Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 1 of 16
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`------------------------------------------X
`COLOUR & DESIGN,
` :
` :
` : 04 Civ. 8332 (MBM)
`Plaintiff,
` :
` : OPINION AND ORDER
`-against-
` :
`
`U.S. VINYL MANUFACTURING CORPORATION and :
`STEVEN W. MCCLOUD,
` :
`
`
` :
`
`Defendants.
` :
`------------------------------------------X
`APPEARANCES:
`MARC A. LIEBERSTEIN, ESQ.
`(Attorney for Plaintiff)
`PITNEY HARDIN LLP
`7 Times Square
`New York, NY 10036
`(212) 297-5800
`ARTHUR M. PESLAK, ESQ.
`(Attorney for Defendant)
`MANDEL & PESLAK LLC
`80 Scenic Drive, Suite 5
`Freehold, NJ 07728
`(732) 761-1610
`
`
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`------------------------------------------X
`COLOUR & DESIGN,
` :
` :
` : 04 Civ. 8332 (MBM)
`Plaintiff,
` :
` : OPINION AND ORDER
`-against-
` :
`
`U.S. VINYL MANUFACTURING CORPORATION and :
`STEVEN W. MCCLOUD,
` :
`
`
` :
`
`Defendants.
` :
`------------------------------------------X
`APPEARANCES:
`MARC A. LIEBERSTEIN, ESQ.
`(Attorney for Plaintiff)
`PITNEY HARDIN LLP
`7 Times Square
`New York, NY 10036
`(212) 297-5800
`ARTHUR M. PESLAK, ESQ.
`(Attorney for Defendant)
`MANDEL & PESLAK LLC
`80 Scenic Drive, Suite 5
`Freehold, NJ 07728
`(732) 761-1610
`
`
`
`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 2 of 16
`
`MICHAEL B. MUKASEY, U.S.D.J.
`Colour & Design, Inc. (“Colour & Design”) sues U.S.
`Vinyl Manufacturing Corporation (“U.S. Vinyl”) and its president
`and CEO, Steven W. McCloud, for copyright infringement, 17 U.S.C.
`§ 101 et seq. (the “Copyright Act”), and unfair competition under
`New York state law. Defendants move to dismiss the complaint for
`lack of personal jurisdiction pursuant to Fed. R. Civ. P.
`12(b)(2) and the unfair competition claim for failure to state a
`claim pursuant to Fed. R. Civ. P. 12(b)(6). Alternatively, they
`move to transfer this case to the Northern District of Georgia
`pursuant to 28 U.S.C. § 1404(a). For the reasons set forth
`below, the motions are denied.
`
`I.
`Colour & Design, an Arkansas corporation, owns the
`copyrights to the “Sarda” and “Cambria Stripe” (collectively,
`“plaintiff’s patterns”) wallcovering patterns. (Compl. ¶¶ 1, 8)
`U.S. Vinyl, a Texas corporation headquartered in the Northern
`District of Georgia, manufactures and sells wall coverings
`entitled “Fiery Red,” “Sunflower,” “Shantung Gold,” “Shantung
`Copper,” “Peridot II,” and “Sunwashed Stripe.” (collectively,
`“infringing patterns”) (Id. ¶¶ 2, 11) According to Colour &
`Design, these patterns “are nearly identical copies of and are
`substantially and confusingly similar to the overall appearance
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 3 of 16
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`of [plaintiff’s patterns].” (Id. ¶ 11) Colour & Design filed
`the instant complaint on October 21, 2004.
`
`II.
`This court has subject matter jurisdiction pursuant to
`28 U.S.C. § 1338(a) (original jurisdiction over federal copyright
`claims) and Section 1338(b) (original jurisdiction over unfair
`competition claims when joined with a substantial and related
`federal copyright claim). On a motion to dismiss for lack of
`personal jurisdiction under Fed. R. Civ. P. 12(b)(2), “the
`plaintiff bears the burden of showing that the court has
`jurisdiction over the defendants” by a preponderance of the
`evidence. Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d
`560, 566 (2d Cir. 1996). At the motion to dismiss stage, “all
`allegations are construed in the light most favorable to the
`plaintiff and doubts are resolved in the plaintiff’s favor. . .
