Hill Design v . Vivian Hodgdon, et a l . CV-03-074-M 04/07/03 P UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Hill Design, Inc.
v. Civil N o . 03-074-M Opinion N o . 2003 DNH 059 Vivian Hodgdon, et a l .
REPORT AND RECOMMENDATION
The plaintiff, Hill Design, Inc., (“Plaintiff” or “HDI”),
commenced this action against defendants Vivian Hodgdon
(“Hodgdon”), Art In Cooking, Inc. (“AIC”), Patricia Carpenter
(“Carpenter”), and The Garden Shed, LLC. Plaintiff alleges in
the Verified Complaint that each of the defendants have committed
copyright infringement, trademark infringement, and unfair and
deceptive acts. Plaintiff further alleges, among other things,
that Hodgdon and Carpenter committed unlawful conversion.
Plaintiff filed a motion seeking a preliminary injunction
against defendants Hodgdon and AIC with the complaint. In its
motion, Plaintiff seeks an order enjoining Hodgdon and AIC, from
(1) distributing, circulating, selling, offering for sale,
advertising, promoting or displaying any BROWN BAG cookie mold,
shortbread pan or recipe booklet; and (2) imitating, copying, or
making unauthorized use or distributions of the BROWN BAG cookie
molds, shortbread pans, and recipe booklets. Plaintiff also seeks an order requiring Hodgdon and AIC to provide an accounting
of all gains, profits and advantages derived by defendants
through their sale of BROWN BAG cookie molds, shortbread pans and
recipe booklets since April 1 1 , 2002.
Plaintiff’s motion was referred to me for review and to
prepare a report and recommendation (document n o . 4 ) . The Court
held an evidentiary hearing over parts of two days concluding on
March 2 6 , 2003. Plaintiff submitted a supplemental memorandum in
support of its motion on March 2 8 , 2003. After considering the
testimony of the witnesses, exhibits admitted into evidence, and
the relevant authorities, I recommend that the Plaintiff be
granted limited injunctive relief as discussed herein.
BACKGROUND
A. The Parties
HDI is a New Hampshire corporation with a principal place of
business in Hill, New Hampshire. HDI has been in business for
over twenty-five years and manufactures, wholesales, and retails
high-end house and garden products. Paul Natkiel is the
president and chief executive officer of H D I , and a shareholder.
Lucianna Ross Natkiel (“Lucy Natkiel”) is HDI’s vice-president
and an HDI shareholder. Paul and Lucy Natkiel are married.
2 Defendant Hodgdon resides in Danbury, New Hampshire. She
worked for HDI as a warehouse and distribution employee for ten
years until late 2001 when she was laid off. In January 2002,
Hodgdon founded AIC as a sole proprietorship with a principal
place of business in Danbury. AIC was incorporated in New
Hampshire on April 1 6 , 2002. D f . E x . K.1
Defendant Carpenter resides in Pittsfield, New Hampshire.
In December 2001, Carpenter founded The Garden Shed as a sole
proprietorship located in Pittsfield. The Garden Shed was
incorporated as a New Hampshire limited liability corporation on
October 8 , 2002. Df. Ex. PC-2. Although Plaintiff did not move
for a preliminary injunction against Carpenter and The Garden
Shed, Hodgdon called Carpenter as a witness at the hearing.
B. HDI Background
HDI sells copyright protected high-end house and garden
products under registered and unregistered BROWN BAG trademarks
(“BROWN BAG”), including cookie molds, shortbread pans, and
recipe booklets. Lucy Natkiel is the creator and artistic
designer of the BROWN BAG products. She created her first cookie
mold for HDI’s BROWN BAG line in 1983. Lucy Natkiel has designed
1 All references to exhibits refer to the exhibits admitted into evidence at the preliminary injunction hearing.
3 over 250 BROWN BAG molds for HDI of which 150 are registered with
the United States Copyright Office.
In the second half of 2001 and the first half of 2002, HDI
went into serious financial difficulty and was forced to
reorganize, lay off scores of workers, sell product lines at
fire-sale prices, and close a large office and warehouse in
Concord, New Hampshire. However, HDI still owns a production
facility and warehouse located in Hill, New Hampshire (the “Hill
facility”). The Hill facility has a commercial pottery
containing highly specialized and expensive equipment, including
commercial kilns, distillation equipment, agitators, and other
ceramic-specific equipment. The Hill facility also has a
warehouse that HDI uses to prepare and ship orders. Hodgdon
contends that HDI ceased operations and abandoned its assets to
its creditors on October 1 4 , 2001, but Paul Natkiel testified
that HDI has been in continual existence.
