Inhale, Inc. v. Starbuzz Tobacco, Inc. ( 2014 )


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  •                  FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    INHALE, INC., a California                No. 12-56331
    Corporation,
    Plaintiff-Appellant,       D.C. No.
    2:11-cv-03838-
    v.                        ODW-FFM
    STARBUZZ TOBACCO, INC., a
    California Corporation; WAEL                OPINION
    SALIM ELHALAWANI, an individual
    residing in California,
    Defendants-Appellees.
    Appeal from the United States District Court
    for the Central District of California
    Otis D. Wright, II, District Judge, Presiding
    Argued and Submitted
    November 4, 2013—Pasadena, California
    Filed January 9, 2014
    Before: Diarmuid F. O’Scannlain, Susan P. Graber,
    and Carlos T. Bea, Circuit Judges.
    Opinion by Judge O’Scannlain;
    Concurrence by Judge Bea
    2         INHALE, INC. V. STARBUZZ TOBACCO, INC.
    SUMMARY*
    Copyright
    Affirming the district court’s grant of summary judgment
    and award of attorneys’ fees in favor of the defendant, the
    panel held that the shape of a hookah water container was not
    entitled to copyright protection.
    The panel held that the hookah water container, a useful
    article, was not copyrightable because it did not incorporate
    sculptural features that could be identified separately from,
    and were capable of existing independently of, the container’s
    utilitarian aspects. Adopting the reasoning of the Copyright
    Office, the panel held that whether an item’s shape is
    distinctive does not affect conceptual separability.
    The panel also held that the district court did not abuse its
    discretion in awarding attorneys’ fees to the defendant under
    
    17 U.S.C. § 505
    . The panel awarded attorneys’ fees for the
    appeal in an amount to be determined by the district court.
    Concurring in part, Judge Bea wrote that he concurred
    with the majority’s opinion, except for the part of Part II.C
    that discusses the level of deference owed to the Copyright
    Office’s interpretations of the Copyright Act. Judge Bea
    wrote that because the statute was not ambiguous, it was
    unnecessary to look to the Copyright Office for further
    guidance.
    *
    This summary constitutes no part of the opinion of the court. It has
    been prepared by court staff for the convenience of the reader.
    INHALE, INC. V. STARBUZZ TOBACCO, INC.                       3
    COUNSEL
    Louis F. Teran, SLC Law Group, Pasadena, California,
    argued the cause and filed the briefs for Plaintiff-Appellant.
    Natu J. Patel, The Patel Law Firm, P.C., Irvine, California,
    argued the cause and filed the brief for Defendants-Appellees.
    OPINION
    O’SCANNLAIN, Circuit Judge:
    We must decide whether the shape of a hookah water
    container1 is entitled to copyright protection.
    I
    Inhale, Inc. claims copyright protection in the shape of a
    hookah water container that it first published on August 29,
    2008 and registered with the United States Copyright Office
    on April 21, 2011. At both the time of publication and the
    time of registration, the container included skull-and-
    crossbones images on the outside.
    Less than a month after registration, Inhale sued Starbuzz
    Tobacco, Inc. and Wael Salim Elhalawani (collectively,
    “Starbuzz”) for copyright infringement. Inhale claimed that
    1
    A “hookah” is a device for smoking tobacco. It contains coals that
    cause the tobacco to smoke. A user’s inhalation through a tube causes the
    smoke to travel through water, which cools and filters the smoke, before
    it reaches the user. The water is held in a container at the base of the
    hookah.
    4        INHALE, INC. V. STARBUZZ TOBACCO, INC.
    Starbuzz sold hookah water containers that were identical in
    shape to Inhale’s container. The allegedly infringing
    containers did not contain skull-and-crossbones images.
    After determining that the shape of the water container is not
    copyrightable, the district court granted summary judgment
    in favor of Starbuzz.
    II
    Because “ownership of a valid copyright” is an element
    of copyright infringement, Feist Publ’ns, Inc. v. Rural Tel.
    Serv. Co., 
    499 U.S. 340
    , 361 (1991), summary judgment was
    appropriate if the shape of Inhale’s hookah water container is
    not copyrightable.
    A
    The parties agree that Inhale’s hookah water container is
    a “useful article.” As “the design of a useful article,” the
    shape of the container is copyrightable “only if, and only to
    the extent that, [it] incorporates . . . sculptural features that
    can be identified separately from, and are capable of existing
    independently of, the utilitarian aspects of the” container.
    
