PALMIERI, District Judge.
Continental Casualty Company (Continental), an Illinois corporation, seeks a declaratory judgment
Essentially, the litigation stems from the defendant H. T. E. Beardsley's (Beardsley)
The narrative part of the publication referred to was largely an exposition of the reasons of convenience and economy which should impel the use of the attached indemnity insurance forms both by corporations and their stockholders. On the first page of the narrative explanation and over the name of H. T. E. Beardsley appears the following:
It was conceded that the publication was distributed gratis, that many large corporations adopted the use of the forms, or substantially similar forms, and that Beardsley derived a considerable income from the commissions paid to him by the surety companies designated by these corporations as indemnitors.
Continental, which has its principal place of business in Chicago, does an extensive surety business. As part of that business, it has provided for the issuance of "Blanket Loss Original Instrument Bonds" which serve substantially the same purpose as the ones promoted by Beardsley in his business as broker. It has also underwritten coverage for losses of stock sent through the mails, and for transfers of stock in waiver of probate proceedings.
The business interests of the plaintiff and Beardsley have been in conflict for a number of years, and at least since 1948. In that year, in a letter to Continental, Beardsley charged Continental with infringement of his forms, and suggested that he could add plaintiff "to my list" and that he would "cooperate with them in getting for them a share of the business."
There can be no question that the defendants' business has been built up upon the representations that the "Beardsley Plan" was Beardsley's own, validly copyrighted, and consequently, the proper subject for its exclusive exploitation by him. Except for the narrative portion of the publication, plaintiff urges that Beardsley had nothing to copyright and that his assertions of exclusive rights of exploitation to the "Beardsley Plan" and to the documents implementing the plan have no legal basis. At the very threshold of the case, therefore, I must consider whether the defendants have a valid copyright.
The general purposes of copyright protection are to afford authors the
There is sound policy to support this position. Where infringement is accomplished by one who seeks to disseminate information, the situation is not different from those where expressions of novelists, poets, and artists are given liberal protection. However, where the putative infringement is accomplished by one who uses the legal form for the function for which it was designed, different considerations become important.
Skill in drafting legal instruments necessitates familiarity with the applicable forms and with the apposite jurisprudence. It follows that time tested terminology lends itself to repetitive use, given similar needs for its employment. The essence of good drafting is to free the client as much as possible from the danger of litigation, and the chances of controversy are generally attenuated when words with a history of settled meaning or of accepted usage are found and utilized. While this practice in other fields might be termed plagiarism, among lawyers its propriety is unquestioned.
One might urge that the propriety should be recognized if the putative infringer demonstrates that he has labored independently of the purportedly copyrighted document, as, for example, testing the original language and modifying, rejecting or retaining it as the independent
In the instant case, Beardsley has copyrighted and published, I will assume for this argument, a booklet of explanation with forms entitled the "Beardsley Plan." There is no question that the booklet is copyrightable, and Continental so admits. There is also no question that Beardsley's arrangement of contents in his proposed bond, however novel that arrangement may be, is not copyrightable, for the novelty of the arrangement is the key concept in the plan, and ideas and plans fall outside the copyright laws.
Continental, as a surety company, writes many forms of insurance in the normal course of its business, sometimes at the request of a purchaser, other times on its own initiative. Beardsley contends that Continental wrote its bonds in the latter fashion, and that its making the bonds available and selling them to customers constitute an infringement. But, in whatever fashion the bonds were written and sold, and the matter is disputed, it is clear that Continental, if it was using the information and language which Beardsley devised, was using it in the regular course of its business of selling and providing insurance. For the reasons expressed above, I hold that Beardsley is not entitled to copyright protection as against Continental's infringement, even assuming such infringement to exist.
Beardsley's scheme, in general, provided for a surety binding itself to indemnify the corporation or transfer agent for liability which might result from improper replacement of lost securities. When a stockholder would petition for the replacement of his lost shares, he would be sent a form of affidavit, which called for a request for replacement, a statement of his financial responsibility, and his promise to indemnify the surety, corporation and transfer agent. The surety, upon receiving this affidavit, would execute and deliver a certificate by which it assumed liability on the bond previously filed with the corporation or transfer agent, and the latter would then replace the stock.
