This article is written by Nishka Kamath. It aims to extensively cover the laws governing character merchandising in the US and the legal issues involved therein. An attempt is made to explain all the nitty-gritty of character merchandising with the help of famous characters that originated in the United States of America or those renowned worldwide at a global level. Further, the author has tried to incorporate several case laws for a better understanding of the subject matter by the readers. 

It has been published by Rachit Garg.

Introduction

Most of us, at one point or another,have been guilty of spending our hard earned money on a product just because it is our favorite character or is advocated, advertised, and endorsed by one of our favorite celebrities. For us, it might be a minimal amount, but these amounts, when summed up (i.e., when the amount of products thus brought across the nations is summed up), carry whopping large figures, thereby generating a large amount of revenue. Additionally, an entire generation of kids that grew up watching shows like Ben 10, PowerPuff Girls, and the Dexter Laboratory can relate to any products like pencils, lunch boxes, mugs, t-shirts, umbrellas with such characters printed on them. Such kids will certainly compel their parents into buying these products, or if the parent is aware of the child’s liking of said cartoon characters, he/she might end up buying such a licensed product instead of a non-branded one. This is the basis of character merchandising. 

The 21st century has witnessed a huge expansion in the field of media as a provider of knowledge along with acting as a powerful marketing tool. Character merchandising, too, has become one of the most popular tools for marketing. Top-notch companies and entertaiment industries are witnessed using character merchandising as a marketing tool. 

Further, we have all seen our favorite Harry Potter merchandise being sold in various forms, such as cups, wands, diaries, robes, wallets, and music boxes. One must also have witnessed  Kylie Jenner, the famous businesswoman and TV star who started her brand ‘Kylie Cosmetics’ wherein all the products bear her name and through which she is earning great revenue. These are examples of character merchandising, which is a marketing strategy through which one can exploit fictional or real characters or actors by creating merchandise based on them and making profits out of it. In the US, this must be done after having obtained the necessary licenses or approvals under relevant IP laws, such as trademark and/or copyright laws, to do so. However, the two laws may intersect or even overlap with each other, which may give rise to one of many issues that arise due to the prevailing practice of character merchandising in the US.

Through this article, an attempt has been made to enlighten the readers on the legal nitty-gritty of character merchandising. Further, an attempt is made to dive deeper into the popular brands that have followed this marketing strategy of character merchandising to take their brands to another level. 

Character merchandising in the US :  an outline

Types of character merchandising

There are three types of character merchandising, namely:

1. Character merchandising,
2. Personality merchandising,
3. Image merchandising.

For more details, please refer to the different types of character merchandising section in this article.

Concept of character merchandising

In the words of WIPO (World Intellectual Property Organization), as stated in the report prepared by WIPO on character merchandising, the term ‘character merchandising’ can be referred to using elements like:

1. Names;
2. Pictures;
3. Voices;
4. Statements given by a real or fictional personality in order to boost sales of certain products or services. 

This makes it obvious that both fictional characters as well as non-humans and real people fall within the criteria of ‘character’. Fictional characters like Tarzan or James Bond are usually used for their wider public liking, widespread popularity, fan following, and ability to be quickly noticeable, thus giving them a distinct personality and making products related to them easily saleable with high profits. 

So is the case with non-human characters like Donald Duck, Mickey Mouse, Bugs Bunny, Winnie the Pooh, and Peppa Pig, amongst other cartoon characters, and real personalities like that of renowned persons in the film industry, musicians or singers, businessmen, sportsmen, etc. These characters’ main sources can include the following, inter alia:

Literary works

Some common instances of fictional works include comic books, comic strips, and books designed especially for children. For instance, renowned characters like Tintin by Hergé or Astérix by Uderzo and Goscinny and superhero characters from Marvel like Spiderman, Thanos, Thor, Captain Marvel, Doctor Strange, Venom, Black Panther, Iron Man, Avengers, Black Widow, etc., and DC comics like Superman, Batman, The Flash, Aquaman, etc., are known to have grown their fan bases like crazy, thus making selling products related to them more favorable and appealing. 

If you are from the 90s, you surely must have heard about a Peter Rabbit Doll from ‘The Tales of Peter Rabbit’. This doll was marketed by the very famous author and illustrator, Beatrix Potter, who is well-known for ‘The Tales of Peter Rabbit’. What this mastermind did back then was that she registered the design of the doll at the patent office, channeled the power of character merchandising, and went on launching products like board games, wallpapers, chinaware, etc., all featuring characters from her works. 

Further, some of the famous examples of literary work include 

From the comic strip Peanuts by Charles M. Schulz

Characters like:

Snoopy, Charlie Brown, Linus van Pelt, Peppermint Patty,Woodstock, Frieda, Sally Brown, Pig-Pen, Franklin, Patty, Violet, etc. have been known to have a wide range of character merchandise sold on both online and offline platforms.

From the comic strip and now also an animated television series, Garfield by Jim Davis

Characters like-Garfield, Odie, Nermal, Orson Pig, Sheldon, Jon Abruckle, etc. have been known to have a wide range of character merchandise sold on both online and offline platforms.

From the Thimble Theatre that introduced everyone’s favorite Popeye the Sailor Man 

Characters like- Popeye, Olive Oyl, Wimpy, Bluto, Swee’Pea, Poopdeck Pappy, the Sea Hag, etc. have been known to have a wide range of character merchandise sold on both online and offline platforms.

From the comic strip: Mutts by Patrick McDonnell

Characters like, Little Earl, The Birds, Mussels Marinara, Chippy and Monk, Shnelly, Noodles, The Sphinx, Bio and Boop, Chickpea and Chickpea’s brother, Sid, Butchie, Doozy, Frank, Millie, Ozzie, Mooch, Jules, Guard Dog, etc., have been known to have a wide range of character merchandise sold on both, online and offline platforms.

From the comic strip: Calvin And Hobbes by Bill Watterson

Characters like- Calvin (protagonist), Hobbes (other protagonist), Calvin’s father, Calvin’s mother, Susie Derkins, Miss Wormwood, Moe, Rosalyn, Principal Spittle, Spaceman Spiff, Assorted Monsters in Calvin’s room, Stupendous Man, Tracer Bullet, Dinosaurs, Calvin in Inch-Tall Form, Santa Claus, etc., have been known to have a wide range of character merchandise sold on both, online and offline platforms.

Television shows and movies

The process of character merchandising can be said to be traced back to the 1930s, when Walt Disney Studios in the United States put into place a whole different department designed specifically to create and sell Disney merchandise. Ever since then, Disney products or merchandise as we call them, generally, have established their name in the online and offline markets. They have a wide range of merchandise, namely:

From the Mickey Mouse Clubhouse show

Characters like Mickey Mouse, Minnie Mouse, Donald Duck, Daisy Duck, Pluto, Goofy, Pete, Toodles, etc. have been known to have a wide range of character merchandise sold on both, online and offline platforms. 

From the Winnie the Pooh book and show

Characters designed by AA Milne like Winnie the Pooh, Piglet, Tigger, Eeyore, Christopher Robin, Kanga and Roo, Rabbit, etc., have been known to have a wide range of character merchandise sold on both, online and offline platforms. 

Interesting fact: There was a long 18-year feud between the Walt Disney Corporation and Stephen Slesinger, a comic pioneer  who bought the copyright to Pooh in 1930 from the bear’s British creator, A.A. Milne. Fortunately, the fate of this important Pooh bear was finally settled in 2009 in favor of the Walt Disney Corporation.

From the movie and now even a series – Frozen

Characters like Elsa, Anna, Olaf, Bulda, Kristoff, Hans, etc. have been known to have a wide range of character merchandise sold on both online and offline platforms. 

From the Lilo & Stitch movie

Characters like Stitch, Lilo Pelakai, Nani Pelekai, Jumba Jookiba, Pleakley, etc. have been known to have a wide range of character merchandise sold on both online and offline platforms. 

From movies, namely Finding Nemo and Finding Dory

Characters like Nemo, Marlin, Dory, Darla, Bruce, Crush, Gill, Squirt, Mr. Ray, Bailey, Hank, Destiny, Gurgle, etc., have been known to have a wide range of character merchandise sold on both online and offline platforms. 

From the Peter Pan plays, novels, series and films

Characters like Peter Pan, Wendy Darling, Captain Hook, Tinker Bell, Peter Rabbit, etc. have been known to have a wide range of character merchandise sold on both online and office platforms. 

From the Aladdin movie

Characters like Aladdin, Jasmine, Genie, Jafar, Lago, Rajah, Merchant, etc., have been known to have a wide range of character merchandise sold on both, online and office platforms.

From the Toy story film series

Characters like Woody, Buzz Lightyear, Rex, Barbie, Mr. Potato Head, Green aliens, Hamm ( Dr. Evil Porkchop), Slinky Dog, Bo Peep, Lenny, Rocky Gibraltar, Etch, Mr. Spell, Ducky (Sid’s toy), RockMobile, Mrs. Potato Head, etc.  Further, other characters like Ken, Lotso, Bad Buzz, Big Baby, Dolly, Spanish Buzz, Chatter Telephone, Forky, Peas, Ducky, Bunny, Giggle Mcdimples, Duke Caboom, Gabby, Gabby, Benson, RollerBob, Funky Munk, Condor Man, DJ Blue Jay, Lizard Wizard, Pizza Bot, Taikwon-doe, Neptuna, and Koala Copter have been known to have a wide range of character merchandise sold on both online and office platforms.

From The Jungle Book movie

Characters like Mowgli, Baloo, Shere Khan, Kaa, King Louie, Akela, Raksha, Bagheera, Ikki, Rocky the Rhino, Winnifred, etc. have been known to have a wide range of character merchandise sold on both online and office platforms.

From the Extreme Ghostbuster series

Characters like Egon Spengler, Janine Melnitz, Eduardo Rivera, Roland Jackson, Garrett Miller, Kylie Griffin, Slimer, etc. have been known to have a wide range of character merchandise sold on both online and offline platforms.

From the South Park series

Characters like-

1. The four boys,  also known as the Broship, namely, Stan Marsh, Kyle Broflovski, Eric Cartman and Kenny McCormick. 
2. The Fourth graders- 

1. Butters Stotch, 
2. Wendy Testaburger,
3. Jimmy Valmer, 
4. Tolkien Black,
5. Jason White, inter alia, 

have been known to have a wide range of character merchandise sold on both online and offline platforms.

From variety of Disney Princess movies and series

Characters like:

1. Snow White, from Snow White and the Seven Dwarfs; 
2. Cinderella; 
3. Rapunzel; 
4. Briar Rose from “Sleeping Beauty”; 
5. Mulan; 
6. Moana;
7. Merida, from the movie “Brave”; 
8. Princess Jasmine, from “Aladdin”; 
9. Pocahontas, from the movie “Pocahontas”; 
10. Aurora, from Maleficent;
11. Ariel, from “The Little Mermaid”; 
12. Belle, from “Beauty and the Beast”; 
13. Raya, from “Raya and the Last Dragon”;
14. Tiana, from “Princess and the  Frog,” etc.,

have been known to have a wide range of character merchandise sold on both online and office platforms. 

From a variety of cartoon series 

Further, popular characters from cartoon series like Phineas and Ferb, Ben 10, The Simpsons, Rick and Morty, Dora the Explorer, the Flintstones, Scooby Doo, Where are you!, Paw Patrol, Johnny Bravo,  Dexter’s Laboratory, The Family Guy, Garfield, The Smurfs, My Little Pony, The Yogi Bear Show, Jonny Quest, Teenage Mutant Ninja Turtles, The Pink Panther Show, etc. have merchandise like fridge magnets, clothes, accessories, phone covers, pens, collectibles, and keychains.

Advertisements

I am sure most of you have seen commercials of the ‘Michelin Man’ or ‘Michelin Tyre Man’, the official mascot of the Michelin Tyre Company, who got so famous that the company started an online ‘Collectors Store’ that had its major focus on selling figurines, screen prints, and plaques. 

Definition of character merchandising in the US

As mentioned in a report prepared by the International Bureau and published by WIPO, the term character merchandising is defined as “the adaptation or secondary exploitation by the creator of a fictional character, by a real person, or by one or several authorized third parties, of the essential personality features (such as the name, image, or appearance) of a character in relation to various goods and/or services with a view to creating in prospective customers a desire to acquire those goods and/or to use those services because of the customers’ affinity with that character“. 

While understanding the aforementioned definition, a point must be noted that any individual or legal entity that will set up the merchandising activity, commonly said to be the merchandiser, will on very rare occasions also be the creator of the fictional character or the real person concerned. Also, the rights relating to the product (the IP) or the personality rights of the character will be the subject of contracts; the contracts could be:

1. Transfer agreements,
2. License agreements,
3. Product or service endorsement agreements, inter alia. 

These contracts help all parties to the agreement be considered authorized users of the merchandise in question.

Examples of character merchandising

The following are some examples of character merchandising-

1. A McDonald’s Happy Meal toy or a normal three-dimensional reproduction of the functional character Mickey Mouse. 
2. A t-shirt with a printed image or name of the fictional characters, the Ninja Turtles.
3. A label attached to a bottle of perfume bearing the name ‘Alian Delon’. 

Brief history of character merchandising in the US

The concept of character merchandising appeared for the first time in the United States of America in the 1930s, when one of Walt Disney Studios’ employees, Kay Kamen, set up a department specifically for the secondary exploitation of Disney characters like Mickey, Minnie, Donald, etc., in Burbank, California. Astonishingly, those characters were successful in providing a huge number of licenses for the manufacturing and distributing of low-priced mass market merchandise like posters, clothing, toys, buttons, badges, drinks, etc.

Of course, the idea of secondary exploitation of the reputation of a character existed even before the 20th century, however, the reasons were not directly commercial. Like in Asia, the religious characters of ‘The Ramayana’ like Prince Rama, Vishnu and Sita, have for decades been represented in the form of sculptures, puppets, toys, etc. Further, in the 19th century, some industrialists, in order to popularize the products and goods they manufactured, came up with the decision to add fictional characters to them and generate secondary exploitation for functional or ornamental goods like decorative plates, clothing and accessories, clocks, puppets, etc., for instance, in France, the character Pierrot Gourmand (Windows famous mark for lollipops) or the Michelin Man of the tire manufacturing company.

Furthermore, it is somewhat assumed that the exploitation of literary characters began with the works of Beatrix Potter (her books, Peter Rabbit and Squirrel Nutkin, with the animal characters that became and still are manufactured and sold in the form of soft toys or other articles for children) or with the work of Lewis Carroll (Alice in Wonderland), the characters of which were also manufactured and sold as soft toys and later adapted into a motion picture cartoon.

This phenomenon witnessed rapid growth in the 20th century. In the 1950s, several personalities from the fields of politics, movies, show-business, etc., gave permission for reproducing their names or pictures on any piece of clothing (commonly known as ‘tie-in advertisement). Later in the 1970s and 1980s, there started the trend of setting up merchandising programs on the basis of renowned movie characters like Star Wars, E.T., or Rambo. Such programs caused a huge impact on the finances of the individuals doing this, for instance, in 1978, the Walt Disney Merchandising Division sold over $27 million in merchandise bearing the names or images of the famous characters designed in their studios. Another example could be Kenner Products selling over $100 million in 1979 in merchandise relating to the characters depicted in the movie- Star Wars.

With all such developments, there was also an expansion in the range of goods and services covered by merchandising. For instance, the USA now has at least 29 of the 42 classes of the International Classification of Goods and Services established by the Nice Agreement.

Instances of current trends in the field of character merchandising in the US

As of the current trend, ‘merchandising programs’, irrespective of whether or not they include the use of the renowned personality feature of a character, may encompass:

Universities

In the USA, there are several merchandising products of the University of California in Los Angeles being sold with the symbol U.C.L.A. and many more.

Organizations 

There are several organizations that follow the strategy of character merchandising, like-

1. The advertising campaign for Amnesty International in France, with the participation of famous film actors, 
2. The merchandising of products that represented a panda by the World Wide Fund for Nature (WWF), inter alia. 

Sports events

Sports events’ merchandising like the Olympics’ adorable 2018 Winter Olympics and Paralympic Games mascots, Soohorang and Bandabi.

Social events

The strategy of character merchandising is also followed in social gatherings, take for instance, the wedding of Prince Charles and Lady Diana in the United Kingdom

Art exhibitions

The strategy of character merchandising is also followed in art exhibitions, take for instance, the merchandising of the images of Van Gogh or Toulouse-Lautrec; or the natural events merchandising in connection with Halley’s Comet, or some scientific event, like when the comic strip character, Snoopy, was the mascot of the first American astronauts.

Personalities

The strategy of character merchandising is also seen in personalities in several fields of activity, ranging from actors, pop stars to sportsmen, etc., wherein the names and images of these personalities are reproduced on various goods, packaging, documents, or other material.

