Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 1 of 10 Page ID #:1064
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`
`TOM SCHMIDT,
` Plaintiff,
`
`v.
`
`
`SHERRI ANND BALDY, et al.,
` Defendants.
`
`And Related Claims.
`
`
`
`CV 16-9368-DSF (AGRx)
`
`
`Findings of Fact and
`Conclusions of Law re Sherri
`Annd Baldy’s Counterclaims
`Against Tom Schmidt
`
`
`
`INTRODUCTION
`This action involves a dispute between Counterclaim
`Plaintiff Sherri Baldy and Counterclaim Defendant Tom Schmidt.
`On April 26, 2017, Baldy filed counterclaims against Schmidt for
`copyright infringement, vicarious and contributory copyright
`infringement, recovery under the Digital Millennium Copyright
`Act, and violation of California Bus. & Prof. Code § 17200 et seq.
`Dkt. 19 (Counterclaim Compl. (Compl.)). This action was tried
`before the Court on March 26, 2019. Schmidt did not appear.
`Having heard and reviewed the evidence, the Court makes
`the following findings of fact and conclusions of law.1
`
`
`1 Any finding of fact deemed to be a conclusion of law is incorporated into the
`conclusions of law. Any conclusion of law deemed to be a finding of fact is
`incorporated into the findings of fact.
`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`
`TOM SCHMIDT,
` Plaintiff,
`
`v.
`
`
`SHERRI ANND BALDY, et al.,
` Defendants.
`
`And Related Claims.
`
`
`
`CV 16-9368-DSF (AGRx)
`
`
`Findings of Fact and
`Conclusions of Law re Sherri
`Annd Baldy’s Counterclaims
`Against Tom Schmidt
`
`
`
`INTRODUCTION
`This action involves a dispute between Counterclaim
`Plaintiff Sherri Baldy and Counterclaim Defendant Tom Schmidt.
`On April 26, 2017, Baldy filed counterclaims against Schmidt for
`copyright infringement, vicarious and contributory copyright
`infringement, recovery under the Digital Millennium Copyright
`Act, and violation of California Bus. & Prof. Code § 17200 et seq.
`Dkt. 19 (Counterclaim Compl. (Compl.)). This action was tried
`before the Court on March 26, 2019. Schmidt did not appear.
`Having heard and reviewed the evidence, the Court makes
`the following findings of fact and conclusions of law.1
`
`
`1 Any finding of fact deemed to be a conclusion of law is incorporated into the
`conclusions of law. Any conclusion of law deemed to be a finding of fact is
`incorporated into the findings of fact.
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 2 of 10 Page ID #:1065
`
`FINDINGS OF FACT
`1. This Court has subject matter jurisdiction pursuant to the
`Copyright Act of 1976, 17 U.S.C. §§ 101, et seq. 28 U.S.C §
`1331.2 The Court has supplemental jurisdiction over the
`state-law claims. 28 U.S.C. § 1367. Venue is proper under
`28 U.S.C. § 1391.
`2. Baldy has been an artist for more than 20 years, and in the
`crafting industry for about 10 years. She specializes in big
`eyed, big head dolls under the brand name Mybesties. She
`licensed her line of big eyed art dolls all over the world,
`including to the Bradford Exchange and Disney. She sells
`her products directly to consumers and through retailers like
`JOANNE Fabrics, Walmart, and Target. Dkt. 144 (Tr.) at
`7:1-9:7.
`3. Schmidt is an owner of Lacy Sunshine Stamps (Lacy
`Sunshine), a scrapbooking retailer. Dkt. 1 (Compl.) ¶ 8.3
`4. Baldy and Schmidt were introduced by Heather Valentin, an
`artist who licensed her work to Baldy between 2010 and
`2012. Tr. at 11:3-13:7.
`In or around November 2012, Schmidt emailed Baldy
`informing her that Schmidt was going to be Valentin’s
`business manager and requesting an accounting of
`
`2 In its June 11, 2019 Order, Dkt. 153, the Court set out its reasoning as to
`why the recent Supreme Court decision Fourth Estate Pub. Benefit Corp. v.
`Wall-Street.com, LLC, 139 S. Ct. 881 (2019) does not deprive the Court of
`subject matter jurisdiction over this case.
`3 “Factual assertions in pleadings . . . are considered judicial admissions
`conclusively binding on the party who made them.” Am. Title Ins. Co. v.
`Lacelaw Corp., 861 F.2d 224, 226 (9th Cir. 1988).
`
`
`5.
