17 Related Rights: Patent and Copyright 17 Related Rights: Patent and Copyright
part 3. Protecting Intellectual Property Rights
17.1 Imazio Nursery, Inc. v. Dania Greenhouses 17.1 Imazio Nursery, Inc. v. Dania Greenhouses
Patents
IMAZIO NURSERY, INC., Plaintiff-Appellee, v. DANIA GREENHOUSES, Defendant, and Coastal Nursery, Jess Rodrigues, and Donna Rodrigues, Defendants-Appellants.
No. 94-1450.
United States Court of Appeals, Federal Circuit.
Nov. 3, 1995.
Rehearing Denied; Suggestion for Rehearing In Banc Declined Jan. 23, 1996.
*1561David A. Dillard, Christie, Parker & Hale, Pasadena, California, argued for plaintiff-ap-pellee. With him on the brief were Vincent G. Gioia and John D. Carpenter.
Philip C. Swain, Kirkland & Ellis, Los Angeles, California, argued for defendants-appellants. With him on the brief was Jay I. Alexander, Kirkland & Ellis, Washington, D.C.
William L. LaFuze, Vinson & Elkins, L.L.P., Houston, Texas, was on the brief for Amicus Curiae, Greenleaf Nursery Company.
Before RICH, MAYER, and LOURIE, Circuit Judges.
Coastal Nursery, Jess Rodrigues, and Donna Rodrigues (collectively, Coastal) appeal from the judgment of the United States District Court for the Northern District of California granting summary judgment of infringement of U.S. Plant Patent No. 5,336 (the ’336 patent). Imazio Nursery, Inc. v. Dania Greenhouse, No. 92-20755 (SW) (N.D.Cal. September 2, 1993). We reverse the holding of infringement, vacate the finding of willfulness and the award of attorney fees, and remand.
I. BACKGROUND
A. The Patent
Bruno Imazio, the owner of Imazio Nursery, Inc. (Imazio), is the inventor of the ’336 patent which is entitled “Heather Named Erica Sunset.” According to the ’336 patent, Mr. Imazio discovered Erica Sunset heather in 1978 “as a seedling of unknown pollen parentage growing in a cultivated field of Erica persoluta, the variety believed to be the seed parent, where it was noticed because of its early blooming and particularly because of its reaching full bloom, from base to tip, more than a month before the parent plant begins to bloom.” It was the early blooming of the Erica Sunset, during the Christmas and Valentine’s Day seasons, that distinguished the Erica Sunset from other known varieties.
The sole claim of the ’336 patent recites:
A new variety of Heather persoluta, substantially as herein shown and described, particularly characterized by its profuse production of blooms over the entire length of the stem beginning in early December.
*1562B. The Litigation
In April 1992, Imazio sued Coastal for patent infringement alleging that Coastal’s “Holiday Heather” infringed the ’336 patent. In December 1992, the trial court entered an order granting Imazio’s motion for preliminary injunction. Imazio Nursery, Inc. v. Dania Greenhouse, 29 USPQ2d 1217, 1992 WL 551670 (N.D.Cal.1992). The trial court enjoined Coastal from “selling, shipping, giving away, trading or otherwise disposing of potted heather plants of the variety sold by [Coastal] as Holiday Heather.” Coastal was not enjoined from selling cut flowers. Id. at 1222,1992 WL 551670. Coastal appealed the entry of the preliminary injunction to this court. However, in an order dated April 22, 1993, the appeal was dismissed for failure to file a brief. Imazio Nursery, Inc. v. Dania Greenhouses, No. 93-1193 (Fed.Cir. Apr. 22, 1993).
On September 2, 1993 the district court granted Imazio’s motion for summary judgment of infringement, denied its summary judgment motion on the issue of validity, and denied its motion for a permanent injunction.
The issues of patent validity, willful infringement, and damages were subsequently tried to a jury. The jury found the ’336 patent not to have been proven invalid, found Coastal’s infringement to have been willful, and determined actual damages of $101,-279.20. The district court entered final judgment on June 29,1994, finding the case to be exceptional within the meaning of 35 U.S.C. § 285 (1988) and awarding attorney fees of $363,140.59 to Imazio for a total award of $464,419.79 plus pre-judgment interest. Coastal appealed to this court from the grant of summary judgment of plant patent infringement. We have jurisdiction under 28 U.S.C. § 1295(a)(1) (1988).
II. SUMMARY JUDGMENT
Rule 56(e) of the Federal Rules of Civil Procedure provides that summary judgment is appropriate
if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). “In ruling on a motion for summary judgment, the district court is required to view the evidence in a light most favorable to the nonmoving party and draw all reasonable inferences in favor of the non-moving party.” C.R. Bard, Inc. v. Advanced Cardiovascular Sys., Inc., 911 F.2d 670, 672, 15 USPQ2d 1540, 1542 (Fed.Cir.1990).
We review de novo a district court’s grant of summary judgment. Conroy v. Reebok Int’l Ltd., 14 F.3d 1570, 1575, 29 USPQ2d 1373, 1377 (Fed.Cir.1994). A district court’s decision on summary judgment “must be overturned if the court engaged in a faulty analysis in applying the law to the facts and a correct application of the law to those facts might bring a different result.” Litton Indus. Prods., Inc. v. Solid State Sys. Corp., 755 F.2d 158, 164, 225 USPQ 34, 38 (Fed.Cir.1985).
III. PLANT PATENTS
At least as early as 1892, legislation was proposed to grant patent rights for plant-related inventions. H.R.Rep. No. 5435, 52d Cong., 1st Sess. (1892). Plant patent legislation was supported by such prominent individuals as Thomas Edison who stated that “[njothing that Congress could do to help farming would be of greater value and permanence than to give to the plant breeder the same status as the mechanical and chemical inventors now have through the law.” S.Rep. No. 315, 71st Cong., 2d Sess. 3 (1930) (Senate Report). It was also supported by Luther Burbank, a leading plant breeder of the day,1 whose widow stated that her late husband “said repeatedly that until Government made some such provision [for plant patent protection] the incentive to create work with plants was slight and independent *1563research and breeding would be discouraged to the great detriment of horticulture.” H.R.Rep. No. 1129, 71st Cong., 2d Sess. 4 (1930) (House Report).
The Townsend-Purnell Plant Patent Act was passed by Congress on May 13,1930 and was signed by President Hoover on May 23, 1930. It was the first legislation anywhere in the world to grant patent rights to plant breeders2 and was enacted to “afford agriculture, so far as practicable, the same opportunity to participate in the benefits of the patent system as has been given to industry, and thus assist in placing agriculture on a basis of economic equality with industry.” Senate Report at 3.
Before enactment of the Plant Patent Act, two factors were thought to prevent plants from being patentable subject matter. The first was the belief that plants, even those bred by man, were products of nature and therefore not subject to patent protection. The second factor was that plants were not considered amenable to the “written description” requirement of the predecessor of 35 U.S.C. § 112, first paragraph.3 In promulgating the Plant Patent Act, Congress addressed both concerns. It explained that the work of the plant breeder “in aid of nature” was subject to patent protection. Additionally, the written description requirement, applicable to utility patents, was relaxed in favor of a “description ... as complete as is reasonably possible.” 35 U.S.C. § 162 (1988); see also Diamond v. Chakrabarty, 447 U.S. 303, 312, 100 S.Ct. 2204, 2209, 65 L.Ed.2d 144 (1980); Ex Parte Hibberd, 227 USPQ 443 (PTO Bd.App. & Int.1985).
As originally enacted, the provisions for plant patent protection were made as amendments to the general patent law. Specifically, section 4884 of the Revised Statutes was amended to recite:
Every patent shall contain ... a grant to the patentee ... of the exclusive right to make, use, and vend the invention or discovery (including in the case of a plant patent the exclusive right to asexually reproduce the plant).
Rev.Stat. § 4884, as amended by Act of May 23, 1930, ch. 312, § 1, 46 Stat. 376 (current version at 35 U.S.C. § 163 (1988)) (emphasis added).
Similarly, section 4886 of the Revised Statutes was amended to recite:
Any person who has invented or discovered any new and useful art, machine ... or who has invented or discovered and asexually reproduced any distinct and new variety of plant other than a tuber-propagated plant, ... may ... obtain a patent therefor.
Rev.Stat. § 4884, as amended by Act of May 23, 1930, ch. 312, § 1, 46 Stat. 376 (current version split between 35 U.S.C. §§ 101 and 161 (1988)) (emphasis added).
