Magistrate judge recommends that Philadelphia Phillies can continue using modified version of Phillie Phanatic mascot, even after Phanatic’s designers terminated their assignment of mascot’s copyright to team, because Phillies’ redesign of mascot constitutes derivative work.
This case arises from the copyright in the original “Phillie Phanatic” mascot costume for Philadelphia’s Major League Baseball team, The Phillies; the designers’ termination of the 1984 copyright assignment to The Phillies; and The Phillies’ redesigned Phanatic costume, completed just before the designers’ termination was effective.
In 1978, Harrison/Erickson Inc. (H/E), Bonnie Erickson and Wayde Harrison designed the Phillie Phanatic mascot costume for The Phillies and subsequently assigned all of their rights in the costume’s copyright to The Phillies in 1984. After receiving H/E’s notice of termination in 2018, effective June 15, 2020, The Phillies redesigned the Phillie Phanatic costume, debuting “P2” in February 2020. The Phillies then sued H/E, seeking declaratory judgments challenging the validity and authorship of the original Phanatic’s copyright and the validity and scope of the termination, among other claims. In turn, H/E countersued, seeking a declaration that The Phillies’ redesign infringes on the original Phanatic’s copyright, in addition to other claims.
With respect to the validity of the original Phanatic’s copyright, The Phillies contended that H/E fraudulently obtained the Phanatic’s copyright registration because they represented to the Copyright Office that the Phanatic is an “artistic sculpture” rather than a costume. Unpersuaded, the magistrate judge recommended finding that (1) the 1979 registration of the original Phanatic’s copyright was not procured by fraud and is valid, and in the alternative that (2) the team is barred from challenging the registration’s validity due to res judicata. The record was clear that the Copyright Office was aware of the Phanatic as a 3D costume; although the Phanatic’s copyright registration identifies it as a “sculpture,” the Copyright Office’s record describes the item as a “shaggy creature.” Furthermore, the registration included an internal note to staff that suggested the Copyright Office recognized the ambiguity—it was unclear whether it was a real stuffed sculpture or a costume design with a person wearing it—yet nevertheless issued the registration. Thus, the magistrate judge concluded that there was no dispute of material fact from which a reasonable juror could find that the copyright was invalid due to fraud. In the alternative, she recommended finding that the doctrine of res judicata bars The Phillies from challenging the validity of the Phanatic’s copyright because of a 1979 copyright infringement lawsuit between H/E and The Phillies, where The Phillies could have, but did not, raise this challenge and instead settled the action.
With respect to authorship, The Phillies argued that it was a co-author of the original Phanatic costume and author and copyright owner of the Phanatic character, and therefore, H/E could not unilaterally terminate its rights in the Phanatic. H/E sought summary judgment on their claim as sole author of both the costume and character. Again, the magistrate judge recommended summary judgment in favor of H/E, finding H/E to be the sole author. In the Second Circuit, a co-authorship claimant bears the burden of establishing that each of the putative co-authors (1) made independently copyrightable contributions to the work and (2) fully intended to be co-authors. Furthermore, to be an author, one must provide more than merely an idea for the joint work.
As for the Phanatic’s costume, the judge did not find the elements of the Phanatic’s jersey, stirrups and hat to be independently copyrightable because The Phillies did not design a completely new uniform for the Phanatic to wear. The Phillies uniform preexisted, so it could not have been created with the intention to be merged into inseparable parts of a unitary whole. Furthermore, the parties disputed how much direction The Phillies—specifically, The Phillies’ Executive Vice President Bill Giles—provided to H/E in stating the mascot should be a “big, fat, green thing.” But this contribution, too, was not independently copyrightable as it was merely an idea. Finally, there was no evidence of the parties’ intent to be co-authors of the costume; since H/E retained sole authority over the design, each agreement between the parties recognized that “the Phanatic was H/E’s copyright,” and critically, The Phillies later sought an assignment of the copyright.
As for the Phanatic character, the magistrate judge again recommended granting summary judgment in H/E’s favor, finding that The Phillies was not an author of the Phanatic character because the character is not copyrightable. To be copyrightable, a character must be fixed in a tangible work of authorship. The team was unable to point to an admissible, tangible work of authorship that delineates the Phanatic character. And even if The Phillies could provide such a work, the magistrate judge found that the character was not sufficiently delineated. The Phillies described the Phanatic as a mute but passionate Philadelphia sports fan who loves to dance, with fluctuating emotions, a frenetic demeanor and childlike enthusiasm. But this, the court found, was more akin to a “lightly sketched” character, similar to an unprotectable scène à faire character. Finally, although the magistrate judge recommended a grant of summary judgment on the merits, she also found that The Phillies could be barred from challenging authorship on statute of limitation and res judicata grounds, as the authorship claim accrued in 1979, and the issue could have been litigated during the prior 1979 infringement action.
