Fasa Corp. v. Playmates Toys, Inc., 93 C 2445.
| Decision Date | 23 June 1995 |
| Docket Number | No. 93 C 2445.,93 C 2445. |
| Citation | 892 F. Supp. 1061,35 USPQ 2d 1766 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | FASA CORPORATION and Virtual World Entertainment, Plaintiffs, v. PLAYMATES TOYS, INC., Defendant. |
Karen Beth Ksander, Catherine Ann Van Horn, Liza Marie Franklin, Sonnenschein, Nath & Rosenthal, Chicago, IL, for FASA Corp. and Virtual World Entertainment.
Paul R. Garcia, Kirkland & Ellis, Mark Partridge, David C. Hillard, Brett A. August, Marianne E. Ryan, Maxine S. Lans, Pattishall, McAuliffe, Newbury, Hillard & Geraldson, Chicago, IL, Jack D. Samuels, Los Angeles, CA, for Playmates, Toys Inc.
Beginning on June 19, 1995, the Court began the first phase of a potential four phase bench trial in this matter which involves an intellectual property dispute involving futuristic robot-like battle toys. Due to the scope and complexity of the issues to be tried in this case, See FASA Corp. v. Playmates Toys, Inc., 869 F.Supp. 1334-1365 (N.D.Ill.1994), this Court entered Trial Sequence and Timing Orders on June 6, 1995 and June 9, 1995, which are attached hereto as Appendices A and B.
The Court hereby enters the following Findings of Fact and Conclusions of Law at the conclusion of Sequence One of the trial which addressed Playmates' affirmative defense of waiver.1 The Findings of Fact are based upon consideration of all the admissible evidence as well as this Court's assessment of the credibility of the trial witnesses.
The following factual findings are based on all of the competent evidence adduced at trial and are essentially undisputed by the parties:
1. Plaintiff FASA Corporation ("FASA") is an Illinois corporation with its principal place of business in Chicago, Illinois.
2. FASA is the creator, developer, publisher, promoter and distributor of various fictional universes, including but not limited to BATTLETECH, which form the basis for board games, role-playing games, novels, game systems and other game supplements.
3. FASA licenses the intellectual property and proprietary rights in BATTLETECH to third parties for the development of location-based interactive entertainment games and centers, disk-based computer games, cartridge-based computer games, models, miniatures, merchandise, movies, television programming, toys and other items.
4. Plaintiff Virtual World Entertainment ("VWE") is a Delaware corporation with its principal place of business in Burbank, California, and an office in Chicago, Illinois.
5. VWE was founded by the creators of BATTLETECH in 1987.
6. VWE is a virtual reality entertainment company engaged in the acquisition, development, operation, licensing and franchising of location-based virtual reality entertainment games and entertainment centers associated with BATTLETECH and other games.
7. Defendant Playmates Toys, Inc. ("Playmates"), is a California corporation with its principal place of business in La Mirada, California.
8. Playmates is a distributor of toys supplied by a related company, Playmates Toys (Hong Kong) Ltd. ("Playmates HK"), including TEENAGE MUTANT NINJA TURTLES, STAR TREK, ADDAMS FAMILY and various Disney characters, and also participates in the development of toys pursuant to an agreement with Playmates HK.
9. Plaintiffs FASA and VWE2 have sued Playmates alleging federal and common-law unfair competition (Counts I and II, respectively), copyright infringement (Counts III and IV), trademark infringement (Counts V and VI), dilution under Illinois' anti-dilution statute, 765 ILCS 1035/15 (Counts VII and VIII), and tortious interference with prospective business advantage (Count IX).
10. The lawsuit centers on Playmates' alleged infringement of FASA's intellectual property and proprietary rights in BATTLETECH by designing and marketing the ExoSquad toy line.
11. On December 5, 1994, this Court denied Playmates' Motion for Summary Judgment with respect to FASA's claims for federal unfair competition (Count I), copyright infringement (Counts III and IV) and trademark infringement (Counts V and VI) and granted Playmates' Motion for Summary Judgment with respect to Playmates' claims for common law unfair competition (Count II), dilution (Counts VII and VIII) and tortious interference (Count IX). FASA Corp. v. Playmates Toys, Inc., 869 F.Supp. 1334 (N.D.Ill.1994).
