Sweetpea Post-Trial Brief

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DEFENDANTS POST-TRIAL BRIEF
GLASER WEIL FINK HOWARD
AVCHEN & SHAPIRO LLP
PATRICIA L. GLASER, State Bar No. 55668
pglaser@glaserweil.com
G. JILL BASINGER, State Bar No. 195739
jbasinger@glaserweil.com
DAVID SERGENIAN, State Bar No. 230174
dsergenian@glaserweil.com
10250 Constellation Boulevard, 19th Floor
Los Angeles, CA 90067
Telephone: (310) 553-3000
Facsimile: (310)556-2920
CALDWELL LESLIE & PROCTOR, PC
CHRISTOPHER G. CALDWELL, State Bar No. 106790
caldwell@caldwell-leslie.com
LINDA M. BURROW, State Bar No. 194668
burrow@caldwell-leslie.com
725 South Figueroa Street, 31st Floor
Los Angeles, California 90017-5524
Telephone: (213) 629-9040
Facsimile: (213) 629-9022
Attorneys for Defendant SWEETPEA
ENTERTAINMENT, INC. and
Defendant/Counterclaimant
SWEETPEA B.V.I. LTD.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION
HASBRO, INC., et al.,
Plaintiffs,
v.
SWEETPEA ENTERTAINMENT,
INC., et al.,
Defendants.
Case No. 13-CV-03406-DMG (JCGx)
Hon. Dolly M. Gee
DEFENDANTS POST-TRIAL
BRIEF
Trial Dates: September 16-23, 2014
AND RELATED COUNTERCLAIM
Case 2:13-cv-03406-DMG-JCG Document 289 Filed 10/06/14 Page 1 of 18 Page ID
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TABLE OF CONTENTS
Page
I. INTRODUCTION............................................................................................. 1
II. SWEETPEAS SEQUEL RIGHTS DID NOT REVERT................................. 1
A. Sweetpea Could Maintain Its Rights by Releasing a Sequel
Through Any Form of DistributionTheatrical, Non-theatrical
or Television............................................................................................ 1
B. Sweetpea Has Maintained Its Sequel Rights Even If Plaintiffs
Mistaken Interpretation of Paragraph 6 Were Correct............................ 4
1. Plaintiffs Are Estopped From Claiming That the Manner
in Which D&D 3 Was Released Triggered a Reversion.............. 4
2. D&D 3 Was a Non-theatrical Release.......................................... 5
C. D&D 3 Is a Sequel .................................................................................. 7
1. D&D 3 Is a Sequel Under the Customary Definition of
Sequel........................................................................................ 7
2. Plaintiffs Specialized Definition of Sequel Is Not in the
Agreement and Ignores the Nature of the D&D Property............ 8
D. D&D 3 Is Based on the Picture [and] the Picture Creations............. 10
E. The Timing and Amount of the Royalty Payment Are Irrelevant
to Whether Sweetpeas Sequel Rights Revert ...................................... 11
F. California Law Requires That the Reversion Provision Be
Interpreted to Avoid a Forfeiture and Preserve Sweetpeas
Sequel Rights ........................................................................................ 12
III. SWEETPEA HAS A FIRST NEGOTIATION/LAST REFUSAL
RIGHT............................................................................................................. 13
IV. SWEETPEAS TITLE RIGHTS HAVE NOT BEEN FORFEITED............. 14
V. HASBROS COPYRIGHT AND TRADEMARK CLAIMS FAIL............... 14
VI. CONCLUSION............................................................................................... 15
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TABLE OF AUTHORITIES
Page(s)
Cases
Already, LLC v. Nike, Inc.,
133 S. Ct. 721 (2013)............................................................................................ 15
Ballard v. MacCallum,
15 Cal.2d 439 (1940) .......................................................................................12-13
Deutsch v. Phillips Petroleum Co.,
56 Cal.App.3d 586 (1976) .................................................................................... 12
McNeece v. Wood,
204 Cal. 280 (1928) .............................................................................................. 12
Milenbach v. Commr of Internal Revenue,
318 F.3d 924 (9th Cir. 2003) ................................................................................ 12
Universal Sales Corp. v. Cal. Press Mfg. Co.,
20 Cal.2d 751 (1942) ............................................................................................ 13
Statutes
Cal. Civ. Code 1442............................................................................................ 1, 12
Cal. Civ. Code 1639...............................................................................................1-2
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I. INTRODUCTION
Plaintiffs have failed to meet their burden to show that Sweetpea has forfeited
any of its rights under the License Agreement, First Amendment, and Second
Amendment (collectively, the Agreement).
