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SCHOLASTIC, INC. v. STOUFFER

December 5, 2000

SCHOLASTIC, INC., J.K. ROWLING, AND TIME WARNER ENTERTAINMENT COMPANY, L.P., PLAINTIFFS AND COUNTERCLAIM DEFENDANTS,
V.
NANCY STOUFFER, DEFENDANT AND COUNTERCLAIM AND CROSSCLAIM PLAINTIFF V. ABC CORPORATIONS (1 THROUGH 99), CROSSCLAIM DEFENDANTS.



The opinion of the court was delivered by: Allen G. Schwartz, District Judge:

    OPINION AND ORDER

This action centers on certain intellectual property rights related to the Harry Potter series of books, which are written, published and marketed by plaintiffs. Plaintiffs and counterclaim defendants Scholastic, Inc. ("Scholastic"), J.K. Rowling ("Rowling"), and Time Warner Entertainment Company ("TWE") (collectively, "plaintiffs") request a declaratory judgment that (i) they have not infringed and are not infringing any of defendant and counterclaim plaintiff Nancy Stouffer's ("Stouffer's") copyrights or trademarks, and (ii) Stouffer has falsely represented her copyright and trademark rights. By way of counterclaim, Stouffer asserts violations under federal and state law for trademark infringement, copyright infringement, false representation, false designation of origin, unfair competition, injury to business reputation, and tortious interference with business relations. Currently before the Court is plaintiffs' motion to dismiss all of Stouffer's counterclaims except those for copyright and trademark infringement, pursuant to Fed. R. Civ. P. 12(b)(6) ("Rule 12(b)(6)"). For the reasons set forth below, the motion is granted in part and denied in part.

I. Factual Background

Scholastic is a New York corporation with its principal place of business in New York; Rowling is an individual residing in Edinburgh, Scotland; and TWE is a Delaware limited partnership with its principal place of business in New York. (Complaint ¶¶ 2-4.) Rowling is the author of the Harry Potter series of books, and purportedly is the owner of all copyrights, trademarks, and service marks associated with the series; Scholastic is the U.S. publisher and distributor of the Harry Potter books; and TWE owns the film and merchandising rights in two of the Harry Potter books, and purportedly is the exclusive owner of various trademarks derived from the Harry Potter books in connection with the film, and ancillary merchandising projects. (Id. ¶¶ 2-3, 12-15.) Stouffer is an individual who is a citizen and resident of the state of Pennsylvania.*fn1 (Stouffer's First Amended Answer, Counterclaims, and Crossclaims ("Counterclaims") ¶ 44.)

The series of Larry Potter books tells the story of a boy named Harry Potter, who lives with his hated aunt, uncle and cousin, all of whom are known as "Muggles," connoting humans without magical abilities. (Complaint ¶ 10.) Harry, who has magical ability, leaves his home and makes new friends, travels, and has many adventures. (Id.) The Harry Potter books published to date in the United States chronicle these adventures. (Id.) These books are: (i) Harry Potter and the Sorcerer's Stone, published in 1998; (ii) Harry Potter and the Chamber of Secrets, published in 1999; (iii) Harry Potter and the Prisoner of Akbazan, published in 1999; and (iv) Harry Potter and the Goblet of Fire, published in 2000. (Counterclaims ¶¶ 57, 61; Memorandum of Law in Support of the Motion of Plaintiffs to Dismiss ("Pls.' Mem.") at 4.)

Stouffer is the author of several works based on a set of characters called "Muggles," which were created by Stouffer, in particular The Legend of RAH and the Muggles, a children's book containing the Muggles characters which was first published in the 1980s. (Counterclaims ¶¶ 56, 60.) She asserts that she has acquired trademark rights in the "Muggle" and "Muggles" names through her use of such names in children's stories and books and related educational and entertainment services, and has filed trademark applications in the United States Patent and Trademark Office ("PTO") for both marks. (Id. ¶ 70.) She has purportedly used and licensed her trademarks for a variety of commercial products. (Id. ¶¶ 70, 76, 82.) Further, Stouffer claims to own copyrights in (i) "Muggles," a graphic illustration of the characters, (ii) "RAFT," for the book The Legend of RAH and the Muggles, (iii) "RAFT The Movie," based on the book, and (iv) "Muggle-Bye," a musical arrangement. (Id. ¶¶ 62-65.) None of Stouffer's books is currently in print or generally available for sale in the United States. (Complaint ¶ 28; Counterclaims ¶ 104.)