C. The HDI Auction
The inventory at HDI’s Concord facility was sold at an
auction in late 2001. The auction was conducted as a “piece plus
whole auction.” The auctioneers put individual pieces up for
bids, and then they put up entire lots for bid. If the sum of
4 the bids on individual pieces was less than the bid for an entire
lot, the person who bid for the entire lot won the auction.
Hodgdon assisted HDI with the auction and bid on some of the
items. See D f . Ex. B.2 Carpenter testified that she and Hodgdon
met for the first time at the auction. Hodgdon helped Carpenter
load her truck when the auction was over.
Carpenter testified that she has acquired over 10,000 HDI
items through public and private sales, including thousands of
cookie molds, garden pots, plant stakes and books. Carpenter
purchased some lots from Roger Slate, a bidder who had obtained
approximately 75 percent of the available HDI inventory.
Carpenter purchased other items from Ralph Language, another
successful bidder. Carpenter acquired other HDI items from
various Christmas Tree Shops.
D. The Natkiels Train Hodgdon at the Hill Facility
At some point in late 2001, Paul Natkiel and Hodgdon
discussed Hodgdon’s love of the BROWN BAG product line and their
mutual disappointment that HDI was going out of business. Both
2 Defendant’s Exhibit B includes documents that refer to Hodgdon’s purchase of the following items at the auction: Wood Shelving with Contents-Ass’t Packaging Labels/Tools; Assorted Computer Components; Weber Legitronic Label Printer with Stand, etc.; middle of one lot (#314).
5 Hodgdon and Paul Natkiel believed that a market still existed for
the BROWN BAG product line. Thereafter, Hodgdon and the Natkiels
explored the possibility of Hodgdon opening her own business
manufacturing and distributing licensed BROWN BAG products. The
Natkiels trained Hodgdon at the Hill facility in the mixing of
clay, pouring and casting, and finishing of cookie molds in
contemplation of Hodgdon opening up her own production and
distribution business for BROWN BAG products.
With the Natkiels’ assistance, Hodgdon began making BROWN
BAG products before any written license agreement was executed
between Hodgdon and the Natkiels or HDI. The Natkiels fired the
first two production runs of cookie molds for Hodgdon’s business,
which Hodgdon testified resulted primarily in a financial loss to
her because the items produced were of poor quality. Hodgdon
claims that she then taught herself to fire molds at the Hill
facility without further assistance from the Natkiels.
Hodgdon contends that when she produced BROWN BAG products
at the Hill facility, she paid for the electricity, she bought
the clay, and she supplied the labor. Hodgdon also paid for
repairs needed at the Hill facility. Hodgdon claims that she
made this investment in order to supply AIC’s inventory under an
6 oral agreement with the Natkiels.
E. Business Negotiations Breakdown
Plaintiff alleges that the parties contemplated that Hodgdon
would conduct an independent business under a written license
agreement with Plaintiff that would give Hodgdon the right to use
certain of Plaintiff’s copyrights and trademarks. Paul Natkiel
drafted proposed license agreements and sent those drafts to
Hodgdon.3 It is undisputed that the Natkiels and Hodgdon
negotiated certain terms of the proposed license agreement
including the amount of royalties that Hodgdon was expected to
pay, and the length of the agreement. Paul and Lucy Natkiel
testified that they made several concessions to Hodgdon during
these negotiations.
On or about April 1 1 , 2002, the parties’ business
relationship fell apart. Plaintiff alleges that the Natkiels
ended negotiations for three reasons: (1) it became clear that
3 The copies of the draft license agreement entered into evidence state that the agreement is between Paul and Lucy Natkiel and Vivian Hodgdon. HDI is not listed as a party. See P l . Ex. 2 3 ; D f . Ex. H , I . The agreement purports to grant Hodgdon a license “to make or to purchase, and also to market current and future Brown Bag Cookie Art or Brown Bag Designs ceramic cookie and shortbread pan products, and to use the Brown Bag Cookie Art and Brown Bag.” P l . Ex. 2 3 , ¶ 7 ; D f . Ex. H , ¶ 7 ; Df. Ex. I , ¶ 7 .
7 Hodgdon had no intention of signing a license agreement and
sought to market HDI’s products on her own; (2) Hodgdon’s lawyer
contacted a major HDI creditor without legitimate reason; and (3)
Hodgdon’s husband threatened to sue the Natkiels if Hodgdon got
hurt in the course of the parties’ business relationship. Lucy
Natkiel testified that she informed Hodgdon in a face-to-face
meeting on or about April 1 1 , 2002 that the Natkiels did not want
to go forward with negotiations citing the threat from Hodgdon’s
husband to sue even before there was a written contract.
