A central tenet of U.S. copyright law is that state common law or statutory claims that (1) come within the “subject matter” of a copyright and (2) are “equivalent to” any of the exclusive rights within the general scope of the Copyright Act, are preempted.
Under California law, however, a properly pleaded implied contract claim may survive preemption because such a claim is “qualitatively different” from the rights protected by copyright law, and requires proof of an “‘extra element’ that changes the nature of the action.” Grosso v. Miramax Film Corp.,
The Ninth Circuit’s latest decision analyzing such a claim—Montz v. Pilgrim Films & Television Inc.—at least according to the dissent, potentially expands the rights of authors and screenwriters whose efforts to pitch their work are governed by California law, and at the same time expands the potential liability of studios and publishers of works based on a claim that these works were used without authorization.
Consider the following two scenarios: A screenwriter registers a screenplay with the U.S. Copyright Office and then has his agent pitch the work to a producer in California. According to the screenwriter, he provided the screenplay for consideration with the implicit understanding that if the producer used it for a film, the screenwriter would be compensated. After being told by the producer that they decided to pass on his work, the screenwriter discovers that the producer and a movie studio released a film that includes aspects from the screenwriter’s original screenplay. The screenwriter sues for copyright infringement and breach of an implied contract under California law. As to the latter claim, the Ninth Circuit has held that the cause of action was not preempted. Benay v. Warner Brothers Entertainment Inc.,
The second scenario is substantially similar to the first, except that the screenwriter did not pitch his idea to the producer in California with the expectation that if the producer used it in a film the screenwriter would be directly compensated up front, but rather he proposed to be compensated as a “partner” with the producer in the show’s “production and distribution.” Under these facts, a three-judge panel of the Ninth Circuit originally decided, less than a week before the panel’s decision in Benay, that the plaintiff’s implied contract claim was preempted. Montz v. Pilgrim Films & Television Inc.,
An 11-member en banc panel of the Ninth Circuit recently resolved the apparent inconsistency between Benay—where the plaintiff offered to “sell” his work in exchange for compensation—and the now vacated three-judge panel’s decision in Montz—where the plaintiff offered to partner with the producer in the development of a project In Montz v. Pilgrim Films & Television, ___ F.3d. ___, 2011 U.S. App. LEXIS 9099, 98 USPQ2d BNA) 1569 (9th Cir. 2011) (
In other words, the court held that a state law implied contract claim for “compensation for use of a submitted idea” is not preempted so long as the plaintiff had a reasonable expectation of payment (in any form) for the use. Id. at *15. As explained below, it is this element, an implied promise to pay for the disclosed idea, that makes the claim different from a copyright claim, and avoids preemption.
General Copyright Principles.
Article I, Section 8, Clause 8 of the U.S. Constitution empowers Congress “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” The Copyright Act is Congress’ attempt to protect these rights.
The act confers protection for “original works of authorship,” including literary, artistic and other creative works, but it does not protect ideas, procedures, processes and the like. Only the selection, arrangement, or the manner in which the ideas are expressed is protectable.
Ownership of a copyright confers the rights of, among other things, reproduction/copying, adaptation, public distribution, public performance or display, and the preparation of derivative works. Copyright protection begins once the work is created in a fixed/tangible form. That means it is in a form such that it can be “perceived, reproduced, or otherwise communicated for a period of more than transitory duration.”
To prevail on a claim for copyright infringement a plaintiff must prove “(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Feist Publications Inc. v. Rural Telephone Service Co.,
The first is whether the alleged infringer used the copyright holder’s work. The second is whether the use and copying is actionable. Melville B. Nimmer, Nimmer on Copyright, §13.01[B] at 13-8 – 13-9 (2010)). Proof of access without substantial similarity is insufficient to make out a claim for infringement. However, some courts have held that evidence of a “striking similarity” between a plaintiff’s and a defendant’s works may allow a jury to infer copying without any proof of actual access. Id. at §13.02[B] at 13-30.
In the absence of a “striking similarity” between two works, the federal appellate courts have employed a variety of tests for determining whether one work is “substantially similar” to another. In the Ninth Circuit, courts traditionally employ a two-part “extrinsic/intrinsic” test.
