text:
    Charles M. COLEMAN, Plaintiff, v. CORNING GLASS WORKS, Defendant.
    No. CIV-81-894T.
    United States District Court, W.D. New York.
    May 3, 1985.

      Anthony D. Cennamo, Columbus, Ohio, Richard G. Vogt, P.C. (Jeanne M. Colombo, of counsel), Rochester, N.Y., for plaintiff.
    Hodgson, Russ, Andrews, Woods & Goodyear (Robert B. Conklin, of counsel), Buffalo, N.Y., Foley & Lardner (Russell J. Barron, of counsel), Milwaukee, Wis., for defendant.

      . In affirming the District Court's conclusion in Olympia, the Fourth Circuit Court of Appeals held that the defendant’s substantial and profitable business investments were a sufficient finding of the prejudice required for an estoppel. 712 F.2d at 80. See also, Studiengesellschaft, supra, 616 F.2d at 1326-27.

   DECISION AND ORDER

TELESCA, District Judge.

BACKGROUND

Dr. Charles M. Coleman, the plaintiff in this action, is the owner of the patent for a method and apparatus for separating blood cells from blood serum in a collection tube. On January 18, 1969, Dr. Coleman entered into a license option agreement with the defendant, Corning Glass Works, in which Coleman granted to Corning an exclusive license for the development of a commercial integrated blood serum separator under his patent. Plaintiff and defendant worked together on that project until September 25, 1972, when Corning terminated its agreement with Dr. Coleman. According to defendant, the venture was abandoned because of its conclusion that it could not make a functioning blood separation tube in accordance with Dr. Coleman’s design, and because its independent research work had allegedly resulted in the development of a superior method.

After several years of continued research and development, Corning Glass Works announced in 1974 the development of the “Corvac Serum Machine”, which went into production in early 1975. Corning later sold the entire product line to Sherwood Medical Industries in November, 1978.

On October 23, 1981, Dr. Coleman filed this action against Corning Glass Works. Dr. Coleman alleges that the Corvac blood separation device manufactured and sold by Corning was actually covered within the scope of his original patent. The complaint charges Corning with patent infringement, breach of contract, and the conversion and theft of plaintiff’s trade secrets. Corning Glass Works has moved for summary judgment to dismiss the entire complaint under Federal Rules of Civil Procedure 56, principally on the grounds that the several causes of action are barred by plaintiff’s delay in bringing this suit.

DISCUSSION

I. PATENT INFRINGEMENT

Dr. Coleman’s amended complaint alleges that Corning Glass Works was guilty of direct patent infringement through the manufacture and sale of the “Corvac” serum tube (Count II), and contributory infringement through its sale of the product to Sherwood Medical Industries (Count IV). Corning moves for summary judgment on both of these claims, arguing that they are barred by plaintiff’s laches.

The equitable doctrine of laches rests upon the recognition that it is inequitable for a patent owner to sleep on his rights and lead an infringer to make large investments in the belief that he is not infringing or that the patent rights will not be pressed. Potash Company of America v. International Minerals & Chemical Corp., 213 F.2d 153, 156 (10th Cir.1954). “The obvious principle is that it is inequitable to permit the patentee to recover for infringements occurring during the time of its own unreasonable, unexcused, and harmful delay.” A. C. Aukerman & Company v. Miller Formless Company, 693 F.2d 697, 699 (7th Cir.1982).

The defense of laches consists of two essential elements: unreasonable and inexcusable delay in the assertion of the claim, and material prejudice to the defendant resulting from this delay. Leinoff v. Louis Milona & Sons, Inc., 726 F.2d 734, 741 (Fed.Cir.1984). Where the delay in instituting suit exceeds the six (6) year time limitation prescribed by 35 U.S.C. Section 286, the delay is presumptively unreasonable and prejudicial to the defendant, and the burden is shifted to the plaintiff to produce evidence to rebut those presumptions. Id. The first issue to be resolved, therefore, is whether Dr. Coleman’s delay in bringing this suit exceeded six (6) years.

A. Length of the Delay.

To determine the length of plaintiff’s delay, the Court must look to the date when plaintiff first knew or should have known of the defendant’s alleged infringing action. Studiengesellschaft Kohle v. Eastman Kodak Company, 616 F.2d 1315, 1326 (5th Cir.1980), cert. denied, 449 U.S. 1014, 101 S.Ct. 573, 66 L.Ed.2d 473 (1980). Dr. Coleman first became aware of Coming’s plans to market the Corvac device in a published notice sometime around October, 1974 (Coleman Deposition p. 258). He concluded at that time that the Corning blood separator tube “probably” was covered by his patent, although he drew no definite legal conclusion (Id.). Dr. Coleman first saw the Corvac blood separator tube on exhibit at a meeting of the American Association of Clinical Chemists, held in Toronto, July 14- through 19, 1975. (Coleman Affidavit para. 34). It was at that Convention that Dr. Coleman first drew the conclusion that the Corning commercial blood separator tube, the subject of this’ litigation, was covered by his patent (Coleman Deposition pp. 253, 259) — six (6) years and three (3) months before he filed this lawsuit in October, 1981.

Although Dr. Coleman saw the Corvac and knew of Coming’s plans to market the tube by July, 1975, he argues that the laches time period did not begin until April 1, 1976, when he first received a legal opinion from an attorney that the Corvac was an infringement of his patent. That argument is untenable. It is settled that the laches period begins when the plaintiff discovers the facts which create his right or cause of action. Potash Company of America, supra, 213 F.2d 153, 155; Dixon v. American Telephone & Telegraph Company, 159 F.2d 863, 864 (2d Cir.1947), cert, denied, 332 U.S. 764, 68 S.Ct. 69, 92 L.Ed. 350 (1947); Olympia Werke Aktiengesellschaft v. General Electric, 545 F.Supp. 598, 612 (W.D.Va.1982), affd., 712 F.2d 74 (4th Cir.1983). Even if Dr. Coleman did not know whether the Corvac was technically an “infringement” in July, 1975, he knew all the facts concerning the Corvac project, and that he had somehow been wronged. According to his own affidavit (para. 36), after Dr. Coleman received an opinion from one attorney in January, 1975 that there was no infringement, he continued to make “a diligent effort to obtain legal representation regarding my belief that I had my invention stolen from me ... ”.

I therefore conclude that the period of Dr. Coleman’s “delay” in bringing this lawsuit began no later than July, 1975, and hence exceeded the statutory six (6) year period. Accordingly, Coleman’s delay is presumed to be unreasonable and prejudicial, and the burden now shifts to plaintiff to rebut those presumptions. Leinoff v. Louis Milona and Sons, Inc., 726 F.2d 734, 741-42 (Fed.Cir.1984); Olympia, supra, 712 F.2d 74, 77 (4th Cir.1983).

B. Excuse for the Delay

Dr. Coleman has not identified any special circumstances of this case which would counter the presumption that his delay of more than six (6) years was unreasonably long. He alleges that much of the delay was due to his inability to find an attorney to prosecute the action, or to raise the necessary funds. Those excuses are inadequate as a matter of law. Dixon v. American Telephone & Telegraph Company, 159 F.2d 863 (2d Cir.1947); Whitman v. Walt Disney Productions, Inc., 148 F.Supp. 37 (S.D.Calif.1957), aff'd., 263 F.2d 229 (9th Cir.1958). There is no evidence that Dr. Coleman made any protest or assertion of his rights, even to the limited extent allowed by his poverty.

Dr. Coleman also argues that his delay in bringing suit should be excused because he had spent that time diligently consulting with no fewer than a dozen attorneys. But even if plaintiff did not waste any time in preparing for this lawsuit, he does not dispute the fact, critical for the measurement of laches, that he waited more than six (6) years to apprise the defendant of those plans. Although Dr. Coleman concluded that the Corvac was covered by his patent in 1975, he did not communicate that conclusion to the Corning Glass Works by any method before filing his complaint (Coleman Deposition pg. 259), thus giving rise to a “long period of apparent inactivity”. Whitman, supra, 148 F.Supp. at 40. Although Dr. Coleman’s story does not pose the classic laches situation of someone “sleeping on his rights”, it might fairly be said that he took care not to disturb the defendant or to let it know he was awake as he searched about for his rights in the dark.

