IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
NANCY K. STOUFFER, : a Resident of Pennsylvania, : : Plaintiff, : : v. : : SCHOLASTIC, INC., : a New York Corporation, : : J.K. ROWLING, : a Resident of Scotland, : CIVIL ACTION NO. 00-CV-1201 : TIME WARNER ENTERTAINMENT : COMPANY, L.P., : JURY TRIAL DEMANDED a Delaware Limited Partnership, : : MATTEL, INC. : A Delaware Corporation, and : : HASBRO, INC. : A Rhode Island Corporation, : : Defendants. : :
VERIFIED COMPLAINT
Plaintiff, Nancy K. Stouffer ("Stouffer"), for her Complaint against Scholastic, Inc. ("Scholastic"), J.K. Rowling ("Rowling"), Time Warner Entertainment Company, L.P. ("Warner"), Mattel, Inc. ("Mattel"), and Hasbro, Inc. ("Hasbro") (Scholastic, Rowling, Warner, Mattel, and Hasbro are collectively "the defendants"), alleges the following:

NATURE OF THE ACTION

1. Stouffer brings this action under the Trademark Act of 1946, as amended, 15 U.S.C. § 1051 et seq., and under the laws of the Commonwealth of Pennsylvania, to enjoin the defendants' current and prospective infringement and dilution of her trademarks, unfair competition, false representations, false designation of origin, injury to her business reputation, tortious interference with her business relations, and for damages resulting from those actions.

THE PARTIES

2. Plaintiff Stouffer is an individual residing at 231 Reeser Road, Camp Hill, Pennsylvania. Stouffer created and wrote, among other intellectual properties, a number of children's books and book series, the most significant of which, for the purposes of this Complaint, is titled The Legend of RAH and the Muggles. The Legend of RAH and the MUGGLES is a tale of little people called "Muggles" who live in the land of Aura. The Muggles take care of orphan boys, Rah and Zyn, whose arrival at the shores of Aura magically transforms the Muggle world from a dark and polluted land ravaged by war, to a land filled again with sunlight and happiness. Certain Muggles form a group called Nevils. Other characters are known by the work they do, such as Keeper of the Gardens, Keeper of the Children, Keeper of the Food, and the like. Stouffer also created a screenplay and accompanying music and lyrics, as well as illustrations, based on The Legend of RAH and the MUGGLES. Stouffer has also marketed and licensed others to market a large number of properties under her trademarks MUGGLE and MUGGLES ("the MUGGLE marks"). Another of Stouffer's book series, titled Lilly, includes the characters Lilly and Larry Potter.

3. Upon information and belief, defendant Rowling is an individual residing in Edinburgh, Scotland, United Kingdom, and is a citizen of the United States. Further upon information and belief, Rowling is the author of three popular books, titled Harry Potter and the Sorcerer's Stone, Harry Potter and the Chamber of Secrets, and Harry Potter and the Prisoner of Akbazan (collectively "the Harry Potter books"). The Harry Potter books have been widely sold throughout the United States, including in the Eastern District of Pennsylvania (the "District"). Harry Potter is a boy wizard with magical powers who is orphaned as a young child in an event (during which his parents, Lily and James Potter, are killed) that frees the world of wizardry from the dark power of an evil overlord. Harry Potter is raised by non-magical relatives before being re-connected with the world of wizards at the age of 11. In the Harry Potter books, the magical witches and wizards refer to non-magical people as "muggles." Other characters in the Harry Potter books include Neville, who is a half-muggle, and Hagrid, Keeper of Keys.

4. Upon information and belief, defendant Scholastic is a New York corporation with its principal place of business at 555 Broadway, New York, New York. Upon information and belief, Scholastic is the publisher of the Harry Potter books and has promoted, distributed, and sold the Harry Potter books throughout the United States, including in the District. 5. Upon information and belief, defendant Warner is a Delaware limited partnership with a principal place of business at 75 Rockefeller Center, New York, New York. Upon information and belief, Warner is engaged in the business, among other things, of creating, producing, distributing, and marketing motion pictures (films) and goods related to those films, including merchandise related to such properties, in the United States, including in the District. Upon information and belief, Warner owns the film rights to two Harry Potter books and is the exclusive owner of various unspecified trademarks derived from the Harry Potter books in connection with the film and ancillary merchandising projects. Upon information and belief, Warner has promoted and will continue to promote, has distributed and will continue to distribute, and has sold and will continue to sell merchandise related to the Harry Potter books and forthcoming films. Further upon information and belief, Warner has licensed both Mattel and Hasbro to create, produce, distribute, and market merchandise related to the Harry Potter books and forthcoming films.

6. Upon information and belief, defendant Mattel is a Delaware corporation with a principal place of business at 333 Continental Boulevard, El Segundo, California. Upon information and belief, Mattel is engaged in the business, among other things, of creating, producing, distributing, and marketing children's toys, in the United States, including in the District. Upon information and belief, Mattel owns the rights to manufacture toys based on the Harry Potter books under license from Warner and plans to create, produce, distribute, and market dolls, action figures, games, puzzles, vehicles, and high-tech toys based on the Harry Potter books and forthcoming films.

