The opinion of the court was delivered by: PRESKA
FINDINGS OF FACT AND CONCLUSIONS OF LAW
LORETTA A. PRESKA, District Judge:
This copyright action arises out of a disputed copy-right assignment and the scope of the rights transferred pursuant to the assignment from plaintiffs (the "Hensons") to the defendants (the "Wilkins Company"). In a previous Memorandum and Order, I granted in part and denied in part the parties' cross-motions for summary judgment on plaintiffs' claims for trademark infringement, copyright infringement, infringement of right to publicity, unfair competition and breach of contract, disposing of several of these claims. Jim Henson Productions, Inc. v. John T. Brady & Assocs., Inc., 867 F. Supp. 175 (S.D.N.Y. 1994) ("JHP, Inc. "). The copyright claim was tried to the bench over seven days, and at the conclusion of the trial I reserved decision. Subsequent to the trial, the parties submitted proposed findings of fact and post-trial memoranda on the issue of current ownership to the copyright rights to certain muppets created by plaintiffs. Pursuant to Rule 52(a) of the Federal Rules of Civil procedure, I now issue the following findings of fact and conclusions of law in support of my decision in favor of plaintiffs.
1. This action arises out of a dispute over the ownership of the copyrights in two puppet characters named Wilkins and Wontkins created and performed by or at the direction of Jim Henson for certain commercials for the John H. Wilkins Company as more fully described below.
Facts Concerning the Hensons
2. Jim Henson was a world renowned puppeteer who, through his talents as a performer, designer and writer, and his innovative use of television and previously the motion picture medium, created "the Muppets", a now-famous family of original puppets including Kermit the Frog, Miss Piggy, and Big Bird. Mr. Henson (and his company, Jim Henson Productions, Inc.) have won numerous awards including Emmy and Grammy awards for excellence in the art of puppetry. (Pl. Exs. 4, 16-22, 86-87). Mr. Henson passed away suddenly in 1990 at the age of 53.
3. Jane Nebel Henson is a talented puppeteer who was involved in much of Mr. Henson's early work and routinely attended business meetings and discussed with Mr. Henson the business aspects of their work. (Deposition of Jane Henson ("Jane Henson") sworn to on Jan. 27, and June 7, 1993, 6-14, 17, 21, 23-24, 201-03; see, e.g., Pl. Ex. 45 (P 11); Pl. Ex. 12).
4. An essential aspect of Mr. Henson's art form was his personal performance of his puppets. He was an entertainer who performed his own puppets and was not engaged in building or creating puppets for others. As early as 1965, Mr. Henson was quoted as saying "when you do puppets, you can create the whole show yourself, write it, perform it, direct it, everything. It's a whole thing, a mood. It's a way of saying something." (Pl. Exs. 13 (HO2060), 33(c), 34, 38, 86-87; Jane Henson 61-62; Deposition of Jerry Juhl sworn to on Apr. 26, 1993 ("Juhl") 30; Trial Tr.
37-38, 40-41, 54-55, Schube).
5. From the outset of his career, all performances of Muppet puppets have been by Mr. Henson or other Muppet puppeteers trained by Mr. Henson and/or Jim Henson Productions, Inc. Mr. Henson did not permit others to perform his puppets, and Jim Henson Productions, Inc. has consistently enforced that policy. (Id.) ("We wouldn't consider divorcing the puppet from the performance. They're too closely connected.")).
6. From as early as 1954, Mr. Henson had a practice of retaining the copyrights in all Muppet puppets, and to date all such copyrights have been retained by him and/or his company, Jim Henson Productions, Inc. (Deposition of Irwin Russell sworn to on May 24, 1995 ("Russell") 23-26, 43-44, Pretrial Ord. § E P 22; Trial Tr. 45, Schube ("Any muppets that are in those movies or even created for those movies will be and will always be owned by us. That's been our practice throughout the history of the Company and it remains our practice today")).
7. Notwithstanding Mr. Henson's practice of retaining copyright ownership in the Muppet puppets, in the 1950s and 1960s he did not routinely register these copyrights in the Copyright Office. Although a small number of Muppet puppets created in the 1950s and 1960s were registered with the Copyright Office, many Muppets created as early as the mid-50s, including puppets appearing on his Sam and Friends television series, were not registered. (Jane Henson 23-24, Pretrial Ord. § E P 22, Pl. Exs. 4, 12, 89).
Facts Surrounding Recognition of the Henson's Work Prior to Their Relationship with the John H. Wilkins Co.
