IN THE DISTRICT COURT OF THE UNITED STATES
`FOR THE WESTERN DISTRICT OF NORTH CAROLINA
`ASHEVILLE DIVISION
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`CIVIL NO. 1:05CV235
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`MEMORANDUM
` AND ORDER
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`PURE COUNTRY WEAVERS, INC.
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`Plaintiff,
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`VS.
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`BRISTAR, INC.; THE PARADIES
`SHOPS, INC.; JOHN AND JANE DOES
`(1-100); and ABC CORPORATIONS
`(1-100),
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`Defendants.
` )
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`THIS MATTER is before the Court on motion of Defendant Bristar,
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`Inc. (“Bristar”) to dismiss the complaint and the cross-claims of Defendant
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`The Paradies Shops, Inc. (“Paradies”) for lack of subject matter jurisdiction
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`and for failure to state a claim upon which relief can be granted pursuant to
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`Fed. R. Civ. P. 12(b)(1) and (b)(6).
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`Case 1:05-cv-00235-LHT-DLH Document 21 Filed 01/20/06 Page 1 of 27
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`I. STATEMENT OF FACTS
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`Plaintiff Pure Country Weavers, Inc. (“Plaintiff” or “Pure Country”) is a
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`family-owned North Carolina corporation engaged in the manufacture and
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`sale of textile art. Complaint, ¶ 4. Defendant Bristar is a California
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`corporation engaged in importing and selling products. Id., ¶¶ 5, 19.
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`Defendant The Paradies Shops, Inc. (“Paradies”) is a Georgia corporation
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`engaged in the retail business and operates “over 300 news, gifts and
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`specialty stores in about sixty U.S. and Canadian airports.” Id., ¶¶ 6, 22.
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`Defendants “John and Jane Does 1-100 are individuals who are causing
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`Pure Country’s textile art design to be distributed as affiliates of Defendant
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`Bristar,” and Defendants “ABC Corporations 1-100 are corporations who
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`are causing Pure Country’s textile art design to be distributed as affiliates
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`of Defendant Bristar.” Id., ¶¶ 7, 8.
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`This dispute centers around a design “entitled ‘In the Wild,’ which
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`entails an African or safari motif with animal skin patterns and silhouetted
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`animal depiction (hereinafter referred to as the ‘Wild’ design).” Id., ¶ 14.
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`The Wild design was created by Plaintiff’s employees in 1999 and was first
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`made widely available the same year. Id., ¶15. In 2000 the Wild design
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`was incorporated into an afghan blanket and made available on the
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`market. Id., ¶ 16. Plaintiff Pure Country owns the copyright for the Wild
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`design and, in addition to selling merchandise with the design on its own,
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`has licensed third parties to sell products incorporating the Wild design. 1
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`Id., ¶¶ 17, 18.
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`Pure Country alleges that Bristar has reproduced and distributed
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`unauthorized copies of the Wild design, manufacturing and incorporating
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`the design into such products as bags and luggage which are then sold to
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`vendors, distributors or retailers. Id., ¶¶ 20, 21. According to Plaintiff,
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`Paradies has purchased such products from Bristar, which it then resold to
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`the general public. Id., ¶ 22. Plaintiff Pure Country also asserts that
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`“Defendant Bristar has created a network of affiliates (Defendants John
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`and Jane Does 1-100 and ABC Corporations 1-100) who . . . have
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`reproduced or distributed unauthorized copies of Pure Country’s Wild
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`design.” Id., ¶ 24. Plaintiff has asserted a claim for copyright infringement
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`against each Defendant. Id., ¶¶ 30-50.
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`1
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`Plaintiff applied for registration of the Wild design with the U.S.
`Library of Congress’ Copyright Office on March 11, 2005. Complaint, ¶
`17. The registration was accepted by the Copyright Office, with an
`effective date of March 14, 2005. See Certificate of Registration,
`attached to Declaration of Joshua J. Kaufman to Supplement the
`Record Herein, filed September 8, 2005.
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`Paradies denies infringing any copyright held by Pure Country.
