Judge Dismisses Part of Velvet Underground's Lawsuit Against Andy Warhol Foundation

The strange lawsuit concerning one of the most iconic album covers of all time will survive, but over trademark and not copyright.

A federal judge in New York is peeling back a lawsuit brought by The Velvet Underground against The Andy Warhol Foundation for the Visual Arts. At issue is the Warhol Foundation's exploitation of the 1967 album The Velvet Underground & Nico, whose cover famously features an iconic banana image created by Andy Warhol.

In a decision Friday, U.S. District Court Judge Alison Nathan determined that copyright claims are not ripe enough for adjudication. The trademark core of the lawsuit continues.

In the past few years, the Warhol Foundation has become more interested in generating cash. Even before the big art sell-off and its recent move to license paintings of Campbell's soup cans to Campbell's, the foundation was licensing the famous banana design for ancillary products associated with Apple's iPod and iPad.

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The Velvet Underground, one of rock music's most influential bands ever, whose members included Lou Reed and John Cale, sued in January to put a stop to this banana misappropriation.

Originally, the band claimed that the image was in the public domain but then amended the lawsuit to say the Warhol Foundation couldn't claim copyright on it.

In reaction, the Warhol Foundation provided the band a "covenant not to sue for copyright infringement," which led to a motion to dismiss the claim because there wasn't anything for the judge to resolve.

The band argued that there still was a pressing issue -- that the covenant not to sue wasn't broad enough to eliminate concern over what would happen if Velvet Underground made its own licensing deals for the album cover. But Nathan agreed with the defendant that the covenant expressly provides that the Warhol Foundation will not sue any "person or entity claiming to be in privity of contract with VU."

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Nathan also waved away the band's concern that the foundation will use copyright to beat its trademark claim, that the foundation's use of a claimed copyright will impair its ability to exploit its trademarks and that the foundation's licensing necessitates an accounting. The judge said those arguments are not weighty enough to survive a dismissal. (Read the decision on the next page.)

So because Nathan determined that there's no live controversy on copyright, this particular claim was dismissed, which means there probably won't be any further investigation in this case about who actually owns the copyright, thanks to the weird circumstances that led to the image's creation -- including the $3,000 advance that the band shared with Warhol, the repeated publishing of the album without a copyright notice and why Universal Music Group also might have a valid copyright claim.

Now, the case will continue on trademark grounds alone. Fortunately, there's still ample room for a good fight.

The band argues that the cover art "has become so identified with The Velvet Underground ... that members of the public, particularly those who listen to rock music, immediately recognize the banana design as the symbol of The Velvet Underground."

The band also believes that the Warhol Foundation's licensing activities likely will cause confusion and lead consumers into mistakenly believing that The Velvet Underground has endorsed or is affiliated with the licensing.

In response, the Warhol Foundation wonders if this is the same band that broke up nearly 40 years ago.

A judge's input still is needed to resolve this part of the lawsuit.

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner