Troll Co. v. Uneeda Doll Co. ( 2007 )


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  • 05-6487-cv
    Troll Co. v. Uneeda Doll Co.
    UNITED STATES COURT OF APPEALS
    FOR THE SECOND CIRCUIT
    August Term 2006
    Heard: December 22, 2006                      Decided: April 13, 2007)
    Docket No. 05-6487-cv
    - - - - - - - - - - - - - - - - -
    TROLL COMPANY,
    Plaintiff-Appellee,
    v.
    UNEEDA DOLL COMPANY,
    Defendant-Appellant.
    - - - - - - - - - - - - - - - - -
    Before: MESKILL, NEWMAN, and HALL, Circuit Judges.
    Appeal from the November 28, 2005, Order of the United States
    District Court for the Southern District of New York (Richard Owen,
    District Judge), granting a preliminary injunction against Defendant
    for infringing a copyright restored pursuant to section 104A of the
    Copyright Act, 17 U.S.C. § 104A.
    Affirmed.
    Barry G. Magidoff, Greenberg Traurig, LLP,
    New York, N.Y., for Defendant-Appellant.
    Craig S. Mende, New York, N.Y. (Michael
    Chiappetta, Fross Zelnick Lehrman &
    Zissu, P.C., New York, N.Y., on the
    brief), for Plaintiff-Appellee.
    JON O. NEWMAN, Circuit Judge.
    This appeal, concerning so-called “restored” copyrights, requires
    the Court to construe for the first time section 104A of the Copyright
    Act, 17 U.S.C. § 104A, which was enacted in its present form as part
    of the Uruguay Round Agreements Act (“URAA”), Pub. L. No. 103-465, 
    108 Stat. 4809
       (1994).       The    Defendant-Appellant,          Uneeda    Doll   Co.
    (“Uneeda”), appeals from the November 28, 2005, order of the District
    Court for the Southern District of New York (Richard Owen, District
    Judge),      preliminarily      enjoining     Uneeda       from     manufacturing,
    distributing, or selling “Wish-nik” troll dolls, which are alleged to
    infringe a restored copyright owned by the Plaintiff-Appellee, Troll
    Co.     On   appeal,   Uneeda      contends   that   (1)    Troll     Co.    has   not
    demonstrated that it owns the restored copyright, and (2) it is a
    “reliance party” within the meaning of section 104A and is thus
    entitled to sell its existing inventory of Wish-nik dolls during a
    one-year sell-off period.          We conclude that Troll Co. is likely to
    succeed in proving ownership of the restored copyright and that Uneeda
    is not a reliance party.            We therefore affirm the order of the
    District Court.
    Background
    A brief history of troll dolls. This case involves the copyright
    to troll dolls, “those ugly but somehow endearing” plastic dolls with
    oversized heads, big grins, pot bellies, and frizzy hair. See EFS
    Marketing, Inc. v. Russ Berrie & Co., 
    76 F.3d 487
    , 489 (2d Cir. 1996).
    The troll doll was first created in the late 1950s by a Danish
    woodcarver, Thomas Dam.      Dam called his doll a “Good Luck Troll.”               By
    1961, Dam was selling his troll dolls in the United States.
    In 1962, Dam founded a cleverly named Danish company, Dam Things
    Establishment, through which he marketed his dolls.                   In 1965, Dam
    Things Establishment obtained a U.S. copyright for the troll doll.
    -2-
    The copyright registration listed Dam Things Establishment as the
    author of the dolls and 1961 as the year of first publication.       That
    same year, however, the copyright was invalidated because some dolls
    had been sold in the United States without the proper copyright
    notice, and the dolls thereby entered the public domain. See Scandia
    House Enterprises, Inc. v. Dam Things Establishment, 
    243 F. Supp. 450
    ,
    454 (D.D.C. 1965).        The Good Luck Troll is still protected by
    copyright in Denmark.
