SID & MARTY KROFFT TELEVISION PRODUCTIONS, INC. and Sid & 
           Marty Krofft Productions, Inc., Plaintiffs-Appellants, v. 
           McDONALD'S CORPORATION and Needham, Harper & Steers, Inc.,
              Defendants-Appellees.  SID & MARTY KROFFT TELEVISION 
          PRODUCTIONS, INC. and Sid & Marty Krofft Productions, Inc.,
          Plaintiffs-Appellees, v. McDONALD'S CORPORATION and Needham,
                  Harper & Steers, Inc., Defendants-Appellants

                             Nos. 75-1203, 75-1202

              UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT


              562 F.2d 1157; 1977 U.S. App. LEXIS 11224; 196 U.S.P.Q.
                                    (BNA) 97

                                October 12, 1977

JAMES M. CARTER, Circuit Judge:

   This is a copyright infringement action.  Plaintiffs Sid and Marty Krofft
Television Productions, Inc., and Sid and Marty Krofft Productions, Inc. were
awarded $50,000.00 in their action against defendants McDonald's Corporation and
Needham, Harper & Steers, Inc.  Defendants were found to have infringed
plaintiffs' "H. R. Pufnstuf" children's television show by the production of
their "McDonaldland" television commercials.

    [*1161]  Plaintiffs argue on appeal that the district court erred in
awarding damages pursuant to 17 U.S.C. § 101(b).  They contend that the court
should have ordered [**2]  an accounting of profits by defendants or,
alternatively, should have awarded statutory "in lieu" damages.

   Defendants cross-appeal.  They contend that their television commercials did
not infringe upon plaintiffs' television series as a matter of law.  To find
infringement, they suggest, would abridge their first amendment rights.  They
also refute plaintiffs' contentions as to damages.

   We believe that the district court's finding of infringement was not clearly
erroneous, and see no merit to defendants' first amendment claims, We find,
however, that the district court was in error in awarding damages.  We therefore
affirm in part, reverse in part, and remand for further proceedings.

   Facts

   In 1968, Sid and Marty Krofft were approached by the NBC television network
to create a children's television program for exhibition on Saturday morning. n1
The Kroffts spent the next year creating the H. R. Pufnstuf television show,
which was introduced on NBC in September 1969.  The series included several
fanciful costumed characters, as well as a boy named Jimmy, who lived in a
fantasyland called "Living Island," which was inhabited by moving trees and
talking books.  The television series [**3]  became extremely popular and
generated a line of H. R. Pufnstuf products and endorsements.

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   n1 The Kroffts are fifth generation puppeteers who have been in the
entertainment industry in this country over 40 years.  The evidence showed that
they enjoyed years of success with their puppet shows in cities around the
country -- most notably the Le Puppet de Paris adult puppet show.  The Kroffts
created the characters for "The Banana Splits," a popular children's television
series produced by Hanna Barbera, before being asked to create their own show.

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   In early 1970, Marty Krofft, the President of both Krofft Television and
Krofft Productions and producer of the show, was contacted by an executive from
Needham, Harper & Steers, Inc., an advertising agency.  He was told that Needham
was attempting to get the advertising account of McDonald's hamburger restaurant
chain and wanted to base a proposed campaign to McDonald's on the H. R. Pufnstuf
characters.  The executive wanted to know whether the Kroffts would be
interested [**4]  in working with Needham on a project of this type.

   Needham and the Kroffts were in contact by telephone six or seven more times.
By a letter dated August 31, 1970, Needham stated it was going forward with the
idea of a McDonaldland advertising campaign based on the H. R. Pufnstuf series.
It acknowledged the need to pay the Kroffts a fee for preparing artistic designs
and engineering plans.  Shortly thereafter, Marty Krofft telephoned Needham only
to be told that the advertising campaign had been cancelled.

   In fact, Needham had already been awarded McDonald's advertising account and
was proceeding with the McDonaldland project. n2 Former employees of the Kroffts
were hired to design and construct the costumes and sets for McDonaldland.
Needham also hired the same voice expert who supplied all of the voices for the
Pufnstuf characters to supply some of the voices for the McDonaldland
characters.  In January 1971, the first of the McDonaldland commercials was
broadcast on network television. They continue to be broadcast.

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   n2 On June 24, 1970, Needham made a presentation of a McDonaldland
advertising campaign to McDonald's.  Needham was awarded the account by a
contract dated June 29, 1970.  In July, three representatives of Needham came to
the Kroffts' offices in Los Angeles to discuss the design and engineering work
that would be required to produce the McDonaldland commercials.  It is evident,
therefore, that Needham was deceiving the Kroffts in their contacts after the
June 29 contract.

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   Prior to the advent of the McDonaldland advertising campaign, plaintiffs had
licensed the use of the H. R. Pufnstuf characters  [*1162]  and elements to the
manufacturers of toys, games, lunch boxes, and comic books.  In addition, the H.
R. Pufnstuf characters were featured in Kellogg's cereal commercials and used by
the Ice Capades.  After the McDonaldland campaign, which included the
distribution of toys and games, plaintiffs were unable to obtain new licensing
arrangements or extend existing ones. n3 In the case of the Ice Capades, the H.
R. Pufnstuf characters were actually replaced by the McDonaldland characters.

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   n3 The evidence reveals that certain persons with whom plaintiffs dealt for
licensing believed that the H. R. Pufnstuf characters were being licensed to
McDonald's for use in their McDonaldland campaign.  Accordingly, they did not
pursue licensing arrangements for the characters themselves.

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   Plaintiffs filed suit in September 1971.  The complaint alleged, inter alia,
that the McDonaldland [**6]  advertising campaign infringed the copyrighted H.
R. Pufnstuf television episodes as well as various copyrighted articles of
Pufnstuf merchandise. n4 By way of relief, plaintiffs sought compensatory
damages of $250,000, an order for an accounting of profits attributable to the
infringements, or, in the alternative, statutory "in lieu" damages, as provided
by 17 U.S.C. § 101(b).  Prior to trial, the district court signed a Pre-Trial
Conference Order that was "approved as to form and content" by counsel for both
sides.  It provided that "the prayer for relief raises issues of injunctive
relief and an accounting which are questions for the Court."

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   n4 The complaint also contained claims for relief in unfair competition,
tortious interference, quasi-contract, and contract.  The judgment and this
appeal are based solely on the copyright claim.

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   The three week jury trial began on November 27, 1973.  The jurors were shown
for their consideration on the question of infringement: (1) two H. R. Pufnstuf
[**7]  television episodes; (2) various items of H. R. Pufnstuf merchandise,
such as toys, games, and comic books; (3) several 30 and 60 second McDonaldland
television commercials; and (4) various items of McDonaldland merchandise
distributed by McDonald's, such as toys and puzzles.  The jury was instructed
that it was not to consider defendants' profits in determining damages, but
could consider the value of use by the defendants of plaintiffs' work.

   A verdict in favor of plaintiffs was returned and damages of $50,000.00
assessed.  After the verdict, the parties briefed the question of whether
plaintiffs were entitled to additional monetary recovery in the form of profits
or statutory "in lieu" damages.  The district court denied plaintiffs' claim for
such relief.  The court found that these matters were properly for the jury to
consider so that it would not exercise its discretion in hearing further
evidence.  These appeals followed.

I. INFRINGEMENT

   Proof of Infringement

   It has often been said that in order to establish copyright infringement a
plaintiff must prove ownership [**8]  of the copyright and "copying" by the
defendant.  See, e.g., Reyher v. Children's Television Workshop, 533 F.2d 87, 90
(2 Cir. 1976); Universal Athletic Sales Co. v. Salkeld, 511 F.2d 904, 907 (3
Cir. 1975); 2 M. Nimmer on Copyright § 141 at 610-11 (1976) (hereinafter "Nimmer
").  "Copying," in turn, is said to be shown by circumstantial evidence of
access to the copyrighted work and substantial similarity between the
copyrighted work and defendant's work.  Reyher v. Children's Television 
Workshop, supra, 533 F.2d at 90; 2 Nimmer § 141.2 at 613.  But an analysis of
the cases suggests that these statements frequently serve merely as boilerplate
to copyright opinions.

   Under such statements, infringement would be established upon proof of
ownership, access, and substantial similarity. Application of this rule,
however, would produce some untenable results.  For example, a copyright could
be obtained over a cheaply manufactured plaster statue of a nude. Since
ownership of a copyright is established, subsequent manufacturers of statues of
nudes would face the grave risk  [*1163]  of being found to be infringers if
their statues [**9]  were substantially similar and access were shown.  The
burden of proof on the plaintiff would be minimal, since most statues of nudes
would in all probability be substantially similar to the cheaply manufactured
plaster one. n5

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   n5 This is so because the prerequisites for copyright registration are
minimal.  The work offered for registration need not be new, but only original,
i.e., the product of the registrant.  Donald v. Uarco Business Forms, 478 F.2d
764, 765-66 (8 Cir. 1973); Roth Greeting Cards v. United Card Co., 429 F.2d
1106, 1109 (9 Cir. 1970). As stated in Alfred Bell & Co. v. Catalda Fine Arts,
191 F.2d 99, 102-03 (2 Cir. 1951):

     "'Original' in reference to a copyright work means that the particular
     work 'owes its origin' to the 'author.' No large measure of novelty is
     required. * * * * All that is needed to satisfy both the Constitution
     and the statute is that the 'author' contributed something more than a
     'merely trivial' variation, something recognizably 'his own.'
     Originality in this context 'means little more than a prohibition of
     actual copying.' No matter how poor artistically the 'author's'
     addition, it is enough if it be his own" (citations omitted).

Of course, the scope of protection against infringement is not necessarily
coextensive with the scope of the copyright secured.  See Puddu v. Buonamici 
Statuary, Inc., 450 F.2d 401, 402 (2 Cir. 1971).

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   Clearly the scope of copyright protection does not go this far.  A limiting
principle is needed.  This is provided by the classic distinction between an
"idea" and the "expression" of that idea.  It is an axiom of copyright law that
the protection granted to a copyrighted work extends only to the particular
expression of the idea and never to the idea itself.  Mazer v. Stein, 347 U.S.
201, 217-18, 74 S. Ct. 460, 98 L. Ed. 630 (1954); Baker v. Selden, 101 U.S. 99,
102-03, 25 L. Ed. 841 (1879). This principle attempts to reconcile two competing
social interests: rewarding an individual's creativity and effort while at the
same time permitting the nation to enjoy the benefits and progress from use of
the same subject matter.

