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NEW YORK (Reuters) - A federal judge has dismissed part of The Velvet Underground's lawsuit accusing the Andy Warhol Foundation for the Visual Arts of violating its rights to an iconic banana image used on the rock band's best-known album.
While Velvet Underground's trademark case remains untouched, U.S. District Judge Alison Nathan in Manhattan rejected its request for a court order that the Warhol Foundation had no copyright claim to the banana image.
Nathan said the Warhol Foundation's agreement not to sue for copyright infringement over Velvet Underground's use of the image eliminated any copyright dispute for her to resolve, according to a decision released Friday evening.
Velvet Underground sued in January for damages and an injunction after reading about plans by the Warhol Foundation to license the banana image for cases, sleeves and bags for Apple Inc's iPhone and iPad.
The image features a large banana and stylized Andy Warhol signature, and was used on the band's first album, "The Velvet Underground & Nico." Rolling Stone magazine ranks the 1967 release 13th on its list of the greatest albums of all time.
Founded by Lou Reed and John Cale, Velvet Underground developed a collaboration with Warhol that included the pop artist's design of the cover art.
Nathan rejected Velvet Underground's arguments that the Warhol Foundation could still claim a copyright interest despite agreeing not to sue, and that the agreement was not broad enough because it did not appear to cover future licensees.
"Because the Warhol Foundation has broadly covenanted not to sue Velvet Underground," Nathan wrote, "there is no underlying cause of action sounding in copyright for Velvet Underground to head off."
She dismissed the copyright claim without prejudice, meaning that it could be brought again.
Clifford James, a lawyer for Velvet Underground, said his client disagrees with the decision and added that Andy Warhol never copyrighted the banana design.
"The Velvet Underground is confident it will prevail on its trademark claims," he said.
Joshua Paul, a lawyer for the Warhol Foundation, declined to comment.
Velvet Underground broke up as a performing unit in 1972, but it claimed exclusive use of the banana design in licensed merchandising for more than a quarter century. It also said the design is in the public domain and thus cannot be copyrighted.
The Warhol Foundation has countered that Velvet Underground had no enforceable trademark rights to the design.
Apple was not named as a defendant. Warhol died in 1987. The Warhol Foundation is based in New York, where Velvet Underground was formed.
The case is The Velvet Underground v. Andy Warhol Foundation for the Visual Arts Inc, U.S. District Court, Southern District of New York, No. 12-00201.
Reporting By Jonathan Stempel in New York; Editing by Andrew Hay and Andre Grenon