First, Plaintiffs failed to show that Sweetpeas sequel rights reverted. While
Plaintiffs would have the Court read a host of new provisions into the Agreement in
order to concoct an argument that a reversion has occurred, the Agreements actual
terms refute this, particularly in light of California Civil Code 1442 and abundant
case law requiring that the Agreement be interpreted to avoid a forfeiture.
Moreover, Plaintiffs conduct from 2005-2012 is irreconcilable with the reversion
theory their lawyers hatched in 2013. Given that D&D 2 and D&D 3 were subject
to the same Picture, Picture Creations and the Property requirement, and were
released in exactly the same manner, with Plaintiffs full consent, Plaintiffs
admission that D&D 2 did not cause a reversion dooms their claim that D&D 3 did.
Second, Plaintiffs arguments that Sweetpea has lost its First Negotiation/Last
Refusal and primary title rights suffer the same two defects: once again the plain
language of the Agreement and Plaintiffs conduct from 2005-2012 are dispositive.
Third, Plaintiffs copyright and trademark claims are completely lacking in
evidentiary support. The Court should grant Sweetpeas pending Motion for
Judgment on Partial Findings. (See Dkt. No. 272.)
Because Plaintiffs have failed to prove that Sweetpea forfeited any rights, the
Court should reject each of Plaintiffs claims and enter judgment for Sweetpea.
II. SWEETPEAS SEQUEL RIGHTS DID NOT REVERT
A. SweetpeaCouldMaintainI tsRightsbyReleasingaSequel Through
AnyFormof DistributionTheatrical, Non-theatrical or Television
The plain language of the Agreement confirms that the reversion of
Sweetpeas sequel rights did not depend on how the sequels were distributed. See
Cal. Civ. Code 1639 ([w]hen a contract is reduced to writing, the intention of the
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parties is to be ascertained from the writing alone, if possible). Paragraph 6 of the
First Amendmentthe centerpiece of Plaintiffs lawsuitpermits reversion under
only one circumstance: the failure to timely commence production of a sequel or
remake. Paragraph 6 cannot be interpreted to make maintenance of sequel rights
contingent on the type of release. In Paragraph 6, Sweetpea was granted the right
to make one or more sequels . . . based on the Picture, the Picture Creations and the
Property. (Exh. 37-0001, 6 (emphasis added).) The Second Amendment
1
reiterates this exact languagegranting the rights to make one or more sequels . . .
based on the Picture, the Picture Creations and the Propertywithout any of the
buckets manufactured by Plaintiffs in asking the Court to imply a new term that
would require forfeiture. (See Exh. 73-0004, 10.) The parties plain definition of
Picture, which is twice defined in the License Agreement as [o]ne (1) theatrical
or television motion picture based in whole or in part on the Property, is expressly
incorporated into Paragraph 6 and mandates that sequels include television motion
pictures. (See Exh. 12-0002, 1(d), 12-0004, 2) (emphasis added).)
Attempting to create ambiguities where none exist, Plaintiffs rely on three
inapposite clauses in the First Amendment to support their assertion that sequel
rights are limited to theatrical and non-theatrical films.
2
First, Plaintiffs claim that
the presence of a separate reversion clause in Paragraph 12 (the so-called elephant
in the room) means that the reversion clause in Paragraph 6 does not apply to
1
Notably, while the parties made extensive changes to the definition of Property
in the Second Amendment, the definition of Picture was untouched. (Exh. 73.)
2
Plaintiffs also point to Courtney Solomons deposition testimony where he
explained that during D&D 3s production he understood that to preserve
Sweetpeas sequel rights the film was to be released non-theatrically. (See Solomon
Depo. at 258:18 259:5, 260:21 261:7.) But Mr. Solomon was not asked and did
not attempt to identify the universe of releases that would preserve Sweetpeas
sequel rights. (See id.) Accordingly, he did not mention either theatrical (which
even Plaintiffs concede would have preserved sequel rights) or television (which
Mr. Solomon also believed would preserve those rights).
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television movies. Plaintiffs argument ignores that Paragraph 12, by its express
terms, applies solely to the reversion of the additional television rights referenced
in Paragraph 11 (based on the rights granted in Paragraph 10). (See Exh. 37-0003,
12.) Paragraph 10 has nothing to do with sequels or deadlines; rather, it grants
Sweetpea the additional right to make live-action television series or made-for-
television movies that are not required to be sequels. (See Exh. 37-0002, 10.)