    After the troll dolls entered the public domain, numerous
    companies began marketing the dolls in the United States. See EFS
    Marketing, 
    76 F.3d at 489
    .      The market for troll dolls was somewhat
    cyclical, as the dolls’ popularity surged every decade or so.         The
    most recent surge in popularity occurred in the early 1990s. See 
    id.
    Thomas Dam died in 1989.         Following Dam’s death, his heirs
    granted Troll Co., a Danish company, the exclusive right to exploit
    and license the troll dolls.
    The restoration of the Good Luck Trolls copyright. Congress
    enacted the URAA on December 8, 1994.       Among other things, the URAA
    amended1 section 104A of the Copyright Act to bring the United States
    into compliance with the Berne Convention,2 which it had joined in
    1
    Congress had enacted section 104A one year earlier to comply with
    the North American Free Trade Agreement. See Dam Things from Denmark
    v. Russ Berrie & Co., 
    290 F.3d 548
    , 554 (3d Cir. 2002). The URAA
    supplanted that previous version of section 104A. See 
    id.
    2
    Berne Convention for the Protection of Literary and Artistic
    -3-
    1989. See Dam Things from Denmark v. Russ Berrie & Co., 
    290 F.3d 548
    ,
    554 (3d Cir. 2002). Section 104A restores copyrights for a wide range
    of foreign works that had previously entered the public domain in the
    United States because of noncompliance with certain formalities,
    primarily notice of copyright, imposed by United States copyright law.
    See 17 U.S.C. § 104A(h)(6); see also Dam Things from Denmark, 
    290 F.3d at 554-55
    .
    The parties do not dispute that the Good Luck Troll copyright was
    automatically restored pursuant to the URAA on January 1, 1996. Upon
    learning of the restoration, Troll Co. applied for, and was granted,
    a registration certificate in 2000. The registration lists Thomas Dam
    as the author and Troll Co. as the owner of the copyright, and it
    states 1957 as the date of first publication.         After receiving the
    registration, Troll Co. began enforcing its restored copyright.
    Uneeda’s manufacture and marketing of Wish-nik dolls. In 1963 or
    1964,   Dam   Things   Establishment   licensed   Uneeda   Doll   Co.,   Inc.
    (“UDCI”), Uneeda’s predecessor, to produce and distribute a line of
    troll dolls under the name “Wish-niks.”       The record shows that UDCI
    sold Wish-niks periodically between 1965 and 1984.            According to
    UDCI’s chairman, however, UDCI also sold Wish-niks “at least through
    1994 and probably up to 1996.”    In 1996, UDCI sold all of its assets,
    including its copyrights, other intellectual property rights, and
    goodwill, to Uneeda.
    Works, Sept. 9, 1886 (Paris Text 1971), S. Treaty Doc. No. 99-27
    (“Berne Convention”).
    -4-
    In 2001 and 2004, Troll Co.’s president met Wilson Lee, a manager
    of Uneeda’s Hong Kong affiliate, at a toy fair in Germany.          On both
    occasions, Lee allegedly informed him that Uneeda was no longer
    manufacturing or selling troll dolls and had no intention of doing so
    in the future.    Notwithstanding these discussions, just as Troll Co.
    was planning a major relaunch of its troll dolls, it learned in August
    2005 that Uneeda was selling newly produced Wish-niks to Walmart. The
    Wish-niks contained copyright notices in Uneeda’s name.             Walmart
    withdrew the dolls after Troll Co. informed it that the dolls
    infringed its copyright.
    The     District   Court   proceeding.   Troll   Co.    commenced   this
    copyright infringement action in the U.S. District Court for the
    Southern District of New York on October 7, 2005.3          Troll Co. served
    Uneeda with written notice of its intent to enforce the copyright (a
    procedure sometimes required under section 104A, as discussed below)
    on October 18, 2005.       After a hearing, the District Judge granted
    Troll Co.’s motion for a preliminary injunction in an order entered
    November 28, 2005. See Troll Co. v. Uneeda Doll Co., 
    400 F. Supp. 2d 601
     (S.D.N.Y. 2005). Finding “direct evidence of actual copying,” the
    District Judge concluded that Uneeda’s sales of Wish-niks threatened
    irreparable harm to Troll Co. See 
    id. at 603
    .     He also concluded that
    3
    Several days earlier, Uneeda had filed a declaratory judgment
    action against Troll Co. and its licensee in the U.S. District Court
    for the Central District of California, No. 2:05-cv-07185.               That
    action was later transferred to the Southern District of New York.
