Stephen Slesinger Estopped from Challenging Disney’s Ownership of Winnie-the-Pooh Trademarks
|Judges: Rader (author), O’Malley, Reyna (dissenting)|
|[Appealed from TTAB]|
In Stephen Slesinger, Inc. v. Disney Enterprises, Inc., No. 11-1593 (Fed. Cir. Dec. 21, 2012), the Federal Circuit affirmed the TTAB’s dismissal of Stephen Slesinger, Inc.’s (“Slesinger”) challenges, in twelve opposition and cancellation proceedings filed at the TTAB, to the trademark rights related to A.A. Milne’s literary work featuring Winnie-the-Pooh and other characters owned by Disney Enterprises, Inc. (“Disney”). The Court found that the TTAB correctly ruled that the proceedings were barred by collateral estoppel.
For decades, Slesinger and Disney have disputed the Winnie-the-Pooh rights in federal courts and at the TTAB. In 1930, A.A. Milne transferred to Stephen Slesinger exclusive merchandising and other rights based on those works in the United States and Canada. In 1961, Slesinger exclusively “assigned, granted, and set over to” Walt Disney Productions the rights in the 1930 agreement with A.A. Milne. Slip op. at 3 (citation omitted). In 1983, Slesinger acknowledged its transfer and assignment of “rights it had acquired from A.A. Milne to Disney by agreement dated 14 June 1961.” Id. (citation omitted). The 1983 agreement then revoked the prior agreements and gave Slesinger “all of the rights in the work which were transferred to [Slesinger] in 1930 and amended from time to time,” but also transferred back to Disney those and “further” rights. Id. (alteration in original) (citation omitted).
While the 1983 agreement sought to resolve the parties’ previous disputes and clarify their contractual obligations, the parties disagreed about the interpretation of that agreement. Slesinger contended that it retained rights in the Winnie-the-Pooh works, while Disney maintained that Slesinger assigned all rights to Disney.
In 1991, Slesinger brought an action in Los Angeles Superior Court alleging that Disney had breached the 1983 agreement and had underpaid royalties to Slesinger. In the California state court case, Slesinger acknowledged that the 1983 agreement “regranted, licensed and assigned all rights acquired rights [sic] to Disney,” and explained that “the grant of all ‘further rights’ in and to the Pooh Characters [in the 1983 agreement] is a catch-all designed to ensure that Slesinger was granting . . . all of the additional commercial exploitation rights Slesinger acquired that are not specifically mentioned in the 1983 Agreement.” Id. at 4 (first alteration in original) (citation omitted). The state court ultimately dismissed Slesinger’s breach-of-contract claim and the California Court of Appeals affirmed.
The parties’ dispute over royalties, however, proceeded in the District Court for the Central District of California and, in 2006, Slesinger amended its district court claim to allege that Disney’s exploitation of the Winnie-the-Pooh characters infringed Slesinger’s trademarks and copyrights. Based on Slesinger’s admissions in the state court action that Disney’s uses of the Winnie-the-Pooh characters were authorized, Disney moved to dismiss the claim. Disney also argued that Slesinger had granted all of the rights it had in the characters to Disney and that Slesinger had retained no rights that Disney could infringe.
In 2009, the district court considered the parties’ cross-motions for SJ based on the 1983 agreement and addressed the agreement’s scope and judicial estoppel, among other things. The district court noted that the parties’ actions showed that the Winnie-the-Pooh rights were transferred to Disney in the 1983 agreement. For example, between 1983 and 2006, Disney registered at least fifteen trademarks relating to those rights and, in 2004, Disney registered copyrights in forty-five works and renewed copyright registrations for another fourteen. Slesinger, on the other hand, did not attempt to perfect or register trademarks or copyrights before asserting its district court infringement claims and did not object to Disney’s registrations until 2006, when the state court dismissed Slesinger’s claims for breach of contract. The district court also found that because Slesinger could not specifically identify any retained right in the Winnie-the-Pooh works, the contracts did not permit any retention of rights and Slesinger had granted its acquired rights to Disney. Thus, based on the parties’ conduct and the “clear terms” of the agreements, the district court found that Slesinger “transferred all of its rights in the Pooh works to Disney, and may not now claim infringement of any retained rights.” Id. at 5 (citation omitted).
Finally, the district court found that Slesinger was estopped from arguing that it did not relinquish all the rights it received from A.A. Milne to Disney because that argument was inconsistent with statements made and positions taken in the state court action. Specifically, in state court, Slesinger had insisted that Disney’s uses of the works were derived from the Slesinger grants of “‘all’ rights to sound, word, picture representation, television, any representational device, similar or allied devices, videocassettes, promotion and advertising in all media, exploitation and licensing in all media.” Id. (citation omitted).The dispute at the TTAB began in December 2006, with Slesinger attempting to cancel certain trademarks based on the Winnie-the-Pooh work. Slesinger claimed that the 1983 agreement with Disney was a license, and did not grant Disney the right to register the marks. Disney argued that the 1983 agreement assigned all of the Winnie-the-Pooh rights to Disney and moved to dismiss the TTAB proceedings. The TTAB treated the motion as one for SJ, and found that collateral estoppel barred Slesinger’s claims and granted judgment for Disney based on the district court’s decision.