   The real task in a copyright infringement action, then, is to determine
whether there has been copying of the expression of an idea rather than just the
idea itself.  "No one infringes, unless he descends so far into what is concrete
[in a work] as to invade . . . . [its] expression." National Comics Publications
v. Fawcett Publications, 191 F.2d 594, 600 (2 Cir. 1951). [**11]  Only this
expression may be protected and only it may be infringed. n6

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   n6 The idea-expression dichotomy has been criticized by some commentators as
outmoded because it was developed under older, narrower statutes which have
since been considerably broadened.  See, e.g., Collins, Some Obsolescent 
Doctrines of the Law of Copyright, 1 S.Cal.L.Rev. 127 (1928); Umbreit, A 
Consideration of Copyright, 87 U.Pa.L.Rev. 932 (1939); Note, Copyright 
Protection for Mass-Produced Commercial Products: A Review of the Developments 
Following Mazer v. Stein, 38 U.Chi.L.Rev. 807 (1971). Yet the distinction
accurately conceptualizes the fundamental elements in an artistic creation and
balances the competing interests inherent in the copyright law. We have surveyed
the literature and have found that no better formulation has been devised.
Moreover, most of these criticisms are directed at the fact that the courts tend
to pay only lipservice to the idea-expression distinction without it being
fairly descriptive of the results of modern cases.  This is a criticism more of
the application of the distinction than of the distinction itself, and can be
alleviated by the courts being more deliberate in their consideration of this
issue.

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   The difficulty comes in attempting to distill the unprotected idea from the
protected expression.  No court or commentator in making this search has been
able to improve upon Judge Learned Hand's famous "abstractions test" articulated
in Nichols v. Universal Pictures Corporation, 45 F.2d 119 (2 Cir. 1930), cert. 
denied, 282 U.S. 902, 51 S. Ct. 216, 75 L. Ed. 795 (1931):

     "Upon any work, and especially upon a play, a great number of patterns
     of increasing generality will fit equally well, as more and more of
     the incident is left out.  The last may perhaps be no more than the
     most general statement of what the play is about, and at times might
     consist of only its title; but there is a point in this series of
     abstractions where they are no longer protected, since otherwise the
     playwright could prevent the use of his 'ideas,' to which, apart from
     their expression, his property is never extended." 45 F.2d at 121.

 [*1164]  See also Chafee, Reflections on the Law of Copyright, 45 Colum.L.Rev.
503 (1945); Esezobar, Concepts in Copyright Protection, 23 Bull.Cprt.Soc. 258
(1976); Note, "Expression"  [**13]   and "Originality" in Copyright Law, 11
Washburn L.J.  400 (1972).

   The test for infringement therefore has been given a new dimension.  There
must be ownership of the copyright and access to the copyrighted work.  But
there also must be substantial similarity not only of the general ideas but of
the expressions of those ideas as well.  Thus two steps in the analytic process
are implied by the requirement of substantial similarity.

   The determination of whether there is substantial similarity in ideas may
often be a simple one.  Returning to the example of the nude statue, the idea
there embodied is a simple one -- a plaster recreation of a nude human figure.
A statue of a horse or a painting of a nude would not embody this idea and
therefore could not infringe.  The test for similarity of ideas is still a
factual one, to be decided by the trier of fact. See International Luggage 
Registry v. Avery Products Corp., 541 F.2d 830, 831 (9 Cir. 1976); Williams v. 
Kaag Manufacturers, Inc., 338 F.2d 949, 951 (9 Cir. 1964). [**14]

   We shall call this the "extrinsic test." It is extrinsic because it depends
not on the responses of the trier of fact, but on specific criteria which can be
listed and analyzed.  Such criteria include the type of artwork involved, the
materials used, the subject matter, and the setting for the subject.  Since it
is an extrinsic test, analytic dissection and expert testimony are appropriate.
Moreover, this question may often be decided as a matter of law.

   The determination of when there is substantial similarity between the forms
of expression is necessarily more subtle and complex.  As Judge Hand candidly
observed, "Obviously, no principle can be stated as to when an imitator has gone
beyond copying the 'idea,' and has borrowed its 'expression.' Decisions must
therefore inevitably be ad hoc." Peter Pan Fabrics, Inc. v. Martin Weiner Corp.,
274 F.2d 487, 489 (2 Cir. 1960). If there is substantial similarity in ideas,
then the trier of fact must decide whether there is substantial similarity in
the expressions of the ideas so as to constitute infringement.

   The test to be [**15]  applied in determining whether there is substantial
similarity in expressions shall be labeled an intrinsic one -- depending on the
response of the ordinary reasonable person.  See International Luggage Registry
v. Avery Products Corp., supra, 541 F.2d at 831; Harold Lloyd Corp. v. Witwer,
65 F.2d 1, 18-19 (9 Cir.  1933). See generally Nimmer § 143.5.  It is intrinsic
because it does not depend on the type of external criteria and analysis which
marks the extrinsic test.  As this court stated in Twentieth Century-Fox Film 
Corp. v. Stonesifer, 140 F.2d 579, 582 (9 Cir. 1944):

        "The two works involved in this appeal should be considered and
     tested, not hypercritically or with meticulous scrutiny, but by the
     observations and impressions of the average reasonable reader and
     spectator."

Because this is an intrinsic test, analytic dissection and expert testimony are
not appropriate.

   This same type of bifurcated test was announced in Arnstein v. Porter, 154
F.2d 464, 468-69 (2 Cir. 1946), cert. denied, 330 U.S. 851, 67 S. Ct. 1096, 91
L. Ed. 1294 (1947). [**16]  The court there identified two separate elements
essential to a plaintiff's suit for infringement: copying and unlawful
appropriation.  Under the Arnstein doctrine, the distinction is significant
because of the different tests involved.

        "The trier of fact must determine whether the similarities are
     sufficient to prove copying. On this issue, analysis ('dissection') is
     relevant, and the testimony of experts may be received to aid the
     trier of facts. * * * * If copying is established, then only does
     there arise the second issue, that of illicit copying (unlawful
     appropriation).  On that issue . . . . the test is the response of the
     ordinary lay hearer; accordingly, on that issue, 'dissection' and
     expert testimony are irrelevant." 154 F.2d at 468 (footnotes omitted).

    [*1165]  We believe that the court in Arnstein was alluding to the
idea-expression dichotomy which we make explicit today.  When the court in
Arnstein refers to "copying" which is not itself an infringement, it must be
suggesting copying merely of the work's idea, which is not protected by the
copyright.  To constitute an infringement, the copying must reach the point of
"unlawful appropriation,  [**17]  " or the copying of the protected expression
itself.  We analyze this distinction in terms both of the elements involved --
idea and expression -- and of the tests to be used -- extrinsic and intrinsic --
in an effort to clarify the issues involved.

   The Tests Applied

   In the context of this case, the distinction between these tests is
important.  Defendants do not dispute the fact that they copied the idea of
plaintiffs' Pufnstuf television series -- basically a fantasyland filled with
diverse and fanciful characters in action.  They argue, however, that the
expressions of this idea are too dissimilar for there to be an infringement.
They come to this conclusion by dissecting the constituent parts of the Pufnstuf
series -- characters, setting, and plot -- and pointing out the dissimilarities
between these parts and those of the McDonaldland commercials.

   This approach ignores the idea-expression dichotomy alluded to in Arnstein
and analyzed today.  Defendants attempt to apply an extrinsic test by the
listing of dissimilarities in determining whether the expression they used was
substantially similar to the expression used by plaintiffs.  That extrinsic test
is inappropriate;  [**18]  an intrinsic test must here be used.  As the court in
Arnstein stated:

        "Whether (if he copied) defendant unlawfully appropriated presents,
     too, an issue of fact.  The proper criterion on that issue is not an
     analytic or other comparison of the respective . . . . compositions .
     . . . The plaintiff's legally protected interest in the potential
     financial return from his compositions which derive from the lay
     public's approbation of his efforts.  The question, therefore, is
     whether defendant took from plaintiff's works so much of what is
     pleasing to the [eyes and] ears of lay [persons], who comprise the
     audience for whom such popular [works are] composed, that defendant
     wrongfully appropriated something which belongs to the plaintiff.
     Surely, then, we have an issue of fact which a jury is peculiarly
     fitted to determine." 154 F.2d at 472-73 (footnotes omitted).

Analytic dissection, as defendants have done, is therefore improper.

   Defendants contest the continued viability of Arnstein. It is true that
Arnstein's alternative holding that summary judgment [**19]  may not be granted
when there is the slightest doubt as to the facts has been disapproved.  See, 
e.g., First National Bank of Arizona v. Cities Service Co., 391 U.S. 253,
288-90, 88 S. Ct. 1575, 20 L. Ed. 2d 569 (1968); Beal v. Lindsay, 468 F.2d 287,
291 (2 Cir. 1972); Janis v. Wilson, 385 F. Supp. 1143, 1147 (D.S.D.1974); Keller
v. California Liquid Gas Corp., 363 F. Supp. 123, 126 (D.Wyo. 1973). But the
case's tests for infringement have consistently been approved by this court.
See, e.g., Goodson-Todman  Enterprises, Inc. v. Kellogg Co., 513 F.2d 913, 914
(9 Cir. 1975); Overman v. Loesser, 205 F.2d 521, 523 (9 Cir. 1953). They have
also been accepted by other courts.  See, e.g., Universal Athletic Sales Co. v.
Salkeld, supra, 511 F.2d at 907; Scott v. WKJG, Inc., 376 F.2d 467, 469 (7 Cir.
1967). n7 We believe Arnstein is still good law.

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   n7 The two-step approach of Arnstein does have its detractors.  Judge Moore
in a Second Circuit case described this approach as "merely an alternative way
of formulating the issue of substantial certainty." Ideal Toy Corp. v. Fab-Lu 
Ltd., 360 F.2d 1021, 1023 n.2 (2 Cir. 1966). But the approach certainly tends to
decrease the importance of the trier of fact in the first step and increase this
importance in the second step.  See 2 Nimmer § 143.53 at 641-43.  In this it
represents a significant modification of the older audience test.  Id. We do not
resurrect the Arnstein approach today.  Rather, we formulate an
extrinsic-intrinsic test for infringement based on the idea-expression
dichotomy.  We believe that the Arnstein court was doing nearly the same thing.
But the fact that it may not have been does not subtract from our analysis.

