Is the Warhol Banana Public Domain?

Dear Rich: I read that the Andy Warhol banana is in the public domain. Does that mean anyone can use it? The Dear Rich Staff is so old that we remember when our friend, Paul Dodd, bought the 1967 Velvet Underground album, The Velvet Underground and Nico. The cover featured a peel-able banana (underneath the yellow banana skin was a flesh colored banana). Alas, subsequent pressings weren't peel-able. The image was so popular that VU fans eventually referred to the recording as the "Banana Album."
PD or not PD? The Warhol image on the cover may now be in the public domain -- at least that's what the VU's founders hope. They recently sued the Warhol estate over the licensing rights to the image. The VU claims that the image is in the public domain because the album cover was printed in 1967 without copyright notice. Back in the old days (pre March 1989), a published work had to contain a valid copyright notice to receive protection under the copyright laws. (This requirement is no longer in force -- works first published after March 1, 1989 do not have to include a copyright notice to gain protection under the law.) The VU's founders are asking the court for a declaration that the banana imagery is PD which will make it easier for the band to argue that the image functions as the band's trademark and that they, not the estate, are entitled to licensing revenues. You can read the gruesome details of the lawsuit here.
Bottom Line Dept. We wouldn't presume Warhol's banana is public domain until a court rules on the matter. Even if it is public domain, it's unclear whether the VU can assert trademark claims and how far those claims will go -- for example, whether the VU can prevent use of the image on non-band related merchandise.