Full opinion text
OPINION, WITH FINDINGS OF FACTS, CONCLUSIONS OF LAW, AND DECISION WYATT, District Judge. These are the findings of fact and conclusions of law (Fed.R.Civ.P. 52(a)) and the decision in this action tried without a jury. The action was commenced on July 2, 1984, with a simple one count complaint for copyright infringement in which jurisdiction was asserted solely on a federal question (28 U.S.C. § 1331), specifically federal copyright laws (28 U.S.C. § 1338(a)). Any reason for the action as one to stop copyright infringement disappeared early in the litigation when, as will appear, the defendants in this action admitted infringement of the one copyright which they had in fact infringed. The action has for over three years been persistently and aggressively prosecuted, not to stop copyright infringement but, as admitted by plaintiff in its “Revised Proposed Finding of Facts and Conclusions of Law” filed July 20, 1987, p. 3; hereafter cited “P Brief,” for a different reason: “The basic issue in these actions is who should bear the reasonable expenses of a copyright enforcement program — the copyright owner which has had its property infringed or the persons who have willfully infringed it.” Under the seemingly permissible guise of securing for plaintiff “(a) the amount of statutory damages, if any ... and (b) ... the amount of costs and attorneys’ fees, if any, ...”. (Pre-Trial Memorandum of Plaintiff, filed June 17, 1985, p. 25, hereafter referred to as “PTM”) the real purpose of the plaintiff in this action has been to shift the business expense of promoting a motion picture away from its producer (Warner, which made a large profit) and to place it, not on a willful infringer, but on a small shopkeeper who committed but a single and innocent infringement. Thus, the reality is that, while defendants at no time caused any damages whatever to it, Warner has been pressing this litigation for over three years for the purpose of collecting disproportionately large statutory damages and attorneys’ fees. The motives for this litigation seem dubious; they have not been necessary to protect any copyright interest of Warner; they have not been necessary to compensate plaintiff for any damages suffered or reasonable expenses incurred; they have not been necessary to deter and penalize defendant, a small and innocent infringer; they seem in context to be “oppressive reasons” and “vexatious” within the meaning of those words in the opinion of the Supreme Court in F.D. Rich Co. v. Industrial Lumber Co., 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703 (1974). Moreover, the litigation, unreasonably prolonged, was itself conducted in an unfair, vexatious, and oppressive manner. There was a joint trial in October 1986 and May 1987 of this action and nine other actions “involving a common question of law or fact” (Fed.R.Civ.P. 42(a)). The same plaintiff brought each of the ten related actions; the defendants in each of the actions were different. The joint trial was directed by order filed October 2, 1986. While the order for a joint trial directed that the ten actions be “consolidated for a joint trial,” it is well settled that consolidation is permitted as a matter of convenience and economy in administration, but does not merge the suits into a single cause, or change the rights of the parties, or make those who are parties in one suit parties in another. Johnson v. Manhattan Ry. Co., 289 U.S. 479, 496-497, 53 S.Ct. 721, 727-728, 77 L.Ed. 1331 (1933). See also Garber v. Randell, 477 F.2d 711, 715 (2nd Cir.1973). Where several actions are ordered to be tried together “each retains its separate character and requires the entry of a separate judgment.” 9 Wright & Miller, Federal Practice and Procedure: Civil § 2382 at 254 (1971). A separate decision, with findings of fact and conclusions of law, will be filed hereafter in each of the nine other actions tried together with this action. The principal issue as initially framed by the pleadings was whether there should be a permanent injunction against any infringement by defendants of the two copyrights in suit. As will appear, the defendants early offered on November 2, 1984, to consent to a permanent injunction as to both copyrights, this despite the fact that plaintiff had no evidence when the action was commenced (and had never had any evidence) of any infringement by defendants of one of the two copyrights claimed in the complaint to have been infringed; this offer by defendants was rejected by plaintiff, even though it gave plaintiff protection from copyright infringement, because it did not promise payment of substantial statutory damages (there were no actual damages) and attorneys’ fees. The defendants do not now contest, and have not for a long time contested, a permanent injunction as to one of the copyrights (that as to the Gizmo character), the only copyright as to which plaintiff has ever had any evidence of infringement. The claim as to infringement of one copyright (that as to the Stripe character), as will appear, was withdrawn by plaintiff on June 17, 1985. There now remain, some three years after plaintiff had been assured of the primary relief it sought, the following issues for decision which plaintiff pressed to trial: (a) should the court award statutory damages to plaintiff against defendants under 17 U.S.C. § 504(c) and, if so, in what amount?; (b) should the Court “in its discretion,” under 17 U.S.C. § 505, “allow the recovery of full costs” by plaintiff against defendants, including “a reasonable attorney’s fee”?; and (c) should the Court “in its discretion,” under 17 U.S.C. § 505, “allow the recovery of full costs” by defendants against plaintiff, including “a reasonable attorney’s fee” or make such an allowance under Rule 11 of the Federal Rules of Civil Procedure, or otherwise? For the reasons hereafter stated, the decision of this Court is (a) there will be judgment in favor of plaintiff enjoining defendant Dae Rim Trading, Inc. and Yun Yon Cho from infringement of Registered Copyright VAu 54-952 (“Gizmo”); (b) there will be judgment in favor of plaintiff against defendant Dae Rim Trading, Inc. in the sum of $100 as statutory damages for past infringement of Registered Copyright VAu 54-952 (“Gizmo”); (c) no costs are allowed to plaintiff; no attorney’s fee is awarded to plaintiff; and (d) full costs are allowed to defendants Dae Rim Trading, Inc. and Yun Yon Cho against plaintiff Warner; a reasonable attorney’s fee is awarded to defendants against plaintiff; no costs are allowed and no attorney’s fee is awarded to defendants in defending against the infringement of Registered Copyright VAu 54-952 (“Gizmo”) prior to February 20, 1985, when defendants conceded that they had infringed that copyright. A. PROCEDURAL STEPS THROUGH COMPLETION OF THE TRIAL 1. The plaintiff in this action is Warner Bros. Inc., (“Warner”), a Delaware corporation, whose principal place of business is on Warner Boulevard in Burbank, California, a suburb of Los Angeles near Hollywood. Warner is a subsidiary of Warner Communications Inc. (“Warner Com.”), a very large corporate enterprise, the stock of which is publicly owned and listed on the New York Stock Exchange and on other exchanges. Warner Com. has offices at 75 Rockefeller Plaza in New York City and is reported in Standard and Poor’s Register for 1986 to have had revenue