BERRIE & COMPANY, INC., Appellant

                                  NO. 01-4422


              290 F.3d 548; 2002 U.S. App. LEXIS 9448; 63 U.S.P.Q.2D
                    (BNA) 1001; Copy. L. Rep. (CCH) P28,436

                            March 7, 2002, Argued
                              May 14, 2002, Filed
   RENDELL, Circuit Judge.

   We consider this case on an expedited appeal from the United States District
[*552]  Court for the District of New Jersey. The parties to this appeal, Dam
Things from Denmark, a/k/a Troll Company ApS (together "Dam Things"), and Russ
Berrie and Company, Inc. ("Russ"), are purveyors of trolls -- short, pudgy,
plastic dolls with big grins and wild hair. Dam Things, a Danish company,
asserts that its copyright in its original troll design, the "Basic Good Luck
Troll," has been restored pursuant to 17 U.S.C.  104A. Section 104A is a highly
unusual provision which has restored copyright protection in a vast number of
foreign works [**2]  previously in the public domain. Dam Things brought this
action against Russ alleging infringement of its restored copyright. n1 If
restoration is proper under the statute, the key remaining issues are whether
there is infringement, and if so, whether the infringing works will be totally
prohibited or will be entitled to mandatory licenses under  104A's safe harbor
for derivative works.

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   n1 Dam Things' complaint sets forth five other claims for relief which are
not implicated in this appeal.

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   Upon application by Dam Things, the District Court granted a preliminary
injunction forbidding Russ from selling any trolls after February 13, 2002. n2
In its opinion and order, the District Court explained that the preliminary
injunction was warranted because in all likelihood Dam Things could establish
that the copyright in the "Good Luck Troll designs" was restored under  104A
and that Dam Things could also prove that Russ infringed its restored copyright.

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   n2 By agreement of the parties, and in light of this pending appeal, this
date was extended to March 29, 2002.

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   Russ attacks the District Court's grant of the preliminary injunction on two
grounds. First, Russ argues that the Dam Things troll, P1, does not qualify for
copyright restoration, in part because Dam Things abandoned its copyright.
Second, Russ contends that even if restoration is proper, the injunction was
improvidently granted because the Russ trolls at least qualify for the safe
harbor protection  104A provides for derivative works.

   We believe that the District Court properly determined that Dam Things was
likely to establish that P1's copyright qualified for restoration and that this
copyright was not abandoned by Dam Things. We find, however, that the District
Court's subsequent analysis was flawed in two ways. First, the District Court
conflated the tests for infringement and derivative works, and it therefore did
not properly consider the possibility that any of the Russ trolls qualified for
 104A's safe harbor for derivative works. Second, the District Court did not
conduct the proper comparison of each of the allegedly infringing Russ trolls
against the restored Dam Things troll -- P1. As we believe that the District
Court based its grant of the injunction on an incomplete [**4]  factual and
legal analysis, we will vacate the injunction and remand for further
consideration by the District Court in light of this opinion.

   We note that the District Court's somewhat conclusory treatment of the
issues, and trolls, may have been due to the parties' lack of clarity as to what
troll designs were the subject of their arguments. Essentially, the parties
label the trolls and group them as suits each party's interests. The parties'
briefs accordingly ask us to rule in sweeping fashion as to the protection, or
lack thereof, to be afforded to the various Russ and Dam Things trolls. The
District Court's opinion adopts such a general approach in grouping all of the
trolls together, referring to the Dam Things trolls generally as the "Good Luck
Troll designs." The Court's reasoning, however,  [*553]  was based on its
determination that the copyright in the 1957/1958 "Original Good Luck Troll,"
P1, qualified for restoration. Furthermore, on appeal Dam Things has clearly
stated that P1 is the only troll in which it seeks restoration. We note at the
outset, therefore, that we will limit our analysis to the arguments pertaining
to the restoration of P1.


   In the 1950s, Thomas Dam, a [**5]  Danish woodcarver, created a troll figure
for his daughter out of rubber. He called it the "Good Luck Troll," claiming
that it had the ability to bring good luck to whomever possessed it. Apparently,
his creation garnered much attention from the community and Dam decided to sell
trolls to the public. He first manufactured them in his home, and soon
established a factory outside of his home for this purpose. An article from the
Danish weekly magazine Se & HQr dated September 4, 1959, features a photograph
of Thomas Dam's daughter holding the trolls and tells of the troll's rising
popularity -- amounting to sales of 10,000 trolls each month in Denmark alone.
In 1961, the trolls began to be produced in PVC instead of rubber, increasing
their durability. As the troll's success continued, Dam began selling his trolls
in other countries. According to Dam Things, the Dam trolls were first sold in
the United States in 1961.

   In 1960, Thomas Dam applied for a United States design patent for a troll
doll, and the patent was issued in 1961. This troll doll was later described by
Thomas Dam as "girl-like" as opposed to the original "boy-like" troll, and
certain photographs of the troll submitted [**6]  with the application reflect
that the troll has hair pulled back in a ponytail. Dam Things n3 filed
applications for U.S. copyright registration of both the boy-like and girl-like
trolls in 1964 and then again in 1965 after its initial applications were
rejected for improperly designating the copyright holder as Denmark. Dam Things
has held and continues to hold a valid Danish copyright in the trolls. Dam
Things from Denmark v. Russ Berrie & Co., 173 F. Supp. 2d 277, 284 (D.N.J.
2001). In 1965, the District Court for the District of Columbia held that the
Dam Things' trolls submitted for patent and copyright protection were in the
public domain, because they were published in the United States with improper
notice -- they were marked with "Denmark" and the date or with just the date,
instead of with the company's name and date -- or with no notice at all.
Scandia House Enters., Inc. v. Dam Things Establishment, 243 F. Supp. 450,
453-54 (D.D.C. 1965) [hereinafter Scandia].

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   n3 According to an affidavit of Neils Dam, Thomas Dam's son, his father
established Dam Things Establishment in 1962 and assigned all of his copyrights
to the company. Dam Things Establishment was later succeeded by Thomas Dam
Design and Copyrights AG. Finally, in 1993, that company was merged into Troll
Company ApS.

