Ashley Furniture Industries Inc v. American Signature, Inc. et al
Filing
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ORDER granting 26 Plaintiff's Rule 56(d) Motion to Defer Summary Judgment to the extent that discovery is appropriate before resolving Defendants' pending Motion for Summary Judgment; denying 30 Motion to Stay Discovery. Signed by Magistrate Judge Elizabeth Preston Deavers on 9/19/2011. (er1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
ASHLEY FURNITURE INDUSTRIES
INC.,
Plaintiff,
Civil Action 2:11-cv-00427
Judge Michael H. Watson
Magistrate Judge E.A. Preston Deavers
v.
AMERICAN SIGNATURE, INC., et al.,
Defendants.
OPINION AND ORDER
This matter is before the Court for consideration of Plaintiff’s Rule 56(d) Motion to
Defer Summary Judgment Motions Until After the Close of Discovery (ECF No. 26) and
Defendants’ Motion to Stay Discovery Pending Decision on their Motion for Summary
Judgment (ECF No. 30). Plaintiff argues it is entitled to discovery under Federal Rule of
Procedure 56(d) before responding to Defendants’ Motion for Summary Judgment. Defendants,
on the other hand, maintain that this Court should not allow any discovery until it reaches a
decision on the pending dispositive motion. For the reasons that follow, the Plaintiff’s Rule
56(d) Motion to Defer Summary Judgment is GRANTED to the extent that it will allow
discovery before resolving Defendants’ pending Motion for Summary Judgment. Additionally,
Defendants’ Motion to Stay Discovery is DENIED.
I. BACKGROUND
Plaintiff, Ashley Furniture Industries Inc., and Defendant American Signature, Inc.
(“American Signature”), are businesses engaged in selling furniture throughout the United
States. American Signature operates a chain of furniture stores under the business name of
Value City Furniture. Plaintiff filed its Complaint in this action on May 17, 2011, bringing
claims of copyright infringement pursuant to 17 U.S.C. § 101 et seq. In its Complaint, Plaintiff
maintains that Defendants used several of Plaintiff’s copyrighted images in their marketing
materials. Plaintiff contends that through these actions, Defendants have attempted to benefit
from Plaintiff’s name recognition and goodwill in order to sell their own furniture. Plaintiff
seeks injunctive relief, monetary damages, costs, and attorneys’ fees.
Defendants answered Plaintiff’s Complaint on June 8, 2011. On the same day,
Defendants moved for summary judgment. Defendants assert that even assuming Plaintiff
“owns valid copyrights and that American Signature copied the protectable elements of those
copyrights” American Signature’s actions constituted a fair use of the copyright protected works
pursuant to 17 U.S.C. § 107. (Mot. Summ. J. 8–9, ECF No. 17.) Defendants contend that the
advertisements in question are examples of comparative advertising allowable under the
principles of fair use. Defendants maintain, in the alternative, that even assuming Plaintiff
survives summary judgment on its copyright claims, Plaintiff is precluded from seeking statutory
damages pursuant to 17 U.S.C. § 504(c)(1) because Plaintiff did not register the copyrighted
works until after the alleged infringement began.
In moving for summary judgment, Defendants stress that the parties were involved in a
previous lawsuit in the Northern District of Illinois, which Plaintiff filed in August 2010. In this
lawsuit, Plaintiff brought claims for false advertisement, unfair competition, and trademark
infringement. Defendants maintain this action was based on the same advertisements involved
in this case. Upon Plaintiff’s oral motion, that court dismissed the lawsuit without prejudice so
that Plaintiff could “take a fresh look at” its claims. (Tr. 15, ECF No. 17-7.) Defendants have
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attached the complaint and proposed first amended complaint from the Illinois lawsuit, which
contain pictures of various Value City Furniture advertisements, to their Motion for Summary
Judgment.
On July 8, 2011, Plaintiff moved for discovery pursuant to Rule 56(d). Plaintiff
highlights that fair use is a fact-sensitive inquiry and contends that discovery is necessary for it
to respond to Defendants’ Motion for Summary Judgment. In an attached affidavit, Charles A.
Burke, attorney for Plaintiff, outlines several categories of discovery Plaintiff maintains it needs
before responding to Plaintiff’s Motion for Summary Judgment. Defendants assert that the
Court may resolve the issue of fair use by referencing the advertisements Plaintiff set forth in the
Northern District of Illinois action. Consequently, Defendants request that the Court stay all
discovery in this action until it resolves the pending dispositive motion.
II. STANDARD
Under the Federal Rules of Civil Procedure, when a party is faced with a motion for
summary judgment it may “show[] by affidavit or declaration that, for specified reasons, it
cannot present facts essential to justify its opposition . . . .” Fed R. Civ. P. 56(d). If the party
meets this burden the Court may “(1) defer considering the motion or deny it; (2) allow time to
obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order.”
Id.