in that year of 2.23 billion dollars; Warner Com. and subsidiaries are similarly reported to have 8,000 employees, of whom 3,000 are employed by Warner. Warner provides entertainment services to the public, including the production and distribution of motion pictures; it is reported also to license feature films for television, to distribute TV specials, to produce phonograph records, and to publish music. On June 8, 1984, Warner released for public showing a motion picture entitled “Gremlins” which became very popular and successful, with attendant and wide publicity. The “Gremlins” motion picture is aimed primarily at children; it concerns fanciful characters which Warner, in the complaint, avers (para. 7) “were developed specifically for the film”; the relevant such characters are “Stripe” and “Gizmo.” According to the film, Gizmo is a “Mogwai”; the Mogwais are benign and cuddly; Stripe is a “Gremlin”; the Gremlins are evil; under some circumstances, a Mogwai becomes a Gremlin. Warner obtained and owns a valid copyright in the “Gremlins” motion picture, which copyright has been registered with the Copyright Office, but no claim is made on that copyright (T5-8; “T” references are to pages of the stenographic transcript of the joint trial). Warner obtained and owns valid copyrights in the graphic representations of Stripe and Gizmo, which copyrights were registered for copyright as “artwork” or “pictorial work,” being drawn representations of the characters “Stripe” (certificate YAu 54-951, dated December 30, 1983) and “Gizmo” (Certificate VAu 54-952, dated December 30, 1983). After its release on June 8,1984, the film was widely promoted nationally by Warner. Warner claims (PTM, p. 3) that in the first 66 days after release, Gremlins had a box office “gross” of about $125,000,000; that by the end of 1984 it had “grossed” more than $142,000,000; that it was the third most successful film released in 1984; that Warner, through another subsidiary of Warner Com., promoted a licensing campaign for Gremlins character merchandise; and that licenses for such Gremlins merchandise generated about $8,400,000 in “revenue” for Warner through May 1985 (PTM, p. 4). It should be noted that Warner expresses the financial success of Gremlins in terms of “gross,” “revenue,” and the like. The actual profit to Warner has not been given, so far as we have found. Shortly after the release on June 8,1984, of the Gremlins motion picture for public showing, Warner received information (in a way not disclosed in the record, so far as we have found) that “a number of shops” (P Brief, p. 7) in New York City may have been offering for sale merchandise believed to infringe the Stripe or Gizmo, or both, copyrights. In this connection, Warner at some point employed an investigative organization. It appeared that the infringing merchandise included dolls, key chains, puffy stickers (stickers for children to affix to books, toys, clothing, etc.), and the like. Nearly all the small shops selling such merchandise were apparently owned by recently arrived Koreans and were operated as family businesses. 2. On July 2, 1984, Warner filed in this Court a number of complaints commencing separate civil actions for infringement of its two copyrights, these being the graphic representations of the Stripe and Gizmo characters from the film. It is not certain how many such separate civil actions were then commenced but this action was one of them, as were the other nine actions jointly tried with this action. The commencement of these actions so soon (less than a month) after release of the motion picture was a substantial part of what was much later (July 20, 1987) to be described by counsel for plaintiff (P Brief, p. 3) as “a copyright enforcement program.” This “program” appears to have been one of the major aggressive Warner activities referred to in the complaint (para. 10) as “the extensive publicity, merchandising and licensing campaigns associated with Gremlins.” The complaint (not verified nor required to be (Fed.R.Civ.P. 11)) named as defendants Dae Rim Trading, Inc. (“Dae Rim”) and “John Doe.” Dae Rim was averred to be a New York corporation which conducted “business activities” at 43 West 30th Street [in Manhattan]; the nature of the business activities was not described. The identity of John Doe was said to be “presently unknown” but, on “information and belief” (no grounds therefor were given), was said to be “an agent” of Dae Rim, resident in New York; apparently it was thought that he was male. John Doe is mentioned by that fictitious name once in the complaint (para. 4); thereafter he was presumably meant to be included as one of the two “defendants” in the charging paragraphs of the complaint. It is alleged that Warner, through a “licensing agent” (which, since it is another subsidiary of Warner Com. need not be distinguished hereafter from Warner itself), had licensed others to use the copyrighted Stripe and Gizmo character drawings “in the production, marketing and promotion of various products.” What these “various products” are is not stated (except that they include dolls). There is one claim in the complaint. This is there summarized as follows: “Defendants have offered for sale and continue to offer for sale various products bearing the likenesses of Gremlins characters including dolls.” It is then averred that defendants had no license from plaintiff, and that the “activities of defendants” were “willful acts of infringement.” This “willful” infringement was sought to be restrained on the claim that otherwise there would be “irreparable damage” to plaintiff. This “irreparable” damage was said to be (a) in the first instance to the licensees of Warner “for the manufacture and distribution of Gremlins products and, accordingly, will irreparably damage” Warner itself, and (b) in the reduction of revenues to be derived from the distribution of the motion picture. There is no averment that defendants had actually sold any infringing merchandise items. They were said only to have “offered” them for sale. The only item specifically named as having been “offered” for sale was “dolls” (para. 11). The complaint concluded with a prayer for relief. This action, and the others commenced at the same time, were assigned in normal course to Judge Sofaer. 