`
`
`
`2
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 3 of 10 Page ID #:1066
`
`Valentin’s royalties for the prior two years. Schmidt stated
`that if the royalty report was not provided within 48 hours,
`Valentin would terminate her contract with Baldy. Baldy
`did not comply and Valentin terminated her contract within
`a week. Tr. at 13:8-14:10.
`6. At some point thereafter, Schmidt and Valentin established
`“Lacy Sunshine.” Tr. at 14:11-15, 22:8-10.
`A. Works and Copyrights
`7. Baldy created the following list of original works:
`a. Daisy Do All, first created and published on December
`31, 2012 on Baldy’s Facebook page, Tr. at 17:10-18:12,
`18:20-19:13, Ex. 2
`b. Wild Child Fishing Girl, first published on March 25,
`2013, Tr. at 32:12-32:25, Ex. 7;
`c. Wild Child, first published on June 12, 2013 on Baldy’s
`Facebook page, Tr. at 29:2-20, 30:4-31:25;
`d. Wild Child Little Violet, Tr. at 28:21-29:15;
`e. Wild Child Betsy Beanie and Flossie (Betsy), first
`published on November 9, 2013 on Baldy’s Facebook
`page, Tr. at 34:17-35:15, Ex. 10;
`8. Baldy’s Facebook pages are available to the public, and have
`been available to the public since the first image was
`published. Tr. at 19:14-20:10, 31:2-7, 35:16-18.
`9. Baldy applied for copyright registration on April 26, 2017
`and obtained copyright registrations for the following
`
`
`
`3
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 4 of 10 Page ID #:1067
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`characters, among others: Daisy Do All,4 Fishing Girl,
`Betsy, Wild Child. See Tr. at 32:1-3, 33:1-34:8, 40:2-7, 45:21-
`46:2 Exs. 3, 8, 9, 13.
`10. Schmidt claims exclusive rights over the two drawings in the
`left column of Exhibit A to his complaint. Compl. ¶ 8 &
`Ex. A. The first drawing was published on Lacy Sunshine on
`or around 2014, as part of a line called Mayde Dust Bunnies.
`Tr. at 21:9-23:25, 24:12-25:1, Ex. 4. The second drawing, is
`part of the Rory line. There was no evidence that this
`particular drawing was published prior to the filing of the
`complaint, but other versions of Rory were published in 2013
`on Valentin’s blog. Tr. at 28:18-20, 36:2-38:3, 43:16-45:2, Ex.
`11.
`11. Lacy Sunshine continues to sell Mayde and Rory images. Tr.
`at 46:8-47:2, Ex. 14.
`B. Unfair Competition
`12. Baldy submitted evidence that if a customer were to search
`Amazon or Google for “Sherri Baldy,” Valentin’s works would
`appear in the search result. Because of this, some customers
`purchased Valentin art instead of Baldy art. Tr. at 25:10-
`28:10.
`
`CONCLUSIONS OF LAW
`A. Burden of Proof
`13. Baldy was required to establish, by a preponderance of the
`evidence, every element of her claims for copyright
`infringement, vicarious and contributory copyright
`
`4 The Court notes that this copyright does not appear in Exhibit B to Baldy’s
`Counterclaim. Dkt. 19-2. However, allegations as to this work were set forth
`in the Counterclaim. Dkt. 19 ¶ 13.
`
`
`
`4
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 5 of 10 Page ID #:1068
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`infringement, recovery under the Digital Millennium
`Copyright Act, and unfair competition. See In re Exxon
`Valdez, 270 F.3d 1215, 1232 (9th Cir. 2001) (“The standard
`of proof generally applied in federal civil cases is
`preponderance of evidence”).
`B. Copyright Infringement
`14. “A plaintiff bringing a claim for copyright infringement
`must demonstrate ‘(1) ownership of a valid copyright, and (2)
`copying of constituent elements of the work that are
`original.’” Funky Films, Inc. v. Time Warner Entm’t, 462
`F.3d 1072, 1076 (9th Cir. 2006) (quoting Feist Publications,
`Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991)). “[T]he
`second element has two distinct components: ‘copying’ and
`‘unlawful appropriation.’” Rentmeester v. Nike, Inc., 883
`F.3d 1111, 1117 (9th Cir. 2018), cert. denied, 139 S. Ct. 1375
`(2019).
`1.
`Copyright Ownership
`15. “An author gains ‘exclusive rights’ in her work immediately
`upon the work’s creation, including rights of reproduction,
`distribution, and display.” Fourth Estate Pub. Benefit Corp.
