The opinion of the court was delivered by: CASTILLO
Plaintiffs FASA Corporation ("FASA") and Virtual World Entertainment ("VWE")
sue defendant Playmates Toys, Inc. ("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). Pursuant to Rule 56, Playmates moves for summary judgment on all counts.
The following undisputed facts are gleaned from the parties' respective Local Rule 12(M) statements of material facts and accompanying exhibits.
FASA is the creator, developer, and distributor of various fictional universes, including BATTLETECH, which form the basis for board games, role-playing games, novels, and various game supplements. FASA also licenses the intellectual property and proprietary rights in its fictional universes to third parties for the development of interactive entertainment games, models, miniatures, merchandise, toys and other items.
Pls.' Objs. & Resps. to Def.'s Reqs. for Admis. (hereinafter Pls.' Admis.] P 1. VWE is a virtual reality entertainment company formed by the creators of BATTLETECH to create and develop virtual reality games simulating adventures in the BATTLETECH universe. Pls.' Facts P 2. Playmates is a marketer of toys including a line of six toys featuring characters and vehicles found in the EXOSQUAD animated cartoon series.
Id. PP 6, 7, 9. The present lawsuit centers on Playmates' alleged infringement of FASA's intellectual property and proprietary rights in BATTLETECH by designing and marketing the EXOSQUAD toy line.
BATTLETECH - created by FASA in 1984 and originally sold as a role-playing game - is a fictional universe set in the 31st century. The BATTLETECH universe is comprised of empires such as the Star League, an empire consisting of five cosmic houses each of which encompasses hundreds of interstellar worlds. Each house seeks control of the galaxy. The battles between worlds are dominated by BattleMechs (also called Mechs), massive man-shaped, robot-like tanks of various shapes and designs
which are piloted by human soldiers called MechWarriors. Pls.' Admis. P 2.
Among the MechWarriors' adversaries are the Clan Elementals, "men and women bred to be foot soldiers." FASA CORP., BATTLETECH THE RETURN OF KERENSKY TECHNICAL READOUT: 3050 (1990) at 8.
The EXOSQUAD story line is set in the 22nd Century and involves confrontations between the conquering, genetically engineered, Neosapien race and an enslaved human race living on Earth, Venus and Mars. The Neosapiens and humans battle each other, encased in large robotic fighting machines known as "ExoFrames" or "E-Frames."
Segal Decl. P 5 Playmates markets a toy line - consisting of six toys - featuring characters and vehicles from the EXOSQUAD cartoon series.
Pls.' Facts PP 7, 9.
In late 1991, FASA entered into an agreement with Robert Allen whereby Allen would present the BATTLETECH concept, story, and models, on behalf of FASA to a number of toy companies in order to find a company to manufacture a BATTLETECH toy line.
Allen Dep. at 14-15, 150. On December 10 or 11, 1991, Allen met with Chris Devine Dailey, an employee of Playmates, and presented three potential toy lines, including BATTLETECH. Pls.' Facts P 10. Playmates had been looking for a futuristic robot-related toy line for several months prior to Allen's presentation and had previously reviewed a variety of robot-related materials. Def.'s Resp. P 12. Playmates had also been engaged in discussions with Universal Cartoon Studios - prior to Allen's presentation - regarding the development of a "hard-edged" robot line. Id.
At the outset of the meeting with Allen, Dailey required him to sign an untitled document on Playmates' letterhead which provides as follows:
It is the policy of Playmates Toys, Inc. not to review or consider any unsolicited proposals of any kind.
You have advised us that you have an "idea" which you believe may be of interest to us.
We are prepared to consider your idea only upon the following terms:
1. You will expressly waive any and all claims of any kind whatsoever, past, present or future, known or unknown against Playmates Toys, Inc. in any way relating to or connected to the "idea".
2. In consideration for such waiver, Playmates Toys, Inc., will review your "idea" in written form. We will return all materials submitted in connection therewith within two weeks after submission.
The disclosed matter relates to: [handwritten] (1) "BATTLETECH" (2) "WENDY & HER WAGON" (3) "SPEEDBALLS"
Partridge Decl., Ex. 37.