8. While students at the University of Maryland in the 1950s, Jim and Jane Henson began work on what would later become a puppet-based entertainment empire. (Pl. Ex. 13 (H02044-45, H02048, etc.); Pl. Ex. 45 (PP 3, 11); JHP, Inc., 867 F. Supp. at 177).
9. Commencing sometime about 1954, they adopted the term "Muppet" and "Muppets" as a service mark and as a trademark to identify the puppet characters they created and performed. (Pl. Ex. 45 (PP 4, 5, 49); JHP, Inc., 867 F. Supp. at 177). Today, "Muppets" is a famous mark that continues to identify plaintiffs' particular brand of puppetry -- the soft, expressive puppet performed and created by plaintiffs. (Trial Tr. 38, Schube; Pl. Exs. 4, 87-88).
10. The Hensons started gaining notoriety in connection with their performances of Muppet puppets on television in or around the early-to-mid 1950s. (Pl. Ex. 13 (H02044-45, H02048-49, H02052-56, H02060(a)-61, H02068-71), 85).
11. In 1955 or 1956, articles in the Washington Post and Times Herald stated that "big things are . . . in the works for Jim Henson and Jane Nebel" and that "NBC producers were impressed with muppets Sam, Kermit, Algernon J. Kumquat, Yorick, Hank and Frank, and Mush Melon." (Pl. Ex. 13; (H02044-45; H02056)). In 1957, reviewers noted that Jim Henson and his Muppets "have been getting considerable attention recently from the networks. . . ." (Pl. Ex. 13 (H02048)).
12. During 1956 and 1957, the Hensons made guest appearances including performances of the Muppet puppets on the will Rodgers Show, the Steve Allen Show, on Arthur Godfrey Time, and on the Jack Paar Show. (Pl. Ex. 13 (H02050-51, H02055, H02061, H02068-71)).
13. The Hensons subsequently made guest appearances on the Tonight Show and the Jack Paar Show and also appeared on other national television programs, including appearing as guest stars on the Ed Sullivan Show, and as regulars on the Jimmy Dean Show. (See e.g. Pl. Ex. 45 (PP 41 and 42); Pl. Ex. 49 (P 20)).
14. Commencing in approximately May, 1955 (before the John H. Wilkins commercials were created) and continuing until approximately December 1961, Jim and Jane Henson, and later their company, Muppets, Inc., regularly performed various Muppet puppets (but not Wilkins and Wontkins) on a local television show entitled "Sam and Friends" which was broadcast in the Washington, D.C. area and which aired twice nightly on WRC-TV, the NBC affiliate in Washington, D.C., once just after the Huntley Brinkley News Hour, and once just prior to the Tonight Show. (See e.g., Pl. Ex. 45 (PP 41 and 42); Pl. Ex. 49 (P 20); Pl. Ex. 13; Def. Ex. 46; Jane Henson 10-11, 24, 201-03; Deposition of Regis Cupples sworn to on Apr. 23, 1993 ("Cupples") 13; Juhl 21-22, 30; Deposition of Leslie Asch sworn to on Apr. 30, 1993 ("Asch") 32).
15. Prior to 1957, somewhere between twelve and twenty Muppet puppets had been created. (Jane Henson 23-24).
16. In 1958, "Sam and Friends" was "acclaimed by Washingtonians as the most popular local television attraction" and in February 1958 won an Emmy award for best local entertainment. (Pl. Ex. 13 (H02050-51); Pl. Exs. 45 (P 42), 79A and 80A (P 15)).
17. Mr. Martin Stone, an expert called by defendants, testified to the effect of television appearances on one's reputation, stating that a performer "achieved almost immediately, if not in a few months, a presence and if you stay on long enough, you would be extremely successful." (Trial Tr. 309, Stone).
18. Jim Henson and the "Muppet" puppets were already well known prior to the commencement of their relationship with the John H. Wilkins Company for their "Sam and Friends" show, among other things. (See also (PP 8-17), supra, and J. Henson 23, 201-03).
19. Jim and Jane Henson were earning substantial sums from their performances on Sam and Friends in the mid-to-late 1950s, appearing twice daily, five times a week. (See Pl. Ex. 88 (§ 2(b)) -- ($ 370 rate for five performances of 15 minutes or less) X 2 (for 10 performances a week) X 2 (Jim and Jane) X 52 (weeks per year) = $ 76,960 annual income; § 2(c) = $ 740 (assuming that the two performances per day were identical, the two performances would be compensated at one and three-quarter times the single rate, yielding $ 67,340 combined annual income)).