    -5-
    Troll Co. was likely to succeed on the merits of its copyright
    infringement claim, rejecting Uneeda’s claim to protection as a
    “reliance party” under the URAA. See 
    id. at 603-04
    .              Accordingly, he
    preliminarily enjoined Uneeda from manufacturing, distributing, or
    selling Wish-nik dolls pending resolution of the case. See 
    id. at 604
    .
    Discussion
    The standards for obtaining a preliminary injunction and for
    appellate review of the grant of such an injunction are well known and
    need not be repeated.       See Forest City Daly Housing, Inc. v. Town of
    North Hempstead, 
    175 F.3d 144
    , 149 (2d Cir. 1999) (preliminary
    injunction standards); Nicholson v. Scoppetta, 
    344 F.3d 154
    , 165 (2d
    Cir. 2003) (appellate review standard).
    Uneeda does not challenge the District Court’s conclusion that
    Troll     Co.   would   suffer   irreparable    harm   without    a   preliminary
    injunction.      The issue on appeal is whether Troll Co. is likely to
    succeed on the merits of its infringement claim.           Uneeda argues that
    Troll Co. is unlikely to succeed because (1) Troll Co. has not
    established that it owns the restored copyright, and (2) Uneeda is a
    reliance party within the meaning of section 104A, entitling it to
    sell off its inventory of Wish-niks for one year following Troll Co.’s
    service of a notice of intent to enforce the restored copyright.
    I. Ownership of the Restored Copyright
    Uneeda contends preliminarily that the District Court erred in
    determining that Troll Co. owns the restored copyright.4              We conclude
    4
    Although this argument was advanced in the District Court, Judge
    -6-
    that Troll Co. is likely to succeed in proving ownership because
    evidence submitted to the District Court supports a determination that
    Troll     Co.    owns   the   restored   copyright.     Troll   Co.’s   president
    testified that, after Dam’s death in 1989, Dam’s heirs transferred
    Dam’s rights to the troll dolls to Troll Co.             In addition, the 2000
    copyright registration lists Troll Co. as the owner.5
    According to Uneeda, Troll Co.’s trial court evidence contradicts
    evidence submitted to the Copyright Office and the U.S. District Court
    for the District of New Jersey.                First, Uneeda points out, the
    original        1965    registration      certificate    listed    Dam     Things
    Establishment, not Dam himself, as the “author” of the Good Luck
    Trolls. Consequently, Uneeda argues, Troll Co. must establish a chain
    of ownership from Dam Things Establishment, not from Dam through his
    heirs, as Troll Co. argued in the District Court.                 But the URAA
    specifies that authorship is to be determined by reference to the
    source country’s law, not by reference to U.S. copyright registration.
    Owen did not explicitly discuss Uneeda’s ownership argument in his
    opinion.        However, a determination that Troll Co. owns the restored
    copyright is implicit in the District Court’s opinion.
    5
    We recognize that the registration is not prima facie evidence
    of ownership because it was made more than five years after the first
    publication. See 
    17 U.S.C. § 410
    (c).           Nevertheless, it may carry some
    evidentiary weight. See 
    id.
     (“The evidentiary weight to be accorded
    the certificate of a registration made thereafter shall be within the
    discretion of the court.”).
