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IP/Entertainment Case Law Updates

Warner Bros. Entertainment, Inc. v. X One X Productions, dba X One X Movie Archives, Inc.

In dispute over merchandise with images taken from old posters and lobby cards for “Gone with the Wind” and “The Wizard of Oz,” Eighth Circuit affirms $2.57 million award to Warner Bros. for copyright infringement and permanent injunction on trademark claims.

Warner Bros. Entertainment Inc., Warner Bros. Consumer Products Inc. and Turner Entertainment Co. (collectively, Warner Bros.) hold registered copyrights in the films “Gone with the Wind” and “The Wizard of Oz,” and in “Tom and Jerry” cartoons, as well as registered and common law trademarks in images, characters, words, names, phrases and symbols related to those films.

X One X Productions, dba X One X Movie Archives Inc.; AVELA. Inc., dba Art & Vintage Entertainment Licensing Agency; Inc.; and Leo Valencia (collectively, AVELA) obtained restored versions of movie posters and lobby cards for the works, and extracted images of famous characters from the materials. AVELA licensed the images for use on various consumer products, from shirts, lunch boxes and playing cards to three-dimensional figurines, water globes and action figures. Warner Bros. filed suit against AVELA in 2006, alleging copyright and trademark infringement claims under the Copyright Act, the Lanham Act and state law.

In 2009, the district court granted Warner Bros. summary judgment on its copyright infringement claims and entered a permanent injunction prohibiting AVELA from using any of the images in any way except for exact duplication of publicity materials in the public domain. AVELA appealed and the Eighth Circuit affirmed in part and reversed in part, upholding summary judgment and most of the injunction. The Eighth Circuit held that AVELA’s products that simply reproduced “one image from an item of publicity material as an identical two-dimensional image” did not constitute copyright infringement. However, (i) products “that each juxtapose an image extracted from an item of publicity material with another image extracted from elsewhere in the publicity materials, or with a printed phrase from the book underlying the subject film, to create a new composite work,” and (ii) products “that each extend an image extracted from an item of publicity material into three dimensions” were found to constitute copyright infringement. (Read our summary of the Eighth Circuit decision here.)

On remand, the district court awarded statutory damages in the amount of $10,000 per infringed copyright for 257 copyrights, resulting in a total award of $2.57 million. It also granted summary judgment on the trademark infringement and unfair competition claims, and issued a permanent injunction prohibiting AVELA from licensing any images or phrases from the films or cartoons, with the exception of exact reproductions of public materials in the public domain. In a separate order, the district court granted Warner Bros.’ motion for attorneys’ fees but ordered supplemental briefing regarding the amount, which remains undetermined. AVELA appealed again, this time challenging the entry of statutory damages, summary judgment, permanent injunction and attorneys’ fees.

AVELA contested the $2.57 million statutory damages award, asserting that it violated the plaintiffs’ Seventh Amendment right to a jury trial and that the amount awarded did not comport with due process. The Eighth Circuit rejected both arguments, pointing out that AVELA’s Seventh Amendment argument was raised for the first time on appeal and therefore was not properly before the court. Further, emphasizing the intentionally discretionary nature of statutory damages, the Eighth Circuit held that an award of $10,000 per infringed work was not obviously unreasonable in violation of due process, given the case’s “tortured and laborious” discovery history, AVELA’s “intransigence [that] rendered calculating actual damages impossible due to missing or inaccurate records,” the “many years of litigation (now a decade)” during which AVELA did not cease its infringing activity and the extensiveness of AVELA’s infringing activity. Nor did the award contravene the Eighth Circuit’s previous ruling on appeal, which drew distinctions between categories of activities in determining the existence of copyright infringement. The Eighth Circuit noted that such distinctions did not bear on the amount of statutory damages for the infringing activities.

The Eighth Circuit next rejected AVELA’s arguments as to the district court’s summary judgment on the trademark infringement and unfair competition claims.

First, the court held that the doctrines of judicial admissions and judicial estoppel did not bar Warner Bros.’ trademark claims. Warner Bros.’ previous statement — that if the district court’s initial grant of summary judgment on the copyright claim were to be affirmed by the Eighth Circuit, Warner Bros. would not need to pursue its trademark claims — did not constitute a “judicial admission,” as the statement did not “admit” anything, much less anything of evidentiary value. Nor did the doctrine of judicial estoppel apply, because Warner Bros.’ present position was not inconsistent with its past position, given that Warner did not receive all the relief it had sought, did not influence the district court’s ruling, and imparted no unfair advantage or detriment to the parties.

Second, the Eighth Circuit held that Warner Bros.’ trademark claims did not run afoul of Dastar Corp. v. Twentieth Century Fox Film Corp., in which the U.S. Supreme Court rejected Fox’s trademark infringement claims on the grounds that its claims were not trademark claims, but disguised copyright claims. Here, Warner Bros. holds registered trademarks in iconic phrases and names, and used them for trademark purposes for many years. AVELA marketed its products using iconic characters’ pictures to associate them with Warner Bros.’ films, not to copy the films themselves. Because its trademark claims stood alone and were not disguised copyright claims, Dastar did not bar those claims.

Third, the Eighth Circuit held that AVELA had waived its defenses that (i) the key elements of Warner Bros.’ trademarks were functional, and (ii) AVELA’s use of the trademarks constituted fair use, because AVELA failed to plead these affirmative defenses.

Fourth, contrary to AVELA’s claim, the Eighth Circuit held that the “likelihood of confusion” analysis in trademark claims does not always require a jury trial, and that the district court did not err by rendering summary judgment on the likelihood of confusion. The court noted that AVELA challenged only two of the analysis’ six factors — strength of the marks and actual confusion — which the Eighth Circuit determined constituted weak and insufficient challenges. Given the strength of the other four factors the district court considered, which AVELA did not dispute, the district court did not err by rendering summary judgment.

Finally, the Eighth Circuit rejected AVELA’s challenges to the permanent injunction, citing its reasoning elsewhere in the opinion and refusing to consider AVELA’s Federal Rules of Civil Procedure 52(a)(2) and 65(d) arguments on the grounds that they were raised for the first time on appeal and thus waived. Although its previous opinion vacated in part the district court’s permanent injunction as to copyright infringement, the Eighth Circuit noted that copyright law and trademark law are separate and, in any event, because the final injunction made an exception for the reproduction of publicity materials in the public domain in their entirety and without alteration, it was not inconsistent with the Eighth Circuit’s prior holding.

The Eighth Circuit declined to hear the appeal as to the district court’s ruling on attorneys’ fees because the amount of attorneys’ fees remains unresolved, and therefore the order granting the attorneys’ fees is not final.

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