2015 Malcolm Royal Prize Winner – Whose monopoly is it?

Robert Cross

The trade mark MONOPOLY® identifies one of the world’s favourite board games. There are several versions, including “The Junior”, “Classic”, “Empire”, “Pokémon”, “My Monopoly” and “Electronic Banking Monopoly”. A history provided by the manufacturer, Hasbro Inc., records that a braille edition is available and that in 1978, a chocolate version was offered, evidently to reduce the playing time for games between chocoholics.

The game of MONOPOLY highlights different types of “monopoly”, including the game itself, and the common part of the names of all versions of the game. There are registered trade marks including, the word “monopoly”. Rights Hasbro acquired by registration of the marks in Australia include a monopoly that confers (i) the exclusive right to use, or authorise use of, the trade mark MONOPOLY®, and (ii) the right to obtain relief if any of the trade marks is infringed. Of course similar monopoly rights exist in other countries.

As something of a shock to one raised on a game in which the smart thing was to acquire the properties of Park Lane, Mayfair and Pall Mall, MONOPOLY® wasn’t invented in the UK. The game with these upmarket addresses was a minor, regional part of a larger marketing exercise. The game sold under the trade mark MONOPOLY® was the subject of U.S. patent 2,026,082 granted in 1935 to Charles Darrow of Philadelphia, PA, an unemployed radiator repairman and part-time dog walker. The patent was assigned to Parker Brothers of Salem, MA and provided the start of monopoly control. Through a cavalcade of well-known names the game, along with Parker Brothers, was acquired by General Mills in 1968; then by Kenner in 1985 through a merger forming Kenner Parker Toys, acquisition by Tonka in 1987, and then acquisition by Hasbro in 1991. The Hasbro website doesn’t show the game as having a history earlier than 1935, although this has been strongly disputed. Indeed in litigation between Anti-Monopoly (AMI) and General Mills Fun Group (GMFG), commenced in 1974, the United States Court of Appeals, 9th Circuit affirmed in a decision of August 1982, that the game was developed between 1904 and 1934. That court also records that the game came to Atlantic City, NJ in about 1931, when street names of that city were adopted, after which the game was taught to Darrow who falsely claimed inventorship and sold the game to Parker Brothers.

Robert Barton, President of Parker Brothers, negotiated the acquisition with Darrow in 1935, but later testified that he didn’t believe Darrow’s claim to ownership. This is plausible, as the 9th Circuit records the grant of US patents for precursor games to Elizabeth Magie Phillips of Washington in 1904 and 1924, and purchase of Phillips’ games by Parker Brothers in about 1934. The Court also found that in 1957, the President of Parker Brothers recorded in a letter that:

“So far as we know, The Landlord’s Game, invented by Mrs. Elizabeth Magie Phillips of Washington, D.C., was the basic game for both FINANCE and MONOPOLY……and we purchased her patent…it does not make very much difference to us who invented either one of the games…”.

Lizzie Magie was granted U.S. patent 748,626 in 1904. According to Harper’s Magazine Blog of October 2012, the patented game “looked remarkably similar to what we know today as Monopoly”. Among features in common, the Magie game had Chance cards quoting notables of the time, including Andrew Carnegie with:

“The greatest astonishment of my life was the discovery that the man who does the work is not the man who gets rich.”

Given that Andrew set up a trust to monopolise the steel industry, it is unclear whether the irony is in the attribution or his expression of astonishment. He was, after all, one of a group that played real world monopoly to an extent that US Congress enacted the US anti-monopoly laws. It also is said that manufacture of the Magie game commenced in 1910, based on the economic principles of Georgism to teach how rents enrich property owners and impoverish tenants. Formulated by Henry George, those principles held that economic value derived from natural resources and natural opportunities should belong equally to all in a community, with people owning that which they create themselves. Lizzie Magie married and, as Elizabeth Magie Phillips, secured U.S. patent 1,509,312 in 1924 for a sufficiently different version of her original game, designated as “The Landlord’s Game”.

