Malibu Textiles, Inc. v. Label Lane International, Inc. , 922 F.3d 946 ( 2019 )


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  •                 FOR PUBLICATION
    UNITED STATES COURT OF APPEALS
    FOR THE NINTH CIRCUIT
    MALIBU TEXTILES, INC., a New York      No. 17-55983
    corporation,
    Plaintiff-Appellant,       D.C. No.
    2:14-cv-04054-
    v.                       R-MAN
    LABEL LANE INTERNATIONAL, INC., a
    California Corporation; ENTRY, INC.,
    DBA ALT B., a California
    Corporation,
    Defendants-Appellees.
    MALIBU TEXTILES, INC., a New York      No. 17-55984
    corporation,
    Plaintiff-Appellant,       D.C. No.
    2:14-cv-01018-
    v.                         R-E
    H&M HENNES & MAURITZ, L.P., a
    New York limited partnership,
    Defendant-Appellee.
    2          MALIBU TEXTILES V. LABEL LANE INT’L
    MALIBU TEXTILES, INC., a New York                 No. 17-56531
    corporation,
    Plaintiff-Appellee,                 D.C. No.
    2:14-cv-01018-
    v.                               R-E
    H&M HENNES & MAURITZ, L.P., a
    New York limited partnership,                       OPINION
    Defendant-Appellant.
    Appeals from the United States District Court
    for the Central District of California
    Manuel L. Real, District Judge, Presiding
    Argued and Submitted January 7, 2019
    Pasadena, California
    Filed April 24, 2019
    Before: A. Wallace Tashima and Paul J. Watford, Circuit
    Judges, and Jack Zouhary, * District Judge.
    Opinion by Judge Zouhary
    *
    The Honorable Jack Zouhary, United States District Judge for the
    Northern District of Ohio, sitting by designation.
    MALIBU TEXTILES V. LABEL LANE INT’L                       3
    SUMMARY **
    Copyright
    The panel reversed the district court’s dismissal of two
    copyright infringement actions, dismissed a cross-appeal
    regarding attorney fees as moot, and remanded.
    Malibu Textiles claimed that defendants infringed its
    copyrights for two floral lace designs. The panel held that,
    on remand following prior appeal, Malibu sufficiently
    alleged ownership of valid, registered copyrights. Malibu
    also successfully pled striking similarity between its designs
    and defendants’ designs. The panel further held that the
    district court abused its discretion in denying Malibu leave
    to amend its allegations of access for a theory of substantial
    similarity.
    The panel dismissed as moot one defendant’s cross-
    appeal from the district court’s denial of its motion for
    attorney fees.
    **
    This summary constitutes no part of the opinion of the court. It
    has been prepared by court staff for the convenience of the reader.
    4         MALIBU TEXTILES V. LABEL LANE INT’L
    COUNSEL
    Stephen Doniger (argued), Frank Gregory Casella, and Scott
    A. Burroughs, Doniger/Burroughs APC, Venice, California,
    for Plaintiff-Appellant.
    Neal J. Gauger (argued) and Staci Jennifer Riordan, Nixon
    Peabody LLP, Los Angeles, California, for Defendants-
    Appellees.
    OPINION
    ZOUHARY, District Judge:
    INTRODUCTION
    Five years ago, Plaintiff-Appellant Malibu Textiles filed
    these copyright infringement lawsuits against Defendants-
    Appellees Label Lane International, Entry, and H&M
    Hennes & Mauritz (collectively, “Defendants”), accusing
    them of illegally copying Malibu’s lace designs. And for
    five years, these cases have languished at the pleading stage.
    The cases are now before this Court for a second time, after
    the district court again denied leave to amend and dismissed
    with prejudice. We again reverse and remand.
    BACKGROUND
    In 2014, Malibu sued Defendants for copyright
    infringement. Malibu alleges it owns copyrights for two lace
    designs, consisting of flowers, vines, leaves, and other
    elements arranged in a pattern. Malibu refers to these two
    designs collectively as the Subject Work and alleges
    Defendants infringed on both.
    MALIBU TEXTILES V. LABEL LANE INT’L                     5
    The first appeal came after the district court dismissed
    the cases with prejudice for failure to state a claim. This
    Court reversed, stating that “[d]ismissal with prejudice is
    appropriate only if the complaint ‘could not be saved by any
    amendment.’” Malibu Textiles, Inc. v. Label Lane Int’l, Inc.,
    668 F. App’x 803, 803 (9th Cir. 2016) (quoting Leadsinger,
    Inc. v. BMG Music Publ’g, 
    512 F.3d 522
    , 532 (9th Cir.
    2008)); Malibu Textiles, Inc. v. H&M Hennes & Mauritz,
    L.P., 668 F. App’x 800, 801 (9th Cir. 2016) (same). This
    Court concluded that Malibu could fix its Complaints by
    adding more allegations of similarity between the Subject
    Work and Defendants’ works and how Defendants had
    access to the Subject Work. Label Lane, 668 F. App’x
    at 803–04; H&M, 668 F. App’x at 801.
    On remand, Malibu filed new Complaints 1 with
    additional similarity allegations, including side-by-side
    photos of the Subject Work and Defendants’ works. But the
    Malibu attorneys mistakenly omitted new access allegations.
    When they realized their error, the parties filed a joint
    stipulation seeking leave to file amended versions of the
    post-remand Complaints. Malibu included a declaration
    explaining the mistake and provided the district court with
    redlined copies of the new Complaints with the missing
    access allegations. In a one-sentence, handwritten order, the
    district court denied leave to amend: “Denied[,] no good
    cause is shown.”
    Defendants again moved to dismiss, and the district court
    again dismissed with prejudice.        The district court
    determined that most of the similarities between Malibu’s
    designs and Defendants’ designs consisted of non-
    1
    In the Label Lane case, Malibu filed its Second Amended
    Complaint. In the H&M case, Malibu filed its First Amended Complaint.
    6         MALIBU TEXTILES V. LABEL LANE INT’L
    protectable elements, such as “the natural appearance of a
    Bengal Clockvine flower.” The district court identified
    differences in the side-by-side images, concluding that the
    designs were not strikingly similar. The district court further
    held that Malibu failed to plausibly allege access, without
    mentioning whether the proposed amendments would have
    cured this deficiency. H&M moved for attorney fees, which
    the district court denied. These appeals followed.
    DISCUSSION
    This Court reviews dismissals under Federal Civil
    Rule 12(b)(6) de novo, accepting the plaintiff’s allegations
    as true and construing them in the light most favorable to the
    plaintiff. Zucco Partners, LLC v. Digimarc Corp., 
    552 F.3d 981
    , 989 (9th Cir. 2009). At this stage, a complaint’s factual
    allegations need not be detailed. Bell Atl. Corp. v. Twombly,
    