After signing the document, Allen introduced four BATTLETECH toy prototypes
and provided various BATTLETECH materials for Playmates' subsequent review. Def.'s Resp. PP 14, 15. Although the record is less than clear with respect to what materials Allen left with Playmates, it appears that Allen left the following: a press kit containing information on BATTLETECH centers; a poster displaying various miniature BattleMech gaming pieces; a FASA catalogue which displays all of FASA's products; and, a BATTLETECH center operations manual. Allen Dep. at 68, 70, 80, 82; Def.'s Resp. P 15. Dailey told Allen that Playmates would not inform him of any decisions regarding the BATTLETECH toy line until after the February 1992 Toy Fair. Allen Dep. at 59.
In March 1992, Allen received several requests from Playmates for additional BATTLETECH product - including two calls (on or about March 3 and March 7) from Karl Aaronian, Playmates' Director of Marketing and one call (on or about March 30) from Richard Sallis, Playmates' President. Id. at 92-99. In response, Allen provided Playmates with a promotional videotape; the BATTLETECH Technical Readout 2750 - a catalogue of "illustrations, statistics and other vital information about the BATTLEMECHS"; the BATTLETECH Compendium - a compilation of rules, "battle demonstrations . . . [and] MECH construction"; and additional press material. Id. at 79; Ksander Decl., Ex. 23, Allen Letter to Sallis at 2; Pls.' Add'l Facts P 21.
On May 27, 1992, Playmates' Marketing Director, Karl Aaronian informed Allen that Playmates was not interested in a BATTLETECH license. Def.'s Resp. P 32; Allen Dep. at 116. On June 3, 1992, Aaronian returned the promotional videotape and certain other materials supplied by Allen; however, Playmates retained the BattleMech poster, the BATTLETECH Compendium, and the BATTLETECH Technical Readout 2750 containing detailed Mech designs. Def.'s Resp. P 33; Ksander Decl., Ex. 31, Aaronian Letter to Allen.
While it was still considering the BATTLETECH toy line, Playmates entered into a work-for hire agreement, dated April 7, 1992, with Russell Edmisson, a freelance designer, to prepare drawings and prototypes for Playmates. Edmisson's agreement was captioned "RE: Battle Tech." Ksander Decl., Ex. 27. Edmisson testified in his deposition that Aaronian told him that Playmates had a "very high priority project" involving the construction of "a large robot with tons of firepower . . . he wanted the robot to be humanoid in the fact that it would have arms and legs and a head area." Edmisson Dep. at 27, 30. Edmisson also testified that Aaronian had shown him some material "torn out of magazines," id. at 26, 32, but Edmisson could not recall precisely what the material was. Id. Edmisson further testified that, working in conjunction with a model maker, he created two toy robot prototypes but he knew nothing about BATTLETECH (besides the name) at the time he constructed the prototypes and had never seen any books or materials bearing the BATTLETECH name. Id. at 63-64.
While it was considering licensing BATTLETECH, Playmates also instructed Frank Asano, a designer with the Japanese company Sente, to build a BATTLETECH prototype using the BATTLETECH MAD CAT design as a model for the styling of the prototype. Aaronian Dep. at 191; Def.'s Resp. P 25. Aaronian testified that the prototype made by Sente "looked nothing like the BATTLETECH reference sent, and nothing else was done with it." Aaronian Dep. at 108.
Meanwhile, in January 1992, Allen had presented BATTLETECH to Tyco Toys, Inc. ("Tyco"). Def.'s Resp. P 16. Following Playmates' rejection of the opportunity to purchase a BATTLETECH license, FASA renewed its discussions with Tyco and began developing designs for a BATTLETECH toy line. Def.'s Resp. P 34. FASA's Chairman and CEO, Morton Weisman, testified in his affidavit that FASA had planned on entering into a BATTLETECH licensing agreement with TYCO at the 1993 Toy Fair but that Tyco backed out after discovering that Playmates had introduced the EXOSQUAD toy line in its 1993 catalogue. Weisman Decl. P 4 However, approximately two months later, in April 1993, Tyco and FASA entered into a letter of agreement on the terms for an exclusive worldwide master toy license for BATTLETECH. Second Partridge Decl. Ex. 49.
The core of FASA's complaint is that "the designs, images, descriptions characteristics and other elements of Exosquad are substantially similar to the unique images, designs, descriptions, characteristics and other elements of the BATTLETECH universe." Pls.' Compl. P 44 In particular, FASA alleges the following (which we quote at length solely to provide a flavor of the underlying dispute):
The Exosquad lives in a futuristic, interstellar, battle dominated environment significantly resembling the futuristic, interstellar, battle dominated BATTLETECH universe designed . . . by FASA and VWE.