3. At 5:30 in the afternoon of the same day (Monday, July 2, 1984) on which the complaint had been filed four hours earlier, Judge Sofaer signed ex parte a six-page “temporary restraining order, seizure and impoundment order and order to show cause for preliminary injunction and accelerated discovery.” These orders had been prepared by counsel for Warner and presented by them to Judge Sofaer, along with supporting papers as follows: (a) an affidavit by one of the counsel to Warner, sworn to July 2, 1984, to which was annexed a copy of the complaint; (b) the affirmation of an Assistant Secretary of Warner, dated July 2, 1984; (c) the affidavit of the head of the trademark and copyright licensing division of Warner, sworn to July 2,1984; (d) the affidavit of Mr. Cullen, an employee of The Stonegate Agency, Inc., the private investigating firm (“Stone-gate”) employed by Warner, (sworn to July 2, 1984); and (e) the affidavit of Mr. Aglione, head of Stonegate, sworn to July 2, 1984. In all, the ex parte orders and supporting papers, bound together as one group of documents, ran to about fifty pages. There was also submitted to Judge Sofaer a 27-page “Memorandum in Support of Plaintiffs Application for a Temporary Restraining Order, Preliminary Injunction, Seizure and Impoundment Order and Accelerated Pre-trial Discovery.” Fed.R.Civ.P. 65(b) forbids the granting of a temporary restraining order without notice unless it “clearly appears from specific facts shown by affidavit or by the verified complaint [the complaint here was not verified] that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or his attorney can be heard in opposition.” No “specific facts” were shown as to anything Dae Rim or “John Doe” was doing which would cause any immediate injury or any irreparable injury to Warner before the defendants could be heard, and it was admitted in the papers submitted by Warner that no efforts had been made to give any notice to defendants. The only “specific facts” about anything the defendants may have done is in the affidavit of Robert Cullen, an investigator, who says that on June 27, 1984, at the Dae Rim store on West 30th Street he asked for “Gremlins merchandise” and was sold six “six inch Gremlins dolls” for $15. The dolls bought were not themselves submitted, nor any description, nor any photograph. There was no evidence in the papers — nor was any such evidence at any time later submitted — that the dolls were in any way of inferior quality; it was not explained in the papers that all the dolls bought from Dae Rim were in the likeness of Gizmo, nor that Warner, as it later admitted, had no evidence of infringement by defendants of the Stripe copyright. The orders submitted to Judge Sofaer were signed by him ex parte in the exact form as drafted by counsel for Warner; the spaces left blank for the return date and hour of the order to show cause, the amount of the bond to be posted by Warner, the time within which the orders and supporting papers were to be served on defendants, and the like were filled in by hand, presumably by Judge Sofaer. The orders submitted ex parte to Judge Sofaer were harsh and drastic to an extreme. With great deference to the well known learning and ability of Judge So-faer, it must be said that the proposed orders should never have been submitted by counsel nor should they have been signed by a judge of this court; they were unauthorized and in error. Especially mistaken is the order that employees of Stone-gate, a private investigating firm employed by Warner, search the “business premises” of defendants and “seize forthwith and deliver to plaintiffs counsel,” (emphasis supplied), among other things, “all copies or colorable imitations” of the two copyrighted works in suit and “all books, records, correspondence and other documents” of defendants which “relate to” such copies, etc. It seems clear that such an order is neither authorized nor constitutional nor, in any event, could it lawfully be made ex parte. Yet the order was signed ex parte on July 2,1984, and contains these provisions (emphasis supplied): ORDERED, that (1) the United States Marshal for the Southern District of New York, or one or more of his deputies, or (2) The Stonegate Agency, Inc., a private investigatory firm, through one or more of its employees, be, and they hereby are, directed to (a) search defendants’ business premises located at 43 West 30th Street, New York, New York 10001, and (b) seize forthwith and deliver to plaintiffs counsel pending further order of this Court: (i) all labels, signs, prints, packages, wrappers, receptacles and advertisements in defendants’ possession, custody or control bearing any simulation, reproduction, counterfeit, copy or colorable imitation of plaintiff’s Registered Copyrights VAu 54-951 and VAu 54-952; (ii) all simulations, reproductions, counterfeits, copies or colorable imitations of plaintiff’s Registered Copyrights VAu 54-951 and VAu 54-952; (iii) all plates, molds, matrices and other means of making said simulations, reproductions, counterfeits, copies or colorable imitations of plaintiff’s Registered Copyrights VAu 54-951 and VAu 54 — 952; and (iv) all books, records, correspondence and other documents in defendants’ possession, custody or control which relate to said simulations, reproductions, counterfeits, copies or color-able imitations of plaintiff's Registered Copyrights VAu 54-951 and VAu 54-952, or may provide information respecting the vendors or purchasers of such merchandise; .... 4. On July 3, 1984, Cullen, a Stonegate investigator acting for Warner, served at the Dae Rim store two copies of the summons and complaint, the temporary restraining order, what had euphemistically been entitled by plaintiff’s counsel a “seizure and impoundment” order, the order to show cause for a temporary injunction and other relief, and a legal memorandum — a mass of legal papers, formidable even to one learned in law — on Yun Yon Cho “an oriental female approximately 5'0" tall and 40 years of age” who advised Cullen that she was the employee in charge, the owner not being then in New York. (It turned out that Yun Yon Cho is the wife of the owner.) This is recited in the affidavit of service of Cullen (sworn to on July 5, 1984) and filed with the summons on July 6, 1984. Whether any lawyer for Warner was present when service on Yun Yon Cho was made, does not appear. This was a rather aggressive legal move against an oriental woman, a small shopkeeper, with little understanding of English, with apparently no understanding of United States law in general (much less copyright law in particular) and without a long familiarity with the cultural habits of this country, who was working 12 to 14 hours each day and whose husband was away in California. The most extraordinary aspect of the Warner move was the so-called “seizure and impoundment” order, which (as will later be shown) was clearly an unlawful order procured by Warner to enable its private investigators to search the business premises of defendants, to seize items of merchandise and “books, records, correspondence” relating thereto and to turn over everything seized to counsel for Warner; for what purpose the turnover was to be made was nowhere stated. At the same time as the voluminous legal papers were served on July 3, 1984, on the “oriental female,” an unlawful search of her business premises was made (under the order of Judge Sofaer) by a private investigator for Warner. While no mention of the search was made in the affidavit of service, it had been erroneously directed, as before noted, by Judge Sofaer in the late afternoon of the day before; Cullen was told by Stonegate to serve the papers and “to make the seizures” (T786); Cullen could not remember who was with him when the search and seizure took place, but did remember “that there were teams that conducted various seizures, but then the teams were split” and he could not remember who was on his “team” (T788). When asked at trial who picked out the documents to be seized as relating to the infringing goods, counsel for Warner explained they were the “attorneys for the plaintiff ... in the final analysis” and further that “these seizures are typically done by the attorneys for the plaintiff together with investigators working under their supervision” (T120). In any event, Warner made an “inventory” of the July 3 seizure at Dae Rim. This shows that no infringing goods were found at