Plaintiffs filed the instant action on November 22, 1999 seeking a declaration that (i) they have not infringed and are not infringing any of Stouffer's copyrights or trademarks, and (ii) Stouffer has falsely represented her copyright and trademark rights, in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125 (a). On August 14, 2000, the Court denied Stouffer's motion to dismiss for lack of personal jurisdiction, or to transfer the case to the Eastern District of Pennsylvania, where she had filed an action against plaintiffs arising out of their alleged infringement of Stouffer's copyright and trademarks.*fn2 (Opinion and Order dated August 14, 2000.) Stouffer subsequently filed her answer, in which she asserts several counterclaims, numbered as follows: (i) federal and (ii) state trademark infringement, under the Lanham Act, 15 U.S.C. § 1125, and New York law, respectively; (iii) false representation and unfair competition under the Lanham Act; (iv) unfair competition under New York law; (v) false designation of origin under the Lanham Act; (vi) injury to business reputation under the Lanham Act and New York law; (vii) tortious interference with business relations under New York law, and (viii) copyright infringement, under 17 U.S.C. § 501 et seq. (the "Copyright Act"). Plaintiffs now move to dismiss counterclaims three through seven, that is, all of Stouffer's counterclaims except those for copyright and trademark infringement, pursuant to Rule 12(b)(6).

II. Discussion

At this stage of the proceedings, the Federal Rules of Civil Procedure afford the parties the opportunity to challenge the facial sufficiency of the allegations in the pleadings. In arriving at this Opinion, the Court has not considered the merits of either party's substantive positions. In granting plaintiffs' motion to dismiss certain of Stouffer's counterclaims and denying the motion as to others, the Court is merely ruling that the pleadings have or have not stated allegations which, under the law, are sufficient to survive a motion to dismiss.*fn3 The Court's decision is not to be interpreted as a finding as to the truth or legitimacy of any allegations in the pleadings.

A. Motion to Dismiss Standard

In deciding a Rule 12 motion to dismiss counterclaims, the Court must read the pleading as a whole, view the counterclaims in the light most favorable to the claimant, and accept the claimant's factual allegations as true. See Twinlab Corp. v. Signature Media Servs., Inc., No. 99 Civ. 169, 1999 WL 1115237 (AGS), at *3 (S.D.N.Y. Dec. 7, 1999) (citing Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995)); Yoder v. Orthomolecular Nutrition Institute, 751 F.2d 555, 562 (2d Cir. 1985) (citing Conley v. Gibson, 355 U.S. 41, 47-48 (1957)); see also Meridien Int'l Bank Ltd. v. Government of the Republic of Liberia, 23 F. Supp.2d 439, 445 (S.D.N.Y. 1998). The Court's function is not to weigh the evidence that might be presented at trial, but merely to determine whether the pleading itself is legally sufficient. See Festa v. Local 3 Int'l Brotherhood of Electrical Workers, 905 F.2d 35, 37 (2d Cir. 1990). Under Rule 12 (b)(6) specifically, dismissal is inappropriate unless "it appears beyond doubt that the [non-movant] can prove no set of facts in support of the claim which would entitle him to relief." Staron v. McDonald's Corp., 51 F.3d 353, 355 (2d Cir. 1995) (quoting Conley, supra, 355 U.S. at 45-46). The Court may consider "facts stated on the face of the [pleading] and in documents appended to the complaint or incorporated in the [pleading], as well as [] matters of which judicial notice may be taken." Automated Salvage Transport, Inc. v. Wheelabrator Environmental Systems. Inc., 155 F.3d 59, 67 (2d Cir. 1998).*fn4

"[T]he principal function of pleadings under the Federal Rules is to give the adverse party fair notice of the claim asserted so as to enable [that party] to answer and prepare for trial." Levisohn, Lerner, Berger & Lansgam v. Med. Taping Sys., Inc., 10 F. Supp.2d 334, 344 (S.D.N.Y. 1998) (quoting Salahuddin v. Cuomo, 861 F.2d 40, 42 (2d Cir. 1988)). Although the pleading requirements under Fed. R. Civ. P. 8(a) ("Rule 8(a)") are construed liberally, "Elliberal construction has its limits, for the pleading must at least set forth sufficient information for the court to determine whether some recognized legal theory exists upon which relief could be accorded the pleader. If it fails to do so, a motion under Rule 12(b)(6) will be granted." Id. (quoting 2 Moore's Federal Practice § 12.34[1][b] at 12-60 (3d ed.)).

B. Lanham Act Claims

Stouffer's third and fifth counterclaims are asserted pursuant to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125 (a), which prohibits, inter alia misrepresentation likely to cause confusion about the source of a product. This section provides in relevant part:

(a)(1) Any person who, on or in connection with any goods or services . . . uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which — (A) is likely to cause confusion . . . as to the origin . . . of his or her goods . . . shall be liable in a civil action by ...

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