Petition for Writ of Certiorari — Consumers Union of United States, Inc. v. General Signal Corp.

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4 Supreme Court, U.S.

FILED

83.- 1870

MAYaedd 1984

ALEXANDER L. STEVAS

CLERK

IN THE

Suprene Court of the United States

October Term, 1983

CONSUMERS UNION OF UNITED STATES, INC.,

Petitioner,

agamst

GENERAL SIGNAL CORP. and

GREY ADVERTISING, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Micuakxt N. Pouuet

Counsel of Record

MarsHauL BEIL

Carnot A. SCHRAGER

KarpaTKIN PoLLet PERLMUTTER & BELL

Attorneys for Petitioner

708 Third Avenue

New York, New York 10017

(212) 557-4700

QUESTIONS PRESENTED

1. Does the commercial speech

doctrine mandate application of the fair

use exemption to excuse the verbatim

copying of copyrighted material in purely

commercial advertisements?

2. Did the Court of Appeals

violate this Court's holdings in

Sony Corp. of America v. Universal City

Studios, Inc., 104 S.Ct. 774 (1984),

concerning the application of the fair

use exemption by (i) failing to consider

commercial use as presumptively unfair;

(ii) requiring the copyright holder to

show “actual” rather than “potential"

harm to the value of the copyright; (iii)

failing to recognize that harm is

presumed when the infringing use is,

as here, intended purely for commercial

gain; (iv) failing to consider the

deleterious effect of the commercial use

upon petitioner's derivative markets;

and (v) failing to consider the adverse

effect upon petitioner if the Court-

authorized infringement should become

widespread?

iii

TABLE OF CONTENTS

Question Presented.......ccscccccccccck

Mee WE CONROE. 6 cc cccccccccccccchid

Table Of Authorities. ........cccccce J Vi

Pe GR eo cob cccdeecccececcccecd

TERE Ces otanccaccccencdcecect

CONSTITUTIONAL AND STATUTORY

PROVISIONS PPO cehekecesccosceoceced

STATEMENT OF Pte Le

REASONS FOR GRANTING THE WRIT........18

I. The Court of Appeals'

Misapplication of the

Commercial Free Speech

Doctrine Severely

Undermines the

Constitutional and

Statutory System of

the Public's Detriment.......18

II. The Court of Appeals'

Decision Is In Plain

Conflict With Sony

Corp. v. Universal

City Studios........eeeee eee e3e

CORCTDOTOR — . occ ccqccececcccceccesecsSS

APPENDICES

Appendix A: Judgment of the

United States Court of

Appeals for the Second

Circuit (November 25,

COS) . s ocs bomioienndssas 6000222018

Appendix B: Opinion of the

Court of Appeals

(December 6, 1983) ....-++++0+-38

Appendix C: Order of the

Court of Appeals

granting in part and

denying in part petition

for rehearing

(February 14, 1984).....++++-258

Appendix D: Order of the

Court of Appeals

denying petition for

rehearing en banc and

dissenting opinion

(February 14, 1984)..........29a

Appendix E: Order for

Preliminary Injunction

of the United States

District Court, Southern

District of New York

(Ceteber 13, 1963) ccccccceccedS®

Appendix F: Memorandum

Decision of the District

Court (October 12, 1983).....39a

Appendix G: Text of the

article entitled |

"Lightweight Vacuum

Cleaners" published in

CONSUMER REPORTS, July,

1983, pages 369 through

Le Pr peer Pee .

Appendix H: Text of

respondents' commercials.....77a

TABLE OF AUTHORITIES

Cases Page

Amana Refrigeration, Inc. v.

Consumers Union of United

States, inc., 431 F. Supp.

> a. © ye FR, 29

Bose Corp. v. Consumers Union

of United States, Inc., 508 F.

Supp. 1249 (D. Mass. 1981),

rev'd, 692 F.2d 189 (1st Cir.

1982), aff'd, 52 U.S.L.W. 4513

(U.S. Apr. 30, T9S4) coceceesers eeeee3neeee: 8

Central Hudson Gas & Electric

Corp. v. Public Service

Comm'n, 447 U.S. 557 (1980)..........24

Conde Nast Publications, Inc.

v. Vogue School of Fashion

Roaatl in Inc., 105 F. Supp.

325 (S.D.N.Y.

VEeaP es eseeeSecsecsesecaD

Dallas Cowboys Cheerleaders v.

Scoreboard Posters, 600 F.2a

7184 (Sth Cir. eae eae

Dawn Associates v. Links, 203

U.S.P.Q. B31 (N.D. Til. WISdcccccsecad

vii

Friedman v. Rogers, 440 U.S.

1 1 eeeeeeeeeeteeeeeeneeeeeeeeneeeeee 24

Harper & Sow Publ shersy Inc.

v. Nation Enterprises,

F.2d 195 (2d Cir. 1983),

etition for cert. filed, 52

U.S.L.W. (U.S. Apr. 3,

1984) (No. SSIES) cecceceeces eeeeeee 30

Henry Holt and Co. v. Liggett

& Myers Tobacco Co., 23 F.

Supp. eVe a. 1938) . 2.200000 0 29-30

Iowa State University Research

Foundation, inc. v. American

Broadcasting Companies, inc.

- S Pe Terry TTT ii

we beomecs as Inc. v. San Diego,

45 Webbe 1 Oh Webs 666666660 00000084

Ohralik v. Ohio State Bar

Association, 436 U.s.

PSESSOSOS ROHS CEES EEOSEECOECECEDMAS

Rosemont Enterprises, Inc. v.

Random House, Inc., 56 F.2d

303 (2d Cir. 1966), cert.

denied, 385 U.S. 1009 a ea

viii

Roy Export Co. v. Columbia

Broadcasting System, Inc.,

672 F.od TOS ez Cir.), cert.

denied, 103 S.Ct. 60 (1983)..........27

SEC v. Lowe, 10 Media L. Rep.

(BNA) 1225 (24 Cir. 1984)............26

Sony CotE. of America v.

Universal City Studios, Inc.,

104 s.ct. Bheseocccocecetss 20,

24-25, 32-47

Virginia State Board of

Pharmacy v. Virginia Citizens

Consumer Council, Inc., 42

U.S. 748 US py ot Faas T

~ H.C. Wainwright & Co. v. Wall

Street Transcript cCorp., 415

F. Supp. 620 (S.D.N.Y. 1976),

aff'd sub nom. Wainwright

Securities inc. v. Wall

Street Transcript Corp.,

558 F.2a 91 (20 Cir. 1977),

' cert. denied 434 U.S. 1014

9666065506666600606 66666660060 07=8

Walt Disney Productions v. Air

Pirates, soi F.2d 751 (9th

Cir. I ee Be ee ee eacceceteee

Yiamouyiannis v. Consumers

Union of United States, Inc.,

cert. denied, 449 U.S. 839

lp Ee ae er eee ee ae es

Constitutional Provisions

u.S. Constitution Art.. 1, Sec.

8, Gi. ns 6666 SSS SSSSSESECEE COCO OC COC CS

U.S. Constitution, Amend. I.......4, 7,

18-32, 47

Statutes

S O.8eCe ‘ Tome Occ cocecsosssooceeete

17 u.S.C. € 106 TYYTTTTITITILTL TTT

10, 39

17 U.S.C. ‘ |) eee. 7 25,

40,46

17 U.S.C. BR BERCS) cccccecerccoesesecesl

17 U.S.C. SO7(B) .cccccccscccccce coodl

28 SF Poe TREE Chews eeber.cossectuseds

28 0.8.4. co) a ee

28 S.8.. ft a eee a eee

A ABD MAD DH NM

28 0.8.C. pi Arn ys cnn ee ek

28 8.8.c. DS Peel wi ceedleaeeeuseeeees®

Other Authorities

The Bowker Annual of Library

and Book Trade Information

e J Se = grrr 2

3 Nimmer on Copyright

§ 13.051A] (1 oes teebsabceseedsenee

40-41

No. 83-

In the

SUPREME COURT OF THE UNITED STATES

October Term, 1983

CONSUMERS UNION OF UNITED STATES, INC.

Petitioner,

- -against~

GENERAL SIGNAL CORP. and

GREY ADVERTISING, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Petitioner Consumers Union of

United States, Inc. respectfully prays

that a writ of certiorari issue to review

the judgment of the United States Court

of Appeals for the Second Circuit entered

in this proceeding on November 25, 1983,

and confirmed in that Court's opinion

dated December 6, 1983, reversing the

grant of a preliminary injunction by the

United States District Court for the

Southern District of New York.

OPINIONS BELOW

The judgment of the Court of

Appeals for the Second Circuit dated

November 25, 1983 is unreported and is

annexed to this petition as Appendix A

(la-2a). The Court of Appeals' opinion

of December 6, 1983 is reported at 724

F.2d 1044 (2d Cir. 1983) and is annexed

as Appendix B (3a-24a). The Court of

Appeals‘ unreported orders dated February

14, 1984, granting in part and denying in

part rehearing, and denying, over a

dissenting opinion, rehearing en banc,

are annexed as Appendices C (25a-27a) and

D (29a-33a) respectively. The Southern

District of New York's order issuing a

seelintaver injunction of October 13,

1983 and its memorandum decision of

October 12, 1983 are both unreported.

They are annexed as Appendices E (35a-

38a) and F (39a-62a) respectively.

JURISDICTION

The judgment of the Court of

Appeals was entered on November 25, 1983

and confirmed in that Court's opinion of

December 6, 1983. A timely petition for

rehearing and rehearing en banc was

granted in part and denied in part on

February 14, 1984. This petition for a

writ of certiorari is being filed within

90 days of that date.

This Court's jurisdiction is

invoked under 28 U.S.C. §§ 1254(1) and

2101(c).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

U. S. Constitution Art. 1, Sec. &, Cl.

The Congress shall have Power...

To promote the Progress of

Science and useful Arts, by

securing for limited Times to

Authors and Inventors the

exclusive Right to their

respective Writings and

Discoveries;

U. S. Constitution Amend. I:

Congress shall make no law ...

abridging the freedom of speech,

or of the press ....

U.S.C. § 106:

Subject to sections 107 through

118, the owner of copyright

under this title has the

exclusive rights to do and to

authorize any of the

following:

(1) to reproduce the

copyrighted work in copies or

phonorecords;

(2) to prepare derivative

works based upon the

copyrighted work;

(3) to distribute copies or

phonorecords of the

copyrighted work to the public

by sale or other transfer of

ownership, or by rental,

lease, or lending;

(4) in the case of literary,

musical, dramatic, and

choreographic works,

pantomimes, and motion

pictures and other audiovisual

works, to perform the

copyrighted work publicly;

and

(5) in the case of literary,

musical, dramatic, and

choreographic works,

pantomimes, and pictorial,

graphic, or sculptural works,

including the individual

images of a motion picture of

other audiovisual work, to

display the copyrighted work

publicly.

U.S.C. § 107:

Notwithstanding the provisions of

section 106, the fair use of a

copyrighted work, including such

use by reproduction in copies or

phonorecords or by any other

means specified by that section,

for purposes such as criticism,

comment, news reporting, teaching

(including multiple copies for

classroom use), scholarship, or

research, is not an intringement

of copyright. In determining

whether the use made of a work in

any particular case is a fair use

the factors to be considered

shall include --

(1) the purpose and character

of the use, including wi ether

such use is of a commerc.al

nature or is for nonprofit

educational purposes;

(2) the nature of the

copyrighted work;

(3} the amount and

substantiality of the portion

used in relation to the

copyrighted work as a whole;

and

(4) the effect of the use

upon the potential market for

or value of the copyrighted

work.

STATEMENT OF THE CASE

In the words of the Court of

Appeals this case “presents important

issues with respect to the interplay of

the First Amendment commercial speech

doctrine and the fair use defense to a

claim of copyright infringement." (4a)

Petitioner is Consumers Union of

United States, Inc. ("Consumers Union"),

the publisher of CONSUMER REPORTS

magazine, and the nation's leading

independent consumer research and testing

organization. Petitioner's primary

purpose, through the sale of its

publications and the controlled

disposition of its materials for use in

secondary markets, is to inform, educate

and advise the consuming public

accurately and impartially about a wide

variety of products and services. (5a)

Consumers Union itself creates

the information and advice it offers the

public. Consumers Union's publications

consist almost exclusively of the

findings and judgments of Consumers

Union's testers, researchers and writers

based on petitioner's own laboratory and

controlled use tests of product samples

or services purchased at retail.*

* The efforts which Consumers Union

expends in its editorial and testing

procedures are described in

Yiamouyiannis v. Consumers Union of

United States, inc., , , 940

(2d Cir. 1980), cert. denied, 449 U.S.

839 (1981), and Bose Corp. v. nsumers

- Union of United Rates ae SSE F.

Supp. 1245, -57, = (D. Mass.

1981), rev'd on other grounds, 692 F.2d

189 (1st Cir. 1002), aff'd, 52 U.S.L.W.

4513 (U.S. Apr. 30, 1984).

Consumers Union publishes its

original findings and analyses in its own

magazines and books, in its syndicated

newspaper columns and radio broadcasts,

in its cable television program and in

other forms and other media.

Petitioner's best-known publication is

the monthly magazine CONSUMER REPORTS

which has a circulation of sgproctaately

three million.

Since Consumers Union accepts no

outside advertising in any of its

publications, virtually all of

petitioner's income comes solely from the

sale of its original work, that is,

through subscription and newsstand sales

of CONSUMER REPORTS, through sales of

books and other periodicals and by

extensive derivative use of its material

in other publications and media.

