Opinion
Case No. 6:03-cv-404-Orl-22DAB
July 11, 2003
Brent C. Bell, Esq., Shutts Bowen LLP, Orlando, FL
Jonathan Cohen, Esq. Shutts Bowen, LLP 1500 Miami, FL
Brian R. Gilchrist, Esq., Alien, Dyer, Doppelt, Milbrath Gilchrist, P.A., Orlando, FL
REPORT AND RECOMMENDATION TO THE UNITED STATES DISTRICT COURT
This cause came on for consideration without oral argument on the following motion filed herein:
MOTION: PLAINTIFF'S MOTION FOR REMAND AND ATTORNEY'S FEES (Doc. No. 9) FILED: April 29, 2003 THEREON it is RECOMMENDED that the motion be DENIED. BACKGROUNDPlaintiff filed a multi-count Complaint in state court, alleging a variety of claims against an ex-employee and his new employer, including: (1) a Florida common law claim of unfair competition; (2) violation of Florida's Uniform Trade Secret Act; (3) multiple counts of tortious interference; and (4) civil conspiracy. Defendant removed on the ground that the first of these — the common law claim of unfair competition — is preempted by the federal Copyright Act. The Court has reviewed the papers, including the authorities cited in the Notice of Removal (Doc. No. 1), the motion, and the Defendant's response brief (Doc. No. 13). For the reasons set forth below, it is respectfully recommended that the motion for remand be DENIED.
PREEMPTION AND THE FEDERAL COPYRIGHT ACT
It is axiomatic that "the district courts . . . have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Moreover, "[e]xcept as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants. . . ." 28 U.S.C. § 1441(a). As pointed out by Plaintiff, the well-pleaded complaint rule provides that "a suit arises under the Constitution and laws of the United States only when the plaintiffs statement of his own cause of action shows that it is based upon those laws or that Constitution." Louisville Nashville R. Co. v. Mottley, 211 U.S. 149, 152 (1914). If the well-pleaded complaint rule is not satisfied, "a state claim may be removed to federal court in only two circumstances — when Congress expressly so provides . . ., or when a federal statute wholly displaces the state-law cause of action through complete pre-emption." Beneficial National Bank v. Anderson, ___ U.S. ___, ___, 123 S.Ct. 2058, 2063, ___ L.Ed.2d ___ (June 2, 2003).
A preempted state-law claim "is considered, from its inception, a federal claim, and therefore arises under federal law." Caterpillar, Inc., v. Williams, 482 U.S. 386, 393 (1987).
The Copyright Act does not expressly provide for removal of a state claim to federal court. See 17 U.S.C. § 100 et seq. Thus, to determine whether a federal statute wholly displaces a state-law cause of action, "the proper inquiry focuses on whether Congress intended the federal cause of action to be exclusive." Anderson, 123 S.Ct. at 2063. Section 301(a) of the Copyright Act, entitled "Preemption with respect to other laws," provides:
On or after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103 . . . are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.17 U.S.C. § 301(a) (emphasis added). By definition, all copyrighted works are "works of authorship fixed in [a] tangible medium of expression." 17 U.S.C. § 102(a). The Court must therefore determine: (1) whether the state rights with respect to any particular state law claim are "equivalent to any of the exclusive rights . . . specified by section 106"; and (2) whether the work "come[s] within the subject matter of copyright as specified by sections 102 and 103." See 17 U.S.C. § 301(a); "The intention of section 301 is to preempt and abolish any rights under the common law or statutes of a state that are equivalent to copyright and that extend to works coming within the scope of the federal copyright law" H.R. Rep. No. 94-1476, 94th Cong., 2d Sess., at 130 (1976) (emphasis added); Crow v. Wainwright, 720 F.2d 1224, 1225-26 (11th Cir. 1983) ("Section 301 in effect establishes a two-pronged test to be applied in [copyright] preemption cases. We must decide whether the rights at issue fall within the "subject matter of copyright" set forth in sections 102 and 103 and whether the rights at issue are "equivalent to" the exclusive rights of section 106.")
