2002 U.S. Dist. LEXIS 17531, *

SCHOLASTIC, INC., J.K. ROWLING, and TIME WARNER ENTERTAINMENT COMPANY, L.P.,

Plaintiffs/Counterclaim Defendants, -against- NANCY STOUFFER,

Defendant/Counterclaim and Crossclaim Plaintiff, -against- ABC CORPORATIONS

(1 through 99), Crossclaim Defendants.

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

September 17, 2002, Decided

September 17, 2002, Filed

DISPOSITION: Plaintiffs' motion for summary judgment granted.

Stouffer's counterclaims and crossclaims dismissed with prejudice.

Plaintiffs' motion for sanctions granted in amount of $ 50,000.

SCHWARTZ, Allen G., District Judge.

This action involves intellectual property rights related to the Harry

Potter series of books, which were written, published, and marketed by

plaintiffs/counterclaim defendants ("plaintiffs"). Plaintiffs

Scholastic, Inc. ("Scholastic"), J.K. Rowling ("Rowling"), and Time Warner

Entertainment Company, L.P. ("TWE") seek (i) a declaratory judgment that

they have not infringed and are not infringing any of defendant/counterclaim

plaintiff Nancy Stouffer's ("Stouffer's") copyrights or trademarks; and (ii)

injunctive relief barring Stouffer from continuing to claim that plaintiffs

have violated her copyrights or trademarks. Stouffer asserts counterclaims

and crossclaims (referred to herein as "counterclaims") for federal and

state trademark infringement, false designation of origin, unfair

competition, dilution, and copyright infringement.

Before the Court are plaintiffs' motions for summary judgment pursuant to

Fed.R.Civ.P. 56 and for sanctions. For the reasons set forth below, the

motions for summary judgment and for sanctions are granted.

I. Background

Unless otherwise noted, the following facts are undisputed.

A. Plaintiffs/Counterclaim Defendants and the Harry Potter Series

Scholastic is a New York corporation with its principal place of business in

New York; Rowling is an individual residing in Edinburgh, Scotland; and TWE

is a Delaware limited partnership with its principal place of

business in New York. (Complaint PP 2-4). Rowling is the author of the four

books in the Harry Potter series and is the owner of all copyrights,

trademarks, and service marks associated with the series. (Id. PP 12-14; see

also Plaintiffs' Statement Pursuant to Local Rule 56.1 ("Pl. 56.1") P 1.)

Scholastic is the U.S. publisher and distributor of the Harry Potter books.

(Complaint PP 11-12). TWE owns the film rights to at least two of the books

in the series, and also owns trademarks related to its Harry Potter film and

merchandising projects. (Id. P 15). n1

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n1 Crossclaim defendants ABC Corporations (1 through 99) are as yet unnamed

corporations which have contracted with plaintiffs to produce and distribute

merchandise related to the Harry Potter books and films.

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The Harry Potter books tell the story of a young orphan who discovers that

he has magical powers and who attends a school for wizards called "Hogwarts

School of Witchcraft and Wizardry." (Pl 56.1 PP 10, 17). Harry's

parents, James and Lily Potter, also had magical powers but were killed when

Harry was a baby. (Id. P 15). After his parents' death, Harry is dropped off

at the home of his aunt, uncle, and cousin, all of whom are "muggles" --

i.e. ordinary human beings who do not have magical powers. (Id. P 13). On

Harry's eleventh birthday, a friendly giant named "Rubeus Hagrid," who is

the "Keeper of Keys and Grounds" at Hogwarts, delivers a letter inviting

Harry to attend the Hogwarts school. (Id. P 17). Hagrid also informs Harry

that his parents did not die in a car crash, as Harry had been told, but

were in fact killed by an evil wizard named "Lord Voldemort." (Id. P 18).

Hagrid takes Harry to "Diagon Alley," a place with many magical shops where

Harry buys supplies for his studies at Hogwarts. (Id. P 19). At one of the

shops, Hagrid buys Harry a pet owl because owls are used by wizards to

deliver mail. (Id.; see also Declaration of Jennifer D. Choe ("Choe Decl."),

Exh. 1 at 51-52, 61-62, 81, 87). Later, on his way to Hogwarts, Harry meets

other students from the school, including a hapless boy named Neville

Longbottom. (Id. PP 19-21). While at Hogwarts, Harry plays

"Quidditch," a game played on flying broomsticks, and is also given his own

flying broomstick, the "Nimbus 2000," by one of his teachers.(Id. P 25).

Harry also stumbles across an enchanted mirror called the "Mirror of

Erised." (Choe Decl., Exh. 1 at 207-09, 212-14). Those who look into this

mirror can see visions of their deepest desires; for example, when Harry

looks at the mirror he sees his deceased parents standing behind him. (Id.).

The first Harry Potter book, Harry Potter and the Philosopher's Stone, was

published in the United Kingdom by Bloomsbury Publishing PLC in 1997. (Pl.

56.1 P 6). In October 1998, Scholastic published this book in the United

States under the title Harry Potter and the Sorcerer's Stone. Since then

Scholastic has published three other Harry Potter books: Harry Potter and

the Chamber of Secrets, published in June 1999; Harry Potter and the

Prisoner of Azkaban, published in October 1999; and Harry Potter and the

Goblet of Fire, published in July 2000. (Id. P 26). All of the books in the

Harry Potter series have enjoyed tremendous commercial success. (Id. P 29).

The covers of all four books contain illustrations by Mary GrandPre, an

illustrator hired by Scholastic. GrandPre also created illustrations for the

chapter headings in all four books, as well as for the September 20, 1999

issue of Time magazine, which contained a cover story about Harry Potter.

(See Declaration of Mary GrandPre PP 2, 3). Though the four cover

illustrations differ, in all of them Harry is depicted as a young boy with

dark brown or black hair and black-framed eyeglasses with circular lenses.

(See Choe Decl., Exh. 1-4). In all of the illustrations Harry has a scar in

the shape of a lightning bolt on his forehead, and is engaged in some kind

of action (e.g. flying on a broomstick, or raising his magic wand in the

air.) (Id.).

B. Defendant/Counterclaim Plaintiff and Her Works (Prior to 1999)

In 1986, Stouffer, together with a group of friends and family, founded Ande

Publishing Company ("Ande") in Camp Hill, Pennsylvania. (Id. P 32). Ande

sought to publish a series of children's books, collectively referred to as

The Baker's Dozen. (Id. P 33). The series was to consist of ten titles, each

of which would be publishedin monthly installments; each installment

would include a story booklet, an activity booklet, and a coloring booklet.

(Id. PP 34, 35). However, Ande did not produce all of the booklets for its

planned series, and filed for bankruptcy in September 1987. (Id. P 41).

While in operation the company produced only one monthly installment

(consisting of a story booklet, coloring booklet, and activity booklet) for

two of its titles, specifically Rah and Myn and Memory Mountain ("Myn").

(Id. P 37, 38). It is undisputed that Ande never sold any of its booklets in

the United States or elsewhere (Id. P 43) and never sold any merchandise

related to the two booklets it produced. (Id. P 44).

The Rah booklet tells the story of the "Muggles," who are tiny, n2 hairless

creatures with elongated heads, narrow limbs, and plump bellies, and who

"understand all languages, even those of the animals." (See Choe Decl., Exh.

7). Muggles live in the ruins of land called "Aura," which was ravaged by

war and has been in darkness for many years. (Id.) Aura is rejuvenated,

however, when two human babies, carried by a lily pad, arrive on its

shores. (Id.). The two babies had been sent away from their own war-torn

home by their mother, and upon their arrival sunlight returns to Aura and

the Muggles are given "the gift of new life." (Id.; see also Second Amended

Answer and Counterclaims ("SAAC"), Exh. 9).

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n2 The text of the Rah booklet is unclear with respect to the size of the

Muggles. At one point in the story the reader is told that "the average

height of a Muggle is about 18 inches tall. Some are smaller, but none are

ever taller than 20 inches." (Choe Decl., Exh. 7). Later in the booklet,

however, Muggles are seen riding on the backs of ants and bees, an activity

that would require the Muggles to be significantly smaller than 18 inches.

Despite this lack of clarity as to the Muggles' size, it is undisputed that

Muggles are significantly smaller than human beings.

