June 19, 2017

An Implied Contract Can Turn You “Inside Out” — Remember the Non-Confidential Disclosure Agreement

By Bryan K. Wheelock, Principal

Denise Daniels has sued the Walt Disney Company in the Central District of California for breach of an implied-in-fact contract to compensate her for using her ideas in the movie Inside Out.  Daniels alleges that she relied on the custom in the entertainment industry “to provide ideas and materials to producers and studios in exchange for compensation and credit if such ideas or materials are later used.”  She further alleges that “Disney-Pixar accepted the disclosure of the ideas in The Moodsters with an expectation that it would have to compensate Daniels if Disney-Pixar used this idea in any television, motion picture, merchandise, or otherwise.”

This case is a reminder that receiving information from a third party is risky business.  Even where there is no violation of any traditional intellectual property right such as a patent, copyright, trademark or trade secret, one can still find oneself in a lawsuit alleging an implied-in-fact contract to pay for the “idea.”

While an implied-in-fact contract — a contract where none really existed — is a well recognized legal doctrine, this case appears to present a new doctrine — implied-in-fact consideration.  While most cases enforcing rights in ideas require that the idea be both concrete and confidential, many of the aspects of Daniels’ idea appear to have been publicly available.  Her company, Moodsters Company, obtained a copyright registration (PA0001394057) on the pilot The Moodsters: Amoodsment Park Mixup, claiming a date of first publication of June 1, 2007.  There have been Moodsters websites, and Daniels and her company have been sporadically trying to register various Moodsters trademarks for more than a decade.

If the Moodsters are as publicly available as it appears, what did Daniels bring to Disney-Pixar that wasn’t already available to anyone?  Is it possible that Disney-Pixar is in a worse position for talking to Daniels than someone who just referenced her public domain materials?  The answer is clearly yes.  Not because Daniels is certain to win, but rather because even if Disney-Pixar is in the right, they now have to defend themselves.

Daniels reminds us that even in the absence of a confidentiality agreement, there is a risk receiving information from a third party.  Rather than expose oneself to the vagaries of an after-the-fact contract, you may be better served with an explicit contract spelling out your obligations (or lack of obligations) to the disclosing party.