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   In the early 1950s, Russell Berrie was a manufacturer's representative for
two companies who sold Dam Things trolls. Berrie started his own company, Russ
Berrie and Company, Inc. in 1963 and began to sell trolls manufactured by Dam
Things' U.S. licensee, Royalty Design, using the Dam Things molds, in 1967. When
Royalty Design went bankrupt, Russ then used the Dam Things molds to manufacture
trolls. Berrie claims that in 1987 his company began to modify the trolls. In
1988, Russ sent a Dam Things troll "pencil topper" to be used to make a mold and
to manufacture trolls in China. In 1988 Russ also sent to China a photo of a Dam
Things troll from the Russ catalog for the purpose of making a mold and
manufacturing  [*554]  trolls. In the 1990s, Russ obtained fifteen n4 copyright
registrations for trolls -- registered as derivative works of the photographs of
the Dam Things trolls in the Russ catalogs.

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   n4 One additional copyright was obtained by Russ subsidiary Bright of
America, Inc.

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   Dam Things now claims copyright infringement [**8]  of its public domain
troll. This unusual claim is made possible by an act of Congress and is grounded
on Dam Things' assertion that its copyright in its original troll has been
restored pursuant to 17 U.S.C.  104A. In this legislation, Congress declared
that a wide range of foreign works previously in the public domain in this
country, perhaps for many years, are once again afforded copyright protection.
The United States took this action in an effort to comply with agreements it had
entered into with foreign governments regarding intellectual property rights.

   Although Russ points out the "extraordinary windfall" Dam Things will
receive, and the "extraordinary burden" it will bear, if Dam Things' copyright
is restored, the legislature's purpose in providing these protections for
foreign copyright holders was to ensure greater protection for American
copyright holders abroad.

   This protection results from the United States' promise, in the context of
the TRIPs n5 annex to the Agreement Establishing the World Trade Organization (
"WTO"), to adhere to the Berne Convention, which the United States had entered
in 1989.  [hereinafter Nimmer]. In order to comply with the Berne Convention's
"Rule of Retroactivity" contained in Article 18, n6 Congress enacted the Uruguay
Round Agreements Act. Id. The Act supplanted a previous version of  104A
(enacted only one year earlier in an effort to comply with the North American
Free Trade Agreement ("NAFTA")), and provided for broad restoration of foreign
works. Id. Section 104A of the Copyright Act now provides for automatic
restoration of copyright, as of January 1, 1996, for "an original work of
authorship" which meets the following requirements:
     3 Melville B. Nimmer & David Nimmer, Nimmer [**9]  on Copyright 
     9A.04 (2001)

     (A) is protected under subsection (a) [which provides for a term of
     protection equal to what the work would have received "if the work had
     never entered the public domain in the United States," and excepts
     certain works which were "ever owned or administered by the Alien
     Property Custodian"];

     (B) is not in the public domain in its source country through
     expiration of term of protection;

     (C) is in the public domain in the United States due to --

      [*555]  (i) noncompliance with formalities imposed at any time by
     United States copyright law, including failure of renewal,  [**10]
     lack of proper notice, or failure to comply with any manufacturing

     (ii) lack of subject matter protection in the case of sound recordings
     fixed before February 15, 1972; or

     (iii) lack of national eligibility; and

     (D) has at least one author or rightholder who was, at the time the
     work was created, a national or domiciliary of an eligible country,
     and if published, was first published in an eligible country and not
     published in the United States during the 30-day period following
     publication in such eligible country.

    17 U.S.C.  104A(h)(6)(A)-(D).

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   n5 The United States Trade Representative has described the Agreement on
Trade-Related Aspects of Intellectual Property Rights ("TRIPs") as "establishing
comprehensive standards for the protection of intellectual property and the
enforcement of intellectual property rights in WTO member countries. It requires
each WTO member country to apply the substantive obligations of the world's most
important intellectual property conventions, supplement those conventions with
substantial additional protection, and ensures that critical enforcement
procedures will be available in each member country to safeguard intellectual
property rights." Office of the United States Trade Representative, The Uruguay
Round Agreements Act Statement of Administrative Action: Agreement on
Trade-Related Aspects of Intellectual Property Rights (1994) [hereinafter USTR
Statement]. [**11]

   n6 Article 18 of the Berne Convention provides: "This Convention shall apply
to all works which, at the moment of its coming into force, have not yet fallen
into the public domain in the country of origin through the expiry of the term
of protection." Berne Convention for the Protection of Literary and Artistic
Works (Paris Text 1971), 1161 U.N.T.S. 3.

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   Dam Things claims that its copyright in its original troll qualifies for
automatic restoration in accordance with  104A. If it does, then the copyright
"shall subsist for the remainder of the term of copyright that the work would
have otherwise been granted in the United States if the work never entered the
public domain in the United States." 17 U.S.C.  104A(a)(1)(B).

   Section 104A also provides some relief for "reliance parties" -- American
authors who copied the restored works while they were in the public domain in
the United States.  17 U.S.C.  104A(d)(2)-(3). Section 104A defines "reliance
party" in relevant part as "any person who (A) with respect to a particular
work, engages in acts, before [**12]  the source country of that work becomes an
eligible country, which would have violated section 106 if the restored work had
been subject to copyright protection, and who, after the source country becomes
an eligible country, continues to engage in such acts . . . ." 17 U.S.C.  104A
(h)(4)(A). n7 Parties who were in fact copying the restored work are given one
year to sell the now infringing works after being given a "notice of intent to
enforce" ("NIE") by the author of the restored work.  17 U.S.C.  104A(d)(2).
But, the statute also provides a safe harbor in the form of a mandatory license
for authors of "derivative works"; they are allowed to continue manufacturing
and selling their work, but must pay the author of the restored work reasonable
compensation.  17 U.S.C.  104A(d)(3). n8

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   n7 During oral arguments, Dam Things asserted that Russ would not be
protected by the provisions for reliance parties because of the lack of sales by
Russ during relevant time periods. As this issue was not properly raised by Dam
Things in its briefs and appears not to have been raised before the District
Court, we will not address it here. [**13]

   n8 In its report on the Copyright Technical Amendments Act, the House of
Representatives expressed its reason for providing a special provision in  104A
for derivative works: "In enacting section 104A, Congress considered the fact
that restoring copyright in works that are currently in the public domain
creates a potential problem: people may have used these works as the basis for
new derivative works, such as motion pictures made from novels. At the time the
new derivative work was created, the use of the underlying work was completely
lawful, since it was in the public domain. Once copyright in the underlying work
is restored, however, the continued use of the derivative work without the
consent of the owner of the copyright in the underlying work would constitute
copyright infringement." H.R. Rep. No. 105-25, at 12 (1997).

