What are merchandising rights?

By Kevin Nie, China IP,[Comprehensive Reports]

As a new challenge in modern legal studies, the topic of merchandising rights is evolving both in theory and practice.

There has not been a consensus on its definition, subject, object, nature, category or protection mode around the world so far. In China, merchandising rights are not yet accepted at the legislative level and for the time being other areas of law offer no comprehensive legal protection either.

A brief history of merchandising rights

Liu Shi jie, partner at Beijing Dacheng Law Firm, provided a brief introduction, “merchandising rights originated from the Roberson v. Rochester Folding Box Co. case in 1902 in the US. This case led to New York State’s enactment in 1903 naming it a tort or misdemeanor to use another’s name or likeness in advertisements or for business purposes without authorization. The Pavesich v. New England Life Ins. Co. case in 1905 was similar to the Roberson, except that the plaintiff in Pavesich was a celebrity, whom the court believed to be in the public domain, without privacy issues, and therefore was ineligible for protection.

Though merchandising rights were not protected as a kind of right by law at that time, it develops continuously in commercial activities. Disney Company had a lot of character merchandising activities in 1930s, characters like Mickey Mouse, Donald Duck and Snow White being all household names. It established a department specialized in the secondary commercial exploitation of those characters. By the 1950s, such celebrities as politicians and movie stars began to authorize use of their names and likeness for commercial purposes.

The judge first coined the term of “the right of publicity” in Haelan Laboratories, Inc. v. Topps Chewing Gum, Inc. of 1953, which was a landmark case in the formation and development of the right of publicity. The next year, Professor Melville B. Nimmer, a famous intellectual property expert in the US, published an article The Right of Publicity. From this time on, independent from the traditional privacy right, the right of publicity finally became a new type of intellectual property. In 1977, the US Supreme Court decided the Zacchini v. Scripps-Howard Broadcasting Co. case signaling nationwide recognition of the right of publicity.

At the same time, the commercial exploitation activities among publics were also developed greatly. Alongside the identification and development of the right of publicity of real figures, the commercialization process and the merchandising rights of the fictional characters were also greatly promoted. In 1978, the sales of commodities with Disney cartoon names and images reached 270 million US dollars; and the sales of commodities related to characters of Star Wars in 1979 reached 1 billion US dollars.

Japan introduced the concept of the right of publicity from the US in 1970s, and gave a definition in a court precedent that the right to prohibit others from using the celebrities’ names and likeness which have customer attraction power and economic value. The concept of merchandising rights was more commonly used in academia in Japan afterwards and set the “characters” as object, which included imagery characters in cartoons and animations, and fictional characters and real figures depicted in novels.

China borrowed the concept of merchandising rights from Japan in 1980s. Concepts like fictional characters, the right of publicity and merchandising rights are typical views in China.

Nature and types of merchandising rights

Since merchandising rights are new emerging rights in the theoretical study of laws, there is no unified conclusion on its legal nature. People hold different opinions on it. Some scholars consider it as a new type of personality rights, they believe that the merchandising rights belong to personality rights, and it is equally important to special personality rights and general personality rights in logic. Some people believe that merchandising rights are on the boundary of traditional personality rights and the intellectual property rights, but cannot be simply put into any of them, the special nature of the merchandising rights determines that i t is more appropriate to protect the rights by Anti-Unfair Competition Law. People who hold that merchandising rights are a new type of intellectual property rights believe that the characters and the images which is protected by the merchandising rights are closely related to intellectual activities, they have recognition function during commercial activities, therefore should belong to the intellectual property scope. There is another view that merchandising rights should be considered as intangible property, as Professor Wu Handong believes, it is similar to goodwill rights, credit rights and franchising, which have nonphysical character but cannot be classified into the intangible property of intellectual property.

Liu Shijie believed that merchandising rights can be divided into two categories in terms of objects: character merchandising rights and non-character merchandising rights.

Character merchandising rights can be defined as the right to secondary exploit of the essential personality features of a character in relation to various goods and/or services with a view to creating in prospective customers a desire to acquire those goods and/or to use those services. It can be further divided into the real persons’ character merchandising rights and the fictional character merchandising rights.

“Under the circumstance which the stage character is similar to the character of the actor himself, such character belongs to the real person’s character scope, in other words both the abstracted character and the fictional character originated from the real person’s character belongs to the real person’s character scope provided it can be recognized easily; while the rest characters belong to the scope of fictional character. Of course it is more complicated to excise the merchandising rights in practice, since problems like actor’s recognition and too many actors involved would arise.” Liu Shijie said.

Fictional character merchandising rights are the other type of character merchandising rights. The fictional character merchandising means the fictional character created in audiovisual works, artistic works or literary works. Legal entities and other organizations are civil subjects, which have no right to reputation according to the civil law, the rights formed due to external factors are more commonly called character merchandising rights of the entities and other organizations.

Another type of merchandising rights is virtual character merchandising right . The name of a place mentioned in literary works and allusions belongs to the scope of virtual character merchandising. Take “Shangri-La” as an example. People believed that Diqing county of Yunnan Province is the place described as Shangri-La by James Hilton in his novel Lost Horizon, and thereafter Diqing county changed its name into Shangri-La. Shangri-La hotels in cities reflect the excising of merchandising rights. Besides places’ names, slogans in advertisements, events’ names and numbers with specific meanings can also achieve merchandising rights.

Liu Shi jie believes that a person’s image, a character or an article in relation to various goods and/or services as well as its commercialization process is neither a simple replication of the image, the character, the article nor its essential personality features, it motivates the potential customers to buy the products or the services due to their affinity with the image, character or the article.

The commercial value of the fictional character

Attention economy is the social root of the emerging of merchandising. Since images are the essential elements of attention, attention economy is also referred as image economy. The market exploitation of fictional character is a prominent issue of the above economy.

According to the character merchandising report published by WIPO in 1994 , character merchandising can be defined as the adaptation or secondary exploitation, by the creator of a fictional character or by a real person or by one or several authorized third parties, of the essential personality features ( such as the name, image or appearance) of a character in relation to various goods and/or services with a view to creating in prospective customers a desire to acquire those goods and/or to use those services because of the customers’ affinity with that character.

Compared with real person characters, the commercialization of fictional characters is more common, because it is more likely to use the fictional characters of movies and entertainment programs in business.

The fictional characters which have great commercial value after commercialization need more protection. For a well-known cartoon work is no longer only a cultural product, it can be an entire industry chain comprising of audiovisual works, magazines, tolls, stationery, food packagings, exhibitions or even theme parks, and merchandising rights are the core factor of the chain.

(Translated by Emily Tan)

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