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    [*1166]  Since the intrinsic test for expression is uniquely suited for
determination by the trier of fact, this court must be reluctant to reverse it.
See International Luggage Registry v. Avery Products Corp., supra, 541 F.2d at
831; Caddy-Imler Creations, Inc. v. Caddy, 299 F.2d 79, 82 (9 Cir. 1962). As
this court said in Williams v. Kaag Manufacturers, Inc., supra, 338 F.2d at 951:

     "We have commented frequently on the inappropriateness of substituting
     our judgment for that of the trial judge on questions of fact.  The
     more vague the test, the less inclined we are to intervene."

As a finding of fact, a conclusion as to the question of copying is subject to
the "clearly erroneous" standard.  Fed.R.Civ.P. 52(a).  But it follows that this
court will be less likely to find clear error when the subjective test for
copying of expression has been applied.

   The present case demands an even more intrinsic determination because both
plaintiffs' and defendants' works are directed to an audience of children.  This
raises the particular factual issue of the impact of the respective works upon
the minds and imaginations [**21]  of young people.  As the court said in Ideal
Toy Corp. v. Fab-Lu Ltd., 261 F. Supp. 238, 241-42 (S.D.N.Y.1966), aff'd, 360
F.2d 1021 (2 Cir. 1966):

        "In applying the test of the average lay observer, [children] are
     not to be excluded -- indeed they are the ' far-flung faithful . . . .
     audience.' The television advertising campaign of plaintiff was
     directed toward acquainting these youngsters with . . . . its new
     teenage and pre-teen dolls. The impression of the faces and general
     appearance of the dolls was upon them . . . . The dolls create the
     same impression, both with respect to their appearances and the play
     -- uses for which they are suited.  It is the youngsters who, on the
     basis of this impression, go to the stores with their parents or at
     home make their wishes known for the dolls they desire after
     television has made its impact upon them.  In their enthusiasm to
     acquire . . . . [the dolls] they certainly are not bent upon
     'detecting disparities' or even readily observing upon inspection such
     fine details as the point at which the necks are [**22]  molded"
     (citations and footnotes omitted).

   The H. R. Pufnstuf series became the most popular children's show on Saturday
morning television. This success led several manufacturers of children's goods
to use the Pufnstuf characters.  It is not surprising, then, that McDonald's
hoped to duplicate this peculiar appeal to children in its commercials. n8 It
was in recognition of the subjective and unpredictable nature of children's
responses that defendants opted to recreate the H. R. Pufnstuf format rather
than use an original and unproven approach.

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   n8 McDonald's advertising campaign was divided into two distinct parts: its
general audience advertising and its children advertising.  The McDonaldland
commercials were used exclusively on children's programming.  The apparent
success of this format is suggested by the fact that the McDonaldland
commercials are still appearing on television over six years after their
introduction.

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   Defendants would have this court ignore that intrinsic quality which they
recognized [**23]  to embark on an extrinsic analysis of the two works.  For
example, in discussing the principal characters -- Pufnstuf and Mayor McCheese
-- defendants point out:

     "'Pufnstuf' wears what can only be described as a yellow and green
     dragon suit with a blue cummerband from which hangs a medal which says
     'mayor'.  'McCheese' wears a version of pink formal dress -- 'tails'
     -- with knicker trousers.  He has a typical diplomat's sash on which
     is written 'mayor', the 'M' consisting of the McDonald's trademark of
     an 'M' made of golden arches."

So not only do defendants remove the characters from the setting, but dissect
further to analyze the clothing, colors, features, and  [*1167]  mannerisms of
each character.  We do not believe that the ordinary reasonable person, let
alone a child, viewing these works will even notice that Pufnstuf is wearing a
cummerbund while Mayor McCheese is wearing a diplomat's sash.

   Duplication or near identity is not necessary to establish infringement.
Runge v. Lee, 441 F.2d 579, 582 (9 Cir. 1971); Williams v. Kaag Manufacturers, 
Inc., supra, 338 F.2d at 951. [**24]  As this court stated in Universal Pictures
Co., Inc. v. Harold Lloyd Corp., infra, 162 F.2d 354, at 360:

     "[An] infringement is not confined to literal and exact repetition or
     reproduction; it includes also the various modes in which the matter
     of any work may be adopted, imitated, transferred, or reproduced, with
     more or less colorable alterations to disguise the piracy."

And, as Judge Learned Hand put it, copyright "cannot be limited literally to the
text, else a plagiarist would escape by immaterial variations." Nichols v. 
Universal Pictures Corp., 45 F.2d 119, 121 (2 Cir. 1930).

   We have viewed representative samples of both the H. R. Pufnstuf show and
McDonaldland commercials.  It is clear to us that defendants' works are
substantially similar to plaintiffs'. n9 They have captured the "total concept
and feel" of the Pufnstuf show.  Roth Greeting Cards v. United Card Co., 429
F.2d 1106, 1110 (9 Cir. 1970). We would so conclude even if we were sitting as
the triers of fact. There is no doubt that the findings of the jury in this case
are not clearly erroneous.

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   n9 Even a dissection of the two works reveals their similarities. The "Living
Island" locale of Pufnstuf and "McDonaldland" are both imaginary worlds
inhabited by anthromorphic plants and animals and other fanciful creatures.  The
dominant topographical features of the locales are the same: trees, caves, a
pond, a road, and a castle.  Both works feature a forest with talking trees that
have human faces and characteristics.

   The characters are also similar.  Both lands are governed by mayors who have
disproportionately large round heads dominated by long wide mouths.  They are
assisted by "Keystone cop" characters.  Both lands feature strikingly similar
crazy scientists and a multi-armed evil creature.

   It seems clear that such similarities go beyond merely that of the idea into
the area of expression.  The use of the basic idea of the works does not
inevitably result in such similarities. Certainly a jury applying an intrinsic
test could find such similarities of expression substantial.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**25]

   Unity of Idea and Expression

   Defendants argue that dissection is proper and that duplication or near
identity is necessary because the competing works are things, rather than
dramatic works.  They cite numerous cases in which infringement was found
because the defendants' works were nearly identical to those of the plaintiffs.
See, e.g., Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 250, 23 S.
Ct. 298, 47 L. Ed. 460 (1903) (circus posters); Sunset House Distributing Corp.
v. Doran, 304 F.2d 251, 252 (9 Cir. 1962) (plastic Santa Claus); King Features 
Syndicate v. Fleischer, 299 F. 533, 534 (2 Cir. 1924) (doll).  Defendants fail
to perceive, however, that near identity may be required in some cases not
because the works are things, but because the expression of those works and the
idea of those works are indistinguishable.

    Herbert Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738 (9 Cir. 1971),
upon which defendants rely, is illustrative of this point.  In that case,
plaintiff sued for infringement [**26]  of its jeweled bee pin, claiming it
should be protected against the manufacture of any substantially similar object.
This court responded:

        "What is basically at stake is the extent of the copyright owner's
     monopoly -- from how large an area of activity did Congress intend to
     allow the copyright owner to exclude others?  We think the production
     of jeweled bee pins is a larger private preserve than Congress
     intended to be set aside in the public market without a patent. A
     jeweled bee pin is therefore an idea that defendants were free to
     copy.  Plaintiff seems to agree, for it disavows any claim that
     defendants cannot  [*1168]  manufacture and sell jeweled bee pins and
     concedes that only plaintiffs' particular design or expression of the
     jeweled bee pin idea is protected under its copyright.  The
     difficulty, as we have noted, is that on this record the idea and its
     expression appear to be indistinguishable.  There is no greater
     similarity between the pins of plaintiff and defendants than is
     inevitable from the use of jewel-encrusted bee forms in both.

        "When the idea and its expression are thus inseparable, copying the
     expression will not be barred, since protecting the expression [**27]
     in such circumstances would confer a monopoly of the idea upon the
     copyright owner free of the conditions and limitations imposed by the
     patent law." Id. at 742.

See also Herbert Rosenthal Jewelry Corp. v. Honora Jewelry Co., Inc., 509 F.2d
64, 65 (2 Cir. 1974).

   The idea and the expression will coincide when the expression provides
nothing new or additional over the idea.  Thus, the expression of a jeweled bee
pin contains nothing new over the idea of a jeweled bee pin. Returning to our
own example, the idea of a plaster statute of a nude will probably coincide with
the expression of that idea when an inexpensive manufacturing process is used.
There will be no separately distinguishable features in the statute's expression
over the idea of a plaster nude statute. n10

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n10 A description of the "what" and the "how" of a work serves as a useful
tool in determining whether the expression of an idea differs from the idea
itself.  If, in describing how a work is expressed, the description differs
little from a simple description of what the work is, then idea and expression
coincide.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**28]

   The complexity and artistry of the expression of an idea will separate it
from even the most banal idea.  Michaelangelo's David is, as an idea, no more
than a statute of a nude male.  But no one would question the proposition that
if a copyrighted work it would deserve protection even against the poorest of
imitations.  This is because so much more was added in the expression over the
idea.

   When idea and expression coincide, there will be protection against nothing
other than identical copying of the work.  When other defendants made jeweled
bees from the same molds as plaintiffs, they were held liable.  See Herbert 
Rosenthal Jewelry Corp. v. Grossbardt, 436 F.2d 315 (2 Cir. 1970). Therefore,
the scope of copyright protection increases with the extent expression differs
from the idea.

   The coincidence of idea and expression may occur in works other than "things.
" n11 Baker v. Selden, supra, held that blank accounting books are not subject
to copyright protection.  Yet if any information is contained in those blanks,
copyright protection is available.  [**29]  See Edwin K. Williams & Co. v. Edwin
K. Williams, etc., 542 F.2d 1053, 1060-61 (9 Cir. 1976) (account books with
explanation); Guthrie v. Curlett, 36 F.2d 694 (2 Cir. 1929) (index of freight
tariffs); American Code Co. v. Bensinger, 282 F. 829 (2 Cir. 1922) (codes).