20. The Hensons transferred all of their rights in Wilkins and Wontkins to Muppets, Inc. upon its incorporation in Washington D.C. on November 20, 1958. (Jane Henson 73-75, 182; Pl. Ex. 2).
Facts Concerning the John H. Wilkins Co.
21. The John H. Wilkins Company was formed primarily for the purpose of marketing food supplies and related products. (Pl. Ex. 23).
22. During the 1950s and 1960s, the John H. Wilkins Company's business consisted primarily of manufacturing and selling its own coffee products. (Hefler 6-7).
23. At all relevant times prior to 1974, the John H. Wilkins Company sold its coffee and tea products substantially exclusively in two markets: (a) retail stores in the greater Washington, D.C. area (consisting of Baltimore, Washington, Richmond, and Norfolk) and (b) institutional buyers such as hotels and restaurants. By 1974, the John H. Wilkins Company had practically phased out the retail end of its business. (Pl. Ex. 49 (P 2); Hefler 6-7; Ashplant 12-13).
Relationship and Agreements Between the Hensons and the John H. Wilkins Co.
24. The relationship between the Hensons and the John H. Wilkins Company first developed sometime during the mid-1950s when John H. Wilkins, the founder of the John H. Wilkins Company, saw the Hensons' television show "Sam and Friends" on a local television station and asked Roger Hefler, his right hand-man, to contact them about the possibilities of using their talents for an advertising program to promote the John H. Wilkins Company's coffee product. (Hefler 8; Jane Henson 23; Pl. Ex. 42 (MO1329)).
25. Upon Mr. Wilkins' request, Mr. Hefler contacted the Hensons, and, thereafter, the parties had a number of meetings and discussions culminating in the first of many agreements. (Hefler 8-10, 22).
26. In or about 1957 or 1958, the John H. Wilkins Company introduced a regional advertising campaign to promote retail sales of its Wilkins brand coffee that consisted primarily of the television commercials written and then produced by Jim Henson in which Jim Henson and other puppeteers under his direction performed the Wilkins and Wontkins puppet characters. (Hereinafter, the television commercials produced by the Hensons or their company, Muppets, Inc., for the John H. Wilkins company will be referred to as the "John H. Wilkins commercials.") (Hefler 10-15, Pl. Exs. 24A; 49 (P 9)).
27. Over the course of their relationship from around 1957 through the mid-to-late 1960s, the Hensons and their company, Muppets, Inc., and the John H. Wilkins Company had many written and oral agreements. (Hefler 9-10, 14, 18, 19, 53; Jane Henson 141-42, 182-86; see e.g., Pl. Exs. 24(A), (H), (J), (K), (L), (N), 25(D), 45 (PP 80, 87-89, 91)).
28. The documentary records of the parties and their predecessors, however, are incomplete. (Pl. Ex. 45 (PP 80, 88-89, 91); Hefler 15, 76-77, 94; Jane Henson 181-82; Furey 30-32, 86-95, and Pl. Ex. 59; Ver Standig 29, 43-44 and Pl. Ex. 58; Ashplant 5-6, 81-84 and Pl. Ex. 60; Hatch I 16, 39-40, 43, 112; Deposition of Daniel Abensohn sworn to on Nov. 12, 1992 and Apr. 27, 1993 ("D. Abensohn") 237-38, 243, 246, 411; Deposition of Helen Marmoll sworn to on May 17, 1993 ("Marmoll") 80-81; Deposition of Stanford Berman sworn to on May 21, 1993 ("S. Berman") 45-46, 65; Deposition of John T. Brady sworn to on July 24, 1992 ("Brady") 280-281; Winegar 24-25). Defendant Coffee Associates, Inc. did not produce the originals, signed or unsigned, or copies of any agreements between Jim Henson and Jane Henson or Muppets, Inc. and the John H. Wilkins Company or any of defendants' other alleged predecessors in interest. (Pl. Ex. 45 (PP 80, 85(c)). Neither defendant produced any documents from its respective files that concern communications or the relationship between the Hensons and the John H. Wilkins Company. Other than certain documents produced by Helen Marmoll, plaintiffs produced all of the documents in the case concerning the relationship between the Hensons and the John H. Wilkins Company. (Pl. Ex. 46 (PP 142-61, 163-65)).
29. Mr. Hefler was responsible at the John H. Wilkins Company for its relationship with the Hensons and Muppets, Inc. and handled most of the correspondence relating to them on behalf of the John H. Wilkins Company. (Hefler 10).