Hodgdon testified that on the morning of April 1 1 , 2002 her
attorney told her that Lucy Natkiel had “pulled the rug” on the
deal. Hodgdon contended that the break down occurred because
Hodgdon’s attorney sought to protect Hodgdon’s interests. Lucy
Natkiel admitted during cross-examination that she told Hodgdon
that there would be no further business dealings if Hodgdon or
her attorney contacted HDI’s major creditor to request the
creditor’s permission to use HDI’s copyrights. At that time, HDI
was in negotiations with the creditor and the creditor had not
chosen to exercise its rights against HDI’s copyrights. Lucy
Natkiel was concerned that the creditor would try to obtain more
from the Natkiels in a settlement if the creditor believed that a
8 third party was interested in the copyrights. Lucy Natkiel later
learned in a conversation with Hodgdon’s attorney, however, that
the attorney had spoken with HDI’s creditor. Lucy Natkiel
testified that on the morning that she told Hodgdon’s attorney
that she wanted to call off the deal she and the attorney had
argued about the renewal terms in the draft license agreement.
F. Hodgdon Removes Items From the Hill Facility
Shortly after Hodgdon vacated the Hill facility, the
Natkiels learned that Hodgdon had taken scores of items with her.
Paul Natkiel testified that his investigation revealed that the
items taken included cookie molds, shortbread pans, cookie mold
packaging materials, cookie and shortbread recipe books, plaster
molds, and liquid clay. Hodgdon also removed mixing equipment,
kilns, a computer laptop, printer, and handtools. With the
assistance of attorneys, Hodgdon agreed to return certain of the
items that she took from the Hill facility. Paul Natkiel
testified that some items that should have been returned,
including pouring molds, were not returned.
Hodgdon admits that on April 1 6 , 2002, after Lucy Natkiel
asked her to vacate the Hill facility, Hodgdon took numerous
items from the site including approximately half, in monetary
9 value, of an inventory purchased by M s . Helen Ross. Defendant
Carpenter assisted Hodgdon with removing items from the Hill
facility and bringing them to Hodgdon’s home in Danbury.
Hodgdon claims that she took the items from the Hill
facility on the advice of her attorney. Hodgdon disputes that
she failed to return the pouring molds and other items that Paul
Natkiel claims are still missing, although Hodgdon claims that
she did overlook about one hundred pieces. Hodgdon contends that
the Hill facility was not secure at the time that she worked
there and that several other persons who visited the site had
access to the equipment and inventory.
To fully understand Hodgdon’s contentions, it is necessary
to discuss in more detail the items that Hodgdon took from the
Hill facility that were purchased by M s . Helen Ross. Helen Ross
is Lucy Natkiel’s sister. The evidence shows that M s . Ross
purchased three trailer loads of HDI’s Concord inventory prior to
the HDI auction (hereinafter “the Helen Ross Inventory”). See
Df. Ex. A (Hill Design Order Form). Hodgdon testified that the
Helen Ross Inventory consisted of items that Hodgdon picked out
while employed by HDI with the idea of trying to save the BROWN
BAG line. Hodgdon testified that she later asked Paul Natkiel if
10 she could purchase the inventory, but he would not allow i t .
That inventory was sold to Helen Ross. Hodgdon and others loaded
the inventory into trailers for transport to the Hill facility.
Hodgdon testified that Paul Natkiel led her to believe that M s .
Ross purchased the inventory on Hodgdon’s behalf, although the
sale was documented as a purchase for an entity named “Cookie Art
Exchange.” See D f . Ex. A.4
Hodgdon contends that Paul Natkiel encouraged her to
distribute the items in the Helen Ross Inventory and to collect
the proceeds through AIC. The evidence shows that Hodgdon
communicated with former HDI customers regarding orders for BROWN
BAG products as early as January 2002. See D f . Ex. E (Fax from
Vivian Hodgdon on AIC Cover Sheet). Hodgdon testified that Paul
Natkiel directed those customers to her, and promised the
4 The Plaintiff alleges in the Verified Complaint that HDI held goods in storage for the benefit of a third party and agreed to sell the products with a portion of the proceeds to go to the third party. See Ver. Compl. at 10-11 n.1. The evidence presented at the injunction hearing contradicted this characterization at least with respect to the Helen Ross Inventory. The Court finds the record unclear as to the circumstances of the purchase of the Helen Ross Inventory and its intended disposition since the items were nominally purchased by and for non-parties who did not testify. See D f . Ex. A .
11 customers that AIC would fill their orders.5
Carpenter’s testimony supports Hodgdon’s contentions.
