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Silvertop Associates, Inc. v. Kangaroo Manufacturing, Inc.

United States District Court, D. New Jersey

May 29, 2018

SILVERTOP ASSOCIATES, INC. d/b/a RASTA IMPOSTA, Plaintiff,
v.
KANGAROO MANUFACTURING, INC., Defendant.

          ERIC ROBERT CLENDENING ALEXIS KATHRYN ARENA FLASTER/GREENBERG PC On behalf of Plaintiff

          BRUCE ALLEN SCHOENBERG, DAVID ALAN SCHRADER, A. JONATHAN TRAFIMOW, MORITT HOCK & HAMROFF LLP, On behalf of Defendant

          OPINION

          NOEL L. HILLMAN, U.S.D.J.

         This matter concerns Defendant Kangaroo Manufacturing, Inc. (“Kangaroo”)'s alleged copyright infringement of a banana costume made and copyrighted by Plaintiff Silvertop Associates, Inc., doing business as Rasta Imposta (“Rasta Imposta”). Before the Court is Rasta Imposta's Motion for Preliminary Injunction and Kangaroo's Cross-Motion to Dismiss. For the reasons that follow, the Court will grant Rasta Imposta's Motion for Preliminary Injunction, grant Kangaroo's Cross-Motion to Dismiss as to Count III of the Complaint, and deny Kangaroo's Cross-Motion to Dismiss as to Count I and Count II of the Complaint. The Court will require a $100, 000 bond be posted by Rasta Imposta to maintain the preliminary injunction.

         I.

         The Court takes the following facts from Robert Berman's Declaration in support of Rasta Imposta's Motion for Preliminary Injunction and from his testimony at a hearing before the Court. Berman is the Chief Executive Officer of Rasta Imposta, a business that designs, manufactures, and sells costumes for adults and children. Among these costumes, Rasta Imposta began to offer a banana design on March 9, 2011 (“the Banana Costume”). While Rasta Imposta has licensed the Banana Costume to third parties, Kangaroo does not have a license for the Banana Costume. On March 23, 2010, Rasta Imposta filed a copyright application to register the Banana Costume. Copyright Registration No. VA 1-707-439 was issued by the United States Copyright Office on March 26, 2010 for the Banana Costume.

         In 2012, Rasta Imposta entered into a business relationship with Yagoozon, Inc. (“Yagoozon”), founded by Justin Ligeri. This relationship was formed for Yagoozon to sell Rasta Imposta's Banana Costume. Over the course of the business relationship, Ligeri was informed of Rasta Imposta's copyright registration for the Banana Costume, and Yagoozon purchased thousands of them from Rasta Imposta. The business relationship eventually ended. Ligeri is also the founder of Kangaroo. Around September 25, 2017, Berman discovered Kangaroo was selling a costume that resembled the Banana Costume at issue in this case.

         Rasta Imposta filed its Complaint with the Court on October 5, 2017, bringing claims for copyright infringement (Count I), trade dress infringement (Count II), and unfair competition (Count III). On October 19, 2017, the parties entered into a Stipulation of Standstill Period whereby, in anticipation of “discuss[ing] an amicable resolution to this matter prior to December 1, 2017, ” the parties agreed that Kangaroo would “cease manufacturing, ordering, offering for sale, advertising, marketing, promoting, selling and distributing Plaintiff's Banana Design (and any substantially similar Banana costume) until December 1, 2017.” It further stipulated that “if this case is not settled or otherwise resolved prior to December 1, 2017, Plaintiff will file its application for a preliminary injunction on or about December 1, 2017.” Settlement discussions were not successful and on December 1, 2017, Rasta Imposta filed a Motion for Preliminary Injunction. Kangaroo responded with a December 21, 2017 Cross-Motion to Dismiss. This Court held a hearing on the pending motions on January 26, 2018, which was continued on February 13, 2018. Rasta Imposta presented the testimony of Berman, who was cross-examined by Kangaroo, and who testified consistently with his declaration. The parties submitted supplemental briefing following the hearing, which was complete as of March 8, 2018.

         II.

         This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1338(a). In Kangaroo's Cross-Motion to Dismiss, Kangaroo argues it is not subject to personal jurisdiction in New Jersey. This issue was addressed at the hearing before the Court and in the supplemental briefing. In its March 2, 2018 letter brief, Kangaroo “decided to withdraw its jurisdictional objection” and “to consent to personal jurisdiction in this proceeding.” Accordingly, the Court has personal jurisdiction, by consent, over Kangaroo. See Azubuko v. E. Bank, 160 Fed.Appx. 143, 146 (3d Cir. 2005) (“[P]ersonal jurisdiction may be conferred by consent of the parties . . . .” (quoting Zelson v. Thomforde, 412 F.2d 56, 59 (3d Cir. 1969))).