`.” A.I. Trade Fin. Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d
`Cir. 1993).
`
`III.
`The jurisdictional analysis is the same for both U.S.
`Vinyl and Steven McCloud, who can be held individually liable for
`the acts of infringement and unfair competition. See, e.g.,
`Editorial Musical Latino Americana, S.A. v. MAR Int’l Records,
`
`2
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 4 of 16
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`Inc., 829 F. Supp. 62, 64 (S.D.N.Y. 1993). In federal copyright
`cases, the law of the forum state governs whether a party is
`subject to personal jurisdiction. See Design Tex Group, Inc. v.
`U.S. Vinyl Mfg. Corp., No. 04-5002, 2005 WL 357125, at *1
`(S.D.N.Y. Feb. 14, 2005) (citing PDK Labs, Inc. v. Friedlander,
`103 F.3d 1105, 1108 (2d Cir. 1997)).
`The New York long-arm statue provides:
`As to a cause of action arising from any of
`the acts enumerated in this section, a court
`may exercise personal jurisdiction over any
`non-domiciliary . . . who in person or
`through an agent:
`. . .
`(2) commits a tortious act within the state.
`N.Y. CPLR 302(a). “Offering one copy of an infringing work for
`sale in New York, even if there is no actual sale, constitutes
`commission of a tortious act within the state sufficient to imbue
`this Court with personal jurisdiction over the infringers.”
`Editorial, 829 F. Supp. at 64-65 (citations omitted); see also
`Pilates, Inc. v. Pilates Inst., Inc., 891 F. Supp. 175, 180
`(S.D.N.Y. 1995). Colour & Design alleges that in response to a
`phone inquiry made by William Belmont, a private investigative
`attorney working on its behalf, U.S. Vinyl shipped to a New York
`City address a wallcovering sample book entitled “Suntones II”
`that included the allegedly infringing patterns. (Declaration of
`William Belmont, 12/13/04 (“Belmont Decl.”) ¶¶ 1-4) This
`
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 5 of 16
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`shipment and offer of the patterns for sale to a New York
`customer is enough to confer jurisdiction.
`Moreover, U.S. Vinyl sells its products primarily to
`large commercial customers, including hotel chains. (Declaration
`of Steven McCloud (“McCloud Decl.”) ¶ 8) It is undisputed that
`the hotel chains to which U.S. Vinyl sells its wall coverings
`generally have numerous properties in New York. Also, U.S. Vinyl
`operates a website that provides information, sales contacts, and
`links to U.S. Vinyl sales representatives. (See Exs. 7-9 to Pl.’s
`Opp’n) Colour & Design alleges that at the time it filed this
`lawsuit, the infringing patterns were available to customers –-
`presumably for viewing or sale –- on the website as part of the
`“Suntones II Collection” or part of the approved patterns for the
`Courtyard Inn by Marriott and Residence Inn by Marriott hotel
`chains. (Declaration of Tommy Abshire (“Abshire Decl.”) ¶ 11)
`Since then, the link to the “Suntones II Collection” has been
`removed. (Id.) However, “many of the infringing patterns are
`still advertised and made available on the U.S. Vinyl website as
`parts of the [hotel] programs.” (Id.; Ex. 9 to Pl.’s Opp’n)
`Finally, the U.S. Vinyl website lists Jerry, Ian, and Peter
`Fruchtman as its “sales representatives” for New York. (Ex. 7 to
`Pl.’s Opp’n); see Topps Co. v. Gerrit J. Verburg Co., 961 F.
`Supp. 88, 91 (S.D.N.Y. 1997) (“[e]ven if a non-domiciliary
`defendant commits infringement through sales by independent
`
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 6 of 16
`
`brokers or retail merchants in New York, this constitutes
`tortious conduct within New York and subjects the defendant to
`jurisdiction under CPLR 302”).