Like many publishers, petitioner

extensively adapts and republishes its

original work, a right it has under the

Essential to Consumers Union's

ability to sell CONSUMER REPORTS and its

derivative products in the highly

competitive marketplace for consumer

information is Consumers Union's

"impressive" (24a) reputation for

impartiality in providing accurate and

objective judgments on the products of

competing manufacturers. This

reputation, as the District Court

noted (41a-42a), rests on petitioner's

insistence since its founding in 1936

that no advertising use can be made of

its reports. (5a)* Thus, in order to

enhance its ability to continue its work

and survive in its competitive market,

* Consumers Union goes to great lengths

to make known to product manufacturers

and to the public generally its

refusal to permit its ratings, findings

and name to be used in advertising. Each

issue of CONSUMER REPORTS since the first

one in 1936 has stated in substance

(Sa):

Consumers Union accepts no

advertising or product

samples and is not beholden

in any way to any commercial

interest. Its Ratings and

product reports are solely

for the use of readers of

CONSUMER REPORTS. Neither

the Ratings nor the reports

may be used in advertising or

for any commercial purpose.

Consumers Union will take all

steps open to it to prevent

such uses of its material,

its name, or the name of

CONSUMER REPORTS.

Consumers Union has steadfastly foregone

the secondary source of revenue which it

might otherwise earn by allowing

advertisers to quote its original words

and expressions or refer to its ratings.

Respondent General Signal Corp.

is the parent of the Regina Company which

manufactures, among other products,

lightweight electric vacuum cleaners

under the tradename "Electrikbroom.."*

The July 1983 issue of CONSUMER

REPORTS reported on Consumers Union's

* The other respondent is the Regina ;

Company's advertising agency, Grey

Advertising Inc., whose Chicago

subsidiary, Grey North, Inc., prepared

the commercials in question. Both

respondents are referred to collectively

aS “Regina."

evaluation of eighteen models of

lightweight vacuum cleaners including

several manufactured by Regina. (The

article is reproduced in full as

Appendix G. (63a-75a)) Although the

article noted several shortcomings of the

"Regina Electrikbroom Power Team," that

brand model was “checkrated" by CONSUMER

REPORTS. *

Three months after the

publication of the July 1983 issue of

CONSUMER REPORTS, and after having

ascertained from petitioner that it

objected to advertising use (45a-46a),

respondents launched a national

* That is, Consumers Union's engineers

determined that the sample tested was of

high overall quality and appreciably

superior to the other models tested at

the same time.

teievision advertising campaign on all

three networks prominently featuring

verbatim quotations from CONSUMER

REPORTS*. One of respondents'

commercials, which respondents themselves

titled "CONSUMER REPORTS," consists

virtually in its entirety of verbatim

quotations taken from the July 1983

CONSUMER REPORTS article (the copied

quotations are underlined) (77a-79a):

And CONSUMER REPORTS states,

"Regina Powerteam -- far

ahead of the pack in cleaning

ability.”

Of all the lightweights

tested "only one worked

well.”

* The full text of the two commercials

challenged by petitioner, as revised by

respondents during the proceedings in the

District Court, is set forth in

Appendix. .H. (77a-79a)

On medium pile carpeting

Powerteam "did the job with

the least effort."

In fact, it's the only one

CONSUMER REPORTS calls an

"adequate substitute for a

ealitsteed vacuum.”

The text of each quotation is not only

read aloud by the announcer, but also

Simultaneously appears on the screen in

print. Each quotation is further framed

on the screen by the following words

(77a-79a):

CONSUMER REPORTS

[text of quotation]

CONSUMER REPORTS is not

affiliated with Regina and

does not endorse Regina

products or any other

products.

Immediately upon learning of

respondents' commercials, Consumers Union

sought and received, on notice, a

temporary restraining order in the

District Court on October 3, 1983

enjoining broadcast of the two offending

commercials. Ten days later, the

District Court entered a preliminary

injunction.* (35a-38a)

Respondents appealed on an

expedited basis. On November 25, 1983,

*-In the District Court and the Court of

Appeals, petitioner charged respondents

with copyright infringement, violation of

Section 43(a) of the Lanham (Trademark)

Act, 15 U.S.C. § 1125(a), and various

state law offenses. Jurisdiction below

was based on 28 U.S.C. §§ 1331, 1332,

1338 and pendent jurisdiction. The

District Court ruled only on petitioner's

injunction. (62a) On appeal, the Court

of Appeals reversed the District Court's

Consumers Union's Lanham Act and state

law claims. (17a-23a) Only the

petition.

the Court of Appeals reversed the

District Court and vacated the

injunction. (la-2a) The court issued

its opinion in support of its judgment on

December 6, 1983.* (3a-24a)

Following the appeals court's

judgment, respondents broadcast the

commercials on nationwide television.

Upon information and belief, they are

still being broadcast.

*® Petitioner timely moved for rehearing.

The: Court of Appeals' decision on

rehearing was issued on February 14,

1984, approximately one month after this

Court's decision in Sony Corp. of America

v. Universal City studios, Sone T04

S.ct. . a ;

REASONS FOR GRANTING THE WRIT

I. The Court of Appeals’

Misapplication of the Commercial

Free Speech Doctrine Severely

Undermines the Constitutional and

Statutory System of Copyright

Protection to the Public's

Detriment.

The Court of Appeais found that

the "interplay of the First Amendment

commercial speech doctrine" (4a) mandated

the application of the fair use defense

to excuse respondents’ copyright

infringement.* Because these vacuum

cleaner commercials appropriated

expressions from CONSUMER REPORTS which

* The questions of copyrightability,

access, copying, lack of consent and

fulfillment of procedural prerequisites

for suit were all undisputed below.

There were similarly no disputes

concerning the material facts underlying

the fair use defense.

were “of significant public interest",

the commercials themselves were, the

court ruled, “protected by the First.

Amendment", citing Virginia State Board

of Pharmacy v. Virginia Citizens Consumer

Council, Inc., 425 U.S. 748 (1976)

(l1a).* Therefore, the Court of

* In Virginia State Board of Pharmacy,

the Court held that a state could not

completely ban the dissemination of -

commercial information about prescription

drug.prices. Neither the facts nor the

issues before the Court in that case

permit that holding to be properly used

as a basis for allowing a product

advertisement to override copyright

protection. Indeed, the Court limited

the scope of its decision in Virginia

State Board of Pharmacy. ultimately

concluding that commercial advertising

was unworthy of full First Amendment

protection. The Court noted that because

of the “commonsense differences” between

commercial speech and other varieties,

even commercial speech subject to First

Amendment protection enjoys a “different

degree of protection" than that normally

accorded under the First Amendment. 425

U.S. at 771-72 n. 24.

Appeals found that petitioner's copyright

must give way in this purported conflict

between commercial free speech and

This holding is inconsistent with

this Court's numerous decisions in the

commercial speech area. It also

conflicts with the views on copyright and

fair use which this Court expressed in

Sony Corp. of America v. Universal City

Studios, Inc., 104 S.Ct. 774 (1984), and

with the decisions of other circuit

courts, including the Second Circuit

itself.

The erroneous ruling below is not

limited to petitioner alone. Its force

applies to all useful non-fiction*

works containing information at least

as weighty in terms of "significant

public interest" as petitioner's

evaluation of a lightweight vacuum

cleaner. The ruling makes the original

expression of all such works fair game

for inclusion in product advertisements.

To hold that the First Amendment

permits product manufacturers selling

their wares to use copyrighted material

without permission under these

circumstances threatens to vitiate

and important works previously held to be

* In just a single year, 1982, more than

25,000 non-fiction works were published

in the United States. The Bowker Annual

of ess ae Book Trade Information,

- (

th ed. 1963).

protected. To nullify the copyright for

those works which most directly serve the

public's needs -- indeed, to do so

because they serve the public interest --

and to allow them to be exploited

commercially solely for the private gain

of an advertiser is antithetical to the

purposes of the copyright statute. This

holding will surely discourage the

authorship of important information while

providing no benefits to freedom of

expression. The ruling below disserves

the public interest.

The respondents' commercials

simply urge viewers to buy a Regina

vacuum cleaner and little more. In none

of its decisions concerning governmental

prohibition or regulation of advertising

has this Court ever remotely suggested

that the values inherent in such purely

profit-motivated speech deserve

constitutional protection of a magnitude

sufficient to justify infringement of

statutory copyright. Rather, the Court

has consistently ruled that commercial

speech receives only narrow

constitutional protection. As Justice

Powell wrote in Ohralik v. Ohio State Bar

Association, 436 U.S. 447, 456 (1978)

(emphasis supplied):

To require a parity of

constitutional protection for

commercial and noncommercial

speech alike could invite

dilution, simply by a

leveling process, cf the

force of the Amendment's

guarantees with respect to

the latter kind of speech.

Rather than subject the First

Amendment to such

devitalization, we instead

have afforded commercial

speech a limited measure of

rotection, commensurate with

is Subordinate position in

the scale of First Amendment

values, while allowing modes

of regulation that might be

impermissible in the realm of

noncommercial expression.

See also, Metromedia, Inc. v. San Diego,

453 U.S 490, 505-07 (1981); Central

Hudson Gas & Electric Corp. v. Public

Service Comm'n, 447 U.S. 557, 562-63

(1980); Friedman v. Rogers, 440 U.S. 1,

10 (1979).

Given the limited application of

the First Amendment to product

advertising, it is not surpéising that in

the copyright context this Court has held

that -"“every commercial use of copyrighted

material is presumptively an unfair

exploitation of the monopoly privilege

that belongs to the owner of the

Universal City Studios, Inc., supra, 104

S.Ct. at 793 (emphasis supplied). Since

virtually every commercial use of

copyrighted material involves a speech or

press component, the Sony holding is a

plain recognition that the commercial

speech doctrine cannot be misapplied, as

here, to render fair an otherwise

presumptively unfair use.

In addition to its clear conflict

with Sony, (see pp. 32-48, infra), the

decision below is contrary to the

congressional intent as expressed in the

scholarship. Section 107 cites

"criticism, comment, news reporting,

teaching ..., scholarship, ee

---" as examples of fair use. A

television commercial for a vacuum

cleaner can hardly be said to fit within

any of these categories. As Professor

Nimmer has written, “advertising use is a

particular form of commercial use which

is least likely to justify a fair use

defense." 3 Nimmer on Copyright

§ 13.05[A] at 13-60 n. 24 (1983).

The decision of the Court of

Appeals also departs from and conflicts

with prior holdings of the Second Circuit

and other circuits. In SEC v. Lowe, 10

Media L. Rep. (BNA) 1225, 1231 (2d Cir.

1984), the Second Circuit acknowledged

that advertising is entitled to lesser

constitutional protection. And the

panel's holding is directly contrary to

the opinion written by Judge Kaufman in

Iowa State University Research Founda-

tion, Inc. v. American Broadcasting Com-

panies, Inc., 621 F.2d 57 (2d Cir. 1980),

rejecting a fair use defense in a case

involving the televised biography of an

Olympic champion. There, the Second Cir-

cuit held that “(t]he fair use doctrine

is not a license for corporate theft,

empowering a court to ignore a copyright

whenever it determines the underlying

work contains material of possible public

importance". 621 F.2d at 61.

To the same effect, see Roy

Export Co. Estab. of Vaduz v. Columbia

Broadcasting S¥stem, Inc., 672 F.2d 1095,

1100 (2d Cir.), cert. denied, 103 S.Ct.

60 (1982) ("CBS's effort to secure a

First Amendment news-reporting exception

to the copyright laws cannot succeed.");

H.C. Wainwright & Co. v. Wall Street

Transcript Corp., 418 F. Supp. 620, 624

(S.D.N.Y. 1976), aff'd sub nom.

Wainwright Securities, Inc. v. Wall

Street Transcript Corp., 558 F.zd 91 (2d

Cir. 1977), cert. denied, 434 U.S. 1014

(1978); Dallas Ccwboy Cheerleaders v.

Scoreboard Posters, 600 F.2d 1184, 1187

(Sth Cir. 1979) ("The First Amendment is

not a license to trammel on legally

recognized rights in intellectual

property."); Walt Disney Productions v.

Air Pirates, 581 F.2d 751 (9th Cir. 1978).

The Court of Appeals’ decision

is, to petitioner's knowledge, the only

time a court has upheld a fair use

defense, under the First Amendment or

otherwise, to permit verbatim copying in

a purely commercial, non-comparative

advertisement. Indeed, the Court of

Appeals itself, prior to tinis decision,

and many other courts, have uniformly

rejected such a result. See, e.g.,

Rosemont Enterprises, Inc. v. Random

House, Inc., 336 F.2d 303, 309 (2d Cir.

1960), cert. denied, 385 U.S. 1009

(1967); Amana Refrigeration, Inc. v.

Consumers Union of United States, Inc.,

431 F. Supp. 324, 326 (N.D. Iowa 1977)

("The excerpt, however, is more than mere

statement of fact. It contains

[Consumers Union's] original analysis and

conclusions and is copyrightable and use

by others for economic gain may properly

be enjoined."); Dawn Associates v. Links,

203 U.S.P.Q. 831, 835 (N.D. Ill. 1978);

Conde Nast Publications, Inc. v. Vogue

School of Fashion Modeling, Inc., 105

F. Supp. 325, 337 (S.D.N.Y. 1952); Henry

Holt and Co. v. Liggett & Myers Tobacco

Co., 23 F. Supp. 302, 304 (E.D.