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To promote the Rah booklet, Ande placed an advertisement in the March 1987

issue of Playthings magazine. (See Choe Decl, Exh. 23). The

advertisement contained a drawing of several Muggles and the accompanying

text also mentioned Muggles. (Id.). Stouffer refers to this advertisement in

her counterclaims (within a section entitled "Stouffer's Trademark Rights"),

and also attached a copy of the advertisement as an exhibit to the

counterclaims. (SAAC P 83, Exh. 12). However, in that copy, unlike in the

actual advertisement that appeared in Playthings, the words "Muggle's TM

>From RAH TM" appear in large type below the drawing of the Muggles.

>(SAAC,

Exh. 12). Plaintiffs assert that the additional phrase was recently added by

Stouffer in order to bolster her assertion that she holds trademark rights

in the term "Muggles." (See Pl. Memorandum in Support of the Motion for

Sanctions at 15). Stouffer concedes that the copy attached to her

counterclaims differs from the version of the advertisement that actually

ran in Playthings. (See Def. Memo in Opposition to the Motion for Sanctions

at 4). However, she maintains that she attached the altered copy to her

counterclaims in the good faith belief that "it accurately depicted the ad

as run in March of 1987." (Id.) Stouffer does not offer a specific

explanation as to how the additional phrase appeared, but maintains

that Ande's art department routinely modified copies of prior advertisements

for later use. Therefore, she asserts that it is possible, if not likely,

that "Muggle's TM From RAH TM" was "added by Ande's art department at some

time during the late 1980's." (Id.)

In connection with this litigation, Stouffer has produced booklets entitled

The Legend of Rah and the Muggles that were allegedly created by Ande in the

1980's. (See Choe Decl., Exh. 17-19). However, plaintiffs have submitted

expert testimony indicating that the words "The Legend of" and the words

"and the Muggles," which appear on the title pages of these booklets, could

not have been printed prior to 1991. (See Pl. 56.1 PP 67-71). According to

plaintiffs' expert witness--whose testimony Stouffer does not rebut--the

printing technology employed in the application of those words to the title

pages was invented in 1985; however, because the specific printer used to

print those words was between six and ten years old at the time the words

were printed, "The Legend of" and "and the Muggles" could not have been

placed on the title pages before 1991 (i.e. four years after Ande's

bankrputcy). Stouffer concedes that these additional words were added to the

title pages of the booklets after the booklets were originally printed,

although she does not know exactly when the words were added or by what

printing method. (Defendant's Statement Pursuant to Local Rule 56.1 ("Def.

56.1") P 65, 67).

Ande's Myn booklet tells the story of creatures called "Myn," who have very

large ears and live on a volcanic island off the coast of Australia. (Choe

Decl., Exh. 10). The island is known as "Circle Island" because of the

"ball-like projectiles" called "REM" that are released from the island's

volcano. (Id.) REM throw off information as they fly through the air,

although they can only be seen by the Myn and by visitors to the island who

drink from the Well of Desire. (Id.) The Well of Desire is located on the

north side of the island on a mountainous ridge called Memory Mountain and

is fed by water from Diamond Falls. (Id.) Those who drink from the well are

able to answer any question or problem easily. (Id.)

Stouffer maintains that in addition to the Rah and Myn booklets, Ande also

created a coloring book version of a third title, Larry Potter and

His Best Friend Lilly (Def. 56.1 P 37-38), although a completed version of

this booklet has not been produced in this litigation. (Pl. 56.1 PP 108,

109). Stouffer has produced a "printer's proof," which was purportedly the

basis for Larry Potter and His Best Friend Lilly (Id.; Choe Decl., Exh. 27),

although the printer's proof has no title page and contains only one

reference to "Larry Potter." (Choe Decl., Exh. 27). (Throughout the rest of

the printer's proof the main character is referred to simply as "Larry."

(Id.)) Plaintiffs have produced evidence indicating that the one paragraph

referring to "Larry Potter" was printed using fonts that were not available

until 1993. Thus, plaintiffs contend that this part of the printer's proof

could not have been created before Ande ceased operations in 1987 and was in

fact created by Stouffer to give the false impression that she had published

a "Larry Potter" book prior to this litigation. (See Pl. 56.1 PP 114-118;

Pl. Reply Memorandum in Support of the Motion for Sanctions at 10). Stouffer

does not dispute plaintiffs' evidence regarding the fonts used in the

printer's proof but contends that the document was not altered in

connection with this litigation. She maintains that because she continued to

revise Larry Potter and His Best Friend Lilly into the early 1990's, the

printer's proof that she initially claimed to have been printed by Ande in

the 1980's may have actually been printed later. (See Def. Memorandum in

Opposition to Motion the for Sanctions at 12).

The story contained in the printer's proof describes a once happy boy named

Larry who has become sad. (See Choe Decl., Exh. 27 at 2, 4). His best friend

Lilly does not know why Larry is sad and tries to cheer him up by bringing

him gifts and singing to him, but none of her efforts raise Larry's spirits.

(Id. at 6-10). Finally, Lilly decides to throw a party for Larry and gathers

all of his friends together in a park. (Id. at 14). When Larry arrives,

Lilly and the others are surprised to see that Larry is wearing eyeglasses.

Apparently, he had been sad because he was having trouble seeing and was

fearful of how he would be treated once he started wearing glasses. (Id. at

18-22).

After Ande's bankruptcy, Stouffer formed a new publishing venture called

Book Cook, Inc. ("BCI"). (Pl. 56.1 P 122). Although the parties

dispute whether BCI was formally incorporated (Id. P 123; Def. 56.1 P 123),

it is undisputed that BCI only existed for a brief period of time and ceased

operations in October 1988. (Pl. 56.1 P 124). While in operation BCI printed

at least five booklets: (i) Lilly; (ii) Myn; (iii) Silver Linings; (iv) The

Land of the Nother-One; and (v) The Fat Frog. (Id. P 128). The Silver

Linings booklet contains a character named "Nimbus," a brave warrior who

becomes prime minister of the imaginary land of "Troposonia." (See Choe

Decl., Exh 31). The drawings of Nimbus depict him as an adult human male,

although he and the other characters in the booklet are referred to as

"cloud people." (Id.) Nimbus travels through the clouds on horseback

accompanied by his dog, Thor. (Id.)

The parties disagree as to whether BCI also printed a version of Larry

Potter and His Best Friend Lilly. (Pl. 56.1 PP 144-161; Def. 56.1 P 161,

205). Stouffer has not produced any original versions of a booklet with this

title, although she has produced two color photocopies of a booklet

entitled Larry Potter and His Best Friend Lilly that was purportedly

published by BCI in 1988. (Pl. 56.1 P 147). Plaintiffs have produced

evidence indicating that the original documents from which these photocopies

were produced could themselves not have been created before 1993. (Id. PP

148, 154). Also, as with the Ande printer's proof of Larry Potter and His

Best Friend Lilly (see supra), these photocopies contain only one paragraph

referring to "Larry Potter." (See Choe Decl., Exh. 24. 25). Plaintiffs have

produced evidence indicating that the one "Larry Potter" paragraph is

printed in a different typeface from the rest of the story and was created

using printing technology unavailable during BCI's existence. (Pl. 56.1 PP

151-53). Stouffer attributes this discrepancy in typeface to the fact that

she continued to revise the story into the 1990's. (See Memorandum in

Opposition to the Motion for Sanctions at 12).

The photocopied versions of Larry Potter and His Best Friend Lilly allegedly

created by BCI also contain illustrations of the Larry character. (See Choe

Decl., 24-26). These illustrations depict a young boy with brown or

orange hair (depending on the particular illustration) and eyeglasses. (Id.)

The lenses of the boy's glasses are rounded (though not circular) and the

frames are speckled with different colors (including yellow, orange, and

brown). (Id.) In the illustrations, Larry is either standing or sitting, but

is not shown in any active pose; his facial expression is either a smile or

a frown, depending on the particular illustration. (Id.)

The parties disagree as to whether BCI also printed a booklet entitled The

Legend of Rah and the Muggles. (Id. PP 130-143; Def. 56.1 PP 142-43, 198).