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   Dam Things filed this copyright infringement suit on August 22, 2001. In its
complaint, Dam Things sets forth six grounds for relief, and seeks thirteen
forms of relief, including injunctive relief. On August 24, 2001, the District
Court entered an "Order to Show Cause"  [**14]  as to "why an Order should not
be entered for . . . preliminary injunctive relief." Both  [*556]  parties filed
a series of declarations as well as briefs in support of their respective
positions. The District Court concluded that Dam Things had "demonstrated a
likelihood of success on its copyright infringement claim" n9 and on December
20, 2001 it entered a Second Amended Order granting Dam Things a preliminary
injunction and detailing its terms. Part of this order instructs that Russ will
be entirely prohibited from selling its troll dolls as of February 13, 2002 --
one year after the date of the NIE. n10 The Court also ordered Dam Things to pay
a cash or surety bond in the amount of $ 100,000. The case comes before us on an
expedited appeal.

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   n9 The District Court did not consider Dam Things' other claims for relief.

   n10 There is some controversy over the date of the NIE, as Dam Things claims
to have first sent an NIE to Russ in 1996. However, Russ admits that on February
13, 2001 it received a duplicate NIE sent by Dam Things. The District Court
therefore adopted this as the relevant date for the purpose of the injunction.

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   As Dam Things brought this action to enforce an alleged copyright, the
District Court exercised jurisdiction pursuant to 28 U.S.C.  1338(a). We
exercise jurisdiction over this interlocutory appeal of the District Court's
issuance of a preliminary injunction pursuant to 28 U.S.C.  1291(a)(1). We
review the District Court's issuance of the preliminary injunction for an abuse
of discretion. The Court of Appeals for the Second Circuit has explained: "A
district court may abuse its discretion by applying an incorrect legal standard
or by basing the preliminary injunction on a clearly erroneous finding of fact."
Waldman Publ'g Corp. v. Landoll, Inc., 43 F.3d 775, 780 (2d Cir. 1994). In other
words, we will still review the District Court's legal determinations and its
application of the law to the facts de novo. See Southco, Inc. v. Kanebridge
Corp., 258 F.3d 148, 150-51 (3d Cir. 2001).

   The District Court applied the established four-prong test in order to
determine whether to grant Dam Things a preliminary injunction: "(1) whether the
movant has shown a reasonable probability of success on the merits; (2)  [**16]
whether the movant will be irreparably injured by denial of the relief; (3)
whether granting preliminary relief will result in even greater harm to the
nonmoving party; and (4) whether granting the preliminary relief will be in the
public interest." Dam Things From Denmark v. Russ Berrie & Co., 173 F. Supp. 2d
277, 281 (D.N.J. 2001) (quoting Doe v. Nat'l Bd. of Med. Exam'rs, 199 F.3d 146,
154 (3d Cir. 1999)). As we conclude that the District Court committed legal
error in the analysis leading to its determination that Dam Things had a
reasonable probability of success on the merits, we will limit our discussion to
this first prong, and therefore we will examine the merits of Dam Things' claim
under the statute and the District Court's treatment of it. This requires a
three-step inquiry: first, does Dam Things hold a restored copyright, second,
did Russ infringe Dam Things' copyright, and, third, is Russ protected by the
104A safe harbor for creators of derivative works?

   A. Eligibility for Restoration

   1. Background

   As set forth above, 17 U.S.C.  104A provides essentially four requirements
for restoration of a foreign work's copyright [**17]  that are relevant here.
First, the copyright has not expired in its source country. Second, it is in the
public domain in the United States because of failure to comply  [*557]  with
formalities. Third, the author of the work was a national or domiciliary of an
eligible country. Fourth, the work was first published in an eligible country
not less than thirty days prior to being published in the United States. The
first two requirements regarding the continued existence of foreign copyright
protection and the reason for the work's presence in the public domain were
challenged by Russ before the District Court. However, we believe that they were
properly disposed of in the Court's opinion. As to the third requirement, Russ
has not challenged the fact that Thomas Dam is a national of an eligible
country. We will therefore limit our discussion, as the parties did their
arguments before us, to the place of first publication.

   While Dam Things claims that the troll for which it seeks restoration was
first published in Denmark, Russ contends that it was actually first published
in the United States. Underlying this argument is the preliminary question in
this case -- which troll is at issue here?  [**18]  Dam Things has presented one
troll to the Copyright Office, to the District Court, and to us as the troll
whose copyright has been restored -- Plaintiff's Exhibit 1 ("P1"). n11 Dam
Things represents this doll as "an original Good Luck troll." It was reportedly
manufactured in 1959, confirmed by the fact that it is made of rubber and later
dolls were made of PVC. Further, it is shown in a September, 1959 magazine being
held by Thomas Dam's daughter. The doll was presented to us in a box to protect
it, as the rubber doll stuffed with sawdust has become very fragile with age.
The short and stout troll appears to have had four fingers and four toes which
have been broken with age and are now protected by stockings. It has a cheery
smile on its face, a broad nose, large brown circular eyes, large pointy ears,
and a mass of shaggy, dark hair. The doll stands erect with its short arms
pointing out to the sides. Although not required by statute, Dam Things applied
for restoration of the copyright in this troll doll on March 9, 2000.

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   n11 The District Court refers to this as the "1957 Troll"; however, we do not
find this label very helpful, and will instead simply refer to this troll as P1.

