Daniels v. Disney: Copyright | Outside IP Counsel

Q: What is an implied-in-fact contract claim in Hollywood?

Under Desny v. Wilder, a creator who submits an idea expecting payment if it is used may sue for breach of an implied contract. It protects the bargain, not the idea, and so survives copyright preemption, but it must be specifically pleaded.

The Ninth Circuit applied its Batmobile test to deny copyright in 'The Moodsters' and rejected the creator's idea-submission claim against Disney's Inside Out.

Few entertainment disputes capture the peril of the studio pitch better than Daniels v. The Walt Disney Co., No. 18-55635 (9th Cir. Mar. 16, 2020). A child-development expert had spent years developing color-coded characters embodying human emotions and had pitched them to Disney. When Disney and Pixar released Inside Out (a film about five color-coded anthropomorphic emotions living inside a child’s mind), she sued for copyright infringement and breach of an implied-in-fact contract. Writing for a unanimous panel, Judge M. Margaret McKeown affirmed dismissal of the entire case. The opinion is a careful, and sobering, application of the Ninth Circuit’s DC Comics v. Towle framework: it shows that lightly sketched characters do not earn copyright protection, and that the idea-submission theory long associated with Desny v. Wilder has demanding pleading requirements of its own.

At a glance

Case: Denise Daniels; The Moodsters Co. v. The Walt Disney Co., et al., No. 18-55635 (9th Cir. Mar. 16, 2020), affirming the U.S. District Court for the Central District of California.
Court: United States Court of Appeals for the Ninth Circuit (McKeown, J.).
Facts: Denise Daniels created “The Moodsters,” anthropomorphic, color-coded characters representing five emotions. She alleged contact with several Disney employees between 2005 and 2009. The characters appeared in a 2005 pitchbook (the Moodsters Bible), a 2007 television pilot, and a “second generation” line of toys and books developed in 2012 and 2013 and sold beginning in 2015.
Holding: The Moodsters are not protectable characters under the three-part Towle test (they fail the second and third prongs) or the “story being told” test; the implied-in-fact contract claim was likewise inadequately pleaded.
Subsequent history: The Ninth Circuit denied panel rehearing and rehearing en banc and issued an amended opinion on May 4, 2020, 958 F.3d 767, leaving the dismissal intact. The Supreme Court denied certiorari on January 11, 2021 (No. 20-132).

The factual core resembles many idea-theft suits in Hollywood: a creator with a developed concept, a series of meetings with a major studio, and a later release that the creator believes echoes her work. Inside Out, released in 2015, was a critical and commercial triumph. Daniels alleged that its emotion characters (Joy, Sadness, Fear, Anger, and Disgust) descended from her own five emotion characters. The Ninth Circuit never reached the question of copying because it concluded the asserted characters were not protectable in the first place.

At a glance: applying the Towle test to emotions

The court began where Towle ends: the three-part test for character copyrightability. A character must (1) have physical as well as conceptual qualities; (2) be sufficiently delineated to be recognizable as the same character whenever it appears, with consistent, identifiable traits; and (3) be especially distinctive with unique elements of expression.

The Moodsters faltered on the second prong. Across their iterations (the 2005 Moodsters Bible, the 2007 pilot The Amoodsment Mixup, and the later toys and books), the characters changed names and appearances: the insect-like figures with antenna “emotional barometers” of 2005 and 2007 became small, cuddly, cape-and-detective-hat bears by 2015, and each of the five was renamed in every iteration (the red anger Moodster went from Roary to Rizzi to Razzy). What stayed constant was only the idea layer. As the court put it, the Moodsters “have consistently represented five human emotions, and those emotions have not changed,” but beyond color and emotion there were “few other identifiable character traits and attributes that are consistent over the various iterations.” The court found they lacked “consistent, identifiable character traits and attributes” that would let an audience recognize the same character over time. An idea as broad as “emotions personified as colorful characters” is not protectable; only a particular, well-delineated expression of that idea can be. Because the Moodsters had not stabilized into recognizable personalities, they remained, in the court’s framing, “lightly sketched,” a phrase the court drew from its earlier decision in Olson v. National Broadcasting Co.