Dae Rim, but after a search by Warner of the business records and papers, many papers and records were seized by Warner; these included many invoices, a Visa card file and a Rolodex (address wheel) (Dae Rim. Ex. H., T349-350). The “inventory” (Dae Rim Ex. H) is on a photocopied form prepared by Warner and apparently widely and indiscriminately used by Warner, its counsel, and investigators for similar searches and seizures in trademark and copyright cases. The form is signed by Cullen and “for defendant” by Yun Yon Cho, who is elsewhere in the form described as the “person served” and as the “worker employee in charge.” The inventory was not filed in this Court, nor any copy given to either defendant. The disposition of the books and papers seized was not shown at trial. In response to my inquiry, counsel for Warner advise that such books and papers were turned over to counsel for Warner, by whom they were copied and the originals returned within five days to Dae Rim. 5. It is established that on Friday, July 6, 1984, Mr. Dunnegan (one of counsel to Warner), well knowing that the defendants were not represented by counsel (T951), went to the Dae Rim store and, without advising Yun Yon Cho that she should consult a lawyer (T474, T951), presented to her a form of “preliminary injunction by consent” with a blank for Judge Sofaer’s signature; he asked her to sign the injunction consent document and thereby to consent to its being made by Judge Sofaer. The caption names Dae Rim and “John Doe” as defendants and the consent is to an injunction in substance against the infringement of the Warner Stripe and Gizmo copyrights, elaborated in five legalistic subpara-graphs. Relying on the statements of Dunnegan, the consent form was then signed by Yun Yon Cho as “authorized agent” for Dae Rim and also by her individually, the latter signature presumably to serve as an attempted justification for inserting her as a defendant in place of John Doe. The paper was signed by Yun Yon Cho in the two capacities and was acknowledged on July 6 in the Dae Rim store before Mr. Dunnegan as a notary public. The consent to a preliminary injunction recites that “The parties hereby consent to the entry of this order.” Presumably the use of the word “parties” was further to promote the effort by Warner to make Yun Yon Cho — then unrepresented by any attorney — a party to the action in place of “John Doe.” Moreover, the consent was to an injunction against any infringement of either of the two copyrights in suit; Warner at the time had no evidence, and had never had any evidence, that Dae Rim or Yun Yon Cho had infringed the Stripe copyright (T967) or had ever infringed the other copyright (Gizmo) except for the one sale on June 27, 1984, to Warner’s own investigator (T967). In any event, the proposed consent as signed by Yun Yon Cho on July 6 was submitted to Judge Sofaer; the injunction was initialed by him on Wednesday, July 11, and was filed the same day in the Clerk’s office. On July 18, 1984, a Stonegate investigator personally delivered to Yun Yon Cho at the Dae Rim store a copy of the injunction by consent, initialed by Judge Sofaer on July 11, 1984. This is recited in an affidavit of service, sworn to on July 31, 1984, and filed on August 28, 1984. The affidavit now describes Yun Yon Cho as “an oriental female, approximately 39 years of age, 5'4" tall, 125 lbs., with black hair_” It is not stated what defendants were claimed to have been thereby served. The caption of the affidavit of service named Dae Rim and “John Doe” as defendants. The “preliminary injunction by consent,” annexed to the affidavit of service, did not indicate that it had ever been signed or dated by Judge Sofaer; to the contrary, the places for the signature and date by Judge Sofaer were blank. The service would appear to have been a nullity but, in any event, it is undisputed that Dae Rim had not committed any infringement of any copyright of Warner’s since the one sale to Cullen on June 27, 1984. 6. On Friday, September 28, 1984, Warner served by mail, according to the affidavit of service by Mr. Dunnegan, sworn to October 1, 1984, “the Offer of Judgment and Notice of Pre-Trial Conference in the above-entitled action on defendants Dae Rim Trading, Inc. and Yun Yon Cho.” The “above-entitled action” in its caption for the first time showed the defendants as Dae Rim and Yun Yon Cho. “John Doe” has been replaced as a defendant by Yun Yon Cho but this could not properly be done without an order of the court (Fed.R. Civ.P. 21) and there had never been any such order. In any event, neither Dae Rim nor Yun Yon Cho has made any objection to the failure to proceed properly. The offer and notice were directed to Dae Rim and to Yun Yon Cho, showing that Warner well knew that they were not then represented by counsel. The notice was that a pretrial conference “has been scheduled” for Friday, October 19, 1984, before Judge Sofaer; that unless defendants were “represented by an attorney, who will appear on your behalf,” they are “required to attend” the conference and to serve and file an answer “immediately” unless they either “accept the offer of judgment being served herewith” or “do not object to judgment by default....” The “notice” with affidavit of service was filed on October 9, 1984; the “offer of judgment” against defendants in favor of Warner, which was the offer made by Warner, was not filed. Counsel for Warner have supplied a copy of its “offer of judgment” which “hereby offers to let judgment be taken awarding Warner” a permanent injunction against infringement of the two copyrights in suit and $6,000 damages, “with each party to the action to bear its own costs.” The offer of judgment by plaintiff Warner was not an authorized procedure; an offer of judgment is permitted to be served by a party “defending against a claim” (Fed.R.Civ.P. 68) but not by a party asserting a claim, as Warner was then most vigorously doing. There was no pretrial conference on October 19, 1984, an adjournment to October 26, 1984, having been approved (apparently) by Judge Sofaer. 7. The next move by Warner was on Tuesday, October 23,1984, when Warner caused notice to be served personally on Yun Yon Cho of a “motion for default judgment against defendants,” returnable before “this Court” on October 26, 1984. The defendants named in the caption are Dae Rim and Yun Yon Cho. The motion is supported by an affidavit of counsel to Warner, sworn to on October 22, and which recites merely that the “defendants were duly served with the summons and complaint,” were required to answer, “have failed to do so,” and “are in blatant default of their obligation.” It was not disclosed in the moving affidavit (as, it seems to me, should have been disclosed) that three days after service of the summons and complaint a Warner attorney had obtained from Yun Yon Cho, an “oriental female” known by him to be unrepresented by counsel, a consent to a preliminary injunction; that a temporary restraining order obtained ex parte and a consent preliminary injunction had been issued by Judge Sofaer and had been obeyed; that no infringing goods had been found on the premises when they were searched on July 3, 1984; that no copyright infringements had taken place thereafter; and that the owner of Dae Rim was away from New York. Moreover, the copy of the summons and complaint served on Yun Yon Cho with the notice of motion for a default judgment had as exhibits copies of trademarks of Louis Vuitton (see Dae Rim Ex. J, T388), the French luggage maker, rather than of copyrights of Warner; this would have been puzzling even to a lawyer and much more so to a non-lawyer with limited knowledge of the English language and of this country’s law. As will appear, the confusion of the Vuitton and Gremlin papers doubtless came about because counsel for Warner also represent Vuitton in many trademark matters but not, so far as I have found, in copyright matters. The motion of Warner for a default judgment was made returnable on October 26, 1984, and notice thereof, as above related, was served personally by Warner on Yun Yon Cho on October 23, 1984. 