Character merchandising has emerged as one of the most lucrative methods of popularizing different forms of entertainment, with an estimated $2.5 billion industry in India. At the heart of the principle of character merchandising lies the belief that the persona of every character is a merchantable property and, therefore, the person owning the character ought to have the right to control its commercial exploitation. In its present form, the principle of character merchandising applies in the context of a fictional humans such as James Bond as well as non-humans such as Donald Duck and Mickey Mouse. Real celebrities in a diverse array of fields such as sports and music also fall within the auspices of this concept. In addition to mapping the growth of the concept of character merchandising, this article seeks to grapple with the legal norms governing character merchandising in India. It succinctly analyzes prominent cases pertaining to this concept and briefly examines contemporary challenges and emerging trends in this field.

Origin of the concept of character merchandising

Interestingly, it is widely believed that the idea of character merchandising originated in South East Asia and specifically in India. For centuries, characters in prominent Indian mythological works such as the Ramayana have been represented in the form of puppets, toys and statues even though such representations are generally not made for a commercial purpose. The origin of character merchandising in an organized form can be traced back to the emergence of Walt Disney’s cartoon characters such as Mickey Mouse, Minnie Mouse and Donald Duck in the 1930s. During this period, one of Disney’s employees, Kay Kamen, set up a department focusing on the secondary commercial exploitation of these characters in the form of buttons, badges, posters, etc. Similarly, the secondary commercial exploitation of literary characters started with the creation and dissemination of soft toys based on books by Beatrix Potter and Lewis Carroll. The merchandising programs associated with movies like Star Wars, Rambo and James Bond that came into existence in the second half of the 20th century took the phenomenon of character merchandising to a whole new level.

Reasons for growth of character merchandising

The last 2 decades have witnessed unprecedented growth in the area of character merchandising which can be attributed to several factors. First, technological advancements have allowed people to access large amounts of television, film and radio content that were hitherto inaccessible to them. In addition, several channels specifically designed for the entertainment of kids have gained greater popularity in the last few years. As a result, kids can relate at a visceral level with pencils, mugs or T-shirts that are associated with Powerpuff Girls, Ben 10 and Chhota Bheem. Secondly, and more fundamentally, character merchandising is increasingly being seen as an effective tool for offsetting a major portion of the money that is spent on television and film production. This is the reason why a plethora of entertainment production companies are creating separate divisions within their organizations to exploit the potential latent in this industry. Third, character merchandising is increasingly being viewed as a tool for increasing the viewership for the entertainment content with which it is associated. Viewed through this lens, the target audience of character merchandising is not the customer who is an ardent follower of the character in question; it is the customer who is unaware of the said character and who may develop a keen interest in the character after seeing the merchandise. Finally, character merchandising is seen as a way of taking a show or movie to the next level. Viewers generally forget about a movie or show after watching it. However, if they purchase a product that is associated with the main character in the said movie or show, the product constantly reminds them of the character and helps the brand owning the character in surpassing all its competitors who choose to confine their work to the creation of entertainment content.

Types of character merchandising

Broadly speaking, character merchandising can take the following 3 forms:
A. Merchandising of fictional characters
This is the most common and lucrative form of character merchandising. It essentially entails the merchandising of the cardinal features of a fictional character’s personality – the character’s name, voice, image, etc. This can include the merchandising of a diverse array of characters. For example, the merchandising of characters like Pinocchio, Zorro, Tintin, Snoopy, etc would fall in this category. Similarly, characters that are primarily designed for the purpose of merchandising and not TV shows or movies such as the character of Fido Dido which was designed for popularizing Seven-Up would also come under this category. This would also include puppets or dolls created for a movie or show such as the Muppets.
B. Personality merchandising
This type of merchandising, which is sometimes referred to as reputation merchandising, is associated with the commercialization of the principal features of the characters of real persons such as their voice, image, etc. Companies that want to popularize their products often seek the help of famous personalities for associating these products with the traits of such personalities. This can act as a very effective marketing vehicle, especially if the product is relatively new in the market. The idea of personality merchandising is inextricably intertwined with the right of publicity – a right which guarantees to its holder the ability to control how his personality is commercialized.
C. Image merchandising
Image merchandising can be called a hybrid form of the merchandising of fictional characters. More specifically, it not only includes traits of the fictional character such as their attire, but also includes the most important aspect of the movie or show with which the character is associated. For example, a product showcasing the appearance and wand of Harry Potter or the knife scene in Crocodile Dundee would fall under the category of image merchandising.

