In the United States, federal laws take precedence over state law and common law causes of action where there is an overlap. This lesson was recently learned again in Lions Gate Entertainment Inc v TD Ameritrade Services Company1, where the Central District Court of California ruled against Lions Gate, finding its trademark-related claims against a financial services company were pre-empted by the Copyright Act, leaving only its copyright infringement claim intact.

TD Ameritrade Services Company hired second defendant Havas Worldwide New York to craft a national advertising campaign promoting its retirement services. The ads were to feature modified elements of the iconic 1980s’ film Dirty Dancing, owned by Lions Gate. Specifically, the retirement ads:

  • altered the line made famous by Patrick Swayze, “Nobody puts baby in a corner”, to “Nobody puts your old 401k in a corner”;
  • invoked the final dance sequence by showing a man lifting his piggy bank over his head; and
  • referenced the famous song, “(I’ve Had) the Time of My Life” by stating “Because retirement should be the time of your life”.

Lions Gate asserted in its complaint that it owns the copyright in the movie Dirty Dancing and associated trademark rights, namely, NOBODY PUTS BABY IN A CORNER. Lions Gate alleged that the defendants’ unauthorized use of the famous line, song and scene from the movie resulted in trademark and copyright infringement, asserting various trademark-related claims under the Lanham Act, California statute and common law, and copyright infringement under the Copyright Act. The defendants moved to dismiss, unsuccessfully arguing that the California district court did not have personal jurisdiction over Havas, but successfully arguing that the trademark-related claims were pre-empted by the Copyright Act. The court recognized that the complaint asserted sufficient facts to support a copyright infringement cause of action, but did not assert sufficient facts to form the basis for trademark infringement or unfair competition claims.

The court applied a two-prong test to determine whether copyright pre-emption applied. It considered first whether the asserted trademark-related claims included copyrightable subject matter, and second whether the allegedly infringed rights were equivalent to the rights protected by copyright law. The court quickly disposed of the first prong by finding that the song, quote and dance lift scene, which formed the basis of Lions Gate’s trademark-related claims, were copyrightable subject matter covered under Section 102 of the Copyright Act.

Analyzing the second prong, the court dismissed the trademark-related claims arising under Section 1125 (a) of the Lanham Act with prejudice after it concluded that they were barred under Dastar Corp v Twentieth Century Fox Film Corp2 and thus pre-empted by the Copyright Act.

Lions Gate argued that the defendants’ use of the Dirty Dancing elements would confuse consumers as to Lions Gate’s association or endorsement of TD Ameritrade, but the court reasoned that “the advertisements clearly promote TD’s financial services and do not mention Lions Gate or Dirty Dancing, or attempt to pass off products of TD as from Lions Gate or vice versa”. The court found that the facts pled in the complaint sufficiently supported a copyright infringement claim, where the defendants’ altering of the plaintiff’s movie and subsequent use in the advertising campaign could violate Lions Gate’s exclusive right to distribute, reproduce and prepare derivative works under Section 106. However, the court could not discern an “extra element” that would give rise to a separate cause of action under the Lanham Act and at common law. Therefore, the court held that the allegedly violated trademark rights were equivalent to the rights asserted in the copyright infringement claim and the complaint did not sufficiently plead additional facts to support separate trademark-related claims. Under similar reasoning, the court also dismissed the statutory and common law trademark-related claims with prejudice.

Finally, the court also dismissed the plaintiff’s dilution claim for failure to state a claim because the plaintiff failed to demonstrate that the defendants had improperly used the plaintiff’s mark to identify TD’s financial services.

This decision highlights the need for counsel to consider carefully, in the intersection of trademark and copyright causes of action, which claims should be brought.

This article first appeared on WTR Daily, part of World Trademark Review, in May 2016. For further information, please go to http://www.worldtrademarkreview.com.