    17 U.S.C. § 101
     (defining “[p]ictorial, graphic, and
    sculptural works”); 
    id.
     § 102(a)(5) (granting copyright
    protection to “pictorial, graphic, and sculptural works”).
    This statutory standard is satisfied by either physical or
    conceptual separability. See 1 Melville B. Nimmer & David
    Nimmer, Nimmer on Copyright § 2.08[B][3], at 2-99–2-100
    (2011). Inhale does not argue that the container’s shape
    satisfies the requirements of physical separability. Thus, we
    consider only conceptual separability.
    INHALE, INC. V. STARBUZZ TOBACCO, INC.                 5
    B
    Relying on Poe v. Missing Persons, 
    745 F.2d 1238
     (9th
    Cir. 1984), Inhale argues that conceptual separability is a
    question of fact. Inhale’s reliance on Poe is misplaced. Poe
    decided that whether an item is a useful article is a factual
    question. 
    Id.
     at 1241–42. But usefulness is distinct from
    separability.
    In Ets-Hokin v. Skyy Spirits, Inc., 
    225 F.3d 1068
     (9th Cir.
    2000), we ruled that the shape of a vodka bottle was not
    separable from its utilitarian features. Rather than treat
    separability as a question for the jury, we conducted our own
    analysis. See id at 1080. (“[T]he district court did not identify
    any artistic features of the bottle that are separable from its
    utilitarian ones. We also find none.”). In Fabrica Inc. v. El
    Dorado Corp., 
    697 F.2d 890
     (9th Cir. 1983), we affirmed a
    district court’s directed verdict in favor of a copyright
    defendant on the ground that the allegedly infringed work
    was not copyrightable. We assessed separability ourselves.
    See 
    id. at 893
     (“There is no element of the folders that can be
    separated out and exist independently of their utilitarian
    aspects.”).
    Our precedent suggests that whether a useful article has
    conceptually separable features is a mixed question of law
    and fact. See Pullman-Standard v. Swint, 
    456 U.S. 273
    , 289
    n.19 (1982) (describing mixed questions of law and fact as
    those “in which the historical facts are admitted or
    established, the rule of law is undisputed, and the issue is
    whether the facts satisfy the statutory standard”). Because
    both parties agree that the hookah water container is a useful
    article that holds water within its shape, all that is left is the
    application of the legal standard to those facts. Thus, whether
    6          INHALE, INC. V. STARBUZZ TOBACCO, INC.
    the shape of the container is conceptually separable is a
    conclusion that we review de novo. See Mathews v. Chevron
    Corp., 
    362 F.3d 1172
    , 1180 (9th Cir. 2004) (“Mixed
    questions of law and fact are reviewed de novo; however, the
    underlying factual findings are reviewed for clear error.”).
    C
    Relying in part on Ets-Hokin, the district court ruled that
    the container’s shape is not conceptually separable from its
    utilitarian features. In Ets-Hokin, we held that the shape of a
    vodka “bottle without a distinctive shape” was not
    conceptually separable. See 
    225 F.3d at 1080
    . Attempting to
    distinguish this case from our precedent, however, Inhale
    emphasizes the distinctive shape of its hookah water
    container.      Therefore, we must determine whether
    distinctiveness of shape affects separability.
    When interpreting the Copyright Act, we defer to the
    Copyright Office’s interpretations in the appropriate
    circumstances.2 See Richlin v. Metro-Goldwyn-Mayer
    Pictures, Inc., 
    531 F.3d 962
    , 972–73 (9th Cir. 2008); Batjac
    2
    “Courts have twisted themselves into knots trying to create a test to
    effectively ascertain whether the artistic aspects of a useful article can be
    identified separately from and exist independently of the article’s
    utilitarian function.” Masquerade Novelty, Inc. v. Unique Indus., 
    912 F.2d 663
    , 670 (3d Cir. 1990). Under some interpretations of 
    17 U.S.C. § 101
    ,
    distinctiveness of shape would be relevant. See, e.g., Brandir Int’l, Inc.
    v. Cascade Pac. Lumber Co., 
    834 F.2d 1142
    , 1145 (2d Cir. 1987) (asking
    whether “design elements can be identified as reflecting the designer’s
    artistic judgment exercised independently of functional influences”). We
    think § 101 is sufficiently ambiguous to justify deference to administrative
    interpretations. See High Sierra Hikers Ass’n v. Blackwell, 
    390 F.3d 630
    ,
    638–39 (9th Cir. 2004).
    INHALE, INC. V. STARBUZZ TOBACCO, INC.                7
    Prods. Inc. v. GoodTimes Home Video Corp., 
    160 F.3d 1223
    ,
    1230–31 (9th Cir. 1998) (deferring to the Register’s
    interpretation in an internal manual, Compendium of
    Copyright Office Practices). Because Chevron deference
    does not apply to internal agency manuals or opinion letters,
    we defer to the Copyright Office’s views expressed in such
    materials “only to the extent that those interpretations have
    the ‘power to persuade.’” See Christensen v. Harris Cnty.,
    