Whether P2 is a derivative work is at the heart of this case. The derivative works exception under 17 U.S.C. 203(b)(1) permits the continued use of derivative works that were prepared before the termination of a copyright assignment. To qualify as a derivative work, a work’s new elements must be independently copyrightable; while this requires a low threshold of originality, the additional elements must be more than trivial.
The Phillies, in asserting that its redesigned P2 version of the Phanatic is a derivative work, identified several changes between H/E’s original Phanatic design and The Phillies’ own P2 design: (1) a larger hat, (2) lighter eyebrows, (3) star eyelashes, (4) round eyes, (5) a wider head, (6) a shorter snout, (7) operable hands, (8) wing tips, (9) a larger “duck butt,” (10) a lighter tail, (11) modern stockings, (12) red shoes and (13) a modern uniform. The magistrate judge noted that in assessing a derivative work’s copyrightability, a court need not dissect the works into their separate components and compare only those elements that are themselves copyrightable. Instead, the changes in P2 are to be taken as a whole. In response to H/E’s argument that P2 is the same old Phanatic, the judge noted that a derivative work is supposed to retain the same aesthetic appeal as the original work; otherwise, it would not be derivative at all and would be an entirely new creation. “To be sure, the changes to the structural shape of the Phanatic are no great strokes of brilliance, but as the Supreme Court has already noted, a compilation of minimally creative elements, ‘no matter how crude, humble or obvious,’ can render a work a derivative.” Thus, because it is undisputed that P2 was developed before the date of termination, the magistrate judge concluded that P2 qualified as a derivative work of the original H/E design.
Validity of Termination
The Phillies sought a declaration that H/E’s notice of termination was invalid and, in the alternative, that the scope of that termination did not include certain validly exercised rights. At the same time, H/E sought a declaration that the termination was valid and that “all copyright interests” revert to H/E.
As a threshold matter, the magistrate judge recommended granting summary judgment to H/E on the point that the termination notice was valid, as The Phillies conceded this point. As far as the scope of the termination notice, The Phillies argued that it retained the right to use certain material pursuant to an implied license. The judge found no evidence of such an implied license for works created after the 1984 Agreement, since The Phillies was granted the copyright in its entirety in the 1984 Agreement. Regarding works created before the 1984 Agreement, however, The Phillies and H/E did separately negotiate for those rights, and the judge found that when H/E authorized the use of pre-1984 works, it did so by implied license. Since that implied license was a separate grant of rights, it would be subject to a separate notice of termination. Therefore, the judge recommended that the court find that the termination notice validly terminated The Phillies’ right to use all works created after 1984 but did not terminate its rights in works created before 1984. Furthermore, all valid derivative works, including P2, would not be subject to the termination notice either.
The Phillies also brought a trademark-related claim, seeking a declaration that the use of the Phanatic by another commercial entity for any similar goods or services violates the Lanham Act. However, because The Phillies failed to show a substantial controversy of “sufficient immediacy and reality,” the judge recommended granting summary judgment to H/E because of lack of subject matter jurisdiction under the Declaratory Judgment Act. The Phillies also brought state law claims for unjust enrichment and breach of the covenant of good faith and fair dealing based on H/E’s termination of the 1984 assignment. The judge found that these state law claims were not preempted by the Copyright Act, and recommended denying H/E’s motion to dismiss these state law claims because they presented questions of fact.
Finally, addressing H/E’s counterclaim of copyright infringement, the judge recommended granting in part The Phillies’ motion to dismiss, with respect to any claims based on P2, since P2 is a derivative work created before the grant’s termination, as well as any claims relating to merchandise depicting the H/E Phanatic, because of a failure to allege with specificity. On the other hand, she recommended denying The Phillies’ motion to dismiss any claims insofar as they relate to P2 adaptations and reproductions created after the effective date of termination, June 15, 2020, as outside the derivative works exception created by Section 203.
Summary prepared by Linna Chen and Brandon Zamudio
Chair, Intellectual Property Protection; Chair, Luxury Brands; Deputy Chair, Advanced Media and Technology