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Material Facts Exist Concerning Formation of License Agreement

January 07, 2005

Decision icon Decision

Last Month at the Federal Circuit - February 2005

Judges: Dyk (author), Clevenger, and Newman (dissenting-in-part)

In Lamle v. Mattel, Inc., No. 04-1151 (Fed. Cir. Jan. 7, 2005), the Federal Circuit affirmed a district court’s grant of SJ in most respects but vacated the SJ as to a contract claim, finding genuine issues of material fact.

Stewart Lamle invented the board game Farook and obtained two U.S. patents for the game. From May 1996 to October 1997, Lamle and Mattel, Inc. and its subsidiary, J.W. Spear & Sons PLC (collectively “Mattel”), engaged in negotiations regarding the licensing of Farook by Mattel for distribution outside the United States. Lamle signed Mattel’s standard product disclosure form (“the disclosure form”), which expressly disclaimed any obligation by Mattel until a formal written contract was agreed to and entered into. Lamle and Mattel then entered into a written agreement whereby Mattel would pay $25,000 for Lamle’s promise not to license Farook to anyone else until after June 15, 1997. The parties met in June 1997 to discuss licensing terms, and Mattel employee Mike Bucher subsequently sent Lamle an e-mail entitled “Farook deal” on June 26, 1997, that substantially repeated the terms agreed to in the meeting. This e-mail stated that the terms had been agreed in principle by Mattel subject to contract. Lamle then sent a draft licensing agreement to Mattel in August 1997 and a corrected version in September 1997. Neither was ever signed by Mattel. About the same time, Mattel was preparing Farook for presentation at its Pre-Toy Fair, which allows Mattel to ascertain interest for potential toys. After the Fair, Mattel decided not to license Farook and attempted to notify Lamle by e-mail on October 1, 1997. When Mattel could not reach Lamle by e-mail, on October 8, 1997, Mattel notified Lamle of its decision by fax at the office of Jake Sobotka, a business associate of Lamle’s.

In October 1999, Lamle sued Mattel for breach of contract, patent infringement, and intentional interference with economic relations. The district court granted SJ in favor of Mattel on all claims in August 2001. However, in May 2003, the Federal Circuit vacated that SJ because it could not discern the grounds on which the district court had granted SJ. On remand, the district court again granted SJ in favor of Mattel on all claims.

The Federal Circuit concluded that a genuine issue of material fact exists as to whether the parties agreed to a contract at the June 1997 meeting. Although specific details of an agreement to manufacture and market Farook were discussed at the meeting, Bucher’s e-mail on June 26, 1997, specifically stated that the terms were subject to contract by Mattel. Bucher submitted an affidavit stating that the actual terms of any license agreement took time and would need to be approved. The Federal Circuit concluded that the evidence raised a genuine issue of material fact as to whether a contract had been formed. The Court also concluded that under California law, the June 26, 1997, Bucher e-mail satisfied the Statute of Frauds because it concluded with the phrase, “Best regards Mike Bucher.”

Judge Newman dissented-in-part because the parties had twice agreed that any obligation would be contained in a formal written contract, which never materialized.