IP Law Daily DeLorean estate’s second suit for ‘Back to Future’ royalties barred by settlement agreement
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Wednesday, October 17, 2018

DeLorean estate’s second suit for ‘Back to Future’ royalties barred by settlement agreement

By Joseph Arshawsky, J.D.

A lawsuit brought by the estate of John Z. DeLorean, who created "the DeLorean automobile" featured in the "Back to the Future" film series, against DeLorean Motor Company (Texas) ("DMC") to recover royalties under an agreement with Universal Pictures in March 1989 (the "Universal Agreement") was dismissed by a federal court in Newark, New Jersey, due to a settlement between DeLorean and DMC of a 2014 action involving the same trademarks (DeLorean v. DeLorean Motor Co., October 12, 2018, Linares, J.).

In 2014, DeLorean brought a separate action before the court against DMC ("the 2014 Action"), alleging that DMC "improperly and illegally appropriated for its own use Mr. DeLorean’s legacy, including the DeLorean Identity, together with intellectual property such as the DMC Marks and DMC 12 Trade Dress," all of which allegedly belonged to DeLorean. The "DMC Marks" referred to four trademarks used by Mr. DeLorean before his death, specifically "the company name ‘DeLorean Motor Company,’ the ‘DMC’ brand and associated logo, ‘DMC 12,’ (the official name of the car produced by Mr. DeLorean) and ‘The DeLorean’ (the common name used for DMC 12)." The term "DMC 12 Trade Dress" referred to "the distinctive, non-functional design and image of the unique DMC 12 sports car" created by Mr. DeLorean. On September 18, 2015, the parties entered into a settlement agreement ("the Settlement Agreement"), which closed the 2014 Action. Separately, pursuant to the Universal Agreement, Mr. DeLorean granted Universal "certain rights in and to the name and appearance of the DeLorean automobile in order to enable Universal to engage in certain merchandising and commercial tie-up activities in connection with the ‘Back to the Future’ films."

DeLorean sought a declaratory judgment that the Settlement Agreement did not give DMC any rights under the Universal Agreement, and that DeLorean was the rightful owner of all rights stemming from the Universal Agreement. DeLorean also demanded that the court direct DMC to account for, and pay over, the royalty payments it received from Universal under the Universal Agreement. DMC moved to dismiss, and the court granted the motion.

Failure to state a claim and enforce the settlement agreement. The main issue before the court was whether the materials licensed in the Universal Agreement were included in the settlement agreement, thereby barring the plaintiff from asserting a claim under the Universal Agreement as a matter of law. The court analyzed the subject matter of both agreements, and the context in which the agreements applied and found that DeLorean’s claims under the Universal Agreement were within the scope of those claims barred by the settlement agreement.

The subject matter of both agreements. Though the terms "Universal Agreement" or "royalty payments" were not mentioned in the settlement agreement, the court found that the subject matter of the Universal Agreement was covered by the settlement agreement. The court reached this conclusion based on the overlap of the clear terms in both agreements.

In the settlement agreement, DeLorean’s covenant not to sue DMC pertained to the latter’s use of the following words and trademarks: (i) "the name ‘DeLorean Motor Company," (ii) "the DMC logo," and (iii) "the stylized word ‘delorean." In the Universal Agreement, Universal was given the right to use (i) "the appearance of the DeLorean automobile," (ii) "the name ‘DeLorean," and (iii) "the logo DMC’ as it appears on the radiator grille of the DeLorean automobile." Thus, the agreements shared the same or similar terms, such as the use of the word DeLorean and the DMC logo.

The court was convinced that the settlement agreement contemplated the inclusion of the DeLorean automobile’s appearance because examples of the DeLorean and DMC trademarks from the 2014 Action consistently appeared on the image of the DeLorean automobile. As both agreements applied to the use of the word "DeLorean" and the DMC logo, and related to the DeLorean automobile’s image, the court concluded that the subject matter of the agreements overlapped.

Context of the agreements. Considering both agreements pertained to the merchandizing of similar items associated with the DeLorean automobile’s image, brand, and related trademarks, as contemplated by the 2014 Action and the clear language of the agreements, the court concluded that DeLorean’s claims under the Universal Agreement were incorporated in, and therefore barred by, the settlement agreement. "Accordingly, Plaintiff cannot state a claim for relief in connection with the Universal Agreement as a matter of law, and the Complaint must be dismissed," the court held.

The case is No. 2:18-cv-08212-JLL-JAD.

Attorneys: R. Scott Thompson (Lowenstein Sandler PC) for Sally DeLorean. William C. Mead, Jr. (Litchfield Cavo LLP) for DeLorean Motor Co.

Companies: DeLorean Motor Co.

MainStory: TopStory Trademark NewJerseyNews

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