Reno-Tahoe Specialty, Inc. v. Mungchi, Inc.

Filing 110

ORDER Denying 104 First OBJECTIONS re LR IB 3-1 or MOTION for District Judge to Reconsider Order re 101 Motion to Strike Fair Use and Copyright Validity Defenses Signed by Chief Judge Gloria M. Navarro on 11/13/14. (Copies have been distributed pursuant to the NEF - ASB)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 Reno-Tahoe Specialty, Inc., 9 ) ) ) ) ) ) ) ) ) ) 10 This is an action for copyright infringement and related claims. Pending before the 4 Plaintiff, 5 6 vs. Mungchi, Inc., 7 Defendants. 8 Case No.: 2:12-cv-01051-GMN-VCF ORDER 11 Court is the Motion to Reconsider, (ECF No. 104), filed by Defendant Mungchi, Inc. 12 (“Mungchi”). Plaintiff Reno-Tahoe Specialty, Inc. filed a Response, (ECF No. 106). 13 On October 27, 2014, the Court granted Plaintiff’s oral motion to strike the references to 14 a fair use defense from Mungchi’s Trial Brief. (ECF No. 101). In the instant Motion, Mungchi 15 requests that the Court reconsider its ruling and allow the fair use defense to be asserted at trial. 16 I. BACKGROUND This action centers upon allegations that Mungchi infringed upon Plaintiff’s copyright 17 18 over an enhanced image of the Las Vegas Strip by printing a nearly identical image on t-shirts 19 that were sold in competition with Plaintiff’s products. (Am. Compl. 2:27-3:4, 5:4-14. ECF No. 20 31). Plaintiff filed its original Complaint on June 20, 2012, (ECF No. 1), against Mungchi. 21 Mungchi filed its Answer on August 23, 2012. (Answer 1:23-2:13, ECF No. 19).1 Though the 22 Answer set forth twenty affirmative defenses, (id. at 2:17-5:6), it did not indicate that Mungchi 23 considered its actions to be protected under the doctrine of fair use. 24 25 1 Plaintiff filed an Amended Complaint on January 22, 2013, which named additional defendants but did not alter Plaintiff’s allegations against Mungchi. (ECF No. 31). Mungchi did not amend its answer in response to the Amended Complaint. Thus the original answer stands as Defendant Mungchi’s operative pleading. Page 1 of 7 1 The first of Mungchi’s filings to include the term “fair use” was its Response to 2 Plaintiff’s First Motion for Partial Summary Judgment, filed on April 8, 2013. (Def.’s 3 Response, ECF No. 44). Within its “Statement of Undisputed Facts,” Mungchi asserted, “Any 4 use of the ‘subject infringing image’ by Defendant Mungchi is defensible since Defendant 5 Mungchi was under the belief that the ‘subject infringing image’ was a fair use derivative work 6 when purchased from Defendant Top Design.” (Id. at 5:21-23). Mungchi made no other 7 references to fair use within this filing. 8 9 Defendant also mentioned fair use in its Response to Plaintiff’s Second Motion for Partial Summary Judgment, filed on August 19, 2013. (Def.’s Response, ECF No. 60). 10 Mungchi argued, without elaborating, that “Plaintiff RTSI did not meet its burden in rebutting 11 Mungchi’s fair use claims,” and that “[T]he overall shift in focus as well as other changes 12 readily visible in Top Design’s image makes Mungchi’s fair use claim a viable infringement 13 defense.” (Id. at 5:17-18, 9:23-24). This Response also quotes from a letter sent by Mungchi’s 14 counsel on June 8, 2012, which stated, “[Y]ou allege that Mungchi is infringing upon your 15 client’s copyright by selling t-shirts with a picture of the Las Vegas landscape. We must 16 respectfully disagree, and argue that Mungchi’s use qualifies as fair use.” (Ex. 1 to Def.’s 17 Response, ECF No. 60-1). However, the letter went on to discuss only that Mungchi’s counsel 18 did not believe Plaintiff’s image was subject to copyright protection. 19 In its Order denying Plaintiff’s Second Motion for Partial Summary Judgment, the Court 20 observed that Mungchi’s Response “appears to assert as an affirmative defense that Mungchi 21 made fair use of the work,” but ultimately the Court did not rule upon the validity of Mungchi’s 22 perceived attempt to raise a fair use defense. (Order 7:24-25, 15:18-20, ECF No. 76). 23 Mungchi made no further mention of a fair use defense until it filed its Trial Brief on 24 October 23, 2014. (Def.’s Trial Brief, ECF No. 92). In the Trial Brief, Mungchi argues that any 25 use of Plaintiff’s work is protected under the doctrine of fair use, pursuant to the four-factor test Page 2 of 7 1 set forth in Harper & Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539 (1985). (Id. at 2 11:1-12:21). 