                                                                                                                           Opinions of the United
2006 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


6-21-2006

Natl Assn Stock Car v. Scharle
Precedential or Non-Precedential: Non-Precedential

Docket No. 05-1816




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                                                             NOT PRECEDENTIAL

                      UNITED STATES COURT OF APPEALS
                           FOR THE THIRD CIRCUIT


                                      No. 05-1816


 NATIONAL ASSOCIATION FOR STOCK CAR AUTO RACING, INC. (NASCAR)

                                             v.

             MATTHEW T. SCHARLE; FRANKLIN MINT COMPANY
               d/b/a THE FRANKLIN MINT; BRUCE J. NEWMAN

                                    Matthew T. Scharle,
                                              Appellant


                     Appeal from the United States District Court
                       for the Eastern District of Pennsylvania
                            District Court No: 04-cv-05228
                       District Court Judge: Hon. Marvin Katz


                              Argued February 2, 2006

          Before: McKEE, SMITH, and VAN ANTWERPEN, Circuit Judges.

                                  (Filed: June 21, 2006)

Matthew I. Cohen, Esq. (Argued)
Jared H. Reiss, Esq.
Neal A. Jacobs, Esq.
The Jacobs Law Group
1800 John F. Kennedy Boulevard
Suite 404
Philadelphia, PA 19103

Attorneys for Appellant
Martin J. Black, Esq. (Argued)
Jeffrey S. Edwards, Esq.
Dechert LLP
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103

Attorneys for Appellee Franklin Mint Co.


Roderick J. Enns, Esq. (Argued)
Enns & Archer LLP
939 Burke Street
Winston-Salem, NC 27101

Camille M. Miller, Esq.
Cozen & O’Connor
1900 Market Street
4th Floor
Philadelphia, PA 19103

Attorneys for Appellee National Association for Stock Car Auto Racing, Inc.

Vincent V. Carissimi, Esq.
Pepper Hamilton
18th & Arch Streets
3000 Two Logan Square
Philadelphia, PA 19103

Attorney for Appellee Bruce J. Newman



                                      OPINION


McKEE, Circuit Judge.

      Matthew T. Scharle appeals the district court’s orders of February 11 and 14, 2005

granting judgment in favor of the Franklin Mint, Bruce J. Newman, and the National

                                           2
Association for Stock Car Racing (“NASCAR”). For the reasons that follow, we will

affirm.

                                               I.

          Inasmuch as we write primarily for the parties, we will only briefly summarize the

underlying facts and procedural history of this dispute. Scharle did design work for the

Mint pursuant to an independent contractor agreement (“Master Agreement”). The

Master Agreement provided that work would be assigned via riders, however, although

Scharle did a number of assignments for the Mint after execution of the Master

Agreement, none was pursuant to any rider.

          In the fall of 2002, the Mint asked Scharle to design a new trophy for NASCAR to

replace the Winston Cup, the trophy then in use. The new trophy was to be known as the

“NASCAR NEXTEL Cup.” As usual, no rider to the Master Agreement was executed.

Scharle nevertheless agreed to the project, and from then until the summer of 2003, he

created numerous copies of his computer images and revisions for the trophy’s design.

He delivered each of them to the Mint. In separate agreements involving NASCAR, the

Mint, and Bruce Newman, who was then the Mint’s president, Newman was to be in

charge of the project and receive credit for the trophy’s design. NASCAR unveiled the

trophy and began using it in its marketing and promotional efforts. NASCAR attributed

the design to Newman, and Scharle’s attorney contacted NASCAR claiming that Scharle

was the designer of the trophy. He demanded rights in the design for Scharle, and claimed

infringement of Scharle’s rights. He also made several specific demands for Scharle,

                                               3
including: additional payment, public attribution, and photographs of the trophy and the

winning driver, or, in the alternative, $2 million for alleged business loss from the

misattribution.

       Thereafter, NASCAR sued Scharle, the Mint, and Newman for a declaratory

judgment. NASCAR asked the court to declare that it owned all rights in the trophy, free

of any copyrights or attribution rights of Sharle. The complaint attached NASCAR’s

contract with the Mint. NASCAR simultaneously moved for an expedited preliminary

injunction to prevent Scharle from interfering in NASCAR’s use of the trophy at the final

Nextel Cup race and awards banquet. The district court ordered that all discovery related

to the motion for preliminary injunction be completed by November 17, 2004. After a

conference with the parties on November 18, 2004, the district court issued a scheduling

order that discovery be completed by March 21, 2005 and that any motions for summary

judgment be filed within ten days thereafter.

