Resources

On March 26, 2008, the District Court for the Central District of California issued an order closing one chapter to a long running battle between the heirs of one of the original creators of the iconic comic book superhero, Superman, and DC Comics. The court’s order addressed the heirs’ attempt to exercise their rights under the termination provision contained in the Copyright Act of 1976; a formalistic and complex statutory scheme which allows authors and their heirs to terminate a prior grant of copyright in a creation.

At issue in the case was a 1938 grant (and other purported grants) by Jerome Siegel and his creative partner Joseph Shuster, of the copyright in the first edition of Superman published by DC Comics. The court’s order is a detailed 72 page ruling which devotes great consideration to the story behind the creation of Superman. As the court notes, “any discussion about the termination of the initial grant to the copyright in a work begins with the story of the creation of the work itself.”

In 1932 Jerome Siegel and Joseph Shuster were teenagers at Glenville High School in Cleveland, Ohio. Siegel was an aspiring writer and Shuster an aspiring artist. The two men met while working on their high school newspaper and discovered a shared passion for science fiction and comics.

In January, 1933, Siegel and Shuster first introduced the Superman character in a short story, The Reign of the Superman. The story told of a mad scientist’s experiment with a “deprived man from the bread lines,” and the creation of a villain with superhuman powers. A short time later, inspired to introduce a literary character which would bring hope amidst the general despair felt by most as a result of the Depression, Siegel revised the Superman character from a villain to a hero.

Siegel and Shuster made numerous attempts to get their current version of Superman published. The comic book publisher Detective Dan was the first potential publisher. However, Detective Dan later rescinded its offer. Undaunted rejections, Siegel and Shuster continued to work on Superman. They enhanced his powers and modified the format from comic book to newspaper comic strip.

By 1934, Siegel and Shuster had transformed the Superman character to its present day incarnation. Dressed in its now well known cape and outfit, complete with the “S” crest on its chest, Superman possessed superhuman strength, had the ability to jump an eight of a mile and leap a twenty story building; the character could run faster than an express train and was impervious to gunfire. Siegel and Shuster had also developed the concept of Superman’s secret identity and humanized this character by giving it an “ordinary person” alter ego in the form of Clark Kent.

The two shopped Superman for a number of years to numerous publishers but were unsuccessful. During that time, Siegel and Shuster wrote other comic strips that were sold to Nickelson Publishing Company. When Nickelson closed up in 1937, Detective Comics acquired some of the comic properties that Siegel and Shuster had written. On December 4, 1937, Siegel and Shuster entered into an agreement with Detective Comics and agreed to continue to furnish these comics for the next two years. The agreement also gave Detective Comics a sixty day option to publish any new material created by Siegel and Shuster.

Soon thereafter, Detective Comics decided to issue a new comic book magazine entitled Action Comic and became interested in Siegel and Shuster’s Superman material. With Detective Comics intending to publish Superman in an expanded thirteen page format, Siegel and Shuster began work on revising and expanding the existing Superman newspaper material into a format suitable for a comic book. In February, 1938 Siegel and Shuster resubmitted their Superman material to Detective Comics. On March 1, 1938, prior to the printing of the first issue of Action Comics, Detective Comics sent Siegel a check for $130.00 (representing the per page rate for the thirteen page Superman comic book) and a written agreement for Siegel and Shuster’s signature. The agreement assigned to Detective Comics “[all] the goodwill attached…and exclusive right[s]” to Superman “to have and hold forever.” Siegel and Shuster signed and returned the written assignment to Detective Comics.

Siegel and Shuster’s grant of worldwide ownership rights in Superman was later confirmed in a September 22, 1938 employment agreement in which Siegel and Shuster acknowledged that Detective Comics was “the exclusive owner of Superman.” This agreement also provided for Siegel and Shuster to continue to supply the artwork and storyline for Superman at a per page rate for the next five years.

