Opinion
CV 02-01803-SVW (JTLx)
July 22, 2002
ORDER DENYING DISNEY DEFENDANTS' MOTION TO DISMISS THE THIRD AND FOURTH COUNTS OF PLAINTIFF'S FIRST AMENDED COMPLAINT
I. INTRODUCTION
This is an action for copyright infringement, unfair competition, breach of contract, breach of confidence, declaratory relief, and injunctive relief, resulting from Defendants' alleged unauthorized use of Plaintiff's copyrighted works. Defendants The Walt Disney Company, Walt Disney Motion Pictures Group, Inc. (collectively "Disney") and Touchstone Pictures Music Songs, Inc. ("Touchstone") bring this motion to dismiss the third (breach of contract) and fourth (breach of confidence) counts of Plaintiff's first amended complaint.
As set forth below, Defendants' motion to dismiss is DENIED.
II. FACTUAL/PROCEDURAL BACKGROUND
Plaintiff Mark Groubert ("Plaintiff" or "Groubert") is an individual who allegedly pitched an idea for a story and presented copies of a written treatment to Defendants Disney and Touchstone. See First Amended Complaint ("FAC"), ¶ 55. Plaintiff claims that this pitch included an implied agreement that if Disney and/or Touchstone elected to create a motion picture based upon Plaintiff's idea, treatment, and/or pitch, that just and fair compensation would be paid to Plaintiff in consideration thereof. See id. Plaintiff further claims that Disney and Touchstone have in fact produced a motion picture (originally entitled "The Farm") that is based upon the ideas, treatment, and story pitch provided to them by Plaintiff. See id. ¶ 57. Therefore, by allegedly using Plaintiff's ideas, Disney and Touchstone accepted the benefit of the implied-in-fact contract, and were obligated to compensate Plaintiff. See id., ¶ 58. However, Plaintiff claims that no such compensation was paid. See id., ¶ 59. As a result, Plaintiff claims that Defendants Disney and Touchstone breached their implied contract with Plaintiff.
Furthermore, Plaintiff claims that in these pitch meetings, Plaintiff offered his idea and concept for the motion picture in confidence, and this idea was received in confidence by Disney and Touchstone. See id., ¶¶ 62-63. In this regard, "Defendants Disney and Touchstone implicitly understood their duty to maintain the confidentiality of the idea and concept for the motion picture because such is the case with all pitch meetings in the motion picture industry." Id., ¶ 64. Plaintiff claims that Defendants Disney and Touchstone breached their duty of confidentiality with Plaintiff when they impermissibly disclosed Plaintiff's idea and concept by producing the motion picture, "The Farm."See Id., ¶¶ 65-66.
Defendants Disney and Touchstone have filed a motion to dismiss counts three (breach of contract) and four (breach of confidence), on the grounds that both claims are preempted by the Copyright Act of 1976.
III. DISCUSSION
A. Rule 12(b)(6) Standards
Defendants' motion alleges that, pursuant to Fed.R.Civ.P. 12(b) (6), Plaintiff has failed to state a claim upon which relief may be granted, because the third and fourth counts of the first amended complaint are preempted under copyright law.
In evaluating a motion to dismiss under Rule 12(b)(6), the Court must accept all allegations of material fact in the complaint as true, and construe the facts in the light most favorable to the nonmoving party.See, e.g., Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996).
A complaint must allege "specific wrongdoing" sufficient to state a claim for relief. See Johnson v. Regan, 524 F.2d 1123, 1124 (9th Cir. 1975). When considering a motion to dismiss, the Court need not accept as true conclusory allegations or legal characterizations. Nor need it accept unreasonable inferences or unwarranted deductions of fact. See Transphase Systems, Inc. v. Southern California Edison Co., 839 F. Supp. 711, 718 (C.D. Cal. 1993). Nor need the Court assume that Plaintiff can prove facts different from those he has alleged. See Associated Gen. Contractors of California v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 902, 74 L.Ed.2d 723 (1983).
