Blue Mountain Arts, Inc.

P.O. Box 4549
Boulder, Colorado 80306
U.S.A.
(303) 449-0536
Fax: (303) 417-6496
Web site: http//:www.bluemountain.com

Private Company
Incorporated: 1972 as Hartford House, Ltd.
Employees: 120
Sales: $60 million (1998 est.)
NAIC: 511191 Greeting Card Publishers

Blue Mountain Arts, Inc. publishes cards, books, calendars, prints, and other gift items which feature the company’s signature style: poetry and prose printed on a backdrop of colorful nature illustrations. The company offers over 1,000 designs of everyday, all-occasion greeting cards in addition to holiday and special day greeting cards. In addition, over 1,000 Blue Mountain card designs are deliverable through electronic mail from the company’s Internet domain. By the late 1990s, Blue Mountain Arts had sold more than 350 million greeting cards and 16 million books of prose and poetry. Their products, sold worldwide, have been translated into French, German, Spanish, Russian, Dutch, Finnish, Japanese, Korean, Chinese, Hebrew, and Afrikaans.

Togetherness Creates a Business in the 1970s

Blue Mountain Arts combines the complementary creative abilities of artist Stephen Schutz and poet Susan Polis Schutz. Before founding the company Stephen was employed as a physicist at an atmospheric research center in Boulder, Colorado, while Susan taught English and pursued free-lance writing. The initial intention was not to develop a business, but to unite their hobbies as a catalyst for togetherness. Stephen superimposed Susan’s free-form poems on his watercolor paintings of mountain and human silhouettes. Stephen and Susan created posters that expressed their thoughts about life, love, and nature, which reflected the hippie stylings of the early 1970s.

Upon seeing the pictures in the couple’s home, friends commented on their salability. The business took hold when the two convinced the manager of a local Boulder bookseller to offer a dozen posters for sale on a consignment basis. The posters sold quickly and other stores began to carry the posters as well.

When Stephen and Susan transferred their poster designs to greeting cards, they innovated the all-occasion greeting card in two ways. The first innovation was their development of an all-occasion card which was blank inside, in which personal messages could be written. The second innovation was the inclusion of Susan’s poetry, which was intimate and sentimental. Previously, standard greeting card messages included poetry of a rhymed, more formal style. Susan’s emotional, free-form poetry reflected an era that rejected such conventions in favor of heartfelt self-expression.

Stephen and Susan transformed their creative aspirations into a business in 1971 when the couple founded Blue Mountain Arts. The Schutzes rented the main floor of the home in which they lived to support the business, while they lived in the basement. The two traveled around the United States, in a pick-up truck with a camper shell on the back, and sold their artwork at stores and trade shows along the way.

Blue Mountain Arts products found a loyal customer base, and business expanded accordingly. The product line expanded to include calendars, stationery, and gift books. Moreover, Susan wrote a book of poetry entitled, Come into the Mountains, Dear Friend, which Blue Mountain Arts published in 1972. The book was highly successful and others books followed, including Peace Flows from the Sky (1974) and Someone Else to Love (1976). Greeting cards and another gift book, published in 1974, contained prose quoted from such diverse authors as Mark Twain, Kahlil Gibran, and Helen Keller. As with the cards and posters, the written contents of the books were complemented with Stephen Schutz’s illustrations.

After five years, the company had achieved great success; Blue Mountain Arts had grown to approximately $7 million in sales in 1976. The company’s product line included 24 poster and stationery designs, 120 card designs, eight calendars, and 40 inspirational scrolls, sold through over 12,000 retail outlets.

The company had also published 16 books of poetry and inspirational prose. Many of their products were available in several languages. Having employed several kindred artists and writers, Blue Mountain Arts soon entered the business of traditional greeting cards as well, providing holiday, birthday, and other special day cards for the first time in 1981.

During this time, their innovation and success attracted attention to the Schutzes and Blue Mountain Arts. Popular magazines including Time, American Home, Marriage Encounter, Family Weekly, and People, featured stories on the company. The business also attracted the attention of Hallmark Cards, Inc., the largest company in the greeting card industry. In 1985 Hallmark approached Blue Mountain Arts with an offer to acquire it or to engage in joint ventures. Stephen and Susan Schutz refused, however, deciding that their company embodied their values and a partner or parent might cramp their style.

1986-88 Legal Dispute with Hallmark

In April 1986, while shopping in a California card store, Susan Polis Schutz was surprised to mistake Hallmark’s Personal Touch line of greeting cards for her own company’s Airbrush Feelings and Watercolor Feelings line of greetings cards. Blue Mountain Arts contacted Hallmark by letter, noting the similarity and asking the latter to forgo production and distribution of the Personal Touch line. When Hallmark refused, Blue Mountain Arts hired a specialist in intellectual property rights and filed a lawsuit in U.S. District Court in Denver for violation of the company’s trade dress and copyright. In November 1986 Blue Mountain Arts won a preliminary injunction which required Hallmark to remove 83 of the 90 offending cards from stores until the dispute was resolved. Hallmark followed the court order but distributed 83 new, similar card designs in the meantime.