The picture is further complicated by a similar game was invented by Paul Sherk of Wyomissing, PA.. The name Monopoly evidently was used for Sherk’s game to denote the “evils” inherent in the anti-competitive practices of the game. Sherk’s game evidently was used for two decades before Darrow’s “invention” and also was sold to Parker Brothers. Darrow’s board is described as a direct copy of Sherk’s 1916 board.

Thus, Parker Brothers purchased essentially the same game three times and only Darrow, with the weakest claim to inventorship, recorded as having benefited financially. The Harper’s Magazine Blog records that for close to 30 years after Phillips’ first game was fashioned, “The Landlord’s Game” was played under the names “Monopoly”, “Finance” and “Auction”, and was popular among economics professors, university students and Quaker communities in Atlantic City and Philadelphia,. Given this, actual inventorship and expiry of Phillips’ first patent in 1921, the purchase from Darrow clearly wasn’t based on due diligence, but recognition of a marketing opportunity. The Blog also records that Darrow became wealthy and his game likely saved Parker Brothers from bankruptcy.

Phillips’ second patent expired by 1941, and Darrow’s patent expired in 1952. The ongoing protection for Parker Brothers and their successors reduced to trade mark rights, get-up in their products and copyright subsisting in artwork of game boards and packaging. For a substantial period, others have been able to market similar games and some of numerous new products have achieved success. However, none remotely rivalled the dominance of the MONOPOLY® game. That position is attributable to the earlier monopoly position established by patent protection, a prominent market presence and a reputation based on strong trade mark rights. However, it was a trade mark conflict that resulted in the Court decision between AMI and GMFG, a battle captured in the book “The Billion Dollar Monopoly® Swindle” by Ralph Anspach, published in 1998, with a third edition entitled “MONOPOLYGATE” published in 2007. It was Anspach who initiated the litigation in 1974 between hid company AMI and GMFG.

A retired Professor of Economics from San Francisco State University, Ralph Anspach invented a game that, rather than favouring what he perceived as rampant capitalism, would generate a more socially acceptable perspective among players. Anspach’s game, ANTI-MONOPOLY, was released by AMI in 1973, by which time Darrow was rich and famous, an embodiment of the American Dream. The litigation continued through to, and beyond, the 1982 decision, to a Supreme Court decision in 1984, and ultimately, a settlement between the parties. The book describes, from a trade mark perspective, a long roller-coaster ride for the trade mark MONOPOLY®. The “David and Goliath” story of proceedings perhaps explains the no-doubt ironic “®” in the first
edition title of Anspach’s book, and it provided ample justification for the book’s title when re-published.

Anspach claims he invented the ANTI-MONOPOLY game as an antidote to what irked him about Monopoly, and to introduce some humour. His game was marketed by AMI with some initial success, selling 400,000 copies in the U.S. and other countries the first two years. An initial version of the game was protected by U.S. patent 3,961,795 granted in 1976, while U.S. patent 4,136,881 granted in 1979 covered a later version. However Anspach’s fruitful start was interrupted by pressures exerted by GMFG, then the manufacturer of the MONOPOLY® game. Rumours of possible court action caused cancellation of orders for ANTI-MONOPOLY. After attempts to reach a settlement, GMFG’ intention to eliminate competition became clear. Anticipating imminent litigation, AMI initiated an antitrust case in the U.S. District Court in San Francisco, California, to gain the choice of venue and enable a jury trial. This was an unfortunate strategy, at least in terms of the decision handed down by that Court. The 7th amendment to the U.S. Constitution provides that:

“In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any court of the United States, than according to the rules of the common law”.