       Scharle answered the complaint on November 17, 2004, counter-claiming against

NASCAR and cross-claiming against Newman. He denied conveying any rights in his

computer drawings to the Mint, NASCAR, or Newman and denied that the Mint ever

could have conveyed such rights to NASCAR. He asserted the following causes of

action: copyright infringement; breach of a right to attribution and integrity; and a claim

for declaratory judgment. He alleged that his work on the trophy was not subject to the

Master Agreement with the Mint, that Newman and NASCAR could not have obtained

any rights from the Mint, and that he conveyed no rights in the trophy design to the Mint,

                                                4
Newman, or NASCAR.

       On December 27, 2004, the Mint filed an answer to NASCAR’s complaint and a

cross-claim against Scharle seeking a declaration that Scharle had no rights in the trophy

or its design. The Mint also filed a motion for summary judgment, asserting that there

was no genuine issue of material fact as to assignment of the copyright, or in the

alternative, that Scharle had granted the Mint an implied license and had no right of

attribution.

       On January 24, 2005, Scharle moved to dismiss the Mint’s cross-claim on the

ground that there was no ripe controversy between him and the Mint. Scharle also filed a

response to the Mint’s motion for summary judgment stating the motion was moot in light

of his motion to dismiss. The Mint responded on February 10, 2005.

       On February 11, 2005, before the close of discovery, the district court granted the

Mint’s motion for summary judgment on all issues. It found there was no genuine issue

of material fact, and determined that Scharle had transferred all rights in his computer

trophy drawings to the Mint, that he had granted an implied license in the trophy, and that

he had no attribution right in the drawings. The court also denied Scharle’s motion to

dismiss the Mint’s cross-claim, granted NASCAR’s motion to dismiss and Newman’s

motion to dismiss or motion for summary judgment, and ordered the case closed. It

entered judgment in favor of the Mint, NASCAR, and Newman on February 14, 2005.

                                            II.

       We must first address Scharle’s contention that the district court prematurely

                                             5
granted summary judgment. We review that claim for an abuse of discretion. Bradley v.

United States, 299 F.3d 197, 206 (3d Cir. 2002).

       A party against whom a claim, counterclaim, or cross-claim is made may move for

summary judgment “at any time.” Fed. R. Civ. P. 56(b). However, the motion should not

be granted unless “the pleadings, depositions, answers to interrogatories, and admissions

on file, together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). However,

Rule 56 provides:

       [w]hen a motion for summary judgment is made and supported as provided
       in this rule, an adverse party may not rest upon the mere allegations or
       denials of the adverse party’s pleading, but the adverse party’s response, by
       affidavits or as otherwise provided in this rule, must set forth specific facts
       showing that there is a genuine issue for trial. If the adverse party does not
       so respond, summary judgment, if appropriate, shall be entered against the
       adverse party.

Fed. R. Civ. P. 56(e). Rule 56 further provides:

       Should it appear from the affidavits of a party opposing the [summary
       judgment] motion that the party cannot for reasons stated present by
       affidavit facts essential to justify the party’s opposition, the court may
       refuse the application for judgment or may order a continuance to permit
       affidavits to be obtained or depositions to be taken or discovery to be had or
       may make such other order as is just.

Fed. R. Civ. P. 56(f). “[I]n all but the most exceptional cases, failure to comply with Rule

56(f) is fatal to a claim of insufficient discovery on appeal.” Bradley, 299 F.3d at 207.

       Although Scharle’s response to Newman’s motion argued against converting the


                                              6
motion to summary judgment because of inadequate time for discovery, and although he

now argues that there were still outstanding discovery requests when the judgment was

filed, Scharle failed to file any Rule 56(f) affidavit in response to either motion. And he

failed to “present by affidavit facts essential to justify the party’s opposition.” Moreover,

we have explained that there is a strong presumption against finding constructive

compliance with Rule 56(f). Bradley, 299 F.3d at 207. Scharle has not explained why he

did not file a Rule 56(f) affidavit, and nothing on this record suggests that this case falls

into the category of “most exceptional of cases[,]” id., where failure to file a Rule 56(f)

affidavit is excused; nor does Scharle argue to the contrary.