Defendant's claims of copyright revolve around four points which he claims were original in his writings. His plan does not require the surety company to fix its liability by a specific sum on the bond filed by the surety with the corporation or transfer agent subscribing to the plan; instead the company can leave its penalty open limited only by a maximum sum established by statute for any specific claim. Another feature obviates the necessity of having a specific shareholder as principal of this bond; the surety assumes liability directly, fortified by the shareholder's promise of indemnification. A third feature makes the bond prospective in its coverage; the losses of stock to which it applies have not yet occurred when the bond is executed. The fourth feature is a clause in the bond which makes the surety's liability contingent upon its filing with the corporation or transfer agent a certificate by which it assumes its obligation. Except for unimportant variations, the other papers which defendant claims to have been infringed all bear similar notions and are similarly expressed.
Defendant has sought to prove his claim of infringement by proving that the draftsman for the plaintiff had access to the Beardsley papers, which the plaintiff acknowledged, and that Continental's forms are strikingly similar to Beardsley's and to forms which allegedly infringed them.
The defendant urges this by allusion to two solecisms in the Continental papers:
I believe that defendant's proof of infringement is insufficient, despite the apparent similarity of expression found in the forms of the two parties. This is especially so with respect to defendant's claim of indirect infringement, that is, copying from the forms of an infringer, for there is no proof that the purported first infringer did in fact infringe. Defendant seeks to support his argument that the putative first infringer alluded to above in the discussion of plaintiff's solecisms, settled a prior lawsuit brought by Mr. Beardsley. But, of course, a settlement cannot be proof of an acquiescence in the merits of Beardsley's claims.
The striking similarity of language is totally explicable by the nature of the insurance art. Both Mr. Beardsley's format and his expressions were and are common in the business. For instance, practically all of his bond was anticipated by a blanket lost instrument bond to cover real estate transactions written in 1936 by the London and Lancashire Indemnity Company of America.
The affidavit of loss similarly contains much identical language, which again is totally explicable by the nature of the art. Thus, defendant can claim no novelty of expression (novelty of idea is irrelevant) with respect to the information of financial worth sought to be elicited. Furthermore, there are differences in phraseology which can be seen by comparing the following paragraphs in the two forms.
In comparing these paragraphs, one must remember that words of insurance art, and not literary expressions, are involved. Therefore, what might be called a paraphrase and plagiarism in another matter, is significantly different for the purposes of the matter at hand.
Defendant's proof was intended to suggest the inference of copying from arguments directed at demonstrating striking similarity between its forms and those of the plaintiff. Where there were differences in wording between them, defendant then sought to explain plaintiff's language by tracing it to another source. This tour de force cannot be successful, and can only serve to hoist defendant by his own petard, since if his forms were to be subjected to the same treatment, they too would appear to infringe.
A finding of copyrightability, if one were made, does not by itself entitle an author to copyright protection. Authors enjoy such protection before their writings are published, and, if the provisions of the copyright statute are followed, after publication.
In the instant case, Beardsley devised his plan for the replacement of lost securities over a period of a year and a half ending in late 1938 or early 1939, and demonstrated both his inchoate and completed work to lawyers and businessmen in the surety and corporation fields, besides taking advice and accepting revisions throughout that time from them. In January of 1939, Beardsley had 100 copies of his pamphlet printed and distributed these copies to potential customers —corporate officers, transfer agents and surety companies. Also in that month, Columbia Gas & Electric Corporation (and apparently also Loft and General Electric companies) began to use Beardsley's system. It mimeographed copies of his form of bond and filed one executed by the Indemnity Insurance Company of North America as surety. It also printed forms of affidavit which it sent out, allegedly with instructions to return them whether or not used, to nine or ten stockholders who had lost their securities. Until this time, none of Beardsley's papers contained any notice of copyright.
In September of 1939, Beardsley had printed 500 more copies of his pamphlet. The copies bore on them a notice in the form "© 1939 H.T.E.Beardsley," and were distributed beginning October 2, 1939 to potential customers and to three persons who had no apparent economic interest in the plan. On June 23, 1945, copyright of the pamphlet was registered in the Copyright Office, the date of publication being given as September 30, 1939.
