## Facts

- Paddington and Company, Limited owned copyrights in the Paddington Bear character and related works.
- Paddington granted Eden Toys, Inc. exclusive North American merchandising rights for Paddington products, later expanded by amendment (with specified exceptions such as books and audiovisual productions).
- Illustrator Ivor Wood created Paddington sketches for Eden and its sublicensees; Eden later obtained U.S. copyright registration for these sketches as derivative works.
- Eden’s sublicensee (C.R. Gibson Company) used the sketches to create and publish a gift-wrap design containing multiple Paddington drawings; Eden registered this design as a derivative work.
- Eden discovered Florelee Undergarment Co., Inc. selling a nightshirt bearing a bear image the district court found “identical in almost all respects” to one of Eden’s registered drawings.
- Eden sued for copyright infringement under the Copyright Act and false designation of origin under § 43(a) of the Lanham Act based partly on Florelee’s use of the legend “(C) Fred Original.”
- The district court granted summary judgment to Florelee on copyright (finding Eden lacked proprietorship) and granted summary judgment to Eden on the Lanham Act claim.
- Eden appealed the copyright dismissal; Florelee cross-appealed the Lanham Act ruling.

## Issues

1. Whether Eden, as a licensee and registrant of derivative works, had standing under 17 U.S.C. § 501(b) to sue for infringement of the registered Paddington-related drawings.
2. Whether summary judgment was proper given disputes about the scope and exclusivity of Eden’s licensed merchandising rights (including whether they covered the product category at issue).
3. Whether Eden should have been permitted to amend its complaint to rely on an additional copyright registration.
4. Whether Florelee’s labeling and marketing of a copied design as “(C) Fred Original” constituted false designation of origin under Lanham Act § 43(a).

## Decision

- Reversed the grant of summary judgment for Florelee on the copyright claim and remanded for further proceedings.
- Held that Eden stated a viable basis to sue based on its registered derivative works and that factual disputes existed regarding Eden’s exclusive rights and their scope.
- Held the district court should have allowed Eden to amend its complaint to rely on the later-identified registration, absent prejudice and in favor of merits-based adjudication.
- Affirmed summary judgment for Eden on the Lanham Act claim, finding Florelee’s use of “(C) Fred Original” on a design copied from Eden’s Paddington artwork supported false designation of origin.
- Noted that registration obtained after some infringing acts does not bar suit, though it may limit availability of statutory damages and attorneys’ fees for earlier infringement.

## Legal Principles

- A derivative work is protectable to the extent it contains original expression contributed by the derivative author, even when based on a preexisting copyrighted character or work.
- Under 17 U.S.C. § 501(b), the legal or beneficial owner of an exclusive right may sue for infringement; an exclusive license can confer standing.
- Where the scope of an exclusive licensing arrangement turns on intent, course of dealing, and later confirmatory writings, summary judgment is generally improper.
- Leave to amend pleadings should be freely granted when it enables litigation on the merits and does not prejudice the opposing party.
- Under Lanham Act § 43(a), marketing copied artwork with labeling that misrepresents the source of the design can constitute false designation of origin when likely to cause consumer confusion.

## Conclusion

The Second Circuit held that a merchandising licensee with registered derivative Paddington Bear drawings could pursue a copyright infringement claim where evidence supported copying and where disputes remained about the scope of its exclusive rights, while also affirming Lanham Act liability for falsely presenting a copied design as the defendant’s “original” work.


Eden Toys, Inc. v. Florelee Undergarment Co., 697 F.2d 27 (2d Cir. 1982)