The court did not stop at the second prong. Giving Daniels the benefit of the doubt there, it held the Moodsters independently fail the third: representing a single emotion apiece was not enough to make them “especially distinctive” or to give them “some unique elements of expression,” particularly given their otherwise generic attributes and their three different names.

The contrast with Towle is instructive. The Batmobile, though redesigned repeatedly, carried consistent conceptual traits (the sleek, bat-themed, gadget-laden partner to a crime-fighter) that survived its changing looks. The Moodsters lacked that stable conceptual core. The very flexibility that made them adaptable across media defeated their claim to copyright.

The “story being told” alternative

The panel also analyzed the Moodsters under the older alternative test from Warner Bros. Pictures v. Columbia Broadcasting System (the Sam Spade case), which protects a character that “constitutes the story being told” rather than serving as a mere vehicle for it. The Ninth Circuit held that the Moodsters did not meet this standard either. They were chess pieces in the games of storytelling Daniels had devised, not the essence of any particular narrative. Where a character is essentially a tool to convey emotion-education concepts to children, it does not rise to the level of being “the story being told.” Both routes to character protection thus closed.

The idea-submission claim: implied-in-fact contracts after Desny

Daniels’s second theory was contractual, not copyright-based. Under California’s Desny v. Wilder doctrine, a writer who submits an idea to a studio may recover for breach of an implied-in-fact contract if the idea is conveyed on the understanding that the recipient will pay for its use. This theory survives copyright preemption because it protects a bargained-for expectation of payment, not the idea itself, an important escape valve for creators whose concepts are too abstract for copyright.

But the escape valve has its own gate. Applying the multi-part test from Grosso v. Miramax Film Corp., 383 F.3d 965 (9th Cir. 2004), the Ninth Circuit affirmed dismissal. The court accepted that Daniels created the characters and assumed the alleged conversations happened, but held 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 had pleaded only that she relied on industry custom and that Disney accepted the disclosure expecting to pay if it used the idea. That, the court said, was a “boiler-plate allegation, devoid of any relevant details”: no dates were alleged and no details were provided, so there was no basis to conclude that Disney made an express offer to pay or that the disclosure was made under circumstances showing it voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work. The lesson is about the circumstances of the pitch itself, not about proving the studio used anything.

Open questions

How stable must a pitched character be? Daniels punishes evolving, multi-version characters, but development naturally involves iteration. How much consistency a creator must lock in before pitching remains unsettled.
Can idea-submission claims rescue unprotectable characters? The theory remains available, and the court did not reject it on the merits. A Desny claim pleaded with real detail about the circumstances of the disclosure may still succeed where copyright fails.
Where is the line between an emotion “type” and an expressive character? Personified emotions are a common trope; the case leaves uncertain how much unique expression converts the trope into a protectable character.

Implications

Pitch with delineation. Creators who want copyright protection should fix consistent, distinctive traits and appearances before shopping a concept, and document those particulars.
Concepts are not characters. “Emotions as colorful creatures” is an unprotectable idea; only a specific, well-developed execution can be owned.
The two theories are independent. Losing on copyright does not automatically lose the contract claim, but each has separate, demanding requirements.
Idea submitters must plead the circumstances. A Desny claim needs concrete allegations (dates, participants, what was said) showing the studio took the disclosure knowing the terms on which it was offered. Industry custom recited in the abstract will not do.
Towle governs both directions. The same test that protected the Batmobile defeated the Moodsters, underscoring that character copyright is a high, fact-specific bar.

Frequently asked questions

Did Disney copy The Moodsters? The court never decided that. It dismissed the case because the Moodsters were not protectable characters and the contract claim was inadequately pleaded, so the question of copying was never reached.

Why are personified emotions not automatically protectable? Because the general idea of emotions as characters is unprotectable. Copyright reaches only a specific, sufficiently delineated, distinctive expression of that idea. The Moodsters’ shifting versions never achieved that.

What is an implied-in-fact contract claim in Hollywood? Under Desny v. Wilder, a creator who submits an idea expecting payment if it is used may sue for breach of an implied contract. It protects the bargain, not the idea, and so survives copyright preemption, but it must be specifically pleaded.