12. In late 1991, Robert Allen, a Cincinnati, Ohio, toy designer, asked FASA for the opportunity to interest toy companies in the BATTLETECH property.
13. Although Allen and FASA never reached agreement on the nature and scope of Allen's role, FASA did permit Allen to make at least three presentations to toy companies regarding a BATTLETECH toy line.
14. In response to a telephone inquiry, Playmates invited Allen to its California headquarters for a meeting to discuss several toy designs, including BATTLETECH.
15. On December 10 or 11, 1991, Allen met with Chris Devine Dailey, an employee of Playmates, and presented three potential toy lines: BATTLETECH, Wendy And Her Wagon and Speedballs.
16. When Allen arrived at Playmates on December 11, 1991, to present BATTLETECH, Playmates presented Allen with an untitled document that Playmates represented as its standard "New Product Submission Form." (Joint Ex. 13) This New Product Submission Form reads as follows:
17. Allen had signed nondisclosure or new product submission forms before which did not require or include waivers of either copyright or trademark infringement claims or of other future unknown claims by the owner of the property.
18. Chris Dailey did not tell Allen that the form included a waiver of any rights. Ms. Dailey did not explain the form to Allen.
19. Playmates knew that Allen was not an employee of FASA.
20. Although Playmates had never dealt with FASA in the past, Playmates made no effort to verify Allen's authority.
21. At no time did Playmates attempt to contact FASA. There was no communication of any type between Playmates and FASA until this lawsuit was filed.
22. FASA did not explicitly authorize Allen to waive any of its intellectual property rights in BATTLETECH. (Tr. 171)
23. Allen did not believe that he was authorized by FASA to waive FASA's intellectual property rights in BATTLETECH. (Allen Decl. ¶ 5)
24. Allen never contacted FASA to obtain permission to sign the waiver form. (Tr. 107-08)
25. Allen never represented to Playmates that he had any authority or power to waive legal claims on behalf of FASA. (Tr. 27 Daily testimony; Tr. 71-191 Allen Testimony; Allen Decl.)
26. At the conclusion of the meeting, Allen left various printed BATTLETECH materials with Dailey for Playmates' review. Those materials included a video tape, a poster featuring over 48 BATTLEMECH designs, a FASA catalogue which displayed all of FASA's products and a press kit on The BATTLETECH Center containing various newspaper articles and a BATTLETECH Center Operations Manual. (PGX 18J, PX 281)
27. Ms. Dailey told Allen that Playmates would not inform him of any decisions regarding the BATTLETECH toy line until after the February, 1992, Toy Fair.
28. In late May or early June, Playmates notified Allen that it was no longer interested in a BATTLETECH license.
29. While the Court finds that many toy companies use nondisclosure or new product submission forms — the Court finds that such companies do not require, as a standard practice, a waiver of all the intellectual property rights held by the inventor. In this regard, the Court notes that Playmates' own experts testified that it is not typical in the toy industry for a toy company to require an inventor to waive all rights to the invention in order to submit it for review. (Tr. 37 Delaney testimony, 58 Shackelford testimony) Moreover, even Playmates' president testified that he did not understand the waiver provision in Playmates' new product submission form to include a waiver of copyright, trademark, or patent claims. (Tr. 24)
1. California law governs the agency law issue of whether FASA is bound by the purported waiver of its agent, Allen. FASA Corp., 869 F.Supp. at 1343-44.
2. Under the California Civil Code, "an agent has such authority as the principal, actually or ostensibly, confers upon him," CAL.CIVIL CODE § 2315, and "an agent represents his principal for all purposes within the scope of his actual or ostensible authority." CAL.CIV.CODE § 2330. Only those liabilities "which would accrue to the agent from transactions within his actual or ostensible authority, if they had been entered into on his own account, accrue to the principal." Id.
3. Playmates failed to establish that Allen had either actual or ostensible authority to bind FASA when he signed Playmates' waiver.
4. "Actual authority is such as a principal intentionally confers upon the agent, or intentionally, or by...
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