                                             III.

       Scharle also contends that the Mint’s cross-claim against him failed to allege facts

establishing a justiciable controversy between him and the Mint and that the cross-claim

is not ripe for declaratory judgment.

       A declaratory judgment may issue only where the constitutional standing

requirements of a justiciable controversy are satisfied. St. Thomas-St. John Hotel &

Tourism Assoc., Inc. v. Gov’t of United States Virgin Islands, 218 F.3d 232, 240 (3d Cir.

2000). “Abstract, hypothetical, or contingent questions” are not proper matters for

declaratory judgment, but the standing requirements are met when “there is a substantial

controversy, between parties having adverse legal interests, of sufficient immediacy and

reality to warrant the issuance of a declaratory judgment. Id. Our inquiry into

constitutional standing considers the adversity of interest of the parties, the

                                               7
conclusiveness of any judgment, and the practical help or utility of that judgment. Step-

Saver Data Sys., Inc. v. Wyse Tech., 912 F.2d 643, 647 (3d Cir. 1990).

       These parties are clearly adverse. NASCAR’s action against Scharle, the Mint, and

Newman sought a declaratory judgment that NASCAR owned the copyright rights to the

trophy, exclusive of any copyright or attribution rights Sharle might claim. The Mint was

already a defendant in the action and may have faced liability to NASCAR had it not been

shown that Scharle had transferred his rights to it. Further, although Scharle did not sue

the Mint itself, his answer and counterclaim allege infringing acts by the Mint, and that

would be an issue in the action which was currently proceeding. Moreover, these

circumstances will not result in an advisory opinion based upon a hypothetical scenario.

See Pic-A-State PA v. Reno, 76 F.3d 1294, 1300 (3d Cir. 1996). Rather, a judgment

resolves the competing copyright claims and rights in the trophy.

       Accordingly, the Mint’s claim for declaratory judgment is justiciable.

                                             IV.

       Scharle disputes that the trophy project was covered by the Master Agreement, that

he assigned his rights to the Mint, or that the Mint had the ability to convey those rights to

NASCAR. We need not reach this argument, however, because it is clear that Scharle

granted an implied license to NASCAR to use the trophy.

       “A nonexclusive license may arise by implication where the creator of a work at a

defendant’s request ‘hands it over, intending that the defendant copy and distribute it.’”

MacLean Assocs., Inc. v. Wm. M. Mercer-Meidinger-Hansen, Inc., 952 F.2d 769, 779 (3d

                                              8
Cir. 1991) (quoting Effects Associates, Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990)).

We have stated that “[d]elivery of a copy of the creation ‘is one factor that may be relied

upon in determining that an implied license has been granted.’” Id. (quoting Effects

Associates, 908 F.2d at 559 n.6). Other courts have found an implied license where three

factors are present: “(1) a person (the licensee) requests the creation of a work, (2) the

creator (the licensor) makes the particular work and delivers it to the licensee who

requested it, and (3) the licensor intends that the licensee-requestor copy and distribute his

work.” Atkins v. Fischer, 331 F.3d 988, 991-92 (D.C. Cir. 2003) (citing Lulirama Ltd.,

Inc. v. Axcess Broad. Servs., 128 F.3d 872, 879 (5th Cir. 1997) and IAE, Inc. v. Shaver,

74 F.3d 768, 776 (7th Cir. 1996)). Whether there is an implied license is determined by

an objective inquiry into the facts; the private hopes of the creator are not relevant. John

G. Danielson, Inc. v. Winchester-Conant Props., Inc., 322 F.3d 26, 42 (1st Cir. 2003). It

is NASCAR’s burden as the alleged infringer to establish the affirmative defense of

implied license. Atkins, 331 F.3d at 992.

       Scharle’s own deposition establishes that he knew he was being asked to “submit

designs for the cup,” the sponsor was NASCAR, and that he was to design a new trophy

to replace the Winston Cup which was being retired. Scharle Dep. at 31, 100; Appx. at

R-430, R-453. Moreover, the images he created depicted the trophy bearing the phrase:

“NEXTEL CHAMPION” on its base. Appx. R-469-71. His invoices referred to the

“NASCAR-NEXTEL TROPHY” or the “Winston Cup Trophy.” Id. at R-464-68.