With the promulgation of the 1952 Patent Act, the plant patent provisions were included as a separate chapter of the statute. Act of July 19,1952, ch. 950, 66 Stat. 804 (current plant patent provisions at 35 U.S.C. §§ 161-164 (1988)). Additionally, as was done for utility patents in 35 U.S.C. § 154(a)(1) (1988), the plant patent grant was changed from the “exclusive right” to the “right to exclude” following court decisions explaining the nature of the right conferred by a patent. 35 U.S.C. § 163 (1988); see Crown Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24, 34, 43 S.Ct. 254, 256, 67 L.Ed. 516 (1923) (“All that the Government grants and protects is the power to exclude others from making, using or vending dining the grant.”); P.J. Federico, Commentary on the New Patent Act, 35 U.S.C.A. 1, 4CM1 (1954), reprinted in 75 J.Pat. & Trademark Off. Soc’y 161, 202 (1993); Giles S. Rich, Address to the New York Patent Law Association Meeting of Nov. 6, 1952, 14-15 (“A change was made, however, in Section 163, where the plant patent right is expressed as the right to exclude.”).
It should be noted that although the plant patent provisions were separated from the utility patent provisions with the enactment *1564of the 1952 Patent Act, the statute explicitly states that “[t]he provisions of this title relating to patents for inventions shall apply to patents for plants, except as otherwise provided.” 35 U.S.C. § 161. Thus, section 161 “engrafts the Plant Patent Act onto the basic patent law, which requires us to apply thereto all the rules, regulations, and provisions of the basic patent law,” except as otherwise provided.4 In re LeGrice, 301 F.2d 929, 933, 133 USPQ 365, 369 (CCPA 1962); 37 C.F.R. § 1.161 (1994).
The specification of a plant patent application must contain as full and complete a disclosure as possible of the plant and the characteristics thereof that distinguish it from related known varieties and must particularly point out where and in what manner the variety of plant has been asexually reproduced. 37 C.F.R. § 1.163(a). Only a single claim is permitted in a plant patent. 37 C.F.R. § 1.164; Manual of Patent Examining Procedure (MPEP) § 1605 (Rev. 14, Nov. 1992) (“A plant patent is granted only on the entire plant. It therefore follows that only one claim is necessary and only one is permitted.”); Kim Bros. v. Hagler, 167 F.Supp. 665, 120 USPQ 210 (S.D.Cal.1958).
The only amendment to the plant patent provisions since enactment of the 1952 Patent Act came in 1954 when section 161 was amended to preclude patent protection for plants found in an uncultivated state, thereby broadening the statute to include plants found in a cultivated state and subsequently asexually reproduced. Act of Sept. 3, 1954, Pub.L. No. 83-775, 68 Stat. 1190.
Currently, chapter 15 of title 35 of the United States Code includes the following provisions:
35 U.S.C. § 161, entitled “Patents for Plants,” states:
Whoever invents or discovers and asexually reproduces any distinct and new variety of plant, including cultivated spores, mutants, hybrids, and newly found seedlings, other than a tuber propagated plant or a plant found in an uncultivated state, may obtain a patent therefor.
The provisions of this title relating to patents for inventions shall apply to patents for plants, except as otherwise provided. 35 U.S.C. § 163, entitled “Grant,” states: In the case of a plant patent the grant shall be of the right to exclude others from asexually reproducing the plant or selling or using the plant so reproduced.
IV. STATUTORY CONSTRUCTION
A. Standard of Review
We review issues of statutory interpretation under a de novo standard of review. Kane v. United States, 43 F.3d 1446, 1448 (Fed.Cir.1994). We need not defer to the trial court. Chaparral Steel Co. v. United States, 901 F.2d 1097, 1100, 8 Fed.Cir. (T) 101, 105 (1990). When interpreting statutes, a court looks to the language of the statute and construes it according to the traditional tools of statutory construction, including certain well-known canons of statutory construction. Markman v. Westview, 52 F.3d 967, 987, 34 USPQ2d 1321,1336 (Fed.Cir.1995) (in banc) (citing United States v. Grimberg, 702 F.2d 1362, 1365 (Fed.Cir.1983) (in banc)), cert. granted, - U.S. -, 116 S.Ct. 40, 132 L.Ed.2d 921 (1995).
B. Scope of a Plant Patent
We first consider the scope of protection of plant patents. We begin by interpreting the relevant statutory provisions. Statutes in pari materia are to be construed together. Selfway, Inc. v. Travelers Petroleum, Inc., 579 F.2d 75, 80, 198 USPQ 271, 275 (CCPA 1978); see 2 Sutherland & Lewis, Statutory Construction § 344 (1904) (“It is an elementary rule of construction that all the parts of an act relating to the same subject should be considered together, and not each by itself.”).
1. The meaning of the term “variety”
The parties dispute the meaning of the term “variety” in section 161. The meaning of that term may inform the scope of *1565protection of plant patents inasmuch as such patents are granted to “[w]hoever invents or discovers and asexually reproduces any distinct and new variety of plant.” 35 U.S.C. § 161 (emphasis added). Imazio argues that in providing plant patent protection for “any distinct and new variety of plant,” it was intended that a plant patent cover “all plants of that new and distinct variety, i.e., all plants having the same essential and distinctive characteristics.” Thus, argues Imazio, “variety” should be construed in its technical, taxonomical sense and should be interpreted to encompass more than just clones of a single plant. Coastal, on the other hand, contends that “variety” should be construed in the vernacular sense as “something different from others of the same general kind.” Coastal maintains that by use of the term “variety” Congress did not intend to afford plant patent protection to a range of plants but intended only to protect a single plant.
The Plant Patent Act does not define “variety.” However, the legislative history of the Plant Patent Act states:
new and distinct varieties fall into three classes — sports, mutants, and hybrids. In the first class of cases, the sports, the new and distinct variety results from bud variation and not seed variation. A plant or portion of a plant may suddenly assume an appearance or character distinct from that which normally characterizes the variety or species. In the second class of cases, the mutants, the new and distinct variety results from seedling variation by self pol-lenization of species. In the third class of cases, the hybrids, the new and distinct variety results from seedlings of cross pol-lenization of two species, two varieties, or a species and a variety.
Senate Report at 3.
Thus, upon passage of the Plant Patent Act, a patentable variety could be either a sport, mutant, or hybrid. In addition, by amendment in 1954, Congress added another class of plants, newly found seedlings, subject to the exception that such seedlings found in an uncultivated state cannot be patented. Act of Sept. 3, 1954, Pub.L. No. 83-775, 68 Stat. 1190; see Ex parte Moore, 115 USPQ 145 (Pat.Off.Bd.App.1957) (Section 161, as amended September 3, 1954, was intended to include “cultivated sports, mutants, hybrids, and newly found seedlings.”).
Section 161 also requires that a patentable variety be new. Additionally, the variety must be distinct. As to this requirement, the legislative history states that
[i]n order for the new variety to be distinct it must have characteristics clearly distinguishable from those of existing varieties.... The characteristics that may distinguish a new variety would include, among others, those of habit; immunity from disease; resistance to cold, drought, heat, wind, or soil conditions; color of flower, leaf, fruit, or stems; flavor; productivity, including ever-bearing qualities in case of fruits; storage qualities; perfume; form; and ease, of asexual reproduction. Within any one of the above or other classes of characteristics the differences which would suffice to make the variety a distinct variety, will necessarily be differences of degree.
Senate Report at 4.
The legislative history is clear that Congress intended that distinct and new cultivated sports, mutants, hybrids, and newly found seedlings be entitled to plant patent protection.
Although the legislative history does not answer the question of what “variety” means in terms of whether a single plant or a range of plants is protected by a plant patent, in addition to being distinct and new, a patentable plant must also be asexually reproduced. 35 U.S.C. § 161; see Yoder Bros., Inc. v. California-Florida Plant Corp., 537 F.2d 1347, 1377, 193 USPQ 264, 291 (5th Cir.1976) (“For plant patents ... the additional requirement of asexual reproduction is introduced.”), cert. denied, 429 U.S. 1094, 97 S.Ct. 1108, 51 L.Ed.2d 540 (1977); Senate Report at 5 (“It is not only necessary that the new and distinct variety of plant shall have been invented or discovered, but it is also necessary that it shall have been asexually reproduced prior to the application for patent.”). As discussed below, this additional requirement informs the scope of protection of plant *1566patents and hence directs the meaning of “variety” in § 161.
2. The significance of the asexual reproduction requirement
The legislative history defines asexual reproduction as reproduction by “grafting, budding, cuttings, layering, division, and the like, but not by seeds.” Senate Report at 1; see MPEP § 1601.