Pa. 1938).

The "significant public interest”

which the Court of Appeals found in

respondents’ advertising use of

petitioner's copyrighted work extends

only to that segment of the public

considering the purchase of a lightweight

vacuum cleaner. To link, as the Court of

Appeals did (13a), the societal

importance of a vacuum cleaner evaluation

with that of a former President's memoirs

of a time of national crisis, Harper &

Row Publishers, Inc. v. Nation

Enterprises, 723 F.2d 195 (2d Cir. 1983),

petition for cert. filed, 52 U.S.L.W.

3777 (U.S. Apr. 3, 1984) (No. 83-1632),

demonstrates the overbreadth of the

court's interpretation and its potential

to destroy copyright protection for non-

fiction works.

As Judge Oakes stated in his

dissent to the Court of Appeals' denial

of the petition for rehearing en banc

(34a) (emphasis in original):

[T)he use of “commercial free

speech" to justify a fair use

defense to copyright

infringement stands either

the copyright law or the

First Amendment on its head.

A use for commercial

purposes, the opinion

suggests, is more entitled to

the fair use defense than a

use that is not. At the very

least the panel opinion reads

the presumption against the-

fairness of commercial use

out of the statute. Doing so

in the name of the First

Amendment, I fear, cheapens

that Amendment's coin.

Nothing in the commercial free

speech doctrine requires or even permits

the evisceration of copyright protection

for the purpose of granting product

manufacturers a free license to exploit

protected works in their advertisements.

It is difficult to imagine a judicial

decision which would be a greater

disincentive to serious authorship or

which would be more stifling to the

creation of works in the public interest.

II. The Court of Appeals’

Decision Is In Plain Conflict

With Sony Corp. v. Universal

City Studios.

Besides misapplying the

commercial speech doctrine, the Court of

Appeals fundamentally misapprehended the

fair use doctrine as set forth in Sony

Corp. of America v. Universal City

Studios, Inc., 104 S.Ct. 774 (1984). If

the opinion below is permitted to stand,

fair use will mean something entirely

different in the Second Circuit -- the

publishing and advertising capital of

this nation -- than it does in the rest

of the country.

Sony draws a sharp distinction

between copying for esmmeneial gain" or

for a "noncommercial purpose," expressly

disfavoring the former. The Sony

majority held that "every commercial use

of copyrighted material is presumptively

an unfair exploitation of the monopoly

privilege that belongs to the owner of

the copyright." 104 S.Ct. at 793. As

Justice Stevens' opinion further noted,

"([c]lopying for commercial gain has a much

weaker claim to fair use than copying for

personal enrichment." Id. at 795, n. 40.

Consistent with this statutory

and judicial presumption, the Sony Court

held that even potential harm to the

value of the copyright is presumed in

commercial use cases. Id.

Despite this Court's clear

language, the Court of Appeals held

exactly the opposite. It recognized that

"Regina's use undoubtedly is commercial."

(11a) But rather than disfavoring such

use and considering it presumptively

unfair, the Court of Appeals encouraged

such copying. It held that expropriation

of such protected works by advertisers is

to be judicially fostered because it

"serve[s] the important function of

educating the public." (11a)

The Court of Appeals also

violated the Sony holding concerning

proof of harm. The appeals court held

that Consumers Union had not demonstrated

actual harm because it did not establish,

by “convincing evidence of a significant

deleterious effect" that "Regina's use

usurps demand for the July 1983 CONSUMER

REPORTS issue." (16a) This extraordin-

arily high burden of proof conflicts not

only with Sony's presumption of harm from

commercial use, but also with both the

Court's and the dissent's analysis in

Sony concerning harm arising from non-

commercial or unproductive uses.

As this Court held in Sony, even

when opposing a non-commercial use which

is not presumptively unfair, the copy-

right owner need not prove “actual harm"

Or prove “potential harm" with anything

more than a preponderance of the evidence

(104 S.Ct. at 793) (emphasis supplied):

Actual present harm need not

be shown; such a requirement

would leave the copyright

holder with no defense

against predictable damage.

Nor is it necessary to show

with certainty that future

harm will result. What is

necessary is a showing by a

preponderance of the evidence

that so’.< meaningful

Tikelihood of future harm

exists.*

If the infringing use, like that of

respondents, is purely commercial, the

burden of proof is much less (Id.):

If the intended use is for

commercial gain, that

likelihood may be presumed.

* The dissenting opinion agreed (104

S.Ct. at 809):

Infringement thus would be

found if the copyright owner

demonstrates a reasonable

possibility that harm will

result from the proposed use.

Ignoring these rulings, the Court

of Appeals set a precedent that will

reach far beyond the confines of this

case. By requiring the copyright owner

to prove actual usurpation of demand

(14a-16a) for the particular issue of the

magazine copied and - prove such harm by

"convincing evidence of a significant

deleterious effect" (16a), the Court of

Appeals violated Sony's holdings and set

standards which are well-nigh impossible

for any publisher to meet.*

* The Court Of Appeals' decision

effectively reduces the term of

petitioner's copyright from the 75 year

period granted by 17 U.S.C. § 302(c) to

thirty days -- the approximate length of

time that an issue of CONSUMER REPORTS is

on sale on newsstands. It also cuts back

the statute of limitations from three

years, 17 U.S.C. § 507(b), to thirty

days. Applied to other periodicals, the

opinion reduces the copyright period and

(footnote continued on next page)

Moreover, in its improper

restrictive inquiry, the Court of Appeals

overlooked the potential harm to

petitioner's market for derivative uses

of its copyrighted works.* The

(footnote continued from preceding page)

statute of limitations of all monthly

magazines to thirty days, of all weeklies

to seven days, and of all daily

newspapers to one day!

* Consumers Union, like many publishers,

in fact makes extensive use and re-use of

its material. For example, petitioner's

evaluation of vacuum cleaners appeared in

two issues Of CONSUMER REPORTS in 1983

and was later included in the 1984 Buying

Guide issue, which was published after

the appeal was submitted below.

Consumers Union also included the

material in its syndicated newspaper

columns which are purchased by 300-400

newspapers and its syndicated radio

broadcasts. In addition, Consumers Union

produces a cable television program

containing product reports, sells brief

summaries of its findings for use in

electronic media, and is seeking to add

other revenue producing derivative uses

of its original works.

owner broad, exclusive control over deri-

vative uses of its copyrighted material.

17 U.S.C. § 106(2). Consideration of

harm to potential derivative uses thus is

essential in any fair use analysis. As

this Court noted in Sony, "[s]ome copy-

rights govern material with broad poten-

tial secondary markets. Such material

may well have a broader claim to protec-

tion because of the greater potential for

commercial harm." 104 S.Ct. at 795 n.

40. Although the petitioner, like many

other publishers, relies upon derivative

uses to generate needed income to conduct

its operations, the Court of Appeals

failed to consider the threat to such

uses posed by the respondents'

infringement.

It is also clear, as the Sony

majority noted, that in assessing harm a

court must look not only to the particu-

lar copying in question but also to the

potential adverse effect if the copying

"should become widespread." Id. at 793.*

And Justice Blackmun referred to the

Senate Report on the copyright revision

act which stated that (id. at 809):

* See also 3 Nimmer on al

[I]t is a mistake to view

this factor [17 U.S.C.

§ 107(4)], as do some courts,

as merely raising the ques-

tion of the extent of damages

to plaintiff caused by the

particular activities of the

defendant. This factor poses

the issue of whether unre-

stricted and widespread con-

duct of the sort engaged in

by the defendant {whether in

fact engaged in by the defen-

dant or by others) would

result in a substantially

adverse impact on the poten-

tial market for or value of

plaintiff's work.

"[i]solated instances of

minor infringements, when

multiplied many times,

become in the aggregate a

major inroad on copyright

that must be prevented." 1975

Senate Report 65.

Nonetheless, the Court of Appeals

failed to take into account the obviously

injurious impact upon petitioner's

ability to market its protected writings

if other advertisers were to take

advantage of the free license granted by

the court. Judge Oakes, in dissenting

from the denial of rehearing en banc,

pointed out the considerable harm

widespread copying would have (34a):

But this defendant's use

of Consumers Unicn's work is

not for purposes of

criticizing Consumers Union,

but for purposes of

exploiting Consumers Union's

favorable critique of its

product. Thus, the potential

vacuum cleaner buyer, seeing

Regina's commercial, and

believing that it does not

misstate Consumer Reports,

need not buy the magazine to

find out which vacuum cleaner

tested best. Consumer

Reports’ market among vacuum

cleaner buyers is clearly

injured. If even a few

manufacturers, twenty, for

example, do what Regina is

allowed to do, a large

portion of Consumer Reports'

whole market may disappear.

In further disregard of Sony's

holdings and contrary to the clear intent

of the copyright statute, the Court of

Appeals rejected the concept accepted by

all the members of this Court in Sony

that "[iJt is not the role of the courts

to tell copyright holders the best way

for them to exploit their copyrights."

104 S.Ct. at 791 n. 28. “Copyright gives

the author a right to limit or even.

to cut off access to his work." Id. at

808 (dissenting opinion).

The Court of Appeals did exactly

what this Court said it should not do;

it substituted its judgment for Consumers

Union's concerning the proper extent and

means of exploiting the potential market

for Consumers Union's original works.*

* Consumers Union has decided not to

permit advertisers to use its words and

expressions because such use, in its

view, will diminish the "impressive

reputation for independence from industry

{which has been] critical to the success

of CONSUMER REPORTS" (24a, 41a-42a), and

therefore will be harmful to

petitioner's long term financial

viability. (60a) In Judge Oakes' words

(32a-33a) (footnote omitted):

True, Consumers Union does

not sell its product

endorsements as, I gather,

(footnote continued on next page)

In the name of increased public

access, the Court of Appeals granted a

free license to all advertisers to quote

from CONSUMER REPORTS (or any other

copyrighted work containing “useful

(footnote continued from preceding page)

"Good-Housekeeping" sold its

"seal of approval." But

Consumers Union potentially

could do so, perhaps at

considerable profit; the

panel's opinion gives all

product manufacturers a

license, however, to use

Consumer Reports' findings --

pro or con -- for nothing.

Equally, if not more

important is the fact that

Consumers Union does not

utilize this potential market

in the interests of its own

reputation for objectivity

and honesty. Evidently it

believes that this reputation

is worth more -- of greater

"value," in the words of the

statute -- in the long run

than the potential sales of

endorsements are in the short

run. It is that value which

(footnote continued on next page)

information"), while simultaneously

depriving Consumers Union of the benefits

of its copyright. As Justice Blackmun

noted in Sony, "such an extension risks

eroding the very basis of copyright law,

by depriving authors of control over

their works and consequently of their

incentive to create.” 104 S.Ct. at 809

(footnote omitted). The decision of the

Court of Appeals, which violates

virtually every aspect of this Court's

(tootnote continued from preceding page)

the panel's opinion

depreciates and which makes

defendants’ use so unfair.

Indeed, the Court of Appeals went so far

as to suggest that advertisers use

petitioner's copyrighted expressions in

other ways ("periodic advertising in

connection with store displays") in order

to disseminate Consumers Union's findings

to "a wider audience." (11a-12a, n. 4)

analysis in Sony of the fair use

exemption, should not be permitted to

stand.

CONCLUSION

The effect of the Court of

Appeals opinion, in sum, is to turn the

concept of fair use on its head. The

purpose of the fair use exception is to

prevent copyright protection from

stifling creativity and inhibiting

intellectual freedom by permitting

limited copying for "purposes such as

criticism, comment, news reporting,

teaching..., scholarship or research."

17 U.S.C. § 107.

The Court of Appeals' opinion,

however, catapults purely commercial

advertib ide to the top of a list on which

it never previously appeared. Suddenly,

the verbatim copying of a copyrighted,

non-fiction work for the sole purpose of

selling one model of vacuum cleaners has

become "the conveyance to consumers of

useful information which is protected by

the First Amendment” (11a) and exempt

from this Court's holding in Sony that

commercial use is presumptively unfair.

This dramatic rewriting of the law is as

harmful to the public interest as it is

unprecedented.

Accordingly, petitioner

respectfully requests that this Court

issue a writ of certiorari to review and

reverse the fundamental error of the

Court of Appeals.

Dated:

New York, New York

May 14, 1984

Respectfully submitted,

MICHAEL N. POLLET,

Counsel of Record

MARSHALL BEIL

CAROL A. SCHRAGER

KARPATKIN POLLET PERLMUTTER

& BEIL

708 Third Avenue

New York, New York 10017

Attorneys for the Petitioner

Consumers Union of United

States, Inc.

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

At a stated Term of the United

- States Court of Appeals for the Second

Circuit, held at the United States

Courthouse in the City of New York, on

the twenty-fifth day of November. one

thousand nine hundred and eighty-three.

Present: HONORABLE WILLIAM H. TIMBERS,

HONORABLE JON O. NEWMAN,

HONORABLE RICHARD J. CARDAMONE,

Circuit Judges.

CONSUMERS UNION OF UNITED STATES, INC.

Plaintiff-Appellee,

GENERAL SIGNAL CORPORATION and

GREY ADVERTISING, INC.,

Defendants-Appellants.

7 x

Appeal from the United States

District Court for the Southern District

of New York.

This cause came on to be heard on

the transcript of record from the United

States District Court for the Southern

District of New York, and was argued by

counsel.