C. Prejudice

Dr. Coleman has likewise been unable to identify any unusual aspects of this case to rebut the presumption that his delay of more than six (6) years was prejudicial to Corning. Prompt notification of his intention to sue would have either caused Corning to alter its plans to develop the Corvac, or at least would have enabled Corning to proceed with its plans “with complete knowledge of the risk of litigation [so that Corning] could have taken steps to mitigate any losses attendant upon an adverse result in such a suit”. Olympia Werke, supra, 545 F.Supp. at 614. In his Memorandum of Law, Dr. Coleman essentially makes that point himself, where he asserts that Corning sold the rights to Cor-vac several years later, after it became “boldly confident” that Dr. Coleman would not be contesting the ownership of the patents transferred (pg. 33). That is prejudice enough.

Dr. Coleman also reasons that his delay could not have been prejudicial because it had permitted Corning to earn over $10,000,000 in profits. That same argument was properly rejected as “spurious” by the court in Lemelson v. Carolina Enterprises, Inc., 541 F.Supp. 645, 655 (S.D. N.Y.1982). “[I]t is not necessary that a defendant lose money on a product to be prejudiced by a patent holder’s failure to institute a timely action. Such a requirement would eviscerate the laches defense, since patent holders normally do not commence suits for an accounting of profits under the patent laws where there has been no profit to the alleged infringer.” Id. On the contrary, it is settled that the successful expansion of an infringer’s business is itself the kind of prejudice which will support the defense of laches. Olympia, supra, 545 F.Supp. at 614.

D. “Unclean Hands"

Even if the elements of a laches defense are present in this case, Dr. Coleman argues that Corning may not avail itself of the defense because of its egregious conduct in infringing his patent. The equitable doctrine of “unclean hands” applies to cases of an exceptional character, such as where the one asserting the defense of laches was responsible for the plaintiff’s delay, or allayed the plaintiffs suspicions through deception. Potash Company of America, supra, 213 F.2d at 155. For example, in T. W.M. Manufacturing Company, Inc. v. Dura Corporation, 592 F.2d 346 (6th Cir.1979), upon which plaintiff relies, there was evidence that the defendant had sponsored a third-party action challenging the plaintiff’s patent in order to harass the plaintiff and keep the patent’s validity in question. In such unusual circumstances, the assertion of a laches defense would be not only inequitable but unsound, for the plaintiff’s delay would have given the defendant no good reason to believe that the patent rights were worthless or abandoned. See Galliher v. Cadwell, 145 U.S. 368, 372, 12 S.Ct. 873, 874, 36 L.Ed. 738 (1892).

Dr. Coleman has not alleged any similarly extreme examples of “egregious conduct” on the part of Corning Glass Works. Plaintiff’s allegations, if true, merely illustrate that there is always some measure of inequity in allowing an infringer to deprive a patent owner of royalties and other rights afforded by the patent. But that sort of inequity , does not bar the assertion of a laches defense; it is simply a factor to be balanced against the alternative injustice of allowing the patent owner to press his rights after a lengthy delay. Potash Company of America, supra, 213 F.2d at 156. Dr. Coleman’s allegations of Coming’s wrongdoing (most of which occurred before July, 1975) simply do not constitute “the'sort of egregious conduct that would excuse the inordinate delay in this case”. Lemelson, supra, 541 F.Supp. at 654.

E. Conclusion

The Second Circuit Court of Appeals has observed that the questions raised by a laches defense are particularly amenable to resolution by summary judgment. Dixon, supra, 159 F.2d at 864. The required elements of a laches defense have been presumptively established by Dr. Coleman’s delay of more than six (6) years in bringing this suit, and he has failed to produce any evidence to counter those presumptions. Consequently, although Dr. Coleman may seek damages or injunctive relief for events occurring after the complaint was filed, he is barred from recovering any pre-filing damages. Leinoff supra, 726 F.2d at 741.

Since Corning Glass Works sold its Cor-vae product line to another business more than two years before the filing of this complaint, Dr. Coleman’s claims of patent infringement (Count II) and contributory infringement (Count IV) are completely barred by the defense of laches. Corning is therefore granted summary judgment as to those two claims.

II. METPATH INFRINGEMENT

Dr. Coleman’s delay in bringing this suit does not bar Count III of the amended complaint, “Metpath infringement”, plaintiff’s only patent infringement claim based on actions occurring since the beginning of this lawsuit. In that count, Dr. Coleman alleges that Corning Glass Works continues to infringe his patent through the actions of its wholly owned subsidiary, Met-path, Inc., which is procuring and using integrated blood serum separator tubes which are substantially identical to the Cor-vac serum machine.

Metpath, Inc. (“Metpath”) was incorporated on October 3,1967. It is a New York State corporation with its offices in New Jersey. Since February 26, 1982, Metpath has been a wholly owned subsidiary of Corning Glass Works, but it remains separately incorporated. These basic facts, which are amply documented by defendants’ affidavits and documentary proof, are not seriously disputed by plaintiff. Nor does he quarrel with the general rule that two separately incorporated companies are separate and distinct entities under the law.

Nevertheless, Dr. Coleman seeks to hold Corning Glass Works liable for the actions of Metpath, under the doctrine that a veil between corporations will be pierced where “one is a mere agency or department of the other and is used as an instrumentality to perpetrate fraud, justify wrong, avoid litigation or render it more difficult, or generally to escape liability for what are in substance its own acts”. Owl Fumigating Corporation v. California Cyanide Company, 30 F.2d 812, 813 (3rd Cir.1929). To prevail on such a theory, plaintiff must establish that Metpath was a “mere instrumentality” of Corning Glass Works, by showing “that [Corning] actually dominates [Metpath] such that the subsidiary has no existence of its own and that [Corning] uses the corporate existence of [Metpath] to perpetrate a fraud”. Williams v. McAllister Brothers, Inc., 534 F.2d 19, 21 (2d Cir.1976). In the present case, plaintiff has not provided adequate evidence to raise a genuine question of fact as to either of these elements.

Dr. Coleman has been unable to produce any evidence that Metpath, which was incorporated almost 15 years before it became a Corning subsidiary, has no independent existence of its own. In the light of the numerous and uncontroverted aspects of Metpath’s corporate independence documented by defendant, the elements of control identified by Dr. Coleman — including the facts that Corning owns all the shares of Metpath, pays the salary of Met-path’s chief executive^ officer, and may have referred to Metpath as a “division”— are inadequate as a matter of law to establish the degree of domination necessary to disregard Metpath’s separate corporate identity. D.L. Auld Company v. Park Electrochemical Corporation, 553 F.Supp. 804, 807 (E.D.N.Y.1982); Schippers v. Midas International Corporation, 446 F.Supp. 62 (E.D.Tenn.1978). Although plaintiff has pointed to certain loose language in Coming’s Annual Reports about its “merger” with Metpath, the defendant has conclusively established that the merger referred to was actually between Met-path and Cormet Holdings, Inc., one of Coming’s wholly owned and separately incorporated subsidiaries.

Plaintiff has also failed to allege any facts which might establish the second requirement for “piercing the corporate veil”: namely, that Corning uses the separate corporate existence of Metpath to perpetrate a fraud (as would be the case, for example, if Metpath were grossly undercapitalized, or if the connection between the two corporations were concealed). Even if Corning Glass receives an indirect, unjust profit from its ownership of Met-path, plaintiff has offered no explanation as to how Corning derives any fraudulent profits — or any advantage at all — from the mere fact of Metpath’s separate corporate existence.

For both of the foregoing reasons, Dr. Coleman has offered no evidence which would warrant a decision to pierce the corporate veil and hold Corning liable for Met-path’s activities. Summary judgment is therefore granted to defendant as to Count IV of the amended complaint.

III. STATE CLAIMS

The remaining claims of plaintiff’s amended complaint all arise under State law for breach of contract, conversion, and theft of trade secrets. Corning has moved to dismiss these claims as well, on the grounds that they are barred by plaintiffs laches as well as the applicable statutes of limitations. In view of my decision to dismiss the Federal claims in the amended complaint, however, it is appropriate to consider whether this Court ought to exercise subject matter jurisdiction over plaintiffs pendent state claims. The question of subject matter jurisdiction is so fundamental that it is a “question the Court is bound to ask and answer for itself”, even when not otherwise suggested by the parties to the action. Mansfield, Coldwater & Lake Michigan Railway v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511, 28 L.Ed. 462 (1884).