Stouffer has not produced an original version of such a booklet and people

who were associated with BCI in the late 1980's have testified that BCI

never published a booklet with that title. (Pl. 56.1 PP 131, 132). Stouffer

has produced a photocopy of The Legend of Rah and the Muggles that was

purportedly published by BCI in 1988, although plaintiffs have produced

evidence indicating that this copy contains a type of printing that was not

available until the 1990's. (Id. 134-38; Choe Decl. Exh. 20). Plaintiffs

have also submitted testimony from former BCI employees and

associates who do not recall the company ever publishing a booklet with

"Muggles" in the title. (Declaration of Ann Fitzpatrick PP 17-21;

Declaration of Gerald Alpert PP 6-7; Deposition of William O'Brian at 35:11

to 36:7; Deposition of J. Glenn Ebersole, Jr., at 65:23 to 66:8).

Notwithstanding such testimony, Stouffer maintains that BCI did publish a

booklet entitled The Legend of Rah and the Muggles. (Def. 56. PP 128-29).

And though she does not dispute plaintiffs' evidence regarding the printing

used in the copy submitted to the Court, she maintains that she continued to

revise the booklet after BCI's demise and thus the printing in that copy

could date from the early 1990's. (See Memorandum in Opposition to the

Motion for Sanctions at 9).

In April 1988, Stouffer obtained copyright registration for a screenplay

based on the Rah storyline. The screenplay was entitled "RAH The Light,"

although the accompanying application for copyright registration listed the

title as "RAH The Movie." (See Choe Decl., Exh. 16). Stouffer included a

copy of the screenplay as an exhibit to her counterclaims, although the

cover page of that copy bears the title "The Legend of RAH the Light

and the Muggles." (See SAAC P 92, Exh. 18). Plaintiffs assert that the copy

attached to Stouffer's counterclaims was altered by Stouffer in order to

strengthen her assertion of trademark rights in the term "Muggles." (Pl 56.1

P 177). Stouffer maintains that the change in the screenplay's title was

made long before this action was filed and that such change was made to keep

the screenplay "consistent with the title to the series of books as it

evolved." (Declaration of Nancy K. Stouffer ("Stouffer Decl.") P 33).

Stouffer also claims that she created a version of The Legend of Rah and the

Muggles that was published in 1997 by ALCD, a company owned by her husband,

David Stouffer. (SAAC P 60). Stouffer has submitted a photocopy of the

"limited edition promotional copy" that was produced by ALCD. (Id., Exh. 1).

In the ALCD book, which is significantly longer than the earlier Rah booklet

created by Ande, each Muggle has a job to do on Aura, and the Muggles wear

emblems on their chests to identify the kind of work they do. n3 (Id. at

50). The two human babies that arrive in Aura on the lily pad are given the

names "Rah" and "Zyn" by the Muggles. (Id. at 34-35). Rah is

intelligent and kind and becomes a leader of the Muggles. (Id. at 115-121).

Zyn is jealous of his brother's intelligence and success (id.), and develops

a small following of Muggles, called Nevils, with whom he leaves Aura for a

dark and rocky island called Dezra. (Id. at 139-47). Once on Dezra, the

Nevils' bodies adapt to their new environment: their eyes become "catlike,"

enabling them to see in the dark; hair grows on their arms and legs; their

fingernails grow long and resemble tiger claws; and their hands and feet

become webbed. (Id. at 160). The Nevils kidnap Rah from Aura, although he is

later rescued by the Muggles. (Id. at 168-92). One of the characters in the

ALCD book is Seymour, a talking albino hawk; Seymour is used as a scout by

Rah to observe the Nevils on Dezra, and also delivers food to Dezra. (Id. at

149-54, 191).

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n3 A Muggle who works as a "Keeper of the Garden" wears a flower emblem; one

who works as a "Keeper of the Children" wears a bell emblem; one who works

as a "Keeper of the Mills" wears a wheel emblem; one who works as a "Keeper

of the Light" wears a candle emblem; one who works as a "Keeper of the Food"

wears a four-leafed clover emblem; and those who work as "Craftsmen" wear a

scissors emblem. (SAAC, Exh. 1 at 50).

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C. Stouffer's Activities Since 1999

In September 1999, Stouffer wrote to Scholastic regarding Harry Potter and

the Sorcerer's Stone. (Complaint P 22; Choe Decl., Exh. 45). In that letter,

Stouffer stated that the Harry Potter book violated her copyrights and

trademarks, specifically her trademark rights in the term "Muggle(s)." (Id.)

The letter did not mention any infringement by plaintiffs upon Stouffer's

intellectual property rights in the "Larry Potter" character or Larry Potter

and His Best Friend Lilly. (Id.) In November 1999, after further

communication between Scholastic and Stouffer failed to resolve the parties'

differences, plaintiffs filed this action for declaratory and injunctive

relief. (Pl. 56.1 P 191). Stouffer filed her counterclaims on January 4,

2001. (Id. P 192).

In the spring of 2001, The Legend of Rah and the Muggles was published by

Thurman House, LLC, a Maryland publishing company. (Pl 56.1 P 198). This

version of the book is similar, though not identical, to the earlier version

of The Legend of Rah and the Muggles created by ALCD. (See Choe Decl., Exh

43). In the Thurman Houseversion, Muggles have an average height of

three and one-half feet (Id. at xv). The jobs performed by the Muggles in

the Thurman House version include four of the "Keeper" jobs listed in the

ALCD version (see n.2, supra), well as "Keeper of the Beaches"; "Keeper of

the Villages"; "Keeper of the Aviary"; and "Keeper of the Bees." (Id. at

98). Finally, the Thurman House version contains more detailed descriptions

of the Nevils (the evil Muggles who flee to Dezra with Zyn). (Id. at

190-93).

II. Motion for Summary Judgment

A. Legal Standard

A district court may grant summary judgment only if it is satisfied that

"there is no genuine issue as to any material fact and ... the moving party

is entitled to a judgment as a matter of law." Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). All

inferences and ambiguities are resolved in the non-movant's favor. Gallo v.

Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d

Cir.1994) (citations omitted). The burden rests on the moving party to

demonstrate the absence of a genuine issue of material fact. See Goenaga v.

March of Dimes Birth Defects Found., 51 F.3d 1418 (2d Cir.1995).

If

the moving party meets its burden, the opposing party must produce

evidentiary proof in admissible form sufficient to raise a material question

of fact to defeat the motion for summary judgment, or in the alternative,

demonstrate an acceptable excuse for its failure to meet this requirement.

See AGV Prods. v. Metro-Goldwyn-Mayer, Inc., 115 F. Supp.2d 378, 386

(S.D.N.Y.2000) (citation omitted). When reasonable minds could not differ as

to the import of the proffered evidence, then summary judgment is proper.

See Anderson, 477 U.S. at 250-52; Bryant v. Maffucci, 923 F.2d 979, 982 (2d

Cir.1991). Moreover, "conclusory allegations, speculation or conjecture will

not avail a party resisting summary judgment." Cifarelli v. Village of

Babylon, 93 F.3d 47, 51 (2d Cir.1996). On cross-motions for summary

judgment, the rule governing inferences and burden of proof is the same as

for unilateral summary judgment motions. That is, each cross-movant must

present sufficient evidence to satisfy its burden of proof on all material

facts. See AGV Prods., 115 F. Supp.2d at 386.

B. Discussion

Plaintiffs havemoved for summary judgment with respect to their

claims for declaratory judgment and injunctive relief, as well as with

respect to Stouffer's counterclaims and crossclaims. However, granting the

relief sought by plaintiffs in their claims (i.e. declaring that plaintiffs

have not violated Stouffer's intellectual property rights) necessitates the

dismissal of Stouffer's counterclaims (which are for violations of those

same rights). Accordingly, the Court considers both sides' claims together,

and, as the parties have done in their briefs, analyzes plaintiffs' motion

for summary judgment by assessing each of Stouffer's counterclaims.

1. Trademark Infringement, False Designation of Origin, and Unfair

Competition

Stouffer's first four counterclaims are for (i) trademark infringement in

violation of the Lanham Act, 15 U.S.C. 1125 (SAAC PP 119-32); (ii)

trademark infringement in violation of New York law (SAAC PP 133-37); (iii)

false designation of origin in violation of the Lanham Act (SAAC PP 138-51);

and (iv) unfair competition in violation of New York law. (SAAC PP 152-58).

To prevail on any of these claims Stouffer must show that plaintiffs have

used the intellectual property at issue in a manner likely to cause

consumer confusion. See, e.g., Paco Sport, Ltd. v. Paco Rabanne Parfums, 86

F. Supp.2d 305, 309-10 (S.D.N.Y. 2000) (claims of trademark infringement and

false designation of origin under the Lanham Act require plaintiffs to show

likelihood of confusion); see also Waldman Publi'g. Corp. v. Landoll, Inc.,

43 F.3d 775, 781-85 (2d Cir. 1994) (likelihood of consumer confusion is a

necessary element of false designation of origin claim alleging "reverse

passing off"); Horn's, Inc. v. Sanofi Beaute, Inc., 963 F. Supp. 318, 328

(S.D.N.Y 1997) (where there is no likelihood of confusion for purposes of

Lanham Act claim, common law trademark infringement claim also fails); Girl

Scouts of the Unites States of Am. v. Bantam Doubledaly Dell Pul'g. Group,

Inc., 808 F. Supp. 1112, 1131 (S.D.N.Y. 1992) (state law unfair competition

claim failed where plaintiffs failed to show likelihood of confusion),

aff'd, 996 F.2d 1477 (2d Cir. 1993).

When assessing the likelihood of consumer confusion, courts in this district

look to the eight factors identified by the Second Circuit in

Polaroid v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961). Those

factors are (i) the strength of the claimant's mark; (ii) the degree of

similarity between the claimant and defendant's marks; (iii) the proximity

of the products; (iv) the likelihood that either party will "bridge the gap"

and use the mark on products closer to the other's areas of commerce; (v)

the sophistication of the buyers; (vi) the quality of the defendant's

product; (vii) actual confusion; and (vii) the defendant's good or bad

faith. See Time, Inc. v. Petersen Publ'g Co. L.L.C., 173 F.3d 113, 117 (2d

Cir.1999) (citing Polaroid). However, while all of these factors are

relevant, the application of the Polaroid test is not a mechanical process

"where the party with the greatest number of factors weighing in its favor

wins." Physicians Formula Cosmetics Inc. v. West Cabot Cosmetics, Inc., 857

F.2d 80, 85 (2d Cir. 1988). Rather, a court should focus on the ultimate

question of whether consumers are likely to be confused as to the source of

the two parties' merchandise. See Lang v. Retirement Living Publishing Co.,

949 F.2d 576, 580 (2d Cir.1991). In this case the Court need not

address each of the Polaroid factors individually in order to answer the

ultimate question regarding likelihood of confusion. Rather, by simply

comparing the Harry Potter books to Stouffer's works, and by examining the

supposed similarities between the works cited by Stouffer in her briefs, the

Court is able to conclude that no reasonable juror could find a likelihood

of confusion as to the source of the two parties' works.

Stouffer's claims are based on several attributes of the Harry Potter books.

First, she claims that plaintiffs' use of the terms "muggle" and "muggles"

are likely to cause consumer confusion. n4 (SAAC PP 123, 126, 128). However,

plaintiffs have not used either of these terms as trademarks. Rather,

plaintiffs have used "muggles" to refer to certain characters in the Harry

Potter books, and such use is markedly different from Stouffer's use of

"muggles" in her various Rah books. In Harry Potter, a "muggle" is simply

the term used for ordinary human beings, i.e those who do not have magical

powers. In Stouffer's works, "Muggles" are tiny, hairless creatures with

elongated heads who live in a fictional, post-apocalyptic land

called Aura. Stouffer's Muggles may have the basic physical characteristics

of human beings, but their diminutive size (see n.1, supra) and distorted

physical features (see Choe Decl., Exhs. 7, 43 (at xiv-xv), 67 (at 3))

clearly indicate that they are not human beings. Also, while Stouffer's

Muggles may not have magical powers, they do have the superhuman ability to

talk to animals. (See Choe Decl., Exh. 43 at xv, 120). Stouffer has not

produced any evidence indicating that there has been actual confusion

between the two uses, n5 nor is there any evidence in the record indicating

bad faith on plaintiffs' part. Accordingly, the Court finds that there is no

likelihood of confusion between plaintiffs' use of "muggle(s)" and

Stouffer's use of "Muggles."

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n4 Because the Court finds that Stouffer cannot satisfy the other necessary

component of her trademark claims, i.e. likelihood of confusion, the issue

of whether Stouffer's use of "Muggle" and "Muggles" entitles her to

trademark protection need not be reached. However, given the meager sales

and minimal business activities of Ande, BCI, and Thurman House, the Court

has serious reservations as to whether Stouffer has any trademark rights

with respect to "Muggle" or "Muggles."

n5 Stouffer maintains that actual confusion has occurred and in support of

that assertion points to her "receipt of numerous e-mails and letters

accusing her of trying to 'steal' or capitalize on marks associated with

Harry Potter." (See Souffer Surreply Memorandum at 5-6 (emphasis in

original)). However, there is nothing in the record, beyond Stouffer's

conclusory allegations, which indicates that Stouffer ever received such

letters, since neither the letters nor printouts of the electronic mail

messages have been produced. Stouffer did attach printouts of several

electronic mail messages to her Second Amended Answer and Counterclaims

(SAAC, Exh. 31). However, those messages were sent to Stouffer by fans of

the Harry Potter series who were upset by the position she has taken in this

litigation and do not indicate actual confusion. To the contrary, the

authors of those e-mails clearly recognize that Harry Potter and The Legend

of Rah and the Muggles come from two separate sources. (Id.)

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Similarly, the plaintiffs' use of "Harry Potter" as a character in the Harry

Potter books is not likely to cause confusion with Stouffer's use of

"Larry Potter." As an initial matter, the evidence in the record does not

conclusively establish that Stouffer even used the words "Larry Potter" in

any books published prior to the commencement of this litigation. Those

words appear only in a single paragraph of the Ande "printer's proof," and

on the title page and in one paragraph of the Larry Potter and His Best

Friend Lilly booklet allegedly created by BCI. (See supra.) The undisputed

evidence produced by plaintiffs indicates that the paragraphs containing the

words "Larry Potter" were printed utilizing technology that was not

available while Ande and BCI were in existence. (See Pl. 56.1 PP 106-119,

144-153). And the photocopies of the BCI booklet submitted by Stouffer also

could not have been created while BCI was operating. (Pl. 56.1 PP 154-157).

In fact, the only evidence in the record indicating that Stouffer actually

created a booklet containing the words "Larry Potter" prior to 1999 is the

testimony of her nephew, William O'Brian and two of her friends. (See

Declaration of William J. O'Brian PP 6-7; Declaration of Carla M. Palese P

7; Declaration of RobertSgringoli, Jr. PP 5-6). These three persons

all claim that Stouffer gave them individual copies of BCI's Larry Potter

and His Best Friend Lilly during the early to mid-1990's. (Id.).

However, even assuming, arguendo, that Stouffer had used "Larry Potter" in

her works prior to this litigation, plaintiffs' use of "Harry Potter" does

not create a likelihood of confusion. Stouffer's "Larry Potter" appears in

an 11-page booklet about a boy who is sad because he has to wear eyeglasses.

"Larry" has brown or orange hair and glasses with non-circular lenses and

speckled brown frames. (See Choe Decl, Exh. 25). In contrast, "Harry Potter"

is a young orphan boy with dark brown or black hair, a scar in the shape of

a lightning bolt on his forehead, and distinctive eyeglasses with black

frames and circular lenses. (See Choe Decl., Exh. 1-4). After discovering

that he has magical powers and enrolling at a school for young wizards,

Harry has many adventures, which are described throughout the course of the

four Harry Potter books, each of which is several hundred pages in length.

(Id.) Aside from the similar, though not identical, names of the main

characters and the fact that both "Larry" and "Harry" are boys with

glasses, Stouffer's booklet and plaintiffs' books, along with their

accompanying illustrations, have almost nothing in common. (See infra).

Accordingly, no reasonable juror could find a likelihood of confusion

between "Larry Potter" and "Harry Potter." n6

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n6 In her counterclaims, Stouffer refers to her use of a character named

"Lilly Potter" and asserts that plaintiffs use of a character named "Lily

Potter" is likely to cause confusion. (SAAC PP 142, 143). However, in the

papers submitted by Stouffer in connection with the instant motions, she

does not mention her use of "Lilly Potter" as a basis for confusion with

plaintiffs' works. (See Declaration of Thomas McNamara PP 13-26). Also, none

of the evidence in the record indicates that Stouffer has ever used the name

"Lilly Potter" in her books. (The "Lilly" character in Larry Potter and and

His Best Friend Lilly has no last name and, as the title indicates, she is a

friend of Larry Potter's, not a relative). (See Choe Decl., Exh, 25).

Accordingly, plaintiffs' use of "Lily Potter" could not create a likelihood

of confusion.

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Stouffer also argues that there is a likelihood of confusion based on her

use of "Nevils" and plaintiffs' use of a character named "Neville

Longbottom." However, Stouffer's Nevils are a group of Muggles whose

original non-human appearance becomes even more distorted during the course

of The Legend of Rah and the Muggles. (See Choe Decl., Exh 67 (at 130-31,

160). Neville Longbottom, on the other hand, is a young boy who is one of

Harry Potter's classmates at the Hogwarts school. Neville is a

"half-and-half" since his mother was a witch and his father was a muggle.

(See Choe Decl., Exh. 1 at 125). However, despite Neville's status as a

"half-Muggle," he does not share any of the physical attributes of

Stouffer's Nevils, nor are his actions at all similar to those of the

Nevils. Stouffer's Nevils are villainous, whereas Neville Longbottom is

merely hapless. There is, of course, some similarity between the word

"Nevils" and the name "Neville," but, as plaintiffs point out, "Neville" is

simply a common British name. Accordingly, the mere similarity of the words

"Nevils" and "Neville" does not create a likelihood of confusion between

plaintiffs' and Stouffer's works.

Similarly, theappearance of the word "Nimbus" in both the Harry

Potter books and in Stouffer's Myn booklet is not likely to cause confusion.

First, the Court takes judicial notice of the fact that the word "nimbus"

can be found in the dictionary and does not represent a fanciful creation of

either Stouffer or plaintiffs. n7 Secondly, the two parties use the word in

completely different ways. Stouffer's "Nimbus" is a warrior and prime

minister of the cloud people of "Troposonia," and is depicted as an adult

male with shoulder-length hair. (See Choe Decl., Exh 31). In Harry Potter,

the "Nimbus 2000" is a flying broomstick ridden by Harry during games of

Quidditch. (See Choe Decl., Exh. 1 at 165-70). Both parties works use the

word "Nimbus" as a noun, but no reasonable juror could find a likelihood of

confusion between the works based on such a superficial similarity.

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n7 A "nimbus" is defined as either "a cloudy radiance said to surround a

deity when on earth," or "a uniformly gray rain cloud that extends over the

sky." (See American Heritage Dictionary (2d College Ed. 1982) at 842).

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Stouffer also asserts that plaintiffs' use of messenger owls in the Harry

Potter books could create confusion between Harry Potter and The Legend of

Rah and the Muggles. However, Stouffer's work does not contain owls who

deliver mail; rather, it contains an albino hawk named Seymour who acts as a

scout for the leader of the Muggles and who delivers food to the Nevils on

the island of Dezra. (See Choe Decl., Exh. 67 at 149-54, 191). No reasonable

juror could find a likelihood of confusion between the two parties' works

based simply on the fact that both contain birds who are employed to carry

an object from one place to another. Similarly, the "Mirror of Erised" in

the Harry Potter books and the "Well of Desire" in Stouffer's Myn are not

similar enough to give rise to a likelihood of confusion. The Mirror of

Erised is a mirror that allows those who look into it to see visions of

their deepest desires. (See Choe Decl., Exh. 1 at 207-09, 214). In contrast,

the Well of Desire gives those who drink from it the ability to solve any

question or problem easily. (Choe Decl., Exh. 10). Although the Mirror of

Erised and the Well of Desire are both magical objects that contain some form of the word "desire" in their name, they are hardly similar enough

to create a likelihood of confusion since they are completely different

objects which perform dissimilar functions.

Finally, the fact that Harry Potter contains a character whose job title is

"Keeper of the Keys and Grounds" does not give rise to a likelihood of

confusion with The Legend of Rah and the Muggles, in which each Muggle works

as a "Keeper of" various objects. (SAAC, Exh. 1; Choe Decl., Exh. 43 at 98).

"Keeper" is a commonly used word and is often used to describe a particular

job; the mere fact that both parties' works use that word to describe

characters' job titles is not likely to cause confusion. And because there

are no additional similarities between the characters who perform these

"Keeper" roles, there can be no likelihood of confusion based on the usage

of the words "Keeper of" in both works.

In sum, the similarities between Stouffer's books and the Harry Potter

series are minimal and superficial, and even when considered altogether they

could not give rise to a likelihood of confusion. And because likelihood of

confusion is a necessary element of Stouffer's first four counterclaims,

she cannot maintain any of those claims. Accordingly, plaintiffs'

motion for summary judgment seeking to dismiss those claims is granted.

2. Dilution and Tarnishment

In her fifth counterclaim, Stouffer asserts a claim for injury to business

reputation (tarnishment) and dilution (blurring) under New York General

Business Law 360-1. (SAAC PP 159-66). However, a prerequisite for

asserting a claim under this statute is the ownership of "an extremely

strong mark" that is either "distinctive" or has acquired secondary meaning.

Sally Gee, Inc. v. Myra Hogan, Inc., 699 F.2d 621, 625 (2d Cir.1983); Allied

Maintenance v. Allied Mechanical Trades, 42 N.Y.2d 538, 542-46, 399 N.Y.S.2d

628, 632, 369 N.E.2d 1162 (1977). Thus, to merit protection under the New

York dilution statute, a plaintiff cannot simply show that she possesses

trademark rights; rather, she must possess a trademark or name which is

"truly of distinctive quality" or which has "acquired a secondary meaning in

the mind of the public." Allied, 42 N.Y.2d at 546 ("Allied" not sufficiently

distinctive to warrant protection); cf. Tiffany & Co. v. Tiffany

Productions, Inc., 147 Misc. 679, 264 N.Y.S. 459 (N.Y.Sup.Ct.),

aff'd, 237 A.D. 801, 260 N.Y.S. 821 (1st Dep't 1932), aff'd, 262 N.Y. 482,

188 N.E. 30 (1933) (enjoining use of "Tiffany" by a movie producer and

distributor in action by makers of Tiffany jewelry). While the Court did not

reach the issue of whether Stouffer possesses sufficient trademark rights in

the terms "Muggle" and "Muggles" for purposes of pursuing her infringement

claims (see n.3, supra), the question of whether she owns "an extremely

strong mark" for the purposes of a state law dilution claim can only be

answered in the negative.

Even when viewed in the light most favorable to Stouffer, the evidence in

the record indicates that sales of Rah and The Legend of Rah and the Muggles

were meager at best. Stouffer concedes that Ande never sold any of the

booklets it created. (See Pl. 56.1 PP 42, 43; Def. 56.1 PP 42, 43). She

claims that Ande sold various promotional items bearing the "Muggles" mark,

but offers no evidence of such sales aside from her own conclusory

allegations. (See Def. 56.1 P 45). Thurman House sold at most six thousand

copies of The Legend of Rah and the Muggles. (See Choe Decl., Exh 71

(Deposition of Allan Thurman Hirsh, III at 40-41)). And the only evidence

that BCI sold any merchandise are: (i) Stouffer's conclusory allegation that

the company sold booklets in supermarkets and drug stores in Pennsylvania,

Maryland, and Virginia in 1988 and 1989 (see Stouffer Decl. P 40); and (ii)

invoices purporting to be records of sales to Great Northern Distributors in

1988. However, the BCI salesperson listed on the invoices and the customer

to whom the goods were allegedly sold have both testified that the sales

referred to in the invoices never took place. (See Declaration of Joan

Korbin Wright PP 12-15; Declaration of Randolph Slaff, PP 33-45; Choe Decl.,

Exh. 36). The customer has also testified that the signature on the invoice

is not his. (Slaff Decl., PP 35-36, 39-40, 43-44). Even assuming that these

invoices are genuine, they do not indicate whether any of the merchandise

allegedly sold to Great Northern contained the "Muggle" or "Muggles" marks.