3 At Calendar Call, held on October 27, 2014, the Court granted Plaintiff’s oral motion to 4 strike the fair use defense from Mungchi’s Trial Brief, finding that it was not timely raised and 5 that Plaintiff would suffer substantial prejudice if it were asserted at trial. (ECF No. 101). In 6 the instant Motion, Mungchi requests that the Court reconsider its ruling. 7 II. 8 9 LEGAL STANDARD Fed. R. Civ. P. 54(b) provides that any interlocutory order “may be revised at any time before the entry of a judgment adjudicating all claims and all the parties’ rights and liabilities.” 10 Accordingly, “[w]here reconsideration of a non-final order is sought, the court has inherent 11 jurisdiction to modify, alter or revoke it.” Goodman v. Platinum Condo. Dev., LLC, 2012 WL 12 1190827, at *1 (D. Nev. 2012); see also City of Los Angeles, Harbor Div. v. Santa Monica 13 Baykeeper, 254 F.3d 882, 889 (9th Cir. 2001) (A district court “possesses the inherent 14 procedural power to reconsider, rescind, or modify an interlocutory order for cause seen by it to 15 be sufficient.”); United States v. Martin, 226 F.3d 1042, 1049 (9th Cir. 2000); Glavor v. 16 Shearson Lehman Hutton, Inc., 879 F. Supp. 1028, 1032 (N.D. Cal. 1994) (“District courts are 17 authorized to reconsider interlocutory orders at any time prior to final judgment.”) 18 “Reconsideration may be appropriate if a district court: (1) is presented with newly 19 discovered evidence, (2) committed clear error or the initial decision was manifestly unjust, or 20 (3) there has been an intervening change in controlling law.” Rich v. TASER Int’l, Inc., 917 F. 21 Supp. 2d 1092, 1094 (D. Nev. 2013); see also Nunes v. Ashcroft, 375 F.3d 805, 807–08 (9th 22 Cir. 2004); School Dist. No. IJ, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 23 1993), cert. denied, 512 U.S. 1236 (1994). 24 25 “While a motion for reconsideration allows a party to bring a material oversight to the court’s attention, it is not appropriate for a party to request reconsideration merely to force the Page 3 of 7 1 court to think about an issue again in the hope that it will come out the other way the second 2 time.” Brown v. S. Nev. Adult Mental Health Servs., 2014 WL 2807688, at *2 (D. Nev. 2014) 3 (internal quotation omitted); see also Palmer v. Champion Mortgage, 465 F.3d 24, 30 (1st Cir. 4 2006). 5 III. DISCUSSION 6 Mungchi argues that the Court should reconsider its decision to strike the fair use 7 defense because (1) Mungchi made references to a fair use defense in its responses to Plaintiff’s 8 Motions for Partial Summary Judgment; and (2) Mungchi distributed, rather than created, the 9 products with the allegedly infringing image. The Court will address each of these arguments 10 in turn. 11 Pursuant to Federal Rule of Civil Procedure 8(c), affirmative defenses must be raised in 12 a defendant’s first responsive pleading. See Fed. R. Civ. P. 8(c); Magana v. Commonwealth of 13 the N. Mariana Islands, 107 F.3d 1436, 1446 (9th Cir. 1997). An affirmative defense which is 14 not raised in the first responsive pleading is waived unless a defendant can show the plaintiff 15 was given adequate notice and will not suffer prejudice. See Kaufman v. Unum Life Ins. Co. of 16 Am., 834 F. Supp. 2d 1186, 1192 (D. Nev. 2011) (quoting Venters v. City of Delphi, 123 F.3d 17 956, 968-69 (7th Cir. 1997)); see also Magana, 107 F.3d at 1446. 18 It is well established that fair use is an affirmative defense, and therefore it must be 19 asserted within a defendant’s first responsive pleading pursuant to Rule 8(c). See, e.g., Monge 20 v. Maya Magazines, Inc., 688 F.3d 1164, 1170 (9th Cir. 2012) (citing Harper & Row 21 Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 561 (1985)). 22 In the instant case, Mungchi failed to provide adequate notice of its intent to raise a fair 23 use defense at trial. Though Mungchi’s counsel used the term “fair use” in a letter that was sent 24 to Plaintiff’s counsel twelve days before the Complaint was filed, the substance of the letter 25 argues only that Plaintiff’s picture is not eligible for copyright protection. (See ex. 1 to Def.’s Page 4 of 7 1 Resp., ECF No 60-1) (“Simply put, this is nothing more than a picture of the Las Vegas strip 2 which many people have taken. . . . Thus, it is [Mungchi’s] position, that simply placing an 3 image of a familiar sign on a picture of a landmark does not warrant copyright protection.”). 