7. Upon information and belief, defendant Hasbro is a Rhode Island corporation with a principal place of business at 1027 Newport Avenue, Pawtucket, Rhode Island. Upon information and belief, Hasbro is engaged in the business, among other things, of creating, producing, distributing, and marketing children's toys, in the United States, including in the District. Upon information and belief, Hasbro owns the rights to manufacture toys based on the Harry Potter books under license from Warner and plans to create, produce, distribute, and market trading cards, trading-card games, candy, and electronic toys based on the Harry Potter books and forthcoming films.

JURISDICTION AND VENUE

8. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1332(a)(1) through diversity of citizenship, as Stouffer is a resident of the Commonwealth of Pennsylvania and the five defendants are citizens of New York, Scotland, Delaware, and Rhode Island, respectively. The amount in controversy exceeds $75,000. Jurisdiction is also conferred on this Court by the provisions of 28 U.S.C. §§ 1331 and 1338 and 15 U.S.C. § 1121, in that this action arises under the trademark laws of the United States, and under the principles of supplemental jurisdiction stated in 28 U.S.C. § 1367.

9. This Court may exercise personal jurisdiction over the defendants pursuant to the Pennsylvania Long Arm Statute, 42 Pa. C.S. § 5322. Specifically, the defendants are subject to personal jurisdiction in the Commonwealth of Pennsylvania under Section 5322(a)(1) (transacting any business in the Commonwealth of Pennsylvania) and Section 5322(a)(4) (causing harm or tortious injury in Pennsylvania by any act or omission outside of Pennsylvania). Upon information and belief, this Court has personal jurisdiction over Rowling and Scholastic because, among other things, the Harry Potter books, authored by Rowling and published by Scholastic, are sold and promoted in the District, and personal jurisdiction over Warner, Mattel, and Hasbro because of widespread sales of all types of entertainment services and merchandise in the District and specific assertions of trademark rights in the term MUGGLE within the District.

10. Venue in this District is proper under 28 U.S.C. § 1391, in that the defendants conduct business here and either all or a substantial part of the events and transactions giving rise to the claims of this Complaint occurred within the Eastern District of Pennsylvania.

INTRODUCTION

11. Stouffer wrote The Legend of RAH and the MUGGLES in 1984 and, over the next several years, alone and under the labels Andé Publishing Company ("Andé") and Book Cook Incorporated ("BCI"), widely distributed and showcased various versions of the property to publishing and entertainment industry agents, some of whom are now employed by Scholastic. See Exhibit 1. Stouffer also promoted and sold copies of The Legend of RAH and the MUGGLES to the public, and developed, sold, and distributed promotional merchandise bearing the MUGGLE and MUGGLES marks in association with the book. Due to a loss of bank financing, Andé filed for bankruptcy in September 1987. Stouffer continued promoting her books and merchandise under the BCI label until, in late 1988, Andé's bankruptcy placed the legal title to Stouffer's copyrights in dispute just as major publishing and motion picture deals for The Legend of RAH and the MUGGLES and other Stouffer properties appeared imminent. It was not until June of 1991, after her legal actions were final, that Stouffer again had clear ownership of the copyrights. Despite these hardships Stouffer faced in bringing her books and related merchandise to a wide public audience, Stouffer has never abandoned or ever intended to abandon her trademarks; rather, she has continually asserted her rights in the MUGGLE and MUGGLES marks. Stouffer successfully opposed the registration of the mark MUGGLE by Steven Bochco Productions, Inc. in February of 1993. Between 1993 and 1997, Stouffer continued to make appearances at schools with various properties, including The Legend of RAH and the MUGGLES, and worked to update her properties and to market them. Beginning in mid-1997, Stouffer again republished The Legend of RAH and the MUGGLES through her husband's company, ALCD, and once again contacted publishers and promoted her books and related merchandise. Since that time, Stouffer has encountered the refusal of publishers to consider her works, because of the likelihood of confusion between her MUGGLE and MUGGLES characters and trademarks and the use and prospective use of the terms "Muggle" and "Muggles" in the Harry Potter books and by Warner, Mattel, and Hasbro in their related efforts to capitalize on those books with merchandising.

12. On information and belief, Scholastic published Harry Potter and the Sorcerer's Stone in September 1998 in the United States. On information and belief, this book was first published in June 1997 in the United Kingdom under the title Harry Potter and the Philosopher's Stone, and was edited for the U.S. market by Arthur A. Levine, an Editorial Director of Scholastic who purchased the U.S. rights to the book in 1998. On information and belief, the second and third titles of the Harry Potter books were published in the United States in July and October of 1999. The Harry Potter books sold in the United States bear the mark "Arthur A. Levine Books" in addition to the Scholastic label.

13. Between August 1999 and the present, Stouffer attempted to negotiate with three of the defendants regarding the infringement of her MUGGLE and MUGGLES marks, including a face-to-face meeting between Stouffer's representatives and representatives for at least three of the defendants to discuss the defendants' infringement of Stouffer's trademark rights. These negotiations were unproductive.