Superman was published by Detective Comics on April 19, 1938 in Volume One of Action Comics. The comic was highly successful. However, while Superman continued to grow in popularity, a rift developed between the two creators, and Detective Comics. The parties engaged in legal bouts and disputes beginning in 1947, when Siegel and Shuster brought an action against Detective Comics seeking, among other things, to rescind their previous agreements with Detective Comics based lack of mutuality and consideration. The parties litigated again in 1969 as a result of the expiration of the initial copyright term for Superman. Siegel and Shuster brought suit seeking a declaration that they, not Detective Comics, were the owners of the renewal rights to the Superman copyrights. The results were not fruitful, and in 1970 the Federal District Court in New York ruled that the March 1, 1938 grant to Detective Comics (which was reconfirmed in a 1948 stipulation) had transferred and assigned to Detective Comics not only the initial copyright term, but the renewal term in the Superman copyrights as well.

In 1976, Congress made substantial changes to the Copyright Act, and these changes would have a great and profound affect on Siegel and Shuster and their grant of rights to Detective Comics. The 1976 Act expanded the duration of the renewal term for works like Volume One of Action Comics that were already in their renewal term at the time of the Act’s passage. Additionally, the Act gave artists and their heirs the ability to terminate any prior grant of rights to their creation where the grants were executed before January 1, 1978. The purpose was to protect authors, given their lack of bargaining power. Specifically, Section 304(c) of the Act provided that any copyright subsisting in either its first or renewal term on January 1, 1978, other than a copyright in a work for hire, the exclusive or non-exclusive transfer or license executed before January 1, 1978 is subject to termination notwithstanding any agreement to the contrary. It was this right of termination that spurred ten years of negotiation and litigation between the heirs of Jerome Siegel and Detective Comics, its parent company Time Warner, and their affiliated entities.

While the 1976 Act created a new right allowing authors and their heirs to terminate a prior grant of copyright, the Act also set forth specific steps concerning the timing and contents of the termination notice that must be served in order to effectuate termination. The termination of a grant may be effective “at any time during a period of five years beginning of the end of 56 years from the date the copyright was originally secured” and the notice of termination must by served “not less than two or more than ten years” before its effective date. These statutory requirements, along with regulations promulgated by the Register of Copyright made the termination process difficult, complex and extremely technical. However, through assistance of able counsel, the Siegel heirs were able to serve seven separate notices of termination on April 3, 1997, purporting to terminate several of Siegel’s grants in the Superman copyright. The parties negotiated until February, 2002 but were unable to come to terms. Litigation commenced in 2004.

Detective Comics attacked the enforceability of the termination notices and claimed that certain portions of the Superman comic in Volume one of Action Comics were in the nature of a work for hire and not subject to termination. Detective Comics raised other technical challenges to the claims made by Siegel’s heirs. Although highly technical and intricate, the court essentially ruled in favor of Siegel’s heirs and returned to them the copyright in the Superman material that was published in Volume one of Action Comics. Left undecided was how to apportion the profits from the exploitation of new derivative works on a going forward basis. (A termination of rights does not affect the post termination utilization and exploitation of derivative work prepared before termination.) The Court noted that section 304(c)(6)(E) would appear to exclude the Siegel heirs from sharing in profits derived from the foreign exploitation of the Superman material. Additionally, the Court noted that profits derived form the use of the Superman trademarks need not be shared with the Siegel heirs. Also left open is the issue of an accounting for profits resulting from the exploitations of the works by Detective Comics’ corporate siblings, Warner Brothers Entertainment and its corporate parent Time Warner Inc. The genesis of this claim stems from certain inter-corporate transactions concerning the Superman copyright. In noting that summary judgment was inappropriate (and surely ensuring another ten years of litigation), the court noted that “whether the license fees paid represents the fair market value…or whether the license for the works was a sweetheart deal…” are questions of fact that are not answered on summary judgments.

