By, Shrudula Murthy, Karthik Subramaniam

Facts and Legal Context

The United States District Court for the Central District of California had ruled in the case of Daniels v. Walt Disney Co.[i] that the characters portrayed in Disney’s movie Inside Out did not infringe the copyright of The Moodsters, a set of five color-coded anthropomorphic emotions developed by Denise Daniels, one of the plaintiffs. Consequently, the Court of Appeals for the Ninth Circuit dismissed the appeal of the plaintiffs and upheld the decision of the District court.

Disney released their animated movie titled Inside Out in 2015, which revolved around five color-coded anthropomorphized emotions residing inside the mind of an 11-year-old girl named Riley. The five emotions depicted were joy, fear, sadness, disgust, and anger. The plaintiffs claimed that these five characters depicting the emotions, as portrayed in the movie, were infringed from their original characters, The Moodsters. The Moodsters, similar to the characters portrayed in Inside Out, were five anthropomorphised emotions, each associated with a colour.

In 2005, Daniels released the initial product, ‘The Moodsters Bible’, a pitchbook for potential collaborators which included a brief description of the characters, themes, and settings that Daniels visualised. Over different iterations, these characters were depicted differently, with different physical characteristics and names. The plaintiffs pitched the idea of The Moodsters to Disney and Pixar several times hoping to collaborate with them in a project involving these characters. In 2007, Daniels and her team also put up a 30-minute pilot episode for a television series featuring The Moodsters, titled, ‘The Amoodsment Mixup’.

The Court of Appeals upheld the decision of the District Court by asserting that The Moodsters did not comply with the: (i) Towle Test (ii) ‘The Story Being Told’ Test, and therefore, was not protected by copyright. Further, the court also upheld that there was no breach of an implied-in-fact contract between the Plaintiffs and Disney and that the usage of the characters in the movie constituted fair use.


  • The Towle Test

In the United States, the Copyright Act, 1976 does not specify the provision of copyrights to graphically-depicted characters. However, over time, courts in the US have extended copyright protection to such characters in certain cases. The Towle Test which originated in the DC Comics v. Towle,[ii] set in a three-pronged test to determine whether graphically depicted characters are copyrightable. For such a character to be eligible for copyright, the character must:

  1. have physical as well as conceptual qualities;
  2. be sufficiently delineated; and
  3. be especially distinctive and contain some unique elements of expression.

The first prong of the test determines whether a character is a graphically-depicted character, rather than merely being a literary character. The fact that they had certain physical qualities, in addition to conceptual qualities satisfied the requirements of the first prong. The Moodsters meeting this prong of the test was not contested by Disney, and it, therefore, was established that the characters were more than just literary characters.

The second prong of the test is used to determine whether a character has a consistent appearance that makes it recognizable wherever it appears. The court in the present matter found that The Moodsters did not have consistent characteristics and traits across productions and adaptations that sufficiently delineated them and made them adequately unique. The court found that the usage of colours to depict a mood or emotion was a common, recurring theme in children’s books and that the idea of using them to depict a character would not be copyrightable under 17 U.S. Code § 102(b). Further, while analysing the depiction of the characters over time, few characteristics apart from the usage of colour and the emotions were found to be consistent over its various iterations. The court declared that “lightly sketched” characters that did not have any distinctly identifiable character traits would not pass the second prong of the Towle Test, thereby not being eligible for copyright.

Finally, the court in analysing whether The Moodsters met the third prong of the Towle test found that while Daniels identified each character to be unique to the emotion they represented, this still did not make them “especially distinctive”. Drawing a parallel to the Batmobile in Towle, the court mentioned how the Batmobile had a “unique and highly recognizable name” across multiple iterations over time, while characters in The Moodsters had gone through different name changes over the three iterations done by Daniels. Given the generic attributes and character traits of The Moodsters, the court declared that “an anthropomorphised version” of a specific emotion is not sufficient in itself to be considered as copyrightable.

  • ‘The Story Being Told’ Test 

The ‘Story Being Told’ Test was a test developed in the Warner Bros. Pictures v. Columbia Broad. Sys.,[iii] according to which, a character would be accorded protection under copyright laws if they were intrinsic to the plot of the story and were not a mere “chessman in the game of telling the story”. The Court used this test to set a higher bar to determine whether a character could be copyrighted in the future. While the Towle Test grants copyright only to graphical or physical characters, The ‘Story Being Told’ Test expands this protection to literary, fictional characters as long as they are intrinsic to the plot or storyline.  Under ‘The Story Being Told’ Test, characters have been granted copyright in the following circumstances: (i) the title of the plot and of the characters is the same; and (ii) when the character in question is integral to the plot of the story and there is considerable character development which occurs over the course of the story.

The Moodsters Bible merely served as an introduction to the characters while the YouTube pilot included very less character development and did not substantially contribute to the development of the plot. These were considered insufficient and were thus not granted any protection under this test.

Even the five Moodsters as an ensemble were not granted protection under either of the tests as they did not have the necessary distinctiveness or the ability to delineate the characters from the plot. Thus, the plaintiff’s claim failed on this front as well.

  • Implied-in-fact contract 

Daniels claimed that she pitched the idea of The Moodsters to Disney and Pixar and that she should be compensated for her idea as it was common practice in the entertainment industry for the plaintiff to recover compensation for an idea conveyed to the counterparty in the absence of an explicit contract. The Ninth Circuit Court, in the case of Desny v. Wilder,[iv] had developed a test to evaluate the enforceability of an implied-in-fact contract, under which the following criteria had to be complied with:

  1. The plaintiff prepared or created the work in question;
  2. the work was disclosed to the defendant for sale; and
  3. the disclosure was “under circumstances from which it could be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work.” (The Grosso v. Miramax Film Corp. case[v])

Disney agreed to the fact that Daniels did create The Moodsters and that she had had conversations with the Disney and Pixar team(s). Even though Daniels might have approached Disney with the idea under the impression that the common practice in the industry included fulfilling implied-in-fact contracts, the court dismissed the claim on the grounds that Daniels did not provide the court with substantive details and proof.  It was held that there was no basis to conclude that the disclosure was made under circumstances where it could be proved that Disney voluntarily accepted the information knowing the implied conditions surrounding it. The court thus held that there was no breach of an implied-in-fact contract by Disney.

Practical Significance

The decision reached in the present case reiterates the stance of US Courts in offering protection to characters that are not otherwise eligible for protection under present statutes. The copyrightability of these characters however depends on the establishment of certain unique and distinctive traits that are consistent over time, and such traits sufficiently delineating them. The two tests, the Towle Test and ‘The Story Being Told’ Test, have been established as necessities for the declaration of graphically-depicted characters as copyrightable. This decision ensures that a clear-cut understanding is reached on what deserves protection and what doesn’t. The court, through its decision, established that generic concepts that personify ideas cannot be afforded protection under copyright laws. This decision plays a crucial role in ensuring that generic concepts like this continue to remain in the public domain for free artistic use, while the expression of these concepts in an original and creative manner that makes it unique and distinctive, is still accorded with protection.

The court, by making sure that both the Towle Test and ‘The Story Being Told’ Test were used simultaneously, ensured that the bar set for the protection of fictional characters was substantially raised as they now have to comply with a much stricter standard.

One of the criteria of the Towle Test is that the various physical expressions of the character have to be consistently uniform and if there are substantial variations, they would not be granted copyright protection. However, one of the fundamental rights granted by a Copyright stipulates that each version of the expression of a Copyright is granted protection. Thus, each iteration of the Moodsters, from the Bible to the Pilot and soft toys should have been protected. The Towle Test and the Copyright Laws are thus, not in consonance with each other and there needs to be a sound understanding of the extent of protection which should be granted to such fictional characters.

However, the court by declaring that there was no breach of an implied-in-fact contract will change the course of future practice in the industry as it would now require people to be more cautious in their approach towards pitching ideas to individuals or companies. By dismissing the plea of a breach of an implied-in-fact contract on the basis of lack of substantial, supporting details, the court has created new and cumbersome obstacles for the flexible collaboration of ideas between independent artists and other corporations in the film and entertainment industry. The court in turn has afforded big corporations, such as Disney, the opportunity to siphon off the work of independent artists.

[i] Daniels v. Walt Disney Co., Case No. 18-55635 (9th Cir. Mar. 16, 2020).

[ii] DC Comics v. Towle, 802 F.3d 1012, 1015 (9th Cir. 2015)

[iii] Warner Bros. Pictures v. Columbia Broad. Sys., 216 F.2d 945, 948 (9th Cir. 1954).

[iv] Desny v. Wilder, 46 Cal. 2d 715, 728, 299 P.2d 257, 263 (1956).

[v] Grosso v. Miramax Film Corp., 383 F.3d 965, 967 (9th Cir. 2004).

Image source: Photo by Capricorn song on Unsplash