THE WORK AT ISSUE
Whether or not the work or works at issue fall within the subject matter of copyright set forth in sections 102 and 103 requires little more than a resort to these sections and to the ordinary rules of copyright. See, e.g., Lipscher v. LRP Publications, Inc., 266 F.3d 1305, 1311 (11th Cir. 2001) ("[I]t is beyond dispute that compilations of facts are within the subject matter of copyright. . . . Therefore, . . . Law Bulletin's publications . . . are . . . within the subject matter of copyright.); Donald Frederick Evans and Associates, Inc., v. Continental Homes, 785 F.2d 897, 914 (11th Cir. 1986) ("Evans' architectural designs fall within the subject matter of copyright"); Crow, 720 F.2d at 1226 ("The recording `Golden Ring' certainly falls within the scope of section 102(a)(7), which provides copyright protection for `sound recordings.').
It is immaterial whether or not the work has actually been copyrighted. "As long as a work fits within one of the general subject matter categories of sections 102 and 103, [section 301(a)] prevents the States from protecting it even if it fails to achieve Federal statutory copyright because it is too minimal or lacking in originality to qualify, or because it has fallen into the public domain." Lipscher, 266 F.3d at 1311 (quoting H.R. Rep. No. 94-1476, at 131). The Court in Lipscher concluded that "even if [the works at issue] are not copyrightable, they are nevertheless within the subject matter of copyright." Id. at 1311. "Regardless of when the work was created and whether it is . . . in the public domain or copyrighted under the Federal statute, the States cannot offer it protection equivalent to copyright" if the work, viewed in the abstract, comes within the subject matter as specified in sections 102 and 103." H.R. Rep. No. 94-1476 (1976) (emphasis added).
EQUIVALENT TO EXCLUSIVE RIGHTS
To determine whether the rights at issue — i.e., the rights protected by the state-law claims — are equivalent to the exclusive rights of section 106, the Eleventh Circuit "employ[s] an `extra element' test." Lipscher, 266 F.3d at 1311. According to that test, "if an extra element is required instead of or in addition to the acts [to which the owner of a copyright has exclusive rights under section 106], in order to constitute a state-created cause of action, then the right does not lie within the general scope of copyright and there is no preemption." Lipscher, 266 F.3d at 1311-12 ( quoting Foley v. Luster, 249 F.3d 1281, 1285 (11th Cir. 2001)). Section 106 provides:
Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.17 U.S.C. § 106. If, therefore, the state-law claim requires proof of any element instead of or in addition to the acts of reproduction, preparation of derivative works, distribution of copies, performance or display, then the state right is not "equivalent to" the exclusive rights of section 106, and there is no preemption.
The addition of insignificant elements, however, does not preclude preemption. See, e.g., Foley, 249 F.3d at 1285; Crow, 720 F.2d at 1226-27. Only additional elements that "chang[e] the nature of the action so that it is qualitatively different from a copyright infringement claim" preclude preemption. Foley, 249 F.3d at 1285 (quoting Computer Ass'n Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2nd Cir. 1992) [emphasis in original]).
ANALYSIS
Although Plaintiff has set forth several causes of action, removal was predicated on the claim for unfair competition. As pled, Plaintiff contends that it is "an authorized distributor of the ESTIRC-3 fire alarm system" (Comp. ¶ 2); that it "has developed unique and proprietary software" in order "to maintain and service the ESTIRC-3 fire alarm system" which it had "previously installed" (Comp. ¶ 7); that Defendant Doty is a former employee of Plaintiff (Comp. ¶ 9); that Defendant Doty, after his resignation from Plaintiffs employ, maintained in his possession the "unique and proprietary software" above mentioned (Comp. ¶ 11); that Defendant Doty "immediately commenced employment for [Defendant] Simplex" (Comp. ¶ 12); and that Defendants Simplex and Doty have, since 1997, have made use of the "proprietary software program" developed by Plaintiff and retained after his employment by Defendant Doty to "perfor[m] maintenance, service and installations upon the EST IRC-3 fire alarm system at the Orange County Convention Center" (Comp. ¶ 14). Importantly, Plaintiff alleges that despite demand, Defendants "have refused to cease their wrongful activity and have refused to return the misappropriated software to [Plaintiff] and have failed to destroy all illegal copies." (Comp. ¶ 16).
