Taco Bell Corp. v. Tbwa chiat/day Inc.

I. Background

In June 1996, Ed Alfaro, a licensing manager at Taco Bell, attended a trade show in New York where he first discovered a cartoon depiction of a Chihuahua dog character (“Psycho Chihuahua”) being marketed by its creators, Tom Rinks and Joe Shields of Wrench LLC, a Michigan corporation (collec- tively, “Wrench”). Alfaro told Rinks and Shields that he wanted to explore the use of Psycho Chihuahua by Taco Bell.

During the Summer and Fall of 1996, Wrench provided Taco Bell with goods bearing Psycho Chihuahua’s image. From that time through June 1997, Alfaro tried to build sup- port within Taco Bell for its use of Psycho Chihuahua in its advertising. He showed the goods to Taco Bell’s senior man- agers and advertising agency at that time, Bozell Worldwide (“Bozell”). Taco Bell conducted a focus group study which included Psycho Chihuahua and several other designs. Alfaro reported to a senior Taco Bell executive that Psycho Chihua- hua was the most popular out of all the designs. 846 TACO BELL CORP. v. TBWA CHIAT/DAY In November 1996, Taco Bell and Wrench’s licensing agent, Strategy Licensing, discussed the possible use of Psy- cho Chihuahua as Taco Bell’s…