14. On November 22, 1999, Scholastic, Rowling, and Warner filed a Declaratory Judgment Action in the United States District Court for the Southern District of New York against Stouffer, requesting a judgment that the Harry Potter books do not violate Stouffer's trademark, copyright, or other rights. See Exhibit 2. On January 31, 1999, Stouffer served the three defendants (plaintiffs in the New York action) with a Motion to Dismiss the Declaratory Judgment action for lack of personal jurisdiction in New York.

PLAINTIFF'S COPYRIGHTS

15. Stouffer owns U.S. Copyright Registration No. TXu 162-524, issued June 7, 1984, for her work The Legend of RAH and the MUGGLES designated on the copyright application as "RAH." See Exhibits 1 and 3.

16. Stouffer owns U.S. Copyright Registration No. VAU 107 884, issued September 22, 1986, for her graphic illustration titled "MUGGLES" of the MUGGLES characters. See Exhibit 4.

17. Stouffer owns U.S. Copyright Registration No. PAU 1 801 207, issued June 5, 1987, for a musical arrangement titled "Muggle-Bye." See Exhibit 5.

18. Stouffer owns U.S. Copyright Registration No. TXU 321 289, issued April 29, 1988, for the work entitled "RAH the Movie," which is a screenplay based upon The Legend of RAH and the MUGGLES children's story and the MUGGLES characters. See Exhibits 6 and 18.

19. Stouffer also owns more than 40 other U.S. Copyright Registrations for stories, poetry, graphic illustrations, and soft sculpture not related to the MUGGLES characters. Such registrations include those for the Lilly series of books.

PLAINTIFF'S TRADEMARK RIGHTS

20. Stouffer filed trademark applications in the United States Patent and Trademark Office on February 22, 2000, for the mark MUGGLE in connection with decorative magnets in International Class 9; ornamental novelty buttons in International Class 26; and playthings, namely dolls; novelty toys, namely "worry stones" in International Class 28 and for the mark MUGGLES in connection with printed materials, namely a series of children's fiction books, storybooks, coloring books, activity books, and sticker books in International Class 16 and with pre-recorded audio-cassette tapes in International Class 9. As stated in the trademark applications, Stouffer began using her trademarks on all of these goods "at least as early as 1987." See Exhibits 7 and 8.

21. Stouffer originally derived the character name "Muggle" from her then-young son, Vance Stouffer, who called his mother's face a "muggie." Stouffer first used the marks MUGGLE and MUGGLES as singular and plural names for characters in her book titled, The Legend of RAH and the MUGGLES, which was introduced to the public at the American International Toy Fair in New York City in mid-February of 1984, and for which the U.S. Copyright Registration No. TXu 162-524 issued on June 7, 1984.

22. Between February 1984 and April 1986, Stouffer test marketed various properties, including The Legend of RAH and the MUGGLES properties, with school children and educators.

23. In the course of the development of her properties, Stouffer sent manuscripts and promotional copies of The Legend of RAH and the MUGGLES to a number of individuals and major companies in the publishing industry.

24. Stouffer displayed her properties, including The Legend of RAH and the MUGGLES featuring the MUGGLES characters, at the American International Toy Fair in New York City, on February 12-15, 1985. One or both of Charles W. Grimes, Esq. and Gregory J. Battersby, Esq., of Grimes & Battersby L.L.P., 3 Landmark Square, Suite 405, P.O. Box 1311, Stamford, Connecticut, reviewed Stouffer's works for possible representation on February 13, 1985 during the Toy Fair. At least Mr. Battersby later attended a press party promoting Stouffer's properties in 1986. Mr. Battersby visited Stouffer again in 1987 and received a full disclosure of Stouffer's properties in anticipation of prospective legal representation of Stouffer. On information and belief, Mr. Battersby now provides legal counsel for Scholastic and worked on the Scholastic license agreements for the Harry Potter books.

25. In April 1986, Stouffer, Donald R. Stehman, and Patricia Stehman together formed Andé and secured a $1.2 million line of credit from a bank to be used to pay the expenses related to the marketing of Stouffer's properties.

26. Between April 1986 and September 1987, Andé aggressively promoted the stories, including The Legend of RAH and the MUGGLES, and related licensing opportunities under the label THE BAKER'S DOZEN. See Exhibit 9. THE BAKER'S DOZEN denoted the manner in which the individual chapters of The Legend of RAH and the MUGGLES property and nine other Stouffer properties were marketed. Each of the ten properties was repackaged as a series of thirteen smaller books (for a total of 130 books) with accompanying coloring and activity books sold in twelve periodic installments, after which the thirteenth, concluding issue was provided free to buyers of the previous twelve books who sent in proof of purchase. The terms "RAH" and "MUGGLES" were clearly marked with the designation "TM" (or "trademark") on the cover of these books. The Lilly book series was also sold under THE BAKER'S DOZEN label.

27. In September 1986, Andé formed a relationship with Gerald J. Alpert of PVI Licensing Group, Ltd. ("PVI") of New York, New York, who in October 1986 became the sole licensing agent for Andé.

28. PVI sent samples of Stouffer's properties, including The Legend of RAH and the MUGGLES, to movie director Steven Spielberg later in 1986.