Second, Plaintiffs point to language in Paragraph 6 requiring Sweetpea to
release a sequel within five years of its initial U.S. release to suggest that the form
of initial U.S. release determines whether D&D 3 is a sequel. (Exh. 37-0001, 6.)
But initial U.S. release does nothing more than set the clock for the reversion
deadline. On its face, it has no relevance to whether a subsequent film is a sequel.
Indeed, the language in the same sentence, providing for reversion seven years after
the final directors cut, applies even if the previous film was never released
anywhere. (Id.) This confirms that initial U.S. release sets only a deadline for
commencement of production of a sequel, not a requirement for its distribution.
3
Third, Plaintiffs suggest that because Paragraph 6 also refers to the
immediately prior picture (without capitalizing the P), this somehow trumps the
use of the defined term Picture in conjunction with sequel earlier in the
paragraph. Even if Plaintiffs were correct that the lowercase picture was intended
to have a separate meaning (an assertion belied by the use of picture elsewhere)
(see, e.g., Exh. 73-0003 004, 2(l), 4), Plaintiffs offered no evidence whatsoever
that picture was intended to exclude films initially released on television.
4
3
Likewise, the License Agreement expressly contemplated foreign production and
distribution of D&D films, undermining any claim that the type of U.S. distribution
determines whether a film is a sequel. (See Exh. 12-00036 037, 13(a)(ii), (iv).)
4
While there is no need to resort to extrinsic evidence to interpret Picture, if the
Court were to indulge Hasbros invitation, the last long-form draft prepared by Lee
Rosenbaum refutes Hasbros claim that Picture in Paragraph 6 refers only to
D&D 1 and does not include television motion pictures, as he proposed to change
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B. SweetpeaHasMaintainedI tsSequel RightsEvenI f Plaintiffs
MistakenI nterpretationof Paragraph6WereCorrect
Even if Plaintiffs interpretation of Paragraph 6 were correct (and it is not),
D&D 3 was a non-theatrical release. Equally important, Plaintiffs years of
consistent conduct estops them from claiming otherwise.
1. PlaintiffsAreEstoppedFromClaimingThat theManner in
WhichD&D 3 WasReleasedTriggeredaReversion
Plaintiffs concede that the production and 2005 release of D&D 2 did not
cause a reversion of sequel rights. (See Dkt. No. 220, 233 (asserting that [t]he
Sequel Rights reverted to Hasbro on October 8, 2010). Instead, Plaintiffs claim
those rights reverted five years later because D&D 3 was initially released in the
U.S. on Syfy. The flaw in this argument is that the production and release of
D&D 2, which did not cause reversion, were identical to D&D 3:
Plaintiffs approved, and made creative contributions to, the scripts for D&D 2
and D&D 3. (See Sept. 17 Tr. at 76:3 84:10, 142:2-5, 140:16 141:20,
144:21 145:10; Exhs. 90-0003, 2, 106, 453, 457, 530.)
D&D 2 and D&D 3 were then both initially released internationally on DVD.
(See Sept. 17 Tr. at 49:8-16, 52:16 53:5, 56:17 57:1, 126:16-19, 193:17-
21; Sept. 23 Tr. at 179:5-25; Solomon Decl., 132; Exh. 561.)
After international DVD releases, both D&D 2 and D&D 3 debuted in the
U.S. on Syfy. (See AF 27, 33; Sept. 17 Tr. at 56:17-23, 193:17-21; Solomon
Decl., 132.)
Although the releases of D&D 2 and D&D 3 were identical in all material
respects, it was not until 2013 that Plaintiffs lawyers asserted that a reversion had
occurred. (See, e.g., Sept. 17 Tr. at 57:18-22, 123:20 124:3, 124:19-21; Solomon
the License Agreements Paragraph 1(d) definition of Picture to The First Picture
. . . or any other live-action motion picture, whether intended for initial exploitation
in theatrical, television . . . or non-theatrical release. (Exh. 57-0003, I.)
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Decl., 140; Exh. 281.) Plaintiffs are estopped from claiming that D&D 3s release
patternidentical to D&D 2scaused Sweetpeas sequel rights to revert. Having
never asserted that D&D 2s U.S. premiere on Syfy in 2005 caused a sequel rights
reversion, Plaintiffs cannot claim eight years later that D&D 3s identical U.S. Syfy
premiere caused a reversion. (See Dkt. No. 220, 233 (Plaintiffs contention that
Sweetpeas sequel rights reverted in 2010, not 2005).) If an international DVD
release followed by a Syfy premiere in the U.S. is enough to make D&D 2 a non-
theatrical sequel, then D&D 3 must be a non-theatrical sequel as well.