Applying the two prong test set forth above, it is clear that computer programs are within the subject matter of 17 U.S.C. § 102. See DSC Communications Corp. v. Pulse Communications, Inc., 170 F.3d 1354, 1365 (Fed. Cir. 1999). The case turns on whether the rights protected by Florida's common law claim of unfair competition, as alleged in this case, are equivalent to the exclusive rights of Section 106. As pled, the claim is preempted.
As Plaintiff notes, in Florida, the common law claim of unfair competition is "elusive" and incapable of exact definition. As one court noted: "Under Florida law, unfair competition acts as an `umbrella for all statutory and non-statutory causes of action arising out of business conduct which is contrary to honest practices in industrial or commercial matters/" Stoneworks, Inc. v. Empire Marble and Granite, Inc., 49 U.S.P.Q.2d 1760 (S.D. Fla. 1998) (quoting Chassis Master Corp. v. Borrego, 610 F. Supp. 473, 479 (S.D. Fla. 1985)). Due to the inexact nature of the tort, Plaintiffs cause of action for common law unfair competition is perhaps best defined by what it is not. Viewing the Complaint as a whole, the claim is not one for misappropriation of trade secrets, as Plaintiff has pled a separate count for that tort (Count II). Nor is the claim one for tortious interference or "conspiracy", both the subject of separate counts. Thus, construing the allegations set forth above, it is apparent that Plaintiff has pled a garden variety claim of improper use and copying of its software. Such a claim contains no extra element sufficient to take it outside the complete preemption of the Copyright Act. See M.G.B. Homes, Inc. v. Ameron Homes, Inc., 903 F.2d 1486 (11th Cir. 1990).
Plaintiff has alleged that Defendants have wrongfully used the software, for its intended purpose. Such an act, if proven, constitutes "copying." See Stenograph L.LC. v. Bossard Associates, Inc., 144 F.3d 96, 100, 330 U.S.App.D.C. 147, 151(D.C. Cir. 1998) ("Appellants conceded at oral argument, and this court agrees, that if someone loads validly copyrighted software onto his or her own computer without the owner's permission, and then uses the software for the principal purposes for which it was designed, there can be no real doubt that the protected elements of the software have been copied and the copyright infringed.").
In M.G.B. Homes, the Eleventh Circuit was presented with the question of whether a Florida unfair competition claim based on a claim that a competitor of a house builder had built a house which substantially followed a copyrighted floor plan was preempted by the Copyright Act. In holding that the claim was preempted, the Court distinguished a prior holding on the grounds that the acts allegedly constituting unfair competition were different in one case from those in the other. See M.G.B. Homes, 903 F.2d at 1493-94, distinguishing Donald Frederick Evans and Assoc. v. Continental Homes, 785 F.2d 897 (11th Cir. 1986). In Evans, a "passing off' case, architectural drawings were copied and renamed. Id. There, the court held:
[I]n order for Evans to prevail on its unfair competition claim under Florida common law, in this case, it must prove elements other than those mandated in an action under the Copyright Act. Florida law requires that Evans establish deceptive or fraudulent conduct of a competitor and likelihood of consumer confusion.Evans, 785 F.2d at 914. The Evans court concluded that because unfair competition "goes to the question of marketing" and not "to the question of copying," the claim was not preempted under the "extra element" test. Id.
By contrast, the court observed that in M.G.B. Homes there was no allegation of "deceptive or fraudulent conduct of a competitor and likelihood of consumer confusion," the extra elements that had rescued the state claim in Evans from preemption. M. G.B. Homes, 903 F.2d at 1494. Rather, the Court noted that the M. G.B. Homes plaintiffs "right to relief for unfair competition arose . . . because [Defendant] planned to copy [Plaintiffs] work." Id. Because copying ( i.e., reproducing a work) is among the exclusive rights conferred by § 106 on a copyright owner, the court held that "[a] claim for unfair competition based upon allegations of copying, and in the absence of proof of any element of unfair competition other than copying, is clearly pre-empted by the [Copyright] Act." Id. See also Rosciszewski v. Arete Associates, Inc., 1 F.3d 225, 230 (4th Cir. 1993) (holding that claim under state computer crimes act was preempted, as "the core" of the action "is the unauthorized copying of a computer program.")
