USCA Second Circuit, June 26, 2012
- Second Circuit vacates district court’s dismissal of plaintiffs’ claim for breach of implied-in-fact contract for payment for use of their idea, holding that Copyright Act did not preempt claim.
Plaintiffs Forest Park Pictures, and Tove and Hayden Christensen, individuals affiliated with Forest Park, brought suit against defendant USA Network, a division of Universal Television Network, a television production company, alleging that defendant misappropriated an idea for a television series they developed, using the concept without compensation. Finding that the law of the Second Circuit and not California law applied, the district court dismissed the single-claim complaint, holding that plaintiffs’ breach of implied-in-fact contract was preempted by the Copyright Act. (Click here to read out summary of the district court’s decision.) The Second Circuit vacated the dismissal and remanded the case for further proceedings, holding that the Copyright Act did not preempt plaintiffs’ breach of implied-in-fact contract claim and that plaintiffs had properly pleaded that claim.
Plaintiffs developed an idea for a television series titled "Housecall," based on the story of a doctor who, after being expelled from the conventional medical community for treating patients who could not pay their medical bills, moves to Malibu and makes house calls to the rich and famous residents – becoming a "concierge" doctor. Plaintiffs alleged that in 2005 they created materials, including character biographies, concepts, themes, and plot/story lines for the television series, and pitched the concept to defendant by sending the materials to and meeting with a representative of the network, with the objective of persuading defendant to purchase the ideas for development. After meeting and communicating with plaintiffs, defendant rejected “Housecall.” In 2009, the network premiered “Royal Pains,” a show about a doctor who, after being expelled from the conventional medical community for treating patients who are unable to pay, relocates to the Hamptons where he becomes a concierge doctor.
Plaintiffs then sued defendant, asserting a single cause of action for breach of implied-in-fact contract against defendant, based on allegations that defendant knew of the entertainment industry convention that writers and creators pitch creative ideas to purchasers for the purpose of selling those ideas for compensation and with the expectation that they would be compensated in the event of use. Defendant moved to dismiss the claim on the grounds that the Copyright Act preempted the claim and that the contract was too vague to be enforced. The district court dismissed the claim based on preemption and did not address the vagueness argument.
Under Section 301 of the Copyright Act, a state law claim is preempted only if (1) the work at issue “come[s] within the subject matter of copyright” and (2) the right being asserted is “equivalent to any of the exclusive rights within the general scope of copyright.” Under Second Circuit law, works may fall within the subject matter of copyright, and may be subject to preemption, even if they contain material that is uncopyrightable.
In this case, the Second Circuit found that the work at issue meets the subject matter requirement because the complaint adequately alleges that the defendant used the ideas (though themselves not copyrightable) that were embodied and fixed in the written series treatment. The court found, however, that the right being asserted was not equivalent to any of the exclusive rights within the general scope of copyright as specified by Section 106 of the Act, because extra elements are required instead of or in addition to the exclusive rights of reproduction, performance, distribution or display.
Regarding plaintiffs’ breach of contract claim, the Second Circuit found that (1) the Copyright Act does not provide an express right for the copyright owner to receive payment for the use of a work, (2) a plaintiff suing for payment under a breach of contract must prove extra elements beyond use or copying, including mutual assent and valid consideration, and (3) a breach of contract claim asserts rights only against the contractual counterparty, not the public at large as in a copyright infringement claim.
The Second Circuit also noted that this preemption analysis applies in the same way to express and implied-in-fact contracts with a promise to pay. Where the elements of a contract are properly pleaded, no difference exists, for preemption purposes, between an express contract and an implied-in-fact contract. If a plaintiff pleaded an implied-in-law contract, quasi-contract, or unjust enrichment, however, those claims may be preempted by the Copyright Act because under those theories, the plaintiff only needs to prove that the defendant was unjustly enriched through the use of his idea or work, which is not materially different from a claim for copyright infringement requiring a plaintiff to prove that the defendant used, reproduced, copied or displayed the copyrighted work.
After finding that the claim was not preempted, the Second Circuit considered whether the complaint pleaded an enforceable implied-in-fact contract containing a promise to pay – and found that it did. The court applied New York’s choice of law rules to determine that that California law applied to the claim, finding that, although it could not confidently say that no divergence between California and New York law existed, almost all of the significant contacts between the parties regarding the implied-in-fact contract were with California.
Under Desny v. Wilder, a plaintiff can prevail by proving that he submitted an idea with an understanding amounting to a condition that he would be paid for use of the idea and that the defendant knew or should have known of the condition. California law does not require exact price terms to enforce contracts as long as the parties’ intentions can be ascertained, and permits custom and usage to supply absent terms. The Second Circuit found that plaintiffs had properly pleaded a Desny claim by alleging that defendant accepted plaintiffs’ idea, and that it knew or should have known that by keeping the series treatment, scheduling a meeting with plaintiffs, allowing plaintiffs to pitch their idea uninterrupted, and communicating with them after the meeting, plaintiffs would have an understanding that they would be paid for use of their idea.