On March 16, 2020, the Ninth Circuit ended a lawsuit alleging that Disney’s Inside Out infringed plaintiffs’ alleged copyright in characters known as “The Moodsters.” Daniels, et al., v. The Walt Disney Company, et al., Case No. 18-55635 (9^th Cir. Mar. 16, 2020). The Court elaborated on the standards governing character protection and enunciated a rigorous standard for pleading “idea submission” claims in federal court.

Plaintiffs’ five characters are color-coded anthropomorphic emotions, each representing a different emotion. Between 2007 and 2009, Plaintiffs allegedly pitched The Moodsters to Disney. In 2015, Disney released Inside Out, a film that centers on five anthropomorphized emotions that live inside the mind of an eleven-year-old girl.

Plaintiffs’ lawsuit alleged that defendants had infringed the copyrights in their characters.  Additionally, Plaintiffs alleged that defendants had breached an implied-in-fact contract by failing to compensate plaintiffs for the use of their idea. The district court granted defendants’ motion to dismiss under F.R.C.P. 12(b)(6). In affirming dismissal, the Ninth Circuit clarified the law governing character protection and limited the availability of idea submission claims in the Ninth Circuit.

Protectability of Characters

In 2015, the Ninth Circuit, addressing infringement claims in connection with the fictional “Batmobile,” articulated a three-part test for copyright protection of characters.  A character is copyrightable if it: (1) has “physical as well as conceptual qualities”; (2) is “sufficiently delineated to be recognizable as the same character whenever it appears” and “display[s] consistent, identifiable character traits and attributes”; and (3) is “especially distinctive” and “contain[s] some unique elements of expression.” DC Comics v. Towle, 802 F.3d 1012, 1021 (9th Cir. 2015) (Batmobile is copyrightable character). The Moodster Plaintiffs satisfied the first requirement. But the second prong proved an “insurmountable hurdle.”  Unlike protectable characters (e.g., The Batmobile or James Bond), The Moodsters had not maintained distinct physical and conceptual qualities since their first appearance. The characters originally had an insect-like appearance but later became “lovable bears.” Their personalities also changed. Notably, the Court emphasized that The Moodsters colors and representations of variable emotions—their only consistent characteristics—constituted mere uncopyrightable ideas.

The Court also held that, under the third factor, The Moodsters neither were especially distinctive nor contained unique elements of expression. Developing a character as an anthropomorphic representation of an emotion was a mere idea insufficient to meet this prong.

The Court then went on to consider an alternative test for protection, namely whether the characters constitute “the story being told.” Noting that this test sets a “high bar,” the Court held that nothing in the pleadings exhibited “any prolonged engagement with character development or a character study of The Moodsters.”

In summary, after Towle, many wondered whether the Court had granted overbroad protection to characters. The Daniels case sets important limits on the scope of character protection.

Implied-in-fact Contract

The Ninth Circuit also affirmed dismissal of the implied-in-fact contract claim, which was based on Desny v. Wilder, 46 Cal. 2d 715, 738 (1956). In the Ninth Circuit, to prove the existence of an implied contract, a plaintiff must establish that: (1) the plaintiff prepared the work; (2) the work was disclosed to the defendant for sale; and (3) the disclosure was made under circumstances from which it could be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work. The Court in Daniels summarily concluded that plaintiffs had failed to plead a valid implied contract because they alleged only that they had met with defendants and that custom in the industry created an implied contract. However, these barebones allegations could not support an implied-in-fact contract claim. By way of example, the Court noted that plaintiffs had pled neither dates nor details regarding the meetings.

The Ninth Circuit arguably sets forth a more rigorous standard for pleading and proving a contract than prior state court opinions. For example, Blaustein v. Burton, 9 Cal.App.3d 161 (1970), has been cited for the proposition that an implied-in-fact contract arises when industry professionals engage in pitch meetings. Moreover, cases in which an implied-in-fact contract claim is dismissed at the pleading stage are rare. Daniels might open up avenues for challenging such claims at the pleading stage for want of specificity.