The ExoSquad fights the Neosapiens, a genetically bred race seeking to conquer mankind, just as the BATTLETECH MECHWARRIORS fight the Clan Elementals, products of a genetically manipulated human race.
Exosquad fights the Neosapiens in massive, robot-like war machines called ExoFrames or E-Frames, which are substantially similar in design, image, description, characteristics and other elements to the unique BATTLEMECHS and Omni Mechs designed . . . by FASA and VWE.
Exosquad even directly copied specific names created, developed, published, promoted and popularized by BATTLETECH. The name of the Exosquad Neosapien warrior "Draconis" is a well known and widely used name for one of the five interstellar Houses in the BATTLETECH universe.
Id. In addition to alleging copyright (Counts III and IV) and trademark (Counts V and VI) infringement, FASA seeks relief under theories of statutory and common-law unfair competition (Counts I and II), dilution (Counts VII and VIII), and tortious interference with prospective business advantage (Count IX). Pursuant to Rule 56, Playmates moves for summary judgment on all counts.
Summary Judgment Standard
Summary judgment is proper only if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). A genuine issue for trial exists only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). The court must view all evidence in a light most favorable to the nonmoving party, Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 659 (7th Cir.), cert. denied, 484 U.S. 977, 98 L. Ed. 2d 486, 108 S. Ct. 488 (1987), and draw all inferences in the nonmovant's favor. Santiago v. Lane, 894 F.2d 218, 221 (7th Cir. 1990). However, if the evidence is merely colorable, or is not significantly probative, summary judgment may be granted. Liberty Lobby, 477 U.S. at 249-50; Flip Side Productions, Inc. v. Jam Productions, Ltd., 843 F.2d 1024, 1032 (7th Cir.), cert. denied, 488 U.S. 909, 102 L. Ed. 2d 249, 109 S. Ct. 261 (1988). In determining whether a genuine issue exists, the court must view the evidence presented through the prism of the substantive evidentiary burden." Liberty Lobby, 477 U.S. at 254. In making its determination, the court's sole function is to determine whether sufficient evidence exists to support a verdict in the nonmovant's favor. Credibility determinations, weighing evidence, and drawing reasonable inferences are jury functions, not those of a judge when deciding a motion for summary judgment. Liberty Lobby, 477 U.S. at 255.
The Seventh Circuit has recently summarized the respective burdens on the moving and nonmoving parties on a motion for summary judgment as follows:
The moving party bears the initial burden of directing the district court to the determinative issues and the available evidence that pertains to each. "(A) party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986) . . . . Then, with respect to issues that the non-moving party will bear the burden of proving at trial, the non-moving party must come forward with affidavits, depositions, answers to interrogatories or admissions and designate specific facts which establish that there is a genuine issue for trial. Id. at 324, 106 S. Ct. at 2553. The non-moving party cannot rest on the pleadings alone, but must designate specific facts in affidavits, depositions, answers to interrogatories or admissions that establish that there is a genuine triable issue. Id. The non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). "The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202 (1986).
At the outset, Playmates argues that all of FASA's claims are barred by virtue of the waiver signed by Allen. The first question this court must address with respect to the issue of whether FASA is bound by Allen's purported waiver, is what law governs this agency issue. A federal court sitting in Illinois, exercising diversity jurisdiction, must apply the substantive law of Illinois, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 82 L. Ed. 1188, 58 S. Ct. 817 (1938), including Illinois' choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941).
Playmates contends that Illinois law governs. FASA contends that California law governs. To the limited extent that they briefed the choice-of-law issue, both Playmates and FASA appear to have analyzed the issue implicitly characterizing the subject matter underlying the analysis as that of contract. For instance, FASA asserts that California law is "the proper authority" and cites to two cases, Stonewall Surplus Lines Ins. Co. v. Johnson Controls. Inc., 14 Cal. App. 4th 637, 645, 17 Cal. Rptr. 2d 713, 718 (1993), and Gruen Watch Co. v. Artists Alliance, 191 F.2d 700, 703 (9th Cir. 1951), both of which involved determining the proper law to apply in construing certain contracts.