ON CONSIDERATION WHEREOF, it is

now hereby ordered, adjudged, and decreed

that the order of said District Court be

and it hereby is REVERSED and the

preliminary injunction is VACATED.

Opinion will follow. Mandate shall issue

forthwith.

[signatures omitted]

APPENDIX B

[CORRECTED COPY]

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

—

Nos. 522, 541—August Term, 1983

(Argued November 3, 1983 Decided December 6, 1983)

Docket No. 83-7855

CONSUMERS UNION OF UNITED STATES, INC.,

Plaintiff-A ppellee,

—_—Vi—

GENERAL SIGNAL Corp and GREY ADVERTISING, INC.,

| Defendants-Appellants.

—

Before:

TIMBERS, NEWMAN and CARDAMONE,

Circuit Judges.

—

Appeal from a preliminary injunction entered in the

Southern District of New York, Henry F. Werker, District

Judge, enjoining the broadcast of commercial advertising

quoting a CONSUMER REPORTS article on lightweight

vacuum cleaners.

Reversed and vacated.

BrucE D. SOKLER, Washington, D.C.

(Charies D. Ferris, Cameron F. Kerry,

and Mintz, Levin, Cohn, Ferris, Glovsky

& Popeo, Washington, D.C.; Jules P.

Kirsch, and Cooper, Dunham, Clark,

Griffin & Moran, New York, N.Y.; Jo-

seph M. Burke, and Davis & Gilbert,

New York, N.Y., on the brief), for

defendants-appellants.

MICHAEL N. POLLET, New York, N.Y.

(Marshall Beil, Carol A. Schrager, and

Karpatkin Pollet Perlmutter & Beil, New

York, N.Y., on the brief), for plaintiff-

appellee.

TIMBERS, Circuit Judge:

Appellants General Signal Corporation and Grey Ad-

vertising, Incorporated, appeal from a preliminary in-

junction, entered on October 13, 1983 in the Southern

District of New York, Henry F. Werker, District Judge,

enjoining their broadcast of two television commercials

for Regina lightweight vacuum cleaners which quoted

from an issue of CONSUMER REPORTS published by appel-

lee Consumers Union of United States, Inc. (Consumers

Union or CU). The appeal presents important issues with

respect to the interplay of the First Amendment commer-

cial speech doctrine and the fair use defense to a claim of

state law also are involved.

After a full review, we hold that a preliminary injunc-

tion should not have issued. Since we find that Con-

sumers Union has established neither a probability of

success on the merits of its copyright, trademark, or state

privacy law infringement claims, nor a balance of hard-

ships tipping decidedly in its favor, we vacate the injunc-

tion.

CU publishes a monthly magazine, known as CONn-

SUMER REPORTS, which summarizes its independent evalu-

ations of various consumer products. CONSUMER REPORTS

prints the following notice in each copy:

“Consumers Union accepts no advertising or product

samples and is not beholden in any way to any

commercial interest. Its Ratings and product reports

are solely for the use of readers of CONSUMER RE-

PORTS. Neither the Ratings nor the reports may be

used in advertising or for any commercial purpose.

CU will take all steps open to it to prevent such uses _

of its material, its name, or the name of CONSUMER

REPORTS.”

In its July 1983 issue, CONSUMER REPORTS evaluated

lightweight vacuum cleaners. The Regina Powerteam was

“check-rated” and effusively praised in the article.

Models are check-rated when CU judges the product

tested to be of high overall quality, low price, and appre-

ciable superiority to the non-check-rated models ex-

amined. CONSUMER REPORTS’ comments regarding this

product included:

| In view of the urgency of the matter, on November 25, 1983 we

entered an order reversing the order of the district court, vacating the

preliminary injunction, directing that the mandate issue forthwith, and

stating that an opinion would follow. This is that opinion.

—“Regina Power Team—far ahead of the pack in

cleaning ability.”

—“[O]nly one model, the check-rated Regina Power

Team, was an adequate substitute for a full-sized

vacuum.”

—“Only the Regina Power Team vacuumed the floor

thoroughly.”

—“The Regina Power Team also stood out in our

carpet-cleaning test. It alone left the carpet pre-

sentable after only one sweep, pristine after two

sweeps.”

In addition to publication of this information in its

magazine, CU distributed news reports summarizing its

test results to between 300 and 400 newspapers, and

broadcast it in a “Report to Consumers” over the CBS

radio network.

The Regina Powerteam lightweight vacuum cleaner is

marketed by the Regina Company (Regina), a division of

appellant General Signal Corporation’s wholly-owned

subsidiary, the General Signal Appliance Corporation. As

part of its marketing strategy, Regina and its outside

advertising agency, Gray-North, Inc., a division of appel-

lant Grey Advertising, Inc., prepared three half-minute

commercial messages for broadcast on television. The

first does not mention CONSUMER REPORTS and is not —

challenged in this litigation.

The second message, entitled “Squid”, emphasizes the

lightweight convenience of the Regina Powerteam com-

pared to full size vacuums. During one of the many

different visual portions of the message, the voice-over

announcer states that the Regina Powerteam “is the only

lightweight that Consumer Reports says, Quote, was an

SOT APS aR eh apis Hae REE ry 04 rerL yen Pty oe

adequate substitute for a full-sized vacuum.” The state-

ment “Consumer Reports is not affiliated with Regina

and does not endorse products” is superimposed on the

screen the entire time the CONSUMER REPORTS quotation

is mentioned. “Squid” was broadcast on ABC, CBS, and

NBC, starting September 27, 1983.

The third message, entitled “Consumer Reports”, in-

cludes several quotations from CONSUMER REPORTS visu-

ally displayed on the screen as they are read by the

announcer.’ As with “Squid”, each time material from

CONSUMER REPORTS is mentioned, there appears the state-

ment that it is not affiliated with Regina and does not

endorse products. This disclaimer appears on the screen

for a total of 14 seconds out of the 29.5 second duration

of the commercial. The print size used for the disclaimer

is comparable with normal television advertising practice

for required disclosures and remains on the screen for a

longer period of time than is normal for such disclosures.

This commercial was never actually broadcast.

Regina notified CU that it planned to broadcast these

commercials. It offered to provide copies to CU and to

meet to discuss the matter. On the morning of September

30, 1983, Regina received a mailgram from CU demand-

ing that Regina cease and desist from airing its commer-

cials and established a deadline of 3:00 PM. that day.

Counsel for Regina responded but was told that CU

already had commenced the instant action. CU’s com-

a The commercials include the following lines with quoted excerpts

from the Consumer Reports article:

—“Regina Powerteam—far ahead of the pack in cleaning ability.”

—Of all the lightweights tested “only one worked weil.”

—On medium pile carpeting Powerteam “did the job with the least

effort.”

—In fact, it’s the only one Consumer Reports calls an “adequate

substitute for a full-sized vacuum.”

plaint alleged violations of the Copyright Act, 17 U.S.C.

§ 101 et seq. (1982); of the Lanham Act, 15 U.S.C.

§§ 1114(1) and 1125(a) (1982); of state law, N.Y. Gen.

Bus. Law §§ 349, 350, 350-a, 350-d, 368-d, 397 (McKin-

ney 1968 & Supp. 1982); and of common law.’ CU

demanded temporary and permanent injunctive relief,

compensatory damages of not less than $5 million, and

punitive damages of not less than $5 million.

On October 3, 1983, CU applied for a temporary

restraining order. In its papers in support of this applica-

tion, CU alleged that specific defects in the commercials

had a misleading effect. The court granted the T.R.O.

over Regina’s objections.

Upon receiving CU’s motion papers, Regina changed

the commercials’ disclaimer to state “Consumer Reports

is not affiliated with Regina and does not endorse Regina

products or any other products”. This was to allay CU’s

concern that the initial wording of the disclaimer might

convey the impression that, while CU generally did not

endorse products, it had made an exception in Regina’s

case. Responding to CU’s complaint, Regina also revised

the voice-over of the “Squid” commercial to insert the

word “unquote” at the end of the quotation attributed to

CU, and changed the last visual of that message to

eliminate pictures of Regina models other than the Pow-

erteam.

On October 7, a hearing was held on the motion for a

preliminary injunction. The court heard approximately

one-half hour of argument. No testimony was taken. On

October 14, the court entered a preliminary injunction

enjoining the use of both Regina messages and other

3 Only the Copyright Act, § 43(a) of the Lanham Act. and §§ 349, 350

and 397 of the New York General Business Law were pressed by CU in

the district court.

RI Base Ry Hohn

advertising which copied from CONSUMER REPORTS. in its

opinion, the court reached only the copyright issues. It

did not address the Lanham Act or state law claims. It

summarily denied appellants’ First Amendment defense

and rejected the fair use defense after weighing the four

statutory factors referred to below. The court held that a

detailed showing of irreparable injury was unnecessary

once the elements of copyright infringement had been

established. This expedited appeal followed.

Appellants argue, first, that the commercials are a fair

use of copyrighted material and that many of the refer-

ences to CONSUMER REPORTS are facts not protected by

law provides a basis for enjoining a truthful and accurate

report of CU’s article; and, third, that Regina will sustain

irreparable injury if the injunction remains in effect, that

CU has proven no irreparable injury, and that the public

interest is adversely affected by the injunction. We shall

consider each of these arguments seriatim.

II.

Since the district court reached its decision solely on the

pleadings, briefs, affidavits, and counsels’ arguments—

without taking testimony—we have undertaken a full

review to determine whether injunctive relief is appropri-

ate. Jack Kahn Music Co. v. Baldwin Piano & Organ

Co., 604 F.2d 755, 758 (2 Cir. 1979).

A preliminary injunction will issue only where the

moving party “establishes possible irreparable injury and

either (1) probable success on the merits or (2) suffi-

ciently serious questions going to the merits to make them

a fair ground for litigation and a balance of hardships

tipping decidedly in the movant’s favor.” Dallas Cowbovs

10a

Cheerleaders, Inc. v. Pussy 2! Cinema, Lid., 604 F.2d

200, 206-07 (2 Cir. 1979).

We shall consider first CU’s claimed likelihood of

success on the merits.

CU’s copyright on the July 1983 issue of CONSUMER

REPORTS has not been challenged. Some copying of copy-

righted material, however, without the owner’s consent is

permitted. The fair use doctrine “balances the public

interest in the free flow of ideas with the copyright

holder’s interest in the exclusive use of his work.” Warner

Bros., Inc. v. American Broadcasting Companies, Inc.,

F.2d ; (2 Cir. 1983), slip op. 6862, 6882

(Oct. 6, 1983). Fair use is a codification of the decisional

law in an effort to prevent rigid application of the

ably prevent the dissemination of information. |

The Copyright Act states the fair use doctrine as

follows:

“(T]he fair use of a copyrighted work, including such

use by reproduction in copies. . . for purposes such

as criticism, comment, news reporting, teaching

. , scholarship, or research, is not an infringe-

ment of copyright. In determining whether the use

made of a work in any particular case is a fair use the

factors to be considered shall include—

(1) the purpose and character of the use,

including whether such use is of a commercial

nature or is for non profit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the por-

tion used in relation to the copyrighted work as

a whole; and

lla

(4) the effect of the use upon the potential

market for or value of the copyrighted work.”

17 U.S.C. § 107 (1982). Each of these factors contributes

to the factual determination of what constitutes fair use.

We shall consider each in turn.

(1)

' The first factor focuses on the purpose and character of

the use. Aithough the purpose of Regina’s use undoubt-

edly is commercial, this fact alone does not defeat a fair

use defense. Triangle Publications, Inc. v. Knight-Ridder

Newspapers, Inc., 626 F.2d 1171, 1175 (5 Cir. 1980).

Almost all newspapers, books and magazines are

published by commercial enterprises that seek a profit.

Rosemont Enterprises, Inc. v. Random House, Inc., 366

F.2d 303, 307 (2 Cir. 1966), cert. denied, 385 U.S. 1009

(1967).

The distinction between “commercial nature” and “non

profit educational purposes” is merely illustrative of what

is included in assessing the core of the criterion, which is

the purpose and character of the use. Regardless of

motive, the “character” of Regina’s ads includes the

conveyance to consumers of useful information which is

protected by the First Amendment. As the Supreme .

Court recognized in Virginia State Board of Pharmacy v.

Virginia Citizens Consumer Council, Inc., 425 U.S. 748

(1976), commercial uses also serve the important function

of educating the public. The information about light-

weight vacuums in CONSUMER REPORTs is of significant

public interest. Broadcast of Regina’s ads will increase

significantly the number of people exposed to CU’s evalu-

ation.‘

4 In addition to reaching a wider audience through television, repeti-

tion of CU’s findings serves an information function. People tend to

12a

Some infringement actions involve the copying of crea-

tive expression of a copyrighted work for the purpose of

having that precise form of expression advance someone

else’s commercial interests—for example, using well-

known copyrighted lines to attract attention to an adver-

tisement. D.C. Comics, Inc. v. Crazy Eddie, Inc., 205

U.S.P.Q. 1177 (S.D.N.Y. 1979), cited with approval in

Warner Bros., supra, at slip op. 6882. In some circum-

stances copying of that sort may not constitute fair use.

On the other hand, in some circumstances an advertiser

may copy some excerpts from a copyrighted work for the

purpose of having the content of the work advance his

commercial interests. Since the purpose is to report fac-

tual information, as in the imstant case, it is more condu-

cive to the concept of fair use.