30. Of all the persons who have been deposed in this case, Roger Hefler and Jane Henson are the only persons with first-hand knowledge of the purpose of the agreements between the Hensons and/or Muppets Inc. and the John H. Wilkins Company. (Hefler 10-14, 43; Jane Henson 151-54, 162-71, 183-86, 192-95; D. Abensohn 245-49; Marmol 30, 41, 49, 59-60, 81; Winegar 24-25, 121; Ver Standig 21-30, 32-35, 60-61; Ashplant 99-100; Furey 14-31, 37-40; 63-64, 69, 73, 79-80; Deposition of Seymour Abensohn sworn to on Apr. 22, 1993 ("S. Abensohn") 39, 44, 70-72, 132-33, S. Berman 9-10, 87; Hatch II 36; Brady 223-30, 273, 279-80; Cupples 10-11, 27, 120-22; 144-45). Further, of all such persons, including Mrs. Henson, only Mr. Hefler has first-hand knowledge of the terms of such agreement(s). (Hefler 10-11; Jane Henson 145-46, 151-52). Every other witness in the case who had any knowledge of dealings between the Hensons and the John H. Wilkins Company (including defendants' witnesses) identified Mr. Hefler as the individual who would know best the terms of the agreements between the parties. (Hefler 4-6; Furey 16-17; Jane Henson 139-140, 159, 168; Hatch I 114-15, 119; Hatch II 36; Ver Standig 61; Pl. Ex. 42 (M001325)). In their answers to plaintiffs' interrogatories defendants also identified Mr. Hefler as a person who would know the terms of the agreements. (Pl. Ex. 50 (PP 3-4)).
31. However, in the course of defendants' investigation of their asserted rights with respect to Wilkins and Wontkins, neither defendants nor anyone acting under their supervision or authority or on their behalf contacted Roger Hefler and asked him: (a) what the terms were of any agreements between the John H. Wilkins Company and the Hensons and/or Muppets Inc., or (b) if the Hensons had transferred any copyright rights in Wilkins and Wontkins to the John H. Wilkins Company. (Pl. Ex. 46 (P 170)).
32. The purpose and intention of the Hensons and the John H. Wilkins Company with respect to all their agreements during their collaboration was as follows: (1) the Hensons would create television commercials in which they would perform certain "Muppets", here the Wilkins and Wontkins puppet characters; (2) the John H. Wilkins Company would have the exclusive rights to use the puppets in connection with its advertising campaign to promote its coffee product to the retail trade in its trading market -- the greater Washington area -- for the duration of the advertising campaign; and (3) the rights granted to the John H. Wilkins Company with respect to Wilkins and Wontkins were terminable at the conclusion of the advertising campaign. (Hefler 10-13, 20-36; Jane Henson 151-54, 162-71, 183-86, 192-93; Pl. Ex. 45 (PP 20, 48)).
33. An integral part of the agreements between the John H. Wilkins Company and Mr. Henson was that only Mr. Henson or someone under his supervision would perform his Muppet puppets and that such performances would always be in the context of a commercial entirely created by him. Similarly, any ancillary uses of two- or three-dimensional depictions of the puppets would be part of the John H. Wilkins Company's advertising campaign, in its region, and would be subject to Mr. Henson's creative control and consent. In other words, irrespective of the question of copyright ownership, under the parties' agreement, (i) the John H. Wilkins Company only had the right to use the characters in its region to promote Wilkins Coffee; and (ii) the John H. Wilkins Company never had the right to use these puppets or characters separate and apart from Mr. Henson's creative services and control. (Id. and Pl. Exs. 33(c), 34, 38).
34. The initial agreement between the John H. Wilkins Company and the Hensons was memorialized in a letter dated November 14, 1957 from Jim Henson to M. Belmont Ver Standig, Inc., which at the time was the John H. Wilkins Company's advertising agency. In that letter, Mr. Henson stated "This includes creation of situations, characters, voices, sets and the exclusive film commercial rights to the Muppets while these films are being used on the air". (Pl. Ex. 24(a); Hefler 22-24; Jane Henson 144-48).
35. By the time of the September 16, 1958 Assignment (discussed infra), the John H. Wilkins advertising campaign had already been running for approximately 10 months. Roughly 50 of the John H. Wilkins commercials had been created, and they were very popular. By that point, if not earlier, the John H. Wilkins Company was dependent upon Mr. Henson's talents to continue the campaign and could not replace him with anyone else. (Hefler 31-32; Pl. Exs. 5, 24(b) and (c); Pl. Ex. 13 (HOO749); see also Pl. Ex. 14A).