B. Copyright Preemption
The Copyright Act expressly preempts "all legal and equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106." 17 U.S.C. § 301. The test for determining when Federal copyright law preempts state law is whether: (1) the work on which the state claim is based is within the subject matter of copyright; and (2) the state cause of action protects rights that are qualitatively equivalent to copyright protection. See Del Madera Properties v. Rhodes and Gardner, Inc., 820 F.2d 973, 977 (9th Cir. 1987). With regard to the second prong of this test, in order to avoid preemption, the Ninth Circuit has held that the state cause of action must have an "extra element" that changes the nature of the action. See id.; Valente-Kritzer Video v. Pinckney, 881 F.2d 772, 776 (9th Cir. 1989).
1. Breach of Implied Contract
Defendants argue that Plaintiff's claim for breach of implied contract should be dismissed as preempted, since it encompasses subject matter covered under copyright law, and the rights protected by this cause of action are equivalent to copyright protection. Plaintiff argues that there is an additional element involved in the contract claim, namely, the promise to enter into and abide by the contract.
Plaintiff does not argue that the work on which the contract is based is not within the scope of the Copyright Act. In fact, Plaintiff has asserted a copyright infringement claim based on the same work, so Plaintiff obviously concedes that the first prong of the test is satisfied.
Both parties cite a panoply of district and circuit court cases that address this issue; some courts have found preemption, while others have not. In reviewing the relevant case law and the facts of this case, the Court finds that the rights protected by the implied contract at issue in this case are not covered under the protections of the Copyright Act, and therefore the breach of contract claim is not preempted.
The Court recognizes that at the hearing on July 15, 2002, the Court indicated that it was inclined to grant Defendants' motion to dismiss with regard to the breach of implied contract claim. However, upon further reflection, the Court has decided to deny that motion for the reasons set forth in this order.
As noted in Lennon v. Seaman, 63 F. Supp.2d 428, 437 (S.D.N.Y. 1999), the majority of courts addressing copyright preemption over contract claims have found that such claims are not preempted. Those courts have often based such a decision on one of two grounds: "(1) the promise to perform the contract constitutes an extra element or (2) the limited scope of rights protected by contract is not equivalent to the universal scope of rights protected by copyright." Selby v. New Line Cinema Corp., 96 F. Supp.2d 1053, 1059 (C.D. Cal. 2000). As one prominent copyright treatise has noted, "[A] breach of contract action (whether such contract involves a mere idea or a fully developed literary work) is not predicated upon a right that is `equivalent to any of the exclusive rights within the general scope of copyright . . .' This for the reason that a contract right may not be claimed unless there exists an element in addition to the mere acts of reproduction, performance, distribution or display. That additional element is a promise (express or implied) upon the part of the defendant." 4 Melville B. Nimmer and David Nimmer, Nimmer on Copyright, § 16.04[C] at 16-25 (2002).
However, the Court does not feel that a simple rote approach to finding that a breach of contract action is not preempted is appropriate in this case. Here, it is arguable that the promise under the alleged implied contract is no more than the promise not to infringe on Plaintiff's copyright. "The promise not to accept the benefit of a copyright work, with nothing more, is not sufficient to provide the extra element required for a copyright infringement cause of action." Endemol Entertainment B.V. v. Twentieth Television Inc., 48 U.S.P.Q.2d 1524, 1528 (C.D. Cal. 1998); see also Selby, 96 F. Supp.2d at 1060. Furthermore, the rights protected by the contract at issue in this case may be no different than the rights protected by copyright law. In ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996), which set forth the "scope of rights" approach noted above, the court was dealing with a written contract and was analogizing that situation predominantly to circumstances where either the conduct at issue was not covered under the Copyright Act, or the rights under the contract were broader or different than that under copyright law. Id. at 1453-55; see also Selby, 96 F. Supp.2d at 1060. While the ProCD reasoning may apply to this case, such application would only be appropriate if the circumstances relied upon in that case are comparable to the contract at issue here. Thus, a mechanical application of ProCD to this case without an analysis of the contract at issue would be improper.
