Nadel v. Isaksson

• Decision Date: 24 February 2003
• Docket Number: Docket No. 02-7274.
• Citation: 321 F.3d 266
• Parties: Craig P. NADEL, Plaintiff-Appellant, v. Will ISAKSSON, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

321 F.3d 266

Craig P. NADEL, Plaintiff-Appellant, v. Will ISAKSSON, Defendant-Appellee.

Docket No. 02-7274.

United States Court of Appeals, Second Circuit.

Argued: December 10, 2002.

Decided: February 24, 2003.

Martin B. Pavane (Catriona M. Collins, on the brief), Cohen, Pontani, Lieberman & Pavane, New York, NY, for appellant.

Jonathan C. Moore, Law Offices of Jonathan C. Moore, New York, NY, for appellee.

Before: NEWMAN, SACK, and SOTOMAYOR, Circuit Judges.

SOTOMAYOR, Circuit Judge.

Plaintiff-appellant Craig P. Nadel appeals from a judgment as a matter of law issued by the United States District Court for the Southern District of New York (Richard Owen, J.) that supplanted a jury's determination of a special interrogatory, and hence a jury's verdict, in his favor. The district court held that the Jumping Toy, a toy design licensed to a toy company by defendant-appellee Will Isaksson, is a "new" toy vis-a-vis an earlier toy and that as such, it is not within the scope of an oral agreement between the parties to share licensing royalties from the earlier toy. Because we hold that the jury's determination in a special interrogatory finding the Jumping Toy not to be a "new" toy is supported by sufficient evidence, we vacate the district court judgment and reinstate the jury's finding on the "new" toy issue.

We also conclude, however, that the jury charge did not permit the jury to decide other contract-related issues contested at trial by Isaksson, namely whether the agreement makes Nadel's entitlement to royalties contingent upon any particular performance by Nadel (such as Nadel successfully marketing the Jumping Toy) and, if these performance obligations are part of the agreement, whether Nadel fulfilled them. Because Isaksson may therefore still prevail on the ultimate issue of liability, we remand to the district court for further fact-finding limited to these unresolved issues.

BACKGROUND

If we leave to one side the parties' apparent personal interest in adjudicating their inventorship dispute, which is irrelevant to the legal issues as they come to us on appeal, this case presents a textbook dispute over the terms of an oral contract.

1. The Toys and the Agreements

Will Isaksson is a toy inventor. By 1994, he had built a prototype of a toy called the Dual Differential, a remote-controlled vehicle composed of a single two-wheeled axle and a short, rigid tail dragged from the axle's midpoint. A complicated "dual-differential" mechanism permitted a single motor to rotate each tire at an independent speed and thus made the toy highly maneuverable. Furthermore, when the spin of the wheels was suddenly reversed when the toy was moving straight, the toy would suddenly brake, inertia would "flip" the tail over the top of the axle, and the toy could immediately resume traveling in the opposite direction. The tail could flip sides and the toy could roll over in this manner because the toy had no distinct top or bottom. In an oral agreement, Isaksson and Dietmar Nagel of the firm Design O Matic, whose principals were Nagel and Craig P. Nadel, the plaintiff-appellant, agreed to share equally any royalties received if Nagel marketed the Dual Differential to a toy company. Isaksson alleges that this agreement required royalty-sharing only if Nagel succeeded in marketing the toy. Through 1996, all efforts to market the Dual Differential were unsuccessful.

In late 1996 or early 1997, with Dietmar Nagel having retired, Isaksson and Nadel arrived at a new oral royalty-sharing agreement which both parties agree included the Modified Kenner Car, a newer version of the Dual Differential. The Modified Kenner Car could perform the same spinning and flipping maneuvers as the Dual Differential but had off-road tires, a longer tail that permitted the toy to maintain a straighter path, and a simplified dual-motor propulsion mechanism that was extracted from a commercially available "Ricochet" car by Kenner. Although the parties concur that this agreement (the "Modified Kenner Car contract") required royalties from the Modified Kenner Car to be split evenly between them, they disagree as to the point in time at which the agreement was made as well as a number of its other terms.

Nadel contends that the Modified Kenner Car contract sprang from his desire to "dust ... off" and "do something with" the Dual Differential and that he and Isaksson agreed to develop further the Dual Differential jointly. (Likely because inventive contributions are circumstantial evidence of whether the Modified Kenner Car contract is such a collaborative development agreement, each party argues at length that he was the true inventor of the improvements to the Dual Differential that led to the Modified Kenner Car.) Depicting himself as a partner in a development agreement, Nadel alleges that the Modified Kenner Car contract entitled him to half of the royalties from any toy resulting from the collaboration regardless of who succeeded in marketing the resulting toy.

