Opinion
02 Civ. 6284 (JFK)
December 17, 2002
Richard A. Hubbell, THE DWECK LAW FIRM, LLP; New York, New York, Counsel for Plaintiffs
Paul R. Levenson, Ashima Aggarwal, KAPLAN GOTTBETTER LEVENSON, LLP; New York, New York, Counsel for Defendant
OPINION AND ORDER
Background
Plaintiffs Sunham Home Fashions, LLC ("Sunham") and Kam Hing Enterprises, Inc. ("Kam Hing") have moved for a Preliminary Injunction against Defendant Pem America, Inc. ("Pem America"). The plaintiffs allege that Pem America infringed upon their copyrights and trademarks by the importation and sale of certain quilts to Garden Ridge, Inc. ("Garden Ridge"). A Temporary Restraining Order, prohibiting the further sale of the quilts, has been in place in this action since August 9, 2002. The findings of fact in this decision stem from the filings of the parties and an evidentiary hearing held over the course of three days from September 30, 2002 to October 2, 2002.
In its Complaint, plaintiffs claim trademark, Lanham Act and unfair business violations on the part of the defendant. Despite this fact, little or no discussion of these claims was offered during the evidentiary hearing, and the plaintiffs do not raise these issues in their Proposed Findings of Fact and Conclusions of Law submitted in conjunction with this motion. For that reason, the Court will not address those claims in this decision.
Findings of Fact
Sunham is a limited liability company organized and existing under the laws of the State of New York. See Am. Compl. Ex. 1, ¶ 1. Sunham is a wholly owned subsidiary of Kam Hing, a New York corporation. See id. ¶¶ 2-3. Pem America is also a New York corporation. See id. ¶ 4. Both Sunham and Pem America are designers, manufacturers, importers and wholesalers of textiles. See id. ¶¶ 4, 8; Tr. 138-39. In particular, both companies design, manufacture, import and sell to retailers quilts and related bed linens such as pillow shams.
"Tr." refers to the page number of the evidentiary hearing transcript.
Of relevance to this action are six quilt and sham patterns created by Sunham that are named "Woodbury", "Chapel Hill", "Lexington", "Spring Breeze", "American Rose" and "Country Road — Long Star" (collectively, the "Allegedly Infringing Quilts"). See id. ¶ 10. Each quilt is made up of a series of small fabric designs stitched together. Sunham has obtained registrations from the United States Copyright office for many of the individual fabric designs used in its quilts. See Am. Compl. ¶ 9.
For several years, Sunham has sold the quilts, which were designed and manufactured in China, to retailers in the United States. See id., ¶ 10. Sunham sells primarily to large department stores and discount retailers. Some products are sold to both department stores and discount retailers, but certain products are sold exclusively to Sears under the label of "Open Home". The "Open Home" line of bedding was developed exclusively for Sears and is intended to be a slightly higher-end product line than what is sold to discount retailers such as Garden Ridge. Tr. 255-56.
On July 17, 2002, Sam Glasnapp ("Glasnapp"), an Assistant Sales Manager of Sunham, received an e-mail from Dennis Conte ("Conte"), an independent sales representative who handles Sunham's account with Garden Ridge, regarding recent shipments to Garden Ridge from Pem America. Glasnapp Aff. ¶¶ 1-4. Conte informed Glasnapp that he had received an e-mail from Mike Serinaldi ("Serinaldi"), a buyer for Garden Ridge, asking whether Sunham was selling Pem America quilts because quilts Garden Ridge purchased from Pem America were delivered with Sunham inserts. Id. ¶ 5. The term "inserts" refers to the piece of artwork that is placed in the clear plastic packaging of the quilts to indicate the maker, size and contents of the product. The inserts typically include a photograph of a bed with the quilt and matching pillow shams on it.
On July 21, 2002, Glasnapp received an e-mail directly from Serinaldi. Seranaldi wrote:
Sunham Quilts delivered compliments of Pem America.
No UPC codes, Assorted inserts, some "Quilt Set" inserts indicate that the product comes with matching shams. Most quilt sets in these boxes do not have the matching shams as indicated on the insert.
I know that this is not your shipment, but it is your product and my stores and my customers now have a very bad image of your company.