As one recent case has noted, "A more sensible approach requires a court to examine the specific contractual rights at issue to determine whether they are equivalent to exclusive rights under the Copyright Act."Fischer v. Viacom Int'l, Inc., 115 F. Supp.2d 535 542 (D. Md. 2000). This fact-specific approach has been applied by many recent cases in this district as well. In order to determine whether the breach of implied contract claim is preempted1 the Court must look to the rights actually created by the alleged contract, and then determine whether any of those rights differ from the prohibition of I unauthorized reproduction, performance, distribution, or display of work protected under copyright law. See Entous v. Viacom Int'l, Inc., 151 F. Supp.2d 1150, 1160-61 (C.D. Cal. 2001); Selby, 96 F. Supp.2d at 1061-62; Endemol, 48 U.S.P.Q.2d at 1528.
Plaintiff correctly points out that Endemol found copyright preemption based partially on the reasoning that an implied contract is a species of quasi contract, which should be regarded as an equivalent right to copyright law when applied to copyright subject matter. However, this reasoning is dubious because an implied-in-fact contract, unlike an implied-in-law contract, is not actually a quasi contract. See McGough v. Univ. of San Francisco, 214 Cal.App.3d 1577, 1584 (1989). Therefore, to the extent that the implied contract at issue in this case is an implied-in-fact contract, the above reasoning would not apply. Nevertheless, Endemol relies on other grounds that are valid and applicable, such as looking to facts of the underlying contract to see if additional rights are granted, and thus that case is still instructive.
In cases that have held an express or implied contract not preempted by copyright law, the contract at issue bestowed rights upon the copyright holder that are not equivalent to those under copyright law. See, e.g., Wrench LLC v. Taco Bell Corp., 256 F.3d 446, 456 (6th Cir. 2001) (finding that the implied contract contained an extra element of a promise to pay); National Car Rental System, Inc. v. Computer Assoc. Int'l, Inc., 991 F.2d 426, 432-33 (8th Cir. 1993) (finding that the contract created additional rights beyond those protected under copyright law); Berkla v. Corel Corp., 66 F. Supp.2d 1129, 1149-50 (E.D. Cal. 1999) (holding that a non-disclosure agreement, which granted additional rights beyond copyright protection, was not preempted by the Copyright Act).
Here, Plaintiff contends that the alleged contract required Disney and Touchstone to provide just and fair compensation to Plaintiff in the event that Defendants elected to create a motion picture based upon the idea, pitch, and/or treatment that he provided to them. In other words, Plaintiff met with Defendants in order to present them with his idea for a movie, and, according to Plaintiff, there was an understanding between the parties that if Defendants were to actually make a movie out of this idea, then Plaintiff would be compensated. In the absence of such an agreement, Plaintiff would not have presented his idea, and Defendants would not have been able to use his idea for their movie, as Plaintiff alleges they have done.
This is not the equivalent to copyright law, which protects certain forms of expression from unauthorized reproduction, performance, distribution, or display by anyone, regardless of the manner in which the infringing party became aware of such copyrighted work. Here, Defendants may be permitted under copyright law to use Plaintiff's idea for a movie without having to compensate Plaintiff, if the idea does not fall within the protections of the Act. However, Plaintiff only disclosed his idea to Defendants in the first place on the condition that he be compensated for its use, and Defendants allegedly accepted this condition. In this regard, the promise in the formation of this implied contract contains an "additional element" not covered under copyright law. Since the whole purpose of the contract was to protect Plaintiff's rights to his ideas beyond those already protected by the Copyright Act, such rights are obviously not "equivalent." See Katz Dochrermann Epstein, Inc. v. Home Box Office, No. 97 Civ. 7763, 1999 WL 179603 at *4 (S.D.N.Y. March 31, 1999) (finding that the implied contract to pay for the use of the plaintiff's idea was separate from the claim for copyright infringement of the literary work through which that idea was expressed). Therefore, the Court finds that Plaintiff's claim for breach of implied contract (count three) is not preempted by the Copyright Act of 1976.