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`Answer and Cross-Claim of The Paradies Shops, Inc. (“Paradies’
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`Answer”), filed July 18, 2005, at 13-14 (responding to paragraphs 37-
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`43 of the Complaint). In addition, Paradies has asserted cross-claims
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`against Bristar for declaratory judgment, breach of warranty, and breach of
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`indemnification obligation. Id., Cross-Claim ¶¶ 30-46. The relationship
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`between Paradies and Bristar began in 2003, when Paradies met Dony
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`(“Los Angeles”) Corporation (“Dony”), Bristar’s successor-in-interest, at a
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`trade show. Id., Cross-Claim ¶ 8. Dony presented Paradies with luggage
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`bearing the “Safari” pattern for its consideration. Id., Cross-Claim ¶ 9.
`2
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`After negotiations between Dony and Paradies, Paradies began
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`purchasing luggage – including luggage bearing the “Safari” design – from
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`Dony. Id., Cross-Claim ¶¶ 10, 11. Paradies asserts that it “did not create,
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`assist in creating, and does not have knowledge about the creation of the
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`‘Safari’ design,” but rather “relied exclusively upon Dony to to (sic) ensure
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`that it had created, was properly licensed, or otherwise owned all rights, to
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`2
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`Paradies asserts that the Wild design sold by Pure Country is
`different than “the several and distinguishable ‘Safari’ designs sold by
`Bristar[.]” See, e.g., Paradies’ Answer, at 7 (responding to paragraph
`14 of the Complaint).
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`sell the ‘Safari’ luggage.” Id., Cross-Claim ¶¶ 12, 13. The Paradies
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`account was subsequently transferred to Bristar, with the Paradies-Bristar
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`relationship based more on course of performance than a written
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`agreement.
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`18.
`On August 19, 2003, Paradies entered into an agreement
`with Bristar. This agreement, while extremely vague and
`ambiguous, deals with Bristar’s obligation to store merchandise
`pending issuance of a purchase order by Paradies.
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`19.
`As to quantity, price, and shipping instructions, the
`course of performance between the Parties was such that: (a)
`Paradies would issue a Purchase Order from its offices in
`Atlanta for identified quantities of luggage pieces; (b) Bristar
`would thereafter deliver the luggage pieces to Paradies’ shops
`located in airports around the nation; (c) Bristar would issue an
`invoice to Paradies; (d) Paradies would identify any credits,
`which included damaged or defective product or invoice
`amount discrepancies; (e) Paradies would pay the invoice as
`reduced by such credits; and (f) Bristar thereafter accepted and
`deposited the checks paying the invoice as reduced by the
`identified and applicable credits.
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`Id., Cross-Claim ¶¶ 18-19. Paradies asserts that Bristar, as a merchant
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`regularly dealing in goods of this kind, warranted pursuant to the Ga. Code
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`Ann. § 11-2-312 that there would be no rightful claim of infringement by
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`any third party (i.e. warranty of title). Paradies claims Bristar breached this
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`warranty and its duty to indemnify Paradies. Id., Cross-Claim ¶¶ 20-21,
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`24-26.
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`Bristar has moved to dismiss Pure Country’s complaint and Paradies’
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`cross-claims pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6). See,
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`Bristar’s Memorandum in Support of its Motion to Dismiss the
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`Complaint and Cross-Claims (“Bristar’s Memorandum”), filed
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`September 1, 2005. Bristar argues that Pure Country’s complaint must
`3
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`be dismissed pursuant to Rule 12(b)(1) for lack of subject matter
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`jurisdiction because Pure Country did not, at the time the complaint was
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`filed, possess either a registration for the Wild design or a refusal to
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`register by the Copyright Office. Id., at 3-11. In regards to the cross-
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`claims of Paradies, Bristar argues: (1) Because Pure Country’s complaint
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`must be dismissed, Paradies’ cross-claims must also be dismissed as the
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`Court would no longer have jurisdiction over the cross-claims; (2) Bristar
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`has disclaimed its warranties of title and against infringment under Ga.
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`Code Ann. § 11-2-312, and in any event, “Bristar’s liability is limited to the
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`3
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`Bristar does not seek dismissal of the complaint under Rule 12(b)(6);
`however, Bristar does argue for dismissal of Paradies’ cross-claims under
`both Rules 12(b)(1) and (b)(6).
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`7
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`replacement or repair of damaged merchandise;” and (3) Paradies’
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`indemnity claim is preempted by the Copyright Act. Id., at 11-16.
