IP/Entertainment Law Weekly Case Update for Motion Picture Studios and Television Networks -- March 14, 2013


Table of Contents

Gibson Guitar Corp. v. Viacom International, Inc., USDC C.D. California, March 8, 2013
 Click here for a copy of the full decision.

  • District court grants Viacom’s motion to dismiss plaintiff’s Lanham Act and related state law claims for alleged unauthorized use of its trademark, finding that complaint failed to articulate which specific acts underlying the claims plaintiff alleged Viacom committed.

Plaintiff Gibson Guitar Corp. brought suit against defendants Viacom International, Inc., and John Hornby Skewes & Co., Ltd. (JHS), asserting Lanham Act claims and state law claims based on defendants’ alleged unauthorized use of Gibson’s Flying V trademark in licensed products made and sold by JHS pursuant to a licensing agreement between Viacom and JHS. The district court granted defendants’ motion to dismiss for failure to state a claim because the complaint failed to articulate which defendants allegedly performed which acts underlying plaintiff’s claims. The district court denied Viacom’s motion to dismiss for lack of subject matter jurisdiction, however, finding that the court could not make a jurisdictional determination at this stage of the proceedings because the facts related to jurisdiction were inextricably intertwined with the underlying facts related to plaintiff’s claims.

Gibson owns the Flying V Body Shape Design Trademark, the Flying V Peg-Head Design Trademark, and the word mark FLYING V. Viacom owns the trademarks to the animated television character SpongeBob Square Pants, and JHS promotes and sells various products using the SpongeBob trademarks, pursuant to a licensing agreement with Viacom. In its complaint, Gibson asserted that the SpongeBob SquarePants Flying V Ukulele infringes its trademarks. Viacom moved to dismiss the complaint, arguing that the court lacks subject matter jurisdiction under the Lanham Act because the mark had not been used in commerce, based on its agreement with JHS for the licensing of SpongeBob to JHS for character-identified musical items in certain countries outside the United States. Noting that dismissal at this stage is not appropriate when the jurisdictional issue and substantive issues are so intertwined that the question of jurisdiction is dependent on the resolution of factual issues going to the merits, the court determined that the same provision of the Lanham Act established both the jurisdictional requirement and the substantive elements of Gibson’s cause of action and denied Viacom’s motion to dismiss.

Viacom moved to dismiss the complaint, arguing plaintiff failed to allege facts supporting claims for either direct or contributory infringement. Specifically, Viacom asserted that plaintiff’s general allegations that defendants designed, manufactured, and sold the ukulele constituted a “conclusory lumping together” insufficient to meet the pleading requirements. The court agreed. Noting that the only specific allegation against Viacom asserted that the company licensed SpongeBob to JHS and the rest were joint allegations against both defendants, that no advertising and promotional materials mentioned in the complaint were specifically attributed to Viacom, and that the only websites selling the allegedly infringing products were associated with JHS, the court concluded that, given the respective positions of defendants (Viacom as the trademark owner and JHS, the product seller and promoter), plaintiff’s complaint should specify the different roles of each in the allegedly infringing conduct in order to state a claim. “[I]t does not appear plausible to the court that the role of each Defendant in the allegations would be identical. Even without considering the roles as described in the licensing agreement (the authenticity of which Gibson does not dispute for the purposes of this motion), it does not appear plausible that the Defendants’ acts were entirely unitary. To state a claim for relief, Gibson must articulate which acts were performed by which Defendant.”

Scorpio Music (Black Scorpio) S.A. v. Willis, USDC S.D. California, March 4, 2013
 Click here for a copy of the full decision.

  • District court denies motion to dismiss Village People lead singer’s counterclaim asserting 50 percent ownership in copyrights to group’s musical compositions, finding his claims accrued for statute of limitations purposes when singer received plain and express repudiation of his ownership claim and that copyright certificates and record labels alone did not constitute plain and express repudiation.

Plaintiffs Scorpio Music S.A., a French music publisher, and Can’t Stop Productions, Inc., the exclusive U.S. sub-publisher and administrator of Scorpio’s musical compositions, brought a declaratory judgment action against defendant Victor Willis, the original lead singer of Village People, challenging Willis’s attempt to terminate his post-1977 grants of his copyright interest in musical compositions, including the hit songs “YMCA,” “In the Navy,” and “Go West.” In May 2012, the district court dismissed the music publishers’ declaratory judgment action, holding that as a joint author who separately transferred his copyright interest, Willis could unilaterally terminate that grant. (Read our summary of the court’s decision here). Plaintiffs filed a First Amended Complaint, seeking a judicial determination that Willis could recover a maximum of only 33.3 percent of the copyright interest, representing an equal share split between three authors. Willis filed a counterclaim asserting that the third alleged author did not contribute to the authorship of the lyrics or the music of 24 of the compositions and that he is entitled to recapture 50 percent of the copyright interests in those works. Plaintiffs moved to dismiss the counterclaim as barred by the Copyright Act’s three-year statute of limitations and the doctrine of laches. The court denied plaintiff’s motion to dismiss, finding an issue of fact as to when Willis’s claim accrued.