Similarly, in arguing that Illinois' law governs, Playmates prominently cites section 188 of the Restatement (Second) of Conflict of Laws [hereinafter Restatement (Second) ] - which sets forth rules for determining the governing law with respect to an issue in contract wherein the parties have failed to make an effective choice of law -- as well as three cases, Florida Risk Planning Consultants. Inc. v. Transport Life Ins. Co., 732 F.2d 593, 595 (7th Cir. 1984), Champagnie v. W.E. O'Neil Constr. Co., 77 Ill. App. 3d 136, 144-46, 32 Ill. Dec. 609, 395 N.E.2d 990 (1979), and Illinois Tool Works v. Sierracin Corp., 134 Ill. App. 3d 63, 89 Ill. Dec. 40, 479 N.E.2d 1046 (1985), all of which support the proposition that Illinois applies the Restatement (Second) 's most significant relationship analysis to contract issues. However, as noted above, the issue at bar presents, in the first instance, a question of agency law -- whether a principal will be bound by the act of its agent -- not contract law.
In fact, it is clear that both of the parties recognize that an agency question is presented because their substantive arguments as to whether FASA should be bound rely on agency principles. Accordingly, we must determine what law Illinois courts would apply in resolving this issue of agency law.
There is no established Illinois rule governing choice of law in the agency context; in particular, there appears to be no Illinois decisions addressing what law applies to a claim of agency or apparent authority where the alleged principal, agent, and third parties are located in different states.
Indeed, as Scoles and Hay have observed, "the case law [in this area] is scant." EUGENE F. SCOLES & PETER HAY, CONFLICT OF LAWS § 18.34 (2d ed. 1992). In the absence of any clear Illinois authority on the issue, the court's task is to predict how the Supreme Court of Illinois would decide the issue. See Rose v. Franchetti, 979 F.2d 81, 85 (7th Cir. 1992). Decisions of the Illinois appellate courts are ordinarily given great weight in this enterprise, Williams, McCarthy, Kinley, Rudy & Picha v. Northwestern Nat'l Ins. Grp., 750 F.2d 619, 624 (7th Cir. 1984), and should be followed "unless we have solid reason to believe that the state's highest court would repudiate them." Rose, 979 F.2d at 85. In Florida Risk Planning Consultants, Inc. v. Transport Life Ins. Co., 732 F.2d 593 (7th Cir. 1984), the Seventh Circuit determined that "Illinois courts have adopted the rules of the Restatement (Second) of Conflicts (1971)," and proceeded to apply the Restatement (Second) 's "most significant relationship" test to determine the applicable law in a contract dispute. Id. at 595; see also Palmer v. Beverly Enterprises, 823 F.2d 1105, 1107 (7th Cir. 1987) (following Florida Risk Planning and applying the most significant relationship test to a contract dispute). In addition to following the Restatement (Second) 's approach in contract cases, Illinois courts also have adopted the Restatement (Second) for determining the applicable law in tort cases. Ingersoll v. Klein, 46 Ill. 2d 42, 262 N.E.2d 593 (1970). In view of Illinois' adoption of the Restatement (Second) in these two significant substantive areas, the court finds that the Supreme Court of Illinois would also adopt the Restatement (Second) for determining the applicable law in the agency context.
Section 292 of the Restatement (Second) provides:
Contractual Liability of Principal to Third Person
(1) Whether a principal is bound by action taken on his behalf by an agent in dealing with a third person is determined by the local law of the state which, with respect to the particular issue, has the most significant relationship to the parties and the transaction under the principles stated in § 6.
(2) The principal will be held bound by the agent's action if he would so be held bound under the local law of the state where the agent dealt with the third person, provided at least that the principal had authorized the agent to act on his behalf in that state or had led the third person reasonably to believe that the agent had such authority.
RESTATEMENT (SECOND) OF CONFLICT OF LAW § 292 (1971).
In the present case, FASA admits that Allen, acting as a representative of FASA, presented BATTLETECH to Playmates. Pls.' Admis. P 38; see also M. Weisman Decl. P 3 (stating that although no agreement was reached regarding the exact nature and scope of Allen's role, FASA permitted Allen to present BATTLETECH to Playmates). Accordingly, because FASA authorized Allen to act on its behalf in presenting BATTLETECH to Playmates in California, the court finds that section 292(2) controls, and FASA will be bound by Allen's conduct if it would be so bound under the laws of California.
