CUNNINGHAM et al. v. DOUGLAS et al., 72 F.2d 536

WILSON, Circuit Judge. This is an appeal by the defendants from a decree against them in a copyright infringement suit. We shall refer to thei parties as plaintiff and defendant, as they are described in the complaint. The only questions presented by the appeal are:

(1) Whether the District Judge committed prejudicial error, after dismissing the original complaint, in allowing an amended hill to be filed bringing in an additional party plaintiff; and (2) whether the amounts awarded by the District Court for damages and costs, $5’,000' for the former and $1,500 for the latter, are in either, or in both cases, so clearly excessive as to amount to an abuse of judicial discretion. The copyrighted matter consisted of a short story under the title, “Kin Klux,” written by the plaintiff, Douglas. It was published in the American Mercury Magazine for March, 1928.

The copyright relied on was taken out by the publisher of that magazine, American Mercury, Inc., covering its entire contents. Shortly after publication, the publisher of the magazine executed an assignment of the rights in the story, “Klu Klux,” to the plaintiff, Douglas. The original complaint was brought by him alone.

The defendant objected that Douglas could not maintain the suit, on the ground that a copyright is indivisible, and inasmuch as the copyright in question covered the entire number of, the magazine, it could not be split up, and therefore the attempted assignment to Douglas of the copyright in Ms story was ineffective to vest in Mm exclusive rights in the story in question, or to empower him to bring suit for infringement of the copyright. On motion to dismiss, the facts fully appearing on the face of the original bill, the District Judge sustained the defendant’s contention and granted the motion to dismiss.

The plaintiff accepted this ruling and filed a motion to he allowed to file an amended bill, which was annexed to the motion, in which the American Mercury, Inc., was joined as coplaintiff with Douglas, and reforming the allegations of the bill accordingly. A hearing was had on this motion, but from this point there was apparently some misunderstanding as to the nature of the motion. The order of the District Court was that the plaintiff be allowed to amend the bill.

The defendant’s third assignment of error is that the District Court erred “In allowing the plaintiff’s motion to amend the bill.” Though the action of the District Court did not strictly follow the plaintiff’s motion, both parties at the hearing were present in court. All further proceedings were on the new amended bill. The order of the District Court allowing it to he filed was on May 16, 1933. The final hearing on the amended hill was not had until November, 1933-, and it was held without objection by the defendants, except as to the power of the District Court to join another plaintiff by amendment.

We think it was within the power of the sitting justice in equity to permit the amended bill to be filed, both parties being present in court. Equity Rule 37 (28 USCA § 723) provides that: “Any person may at any time be made a party if his presence is necessary or proper to a complete determination of the cause.” As it does not appear that the defendants have suffered any prejudice thereby, they take nothing under the assignment of error.

Amounts awarded as damages, or allowed as counsel fees, in copyright cases, where no actual damage is shown, it is true, are within the discretionary powers of the court, except as limited by the Copyright Act, but any such award is subject to review when there has been a clear abuse of judicial discretion. “When invoked as a guide to judicial action, it [judicial discretion] means a sound discretion, that is to say, a discretion exercised not arbitrarily or willfully, but with regard to what is right and equitable under the circumstances and the law, and directed by the reason and conscience of the judge to a just result.” Langnes v.

Green, 282 U. S. 531, 541, 51 S. Ct. 243, 247, 75 L. Ed. 520. As the considerations on which it rests are often of a rather subtle character and difficult to present in a printed record, and as there is a wide field for individual judgment and difference of opinion in such matters, the burden of showing that there has been an abuse of the discretionary power of the court may be a heavy burden on one seeking to show an abuse of that power; but when that burden is sustained, a judgment resting thereon will be revised on appeal. See Langnes v. Green, supra, at page 541 of 282 U. S., 51 S. Ct. 243; Commonwealth v.