Hope this helps you uncover how this problem has happened.
Pl. Ex. 19.
A few days after Seranaldi's e-mail to Glasnapp, Dean Devaros ("Devaros"), Sunham's National Sales Manager, received two phone calls from upset retail customers. Each customer complained that she had purchased Sunham quilts from Garden Ridge, and that the packaging indicated that shams were included when in fact they were not. According to Devaros, the customers believed they were entitled to "restitution," and that "Sunham had engaged in unethical conduct." Devaros Aff. ¶ 2; Tr. 59-61.
Concerned by the e-mails and telephone calls, Sunham, through an agent, purchased six quilts — one of each of the Allegedly Infringing Quilts — at a Garden Ridge store. A. Compl. ¶ 18. Each of the quilts included an insert indicating that the product was made by Sunham. Yung Aff. ¶ 14. Each insert also identified the quilts as part of Sunham's "Sleep" brand and included Sunham's website address and United States Custom's registration numbers. Pl. Exs. 11-16. The quilts themselves were identical in design and pattern to those created and sold by Sunham. The tags attached to the quilts, however, stated that the items were imported by Pem America. Id.
This is not the first time that Sunham has accused Pem America of infringing upon its copyrights and trademarks. In the past, Sunham has been forced to issue cease and desist letters to Pem America. On no fewer than three occasions Pem America has entered into settlement agreements with Sunham to avoid litigation over alleged infringements. Pl. Exs. 20-28.
Pem America does not deny that it imported and sold approximately 5,400 of the Allegedly Infringing Quilts to Garden Ridge. Wang Aff. ¶ 3; Tr. 132. Pem America claims that in January of 2002 it received a "specialty close-out order" from Garden Ridge to be filled using fabrics leftover with Pem America's manufacturer in China, An Hui Garment Import and Export Co., Ltd. ("An Hui"), from previous Pem America orders. In turn, An Hui hired Taicang Empress Textile Products Co., Ltd. (the "Factory") to produce the actual quilts. In the defendant's version of the facts, the Factory sent the Allegedly Infringing Quilts to Garden Ridge without Pem America's knowledge. Tr. 132.
According to Pem America, prior to receiving Pem America's order, the Factory had been engaged by Shanghai Hua Chang Textile Printing and Dying Co., Ltd. ("Hua Chang") to fulfill an order for quilts placed with Hua Chang by Sunham. Wang Decl. ¶ 9. Pem America claims that Sunham cancelled the order after the Factory had already produced some of the quilts and obtained the fabric for others. Left with surplus quilts and fabric and unable to convince Sunham to purchase the goods, Pem America asserts that the Factory obtained permission from Hua Chang to sell the quilts and fabric on the open market. The Factory, in turn, used the remaining quilts and fabric from Sunham's cancelled order to fulfill Pem America's "close-out" order. Def. Prop. Findings of Fact Concl. of Law ¶ 43.
Although the defendant's version of the facts is somewhat dubious, because Pem America concedes that it imported the Allegedly Infringing Quilts and for reasons explained herein, the Court need not reach a conclusion as to exactly how the Allegedly Infringing Quilts came to be sent to Garden Ridge in order to decide this preliminary injunction motion. The inescapable fact is that. the Infringing Quilts were sent to Garden Ridge.
Conclusions of Law
Standard for Granting a Preliminary Injunction
In order to obtain a preliminary injunction in this Circuit, a party must demonstrate in the absence of the injunction (I) that the party will suffer irreparable harm and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits to make them fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor. Random House, Inc. v. Rosetta Books LLC, 283 F.3d 490, 491 (2d Cir. 2002); Hasbro Bradley, Inc. v. Sparkle Toys, Inc., 78 () F.2d 189, 192 (2d Cir. 1985). When a preliminary injunction is sought to protect a copyright, irreparable harm may ordinarily be presumed upon a showing of a prima facie case of copyright infringement. See Wainwright See, Inc. v. Wall St. Transcript Corp., 558 F.2d 91, 94 (2d Cir. 1977). "A prima facie case of copyright infringement consists of proof that the plaintiff owns a valid copyright and the defendant has engaged in unauthorized copying." Hasbro Bradley, 780 F.2d at 192; see also Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d 1090, 1092 (2d Cir. 1977); Harrison/Erickson, Inc. v. Chicago Bulls Ltd. P'ship, 1991 WL 51118, *4 (S.D.N.Y.) (Leisure, J.).