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n11 We are not at all certain what defendants mean by distinguishing "things"
from "dramatic works." They list statuettes, dolls, pictures, and jewelry as
being "things." We assume this broad category would include fine paintings and
sculpture, which surely are not "dramatic works." To suggest that such works
must be identically copied to be infringed shows the spuriousness of the
distinction.  Moreover, defendants' cited cases do not lend any support to their
contention.  They find infringement where there have been identical copies made.
This does not suggest that infringement would not have been found if only
substantially similar copies were made.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   There is no special standard of similarity [**30]  required in the case of
"things." Nor is any such standard suggested by any of the cases cited by
defendants.  For example, in Monogram Models, Inc. v. Industro Motive Corp., 492
F.2d 1281, 1284 (6 Cir. 1974), the issue was one of copyright infringement of
scale model airplane kits.  Defendant admitted copying, but argued lack of
substantial copying. The court affirmed a jury finding of infringement, citing
the ordinary reasonable observer test.  Id. at 1286. See also Williams v. Kaag 
Manufacturers, Inc.,  [*1169]  supra, 338 F.2d at 951 (cowboy statuettes);
Day-Brite Lighting, Inc. v. Sta-Brite Fluorescent Manufacturing Co., 308 F.2d
377, 380 (5 Cir. 1962) (catalogue).

   No standard more demanding than that of substantial similarity should be
imposed here.  This is not a case where the idea is indistinguishable as a
matter of law from the expression of that idea.  See Goodson-Todman Enterprises,
Inc. v. Kellogg Co., supra, 513 F.2d at 914. The expression inherent in the H.
R. Pufnstuf series differs markedly from its relatively simple idea.  The
characters each have developed personalities [**31]  and particular ways of
interacting with one another and their environment.  The physical setting also
has several unique features.

   Lest we fall prey to defendants' invitation to dissect the works, however, we
should remember that it is the combination of many different elements which may
command copyright protection because of its particular subjective quality.
Reyher v. Children's Television Workshop, Inc., supra, 533 F.2d at 91-92; Ideal
Toy Corp. v. Sayco Doll Corp., 302 F.2d 623, 624 (2 Cir. 1962). As the court
said in Malkin v. Dubinsky, 146 F. Supp. 111, 114 (S.D.N.Y. 1956): "While any
one similarity taken by itself seems trivial, I cannot say at this time that it
would be improper for a jury to find that the over-all impact and effect
indicate substantial appropriation." n12 The same is true here. n13

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n12 We also note that the jury was specifically instructed to consider the
works as a whole.  Instruction No. 17, requested by the defendants themselves,
read:

        "In comparing the PUFNSTUF series and the McDonaldland commercials
     to determine whether there has been copyright infringement, you must
     consider and compare each of the works as a whole.  That is, you must
     not simply focus on isolated elements of each work to the exclusion of
     the other elements, combination of elements, and expressions therein."

This instruction properly warned the jury against analytic dissection in
accordance with Arnstein and our opinion today. [**32]



   n13 One measure of infringement used in the past has been the effect of the
allegedly infringing work on the value of the original.  As this court said in
Universal Pictures Co., Inc. v. Harold Lloyd Corp., 162 F.2d 354, 361 (9 Cir.
1947):

        "To constitute an invasion of copyright it is not necessary that
     the whole of a work should be copied, nor even a large portion of it
     in form or substance, but that, if so much is taken that the value of
     the original is sensibly diminished, or the labors of the original
     author are substantially, to an injurious extent, appropriated by
     another, that is sufficient to constitute infringement."

The record shows that the value of the H.R. Pufnstuf series, particularly as
regards to its merchandising potential, was sizeably diminished after the
McDonaldland commercials appeared.  While we do not think that infringement
should be so objectively measured, it is another indication of infringement
here.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   Copyright and the First Amendment [**33]

   Defendants argue that the first amendment operates in this case to limit the
protection for plaintiffs' works.  n14 They seem to suggest that a more
demanding standard than that of substantial similarity should be imposed, and
that the threshold question about copying becomes one of "constitutional fact"
to be reviewed de novo on appeal.  Defendants attempt to analogize the copyright
area to those of obscenity and defamation in suggesting that prior law must be
modified to accommodate expanding first amendment rights.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n14 We note that this First Amendment argument was never raised in the court
below and is asserted here for the first time.  Plaintiffs suggest that it may
not therefore be considered.  See Frommhagen v. Klein, 456 F.2d 1391, 1395 (9
Cir. 1972); Simpson v. Union Oil Co., 411 F.2d 897, 900-01 (9 Cir.), rev'd on 
other grounds, 396 U.S. 13, 90 S. Ct. 30, 24 L. Ed. 2d 13 (1969). Since the
asserted constitutional claims would affect not only the standard of review but
our infringement tests, however, we exercise our discretion to consider the
arguments.  See Hormel v. Helvering, 312 U.S. 552, 556, 61 S. Ct. 719, 85 L. Ed.
1037 (1941).

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**34]

   The constitutionality of the copyright law was settled long ago by the
Supreme Court.  In Kalem Co. v. Harper Brothers, 222 U.S. 55, 32 S. Ct. 20, 56
L. Ed. 92 (1911), the defendant argued that the copyright law could not grant an
author an exclusive right to dramatize his works.  In rejecting this contention,
the Court stated:

         [*1170]  "It is argued that the law, construed as we have
     construed it, goes beyond the power conferred upon Congress by the
     Constitution, to secure to authors for a limited time the exclusive
     right to their writings.  Art. I, § 8, cl. 8.  It is suggested that to
     extend the copyright to a case like this is to extend it to the ideas,
     as distinguished from the words in which the ideas are clothed.  But
     there is no attempt to make a monopoly of the ideas expressed.  The
     law confines itself to a particular, cognate, and well-known form of
     reproduction.  If to that extent a grant of monopoly is thought a
     proper way to secure the right to the writings, this court cannot say
     that Congress was wrong." Id. at 63, 32 S. Ct. at 22.

The Court recognized that the protection of the copyright laws is necessary to
provide [**35]  an incentive for artistic creation which ultimately advances the
public good.  See Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95
S. Ct. 2040, 45 L. Ed. 2d 84 (1975).

   But the impact, if any, of the first amendment on copyright has not been
discussed by the Court. n15 We believe this silence stems not from neglect but
from the fact that the idea-expression dichotomy already serves to accommodate
the competing interests of copyright and the first amendment. The "marketplace
of ideas" is not limited by copyright because copyright is limited to protection
of expression.  As one commentator has stated:

     "The idea-expression line represents an acceptable definitional
     balance as between copyright and free speech interests.  In some
     degree it encroaches upon freedom of speech in that it abridges the
     right to reproduce the 'expression' of others, but this is justified
     by the greater public good in the copyright encouragement of creative
     works.  In some degree it encroaches upon the author's right to
     control his work in that it renders his 'ideas' per se unprotectible,
     but this is justified by the greater public need for free access to
     ideas as part of [**36]  the democratic dialogue."

Nimmer, Does Copyright Abridge the First Amendment Guarantees of Free Speech and
Press?, 17 U.C.L.A.L.Rev. 1180, 1192-93 (1970). Cf.  Lee v. Runge, 404 U.S. 887,
892-93, 92 S. Ct. 197, 30 L. Ed. 2d 169 (1971) (Douglas, J., dissenting).

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n15 In Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 84 S. Ct. 784, 11
L. Ed. 2d 661 (1964), and Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S.
234, 84 S. Ct. 779, 11 L. Ed. 2d 669 (1964), the court reasoned that in an
economy based on free competition, the constitutionality authorized monopolies
of patent and copyright must be strictly construed.  It therefore found invalid
state doctrines of unfair competition which expanded these monopolies. The court
's concern was with monopolies as commercial, not political, impediments, and
thus it did not reach first amendment considerations.  See also Lee v. Runge,
404 U.S. 887, 892-93, 92 S. Ct. 197, 30 L. Ed. 2d 169 (1971) (Douglas, J.,
dissenting).

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**37]

   Ideas which may be of public interest are not subject to copyright; the
specific form of expression of these ideas are.  Thus, the political views of
Dr. Martin Luther King may be widely disseminated.  But the precise expression
of these views in a speech may be protected.  King v. Mister Maestro, Inc., 224
F. Supp. 101 (S.D.N.Y.1963). See also Public Affairs Associates, Inc. v. 
Rickover, 177 F. Supp. 601 (D.D.C.1960), rev'd, 109 U.S.App.D.C. 128, 284 F.2d
262 (1960), rev'd, 369 U.S. 111, 82 S. Ct. 580, 7 L. Ed. 2d 604 (1962), on 
remand, 268 F. Supp. 444 (D.D.C.1967); Atlantic Monthly Co. v. Post Pub. Co., 27
F.2d 556 (D.Mass.1928). Similarly, the facts about a historical figure are
available to all to use.  But if the expression of those facts in a biography is
substantially copied infringement will be found.  See, e.g., Toksvig v. Bruce 
Publishing Co., 181 F.2d 664 (7 Cir. 1950); Marvin Worth Productions v. Superior
Films Corp., 319 F. Supp. 1269 (S.D.N.Y.1970); [**38]  Holdredge v. Knight 
Publishing Corp., 214 F. Supp. 921 (C.D.Cal.1963).

   With the law of copyright permitting the free use of ideas, it is not
surprising that the few courts addressing the issue have not permitted
defendants who copy a work's expression to hide behind the first amendment. See,
e.g., Duchess Music  [*1171]  Corp. v. Stern, 458 F.2d 1305, 1310-11 (9 Cir.
1972); United States v. Bodin, 375 F. Supp. 1265, 1267-68 (W.D.Okl.1974)
McGraw-Hill, Inc. v. Worth Publishers, Inc., 335 F. Supp. 415, 422
(S.D.N.Y.1971). In Walt Disney Productions v. Air Pirates, 345 F. Supp. 108
(N.D.Cal.1972), plaintiff sued for infringement of several of its famous cartoon
characters by defendants, who used them for purposes of literary criticism.
Defendants claimed that the first amendment limited the scope of plaintiff's
copyright protection.  The court responded:

        "However defendants would have it, the hard fact remains that both
     parties are dealing in cartoon series, comic books or strips, and that
     the mode which the defendants have chosen for the expression of their
     concepts amounts to a substantial [**39]  taking of plaintiff's
     expression of its concepts, even assuming vast difference in the
     content of those concepts.  It can scarcely be maintained that there
     is no other means available to defendants to convey the message they
     have, nor is it even clear that other means are not available within
     the chosen genre of comics and cartoons.  To paraphrase, it is true
     that it would be easier to copy substantial portions of the expression
     as distinguished from the idea itself of the Disney works, but the
     value of such labor-saving utility is far outweighed by the copyright
     interest in encouraging creation by protecting expression." Id. at 115
     (footnotes omitted).

