Opinion
No. 96 C 2329
June 9, 2000
Alvin R. Becker, Gabriel B. Anthan, for Plaintiffs.
Burton S. Ehrlich, Edonard v. Rosa (via telephone), for Defendants.
MEMORANDUM AND ORDER
On February 24, 2000, we gave the parties until March 2, 2000, to file anything additional; they did not do so, and since then the matter has languished. Plaintiffs have prepared a draft judgment order. It reflects my findings and conclusions, and I therefore have signed it this day. I do not agree with defendants' proposed amendments and additions, other than to observe that plaintiffs should reissue the check, which, of course, can reflect the prior restrictions. The findings and conclusions orally delivered February 1, 2000, denied attorneys' fees and specifically held that the seminar was not a partnership and was plaintiffs' enterprise.
Plaintiffs' motion to dismiss counts 2, 3, 4, 5 and 8 is granted. The findings and conclusions deprive those counts of any factual basis for recovery. That still leaves open the slander and libel counts 6 and 7. We schedule a status on July 12, 2000, at noon, Chicago time, to determine how best to resolve those disputes. Mr. Rosa may participate by telephone. He should be available to receive a call at that time at a number he should furnish to the court.
JUDGMENT ORDER
THIS MATTER having come on for trial before the Court, the evidence having been heard and closed, the Court having heard argument in the matter and having made its rulings on the record as set forth in "Exhibit A" attached hereto, enters judgment pursuant to Rule 52 of the Federal Rules of Civil Procedure as follows:
Findings of Fact
The Court finds that the relationship between the parties commenced early in 1994 with the Defendants/Counterplaintiffs providing professional consultations and work on a script book and certain letters for the Plaintiffs/Counterdefendants on a work-for-hire basis. The parties agreed that the Defendants/Counterplaintiffs would be compensated at the rate of $125 per hour.
Later in 1994, the Defendants/Counterplaintiffs began work on a book, already in progress, entitled "How to Become Mortgage Free in Ten Years or Less Without Extra Payments," at the request of the Plaintiffs/Counterdefendants, also on a work-for-hire basis at the rate of $125 per hour. Through the end of 1994 and continuing into 1995, the Defendants/Counterplaintiffs continued their work on the book and began work on a seminar brochure and manual, both also works already in progress, and also committed to speaking at a seminar to be held in March, 1995. For all of this work, the Defendants/Counterplaintiffs submitted invoices to the Plaintiffs/Counterdefendants and requested and received payment at the rate of $125 per hour.
Sometime prior to May, 1995, the Defendants/Counterplaintiffs sent proposed drafts of a purported partnership agreement concerning the book in progress and the seminar brochure and manual to the Plaintiffs/Counterdefendants. The Plaintiffs/Counterdefendants did not agree to the proposed partnership and, instead, prepared three documents to be signed by the Defendants/Counterdefendants memorializing the parties prior agreement that the work performed by the Defendants/Counterplaintiffs did not create any rights of ownership or authorship, but rather, that the work was being performed on a work-for-hire basis.
The Defendants/Counterplaintiffs executed the three documents on May 17, 1995. The documents were executed freely and voluntarily, and not under any duress or impairment of thought. The Court finds the testimony of Plaintiffs'/Counterdefendants' witnesses, Joan Bakker and Marcia Beinlich, particularly credible on this issue. To the contrary, the testimony at trial of Donald Moine with respect to the signing of the three documents is materially at odds not only with other testimony given at trial, but also with his prior testimony during his deposition and with documents offered into evidence and affidavits proffered during the course of this litigation.
Similarly, the testimony of Defendants'/Counterplaintiffs' witness, Roger Pell, is of dubious credibility. Mr. Pell testified that the March, 1995 seminar was a disaster, yet later wrote a glowing endorsement letter about the seminar.
The audiotape recordings offered by the Defendants/Counterplaintiffs, to the extent that they may impeach the testimony of Sanford Mappa, lead only to the conclusion that Sanford Mappa created an expectation in Donald Moine s mind that they would get rich from working together on the seminars. However, Sanford Mappa's statements on the audiotapes never amounted to more than "puffing expectations" which were never realized. Nothing contained on the audiotapes, or in the other evidence offered by the Defendants/Counterplaintiffs, gives the Defendants/Counterplaintiffs intellectual property rights to the book, seminar manual or brochure.