`The exercise of personal jurisdiction over defendants
`in this case does not offend due process. “Ordinarily . . . if
`jurisdiction is proper under the CPLR, due process will be
`satisfied because CPLR § 302 does not reach as far as the
`constitution permits.” Topps, 961 F. Supp. at 90. Here, minimum
`contacts requirements are satisfied by an actual offer of sale
`and shipment of infringing products to an entity in New York, the
`maintenance of an interactive website accessible in New York, and
`relationships with sales representatives designated to serve
`customers in New York. See Capitol Records, Inc. v. Kuang Dyi
`Co. of RM, No. 03-520, 2004 WL 405961, at *2 (S.D.N.Y. Mar. 4,
`2004).
`“A corporate president who has a financial interest in
`the company and the ability to supervise or control an infringing
`activity will be held personally liable.” Editorial, 829 F.
`Supp. at 66 (citing Lauratex Textile Corp. v. Allton Knitting
`Mills, Inc., 517 F. Supp. 900 (S.D.N.Y. 1981)). So long as he
`can be held personally liable for U.S. Vinyl’s acts of
`infringement and unfair competition as alleged in the complaint,
`McCloud is subject to personal jurisdiction. Id.; (Compl. ¶¶ 3,
`12 (McCloud “directs and controls the actions of Defendant U.S.
`
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 7 of 16
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`Vinyl, and has authorized, controlled, and directed U.S. Vinyl to
`copy the copyrighted Colour & Design Patters and manufacture,
`sell and distribute the Infringing Wallcoverings” and “receives
`pecuniary benefit” from the alleged infringement)).
`Accordingly, defendants’ motion to dismiss for lack of
`personal jurisdiction is denied.
`
`IV.
`Venue in federal copyright infringement claims is
`governed by 28 U.S.C. § 1400(a), which states that an action “may
`be instituted in the district in which the defendant or his agent
`resides or may be found.” Editorial, 829 F. Supp. at 66. “It is
`well-established that a defendant ‘may be found’ in any district
`in which he is amenable to personal jurisdiction; thus, venue and
`jurisdiction are coextensive.” Id.; Capitol Records, 2004 WL
`405961, at *1. Hence, venue is proper in this district.
`“Motions for transfer lie within the broad discretion
`of the district court and are determined upon notions of
`convenience and fairness on a case-by-case basis.” Hall v. South
`Orange, 89 F. Supp.2d 488, 493 (S.D.N.Y. 2000). “The inquiry on
`a motion to transfer is two-fold.” Orb Factory, Ltd. v. Design
`Science Toys, Ltd., 6 F. Supp.2d 203, 208 (S.D.N.Y. 1998).
`First, it must be determined whether the action sought to be
`transferred is one that “might have been brought” in the
`
`6
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 8 of 16
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`transferee court. Id.; 28 U.S.C. 1404(a). The parties do not
`appear to dispute that the Northern District of Georgia is a
`district where the action might have been brought.
`Second, several factors dealing with the “convenience”
`of a transfer and the “interest of justice” must be considered to
`determine whether a transfer is appropriate. Orb Factory, 6 F.
`Supp.2d at 208. The moving party must make “a clear and
`convincing showing that the balance of convenience favors [its]
`choice.” Hubbell, Inc. v. Seymour, Inc., 883 F. Supp. 955, 962
`(S.D.N.Y. 1995); Lipton v. The Nature Co., 781 F. Supp. 1032,
`1035 (S.D.N.Y. 1992) (“heavy burden” in a copyright infringement
`action). The following factors must be considered: (i)
`convenience of the witnesses and parties; (ii) the locus of
`operative facts in the case; (iii) the location of relevant
`documents and access to proof; (iv) the forums’ familiarity with
`the governing law; (v) the availability of process to compel the
`attendance of unwilling witnesses; (vi) the weight accorded to a
`plaintiff’s choice of forum; and (vii) trial efficiency and the
`interest of justice generally. See 28 U.S.C. § 1404(a); Orb
`Factory, 6 F. Supp.2d at 208.
