Shapiro, Bernstein & Co. v. H. L. Green Company

316 F.2d 304 (2nd Cir. 1963)

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Nature of the Case

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Facts

Jalen (D) operated the phonograph record department as a concessionaire in twenty-three stores of D pursuant to written licenses from D. The licensing agreements provided that Jalen (D) and its employees were to 'abide by, observe and obey all rules and regulations promulgated from time to time by D. * * *' D, in its 'unreviewable discretion', had the authority to discharge any employee believed to be conducting himself improperly. Jalen (D) agreed to save D harmless from any claims arising in connection with the conduct of the phonograph record concession. D was to receive a percentage -- in some cases 10%, in others 12% -- of Jalen's (D) gross receipts from the sale of records, as its full compensation as licensor. Jalen (D) ordered and purchased all records, was billed for them, and paid for them. All sales were made by Jalen (D) employees, who, as the District Court found, were under the effective control and supervision of Jalen (D). All of the daily proceeds from record sales went into D's cash registers and were removed therefrom by the cashier of the store. D deducted its 10% or 12% Commission and deducted the salaries of the Jalen (D) employees, which salaries were handed over by D to one of Jalen's (D) employees to be distributed to the others. Social security and withholding taxes were withheld from the salaries of the employees by D, and the withholdings then turned over to Jalen (D). Then the balance of the gross receipts of the record department was given to Jalen (D). Customers got a receipt on a printed form marked 'H. L. Green Company, Inc.' P's complaint alleged that D was liable for copyrights infringement because it 'sold, or contributed to and participated actively in the sale of' the so-called 'bootleg' records manufactured by Jalen (D) and sold by Jalen (D) in D stores. Jalen (D) was found liable as the manufacturer of the 'bootleg' records. The court imposed liability for the statutory royalty of two cents for each record. The judge concluded that D had not sold any of the phonograph records and was not liable for any sales made by Jalen (D); accordingly, the court dismissed the complaint as to D. P appealed.