Subafilms, Ltd v. Mgm-Pathe Communications Co.

24 F.3d 1088 (9th Cir. 1994)

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Nature of the Case

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Facts

The Beatles, through P entered into a joint venture with the Hearst Corporation to produce the animated motion picture entitled 'Yellow Submarine.' Hearst, acting on behalf of the joint venture negotiated an agreement with United Artists Corporation (UA) to distribute and finance the film. Separate distribution and financing agreements were entered into in May 1967. Pursuant to these agreements, UA distributed the Picture in theaters beginning in 1968 and later on television. In the early 1980s, UA entered into several licensing agreements to distribute a number of its films on videocassettes. UA refused to license 'Yellow Submarine' because of uncertainty over whether home video rights had been granted by the 1967 agreements. UA's successor company, D, over P's objections, authorized its subsidiary MGM/UA Home Video, Inc. to distribute the Picture for the domestic home video market, and, pursuant to an earlier licensing agreement, notified Warner Bros., Inc. (Warner) that the Picture had been cleared for international videocassette distribution. Warner, through its wholly-owned subsidiary, Warner Home Video, Inc., in turn, entered into agreements with third parties for distribution of the Picture on videocassette around the world. Ps brought suit against D, Warner, and their respective subsidiaries for copyright infringement and a breach of the 1967 agreements. The case was tried before a retired California Superior Court Judge acting as a special master. The special master found for Ps on both claims, and against Ds on their counterclaim for fraud and reformation. Ps were awarded $2,228,000.00 in compensatory damages, split evenly between the foreign and domestic home video distributions. A panel affirmed the district court's judgment on the ground that both the domestic and foreign distribution of the Picture constituted infringement under the Copyright Act. As for the foreign distribution, the panel concluded that it was bound by Peter Starr Prod. Co. v. Twin Continental Films, Inc which held that infringing actions that take place entirely outside the United States are not actionable under the Copyright Act. The decision state that an 'act of infringement within the United States' properly is alleged where the illegal authorization of international exhibitions takes place in the United States.' Ds had admitted that the initial authorization to distribute the Picture internationally occurred within the United States. The panel affirmed the district court's holding with respect to liability for extraterritorial home video distribution of the Picture. Ds petitioned for rehearing en banc to consider whether the panel's interpretation of Peter Starr conflicted with Lewis Galoob Toys, Inc. v. Nintendo of Am., Inc. which held that there could be no liability for authorizing a party to engage in an infringing act when the authorized party's use of the work would not violate the Copyright Act.