Carpenter testified that she contacted Paul Natkiel some time
after the HDI auction to learn whether HDI had any additional
inventory that she could purchase. Carpenter later arranged to
visit the Hill facility. During that visit, Carpenter offered to
purchase $400 to $500 worth of items. Paul Natkiel instructed
Carpenter to write her check out to Hodgdon. According to
Carpenter, Paul Natkiel stated that he was helping Hodgdon out
and that no money should go through his hands. Carpenter
testified that she also engaged in a conversation with Paul
Natkiel about possibly making an investment in AIC. Paul Natkiel
represented to Carpenter that the inventory at the Hill facility
belonged to AIC and that AIC had sufficient inventory to serve as
collateral for a $100,000 investment.
Hodgdon testified that her attorney led her to believe that
she was authorized to sell the Helen Ross Inventory even after
5 Plaintiff alleged in the complaint that the Natkiels repeatedly told Hodgdon that Hodgdon would not be permitted to produce, distribute, or sell HDI’s copyright protected cookie molds, recipe booklets, or shortbread pans or use HDI’s BROWN BAG trademarks absent a written license agreement. Ver. Compl. ¶ 27- 2 8 . Plaintiff admits, however, that Hodgdon’s sales prior to April 1 1 , 2002 were authorized. Ver. Compl., ¶ 4 1 .
12 Lucy Natkiel told her to vacate the Hill facility. According to
Hodgdon, her attorney advised her that she could “take what you
need to get yourself on your feet.” Hodgdon testified that it
was her belief, after her conversations with her attorney and
Lucy Natkiel, that the business deal had been put on hold pending
completion of HDI’s settlement with its creditor.6
Some time after Hodgdon vacated the Hill facility, Hodgdon
received a phone call from an unidentified person seeking the
return of the Helen Ross Inventory. Hodgdon then received a
letter seeking the return of the inventory from M s . Ross.
Hodgdon prepared a handwritten inventory and returned items that
she took from the Hill facility on or about May 6, 2002. See P l .
Ex. 4 . Hodgdon testified that she only intentionally retained
items that she purchased for AIC, items that she had produced at
the Hill facility with her own labor and at her own expense, and
items from the Helen Ross Inventory needed to fill pending
6 The Court finds this testimony suspect in light of the conflicting testimony regarding whether Hodgdon attempted to pay the Natkiels approximately $15,000 for the Helen Ross Inventory immediately after taking it from the Hill facility. Lucy Natkiel testified that Hodgdon visited the Natkiels’ home, told Lucy Natkiel that she had taken the inventory, and asked the Natkiels to accept a check. Lucy Natkiel refused. Hodgdon denied that this encounter took place, but later seemed to defend the offer for the inventory as reasonable because Helen Ross had paid only $5,000 for i t .
13 orders. Hodgdon testified that she continued to fill orders that
were placed by HDI’s former customers after April 1 1 , 2002
because Paul Natkiel had promised those customers before April
1 1 , 2002 that their orders would be filled.
G. Hodgdon’s Sales of BROWN BAG Products
Plaintiff contends that Hodgdon’s sales of BROWN BAG
products after the Natkiels terminated the business relationship
infringed on Plaintiff’s copyrights and trademarks. See Ver.
Compl., ¶ 4 1 . Hodgdon sold three categories of BROWN BAG
products after her business relationship with the Natkiels ended:
(1) items from her personal collection of BROWN BAG products
acquired while she was an HDI employee; (2) items Hodgdon made at
the Hill facility; and (3) items from the Helen Ross Inventory.
Hodgdon placed stickers on the backs of the cookie molds
that she made at the Hill facility. The stickers on the cookie
molds state: “HANDCAST BY Art In Cooking.” See, e.g., P l . Ex.
19. Hodgdon also placed stickers on a recipe booklets attached
to the molds. The stickers on the recipe booklets state:
Distributed by: Art In Cooking, Inc. PO Box 163 Danbury, NH 03230 artincooking.com
14 See P l . Ex. 1 9 . Imprinted copyright notices are clearly visible
on the backs of the cookie molds made by Hodgdon notwithstanding
the placement of the “HANDCAST By Art in Cooking” stickers. See
P l . Ex. 18-21. However, Hodgdon’s stickers completely cover the
copyright notice on the back of the recipe booklets. The covered
copyright notice states:
(c) 1995 Hill Design, Inc., Concord, NH 03301 All rights reserved. Brown Bag Cookie Art is a registered trademark of Hill Design, Inc. All products are copyrighted and sold specifically for private use only. All commercial uses of Hill Design products involving reproduction of imagery or duplication of products are prohibited unless specifically licensed in writing from the copyright owner.