Murphy, 282 Mass. 593, at page 598, 185 N. E. 486; Newton v. Consolidated Gas Co., 259 U. S. 101 and 105; 42 S. Ct. 438; 66 L. Ed. 844. The statute relating to damages in this class of cases (17 USCA § 25), omitting such parts of this

section as have no application to this ease, provides: “If any person shall infringe the copyright in any work protected under the copyright laws of the United States such person shall be liable: * * * (

b) To pay to the copyright proprietor * * .* in lieu of actual damages and profits such damages as to the court shall appear to be just, and in assessing such damages the court may, in its discretion, allow the amounts as hereinafter stated [omitting certain specific exceptions], and such damages shall in no other ease exceed the sum of $5,000 nor be less than the sum of $250, and shall not be regarded as a penalty. * * * ” The amounts “hereinafter stated” are found in four subparagraphs under paragraph (b), of which the second provides that: “In the case of any work enumerated in

section 5 of this title, except a painting, statute, or sculpture, $1 for every infringing copy made or sold by or found in the possession of the infringer or his agents or employees.”

Section 5 of the Copyright Act (17 USCA § 5) includes both periodicals and newspapers. However, not every infringement ,of a copyright by a publication in a newspaper, where no actual damages are shown, requires an award “in lieu of actual damages” of the arbitrary amount stated in paragraph second under

section 25 (b), viz., $1 for every infringing copy of the newspaper made or sold by or found in the possession of the publisher. In the first place, if no actual damages are shown, unless the publication is after personal notice of the copyright, and except in the special cases enumerated under paragraph (b), the damages are limited to $5,000; and, secondly, while Congress has arbitrarily fixed $250 as the minimum damage that may be allowed in such cases, any judgment in excess of the minimum amount fixed by the statute must first,’and in all cases, be “just.” (Italics supplied.) The Supreme Court, in interpreting this

section of the statute in Westermann Co. v. Dispatch Co., 249 U. S. 100, 106, 39 S. Ct. 194, 195, 63 L. Ed. 499, said: “Both parties recognize that under the proofs the damages must be assessed under the alternative provision requiring the infringer, in lieu of aetnal damages and profits, to pay such damages as to the court shall appear to be just, ete. The fact that these damages are to be 'in lieu of actual damages’ shows that something other than actual damages is intended — that another measure is to be applied in making the assessment.

There is no uncertainty as to what that measure is or as to its limitations. The statute says, first, that the damages are tobe such as to the court shall appear to be just; next, that the court may, in its discretion, allow the amounts named in the appended schedule, and finally, that in no case shall they be more than $5,-000 nor less than $250; except that for a newspaper reproduction of a copyrighted photograph they shall not be more than $200 nor less than $50.

In other words, the court’s conception of what is just in the particular case, considering the nature of the copyright, the circumstances of the infringement and the like, is made the measure of the damages to be paid, but with the express qualification that in every case the assessment must be within the prescribed limitations, that is to say, neither more than the maximum nor less than the minimum. Within these limitations the court’s discretion and sense of justice are controlling.” (Italics supplied.) In the present ease the copyrighted story was published by the defendant company as an

article of news with headlines on the front page of the Sunday edition of the newspaper, the Boston Post. In the District Court the plaintiffs counsel agreed that it was published innocently by the defendant, the Post Publishing Company. The admission that it was published innocently by the principal also includes in effect an admission that Cunningham, the employee and agent of the publishing company, in gathering data for and writing special feature stories, had no knowledge that the story had been copyrighted.

If the suit had been against the publishing company alone, it eould not have defended on the issue of damages on the ground that it had published the story ignorant of the fact that it had been copyrighted, if it was shown that Cunningham knew it was copyrighted matter. Fletcher’s Cyc. of Corp. vol. IV, § 2215; Suit v. Woodhall, 113 Mass. 391; Distilled Spirits, 11 Wall. 356, 20 L. Ed. 167; Curtis Co. v. United States, 262 U. S. 215, 222, 43 S. Ct. 570, 67 L. Ed. 956; Schneider v. Thompson (C. C. A.) 58 F.(2d) 94, 96.

