Trademarks: Phase 10 Goes to Court for Copyright Infringement

Inventor’s lawsuit sets up high-stakes fight

In the world of card games, Phase 10 is a whale. About 3 million copies of the rummy variation are sold each year, second only to Uno. The game has been the top seller for Plainfield-based Fundex Games Ltd. for years.

But now the 50-employee company has been dealt a wild card: The man who created Phase 10 in 1982, Michigan resident Kenneth Johnson, is suing to yank the firm’s rights to make and market the game.

Johnson accuses Fundex of copyright infringement, trademark dilution, fraud, conversion and theft in the suit, which was filed in December in U.S. District Court in Indianapolis. Johnson claims the privately held company has withheld royalties, granted sub-licenses without his consent, failed to include Johnson’s copyright notice on card games, and registered the Phase 10 mark for itself in the United Kingdom and France.

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The principals of Fundex struck a deal for the game in 1986, paying Johnson a flat $60,000 and assigning him royalties on all future sales. The parties amended the agreement in 1996 and 2003, but the gist remained the same: Fundex had the right to market and sell Phase 10 and the first right to market new products related to the game, in exchange for royalty payments.

The lawsuit says Johnson discovered in the summer of 2008 that Fundex wasn’t living up to its end of the deal. He spelled out his concerns in two letters to the company. And he notified Fundex of plans to review its records on Phase 10, as allowed in the contract, but when his auditors arrived a month later the company refused to provide the requested information.

So Johnson, who received a trademark for the game in 1994, told the company on Nov. 1 that he was canceling the deal. When Fundex continued to market and sell the game, he filed suit. The featured game on Fundex’s Web site at press time was a board game called “Phase 10 Twist.”

Notice that Johnson trademarked the game after he first entered into the contract. I found that the outstanding fact, an odd fact but which gives him the big stick in this case.