29. Andé representatives, including Mr. Alpert of PVI, attended the 1987 Nuremberg Toy Fair in Germany between February 5-8, 1987. These representatives met with European toy manufacturers and educators, discussing licensing of Stouffer's properties, including The Legend of RAH and the MUGGLES featuring the MUGGLES and other characters. Properties were given to many individuals and companies, such as BORG Fancy Goods Ltd. of Cheshire, England, who requested them at the Toy Fair.

30. Andé again displayed Stouffer's properties, including The Legend of RAH and the MUGGLES, at the American International Toy Fair in New York City, in February 1987. Ms. Arlene Chemenko and Ms. Deborah Forte of Scholastic visited Stouffer's Toy Fair Booth #430 on February 13, 1987, and Ms. Forte met personally with Stouffer on February 16, 1987. See Exhibit 10.

31. In February 1987, Stouffer and PVI met with producers from 20th Century Fox ("Fox") and Hanna-Barbera to discuss a live and animated movie production of The Legend of RAH and the MUGGLES.

32. By March 1987, Andé had secured a licensing agreement with Arjon Manufacturing Company to produce and market a line of kitchen and children's room Muggle( magnets and with Concept International to manufacture toy items under the MUGGLE and MUGGLES marks. In addition, the MUGGLE and MUGGLES marks were featured prominently on other promotional items manufactured, sold, and distributed to the general public and to interested parties in the publishing, toy, and licensing trades during 1986-87. Such items included buttons, pre-recorded audio-cassette tapes for the movie soundtrack, dolls, and "worry stones," all bearing one or both of the marks MUGGLE( and MUGGLES(. Other licensing concepts were proposed but never came to fruition, largely due to the bankruptcy of Andé. Among these concepts were children's character underwear bearing the MUGGLES mark, character sleepwear bearing the slogan "HAVE A MUGGLETM DAY," a MUGGLETM character hand-puppet, and character boys' shirts, pants, and shoes. Prototypes of some of these items were produced, however, for the purposes of soliciting wholesale sales to retailers. See Exhibit 11.

33. Through licensing agent PVI, Andé placed an advertisement in the March 1987 issue of Playthings with an illustration titled Muggle'sTM from RAHTM promoting Andé's proposed advertising campaign featuring $6,000,000 worth of print advertisements and $1,100,000 in scholarships and prizes awarded to consumers. Various other articles, advertisements, and press releases were published in about this same time period promoting Andé, Stouffer, and THE BAKER'S DOZEN in general. See Exhibit 12.

34. In April 1987, Stouffer met with Mr. Ronald Small of Fox to review movie story-boards and licensing potential for the MUGGLES characters.

35. In May of 1987, Andé received several million dollars worth of orders for books, including THE BAKER'S DOZEN properties, from Federated Department Stores; Kroger Food Stores; Superx Drug Corporation stores; and Big Bear, Inc. stores. See Exhibit 13. BCI continued to fill those orders after Andé's bankruptcy.

36. Andé and PVI attended and participated in the three-day Licensing '87 show June 3-5, 1987, at the Jacob K. Javits Convention Center, and placed 13 full-page advertisements in each of the three editions of the Licensing Today Show Daily, one page for each series of books in THE BAKERS DOZEN collection. The advertisement illustrating "Muggles from RAH" was featured twice, indicating the "flagship" value of the Muggles characters among Stouffer's properties. The June 1987 issue of Toy & Hobby World included the same "Muggles from RAH" advertisement. The cost of preparing and placing these advertisements was over $60,000. See Exhibit 14.

37. In July 1987, Andé arranged to sell and did later sell the Stouffer properties, including THE BAKER'S DOZEN properties, in Giant Food, Inc. supermarkets and Rite Aid Stores. See Exhibit 15.

38. In August 1987, a representative of Andé appeared on the Oprah Winfrey television show to discuss the Stouffer properties.

39. In September 1987, Andé lost bank financing and filed for bankruptcy.

40. After the demise of Andé, Stouffer continued to promote, sell, and license her properties on her own, under the name BCI. Specifically, for example, during the Summer of 1988, Mr. Robert Jackmon, Executive Vice President of Coleco, requested and received the Stouffer properties to evaluate potential licensing. Mr. Lester Borden of Columbia Pictures requested and received Stouffer's properties to evaluate them for potential use as a merchandising vehicle for toy action figures. Maryellen Shea, Senior Buyer of Children's Books at Walden Book Co., Inc. met and corresponded several times with Stouffer regarding interest in the Stouffer properties. Warner Publisher Services, Inc., of New York, New York, also received and evaluated the Stouffer properties. In September 1988, Stouffer arranged to sell and did later sell the Stouffer properties, including THE BAKER'S DOZEN properties, in Acme supermarkets. See Exhibit 16.

41. In October of 1988, Stouffer was successful in attracting the interest of Warner Publisher Services, Inc. Mr. Robert Matthiessen of Warner Publisher Services provided four different distribution contracts (licenses) to Stouffer under which his company would distribute THE BAKER'S DOZEN collections, including The Legend of RAH and the MUGGLES. See Exhibit 17. On information and belief, Mr. Levine was associated with Warner and had access to the Stouffer properties.

42. In 1988, Stouffer completed the screenplay for "RAH the Movie," for which Copyright Registration No. TXU 321 289 was issued on April 29, 1988. See Exhibit 18.

