Ott v. Target Corp.

• Decision Date: 08 March 2001
• Docket Number: No. CIV 99-1170 (PAMJGL).,CIV 99-1170 (PAMJGL).
• Citation: 153 F.Supp.2d 1055
• Parties: Heidi OTT A.G. and Heidi Ott, Plaintiffs, v. TARGET CORPORATION; the Brass Key, Inc.; Unimax Toys Limited; Unimax Toys (USA), Inc.; and John Pellegrene; Defendants.
• Court: U.S. District Court — District of Minnesota

153 F.Supp.2d 1055

Heidi OTT A.G. and Heidi Ott, Plaintiffs, v. TARGET CORPORATION; the Brass Key, Inc.; Unimax Toys Limited; Unimax Toys (USA), Inc.; and John Pellegrene; Defendants.

No. CIV 99-1170 (PAMJGL).

United States District Court, D. Minnesota.

March 8, 2001.

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Donald Wayne Niles, Norman M. Abramson, Patterson & Keough, Minneapolis, MN, for Plaintiffs.

John Bennett Gordon, James Robert Steffen, Kristin R. Eads, Faegre & Benson, Minneapolis, MN, Mark Joseph Chasteen, Michelle Bergholz Frazier, James Jenner McConnell, Dorsey & Whitney, Minneapolis, MN, Allen W. Hinderaker, Merchant & Gould, Minneapolis, MN, Valerie du Laney, C. Dean Little, Ashley Bale, Miller Nash Wiener Hager & Carlsen, Seattle, WA, D. William Toone, Mark S. Carlson, Dorsey & Whitney, Seattle, WA, John Allen Clifford, Kristina M. Foudray, Merchant & Gould, Minneapolis, MN, Larry L. Saret, Martin L. Stern, Rita A. Abbati, Kevin C. Trock, William A. Meunier, Laff Whitesel & Saret, Chicago, IL, for Defendants.

MEMORANDUM AND ORDER

MAGNUSON, District Judge.

This matter is before the Court on Defendants' Motions for Summary Judgment and Plaintiffs' Motion for Partial Summary Judgment. For the reasons that follow, the Court grants in part and denies in part each Defendant's Motion and denies Plaintiffs' Motion.

BACKGROUND¹

Plaintiff Heidi Ott ("Ott"),² a Swiss citizen, has designed and manufactured artisan dolls for many years. On November 2, 1982, Ott registered her mark, Heidi Ott®, with the United States Patent and Trademark Office (Reg. No. 1,215,011). Ott's handmade dolls range in price from $100 to several thousand dollars, and are primarily sold through small doll specialty shops catering to serious doll collectors. In 1989 she created her first line of mass-produced dolls, the Little Ones collection. The Little Ones dolls are 12 inch international dolls dressed in traditional costume. Although mass-produced, Ott maintains that these dolls retain the distinctive characteristics of her handmade dolls.

In June 1994, after noting the overwhelming success of The Pleasant Company's American Girl collection of mass-produced 18 inch vinyl dolls,³ Ott began exploring the possibility of producing similar dolls for sale in the United States. Ott asked Julie Abdo ("Abdo"), an avid doll collector who resides in Minnesota, if she could help Ott cultivate business opportunities in the United States. Abdo eagerly accepted.⁴

In August 1994, Ott and her son, Karl, traveled to Minneapolis to meet with Abdo, whereupon they were introduced to Abdo's longtime friend Defendant John Pellegrene ("Pellegrene"), Executive Vice President of Target. Pellegrene, the Otts, and Abdo discussed the possibility of collaborating on a project involving traditionally dressed 18 inch vinyl dolls that would be priced under $40.00. Although at the time of Ott's meeting with Pellegrene, Target sold a small selection of porcelain dolls, its arrangement with Ott would signal its first real foray into the collectible doll market.

During the meeting, Pellegrene also expressed an interest in Ott's 12 inch Little Ones dolls for a project with Disney centered on the "It's a Small World" theme. According to Ott, Pellegrene indicated that one million dolls would be needed for the Disney project. Believing that they were to be used to further negotiate the Disney project, Ott left samples of her Little Ones dolls and doll clothing with Pellegrene. In fact, the samples were shown to a sales representative of Defendant Unimax, Michael Boe, for the alleged purpose of creating lower quality knock-off dolls, the "Dolls of All Nations." (Boe Dep. at 71, 77-81, 85-86.)

In March 1995, Ott returned to Minneapolis with samples of her newly created 18 inch dolls. Target was pleased with the samples, and the parties proceeded to discuss the details of their business relationship. Ott agreed to design and produce 6,000 18 inch vinyl dolls under the label "Best Friends" for a test market in a few dozen Target stores, with the understanding that more substantial orders would follow. Again, Ott left samples of her dolls in Minnesota with Target, and, again, Ott alleges that Target forwarded the samples to a competitor, this time Defendant Brass Key, for the purpose of making knock-offs. The alleged knock-offs of her 18 inch dolls were later sold exclusively by Target under the name "Liberty Landing."

