In my never-ending quest to write articles that my children would read, I bring you the case of Grumpy Cat.
The guardians of Grumpy Cat (whose actual name is Tardar Sauce), through its company, Grumpy Cat Limited, developed a cottage business in commercially exploiting the likeness of Grumpy Cat for use on, among other things, T-shirts, coffee mugs, books and calendars. Among other endeavors, the company licensed copyrights and trademarks relating to Grumpy Cat to Grenade Beverage, LLC, for use with a line of Grumpy Cat-branded coffee products. The parties’ first product was an iced-coffee beverage. Grenade wanted to add a ground coffee product to the product line and raised the proposal with Grump Cat Limited. Grumpy Cat Limited did not provide approval, but Grenade went ahead and offered the ground coffee anyway, and also began selling a T-shirt with the Grumpy Cat likeness.
Grumpy Cat Limited then sued for breach of contract, copyright infringement and trademark infringement in the Central District of California, Grumpy Cat Limited v. Grenade Beverage, LLC, et al., No. SA CV 15-2063. At issue was whether the license required Grumpy Cat Limited’s permission for any new products in the product line. The jury decided that Grenade breached the contract by offering the new products without the permission of Grumpy Cat Limited.
While the jury found that Grenade breached the contract, it awarded only $1 in nominal damages for the breach of contract claim. Proving breach of contract damages requires proof of lost profits, and apparently the decision to market the ground coffee didn’t amount to a hill of beans.
But the jury did award substantial damages for the copyright infringement and the trademark infringement claims. The jury awarded $230,000 for copyright infringement, which indicates that the jury awarded statutory damages for willful infringement. The jury awarded $480,000 for trademark infringement, which also indicates that the jury awarded statutory damages for willful trademark infringement. The jury also found for Grumpy Cat Limited and against Grenade on Grenade’s counterclaims for breaches of good faith, fair dealing and fiduciary duty, and misrepresentation.
Here is where the lesson lies. The availability of statutory damages for infringement was an element that Grenade should have taken into account when it decided to launch a product without approval. Grumpy Cat received a substantial jury verdict without having to prove damages for lost profits. The presence of intellectual property rights and the specter of statutory damages for infringement raised the exposure risk.
So Grumpy Cat is less grumpy perhaps? It turns out that Tardar Sauce is a relatively happy cat off camera – you just never know with these Hollywood types! Regardless, $710,000 should buy the feline phenom many balls of yarn to play with.