Validity of Kam Hing and Sunham's Copyrights
Ordinarily a copyright will be presumed valid if the claimant can produce a copyright certificate. 17 U.S.C. § 401 (c); see also Gaste v. Kaiserman, 863 F.2d 1061, 1064 (2d Cir. 1988). The plaintiffs have produced certificates of copyright registrations from the United States Copyright office for many of the individual fabric designs used in its quilts. Pl. Exs. 2-10. Because the production of the certificates creates only a presumption of validity, the defendant can attempt to rebut the presumption and force the plaintiffs to prove the copyrights are valid. See Durham Indus., Inc. v. Tomy Corp., 630 F.2d 905, 908 (2d Cir. 1980). According to Pem America, the presumption of validity is overcome because "the holder knowingly failed to advise the Copyright Office of facts that might have occasioned a rejection of the application[s]," and thereby committed a fraud on the Copyright Office. Def. Prop. Findings of Fact and Concl. of Law ¶ 66.
Sunham has also produced copyright registrations for each of the six Allegedly Infringing Quilts as a whole. These registrations, filed with the Copyright Office on August 5, 2002, were not included in the Plaintiffs' Complaint or First Amended Complaint. Nor had the Copyright Office issued the copyrights as of the date of the evidentiary hearing on this matter. Tr. 55. Full and proper registration is a prerequisite for Kam Hing to sue for infringement of the copyrights of the Allegedly Infringing Quilts. See Morris v. Bus. Concepts, Inc., 259 F.3d 65, 68 (2d Cir. 2001); Whimsicality, Inc. v. Rubie's Costume Co., 891 F.2d 452, 453 (2d Cir. 1989). Therefore, these registrations will not be considered by the Court in reaching its decision.
Pem America claims Kam Hing fraudulently designated the fabric designs at issue as "works made for hire" on their respective copyright registrations. Def. Prop. Findings of Fact and Concl. of Law ¶ 71;see also Pl. Exs. 2-10 (indicating that each design is registered as a work made for hire). Pem America maintains that the designs were produced by independent contractors and are not works made for hire. Thus, according to the defendant, the registration applications are misleading and amount to a fraud on the Copyright Office and the registrations should not be considered valid. See Whimsicality, Inc. v. Rubie's Costume Co., Inc., 891 F.2d 452, 455-56 (2d Cir. 1989) (finding claimant committed fraud on the Copyright Office by designating its product as a "soft statue" instead of a costume); Arch Assocs., Inc. v. Hedaya Bros., Inc., 1993 WL 426888, *4 (S.D.N.Y.) ("The validity of a Certificate should not be presumed where evidence casts doubt upon its integrity.").
A work is deemed to have been made for hire if (1) it is made by an employee within the scope of the employee's employment, or (2) it is specially ordered or commissioned, fits within one of the specifically enunciated categories set forth in 17 U.S.C. § 101(2), and the parties expressly agree in a written instrument that the work shall be considered one made for hire. See Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730 (1989). The copyright statute does not define "employee", therefore courts must use the principles of common law agency to determine whether a work was created by an employee or an independent contractor. Id. at 751. Reid specifically sets forth the most relevant factors to be considered in reaching this conclusion. Among the factors are: the source of the instruments and tools used to create the work; the skill required; the extent of the hired party's discretion over when and for how long to work; how the person is paid; and whether the hired party is in business. Id. at 751-52.