    -7-
    See 17 U.S.C. § 104A(b); see, e.g., Alameda Films S A v. Authors
    Rights Restoration Corp., 
    331 F.3d 472
    , 477 (5th Cir. 2003) (applying
    Mexican law).     Neither party submitted evidence of Danish law to the
    District Court.     In any event, to obtain a preliminary injunction,
    Troll Co. needed to show only that it was likely to prove ownership,
    and it seems likely that Danish law would consider Dam to be the
    “author” of the troll dolls since he created the dolls several years
    before he established Dam Things Establishment.6
    Second, Uneeda contends that Troll Co. is estopped from arguing
    that it acquired rights to the troll dolls from Dam’s heirs because it
    6
    Section 104A(b) does not explicitly state that ownership vests
    in an author’s heirs if the author is deceased.     Nor does it explain
    what, if any, effect should be given to an author’s pre-restoration
    transfer of his ownership rights. Cf. 6 William F. Patry, Patry on
    Copyright § 24:31 (2007) (stating that “where the author is dead on
    the date of restoration, ownership of the restored copyright will be
    determined by the law of successorship of the source country,” but
    that transferees of an initial author must pursue a state court
    contract action to secure rights to a restored copyright); 3 Melville
    B. Nimmer & David Nimmer, Nimmer on Copyright § 9A.04[B][2][b] (2006)
    (discussing the ambiguity of this provision).      Because the parties
    have not raised these issues, we will assume, as the District Court
    apparently did, that the restored copyright vests in the author’s
    heirs and that courts can give effect to heirs’ pre-restoration
    transfer of rights.
    -8-
    represented to the U.S. District Court for the District of New Jersey
    in another action that it acquired those rights from Dam Things
    Establishment. See Dam Things from Denmark, 
    290 F.3d at
    553 n.3.                   The
    doctrine        of   judicial    estoppel    does   not   prevent   Troll   Co.   from
    asserting a different theory of ownership in this case.7 In any event,
    even if it is unclear whether Troll Co. obtained ownership of the
    copyright from Dam Things Establishment, as the Third Circuit stated,
    or from Dam’s heirs, as Troll Co. claims here, Troll Co. is likely to
    prove ownership one way or the other.
    7
    “The    doctrine   of    judicial    estoppel    prevents   a   party    from
    asserting a factual position in one legal proceeding that is contrary
    to a position that it successfully advanced in another proceeding.”
    Rodal v. Anesthesia Group of Onondaga, P.C., 
    369 F.3d 113
    , 118 (2d
    Cir. 2004).          A party invoking judicial estoppel must show that (1)
    another party advanced an inconsistent position in another proceeding
    and (2) the first tribunal adopted that position in some manner. See
    
    id.
     Even if Troll Co.’s theories of ownership are factual positions,
    and even if the Third Circuit or the New Jersey district court adopted
    Troll Co.’s theory of ownership, the two theories of ownership are not
    necessarily contrary to one another. The district court in Dam Things
    from Denmark also mentioned a 1989 agreement between Dam’s heirs and
    Troll Co. confirming Troll Co.’s exclusive rights to the Good Luck
    Troll designs. See Dam Things from Denmark v. Russ Berrie & Co., 
    173 F. Supp. 2d 277
    , 280 (D.N.J. 2001), rev’d on other grounds, 
    290 F.3d 548
     (3d Cir. 2002).
    -9-
    II. Whether Uneeda Is a Reliance Party
    Uneeda’s primary argument on appeal is that Troll Co. cannot
    bring an action at this time to enjoin Uneeda’s sales because Uneeda,
    as a reliance party under the URAA, is entitled to a one-year sell-off
    period.      To understand this argument, it is necessary to review the
    URAA’s provisions in some detail.
    A. The URAA
    Congress enacted the URAA on December 8, 1994, to bring the
    United States into compliance with the Berne Convention’s Rule of
    Retroactivity.8 See Dam Things from Denmark, 
    290 F.3d at 554
    ; see also
    6 William F. Patry, Patry on Copyright § 24:18 (2007) (“Patry”); 3
    Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 9A.02 (2006)
    (“Nimmer”). The URAA restored copyright protection for foreign works
    that had fallen into the public domain for technical reasons unrelated
    to   expiration    of   the   copyright   term.   Congress’s   intention   in
    restoring such protection to foreign copyrights was to secure similar
    protection for American copyright holders abroad. See Dam Things from
    Denmark, 
    290 F.3d at 554
    .
