Famous NYC Nightclub Sues SF Nightclub For Using "The Stork" Brand

Can a nightclub owner name her new club in San Francisco after a famous club in New York City?

Probably not, according to the Court in the Stork nightclub case.

What was the Stork Club?

"The Stork Club" was located on 3 East 53d Street in New York City and it was the place to be in the late 1930s through the 40s. It was described as "the best and most publicized night club in the entire world." It provided "expensive food, beverages, music and dancing," employed over 240 people and had a gross annual income of one million dollars.

How did the Stork Club become so popular?

Becoming this well known was not cheap. The Stork spent 700 thousand dollars over eleven years on advertising - radio, newspaper, magazines, books, movies, and mailing lists. They also did extensive "cash advertising" - gifts to customers that included perfumes, radios by the hundreds, and even automobiles.

Another form of promotion was "house advertising" - food and liquor to "men in prominent and public life in the industrial world," such as newspaper people, radio, and stage and film celebrities. The club was associated with celebrities like Bing Crosby, Walter Winchell, Jack Benny, Jimmy Durante, Fred Allen, and Frank Sinatra.

The Stork Club was so popular that Paramount pictures released a movie entitled "The Stork Club" at a cost of 1.7 million dollars which starred Butty Hutton and Barry Fitzgerald. It was given 14,457 exhibitions throughout the US. George A. Smith, the western sales manager for Paramount, said the picture "had a very salable title, the popularity of the Stork Club was spread all over the United States."

What happened?

In 1945, a business owner began running a bar at 200 Hyde Street in San Francisco under the name Stork Club. This bar was nothing like the Stork Club in New York.

The bar had about 10 stools and could accommodate, at most, 50 people. It had four employees and served only enough food to "conform with the law regulating the operation of bars." The bar didn't even have dancing, although, as the court pointed out, the the club distributed match pads that depicted a couple dancing. Needless to say, this place was a dive.

The owners of the New York Stork Club sued for Trademark violations.

What is Trademark law?

Trademark law is designed to prevent "confusion of source." Trademarks tell customers where products come from. They stand for the goodwill of the company and the quality and reputation of their products.

For example, when you see the Pepsi trademark, you know that the product came from the Pepsi company. It has been approved by Pepsi's quality control. If you have had a Pepsi product in the past, you know what to expect when you purchase Pepsi and you can decide if you want to do business with them again.

Trademarks allow customers to rely on brands so that they do not need to research every single product every single time they make a purchase. Trademarks also allow businesses to develop a reputation and relationship with customers that extends beyond a single transaction.

So who did the Court side with in the Stork Club case?

The Court sided with the New York Stork Club. In doing so, they summarized general rules and policies about Trademark law:

1. You cannot reap where you do not sow. It is not fair to do so. When a business has spent money and time building a reputation, another business cannot come in and "ride the coat tails" of the original. "Equity frowns upon such business methods."

2. The difference in size between two businesses does not matter. The San Francisco Stork Club argued that they are so small in comparison to the New York Stork Club, that no consumer would ever confuse the San Francisco Stork Club with the one in New York.

The Court said the difference in size does not matter and is still a violation of Trademark law.

3. Geographical distance does not matter. The San Francisco Stork Club owners argued that the two clubs are separated by an entire continent and customers are unlikely to know of each others' business, let alone be confused.

The Court said no. Restaurants have chains all over the country, and in fact, it is not common for a branch location to be smaller than the "mother house."

4. The fact that there is no actual loss does not matter. The San Francisco Stork Club owners argued that the New York club has not lost any business or sales because of the San Francisco club. There is not a shred of evidence, according to the San Francisco owners, that suggests that the New York Stork Club has been hurt by the San Francisco Club by even the sale of one drink.

The Court says this does not matter. The law does not require a loss in order to find that there has been a violation of Trademark law.

5. It's obviously not the real Stork Club! The San Francisco Stork Club owners said, listen, anyone who drove by the Stork Club in San Francisco would know immediately that the bar is not in any way affiliated with the prestigious New York club. The San Francisco club is a dive in comparison to the New York club. Any intelligent person could see this.

The Court said this does not matter. While it may be true that "worldly-wise" people may know the two are unrelated, there are people that may be confused. As the Court put it: "the law protects not only the intelligent, the experienced, and the astute. It safeguards from deception also the ignorant, the inexperienced, and the gullible."

What does all this mean?

