Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00047/USCOURTS-caed-2_04-cv-00047-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement

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1 Local Rule 56-260 obligates the parties to “cite the

particular portions of any pleading, affidavit, deposition,

interrogatory answer, admission or other document relied upon to

(continued...)

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

KEITH STAFFORD, an individual, )

) CIV. S-04-47 GEB PAN

Plaintiff, )

)

v. ) 

) ORDER

UNITED TREASURES, INC., a ) 

Washington corporation, )

)

Defendant. )

)

Pending are cross motions for summary judgment or for

summary adjudication. The motions were heard April 18, 2005. At this

hearing, the parties agreed that no genuine issues of material fact

exist preventing decision on the liability issues involved in the

motions. Therefore, each party was requested to file a prevailing

party proposed order. On May 2, 2005, proposed orders were filed, and

responses thereto were filed on May 9, 2005. 

The pending motions involve copyright, trademark and issues

arising out of an alleged breach of a licensing agreement. The

following facts are undisputed.1

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1(...continued)

establish [a] fact” asserted to be undisputed or disputed. Although

UTI asserts Stafford’s Undisputed Facts Nos. 15, 17, 18, 20, and 33

are disputed, UTI’s evidence and argument do not constitute specific

facts establishing a genuine issue of material dispute as to any of

these facts. 

2

1. Keith Stafford (“Stafford”) and United

Treasures, Inc. (“UTI”) entered a license

agreement dated August 1, 1999.

***

15. Following the execution of the License

Agreement, Stafford submitted two-dimensional

artwork to UTI to use to make polyresin figurines.

***

18. Stafford in fact exercised control and

approval over the quality of the GOODS during the

process of developing them.

19. Stafford came up with the name ANGELS OF

INSPIRATION and instructed UTI on the proper

trademark to use.

20. UTI’s own agents and representatives have

admitted they understood Stafford was the owner of

the trademark ANGELS OF INSPIRATION.

***

22. On or about September 28, 2001 United

Treasures filed an application for, and ultimately

obtained, federal registration of the mark ANGELS

OF INSPIRATION. 

***

24. The name of Keith Stafford and Stafford’s

Ethnic Collectibles was prominently and regularly

featured in United Treasures’ advertisements for

ANGELS OF INSPIRATION.

25. The label attached that was originally

attached by United Treasures to its angel

figurines said “Angels of Inspiration by Keith

Stafford” and continued to do so until 2004.

***

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2 This background is substantially quoted from Plaintiff’s

Proposed Order on Motions for Summary Judgment filed May 2, 2005. 

Except as otherwise indicated, no genuine issue of material fact

exists as to the facts stated in this Order. 

3

28. Stafford owns the copyrights in the twodimensional artwork for Kente Claus and the Angels

of Inspiration that was submitted to UTI in 1999.

29. Stafford obtained federal registration of his

COPYRIGHTS in (a) the 2-dimensional artwork he

submitted to United Treasures, (b) the figurines

that UTI had made reproducing his artwork, and (c)

the 2-dimensional artwork for the second series of

angels in 2001.

***

32. From the first sale of the figurines until

2004 the only copyright used by United Treasures

on the figurines themselves was ©1999 Keith &

Shereen Stafford.

33. During the process of developing figurines,

Stafford was intimately involved in review of

sculptural changes and in providing specific

design suggestions over the telephone with Colleen

Melott.

***

45. Stafford owns the copyright in the twodimensional artwork for the Angels of Inspiration

and Kente Claus, which were submitted to UTI and

upon which the UTI figurines were based. 

46. Stafford has registered his copyrights in the

two-dimensional artwork he submitted and in the

finished figurines for the original seven angels,

and in just the two-dimensional artwork for the

second series of three angels.

(Def.’s Resp. to Pl.’s Separate Statement of Undisputed Material Facts

in Supp. of Mot. for Summ. Adjudication.)

