In 2006, Warner Bros. filed suit against A.V.E.L.A., X One X Productions, and ArtNostalgia.com, Inc. (collectively, “AVELA”) for copyright and trademark infringement under the Copyright Act, the Lanham Act, and state law. AVELA used publicity materials that were created and distributed by Warner Bros. for the films Wizard of Oz and Gone with the Wind, before the films were completed and copyrighted. These publicity materials contained images of the characters on set, and due to a failure to comply with the notice requirements of the 1909 Copyright Act, the Eighth Circuit found that these materials entered the public domain. AVELA subsequently obtained copies of these publicity materials and extracted the images of famous film characters such as Dorothy, Scarecrow, and Scarlett O’Hara. AVELA licensed out these extracted images for use on clothing and other memorabilia.

A 2011 Eighth Circuit opinion focused on the Warner Bros. copyrights and whether AVELA had the right to grant licenses for the production of the memorabilia. The court divided these materials into three categories, the first being exact reproductions of two-dimensional images extracted from the publicity material. The Court found Warner Bros. had no copyright protection for the use of such images on memorabilia.

The second category included memorabilia that juxtaposed two different images extracted from the publicity material, or an image from the publicity material with a quote from the underlying book. An example would be to combine a character’s image with that character’s signature phrase from the movie. The court found that even if both elements were within the public domain, the composite work contained a “new increment of expression” that infringed the copyright of the corresponding film.

The third category included memorabilia in the form of figurines where a three-dimensional statue was created from a two-dimensional image extracted from the publicity material. The court determined that features of the figurines must have been taken from the film in order to produce statues that resembled the film characters. Therefore, the court reasoned, Warner Bros. movie copyrights had been infringed.

A November 1, 2016 Eighth Circuit Opinion focused on the trademark claims. The Eighth Circuit upheld the district court’s finding that Warner Bros. holds valid trademarks in the characters from the films, including their names and iconic phrases. AVELA presented a number of wide-ranging arguments to the Eighth Circuit, including that Warner Bros. trademark claims were impermissible “disguised copyright claims” and that the district court’s decision on the trademark and unfair competition issues was inconsistent with the Eighth Circuit’s ruling in the prior appeal on the copyright issues. The Eighth Circuit Court rejected all of AVELA’s arguments and affirmed the district court’s order of summary judgment on the claims of trademark infringement and unfair competition. In particular, the Eighth Circuit Court pointedly stated that “whether the products in question infringed Warner’s copyrights has no bearing on whether the products infringe Warner’s trademarks.” The court went on to note that the district court opinion was not inconsistent with the previous Eighth Circuit opinion, because the final injunction made an exception for an exact reproduction of publicity materials in the public domain, which was consistent with the 2011 decision.

The end result of the decade-long litigation was an award of $2.57 million for infringement of 257 copyrights (calculated by an award of $10,000 for each infringing work), and a grant of permanent injunction from further licensing by AVELA (except for those publicity materials that were entirely in the public domain).

This case serves as a reminder to designers that alterations of public domain materials, including combinations of multiple public domain elements, may add a “new increment of expression” that could be covered under the Copyright Act. A designer needs to know that using images that are not protected under copyright law, may still run afoul of other rights, such as trademark law under the Lanham Act. Before utilizing altered public domain materials, consideration should be given to the possible existence of other outstanding rights. Similar considerations exist in the use of licensed materials, as the licensor may not be entitled to grant a license to all necessary rights in a work. In the case of a license, consider language in the agreement that shifts this risk to the licensor.