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May 2010

No Probable Cause Existed to Prosecute Trademark Dilution Claim Where Princess Diana's Name Identified the Individual Rather Than the Source of Goods or Services

Franklin Mint Co. v. Manatt, Phelps & Philips LLP, ___Cal.App.4th____, 2010 Cal.App.LEXIS 606 (May 3, 2010), 2010 Daily Journal DAR 6539

On May 3, 2010, the California Court of Appeal for the Second Appellate District ruled that defendants and respondents Manatt, Phelps & Philips LLP ("Manatt"), a Los Angeles-based firm, lacked probable cause to bring trademark dilution and false advertising claims against Franklin Mint Co. relating to Princess Diana collectibles.

The underlying case arose when Franklin Mint decided to design a line of commemorative products featuring Princess Diana after her death. Franklin Mint wrote the trustees of The Diana, Princess of Wales Memorial Fund ("Fund"), proposing an official endorsement and the distribution of proceeds by the Fund. When the Fund did not immediately respond, Franklin Mint decided to go ahead anyway and manufacture and market a tribute plate, and donate the proceeds to charities that Princess Diana favored. Franklin Mint printed advertisements for the tribute plate, stating that "All proceeds to go to Diana, Princess of Wales Charities" and "100% of your purchase price will be donated to Diana, Princess of Wales' favorite charities." Franklin Mint paid over $1.5 million to the Great Ormond Street Children's Hospital, a charity in England with which Princess Diana had been involved.

At some point, Franklin Mint stopped running these advertisements, and instead printed new ads that stated that Franklin Mint "has pledged a minimum of $1.5 million worldwide to charity in tribute to the beloved Princess Diana." Franklin Mint used a "response code" to track sales derived from these later advertisements.

The Fund eventually declined Franklin Mint's earlier proposal. In fact, it decided instead to sue. On May 18, 1998, Manatt, on behalf of the Fund and the executors of Princess Diana's estate, filed a complaint for claims under the Lanham Act, 15 U.S.C. § 1125, for trademark dilution, false designation of origin, and false advertising; and California state claims for unfair competition and infringement of right of publicity. The trial court granted Franklin Mint's motion to dismiss the right of publicity claim, and the remaining claims were disposed of on summary judgment. As a result, Franklin Mint was awarded attorney's fees. The $2.5 million that Franklin Mint interpleaded with the court was returned to Franklin Mint, who then distributed that amount to various charities, not necessarily endorsed by Princess Diana, but supporting similar causes.

On November 15, 2002, Franklin Mint filed a lawsuit against Manatt and the Fund for malicious prosecution of the federal trademark dilution and false advertising claims.

To succeed in a malicious prosecution claim, plaintiff must prove that the underlying case was "(1) terminated in the plaintiff's favor, (2) prosecuted without probable cause, and (3) initiated with malice." The trial court found that probable cause existed to prosecute those two claims, and therefore entered judgment in favor of Manatt. The California Court of Appeal reversed the trial court's judgment, finding that Manatt lacked probable cause to bring the two claims.

Trademark Dilution

The Court of Appeal found that Manatt failed to show two essential requirements for the trademark claims it had filed: (a) that in fact Princess Diana had used "Diana, Princess of Wales" as a trademark, that is, to designate the source of goods or services; and (b) that "Diana, Princess of Wales" had acquired secondary meaning, that is, as such a designator in consumers' minds.

Manatt argued that Princess Diana's name and likeness qualified as a trademark "because it was used on promotional materials to inform the public that she would perform a service." Manatt argued that Johnny Carson and Elvis Presley similarly obtained trademarks in their names by using their names in association with services. However, the court distinguished Carson's and Presley's uses, as those uses were "in close association with a clear reference?to entertainment services" at clubs or concerts (emphasis in original). To qualify as a trademark, the name used cannot only identify the individual, it must also identify goods or services rendered by the individual in commerce. The use of Princess Diana's name in association with appearances at or supporting a charitable event did not constitute use in a service mark manner; rather, her name was used only to identify her as an individual.

Further, the court indicated that to establish secondary meaning in this case, Manatt would have had to show that the primary significance of Princess Diana's name was to identify charitable and humanitarian services rather than to identify the individual. The court again distinguished other celebrities: Elvis Presley, Glenn Miller, Johnny Carson, and chef Paul Prudhomme all "achieved public name (or image) recognition in connection with their provision of services" (emphasis in original). The Princess Diana name, however, "came to strongly associate?with the person, long before she became associated with charitable work." The court also rejected Manatt's contention that because "Diana, Princess of Wales" could only refer to one person, it must be inherently distinctive. The court stated that Manatt overlooked the requirement that a "trademark must designate the source of goods or services" (emphasis in original).

Even though there had been no previous case "quite like the underlying case, where a person achieved worldwide fame unconnected to any goods or services she provided and her successor subsequently sought protection for her name and image under the trademark dilution law," Manatt was not excused from understanding the basics of trademark law—"that a trademark must be used to identify a product or service and its source, and that a descriptive mark (such as a personal name) must acquire a secondary meaning such that the source-identifying meaning predominates over its descriptive meaning in the minds of the public."

False Advertising

The Court of Appeal also found that Manatt lacked probable cause for its false advertising claim. The court rejected Manatt's first theory that the challenged advertisements were "literally false," and found that no reasonable attorney could have thought that all proceeds from all products would be donated to charity, but rather, only that the proceeds as a result from that particular advertisement would be donated to Princess Diana's favorite charities. The court also rejected Manatt's second theory that the advertisements were misleading, as that theory requires "proof that the advertisements 'deceived a significant portion of the recipients.'" Because the evidence showed that only one customer thought the proceeds were going to the Fund, that did not constitute a "significant portion" of customers.

This decision might be thought of as a hard case making bad law, and certainly no sympathy is evident in the Court's decision for the high-profile law firm defendant. One might reasonably think that Manatt was entitled to argue for the application of trademark law to this unusual set of facts; the arguments were not so far-fetched as to seem outside the mainstream or other than a good faith effort to apply existing law. Manatt's real problem may have been that the laws of England applied to the case, and English law does not provide a cause of action for right of celebrity as California law does.

In any event, this case is an important reminder for attorneys to keep in mind the fundamentals of trademark law while prosecuting a Lanham Act lawsuit. While Judge Mosk noted in his dissent that attorneys should not be fair game where the attorneys were presented with facts not squarely addressed by any existing case (as no trademark case involved a "celebrity" such as Princess Diana who was widely known, but not for any connection to any services provided in commerce), the appellate court nevertheless decided otherwise.

This opinion is not final. Though it has been certified for publication, it may be withdrawn from publication, modified on rehearing, or granted review by the California Supreme Court. Should any of these events occur, the opinion would be unavailable for use as authority in other cases.

Intellectual Property

Yuo-Fong Amato
Richard P. Sybert


Intellectual Property