Landsberg v. Scrabble Crossword Game Players, Inc. (1986) – Detailed Study Notes

Parties & Procedural Posture

• Plaintiff: Mark Landsberg – author of an unpublished Scrabble strategy manuscript.
• Defendants:
  • Selchow & Righter Co. ("S & R") – owner of the SCRABBLE® trademark.
  • Scrabble Crossword Game Players, Inc. – S & R subsidiary.
  • Crown Publishers, Inc. – publisher of S & R’s competing strategy book.
• Initial claims filed in California state court: copyright infringement + breach of implied-in-fact contract → removed to federal court under 28\ U.S.C.\ § 1441(a).
• District Court (Trial 1): Found copyright infringement; awarded damages, profits, fees, costs, and 100{,}000 punitive damages.
• Ninth Circuit (Landsberg I, 736\ F.2d\ 485):
  • Reversed copyright judgment (substantial-similarity standard for nonfiction not met).
  • Remanded solely for findings on implied contract claim.
• District Court (Remand): Entered summary judgment for Landsberg on contract theory; reinstated compensatory damages (profits), added post-1978 profits, doubled punitive damages, granted additional attorney’s fees & 10 % prejudgment interest from date of first judgment.
• Current Appeal (Landsberg II, 802\ F.2d\ 1193): Defendants challenge liability, damages, fees, interest; Ninth Circuit affirms liability but modifies monetary awards.

Key Legal Questions

• Did disclosure precede formation of an implied-in-fact contract, thereby defeating contractual protection?
• Were defendants’ profits a legally proper measure of compensatory damages under California contract law (Cal. Civ. Code §§ 3300, 3358)?
• Could punitive damages be awarded for breach of an implied-in-fact contract under Seaman’s tort doctrine (Cal. Civ. Code § 3294)?
• Was doubling the punitive award after a successful appeal permissible, or a penalty on the right to appellate review?
• Were post-remand attorney’s fees & billing-rate increases justified?
• Was prejudgment interest allowable on the entire award, and from which date should it accrue (Cal. Civ. Code § 3287(a))?

Findings on Implied Contract Formation

• Initial submission of manuscript confidential & limited to securing permission to use the SCRABBLE mark.
• Landsberg expressly communicated intent to commercially exploit the manuscript; any use conditioned on payment.
• Negotiations evidenced defendants’ understanding that compensation was expected.
• District court’s supplemental findings not clearly erroneous: disclosure did not precede contract; defendants breached by copying without consent or payment.

Waiver / Cross-Appeal Issue

• Landsberg’s failure to cross-appeal contract claim in Landsberg I ≠ waiver:
  • Claims pled in the alternative; winning full profits under copyright made contract appeal unnecessary (avoid double recovery).
  • Ninth Circuit’s own remand order established “law of the case” that contract claim survived.

Compensatory Damages Analysis

• Contract aim: place plaintiff where he would be on full performance.
• Contract interpreted as: S & R must obtain permission + payment before any use (otherwise Landsberg free to market elsewhere).
• Denial of opportunity to exploit = loss measured best by defendants’ profits.
• Inclusion of Crown Publishers’ profits proper: breach diverted those profits; Crown’s non-party status irrelevant to compensatory measure.
• No foreseeability problem under § 3300 (Hadley v. Baxendale codification).

Punitive Damages

• Seaman’s Direct Buying Service v. Standard Oil: Tort liability when breaching party, in bad faith and without probable cause, denies contract’s existence.
• Implied-in-fact contracts are "true" contracts → Seaman’s doctrine applies.
• Trial court’s finding of bad-faith denial by S & R supported; initial 100{,}000 punitive award affirmed.
• Second 100{,}000 punitive award vacated: doubling solely because defendants exercised right to appeal ≈ impermissible chill; attorney’s fees + interest already compensated delay.

Attorney’s Fees

• Post-remand fees permissible: Landsberg prevailed; court found defendants’ bad faith.
• Billing-rate issue: Court cannot apply 1985 rates to hours incurred pre-1985; award reduced to:
  • Original fee amount (at historic rates) +
  • Additional hours post-remand at 1985 rates.

Pre-Judgment Interest

• Diversity → state law governs (Michael-Regan v. Lindell).
• Under California precedent (Stockton Theatres v. Palermo): When prior judgment VACATED (not merely modified), interest runs from new judgment date, not original.
• District court erred by starting on 11-08-1979; modified to accrue from date of remand judgment.
• § 3287(a) allows interest once claim becomes liquidated during litigation → may include fees, costs, punitive damages once quantified.

Final Disposition (as modified by Ninth Circuit)

• Liability on implied-in-fact contract AFFIRMED.
• Monetary relief adjusted:
  • Compensatory damages = S & R + Crown profits (through trial & post-1978) ✔
  • Punitive damages = 100{,}000 (single award) ✔
  • Attorney’s fees = historic-rate component + remand-work component ✔ (reduced)
  • Prejudgment interest = 10 % from remand-judgment date ✔ (date adjusted)

Connections & Significance

• Illustrates interplay between copyright and contract: even when copyright fails, implied contract can protect authors’ submissions.
• Clarifies that ideas vs. expression dichotomy in copyright is irrelevant to contract theory; focus shifts to parties’ conduct & expectations.
• Applies Seaman’s tort-breach doctrine to implied contracts, expanding punitive-damage exposure for bad-faith denials.
• Demonstrates California’s strict stance against "forced exchanges" of creative works.
• Affirms appellate courts’ vigilance against trial-level penalties that chill appeals (doubling punitive damages).

Practical / Ethical Takeaways

• Always document expectations of compensation & confidentiality before disclosing creative material.
• Companies soliciting ideas must clarify acceptance/use terms to avoid implied-contract liability.
• Counsel should avoid denying obvious contracts without probable cause; exposes client to tort & punitive damages.
• Courts may award opponent’s profits where breach deprives plaintiff of control/market opportunity.

Statutes & Key Citations

• 28\ U.S.C.\ § 1441(a) – Removal jurisdiction.
• Cal. Civ. Code §§ 3300, 3358 – Contract damages (Hadley limitation & no greater than performance value).
• Cal. Civ. Code § 3294 – Punitive damages.
• Cal. Civ. Code § 3287(a) – Prejudgment interest on liquidated claims.
• Cases: Donahue v. Ziv Television Programs (idea-submission contracts), Desny v. Wilder, Seaman’s Direct Buying Service, Stockton Theatres.

Numbers & Timeline (Key Dates)

• Manuscript sent: 1970s (exact date not specified in excerpt).
• Initial district-court judgment: 11 Nov 1979 (interest reference).
• Landsberg I opinion: 736\ F.2d\ 485 (1984).
• Oral argument on second appeal: 02 Jun 1986; decision: 21 Oct 1986.

Exam Pointers

• Distinguish implied-in-fact vs. quasi-contract (obligation implied by law) – only the former supports Seaman’s punitive damages.
• For damages essays: discuss § 3358 (no greater than performance), but explain when defendant’s profits can still satisfy the statute.
• When analyzing interest: recall California rule on reversal/vacatur and date-of-judgment accrual.
• Always consider alternative theories (copyright, contract, tort); failure of one does not bar relief under another when facts support it.