Member Article

This is a story of the age, a story of a character that became a global sensation thanks to the internet. The story is also about the creator of that character, who had the foresight to understand that the character might well become a valuable marketing property and took steps to legally protect the character (its name and image) through IP law, particularly trade mark and copyright law, thus creating “the IP rights” and making the creator “the IP owner”.

The character in this story is Grumpy Cat. The genesis of Grumpy Cat is about as simple as it gets. Apparently, the brother of the owner of a particularly miserable looking cat took a photo of the animal and posted it on the internet, where it went viral. A gap was spotted. Trade mark and copyright registrations were secured (although in most countries, copyright is a right that exists without any formality, in some countries like the USA, copyright can be registered). Licence deals were signed and revenue streams were created, in much the same way as celebrities do with their names, images, catchphrases, signatures and the like. Licensing is an exercise that involves drawing up detailed licence agreements that deal with various aspects of a licence, including the territories in which the licensee can use the rights, the exact manner in which the rights must be used, the actual products or services that the licence relates to, the fact that all use by the licensee will, for legal purposes, be regarded as use by the owner of the rights, and the fact that it may be necessary to record the licence with the IP authorities.

(Photo credit: Gage Skidmore)

Grumpy Cat became a brand in some pretty predictable product areas such as pens, mugs and calendars. But there were also some interesting projects, such as a Grumpy Cat Guide to Life column and a YouTube channel.

The IP owner also licensed a Los Angeles-based company called Grenade Beverage to use the Grumpy Cat IP rights for an iced coffee product that would go under the name Grumpy Cat Grumppuccino. But Grenade Beverage had bigger plans. When it announced that it would be launching a line of Grumpy Cat ground coffee, the IP owner warned Grenade Beverage that there would be consequences. But Grenade Beverage went ahead with its Grumpy Cat roasted coffee, advertising the product on social media and through the website www.drinkgrumpycat.com. The IP owner sued in a California court. The IP owner had other complaints too, including claims that Grenade Beverage had sold Grumppuccino T-shirts, and had failed to produce certain royalty reports and make certain royalty payments. The IP owner was successful, with the court awarding damages of USD710 000 for trade mark and copyright infringement. 

There are lessons aplenty here. Lessons about doing things correctly. Lessons for entrepreneurs about the vital importance of using IP law (and particularly trade mark law) to secure legal protection through registrations, and thereby creating revenue streams. It’s worth bearing in mind that when doing business in a number of product categories, so-called multi-class or even multiple trade mark registrations may be needed. It’s also worth bearing in mind that when contemplating doing business in a number of countries, multiple registrations may also be required, although regional and the international registration systems may come into play.

There are lessons for trade mark owners. When giving a third party rights to use a trade mark, there needs to be a solid and clear agreement in place, one that makes it very clear just what each parties’ rights and obligations are.

There are also lessons for licensees. If the terms of the licence agreement say that the IP rights are limited to very specific goods or services, that is exactly where the rights start and end. Any use on other goods or services is trade mark infringement, something that can be met with court proceedings that can lead to an interdict (injunction) and damages. A dispute of this nature will almost certainly also lead to a termination of the licence agreement.

If you don’t want to be grumpy the solution is very simple: get advice.