8. There is no record in the civil docket of any pretrial conference on October 26, 1984, and no stenographic transcript of any such conference, but apparently one was held. After inquiry by me, counsel for Warner explained in a letter, dated March 10, 1987, as follows: [O]ur records indicate that the conference originally scheduled for October 19, 1984, was adjourned to October 26, 1984. Although there was no stenographic transcript of the proceedings, I recall that (a) Mr. Razzano and the other counsel entered their appearances in these actions at that time, (b) Mr. Razzano and the other counsel indicated that they would answer the complaint forthwith, (c) Judge Sofaer asked Warner to withdraw its motion for a default judgment, and (d) Warner did so. No written order, however, was entered as a result of the conference. It thus appears that on or before October 26, 1984, Yun Yon Cho or her husband (returned to New York) had retained counsel — Mr. James L. Killerlane and Curtis, Morris & Safford (Mr. Razzano of that firm leading) — and that the motion of Warner for a default judgment had been withdrawn. According to an affidavit later filed in the action (sworn to on November 2, 1984), in support of “motion for a protective order” etc., at the pretrial conference before Judge Sofaer on October 26, 1984, Mr. Bainton represented Warner and Mr. Raz-zano of the Curtis firm represented Dae Rim and Yun Yon Cho and also defendants in other actions. Mr. Bainton declared that “Warner was ready for trial,” despite the fact that neither Dae Rim nor Yun Yon Cho had filed an answer to the complaint. Mr. Razzano declared that discovery was necessary before a trial could commence. Apparently the matter was left by Judge Sofaer for discussion between counsel, which took place. Mr. Bainton advised at such discussion that “Warner sought in addition to a permanent injunction only its attorneys’ fees, disbursements and statutory damages of $500.” Mr. Razzano advised that “extensive discovery would still be necessary.” Mr. Bainton asked for a letter explaining what discovery was needed. Under date of October 81, 1984, Mr. Razzano sent such a letter. 9. On November 2, 1984, Dae Rim and Yun Yon Cho served by hand and filed an answer with two counterclaims and a separate demand for jury trial. One of the two counterclaims was for money damages for enforcement by Warner of an “unlawfully granted” temporary restraining order; as already noted and as will appear, the ex parte temporary restraining order had indeed been granted unlawfully. Defendants appear to have been entitled to a jury trial on any claim by Warner to actual damages, or by them in a counterclaim; there is authority that defendants, even as to statutory damages, had a right to jury trial (Circuit Judge (then District Judge) Newman’s decision in Chappell & Co. Inc. v. Pumpernickel Pub, Inc., 79 F.R.D. 528, 529 (D.Conn.1977)). Any jury trial question is, of course now academic; the jury demand was later withdrawn by defendants. On November 2, 1984, along with their answer, Dae Rim and Yun Yon Cho served on Warner offers of judgment under Fed.R.Civ.P. 68. The offers of judgment were in each case for a permanent injunction substantially as demanded in the complaint. The offer for Dae Rim (but not for Yun Yon Cho) also included consent to a judgment for $250 as statutory damages. Each offer specified that “each party to the action to bear its own costs and attorneys fees.” Fed.R.Civ.P. 68 provides for an “offer of judgment” by any party “defending against a claim.” The offer of judgment must include “with costs then accrued,” not included in the offer by defendants here. The offers here were not filed, but filing is authorized under Rule 68 only when “the offer is accepted” and the offers here were not accepted by Warner. It should carefully be noted, however, that Warner, over three years ago, had offers of judgments from the two defendants it had named (eventually) in the caption of its complaint, which judgments would have then given Warner the principal relief sought in its complaint — a permanent injunction against any infringement of its two copyrights. Warner rejected these offers and for over three years has persistently and aggressively prosecuted this action to secure unwarranted statutory damages, costs and attorneys’ fees (the amount claimed greatly increasing with each passing day). 10. The next move by Warner was for a protective order or alternatively for a bond from the defendants. The protection sought was from discovery to the extent asked by counsel for defendants in the pre-trial conference of October 26, 1984, and thereafter. Notice of motion for such an order was served for Warner on Friday, November 2, 1984, at 7:30 in the evening, according to the affidavit of service. The offices were closed at that hour of the evening and the affidavit recites that the server “was unable to find a person in charge of the offices.” Warner attempted to support its motion by an affidavit, somewhat lacking in candor. The statements in the affidavit would in any event be confusing to the Court and prejudicial to the defendants because (among other things) they incorrectly applied to defendants the epithet “counterfeiters.” The lack of candor lies in the charge in the affidavit, sworn to November 2, 1984, that defendants were infringing Warners “copyrights” (plural) by sale of merchandise depicting “two characters” (emphasis supplied) from the Gremlins movie; and by emphasis in the affidavit on the fact that, between July 3, 1984, when defendants were first notified of the commencement of the action, and October 26, 1984, they “did not retain counsel in this action.” When this charge was made and the emphasis employed, Warner well knew that defendants had never infringed the Stripe copyright, one of the two copyrights on which the complaint was based, and that the only infringement of the other copyright by defendants was the $15 sale to a Warner investigator more than four months before. Warner also well knew that, while defendants did not retain counsel until October 26, 1984, they had not, since the single infringement on June 27, 1984, further infringed, had consented to a preliminary injunction, and had obeyed such an injunction. These significant facts were not disclosed to the Court in the affidavit. The confusion of the Court and the prejudice to defendants would result from Warner’s persistent misuse of the words “counterfeit” and “counterfeiters.” They are employed by Warner as synonyms for “infringe” or “infringing” and for “infring-ers.” The words “counterfeit” and “infringe,” however, are