Since Dr. Coleman’s federal claims of patent infringement were not insubstantial, this Court has the power under 28 U.S.C. Section 1338(b) to entertain and decide his related state law claims (at least to the extent that those claims can be fairly construed as “a claim of unfair competition”). “But the existence of federal power does not mean that the trial court must or should exercise its jurisdiction in all cases where it in fact exists.” A.H. Emery Company v. Marcan Products Corporation, 389 F.2d 11, 20 (2d Cir.1968), cert. denied, 393 U.S. 835, 89 S.Ct. 109, 21 L.Ed.2d 106 (1968). “Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well.” United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966); see also, Federman v. Empire Fire & Marine Insurance Company, 597 F.2d 798, 809 (2d Cir.1979); C.E.S. Publishing Corporation v. St. Regis Publications, Inc., 531 F.2d 11, 15 (2d Cir. 1975). That rule is to be observed even in cases, such as this one, where the district court has original jurisdiction over the state claims under 28 U.S.C. Section 1338(b). A.H. Emery Company, supra, 389 F.2d at 20 (2d Cir.1968); Smith v. Weinstein, 578 F.Supp. 1297, 1304-05 (S.D. N.Y.1984), affd. 738 F.2d 419 (2d Cir.1984).

Based on the reasoning of the foregoing authorities, and after weighing considerations of comity, judicial economy, convenience, and fairness to the litigants, this Court declines to exercise its pendent jurisdiction over Dr. Coleman’s state law claims. I note that Dr. Coleman is not precluded from bringing his action in state court, since the state statutes of limitations have been tolled during the pendency of this action. See Dunton v. County of Suffolk, 729 F.2d 903, 911 fn. 8 (2d Cir.1984), modified on other grounds, 748 F.2d 69 (2d Cir.1984). This decision is also consistent with the Supreme Court’s recommendation that federal courts should avoid rendering “needless decisions of state law”. Gibbs, supra, 383 U.S. at 726, 86 S.Ct. at 1139. Accordingly, there is no need to decide defendant’s remaining motions on the merits of Dr. Coleman’s state claims.

CONCLUSION

Defendant’s motion for summary judgment on the grounds of plaintiff’s delay in bringing suit is granted with respect to each of the plaintiff’s federal claims arising under the patent laws of the United States, and those claims are dismissed with prejudice.

As this Court lacks subject matter jurisdiction over the remaining causes of action in the plaintiffs complaint, they are dismissed on the motion of the Court pursuant to Federal Rules of Civil Procedure 12(h)(3), without prejudice to being raised in State court.

ALL OF THE ABOVE IS SO ORDERED.

      . In the alternative, plaintiff argues, without citing any authority, that his cause of action did not accrue, and that the laches period therefore did not commence, until Corning Glass finally began commercial sales of the Corvac in April, 1976. By July of 1975, however, Dr. Coleman knew that Corning had declared its intention of marketing the allegedly infringing Corvac, and could have brought suit for prospective injunc-tive relief at that time. Nothing more is required to commence the running of the laches clock.

      . For example, it has often been held that a plaintiffs delay in bringing suit against an in-fringer is not excused by the plaintiff’s activity in pursuing other infringers in other suits, unless the defendant has been notified of the pending suits. “The importance of a patentee’s giving notice of other litigation, and of its intent to pursue other infringers, is to let the alleged infringer know that the patentee has not acquiesced in the former’s infringement.” A.C. Aukerman v. Miller Formless Company, Inc., 693 F.2d 697, 700 (7th Cir.1982). The same reasoning applies with even greater force to a plaintiff who seeks to excuse his delay on the grounds of his activity in trying to obtain legal counsel.

      . I note that plaintiff has never asserted the presence of diversity jurisdiction in this action. Even if he had done so, the amended complaint fails to show diversity of citizenship on its face, because it does not allege the citizenship of the plaintiff. Baer v. United Services Automobile Association, 503 F.2d 393, 397 (2d Cir.1974). (Before it was amended, the plaintiff’s complaint had originally alleged that he was a resident of Pennsylvania, but "a statement that the party is a 'resident' of a particular state or foreign country is not sufficient since jurisdiction depends on citizenship and not mere residence". Wright and Miller, Federal Practice and Procedure, Section 1208 (1969).)
      Since neither the complaint nor the record before me “negates the possibility that the parties are not of diverse citizenship”, the complaint must be dismissed sua sponte for lack of subject matter jurisdiction. Baer, supra, 503 F.2d at 393.


source: Caselaw Access Project

author: PLUNKETT, District Judge.

license: Public Domain

text:
    BROADCAST MUSIC, INC., Plaintiff, v. NIRO’S PALACE, INC., Defendant.
    No. 83 C 7362.
    United States District Court, N.D. Illinois, E.D.
    May 28, 1985.

      Lee Ann Watson, Patrick J. Lamb, Fatten, Muchin, Zavis, Pearl & Galler, Chicago, 111., for plaintiff.
    Dennis Pence, Schumacher, Jones, Kelly, Olson & Pusch, Chicago, 111., for defendant.
   MEMORANDUM OPINION AND ORDER

PLUNKETT, District Judge.

Broadcast Music, Inc. (“BMI”) brought this action against Niro’s Palace, Inc. (“Niro’s”), seeking injunctive relief, statutory damages, and attorney’s fees for Niro’s alleged infringement of certain musical composition copyrights. Jurisdiction is based on 28 U.S.C. § 1338(a) and is not contested. Presently before the court are the parties’ cross-motions for summary judgment. For the reasons set forth below, BMPs motion is granted in part and denied in part, and Niro’s motion is denied.

Factual Background

The following facts are not in dispute. BMI purports to be the world’s largest “performing rights organization” that licenses nondramatical musical works on behalf of copyright owners under 17 U.S.C. § 110 et seq. Under this arrangement, BMI pays a fee to the copyright owner, charges a fee for nonexclusive licenses to perform copyrighted musical compositions, and enforces infringements of BMI held copyrights.

Niro’s owns and operates the Palace Bowl, a bowling alley and tavern. It serves food and drink to the public, and provides live entertainment including performances of musical compositions. In early December 1982, BMI learned that live music was being performed on Niro’s premises despite the fact that Niro’s did not have a licensing agreement with BMI. On December 10, 1982, BMI sent a letter to Niro’s informing it that copyrighted music could not be performed on its premises without prior consent of the copyright owner or a BMI license. Enclosed with the letter was a BMI “blanket” license agreement.

Sometime in late December 1982 or early January 1983, a BMI representative telephoned Niro’s and advised Jack Nickol (“Nickol”), a principal of Niro’s, that Niro's was violating the Copyright Act of 1976 by allowing copyrighted songs to be performed on Niro’s premises without first obtaining a BMI license. Niro’s nonetheless refused to enter into a licensing agreement. Subsequently, BMI sent a letter to Niro’s again informing it that it had to obtain a BMI license in order to have copyrighted songs played on its premises. Niro’s did not respond to this letter. In late January 1983, BMI sent a “mailgram” to Niro’s demanding that it stop the playing of BMI music on its premises. Niro’s rebuffed all of these warnings to stop infringing copyrights held by BMI.

BMI alleges that on March 18, 1983, a BMI investigator and his wife observed the live performance of thirty-two musical works on Niro’s premises. Of these thirty-two musical works, BMI alleges that fourteen involve copyrights held by BMI. Subsequently, BMI contacted Niro’s on two occasions, again warning Niro’s that performance of copyrighted music without consent or a license constituted copyright infringement. No license agreement was ever executed.

Discussion

Rule 56(c) of the Federal Rules of Civil Procedure provides that:

[summary judgment] shall be rendered forthwith if 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 a judgment as a matter of law.

Niro’s attempts to raise several factual issues so as to stave off summary judgment. As discussed below, its attempts are entirely lacking in merit. (On the other hand, Niro’s contends that one or more of its affirmative defenses has been established as a matter of law, and that it is therefore entitled to summary judgment.)

I. Copyright Infringement

In order for BMI to establish copyright infringement, it must prove (1) ownership of a valid copyright, and (2) “copying” by defendant. E.g., Atari, Inc. v. North American Philips Consumer Electronics Corporation, 672 F.2d 607, 614 (7th Cir.1982); 3 M. Nimmer, Nimmer On Copyright § 13.01, at 13-3 (2d ed. 1984). The first element has been established by the filing of BMI’s registration certificates and the affidavit of Theodore Zavin (“Zavin Aff.”), which constitute a “prima facie showing of proprietorship.” Broadcast Music, Inc. v. Moor-Law, Inc., 484 F.Supp. 357, 362-63 (D.Del.1980).