After October 1939, not only the booklet but all the forms of affidavit contained this notice. The only exceptions were the affidavits sent out to shareholders between 1941 or 1942 and 1949, by the Niagara Mohawk Power Company, a user of Beardsley's plan, and the notice was finally put on them when Beardsley brought the matter to the attention of the Corporation. In general, none of Beardsley's bonds was marked with the notice, and at one point after publication and notice of copyright, he stated that he claimed no copyright on a bond.
Beardsley contends that the distribution of the first edition of his pamphlet was a limited one and hence was not a forfeiture of his common-law copyright. Thus, he argues, his later publication with notice of copyright was sufficient to place him within the coverage of the
I take up first the question of forfeiture, and since I decide it adversely to Beardsley's position, it will not be necessary to pursue the other points. It is true that the first edition was distributed to a limited group, but interest in his plan would naturally be confined to this group. This is evidenced by the fact that the subsequent printings with notice of copyright were similarly disseminated, except for the three copies distributed, as a matter of form, to the disinterested people. Beardsley contends that this pamphlet was circulated upon the condition that it could not be shown to others and had to be returned if not adopted. However, this statement was not proved and I cannot conclude that the actual conditions of distribution were those described. Beardsley testified that he had no thought of copyright at the time,
Since the vitality of federal copyright protection is in question, it might be expected that federal law would be applied to determine whether that protection was vitiated by an earlier forfeiture.
Federal law, while clear in its statement that the common-law protection is lost by a distribution not limited to a restricted group and for a particular purpose, is not entirely clear in its application. The difficulty arises from comparing generally similar factual situations which are deemed to constitute general publications where satisfaction of federal copyright requirements is an issue, but limited publications when forfeiture of common-law copyright is involved.
It is doubtful that this feature of copyright law was intended to apply to situations similar to that of defendant. The concept of limited publication, it would seem, serves the purpose of permitting authors to submit copies of their writings to associates and acquaintances for criticism without losing their literary property.
The instant case presented just such an unlimited distribution. While no doubt Beardsley could argue that he sought criticism on his first 100 copies of his explanation and forms, and that many subscribers to his plan made changes in the wording, the fact remains that his plan had been formulated by this time and that three companies had adopted it. Moreover, the copies were available to all who might be interested, and Beardsley, far from being averse to his distributees' showing his forms to other interested parties, seemed anxious for wide consideration of his papers since thereby he was building up an impressive surety brokerage business. Thus I have no difficulty in finding that under federal law Beardsley forfeited his right to copyright.
New York law gives the defendant even less solace. There is no talk of double standards, and, in fact, it has been stated that common-law protection is lost by the same circumstances which would be tantamount to a publication general for the purpose of federal protection.
Defendant, in addition to claiming copyright infringement, has also counterclaimed on the theory of unfair competition. His proof indicates no interference with contractual or confidential relations, nor does it show that plaintiff was passing off its product as defendant's. Indeed, it essentially does not differ from that which he introduced to prove copyright infringement. Nevertheless, Beardsley urges this claim, relying on the International News Service v. Associated Press doctrine of misappropriation.
The matter is, of course, one of state law which is entertained in this court because of diversity of citizenship of Beardsley and Continental, or because it is joined with a substantial and related claim under the copyright laws.
In Illinois, an unfair competitor is one who causes the consuming public to confuse his product with the products of another.
The law of New York is somewhat more liberal than that of Illinois. "Palming off" and "confusion" are not the sole criteria for finding unfair competition, as the tort has also been found from other circumstances. Thus, the doctrine of International News Service v. Associated Press,
The instant case clearly cannot be subsumed under the New York desiderata for unfair competition. Not only is the proof deficient of Continental's appropriating Mr. Beardsley's forms, but there is not a shred of evidence indicative of a belief that Continental was being helped by Mr. Beardsley's business reputation. Moreover, Mr. Beardsley had no exclusive interest in his idea or in his product with which Continental might have interfered.
In the federal courts, the doctrine of International News Service v. Associated Press
Beardsley has also counterclaimed on a theory of breach of confidences and of implied contracts. There is insufficient proof to substantiate these claims.
Continental, in addition to its action for a declaratory judgment that the Beardsley plan was not copyrightable nor infringed, also has sued for damages on the theory of unfair competition and violations of the anti-trust laws. Both of these last two causes of action have not been proved and they must be dismissed.