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`II. STANDARD
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`“The existence of subject matter jurisdiction is a threshold issue”
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`which must be addressed before the merits of the case. Jones v. Am.
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`Postal Workers Union, 192 F.3d 417, 422 (4 Cir. 1999). The parties or
`th
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`the court, acting sua sponte, may raise the issue of subject matter
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`jurisdiction at any time. New Horizon of N.Y. LLC v. Jacobs, 231 F.3d
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`143, 150 (4 Cir. 2000). The plaintiff bears the burden of proving that
`th
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`subject matter jurisdiction exists. Evans v. B.F. Perkins Co., 166 F.3d
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`642, 647 (4 Cir. 1999). Where, as here, the defendant contends “that a
`th
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`complaint simply fails to allege facts upon which subject matter jurisdiction
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`can be based[,] . . . all the facts alleged in the complaint are assumed to be
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`true and the plaintiff, in effect, is afforded the same procedural protection
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`as he would receive under a Rule 12(b)(6) consideration.” Adams v. Bain,
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`697 F.2d 1213, 1219 (4 Cir. 1982); United States v. North Carolina,
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`180 F.3d 574, 580 (4 Cir. 1999) (citing Adams).
`th
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`When considering a motion to dismiss for failure to state a claim
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`upon which relief can be granted under Federal Rule of Civil Procedure
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`12(b)(6), “‘the court should accept as true all well-pleaded allegations and
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`should view the complaint in a light most favorable to the plaintiff.’” T.G.
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`Slater & Son, Inc. v. Donald P. & Patricia A. Brennan LLC, 385 F.3d
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`836, 841 (4 Cir. 2004) (quoting Mylan Labs., Inc. v. Matkari, 7 F.3d
`th
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`1130, 1134 (4 Cir. 1993)). All reasonable inferences should also be
`th
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`drawn in the plaintiff’s favor. Ibarra v. United States, 120 F.3d 472, 474
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`(4 Cir. 1997). “[A] district court may dismiss a complaint for failure to
`th
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`state a claim only if it appears beyond doubt that the plaintiff can prove no
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`set of facts that would entitle him to relief.” Lambeth v. Bd. of Comm’rs
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`of Davidson County, NC, 407 F.3d 266, 268 (4 Cir.), cert. denied, 126
`th
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`S. Ct. 647 (2005).
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`III. DISCUSSION
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`A. Motion to Dismiss the Complaint for Lack of Subject Matter
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`Jurisdiction
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`Before addressing Bristar’s motion under Rule 12(b)(6), the Court
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`must first resolve Bristar’s lack of subject matter jurisdiction allegation.
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`Jones, supra. Bristar claims that this Court lacks subject matter
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`jurisdiction because, at the time the complaint was filed, Plaintiff had
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`applied for a copyright on its Wild design but had not received certification
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`from or had its application denied by the Copyright Office. Defendant
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`argues that jurisdiction under the Copyright Act will only lie when one of
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`those two things has occurred. This is often termed the “registration
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`approach” to Copyright Act jurisdiction. See Derminer v. Kramer, 386 F.
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`Supp. 2d 905, 911 (E.D. Mich. 2005) (“[T]he registration approach
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`finds subject matter jurisdiction only when the Copyright Office has
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`either accepted or rejected [a proper copyright application] before the
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`suit was filed.”). Conversely, Plaintiff asserts that simply having applied
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`for registration is enough to confer jurisdiction on this Court under the Act.
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`This position is referred to as the “application approach.” Id. (“The
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`application approach finds subject matter jurisdiction when the date
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`of a proper application precedes the date of filing[.]”). The federal
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`courts are as divided as the parties here on whether the “application” or
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`“registration” approach is the correct jurisdiction approach. In this case,
`4
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`however, the Court has no need to pick a side.