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Indeed, the evidence establishes that, like Sweetpea, Plaintiffs did not believe
an initial U.S. release on Syfy triggered reversion. Plaintiffs knew of (indeed
actively encouraged) Sweetpeas initial plan (aborted when Syfy passed on the
project) to release D&D 3 first on television and then on DVD. (See, e.g., Sept. 17
Tr. at 60:21 61:8, 75:20-23; Exhs. 116, 138.) Plaintiffs also knew that Sweetpea
and Silver Pictures were scrambling in early October 2010 to commence production
of D&D 3 within five years of D&D 2s initial U.S. release (see Exhs. 119, 122), a
deadline that was relevant only to preserve sequel rights. (See Exh. 37-0001, 6.)
Plaintiffs, however, never uttered a word about reversion until April 2013long
after D&D 3 was released. Plaintiffs are estopped from sitting back and allowing
Sweetpea to produce and distribute two sequels based on the Parties mutual
understanding of how the Agreement should operate, but then reversing course
when it suits them.
2. D&D 3 WasaNon-theatrical Release
Even if Paragraph 6 of the First Amendment required that a sequel be released
theatrically or non-theatrically (which it does not), Plaintiffs claim still fails since
D&D 3 was a non-theatrical release. The following evidence was undisputed at trial:
5
The Parties concur that non-theatrical means a movie that is neither made for
television nor for release in theaters. (See Dkt. No. 220, 58, 92; see also Sept. 23
Tr. at 154:15 157:5.)
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Production of D&D 3 commenced on October 1, 2010 in order for Sweetpea
to maintain its sequel rights. (AF 27, 28.)
When production of D&D 3 began, no agreement was in place for a domestic
television release, or television financing. (See Sept. 17 Tr. at 186:7-10, 187:21-24,
190:22-24, 194:21-24.)
When D&D 3 began production, the only distribution deal in place was the
Graysons/IM Global overseas pre-sale deal for all media, including theatrical and
non-theatrical. (See Sept. 17 Tr. at 184:3 188:5.)
D&D 3 was produced independently, without Syfys funding, oversight, or
approvalrequired factors if D&D 3 were, in fact, a made-for-television movie.
(See Solomon Decl., 109; Sept. 17 Tr. at 189:17-25; Exh. 99-0009 0012 (never-
executed draft Syfy deal with script, cast, and other approval terms); Exhs. 532, 533
(agreements for production of made-for-television movies St. Patricks Day and Area
51).) By the time D&D 3 was licensed to Syfy, the film was finished (without Syfys
involvement) and had been sold overseas, and Syfy paid a mere 14 percent of D&D
3s budgetfar below what it would have paid for a made-for-television picture.
(Sept. 17 Tr. at 187:21 188:5; Sept. 18 Tr. (P.M. Session) at 16:2 17:18; Solomon
Decl., 112; Exhs. 99-0017, 6(a), 142, 172-0006, 5(a), 567.)
D&D 3 initially was released on DVD in the United Kingdom, well before it
premiered on Syfy, as Plaintiffs admitted they knew. (See Sept. 17 Tr. at 56:17
57:1, 195:8 197:9; Sept. 23 Tr. at 179:17-25.)
Plaintiffs assert that it is not the actual release pattern which determines
reversion, but the producers intent at the time of principal photography. They
further argueand spent much of the trial trying to provethat at the time of
principal photography on D&D 3, Sweetpea and Silver Pictures intended to make a
television movie. But nothing in the Agreement requires a specific type of release
to preserve sequel rights or provides that the type of release is determined by the
producers intent at the time of principal photography. Even if such a requirement
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were imputed, producer Steve Richards testified unequivocally that he intended
D&D 3 to be released non-theatrically (and in fact hoped for a theatrical release).
(See Sept. 17 Tr. at 159:24 160:8, 188:11 190:24, 194:21-24, 195:18 196:2.)
As noted above, the manner in which D&D 3 was financed and distributed bore
none of the indicia of a made-for-television movie. Similarly, Plaintiffs ignore the
not-for-television content of the D&D 3 script (including sexual scenes and
violence) that was included in the final version of the film released prior to the Syfy
airing. (Id. at 73:13 74:11, 75:15 76:2, 187:12-17; Exh. 525.)