All but one of the designs at issue in this litigation were created by an artist named Cui Huarong ("Cui"). See Tr. 28-29. The other design at issue was created by Tom Cody ("Cody"). See id. at 27. When questioned about the nature of the work arrangement between Kam Hing and Cui, Howard Yung ("Yung"), the President of Kam Hing and Managing Member of Sunham, testified that Cui was a "free-lancer" who maintained his own hours, worked with his own materials and was paid per design. Id., at 25. Analyzing this testimony in light of the factors set forth in Reid, it is clear that Cui was acting as an independent contractor and not an employee of Sunham. Thus, Cui's work can only be considered a work made for hire if it fits within one of the categories specifically enunciated in Section 101(2) of the statute, and there was a written and signed agreement between the parties that it be considered a work made for hire. Playboy Enters., Inc. v. Dumas, 53 F.3d 549, 558 (2d Cir. 1995). The design does not fit within one of the categories, and the claimant has not proffered any evidence of a written agreement. For these reasons, Cui's designs cannot be deemed to be works made for hire. Although the testimony of Yung with respect to the nature of the work arrangement between Kam Hing and Cody was limited to an acknowledgment of Cody as a "free-lancer," there is little reason for the Court to believe he too was anything but an independent contractor.
Cui was subsequently hired as an employee of Sunham. Tr. 23-24.
Does the fact that Kam Hing designated the designs as works made for hire constitute a fraud on the Copyright Office? Pem America argues that it does because the Copyright Office would not have registered the applications had it known they were not works made for hire. Def. Prop. Findings of Fact Concl. of Law, ¶ 79. The misrepresentation is significant because it goes directly to the question of ownership. If the designs are nor works made for hire, Kam Hing is not the "author" and owner of the works' rights. 17 U.S.C. § 201 (a), (b) (defining "author"); see also Reid, 490 U.S. at 737 (stating that ownership of copyright rights reside with a work's author). For this reason, had the Copyright Office known that Kam Hing was not the author of the designs, it is entirely possible that it would have rejected Kam Hing's application.
The significance of the misrepresentation alone is not grounds to find a fraud has been committed, however. "Only the `knowing failure to advise the Copyright Office of facts which might have occasioned a rejection of the application constitute[s] reason for holding the registration invalid and thus incapable of supporting an infringement action." Eckes v. Card Prices Update, 736 F.2d 859, 861-62 (2d Cir. 1984) (quoting Russ Berrie Co., Inc. v. Jerry Elsner Co., Inc., 482 F. Supp. 980, 988 (S.D.N.Y. 1980). Where the misrepresentation can be construed as inadvertent, innocent or unintentional, it is insufficient to rebut the presumption of validity. Lida v. Texollini, Inc., 768 F. Supp. 439, 442 (S.D.N.Y. 1991). Thus, Kam Hing must have designated the designs as works made for hire with the intention of misleading the Copyright Office to approve an application it otherwise believed might be rejected.
The facts adduced at the evidentiary hearing indicate that Kam Hing acted innocently, even if irresponsibly. Yung testified that the applications for copyright protection were filled out by employees in Kam Hing's design department. See Tr. 34-35. It is sensible to believe that in filling out the applications designers would fail to understand the legal significance of the phrase "work made for hire" and, considering the circumstances of their creation, view the designs as such. Without evidence that the registration applications were filled out with the active intention of misleading the Copyright Office, the misrepresentation does not rise to the level of fraud. In Lida, Judge Duffy similarly reasoned that a claimant who had purchased the rights to a design from its author but designated itself as the author on the registration had not committed fraud. Rather, the court found the claimant to have committed an inadvertent and unintentional error insufficient to rebut the presumed validity of the copyrights. Lida, 768 F. Supp. at 442.
As in Lida, claimant Kam Hing possesses assignments of the rights.
Although the Court does not believe a fraud was committed upon the Copyright Office, assuming one was, the import of such a finding would be to shift the burden of proving validity of the copyright back to the claimants. See Tuff `N' Rumble Mgmt., Inc. v. Profile Records, Inc., 1997 WL 158364, *2 (S.D.N.Y.). Kam Hing must therefore demonstrate that it has original and copyrightable subject matter. See Feist Publ'n, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 345 (1991). Pem America contends that Kam Hing cannot meet this burden because there is nothing original about plaid and floral designs. Def. Prop. Findings of Fact Concl. of Law, ¶ 88-92.
Pem America also challenges the copyright on the basis that Kam Hing sailed to inform the Copyright Office that its designs were derivative works. Pem America maintains that the Copyright Office was denied the opportunity to determine whether or nor the works were sufficiently original to merit protection. For reasons explained infra, the Court believes that the designs are original and not derivative works. As such, there was no need for Kam Hing to label the designs as derivative works. Nor does failing to label them as derivative amount to fraud. See Lida, 768 F. Supp. at 442.
