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Wrench, LLC v. Taco Bell Corp.

United States Court of Appeals for the Sixth Circuit
256 F.3d 446 (2001)
ELI5:

Rule of Law:

A state law claim for breach of an implied-in-fact contract is not preempted by the Copyright Act if the claim contains an 'extra element,' such as a promise to pay for the use of a creative idea, that makes it qualitatively different from a copyright infringement claim.


Facts:

  • Thomas Rinks and Joseph Shields created the 'Psycho Chihuahua' cartoon character, which they promoted through their company, Wrench LLC.
  • In June 1996, Taco Bell employees Rudy Poliak and Ed Alfaro expressed interest in the character at a trade show.
  • At Taco Bell's request, Rinks and Shields created and sent promotional materials, including art boards combining the character with Taco Bell's logo.
  • Rinks suggested to Alfaro that Taco Bell use a live dog with the Psycho Chihuahua personality in its commercials.
  • During discussions, Alfaro understood that if Taco Bell used the Psycho Chihuahua concept, Rinks and Shields would have to be paid.
  • Wrench's licensing agent submitted a formal licensing proposal to Taco Bell in November 1996, which was neither accepted nor explicitly rejected.
  • Discussions and presentations between Wrench and Taco Bell regarding the concept continued into early 1997, including specific ideas for commercials.
  • In July 1997, Taco Bell began airing a national advertising campaign prominently featuring a Chihuahua character.

Procedural Posture:

  • Wrench LLC, Shields, and Rinks sued Taco Bell Corporation in the U.S. District Court for the Western District of Michigan for breach of implied-in-fact contract and other state law claims.
  • Taco Bell filed a motion to dismiss, which the district court granted in part, finding some tort claims were preempted by the Copyright Act.
  • After discovery, Taco Bell moved for summary judgment.
  • The district court granted Taco Bell's motion for summary judgment, holding that the implied-in-fact contract claim was preempted by the Copyright Act and, alternatively, that the underlying idea lacked novelty.
  • Wrench LLC, Shields, and Rinks, as appellants, appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Sixth Circuit.

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Issue:

Does the federal Copyright Act preempt a state law claim for breach of an implied-in-fact contract when the claim is based on a promise to pay for the use of a creative idea?


Opinions:

Majority - Graham, District Judge

No. A state law claim for breach of an implied-in-fact contract is not preempted by the Copyright Act because it contains the extra element of a promise to pay, which makes it qualitatively different from a copyright infringement claim. The court applied the two-prong preemption test from § 301 of the Copyright Act. First, the court held that the work fell within the subject matter of copyright because the ideas were fixed in tangible media like storyboards and drawings, and the scope of copyright's subject matter for preemption is broader than the scope of its protection. Second, the court held that the state law right asserted was not equivalent to any exclusive right granted by the Copyright Act. A copyright claim alleges unauthorized reproduction or use, whereas this implied contract claim alleges the breach of a promise to pay for such use. This promise is the 'extra element' that saves the claim from preemption. The court also held that under Michigan law, a contract-based claim for the use of an idea does not require the idea to be novel.



Analysis:

This decision clarifies the boundary between federal copyright preemption and state contract law, particularly for 'idea submission' cases. It establishes that creators can use contract law to protect their interests when disclosing ideas, even if the ideas themselves are not copyrightable. By finding that a promise to pay constitutes an 'extra element' sufficient to avoid preemption, the court provides a vital avenue for creators to seek compensation when they disclose ideas to companies under an expectation of payment. This ruling solidifies the principle that contract rights are separate from copyright protections and shapes how corporations must handle ideas pitched to them under an implied agreement.

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