    550 U.S. 544
    , 555 (2007). They “must be enough to raise a
    right to relief above the speculative level” and to “state a
    claim to relief that is plausible on its face.” 
    Id. at 555,
    570.
    To state a claim for copyright infringement, Malibu
    “must plausibly allege two things: (1) that [it] owns a valid
    copyright in [the Subject Work], and (2) that [Defendants]
    copied protected aspects of [the Subject Work]’s
    expression.” Rentmeester v. Nike, Inc., 
    883 F.3d 1111
    ,
    1116–17 (9th Cir. 2018).
    Ownership
    Although the district court based its decision on the
    copying element, Defendants argue this Court should affirm
    because Malibu failed to allege ownership of a registered
    copyright in the Subject Work. See Livid Holdings Ltd. v.
    Salomon Smith Barney, Inc., 
    416 F.3d 940
    , 950 (9th Cir.
    2005) (“This court can affirm the district court’s dismissal
    MALIBU TEXTILES V. LABEL LANE INT’L              7
    on any ground supported by the record, even if the district
    court did not rely on the ground.”). To plead ownership,
    Malibu must plausibly allege it owns a valid copyright
    registration for its work. See Unicolors, Inc. v. Urban
    Outfitters, Inc., 
    853 F.3d 980
    , 988 (9th Cir. 2017)
    (“[Plaintiff] was required to show registration as an element
    of an infringement claim.”); see also Fourth Estate Pub.
    Benefit Corp. v. Wall-Street.com, LLC, 
    139 S. Ct. 881
    , 887
    (2019) (“[A]lthough an owner’s rights exist apart from
    registration, registration is akin to an administrative
    exhaustion requirement that the owner must satisfy before
    suing to enforce ownership rights.”) (citations omitted).
    Malibu alleges it owns “two original two-dimensional
    artworks”—Designs 1967 and 1717—which are registered
    with the United States Copyright Office under numbers
    VA 1-159-155 and VA9230008. But Defendants argue that
    Malibu’s case is not based upon either of these copyrights,
    but rather upon some third work called the “Subject Work.”
    Defendants mischaracterize Malibu’s allegations.
    According to Malibu, Design 1967 derives from Design
    1717. The designs are “essentially the same artwork” with
    only “slight variations” due to differences in the machinery
    used in production. The post-remand Complaints allege that
    Malibu owns valid, registered copyrights in both Design
    1967 and Design 1717, and that the infringement action is
    based on the original artistic expression owned by Malibu
    and reflected in both designs. Malibu is entitled to protect
    all components of that artistic expression—both derivative
    and original. See DC Comics v. Towle, 
    802 F.3d 1012
    ,
    1023–25 (9th Cir. 2015). Malibu plausibly alleges it owns
    registered copyrights for the artwork in Designs 1967 and
    1717; its use of a shorthand label for that artwork does not
    change that fact.
    8         MALIBU TEXTILES V. LABEL LANE INT’L
    And contrary to Defendants’ assertions, Malibu was not
    required to include images of Design 1717, a complete
    deposit of Design 1967, or registration materials for either
    Design in the Complaints to plausibly allege ownership. See
    
