USDC N.D. California, March 31, 2009

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  • Breach of contract claim based on breach of website’s terms of use is not preempted by Copyright Act

Plaintiff Craigslist, Inc., operator of the popular Craigslist.com website, filed suit against defendants for breach of contract, inducing breach of contract, intentional interference with contractual relations, fraud, trademark infringement under state law, computer fraud and abuse, and unauthorized access of a website and computer system. The individual defendant moved to dismiss for failure to state a claim, arguing that the state law claims were preempted by the Copyright Act, and moved for a more definite statement. The court denied both motions.

The court held that plaintiff’s state law claims, including claims based on breach of Craigslist’s Terms of Use and defendants’ use of plaintiff’s trademark in domain names and email addresses, are not preempted by the Copyright Act because they fail to satisfy the two requirements for preemption established by the Ninth Circuit, namely, that: (1) the content of the state right falls within the subject matter of copyright; and (2) the right asserted under state law is equivalent to the exclusive rights contained in Section 106 of the Copyright Act. According to the court, the second condition is not met if the state law claim contains an “extra element” that is qualitatively different from rights protected by copyright. The court further found that general incorporation of copyright allegations (along with all other general allegations) in state law claims does not establish preemption.

In this case, the court held that the plaintiff’s claims of breach of contract, inducing breach of contract, intentional interference with contractual relations and fraud are all based on defendant’s breach of the Craigslist.com Terms of Use. The Terms of Use “contain extra obligations beyond those imposed by the Copyright Act,” for example, that Craigslist users are not to post listings on behalf of third parties or post outside their designated geographic area.

The court also held that plaintiff’s trademark infringement claim based on the use of the trademark Craigslist in domain names and email addresses is not preempted by the Copyright Act because “the rights protected under trademark law are not the same rights protected under the Copyright Act.”

The court also rejected defendants’ argument that plaintiff’s state trademark infringement claim is preempted by the Lanham Act. The court noted that the statement in Mr. Donut of America, Inc. v. Mr. Donut, Inc., 418 F.2d 838 (9th Cir. 1969), that “[t]he Lanham Act has preempted the field of trademark law and controls,” subsequently was rejected by the Ninth Circuit and that the Ninth Circuit has held that California state trademark infringement is not preempted by the Lanham Act because it affords more protection to trademark owners than federal trademark law.