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TY, INC. v. PUBLICATIONS INTERNATIONAL

June 4, 2003

TY, INC., PLAINTIFF
v.
PUBLICATIONS INTERNATIONAL, LTD., DEFENDANT.



The opinion of the court was delivered by: James B. Zagel, District Judge

MEMORANDUM OPINION AND ORDER

This is a copyright and trademark infringement suit brought by Ty, Inc. ("Ty") against Publications International, Ltd. ("PIL"), in connection with PIL's publication and sale of books featuring Ty's Beanie Babies plush toys. On August 25, 1999, Ty filed its complaint which stated a jury demand "of all counts and claims triable by a jury." Subsequently, Ty filed a preliminary injunction motion, which I granted. PIL then moved for an evidentiary hearing on Ty's motion for a preliminary injunction, which I also granted. In that order, I gave the parties a choice between an evidentiary hearing on Ty's motion for preliminary injunction or an expedited and consolidated hearing on a final injunction pursuant to Federal Rule of Civil Procedure 65(a)(2). At a status hearing on March 7, 2000, the parties informed me that they had "agreed to go ahead with the expedited hearing on the final injunction." They also requested an expedited eight-week discovery period and a hearing date sometime during the month of May 2000. In addition, Ty expressly reserved its right to a jury trial on damages, but PIL, although consenting to the expedited discovery and hearing, made no statement regarding its waiver of a jury trial.

Following the status hearing, I entered a minute order on March 13, 2000 setting a discovery cutoff date of May 2, 2000. After discovery closed, but before a final hearing on the merits was held, Ty moved for summary judgment in connection with its copyright and trademark related claims, which I granted as to copyright claims but denied as to the trademark claims. Ty then moved for summary judgment for monetary relief as to its copyright claim, which I granted and subsequently entered final judgment on the claim under Federal Rule of Civil Procedure 54(b).

PIL appealed both summary judgment rulings, and the Seventh Circuit reversed. Ty, Inc. v. Publications Int'l, Ltd., 292 F.3d 512 (7th Cir. 2002), cert. den., 123 S.Ct. 892 (2003). It its opinion, the court noted that the "only question is whether PIL is entitled to a trial on its defense of fair use." Id. at 516. The case was reversed and remanded because, according to the Court, "[t]he proper characterization of PIL's Beanie Baby book is the kind of fact-laden issue appropriate for summary judgment only in extreme cases, which this case is not — in part because of differences among the books the district court found infringed Ty's copyright." Id. at 519. Rehearing and rehearing en banc were denied by the Court on July 11, 2002, and Ty's Petition for Certiorari before the U.S. Supreme Court was denied on January 13, 2003. Ty, Inc. v. Publications Int'l, Ltd., 123 S.Ct. 892 (2003).

On remand, PIL has indicated that it intends to pursue, as a defense to Ty's copyright and trademark infringement claims, that Ty has misused its copyrights. In that regard, PIL has recently named as potential witnesses fourteen individuals, including two attorneys for Ty. Along with putting forth this defense and in order to develop it, PIL has requested additional discovery on both damages and merits. Finally, PIL claims that it has not waived its right to a jury trial by agreeing to a Rule 65(a)(2) hearing. Ty has an opposite position on all of these issues. In response to this dispute, I have given both parties an opportunity to brief the issues remaining on remand — an opportunity to which both parties have certainly availed themselves. I now set forth the remaining issues on remand.

PIL's Right to a Jury Trial

Once a valid jury demand has been made, it may not be withdrawn without the consent of both parties. Cram v. Sun Ins. Office, Ltd., 375 F.2d 670, 675 (4th Cir. 1967); Thomson v. Jones, 102 F.R.D. 619, 621-22 (N.D.Ill. 1984). Federal Rule of Civil Procedure 39(a) specifies the limited conditions under which such consent can be given: (1) a written stipulation, or (2) an oral stipulation made in open court on the record. According to Ty, both parties have waived their right to a jury on liability, but Ty has reserved its right to a jury trial on damages. PIL argues that it has not waived its right to a jury at all.

The first alleged basis for PIL's waiver is the March 7, 2000 status hearing at which both parties agreed to an expedited hearing and discovery schedule. After reviewing the transcript of the hearing, it is clear that Ty waived its right to a jury on all issues except damages, but it is far from clear that PIL also waived its right. First, PIL did not expressly do so. Wayne Giampietro, PIL's counsel during the hearing, never uttered the words "jury" or "bench trial." Second, the statements by Laura Haynie, Ty's counsel, cannot be construed as a waiver by PIL. Her discussion of the jury issue began with the plural "we," but she immediately and correctly switched to discuss Ty's desire to clarify that it was not waiving its right to a jury on damages. This statement cannot be read as an oral stipulation by PIL waiving its right.