Advantages of character merchandising in the US

Character merchandising can come with a lot of advantages for the parties involved. Some of the advantages are as follows: 

1. Firstly, the added appeal helps in enriching the sales of goods and services.
2. Secondly, it helps the organizations venture into new markets and earn and generate additional revenue. 
3. Thirdly, it is quite an efficient way for brands to improve their brand value and image.
4. Lastly, with a wide range of products that feature an individual’s favorite character(s), he/she is likely to have been spoiled, thus generating more revenue for the companies focused on such products. 

Prevalent issues in following the strategy of character merchandising

The following are some of the issues faced by companies and individuals that have utilized this new method of business promotion:

Issues related to personality rights

Usually, every state law has two main personality rights that have to be provided to every citizen and are enjoyed by every citizen, namely: 

1. Right to privacy, and 
2. Right to publicity. 

On one hand, there is a belief that any unsanctioned, accredited usage of an individual’s likeness results in invading such a person’s right to privacy; on the other hand, there is this belief that a celebrity, upon becoming a renowned public personality, loses his/her right to privacy. Thus, if any celebrity engages in any sort of public affairs and that action attracts the attention of the local public, in such a case, it can be said that he consented to the publication of his figures and actions relating to his public life.

Issues related to copyright

As a general rule, the author of the work is the owner of the copyright unless another person commissions the work. In the case of a cinematographic film, the producer of the film is considered to be the author of the film. However, in cases where an actor plays the character, it may not be possible to exploit all the elements of the character without the actor’s consent. It is argued that the actor also invests his/her labor and efforts to create this persona and should be sufficiently rewarded to be incentivized to contribute further to society, which is the basic principle that drives the notion of IP. This is another conflict dealing with who is the owner of copyright over the character depicted.

Generally, the author of the work is the owner of the copyright, unless the same is commissioned or financed by another individual. Further, the producer is said to be the author of the film, in the case of a cinematographic film; however, in cases where a character is being played by a certain actor, it is not feasible to exploit all the elements of the character without obtaining prior consent from the actor, thus, it is said that the actor should be rewarded properly in such matters. The reason for the same is that the authors, too, put in their time, efforts, and labor to build the personality and must definitely be rewarded for the same. This is the fundamental principle of IP law. 

Issues related to trademarks and passing off

In general terms, a trademark is used to determine the origin of goods or services. Using any registered trademark without obtaining prior permission from the original owner will constitute a copyright infringement on the rights of the owner who actually owns the goods or services. Further, in cases where a trademark is not developed, the original owner can seek redress by seeking the common law remedy of passing off. 

Must note: Passing off is a common tort that can be used to execute rights relating to unregistered trademarks. The first is passing off, which safeguards the goodwill of a trader from misinterpretation. The term ‘passing off’ refers to the law of passing off, which prevents a trader from misinterpreting goods or services as being goods or services of another. It also prevents a trader from holding out his or her goods or services as having some association or connection with another when this is false. 

Thus, it is the trademark that drives the product into the market. Similarly, associating the name of a celebrity with a product lends credibility to the product as consumers have faith in such personalities, and thus this move acts as an opportunity to reassure the customers that the product is useful and effective. Here, it is not easy to figure out whether it is the brand name or the celebrity association that has a remarkable impact on the success of the merchandise. 

Issues related to contracts and agreements

In matters where both the copyright owner and the celebrity are allowed to carry out activities relating to merchandising, the chances of an endorsement dispute rise. 

Counterfeit goods and privacy

Nowadays, consumers barely check the authenticity of the source of the products they are buying that feature their favorite characters. Further, there has been quite a surge in the making and selling of fake merchandise lately, and this is definitely a growing cause of concern for licensors and creators. 

Moreover, to tackle such issues, companies have now begun to set up anti-piracy teams to keep an eye on the online and offline markets. Some companies, as another precautionary measure, have set up independent investigation agencies to ensure no such issues of piracy or fake merchandise arise. 

Issues related to infringement of personality rights

The right to privacy as a common-law right is widely known in the USA. There is proper statutory protection for publicity/personality rights in the United States. Let us have a look at one of the most eminent cases that helped influence the development of privacy laws in the USA. 

Norris v. Moskin Stores (1961)

Facts of the case

1. In the case of Norris v. Moskin Stores, Inc., 272 Ala. 174, 132 So. 2d 321 (Ala. 1961), the plaintiff Nealus Norris sued Moskin Stores, the defendant employer, and Morris Nathan, the employee of the defendant, for the following reasons: 

1. Invading his privacy,
2. Intentionally interfering with his marital relations, and
3. Slander. 

2. The plaintiff owed some amount of money to Moskin Stores, Inc., the defendant in this case. 
3. So, in order to recover the debt, Moskin employed Morris Nathan. Nathan’s agent, as a strategy to collect the debt, called the family members of Norris and fraudulently claimed that her name was “Dorris” and that Norris and she had an affair, and during that period he (Norris) impregnated her, and that Dorris had to find out where exactly Norris was! 
4. Hearing this, the plaintiff’s wife obviously separated temporarily, and their marriage was strained until the truth came out. 
5. When Norris came to know about this act, aggrieved by such an odious strategy, he sued Moskin for invading his privacy, reason being, the phone call by Dorris embarrassed him, destroyed his marriage, and caused him a lot of mental stress.
6. However, the Trial Court first dismissed the lawsuit as Norris had failed to give a reasonable explanation for infringement of his privacy. Norris then appealed to the Alabama Supreme Court to seek redress. 

Judgment by the Court

1. Upon appeal, the case reached the Supreme Court of Alabama.
2. The Supreme Court reached the inference that there is a prima facie case of infringement of privacy when the actions of a debt collector are abhorrent and mortifying to an individual of ordinary sensibilities.
3. Since Norris had elicited sufficient questions of fact in relation to the defendant’s activity or strategy of collecting debt, a prima facie claim for infringement of privacy was valid, and the dismissal of the suit by the trial court was inapt. 
4. The Supreme Court, while giving its verdict, stated that the mere efforts of a creditor to collect debt cannot be considered to be wrongful and actionable intrusion and that a creditor indeed has the right to take “reasonable actions” to collect the debt, but the action should not be something that would outrage the debtor, like the occurrence in this very case where the plaintiff almost broke down his marriage, amongst suffering other issues. 
5. The Court further stated that what exactly would be regarded as “reasonable actions” would depend upon several factors. In this case, the Court looked at the following three factors:

1. Was there any systematic harassment?
2. Was the plaintiff humiliated publicly?
3. Was there a reasonable nexus between the action taken and the collection of the debt? 

The Court found the third factor missing in this case. 

6. To sum up the judgment, the Court affirmed that there is a valid cause of action for infringement of privacy when a creditor’s obtrusive actions are unreasonable or do not bear a reasonable relation to the motive of collecting the debt thus owed. 

Must note:

It was in this case that the Supreme Court established that the tort of infringement of privacy consists of the following acts: 

1. The interference upon the plaintiff’s physical solitude or seclusion;
2. The publicity which breaches ordinary decencies;
3. Putting the plaintiff in a false, but not necessarily defamatory, position in the public eye; and
4.  The appropriation of some element of the plaintiff’s personality for commercial use.

Character merchandising in the US : a brief overview

To promote their products, several companies or brands in the US have been engaging in the lucrative business of character merchandising. The use of the characters in the US is governed by a complex set of laws and regulations, including trademark law in the form of the Lanham Act of 1946, the Copyright Act of 1976, and the right of publicity. 

Beside these laws, there are various tests and doctrines governing character merchandising in the country, some of which are codified while others have been evolved by the courts over time through various judicial pronouncements. 

Reasons for growth of character merchandising

Character merchandising has revolutionized marketing strategies and grown rapidly with the advent of technology and the internet. This has made it accessible to a larger audience through various mediums, including social media, television, and radio. People , especially children, emotionally connect with their favorite characters on everyday objects, creating a feeling of oneness and leading to increased sales. Additionally, character merchandising can be used as a marketing tool to increase the popularity and viewership of a movie or web series, even among those who may not be familiar with the characters or actors involved.

Importance of character merchandising

One of the primary benefits of character merchandising is the brand recognition and increase in brand awareness that come with it. This is because people start associating the characters with the brand and vice versa. The further benefit lies in fan engagement and revenue generation. At last, through the concept, one can be involved in cross-promotion and earn significant revenue.

Different types of character merchandising

Character merchandising has developed gradually from a secondary source of commercial exploitation operated by the entertainment industry to a primary tool for the purpose of running a business and to generate revenue and/or gain profits. For properly understanding the scope of character merchandising, it is crucial that one study the different types of character merchandising. Let us begin, shall we?!

So, there are broadly three types of character merchandising, all of which have been discussed in great detail below:

Fictional and cartoon character merchandising 

This type of character merchandising uses the fundamental or chief features of a fictional character’s personality to advertise or market goods and services. This involves cartoon characters or characters from artistic or literary works. The features of characters’ personalities may involve voice, name, appearance, image, etc. The potential for profit through fictional merchandising is huge. This is because fans of a particular movie or a particular character in a movie love to express their love for them by buying related merchandise.

Further, it is pertinent to note that the most popular merchantable characters ever created were those of cartoon characters, and they can also be deemed to be the oldest considering the context of Walt Disney Studios (discussed above) selling just merchandise in the 1930s. Ever since then, characters like Mickey Mouse, Winnie the Pooh, Disney Princesses, etc., have marked their presence in the world of merchandise. Additionally, literary work, being one of the largest sources of cartoon and fictional characters, has paved the way for merchandise featuring a wide range of characters, including Peter Pan, Pinocchio, Garfield, Alice in Wonderland, and Archie, inter alia. Moreover, the very famous comic series Tintin, created by the renowned Belgian cartoonist Georges Remi (Hergé), received a lot of love and admiration from the readers when it was first published in 1929 in a Belgian newspaper. This comic strip was subsequently made into movies and television shows, along with being used as Belgian postage stamps and, amusingly, Euro coins as well.

Interesting fact : One of the most interesting characters for merchandise was born from the artistic works of Leonardo Da Vinci. It was none other than the very renowned painting of the “Mona Lisa” that received world-wide fame and was subsequently used as merchandise, especially apparels. 

Cinematographed films, too, have played a major role in developing character merchandise. This involves popular movie characters like Kung Fu Panda and Nemo. 

Personality merchandising

The term ‘personality merchandising’ is also known as ‘reputation merchandising’. It can be described as the usage of famous personalities, mostly celebrities and sports personalities, to improve marketing standards. This is one of the most common forms of character merchandising, wherein famous actors or celebrities are used to endorse, advertise, or market goods and services. The actors are chosen because of their ability to influence the audience and their personality attributes, which are matched with the products they are given to endorse. We all see our favorite actors endorsing different brands through advertisements, and we all get excited to buy those products. That’s a perfect example of personality merchandising. This is a strategy used by brands to make people buy even those things they would not have wanted to buy if the celebrity endorsing them had not been there. 

In this process, as consumers become familiar with famous personalities and relate to their relative products on a deeper level, they tend to buy more products that form a part of such a celebrity’s lifestyle. What these advertising agencies and companies do is that they follow the process of personality merchandising by utilizing the name, image, voice, or other distinct character features of such renowned personalities in order to promote goods and services in the market. 

Some of the known brands of famous personalities include:

Kanye West

Kanye Omari West, a renowned American rapper, is also known as one of the most successful businessmen who has created and owned several successful companies. Some of the major brands that have been involved with Kayne over the years, include:

1. Yeezy, 
2. Yeezy Supply, 
3. DONDA, 
4. Good Music, 
5. KW Foods LLC, 
6. Yeezy Home, and 
7. KKW Beauty.

Kate Hudson

Kate Hudson’s love for moment/workout made her establish a brand named ‘Fabletics’. She has also launched King St. Vodka and InBloom nutritional powders, amongst other merchandise.

Britney Spears

Britney Spears, an American singer-songwriter, occasional actress, and author, has a  wide range of exclusive merchandise and apparel, including hoodies, tee shirts, accessories, fragrances, etc., all of which can be accessed from the Britney Spears Official Store.

Sarah Jessica Parker

The famous Sex and the City actress, Sarah Jessica Parker’s brand, SJP by Sarah Jessica Parker, has a wide range of products ranging from womenswear, housing, footwear, accessories to candles.

Lady Gaga

Lady Gaga, the famous American singer-songwriter has her own variety of unique, exclusive merchandise like t-shirts, earrings, bracelets, phone cases, birthday cards, mugs, Fame-fragrance, cupcake toppers, wall art, and other accessories.

Paris Hilton

Paris Hilton, one of America’s famous media personalities, also has her own line of merchandise. The products include tracksuits, hoodies, t-shirts, fragrances, amongst other accessories. Further, her store also has several items for pets, like dog collars, dog hoodies and sweaters, dog crowns, dog carriers, dog necklaces, cat crowns, cat harnesses, cat necklaces, etc.

Katy Perry

Katy Perry, an eminent American singer-songwriter also has her own merchandise store. The products range from t-shirts, lunch boxes, key chains, stickers, hats, glasses, face masks, etc. 

Kim Kardashian

Kim Kardashian, another American media personality, is also an entrepreneur, a social media phenomenon, and the founder and owner of several brands like KKW Beauty, KKW Fragrance, and the shapewear brand SKIM. She is known to have sold several fashion pieces, clothes, perfumes and fragrances. 

Taylor Swift

Taylor Swift, yet another American singer-songwriter also has an exclusive store that sells products like shirts, hoodies, accessories, music, mobile phone cases, mugs, etc.

Jennifer Lopez

Jennifer Lopez, another American actress, also owns a brand name called J.Lo., where a wide variety of products ranging from the latest merch, music, t-shirts, hoodies, accessories, perfumes, and fragrances are sold. 

Elizabeth Taylor

The late Elizabeth Taylor, a British-American actress, also has her own store where several products, including t-shirts, bracelets, earrings, necklaces, brooch pins, perfumes, home decor, posters, stickers, etc., are sold. 

Jennifer Aniston

Jennifer Aniston, an American actress, has her own hair care brand under the name LolaVie, where several hair care products like hair care oil, hair serum, etc. are put up for sale. 

Pharrell Williams

Pharrell Williams, an American record producer, too has his own line of clothing and the products include hoodies, sweatshirts, pants, shorts, etc. The biggest advantage of these clothing accessories is that most of them are gender-neutral. 

Jessica Simpson

Jessica Simpson, an American singer, has her own brand under her own name. This platform sells a lot of fashion products, ranging from shoes, clothing, swimwear, bridal wear, purses and handbags, jewelry, home decor and accessories, eyewear, activewear, etc. 

Selena Gomez

Selena Gomez, another American singer, established her very own makeup brand named ‘Rare Beauty’ in 2020. Further, Selena, who herself has struggled with her mental health issues, wanted to address this issue and create a level of awareness amongst people, and wanted to bring their attention to such issues. To aid in this process, 1% of her revenue goes to ‘Rare Impact Fund’, a foundation that tries to bridge the gap between the healthcare system and the sufferers of mental health issues.

Kelly Clarkson

Kelly Clarkson, the winner of American Idol, has her own furniture design store named ‘Kelly Clarkson Home’. 

Dr. Dre

Founded by Dr. Dre and Jimmy Iovine, came up with a brand titled ‘Beats’ which is one of the leading audio brands and sells several music accessories like headphones, earphones, speakers, and other premium sound entertainment systems. 

Millie Bobby Brown

Florence by Mills, a brand created by the British actress Millie Bobby Brown in 2019, also has a wide range of make-up and skincare products like lip sticks, beauty sets, serums, under eye gel pads, glow masks, etc. This brand makes donations to a charity named ‘Olivia Hope Foundation’ which carries out research and cures for childhood cancers.

Rihanna

Rihanna, one of the most famous singers, too, has a wide range of merchandise. Her store includes fragrances, t-shirts, hoodies,  beauty products, etc. Further, Rihana’s brand, ‘Fenty Beauty’ has numerous make-up products, especially for those with dark-toned skin. All makeup products, like highlighter, concealer, contour, etc., are available on the platform. She has also launched the aforementioned brand’s extension named ‘Fenty Skin’ where several skin care products for face as well as body that are vegan, cruelty-free, environmentally safe, and conscious were launched. 

Interesting fact : The brand name ‘Fenty Beauty’ is derived from Rihana’s surname – Fenty, which very few people are aware of, you, now being one of them! 🙂 

Image merchandising

This form of character merchandising is a combination of the first two forms. This is because it involves the use of the central features of fictional characters in a movie or TV show, which are played by real actors, to advertise or market goods and services. The essential features may include the dialogue of a functional character or its appearance or voice. In these situations, people start identifying the real actor with his fictional counterpart. 

Usually, the process of visualizing fictional characters is carried out by actors who play out their respective roles in cinematographic works. In these cases, the identification of the character is done by amalgamating the characteristics of the real life person along with those of its fictional counterpart. With the help of such merchandising, the public can effortlessly relate to their favorite character being portrayed in a particular way, thus helping to make and maintain a connection between the personality and the public. 

