217 U.S.P.Q. 1162, 1982 Copr.L.Dec. P 25,452
United States District Court; S.D. Texas, Houston Division. Universal City Studios, Inc., and Merchandising Corporation of America, Inc. v. Kamar Industries, Inc., dba Southwest Industries, Inc. Civil Action No. H-82-2377 Dated September 20, 1982

DE ANDA, District Judge.
Memorandum Following a one day hearing on September 3, 1982, as to the plaintiffs' request for a preliminary injunction, the Court makes the following findings of fact and conclusions of law in accordance with Rule 52(a), Fed. R. Civ. P.
Findings of Fact 1. Plaintiff Universal City Studios, Inc. (Universal) is a Delaware corporation having its principal place of business in California. Plaintiff Merchandising Corporation of America, Inc. (MCA), is a California corporation having its principal place of business in California.
2. Defendant Kamar Industries, Inc. (Kamar) is a Texas corporation having an office and place of business in Houston, Texas, and doing business under the name Southwest Industries.
3. Universal produces and distributes motion pictures and television programs to the public throughout the world. Universal is the producer of a motion picture entitled "E.T. The Extra-Terrestrial" which was released in late May of 1982 to theatres throughout the United States and Canada. Universal owns the copyright in the motion picture, "E.T. The Extra-Terrestrial."
4. Since its release "E.T. The Extra-Terrestrial" has grossed approximately $230,000,000.00, making it second only to "Star Wars" as the greatest box office success of all time. This status has been achieved only three months after its initial release. As a result of its enormous success "E.T. The Extra-Terrestrial" and its central character, "E.T.," have become widely known to the general public and have acquired great and valuable popularity and goodwill. The motion picture's extraordinary popularity results from much labor and skill on the part of Universal and its agents, and has been achieved through the expenditure of considerable effort and money.
5. Through its licensing agent, MCA, Universal has entered into numerous merchandising licenses over the years relating to Universal's motion pictures and television programs. Universal and MCA have developed a large and valuable business in the licensing of such merchandising rights. Even prior to the release of its copyrighted motion picture Universal, through MCA, had entered into negotiations for the licensing of merchandising rights relating to "E.T. The Extra-Terrestrial" for the purpose of exploiting the expected popularity of that movie through the manufacture and sale of a variety of items, including toys, games, clothing and plastic drinking mugs.
6. The licenses for merchandising rights relating to "E.T. The Extra- Terrestrial" include stringent conditions for approval and quality control of all merchandise to be marketed thereunder. In order to maintain a consistent image and appeal for the "E.T." character consonant with that developed in the movie Steven Spielberg, who directed the movie and who is responsible, in large part, for its creation and success, has retained and exercises personal control over the nature and quality of all "E.T." items to be marketed under such licenses. Mr. Spielberg and the plaintiffs are rightly concerned that the loss of control over the public image and appeal of the "E.T." name and character, which would result from its unauthorized use on unlicensed commercial products, is likely to cause irreparable injury to that name and character. Unauthorized use of the "E.T." name and character also would injure irreparably plaintiffs' goodwill and merchandising rights, as well as the opportunity for favorable public reception of future movies, books and other "E.T." merchandise.
7. Universal has acquired valuable trademark and service mark rights in the "E.T." name and character because of the widespread popularity and acclaim of "E.T. The Extra-Terrestrial." The "E.T." character has become a valuable property right and symbol distinctive of Universal and its motion picture, and the name "E.T." has acquired a secondary meaning as indicating Universal's famous "E.T." character.
8. Kamar manufacturers and/or sells a variety of consumer products, including porcelain drinking mugs. Sometime around August of 1982 Kamar began to promote and market certain merchandise, such as drinking mugs and pencil holders, bearing prominent inscriptions in the form of "I E.T." and "E.T. Phone Home!!"
9. The inscriptions on Kamar's products would be recognized readily by the average lay observer as having been appropriated from Universal's copyrighted motion picture because the central themes which run throughout the motion picture involve the loving relationship which develops between "E.T.," an alien mistakenly abandoned on Earth, and Elliott, human child, as well as the attempts by "E.T." to reestablish contact with his alien companions. These themes are consistently emphasized and repeated throughout the movie in the sentences "I love you, E.T." and "E.T. phone home!!," which the testimony at the hearing and the film clip viewed by the Court revealed to be prominently featured in "E.T. The Extra-Terrestrial."