Conclusions of Law
THE COURT ADJUDGES, DECREES AND DECLARES that the Plaintiffs/Counterdefendants are the sole owners and authors of the book entitled "How to Become Mortgage Free in Ten Years or Less Without Extra Payments," the seminar brochure and manual derived therefrom, the expressions contained therein, and the revenues derived therefrom, past, present and future.
The Plaintiffs/Counterdefendants are also entitled to judgment in their favor as to the Defendants'/Counterplaintiffs' counterclaim for copyright infringement (Count I of the Defendants'/Counterplaintiffs' counterclaim).
Costs of this action are awarded to the Plaintiffs/Counterdefendants pursuant to Rule 54(d)(1) of the Federal Rules of Civil Procedure.
THE COURT: Well, people, I have spent some time since we last met going through all this, and I do conclude that plaintiff is entitled to declaratory judgment. Let me explain briefly how I get there.
I must say that the case was, in my own mind, three words characterize or help to describe it, which was hyperbole, ego, and money.
Quite often in cases involving college professors disagreeing, they have a tendency to beat each other over the heads and shoulders with baseball bats, but I must say that in this case, people by and large made college professors look rather timid.
I have no doubt that Dr. Moine contributed significantly to the book and to the seminar brochure and the workbook, but that's really not the issue in the case. The issue is what rights by agreement Mr. Mappa and Dr. Moine had in the book and in the seminars and seminar material.
Two particularly credible witnesses as far as I was concerned were Joan Bakkar and Marcia Beinlich, especially Marcia Beinlich. From their testimony I conclude that there was an initial draft of the book, however imperfect, back in 1993. Dr. Moine did a little work on it in 1994, but his work was mostly done in February 1995 and thereafter.
The invoices are entirely consistent with Mappa's testimony. The relationship started off with consultations unrelated to a book or seminars, and it also related to work on a script book and various letters. There is no reference to a book until the August 31, 1994 invoice. At no time did the invoices reflect that any payments were an advance on book profits or royalties or on seminar profits. Mappa paid all of the seminar expenses, hardly an indication of a partnership.
I might note here that certainly a recurring theme here was that Dr. Moine economically was in a fairly bad position, and things happened here which may well be different from what he was normally doing, but it was work that brought him in somewhere in the area of about $40,000 in providing services, and as far as I am concerned, it basically was providing work for hire.
There did come a time when Dr. Moine sent proposed drafts of a purported agreement, but I am unable to conclude that Mappa ever agreed to such a proposal. He certainly had no incentive to lock himself into a four-year schedule of 24 seminars with a $240,000 guarantee. But such a proposal did trigger the events of May 17, 1995.
I have no doubt that Dr. Moine signed Plaintiffs' Exhibits a, B and C. His explanations were several. One was that he was tired, in pain, and heavily medicated. Another was that he was eager to get to work on the book, hardly work to be undertaken by a person whose mind was not properly functioning. Another was that he had to sign or Mappa would cut him out of the Kemper deal. Finally, Mappa told him it was to get a tax deduction, and he would tear it up. That is, it wasn't true and was necessary, as far as I could see, to get a fraudulent deduction.
That was not the only time in the trial that a witness testified to something that was really indefensible. I was struck by the fact that Pell testified that the seminar was a real disaster and then wrote a glowing endorsement letter explaining what a wonderful occasion it had been.
There are other versions of the events of May 17, 1995, as well, such as Dr. Moine's affidavit that he did not sign the exhibits and his deposition testimony that he did sign something, but the signatures on the exhibits were not his.
His preamble to the copyright registration was a general version of events at odds in material respects to his testimony.
In short, I conclude that plaintiff said that A, B and C were one memorial of what the agreement had always been, that Dr. Moine was to be paid for his services, but the book was Mappa's, and there was no seminar partnership, and it was Mappa's show. That does not mean that Dr. Moine did not have a right to be disappointed in the eventual outcome.
Perhaps I can consider the telephone tapes as impeachment resting on United States versus Havens, 446 U.S. 620 back from 1980, and if I did, I would have to conclude that Mr. Mappa did create an expectation in Dr. Moine's mind that the two of them were likely to work together to make millions from seminars, and that Kemper was the Golden Calf. But it never got beyond, well, as so much else was true in this case, puffing expectations of what glorious things were going to happen in the future and how everybody was going to become very rich. And, indeed, that really didn't even happen. The economics apparently were that Mappa had one successful seminar and a book that was hardly a New York Times best seller. Dr. Moine's expectations were disappointed, and he obviously thinks he was badly used, and he may have been badly used, but that does not give him rights in intellectual property in the circumstances that were presented.
