Opinion ID: 663725
Heading Depth: 2
Heading Rank: 1

Heading: Materiality of Academy Trademark Claim

Text: 18 Leisure Time contends that the Academy claim does not materially affect Tri-Star's rights under the Distribution Agreement and, therefore, that Tri-Star is not entitled to terminate the Distribution Agreement. Two provisions of the Distribution Agreement are relevant here. Paragraph 9(A)(2) of Exhibit A provides that [t]here are, and will be, no claims ... of any nature in or to the Picture or any part thereof which can or will impair or interfere with the rights of Tri-Star hereunder. Paragraph 7(A)(2) of Exhibit A provides that the right to terminate the contract would occur upon any breach or default by [Leisure Time] of any representation, warranty or other term or provision of this Agreement, which materially affects Tri-Star's rights hereunder. (emphasis added). In determining whether Tri-Star is entitled to exercise the right of termination under paragraph 7(A)(2), our inquiry is limited to whether the Academy claim constitutes a breach of the representation in paragraph 9(A)(2) and whether the breach materially affects Tri-Star's rights. We need not determine that the underlying trademark action will succeed in order to decide this case. 19 To prevail on a statutory or common law claim of trademark infringement, a party must establish that the symbols for which it seeks trademark protection are valid, legally protectable marks and that another's subsequent use of a similar mark is likely to create confusion as to the origin of the product. Pirone v. MacMillan, Inc., 894 F.2d 579, 581-82 (2d Cir.1990). Titles of motion pictures and other works of artistic expression are entitled to trademark protection under section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a) (1988 & Supp. IV 1992). See Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1379 (2d Cir.1993); Alan Behr, Film and TV Titles Prove Difficult to Protect, Nat'l L.J., Nov. 1, 1993, at S34, S34. 20 The district court, in denying summary judgment to both Academy and Leisure Time on the trademark issue that now is before the district court in the companion case, noted that material issues of fact remained regarding the merits of this claim. 749 F.Supp. at 1253; 1992 WL 296314, at  6-7, 1992 U.S.Dist. LEXIS 15232, at  19-21. The district court also noted that Academy had made a strong preliminary showing for relief under the Lanham Act. The district court indicated that surveys submitted to the court in conjunction with the trademark issue demonstrated that a substantial portion of the sample population mistakenly believed that Return was a sequel to Bridge. 1992 WL 296314, at  7, 1992 U.S.Dist. LEXIS 15232, at  21. Thus, at the very least, Academy has presented a colorable claim that may have forced Tri-Star to engage in protracted litigation. The Distribution Agreement clearly was designed to protect Tri-Star from such a burden. The claim was contrary to Leisure Time's representation that there would be no claims interfering with the rights of Tri-Star. 21 Notwithstanding the merits of the Academy claim, Tri-Star cannot exercise the termination clause of the Distribution Agreement if the claim does not materially affect its rights thereunder. Distrib.Agree., Exhibit A, p 7(A)(2). The possibility of liability for money damages alone does not represent a threat because Leisure Time agreed to indemnify Tri-Star against such liability. Paragraph 9(B) of Exhibit A provides: 22 [Leisure Time] shall indemnify and hold harmless Tri-Star and the corporations comprising Tri-Star, and its and their officers, directors and employees, from and against any and all liability, damages, costs and expenses (including reasonable attorneys' fees and court costs) which any of them may sustain or suffer by reason of a breach of any of the covenants, agreements, representations or warranties of [Leisure Time] contained in this Agreement. In addition to any and all rights and remedies granted to Tri-Star hereunder, Tri-Star shall have the right to set off against any monies payable to [Leisure Time] hereunder the amount of any such liability, damages, costs and expenses. 23 Additionally, Leisure Time, in accordance with paragraph 6(A) of Exhibit A, obtained E & O insurance for Return on behalf of itself and Tri-Star. This insurance was for $1,000,000 per claim, with an aggregate of $3,000,000, amounts which were specified in the Distribution Agreement. Given the broad indemnity provision and E & O insurance, we conclude that the threat of money damages posed by the Academy claim does not materially affect Tri-Star's rights under the Distribution Agreement. 24 If Academy were to obtain a preliminary injunction enjoining the distribution of Return, however, there can be little dispute that the injunction would materially affect Tri-Star's rights. Leisure Time acknowledges as much in its answer, submitted in response to the complaint in this action, wherein it conceded that any restraint against release of Leisure Time's motion picture would be damaging to [Tri-Star]. The Distribution Agreement obligates Tri-Star to contract with exhibitors and to otherwise distribute and market Return. An injunction would impede the performance of that obligation and adversely affect Tri-Star's relationship with those parties with which it necessarily would contract for the distribution and marketing of the motion picture. Leisure Time nevertheless argues that the Academy claim does not materially affect Tri-Star's rights because the doctrine of laches forecloses Academy from obtaining injunctive relief. 25 Laches is an equitable defense which bars injunctive relief where a plaintiff unreasonably delays in commencing an action. Stone v. Williams, 873 F.2d 620, 623 (2d Cir.), cert. denied, 493 U.S. 959, 110 S.Ct. 377, 107 L.Ed.2d 362 (1989), vacated on other grounds, 891 F.2d 401 (2d Cir.1989), cert. denied, 496 U.S. 937, 110 S.Ct. 3215, 110 L.Ed.2d 662 (1990). To prove laches and bar the grant of injunctive relief in the companion trademark action, Leisure Time would need to show that Academy had knowledge of Leisure Time's planned use of the trademark, that Academy inexcusably delayed in taking action and that Leisure Time would be prejudiced if Academy belatedly asserted its rights. Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1040 (2d Cir.1980); see New Era Publications Int'l v. Henry Holt & Co., 873 F.2d 576, 584-85 (2d Cir.1989) (equitable doctrine of laches barred plaintiff from enjoining publication of author's biography when there was severe prejudice and unconscionable delay in seeking injunctive relief), cert. denied, 493 U.S. 1094, 110 S.Ct. 1168, 107 L.Ed.2d 1071 (1990). The equitable nature of laches necessarily requires that the resolution be based on the circumstances peculiar to each case. Stone, 873 F.2d at 623-24. The inquiry is a factual one. The determination of whether laches bars a plaintiff from equitable relief is entirely within the discretion of the trial court. Robins Island Preservation Fund, Inc. v. Southold Dev. Corp., 959 F.2d 409, 423 (2d Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 603, 121 L.Ed.2d 539 (1992). 26 The record is not so clear that we can conclude with certainty that the injunctive relief sought by Academy against the release and distribution of Return is foreclosed by laches. There are questions of fact as to whether Academy received notice in 1978 or 1987 that a motion picture entitled Return would be filmed; whether Academy inexcusably delayed in asserting its trademark claim against Leisure Time between 1987, when Academy acknowledges notice, and 1989, when the trademark action was commenced; and whether Leisure Time was prejudiced by this delay. The district court noted that there are disputed issues of material fact as to whether Academy is guilty of laches. 1992 WL 296314, at  7, 1992 U.S.Dist. LEXIS 15232, at  21. Since Leisure Time is unable to demonstrate, as a matter of law, that Academy is foreclosed from obtaining the injunctive relief it seeks, the Academy claim materially affects Tri-Star's rights and obligations under the Distribution Agreement and, therefore, Tri-Star is entitled to exercise its right of termination.