GALIANO v. HARRAH'S OPERATING CO., INC.

JERRY E. SMITH, Circuit Judge:

Gianna, Inc. ("Gianna"), sued Harrah's Entertainment, Inc. ("Harrah's"), for copyright infringement. The district court granted Harrah's' motion for summary judgment on the infringement claim and denied Gianna's motion for summary judgment on Harrah's' fraud on the Copyright Office counterclaim. After the court issued its judgment, in a separate motion Harrah's requested, and the district court granted, attorney's fees. Gianna timely appealed (1) the summary judgment against its copyright infringement claim; (2) the denial of its summary judgment motion involving Harrah's fraud on the Copyright Office counterclaim; and (3) the award to Harrah's of attorney's fees. We have consolidated all issues for appellate argument. We affirm the summary judgment in favor of Harrah's on the infringement claim, dismiss the appeal regarding the denial of summary judgment to Gianna on the counterclaim, and vacate and remand the order awarding attorney's fees.

I.

Jane Galiano is the founder and owner of Gianna, Inc., which designs clothing and counsels various industries regarding their professional attire. In August 1995, Gianna and Harrah's entered into an agreement (the "Design Consulting Agreement") pursuant to which Gianna was to design uniforms for employees of various Harrah's casinos. Subsequent exchanges between the parties resulted in the creation of several proposed sketches.

Because Gianna did not have the capacity to produce patterns of the sketch designs or make the finished uniforms, it entered into a manufacturing agreement (the "Uniform Manufacturing Agreement") with Uniform Ideas, Inc., one of Harrah's' suppliers. That agreement stated that Uniform Ideas, Inc., would manufacture uniforms for Gianna during the period from September 1, 1995, to August 31, 1996. Gianna also contacted All-Bilt Uniform Fashion ("All-Bilt"), another Harrah's supplier, about manufacturing some of the uniform designs. Gianna and All-Bilt did not sign a contract, but All-Bilt produced some prototypes of Gianna-designed uniforms and submitted them for Harrah's' approval.

The design agreement between Gianna and Harrah's expired according to its terms on December 1, 1995. The parties entered into negotiations to extend the contract, but failed to do so and entered into an agreement purporting to settle all disputes in May 1996.1 Harrah's continued to order Gianna-designed costumes from its suppliers.

In October 1999 Gianna sought and received copyright protection for a collection of sketches entitled "Uniform and Costume Collection submitted to Harrah's Operating Company, Inc."2 The certificate identified the collection as "Artwork for Wearing Apparel" and classified the work as "2-dimensional artwork." Galiano is identified as the author of the copyrighted work. The collection includes more than fifty colored and numbered illustrations, including sketches of uniform style shirts, blouses, vests, jackets, pants, shorts, ensembles, elaborate masquerade-type costumes, and unique head gear and a dozen pages of silkscreen artwork.3

Three months after obtaining the copyright protection, Gianna (with Galiano individually as co-plaintiff) sued in federal district court alleging that Harrah's had breached the May 1996 settlement agreement4 and committed copyright infringement by continuing to use and order Gianna-designed uniforms. Harrah's counterclaimed for fraud and misuse of the Copyright Office, asserting that Gianna had failed to disclose that the allegedly copyrighted work was not original and that it intended to cover items that are not properly copyrightable.

II.

To prove copyright infringement, a plaintiff must show ownership of a valid copyright and actionable copying. See Positive Black Talk, Inc. v. Cash Money Records, Inc., 394 F.3d 357, 367 (5th Cir.2004). Accordingly, the district court first determined the extent of Gianna's copyright in her "registered" works. Because copyright law does not allow one to copyright "clothing designs" in which the artistic and utilitarian qualities are indivisible, the court reasoned, Gianna's copyright could not extend to the designs for the wearing apparel depicted in the illustrations referenced in her Certificate of Copyright. The court therefore found that Gianna's copyright is valid only to the extent that it protects the two-dimensional art-work, i.e., the illustrations and silkscreens that comprise the collection. We elaborate on this first holding somewhat extensively here.

The district court relied on much of the material we examine in part II.C.2.b, infra, in holding that Gianna's copyright did not extend to the uniform designs. The court explained that copyright protection would be available only for a design's artistic expression and not for the design of the clothing itself. Because the court could not equate the design of the uniforms' buttons, pleats, and collars—though admittedly very creative—to an artistic drawing on a shirt or a fabric design, it concluded that the design's artistic and utilitarian elements were conceptually indivisible and therefore not copyrightable subject matter.