Some very famous examples of this include:

1. The role of Daniel Radcliffe in the character of Harry Potter in the Harry Potter series.
2. The role of James Bond being played by several actors over the years.
3. The role of Captain Jack Sparrow, played by Johnny Depp in Pirates of the Caribbean.
4. The roles of Sherlock Holmes and Iron Man played by Robert Downey Jr. 
5. The role of Hannah Montana, played by Miley Cyrus, inter alia. 

Such scenarios usually create a dual reputation for individuals, whereby the same individual develops a reputation of his own as well as carries the reputation of the character that is portrayed by him.

Interesting fact: Just like the above three, yet another type of character merchandising is identified, namely the merchandising of artistic works. These works comprise works of art that are used for products, like the artistic works of Leonardo da Vinci, especially the Mona Lisa, which is known worldwide and has several products and merchandise based on it, including some in museums across the globe.

Laws and regulations governing character merchandising in the US

The Lanham Act of 1946

The primary legislation governing trademarks in the US is the Lanham Act of 1946. Section 32 of the Act establishes civil liability for trademark infringement, which arises when someone uses a trademark that can lead to consumer confusion, misunderstanding, or deception. Further, Section 43(a) of the Act establishes civil liability for misleading advertising, which may apply to character merchandise if exaggerated claims are made regarding a product’s quality or nature.

The Copyright Act of 1976

The main federal statute governing copyright in the US is the Copyright Act of 1976. The exclusive rights of copyright holders, including the ability to reproduce, distribute, and exhibit their works, are outlined in Section 106 of the Act. Further, the factors that can be used to determine whether the use of a copyrighted character is fair use are provided under Section 107.

The Federal Trade Commission Act of 1914

A federal statute that addresses both consumer protection and advertising control is the Federal Trade Commission Act, 1914. Deceptive and unfair conduct or practices in or affecting trade are prohibited under Section 5 of the Act. False or misleading advertising falls under the purview of the Federal Trade Commission (FTC), which may be important in character marketing if false or misleading claims are made about a product.

The Digital Millennium Copyright Act, 1998

Online works that are copyrighted are protected by the DMCA of 1998. For internet service providers that host user-generated content, such as social media platforms, the legislation sets liability restrictions. The Act also stipulates that infringing content must be reported and removed, which may apply to character merchandise if unlawful content is put online.

Overview of the legal framework governing character merchandising in different states of the US

California

California has the California Right of Publicity Act (CRPA) of 2020, which comprehensively covers the right of publicity. The state also gives recognition to the common law right of publicity, which is enforceable even after the death of the concerned person. Further, the provision regarding California Celebrities Rights regulates the commercial use of a celebrity’s name, image, likeness, and signature and imposes both civil and criminal penalties for the unlawful use of a celebrity’s identity.

Nevada

The law of Nevada prohibits the use of a person’s picture, name, likeness, and other personal characteristics for commercial purposes without their consent. Interestingly,  the state’s law also permits people to transfer their rights of publicity to a trust, which could help administer and safeguard those rights after their death.

New York

Character merchandise in New York is primarily governed under Section 51 of the New York Civil Rights Law, the state’s right of publicity statute. This law gives people the power to limit how their name, picture, likeness, and other identifying characteristics are used for commercial purposes. This right applies to both living and deceased people, and it may be used by the person themselves, by their heirs, or by their estate.

Tennessee

Tennessee recognizes a common law right to publicity, but the state has a special way of defining when a claim can be brought. Regardless of when the cause of action arose, under Tennessee law, the right to publicity expires at the end of the person’s life plus ten years. This means that a claim can only be made by a deceased’s heirs or estate ten years after the deceased passed away.

North Carolina

A common law right of publicity is recognized in North Carolina, and common law remedies like damages and injunctions can be used to enforce this right. Further, the False Advertising Act of 2005 specifically forbids false or deceptive advertising in addition to the right to publicity, which can be used if exaggerated claims are made about the nature or quality of a product.

Development of various tests to determine the copyrightability of fictional characters

In the US, fictional characters have been subject to copyright protection since 1930. To determine the copyrightability of fictional characters, courts have developed various tests through various judgments that have come before them. 

The judgments and the tests pronounced therein are described below in detail:

Character delineation test

Through the landmark judgment of Nichols v. Universal Pictures Corporation (1929), Judge Learned Hand gave the character delineation test. As per the test, a character will be entitled to a certain level of protection provided the author has built the character with certain details that are sufficiently original. This means that the distinctiveness of a character can help make it entitled to a greater degree of protection. 

The brief facts of the given case are that an author of a play called “Abie’s Irish Rose” claimed that her copyright over a fictional character had been infringed by a film called “The Cohens and the Kellys.” The issue revolved around the determination of the copyrightability of fictional characters. Applying this test to the case, the court held that the defendants were not liable for the copyright infringement, giving the reasoning that the characters in the play were not sufficiently developed and were ones that often appear in literature and thus were not copyrightable.

Story being told test

This test replaced the previous standard and was given by the US courts in the case of Warner Bros. Pictures v. Columbia Broadcasting in 1954. As per the test, the concerned character is eligible for copyright protection only when it is imaginable that the character constitutes the story being told. It means that to be granted protection under copyright laws, the story has to revolve around the concerned character. This test raised the standards for proving copyright infringement before a court of law. It is pertinent to note that courts focused on the prevention of the monopoly of an author over a particular character to promote the imagination and creativity of authors, provided such a character fulfills the standard laid down through this test.

Character delineation test v. story being told test

In Walt Disney Productions v. Air Pirates (1978), Walt Disney claimed that Air Pirates’ usage of its Disney characters in an underground counterculture magazine constituted a copyright violation. The Court acknowledged both the character delineation test and the story being told test but ultimately decided that if the characters are visually depicted, it suffices to clearly define them and that the story being told test is therefore unnecessary. Thus, the conclusion drawn was that fictional characters are protected under copyright law.

A three-pronged test 

In another case, DC Comics v. Towle (2013), the defendant, who was selling cars and advertising them as Batmobiles, was held liable for copyright infringement of the Batman series Batmobile. The Court found that the main character constitutes a major part of art and is therefore entitled to copyright protection. To decide the appropriateness of the application of protection of copyright to characters’ fictional in nature that appear in films, books, and TV shows, what was applied was another interesting standard, i.e., a three-pronged test. 

As per the test, the character must:

1. possess both physical and intellectual qualities
2. be sufficiently identified or developed
3. be particularly distinctive and contain some special components of the expression

Product liability under character merchandising

Product liability under character merchandising makes a producer, distributor, manufacturer, or any other person who is the producer of the goods concerned liable to the public for any injury caused to them due to that product. In the US, some courts have also imposed liability on licensors through the application of the theory of apparent manufacturer. 

Theory of apparent manufacturer

The apparent manufacturer doctrine seeks to impose liability on the licensor of a trademark because of his significant contribution concerning the manufacture, distribution, or design of a product. This also involves putting the product in the marketplace. In other words, as per the theory, where the licensor permits the use of a mark that symbolizes his goodwill and exercises control over the quality of the goods, it serves as a signal to consumers that the items are of sufficient quality. However, his chances of being held accountable are lower where there is sufficient evidence that the licensor is not the manufacturer of the goods.

Please note: It may also held persons who are neither the manufacturer of the product nor trademark licensor, if they are somewhat related to the manufacturer, such as in marketing, labeling and advertising, etc.

Right of publicity in the US

The right of publicity is a precious right in the US that is protected largely by statutory law or state common law. Through the right, one can claim protection from unauthorized use of a person’s or character’s likeness, name, or other aspects that are identifiable. In other words, the right gives one the exclusive right to license of using and exploiting their identity for commercial purposes. Though the right extends to a person’s identifiable voice, the right is limited in the sense that it is not “descendible” in some states of the US.

The right to publicity is one of the most interesting and informative rights one can examine and refer to when it comes to the protection given to the names and faces of celebrities in the United States in various matters relating to unwanted or unauthorized use of their face or name. Usually, in order to safeguard one’s rights, the right to privacy is invoked by such individuals, as held in the case of Pavesich v. New England Life Insurance Co. et al [122 Ga. 190 (Ga. 1905)]. Let us take a look at this case in detail. 

Pavesich v. New England Life Insurance Co. (1905)

Facts of the case

1. In this case, it was contended that the defendant, New England Mutual Life Insurance Company (NEMLIC), used the photo of the plaintiff, Paolo Pavesich, in a newspaper advertisement that endorsed some life insurance.
2. In the advertisement, there were some statements falsely implying that Pavesich encouraged people to get that life insurance from that particular organization (NEMLIC). 
3. Affected by the same, Paolo Pavesich brought a legal action against NEMLIC, a non-resident corporation, and some of its employees for libel and for breaching his right to privacy. 
4. The city court dismissed his complaint as the company, NEMLIC, presented a general demurrer, which was validated by the city court, and thus Pavesich appealed the dismissal and the judgment in the Supreme Court of Georgia. 

Issue of the case

The main issue in this case was whether, considering the circumstances of the cases, libel upon Pavesich was committed by the company, NEMLIC, and further, whether NEMLIC violated Pavesich’s right to privacy.

Rule to be noted in context with the case

The right of privacy of an individual, like every other right, rests in the hands of the individual. It may be waived by him or any other person who has consent to do so or by any individual that permits him/her to take such an action under the law, provided the effect of such a waiver will not be such as to bring before the general public any matters that are purely of a private nature that express law or public policy demands shall be kept exclusive. 

The waiver could be expressed or implied; however, the existence of the waiver carries with it the right to an infringement of privacy only to such an extent that may be legally crucial and apt while dealing with the matter of waiver of such rights. 

Answer to the issue of the case

The answer to the above question is a big yes. Let us take a look at why this is the case. 

Conclusion of the case

The Supreme Court of Georgia recognized the right to privacy as a legal right in this very case. Based on this inference, the Court held that NEMLIC’s action of publishing Pavesich’s picture in the newspaper for the purpose of gaining profits without obtaining his prior consent was indeed an infringement of his right to privacy and was a valid ground to seek remedy as per the law of the state. Additionally, the Court noted that Pavesich had never taken a policy from the insurance company, and this fact was known to everyone, including his friends and acquaintances. Thus, the words chalked up on the advertisement relating to Pavesich became untrue and libelous as they exposed him to contempt or ridicule. 

Final say

The Supreme Court of Georgia in this case held that commentators on ancient Roman and Greek laws recognized that the right of personal liberty included the right to exhibit oneself before the public at proper times and places and in a proper manner. As a corollary, this liberty encompassed the right of a person not to be exhibited before the public.

There is yet another case one must discuss while discussing character merchandising. Let us read about it. 

Haelan Labs., Inc. v. Topps Chewing Gum, Inc. (1953)

There is something definitely contradictory about referring to the right of privacy for well-known celebrities, usually in situations when their names and likenesses are oftentimes featured in newspapers, magazines, films, or on T.V. commercials, or the like. Which is why the US Courts have developed a ‘right to publicity’. This right was first recognized in the case of Haelan Labs., Inc. v. Topps Chewing Gum, Inc. (1953) by the United States District Court, E.D. New York, which was then appealed in the US Court of Appeals for the Second Circuit. Let us find out what exactly this case was all about! 

Facts of the case

1. In this case, two parties:

1. Haelan Laboratories, Inc., and
2. Some baseball players,

entered into a contract that provided the former to gain exclusive rights to feature the players’ photographs in their gum sales. 

2. As per the contract, none of the players had permission to give similar rights to any other gum manufacturing unit. Further, the company, Haelan Laboratories, had the right to extend the tenure as per its wish. 
3. However, another chewing company, named Topps Chewing Gum, Inc., which was actually a rival of Haelan Laboratories, persuaded the players to enter into an agreement that permitted the usage of the players’ photographs in connection with the sales of Topps’ gum either during the original or extended term of Haelan’s contracts.
4. After the signing of the agreement, Topps, having the authority to use the players’ photographs, featured it somewhere.
5. Aggrieved by the same, Haelan Laboratories filed a suit against Topps, claiming that the latter exerted its influence on one of the sports figures to infringe the contract signed between the player and Haelan and eventually market his photographs.
6. The District Court dismissed this suit filed by Haelan Laboratories, and thus an appeal was made in the US Court of Appeals for the Second Circuit. 

Issue of the case

The main issue in this case was whether or not the District Court made any mistake in dismissing the suit filed by Haelan Laboratories.

Rule to be noted in context with the case

Along with the right of privacy, an individual also has a right to the publicity value of his photographs. This right can be regarded as the right to publicity. It is not a fact unknown that several renowned personalities, like that of actors and sportspersons, far from having their feelings bruised through public exposure of their likenesses, would have the feeling of their rights being deprived to a huge extent if they did not receive money for authorizing advertisements, publicizing their countenances, and having their images displayed in newspapers, magazines, buses, trains, and subways. Thus, this right of publicity would generally not provide them with any income unless they were the subject of an exclusive grant that prohibited any advertising agency or company from featuring their images or photographs. 

Answer to the issue of the case

Yes, indeed, the District Court erred in dismissing the suit filed by Haelan Laboratories.

Conclusion

The US Court of Appeals for the Second Circuit overturned the dismissal of the suit and reassigned the matter to the District Court for a determination of the date and contents of each of Haelan’s contracts, whether Haelan exercised its option to renew, and of Topps’ or its agent’s conduct with respect to each such an agreement. Further, Topps was not liable for any infringement persuaded by a non-agent.

The Court, in this very case, recognized the right of publicity, which was in addition to the right to privacy, and also stated that this right to publication of an image could have been subject to exclusive rights contracts under New York law.

Final say

The Court set a precedent in this case by recognizing that a man has a right to the publicity value of his images, i.e., the right to grant the exclusive privilege of publishing them; this right was regarded as the right of publicity. 

Further, we must also note that the right of publicity has been justified by Dean William L. Prosser in an article written by him titled ‘Privacy’ and in a book on the subject of torts titled, ‘Handbook of The Law Of Torts’. He stated that the right of publicity is one of the four distinct kinds of privacy, namely appropriation for the defendant’s advantage of the plaintiff’s name or likeness, and that as opposed to the three other breaches of privacy, appropriation does not need the invasion of something confidential or secluded, merely the appropriation for the defendants benefit or advantage of the plaintiff’s name or likeness. There are some cases mentioned and discussed in detail below that highlight the complaints raised by famous personalities in order to prevent misappropriation of their names, faces, or images since 1953.

Instances of case laws on right of publicity in the USA

Palmer v. Schonhorn Enterprises (1967)

Palmer v. Schonhorn Enterprises, Inc. (1967) was one of the first cases where plaintiffs who were famous sportspersons sued a party for the authorized usage of their names and infringing on their right to publicity. 

Facts of the case

1. This case involves a complaint lodged by four famous and well-known professional golfers and members of Professional Golfers’ Association of America, namely Arnold Palmer, Gary Player, Doug Sanders, and Jack Nicklaus, to seek an injunction for the damages they incurred because of the usage of their names by the defendant, Irwin P. Schonhorn Enterprises, in a board game titled ‘Pro-Am Golf’.
2. Schonhorn only made around 50-100 copies, and despite the limited availability, the golfers somehow ended up getting one. 
3. This game board had names of 23 individuals (each being a renowned, internationally known professional golfer or a well-known personality) on each sheet of paper titled ‘Profile and Playing Chart’. 
4. Each of these papers contained names of these 23 individuals along with a short summary of them and additional accurate facts in context to their respective professional careers. 
5. Further, the cover of the box had a large lithographic drawing of a golfer completing his swing and of a caddy holding a golf bag in the presence of spectators. The cover of the box also had the caption: “PRO-AM GOLF GAME. 18 Championship holes. Profiles and playing charts of 23 famous golfers. Yardage ruler. Ball markers. Tee. Flag. Score cards. Dice. AS CHALLENGING AND EXCITING AS GOLF ITSELF.“
6. Out of these 23, four of them, being aggrieved by the same and having never given their consent to using their names and profiles by the defendant, filed a suit to sue the defendant. 
7. The plaintiffs requested that the information and their respective names be removed and be no longer associated with the board game, but the defendant denied the request, hence the suit.

Issue of the case

The main issue in this case was whether or not the defendant, by refusing to remove the names of the players from the board game, violated and continued to violate the plaintiffs’ right of privacy.

Rule to be noted in context with the case

The right to privacy has several definitions, one of them is “the right to be free from the unwarranted appropriation or exploitation of one’s personality”.

Answer to the issue of the case

Yes, the right to the defendant, by refusing to remove the names of the players from the board game, did violate and continued to violate the plaintiffs’ right of privacy.

Conclusion

1. The defendant, in this case, recognizes the existence of the right of privacy but does not agree that he has violated the right of privacy of the plaintiff by using their names in the board game. Further, the defendant claims that the right of privacy is waived off by the plaintiffs considering their renowned athlete status, which deliberately invites publicity in order to enhance their career. 
2. However, the Superior Court of New Jersey inferred that the defendant, Schonhorn Enterprises, indeed violated the golfers’ right of privacy as it did not explicitly seek prior permission from the golfers.
3. The Court further affirmed that “a person is entitled to relief when his name has been used without his consent, either to advertise the defendant’s product or to enhance the sale of an article.”

