sweetpea post-trial brief

8/11/2019 Sweetpea Post-Trial Brief

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DEFENDANTS POST-TRIAL BRIEF

GLASER WEIL FINK HOWARDAVCHEN & SHAPIRO LLP

PATRICIA L. GLASER, State Bar No. [email protected]

G. JILL BASINGER, State Bar No. [email protected]

DAVID SERGENIAN, State Bar No. [email protected] Constellation Boulevard, 19th FloorLos Angeles, CA 90067Telephone: (310) 553-3000Facsimile: (310)556-2920

CALDWELL LESLIE & PROCTOR, PCCHRISTOPHER G. CALDWELL, State Bar No. 106790

[email protected] M. BURROW, State Bar No. 194668

[email protected] South Figueroa Street, 31st FloorLos Angeles, California 90017-5524Telephone: (213) 629-9040Facsimile: (213) 629-9022

Attorneys for Defendant SWEETPEAENTERTAINMENT, INC. andDefendant/CounterclaimantSWEETPEA 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-TRIALBRIEF

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#:10674


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-i- DEFENDANTS POST-TRIAL BRIEF

TABLE OF CONTENTSPage

I. INTRODUCTION............................................................................................. 1

II. SWEETPEAS SEQUEL RIGHTS DID NOT REVERT.................................1

A. Sweetpea Could Maintain Its Rights by Releasing a SequelThrough Any Form of DistributionTheatrical, Non-theatricalor Television............................................................................................ 1

B. Sweetpea Has Maintained Its Sequel Rights Even If PlaintiffsMistaken Interpretation of Paragraph 6 Were Correct............................ 4

1. Plaintiffs Are Estopped From Claiming That the Mannerin WhichD&D 3Was Released Triggered a Reversion..............4

2. D&D 3Was a Non-theatrical Release..........................................5

C. D&D 3Is a Sequel ..................................................................................7

1. D&D 3Is a Sequel Under the Customary Definition ofSequel ........................................................................................ 7

2. Plaintiffs Specialized Definition of Sequel Is Not in theAgreement and Ignores the Nature of the D&D Property............8

D. D&D 3Is 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 ......................................11F. California Law Requires That the Reversion Provision Be

Interpreted to Avoid a Forfeiture and Preserve SweetpeasSequel Rights ........................................................................................ 12

III. SWEETPEA HAS A FIRST NEGOTIATION/LAST REFUSALRIGHT.............................................................................................................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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-ii- DEFENDANTS POST-TRIAL BRIEF

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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-1- DEFENDANTS POST-TRIAL BRIEF

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 thatD&D 2and D&D 3were 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 thatD&D 2did not cause a reversion dooms their claim that D&D 3did.

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. (SeeDkt. 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. Sweetpea Could M aintain Its Rights by Releasing a Sequel Thr ough

Any Form of 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 Amendment1

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. (SeeExh. 73-0004, 10.) The parties plain definition of

Picture, which istwicedefined in the License Agreement as [o]ne (1) theatrical

or television motion picturebased in whole or in part on the Property, is expressly

incorporated into Paragraph 6 and mandates that sequels include television motion

pictures. (SeeExh. 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 Propertyin the Second Amendment, the definition of Picture was untouched. (Exh. 73.)2

Plaintiffs also point to Courtney Solomons deposition testimony where heexplained that duringD&D 3s production he understood that to preserveSweetpeas sequel rights the film was to be released non-theatrically. (SeeSolomonDepo. at 258:18 259:5, 260:21 261:7.) But Mr. Solomon was not asked and didnot attempt to identify the universe of releases that would preserve Sweetpeassequel rights. (See id.) Accordingly, he did not mention either theatrical (whicheven Plaintiffs concede would have preserved sequel rights) or television (whichMr. 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 theadditionaltelevision rights referenced

in Paragraph 11 (based on the rights granted in Paragraph 10). (SeeExh. 37-0003,

12.) Paragraph 10 has nothing to do with sequels or deadlines; rather, it grants

Sweetpea theadditionalright to make live-action television series or made-for-

television movies that are notrequired to be sequels. (SeeExh. 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 whetherD&D 3is 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 anddistribution ofD&Dfilms, undermining any claim that the type of U.S. distributiondetermines whether a film is a sequel. (SeeExh. 12-00036 037, 13(a)(ii), (iv).)4 While there is no need to resort to extrinsic evidence to interpret Picture, if theCourt were to indulge Hasbros invitation, the last long-form draft prepared by LeeRosenbaum 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. Sweetpea H as M aintained I ts Sequel Rights Even I f Plaintiff s

M istaken I nter pretation of Paragr aph 6 Wer e Corr ect

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. Plaintiffs Are Estopped Fr om Claiming That the M anner in

WhichD&D 3 Was Released Tr igger ed a Reversion

Plaintiffs concede that the production and 2005 release ofD&D 2did not

cause a reversion of sequel rights. (SeeDkt. 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 3was 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 toD&D 3:

Plaintiffs approved, and made creative contributions to, the scripts forD&D 2

andD&D 3. (SeeSept. 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 2and D&D 3were then both initially released internationally on DVD.