With respect to the second element, “copying,” Niro’s makes a tortured attempt to raise a material issue of fact. Copying can take many forms. The most straightforward type of copying is the public performance of another’s musical composition. Twentieth Century Music Corporation v. Aiken, 422 U.S. 151, 157, 95 S.Ct. 2040, 2044, 45 L.Ed.2d 84 (1975). Moreover, not only is the peformer liable for infringement, but so is anyone who sponsors the performance. As the Supreme Court found in Aiken:

An orchestra or individual instrumentalist or singer who performs a copyrighted musical composition in ... a public place without a license is ... clearly an in-fringer under the statute [the Copyright Act of 1909]. The entrepreneur who sponsors such a public performance for profit is also an infringer — direct or contributory.

422 U.S. at 157, 95 S.Ct. at 2044 (emphasis added).

In this case, BMI’s affidavits establish that 14 copyrighted songs were performed on Niro’s premises on the evening of March 18, 1983. (Affidavit of Daniel Wagemann, II6; Affidavit of Audrey Wagemann, f 5.) In an attempt to challenge these affidavits, Niro’s has submitted the affidavits of a band member and of a bartender on duty on the night in question. Niro’s argues that the affidavit of the bartender raises a material issue of fact because he disputes the kind of food and drink that the BMI investigator and his wife claimed they were served. (Affidavit of Michael Murphy, MI 4-5.) Such wholly irrelevant details, however, do not effectively controvert BMI’s affidavits.

In addition, Niro’s argues that the affidavit of the band member raises a material issue of fact as to the songs played on March 18, 1983. (Affidavit of Gregory Kerkera, MI 2-9.) However, Kerkera’s affidavit merely reveals that he cannot remember what musical compositions were pe-formed. (Id., MI 4-5.) Such evidence does not establish that a material factual dispute exists in this case. However, as to two of the musical compositions, “Yesterday” and “Tutti Frutti,” the Kerkera affidavit does controvert the BMI affidavits because it states that “Yesterday” has never been performed by the band, and that “Tutti Frutti” was added to the repertoire of the band only after the night in question. (Id., MI 7-8.)

Therefore, as to the playing of twelve of the fourteen musical compositions in question, no material factual dispute exists. Accordingly, performance of these twelve songs on Niro’s premises constituted copyright infringement, unless Niro’s can establish a valid affirmative defense to that charge.

II. Niro’s Affirmative Defenses

Niro’s has attempted to establish four affirmative defenses, all of which are lacking in either legal or factual support. Mere asertion of an affirmative defense, without a factual predicate for it, is insufficient to defeat a motion for summary judgment. See Fed.R.Civ.P.Rule 56(e); Tilden Financial Corporation v. Palo Tire Service, 596 F.2d 604, 607-608 (3d Cir.1979).

A. “Per Piece” Licensing

Under a “per piece” license agreement, a licensee pays for the right to perform specific musical compositions. The per piece license is the product of a consent decree entered into by BMI and the United States in 1966 in an antitrust suit, United States v. Broadcast Music, Inc., 1966 Trade Cases (CCH) U 71,941 (S.D.N.Y.1966). The conditions under which BMI is required to offer a per piece license are set forth in the consent decree as follows:

Defendant [BMI] shall not, in connection with any offer to license by it the public performance of musical compositions by music users other than broadcasters, refuse to offer a license at a price or prices to be fixed by defendant with the consent of the copyright proprietor for the performance of such specific (i.e., per piece) musical compositions, the use of which shall be requested by the prospective licensee.

1966 Trade Cases (CCH) at 111183,326-83,-327.

Niro’s argues that BMI’s alleged refusal to offer a per piece license establishes abuse of copyright in this case. This argument, however, is totally lacking in legal support. The last clause of the quoted section of the consent decree plainly states that the use of a per piece license “shall be requested by the prospective licensee.” Since Niro’s has neither alleged in its pleadings nor averred in its affidavits that it ever requested a per piece license, it cannot complain that BMI never offered one.

B. List of Protected Songs

Niro’s next argues that BMI should be barred from maintaining this copyright infringement action because BMI refused to provide Niro’s with a list of all of the songs assigned to BMI. However, Niro’s has not cited a single case where a court has held that BMI has a duty to provide such a list. Rather, the law is directly to the contrary. In Leigh v. Sakkaris, 215 U.S.P.Q. (BNA) 113 (N.D.Cal.1982), for example, the defendant, a tavern owner, also argued that the plaintiff-in-interest, the American Society of Composers, Authors and Publishers (“ASCAP”), was barred from maintaining a copyright infringement action because of its refusal to provide a list of copyrighted songs. The court rejected that argument, stating as follows:

As to the failure of the ASCAP to provide a list of musical works covered by its licensing agreement, courts have stated that in an era when much of the music performed is copyrighted, a proprietor should not profit at the expense of song composers by instructing musical groups not to play copyrighted music and by then claiming ignorance of their program. See Chess Music, Inc. v. Sipe, 442 F.Supp. 1184, 199 U.S.P.Q. 767 (D.Minn.1977). As the only purpose of a list would be to instruct musicians not to play those pieces listed, production of a list is not a defense to copyright violations.

215 U.S.P.Q. (BNA) at 115. Accord Warner Brothers, Inc. v. O’Keefe, 468 F.Supp. 16, 20 (S.D.Iowa 1977). See also Famous Music Corporation v. Bay State Harness Horse Racing and Breeding Association, Inc., 554 F.2d 1213, 1215 (1st Cir.1977). Thus, BMI clearly did not have a duty to provide Niro’s with a list of copyrighted songs. Accordingly, Niro’s affirmative defense is, as a matter of law, insufficient to bar BMI’s claims for copyright infringement.

C. Editing Service

Niro’s next argues that BMI is equitably estopped from asserting infringement on the theory discussed in Tempo Music, Inc. v. Myers, 407 F.2d 503, 507 (4th Cir. 1969). In Tempo Music, the court held that the plaintiffs were “estopped to assert [the] infringement and ask for damages and counsel fees” because an ASCAP representative, as agent for the plaintiffs, failed to advise the defendant of the availability of an editing service, as required by ASCAP’s consent decree. See United States v. American Society of Composers, Authors and Publishers, Civil Action No. 13-95 (S.D.N.Y. Mar. 14, 1950).

Niro’s reliance on Tempo Music is misplaced. In that case, the source of the duty to disclose the availability of an editing service was ASCAP’s consent decree, to which BMI was not a party. BMI’s consent decree created no such duty, and Niro’s has not suggested any other source for such a duty. Therefore, Niro’s third affirmative defense is, as a matter of law, insufficient to bar BMI’s claims for copyright infringement.

D. Copyright Misuse

Niro’s alleges copyright misuse as a fourth affirmative defense. In support of this defense, Niro’s relies heavily on the decision in Broadcast Music, Inc. v. Moor- Law, Inc., 484 F.Supp. 357 (D.Del.1980). In Moor-Law, BMI sued a small nightclub and its owner for copyright infringement. The defendants raised copyright misuse as an affirmative defense, and they filed an antitrust counterclaim. The counterclaim alleged that an offer of a per piece license to a small nightclub was a “sham” because such a license could not satisfy its needs, and therefore left the nightclub with no alternative except to purchase a blanket license.

As Niro’s notes, the court in Moor-Law denied BMI’s motion for summary judgment, despite clearly proven infringements, because:

defendants point to evidence tending to show (1) that after offering a per piece license, BMI declined to supply a list of compositions within its repertory, (2) that a BMI employee referred to BMI’s standard requests as a “snow job,” and (3) that BMI has apparently entered no license more limited than the repertory-wide blanket license with any [other small tavern owner].

484 F.Supp. at 367. Based on this evidence, the court found that the defendants’ copyright misuse defense and antitrust counterclaim raised material issues of fact. Unlike the defendants in Moor-Law, however, Niro’s points to no evidence to support its bald allegation of copyright misuse. Indeed, Moor-Law helps to highlight the insufficiency of Niro’s affirmative defense of copyright misuse.

Since Niro’s affirmative defenses are insufficient as a matter of law, much less established as a matter of law, its motion for summary judgment should be denied. Since BMI has proven infringement of twelve of the fourteen copyrighted songs, BMI’s motion for summary judgment with respect to those twelve songs is granted, but denied with respect to the remaining iwo songs.