The Court can further conceptualize the scenario as follows: Suppose two parties entered into an express, written agreement, whereby one party disclosed his concept for a story to the second party upon the condition that such concept — were it to fall outside of the protection of the Copyright Act — would still not be reproduced, performed, distributed, or displayed without compensation. Under the prevailing case law, that story concept, as long as it was an original work of authorship fixed in a tangible medium of expression, would still likely fall within the subject matter of copyright, and therefore satisfy the first prong of the preemption test. See U.S. Ex Rel. Berge v. Bd. of Trustees of Univ. of Ala., 104 F.3d 1453, 1463 (4th Cir. 1997) (holding that ideas embodied in a work covered by the Copyright Act fall within the subject matter of the Act because "scope and protection are not synonyms."); Selby, 96 F. Supp.2d at 1057-59; Metrano v. Fox Broadcasting Co., Inc., No. CV-00-2279 CAS, 2000 WL 979664 at *4 n. 3 (C.D. Cal. Apr. 24, 2000).
However, if the rights protected under this hypothetical agreement are considered equivalent to those under copyright law, then the second prong of the test would also be satisfied and an action for breach of that contract would be preempted. In other words, the parties would be prohibited under the law from entering into an agreement that precludes the copying of another's work if some aspect of that work is not entitled to copyright protection. The Court cannot fathom that it is the intention of the Copyright Act to preclude parties from entering into such agreements, and therefore, the Court finds that the rights created by such an agreement are not equivalent to those under copyright law since such an agreement is broader than the protections granted by the Copyright Act.
2. Breach of Confidence
Defendants argue that Plaintiff's claim for breach of confidence (count four) is preempted as well. Defendants' entire argument is based on the assertion that this breach of confidence claim is equivalent to the right of first publication, which is protected under the Copyright Act. See Harper Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 552-53, 105 S.Ct. 2218, 2226-27, 85 L.Ed.2d 588, 602 (1985).
However, this argument fails for two reasons. First, it is by no means obvious at this point that Plaintiff's breach of confidence claim is the equivalent to a right of first publication. Were Plaintiff to demonstrate that a confidential relationship existed between the parties, then Defendants could potentially have disclosed Plaintiff's confidential idea and breached their duty without having ever published Plaintiff's work in a manner that is protected under copyright law. Thus, the rights are not necessarily equivalent.
Second, Plaintiff's breach of confidence claim does not satisfy the second prong of the test for preemption, because this claim contains an extra element, namely, the confidential relationship. In order to demonstrate such a relationship, Plaintiff must show that Defendants had an understanding that they were receiving Plaintiff's information in confidence and had a duty to maintain that confidentiality. Many courts have held that this additional element warrants a finding that a breach of confidence claim is not preempted by copyright law. See Berkla v. Corel Corp., 66 F. Supp.2d at 1150-51 (finding breach of confidence claim not preempted because it contains an extra element); Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 717 (2d Cir. 1992) (acknowledging that some state law rights, such as breach of confidence, even when they arise in connection with copyright infringement, satisfy the extra element test and are therefore not preempted); Metrano v. Fox Broadcasting Co., 2000 WL 979664 at *6-7 (holding that the agreement of confidentiality constitutes an extra element that precludes preemption of the breach of confidence claim); see also Fischer v. Viacom Int'l, 115 F. Supp.2d at 542 ("As a general rule, courts have found that the Copyright Act does not preempt [breach of confidence] claims because they involve the extra element of a confidential promise or duty of trust between the parties.").
The Court agrees with the reasoning of the above courts. Therefore, the Court finds that Plaintiff's claim for breach of confidence (count four) is also not preempted by the Copyright Act of 1976.
IV. CONCLUSION
For the reasons discussed above, Defendants' motion to dismiss is DENIED.
IT IS SO ORDERED.