The legislative history further states that [w]hether the new variety is a sport, mutant, or hybrid, the patent right granted is a right to propagate the new variety by asexual reproduction[5] It does not include the right to propagate by seeds. This limitation in the right granted recognizes a practical situation and greatly narrows the scope of the bill. Whether the new variety is a hybrid, mutant or sport, there is never more than one specimen of it produced except through asexual reproduction. For example, without asexual reproduction there would have been but one true McIntosh or Greening apple tree. These varieties of apples could not have been preserved had it not been through human effort in the asexual reproduction of the two original trees. They could not have been reproduced true to the type by nature through seedlings.
Senate Report at 4 (emphasis added) (footnote added).
The legislative history additionally sets forth that plants sought to be patented
must be asexually reproduced in order to have their identity preserved. This is necessary since seedlings either of chance or self-pollenization from any of these would not preserve the character of the individual.
Senate Report at 3.
It is clear from the legislative history that as a result of the asexual reproduction requirement, only a single plant, i.e., reproduction from one original specimen in the words of Congress, is protected by a plant patent. At the time of enactment, Congress recognized that the asexual reproduction prerequisite greatly narrowed the scope of protection of plant patents but found such a limitation necessary to ensure that the characteristics of the plant to be patented were maintained. Additionally, it has since been recognized that as intimated by Congress, asexual reproduction confirms the existence of a new variety by separating variations resulting from fluctuations in environmental conditions from true plant variations. Kenneth J. Burehfiel, Biotechnology and the Federal Circuit 407 (1995); Dunn v. Ragin, 50 USPQ 472, 475 (Pat.Off.Bd.Interf. Ex’rs 1941). The Supreme Court also recognized the significance of the asexual reproduction requirement of the Plant Patent Act. In Diamond v. Chakrabarty, the Court indicated that asexual reproduction was required in the Plant Patent Act because it was believed that new varieties could not be reproduced true-to-type through seed. 447 U.S. at 312, 100 S.Ct. at 2209.
Though there is a paucity of case law on this point,6 the requirement and effect of asexual reproduction as a prerequisite to plant patent protection has been recognized by the courts and the Patent Office. Yoder, 537 F.2d at 1380, 193 USPQ at 293 (“Asexual reproduction is the heart of the present plant patent system: the whole key to the ‘invention’ of a new plant is the discovery of new traits plus the foresight and appreciation to take the step of asexual reproduction.”) (emphasis in original); In re LeGrice, 301 F.2d 929, 937, 133 USPQ 365, 372 (CCPA 1962) (“In ‘asexual propagation,’ ... the plant is propagated by divisions or cuttings to form clones, each of which is identical to the parent plant and to all other cuttings or clones taken from the parent.” (citing Samuel L. Emsweller, Fundamentals in Plant Breeding, Plants and Gardens, Summer 1959)); see also Dunn v. Ragin, 50 USPQ at *1567474; Ex parte Moore, 115 USPQ 145 (Pat. Off.Bd.App.1957).
The commentators have also identified the importance of the asexual reproduction requirement. 1 Donald S. Chisum, Patents § 1.05[l][b][ii] (1986) (“Asexual reproduction is of central importance throughout the plant patent act.”). The significance of the asexual reproduction requirement has also been appreciated. Edward A. Hayman, Botanical Plant Patent Law, 11 Cleveland-Marshall L.Rev. 430, 433 (1962) (“It would seem that a plant patent only protects the clones, or in other words, the asexual progeny of a particular plant.”); Robert S. Allyn, The First Plant Patents 28 (1934) (“The fact that the Commissioner of Patents has ruled that only a single claim will be permitted in these plant patents indicated that he regards the protection intended by the Statute as limited to the exact variety described.”); Robert S. Allyn, Plant Patents 1934-194-8 at 12 (1944) (“From a study of the plant patents thus far issued I have reached the conclusion that regardless of the intent of the law — most plant patents if sustained at all by the Courts will be considered as covering only plants which have been asexually reproduced from the original plant.”); Peter F. Langrock, Plant Patents — Biological Necessities in Infringement Suits, 41 J.Pat.Off. Soc’y 787, 787 (1959) (“What constitutes asexual reproduction, this semi-sacred word in the field of plant patents? There are several specific methods. Each one of these methods consists of the isolation of a group or mass of vegetative cells from the parent plant that are capable of reproducing a plant that is genetically an exact duplication of its parent plant. In asexual reproduction, as the cells are separated from the parent plant without any internal change, they will reproduce an exact replica of the parent.”) (emphasis added).
Due to the asexual reproduction prerequisite, plant patents cover a single plant and its asexually reproduced progeny. See Senate Report at 6 (Plant patent protection encourages “those who own the single specimen to reproduce it asexually and create an adequate supply.”). Thus, the term “variety” in section 161 must be interpreted consistently with this requirement. Accordingly, “variety” in section 161 cannot be read as affording plant patent protection to a range of plants, as asserted by Imazio.
3. Comparison with the Plant Variety Protection Act
Both parties argue that the provisions of the Plant Variety Protection Act are relevant to a proper interpretation of the scope of protection afforded plant patents under the Plant Patent Act.
The Plant Variety Protection Act of 1970 (PVPA) provides “patent-like protection to novel varieties of sexually reproduced plants (that is, plants grown from seed), which parallels the protection afforded asexually reproduced plant varieties (that is, varieties reproduced by propagation or grafting) under Chapter 15 of the Patent Act.” Asgrow Seed Co. v. Winterboer, — U.S. —, —, 115 S.Ct. 788, 790, 130 L.Ed.2d 682 (1995). Under the PVPA, the U.S. Department of Agriculture issues certificates of plant variety protection to the “breeder of any novel variety of sexually reproduced plant (other than fungi, bacteria, or first-generation hybrids) who has so reproduced the variety.” 7 U.S.C. § 2402(a) (1994).
The term “variety” is defined in the PVPA at 7 U.S.C. § 2401(a)(9) (1994) as follows:
The term “variety” means a plant grouping within a single botanical taxon of the lowest known rank, that, without regard to whether the conditions for plant variety protection are fully met, can be defined by the expression of the characteristics resulting from a given genotype or combination of genotypes, distinguished from any other plant grouping by the expression of at least one characteristic and considered as a unit with regard to the suitability of the plant grouping for being propagated unchanged. A variety may be protected by seed, transplants, plants, tubers, tissue culture plantlets and other matter.
According to the legislative history, the 1994 amendments to the PVPA were made to conform the statute with the International Convention for the Protection of New Varieties of Plants of March 1991. H.R.Rep. No. *15682927, 103d Cong., 1st Sess. 6377 (1994). There is no indication in the legislative history that the addition of a definition of the term “variety” was in any sense intended to change the scope of protection afforded under the PVPA. In fact, both before and after the 1994 amendments, the right to protection under the PVPA is based on a determination of whether the variety is new, distinct, uniform, and stable. 7 U.S.C. § 2402(a).
Imazio argues that because the Plant Patent Act and the PVPA both use the term “variety,” that term must be interpreted in the same manner in both statutes. As such, according to Imazio, the term variety can only mean a group of plants that have the same essential and distinctive characteristics under the Plant Patent Act because that is how the term is defined under the PVPA. We disagree.
Where Congress uses the same form of statutory language in different statutes having the same general purpose, courts presume that Congress intended the same interpretation to apply in both instances. Northcross v. Board of Educ., 412 U.S. 427, 428, 93 S.Ct. 2201, 2202, 37 L.Ed.2d 48 (1973). It is true that both the Plant Patent Act and the PVPA use the term “variety” and grant some form of intellectual property protection. However, the two statutes differ significantly in their purposes. The Plant Patent Act grants a plant patent to one who “invents or discovers and asexually reproduces any distinct and new variety of plant.” 35 U.S.C. § 161. Conversely, one is entitled to plant variety protection under the PVPA if he has sexually reproduced the variety and has otherwise met the requirements of 7 U.S.C. § 2402(a). The term “variety” in both statutes cannot be read divorced from the very different circumstances in which that term is used.
Those circumstances, asexual reproduction in the case of plant patents, and sexual reproduction in the case of plant variety protection, mandate the protection afforded under these different statutory provisions. Asexual reproduction is the cornerstone of plant patent protection, while sexual reproduction is the distinguishing feature of plant variety protection. Indeed, this is why the PVPA was enacted, to afford protection for sexually reproduced plants. Diamond v. Chakrabarty, 447 U.S. 303, 313, 100 S.Ct. 2204, 2209-10, 65 L.Ed.2d 144 (1980). The result of asexual reproduction is a plant that is genetically identical to its parent. Yoder, 537 F.2d at 1380,193 USPQ at 293 (“Asexual reproduction is literally the only way that a breeder can be sure that he has reproduced a plant identical in every respect to the parent.”); LeGrice, 301 F.2d at 937, 133 USPQ at 372. The result of sexual reproduction is a plant that combines the characteristics of the parents, but is a different plant. Id. (In sexual reproduction, “the parent plants each contribute to the formation of the embryo that will develop in the seed and eventually give rise to a plant that differs from either of the parent plants as well as from other plants produced from other seeds resulting from the cross-pollination.”)7
It follows from this that the scope of protection afforded as a result of sexual versus asexual reproduction must be different; in the case of asexual reproduction, the same plant is produced, but in the case of sexual reproduction, a different plant, albeit like the parent plants, is produced. Given this, we reject Imazio’s contention that the meaning of variety in the Plant Patent Act and the PVPA must be the same.
