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February 1, 1995


The opinion of the court was delivered by: SHIRA A. SCHEINDLIN



 The parties in this action (and many of the parties in two recently filed related actions) have spent a good deal of their time during the last fourteen years litigating against one another. The subject matter of this litigation marathon is the artwork of the late Pablo Picasso, who created more than one hundred thousand works of art prior to his death in 1973. In this action, plaintiff Museum Boutique Intercontinental, Ltd. ("MBI") is suing the heirs of Pablo Picasso (and their agents), seeking damages for copyright infringement and unfair trade practices as well as for a declaratory judgment and preliminary and permanent injunctive relief.

 This action was originally filed in late August, 1993 in New York State Supreme Court. It was then removed to this Court by defendants. On or about September 10, 1993, the parties entered into a Standstill Stipulation ("Standstill") in lieu of MBI proceeding with its motion for preliminary injunctive relief. For the next year the parties attempted to settle the action while continuing to do business in accordance with the terms of the Standstill. In October, 1994, plaintiff alleged that defendants had violated the terms of the Standstill. This spelled the end of the settlement discussions and of the unexpectedly lengthy period of wary coexistence.

 In November, 1994, defendants brought a motion for a preliminary injunction and moved to vacate the Standstill. Plaintiff countered by also moving for a preliminary injunction or, in the alternative, a finding that the defendants had violated the Standstill. In addition to extensive briefing, oral argument on the motions was held on December 30, 1994. Post-argument submissions were also received. These three motions are now pending before this Court.


A. The Parties

 The heirs of Pablo Picasso consist of his children and grandchildren, including Claude, Paloma, Maya, Marina and Bernard Picasso. Claude Picasso is the administrator of the Picasso Estate, also known as the Succession Picasso. In that capacity, he is authorized to act on behalf of all of the Picasso heirs.

 The Societe de la Propriete Artistique et des Dessins Et Modeles ("SPADEM") (now known as the Societe des Auteurs des Arts Visuels), is a French organization engaged in the business of protecting the intellectual property rights of individual artists on a worldwide basis. The Succession Picasso is a member of SPADEM. In 1976, SPADEM and the heirs entered into an agreement by which SPADEM was granted the right to administer, manage and exploit the Picasso name, image and likeness in connection with reproductions of Picasso artwork. See Complaint, SPADEM v. Finesod, et al., 95 Civ. 0102, at P 19. *fn1" SPADEM has the right to grant licenses for the exploitation of Picasso artwork. *fn2"

B. The Remaining Cast of Characters

 In order to fully understand the various complaints and motions, as well as the history of the relevant licensing agreements, it is necessary to set forth a brief description of each of the entities and individuals who play a role, whether major of minor, in this history. An attempt is made to identify these players in somewhat of a chronological order:

 --Talent Network, Inc. ("TNI") is a Chicago based licensing organization. In or about 1976, SPADEM entered into a license agreement with TNI. Pursuant to that agreement, TNI created a line of eyewear, fabrics and wall coverings utilizing reproductions of Picasso artwork, together with the Picasso signature.

 --Paraselenes S.A. is a Swiss corporation representing Marina Picasso. In 1979, Paraselenes granted certain rights to Art Masters International ("AMI") to exploit a group of paintings known as the Marina Picasso collection. This lawsuit concerns the Marina Picasso collection.

 --AMI, a Delaware corporation, was in the business of purchasing the copyrights of artistic works for use in reproductions, products and merchandise. AMI purchased only the rights in the artwork, not the tangible works of art.

 --The Paraselenes Agreement was entered into on December 6, 1979. By the terms of this Agreement, Marina Picasso agreed to sell to AMI the option to buy photoscreen negatives of more than 1,000 Picasso paintings, the reproduction rights in those works, the accompanying global copyrights, and the exclusive license to use, control, manufacture and sell the works produced. See Paraselenes Agreement, Attached as Exhibit D to Defendants' Statement of Facts at P 6. In return, Marina Picasso was to receive annual guaranteed payments, including 60% of the gross receipts received by AMI from any third party which bought and marketed a painting. Id. at PP 9-10. All payments due from AMI were secured by a security interest that Paraselenes retained in the copyrights that were sold to AMI. Id. In addition, the contract had a fifteen year term which expired in December, 1994.

 The Agreement also provided that AMI would presell any photoscreen negatives and the accompanying copyrights to third party investors and would retain a security interest in this property. Id. at P 10. The investors were to pay AMI 50% of the revenues received from exploiting the images. Id. Finally, AMI and its successors or assigns were contractually obligated to respect the Estate's droit moral, or moral rights, as that term is defined by French law. Id. at PP 7(j), 12, 19(e). *fn3" The Agreement also states that "buyer agrees that in no event will the reproduction master or the images be used on any item or in any way that would denigrate the name, honor, reputation or memory of Pablo Picasso as provided in the droit moral." Id. at P 12.

