• Pay Me Now or Pay Me Later

    by  • October 21, 2008 • copyright

    Tacori Enterprises v. Rego Manufacturing is such a meaty case that I’ll do separate posts on the various trademark and copyright issues in the case. This post is a lesson on how not to assign ownership of a copyright and register it – the plaintiff spent tens of thousands of dollars defending attacks on the validity of its ownership and registration during the lawsuit, instead of a few hundred getting legal advice way back in the beginning.
    Haig Tacorian is the President of Tacori Enterprises and Garo Karounian is an independent designer. At different times that are relevant in the case, Karounian was the sole proprietor of a business called Anais Fine Jewelry Mfg. and later Anais Designs, Inc. The lawsuit is about a very successful design for a ring, shown below:
    The history of the copyright in the ring is something like this:
    • 1994: Tacorian and Karounian began working together on ring designs. They had an oral agreement that Tacori would own any ring designs and Anais Fine Jewelry would manufacture the rings.
    • 1999: Tacorian and Karounian worked together to design the ring in suit.
    • September 30, 1999: the first ring was ordered.
    • November 16, 1999: the ring was shipped.
    • July 31, 2001: Tacori registered the copyright in the ring design. The application had four errors: (1) it listed Tacori as the author of a work made for hire; (2) it did not list Tacorian or Karounian as authors; (3) it did not state that Tacori was owner by virtue of assignment; (4) the dates of creation and publication were listed as 2000, not 1999.
    • May, 29, 2003: Karounian incorporated Anais Designs, Inc.
    • December 23, 2003: Tacori and Anais Designs, Inc. executed an assignment confirming the oral assignment, but the document did not list the copyright in the ring as one of the assigned works.
    • December 29, 2003: A Supplemental Registration was filed that listed Anais Designs, Inc. as a co-author of the ring design and that Tacori’s ownership was by assignment, not as a work-made-for-hire.
    • August 18, 2005: A second Supplemental Registration was filed, changing the dates from 2000 to 1999.
    • February 20, 2008 (During briefing on cross-motions for summary judgment) Tacori and “Anais Designs, Inc., as the successor-in-interest to Anais Fine Jewelry Mfg.” entered into an amended copyright assignment assigning the ring in suit and stating it was an inadvertent error that it was previously omitted.
    • Later in the litigation: Karounian signs a declaration stating that it was his intent that Tacori own the copyright in the ring.
    You’ve probably already seen where this is going. In what should have been a fairly routine copyright infringement case, defendant Rego was able to make all sorts of hay with the comedy of errors in the assignment and registration history for the ring. Luckily for Tacori, nothing worked.
    Rego’s theory was that Karounian as an individual was the sole author of the design and, since he was not employed by Tacori, he was the owner of it. Thereafter, Karounian never transferred his ownership interest to Tacori or Anais Designs, Inc. by a written assignment as required under section 204(a). Thus, the 2003 and 2008 assignments were ineffective because the assignor, Anais Designs, Inc., owned nothing to assign.
    The court wasn’t buying it. First, the court refused to even entertain the theory, finding that Rego had no standing to challenge the validity of the assignment where there was no dispute between the transferring parties – instead, the purpose of section 204(a) of the Copyright Act, requiring a written assignment, is to resolve disputes between owners and transferees.
    Second, even if Rego did have standing, and even if the 2003 and 2008 ratifications of the 1999 oral transfer weren’t effective, the declaration Karounian had signed for the litigation stating that he had transferred the ownership was good enough to serve as the writing for purposes of 204(a).
    Finally, for good measure and in a footnote, the court noted that Rego didn’t dispute that Karounian had the right to take actions on behalf of Anais Fine Jewelry, his sole proprietorship, or that Anais Designs, Inc. was the successor in interest of Anais Fine Jewelry. Since, though, the court had relied on the declaration for the assignment of ownership, it didn’t decide whether the 2003 and 2008 assignments were also therefore effective.
    So there was no question that Tacori owned the copyright in the work, but under U.S. law the owner must have a registration to bring suit. A collateral attack on the validity of a registration, and thus the plaintiff’s standing, is a popular tactic in a copyright litigation. Given the number of errors in Tacori’s registration, it was surely worth raising here.
    But still no luck for Rego. Even though the written assignments were executed after the work was initially registered, the effective assignment (in the court’s analysis, the declaration) was operative as of the date of the original transfer, in 1999. Therefore the owner as originally listed in the copyright registration was correct and the original registration valid.
    Rego also claimed that the registration was procured through fraud on the Copyright Office by Tacori’s fraudulent misrepresentations in its applications, original and supplemental, of its ownership claim. This argument didn’t work for three reasons: Rego hadn’t pleaded a fraud defense; it had provided no evidence of fraudulent intent; and, Tacori’s original misstatement that it came to be owner as a work made for hire wasn’t a material misrepresentation.
    A lot of opportunity for Rego to get rid of the infringement claim for reasons having nothing to do with the meat of the case, substantial similarity, but none that worked.
    Tacori Enter. v. Rego Mfg., Civ. No. 1:05cv2241, 2008 U.S. Dist. LEXIS 73686 (D. Ohio Sept. 25, 2008)
    © 2008 Pamela Chestek