4. Conclusion
In view of the statutory language, the legislative history, the ease law, the views of the commentators, and a review of relevant provisions of the PVPA, we conclude that the scope of a plant patent is the asexual progeny of the patented plant variety. Variety as used in section 161 encompasses a single plant, the plant shown and described in the specification.
V. INFRINGEMENT
A. The Trial Court’s Analysis
In issuing its December 1992 preliminary injunction order, the trial court adopted the *1569standard set forth in Pan-American Plant Co. v. Matsui 433 F.Supp. 693, 694 n. 2, 198 USPQ 462, 463 n. 2 (N.D.Cal.1977) that the Plant Patent Act “bars the asexual reproduction and sale of any plant which is the same variety (i.e., has the same essential characteristics) as the patented plant, whether or not the infringing plant was originally cloned from the patented plant.” Imazio, 29 USPQ2d at 1219, 1992 WL 551670. The district court also addressed whether independent creation could be a defense to plant patent infringement as discussed in Yoder, 537 F.2d 1347, 193 USPQ 264. The district court stated that “independent creation is [not] a proper defense to patent infringement” and asserted that “the courts’ recognition of an independent creation defense would inadvertently entice deliberate infringement, with a fraudulent defense of independent creation asserted.” Id.
In granting summary judgment of infringement in September 1993, the trial court reiterated its adoption of the standard for plant patent infringement set forth in Pan-American. The trial court also reiterated its refusal to recognize independent creation as a defense to plant patent infringement concluding that such a defense “would result in a deluge of litigation without contributing any necessary safeguards.”
On the merits of the infringement charge, the trial court reviewed the testimony of both parties’ experts and found that the “undisputed evidence thus shows that the patented Erica Sunset heather and the Holiday Heather are the same plants both morphologically (internal and external characteristics) and phenologieally (blooming cycle).” The trial court concluded that Imazio had “successfully demonstrated that the Holiday Heather is an asexual reproduction of the Erica Sunset.”
B. The Law of Infringement
Determining infringement is a two-step process. The first step is to determine the meaning and scope of the patent claim asserted to be infringed. Markman, 52 F.3d at 976, 34 USPQ2d at 1326. The second step is to compare the properly construed claim to that which is asserted to infringe. Id. We review claim construction, a question of law, de novo. Id. 52 F.3d at 979, 34 USPQ2d at 1329.
C. Infringement of a Plant Patent
As to the first step, consistent with our analysis above, the scope of the claim of the ’336 patent is the asexual progeny of the Heather persoluta shown and described in the ’336 patent specification. To perform the second step of the infringement analysis, we first look to the language of the statute.
Section 163 grants to plant patentees the right to exclude others from asexually reproducing the plant or selling or using the plant so reproduced. 35 U.S.C. § 163. As stated above, the trial court held that asexual reproduction is shown if the patentee can prove that the alleged infringing plant has the same essential characteristics as the patented plant. We disagree.
We note that the trial court based its infringement analysis on a footnote in Pan-American which is dictum because in that ease infringement was denied on other grounds. Additionally, the Pan-American court expressly stated that “there [was] no need to discuss the asexual reproduction question in detail.” Id.
The “asexual reproduction question,” however, is critical to the infringement analysis. In construing section 161, we held above that the scope of a plant patent is the asexual reproduction of the plant shown and described in the specification. Asexual reproduction, in terms of section 161, means the progeny of the patented plant via “grafting, budding, cuttings, layering, division and the like, but not by seeds.” Senate Report at 1; see MPEP § 1601.
We must construe the term “asexual reproduction” in section 163 in the same way as we did in section 161. Thus, for purposes of plant patent infringement, the patentee must prove that the alleged infringing plant is an asexual reproduction, that is, that it is the progeny of the patented plant. Yoder, 537 F.2d at 1380, 193 USPQ at 293 (“It is quite possible that infringement of a plant patent would occur only if stock obtained is *1570used, given the extreme unlikelihood that any other plant could actually infringe.”).
Our interpretation of section 163 is in accord with the majority of the commentators who have considered this issue. 1 Donald S. Chisum, Patents § 1.05[l][d] (1994). (“It is generally assumed that one infringes only if the accused plant is a direct or indirect asexual reproduction of the patentee’s original parent plant.”); Peter F. Langrock, Plant Patents — Biological Necessities in Infringement Suits, 41 J.Pat.Off. Soc’y 787, 788-89 (1959) (“What test is to be used in [plant patent] infringement proceedings ... ? It is necessary that there be some sort of physical appropriation from one of the patent plants. It is only when there is such a physical appropriation that the rights of the patentee are invaded.... The test set out by [another] calling for only a showing of an asexual reproduction of ‘substantially the same plant’ misses the narrow confinement of the protection afforded to plant patents.” (footnotes omitted)); David B. Bernstein, Is a Plant Patent a Form, of Copyright?, 27 IDEA 31, 35 (1986) (“The relevant court holdings have suggested that no infringement of a plant patent can occur without an actual, physical taking from the plant discovered by the pat-entee.”).
1. Independent creation as a defense to plant patent infringement
Below, the parties disputed whether independent creation is a proper defense to plant patent infringement. The trial court refused to recognize such a defense stating that the “patent holder would have great difficulties enforcing his patent rights if a defendant were allowed to raise independent creation as an affirmative defense.” The trial court reasoned that it would be hard for the patentee to refute evidence of independent creation because all such evidence would be in the defendant’s control.
We must reject the trial court’s analysis of the independent creation defense because it is contrary to the plain meaning of the statute. See Wilner v. United States, 24 F.3d 1397, 1402 (Fed.Cir.1994) (in banc) (court’s approach constituted legal error because it was contrary to the plain meaning of the statute). The statute requires asexual reproduction of the patented plant for there to be infringement. It is necessarily a defense to plant patent infringement that the alleged infringing plant is not an asexual reproduction of the patented plant. Part of this proof could be, thus, that the defendant independently developed the allegedly infringing plant. However, the sine qua non is asexual reproduction. That is what the pat-entee must prove and what the defendant will seek to disprove.
D. Conclusion as to Infringement
In this case, therefore, in order for there to be infringement of the ’336 patent, the infringing plant must be an asexual reproduction of the plant claimed, i.e., the Heather persoluta shown and described in the ’336 patent. The trial court erred as a matter of law when it held that infringement of the ’336 patent was shown by proof merely of asexual reproduction of a plant having the same essential characteristics as the patented plant. Accordingly, we reverse the holding of infringement. We also therefore vacate the finding of willfulness and the award of attorney fees.
“We recognize that, in some cases, it may be proper for an appellate court which disagrees with a district court’s decision granting summary judgment in favor of the moving party, to reverse and remand with instructions to award summary judgment in favor of the nonmoving party.” Litton, 755 F.2d at 164, 225 USPQ at 38. However, in certain circumstances it is more appropriate to remand to the trial court for further proceedings. Id. at 164, 225 USPQ at 38-39 (citations omitted). We believe such circumstances exist here because the trial court did not consider the proper standard for plant patent infringement and, therefore, may not have considered all evidence relevant to the infringement issue. Therefore, we remand to the district court for an infringement determination consistent with this opinion.
VI. CONCLUSION
The judgment of infringement of the ’336 patent is reversed. The finding of willfulness *1571and the award of attorney fees are vacated, The case is remanded for further proceedings consistent with this opinion.
VII. COSTS
No costs.
REVERSED-IN-PART, VACATED-IN-PART, AND REMANDED.
17.2 Columbia Pictures Industries, Inc. v. Redd Horne, Inc. 17.2 Columbia Pictures Industries, Inc. v. Redd Horne, Inc.
Copyright
749 F.2d 154
224 U.S.P.Q. 641, 1985 Copr.L.Dec. P 25,733
COLUMBIA PICTURES INDUSTRIES, INC., Embassy Pictures,
Paramount Pictures Corporation, Twentieth Century-Fox Film
Corporation, Universal City Studios, Inc., Walt Disney
Productions and Warner Bros., Inc., Appellees,
v.