Contrary to Playmates' suggestion, the fact that FASA admits that Allen was acting as its representative, does not, standing alone, compel the conclusion that FASA is bound by Allen's act of signing a waiver. As noted in Turner v. Citizens Nat'l Bank, 206 Cal. App. 2d 193, 23 Cal. Rptr. 698, 704 (1962), "an admission that a person is an agent does not adopt every act performed by him; the admission does not cover the extent of his authority." Under section 2330 of the California Civil Code, "an agent represents his principal for all purposes within the scope of his actual or ostensible authority," CAL. CIV. CODE § 2330, and 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.
Indeed, in recognition of section 2330, Playmates correctly states that "FASA is bound by 'all the rights and liabilities which would accrue to the agent from transactions' within the limit of [Allen's] actual or ostensible authority." Def.'s Mem. at 13. Therefore, in order to determine whether FASA is bound by Allen's waiver, the court must determine whether Allen's signing of the waiver was within the scope of his actual or ostensible authority.
Both FASA and Allen expressly deny that Allen was actually authorized by FASA to sign Playmates' waiver, see Allen Dep. at 135; M. Weisman Decl. P 4, and Playmates has submitted no evidence suggesting that Allen was actually authorized to waive claims on behalf of FASA. Accordingly, at the very least, a genuine issue of material fact exists as to whether Allen was so authorized.
Playmates argues, nevertheless that FASA should be bound by Allen's waiver because it is undisputed that Allen had actual authority to present BATTLETECH to Playmates, and by statute, "an agent has authority: (1) to do everything necessary or proper and usual in the ordinary course of business, for effecting the purpose of his agency." CAL. CIV. CODE § 2319. In light of section 2319, Playmates argues that because its "normal operating procedures" called for Allen to sign a waiver before he could make his presentation, the signing of the waiver was necessary for the performance of his authorized conduct. Thus, Playmates concludes, Allen's waiver was within the scope of his authority. This argument, while superficially clever, cannot withstand scrutiny. Although it may be Playmates' normal operating procedures to require a waiver before considering solicitations, this does not necessarily make signing a waiver "necessary" for Allen's authorized conduct. Allen was authorized to present BATTLETECH to toy manufacturers; there is no evidence in the record to support the inference that toy manufacturers uniformly require such waivers or that such waivers are "necessary or proper and usual in the ordinary course of business." Based upon the present record, the court cannot conclude that Playmates' unilateral requirements define the range of conduct that is "necessary" for effecting the purpose of Allen's agency. At the very least, a genuine issue of material fact exists as to whether Allen's signing of the waiver fell within the scope of his actual authority.
Absent actual authority, FASA will be bound by Allen's waiver only if Allen acted within the scope of his ostensible authority in signing the waiver. Ostensible authority, under California law, arises as a result of conduct of the principal which causes the third party reasonably to believe that the agent possesses the authority to act on the principal's behalf." United States Credit Bureau, Inc. v. Cheney, 235 Cal. App. 2d 357, 360, 45 Cal. Rptr. 525, 527 (1965). Ostensible authority is predicated on the doctrine of estoppel: If a principal, by its acts, leads another to believe that it has conferred authority upon an agent, it will be estopped from asserting -- as against the person who has justifiably relied on the principal's acts -- that it did not intend to confer such authority. Yanchor v. Kagan, 22 Cal. App. 3d 544, 549, 99 Cal. Rptr. 367, 370 (1971). Thus, ostensible authority is predicated on the acts or declarations of the principal vis-a-vis the third party. Dill v. Berquist Constr. Co., 24 Cal. App. 4th 1426, 1438, 29 Cal. Rptr. 2d 746, 752 (1994); People v. Torres, 136 Cal. App. 3d 556, 562, 186 Cal. Rptr. 385, 389 (1982). The essential elements of ostensible authority are: (1) an act or representation by the principal; (2) justifiable reliance by a third party; and (3) change of position or injury resulting from such reliance. Yanchor, 22 Cal. App. 3d at 549, 99 Cal. Rptr. at 370 (1971).
Because Playmates fails to establish that no genuine issue exists as to whether Allen acted within the scope of his actual or ostensible authority when he signed Playmates' waiver, Playmates is not entitled to summary judgment in its favor on the grounds of ...