PMC, Inc. v. Saban Entertainment, Inc.

• Decision Date: 16 May 1996
• Docket Number: No. B093683,B093683
• Citation: 52 Cal.Rptr.2d 877,45 Cal.App.4th 579
• Court: California Court of Appeals Court of Appeals
• Parties: , 1996 Copr.L.Dec. P 27,528, 96 Cal. Daily Op. Serv. 3531 PMC, INC., etc., Plaintiffs and Appellants, v. SABAN ENTERTAINMENT, INC., etc., et al., Defendants and Respondents.

Page 877

52 Cal.Rptr.2d 877

45 Cal.App.4th 579, 1996 Copr.L.Dec. P 27,528,

96 Cal. Daily Op. Serv. 3531

PMC, INC., etc., Plaintiffs and Appellants, v. SABAN ENTERTAINMENT, INC., etc., et al., Defendants and Respondents.

No. B093683.

Court of Appeal, Second District, Division 3, California.

May 16, 1996.

Christensen, White, Miller, Fink, Jacobs, Glaser & Shapiro, Michael J. O'Connor and Peter C. Sheridan, Los Angeles, for Plaintiff and Appellant.

Greenberg, Glusker, Fields, Claman & Machtinger, Michael A. Greene, James E. Hornstein, Jeffrey Spitz, Wendy M. Mesnick, Kinsella, Boesch, Fujikawa & Towle, Dale F. Kinsella and Gregory J. Aldisert, Los Angeles, for Defendants and Respondents.

CROSKEY, Associate Justice.

Defendant and respondent Saban Entertainment, Inc. ("Saban") held the copyright for the name and likeness of "The Mighty Morphin Power Rangers." Plaintiff and appellant Cosrich, a division of PMC, Inc. ("Cosrich"), was bidding against defendant and respondent Tsumura International, Inc. ("Tsumura") to obtain an exclusive license to market and manufacture items using the Power Rangers name. Saban ultimately entered into an exclusive license contract with Tsumura. Cosrich brought this lawsuit alleging it actually had entered into a prior exclusive contract with Saban, which Saban had breached by entering into the contract with Tsumura. Cosrich also alleged that Tsumura had intentionally interfered with Cosrich appeals from the judgment entered after the trial court granted the summary judgment motions of both Saban and Tsumura. We conclude that the cause of action for breach of contract against Saban must fail because there was no formalized agreement which satisfied the Copyright Act's requirement of a signed writing. As to Tsumura, we hold Cosrich cannot assert a cause of action for intentional interference with contract because there was no enforceable contract with which to interfere; as a result, the only available claim against Tsumura has to be based upon an interference with prospective economic advantage. However, that is not viable in this case because Tsumura's actions as Cosrich's competitor were privileged as a matter of law. We therefore affirm the judgment.

Cosrich's contractual and business relationship with Saban.

FACTUAL AND PROCEDURAL BACKGROUND ¹

In the fall of 1993, Cosrich and Tsumura were each bidding to obtain from Saban an exclusive license to manufacture and market children's cosmetic and toiletry items using the name and likeness of the "Mighty Morphin Power Rangers." The following chronological summary of the negotiations and correspondence between the members of this commercial triangle is sufficient to present the issues which we must decide.

On November 10, 1993, Cosrich's president (Michael Reich) wrote a letter to Saban expressing "my Company's interest in licensing [the Power Rangers] in the toiletries category." The letter confirmed there had been discussions of a license contract with a specified 10% royalty rate, a "2 year term and a $50,000.00 Guarantee for the term." Reich also expressed his hope that "we will be able to finalize this deal prior to [a meeting set for November 16]." Attached to the letter was a list of the articles for which Cosrich wished to obtain a license.

On November 18, 1993, Reich met with representatives of Saban. In the meeting, they discussed the proposed license agreement. Saban's representatives told Reich that Saban was positively inclined toward awarding Cosrich the license. Saban's representatives also stated that while other competitors were vying for the license and the final decision would have to be made by Saban's president, they were quite confident Cosrich would be awarded the license. At this meeting, Reich was given a copy of Saban's 'Style Guide,' a document specifying Saban's proprietary requirements for the licensed products, including artwork, advertising and other aspects of the product line.

Also on November 18, 1993, Saban prepared and internally filed a "deal memo." Deal memos were internal documents which enabled Saban's creative manager to ascertain if submitted artwork was included in a particular license agreement. The deal memo listed Cosrich as licensee, the property was identified as the "Mighty Morphin Power Rangers," the territory was shown as the United States, and distribution outlets were specified. The second page of the memo itemized products and estimated marketing dates.