    The URAA restores copyrights as of January 1, 1996,9 for original
    8
    See Berne Convention art. 18.
    9
    The date of restoration, as specified by Congress in 1997, see
    Pub. L. No. 105-80, 
    111 Stat. 1529
     (1997), is January 1, 1996, if the
    source country of the work was an adherent to the Berne Convention or
    a World Trade Organization member on that date. See 17 U.S.C. §
    104A(h)(2)(A).      A leading commentator contends that the restoration
    -10-
    works that (1) are not in the public domain of their source countries
    through expiration of their copyright terms, (2) are in the public
    domain in the United States because of noncompliance with legal
    formalities, (3) have at least one author who was a national or
    domiciliary of an eligible country,10 and (4) were first published in
    an eligible country and were not published in the United States within
    thirty days of first publication. See 17 U.S.C. § 104A(h)(6). A
    copyright restored under section 104A “vests initially in the author
    . . . of the work as determined by the law of the source country of
    the work.” Id. § 104A(b).       The parties do not dispute that the
    invalidated troll doll copyright qualifies for restoration under these
    provisions.
    Much of     section 104A concerns the enforcement of restored
    copyrights against parties that were legitimately exploiting works in
    reliance on their public domain status.        The statute creates a
    category of prior exploiters called “reliance parties,” who may
    continue to exploit the work until the owner of the restored copyright
    makes known its intent to enforce its copyright. The statute creates
    three categories of reliance parties:
    date, which he equates with what he contends is the effective date, is
    January 1, 1995. See 6 Patry §§ 24:26-24:28.   We take no position on
    this controversy, which has no bearing on our decision.
    10
    Eligible countries include World Trade Organization member
    countries and adherents to the Berne Convention. See 17 U.S.C. §
    104A(h)(3).
    -11-
    (A) [any person who,] with respect to a particular work,
    engages in acts, before the source country of that work
    becomes an eligible country, which would have violated
    section 106 if the restored work had been subject to
    copyright protection, and who, after the source country
    becomes an eligible country, continues to engage in such
    acts;
    (B) [any person who,] before the source country of a
    particular work becomes an eligible country, makes or
    acquires 1 or more copies . . . of that work; or
    (C) [any person who,] as the result of the sale or other
    disposition of . . . significant assets of a person
    described in subparagraph (A) or (B), is a successor,
    assignee, or licensee of that person.
    17 U.S.C. § 104A(h)(4). Thus, subsections (A) and (B) make the status
    of a reliance party turn on whether a person took certain actions with
    respect to a work prior to the date that the source country of that
    work became an eligible country. And, for purposes of subsections (A)
    and (B), a source country that was a member of the Berne Convention
    when the URAA was enacted (including Denmark) became an eligible
    country on the date of the URAA’s enactment, December 8, 1994.           See
    id. § 104A(h)(3)(B); Hoepker v. Kruger, 
    200 F. Supp. 2d 340
    , 345-46
    n.5   (S.D.N.Y.   2002);   see   also    6   Patry   §   24:39;   3   Nimmer
    § 9A.04[C][1][b][i]-[ii]. The District Court mistakenly looked to the
    date of copyright restoration, January 1, 1996, rather than the date
    of the URAA’s enactment, to determine the date when Denmark became an
    eligible country and hence whether Uneeda or its predecessor was a
    reliance party by reason of having acted with respect to the troll
    dolls prior to that date. See Troll Co., 
    400 F. Supp. 2d at 603
    . This
    error was understandable, as several other courts have also tied
    reliance party status to the date of copyright restoration. See
    -12-
    Peliculas y Videos Internacionales, S.A. v. Harriscope of Los Angeles,
    Inc., 
    302 F. Supp. 2d 1131
    , 1137 (C.D. Cal. 2004); Dam Things from
    Denmark v. Russ Berrie & Co., 
    173 F. Supp. 2d 277
    , 285 n.9 (D.N.J.