Ty may very well be correct when it states that "there would have been no need to reserve the right to a jury trial on the issue of damages unless it was understood that the trial on the issue of liability was to be a bench trial," but Ty's reservation of its right merely reflects its understanding that the trial on liability was to be a bench trial, not PIL's understanding. Ty is in no position to state PIL's understanding on the basis of its own statement in open court. Nor can Mr. Giampietro's later comment ("I think that makes sense, your Honor") with respect to the scheduling issue be construed as an oral waiver, even though the Seventh Circuit "has not required strict compliance with Rules 38 and 39 to effect a waiver of a jury demand." Middle Tennessee News Co., Inc. v. Charnel of Cincinnati, Inc., 250 F.3d 1077, 1083 (7th Cir. 2001) (citation omitted). Even under the less formal standard, Mr. Giampietro's comments cannot be construed as complying with Rule 39's jury waiver provisions. In fact, the best source for Mr. Giampietro's understanding of the implications of his agreement to an expedited hearing comes from his own affidavit in which he states that it "was always my intention and understanding that Publication International would be entitled to a jury on all issues, including liability and damages" and that "[n]o comment I ever made in open court or to Ty's attorneys is to the contrary." I have no reason to doubt his honesty.

A second alleged basis for PIL's waiver of its right to a jury is its simple agreement to a Rule 65(a)(2) proceeding, but this agreement says nothing about whether that proceeding would be by bench or jury. Rule 65(a)(2) expressly provides that it "shall be so construed and applied as to save to the parties any rights they may have to trial by jury." Silence on the jury issue in the context of agreeing to a Rule 65(a)(2) proceeding hardly comports with the rule's admonition to preserve a right to a jury. Moreover, it is well established that mere agreement to consolidate an injunction hearing with a hearing on the merits cannot constitute waiver of a party's right to a jury. Bowles v. Bennett, 629 F.2d 1092, 1095 (5th Cir. 1980); Heyman v. Kline, 456 F.2d 123, 130 (2d Cir. 1972).

Finally, in light of recent contrary uses of the word "hearing" to connote proceedings before a jury, I am not persuaded by Ty's argument that the use of the word "hearing" carried the clear connotation that the expedited hearing was going to be a bench proceeding. See Penry v. Johnson, 532 U.S. 782 (2001); Jones v. United States, 527 U.S. 373 (1999); Mahaffey v. Schomig, 294 F.3d 907, 910 (7th Cir. 2002), cert. den., 123 S.Ct. 890 (2003); Bracy v. Schomig, 286 F.3d 406, 408 (7th Cir.), cert. den., 123 S.Ct. 169 (2002). Moreover, Rule 65(a)(2) hearings themselves, including those on liability, may proceed with a jury. E.g., Conner v. Jeffes, 67 F.R.D. 86, 88-89 (M.D.Pa. 1975). In the end, it is ambiguous at best whether PIL intended to waive its right to a jury. In light of this ambiguity, I will not hold that it has waived this right "of such importance." Dimick v. Schiedt, 293 U.S. 474, 486 (1935).*fn1

PIL's Misuse Defense

A second disputed issue is whether PIL is precluded from raising its misuse defense because the scope of the remand from the Seventh Circuit is limited to its fair use defense. PIL seeks to put forth the defense against both the copyright and trademark infringement claims.*fn2 Before addressing whether this defense is appropriately raised on remand, there are few preliminary matters. First, Ty claims that I denied PIL's request to brief this issue at the February 11, 2003 status hearing. Although I did decide that PIL had waived the defense and stated that I was "adhering to that view," I did permit the parties to "send me whatever you want to send me" and "whatever proffer you wish," essentially granting PIL leave to address the issue of whether it had waived the defense. In light of the parties' extensive briefing on this issue and in light of this issue's importance to the case, I deem it only fair to give these briefs full consideration with an open mind, which I have done.*fn3 Another preliminary matter is Ty's argument that PIL cannot raise a misuse defense because it failed to plead it prior to the remand (i.e., in its Answer). However, the defense is arguably, although not artfully, set forth in ¶ 60 of PIL's Answer, which involves PIL's allegation that Ty has misused its intellectual property by using threats and litigation to force individuals and companies to suppress information that is unfavorable or unflattering to Ty, thereby unlawfully extending the scope of its intellectual property rights.*fn4

Having established that PIL has adequately pleaded its misuse defense and that it has leave to argue for its reinstatement on remand, I now turn to whether the Seventh Circuit limited the claim on remand to the issue of fair use. Determining the scope of a reviewing court's mandate requires an examination of the appellate court's entire opinion. United States v. Parker, 101 F.3d 527, 528 (7th Cir. 1996) ("the scope of the remand is not determined by formula, but by inference from the opinion as a whole"); see also Exxon Chem. Patents, Inc. v. Lubrizol Corp., 137 F.3d 1475, 1483 (Fed. Cir. 1998) ("the nature of the district court's remaining tasks is discerned not simply from the language of the judgment, but from the judgment in combination with the accompanying opinion"). Pursuant to 28 U.S.C. ยง 2106, the Seventh Circuit has the option of issuing either general or limited remands to the district courts. See United States v. Young, 66 F.3d 830, 836 (7th Cir. 1995); United States v. Polland, 56 F.3d 776, 777 (7th Cir. 1995). The determination of whether a remand is limited or general cannot be reduced to a formula. The opinion must indicate either some explicit or implicit intent on the part of the circuit court to limit the scope of the proceedings on remand. That intent is often shown by an express statement limiting the scope of remand. In other instances, the intent to limit the scope of remand may be implied from the entirety of the circuit court opinion, ...


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