(SeeSept. 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, bothD&D 2and D&D 3debuted in the

U.S. on Syfy. (SeeAF 27, 33; Sept. 17 Tr. at 56:17-23, 193:17-21; Solomon

Decl., 132.)

Although the releases ofD&D 2and D&D 3were identical in all materialrespects, 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 exploitationin theatrical, television . . . or non-theatrical release. (Exh. 57-0003, I.)



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Decl., 140; Exh. 281.) Plaintiffs are estopped from claiming thatD&D 3s release

patternidentical toD&D 2scaused Sweetpeas sequel rights to revert. Having

never asserted thatD&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. (SeeDkt. 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 2a non-

theatrical sequel, thenD&D 3must be a non-theatrical sequel as well.5

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 releaseD&D 3first 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

ofD&D 3within five years ofD&D 2s initial U.S. release (seeExhs. 119, 122), a

deadline that was relevantonlyto preserve sequel rights. (SeeExh. 37-0001, 6.)

Plaintiffs, however, never uttered a word about reversion until April 2013long

afterD&D 3was 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 Was a Non-theatrical Release

Even if Paragraph 6 of the First Amendment required that a sequel be releasedtheatrically or non-theatrically (which it does not), Plaintiffs claim still fails since

D&D 3 wasa non-theatrical release. The following evidence was undisputed at trial:

5 The Parties concur that non-theatrical means a movie that is neither made fortelevision nor for release in theaters. (SeeDkt. No. 220, 58, 92;see alsoSept. 23Tr. at 154:15 157:5.)



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Production ofD&D 3commenced on October 1, 2010 in order for Sweetpea

to maintain its sequel rights. (AF 27, 28.)

When production ofD&D 3began, no agreement was in place for a domestic

television release, or television financing. (SeeSept. 17 Tr. at 186:7-10, 187:21-24,

190:22-24, 194:21-24.)

WhenD&D 3began production, the only distribution deal in place was the

Graysons/IM Global overseas pre-sale deal forallmedia, including theatrical and

non-theatrical. (SeeSept. 17 Tr. at 184:3 188:5.)

D&D 3was produced independently, without Syfys funding, oversight, or

approvalrequired factors ifD&D 3were, in fact, a made-for-television movie.

(SeeSolomon 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 Dayand Are

51).) By the timeD&D 3was licensed to Syfy, the film was finished (without Syfy

involvement) and had been sold overseas, and Syfy paid a mere 14 percent ofD&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 3initially was released on DVD in the United Kingdom, well before it

premiered on Syfy, as Plaintiffs admitted they knew. (SeeSept. 17 Tr. at 56:17

57:1, 195:8 197:9; Sept. 23 Tr. at 179:17-25.)

Plaintiffs assert that it is not theactualrelease pattern which determines

reversion, but the producers intent at the time of principal photography. Theyfurther 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).

(SeeSept. 17 Tr. at 159:24 160:8, 188:11 190:24, 194:21-24, 195:18 196:2.)

As noted above, the manner in whichD&D 3was financed and distributed bore

none of the indicia of a made-for-television movie. Similarly, Plaintiffs ignore the

not-for-television content of theD&D 3script (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, Sweetpeasintent

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,6

they ignore that Sweetpea forwarded its share of the non-theatricalroyalty

($61,000) to Grayson (and Sweetpea was then told by Grayson that Hasbro had

consented to a lesser payment), which is objective evidence ofSweetpeasintent to

makeD&D 3a non-theatrical film. (SeeDkt. No. 220, 145, 146;see alsoSept.

23 Tr. at 105:22 106:24; Solomon Decl., 118-122; Exhs. 125, 129, 130.)

C. D&D 3 I s a Sequel

1. D&D 3 I s a Sequel U nder the Customary Defini tion of 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. (SeeDekom Decl., 9, 10, 22.) Asequel 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 3was an originalSyfy movie, while ignoring that $20,000 was double the correct payment becauseSyfy 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 2and

D&D 3 each were marketed as sequels. (SeeExhs. 525, 555.) Mr. Richards, who

produced D&D 2and 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. (SeeSept. 17 Tr. at 140:6 145:18, 156:24 159:12.)

