(main body of motion)

 

Karen Dudnikov, and Michael Meadors ("Plaintiffs") seek summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, or in the alternative, declaratory judgment pursuant to Rule 57 of the Federal Rules of Civil Procedure on all claims alleged in their Complaint dated December 10, 2003. As set forth in detail below, summary judgment is warranted on the grounds that (a) as a matter of law, the Plaintiffs have not infringed on any trademarks held by MGA Entertainment ("MGA"), (b) the Plaintiffs have not infringed on any copyrights held by MGA, (c) MGA deliberately misrepresented liability under trademark and copyright laws, and (d) MGA deliberately made false and misleading statements with the intent to cause harm. As a result, the Plaintiffs have suffered financial loss and damage to their business reputation and will continue to suffer these losses absent relief from this court. Background         1. The Plaintiffs brought this action on behalf of themselves because of actions by MGA interfering with their home-based sewing business.         2. The Internet has expanded access to large numbers of persons not only for informational purposes but also for the purposes of buying and selling to a wide market throughout the world. Early problems of security have been mostly resolved and there is an abundance of marketplaces as well as potential buyers. eBay, an internet on-line auction venue, is one of the larger and better known of these marketplaces. eBay dominates the on-line auctions with over an estimated 80% of the marketplace.         3. The Internet has introduced a number of sticky problems for the legitimate owners of copyrights and trademarks. Congress has attempted to afford some protections to those legitimate owners of copyrights and trademarks through recent legislation.         4. Some owners of copyrights and trademarks have opted to aggressively police these marketplaces. These policing activities include, but are not limited to, cease and desist letters and emails and the closing down of web sites and on-line auctions using the provisions of the Digital Millennium Copyright Act ("DMCA").         5. While many owners of copyrights and trademarks are engaged in legitimately protecting those copyrights and trademarks, some owners allege infringements knowing when in fact there are none. They harass merchants by deliberately misstating the provisions of the Lanham Act and falsely claiming derivatives when in fact the items do not meet the federal standards to be considered derivatives. . Statement Of Undisputed Material Facts         6. The Plaintiffs lawfully acquired, at a retail store, appliques that contained copyrighted and trademarked images belonging to MGA.         7. The Plaintiffs then made a fleece hat and attached the applique onto the hat and offered it for sale on eBay.         8. MGA ordered this auction terminated.         9 The auction listing contained a disclaimer: "This is not a licensed Bratz product. It is however hand-crafted with care using a licensed Bratz applique. I am not affiliated with Bratz or MGA Entertainment." ARGUMENTS I. The Summary Judgment Standard         10. Summary Judgment is appropriate when "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law". Fed. R. Civ. P. 56(c). There are no genuine issues of material fact in this case. MGA asserted a claim of protecting its intellectual property as a basis for the actions taken (see Answer Of Defendant ¶15). This claim is refuted by federal law, case histories, MGA's own statements, and accepted reputable experts. II. Jurisdiction and Venue         11. This Court has jurisdiction over the federal claims in this action under the Trademark Laws of the United States, Lanham Act Sections 32, 39, 43 (a), and 43 (c)(1), 15 U.S.C. §§ 1114, 1121 and 1125 (a)(c)(1), the Copyright Act 17, U.S.C. § 101 et seq. and the Judicial Code of the United States, 28 U.S.C. §§ 1331, 1338 (a) and (b). This Court has supplemental jurisdiction over any common law and state statutory claims under 28 U.S.C. § 1367.         12. Venue is proper in this district pursuant to 28 U.S.C. § 1391 (b)(2), in that a substantial part of the events giving rise to the claims occurred in this judicial district and plaintiffs are doing business within this judicial district. III. TRADEMARKS A. Use of trademarks Without Authorization         13. On December 4, 2003, the plaintiffs received the following email from David         Oakes at MGA:         "MGA Entertainment, Inc. owns and controls all copyright, trademark, manufacturing, distribution, licensing and merchandising rights in and to the property "BRATZ", its related characters (i.e., "Chloe", "Sasha", "Jade", "Dana", "Yasmin", etc.) and ancillary properties, (i.e. "LIL' BRATZ", "BRATZ BOYZ", etc.). MGA takes its responsibility for the protection of "BRATZ" and the rights it has granted to its authorized licensees very seriously. Due to contractual obligations to its licensees, MGA cannot permit the unauthorized use, sale and distribution of any unlicensed items using the "BRATZ" characters for commercial purposes."         