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FASA Corp. v. Playmates Toys, Inc.

District Court, N.D. Illinois
892 F. Supp. 1061 (1995)
ELI5:

Rule of Law:

A contractual provision that purports to waive all future, unknown claims for infringement of federal intellectual property rights is unenforceable and void as against public policy. Such a waiver is also ineffective if signed by an agent who lacks either actual or ostensible authority to bind the principal.


Facts:

  • FASA Corporation is the creator and owner of the intellectual property rights for the BATTLETECH fictional universe.
  • In late 1991, toy designer Robert Allen sought and received permission from FASA to present the BATTLETECH property to toy companies, although no formal agency agreement was established.
  • On December 11, 1991, Allen met with an employee of Playmates Toys, Inc. to present the BATTLETECH toy line concept.
  • Before the presentation, Playmates required Allen to sign its standard 'New Product Submission Form'.
  • The form contained a clause requiring the signer to 'expressly waive any and all claims of any kind whatsoever, past, present or future, known or unknown against Playmates Toys, Inc. in any way relating to or connected to the “idea”.'
  • FASA never gave Allen authority to waive its intellectual property rights, and Allen did not believe he possessed such authority.
  • Playmates made no attempt to contact FASA to verify the scope of Allen's authority.
  • After the meeting, Playmates developed and marketed its ExoSquad toy line, which FASA alleged infringed on its BATTLETECH property.

Procedural Posture:

  • FASA Corporation sued Playmates Toys, Inc. in the U.S. District Court for the Northern District of Illinois for claims including copyright and trademark infringement.
  • Playmates moved for summary judgment on all claims.
  • The District Court denied summary judgment on FASA's core intellectual property claims but granted it on several of FASA's other state law claims.
  • Playmates asserted as an affirmative defense that FASA had waived its claims by virtue of the 'New Product Submission Form' signed by Robert Allen.
  • The District Court bifurcated the bench trial, ordering that the first phase would address only the issue of Playmates' affirmative defense of waiver.

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Issue:

Does a 'New Product Submission Form' that requires the waiving of all future, unknown intellectual property claims bind the property's owner when signed by an agent without explicit authority, and is such a waiver enforceable as a matter of public policy?


Opinions:

Majority - Castillo, District Judge

No. The waiver is not binding because the agent lacked authority, and the waiver itself is unenforceable as it violates public policy. First, under California agency law, Allen possessed neither actual nor ostensible authority to waive FASA's intellectual property rights. FASA did not intentionally confer this power (no actual authority), and FASA had no contact with Playmates that could lead Playmates to reasonably believe Allen possessed such extraordinary power (no ostensible authority). Second, as an alternative basis, the waiver of future, unknown federal intellectual property claims is void as against public policy. Such waivers contravene the purpose of copyright and trademark laws, which is to encourage creativity, and would permit companies to infringe on intellectual property with impunity. This principle is consistent with state laws disfavoring general releases of unknown claims and federal policies in areas like securities and antitrust law.



Analysis:

This case establishes a significant precedent at the district court level by declaring that broad, prospective waivers of unknown intellectual property claims are void as against public policy. The ruling serves as a strong warning to companies that rely on boilerplate submission forms with overreaching liability releases, clarifying that such clauses may not shield them from future infringement litigation. It also reinforces the fundamental agency principle that a third party has a duty to inquire about an agent's authority when an agent purports to waive substantial rights of a principal. The decision protects creators and inventors by preventing them from inadvertently forfeiting their core intellectual property rights simply to present an idea.

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