However, beginning in about 1975, U.S. courts decided juries weren’t to be trusted with antitrust cases, and AMI was denied a trial by jury. An initial trial judge ordered trial by jury, but he withdrew, evidently due to a conflict of interest. His replacement declared that order void. Also, rather than AMI having use of ANTI-MONOPOLY held not to infringe the trade mark MONOPOLY®, or having the registration of MONOPOLY® held to be invalid, the converse was decided on each matter. Also, AMI was ordered to submit all offending material for destruction. As a warning to others, GMFG arranged for 40,000 of AMI’s ANTI-MONOPOLY games to be publicly buried in a Minnesota dump.

Prior to adopting the name ANTI-MONOPOLY, Anspach received advice that use of that name, as a trade mark, wouldn’t infringe rights in MONOPOLY. However, the attorney providing the advice was disinclined to act against the large, aggressive GMFG. Despite this, AMI obtained good professional support throughout the long court battle. AMI successfully appealed to the Federal Court of Appeals, 9th Circuit, against the adverse decision of the District Court. The appeal decision (designated Monopoly I) held MONOPOLY® was generic and hence invalid, and that ANTI-MONOPOLY wasn’t an infringement. The matter was remanded back to the District Court, but this resulted in:

(i) the initial District Court decision being affirmed,
(ii) a further appeal to the 9th Circuit Court of Appeals, and
(iii) re-affirmation in Monopoly II of the Monopoly I decision.

The response of GMFG to the Monopoly II decision was to appeal to the Supreme Court, but there the decision in Monopoly II was upheld. Thus, a consequence of the initial decision of the District Court was to inappropriately kept AMI out of the market for seven years, a result considerably less likely in a trial by jury.

After the District Court proceedings were initiated in 1974, but before its unfavourable decision, Ralph Anspach appeared on a television chat show. He then had no reason to doubt “one of the best-known chronicles of Yankee ingenuity and well-rewarded initiative” involving Darrow and his claim to have invented and patented the game Monopoly. By incredible good fortune for Anspach, given his major litigation, a viewer of the programme phoned to give an on-air story about her friend, Joanna. The story was that Joanna’s friends created the exact same game, based on Atlantic City street names, and that Darrow had stolen the game, commenced marketing and entered into an arrangement with Parker Brothers for its manufacture and sale. The true creators were said to be Quakers who didn’t seek redress, as they were peaceful and disliked quarrelling in court. The caller advised that she had lost contact with Joanna whose surname was unknown due to Joanna’s remarriages. However, while unable to give Joanna’s contact details, the caller described her as about 50, and an aeronautical engineer who had worked at a helicopter defence plant. Given Anspach’s believe that he had gained a war-time introduction “to the world of clandestine operations and improvising solutions for the normally can’t-be-done ventures”, the story was all he needed to start drawing out and corroborating the truth concerning Darrow’s involvement with the game and other events pre-dating, but leading to Darrow’s deceptions.

Ralph Anspach’s skills in clandestine operations didn’t enable him to identify and locate Joanna. However, his attempts uncovered some history of the Monopoly games played for at least two decades before Darrow’s involvement. Specifically he discovered Lizzie Magie’s core concept invention in 1903 that due to Scott Nearing, an American radical economist, became widely played using home-made boards. Also he discovered that the game travelled to Atlantic City where, in 1931-32, a community of Quaker teachers transformed the game essentially into the form for the world’s most popular game. Anspach recognised the irony that a “game perceived to be the embodiment of an individualistic, ruthless, greedy and testosterone driven extremist form of capitalism was initially invented by a woman who disliked monopolism in all its forms”. He may well have added that this was made possible by fraud on the US Patent Office leading to resultant abuse of a monopoly conferred on Darrow and Parker Brothers.