Final say

The Court, in this case, by asserting its point of view that news and information are spread through newspapers and books, indirectly referred to board games as merchandise. 

Grant v. Esquire Inc. (1973)

Facts of the case

1. In  Grant v. Esquire, Inc. (1973), actor Cary Grant sued a magazine titled ‘Esquire Magazine’ for publishing a picture in the same magazine.
2. The image consisted of Cary Grant’s face; however, the body was of a different model. The model was wearing a cardigan sweater-jacket. 
3. Now, Cary Grant had originally agreed to pose for some photographs back in 1946 for an article in the same magazine but did not give any consent in 1971 for using his images, yet again.
4. Aggrieved by this, Grant filed a suit against Esquire on the grounds that his right of publicity had been violated.
5. The plaintiff here asserted that the 1971 Esquire article that used his name and picture gave rise to three causes of action, namely:

1. Libel,
2. Invading his statutory right of privacy, and 
3. Violating his right of publicity. 

Issue of the case

The main issue in this case was whether or not the re-usage of Cary Grant’s picture shot for a 1946 article without his consent in a 1971 publication in the same magazine was a violation of Cary Grant’s right of publicity and that whether or not the defendant used his likeness for legitimate commentary or for commercial purposes.

Rule to be noted in context with the case

In accordance with § 51, the right of publicity is defined as the use of any individual’s name, portrait or image for advertisement or trade purposes within New York State, without obtaining prior written consent from that individual, which may attract a punishment or action by the Supreme Court of the state against the person, firm, organization, or company that used the individual’s name, portrait, or image. Such an act would attract a suit for recovery of damages for any injuries thus sustained by the plaintiff considering such a usage.

Answer to the issue of the case

Yes, Cary Grant’s picture shot for a 1946 article without his consent in a 1971 publication in the same magazine was no doubt a violation of Cary Grant’s right of publicity, and that the defendant used his likeness for legitimate commentary or for commercial purposes.

Conclusion

Here, the Court inferred that the defendant is entitled to get protection against the images used for commercial purposes without his approval and that it is up to the court to determine whether the defendant used Grant’s picture for legitimate commentary or for commercial purposes. The Court further said that if the defendant is found guilty of using Grant’s likeness discreetly for commercial purposes, then Grant would be entitled to punitive damages. The Court dismissed the claim for libel by Grant but allowed the remaining claims based on § 51 of the New York Civil Rights Law and the common law “right of publicity.”

Further, it was in this case that the Court discussed the importance of protecting First Amendment rights and the restrictions on courts while levying sanctions or relief that could impede one’s right to free speech. 

Final say

The Court in this case discussed the importance of First Amendment rights while also providing the aggrieved party with relief for his claims.

Martin Luther King, Jr., Center for Social Change, Inc. v. American Heritage Products (1982)

Facts of the case

1. In the case of Martin Luther King, Jr., Center for Social Change, Inc. v. American Heritage Products, Inc (1982), the plaintiff, Martin Luther King, Jr., Center for Social Change (Center), filed a suit against American Heritage Products (AHP), the defendants, as they advertised and offered for sale a bust of Dr. Martin Luther King, Jr.; these statues were used as a funeral accessory. 
2. The defendants, James E. Bolen and James F. Bolen, on behalf of AHP, asked the plaintiff to join hands and work with them on the project, but the plaintiff refused to do so.
3. Even after the refusal, Bolen decided to go for the idea and thus pursued and hired an artist to prepare the mold. Bolen also hired an agent to go about with the promotion of the statute. 
4. The advertisement for the statue had a line asserting that a part of one’s order would go to the King Center for Social Change. Further, the advertisement also had a ‘free’ offer of getting a booklet depicting the life of Dr. King titled “A Tribute to Dr. Martin Luther King, Jr.”
5. Aggrieved by all such activities, the plaintiff filed for an injunction in the Supreme Court of Georgia, thus appealing that the sale and promotion of such a bust statue be ceased, for it violated Dr. King’s right of publicity. 

Issue of the case

The main issue in this case was whether the ‘right of publicity’ recognized explicitly in the state of Georgia as an exclusive right, was any different from the ‘right of privacy’.

Rule to be noted in context with the case

In Georgia, any activity of appropriation of an individual’s name and likeness, irrespective of the fact that this likeness is/was a photograph, an image, or a structure, and that such an activity was carried out to receive financial gains or profits, will constitute a tort. It will not matter whether the person whose name and likeness are thus used comes under the category of a private citizen, an entertainer, or a public figure who is not a public official.

Answer to the issue of the case

Yes, the ‘right of publicity’ recognized explicitly in the state of Georgia as an exclusive right, is indeed different from the ‘right of privacy’. 

Conclusion

In this case, the Supreme Court of Georgia inferred that the right of publicity was different from the right of privacy. The Court, inter alia, asserted the rule discussed above in brief, that any activity of appropriation of an individual’s name and likeness, irrespective of the fact that this likeness is/was a photograph, an image, or a structure, and that such an activity was carried out to receive financial gains or profits, will constitute a tort as stated under the state law. Further, the Supreme Court in Georgia also affirmed that the right of publicity did survive the demise of its owner and that there was, moreover, no reason to safeguard the right after demise only for those who had taken commercial advantage of their fame during their lifetime.

Final say

Here, the Court rightly ceased the sale and advertisement of Dr. King’s statues.

Besides, in the case of State ex Rel. Elvis Presley v. Crowell (1987), the Court of Appeals of Tennessee, Middle Section, at Nashville, held that the right of publicity was not inheritable. The California Supreme Court took the same approach in the case of Lugosi v. Universal Pictures (1979). In this case, the widow of Bela Lugosi, who played the role of Dracula, sought to restrain Universal Pictures from granting additional licenses merchandising Lugosi’s portrayal of Dracula on the grounds that she had inherited those rights that were not contracted to Universal Pictures when the movie was made. 

In these cases, both courts were worried about the issues that would arise if there was a right of publicity even after the demise of the person. Some instances of these issues were:

1. How long would the right of publicity survive? 
2. Should the right be devised by will a second time?
3. What would happen if an artist painted a likeness of a famous person to hang in public places and was paid for it? 
4. Would this amount to a breach of the right of publicity?
5. Does the right of publicity extend to elected officials and military heroes whose popularity was attained on the public payroll?
6. Does the right of publicity restrict the naming of subdivisions after famous people? 

It will be interesting to see further debate on this issue. In addition, while talking about case laws on the right of publicity in the USA, it is not possible to not mention the famous case of Carson v. Here’s Johnny Portable Toilets, Inc. (1980). Let us take a look at this interesting case in detail. 

Carson v. Here’s Johnny Portable Toilets, Inc.

Facts of the case

1. In this case, the host, entertainer, and star of ‘The Tonight Show’, Johnny Carson, also the Plaintiff, was introduced with the phrase “Here’s Johnny”. 
2. This method was introduced and used in 1957 by the plaintiff and further licensed in 1967 by the plaintiff to a chain of restaurants. Furthermore, the plaintiff licensed the company Johnny Carson Apparel, Inc., the right to use the phrase for clothing in 1970. However, this phrase was never registered as a trademark. 
3. In 1976, the defendant launched ‘Here’s Johnny Portable Toilets’, and used the phrase “Here’s Johnny! World’s foremost commodian, Portable Toilet Co. Inc.” for portable toilets. The defendants, in this case, were a company engaged in the business of renting and selling portable toilets and were well-aware of the introductory slogan used on Carson’s show, yet went on using the catchphrase for their product. 
4. Very soon after the defendant started his venture in 1976, the plaintiff sued him for the following reasons:

1. unfair competition, 
2. Infringement of trademarks under federal and state law, and 
3. invasion of privacy and publicity rights. 

5. The plaintiff sought damages and pleaded for an injunction, thus restricting the usage of the catchphrase “Here’s Johnny” as a corporate name or to boost the sale or rental of portable toilets. 
6. The US District Court for the Eastern District of Michigan dismissed the complaint which was later overturned by the United States Court of Appeals, Sixth Circuit.

Issue of the case

The main issue in the case was whether there was really any unfair competition on the part of the defendant. The second issue was- did the defendant infringe the right of publicity of the plaintiff in this case?

Rule to be noted in context with the case

The test for equitable relief under § 43(a) of the Lanham Act, 15 U.S.C.S. § 1125(a), is the “likelihood of confusion” standard. The courts have approved the balancing of various factors in reaching an inference of whether a likelihood of confusion exists among consumers of goods involved in a § 43(a) action. Such factors include the following:

1. The strength of the plaintiff’s mark; 
2. The relatedness of the products; 
3. The similarity of the marks; 
4. The evidence of actual confusion; 
5. The marketing channels used; 
6. The likely degree of purchaser care; 
7. The defendant’s intent in selecting the mark; 
8. The likelihood of expansion of the product lines. 

Answer to the issue of the case

The answers to the issues are no and yes.

No, there wasn’t really any unfair competition on the part of the defendant and yes, the defendant infringed the right of publicity of the plaintiff in this case

Conclusion

1. The United States Court of Appeals, Sixth Circuit, inferred that the test for relief under the Act and Michigan common law for unfair competition was the likelihood of confusion standard.
2. The Court stated that the plaintiff was not successful in establishing a likelihood of confusion and that his claim that his right of publicity was infringed was not supported by any law or the facts. 
3. Nonetheless, the Court held that the plaintiff’s right of publicity was infringed in this case as celebrities had the right to safeguard their financial interests when it comes to the commercial exploitation of their identities, and that if their identities were exploited commercially, there had been an infringement of their rights irrespective of whether or not their names or likeness were used. 
4. The Court also stated that the district court’s idea of the right of publicity is too narrow and that Carson’s identity was exploited even though his name was used directly in the picture.

Final say

The Court rightfully granted an injunction to Johnny Carson on the grounds that his rights of publicity were being infringed as Carson’s catchphrase ‘Here’s Johnny’ had become his trademark. Further, the usage of the phrase “the world’s foremost commodian” was a clear appropriation of his personality, as the defendant used it for gaining profit by using such a phrase.

Criticism of doctrines and tests regarding character merchandising in the US

The problem with the “distinctly delineated” and “story being told” tests is that they lack a clear structure, which further causes discrepancies and ambiguity over their applicability.  This is due to the fact that both tests demand that judges make subjective decisions regarding the literary value of characters and whether or not they are sufficiently defined to be protected by copyright. Due to this subjectivity, each issue involving character protection has to be resolved on an individual basis. 

Further, the specific problem with the “story being told” test is that it focuses on imagining a narrative without a storyline and with the sole purpose of focusing on the characters. Moreover, the three-pronged test has been facing criticism over the years because of its failure in American law to simplify the present state of jurisprudence regarding the determination of the copyrightability of fictional characters. At last, the right of publicity has also faced criticism for being too wide and allowing individuals to control the use of their likeness beyond what is reasonable, potentially suppressing free speech and artistic expression. The originality requirement under copyright law has also been criticized for establishing a low standard for copyright protection.

Trademark licensing in character merchandising

Character licensing is when the licensor, i.e., the owner of a copyrighted and/or trademarked property, grants a license to the licensee, i.e., another entity seeking the license to use the copyrighted and/or trademarked property of the licensor, after both agree upon certain conditions by entering into an agreement with a licensee. This agreement, when entered into for the purpose of merchandising, becomes a “merchandising licensing agreement.”

Licensing agreement under IP law

A licensing agreement can be defined as a legal agreement between the owners of any product or intellectual property that provides specific rights to a third party in exchange for money and royalty fees. Under this agreement, the licensor has to mention how the licensee shall or shall not make use of the IP that he/she has acquired through the agreement with the licensor. 

Further, licensing agreements can only take place when parties have significant intellectual property. The right to forbid others from using an IP for the purposes of obtaining profits comes with the ownership of a piece of IP. Moreover, for IP owners, licensing is beneficial since it enables them to earn an income from their assets by making them accessible to a licensor in exchange for a fee, without making amends to the ownership of the assets in question. Licensing is also beneficial to licensees as it allows them to save funds as they do not have to spend them on the development of the asset, thereby eliminating the risks associated with the same. 

You might wonder what exactly the terms licensor and licensee mean! Let us have a look at them in order to understand the subject of licensing agreements better. 

Licensor

A licensor can be defined to be an individual or entity that provides legal authorization to someone else to perform certain restricted activities. Some instances of licensor include:

1. A new program designed by a software company and licensed it to other organizations to utilize it for their benefit.
2. A musician licensing his/her music to a movie producer to be used in one of his films.
3. A pharmaceutical company licensing its patents to such other companies to create and sell generic versions of their drugs. 
4. A franchisor licensing its brand and business model to a franchisee who wants to open a branch in another location(s). 
5. An author granting publishing rights to a publication house and the right to distribute their book in exchange of a royalty payment. 

Licensee

A licensee can be defined as the party that gets the license. Licensees are granted limited rights or legal authorization by a licensor in the form of a licensee. Some instances of licensees are as follows: 

1. Individuals with a driving license,
2. Individuals having the license to practice law,
3. Individuals having the license to practice medicine. 

As an IP lawyer, one must try to create a balance between the interests of the licensee and the licensor.

What is a merchandise license agreement

A merchandise license agreement can be regarded as an agreement or a contract between two parties, likely:

1. The copyright holder of any material, and
2. An entity that wants to utilize the material for the purpose of gaining profits. 

Such agreements or contracts have details like:

1. The materials permitted to be used,
2. The duration for using such a material,
3. To what capacity is such a use permissible, 
4. The process and details of payments and schedules, amongst other things. 

Usually, licensing companies that are in the business of licensing merchandise focus their business on closing deals in relation to the merchandise license agreement. A few instances would be:

1. Band merchandise licensing, 
2. Apparel merchandise licensing, and
3. Publishing merchandise licensing.

One of the best-known instances of licensing would be the Disney-themed apparel and gifts and the official NFL (National Football League) jerseys.

Role of licensing agreements for character merchandising 

The major role of merchandising licensing agreements involves the protection of the rights of both parties while they seek to earn money in different ways. For instance, as a licensor, giving up the rights on his property to a third party could enable him to generate income from goods for which he may not have the necessary resources or market expertise. On the other hand, obtaining a merchandising license allows the licensee to earn profit from the property’s established value or popularity and use his connections in the marketing industry to drive significant sales.

Key terms, clauses and provisions that should be included in a merchandising licensing agreement

The key terms used in a licensing agreement can determine its scope, which can be further used by parties to reach a middle ground by having a win-win situation where no party goes back home unsatisfied. In light of this, discussed below are certain key terms and provisions that should be included in a merchandising licensing agreement:

Scope of the license

A license must have a broad scope, depending on the type of IP rights that are being licensed. The licensing agreement has to clearly mention the intellectual property that is being licensed. Further, a licensee can only grant those rights to a licensor that he/she owns by self. The licensee can grant all or some rights to the third party as they deem fit. Additionally, with the scope of the license and the agreement, it is crucial that one must also indicate the geographical location. 

Moreover, ‘sublicensing’ rights, if any, must be clearly mentioned in the license agreement, as well as whether or not they are included in the grant. The rights to sublicense can be applied to all the licensed rights or just a part of them; for instance, in several cases, a license was provided for using, modifying and selling the same work. Nonetheless, there are two major points that have to be included in the licensing agreement for any IP, including character merchandising, namely: 

Licensed product 

An IP license is regarded as a ‘licensed product’. 

Use

As defined by the licensee’s use of licensed IP, the term ‘use’. 

Nature of the license

It depends on the nature of the license as to whether it is exclusive, non-exclusive or sole. Let us discuss these terms further for a better and clearer perspective.

Exclusive

Exclusivity in a licensing agreement is when both parties to the contract sign it and the licensor approves that the intellectual property in question can be used by only one licensee, the party being the one that is signing the contract/agreement.

Non-exclusive 

Under this type of agreement, there can be more than one licensee for a single intellectual property under a non-exclusive license. This method has proven to be quite efficient and economical for the licensee. 

Sole

In this type of agreement, one licensee is agreed upon by the licensor, however, the licensor even then has the authority to persist on using their IP, as well.

Rights

In order to execute the rights that shall be created by the signing of the licensing agreement, it is crucial that the agreement mention the obligations of the parties for maintaining  the IP and all other pointers, like which party will take responsibility  for paying all the registration costs and the like. 

Furthermore, several contractual remedies, like-

1. monetary damages,
2. injunctions, 
3. other rational remedies, 

or a specific form of dispute settlement, can be used in the enforcement of rights like that of an arbitration clause.  

Rights transferred by the licensee onto the licensor

A licensee’s rights cannot be assigned to another person unless and until there is an explicit mention and crystal clear permission of the same in the license agreement. Further, to maintain control over who acquires the IP rights to a particular product, a licensor often resists free transferability of licensing rights by the licensees. Also, unless decided otherwise, it is crucial that all the IP agreements on character merchandising make an explicit mention that the licensee cannot assign the license to anyone else. 