See P l . Ex. 1 7 . Paul Natkiel testified that HDI did not
authorize the placement of any of the stickers used by Hodgdon.
He further testified that neither HDI nor the Natkiels have
received any royalty payments from Hodgdon for her sales after
the parties’ business relationship broke down. In response,
Hodgdon testified that she discussed placing stickers on the
items she cast with the Natkiels. And Hodgdon claimed that she
was well aware that she owed royalties for her sales of BROWN BAG
products. Hodgdon claims that she was unclear to whom royalties
should be paid in light of the lien on HDI’s assets, and the
Natkiels’ refusal to cash checks that she sent to them.
15 H. Plaintiff’s Attempts to Halt Defendant’s Sales
Plaintiff later learned that Hodgdon was offering BROWN BAG
products for sale to some of HDI’s former customers and to the
public on eBay, an Internet website that facilitates on-line
auctions. The Plaintiff submitted evidence showing that Hodgdon
sold BROWN BAG items to at least three individuals after April
1 1 , 2002: Maureen Daly, Suzanne Sicard, and George Nemcosky.
The evidence showed that Hodgdon began listing BROWN BAG
items for sale on eBay beginning in July 2002 with her last
listing appearing as recently as February 2003. Plaintiff
complained to its former customers and to eBay claiming that
Hodgdon was infringing its copyrights and trademarks. eBay
immediately removed Hodgdon’s auction listings.
Hodgdon testified that the only former HDI customers to whom
she sold BROWN BAG items were customers who were directed to her
by Paul Natkiel. Hodgdon further testified that the items that
she listed on eBay were items from her personal collection and
items that she made at the Hill facility.
DISCUSSION
A. Standard of Review
“The purpose of a preliminary injunction is to preserve the
16 status quo, freezing an existing situation so as to permit the
trial court, upon full adjudication of the case’s merits, more
effectively to remedy discerned wrongs.” CMM Cable Rep., Inc. v .
Ocean Coast Prop., Inc., 48 F.3d 6 1 8 , 620 (1st Cir. 1995) (citing
Chalk v . U.S. Dist. C t . Cent. Dist. of Cal., 840 F.2d 7 0 1 , 704
(9th Cir. 1988); American Hosp. Ass’n v . Harris, 625 F.2d 1328,
1330 (7th Cir. 1980)). Thus, if the court ultimately finds for
the movant, a preliminary injunction provides the court with a
method for preventing or minimizing any current or future wrongs
caused by the defendant. CMM Cable Rep., 48 F.3d at 620.
A court may grant a plaintiff’s request for a preliminary
injunction if the plaintiff can satisfy a four-part test: (1) the
plaintiff will suffer irreparable harm if the injunction is not
granted; (2) a likelihood of success on the merits; (3) that such
injury outweighs any harm which granting the injunction would
inflict on the defendant; and (4) that the public interest will
not be adversely affected by the granting of the injunction.
Keds Corp. v . Renee Int’l Trading Corp., 888 F.2d 215, 220 (1st
Cir. 1989), quoting Planned Parenthood League of Mass. v .
Bellotti, 641 F.2d 1006, 1009 (1st Cir. 1981). The key issue in
determining whether injunctive relief should be granted is
17 whether the plaintiff can demonstrate a likelihood of success on
the merits. Equine Tech., Inc. v . Equitechnology, Inc., 68 F.3d
542, 544 (1st Cir. 1995)(the central issue in most preliminary
injunction trademark cases is whether plaintiff has demonstrated
a likelihood of success on the merits); Weaver v . Henderson, 984
F.2d 11 (1st Cir. 1993) (plaintiffs who are unable to convince
the trial court that they will probably succeed on the merits
will usually not obtain interim injunctive relief).
B. Likelihood of Success on the Merits
1 . Copyright and Trademark Infringement
To succeed in an action for copyright infringement, the
plaintiff must establish the following elements: (1) ownership of
a valid copyright, and (2) unauthorized copying of constituent
elements of the copyrighted work. Feist Publ’n v . Rural Tel.
Serv. Co., Inc., 499 U.S. 3 4 0 , 361 (1991); see also, Lotus Dev.
Corp. v . Borland Int’l, Inc., 49 F.3d 8 0 7 , 813 (1st Cir. 1995);
Gamma Audio & Video, Inc. v . Ean-Chea, 11 F.3d 1106, 1114 (1st
Cir. 1994). To succeed in an action for trademark infringement,
the plaintiff must establish following elements: (1) that it uses
and thereby owns the mark; (2) that the defendant is using the
same or a similar mark; and (3) that the defendant’s use is
18 likely to confuse the public, thereby harming the plaintiff.