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   Russ, on the other hand, focuses its attention on what it terms "the 1961" or
"Public Domain Troll." This is the troll that was the subject of Dam Things'
1961 design patent. Dam Things has referred to this at various times as a
girl-like version of P1 and has also applied for a new registration for this
troll in 2000 as being an "adaptation of previously published boy doll." Dam
Things has not agreed that this troll was first published in 1961, and, in fact,
on its 2000 copyright application it claimed it was first published in 1958. The
girl-like troll that was the subject of the design patent was presented to the
District Court and us as Plaintiff's Exhibit 4 ("P4"). This troll doll appears
much like the first -- it has four fingers on each hand and four toes on each
foot, a large smile, broad nose, and large round eyes. It also stands erect with
its arms outstretched, and it has a short, pudgy figure. n12 The one difference
which has been pointed to and was relied on by the Copyright Office in
considering P4 as a derivative work for copyright registration purposes was its
rounded ears in contrast to the pointy ears of P1.

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   n12 Photographs of these early Dam Things trolls -- a boy and a girl --
appeared in Danish magazines Familie Journal and Femina in 1960 along with the
story of their success.

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   Russ does not contest before us the fact that P1 was first published in
Denmark. Instead, it argues that P4 is the relevant troll because it is really
the troll that Dam  [*558]  Things contends Russ infringed. Dam Things, on the
other hand, suggests that P4 is not a distinct work from P1 and therefore if one
of them is infringed then the other is as well. Neither party argues that all of
Dam Things' trolls are identical in appearance, and both seem to concede that
restoration of a copyright in a troll must of necessity be linked to a specific
troll which was first used in its nation of origin other than the United States.
While the standards for judging infringement and derivative works are useful in
some copyright analyses, we are confronted with a creature of statute and must
decide in exactly what work the copyright was restored. The parties seem to
conflate the statutory requirement for restoration, with Dam Things seeking
restoration of its "troll," and Russ seeking to deny restoration in Dam Things'
"trolls." However, we cannot properly consider this argument framed in this
fashion regarding the breadth of the copyright protection, given the fact that
the myriad trolls paraded before [**21]  us by Dam Things are not identical
works, and the statute envisions that one must be able to identify the first
publication of a tangible item, a "work," in a specific location. Here, Dam
Things made clear at oral argument that P1 was the only specific item as to
which restoration was sought. n13

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   n13 During oral argument, Dam Things asserted: "Only the plaintiff, has the
right to determine which is the restored work and which work gets the restored
copyright. Dam did that. Judge Politan found it. It is PX1. So with all these
other labels that have been given to the 1961 doll, the '64 troll, the later
dolls, the girl/boy troll, it doesn't matter. We're here saying under 17 U.S.C.
104A, the work that has been restored in PX1."

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   As the other trolls that were created after P1 are not identical works and
were first used admittedly at different times and even in different locations
than P1, our holding as to the restoration of P1 does not control as to
restoration of any other specific troll. [**22]  That is not to say that the
copyright restored in P1 might not provide protection for the other works based
upon the appropriate originality analysis. Understandably, and appropriately, on
remand the District Court will have to determine the extent of the protection
provided to other Dam Things works to the extent that Russ argues that its
trolls are merely derivative or even copies of Dam Things works other than P1.

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   n14 We need not decide for the purpose of this opinion whether P4 is a
distinct work, a derivative work, or just a "copy" of P1.

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   Our holding today as to restoration is therefore limited to P1, and our
discussion of Appellant's arguments will be limited accordingly. All that we
need to decide is whether, as Dam Things urges, the copyright in P1 was
restored. Therefore the place where P1 was first published is what matters.

   2. Russ's Contentions

   a. Judicial Estoppel

   Russ argues that Dam Things should be estopped from contending now that its
trolls were not first published in the United States [**23]  because it
previously represented to the United States Patent Office and to the court
during the Scandia litigation that P4, the troll for which it was seeking design
patent protection, was first published in the United States. Russ specifically
points to two statements made by Thomas Dam. First, in his patent application
filed on September 1, 1960, Dam represented that he did "not believe that this
design [P4] was ever known or used before [his] invention thereof or patented or
described in any printed publication in any country before [his] invention
thereof, or more  [*559]  than one year prior to this application." Second, in
the course of the Scandia litigation, before the issues were limited solely to
the matter of copyright, Thomas Dam reaffirmed the truth of this statement and
also explained that P4 was "vastly different artistically" from P1.

   We have held that judicial estoppel n15 is appropriate only where the
following factors are met: "(1) the party to be estopped is asserting a position
that is irreconcilably inconsistent with one he or she asserted in a prior
proceeding; (2) the party changed his or her position in bad faith, i.e., in a
culpable manner threatening to the [**24]  court's authority or integrity; and
(3) the use of judicial estoppel is tailored to address the affront to the court
's authority or integrity." Montrose Med. Group Participating Sav. Plan v.
Bulger, 243 F.3d 773, 777-78 (3d Cir. 2001).

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   n15 Russ also contends that, in the alternative, we should apply collateral
estoppel. We have "required the presence of four factors before collateral
estoppel may be applied: (1) the identical issue was previously adjudicated; (2)
the issue was actually litigated; (3) the previous determination was necessary
to the decision; and (4) the party being precluded from relitigating the issue
was fully represented in the prior action." Raytech Corp. v. White, 54 F.3d 187,
190 (3d Cir. 1995) (citing United Indus. Workers v. Gov't of the Virgin Islands,
28 V.I. 211, 987 F.2d 162, 169 (3d Cir. 1993)). The issue here -- P1's country
of first publication -- only possibly satisfies the fourth factor. Clearly we
would not apply collateral estoppel in such a case.