    2001), rev’d on other grounds, 
    290 F.3d 548
     (3d Cir. 2002).
    An owner of a restored copyright may not enforce its copyright
    against   a   reliance   party    without   first   giving   notice,   either
    constructive or actual, of its intent to enforce the copyright. Until
    January 1, 1998, an owner of a restored copyright could file a notice
    of intent to enforce its copyright with the Copyright Office, thereby
    putting all reliance parties on constructive notice of its intent. See
    17 U.S.C. § 104A(e)(1).          Troll Co. did not file such a notice.
    Alternatively, at any time, a copyright owner may serve a notice of
    intent directly on a reliance party. See id. § 104A(e)(2).         Troll Co.
    served a notice of intent on Uneeda on October 18, 2005.               After
    receiving actual or constructive notice of intent to enforce, a
    reliance party must cease making copies of the protected work. See id.
    § 104A(d)(2)(A)(ii)(III), (B)(ii)(III).        However, the reliance party
    is entitled to a twelve-month grace period in which to sell off its
    already existing copies. See id. § 104A(d)(2)(A)(ii)(I), (B)(ii)(I);
    see also Dam Things from Denmark, 
    290 F.3d at 555
    .
    B. Uneeda’s Claim to Reliance Party Status
    Uneeda contends that its predecessor, UDCI, was a reliance party
    under subsection 104A(h)(4)(A) because UDCI continued to engage in
    infringing acts after Denmark became an eligible country upon the
    URAA’s enactment, and under subsection 104A(h)(4)(B) because UDCI made
    at least one copy of the troll doll before the URAA’s enactment.
    -13-
    Accordingly, Uneeda further contends, it is a reliance party under
    subsection 104A(h)(4)(C) because it is UDCI’s successor, and it is
    therefore entitled to the URAA’s twelve-month sell-off period.
    Uneeda’s subsection 104A(h)(4)(A) contention. Because subsection
    104A(h)(4)(A)        confers   reliance   party   status   on   a    person    who
    “continues” to engage in infringing acts after December 8, 1994,
    Uneeda’s subsection (A) contention requires us to construe the term
    “continues,” which is, as far as we are aware, a task courts have not
    previously undertaken.11 Troll Co. argues that the provision contains
    a “continuing acts requirement” and that resuming sales after nine or
    ten years, as Uneeda did, does not satisfy this requirement.                Uneeda
    responds that the language of subsection (A) does not require the
    infringing activity to be uninterrupted and that the periodic renewal
    of cyclical exploitation “continues” such exploitation.
    The text of the statute is ambiguous and could support either
    11
    Uneeda cites two cases in which courts concluded that defendants
    were entitled to reliance party status notwithstanding several-year
    gaps    between      the   first   exploitation   or   acquisition    and    post-
    restoration exploitation.           See Peliculas y Videos Internacionales,
    S.A. v. Harriscope of Los Angeles, Inc., 
    302 F. Supp. 2d 1131
     (C.D.
    Cal. 2004); Hoepker v. Kruger, 
    200 F. Supp. 2d 340
     (S.D.N.Y. 2002).
    However, it does not appear that the plaintiffs in those cases argued
    that gaps in exploitation precluded reliance party status.              Because
    these cases did not expressly consider this issue, they provide little
    value to our analysis here.
    -14-
    interpretation.      Given the statute’s ambiguity, it is appropriate to
    consider the legislative history. See Rombro v. Dufrayne (In re Med
    Diversified, Inc.), 
    461 F.3d 251
    , 255 (2d Cir. 2006). The Chairman of
    the   House     Subcommittee   on   Intellectual   Property   and   Judicial
    Administration stated:
    A key to the reliance party status under this provision is
    the requirement that the person have continued to engage in
    the described conduct. This requirement incorporates the
    continuing infringement doctrine and is also relevant to
    section 104A(4) concerning statutory damages and attorney’s
    fees.[12]  Under this doctrine and section 104A, the
    defendant must have engaged in an ongoing series of acts.
    Cessation of that activity for an appreciable period of time
    will deprive one of reliance party status.