Trademark infringement occurs when a third party uses a mark in a way that infringes upon a trademark owner’s exclusive right and use of a trademark. Often, the third party will use a similar mark in a way that confuses consumers as to the source of the goods and services. For example, a fast food restaurant named “Wendi’s” would likely cause confusion with “Wendy’s.” Trademark infringement can occur only when it is likely that consumers will be confused as to the source of the goods. The purpose of this article is to examine the test and factors that courts use to determine if such infringement exists.

Many courts have developed a balancing test to determine if a mark infringes on another. This balancing test has largely grown from the seminal case Polaroid Corp. v. Polarad Elect. Corp., 287 F.2d 492 (2nd Cir. 1961). In that case, the court identified several variables to consider when assessing if a mark is infringing on another mark. This balancing test seeks to determine if consumers would likely be confused as to the source of the marks. If the test favors that confusion would likely result, then the court will likely rule that infringement exists. On the other hand, if confusion is unlikely or minimal, the court will likely rule against infringement.

The following are factors used by courts to assess the possibility of trademark infringement by looking at the likelihood of consumer confusion. Not one of these factors is dispositive to the issue of consumer confusion, and each factor must be examined in the context of the ultimate likelihood of confusion.

The first factor the court will look at is the strength of the marks in question. The strength of the marks is determined by distinctiveness of the mark. The more unique and distinct the mark, the more likely the mark will be protected against junior users. On the hand, the more descriptive and generic the mark, the less protection courts will provide to these marks. For example, the mark KODAK will receive more protection than a similar product that uses the mark FAST PHOTO.

Another factor examined is the similarity between the marks. Similarity of marks is tested based on sight, sound and meaning. The marks will be considered in their entirety to determine any similarities. A mark that looks different from another but gives off a similar commercial impression might be considered similar and thus weigh in favor of confusion. For example, a trademark that consisted of the word MONEY might be confused with the mark $$$ because the marks have similar commercial impressions.

The courts will also look at the proximity of the goods in the marketplace. This test relates to the channels of trade used by the goods. The more related the goods the greater the likelihood that they would exist together in the marketplace. Similar marks that are also are related would likely cause confusion as to the source of those goods. Highly related goods are more likely to cause confusion compared to unrelated goods.

The above three factors weigh heavily in determining likelihood of confusion. A mark will not be found confusingly similar with another mark if the two are not found similar in one of these areas, and the complaining mark is considered a weak mark.

After reviewing these, the courts will examine the likelihood that the prior owner will “bridge the gap” in the marketplace. This factor addresses the possibility that a mark will expand into other product lines. The more likely expansion will occur, the more likely consumer confusion will exist.

Next the courts examine evidence of actual confusion. When a case is brought to trial, the evidence is usually in the form of consumer surveys done by the parties. Survey evidence of this nature is often critical in determining likelihood of confusion in infringement cases.

The courts will also look to the sophistication of the buyers of the goods or services to determine likelihood of confusion. Courts have found that sophisticated buyers, such as those who have expertise in a specific area, are less likely to be confused by similarities in marks. In addition, courts have held that consumers of goods and services that are expensive exercise a higher degree of care in making these expensive purchasers. For example, a consumer would exercise a higher degree of care when purchasing a car compared to when that consumer purchases a piece of candy.

The last factor courts examine in a trademark infringement case is the intent of the defendant. If the defendant copies an existing trademark in bad faith to capitalize on that trademark’s goodwill, the courts will lean in favor of finding infringement. The likelihood of confusion, however, is the main consideration in determining infringement regardless of intent. If an individual copies a mark that does not lead to consumer confusion, the courts will likely not find infringement.

The above are not a rigid set of factors used by the courts. Most jurisdictions use some form of the above factors to determine if a likelihood of confusion exists. Regardless of the different variations, courts ultimately are seeking to discover if marks, as they are used in commerce, cause consumer confusion and lead to trademark infringement.