4 Arguing that a work is not protected under copyright law is inconsistent with a fair use defense, 5 as the fair use doctrine applies only to cases in which someone other than a copyright owner 6 uses a copyrighted work without authorization. Harper & Row, 471 U.S. at 549 (1985); see 7 also Monge, 688 F.3d at 1170 (stating that the fair use doctrine “presumes that unauthorized 8 copying has occurred, and is instead aimed at whether the defendant's use was fair”). Indeed, 9 17 U.S.C. § 107, which establishes the fair use doctrine, provides “the fair use of a copyrighted 10 work . . . is not an infringement of copyright.” 17 U.S.C. § 107 (emphasis added). Therefore, 11 because the substance of Mungchi’s June 2012 letter made only a passing reference to fair use 12 while setting forth arguments that were incongruous with a fair use defense, the Court finds that 13 the letter failed to provide adequate notice that Mungchi would argue fair use at trial. 14 Similarly, the references to fair use in the Responses to Plaintiff’s Motions for Partial 15 Summary Judgment failed to indicate that Mungchi would later attempt to raise this defense. 16 The first of these Responses merely states that Mungchi had previously suspected that the 17 image itself, regardless of its application, was somehow protected by the doctrine of fair use— 18 “Defendant Mungchi was under the belief that the ‘subject infringing image’ was a fair use 19 derivative work when purchased from Defendant Top Design.” (Def.’s Response 5:22-23, ECF 20 No. 44). 21 In the second Response, Mungchi asserts that Plaintiff “did not meet its burden in 22 rebutting Mungchi’s fair use claims,” and also argues that it is protected by the doctrine of fair 23 use because certain key differences between the two works indicate that the t-shirt image is not 24 actually a copy of Plaintiff’s image. (Def.’s Response 5:18-19, 9:23-24, ECF No 60). As stated 25 supra, the doctrine of fair use applies only in cases in which a protected work has been copied. Page 5 of 7 1 Therefore, Mungchi’s argument that its actions constituted fair use because Plaintiff’s image 2 was not actually copied is doctrinally incoherent. Thus, the Court finds that the references to 3 fair use contained in the Responses to Plaintiff’s Motions for Partial Summary Judgment failed 4 to give adequate notice that Mungchi intended to argue that its actions fell within the doctrine 5 of fair use. 6 Accordingly, because Mungchi failed to provide notice of its intent to raise a fair use 7 defense until three weeks prior to trial, the Court finds that allowing Mungchi to assert this 8 argument at trial would cause severe prejudice to Plaintiff. 9 Mungchi also appears to argue that its failure to timely raise the fair use defense should 10 be excused because Mungchi merely distributed, rather than created, the allegedly infringing t- 11 shirts. (Mtn. to Reconsider 7:18-20, ECF No. 104). Mungchi states, “[I]t was Defendant Top 12 Design’s responsibility to plead the fair use defense as the creator of the image at issue.” (Id. at 13 7:20-21). However, Mungchi fails to cite to any legal authority indicating that a defendant may 14 wait until the eve of trial to assert an affirmative defense based on its own assumption that a 15 different defendant is better situated to raise it earlier. In fact, allowing such conduct could 16 create a perverse incentive for one defendant to intentionally fail to timely raise an affirmative 17 defense in order to allow another to ambush the plaintiff with that same defense at the eleventh 18 hour. This would subject plaintiffs to significant prejudice and act in direct opposition to the 19 requirements of Rule 8(c). Therefore, the Court declines to hold that Mungchi’s failure to 20 timely raise its fair use defense is excused by the fact that the defense was not raised by the 21 other defendants in this case. 22 Therefore, the Motion to Reconsider does not present newly discovered evidence, 23 demonstrate that the Court committed clear error, or show that there has been an intervening 24 change in controlling law. 25 /// Page 6 of 7 1 2 3 4 IV. CONCLUSION IT IS HEREBY ORDERED that the Motion to Reconsider (ECF No. 104) is DENIED. DATED this 13th day of November, 2014. 5 6 7 ___________________________________ Gloria M. Navarro, Chief Judge United States District Court 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 7 of 7

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