Page:Michael Anthony Jewelers v. Peacock Jewelry.pdf/5

 Unlike “polished” charms, whose mold lines and imperfections have been carefully sanded out, diamond-cut charms obtain their luster by being run over by a rapidly rotating wheel with a small diamond on its outer surface. The diamond makes numerous small nicks in the face of the charm, leaving it with a shiny surface that reflects light. Because polishing is more labor-intensive and requires greater skill than diamond cutting, polished charms are generally more expensive than their diamond-cut counterparts.

Although Peacock’s amended counterclaims are asserted under a number of different legal theories, the factual backdrop to all of them is virtually identical. According to the allegations in the amended countercomplaint, MAJ engaged in a variety of unlawful practices, all with the intended purpose of increasing its share of the diamond-cut charm market and driving its competitors out of business.

Copying Charms, Obtaining Fraudulent Copyright Registrations, and Engaging in Sham Litigation.

Perhaps the most thoroughly developed allegations in Peacock’s amended countercomplaint are those relating to MAJ’s “practice of copying charms manufactured by others.” ¶ 99. According to Peacock’s pleading, MAJ gained access to its competitors’ charms in a number of ways. In the first place, MAJ did casting for companies that lacked the facilities to cast their own charms. Because those companies had to leave their molds with MAJ to have them cast, MAJ had the opportunity to make duplicate molds.

One of the companies that had MAJ do its casting was the Old Mr. Craftsman, whose assets Peacock acquired in 1985. After Steven Wrona, an Old Mr. Craftsman employee, noticed that some of the charms resulting from molds left for casting with MAJ had different mold lines and bore markings indicating that they were copyrighted and/or trademarked by MAJ, Mr. Wrona deduced that MAJ had made unauthorized copies of the charms. ¶¶ 93–95. Mr. Wrona conferred with the Old Mr. Craftsman’s President, and the two men demanded the return of the duplicate molds. MAJ complied, and the “several hundred” counterfeit molds were brought back to the Old Mr. Craftsman’s premises where they remained unused for several years. ¶¶ 96, 98.

Another means by which MAJ gained access to its competitors’ charms was by letting its employees use MAJ’s facilities to do extra work for other companies. One MAJ employee who took advantage of that practice was Joseph Triburgo, who “moonlighted” for other companies by polishing their charms. When Mr. Triburgo did such work, Anthony Paolercio “often looked at the charms … brought in for polishing” and “[w]hen one of the designs appealed to him, [he] directed that the charm be copied.” ¶ 100. MAJ, acting “at the direction of Michael Paolercio and/or Anthony Paolercio,” would thereafter "mark the copied charms with MAJ’s own trademark and copyright notice. MAJ, therefore, would represent to the consuming public that MAJ had originated the design of the charms marked with its copyright notice, even though those charms may have been copied without permission from charms designed (and copyrighted) by others, or in the public domain."

¶ 102.

According to the amended pleading, MAJ was not content to simply copy the charms of its competitors. Instead, it would “apply for copyright registrations in its own name for charms that were copied from designs originated by others.” ¶ 130. In each application to the Copyright Office, MAJ would “willfully omit reference to any