Quick Summary
Wrench LLC (Wrench) (plaintiff), Joseph Shields, and Thomas Rinks (the appellants) brought a diversity action against Taco Bell Corporation (Taco Bell) (defendant) claiming breach of an implied-in-fact contract and various torts related to Taco Bell’s alleged use of their ideas.
The district court granted summary judgment in favor of Taco Bell, finding that the Copyright Act preempted all appellants’ claims, including the implied-in-fact contract claim.
Facts of the Case
In June 1996, Taco Bell employees Rudy Pollak and Ed Alfaro expressed interest in the “Psycho Chihuahua” cartoon character, created by appellants Wrench LLC, Joseph Shields, and Thomas Rinks, at a New York licensing trade show. After returning materials to Taco Bell’s headquarters, Alfaro promoted the idea internally and contacted Rinks for additional materials, including artboards combining the character with Taco Bell branding, and discussed using a live dog with computer graphics imaging for television advertisements.
In September 1996, Teddy Rudge, a licensing agent hired by appellants, contacted Taco Bell about their interest in the Psycho Chihuahua concept. The negotiations continued over several months, including discussions about payments based on advertising sales and retail licensing.
On June 2, 1997, Taco Bell proposed a commercial featuring a Chihuahua passing up a female dog to get to someone eating Taco Bell food. This idea was developed by creative directors at Taco Bell’s ad agency, TBWA Chiat/Day.
Appellee contends that this idea was independently created by their creative team of Chuck Bennett and Clay Williams while eating at a sidewalk café. They allegedly saw a Chihuahua trotting down the street with an intense desire for food. They came up with the idea of using a Chihuahua to personify the intense craving for Taco Bell food.
Procedural History
1. In January 1998, Appellants sued Taco Bell, alleging a breach of implied-in-fact contract and tort claims.
2. In June 1998, The court allowed misappropriation and unfair competition claims to proceed.
3. In September 1998, The court denied Taco Bell’s motion to dismiss tort claims based on an implied-in-fact contract.
4. In November 1999, The district court granted summary judgment, ruling all claims, including the implied-in-fact contract, were preempted by the Copyright Act.
5. In December 1999, Appellants filed an appeal challenging the summary judgment.
I.R.A.C. Format
Issue
Whether the implied-in-fact contract claim brought by the appellants is preempted by the Copyright Act.
Rule of Law
The Copyright Act preempts state law claims if:
- The work is within the “subject matter” of copyright; and,
- The rights asserted under state law are “equivalent” to any exclusive rights granted under federal copyright law.
Reasoning and Analysis
The court found that the appellant’s claims fell within the subject matter of copyright because they were based on tangible expressions such as storyboards and presentation materials. The court also found that the Copyright Act did not preempt appellants’ implied-in-fact contract claim.
Although the idea proposed was not novel, the promise to pay for the use of the ideas constituted an extra element that qualified it as a different cause of action from copyright infringement.
The court rejected the appellee’s argument that summary judgment should be granted based on their defense of independent creation.
Conclusion
The court concluded that the district court erred in finding that the Copyright Act preempted appellants’ implied-in-fact contract claim. The case was remanded for further proceedings.
Key Takeaways
- Implied-in-fact contracts based on a promise to pay for the use of ideas are not preempted by the Copyright Act.
- The copyright preemption analysis requires examination of both subject matter and equivalency to exclusive rights.
Relevant FAQs of this case
Can state law claims be preempted by the Copyright Act?
If the work is within the subject matter of copyright and the state law rights are equivalent to federal copyright rights.
What types of works fall within the subject matter of copyright?
Copyright protects original works of authorship, including literary works, music, artistic creations, and other intellectual creations. In short, it covers a broad range of creative works such as books, music, paintings, sculptures, software code, and more.
How does an implied-in-fact contract differ from copyright infringement?
An implied-in-fact contract involves a promise to pay for ideas, adding an extra element beyond copyright infringement.
- For example: Promising payment for a unique marketing concept.
References
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