Thomas Rinks and Joseph Shields created the Psycho Chihuahua cartoon character, which they promote, market, and license through their company, Wrench LLC. Rinks and Shields attended a licensing trade show in New York City, where they were approached by two employees of Taco Bell who expressed interest in the Psycho Chihuahua character for Taco Bell advertisements. They thought this cartoon character would appeal to Taco Bell’s core consumers, males aged 18 to 24. The Taco Bell employees obtained some Psycho Chihuahua materials to take back with them to Taco Bell’s headquarters.
Later, Taco Bell contacted Rinks and asked him to create art boards combining Psycho Chihuahua with the Taco Bell name and image. Rinks and Shields did this and sent them to Taco Bell, along with Psycho Chihuahua t-shirts, hats, and stickers. Taco Bell shared the materials with its outside advertising agency and tested the Psycho Chihuahua marketing concept with focus groups. Rinks suggested that instead of using the cartoon version of Psycho Chihuahua in its ads, Taco Bell should use a live Chihuahua manipulated by computer graphic imaging that had the personality of Psycho Chihuahua and a love for Taco Bell food.
Just after Rinks and Shields made a formal presentation to Taco Bell’s marketing department, Taco Bell hired a new outside ad agency, Chiat/Day. Taco Bell passed on the materials received from Rinks and Shields to their new ad agency. Three months later, Chiat/Day proposed using a Chihuahua in Taco Bell commercials. Chiat/Day claims that it conceived that idea by itself. Taco Bell began airing Chihuahua commercials in the United States, and they were an instant success. Taco Bell paid nothing to Wrench LLC or to Rinks and Shields individually. As a result, Wrench LLC and Rinks and Shields sued Taco Bell to recover damages for breach of an implied-in-fact contract.
Questions
1. What is an implied-in-fact contract?
2. What do the plaintiffs have to show in order to prove the existence of an implied-in-fact contract?
3. How do you think the court should have ruled in this case?