How Much Is That Velvet Elvis Really Worth? : Texas bar owner says his nightspot is a salute to kitsch. But Presley estate suit accuses him of using the King’s name in vain.

In the solemn, wood-and-marble chambers of the U.S. district courthouse here, a federal judge is weighing one of modern America’s most vexing questions:

What is the true meaning of a velvet Elvis?

Nothing says kitsch better than a fuzzy, black, air-brushed painting of the King. But when does campy fun infringe on the trademark image of a rock ‘n’ roll legend? Is a velvet Elvis a portrait of an entertainer, or is it an icon of cheesiness--one that says less about the man than about the pop culture embracing him?

Those questions were debated with straight faces last week in the case of Elvis Presley Enterprises Inc. vs. Barry Capece and Velvet Ltd., owners of a Houston watering hole known as the Velvet Elvis. As the name eponymously suggests, a life-size velvet Elvis in white jumpsuit (direct from the Mexican border town of Ciudad Juarez) adorns the trendy club, a high-end saloon that dubs itself the “King of Dives.”

Capece, a 36-year-old entertainment lawyer who opened the nightspot in 1991, defends his choice of name and artwork as a tribute to bad taste. “We’re not an Elvis bar and we’re not commercializing Elvis Presley’s image,” he said. “We’re named after a tacky velvet painting--and damn proud of it.”

The watchdogs of the Presley empire, often described as “the Elvis police,” want the bar purged of all Elvis references. The issue is not off-the-wall humor, they say, but unauthorized use of a licensed name and face--commodities that have become far more valuable in death than during Presley’s life.

“The name ‘Velvet Elvis’ conjures up Elvis Presley,” said Mack Webner, the estate’s attorney. “There is no other Elvis known to be painted upon velvet.”

As absurd as their dispute has become, the case illustrates the evolving, often uncharted, frontiers of copyright law.

Courts increasingly are being asked to decide what images are protected and what are fair game--a task complicated by changes in technology that have given millions of Americans the power to reproduce all kinds of images on their own.

In a media-driven society, after all, who owns popular culture? Is it a tapestry of common experiences and reference points, a true World Wide Web to which we all share a connection? Or is it an inventory of celebrities and nicknames and theme songs, all of them commercial products to be licensed and marketed and sold?

Just last month, the heirs of the Rev. Martin Luther King Jr. sued CBS for allegedly misappropriating the slain civil rights leader’s “I Have a Dream” speech. The network used 10 minutes of King’s historic sermon in the documentary “20th Century With Mike Wallace,” which is now being sold on videocassettes.

Earlier this year, the American Society of Composers, Authors and Publishers (ASCAP) triggered a firestorm when it threatened to sue the nation’s summer camps for unauthorized sing-alongs. ASCAP wanted royalties paid on all of its 4 million copyrighted songs, including such campfire classics as “This Land Is Your Land.”

Although the 1st Amendment provides for some limited use of proprietary material--usually brief quotations for journalistic or charitable purposes--the law does protect trademark names and images from unfair competition. Much depends on the quantity of disputed material, the purpose for which it is being used and the extent to which it may undermine the value of the original version.

For example, Luther Campbell, the leader of the raunchy rap group 2 Live Crew, was forced to pay a $300,000 fine and drop the stage name Luke Skyywalker after filmmaker George Lucas claimed that it tainted his blockbuster “Star Wars” trilogy.

By contrast, a federal judge rejected the claims of Hormel Foods Corp. that viewers of the “Muppet Treasure Island” film would confuse a wild boar character known as “Spa’am” with Hormel’s canned luncheon meat.

In the Velvet Elvis case, Capece insists that nobody is going to mistake his bar for a sanctioned shrine to Presley. He figures he could just as easily have named it The Velvet Dogs-Playing-Billiards because he has that painting on the wall, along with velvets of Malcolm X, Bruce Lee, Stevie Wonder, John Wayne and dozens of others--without a complaint from anyone.

“The whole attitude of the bar is ‘Don’t take the world so seriously,’ ” said Capece, noting that his customers tend to be well-heeled 20- and 30-somethings--a crowd more interested in microbrews and hand-rolled cigars than in the King’s enduring fame.

Presley’s estate argues that any Elvis reference, even a backhanded one, illegally co-opts a multimillion-dollar name. The bar has become such a hit that Capece opened a clone this year in Dallas--thinly veiled as the Velvet E--and is working on plans to replicate the formula in Austin, Denver and Jackson Hole, Wyo.

“Mr. Capece understands what everyone for the last 40 years has understood,” Webner told the court. “Elvis sells.”