(2)

The second factor to be considered is the nature of the

copyrighted work. CONSUMER REPORTS is primarily infor-

mational rather than creative. Since the risk of restraining

the free flow of information is more significant with

informational work, the scope of permissible fair use is

greater. Rosemont Enterprises, Inc. v. Random House,

Inc., supra, 366 F.2d at 307; 3 Nimmer on Copyright

§ 13.05[A][2] at 13-61 (1982).

Facts cannot be copyrighted. 17 U.S.C. § 102(b). CU

cannot prevent Regina from accurately reporting facts

about the results of CU’s independent testing, irrespective

of Regina’s motive in doing so. Regina wants to com-

municate CONSUMER REPORTS’ favorable rating of its

product. Regina uses CU’s words in the interest of ac-

forget information presented in books and newspapers when ii comes

time to buy the item. Periodic advertising in connection with store

displays presents the information in a form which aids retention.

13a

curacy, not piracy. Where an evaluation or description is

being made, copying the exact words may be the only

valid way precisely to report the evaluation. Morrissey v.

Procter & Gai.zble Co. , 379 F.2d 675, 678-79 (1 Cir. 1967).

In Harper & Row, Publishers, Inc. v. Nation En-

terprises, 12.3 F.2d11S (2 Cir. 1983), stip-op-+69-(Ne-.

+7-4+983), we recently approved a fair use defense in a

case involving President Ford’s memoirs. Some of the

article describing the Ford memoirs was paraphrased;

other parts were taken verbatim from a pre-publication

copy of the book obtained by Nation magazine. We held

that the paraphrasing was not subject to Harper & Row’s

a matter of great public importance. We also permitted

use of actual quotations. Implicit in that decision is an

ackuowledgement that, where accurate reporting requires

use of verba.im quotations, fair use will be liberally

applied. The scope of the doctrine is undoubtedly wider

when the information conveyed relates to matters of high

public concern. But the doctrine has some application to

communicating information pertinent to consumer

choices.°

In truth, CU is not really objecting to Regina’s copying

CU’s expression. The statement of policy in its magazine

and its position in its brief before us is that any mention

of CU in commercial advertising will diminish its effec-

tiveness as an unbiased evaluator of products.°

5 Indeed, CU, recognizing the public interest in the flow of its

information, has successfully invoked First Amendment protections to

avoid its own liability for allegedly false product disparagement. See

Bose Corp. v. Consumers Union of United States, Inc., 692 F.2d 189 (1

Cir. 1982), cert. granted, $1 U.S.L.W. 3774 (Apr. 25, 1983).

6 We think CU’s fear that consumers will assume that Regina pur

chased a CU endorsement is exaggerated, see Consumers Union of

United States, Inc. v. Hobart Manufacturing Co., 189 F. Supp. 275,

14a

(3)

The third factor to consider is the amount and substan-

tiality of the portion used in relation to the copyrighted

work as a whole. “Squid” uses one phrase; “Consumer

Reports” borrows 29 words. In relation to the CONSUMER

REPORTS magazine article (2100 words), both commer-

cials make relatively insubstantial use of CU’s work.

(4)

The fourth factor to consider in evaluating fair use is

“the effect of the use upon the potential market for or

value of the copyrighted work.” 17 U.S.C. § 107(4). This

factor is “widely accepted to be the most important.”

Triangle Publications v. Knight-Ridder Newspapers, su-

pra, 626 F.2d at 1177.

The district court accepted CU’s argument and stated

that “Regina’s commercial use of the article could be the

demise of Consumers Union since such commercial use

could lead the public to view Consumers Union as [an]

unfair tester of products.” Consumers Union of United

States, Inc. v. General Signal Corp., 83 Civ. 7209

(S.D.N.Y. Oct. 12, 1983) at 11. We believe that this

conclusion is based on a faulty premise. The Copyright

Act was not designed to prevent such indirect negative

effects of copying. The fourth factor is aimed at the

278-79 (S.D.N.Y. 1960), and at least unsupported by the present

record. Regina would not want to quote CU if that were an accurate

depiction of public reaction. Regina benefits from public perception of

CU as an unbiased evaluator.

Instead, Regina in effect is saying that it believes that the viewing

public places great stock in what Consumer Reports has to say. In this

way, the use of such statements and the credit given to Consumer

Reports actually may reinforce a positive public perception of the

magazine.

15a

copier who attempts to usurp the demand for the original

work. Wainwright Securities Inc. v. Wall Street Transcript

Corp., 558 F.2d 91, 96 (2 Cir. 1977), cert. denied, 434

U.S. 1014 (1978); Rubin v. Boston Magazine Co., 645

F.2d 80, 84 (1 Cir. 1981); Quinto v. Legal Times of

Washington, Inc., 506 F. Supp. 554, 560 (D.D.C. 1981).

The copyright laws are intended to prevent copiers from

taking the owner’s intellectual property, Zacchini v.

Scripps-Howard Broadcasting Co., 433 U.S. 562 (1977),

and are not aimed at recompensing damages which may

flow indirectly from copying.

Our approach in literary criticism cases illustrates this

distinction. A reviewer excerpts parts of a story and then

severely criticizes it. The fourth fair use factor will come

into play if too much is copied or if the entire plot is

revealed, thereby usurping the demand for the original

work. A court would not find it relevant in deciding the

fair use question, however, that evidence might show that

the devastating critique had diminished sales by convinc-

ing the public that the original work was of poor quality.

Both instances of copying result in decreased sales and

popularity of the original work, but only the former lies

within the scope of copyright protection.’ Dow Jones &

Co. v. Board of Trade of the City of Chicago, 546 F.

Supp. 113, 121 & n.9 (S.D.N.Y. 1982); The New York

Times Co. v. Roxbury Data Interface, Inc., 434 F. Supp.

217, 223 (D.N.J. 1977) (presumption that use by a non-

7 There are alternate forms of relief where copying results in a

negative effect which is not an usurpation of plaintiff's original

market. The only alleged injury which CU truly presses is that Regina’s

use may lead to public perception of endorsement. Truthful excerpting

of CU’s ratings cannot hurt CU unless the public perceives that CU

sponsored the use. In such a case, § 43(a) of the Lanham Act and the

privacy statutes which prevent unauthorized product endorsements are

more appropriate. CU will have an opportunity to offer proof on this

issue at trial and establish this aspect of its § 43(a) claim if it can.

16a

competitor will not injure market for copyrighted mate-

rial); Life Music, Inc. v. Wonderland Music Co., 241 F.

Supp. 653, 656-57 (S.D.N.Y. 1965) (a tighter standard of

irreparable injury applies where works do not compete).

The theory behind the copyright laws is that creation will

be discouraged if demand can be undercut by copiers.

Where the copy does not compete in any way with the

original, this concern is absent.

Not only are we faced with a claim of injury which

does not stem from competition between the copyright

owner and the copier, but the owner does not even allege

injury to any work currently copyrighted. Rather, it is the

value of possible future issues of CONSUMER REPORTS

which CU seeks to protect. This clearly does not involve

the fourth factor which focuses upon the effect of the use

upon the potential market for or value of the copyrighted

work. 17 U.S.C. § 107(4).

Applying the proper test to determine whether Regina’s

use usurps demand for the July 1983 CONSUMER REPORTS

issue, we find no convincing evidence of a significant

deleterious effect. Back issues are available for purchase,

but probably few people would order the July issue solely

because of its evaluation of lightweight vacuum cleaners.

Those who do probably will not be deterred by watching

Regina’s commercials.

Based on our examination of the four statutory factors,

we hold that CU has failed to establish likelihood of

success on the merits and that the district court erred in

holding that the Copyright Act warranted injunctive re-

lief.

17a

Although the district court relied solely on the Copy-

right Act in issuing a preliminary injunction, CU is

entitled to assert its other claims in support of an injunc-

tion. United States v. American Railway Express Co. , 265

U.S. 425, 435 (1924). We turn first to CU’s claims under

the Lanham Act.

Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),

proscribes both express implied false representations

made in connection with the sale of goods and renders the

maker of any such representations liable to those dam-

aged by the misrepresentations.* CU asserts that Regina’s

ads are false and misleading in three respects.

First, it claims that the ads convey the false impression

that CONSUMER REPORTS’ review of the Powerteam was

exclusively favorable.’ Although CU check-rated the

Powerteam, it did note that its dust-holding capacity was

8 15 U.S.C. § 1125(a) provides:

“Any person who shall affix, apply, or annex, or use in

connection with any goods or services, or any container or

containers for goods, a false designation of origin, or any

false description or representation, including words or other

symbols tending falsely to describe or represent the same, and

shall cause such goods or services to enter into commerce,

and any person who shall with knowledge of the falsity of

such designation of origin or description or representation

cause or procure the same to be transported or used in

commerce or deliver the same to any carrier to be transported

or used, shall] be liable to a civil action by any person doing

business in the locality falsely indicated as that of origin or in

the region in which said locality is situated, or by any person

who believes that he is or is likely to be damaged by the use of

any such false description or representation.”

9 There is a conflict between CU’s position here and with respect to its

fair use claim: there, it argues that Regina has appropriated CU’s

entire product; here, it argues that Regina did not copy enough.

18a

not good and found other minor defects."” The Lanham

Act protects against distortion through selective excerp'

ing. Amana Refrigeration, Inc. v. Consumers Un yf

United States, Inc., 431 F. Supp. 324 (N.D. lowa !977)

As a factual matter, however, Regina’s ads do not convey

the impression that CU’s review was wholly favorable.

Rather, they merely convey an accurate impression that

CU concluded that the Powerteam lightweight vacuum

was superior to others tested. CU virtually admits that the

negative factors were of little consequence: the November

issue Of CONSUMER REPORTS lists the Powerteam as a

“Best Buy Gift” with no negative qualifications.

Second, CU asserts that Regina’s original ads conveyed

the false impression that CU’s favorable review applied to

the entire Regina line, when in fact models other than the

Powerteam were not rated so highly. We question the

accuracy of this assertion. The Powerteam is the only

machine shown and named during the commercial. A

group picture of the other models flashes rapidly past the

viewer’s eyes only at the very end. In any event, Regina

already has changed the commercial. The question, at

least with respect to preliminary injunctive relief, is

moot.’

Third, CU objects to the failure of the commercial

announcer to close the quotation from CONSUMER RE-

PORTS. Instead of saying “unquote” following the ex-

10 The original article in Consumer Reports faulted the Powerteam’s

capacity; gave it a “poor” rating in “edge cleaning” of medium pile

carpets, in “initial suction”, and in “emptying convenience”; and gave

it a “fair” rating in noise and in cleaning bare floors and deep pile

carpet.

i Not only has Regina offered to change the commercial, but it has

actually done so. CU’s argument that an offer to change does not

moot an injunction is inapposite.

eee dat LENE SIC B OEE IIE SERED Yi Eee eat te MERI MILO DIESEL TH

19a

cerpt, the announcer continues with the rest of the

commercial text. We think it unlikely that viewers would

attribute to CU the voice-over statements “Why wrestle

with an ordinary vacuum when there’s Powerteam? One

fine Electrikbroom cleaner from Regina”. Again, Regina

has changed the commercial to include the word “un-

quote”; so the issue is moot.

In addition to prohibiting false representations, § 43(a)

of the Lanham Act also proscribes advertisements which

are not technically false, but which lead to a mistaken

public belief that “the mark’s owner sponsored or

otherwise approved the use.” Dallas Cowboys Cheer-

leaders, supra, 604 F.2d at 205. A preliminary injunction

will issue where an advertisement creates a reasonable

likelihood of confusion by consumers regarding the origin

or sponsorship of the product. Societe Comptoir de

L’Industrie Cotonniere Etablissements Boussac v. Alexan-

der’s Department Stores, Inc., 299 F.2d 33, 36 (2 Cir.

1962); Cuisinarts, Inc. v. Robot-Coupe International

Corp., 509 F. Supp. 1036, 1044 (S.D.N.Y. 1981).

On this record Regina’s ads have not been shown to

give rise to reasonable likelihood of confusion regarding

source or sponsorship. The record is devoid of any

evidence of actual confusion. The only evidence relating

to consumer confusion is the conclusory affidavit of CU’s

own Executive Director. We are satisfied that the dis-

claimer is adequate to distance CU and Regina.

CU asserts that the visual disclaimer—“Consumer Re-

ports is not affiliated with Regina and does not endorse

Regina products or any other products”—cannot cure the

false public perception of an association between CU and

Regina. CU argues that only a total ban on use of its

name in advertising will achieve this objective.

20a

Disclaimers are a favored way of alleviating consumer

confusion as to source or sponsorship. Champion Spark

Plug Co. v. Sanders, 331 U.S. 125, 130 (1947); Societe

Comptoir, supra, 299 F.2d at 36. Absolute prohibitions of

speech as provided for in the instant preliminary injunc-

tion are improper where there is any possibility that an

explanation or disclaimer will suffice. Jn re R.M.J., 455

U.S. 191, 203 (1982). There, in a slightly different context

(attorney advertising), the Supreme Court held that the

government “may not place an absolute prohibition on

certain types of potentially misleading information. . .

if the information also may be presented in a way that is

not deceptive. . . . [T]he remedy in the first instance is

not necessarily a prohibition but preferably a requirement

of disclaimers or explanation.” Jd.