Furthermore, because the Court is willing to engage in an analysis of the copyright's validity without relying on the presumption created by the registrations, there is no need to discuss the impact of not designating the designs as derivative works on the presumption of validity.
In Feist, the Supreme Court stated:
Original as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity. To be sure, the requisite level of creativity is extremely low; even a slight amount will suffice. The vast majority of works make the grade quite easily, as they possess some creative spark, no matter how crude, humble or obvious it might be. Originality does not signify novelty; a work may be original even though it closely resembles other works so long as the similarity is fortuitous, not the result of copying.499 U.S. at 345 (citations and quotation marks omitted); see also Rogers v. Koons, 960 F.2d 301, 307 (2d Cir. 1992) ("[T]he quantity of originality that need be shown is modest — only a dash of it will do."); Thomas Wilson Co., Inc. v. Irving J. Dorfman Co., Inc., 433 F.2d 409, 411 (2d Cir. 1970) ("[T]he required creativity for copyright is modest at best."). Having examined each of the designs at issue, the Court is of the opinion that there exists at least modest originality. Although the idea of a plaid or floral pattern may not of its own be original, the patterns' sizes, shapes, arrangements and colors taken together are original and copyrightable.
The Court's opinion is supported by Boisson v. Banian, Ltd., 273 F.3d 262 (2d Cir. 2001), which offers a strikingly similar set of facts and arguments to those in this action. In Boisson, the plaintiff was the holder of copyrights related to the designs of two quilts. Each of the quilts consisted of square blocks containing capital letters of the alphabet, displayed in order. The blocks, set in rows and columns, were different colors. Id., at 266. The defendant was found to have infringed upon the plaintiffs copyright by marketing quilts that were substantially similar to the plaintiff's. Id., at 276. In reaching its holding, the Second Circuit stated that a particular layout for a design may be original and protectible. Id., at 269. Furthermore, the court agreed with the argument that an original combination of colors should be regarded as an artistic expression capable of copyright protection. The court reasoned, "[E]ven though a particular color is not copyrightable, the author's choice in incorporating color with other elements may be copyrighted." Id., at 271.
In each of the claimants' designs it is apparent that careful thought went into the colors used, the size of the shapes in the designs and the spacing of the designs' patterns. The thought that went into each of the designs is evidenced in Yung's testimony at the evidentiary hearing. Asked about his instructions to Cui regarding the commission of a particular design, Yung testified that he had requested: "[A] summer/spring kind of feeling with pink and blue colors. . . . It has to be fresh looking . . . and the flower has to be in a medium scale size." Tr. 24.
Having established that the designs are original and copyrightable, the only remaining question with respect to the validity of the copyright is whether the claimants, namely Kam Hing, actually own the copyrights. As is discussed supra, Kam Hing is not the author of the designs because the designs were created by another party and are not works made for hire. Accordingly, Kam Hing must possess written transfers of copyright ownership in order to be considered the owners. 17 U.S.C. § 204. Kam Hing has proffered written assignments for eight of the nine fabric designs at issue in this litigation. Kam Hing has failed to produce a transfer for the design KH 525 created by Cody.
The assignments for KH 007, KH 144, KH 161, KH 158, KH 135, and KH 013 are attached as Exhibit M to the Declaration of Ashima Aggarwal. The assignment for KH 481 is attached to the letter of November 20, 2002 from Ashima Aggarwal, Esq. to the Court. The assignment for KH 321 is attached to the letter of November 22, 2002 from Richard A. Hubbell, Esq. to the Court.
Pem America says that the transfers should be discounted because they are written in English, and Cui, the transferor in each instance, does not speak English. Furthermore, none of the assignments identify Kam Hing or Sunham as the assignees, and all are undated. Def. Prop. Findings of Fact Concl. of Law, ¶¶ 86-87. As evidence of the fact that Cui does not speak English, Pem America has submitted the deposition testimony of Yung in a separate action. Aggarwal Decl. Exh. O. During his examination, Yung testified that Cui does not speak English. Id. In the same testimony, however, Yung explained that when having Cui sign transfers he has someone translate them for him and make certain he understands what he is signing. Id. There is no reason to believe that Cui did not understand what it was he was signing. Nor has Pem America provided the Court any reason to believe that Cui was forced to sign the transfers against his will, or that had Cui wanted a translation he would not have received one.
