Misappropriation of Ideas – Implied-in-Fact Contract Law Definition Elements Defense Lawyer
Definition.
When an idea has been used without the permission of its creator, he may protect his idea under an implied-in-fact contract theory. In order to establish an implied-in-fact contract, one must show: “that he or she prepared the work; that he or she disclosed the work to the offeree for sale; that under all circumstances attending disclosure it can be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered (i.e. the offeree must have the opportunity to reject the attempted disclosure if the conditions were unacceptable); and the reasonable value of the work.” Aliotti v. Dakin & Co., 831 F. 2d 898, 902 (9th Cir. 1987).
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1:21 Idea
When the originator seeks protection for his idea, courts that generally follow the more traditional view will require that the idea be novel and reduced to concrete form. Stanley v. Columbia Broadcasting System, Inc., 35 Cal. 2d 653, 656 (1950); Yadkoe v. Fields, 66 Cal. App. 2d 150, 159 (1944); but see Chandler v. Roach, 156 Cal. App. 2d 435 (1957) (some courts in recent years no longer require the elements of novelty and concreteness for implied-in-fact contracts with reference to certain types of idea cases); Minniear v. Tors, 266 Cal. App. 2d 495, 72 Cal. Rptr. 287, 293 (1968) (when consideration is found not in the idea sold but rather in plaintiff’s services in disclosing the idea, then the idea need not be novel or concrete).
Traditionally, where courts have assumed that an idea must be property in order to be protectable, they have required that the idea be novel and concrete. Yadkoe v. Fields, 66 Cal. App. 2d 150, 152, 158-59 (1944); but see Minniear v. Tors, 266 Cal. App. 2d 495, 72 Cal. Rptr. 287, 293 (1968) (when consideration is found not in the idea sold but rather in plaintiff’s services in disclosing the idea, then the idea need not be novel or concrete).
Where plaintiff submitted comic gags and material for use by defendant in motion picture productions and in radio broadcasts, the court held that the material was a sufficiently developed concrete form so as to warrant recovery under an implied-in-fact contract. Yadkoe, 66 Cal. App. 2d at152, 158-59 (1944).
Defendant conceded that plaintiff’s idea had been reduced to the concrete form of a script format and recording, needing no additional embellishments and was ready for immediate use. Stanley v. Columbia Broadcasting System, Inc., 35 Cal. 2d 653, 663, 221 P. 2d 73, 79 (1950).
A radio program offered its audience the opportunity to voice their opinions as to what types of movies they preferred to watch and to suggest players for the leading roles. Each element of the radio program by itself was nothing new to radio, but the combination of these elements created a program that was new and novel. Stanley, 35 Cal. 2d at 633.
Plaintiff’s presentation for a television program about a war hero, the effect of his past on his present life, the method for recapturing the back story in sequential episodes, and portrayal techniques had sufficient concreteness and novelty to be classified as protectable. Fink v. Goodson-Todman Enterprises, Ltd., 9 Cal. App. 3d 996, 1014, 88 Cal. Rptr. 679, 693-94 (1970).
1:22 Preparation of Idea
The originator of the idea must prove that he prepared the idea. Aliotti v. Dakin & Co., 831 F. 2d 898, 902 (9th Cir. 1987).
Plaintiffs conceived an idea for a television format titled “The Underwater Legion,” and submitted the format in written form to defendants along with story outlines, a screenplay, and a proposed budget. Donahue v. United Artists Corp., 2 Cal. App. 3d 794, 800, 83 Cal. Rptr. 131, 131-32 (1969).
Plaintiff had developed a 65-page story based upon the life of Floyd Collins and prepared a short synopsis that he read to defendant’s secretary. Desny v. Wilder, 46 Cal. 2d 715, 726, 299 P. 2d 257, 262 (1956).
1:23 Disclosure of Idea
The originator of the idea must prove that he disclosed the work to the offeree for sale. Aliotti v. Dakin & Co., 831 F. 2d 898, 902 (9th Cir. 1987).