A factual pattern similar to the instant case was pre-

sented to the court in Better Business Bureau of Metro-

politan Houston, Inc. v. Medical Directors, 681 F.2d 397

(S Cir. 1982). There a weight-loss clinic advertised that a

BBB “spy” had concluded that the program “really

works”. Like CU, the Better Business Bureau’s reputa-

tion depends on the public’s perception that it is totally

independent from industry. It promptly commenced an

action to enjoin further mention of its name in advertise-

ments. Even though the court agreed that the ad was

misleading, it held that the injunction forbidding all use

of the words “Better Business Bureau” in appellant’s

advertising violated the First Amendment. The court

modified the injunction to forbid only language suggest-

ing that the BBB had endorsed the clinic and to require a

disclaimer to that effect.

The district court in the instant case erred in enjoining

Regina from making any reference to the favorable Con-

21a

SUMER REPORTS rating. If the record truly evinced a

likelihood of consumer confusion (which it does not), the

proper course would have been to require a clear dis-

claimer. The First Amendment demands use of a dis-

claimer where there is a reasonable possibility that it will

suffice to alleviate consumer confusion.

Turning to Regina’s disclaimer in the instant case, of

course an inadequate disclaimer would be no defense,

Dallas Cowboys Cheerleaders, supra, 604 F.2d at 205.

Here there was no evidence that the disclaimer was

inadequate. The court in Better Business Bureau, supra,

681 F.2d at 406, found that a similar disclaimer was

sufficient to protect the Better Business Bureau’s interests

in maintaining its reputation for impartiality. Presumably

the disclaimer printed in each issue of CU’s magazine

dissuades the readers of CONSUMER REPORTS from con-

cluding that CU is affiliated with the companies whose

products it reviews. In view of its faith in the efficacy of

its own disclaimer, CU’s position that no disclaimer by

Regina would be sufficient to prevent consumer confu-

sion does not ring true. In any event, its extreme position

is not supported by the evidence.

We hold that § 43(a) of the Lanham Act and the

corresponding claims under state law’ provide no sup-

port for the preliminary injunction."

12 CU argues that §§ 349 and 350 of the New York General Business

Law provide an appropriate ground on which to base injunctive relief.

For the reasons stated above, we hold that Regina’s ads have not been

shown to be “misleading in a material respect”.

13 Our conclusion that CU has not presented a serious question on the

merits of the Lanham Act claim warranting injunctive relief is consis-

tent with the judgments of courts in prior cases that CU’s trademark

claims were too doubtful to warrant injunctive relief, even where the

advertising involved was deceptive and presented a far greater potential

for confusion than does Regina’s. See Amana Refrigeration, Inc. v.

22a

This brings us to CU’s privacy claims.

Section 397 of the New York General Business Law

prohibits use of the name of a non-profit corporation for

advertising purposes without first obtaining written con-

sent.'* We do not believe that the legislature intended that

§ 397 should apply to a situation where the non-profit

corporation’s business is that of evaluating products and

where it widely disseminates the results. Not only does

CONSUMER REPORTS favorably assess the Regina Power-

team,’° but it attempts to spread this assessment through

newspapers and radio announcements. The purpose of

Consumers Union of United States, Inc., 431 F. Supp. 324 (N.D. lowa

1977) (brochure quoted favorable 1968 Consumer Reports rating and

ignored unfavorable 1973 Consumer Reports article); Consumers

Union of United States, Inc. vy. Theodore Hamm Brewing Co., 314 F.

Supp. 697 (D. Conn. 1970) (advertising claimed CU rated Hamm’s

beer “first” among “beers Americans like best” when only certain

beers were tested and Coors received a rating equal to Hamm’s).

14 N.Y. Gen. Bus. Law § 397 in relevant part provides:

“1. No person, firm, association or corporation shall use, fcr

advertising purposes or for purposes of trade, the name, symbol,

device or other identification of any non-profit corporation, asso-

ciation, society or organization organized exclusively for religious,

benevolent, humane, charitable, educational . . . purposes .. .

without having first obtained the written consent of such non-profit

corporation, association, society or organization. Any violation of

this section shall be a misdemeanor.

3. Whenever there shall be an actual or threatened violation of

subdivisicn one of this section, the corporation, association, society

or organization affected thereby may maintain an equitable action

in the supreme court of this state to prevent and restrain said actual.

or threatened violation. . . .”

15 Th: magazine would have a very small circulation if consumers

bought it only out of intellectual curiosity and not to rely upon it in

selecting their purchases.

23a

§ 397 and similar state statutes is to protect the right to

privacy. By going public with its views, CU places itself in

a position where its privacy is not infringed when these

views are repeated.

Absent state decisional law to the contrary, we hold

that § 397 is not intended to bar the use of the name of a

non-profit corporation where it injects itself into the

commercial world by publicly evaluating commercial

products.

Since CU has failed to establish a likelihood of success

on the merits, there remains to be determined whether it

has shown sufficiently serious questions going to the

merits to make them a fair ground for litigation and

whether there is a balance of hardships tipping decidedly

in its favor.

In balancing the hardship to CU stemming from con-

tinued teiecast of the commercials with the hardship to

Regina attendant on maintenance of the injunction, we

hold that CU has not sustained its burden of showing that

the equities lie in its favor. The only evidence introduced

by CU on the issue of hardship is the affidavit of Rhoda

Karpatkin, Executive Director of CU, which states:

“fejach broadcast hurts Consumers Union deeply. Each

broadcast destroys more and more of the untainted repu-

tation for impartiality and freedom from commercial bias

which we have painstakingly spent forty-seven years in

acquiring.” '®

16 This reputation nevertheless appears to have grown despite past uses

of CU’s name which it has not succeeded in enjoining. Consumers

Union of United States, Inc. v. Theodore Hamm Brewing Co., supra

note 13, 314 F. Supp. at 701; Consumers Union of United States, Inc.

v. Hobart Manufacturing Co., 189 F. Supp. 275 (S.D.N.Y. 1960).

24a

It is undeniable that CU has built an impressive reputa-

tion for independence from industry and that this reputa-

tion may be critical to the success of CONSUMER REPORTS.

Nevertheless, too great an inferential leap is required to

go from acknowledgement of this reputation to the con-

clusion that Regina’s use, accompanied by the disclaimer, -

will injure CU’s reputation significantly. Regina’s use of

an explicit disclaimer makes CU’s conclusory claims of

harm unacceptable. Stop the Olympic Prison v. United

States Olympic Committee, 489 F. Supp. 1112, 1123

(S.D.N.Y. 1980). Much like the court presented with a

poster of a pregnant Girl Scout captioned “Be Prepared”,

we doubt that CU’s reputation faces imminent collapse.

Girl Scouts of the United States of America v. Personelity

Posters Mfg. Co., 304 F. Supp. 1228 (S.D.N.Y. 1969).

Ba‘anced against the lack. of concrete evidence of harm

to CU, there is substantial evidence of potential harm to

Regina from maintenance of the injunction. The further

removed Regina’s ads become from the date of CU’s

publication, the less significant an impact the advertising

will have on the market. Consumers Union of United

States, Inc. v. Theodore Hamm Brewing Co., supra note

13, 314 F. Supp. at 701. The highly competitive nature of

the lightweight vacuum cleaner market makes effective

pre-Christmas advertising essential to Regina.

We conclude that CU has failed to establish a likeli-

hood of success on the merits and has failed to establish

that the equities clearly favor CU. Accordingly, we con-

firm our order entered November 25, 1983 reversing the

order of the district court, vacating the preliminary in-

junction, and directing that the mandate issue forthwith.

Costs to appellants.

Reversed and vacated.

APPENDIX C

25a

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

At a stated Term of the United

States Court of Appeals for the Second

Circuit, held at the United States

Courthouse in the City of New York, on

the fourteenth day of February one

thousand nine hundred and eighty-four.

Present: HONORABLE WILLIAM H. TIMBERS,

HONORABLE JON O. NEWMAN,

HONORABLE RICHARD J. CARDAMONE,

Circuit Judges.

CONSUMERS UNION OF UNITED STATES, INC.

Plaintiff-Appellee,

GENERAL. SIGNAL CORPORATION and

GREY ADVERTISING, INC.,

Defendants-Appellants.

_, 83-7855

ORDER ON PETITION FOR REHEARING ADDRESSED

TO PANEL AND MOTION TO ENLARGE RECORD

Appellee having filed on

December 16, 1983 a petition for

rehearing seeking (a) reconsideration of

26a

our order of November 25, 1983 vacating

the preliminary injunction as confirmed

by our opinion of December 6, 1983 and

(b) “supplementation of the record" to

admit an 8 page affidavit of one Rhoda H.

Karpatkin, sworn to December 15, 1983,

together with 29 pages of "exhibits"

attached to her affidavit (the said Rhoda

H. Karpatkin previously having submitted ©

in the district court an affidavit sworn

to October 3, 1983 in support of

appellant's motion for a preliminary

injunction); and

The Court having given due

consideration to appellee's petition for

rehearing and motion to enlarge the

record, it is now

ORDERED as follows:

(1) Appellee's petition for

rehearing addressed to the panel is

granted to che extent that the panel

opinion is hereby revised in the

following respects:

(a) Page 476, 10th line from

bottom f mig:

Beginning with “There is a

oo", the last ten lines on the page are

deleted.

(b) Page 482, line 8

Change "freely" to "widely".

27a

Delete the word "gratis".

(2) Appeliee's petition for

rehearing in all other respects is hereby

denied.

(3) Appellee's motion to enlarge -

the record, as set forth in the last

sentence of the second footnote on the

third page of the petition for rehearing,

is hereby denied in all respects.

[signatures omitted]

APPENDIX D

29a

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

At a stated term of the United States Court of Appeals,

in and for the Second Circuit, held at the United States

Courthouse, in the City of New York, on the 14th-day of

February, one thousand nine hundred and eighty-four.

No. 83-7855, 83-7859

CONSUMERS UNION OF THE UNITED STATES, INC.,

Plaintiff-Appellee,

GENERAL SIGNAL Corp, and GREY ADVERTISING, INC.,

Defendants-Appellants.

nn, as

A petition for rehearing containing a suggestion that

the action be reheard in banc having been filed herein by

counsel for the plaintiff-appellee, Consumers Union of

the United States, Inc.; and the panel that heard the

appeal having granted in part and denied in part said

petition for rehearing in an order filed on February 14,

1984.

It is further noted that a poll of the judges in regular

active service having been taken on the suggestion for

30a

rehearing in banc and there being no majority in favor

thereof, rehearing in banc is DENIED.

A. Daniel Fusaro, Clerk

/S/ FRANCIS X. GINDHART

by Francis X¥. Gindhart,

Chief Deputy Clerk

OAKES, Circuit Judge (dissenting):

I dissent from the denial of the petition for rehearing

en banc in this case, reported as Consumers Union of

United States, Inc. v. General Signal Corp., No. 83-7855,

slip op. 463 (2d Cir., Dec. 6, 1983). This case is the first to

permit a manufacturer to use in its advertising copy-

righted consumer research findings by a concern whose

product consists of publication of those findings in its

magazine, its syndicated news reports, and its broadcasts.

It misapplies the doctrine of commercial free speech and

takes the heart out of the “fair use” doctrine, codified in

17 U.S.C. § 107 (Supp. V 1981). In so doing, it permits

the appropriation without compensation of another’s

statutorily secured intellectual property, thereby acting as

a disincentive to consumer research, and is therefore

injurious to the public interest.

The copyright statute, set out in the margin,' excludes

fair use from copyright infringement, but circumscribes

! 17 U.S.C. § 107 provides:

§ 107. Limitations on exclusive rights: Fair use

Notwithstanding the provisions of section 106, the fair use of a

copyrighted work, including such use by reproduction in copies or

3la

fair uses to uses “such as criticism, comment, news

reporting, teaching . . ., scholarship, or research. . . va

The use of copyrighted material in television advertising

is none of these; nor is it of the same character as these

uses. Thus, I believe that such use should not have been

approved under the fair use exception.

The statute mentions four factors for determining

whether a particular use is “fair.” The first of these, the

“purpose and character of the use,” clearly cuts against a

finding of fair use in this case. The use here was clearly

“of commercial nature,” and not for “nonprofit educa-

tional purposes.” While this court has rejected the propo-

sition that “copying for commercial gain may never be

fair use,” Rosemont Enterprises, Inc. v. Random House,

Inc., 366 F.2d 303, 308 (2d Cir. 1966), cert. denied, 385

U.S. 1009 (1967), it is very clear that use solely for

commercial purposes is presumptively unfair. Sony Corp.

of America v. Universal City Studios, Inc., §2 U.S.L.W.

4090, 4098 & n.32, 4099, 4100 n.40 (U.S. Jan. 17, 1984).

Moreover, advertising is the least favored commercial use.

The second statutory factor is “the nature of the

copyrighted work.” Here that work consists of the evalua-

phonorecords or by any other means specified by that section, for

such as criticism, comment, news reporting, teaching

the use made of a work in any particular case is a fair use the

factors to be considered shall include—

(i) the purpose and character of the use, including whether

such use is of a commercial nature or is for nonprofit

educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in

relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or

value of the copyrighted work.

iil eee

32a

tion with comment of consumer tests and research, repre-

senting “a substantial investment of time and labor made

in anticipation of a financial return.” MCA, Inc. v.

Wilson, 677 F.2d 180, 182 (2d Cir. 1981) (citing

Wainwright Securities, Inc. v. Wall Street Transcript

Corp., 558 F.2d 91, 96 (2d Cir. 1977), cert. denied, 434

U.S. 1014 (1978)). Although Consumer Reports may not

be creative, imaginative, or original in the same way that

a play or novel may be, see New York Times Co. v.