III. Injunctive Relief, Damages, Costs, and Attorney’s Fees

A. Injunctive Relief

One of the remedies afforded by the Copyright Act of 1976 is injunctive relief. 17 U.S.C. § 502. Injunctive relief is appropriate in this case because the nature of the infringement prevents BMI from obtaining an adequate remedy at law. E.g., Broadcast Music, Inc. v. Dendrinos, 220 U.S.P.Q. (BNA) 865, 869 (N.D.Ill.1983); Boz Scaggs Music v. END Corporation, 491 F.Supp. 908, 914 (D.Conn.1980).

A permanent injunction is especially appropriate where a threat of continuing infringement exists. See, e.g., Broadcast Music, Inc. v. Dendrinos, 220 U.S.P.Q. (BNA) at 869. The threat of continuing infringement is substantial in the present case. Niro’s provided unauthorized performances of copyrighted musical compositions on its premises after receiving oral and written notices of infringement and demands to stop such infringement from BMI. This behavior indicates a willful disregard of copyrights held by BMI and should be permanently enjoined.

B. Statutory Damages

BMI has elected and is entitled to statutory damages of not less than $250.00 nor more than $10,000.00 for each of the twelve copyright infringements for which we have found that BMI is entitled to summary judgment in this case. See 17 U.S.C. § 504(c); Big Sky Music v. Todd, 388 F.Supp. 498, 501 (S.D.Ga.1974). See also Milene Music, Inc. v. Gotauco, 551 F.Supp. 1288, 1296 (D.R.I.1982). Within the statutory bounds, the amount of damages is within the court’s discretion. E.g., Quinto v. Legal Times of Washington, Inc., 511 F.Supp. 579, 582 (D.D.C.1981).

BMI has asked for $10,000.00 for each infringement. We believe, however, that that amount is excessive. Instead, we are persuaded that $500.00 per infringement is an effective deterrent for a willful infringer in Niro’s position.

C. Costs and Attorney’s Fees

A plaintiff is entitled to recover costs and attorney’s fees for willful copyright infringement. 17 U.S.C. § 505; Lau-ratex Textile Corporation v. Allton Knitting Mills, Inc., 517 F.Supp. 900, 904 (S.D. N.Y.1981); Boz Scaggs Music v. KND Corporation, 491 F.Supp. at 915. In the present case, an award of costs and reasonable attorney’s fees is justified because if Niro’s had heeded BMI’s warnings either to enter a license agreement or to stop playing copyrighted music, this litigation would have been wholly unnecessary. In addition, Niro’s repeatedly rebuffed offers to resolve this dispute prior to the commencement of litigation. See Boz Scaggs Music v. KND Corporation, 491 F.Supp. at 915. Thus, Niro’s was not an innocent infringer, and costs and reasonable attorney’s fees are appropriate.

Conclusion

For the reasons stated above, BMI’s motion for summary judgment is granted with respect to twelve of the fourteen claimed infringements and denied with respect to the remaining two, and Niro’s motion for summary judgment is denied. Accordingly, we permanently enjoin Niro’s from playing music for which BMI holds the copyright on its premises without obtaining consent or a license from BMI. We order Niro’s to pay BMI $6,000.00 in statutory damages, and costs and reasonable attorney’s fees. BMI should submit affidavits detailing the amount of costs and attorney’s fees incurred in prosecuting this action within fourteen days after receiving notice of this decision. Niro’s should file any objections to BMI’s submissions within fourteen days thereafter.

       Under this consent decree, ASCAP is required, upon written request from a prospective licensee, to inform the prospective licensee whether specific songs are in the ASCAP repertoire.


author: VUKASIN, District Judge.

text:
    GRACE GEOTHERMAL CORPORATION, a Delaware corporation, Plaintiff, v. NORTHERN CALIFORNIA POWER AGENCY, et al., Defendants.
    No. C-84-6741 JPV.
    United States District Court, N.D. California.
    June 14, 1985.

      Michael R. Marrón, Arnold S. Rosenberg, Morris Bailer, Marrón, Reid & Sheehy, San Francisco, Cal., for plaintiff.
    Martin McDonough, Dennis W. DeCuir, Stuart L. Somach, McDonough, Holland & Allen, Sacramento, Cal., for defendants.
   FINDINGS OF FACT AND CONCLUSIONS OF LAW RE ENTRY OF PRELIMINARY INJUNCTION

VUKASIN, District Judge.

INTRODUCTION

Plaintiff Grace Geothermal Corporation [“Grace”] instituted the above-referenced action against defendants Northern California Power Agency [“NCPA”]; the Cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah; the Plumas-Sierra Rural Electric Cooperative; and Robert Grimshaw. At the time of filing the complaint on October 11,1984, plaintiff further filed a Motion for Temporary Restraining Order and Preliminary Injunction.

Oral argument on this Motion was entertained by the Court, the Honorable J.P. Vukasin, Jr., presiding, on October 15, 1984, and again on October 19, 1984. Michael R. Marrón, Esq., and Arnold S. Rosenberg, Esq., of Marrón, Reid & Sheehy appeared for plaintiff; defendant NCPA was represented by Dennis W. De-Cuir, Esq., Stuart L. Somach, Esq., and Allen Ciamporeero, Esq., of McDonough, Holland & Allen. The Court heard argument for approximately two and one-half hours, at the conclusion of which on October 19, 1984, the Court granted plaintiff’s Motion for a Preliminary Injunction. The Court thereupon dictated into the record an Order enjoining defendants from filing eminent domain or condemnation proceedings, or any other litigation, against plaintiff’s interest in the property which is the subject of this action. On October 24, 1984, the Court signed and filed its written Order Granting Preliminary Injunction and Setting Bond.

NCPA appealed the Order of October 24, 1984 to the United States Court of Appeals for the Ninth Circuit. The matter was argued and submitted on April 9, 1985; on May 2, 1985, the Court of Appeals, 762 F.2d 1017, remanded the cause to this Court for entry of Findings of Fact and Conclusions of Law pursuant to Rules 52(a) and 65(d) of the Federal Rules of Civil Procedure.

In response to the mandate of the Ninth Circuit, the Court hereby renders the following Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

1. Grace is a corporation incorporated under the laws of the State of Delaware; its principal place of business is in New York. NCPA is a California joint powers public agency organized pursuant to Cal. Govt.Code § 6500 et seq. Defendant Robert E. Grimshaw was, at the time of the filing of Grace’s complaint, the General Manager of NCPA. The remaining defendants are public entity members of NCPA; all are located in the State of California. The amount in controversy in this action exceeds $10,000.00 independent of interest and costs.

2. Grace is the lessee under United States Geothermal Resources Leases Nos. CA-949 and CA-950 [the “federal leases”]. Said leases were granted by the United States Department of the Interior, Bureau of Land Management [“BLM”], as lessor. The federal leases cover 4,076 acres of federally-owned land in the Geysers Known Geothermal Resources Area in Sonoma and Lake Counties, California. Decl. of O. Grace, 114 and Exh. A, B.

3. Grace acquired the federal leases from Shell California Production, Inc., in 1983, subject to two Steam Sales Agreements between Shell and NCPA. Decl. of O. Grace, 11114, 6. The Steam Sales Agreements, entered into in 1977 and 1980, commit Grace to sell geothermal steam from a 2,000 acre portion of the federal leases to NCPA, for use by the latter in electric power generation. Decl. of O. Grace, HH 6, 7. The Agreements contain detailed provisions governing the production and delivery of geothermal steam by Grace to NCPA, and provisions for resolution of disputes by arbitration. Decl. of O. Grace, 1116 and Exh. C, D. NCPA has no contractual right to any steam produced beyond the amount committed to NCPA, nor to any steam produced on other portions of the federal leases. Decl. of O. Grace, H 7.

4. On August 31, 1982, BLM approved the assignment of the federal leases by Shell to Grace. Decl. of 0. Grace, 114 and Ex. C, D.

5. The federal leases which are the subject of this action constitute one of Grace’s principal assets. Suppl.Decl. of O. Grace, H 2. Grace has committed virtually all of its assets and operations to the development of geothermal steam resources for sale to electric utilities for power generating purposes, and the Steam Sales Agreements implicated in this action generate virtually all of its operating revenue. Decl. of O. Grace, 1111 6-8, 15; Suppl.Decl. of O. Grace, 112.