10. Kamar has not been licensed or authorized by Universal or MCA to use the "E.T." name or character in any form on its products, or to reproduce lines of dialogue from the movie "E.T. The Extra-Terrestrial." Kamar's president, Mr. Andy Aberman, testified that he never applies for merchandising rights licenses because obtaining such licenses would be too expensive.
11. Although Kamar identifies itself as the manufacturer of the mugs by affixing a self-adherent label to their bottom surfaces and by including its name on stationery and invoices which accompany shipments of mugs, its unauthorized use of the name "E.T." on its products, and its reproduction of lines of dialogue from "E.T. The Extra-Terrestrial" are likely to cause confusion as to the source of Kamar's products, or as to their sponsorship, approval or licensing by the plaintiffs. Kamar's unauthorized actions, together with Mr. Aberman's testimony that he has attempted "to capitalize off (the) E.T. ... fad," convinces this Court that Kamar intended to trade on the goodwill and public recognition of the "E.T." name and character and of Universal's copyrighted movie.
12. As a result of Kamar's intentional actions and the likeihood of confusion resulting therefrom, Universal stands to suffer irreparable injury through the loss of control over the use of its "E.T." name and character. Universal and MCA also are likely to suffer irreparable injury to their planned licensing program through the confusion and loss of goodwill caused by Kamar's unauthorized actions.
13. The evidence indicates that Kamar has copied the appropriated lines of dialogue from "E.T. The Extra-Terrestrial." Although Mr. Aberman testified that he has not seen "E.T. The Extra-Terrestrial," there is no dispute that Kamar had access to Universal's copyrighted motion picture which had been released several months prior to the creation of Kamar's infringing products. Such access, when considered together with the identity of the inscriptions on Kamar's products and key lines from the movie as well as Mr. Aberman's testimony that (a) the "E.T." mug designs were suggested to him by a Kamar salesman and (b) he looked at a printed advertisement for "E.T. TheExtra- Terrestrial" before creating the Kamar mug designs, creates a strong inference of copying. The identity of the Kamar mug inscriptions with the movie's dialogue itself creates a strong inference of copying.
14. The character "E.T." is a central component of "E.T. The Extra- Terrestrial." "E.T." is a unique and distinctive character about whom the movie revolves. Plaintiffs contend, and the Court believes, that "E.T." is more than a mere vehicle for telling the story and that "E.T." actually constitutes the story being told. The name "E.T." itself is highly distinctive and is inseparable from the identity of the character. The use of the name "E.T." on Kamar's products inevitably conjures up the image and appeal of the "E.T." character. The Court finds that the average lay observer would recognize readily the "E.T." name as used on Kamar's products as having been taken from the central character of Universal's copyrighted motion picture. This conclusion is reinforced by the fact that the name "E.T." appears on Kamar's products in conjunction with actual lines of dialogue from the movie, and that it is displayed on at least one of Kamar's products in a distinctive style and format similar to that used in connection with Universal's movie.
15. Plaintiffs' valuable licensing and merchandising rights and opportunities relating to the "E.T." character have been acquired as a result of careful organization and the expenditure of considerable labor, skill and money. In appropriating the fruits of plaintiffs' efforts to itself, Kamar is endeavoring to reap where it has not sown and to appropriate to itself the rewards of those who have. Kamar's actions constitute an unauthorized interference with the development and operation of plaintiffs' licensing and merchandising program at the point where the profit is to be made. Kamar is attempting to divert a material portion of plaintiffs' profit.
16. Kamar's attempt to market unauthorized "E.T." merchandise before the plaintiffs have been able to implement fully their licensing program threatens to undermine and damage irreparably the plaintiffs' carefully planned and executed licensing program. Kamar's conduct amounts to a misappropriation of the plaintiffs' valuable licensing and merchandising rights.
17. Any finding of fact deemed to be a conclusion of law is hereby adopted as such.
Conclusions of Law 1. This action arises under the Copyright Law, 17 U.S.C. § 101 et seq.; under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); and under the common law of trademark infringement and unfair competition.
2. This Court has jurisdiction of the parties and subject matter of this action pursuant to 15 U.S.C. § 1121 and 28 U.S.C. § 1338.
I. Copyright Infringement 3. To establish a claim for copyright infringement a plaintiff must show ownership of a valid copyright and copying by the defendant. Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d 1090, 1092 (2nd Cir. 1977). The Certificates of Copyright Registration introduced at the hearing constitutes prima facie evidence of the validity of the copyright in the motion picture "E.T. The Extra-Terrestrial" and its ownership by Universal. Id.; Murray v. Gelderman, 566 F.2d 1307 (5th Cir. 1978); 17 U.S.C. § 410(c).
