar.”

Acknowledging that substantial similarity is a question of fact generally reserved for the jury and that summary judgment is “generally disfavored,” the court noted two Texas cases holding that summary judgment in plaintiff’s favor is justified in limited circumstances – where the similarities between the works are so overwhelming that they preclude the possibility of independent creation and where no reasonable juror would find otherwise. Wood v. B L Building Co., Civil Action No. H-03-713, 2004 WL 5866352 (S.D. Tex. June 22, 2004); see also Biggs v. Cabela’s, Inc., No. 4:03-CV-0205-A, 2004 WL 530167 (N.D. Tex. Feb. 23, 2004).

The court found that the similarities between plaintiffs’ copyrighted images and the ones defendant displayed on its website were so overwhelming that there was no question defendant engaged in actionable copying and no reasonable jury could believe that the images did not rise to the level of substantial similarity.

Plaintiffs also argued and the court agreed that defendant’s infringement was willful, based on uncontroverted plaintiffs’ evidence that defendant had ignored the cease-and-desist letter, refusing to remove the images after it had actual awareness of that its conduct constituted copyright infringement.

Regarding the false advertising claim, plaintiffs argued and the court agreed that by using copyrighted images of plaintiffs’ products in advertising on defendant’s website, defendant violated Section 43(a) of the Lanham Act.

To establish false advertising, a plaintiff must establish defendant (1) made false or misleading statements of fact about a product, (2) that either deceived, or had the capacity to deceive, a substantial segment of potential consumers; (3) that the deception is material; (4) that the product is in interstate commerce; and (5) plaintiff has been or is likely to be injured as a result of the statement. If an advertisement is literally false the materiality and deception elements are generally presumed.

The court found that by posting these images of plaintiffs’ products on its website in connection with the promotion of its competing industrial pumps, defendant made literally false representations about the nature of its products. Defendant used its website to advertise its products on the Internet and to sell them throughout the United States, and defendant’s false and misleading representations to consumers about defendant’s competing pumps impacted plaintiffs’ business and goodwill.

As with the copyright infringement claim, the court found that defendant’s actions constituted a willful violation of Section 43(a) of the Lanham Act. Defendant’s refusal to remove the images from its website after receiving plaintiffs’ cease-and-desist letter, giving actual notice that it was advertising using images that did not depict its products, constituted “reckless disregard” of its false advertising at the very least. The court also noted that two of defendant’s management independently reviewed and subsequently approved the website containing the images before it was made available to the public, and both “knew or should have known” that the images were not of the defendant’s products, but were images of its competitor’s similar products.

Noting that it had discretion to award plaintiff up to $150,000 for each of the infringed images under the Copyright Act, and that the evidence established that defendant had willfully used its competitors’ copyrighted images to sell its own products, the court granted plaintiffs their requested relief of statutory damages of $10,000 per image – a total of $20,000 – reasoning that it both adequately compensated plaintiffs and would likely deter defendant from engaging in similar conduct in the future.

The court also granted plaintiffs’ request for an injunction permanently barring defendant from displaying images of plaintiffs’ products in defendant’s advertising, including on its website. The court also granted plaintiffs reasonable attorney’s fee, reasoning that defendant’s willful and blatant copying of the copyrighted images of its competitor, and its literally false use of the images, coupled with its refusal to remove the infringing images even after receiving plaintiffs’ cease-and-desist letter, justified the award under both the Copyright Act and the Lanham Act.