"Does Sex sell magazines?" the Harvard Lampoon asked the 500,-000 people who bought its latest Time parody this fall.

"Are you ready to shell out $10 million for libel and invasion of privacy?" five members of a family pictured in the parody issue are now asking back.

Sound funny? It's not. The Harvard Lampoon Inc. and the New York Times Company have been named co-defendants in a libel and invasion of privacy suit served on the Times last week in New York.

Members of the Frank Uzzi family, who appear in the Time parody eating dinner under the caption, "Unsightly garbage: off the streets and onto the table," are now seeking a total of more than $15 million from the two publications.

The Uzzis have served the Times with a 41-page brief citing 15 alleged violations of New York's "Right of Privacy" law and libel laws and are expected to deliver the brief to Lampoon lawyers in New York in the next few days.

The brief asks $30,000 in pecuniary damages and $10 million in exemplary damages from the Lampoon but only a paltry $5,015,000, from the Times.

The Times is being sued on the grounds that it made the picture available to the Lampoon for the allegedly libelous use.

A Times photographer took the picture for a photographic feature on how New York families spent Easter day on April 19, 1965. The picture apparently went into the Associated Press file of old pictures-called Wide World Photo-and the Poonies picked it out last year for use in the parody issue.***

Among other charges, the suit alleges that the Lampoon used the picture without consent and that the picture portrayed the five Uzzis as "infamous." "unclean," "disgraceful." and "disgusting." It also charges the Lampoon with damaging both the good name of the plainfiffs and their standing in the community.

The five plaintiffs-Frank Uzzi. Carmella Uzzi. Richard Uzzi. Ralph Uzzi. and Michael Uzzi-live at 89 Mulbury St., Manhattan, a neighborhood formerly known as "Little Italy." Michael Uzzi is listed as an infant under the age of 14 and his suit against the defendants ask for $3 Million in total damages.

Although the suit has been served on the Times, New York law allows the paper 20 days to respond before the suit is filed in court.

Previons libel suits have usually involved millions of dollars when initially filed and often take three to five years before a final decision is reached. Because the Times and the Lampoon are registered in different states, there will be a jurisdictional problem before court action can even begin.

Although the success of the Time parody brought thousands of dollars into the Castle's treasury last fall, much of the money went toward paying off a reported debt of $75,000 and the rest reportedly went into different trust funds.

The cost of the litigation, if the plaintiffs follow through on the suit, will probably be thousands of dollars more than the small operating budget of the Lampoon.

Members of the Lampoon refused comment yesterday, although one member did acknowledge that a brief had been served on the Times.