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`On September 8, 2005, Plaintiff filed an affidavit stating that the
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`registration from the Copyright Office had been received and attached the
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`registration. See Certificate of Registration, attached to Kaufman
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`Declaration, supra. This occurred only seven days after Bristar’s motion
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`to dismiss was filed, and long before briefing on the topic had been
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`completed or this Court had begun to consider the motion. Plaintiff
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`allegedly asked Bristar to withdraw its motion to dismiss for lack of subject
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`4
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`See, Positive Black Talk, Inc. v. Cash Money Records, Inc., 394
`F.3d 357 (5 Cir. 2004) (held “application approach” is proper);
`th
`Datatel, Inc. v. Rose & Tuck, LLC, 2005 WL 1668020 (E.D. Va. 2005)
`(same); Iconbazaar, LLC v. America Online, Inc., 308 F.Supp.2d 630
`(M.D.N.C. 2004) (same); Foraste v. Brown Univ., 248 F.Supp.2d 71
`(D.R.I. 2003) (same); Int;l Kitchen Exhaust Cleaning Ass’n v. Power
`Washers of North Am., 81 F.Supp.2d 70 (2000) (same); SportsMEDIA
`Tech. Corp. v. Upchurch, 839 F. Supp. 8 (D. Del. 1993) (same); but see,
`La Resolana Architects v. Clay Realtors Angel Fire, 416 F.3d 1195
`(10 Cir. 2005) (held “registration approach” is proper); Mays &
`th
`Assoc. v. Euler, 370 F.Supp.2d 362 (D. Md. 2005) (same); Tabachnik v.
`Dorsey, 2005 WL 1668542 (S.D.N.Y. 2005) (same); Loree Rodkin Mgmt.
`Corp. v. Ross-Simons, Inc., 315 F.Supp.2d 1053 (C.D. Cal. 2004)
`(same); Corbis Corp. v. Amazon.com, Inc., 351 F.Supp.2d 1090 (W.D.
`Wash. 2004) (same); Zimmer v. CooperNeff Advisors, Inc., 2004 WL
`2933979 (E.D. Pa. 2004) (same); Gerig v. Krause Publ’ns, Inc., 33
`F.Supp.2d 1304 (D. Kansas 1999) (same). Neither the Fourth Circuit
`Court of Appeals nor the district courts in this District have adopted either
`approach.
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`11
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`matter jurisdiction upon receipt of the registration, but Bristar refused to do
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`so. See Plaintiff’s Memorandum in Opposition to Defendant Bristar,
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`Inc.’s Motion to Dismiss (“Plaintiff’s Opposition”), filed October 3,
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`2005, at 1. It is clear that any defect in the pleading – if there is in fact a
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`defect – could be cured by supplementing the complaint. However,
`5
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`Defendant Bristar – citing no possible prejudice, undue hardship, or any
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`reason whatsoever – would have this Court dismiss the complaint only to
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`have Plaintiff immediately refile the case, Defendant Paradies refile its
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`answer and cross-claims, and this entire process begin anew. See
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`Bristar’s Reply Memorandum in Support of its Motion to Dismiss the
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`Complaint and Cross-Claims (“Bristar’s Reply”), filed October 17,
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`2005, at 4-5. There is ample authority for allowing Plaintiff to file a
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`supplemental pleading reflecting receipt of the copyright registration and,
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`therefore, quieting any subject matter jurisdiction concerns. See, e.g.,
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`Joseph J. Legat Architects, P.C. v. United States Dev. Corp., 601 F.
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`5
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`Plaintiff requested that if Bristar’s motion to dismiss the complaint
`was not denied outright, that it be allowed to amend its complaint pursuant
`to Rule 15(c). See Plaintiff’s Opposition, at 6-8. Although there is little
`practical difference between the two, because the amendment would
`concern matters occurring after the filing of the complaint, the proper
`avenue would be for Plaintiff to file a supplemental pleading pursuant to
`Rule 15(d). See Franks v. Ross, 313 F.3d 184, 198 n.15 (4 Cir. 2002).
`th
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`12
`Supp. 673, 675 (N.D. Ill. 1985) ; Demetriades v. Kaufmann, 680 F.