One thing, Mr. Rosa, that you mentioned that I agree with you on is that a draft that mentions the Kobe earthquake which was in January of 1995 obviously was not written in 1993, and there were various other things that leave me in a somewhat puzzled state, but they were not, it seems to me, germane to the decision I had to make.
So that's where I am at.
MR. BECKER: Thank you, Your Honor.
MR. EHRLICH: Thank you, Your Honor.
MR. BECKER: May I ask a procedural question, sir?
THE COURT: Yes.
MR. BECKER: And that is as I understand it, a decision is not yet an order unless and until the clerk of the Court memorializes it in that form.
I cannot tell from what Your Honor has just done as to whether or not you expect or suggest or require that the lawyers draft something for your signature.
THE COURT: I think it would be a good idea, just because there have been so many pleadings in this case, to draft an order that covers what was covered because a lot of things were covered. I mean, there still are some other counts out there.
MR. BECKER: Counterclaim counts which were severed.
THE COURT: But I do think what we conclude today is that plaintiff is entitled to declaratory judgment, and that he or they have the rights to the intellectual property, and they don't prevail on a claim of copyright infringement because Dr. Moine never infringed a copyright even if it was valid.
MR. BECKER: Nor have we asserted such a claim.
THE COURT: And by the same token, it means that the counterclaim for copyright infringement is over and done with.
MR. BECKER: Very good.
MR. ROSA: Thank you, Your Honor. That was going to be my next question, but you have now clarified it.
THE COURT: So I think we need an order kind of bringing us up to speed, and which obviously is not going to get done this afternoon.
MR. BECKER: Yes, sir.
THE COURT: But if you have it when I come back, then maybe at the same time we can have a status and talk about what's left.
MR. BECKER: May I in your absence, sir, with notice to Mr. Rosa and local counsel, deliver to your minute clerk a proposed order and judgment with regard to plaintiffs' complaint, and Your Honor can then look at that, and if it's satisfactory, it can be entered, and then we can move onto the counterclaim after Your Honor's return?
THE COURT: Okay.
Yes, Mr. Rosa?
MR. ROSA: Well, yes, Your Honor. It was my understanding that the findings of fact and conclusions of law were going to be prepared by the Honorable Court.
THE COURT: Yes, and what I have just recited are my findings of fact and conclusions of law.
MR. ROSA: And, Your Honor, for clarification, it's my understanding that you would request respective counsel to prepare their own draft order?
THE COURT: I think the easiest thing to do is to have plaintiff prepare a draft, send it to you, and hopefully you can reach agreement on it. I mean, obviously, you aren't going to agree that that's the way you want it to come out, but you can agree hopefully that that's the way I ruled, and then I can enter it when I get back.
MR. ROSA: I appreciate that, Your Honor. One other question. I have the complaint in front of me, at least the prayer for relief. Your Honor indicated the declaratory relief, that plaintiff was entitled to declaratory judgment. But may I request the Court's indulgence from the standpoint of what this Court has determined in terms of their prayer for relief?
THE COURT: Well, actually at this point, we are governed less by the complaint than we are by the final pretrial order and what, in fact, the issues ultimately turned out to be.
MR. ROSA: All right. Well, in terms of one of the requests were for costs and/or attorneys' fees.
THE COURT: Well, I don't see — I mean, as a prevailing party, they are entitled to costs. They aren't entitled to attorneys' fees.
MR. ROSA: Thank you, Your Honor. That's the clarification I was requesting.
THE COURT: Okay?
MR. ROSA: At this time, Your Honor, I would like to thank you on behalf of myself and my client for the time and patience, for allowing us to present our case. We appreciate your consideration.
THE COURT: Well, thank you.
MR. MOINE: Thank you, Your Honor.
MR. ANTMAN: Your Honor, should we just expect a status date to issue from the Court since Mr. Haynes isn't in here?
THE COURT: Why don't we do it right now. Mr. Rosa, obviously, if you want to be patched in on that, we can do that by the telephone also.
MR. ROSA: Yes. I appreciate that, Your Honor.
THE COURT: There is absolutely no point in getting on an airplane.
MR. ROSA: Especially with what happened last night.