Tsumura had also submitted a proposal to Saban, but it specified a royalty percentage of only 5%. Saban was insisting on a 10% royalty (which Cosrich had agreed to pay). Saban asked Tsumura to submit another proposal which would increase the royalty percentage to 10%. Tsumura refused to do so, but did submit a new proposal with a royalty rate of 8%.

On November 29, 1993, Reich had a conversation with Saban's manager of domestic sales. Saban's manager stated that Saban had decided to award the license to Cosrich in accordance with Cosrich's proposal of November 10, 1993. The items listed in the November 10 communication were discussed, as well as certain changes and modifications which would be granted in the license. Reich agreed to all of these changes. Saban's Manager stated that she needed additional On November 29, 1993, Saban's manager wrote Tsumura and stated that "management has decided to grant the license to another company based on their ability to commit to a higher royalty and FOS rate.... I know [Tsumura's offer of 8%] was the highest percentage you could reasonab[ly] offer without cutting into your margins. Therefore, ... the decision has been made to go with the company who could meet the requirements."

information on certain items. Cosrich's president said this would be provided in the next few days. Reich also confirmed the agreement to increase the amount of the guarantee to $50,000. At the end of the conversation, Saban's manager told Reich that she would be preparing [45 Cal.App.4th 587] and forwarding to him a written agreement which would incorporate the terms of the license they had agreed upon, as well as standard license provisions for agreements of that kind.

After receiving this communication, Tsumura's agents had a number of telephone conversations with Saban's representatives in which Tsumura's strengths were emphasized. During these telephone calls, Tsumura learned that Cosrich was the competitor that had submitted a better offer.

On November 30, 1993, Reich wrote Saban the following: "We very much appreciated [the] call last night informing us that you have decided to award us the license for MIGHTY MORPHIN POWER RANGERS in the toiletries category. Thank you ... for the confidence you have shown in Cosrich---you may be sure we will not disappoint you. [p] As promised we are already in the process of putting together a comprehensive product line so that when MIGHTY MORPHIN POWER RANGERS toiletries are presented to the trade, they will not be seeing one or two items but a complete program. [p] Thank you again ..."

On November 30, 1993, Cosrich began the development process preparing a Power Ranger line of toilette products. Cosrich expended thousands of dollars on drawings, artwork, clay figurines, plastic molds, labels, packaging and layouts for sales promotions.

On December 1, 1993, Reich directed the following additional letter to Saban: "This letter is in response to your question about the inclusion of figurines in our License Agreement. Please understand that these would only be used as an accessory to be sold with one or more of our licensed articles." Proposed designs and illustrations of certain initial items were attached to the letter. Saban responded the next day, indicating it had received the designs and "[h]ope to have approvals early next week."

A December 15, 1993 letter from Tsumura to Saban stated, "[W]e have here ... a serious communication problem that seems to be affecting the decision making process. [p] While we were negotiating with Saban, we thought we were the company because of our strength in the category.... Unfortunately as it turns out, we were not the only candidate and without any further conversation with us, a contract was sent out to another company. That was not fair or honorable to us. [p] [O]ther licensors are thrilled with our quality, commitment, and strength in the category and if you want to maximize your income, we are the company of choice ..." (Italics added.)

On December 21, 1993, Tsumura submitted a new proposal to Saban, increasing its guarantee to $250,000 and offering 10% royalty rate. In the same communication, Tsumura stated it was surprised to learn that it had any competitor for the license. Saban was apparently concerned about the negotiations and correspondence which it had just concluded with Cosrich. Thus, during the first week of January 1994, Saban countered to Tsumura with the request that Saban be indemnified for any expenses incurred as a result of legal issues which might arise if the license was awarded to Tsumura. Tsumura agreed to this request.

On January 11, 1994, Saban sent a letter to Cosrich stating that, "Saban will not be able to grant you such a license [for a line of health and beauty aids incorporating elements from the television series Mighty Morphin Power Rangers] at this time." In mid- On January 20, 1994, Cosrich filed a complaint against Saban and Tsumura. ³ Cosrich sought to prevent Saban and Tsumura "from purporting to convey to others or otherwise interfere with Cosrich's rights under its exclusive licensing agreement with [Saban] to develop, market and sell a line of children's cosmetic and toiletry products using the names and likenesses of characters from the top rated children's television program 'Mighty Morphin Power Rangers.' " Cosrich alleged an oral agreement was formed on November 29, 1993 when Saban "accepted Cosrich's proposal for an exclusive license on the terms set forth in...