Legal implications of character merchandising

The concept of character merchandising is riddled with legal complications in most jurisdictions. Courts across the globe are increasingly recognizing the importance of stipulating clear principles for regulating this burgeoning industry. Generally speaking, most countries have unequivocally recognized, either through the judicial or the legislative route, that the person or entity owning the rights in a character is exclusively entitled to commercially exploit that character in whatever manner it deems fit. As a result, any other entity which wishes to commercialize a character must, of necessity, acquire the approval of the entity owning the rights in the character either through a license or otherwise. Sec. 2 (1) of the Indian Trade Marks Act, 1999, sets out the things that can be registered as trademarks. It states, inter alia, that personal names, designs and the packaging of goods can be registered as trademarks. Indian courts have upheld the registration of character names as trademarks – the best example being the case of Sholay Media vs. Parag M Sanghavi, CS (OS) No. 1892 of 2006 in which the court prevented the defendant from using plaintiff’s trademarks such as the word “Sholay” and “Gabbar Singh”. The Indian Copyright Act provides an exclusive right to an individual to authorize the reproduction of a work into another form, such as the conversion of a 2-dimensional work into a 3-dimensional form. This provision can serve as the legal basis for authorizing the reproduction of merchandise like toys. Courts in India have dealt with the concept of character merchandising in several important cases. In the case of Star India Pvt Ltd vs. Leo Burnett (India) Pvt Ltd, 2003(2)Bom CR 665, the plaintiffs sought to prevent the defendants from using the characters whose merchandising rights were owned by the plaintiff in an advertisement. The court held that, in order to prevent a party from using a character whose rights are owned by the plaintiff, the plaintiff must prove that the characters in question have gained immense public recognition and an independent life which is distinct from the show or movie that they are associated with. Furthermore, the plaintiff must also show that the connection between the character and the plaintiff is so strong that any reference to the character would automatically remind the public of the plaintiff. In the instant case, one factor which heavily weighed against the plaintiff was that the plaintiffs had not engaged in character merchandising at the time of filing the lawsuit. As a result, the court held that the plaintiffs were unable to show that the characters had gained enough recognition in the public eye for the plaintiffs to be able to prevent the defendant from using those characters in other contexts. An interesting contention that was raised by the plaintiffs was that the defendant’s use of the characters greatly undermined the plaintiffs’ ability to use those characters for the purpose of merchandising in future. In answer to this question, the court held that the plaintiffs were unable to prove that the characters had become so famous as to be capable of being merchandised and, therefore, the plaintiffs were unable to show that there was any likelihood of any damage being caused to them because of what the defendants did. In the case of Chorion Rights Limited Vs. Ishan Apparel and Ors. (2010)ILR 5Delhi481, the plaintiff, who claimed to be the owner of the worldwide trademark and merchandising rights in a fictitious character named NODDY, sought to prevent the defendant from selling apparel under the trade name NODDY. While the court recognized the importance of upholding character merchandising rights, it held that the registration for the mark was granted to the defendant sometime in 1995 whereas the plaintiff’s claim on the mark was with effect from 1997. As a result, even though the plaintiff owned the merchandising rights in NODDY in most jurisdictions, the defendant was first past the post with regard to India. The court extensively analyzed the concept of personality merchandising in the case of D.M. Entertainment Pvt. Ltd. Vs. Baby Gift House and Ors CS(OS) 893/2002. In this case, the plaintiff – a company representing Daler Mehndi – sought to prevent the defendant from selling dolls that could, inter alia, sing portions of Mr. Mehndi’s songs. The court recognized that Mr. Mehndi’s persona was improperly used by the defendants in the dolls and that this misled consumers into believing that the dolls were endorsed by Mr. Mehndi. The court further stated that such commercial exploitation caused significant losses to the plaintiff and held the defendant liable for passing off. In a recent case of Disney Enterprises Inc. & Anr. Vs. Santosh Kumar & Anr. CS(OS) 3032/2011, The Delhi High Court held the defendant liable for selling products containing representations of characters such as Hannah Montana, Winnie the Pooh, etc whose merchandising rights were owned by the plaintiff. The court held that there is an intense degree of association between the plaintiffs and the aforementioned characters which is why any reference to these characters reminds the public exclusively of the plaintiffs.

Emerging trends and contemporary challenges

The licensing and merchandising industry is fundamentally transforming the relationship between TV and movie characters and viewers. The increasing popularity of this method of marketing is evidenced by the fact that the top 125 licensors in this industry have reportedly accounted for sales amounting to more than US $ 184 billion. Disney has widely been regarded as the most innovative and influential player in this industry with sales of US $ 28.6 billion in 2010. Even though the licensing and merchandising industry in India is still in a nascent stage, there has been significant progress in the last few years. The partnership between Disney and the KK Modi Group in 1993 for selling Disney-branded merchandise and the launch of Turner India’s consumer products division, Cartoon Network Enterprises, in 2001 have played a pivotal role in the growth of this industry. The emergence of big retail chains such as Pantaloons, Westside, Shoppers Stop, etc in India has paved the way for greater access to merchandised products. Estimates show that organized retail in India is expected to grow from 9 per cent of the total retail market in 2015 to a staggering 20 per cent by 2020. This growth is expected to mark a quantum leap in the merchandising industry in India. Sports stars are also increasingly engaging in the business of character merchandising with the best example being Harbhajan Singh. Merchandising featuring animated characters such as Chhota Bheem and Hanuman and superheroes such as Krrish and Ra.One have also become commonplace, but creators of these characters have still not been able to commercially exploit them to the fullest extent possible. Moreover, it is dismaying to note that authors of comics and other literary characters have not been able to make the most of what this industry has to offer. From a legal standpoint, now, as never before, there is a dire need to put in place a robust framework for regulating the sale of character merchandise. In a bid to buy the cheapest available merchandise, customers often fall prey to the deceptive tactics of those who sell counterfeit merchandise. As neither the Indian Copyright Act nor the Indian Trade Marks Act clearly delineates the norms governing character merchandising, it is an arduous task to bring the sellers of counterfeit merchandise to book.
In sum, there is a pressing need to streamline overlapping, and often conflicting, norms which inhibit the growth of this industry and to put in place clear guidelines that would promote the progress of this innovative form of marketing.