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JIM HENSON PRODUCTIONS v. JOHN T. BRADY & ASSOCS.

October 14, 1994

JIM HENSON PRODUCTIONS, INC., JANE HENSON, and ALBERT GOTTESMAN and KAREN BARNES as Executors of THE ESTATE OF JIM HENSON, Plaintiff(s),
v.
JOHN T. BRADY & ASSOCIATES, INC., and WILKINS COFFEE, INC., Defendant(s).


PRESKA


The opinion of the court was delivered by: LORETTA A. PRESKA

LORETTA A. PRESKA, District Judge:

 This dispute centers around the ownership of a pair of characters named "Wilkins" and "Wontkins" and their possible status as members of the family of puppets created by Jim and Jane Henson and commonly known as "The Muppets." Currently before me are the parties' cross-motions for summary judgment.

 Background

 While students at the University of Maryland in the 1950s, Jim and Jane Henson began work on what would become a puppet-based entertainment empire. Commencing sometime about 1954, they adopted the term "Muppet" as a service mark and as a trademark to identify the characters they created and performed. In the years following, the Hensons developed the Muppet mark, as well as the Henson mark, into symbols recognized around the world as representing the Hensons' unique brand of entertainment. The Muppet and Henson marks are currently owned by Jim Henson Productions, Inc. ("Henson Productions"), a plaintiff in this action. As always, the Muppets are performed only by Henson Productions-trained puppeteers, and licensing of the Muppet and Henson marks is tightly controlled to maintain their reputation for quality.

 In 1957 or 1958, the Hensons created two puppet characters named Wilkins and Wontkins ("W & W"). W & W were employed at the time by the John H. Wilkins Company ("J.H. Wilkins) as "spokespuppets" in a Washington, D.C. advertising campaign for its coffee products. As part of the campaign, the Hensons produced and performed a series of television commercials starring W & W, which ran throughout the late 1950s and early 1960s. Additionally, the characters were featured in print and newspaper advertising. W & W never appeared on containers of J.H. Wilkins' coffee products, except that during the running of the television ads, they were depicted on coffee can lids in connection with an offer to sell soft vinyl W & W miniatures described as "Wilkins Hand Muppets." J.H. Wilkins never attempted to register the characters as trademarks, and in the mid-1960s, the W & W campaign was discontinued.

 Soon after J.W. Wilkins began using W & W, the company and the Hensons entered into a pair of agreements concerning rights in the characters. On September 16, 1958, the parties executed an Assignment Agreement, wherein the Hensons transferred to J.H. Wilkins, and its successors and assigns, inter alia,

 
the entire right, title and interest in and to [W & W] and to any and all copyright(s), trademark(s) or trademark registration(s), Letters Patent and patent applications, United States or foreign, which may be obtained for and on [W & W] or any part, embodiment, use or adaptation thereof of any nature, without any limitation or reservation whatever.

 Subsequently, on October 16, 1958, the Hensons executed a separate assignment to J.H. Wilkins of their entire right, title, and interest in and to their designs for W & W dolls, puppets, or the like, and their application for Letters Patent and any and all Letters Patent or Patents which might be granted thereon and any and all continuations, reissues, or extensions thereof. *fn1"

 In mid-1974, there began a series of transactions whereby the rights transferred in the 1958 agreements allegedly fell into the hands of one of the present defendants, Wilkins Coffee, Inc. ("Wilkins"). At that time, J.H. Wilkins sold substantially all of its assets to Ziko, Inc., a division of Halco Products Corporation. Ziko, Inc., in turn, sold substantially all of its assets to the Wilkins Corporation in April, 1984. The Wilkins Corporation, in 1984, was merged into Wilkins Coffee Service, Inc., and in 1987, Wilkins Coffee Service, Inc. sold substantially all of its assets to Seymour S. Abensohn. Finally, that same year, Abensohn assigned the assets to Wilkins.

 During the 1980s and 1990s, Wilkins and its predecessor, Wilkins Coffee Service, Inc., revived W & W and employed them as promotional aids in a variety of settings. Wilkins broadcast several television commercials featuring W & W and incorporating clips from the original J.H. Wilkins spots. In addition, Wilkins placed W & W on its coffee can lids, in newspaper advertisements, and on T-shirts, coupons, and free-standing display cases in stores. Wilkins obtained trademark registrations on the characters on October 8, 1991.

 Aside from using the characters themselves, Wilkins and Wilkins Coffee Service, Inc., on numerous occasions during the 1980s, licensed W & W to other parties, including the plaintiffs, for use in television programs. Apparently hoping to develop more opportunities of this type, Wilkins, in early 1991, executed an agreement with defendant John T. Brady & Associates, Inc. ("Brady") giving that company the exclusive right to market and license W & W. With Wilkins' cooperation, Brady launched a plan to market W & W as Muppets and license them as trademarks. Brady's materials promoting this program describe W & W as "Original Muppets Created by Jim Henson" and feature several photographs of Jim Henson performing the characters. Henson's name is sprinkled liberally throughout the text.

 Soon after the plaintiffs became aware of the Wilkins-Brady agreement, they filed applications for copyrights on W & W and brought the instant suit. The plaintiffs claim that the defendants' past activities and future plans constitute infringement of the Muppet and Henson trademarks, infringement of their copyrights in W & W, infringement of the Hensons' respective rights to publicity, unfair competition under both New York and federal law, and breach of the 1958 agreements. Additionally, the plaintiffs ask for a declaratory judgment that the defendants have not succeeded to the rights conveyed to J.H. Wilkins under the 1958 agreements. The defendants, for their part, deny all of the plaintiffs' claims and assert several of their own.