REDD HORNE, INC., Maxwell's Video Showcase, Ltd., Glenn W.
Zeny and Robert Zeny, Appellants.
No. 83-5786.
United States Court of Appeals, Third Circuit.
Argued Aug. 14, 1984.
Decided Nov. 23, 1984.
[156] Howard A. Hain (Argued), Galbo, Dailey, Resetifo, Held & Dailey, Erie, Pa., for appellants.
Robert L. Byer, Eckert, Seamans, Cherin & Mellott, Pittsburgh, Pa., Bancroft D. Haviland (Argued), Carole E. Handler, Nancy L. Schultz, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellees; Burton H. Hanft, Harvey L. Shapiro, Sargoy, Stein & Hanft, New York City, of counsel.
Before ALDISERT, Chief Judge, WEIS, Circuit Judge, and RE, Judge.[*]
OPINION OF THE COURT
RE, Chief Judge.
In this copyright infringement case, defendants appeal from an order of the United States District Court for the Western District of Pennsylvania which granted the plaintiffs' motion for summary judgment, and enjoined defendants from exhibiting plaintiffs' copyrighted motion pictures. Columbia Pictures Indus., Inc. v. Redd Horne Inc., 568 F.Supp. 494 (W.D.Pa.1983). The defendants, Redd Horne, Inc., Maxwell's Video Showcase, Ltd., Glenn W. Zeny and Robert Zeny, also appeal from the dismissal of their antitrust counterclaims, and from an award of damages against them in the amount of $44,750.00.
Defendant-appellants raise three questions on this appeal: (1) whether the activities of the defendant Maxwell's Video Showcase, Ltd., (Maxwell's) constitute an infringement of plaintiffs' copyright protections which would entitle the plaintiffs to injunctive relief and damages; (2) if so, whether the activities of the other defendants, Robert Zeny, the president and sole shareholder of Maxwell's, Redd Horne, Inc., Maxwell's advertising and public relations firm, and Glenn W. Zeny, the president of Redd Horne, Inc., and Robert Zeny's brother, are sufficient to hold each of them liable as co-infringers with Maxwell's; and (3) whether the antitrust counterclaims of the defendants were properly dismissed by the district court. Since we agree with the district court, we affirm.
The Facts
Maxwell's Video Showcase, Ltd., operates two stores in Erie, Pennsylvania. At these two facilities, Maxwell's sells and rents video cassette recorders and prerecorded video cassettes, and sells blank video cassette cartridges. These activities are not the subject of the plaintiffs' complaint. The copyright infringement issue in this case arises from defendants' exhibition of video cassettes of the plaintiffs' films, or what defendants euphemistically refer to as their "showcasing" or "in-store rental" concept.
Each store contains a small showroom area in the front of the store, and a "showcase" or exhibition area in the rear. The front showroom contains video equipment [157] and materials for sale or rent, as well as dispensing machines for popcorn and carbonated beverages. Movie posters are also displayed in this front area. In the rear "showcase" area, patrons may view any of an assortment of video cassettes in small, private booths with space for two to four people. There are a total of eighty-five booths in the two stores. Each booth or room is approximately four feet by six feet and is carpeted on the floor and walls. In the front there is a nineteen inch color television and an upholstered bench in the back.
The procedure followed by a patron wishing to utilize one of the viewing booths or rooms is the same at both facilities. The customer selects a film from a catalogue which contains the titles of available films. The fee charged by Maxwell's depends on the number of people in the viewing room, and the time of day. The price is $5.00 for one or two people before 6 p.m., and $6.00 for two people after 6 p.m. There is at all times a $1.00 surcharge for the third and fourth person. The fee also entitles patrons to help themselves to popcorn and soft drinks before entering their assigned rooms. Closing the door of the viewing room activates a signal in the counter area at the front of the store. An employee of Maxwell's then places the cassette of the motion picture chosen by the viewer into one of the video cassette machines in the front of the store and the picture is transmitted to the patron's viewing room. The viewer may adjust the light in the room, as well as the volume, brightness, and color levels on the television set.
Access to each room is limited to the individuals who rent it as a group. Although no restriction is placed on the composition of a group, strangers are not grouped in order to fill a particular room to capacity. Maxwell's is open to any member of the public who wishes to utilize its facilities or services.
Maxwell's advertises on Erie radio stations and on the theatre pages of the local newspapers. Typically, each advertisement features one or more motion pictures, and emphasizes Maxwell's selection of films, low prices, and free refreshments. The advertisements do not state that these motion pictures are video cassette copies. At the entrance to the two Maxwell's facilities, there are also advertisements for individual films, which resemble movie posters.
Infringement of Plaintiffs' Copyright
It may be stated at the outset that this is not a case of unauthorized taping or video cassette piracy. The defendants obtained the video cassette copies of plaintiffs' copyrighted motion pictures by purchasing them from either the plaintiffs or their authorized distributors. The sale or rental of these cassettes to individuals for home viewing is also not an issue. Plaintiffs do not contend that in-home use infringes their copyright.
The plaintiffs' complaint is based on their contention that the exhibition or showing of the video cassettes in the private booths on defendants' premises constitutes an unauthorized public performance in violation of plaintiffs' exclusive rights under the federal copyright laws.
It is acknowledged that it is the role of the Congress, not the courts, to formulate new principles of copyright law when the legislature has determined that technological innovations have made them necessary. See, e.g., Sony Corp. v. Universal City Studios, Inc., — U.S. —, 104 S.Ct. 774, 783, 78 L.Ed.2d 574 (1984); Teleprompter Corp. v. CBS, 415 U.S. 394, 414, 94 S.Ct. 1129, 1141, 39 L.Ed.2d 415 (1974). In the words of Justice Stevens, "Congress has the constitutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology." Sony Corp., supra, 104 S.Ct. at 783. A defendant, however, is not immune from liability for copyright infringement simply because the technologies are of recent origin or are being applied to innovative uses. Although this case involves a novel application of relatively recent technological developments, it can nonetheless be readily analyzed and resolved [158] within the existing statutory framework.
Section 106 of the Copyright Act confers upon the copyright holder certain exclusive rights. This section provides:
Subject to sections 107 through 118, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending.
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly.
17 U.S.C. Sec. 106 (1982) (emphasis supplied).
It is undisputed that the defendants were licensed to exercise the right of distribution. Id. Sec. 106(3). A copyright owner, however, may dispose of a copy of his work while retaining all underlying copyrights which are not expressly or impliedly disposed of with that copy. Id. Sec. 202. Thus, it is clear that the plaintiffs have retained their interest in the other four enumerated rights. See M. Nimmer, 2 Nimmer on Copyright Sec. 8.01[A], at 8-11 to 8-12 (1983) (citing Interstate Hotel Co. v. Remick Music Corp., 157 F.2d 744 (8th Cir.1946)). Since the rights granted by section 106 are separate and distinct, and are severable from one another, the grant of one does not waive any of the other exclusive rights. Thus, plaintiffs' sales of video cassette copies of their copyrighted motion pictures did not result in a waiver of any of the other exclusive rights enumerated in section 106, such as the exclusive right to perform their motion pictures publicly. In essence, therefore, the fundamental question is whether the defendants' activities constitute a public performance of the plaintiffs' motion pictures. We agree with the conclusion of the district court that these activities constitute a public performance, and are an infringement.
"To perform a work means . . . in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible." 17 U.S.C. Sec. 101 (1982). Clearly, playing a video cassette results in a sequential showing of a motion picture's images and in making the sounds accompanying it audible. Thus, Maxwell's activities constitute a performance under section 101.
The remaining question is whether these performances are public. Section 101 also states that to perform a work "publicly" means "[t]o perform . . . it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered." Id. The statute is written in the disjunctive, and thus two categories of places can satisfy the definition of "to perform a work publicly." The first category is self-evident; it is "a place open to the public." The second category, commonly referred to as a semi-public place, is determined by the size and composition of the audience.
The legislative history indicates that this second category was added to expand the concept of public performance by including those places that, although not open to the public at large, are accessible to a significant number of people. See H.R.Rep. No. 1476, 94th Cong., 2d Sess. 64, reprinted in, 1976 U.S.Code Cong. & Ad.News 5659, 5677-78 (hereinafter cited as House Report). Clearly, if a place is public, the size and composition of the audience are irrelevant. However, if the place is not public, the size and composition of the audience will be determinative.