not synonyms; they have an entirely different meaning. The word “counterfeit” does not appear in the copyright law, neither in the Copyright Act of 1909 nor in the presently effective Copyright Act of 1976 (17 U.S.C. § 101 and following). The word “counterfeit” in the law of trade competition is used frequently in trademark law. For example, the trademark law (15 U.S.C. § 1114(1)(a)) provides remedies in a civil action by the owner of a registered trademark against any person who shall use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; (emphasis supplied) The word “counterfeit” is defined in the trademark law (15 U.S.C. § 1127) as: “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” The trademark law (15 U.S.C. § 1116(d)(1)(A)) also provides that in a civil action for “using a counterfeit mark in connection with the.sale, offering for sale, or distribution of goods or services, the court may, upon ex parte application, grant an order for the seizure of goods and counterfeit marks involved in such violation and the means of making such marks, and records documenting the manufacture, sale, or receipt of things involved in such violation.” The term “counterfeit mark” is defined in the trademark law (15 U.S.C. § 1116(d)(1)(B)) in relevant part as follows: a counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered;. The word “counterfeit” thus is properly used with respect to an item which is sold with a false trademark, because the false trademark is deceptive to the public since it falsely represents that the item was made by the owner of the trademark. There was no such false mark on the dolls sold by Dae Rim to the Warner investigator (PX 1-5). There was no mark of any kind on those dolls; there was nothing to show by whom they were made, or where. As Warner well knew, they had not been made or imported by defendants. There was no name or sign or other false claim that they were made by Warner or any licensee of Warner or had any connection with Warner or with the Gremlins movie. There was no copyright notice on the dolls claimed to infringe, as Warner’s witness, Grant, admitted (T66). They may well infringe the Gizmo copyright owned by Warner, but there is not the slightest excuse for describing them as “counterfeit.” There was a meeting on November 1, 1984 between counsel for Warner and counsel for Dae Rim. Settlement was then discussed. According to an undated declaration of counsel for Dae Rim (later filed November 7, 1984) Warner then “sought to receive $85,000.00 as the attorney’s fees and private investigator’s fees ...” and “demanded $5,000 from each defendant in settlement.” Counsel for defendants refused to settle on those terms, explaining in the cited declaration that “defendants are innocent infringers at worst and indeed are all themselves victims of the originator of the accused products.” The motion by Warner for a protective order or bond was submitted on elaborate moving and opposing papers and memoran-da of law. There was apparently no oral argument. By endorsed memorandum and order dated November 7, 1984, Judge So-faer denied Warner’s request for a bond and directed the parties to agree on the scope of discovery or to submit proposed orders so that he could decide their disagreements. The parties did agree and Judge Sofaer on November 20, 1984, “so ordered” their agreed “discovery schedule.” There was then a period of relative inactivity by Warner in this action, but at a pre-trial conference on February 20, 1985, not reflected in any docket entry nor in any transcript in the court’s file, the defendants in this action, according to counsel for Warner (PTM, p. 25), “conceded that they infringed one or both of the ‘Gremlin’s’ Character Copyrights.” This means that as early as November 2, 1984, by the offer of judgment, and confirmed on February 20, 1985, as just shown, Warner knew that defendants in this action did not contest the issue of infringement. 11. On June 17, 1985, counsel for Warner filed a 49 page “pre-trial memorandum of plaintiff” (“PTM”) in this action (and in those related). This is said (p. 1) to have been done “in anticipation of the joint trial of the actions.” It should be noted that in this document Warner withdrew, for want of any evidence of infringement, any claim in this action based on the copyright of the Stripe character, one of the two copyrights in suit. The statement of Warner was (p. 8): “Warner has no evidence of infringement of the Stripe copyright and so much of its claim as is based on that copyright is withdrawn.” Since the Warner claim was that two copyrights had been infringed and since Warner admitted that it had no evidence that one of the copyrights was ever infringed by defendants in this action, it would seem that Warner withdrew at least half the claim alleged in the complaint. In the “PTM”, filed June 17, 1985, Warner also elects to recover “statutory damages.” This election is permitted under the Copyright Law (17 U.S.C. 504(c)) which provides that “the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages_” Warner states in its “pretrial memorandum” (p. 27): “In this action [presumably Warner means in each of the actions, the file numbers of which are shown in the caption, including that against Dae Rim], Warner hereby elects to recover statutory, rather than actual, damages.” The reason for such an election by Warner seems clear. Warner had no evidence to prove any actual damages; on the contrary, if there had been any infringing sales or offers to sell Gizmo dolls to the public (as opposed to the evidence of one sale to an investigator for Warner), they would have more likely been of benefit to Warner with its target audience of children as contributing to their knowledge of, and attraction to, the Gremlin movie. The pre-trial memorandum of Warner, filed June 17, 1985, makes it clear that the copyright litigation rhetoric of Warner was not based on any evidence of damage to Warner by the claimed infringement of defendants. On the contrary, according to the memorandum (PTM 2-5), nothing the defendants did caused any actual damage to Warner; in fact, the Gremlins film and merchandise licensing were enormously profitable to Warner. The defendants were charged with extravagant misconduct: “blatant and ... willful advertising, offering for sale or sale of piratical ‘Gremlins’ character merchandise” (PTM 1). The word “piratical” is the overblown term used by Warner counsel instead of the correct term “infringing.” The pre-trial memorandum (PTM 2) made it clear, however, that the theory of Warner was not that it should recover as “statutory damages” for actual damages. Warner was asking (PTM 2) for a recovery of “statutory damages in an amount sufficient to deter defendants from future violations.” Warner did not contend that the conduct of defendants caused it any damages; on the contrary Warner stated (PTM 2) that from the moment of its release, the Gremlins film “demonstrated immense popularity,” the millions in revenues were emphasized (PTM 3), the film was “unquestionably among the most successful motion pictures of the 1984 summer season” (PTM 3), merchandise licensees “generated” $7,700,000 “in revenue for Warner” in 1984 and $700,000 through May, 1985 (PTM 4), the “merchandising program also contributed to the promotion and advertising of the motion picture” (PTM 5), and “infringing