    529 U.S. 576
    , 587 (2000).
    In an opinion letter and an internal manual, the Copyright
    Office has determined that whether an item’s shape is
    distinctive does not affect separability. See Letter from
    Nanette Petruzzelli, Assoc. Register, U.S. Copyright Office,
    to Jeffrey H. Brown, attorney for MSRF, Inc., Re: Fanciful
    Ornamental Bottle Designs 1–9, Control No. 61-309-9525(S),
    April 9, 2008. That determination was based on the principle
    that “analogizing the general shape of a useful article to
    works of modern sculpture” is insufficient for conceptual
    separability. Compendium of Copyright Office Practices II
    (Compendium II) § 505.03. Although Inhale’s water
    container, like a piece of modern sculpture, has a distinctive
    shape, “[t]he shape of the alleged ‘artistic features’ and of the
    useful article are one and the same.” Id.
    Because the Copyright Office’s reasoning is persuasive,
    we adopt it for this case. The shape of a container is not
    independent of the container’s utilitarian function—to hold
    the contents within its shape—because the shape
    accomplishes the function. The district court correctly
    8          INHALE, INC. V. STARBUZZ TOBACCO, INC.
    concluded that the shape of Inhale’s hookah water container
    is not copyrightable.3
    III
    A
    Exercising its discretion under 
    17 U.S.C. § 505
    , the
    district court awarded $111,993 in attorneys’ fees to Starbuzz.
    The district court considered the five, non-exclusive factors
    listed in Jackson v. Axton: “[1] the degree of success
    obtained; [2] frivolousness; [3] motivation; [4] objective
    unreasonableness (both in the factual and legal arguments in
    the case); and [5] the need in particular circumstances to
    advance considerations of compensation and deterrence.”
    
    25 F.3d 884
    , 890 (9th Cir. 1994) (citation omitted). In ruling
    that the factors favored an award to Starbuzz, the district
    court relied on, among other things, Starbuzz’s “total success
    on the merits” and the need for deterrence of “similarly
    frivolous claims against innocent Defendants.”
    The district court did not abuse its discretion because “the
    reasons given by the district court in this case are well-
    founded in the record and are in keeping with the purposes of
    the Copyright Act,” Fantasy, Inc. v. Fogerty, 
    94 F.3d 553
    ,
    560 (9th Cir. 1996). A successful defense furthers the
    purposes of the Copyright Act just as much as a successful
    infringement suit does. See Fogerty v. Fantasy, Inc.,
    3
    That the Copyright Office issued a certificate of registration to Inhale
    does not contradict this conclusion. Because Inhale’s application included
    skull-and-crossbones images on the container, the certificate of
    registration does not show that the Copyright Office considers the shape
    of the container copyrightable.
    INHALE, INC. V. STARBUZZ TOBACCO, INC.               9
    
    510 U.S. 517
    , 527 (1994) (“[D]efendants who seek to
    advance a variety of meritorious copyright defenses should be
    encouraged to litigate them to the same extent that plaintiffs
    are encouraged to litigate meritorious claims of
    infringement.”).
    B
    Starbuzz also requests attorneys’ fees for this appeal
    under 
    17 U.S.C. § 505
    . Section 505 gives us the same
    discretion that it gave to the district court. See Disenos
    Artisticos E Industriales, S.A. v. Costco Wholesale Corp.,
    
    97 F.3d 377
    , 382 (9th Cir. 1996). We award attorneys’ fees
    incurred in the defense of this appeal to Starbuzz in an
    amount to be determined by the district court. See Fantasy,
    
    94 F.3d at 561
    (“[W]e conclude that fees are warranted under
    § 505 inasmuch as it served the purposes of the Copyright
    Act for Fogerty to defend an appeal so that the district court’s
    fee award would not be taken away from him.”).
    IV
    For the foregoing reasons, we affirm the district court’s
    grant of summary judgment and award of attorneys’ fees to
    Starbuzz. We award attorneys’ fees for this appeal in an
    amount to be determined by the district court.
    AFFIRMED AND REMANDED.
    10       INHALE, INC. V. STARBUZZ TOBACCO, INC.
    BEA, Circuit Judge, concurring in part:
    I concur with the majority’s opinion, except for the part
    of Part II.C which discusses the level of deference owed to
    the Copyright Office’s interpretations of the Copyright Act.
    The text of 
    17 U.S.C. § 101
     does not suggest that
    “distinctiveness” is an element of separability. Because the
    statute is not ambiguous in this respect, it is unnecessary to
    look to the Copyright Office for further guidance.
    Once we start engrafting administrative interpretation to
    our opinions, there is a tendency to look elsewhere than the
    text of the enactments of Congress. This misplaces the power
    of enactment of laws from the legislative to the administrative
    branch and is contrary to my concept of the separation of
    powers.