Klauber Brothers, Inc. v. QVC, Inc.

Background

Klauber Brothers, Inc. alleged that QVC, Inc., Quarate Retail Group, Inc., Xcel Brands, Lai Apparel Design, Inc., and unidentified defendants manufactured, caused to be manufactured, and sold fabric and clothing that infringed seven lace-design copyrights. The First Amended Complaint included copyright-registration certificates, descriptions and photographs of the designs, comparisons with the accused products, and diagrams identifying allegedly copied elements.

Klauber Brothers asserted direct copyright infringement claims and secondary claims based on contributory and vicarious liability. It alleged that the defendants had access to the designs through its showroom, samples, copies, and garments bearing the designs. It also alleged that QVC and Quarate had agreements with Xcel and Lai giving them oversight and control over the sourcing of lace, and that the defendants profited from sales of the accused products.

The defendants moved to dismiss under Rule 12(b)(6), arguing that Klauber Brothers had not adequately alleged valid copyrights, substantial similarity, knowledge or access, secondary liability, or willful infringement.

Copyright Ownership and Similarity

The court held that the registration certificates attached to the First Amended Complaint were sufficient at the pleading stage to support the allegation that Klauber Brothers owned valid copyrights. The defendants could attempt to rebut that showing later, but Klauber Brothers was not required at this stage to provide the deposit materials associated with the registrations.

The court applied the ordinary-observer test for substantial similarity, asking whether an ordinary observer would overlook differences and view the works as having the same aesthetic appeal. It found that the accused products were substantially similar to Design A and Design D. The court found that the accused products were not substantially similar to Designs B, C, E, F, and G, because differences in structure, shading, texture, arrangement, and overall appearance made the designs distinct. The court ruled that the claims involving those five designs failed as a matter of law.

Access and Direct Infringement

Even for Designs A and D, where substantial similarity was adequately alleged, the court held that Klauber Brothers had not adequately pleaded copying or access. The complaint stated generally that the designs had been sampled or sold to numerous people in the fashion and apparel industries, and that the defendants could have encountered the designs through showrooms, design libraries, samples, third-party copies, or garments sold to the public.

The court found those allegations too general because they did not identify how much lace was distributed, when it was distributed, or to whom it was distributed. Without facts connecting the defendants to the designs at the relevant time, the court could not reasonably infer that the defendants had seen or could have seen them. The court therefore held that the direct infringement claims failed to state a claim.

Contributory and Vicarious Liability

The court dismissed the contributory infringement claim because Klauber Brothers had not adequately alleged that any defendant knew about the designs or knew of infringement by another party.

The court found that the allegations of control over manufacturing and financial benefit were enough, at the pleading stage, to suggest the possible elements of vicarious liability. Vicarious liability does not require actual knowledge, but it does require an underlying or primary infringement by a defendant or a third party. Because Klauber Brothers had not adequately alleged direct infringement by the defendants and had not identified a primary infringement by a third party, the vicarious liability claim also failed.

Other Issues and Disposition

The court did not decide the willful-infringement allegations, stating that willfulness primarily concerned damages and reserving that issue.

Klauber Brothers requested permission to amend its complaint again. The court denied that request because the First Amended Complaint had already been filed after an earlier motion to dismiss raised substantially the same deficiencies, giving Klauber Brothers an opportunity to address them.

The court granted the defendants’ Motion to Dismiss the First Amended Complaint. It directed the clerk to close the motion at docket entry 27 and terminate the case. The opinion does not describe the dismissal as being with or without prejudice.