National Lampoon Suit Is Serious Business : Trademarks: Breach of contract complaint could determine who gets the rights to the famous name and logo.

What’s in a name?

If it’s National Lampoon, the name is worth more than $5 million over the next three years, according to the company that owns the name and logo associated with the satirical magazine and movies such as “Animal House” and “National Lampoon’s Vacation.”

But another company that is suing to foreclose on the National Lampoon trademark argues that the famous name is quickly losing value, and it should be allowed to sell all rights to the name and logo to satisfy a legal claim.

The battle over the National Lampoon trademark is being played out in Superior Court in Los Angeles, where the two companies have sued each other over a disputed business deal.

It’s a complex case involving allegations of breached contracts, broken promises and even lawyers who have allegedly switched sides. A resolution of the case will ultimately determine who gets to keep the National Lampoon name and logo.

On one side is ITC Distribution Inc., a film distributor company that is part of ITC Entertainment Group in Studio City. ITC produced “On Golden Pond” and other less noteworthy films such as “Billy the Kid & the Blue Baize Vampire.”

On the other side is J2 Communications Inc., a Los Angeles company that sells movie home videos, which acquired National Lampoon Inc. two years ago.

In 1988, court documents say, ITC and J2 entered a four-year contract calling for J2 to distribute 17 of ITC’s films on videocassette in exchange for one-third of the net profits.

But last year, ITC notified J2 that it was terminating the contract, and that J2 no longer had the right to continue selling ITC films on videocassette.

ITC contended that J2 had withheld more than $150,000 in profits that were due to the film company for the period ending April 30, 1990. To settle the dispute, J2’s National Lampoon Inc. agreed to pay ITC $75,000 and to give ITC the right to make one motion picture using the National Lampoon name and logo.

But another dispute soon arose, and in July of this year ITC filed suit against J2 for breach of contract and fiduciary duty. In its suit, ITC contends that the $75,000 was essentially a settlement payment only, and that J2 still owes ITC money earned from video sales.

ITC also contends that J2 continued to sell videocassettes of ITC films after the distribution contract was terminated.

“The defendants, pure and simple, have cheated ITC,” the company said in court documents.

J2 denied ITC’s claims and countersued, saying that ITC breached its contract by refusing to honor the terms of the settlement agreement with National Lampoon. Both sides are seeking unspecified damages.

And in a confusing twist to the already convoluted case, ITC contends that a clause in its agreement with National Lampoon Inc. gives it the right to foreclose on the National Lampoon trademark. ITC wants to sell the rights to the name and logo as a way to recoup the money it says it is owed.

For its part, J2 argues that the clause was only intended to protect ITC’s right to use the name and logo in one film in case loss-plagued National Lampoon were to seek bankruptcy court protection.

It calls ITC’s attempt to auction the trademark a “sham transaction.”

James P. Jimirro, J2’s chairman and chief executive, is quoted in court documents as estimating that the loss of the National Lampoon name and logo would cost the company at least $5 million in lost revenues over the next three years.

ITC countered that the value of the National Lampoon trademark “is rapidly dissipating,” noting that no issues of the magazine have been published since April.

To get a favorable price for the trademark, it argued in court, it should be allowed to proceed with the sale.

Nonetheless, Judge Ronald M. Sohigian granted J2’s request for a temporary restraining order barring ITC from foreclosing on the trademark. The two sides are now discussing a possible settlement.

John G. Huncke, ITC’s general counsel, declined to say if the companies were near an agreement. But Michael H. Lauer, who handles business affairs at J2, said the settlement talks were going well.

Last week, ITC lost another, unrelated legal battle when a Los Angeles Superior Court jury found that ITC violated antitrust laws by distributing to TV stations the film “Twice in a Lifetime” as part of a package of other films. Bud Yorkin, the film’s producer, was awarded $2.4 million in damages. Huncke said ITC would appeal.

In J2’s countersuit against ITC, Jimirro complained that the law firm hired by ITC to help with the sale of the National Lampoon trademark had also represented National Lampoon in a separate legal matter, and that National Lampoon had consulted with the law firm about the ITC dispute.

For J2, losing the National Lampoon trademark would be a blow to the struggling company.

J2 acquired National Lampoon in October, 1990, in a stock swap valued at about $4.7 million. At the time, the film producer and publisher of the well-known humor magazine had not reported a profit in eight years, and shortly after the acquisition actor Tim Matheson and film producer Daniel Grodnik left their posts as National Lampoon’s co-chairmen.

The problems have since continued, contributing to J2’s $735,000 loss on $3.98 million in revenue in the nine months that ended April 30. In documents filed with the Securities and Exchange Commission, J2 said it temporarily suspended publication of the National Lampoon magazine in April while it reviews the magazine’s operations.

J2 also said in SEC documents that losing ITC’s business “would have a serious impact” on its sales.