 Pursuant to this Agreement, AMI purchased 109 works from Marina Picasso which were subsequently sold to third party investors ("First Investors"). The First Investors invested in the works primarily as a tax shelter. In early 1980, Marigold Enterprises (MBI's predecessor) began contracting with the third party investors to market their Picasso images.

 --Jackie Fine Arts ("JFA") is the successor in interest to AMI. Herman Finesod is the owner and president of JFA.

 --VAGA and 1980 VAGA Agreement. In 1980, the Picasso Estate sued JFA in New York Supreme Court in an attempt to force JFA to produce the names of the investors who had purchased the works sold to JFA under the Paraselenes Agreement. JFA and AMI then sued the heirs and SPADEM to establish the rights of the parties in the images and associated copyrights. The Picasso Estate then sued AMI, JFA and Marigold Enterprises in this Court for, inter alia, the ownership of the copyrights to the 109 works and the enforcement of the moral rights in the works. On October 28, 1980, these lawsuits were settled pursuant to an agreement between Visual Artists and Galleries Association, Inc. ("VAGA"), SPADEM's U.S. agent, and AMI and JFA ("1980 VAGA Agreement"). By this agreement VAGA (which had acquired all of the works in the Marina Picasso collection) granted to AMI an exclusive option to acquire or reproduce, sell or manufacture an additional 391 images and the associated copyrights. See 1980 VAGA Agreement, Attached as Exhibit E to Defendants' Statement of Facts. In return, VAGA received a minimum guaranteed annual payment totaling over ten million dollars (to be paid over a thirteen year period), a fee of $ 10,000 for each unit actually purchased, and a deferred obligation in the amount of $ 270,000, which was to be paid from revenues received by AMI from third party investors. Id. at PP V-VI. The VAGA Agreement also reaffirmed the Paraselenes contract and AMI's right to the 109 images purchased pursuant to that Agreement. Id. at P VII.

 The VAGA Agreement provides VAGA with a security interest in the long term notes given by third party investors to AMI or JFA in order to enable VAGA to collect 60% of the revenue received by AMI from the investors. Id. at P XI and Attachment B. VAGA also received a security interest in the images and copyrights to protect against a default by AMI on its obligations to VAGA. Id.

 In addition, the VAGA Agreement provides for a stringent approval process regarding moral rights. The Agreement specifically provides that "the parties to this Agreement and their assigns are bound by the following provisions [regarding approvals]." Id. at Attachment A (emphasis added). These provisions dictate that a committee comprised of Maya, Paloma, Marina, Bernard, and Claude Picasso will decide whether any reproduction of a Picasso image conforms to the droit moral, as applicable to the work in question. Id. Certain products -- including prints, posters, and greeting and note cards -- were approved types of uses in all cases. In case of dispute, an expert designated by mutual agreement of the parties would review the committee's conclusions and determine if the reproduction violated the droit moral. Id. In addition, AMI agreed to use its best efforts to make the First Investors, who had purchased the 109 Paraselenes images from AMI, accept this approval process. Id. at P VII(b). *fn4"

 JFA then purchased 125 works from the Marina Picasso collection which were subsequently sold to third party investors. ("Second Investors"). Thus, a total of 234 (109 125) works were bought by AMI/JFA pursuant to the 1979 Paraselenes and 1980 VAGA agreements. MBI and its predecessor companies received exclusive licenses from a number of both the first and second investors to market, produce, and license reproductions of these works. These licenses purported to make MBI the exclusive owner of the copyrights associated with the individual images. These licenses began in 1980 and continue through January, 1995. *fn5"

 --1983 Amended VAGA Agreement. In 1983, AMI and JFA assigned and transferred to VAGA their "interests in all security interests" that either of them had in the images and copyrights obtained under the 1979 Paraselenes or 1980 VAGA Agreement "to the extent required to enable VAGA to collect on [the investors long-term] obligations." See 1983 VAGA Agreement, Attached as Exhibit K to Defendants' Statement of Facts at P IV. In return, VAGA was to return 30% of any monies collected to JFA and/or AMI. All of the long term notes given by the First and Second Investors became due in June, 1994 or January, 1995. While the 1983 Amended VAGA Agreement changed the manner in which JFA was to pay for the images and modified the amount to be paid, it expressly stated that none of the original agreements were cancelled. Id. at P VI.

 --Artists Rights Society, Inc. ("ARS"), is a New York corporation which in 1988 replaced VAGA as SPADEM's U.S. agent. It, in turn, was replaced in 1993 by Picasso International Licensing Company ("PPIL").

 --Worldco Services Group, Inc. ("Worldco") is a Delaware corporation controlled by Herman Finesod, the president of JFA. In or about December, 1992, JFA assigned its interest in 173 (of the 234 Marina Picasso images) images to Worldco. JFA allegedly received its interest in the 173 images ...

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