BACKGROUND2

Plaintiff Keith Stafford began making ethnic figurines and

artwork in 1994, when he started the business Stafford’s Ethnic

Collectibles with his wife, Shereen. Beginning in 1994 Stafford sold

a line of African angel dolls, and his sales grew. In 1995, Stafford

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4

developed the figure of Kente Claus, an African Santa Claus ornament. 

Stafford ultimately developed, and through a series of license

relationships, marketed and sold, a series of products based upon his

angel and Kente Claus designs. 

In early 1999 Stafford’s agent, Anmarie Linsley, owner of an

agency firm, Public Image Consultants, met representatives of UTI at a

trade show in Los Angeles, California. They saw samples of Stafford’s

work and expressed interest in negotiating a license deal for his

work. Linsley sent one of the representatives, Matt Lord, a

confirming letter. Thereafter, the parties negotiated the terms of a

license agreement (“Licensing Agreement”), pursuant to which UTI would

manufacture and sell polyresin figurines based upon artwork provided

by Stafford. At the time the Licensing Agreement was entered, the

artwork upon which the polyresin figurines were to be based did not

exist. In July 1999 Stafford entered a work for hire agreement with

an illustrator named Thomas Blackshear, who was to prepare

illustrations to submit to UTI based upon Stafford’s Kente Claus

figure. Blackshear prepared artwork, and Stafford submitted it to

UTI. Stafford also retained another artist named Robert Grist, who,

under the terms of a work made for hire agreement, prepared

illustrations for seven African angel figurines based upon Stafford’s

recommendations. There is some dispute about exactly what artwork

Stafford provided to UTI after executing the Licensing Agreement. 

Stafford testified that in the fall of 1999 he submitted to UTI

two-dimensional line drawings and color artwork for seven angel

figurines, which Stafford had individually named Joy, Unity, Peace,

Happiness, Love, Faith, and Mercy. UTI admits Stafford submitted

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5

two-dimensional artwork that was used to make the figurines, but its

account is somewhat different.

After Stafford submitted his artwork, UTI, working with

artists located in China, manufactured eight painted polyresin

figurines, seven of which were based upon Stafford’s Joy, Unity,

Peace, Happiness, Love, Faith, and Mercy designs, and one of which was

based upon his Kente Claus design. Photographs of these were e-mailed

to UTI’s customer service representative, Colleen Melott, and to

Stafford. Melott and Stafford then talked on the telephone to discuss

changes to be made to the figurines. Melott was Stafford’s main

contact for UTI for the development of the figurines. Melott sought

Stafford’s approval on changes and design recommendations. 

Although the parties dispute some of the details and the

legal consequences of their respective contributions to the

development of the figurines following the submission of Stafford’s 

two-dimensional artwork, the crucial material facts concerning the

development of the figurines are undisputed: first, Stafford

contributed copyrightable artwork in the form of two-dimensional

illustrations and line drawings for the express purpose of

incorporating the artwork into three-dimensional figurines; second,

Stafford was involved, through telephone conversations with Colleen

Melott, in reviewing, proposing, and authorizing changes to the color

and form of the figurines during the sculpting process; and, third,

UTI was contractually obligated to seek Stafford’s approval, and

throughout the development process did seek and obtain Stafford’s

approval, for the design of the figurines.

As was required of UTI under the terms of the Licensing

Agreement, UTI sought and obtained Stafford’s approval for the

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6

specific form of the copyright notice to be placed on the figurines.

Stafford authorized the notice “© 1999 Keith & Shereen Stafford,” and

the parties do not dispute that this was the sole copyright notice

used on the figurines until 2004.

During the development process Stafford also came up with

the trademark ANGELS OF INSPIRATION, and he authorized this mark to be

used in connection with the angels. UTI also sought and obtained, by

letter from Lord, Stafford’s approval concerning the form of the

trademark notice for KENTE CLAUS. 

