The Michigan creators of the cool, confident and edgy Chihuahua immortalized in Taco Bell advertising were awarded $30.1 million today by a federal jury that agreed the fast-food giant should be made to pay for using their character.
This afternoon's verdict ends a five-year, multimillion-dollar battle over rights to the Chihuahua made famous by Taco Bell, a subsidiary of Louisville-based YUM! Brands, Inc. (NYSE: YUM). The dog's creators, Joseph Shields and Thomas Rinks, sued Taco Bell in federal court in 1998 for breach of contract and other claims for failing to pay for the use of the pair's Chihuahua character in a popular three-year advertising campaign. The pair was seeking $30.1 million in compensation from Taco Bell based on a percentage of the more than $500 million spent by Taco Bell on the Chihuahua campaign.
"We created the popular Chihuahua that Taco Bell used as its mascot and marketing icon," Rinks said. "After Taco Bell approached us and asked for our ideas, they just went ahead and used the character that we had created without paying for it. Now that we've been vindicated, we plan to aggressively pursue licensing opportunities with our Chihuahua character."
A jury of five women and three men deliberated approximately five hours before returning a verdict in favor of Shields and Rinks. The three-week trial was presided over by Judge Gordon Quist in U.S. District Court of Western Michigan.
"This day has been a long time in coming, and we are extremely pleased with the jury's verdict," said Douglas A. Dozeman, lead attorney in the case and a partner with Michigan-based Warner Norcross & Judd LLP. "This lawsuit has been a classic case of David vs. Goliath, and demonstrates that even large, multinational corporations must play by the rules. Joe and Tom have persevered long after others might have given up, and we are pleased that they will finally be able to achieve the recognition – and the compensation – that they well deserve."
The story began in 1995 when Shields and Rinks formed Wrench LLC and collaborated to create—and then market—the "Psycho Chihuahua," a cool, confident dog with an attitude. The pair enjoyed licensing success with their character, signing deals with T-shirt manufacturers, calendar makers and other manufacturers intrigued by the Chihuahua.
Wrench met executives from Taco Bell at a licensing show in New York City the following year. At Taco Bell's request, Wrench adapted its cartoon dog into a live-action Chihuahua and developed a number of ideas and advertising storyboards, including numerous commercials. After meetings to discuss and refine the concept over a period of several months, Taco Bell broke off discussions with Shields and Rinks, but went on to use their Chihuahua character as the creative platform for a $500 million national advertising campaign.
Wrench filed a lawsuit against Taco Bell in January 1998, charging breach of contract and other claims. The suit was dismissed on technical grounds in June 1999, just days before the case was scheduled to begin trial. Shields and Rinks appealed to the Sixth Circuit Court of Appeals in Cincinnati, which unanimously reversed the ruling in July 2001 and returned the case to the original trial court. Taco Bell appealed this ruling to the Supreme Court, which declined to hear the appeal and cleared the way for the trial to begin in U.S. District Court in Grand Rapids in May 2003.