More important, even if a non-theatrical release were required and intent were
relevant, it is not the intent of Silver Pictures that matters; rather, Sweetpeas intent
controls. Sweetpea is the party to the Agreement and the sole owner of sequel
rights. While Plaintiffs point to the $20,000 passive royalty payment as evidence of
intent,
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they ignore that Sweetpea forwarded its share of the non-theatrical royalty
($61,000) to Grayson (and Sweetpea was then told by Grayson that Hasbro had
consented to a lesser payment), which is objective evidence of Sweetpeas intent to
make D&D 3 a non-theatrical film. (See Dkt. No. 220, 145, 146; see also Sept.
23 Tr. at 105:22 106:24; Solomon Decl., 118-122; Exhs. 125, 129, 130.)
C. D&D 3 I saSequel
1. D&D 3 I saSequel Under theCustomaryDefinitionof Sequel
D&D 3 easily satisfies the customary industry definition of sequel. As
Mr. Dekom testified, the term sequel refers to a subsequent motion picture that is
linked to a prior production in the minds of consumers by taking place in the same
world or universe as the prior production. (See Dekom Decl., 9, 10, 22.) A
sequel need not have recurring characters, particularly where it (1) is based on a
6
Plaintiffs point to the $20,000 payment as evidencing that D&D 3 was an original
Syfy movie, while ignoring that $20,000 was double the correct payment because
Syfy is not U.S. prime-time network free television. (Exh. 37-0003, 11.)
Hasbro has never refunded what they now apparently assert was an overpayment.
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property that emphasizes discontinuity of characters and narrative, and (2) shares the
same title as its predecessors. (See id.)
Once again, the Parties conduct from 2005-2012 confirms that they
interpreted sequel consistent with industry custom and practice. D&D 2 and
D&D 3 each were marketed as sequels. (See Exhs. 525, 555.) Mr. Richards, who
produced D&D 2 and D&D 3, testified that he always considered the latter two
films to be sequels (and part of a trilogy), and that prior to this lawsuit no one
suggested otherwise. (See Sept. 17 Tr. at 140:6 145:18, 156:24 159:12.)
Likewise, Mr. Solomons rush to start production of D&D 3 by October 2010 makes
sense only if he was making a sequel, as there was no deadline to start production of
a non-sequel television motion picture under Paragraphs 10-12. (Solomon Decl.,
114, 115; Exh. 37.) Most important, Plaintiffs, who approved and contributed to
the script for each film, concede that D&D 2 (which, as discussed below, does not
meet their current definition) was a sequel, and never claimed that D&D 3 was not,
at least until their attorneys developed the reversion argument in 2013. (Exh. 281.)
2. Plaintiffs SpecializedDefinitionof Sequel I sNot inthe
Agreement andI gnorestheNatureof theD&DProperty
Ignoring the plain language of the Agreement, industry custom and practice,
and the intent of the parties, Plaintiffs cling to the testimony of their expert,
Mr. Toll, who seeks to import into the Agreement a wholly inapposite definition of
the term sequel from the Writers Guild of Americas Minimum Basic Agreement
(WGA definition). The evidence at trial discredited Mr. Tolls opinion.
First, D&D 2, as Mr. Toll confirmed, would not be a sequel under the WGA
definition, as it contained only a single recurring character from D&D 1 (Damodar),
who was not the protagonist. (See Sept. 18 Tr. at 130:3 131:3; Sept. 19 Tr. at
35:14-17.) In contrast, Plaintiffs core argumentthat reversion occurred in
October 2010requires that D&D 2 was a sequel under Paragraph 6 of the First
Amendment. (Exh. 37-0001, 6.) Plaintiffs simply cannot have it both ways.
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Second, Mr. Tolls definition of sequel ignores the unique nature of the D&D
property. As Plaintiffs own publications show, D&D characters are created anew
for each campaign, and the characters often die and are not carried over from one
campaign to the next. (See, e.g., Exh. 371-0147 (Plaintiffs 2008 Dungeon Masters
Guide, written by Mr. Wyatt, instructing that [i]n the end, though, the new
campaign is a new story with new protagonists. They shouldnt have to share the
spotlight with the heroes of days gone by.) Indeed, Plaintiffs admit in their Answer
that [e]ach game [of D&D] that is played is new, comprising new characters and
new environments, following its own path, and ending in a different way. (Dkt.
No. 62 at 16, 14; Dkt. No. 68, 14.)
7
Mr. Tolls emphasis on the WGA-MBA
definition is irreconcilable with D&Dsand Plaintiffsemphasis on nonrecurring
characters, another reason the definition does not apply here.