THE COURT: How about February —
MR. BECKER: Should we ask Mr. Haynes to come in, Judge?
THE COURT: Actually I can figure it out. Let's figure February 24th at 10 o'clock.
MR. BECKER: That will be fine.
MR. ANTMAN: We will be here.
MR. EHRLICH: Okay.
0 (Discussion off the record.)
MR. ANTMAN: Judge, I will let Mr. Haynes know, if you would like, the date that you selected.
THE COURT: Okay.
MR. BECKER: Thank you.
MR. ANTMAN: Thank you, Judge.
MR. EHRLICH: Thank you.
MR. ROSA: Have a good day. Thank you, Your Honor. Thank you, gentleman.
THE COURT: Bye.
MR. EHRLICH: Bye.
Proceedings concluded.)
CERTIFICATE
I, K. Joseph Snyder, do hereby certify that the foregoing is a partial, true, and accurate transcript of the proceedings had in the above-entitled case before the Honorable JAMES B. MORAN, one of the judges of said Court, at Chicago, Illinois, on February 1, 2000.
BERTHOLD TYPES LTD. v. ADOBE SYSTEMS, INC., (N.D.Ill. 2000)
BERTHOLD TYPES LTD., an Illinois corporation, Plaintiff, v. ADOBE SYSTEMS, INCORPORATED, a Delaware corporation, Defendants. No. 00 C 1490 United States District Court, N. D. Illinois, Eastern Division. June 12, 2000
Douglas N. Masters, Pattishall, McAuliffe, Newbury, Hilliard Geraldson, Chicago, IL., for Plaintiff
James A. McGurk, Robert A. Filpi, Stack, Filpi Kakacek, Chicago, IL., Defendant
MEMORANDUM OPINION AND ORDER
ELAINE E. BUCKLO, JudgeBerthold Types, Inc., of Chicago, Illinois, markets typefaces; Adobe Systems, Inc., of San Jose, California, markets computer software, including software for computer typefaces. The Adobe Type Library, a collection of typefaces, is included in a piece of software in Adobe's repertoire (the "Library"), and it incorporated, among others, Berthold typefaces under a 25-year agreement executed in 1990. In October 1997, the 1990 agreement was replaced by a new typeface license agreement (the 1997 agreement). Berthold alleges that it has learned that Adobe has removed all the Berthold typefaces from the Library, no longer grants license extensions for the Berthold typefaces to purchasers of the Library, and falsely represents orally to customers that Berthold sells Adobe fonts software containing Berthold typefaces at higher prices than Adobe sells or sold these typefaces. Berthold also alleges that Adobe contacted Freydank Koerbis Pillich Talke GbR of Germany ("FKPT") about settling a claim against Adobe that FKPT assigned to Berthold as part of a settlement agreement (in another lawsuit) providing in part that FKPT would let Berthold use its best efforts to collect consideration from Adobe.
In its first amended complaint, Berthold sued Adobe for breach of contract (Count I), false advertising under the Lanham Act, 15 U.S.C. § 1125 (a) (Count II), and consumer fraud and deceptive trade practices under Illinois law (Count III), as well as unjust enrichment (Count IV). In the second amended complaint, Berthold dropped the unjust enrichment claim, and substituted as Count IV a claim of intentional interference with contract. Adobe moves to dismiss Berthold's first amended complaint, and Berthold moves to file a second amended complaint. I grant these motions in part and deny them in part.
Berthold's breach of contract count fails to state a claim because the term that Adobe allegedly breached, to continue to include Berthold typefaces, by its own admission is not within the four corners of the contract. Illinois uses in general a "four corners" rule in the interpretation of contracts. Bourke v. Dun Bradstreet, 159 F.3d 1032, 1036 (7th Cir. 1998). When there is no ambiguity, contract terms must be determined "from the language of the [contract] alone." Flora Bank Trust v. Czyzewski, 583 N.E.2d 720, 725 (Ill.App.Ct. 1991). Moreover, when an unambiguous contract is fully integrated, extrinsic evidence is not considered. See Air Safety, Inc. v. Teachers Realty Corporation, 706 N.E.2d 882, 884-86 (Ill. 1999).
