Hoverboard Barbie: A Novelty Toy Without A Novel Concept – Corporate/Commercial Law

Bizar Male


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The California Court of Appeal recently upheld the dismissal of
claims against Mattel, which alleged that Mattel stole the idea for
its flying Barbie doll from Technology from Heaven Unlimited
(“TFHU”). Applying New York law, the Court found that
Mattel did not misappropriate TFHU’s idea to create a flying
Barbie using drone technology, as this idea did not have general
novelty, even if the idea was novel to the buyer. Moving forward,
companies should ensure that they have clear policies and
procedures in place before accepting ideas and before entering into
contracts for the disclosure of ideas, because whether an idea may
be novel may depend on the timing of the contract.

Factual Background

In early 2014, Plaintiff TFHU, a toy-inventing nonprofit,
learned that defendant Mattel, a highly successful toy
manufacturer, was looking to develop a new version of its
“Barbie” brand doll that would include a mechanism for
Barbie to fly. Accordingly, TFHU began to develop a toy to submit
to Mattel.

In July 2014, Mattel informed TFHU that submissions would have
to be made through an online process called Mattel Inventor Connect
(“MIC”). As part of submitting an idea through MIC,
inventors were required to execute a “Submission
Agreement,” which specifically stated that it did not create
any financial or equitable obligation between the parties and that
any obligations must be in a separate written agreement. TFHU
executed the Submission Agreement.

In August 2014, TFHU created a flying Barbie using a four
propeller drone, and depicted Barbie riding the drone as a
hoverboard, hanging from the drone as a hang glider, and using the
drone as fairy wings. TFHU then submitted this concept through the
MIC.

In December 2014, TFHU’s CEO, Clayton Golliher, met with
Mattel’s Barbie department to discuss the concept. Golliher
expressed his opinion that operating the flight control technology
may be too difficult for a young girl and that “auto
hover” technology would be more appropriate. The following
day, Mattel informed Golliher that it was not interested in moving
forward with TFHU’s concept.

Despite this, in February 2016, Mattel released Barbie Starlight
Adventure—a toy which depicted Barbie riding a drone
hoverboard equipped with auto hover technology. ­Believing
Mattel used ideas from its submission, TFHU requested reasonable
compensation from Mattel. Mattel declined and a lawsuit
commenced.

Under the terms of Mattel’s Submission Agreement, the
parties agreed that the suit would be governed by New York law.

Understanding Idea Misappropriation Claims

On July 20, 2019, TFHU filed its first amended complaint which
alleged, after the third cause of action was dismissed, two causes
of action: 1) tortious/property-based misappropriation of an idea;
and 2) breach of contract-based misappropriation of an idea.

Property Claims

To successfully allege a claim for idea misappropriation, the
individual asserting the claim must have a property-based interest
in the idea. Under New York law, specifically as held
in Downey v. Gen. Foods Corp., for an individual to
have a property right in an idea, the idea must possess the
elements of novelty and originality. Downey v. Gen. Foods
Corp.
, 31 N.Y.2d 56, 61 (1972). The novelty must be
“absolute” or “general,” meaning that the
idea is novel and original to the world at large, and not just to
the person seeking to use the idea.

Contract Claims

For contract claims based on idea misappropriation, New York law
distinguishes between pre-disclosure agreements (contracts formed
before the idea is disclosed to the buyer) and post-disclosure
agreements (contracts formed after the idea is disclosed to the
buyer).

With regards to post-disclosure agreements, Apfel v.
Prudential-Bache Sec., Inc.
 is the controlling
case. Apfel v. Prudential-Bache Sec., Inc., 81 N.Y.2d
470, 473 (1993). Apfel held that if a buyer and
seller enter into a post-disclosure agreement, then the novelty of
the idea is irrelevant, because the buyer is aware of what it is
buying and in entering into the agreement, has agreed that the idea
has value.

Pre-disclosure agreements, on the other hand, do require a
showing of novelty. 
This is because, unlike in
post-disclosure contracts where the buyer has already determined
that the idea has value, in pre-disclosure contracts, a
determination of the idea’s novelty is necessary to decide
whether the idea would be valuable and therefore constitute
sufficient consideration under the contract.

In dicta, Apfel addressed pre-disclosure
agreements, stating that novelty “at least to the
buyer” is necessary for a seller to prove ownership of an
idea. Because of this, New York law was left with some ambiguity as
to whether the Downey rule, which requires that
an idea have general novelty, or the Apfel 
rule, which only requires limited novelty (novelty to the buyer),
would apply to pre-disclosure agreements.

While New York federal law has chosen to
adopt Apfel‘s dicta as a rule, no state case
has applied the “novelty to the buyer” standard to
pre-disclosure contracts. See Nadel v. Play-By-Play Toys
& Novelties, Inc.,
 208 F.3d 368 (2d Cir. 2000). This
is because state courts have seen no reason to overrule the holding
in Downey in favor
of Apfel‘s dicta. See Lapine v.
Seinfeld
, 31 Misc. 3d 736, 738 (Sup. Ct. 2011)

Application to the Barbie Starlight Adventure Toy

The trial court sustained Mattel’s demurrer as to both the
property and contract-based idea misappropriation claims arising
from Mattel’s Barbie Starlight Adventure toy.

As to the property claim, the court found that a “hover
board drone” and “auto hover technology, combined with
an override feature” did not satisfy the novelty requirement.
With respect to the “hover board drone,” the court
found that neither a “hover board” nor a
“drone” were novel in themselves. Moreover, the court
ruled that these two elements were not novel as combined, as
“a combination of pre-existing elements” will not
satisfy the novelty requirement. See Schroeder v.
Cohen
, 169 A.D.3d 412 (App. Div. 1st Dept. 2019). The
“auto hover technology, combined with an override
feature” was also not found to be novel, as this technology
already existed in the public domain.

As to the contract claim, the court,
applying Downey, found that a breach of contract
claim for idea misappropriation also required a showing of general
novelty, which as discussed above, was not met.

On appeal, Plaintiff focused on the contract claim, arguing that
the Apfel test, rather than
the Downey test, should be applied. The Court of
Appeals disagreed with plaintiff, and ultimately upheld the trial
court’s ruling, holding that in the case of pre-disclosure
agreements, the Downey test is the appropriate
standard to use and therefore a showing of general novelty
is required. Specifically, the court stated:
“Plaintiff has not provided, and we have been unable to find,
any New York published case holding that only novelty to the buyer
is required for a claim of pre-disclosure contract-based
misappropriation of an idea. … As such, we hold that
the Downey rule applies to the instant case
requiring a greater showing of novelty.”

Takeaways

Moving forward, buyers should ensure that they have clear
policies and procedures in place before entering into contracts for
the disclosure of ideas, because whether an idea must be novel or
not depends entirely on the timing of the contract. If a buyer has
a pre-disclosure contract in place which states that the
seller’s disclosure of an idea
does not create an agreement that the buyer will
purchase the idea, then the idea must be novel both to the
buyer and to the world at large in order to
create an implied contractual duty for the buyer to pay if it uses
the idea. On the other hand, if the buyer enters into a
post-disclosure agreement with the seller, then the novelty
requirement is eradicated and the buyer must pay regardless of if
the idea is unique. Therefore, buyers should ensure that they have
clear policies and procedures in place, or they may end up paying
for ordinary, unremarkable ideas that they could have come up with
entirely on their own.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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