Star Fin. Serv.,Inc. v . AAStar Mortg. Corp., 89 F.3d 5 , 9 (1st
Cir. 1996); DeCosta v . Viacom Int’l, Inc., 981 F.2d 6 0 2 , 605 (1st
Cir. 1992). As with copyright infringement, the plaintiff must
show that the defendant’s use of the plaintiff’s mark was
unauthorized. See 15 U.S.C. § 1114.
The Court determines, after reviewing the testimony and
documentary evidence, that the Plaintiff has not demonstrated
that it is likely to succeed on the merits on its infringement
claims. There is no dispute that HDI owns numerous copyright
protected products sold under federally registered and
unregistered BROWN BAG trademarks, including cookie molds,
shortbread pans, and recipe booklets. Hodgdon testified that the
Natkiels gave her permission to use the copyrights and trademarks
in an oral agreement prior to the end of the parties’ business
relationship. I find Hodgdon’s testimony credible.7
The Natkiels purported to have authority to grant Hodgdon
permission to use HDI’s copyrights and trademarks in the draft
license agreements. Although the Plaintiff contends that the
7 Except as otherwise stated, I find the defendants’ testimony more credible in instances where the testimony at the injunction hearing was conflicting.
19 Natkiels made it clear that the parties had no business
relationship before a written agreement was executed, they must
have known that Hodgdon was creating BROWN BAG products prior to
entering a written agreement because Hodgdon was producing those
products at the Hill facility. Indeed, the Natkiels made the
first set of cookie molds for Hodgdon.
In the typical copyright infringement case, a plaintiff must
prove copying by showing that the defendant had access to the
plaintiff’s copyrighted work and that defendant’s work is
“substantially similar” to this material. Gamma Audio, 11 F.3d
at 1115.
[P]roof by direct evidence of copying is generally not possible since the actual act of copying is rarely witnessed or recorded. Normally, there is no physical proof of copying other than the offending object itself.
Id. at 1114 (quoting Concrete Machinery C o . v . Classic Lawn
Ornaments, 843 F.2d 6 0 0 , 605 (1st Cir. 1988)).
In stark contrast to the typical infringement case, here the
evidence shows that the Natkiels were fully aware that Hodgdon
was creating products using the Plaintiff’s copyrights. Hodgdon
testified that Paul Natkiel encouraged her to cast and sell
cookie molds under an oral agreement. Paul Natkiel directed
20 former customers to Hodgdon for fulfillment of orders and
promised those customers that Hodgdon would fill their orders.
The evidence shows that Hodgdon partially performed under the
oral agreement by investing her labor, time, and financial
resources in the production and sales of BROWN BAG products.
Hodgdon admits that she has not paid any royalties for her
sales, but testified it was unclear to whom royalties should be
paid because of the creditor’s foreclosure on HDI’s assets. I
find this testimony credible. The evidence shows that Paul and
Lucy Natkiel negotiated with Hodgdon in contemplation of entering
into a license agreement separate from HDI. See P l . Ex. 2 3 ; D f .
Ex. H-I. These negotiations took place while the Natkiels were
in negotiations with HDI’s major creditor, which had already
opted to foreclose on HDI’s assets. Some of the BROWN BAG
products that were entered into evidence have a copyright notice
from HDI and others have a copyright notice from “Natkiel.”8
Hodgdon’s confusion as to whom to pay royalties in light of the
confusion over copyright ownership does not appear to be
8 The copyright notices imprinted on the backs of the cookie molds stickered by Hodgdon vary. A copyright notice from “Hill Design” is imprinted on Plaintiff’s Exhibits 18 and 2 1 . A copyright notice from “Natkiel” is imprinted on Plaintiff’s Exhibits 19 and 2 0 .
21 unreasonable. In any event, Hodgdon’s failure to pay royalties
does not support Plaintiff’s request for an injunction because
there has been no showing of irreparable harm.
2. The First Sale Doctrine
The Supreme Court held in Bobbs-Merrill C o . v . Straus, 210
U.S. 339, 349-350 (1908), that a copyright holder’s exclusive
right to sell copyrighted works only applies to the first sale of
the copyrighted work. The first sale doctrine was endorsed by
Congress in the Copyright Act of 1976 and codified in the United
States Code. See 17 U.S.C. § 109(a) (providing that the owner of
a particular copy that was lawfully made is entitled, without the
copyright owner’s authorization, to sell or otherwise dispose of
that copy); see also, Quality King Distrib., Inc. v . L’Anza
Research Int’l, Inc., 523 U.S. 135 (1998) (finding that the first
sale doctrine applies to imported copies).