   The district court in Disney recognized that the expression inherent in
plaintiff's works differs from the mere idea of those works.  The "idea" of
Mickey Mouse is, after all, no more than a mouse.  Yet the particular expression
of that mouse has phenomenal commercial value and is recognized worldwide.
Defendants there could have chosen any number of ways to express their idea of a
mouse, but chose to copy Disney's.  So too the defendants in this case had many
ways to express the idea of a fantasyland [**40]  with characters, but chose to
copy the expression of plaintiffs'.  The first amendment will not protect such
imitation.

   There may be certain rare instances when first amendment considerations will
operate to limit copyright protection for graphic expressions of newsworthy
events. n16 For example, in Time, Inc. v. Bernard Geis Associates, 293 F. Supp.
130 (S.D.N.Y.1968), Life magazine sued a historian for copying frames of the
Zapruder films of the assassination of John F. Kennedy. Although the court did
not expressly invoke the first amendment, it did justify the defendant's right
to copy frames of the film on the ground of the "public interest in having the
fullest information available on the murder of President Kennedy." Id. at 146.
Plaintiffs' work in this case is neither a graphic expression nor concerning
newsworthy events.  Therefore, no first amendment considerations operate. n17

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n16 This exception to the rule that first amendment considerations do not
operate to limit copyright protection was suggested by Professor Nimmer.
Nimmer, Does Copyright Abridge the First Amendment Guarantees of Free Speech and
Press?, 17 U.C.L.A.L.Rev. 1180, 1199 (1970). He suggests a system of compulsory
licensing for "news photographs," which he defines as all products of the
photographic and analogous processes (including motion pictures and video tape
but excluding paintings, sculpture, and the like) depicting an event which was
the subject of news stories appearing in the press.  He gives the photographs of
the My Lai massacre as an example. [**41]



   n17 In Rosemont Enterprises, Inc. v. Random House, Inc., 366 F.2d 303 (2 Cir.
1966), Howard Hughes attempted to enjoin Random House from publishing a
biography of Hughes.  The biography was based on information contained in a
series of articles appearing in Look magazine over which Hughes (via Rosemont)
held a copyright.  Had the biography merely attempted to use the information in
the articles we would agree with the Second Circuit's refusal to enjoin because
such information represents the "idea" of a biography on Hughes.  But the Random
House biography copied verbatim almost 27% of one of the Look articles and 14%
of all of the articles.  Rosemont Enterprises, Inc. v. Random House, Inc., 256
F. Supp. 55, 61 (S.D.N.Y.1966). We believe this represents an unjustifiable
appropriation of the expression of the idea, and hence disapprove of the result
in Rosemont. Because there are available alternatives in the form of expressing
any verbal ideas, first amendment considerations should not limit copyright
protection in this area.  We need not reach this precise issue today, however,
since it is clear that neither the H.R. Pufnstuf series nor McDonaldland
commercials are newsworthy.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**42]

    [*1172]  Access

   In addition to substantial similarity, a plaintiff must show access in order
to prove infringement. Reyher v. Children's Television Workshop, supra, 533 F.2d
at 90; 2 Nimmer § 141.2 at 613.  Access is proven when the plaintiff shows that
the defendant had an opportunity to view or to copy plaintiff's work.  Arrow 
Novelty Co. v. Enco National Corp., 393 F. Supp. 157, 160 (S.D.N.Y.), aff'd, 515
F.2d 504 (2 Cir. 1975); Universal Athletic Sales Co. v. Salkeld, 340 F. Supp.
899, 901 (W.D.Pa.1972). In this case, there is no dispute as to defendants'
access to plaintiffs' work.  Indeed, defendants were engaged in negotiations
with plaintiffs for licensing of the works even while preparing the McDonaldland
commercials.

   No amount of proof of access will suffice to show copying if there are no
similarities. Williams v. Kaag Manufacturers, Inc., supra, 338 F.2d at 951;
Arnstein v. Porter, supra, 154 F.2d at 468. This is not to say, however, that
where clear and convincing [**43]  evidence of access is presented, the quantum
of proof required to show substantial similarity may not be lower than when
access is shown merely by a preponderance of the evidence.  As Professor Nimmer
has observed:

        "Clear and convincing evidence of access will not avoid the
     necessity of also proving substantial similarity since access without
     similarity cannot create an inference of copying. However, this
     so-called 'Inverse Ratio Rule' . . . . would seem to have some limited
     validity.  That is, since a very high degree of similarity is required
     in order to dispense with proof of access, it must logically follow
     that where proof of access is offered, the required degree of
     similarity may be somewhat less than would be necessary in the absence
     of such proof." 2 Nimmer § 143.4 at 634.

Accord, Fink v. Goodson-Todman Enterprises, Ltd., 9 Cal.App.3d 996, 1013, 88
Cal.Rptr. 679 (1970). We agree.  But see Arc Music Corp. v. Lee, 296 F.2d 186 (2
Cir. 1961).

   In this case, representatives of Needham actually visited the Kroffts'
headquarters in Los [**44]  Angeles to discuss the engineering and design work
necessary to produce the McDonaldland commercials.  They did this after they had
been awarded the contract by McDonald's and apparently with no intention to work
with the Kroffts.  We believe that this degree of access justifies a lower
standard of proof to show substantial similarity. Since the subjective test
applies, it is impossible to quantify this standard.  But there is no question
it is met here.

II. DAMAGES

   Awarding Damages

   Section 101(b), 17 U.S.C., provides that a copyright infringer shall be
liable as follows:

     "(b) Damages and profits; amount; other remedies.

        To pay to the copyright proprietor such damages as the copyright
     proprietor may have suffered due to the infringement, as well as all
     the profits which the infringer shall have made from such
     infringement, and in proving profits the plaintiff shall be required
     to prove sales only, and the defendant shall be required to prove
     every element of cost which he claims . . . ."

Thus, a court in making an award for infringement must determine both [**45]
actual damages suffered by a plaintiff and profits from the infringement made by
defendant.

   While there is disagreement as to whether both damages and profits are to be
included in the award, an issue we will take up shortly, there is agreement that
a successful plaintiff is entitled to at least the greater of damages or
profits.  See Universal Pictures Co. v. Harold Lloyd Corp., 162 F.2d 354, 375-77
(9 Cir. 1947); L & L White Metal Casting Corp. v. Joseph, 387 F. Supp. 1349,
1357  [*1173]  (E.D.N.Y.1975); 2 Nimmer §§ 150-51 at 666-69.  In order to
accurately determine profits, a defendant may be required to make an accounting.
2 Nimmer § 153.2 at 674.

   The jury assessed damages of $50,000 against defendants in this case.
Subsequent to the return of the verdict, counsel for both sides, at the district
court's request, briefed the question of whether plaintiffs were entitled to
additional monetary recovery either in the form of profits or statutory "in lieu
" damages.  After considering this question, the district court concluded that
plaintiffs were not entitled to any additional recovery and denied plaintiffs'
motion for an accounting [**46]  of profits by defendants.

   The issues on appeal are threefold: (1) whether the jury considered profits
in assessing damages; (2) if not, whether plaintiffs are entitled to recovery of
damages and profits or merely damages or profits; and (3) whether, if profits
cannot accurately be determined, plaintiffs are entitled to statutory "in lieu"
damages.

   Consideration of Profits by the Jury

   Two weeks before trial, the district court signed the Pre-Trial Conference
Order that was prepared and "approved as to form and content" by counsel for
both sides.  It provided:

     "All factual questions of liability and damages are for the jury.  The
     prayer for relief raises issues of injunctive relief and an accounting
     which are questions for the court."

Rule 16 of the Federal Rules of Civil Procedure expressly provides that a
Pre-Trial Conference Order "when entered controls the subsequent course of the
action, unless modified at the trial to prevent manifest injustice." There was
no modification of this Order at trial or at any other time.  Rule 39(a) of the
Federal Rules further [**47]  provides that issues will not be given to the jury
when reserved for the court by "written stipulation filed with the court."

   Defendants argue that plaintiffs' original demand for a jury trial meant that
all issues had to go to the jury.  See Fed.R.Civ.P. 38(c).  But the clear
language of the Pre-Trial Conference Order and the subsequent conduct of the
parties contradict any claimed general demand for a jury trial. n18 We conclude
that the parties intended to withhold the issue of profits from the jury.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n18 Later, while discussing a proposed jury instruction, counsel for
defendants commented:

     "To say that the jury could consider the profits of McDonald's
     corporation as an element of damages here I think would be totally
     improper, and the same with Needham, Harper & Steers."

We do not believe that defendants should now be permitted to ignore the
difference between damages and profits when they clearly recognized this
difference during trial.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   This conclusion is supported by the instructions [**48]  given to the jury.
Jury Instruction No. 26 was accepted by the court and read to the jury as
follows:

     "(i) Under a claim of copyright infringement a plaintiff, after, and
     only after, having first established the necessary elements thereof
     (about which I have previously charged) by a preponderance of the
     credible evidence, is entitled to recover only such actual damages as
     he has proven to be attributable to the infringing use of his
     material, that is to say, they may recover only that sum of money
     which they have proven to be their actual pecuniary loss.

        "(ii) The profits of defendants are not to be considered by you in
     determining plaintiffs' money damages claim hereunder" (emphasis
     added).

The record also shows that inquiry from the court elicited agreement with this
instruction from counsel for both sides. n19

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n19 While discussing proposed jury instruction No. 26, the following colloquy
took place:

        "THE COURT: 'It is agreed, insofar as instruction No. 26, that the
     profits -- '

        "MR. BERMAN (Counsel for plaintiffs): 'I beg your pardon, sir?'

        "THE COURT: 'Let's return to 26.'

        "MR. BERMAN: 'Yes.'

        "THE COURT: 'It is agreed that the profits of the defendants are
     not to be considered by the jury in determining the plaintiffs'
     money-damages claim?'

        "MR. BERMAN: 'It's our position that's a question for the Court if
     a favorable verdict on the infringement claim is returned.'

        "THE COURT: 'Mr. Liebig.'

        "MR. LIEBIG [counsel for defendants]:

     'Well, the problem, of course, in that thing, I want to discuss it
     with the Court.  In the ordinary context of the copyright case, of
     course, the defendant, infringer, publishes a book, and either he
     makes money or he doesn't make money selling that book.  Now, in that
     sort of a situation profits are allowable.  Now, I would suppose that
     the rule would be translated into this case if somehow you could
     identify a profit with an infringement, but to say that the jury could
     consider the profits of McDonald's corporation as an element of
     damages here I think would be totally improper, and the same with
     Needham, Harper & Steers.  You get into the area of corporate profits,
     the -- let's see, that's --'

        "THE COURT: 'Let's proceed. 27.'"