Not only was AMI denied a jury trial, but also the antitrust aspect was deferred pending consideration of validity and infringement of the trade mark MONOPOLY. Given the bias of the District Court judge towards big business, his initial decision held the trade mark MONOPOLY® wasn’t generic, and hence was valid. This was on the basis that the primary significance of the trade mark was held to denote the source of the game, even though the word was the name of the game. Also, MONOPOLY® was held to be infringed by use of the trade mark ANTI-MONOPOLY. After AMI’s successful appeal, the matter was sent back to the District Court for consideration of validity on the basis of the proper mode of analysis stated by the Court of Appeals and, if necessary, then to re-assess infringement. The District Court wilfully disagreed with the analysis, and in May 1981 affirmed its initial decisions. AMI again appealed, and the Court of Appeals firmly re-stated its own judgement in a decision of August 1982, with criticism of the erroneous approach of the District Court judge. Thus, the trade mark MONOPOLY® was held to be generic and not valid. The case again was remanded to the District Court to enter judgement in favour of AMI, but delayed by GMFG unsuccessfully seeking leave in October 1982 to appeal to the U.S. Supreme Court.
The leave sought by GMFG wasn’t without interest. It also added complications for AMI who needed to cope with constraints in replying to submissions on behalf of GMFG. However, holding MONOPOLY® to be generic and invalid received criticism from IP professionals and trade mark owners, and generated political activity on amending the legislation. Several bodies filed amicus curiae briefs supporting the appeal and AMI needed to respond to these. Also, attempts were made to involve Kenneth Starr, the Solicitor-General and second highest law officer in the U.S. government (later head of investigations leading to the Starr Report on President Clinton). However, leave to appeal was refused, and it might incorrectly be thought the long running, courageous battle initiated by Ralph Anspach was almost concluded.

A hearing before the District Court for entry of judgement in favour of AMI was set in August 1983. Compensation was to be paid for games destroyed by GMFG, although court costs recovered were minimal and there was no award for damages for the seven years AMI was held out of the market. A court order for damages would have necessitated further potentially long court action, and the costs couldn’t be managed by debt-laden AMI. In irony matching that of the high-minded game falling to Parker Brothers, AMI was obliged to reach an accommodation with GMFG. Monopoly II, in effect, had directed cancellation MONOPOLY®, but this act necessitated the August 1983 hearing proceeding. AMI was obliged to terminate the proceedings, saving MONOPOLY® from humiliating cancellation, but leaving AMI free to market its game (subject to disclaiming any connection with GMFG). The District Court recorded the settlement, a task more in keeping with the capability of the judge involved.

The debate between the District Court and the Appeals Court involved consideration of the “genericness doctrine”. Under this, a trade mark that primarily denotes a product, not its producer, is generic. The two courts differ in assessing both the doctrine and the nature of survey evidence on which each party relied. Concern prompted several proposals to amend the legislation and the Lanham Trademark Act, with an amendment introduced by Public Law 98-620 of 8 November 1984, providing:

“A registered mark shall not be deemed to be the common descriptive name of goods or services solely because such mark also is used as a name of or to identify a unique product or service. The primary significance of the registered mark to the relevant public rather than purchaser motivation shall be the test for determining whether the registered mark has become the common descriptive name of goods or services in connection with which it has been used.”

For a time AMI traded successfully. In the 1990s, the market for their game collapsed, due partly to Hasbro’s growth through acquisition of competitors. Hasbro acquired Tonka, then the owner of MONOPOLY®, and controlled about 90% of the board game industry; its monopoly position strangling remaining competition. The situation was so dire that AMI could only go out of business or challenge the dominance of Hasbro. Not surprisingly, Ralph Anspach fought back. AMI brought an antitrust action before the US District Court, Southern District of New York, alleging Hasbro exercised retailer discrimination, favouring larger retailers, thereby harming the market for smaller producers. Additionally, Hasbro was accused of requiring the purchase of less favourable games for access to “hot” items, and of price fixing. The action was dismissed, with the court holding Hasbro hadn’t violated the antitrust laws.

MONOPOLY® continues as a world famous game, while AMI has faded away. The origin of the famous direction “Go to jail. Go directly to jail. Do not pass GO. Do not collect £200” seems to have lost relevance in the mists of time, although the original currency would have been US$. However, it is of some comfort that Lizzie Magie originated the game, and the jail sentence. How would matters have progressed had the same events unfolded under our legislation, before Australian courts?

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