Wrench, LLC v. Taco Bell Corp.

Facts

Plaintiff created and promoted a cartoon chihuahua known as “Psycho Chihuahua.” Employees of Defendant’s creative services department saw the character at a trade show and approached Plaintiff about using the character in retail licensing. Plaintiff then hired a licensing agent to continue communications with the Taco Bell employees. Those discussions grew to include advertising, although Defendant’s marketing department was not yet involved. Plaintiff’s licensing agent sent Defendant a proposal for use of the chihuahua character, providing that Defendant would pay Plaintiff a percentage of the amount spent on advertising, a percentage of the retail licensing sales, and a percentage based upon the cost of items such as chihuahua toys sold at Defendant’s restaurants. Defendant neither accepted nor rejected the proposal. Discussions continued and Defendant asked Plaintiff to prepare a presentation for its marketing department. The presentation was prepared, but never given. The creative services department remained interested in the use of the character, however. At this time, Defendant hired a new advertising agency. This agency had previously created a commercial for an automobile company that featured a driving chihuahua and now proposed a commercial for Defendant showing a chihuahua choosing Defendant’s food over a female chihuahua. Plaintiff had previously proposed the same idea. The employees from Defendant’s creative services department still wanted to use Plaintiff’s character and wanted to persuade the marketing department to approve the idea. The materials for a campaign featuring Psycho Chihuahua were passed on to the marketing department, who then sent them to the new advertising agency. A few months later, Defendant aired commercials using a chihuahua saying “Yo quiero Taco Bell.” The commercials were very successful and Defendant continues to use the character. Plaintiff sued Defendant for breach of implied-in-fact contract, misappropriation, conversion, and unfair competition. Defendant moved for summary judgment on all claims, arguing that no implied-in-fact contract was created, and that even if one existed, it was preempted by federal copyright law. Defendant also argued that the idea to use a chihuahua came from its new advertising agency only and that Plaintiff’s ideas were not novel.