## Facts

- MindGames, Inc. was formed to manufacture and sell an adult board game, *Clever Endeavor*, its only product.
- The game launched in 1989 and initially sold approximately 30,000 units in about 75 days.
- In March 1990, MindGames entered a written licensing agreement under which Western Publishing would manufacture, market, distribute, and sell the game, and MindGames would receive a 15% royalty on games sold.
- The agreement ran through January 31, 1993, and allowed Western to extend the agreement for an additional year if, before expiration, Western paid MindGames at least $1.5 million in royalties “due under the contract or otherwise.”
- The agreement also referenced renewals for “subsequent years” upon payment of an annual $300,000 renewal fee.
- In 1990, Western’s net sales were about 165,000 units, and it paid MindGames about $600,000 in royalties; sales declined thereafter.
- Despite Western not paying the additional $900,000 needed to reach the $1.5 million threshold, the parties continued their business relationship into early 1994.
- In late 1993 and 1994, Western cut prices and then conducted a bulk sale to liquidate remaining inventory; the parties separated in February 1994.
- MindGames sued for breach, seeking roughly $40 million in lost royalties (as lost profits), plus asserted “renewal fees” and other amounts tied to the inventory liquidation and pricing decisions.

## Issues

1. Whether the licensing agreement entitled MindGames to a $900,000 “make-up” payment to reach the $1.5 million renewal threshold and/or a $300,000 renewal fee despite Western’s failure to satisfy the contract’s stated renewal condition.
2. Whether MindGames could recover approximately $40 million in lost royalties, including whether Arkansas law barred such damages for a new business and whether MindGames’s proof was sufficiently certain rather than speculative.

## Decision

- The Seventh Circuit affirmed summary judgment for Western.
- MindGames was not entitled to renewal-related payments because the contract conditioned renewal on a $1.5 million payment threshold that Western did not meet, and the $300,000 renewal fee applied only after a valid renewal.
- Arkansas law did not impose a categorical prohibition on lost profits for a new business, but MindGames’s lost-royalty claim was too speculative to be recoverable on the record presented.

## Legal Principles

- Contractual renewal rights and payment obligations turn on the agreement’s express conditions; where a condition precedent to renewal is not satisfied, renewal fees and extension payments are not owed.
- Continued dealings after an agreement’s stated term do not, without contractual support, create the renewal obligations specified for a validly renewed term.
- Under Arkansas contract-damages standards, lost profits may be recoverable when proven with reasonable certainty; the controlling concern is evidentiary reliability, not merely the claimant’s status as a new venture.
- Projections of lost profits based on conjectural “blockbuster” success, without concrete evidence permitting a reasonable estimate of incremental sales attributable to the alleged breach, are too speculative to submit to a jury.

## Conclusion

The court enforced the license’s express renewal conditions and held that MindGames could not transform continued post-term performance into contractual renewal fees, and it rejected MindGames’s large lost-royalty damages claim because the proof did not allow a reasonably certain estimate of losses.


MindGames, Inc. v. W. Publ’g Co., 218 F.3d 652 (7th Cir. 2000)