It may be urged that the admission in court should be construed only to cover the innocence in fact of the publishing company; but the defendant Cunningham testified that he had never read the story published in the American Mercury Magazine; that the material facts were furnished him as an actual occurrence by a newspaper reporter who formerly -worked with him on a newspaper in Dallas, Tex., and who received a certain charitable bounty therefor from Cunningham in return.

There is no evidence in the case that Cunningham ever saw the story as printed in the magazine except the similarity of the subject-matter, which is accounted for by the financial needs of the “down and out” reporter, Abe Martin by name, who furnished it to Cunningham. The only inference is that Martin pirated the facts from the story in the American Mercury Magazine, unless Cunningham deliberately committed perjury in court, and he, at least, is entitled to the presumption of innocence of this crime.

Counsel for plaintiffs also admitted in open court ill at no actual damages were shown to have resulted to the plaintiffs. The District Judge’s award appears to have been based on the paragraph headed “second” of the statute above quoted. While the statute leaves much to the judgment or “discretion” of the trial judge, an award under it is made as compensation for pecuniary loss, not as a punishment. The plaintiffs undoubtedly have in law suffered nominal damages by the infringement, and under the statute are entitled to the minimum sum named therein. Jewell-La Salle Realty Co. v. Buck, 283 U. S. 202, 208, 51 S.

Ct. 407, 75 L. Ed. 978. The provisions of the second paragraph under (b), even when actual damages are shown, but the amount is not susceptible of proof, merely permit justice to be done. They are not intended to open the door to punitive or arbitrary awards, having no relation to actual damages. The award of $5,000- as damages in this ease under “the circumstances of the infringement,” as disclosed by the admissions of counsel and the uncontradicted evidence, is so unreasonable and unjust as to amount to an abuse of the discretion vested in the court under

section 26 of the Copyright Act (17 USCA §25). Whore no actual damages are proven or are shown to have resulted, there has been a clearly marked tendency by the courts to limit the award in lieu of actual damages to the minimum amount. See Insurance Press v. Ford Motor Co. (C. C. A.) 255 F. 896; Altman v. New Haven Union Co. (D. C.) 264 F. 113; Fisher, Inc., v. Dillingham (D. C.) 298 F. 145; Sauer v. Detroit Times Co. (D. C.) 247 F. 687; Waterson, Berlin & Snyder Co. (D. C.) v. Tollefson (D. C.) 253 F. 859; Cravens v. Retail Credit Men’s Ass’n (D. C.) 26 F.(2d) 833.

Under the circumstances- of this case, we think the maximum amount which could reasonably be awarded “in lieu of actual damages” should not exceed the minimum sum of $250 fixed in the statute, and that the decree of the District Court should be reversed in this particular. As to counsel fees: The original suit was not justified.

While the allowance for counsel fees should constitute a fair compensation for the professional work required, compensation for the work on the original bill, which was dismissed, should not be included, except in so far as it may have been essential as a preparation for the conduct of the case at the trial on the amended bill. Compensation of counsel in copyright cases, to be taxed as costs, is within the discretion of the court; yet if an amount allowed is so clearly unreasonable as to amount to an abuse of judicial discretion, it may be revised on appeal. In Marks v. Feist, Inc. (C. C.

A.) 8 F.(2d) 460, an allowance of ,$1,500 as counsel fees under this statute was reduced to $500. In Universal Film Mfg. Co. v. Copperman et ah, 212 F. 301, Judge Hough sitting in the District Court made an allowance of $250 in a copyright case which was affirmed on appeal (218 F. 577). Each case, of course, depends on its own facts, and no two will be precisely alike. The present ease, at least, on the amended bill, involved no unusual difficulties or complications. The trial on the amended bill was brief. The infringement was admitted. Only the issue of damages and counsel fees were involved.

It seems clear that the allowance of $1,500 as counsel fees was unreasonably excessive. We think they should not exceed $750. The decree of the District Court is reversed as to the amount of damages and costs, and the case, is remanded to that court for further proceedings not inconsistent with this opinion.