43. Stouffer was unable to accept the publishing contract offered by Warner Publisher Services or to proceed further with licensing the movie rights, because the Andé bankruptcy had placed legal title to Stouffer's copyrights in dispute. This dispute was not resolved until June 3, 1991, when the United States Bankruptcy Court for the Middle District of Pennsylvania declared Stouffer the sole owner of her copyrights. See Exhibit 19.

44. During the 1991-1992 time period, Mr. Levine showed an interest in Stouffer's properties several times. On information and belief, Leslie M. Levine, Mr. Levine's relative, was and may now be Director of Entertainment & Licensing for Mattel (responsible for management of licensing of Mattel-branded products).

45. On November 5, 1991, Stouffer, through attorney Gregory Lyons of the law office of Robert E. Myers of New Cumberland, Pennsylvania, sent a letter to Walter Swanson, Esq. of Fox concerning potential infringement of Stouffer's MUGGLES mark by Fox. See Exhibit 20. On information and belief, Fox had licensed from Steven Bochco Productions, Inc. rights to use the mark "MUGGLE & design" (a mouse cartoon character). Fox ceased its potential infringement.

46. Steven Bochco Productions, Inc. filed U.S. Trademark Application Serial Number 74/214601 on October 22, 1991. The applicant sought to register the mark "MUGGLE & design" (a mouse cartoon character) in connection with "Entertainment services in the nature of an animated television series." The application was published in the U.S. Patent and Trademark Office Trademark Official Gazette of June 23, 1992, and was immediately opposed by Stouffer based on Stouffer's earlier trademark rights in the marks MUGGLE and MUGGLES. Judgment was entered for Stouffer and against Steven Bochco Productions, Inc. by the Trademark Trial and Appeal Board of the United States Patent and Trademark Office in February 1993. See Exhibit 21.

47. Because the market was flooded with children's story properties, Stouffer was advised by her agent, Mr. Kenneth Curtis, to wait for the right time to re-introduce the Stouffer properties into the market. Stouffer continued to make visits to schools to read her books and to promote her properties.

48. Between 1986 and 1995, Stouffer made over two hundred intrastate and interstate appearances to promote, autograph, and read her properties, including The Legend of RAH and the Muggle's and THE BAKER'S DOZEN properties. Such appearances included many visits to schools in the Maryland, Pennsylvania, and New York area. Stouffer received hundreds of letters of appreciation from school children during that time period. See Exhibit 22.

49. On July 14, 1997, after having decided several months previously that the time was right to re-introduce her properties, Stouffer republished promotional copies of The Legend of RAH and the MUGGLES and sent a package including a manuscript, coloring and activity graphics, and color illustrations, to Hugh Crocker, a retired senior consultant for Warner Publishing, for his review and possible assistance in supporting re-publication of the properties. See Exhibit 23.

50. Mr. Curtis contacted Stouffer in 1998, advising that American Educational Publishers/Landoll would like Stouffer to re-package her properties for consideration for renewed publication. Stouffer re-packaged her properties according to Landoll's instructions and submitted them to Landoll for review.

51. In 1999, Stouffer established an Internet site on the World Wide Web, under the name "Real MugglesTM," further promoting her properties, including the MUGGLES characters. See Exhibit 24.

52. Stouffer has continued to police her rights in the marks MUGGLE and MUGGLES, having filed multiple cancellation proceedings before the Trademark Trial and Appeal Board of the U.S. Patent and Trademark Office to challenge use and registration of those marks by third parties. Such proceedings are on-going.

53. Throughout 1999 and to date, Stouffer has encountered the continued refusal of publishers, including Landoll, to consider her works because of the perceived likelihood of confusion and, in fact, confusion between her MUGGLES characters and the use of the term "Muggles" in the Harry Potter books.

54. On August 31, 1999, Stouffer contacted the office of Scholastic and followed up with a letter on September 8, 1999, relating her belief that the Harry Potter books infringed her copyright and trademark rights. This was later followed by a meeting in New York between representatives for Stouffer and Scholastic. Another letter was sent by Kevin R. Casey, Esq., on behalf of Stouffer, to Scholastic further stating Stouffer's position that the Harry Potter books and related merchandise now infringe and would continue to infringe Stouffer's trademarks.

THE DEFENDANTS' USE OF STOUFFER'S MARKS

55. On information and belief, Rowling was in the United States in Baltimore, Maryland as part of a work-study exchange program in 1987-1988, providing potential access to Stouffer's properties in an area in which Stouffer's books were known and sold. Rowling also had potential access to Stouffer's properties during the Nuremberg Toy Fair in Germany between February 5-8, 1987.

56. On information and belief, Rowling has borrowed a number of character names and concepts from a number of different sources. See Exhibit 25.

57. Not only do the Harry Potter books appropriate verbatim Stouffer's MUGGLE and MUGGLES marks as names for human-like, non-magical characters, the Harry Potter books also feature key character names suspiciously similar to characters in Stouffer's books, specifically Stouffer's Larry Potter (as Harry Potter), Lilly Potter (as Lily Potter), Nevils (as Neville), and "Keeper of [Various Things]" (as Hagrid, Keeper of Keys). See Exhibit 1 (The Legend of RAH and the MUGGLES book containing Muggles, Nevils, and "Keeper of [Various Things]") and Exhibit 26 (Lilly book illustrating Larry and Lilly Potter).