[159] We find it unnecessary to examine the second part of the statutory definition because we agree with the district court's conclusion that Maxwell's was open to the public. On the composition of the audience, the district court noted that "the showcasing operation is not distinguishable in any significant manner from the exhibition of films at a conventional movie theater." 568 F.Supp. at 500. Any member of the public can view a motion picture by paying the appropriate fee. The services provided by Maxwell's are essentially the same as a movie theatre, with the additional feature of privacy. The relevant "place" within the meaning of section 101 is each of Maxwell's two stores, not each individual booth within each store. Simply because the cassettes can be viewed in private does not mitigate the essential fact that Maxwell's is unquestionably open to the public.
The conclusion that Maxwell's activities constitute public performances is fully supported by subsection (2) of the statutory definition of public performance:
(2) to transmit or otherwise communicate a performance . . . of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place or in separate places and at the same time or at different times.
17 U.S.C. Sec. 101 (1982). As explained in the House Report which accompanies the Copyright Revision Act of 1976, "a performance made available by transmission to the public at large is 'public' even though the recipients are not gathered in a single place. . . . The same principles apply whenever the potential recipients of the transmission represent a limited segment of the public, such as the occupants of hotel rooms. . . ." House Report, supra, at 64-65, U.S.Code Cong. & Admin.News, p. 5678. Thus, the transmission of a performance to members of the public, even in private settings such as hotel rooms or Maxwell's viewing rooms, constitutes a public performance. As the statutory language and legislative history clearly indicate, the fact that members of the public view the performance at different times does not alter this legal consequence.
Professor Nimmer's examination of this definition is particularly pertinent: "if the same copy . . . of a given work is repeatedly played (i.e., 'performed') by different members of the public, albeit at different times, this constitutes a 'public' performance." 2 M. Nimmer, Sec. 8.14[C], at 8-142 (emphasis in original). Indeed, Professor Nimmer would seem to have envisaged Maxwell's when he wrote:
one may anticipate the possibility of theaters in which patrons occupy separate screening rooms, for greater privacy, and in order not to have to await a given hour for commencement of a given film. These too should obviously be regarded as public performances within the underlying rationale of the Copyright Act.
Id. at 8-142. Although Maxwell's has only one copy of each film, it shows each copy repeatedly to different members of the public. This constitutes a public performance.
The First Sale Doctrine
The defendants also contend that their activities are protected by the first sale doctrine. The first sale doctrine is codified in section 109(a) of Title 17. This section provides:
Notwithstanding the provisions of section 106(3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.
17 U.S.C. Sec. 109(a) (1982). Section 109(a) is an extension of the principle that ownership of the material object is distinct from ownership of the copyright in this material. See 17 U.S.C. Sec. 202 (1982). The first sale doctrine prevents the copyright owner from controlling the future transfer of a particular copy once its material ownership has been transferred. See, e.g., Bobbs-Merrill [160] Co. v. Straus, 210 U.S. 339, 350, 28 S.Ct. 722, 726, 52 L.Ed. 1086 (1908); Independent News Co. v. Williams, 293 F.2d 510, 515-17 (3d Cir.1961). The transfer of the video cassettes to the defendants, however, did not result in the forfeiture or waiver of all of the exclusive rights found in section 106. See, e.g., United States v. Moore, 604 F.2d 1228, 1232 (9th Cir.1979); United States v. Wise, 550 F.2d 1180, 1187 (9th Cir.), cert. denied, 434 U.S. 929, 98 S.Ct. 416, 54 L.Ed.2d 290 (1977). The copyright owner's exclusive right "to perform the copyrighted work publicly" has not been affected; only its distribution right as to the transferred copy has been circumscribed. See United States v. Powell, 701 F.2d 70, 72 (8th Cir.1983); see generally M. Nimmer, supra, at Sec. 8.12[D].
In essence, the defendants' "first sale" argument is merely another aspect of their argument that their activities are not public performances. For the defendants' argument to succeed, we would have to adopt their characterization of the "showcasing" transaction or activity as an "in-store rental." The facts do not permit such a finding or conclusion. The record clearly demonstrates that showcasing a video cassette at Maxwell's is a significantly different transaction than leasing a tape for home use. Maxwell's never disposed of the tapes in its showcasing operations, nor did the tapes ever leave the store. At all times, Maxwell's maintained physical dominion and control over the tapes. Its employees actually played the cassettes on its machines. The charges or fees received for viewing the cassettes at Maxwell's facilities are analytically indistinguishable from admission fees paid by patrons to gain admission to any public theater. Plainly, in their showcasing operation, the appellants do not sell, rent, or otherwise dispose of the video cassette. On the facts presented, Maxwell's "showcasing" operation is a public performance, which, as a matter of law, constitutes a copyright infringement.
Liability of Co-Defendants
Defendant-appellants, Robert Zeny, Glenn W. Zeny, and Redd Horne, Inc., challenge that part of the district court's order which holds them liable as co-infringers. We agree with the district court and affirm.
It is well settled that "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing activity of another, may be held liable as a 'contributory' infringer." Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir.1971). An officer or director of a corporation who knowingly participates in the infringement can be held personally liable, jointly and severally, with the corporate defendant. See, e.g., Samet & Wells, Inc. v. Shalom Toy Co., 429 F.Supp. 895, 903-04 (E.D.N.Y.1977), aff'd without opinion, 578 F.2d 1369 (2d Cir.1978); accord Donsco, Inc. v. Casper Corp., 587 F.2d 602, 605-07 (3d Cir.1978) (corporate officer held personally liable in unfair competition action).
Robert Zeny is the president and the sole shareholder of Maxwell's Video Showcase, Ltd. He knowingly initiated and participated in the infringing activity, and ignored repeated requests from the plaintiffs that he cease and desist the activity. He too, therefore, is clearly liable as a co-infringer.
Glenn W. Zeny, Robert's brother, is not a stockholder or officer, nor does he have a direct financial interest in Maxwell's Video Showcase, Ltd. Glenn W. Zeny, however, conducted negotiations and wrote letters, on Redd Horne, Inc., stationery, on behalf of Maxwell's and its predecessor corporation. Some of these letters on Redd Horne, Inc., stationery, refer to "our company" and "our concept" without mentioning Maxwell's. The impression conveyed by the letters is that Glenn Zeny and Redd Horne, Inc., are principals in the venture. Glenn W. Zeny, like his brother, participated knowingly and significantly in the infringing activity and ignored the plaintiffs' persistent requests that the activity cease.
[161] Redd Horne, Inc., conducted all of the advertising and promotional work for Maxwell's. It also provided financial, accounting, and administrative services for Maxwell's. All of these services, and the advertising services in particular, contributed and, indeed, were essential to the copyright infringement. In addition, Glenn W. Zeny's knowledge of, and substantial participation in, the infringing activities may be imputed to his employer, Redd Horne, Inc. See Shapiro, Bernstein & Co. v. H.L. Green Co., 316 F.2d 304, 307 (2d Cir.1963); Screen Gems-Columbia Music, Inc., v. Mark-Fi Records, Inc., 327 F.Supp. 788, 792 (S.D.N.Y.1971), rev'd on other grounds, 453 F.2d 552 (2d Cir.1972). Thus, we hold that the substantial, knowing participation of Glenn W. Zeny and Redd Horne, Inc., was more than sufficient to hold them liable as co-infringers.
The Defendants' Counterclaims
The appellants also appeal from the district court's dismissal of their antitrust counterclaims. In considering a motion to dismiss for failure to state a claim for which relief can be granted, the allegations in the complaint are to be liberally construed. A motion under F.R.C.P. 12(b)(6) should be granted only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)); Miller v. American Tel. & Tel. Co., 507 F.2d 759, 761 (3d Cir.1974). Construing the complaint liberally, we can find no allegations of fact which, if proven, would constitute a violation of the antitrust laws. Therefore, we affirm the district court's dismissal of the counterclaims.
Count I of the defendants' counterclaim alleges a "combination and conspiracy in restraint of trade in violation of the Anti-Trust laws." The facts alleged in support of this claim, however, amount to nothing more than an effort by the plaintiffs to enforce their rights under the copyright laws.
It is not a violation of the antitrust laws for parties with common interests to utilize the courts to protect their business or economic interests from competitors. See, e.g., California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510-11, 92 S.Ct. 609, 611-12, 30 L.Ed.2d 642 (1972); United Mine Workers v. Pennington, 381 U.S. 657, 669-70, 85 S.Ct. 1585, 1592-93, 14 L.Ed.2d 626 (1965); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 136-38, 81 S.Ct. 523, 528-30, 5 L.Ed.2d 464 (1961). More specifically, a good faith attempt to enforce a copyright does not violate the antitrust laws. Edward B. Marks Music Corp. v. Colorado Magnetics, Inc., 497 F.2d 285, 290 (10th Cir.1974); Alberto-Culver Co. v. Andrea Dumon, Inc., 466 F.2d 705, 711 (7th Cir.1972). Only when resort to the courts is in bad faith and a "mere sham" may antitrust liability be imposed. California Motor Transp., 404 U.S. at 511, 92 S.Ct. at 612 (quoting Noerr, 365 U.S. at 144, 81 S.Ct. at 533).
