## Facts

- George Bernard Shaw registered a U.S. copyright in the stage play *Pygmalion* in 1913 and obtained a renewal copyright that, as extended by Congress, remained in force through 1988.
- A 1938 motion-picture adaptation of *Pygmalion* was produced under license, separately copyrighted, and commercially distributed.
- The film’s copyright was allowed to expire in 1966.
- Shaw’s successors (owners of the play’s copyright) granted Janus Films an exclusive U.S. distribution license for the 1938 film in 1971.
- Defendants, associated with Budget Films, distributed copies of the 1938 film without authorization from the play’s copyright owners or Janus.
- Plaintiffs sued in federal court for copyright infringement; the district court found liability, awarded damages and attorney’s fees, and calculated damages using defendants’ gross receipts rather than statutory “in lieu” damages.
- Defendants appealed the liability and damages rulings; plaintiffs cross-appealed the denial of statutory damages.

## Issues

1. Whether expiration of the film’s copyright placed the film in the public domain free of the underlying play owners’ copyright claims, permitting unrestricted distribution of the film.
2. Whether unauthorized distribution of the film infringed the still-valid copyright in the underlying play.
3. Whether laches barred relief due to plaintiffs’ delay in filing suit.
4. Whether the district court properly calculated damages using gross receipts and properly declined statutory “in lieu” damages.

## Decision

- The Ninth Circuit affirmed the judgment for plaintiffs in all respects.
- The court held that defendants infringed the subsisting copyright in the underlying play by distributing the film, notwithstanding the film’s public-domain status.
- The court rejected laches as a bar to relief.
- The court affirmed the damages award based on defendants’ gross receipts where defendants failed to substantiate deductible costs.
- The court affirmed the denial of statutory “in lieu” damages as within the district court’s discretion and affirmed the attorney’s fee award; additional fees on appeal were denied.

## Legal Principles

- Copyright in an underlying work and copyright in a derivative work are distinct; a derivative work’s entry into the public domain does not extinguish a valid copyright in the underlying work.
- Distribution or other exploitation of a derivative work may infringe the underlying work if it embodies protected expression from the underlying work and the exploiter lacks authorization.
- In proving infringer’s profits, the copyright owner must show gross revenues; the infringer bears the burden of proving deductible expenses, and failure to do so may justify using gross receipts.
- Statutory damages may be denied where actual damages and profits are reasonably ascertainable; the choice between actual and statutory damages is committed to the trial court’s discretion.

## Conclusion

The court held that defendants could not lawfully distribute a public-domain film adaptation where doing so exploited protected expression from a still-copyrighted play, and it affirmed a damages award based on gross receipts and the discretionary denial of statutory damages.


Russell v. Price, 612 F.2d 1123 (9th Cir. 1979)