14. Section 1114 of The Lanham Act states: (1) "Any person who shall, without the consent of the registrant - (a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or (b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive,"…         15. Section 1115(b)(4) of the Lanham Act defines "Fair Use" as: "…a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin…."         16. Section 1114(1)(a) of the Lanham Act does not apply because the Plaintiffs were using a lawfully acquired, copyrighted applique, upon which appeared a trademark of MGA that was there with the knowledge and consent of MGA. MGA has made no claim that the Plaintiffs were using "any reproduction, counterfeit, copy, or colorable imitation" nor has MGA asserted the applique was unlawfully acquired.         17. Court after court refers to "counterfeiting" and "knockoffs" when applying the Lanham Act. The use of lawfully acquired copyrighted appliques does not fall under the Lanham Act's restrictions.         18. Section 1114(1)(b) of the Lanham Act does not apply for two reasons: (a) the Plaintiffs did not "reproduce, counterfeit, copy, or colorably imitate a registered mark" as stated in Paragraph 14, and (b) the use of the trademarked names and use of pictures of the product are protected under Section 1115(b)(4) of the Lanham Act as "fair use".         19. Additionally, there is no presumption of infringement in the Lanham Act. The wording is specific in that the use of a mark has to create a likelihood of confusion. MGA admits the plaintiffs used in the auction listing a disclaimer that said: "This is not a licensed Bratz product. It is however hand-crafted with care using a licensed Bratz applique. I am not affiliated with Bratz or MGA Entertainment." (see Answer Of Defendant ¶49).         20. The claim of trademark protection does not apply to a copyright. The applique was copyrighted by the licensee of MGA. The fact that the image happens to be a trademark does move the copyright issue into trademark protection as claimed by MGA. B. Fair Use         21. In New Kids on the Block v. News Am. Publ'g, Inc., 971 F.2d 302, 308 (9th Cir. 1992), Judge Kozinski stated:         "one might refer to "the two-time world champions" or "the professional basketball team from Chicago," but it's far simpler (and more likely to be understood) to refer to the Chicago Bulls. In such cases, use of the trademark does not imply sponsorship or endorsement of the product because the mark is used only to describe the thing, rather than to identify its source."         22. Judge Kozinski further stated: "Indeed, we may generalize a class of cases where the use of the trademark does not attempt to capitalize on consumer confusion or to appropriate the cachet of one product for a different one. Such nominative use of a mark--where the only word reasonably available to describe a particular thing is pressed into service--lies outside the strictures of trademark law: Because it does not implicate the source- identification function that is the purpose of trademark, it does not constitute unfair competition; such use is fair because it does not imply sponsorship or endorsement by the trademark holder. "When the mark is used in a way that does not deceive the public we see no such sanctity in the word as to prevent its being used to tell the truth." Prestonettes, Inc. v. Coty, 264 U.S. 359, 368, 44 S.Ct. 350, 351, 68 L.Ed. 731 (1924) (Holmes, J.)."         23. New Kids on the Block held that a commercial user is entitled to a nominative fair use defense provided the following three requirements are met: first, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder. The plaintiffs met ALL of these requirements. IV. Copyrights         24. MGA did not claim the item was a derivative but it is an issue to be addressed. A. Derivatives         25. The First Sale Doctrine allows that the owner of a lawfully acquired copy of a product may dispose of that copy without interference from the owner of the copyright unless the copyrighted work is transformed into a derivative. One test of a derivative is whether the copyrighted item was used as intended by the copyright owner. Appliques are intended to be attached to fabric items.         