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Disney Turns Grumpy Over Copyright Infringements

May 19, 1991 GMT

BURBANK, Calif. (AP) _ Officer, arrest that pinata 3/8

Pirates are moving mountains of illegally produced movie merchandise, and Walt Disney Co. is tracking down scores of copyright infringers worldwide.

The bootleg merchandise includes the predictable assortment of Roger Rabbit T-shirts and Dick Tracy watches. More creative plagiarists sell Disney-themed sex posters, fugitive gummy candy and even outlaw Mickey Mouse pinatas. Two years ago, Disney sued the Academy Awards over a contraband Snow White.

The copyright violations have forced Disney, known as a friendly, whimsical outfit, to create its own network of tough-fisted trademark police. Disney says the take-no-prisoners posture might not please everyone, but smart business demands it.

Piracy investigators scour stores for illegal goods around the globe, and Disney employs several attorneys who do little else but file copyright infringement lawsuits.

Disney estimates that 25 percent of its 800 lawsuits and regulatory cases each year are copyright- and trademark-related.

″Most people think of pirating as a mom and pop operation,″ said Robert Ogden, vice president and counsel for Disney’s consumer products division. ″It is, in fact, organized crime, and its tactics are very sophisticated.″

Ogden says illegal merchandise generates more than $1 billion in proceeds annually. For Disney, that’s like strangling the Little Mermaid’s golden voice - no other Hollywood company is as dependent on its copyrights and trademarks.

The entertainment giant’s consumer products division claimed revenue of $573.8 million in 1990, up 40 percent from the previous year. Operating income surged 19 percent to $223.2 million last year from 1989. Most revenue is delivered by Mickey Mouse items.

For comparison, Disney’s filmed entertainment unit, including movies and television shows, earned $313 million last year on revenue of $2.25 billion.

″We’re not in the business of suing the world,″ said Peter Nolan, a Disney vice president and counsel. ″People like our characters and we’re very pleased with that. We don’t sue everybody who infringes.

″But if you sit on your rights and don’t enforce your rights, you can be considered to have abandoned your rights,″ Nolan said.

Disney sells licensing agreements to dozens of manufacturers, who in turn make such items as paper napkins, pencils and pajamas based on properties like ″Chip ’n Dale Rescue Rangers,″ ″101 Dalmatians″ and the upcoming ″The Rocketeer.″

Copyright infringers don’t pay these license fees, and tend to use poorer materials. Thus, their goods cost less than legitimate products.

In Disney’s New York offices, samples of illegal merchandise tumble out of mail sacks daily. Consumers and Disney stock holders submit faked products, including one observant Staten Island, N.Y., woman who noticed her bag of Disney-themed gummy candy lacked a copyright notice. A lawsuit followed.

Legitimate manufacturers volunteer bogus goods, as do Disney’s piracy inspectors. Occasional anonymous callers offer tips, too.

In one case several years ago, a poster series featuring Disney characters in sexual situations surfaced in Los Angeles. Unable to pinpoint the source, Disney decided to open an undercover poster shop in nearby Glendale, hoping the suspect posters would be offered to them wholesale.

The sham store wasn’t popular with residents, and before Disney could open it, the store was torched by a firebomb.

The counterfeiters work might not always shine, but their timing can be brilliant.

″The pirates are very savvy as to what is going to be a hit,″ Ogden said. ″Dick Tracy″ merchandise, in particular, was plagiarized early and often.

Unauthorized manufacturers are notified, warned to cease and asked to pay damages. If they don’t, Disney often launches legal action, suing more than 1,100 companies and individuals in the last four years. Most cases are settled before trial.

In February, Disney joined with other companies and New York City’s consumer affairs commissioner in an action against 25 retail stores along Canal Street and lower Broadway selling counterfeit watches.

Lawsuits - or threats of lawsuits - don’t always have the desired effect.

Critics said Disney couldn’t take a joke when the company sued the Academy of Motion Picture Arts and Sciences over its unauthorized Snow White singer in the 1989 Oscar show.

A month later, onlookers blasted Disney’s threats against three private children’s centers in Hallandale, Fla., that decorated their walls with Minnie Mouse, Donald Duck and Goofy. In a public relations coup, MCA Inc. gave the schools permission to use its Jetsons and other characters, leaving Disney looking like a spoilsport.

In a twist, Henson Associates sued Disney in April, arguing Disney had infringed the trademark and copyrights that protect Henson’s Muppet characters. The suit was settled, with Disney paying for limited Muppet rights.

Disney will take the bad press, though, because the financial benefits the Disney police guarantee outweigh any publicity embarrassments.

″In general, we find that the enforcement program does act as a very good deterrent,″ Nolan said. ″We have some feedback that (infringers) stay away from us because we have the enforcement program that we do have, and they will go to (trademark and copyright holders) that don’t have as good an enforcement program.

″The other alternative is not to do anything. And then the problem really gets bad.″

Disney isn’t the only one pursuing illegal merchandisers - just the most visible.

Attorney Bill Crutcher, who represents Surge Licensing, says Teenage Mutant Ninja Turtles products have sparked $1 billion worth of merchandise, and an almost equally huge payoff for infringers.

One British importer sent 500,000 unauthorized Turtle action figures to the United States during the last six months, Crutcher said. ″U.S. Customs has helped us a lot,″ said Crutcher, who said the agents have a list of authorized Turtle licensees and seize illicit goods.

Still, Crutcher concedes, progress is slow and costly. Many violators don’t have enough money to pay damages, and new cheaters crop up all the time.

Counterfeiting ″is as big as the legitimate industry,″ Crutcher said. ″I don’t think there is enough money in the world to go after every infringer. It’s very pervasive and it’s not lucrative litigation. But it’s the cost of doing business.″