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Michaels Stole Paint-By-Number IP, Company Says

Jun 5, 2024

A paint-by-number company told a jury Monday during opening arguments in Texas federal court that arts and crafts corporation Michaels Stores Inc. used the company's trademarks to create a competing product, saying it only learned of the phony product after a customer called in praising it. 

ATC Media LLC, doing business as Masterpiece by Numbers, sued Michaels in 2022 after finding out that the company had released its own paint-by-number kits with the branding Masterpiece Paint by Number printed on its packaging, per ATC media. Paint-by-number kits tell a user how to paint a picture by identifying where different colors go with corresponding numbers.

"This gist of this case is about art, and not about art for art's sake, but art for profit," Scott Harper with Harper & Bates LLP, representing ATC Media, told the jury in U.S. District Court for the Northern District of Texas.

The paint-by-number company opened up shop in 2017, seeing a desire in the market for higher-end kits. ATC Media's sales rose rapidly after COVID-19 forced customers to adopt homebound hobbies, Harper said.

ATC Media met with Michaels executives in late 2020 to discuss a possible business agreement under which ATC could give customers an affiliate code to purchase frames for their pictures. During that meeting, Harper said, both parties were subject to a nondisclosure agreement, and ATC shared significant confidential information about its business, such as its marketing tactics.

In late 2021, Michaels began selling a competing product with confusingly similar branding, he said. ATC Media saw its sales drop drastically, Harper said, and launched the suit after finding out about the competing product.

But just because Michaels was selling a paint-by-number kit that had similar branding doesn't mean that the arts and crafts store stole trade secrets or ripped off ATC's marks, said Jamil Alibhai with Munsch Hardt Kopf & Harr PC, representing Michaels Stores. Details matter in this case, he said, and Michaels was already planning on releasing a paint-by-number kit with the word "masterpiece" well before the meeting with ATC media took place.

Michaels has sold paint-by-number kits for quite some time, he said, well before the meeting with ATC Media occurred. The company had developed a new line of paint-by-numbers kits that "catered to customers with a higher degree of artistic skill," and research for the product began in earnest in 2020, according to a brief filed by Michaels.

ATC Media's sales likely dropped because people "stopped painting or making sourdough" or doing whatever else they did to keep themselves busy during the COVID-19 lockdown, Alibhai said.

"This is not about art for profit, this is about litigation for profit," he said.

The word "masterpiece" is commonly used when talking about art, such as referring to a great artist's significant works, he said. Additionally, many paint-by-number kits contain the words "paint by number" on their branding to tell the customer what's in the box.

While ATC Media owns the trademark to "Masterpiece by Numbers," it only owns the right to it in computer services, Alibhai said. ATC Media offers a service that allows customers to submit photos that the company then converts to paint-by-number canvases.

Representatives and counsel for ATC Media and Michaels didn't immediately respond to a request for comment.

ATC Media is represented by Scott Harper, Shannon Bates and Jordyn Hendrix of Harper & Bates LLP.

Michaels Stores Inc. is represented by Jamil Alibhai and Jordan Curry of Munsch Hardt Kopf & Harr PC.

The case is ATC Media LLC v. Michaels Stores Inc et al., case number 3:22-cv-01416, in the U.S. District Court for the Northern District of Texas.