The figurines began being sold in 2000. From the beginning

a hang tag was placed on the figurines that said “ANGELS OF

INSPIRATION by Keith Stafford.” Throughout 2000 and beyond UTI

consistently advertised Stafford as the copyright owner of the

figurines and consistently featured Stafford’s name in connection with

the ANGELS OF INSPIRATION mark. The parties agree that this first

commercial use of the mark ANGELS OF INSPIRATION was by UTI. 

In 2001 Stafford and UTI began working on an additional

series of angel figurines to be sold under the ANGELS OF INSPIRATION

mark. Their names were to be Blessed, Guidance, and Grace. Stafford

and UTI began working on developing the figurines even before they had

negotiated a new contract to cover them. As before, Stafford

submitted two-dimensional artwork that had been prepared by an artist

under a work for hire agreement. The parties negotiated the terms of

a new contract to cover this new artwork, but ultimately the parties

could not agree on the terms of a new contract.

In 2001 each of the parties, without informing the other,

registered copyrights in the figurines. Stafford registered

copyrights in the two-dimensional artwork for the original seven

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7

Angels of Inspiration, in the original seven figurines themselves, and

in the artwork and drawings for the second series of three angels.

Meanwhile, UTI registered copyrights in the original seven figurines,

and in the three additional figurines over which the parties had

failed to execute a new contract. No agreement had ever been signed

by Stafford and UTI giving UTI these copyrights. Further, UTI filed

an application for the mark ANGELS OF INSPIRATION on September 28,

2001. 

In 2002 Stafford entered an agreement with a company called

Sarah’s Attic, Inc. to make and sell figurines based upon new designs

under the Angels of Inspiration name. The new angels – Worthy,

Courage, Comfort, and Forgiveness – were based upon new illustrations

provided by Stafford to Sarah’s Attic. The parties do not dispute

that these angels are not based upon the angels made under Stafford

and UTI’s Licensing Agreement. In addition, Stafford licensed Sarah’s

Attic to make four-inch Christmas figurines based upon four of the

angel designs -- Joy, Love, Peace, and Unity – that Stafford had

submitted to UTI in 1999 under the Licensing Agreement. Stafford also

licensed Sarah’s Attic to make three additional figures based upon the

three angel designs -- Guidance, Blessed, and Grace – for which

Stafford and UTI had failed to enter a new contract in 2002.

In April 2003 Stafford entered another license agreement

with Perkins, Inc. to permit Perkins to take photographs of the Angels

of Inspiration figurines being sold by UTI and to use the photographs

in calendars. In December 2003 UTI sent Sarah’s Attic and Perkins

cease and desist letters and then sued them in federal court in the

State of Washington. 

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8

The key issues to be resolved in the cross-motions for 

partial summary judgment are the interpretation of the Licensing

Agreement and determination of which party owns the copyrights and

trademark.

DISCUSSION

Each party contends that the Licensing Agreement is

unambiguous and that it entitles each party to claim ownership of the

polyresin figurines. Stafford asserts he licensed only a narrow right

to UTI to reproduce his artwork in a specified medium, and that this

did not convey a right to UTI which authorized it to own WORKS derived

from Stafford’s artwork. UTI asserts that the Licensing Agreement

transferred more rights to it, arguing: 

When placed in context, and taking into

consideration the language of the contract as a

whole, it is clear that the instant Licensing

Agreement conferred Stafford’s right to create

derivative works to UTI. While it is true that

the word “reproduce” is found in the license’s

Grant Clause, and that the Grant Clause does not

contain the phrase “derivative works,” a plain

reading of the contract demonstrates that the

parties intended that UTI would use Stafford’s

two-dimensional sketches of angels to create new

three-dimensional, color and more complete poly

resin figurines. Since the two-dimensional

sketches were transformed into both a different

form of art and a more elaborate work of art, the

figurines are derivative works as a matter of law.

