Paramount Pictures Corp. v. Carol Publishing Group, Inc.
1998 U.S. Dist. LEXIS 20864, 1998 WL 789734, 25 F. Supp. 2d 372 (1998)
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Rule of Law:
An injunction does not bind non-parties who acquired allegedly infringing goods from an enjoined defendant in a completed transaction prior to the issuance of the injunction, as their subsequent, independent actions do not constitute "active concert or participation" under Federal Rule of Civil Procedure 65(d).
Facts:
- In December 1997, Carol Publishing Group shipped nearly 6,000 copies of the book "The Joy of Trek" to various independent distributors and retailers.
- The books were sold on a "sale or return" basis, a type of transaction where the buyer takes title and ownership of the goods upon delivery but retains the right to return any unsold inventory.
- Under this arrangement, the sales transactions between Carol Publishing and the non-party distributors and retailers were completed before any court order was issued.
- After these sales were completed, Paramount Pictures Corporation obtained a preliminary injunction against Carol Publishing to stop all further sales and distribution of the book.
Procedural Posture:
- Paramount Pictures Corporation sued Carol Publishing Group and Sam Ramer for copyright infringement in the U.S. District Court for the Southern District of New York.
- Paramount moved for a preliminary injunction to stop the sale and distribution of the book "The Joy of Trek."
- The district court granted the preliminary injunction, enjoining Carol Publishing from further printing, publishing, or selling the book.
- Paramount then filed a request with the district court for a supplemental order to clarify whether the injunction also applied to non-party distributors and retailers who already possessed copies of the book.
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Issue:
Does a preliminary injunction enjoining a publisher from selling an infringing book also bind non-party distributors and retailers who purchased copies of the book in a "sale or return" transaction before the injunction was issued?
Opinions:
Majority - Scheindlin, J.
No. A preliminary injunction does not bind non-party distributors and retailers under these circumstances because they are not acting in "active concert or participation" with the enjoined publisher. An injunction's power is prospective and does not reach backwards in time to actions, such as a completed sales transaction, that occurred before the injunction was issued. According to the Uniform Commercial Code, title in a "sale or return" transaction passes to the buyer upon delivery, meaning the non-party booksellers owned the books before the injunction existed. Their subsequent resale of this property is an independent act, not a coordinated effort with Carol Publishing to violate the court's order. Therefore, the non-parties are not bound by the injunction, and Carol Publishing has no duty to notify them of it.
Analysis:
This decision clarifies the scope of "active concert or participation" under Rule 65(d), emphasizing its temporal limits. It establishes that a pre-injunction, completed transaction, such as a "sale or return," severs the legal relationship required to bind a non-party. This means plaintiffs cannot rely solely on an injunction against a primary infringer to stop downstream sales by third parties; they may need to initiate separate legal actions against those third parties to halt the distribution of infringing goods already in the market.