Third, the WGA definition of sequel is not, as Plaintiffs claim, an industry
standard for how sequels are defined by parties licensing rights. To the contrary,
the WGA definition is designed to ensure that writers are paid for their creative
contributions whenever a subsequent film takes advantage of an initial films
characters and storylines. (See Dekom Decl., 20.) Sweetpea identified numerous
examples of sequels that do not meet the WGA definition, wholly undermining
Plaintiffs claim that this definition is somehow standard. (See id., 12-18.)
Finally, Plaintiffs offered no evidence that the Parties ever considered the
WGA-MBA in their negotiations, and it certainly is not referenced in Paragraph 6 or
any other provision of the Agreement. (See Exhs. 12, 37, 73.)
7
Even Plaintiffs rebuttal exhibits are in accord. (See, e.g., Exh. 576-0006 (If the
Dungeon Master is just beginning a new campaign, he should call everyone together
for a session where all players create their characters . . . .), Exh. 577-0018 (the
2003 Dungeon Masters Guide explaining that [c]haracters . . . die (sometimes
repeatedly) . . . . [E]veryone can roll up new characters and start anew. Even thats
not really so badin fact, its an opportunity for a dramatic change of pace.).)
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D. D&D 3 I sBasedonthePicture[and] thePictureCreations
Plaintiffs argument that D&D 3 did not satisfy the Agreements requirement
that it be based on the Picture, the Picture Creations and the Property is easily
dispatched, because there is abundant evidence that Plaintiffs were deeply involved
in the writing of the D&D 3 script and they ultimately approved that script. (Supra
at p. 4.) This approval means that the Picture, the Picture Creations and the
Property requirement was necessarily satisfied, because this requirement applied
identically, whether Plaintiffs were reviewing the script as a Paragraph 6 sequel or a
Paragraph 10 television motion picture. (Exh. 37-0001 002, 6, 10.)
But even if Plaintiffs approval did not resolve the issue (and even assuming
that a sequel must be based on all three elements), the requirement was still
satisfied. There is no dispute that all three movies are based on the Property, and
Sweetpea proved that D&D 3 contained numerous Picture Creations drawn from
D&D 1, thus also proving that D&D 3 was based on a Picture. (Sept. 23 Tr. at
135:21 149:3.) Contrary to Plaintiffs assertion, there is no requirement that D&D
3 have the same Picture Creations as D&D 1it need only have Picture Creations
based on prior Picture Creations. (See Exh. 12-0002, 1(e).) Picture Creations
also need not be based on the Property; they include any creative elements in a prior
film. (Id.) And as for Picture Creations that are derived from the Property, they
need to be only changed in some manner, whether visual or otherwise, which
distinguishes them as Picture Creations of the Picture. (Id. (emphasis added).)
Given this expansive definition, the evidence readily establishes that D&D 3
is based on Picture Creations from D&D 1. The eye stalk in D&D 3, for example,
is based on the ear stalk in D&D 1. (See Sept. 23 Tr. at 138:14 139:15.)
Likewise, the red dragons in D&D 3 are based on the Picture Creations in D&D 1
(id. at 141:8 142:23); indeed, D&D 3s red dragons were visualized based on the
same special-effect computer wire frames used in D&D 1 (id. at 29:15 30:12).
Other examples of Picture Creations from D&D 3 based on Picture Creations in
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D&D 1 include the teleportation spells (id. at 143:13 144:9), magical blood (id. at
144:10 145:19), healing magic (id. at 145:20 146:11), vicious blades (id. at
147:16 148:23), and approximately twenty others (id. at 148:25 149:14).
8
E. TheTimingandAmount of theRoyaltyPayment AreI rrelevant to
Whether SweetpeasSequel RightsRevert
Ignoring, again, the actual language of the Agreement, Plaintiffs ask the Court
to write a payment deadline into the Agreement where none exists. Plaintiffs claim
that Paragraph 6 of the First Amendment requires that the payment be made upon
commencement of principal photography. If the Parties had wanted to require the
payment for any sequel to be made before photography commenced, they would
have included that requirement somewhere in the Agreement (as they did for
D&D 1, see Exh. 37-0001, 3), and there would have been no need for Plaintiffs to
separately impose such a deadline for D&D 2. (See Exh. 90-0004, 5.) The
absence of such a deadline in the Agreement is conclusive evidence that none exists,
which is completely consistent with the rules of independent film production (rather
than major studio production). (See Dekom Decl., 62-63.)
Plaintiffs payment deadline theory cannot be squared with the Agreements
other provisions. As with sequel payments, the Agreement contains no deadline for
when a non-sequel television royalty payment must be made. (See Exh. 37-0002
003, 10, 11.) Plaintiffs, who now claim they thought D&D 3 was made pursuant
to Paragraph 10 of the First Amendment, fail to explain why a royalty deadline
should be read into Paragraph 6 (i.e., to trigger reversion) but not Paragraph 10.