58. The defendants admit that the Harry Potter books have "enormous merchandising value," and that the books contain "a multitude of" unspecified "trademarked elements." See Exhibit 2, Paragraph 13.

59. On information and belief, Rowling has assigned film rights to the books Harry Potter and the Sorcerer's Stone and Harry Potter and the Chamber of Secrets, together with ancillary merchandising rights and ownership of unspecified Harry Potter trademarks, to Warner.

60. Upon information and belief, Mattel and Hasbro own the rights to manufacture and market various merchandise based on the Harry Potter books under license from Warner and plan to create, produce, distribute, and market dolls, action figures, games, puzzles, vehicles, trading cards, trading-card games, candy, and electronic and high-tech toys based on the Harry Potter books and forthcoming films.

61. Upon information and belief, the defendants have incorporated the marks MUGGLE and MUGGLES and various other character names created by Stouffer in the body of their Internet web pages while promoting their goods and services.

62. Numerous media articles demonstrate that consumers now identify the terms MUGGLE and MUGGLES with the Harry Potter books and the defendants, not with Stouffer, and that the terms as defined in the Harry Potter books have already entered the popular culture, thereby eclipsing any prior distinctiveness associated with Stouffer's MUGGLE and MUGGLES characters. See Exhibit 27.

63. Despite the success and acclaim for the Harry Potter books among many consumers, others have denounced the books primarily because of the anti-Christian message perceived in the Harry Potter themes of witchcraft and wizardry and the mature themes of death and evil. See Exhibit 28.

64. On information and belief, Warner has already asserted trademark rights in the term MUGGLE against an individual who attempted to capitalize on the merchandizing capability inherent in the defendants' infringing use of MUGGLE in the Harry Potter books. See Exhibit 29.

COUNT ONE - FEDERAL TRADEMARK INFRINGEMENT

65. Paragraphs 1 through 64 of this Complaint are incorporated by reference in this Count.

66. This first claim is for trademark infringement under 15 U.S.C. § 1125(a).

67. Stouffer's long and widespread use of the marks MUGGLE and MUGGLES on and in connection with her various properties, including extensive advertising, has assured that her marks have acquired recognition in the minds of consumers and are associated with Stouffer.

68. Therefore, the marks MUGGLE and MUGGLES serve to identify the origin of products marketed, sold, and distributed by Stouffer and represent substantial goodwill in connection with the identity and quality of Stouffer's products.

69. The defendants' unauthorized use and prospective use in interstate commerce of designations that are either the same as or deceptively similar to Stouffer's trademarks MUGGLE and MUGGLES, on products that are substantially the same as or similar to Stouffer's products, have caused and are likely to continue to cause confusion, mistake, and deception as to the source of origin of goods and services to which the designations are applied.

70. Stouffer and the defendants are both advertising in the mass media. The product lines of both Stouffer and the defendants are sold in the same marketing channels.

71. Both the defendants and Stouffer cater to the same customer groups.

72. Stouffer has received communications from consumers who have seen the defendants' use of the marks MUGGLE and MUGGLES and who mistakenly believed that Stouffer and the defendants were somehow connected.

73. The defendants' use and prospective use of Stouffer's marks in connection with marketing and promotion of goods and services infringes and will infringe the trademark rights of Stouffer and is causing and will cause immediate and irreparable injury to Stouffer and damages in an amount not yet determined.

74. The defendants have misappropriated the MUGGLE and MUGGLES marks of an individual, Stouffer, who is the senior user of those marks. Four of the defendants, all of whom are junior users of those marks, are very large businesses and have so saturated the market with their high-profile uses of the marks that consumers commonly associate the MUGGLE and MUGGLES marks with the defendants. Consumers are now likely to believe that Stouffer's properties emanate from or are affiliated, connected, or associated with the defendants because of the defendants' larger visibility. Thus, Stouffer is and is likely to be considered by consumers as an infringer by using her own marks-a classic case of "reverse confusion."

75. This likelihood of confusion and injury to Stouffer caused by the defendants' violation of Stouffer's trademark rights prevents Stouffer from being able to successfully market her "Muggles" properties now and in the future, and devalues Stouffer's ability to promote her other properties in association with her "flagship" property.

76. The defendants and their agents had access to Stouffer's properties well before the defendants' public use of Stouffer's MUGGLE and MUGGLES marks, and were thus aware of Stouffer's rights in those marks, yet the defendants have intentionally and willfully infringed Stouffer's MUGGLE and MUGGLES marks.

77. Stouffer put the defendants on notice that Stouffer created and owned the marks MUGGLE and MUGGLES. Thus, the defendants have intentionally marketed their products and services using infringing designations.

78. The foregoing acts of the defendants constitute infringement of Stouffer's trademark rights for which Stouffer has no adequate remedy at law. Stouffer has suffered irreparable harm and damage as a result of the defendants' acts and has suffered and is suffering monetary damage in an amount not thus far determined. Moreover, that harm will continue unless restrained and enjoined by this Court. This on-going trademark infringement constitutes irreparable harm to Stouffer.