Roxbury Data Interface, Inc., 434 F. Supp. 217, 221

(D.N.J. 1977), it still is much more than a catalog, index,

or other compilation. Consumer Reports involves origi-

nal, sometimes creative research, and a certain amount

of imagination as to what subjective and objective factors

consumers deem important.

The third factor is the “amount and substantiality of

the portion used in relation to the copyrighted work as a

whole.” Here the panel is on its strongest ground, but the

copying of the essence of the findings as to one product is

certainly substantial. Cf. Roy Export Co. v. Columbia

Broadcasting System Inc., 503 F. Supp. 1137 (S.D.N-Y.

1980), aff'd, 672 F.2d 1095 (2d Cir. 1982) (copying of one

minute and fifteen seconds fr: in one hour twelve minute

motion picture held quantitatively substantial so as to

preclude fair use defense). The conclusions quoted by

Regina are both the essence of Regina’s television com-

mercial and the essence of the Consumers Union vacuum

cleaner findings as reported in Consumer Reports.

The fourth factor is “the effect of the use upon the

potential market for or value of the copyrighted words.”

Here the panel’s opinion does not sufficiently recognize

that it is the potential market, not the actual market, that

is at stake in this case. True, Consumers Union does not

sell its product endorsements as, I gather, “Good-House-

33a

keeping” sold its “seal of approval.” But Consumers

Union potentially cou/d do so, perhaps at considerable

profit; the panel’s opinion gives all product manufac-

turers a license, however, to use Consumer Reports’

findings—pro or con—for nothing.’

Equally, if not more important is the fact that Con-

sumers Union does not utilize this potential market in the

interests of its own reputation for objectivity and honesty.

Evidently it believes that this reputation is worth more—

of greater “value,” in the words of the statute—in the

long run than the potential sales of endorsements are in

the short run. It is that value which the panel’s opinion

depreciates and which makes defendant’s use so unfair.

The idea that “Regina would not want to quote” Con-

sumers Union if the public was likely to think that Regina

simply purchased its endorsement, expressed in the

court’s opinion, slip op. at 474 n.6, to answer this point is

simply unpersuasive when seen in the light of a number of

product sellers’ quoting favorable Consumers Union find-

ings (ur their competitors quoting negative findings), all

as licensed by the opinion of the court.

Finally, the panel suggests that the copyright laws aim

to protect against cc.upetitors’ copying, rather than

against damages flowing indirectly from copying, as in

the case of dramatic criticism. /d. at 474-75. Concededly,

the different functions performed by the words in ques-

2 3 Nimmer on Copyricht § 13.05{Aj[4} at 13-65 states:

It is submitted, however, thai it is a mistake to view this factor, as

do some courts, as merely raising the question of the extent of

damages to plaintiff caused by the particular activities of the

defendant. This factor rather poses the issue of whether unrestricted

and widespread conduct of the sort engaged in by the defendant

(whether in fact engaged in by the defendant or by others) would

result in a substantially adverse impact on the potential market for

or value of the plaintiff's work.

34a

tion are relevant, see 3 Nimmer on Copyright § 13.95[B},

and the defense of fair use “is most universally recognized

in connection with the function of criticism, and review.”

Id. at 13-70. But this defendant’s use of Consumers

Union’s work is not for purposes of criticizing Con-

sumers Union, but for purposes of exploiting Consumers

Union’s favorable critique of its product. Thus, the

potential vacuum cleaner buyer, seeing Regina’s commer-

cial, and believing that it does not misstate Consumer

Reports, need not buy the magazine to find out which

vacuum cleaner tested best. Consumer Reports’ market

among vacuum cleaner buyers is clearly injured. If even a

few manufacturers, twenty, for example, do what Regina

is allowed to do, a large portion of Consumer Reports’

whole market may disappear.

I obviously thiak the panel wrongly decided this case. I

also think it sufficiently important to warrant en banc

consideration not only because “fair use” is one of, if not

the most, difficult areas of copyright law, but also be-

cause the use of “commercial free speech” to justify a fair

use defense to copyright infringement stands either the

for commercial purposes, the opinion suggests, is more

entitled to the fair use defense than a use that is not. At

the very least the panel opinion reads the presumption

against the fairness of commercial use out of the statute.

Doing so in the name of the First Amendment, | fear,

cheapens that Amendment’s coin.

For the foregoing reasons, I respectfully must dissent

from the denial of a rehearing en banc in this case.

APPENDIX E

35a

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

CONSUMERS UNION OF UNITED STATES, INC.

Plaintiff,

-against-

GENERAL SIGNAL CORP. and

GREY ADVERTISING, INC.,

Defendants.

83 Civ. 7209 (HFW)

ORDER FOR PRELIMINARY INJUNCTION

This cause having come on to be

heard on plaintiff's application dated

October 3, 1983 for an order to show

cause for a preliminary injunction and a

temporary restraining order and said

temporary restraining order havi:a been

issued on October 3, 1983, and the Court

having considered the pleadings, moving

36a

affidavits, briefs, and having heard the

oral arguments of the parties at a

hearing in open court held on October 7,

1983, and it appearing to the Court after

deliberation that defendants are engaged

in committing and will continue to commit

certain of the acts of which plaintiff

complains, to the irreparable injury of

the plaintiff, and upon the memorandum of

decision filed by this Court on

October 12, 1983 it is hereby

ORDERED, that defendants, their

officers, directors, agents, servants,

-employees, attorneys, and all persons in

active concert or participation with them

be and they hereby are restrained and

enjoined, pending the determination of

this action, from:

37a

1. Further broadcasting,

displaying or exhibiting publicly,

| publishing or distributing in ary manner

whatsoever defendants' television

advertising commercials entitled

“"CONSUMER REPORTS" and "Squid Rev." widen

copy material from plaintiff's duly

copyrighted article on "Lightweight.

Vacuum Cleaners" appearing in the July

1983 issue of CONSUMER REPORTS magazine

or any other form of advertising which

similarly copies material from

. Plaintiff's copyrighted article;

and it is further

ORDERED, that the security in the

amount of $5,000.00 posted by the

Plaintiff on October 4, 1983 shall be

proper for the payment of such costs and

damages as may be incurred or suffered by

38a

any party who is found to have been

wrongfully enjoined or restrained.

Dated: New York, New York

October 13, 1983

United States District Judge

APPENDIX F

39a

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

CONSUMERS UNION CF UNITED STATES,

Plaintiff,

-against-

GENERAL SIGNAL CORP. and

GREY ADVERTISING, INC.,

Defendants.

INC.

MEMORANDUM DECISION

83 Civ. 7209 (HFW)

Dated: 10/12/83

# 1075

APPEARANCES: [omitted]

HENRY F. WERKER, D. J.

This is a motion by plaintiff

Consumers Union of United States, Inc.

(Consumers Union) for a preliminary

injunction restraining defendants'

40a

broadcast of two television commercials

for Regina lightweight vacuum cleaners.

Plaintiff contends, among other things,

that the commercials infringe its

violation of section 43(a) of the Lanham

Trademark Act, make unauthorized use of

its trademark, “Consumer Reports", and

violate section 397 of the New York

General Business Law. The complaint was

filed on September 30, 1983. A temporary

restraining order was issued by the court

on October 3, 1983.

Consumers Union was organized

under the New York not-for-profit

corporation law. It is a leading

independent consumer research and testing

organization. Its main purpose is to

educate the public about different

4la

products and services.* The advice given

consumers is based principally on

Consumers Union's expert testing of

product samples or services. Consumers

Union accepts no products from

manufacturers. The items tested are

purchased at retail at market prices.

The results of the tests are made known

to the public through the monthly

magazine “Consumer Reports", which has a

wide circulation. Each issue of

"Consumer Reports" is copyrighted and the

name is a registered trademark belonging

to Consumers Union. Virtually all of the

income of Consumers Union is derived from

the sale of “Consumer Reports". No

advertising is accepted for “Consumer

Reports" or any other Consumers Union

publication. Basic to the success of

42a

Consumers Union is its reputation as an

impartial tester of products of competing

manufacturers. Consumers Union has a

policy of complete independence from

commercial interests and insists that no

commercial use be made of its reports.

Each issue of "Consumer Reports” states

that the ratings and findings set forth

in the publication may not be used in

advertising.

Consumers Union's reputation for

publishing unbiased information and the

goodwill it has acquired over the years

are its most important assets.

Therefore, it is understandable that the

plaintiff seeks to safeguard its good

name by enjoining any unfair

commercialization of its published

reports.

43a

Consumers Union contends that the

defendants are doing irreparable damage

to its reputation by nationally

broadcasting commercials which it

contends infringe its copyright. The

Regina Company (Regina) is a division of

the General Signal Appliance Corporation

which is a wholly-owned subsidiary of

defendant General Signal Corporation.

dooinn*s principal business is the

manufacture of lightweight, upright

vacuum cleaners, sold under the Regina

and Electrikbroom trademarks. Defendant

Grey Advertising, Inc. prepared the

commercials in question.

The July 1983 issue of “Consumer

Reports", at pages 369-71, contains an

article reporting on Consumers Union's

evaluations of eighteen models of

44a

lightweight vacuum cleaners. Included in

the tests, were four models manufactured

by Regina. One, the "Regina

Electrikbroom Powerteam HB6910" was

judged to be the best of all models

tested. Though the article found certain

faults with it, this model was "check-

rated". Models are "check-rated" by

"Consumer Reports” when the engineers

determine the samples to be of high

quality and markedly superior to non-

checked models. The other three Regina

models that were tested were each rated

below the models of several competing

manufacturers on the ratings chart in

which comparison of the products of the

manufacturers were made.

The July issue of "Consumer

Reports” was placed for sale on

45a

newsstands in June 1983. On June 28,

Consumers Union received a telephone call

from Jeffrey Mednick, an attorney

representing defendant General Signal

Corporation. Mednick was referred to the

law firm of Karpatkin, Pollet, Perlmutter

& Beil, counsel for plaintiff in this

lawsuit. He states in his affidavit that

he was not seeking permission for Regina

to use the article. He says that he was

only seeking guidance as to Consumers

Union's policy on quotations from

*Chieuaee Reports". In any event, it is

undisputed that permission was not given

to Regina by Consumers Union to make

commercial use of the July article on

lightweight vacuum cleaners. On

September 27, 1983, Consumers Union

received a letter from Donald Sheelen,

46a

president of The Regina Company. This

letter stated that Regina had begun

television commercials which would use

segments of the July article. On

September 28, Regina provided the

attorneys for Consumers Union with a

videotape of Regina's two commercials.

This tape was viewed by Rhoda Karpatkin,

Executive Director of Consumers Union,

who, after viewing it, sent a telegram to

Regina demanding withdrawal of the

commercials. The defendants refused to

comply contending that the commericals do

not. infringe any copyrights, constitute

fair use and are not false or misleading.

One of the commercials, which

defendants call "Consumer Reports",

consists of quotations taken from the

47a

July 1983 "Consumer Reports” article on

lightweight vacuum cleaners, to wit:

And CONSUMER REPORTS states,

"Regina Powerteam -- far ahead of

the pack in cleaning ability.”

of at the Lightweights tested

"only one worked well."

On medium Pile carpeting

Powerteam “did the job with the

least effort.”

In fact, its the only one

CONSUMER REPORTS calls an

"adequate substitute for a full-

sized vacuum."

The underlined phrases are the

quotations.

The text of each quotation is

read aloud by the announcer and also

simultaneously appears on the television

screen in print. Each quotation is

further framed on the screen by the

following statement:

CONSUMER REPORTS

[text of quotation]

CONSUMER REPORTS is not affiliated with

Regina and does not endorse products.

48a

The second commercial is also

thirty seconds long and is called

"Squid". It contains the following

excerpt from the July 1983 issue of

"Consumer Reports” (the underlined

portion is the quotation):

It's the only lightweight

that CONSUMER REPORTS says,

quote, was an adequate

substitute for a moe

vacuum. Why wrestle with an

Ordinary vacuum cleaner when

there's Powerteam. One fine

Electrikbroom from Regina.

In this commercial, the text does

not appear on the screen but the subtitle

"CONSUMER REPORTS is not affiliated with

Regina and does not endorse products"

appears as the quotation is read aloud by

the television announcer.

49a

The two ending sentences are not

from the July issue of "Consumer

Reports". Consumers Union contends that

the viewer is led to believe otherwise

while being shown a picture of four

different vacuum cleaners. Regina states

that it is willing to respond to those

concerns of the plaintiff as it can

without compromising its own legitimate

interests. Accordingly, Regina is

revising the audio portion of the "Squid"

commercial to include the word "“unquote",

and will change the last shot of the

commercial to eliminate pictures of

Regina products other than the Regina

Powerteam. ‘To counter plaintiff's

argument that the disclaimer that

"Consumer Reports is not affiliated with

Regina and does not endorse products"

50a

suggests that plaintiff has endorsed the

Regina Powerteam, Regina“is willing to

modify the disclaimer in both

advertisements to read "does not endorse

Regina products". Regina demonstrated

the revised commercials at the hearing on

October 7, 1983.

The Copyright Act of 1976, 17

U.S.C. §§ 101 et seg. (1977), authorizes

this court to grant a preliminary

injunction to “prevent or restrain

infringement of a copyright." 17 U.S.C.