(See SAAC, Exh. 16). In addition, a letter from Great Northern to Stouffer

dated, August 16, 1988, states that "sales of the books were very slight . .

. and have remained so." (Stouffer Decl., Exh. C). In short, even if

all of Stouffer's assertions regarding her commercial use of "Muggle" or

"Muggles" are accepted as true, no reasonable juror could find that such use

is sufficient to establish that the marks are "extremely strong." n8

Therefore Stouffer cannot pursue a dilution claim under New York GBL

360-1. Accordingly, plaintiffs' motion for summary judgment with respect to

Stouffer's fifth counterclaim is granted.

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n8 Stouffer has submitted no evidence relating to the marks' acquisition of

secondary meaning in the marketplace. Nor is there any indication that

"Muggle" or Muggles" could be viewed as "truly distinctive," especially

given the fact that these words have been used in commerce by third parties

long before Stouffer created any of her works. (See Pl. Reply Memo at 9 n.8

(noting earlier use of "Muggles" in a 1946 book entitled Raggedy Ann in the

Snow White Castle; a 1959 book by Carol Kendall entitled The Gammage Cup;

and a song entitled "Muggles," which was recorded in 1928 by Louis

Armstrong)).

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3. Copyright Infringement

Stouffer's sixth counterclaim is for copyright infringement under 17 U.S.C.

501. Specifically, she alleges that the cover illustrations on the Harry

Potter books infringe upon her copyrights in an illustration from Larry

Potter and His Best Friend Lilly. (See SAAC P 168). However, in order to

pursue this claim she must establish, inter alia, that the plaintiffs'

illustration and her illustration are substantially similar, see, e.g.,

Novak v. National Broadcasting Co., 716 F. Supp. 745, 750 (S.D.N.Y. 1989)

(noting that "substantial similarity" is an essential element of actionable

copying), and that the similarities concern the protectible elements of

Stouffer's illustration. See Williams v. Crichton, 84 F.3d 581, 587 (2d

Cir.. 1996); Walker v. Time Life Films, Inc., 784 F.2d 44, 48 (2d Cir.),

cert. denied, 476 U.S. 1159, 90 L. Ed. 2d 721, 106 S. Ct. 2278 (1986)

(holding that summary judgment is appropriate if the similarity between two

works concerns only noncopyrightable elements of plaintiff work, or if no

reasonable trier of fact could find the works to be substantially

similar).

However, as set forth above (see Section II.B.1, supra), the illustrations

are not substantially similar. While both Harry Potter and Larry Potter are

depicted as young boys with dark hair and eyeglasses, such generic elements

are not copyrightable. The protectible elements of Stouffer's

illustration--Larry Potter's facial features, the shape and color of his

eyeglasses, the style and color of his hair--are simply not present in

plaintiffs' Harry Potter illustrations, and thus Stouffer cannot sustain her

claim for copyright infringement. Accordingly, plaintiffs' motion for

summary judgment with respect to Stouffer's sixth counterclaim is granted.

In addition, the Court notes that there is no evidence in the record

indicating that either Rowling or Mary GrandPre, the illustrator who created

the Harry Potter covers, ever had access to Stouffer's works prior to this

litigation. It is undisputed that Rowling had never been to the United

States prior to the 1998 publication of Harry Potter and the Sorcerer's

Stone. (See Declaration of J.K. Rowling P 8). As a result, Stouffer's

allegation that Rowling had access to Stouffer's works prior to this

litigation is based on two pieces of circumstantial evidence: first, that

some of Stouffer's works were displayed at a toy fair in Nuremberg, Germany

in 1987; and second, that Stouffer's properties were available through a

company in Cheshire, England. (See SAAC P 106). However, there is no

evidence whatsoever that Rowling attended the Nuremberg toy fair; in fact,

Stouffer has admitted that her allegation that Rowling had access to

Stouffer's works at that fair is based solely on the fact that Rowling was

living in Europe when the fair occurred. (Stouffer Deposition (Choe Decl.,

Exh. 71) at 848:17 to 850:15). And with respect to the store in Cheshire,

England in which Rowling may have had access to Stouffer's works, Stouffer

has admitted that there is no evidence indicating that the company she

refers to in her counterclaims ever sold her properties, nor even any

evidence that the company operated a store. (Stouffer Deposition at 852:18

to 854:4, 830:9 to 832:22). Finally, Stouffer has failed to submit any

evidence indicating that GrandPre ever saw Stouffer's works prior to this

litigation.

III. Motion for Sanctions

Plaintiffs have moved for sanctions based on Stouffer's alleged

submission of falsified evidence. Specifically, plaintiffs have asked the

Court to issue an order, pursuant to its inherent power, dismissing

Stouffers's counterclaims with prejudice and directing Stouffer to reimburse

plaintiffs for the attorneys' fees and costs that they have incurred in this

action. The motion for sanctions is based upon Stouffer's alleged

perpetration of a fraud upon the Court, namely her production of at least

seven pieces of falsified evidence: (i) the altered Playthings advertisement

that was attached to her counterclaims (SAAC, Exh. 12); (ii) the altered

copies of The Legend of Rah and the Muggles (Choe Decl. Exh. 17-20); (iii)

the altered copy of the "RAH" screenplay (SAAC, Exh. 18); (iv) drawings of

"Muggles" merchandise that were altered to include the word "Muggles TM"

(Choe Decl, Exh. 63); (v) altered copies of Larry Potter and His Best Friend

Lilly (Choe Decl., Exh. 24-27); (vi) the forged invoices that purport to

record sales by BCI to Great Northern Distributors (SAAC, Exh. 16); and

(vii) an altered draft agreement between BCI and Warner Publisher Services.

(SAAC, Exh. 17; Choe Decl., Exh 37).

In order for the Court to grant sanctions based upon such a fraud,

it must be established by clear and convincing evidence that Stouffer has

"sentiently set in motion some unconscionable scheme calculated to interfere

with the judicial system's ability impartially to adjudicate" the action.

Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1118 (1st Cir. 1989); see also

Shepherd v. American Broadcasting Cos., Inc., 314 U.S. App. D.C. 137, 62

F.3d 1469 (D.C. Cir. 1995) (sanctions pursuant to a court's inherent power

must be based on abusive litigation conduct that has been proven by clear

and convincing evidence); Pfizer, Inc. v. Int'l. Recitifier Corp., 538 F.2d

180, 195 (8th Cir. 1976), cert.denied, 429 U.S. 1040, 50 L. Ed. 2d 751, 97

S. Ct. 738 (1977) (same); McMunn v. Memorial Sloane-Kettering Cancer Center,

191 F. Supp.2d 440, 445 (S.D.N.Y. 2002) (Buchwald, J.). Accordingly, the

Court must examine the record with respect to each of the seven pieces of

allegedly falsified evidence. Upon such examination, the Court finds

Stouffer's conduct warrants sanctions.

A. The Playthings Advertisement

It is undisputed that the copy of the Playthings advertisement that

was attached to Stouffer's counterclaims is not a true and correct copy of

the advertisement that appeared in the March 1987 issue of Playthings. See

Section I.B., supra. The copy attached to Stouffer's counterclaims contains

the phrase "Muggles TM from RAH TM" whereas the advertisement that ran in

Playthings did not. (Compare SAAC, Exh. 12 with Choe. Exh. 12). Stouffer

does not offer a specific explanation as to how the additional phrase

appeared, but maintains that Ande's art department routinely modified copies

of prior advertisements for later use and therefore it is possible that the

additional phrase was "added by Ande's art department at some time during

the late 1980's." (See Def. Memo in Opposition to the Motion for Sanctions

at 4). However, Stouffer offers no evidence to support this possible

explanation for her submission of the altered advertisement: no one who

worked in Ande's art department has testified that the company did indeed

modify advertisements for later use, nor does Stouffer point to any later

use of this particular advertisement. Furthermore, if Stouffer knew that

Ande routinely altered advertisements for later use, it was incumbent

upon her to determine whether the advertisement she submitted with her

counterclaims had been altered before submitting that add as proof that the

phrase "Muggles TM from RAH TM" had appeared in Playthings. (See SAAC P 83).

n9 And since that phrase is the only portion of the advertisement relevant

to Stouffer's claim that she had acquired trademark rights to the term

"Muggles" prior to the publication of plaintiffs' Harry Potter series, its

presence in the copy attached to the counterclaims--and its absence from the

actual Playthings advertisement--indicate that Stouffer has willfully

altered the document for purposes of perpetrating a fraud on the court.