36. Jim Henson and/or Jane Henson and/or Muppets, Inc. did not provide puppets separately, but instead provided, in combination, all the creative services necessary to the entire filming of the John H. Wilkins commercials, including the storyboards, scripts, sets, special effects, costumes, art work, props (other than actual Wilkins Coffee products), directorial services, production services, and performers. This was consistent with Mr. Henson's way of expressing his art form. (Jane Henson 133, 148; Pls. Ex. 3, 24A; Hefler 8, 10, 12-13, 22-24).
37. The Wilkins and Wontkins puppets had a strong physical resemblance to the then-existing "Muppet" puppets (compare Pl. Exs. 4, p. 37, 16 with Pl. Ex. 8) but were built after Jim Henson created the storyboards for the John H. Wilkins commercials. (Pl. Ex. 3, Jane Henson 21).
38. During the 1950s and 1960s, the John H. Wilkins commercials were broadcast in the greater Washington, D.C. area only. (Pl. Ex. 49 (P 10); Hefler 24, 29-31, 36).
39. As part of the John H. Wilkins Company's advertising campaign, beginning in or about late December 1958 and ending sometime in early 1959, for approximately three months, depictions of the Wilkins and Wontkins characters appeared in local Washington, D.C. newspaper advertisements promoting Wilkins brand coffee, and miniaturized rubber or vinyl figurine adaptations of the Wilkins and Wontkins puppets (called "premiums") were offered and distributed by the John H. Wilkins Company to its retail customers in the greater Washington, D.C. area. Also during this three-month period, an offer for the premiums, depicting them, was placed on the lid of the Wilkins Coffee cans. Although the premiums were not released until late December, 1958 (Pl. Ex. 28(d)), their introduction was anticipated in late August, 1958 (Pl. Ex. 27(c)), which coincides with the timing of the September 16, 1958 Assignment. (Pl. Ex. 45 (PP 97, 98); Pl. Ex. 49 (PP 12 and 13); Pl. Ex. 51 (P 34); Hefler 96-97). Other than the foregoing, no depictions of the Wilkins and Wontkins premiums or puppets, or their character names, were used on Wilkins coffee cans or other product containers.
40. The Wilkins and Wontkins premiums, which were approved by Jim Henson and based upon drawings created by him, bore copyright and patent pending notices in the name of the John H. Wilkins Company with a date of 1958. (Pretrial Ord. § E (PP 46, 53); Hefler 78, 83, 95; Pl. Ex. 51 (P 43); Def. Exs. 8, 9). At least 65 of the John H. Wilkins commercials also bore a copyright notice in the name of the John H. Wilkins Company. (Pl. Ex. 6). I find that the parties were concerned about using the proper copyright notice to protect the exclusive rights being enjoyed by the John H. Wilkins Company, for their mutual benefit, and with respect to the premiums. (Pl. Exs. 25(B), 26H, 27(F); Def. Ex. 43). I also find that the John H. Wilkins Company, as the advertiser, had sound business reasons for wanting its own name in the copyright notice. (Id. and Trial Tr. 275-76, Perle).
41. Mr. Henson was paid a royalty on sales of the premiums (Pl. Exs. 27(f) last P, 28(h), 31(c)). As early as 1962, in connection with premiums for out-of-town advertisers, Muppets, Inc. handled these transactions on its own with no involvement of, or payment to, the John H. Wilkins Company. (Pl. Ex. 27(j); Def. Exs. 106, 109; Hefler 87-89).
42. The John H. Wilkins Company never intended to use on its own and never used the Wilkins and Wontkins puppets at all -- the actual puppets were retained by the Hensons and used by them alone in connection with their performances in the John H. Wilkins commercials and the out-of-town commercials. (Pretrial Ord. § E (PP 9, 10, 28)). The John H. Wilkins Company never intended to and never did use the commercials or the premiums in any manner other than to promote its coffee and tea products in the retail trading market in the greater Washington D.C. area. (Hefler 6-7, 13, 20, 21, 24, 28-29; Pl. Ex. 45 (PP 20, 47, 92, 93, 103)).
