Disney Enters., Inc. v. Sarelli

• Decision Date: 09 August 2018
• Docket Number: 16 Civ. 2340 (GBD)
• Citation: 322 F.Supp.3d 413
• Parties: DISNEY ENTERPRISES, INC., Marvel Characters, Inc., LucasFilm Ltd. LLC, and LucasFilm Entertainment Company Ltd. LLC, Plaintiffs, v. Nick SARELLI, a/k/a Avi Lieberman, and Characters for Hire, LLC, Defendants.
• Court: U.S. District Court — Southern District of New York

322 F.Supp.3d 413

DISNEY ENTERPRISES, INC., Marvel Characters, Inc., LucasFilm Ltd. LLC, and LucasFilm Entertainment Company Ltd. LLC, Plaintiffs,

v.Nick SARELLI, a/k/a Avi Lieberman, and Characters for Hire, LLC, Defendants.

16 Civ. 2340 (GBD)

United States District Court, S.D. New York.

Signed August 9, 2018

Louis Sherman Ederer, Tal Rachel Machnes, Matthew Thomas Salzmann, Arnold & Porter Kaye Scholer LLP, New York, NY, Michael Walls O'Br Holihan, Holihan Law, Maitland, FL, for Plaintiffs.

Steven Michael Crosby, Jonathan James Ross, Feldman Law Group, New York, NY, for Defendants.

MEMORANDUM DECISION AND ORDER

GEORGE B. DANIELS, United States District Judge:

Plaintiffs Disney Enterprises, Inc. ("Disney"), Marvel Characters, Inc. ("Marvel"), LucasFilm Ltd, LLC, and LucasFilm Entertainment Company Ltd. LLC (together with LucasFilm Ltd. LLC, "LucasFilm") bring this copyright and trademark infringement action against Defendant Characters for Hire, LLC ("CFH") and its principal, Defendant Nick Sarelli. (See 2d Am. Compl. ("SAC"), ECF No. 51.) Plaintiffs assert multiple claims against Defendants under federal and New York common law, principally alleging that Defendants infringed on Plaintiffs' intellectual property rights by marketing and operating a party services and entertainment business that uses Plaintiffs' copyrighted works and trademarks without authorization. (SAC ¶¶ 1, 33–37, 39–42, 44–17, 49–52, 54–57, 59–64.)

Plaintiffs move pursuant to Rule 56 of the Federal Rules of Civil Procedure seeking partial summary judgment with respect to their federal claims for copyright and trademark infringement, as well as their claim for trademark dilution under Section 360-1 of New York's General Business Law. (See Pl's.' Mot. for Summ. J. ("Pls.' Mot"), ECF No. 59, at 1; Pls.' Mem. in Supp. of Mot. for Summ. J. ("Pls,' Mem. in Supp."), ECF No. 60, at 13 n.4.) In addition, Plaintiffs seek summary judgment on the issue of willfulness. (See Pls.' Mot. at 1.) Defendants also move under Rule 56, seeking summary judgment dismissing all claims asserted in the SAC. (See Defs.' Mot. for Summ, J. ("Defs.' Mot."), ECF No. 66, at 1.) They argue, among other things, that Plaintiffs' alleged copyrighted works are based on prior works that are part of the public domain and that their use of Plaintiffs' trademarks is protected by the nominative fair use defense. (See Defs.' Mem. in Supp. of Summ. J. ("Defs.' Mem."), ECF No. 67, at 5–6, 7–9.)

Defendants' motion for summary judgment dismissing Plaintiffs' claims for (i) trademark infringement, (ii) unfair competition, and (iii) false designation of origin is GRANTED. However, Defendants' motion for summary judgment dismissing Plaintiffs' claims for (i) trademark dilution, and (ii) copyright infringement is DENIED. Plaintiffs' motion for partial summary judgment on its claims of (i) trademark infringement, (ii) copyright infringement, and (iii) trademark dilution is similarly DENIED.

I. FACTUAL BACKGROUND¹

A. The Parties

Plaintiffs are large, related entertainment companies responsible for creating and bringing to life popular characters through comic books, animated series, motion picture films, video games, and theme parks. (Pls.' 56.1 Stmt, ECF No. 61, ¶ 1.) Plaintiffs claim intellectual property rights with respect to these characters, as well as their brands, titles, and properties, and those of its affiliates. (Id. ¶ 4.) Disney claims that it is the owner of federally-registered trademarks and copyrights in the "Mickey Mouse" and "Minnie Mouse" characters, among others, as well as the "Elsa" and "Anna" characters featured in the Disney motion picture film "Frozen."²

(Id. ¶¶ 18–25, 41–47.) Marvel claims ownership of federally-registered trademarks and copyrights in the "Avengers" characters, including "Captain America," "Hulk," and "Iron Man." (Id. ¶¶ 26–32, 48–56.) LucasFilm claims that it owns federally-registered trademarks and copyrights in several characters featured in the "Star Wars" motion picture films, including the "Stormtrooper," "Darth Vader," "Darth Maul," "Chewbacca," "Luke Skywalker," "Princess Leia," "Han Solo," "Obi-Wan Kenobi," and "Yoda" characters.³ (Id. ¶¶ 33–40, 57–62.) Although Plaintiffs and their affiliates engage in licensed merchandising of their intellectual property, they maintain quality and other controls over authorized uses of those rights. (Id. ¶¶ 4, 9.) Such authorized uses include live appearances and meet-and-greet opportunities with Plaintiffs' characters at theme parks located in Florida and California, among other places. (Id. ¶ 10.)