The evidence presented at the injunction hearing showed that
Plaintiff’s infringement claims are not likely to succeed in part
because of the first sale doctrine. The first two categories of
BROWN BAG items that Hodgdon sold were items that Hodgdon claims
she made at the Hill facility with the Natkiels’ permission, and
items that Hodgdon collected over the years. If Hodgdon’s
22 testimony is credited, and it is accepted by this Court for the
purposes of this report, the first sale doctrine renders
Hodgdon’s sales lawful.
The third category of items that Hodgdon sold were items
from the Helen Ross Inventory. Those items no longer belonged to
Plaintiff after Plaintiff sold them to Helen Ross. Therefore,
the first sale doctrine would also apply to prevent Plaintiff
from restricting the resale of those items.
This Court does not find that Hodgdon had any right to take
and sell the items in the Helen Ross Inventory. It is entirely
possible that M s . Ross has a cause of action against Hodgdon.
But M s . Ross is not a party to this lawsuit. The Court finds,
therefore, that the Plaintiff is unlikely to succeed on a claim
that Hodgdon has infringed its copyrights and trademarks by
selling the BROWN BAG items that she made with the Natkiels’
permission, collected over the years, or obtained from the Helen
Ross Inventory.
3. Allegation of Hodgdon’s Planned Future Infringement
Plaintiff argues that it is entitled to a preliminary
injunction because Hodgdon is preparing to mass produce
unauthorized BROWN BAG products with the equipment that she has
23 in Danbury. Hodgdon denies Plaintiff’s allegation. I find that
Plaintiff’s allegation is not supported by the evidence.
Hodgdon testified that she has not poured any BROWN BAG
molds since she vacated the Hill facility in April 2002. Hodgdon
testified that she does not have any working molds, and that as
of the date of the injunction hearing she has not used the kilns
that she purchased for AIC. Hodgdon claims that she has no
intention to make any additional BROWN BAG products.
The Court finds that the Plaintiff has not demonstrated that
Hodgdon has the capacity or the inclination to produce any
additional BROWN BAG cookie molds. The Court further finds that
the Plaintiff has not demonstrated that there is a basis for
enjoining Hodgdon from selling the BROWN BAG items that Hodgdon
produced with the Natkiels’ permission or otherwise acquired as
discussed herein.
4 . Unfair and Deceptive Acts
Plaintiff contends that even if this Court determines that
HDI has not established that Hodgdon converted its property,
Plaintiff is entitled to injunctive relief based on the
undisputed evidence that Hodgdon placed “HAND CAST by Art In
Cooking” stickers on the backside of the cookie molds that she
24 made and sold after April 1 1 , 2002. It is also undisputed that
Hodgdon placed stickers that state “Distributed by Art In Cooking
. . . .” on the back of the recipe booklets attached to the
cookie molds. The stickers placed on the back of the recipe
booklets completely cover HDI’s copyright notice.
Plaintiff contends that Hodgdon’s placement of stickers on
the cookie molds and recipe booklets constitute unfair
competition under § 43(a)(1) of the Lanham Act. See 15 U.S.C. §
1125(a)(1).9 Plaintiff cites cases from several jurisdictions
for the proposition that an unfair competition violation may be
based on the defendant’s misleading representations that create a
potential for confusion regarding the source of the goods or the
9 The statute provides in relevant part that:
any person who, on or in connection with any goods or services, . . . uses in commerce any word, term, name, symbol, or device, . . . for any false designation of origin, false or misleading description of fact, or false or misleading misrepresentation of fact, which –- (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, . . . shall be liable in a civil action by any person who believes that he or she is likely damaged by such act.
15 U.S.C. § 1125(a)(1)(A).
25 defendant’s apparent authorized affiliation with the plaintiff or
the plaintiff’s goods. See, e.g., Johnson v . Jones, 47 U.S.P.Q.
2d 1481, 1488 (6th Cir. 1998); Montgomery v . Noga, 168 F.3d 1282,
1301 (11th Cir. 1999); U.S. Media Corp., Inc. v . Eddie Entm’t
Inc., 40 U.S.P.Q. 2d 1581, 1588-89 (S.D.N.Y. 1996); Playboy
Enter., Inc. v . Frena, 839 F. Supp. 1552, 1562 (M.D. Fla. 1993);
see also, McCarthy on Trademarks and Unfair Competition § 27:9
(4th ed. 2002).
Plaintiff contends that in the instant case, the stickers
that Hodgdon placed on the BROWN BAG molds and recipe booklets at
issue are misleading and cause a potential for confusion
regarding the source and origination of the goods. Plaintiff
argues that the “HANDCAST BY Art in Cooking” stickers are a
misrepresentation because the molds sold with these stickers were
cast by Hodgdon at the Hill facility, not AIC. The Court finds
this argument unpersuasive.