Isaksson in turn alleges that the agreement did not arise until after the development of the Modified Kenner Car and that it reflects a new version of the same arrangement that he had made regarding the Dual Differential. Under Isaksson's theory, the agreement was specific to a particular toy, the Modified Kenner Car, and Nadel was a toy marketer who was entitled to half of the royalties only if he successfully marketed the Modified Kenner Car.

With these different understandings of the contract either unrecognized or deemed unimportant, the parties prepared to market the Modified Kenner Car. Nadel commissioned a set of concept drawings in conjunction with his marketing efforts from a design firm called Joe Designer. In the Spring of 1997, he scheduled a meeting to pitch the Modified Kenner Car to Hasbro, a toy company, but the prototype Isaksson had constructed broke while Nadel was preparing for the meeting. Nadel returned the prototype to Isaksson for repairs.

Then came the "fin." In the process of repairing the Modified Kenner Car prototype, Isaksson attached a rigid fin-shaped sheet of plastic extending upward from the midpoint of the axle. This fin, the curved edge of which is called a cam surface, altered the way in which the toy functioned. With the addition of the fin, when the spin of the motor was suddenly reversed and the toy's forward momentum began to flip the toy over, the toy was no longer able to continue in the opposite direction because the fin, unlike the tail, gave the toy discrete top and bottom sides. The toy instead rolled onto and across the cam surface which used the toy's rolling motion to send the toy tumbling up off the ground and into the air. The shape of the cam surface — the fact that the surface or edge became increasingly distant from the axle as the roll of the toy progressed — combined with a little friction to translate some of the toy's horizontal motion into vertical motion. In other words, the toy jumped. For consistency, we adopt the district court's terminology and refer to this finned toy as the "Jumping Toy."

In keeping with his joint-development theory of the Modified Kenner Car contract, Nadel claims that the Joe Designer drawings that he commissioned inspired Isaksson to add the fin and to create the Jumping Toy. In contrast, Isaksson alleges that he dismissed the Joe Designer drawings as they "didn't let the car function at all" and ascribes to himself the status of sole inventor of the Jumping Toy.

Isaksson contacted Nadel soon after conceiving of the Jumping Toy, and the two discussed plans for Nadel to market it to Hasbro. When Nadel announced plans to market it first to a smaller toy company, however, Isaksson, still in possession of the prototype, decided to market the toy directly to Hasbro himself. Isaksson succeeded in pitching and licensing the Jumping Toy to Hasbro, which sold the toy under the name "SkyDriver." The license generated $534,977.26 in royalties.

2. The District Court Proceedings

Claiming a right to half of the royalties, Nadel brought this suit in April 1998 in the United States District Court for the Southern District of New York (Richard Owen, J.) on several contract-related theories.¹ He alleged that the Jumping Toy was covered by the Modified Kenner Car contract, that an express oral contract or an implied contract existed directly addressing the Jumping Toy, and that Isaksson was liable in quasi-contract for the benefit Nadel conferred on Isaksson through his efforts to develop and market the Jumping Toy.

The case went to a jury trial in December 1999, and the jury returned a special verdict in favor of Nadel. Question one of the verdict sheet, intended to be dispositive of Nadel's claim under the Modified Kenner Car contract, asked the jury "Is the Jumping Toy ... a `new' toy? ... If your answer is `no', proceed no further and return a verdict for plaintiff Nadel, awarding 50% of royalties earned on the Jumping Toy. If your answer is `yes', proceed to Question 2." During deliberations, the jury requested a definition of a "new" toy and the district court provided the following: "In answer to your question, did the Jumping Car develop from the modified Kenner car, or did it not reasonably develop from that, but in fact embody a new concept of use and performance? The former is not a new toy and the latter is." The jury then answered question one "no" and never reached the four remaining special interrogatories in questions two through five which addressed Nadel's other contract and quasi-contract claims.

Each party had properly objected to a different aspect of question one, but each objection was overruled. Isaksson objected that the jury charge did not give the jury the opportunity to decide whether the Modified Kenner Car contract was an agreement to share royalties only if Nadel succeeded in marketing the toy, because the charge required the jury to enter a verdict in favor of Nadel if...