`The convenience of the parties and non-party witnesses
`is generally considered the most important factor in a motion to
`transfer venue. See, e.g., Coker v. Bank of Am., 984 F. Supp.
`757, 765 (S.D.N.Y. 1997). “In order to meets its burden, the
`
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 9 of 16
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`motion of the party seeking transfer must specifically list he
`evidence and witnesses on which the party intends to rely in the
`transferee district, along with a general statement of the topics
`of each witness’ testimony.” Editorial, 829 F. Supp. at 66-67;
`see also Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218
`(2d Cir. 1978).
`Defendants have not identified specific witnesses they
`intend to call, let alone any hardship to those witnesses. Nor
`has any proposed testimony been specified. Defendants simply and
`baldly assert that “no witnesses are located in New York” and
`that “all witnesses are in either Arkansas or Georgia.” (Defs.’
`Mem. of Law at 9) Without more, such assertions are not
`sufficient to justify a transfer to the Northern District of
`Georgia. See Orb Factory, 6 F. Supp.2d at 208-09 (“Vague
`generalizations and failure to clearly specify key witnesses to
`be called, along with a statement concerning the nature of their
`testimony, are an insufficient basis upon which to grant a change
`of venue.”). Also, defendants have not identified any unwilling
`witnesses over whom there may be an issue as to availability of
`process. See, e.g., GPA, Inc. v. Liggett Group, Inc., No. 94-
`5735, 1994 WL 537017, at *2 (S.D.N.Y. Oct. 4, 1994) (declining to
`find availability of process to compel unwilling witnesses as a
`factor in favor of transfer where defendant failed to offer
`evidence that witnesses would be unwilling to travel).
`
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 10 of 16
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`Likewise, defendants’ assertion that relevant documents
`and sources of proof warrant transfer is accorded little weight
`without a detailed showing of the burden defendants would incur
`absent transfer. Their cursory attempt to justify transfer based
`on the location of documents and evidence does little more than
`claim that “U.S. Vinyl documents, Steven McCloud and other U.S.
`Vinyl employees who may have knowledge relevant to this case” are
`located within defendants’ home forum. (Defs.’ Mem. of Law at
`8); see, e.g., Intria Corp. v. Intira Corp., No. 00-7198, 2000 WL
`1745043, at *4 (Nov. 27, 2000) (defendant’s blanket assertion
`that all documents relating to the litigation were in defendant’s
`home forum was not enough to favor transfer). Accordingly, given
`defendants’ failure to specify the nature and volume of the
`documents they plan to use in support of their case, or the
`difficulty in transporting such documents, this factor weighs
`against transfer.
`None of the remaining factors weigh in defendants’
`favor. Because this is a federal copyright action, this court
`and the Northern District of Georgia are presumed to be equally
`familiar with the governing law. See Capitol Records, 2004 WL
`405961, at *4. As for the locus of operative facts, defendants
`simply claim that “no relevant activities occurred in New York.”
`(Defs.’ Mem. of Law at 9) Colour & Design points to defendants’
`offer for sale and shipment of samples of the allegedly
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 11 of 16
`
`infringing designs to New York, in response to the inquiry made
`by Colour & Design’s investigator, William Belmont. Moreover,
`U.S. Vinyl has designated New York sales representatives.
`Therefore, New York has a sufficient connection to the locus of
`operative events, and the “center of gravity of the litigation”
`is not tilted in favor of transfer, especially where defendants’
`claims are so vague. Capitol Records, 2004 WL 405961, at *4.
`The convenience of the parties does not favor transfer
`when it would merely shift any inconvenience from defendant to
`plaintiff. See Nabisco, Inc. v. Brach’s Confections, Inc., No.
`00-5875, 2000 WL 1677935, at *3 (S.D.N.Y. Nov. 8, 2000). Colour
`& Design has identified several potential witnesses all of whom
`reside in or very close to the Southern District of New York.