“The idea man who blurts out his idea without having first made his bargain has no one but himself to blame for the loss of his bargaining power. The law will not in any event, from demands stated subsequent to the unconditioned disclosure of an abstract idea, imply a promise to pay for the idea, for its use, or for its previous disclosure.” Desny v. Wilder, 46 Cal. 2d 715, 739, 299 P. 2d 257, 270 (1956); but see Landsberg v. Scrabble Crossword Game Players, Inc., 736 F. 2d 485, 490 (9th Cir. 1984) (suggesting that after plaintiff blurted out his submission, defendant’s request for a second copy of plaintiff’s manuscript “may constitute conduct creating an implied-in-fact contract”).
Where plaintiffs submitted their idea with the expectation of compensation, the court found that disclosure was sufficient to support the finding of an implied-in-fact contract. Donahue v. United Artists Corp., 2 Cal. App. 3d 794, 83 Cal. Rptr. 131, 138 (1969).
Plaintiff stated that during his conversation with defendant’s secretary he mentioned that his story was for sale and if anybody used it they would have to pay for it. Desny, 46 Cal. 2d at 727.
It is not necessary that the seller definitely state that he is selling his merchandise to the prospective buyer. The agreement of sale may be inferred by the circumstances. Minniear v. Tors, 266 Cal. App. 2d 495, 504, 72 Cal. Rptr. 287, 294 (1968).
“No contract may be implied where an idea has been disclosed not to gain compensation for that idea but for the sole purpose of inducing the defendant to enter a future business relationship.” Aliotti v. Dakin & Co., 831 F. 2d 898, 902 (9th Cir. 1987).
1:24 Voluntarily Accepted Disclosure of Idea
“Under all circumstances attending the disclosure, it can be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered (i.e., the offeree must have the opportunity to reject the attempted disclosure if the conditions were unacceptable).” Aliotti v. Dakin & Co., 831 F. 2d 898, 902 (9th Cir. 1987).
When the defendant screened a showing of plaintiff’s pilot film and requested an outline for future shows, there was sufficient evidence to infer that defendant had voluntarily accepted the submission of the idea. Minniear v. Tors, 266 Cal. App. 2d 495, 504, 72 Cal. Rptr. 287, 294 (1968).
The court inferred defendant’s voluntary acceptance of plaintiff’s story about Floyd Collins from defendant’s failure to reject the story at the time of submission. Desny v. Wilder, 46 Cal. 2d 715, 745-746 (1956).
1:25 Reasonable Value of Idea
The originator of the idea must prove the reasonable value of the idea. Aliotti v. Dakin & Co., 831 F. 2d 898, 902 (9th Cir. 1987).
California courts have consistently held that an owner of literary property may properly testify as to its value even if he is not an expert in such matters. Golding v. R.K.O. Pictures, Inc., 35 Cal. 2d 690, 700-701, 221 P. 2d 101 (1950).
The reasonable value of plaintiff’s idea was estimated to be $200,000 for 100,000 telecasts at $2 for each exhibition. Donahue v. United Artists Corp., 2 Cal. App. 3d 794, 804, 83 Cal. Rptr. 131, 135-36 (1969).
In order to be compensated for breach of an implied-in-fact contract, the use must be an unauthorized one. Donahue v. United Artists Corp., 2 Cal. App. 3d 794, 804, 83 Cal. Rptr. 131, 135 (1969); see also Davies v. Krasna, 14 Cal. 3d 502, 512 (1975).
“A suit for breach of an implied contract not to exploit an idea without paying for it does arise only with the sale or exploitation of the idea.” Davies v. Krasna, 14 Cal. 3d 502, 511-12, 535 P. 2d 1161, 1167 (1975).
A limited use of an idea during a test period to gauge the public’s reaction constituted an unauthorized use. Thompson v. California Brewing Co., 191 Cal. App. 2d 506, 508, 12 Cal. Rptr. 783, 785 (1961).
