Why Wolverine should never scratch his nose…

Marvel Enterprises, Inc. et al. v. NCSoft Corporation, et al.

(Headnote: subsequent to our previous posting on this case, the parties have settled…)

Amid the frenzy of superhero films hitting theaters this summer, it is important to remember that superheroes exist not just as men and women in spandex, but also as intellectual properties of their respective copyright holders who might not be very amused if you try to slip into some suspiciously similar virtual tights. In a suit filed in November of 2004, Marvel, best known for characters such as Spider-Man, the Incredible Hulk, and the merry mutants of X-Men, sued NCSoft, makers of the popular massively multiplayer online game “City of Heroes,” which enables players to create and play as characters with superhero attributes, for various copyright and trademark infringements.

Marvel claimed that NCSoft was directly, contributory and vicariously liable for copyright infringement for, inter alia, knowingly copying numerous Marvel characters, knowingly permitting infringing conduct of their users who were copying Marvel characters, and benefiting financially from the infringing conduct of its users. The screenshot shown above, along with others, were introduced by Marvel as exhibits to substantiate its claims. The resemblance to Wolverine is uncanny, but the real kicker is that the character, along with others used as exhibits, were actually created by Marvel to demonstrate the potentially infringing characters a user could create in NCSoft’s game. These exhibits were stricken as “false and sham.”

Marvel further asserted direct, contributory and vicarious liability for trademark infringement, claiming that the name of a NCSoft’s character, “Statesman,” was likely to cause confusion with Marvel’s own “Captain America,” and that users of NCSoft’s game create character names that infringe upon Marvel’s trademarks. Marvel asserted similar trademark claims under California’s common law, as well as the tort of interference with prospective economic advantage, claiming that NCSoft knew or should have known that their copyright and trademark infringement would interfere with Marvel’s economic relationships with third parties by misappropriating or diminishing the value of Marvel’s intellectual property rights in its characters.

On NCSoft’s motion to dismiss for failure to state a claim for all claims, the District Court of Central District of California denied the motion as to the copyright infringement claims, finding Marvel’s allegations to be sufficient in stating the claims. NCSoft’s motion to dismiss as to the trademark claims under the federal statute was granted because a finding of likelihood of confusion as to the names “Statesman” and “Captain America” would be unreasonable, and because Marvel did not allege that the game users were using the infringing names for commercial activities, as required for a federal trademark infringement action. However, Marvel’s trademark claims under California common law survived the motion to dismiss, as well as the interference tort claim.

Because a motion on the pleadings does not concern the merits of the claims themselves, it is difficult to gauge the seriousness of Marvel’s allegations, let alone speculate as to how the case might turn out. But suffice to say, it was enough to prompt the two sides to reach a settlement in December 2005. While the exact terms of the settlement remain undisclosed, the proliferation of costumed characters in “City of Heroes” reminiscent of Marvel characters suggests either Marvel graciously acquiesced to such conduct or, more likely, reached some sort of financially benefiting settlement.

(Thanks to Han Xu for his assistance with this case summary)