The Fourth Circuit affirms the district court's decision in a six-year battle in Universal Furniture International, Incorporated("Universal") v. Collezione Europa USA, Incorporated ("Collezione"), Nos. 07-2180, 09-1437 (4th Cir. 2010).  The case involved violations of copyright, trademark and unfair trade practices and was initiated by Universal after Collezione allegedly imitated two of Universal’s decorative furniture lines. The district court initially denied Universal’s motion for an injunction, based on limited evidence that the furniture designs were copyrightable.  After a full hearing on the merits, the district court was persuaded that Collezione infringed the protectable, copyrighted elements on the furniture, and the court awarded $11 million in a subsequent damages proceeding.

On appeal, the Fourth Circuit reviewed the district court opinion for issues of ownership, originality and copyrightability of the designs, substantial similarity, and infringement of Universal’s designs, and the award of damages. The appellate court first found clear chain of title in the designs.  Collezione had argued that the designs were not properly transferred to Universal from their individual designers or from Universal’s predecessor, but the court concluded that service agreements clearly assigned all designs and associated copyright rights to the predecessor company, which subsequently transferred the designs to Universal by merger and asset agreement.

Next, the Fourth Circuit reviewed the standard for copyright validity in design compilations, such as Universal’s, noting that, to be protected, Universal must show that the designs were original and conceptually separable from the utilitarian aspects of the furniture, and that "the principal focus should be on whether the selection, coordination, and arrangement are sufficiently original to merit protection." Id. at 12-13 (citing Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 358 (1991)). The district court had found that Universal’s designer had done more than simply take two-dimensional designs from the public domain, but had modified and arranged the decorative elements in unique ways, in a manner more than sufficient to satisfy the originality requirement. The Fourth Circuit agreed, finding that the decorative elements on the furniture, including three-dimensional shells, acanthus leaves, columns, finials, rosettes, and other carvings were "superfluous nonfunctional adornments for which the shape of the furniture (which is not copyrightable) serves as a vehicle." Such features were entitled to protection because they were "‘artistic and aesthetic features’ that can be conceived of as having been added to, or superimposed upon, an otherwise utilitarian article." Id. at 20.

Next, in determining whether there was infringement, the Fourth Circuit reviewed whether the works were:  "(1) extrinsically similar because they contain substantially similar ideas that are subject to copyright protection" and (2) "intrinsically similar in the sense that they express those ideas in a substantially similar manner from the perspective of the intended audience of the work." Id. at 23 (citing Lyons P’ship v. Morris Costumes, Inc., 243 F.3d 789, 801 (4th Cir. 2001)). Although Collezione argued that the district court had focused on the overall designs rather than the copyrightable elements, the Fourth Circuit disagreed.  The appeals court found that the trial court had properly focused on the copyrightable ornamentation and observed that the furniture pieces shared a "highly decorative appearance with a traditional feel" and "very ornamental designs combined with basic styles that resemble pieces from England in the 18th and 19th centuries." Id. at 24. Because the lines of furniture were substantially similar, there was no clear error in the court’s determination of infringement.

The Fourth Circuit also upheld the district court’s determination that Collezione had violated trademark and unfair competition laws by falsely passing itself off as the source of origin of the furniture pieces, particularly because Collezione had displayed actual pieces from Universal’s furniture lines.

Finally, the Fourth Circuit upheld the damages award, finding that it reflected Collezione’s profits based on the infringement, and that Collezione had failed to prove any deductible expenses.

In Nemet Chevrolet v. Consumeraffairs.com, Inc., No. 08-2097 (4th Cir. 2009), the Fourth Circuit majority, Judges King and Agee, recently upheld the district court’s Rule 12(b)(6) dismissal of Nemet's defamation claims against Consumeraffairs.com, based on website posts relating to Nemet’s automobile services. The majority found defendant immune as an information service provider under section 230 of the Communications Decency Act (“CDA”). Nemet argued that its claims were sufficient to withstand the motion to dismiss and that Consumeraffairs.com was not entitled to immunity because it was an “information content provider” under section 230(f)(3).

Section 230 of the CDA prohibits a “provider or user of an interactive computer service” from being held responsible “as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1).  However, the scope of the immunity depends on whether a person’s actions also make it an “information content provider” or “responsible … for the creation or development of information provided through the Internet,” in which case the person is not entitled to immunity.  Id. at § 230(f)(3).

Nemet first argued that its general allegations that defendant participated in the preparation of the posts: (1) through the structure and design of its website, or (2) by soliciting its customers’ complaints, steering them into specific categories designed to attract consumer class action lawyers, contacting customers to ask questions about their complaints, and helping them draft or revise their complaints, were sufficient to show that Consumeraffairs.com was responsible, in part, for the creation or development of the information in the posts. Nemet’s argument was based on Fair Housing Council v. Roommates.com, LLC, 521 F.3d 1157 (9th Cir. 2008), in which the Ninth Circuit held a website operator liable as an information content provider for the discriminatory postings created by third parties because it had designed the website to develop unlawful content as a condition precedent of use.

However, the Fourth Circuit disagreed with Nemet, finding Roommates.com distinguishable because the website there required users to input illegal content, whereas Nemet merely alleged that Consumeraffairs.com structured its website and business operations to develop purely lawful information related to class-action lawsuits. Also, because Nemet failed to make any cognizable argument as to how a website operater who contacted a user “developed” or “created” the website content, the court found the allegations both threadbare and conclusory.

Nemet also argued that Consumeraffairs.com had fabricated eight of the posts because it could not confirm that the posts were created by a Nemet customer, based on the date, model of car, and first name. However, the majority found that the sole basis for these claims was that Nemet could not find the customer in its records based on the information in the post. Thus, viewed in their best light, Nemet’s allegations allowed inference of no more than “the mere possibility” that defendant was responsible for the creation of the posts, and it was entitled to immunity under the CDA.

Judge Jones concurred with respect to the insufficiency of the allegations based on the website structure and design, but dissented with regard to the eight fabricated posts, because Nemet had alleged that each of those posts gave the name and hometown of the putative customer as well as the make and model of the vehicle sold by Nemet.  Thus, Judge Jones believed Nemet’s allegations, along with other factual allegations concerning Consumeraffairs.com’s derogatory statements about Nemet in connection with the posts, were sufficient to create a reasonable inference that Consumeraffairs.com wrote the eight posts to attract additional complaints, and should withstand the motion to dismiss.

Click here for this Fourth Circuit opinion.

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