A jury recently found in favor of DreamWorks, rejecting legal claims by Terence Dunn, a self-described writer-producer-teacher-philosopher. Jurors decided the studio did not misappropriate his ideas in creating the story behind Kung Fu Panda. But this case’s real relevance may rest in how the jury decided that DreamWorks and Dunn had entered into an implied-in-fact contract before eventually ruling against him on substantive grounds. Bottom line: this litigation could serve as a useful reminder to Hollywood folks about the risks they face if they accept scripts, treatments or pitches from third parties.

California jury instruction CACI 305 states:

In deciding whether a contract was created, you should consider the conduct and relationship of the parties as well as all the circumstances of the case. Contracts can be created by the conduct of the parties, without spoken or written words. Contracts created by conduct are just as valid as contracts formed with words. Conduct will create a contact if the conduct of both parties is intentional and each knows, or has reason to know, that the other party will interpret the conduct as an agreement to enter into a contract.”

In light of this, it is interesting that the jury found an implied-in-fact contract between Dunn and DreamWorks.  Dunn claimed he brought the idea of a “spiritual ku-fu fighting panda bear” to DreamWorks in 2001 thinking he would be included in subsequent developments and he conducted several conversations with the studio before it passed on his pitch and put together Kung Fu Panda about a year later.

How to avert litigation like this? Studio executives must be wary of what they read and what they hear. To avoid vague interpretations of the “conduct of the parties,” studio execs could a send standard email immediately after a pitch meeting clarifying the situation — whether they officially will forego material or if they retain an interest in it. Studios also could have a document ready for both parties to sign after any pitch ended, similarly memorializing intent (though maybe pads of these could be posted in elevators, in certain taverns and restaurants or even near certain swimming pools or even budoirs?).

In May, the U.S. Ninth Circuit Court of Appeals upheld a script writer’s implied-in-fact contact claim under California state law in Monty v Pilgrim Films. Head to Seattle Copyright Watch for a review of Monty and the controlling Desny standard.