The Inside Out of Character Copyrights

On May 4, 2020, the U.S. Court of Appeals for the Ninth Circuit denied Plaintiff’s petition for rehearing and amended and superseded their March 16, 2020 decision in the case of Daniels v. Walt Disney Co., No. 18-55635, 2020 WL 2119396 (9th Cir. May 4, 2020).

Denise Daniels claimed that her characters, The Moodsters, were infringed by Disney and used to create the characters in the movie Inside Out. Daniels created a pitchbook, “The Moodsters Bible,” to easily convey her idea to media executives, and produced a pilot episode in 2007. Between 2005 and 2009, Daniels attempted to sell The Moodsters to several different media companies, including The Walt Disney Company.

In deciding against Daniels on appeal, the Ninth Circuit identified three (3) reasons: (1) “The Moodsters, lightly sketched anthropomorphized characters representing human emotions, did not qualify for copyright protection because they lacked consistent, identifiable character traits and attributes and were not especially distinctive[;]” (2) the characters were not entitled to copyright protection under “the story being told” test; and (3) the Plaintiff failed to state a plausible implied-in-fact contract claim.

With respect to the proposition that “lightly sketched” characters do not enjoy copyright protection, the Court held that “[a] character is entitled to copyright protection if (1) the character has ‘physical as well as conceptual qualities,’ (2) the character is ‘sufficiently delineated to be recognizable as the same character whenever it appears’ and ‘display[s] consistent, identifiable character traits and attributes,’ and (3) the character is ‘especially distinctive’ and ‘contain[s] some unique elements of expression.’”

Disney conceded that The Moodsters characters met the first prong of the test, but the Court held that the second prong presented “an insurmountable hurdle” for Daniels. The Court held: Although the character does not have to be identical every time it appears, the character must “display consistent, identifiable character traits and attributes[.]” Unfortunately for Daniels, the Court determined The Moodsters changed in appearance significantly over time. In 2005 and 2007, the characters had “an insect-like appearance, with skinny bodies, long ears, and tall antennas[,]” whereas the next iteration of the same characters appeared as “small, loveable bears[ who] are round and cuddly, have small ears, and each dons a detective’s hat and small cape.”

However, the Court appears to have unreasonably penalized the Plaintiff for changing the look of her characters. Each and every iteration of a character is separately protected by copyright. The second iteration of characters would normally be considered a derivative work (i.e., a work based upon one or more preexisting works”), which is also entitled to protection under the Copyright Act. Therefore, as Plaintiff’s Petition for Rehearing states, “[l]ater versions of a character [] do not negate the copyrightability of characters as expressed in an earlier work.”

The Court gave Daniels the benefit of the doubt on the second prong and moved to the third prong, where The Moodsters failed again, holding the characters were not “especially distinctive” given their “generic attributes and character traits.”

The Court also analyzed an alternative test, “the story being told” test, which dates back to the 1950s, where copyright protection has been extended to literary and graphic characters that constitute “the story being told” in a work, relying upon the cases of Warner Bros. Pictures v. Columbia Broad. Sys., 216 F.2d 945, 950 (9th Cir. 1954); and Halicki Films, LLC v. Sanderson Sales & Mktg., 547 F.3d 1213, 1224 (9th Cir. 2008). However, the Court stated that the character must be so important, so integral, and “so dominate the story such that it becomes essentially a character study.” Mysteriously, Daniels’ characters were not protected under this test either. The Court found that the characters did not have any “prolonged engagement with character development or a character study” in either Daniels’s Bible or her pilot episode. This holding appears highly questionable.

However, there is really no reason to require anything more than sufficient originality to support the copyrightability of characters. “[O]riginality … [is] the touchstone of copyright protection[.]” Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 347 (1991). All of the additional requirements imposed by the Ninth Circuit to copyright characters run afoul of this basic principle of copyright law.

Even more egregious was the Court’s decision (a) which did not even mention the “selection and arrangement” test (i.e., this test requires the court to consider the combination of the different characters as different emotions together) and (b) declining to find an implied-in-fact contract claim (i.e., an idea theft claim). As to the former, the Court simply stated: “Daniels’s ensemble claim does not change the distinctiveness or degree of delineation of the characters, and so The Moodsters as an ensemble are no more copyrightable than the individual characters.” This is bizarre as it runs afoul of well-established copyright law concerning the “selection and arrangement” test.

As to the latter, Daniels claimed that Disney breached an implied-in-fact contract, based on her disclosure of information about The Moodsters to multiple and various Disney employees and affiliates between 2005 and 2009.

Mysteriously, the Court held that no implied-in-fact contract was ever created.

The Court accepted as true that the alleged conversations with Disney employees and affiliates occurred, but stated that “the existence of a conversation in which an idea is disclosed is, by itself, an insufficient basis to support an implied-in-fact contract.” Daniels alleged that she relied on “customs and practices in the entertainment industry when she approached Disney+Pixar about a partnership,” including that “Disney+Pixar accepted the disclosure of the ideas in The Moodsters with an expectation that it would have to compensate Daniels and The Moodsters Company if Disney+Pixar used this idea in any television, motion picture, merchandise, or otherwise.”

Inexplicably, the Court determined that Daniels “offer[ed] only bare allegations, stripped of relevant details that might support her claim for an implied-in-fact contract. No dates are alleged, and no details are provided.” Instead the Court unilaterally concluded that there was no basis to find that Daniels’s disclosure was made “under circumstances from which it could be concluded that [Disney] voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work.” How the Court could possibly determine this on a Motion to Dismiss attacking the pleadings is beyond this author’s imagination.

This is a case of the Court failing to see the forest for the trees. It is obvious that Disney at least stole the idea from Plaintiff to portray five human emotions (i.e., love, happiness, sadness, anger, and fear) as animated characters. This is a clever idea. At least, the idea theft/implied contract claim should have survived. And why didn’t the Court even mention the “selection and arrangement” test, which is the prevailing test for substantial similarity in copyright infringement cases? The “selection and arrangement” test is a doctrine whereby copyright protection is granted to the way an author selects and arranges multiple elements, whether individually “protectable” or “unprotectable.” Clearly the Court bent over backwards to rule in favor of the Defendants. The opinion is convoluted and extraordinarily unfair to creators.

Plaintiff’s attorney, Patrick Arenz, summarizes the result by saying, “The decision creates new law and troubling new obstacles for creators of artistic works. It makes it easier for corporations like Disney to trade off the creative genius of others.”

Daniels is represented by Patrick Arenz, Ronald J. Schutz, and Brenda L. Joly of Robins Kaplan LLP.

Disney and Pixar et al. are represented by Mark Remy Yohalem, Glenn D. Pomerantz, Erin J. Cox, Kenneth M. Trujillo-Jamison, and Anne K. Conley of Munger, Tolles & Olson LLP.

The case is Daniels v. The Walt Disney Co., No. 18-55635, 2020 WL 2119396 (9th Cir. May 4, 2020) in the U.S. Court of Appeals, Ninth Circuit.

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