On Monday, the U.S. Supreme Court, without comment, refused to hear an appeal in the case over the sales of VEGGIETALES DVDs and other products.
In the case, Lyrick Studios sued Big Idea Prods., claiming that Big Idea had breached their agreement giving Lyrick exclusive license to distribute the children's cartoons. In 2003, a Dallas jury agreed with Lyrick, stating that the companies had an agreement and a two-year working relationship that was in effect a contract, even though a contract wasn't formally signed.
On appeal, Big Idea convinced a three-judge panel of the U.S. 5th Circuit Court of Appeals that Lyrick cannot satisfy the legal requirement that all transfers of copyright must be in writing and signed by the copyright holder, which lead to the overturning of the trial court's decision.
In turn, that decision was appealed to the Supreme Court, which refused to hear the case, which had forced Big Idea into bankruptcy.
Big Ideas founder Phil Vischer originally distributed VEGGIETALES independently to members of the Christian Bookstores Assn. Upon the shows' success, Big Idea wanted to sell its products to a larger audience and began negotiating with Lyrick Studios.
In February 1997, Lyrick ceo Tim Clott sent Big Idea the first of three documents that are critical to this case, according to the appellate court's opinion. This document was a proposal for distribution of VEGGIETALES to the "general marketplace." According to court documents, the proposal ended with the statement that "for both of our protection, no contract will exist until both parties have executed a formal agreement."
Big Idea vp licensing and development Bill Haljun sent the second critical document, a fax that listed several issues still to be worked out. The next day, the parties discussed the issues in a phone call and agreed to resolve them. Haljun faxed Clott a few days later, saying that "Phil is ecstatic.
After that, Lyrick prepared a 16-page contract, which was never signed. Over the years, several draft contracts and suggested revisions were sent back and forth.
Issues included DVD distribution rights, rights to stuffed animals, the possibility of a "key man" provision and even the term of the contract. The parties agree that no formal "longform" contract was ever signed.
Negotiations over a written contract continued until June 1999, when the fourth and final draft was sent by Lyrick, but was never signed.
An internal memo written by Haljun in November 1997 then became critical in the court case. It describes the parties' negotiations and indicates that, "We agreed over the phone to his contract and thanked him very much," the appeals court wrote. However, the memo was never sent to Lyrick.
Despite no formal signed contract, Lyrick began distributing VEGGIETALES videotapes in 1998. The appellate court ruled that the deal made significant profits for both firms.
In March 2001, Lyrick was acquired by the London-based children's entertainment company HIT Ent., but it continued to distribute VEGGIETALES.
In December of that year, Big Idea told Lyrick that it was going to use Warner Music as its new distributor. In turn, Lyrick sued, winning more than $11 million, which was later reversed on appeal.