Defendant for many years has used assertions that his system was copyrighted as a business expedient. He has also stated that he would not desist from such assertions unless his copyright were to be invalidated by a court of last resort.
Plaintiff is directed to submit a form of judgment on notice.
But cf. Deutsch v. Arnold, 2 Cir., 1938, 98 F.2d 686 (infringement by a former employee); Smith v. Thompson, D.C. S.D.Cal.1941, 43 F.Supp. 848, 850 (same); Edwards & Deutsch Lithographing Co. v. Boorman, 7 Cir., 15 F.2d 35, certiorari denied 1926, 273 U.S. 738, 47 S.Ct. 247, 71 L.Ed. 867 (infringement by one who had access because of a continued course of dealing).
"I (the company official) told him (Beardsley's attorney) National Union (the affected company) preferred its own forms and Sprague immediately countered with the statement that it might use any language it sees fit, so long as the words `Copyright 1939, H. T. E. Beardsley' appear at the bottom of the application or, as he calls it, the affidavit of loss and indemnity agreement. He kept insisting on the legend in order to protect, as he said, Beardsley's copyright.
"I expressed surprise that he was not interested in the form of the blanket bond but he replied pointedly that he was concerned only about the affidavit of loss and indemnity agreement. He said that Beardsley does not even provide a form of resolution for the use of corporations in approving use of the system." See Exhibit No. 60.
And, in another instance, Beardsley wrote as follows:
"To relinquish our copyright or spread the information generally would mean that we would have no reward for our idea except the privilege of costly litigation. I don't want to be a dog in the manger and won't be but your knowledge of this very simple plan came to you from me. For forty years or more no surety man took the trouble to sit down and develop this idea. I believe you will see the fairness of not using my idea and I have perfect confidence in your integrity. If I hadn't had I should not have disclosed the matter to you. Please understand that in giving you permission to use the Beardsley Plan in certain cases is not done with any thought that it will influence your decision.
"* * * To protect myself I have managed so far to get the companies to refer to my plan as the Beardsley Plan —not the Beardsley Bond." See Exhibit C U.
During the trial, counsel for the plaintiff asked Beardsley if he claimed a copyright on his form of bond. Beardsley replied:
"That's right, no copyright. It should have said, `No copyright on a blanket bond,' but I wasn't making a blanket copyright on a bond. There are millions of bonds. That's what I meant. But this I was making a copyright on a plan that included a bond, which of course was copyrighted with the plan." See Record, p. 573.
Nevertheless, in the brief and in formal statements when challenged, Beardsley's attorneys denied a claim of copyright on the "plan," asserting it only on the writings.
"I recognize that the Beardsley Plan in connection with which Blanket Lost Security Bonds are written was formulated in cooperation with the Indemnity Insurance Company of North America and in consideration of the assistance rendered to me by you in the development of the idea and the securing of the two accounts already written by you, the Columbia Gas & Electric Company and the General Electric Company, I agree to release the Beardsley plan and copyrighted bond form in use by your Company in the development of business through your own agents and brokers." See Exhibit No. 41.
This admission is not rationalized by subsequent comments by which he insisted that he had a copyright.
Besides the interstate nature of many of these unfair competition litigations, there is another element of disparity between them and the ordinary diversity cases. A good many unfair competition claims are pendent to substantial and related claims under the federal copyright, patent and trademark laws. The different venue statutes, and perhaps requirements which govern them, See Note, Doing Business as a Test of Venue and Jurisdiction over Foreign Corporations in the Federal Courts, 56 Col.L. Rev. 394, 411, 413-16 (1956), as well as their close connection with federal claims, might make it unfair to extend to them a priori the normal rules for diversity cases. Perhaps a greater flexibility in following state decisional law than is otherwise thought to be proper for a federal judge in a diversity case, cf. Pulson v. American Rolling Mill Co., 1 Cir., 1948, 170 F.2d 193, might be achieved in this area by presuming that the state courts would amend an old precedent by developments in the law of unfair competition in the federal courts and in other jurisdictions. See National Fruit Product Co. v. Dwinell-Wright Co., note 53, supra. Flexibility might also be achieved by using the distinction of pendent from diversity jurisdiction as a basis for adopting a federal courts law of conflicts, which, in turn, might support a freer choice in choosing precedents.