COUNT TWO - STATE TRADEMARK INFRINGEMENT

79. Paragraphs 1 through 78 of this Complaint are incorporated by reference in this Count.

80. This second claim is for trademark infringement under 54 Pa. Cons. Stat. § 1123(a).

81. Stouffer's marks are distinctive and have acquired secondary meaning as a result of advertising and exposure to the public. The defendants' use of the marks MUGGLE and MUGGLES is likely to cause confusion, to cause mistake, or to deceive the public with regard to Stouffer's marks used with her publications and other related properties.

82. The defendants' illegal acts have caused and, unless enjoined, will continue to cause Stouffer irreparable harm, damage, and injury.

83. Stouffer has no adequate remedy at law.

COUNT THREE - TRADEMARK DILUTION

84. Paragraphs 1 through 83 of this Complaint are incorporated by reference in this Count.

85. This third claim is for trademark dilution under 15 U.S.C. § 1125(c) and 54 Pa. Cons. Stat. § 1124.

86. Stouffer's marks have a distinctive quality in the marketplace which is being diluted by the conduct of the defendants.

87. Stouffer's MUGGLE and MUGGLES marks are famous due to, among other factors, the inherent and acquired distinctiveness of the marks, the duration of Stouffer's use and extent of advertising and publicity, the geographical extent of the trading area in which Stouffer used her mark, the identical channels of trade (children's books) of Stouffer's marks and the defendants' use of Stouffer's marks, and the degree of exposure of Stouffer's marks in the geographical trading area and in the publishing and entertainment industry.

88. The defendants have commercially used Stouffer's MUGGLE and MUGGLES marks in the Harry Potter books in commerce through the sales of the Harry Potter books. The defendants have also begun, and have announced intentions to begin and to continue, widespread use of the marks on and in connection with various properties marketed in relation to the Harry Potter books and the characters in those books.

89. The use of the designations MUGGLE and MUGGLES by the defendants in connection with their products and services have tended and will tend to dilute the distinctive quality of Stouffer's marks and further have diminished and will diminish the goodwill associated with those marks.

90. The defendants' dilution of Stouffer's trademarks has caused irreparable damage to Stouffer and the defendants' use of Stouffer's trademarks will continue to cause such damage unless enjoined by this Court.

91. Stouffer has no adequate remedy at law for the defendants' actions.

COUNT FOUR - FALSE REPRESENTATION

92. Paragraphs 1 through 91 of this Complaint are incorporated by reference in this Count.

93. This fourth claim is for false representation and unfair competition under 15 U.S.C. § 1125(a).

94. The defendants have unlawfully used Stouffer's marks, character names, and other creative properties in interstate commerce to sell and promote the defendants' goods and services for profit and benefit. The defendants' use of Stouffer's properties falsely represents or creates the impression in the consumer's mind that the defendants and Stouffer are associated, connected, or affiliated, or that Stouffer and the defendants sponsor or endorse the products and services of the other. Such false representation is likely to cause damage to Stouffer's business reputation, image, and goodwill.

95. The defendants have falsely asserted trademark rights in the marks MUGGLE and MUGGLES and asserted that Rowling created certain character names when they were created and developed by Stouffer. By these acts and associated acts, including (a) complete lack and denial of attribution and (b) misrepresentation of Rowling's creativity, the defendants have made false and misleading representations and laid false claim to the intellectual property of Stouffer--all to the harm of Stouffer.

96. The defendants' acts constitute unfair competition and false or misleading representations of fact.

97. The defendants have knowledge of the falsity and misleading nature of their representations.

98. The defendants' illegal acts have caused and, unless enjoined, will continue to cause Stouffer irreparable harm, damage, and injury for which Stouffer has no adequate remedy at law.

COUNT FIVE - COMMON LAW UNFAIR COMPETITION

99. Paragraphs 1 through 98 of this Complaint are incorporated by reference in this Count.

100. This fifth claim is for common law unfair competition under the laws of the Commonwealth of Pennsylvania.

101. Upon information and belief, the defendants have intentionally promoted their goods and services to the public through the use of Stouffer's intellectual property.

102. The defendants have infringed Stouffer's trademarks by using such marks.

103. These actions misappropriate and unlawfully exploit the intellectual property, including the distinguishing marks, of Stouffer and the valuable property and goodwill of Stouffer in her property and marks. Stouffer has made significant investment in promoting and developing her intellectual property and accruing goodwill. The defendants have misappropriated such goodwill by their actions.

104. Moreover, timing is critical. The defendants have introduced their products and services and promoted those products and services using Stouffer's intellectual property at a time when the market for children's products is most receptive. The defendants have marketed their products and services so as to compete unfairly at a critical time, thereby diverting business for themselves and causing immediate injury to Stouffer.

105. The defendants' illegal acts have caused and, unless enjoined, will continue to cause Stouffer irreparable harm, damage, and injury for which Stouffer has no adequate remedy at law.