`6
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`Supp. 658, 661 (S.D.N.Y. 1988) ; Rosedale v. News Syndicate Co. Inc.,
`7
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`39 F. Supp. 357, 358 (S.D.N.Y. 1941) ; Frankel v. Stein & Day, Inc., 470
`8
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`6
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`“When Legat filed this suit, it had merely applied for copyright
`registration; the Register of Copyrights had not yet approved the
`registration. Thus, the precise issue raised in defendants’ motion was
`whether an application for registration satisfied § 411(a) or whether that
`section requires final approval or denial of registration. We need not
`resolve that issue, however, because it is now moot. While the motion was
`being briefed, Legat’s copyright registration was approved, as defendants
`concede in their reply brief. Even if we were to grant defendants’ motion,
`Legat would simply amend the complaint on the basis of the now-valid
`registration. Because the effective date of the registration is the date of
`application, see 17 U.S.C. § 410(d), the outcome would be the same as if
`we had denied defendants’ motion. Instead of resolving this moot issue,
`then, we grant Legat leave to amend its complaint to allege and attach its
`valid registration.” Legat, 601 F. Supp. at 675 (emphasis added).
`“In the case at bar, plaintiffs only mailed their application for
`copyright protection to the Copyright Office on February 2. When this
`action was instituted (February 8), a certificate of registration had not yet
`issued. Consequently, this court had no jurisdiction over the copyright
`claim. A valid certificate, however, has since been issued (No. VA 290-
`080, effective February 2, 1988). On March 1 (after this motion was
`noticed), an amended complaint was filed properly setting forth this court’s
`jurisdiction based on the issuance of the certificate. Accordingly, and in
`the interests of substantial justice, we treat this motion as deriving from a
`proper jurisdictional base.” Demetriades, 680 F. Supp. at 661.
`“If this were a suit where the conditions precedent had been satisfied
`after its institution, it would be proper to direct the plaintiff to file a
`supplemental complaint. But from what appears here, the plaintiff could
`not replead to correct the defect because he yet lacks proper registration.”
`Rosedale, 39 F. Supp. 358 (emphasis added). The Rosedale court
`dismissed the complaint without prejudice, leaving plaintiff with the
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`7
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`8
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`13
`F. Supp. 209, 212 n.2 (S.D.N.Y. 1979), aff’d, 646 F.2d 560 (2d Cir.
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`1980) ; see also Franks v. Ross, 313 F.3d 184, 198 (4 Cir. 2003).
`9
`th
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`10
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`Therefore, finding no undue prejudice to Defendant Bristar nor any bad
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`faith or dilatory motive on the part of Plaintiff Pure Country, and in the
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`interest of substantial justice and judicial efficiency, the Court will deny
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`Defendant’s motion to dismiss the complaint for lack of subject matter
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`jurisdiction. The Court will allow Plaintiff to file a supplemental pleading
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`pursuant to Fed. R. Civ. P. 15(d), showing the date the certificate of
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`registration was received, the effective date of registration, and the
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`copyright number. See Davis v. Piper Aircraft Corp., 615 F.2d 606, 613
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`(4th Cir. 1980) (“In the absence of any apparent or declared reason
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`opportunity to refile when he had received proper registration.
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`9
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`“Frankel states in his reply affidavit that, upon learning of this defect,
`he immediately complied with the registration requirements of the
`[Copyright] Act and asks that the court permit amendment of the complaint
`to allege that such registration has taken place. If such an amendment is
`made, we see no reason why the action may not proceed uninterrupted. . .
`. Plaintiffs are therefore given leave to amend their complaint.” Frankel,
`470 F. Supp. at 212 n.2 (internal citations omitted).
`Franks noted that “the filing of a supplemental pleading is an
`appropriate mechanism for curing numerous possible defects in a
`complaint,” and “permitt[ed] plaintiffs to file amended complaint to
`demonstrate that, subsequent to filing of initial complaint, they complied
`with jurisdictional prerequisites of Title VII.” Franks, 313 F.3d at 198
`(citing Bates v. W. Elec., 420 F. Supp. 521 (E.D. Pa. 1976).
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`10
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`14
`such as undue delay, bad faith or dilatory motive on the part of the
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`movant, repeated failure to cure deficiencies by amendments
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`previously allowed, undue prejudice to the opposing party by virtue of
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`allowance of the amendment, futility of amendment, etc. the leave
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`sought should, as the rules require, be ‘freely given.’” (quoting
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`Foman v. Davis, 371 U.S. 178, 182 (1962))); Franks, supra, at 198 n.15
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`(“This distinction [between a supplemental pleading and an amended
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`pleading] is of little practical significance, however, because the
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`standards used by a district court in ruling on a motion to amend or
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`on a motion to supplement are nearly identical. In either situation,
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`leave should be freely granted, and should be denied only where
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`good reason exists . . ., such as prejudice to the defendants.”