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   As discussed above, our restoration analysis is limited to P1. Here the
threshold requirement of inconsistency is not satisfied because the
representations made regarding P4's qualification for a design patent do not
pertain to P1, and, therefore, are not inconsistent with representations
regarding P1's date and place of publication. Russ points to statements in the
patent application and in Thomas Dam's later affidavit that specifically address
the requirements for patent protection: that the design be "unobvious," 35
U.S.C.  103(a), and that the subject of the patent has not been "described in a
printed publication in this or a foreign country or in public use or on sale in
this country, more than one year prior to the date of the application." 35
U.S.C.  102. Both of these representations were made with respect to P4,
however, and therefore wholly unrelated to the issue before us. Dam made no
representations regarding P1, let alone regarding its date or place of first
publication. Therefore, Dam Things' position here that P1 was first published in
Denmark in 1958 is not "irreconcilably inconsistent" with its position before
the Patent [**26]  Office that P4 was not previously published outside the
United States more than a year prior to the date of publication -- September
1960. n16

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   n16 Additionally, the assertions in Thomas Dam's affidavit during the Scandia
litigation would not properly be the subject of judicial estoppel because the
statements were not adopted by the court in the course of the litigation, and
therefore bad faith is not evidenced. We have explained "that a party has not
displayed bad faith for judicial estoppel purposes if the initial claim was
never accepted or adopted by a court or agency." Montrose Med. Group
Participating Sav. Plan, 243 F.3d at 778 (citing Cleveland v. Policy Mgmt. Sys.
Corp., 526 U.S. 795, 143 L. Ed. 2d 966, 119 S. Ct. 1597 (1999)). Thomas Dam's
statement on the patent application could arguably satisfy this requirement
because the Patent Office accepted this date in its decision to issue the design
patent, and, furthermore, Dam profited thereby. However, estoppel is still
improper because Russ fails to overcome the most basic requirement of

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   Furthermore, we have previously explained that judicial estoppel is
appropriately applied in a narrow category of cases because it "is an
extraordinary remedy that should be employed only when a party's inconsistent
behavior would otherwise  [*560]  result in a miscarriage of justice." Montrose
Med. Group Participating Sav. Plan, 243 F.3d at 784 (internal quotations
omitted). We will not expand our application of judicial estoppel to factual
settings where the specific test we have set forth is not satisfied. n17

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   n17 Russ also tries to use Thomas Dam's prior statements to establish that P4
is a distinct work from P1 and that it was P4, not P1, which was thrust into the
public domain in Scandia. Russ admits, however, that even if it was P4 and not
P1 that was placed in the public domain via the Scandia litigation, P1 still is
properly the subject of restoration under  104A. As Russ itself explains: "The
statute was intended not merely to revive lapsed U.S. copyrights in foreign
works, but to confer U.S. copyright protection on eligible foreign copyrighted
works even if those works had not previously had a U.S. copyright." (citing USTR
Statement at 12; 3 Nimmer  9A.04[A][1]). Therefore, this argument does not help
Russ defeat Dam Things' claim to restore P1.

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   b. Abandonment

   Russ also contends that Dam Things abandoned its copyright in P1. It points
specifically to Dam Things' publication of many trolls in the United States in
the 1960s without proper notice, the fact that it did not appeal the Scandia
decision, and its admission to Scandia that the trolls were in the public
domain, as acts constituting abandonment. "Abandonment occurs only if there is
an intent by the copyright proprietor to surrender rights in his work." 4 Nimmer
 13.06. While there is a split of authority as to whether an overt act is
necessary to establish abandonment, it is undisputed there must be either an
act, or a failure to act, from which we can readily infer an intent to abandon
the right. See id. (setting forth the conflicting authorities). We agree with
the District Court that the acts relied upon by Russ are insufficient to
establish that Dam Things intended to abandon its United States copyright. In
doing so, we do not suggest that, as Dam Things proposes, abandonment may never
be a bar to restoration pursuant to 17 U.S.C.  104A.

   3. Conclusion

   The District Court concluded "that [Dam Things] can prove all of the
requisite [**29]  elements of  104A and is therefore likely to succeed on the
merits of its restoration claim." Dam Things from Denmark v. Russ Berrie & Co.,
173 F. Supp. 2d 277, 286-87 (D.N.J. 2001). We agree with this aspect of the
District Court's ruling, as it appears that Dam Things will be able to establish
that P1 satisfies all four requirements for restoration, including first
publication in an eligible country.

   B. Copyright Infringement

   Upon determining that the restoration of the Dam Things copyright was likely,
the District Court focused on the merits of Dam Things' claim -- the likelihood
of success on the copyright infringement claim. The District Court's reasoning
was as follows:

     The Court has carefully examined the dueling trolls at issue here, and
     is convinced that Plaintiff has made a prima facie showing of
     infringement. A finder of fact who compares Russ's trolls with Dam's
     could not reasonably conclude that the Russ's trolls [sic] are
     original designs or that they comprise original expression of the idea
     of a troll. In the present case, all of the troll embodiments involved
     are very similar in appearance. This Court believes that, for purposes
     of copyright [**30]  law, the designs are too similar to be given
     individual copyright protection. Contrary to Defendant's contention,
     Plaintiff's [sic] do not claim a copyright on the idea of a  [*561]
     troll or a monopoly on trolldom. Nor are they entitled to it. But
     Plaintiff is entitled to protect its particular, original,
     identifiable expression of troll.

        Russ argues that it has modified Dam's designs by changing the size
     of the heads, changing the facial expressions, and changing the shape
     and size of the dolls' bodies, and that these changes are sufficient
     to constitute original designs. Def. Surreply Br. at 18. Simply
     because one troll's nose is larger or one's ears are slightly more
     pointed, or that a troll's mouth is opened or closed, in this Court's
     view, does not make these designs sufficiently distinct so as to be
     afforded independent copyright protection. . . .

        In further defense of its trolls, Russ maintains that only minimal
     or slight creativity need be demonstrated in order for a work to be
     original. See Feist Publications, Inc., 499 U.S. 340, 111 S. Ct. 1282,
     113 L. Ed. 2d 358. But as Defendant also points out, "something more
     than a 'merely trivial variation,' something recognizably [**31]  'his
     own'" is necessary for a showing of originality. Alfred Bell & Co. v.
     Catalda Fine Arts, 191 F.2d 99 (2d Cir. 1951). Here, the Court
     believes that Russ's trolls contain only trivial variations from Dam's
     original troll, and therefore are not sufficiently original. . . .

