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WINTERLAND CONCESSIONS CO. v. FENTON

October 19, 1993

WINTERLAND CONCESSIONS CO., et al., Plaintiffs,
v.
PETER FENTON, et al., Defendants



The opinion of the court was delivered by: BARBARA A. CAULFIELD

 Plaintiffs Winterland Concessions Co. d/b/a/ Winterland Productions, Big Geoff Overseas, Ltd., Big Step Productions, Inc. Boy Toy, Inc., Bustin' Productions, Inc., and FYC Tours, Inc., the holders of exclusive licenses to sell products that exhibit pictures of the popular music artists Madonna, George Michael, New Kids on the Block, Hammer, and the Fine Young Cannibals, filed this action for damages under the Lanham Act, 15 U.S.C. § 1051 et seq., and California's right to publicity law, Cal. Civ. Code § 3344. Defendants peter Fenton and Rathglade Limited d/b/a Atalanta West, Atalanta Press and Culture Shock are unlicensed producers and distributors of posterbooks and calendars, which contain photographs of the musicians. Defendants sell calendars and posterbooks in both the United Kingdom ("U.K.") and the United States ("U.S."). On May 10, 1993, the jury returned a verdict for plaintiffs.

 DISCUSSION

 This order has three purposes: (1) to memorialize and explain two rulings that the court made from the bench; (2) to resolve the parties' respective motions to increase and decrease damages; and (3) to enter judgment.

 A. The Court's Pretrial Decisions

 During pretrial conferences, the court ruled on two issues that were hotly debated by the parties. The court believes that the parties would benefit in any future discussions from a written explanation of those rulings. The first is the court's determination that it could exercise extraterritorial jurisdiction over defendants' U.K. sales. The second is the court's denial of defendants' motion for summary judgment based on their assertion of a functionality defense.

 1. Extraterritorial Jurisdiction. In Ocean Garden, Inc. v. Marktrade Co., Inc., 953 F.2d 500, 503 (9th Cir. 1991), the Ninth Circuit held that a three-part test, first developed under the antitrust laws, see Timberlane Lumber Co. v. Bank of Am., N.T. & S.A., 549 F.2d 597, 613 (9th Cir. 1976), governed findings of extraterritorial jurisdiction under the Lanham Act:

 
(1) there must be some effect on American foreign commerce; (2) the effect must be sufficiently great to present a cognizable injury to the plaintiffs under the federal statute; (3) the interests of and links to American foreign commerce must be sufficiently strong in relation to those of other nations.

 The first two factors were readily met in this case. Defendants' foreign sales activities competed with and presumably decreased plaintiffs' foreign sales. See Ocean Garden, 953 F.2d at 503. More importantly, Mr. Fenton frequently oversaw his business' U.S. operations and sales from his U.K. base, thereby directly affecting plaintiffs' U.S. revenues.

 The third factor requires the balancing of seven subcomponents: (1) the degree of conflict with foreign law; (2) the nationality of the parties; (3) the extent to which enforcement is expected to achieve compliance; (4) the relative significance of effects on U.S. as compared to elsewhere; (5) whether the explicit purpose of the infringement was to harm U.S. commerce; (6) the foreseeability of harm; and (7) the relative importance of violations within the U.S. Id. at 503-04. Like the first two factors, the third weighs in favor of exercising extraterritorial jurisdiction. The parties agreed that the Lanham Act does not conflict with U.K. law, all of the parties have substantial ties to California, and Mr. Fenton's substantial U.S. assets make an award readily enforceable here. By failing to pay for licensing rights and by selling items that competed with plaintiffs' domestic and foreign products, defendants substantially affected plaintiffs' U.S. business. The decision to sell competing products without paying licensing fees was an explicit decision to harm plaintiffs, and defendants' knowledge of plaintiffs' exclusive rights indicates that the harm was foreseeable. The court carefully weighed all of these factors, and held that it could properly exercise supplemental jurisdiction over defendants' foreign sales.

 After the court ruled on the matter, defendants argued that the factors should be submitted to the jury. The court disagreed: The existence of subject matter jurisdiction is a question of law, e.g., Reebok Int'l, Ltd. v. Marnatech Enter., Inc., 970 F.2d 552 (9th Cir. 1992), and therefore is one for the court.

 2. The Functionality Defense. In their pretrial papers, defendants argued that they were entitled to judgment as a matter of law because the photos of the performers were functional. The question is intriguing. While it is clear in the Ninth Circuit that a celebrity has a trademark in his or her "persona," Vanna White v. Samsung Electronics Am., Inc., 971 F.2d 1395 (1992), amended, 989 F.2d 1512 (9th Cir. 1993), and cert. denied, 113 S. Ct. 2443 (1993). It is well established that a trademark is functional if it "constitute[s] the actual benefit that the consumer wishes to purchase, as distinguished from an assurance that a particular entity made, sponsored, or endorsed a product," International Order of Job's Daughters v. Lindeburg & Co., 633 F.2d 912, 917 (9th Cir. 1980), cert. denied, 452 U.S. 941, 69 L. Ed. 2d 956, 101 S. Ct. 3086 (1981).

 The court denied defendants' motion for summary judgment, but later asked if they wished to propound a jury instruction on functionality. Defendants declined. Even if they had accepted, however, the court now holds that plaintiffs' would have been entitled to an instructed verdict on the issue: When a product feature is both functional and source-identifying, the copier must take "reasonable measures to avoid consumer confusion," Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, 1532 n.11 (1992), amended, 1933 U.S. App. LEXIS 79, 93 Daily J. D.A.R. ...


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