Defendant CFH is in the business of advertising, promoting, producing, and selling themed entertainment party services for private parties and corporate events. (Id. ¶ 12; Defs.' 56.1 Stmt, ECF No. 71, ¶ 2.) Defendant Nick Sarelli, who uses the pseudonym "Avi Lieberman," is CFH's sole owner and managing director. (Pls.' 56.1 Stmt. ¶ 15.) As part of its business, CFH provides its customers with a wide variety of costumed characters for entertainment purposes.⁴ (Defs.' 56.1 Stmt. ¶ 2.) CFH promotes its business through its own website, as well as on several social media accounts. (Id. ¶ 3.)

B. Alleged Infringing Conduct

Plaintiffs allege that CFH copied and used the images, likenesses, personas, and names of Plaintiffs' characters, as well as Plaintiffs' trademarks, to promote and advertise its services online. (Pls.' 56.1 Stmt. ¶¶ 13, 63.) For instance, Plaintiffs claim that promotional videos on CFH's website and YouTube and Facebook pages depict costumed individuals portraying Disney's Mickey and Minnie Mouse characters. (Id. ¶¶ 64–66.) Plaintiffs also claim that CFH advertised "Frozen Theme[d] Parties" on their website and social media sites, offering "Anna and Elsa [to] delight your children as they sing their favorite songs." (Id. ¶ 67; see also Decl. of Louis S. Ederer dated Oct. 13, 2017 ("Ederer Decl."), Ex. T, ECF No. 62-31, at DEI00009368–69.) The advertisements contained videos and/or hyperlinks to videos of costumed actors portraying the Elsa and Anna characters singing songs from the Disney motion picture film Frozen. (Pls.' 56.1 Stmt. ¶¶ 68, 72; see also Ederer Decl., Ex. X at DEI00009367.) One such advertisement included the caption "Delight your children as they watch the Frozen Snow Queen Elsa and her sister, Princess Anna[,] tell their story in this professional adaptation." (Pls.' 56.1 Stmt. ¶ 73.) Another read, "Frozen themed kids party entertainment: Bring these professional musical theatre performers to your next kids [sic] birthday party as they retell the story of two sisters." (Id. ¶ 74.) Plaintiffs claim that CFH posted photographs on its Facebook page of costumed actors dressed in full costume as the Elsa and Anna characters. (Id. ¶ 75.)

Plaintiffs claim that CFH's website also advertised "Avenging Team" themed parties, with images of several costumed actors portraying the Marvel franchise's Captain America, Hulk, and Iron Man characters described as "The Soldier," "Man of Iron," and "Big Green Guy," respectively. (Id. ¶¶ 77–79.) One such advertisement offers "the most amazing premium entertainment" featuring "high flying action and incredible acrobatic stunts." (Id. ¶ 77.) Another notes that CFH's actors "are very authentic and remain in character throughout [the] event" and that "[s]ome of [CFH's] actors have even been trained by the actual Avengers stunt team." (Id. ¶ 79.)

CFH's website similarly advertised "Star Battles" events, with images of characters from the Star Wars motion picture series, as well as images of costumed actors portraying LucasFilm's characters such as Luke Skywalker ("Young Luke"), Darth Vader ("The Dark Lord"), Chewbacca ("Smugglers Co Pilot [sic]"), and Princess Leia ("The Princess"), and Obi-Wan Kenobi ("Old Ben"). (Id. ¶¶ 87–88; see also Ederer Decl., Ex. A, ECF No. 62-1, at 4.) In addition, CFH's website featured a video entitled "Star Wars Episode VII Themed Birthday Party," which portrayed various Star Wars characters dressed in full costume and CFH's "Special Effects, Robotics, and Lighting" design services, (Pls.' 56.1 Stmt. ¶ 89.) CFH also posted promotional videos on its Yelp, YouTube, Facebook, and Instagram webpages featuring actors depicting various Marvel and LucasFilm characters.⁵ (Id. ¶¶ 80–86, 90–96.)

Plaintiffs assert that Defendants infringed their trademarks and copyrights not only with respect to CFH's advertising and marketing materials, but also by providing customers with the live costumed actors portraying Plaintiffs' copyrighted and trademarked characters. (Id. ¶¶ 101–210.) To support this claim, Plaintiffs point to several dozen, largely unsigned CFH event contracts offering various "party packages."⁶ (See Ederer Decl., Exs. N–P.⁷ ) One such contract purports to book an event at which CFH was to provide the "Captain America, Iron Man, [and] Hulk" characters, among others, who would perform an "Avengers Stage Combat Stunt Show" and run an "Avengers Camp." (Id. , Ex. O at CFH000194.) Another contract requires CFH to provide the "Darth Vader" and "Luke Skywalker" characters for a "Meet and Greet Plus" party, with CFH providing "Jedi Training, [an] Interactive Stage Show, [and] Darth Vader Combat" services. (Id. , Ex. P at CFH000188.) A different event contract had CFH providing the "Captain America" and "Iron man [sic]" characters for an "Interactive Theatrical Performance," (id. , Ex. O at CFH000198), while another purports to book an event with CFH providing the "Princess Anna" and "Snow Queen" characters for a "Meet and Greet with 3 songs." (Id. , Ex. N at CFH000232.)

Plaintiffs' claim that evidence of Defendants' bad faith and willful infringement can be inferred from the standard form language in CFH's event contracts. They cite, for example, language added to CFH's contracts in or about November 2013 stating that, "[f]or copyright reasons, costumes may vary from design, pattern & color & will not be the same exact costume seen on the...