Miss America Organization v. Mattel, Inc.

• Decision Date: 25 September 1991
• Docket Number: No. 1865,D,1865
• Citation: 945 F.2d 536
• Parties: , 60 USLW 2212, 1991 Copr.L.Dec. P 26,806, 20 U.S.P.Q.2d 1273 The MISS AMERICA ORGANIZATION; Kenner Products, a division of Tonka Corporation, Plaintiffs-Appellants, v. MATTEL, INC.; Nicholas F. Brady, Secretary of the U.S. Treasury; Carol Hallett, Commissioner of U.S. Customs; Anthony Liberta, New York Regional Commissioner, U.S. Customs, Defendants-Appellees. ocket 91-6111.
• Court: U.S. Court of Appeals — Second Circuit

Page 536

945 F.2d 536

13 ITRD 1842, 60 USLW 2212, 1991

Copr.L.Dec. P 26,806,

20 U.S.P.Q.2d 1273

The MISS AMERICA ORGANIZATION; Kenner Products, a division

of Tonka Corporation, Plaintiffs-Appellants, v. MATTEL, INC.; Nicholas F. Brady, Secretary of the U.S.

Treasury; Carol Hallett, Commissioner of U.S.

Customs; Anthony Liberta, New York

Regional Commissioner, U.S.

Customs, Defendants-Appellees.

No. 1865, Docket 91-6111.

United States Court of Appeals,

Second Circuit.

Argued June 24, 1991.

Decided Sept. 25, 1991.

Carol F. Simken, New York City (Weiss Dawid Fross Zelnick & Lehrman, P.C., of

counsel), for plaintiff-appellant Miss America Organization

Sara L. Shudofsky, Asst. U.S. Atty., S.D.N.Y. (Otto G. Obermaier, U.S. Atty. for S.D.N.Y., Richard M. Schwartz, Asst. U.S. Atty., S.D.N.Y., of counsel), for defendant-appellee Nicholas F. Brady.

Arthur J. Levine, Washington, D.C. (Laurence R. Hefter, Thomas W. Winland, Mark Traphagen, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., Thomas I. Sheridan, III, Richards & O'Neil, New York City, of counsel), for defendant-appellee Mattel, Inc.

Donald E. DeKieffer, Washington, D.C. (J. Kevin Horgan, Pillsbury, Madison & Sutro, of counsel), filed a brief on behalf of The Intern. Anticounterfeiting Coalition, Inc. as amicus curiae.

Before CARDAMONE, MINER and MAHONEY, Circuit Judges.

CARDAMONE, Circuit Judge:

The substantial legal issues presented by this appeal arise from a dispute over five 11 1/2 inch glamorous but--according to their maker--wholesome, high fashion dolls: "Blair," "Justine," "Tonya," "Devon," and "Raquel." The dolls, manufactured in China for plaintiffs, Kenner Products, a division of Tonka Corporation, and the Miss America Organization, a non-profit corporation that conducts the well-known beauty pageants, are the subject of this litigation because Mattel, Inc., the owner of the copyright on the ubiquitous "Barbie" doll, believes some of the five named dolls infringed its copyright. Not only important legal issues but also high economic stakes are packaged in these petite plastic figures. The "Barbie" doll is the best selling toy doll in the world--96 percent of three to eleven year old girls in the United States own at least one. In the past 30 years 600 million Barbie dolls have been sold--one is sold every two seconds--and, in 1990 alone 26 million of them were sold, earning gross revenues for Mattel of $740 million.

When Kenner began importing its "Miss America" line of dolls into the United States, Mattel asked U.S. Customs to detain them. Kenner and the Miss America Organization responded by suing Mattel and United States Customs in federal court. This appeal comes from the April 24, 1991 order of the United States District Court for the Southern District of New York, 760 F.Supp. 1107, (Sand, J.), denying plaintiffs' motion for a preliminary injunction that sought to order Mattel, Inc., Nicholas Brady, the Secretary of the United States Treasury, Carol Hallett, the Commissioner of United States Customs, and Anthony Liberta, the New York Regional Commissioner for United States Customs (defendants) to cease interfering with the importation and sale of their dolls in the U.S.--particularly from detaining shipments at the border--for Mattel to submit all its claims to the district court, and to withdraw requests for action before other judicial or administrative bodies. The district court held that the plaintiffs' failure to exhaust their administrative remedies in United States Customs, where proceedings in this matter are ongoing, precludes judicial intervention.