This case shows that trademarks, particularly those that have been around for a long time with lots of money behind them, are very powerful. The Court is adamant about this idea that trademarks protect a business's goodwill and prevent customers from confusion about the source of a product.

[*1] Stork Restaurant, Inc. v. Sahati et al., 166 F.2d 348 (9th Cir. 1948)

Can I Disinherit My Spouse?

Probably not. All states have laws in place to prevent people from intentionally disinheriting their spouse. This was the issue in Sullivan v. Burkin. [*1]

What happened in the Sullivan case?

Earnest Sullivan created a trust and transferred property into the trust.

The trust benefited him only and not his wife, Mary. Income from the trust went to him and he was able to take property from the trust as he pleased.

He also wrote a will. The will gave the trust, and all the property in the trust, to some other people - not his wife Mary! He even wrote in his will that he intended to leave his wife nothing.

What did Mary argue?

She said that the property should be taken out of the trust, and given to her as an heir.

What did the Court say?

The Court was torn. The problem was that the law at the time supported Earnest. What he did was not against the law. For this reason, Mary did not get the property

The Court was so appalled, however, that they changed the law. They said that, in the future, if you create a trust benefiting only yourself, when you die, the property will not stay in the trust, it will go the heirs.

What does this mean?

This shows that courts do not want to disinherit spouses. They see it as against public policy and will do what they can to allow spouses to inherit.

[*1] Sullivan v. Burkin, 460 N.E.2d 571 (1984)

Can I Leave Property To My Dog When I Die?

Yes, although you have to be careful on how you do it. This was the issue in Estate of Russell.[*1]

What happened in the Russell case?

Georgia Nan died leaving a will. Her will gave a $10 dollar piece of gold to her sister and the rest of the property equally to a man named Charles Quinn and someone by the name of Roxy Russell. Charles Quinn was a long time friend. Roxy Russel, however, was a DOG!

So the sister sues.

What did the sister argue?

The sister argued that the gift to the dog was void because dogs cannot receive gifts by will. She claimed that because the gift is void, it should go to the next closest relative. And who's the next closest relative - you guessed it, the sister!

Charles counter argued that Georgia Nan intended for him to receive all the property and money so that he can use it to take care of the dog (basically, a trust for the dog).

What did the Court say?

The sister wins. The Court says there is nothing in the will that suggests that the gift to the dog was actually for Charles to take care of the dog. It was very clearly for the dog directly.

Therefore, the gift to the dog is void and passes to the sister as the next closes relative.

What does this mean?

The laws of wills are complicated and different in every state. If you want to include a pet in your will so that the pet is taken care of when you die, make sure to talk to an attorney about writing it properly. It can be done, and in fact, has become common.

[*1] Estate of Russell, 444 P.2d 353 (1968)

Is A Price List Copyrightable?

Can a price list be protected by copyright?

They can be according to the Court in CDN Inc. v. Kapes. [*1]

What happened in CDN?

CDN published a weekly report that lists wholesale prices for collectible United States coins. This newsletter included prices for almost all collectible coins and was used extensively by coin dealers.

Kenneth Kape had a coin business and regularly received calls about the retail price of coins. Using CDN’s report on wholesale coin prices, he created a computer program that generated a list of retail coin prices. He published these retail prices on his website.

CDN sued.

What did CDN argue?

CDN argued that the wholesale coin prices in their weekly report are protected by copyright. They claimed that Kapes infringed on CDN’s copyrights because he used the CDN wholesale price to create his retail list.

What did the Court say?

The Court agreed. Copyright law requires the work to be original. “In order to warrant protection, compilation and other works must contain a minimal amount of originality or creativity.” The Court said that originality was apparent in how CDN created their pricing data.

CDN’s prices were original because they exercised judgment and creativity in determining what information matters to make their price lists. CDN looked at whether the coin was graded by a professional service and reviewed online bids. They looked at public auctions and private sales, and even effects on the economy and foreign policies.

CDN did not republish data from another source or use a set formula to generate the prices.

What does this mean?

This case shows that originality and judgment matter to earn a copyright in a compilation. If you use your judgment in putting together compilations, then it is more likely the compilation is protected by copyright. If your compilation is based on pure facts, then it is unlikely that it will be protected by copyright.

[*1] CDN Inc. v. Kapes, 197 F.3d 1256 (9^th Cir. 1999)

Are Video Games Protected By Copyright?

