Frankfurt Kurnit Klein & Selz

July 7th, 2011

Harry Potter and the Uncommon Award

In a recent decision, a judge in New York assessed $50,000 in sanctions, plus attorneys' fees and costs, against an unknown author who claimed that her copyrights and trademarks had been violated by the publication of the Harry Potter books. Such an award is rarely made in U.S. intellectual property infringement cases.

Many of our clients in Europe, and particularly those in the United Kingdom, are surprised to learn that in the United States, the losing party in a litigation usually is not responsible for paying the attorneys' fees and costs of the winner. Even in cases where frivolous claims are rejected by a court, the successful defendant often is left with a small amount of satisfaction and a large legal bill. While there are certain types of cases where the prevailing party is entitled to recover its fees as a matter of statute, including copyright, civil rights and certain trademark and employment cases, American courts have been reluctant to award fees to the winner.

That is why there has been so much interest in a recent case in federal court in New York where Judge Allen G. Schwartz awarded Harry Potter author J.K. Rowling, publisher Scholastic Inc. and licensor Time Warner Entertainment Co., L.P. sanctions in the amount of $50,000 plus attorneys' fees for successfully defeating a claim of infringement by a Pennsylvania woman named Nancy Stouffer.

Here is how the story began: It was the fall of 1999 and the popularity of a fictional boy wizard named Harry Potter was reaching a fever pitch in the United States. Author J.K. Rowling's Harry Potter and the Chamber of Secrets, the second installment in the series, had just been published in the U.S. by Scholastic Inc., and was topping the bestseller's lists. Fans were eagerly awaiting Harry Potter and the Prisoner of Azkaban, the third installment in the series, which was just about to be released.

By that time, practically any school-age child could recite by heart the particulars of Harry Potter's story - how his wizard parents, James and Lily Potter, were killed by the evil wizard Voldemort shortly after Harry's birth; how Harry survived the attack unscathed except for a signature lightning bolt scar on his forehead; how Harry was raised by "Muggles" (which is what wizards call ordinary humans without magical powers) until his eleventh birthday, when he was invited to attend a wizard boarding school, the Hogwarts School of Witchcraft and Wizardry.

Enter Nancy Stouffer, an unknown author from rural Pennsylvania, with an amazing claim - that Rowling had copied key elements of her stories, including the names Muggles and Harry Potter - from Stouffer's own books. Not only did Stouffer contact Scholastic about her claims, she shopped her books around New York City, hoping to pique a publisher's interest by claiming that J.K. Rowling and Scholastic were infringing her rights. A few months later, Scholastic, Rowling and Time Warner Entertainment Co., L.P. (the licensor of Rowling's movie and merchandising rights) filed a declaratory judgment action, seeking an order that the Harry Potter books in no way infringed any of Stouffer's rights. Stouffer counterclaimed, asserting among other things violations of her copyrights and common law trademark rights.

A full-scale litigation ensued (in which Stouffer was represented by counsel), with a few things quickly becoming apparent to the Harry Potter lawyers. First, it became clear that Stouffer's works were self-published story, coloring and activity booklets which, at most, had some limited distribution in the Harrisburg, Pennsylvania area in the 1980s. More importantly, there was absolutely no overlap or possibility of confusion between Stouffer's characters and Rowling's. For instance, Stouffer's "Muggles," as depicted in her booklets, were tiny, post-apocalyptic, hairless creatures with bulbous eyes and potbellies, while Rowling's "Muggles" were ordinary humans. Stouffer's "Larry Potter" character, who appeared in a totally different booklet from the "Muggles," was a boy who was sad because he had to wear eyeglasses. "Larry" had brown or orange hair and glasses with non-circular lenses and speckled brown frames, while "Harry Potter" was a young orphan boy with black hair, a lightning bolt scar on his forehead, and distinctive eyeglasses with black frames and circular lenses. While Larry appeared in one 11-page booklet, Harry was the central figure of a series of books, each several hundred pages in length, each detailing his fabulous adventures.¹

Second, the Harry Potter lawyers began to question the authenticity of the evidence Stouffer had submitted to them and the Court as documentation of her creation and use of her characters. After examining Stouffer's evidence, and tracking down the printers, illustrators, salespeople and retail outlets that were allegedly involved in the creation and sale of her works, they found discrepancies that Stouffer could not explain, ultimately leading them to make a motion for sanctions.