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`(citation and internal quotations omitted)).
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`B. Motion to Dismiss Defendant Paradies’ Cross-Claims
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`Defendant Bristar has also moved to dismiss the cross-claims of
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`Defendant Paradies under Rules 12(b)(1) and 12(b)(6). Paradies has
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`asserted cross-claims against Defendant Bristar for: (1) Declaratory
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`judgment for indemnification from Bristar under Georgia common law and
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`15
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`pursuant to Ga. Code Ann. § 11-2-312, and to set-off any amounts owed to
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`Bristar pursuant to Ga. Code Ann. §§ 13-7-11, 13-7-5, and 23-2-76; (2)
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`Breach of warranty of title under Ga. Code Ann. § 11-2-312; and (3)
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`Breach of indemnification obligation under Ga. Code Ann. § 11-2-312. See
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`Paradies’ Answer, Cross-Claim, ¶¶ 30-46. In response, Defendant
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`Bristar makes three arguments: (1) “This Court cannot render declaratory
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`judgment in this matter” because the Court lacks subject matter
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`jurisdiction; (2) Paradies’ breach of warranty of title claim must be
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`dismissed because Bristar has disclaimed its warranties; and (3) Paradies’
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`indemnity claim is preempted by the Copyright Act. See Bristar’s
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`Memorandum, at 11-16.
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`Inasmuch as Bristar’s motion to dismiss the complaint for lack of
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`subject matter jurisdiction has been denied, Bristar’s first contention is now
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`moot.
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`Bristar next asserts that Paradies’ cross-claim for breach of warranty
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`must be dismissed because Bristar has disclaimed its warranties of title
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`and against infringement, and that Ga. Code Ann. § 11-2-312(3) (warranty
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`against infringement) does not apply to copyrights. Id., at 12-14. In
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`making its disclaimer argument, Bristar relies on language contained on its
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`16
`invoices, a sample of which is attached to Bristar’s memorandum. Id., at
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`Exhibit 2. However, a motion to dismiss under Rule 12(b)(6) tests only the
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`legal sufficiency of the complaint, and consideration of this outside material
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`would convert the motion into one for summary judgment under Rule 56.
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`See, e.g., Warth v. Seldin, 422 U.S. 490, 527 (1975); Finley Lines Joint
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`Protective Bd. Unit 200 v. Norfolk S. Corp., 109 F.3d 993, 995 (4 Cir.
`th
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`1997); Mabry v. W & S Life Ins. Co., 2005 WL 325455, *2 (M.D.N.C.
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`2005). Therefore, the Court will not consider the invoice at this time and,
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`as the invoice’s language and its purported effect is the only basis for
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`Defendant Bristar’s motion in regards to disclaimer of warranties, Bristar’s
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`motion to dismiss is denied without prejudice to reassert this argument in a
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`proper motion under Rule 56.
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`Defendant Bristar also argues that no claim can be stated under Ga.
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`Code Ann. § 11-2-312(3) for breach of warranty against infringement
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`because this section is inapplicable to copyrights. See Bristar’s
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`Memorandum, at 13-14. Bristar cites no cases reaching such a
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`conclusion, nor has this Court found any authority stating that Ga. Code
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`Ann. § 11-2-312, U.C.C. § 2-312, or the equivalent section of any other
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`state’s commercial code is inapplicable to copyrights. Rather, Bristar
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`bases its assertion on the absence of the word “copyright” from the text of
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`the statute and the comments thereto, arguing that “[h]ad the Georgia
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`legislature intended for copyright infringement to be included it certainly
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`could have crafted the statute to say so or could have addressed the issue
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`in its comments.” Id., at 14.
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`First, the mere presence of the terms “patent” and “trademark,” and
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`absence of the word “copyright,” in the comments to Ga. Code Ann. § 11-
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`2-312 is not determinative of this issue.
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`11
`
` While it is certainly true that the
`
`Georgia legislature could have chosen to craft the statute or comments
`
`thereto to expressly include copyrights, the legislature could have crafted
`
`the statute or comments just as easily to expressly exclude copyrights.
