Billy-Bob Teeth, Inc. v. Novelty, Inc.

Rich Bailey and John White started Billy-Bob Teeth, Inc. (Billy-Bob) (plaintiff), a company that made novelty gag teeth. Billy-Bob was incorporated in May 1996. Bailey and White were 50-50 shareholders until Bailey left the company in 1997. Bailey created the original novelty-teeth prototype, but White created all subsequent designs and handled the manufacture, marketing, and distribution of the teeth. Billy-Bob became enormously successful, eventually signing a lucrative contract with Newline Cinema to provide the prosthetic teeth used in the “Austin Powers” movies. In 1999, Billy-Bob registered copyrights for its novelty teeth. Subsequently, Novelty, Inc. (defendant), which sold products to 5,000 gas stations, requested sample teeth from White because it was considering selling Billy-Bob’s teeth. However, instead of contracting with Billy-Bob, Novelty instructed its own manufacturer to make novelty teeth based off the Billy-Bob design, but with enough differences not to be exact copies. Novelty sold its own, lower-quality teeth in copies of Billy-Bob’s packaging, which negatively impacted Billy-Bob’s sales and reputation. Billy-Bob sued Novelty for copyright and trade-dress infringement. White testified that he orally agreed to transfer his copyrights in the novelty teeth to Billy-Bob in 1996, following its incorporation, and signed a nunc pro tunc copyright assignment stating that he transferred his copyrights to Billy-Bob in 1996. Novelty challenged, arguing that Billy-Bob did not have valid copyrights in the novelty teeth because the transfer of the copyrights from White to Billy-Bob was invalid. The district court granted Billy-Bob damages for trade-dress infringement but held that Billy-Bob did not hold valid copyrights for the novelty teeth because White had not produced sufficient evidence demonstrating he had an oral agreement with Billy-Bob to assign the copyrights in 1996. Billy-Bob appealed.