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May 2011

Ninth Circuit Decision Protects State Claims From Preemption By Copyright Law

In Montz v. Pilgrim Films & Television, Inc., 2011 U.S. App. LEXIS 9099 (May 4, 2011), the Ninth Circuit Court of Appeals addressed whether copyright law preempts an implied contractual claim to compensation for use of an idea presented to another party.

Plaintiff Larry Montz, a parapsychologist, conceived of an idea for a television show that would follow a team investigating reports of paranormal activity to real-world locations.  Montz and his producer pitched this idea to television studios and producers, including representatives of NBC and the Sci-Fi Channel.  Ultimately, the studios expressed that they were not interested in Montz's concept.  After these meetings with Montz occurred, NBC partnered with Pilgrim Films & Television and others to produce a series on the Sci-Fi Channel called Ghost Hunters.  The series followed a team of investigators who travel across the United States to investigate paranormal activity.

Montz and his producer sued defendants for copyright infringement and state claims for breach of implied contract and breach of confidence.  Ruling on a motion to dismiss, the district court concluded that federal copyright law preempted the state claims. 

Reversing the district court's ruling, the Ninth Circuit held that copyright law does not preempt a contract claim where a plaintiff's complaint alleges a bilateral expectation that he would be compensated for use of the idea.  The Court noted that the California Supreme Court had already established that there is an implied contractual right to compensation when a writer submits material to a producer with the understanding that the writer will be paid if the producer uses the concept, known as a Desny claim.  Applying that California law, the Ninth Circuit had previously held in Grosso v. Miramax Film Corp., 383 F.3d 965 (9th Cir. 2004), that such an implied contractual claim is not preempted by federal copyright law. 

In this case, the Court used a test found in the Copyright Act of 1976 to determine whether the state claims were preempted.  The Copyright Act expressly preempts state claims where (1) the plaintiff's work "come[s] within the subject matter of copyright" and (2) the state law grants "legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright." 

The Court agreed that the first prong was met because Montz's idea was fixed in a tangible medium such that it was within the subject matter of copyright.  The second prong, however, was not met, according to the Court. 

Following its decision in Grosso, the Court held that Montz's state claims asserted rights that were qualitatively different from the rights protected by copyright.  Montz's contract claim possessed an extra element that was not present in copyright law – the implied agreement of payment for use of a concept.  This implied agreement is a personal one, made between the parties.  In contrast, a copyright is a public monopoly and is an exclusive right that is asserted against the world.  In addition, Montz's claim for breach of confidence also had an extra element that made it qualitatively different from a copyright claim, as the claim protects the duty of trust or confidential relationship between parties.

Lastly, the Court cited policy reasons relating to the entertainment industry in support of its holding.  The decision gives "some protection for those who wish to present creative concepts and ideas but with the understanding that they are not giving away the ideas for free.  Without such legal protection, potentially valuable creative sources would be left with very little protection in a dog-eat-dog business." 

The dissenting opinion disagreed with the majority that the state claims had an extra element to make the claims qualitatively different from a copyright claim.  According to the dissent, the majority ignored an important fact alleged by Montz – that he retained his rights as a copyright owner.  This fact distinguishes this case from Grosso, in which the plaintiff claimed to have sold the rights to the ideas embodied in his materials.  "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."  As such, the dissent believed that all of Montz's claims revolved around a copyright claim. 

This opinion is noteworthy because it demonstrates how a plaintiff pleads state claims with its copyright claims can determine whether preemption will apply.  Both the majority and dissenting opinions relied upon Montz's specific allegations in his complaint to determine whether his state claims were of a nature that made them qualitatively different from his copyright claim.  This decision also emphasizes the importance of establishing expectations in an agreement prior to the sharing of ideas that come within the scope of copyright subject matter.

Intellectual Property

Intellectual Property