§ 502(a). In this Circuit, entitlement

to a preliminary injunction requires the

movant to show: "(a) irreparable harm and

(b) either (1) likelihood of success on

the merits or (2) sufficiently serious

Sla

questions going to the merits to make

them a fair ground for litigation and a

balance of nendehine tipping decidedly

toward the party requesting the

preliminary relief." Jackson Dairy, Inc.

v. H.P. Hood & Sons, Inc., 596 F.2d 70,

72 (2d Cir. 1979) (per curiam). See

also, Dallas Cowboys Cheerleaders, Inc.

v. Pussycat Cinema, Ltd., 604 F.2d 200,

206-207 (2d Cir. 1979).

Once the elements of copyright

infringement are made out, a preliminary

injunction should issue even in the

absence of a detailed showing of

irreparable harm. Robert Stigwood Group

Ltd. v. Sperber, 457 F.2d 50, 55 (2d Cir.

1972). In Consumers Union of United

States, Inc. v. Tieodore Hamm Brewing

Co., Inc., 314 F. Supp. 697 {D. Conn.

——s

o2a

1970), the court issued a preliminary

injunction but not one as broad as

requested by the plaintiff. Id. at 700.

In Hamm, the court rejected the

defendant's contention that there was no

irreparable harm to Consumers Union.

There defendant argued that an

injunction was improper because the

parties were not competitors and because

Consumers Union had suffered no financial

loss, and could be compensated fully by

money damages in the event of judgment in

its favor, id. The court stated:

These contentions overlook

[Consumers Union's] unique

position in the business

world. Throughout the years,

it has been scrupulous in

avoiding even the slightest

affiliation with any

commercial interest. Its

most important asset is its

good name for independence

and accuracy; its reputation

03a

as an impartial and untainted

adviser is the foundation

upon which the public's

confidence rests ... It is,

of course, to be expected

that now and then a

manufacturer whose product is

rated highly will seek to

advertise the testimonial

truthfully and fairly over as

wide an audience of

purchasers as possible. The

extent to which such

advertising is permissible is

not here decided.

For our purposes we need

only decide whether the

plaintiff has made a clear

showing of probable success

at trial with respect to its

claims of copyright

infringement, unfair

competition and false and

misleading advertising. If

so, there is a likelihood

that the plaintiff has and

will in the future suffer

harm. Because of the

difficulties of proof, money

damages may be inadequate; a

preliminary injunction under

such circumstances should

issue to protect the

plaintiff and the public

interest.

d4a

In Amana Refrigeration, Inc. v.

Consumers Union of United States, Inc.,

431 F. Supp. 324 (N.D. Iowa 1977), the

court granted summary judgment in favor

of Consumers Union on its counterclaim

alleging copyright infringement. The

court stated:

[Amana] claims the quoted

portion of defendant's

article is not copyrightable

because it is merely a baid

Statement of fact without

originality. The excerpt,

however, is more than mere

statment of fact. It

contains defendant's original

analysis and conclusion and

is copyrightable and use by

others for economic gain may

properly be enjoined

(footnote omitted).

431 F. Supp. at 326.

Consumers Union of United States,

Inc. v. Hobart Mfg. Co., 189 F. Supp. 275

(S.D.N.Y¥. 1960), is distinguishable from

55a

this case. In Hobart, a critical sales

brochure was found uninfringing. Hobart

involved bulletins directly criticizing

the findings of “Consumer Reports". The

advertisements here contain no such

criticism and constitute an infringement

of Consumers Union's copyright.

Consumers Union has established

possible irreparable harm if an

injunction is not issued since damages do

not provide an adequate remedy in this

case. It also has demonstrated

likelihood of success on the merits of

its copyright infringement claim.

Defendants have not challenged

the validity of the plaintiff's

given permission to the defendants to use

any portion of the July article,

56a

defendants' copying for commercial

purposes constitutes an illegal

infringement of Consumers Union's

original, copyrighted material. See,

Amana Refrigeration, Inc. v. Consumers

Union of United States, Inc., 431 F.

Supp. at 326. Courts have held that even

where a small portion of a work is

copied, a copyright violation may be

‘found. Higgins v. Baker, 309 F. Supp.

635, 637 (S.D.N.Y. 1969).

The court is not persuaded that

the fair use defense bars plaintiff's

claim. This judge-made doctrine has been

codified in 17 U.S.C. § 107. The fair

use defense "permits courts to avoid

rigid application of the copyright

Statute when, on occasion, it would

stifle the very creativity which that law

57a

is designed to foster." Iowa State

University Research Foundation, Inc. v.

American Broadcasting Companies, Inc.,

621 F.2d 57, 60 (2d Cir. 1980). It

creates a “privilege in others than the

owner of the copyright to use the

copyrighted material in a reasonable

manner without his consent,

notwithstanding the monopoly granted to

the owner ...”" Rosemont Enterprises, Inc.

vy. Random House, Inc., 366 F.2d 303, 306

(2d Cir. 1966), cert. denied, 385 U.S.

1009 (1967) quoting Ball, The Law of

(1944). See also, Roy Export Co. of

Vaduz v. Columbia Broadcasting System,

Inc., 503 PF. Supp, 1137, 1143 (S.D.N.Y

1980), aff'd, 672 F.2d 1095 (2d Cir.

1982). In Amana, the court rejected the

58a

manufacturer-advertiser's claim of fair

use finding that the use was for Amana's

economic gain and contained "no comment

or criticism of alleged inaccuracies” in

the article in "Consumer Reports". 431 F.

Supp. at 326-27. Here, the use by

defendants does not constitute comment or

criticism of plaintiff's article.

The first fair use factor set

forth in § 107 is "the purpose and

character of the use including whether

such use is of a commercial nature or is

for nonprofit educational purposes."

Defendants' use is clearly of a

commercial character in that it is

contained in television advertisements.

Nevertheless, the fact that a use is "of

a commercial nature" does not necessarily

negate a fair use determination. See,

59a

Triangle Publications, Inc. v. Knight-

Ridder Newpapers, Inc., 626 F.2d 1171

(Sth Cir. 1980). The defendants,

however, have taken copyrighted material

for no purpose other than their own

financial gain.

The second factor specified in

§ 107 is the nature of the copyrighted

work. “Consumer Reports" is, as its name

indicates, a consumer oriented magazine

with an explicit no commercialization

policy. The July 1983 article contains

original conclusions of Consumers Union

which are entitled to protection under

the federal Copyright laws. With respect

to the third factor, while the portion of

the article used is relatively small in

relation to the copyrighted work as a

whole, it is not necessary for a

60a

manufacturer to take much from "Consumer

Reports" in order to reap commercial

advantage from the use of the name and

analysis of that publication. The fourth

factor to analyze under § 107 is the

effect of the use upon the market for, or

the value of, the copyrighted work. The

argument that fair use applies because

Consumers Union is an objective provider

of accurate information which is of

public importance proves too much. Such

an argument would destroy all of

Consumers Union's rights in its literary

property and name. Regina's commercial

use of the article could be the demise of

Consumers Union since such commercial use

could lead the public to view Consumers

Union as an unfair tester of products.

The effect of denying an injunction in

6la

this case would be to virtually nullify

. the copyright of Consumers Union.

As the Second Circuit has noted,

"(t]he fair use doctrine is not a license

for corporate theft mpeneios a court to

ignore a copyright whenever it determines

the underlying work contains material of

possible public importance." Iowa State

University Research Foundation, Inc. v.

American Broadcasting Companies, Inc.,

621 F.2d at 61.

The First Amendment defense urged

by the defendants is unpersuasive and has

been rejected by the court.

Defendants have copied material

containing Consumers Union's original

analyses and conclusions. The defendants

have, without consent, used that material

for advertising in two separate

62a

television commercials. The court finds

that the Consumer Reports commercial, the

first Squid commercial and the revised

Squid commercial all infringe plaintiff's

Since the court has found that

issuance of an injunction is warranted

under the Copyright Act, it need not

reach plaintiff's other grounds for

relief. Accordingly, plaintiff's motion

for a preliminary injunction is granted.

Plaintiff is directed to submit an order

on notice forthwith.

-SO ORDERED.

DATED: New York, New York

October 12, 1983

mw Cobalt s

APPENDIX G

63a

CONSUMER REPORTS July, 1983

Pages 369 through 371

ightweight

vacuum

cleaners

Most of the 18 we tested were lightweight

performers. Only one worked well.

t's a chore to drag out the heavy-duty

BE iiccrer ck tp te crams tro

last night's snack or the sand tracked

in from this morning's beach outing. You

can use a carpet sweeper to touch

rags, and a benom to clean bese Sees. Or

you can use a lightweight, upright vacu-

um cleaner—sometimes called an electric

_ broom—on rugs as weil as bare floors.

Bissell, Hoover, and Regina dominate

the vacuum market. Each

company a number of models

under its own name as well as models

tages. They're light (five to nine

might rely on a

lightweight for all

vacuuming chores,

tion, and most

have limited AP

Not-so-clean sweep

To test the lightweights’ clean-up ca-

pabilities, we vacuumed sections of bare,

the floor thoroughly.

The Regina Power Teum also stood out

in our carpet-cleaning test. It alone left

66a

the carpet presentable after only one

sweep, pristine after two sweeps. The

motorized brush in its nozzle obviously

made the difference, The other light-

weights generally left cnough soil to

make our blue carpet look rather linty.

The Regina HB7439 and the similar

Sears 62382 feature an air-pulse function

in the nozzle (see the drawing on the next

burbling of a flap inside the nozzle cre-

ated the impression that the machine was

swallowing up a lot of dirt. Inspection of

the carpet proved otherwise.

Since the Regina Power Team was the

only lightweight with a powered nozzle

brush, it was the only model tested for

deep carpet cleaning. Our experience

showed that the others, using suction

alone, couldn’t handle the job. The Power

Team's deep-cleaning performance was

_ gina HB7439 and B6222 and their twins

from Sears, have a shuttle in the nozzle

that can shift suction to one edge of the

nozzle or the other. In theory, that

67a

“Air pulse’’ in the

Regina 7439 and

On bare wood, most of the light-

in tho insulation dust adja-

full-suction setting, their edge-cleaning

ability was even worse.) Eight light-

weights were judged good in edge-clean-

ing on carpet, but even so, they passed

over enough soil to leave the carpet linty.

How convenient?

There's more to convenience than light

weight and small size. There's case of

maneuvering, frequency and ease of

emptying the bag, and noise.

Maneuvering. Pushing any vacuum

cleaner over a hard floor is easy. Pushing

one over carpeting may not be. Since

these lightweights are so slow to pick up

369

68a

soil, it can take a lot of pushes

to clean a section of carpet. —

Most of the models we tested have lit-

tle wheels or rollers built into the nozzie,

making it reasonably easy to maneuver

the machines over carpet.

vi Ceree See Hoovers and

two Wards) don’t have wheels. Since the

nozzle bears down directly on the carpet,

;

be emptied. The dust cup on the Regina

and Sears models (see photo at far left) is

supposed to be emptied after each «se.

Otherwise, it’s all too easy to vacuum

until the cup overflows, spilling dust

back into the bag, If you're doing a lot of

touch-up cleaning, it might be wise to

Tla

with all models operating at normal

speed. Since the performance at normal

speed was marginal, at best, we see no

use for the slower speeds.

$2039 and $2041, the Wards 7260, and

the Eureka were judged the quietest.

The models with variable speed set-

tings were a bit quieter at slower speeds

than they were at normal speed.

Recommendations

The check-rated Regina Power Team,

with its power nozzle, performed much

the only model judged very good at pick-

ing up sand and dust from bare floors. It

was the only model that did a very good

job of cleaning our medium-pile carpet.

And it did the job with the least effort.

The Power Teum, about $72 before

72a

discounts, could serve as the primary

cleaning machine for an apartment

dweller. It could also be especially useful

for older or disabled people. The Power

Team's main Grawback is its limited dirt-

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APPENDIX H

TTa

Text of respondents' commercial entitled

"CONSUMER REPORTS"

Regina believes that the

Electrikproom Powerteam is the one

lightweight that cleans like a

heavyweight...

And CONSUMER REPORTS states

"Regina Powerteam --far ahead of the pack

in cleaning ability." [While these words

are spoken, on the screen appear the name

"CONSUMER REPORTS", the text of quotation

and the subtitle, “CONSUMER REPORTS is

not affiliated with Regina and does not

endieres aiekan products or any other

products. "]

Of all the lightweights tested

"only one worked well." ["CONSUMER

REPORTS," text of quotation and subtitle

appear on screen.)

78a

On medium pile carpeting

Powerteam "did the job with the least

effort". ["CONSUMER REPORTS," text of

quotation and subtitle appear on screen.]

In fact, it's the only one

CONSUMER REPORTS calls an “adequate

substitute for a full-sized vacuum".

["CONSUMER REPORTS,” text of quotation

and subtitle appear on screen. ]

The Electrikbroom Powerteam from

Regina. CONSUMER REPORTS checkrates it -

- you will too.

Text of respondents’ commercial entitled

"Squid"

You can fight your way through

housecleaning with an ordinary vacuum

cleaner -- or you can try the Regina

Powerteam.

79a

You can push furniture around --

or you can glide in between.

Ordinary vacs don't like to go

upstairs -- Regina Powerteam thinks

nothing of it.

And it cleans deep. It's the

only lightweight that CONSUMER REPORTS

says, Quote, “was an adequate substitute

for a full-sized vacuum.” Unquote. [As

these words are spoken the following

subtitle appears on screen, "CONSUMER

REPORTS is not affiliated with Regina and

does not endorse Regina products or any

other products.”"]

Why wrestle with an ordinary

vacuum when there's Powerteam. One fine

Electrikbroom cleaner from Regina.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.