        As the foregoing analysis makes clear, this Court is convinced that
     all of the dolls in this case involve one basic troll design; Thomas
     Dam created this design in 1957 and 1958 in Gjol, Denmark. His company
     owns the rights to it, and it is entitled to copyright protection for
     the original design.

   Dam Things from Denmark, 173 F. Supp. 2d at 288-90 (D.N.J. 2001) (footnotes

   We believe that the District Court's analysis was too conclusory, given the
complex issues of infringement and originality before it, and particularly in
light of the unique challenges presented by  104A. We are specifically
concerned with the District Court's incomplete consideration of Russ's
contention that its trolls would qualify as derivative works. As the United
States Courts of Appeals have yet to provide any guidance as to the application
of  104A, and, additionally, as courts often confuse [**32]  and even conflate
the issues of infringement and originality, we will set forth the proper
standards and analysis that needs to be conducted by a district court faced with
an issue of whether a  104A reliance party's work infringes and should be
barred, or is a derivative work entitled to licensing.

   1. Infringement

   In cases where copyright infringement is at issue, the Court should first
consider whether there has been infringement by comparing each of the allegedly
infringing works against the restored work. n18 The test for copyright
infringement is well-established. There are two essential elements: ownership of
copyright, and copying by the defendant.  Whelan Assocs., Inc. v. Jaslow Dental
Lab., Inc., 797 F.2d 1222, 1231 (3d Cir. 1986). Copying is proven by showing not
only that the defendant had access to a copyrighted work, but also that there
are substantial similarities between the two works. Id.; see also Ford Motor Co.
v. Summit Motor Prods., Inc., 930 F.2d 277, 291 (3d Cir. 1991) (footnote
omitted)  [*562]  ("Copying is demonstrated when someone who has access to a
copyrighted work uses material substantially similar to the copyrighted work in
a manner [**33]  which interferes with a right protected by 17 U.S.C.  106.").

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   n18 As discussed below, the District Court need not reconsider its
infringement analysis on remand because Russ has conceded that it "performed
what would have been an infringing act if the work had not been in the public

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   Following the Second Circuit's lead in Arnstein v. Porter, 154 F.2d 464,
468-69 (2d Cir. 1946), we have further subdivided the test for substantial
similarity into two considerations. See Whelan Assocs., 797 F.2d at 1232 (noting
our adoption of the Arnstein bifurcated substantial similarity test); see also
Sid & Marty Krofft Television Prods., Inc. v. McDonald's Corp., 562 F.2d 1157,
1164-65 (9th Cir. 1977) (describing the two considerations as "extrinsic" and
"intrinsic"). First, the opinions of experts may be called upon in determining
whether there is sufficient similarity between the works so as to conclude that
the alleged infringer "copied" the work.  Whelan Assocs., 797 F.2d at 1232.
[**34]  Second, the fact-finder is to determine whether a "lay-observer" would
believe that the copying was of protectible aspects of the copyrighted work. Id.
One court has described this test as being whether "the ordinary observer,
unless he set out to detect the disparities, would be disposed to overlook them,
and regard their aesthetic appeal as the same." Folio Impressions, Inc. v. Byer
California, 937 F.2d 759, 765 (2d Cir. 1991), quoted in Boisson v. Banian, Ltd.,
273 F.3d 262, 272 (2d Cir. 2001).

   The Court of Appeals for the Second Circuit has termed these two
considerations as "actual copying" which focuses on access in conjunction with
"probative" similarity, n19 and "actionable copying" which considers whether
there is "substantial" similarity between the alleged infringing work and
protectible elements of the original work. n20 Boisson, 273 F.3d at 267; see
also Sturdza v. United Arab Emirates, 281 F.3d 1287 (D.C. Cir. 2002) (dividing
the test into the consideration of whether the defendant actually copies and
whether it copied protectible aspects of the copyrighted work). The test for
actual copying can be established by direct [**35]  evidence or inferred by
evidence of access and "similarites that are probative of copying between the
works, and expert testimony." See Laureyssens, 964 F.2d at 140, quoted in
Boisson, 273 F.3d at 267. However, the Supreme Court has explained that "not all
copying . . . is copyright infringement." Feist Publ'ns, Inc. v. Rural Tel.
Serv. Co., 499 U.S. 340, 361 (1991). The trial court therefore must still
consider whether the copying is actionable, viewing the item through the lay
person's eyes, focusing on whether the substantial similarities relate to
protectible material. n21 Boisson, 273 F.3d at 268.

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   n19 In Laureyssens v. Idea Group, Inc., 964 F.2d 131 (2d Cir. 1992), the
Second Circuit adopted the term "probative similarity" in this first portion of
the test instead of "substantial similarity" because "the presence of a
'substantial similarity' requirement in both prongs of the analysis -- actual
copying and whether the copying constitutes an improper appropriation -- creates
the potential for unnecessary confusion, especially because a plaintiff need not
prove substantial similarity in every case in order to prove actual copying."
Id. at 140. [**36]

   n20 As Nimmer has explained in his treatise on copyright: "It bears
repeating, moreover, that the inquiry in this section is into improper
appropriation, i.e., actionable copying as a legal proposition. Although the
term 'substantial similarity' often is invoked as a proxy to prove copying as a
factual proposition, we have seen that the term 'probative similarity' is to be
preferred in that context and the question of 'substantial similarity' arises
analytically only thereafter." 4 Nimmer  13.03[A].

   n21 A This test makes clear that "it is only after actual copying is
established that one claiming infringement then proceeds to demonstrate that the
copying was improper or unlawful by showing that the second work bears
'substantial similarity' to protected expression in the earlier work." Castle
Rock Entm't, Inc. v. Carol Publ'g Group, Inc., 150 F.3d 132, 137 (2d Cir. 1998).