The deposition was taken in Kam Hing Enters. v. Zheng Zhang USA, Inc., on August 15, 2000.
The testimony actually refers to an individual named Cai Hui Yong, not Cui Huarong. The Court assumes that the two individuals are actually one and the same and that the reporter, understandably, was unclear as to the correct spelling of Cui's name. Pem America certainly implies as much by submitting this portion of the deposition transcript as evidence of Cui's lack of knowledge of the English language.
With respect to the lack of a designated assignee, the copyright statute states that "[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent." 17 U.S.C. § 204 (a). Although common sense, good business judgment and even a modicum of legal intuition dictate that a transfer should clearly name the transferee, neither the statute nor the case law require it. The purpose of the writing requirement is to resolve disputes between copyright owners and transferees about the status of the copyright. Where there is no such dispute, it would be "unwarranted to permit a third-party infringer to invoke section 204(a) to avoid suit for copyright infringement." Imperial Residential Design, Inc. v. Palms Dev. Group, Inc., 70 F.3d 96, 99 (11th Cir. 1995).
Furthermore, as the transfers do not contain merger clauses, the Court is permitted to examine extrinsic evidence in considering them. See P.C. Films Corp. v. MGM/UA Rome Video, Inc., 138 F.3d 453 (2d Cir. 1993);Bourne v. Walt Disney Co., 68 F.3d 621 (2d Cir. 1995). There is enough extrinsic evidence to believe that the transfers are in Kam Hing's favor. Each of the pattern names begins with the letters "KH," which Yung testified stands for "Kam Hing." Tr. 30. In addition, Cui is now an employee of Sunham. Tr. 23. These factors, taken in conjunction with the fact that the transfers were in Kam Hing's possession, provide reason to believe that the transfers were to Kam Hing. That the transfers are undated does not prevent them from being effective because the writings may follow earlier oral transfers. See Eden Toys, Inc. v. Florelee Undergarment Co., Inc., 697 F.2d 27 (2d Cir. 1982)
For the foregoing reasons, claimants are deemed to have established a copyright in each of the fabric designs, except KH 525. The KH 525 design is not a work made for hire, and Kam Hing has failed to provide a transfer from Tom Cody for this design.
The Contention of Authorized Infringement
Pem America argues that the plaintiffs' claim of copyright infringement fails because the defendant's actions with respect to the quilts were authorized. According to Pem America, because Hua Chang was permitted to subcontract the manufacture Sunham's goods, Hua Chang became Sunham's agent. Thus, Hua Chang was cloaked with the apparent authority to permit the Factory to sell the leftover fabrics on the open market.
The fact that Sunham submitted purchase orders to Hua Chang and allowed Hua Chang to engage subcontractors does not create an agency relationship between Sunham and Hua Chang. Hua Chang was in no position to authorize the Factory to sell the goods to a third party. "[A]n agent must have authority, whether apparent, actual or implied, to bind his principal."Merril Lynch Interfunding, Inc. v. Argenti, 155 F.3d 133, 122 (2d Cir. 1998). In order for Hua Chang to have been considered Sunham's actual or implied agent, Hua Chang would have had to have been able to reasonably infer that Sunham had consented to Hua Chang taking certain actions on its behalf. See Minskoff v. Am. Express Travel Related Servs. Co., Inc., 98 F.3d 703, 708 (2d Cir. 1996). At no point did Sunham imply that Hua Chang could sell Sunham's copyrighted fabrics, Tr. 94, and at no point did Hua Chang ever believe it was authorized to sell or liquidate Sunham's copyrighted fabrics. Pl. Ex. 28.
Similarly, Hua Chang lacked apparent authority to sell or liquidate Sunham's copyrighted fabrics. Apparent authority is created by the words and conduct of the principal as they are interpreted by a third party.See Minskoff, 98 F.3d at 708. The principal itself must manifest to the third party that it "consents to have the act done on [its] behalf by the [entity] purporting to act for [it]." Fennell v. TLB Kent Co., 865 F.2d 498, 502 (2d Cir. 1989) (quoting Restatement (Second) of Agency § 8 (1958)). Apparent authority, therefore, cannot be created by the agents own actions or representations. Id. Pem America has provided no evidence that Sunham had any contact with the Factory or did anything to manifest an intention that Hua Chung act as its agent. Just as contracting with a designer for a pattern does not make the designer an employee, simply contracting with Hua Chang to manufacture quilts does not create an agency relationship.