 Presently before me are the parties' cross-motions for summary judgment. The plaintiffs move for summary judgment granting their declaratory judgment claim, while the defendants seek dismissal of that claim and all others.

 Discussion

 I. Standard for Summary Judgment

 Rule 56(c) provides that summary judgment

 
shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

 Fed. R. Civ. P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Richardson v. Selsky, 5 F.3d 616, 620 (2d Cir. 1993). The substantive law identifies the facts which are material. Anderson, 477 U.S. at 250.

 The party seeking summary judgment bears the initial burden of "informing the district court of the basis for its motion" and identifying the matter "it believes demonstrate[s] the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Upon the movant's satisfying that burden, the onus then shifts to the nonmoving party to "'set forth specific facts showing that there is a genuine issue for trial.'" Anderson, 477 U.S. at 250 (quoting Fed. R. Civ. P. 56(e)). The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 89 L. Ed. 2d 538, 106 S. Ct. 1348. However, the nonmoving party is entitled to have all inferences and ambiguities resolved in its favor. Gladstone v. Fireman's Fund Ins. Co., 536 F.2d 1403, 1406 (2d Cir. 1976). "Only when no reasonable trier of fact could find in favor of the nonmoving party should summary judgment be granted." Cruden v. Bank of New York, 957 F.2d 961, 975 (2d Cir. 1992).

 II. The Declaratory Judgment Claim

 The defendants claim to be the successors-in-interest to rights in W & W assigned by the plaintiffs to J.H. Wilkins in 1958. They assert these rights as a basis for their alleged entitlement to employ and license W & W. The plaintiffs, on the other hand, seek a declaratory judgment that such is not the case.

 As an initial argument against summary judgment on this claim, the defendants contend that the plaintiffs are equitably estopped from denying their rights in W & W on account of the Hensons' relinquishment of rights in the 1958 agreements. In order to prove estoppel, a party must show that it actually and reasonably relied to its detriment on the other party's misrepresentation or concealment of a material fact. See U.S. West Financial Services, Inc. v. Tollman, 786 F. Supp. 333 (S.D.N.Y. 1992); Bernstein v. Centaur Insurance Co., 644 F. Supp. 1361 (S.D.N.Y. 1986).

 I am hard pressed to discern the misrepresentation or concealment upon which the defendants claim to have relied. They assert that they

 
had every reason to believe that Jim and Jane Henson and their company understood and agreed that Wilkins Coffee and its predecessors-in-interest owned all rights to Wilkins and Wontkins and that the Hensons would not interfere with their use of Wilkins and Wontkins.

 Def. Opp. Mem. at 23. It is not clear, however, how the plaintiffs are responsible for giving rise to that belief. There is no allegation that the Hensons ever affirmatively said to Wilkins or any other party anything to the effect that they understood Wilkins to own the characters. Apparently, Wilkins reads the 1958 assignments as representations by the Hensons that they no longer claimed any interest in W & W, and, on the basis of the plaintiffs' actions in prosecuting this suit thirty years later, argues that those representations were false and misleading when made.

 Second, and just as damaging to the defendants, even if they could establish reliance, their estoppel claim would still lack merit because of their failure to prove any resulting detriment. See Philanz Oldsmobile, Inc. v. Keating, 51 A.D.2d 437, 381 N.Y.S.2d 916 (4th Dept. 1976) (noting reliance as element of estoppel claim). On this point, the defendants simply argue that prejudice may be presumed from their use of W & W in various advertising media to build consumer awareness and identification with Wilkins' products. The logic is not so obvious to me.

 If defendants had demonstrated that W & W had become synonymous with Wilkins in the public eye so that loss of the characters would adversely affect sales and require them to redesign their whole marketing strategy, detriment would be clear. The record, however, contains no evidence tending to establish the existence of such a scenario. In fact, the principal of Wilkins' advertising agency testified that Wilkins has been reducing its use of W & W for more than a year. See Pearson 9/10/93 Aff. at P 17. See Cullman Ventures, Inc. v. Columbian Artworks, Inc., 717 F. Supp. 96, 135 n. 31 (S.D.N.Y. 1989) (estoppel defense not viable where defendant failed to show it had built up goodwill in its purported mark or that an injunction would be prejudicial). Defendants' motivation in pursuing this litigation is not to protect W & W as symbols of Wilkins' goodwill. Quite the opposite, they seek to protect their rights to license the characters for independent use by others. *fn2" See Def. Ex. 66.

 Because the defendants have failed to raise issues of fact as to reliance or detriment, their estoppel claim fails, and I will go on to consider the plaintiffs' arguments in favor of summary judgment.

 The basis of the plaintiffs' position that Wilkins is not the successor to J.H. Wilkins' rights under the 1958 agreements is that there are allegedly breaks in the chain of title by which Wilkins claims successor-in-interest status. The first break the plaintiffs claim to expose is said to exist in the chain's first link, the Asset Purchase Agreement between J.H. Wilkins and Ziko, Inc., executed in August, 1974.

 Section 1.01(a) of that agreement provides that the property conveyed consisted of:

 
all the goodwill, business as a going concern, properties and assets of the [J.H. Willkins Coffee] Division, of every kind, nature and description, real, personal or mixed, tangible or intangible, wherever situated. . .

 According to the defendants, the clear language of this clause demonstrates that the J.H. Wilkins-Ziko, Inc. transaction included the rights in W & W conveyed ...


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