    140 Cong. Rec. E2263, E2264 (Oct. 8, 1994) (statement of Rep. Hughes).
    The Chairman’s reference to statutory damages and attorney’s fees
    indicates that he understood the “continuing infringement doctrine” as
    the principle that “infringement ‘commences’ for the purposes of
    [determining whether infringement commences before a copyright’s
    registration] when the first act in a series of acts constituting
    continuing infringement occurs.” Johnson v. Jones, 
    149 F.3d 494
    , 506
    (6th Cir. 1998).
    Under 
    17 U.S.C. § 412
    , a plaintiff may not recover statutory
    12
    Section 104A(4) does not exist.   The Chairman presumably meant
    to refer to section 104A(d)(4), which states that, for purposes of 
    17 U.S.C. § 412
     (discussed below), “infringement shall be deemed to have
    commenced before registration when acts which would have constituted
    infringement had the restored work been subject to copyright were
    commenced before the date of restoration.”
    -15-
    damages or attorney’s fees for any infringement “commenced” before the
    effective date of a copyright’s registration.                The courts have held,
    based on the provision’s text, legislative history, and purpose, that
    a plaintiff may not recover statutory damages and attorney’s fees for
    infringement occurring after registration if that infringement is part
    of an ongoing series of infringing acts and the first act occurred
    before registration. See, e.g., id. at 505-06 (holding that the
    purposes      of    section   412   “would        be   thwarted    by   holding    that
    infringement is ‘commenced’ for the purposes of § 412 each time an
    infringer commits another in an ongoing series of infringing acts,”
    and citing cases); Singh v. Famous Overseas, Inc., 
    680 F. Supp. 533
    ,
    535 (E.D.N.Y. 1988) (“That verb [commenced] generally presupposes as
    a subject some kind of activity that begins at one time and continues
    or reoccurs thereafter.”).
    The legislative history of section 104A suggests that Congress
    understood section 412 to mean that a post-registration act of
    infringement will not be deemed to have commenced before registration
    if the infringing activity ceased for an appreciable period of time.
    In such a case, the copyright owner could recover statutory damages
    and   attorney’s       fees   for    that     new,      post-registration    act     of
    infringement.        By using the word “continues,” Congress must have
    intended       to   incorporate     this    same       principle   into   subsection
    104A(h)(4)(A).13       We therefore construe subsection 104A(h)(4)(A) to
    13
    See also 6 Patry § 24:40 (“There is no definition of ‘continue’
    because Congress wanted the doctrine of continuing infringement
    -16-
    confer reliance party status only on persons whose infringement is
    ongoing and without more than trivial interruption.             This limitation
    is consistent with the purpose of the URAA’s reliance provisions.              A
    party that has invested time and resources into ongoing exploitation
    of a work in reliance on the work’s public domain status would incur
    substantial harm from the sudden inability to engage in that business;
    the URAA therefore requires owners of restored copyrights to notify
    such parties of their intent to enforce and gives those parties a year
    after notification to sell off their inventories.               By contrast, a
    party that has voluntarily ceased exploitation for a non-trivial
    period of time, here, nine or ten years--even where such exploitation
    was episodic due to the cyclical nature of consumers’ interest in the
    product--has a less substantial interest in being able to resume that
    exploitation after restoration.14
    Applying this standard to this case, we first observe that UDCI
    initially      may    have   been   a   reliance   party    under   subsection
    104A(h)(4)(A) following the URAA’s enactment.               According to the
    evidence     before   the    District   Court,   UDCI   “sold   Wish-nik   dolls
    beginning in 1992 and continuing into the mid-1990s, at least through
    developed by the courts to apply. . . . Without setting an outside
    limit, a cessation of one year is beyond that permitted under the
    section.”).
    14
    We express no opinion on whether an exploiter of seasonal, as
    opposed to cyclical, goods, e.g., a seller of holiday merchandise,
    could qualify as a reliance party.