26. The applique was not "recast, transformed, or adapted" in any manner. The applique was used to make an end product consistent with the intended use. Indeed, the applique image would have had to been altered before the First Sale Doctrine could be refuted under 15 U.S.C. Section 1114.         27. Another test of a derivative is whether the "new" item would be copyrightable in it's own right. A fabric item made from plain fleece fabric, made into a hat, with an applique attached would not qualify for copyright as there is nothing new.         28. A final test of a derivative is the mandated requirement that it be "recast, transformed, or adapted" having "modifications" that "represent an original work". There is no originality in fabric items. In Precious Moments vs La Infantil, 1997, (D.P.R.) 971 F.Supp. 66, the First Circuit Court specifically rejected the copyright claim where La Infantil was being accused with unauthorized use of copyrighted fabric, saying that "bedding items manufactured with lawfully acquired, authentic fabric with copyrighted design were not infringing derivative works." B. First Sale Doctrine         29. In Quality King Distributors, Inc. v. L'Anzaresearch Int'l, Inc (98 F.3d 1109, reversed), Justice Stevens noted for a unanimous court: "The whole point of the first sale doctrine is that once the copyright owner places a copyrighted item in the stream of commerce by selling it, he has exhausted his exclusive statutory right to control its distribution."         30. The common-law roots of the first sale doctrine allows the owner of a particular copy of a work to dispose of that copy. This judicial doctrine was grounded in the common-law principle that restraints on the alienation of tangible property are to be avoided in the absence of clear congressional intent to abrogate this principle. This doctrine appears in section 109 of the Copyright Act of 1976. Section 109(a) specifies that this notwithstanding a copyright owner's exclusive distribution right under section 106 the owner of a particular copy or phonorecord that was lawfully made under title 17 is entitled to sell or further dispose of the possession of that copy or phonorecord. CLAIMS OF WRONGDOING BY MGA A. Perjury         31. To establish Perjury under 17 USC §512, it must be shown that MGA knew, or reasonably should have known, the statements made in the affidavit sent to eBay were false.         32. MGA plainly stated the auction was terminated to protect its licensees (see ¶13). The affidavit to eBay stated that the auction by the plaintiffs infringed upon the IP rights of MGA. The statement to eBay was deliberately false and therefor constitutes perjury.         33. There are no statutes or case histories that support MGA's contention that protecting licensees gives them the right to claim trademark infringement when the alleged infringer is not misrepresenting the product or doing something to give the impression of endorsement or affiliation.         34. The auction listing prominently displayed a disclaimer in the same size font in bold, back-highlighted in yellow. No reasonable person would have missed the disclaimer and no reasonable person would have misunderstood the disclaimer. B. Misrepresentation.         35. Under 17 USC §512(f), if the court feels MGA misrepresented facts to eBay, the plaintiffs are entitled to court costs and expenses.         36. Arguments stated in ¶¶32 through 34 apply to misrepresentation as well. C. Tortious Business Interference         37. To establish Tortious Business Interference under Colorado Law, it must be shown that Plaintiffs had a contract in effect, that MGA knew there was a contract, that MGA interfered with that contract, that MGA's actions were unjustified, and that the interference caused harm.         38. Listing an item on the internet auction site eBay is an offer to sell. A bid on the listing is an offer to buy. An offer to sell accompanied by an offer to buy is a contract. The plaintiffs had a bid on the fleece hat on auction. A contract was in place.         39. All eBay users agree to abide by the eBay User Agreement. Paragraph 4 of the Agreement states:         "4. Bidding and Buying. As a buyer, you are obligated to complete the transaction with the seller: a. if you purchase an item through one of our fixed price formats; or b.if you are the highest bidder at the end of an auction (meeting the applicable minimum bid or reserve requirements) and your bid is accepted by the seller, unless the item is listed in a category under the Non-Binding Bid Policy or the transaction is prohibited by law or by this Agreement. By bidding on an item you agree to be bound by the conditions of sale included in the item's description so long as those conditions of sale are not in violation of this Agreement or unlawful. Bids are not retractable except in exceptional circumstances, such as: when the seller materially changes the item's description after you bid; a clear typographical error is made; you cannot authenticate the seller's identity; or when the seller does not confirm your purchase in the Half.com area of our services. If you choose to bid on mature audience items or items that are restricted to adult use, you are certifying that you have the legal right to purchase such items."         