By Jordan Kobritz
When is a “forever” contract not forever? We may soon find out, thanks to a lawsuit involving one of the most popular and recognizable sports mascots of all time.
The Philadelphia Phillies are suing the design and merchandising firm that helped them create the costume of their iconic mascot, the Phillie Phanatic. According to a complaint filed in United States District Court for the Southern District of New York, in February of 1978 Bill Giles, who was the Executive Vice President of the Phillies, decided to develop a mascot for his team. Giles had a vision for the team mascot — “he would be green, fat, furry, big-nosed and instantly accessible to children.”
To help him develop a costume, Giles sought the assistance of Harrison and Erickson, Incorporated (H/E), a design and marketing company in New York City.
On March 17, 1978, the Phillies and H/E entered into an agreement whereby H/E would provide a design and construct a costume based on Giles’ specifications for $3,900, plus expenses. In exchange, the Phillies were granted the right to use the costume on TV, in commercials and personal appearances to promote the team.
The Phanatic, brought to life by Dave Raymond, an intern in the Phillies’ marketing department, debuted on April 25, 1978 and was an instant hit, thanks to his playful routines that poked fun at anyone in the ballpark.
In case you’re not familiar with the Phanatic, his biography describes him as standing 6-foot-6, boasting a 90-inch waistline and a slight case of body odor. He allegedly hails from the Galapagos Islands and his diet consists of cheesesteaks, soft pretzels, hoagies, scrapple and Tastykakes. His favorite movie is Rocky.
The Phanatic was so well received, the Phillies decided to develop Phanatic-related promotional items like key chains, pennants, t-shirts and a Phanatic doll to be given away to fans. In order to do that, they entered into a second agreement with H/E on July 15, 1978. The team was given exclusive rights to make reproductions of the costume on souvenir items and agreed to pay H/E $5,000 per year plus 7% of the greater of the manufacturing cost or retail selling price of the licensed items.
Less than a year later, H/E was back for more. In May 1979, they sued the Phillies over the extent to which H/E’s approval was needed on promotional and merchandising items. Apparently unbeknownst to the Phillies, H/E had obtained a copyright on the Phanatic, claiming in their application to the Copyright Office that the Phanatic was an “artistic sculpture,” rather than a “costume.” The distinction may have been relevant had the matter gone to trial. What H/E had created, with substantial assistance from the Phillies, was a costume; it wasn’t a true sculpture without someone inside it. Had H/E been fully transparent in their application, they may not have been able to copyright the costume.
The parties settled the litigation in November 1979 by renegotiating their agreement. The Phillies received exclusive rights to use the Phanatic costume and make certain reproductions. In return, they agreed to pay H/E a lump sum of $115,000 plus $5,000 annually, increasing by $1,000 per year.
Thanks to the growing popularity of the Phanatic, H/E’s desire for a piece of his ever-growing merchandise sales remained unsatiated. In 1984, the parties renegotiated yet again. This time, the Phillies, no doubt fed up with H/E’s greed, insisted that H/E convey its rights to the Phanatic “forever.” In exchange for the sum of $215,000, which the Phillies paid in three installments, H/E agreed to convey whatever rights it had in the “artistic sculpture known as the ‘Phillie Phanatic.’”
The exact language reads: “H/E hereby sells, assigns, and transfers to the PHILLIES, its successors and assigns, all of HE’s right, title and interest in and to (a) the copyright in the artistic sculpture (Phanatic) and all renewals and extensions thereof and (b) any and all causes of action heretofore accrued in HE’s favor for infringement of said copyright.”
The Phillies allege that had they understood the 1984 agreement would not be an assignment “forever,” they would have paid less than $215,000.
H/E has a different interpretation of the 1984 agreement. Last year the design firm sent the Phillies a termination letter under the provisions of the U.S. Copyright Law that allows an author to reclaim rights after 35 years. If H/E can terminate the 1984 agreement, the Phillies could lose exclusive control of the mascot after June 15, 2020, making him a free agent and licensable to another sports team.
The Phillies claim that due to their contribution to the origination of the Phanatic and their significant investment in the mascot over the past four decades — the team holds eight trademarks related to the Phanatic — his name and image have come to be strongly associated with the team’s identity.
Like most disputes and lawsuits, this one is about money, gobs of it. Unlike the three prior renegotiations with H/E, the Phillies are unwilling — at least for the present – to accede to the firm’s demands. Unlike the prior renegotiations, there’s a lot more at stake, for both parties. If the Phillies win, H/E stands to lose potentially millions of dollars. If H/E is successful, the Phillies could lose their iconic mascot, or as the team claims, their very identity.
The lawsuit involves authorship and intellectual property along with issues related to contract law. Regardless of the outcome, there are broad implications for the entertainment industry, which means lawyers who specialize in that realm are paying attention as a matter of professional interest. Phillies fans, on the other hand, are on edge hoping their furry mascot doesn’t become a free agent, which would allow him to root for another team.
If H/E can prove authorship of valid copyrighted material, the court may decide the firm’s termination of a license is effective notwithstanding a “forever” agreement to the contrary.
Jordan Kobritz is a non-practicing attorney and CPA, former Minor League Baseball team owner and current investor in MiLB teams. He is a Professor in the Sport Management Department at SUNY Cortland.
