USDC E.D. Tennessee, February 12, 2008

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The owner of the copyright in a number of paintings licensed the paintings to a book publisher for use in a text book. The licensor claimed to have been told by the publisher that 40,000 copies of the book would be printed, when the publisher in fact intended to print more than 1 million. The licensor sued for copyright infringement and fraud, and the book publisher moved to dismiss the fraud claim on the grounds that it was preempted by the Copyright Act, because the fraud and copyright claims rest on the same fundamental allegations that the defendant copied and distributed the paintings beyond the limitations in the license agreement.

In the Sixth Circuit, a state law claim is not preempted by the Copyright Act if the state law claim “contains an extra element, which is not illusory, and provided the extra element changes the nature of the action so that it is qualitatively different from a copyright infringement claim.” To determine whether a claim is qualitatively different, courts generally examine both the elements of the state law cause of action and the way the plaintiff has actually pled that cause of action.

In this case, the court examined the elements of the copyright infringement claim and the fraud claim and explained that by “requiring misrepresentation of a material fact, knowledge of falsity, fraudulent intent, and reliance on a misrepresentation, fraud has extra elements that are not illusory.” The court denied the defendant's motion to dismiss, and held that fraud committed by a licensee, to induce a copyright owner to enter into a license, can constitute the extra element needed to avoid preemption by the Copyright Act.

The court noted that there is parallel litigation in other courts and that a federal court in New York came to a different conclusion and granted the defendants’ motion to dismiss the fraud claim. See Semerdjian v. McDougal Littell, 2008 WL 110942 (S.D.N.Y. Jan. 2, 2008).