`
`See, e.g., Robinson v. Shell Oil Co., 519 U.S. 337, 342 (1997) (where in
`
`attempting to determine whether the term “employees” as used in
`
`Title VII includes “former employees,” the Court stated: “That the
`
`statute could have expressly included the phrase ‘former employees’
`
`11
`
`Nor is the absence of the word “copyright” in the text of the statute
`determinative. Section 11-2-312 does not expressly refer to patents or
`trademarks. Therefore, if Bristar’s logic were followed regarding the
`absence of the word “copyright,” the statute would be virtually meaningless
`because it would be inapplicable to patents, trademarks, or copyrights.
`
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`18
`does not aid our inquiry. Congress also could have used the phrase
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`‘current employees.’”).
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`Second, the text of the statute, referencing “infringement or the like,”
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`evidences an intent for broad application. See Ga. Code Ann. § 11-2-
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`312(3).
`
`The broad language of this section, comprehending
`“infringement or the like,” applies to claims of
`copyright infringement although the Official
`Comment explicitly refers only to “claim[s] of
`infringement of a patent or trademark by a third
`party.” See J. White & R. Summers, Uniform
`Commercial Code 364 (2d ed. 1980) (section 2-
`312(3) applies to claims similar to patent and
`trademark infringement). The policy underlying this
`statute – that a merchant who regularly deals in
`like goods has a duty to insure that no claim of
`infringement by a third party mars the buyer’s title –
`applies equally well to claims of copyright
`infringement.
`
`Dolori Fabrics, Inc. v. Limited, Inc., 662 F. Supp. 1347, 1358 (S.D.N.Y.
`
`1987).
`
`Finally, the only two cases to have considered this precise issue
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`have determined that the warranty against infringement does apply to
`
`copyrights. Id.; Chere Amie, Inc. v. Windstar Apparel Corp., 2003 WL
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`22056935, *2 (S.D.N.Y. 2003). Bristar seems to be opposed to
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`consideration of cases from other jurisdictions on this issue. See,
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`Bristar’s Reply, at 8-9. However, where there is no Georgia decision on
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`Case 1:05-cv-00235-LHT-DLH Document 21 Filed 01/20/06 Page 18 of 27
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`

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`19
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`point, it is proper for the Court to look to the decisions of other jurisdictions
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`interpreting Uniform Commercial Code provisions. See, In re Carmichael
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`Enter., Inc., 334 F. Supp. 94, 99 (N.D. Ga. 1971), aff’d, 460 F.2d 1405
`
`(5 Cir. 1972) (“The absence of any Georgia decisions on the issue
`th
`
`before the Court, coupled with the legislature’s express desire for
`
`national uniformity in the area of commercial law compels the Court
`
`to examine the decisions of other Uniform Commercial Code
`
`jurisdictions.”); Ga. Code Ann. § 11-2-312 (warranty of title and
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`against infringement); Dolori Fabrics, supra (discussing U.C.C. § 2-
`
`312, of which Ga. Code Ann. § 11-2-312 is a virtual carbon copy).
`
`Bristar’s motion to dismiss Paradies’ breach of warranty claim is therefore
`
`denied.
`
`Defendant Bristar’s final argument is that Paradies’ indemnity claim
`
`
`
`should be dismissed because it is preempted by the Copyright Act. 12
`
`Bristar’s Memorandum, at 14-16; Bristar’s Reply, at 6-8. Paradies
`
`12
`
`Bristar also argues that Paradies has no claim for indemnification
`under Ga. Code Ann. § 11-2-312 because that section does not apply to
`copyrights. See Bristar’s Reply, at 8-9. The Court has rejected this
`argument.
`
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`

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`20
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`bases its claim for indemnification on both Georgia common law and Ga.
`
`Code Ann. § 11-2-312. Paradies’ Answer, Cross-Claim, ¶ 44.
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`Generally, under Georgia common law, “[a] person who is compelled
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`to pay damages because of liability imputed to him as the result of a tort
`
`committed by another may maintain an action for indemnity against the
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`person whose wrong has thus been imputed to him.” North Ga. Elec.
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`Membership Corp. v. Thomason & Holsomback Constr. Co., Inc., 157
`
`Ga. App. 719, 720, 278 S.E.2d 433 (1981); Nguyen v. Lumbermens Mut.