    -17-
    1994 and probably up to 1996.” Because the District Court mistakenly
    deemed reliance party status to turn on the date of restoration,
    January 1, 1996, it concluded that UDCI could not have been a reliance
    party.   However, as explained above, the critical date for assessing
    reliance party status is December 8, 1994. If the District Court were
    to credit Uneeda’s evidence and find that UDCI sold Wish-niks in 1995,
    UDCI would have been a reliance party under subsection 104A(h)(4)(A)
    because it would have continued to engage in infringing acts after
    December 8, 1994.
    Notwithstanding this observation, we need not remand the case for
    reexamination of UDCI’s claim to reliance party status.       Even if we
    assume that UDCI was a reliance party for some period of time, UDCI
    and Uneeda, as its successor, would have retained that status only to
    the extent that they continued to engage in such infringing acts. For
    the reasons set forth above, Uneeda’s renewed manufacture and sale of
    Wish-niks after a nine- or ten-year hiatus is not a continuation of
    infringement under subsection 104A(h)(4)(A).        Accordingly, Uneeda
    cannot claim protection as a reliance party under this provision.
    Uneeda’s subsection 104A(h)(4)(B) contention. In the alternative,
    Uneeda claims that UDCI qualified as a reliance party under subsection
    104A(h)(4)(B) because it made or acquired at least one copy of the
    troll doll before the URAA’s enactment.       The parties urge competing
    interpretations of subsection 104A(h)(4)(B). According to Uneeda, the
    provision allows anyone who made or acquired a copy of a work before
    the   URAA’s   enactment   to   manufacture   additional   copies   after
    restoration.    Under this interpretation, Uneeda would be able to
    -18-
    manufacture new Wish-niks after the copyright’s restoration because
    UDCI made Wish-niks before the URAA’s enactment. Troll Co. argues for
    a narrower interpretation that would permit a party who acquired or
    made one or more copies of a work before the URAA’s enactment only to
    dispose of those particular copies.               Under this interpretation of
    subsection 104A(h)(4)(B), UDCI and Uneeda, as its successor, could
    sell Wish-niks manufactured before the URAA’s enactment, but they
    could not manufacture new Wish-niks.
    The text of subsection 104A(h)(4)(B) is ambiguous on this point,
    and there is no legislative history clarifying Congress’s intent.
    However, it is an elemental principle of statutory construction that
    an ambiguous statute must be construed to avoid absurd results. See,
    e.g., Frank G. v. Board of Education, 
    459 F.3d 356
    , 368 (2d Cir.
    2006). Uneeda’s proposed interpretation would render the statute
    absurdly broad: any entity that purchased even one Wish-nik doll many
    years ago while the troll dolls were in the public domain could decide
    to begin manufacturing troll dolls after the restoration of the
    copyright and thereby become a reliance party.15             Conferring reliance
    party status on such entities would be incompatible with the URAA’s
    15
    See also 6 Patry § 24:40 (distinguishing between subsections (A)
    and (B) on the ground that (A) “focuses on particular infringing acts,
    whereas      .   .   .   (B)   focuses   on    particular   copies”);     3    Nimmer
    §   9A.04[C][1][a]       (advocating     the    narrow   interpretation       of   this
    provision because the broader interpretation would “qualif[y] even a
    casual book collector with an old volume languishing on the shelf”).
    -19-
    dual    goals   of   restoring   copyright   protection    and   safeguarding
    legitimate reliance interests. Because we must interpret the statute
    to avoid such an absurd result, we conclude that Congress intended to
    limit    the    benefit   of   reliance   party   status   under   subsection
    104A(h)(4)(B) only to those copies made or acquired before the URAA’s
    enactment.
    Because Uneeda intends to sell recently manufactured Wish-niks
    and does not claim to be disposing of Wish-niks made by UDCI before
    the URAA’s enactment, it is not entitled to reliance party status as
    UDCI’s successor under subsections 104A(h)(4)(B)-(C).
    Conclusion
    For the foregoing reasons, the District Court’s order granting
    preliminary injunctive relief to Troll Co. is affirmed.
    -20-