`(Pl.’s Opp’n at 20) Although defendants note that their
`witnesses will include U.S. Vinyl employees located in Georgia,
`no further detail is provided. Hence, plaintiff’s witnesses
`would be as much inconvenienced traveling to Georgia as would
`defendants’ witnesses if required to travel to New York.
`Accordingly, this factor does not weigh in favor of transfer.
`Although “ordinarily plaintiff’s choice of forum is
`given significant weight in a Section 1404(a) analysis, where the
`forum chosen is not the plaintiff’s home forum, the choice is
`given less deference.” Foley v. Sammons Preston, Inc., No. 03-
`5485, 2004 WL 35438, at *5 (S.D.N.Y. Jan. 6, 2004) (quoting Kiss
`
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 12 of 16
`
`My Face v. Bunting, No. 02-2645, 2003 WL 22244587, at *4
`(S.D.N.Y. Sept. 30. 2003)). However, Colour & Design’s ongoing
`business activities in New York and New York’s strong connection
`to the “locus of operative facts” weigh against transfer. See
`Goggins v. Alliance Capital Mgmt., 279 F. Supp.2d 228, 232
`(S.D.N.Y. 2003); Virgin Enters. Ltd. v. Am. Longevity, No. 99-
`9854, 2001 WL 34142402, at *11 (S.D.N.Y. Mar. 1, 2001).
`Defendants do not argue how trial efficiency or “the
`interest of justice” would be compromised by litigating in this
`district.
`Defendants have failed to meet their burden of
`demonstrating that transfer to the District of Georgia is
`warranted. Their motion to change venue is denied.
`
`V.
`Defendants also move to dismiss Colour & Design’s
`unfair competition claim as preempted by the Copyright Act. That
`Act grants copyright holders the exclusive rights “(1) to
`reproduce the copyrighted work . . .; (2) to prepare derivative
`works based upon the copyrighted work; (3) to distribute copies .
`. . of the copyrighted work to the public by sale or other
`transfer of ownership, or by rental, lease, or lending; (4) . . .
`to perform the copyrighted work publicly; and (5) . . . to
`display the copyrighted work publicly.” 17 U.S.C. § 106.
`
`11
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 13 of 16
`
`“A state cause of action is preempted by federal
`copyright laws if the subject matter of the state-law claims
`might fall within the subject matter of the copyright laws and
`the state-law right asserted is equivalent to the exclusive
`rights protected by federal copyright law.” Kregos v. Associated
`Press, 3 F.3d 656, 666 (2d Cir. 1993); 17 U.S.C. § 301. However,
`if an “extra element” is “required instead of
`or in addition to the acts of reproduction,
`performance, distribution or display, in
`order to constitute a state-created cause of
`action,” then the right does not lie ‘within
`the general scope of copyright’ and there is
`no preemption.” . . . A state law claim is
`not preempted if the “extra element” changes
`the “nature of the action so that it is
`qualitatively different from a copyright
`infringement claim.”
`Computer Assocs. Int’l v. Altai, Inc., 982 F.2d 693, 716 (2d Cir.
`1992) (citations omitted and emphasis in original).
`Following this “extra element” test, the Second Circuit
`has held that unfair competition and misappropriation claims
`grounded solely in the copying of a plaintiff’s protected
`expression are preempted by federal copyright law. See, e.g.,
`Walker v. Time Life Films, Inc., 784 F.2d 44, 53 (2d Cir. 1986);
`Warner Bros., Inc. v. Am. Broad. Cos., 720 F.2d 231, 247 (2d Cir.
`1983); Durham Indus., Inc. v. Tomy Corp., 630 F.2d 905, 919 &
`n.15 (2d Cir. 1980); see also Morris v. Buffalo Chips Bootery,
`Inc., 160 F. Supp.2d 718, 721-22 (S.D.N.Y. 2001). However, the
`Court has held also that state law unfair competition claims that
`
`12
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 14 of 16
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`allege the tort of “passing off” one’s goods as those of another
`or creating confusion as to the source of goods are not preempted
`because they do not entail the assertion of rights equivalent to
`those protected by federal copyright law. See Lone Wolf McQuade
`Assoc. v. CBS, Inc., 961 F. Supp. 587, 598-99 (S.D.N.Y. 1997)
`(citing Warner Bros., 720 F.2d at 247 (citing Nimmer on Copyright
`§§ 1.01[B][1] n. 47, 2.12 n. 25 (1983))). Put another way,
`“confusion as to source” constitutes an “extra element.” Samara
`Bros., Inc. v. Wal-Mart Stores, Inc., 165 F.3d 120, 131-32 (2d
`Cir. 1998).
