CDN INC., a California Corporation, Plaintiff-Appellee, v. Kenneth A. KAPES, an Individual D/B/A Western Reserve Numismatics, Defendant-Appellant

Citations: 197 F.3d 1256; 53 U.S.P.Q. 2d (BNA) 1032; 99 Cal. Daily Op. Serv. 9421; 99 Daily Journal DAR 12157; 1999 U.S. App. LEXIS 31372Docket: 1256

Court: Court of Appeals for the Ninth Circuit; December 2, 1999; Federal Appellate Court

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The case CDN INC. v. Kenneth A. Kapes addresses the copyrightability of prices listed in a wholesale coin price guide. Kenneth Kapes, operating as Western Reserve Numismatics, developed "The Fair Market Coin Pricer" on his website, generating retail prices for coins using a program that referenced CDN, Inc.'s wholesale price lists. CDN publishes the Coin Dealer Newsletter, which reports wholesale prices for collectible coins and is widely used in the industry. After discovering Kapes' website in December 1996, CDN filed a copyright infringement complaint in February 1997, claiming Kapes improperly used its wholesale prices to calculate retail prices. Kapes contended that while some content may be copyrightable, he did not copy it and raised defenses including license and unclean hands.

The parties agreed to resolve the case through cross-motions for summary judgment on the sole issue of whether CDN's price listings were copyrightable under Section 102 of the 1976 Copyright Act. The district court, upon hearing the motions, ruled that CDN's prices constituted original creations, not mere facts, and granted CDN's motion for summary judgment while denying Kapes'. Consequently, the court issued an injunction against Kapes to prevent further copyright infringement.

Kapes has appealed, clarifying that the core issue is the copyrightability of prices, as agreed in a stipulation that effectively admits to copying CDN's work. The stipulation precludes Kapes from contesting the copying or raising affirmative defenses such as license, unclean hands, and estoppel on appeal. Stipulations are enforceable unless there is evidence of involuntary or uninformed consent, and no such claim has been presented here. The appellate court will not consider issues not raised at the district court level, and by stipulating, Kapes has waived his right to challenge the agreement or raise previously asserted defenses. 

The legal framework for copyright infringement requires proof of valid copyright ownership and copying of protectable elements. Copyright protection applies to original works and compilations, with the stipulation restricting the appeal to the question of whether prices are copyrightable. While ideas and discoverable facts are not copyrightable, compilations of facts can be, provided they exhibit a minimal level of originality or creativity. The distinction between facts and creative works is crucial, as demonstrated in Feist Publications, where the Supreme Court ruled that a compilation of telephone listings lacked the necessary originality for copyright protection. Consequently, Kapes' appeal is limited to the copyrightability of prices, as he has waived other claims.

Appellant's argument equating phone number listings in *Feist* with CDN's price lists lacks merit upon scrutiny. It conflates two separate points: the originality of the selection, arrangement, and inclusion of prices and the originality of the prices themselves. The key issue is whether the prices can be protected as original compilations, not whether their selection is obvious or standard in the industry. The court noted that while originality is a constitutional requirement, it only requires a minimal level of creativity, as established in *Feist*. The phone listings were deemed unoriginal due to their triviality, but CDN's prices exhibit a sufficient degree of creativity, derived from a thoughtful process of selection and judgment.

The district court, referencing *Feist*, concluded that CDN's prices are not mere facts but products of creativity, generated through expert analysis of various factors influencing coin values. CDN’s method involves synthesizing data from major coin publications, selectively retaining the most relevant information, and incorporating insights from various market conditions and sales. The court emphasized that CDN does not simply repackage data but instead generates original price estimates based on its analysis, thereby affirming the originality of CDN's compilations.

The time and effort involved in creating a work do not determine its copyrightability; instead, copyright protection is granted for originality, not for the labor expended in its creation. The Supreme Court in *Feist* rejected the 'sweat of the brow' theory, emphasizing that mere discovery of facts, such as prices paid in transactions, lacks copyrightable originality. However, CDN's reported prices go beyond mere listings; they represent CDN's best estimates of a coin's fair value, derived from a creative process that meets the constitutional standard for copyright protection. This process is not merely mechanical or routine, but involves a minimal degree of creativity, as established in prior cases. 

CDN's pricing methodology is comparable to the Second Circuit's ruling in *CCC Information Services Inc. v. Maclean Hunter Market Reports*, which held that the Red Book's car valuations were not simply pre-existing facts but rather editor-generated predictions based on expertise and judgment. Although Kapes attempts to differentiate between the present value estimates in CDN's Greysheet and the future projections in the Red Book, the critical aspect is the creative process of generating these values from factual data, rather than merely reporting historical facts. Thus, CDN's prices reflect sufficient creativity and originality to warrant copyright protection.

Kapes defends his position by asserting that prices represent the value of a product expressed numerically, arguing that this concept merges the idea and its expression, thus rendering both ineligible for copyright protection under the doctrine of merger. This principle, rooted in copyright law, states that only the expression of an idea, not the idea itself, is protected. As established in cases such as Mazer v. Stein and Baker v. Selden, ideas and facts do not qualify for copyright. Courts have maintained that if an expression is essential to convey an idea, that expression may also be unprotected to prevent monopolization of the idea itself. The challenge lies in distinguishing between idea and expression, a nuance highlighted by Judge Learned Hand, who noted that the distinction is difficult and varies by degree. The court concludes that the prices in question are protectable expressions, allowing CDN to safeguard its specific price guide while enabling competitors to develop their own guides. Kapes also asserts a defense of copyright estoppel, claiming CDN's representation of prices as facts prevents it from denying their status as non-facts. However, the court declines to consider this argument due to Kapes' failure to raise it properly in the lower court, thereby waiving the issue.

Kapes contends that CDN lacks the necessary equity due to its failure to utilize the proper legal framework, specifically a license, to safeguard its material. He references several cases where companies successfully protected their uncopyrighted works through licensing, suggesting that CDN could have similarly done so. However, Kapes fails to provide any legal authority supporting the claim that CDN cannot obtain an injunction solely because it opted for copyright rather than contract protection. The argument lacks coherence; if CDN's copyright claim is valid, it is entitled to the injunction granted by the district court. Conversely, if the material is deemed uncopyrightable, the injunction should be lifted, regardless of CDN's copyright claim approach. The court affirms the district court's ruling that the prices in the guides possess sufficient originality to qualify for copyright protection. The decision is upheld.