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ESTATE OF LENNON v. SCREEN CREATIONS

September 9, 1996

THE ESTATE OF JOHN LENNON, by its duly empowered Executrix, YOKO ONO LENNON, Plaintiff, against SCREEN CREATIONS, LTD. and LEGGOONS, INC., Defendants. BAG ONE ARTS, INC., Plaintiff, -against- LEGGOONS, INC., Defendant.


The opinion of the court was delivered by: BAER

 HAROLD BAER, JR., District Judge:

 Plaintiffs Estate of John Lennon (the "Estate") and Bag One Arts, Inc. ("Bag One") move for a preliminary injunction and summary judgment on the issue of termination of a licensing agreement between Bag One and defendant Leggoons, Inc. The Estate also moves to dismiss two counterclaims brought by Leggoons. The Court held an evidentiary hearing on February 16, 1996 on the motion for a preliminary injunction and has taken the two additional motions on submissions. For the reasons discussed below, the motion to dismiss is granted and the motion for a preliminary injunction and summary judgment is denied.

 Background

 On July 30, 1993, Bag One, a licensee of the Estate, entered into a contract (the "Agreement") with Leggoons authorizing Leggoons to utilize copyrighted works and trademarks owned by the Estate on specified types of clothing. The negotiations that lead to the Agreement were facilitated by James Powers of JP/BK Limited. Powers was later hired as a consultant to Leggoons to assist it in developing products.

 The Agreement provides Leggoons with "the exclusive right and license in [the] United States and Canada, Mexico and the Caribbean . . . to use the signature of John Lennon . . . and artwork created by John Lennon selected by Licensee and approved by Licensor." Pl. Ex. 1, at P 1(a). In addition, the Agreement provides that "no right to use the likeness of John Lennon are granted hereby, with the exception of the likeness described in Exhibit B." Id. at P 1(c). This photograph is credited to the photographer MacMillan and was submitted as plaintiff's exhibit 2. Leggoons argues that paragraph 1(c) should be read in conjunction with paragraph 1(a) such that the Agreement is interpreted to grant Leggoons an exclusive right to use the MacMillan photograph on clothing. See Leggoons' Memorandum of Law in Opposition to Plaintiffs' Motion for a Preliminary Injunction at 4 n.2 (citing L.G.B., Inc. v. Gitano Group, Inc., 769 F. Supp. 1243, 1248 (S.D.N.Y. 1991)). Plaintiffs did not respond to this argument in their papers. However, their conduct indicates that they agree that the right to use the MacMillan photograph was exclusive. As plaintiffs' counsel informed the Court at oral argument, when Leggoons complained to Bag One that another firm, Winterland Productions, Inc. was using the image, a member of her law firm wrote a cease and desist letter to Winterland. See Tr. at 9; Pl. Ex. 3. In addition, plaintiffs' counsel stated that "it is Bag One's position that upon finding out that someone had breached their rights, they immediately took all necessary steps to stop that infringement." Tr. at 10. Based on the text of the Agreement and plaintiffs' counsel's representations, I conclude that the Agreement should be interpreted as Leggoons urges.

 The Agreement required that all goods that Leggoons proposed to produce be approved by Bag One prior to production and outlined the following approval procedure:

 
4.(a) Prior to the manufacture of the Products, Licensee shall submit to Consultant [JP/BK Limited] and Licensor design boards with fabric standards and item description for each Product, for Licensor's prior written approval, which approval shall not be unreasonably withheld. In the event Licensor has not responded in writing within seven (7) days after receipt of a prototype for approval, the prototype shall be deemed disapproved. In the event no response is received from the Licensor in writing as to its approval or disapproval, within such (7) days, Licensee may thereafter provide Licensor with written notice of such failure to respond. Should Licensee provide such written notice and should Licensor thereafter fail to respond within five (5) days from receipt, Licensor's silence shall be deemed to constitute approval for such prototype.

 Pl. Ex. 1, at P 4(a).

 The Agreement also provided in paragraph seven that Leggoons would make periodic advance royalty payments on a semi-annual basis. Id. at P 7(d). The Agreement specified that Bag One could terminate the Agreement for cause if Leggoons breached any of the material terms, including the obligation to pay advance royalties. As stated in paragraph 14(b):

 
If Licensee shall breach any of the material terms and conditions of this agreement, Licensor shall have the right to terminate the Term upon written notice to Licensee unless Licensee shall completely remedy the breach within fifteen (15) days from receipt of Licensor's notice of a breach of paragraph "7" and within forty-five (45) days from receipt of Licensor's notice of a breach of paragraphs "4", "8", or "13". For the purposes of this agreement, Licensee's breach of paragraphs "4", "7", "8" or "13" hereinabove are hereby acknowledged by both parties to be deemed material breaches.

 Id., at P 14(b).

 At issue in this dispute are three images that the Estate claims were never approved and the "John Lennon" signature trademark. The first image is a photograph of John Lennon wearing sunglasses and a fedora, credited to the photographer Nishi. The Estate claims that use of this image was not authorized under the Agreement and was not subsequently approved. *fn1"


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