Berthold admits that the term requiring Adobe to continue to include its typefaces is not in the contractual language and that the 1997 agreement is fully integrated. Nevertheless, Berthold, arguing that this transaction involves a UCC Article 2 sale of goods, wants me to read this term into the contract from the course of dealing between the parties. See Scott v. Assurance Co. of America, 625 N.E.2d 439, 443 (Ill.App.Ct. 1994) (Even without ambiguous language, a course of dealing between the parties is admissible to explain, supplement, or add to the agreement, but not contradict a written contract.).
However, the UCC does not apply to this transaction because it involves only granting a license and not a sale of goods. A transaction involving a computer program can involve an Article 2 sale of goods, see Analysts Int'l Corp. v. Recycled Paper Products, Inc., No. 85 C 8637, 1987 WL 12917, at *2 (N.D. Ill. June 19, 1987) (unreported case)), but an agreement that does not involve a transfer of title cannot be an Article 2 sale in Illinois. "A `sale' is defined as `the passing of title from the seller to the buyer for price.'" Lukwinski v. Stone Container Corp., 726 N.E.2d 665, 668 (Ill.App.Ct. 2000) (citing 810 ILCS 5/2-106(1)). A pure license agreement, like the 1997 agreement, does not involve transfer of title, and so is not a sale for Article 2 purposes.
Berthold invokes Capitol Converting Equipment, Inc. v. LEP Transport, Inc., 965 F.2d 391, 395 n. 5 (7th Cir. 1995), which appears to apply the notion of course of dealing outside the Article 2 context. In Illinois, however, a course of dealing will not "be applied to contravene an established rule of law," Vermilion County Production Credit Assoc. v. Izzard, 249 N.E.2d 352, 355 (Ill.App.Ct. 1969), and the "four corners" rule is such an established rule here. See Air Safety, above. Samuel Goldwyn once said that "An oral contract isn't worth the paper it's written on." If I were allow Berthold to argue its way past plain language and and integration clause, neither would a written contract.
Berthold's Lanham Act count is based on the idea that Adobe's advertising conveys a false or misleading impression in context, see Abbot Laboratories v. Mead Johnson Co., 971 F.2d 6, 13 (7th Cir. 1992) (Lanham Act prohibitions), here, that the Library still contains Berthold typefaces, by using the phrase "Adobe Type Library." What Adobe sells is in fact the Adobe Type Library, as advertized, but Berthold's argument is that people will be mislead into thinking that the Library must still contain Berthold typefaces because it once did. Berthold alleges that "the common understanding in the relevant market is that the Adobe Type Library includes the Berthold typefaces."
Under this theory, the only way that Adobe could avoid Lanham Act liability would be to prominently post on Library software some warning notice to the effect that "This product no longer contains Berthold typefaces." Generalized, this would in effect require any seller of software bundles or any bundles of intellectual property, such as a book catalog, the contents of which change from time to time but which are widely understood to contain certain items, to prominently post all changes, advertising which products it no longer contains. Otherwise there would be litigation about which items it is commonly understood that it does contain every time an item was dropped. That is a reductio.
Berthold's fraud allegations fail to state a claim because Berthold does not allege that Abode or its representatives engaged in any fraud or deception. Illinois statute bans "any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon [it]." 815 ILCS 510/2. Both under the statute and with common law fraud, one element to be proved is that "the party making the statement must know or believe it to be untrue." Tague v. Molitor Motor Co., 487 N.E.2d 436, 438 (Ill.App.Ct. 1985). But Berthold alleges only that Adobe or its representatives "represent to Adobe's customers that Berthold sells Adobe font software containing the Berthold typefaces at a higher price than Adobe sells or sold the same typefaces," and that this is not true. Berthold does not allege that Adobe knew the statement was untrue or intended to misrepresent anything to anyone. In analyzing this motion, I must assume that Adobe did convey this misinformation to its customers, but stating something that is untrue is not fraud or a deceptive trade practice if it is unwitting and innocent, and Berthold does not say that it was not.
In its second amended complaint, Berthold drops its claim of unjust enrichment made in the first amended complaint, so I dismiss this count by consent of all parties.
Adobe's motion to dismiss Count I (breach of contract), Count II (false and misleading advertising), Count III (fraud, deceptive trade and business practices), and Count IV (unjust enrichment) of the plaintiff's first amended complaint is GRANTED, and the complaint is DISMISSED without prejudice. Berthold's motion to file a second amended complaint is GRANTED as to Count TV only (the intentional interference with contract claim). Counts I-III in the second amended complaint are identical with those in the First Amended Complaint, and so have already been dealt with.