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**49]

    [*1174]  Defendants argue that this instruction was designed only to prevent
the jury from considering the corporate profits of McDonald's, which are derived
from the purveying of food.  They point instead to Jury Instruction No. 49,
which reads:

     "If you find that defendants infringed plaintiffs' copyright,
     plaintiffs are entitled to all of the damages, if any, suffered as a
     result of such infringement. In arriving at any such damages, you may
     take into consideration the reasonable value, if any, of plaintiffs'
     work including the publication and republication rights therein, and
     the value, if any, to defendants of the use of plaintiffs' works."

Defendants claim that the value of use provided in this instruction is
equivalent to defendant's profits from the infringement.

   The value of use reference in Instruction No. 49 is defined as a part of the
reasonable value of plaintiffs' work.  It amounts to a determination of what a
willing buyer would have been reasonably required to pay to a willing seller for
plaintiffs' work.  That is a different measure than the determination of
defendants' actual profits from the infringement. An author might license the
use of his [**50]  copyright either for a lump sum based on the reasonable value
of the work or for a royalty derived from the licensee's profits, or for a
combination of both. n20

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n20 This same distinction is recognized in patent cases.  For example, in
Atlas-Pacific Engineering Co. v. Ashlock, 339 F.2d 288, 290 (9 Cir. 1964), cert.
denied, 382 U.S. 842, 86 S. Ct. 55, 15 L. Ed. 2d 83 (1965), this court
recognized:

     "There is a variety of possible elements of damages for patent
     infringement, such as the profits made by the infringer, the actual
     damage to the patentee . . . . or a reasonable royalty . . . ."

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   The district court recognized the potential for confusion between these two
instructions.  It agreed upon an explanation offered by counsel for plaintiffs:
"I think that the difference would be that a person may pay to use 'Living
Island' and the characters, and then, even though they have paid for them, they
may have suffered a loss and suffered no profit." It was only because [**51]
the district court concluded that there was a difference between profits and
value of use that both Instructions 26 and 49 were delivered to the jury.  We
agree with this distinction.

   Defendants argue further that profits in fact were considered by the jury.
The record does not support this conclusion.  No exhibits regarding either
defendants' profits were submitted to the jury in the infringement action. n21
We therefore find that the issue of profits was neither submitted to nor
considered by the jury.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n21 Defendants contend, for example, that an Exhibit No. 52 was submitted
listing all of Needham's commissions derived from production of the McDonaldland
commercials from 1971 to 1973.  No such exhibit appears in the record.  A
document numbered 112 contains this information but was not offered or received
in evidence.  What attention plaintiffs brought to the commissions of Needham
arose from the claim for breach of contract, not copyright infringement. And
certainly nothing was ever said or submitted regarding the amount of McDonald's
profits.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**52]

   An Accounting of Profits as a Legal Remedy

   In denying plaintiffs' motion for an accounting of profits, the district
court relied upon Dairy Queen v. Wood, 369 U.S. 469, 82 S. Ct. 894, 8 L. Ed. 2d
44 (1962). That  [*1175]  case involved claims for breach of contract and
trademark infringement in which the plaintiffs also asked for an accounting. The
Court ruled that the wording of the claim for relief is not dispositive.  The
plaintiffs sought money damages and had a right to trial by jury.  Id. at
477-78, 82 S. Ct. 894. See also Ross v. Bernhard, 396 U.S. 531, 541-42, 90 S.
Ct. 733, 24 L. Ed. 2d 729 (1970); Beacon Theatres, Inc. v. Westover, 359 U.S.
500, 509, 79 S. Ct. 948, 3 L. Ed. 2d 988 (1959). Plaintiffs' claim for damages
and an accounting of profits in this case parallels that made in Dairy Queen.

   The issue whether an accounting of profits in an infringement action is legal
or equitable was considered by the court in Swofford v. B & W, Inc., 336 F.2d
406 (5 Cir.), cert. denied, 379 U.S. 962, 85 S. Ct. 653, 13 L. Ed. 2d 557
(1964). That court held that  [**53]  Dairy Queen controlled, and said:

        "An accounting for profits, although a creature of equity, is a
     rule of administration and not of jurisdiction.  The court of equity
     awarded compensatory damages incidental to an injunction to avoid
     multiplicity of suits and not because the jury lacked competence.  We
     do not believe that this practice in patent and copyright infringement
     cases, which was justified historically to avoid multiplicity of
     litigation in a divided procedure, should be continued in a merged
     system where such multiplicity can be avoided by one civil action.  It
     is a well-settled doctrine that the distinction of jurisdiction,
     between law and equity, is constitutional, to the extent to which the
     Seventh Amendment forbids any infringement of the right of trial by
     jury, as fixed by the common law.  To continue the past practice is to
     convert an administrative rule into a jurisdictional one so as to
     deprive the parties of a jury on what is basically a money claim for
     damages based on a charge of . . . . infringement." 336 F.2d at 411
     (citations omitted).

We [**54]  agree with this reasoning.  Plaintiffs in this case had a right to a
jury trial. n22

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n22 The Court in Dairy Queen did make an exception to its right to jury rule,
where "the 'accounts between the parties' are of such a 'complicated nature'
that only a court of equity can satisfactorily unravel them." 369 U.S. at 478,
82 S. Ct. at 900. Plaintiffs claim that the complex nature of the accounting
process in this case bars jury consideration under this reasoning.  We disagree.
The mere fact that corporate profits are so indirectly related to the
infringement as to make an accounting impossible does not make the case
complicated.  As the Supreme Court noted, it will be a "rare case" where a jury
could not adequately handle the issue.  Id. This is not such a case.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   But a right is not an obligation.  Dairy Queen only decided when a party has
a right to a jury trial.  It certainly cannot be read to hold that the parties
are required to have a jury determination even if they do not wish it.  [**55]
It is clear from our analysis of the Pre-Trial Conference Order and jury
instructions that the parties did not intend the jury to consider profits.  The
district court therefore was in error in concluding that Dairy Queen compelled
the jury to consider profits in this case.

   Conclusion

   The judgment of the district court finding infringement is affirmed.  The
McDonald commercials are based on the same ideas as the H. R. PufnStuf series.
The expression of that idea is sufficiently similar so that a jury applying an
intrinsic test could find infringement. This is especially true here since there
was strong evidence of access.

   SNEED, Circuit Judge:

   I concur in the preceding portion of this opinion.  The following portion,
dealing with the problems of alternative or cumulative recovery and "in lieu"
damages, expresses the majority view of this court on these two issues, and is
intended to complement the preceding portion of this opinion.

   I.

    Alternative or Cumulative Recovery.

   If defendants can render an accounting of their profits, the question remains
[*1176]  whether plaintiffs are entitled either to (1) the greater of either
damages or profits, or (2) both [**56]  damages and profits.  Courts have been
unable to agree on this question. n1 This disagreement has its roots in the
conflict between the statutory language, which appears to contemplate a
cumulative recovery, n2 and the legislative history, which indicates that
Congress envisioned an alternative recovery. n3 This circuit in Universal 
Pictures Co. v. Harold Lloyd Corp., 162 F.2d 354 (9th Cir. 1947) expressly
adopted the alternative recovery, and we are constrained to follow that decision
here.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n1 Compare Universal Pictures Co. v. Harold Lloyd Corp., 162 F.2d 354 (9th
Cir. 1947) and Gordon v. Weir, 111 F. Supp. 117 (E.D.Mich. 1953) aff'd 216 F.2d
508 (6th Cir. 1954) with Thomas Wilson & Co. v. Irving J. Dorfman Co., 433 F.2d
409 (2d Cir. 1970), cert. denied, 401 U.S. 977, 91 S. Ct. 1200, 28 L. Ed. 2d 326
(1971) and Gelles-Widmer Co. v. Milton Bradley Co., 132 U.S.P.Q. 30
(N.D.Ill.1961), aff'd, 313 F.2d 143 (7th Cir.), cert. denied, 373 U.S. 913, 83
S. Ct. 1303, 10 L. Ed. 2d 414 (1963). [**57]



   n2 The Act provides that an infringer shall be liable for "such damages as
the copyright proprietor may have suffered due to the infringement, as well as
all the profits which the infringer shall have made from such infringement . . .
." 17 U.S.C. § 101(b).

   n3 H.R.Rep.No.2222, 60th Cong., 2d Sess. 15 (1909) states:

     The provision that the copyright proprietor may have such damages as
     well as the profits which the infringer shall have made is
     substantially the same provision found in section 4921 of the Revised
     Statutes relating to remedies for the infringement of patents. The
     courts have usually construed that to mean that the owner of the
     patent might have one or the other, whichever was the greater.  As
     such a provision was found both in the trademark and patent laws, the
     committee felt that it might be properly included in the copyright
     laws.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   It has been argued that the Supreme Court's decision in F. W. Woolworth Co. 
v. Contemporary Arts, Inc., 344 U.S. 228, 73 S. Ct. 222, 97 L. Ed. 276 (1952)
and this court's interpretation of that [**58]  decision in Shapiro, Bernstein &
Co.  v. 4636 S. Vermont Ave., Inc., 367 F.2d 236 (9th Cir. 1966) overruled, sub
silentio, Universal Pictures. We disagree.  Both Woolworth and Shapiro dealt
with the related question of the propriety of "in lieu" damages in certain
factual situations; neither squarely confronted the question of cumulative
versus alternative recovery.

   To illustrate, in Woolworth the district court had awarded "in lieu" damages
in the face of ascertained, albeit small, profits and substantial but unproven
damages.  The Supreme Court affirmed this award for two reasons: (1) to
compensate the copyright owner for injury when proof of such injury is difficult
or impossible, and (2) to discourage wrongful conduct.  In the context of this
holding the Court used the following language, which it has been argued,
demonstrates that it favors cumulative recovery.

     [A] rule of liability which merely takes away the profits from an
     infringement would offer little discouragement to infringers. It would
     fall short of an effective sanction for enforcement of the copyright
     policy.  The statutory rule, formulated after long experience, not
     [**59]  merely compels restitution of profit and reparation for injury
     but also is designed to discourage wrongful conduct.