Gianna also relies heavily on the deposition and report of Bonnie Belleau, Ph.D.,5 who opined that the Gianna uniform designs are highly artistic and that the utilitarian and aesthetic elements are easily separable. Belleau testified that the Gianna uniforms have a "costume look" as distinguished from a "functional uniform appearance" and therefore should qualify for copyright protection as artistic costumes.6 Gianna argues that Belleau's report and testimony demonstrate that these designs are not intended merely to enhance the garment's functionality, but to render the design a creative asset.7

The district court noted that Belleau set out in some detail the artistic features of the uniforms, but the court found that these features were nothing more than "useful design features of wearing apparel." Because none of these design features has intrinsic value as a work of art that can exist independently of the uniform wearing apparel, the district court concluded, they do not qualify for copyright protection.

Next, the court analyzed whether Harrah's committed "actionable copying" of Gianna's collection, in light of the previously determined scope of copyright. The court differentiated between "direct infringement" and "contributory or vicarious infringement," which are separate and distinct causes of action.

In her original and amended complaints, Gianna alleged that Harrah's "reproduced the copyrighted work in copies" and "prepared derivative works based on the copyrighted works throughout its gambling empire."8 Therefore, the court concluded, Gianna based its claim on a theory of direct infringement. In its opposition to summary judgment, however, Gianna alleged that Harrah's would be liable for contributory infringement even if there was insufficient evidence of direct infringement. The court considered this additional allegation to constitute Gianna's pleading a new cause of action, which the court refused to allow Gianna to do after four years of litigation in this case. Denying Gianna leave to amend her complaint to add allegations of contributory or vicarious infringement, the court dismissed the infringement claim, holding that Gianna failed to show a material fact issue existed as to whether Harrah's committed "direct actionable copying" of the Gianna collection that was entitled to copyright protection.

We conclude that Gianna did not own a valid copyright in the clothing designs. As a result of this disposition, we do not reach (1) whether Gianna's claim sounded in direct or contributory infringement or (2) whether Gianna could prevail under either theory.

A.

We have appellate jurisdiction of the district court's final order under 28 U.S.C. § 1291.9 We review a summary judgment de novo, in accordance with the Federal Rule of Civil Procedure 56 analysis that guides the district court. See Ford Motor Co. v. Tex. Dep't of Transp., 264 F.3d 493, 498 (5th Cir.2001).

B.

This case involves the copyrightability of "pictorial, graphic, and sculptural works" ("PGS" works). These articles may be two- or three-dimensional and include works such as maps, fine or graphic art, diagrams, models, and technical drawings. 17 U.S.C. § 101. If an item qualifies as a "useful article" under the Act,10 however, it is entitled to copyright protection only to the extent that its artwork or creative design is separable from the utilitarian aspects of the work.

The applicable statute provides the following:

17 U.S.C. § 102(a). The statute then defines what a PGS work is:

17 U.S.C. § 101.

C.

The test for whether Gianna can copyright the designs proceeds in two steps. First, we must determine whether the asset for which the creator seeks copyright protection is a "useful" article. If it is not, there is no PGS bar to copyright protection. If it is, the panel must determine whether the "design incorporates [PGS] features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article." Id. Answering the first question is easy; answering the second is not.

1.

There is little doubt that clothing possesses utilitarian and aesthetic value. "It is common ground ... among the courts that have examined this issue [that the 1976 Copyright Act's PGS provisions were] intended to distinguish creative works that enjoy protection from the elements of industrial design that do not." See Pivot Point Int'l, Inc. v. Charlene Prods., Inc., 372 F.3d 913, 920-21 (7th Cir.2004) (en banc). The hard questions involve the methodology for severing creative elements from industrial design features.

2.

Although the statutory language ostensibly requires that two conditions be satisfied, the consensus among courts and academics is that, because the statutory language was essentially lifted from a case predating the legislation,11 § 101's separateness requirements implement what is called the "conceptual separability test."12 There are at least six distinct variations of that test,13 and 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., Inc., 912 F.2d 663, 670 (3d Cir.1990).

Pivot Point is a sprawling, comprehensive exegesis of conceptual separability jurisprudence. See Pivot Point, 372 F.3d at 920-32. Although it is not binding on this court, Pivot Point represents, by orders of magnitude, the most thorough and persuasive analysis of this question in any circuit.

That survey revealed several things. First, it concluded that "the circuits that have addressed [this question] have recognized that the wording of the statute does not supply categorical direction, but rather requires the Copyright Office and the courts `to continue their efforts to distinguish applied art and industrial design.'" Id. at 921 (internal citations omitted). Second, and more importantly, it re-framed the conceptual separability test:

Id. at 931 (citations omitted). In other words, where artistic discretion dominates practical necessity as the driving force behind design choices, a useful article may nonetheless qualify for protection as a PGS work. Third, Pivot Point strongly suggests that the contested features may be considered in the aggregate. See id. at 925 (quoting Carol Barnhart, 773 F.2d at 418).14

Acknowledging the comprehensiveness of that opinion, however, is not tantamount to applying it here. We do not reject the Pivot Point test in this circuit, but we decline to apply it to the instant facts for several reasons.

a.