The “extrinsic test” considers whether the two works share a similarity of ideas and expression based on external objective criteria. Swirsky v. Carey,
For example, in the context of screenplays, the test focuses on “articulable similarities between plot, themes, dialogue, mood, setting, pace, characters, and sequence of events in two works.” Benay, 607 F.3d at 624 (quoting Kouf v. Walt Disney Pictures & Television,
Preemption and Montz v. Pilgrim Films.
Section 301 of the Copyright Act sought to create a single system of protection for works coming within the scope of U.S. copyright law. That section provides, in pertinent part, that “all legal or equitable rights that are equivalent to any of the equivalent rights within the general scope of copyright … in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright … are governed exclusively by this title.”
For example, a court will not permit claims for rescission, conversion, unjust enrichment, interference with contract, unfair competition, and the like if they are not “qualitatively different” than a copyright claim. Such “disguised” copyright claims are preempted.
On the other hand, a cause of action that includes an “extra element” that differentiates itself from a copyright claim, and “changes the nature of the action,” is not preempted. Grosso, 383 F.3d at 968. For example, under California law a contract claim requires proof of the “extra element” of a promise to pay, whereas a copyright claim does not. Id. (quoting Landsberg v. Scrabble Crossword Game Players Inc.,
In Grosso, the Ninth Circuit held that under California law a claim for breach of implied contract based on the alleged unauthorized use of an idea in a movie script was not preempted. Relying on the California Supreme Court’s 1956 decision in Desney v. Wilder, the Ninth Circuit held that the screenwriter’s implied-in-fact contract claim that the defendants stole the idea for his work alleged the necessary “extra element” to avoid preemption.
Specifically, the Grosso court held that to prove a “Desney claim,” the plaintiff “must show that the plaintiff prepared the work, disclosed the work to the offeree for sale, and did so 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.” Grosso, 383 F.3d at 967. The Grosso court concluded that the plaintiff there had sufficiently pled such a claim.
The en banc panel of the Ninth Circuit in Montz v. Pilgrim Films encountered a different factual scenario than in Desney or Grosso, including several distinctions which four dissenting members of the panel believed justified a finding that the plaintiffs’ claim was preempted. The majority, however, concluded that for preemption purposes these were distinctions without any meaningful difference.
Montz alleged that he came up with the idea for a reality television show that followed a team of “paranormal investigators.” He claimed that he presented written materials to the defendants (screenplays, videos and the like) “for the express purpose of offering to partner … in the production, broadcast and distribution of the Concept.” Montz alleged that although the defendants expressed interest in his work, they instead partnered with Pilgrim Films to produce a show called Ghost Hunters, which Montz claimed infringed his work.
Montz sued for copyright infringement and also asserted California state law implied contract and “breach of confidence” claims, alleging in part that the defendants breached an “implied agreement not to disclose, divulge, or exploit the Plaintiffs’ ideas and concepts without the express consent of the Plaintiffs.”
The district court dismissed both state law claims on preemption grounds and a three-judge panel of the Ninth Circuit affirmed. Montz,
The three-judge panel found dispositive that the plaintiffs had alleged that they “expected to receive a share of the profits and credit for use of their work,” and that this expectation “was premised on the fact that they would retain control over their work, whether in partnership with the defendants or not.” Id. at 1158. The court concluded that this claimed right—to receive a share of profits—was “part and parcel of a copyright claim,” because it is derivative of “the plaintiffs’ exclusive rights to use and to authorize use of their work,” which are at the core of the bundle of rights copyright owners hold under the Copyright Act. Id.
The court rejected the plaintiffs’ argument that their implied contract claim includes an “extra element” that differentiates it from a copyright claim (like the claim asserted by the plaintiffs in Grosso). The court concluded that plaintiff’s “mere mention” of their claimed right to receive a share of the profits from their idea is not enough because what they expected was what “any copyright owner would, that their work would not be used without their permission.” Id. Thus, the three-judge panel found the plaintiffs’ claim preempted because the rights the plaintiffs were asserting were “merely derivative of the rights fundamentally at issue: the plaintiffs’ exclusive rights to use and to authorize use of their work,” instead of based solely upon the “extra element” of a promise to pay.
The Ninth Circuit vacated the three-judge panel’s decision in Montz, ordered an en banc rehearing, and issued a new decision taking a broader approach. Writing for the majority, Schroeder—who also authored the Ninth Circuit’s decision in Grosso—reaffirmed that “copyright law does not preempt an implied contractual claim to compensation for use of a submitted idea,” whether the owner of the work refused to explicitly authorize the defendant to use his ideas or not.
