Hobbit highlights character merchandising pitfalls

Tuesday 20th March 2012

Hitting news headlines worldwide is the story of a popular British pub by the name of The Hobbit, which has apparently been threatened with legal action by Saul Zaentz Company (SZC), on the basis that SZC owns “worldwide rights” to several brands associated with author JRR Tolkien, including THE HOBBIT. This story highlights the complex Intellectual Property issues which arise in the context of character merchandising. SZC allegedly holds the film rights to The Hobbit, but to what extent does this allow them to force a pub in Britain to change its name of 20 years?

Firstly, it is important to note that the alleged infringements of the pub extend beyond simply using the name THE HOBBIT. For example, images from the film appear on various materials, such as the face of Lord of the Rings star Elijah Wood on the pub’s loyalty card. This appears to be clear copyright infringement.

SZC appears to hold trade mark registrations for THE HOBBIT in Europe, including for food and beverage goods and services. However, as the pub has used the name for over 20 years, apparently since prior to SZC’s registrations, they may have a defence against trade mark infringements due to their longstanding use of the name. Furthermore, if SZC have not made genuine use of their trade mark for the relevant goods and services, then their registration may be vulnerable to cancellation for non-use once five years passes from the date of registration. At least some of their registrations appear to fall in this category. In New Zealand and Australia the non-use period is generally three years.

SZC may be able to pursue an action against the pub based on the tort of passing off. This would require SZC to prove they have a reputation in the relevant goods and services, which arguably they may not have. Furthermore, critical to a passing off action is the ability to show that customers of the pub will be deceived into thinking that the pub is associated with SZC and that this has caused SZC damage. In New Zealand at least, case law appears to be reluctant to extend the scope of passing off to character merchandising per se. The fact that a pub such as THE HOBBIT is arguably not trying to project a commercial connection with SZC or SZC’s officially licensed goods or services, but is rather trying to project an association with the character per se, is a key reason why passing off may not extend to such character merchandising. Furthermore, a defence to passing off may be available to the pub if they can show concurrent or antecedent rights in the name THE HOBBIT.

This story highlights the pitfalls of character merchandising, particularly when dealing with iconic works such as JRR Tolkien’s. At least some of the pub’s use may be defensible. However, it is more likely that this matter will settle privately than be pursued through costly litigation in the Court system. In the meantime, The Hobbit pub seems to be garnering increasing support through its Facebook page and has recently added the voice of British actor Stephen Fry to its collection of supporters. On the other hand, SZC appears to be painted as a bully, ultimately damaging its reputation and Lord of The Rings fan’s perception of the film and officially licensed merchandise. Overall, this highlights both the importance of securing correct authorisation from the relevant author or rights owner prior to commencing use as well as addressing any unauthorised use in a timely manner.

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