 344 U.S. at 233, 73 S. Ct. at 225.

When read in light of the issue before the Court, viz. the propriety of "in lieu
" damages, this passage does not indicate that cumulative recovery is required
to discourage infringement, but rather that the threat of "in lieu" damages
should exist to serve as a deterrent to future infringement. The remainder of
the quoted passage further evidences the thrust of the Court's opinion.

     The discretion of the court is wide enough to permit a resort to
     statutory damages for such purposes.  Even for uninjurious and
     unprofitable invasions of copyright the court may, if it deems it
     just, impose a liability within the statutory limits to sanction and
     vindicate the statutory policy.

Id.

The fact that "a rule of liability which merely takes away the profits" is an
insufficient  [*1177]  deterrent helped to convince the Court to hold that "in
lieu" recovery, not cumulative recovery, was available.

   Nor does Shapiro hold that cumulative recovery is available under the Act.
In Shapiro,  [**60]  the trial court had determined that, although
ascertainable, damages were non-existent and profits were de minimus and
consequently, the copyright owner was entitled to no monetary recovery.  The
Ninth Circuit affirmed these findings of fact and, reasoning from Woolworth,
held that although the trial court had the discretion to apply "in lieu"
damages, its refusal to do so was not error.

   The trial court, relying on Sheldon v. Metro-Goldwyn Corp., 309 U.S. 390, 60
S. Ct. 681, 84 L. Ed. 825 (1940), had concluded that if either profits or
damages are ascertainable, then "in lieu" damages are inappropriate.  We
disagreed with that conclusion.  In passing we stated that

     since the opinion in Woolworth, Sheldon does not stand for the
     proposition that where both profits and damages can be ascertained the
     court should award the higher but not both and should decline to
     resort to the "in lieu" provision.

 367 F.2d at 240.

This statement merely acknowledges the Woolworth dicta which indicates that the
trial court has discretion to award "in lieu" damages even though both profits
and damages have been proved.  Again, we must [**61]  note that this court was
dealing not with the propriety of cumulative versus alternative recovery, but
rather with the availability of "in lieu" damages.  The question of whether only
the higher of the two ascertainable elements may be awarded was not before the
court; the court simply held that even with ascertainable profits and damages,
"in lieu" damages still may be granted. n4

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n4 In addition, subsequent to Shapiro, this circuit affirmed an award of only
the larger of damages and profits.  Runge v. Lee, 441 F.2d 579 (9th Cir.), cert.
denied, 404 U.S. 887, 92 S. Ct. 197, 30 L. Ed. 2d 169 (1971). In Runge, the
trial court elected to award compensatory damages in the amount of $80,000.00
instead of the profits of the infringer which amounted to $64,253.00.  This
court held that such an election was within the trial court's discretion, citing
Universal Pictures, with no mention of Shapiro.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   II.

   Statutory "In Lieu" Damages.

   In the case now before us the [**62]  district court, after the jury had been
dismissed, refused to exercise its discretion to hear additional testimony on
the applicability of "in lieu" damages.  It ruled that "in lieu" damages should
have been submitted previously to the jury and consequently it declined to
consider the propriety of such an award.  We reverse this determination and hold
that, after the plaintiffs have had an opportunity to prove profits, the
district court should consider the propriety of "in lieu" damages, although an
award of such damages will be within its discretion.

   We so hold because the issue of "in lieu" damages is properly addressed to
the court, not the jury.  Section 101(b) expressly directs the court to use its
discretion in the determination of "in lieu" damages. n5 The jury plays no role
in this determination, because "the court's conception of what is just in the
particular case, considering the nature of the copyright, the circumstances of
the infringement, and the like, is made the measure of the damages to be paid .
. . ." Westermann Co. v. Dispatch Printing Co., 249 U.S. 100, 106, 39 S. Ct.
194, 196, 63 L. Ed. 499 (1919) (emphasis added).  See F. W. Woolworth Co. v. 
Contemporary Arts, Inc., supra.  [**63]

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n5 Section 101(b) of 17 U.S.C. states in part:

     Or in lieu of actual damages and profits, such damages as to the court
     shall appear to be just, and in assessing such damages the court may,
     in its discretion, allow the amounts hereinafter stated . . . . and
     such damages shall in no other case exceed the sum of $5,000 nor be
     less than the sum of $250, and shall not be regarded as a penalty . .
     . . But the foregoing exceptions shall not deprive the copyright
     proprietor of any other remedy given him under the law, nor shall the
     limitation as to the amount of recovery apply to infringements
     occurring after the actual notice to a defendant, either by service of
     process in a suit or other written notice served upon him . . . ."

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

    [*1178]  The precise scope of the district court's discretion in awarding
"in lieu" damages presents a more difficult question.  Although in all cases the
amount of "in lieu" damages is left to the discretion of the district court,
limited in certain circumstances by the maximum [**64]  and minimum amounts
prescribed by the Act, the circumstances, if any, under which such an award must
be made can be discerned only after properly interpreting F. W. Woolworth Co. v.
Contemporary Arts, Inc. and Shapiro, Bernstein & Co. v. 4636 S. Vermont Ave., 
Inc.

   Woolworth, strictly read, teaches us that when only profits are proven the
district court has the discretion to award "in lieu" damages also could be
awarded when only actual damages were proven: "Lack of adequate proof on either
element would warrant resort to the statute in the discretion of the court,
subject always to the statutory limitations." n6 F. W. Woolworth Co. v. 
Contemporary Arts, Inc., 344 U.S. at 233, 73 S. Ct. at 225 (Emphasis added).

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n6 The Court in Woolworth also noted that the district court has the
discretion to award "in lieu" damages when both profits and actual damages have
been proved.

     The statute has been interpreted to vest in the trial court broad
     discretion to determine whether it is more just to allow a recovery
     based on calculation of actual damages and profits, as found from
     evidence, or one based on a necessarily somewhat arbitrary estimate
     within the limits permitted by the Act.

 344 U.S. at 231-32, 73 S. Ct. at 224.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [**65]

   It has been suggested that Shapiro teaches that if either profits or actual
damages are not ascertained the district court must award "in lieu" damages.
See, e.g., 2 M. Nimmer § 154.13 at 681, n. 91a (June 1976 Supp. at 77-78).  We
disagree.  Shapiro was a case in which both actual damages and profits were
ascertained. Under these circumstances the district court declined to award "in
lieu" damages.  This court affirmed the findings of fact but held, nonetheless,
that the trial court in its discretion could award "in lieu" damages but was
under no duty to do so.

   Those who read Shapiro to impose a duty to award "in lieu" damages if either
profits or actual damages are unascertainable point to dicta that states that
"the judicial discretion . . . . only comes into play when profits and damages
have actually been proved, and unless they have, the court must apply the
statutory standard." 367 F.2d at 240. We read this to mean that the district
court has a duty to award "in lieu" damages only when both profits and damages
have not been established.  Three considerations support this interpretation.
First, the cases cited immediately after [**66]  the above quoted dicta, i.e., 
Douglas v. Cunningham, 294 U.S. 207, 55 S. Ct. 365, 79 L. Ed. 862 (1935);
Jewell-LaSalle Realty Co. v. Buck, 283 U.S. 202, 51 S. Ct. 407, 75 L. Ed. 978
(1931); Westermann Co. v. Dispatch Printing Co., 249 U.S. 100, 39 S. Ct. 194, 63
L. Ed. 499 (1919), all involved fact situations in which neither damages nor
profits were proven. With this in mind, it is clear why the court said
immediately following the citations that Woolworth did not conflict with these
cases.  Second, a contrary interpretation of Shapiro would place it in direct
conflict with the holding of Woolworth. Faced with ascertained profits, but
unascertained damages, the Court nevertheless held that "in lieu" damages were
discretionary.  Third, inasmuch as Shapiro was decided in the context of
ascertained profits and ascertained damages, it is not unreasonable to assume
that the court was addressing situations in which either both profits and
damages are ascertained or neither is ascertained.

   This interpretation of Shapiro leaves the problem of "in lieu" damages in the
following posture.  If either profits or actual [**67]  damages or both are
ascertained, the court, in its discretion, may award statutory "in lieu"
damages. n7 If neither profits nor  [*1179]  actual damages are ascertained,
then under the dicta of Shapiro the award of statutory "in lieu" damages is
mandatory, although the amount of such recovery remains discretionary.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

   n7 We assume that any such award of "in lieu" damages would exceed the amount
of any ascertained damages or profits.  Under no circumstances can an award of
"in lieu" damages less than the amount of the ascertained damages or profits
deprive the aggrieved party of his right to the greater of damages or profits,
when both are ascertained, or the greater damages or profits, when only one is
ascertained. In brief, an award of "in lieu" damages can only benefit, but not
hurt, the aggrieved party.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   The foregoing interpretation of Woolworth and Shapiro provide the rules by
which the trial court will be guided in respect to "in lieu" damages on remand
of this case.  On remand the trial [**68]  court's first task is to determine,
if possible, the profits of the infringers. If these profits are ascertainable,
then plaintiffs are entitled to the larger of either the profits or damages,
unless the district court, in its discretion, awards the statutory "in lieu"
damages.  If the profits are not ascertainable, then plaintiffs are entitled to
the compensatory damages as found by the jury, unless the district court awards
the discretionary "in lieu" damages.

   III.

   Conclusion.

   In view of the holdings set forth in both portions of this opinion the
judgment of the district court finding infringement is affirmed.  The district
court's denial of plaintiffs' motion for an accounting is reversed.  The case is
remanded for an accounting, after which the district court may, in its
discretion, award statutory "in lieu" damages.

   Affirmed in part and Reversed in part.

CONCURBY: 

   CARTER

DISSENTBY: 

   CARTER

DISSENT: 

   JAMES M. CARTER, Circuit Judge, concurring and dissenting.

   I concur in that portion of Judge Sneed's Opinion dealing with statutory "in
lieu" damages.  However, I am convinced that the Copyright Act contemplates
cumulative recovery of both damages and profits, and therefore dissent [**69]
from that portion of the Majority Opinion dealing with this issue.