articles could have inflicted incalculable damage on the licensees” of Warner (PTM 5; emphasis supplied; “could have inflicted,” not “did in fact inflict”). The “pre-trial memorandum” of Warner (PTM 1) makes clear that the only reason for the prosecution of the litigation by Warner was to recover “the amount of statutory damages, if any,” and “the amount of costs and attorneys’ fees, if any.” On June 20, 1985, this action (and other related actions) were reassigned to Judge, Haight. The cause was doubtless the resignation of Judge Sofaer. On July 26, 1985, Warner served notice of motion to strike the jury demand of defendants. On August 7, 1985, the defendants filed a “reply” to the motion to strike their jury demand. The reply was withdrawal of the jury demand. The demands were struck by endorsed order of Judge Haight filed January 29, 1986. On June 26, 1986, Judge Haight filed a “Scheduling Order for Pre-Trial Memoran-da.” On August 5, 1986, the parties to the related actions assigned to Judge Haight filed a “Final Pre-Trial Memorandum.” Under date of September 29, 1986, this action against Dae Rim and Yun Yon Cho was reassigned from Judge Haight to me (the other related actions were reassigned at the same time). These transfers were on the consent of the two judges affected, as provided in Rule 16 of the “Rules for Division of Business” of this Court. 12. There was a pretrial conference before me on October 1, 1986, of this action (and of the other related but separate actions then just transferred from Judge Haight). There is a stenographic transcript of that conference; references to its pages are preceded by “PTC” (Pretrial Conference). It was agreed by counsel for all parties that the trial of the actions was to be to the Court and not to a jury (PTC5-6). Counsel for Warner attempted a summary explanation to the Court of a proceeding brought by Warner before the International Trade Commission (ITC) “for an order excluding entry into the United States of piratical Gremlins merchandise” (PTC8). The proceeding before the ITC will be described in the section to follow. As the pretrial conference continued, counsel for Warner made claims as to the volume of infringing merchandise, which claims turned out to have no support in the evidence. Counsel claimed (PTC9) that when “the motion picture was released, there was an avalanche of piratical Gremlins merchandise on the market” and (PTC12) “there was a flood of piratical Gremlins merchandise in the New York metropolitan area.” It appeared that the defendants in this action reaffirmed their concession (made in the November 2, 1984, offer of judgment, and again at the pretrial conference on February 20, 1985) that they infringed the Warner Gizmo copyright but denied that they were liable for statutory damages or attorneys’ fees or costs (PTC14). After discussion at the October 1, 1986, pretrial conference whether there should be a joint trial of the ten actions, the Court made its decision (PTC30) which was embodied in a written order filed October 2, 1986 directing that the ten actions be “consolidated for a joint trial of all issues enumerated in the final pretrial memorandum ... except the quantum of statutory damages, attorneys’ fees or costs, if any, that any party may recover against another party.” 13. We digress from this action to describe the related Gremlins litigation by Warner before the ITC. On July 25, 1984, Warner had extended its copyright enforcement program by filing a complaint with the ITC under Section 337 of the Tariff Act of 1930, as amended (19 U.S.C. § 1337). At the same time, Warner moved for temporary relief to exclude imports. The complaint and the motion were based on the claim that there were unfair methods of competition and unfair acts in the importation of products which were depictions of characters from the Gremlins film and which infringed Warner’s Stripe and Gizmo copyrights — the same as those here in suit — and the Gremlins film copyright. Warner sought to exclude the imports of claimed infringing items of Gremlins merchandise. Among the parties named as respondents was Dae Rim, which was served by mail with the complaint on August 28, 1984. Dae Rim was not represented. There were hearings, a record was made, Warner was represented, and ITC staff counsel represented ITC. On December 10, 1984, the Administrative Law Judge (AU) filed an Initial Determination (ID) and Order, finding “reason to believe” that there was a violation of 19 U.S.C. § 1337 by the “unauthorized importation into and sale in the United States of certain products with Gremlins character depictions” but denying Warner’s motion for temporary relief on the ground that “immediate and substantial harm” had not been shown by Warner. The AU explained (ID p. 42): In order to meet the requirement of immediate and substantial harm, the level of lost sales during the Christmas selling season would have to cause greater injury to the overall merchandise licensing program than necessary to justify permanent relief. The injury would truly have to be irreparable. The evidence adduced on this point that complainant [Warner], in the absence of temporary relief during the Christmas selling season, will be caused immediate and substantial harm is unconvincing. In his opinion, the AU found that the cheap imported items of infringing merchandise, such as the plastic dolls of defendants, were not in competition with the licensees of Warner. He explained this as follows (ID, pp. 21-23; indicated omissions are for brevity): The “Gremlins” movie is a fantasy that appeals to children. (FF 115-16, 137, 142). The film recorded one of the highest gross ticket sales in 1984 during a relatively limited engagement. (FF 238). The movie was released for commercial distribution in June 1984 and withdrawn from distribution on November 1, 1984 (FF 187-88). If a child enjoys viewing a film, there is generated a desire to possess a reminder of the film and its characters. This desire for momentoes [so in original] is referred to in the licensing industry as the “souvenir value” of the film. (FF 117-21). There is reason to believe that the licensed products produced to exploit the souvenir value constitute a distinct market for GREMLINS character depictions. (FF 117-21, 134). The licensing of such products, however, has been deliberately limited by complainant’s licensing agent in the belief that elimination or severe limitation of such low-priced products would enhance the overall attractiveness and profitability of the licensing program. (FF 134, 249). As a result, very few types of licensed souvenir products are present in the marketplace; they are apparently limited to puffy stickers and a series of picture cards showing scenes from the “Gremlins” film. Further, distribution of the puffy stickers product is limited only to Hallmark stores. (FF 147). These products generally sell at retail for substantially under one dollar. j¡« * >K * $ * In the “souvenir” market, the utilitarian value of the product is distinctly secondary to the child’s desire to obtain a depiction of the licensed character. (FF 118). The souvenir market is further characterized by impulse purchasing; that is, a large proportion of the purchases are made when the child sees the item in the store or on the shelf. Few purchases are made by individuals who actually go to a store with the