## Facts

- Wrench LLC and its principals created and marketed the “Psycho Chihuahua” cartoon character and related advertising concepts.
- At a 1996 licensing trade show, Taco Bell employees approached plaintiffs and expressed interest in using the character.
- Taco Bell and plaintiffs held discussions in which Taco Bell requested additional materials and a presentation; plaintiffs provided depictions and proposals integrating the character with Taco Bell branding and contemplated compensation through licensing terms.
- Taco Bell later launched a national advertising campaign featuring a Chihuahua character, which plaintiffs claimed used their character and concept without payment.
- Plaintiffs sued under Michigan law, including breach of an implied-in-fact contract to pay if Taco Bell used their ideas.

## Issues

1. Whether the Copyright Act, 17 U.S.C. § 301, preempts a Michigan implied-in-fact contract claim alleging an implied promise to pay for use of an idea submitted at the defendant’s request.
2. Whether Michigan law requires an idea’s “novelty” as an element of an implied-in-fact contract claim based on idea submission and use.

## Decision

- The Sixth Circuit reversed summary judgment for Taco Bell and remanded.
- The court held the implied-in-fact contract claim was not preempted because it required an extra element—an implied promise to pay—making it qualitatively different from copyright infringement.
- The court held Michigan law does not require novelty to maintain an implied-in-fact contract claim for payment based on use of an idea.
- The record contained triable factual disputes on whether Taco Bell requested disclosure and understood plaintiffs expected compensation if Taco Bell used the ideas.

## Legal Principles

- Copyright Act § 301 preempts state-law claims only if (1) the work falls within copyright subject matter and (2) the state-law right is equivalent to rights within 17 U.S.C. § 106.
- A state-law claim is not equivalent, and thus not preempted, when it includes an “extra element” beyond reproduction, distribution, performance, or display.
- An implied-in-fact contract arises from conduct and surrounding circumstances showing mutual assent, even without express words.
- In an idea-submission context, an implied-in-fact contract may be found where the recipient requests disclosure and knows the submitter expects payment if the idea is used.
- For a contract-based claim to pay for use of an idea, Michigan law does not impose an independent requirement that the idea be novel; the duty arises from agreement, not from property-like protection of the idea.

## Conclusion

The Sixth Circuit held that an implied-in-fact promise to pay for a submitted idea is a contractual obligation not preempted by the Copyright Act and that Michigan law does not require novelty for such a contract claim, requiring further proceedings to resolve disputed facts about assent and expectation of payment.


Wrench LLC v. Taco Bell Corp., 256 F.3d 446 (6th Cir. 2001)