Taco Bell must pay the entirely of a $42 million in breach-of-contract award to the two Michigan men who created the idea of a taco-selling Chihuahua. oseph Shields and Thomas Rinks of Grand Rapids, Mich., prevailed in their claims against the chain as the originators of the “Yo quiero Taco Bell” ads. According to the court, Taco Bell and not its ad company is responsible for the full amount of the damages.

The men say that they were discussing the idea with Taco Bell when the company took their idea to another ad company, TBWA\Chiat\Day. Taco Bell insisted that the men pitched the use of “Psycho Chihuahua” which was not actually used in the ad campaign. The fight was over an indemnification clause in the agreement with TBWA. The court ruled:

The undisputed facts do not support a finding of fault or negligence on the part of TBWA. TBWA was not a party to the implied contract between Taco Bell and Wrench and was unaware of its existence. TBWA had no knowledge of
Psycho Chihuahua nor Taco Bell’s contact with Wrench before proposing a Chihuahua character for Taco Bell advertising on June 2, 1997. The facts that Taco Bell did not have input on TBWA’s creation of its advertising character and that a box of Psycho Chihuahua materials was sent to TBWA are of no consequence not only because TBWA created its own Chihuahua character before it received the Psycho Chihuahua materials, but also because Taco Bell was found liable for the use of Psycho Chihuahua without compensating Wrench, not copyright infringement.

A jury ruled against Taco Bell in June 2003 and ordered that the company pay $30 million. The federal judge in Michigan added $12 million in interest. Taco Bell then sued TBWA for liability on the disputed content but the United States Court of Appeals ruled that the ad agency was not liable for the money.

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