For example, in support of her trademark infringement claims, Stouffer produced a copy of an advertisement that allegedly had appeared in Playthings, a U.S. toy industry trade magazine, in the 1980s. The advertisement, as submitted to the Court, contained the phrase "Muggles™ from RAH™" thus allegedly bolstering Stouffer's claim that she had used "Muggles" as a trademark before the publication of the Harry Potter books. The Harry Potter lawyers, however, visited the Playthings office, examined the actual advertisement as it ran, and discovered that it did not have the "Muggles™ from RAH™" legend on it. The Court concluded that even if Stouffer herself had not altered the advertisement, it was incumbent upon her to determine whether it was authentic before submitting it to the Court, and representing that it was an advertisement that actually ran. Scholastic, 221 F. Supp. 2d at 440.

The Harry Potter lawyers also determined, with the aid of a forensic document expert, that several booklets produced by Stouffer that bore the title "The Legend of Rah and the Muggles" had been altered after their original printing, such that their titles were changed from "RAH" to "The Legend of RAH and the Muggles" sometime in the 1990s. The Court found that by attaching the altered booklets as exhibits to her counterclaims, and representing that they were created, marketed and sold in the 1980s, Stouffer had committed a fraud on the Court.

The Harry Potter lawyers were also troubled by Stouffer's inability to produce a copy of her "Larry Potter" booklet she claimed to have published in the 1980s. She did produce a "printer's proof" as well as two color photocopies, but the forensic expert was able to determine that none of those documents could have been printed prior to 1993. Stouffer could not explain that discrepancy, and the Court found that even if the original booklet was created in the early 1990s, then its title page -- which contained a copyright date of 1988 -- was patently false, and Stouffer's knowing submission of photocopies containing such a misrepresentation constituted a fraud on the Court.²

The Court found, by clear and convincing evidence, that Stouffer "had perpetrated a fraud on the Court through her submission of fraudulent documents as well as through her untruthful testimony."  Scholastic, 221 F. Supp. 2d at 444. In assessing a monetary sanction against her for $50,000, it found that Stouffer had "engaged in a pattern of intentional bad faith conduct and failed to correct her fraudulent submissions, even when confronted with evidence undermining the validity of those submissions," and that her "calculated generation of fraudulent documents and testimony undoubtedly imposed burdens on [the Harry Potter parties] by increasing the legal fees and expenses incurred... in the investigation and defense of her counterclaims." Id.

In addition, the Court awarded the Harry Potter parties statutory attorneys' fees and costs incurred in defending Stouffer's trademark claims under the Lanham Trademark Act, finding that the case met the standard of being "an exceptional case" thus justifying the award of fees under that statute. The Court concluded that Stouffer had "asserted claims and defenses without any reasonable basis in fact or law and . . . attempted to support such claims and defenses with items of evidence that have been created or altered for purposes of this litigation." Id.

This particular Harry Potter story has several important lessons. First, lawyers defending against what appear to be spurious claims of copyright and trademark infringement are well advised to view the claimant's evidence skeptically. Moreover, tools are available, albeit at a cost, to analyze documents and other physical evidence. Amazing things can be learned from analysis of paper stock, glue, printing techniques, ink and other numerous elements of a physical object. Finally, even in the United States courts may be willing to hold litigants personally responsible for the claims they make and the evidence they submit in court, and to impose serious sanctions and attorneys' fees in the exceptional case.

1. On summary judgment, the Court ultimately concluded that "the similarities between Stouffer's books and the Harry Potter series are minimal and superficial, and even when considered altogether they could not give rise to a likelihood of confusion..." Scholastic Inc. v. Stouffer, 221 F. Supp. 2d 425 (S.D.N.Y. 2002).
2. These are but three examples of evidence submitted by Stouffer that the Court found was created or altered. For a complete discussion of the Court's findings see Scholastic, 221 F. Supp. 2d at 439-46 and Scholastic Inc. v. Stouffer, 2002 U.S. Dist. LEXIS 21294 (Nov. 1, 2002) (denying Stouffer's motion for reconsideration).

​Authors: Edward Rosenthal & Jessie Beeber