intention of purchasing such an item. (FF 119-20). Such products have as their primary function the satisfaction of a child’s desire to obtain a copy of the copyrighted fantasy characters and can be purchased by children using their own funds. (FF 117-19). In contrast, the higher priced utilitarian goods are almost always purchased by a parent or adult, in conjunction with a child, with the funds of the adult. Such purchases are made not on impulse; a decision to enter the store is usually deliberately made to obtain the product. ... ****** In accordance with the realities of the market, there is “reason to believe” that “souvenir” licensed products are not in competition with higher priced utilitarian products, which the inclusion of a depiction of a GREMLINS characters provides only an “added-on” fantasy value. The unauthorized imports are virtually limited to the souvenir market for GREMLINS characters: .... ****** The lower priced, imported Gizmo dolls appear to belong more to the souvenir than the functional category. Warner asked ITC to review the order of the AU denying its motion for a temporary exclusion order. The ITC, by order issued January 4,1985, declined to do so on the ground that “Warner failed to prove that the domestic industry would suffer immediate and substantial harm in the absence of such relief” Warner Bros. v. U.S. Intern. Trade Com’n, 787 F.2d 562, 563 (Fed.Cir.1986). Warner then appealed to the Court of Appeals for the Federal Circuit which unanimously affirmed the order of the ITC, Warner, 787 F.2d 562. 14. The joint trial of certain issues began on October 6, 1986, and continued at sessions on October 8, 9, 17, and 23. After opening statements for the parties (Tll-30), Warner put in its case in chief against the defendants in all ten cases (T30-193), and then rested (T193). The defendants then put in their cases (T197-99, 204-325, 327-714), completing their presentation on October 23. Warner then on October 28 began a case in rebuttal (T716), at the end or near the end of which Warner called Mr. Dunnegan as a witness (T879-80). Mr. Bainton, a partner of the law firm representing Warner at the trial and lead trial counsel for Warner, was preparing to question the witness. Mr, Dunnegan, as an associate in the law firm representing Warner, was active in the preparation of the case for trial, and had acted throughout the trial as an assistant of Mr. Bainton. Counsel for the defendants then raised the point that Mr. Dunnegan could not testify so long as the law firm with which he was associated was acting as trial counsel to Warner — that if Mr. Dunnegan were to testify, then before doing so, Mr. Bainton’s law firm must be disqualified. Mr. Razza-no, counsel for most of the defendants, asked the Court “to order Mr. Bainton and his firm to withdraw from representation” (T883). It then developed that the question whether Mr. Dunnegan could testify and also whether counsel for Warner could properly continue their representation were questions which had to be decided before Mr. Dunnegan could properly testify (T887-88). His testimony was therefore deferred (T890). The trial continued as to other matters and at the end of the court day on October 28, 1986, was adjourned without date, to await the decision on the propriety of Mr. Dunnegan testifying (T940). The parties thereafter submitted memo-randa in support of their positions on the motion to disqualify counsel for Warner. By memorandum opinion and order, filed March 19, 1987, the Court denied the motion to disqualify counsel for Warner, ruling that Mr. Dunnegan might properly be called as a witness by counsel for Warner. The trial resumed on May 18, 1987. Mr. Dunnegan testified on that day (T946-982). Warner then rested its rebuttal case and the taking of evidence on the issues tried was completed (T982-83). Thereafter Warner filed in this action on July 21,1987, its P Brief, already noted; on August 19, 1987, defendants Dae Rim and Yun Yon Cho filed in this action their “Proposed Post-Trial Findings of Fact and Conclusions of Law,” hereafter referred to, for convenience, as “D Brief.” B. MATTERS OF FACT RELEVANT TO THE ISSUES TO BE HERE DECIDED 15. The copyright litigation pressed by Warner to promote Gremlins may well have had its origin in earlier experiences of Warner counsel in unrelated trademark litigation involving a French luggage manufacturer. At the least, those earlier trademark experiences seem to have affected the methods employed in the Gremlins copyright litigation. Beginning as early as the first papers submitted to Judge Sofaer on July 2, 1984, counsel for Warner have persistently and extensively cited many decisions in earlier Vuitton trademark cases to justify their contentions and activities in Gremlins copyright litigation. For an example, in this very action, July 2, 1984, in an affidavit submitted to Judge Sofaer in support of an ex parte application for a temporary restraining order and a search and seizure order, counsel for Warner made the following representations, among others: 11. The facts present in In re Vuitton et Fils S.A., 606 F.2d 1 (2d Cir.1979) —a trademark counterfeiting case in which the United States Court of Appeals for the Second Circuit granted plaintiff’s mandamus petition to compel the United States District Court for the Southern District of New York to issue an ex parte temporary restraining order —are even more compellingly present in this case. During the course of numerous actions which plaintiff’s counsel have instituted and hundreds of investigations which counsel have directed on behalf of Louis Vuitton S.A., and other trademark owners, we have concluded that there are numerous, closely knit networks of manufacturers and distributors of counterfeit merchandise. We have also learned that when one member of this community of counterfeiters realizes that he has been identified and is about to be enjoined from continuing his illegal enterprise, he will immediately transfer his inventory to another counterfeit seller, whose identity is unknown to plaintiff. Vuitton is an old, well-known and established Paris manufacturer of elegant and expensive luggage and kindred items. At some time in 1978 or earlier, Vuitton had been faced by widespread sales in this country of cheap imitations of its expensive luggage. These imitations carried Vuitton’s distinctive trademark, falsely representing thereby that the imitation items had been made by Vuitton. By the end of March 1979, Vuitton had brought 84 trademark actions in this country, of which 53 were in this Circuit. Counsel for Warner in the case at bar acted with success for Vuitton in this litigation. In the Vuitton case, referred to in the affidavit quoted above and heard by our Court of Appeals, the Court ordered an ex parte temporary restraining order to issue, emphasizing that “[i]n a trademark infringement case such as this, a substantial likelihood of confusion constitutes, in and of itself, irreparable injury to satisfy the requirements.... ” In re Vuitton et Fils, S.A., 606 F.2d 1, 4 (2d Cir.1979), (emphasis supplied). The Court further explained at the same place: Here, we believe that such a likelihood of product confusion exists. The allegedly counterfeit Vuitton merchandise is virtually identical to the genuine items. Indeed, the very purpose of the individuals marketing the cheaper items is to conf