In their brief, the appellants admit that the "basis of the counterclaims are [sic] quite simply that there is no good faith underlying the plaintiff's [sic] actions. . . ." However, the plaintiffs' success on the merits of their copyright infringement action demonstrates clearly that plaintiffs possessed valid causes of action under the copyright laws which they had the legal right to enforce. Hence, it would be impossible for the appellants to prove bad faith, and the first count of the counterclaim must fail.
The second count of the defendants' counterclaim alleges that the actions of the plaintiffs constitute an "unlawful tying arrangement." A tying arrangement "may be defined as an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees that he will not purchase that product [162] from any other supplier." Northern Pacific Ry. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 518-519, 2 L.Ed.2d 545 (1958). See Ungar v. Dunkin' Donuts, Inc., 531 F.2d 1211, 1218 (3d Cir.), cert. denied, 429 U.S. 823, 97 S.Ct. 74, 50 L.Ed.2d 84 (1976). To establish liability, the plaintiff in a "tying" case must also prove that the seller has "sufficient economic power with respect to the tying product to appreciably restrain competition in the market for the tied product," and that "a 'not insubstantial' amount of interstate commerce is affected." Ungar, supra, at 1244 (quoting Northern Pacific, supra, 356 U.S. at 5, 78 S.Ct. at 518). In short, a tying arrangement requires that a seller with sufficient economic power in the tying product coerce the buyer into also buying an unwanted "tied" product. See Ungar, supra, at 1222. The plaintiffs in this case have declined to allow Maxwell's to exhibit their copyrighted works in its stores. They have not attempted to tie any other product to the sale of their video cassettes. A tying arrangement requires two products. Since there is only one in this case, the second count of the counterclaim must also fail.
Conclusion
In view of the foregoing, it is the holding of this Court that the defendants' activities constituted an unauthorized, and, therefore, an unlawful public performance of the plaintiffs' copyrighted motion pictures. We also conclude that the activities of each named defendant were sufficient to hold each jointly and severally liable for the copyright infringement. In addition, we hold that the defendants' counterclaims were properly dismissed.
The judgment of the district court, therefore, will be affirmed.
[*] The Honorable Edward D. Re, Chief Judge, United States Court of International Trade, sitting by designation.
17.3 Cass County Music Co. v. Muedini 17.3 Cass County Music Co. v. Muedini
Copyright
CASS COUNTY MUSIC COMPANY, et al., Plaintiffs-Appellants, v. Vasfi MUEDINI d/b/a Port Town Family Restaurant, Defendant-Appellee.
No. 93-3109.
United States Court of Appeals, Seventh Circuit.
Argued Nov. 15, 1994.
Decided May 16, 1995.
*264Jeffrey A. Brauch, Michael J. Gonring, Quarles & Brady, Milwaukee, WI, Richard H. Reimer (argued), A.S.C.A.P., Legal Department, I. Fred Koenigsberg, White & Case, New York City, for plaintiffs-appellants Cass County Music Co., Red Cloud Music Co., Jobete Music Co., Inc., Colgems-EMI Music, Inc., Stephen Mitchell Music, Anidraks Music, Impulsive Music, Brockman Enterprises, Inc.
Vasfi Muedini, Port Town Family Restaurant, Racine, WI, for appellee Vasfi Muedini, dba Port Town Family Restaurant.
E. Leonard Rubin (argued), William Cook, Barry F. Irwin, Willian, Brinks, Hofer, Gil-son & Lione, Chicago, IL, for amicus curiae Willian, Brinks, Hofer, Gilson & Lione.
Before COFFEY, RIPPLE and ROVNER, Circuit Judges.
The plaintiffs, Cass County Music Company and seven other music publishers, appeal the district court’s grant of summary judgment in favor of the defendant, Vasfi Muedi-ni, a defaulting party.1 At this court’s request, the law firm of Willian Brinks Hofer Gilson & Lione submitted an amicus curiae brief in support of the judgment of the district court.2 For the following reasons, we reverse the judgment of the district court and remand for further proceedings consistent with this opinion.
I
BACKGROUND
The plaintiffs, Cass County Music Company, Red Cloud Music Company, Jobete Music Company, Inc., Brockman Enterprises, Inc., Colgems-EMI Music, Inc., Stephen Mitchell Music, Anidraks Music, and Impulsive Music, own copyrights to six songs that are the subject of this suit.3 At the time the suit was brought, the defendant, Vasfi Muedini, was the owner of the Port Town Family Restaurant located in Racine, Wisconsin.4 The res*265taurant is a free-standing building accommodating up to 128 patrons with a public dining area of approximately 1500 square feet. The restaurant is equipped with a “radio-over-speaker” sound system that provides for a consistent level of background music throughout the dining area.
On the night of March 13,1992, two investigators employed by ASCAP had dinner in the Port Town Family Restaurant. While dining, the investigators heard some of the plaintiffs’ songs played over the restaurant’s sound system.5 The source of the music was a radio broadcast of WMYX-FM, a Milwaukee station. The radio station is an ASCAP licensee. The license between ASCAP and WMYX-FM prohibits retransmissions of the station’s broadcasts. The license provides:
Nothing in this agreement shall be construed as granting, or as authorizing Licensee to grant to others any right to perform publicly ... any of the musical compositions licensed under this agreement, or as authorizing any receiver of any radio broadcast to perform publicly or reproduce the same in any manner.
As of April 1993, ASCAP had licensed 151 Wisconsin establishments where, like the Port Town Family Restaurant, the only entertainment was mechanical music.6 The licensing fee for establishments that play music four to seven nights a week and seat between 76 and 150 patrons is $327 per year. From May 1985 until December 1991, AS-CAP repeatedly and unsuccessfully approached the Port Town Family Restaurant about the need for the restaurant to obtain an ASCAP license in order to continue legally to play background music.
The plaintiffs subsequently brought this action against Muedini. They alleged copyright infringement on the basis of the public performance of the six copyrighted musical compositions. The plaintiffs requested an injunction prohibiting further performances, $1000 damages for each infringement, and costs, including reasonable attorneys’ fees.
Muedini did not respond to the complaint, and the plaintiffs, therefore, moved for the entry of a default judgment. At the hearing that followed, the district court expressed doubt as to Muedini’s liability and requested that the plaintiffs brief the issue of the applicability of the § 110(5) exemption of the United States Copyright Act, 17 U.S.C. § 101 et seq. After reviewing the relevant case law and additional authorities, the district court denied the plaintiffs’ motion for default judgment. Cass County Music Co. v. Muedini, 821 F.Supp. 1278 (E.D.Wis.1993). The court held that the restaurant owner was statutorily exempt from the Act’s requirement that he obtain a license to play copyrighted works. Id. at 1279. The plaintiffs requested reconsideration of the decision. A hearing was granted, but the district court declined to reverse its earlier decision, and entered, judgment dismissing the case. The plaintiffs appeal.
II
DISCUSSION
As we have noted earlier, the defendant declined to participate in this litigation. The district court was thus confronted with a default. The court correctly realized that, in such a situation, it was not appropriate simply to enter judgment for the plaintiffs. Rather, it was necessary that the plaintiffs demonstrate that they were entitled to judgment as a matter of law. In making this inquiry, the court must assume that the fac*266tual allegations are, by reason of the default, true.
A.
The Copyright Act of 1976 7 grants copyright owners the exclusive right to control the public performance of their works. 17 U.S.C. § 106(4). The Act defines public performance so that it includes the playing of a radio or television broadcast in a business establishment:
To perform or display a work “publicly” means—
(2) to transmit or otherwise communicate a performance or display of the work to ... the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.