Specifically, as set forth above, the Licensing

Agreement confers the exclusive right to UTI

“. . . to reproduce the WORKS on the GOODS . . . “ 

According to Schedule A found at page 8 of the

Licensing Agreement, the “WORKS” include “Six

Angel images . . .”. According to Schedule B

(also found at page 8 of the Agreement), the term

“GOODS” means “Poly Resin Figurines”. Taken

together and inserted into the Grant Clause, that

clause reads that UTI “. . . shall have the

exclusive right . . . to reproduce the [Six Angel

images] on the [Poly Resin Figurines].[”] 

Accordingly, by its terms, the Licensing Agreement

conferred to UTI the exclusive right to reproduce

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3 At the April 18 hearing on the motion, UTI’s counsel

indicated that UTI’s claim to derivative work was implied from

language in the Licensing Agreement.

9

the two-dimensional sketches of angels on threedimensional poly resin figurines.

Transference of the derivative work right to UTI

comports with the use of the word “reproduce” in

the Licensing Agreement. By definition, a

derivative work requires that the creator of the

derivative work “reproduce” a substantial portion

of the original work in his or her new

creation[.]3

(Def.’s Proposed Order on Cross-Motions for Summ. J. at 10-11.)

Stafford rejoins that “as the licensor he is entitled to

ownership of the copyright, and UTI’s rights are only those of a

licensee.” (Pl.’s Proposed Order on Cross-Motions for Summ. J. at

10.) Stafford also asserts that “under the terms of the License

Agreement (specifically; paragraphs 3, 5, and 11), [UTI’s] use [of the

trademark Angels of Inspiration was] for the benefit of the licensor,

or Stafford”; and therefore, he is “the proper owner of the mark.” 

(Pl.’s Resp. to UTI’s Proposed Order on Motions for Summ. J. at 7.) 

The Licensing Agreement was formed in California and

contains a choice-of-law clause which states that California law

governs its interpretation. UTI argues that its federal registration

of the “Angels of Inspiration” trademark is prima facie evidence of

its ownership of the mark, and constitutes a presumption of ownership

that can only be overcome by a showing that meets the preponderance of

evidence standard. Sengoku Works Ltd. v. RMC Int’l, Ltd., 96 F.3d

1217, 1220-21 (9th Cir. 1996). Similarly, UTI argues it is the

copyright holder in the polyresin figurines under the first sale

doctrine.

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10

“[G]eneral principles of contract interpretation [are

applied] when interpreting the terms and scope of a licensing

agreement.” Miller v. Glen Miller Productions, 318 F. Supp. 2d 923,

934 (C.D. Cal. 2004). “Summary judgment is appropriate when the

contract terms are clear and unambiguous, even if the parties disagree

as to their meaning. Interpretation of a contract is a matter of law,

including whether the contract is ambiguous.” United States v. King

Features Entertainment, Inc., 843 F.2d 394, 398 (9th Cir.

1988)(citations omitted). 

The Licensing Agreement states as its purpose that the 

LICENSOR . . . grant[s] LICENSEE the right to

reproduce LICENSOR’S designs described at Schedule

A attached hereto and any other designs which may

later be added to Schedule A (WORKS) according to

Paragraph 8 on the GOODS described at Schedule B

attached hereto or any other GOODS which may be

later added by mutual written agreement to

Schedule B (GOODS) . . . and to use LICENSOR’S

trademarks and or copyrights described at

Schedule C (TRADEMARKS/COPYRIGHTS) on the GOODS

incorporating reproductions of the WORKS.

Paragraph 8 states in pertinent part “Such new WORKS shall

be subject to all the terms and conditions of this Agreement.” 

Further, in the “Acknowledgments” and “Grant” sections of the License,

the 

LICENSEE acknowledges and agrees that LICENSOR is

the sole owner of all rights, in and to the WORKS

now described in Schedule A and any new WORKS to

be added to Schedule A by LICENSOR. LICENSEE

acknowledges that said WORKS and each of them are

the unique creations of LICENSOR and that the

WORKS carry with them unique design elements which

constitute a protectable trade dress for

LICENSOR’s products. Furthermore, LICENSEE

acknowledges that the trademarks and COPYRIGHTS

have become distinctive of LICENSOR’S GOODS

throughout the TERRITORY and that the maintenance

of quality of GOODS sold in connection with the

TRADEMARKS and COPYRIGHTS is an important interest

of LICENSOR . . . .

