The Briefing Podcast: Ninth Circuit Agrees with Woz – No Promise to Pay, No Desny Claim

The 1950 case Desny v. Wilder set the ground rules for an idea theft/implied contract case in California. In Desny, the plaintiff Victor Desny wrote a script depicting the real-life story of Floyd Collins, a boy who made headlines after he was trapped in a cave 80 feet underground. In an effort to market his script, Desny called Billy Wilder, a writer, producer and director at Paramount Pictures. Desny could not get through to Wilder and subsequently stripped his script to the bare facts so that Wilder’s secretary could copy it in shorthand over the phone. After reading his synopsis, Desny told Wilder’s secretary that Wilder and Paramount could use the script only if they paid him a reasonable amount for doing so. Shortly thereafter, Wilder created his own movie script mirroring Desny’s. Because Desny’s script was based on historical facts, and because Desny only conveyed the bare minimum of those facts to Wilder’s secretary, both parties conceded for the purpose of the appeal that the synopsis was not sufficiently original to form the basis of a federal copyright claim. The court, however, held that Desny stated sufficient facts to establish the existence of an implied-in-fact contract between the parties. The California Supreme Court explained that where an idea is furnished by one party to another, a contract sometimes may be implied even in the absence of an express promise to pay; a contract exists where “the circumstances preceding and attending disclosure, together with the conduct of the offeree acting with knowledge of the circumstances, show a promise to pay.”

In Grosso v. Miramax, the Ninth Circuit states “[t]o establish a Desny claim for breach of implied-in-fact contract, the plaintiff must show that the plaintiff prepared the work, disclosed the work to the offeree for sale, and did so under circumstances from which it could be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work.”

Promise to Pay

A recent non-citable Ninth Circuit opinion in Ralph Reilly v. Steve Wozniak, et al. looks at the promise to pay element of a Desny claim. In that case, Reilly, an IT professor, claimed that he had a verbal agreement with Wozniak to create a new high-tech online university based on a course design and outline developed by Reilly. Apparently, at least according to Reilly, the two shook hands on a deal, and Reilly developed the course outline. Later Reilly learned that Wozniak had partnered with Southern Career Institute Inc. to create “Woz U”. Reilly claims that he went to two pitch meetings with Wozniak. Wozniak claimed that he never agreed to compensate Reilly and further that he never made any money off of Reilly’s idea because Southern Career Institute reached out to Wozniak to license his name and likeness.

In an appeal from the district court’s dismissal of Reilly’s contract claim, Reilly alleged that it was understood that he and Wozniak would “jointly market,” and Wozniak would be his “partner in exploiting,” Reilly’s idea. The court said that these facts, as alleged by Reilly, do not show an offer for sale but rather the intent to enter into future business relationships. The court noted the 1987 Ninth Circuit case of Aliotti v. R. Dakin and Co. which held “no contract may be implied where an idea has been disclosed not to gain compensation for that idea but for the sole purpose of inducing the defendant to enter a future business relationship.” It was in this precise context, the contemplation of a partnership, that Aliotti held that an idea must be disclosed for sale for an implied-in-fact contract to exist. As such, the Ninth Circuit said that the district court did not err in granting summary judgment because there was no genuine dispute of fact as to whether Reilly offered his idea to Wozniak for sale.

Understanding the Ninth Circuit’s Reasoning

The court’s citation to Aliotti seems to be contrary to its holding in Montz v. Pilgrim in which the plaintiffs alleged that they pitched a screenplay to NBC and the Syfy Channel “for the express purpose of offering to partner . . . in the production, broadcast and distribution of [Ghost Hunters].”  In Montz, the court said that it sees “no meaningful difference between the conditioning of use on payment … and conditioning use on the granting of a partnership interest in the proceeds of the production.” However, to understand how the Ninth Circuit is applying Aliotti in its short, unpublished opinion, you have to go back to the district court’s ruling on the motion for summary judgment in Reilly. There, the district court drilled down on what Reilly was pitching to Wozniak. Reilly wasn’t pitching an idea for Wozniak to acquire. Rather, what Reilly pitched was that Reilly be able to use Wozniak’s name as part of a pitch to potential financiers for an online computer school.

There were two fatal flaws with Reilly’s claim. The first is that an implied-in-fact contract requires a “reasonable expectation of payment which can be inferred from the facts and circumstances.” The district court found that the evidence established that Reilly initially solicited Wozniak’s “endorsement” to start the Woz Institute of Technology, but not an agreement that Woz pay him for the idea. The second fatal flaw was that the alleged “deal” between Wozniak and Reilly – strongly contested by Wozniak — was consummated, according to Reilly, well after Reilly initially disclosed his idea to Woz.

The court in Desny commented on that specific factual scenario: “[t]he idea man who blurts out his idea without having first made his bargain has no one but himself to blame for the loss of his bargaining power. The law will not in any event, from demands stated subsequent to the unconditioned disclosure of an abstract idea, imply a promise to pay for the idea, for its use, or for its previous disclosure.”

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