Franklin Mint Co. v. Manatt

• Decision Date: 21 July 2010
• Docket Number: No. B190482.,B190482.
• Citation: 109 Cal.Rptr.3d 143,184 Cal.App.4th 313
• Court: California Court of Appeals
• Parties: FRANKLIN MINT COMPANY et al., Plaintiffs and Appellants, v. MANATT, PHELPS & PHILLIPS, LLP, et al., Defendants and Respondents.

184 Cal.App.4th 313

109 Cal.Rptr.3d 143

FRANKLIN MINT COMPANY et al., Plaintiffs and Appellants,

v.MANATT, PHELPS & PHILLIPS, LLP, et al., Defendants and Respondents.

No. B190482.

Court of Appeal, Second District, Division 4, California.

May 3, 2010.

Review Denied July 21, 2010.

Loeb & Loeb, Andrew S. Clare, Los Angeles, Lawrence B. Gutcho; Akin Gump Strauss Hauer & Feld, William A. Norris, Los Angeles, Edward P. Lazarus, L. Rachel Helyar, Michael C. Small and Rex Heinke, Los Angeles, for Plaintiffs and Appellants.

Horvitz & Levy, David M. Axelrad, John A. Taylor, Jr., Frederic D. Cohen, Encino; Munger, Tolles & Olson, Michael R. Doyen and Brad D. Brian, Los Angeles, for Defendant and Respondent Manatt, Phelps & Phillips, LLP.

Hill Farrer & Burrill, Kevin H. Brogan, Neil D. Martin and Dean E. Dennis, Los Angeles, for Defendant and Respondent Mark S. Lee.

WILLHITE, Acting P.J.

The Franklin Mint Company and its principals, Stewart and Lynda Resnick, (collectively, Franklin Mint) appeal from a judgment dismissing their malicious prosecution action against the law firm Manatt Phelps & Phillips LLP and attorney Mark S. Lee (collectively, Manatt). Manatt represented the executors of the estate of Diana, Princess of Wales and the trustees of The Diana, Princess of Wales Memorial Fund (collectively, the Fund) in a lawsuit filed against Franklin Mint alleging claims related to Franklin Mint's use of Princess Diana's name and image in connection with merchandise Franklin Mint advertised and sold. Franklin Mint's malicious prosecution claim is based upon two of the claims that were alleged in that underlying lawsuit, for false advertising and trademark dilution under the Lanham Act (15 U.S.C. § 1125(a), (c)). After a 17-day jury trial, the trial court granted Manatt's motion for nonsuit or directed verdict, finding that Manatt had probable cause to prosecute those claims.¹ We reverse.

We conclude that, based on the record before us, no reasonable attorney could find tenable the false advertising claim as it was alleged and litigated in the underlying action. Therefore, we hold there was no probable cause to prosecute that claim.

We also hold there was no probable cause to prosecute the trademark dilution claim because no reasonable attorney could conclude that the claim could satisfy two fundamental, long-standing principles of trademark law. First, to be protectable as a trademark,² a word, phrase, name, or symbol must be used in commerce to identify goods or services and their source. Although Manatt contends that Princess Diana used her name in connection with her appearances at charitable events, that use does not demonstrate trademark use. Second, a trademark that is descriptive—such as a personal name—must acquire secondary meaning to be protectable in a trademark dilution action. In other words, the primary meaning of the mark (i.e., the descriptive meaning) must in the minds of the public be subordinate to its meaning as the source of goods or services. Because "Diana, Princess of Wales" has such an extraordinarily strong primarymeaning as descriptive of Princess Diana as a person, the contention that it had acquired secondary meaning at the time of the underlying lawsuit was, as the district court in the underlying lawsuit observed, "absurd." ( Cairns v. Franklin Mint Co. (C.D.Cal.2000) 107 F.Supp.2d 1212, 1222 ( Cairns III ).) Therefore, we conclude that the trademark dilution claim was untenable.

Manatt argues, however, that we should not find that the claim lacked probable cause, because the issues are complex and there is no directly controlling authority. But the fundamental principles of trademark law—a trademark must identify a source of a product or service, and a descriptive mark such as a personal name must acquire secondary meaning in the minds of the public—were clear and well-established, and their application to this case is straightforward and uncomplicated. The complexity of the issues arises only from Manatt's attempts to avoid those fundamental principles. Accordingly, we reverse the judgment and remand for trial on malice and damages issues.

BACKGROUND

The parties' briefs on appeal contain extensive discussion of the factual background of this case, including many facts relevant only to the issue of malice. Because the only issue in this appeal is whether there was probable cause for the trademark dilution and false advertising claims, our discussion of the facts will be limited to those facts relevant to that issue.