First, the degree of influence Pivot Point will ultimately exert is manifestly uncertain. Courts considering PGS issues post-Pivot Point seem either to be adopting the test in name only or to be straining to conform the results both to Pivot Point and to the relevant circuit's prior caselaw. For example, in Bonazoli v. R.S.V.P. Int'l, Inc., 353 F.Supp.2d 218 (D.R.I.2005), the court cited Pivot Point extensively but reached a result that seems to belie the Seventh Circuit's reasoning. It held that the design of certain measuring spoons was not protectable under the Copyright Act, although the bowl of each spoon was designed in the shape of a heart and the handle in the shape of an arrow shaft. See id. at 220.

Although Pivot Point seems to require a contrary result—it is hard to conceive a utilitarian consideration animating these particular designs of bowls and shafts—the Bonazoli court ruled that "no reasonable trier of fact could conclude that the artistic aspects of Plaintiff's spoons are separable from their functional aspects." Id. at 226. Moreover, the Bonazoli court explicitly declined formally to adopt the Pivot Point test:

Id. at 225 (internal citations omitted). The court went on to explain why the measuring spoon design would fail several other conceptual separability tests, see id. at 225-26, a methodology that betrays discomfort with adopting Pivot Point wholesale.

In the only other non-Seventh Circuit case to address the issue, Stanislawski, 337 F.Supp.2d at 1113, the court seemed similarly circumspect about adopting Pivot Point in its entirety. Stanislawski considered the copyrightability of custom-designed picture frames; the plaintiff designed frames containing images such as cruise ships and bowling balls and bearing varied expressions and lettering. Not only did the court appear to resort to a crude physical separability analysis, see id., but it also hedged on the Pivot Point methodology.15

b.

Thus, a clothing design that is intended to be used on clothing is copyrightable only to the extent that its artistic qualities can be separated from the utilitarian nature of the garment. How to conduct the conceptual separation is, in turn, what continues to flummox federal courts. The leading treatise in the field, NIMMER ON COPYRIGHT, discusses conceptual separability extensively. It presents the conceptual separability test somewhat differently, and one standard reads as follows: "[I]t may be concluded that conceptual separability exists where there is substantial likelihood that even if the article had no utilitarian use it would still be marketable to some significant segment of the community simply because of its aesthetic qualities."16

Nimmer's cogent discussion of the scope of copyright protection in design works breaks the subject into two categories: (1) fabric design and (2) dress design. Fabric designs include patterns or artistic features imprinted onto a fabric or that appear repeatedly throughout the dress fabric. Because one can generally separate the artistic elements of this design from the utility of the wearable garment, NIMMER ON COPYRIGHT states that fabric designs are generally entitled to copyright protection. On the other hand, dress designs, which graphically set forth the shape, style, cut, and dimensions for converting fabric into a finished dress or other clothing garment, generally do not have artistic elements that can be separated from the utilitarian use of the garment, and therefore typically do not qualify for copyright protection.17

The caselaw generally follows Nimmer's conceptual breakdown. Design of sweaters is usually classified as "fabric design" and is entitled to copyright protection.18 Similarly, artistic designs woven or imprinted onto rugs qualify for copyright protection. See Peel & Co. v. Rug Market, 238 F.3d 391, 394 (5th Cir.2001).

Cases dealing with the copyrightability of clothing designs do not exclude them from protection per se; they instead focus on the "separability" analysis. In Poe v. Missing Persons, 745 F.2d 1238 (9th Cir.1984), for example, the court awarded copyright protection to a swimsuit design.19 Poe is quite enlightening, because it involved no ordinary swimsuit. The court found that there was little chance of this elaborately crafted swimsuit's ever being worn—it appeared that it was marketed as a work of art.20

The Second Circuit faced a similar situation dealing with belt buckles in Kieselstein-Cord. The court determined that "Winchester" and "Vaquero" belt buckles contained artistic elements that were conceptually separable despite the buckles' utilitarian functions. See Kieselstein-Cord, 632 F.2d at 993. This ruling was premised on the belief that the buckles could exist independently as a valuable artistic commodity.21 The court nonetheless determined that the belt buckle in question existed on the "razor's edge of copyright law." As with the court in Poe, the Kieselstein/Cord court's willingness to recognize the copyrightability of a useful article seems, at some elemental level, to turn on the capacity of the item to moonlight as a piece of marketable artwork.

c.

