IP Law Daily How to restrain your dragon: Artists win infringement case against legendary Chinatown restaurant
Wednesday, September 22, 2021

How to restrain your dragon: Artists win infringement case against legendary Chinatown restaurant

By Matthew Hersh, J.D.

The mother-daughter team proved that the restaurant purloined their dragon t-shirt design, but fell short of showing a DMCA violation.

Two graphic designers were entitled to prevail on their claim that a New York restaurant infringed their artistic rendering of a dragon by reproducing it on t-shirts, the federal court in Manhattan has held. But the mother-daughter team of artists failed to sway the court on their claim that the restaurant, a Chinatown landmark for more than 80 years, violated the Digital Millennium Copyright Act by removing their copyright notice (Shepard v. Wo Hop City, Inc., September 20, 2021, Oetken, J.).

The case involves the legendary Wo Hop restaurant, a restaurant well known to Manhattan denizens that has been tucked away in a nondescript corner of Chinatown since 1938. The New York Times once described Wo Hop as “what New Yorkers used to know as a Chinese restaurant, serving an Americanized version of Chinese food, an authentic taste of an inauthentic past.”

The present lawsuit traces its roots to 1993, when a mother-daughter artist team named Shirley and Andrea Shepard designed and sold to the restaurant approximately 1,000 copies of a t-shirt bearing a dragon design to the Wo Hop restaurant. Twenty-four years later, in 2017, they discovered from an article in GQ magazine that the restaurant was marketing a t-shirt that was virtually identical to their design, except that their copyright notice had been removed. In the next year, they discovered that an affiliate of the restaurant had submitted their design in support of a trademark application.

The artists sued the owner of the restaurant in 2018, along with the trademark affiliate and one other related entity, alleging copyright infringement as well as violation of the DMCA. The parties moved for summary judgment on several issues, leading to this opinion.

Statute of limitations. The court denied the restaurant’s summary judgment motion on the statute of limitations, finding the claim timely. Under the Copyright Act, a lawsuit must be filed within three years of the time the plaintiff discovers, or with due diligence should have discovered, the infringement. The restaurant argued that the artists should have known of the infringement before 2018 from social media posts of people wearing the t-shirts. In addition, as the artists worked as courtroom sketch artists in the nearby court complex in lower Manhattan, they should have seen people wearing the t-shirt in the area. But without evidence that the artists were in fact aware of the infringement—or at least, were aware of facts or circumstances that should have prompted a further investigation—this was not enough, “The discovery rule does not require the [artists] to periodically check on whether their former clients are using old designs without permission,” the court explained.

Copyright infringement. Having found that the artists’ claim was timely, the court easily found that it had merit. There was little question that the restaurant copied the design for its t-shirt. That the present owners may have done so innocently—they bought the restaurant in 2008 and may well have believed they acquired the rights to the design—made no difference, as intent is not an element in copyright infringement. A more substantial question was whether the dragon design was original, but this too was easily resolved. Depictions of animals are copyrightable, and this is especially so for mythical creatures as “[i]t surely takes at least some imagination to draw an animal that does not exist.” And it made no difference that the dragon design looked like other dragons found on t-shirts sold in the Chinatown area, as a copyrightable work—unlike a patentable invention—need only be an independent original creation by the artist, even if others have created the same work before.

Damages. Although the artists prevailed on the merits, the question of damages was deferred to trial. The artists sought recovery of the restaurant’s profits from t-shirt sales during the three years prior to the lawsuit. But because the restaurant did not keep records of its sales figures, both sides were forced to estimate those sales—and their calculations were dramatically different. The artists estimated that the restaurant sold over 27,000 t-shirts during the preceding three years, but that was based on an unreliable extrapolation from sales figures in 1993. The restaurant estimated sales of only 300 in total, but that was based, even less reliably, merely on social media posts attached to the artists’ own moving papers. Nor could the restaurant’s total gross revenues be used as a proxy for t-shirt sales, as that figure was broadly overinclusive. Thus, the open questions would have to be resolved at trial.

DMCA claim. Although the artists prevailed on their infringement claim, they failed to show a DMCA violation. The artists claimed that the restaurant removed copyright management information—in this case, the artists’ copyright notice—from the dragon design when reproducing it on new t-shirts. But the DMCA contains what is known as a “double-scienter” requirement under which a plaintiff must prove not only that copyright management information has been removed, but that it has been removed “knowingly” and with constructive knowledge that the removal will induce or enable an infringement. The scienter requirement could not be met here, the court reasoned, since the current owners of the restaurant took over only in 2008—and there was no evidence that they removed the information themselves or knew that the prior owners had done so. “All we know is that the shirts had CMI in 1993 but not in 2017,” the court said. “That is not enough.”

Liability of affiliates. Finally, although the court found the restaurant liable for infringement, it refused—at least on the present record—to extend that judgment to the restaurant’s affiliates. In addition to suing the owners of the Wo Hop restaurant, the artists also sued the owners of a neighboring restaurant owned by the same shareholders (named “Wo Hop City” to distinguish it from the original “Wo Hop”), as well as the company that filed the trademark application for the revised dragon design. The claim against the neighboring restaurant failed because there was no evidence that the two companies had disregarded corporate formalities in a way that could impute the original restaurant’s liability to its neighboring affiliate. As to the affiliate that filed the trademark application, the record was too ambiguous to permit summary judgment for either party. The affiliate filed a trademark application for a different dragon design but—to show a history of use—attached a photo of the original design and stated that the mark “was first used by the applicant or the applicant’s related company” as early as 2001. This arguably could have been an admission that the affiliate itself used had the artists’ design in earlier infringing sales. On the other hand, the statement could have referred only to the restaurant’s own sales, and not to any sales by the affiliate. In either case, the present record was too ambiguous to permit summary judgment.

The case is No. 1:18-cv-09634-JPO-RWL.

Attorneys: Andrea Terese Timpone (Garson, Segal, Steinmetz, Fladgate LLP) for Shirley Shepard and Andrea Shepard. Morton Seth Minsley (Morton Seth Minsley, Attorney at Law) for Wo Hop City, Inc., Wo Hop 1938, Inc. and Wo Hop 17, Inc.

Companies: Wo Hop City, Inc.; Wo Hop 17, Inc.; Wo Hop 1938, Inc.

MainStory: TopStory Copyright TechnologyInternet GCNNews NewYorkNews

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