According to the court, Willis’s claim is in the nature of a co-ownership claim and, under the Ninth Circuit’s decision in Zuill v. Shanahan, accrued when plain and express repudiation of his claim to ownership of 50 percent of the copyright interests was communicated to him. Willis argued that his claim accrued in 2011, when he terminated his grant of rights pursuant to Sec. 203 of the Copyright Act. The court disagreed. Noting that Section 203(b) does state that upon termination, “all rights” that were covered by the terminated grants revert back to the author, the court reasoned that these rights are privileges or claims that depend on the interpretation of laws and the rights of others, often by a court. Further, Section 203 does not address when the rights covered by terminated grants must be determined nor provide a different statute of limitations for ownership claims raised in connection with terminated grants. With respect to ownership claims raised in the context of the termination of grants, the statute of limitations in the Copyright Act acts as it normally does, barring claims brought more than three years after plain and express repudiation of the ownership claim. The fact that Willis’s future rights to the disputed works vested upon service of the notice of termination does not mean that he could not have brought his co-ownership claim earlier. In fact, the court noted, at the time Willis granted his copyright interests to Can’t Stop, the Copyright Act of 1976 had been enacted. Willis therefore knew he would have the opportunity to terminate his grants and could have litigated any ownership disputes of which he was aware in order to preserve his rights.

Citing Zuill, the court also rejected the argument, made by Willis and the Songwriters Guild of America, that the statute of limitations prevented Willis from recovering monetary damages for claims that accrued more than three years before filing suit (in this case, credit for the disputed works for the past 35 years), but does not preclude Willis from asserting his substantive right to reclaim one-half of the copyright ownership interests on a prospective basis. Under Zuill, while § 507(b) applies in infringement actions to limit a plaintiff’s remedy to the prior three years without extinguishing the rights of the copyright owner, it would operate as a complete bar to Willis’s co-ownership claim if he brought his claim more than three years after it accrued.

The court concluded that factual issues existed as to when plain and express repudiation of his 50 percent ownership interest was first communicated to Willis. Plaintiffs asserted that the copyright registration certificates, filed between 1978 and 1980, identifying the third author, as well as printed labels on the original vinyl albums released in 1978, 1979, and 1981, constituted plain and express repudiation and started the running of the clock. The court disagreed, finding that the mere filing of copyrights and the release of records with labels identifying the third author did not rise to the level of “plain and express repudiation” communicated to Willis and that, at the very least, plaintiffs should have to show that Willis had actual notice of the content of the registrations and the record labels. The court denied plaintiffs’ motion to dismiss, concluding that factual issues as to what Willis knew and when precluded the determination of whether the three-year statute of limitations barred Willis’s claim. The court likewise denied the motion based on plaintiffs’ laches argument, finding that if Willis’s counterclaim proved timely under § 507(b), an unreasonable delay that would support the application of the equitable doctrine would be unlikely to exist.

Marathon Funding, LLC v. Paramount Pictures Corp., California Court of Appeal, Second Appellate District, March 4, 2013
 Click here for a copy of the full decision.

  • California appeals court affirms judgment in favor of Paramount on breach of fiduciary claims case brought by investor in No Country for Old Men, finding that, under New York law, investment agreement did not create joint venture relationship between the parties and that enforceable provisions unequivocally discharged Paramount of any fiduciary duties.

Marathon Funding, an affiliate of Morgan Stanley, sued Paramount Pictures in California state court over a deduction made by Paramount to Marathon’s share of the proceeds from the Coen brothers’ film No Country for Old Men. Marathon had a “Multi-Picture Investment Agreement” with Paramount to invest in a slate of 14 movies, one of which was the Oscar-winning picture starring Tommy Lee Jones. A drafting error in his contract gave Jones approximately $10 million more in bonus money than he was supposed to receive, and Paramount apportioned the error among itself and the investors in the film, deducting $2 million from Marathon’s share of the proceeds. Marathon sued Paramount in California state court, asserting Paramount breached its fiduciary duties in several ways, including by failing to catch the error in Jones’s contract and by not initially disclosing the reason for the $2 million deduction to Marathon. Following a bench trial, the trial court entered judgment for Paramount, finding that, under New York law, language disclaiming any fiduciary duty in the investment agreement was effective because the agreement did not create a joint venture. The trial court later granted Paramount’s post-trial motion for more than $690,000 in attorneys’ fees. On appeal, the California Court of Appeal affirmed the trial court’s decision, finding that the contract between the parties unequivocally discharged them of any fiduciary duties they might otherwise owe each other under New York law.

At the outset, the Court of Appeal determined that New York law applied to Marathon’s claim. Noting that under New York law, joint venturers are fiduciaries, the court found that the investment agreement did not create a joint venture with Marathon and Paramount, not only because the agreement stated in several places that the parties disclaimed any fiduciary duties or agency, trustee, and partnership relationships, but also because the agreement deprived Marathon of any control whatsoever over the motion pictures, a required element for formation of a joint venture under New York law. The court also found that any other potential bases for the existence of a fiduciary duty were negated by the investment agreement’s express disclaimers that no such relationship was created, all of which were enforceable under New York law.

The Court of Appeal also affirmed the trial court’s award of attorneys’ fees to Paramount under a provision in the investment agreement. The court rejected Marathon’s arguments that the language of the attorneys’ fees provision, awarding fees and costs to the prevailing party in “any action, suit, or other proceeding [that] is instituted concerning or arising out of this agreement,” was not broad enough to cover the tort claim for breach of fiduciary duty and that the amount awarded was excessive. 

For more information, please contact Jonathan Zavin at jzavin@loeb.com or at 212.407.4161.

Westlaw decisions are reprinted with permission of Thomson/West. If you wish to check the currency of these cases, you may do so using KeyCite on Westlaw by visiting http://www.westlaw.com/.


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