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AEB & ASSOCS. DESIGN GROUP v. TONKA CORP.

May 25, 1994

AEB & ASSOCIATES DESIGN GROUP, INC., Plaintiff,
v.
TONKA CORPORATION, Defendant.



The opinion of the court was delivered by: SHIRLEY WOHL KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 This action for breach of an implied contract, unjust enrichment and misappropriation arises out of the development of a children's "Colorblaster" toy by defendant Tonka Corporation's ("Tonka") Kenner Products Division. Presently before the Court is Tonka's motion, pursuant to Federal Rule of Civil Procedure 56(b), for summary judgment. Plaintiff AEB & Associates Design Group, Inc. ("AEB") opposes the motion, and moves, pursuant to Federal Rule of Civil Procedure 15(a), for leave to amend its complaint to assert a claim for breach of contract. For the reasons set forth below, Tonka's motion for summary judgment is granted and AEB's motion to amend the complaint is denied.

 BACKGROUND1

 I. Kenner's Corporate Structure

 Tonka is the successor in interest to Kenner Parker Toys, Inc. ("Kenner"). From March 1988 until January 1990, the responsibility for developing new products at Kenner was split between a "product concepts group" and an "advanced concepts group," both of which were employed at Kenner's headquarters in Cincinnati, Ohio. The product concepts group, headed by David Okada ("Okada"), was responsible for developing (1) line extensions of existing toys; (2) toys based on movie licenses; and, to a more limited extent, (3) new toy ideas in toy categories that traditionally had been part of Kenner's past successes. The advanced concepts group, headed by Howard Bollinger ("Bollinger"), met with outside inventors to come up with entirely new toy concepts.

 The product concepts and advanced concepts groups were independent divisions at Kenner, both in physical distance and spirit. The groups were created to accommodate the fact that Okada and Bollinger were senior vice presidents at Kenner and strong rivals. Accordingly, although the responsibilities of the two groups overlapped to some degree, they worked on separate floors of the Kenner office building, and the product concepts group was separated from Kenner's other departments by locked doors.

 John Mayer ("Mayer"), who conceived and developed the Colorblaster toy, worked in the product concepts group. Mayer reported directly to Ronald Hayes ("Hayes"), vice president of product concepts and design at Kenner. Hayes, in turn, reported to Okada until January 1990, when Okada left the company. At that time, the advanced concepts group was folded into the product concepts group, under the direction of Bollinger.

 II. Development of the Colorblaster Toy *fn2"

 The Colorblaster toy consists of a children's airbrush tool. Air that has been hand pumped into a canister is released from a nozzle and passes through a hole in the tip of a marker, spraying ink on paper. Stencils are provided with which children can create different designs.

 In March 1988, Mayer conceived of the airbrush concept when he was asked by Hayes to come up with ideas for new toy designs. Mayer took notes on his ideas, expressing his idea for an airbrush toy as an "Air brush, Hand pump." See Note from John Mayer (March 2, 1988) (the "Note"). The idea was based on the design for commercial airbrushes used by artists. "Air brush" referred to a type of airbrush involving an air supply hose through which compressed air passed from a container into a valve containing an ink marker. "Hand Pump" referred to an air tank containing a hand pump mechanism.

 In late June or early July 1989, Mayer began to work on the airbrush idea, and he turned a working prototype over to Kenner's engineering department in November 1989. The engineering department expressed concerns that the airbrush prototype would not be safe for children, however, and did not begin preparing specifications for mass-producing it until February 1990. *fn3" The Colorblaster toy eventually was introduced to Kenner's retailer accounts in the fall of 1990, and appeared in the Kenner showroom at the February 1991 New York toy fair (the "Toy Fair").

 Mayer contends that he worked on the project independently, and that he did not receive suggestions from anyone in the advanced concepts group about the Colorblaster toy. Okada was "generally aware" of the fact that Mayer was working on an airbrush toy, but did not participate in its development. Hayes also did not assist Mayer, other than to suggest that Mayer use an insect sprayer as the hand-pumped vessel for holding compressed air in the first working prototype of the Colorblaster toy. *fn4"

 III. Development of the "Jet Art" Toy

 AEB is engaged in product design, invention and development. Ken Hoare ("Hoare"), a principal of AEB, conceived of the idea for an airbrush toy in the spring of 1988, and made a prototype of it, naming the toy "Jet Art." The Jet Art prototype is based on the design for commercial airbrush tools, and consists of a canister, adapted from plumbing parts, into which air is pumped from a standard bicycle pump, requiring two hands to operate. One end of the canister is attached to a tube ending in a nozzle, into which a standard commercial marker can be affixed perpendicularly.

 Kiscom, Inc. ("Kiscom"), formerly known as Kiss Communications, is a designers' representative. In the fall of 1986, AEB entered into an agreement with Kiscom, pursuant to which Kiscom was to submit toy ideas to toy companies, and any revenues received from products placed by Kiscom were to be divided equally between Kiscom and AEB. See the letter agreement, dated September 26, 1986, annexed to the Declaration of Kim J. Landsman, dated July 13, 1993 (the "Landsman Dec."), as Exh. "18."

 Commencing on April 16, 1988, Kiscom presented the Jet Art submission to six toy companies, all of which rejected it. One of those companies, Fisher-Price, reviewed the submission pursuant to its "Policy and Agreement Concerning Ideas Submitted by Persons Outside of the Fisher-Price Toys Division of the Quaker Oats Company" (the "Fisher-Price Agreement"). Paragraph One of the Fisher-Price Agreement provided that "the disclosure must be understood to be purely voluntary and is not made in confidence." See the Fisher-Price Agreement at P 1, annexed to the Landsman Dec. as Exh. "52." The Fisher-Price Agreement provided further that "we are released from any liability in connection with the receipt and examination of your disclosure or in connection with our use or disclosure to others of any portion of your disclosure." Id. at P 3.

 IV. The Confidentiality Agreement

 On April 23, 1988, Kiscom and Kenner entered into a written contract entitled "Agreement to Hold Confidential" (the "Confidentiality Agreement"), which set forth the rights and obligations of the parties with respect to submissions presented by Kiscom to Kenner. The Confidentiality Agreement provided that Kenner was to hold in confidence information submitted to it by Kiscom, and was not to use this information unless an agreement to permit such use had been reached by the parties. See the Confidentiality Agreement at P 3, annexed to the Landsman Dec. as Exh. "B." The term "use" was defined in the Agreement as the "conscious consideration of such identified information followed by deliberate adoption thereof." Id.

 The Confidentiality Agreement provided further, however, that Kenner would not be liable for the independent creation of a toy that was similar to an outside submission. Id. at P 4(F). In addition, Kiscom did not have rights to ideas already known to Kenner or the public, and Kenner would not be liable if the idea had already been disclosed to a third party without restriction. Id. at P 4(A) - (D).

 Pursuant to the Agreement, Kiscom warranted that it did not represent any third party who had a claim to any concept disclosed to Kenner. Id. at P 6. In addition, Kiscom was required to provide a written description of each item presented to Kenner. Id. at P 1.

 The obligations set forth in the Agreement extended for two years from the date of disclosure. Id. at P 11. The Agreement provided further, however, that its terms "shall be in perpetuity unless modified or terminated as specified herein." Id. The Confidentiality Agreement also stated that it

 
contains the entire understanding between the parties relative to the protection of information which may be exchanged, and supersedes any prior or collateral related communications and ...

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