v30#4 Cases of Note — Copyright- A Desny Implied-in-Fact Contract

by | Oct 10, 2018 | 0 comments

Column Editor:  Bruce Strauch  (The Citadel, Emeritus)  


Michael Wahl was an attorney become animation exec with his company Gunther-Wahl.  And it’s the age of girl-oriented entertainment/consumer projects.  Circa 1993, with his wife, Candy, Wahl came up with “Flutter Faeries” and put together a presentation package.

At a NYC industry show, he met Debra Gallinni of Mattel who invited him to come in and show what they had.  Wahl saw her as a gatekeeper and believed she wanted him to pitch cartoon ideas with toy applications.

Yes, Hasbro’s My Little Pony had just had a successful decade of lapping up money from little girls and crazed adult collectors via toys, movies and TV.  And is still going strong. Indeed there’s the male fan base (age 13-35) called bronies from bro and pony.

Hasbro also had Transformers and G.I. Joe which Mattel countered with He-Man and Masters of the Universe.  The last got a nod in Tom Wolfe’sBonfire of the Vanities.”

Gunther-Wahl and Mattel had their meeting in June of 1993.  Wahl quite logically assumed Mattel knew he owned Flutter Faeries and would have to compensate him if it took them.  Otherwise no one would show anything for fear of theft.

And Wahl sho’ nuff laid on a concept.  Segmented caterpillars hatch into half-butterly — hence flutter — half-human with magic powers — hence faerie.  Each represented a season for the environmentally conscious angle.

And the spin-off products were consumerist heaven.  Dolls, fashion, hair play, books shaped like each character, wands, fairy dust, costumes of wings and tiaras, a wasp coach.  Woo. Fantasy, collectability, empowerment, romance. Ka-ching goes the cash register.

Wahl was not a newbie to this kind of thing.  Industry custom was to stop you immediately if the toy company had a similar product under development.

Instead, he was told to leave his work for evaluation by Mattel.  Compensation was not discussed, but this was an early stage.  And no one had ever stolen anything from him before. He didn’t see the need for a written contract to protect what he owned.

So how much would he make?  Harriet Beck, an attorney and expert witness for Wahl testified that if materials are taken without negotiation, the normal industry standard is 8 percent of production cost.

Wahl had a subsequent lunch meeting with Mattel where the Faeries were discussed.  Mattel pronounced the idea charming, “thought something was there,” and asked if any animation had been done.  Wahl sent them an animation reel.  It was August, 1993 by then.

In October, Mattel announced they were going to pass on the project.  Wahl asked for his materials back, but didn’t get them until December.  And he only got part of them.

Can you feel it building?

Yes, next Wahl learned Mattel had trademarked the name “Flutter Fairies” and in 1995 put out an animated TV series and lavish fairy products line.  And of course there was litigation based on breach of an implied-in-fact contract.

And you spotted Fairies vs. Faeries.  I personally prefer the Elizabethan look.  Spenser’sFaerie Queen” and all that.

At trial Mattel presented evidence that fairies are not a unique idea and Mattel developed its product on its own.  See Teich v. General Mills (1959) 170 Cal. App. 2d 791, 803-804 which holds independent conception and development lets you evade liability.

And the jury bought that and held for Mattel.  Or was that their reasoning?

The Appeal

Wahl argued that the trial judge erred by instructing the jury that Wahl had had the obligation to condition his pitch disclosure on Mattel’s agreement to pay.  The judge completely ignored the basis of the suit — the notion that an invited pitch implies a promise to pay.

Declarations from jurors showed they didn’t get the implied-in-fact contract idea and were baffled by the judge’s instructions.

Declarations from jurors?  Do they get to do that in California?  And aren’t all jurors everywhere baffled by judges’ instructions?

And even though ideas can’t be owned, 4 Nimmer on Copyright (1963) The Law of Ideas, section 1605.[D], pages 16-40 to 16-41 says an invitation to disclose ideas implies a promise to pay for the disclosure if the idea if used.

And that brings us to Desny v. Wilder (1956) 46 Cal.2d 715 which the trial judge should have been only too familiar with.

Now Who the Heck was Desny?

Screenwriter Desny sent a 65-page script to a movie studio about the rescue of a man trapped in a cave — a real event of the moment.  Gatekeeper couldn’t bother to read, wanted an elevator pitch. Desny phoned it in.

Desny is shocked (or not) to find his work made into a movie without him getting paid.  Movie contained fictional add-ons Desny had invented.  Also in Desny’s favor, he had clearly stated that he expected to get paid if the idea was used.

A Desny Implied-in-fact Contract is now used as short-hand for these type issues.

Just to confuse you, one of the more widely used quotes from the case is: “The idea man who blurts out his idea without having first made his bargain has no one but himself to blame for the loss of his bargaining power.”  Id. P.738-739.

So how useful is that?  He’s drunk in a bar blurting ideas?  Movie studio answers phone and he blurts his ideas?

I think you really need to look beyond a simple idea — how about some fairy dolls for little girls to collect? — to the complete product design and animation pilot Wahl presented.

Minniear v. Tors (1968) 266 Cal. App. 2d 495 is a nice Desny contract example.  Author wrote and filmed a TV pilot entitled Sea Divers.  Studio helped edit the film, gave a private showing, discussed the next steps (vaguely).

Writer outlined an entire season.  Studio began production of Sea Hunt, hired writer’s underwater photographer, tried to hire the leading man.

I wonder who that was.  The show — a classic of the early ‘60s — made Lloyd Bridges famous and gave his two sons their starts in acting.

Anyhoo, getting back to our case, Mattel argued Wahl was a classic Desny who blurted out his ideas.

The appellate court disagreed.  Mattel had invited him to present.  The law does not require an express oral agreement on compensation for an implied contract.  That’s why it’s implied.

The trial court had hemmed in the jury with that instruction and was reversed.  


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