Roles and responsibilities of each party 

The terms of the agreement must necessarily state the roles, responsibilities, and obligations of each party.

Geographical areas of interest 

It should be mentioned in the agreement whether or not the licensor wishes to restrict or provide rights to the licensee to sell products in certain geographic areas.

Length of license’s term

Most licenses have expiration dates or renewal clauses for activating, under which certain conditions could be put, such as the licensee meeting predetermined sales targets.

Financial details

This could include the amount due to the licensor while signing the contract along with the amount of royalty payments, the method of calculating royalties as per sales, the manner of reporting and creating royalty payments, and a provision for a minimum guarantee.

Quality control standards

This is an important header from the licensor’s point of view. This is because the licensor providing the license to use an established brand product would want that standard to be maintained by the licensee. This header could also include the approval procedure by the licensor while the product is in the preproduction and production stages. The approval procedure could also involve the approval of samples (if any).

Dispute resolution method

The most important clause, i.e., the dispute resolution method, should always be included by virtue of the fact that issues among the parties can arise at any stage of the transaction. This is also the reason why entering into a written and detailed merchandising licensing agreement becomes pertinent.

Terms and termination clause of the licensing agreement

Both parties must discuss the grounds and ways of terminating an agreement, which should be put in writing so that parties are clear on their stance from the beginning and can proceed accordingly. For instance, if the licensee fails to fulfill any/all of his obligations or does something which goes against the substance of the agreed terms and conditions or sub-licenses owing to the exclusivity or non-exclusivity of rights in the agreement (considering sub-licensing was not allowed), the licensor could be given the right to terminate by virtue of this key provision in the agreement. 

Apart from the above-discussed key terms, it is suggested to include details such as audit rights, the distribution channel of products and/or any restriction concerning a particular category of product, the identification of IP being licensed as an exhibit in the agreement, or while writing the property’s description, and whether the license is required to be extended to the containers, labels, packaging, and other related items.

Further, for those individual  owners who want to protect their products and rights, it is crucial that a point of immediate discontinuation of using the IP rights and removal of all the connections to the IP from all the works of the licensee be explicitly mentioned when the agreement comes to an end or is terminated for any reason. As a consequence, the responsibilities of the licensee may vary depending on the type of IP or product being licensed and  the kind of business the licensee is in. 

Terms of payments

This is quite a complicated clause in IP licensing or product merchandising agreements since each party has a different approach to follow, it may include terms like- 

1. Royalty fees,
2. Initial payments.  

It must be noted that the payment method and the royalty fees are calculated and decided by the value of the IP license, and this includes-

1. marketing and production costs, 
2. obligatory licensing fees, and 
3. import/export taxes.

Confidentiality clause

A confidentiality clause is defined as any piece of information that was exchanged between the parties as well as the terms and conditions of service wherein one party puts obligation on another to refrain from sharing that information with anyone outside the scope of such a clause.

Indemnity clause

An indemnity clause in an IP agreement can be defined as an agreement that decides which party bears the brunt of infringement risk if such an issue arises. Such a clause may also incorporate the obligation to ‘defend’ and/or ‘hold harmless’ the other party to the agreement. Typically, an IP indemnification agreement binds one party to provide compensation to another party for any sort of losses or damages incurred, provided they are protected by such a clause. There are times when such a clause in IP licensing agreements is not given that much importance despite the fact that it holds quite some importance for the parties to the agreement. 

Usually, there is an insistence that the clause delegate or give the licensor the obligation to reimburse the licensee against any risks as it is the licensor that gives the licensee the IP rights and the benefits that would arise from such an agreement. Similarly, the licensor can also use an indemnification clause to cover any sort of loss that occurred due to the actions of the licensee, any confidentiality issues or for abusing certain rights. Nonetheless, there are some risks that should be covered even after the cessation or expiration of the contract.

Some common pointers/clauses that are incorporated in a merchandise license agreement 

Mentioned below are the common pointers/clauses incorporated in a merchandise license agreement. These pointers/clauses are linked along with the sample of a merchandise license agreement mentioned in the upcoming paragraphs.

1. Incorporation of recitals,
2. Definitions,
3. Grant of license,
4. Licensor’s approval rights,
5. Term,
6. Royalty payments,
7. Monthly royalty payments and statements,
8. Records and audit rights,
9. Exploitation of license; restrictions on sale,
10. Trademark protection,
11. Copyright provisions,
12. Representations and warranties, 
13. Indemnification,
14. Reservation of rights,
15. Infringements,
16. Claims,
17. No sublicensing,
18. Agreements with manufacturers,
19. Breach and termination,
20. General provisions,
21. Licensor’s right to buy articles.

Sample merchandising license agreement

Below is a sample of a merchandising licensing agreement. One can look at the original character merchandising agreement sample on this website by the US Government-https://www.sec.gov/Archives/edgar/data/319029/000119312503040337/dex99d2h.htm 

Please note: The licensing agreement is just a sample for the readers. It is always advisable to seek legal assistance in matters pertaining to merchandising licensing agreement. 

MERCHANDISE LICENSE AGREEMENT

This Merchandise License Agreement (the “Agreement”) is signed on June 24, 2023 (the “Effective Date”) by and between DS Consumer Products, a division of Daniel-Sezzi Entertainment Inc., a North Dakota corporation, and Daniel-Sezzi Tiger Corp., a North Dakota corporation (collectively, “Licensor”), on the one hand, and Marriott International Retail, a South Dakota corporation (“Licensee”), on the other.

RECITALS 

WHEREAS, all the parties to this Agreement accede to the point that they enjoy a unique historical relationship with each other; and

WHEREAS, the Licensor is the holder of all the rights, titles and interests throughout the world to the Daniel-Sezzi Entertainment Inc. and the Daniel-Sezzi Tiger Corp. logo trademarks and service marks, and variants thereof, as represented on Exhibit A attached hereto and incorporated herein by reference (the “Marks”); and

WHEREAS, the Licensee is an indirect wholly-owned division of Marriott International Retail, a South Dakota organization, which, through other subdivisions, possesses and manages multiple hotels, casinos and resorts across the globe; and

WHEREAS, the Licensor wishes to license the use of the Marks to the Licensee exclusively in relation with the retail sale of merchandise by the Licensee and its Affiliates (as defined below) under the terms of this Agreement, and the Licensee wishes to obtain a license for the same from the Licensor.

AGREEMENT

NOW, THEREFORE, in light of the foregoing and the mutual promises set forth below, and in exchange for other good and valuable consideration, the receipt and sufficiency of which is accepted as valid and true by the parties, the parties agree to the following provisions:

1. Incorporation of Recitals

The recitals to this Agreement are true and correct, and all the parties to the Agreement accept and approve the same and consent that the recitals be included in and made a part of this Agreement.   

2. Definitions 

Each of the terms referred to below shall have the following meanings with respect to this Agreement:

1. The word “Advertising Materials” shall have the interpretation incorporated in Section 4.2.
2. The word “Affiliate” shall be interpreted as any individual or entity that, either directly or indirectly, through one or more intermediaries or controls, is supervised by or is under common supervision with the person or entity specified. Despite this, neither the Licensor nor Daniel-Sezzi Inc. or any of its subsidiaries are to be considered “Affiliates” of the Licensee or Marriott International.
3. The word “Annual Period” shall mean that each period of one year commences on the Effective Date and on each anniversary of that Effective Date.
4. The word “Effective Date” shall have the meaning incorporated in the first paragraph of this Agreement.
5. The word “License” shall have the meaning incorporated in Section 3.
6. The word “Licensed Locations” indicates all the retail outlets situated or based within the hotels, casinos, or resorts that are at least majority-owned or operated by Licensee or an Affiliate of Licensee anywhere in the world, and any retail outlet that is at least majority-owned or is operated by Licensee or an Affiliate of Licensee situated or based in the same metropolitan region as that of any such hotel, casino, or resort. Notwithstanding the foregoing, Licensee and its Affiliates may propose for sale and sell the Merchandise via the following means-

1. catalog, 
2. direct mail order, or 
3. through Internet sites that are owned and operated by the Licensee or an Affiliate of Licensee.

7. The word “Licensee” shall have the same meaning as specified in the foremost paragraph of this Agreement.
8. The word “Licensor” shall have the same meaning as specified in the foremost paragraph of this Agreement.
9. The word “Marks” shall have the same meaning as specified in the foremost paragraph of this Agreement.
10. The word “Merchandise” refers to the retail merchandise bearing any of the Marks, including but not limited to clothing and apparel, jewelry, personal accessories, housewares, stationery, backpacks, tote bags, and duffel bags, all subject to the acceptance rights of the Licensor as established in Section 4.
11. The word “Net Revenues” refers to the gross revenues actually received by Licensee or any Affiliate of Licensee from retail sales of Merchandise pursuant to this Agreement, as decided unanimously in accordance with Licensee’s or such Affiliate’s invoice, less-

1. sales, value added, use, and similar taxes that are individually itemized, billed by Licensee or its Affiliate to its customers and directed to paid to the relevant taxing authority by Licensee or its Affiliate;
2. sum of money paid by the Licensee or any of its Affiliate and billed to its customers for the purpose of insurance, shipping and similar charges; and
3. credits for refunds and returns of Merchandise.

12. The word “Packaging Materials” shall carry the meaning stated in Section 11.2.
13. The word “Royalties” would mean royalty payments by the Licensee to the Licensor as defined in Section 6.
14. The word “Term” shall have the meaning added in Section 5.
15. Grant of License

The Licensor hereby accords the Licensee the right and license (the “License”) to use the Marks exclusively for the design, manufacture, production, marketing, advertising, and sale of Merchandise by the Licensee or its Affiliates at the Licensed Locations during the period of the agreement. The License shall be non-exclusive, with the exception that the Licensor will not directly or indirectly license the right to use the Marks for the production, promotion, or sale of merchandise to other casinos or to other hotels or resorts with casinos nearby or anywhere in the world.

4. Licensor’s Approval Rights

4.1 The Licensee pledges that the Merchandise will be of acceptable quality in terms of design, materials, and workmanship and apt for the purpose it is intended for, i.e., no detrimental or harmful materials will be utilized in or on the Merchandise, that the Merchandise will not result in hurt or injury when used as intended and with ordinary care; and that the Merchandise will be produced, marketed, publicized, promoted and sold, or otherwise distributed while keeping in mind all the applicable regulations and statutes.

4.2 Prior to the proposed sale of any Merchandise not previously sanctioned by the Licensor, or the proposed use of any advertisement or promotional materials in relation to the Merchandise (“Advertising Materials”) not formerly approved by the Licensor, the Licensee shall present the ideas for such Merchandise or Advertising Materials to the Licensor for its assessment. The Licensor shall have 10 business days from the receipt of the proposal in which he must determine whether to authorize or object the proposition, by written notice to the Licensee, to such concepts for Merchandise or Advertising Materials. In case the Licensor does not approve of such a proposal for Merchandise or Advertising Materials within such the 10-business-day time frame, the same shall not be considered to be agreed upon for all purposes of this Agreement.

The Licensor shall have the freedom to object to any of the ideas for Merchandise or Advertising Materials if it thinks, in the exercise of its reasonable good faith judgment, that the Merchandise or Advertising Materials would degrade or tarnish the significance and goodwill associated with the Marks or Licensor’s associated copyrights or trademarks, considering the following reasons-

(i) their failure to meet the acceptable quality criteria laid down in Section 4.1, 

(ii) their usage of artwork, designs or concepts that do not accurately portray the Marks, 

(iii) their use of materials which are not ethical, or moral or are otherwise offensive or objectionable to good taste, 

(iv) their failure to incorporate copyright or trademark notices that are plausible in essence, or 

(v) any additional rational  grounds. 

In case the Licensor does not give permission for any ideas for Merchandise or Advertising Materials as provided herein, the Licensor shall communicate the same to the Licensee in writing along with explicit justifications for such a disapproval, and the Licensee shall not use or sell any such Merchandise or Advertising Materials until they have been altered and revised as provided in the notice sent by the Licensor(s) to the Licensee and resubmitted to the Licensor(s) for approval as referred to in Section 4.2.

4.3 The Licensee consents to maintain the quality of all Merchandise thus produced in accordance with this Agreement up to the prescribed details, quality, and finish of the production sample of such Merchandise authorized by the Licensor under Section 4.2. Further, the Licensor consents that there will not be any modifications carried on to the Merchandise in any way or any revisions in the Advertising Materials without first providing a specimen to the Licensor portraying the suggested modifications and acquiring the permission of the Licensor(s) pertaining to the  specimen. Upon the proposal of the Licensor, the Licensee shall provide the Licensor the addresses of the  facilities that are manufacturing the products (the units used by the Licensor for producing the  Merchandise), and shall make arrangements for the Licensor to visit the units and examine such manufacturing units, provided a reasonable notice in advance is provided and the assessment is/are carried out during the usual business hours.

4.4 The Licensee shall not give its Affiliates the permission to use any other

1. Name, 
2. trademark, or 
3. logo

on any Merchandise or on the packaging of any Merchandise that contains, reflects, or otherwise uses the Marks. Notwithstanding the foregoing, the Licensee and its Affiliates shall be entitled to use their own marks in association with the Marks for the purposes of identification and promotion of the Licensed Locations.

5. Term

The term of this Agreement (the “Term”) shall start on the Effective Date and end on the fifth anniversary of that Effective Date, until and unless the Licensee decides to end it any sooner by furnishing a 60 days’ notice to the Licensor. The  Term may be extended by the Licensee (this being one of their rights) for an additional five years, provided that that-

(i) The Licensee informs the Licensor of such an extension at least 60 days before the cessation of the original Term, and 

(ii) The  Licensee is not in violation of this Agreement at any point in the extension process.

6. Royalty Payments

With respect to the Net Revenues from sales of Merchandise, the Licensee shall give money in the form of royalties (“Royalties”) to the Licensor during the Term or subsequent to the termination of this Agreement for any reason. The appropriate Royalty percentage shall be assessed based on the total Net Revenues from sales of all Merchandise during the Term of this Agreement. The Royalty percentages shall be as follows: 

(i) 4.4% of Net Revenues up to $4,000,000 accrued during the Term of this Agreement, plus 

(ii) 6.5% of Net Revenues between $3,000,000 and $4,000,000 accrued during the Term of this Agreement, plus 

(iii) 10% of Net Revenues in excess of $5,000,000 accrued during the Term of this Agreement.

7. Monthly Royalty Payments and Statements

7.1 Considering the sale of the Merchandise, all the Royalties due to the Licensor shall be collected. For the purpose of this Agreement, the Merchandise shall be said to be “sold” as of the date on which such Merchandise is sold by the Licensee or any of the Affiliates of the Licensee to any customer or any third party.

7.2 The Licensee shall pay all Royalties due to the Licensor under this Agreement with respect to the sales of Merchandise during any month within 15 days following the end of such month. All Royalty statements that must be submitted by the Licensee shall be presented within a span of 15 days following the end of the month to which they relate and shall accompany the Royalty payment to the Licensor. The first such Royalty payment and statement shall be due no later than April 4, 2022, and shall contain any sales of Merchandise between the Effective Date and March 3, 2022.

7.3 In case the Licensee or its Affiliates sell any Merchandise at a price lower than 10% above the Licensee’s manufactured cost of such Merchandise without obtaining prior permission from the Licensor, the Net Revenues with respect to such sale shall be considered to reflect a retail selling price of 10% above the Licensee’s manufactured cost of such Merchandise. 

7.4 Unless this Agreement states otherwise, no amount will be deducted from the Royalties thus payable to the Licensor for taxes, fees, assessments or expenses of any type that may be incurred or paid by the Licensee in connection with-

(i) Royalty payments due to Licensor, or 

(ii) The manufacture, sale, distribution, or advertising of the Merchandise. 

The Licensee shall have the sole responsibility, at its expense, to obtain the permission of any governmental authorities before implementing any steps to effect the payment of funds to the Licensor, to enable the Licensee to commence or continue doing business in any jurisdiction, and to comply in all respects with all applicable laws and regulations. Notwithstanding the foregoing, if-

(i) any country imposes a withholding tax against Licensor, as licensor, with respect to the Royalties payable to Licensor on sales of Merchandise in such country, 

(ii) such tax is paid by Licensee on behalf of Licensor, and 

(iii) such tax is an income tax for which a foreign tax credit is allowable to Licensor under Section 901 of the Internal Revenue Code of 1986, as amended, then Licensee may deduct the amount of such withholding tax from the Royalties payable to Licensor under this Agreement, on the condition that Licensee furnishes to Licensor all information and documentation required by Licensor to enable Licensor to obtain a foreign tax credit on its U.S. income tax return with respect to such withholding tax payment by Licensee.

7.5 The Licensee shall furnish to the Licensor, at the same time it makes payment of Royalties, a complete statement, certified by an officer of the Licensee to be true and accurate, setting forth the ground upon which Royalty payments were accrued during the preceding calendar month, the amount of the Royalty payments payable with respect to such calendar month, and such other information as the Licensor may reasonably request.