    Rentmeester, 883 F.3d at 1117
    –18. As for Defendants’
    arguments about their foreign copyright registrations, those
    defenses are better suited for summary judgment. At the
    pleading stage, Malibu successfully alleged ownership of
    valid, registered copyrights.
    Copying
    To allege actionable copying, Malibu was required to
    plead facts plausibly showing either (1) “that the two works
    in question are strikingly similar,” or (2) “that [the works]
    are substantially similar and that [Defendants] had access to
    the [Subject Work].” Label Lane, 668 F. App’x at 803
    (citing Three Boys Music Corp. v. Bolton, 
    212 F.3d 477
    , 481,
    485 (9th Cir. 2000)); H&M, 668 F. App’x at 801 (same).
    Where two works are strikingly similar, access may be
    inferred.    
    Unicolors, 853 F.3d at 987
    –88; see also
    
    Rentmeester, 883 F.3d at 1124
    (“[I]f the similarities are
    ‘striking’ enough . . . such similarities can be sufficient on
    their own to establish that the defendant must have had
    access to the plaintiff’s work.”). Thus, a plaintiff must
    separately plead access only when alleging substantial
    similarity, not when alleging striking similarity. See, e.g.,
    Three Boys 
    Music, 212 F.3d at 485
    ; Baxter v. MCA, Inc.,
    
    812 F.2d 421
    , 423–24 & n.2 (9th Cir. 1987); see also Astor-
    White v. Strong, 733 F. App’x 407, 407 (9th Cir. 2018).
    “In assessing whether particular works are substantially
    similar, or strikingly similar, this Circuit applies a two-part
    analysis: the extrinsic test and the intrinsic test.” 
    Unicolors, 853 F.3d at 985
    . At the pleading stage, this Court considers
    only the extrinsic test. See Williams v. Gaye, 
    895 F.3d 1106
    ,
    MALIBU TEXTILES V. LABEL LANE INT’L               9
    1119 (9th Cir. 2018). The extrinsic test “is an objective
    comparison of specific expressive elements; it focuses on the
    articulable similarities between the two works.” L.A. Printex
    Indus., Inc. v. Aeropostale, Inc., 
    676 F.3d 841
    , 848 (9th Cir.
    2012) (internal quotation marks and citation omitted). The
    extrinsic test consists of two steps.
    Step 1: Protectable Elements
    First, the reviewing court “must ‘filter out’ the
    unprotectable elements of the plaintiff’s work,”
    
    Rentmeester, 883 F.3d at 1118
    (citation omitted), and
    determine the breadth of copyright protection for the
    protectable elements, 
    id. at 1120.
             Although certain
    elements—like elements found in nature—may not be
    protectable individually, “[o]riginal selection, coordination,
    and arrangement” of unprotectable elements may be
    protectable expression. L.A. 
    Printex, 676 F.3d at 849
    . A
    combination of unprotectable elements is eligible for
    copyright protection “if those elements are numerous
    enough and their selection and arrangement original enough
    that their combination constitutes an original work of
    authorship.” Satava v. Lowry, 
    323 F.3d 805
    , 811 (9th Cir.
    2003).
    For protectable elements, this Court “distinguishe[s]
    between ‘broad’ and ‘thin’ copyright protection based on the
    ‘range of expression’ involved.” 
    Williams, 895 F.3d at 1120
    (quoting Mattel, Inc. v. MGA Entm’t, Inc., 
    616 F.3d 904
    ,
    913–14 (9th Cir. 2010)). “[T]he greater the range of creative
    choices that may be made, the broader the level of protection
    that will be afforded to the resulting [work].” 
    Rentmeester, 883 F.3d at 1120
    . “We review de novo the district court’s
    determination as to the scope of copyright protection.”
    