         III.

         The Court turns to the merits of Rasta Imposta's Motion for Preliminary Injunction. “A district court must consider four elements in determining whether to grant a preliminary injunction: (1) reasonable probability of success on the merits; (2) irreparable injury to the moving party; (3) harm to the nonmoving party; and (4) the public interest.” Goodwin v. Castille, 465 Fed.Appx. 157, 160 (3d Cir. 2012) (citing Iles v. de Jongh, 638 F.3d 169, 172 (3d Cir. 2011)).

         However, before turning to these elements, the Court must determine whether or not Rasta Imposta is requesting a mandatory injunction. Kangaroo argues Rasta Imposta is seeking “a mandatory injunction seeking the ultimate relief requested should it win the case, ” which Kangaroo argues would require the Court to apply a heightened burden on Rasta Imposta. Rasta Imposta, however, argues Kangaroo “mistakenly alleged” that it is seeking a mandatory injunction and maintains that it “is only seeking a preliminary injunction at this stage.” The Court finds that the question of whether Rasta Imposta is asking for a mandatory injunction or not depends not on the wording of the motion and the moving papers, but on the substance of the relief being requested. Accordingly, the language Rasta Imposta chose in framing its request does not resolve this issue.

         “An injunction is mandatory if the injunction will either (1) ‘alter the status quo by commanding some positive act' or (2) provide the moving party with ‘substantially all the relief sought and that relief cannot be undone even if the defendant prevails at a trial on the merits.'” Coast to Coast Entm't, LLC v. Coastal Amusements, Inc., No. 05-3977, 2005 WL 7979273, at *9 (D.N.J. Nov. 7, 2005) (quoting Tom Doherty Assocs. v. Saban Entm't, 60 F.3d 27, 33-34 (2d Cir. 1995)). “Where a plaintiff seeks a mandatory injunction rather than a prohibitory injunction, the burden of showing an entitlement to the preliminary injunction is greater, as mandatory injunctions are generally disfavored.” Id.

         The Court finds Rasta Imposta is not requesting a mandatory injunction, and the Court will accordingly not apply a heightened burden in determining whether a preliminary injunction is warranted in this case.[1] The Court finds Rasta Imposta's request is to maintain the status quo established by the October 19, 2017 Stipulation of Standstill, which provided that Kangaroo would “cease manufacturing, ordering, offering for sale, advertising, marketing, promoting, selling and distributing Plaintiff's Banana Design (and any substantially similar Banana costume) until December 1, 2017.” The Court further finds this is not a case where Rasta Imposta will be granted all of its requested relief in such a way that the relief cannot be later undone.[2]

         First, Rasta Imposta requests relief other than the enjoinment of Kangaroo's alleged copyright infringement. Rasta Imposta's Complaint pleads it “is entitled pursuant to 17 U.S.C. § 504 to either disgorgement of profits and recovery of actual damages, or statutory damages” under its copyright claim. Rasta Imposta further pleads an entitlement to attorneys' fees and costs pursuant to 17 U.S.C. § 505. Similarly, under its trade dress infringement claim, Rasta Imposta pleads it “is entitled to recover their damages, as well as Kangaroo's profits received as a result of the infringement, pursuant to 15 U.S.C. § 1117(a).” Second, the Court does not find the injunctive relief “cannot be later undone.” If later shown to be warranted, the injunction can be lifted and the $100, 000 bond will be used to make Kangaroo whole. The Court does not consider this to be a motion for a mandatory injunction.

         A. Reasonable Probability of Success on the Merits

         The Court begins by considering the reasonable probability of success on the merits of Rasta Imposta's copyright infringement claim. “To establish infringement, two elements must be proven: (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991).

         1. Ownership of a Valid Copyright

         “A plaintiff in a copyright infringement action must prove . . . that the copyright upon which it rests its claim is valid.” Don Post Studios, Inc. v. Cinema Secrets, Inc., 124 F.Supp.2d 311, 315 (E.D. Pa. 2000). “Under 17 U.S.C. § 410(c), only works that are registered within five years after the first publication of the work are entitled to a presumption of validity.” Id. “For works registered after the five year period following publication, it is within the court's discretion to determine what evidentiary weight the registration should be accorded.” Id.; 17 U.S.C. § 410(c) (“In any judicial proceedings the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate. The evidentiary weight to be accorded the certificate of a registration made thereafter shall be within the discretion of the court.”).

