Bear in mind I’m not a lawyer — I don’t even play one on TV. Be that as it may, the question is whether American Greetings actually has a case here, of if they’re just being corporate assholes lashing out at someone who dares to use their copyrighted property for parody purposes with which they don’t approve. The first blush is of course that Penny Arcade didn’t do anything wrong — Parody is covered by the First Amendment. However, that coverage is not absolute, and it could be that Penny Arcade has gotten snagged in an interesting loophole, which is that if you use a copyrighted entity to parodize something other than that entity specifically, use of that character for parody is not necessarily covered under the first Amendment.
To which you say: Wha? It’s simple: American Greeting’s argument here could be that Penny Arcade’s image is using the Strawberry Shortcake name to parodize American McGee’s tendency to appropriate young female literary characters for his dark and bloody video games, not Strawberry Shortcake herself. Therefore, using Strawberry Shortcake for that purpose is not covered under parody. It’s an interesting assertion.
However, I wonder if this line of reasoning, if indeed it is the one American Greetings is using, is as strong as it might appear initially. This line of reasoning works only to the extent that Strawberry Shortcake herself does not fit the rubric that the Penny Arcade is parodizing, namely that Strawberry Shortcake is not a young female literary character. In fact she is, the main character in dozens of books: Strawberry Shortcake: Meet Strawberry Shortcake, Strawberry Shortcake at the Beach, Strawberry Shortcake: The Berry Big Storm, and Happy Halloween, Strawberry Shortcake are just some of the titles in her oeuvre. And in an interesting literary note, in several of these titles, Strawberry Shortcake is either planning or having a party of some sort or another, which makes her activity in the parody (planning a party with her friends) not an atypical activity for her. Although to be fair she’s not typically whipping her friend Plum Pudding at those parties. But that’s part of what makes it a parody.
If you grant that being the main character of dozens of books does make one a legitimate literary character, I would say that Penny Arcade’s use of Strawberry Shortcake is indeed well within the parameters of parody here, because, remember, the boys are parodizing McGee’s appropriation of young female literary characters for his video games. If American Greetings wants to argue that she’s not a literary character, the evidence is rather against them. Thus are the perils of cross-merchandising.
Note again that I’m not a lawyer, so I may be entirely misreading this. I personally would check this with one of them people with a JD. But I’m personally confident enough about being right here that I’m not especially afraid of posting the offending illustration. In my opinion, the only copyright I need to worry about violating here is Penny Arcade’s, since I’m posting it here without their permission or foreknowledge (I got the image from somewhere other than their site). And I’ll be happy to reimburse them for its use if they ask.