`v. Wall-Street.com, LLC, 139 S. Ct. 881, 887 (2019). “Before
`pursuing an infringement claim in court, however, a
`copyright claimant generally must comply with § 411(a)’s
`requirement that ‘registration of the copyright claim has
`been made.’” Id. (quoting 17 U.S.C.A. § 411(a)).5 “In any
`
`5 At the time the lawsuit was filed, the law in the Ninth Circuit required only
`“receipt by the Copyright Office of a complete application” to “satisfy[y] the
`registration requirement.” Cosmetic Ideas, Inc. v. IAC/Interactivecorp., 606
`F.3d 612, 621 (9th Cir. 2010). However, a few weeks before trial, the
`Supreme Court held in Fourth Estate that registration did not occur until
`“the Copyright office grants registration.” 139 S. Ct. at 888. The Court found
`
`
`
`5
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 6 of 10 Page ID #:1069
`
`judicial proceedings the certificate of a registration made
`before or within five years after first publication of the work
`shall constitute prima facie evidence of the validity of the
`copyright and of the facts stated in the certificate.” 17
`U.S.C. § 410(c). Here, each of the registration certificates
`were made within five years of Baldy’s first publication.
`Therefore, she has established ownership of valid copyrights.
`
`Copying
`2.
`16. There is no evidence that Schmidt himself copied Baldy’s
`work. See Ellison v. Robertson, 357 F.3d 1072, 1076 (9th
`Cir. 2004) (“[A] plaintiff must show that . . . the defendant
`himself violated one or more of the plaintiff’s exclusive rights
`under the Copyright Act”). The only evidence linking
`Schmidt to the allegedly infringing images created by
`Valentin is that Schmidt is “an owner” of the website where
`the allegedly infringing images were sold. This, without
`more, is insufficient to establish that Schmidt himself
`violated one of Baldy’s rights.
`17. The Court finds in favor of Schmidt and against Baldy on
`Baldy’s counterclaim for copyright infringement.
`C. Vicarious and Contributory Copyright Infringement
`18. Copyright law “allows imposition of liability when the
`defendant profits directly from the infringement and has a
`right and ability to supervise the direct infringer, even if the
`defendant initially lacks knowledge of the infringement.”
`Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545
`
`
`that in the circumstances of this particular case, the change in law did not
`warrant dismissal of the copyright claims. See Dkt. 153.
`
`
`
`
`6
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 7 of 10 Page ID #:1070
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`U.S. 913, 930 n.9 (2005); see also Ellison, 357 F.3d at 1076
`(“A defendant is vicariously liable for copyright infringement
`if he enjoys a direct financial benefit from another’s
`infringing activity and ‘has the right and ability to supervise’
`the infringing activity.” (quoting A & M Records, Inc. v.
`Napster, Inc., 239 F.3d 1004, 1022 (9th Cir. 2001))).
`19. “[O]ne contributorily infringes when he (1) has knowledge of
`another’s infringement and (2) either (a) materially
`contributes to or (b) induces that infringement.” Perfect 10,
`Inc. v. Giganews, Inc., 847 F.3d 657, 670 (9th Cir.) (quoting
`Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788, 795
`(9th Cir. 2007)), cert. denied, 138 S. Ct. 504 (2017).
`20. As set out in the Court’s finding of facts and conclusions of
`law regarding Baldy’s Third Party Claims against Valentin,
`the Court found that Valentin infringed one of Baldy’s
`copyrights. However, Baldy submitted no evidence that
`Schmidt had the right and ability to supervise Valentin or
`the content on the Lacy Sunshine website,6 or that he
`benefitted financially from the sale of the infringing works.7
`Nor did Baldy submit evidence that Schmidt had knowledge
`that Valentin’s Mayde doll infringed Baldy’s Daisy Do All
`doll, or that he materially contributed to or induced
`Valentin’s infringement.
`21. Even if there were evidence that Schmidt was vicariously
`liable, Baldy presented no evidence at trial of her actual
`
`6 Schmidt’s admission that he was “an owner” of the website, without more,
`does not establish by a preponderance of the evidence that he had the right
`and ability to supervise the infringing activity.
`7 Again, that he is “an owner” does not establish by a preponderance of the
`evidence that he received any direct financial benefit from the sale of the
`infringing works.
`
`
`
`7
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 8 of 10 Page ID #:1071
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`damages8 and is not entitled to statutory damages or
`attorneys’ fees, 17 U.S.C. § 412 (“[N]o award of statutory
`damages or of attorney’s fees, as provided by sections 504
`and 505, shall be made for . . . any infringement of copyright
`commenced after first publication of the work and before the
`effective date of its registration, unless such registration is
`made within three months after the first publication of the
`work.”).