As this Court has recently noted, “it is within the discretion of the district court whether or
not to permit additional discovery under Rule 56(d).” Fletcher v. Sheets, No. 2:09–CV–1130,
2011 WL 3861831, at *2 (S.D. Ohio Aug. 30, 2011) (citing Egerer v. Woodland Realty, Inc., 556
F.3d 415, 425–26 (6th Cir. 2009)). “The non-movant . . . has the burden of informing the district
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court of his need for discovery.” Murphy v. Grenier, 406 F. App’x 972, 976 (6th Cir. 2011).
“Bare allegations or vague assertions of the need for discovery are not enough.” Summer v. Leis,
368 F.3d 881, 887 (6th Cir. 2004). Rather, the nonmovant must demonstrate “to the district court
[its] need for discovery, what material facts [it] hope[s] to uncover, and why [it has] not
previously discovered the information.” Short v. Oaks Corr. Facility, 129 F. App’x 278, 282 (6th
Cir. 2005) (internal quotations omitted). Finally, the United States Court of Appeals for the Sixth
Circuit has emphasized that “[t]ypically, when the parties have no opportunity for discovery,
denying the [Rule 56(d)] motion and ruling on a summary judgment motion is likely to be an
abuse of discretion.” CenTra, Inc. v. Estrin, 538 F.3d 402, 420 (6th Cir. 2008).
III. ANALYSIS
Here, Defendants’ Motion for Summary Judgment relies on the affirmative defense of fair
use. After examining the law of fair use, the Court finds, in its discretion, that Plaintiff is entitled
to discovery.
A.
Fair Use
The doctrine of fair use is designed “to ensure courts ‘avoid rigid application of the
copyright statute when, on occasion, it would stifle the very creativity which that law is designed
to foster.’” Zomba Enterprises, Inc. v. Panorama Records, Inc., 491 F.3d 574, 581 (6th Cir.
2007). Congress has specifically provided that “the fair use of a copyrighted work . . . for
purposes such as criticism, comment, news reporting, teaching . . ., scholarship, or research, is not
an infringement of copyright.” 17 U.S.C. § 107. In making the fair use determination, the
following factors are relevant:
(1) the purpose and character of the use, including whether such use is of a
commercial nature or is for nonprofit educational purposes;
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(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted
work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted
work.
17 U.S.C. § 107.
Fair use, within the meaning of Section 107, is a mixed question of law and fact,
ultimately amounting to an “equitable rule of reason.” Harper & Row Publishers, Inc. v. Nation
Enters., 471 U.S. 539, 560 (1985) (internal quotations omitted). Furthermore, the list of factors
within Section 107 is non-exhaustive. Lexmark Intern., Inc. v. Static Control Components, Inc.,
387 F.3d 522, 537 (6th Cir. 2004). Accordingly, in assessing fair use, “[t]he task is not to be
simplified with bright-line rules, for the statute, like the doctrine it recognizes, calls for
case-by-case analysis.” Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 577 (1994). Fair use
is an affirmative defense. Therefore, the party asserting fair use carries the burden of proof.
Princeton Univ. Press v. Michigan Document Servs., Inc., 99 F.3d 1381, 1390 n.5 (6th Cir.
1996).
Some federal courts have addressed the fair use doctrine within the context of
comparative advertising. For example, both the Fifth and Ninth Circuit have indicated that,
under certain circumstances, comparative advertising may constitute fair use. Sony Computer
Entm’t Am., Inc. v. Bleem, LLC, 214 F.3d 1022, 1030 (9th Cir. 2000) (concluding that the use of
comparative “screen shots” of video games for the purposes of advertising was fair use);
Triangle Publ’ns, Inc. v. Knight-Ridder Newspapers, Inc., 626 F.2d 1171, 1175–78 (5th Cir.
1980) (holding that fair use defense applied to advertisements featuring a side by side
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comparison of a “TV Guide” cover with a competing TV supplement to demonstrate the larger
size of the competing booklet). Both of these cases suggest that, to constitute a fair use of the
copyright involved, comparative advertisements must not be misleading. See Sony Computer,
214 F.3d at 1027, 1030 (emphasizing that the plaintiff did not contend that the screen shots
involved were “untruthful or deceptive” and reasoning that “[t]he entire premise of comparative
advertising is that the consumer is being made aware of the true choices”); Triangle Publ’ns, 626
F.2d at 1176 (indicating that the result may have been different if the advertiser was
“attempt[ing] to palm off” the competitor’s product as its own). At least two district court
decisions, however, have shown more reservation in applying the fair use doctrine when the
purpose of comparative advertising is to demonstrate the similarity or sameness of products. See
Forest River, Inc. v. Heartland Recreational Vehicles, LLC, 753, 762–64 (N.D. Ind. 2010)
(refusing to decide the issue of fair use at the pleadings stage and noting “what makes this
analysis a potentially close call is that the product the Defendant advertises for sale is one for
which the floor plan is represented to be exactly the same as that of the [Plaintiff]”); Southco,
Inc. v. Kanebridge Corp., No. CIV. A. 99–4337, 2000 WL 21257, at *6 (E.D. Pa. Jan. 12, 2000)
(concluding, at the preliminary injunction stage, that use of copyright in comparative advertising
was not fair use in part because “[the defendant] seeks to show that their products are the same
as, and no better than, those made by [the plaintiff]”), re’vd on other grounds 258 F.3d 148 (3rd
Cir. 2001).
