Great American Duck Races Inc. v. Kangaroo Manufacturing Inc.

          ORDER

          Honorable Roslyn O. Silver Senior United States District Judge

         As established at trial, ducks in nature are often yellow and usually have wings, bills, and tails. But “[d]ucks do not naturally wear sunglasses in the wild.” (Doc. 177 at 27). Both parties decided to try to improve on nature by manufacturing pool floats in the shape of ducks wearing sunglasses. Plaintiff Great American Duck Races Inc. (“GAME”) owns copyrights and trademarks covering its depiction of a duck wearing sunglasses and GAME believes the pool float manufactured by Defendant Kangaroo Manufacturing Inc. (“Kangaroo”) infringed those copyrights and trademarks. GAME also believes Kangaroo engaged in unfair competition. Based on the evidence presented at the trial, all of GAME's claims do not succeed.

         BACKGROUND

         Many of the relevant facts were undisputed at trial but to the extent there were factual disagreements, the following represent the Court's factual findings. In 1988, Eric Schechter started GAME. At the time, GAME was focused on conducting fundraising activities. The fundraising concept was for individuals to “adopt” a small toy duck and then all the ducks would “race” on a waterway, such as the Salt River Canal or in New York Harbor. (Doc. 176 at 36). The person who had adopted the duck that finished first would win “a new car [or] prizes, ” which had been donated. The sponsoring organization would then retain all the “adoption” fees. (Doc. 176 at 35). Hoping to prevent knockoffs, Schechter realized he needed to “brand” or make GAME's races “unique.” “[O]ne of the ways to do that was the duck itself.” (Doc. 176 at 33). Thus, Schechter and a few other individuals designed a unique plastic duck to use in the fundraising activities. (Doc. 176 at 27, 30).

         Schechter and his collaborators designed a small duck from “scratch.” (Doc. 176 at 33). GAME's original duck was similar to the familiar Rubber Duckie of Sesame Street fame with one crucial alteration: sunglasses. As explained by Schechter, the sunglasses served no functional purpose. (Doc. 176 at 34). Rather, the sunglasses were merely to differentiate GAME's duck from other similar ducks already available in the market.

         GAME experienced great success in its fundraising business. In 2001, a major retailer approached GAME and asked “to take the duck and make it into some pool products.” (Doc. 176 at 38). That inquiry resulted in GAME producing a few products, such as a “pool-dispensing chlorinator” with the distinctive GAME duck on the top. (Doc. 176 at 40). In 2012 or 2013, other retailers asked GAME to make a large inflatable in the shape of GAME's duck. (Doc. 176 at 61). In 2015, GAME produced what it calls the “Giant Inflatable Derby Duck.” That product was offered for sale in 2016 and it became an immediate hit. (Doc. 176 at 66, 77-78).

         The Giant Inflatable Derby Duck (“Derby Duck”), when inflated, measures 81 inches long, 76 inches wide, and 44 inches tall.^[1] The Derby Duck is yellow and has a red bill, which is open. The top of the Derby Duck's head has a small crest. The Derby Duck is wearing black sunglasses that are also inflatable, giving them a striking three-dimensional appearance. The Derby Duck has inflatable wings and an inflatable tail.^[2] The Derby Duck is a "flatbed float" which means there is a flat surface where individuals can sit or lie down without touching the water. (Doc. 176 at 110).

         The Derby Duck is sold in a rectangular box. On the front of that box is a picture of the Derby Duck in a swimming pool, with three people sitting on it and one standing next to it. The name "Giant Inflatable Derby Duck" is written across the top of the front in blue letters on a white background. The bottom of the box's front has white writing on a blue background. The other sides of the box also have blue backgrounds with white writing. The back of the box is mostly white with blue writing. The back also has a different picture, depicting a woman lying on the Derby Duck.

         GAME has sold tens of thousands of its Derby Duck through numerous retailers. The Derby Duck has appeared in the press and in viral videos. When purchasing the Derby Duck, consumers encounter either the product box or two-dimensional pictures. Consumers usually do not see the Derby Duck inflated prior to purchasing.