COUNT SIX - FALSE DESIGNATION OF ORIGIN

106. Paragraphs 1 through 105 of this Complaint are incorporated by reference in this Count.

107. This sixth claim is for false designation of origin under 15 U.S.C. § 1125(a).

108. The defendants' use of designations the same as or deceptively similar to Stouffer's marks, including use in commerce of these designations in connection with their web sites, and the defendants' use of Stouffer's trademarks in promoting their various products and services falsely designate the origin of products and services as being in some way connected with or licensed, authorized, or approved by Stouffer.

109. The defendants have also misrepresented Rowling's creation of her characters and, thereby, have falsely associated the defendants with Stouffer.

110. The defendants' conduct has caused irreparable injury to Stouffer and damages in an amount not yet determined.

COUNT SEVEN - INJURY TO BUSINESS REPUTATION

111. Paragraphs 1 through 110 of this Complaint are incorporated by reference in this Count.

112. This seventh claim is for injury to business reputation under the laws of the Commonwealth of Pennsylvania and 15 U.S.C. § 1125(a).

113. The likelihood of trademark confusion and the likelihood of reverse confusion and widespread association of the MUGGLE and MUGGLES marks with the defendants causes harm to Stouffer's reputation not only with respect to the "Muggles" properties, but also with respect to all of Stouffer's properties, because consumers are likely to incorrectly assume that Stouffer is an infringer.

114. Furthermore, the association of the MUGGLE and MUGGLES marks and Stouffer's characters with the witchcraft, wizardry, and mature themes of death and evil found in the Harry Potter books injures the reputation of Stouffer and her intellectual properties among certain consumers.

115. Accordingly, Stouffer has been irreparably damaged in an amount not yet determined.

COUNT EIGHT -INTERFERENCE WITH BUSINESS RELATIONS

116. Paragraphs 1 through 115 of this Complaint are incorporated by reference in this Count.

117. This eighth claim is for tortious interference with prospective business relations under the laws of the Commonwealth of Pennsylvania.

118. Stouffer had and has reasonable expectation of economic advantage based on Stouffer's performed and prospective contracts to provide goods and services to third parties relating to her intellectual property.

119. By their actions, the defendants have knowingly and intentionally interfered with Stouffer's existing and prospective economic relations with existing and prospective purchasers of her goods and services, and have induced or persuaded such existing and prospective purchasers not to purchase such goods and services from Stouffer.

120. Upon information and belief, statements have been made by the defendants to third parties that were calculated to prevent such parties from doing business with Stouffer, or to interfere with Stouffer's relationships with such third parties.

121. The defendants' acts and statements have induced potential publishers not to republish Stouffer's books.

122. Stouffer has been damaged as a result of the defendants' interference with Stouffer's existing and prospective economic advantage and with Stouffer's existing and prospective contractual relations.

123 The conduct of the defendants was malicious, fraudulent, and oppressive under Pennsylvania law. Stouffer is entitled to actual, punitive, and exemplary damages according to proof.

PRAYER FOR RELIEF

In view of the foregoing, Stouffer asks that this Court grant relief as follows:

A. That the defendants and all others acting in consort with the defendants be preliminarily and permanently enjoined from use of Stouffer's marks or any confusingly similar designation, alone or in combination with other words, as an Internet domain name, trademark, service mark, trade name component, or otherwise to market, advertise, or identify the defendants or their goods and services;

B. That the defendants and others acting in consort with the defendants be preliminarily and permanently enjoined from engaging in acts diluting Stouffer's marks;

C. That the defendants and others acting in consort with the defendants be preliminarily and permanently enjoined from unfairly competing with Stouffer or engaging in any activity which has a tendency to dilute, tarnish, or otherwise irreparably harm and damage Stouffer's marks and the goodwill associated with those marks;

D. That the defendants and others acting in consort with the defendants be preliminarily and permanently enjoined from engaging in acts of tortious interference with business relations between Stouffer and her customers, clients, and those participating in the preparation of Stouffer publications and related merchandise;

E. That the defendants and others acting in consort with the defendants also be restrained and preliminarily enjoined from the same conduct referred to in the Paragraphs A, B, C, and D during the pendency of this litigation;

F. That the defendants be required to account to Stouffer or to pay over to Stouffer an amount equal to all gains, profits, and advantages derived by the defendants by reason of the infringement of Stouffer's marks and their acts of unfair competition;

G. That, should the Court find inadequate the gains, profits, and advantages stated in Paragraph F, the defendants be required to pay to Stouffer such sum as the Court shall find just according to the willful nature of the unlawful acts of the defendants;

H. That the amounts awarded be trebled pursuant to 15 U.S.C. § 1117;

I. That the defendants be required to pay over to Stouffer a sum equal to the damages for the injury to the goodwill associated with Stouffer's marks in the business associated with those marks and for injury to Stouffer's general business reputation;

J. That the defendants be required to pay over to Stouffer a sum equal to the damages suffered by Stouffer by reason of the defendants' tortious interference with Stouffer's business relations;

K. That Stouffer be awarded the cost of this action and her attorneys fees pursuant to 15 U.S.C. § 1117; and

L. That the Court order such other and further relief as may be appropriate.

Respectfully submitted, ____________________ Kevin R. Casey (58,083) Benjamin E. Leace (54,281) Rex A. Donnelly IV RATNER & PRESTIA Suite 301, One Westlakes Valley Forge, PA 19482 (610) 407-0700

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