4. Evidence introduced at the hearing conclusively establishes that the inscriptions appearing on the defendant's products, "I love You, E.T." and "E.T. Phone Home" were copied from Universal's copyrighted motion picture. In any event, a presumption of copying arises from the defendant's access to "E.T. The Extra-Terrestrial" together with the "substantial similarity" (identity) of the inscriptions on the defendant's products to key lines of dialogue from the copyrighted motion picture. Ferguson v. National Broadcasting Co., 584 F.2d 111, 113 (5th Cir. 1978); Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d at 1092.
5. The test for copyright infringement is "whether an average lay observer would recognize the alleged copy as having been appropriated from the copyrighted work." Ideal Toy Corp. v. Fab-Lu, Ltd., 360 F.2d 1021, 1022 (2nd Cir. 1966). The inscriptions on the defendant's products would be readily recognizable to the lay observer as key lines of dialogue from the copyrighted movie and, therefore, the test for copyright infringement has been satisfied. See Finding of Fact No. 9. Thus, the plaintiffs are likely to prevail on their copyright infringement claim.
6. The Court also concludes that there is a substantial likelihood that the plaintiffs will prevail on their copyright infringement claim by reason of the defendant's unauthorized appropriation and use of the "E.T." character and name. A character in a work in which the character is central to the story is copyrightable. See Walt Disney Productions v. Air. Pirates, 581 F.2d 751 (9th Cir. 1978), cert. denied, 439 U.S. 1132 (1979); Detective Comics, Inc. v. Bruns Publications, Inc., 111 F.2d 432 (2nd Cir. 1940); Burroughs v. Metro Goldwyn Mayer, Inc., 519 F.Supp. 388 (S.D.N.Y. 1981), aff'd, 1982 Copyright L.Rep. (CCH) P 25, 406 (2d Cir. May 26, 1982). The defendant's contention that copyright protection for a motion picture does not extend to characters or their names is not well taken in a situation involving a distinctive and well developed character such as "E.T." See Finding of Fact No. 14. See also Warner Brothers Pictures, Inc. v. Columbia Broadcasting System, Inc., 216 F.2d 945 (9th Cir. 1954), cert. denied, 348 U.S. 971 (1955); Nichols v. Universal Pictures Corp., 45 F.2d 119 (2nd Cir. 1930), cert. denied, 282 U.S. 902 (1931).
7. The test for infringement of a character is the same as that for infringement of any other copyrighted work. See Conclusion of Law No. 5. The defendant's appropriation and use of name "E.T." on its products satisfies this test because the average lay observer would readily recognize the name "E.T." as having been taken from the copyrighted character.
8. Since plaintiffs are likely to prevail on the merits of their copyright infringement claim, there exists as presumption of irreparable harm to plaintiffs in the absence of injunctive relief. Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d at 1094; Rushton v. Vitale, 218 F.2d 434, 436 (2nd Cir. 1955).
II. Section 43(a) of the Lanham Act 9. Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), provides in pertinent part that "[a]ny person who shall affix, apply or annex, or use in connection with any goods or services ... any false description or representation, including words or other symbols tending falsely to describe or represent same, and shall cause such goods or services to enter into commerce ... shall be liable to a civil action ... by any person who believes he is or is likely to be damaged by the use of any such false description or representation." The protection afforded by this statute extends to "a broad spectrum of marks, symbols, design elements and characters which the public directly associates with the plaintiff or its product." Warner Brothers, Inc. v. Gay Toys, Inc., 658 F.2d 76, 78 (2nd Cir. 1981). It is not necessary that the name or symbol for which protection is sought under Section 43(a) be a registered trademark. Id.; New West Corp. v. NYM Co. of California, Inc., 595 F.2d 1194, 1198 (9th Cir. 1979). Generally the same facts that would support a claim for trademark infringement or common law unfair competition will support an action under Section 43(a). Id. at 1201; Boston Professional Hockey Ass'n., Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d 1004, 1010 (5th Cir. 1975), cert. denied, 423 U.S. 868 (1975). Furthermore an inherently distinctive name such as "E.T." (See Finding of Fact No. 14) would qualify for protection under Section 43(a) even without a showing of secondary meaning. See Chevron Chemical Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d 695, 702-03 (5th Cir. 1981), cert. denied, 102 S.Ct. 2947 (1982).