“With such a clear explanation that Slesinger conveyed all rights completely to Disney, it is immaterial that the district court used the terms ‘transfer’ and ‘grant’ rather than ‘assignment.’ Moreover, it is the court’s ultimate ‘judgment that matters,’ not the language used to discuss the court’s rulings.” Slip op. at 9 (citation omitted).
On appeal, the Federal Circuit applied the four-part test for collateral estoppel set forth in Laguna Hermosa Corp. v. United Staes, 671 F.3d 1284, 1288 (Fed. Cir. 2012): “(1) a prior action presents an identical issue; (2) the prior action actually litigated and adjudged that issue; (3) the judgment in that prior action necessarily required determination of the identical issue; and (4) the prior action featured full representation of the estopped party.” Slesinger conceded that the case satisfied the first and fourth factors, and the Court agreed. On the second factor, Slesinger argued that the district court did not properly consider the issue of the scope of the 1983 agreement, and it did not specifically declare that Slesinger “has no rights at all,” implying that some rights might have survived the 1983 agreement. Slip op. at 7. Further, Slesinger argued that the district court’s use of the term “retained rights” and its failure to use the word “assignment” (as opposed to “grant” or “transfer”) implied that Disney licensed, rather than assigned, the rights. The Court rejected these arguments, finding that the district court extensively analyzed the scope of the 1983 agreement based on the pleadings (Slesinger’s Second Claim for Relief presented this issue) and the parties’ briefing, which addressed the scope of the agreement as an assignment or license. Thus, the Court found that the district court had litigated and decided the identical issue.
The Court also agreed with the TTAB that the clear wording of the district court’s order did not support Slesinger’s contention that the decision was focused only on whether Disney’s uses of the Winnie-the-Pooh works was authorized. Rather, the Court found that the district court had determined that the 1983 agreement represented “a transfer from [Slesinger] to Disney of all of [its] interest in the Winnie-the-Pooh characters” and that Slesinger had transferred all of its rights in the Winnie-the-Pooh works to Disney, and could not claim infringement of any retained right. Id. at 8 (citation omitted). Further, the Court found that the conduct of the parties over fifty years (which the district court relied on in its decision) supported the finding that both parties treated the agreements as constituting a complete assignment and, thus, the record showed that the district court did not find that Slesinger retained any rights. Rather, it had completely granted all of its rights to Disney as an assignment. Finally, the district court ruled that it had “fully adjudicated all claims and counterclaims,” and stated that “all of [Slesinger’s] Counterclaims are dismissed on the merits and with prejudice.” Id. at 9 (alteration in original) (citation omitted). Since Slesinger had specifically required an order directing that the TTAB correct Disney’s Pooh-related trademark registrations to reflect Slesinger’s name, the Court found that the district court had ruled on and denied that request.
Regarding the third element of the collateral estoppel test—which prevents the incidental or collateral determination of a nonessential issue from precluding reconsideration of that issue—the Court found that the district court’s ruling was neither incidental nor collateral. Rather, it directly addressed Slesinger’s ownership interest in the Winnie-the-Pooh rights. The Court found that the record showed that the evaluation of those rights was clearly an essential element of the judgment. Specifically, the district court had to determine that issue before deciding whether Disney’s uses of the Winnie-the-Pooh rights were infringing. And it was essential to first determine whether Slesinger had any ownership rights in the marks before considering Slesinger’s request to correct Disney’s trademark registrations to Slesinger’s name.
In sum, the Court found that the TTAB correctly applied collateral estoppel to prevent Slesinger from asserting a claim that its 1983 grant of rights to Disney was a license as opposed to an assignment.
Judge Reyna dissented, finding that the TTAB erred on two grounds: (1) the district court did not actually decide the ownership issue, and (2) resolution of the ownership issue was not essential or necessary to the district court’s decision on noninfringement. Regarding point one, Judge Reyna noted that the district court did not explicitly state in clear, plain language whether the grant of rights, i.e., the transfer, was a license or an assignment. Further, Judge Reyna found that the decision appeared to suggest that Slesinger retained some rights to the Winnie-the-Pooh trademarks, but that any rights retained were insufficient to support an infringement action. This situation, according to Judge Reyna, was as suggestive of a license as an assignment and, accordingly, there was a reasonable doubt whether the district court had actually decided that the transfer was accomplished via an assignment.Regarding point two, Judge Reyna found that the district court was not necessarily required to decide whether the transfer of the Winnie-the-Pooh trademarks was an assignment to resolve the issue of trademark infringement because an effective defense to a claim of trademark infringement can be made upon a showing of authorized use under a license. Thus, Disney’s ownership of the Winnie-the-Pooh trademarks was not the only rational basis on which a fact-finder could find noninfringement. An equally rational basis would have been that Disney was authorized to use the marks under a license. For these reasons, Judge Reyna concluded that the TTAB erred in applying the doctrine of collateral estoppel.