While Hallmark conceded that it had copied the Blue Mountain Arts style, it did not view the practice as illegal and appealed to higher courts. In August 1987, Hallmark filed a brief in the Tenth Circuit Court of Appeals which contained the expert opinion of the Society of Illustrators, a prestigious, nonprofit organization in New York City. The opinion stated that a monopoly on a particular artistic style should not allowed. Upon examining the brief, however, Blue Mountain Arts lawyers found the words “Property of Hallmark Cards Creative Department” stamped on the back of an exhibit. The lawyers then submitted a plea to the U.S. Court of Appeals to reject the brief based on Hallmark’s obvious association with the Society of Illustrators. Eventually, the Court rejected the brief and upheld the injunction in May 1988.

The following August Hallmark retaliated, requesting the Supreme Court review the case on the basis that the injunction conflicted with the Copyright Act and arguing that to give an artist special claims on a style was unconstitutional. The Wall Street Journal, on September 22, 1988, quoted Blue Mountain Arts’ response which termed Hallmark’s imitation of the trade dress as an act of “counterfeit.” Blue Mountain Arts argued that, “Contrary to Hallmark’s assertion, Hallmark does not need to copy Blue Mountain’s cards in order to compete.” A company was recognized by its trade dress, they contended, and costumers could be confused by an imitation and that could have a negative impact on a company that had succeeded through its distinctive style.

The Supreme Court again upheld the preliminary injunction in October 1988, and Hallmark settled with Blue Mountain Arts. In the consent decree Hallmark agreed to repurchase the Personal Touch line of cards from retail outlets. The line would be discarded and replaced with a new concept which did not copy Blue Mountain Arts’s trade dress. An admission of fault or liability was not required by either party. Also, Hallmark agreed not to block sales of Blue Mountain Arts products in its stores. The case was considered a landmark for the protection of intellectual property rights for creative entrepreneurs.

The lawsuit against Hallmark hampered productivity at Blue Mountain Arts, diverting time and energy away from the company’s creative rhythm. Nevertheless, the company had garnered significant national media attention, as articles about it appeared in the Wall Street Journal, the New York Times, and Life magazine; in 1987, the Schutzes were interviewed for ABC’s 20/20 television show. Despite a slight lull in creative efforts during this time, the Schutzes did publish a bestselling book in 1986, To My Daughter, with Love, on the Important Things in Life. To My Son With Love followed in 1988 and Love, Love, Love in 1989, all of the books being illustrated by Stephen Schutz. Moreover, bookmarks and coffee mugs were added to the Blue Mountain Arts product line.

Blue Mountain Arts in the Computer Age

The early 1990s at Blue Mountain Arts were characterized by a more high-tech approach to greeting cards. One significant computer-based innovation was Stephen Schutz’s trademarked 5-D Stereogram, an application of technology to art that used a random-dot system and accounted for the span between human eyes in producing the visual sensation of a three-dimensional picture. Stereogram pictures were not immediately recognizable to the viewer, but at first glance looked like a melange of color. To see the image, a person had to look very close at the picture, nose almost touching it, and then pull it away from the eyes, at which point a three-dimensional image became apparent. The designs were created and transferred into a computer, which generated the multi-dimensional picture.

The computer program took Stephen Schutz, a Princeton-trained physicist, six months to write. Blue Mountain Arts produced one million cards which sold so quickly that a reprint was necessary a month later. The company sold the popular pictures as posters, cards, and collected in a book, Endangered Species in 5-D Stereograms, published in 1994.

Company Perspectives:

Blue Mountain Arts is helping the world communicate.

When Blue Mountain Arts launched its web site offering free electronic greetings in September 1996, the Schutzes saw the Internet version of its greetings as another extension of their mission to help people communicate their feelings. The idea originated when their son Jared, later Director of Business Development at Blue Mountain Arts, went to college at Princeton, and the family began keeping in touch by electronic mail. The Schutzes’ children began writing birthday and other special greetings by e-mail, leading to the development of e-mail greeting cards.

Blue Mountain Arts started with 35 card designs for birthdays, graduation, emotional support, thank you, and all-occasion greetings of love and friendship. The recipient of an online greeting received an e-mail notification which included a link to the company’s web site. The recipient then accessed the greeting from the “Card Pickup Window” on the company’s web site. The cards featured animated animals, some of which sang or spoke, and danced or moved in some manner when the viewer clicked a computer mouse on the image. By the 1996 winter holidays 100 different greeting card designs were available on the Internet from Blue Mountain Arts.