Considering that Pem America concedes that it sold the Allegedly Infringing Quilts to Garden Ridge, Wang Decl. ¶ 3 ("Pem America admits that, as a technical matter, it did sell the Allegedly Infringing Goods to Garden Ridge."), the Court need not address whether the defendant copied the claimants' designs.
Declaration of Gu Wei Laing
On November 20, 2002, the Court received from plaintiffs what is purported to be a Declaration from Gu Wei Liang ("Gu"), a former manager of Hua Chang, dated October 28, 2002. The declaration, which is the third one submitted to this court under Gu's name, alleges that the prior declarations bearing his signature are forgeries. The defendant, who submitted the prior two declarations, sent a letter to the Court on November 26, 2002, questioning the authenticity of the latest Gu declaration and requesting that the Court reopen the record and allow for further discovery. Because the Court does not rely on any of the submissions bearing Gu's signature or the substance of his communications with the Factory in reaching its decision regarding a preliminary injunction, the defendant's request is hereby denied.
The correspondence relating to this matter is, however, entered into the record of the case. Should this case proceed to trial, the parties are free to raise this issue and the Court will again consider whether further discovery is warranted.
Plaintiffs' Rule 65(a)(2) Application
Pursuant to Rule 65(a)(2) of the Federal Rules of Civil Procedure, plaintiffs' have moved this Court by letter application, Letter from Rubbell to Ct. 11/15/02, to consolidate the preliminary injunction hearing with a trial on the merits. This application is denied as inappropriate in this case. The ordinary rules of evidence do not apply to preliminary injunction hearings, the procedures of the hearing are less formal and the burdens of proof required are not as high. For those reasons "it is generally inappropriate for a federal court at the preliminary-injunction stage to give a final judgment on the merits."Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981). When a Court does exercise the discretion to consolidate the hearing with the trial on the merits, the Court has an obligation to notify the parties of its intent in a manner affording the parties an opportunity to present a more full case. Id. Such notice was not given in this action.
Preliminary Injunction
For the reasons set forth above, the Court finds that the plaintiffs have demonstrated both irreparable harm and a likelihood of success on the merits with respect to its copyright infringement claim against the defendant. A preliminary injunction is therefore appropriate in this case.
IT IS SO ORDERED that:
1. Defendant Pem America, Inc., its officers, agents, servants, employees and attorneys, and any and all persons in active concert or participation with it who receive actual notice of this Order, by personal service or otherwise, are restrained and enjoined from directly or indirectly advertising, marketing, offering for sale, vending or distributing and from offering to or causing others to print, publish, reprint, advertise, market, offer for sale, vend or distribute any documents and products that contain designs which are the subject of Plaintiffs' copyright registrations VA876-482, VA879-486, VA892-071, VA785-565, VA892-087, VA935-289, VA774-297, VA935-119.
2. Defendant Pem America, Inc. its agents, servants, employees and those in active concert with it who receive actual notice of this Order, by personal service or otherwise, are required to maintain in a storage facility, agreed to by the parties, my documents and products that contain designs which are the subject of Plaintiffs' copyright registrations VA876-482, VA879-486, VA892-071, VA785-565, VA892-087, VA935-289, VA774-297, VA935-119, pending stipulation of the parties or further order of this Court.
3. Defendant Pem America, Inc. its agents, servants, employees, attorneys and those in active concert therewith are required to forthwith deliver to the plaintiffs a list of all persons and entities who purchased the infringing products that are the subject of this lawsuit.
4. The bond previously posted by Plaintiffs in the sum of $5,000.00 shall be increased to $25,000 on or before January 3, 2003, and shall remain in effect in such greater amount until the final Judgment of this Court, in this action, or until further order of this Court, whichever occurs soonest.
5. A status conference is set for January 10, 2003 at 11:30 a.m.