Section 110(5) of the Act provides an exception for small commercial establishments that play radio or television broadcasts on a “homestyle receiving apparatus.” In pertinent part § 110(5) provides:
Notwithstanding the provisions of section 106, the following are not infringements of copyrights:
(5) communication of a transmission embodying a performance or display of a work by the public reception of the transmission on a single receiving apparatus of a kind commonly used in private homes, unless—
(A) a direct charge is made to see or hear the transmission; or
(B) the transmission thus received is further transmitted to the public;8
17 U.S.C. § 110(5).
In Broadcast Music, Inc. v. Claire’s Boutiques, Inc., 949 F.2d 1482 (7th Cir.1991), cert. denied, 504 U.S. 911, 112 S.Ct. 1942, 118 L.Ed.2d 547 (1992), this court, through the pen of Judge Cummings, extensively reviewed and analyzed § 110(5) and its legislative history. The court noted that the Congress included the small business exemption in response to the Supreme Court’s decision in Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 95 S.Ct. 2040, 45 L.Ed.2d 84 (1975). In Aiken, the Supreme Court had held that a restaurant owner’s simple act of turning on a radio for the listening pleasure of his patrons did not constitute a performance for which a license could be required. Id. at 162, 95 S.Ct. at 2047. Writing for the Court, Justice Stewart noted the “practical unenforceability of a ruling that all of those in Aiken’s position are copyright infringers.” Aiken, 422 U.S. at 162, 95 S.Ct. at 2047. He noted the pragmatic implications of a contrary decision:
One has only to consider the countless business establishments in this country with radio or television sets on their premises — bars, beauty shops, cafeterias, ear washes, dentists’ offices, and drive-ins — to realize the total futility of any evenhanded effort on the part of copyright holders to license even a substantial percentage of them.
Aiken, 422 U.S. at 162, 95 S.Ct. at 2047.
In response to Aiken, the Congress defined “performance” in the 1976 Act to include playing works by means of a device such as a radio. Nevertheless, the Congress also included an exemption for small commercial establishments. Thus, although the *267Congress changed the definition of “performance” used by the Court in Aiken, it acknowledged its practical wisdom in exempting the playing of a single radio:
The § 110(5) exemption will allow the use of ordinary radios and television sets for the incidental entertainment of patrons in small businesses or other professional establishments, such as taverns, lunch counters, hairdressers, dry cleaners, doctors’ offices, etc.
See S.Rep. No. 988, 93d Cong., 2d Sess. 130 (1974). In Claire’s Boutiques, the sound system installed consisted of a “Radio Shack Optimus STA-20 5-watt stereo receiver, two Realistic Minimus 7 speakers, an indoor antenna, and speaker wire.” 949 F.2d at 1485. The receiver was kept in the back storage room, and two strands of speaker wire ran from the receiver to the speakers, which were mounted inconspicuously on the ceiling. Id. The speakers were approximately five to fifteen and twenty to thirty-five feet from the receiver, respectively. Id. Keeping in mind the Congress’ intent to exempt small commercial establishments,9 this court delineated a four-part test for application of the § 110(5) exemption: “the exemption is available only if (1) a single receiving apparatus is used, (2) the single receiving apparatus is of a kind commonly used in private homes, (3) the transmission is provided free of charge, and (4) the transmission is not ‘further transmitted’ to the public.” 949 F.2d at 1489.10 Additionally, the court found the physical size of the establishment “relevant as indicative of the reach of a stereo system.” 949 F.2d at 1494.11 The focus, we stressed, must be on the entire audio reproduction system. Id. at 1493. If the Congress had wanted the review to be limited to the receiver, it would have used the word “receiver” and not “receiving apparatus.” Apparatus signifies “the totality of means by which a designated function is performed ... [or] a group of machines used together ... to accomplish a task.” Id. (quoting American Heritage Dictionary 120 (2d ed. 1982)).
Elaborating on the application of this “entire system” approach, Claire’s Boutiques identified two ways in which an establishment could fall outside the exemption created by § 110(5). First, if any non-home-type components are used, then the entire system must be considered a non-home-type system. Id. Second, if the establishment has configured the home-type equipment in a way not commonly used in a home, the. exemption is lost. Id. The critical factors are the “type and sophistication of the equipment used, the size of the area in which the broadcast is audible, and whether the equipment has been altered, augmented, or integrated in some fashion.” Id. at 1494. Further, it is notable whether the speakers and speaker wire were concealed. Id.12
*268In evaluating the record before it, the court in Claire’s Boutiques determined that Claire’s Boutiques remained within the exemption. Id. at 1494. The system was comprised of home-type components, and was configured in a way not uncommonly found at a home. Id. at 1493-94. Only two speakers were used; they were located close to the receiver, and there was a lack of integration of “other technologies” in the system. Id. at 1493. The sound system employed by Claire’s was a “receiving apparatus” comprised of home-type components, which were not augmented or altered; the transmission was free of charge, and was not “further transmitted” to the public.
B.
In applying the factors delineated in Claire’s Boutiques to the present case, we conclude that the first and third requirements of the § 110(5) exemption are met. The Port Town Family Restaurant’s sound system is comprised of a single receiving apparatus, and no fee is charged to the public to hear the music. It is, however, the second requirement — that an apparatus must be of the kind commonly used in a private home— upon which we must focus. The district court concentrated on the restaurant’s receiver, and reasoned:
More important than the number, size, spacing, and configuration of the speakers, I believe it makes more sense in cases like this to look to the type of receiving device used to receive the music and the type of place receiving the signal.
Cass County, 821 F.Supp. at 1282. The restaurant’s sound system utilizes a Realistic brand receiver, Model No. STA-700 AM/FM, sold at Radio Shack for approximately $200. The district court concluded that this model was the type of receiver that commonly would be used in private homes. Id. The district court believed that a small restaurant should not be liable when each store in the conglomerate retail chain, Claire’s Boutique, fell within the exception. The court stated:
To say that Port is liable because it has nine speakers and the shops in Claire’s only had two (four in Aiken) would be silly. Sophisticated “home entertainment” systems today often have multiple speakers to permit sound to be heard in various areas of a home. Although nine speakers in a home would be quite a few, that number would not be unprecedented.
We find ourselves in respectful disagreement with the conclusion of the district court. In our view, Claire’s Boutiques requires a different result. In Claire’s Boutiques, we held that, in determining what qualified as “a single receiving apparatus,” the entire sound system at a single location should be examined. Claire’s Boutiques, 949 F.2d at 1493. The record makes clear that the system in place at the Port Town Family Restaurant is more sophisticated than the individual system in Claire’s Boutiques. It cannot be characterized fairly as composed of only home-type components, nor can it be said to be configured in a manner commonly found in a home. Id. The Port Town music system utilizes, in addition to the Radio Shack receiver, a separate control panel containing five selector switches, nine speakers recessed into the dropped acoustic tile ceiling, and concealed wiring. Each speaker consists of a 12" aluminum grille, an 8" loudspeaker, and a 70 volt (70-V) loudspeaker line matching transformer. The total rated power output of the receiver utilized by the restaurant is 40 watts per channel. Without the addition of the transformers, the receiver is designed to drive only four speakers over moderate lengths of speaker cable. However, with the 70-V transformer attached to each speaker, the nominal impedance load level presented to the amplifier in the receiver is increased (from 8 ohms to approximately 10,000 ohms), consequently allowing for the use of small and moderate gauge speaker cable runs of up to 1000 feet without appreciable signal degradation. Additionally, because of the implementation of the transformers in the system configuration, the receiver effectively can power up to forty speakers wired in parallel, thirty-six speakers more than the receiver was designed to handle without overloading. R. 13, Ex. A. As the court noted in Claire’s Boutiques, the extent to which a system is augmented for the purpose of improving the performance is a relevant factor to consider. Id. at 1494. The nine speakers are evenly spaced within the 1500 square foot dining *269area. The parallel wiring of the speakers allows for easy installation of additional speakers at a later date. The set-up, known as a distributed 70 volt system, provides background music that is consistent and evenly audible throughout the public seating area.13
Although the system in Aiken — characterized by the congressional committee as the “outer limit” of the exception14 — used four speakers, we need not decide today whether a certain number of speakers is the absolute limit that may be attributed to a “homestyle” set. What is “a single receiving apparatus of a kind commonly used in private homes” must be determined on a case-by-case basis. Cf. Broadcast Music, Inc. v. U.S. Shoe Gorp., 678 F.2d 816, 817 (9th Cir.1982) (noting that a person of “ordinary intelligence” could understand the phrase “commonly used in private homes” and finding that phrase did not render Act void for vagueness). As the district court believed, there may be households in the United States in which a system similar to the one employed here can be found. It is important to note, however, that, under the prevailing test articulated in Claire’s Boutiques, the focus must be on whether the system, as installed and operated, is commonly found in homes. The system at issue here, when assessed in its totality, cannot be characterized fairly as such a system. The receiver clearly is used beyond the normal limits of its capabilities. Accordingly, the Port Town Family Restaurant is not exempt under § 110(5).
Conclusion
For the foregoing reasons, we reverse the ruling of the district court and remand for entry of judgment for the plaintiffs and the determination of the appropriate relief.
REVERSED AND REMANDED