While this matter was sub judice the Intellectual Property Rights Branch of the United States Customs Service determined in an administrative decision dated August 6, 1991 that the overall appearances of three of the Kenner dolls' heads were "substantially similar" to the head of Superstar Barbie and, therefore, the dolls infringed Mattel's copyright. The plaintiffs have several avenues to obtain relief from the agency decision. Under the regulations, after Customs initiates its process for seizure and forfeiture the plaintiffs may petition for administrative relief and, if denied, for administrative reconsideration. See 19 U.S.C. §§ 1607, 1618; 19 C.F.R. §§ 133.51(a), 162.32(a), 171. Alternatively, if the plaintiffs timely appear and post bond, they may be entitled to judicial review of the Customs decision through a judicial forfeiture proceeding in the federal district court where the property was seized, in this case, the United States District Court for the Northern District of Ohio. See 19 U.S.C. § 1608; 19 C.F.R. § 162.47. In light of these developments, we asked the parties

                to respond to this administrative ruling.   The parties responded and requested that this panel render a decision.   We conclude that the case is not moot because the administrative proceedings remain ongoing, and therefore proceed to decide this appeal
                

BACKGROUND

The factual background of this case is not complicated. Together, Kenner and The Miss America Organization developed the Miss America line of fashion dolls, the profits from which were to go to Kenner and to fund Miss America pageant scholarships, the largest scholarship foundation in the world for young women. The venture began in May, 1990 when a designer at Kenner sketched four different drawings from which its sculptors created seven doll heads. Kenner selected three of them for the line of dolls. One of these heads was used for two dolls--"Devon" and "Tonya." Another head was used for "Blair," and the third was used for "Justine" and "Raquel." Kenner began manufacture of the dolls in China, and introduced them at a Toy Fair in New York in February, 1991. It has received over ten million dollars in customer orders and began placing the dolls in retail stores on February 21, 1991. Four television commercials were aired in April of 1991 and numerous other advertisements tied in with the Miss America Pageant were produced.

On March 11, prior to the airing of the commercials, Mattel contacted Customs and sought an exclusion order on the ground that two of the Miss America dolls--"Devon" and "Tonya"--were copies of the "Barbie" doll and therefore infringed on Mattel's copyright. Customs decided to detain further shipments of the dolls on "suspicion" of infringement; it reaffirmed its finding of suspicion on April 10.

On March 28, 1991 Kenner and the Miss America Organization sued Mattel in federal district court, seeking a judgment declaring that the dolls did not infringe Mattel's copyright, and a permanent injunction barring Mattel from further interference with their importation, distribution, or marketing. The complaint also asserted claims for misuse of copyright, unfair competition, and tortious interference with prospective economic advantage. Plaintiffs amended their complaint on April 12, 1991 to add United States Customs as a defendant and moved at the same time for the preliminary injunction, the denial of which is the subject of this appeal.

Mattel answered the Amended Complaint on May 1, 1991 and interposed counterclaims alleging that the importation of the "Devon" and "Tonya" dolls--as well as "Blair"--violated Mattel's copyright in the "Barbie" doll, and its rights under the Lanham Act and N.Y.Gen.Bus.Law § 368-d. In denying the plaintiffs' preliminary injunction motion on April 24, 1991 the district court stated it believed judicial intervention premature. It did not reach or decide whether a preliminary injunction should issue on the merits.

In a series of motions, plaintiffs sought various injunctions pending appeal of the district court's order, all of which were denied either by the district court or by this Court, though an expedited appeal was granted. In the meantime, Mattel had sought and received an exclusion order detaining the "Blair" doll as well as "Devon" and "Tonya" on suspicion of infringement. Customs has now detained a shipment of dolls pursuant to the original exclusion order. Because of the way in which they are packed and shipped--apparently the dolls are all together, not separately boxed by name--all five types of the "Miss America" dolls were held. Mattel has posted a bond in the amount of $505,450, equal to 300 percent of the value of the detained goods and duty, pursuant to Customs regulations.

STATUTORY AND REGULATORY FRAMEWORK

To resolve this appeal, it is necessary to set forth the controlling statutory and regulatory framework. Section 603 of the Copyright Act of 1976 empowers the Secretary of the Treasury to make regulations to enforce the provisions of the law prohibiting importation of infringing goods. See 17 U.S.C. § 603(a) (1988). The regulations may require as a condition of exclusion The Treasury Department promulgated regulations setting forth the procedures to be followed by Customs in cases under § 602 where there is "suspicion" of the importation of infringing copies. 19 C.F.R. § 133.43 (1990). These procedures are distinct from those used in a clear case of piracy. See 19 C.F.R. § 133.42 (1990). The procedures applicable to "suspicion" cases provide that if a Customs district director

that the person seeking exclusion obtain a court order, furnish proof in accordance with prescribed procedures that there is a valid copyright and the importation would infringe that copyright under 17 U.S.C. § 602 (1988) (importation of infringing copies), and/or post a surety bond for any injury that might result from an unjustified detention of the goods. 17 U.S.C. § 603(b) (1988).

has any reason to believe that an imported article may be an infringing copy ... he shall withhold delivery, notify the importer of his action, and advise him that if the facts so warrant he may file a statement denying that the article is in fact an infringing copy and alleging that the detention of the article will result in a material depreciation of its value, or a loss or damage to...