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11

 . . . During the [license] TERM . . ., and

provided that LICENSEE complies with all the

term[s] and conditions hereof, LICENSEE shall have

the exclusive right throughout the TERRITORY to

reproduce the WORKS on the GOODS and to use the

TRADEMARKS and COPYRIGHTS on such GOODS

incorporating reproductions of the WORKS. Any and

all rights in and to the WORKS and TRADEMARKS and

COPYRIGHTS not expressly granted to the LICENSEE

are hereby reserved by LICENSOR.

The “artwork” section of the license states in pertinent 

part the

LICENSEE may not use this artwork for any purpose

except to make reproductions of the WORKS on the

GOODS for distribution in the TERRITORY during the

TERM. Until such time as LICENSEE is obligated to

return the artwork to LICENSOR as mentioned above,

LICENSEE shall keep such artwork in a safe and

secure place and ensure that the same is not made

available to any other person for any purpose. 

LICENSEE agrees not to reproduce the artwork to

the WORKS except during the TERM and under the

terms and conditions specified hereunder.

The “Quality Control” section of the license states in

pertinent part the

LICENSEE shall use the TRADEMARKS and or

COPYRIGHTS on the GOODS as prescribed in writing

by LICENSOR, including any statutory or other

notice or symbol of trademark registration. 

LICENSEE shall use LICENSOR’S copyright notices,

as prescribed by LICENSOR, on all reproductions of

the WORKS as described at Schedule A shall be

“©1999 Keith and Shereen Stafford” such dates for

each of the WORKS being determined by first

production run. 

Lastly, the Licensing Agreement contains an integration

clause providing that: 

This Agreement represents the complete

understanding between the parties as to its

subject matter and supersedes all prior

understandings, if any, as to its subject matter. 

No modification or amendment, nor any promise,

waiver or representation (past, present or future)

shall be valid or binding unless made in writing

and signed by the party to be bound thereby.

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The language in the Licensing Agreement is unambiguous. UTI

acquired the right to reproduce Stafford’s artwork, but Stafford

retained all ownership rights. In the context of the parties' entire

agreement, it is clear that the "right of reproduction” was not

intended to convey to UTI any ownership right in any of the works

created under the Licensing Agreement; all ownership rights in the

works, trademarks, and copyrights were “reserved by” Stafford. The

literal language of the Licensing Agreement, which provides that the

LICENSOR “reserved” “any rights in and to the WORKS and TRADEMARKS and

COPYRIGHTS not expressly granted to the LICENSEE,” plainly encompasses

not only copyright and trademark ownership, but also ownership of any

“works” of the LICENSEE under the Licensing Agreement. 

Ownership rights in a trademark or service mark

can be acquired and maintained through the use of

the mark by a controlled licensee even when the

first and only use of the mark was made, and is

being made, by the licensee. This is because use

of a designation as a mark by a qualified licensee

inures to the benefit of the licensor, who as a

result becomes owner of the trademark or service

mark rights in the designation. 

McCarthy on Trademarks, § 18:46 (emphasis added).

Section 5 of the Lanham Act definitely

contemplates that a trade or service mark may be

acquired through its use by controlled licensees,

even though the registrant itself may not have

used the mark.

Turner v. HMH Publ’g Co., 380 F.2d 224, 229 (5th Cir. 1967). This is

what occurred in this case. Accordingly, Stafford is the lawful owner

of the mark ANGELS OF INSPIRATION because UTI’s usage of that mark

inures to the benefit of Stafford under the Licensing Agreement. 

Therefore, Stafford is entitled to either have UTI’s registration of

the mark cancelled or is entitled to an assignment of rights in the

mark by UTI to Stafford.