Are video games protected by copyright?

Yes. While this may seem obvious now, it was the subject of the 1982 case Williams Electronics v. Artic International [*1]

What happened in Williams Electronics v. Artic International?

Williams Electronics owned multiple copyrights for the videogame “Defender.” Artic made an identical copy of Defender and marketed the game under the title “Defense Command.” Williams Electronics sued for copyright infringement.

What was Artic’s argument?

Artic’s argument was very technical and very legal. They argued that a creative work must be "fixed" under Copyright law. Specifically, the Copyright Act requires that a work be “sufficiently permanent or stable to permit it to be perceived, reproduced or otherwise communicated for a period of more than a transitory period.” [*2] Artic argued that since the video game image is constantly changing the image is not fixed, and therefore, not copyrightable.

What did the Court say?

Sorry, Artic. Images in video games are sufficiently fixed. While it is true the images in video games constantly change, the same images repeat over and over, and for this reason are sufficiently “fixed” for the purpose of copyright law. Video games are copyrightable.

What does this mean?

This case shows that the Courts are willing to take a liberal view on the term “fixed." This is important because it allows copyright law to protect newer technologies, such as video games.

[*1] Williams Electronics, In. v. Artic International, Inc. 685 F.2d 870 (3d Cir. 1982)

[*2] 17 U.S.C. Section 101

Independant Contractor or Employee?

I do consulting work without a contract - am I an independent contractor or employee?

It depends on a few things according to the Court in Aymes v. Bonelli. [*1]

What happened in the Aymes case?

Bonelli hired Aymes to create software for his swimming pool business. The program maintained records, inventory, sales figures, purchase orders, and price changes. There was no written agreement between Bonelli and Aymes.

Aymes did most of his work at Bonelli’s office, using Bonelli’s computers. He usually worked alone, and was given considerable autonomy and flexibility. He worked semi-regular hours. Sometimes he was paid by the hour, sometimes he was paid by the project with a bonus.

Aymes was not given health or other insurance benefits, nor were taxes withheld from his salary.

What did Aymes argue?

Aymes argued that because Bonelli did not provide benefits or pay social security taxes, he is an independent contractor.

What did the Court say?

The Court agreed. Five factors are relevant when determining if someone is an independent contractor:

1. The hiring party’s right to control the manner and means of creation
2. The skill required
3. Whether employee benefits are provided
4. The tax treatment of the hired party
5. Whether the hiring party has the right to assign additional projects to the hired party

The Court said that all 5 are relevant, but employee benefits and tax treatment are the most important.

Why is this distinction important?

It matters in determining who owns the work created. If you are hired by a company, and there is no contract, you probably own the work if you are an independent contractor. But, if you are considered an employee, then the company probably owns the work.

[*1] Aymes v. Bonelli, 980 F.2d 857 (2d Cir. 1992)

Movie studio sues rental store over private rooms

Can a video store allow customers to rent private rooms to watch movies without permission?

No, not without permission from the copyright owner. This was the issue in Columbia Pictures v. Redd Horn [*1].

What happened in Columbia Pictures?

Redd Horne, a video rental store, allowed customers to rent a room to watch videotapes in small groups. Redd Horne did not get permission from the movie studios (who owned the copyrights to the movies).

What was Red Horne’s argument?

Red Horne argued that they bought the video tapes and can do with them what they want. [*2] According to Red Horne, after they buy the video tapes, the movie studios no longer have a say in how the video tapes are used.

What did the Court say?

Sorry, Red Horne. You are allowed to resell the video tapes but you are not allowed to show them in private rooms.

Renting private rooms to show movies is prohibited by copyright law. Copyright law prohibits unauthorized “public exhibition of motion pictures and other audio visual works.” [*3] This includes showing video tapes in private rooms. The display is “public” under the law because the video store is open to the public for anyone to rent a video (even though customers are viewing the videos privately in a rented room).

So what?

When you buy a video tape, you have the right to resell it. You do not have the right to show the copyrighted work “publically.” This case shows that the Court is willing to interpret the term “public” very broadly – so broadly that private showings in small groups available to the general public counts as “public” under the law.

[*1] Columbia Pictures Indus. V. Red Horne, Inc., 749 F.2d 154, 224 U.S.P.Q. 641 (3^rd. Cir. 1984)

[*2] First Sale Doctrine

[*3] 17 U.S.C. Section 106