Nature of the Case
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Facts
The puzzles produced by each of the parties contain six pieces with a variety of notches cut into each of their four edges. By interlocking the notched edges, the puzzles can be assembled either in a flat form in a rectangular frame or into a three-dimensional hollow cube. Puzzlers can also piece together more challenging multi-puzzle combinations such as a larger cube or other three-dimensional figures including a beam of two or three cubes joined in a line, a cross of five cubes, and a star comprised of pieces from six cube puzzles. The HAPPY CUBE puzzles were designed by P. P refined his cube puzzle designs by selecting puzzle pieces that would not only permit assembly in flat and cube form, but which also were aesthetically pleasing. Six puzzle designs emerged, each of which contains pieces with edges that are five notch-widths to a side. By 1991, P had filed certificates of copyright registration for each of his six designs. The certificates indicate that the nature of authorship claimed consists of the shape of the pieces; the certificates also refer to earlier filings with the Copyright Office in 1987 and 1988 which also covered his puzzle designs. P introduced his puzzles for sale in a 1988 International Toy Fair held in New York City. P eventually marketed them under HAPPY CUBE. P's puzzles come in six colors and each is named after a well-known city. The puzzles are packaged for sale in the flat assembled form in clear plastic shrink-wrap with a cardboard insert. The HAPPY CUBE name is printed on the upper right-hand portion of the cardboard insert against a black background. Each letter of the word HAPPY is colored in one of the puzzle colors. The word 'CUBE' is colored blue, the color of the sixth puzzle variation. Underneath the logo is a color and model chart identifying all six puzzles by color and city name. Beneath the chart is a color photograph of two hands assembling a double-sized cube involving pieces from all six puzzles. The reverse side of the insert, which can only be read after removing the insert from the packaging, depicts the different 'missions' for the puzzler. These range from assembling a one-color cube to assembling the HAPPY CUBE star, involving thirty of the thirty-six pieces from the six different puzzles. P claims substantial sales and prospects but is unable to substantiate those claims. P exhibited the puzzles at toy and novelty shows across the country. P advertised the puzzles in various trade publications, such as the New York Toy Fair Directory. P claims he spent approximately $180,000 to advertise and promote the puzzles over the last three years, but later conceded during his deposition that these expenditures covered the entire line of HAPPY toy products. In 1990, P discovered that D was manufacturing and marketing identical puzzles called SNAFOOZ. D acknowledged that 'our puzzle apparently was copied from a sample obtained through your French distributor or licensee and, in its present form, cannot be marketed in the U.S. without your permission.' P and D negotiated but failed to reach an agreement. D developed its own version of the flat-to-cube puzzle series, utilizing pieces whose edges were six notch-widths in length rather than five. D claimed that it designed the new series entirely from scratch, utilizing the old SNAFOOZ Puzzles only to gain an understanding of the desired product and to calibrate the difficulty of his puzzle designs against the five notch-width designs of P's puzzles. D received approximately 300,000 SNAFOOZ puzzles from its manufacturer in Korea. D also conducted a direct mail campaign to potential customers and placed advertisements in the 1991 Toy Fair Directory and other trade publications. The simplest packaging consists of one puzzle assembled in flat form, wrapped in shrink wrap, and a cardboard wraparound insert. The cardboard insert features the word SNAFOOZ across the top in large, wind-swept, rainbow-colored lettering against a black background. Each letter is colored in at least two different rainbow hues. Beneath the SNAFOOZ logo is a black and white depiction of an assembled cube that protrudes into a cut-out window revealing the puzzle itself. The back of the insert, which can be seen by turning over the package, displays the various combinations the puzzler can attempt. D also markets SNAFOOZ puzzles in blister packs of one, three, and six puzzles. The blister packs feature the same SNAFOOZ logo printed on black cardboard backing. Inside the molded plastic blister, D includes one puzzle in the assembled cube form. They are offered in the same six colors as P's puzzles. P saw the puzzles at a trade show but made no cease and desist demands. In April 1991, P sued D. On June 5, 1991, P moved for a preliminary injunction. The court denied P's motion for a preliminary injunction based on copyright infringement, but granted it on the grounds that D's flat-form, shrink-wrapped SNAFOOZ packaging raises a serious question of trade dress infringement under section 43(a) of the Lanham Act and under the New York common law of unfair competition. Both parties appealed.
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