When Taco Bell retired the famous “Yo Quiero Taco Bell” Chihuahua in 2000, which had since 1997 become a cultural icon, rumors spread that the Taco Bell Chihuahua had died due to a tragic accident on the set of a commercial. People said he had been crushed by a camera or a light. There were even rumors that Taco Bell had put a hit on the dog actor rather than to finish the contract with its owner. All of these rumors, of course, are ridiculous and had nothing to do with why the commercials stopped running. Indeed, many chihuahuas could have been used to fill the part left by a late canine actor, as is common in the animal acting world.
The canine thespian that portrayed the Taco Bell “Yo Quiero Taco Bell” Chihuahua was a female chihuahua named Gidget. She not only did not die after the part ended, she went right on working, including a part in Legally Blonde 2. She finally died in 2009, of natural causes. Gidget was 15, a goodly sum of years for a Chihuahua.
It is claimed that the commercials, although highly popular and successful (though controversial because of stereotyping) were not really helping Taco Bell make money, and so the campaign was pulled to make way for a change in strategy. This is certainly true. While the character itself was popular and the “Yo Quiero” line got ripped off all over the place, similar to Wendy’s “Where’s the Beef” or “What Happens in Vegas..,” it didn’t really inspire people to eat at Taco Bell. This may make sense if you think about it. You might think the character is cute, but why would you want to eat a food that a dog likes?
Then, of course, was the stereotyping. The Chihuahua tends to be associated with Mexican people. Add to this Taco Bell’s absolutely moronic decision, in some of the commercials, to dress the dog like a Mexican revolutionary with a beret, as in its Viva Gorditas commercial, or a bandido with a sombrero, and you have a perfect recipe for an angry Hispanic public, rather than one for selling tacos.
However, what is not often reported is that this sassy little chihuahua cost the corporation a lot more money than they had bargained for, to the tune of $42,000,000.
The story of the Taco Bell chihuahua doesn’t really start with Taco Bell being suddenly inspired to use a chihuahua spokes-character and make a series of commercials with a talking dog. It starts, instead, at a trade show, where a company called Wrench, LLC was trying to promote its creation.
Wrench’s creation was a chihuahua. Not just any old chihuahua but a character called “Psycho Chihuahua,” described as a “feisty, edgy, confident Chihuahua with a big dog do-not-back-down attitude.” Sound familiar? In 1996, Thomas Rinks and Joseph Shields, owners of Wrench, LLC of Michigan, a developer of cartoon characters, were promoting their feisty chihuahua character for use in marketing. Two Taco Bell employees, Ed Alfaro and Rudy Pollak, from the creative services division, learned of the character and thought it might be a good fit for Taco Bell, for use in its retail licensing. Although they were not part of the marketing department, they discussed the possibility with Wrench and then promoted the idea to Taco Bell.
Afterwards, Wrench had a licensing agent represent them in talks with Taco Bell, concerning possible licensing deals for Psycho Chihuahua, and talks with Alfaro continued, with Alfaro promoting the character to Taco Bell.
The talks expanded to the possibility of advertising, rather than just retail licensing. The licensing agent prepared a proposal, detailing what Wrench expected in compensation, should Taco Bell use the character in retail licensing and/or advertising, including a percentage of money spent on advertising, percentage of retail licensing sales, and percentage of cost of premiums (such a free toys). Taco Bell did not really respond to the proposal, neither accepting it or rejecting it, although discussion continued.
Then, Alfaro asked Wrench to prepare a presentation for the marketing department. Wrench complied, but the presentation was never made to marketing.
Around this time, Taco Bell hired an advertising agency, TBWA. It “just so happened” that this agency had previously made an automobile commercial featuring a driving chihuahua. TBWA came up with a commercial for Taco Bell featuring a male chihuahua turning down a female chihuahua for Taco Bell food. This idea is one that had been presented by Wrench.
During this time, Alfaro continued talking with Wrench, in the hopes of persuading the marketing department to use Psycho Chihuahua. It is claimed that materials for a campaign using the character were forwarded to the marketing department, which forwarded the materials to the advertising agency.
A few months later, Taco Bell started airing its “Yo Quiero Taco Bell” commercials. The first 1997 commercial, below, was shown to a limited audience, but its popularity prompted Taco Bell to roll out the promotion of a national audience.
Wrench sued Taco Bell in Federal District Court for breach of implied-in-fact contract, misappropriation, conversion, and unfair competition. An implied-in-fact contract is one which is created when a plaintiff, and the defendant’s request, discloses an idea to the defendant, with the understanding that the plaintiff expects to be compensated for any use of the idea.
Taco Bell moved for summary judgment on all these claims. They claimed that there was no implied-in-fact-contract. And, even if there was such a contract, claimed the company, it was preempted by federal copyright law. They claimed that Wrench’s idea was not novel and the chihuahua idea was had been independently created by its advertising agency. Taco Bell specifically argued that since there was no agreement on price, duration, scope of use, and exclusivity, there was no implied-in-fact-contract. Wrench argued that such terms were not necessary to support an implied-in-fact-contract, only the mutual understanding that Wrench expected to be compensated for any use of the Psycho Chihuahua idea, concept, or image.
The district court decided that although Wrench’s claim of breach of implied-in-fact-contract was preempted by the federal Copyright Act, granting judgment to Taco Bell.
Wrench a appealed in Sixth Circuit court, where the decision of the district court was reversed and remanded. The court decided that the contract claim was not preempted by federal copyright law. In 2004, Wrench was awarded over $30,000,000 in damages, plus an additional $12,000,000 in interest. Taco Bell, trying to get its money back, turned around and sued TBWA, its advertising agency, claiming they should have known better. Taco Bell lost this suit as well.