         GAME owns various copyrights and trademarks involving a duck wearing sunglasses. GAME uses its trademarks in selling "a wide variety of products and services" including the Derby Duck as well as "pool lights, chlorinators, and thermometers." (Doc. 183 at 3). One of GAME'S trademarks is:

         (Image Omitted)

         (Doc. 1-1 at 12). GAME has devoted considerable resources in promoting, advertising, and marketing its products and services using its trademarks.

         The parties have stipulated the Derby Duck "is an original work of authorship protected under the Copyright Act.” (Doc. 183 at 3). GAME registered the Derby Duck with the United States Copyright Office and it is protected under Copyright Reg. No. VA0002004191. That Copyright is titled “Giant Inflatable Derby Duck.” A few years after the Derby Duck was first sold, competitors began to emerge.

         Defendant Justin Ligeri was responsible for production of one of the Derby Duck's competitors. Ligeri is the owner of Defendants Kangaroo and Yagoozon, Inc. (Doc. 176 at 124). Kangaroo was incorporated in 2014 and has offices in Tempe, Arizona. (Doc. 176 at 124). It purportedly is in the business of manufacturing “toys [and] novelties for mass consumption.” (Doc. 176 at 124). It is unclear when Yagoozon was established but it was not a manufacturer. Instead, Yagoozon was in the business of “selling products at retail that it bought from other manufacturers.” (Doc. 176 at 125). Yagoozon sold products exclusively on Amazon.com.^[3] (Doc. 176 at 124). Neither Kangaroo nor Yagoozon engaged in normal corporate formalities, such as regular board meetings. (Doc. 176 at 127). For present purposes, the Court will usually refer simply to Kangaroo when discussing the activities of Kangaroo and Yagoozon.

         Ligeri and Kangaroo experienced substantial success selling products on Amazon. (Doc. 176 at 130). At one point, Ligeri offered live seminars to teach other individuals how to successfully sell products on Amazon. In advertising those seminars, Ligeri very confidently appeared in a video where he presented his business model. What he would enlighten others to do was to “create a product for Amazon that people are looking for already.” (Doc. 176 at 137). At trial, Ligeri explained that statement meant he instructed people to “to look for what people are searching for . . . and then improve upon what the marketplace is offering.” (Doc. 176 at 139-40). In practice, it was clear that Ligeri and his companies would identify successful products on Amazon and then make slightly different versions of those products without apparent concern about possible intellectual property violations. That design process was described in detail at trial.

         According to Bernard Oliver, Kangaroo's product designer, he received design instructions from David Follett, Kangaroo's Executive Director. (Doc. 177 at 125). Follett would “come in with a product that was already in the field, and he would say: This is a product we are going to produce under Kangaroo.” (Oliver Deposition at 28). Follett did not instruct Oliver to copy the product in its entirety. Instead, Follett would hand Oliver the “product and say: We want to make something like this, bigger, brighter. It has got to be better, but basically, this is the product we are making.” (Id. at 37). In other words, the Kangaroo product was meant to be “bigger and better” but it was meant to “look in [the same] realm” as the existing products. (Id. at 74). When asked whether Kangaroo investigated intellectual property rights before producing its products, Oliver stated he was “not really part of . . . those types of discussions.” In addition, Oliver did not have time to investigate intellectual property rights because Kangaroo was operated “like a sweatshop” where he “worked all day” and only left when he was “exhausted.” (Id. at 39).

         In late 2015 or early 2016, Follett decided Kangaroo should manufacture “novelty pool floats.” (Doc. 176 at 147). Follett looked at the available pool floats and discovered four duck pool floats sold by four different companies. (Doc. 176 at 148). Follett provided the other companies' products to Oliver and instructed Oliver to “create the design of a pool float in the form of a yellow duck with sunglasses [but] make it different from the yellow duck pool floats” already on the market. (Doc. 176 at 148). Oliver designed the new pool float and Kangaroo manufactured its own duck-wearing-sunglasses pool float. In other words, Oliver had the Derby Duck when designing Kangaroo's duck and, to some extent, modeled Kangaroo's duck after the Derby Duck. Oliver did not, however, slavishly copy the Derby Duck. Thus, while there are some similarities, there are also significant differences.

