Opinion ID: 2967367
Heading Depth: 2
Heading Rank: 3

Heading: Duffy the Dragon costume

Text: The district court held that, in contrast to the NDC- and Hillarybased claims, Lyons' causes of action with respect to the Duffy the Dragon costume were not time-barred under either a statute of limitations or laches theory, but the court found that Morris Costumes did not infringe Lyons' copyrights and trademarks in Barney when it dis12 tributed the Duffy costume. Lyons contends that the court's findings were based on legal error because it (1) applied an inappropriate legal standard for finding substantial similarity under the Copyright Act claim; and (2) wrongly excluded as hearsay evidence of children's reactions to the Duffy costume, as well as newspaper articles evidencing confusion, in considering the Lanham Act claim. We address these points in order.
The district court found that Morris Costume's distribution of the Duffy costume did not infringe Lyons' copyrights because, in its words, Duffy is not subjectively, intrinsically similar to the Barney character when viewed from the perspective ofthe average adult renter or purchaser of these costumes. We agree with Lyons that this exclusive focus upon the average adult's perspective is too narrow and fails to apply the established copyright principles of this circuit. To establish a claim for copyright infringement, a plaintiff must prove that it owned a valid copyright and that the defendant copied the original elements of that copyright. See Ale House Mgmt., Inc. v. Raleigh Ale House, Inc., 205 F.3d 137, 143 (4th Cir. 2000) (citing Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991)). When the plaintiff possesses no direct evidence that the defendant copied its protected work, it may create a presumption of copying by indirect evidence establishing that the defendant had access to the copyrighted work and that the defendant's work is substantially similar to the protected material. See Towler v. Sayles, 76 F.3d 579, 58182 (4th Cir. 1996). Proof of substantial similarity requires resort to yet another two-part analysis. First, the court must determine whether the two works are extrinsically similar because they contain substantially similar ideas that are subject to copyright protection. Id. at 583. And second, the court must ask whether the works are intrinsically similar in the sense that they express those ideas in a substantially similar manner from the perspective of the intended audience of the work. See id. at 583-84. The notion of intrinsic similarity can be a slippery one because it requires the court to inquire into the `total concept and feel' of the works, but only as seen through the eyes of the ordinary observer. Dawson v. Hinshaw Music, Inc., 905 F.2d 731, 733 (4th Cir. 1990). This ordinary observer is to be a member of the 13 intended audience of the plaintiff's work. Id. at 736. In most cases, when a copyrighted work will be directed at the public in general, the court need only apply a general public formulation to the intended audience test. See id. at 736-37. But when it is clear that the work is intended for a more particular audience, the court's inquiry must be focused upon the perspectives of the persons who comprise that group. See id. In determining that Morris Costumes' sales of the Duffy costume did not violate the Copyright Act, the district court found that Barney and Duffy were extrinsically similar but not intrinsically similar. That finding was based upon the court's conclusion that the intended audience of the Duffy costumes was the average adult renter or purchaser of those costumes because that person is the one who would actually decide whether to obtain the costumes. The court reasoned that the perspectives of children were irrelevant becausethere is no evidence in the record that children directly influenced any purchase or rental decisions regarding Defendants' costumes. Rather, [c]hildren were only able to view Defendants' costumes after an adult obtained them. Accordingly, the district court held, because the average adult would not believe that Duffy and Barney were intrinsically similar, Lyons had not proven that Morris had engaged in copying, and thus had not established a claim under the Copyright Act. The evidence of actual confusion among children, however, which the court disregarded, was substantial. An elementary school administrator testified that her school rented the Duffy costume for a school rally called Character Counts, because Barney exemplified the qualities that the rally intended to communicate. When the administrator appeared without advance notice before 500 children in the Duffy costume, the children saw Barney. As she testified, the kids just went wild. They went crazy and they were just going,`Barney. Barney. Barney.' Also, various parents testified that they rented Duffy knowing that it would be perceived by children as Barney, and in each case the children so perceived Duffy as Barney. In addition to this evidence of actual confusion among children, Lyons offered over 30 newspaper clippings from around the country in which persons wearing the Duffy costume were depicted but the newspaper reported them as Barney. None of the papers reported an awareness of its error. 14 We conclude that the district court's limiting of the intended audience to the adult renters and purchasers directly conflicts with our decision in Dawson, in which we first articulated the intended audience rule. In Dawson, we held that, in evaluating whether two works of music were intrinsically similar, the district court should have considered whether the works' intended audience possessed specialized expertise, relevant to the purchasing decision, that lay people would lack, and if so, whether that specialized audience, rather than the ordinary lay observer, would find the works to be substantially similar. 