A. Events Leading Up To The Underlying Lawsuit

From the time of her engagement to Charles, Prince of Wales, in 1981, until her untimely death on August 31, 1997, Diana, Princess of Wales (Princess Diana) "was one of the most beloved, most photographed and most talked about celebrities" of the latter part of the twentieth century. ( Cairns v. Franklin Mint Co. (C.D.Cal.1998) 24 F.Supp.2d 1013, 1021 ( Cairns I ).) During her lifetime, Franklin Mint, a direct mail marketer of collectible memorabilia, sold over $9 million of products related to Princess Diana.

Immediately after her death, Franklin Mint decided to design a line of products featuring Princess Diana, including one product from which all proceeds would be donated to charity in her honor. On September 5, 1997, the vice president and general counsel of Franklin Mint, Howard Lucker, wrote to the trustees of The Diana, Princess of Wales Memorial Fund, which was a charitable trust established on September 4, 1997, at the direction of the executors of Princess Diana's estate, to receive contributions made in her memory. Lucker informed the trustees that Franklin Mint wanted to create and market a collectible porcelain plate in tribute to Princess Diana, from which all net proceeds would be donated to her favorite charities, and proposed that the Fund distribute those proceeds. Lucker stated that, if Franklin Mint and the Fund were able to come to an agreement quickly, Franklin Mint could advertise that it was officially authorized by the Fund and that all profits would be donated to the Fund.

The Fund did not immediately respond. Franklin Mint then decided that it would donate all proceeds from the tribute plate to charity. On September 9, 1997, Franklin Mint issued a press release stating that it was developing a tribute plate at its own expense and that all of the proceeds from the sale of the plate "will go directly to The Diana, Princess of Wales Charities." Five days later, it ran print advertisements for the tribute plate that featured a picture of the plate and stated, "All proceedsto go to Diana, Princess of Wales' Charities" and "100% of your purchase price will be donated to Diana, Princess of Wales' favorite charities." The Fund eventually declined Franklin Mint's proposal on October 31, 1997.

Because Franklin Mint wanted to "associate" its Princess Diana collectibles with donations to charities that supported causes that were important to her, and the Fund was not responsive to its proposal, Franklin Mint entered into an agreement with the Great Ormond Street Children's Hospital (a charity in England with which Princess Diana had been involved). Under that agreement, the charity allowed Franklin Mint to use its name in advertising Princess Diana collectibles in exchange for a promise by Franklin Mint to donate a minimum of £250,000 to the charity from sales of the tribute plate. Franklin Mint ultimately paid over $1.5 million to Great Ormond Street Children's Hospital from sales of the tribute plate outside the United States.

At some point, Franklin Mint stopped running advertisements for the tribute plate that included the "all proceeds" language, although it continued to advertise the tribute plate. Those later advertisements, as well as additional advertisements for other Princess Diana collectibles, instead included a statement that Franklin Mint had pledged a minimum of $1.5 million worldwide to charity in tribute to Princess Diana. Franklin Mint included a "response code" on all of its advertisements so it could track which purchases came from each advertisement. When a customer sent in the coupon at the bottom of the advertisement to purchase an item, the response code was printed on the coupon, and if the customer called Franklin Mint to order an item, the customer service representative asked for the response code; Franklin Mint sorted all purchases by response code. Using the response code, Franklin Mint was able to determine that the "all proceeds" tribute plate advertisement generated approximately $2.5 million in sales, and the tribute plate advertisement without the "all proceeds" language generated approximately $3.5 million in sales in the United States, and $3.5 million to $4 million in sales outside the United States ($1.5 million of which was paid to Great Ormond Street Children's Hospital). Franklin Mint eventually interpleaded with the district court in the underlying lawsuit $2,527,107 from sales attributable to the "all proceeds" advertisement, to be distributed to charity upon resolution of the lawsuit.

B. The Underlying Lawsuit

1. Princess Diana's estate and the Fund retain U.S. attorneys

By the middle of September 1997, Princess Diana's estate had retained an attorney in New York who specialized in intellectual property litigation, Paul LiCalsi, to advise it about intellectual property issues in the United States. The estate was aware of the advertisement for the tribute plate, which had run in the New York Times on September 16, 1997. It also was aware that, a few weeks before Princess Diana's death and in the weeks after, Franklin Mint had applied to the United States Patent and Trademark Office to register various trademarks related to its Princess Diana products, all of which used some form of Princess Diana's name or nicknames (such as "The People's Princess"). ³ On September 19, 1997, LiCalsiadvised the estate that a "cease and desist" letter should be sent to Franklin Mint, and a few...