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IP Law Daily, COPYRIGHT—N.D. Ill.: Copyright Register need not reconsider registration of a line of Beanie Babies, (Sep 22, 2022)

Law Firms Mentioned:Faegre Drinker Biddle & Reath LLP | Husch Blackwell LLP
Organizations Mentioned:Faegre Drinker Biddle & Reath, LLP | Husch Blackwell, LLP | MGS Group, Ltd. | Register of Copyrights | TY Inc. | Target Corp. | Ulmer & Berne, LLP

By Matthew Hersh, J.D.

Target failed to show that the registrations were made with knowing falsehoods.

There was no need to ask the Copyright Register to reconsider the registration of three plush toys from the well-known Beanie Babies line because the toymaker did not know ...

By Matthew Hersh, J.D.

Target failed to show that the registrations were made with knowing falsehoods.

There was no need to ask the Copyright Register to reconsider the registration of three plush toys from the well-known Beanie Babies line because the toymaker did not knowingly include any falsehoods on its registration forms, the federal district court for Chicago has held. The court, in denying the referral motion, also underscored Seventh Circuit caselaw warning of the “potential for abuse” of the referral provision and advising courts to “tread carefully and employ this mechanism only when necessary” (TY Inc. v. Target Corp., September 21, 2022, Pacold, M.).

The case involves a line of toys that have long captured the attention of the public—as well as the courts. Toymaker and entrepreneur Ty Warner sold the popular product in reduced numbers during the 1990s, leading to long lines at retail stores and even a “Beanie Baby Bubble,” as one publication called it, on the secondary market. As to the courts, Beanie Babies have generated their fair share of copyright litigation, perhaps most notably in Ty Inc. v. Publications International, 292 F.3d 512 (7th Cir. 2002), in which Judge Posner elaborated on what he called (perhaps optimistically) “economic terminology that has become orthodox in fair-use case law,” particularly the distinction between uses that “complementary to the copyrighted work” as opposed to “copying that is a substitute.”

This case involves no such high-minded theoretical concepts, although it does raise an issue that has percolated extensively through the courts in recent years, namely the question of when a federal court should refer the question of a prior registration to the Copyright Register for reconsideration. In this case, Ty, Inc.—the company founded by Warner—sued Target over its alleged infringement of Ty’s plush toy poodle, known as “Rainbow.” Target moved for the court to issue a request to the Copyright Office to advise whether the Copyright Office would have refused registration if it knew that certain information included in the registration was inaccurate, leading to this opinion.

Motion for referral. The court denied the motion for referral. Under Section 411(b) of the Copyright Act, where a defendant in a copyright case alleges that the plaintiff has knowingly included inaccurate information on a registration, “the court shall request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused [it] to refuse registration.” Target alleged three types of inaccuracies in its motion: first, that the toymaker failed to disclose that “Rainbow” was a derivative of two earlier toys; second, that it failed to disclose that Rainbow’s new material was previously used in another toy; and third, that Rainbow’s registration inaccurately stated that it featured new “sculptural” material when it was in fact contained “nothing more than a variation in coloring of” preexisting works. Did the alleged inaccuracies require such referral here? The court found that they did not.

The failure to disclose the derivative nature of “Rainbow” was easily dismissed, the court held. To be sure, the toymaker’s initial registration of the work did not make that disclosure. But the toymaker made a supplementary registration two years later that corrected the error. “Taking into account the totality of Ty’s representations to the Copyright Office,” the court found, Ty’s representations regarding Rainbow’s relationship to [the prior works] are accurate.”

The alleged failure to disclose the prior use of Rainbow’s new material also did not warrant referral, the court held—because it was simply not substantiated. Target argued that Rainbow used either the colors or the fabric of an early toy owl. But at best, the court observed, the evidence showed that some of the colors of the toy owl made their way into Rainbow. “But the court lacks any other evidence,” the court noted, “suggesting that Ty ‘based’ Rainbow on the toy owl or ‘incorporated’ the toy owl into its design.” Failing that, the court noted, there was no basis for referral.

As to the third alleged inaccuracy, this required somewhat more discussion but ultimately came out the same way. Target alleged that the registration form for Rainbow characterized the new material in that registration as “sculpture” even though, in fact, the new changes were only to color. But the record showed that the new work contained changes to the fabric as well as to the colors, the court noted—and that was enough, especially given the Copyright Office’s “capacious definition of ‘sculpture.’” Nor did Copyright Office internal precedent change the outcome, the court held. To be sure, the court noted, the Office had once refused to register a derivative sculpture because it was “unconvinced that [a] change in faux fur color and texture is enough” to render it a copyrightable derivative. But that was a question about the registrability of a work, the court noted, while the relevant question here was the accuracy of the toymaker’s representations. That difference was critical, the court reasoned, because the Seventh Circuit had long warned about the “obvious potential for abuse” of the referral provision and had advised courts to “tread carefully and employ this mechanism only when necessary.” That prescription, the court found, required denial of the motion here.

The case is No. 1:18-cv-02354.

Attorneys: Scott E. Rogers (Ulmer & Berne, LLP) and John Aron Carnahan (Husch Blackwell LLP) for TY Inc. David R. Merritt (Faegre Drinker Biddle & Reath LLP) for Target Corp. MGS Group, Ltd.

Companies: TY Inc.; Target Corp.; MGS Group, Ltd.

Cases: Copyright IllinoisNews GCNNews