6. Grace’s acquisition and development of the federal leases has been in accordance with the purposes and provisions of the Geothermal Steam Act, 30 U.S.C. §§ 1001 et seq.

7. NCPA constructed, owns, and, since January 1,1983, has operated a geothermal power plant and related facilities [the “Geothermal Plant No. 2”] which utilizes geothermal steam produced on the federal leases. In addition, by October 19, 1984, NCPA had completed approximately 71% of its construction of an additional geothermal plant [“Geothermal Plant No. 3”] which will also utilize geothermal steam from the federal leases. Geothermal Plant No. 3 is scheduled to produce its first electrical power in the third quarter of 1985. Decl. of Whalen, 115.

8. The Steam Sales Agreements require at least 1000-foot spacing between the open intervals of wells funded by NCPA and existing wells. Decl. of Berge, 114. Notwithstanding this, NCPA requested Grace in July, 1984, to drill a well less than 1000 feet from an existing well. Grace initially refused. Decl. of O. Grace, H 9. Grace’s refusal was based on its belief that if a geothermal well is drilled at a point too near to existing wells where steam is known to exist, and steam is then drawn from the wells too fast, this may create an increased risk of damage to the fracture system and well bore through which the steam flows. Decl. of Berge, II5. On or about August 7, 1984, Grace offered to permit NCPA to drill one well within 1000 feet of existing wells if NCPA would agree to honor the 1000-foot spacing limitation in the future. NCPA refused. Decl. of 0. Grace, 1110.

9. NCPA’s request that Grace drill a well less than 1000 feet from an existing well was based on NCPA’s concern that its geothermal steam requirements for Geothermal Plant No. 3 either would not be met by Grace or not be met by Grace in a timely fashion and that NCPA would be unable to satisfy its commercial operations schedule. Decl. of Whalen, UK 5-17.

10. In August, 1984, NCPA decided to attempt to acquire Grace’s interest in the federal leases.

11. On August 22, 1984, defendant Grimshaw wrote a letter to Grace offering $145,000,000.00 for the portion of the federal leases dedicated to supplying NCPA’s geothermal steam requirements. The letter alerted Grace that if the offer were not accepted by the following day NCPA would commence condemnation proceedings. Decl. of 0. Grace, 1111; Suppl.Decl. of O. Grace, Ex. B.

12. On August 12, 1984, NCPA adopted a resolution approving the offer of a purchase price of $145,000,000.00 in accordance with Grimshaw’s letter of August 22, 1984, if accepted by Grace’s Board of Directors by Tuesday, September 4, 1984. The resolution further provided that if the offer was not accepted, Grimshaw was authorized to obtain an appraisal of the property as the basis for acquisition through condemnation and that Grimshaw and NCPA’s General Counsel were authorized to take all necessary steps to prepare for early acquisition of Grace’s interests in the federal leases. Decl. of O. Grace, K11; Suppl.Decl. of O. Grace, Ex. C.

13. On September 1, 1984, the parties entered into a Memorandum of Understanding for the transfer of the leasehold interest held by Grace, pursuant to a transfer agreement that was to be reached by October 15, 1984. Dft’s.Memo., Ex. A.

14. On September 27, 1984, pursuant to California statutes governing condemnation actions, NCPA sent Grace a precon-demnation offer and a notice of hearing on the necessity for condemnation proceedings. Decl. of O. Grace, II12 and Ex. G. The September 27 offer price was, like that announced on August 22, 1984, $145,000,-000.00; unlike the earlier offer, however, that price was proposed for the entire 4,067 acres of federal leasehold property. Id.

15. On October 3, 1984, Grace wrote NCPA stating that Grace did not consider the September 1 Memorandum of Understanding binding because it had been obtained in a coercive manner. Dft’s.Memo., Ex. D.

16. The hearing at which NCPA was to adopt the requisite resolution of necessity was scheduled for October 12, 1984. That hearing was held and the resolution was passed on that date. Dft.Memo., Ex. F. At the October 15, 1984, hearing this Court announced its intention to enter a Temporary Restraining Order precluding defendants from acting upon the resolution of necessity by instituting condemnation proceedings. Counsel for NCPA, contending that issuance of such an Order would be devastating to NCPA’s proposed bond offering, See Findings of Fact infra, 1127, agreed to take no action on condemnation pending the October 19, 1984, hearing on Plaintiff’s Motion for Preliminary Injunction.

17. Were Grace to lose possession of the federal leasehold in a condemnation action, it would be deprived of its principal revenue-generating asset, leading to loss of its business operations and all of its operating income. Suppl.Decl. of O. Grace, H 2.

18. Grace is obligated to pay interest on over $100,000,000.00 of bonds issued to finance its acquisition and development of the federal leases. Decl. of O. Grace, 1114. Loss of possession of the federal leasehold would deprive Grace of the means with which to pay interest due on the bonds, Decl. of 0. Grace, 1114, and could result in default on those bonds within two months. Suppl-Decl. of 0. Grace, 12. The bond indenture trustee could then accelerate the principal obligation. Decl. of 0. Grace, H 14. Grace would not have sufficient resources to pay off that obligation. Decl. of 0. Grace, 112.

19. In addition, loss of possession of the federal leasehold would deprive Grace of the means with which to meet its ongoing expenses for employee payroll and for leasehold development on this and other properties. Decl. of 0. Grace, 1115.

(a) Loss of possession of the federal leasehold would deprive Grace of the means to pay key employees and would require their termination. Id.

(b) Loss of possession of the federal leasehold would damage Grace’s credit, and would probably lead to cancellation of the line of credit needed by Grace to develop other properties. Without access to credit, those properties cannot be developed. Id.

20. Grace has contracted to sell Pacific Gas & Electric Company [“PG & E”] electricity produced on the federal leasehold from certain steam not committed to NCPA under the Steam Sales Agreements. Loss of possession of the federal leasehold would deprive Grace of the ability to produce electricity for sale to PG & E under the contract. Decl. of 0. Grace, ITU 8, 15.

21. In evaluating the foregoing probable consequences of NCPA’s taking possession of Grace’s federal leasehold via condemnation, Grace’s Chairman of the Board has concluded that, if condemnation is allowed to proceed, “GRACE will be destroyed as a going business.” Suppl.Decl. of 0. Grace, K 2. The Court finds that statement to be credible.

22. The procedures and standards applicable to any condemnation by NCPA of Grace’s federal leases are codified in the California Eminent Domain Law [the “Eminent Domain Law”], Cal.Civ.Proc.Code §§ 1230.010 et seq.

23. The Court’s analysis reveals that the Eminent Domain Law does not necessarily assure that Grace will have a clear, complete, and adequate remedy at law; particularly, Grace is not assured of a full and fair hearing on its legal objections and defenses to NCPA’s right to exercise the power of eminent domain prior to NCPA’s taking possession of the subject property. See Conclusions of Law infra, 11113-6.

24. The Court finds that NCPA could potentially take the leases from Grace in as little as three days after filing of the condemnation action. See Conclusions of Law infra, 116(d). In light of the fact that loss of possession would terminate Grace’s operating revenues, causing irreparable adverse consequences, see Findings of Fact supra, 111117-21 — including, in particular, a potential bond default within sixty days— the Court finds that any taking under the Eminent Domain law could proceed so quickly that it would not allow Grace to protect its vital interests as a viable business entity.

25. In view of these consequences to Grace, neither the payment to Grace of the deposit amount required by the Eminent Domain Law nor the award of money damages in this or another action would provide Grace with an adequate remedy.

(a) Acceptance by Grace of the deposit amount would, under the Eminent Domain Law, preclude Grace from continuing to contest NCPA's right to take the property by condemnation. See Conclusions of Law infra, H 6(h). Grace’s endangered financial status could compel it to accept such a deposit in order to pay interest to its bondholders; it would thereby be deprived of the means necessary to maintaining possession of the property and continuing its business.

(b) The controversy between Grace and NCPA is complex, turning largely on refined questions of federal law. See Conclusions of Law infra, 113. Its final resolution will not occur quickly. Any future award of damages to Grace would come far too late to provide it with a means of continuing its operations. Injury to these operations, in the form of possible bond default, loss or termination of employees, inability to develop other properties, loss of the PG & E contract and, quite possibly, the end of Grace as a viable corporation, would be a fait accompli by the time any damages award could be collected.. Decl. of 0. Grace, 1ÍH 14-15; Suppl.Decl. of 0. Grace, § 2.

26. To grant the preliminary injunction would do no more than preserve the status quo, by which Grace owns the federal leases and sells NCPA geothermal steam adequate for the latter’s electricity generation needs pursuant to the 1977 and 1980 Steam Sales Agreements. Said Agreements provide NCPA with both steam rights and the right to finance drilling to produce additional steam if necessary. Decl. of 0. Grace, HU 6-7, 17. The Court finds that Grace has adhered, and continues to adhere, to the terms of the Steam Sales Agreements.

27. NCPA planned a $400,000,000.00 bond offering in October, 1984, in order to finance the completion of its geothermal generating units and related facilities on the federal leaseholds. NCPA Preliminary Official Statement, dated October 15, 1984, p. i; Decl. of Whalen, H 12. Both in its written documents and at oral argument, NCPA claimed that the primary injury that it would sustain if the preliminary injunction were granted would be the jeopardizing of this bond sale. Dft’s.Memo. at 22-25. Decl. of Schaff, UU 4-8. NCPA further argued that approval by the electorate of Proposition 36, the so-called Jarvis Tax Initiative, at the November, 1984, General Election, would effectively deprive NCPA of access to the credit market. Dft’s. Memo, at 23. NCPA’s theory was that if the Court granted an injunction NCPA would be unable to market its bonds as scheduled prior to the General Election and would be barred from the relevant bond markets by the passage of Proposition 36 after the Election. Id. at 24; see also NCPA Preliminary Official Statement, Appendix G.

28. The Court hereby takes judicial notice that the electorate defeated Proposition 36 at the November, 1984, General Election. Official Statement of Vote, General Election, compiled by March Fong Eu, Secretary of State, p. 32.

29. The Court further takes judicial notice that on October 31, 1984, NCPA sold $400,000,000.00 in revenue bonds, notwithstanding issuance of the preliminary injunction. Standard & Poor’s Creditweek, November 19, 1984, p. 482.

30. Contrary to NCPA’s repeated and emphatic representations to the Court that any delay — or even suggestion of delay — in the condemnation proceedings would cause immediate and irreparable harm, NCPA represented three times in its Official Statement for the 1984 bond offering that, “[sjhould condemnation be necessary [to acquire the federal leases], ... any delay in obtaining possession [after institution of the condemnation proceedings] will not materially adversely affect the proposed operations of the Project.” NCPA Preliminary Official Statement, pp. 12, 42, A-3.

31. In view of the statements of NCPA quoted in Finding 30 supra, The Court can find no irreparable injury to NCPA resulting from issuance of the preliminary injunction.

(a) The Court finds Grace’s assurance that it will continue to provide steam to NCPA as provided by the Steam Sales Agreements to be credible. See Finding 26 supra.

32. The injury which Grace would suffer by the Court’s denial of the requested injunction is far greater than any injury which NCPA can credibly claim.

CONCLUSIONS OF LAW

1. The Court has jurisdiction of the subject matter of this action pursuant to 28 U.S.C. § 1331. Because of the existence of jurisdiction based on a federal question, it is unnecessary to determine whether the Court also has jurisdiction based on diversity of citizenship, pursuant to 28 U.S.C. § 1332. Diversity jurisdiction, however, appears to exist.

2. Before granting a preliminary injunction, the Court must find that the party seeking the injunction has demonstrated “either a combination of probable success on the merits and a possibility of irreparable injury, or that serious questions are raised and the balance of hardships tips sharply in the moving party’s favor.” Beltran v. Myers, 677 F.2d 1317, 1320 (9th Cir.1982) (emphasis in original). These tests are “not separate.” Los Angeles Memorial Coliseum Comm’n v. National Football League, 634 F.2d 1197, 1201 (9th Cir.1980). Rather, they represent the “outer reaches of a single continuum.” Id,., quoting Benda v. Grand Lodge of Int’l Assoc, of Machinists, etc., 584 F.2d 308, 315 (9th Cir.1978), cert. dismissed, 441 U.S. 937, 99 S.Ct. 2065, 60 L.Ed.2d 667 (1979). The Court may also properly consider whether the public interest would be advanced by granting the injunction. See, e.g., Zepeda v. United States I.N.S., 753 F.2d 719, 727 (9th Cir.1985), citing Sierra Club v. Hathaway, 579 F.2d 1162, 1167 (9th Cir.1978). As with any form of equitable relief, inadequacy of available legal remedies is a prerequisite to issuance of an injunction. Los Angeles Memorial Coliseum Comm’n, supra, 634 F.2d at 1201, citing Sampson v. Murray, 415 U.S. 61, 88, 94 S.Ct. 937, 952, 39 L.Ed.2d 166 (1974).

3. Grace’s Complaint raises serious questions of federal law. For the reasons hereinafter stated, there is, further a strong probability that Grace will succeed on the merits of this action, particularly on the issue of whether NCPA’s exercise of its state powers of eminent domain with regard to Grace’s federal geothermal leases is barred by the Supremacy Clause of the United States Constitution. U.S. Const., art. VI, cl. 2.

(a) The leaseholds in question were acquired under the provisions of the Geothermal Steam Act of 1970. 30 U.S.C. § 1001 et seq. Section 23(b) of the Act, 30 U.S.C. § 1022(b), provides:

Rights to develop and utilize geothermal resources underlying lands owned by the United States may be acquired solely in accordance with the provisions of this chapter.

Nowhere in the Act is there authority for state or local condemnation of federal geothermal leases.

(b) Pursuant to the authority conferred by Section 24 of the Act, 30 U.S.C. § 1023, the Secretary of the Interior has established a comprehensive regulatory scheme which is inconsistent with NCPA’s claimed right of condemnation. 43 C.F.R. § 3201 et seq.

(i) New leases ordinarily may be acquired only through competitive bidding. 43 C.F.R. §§ 3207.2-1, 3207.3, 3220. Any assignment or transfer of a geothermal lease or an interest therein must be filed with BLM within 90 days thereof, must be signed by the parties, and “must contain all of the terms and conditions agreed upon by the parties thereto____” 43 C.F.R. § 3241.1 (emphasis added).

(ii) The regulations permit involuntary termination of the rights of a federal geothermal steam lessee in a producing property only by means of cancellation. This is allowed only if the terms of the lease have been violated, and only BLM has the power to cancel a federal geothermal steam lease. 43 C.F.R. § 3241.1 et seq. Cancellation procedures guarantee that, at its request, a lessee will be afforded a federal administrative hearing conducted by an administrative law judge. Id.

(iii) Thus, none of the applicable regulations purports to vest states or cities with power to condemn federal geothermal steam leases, and the entire regulatory scheme is inconsistent with such power.

(c) A primary purpose of the Geothermal Steam Act of 1970 was “to encourage private enterprise to invest in and develop” federal geothermal resources. S.Rep. No. 1160, 91st Cong., 2d Sess., at 3-4, U.S.Code Cong. & Admin.News 1970, p. 5113. Subjecting federal geothermal leases issued under the Act to the eminent domain powers of state and local governmental entities would be inconsistent with, and would adversely affect, the accomplishment of this federal purpose. The willingness and ability of private enterprise to acquire and develop federal geothermal leases would be substantially and negatively affected by allowing NCPA to condemn the subject leases; this precedent would inhibit private acquisition and development of federal geothermal leases by raising the ever-present spectre of possible condemnation of such leases by state and local entities. In addition, the amounts bid in future competitive bidding to acquire such leases would probably be less than if the risk of condemnation were absent; federal revenues would thus be adversely affected.

. (d) A number of Court of Appeals decisions have proscribed, on the basis of the Supremacy Clause, condemnation and similar state interference with federal leases. In Transwestern Pipeline Co. v. Kerr-McGee Corp., 492 F.2d 878 (10th Cir.1974), the Court held that federal leases under the Mineral Leasing Act of 1920 were not subject to condemnation. Id., at 883-84. In Kirkpatrick Oil & Gas Co. v. United States, 675 F.2d 1122, 1125-26 (10th Cir. 1982), the Court refused to bind federal leases by a state-compelled communitization of oil and gas interests. The Ninth Circuit has held that oil exploration and extraction activities on federal leaseholds are not subject to the permit requirements of local county zoning ordinances. Ventu-ra County v. Gulf Oil Corp., 601 F.2d 1080, 1084-86 (9th Cir.1979); see also Union Oil Co. v. Minier, 437 F.2d 408, 411 (9th Cir.1970).