43. I find that the John H. Wilkins Company did not intend by its agreements with Mr. Henson to acquire characters which were to become corporate symbols or trademarks to identify or be associated with Wilkins brand coffee. In the seven years during which the commercials aired, on and off, the character names were not promoted to the public, nor were they used in any of the commercials. Nor were they used as trademarks. (Pl. Exs. 7, 13 (H00751); Def. Exs. 47, 48; JHP, Inc., 867 F. Supp. at 182-83). The character names were so unimportant that they are not even mentioned in the initial letter agreement in November 1957, or even in the September 16, 1958 Assignment, where they are referred to as "certain Muppets." (Pl. Ex. 24(a); Def. Ex. 13). Further, Mr. Henson's scripts for other advertisers used different names for the same characters. (Pl. Exs. 94, 95; see also Pl. Exs. 26I, M, and 27C). Instead, I find that the John H. Wilkins Company intended by its agreements with Mr. Henson to acquire his talents as an entertainer, so that commercials could be created to draw attention to its coffee product. The John H. Wilkins Company understood that Mr. Henson's Muppet puppets and all copyrights therein would remain with him when the commercial campaign was over.
44. The John H. Wilkins Company never believed that it obtained any copyright rights with respect to the Wilkins and Wontkins puppets, other than to use Jim Henson's commercials and the premiums and print advertisements containing depictions thereof to promote its coffee product to the retail trade in its trading market, the greater Washington D.C. area, for the duration of its advertising campaign. (Hefler 20-21, 24, 25, 74-75).
45. The John H. Wilkins Company never paid the Hensons or their company for a transfer or assignment of all their rights in Wilkins and Wontkins. (Hefler 41; Pl. Ex. 40A). Based on the expert testimony of Lincoln Diamant, which I find persuasive, the amounts paid to the Hensons and/or Muppets, Inc. in connection with the production of the John H. Wilkins Company commercials were low for the services rendered and do not leave any room for a buy-out of all rights, which would have cost a substantial amount even in those years. (Trial Tr. 101-105). The testimony of Mr. Stone, defendants' expert, is not to the contrary; he testified that his company bought out a puppeteer's copyright in 1950 for $ 250,000. (Trial Tr. 314, 331, Stone).
46. The M. Belmont Ver Standig Advertising Agency produced the John H. Wilkins Company commercials at various periods of time during the years commencing sometime in late 1957 or 1958 until on or about October 1, 1961, and thereafter Muppets, Inc. produced such commercials through and including at least 1965, but not later than 1968. (Pl. Exs. 24A, 24G, 45 (P 90); Furey 65-66; Hefler 74-75, 85; Henson 124-25). Mr. Henson and Muppets, Inc. had sole creative control over these commercials.
47. In light of the fact that while the John H. Wilkins Company commercials were on the air Mr. Henson had given that company "the exclusive film commercial rights to the Muppets," (Pl. Ex. 24(a)), and in light of the fact that the John H. Wilkins Company referred non-competing advertiser "clients" to Mr. Henson, I find that the John H. Wilkins Company agreed with Muppets, Inc. that in the event that Muppets, Inc. produced commercials featuring performances of Wilkins and Wontkins for other advertisers outside of the John H. Wilkins Company's market area, Muppets, Inc. was to pay the John H. Wilkins Company a commission for such commercials. (Pl. Ex. 44 (P 76); Hefler 41-56; Henson 50-51; 186-89).
48. I also find, based on Mr. Hefler's testimony, which I find both credible and highly persuasive, that the commission paid to the John H. Wilkins Company with respect to out-of-town commercials was not, as defendants contend, a license fee or a royalty payment because the John H. Wilkins Company was the copyright owner of Wilkins and Wontkins. To the contrary, it is clear from his testimony and corroborating documents (Pl. Ex. 24J) that this commission was paid for all Muppet puppets used in other commercials, including such puppets as Scoop and Skip, the copyrights to which, defendants concede, were always to remain with Mr. Henson.
49. The out-of-town commercials were produced pursuant to agreements between Muppets, Inc. and the advertisers in question (and/or their respective advertising agencies). The John H. Wilkins Company had no contract with the advertisers, and there is no evidence that its consent was required, sought or given. (Pl. Ex. 45 (P 77)). Initially, the Hensons worked out their deal with the other advertisers through the Belmont Ver Standig Agency, with whom Mr. Henson had made a separate agreement (which agreement he bought out for $ 5,000 as of October 1, 1961) and thereafter through Muppets, Inc. (Hefler 42, 86-90, 92-93). Thus, during the 1958-1961 period, when the Ver Standig Agency was still involved in the out-of-town commercials, the Ver Standig Agency first paid the Hensons, and then, after payment of expenses, remitted to the John H. Wilkins Company its commission, which was a share of profits, and retained the remainder as its fee. After October, 1961, when the Ver Standig Agency was no longer involved, Muppets, Inc. paid the John H. Wilkins Company a 20% commission directly. On this record, I find that the Ver Standig Agency and the John H. Wilkins Company never had a joint venture to sell Mr. Henson's commercial films.