40. Paragraph 5 of the eBay User Agreement states:         "5.2 Binding Bids. Except for items listed in a category under the Non-binding Bid Policy, if you receive at least one bid at or above your stated minimum price (or in the case of reserve auctions, at or above the reserve price), you are obligated as the seller to complete the transaction with the highest bidder upon the auction's completion, unless there is an exceptional circumstance, such as: (a) the buyer fails to meet the terms of your listing (such as payment method), or (b) you cannot authenticate the buyer's identity. "         41. When a person submits a bid for an item on auction, just below the box for the bid the following warning from eBay:         "Your bid is a contract - Place a bid only if you're serious about buying the item. If you are the winning bidder, you will enter into a legally binding contract to purchase the item from the seller. "         42. MGA is a member of eBay's Verified Rights Owner ("VeRO") Program, and as such, is a registered member of eBay, agreeing to abide by the User's Agreement. Therefore MGA knew, or reasonably should have known, a contract existed as there was a bid on the auction.         43. As stated above, MGA knew, or reasonably should have known, the allegations made in the affidavit were false. When MGA submitted the affidavit to eBay, MGA knew eBay would take action based upon the affidavit.         44. As a result of the affidavit, eBay was compelled to terminate the auction to avoid liability under federal statutes, and thus the contract was terminated.         45. As a result of the auction termination, the Plaintiffs lost money based upon the existing bid, and in all probability, future bids that would have resulted in a higher closing amount.         46. The terminated auction also interfered with the possibility of prospective future business from those individuals bidding.         47. The terminated auction also caused harm to the Plaintiffs' business reputation. When an auction is terminated in this manner, eBay sends an email to the bidders informing them that the auction(s) was terminated giving the reason as the seller committed a violation of someone's intellectual property rights. This creates a negative impression in the minds of the bidders making them reluctant to again bid on items offered by that seller. VIII. CONCLUSION Based upon the above arguments, the plaintiffs firmly believe that the actions of MGA were calculated, improper, unethical and illegal and will continue unless stopped. As a matter of law, the plaintiffs are entitled to summary judgment, or in the alternative, a declaratory judgment, affirming MGA committed perjury and misrepresented trademark infringement. The actions of MGA has caused harm, present and future, to the plaintiffs. Therefore the plaintiffs request the court issue a declaratory judgment affirming:         1. Selling copyrighted items is allowed reasonable "fair use" of images and descriptions that pertain to the items being offered without interference and threats from the copyright and trademark holder.         2. Selling items made from lawfully acquired copyrighted appliques are protected by the "First Sale Doctrine" because the fabric items do not qualify as derivatives as defined in Copyright Law.         3. Selling items made from lawfully acquired copyrighted appliques do not need "authorization" to make and subsequently offer for sale these fabric items.         4. "Cease and Desist" letters (or emails) that reference the above items (1 & 2 & 3) are illegal and a violation of professional ethics.         5. Auctions terminated for reasons stated in 1, 2 and 3 constitute tortious interference with business.         6. Auctions terminated for reasons stated in 1, 2 and 3 constitute perjury under 17 U.S.C Section 512.         7. Auctions terminated for reasons stated in 1, 2 and 3 constitute misrepresentation under 17 U.S.C Section 512(f).         8. Plaintiffs request the court grant legal costs and any other reimbursements deemed to be appropriate         Respectively submitted this 17th day of March, 2004   Karen Dudnikov Michael Meadors 3463 Maskoke Trail P.O. Box 87 Hartsel, Colorado 80449 PRO SE PLAINTIFFS 303-913-4702 303-913-6075     (end of complaint)