Montz’s mere claim that he expected that he would be compensated for the use of his idea, without more, was enough to avoid the preemption bar. Montz, 2011 U.S. App. LEXIS 9099 at *16. That is, there is no preemption where the plaintiff “alleges a bilateral expectation that he would be compensated for use of the idea, the essential element of a Desney claim that separates it from preempted claims for the use of copyrighted materials.” Id. at *14. Such a claim, Schroeder wrote, fills a “gap that would otherwise exist between state contract law and copyright law in the entertainment industry” in that it “serves to give some protection for those who wish to find an outlet for creative concepts and ideas but with the understanding that they are not being given away for free.” Id. at *15-16.
Four judges dissented in Montz. Judge Diarmuid F. O’Scannlain—who wrote the vacated three-judge panel’s decision in Montz—believed that Montz’s claim was not a Desney claim because Montz alleged that he retained his rights as a copyright owner and did not authorize the defendants to use his ideas in his works. Rather, Montz offered to partner with the defendants in the show’s “production and distribution.”
The dissent believed that when that offer was refused, all Montz had left was “an implied promise that [defendants] would not use the ideas embodied in his materials without his consent.” Id. at *23-24. Such a claim, the dissent argued, included no “extra element” beyond what would need to be proven in copyright claim.
Finally, responding to the majority’s view that a Desney claim is designed to fill a “gap” between state contract law and copyright law, the dissent believed that the focus should be on what was authorized by the plaintiff: “Where a copyright owner authorizes the use of his work, but does not receive the consideration he was promised, he has a contract claim; where a copyright owner does not authorize the use of his work, but, nonetheless, someone uses it to produce a substantially similar work, he has a copyright claim.” Id. at *28.
Responding to O’Scannlain’s dissent, the majority wrote that “[t]he dissent misses the point when it tries to limit protection to those who seek payment, and excludes the plaintiffs who want a piece of the action and contractual agreement on the terms of the defendant’s use.” Id. at *16.
Effect of Montz v. Pilgrim Films.
After Montz, a plaintiff may assert an implied contract claim under California law where either she offers to sell her idea to the defendant or partner with the defendant with the expectation that she will receive a share of the profits derived from her idea. The “extra element” of such a claim which allows it to survive preemption is “the implied agreement of payment for use of a concept.” Id. at *13.
Judge Ronald M. Gould, who joined in O’Scannlain’s dissent in Montz, penned a separate dissent in which he wrote of what he perceived to be the practical implications of the majority’s decision: “Under such a legal regime, film production and network companies face the chaotic prospect of having to meet conflicting federal and state standards on essentially the same question, a result the Copyright Act aimed to avoid. Studio and network ventures need stable law that does not unsettle expectations.
The majority’s decision, however, will lead to uncertainty by making state law—with its ambiguity, variability, and volatility—available to litigants who bring nebulous state law claims that in substance assert rights in the nature of copyright.” Montz, 2011 U.S. App. LEXIS 9099 at *32-33 (J. Gould, dissenting). Whether there will be an onslaught of such cases is an open question.
Further, from a practical standpoint, the ability to assert a separate claim for breach of an implied contract has several advantages. For one, a party asserting only an implied contract claim under state law may be able to avoid removal to federal court in the absence of diversity jurisdiction.
Second, as the court in Benay noted, just because a plaintiff cannot satisfy the “substantial similarity” test for purposes of his copyright claim does not necessarily preclude a finding of substantial similarity under state contract law. Benay, 607 F.3d at 631 (“California law does not support the proposition that when a complete script is submitted under an implied-in-fact contract, only those elements of the script that are protected under federal copyright law are covered by the contract.”)
If nothing else, Montz should be a reminder to authors and screenwriters on the one hand, and to producers and production companies to whom works are pitched on the other, that they should both be cautious when submitting and/or accepting manuscripts or other materials and to make it absolutely clear what the parties’ mutual understandings and rights are with respect to the works.
Moreover, and quite obviously, any use of such works should be in conformity with copyright law, as well as state contract law based on the arguably expansive nature of the Ninth Circuit’s decision in Montz.
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