4. Grace has further demonstrated probable success on its contention that NCPA lacks the power to condemn Grace’s interest in the federal leases. This argument is based on Cal.Govt.Code § 6508, which prohibits joint agencies such as NCPA from condemning, for an electrical generation project, “property owned or otherwise subject to use or control by any public utility within the state.” Id. It is probable that PG & E’s contractual interest in the steam production of the federal leases makes such leases “subject to use ... by a public utility” within the meaning of the statute. See Findings of Fact supra, 1120.

5. Plaintiff is likely to be irreparably injured if the Court does not enjoin defendants from proceeding with the projected condemnation action. See Findings of Fact supra, Hlf 17-21.

6. After a careful review of the Eminent Domain Law, Cal.Civ.Proc.Code §§ 1230.010 et seq., and the relevant deci-sional law, the Court is unpersuaded that the Eminent Domain Law furnishes Grace with a clear, complete, and adequate remedy at law in this case. The Eminent Domain Law does not adequately insure that Grace will receive a full and fair hearing on its legal objections and defenses to NCPA’s right to take prior to any loss of possession of the property. This conclusion is based on the following construction of the applicable provisions of the Eminent Domain Law:

(a) The defendant in an eminent domain proceeding may raise by answer or demurrer its legal objections and defenses to the plaintiff’s right to take. Cal.Civ.Proc.Code §§ 1250.350, 1250.360, 1250.370.

(b) At the time of filing an eminent domain complaint, or at any time thereafter, the plaintiff may apply on an ex parte basis for an order for possession of the property. Cal.Civ.Proc.Code, § 1255.410.

(e) The issuance of an order for possession is mandatory provided that the plaintiff has adopted the statutorily-required resolution of necessity — as NCPA has in fact done — and has deposited the amount required by statute with the court. Cal. Civ.Proc.Code § 1255.410(a).

(d) Although the order for possession is generally effective in ninety days, see Cal. Civ.Proc.Code § 1255.450(b), the court can make it effective as early as three days after issuance; the court’s determination of the effective date of the order for possession is on an ex parte basis. Cal.Civ.Proc. Code § 1255.410(c).

(e) The defendant may file a motion for relief seeking a stay of the order for possession on the basis that the taking of possession will cause the defendant substantial hardship. The motion for relief and stay must be denied, however, if the plaintiff makes a showing that it needs possession of the property within the time specified in the order for possession and that a stay would cause the plaintiff substantial hardship. Cal.Civ.Proc.Code § 1255.420.

(f) Where the defendant has objected to the plaintiff’s right to take, the court may stay the order for possession until it has ruled on the objections if it finds that there is a reasonable probability that the defendant will prevail. Cal.Civ.Proc.Code § 1255.-430. The procedure to be followed by the court in making this determination is not specified by the statute, and there is no decision of any California appellate court interpreting § 1255.430 or establishing the proper procedures to be followed. Because of this, the present Court is unable to state that there is any adequate assurance that, prior to the loss of possession of the property, the defendant would receive a full and fair hearing on its legal objections and defenses to the plaintiff’s right to take.

(g) The defendant can seek judicial review of the validity of the plaintiff’s resolution of necessity. Cal.Civ.Proc.Code § 1245.255(a)(1), (2). However, such review does not encompass or decide the defendant’s legal objections and defenses to the plaintiff’s right to take. Moreover, the action seeking judicial review of the resolution must be dismissed upon commencement of the eminent domain action unless the court determines that dismissal will not be in the interests of justice. Cal.Civ.Proc. Code § 1245.255(a)(1).

(h) If the defendant withdraws any portion of the deposit in a condemnation proceeding, the defendant thereby waives the right to contest the plaintiff’s right to exercise the power of eminent domain or the sufficiency of the resolution of necessity. In such a case, the defendant’s sole remaining remedy is to claim greater compensation for the property. Cal.Civ.Proc.Code § 1255.260.

7. The balance of hardships tips strongly in favor of Grace.

(a) Absent preliminary injunctive relief, there is a substantial likelihood that Grace would be destroyed as a business entity. Even were Grace not completely destroyed by loss of possession of the federal leaseholds, it would be deprived of its principal revenue-generating asset, and its ability to finance, manage, and staff operations on other properties would in all likelihood be destroyed.

(b) In contrast, NCPA will not be greatly harmed by issuance of a preliminary injunction preserving the status quo as to ownership of the leases. NCPA currently receives steam from Grace pursuant to the Steam Sales Agreements, and enjoys the right thereunder to finance such additional drilling by Grace, within the terms of the Agreements, as may be necessary to assure the production and delivery of steam for NCPA’s future operations. The Agreements further provide a speedy and fair means, through arbitration, of resolving disputes concerning development of the property or production and delivery of steam to NCPA.

(c) The Court notes that most of NCPA’s claims of hardship arise from complicated disputes involving the parties’ operation of the steam field. Deck of Whalen; Deck of Cavóte. The Court is unable to resolve these disputes at the present stage of the proceedings; the issues posed by said disputes are removed both from the scope of the litigation at this stage — where plaintiff’s request for injunctive relief is concurrent with the filing of the complaint — and from the major contention on the merits underlying plaintiff’s suit: that federal law and policy preclude condemnation of the federal leases. For these reasons and because, as noted in the preceding paragraph, the arbitration provision of the Steam Sales Agreements gives NCPA a more appropriate forum for prompt resolution of its claims concerning the operating disputes, the Court concludes that NCPA has failed at this time to demonstrate that it will be irreparably injured by issuance of the preliminary injunction.

(d) The Court further concludes that possible hardship to NCPA with regard to its ability to sell its bonds — allegedly resulting from issuance of the preliminary injunction herein — is at present negligible. Indeed, it appears to the Court that NCPA has suffered little or no harm on account of the preliminary injunction. See Findings of Fact supra, 129. Notwithstanding this, it is clear that, were injunctive relief to be denied, Grace would suffer hardship far in excess of any prospective hardship which might be suffered by NCPA.

8. It is in the public interest and in accordance with federal policy that federal geothermal leases held by private developers not be subject to the eminent domain power of state and local governments.

9. Grace has established a strong probability of success on the merits as well as a likelihood of irreparable injury should the preliminary injunction not issue; it has further demonstrated that serious questions concerning the ability of state and local governmental entities to acquire federal geothermal leaseholds by condemnation are raised in the present lawsuit, and that the balance of hardships tips sharply in Grace’s favor.

10. Plaintiff is therefore entitled to preliminary injunctive relief as prayed for in its complaint.

      . The Court further had before it on October 19, 1985, and had read and considered, the following documentary materials:
      (1) Plaintiffs Complaint, filed 10/11/84;
      (2) Plaintiffs Motion for Temporary Restraining Order and Preliminary Injunction, filed 10/11/84;
      (3) Plaintiffs Memorandum of Points and Authorities in Support of Motion for Temporary Restraining Order, filed 10/11/84;
      (4) Declaration of Oliver Grace in Support of Plaintiffs Motions, with attachments, filed 10/11/84;
      (5) Declaration of Dr. C.W. Berge in Support of Plaintiffs Motions, filed 10/11/84;
      (6) Declaration of John Grace in Support of Plaintiffs Motions, filed 10/11/84;
      (7) Defendant NCPA's Memorandum of Points and Authorities in Opposition to Plaintiffs Motions, filed 10/17/84;
      (8) Defendant's Declaration of Homer D. Schaaf in Opposition to Plaintiff s Motions, filed 10/17/84;
      (9) Defendant’s Declaration of Richard H. Molke, Jr., in Opposition to Plaintiffs Motions, filed 10/17/84;
      (10) Defendant’s Declaration of James W. Whalen in Opposition to Plaintiffs Motions, filed 10/17/84;
      (11) Defendant’s Declaration of Paul E. Ca-vóte in Opposition to Plaintiffs Motions, filed 10/17/84;
      (12) Defendant’s Exhibits A-F re its Memorandum of Points and Authorities, filed 10/17/84;
      (13) Plaintiffs Reply Memorandum of Points and Authorities, filed 10/18/84;
      (14) Plaintiffs Declaration of Arnold S. Rosenberg in Support of its Motions, filed 10/18/84;
      (15) Plaintiff’s Declaration of Michael Saburn in Support of its Motions, filed 10/18/84; and
      (16) NCPA Preliminary Official Statement, dated October 15, 1984, filed 10/19/84.