Susan Yorke, California Appellate Law Group (Photo: Courtesy Photo) Susan Yorke, California Appellate Law Group (Photo: Courtesy Photo)

For the second time in five years, the U.S. Court of Appeals for the Ninth Circuit has breathed new life into Malibu Textile’s claims that fast-fashion retailer H&M, among others, copied its lace designs. The most recent decision is succinct and unassuming, but it’s worth a quick read for copyright litigators and for plaintiffs attorneys more generally. It offers a clear articulation of the pleading requirements for copyright cases and a useful assessment of what questions are better left for summary judgment or a jury. It also offers a decisive rebuke of district courts that deny plaintiffs leave to amend their complaints without a solid reason for doing so.

The saga began when Malibu sued Label Lane International, Entry, and H&M for copyright infringement. The complaints alleged that defendants had illegally copied Malibu’s floral lace designs. The district court dismissed the cases with prejudice for failure to state a claim, and the Ninth Circuit reversed that decision by memorandum disposition, concluding that Malibu should have been offered a chance to cure the deficiencies in its complaints. Back the cases went to the district court, which again dismissed them with prejudice.

This time, the Ninth Circuit reversed in a published opinion. Written by visiting U.S. District Judge Jack Zouhary of the District Court of Ohio and joined by Ninth Circuit Judges Wallace Tashima and Paul Watford, the opinion provides a walk-through of the pleading requirements for each element of a copyright claim. To state a claim for copyright infringement, a plaintiff “must plausibly allege two things: that it owns a valid copyright in [the subject work], and that the defendant copied protected aspects of [the subject work]’s expression.” The Malibu lace cases have useful things to say about the pleading requirements for each of those points.

First, as to ownership, a plaintiff must plausibly allege that it owns valid copyright registration for its work. Here, Malibu alleged that it owned not one but two copyrights for two pieces of artwork depicting lace designs. Those two designs were “essentially the same artwork” with “slight variations” due to machinery differences. Given the extreme similarity between the two designs it owned, Malibu alleged that the defendants’ designs infringed on both of them, referring generally to its design (as embodied in the two copyrights) as the “subject work.”

Based on that characterization, the defendants attempted to argue that Malibu’s claim was based not on either of its copyrighted designs, but “rather upon some third work called the ‘subject work.’” As to that third work, the defendants claimed, Malibu had failed to make an allegation of ownership.

Not so, said the Ninth Circuit. Malibu’s shorthand for referring to its two almost-identical designs did not create a flaw in its pleadings. Nor was Malibu required to include images of both designs or registration materials for either of them in order to plausibly allege ownership. At the pleading stage, Malibu’s allegations that it owned the designs and that, together, they constituted the subject work, were sufficient.

Second, a plaintiff must plausibly allege that the defendant copied protected aspects of its work. It can accomplish this by alleging that the works in question are strikingly similar, or that they are substantially similar and that the defendants had access to the plaintiff’s work. Here, Malibu sought to plead its claims under both theories.

To support its claim of striking similarity, Malibu had attached photographs of its design next to the works done by the defendants. The works at issue were floral lace, and the complaint alleged that they contained nearly identical floral, leaf, and dot elements arranged in virtually the same way. In dismissing the complaint with prejudice, the district court decided otherwise, concluding that most of the elements of the design were nonprotectable and that the works were not, as a matter of law, strikingly similar.

The Ninth Circuit rejected that view. As an initial matter, although some of the natural elements of the lace—such as the appearance of a certain type of flower—were nonprotectable, the particular arrangement of those elements was protectable. The court also acknowledged that “the pictures do show minor differences between the subject work and the defendants’ works, such as in color, netting, and shape curvature.” Yet despite those differences, and contrary to the district court’s conclusion, Malibu had sufficiently pleaded striking similarity between the works.

The critical point was that a rational juror could have found that the differences that between the works were inconsequential. Indeed, the differences might have simply resulted from the use of “cruder, lower-quality” techniques in manufacturing the alleged copycat fabrics. A rational juror could have also found the differences to be “knowing modifications, which could be evidence of willful copying.” And to the extent that some of the similarities between the works may have, as the defendants argued, resulted from the constraints of the lace medium, those arguments were better suited to summary judgment, “perhaps with the aid of expert testimony.” Dismissal at the pleading stage was thus inappropriate.

Malibu had also attempted to plead its copyright infringement claims based on a theory of substantial similarity coupled with access. But in filing the operative complaints, Malibu attorneys mistakenly omitted their allegations regarding access. When they realized the error, the parties filed a joint stipulation seeking leave to file amended versions of the complaints to add the access allegations. Malibu included a declaration explaining the mistake and redlined copies of the proposed amended complaints. The district court denied leave to amend in a one-sentence, handwritten order: “Denied, no good cause is shown.”

The Ninth Circuit reversed that ruling, too. The court concluded that Malibu’s proposed access allegations would have been sufficient to state a claim under a theory of substantial similarity. Malibu asserted that approximately 1 million yards of its lace had been manufactured in over 20 mills, that some of the mills had improperly offered the patterns to other customers, and that Malibu and the defendants operated in the same markets. This was good enough to plausibly allege that the defendants “had reasonable opportunities to view the subject work.”

Because Malibu could have plausibly stated a claim under this theory had it been permitted to amend its complaints, the district court’s denial of leave to amend and dismissal with prejudice amounted to an abuse of discretion. The court reiterated that amendment should be liberally granted, and that an “outright refusal to grant leave to amend without a justifying reason … is an abuse of discretion.”

The court also offered a stern warning about the very real costs of premature dismissal. By attempting to resolve Malibu’s copyright claims by repeatedly dismissing them at the pleading stage—in apparent disregard of the Ninth Circuit’s prior remand order—the district court had in fact caused the case to drag on. The opinion noted that “it is the responsibility of ‘the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.” With five years spent at the pleading stage, that “aspirational goal” was not achieved here.

Although the Malibu lace cases don’t necessarily break new ground, they should prove useful for copyright plaintiffs trying to make it past the pleading stage. It can always be tempting for a judge to look to two photographs and decide that the works at issue just aren’t similar enough. But many of those determinations are more suitable for summary judgment or a jury, and, as these cases aptly illustrate, attempting to shortcut the process can actually prolong it.

On Appeals is a monthly column by the attorneys of the California Appellate Law Group LLP, an appellate boutique with offices in San Francisco and Los Angeles. Susan Yorke is of counsel with the firm. She served as a law clerk on the U.S. Court of Appeals for the Ninth Circuit for two judges and in the Appellate Division of the Oregon Department of Justice. Find out more about Yorke and the California Appellate Law Group LLP at www.calapplaw.com.