905 F.2d at 736. Likewise, the similarity of child-oriented works must be viewed from the perspective of the child audience for which the products were intended. Id. at 735; Atari, Inc. v. N. Am. Phillips Consumer Electronics Corp., 672 F.2d 607, 619 (7th Cir. 1982); Sid & Marty Krofft Television Prods. v. McDonald's Corp. , 562 F.2d 1157, 1166-67 (9th Cir. 1977). The Dawson court adopted the intended audience rule, as opposed to an ordinary observer rule, because copyright law, at its core, is intended only to protect the creator's economic market and resulting financial returns. See Dawson, 905 F.2d at 733-34 (citing Arnstein, 154 F.2d at 473). Accordingly, the relevant question that courts must ask in determining whether a work has been copied is not whether society as a whole would perceive the works to be similar in an aesthetic sense, but rather whether the works are so similar that the introduction of the alleged copy into the market will have an adverse effect on the demand for the protected work. Put more directly, copyright law is concerned with those knock-offs that could actually diminish a copyright owner's profits, and that threat only arises when the owner's customers or potential customers believe that the new work is in fact a copy. In this case, all of the relevant evidence tended to show that the target for both the Barney and Duffy characters was an audience consisting of young children. Lyons states more particularly that it targets children from ages two to five. Accordingly, the economically important views are those of the young children who watch Barney on television, wear t-shirts bearing his likeness, and desperately hope that the purple dinosaur will make an appearance at their birthday parties. Even if adults can easily distinguish between Barney and Duffy, a child's belief that they are one and the same could deprive Barney's 15 owners of profits in a manner that the Copyright Act deems impermissible. We can only surmise the economic impact that would be felt by Lyons in its future sales of copyrighted materials if Duffy, mistaken by children for Barney, were to conduct himself (outside of a parodic context) in a manner that undermined the image that Lyons had created in Barney. Such a Barney at the mall, at school, or at local promotions might quickly erode the good will of the true Barney on PBS and adversely affect Lyons' sales of copyrighted toys, clothes, and videotapes. The district court attempted to skirt the problem by stressing the unique nature of the allegedly infringing work in this case: the evidence in the record showed that unlike, say, a toy, the adult-sized costumes at issue were always bought or rented outside the presence of children. Thus, the court held, the child's perspective was irrelevant because the adult is the one who would actually decide whether to obtain the costumes. We find this distinction unpersuasive on two levels. First, such logic would practically obliterate the consideration of children's viewpoints in any case involving protected works that are directed towards children, as many such works are purchased as surprise gifts -- and thus necessarily outside of the child's presence. More fundamentally, the district court's distinction ignores the fact that, even though children were not present during any of the purchases or rentals testified to at trial, their impressions and views were the primary influences on the purchase decision. As the district court explicitly found, many of these adults rented these costumes with the intent of confusing their young children. Thus, the fact that the adults were the nominal purchasers of the costumes is irrelevant for the purposes of the substantial similarity inquiry; the adults' actions only confirm that children are the intended audience with respect to both the Barney character and the Duffy costume. Moreover, the entertainment of the children with the costumes could have a direct economic impact on later wishes, later purchases, and general good will in an economic sense -- a potentially detrimental impact against which the Copyright Act seeks to protect. We recognize the risk that by considering the perspectives of young children in the substantial-similarity analysis, the potential liability for infringement might tend to broaden, given the reduced ability of young children to distinguish between objectively different 16 items and concepts. But this concern is largely ameliorated by the first, objective prong of the substantial similarity inquiry, which requires the court to find, as a matter of law, that the works are extrinsically similar. Moreover, to the extent that liability is broadened, it represents the reality of the confusion and actual economic loss to the copyright owner. In sum, in conducting its infringement analysis with respect to works targeted at children, the district court should have considered the perspectives of those children. The fact that children were not actually present when their parents purchased or rented the costumes did not eliminate the need to consider the children's perspectives because both Morris Costumes and those parents foresaw that the costumes would be used to entertain children. Accordingly, we vacate the court's judgment on this copyright issue and remand with instructions that the district court reevaluate the disregarded evidence in light of this opinion.
