On August 19, 2011, the U.S. Court of Appeals for the Ninth Circuit withdrew its own previous opinion in Fleischer Studios, Inc. v. A.V.E.L.A., Inc., No. 09-56317, and supplanted it with a new opinion. The change is noteworthy because the original opinion in Fleischer had generated substantial attention and concern based on its potentially far-reaching implications for the trademark licensing industry.

The case concerns the unlicensed reproduction of images of the Betty Boop cartoon character on clothing and bags sold by the defendant. The plaintiff company—which is owned by the family of Betty Boop’s creator, Max Fleischer—brought both copyright and trademark infringement claims. The district court granted summary judgment to defendant on all claims. In its original ruling, the Ninth Circuit affirmed as to all claims.

The district court determined that the plaintiff’s copyright infringement claim should be dismissed, because it was unable to demonstrate ownership of a valid copyright in the Betty Boop character. Plaintiff’s claimed copyright was the product of a seventy-year-long chain of title that stretched back through five separate parties.1 But the district court held that a provision in a 1941 assignment within that chain severed the copyright in certain Betty Boop movies from the copyright in the Betty Boop character herself. Thus, the plaintiff had no grounds to claim ownership over the character copyright, and could not maintain its action for copyright infringement. The Ninth Circuit affirmed this holding.

With regard to the trademark claims, the Ninth Circuit also affirmed the district court holding, but on independent grounds. In short, the Ninth Circuit’s original opinion held that defendant’s use of the Betty Boop image was a functional use, not a trademark use. In this sense “trademark use” means use of a word or image to identify the source of goods. The court determined that the Betty Boop image on defendant’s wares was not operating as an indication of source, but rather that it constituted the “actual benefit that the consumer wishes to purchase.” The image, according to the court’s reasoning, was a “functional aesthetic component[],” which served a self-defining function for purchasers. That is, people buy the item because they want to be associated with the Betty Boop character, regardless of who produced the ware it is emblazoned upon.

In so holding, the Court relied heavily on its own 1980 decision in International Order of Job’s Daughters v. Lindeburg & Co., 633 F.2 912 (9th Cir. 1980). Neither party had cited Job’s Daughters, presumably because its holding had been substantially undermined by a later Ninth Circuit case, Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., 457 F.3d 1062 (9th Cir. 2006). Au-Tomotive Gold discredited the widely-criticized doctrine of “aesthetic functionality,” which holds that attractive, commercially desirable design features cannot serve as trademarks. The Fleischer Court not only declined to distinguish Au-Tomotive Gold in its original opinion, it failed to even cite the case, leaving brand owners to wonder whether the Court intended to implicitly limit or event partially overrule Au-Tomotive Gold, and thereby breathe new life into the aesthetic functionality doctrine.

Now, however, brand owners can breathe a sigh of relief. In its new Fleischer opinion, the Ninth Circuit again upholds the district court’s summary judgment decision in the defendant’s favor, and comes to the same conclusion as before with respect to the copyright claims. But the new opinion partially vacates the district court’s grant of summary judgment on the trademark claims, and in so doing, omits all discussion of trademark functionality or the 1980 Job’s Daughters case and therefore removes any doubt that the later (2006) Au-Tomotive Gold case—which construed the doctrine of aesthetic functionality narrowly—remains good law. Additionally, in the new opinion, the Court addresses and rejects the district court’s holding that the Betty Boop image could not identify a single source due to the fact that multiple parties owned copyrights in the character (and, therefore, could lawfully reproduce images of Betty Boop). Describing this as the “fractured history theory,” the Court determines that “though the fractured ownership of a trademark may make it legally impossible for trademark holder to prove secondary meaning,” the facts of this case do not support that conclusion. Furthermore, the Court finds there is not enough evidence on the record to prevent the plaintiff from bringing trademark claims over the word mark BETTY BOOP.

The new opinion is far more dependent on the intricate facts of the case and has narrower implications for trademark law. However, even the new opinion contains some important lessons for copyright and trademark owners and prospective assignees/licensors. First and foremost, when dealing with copyrights, it is always important to inspect your chain of title and be aware of the exact rights you own or are considering acquiring (e.g., Will you own the rights to distribute the work over yet-to-be developed media? Will you own the right to create and distribute derivative works based on the original work? And, as the Fleischer plaintiff learned the hard way, will you own copyrights in the characters from a work or only in the work itself?). Second, it is important to note that the Ninth Circuit has left the door open for the fractured history theory. Future application of that theory could render it legally impossible in some cases to use a copyrighted work (be it an image, character, sound, or otherwise) as a trademark, if the copyrights to that work are owned by multiple parties.

The new opinion moots the defendant’s request for a rehearing, which had been supported by multiple amici, including the Motion Picture Association of America Inc. (“MPAA”), the International Trademark Association (“INTA”) and various professional sports leagues. Interestingly, Fleischer comes not even ten days after Judge Marrero of the Southern District of New York issued his opinion in Christian Louboutin S.A. v. Yves St. Laurent, No. 11-Civ-2381, which we commented on in a previous post. In Louboutin, Judge Merrero cast doubt on the famous shoemaker’s claimed “red sole” trademark rights, claiming that “in the fashion industry color serves ornamental and aesthetic functions vital to robust competition.” Christian Louboutin is appealing that ruling to the Second Circuit.

[New Fleischer Studios Opinion]

[Original Fleischer Studios Opinion]