Accordingly, the Court finds that Stouffer's submission of the altered

advertisement as an exhibit to her counterclaims represents sanctionable

conduct.

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n9 The Court notes that it would not have been difficult for Stouffer to

determine whether or not the copy of the advertisement she attached to the

counterclaims was accurate. Plaintiffs apparently discovered the discrepancy

between Stouffer's copy and the original version that ran in Playthings by

simply visiting the New York City offices of the company that publishes

Playthings. (See Declaration of Christina B. Keflas P 6).

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B. The Altered Copies of The Legend of Rah and the Muggles

It is undisputed that several booklets produced by Stouffer that bear the

title "The Legend of Rah and the Muggles" were altered after their original

printing. (Def. 56.1 PP 65, 67; see also Section I.B., supra). Specifically,

these booklets were altered such that their titles were changed from "RAH"

to "The Legend of RAH and the Muggles." (Def. 56.1 PP 65, 67). Stouffer

originally testified that she assumed such alteration occurred in the late

1980's (Stouffer Deposition at 625:4-12); however, after being confronted

with evidence indicating that the addition of "The Legend of" and "and the

Muggles" could not have occurred prior to 1991 (see Pl. 56.1 PP 67-71), she

now concedes that alterations could have occurred in the 1990's. She also

claims to have no knowledge regarding the process used to add the additional

words to the title because the additional printing was handled by her

company's art department (Memorandum in Opposition to Motion for Sanctions

at 9; Def. 56.1 P 63); however, neither Ande nor BCI still existed in 1991,

and consequently there was no art department to which Stouffer could

have delegated any reprinting responsibilities. And though the evidence may

not clearly establish that Stouffer altered the title pages of the booklets

for the specific purpose of supporting her claims in this litigation, she

clearly knew that the booklets at issue were not created--much less marketed

and sold--by Ande in the 1980's. Thus, by attaching a copy of one of the

altered booklets as an exhibit to her counterclaims (SAAC Exh. 9), and by

relying upon that exhibit to support her patently false allegation that

"between April 1986 and September 1987, Ande aggressively promoted . . . The

Legend of RAH and the MUGGLES" (SAAC P 76), she committed a fraud upon the

Court.

C. The Altered RAH Screenplay

It is undisputed that Stouffer attached a screenplay bearing the title "The

Legend of RAH the Light and the Muggles" as an exhibit to her counterclaims

(SAAC, Exh. 18; see also Section I.B., supra), and that she relied on this

exhibit to support her claim that she owns trademark rights in the term

"Muggles." (SAAC P 92, passim). It is also undisputed that the screenplay

for which Stouffer obtained copyright registration in 1988 was not entitled

"The Legend of RAH the Light and the Muggles," and did not contain

the word "Muggles" in its title. (See Choe Decl., Exh. 16). Stouffer

concedes that the screenplay attached to her pleading is not a true and

accurate representation of the screenplay deposited with the Copyright

Office. (Memorandum in Opposition to the Motion for Sanctions at 10).

However, she maintains that the change in the screenplay's title was made

long before this action was filed and that she inadvertently attached a

"working copy" of the screenplay to her counterclaims rather than a copy of

the screenplay that was actually registered. (Id.). She also points out that

the specific allegation in her counterclaims that relates to the screenplay

refers to the title as "RAH the Movie" (Id.; SAAC P 92); she insists that

this fact undermines plaintiffs' assertion that she purposely altered the

screenplay in order to create the false impression that she had copyrighted

a work with "Muggles" in the title in 1988. Regardless of how or why

Stouffer attached the inaccurate copy of the screenplay to her

counterclaims, the Court is troubled by her inclusion of yet another

inaccurate and misleading exhibit in her pleading. And while such

conduct might not by itself constitute clear and convincing evidence of a

fraud upon the Court, when considered along with all the other pieces of

falsified evidence submitted by Stouffer (see supra, infra), it bolsters the

Court's finding that Stouffer has engaged in sanctionable misconduct.

D. Altered Drawings of Muggles Merchandise

In her counterclaims, Stouffer supports her assertion of trademark rights in

the term "Muggle(s)" by alleging that prior to Ande's bankruptcy in 1987,

the company had proposed "licensing concepts [including]character sleepwear

bearing the slogan 'HAVE A MUGGLE TM DAY,' a MUGGLE TM character

hand-puppet, and character boys' shirts, pants and shoes." (SAAC P 82).

Stouffer also attached drawings of those products as an exhibit to her

counterclaims (SAAC, Exh. 11). One of those drawings depicts a girl wearing

a nightgown that bears the slogan "HAVE A Muggle TM DAY," and in another, in

which a boy wears Muggle-related clothing and clutches a Muggle hand-puppet,

the word "Muggle TM" written across the top. (Id.). However, during

discovery plaintiffs' obtained other copies of these drawings from a

Pennsylvania law firm involved in Ande's bankruptcy proceeding.

(Declaration of Joanna Schmitt PP 17-18). The copies Stouffer submitted to

her bankruptcy counsel are identical to the drawings attached to her

counterclaims, except that in the copies obtained from her bankruptcy

attorneys the girl in the nightgown does not contain the phrase "HAVE A

Muggle TM DAY," nor does the drawing of the boy contain the word "Muggle

TM." (Id. Exh. M). Also, one of Ande's former illustrators has testified

that the original versions of these drawings did not include the word

"Muggle" or "Muggles." (Declaration of Ann Fitzpatrick PP 12-13). Thus, it

is clear that the drawings were altered after Ande ceased operations. It is

also clear that the words which were added to the drawings directly support

Stouffer's claim that she used "Muggle" as a trademark in the 1980's.

Stouffer does not contest the inescapable conclusion that the drawings were

altered. She claims, however, to have no knowledge regarding the alteration,

and asserts that because she continued to market and promote Muggles

merchandise after Ande's demise it is "certainly possible" that the drawings

were altered long before this litigation arose. (See Memorandum in

Opposition to the Motion for Sanctions at 11). However, after Ande filed for

bankruptcy, any promotion of merchandise relating to RAH or the Muggles

would have been done either under the auspices of BCI, which only existed

for a period of roughly five months in 1988 (see Def. 56.1 P 123; Pl. 56.1 P

124), or by Stouffer herself, who was the only person working to promote her

properties after BCI closed. And since BCI was an informal operation that

employed at the most three people (Stouffer, her mother, and Joan Korbin

Wright), it is difficult to believe that the alterations to the drawings,

which directly affect Stouffer's supposed trademark rights, could have been

made without her knowledge. Therefore, regardless of whether the alterations

were made before or after this litigation arose, when Stouffer submitted the

altered drawings as evidence of Ande's use of "Muggles" as a trademark in

the 1980's, she made a fraudulent misrepresentation to the Court.

E. Altered Copies of Larry Potter and His Best Friend Lilly

In her counterclaims, Stouffer asserts that plaintiffs' use of the character

"Harry Potter" infringes on her copyrights to "Larry Potter," a

character who appears in Larry Potter and His Best Friend Lilly, a booklet

that Stouffer claims to have published in the 1980's. (SAAC PP 68, 108 and

Exh. 27; Stouffer Deposition 617:24-618:4). However, in the course of this

litigation Stouffer has not produced a single booklet entitled Larry Potter

and Her Best Friend Lilly. Rather, she has produced one "printer's proof" of

this booklet that was allegedly created by Ande, and two color photocopies

of a booklet purportedly created by BCI in 1988. (Choe Decl., Exh. 25-27;

Section I.B., supra). Plaintiffs have produced undisputed evidence

indicating that neither the one paragraph in the Ande printer's proof that

refers to "Larry Potter," nor the original booklet from which the two color

photocopies were made, could have been printed prior to 1993 (Pl. 56.1 PP

114-118, 148, 154). In the face of such evidence, Stouffer now claims that

the color photocopies were made from a booklet printed in the early 1990's,

when Stouffer was allegedly revising Larry Potter and Her Best Friend Lilly

for future publication. (Memorandum in Opposition to the Motion for

Sanctions at 12). However, if the original booklet was created in

the early 1990's, then its title page--which contains a copyright date of

1988--is patently false, and Stouffer's knowing submission of photocopies

containing such a misrepresentation constitutes a fraud on the Court.