    Mattel, 616 F.3d at 914
    (citation omitted).
    10        MALIBU TEXTILES V. LABEL LANE INT’L
    Here, although copyright law does not protect the natural
    appearance of a Bengal Clockvine flower, see 
    Satava, 323 F.3d at 813
    , it does protect the original “selection,
    coordination, and arrangement” of floral elements in a lace
    pattern, Label Lane, 668 F. App’x at 803 (citing L.A. 
    Printex, 676 F.3d at 850
    ); H&M, 668 F. App’x at 801 (same). The
    Subject Work’s copyright protection is broad—not thin—
    because there is “‘a wide range of expression’ for selecting,
    coordinating, and arranging floral elements in stylized fabric
    designs.” L.A. 
    Printex, 676 F.3d at 850
    (citation omitted).
    After all, “there are gazillions of ways to combine petals,
    buds, stems, leaves, and colors in floral designs on fabric.”
    
    Id. at 850–51
    (internal quotation marks and citation omitted).
    Step 2: Similarity Comparison
    Second, the “protectable elements that remain are then
    compared to corresponding elements of the defendant’s
    work to assess similarities in the objective details of the
    works.” 
    Rentmeester, 883 F.3d at 1118
    . “We do not have a
    well-defined standard for assessing when similarity in
    selection and arrangement becomes ‘substantial’” or
    striking, “and in truth no hard-and-fast rule could be devised
    to guide determinations that will necessarily turn on the
    unique facts of each case.” 
    Id. at 1121.
    “In comparing fabric
    designs, we examine the similarities in their objective details
    in appearance, including, but not limited to, the subject
    matter, shapes, colors, materials, and arrangement of the
    representations.” L.A. 
    Printex, 676 F.3d at 849
    (internal
    quotation marks and citation omitted).
    Striking Similarity. The first question is whether Malibu
    pled striking similarity, which would obviate the need to
    plead access. Two works are strikingly similar when the
    similarities between them are so great that they are “highly
    MALIBU TEXTILES V. LABEL LANE INT’L                11
    unlikely to have been the product of independent creation.”
    
    Rentmeester, 883 F.3d at 1124
    .
    Here, the similarities between the lace patterns go well
    beyond their mutual inclusion of the Bengal Clockvine
    flower. The works contain nearly identical floral, leaf,
    boteh, and dot elements, and those elements are arranged in
    virtually the same way. The post-remand Complaints state
    that the patterns are “identically arranged” and that the
    elements “are arranged exactly the same in relation to each
    other.” They describe, in detail, some of the similarities
    between the patterns. And most importantly, they provide
    side-by-side pictures that make the similarities apparent. See
    Appendix, infra.
    To be sure, the pictures do show some minor differences
    between the Subject Work and Defendants’ works, such as
    in color, netting, and shape curvature. “But a rational jury
    could find that these differences result from the fabric-
    printing process generally and are ‘inconsequential,’ or
    could credit [Malibu]’s assertion that these differences result
    in part from ‘print[ing] using cruder, lower-quality
    techniques and machinery.’” L.A. 
    Printex, 676 F.3d at 851
    (second alteration in original) (citations omitted).
    Alternatively, a jury could find these to be knowing
    modifications, which could be evidence of willful copying.
    See Concord Fabrics, Inc. v. Marcus Bros. Textile Corp.,
    
    409 F.2d 1315
    , 1316 (2d Cir. 1969) (per curiam) (“While the
    trial court placed great emphasis on the minor differences
    between the two patterns, we feel that the very nature of
    these differences only tends to emphasize the extent to which
    the defendant has deliberately copied from the plaintiff.”).
    As for the differences pointed out by the district court in
    its dismissal order, those appear to result from the cropping
    and angle of the images rather than any real differences in
    12        MALIBU TEXTILES V. LABEL LANE INT’L
    the designs. And to the extent Defendants contend the
    similarities are “required by the medium of lace” and are
    merely “functional choices . . . dictated by the lace medium,”
    those arguments are better suited for summary judgment,
    after discovery and perhaps with the aid of expert testimony.
    For this stage, Malibu successfully pled striking similarity in
    the post-remand Complaints, and the district court erred in
    dismissal on this ground.
    Substantial Similarity. But striking similarity was not
    the only theory Malibu sought to plead. The next question
    is whether the district court erred in denying Malibu leave to
    amend its access allegations for a theory of substantial
    similarity. This Court reviews denial of leave to amend for
    abuse of discretion. Gompper v. VISX, Inc., 
    298 F.3d 893
    ,
    898 (9th Cir. 2002). “Dismissal without leave to amend is
    improper unless it is clear, upon de novo review, that the
    complaint could not be saved by any amendment.” 
    Id. (citation omitted).
    “An outright refusal to grant leave to
    amend without a justifying reason is . . . an abuse of
    discretion.” Manzarek v. St. Paul Fire & Marine Ins. Co.,
    