Plaintiffs claim that Paragraph 6 has an implied royalty deadline is irreconcilable
8
The ear and eye stalks illustrate why Plaintiffs attempt in their closing to import
the substantial similarities copyright infringement test to the Picture
Creations/sequel test is wholly misplaced. The eye stalk in D&D 3 is plainly based
on the ear stalk as expressed in D&D 1. Whether or not the two stalks are similar in
protectable expression, as would be required under copyright law, is of no moment.
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with their implicit concession that Paragraph 10 contains no such implied term.
Even if the Agreement included a provision requiring a D&D 3 royalty
payment before the commencement of principal photographywhich it does not
the six-day delay was at most a breach of the Agreement requiring notice, not
grounds for reversion. (See Exh. 12-0041 042, 19(a),(b).) And if the late
payment was a breach, the appropriate remedy would be damages, not the drastic
remedy of forfeiture. McNeece v. Wood, 204 Cal. 280, 284 (1928). Given that
Plaintiffs simultaneously, and anomalously, insist that Sweetpea did not breach the
Agreement (see Dkt. No. 229 at 4:21-22 (Hasbro does not claim that Sweetpea
breached the Agreement)), Plaintiffs invocation of equity to compel an even
harsher remedy turns the concept on its head. See, e.g., Ballard v. MacCallum, 15
Cal.2d 439, 444 (1940) (following the accepted doctrine that equity will relieve
even against an express provision for forfeiture) (emphasis added).
F. CaliforniaLawRequiresThat theReversionProvisionBeI nterpreted
toAvoidaForfeitureandPreserveSweetpeasSequel Rights
Plaintiffs attempts to have the Court import new confiscatory provisions into
the Agreement do violence to well-settled California law. A condition involving a
forfeiture must be strictly interpreted against the party for whose benefit it is
created. Cal. Civ. Code 1442; accord Deutsch v. Phillips Petroleum Co., 56
Cal.App.3d 586, 592 (1976) (the law abhors forfeitures, and will strictly construe
forfeiture provisions against the party in whose behalf they are invoked);
Milenbach v. Commr Internal Revenue, 318 F.3d 924, 936 (9th Cir. 2003) (same).
Because the Agreement may be interpreted to avoid the reversion of
Sweetpeas sequel rights, it is the Courts duty to do so. McNeece, 204 Cal. at
284 ([i]f the agreement can be reasonably interpreted so as to avoid the forfeiture,
it is our duty to do so) (citation omitted); Ballard, 15 Cal.2d at 444 (providing that,
where there are two possible constructions, one of which leads to a forfeiture and
the other avoids it . . . the construction which avoids forfeiture must be made if it is
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at all possible); Universal Sales Corp. v. Cal. Press Mfg. Co., 20 Cal.2d 751, 771
(1942) ([a] contract is not to be construed to provide a forfeiture unless no other
interpretation is reasonably possible) (citations omitted) (emphasis added).
III. SWEETPEA HAS A FIRST NEGOTIATION/LAST REFUSAL RIGHT
The rights granted to Sweetpea in Paragraph 2(k) of the License Agreement
never have been deleted or superseded, and thus belong to Sweetpea irrespective of
how the other issues are resolved. Paragraph 2(k) broadly provides Sweetpea with
the right of First Negotiation/Last Refusal with respect to all sequels and remakes
of any television or theatrical motion picture. (Exh. 12-0008, 2(k) (emphases
added).) Although Plaintiffs contend that Paragraph 2(k) was superseded by the
First Amendment, nothing in the First Amendment remotely supports this assertion.
In the face of this evidentiary void, Plaintiffs cling to unexecuted drafts of the
long-form agreement, which the Parties abandoned. Because the Agreement is
integrated, such evidence would be admissible only to explain an ambiguity in the
Agreement, which does not exist. (See Exh. 73-0005, 12.) If the parties had
intended to delete Paragraph 2(k), they would have expressly said so in the Second
Amendment, which, by its terms, was intended to contain all those terms not
reflected in the First Amendment on which the parties had reached agreement. (Id.)
In fact, while the Second Amendment expressly sets forth a number of deletions of
terms in the License Agreement and the First Amendment, it conspicuously does not
mention Paragraph 2(k). (See Exh. 73-0004, 3, 5-8.)
Nor is there any inconsistency between the rolling sequel rights in
Paragraph 6 of the First Amendment and the right of First Negotiation/Last Refusal.
