United States Naval Institute v. Charter Communications, Inc.

936 F. 2d 692 (2d Cir. 1991)

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Nature of the Case

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Facts

Naval Institute (P) entered into a licensing agreement with Charter Communications and Berkley Publishing Group (D) to publish a paperback edition of the Hunt for Red October. That license called for the book to be published no sooner than October 1985. D shipped editions to retailers before October. The paperbacks were being sold by September 15, 1985. P sued for a breach of the licensing agreement when it learned that D was going to ship the paperbacks early. It unsuccessfully sought a preliminary injunction. The trial court ruled that D was entitled to ship early as it was industry custom. On appeal that was reversed and this court held that the Agreement did not prohibit early shipment but that that the terms of the Agreement meant at least that D was not allowed to cause such voluminous paperback retail sales prior to that date and that D, therefore, breached the agreement. On remand, P asserted that it was entitled to recovery for copyright infringement and it sought all of D’s pre-October 1985 profits on the sales. D contended that it could not be held liable for a copyright infringement because it was the exclusive licensee and at most, there was only a claim for a breach of contract, and since P had disavowed pursuit of that option there was no claim to be litigated. D also argued that P was inflating the alleged profits. The judge rejected D’s claim and found that P’s copyright was infringed and P was entitled to those damages. The court calculated P’s actual damages as the profits P would have earned from hardcover sales if the paperback had not been offered for sale. The court ruled that the September 1985 sales would not have exceeded the August 1985 sales and awarded P $35,380.50 in damages. P appealed and D cross-appealed.