Disney Finds It's Not So Easy to Sue Over Knockoff Characters at Birthday Parties

The studio suffers a setback at the summary judgment phase of an ongoing lawsuit.
Disneyland

Does Disney really want to go to trial to prevent knockoffs of Darth Vader, Iron Man and Elsa and Anna from Frozen from showing up at children's birthday parties? If the studio really wishes to continue a lawsuit over unlicensed characters, it may need to after experiencing a setback against Characters for Hire, LLC.

On Thursday, a New York federal judge refused to grant summary judgment in favor of Disney in its ongoing case against Nick Sarelli, alleged to run a  "knock-off business ... built upon the infringement of Plaintiffs' highly valuable intellectual property rights."

What's more, U.S. District Court Judge George Daniels threw out most of Disney's trademark claims against a defendant who will send out individuals dressed as "The Princess" (meaning Leia) or "Big Hairy Guy" (meaning Chewbacca) for special events. 

Daniels recognizes some similarity, but isn't buying that Disney and Sarelli compete in the same business nor that Sarelli's customers are likely to be confused. The judge makes the point that it's "adults, not children" who plan parties and there's no evidence of actual confusion.

"The only anecdotal 'evidence' [Disney] can muster are a handful of instances where CFH's customers referred to the actual names of Plaintiffs' characters in online reviews rather than using the names provided for such characters on CFH's website," writes the judge. "Yet, none of the customer reviews suggest the slightest sign of confusion as to the origin, source, affiliation, or sponsorship of CHF's services, much less confusion likely to produce 'a diversion of sales, damage to goodwill, or loss of control over reputation. Plaintiffs also fail to offer statistical surveys showing any instances of consumer confusion despite CFH providing character-for-hire services using Plaintiffs' trademarked characters since at least 2012. That Plaintiffs and Defendants have used similar marks over a substantial period of time without ever producing a single recorded instance of consumer confusion shows that there is no likelihood of consumer confusion."

Daniels weighs what's above with further evidence including a disclaimer on the defendant's contracts and the lesser quality of Sarelli's characters and ultimately grants a motion from Sarelli to reject claims of trademark infringement, unfair competition and false designation of origin.

The only trademark claim that remains is one for dilution. The judge says there is a genuine issue of fact with respect to whether the use of Disney's marks in connection with a character-for-hire business tarnishes those marks.

Disney is represented by the giant law firm of Arnold & Porter Kaye Scholer, while the defendants are handled by Feldman Law Group.

In another small win for David in the battle with Goliath, Disney isn't able to prevail on summary judgment on its copyright claims, either.

"Based on the current record, this Court cannot conclude that Defendants have infringed Plaintiffs' copyrighted characters because Plaintiffs do not point to any admissible evidence demonstrating that Defendants have engaged in the alleged infringing conduct," writes the judge. "For instance, Plaintiffs rely on various poor quality screenshots of CFH's website and other social media sites, including screenshots of older versions of the websites preserved by the Internet Archive... The screenshots and videos, however, have not been properly authenticated..."

The judge adds that there is a factual dispute whether the images on defendants' website are substantially similar to Disney's characters, their personas, and their "story lines." Accordingly, this one is headed to a trial if there's no settlement.