The rights are different: one is a vested right to produce sequels within a specific
time, and the other is the right to negotiate for the right to produce sequels in the
absence of those rights. Thus, the right of First Negotiation/Last Refusal gave
Sweetpea the opportunity to participate in a sequel if it did not otherwise have that
right, whether after one film, as in the License Agreement, or after multiple sequels,
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as in the First Amendment. Under either scenario, Sweetpea, which invested huge
amounts of human and financial resources in the D&D franchise, would have the
right to attempt to be involved in future sequels even if it no longer had sequel
rights. (See Sept. 23 Tr. at 176:3 178:1; Dekom Decl., 74.)
IV. SWEETPEAS TITLE RIGHTS HAVE NOT BEEN FORFEITED
Under the First Amendment, Plaintiffs are forbidden from using or permitting
third parties to use Dungeons & Dragons . . . in the primary title of any live-
action motion picture or television program unless (i) D&D 1 was not released
prior to January 1, 2004, or (ii) Sweetpea elects not to use such words in the title(s)
at any point (and not due to a breach by TSR of the Agreement). (Exh. 37-0003,
14(b), 15.) Neither has occurred. D&D 1 was released in 2000 (AF 25), and
even under Plaintiffs interpretation of the Agreement, Sweetpea has continuing
production rights and has not elected to relinquish the title. Plaintiffs assertion
that title rights were forfeited ignores Sweetpeas undisputed ongoing rights to make
television motion pictures and series under Paragraph 10 of the First Amendment.
(Exh. 37-0002.) Hasbros argument is also inconsistent with its actions in
repeatedly acknowledging to others that Sweetpeas title rights were intact. In
Plaintiffs negotiations with Warner Bros. and Universal, before and after this
lawsuit was filed, Plaintiffs made clear that they could license only limited
secondary title rights. (See Exhs. 175-0002, 201, 295-0001 and 295-0020.)
9
V. HASBROS COPYRIGHT AND TRADEMARK CLAIMS FAIL
As Plaintiffs filed no response to Sweetpeas Rule 52(c) motion on the
copyright claims (Dkt. 272), judgment should be entered in favor of Sweetpea.
As to the trademark claims, Plaintiffs Opposition (Dkt. 274) has four
fundamental defects. First, Plaintiffs do not dispute that they (i) failed to register the
9
A detailed list of exhibits showing Hasbros conduct inconsistent with its claims in
this lawsuit was provided to the Court during Sweetpeas closing argument.
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Dungeons & Dragons mark in Class 41 for motion pictures, and (ii) failed to offer
any evidence of confusion between a putative D&D 4 and Plaintiffs non-motion-
picture trademarks. Plaintiffs bald and unsupported assertion that there can be no
doubt whatsoever that consumers likely would be confused by a hypothetical D&D
film cannot substitute for evidence. (Id. at 5:11.) Second, Plaintiffs reliance on
licensee estoppel (id. at 6:15 7:12) ignores that Sweetpea is not challenging the
validity of Plaintiffs marks or arguing abandonment. Third, while Plaintiffs
conceivably have broad common law rights in the DUNGEONS & DRAGONS
mark (id. at 1:17-18), they did not preserveand certainly did not proveany
common law claims at trial. (See Dkt. No. 194 (Final Pretrial Conference Order) at
3:3 4:5 (alleging claims only for federally registered marks).)
Finally, Plaintiffs assert that an injunction is warranted despite no evidence of
Sweetpeas intent to infringe following the Courts rulings. (See Dkt. No. 274 at
7:13 9:10.) The sole case on which Plaintiffs rely, Already, LLC v. Nike, Inc., 133
S. Ct. 721 (2013), does not even involve an injunction. The abundant case law cited
by Sweetpea confirms that no injunction may issue unless Plaintiffs establish an
imminent threat of irreparable harm. (See Dkt. No. 272 at 15:25 20:2.) Plaintiffs
offer no facts establishing the existence of any such threat.
VI. CONCLUSION
For the foregoing reasons, Sweetpea respectfully requests that the Court enter
judgment against Plaintiffs and in favor of Sweetpea on all of the Parties claims.
Dated: October 6, 2014
GLASER WEIL FINK HOWARD
AVCHEN & SHAPIRO LLP
Respectfully submitted,
CALDWELL LESLIE & PROCTOR, PC
By: /s/ Patricia L. Glaser
PATRICIA L. GLASER
By: /s/ Christopher G. Caldwell
CHRISTOPHER G. CALDWELL
Attorneys for Defendants
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