The caselaw on costume design is, to say the least, uneven. Generally speaking, however, it tends to reflect a direct relationship between a costume's copyrightability and its actual or potential market value as a stand-alone piece of artwork.22

Confusion regarding the copyrightability of costumes and questions from the garment industry led to a 1991 opinion from the United States Copyright Office, 56 FR 56530-02, 1991 WL 224879 (F.R.), which concluded that "[g]arment designs (excluding separately identified pictorial representations of designs imposed upon the garment) will not be registered even if they contain ornamental features, or are intended to be used as historical or period dress." See id.23 The garment industry had sought broader protections for elaborate garment designs; the Office answered that "[g]arments are useful articles, and the designs of useful articles are generally outside of the copyright law."24

Sometimes, we must favor what might be a sub-optimal prophylactic rule because it is more determinate than the theoretically superior but hopelessly subjective one. We do not mean to suggest that the Nimmer/Poe test we ultimately endorse is conceptually inferior, but we do conclude that, if it is, it is not so theoretically infirm that such inferiority overcomes the benefits—at least at this time—of having a more determinate rule. Despite the alleged "elegance" of the Pivot Point rule, the scope of that holding remains uncertain. Surely the Seventh Circuit considered itself as setting forth a test for courts to use when encountering any applied art but, as we have shown in part II.C.2.a, supra, courts have not rushed to extend the rule beyond mannequin designs.

Nor is it obvious that Pivot Point could not incorporate the Nimmer rule as a means to determine—for garment design only—whether the utilitarian and artistic elements are conceptually separable. In other words, as an evidentiary matter, Pivot Point could well require that, to prove that design choices were dominated by artistic considerations, a plaintiff must demonstrate that the piece of applied art could fetch a return functioning purely as an artistic commodity. We therefore adopt the likelihood-of-marketability standard for garment design only,25 because it appears firmly rooted as the implicit standard courts have been using for quite some time. We are not unaware of the pitfalls of such a standard,26 but its inherent problems are minimized when the rule's ambit reaches a single type of applied art.27

Gianna makes no showing that its designs are marketable independently of their utilitarian function as casino uniforms. Gianna correctly notes that there are costume museums and that they are replete with extravagant designs that might also have utilitarian qualities, but Gianna does not demonstrate that its designs describe such material. We therefore affirm the denial of summary judgment.

III.

Harrah's counterclaimed against Gianna for fraud on the Copyright Office. The district court denied Gianna's motion for summary judgment on the counterclaim. Denials of summary judgment are typically not final orders28 and are generally appealable only as provided in 28 U.S.C. 1292(b), which requires a district court's designation. Neither party points to such designation, nor can we locate one in the record.

Both parties instead premise jurisdiction for this issue on Federal Rule of Civil Procedure 54(b).29 The district court's rule 54(b) certification, however, says nothing of the fraud counterclaim; it certifies only the infringement determination. Both parties inexplicably and incorrectly assume that we have appellate jurisdiction and proceed directly to argument on the merits.

We may exercise only proper appellate jurisdiction, even if doing so requires us to consider the jurisdictional question sua sponte. See Chunn v. Chunn, 106 F.3d 1239, 1241 (5th Cir.1997). We lack jurisdiction over the fraud counterclaim and dismiss the appeal of that issue.

IV.

The Copyright Act provides that "in its discretion" a district court may "award a reasonable attorney's fee to the prevailing party as part of the costs." 17 U.S.C. § 505. In a separate appeal that we have consolidated with the case on the merits, Gianna argues that the district court erred in granting Harrah's' motion for attorney's fees. The court ruled on this motion from the bench but declined to quantify its award of fees until a later hearing.

A.

We have jurisdiction over the rule 54(b) order granting fees as an order designated by the district court as immediately appealable. We review an award of attorney's fees for abuse of discretion. See Alameda Films S A de C V v. Authors Rights Restoration Corp., 331 F.3d 472, 483 (5th Cir.2003).

B.

The district court did not consider any of the four factors set forth in Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994), in which the Court rejected the "British Rule," used in some circuits, whereby the prevailing party in a copyright case is awarded attorney's fees as a matter of course. The Court instead favored a more discretionary approach:

Id. at 527, 114 S.Ct. 1023. Fogerty instructed courts, in determining whether to award attorney's fees, to consider (1) frivolousness; (2) motivation; (3) objective unreasonableness; and (4) the need in particular circumstances to advance considerations of compensation and deterrence. See id. at 534 n. 19, 114 S.Ct. 1023.30

The district court, without explanation, just assumed that, if it erred, this court would fix the mistake. The order gives no reason why the court awarded fees. The hearing transcript contains only the following passage:

We cannot review a district court's decision for abuse of discretion where that court effectively delegates the underlying issue to us without making a substantive ruling of its own. Although we view this suit to be far from frivolous—this is a close question of law—remand is appropriate. The district court should provide a Fogerty analysis in its ensuing opinion so that its ruling can, if needed, be reviewed on appeal.

In summary, we AFFIRM the summary judgment in favor of Harrah's on the infringement claim, DISMISS the appeal regarding the denial of summary judgment to Gianna on the counterclaim, and VACATE and REMAND the order awarding attorney's fees.31