Hallmark sends its very best to appeal card-copying case
Next time you get misty-eyed picking a card for that special someone, just remember that greeting card companies are fighting tooth and nail for your sweet, sentimental dollar. Part of that battle finds Blue Mountain Arts, a mere pipsqueak of a greeting card company, attempting the hurculean task of teaching Hallmark Cards Inc., the industry leader, a lesson in court for allegedly copying its products.
Today, the tiny Boulder, Colo.-based card company will meet the greeting card giant from Kansas City, Mo., in a court hearing in Kansas City, Kan., and Hallmark cares enough to send its very best lawyers.
In November, Blue Mountain won the first round by gaining an injunction that barred Hallmark from selling 83 of its Personal Touch designs, because of their remarkable similarity to Blue Mountain's cards. Today's hearing before the 10th US Circuit Court of Appeals involves Hallmark's appeal of that preliminary injunction.
In that initial ruling, US District Judge Jim R. Carrigan decided evidence showed that ``Hallmark copied Blue Mountain's cards for the purpose of `cashing in' on Blue Mountain's already established reputation and goodwill.''
Susan Polis Shutz and her husband, Stephen, are Blue Mountain's founders and artistic source. She writes the poetry, he paints the card illustrations. Their suit alleges that Hallmark deliberately copied the ``look'' of Blue Mountain's highly successful cards and that the company is using illegal business practices to have Blue Mountain cards wiped off the racks of many stores.
``We found that the copying problem was just the tip of the iceberg,'' says Harry Melkonian, the Shutzes' lawyer. ``We discovered a pernicious scheme, of which the card copying was just one phase.''
A spokeswoman for Hallmark, Patty Moore, categorically denies that the company copied Blue Mountain's cards or that any policy exists to injure Blue Mountain's business. The financial incentives Hallmark offers store owners to display Hallmark cards, and its occasional buybacks of competing cards, are aimed at keeping stale cards off the shelves, she says, not squeezing other cards out.
``Quite simply, Hallmark is not trying to limit or pressure store owners in any way'' regarding the types of cards on display, Ms. Moore says. ``We feel the central issue is whether or not an artist [Shutz] is going to be allowed to monopolize a specific style.''
Indeed, the artistic-freedom issue apparently so concerned the Society of Illustrators, a New York group of professional artists, that the society recently felt impelled to file an amicus curiae brief with the 10th Circuit Court of Appeals. In law, the amicus, or ``friend of the court,'' brief is intended to clarify legal issues and to impartially aid the court in making its decisions.
Recently, however, it was discovered that the society's lofty concern about the case was perhaps somewhat less noble than it first appeared. Though the document initially seemed impartial enough, it neglected to mention that Hallmark recently contributed $200,000 to the society, and that Hallmark lawyers had drawn up virtually the entire argument.
``It is difficult to think of a more plainly bad-faith tactic than to file a supplemental brief under an assumed name and falsely disguised as an impartial friend of the court,'' Mr. Melkonian wrote in a move to have the ``sham'' brief stricken.
Hallmark's Moore says that while one of the members of the society is an employee of Hallmark, the society filed the brief ``on their own.'' The Blue Mountain complaint alleges the brief was ``written by Hallmark's lawyers'' and ``entirely at Hallmark's expense.'' Moore says a Hallmark attorney at a single meeting acted in an advisory capacity.
No matter which way the court decides Hallmark's appeal of the injunction, it is likely that Blue Mountain's $100 million lawsuit will continue. The question of the ``look'' of a product that falls under federal ``trade dress'' statutes which protect aspects of artistic endeavor from copying still won't be resolved by the hearing.
Hallmark dominates the greeting card industry with a 40 to 45 percent share of the $1.8 billion card market. American Greetings Corporation holds 30 to 35 percent, and Gibson Greeting Cards Inc. has 10 to 12 percent.
Even though Blue Mountain's share of the card industry is so small as to be declared ``insignificant,'' the issues at stake in the case are important, says E.Gray Glass III, an industry analyst with Prudential-Bache Securities.
If Blue Mountain won its case, it might spur numerous similar suits to be filed on behalf of other disgruntled artists. That is not good publicity for Hallmark, and Moore points out that ``reputation is important to us, because we've worked hard to earn the public's trust.''
The ethical issues intertwined in such a case are also of concern to those who try to draw distinctions between good, tough business strategies that are legal and ethical and those that, while legal, are unethical. For example, is it fair or ethical to produce products that seem to confuse or fool consumers?
``Protecting the `look' of a product is a hard case for both ethics and law,'' says Robert Fredericks, a professor with the Center for Business Ethics at Bentley College in Waltham, Mass.
``When you steal a person's watch you have something physical in your possession. But when you take something proprietary, they still have the product, but you have taken the fruits of their intellectual labor.''