`Whether Colour & Design’s unfair competition claim is
`preempted depends on the nature of the claim. “Claims for unfair
`competition in New York have traditionally involved passing off
`or malicious or fraudulent interference with good will.” Fun-
`Damental Too, Ltd. v. Gemmy Industries Corp., No. 96-1103, 1996
`WL 724734, at *2 (S.D.N.Y. Dec. 17, 1996) (quoting Nifty Foods
`Corp. v. Great Atl. & Pac. Tea Co., 614 F.2d 832, 842 (2d Cir.
`1980)). There are two types of passing off claims. “In reverse
`passing off, the wrongdoer sells plaintiff’s products as its own.
`It contrasts with passing off, where the wrongdoer sells its
`products as the plaintiff’s.” Id. (quoting Waldman Publ’g Corp.
`v. Landoll, Inc., 848 F. Supp. 498, 500-01 (S.D.N.Y.), vacated in
`part on other grounds, 43 F.3d 775 (2d Cir. 1994)). Unfair
`competition claims alleging the former are preempted because they
`
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`Case 1:04-cv-08332-JSR Document 14 Filed 06/03/05 Page 15 of 16
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`are “equivalent to a claim for copyright infringement.” See,
`e.g., Am. Movie Classics Co. v. Turner Entm’t Co., 922 F. Supp.
`926, 934 (S.D.N.Y. 1996) (citing Waldman, 848 F. Supp. at 505).
`Colour & Design contends that its unfair competition
`claim is based on confusion as to source and that because
`“customer confusion” constitutes an “extra element,” the claim is
`not preempted by the Copyright Act. See Am. Footwear Corp. v.
`Gen. Footwear Corp., 609 F.2d 655, 664 (2d Cir. 1979) (to succeed
`on unfair competition claim, plaintiff must show likelihood of
`confusion or deception of the consuming public as to source). In
`its complaint, Colour & Design alleges:
`By reason of the foregoing conduct and acts,
`Defendants . . . have been and are engaging
`in unfair competition with Plaintiff by
`copying, publishing, displaying, vending,
`distributing, selling, utilizing, promoting
`and otherwise commercially benefiting from
`wallcoverings and designs which are likely to
`deceive and confuse the public into believing
`that Defendants’ Infringing Wallcoverings and
`designs are Plaintiff’s Copyrighted Deigns or
`are sponsored by, licensed by, endorsed by or
`are otherwise associated with Plaintiff and
`by misappropriating or attempting to
`misappropriate the copyrighted [] Designs and
`Plaintiffs goodwill and reputation which are
`associated therewith.
`(Compl. ¶ 20) In other words, Colour & Design’s unfair
`competition claim is one of passing off. It alleges that U.S.
`Vinyl’s product is similar enough to its own to confuse consumers
`and lead them to believe that U.S. Vinyl’s patterns are Colour &
`Design’s. Confusion between the two sets of designs constitutes
`14
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`Case 1:O4—cv—O8332—JSR Document 14 Filed 06/03/05 Page 16 of 16
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`an “extra element” that insulates the unfair competition claim
`
`from preemption. Accordingly, defendants’ motion to dismiss
`
`Colour
`
`& Design’s unfair competition claim is denied.
`
`it
`
`it
`
`*
`
`For the reasons set forth above, defendants’ motions
`
`are denied.
`
`Dated:
`
`New York, New York
`
`May 19, 2005
`
`
`fiu¢fijE§%7
`
`u.s. District Judge
`
`15
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