Further, email exchanges between Scharle and Donna Tarquino, his contact at the Mint,

                                              9
show that he was aware that the project was for the “Winston Cup,” and that the sponsor

had a say in the final design. Appx. R-476-81.

       Moreover, Scharle conceded during his deposition that, while working on the

designs for the trophy, he made the following inquiry of Tarquino regarding attribution or

credit: “You know, this is a big thing. This isn’t a Franklin Mint product. This is a very

high profile thing. Is there any way that the Franklin Mint would be attributed as being

the designer, is there any way I could be along with that, Matt Scharle or Franklin

Mint/Matt Scharle?” Scharle Dep. at 113, Appx. R-456. Although he was informed that

he would not be credited with the design, or share in credit for it, he nevertheless

continued working on the trophy.

       There is no dispute that Scharle was asked to create images, pursuant to the Master

Agreement (as discussed above), that would be used for the new NASCAR trophy.

Scharle’s own deposition testimony establishes that he knew there would be a lot of

exposure for the trophy, and it is clear that he understood the scope of the trophy’s use. It

is undisputed that he delivered his images to the Mint and that he was paid for those

images.

       Scharle cannot seriously argue that he did not intend for NASCAR to cast and use

the trophy he had designed. His deposition testimony demonstrates that he did, and that

he anticipated that NASCAR would use the trophy without crediting his role in creating

it. NASCAR, through the Mint, requested the designs, Scharle, through the Mint, created

and delivered those designs to NASCAR, and Scharle expected NASCAR to use the

                                             10
trophy in the “high-profile” manner it eventually did.

       As the district court pointed out, there is no privity requirement for an implied

license. We believe this case is very similar to Effects Associates.1 Based upon the

undisputed facts recited above, Scharle created the trophy images with the intent that they

would be used and displayed by NASCAR. Accordingly, the undisputed facts establish

that NASCAR was granted an implied license.

                                              V.

       Similarly, Scharle cannot establish rights under the Visual Artists’ Rights Act

(“VARA”), 17 U.S.C. § 106A.2 VARA protects the rights of attribution and integrity of

the author of a “work of visual art.” 17 U.S.C. § 106A. A “work of visual art” is defined

as:

       (1) a painting, drawing, print, or sculpture, existing in a single copy, in a
       limited edition of 200 copies or fewer that are signed and consecutively
       numbered by the author, or, in the case of a sculpture, in multiple case,
       carved, or fabricated sculptures of 200 or fewer that are consecutively
       numbered by the author and bear the signature or other identifying mark of
       the author; or


       (2) a still photographic image produced for exhibition purposes only,
       existing in a single copy that is signed by the author, or in a limited edition
       of 200 copies or fewer that are signed and consecutively numbered by the
       author.



       1
         Although Scharle cites Johnson v. Jones, 149 F.3d 494 (6th Cir. 1998), we
believe this case is much closer to Effects Associates.
       2
           We have not previously discussed VARA.

                                              11
17 U.S.C. § 101. Among other things, a work of visual art does not include any:

“technical drawing, diagram, model, . . . merchandising item[,] or advertising [or]

promotional . . . material.” Id.

       The district court found that Scharle’s drawings for the trophy fell outside the

purview of VARA and granted summary judgment for the Mint on this claim. The court

determined that Scharle’s works were drafts which did “not exist in a single copy or a

limited quantity of signed and numbered copies, but instead as multiple attempts to arrive

at the optimal design for the trophy.” Dist. Ct. Op. at 21, Appx. R-662.

       We agree with the district court’s conclusion. We note, however, that there is at

least one other ground upon which the district court could have relied upon in concluding

that VARA did not apply to Scharle’s work. We believe that the court could have

concluded as a matter of law that Scharle created technical drawings, diagrams, or models

for the trophy, and are therefore excluded from the definition of “works of visual art.” 17

U.S.C. § 101.

       Accordingly, the district court properly determined that the trophy images were not

“works of visual art” under VARA.

                                             VI.

       For the reasons set forth above, we will affirm the district court’s grant of

       summary judgment.




                                             12