10. The governing standard in trademark infringement action is "likelihood of confusion." Sun-Fun Products, Inc. v. Suntan Research & Development, Inc., 656 F.2d 186, 189 (5th Cir. 1981). Trademark infringement exists "if use of the allegedly infringing mark is likely to cause confusion or mistake, or to deceive purchasers or users as to the source, endorsement, affiliation or sponsorship of the product." Control Components, Inc. v. Valtek, Inc., 609 F.2d 763, 770 (5th Cir. 1980), cert. denied, 449 U.S. 1022 (1980). See also Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 549 F.2d 368, 388 (5th Cir. 1977).
11. In order to obtain injunctive relief under Section 43(a) it is sufficient to show merely a likelihood of confusion or deception. Warner Brothers, Inc. v. Gay Toys, Inc., 658 F.2d at 79; Boston Professional Hockey Ass'n., Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d at 1013. The defendant's use of prominent lines of dialogue from the motion picture, "E.T. The Extra-terrestrial" and the name "E.T." in the identical distinctive format used by Universal in promoting its motion picture is likely to confuse the public as to the course, endorsement, affiliation or sponsorship of the defendant's products. See Finding of Fact No. 11. The testimony of the defendant's president, Mr. Andy Aberman, revealing that the defendant intended to trade on the goodwill and public recognition of that "E.T." movie and character creates a presumption of likelihood of confusion as to the association or connection between the defendant's products and Universal's motion picture. See Chevron Chemical Co. v. Voluntary Purchasing Groups, Inc., 659 F.2d at 703-04; Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 467 F.Supp. 366, 374-75 (S.D.N.Y. 1979), aff'd, 604 F.2d 200 (2nd Cir. 1979).
12. The fact that Kamar identifies itself as the manufacturer of its products (See Finding of Fact No. 11) does not dispel the likelihood of confusion. W.E. Bassett Co. v. Revlon, Inc., 435 F.2nd 656, 662 (2nd Cir. 1970). Furthermore, it is no significance that the defendant is using the "E.T." name and dialogue on products which are not yet marketed by the plaintiffs' licensees. The Fifth Circuit "has repeatedly held that direct competition is not the sine qua non of trademark infringement; rather the gist of the action lies in the likelihood of confusion to the public." Professional Golfers Ass'n. v. Bankers Life & Casualty Co., 514 F.2d 665, 669 (5th Cir. 1975). Therefore, the Court concludes that the plaintiffs are likely to prevail on the merits of their Lanham Act claim.
III. Common Law Trademark Infringement and Unfair Competition 13. Trademark infringement is but a specific example of the broader tort of unfair competition. Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 413 (1916), and the same set of facts generally supports a suit for either. See Conclusion of Law No. 9. As it is true under Section 43(a) of the Lanham Act, secondary meaning need not be established in order to protect an inherently arbitrary or distinctive mark or symbol. Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 11 (2nd Cir. 1976).
14. The governing standard for common law trademark infringement and unfair competition is the same as that under Section 43(a) of the Lanham Act: The likelihood of confusion as to the source of sponsorship of the marks or symbols being used without authorization. Boston Professional Hockey Ass'n., Inc. v. Dallas Cap & Emblem Mfg., Inc., supra; Chevron Chemical Co. v. Voluntary Purchasing Groups, Inc., supra. In light of Conclusions of Law Nos. 9-12, supra, the Court concludes that plaintiffs are likely to prevail on the merits of their common law trademark infringement and unfair competition claims.
IV. Misappropriation 15. The doctrine of misappropriation is a branch of the tort of unfair competition which involves the appropriation and use by the defendant, in competition with the plaintiff, of a unique pecuniary interest created by the plaintiff through the expenditure of labor, skill and money. International News Service v. Associated Press, 248 U.S. 215 (1918); Roy Export Co. Establishment v. Columbia Broadcasting System, Inc., 672 F.2d 1095, 1104-06 (2nd Cir. 1982); Lone Ranger, Inc. v. Cox, 124 F.2d 650, 652-53 (4th Cir. 1942). It is recognized under Texas law. Gilmore v. Sammons, 269 S.W. 861, 863 (Tex. Civ. App.-Dallas, 1925, writ ref'd); Synercom Technology, Inc. v. University Computing Co., 474 F.Supp. 37, 39 (N.D. Tex. 1979).
16. Product licensing arrangements in the entertainment industry often are more profitable than the original work itself. Warner Brothers, Inc. v. Gay Toys, Inc., 658 F.2d at 79. The doctrine of misappropriation has been held to afford a cause of action for the unauthorized appropriation and use, in competition with the plaintiff's licensing program, of the elements and symbols of a successful television series. Id.