In the fall of 1995, while perusing a "Target the Family" magazine containing an article about her and her new Best Friends collection, Ott noticed an advertisement for Unimax's Dolls of All Nations. Ott was immediately struck by the similarity between her Little Ones dolls and the Dolls of All Nations. Like her Little Ones collection, the Dolls of All Nations collection included 12 inch dolls dressed in traditional international costumes. In addition, Ott was concerned that the advertisement's proximity to the article about her created the impression that the Dolls of All Nations were made by her, particularly because the source of the dolls was not indicated on the advertisement.

In November 1995, Target ran a test market of Ott's Best Friends dolls in Chicago, Arizona, the Twin Cities. In conjunction with the test market, Target held doll signings in several Twin Cities stores. The test market was, by any standard, a success. Target customers began lining up 4-5 hours in advance of the Ott doll signings. Within hours, Target sold out of Ott's dolls at the stores that held doll signings. (Abramson Aff., Ex. H39, H67.) Sales also exceeded expectations in stores that did not hold doll signings. (See id. Ex. H33-36, H39.)

At a meeting with Target on December 4, 1995, Ott raised her concerns about the Dolls of All Nations collection, which had been introduced in Target stores nationwide just prior to the test market of Ott dolls. Ott advised that Target customers were presenting her with Dolls of All Nations at the signings believing that they were her creations. Ott specifically asked that Target instruct Unimax to destroy the molds used to make the Dolls of All Nations. (Id. Ex. H38.) In response, Target agreed not to sell the Dolls of All Nations in Europe, where Ott's Little Ones are particularly well-known. (Id.) In addition, Target promised that future Dolls of All Nations would not look similar to her Little Ones dolls. (Id.)

At the same meeting, Ott asserts that Target ordered 200,000 more Best Friends dolls for sales in Target stores nationwide. Thereafter, Ott expanded her manufacturing facility in China and began training the approximately 200 workers needed to manufacture 200,000 dolls per year. However, in July 1996, Target decreased the order to 75,000 dolls, allegedly because the test market did not go as well as expected. (See Target Mem. in Supp. Mot. for Sum. J. at 6 n. 1.) Although Target acknowledges that it had initially forecasted the need for 200,000 Ott dolls for 1996, it denies ever ordering or ever promising to order that amount for 1996 or any other year.

In the spring of 1996, Ott produced the 18 inch dolls, renamed "Faithful Friends," for sale in Target stores nationwide. At the same time, Target increased the number of porcelain dolls on its shelves and began selling collectible dolls from other manufacturers such as the Heritage Collection, Helmut Engel, and Danbury Mint. Target also added Brass Key's Liberty Landing collection to its product line at that time.

In the fall of 1996, Target expanded its collectible doll offerings to encompass the entire side of an aisle. Target's goal was to create a store-within-a-store by displaying the service mark "Collector's Lane" and a stylized "CL" logo across the entire aisle with street sign outriggers and shelf headers that suggested a row of quaint houses along the aisle. In addition, Collector's Lane included two glass front display cases-one displaying Barbie dolls and the other displaying Ott's Faithful Friends and Brass Key's Victorian Rose porcelain dolls. The display case containing Ott's Faithful Friends was marked with a cling-on placard incorporating the Collector's Lane mark and representing that the dolls contained therein were "Faithful Friends by Heidi Ott." The placard also incorporated a picture of Ott and descriptions of her Faithful Friends dolls.⁵

Ott first saw the Liberty Landing dolls when she returned to the United States in the winter of 1996 for a Target-sponsored promotional tour. Ott claims that she became immediately concerned upon seeing the dolls. She suspected that, as with her Little Ones dolls, her Faithful Friends dolls had been copied. In addition, Ott was distressed by the fact that Liberty Landing dolls were intermingled on the shelves with Faithful Friends dolls and that some Liberty Landing dolls had actually been placed in the glass case behind the Ott placard. (See Ott Dep. 790-93, 785-87, 841-42; Abdo Aff. ¶ 14.) Ott, her son, and Abdo discussed the problem with Pellegrene, who promised to investigate the matter. (Id.) According to Ott, when they also discussed the problem with Target buyer Joe Fusaro, he became defensive and retorted that Target could place merchandise on its shelves as it wished. (See Abdo Aff. ¶ 14.) Target did not responded to Ott's allegations regarding the Liberty Landing dolls until March 1997, at which time Target denied having any knowledge that the dolls were knock-offs of Ott's dolls. Target suggested that Ott contact Brass Key directly.

Target maintains that although it vigorously marketed Ott's Faithful Friends collection, the dolls simply did not meet sales expectations. As a result, in the fall of 1997, Target ordered only 10,000 Faithful Friends dolls. By October 1998, Target had decided not to purchase any more dolls from Ott, although Ott was not informed of that decision until December 1998. No Ott dolls were shipped to Target in 1999, and Target sales of Ott dolls ended by mid-1...