         The Certificate of Registration Rasta Imposta presents to the Court lists an “effective date of registration” of March 26, 2010. However, it lists the date of first publication as March 9, 2001 - well over five years before the registration date. The Court thus finds there is no presumption of validity in this case due to the registration of the Banana Costume over nine years after its first publication. Nonetheless, the Court considers the existence of this registration in its analysis of the validity of the copyright.

         The Court begins by considering whether the Banana Costume is a useful article. The Court finds the Banana Costume is a useful article under the definition provided in 17 U.S.C. § 101 (“A ‘useful article' is an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.”); see, e.g., Masquerade Novelty, Inc. v. Unique Indus., 912 F.2d 663, 670-71 (3d Cir. 1990) (“[A] costume . . . may serve, aside from its appearance, to clothe the wearer . . . .”).[3]

         The Supreme Court in Star Athletica, L.L.C. v. Varsity Brands, Inc., 137 S.Ct. 1002 (2017) clarified the boundaries of when useful articles can be eligible for copyright protection in its March 22, 2017 opinion.[4]

The Copyright Act . . . establishes a special rule for copyrighting a pictorial, graphic, or sculptural work incorporated into a “useful article, ” which is defined as “an article having an intrinsic utilitarian function that is not merely to portray the appearance of the article or to convey information.” The statute does not protect useful articles as such. Rather, “the design of a useful article” is “considered a pictorial, graphical, or sculptural work only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.”

Id. at 1008 (quoting 17 U.S.C. § 101). This analysis is described as “separability.” Id. Thus, under § 101, a pictorial, graphic, or sculptural feature incorporated into a useful article “is eligible for copyright protection if it (1) ‘can be identified separately from, ' and (2) is ‘capable of existing independently of, the utilitarian aspects of the article.'” Id. at 1010 (quoting 17 U.S.C. § 101).

         For the first requirement of separate identification, “[t]he decisionmaker need only be able to look at the useful article and spot some two- or three-dimensional element that appears to have pictorial, graphic, or sculptural qualities.” Id. For the second requirement of independent existence, “[t]he decisionmaker must determine that the separately identified feature has the capacity to exist apart from the utilitarian aspects of the article.” Id. at 1010, 1016 (“[A]n artistic feature of the design of a useful article is eligible for copyright protection if the feature . . . would qualify as a protectable pictorial, graphic, or sculptural work either on its own or in some other medium if imagined separately from the useful article.”).

In other words, the feature must be able to exist as its own pictorial, graphic, or sculptural work as defined in § 101 once it is imagined apart from the useful article. If the feature is not capable of existing as a pictorial, graphic, or sculptural work once separated from the useful article, then it was not a pictorial, graphic, or sculptural feature of that article, but rather one of its utilitarian aspects.

Id. at 1010. “[T]he ultimate separability question . . . is whether the feature for which copyright protection is claimed would have been eligible for copyright protection as a pictorial, graphic, or sculptural work had it originally been fixed in some tangible medium other than a useful article before being applied to a useful article.” Id. at 1011, 1012 (“In sum, a feature of the design of a useful article is eligible for copyright if, when identified and imagined apart from the useful article, it would qualify as a pictorial, graphic, or sculptural work either on its own or when fixed in some other tangible medium.”).

         Rasta Imposta claims the following as the unique features of the banana design: the overall shape and cutout holes of the costume, the black ends of the banana, and the vertical lines running down the middle of the banana. Rasta Imposta argues the elements could be removed and displayed elsewhere, such as “to a two-dimensional painter's canvas” or “made into a three-dimensional item like a piñata, a clay sculpture or a paperweight.” The Court addresses the cutout holes first. Kangaroo argues the cutout holes “are [a] utilitarian aspect of a useful article, ” and as such “cannot be protected through copyright.” Kangaroo argues the cutout holes serve no “design or aesthetic purpose” and exist solely “to enable the costume to be worn by an individual, no different than the arm or neck cutouts on a shirt or the leg cutouts on a pair of shorts.” A close reading of Star Athletica compels the Court to find that the cutout holes are not, per se, a feature eligible for copyright.

         Star Athletica concerned a claim of copyright infringement for five designs of cheerleading uniforms. Id. at 1007. The Supreme Court held that “the only feature of the cheerleading uniform eligible for a copyright . . . [wa]s the two-dimensional work of art fixed in the tangible medium of the uniform fabric.” Id. at 1012. The Court held that “respondents have no right to prohibit any person from manufacturing a cheerleading uniform of identical shape, cut, and dimensions to the ones on which the decorations in this case appear.” I ...


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