`
`Cas. Co., 261 Ga. App. 553, 557, 583 S.E.2d 220, 224 (2003). However,
`
`where the basis for this action is the violation of a federal statute – such as
`
`the Copyright Act – “indemnification from another who has also violated the
`
`statute [is available] only if such right arises (1) through the affirmative
`
`creation of a right of action by Congress, either expressly or implicitly, or
`
`(2) via the power of the courts to formulate federal common law.”
`
`Mortgages, Inc. v. U.S. Dist. Court for Dist. of Nev. (Las Vegas), 934
`
`F.2d 209, 212 (9 Cir. 1991) (citing Texas Indus., Inc. v. Radcliff
`th
`
`Materials, 451 U.S. 630, 638 (1981)). This Court, like others, has
`
`previously determined that no right of indemnification was affirmatively
`
`created (either expressly or implicitly) by Congress in the Copyright Act,
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`

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`21
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`and that this is not one of the “limited situations” in which the Court should
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`formulate federal common law to create such a right. See Exhibit 1,
`
`Order in Civil No. 3:03cv429, Christopher Phelps & Assocs., Inc., v.
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`Galloway (W.D.N.C. Feb. 24, 2004) (Mullen, C.J.), attached to Bristar’s
`
`Reply; Equity Builders & Contractors., Inc. v. Russell, 2005 WL
`
`2664243 (N.D. Ill. 2005); Arista Records, Inc. v. Flea World, Inc., 356 F.
`
`Supp. 2d 411, 416 (D.N.J. 2005); Lehman Bros., Inc. v. Wu, 294
`
`F.Supp.2d 504 (S.D.N.Y. 2003); Johnston v. Smith, 1997 WL 584349
`
`(N.D. Ga. 1997). Therefore, Paradies’ indemnification claim based on
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`Georgia common law is dismissed with prejudice for failure to state a claim
`
`upon which relief can be granted.
`
`Paradies’ claim for indemnification under Ga. Code Ann. § 11-2-312,
`
`however, is not preempted by the Copyright Act. Unlike Paradies’ common
`
`law indemnification claim, Paradies’ indemnity claim based on § 11-2-312
`
`is not controlled by Galloway and the other cases cited above. By this
`
`claim, Paradies seeks indemnification as a remedy for violation of state
`
`statutory law, not for violation of a federal statute. Therefore, to determine
`
`if this remedy is precluded, it must be determined if the claim upon which it
`
`is based is preempted by the Copyright Act.
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`

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`22
`
`Whether Paradies indemnification claim under § 11-2-312 is
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`preempted by the Copyright Act is a two-part inquiry: “first, the work must
`
`be ‘within the scope of the ‘subject-matter of copyright’ as specified in 17
`
`U.S.C. §§ 102, 103,’ and second, ‘the rights granted under state law’ must
`
`be ‘equivalent to any exclusive rights within the scope of federal copyright
`
`as set out in 17 U.S.C. § 106.’” United States ex. rel. Berge v. Bd. of
`
`Trustees of the Univ. of Ala., 104 F.3d 1453, 1463 (4 Cir. 1997)
`th
`
`(quoting Rosciszewski v. Arete Assocs., Inc., 1 F.3d 225, 229 (4 Cir.
`th
`
`1993)). The exclusive rights within the scope of a federal copyright are the
`
`rights to: “‘(1) reproduce the copyrighted work; (2) prepare derivative
`
`works; (3) distribute copies of the work by sale or otherwise; and, with
`
`respect to certain artistic works, (4) perform the work publicly; and (5)
`
`display the work publicly.’” Rosciszewski, supra (quoting Computer
`
`Assocs. Int’l v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992)). A state law
`
`claim “that infringe[s] one of the exclusive rights . . . [is] preempted by §
`
`301(a) if the right defined by state law ‘may be abridged by an act which, in
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`and of itself, would infringe one of the exclusive rights.’” Rosciszewski,
`
`supra (quoting Computer Assocs. Int’l, supra) (other citations
`
`omitted). The focus is on the elements of the cause of action, and “[t]o
`
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`

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`23
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`avoid preemption, a cause of action defined by state law must incorporate
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`elements beyond those necessary to prove copyright infringement, and
`
`must regulate conduct qualitatively different from the conduct governed by
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`federal copyright law.” Trandes Corp. v. Guy F. Atki