50. As of October 1, 1961, if not earlier, it was agreed that Mr. Henson's obligation to pay commissions to the John H. Wilkins Company for Mr. Henson's out-of-town commercials would end two years after the John H. Wilkins Company ceased using the John H. Wilkins Company commercials. (Pl. Ex. 24J).
51. The agreements between Muppets, Inc. and the companies in question (and/or their respective advertising agencies) generally granted the companies the exclusive right in their trading area to broadcast the commercials in which the Wilkins and Wontkins puppet characters were performed by the Hensons. (See, e.g., Pl. Exs. 26A, 27I, 29, 30A, 31A, 32B, 36B, 38).
52. The John H. Wilkins Company had no involvement in, exercised no control over and possessed no right to control the commercials or the quality of the goods and/or services offered by the other advertisers who used commercials featuring performances of Wilkins and Wontkins. As between the John H. Wilkins Company and Mr. Henson, Mr. Henson and his company had sole control, including creative control, over these commercials. (Hefler 25, 89, 92-93; Pl. Exs. 26(A, B), 27(A, B, I), 28A, 29, 30(A), 31(A), 32(B), 38, 36(A-B)).
53. Defendants' assertion that the John H. Wilkins Company acquired all copyright rights in Wilkins and Wontkins from the Hensons is based exclusively on the transfer purportedly effectuated by the September 16, 1958 Assignment; defendants admit that they know of no other documents or evidence which they contend constitutes a transfer of copyright rights in Wilkins and Wontkins from the Hensons and/or Muppets Inc., the Hensons' company, to the John H. Wilkins Company. (Pl. Ex. 46 (PP 125-28)).
54. Defendants also contend that certain patent rights in Wilkins and Wontkins were assigned by the Hensons to the John H. Wilkins Company pursuant to an assignment executed on October 16, 1958 (the "October 16 Assignment"). (Pl. Ex. 51 (P 24)).
55. Documentary evidence, oral testimony, conduct of the parties and the surrounding circumstances, and evidence of custom and practice establish that the September 16, 1958 Assignment was not the complete agreement between the parties and was not intended to transfer all rights, including copyright rights, in the Wilkins and Wontkins puppets in perpetuity to the John H. Wilkins Company.
56. The September 16, 1958 Assignment and October 16, 1958 Assignment were entered into shortly prior to the sale and distribution of the Wilkins and Wontkins premiums, around the time the Hensons and/or Muppets, Inc. began performing the Wilkins and Wontkins puppets to promote the products of companies other than the John H. Wilkins Company and around the time when such companies began expressing interest in distributing premiums to promote their products. (JHP, Inc. at 178; Pl. Exs. 25A-B; 26B-K; 27A-F; 28A-G; 29; 45 (P 98)).
57. Jane Henson believes that the September 16, 1958 Assignment related to the premiums and protecting rights against third parties. (Jane Henson 155-56, 172-74, 207-08).
58. The John H. Wilkins Company was represented by intellectual property counsel during, but not solely in 1958. (Pl. Ex. 47 (P 195), Pl. Ex. 42 (M01090-1424); Hefler 38; Furey 58-60).
59. The September 16, 1958 Assignment was drafted by attorneys for the John H. Wilkins Company. (Trial Tr. 186, Olsson; Trial Tr. 270-71, Perle; Trial Tr. 486, Baumgarten; Hefler 91; Pretrial Ord. § E PP 31 and 39). I find it most probable that the September 16, 1958 Assignment was recorded by attorneys for the John H. Wilkins Company. (Trial Tr. 420, 488-489, Baumgarten). Further, there is no evidence that Mr. Henson was notified of such recordation.
60. Although the parties' records are incomplete, and there is no documentary evidence other than the document itself as to who prepared the 1958 Assignment, documents produced by Helen Marmoll show that during the 1950s and 1960s, Mr. Hefler regularly exchanged correspondence with the law firm of Scrivener Parker Scrivener and Clarke, an intellectual property law firm. (Pl. Ex. 42 (M01090-1424); Hefler 38; Furey 58-59).
