American Apparel Settles Suit with Woody Allen for Five Million Dollars.

Reuters reports today that American Apparel, Inc. has settled a lawsuit brought by director Woody Allen for $5 million. Allen had sued American Apparel for using an image of him dressed as a Hasidic Jew from his 1977 film Annie Hall without permission.

American Apparel's attorneys had contended that the images, which appeared on the company's billboards and internet ads, did not have a commercial purpose and were intended as parody.

As someone who's been hanging out with Intellectual Property attorneys quite a bit recently, it seems to me that American Apparel got themselves into trouble on two fronts. First, they very obviously used Allen's likeness without his consent and for commercial purposes. Second, and perhaps more seriously, they used a still image from a film to which they do not hold the copyright. If I had to guess, I'd say the second of those two points is the one that convinced American Apparel to settle before Allen's attorneys could take them to the cleaners.

Update: More on this from the New York Times.