F. Forged BCI Invoices

In her counterclaims, Stouffer alleges that her booklets were sold in Acme

supermarkets in 1988. In support of that allegation she has attached as

exhibits two invoices purporting to be records of sales to Great Northern

Distributors. (SAAC P 90, Exh. 16). However, as set forth supra (Section

II.B.2.), the BCI salesperson and the representative of Great Northern who

are listed on the invoices have both testified that the sales referred to in

the invoices never took place. (See Declaration of Joan Korbin Wright PP

12-15; Declaration of Randolph Slaff, PP 33-45; Choe Decl., Exh. 36).

Stouffer does not deny that the goods listed in the invoices were never sold

to Great Northern, although she now maintains that the invoices "appear to

relate primarily to future [sales]periods." (Memorandum in Opposition to

the Motion for Sanctions at 14). However, such explanation does not justify

submitting the invoices in support of her allegation that she

"arranged to sell and did later sell" her properties in 1988. (SAAC P 90).

Her counterclaims did not refer to the invoices as being representative of

"future" sales that never occurred, and thus her submission of the invoices

was clearly misleading. n10

- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - -

- -

n10 The Court also notes that Stouffer's recent admission that BCI made only

"slight" sales to Great Northern Distributors (Memorandum in Opposition to

the Motion for Sanctions at 14) directly contradicts her earlier testimony

that "quite a huge amount" of books were shipped to Great Northern.

(Stouffer Deposition 505:6-10).

- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - -

- -

More importantly, the evidence in the record clearly indicates that the

invoices themselves are fraudulent. The representative of Great Northern

whose name appears on the invoices has testified that the signature on the

invoice is not his. (Slaff Decl. PP 35-36, 39-40, 43-44). And Joan Korbin

Wright, the BCI salesperson listed on the invoice, has stated under oath

that she recognizes the signature on the invoice--which purports to

be that of Great Northern's president, Randolph Slaff--to be in Stouffer's

handwriting. (Wright Decl. P 15). Stouffer claims that the Slaff signature

is in Wright's handwriting, but even if that were true the invoices would

still be forgeries--and thus Stouffer would still have knowingly submitted

fraudulent documents to the Court. Such conduct is clearly sanctionable.

G. The Draft Agreement Between BCI and Warner Publisher Services

Stouffer has alleged that in 1988 she entered negotiations with Warner

Publisher Services (WPS) for the purpose of establishing a distribution

agreement between BCI and WPS. (SAAC P 91). Though the two companies never

entered into a final agreement, Stouffer attached a draft agreement between

BCI and WPS as an exhibit to her counterclaims; such exhibit was attached in

support of her claim that plaintiffs had access to her RAH booklets in the

late 1980's. (Id. P 91, Exh. 17). The draft agreement submitted by Stouffer,

which is dated October 20, 1988, contains an exhibit listing the five

booklets which were to be distributed by WPS, the third of which is RAH.

(Id. Exh. 17). However, on two other copies of that same draft agreement--a

copy retained by BCI employee Joan Korbin Wright (Wright Decl. PP

21-22, Choe Decl., Exh. 38) and a second copy given by Stouffer to the

attorney representing her during Ande's bankruptcy (Transcript of

Proceedings, May 31, 2001, 11:5-10)--the third title listed in the exhibit

is The Land of the Nother-One, not RAH. And upon close inspection of the

version submitted by Stouffer, it is clear that the word "RAH" is not

aligned with the other words on the page. (Choe Decl., Exh. 38). Clearly the

word "RAH" was added to the draft agreement exhibit after the document was

originally created.

Stouffer recognizes that the version of the draft agreement that she

submitted with her counterclaims was altered, although she denies altering

the document herself. (Memorandum in Opposition to the Motion for Sanctions

at 17). However, given the fact that two parties with no interest in the

outcome of this litigation produced unaltered copied of the agreement,

whereas Stouffer produced a copy that was altered in a manner that directly

supports her claims in this litigation strongly indicates that she is

responsible for the alteration.

In conclusion, the Court finds, by clear and convincing [*58] evidence,

that Stouffer has perpetrated a fraud on the Court through her submission of

fraudulent documents as well as through her untruthful testimony. Such

finding requires that the Court next determine the appropriate sanction to

impose. In making that determination, the Court considers five factors: (i)

whether the misconduct was the product of intentional bad faith; (ii)

whether and to what extent the misconduct prejudiced the plaintiffs; (iii)

whether there was a pattern of misbehavior rather than an isolated instance;

(iv) whether and when the misconduct was corrected; (v) whether further

misconduct is likely to occur in the future. See McMunn, supra, 191 F.

Supp.2d at 461.

Plaintiffs seek two types of sanctions: the dismissal of Stouffer's

counterclaims and the award of plaintiffs' attorneys' fees and costs

incurred in this action. In granting plaintiffs' motion for summary judgment

the Court has already dismissed Stouffer's claims; thus, the Court need not

address the issue of whether dismissal is an appropriate sanction. With

respect to plaintiffs' legal fees and costs, the Court finds that an award

of such fees and costs is appropriate given the fact that Stouffer

has engaged in a pattern of intentional bad faith conduct and failed to

correct her fraudulent submissions, even when confronted with evidence

undermining the validity of those submissions. It is true that Stouffer is

the defendant in this action and thus not all of the attorneys' fees and

costs incurred by plaintiffs in this action are attributable to Stouffer's

fraud on the Court. However, Stouffer's calculated generation of fraudulent

documents and testimony undoubtedly imposed burdens on plaintiffs by

increasing the legal fees and expenses incurred by plaintiffs in the

investigation and defense of her counterclaims. Accordingly, the Court

awards a monetary sanction against Stouffer in the amount of $ 50,000.

In addition, the Court finds that plaintiffs are entitled to a statutory

award of attorneys' fees and costs with respect to their defense of

Stouffer's trademark claims. Under the Lanham Act, prevailing parties in

trademark infringement actions may be awarded attorneys' fees and costs in

"exceptional cases." 15 U.S.C. 1117(a). The Second Circuit has held that

fees will only be awarded upon evidence of fraud or bad faith. See Conopco,

Inc. v. Campbell Soup Co., 95 F.3d 187, 194 (2d Cir. 1996)

(citations omitted). Here the Court finds that Stouffer has asserted claims

and defenses without any reasonable basis in fact or law and has attempted

to support such claims and defenses with items of evidence that have been

created or altered for purposes of this litigation. This Court has granted

plaintiffs' motion for summary judgment with respect to Stouffer's Lanham

Act claims and finds that there is clear evidence of Stouffer's fraud and

bad faith in the prosecution of such claims. Accordingly, plaintiffs are

awarded their attorneys' fees and costs incurred in defending those claims.

Conclusion

For the reasons set forth above, plaintiffs' motion for summary judgment is

granted. Stouffer's counterclaims and crossclaims are dismissed with

prejudice. The Court declares that plaintiffs' publication, distribution,

and exploitation of the Harry Potter books does not violate any of

Stouffer's intellectual property rights. Stouffer is permanently enjoined

from making false representations to third parties indicating that she owns

all rights in the "Muggle" and "Muggles" trademarks and copyrights, or

indicating that plaintiffs have violated her intellectual property rights.

Plaintiffs are granted judgment against defendant for their attorneys' fees

and costs incurred in defending Stouffer's Lanham Act claims in this action.

Plaintiffs are directed to make an application, within 30 days from the

entry of this order, detailing the amount of such fees and costs. Further,

plaintiffs' motion for sanctions is granted in the amount of $ 50,000.

The Clerk of the Court is directed to enter judgment in favor of plaintiffs

and against defendant and, following the Court's disposition of plaintiffs'

fee application, to close the file in this action.

SO ORDERED.

Allen G. Schwartz

United States District Judge

Dated: New York, New York

September 17, 2002