Likewise, Mr. Solomons rush to start production ofD&D 3by October 2010 makes

senseonlyif 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 thatD&D 2(which, as discussed below, does not

meet their current definition) was a sequel, and never claimed that D&D 3was not,

at least until their attorneys developed the reversion argument in 2013. (Exh. 281.)

2. Plaintif fs Specialized Defi nition of Sequel Is Not in the

Agreement and I gnores the Nature of the D& D Property

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 WGAdefinition, as it contained only a single recurring character from D&D 1(Damodar),

who was not the protagonist. (SeeSept. 18 Tr. at 130:3 131:3; Sept. 19 Tr. at

35:14-17.) In contrast, Plaintiffs core argumentthat reversion occurred in

October 2010requires thatD&D 2 wasa 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. (SeeDekom 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. (SeeExhs. 12, 37, 73.)

7 Even Plaintiffs rebuttal exhibits are in accord. (See, e.g., Exh. 576-0006 (If theDungeon Master is just beginning a new campaign, he should call everyone togetherfor a session where all players create their characters . . . .), Exh. 577-0018 (the2003Dungeon Masters Guideexplaining that [c]haracters . . . die (sometimesrepeatedly) . . . . [E]veryone can roll up new characters and start anew. Even thatsnot really so badin fact, its an opportunity for a dramatic change of pace.).)



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D. D&D 3 I s Based on the Picture [and] the Picture Creations

Plaintiffs argument thatD&D 3did 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 theD&D 3script 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 thatD&D 3contained numerous Picture Creations drawn from

D&D 1, thus also proving that D&D 3was based on a Picture. (Sept. 23 Tr. at

135:21 149:3.) Contrary to Plaintiffs assertion, there is no requirement thatD&D

3have thesamePicture Creations asD&D 1it need only have Picture Creations

based on prior Picture Creations. (SeeExh. 12-0002, 1(e).) Picture Creations

also need not be based on the Property; they includeany creative elements in a prior

film. (Id.) And as for Picture Creations thatarederived 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 fromD&D 1. The eye stalk inD&D 3, for example,is based on the ear stalk in D&D 1. (SeeSept. 23 Tr. at 138:14 139:15.)

Likewise, the red dragons inD&D 3are based on the Picture Creations inD&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 inD&D 1(id.at 29:15 30:12).

Other examples of Picture Creations fromD&D 3based 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. The Timing and Amount of the Royalty Payment Are I rr elevant to

Whether Sweetpea s Sequel Rights Rever t

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 foranysequel to be made before photography commenced, they would

have included that requirement somewhere in the Agreement (as they did for

D&D 1,seeExh. 37-0001, 3), and there would have been no need for Plaintiffs to

separately impose such a deadline forD&D 2. (SeeExh. 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). (SeeDekom 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. (SeeExh. 37-0002

003, 10, 11.) Plaintiffs, who now claim they thoughtD&D 3was 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 importthe substantial similarities copyright infringement test to the PictureCreations/sequel test is wholly misplaced. The eye stalk inD&D 3is plainly basedon the ear stalk as expressed in D&D 1. Whether or not the two stalks are similar inprotectable 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 3royalty

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. (SeeExh. 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 (seeDkt. 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 . Calif ornia L aw Requires That the Reversion Provision Be I nterpreted

to Avoid a F orf eitu re and Preser ve Sweetpea s Sequel 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 ofSweetpeas 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

interpretationis 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 allsequels and remakes

ofanytelevision 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. (SeeExh. 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 allthose 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). (SeeExh. 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 negotiatefor 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&Dfranchise, would have the

right toattemptto be involved in future sequels even if it no longer had sequel

rights. (SeeSept. 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 1was 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 1was 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. (SeeExhs. 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 inthis 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 4and 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. (SeeDkt. 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. (SeeDkt. 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. (SeeDkt. 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 HOWARDAVCHEN & SHAPIRO LLP

Respectfully submitted,

CALDWELL LESLIE & PROCTOR, PC

By: /s/ Patricia L. GlaserPATRICIA L. GLASER

By: /s/ Christopher G. CaldwellCHRISTOPHER G. CALDWELL

Attorne s for Defendants


sweetpea post-trial brief

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