Here, the claim for unfair competition is based on the alleged "unauthorized use of Plaintiff's proprietary software." Plaintiff does not allege in this count a "passing off" situation, nor is there any allegation of customer confusion. Plaintiff has alleged that Defendants are wrongfully using the software, have refused to return the misappropriated software, and have failed to destroy all illegal copies. Plaintiff identifies no source other than copyright for its assertion to have a protected interest in the software. If Plaintiff's allegations that use of the software was "unauthorized" and that the software is "proprietary" have any meaning, it can only be that Plaintiff claims that copying (and using) the software violates a legal right of Plaintiff in the software. This is, plain and simple, the practical equivalent of the exclusive rights protected by the Copyright Act.
Note that this allegation directly contradicts Plaintiffs assertion in its brief that the Complaint does not allege that Defendant's have "copied" Plaintiff's software. (Doc. No. 9, at 3).
Plaintiff seeks to avoid the preemption bar by citing cases which hold, in essence, that a Florida trade secret claim is not preempted by the Copyright Act. See Bateman v. Mneumonics, Inc., 79 F.3d 1532, 1549 (11th Cir. 1996) (noting that Florida's trade secret statute satisfies the "extra element" test due to the requirement that plaintiff prove existence and breach of a confidential relationship); and All Pro Sports Camp, Inc. v. Walt Disney Company, 127 So.2d 363, 366-367 (Fla. 5th DCA 1999) (claims of misappropriation of trade secrets, among others, not preempted by the Copyright Act). As noted above, however, the count for unfair competition in this complaint is not a claim for trade secret misappropriation. Indeed, the words "trade secret" are not included anywhere in Count One. The allegation that the proprietary software is, in fact, a trade secret appears first in Count Two, which is a claim for trade secret misappropriation under Florida's Uniform Trade Secrets Act. To the extent Plaintiff is attempting to transform his unfair competition claim into a common law misappropriation of trade secrets claim, such an attempt must fail. As noted by the court in All Pro Sports, cited by Plaintiff, "The misappropriation claim, however, is statutory, and Florida's Uniform Trade Secrets Act displaces tort law regarding trade secret misappropriation." 727 So.2d at 367 (citing Section 688.008(1), Fla. Stat. (1993).)
To survive preemption, "the state cause of action must be `predicated upon an act incorporating elements beyond mere reproduction,' . . . failure to obtain permission for use or continued use . . . in order to be qualitatively different from and not equivalent to federal copyright law." Tingley Systems, Inc. v. CSC Consulting, Inc., 152 F. Supp.2d 95, 105 (D. Mass. 2001) (citations omitted). As the cause of action pled by Plaintiff is predicated solely on reproduction, failure to obtain permission for use and continued use, the Court finds that the claim is preempted by the Copyright Act. As such, removal based on complete preemption of Count I was appropriate and remand is not. It is respectfully recommended that the motion be DENIED.
In view of this recommendation, the Court need not reach the attorney's fee claim.
Plaintiff appears to concede that it does not have an enforceable copyright in the software that is the subject of Count I. It is appropriate to direct Plaintiff to show cause why that Count ought not be dismissed with prejudice. Assuming that Count I is dismissed, the question arises whether the Court should retain jurisdiction over the remainder of the case, as to which there is no assertion of any federal question jurisdiction. Accordingly, it is further respectfully recommended that, within 11 days of any Order adopting or approving this Report and Recommendation, both parties be directed to show cause why Count I ought not be dismissed with prejudice and the remainder of the case remanded to state court.
Failure to file written objections to the proposed findings and recommendations contained in this report within ten (10) days from the date of its filing shall bar an aggrieved party from attacking the factual findings on appeal.
Recommended.