`22. The Court finds in favor of Schmidt and against Baldy on
`Baldy’s counterclaim for vicarious and contributory
`copyright infringement.
`D. Digital Millennium Copyright Act
`23. Baldy did not provide any evidence to support her claims for
`violation of the Digital Millennium Copyright Act.
`24. The Court finds in favor of Schmidt and against Baldy on
`Baldy’s counterclaim for violation of the Digital Millennium
`Copyright Act.
`E. Unfair Competition
`25. California’s unfair competition law (UCL) “does not proscribe
`specific practices,” but rather “defines ‘unfair competition’ to
`include ‘any unlawful, unfair or fraudulent business act or
`
`8 Although Baldy testified that her revenues declined from approximately
`$300,000 in 2012 to $90,000 in 2019, Tr. at 15:10-16:18, actual damages for
`copyright infringement cannot be established by showing a vague decrease in
`revenues over a 7-year period, not tied to any infringement. With only that
`information, determining the “profits lost due to the infringement or by the
`value of the use of the copyrighted work to the infringer” would be entirely
`speculative. Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 708 (9th
`Cir. 2004) (emphasis added) (quoting McRoberts Software, Inc. v. Media 100,
`Inc., 329 F.3d 557, 566 (7th Cir. 2003)).
`
`
`
`8
`
`
`
`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 9 of 10 Page ID #:1072
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`practice.’” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular
`Tel. Co., 20 Cal. 4th 163, 180 (1999) (quoting Cal. Bus. &
`Prof. Code § 17200). “Because Business and Professions
`Code section 17200 is written in the disjunctive, it
`establishes three varieties of unfair competition.” Id.
`(quoting Podolsky v. First Healthcare Corp., 50 Cal. App. 4th
`632, 647 (1996), as modified (Nov. 5, 1996), as modified (Nov.
`20, 1996)).
`26. “A ‘violation of another law is a predicate for stating a cause
`of action under the UCL’s unlawful prong.’” Graham v. Bank
`of Am., N.A., 226 Cal. App. 4th 594, 610 (2014) (quoting
`Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th
`1544, 1554 (2007)). A competitor’s actions are “unfair” if
`their conduct “threatens an incipient violation of an
`antitrust law, or violates the policy or spirit of one of those
`laws because its effects are comparable to or the same as a
`violation of the law, or otherwise significantly threatens or
`harms competition.” Id. at 612 (quoting Cel-Tech, 20 Cal.
`4th at 187). A business practice is fraudulent if “members of
`the public are ‘likely to be deceived.’” Id. at 613 (quoting
`Buller v. Sutter Health, 160 Cal. App. 4th 981, 986 (2008)).
`27. Baldy has not established by a preponderance of the
`evidence that Schmidt himself committed the challenged
`business acts. Vague assertions of what “they” did, without
`more, are insufficient. See, e.g., Tr. at 15:17-18 (“[T]hey
`went in and would meta tag my names, meta tag my
`business name.”). Similarly, claims about Valentin cannot
`establish Schmidt’s liability. See, e.g., Tr. at 25:20-23 (“She
`was meta tagging every single thing that I would do. She
`would meta tag my brand. She would meta tag my personal
`name. She would meta tag personal names of my
`collections.”).
`
`
`
`9
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`Case 2:16-cv-09368-DSF-AGR Document 157 Filed 10/19/19 Page 10 of 10 Page ID
` #:1073
`
`28. Further, Baldy’s testimony that “[she] did screenshots of
`when [she] type[s] in [her] name, there were [Valentin’s]
`books [and] [n]o other artists showed up under [her] name,”
`and that “the meta tags came off of [her] Amazon store” after
`she “filed the counter lawsuit,” Tr. at 28:5-10, without more,
`is insufficient to establish how meta-tagging works on
`Amazon or Google, and therefore that someone with control
`over the infringing artwork committed an unlawful, unfair,
`or fraudulent act.
`
`CONCLUSION
`Judgment shall be entered in favor of Schmidt and against
`Baldy on Baldy’s claims for copyright infringement, vicarious and
`contributory copyright infringement, recovery under the Digital
`Millennium Copyright Act, and unfair competition.
`
`IT IS SO ORDERED.
`
`Date: 10/19/2019
`
`
`
`
`
`___________________________
`Dale S. Fischer
`United States District Judge
`
`10
`
`
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