Flowserve Corp. v. Hallmark Pump Co., 2011 WL 1527951 (S.D. Tex.)
An introductory note: kudos to the district court for showing us exactly what is going on in this case. It’s not quite the delicious irony of appending Action Comics #1 in its entirety to an opinion about owning Action Comics #1, but the pictures are extremely convincing even to a skeptic like me.
Another note: Hallmark was pro se, which means that some available arguments didn’t get made.
Flowserve makes industrial pumps, valves, and related products, and Hallmark distributes com-peting pumps. Flowserve alleged that Hallmark copied three images from Flowserve’s website for its own. Images 1 and 3 were registered, and Image 2 was allegedly “substantially similar” to images in a brochure whose registration status is not clear from the opinion; Flowserve pressed only claims relating to 1 and 3.
Flowserve sued for copyright infringement and false advertising.
The court first noted that summary judgment in favor of a copyright plaintiff is possible when no reasonable juror could avoid finding copying and substantial similarity. Given the striking similarity here, the court had no doubt that Hallmark had copied the images, and there was also proof of access through Flowserve’s website and ad materials such as catalogs (the court also mentioned the registrations, though that’s pretty silly). There was also substantial similarity—the Image 1s were identical, and the Image 3s were identical except for a change from red to blue highlighting, while the yellow and light blue highlighting remained the same. Thus, without disrupting the general rule that summary judgment on substantial similarity is disfavored, it was appropriate here.
Infringement was also willful, which requires a defendant to know its actions constitute infringement or act in reckless disregard/willful blindness to a copyright owner’s rights. Ignoring a C&D can be willful, and was here given Hallmark’s failure to submit evidence that it was unaware of the infringement.
False advertising: In most situations, using a photo of the plaintiff’s product to advertise the defendant’s violates §43(a). (This isn’t an absolute rule: if the products really are the same, or at least indistinguishable at the level of detail shown in the photo, there may be no false advertising. Compaq Computer Corp. v. Procom Tech, Inc., 908 F. Supp. 1409, 1426-27 (S.D. Tex. 1995). There’s also some potential relevance to Dastar, again if the products are truly interchangeable. But don’t expect much toleration for this conduct.)
Flowserve argued, and the court agreed, that Hallmark’s photos were literally false representations about the nature and quality of its products. Hallmark submitted no evidence that the photos depicted its own products. Materiality and deception were presumed from literal falsity. The same finding of willfulness as in the copyright claim also followed—ignoring the C&D was, at minimum, reckless disregard. Moreover, Hallmark’s management reviewed the website containing the brochure, and they should have known that the images were not images of its own pumps but rather images of its competitor’s. (I can see rejecting this conclusion if the pumps actually look alike—but Hallmark would have needed to fight on this point.)
Remedies: For the copyright infringement, Flowserve asked for $10,000 per work, which the court agreed was appropriate, especially given that statutory damages could go up to $150,000 per work for willful infringement. $20,000 was reasonable compensation for Flowserve and a sufficient deterrent for Hallmark. (A high price to pay for not taking your own product shots!)
Saying that it was applying eBay to both causes of action, the court also found that a permanent injunction was warranted. (I say “saying” because it’s far from clear that the actual analysis is consistent with eBay, though that’s not a problem unique to this court; indeed, the analysis is taken directly from other post-eBay cases.) So: TM infringement can be irreparable injury when there’s a substantial threat to the plaintiff’s goodwill. Likely confusion can also justify a finding of irreparable injury. (In other words, a finding of irreparable injury is generally going to follow automatically from likely success; compare the eBay concurrences on whether this makes sense.) Also, irreparable harm is presumed from copyright infringement. (Again, query whether eBay is being honored in the breach.)
Thus, Flowserve had suffered irreparable injury. If we really took this requirement seriously, we’d want to ask how many people saw the website; Network Solutions, the website provider, produced discovery in this case, and there might actually be some information available on this point, but the court doesn’t talk about it.
Anyway, monetary damages were inadequate; the damage done to Flowserve’s goodwill and brand name through consumer confusion could not be quantified. (And why are copyright damages inadequate?)
The balance of hardships also favored an injunction, where all that was required was compliance with the Copyright Act and the Lanham Act. And the public interest in copyright protection and compliance with the Lanham Act also favored an injunction.
An attorneys’ fees award was also appropriate under both statutes, under the circumstances: willful and blatant copying of a competitor’s images, literally false use, and refusal to remove the images after a C&D. Absent objection from Hallmark, the court found $75,000 requested by Flowserve to be reasonable, given that Flowserve engaged in discovery, responded to a motion to dismiss or to transfer venue, and prepared a motion for summary judgment.