         Kangaroo's duck is about one-third the size of the Derby Duck. (Doc. 176 at 108). When inflated, Kangaroo's duck is 49 inches long, 45 inches wide, and 32 inches tall. That size means Kangaroo's duck can only accommodate one person. Kangaroo's duck is yellow with a closed orange bill. Unlike the Derby Duck, Kangaroo's duck is a ring instead of a flat surface. Also, Kangaroo's duck has wings and a tail that are drawn on instead of being inflatable like the Derby Duck. Like the Derby Duck, however, Kangaroo's duck has a small crest on its head and is wearing sunglasses. But the sunglasses on Kangaroo's duck are not completely black and they are not inflatable. Instead, the sunglasses are drawn on and have partially grey lenses and partially grey temples.

         Kangaroo sold its duck in a rectangular box. The cover of Kangaroo's box is dominated by a picture of a young woman sitting on the duck. The cover consists of a blue and white background, with bubbles in the blue portions to evoke water. In the upper left of the box is writing in mostly black lettering stating “‘HUGE' 49” Yellow Duck Pool Float.” The back of the box contains a picture of the duck. The sides of the box are also blue and white with a picture of Kangaroo's duck along with the same lettering stating “‘HUGE' 49” Yellow Duck Pool Float.”

         When asked why Kangaroo decided to put sunglasses on its duck, Follett explained that “[s]unglasses are cool” and because “[p]eople wear sunglasses at the beach.” (Doc. 177 at 131). Kangaroo manufactures other floats depicting animals wearing sunglasses, such as a flamingo. (Doc. 177 at 131). Kangaroo also manufactures a duck float that does not have sunglasses. (Doc. 177 at 132).

         Sometime in 2016, Kangaroo and Yagoozon began selling their duck-wearing-sunglasses float on Amazon. However, GAME was not able to present evidence establishing how Kangaroo's duck was listed on Amazon because the information was destroyed or was otherwise unavailable. Thus, it is unknown whether Kangaroo's Amazon listing included a picture of the box or merely displayed pictures of the duck. It is also unknown how prominently Kangaroo identified itself in the listing. For example, the listing might have emphasized the source of the duck was Kangaroo or the listing might not have indicated a source. In short, the Court has no material and admissible evidence of how Kangaroo marketed its duck or how consumers encountered the Kangaroo duck.

         Around January 2017, GAME saw Kangaroo's duck listed for sale on Amazon. GAME complained to Amazon and Amazon immediately removed the listing. GAME also wrote to Kangaroo and claimed Kangaroo had “been selling a strikingly similar, knock-off version” of the Derby Duck. According to GAME, Kangaroo's duck had “virtually the same appearance as” the Derby Duck. GAME requested Kangaroo “immediately stop all sales and distribution” of its duck. It is unclear whether Kangaroo responded to that letter but GAME filed the present suit a few days later. There was no evidence at trial that Kangaroo continued to sell its duck.

         ANALYSIS

         Pursuant to the operative complaint, GAME believes Kangaroo's duck infringes its copyright for the Derby Duck. GAME also believes Kangaroo has committed trademark infringement as well as federal and common law unfair competition. Prior to trial, GAME dismissed its claims for monetary relief. (Doc. 151). Accordingly, the only remaining issues are Kangaroo's liability and, if liability exists, whether GAME is entitled to a permanent injunction forbidding Kangaroo from marketing and selling its duck.

         I. Copyright Infringement

         To prevail on its copyright infringement action, GAME needed to prove two things: (1) that it owns a valid copyright in the Derby Duck and (2) Defendants copied protected elements of the Derby Duck. Rentmeester v. Nike, Inc., 883 F.3d 1111, 1116 (9th Cir. 2018). The parties stipulated that GAME owns a valid copyright, leaving only the second element at issue.

         As recently explained by the Ninth Circuit, “the second element has two distinct components: ‘copying' and ‘unlawful appropriation.'” Id. at 1117. “Proof of copying by the defendant is necessary because independent creation is a complete defense to copyright infringement.” Id. And “[p]roof of unlawful appropriation . . . is necessary because copyright law does not forbid all copying.” Id. Among other limitations, copyright law does not prohibit the copying of “‘ideas' or ‘concepts' used in the plaintiff's work.” Id. Rather, copyright law only prohibits copying “the plaintiff's expression of those ideas or concepts to render the two works ‘substantially similar.'” Id.

         A. ...