Finally, the Federal Trade Commission recognizes the benefits of comparative
advertising:
The Commission has supported the use of brand comparisons where the bases of
comparison are clearly identified. Comparative advertising, when truthful and
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nondeceptive, is a source of important information to consumers and assists them in
making rational purchase decisions. Comparative advertising encourages product
improvement and innovation, and can lead to lower prices in the marketplace.
16 C.F.R. § 14.15(c). As this language plainly states, however, an important component of
comparative advertising is that it is truthful and not misleading.
B.
Discovery is Appropriate in this Case
Despite the prolific briefing on the matter, the Court will attempt to resolve this
discretionary issue in a clear and concise fashion. Given the circumstances of this case, Plaintiff
is entitled to discovery prior to the Court’s resolution of the pending Motion for Summary
Judgment. Application of the fair use doctrine is fact intensive and requires the Court to conduct
an equitable case-by-case analysis. Furthermore, to the extent this case hinges on fair use of
comparative advertising, whether the subject advertising was truthful and not misleading
becomes a relevant concern. In this case, Plaintiff’s Complaint alleges that Defendants have
wrongfully used eight different copyrighted images. Defendants contend that any use of these
images was fair. In order to respond to this contention, at the very least, Plaintiff is entitled to
discovery regarding the scope of Defendants’ use of the copyrighted images as well as the
general context in which Defendants used the images. Assessing how far any use of Plaintiff’s
copyrighted images extended, and the circumstances of such use, will be relevant to the Court’s
determination, generally, of whether any use was fair, and more specifically, whether the
comparative advertising in question was untruthful or misleading.1
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Defendants have also moved for summary judgment based on the theory that Plaintiff is
not entitled to statutory damages. The parties disagree as to whether discovery is necessary for
resolution of this issue. Because the Court finds that discovery is necessary as to the broader
defense of fair use, it is unnecessary to decide whether discovery is appropriate on this more
limited issue. Even assuming the Court were to grant summary judgment on this alternative
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Defendants appear to argue that Plaintiff’s action is necessarily confined to the Value
City Furniture advertisements Plaintiff identified in its earlier Northern District of Illinois
lawsuit. The Court finds no support for this premise. A fair reading of Plaintiff’s Complaint
indicates that the current copyright infringement suit is based on all of the alleged instances in
which Defendants have used the eight copyrighted images in question. To determine whether
Defendants’ use of these images was fair, Plaintiff is entitled to discover the full extent of the
alleged use. The previous lawsuit involved different claims and was ultimately dismissed
without prejudice. It does not control the scope of the current action.
Finally, Defendants’ request to deny Plaintiff’s Rule 56(d) Motion on vagueness grounds
is without merit. In support of its Motion, Plaintiff submitted the Declaration of Attorney
Charles A. Burke. Mr. Burke emphasizes that Plaintiff does not currently know the full extent of
Defendants’ activities involving the images at issue, because it has not yet had an opportunity for
discovery. Additionally, Mr. Burke identified seventeen categories of facts Plaintiff intends to
uncover that it believes are relevant to the issue of fair use. For the reasons detailed above and
based on a review of the fair use doctrine, the Court finds it readily apparent that at least some of
these categories, such as the scope of Defendants’ use of copyrighted photographs, have the
potential to materially influence the Court’s summary judgment determination. Under these
circumstances, the Court finds that the affidavit presented in support of Plaintiff’s Motion is
sufficiently specific to satisfy Rule 56(d) requirements.
theory without allowing discovery, the case would continue as to Plaintiff’s other claims for
relief. Accordingly, for the purposes of judicial economy, the Court will refrain from reaching
this issue.
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IV. CONCLUSION
For the above reasons, Plaintiff’s Rule 56(d) Motion to Defer Summary Judgment (ECF
No. 26) is GRANTED to the extent that discovery is appropriate before resolving Defendants’
pending Motion for Summary Judgment. Because at least some discovery is necessary prior to
the resolution of the Motion for Summary Judgment, Defendants’ Motion to Stay Discovery
(ECF No. 30) is DENIED. The Court does not determine at this time whether there is some
practical and efficient way for the parties to phase discovery in this case. Ideally, the parties will
be able to work together to resolve this issue in light of this Opinion and Order. The Court will
discuss how discovery will proceed at the Pretrial Conference currently scheduled for October 4,
2011. Unless and until the Court requests otherwise, the parties should not submit any further
briefing on these issues.
Finally, the parties’ briefing suggests that the parties disagree as to whether certain
information is discoverable. Recognizing the interests of judicial restraint and economy, the
Court has purposely refrained at this time from reaching discovery issues beyond its Rule 56(d)
determination. The Court expects the parties to work together to resolve discovery disputes
informally before seeking judicial intervention. Nevertheless, nothing in this Opinion and Order
should be construed as precluding the parties from relying on the protections that the Federal
Rules of Civil Procedure afford.
IT IS SO ORDERED.
Date: September 19, 2011
/s/ Elizabeth A. Preston Deavers
Elizabeth A. Preston Deavers
United States Magistrate Judge
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