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    [*563]  2. Derivative Works

   In light of the special provisions in  104A, once a court has found
infringement, it must consider whether the safe harbor provision is implicated,
namely, whether the infringing [**37]  works are derivatives of the restored
work. n22 Just as with all other works, "originality is a constitutionally
mandated prerequisite for copyright protection" for derivative works.  Feist
Publ'ns, Inc., 499 U.S. at 351; see also U.S. Const. art. I,  8. However, all
aspects of a work need not be original with the author. An author's work can
utilize expression from an already existing work created by another author, or
even that same author. A new work that utilizes expression from a previously
existing work is considered to be derivative of that work. The Copyright Act
defines a derivative work as "based upon one or more preexisting works, such as
a translation, musical arrangement, dramatization, fictionalization, motion
picture version, sound recording, art reproduction, abridgment, condensation, or
any other form in which a work may be recast, transformed, or adapted." 17
U.S.C.  101. An author's right to protection of the derivative work only
extends to the elements that he has added to the work; he cannot receive
protection for the underlying work. Furthermore, if the underlying work is
itself protected by copyright, then he will receive [**38]  no protection at
all; on the contrary, he is a copyright infringer, because in order to create
his work he has copied the underlying work. However, section 104A obviously
creates an exception to this rule and even though the foreign author has a
restored copyright, the creator of the derivative work is given special
dispensation and is not considered an infringer, and is instead treated as a
licensee.  17 U.S.C.  104A(d)(3).

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   n22 If, on the other hand, there was no infringement, Russ would succeed in
this case and our analysis would be over. As Nimmer explains: "a work will be
considered a derivative work only if it would be considered an infringing work
if the material that it has derived from a pre-existing work had been taken
without the consent of a copyright proprietor of such pre-existing work." 1
Nimmer  3.01.

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   In considering the originality required to qualify for copyright protection
as a derivative work, the Supreme Court has explained: "To qualify for copyright
protection,  [**39]  a work must be original to the author. Original, as the
term is used in copyright, means only that the work was independently created by
the author (as opposed to copied from other works), and that it possesses at
least some minimal degree of creativity." Feist Publ'ns, Inc., 499 U.S. at 345
(emphasis added) (citations omitted). The Court went on to explain: "To be sure,
the requisite level of creativity is extremely low; even a slight amount will
suffice." Id. The Court of Appeals for the Second Circuit has explained: "We do
follow the school of cases in this circuit and elsewhere supporting the
proposition that to support a copyright there must be at least some substantial
variation, not merely a trivial variation such as might occur in the translation
to a different medium." L. Batlin & Son, Inc. v. Snyder, 536 F.2d 486, 491 (2d
Cir. 1976) (en banc). In Batlin, the Second Circuit considered whether a plastic
Uncle Sam bank based on a cast iron original contained sufficient originality to
satisfy the requirements for derivative works.  [*564]  Id. The court concluded
that differences as to the shape of the satchel, the leaves in the eagle's
talons, and other such [**40]  alterations were too minor to support a claim for
originality. Id. at 489. By contrast, in litigation over the alleged copying of
Paddington Bear, the Second Circuit found sufficient variations to constitute
originality in the drawing of the bear where changes included: "the changed
proportions of the hat, the elimination of individualized fingers and toes, the
overall smoothing of lines -- combine to give the . . . drawing a different,
cleaner 'look.'" Eden Toys, Inc. v. Florelee Undergarment Co., 697 F.2d 27, 35
(2d Cir. 1982). The court there explained that while the alterations to the new
drawing were "too minor to entitle the [new] work to claim a different aesthetic
appeal, [they] are still original and substantial enough to deserve independent
copyright protection." Id. at 34-35. The Court of Appeals for the Seventh
Circuit has contended that Batlin presented a change by the Second Circuit to a
"less liberal" test requiring that a derivative work be "substantially different
from the underlying work [in order] to be copyrightable." Gracen v. Bradford
Exch., 698 F.2d 300, 305 (7th Cir. 1983). n23 The Second Circuit's analysis
[**41]  appears unchanged, however, as that court has reconfirmed its approach
in Batlin: "The law requires more than a modicum of originality. This has been
interpreted to require a distinguishable variation that is more than merely
trivial." Waldman Publ'g Corp. v. Landoll, Inc., 43 F.3d 775, 782 (2d Cir. 1994)
(citing L. Batlin & Son, Inc., 536 F.2d at 490).

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   n23 In Gracen, the Seventh Circuit found insufficient originality in a
painting portraying Dorothy from the film version of the Wizard of Oz because it
was not "substantially different from the underlying work." 698 F.2d at 304.

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   We have similarly applied the originality test set forth in Feist that a work
"must possess 'at least some minimal degree of creativity.'" Southco, Inc. v.
Kanebridge Corp., 258 F.3d 148, 150 (3d Cir. 2001) (quoting Feist Publ'ns, Inc.,
499 U.S. at 345). In Southco, we went on to explain: "Although the Court has
noted that this is not a 'stringent' standard, it has also held [**42]  that
there is 'a narrow category of works in which the creative spark is utterly
lacking or so trivial as to be virtually nonexistent.'" 258 F.3d at 151.
(quoting Feist Publ'ns, Inc., 499 U.S. at 358-59). When considering originality,
therefore, the court must determine whether the author's creativity is enough to
overcome a charge of triviality.

   3. District Court's Analysis

   These descriptions of the tests for copyright infringement and for derivative
works illustrate the complex task that a court faces in addressing these issues.
In this case, the District Court did assess the similarity between the trolls,
and Russ does not challenge the Court's determination that the Russ trolls
infringe Dam Things' restored copyright in P1. We therefore focus our discussion
on the derivative works analysis. Unfortunately, it is not clear whether the
Court actually addressed the derivative works issue which requires a
determination as to originality, but, if so, it did not apply the proper
standards for originality; instead, it conflated them with the requirements for
infringement, which involve findings regarding similarity. Furthermore, the
District Court did not properly compare the [**43]  relevant trolls.