For similar reasons, we also vacate the district court's finding against Lyons on its trademark claims brought under 15 U.S.C. §§ 1114 and 1125. A plaintiff asserting an infringement claim under the Lanham Act must prove that it has a valid, protectable trademark and that the defendant is infringing its mark by creating confusion, or a likelihood thereof, by causing mistake, or by deceiving as to the attributes of its mark. See 15 U.S.C. §§ 1114, 1125; Petro Stopping Ctrs., L.P. v. James River Petroleum, Inc., 130 F.3d 88, 91 (4th Cir. 1997). In determining whether the plaintiff has proven a likelihood of confusion, we consider, among other factors, (1) the strength or distinctiveness of the plaintiff's mark, (2) the similarity of the two parties' marks, (3) the similarity of the goods and services the marks identify, (4) the similarity of the facilities the two parties use in their businesses, (5) the similarity of advertising used by the two parties, (6) the defendant's intent, and (7) actual confusion. Petro Stopping Ctrs., 130 F.3d at 91 (citing Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir. 1984)). The importance and relevance of each factor will, of course, vary from case to case. See id. Nevertheless, we have indicated that the seventh factor -- actual confusion -- is often paramount. When the plaintiff's mark is strong and the defendant's 17 use of a similar mark has actually confused the public, our inquiry ends almost as soon as it begins. Sara Lee, 81 F.3d at 467. The district court found that Lyons owned valid trademarks in the Barney character. But it determined, after undertaking an analysis of each of the Pizzeria Uno factors, that Lyons had not demonstrated a likelihood of confusion between the Duffy costume and the Barney character. It reached its conclusion, however, only after disregarding most of the evidence of actual confusion, the paramount factor in the analysis. Although the court stated that [t]here is no evidence on which to support a finding concerning actual confusion of children, ample evidence presented at trial would have supported such a finding. As we noted above, the principal at an elementary school testified that when she wore the Duffy costume at a school rally, the children shouted Barney. Barney. Barney, and parents testified that when they rented the Duffy costume for their children's birthday parties, the children believed that the person dressed as Duffy was in fact Barney. In addition, Lyons offered newspaper clippings that evidenced actual confusion between Duffy and Barney, not only by the children who were the subject of the articles, but by the reporters themselves, who erroneously described Duffy as Barney. Despite initially admitting that evidence, the district court's final opinion dismissed it as unreliable hearsay. If the district court disregarded this evidence because it was hearsay, we believe that this conclusion was erroneous. Lyons did not offer the children's statements or the newspaper articles to prove the truth of the matter asserted -- i.e., that the persons wearing the Duffy costume were in fact Barney -- but rather merely to prove that the children and the newspaper reporters expressed their belief that those persons were Barney. This was direct evidence of the children's and the reporters' reactions and not hearsay. Accordingly, it could not have been excluded as such. See Fed. R. Evid. 801(c) (limiting the definition of hearsay to statements offered to prove the truth of the matter asserted); cf. Fed. R. Evid. 803(1) (creating an exception to the hearsay rule, regardless of the availability of the declarant, for a statement about an event or condition made while the declarant was perceiving the event or condition, or immediately thereafter). Because such evidence was highly probative of actual confusion and the existence of actual confusion is often dispositive to a trade18 mark infringement analysis, see Sara Lee, 81 F.3d at 467, we also vacate the district court's judgment as to the Duffy-related trademark claim.