61. With respect to Mr. Henson's agreements with the John H. Wilkins Company, Mr. Henson did his own negotiating and never had anyone else with him. (Hefler 92, 95).
62. An attorney represented the Hensons in connection with the incorporation of Muppets, Inc., but there is no evidence that any other attorneys were representing them at that time. (Jane Henson 161-62).
63. Documents produced in this case that refer to copyright ownership of Wilkins and Wontkins reflect that the John H. Wilkins Company was actively interested in maintaining copy-right protection and/or in preventing copyright infringement. (Pl. Exs. 25(B), 26(H), 27(F), 27(G), 28(G), 31(B), 42 (see, e.g., M001097, M001154-55, M001212, M001309, M001334, M001338; see also, M001318-22); Def. Exs. 31, 41, 42, 43, 72).
Business Climate of the Relevant Time Period
Expert Testimony with respect to Business Practices
64. Plaintiffs' expert Lincoln Diamant was qualified as an expert in the broadcast commercial industry in the 1950s and 1960s. As a television commercial producer for such leading advertising agencies as McCann-Erickson, Inc., Ogilvy & Mather and Grey Advertising, Inc., among others, and eventually for his own company, Spots Alive, from 1949 through 1992, Mr. Diamant watched and directly participated in the evolution and development of the customs and practices of the television commercial industry and had extensive personal involvement in negotiating and administering talent agreements and the applicable talent union contracts. (Trial Tr. 63-66, Diamant; Pl. Ex. 73).
65. Defendants did not seek to qualify Martin Stone as an expert witness in the television commercial industry. Rather, he was qualified as an expert in the licensing industry, which is an industry devoted to the merchandising of names, fictional characters, including puppets and personalities. (Trial Tr. 320-21, 329, Stone). I find Mr. Stone's testimony to be entitled to less weight and, therefore, less persuasive than Mr. Diamant's because, in the 1950s, there was no significant overlap between the television advertising industry and the licensing industry, and neither the John H. Wilkins Company nor Jim Henson was in the licensing industry at that time. (Trial Tr. 71, Diamant; Trial Tr. 330-31, Stone). Moreover, the licensing industry was just starting out in the 1950s, and few realized the potential for exploiting their works in this manner. (Trial Tr. 308, 328-29, 365-67, Stone). In the 1950s and 1960s, it was not common for advertisers to license elements of their commercials to third parties. (Trial Tr. 71, Diamant; Trial Tr. 365-67, Stone).
Agreements in the Television Commercial Industry
66. Roger Hefler's testimony -- that the only rights that the John H. Wilkins Company obtained in the Wilkins and Wontkins puppets were the exclusive rights to use the puppets in connection with its advertising campaign to promote its products in its region for the life of its advertising campaign and that whatever rights were granted to the company with respect to the puppets were terminable at the conclusion of the advertising campaign -- is fully consistent with the custom and practice of the television advertising industry in the 1950s and 1960s. (Trial Tr. 107, Diamant; Pl. Ex. 83).
67. In the late 1950s, the television commercial industry was a simpler business than it is today, and transactions were much less frequently documented on paper. A handshake often sealed an agreement, and written contracts were generally simpler agreements. Much of the business was built on familiarity and trust. (Trial Tr. 67-69, Diamant; Trial Tr. 313 ("Things were done very quickly . . . There were no contracts. There were words of mouth . . . ."), Stone; Pl. Ex. 83).
68. Even in the 1950s, however, an agreement -- whether oral, written or a combination of both -- between a television advertiser or its advertising agency on the one hand and the "talent" that appeared in or created copyrightable material for television commercials for that advertiser on the other hand would normally address numerous basic points. Because it fails to address so many of the points that would normally be covered by such an agreement, I find that the September 16, 1958 Assignment signed by Jim Henson and Jane Nebel certainly is not the complete agreement between the Hensons and the John H. Wilkins Company regarding the Wilkins and Wontkins commercials. (Trial Tr. 90-92, 105-106, Diamant).
69. TV commercials are temporary tools for temporary campaigns, and long-running commercials are the exception, not the rule. In the late 1950's, as today, advertisers and advertising agencies worked from the premises that (a) advertising campaigns have lives of limited duration and are generally targeted to particular audiences in a specific geographic area through specific media, and (b) they purchased only the rights required to effectuate the campaign. (Trial Tr. 69-71, Diamant).
70. While the advertiser customarily owned whatever elements of its commercials that were created by the creative department of its advertising agency, it did not customarily own the elements of its ...