7.6 The receipt or acceptance by Licensor of any Royalty statement furnished pursuant to this Agreement or any Royalty payment made, shall not avert Licensor from questioning their accuracy at any time for a period of three years from the receipt of the Royalty statement. If any mistakes are discovered in such statements or payments, appropriate adjustments shall be promptly made by the parties. Licensee shall pay Licensor interest on late Royalty payments at an annual rate of 2% above the prevailing prime interest rate of Bank of America, Los Angeles, California, in effect on the date on which such late Royalty payment should have been paid to Licensor, but in no event shall such interest rate overreach the maximum rate permitted by applicable law.

8. Records and Audit Rights

8.1 During the course of this Agreement and three years after that, the Licensee shall keep accurate books of account and copies of all documents relating to this Agreement at Licensee’s principal office. The Licensor, through its duly authorized agents and representatives, shall have the right, to be exercised not more than once per Annual Period and upon not less than five business days’ prior notice to Licensee, solely for the purpose set forth in Section 7.6, to scrutinize and audit such books and documents during normal business hours, and shall have the right at its own expenditure to make reproductions of such books and documents except to the extent expressly restricted by applicable law or regulation, including without limitation the South Dakota Gaming Control Act and the regulations promulgated thereunder. At Licensee’s request, Licensee shall furnish an authorized employee to aid in the inspection of Licensee’s records. All information regarding the Licensee’s or its Affiliates’ business received in any such examination shall be held in strict confidence by the Licensor and shall not be used or disclosed by the Licensor in any manner. The Licensor shall not unreasonably impede the Licensee’s business operations in exercising the foregoing right of examination.

8.2 The expenditures of examinations and audits pursuant to Section 8.1 shall be borne by the Licensor; provided, however, that the Licensee shall be charged for the reasonable out-of-pocket expenses of any such examination or audit that conclusively establishes an underpayment of Royalties in excess of 5% of the Royalties reported and paid for the relevant calendar month.

9. Exploitation of License; Restrictions on Sale

9.1 The Licensee consents to manufacturing or causing the Merchandise to be manufactured in adequate quantities to meet the reasonably anticipated demand. The Licensee also agrees to use reasonable initiatives to publicize and promote the Merchandise at its own expense and to sell the Merchandise at the Licensed Locations, consistent with the Licensee’s good faith business judgment. Nothing contained in this Section 9.1 shall constitute a representation by the Licensee, that any specified minimum amount of Merchandise will actually be sold or that a stipulated minimum amount of Net Revenues will actually be achieved in any period. The Licensor acknowledges and agrees that the Licensee does not aspire to sell Merchandise in all of the Licensed Locations and that the Licensee may not begin to sell Merchandise for some period of time following the Effective Date.

9.2 The Merchandise shall be sold to the public only in the manner in which merchandise articles of the same general type are generally sold to consumers. The Licensee shall not use or sell the Merchandise as premiums, or circulate the Merchandise to persons whom the Licensee has reason to believe intend to use or sell the Merchandise as premiums. For purposes of the foregoing provision, use or sale of the Merchandise as “premiums” shall mean use or sale of the Merchandise in connection with self-liquidator programs, joint merchandising programs, giveaways, sales incentive programs, door-openers, traffic-builders and any other kind of promotional program designed to facilitate the sale of the Merchandise or other goods or services of the Licensee, its Affiliates, or a third party. Notwithstanding the foregoing, the Licensee and its Affiliates may use and distribute Merchandise in association with hotel, casino, and resort promotions and special events.

10. Trademark Protection

10.1 The Licensee recognizes the substantial goodwill associated with the Marks and acknowledges that such goodwill belongs solely to the Licensor, that its use of the Marks insures to the Licensee’s benefit, and that the Licensee shall not thereby obtain any rights in the licensed Marks. The Licensee shall not, during the Term hereof or thereafter, assert rights in the Marks, challenge the rights of the Licensor in and to the Marks, or attack the validity of this Agreement. In addition, the Licensee shall not, during the Term hereof or thereafter, try to acquire rights to the Marks through use, registration, or otherwise in any state or country or otherwise throughout the universe. The Licensee shall not use the Marks in a scandalous or derogatory manner or in any other manner that would, in the reasonable opinion of the Licensor, cause loss of value or goodwill or otherwise cause injury to the Marks or to the Licensor. The Licensee also agrees not to attempt to register, use or to aid any third party in attempting to register or to use any trademark or service mark that may be, in the opinion of the Licensor, confusingly similar to the Marks, in any state or country. It is expressly understood that this covenant shall survive termination or expiration of this Agreement. Any infringement of this paragraph shall constitute a material breach of this Agreement.

10.2 The Licensee shall keep reasonable records relating to the dates when each article of Merchandise is first placed on sale or sold in each country, and the dates of use in each country of each different Mark on the Merchandise and Advertising Materials. At the Licensee’s request, the Licensee shall furnish the Licensor with specimens of the trademark usages in question and other information that will allow the Licensor to finalize and acquire trademark or design applications or registrations, or to assess or disagree with any trademark or design applications, registrations, or uses by third parties, all at the expense of the Licensor.

10.3 The Licensee consents to affix to Merchandise and to the Advertising Materials the following notice or such other notice as may be specified in writing by the Licensor:

TM & © Daniel Sezzi Tiger Corp., and DS Consumer Products, are used by permission of Daniel Sezzi Tiger Corp.

When one of the Marks is used as a trademark for any Merchandise, the name shall be properly used as a trademark in a larger or bolder type than the name of the Merchandise, and shall not be used as the generic name of the Merchandise.

11. Copyright Provisions

11.1 The authorization of the Licensor to the Licensee to make public distribution of the Merchandise and Advertising Materials is expressly conditioned upon the agreement of the Licensee to place on all Merchandise and Advertising Materials the copyright notice in the name of the Licensor as set forth in Section 10.4.

11.2 The Licensee acknowledges that the copyright notice must be permanently affixed to all Merchandise and packaging thereof (the “Packaging Materials”) and Advertising Materials and to any separate portions of the Merchandise or Packaging Materials or Advertising Materials which contain the Marks and which are intended to be used separately by the purchaser. The Licensee agrees that it will not, without the Licensee’s prior written consent, affix to the Merchandise or the Packaging Materials which contain, reflect or otherwise use the Marks a copyright notice in the Licensee’s name or the name of any person or entity other than the Licensor.

11.3 The Licensee hereby sells, signs, and transfers to the Licensor all of its worldwide right, title, and interest in and to all “new works” or “derivative works” heretofore or hereafter created using the Marks, including without limitation the copyrights thereon. If individuals that are not residing in the U.S. or those who are not employed by the Licensee or its Affiliates make any contribution in creating “new work,” so that such persons might be deemed to be “authors” of the same as that term is used in present or future U.S. copyright statutes, the Licensee agrees to obtain from such persons a comparable full assignment of rights so that the foregoing assignment by the Licensee vests in the Licensor full rights in the “new work,” free of any claims, interests, or rights of other parties. The Licensee is in accord with not permitting any of its employees or the employees of its Affiliates to obtain or reserve by oral or written employment agreements any rights as “authors” of such “new works.” At the Licensor’s request, the Licensee agrees to furnish the Licensor with information concerning the creation of “new works” and with copies of assignments of rights obtained from other parties.

12. Representations and Warranties; Indemnification

12.1 Each party represents and warrants to the other that: 

(i) This Agreement has been duly authorized, executed and delivered by such party; 

(ii) That such party has the full power and authority to enter into this Agreement and to execute its obligations hereunder; 

(iii) This Agreement constitutes a valid and binding obligation of such party, enforceable in accordance with its terms; and 

(iv) The execution and performance of this Agreement by such party does not and will not infringe any agreement or obligation between such party and any other person or entity.

12.2 The Licensee agrees to indemnify and hold the Licensor harmless from and against any and all claims (and liabilities, judgments, penalties, losses, costs, damages and expenses resulting therefrom, including reasonable attorneys’ fees, but excluding lost profits) made by third parties against the Licensor arising out of or in connection with any activity taken under or in breach of this Agreement by the Licensee, its Affiliates, manufacturers, distributors or the employees or agents of any of the foregoing, including without limitation the manufacture, distribution, advertising, sale or use of the Merchandise, but excluding any claims to the extent based on or arising out of the use of the Marks by the Licensee or its Affiliates in accordance with the terms of this Agreement.

12.3 The Licensor agrees to indemnify and hold the Licensee and its Affiliates harmless from and against any and all claims (and liabilities, judgments, penalties, losses, costs, damages, and expenses resulting therefrom, including reasonable attorneys’ fees, but excluding lost profits) made by third parties against the Licensee or its Affiliates asserting rights in the Marks and to the extent based upon or arising out of the use of the Marks by the Licensee or its Affiliates in accordance with the terms of this Agreement.

12.4 With respect to any claims falling within the scope of the foregoing indemnifications, 

(i) Each party shall promptly inform the other of and keep the other fully notified with respect to such claims and the progress of any suits in which the party is not participating, 

(ii) Each party shall have the right to assume, at its sole expense, the defense of a claim or suit made or filed against the other party for which such party is required to indemnify the other party, 

(iii) Each party shall have the right to participate, at its sole expense, in the defense of any suit instituted against it and to approve any attorneys selected by the other party to defend it, whose approval shall not be unreasonably withheld or delayed, and 

(iv) The party assuming the defense of a claim or suit against the other party shall not settle such a claim or suit without the prior written approval of the other party, whose approval shall not be unreasonably withheld or delayed.

13. Reservation of Rights

All rights in and to the Marks are retained by the Licensor for its own use, except for the specific rights in the Marks licensed to the Licensee under this Agreement. The Licensor reserves the right to use, and to license other parties to use, the Marks throughout the world for any purpose Licensor may determine, except as otherwise expressly provided in this Agreement, but neither the Licensor nor any party licensed by the Licensor shall have the right to use the Marks in any manner that would conflict with the rights granted to the Licensee under this Agreement, including the right to maximize sales of Merchandise bearing the Marks.

14. Infringements; Claims

14.1 If the Licensee learns that a party is making unauthorized use of the Marks, the Licensee consents to promptly give the Licensor written notice, providing complete information (to the extent actually known by the Licensee) with respect to the actions of such party. The Licensee agrees not to make any demands or claims, bring suit, effect any settlement, or take any other action against such party without the prior written consent of the Licensor. The  Licensee agrees to cooperate with the  Licensor, without expense to the Licensee (except with respect to costs associated with providing samples and evidence of use), in relation to any activity taken by the Licensor to terminate infringements.

14.2 If claims are made against the Licensor or the Licensee or the Licensee’s Affiliates by a party claiming  ownership of rights in a name or design which is the same as or similar to the Marks, and claiming further that the use of a particular Mark by the Licensee or its Affiliates infringes the rights of such party, or if the parties discover that another party has or claims rights in a trademark, name or design which would clash with the proposed or actual use of a Mark by the Licensee, the Licensor and the Licensee agree in any such case to consult with each other on a suitable course of action. In no event shall the Licensee have the right, without the prior written approval of the Licensor, to acknowledge the validity of the claim of such party, to obtain or seek a license from such party, or to take any other action which might impair the ability of the Licensor to contest the claim of such party if the Licensor so elects. The Licensee agrees at the Licensee’s request to make reasonable modifications requested by the Licensor in the Licensee’s use of the Marks in question or to halt or suspend their use in the country of the Licensed Location in question on the particular Merchandise that is involved, if the Licensor, in its reasonable discretion, discerns that such activity is crucial to decide or resolve the claim or suit or annihilate the peril of a claim or suit by such party. The Licensor shall have the right to take part in full at its own expense in defense of any claim or suit instituted against the Licensee or its Affiliates with respect to the use by the Licensee or its Affiliates of a Mark.

15. No Sublicensing; Agreements with Manufacturers

15.1 The License shall not incorporate the right to sublicense any of the rights granted to the Licensee under this Agreement.

15.2 The Licensee and its Affiliates shall have the right to arrange with another party to manufacture Merchandise or components of Merchandise for exclusive sale, use, and distribution by the Licensee and its Affiliates. The Licensee consents to enter into a written agreement with all such manufacturers and to include into such written agreements all of the provisions, for the protection of the rights of the Licensor, that are contained in the form manufacturer agreement that has been designed by the Licensor for such purpose and that is available from the Licensor. The Licensee further agrees to furnish the Licensor, within 30 days of their execution, copies of all agreements with such manufacturers.

15.3 The Licensee agrees to enforce against its manufacturers all of the provisions which are required to be incorporated in such agreements for the security of the Licensor as provided in Section 15.2, to advise the Licensor of any infringements thereof by manufacturers of which the Licensee has actual knowledge, and of corrective actions taken by the Licensee and the results thereof, and, at the request of the Licensor, to terminate such agreement with any manufacturer which infringes any of such provisions for the security of the Licensor.

16. Breach and Termination

16.1 The Licensor shall have the right to cease this Agreement for any violation of this Agreement set forth below if after 30 days’ written notice from vLicensor to the Licensee specifying the breach and stating prominently that it is a “NOTICE OF BREACH” (the “Initial Cure Period”), Licensee-

(i) has failed to or is unable to cure such breach, 

(ii) has initiated to rectify such an infringement and such rectification is not completely effectuated within an additional 30 days after the Initial Cure Period to Licensor’s reasonable satisfaction, or 

(iii) has given written notice of the proposed measures and duration of time reasonably necessary for effectuating such cure, acceptable to Licensor, and failed to complete the cure within the agreed-upon cure period:

1. If the Licensee or its Affiliates make, sell, offer for sale or distribute or use any Merchandise or Advertising Materials without prior approval of the Licensor as provided in Section 4, or make any use of the Marks not authorized under this Agreement.
2. If the Licensee fails to include on any Merchandise or any Advertising Materials or Packaging Materials the required trademark and copyright notice as provided in Section 10.4.
3. If Licensee fails to submit Royalty statements or Royalty payments to the Licensor within 30 days following the end of any calendar month.
4. If the Licensee becomes subject to any voluntary or involuntary order of any governmental agency involving the recall of any Merchandise because of safety, health, or other hazards to the public and the Licensee falls or refuses to stop the sale or use of such Merchandise within 10 days of receipt of the recall notice.
5. If, other than under Title 11 of the U.S. Code, Licensee becomes subject to any voluntary or involuntary insolvency, cessation, bankruptcy, or similar proceedings, or an assignment for the benefit of creditors is made by the Licensee, or an agreement between the Licensee and its creditors generally is entered into providing for extension or composition of debt, or a receiver is appointed to administer the assets of the Licensee, or the assets of the Licensee are liquidated, or any distress, execution, or attachment is levied on such of its equipment as is used in the production and distribution of the Merchandise and remains undischarged for a period of 60 days.
6. If the Licensee breaches any of the provisions of Section 15 or Section 17.1.
7.  If the name “Daniel and Sezzi” or an authorized variation thereof is no longer used as part of the name of one or more hotels of which the Licensee and/or its Affiliates directly or indirectly own more than 50% of the outstanding equity and voting interests.

16.2 Notwithstanding the provisions of Section 16.1, if the Licensee fails to obtain proper approvals or fails to timely submit Royalty statements or Royalty payments on more than two occasions during any one Annual Period, the Licensor shall have the right to terminate this Agreement upon written notice to the Licensee without further opportunity for the Licensee to cure.

16.3 If any order for relief under the Bankruptcy Code is entered against the Licensee, the Licensee must assume or rescind this Agreement within 60 days after the order for relief is entered. If the Licensee does not assume this Agreement within such a 60-day period, the Licensor may, at its sole option, put an end to this Agreement by providing a written notice to the Licensee, without further liability on the part of the Licensor.

16.4 Termination of this Agreement as provided in this Section 16 shall be without prejudice to any rights or claims which the Licensor may otherwise have against the Licensee, except that in no event shall the Licensor have any claim for lost profits. Upon termination of this Agreement as a result of a breach by the Licensee, all Royalties based on sales previously made shall become instantly due and payable to the Licensor. Upon cessation of this Agreement under Section 16.1(d), 16.2, or 16.3, the Licensee, its receivers, trustees, assignees, and other representatives shall have no right to sell, exploit or in any way deal with the Merchandise, the Advertising Materials or the Marks, except with the express written consent of the Licensor.

16.5 Subject to the provisions of Section 16.6, upon the expiration or termination of this Agreement for any reason, the Licensee and its Affiliates agree immediately and permanently to suspend manufacturing, selling, advertising, distributing and using the Merchandise and Advertising Materials, immediately and permanently to halt using the Marks, to undertake with third-party manufacturers to instantly destroy any molds, dies, patterns or similar items from which Merchandise and Advertising Materials were made where any Mark is an essential part thereof, and instantly to cease all agreements with manufacturers, distributors and others which relate to the manufacture, sale, distribution and use of the Merchandise.