   Dam Things claims that the District Court did consider the issue of
originality, because it used the magic derivative works language: "Here, the
Court believes that  [*565]  Russ's trolls contain only trivial variations from
Dam's original troll, and therefore are not sufficiently original." Dam Things
from Denmark, 173 F. Supp. 2d at 288-89 (emphasis added). But, then, in the next
paragraph when comparing the Dam Things trolls to one of the Russ trolls, the
District Court reverted to a broader statement: "They are substantially similar
in appearance, and a casual observer would be unable to differentiate the maker
of these troll dolls." Id. at 290. The Court seems to have completely
intertwined the two tests to a point where it is impossible to determine where
one analysis begins and the other ends, if in fact there are two analyses. It is
important to remember that by definition, derivative works are substantially
similar to the original work, because "[a] work is not derivative unless it has
been substantially copied from a prior work." 1 Nimmer  3.01. The test for
minimal creativity is therefore necessarily separate and apart from the test
[**44]  for substantial similarity. We cannot conclude that the District Court
conducted a derivative works analysis, apart from a similarity analysis, because
although the Court used the "trivial variations" language that is used to
distinguish works as derivative, it never once employed the word "derivative" or
noted that a second test needs to be applied. n24

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   n24 In its consideration of restoration, the District Court briefly mentioned
the reliance party issue, but seemed to misunderstand the possible implications
of such status, particularly regarding whether the reliance party is a copier or
a creator of an original work. The District Court explained: "Because Dam's Good
Luck trolls were in the public domain when Russ 'created' its trolls, Russ
indeed may have been a reliance party. The Court, however, makes no final
determination on this issue today, but assumes for purposes of this motion that
Russ qualifies as a reliance party." Dam Things From Denmark, 173 F. Supp. 2d at
285 n.9. This is further evidence that the court entirely overlooked the
copy/derivative work distinction that is so vital to its ultimate determination.

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   The distinction between the tests for infringement and for originality may be
nuanced, but it does exist and must be carefully considered by the court. The
Court of Appeals for the Second Circuit explained:

     The difference between these two tests is not merely academic. A work
     which makes non-trivial contributions to an existing one may be
     copyrighted as a derivative work and yet, because it retains the 'same
     aesthetic appeal' as the original work, render the holder liable for
     infringement of the original copyright if the derivative work were to
     be published without permission from the owner of the original

    Eden Toys, 697 F.2d at 34. n25 The fact that the two companies' dolls have
the "same aesthetic appeal" or "are very similar in appearance" does not rule
out the applicability of the safe harbor for derivative works. n26

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   n25 Nimmer also provides a helpful explanation: "The standards for
originality and for substantial similarity should not be confused. While a mere
'distinguishable variation' will constitute a sufficient quantum of originality
so as to support a copyright in such variation, that same 'distinguishable
variation' in one work may not sufficiently alter its substantial similarity to
another so as to negative infringement." 4 Nimmer  13.03[A]. [**46]

   n26 At one point during its generalized comparison of the trolls, the
District Court observed: "Simply because one troll's nose is larger or one's
ears are slightly more pointed, or that a troll's mouth is opened or closed, in
this Court's view, does not make these designs sufficiently distinct so as to be
afforded independent copyright protection." Dam Things from Denmark, 173 F.
Supp. 2d at 289. Such comparisons of the trolls would be proper, but must be
undertaken using the standard of more than mere trivial variations.

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    [*566]  The District Court's analysis was also deficient in that it
conducted a generalized comparison of the Dam Things trolls and the Russ trolls.
In order to determine whether one work is a derivative of another, the trial
judge must actually compare the exact works at issue. In this case Dam Things
presented its trolls to the District Court on one occasion and Russ presented
its trolls on a separate occasion. The trolls themselves were never placed into
evidence. As a result, the Court never had the opportunity to compare the
physical trolls of both Russ and Dam Things [**47]  side-by-side. While each
side places the blame for this evidentiary lapse on the other party, the
placement of the blame is irrelevant. Furthermore, we will not state that as a
matter of law it is insufficient for the judge to consider photos of the trolls
instead of the trolls themselves. However, having ourselves been faced with a
legion of trolls on counsels' tables during oral arguments, we know for a fact
that the photographs are no substitute for the real thing in this case.

   The District Court should have compared the relevant trolls against one
another to determine whether the various Russ trolls are derivatives of P1.
Without detailed consideration of the Russ trolls as against P1, the District
Court determined that all of the Russ trolls and all of the Dam Things trolls
are too similar to be distinguishable. It explained: "A finder of fact who
compares Russ's trolls with Dam's could not reasonably conclude that the [sic]
Russ's trolls are original designs or that they comprise original expression of
the idea of a troll." Dam Things from Denmark v. Russ Berrie & Co., 173 F. Supp.
2d 277, 288-89 (D.N.J. 2001). This blanket treatment relating to the trolls fell
[**48]  short of what is required. As we saw firsthand, these trolls come in all
shapes and sizes -- small pencil-toppers, and nine inch "giants," as well as
grandparents, teenagers, and babies. Perhaps in the abstract one can believe
that "a troll is a troll," but it is clear that all trolls cannot simply be
judged alike, particularly when the inquiry must focus on distinct aspects of
each. It is certainly possible that some of the Russ trolls could be considered
to be derivative works while others would not. This exacting comparison needs to
be made.

   On remand, the District Court must reexamine Dam Things' "likelihood of
success on the merits." While a party need not prove that its success is
certain, and is not expected to submit all of its proof, it is essential that
the District Court consider the evidence before it according to the proper legal
standards. Therefore, on remand, the District Court should look at the
infringing Russ trolls and individually compare each one to P1 to determine
whether it constitutes a derivative work of the Dam Things troll. n27

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   n27 In the interest of efficiency, we suggest that the District Court
consider consolidating its Rule 65 injunction hearing with its merits hearing on

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   As the District Court conducted an incomplete legal analysis of the
likelihood of Dam Things' success on the merits in this case, we will vacate the
District Court's preliminary injunction order and remand this case for further
consideration consistent with this opinion. n28 Costs on appeal are to be borne
equally by the parties.

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   n28 As the preliminary injunction is being vacated, we need not reach Russ's
challenge to the amount of the injunction bond ordered by the District Court.

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