The company’s electronic greetings were unique in several ways. True to the company’s mission of helping people communicate, the greetings were free of charge, and personal messages could be added by the sender. Moreover, Blue Mountain Arts did not require that personal questions be answered before a greeting could be delivered. By contrast, other online greetings routinely charged about $2.50 for an online card and required demographic surveys be answered by the sender, with questions about gender, age, and mailing address. Having approximately 20,000 retail outlets throughout the United States and in several foreign countries, Blue Mountain Arts decided not to sell its printed products online, believing that to do so would be disloyal to their vendors.

Blue Mountain Arts succeeded without advertising on other web sites and without extensive advertising on its own web site. The company was concerned that advertising banners would interfere with the more intimate experience customers had come to expect from the company. It did, however, experiment with subtle, less invasive forms of advertising to cover the costs of maintaining and developing online greetings. For example, at the web site proflowers.com, an online flower delivery company founded by Jared Schutz, a Blue Mountain Arts banner would appear on the screen only after that PC user had already sent a greeting card and was familiar with the company.

By the late 1980s Blue Mountain Arts had expanded its online offerings to over 1,000 online card designs, available for every known and obscure holiday in the United States as well as worldwide cultures and religions. Moreover, the web site incorporated French and Spanish language accessibility. The French language cards, found under Arts Mont Bleu, supplied greetings for French holidays, such as Bastille Day, while Spanish language cards for Spanish holidays could be found under Monte Azul. German language cards and holidays were expected to be launched in 1999 under Die Kunst der Blauen Berge.

By the end of 1997 the company’s web site was among the ten most visited Internet domains, with more than 12 million people having visited the site. In April 1999 alone more than five million people accessed www.bluemountain.com. Through word-of-mouth as well as through the access of greeting card recipients, Blue Mountain Arts reached an estimated 21 percent of Internet users. Annual retail sales of their printed products has increased 20 percent since the web site was launched.

Blue Mountain Arts v. Microsoft in 1998

In November 1998, Blue Mountain Arts found evidence that the junk e-mail filter on Microsoft’s new Internet browser, Internet Explorer, transferred electronic greetings sent from Blue Mountain Arts customers to junk mail trash. When the company contacted Microsoft they were informed that a bug in the software caused the problem, and that no definitive date for resolving the problem could be forecast. Further, on November 27 of that year, Blue Mountain Arts found evidence that WebTV, a subsidiary of Microsoft as well as its Internet service provider, had obstructed thousands of the company’s e-mail greetings to WebTV customers.

Microsoft had recently issued an updated test software, Outlook Express 5 Beta, an electronic mail software program that detected junk e-mail and diverted it to a junk mail folder before an Outlook Express e-mail user would see it. The filter determined junk e-mail by particular characteristics, such as multiple exclamation points and words in all capital letters, as well as by a statistical formula that analyzed the frequency with which those characteristics were found.

Several coincidences raised suspicions of unfair business practices on the part of Microsoft. Blue Mountain Arts had never had any problems over the past two years in providing electronic greeting cards, and Microsoft had launched its own greeting card service about the time the problems began. Also, the timing of the obstruction coincided with peak holiday greeting season, from Thanksgiving through Valentine’s Day. Blue Mountain Arts was naturally concerned about a potential loss of credibility and goodwill with its customers and advertisers.

In December 1998 Blue Mountain Arts filed for a restraining order to stop Microsoft and WebTV from obstructing the transfer of its e-mail greetings on the Internet. WebTV promptly altered its filtering process to allow the greetings to proceed to their recipients. Moreover, a temporary restraining order was issued against Microsoft by a California Superior Court, which required Microsoft to cooperate with Blue Mountain Arts to redesign the greeting cards so that they would not be diverted to the junk mail folder by the junk mail filter.

On February 2, 1999 the California Superior Court ruled in favor of Blue Mountain Arts, transferring the temporary restraining order to a preliminary injunction. The Court found that Microsoft’s assistance to Blue Mountain Arts under the temporary restraining order had not effectively resolved the problem. The injunction required Microsoft to allow the effective delivery of the company’s electronic greetings by altering the software itself.

Judge Robert Baines acknowledged Microsoft and Blue Mountain Arts as competitors in the electronic greeting card business and found it inconceivable that the Microsoft engineers who developed the filter had no knowledge of the competitive electronic greeting card business. The judge considered a variety of factors which led him to conclude that Microsoft had, “some concern if not outright targeting of Blue Mountain Arts or similar outfits.” Having won the preliminary injunction, Blue Mountain Arts hoped to settle the case out of court as it moved into a new century of business.