16.6 Notwithstanding the provisions of Section 16.5, upon termination or expiration of this Agreement for any reason, except as a result of an infringement set forth in Section 16.2, Licensee and its Affiliates shall have a sell-off period of one year, subject to the payment of Royalties to the Licensor on any such sales in accordance with this Agreement. The Licensee shall deliver to the Licensor within 30 days following expiration or termination a written inventory listing all Merchandise in the Licensee’s possession or control as of the date of such inventory.

17. General Provisions

17.1 Neither party shall directly or indirectly assign, transfer, sublicense, or encumber any of its rights under this Agreement without the prior written approval of the other party, except that the Licensor may allocate its right to receive Royalty payments to any party. A request by the Licensee to assign this Agreement to an Affiliate of the Licensee, which Affiliate is not in breach of Section 16.1 (g) hereof, shall not be unreasonably withheld or delayed by the Licensor. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

17.2 Nothing contained in this Agreement shall be construed so as to make the parties partners or joint venturers with each other or to permit either party to bind the other or purport to act on behalf of the other in any respect.

17.3 No waiver or modification of any of the terms of this Agreement shall be effective unless in writing and signed by both parties. Failure by either party to execute any rights under this Agreement shall not be construed as a waiver of such rights, and a waiver by either party of a default in one or more instances shall not be construed as a continuing waiver or as a waiver in other instances.

17.4 If any term or provision of this Agreement is for any reason held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other term or provision, and this Agreement shall be interpreted as if such term or provision had never been contained herein.

17.5 All notices required or desired to be given under this Agreement shall be in writing and shall be deemed to have been received 

(i) when received, if personally delivered, 

(ii) three days after being mailed by first-class mail, postage prepaid, 

(iii) the next business day after being sent by overnight commercial courier, or 

(iv) when receipt is sent by confirmed telecopy, in each case addressed as follows or to such other address as either party shall designate by written notice to the other:

If to Licensor:

DS Consumer Products, a division of  

Daniel-Sezzi Entertainment, Inc.

2300 Gentlemen’s Street

Beverly Hills, CA, 90213

Attention: Senior Vice President, DS Consumer Products

Products 

Telecopy No.: (230) 007-1999 

With a Copy to:

Danielle-Sezzi Studios, Inc.

2300 Gentlemen’s Street

Beverly Hills, CA, 90213

Attention: General Counsel

If to Licensee:

Marriott International Retail

3730 Las Vegas Blvd. South, 

Las Vegas, United States, 89109

Attention: President

Telecopy No.: (203) 1100-2364

With a copy to:

Marriott International

3730 Las Vegas Blvd South, 

Las Vegas, United States, 89109

Attention: General Counsel

Telecopy No.: (107) 562-2345

17.6 The paragraph and section headings of this Agreement are added only for convenience and shall not be rendered as a part of this Agreement.

17.7 This Agreement contains the entire understanding of the parties with respect to its subject matter and replaces any and all prior agreements, understandings and negotiations, whether oral or written. This Agreement shall have no effect on the existing License Agreement, dated as of July 23, 1992, as subsequently amended, between Affiliates of Licensor and the Licensee, which shall remain in full force and effect.

17.8 This Agreement shall be presided over by and construed in consonance with the laws of the State of California and the United States, regardless of the place of its physical execution or performance.

17. 9 If any action is brought with respect to or arising out of this Agreement, the prevailing party shall be entitled to recoverthe  its costs and expenses incurred in the prosecution and defense of that action, including reasonable attorneys’ fees.

17.10 Licensor acknowledges that Licensee’s Affiliates are engaged in businesses that are or may be subject to and exist because of privileged licenses issued by governmental authorities. If Licensee or any parent, subsidiary or other Affiliate of Licensee is directed to cease doing business with the Licensor by any such authority, or if the Licensee shall determine in good faith, in the Licensee’s sole and exclusive judgment, that the Licensor or any of its officers, directors, key employees, agents or representatives (i) is or might be engaged in, or is about to be engaged in, any activity or (ii) was or is involved in any relationship, either of which could or does jeopardize Licensee’s business or such the licenses, or those of a parent, subsidiary or other Affiliate, or if any such license is threatened to be or is denied, suspended or revoked, then this Agreement may be terminated by the Licensee without further liability to either party upon notice to the Licensor, provided that the Licensor shall be entitled to retain all Royalties previously paid and to receive Royalties due but unpaid at the time of termination.

17.11 The Licensor acknowledges that the Licensee, its parent, subsidiaries and other Affiliates have a reputation for offering high-quality entertainment and services to the public, and that it and its Affiliates are subject to regulation and licensing, and that they desire to maintain their reputation and receive positive publicity. The Licensor therefore agrees that, during the Term of this Agreement and for a period of two years thereafter, the Licensor and its officers and directors will not make any oral, written, or recorded statement or comment that is disparaging, critical, or defamatory toward the Licensee or its Affiliates. If the Licensee determines in its good faith business judgment that the Licensee’s conduct or that of its officers or directors is in violation of this provision, the Licensee shall have the right to terminate this Agreement without further liability to either party upon notice to the Licensor, provided that the Licensor shall be entitled to retain all Royalties previously paid and to receive Royalties due but unpaid at the time of termination.

17.12 Notwithstanding any other provision of this Agreement, the parties hereto acknowledge that neither Kirk Kerkorian nor Tracinda Corporation, individually or collectively, is a party to this Agreement or any agreement provided for herein. Accordingly, the parties hereby agree that in the event –

1. there is any alleged breach or default by any party under this Agreement or any agreement provided for herein, or
2. any party has any claim arising from or relating to any such agreement, no party, nor any party claiming through such party, shall commence any proceedings or otherwise seek to impose any liability whatsoever against Kirk Kerkorian or Tracinda Corporation by reason of such alleged breach, default or claim.
3. Licensor’s Right to Buy Articles

Licensor’s Right to Buy Articles. From time to time during the Term of this Agreement, upon its request, Licensor shall have the right to purchase from the Licensee Merchandise at a cost equal to fifteen percent (15%) above Licensee’s manufactured cost. The revenues from any such sales to the Licensor shall not constitute Net Revenues for purposes of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

LICENSOR:

DS Consumer Products, a Division of Daniel-Sezzi Entertainment Inc.

By: /s/ Steward Quagmire

Steward Quagmire 

 Senior Vice President

DANIEL-SEZZI TIGER CORP..

By: /s/ Peter Griffin

Peter Griffin

Senior Executive Vice President

and General Counsel

 LICENSEE:

MARRIOTT INTERNATIONAL RETAIL

By: /s/ Louis P. Shaw

 Louis P. Shaw,

 President

Some noteworthy pointers while drafting a licensing agreement for character merchandising 

1. At times, lawyers use legal margins that may or may not be understood by the parties to the agreement, which is why to avoid any misapprehension by these parties, the agreement must clearly state that it is a license agreement. 
2. All the clauses in such an agreement must be written clearly without any ambiguity. 
3. In the rights clause (discussed above), the licensor must not provide the licensee with all the rights or interest of the product; to avoid such a blunder, the rights clause must explicitly state that it is an assignment of the rights. 
4. A provision on quality control must be incorporated in a trademark license agreement for preserving the distinct characteristics of the products and the goodwill. Without this provision, there can be a conflict between the qualities of two products being sold under the same trademark. 
5. Also, where there are more than two parties involved then it is better not to use terms like ‘licensee’ and ‘licensor’ and if it is utmost necessary to use these terms, such terms must be defined properly. The definitions must be added in the definition clause.

Defenses available to an alleged infringer of character merchandising in the US 

Fair use doctrine

The Copyright Act, 1976, codifies the fair use doctrine under Section 107. The doctrine, in essence, limits the exclusive rights of a character’s owner. This means that till the time the use by a new creator exceeds the parameters of fair use, the creator’s use of the concerned character will not constitute a copyright infringement under the law. 

Abstraction/ filtration test

The abstraction/filtration test falls within the ambit of the fair use doctrine, which is used to determine whether a creative work infringes upon the copyrighted work of another. Even if a work contains distinctive and original characters, the court must determine whether they differ significantly enough from other character types to qualify for copyright protection.

This test first appeared in 1992 in the United States Court of Appeals for the Second Circuit in its judgment on Computer Associates Intern., Inc. v. Altai Inc., 775 F. Supp. 544 (E.D.N.Y. 1991). Ever since then, this doctrine has been used by US courts as well as courts outside the US. 

Please note: The AFC test is a method of determining substantial similarity for the purposes of applying provisions of copyright law. Specifically, the AFC test is used to decide whether or not the non-literal elements of a computer program have been imitated by making a comparison between the protectable elements of two programs.

First sale doctrine

The first sale doctrine is codified by the Copyright Act, 1976, under Section 109. It is also known as the “right of first sale” or the “first sale rule”. According to the doctrine, despite the interests of the copyright owner, a person who purchases a copy of a work “intentionally” and the work is protected by copyright from the copyright holder gets the right to sell, display, or otherwise dispose of that specific copy. According to some cases in the US, it must be demonstrated that the copyrighted work was not the object of a first sale in order to win a criminal copyright case. 

“Scènes à faire” exception to “distinctly delineated” test

The “scènes à faire” doctrine promotes the free exchange of ideas and creativity in art and literature by preventing copyright owners from monopolizing common or essential components of a genre or idea. An alleged infringer may use it to claim that the purportedly infringing work merely comprises common or ordinary features that are not covered by copyright law. Incidents, characters, or locations that are important, or at least standard, in the exposition of a specific theme are covered within the ambit of the exception.

Limitations on character’s own monopoly

It is pertinent to note that copyright law does not establish a monopoly on mere concepts or ideas which are in the public domain and accessible to all. There are certain tests that must be met in order for a character to be granted exclusive copyright, which have been discussed above. However, as long as the alleged infringer can show his use of certain aspects already in the public domain and can counter the tests that have been developed over time to determine the copyrightability of characters, he can save himself from any sort of liability. 

The First Amendment 

The First Amendment seeks to protect and guarantee certain fundamental rights and freedoms, including the right of freedom of speech. When a trademark is utilized for artistic expression and not primarily for commercial gain, free speech rights permit its use in the title of a creative work. Following this legal perspective, in cases such as Rogers v. Grimaldi (1989) and Mattel v. Walking Mountain (2003), where a character’s name was all that was used, the defendant’s right to free speech prevailed over the plaintiff’s concern that the title would deceive customers. In fact, using the defense of the First Amendment, even allegations of publicity rights violations may be refuted. 

Landmark legal disputes on character merchandising in the US  

Walt Disney Productions v. Air Pirates (1972)

Gist of the case

In the case of Walt Disney Productions v. Air Pirates (1972), without Disney’s permission, a team of underground comic book creators known as “Air Pirates” produced a satirical comic book portraying Disney characters behaving inappropriately. Disney filed a lawsuit alleging copyright infringement, and the United States Court of Appeals, Ninth Circuit, ruled in its favor, holding that the use of characters protected by copyright for satirical purposes does not fall under the purview of fair use.

Let us have a look at this case in detail. 

Facts of the case

1. This case involves the admitted copying of plaintiff, Walt Disney Productions’ (Disney), cartoon characters in defendants’ comic books that depicted adult counter-culture.
2. The defendants in this case are three individuals and two business organizations that they operate. 
3. The complainant, Disney, asserted that the defendants breached Disney’s copyrights, a Disney trademark, and were also involved in unfair competition, trade disparagement, and further meddling in Disney’s business.
4. Aggrieved by this, Disney sought the following actions:

1. An injunctive relief, 
2. The disfigurement of all the infringed material, 
3. Damages, 
4. Costs and attorney’s fees. 

5. However, the defendants contended they did so under the fair use doctrine. 
6. The trial court granted the plaintiff’s motion for summary judgment and went on to  issue a permanent injunction against the defendants.

Issue of the case

Whether or not the District Court made an error in reaching the inference that Disney’s graphic depictions were protected under Section 3 of the Copyright Act (in effect then)  as component parts of Disney’s copyrighted work?

Rule to be noted in context to the case

Even though most of the literary characters personify more than an idea that is not protected, a character from the comic book that has physical as well as conceptual qualities is likely to have some distinct elements of expression. Therefore, as comic book characters can be differentiated from those of literary characters, they are not prevented from being protected against infringement or the like. 

Answer to the issue of the case

No, the district court did not make an error in reaching the inference that Disney’s graphic depictions were protected under Section 3 of the Copyright Act (in effect then) as component parts of Disney’s copyrighted work.

Conclusion

The U.S. District Court for the Northern District of California – 345 F. Supp. 108, reached the inference that the defendants copied Disney’s images entirely and that they took more than what was “necessary to place firmly in the reader’s mind the parodied work and the specific attributes that were to be satirized”. The Court also pronounced that since the amount of Disney portrayals in the comic book exceeded the permissible limits, the former court’s judgment was apt considering the claims of copyright infringement by Disney; however, a grant of summary judgment for Disney was inapt as to the trademark infringement claim and the unfair competition claim because there were reasonable issues of material fact as to those claims.

Rogers v. Grimaldi (1989)

Gist of the case

In the case of Rogers v. Grimaldi (1988), Ginger Rogers filed a lawsuit alleging that the use of her name in the title of the movie “Ginger and Fred” infringed on her right to privacy. Yet, the Court held that as long as the name wasn’t deceptive or clearly linked to commercial exploitation, the use of her name was allowed by the First Amendment’s free speech clause.

Facts of the case

1. The duo comprising Ginger Rogers and the late Fred Astaire were amongst the most famous duos in the history of entertainment or show business and were generally identified by their first names only, particularly, ‘Ginger and Fred’. 
2. The defendants in this case, namely Alberto Grimaldi, MGM/UA Entertainment Co., and PEA Produzioni Europee Associate, S.R.L., produced and distributed a film under the title ‘Ginger and Fred’. This movie was directed by the renowned Italian film-maker Federico Fellini. The movie was about a fictional satire of two Italian cabaret performers who were well-known in Italy as Ginger and Fred. 
3. Once the movie was made, distribution began. When the plaintiffs came to know about the activity, a suit seeking injunctive relief and compensation in the form of money damages was filed. Rogers sued Grimaldi in the United States District Court for the Southern District of New York for violating some provisions discussed below. 
4. The plaintiff (Rogers) alleged the following in the suit-

1. That the defendant violated Section 43(a)n of the Lanham Act, 15 U.S.C. § 1125(a) (1982), by creating the false impression that the film was about her or that she sponsored, endorsed, or was otherwise involved in the film;
2. That the action infringed her common law right of publicity; and 
3. That the action defamed her and violated her right to privacy by depicting her in a false light.

5. The defendants then moved for a summary judgment, to which Rogers raised an objection. He further submitted a market research survey to provide proof of the statement that claimed  the title ‘Ginger and Fred’ misled potential movie viewers as to Rogers’ connection with the film. 
6. The District Court furnished the defendants with a summary, and held that the action of the defendants of using Roger’s first name in the title and screenplay of the film was indeed an exercise of artistic expression instead of commercial speech. Furthermore, the District Judge also claimed that the First Amendment concerns barred Rogers’ state law right of publicity claim. 
7. Aggrieved by this, Rogers appealed the summary judgment.

Issues of the case

There were two issues in this case, namely:

1. Was the usage of a celebrity’s first name in a movie creating the erroneous impression that such a celebrity sponsored, endorsed, or was involved in the movie while contravening the law?
2. Was using the first name of a celebrity a breach of common law rights of privacy of that celebrity?

Rule to be noted in context with the case

To sum it all, the Section 43(a) of the Lanham Act does not forbid a minimal yet reasonable use of a name of a celebrity in the title of an  artistic work where the title does not explicitly denote any sort of authorship, sponsorship, or endorsement by the celebrity or explicitly mislead as to content. 

Also, Oregon law on the right of publicity, as explained by New York, would not forbid the use of a celebrity’s name in a movie title except if the title was totally not related to the movie or was ‘simply a disguised commercial advertisement for the sale of goods or services’. Thus, under these standards, summary judgment was aptly entered on the undisputed facts of this case, dismissing the Lanham Act and claims relating to the right of publicity, as well as the claim for false-light defamation.

Answers to the issues of the case

1. No, the usage of a celebrity’s first name in a movie did not create the erroneous impression that such a celebrity sponsored, endorsed or was involved in the movie while contravening the law.
2. No, using the first name of a celebrity is not a breach of common law rights of privacy of that celebrity.

Conclusion

1. The U.S. District Court for the Southern District of New York affirmed that there was no reasonable issue on Roger’s claim upon the sponsorship and advertisement aspects under the Lanham Act and that the title of the movie ‘Ginger and Fred’ did not mention anything explicitly as to Roger’s role in producing or endorsing it. 
2. Further, the Court also claimed that the survey evidence provided by Rogers would at best give the impression that Rogers endorsed the movie or had any role in its production; however, the impression was not that  significant so as to be outweighed by the interests in artistic expression as to interdict the application of the Lanham Act.
3. Further, about the misleading contentions in context to the movie, the Court made an observation that the amalgam or mixture of meanings along with the possibly misleading meaning are not the consequence of the explicit   thus prohibiting a Lanham Act claim for false description of content. 
4. Thus, the Court inferred that it would be unfair to restrict expression just because there was a meager possibility of a title misleading consumers or the general public.
5. The Court also claimed that there was no breach of common law rights of privacy of Rogers and that the title of the movie was explicitly related to the content of the movie and not a disguised advertisement for the sale of goods or services or a collateral commercial product. 
6. The Court also stated that under Oregon law, there was no legal remedy for Roger per se.
7. Further, the Court asserted that the film was about a duo of fictional characters who were like Rogers and Astaire only in the mind’s eye and in the sentiments of the fictional audience at the most.
8. Thus, the Court affirmed the summary judgment.