17. Since the plaintiffs have acquired valuable and unique licensing and merchandising rights as a result of Universal's considerable effort, expenditure and skill in producing and promoting the motion picture "E.T. The Extra-Terrestrial" (See Finding of Fact No. 15) and Kamar is "endeavoring to reap where it has not sown ... in order to divert a material portion of the profit from those who have earned it to those who have not ...," International News Service v. Associated Press, 248 U.S. at 239-40, plaintiffs are likely to prevail on the merits of their cause of action for misappropriation.
V. The Standards for a Preliminary Injunction 18. A preliminary injunction is an extraordinary remedy which should issue only if the moving party has clearly demonstrated (a) a substantial likelihood that it ultimately will prevail on the merits of its claims; (b) a showing that it would suffer irreparable injury unless an injunction issues; (c) proof that the threatened injury to the moving party outweights the damage which the proposed injunction would cause to the opposing party; and (d) a showing that an injunction is not adverse to the public interest. Vision Center v. Opticks, Inc., 596 F.2d 111, 114 (5th Cir. 1979), cert. denied, 444 U.S. 1016 (1980).
19. Where the moving party has made out a prima facie case of copyright infringement, there is a presumption that irreparable harm will follow in the absence of injunctive relief. Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d at 1094; Rushton v. Vitale, 218 F.2d at 436. Moreover, the Court has found that plaintiffs will suffer irreparable injury to the goodwill and public acceptance of the "E.T." name and character and to plaintiffs' licensing program if an injunction does notissue. See Finding of Fact No. 16. Plaintiffs' loss of control over the reputation and goodwill attaching to the "E.T." name and character as a result of their unauthorized use by third parties constitutes irreparable injury in and of itself. Ambassador East, Inc. v. Orsatti, Inc., 257 F.2d 79, 82 (3rd Cir. 1958); Franklin Mint, Inc. v. Franklin Mint, Ltd., 331 F.Supp. 827, 830 (E.D.Pa. 1971) (Lanham Act § 1125(a); federal trademark infringement; and unfair competition). The Court also has found a likelihood of confusion from defendant's activities, and the standard of irreparable injury is satisfied without more. Black Hills Jewelry Mfg. Co. v. Gold Rush, Inc., 633 F.2d 746, 753 (8th Cir. 1980) (Lanham Act § 1125[a]); In re Vuitton et Fils S.A., 606 F.2d 1, 4 (2d Cir. 1979) (trademark infringement); Ideal Industries, Inc. v. Gardner Bender, Inc., 612 F.2d 1018, 1026 (7th Cir. 1979), cert. denied, 447 U.S. 924 (1980) (common law). Plaintiffs, therefore, have satisfied the second prerequisite for issuance of a preliminary injunction.
20. Plaintiffs also have demonstrated that the balance of hardships tips decidedly in their favor. The likelihood of confusion caused by defendant's actions and the irreparable injury thereby engendered, as well as the threatened injury to plaintiffs' incipient licensing program, cannot be adequately quantified and compensated in damages. On the other hand, any damage to defendant from the granting of an injunction would consist primarily, if not entirely, of lost sales of its unauthorized "E.T." products which would be fully compensable in damages and do not outweigh the threatened irreparable harm to plaintiffs. Furthermore, it has been held that the loss of sales of infringing products is one which the infringer justifiably is called upon to bear. Corning Glass Works v. Jeannette Glass Co., 308 F.Supp. 1321, 1328 (S.D.N.Y. 1970), aff'd, 432 F.2d 784 (2nd Cir. 1970).
21. As to the public interest, one of the primary purposes of the law governing trademark infringement and unfair competition is to protect the public from confusion and deceit. James Burrough, Ltd. v. Sign of Beefeater, Inc., 540 F.2d 266, 274 (7th Cir. 1976). Since the likelihood of confusion resulting from defendant's unauthorized use of the famous "E.T." name and lines of dialogue from the movie "E.T. The Extra-Terrestrial" is directly contrary to the public's interest in being free from confusion and deception as to the origin, approval or licensing of defendant's products, a preliminary injunction not only would not be adverse to the public interest, but would be directly in furtherance of that interest.
22. The Court finds that plaintiffs have satisfied the prerequisites for preliminary injunctive relief, the plaintiffs' request for a preliminary injunction is granted.
23. Any conclusion of law deemed to be a finding of fact is hereby adopted as such.
The Clerk shall file this Memorandum and provide counsel for all parties with a true copy.
Universal City Studios v. Kamar Industries
1982 WL 1278, 1982 WL 1278 (S.D.Tex.), 217 U.S.P.Q. 1162, 1982 Copr.L.Dec. P 25,452