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4 S.O.S. also cites 17 U.S.C. § 204(a) (stating “transfer of

copyright ownership must be in writing.”). As stated in Chamberlain

v. Cocola Ass’n., 958 F.2d 282, 285 (9th Cir. 1992), among “the

exclusive rights” the owner of a copyright has is “to prepare

derivative works based upon copyrighted work. . . .” 

13

UTI’s argument that the Licensing Agreement “conferred

Stafford’s right to create derivative works to UTI” is based upon the

contention that an implied covenant can overrule or modify the express

terms of the Licensing Agreement. But it is pellucid that “terms that

conflict with an express written contract cannot be implied in a

written contract.” Kucharczyk v. Regents of Univ. of Cal., 946 F.

Supp. 1419, 1432 (N.D. Cal. 1996) (citing Tollefson v. Roman Catholic

Bishop, 219 Cal. App. 3d 843, 855 (1990)). Moreover, the integration

clause in the Licensing Agreement prevents the use of parol or

extrinsic evidence “to vary or contradict the terms of [the]

integrated written [Licensing Agreement].” Traumann v. Southland

Corp., 842 F. Supp. 386, 390 (N.D. Cal. 1993) (citing Masterson v.

Sine, 68 Cal. 2d 222 (1968)). Thus, UTI’s indication that an implied

agreement overrides the integration clause is unavailing. 

The license must be construed in accordance with

the purposes underlying federal copyright law. 

Chief among these purposes is the protection of

the author's rights. We rely on state law to

provide the canons of contractual construction,

but only to the extent such rules do not interfere

with federal copyright law or policy. . . . 

Copyright licenses are assumed to prohibit any use

not authorized.

S.O.S., Inc. v. Payday, Inc., 866 F.2d 1081, 1088 (9th Cir. 1988)

(citations omitted).4

Construing the Licensing Agreement in accordance with the

purposes underlying federal copyright law makes it obvious that

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5 The public policy of California as evidenced in California

Civil Code section 988 is in accordance with this holding since that

statute indicates that, even in a situation where an ambiguity is

present, “any ambiguity with respect to the nature or extent of the

rights conveyed shall be resolved in favor of the reservation of

rights by the artist or owner, unless in any given case the federal

copyright law provides to the contrary.” “As a legislative enactment,

[a California statute] becomes public policy.” English v. Marin Mun.

Water Dist., 66 Cal. App. 3d 725, 730 (1977) (overruled on other

grounds). When section 988 was construed in Chamberlain, the Ninth

Circuit stated in part:

[W]hen the California statute is read in

conjunction with the federal copyright law and the

California statute's own legislative history, the

most reasonable interpretation of the California

statute is that where there is an express, written

conveyance of one or more of the limited rights

listed in it, there can be no accompanying

transfer of ownership unless the transfer of

ownership is also in writing. 

***

California's section 988 simply refines this

requirement to direct that there be not merely an

agreement, but a written agreement before a

transfer of property rights may accompany a

transfer of copyright rights. 

Chamberlain, 958 F.2d at 285. 

14

Stafford is the lawful owner of the copyrighted polyresin figurines.5

Nothing in the Licensing Agreement authorized UTI to copyright the

figurines. Accordingly, Stafford is granted declaratory relief that

Stafford is the sole owner of the copyrights in the figurines, and

UTI’s copyright registrations are invalid and unenforceable. 

Therefore, Stafford’s partial summary judgment motion for a

declaration that the Staffords are the lawful copyright owners of the

figurines is granted.

Because of the above rulings, UTI’s counterclaims against

Stafford for copyright infringement, trademark infringement, false

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designation of origin, state unfair competition, and declaratory

relief are dismissed and UTI’s motion for partial summary judgment is

denied. The remaining issues will be tried. 

IT IS SO ORDERED.

Dated: May 17, 2005

/s/ Garland E. Burrell, Jr.

GARLAND E. BURRELL, JR.

United States District Judge

Case 2:04-cv-00047-GEB-EFB Document 81 Filed 05/17/05 Page 15 of 15