   The statutory language of Section 101(b) provides for recovery of "such
damages as the copyright proprietor may have suffered due to the infringement,
as well as all the profits which the infringer shall have made from such
infringement . . . ." Thus, the statute itself provides for cumulative recovery
of both damages and profits.  However, considerable confusion was engendered by
the House Report on the 1909 Act which indicated that recovery was to be in the
alternative, as under the Patent Law. n1 This led Courts in several early
decisions to rule that recovery was either of damages or profits.  See Sheldon 
v. Metro-Goldwyn Pictures Corp., 309 U.S. 390, 400-01, 60 S. Ct. 681, 84 L. Ed.
825 (1940); Gordon v. Weir, 111 F. Supp. 117, 123 (E.D.Mich.1953), aff'd, 216
F.2d 508 (6th Cir. 1954); Lundberg v. Welles, 93 F. Supp. 359, 361
(S.D.N.Y.1950); Orgel v. Clark Boardman Co., Ltd., 128 U.S.P.Q. 531, 532
(S.D.N.Y.1960), modified, 301 F.2d 119 (2 Cir. 1962). See generally Note,
Monetary Recovery for Copyright  [**70]   Infringement, 67 Harv.L.Rev. 1044,
1051 (1954). This court adopted the alternative recovery rule in the early case
of Universal  Pictures Co. v. Harold Lloyd Corp., supra, 162 F.2d at 376, which
the  [*1180]  majority believes still controls.  More recent decisions have
without exception favored cumulative recovery, however.  See F. W. Woolworth Co.
v. Contemporary Arts, Inc., 344 U.S. 228, 233, 73 S. Ct. 222, 97 L. Ed. 276
(1952); Thomas Wilson & Co. v. Irving J. Dorfman Co., 433 F.2d 409, 413 (2 Cir.
1970); Alouf v. Expansion Products, Inc., 417 F.2d 767, 768 (2 Cir. 1969); Peter
Pan Fabrics, Inc. v. Jobela Fabrics, Inc., 329 F.2d 194, 196 (2 Cir. 1964);
Baldwin Cooke Co. v. Keith Clark, Inc., 420 F. Supp. 404, 405-06 (N.D.Ill.1976);
L. L. White Metal Casting Corp. v. Joseph, supra, 387 F. Supp. at 1357; Fedtro,
Inc. v. Kravex Manufacturing Corp., 313 F. Supp. 990, 995 (E.D.N.Y.1970);
Ziegelheim v. Flohr, 119 F. Supp. 324, 329 (E.D.N.Y.1954); Trebonik v. Grossman
Music Corp., 305 F. Supp. 339, 163 U.S.P.Q. 352, 361-62 (N.D.Ohio 1969); [**71]
Gelles-Widmer Co. v. Milton Bradley Co., 132 U.S.P.Q. 30, 35 (N.D.Ill.1961), aff
'd, 313 F.2d 143 (7 Cir. 1963). n2

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

     n1 "The provision that the copyright proprietor may have such damages
     as well as the profits which the infringer shall have made is
     substantially the same provision found in section 4921 of the Revised
     Statutes relating to remedies for the infringement of patents. The
     courts have usually construed that to mean that the owner of the
     patent might have one or the other, whichever was the greater.  As
     such a provision was found both in the trademark and patent laws, the
     committee felt that it might be properly included in the copyright
     laws."

Id. at 15.  I do not believe that resort to the legislative history of the 1909
Copyright Act is necessary.  The language of the statute itself is plain.  It is
a well-established rule of statutory construction that where the language of a
statute itself is clear and unambiguous, it is determinative of construction.
Monte Vista Lodge v. Guardian Life Ins. Co. of America, 384 F.2d 126, 128 (9
Cir. 1967); 2A C. Sands, Statutes and Statutory Construction §§ 45.02, 46.04 at
4, 54 (Rev.ed.1973).  The legislative history does not resolve ambiguity; it
creates it. [**72]



   n2 Commentators generally endorse the cumulative over alternative recovery.
See, e.g., L. Ambur, Copyright Law and Practice 1117 (1936); A. Weil, Copyright
Law 467 (1917); Price, Monetary Remedies Under the United States Copyright Code,
27 Ford.L.Rev. 555, 564 (1959); Note, Remedies for Copyright Infringement, 23
Ark.L.Rev. 464, 466 (1969); Note, Monetary Recovery Under the Copyright, Patent,
and Trademark Acts, 45 Texas L.Rev. 953, 962 (1967). But cf. 2 Nimmer § 151 at
667-69; Caplan, The Measure of Recovery in Actions for the Infringement of 
Copyright, 37 Mich.L.Rev. 564, 586 (1939); Comment, A New Look at Section 101(b)
of the Copyright Act, 32 U.Chi.L.Rev. 98, 107-09 (1969).

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

   In the Woolworth case the lower court had awarded statutory "in lieu" damages
and attorneys' fees for infringement of a statute.  The Supreme Court found that
there had been an adequate showing of profits by the infringer to enable
assessment of that liability.  "As to the other ingredient in computing
liability, damages [**73]  suffered by the copyright proprietor, the record is
inadequate to establish an actually sustained amount." 344 U.S. at 230, 73 S.
Ct. at 224. Nonetheless, the Court approved the "in lieu" damages award because
cumulative recovery is provided by the Copyright Act. Thus the Court stated:

     "[A] rule of liability which merely takes away profits from an
     infringement would offer little discouragement to infringers. It would
     fall short of an effective sanction for enforcement of the copyright
     policy.  The statutory rule, formulated after long experience, not
     merely compels restitution of profit and reparation for injury but
     also is designed to discourage wrongful conduct." 344 U.S. at 233, 73
     S. Ct. at 225.

   The majority argues that Woolworth should not be viewed as controlling
precedent in this case because it did not specifically deal with the issue of
cumulative or alternative recovery.  But the above-quoted language indicates
that the Court believed that recovery of more than just profit is necessary.
While in that case, damages could not be ascertained so that "in lieu" damages
were appropriate, the conclusion is inescapable that where damages [**74]  can
be ascertained, they must be awarded in addition to profits in order to obtain
the deterrent effect sought by the Court.  As the Supreme Court recognized, the
damage provision of the Copyright Act aims at more than just compensation of the
copyright owner.  It also served to prevent unjust enrichment by the infringer
and to deter infringement. I agree with the Second Circuit that fulfillment of
these purposes requires cumulative recovery.  See Thomas Wilson & Co. v. Irving
J. Dorfman Co., supra, 433 F.2d at 413-14; Peter Pan Fabrics, Inc. v. Jobela 
Fabrics, Inc., supra, 329 F.2d at 196. It follows that plaintiffs in this case
should be entitled to recover both damages and profits, if the latter can be
proven.

    Universal Pictures Co. v. Harold Lloyd Corp., supra, was decided before the
Woolworth case.  It relied, instead, on Sheldon v. Metro-Goldwyn Pictures Corp.,
309 U.S. 390, 400, 60 S. Ct. 681, 84 L. Ed. 825 (1940) and Underwood Typewriter
Co. v. E. C. Stearns & Co., 227 F. 74, 82 (2 Cir. 1915). This Court has already
concluded that the Sheldon case was superseded by Woolworth.  [**75]  As the
Court said in Shapiro, Bernstein & Co. v. 4636 S. Vermont Ave., Inc., 367 F.2d
236, 240 (9 Cir. 1966):

      [*1181]  "The Sheldon case did make reference to and relied upon a
     report of the House Committee on the Copyright Act (309 U.S. at 400,
     60 S. Ct. 681), which said that where both profits and damages had
     been ascertained the court could award the greater amount but not
     both.  But that statement was superseded by the majority opinion in F.
     W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228, 234, 73 S. Ct.
     222, 97 L. Ed. 276 (1952). This distinguished the Sheldon case
     specifically, holding that the only question before the court in
     Sheldon had been apportionment of profits from an infringing motion
     picture, and that the case did not stand for the proposition that
     where profits were established the 'in lieu' provision did not come
     into play.  Further support for the view that Sheldon does not stand
     for the point cited by the district court is the dissenting opinion in
     Woolworth which quotes the same provision from the House Committee
     report which was rejected in the majority opinion.  We conclude [**76]
     that Sheldon is not authority for the rule stated in conclusion of law
     4, and that, since the opinion in Woolworth, Sheldon does not stand
     for the proposition that where both profits and damages can be
     ascertained the court should award the higher but not both and should
     decline to resort to the 'in lieu' provision."

   In Runge v. Lee, 161 U.S.P.Q. 770 (C.D.Cal.1969), aff'd 441 F.2d 579 (9
Cir.), cert. denied, 404 U.S. 887, 92 S. Ct. 197, 30 L. Ed. 2d 169 (1971), The
jury returned a verdict in favor of plaintiff in a copyright infringement action
and awarded plaintiff compensatory damages of $80,000.  The district court later
held an accounting of profits and determined that defendant's profits
attributable to the infringement amounted to $64,253.  But the court awarded
plaintiff only "the higher of the two" figures.  161 U.S.P.Q. at 772. Plaintiff,
however, did not claim both damages and profits, and it is clear that neither
the district court nor this court considered the damage issue.

   It is significant that the Second Circuit also did not feel constrained by
its early precedent establishing alternative [**77]  recovery.  Indeed, Peter 
Pan Fabrics, Inc. v. Jobela Fabrics, Inc., 329 F.2d 194 (2 Cir. 1964), which
established the cumulative rule, did not even mention Underwood Typewriter. It
seems clear that the Second Circuit concluded that Underwood  Typewriter, like
Sheldon, was no longer good law after Woolworth. I agree.

   The cumulative recovery rule is supported by the recent general revision of
the Copyright Act. Act of October 19, 1976, Publ.L.No.94-553, 90 Stat. 2541,
amending 17 U.S.C. § 101 et seq. (1909).  Section 504(b) thereof provides in
part:

     "The copyright owner is entitled to recover the actual damages
     suffered by him or her as a result of the infringement, and any
     profits of the infringer that are attributable to the infringement and
     are not taken into account in computing the actual damages."

The new Act thus makes it explicit that the plaintiff is entitled to both actual
damages and additional profits realized by the defendant from the infringement.
See H.R.Rep.No.94-1476, 94th Cong., 2d Sess., at 161 (1976); S.Rep.No.94-473,
94th Cong., 1st Sess., at 143-44 (1976); U.S.Code Cong. &  [**78]  Admin.News
1976, p. 5659.  This court should view this new Act as indicative of
Congressional intent in this area, see N.L.R.B. v. Bell Aerospace Co., 416 U.S.
267, 275, 94 S. Ct. 1757, 40 L. Ed. 2d 134 (1974), and follow the cumulative
recovery rule.

   GOODWIN, Circuit Judge, concurs in the Opinion by Judge Carter on
infringement and concurs in the Opinion by Judge Sneed on damages.