Warner Bros. v. American Broadcasting Companies (1983)

Gist of the case

In this case (Warner Bros. v. ABC – 720 F.2d 231 (2d Cir. 1983), Warner Bros. filed a lawsuit against ABC, alleging trademark infringement, over the use of “Superman” in a documentary about the origin of animation. The United States Court of Appeals, Second Circuit, determined that the character’s use qualified as free speech under the First Amendment since it made a valid reference to the advent of animation.

Facts of the case

1. The plaintiff, in this case, Warner Brothers, Inc. owned the rights to Superman, however, the defendant, American Broadcasting Companies, Inc. (ABC), sought to produce a spinoff of Superman.
2. However, Warner Bros. denied the same, and thus, ABC came up with its own weekly television series “The Greatest American Hero”, which was based on a superhero. This show allegedly made several direct and indirect references to Superman. 
3. Further, the main character, or rather hero’s protagonist, Ralph Hinkley, was portrayed as an ‘ordinary guy’. Hinkley is portrayed as a young high school teacher who is trying to cope up with his recent divorce, a dispute for his son’s custody, and the strain that his domestic issues place on his work and his relationship with his girlfriend. Furthermore, even though Hinkley is generally attractive, his physical appearance is not imposing and he has medium height with curly-blonde hair.
4. In the show, Ralph used his superpowers in a comedically awkward manner which was clearly not the same as Superman’s heroism and competence.
5. Warner filed a suit against ABC, claiming-

1. copyright infringement, 
2. unfair competition, and 
3. violation of the Lanham Act.

The District Court granted summary judgment in favor of ABC to which Warner Bros. Inc. appealed. The United States Court of Appeals for the Second Circuit granted certiorari.

Issue of the case

The main issue in this case was whether or not the fictional character, Ralph Hinkley, the protagonist of the television series “The Greatest American Hero’’, was sufficiently similar to the fictional character, Superman, the hero of comic books, television, and more recently films, so that claims of copyright infringement and unfair competition may be repudiated without being considered by a jury.

Rule to be noted in context with the case

For claiming copyright infringement, the similarity to be assessed must concern the expression of ideas and not the ideas themselves, a distinction easier to assert than to apply. Even though the issue of substantial similarity is frequently a fact issue for jury resolution, the Court of Appeals affirmed that a court may determine non-infringement as a matter of law on a motion for summary judgment, either because the similarity between two works concerns only non-copyrightable elements of the plaintiff’s work, or because no reasonable jury, properly instructed, could find that the two works are substantially similar. 

Answer to the issue of the case

No, the fictional character, Ralph Hinkley, the protagonist of the television series, “The Greatest American Hero’’, was not sufficiently similar to the fictional character, Superman, the hero of comic books, television, and more recently films, so that claims of copyright infringement and unfair competition may be repudiated without being considered by a jury.

Conclusion

Here, the United States Court of Appeals for the Second Circuit affirmed the ruling, the reason being that there was no likelihood of confusion or tarnishing Warner’s mark upon comparing the two shows. The Court also asserted that denying attorney fees and costs to ABC was not an abuse of discretion. 

Mattel, Inc. v. MCA Records, Inc. (1998)

Gist of the case

In this case, the Barbie trademark was used in the song “Barbie Girl” by the band Aqua, which led to a lawsuit from Mattel. The Court ruled in favor of the defendants, finding that the song was a parody and that the First Amendment’s free speech clause protected their use of the trademark.

Facts of the case

1. Mattel, the plaintiffs in the case, and a toy company owned the trademark for and were the makers of an iconic cultural doll named ‘Barbie’. The doll, Barbie, had been the best-seller in the United States for a long period of time and had also become a part of American culture. 
2. A Danish band, Aqua, agreed to produce a song with MCA Records, Inc., the defendants, on their Aquarium album entitled ‘Barbie Girl’ that parodied the doll. The song consisted of one member of the band mimicking the doll in a high pitched voice, whereas, another band member acted as Ken, who invites Barbie to go to a party. 
3. The song was so prominent that it made it onto some Top 40 music charts.
4. Aggrieved by this, the toy company filed a suit against the music companies that created, marketed, and sold the song. The music company had foreign members of the same parent music corporation as well as domestic members of the music corporation. 
5. The lower court awarded a summary judgment on the side of the music companies regarding the trademark infringement and dilution claims. The lower court further awarded summary judgment in favor of the toy company on the defamation claim. 
6. With these judgments, both sides appealed to the higher court. 

Issues of the case

1. Whether or not using the Barbie doll by the music companies’ a breach of the toy company’s trademark.
2. Is the parody of a well-known product, where the product has assumed a role in society outside the protections offered under trademark law, allowed as protected non-commercial free speech under the First Amendment?

Rule to be noted in context with the case

As per the provisions of the trademark law, literary titles are not in breach of the Lanham Act until and unless the title has no artistic relevance to the underlying work whatsoever, or if it has some artistic relevance, unless the title clearly misguides as to the inventor, source, or content of the work.

Answers to the issues of the case

The answer was no. No, there was no breach of contract by the toy’s company when the music companies used the doll.

Whereas, the answer to the second question was yes. The parody of a well-known product where the product has assumed a role in society outside the protections offered under trademark law is allowed as protected non-commercial free speech under the First Amendment

Conclusion

The U.S. District Court for the Central District of California reached the inference that using the doll was not a violation of the toy company’s trademark; although the song’s title was apropos to the underlying work, the song did not indicate that it was created by Matel, the toy company. According to the appellate court, the song track was not purely commercial speech and was entirely protected by the First Amendment. Further, the usage of the toy company’s doll mark in the song fell within the noncommercial use exemption to the Federal Trademark Dilution Act of 2006. Moreover, the Paris Convention for the Protection of Industrial Property, Mar. 20, 1883, as revised at Stockholm, July 14, 1967, art.10bis, 21 U.S.T. 1583, 1648, 828 U.N.T.S. 305, 337, only provided for national treatment and did not define the substantive law of unfair competition.

Marvel Characters, Inc. v. Kirby (2014)

Gist of the case

In this case, the X-Men, Fantastic Four, and Thor were among the co-created characters for which the estate of comic book creator Jack Kirby sued Marvel Comics, claiming that he was the creator of the characters. However, Kirby’s contributions were considered work-for-hire and thus, the Court ruled in favor of Marvel rather than Kirby.

Facts of the case

1. The defendants (Lisa, Neal, Susan, and Barbara Kirby) in this case, who are the children of the late Jack Kirby, one of the most prominent comic book artists of all time, made an appeal to the District Court’s award of summary judgment to Marvel.
2. This case was related to the property rights to 262 works published by Marvel between 1958-1963. 
3. A notice by the defendants was served to the various Marvel entities for termination, claiming the statutory termination rights under Section 304(c)(2) of the Copyright Act of 1976, 17 U.S.C. 304.
4. Marvel filed a suit seeking a declaration that the defendants have no right to termination under Section 304(c)(2).

Issues of the case

There were three issues in the case, namely:

1. Whether or not a court can constitutionally take copyrights to any work originally possessed and authored by an independent contractor and pass it over to a private party by redesignating them as ‘works of hire’. 
2. Whether or not the definition of the term ‘employer’ under the Copyright Act of 1909 can be judicially expanded beyond the usual employment to independent contractors, when this states the opposite of the common law meaning, thus binding Supreme Court precedent and long standing canons of statutory construction.
3. Whether or not the ‘work for hire’ can be ascertained based on post-creation contingencies, like voluntary payment, when authorship and ownership of a copyrightable work, including ‘work for hire’ vest at inception.

Conclusion

1. The United States Court of Appeals, Second Circuit, reached the inference that the distinct court had no personal jurisdiction over Lisa and Neal Kirby and thus dismissed the judgment given in favor of the opposite party. 
2. Further, the Court of Appeals claimed that Lisa and Neal are not ‘indispensable parties’ and that it was appropriate for the action against Barbara and Susan Kirby to have proceeded on its merits.
3. The Court also affirmed that there was no mistake by the District Court in determining as a matter of law that the works at issue were ‘made for hire’, made at Marvel’s instance and expense, and that there was no agreement between the parties to state the opposite, and that the district court was correct in granting Marvel’s motion for summary judgment as to Susan and Barbra under Section 304(c).

Key legal issues in character merchandising

The idea-expression dichotomy under copyright law

Under US copyright law, the idea-expression dichotomy is a fundamental legal doctrine that makes a distinction between the ideas that inspire a work and how those ideas are expressed. Only the exact expression of ideas is covered by copyright; the ideas themselves are not. The implication of this is that while a character’s personality, background, and attributes may be protected by copyright law, the character’s core idea might not. The issue may specifically arise when the alleged infringer uses the dichotomy as a defense.

The extent of protection for literary works in the public domain 

Even if a character has copyright protection, the same cannot last forever. This is because the copyright for the work involving that character has an expiration period. After such a period, the work, including the character, enters the public domain. In cases such as Klinger v. Conan Doyle Estate, Ltd. (2013) and Silverman v. CBS Inc. (1989), courts have held that if a character has been used by an author in a series of works, any of which enters the public domain, then the elements of that character in the public domain and the story from the works can be used by anyone.

The extent of protection for visual images in the public domain 

Issues could also arise when a piece of work that features visual images of a character enters the public domain. The defendants may argue that they have used only the visual images available in the public domain for the purpose of merchandising, as opposed to stills from the actual film, and there is no infringement upon the plaintiff’s copyrights in the film. The same was the defendant’s contention in Warner Brothers v. X one X Productions (2011), which was partially accepted by the Court. In Frederick Warne & Co. v. Book Sales, Inc. (1979), it was held that even though the illustrations had entered the public domain, they could still be protected under trademark law if it could be demonstrated that they had developed independent trademark significance in some way indicating the source or sponsorship of the goods.

The right of publicity versus freedom of expression

Balancing the right of publicity with the First Amendment’s guarantee of free expression has been increasingly becoming difficult for the courts in the US. A critical factor in resolving the conflict was given in the case of Comedy III Productions v. Gary Saderup Inc. (2001) to determine whether the concerned work is “transformative” or merely uses a person’s identity as “raw material.” Recent cases involving video games featuring virtual characters based on real-world individuals suggest that the use of a living person’s resemblance is unlikely to be protected by the First Amendment, and modest changes might not be sufficiently transformative. In a nutshell, there are only a few legal restrictions on people’s right to publicity and the conflict between the right of publicity and freedom of expression still finds its place in the American law jurisprudence concerning character merchandising.

Trademarks and passing off

The owners of characters often register trademarks or resort to passing off actions to prevent others from using the character’s name or other indicators to mislead consumers into thinking there is a connection between the goods and the character. Trademarks are crucial to identify and build goodwill for products, but a celebrity’s popularity is also important in character merchandising. A celebrity’s association with a product lends credibility and allows consumers to connect instantly, making it difficult to determine which brand name and the celebrity association has a greater impact on the success of merchandise.

Overlapping protection under various IP laws

Comprehensive copyright as well as trademark laws governing character merchandising in the US, in addition to the tests, doctrines, and landmark judicial pronouncements given by the courts over time, gives rise to another key legal issue, i.e., overlapping protection under various IP laws. This issue gives rise to challenges such as the determination of the application of specific IP law, the scope of protection under the same, and understanding the loopholes of each law. For instance, the Copyright Act of 1976 does not provide any form of protection to characters from any moral rights, with the exception of the rights of attribution and integrity for authors of visual art. Moreover, when it comes to fictional characters, it becomes a challenge to determine which aspects of the characters are protected by trademark and copyright laws respectively. 

Exploring ways of resolving character merchandising issues

Aiming at bringing clearer laws and guidelines

To address the key legal issues that have been discussed above, there is a need for clearer laws and guidelines to resolve the legal issues surrounding character merchandising. For bringing the same, the focus should be on the development of specific legislation for character merchandising and clearer guidelines for distinguishing between commercial exploitation and creative works. Taking these steps could provide greater clarity for stakeholders, which can lead to a more stable and sustainable character merchandising industry.

Balancing publicity rights with freedom of speech

The capacity of creators and merchandisers to use well-known characters in creative ways may be restricted if the right of publicity is interpreted too broadly. This might limit the public’s ability to enjoy these characters and inhibit creativity. However, if the right to publicity is not given enough consideration, it may result in the unauthorized exploitation of people’s identities for commercial advantage. Finding a solution to strike a balance between publicity rights and the right to free speech, therefore, becomes the need of the hour.

Predominant use test

Rejecting the “transformative test,” Doe v. MacFarlane (2006) established a “predominant use test” to balance the right of publicity against freedom of speech. As per the test, if a product exploits a celebrity’s identity for commercial gain, it may violate the right of publicity, regardless of any expressive content. But if the product’s primary purpose is to comment on the celebrity, expressive elements may be given more weight.

Conclusion

In the US, the character merchandising business is significantly expanding and may soon completely revolutionize marketing practices. People’s, specifically kids’, emotional connection to their favorite cartoon or fictional characters or actors is a major factor in the industry’s expansion. However, with growth, there also arise moral and legal issues that need to be resolved. Character merchandise is governed by a complicated legal system that is always changing, with distinct laws and rules in each state. In this view, it becomes pertinent to explore ways to resolve key legal issues in jurisprudence revolving around character merchandising in the US that are arising and that may arise in the coming future.

Frequently Asked Questions (FAQs) on character merchandising in the US

What are the different types of character merchandising?

The three main types of character merchandising are as under:

1. Fictional and cartoon character merchandising,
2. Personality merchandising,
3. Image merchandising.

Can a character be copyrighted?

Any drawing, portrait, image, picture, depiction, or written description of a character can be registered for copyright. However, it must be noted that protection does not extend to the following:

1. The title or general theme for a cartoon or comic strip,
2. The general idea or name for characters depicted, or
3. The characters’ intangible attributes.

What are the 4 P’s of merchandising?

The 4 P’s of merchandising are as follows:

1. Product, 
2. Placement, 
3. Pricing, and 
4. Promotion.

How long will a copyright on character merchandising last?

1. The duration of copyright for a specific work relies on several factors including whether it was published and, if so, what was the date of such a publication. 
2. Generally, for works designed after 1st January, 1978, the copyright protection would be for the whole life of the author plus an additional 70 years.
3. When it comes to anonymous works, a pseudonymous work, or a work made for hire, the copyright will last for 95 years from the date of publication or 120 years from the year of its creation, whichever expires first. 
4. Further, for works that were published before 1978, the term will differ based on several factors.

Does one have to renew their copyright after a particular period of time?

No, the works created on or after January 1, 1978, need not be renewed time and again. However, for the works that were published or registered before January 1, 1978, renewal is optional after completing 28 years; doing so will definitely provide some legal advantages.

References

• https://iprlawindia.org/wp-content/uploads/2021/03/Jatin-Johns-Paly-.pdf 
• https://lawtimesjournal.in/character-merchandising/
• https://guides.lib.umich.edu/copyrightbasics/copyrightability 
• https://open.mitchellhamline.edu/cgi/viewcontent.cgi?article=1043&context=cybaris 
• https://www.majumdarip.com/blog_post/an-introduction-to-alternate-or-fictional-character-persona-under-the-laws-of-copyright-in-india/
• https://research.bangor.ac.uk/portal/files/20576631/null
• https://www.fenwick.com/insights/publications/publicity-rights-vs-the-first-amendment
• https://www.upcounsel.com/merchandise-license-agreement
• https://www.gandb.com/intellectual-property/character-licensing-and-merchandising-attorney/
• https://www.jdsupra.com/legalnews/merchandise-license-agreements-2869691/
• https://www.lexorbis.com/character-merchandising-vis-a-vis-ipr/
• https://lexforti.com/legal-news/copyright-protection-of-fictional-characters/#USA_and_India_-_A_Comparative_Study
• http://docs.manupatra.in/newsline/articles/Upload/6E98AFD8-25C9-441B-B663-0866D80E1064.pdf 
• https://southerncalifornialawreview.com/wp-content/uploads/2018/01/79_945.pdf
• https://scholarlycommons.law.case.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=2259&context=caselrev 
• https://www.ipandlegalfilings.com/protection-of-fictional-characters-copyright-and-the-doctrine-of-fair-use-in-the-digital-age/?utm_source=rss&utm_medium=rss&utm_campaign=protection-of-fictional-characters-copyright-and-the-doctrine-of-fair-use-in-the-digital-age

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