    519 F.3d 1025
    , 1034 (9th Cir. 2008) (citation omitted).
    When pleading substantial similarity, a copyright
    infringement plaintiff “must allege facts ‘from which a
    reasonable finder of fact could infer that the defendant had a
    reasonable opportunity to copy his or her work.’” Shame on
    You Prods., Inc. v. Banks, 
    120 F. Supp. 3d 1123
    , 1149 (C.D.
    Cal. 2015) (citation omitted), aff’d, 690 F. App’x 519 (9th
    Cir. 2017); see also L.A. 
    Printex, 676 F.3d at 846
    (“Proof of
    access requires ‘an opportunity to view or to copy plaintiff’s
    work.’”) (citation omitted). As the prior Panel instructed,
    Malibu could meet this pleading requirement by alleging “a
    chain of events that linked the protected pattern with the
    allegedly infringing patterns, or provid[ing] sales figures
    MALIBU TEXTILES V. LABEL LANE INT’L             13
    accompanied by dates and geographic distribution
    information plausibly showing access via widespread
    dissemination.” Label Lane, 668 F. App’x at 804; see also
    H&M, 668 F. App’x at 801.
    Here, the proposed amended Complaints allege several
    ways Defendants had access to the Subject Work. Malibu
    first alleges that Defendants do business in California and
    that they had access to the Subject Work through Malibu’s
    California showrooms. Malibu next states that, since 1998,
    it has produced “approximately 1 million yards of lace
    bearing the Subject Work,” which have been manufactured
    in “over twenty mills, including numerous mills in China.”
    Those mills’ libraries of patterns, containing the Subject
    Work, have since been acquired by other mills, who in turn
    “have offered those patterns to customers without regard to
    whether those patterns were protected by copyright law.”
    Malibu further alleges that its customers have “sold
    garments and other products featuring the Subject Work . . .
    in the same markets (domestically and internationally) as
    Defendants.” Finally, Malibu specifies several clothing
    retailers “operating in the same market as Defendants” that
    collectively “have sold hundreds of thousands of garments
    featuring reproductions of the Subject Work.”
    These allegations, taken as true, plausibly allege
    Defendants had reasonable opportunities to view the Subject
    Work. See L.A. 
    Printex, 676 F.3d at 848
    . The proposed
    amendments would have sufficiently alleged access. The
    district court thus abused its discretion by denying leave to
    amend.
    Attorney Fees
    In its cross-appeal, H&M argues the district court erred
    in denying its motion for attorney fees. Because of the
    14        MALIBU TEXTILES V. LABEL LANE INT’L
    district court errors, H&M is no longer a prevailing party
    eligible for attorney fees under 17 U.S.C. § 505, making its
    cross-appeal moot. See Electro Source, LLC v. Brandess-
    Kalt-Aetna Group, Inc., 
    458 F.3d 931
    , 941 (9th Cir. 2006).
    CONCLUSION
    It is the responsibility of “the court and the parties to
    secure the just, speedy, and inexpensive determination of
    every action and proceeding.” Federal Civil Rule 1. This
    aspirational goal was not achieved in these cases. This latest
    round of appeals added nearly two years to cases that were
    already three years old. And these cases have not advanced
    beyond the initial pleading stage. Direction from the earlier
    appeals was disregarded, as were the parties’ stipulations to
    allow amendments to the Complaints. This Court reverses
    the dismissal of the Complaints and remands to allow the
    cases to proceed consistent with this Opinion.
    The district court judgments in Case Nos. 17-55983 and
    17-55984 are REVERSED and REMANDED. The cross-
    appeal in Case No. 17-56531 is DISMISSED as moot.
    MALIBU TEXTILES V. LABEL LANE INT’L   15
    APPENDIX
    SUBJECT WORK             LABEL LANE
    PATTERN
    16     MALIBU TEXTILES V. LABEL LANE INT’L
    SUBJECT WORK            H&M PATTERN