The relevant fact about the production of the molds is that
Hodgdon, and not HDI or the Natkiels, cast the molds to which
Hodgdon affixed the handcast stickers. Hodgdon testified that
productions runs cast by the Natkiels resulted in a loss because
they were not of first quality. The undisputed evidence is that
26 Hodgdon thereafter cast all subsequent molds by herself for her
sole proprietorship, which was later incorporated. The Court
finds no basis for granting an injunction because of Hodgdon’s
placement of “HANDCAST BY Art In Cooking” stickers on the backs
of the molds Hodgdon cast.
With respect to the stickers that Hodgdon placed on the
backs of the recipe booklets attached to the molds, the Court
finds that the Plaintiff has a legitimate argument. The stickers
that Hodgdon placed on recipe booklets suggest an ongoing
affiliation between AIC and HDI that was no longer the case after
April 1 1 , 2002. The stickers are also potentially confusing
because Hodgdon placed them directly over HDI’s copyright notice.
The Court finds that Hodgdon should be enjoined from obstructing
HDI’s copyright notices on the HDI items she owns and resells,
and enjoined from placing stickers on those items indicating that
they are “distributed by Art In Cooking.”
C. Irreparable Harm
In copyright and trademark infringement cases, there is a
presumption that infringement causes irreparable harm. See,
e.g., Am Bd. of Psychiatry and Neurology, Inc. v . Johnson-Powell,
129 F.3d 1 , 4 (1st Cir. 1997); Societe Des Produits Nestle, S.A.
27 v . Casa Helvetia, Inc., 982 F.2d 633, 640 (1st Cir. 1992);
Concrete Machinery, 843 F.2d at 611; Hypertherm, Inc. v .
Precision Prods., Inc., 832 F.2d 697 (1st Cir. 1987). The Court
finds that the Plaintiff is entitled to a presumption of
irreparable harm based on Hodgdon’s placement of potentially
confusing stickers on the BROWN BAG recipe booklets. Hodgdon
made no showing that rebuts that presumption.
D. Balance of the Hardships
The Court finds that any hardship that Hodgdon would suffer
as a result of the limited injunctive relief recommended herein
is minimal. Hodgdon has not argued or demonstrated that her
efforts to sell her BROWN BAG items would be diminished in any
way without placing potentially confusing stickers on the BROWN
BAG recipe booklets.
E. Public Interest
The Court must consider the impact that a preliminary
injunction would have on the public interest. Trademark and
unfair competition laws protect the public by providing a means
to minimize the confusion consumers may experience in attempting
to obtain desired goods and services. DeCosta, 981 F.2d at 605.
I find that the public interest would not be adversely affected
28 by granting the Plaintiff limited injunctive relief.
F. Preliminary Injunction Bond Requirement
Under Rule 65 of the Federal Rules of Civil Procedure, the
Court must require an applicant for a preliminary injunction to
give security in a sum that the Court determines is proper to
pay the costs and damages of any wrongfully enjoined party. I
find that the potential cost and damages to Hodgdon caused by the
form of injunctive relief recommended in this report is
insignificant. I recommend that no bond requirement be set.
CONCLUSION
Based on the evidence presented at the injunction hearing,
and the relevant authorities, I recommend that the Plaintiff’s
motion for preliminary injunction (document n o . 3 ) be granted in
part and denied in part. I recommend that the Court issue the
following order:
Pending a final determination on the merits in this case, Vivian Hodgdon and Art In Cooking, Inc., together with their agents, affiliates, subsidiaries and any person in active concert with or participation with them, are hereby enjoined and restrained from suggesting or implying that they have an ongoing business relationship with the Plaintiff unless expressly authorized to do so in writing, and are enjoined and restrained from obstructing or obscuring the Plaintiff’s copyright notice in connection with the sale, promotion, advertising, or offering of items made by Vivian Hodgdon at the Hill facility, or obtained by
29 Hodgdon through other sources.
I recommend that Plaintiff’s request for a preliminary injunction
be denied in all other respects.
Any objections to this Report and Recommendation must be
filed within ten (10) days of receipt of this notice. Failure to
file objections within the specified time waives the right to
appeal the district court’s order. See Unauthorized Practice of
Law Comm. v . Gordon, 979 F.2d 1 1 , 13-14 (1st Cir. 1992); United
States v . Valencia-Copete, 792 F.2d 4 , 6 (1st Cir. 1986).
James R. Muirhead United States Magistrate Judge Date: April 7 , 2003
cc: David P. Eby, Esq. Vivian Hodgdon, pro se