Remedies
Compensatory Damages
(although there is no specific statute providing for damages, see generally Cal. Civ. Code § 3333). Donahue v. United Artists Corp., 2 Cal. App. 3d 794, 805, 83 Cal. Rptr. 131, 135-136 (1969).
Statute of Limitations
The statute of limitations is two years for an action upon a contract, obligation or liability not founded upon an instrument of writing. Cal. Code of Civ. Proc. § 339 (1).
Affirmative Defenses
Statute of Limitations (see above)
Express contract dealing with the same subject matter
Laches
Inadequacy of consideration
See generally Appendix A
Form Complaint
Model Complaint for Misappropriation of Ideas – Implied-in-Fact Contract
Name and Address of
Plaintiff’s Attorneys
SUPERIOR COURT OF THE STATE OF CALIFORNIA
IN THE COUNTY OF ________
__________________________ ) CASE NO.____
Plaintiff, )
) COMPLAINT FOR
) MISAPPROPRIATION OF IDEAS –
vs. ) IMPLIED-IN-FACT CONTRACT
)
__________________________ )
Defendant )
)
Plaintiff alleges that:
- (Allegation of Jurisdiction and Venue)
- (Status of Parties)
Plaintiff is a corporation incorporated under the laws of the State of California having its principal place of business at 0000 Montgomery St., San Francisco, CA.
Defendant is a corporation incorporated under the laws of the State of California having its principal place of business at 0000 Wilshire Blvd., Los Angeles, CA.
- (The Idea)
Plaintiff is the originator of the idea, namely ______________ (identify idea).
- (Plaintiff’s Preparation of the Idea)
Plaintiff prepared the idea by means of ____________________.
- (Disclosure of the Idea)
That on or about _____, 20___, Plaintiff disclosed the idea to the defendant, for sale.
- (Voluntary Accepted the Disclosure of the Idea)
That on or about _______, 20_____, defendant voluntarily accepted the disclosure of the idea, knowing the conditions on which the idea was tendered. Defendant had the opportunity to reject the attempted disclosure if the conditions of disclosure were unacceptable to defendant.
Count One
- Plaintiff hereby realleges, as if fully set forth, the allegations of paragraphs _____ through _____.
- Said acts of defendant constitute Misappropriation of Ideas and Breach of Implied-in-Fact Contract.
Allegation of Damage
- (Inadequate Remedy at Law)
Defendant threatens to continue to do the acts complained of herein, and unless restrained and enjoined, will continue to do so, all to plaintiff’s irreparable damage. It would be difficult to ascertain the amount of compensation which could afford plaintiff adequate relief for such continuing acts, and a multiplicity of judicial proceedings would be required. Plaintiff’s remedy at law is not adequate to compensate it for injuries threatened.
Prayer for Relief
WHEREFORE, Plaintiff prays:
- (Injunctive Relief for Infringement Under California Law)
That this Court grant an injunction pursuant to the power granted it under Cal. Civ. Code §3426.2(a), enjoining and restraining defendant and its agents, servants, and employees from directly or indirectly using plaintiff’s confidential idea.
- That defendant be required to account to plaintiff for any and all profits derived by defendant from the use of plaintiff’s confidential idea.
- (Damages for Actual Loss)
That this Court award damages for actual loss against defendant in favor of plaintiff in the sum of $____ by reason of defendant’s improper appropriation of plaintiff’s confidential idea.
- (Exemplary Damages under CAL. CIV. CODE §3426.3(c))
That this court award exemplary damages against defendant and in favor of plaintiff in the sum of $ ______ by reason of defendant’s improper appropriation of plaintiff’s confidential idea.
- That costs of this action be awarded plaintiff.
- That this is an exceptional case and that plaintiff be awarded its reasonable attorney fees.
- That this Court grant such other and further relief as it shall deem just.
__________________________
Signature
Form contributed by:
Lawrence J. Siskind, Esq.
Harvey Siskind Jacobs LLP
San Francisco