Addressing issues of subject matter jurisdiction in a copyright-based declaratory judgment action, the U.S. Court of Appeals for the Eleventh Circuit found a lack of subject matter jurisdiction where there was no registered copyright in dispute. Stuart Weitzman LLC v. Microcomputer Resources, Inc., Case No. 07-12998 (11th Cir., Sept. 12, 2008) (Anderson, J.).
Plaintiff Stuart Weitzman LLC is a designer and seller of women’s shoes. Weitzman contracted, through an oral agreement, for Microcomputer Resources, Inc. (MRI) to create software to manage Weitzman’s distribution. Weitzman later orally contracted with MRI to create a custom software program, which both parties agree was created and owned by MRI, even though MRI never registered the copyright. After the relationship between the parties deteriorated, MRI told Weitzman it was no longer entitled to the use or possession of the software source code, although it was still entitled to use the software.
Weitzman brought a declaratory judgment action in federal court, claiming that the federal court had jurisdiction under § 117(a) of the Copyright Laws, which provides that the owner of a computer program copy is not an infringer even though there was no registered copyright in dispute. As the parties were not diverse, the court analyzed whether subject-matter jurisdiction over the case could be maintained in federal court, i.e. based on a federal question.
The court explained that § 117(a) only defines which actions do not constitute infringement, so Weitzman alleged no coercive action (such as copyright infringement) by MRI that would establish federal subject-matter jurisdiction. But moreover, MRI had never registered its copyright in the source code, a prerequisite for any infringement action under § 411(a): “this circuit has held that §411(a)’s registration requirement is a jurisdictional prerequisite to an infringement suit.” The court also noted that it would lack subject matter jurisdiction even if MRI were to bring an infringement action against Weitzman. Under the circumstances, the court could find no “theoretical coercive action” to provide the district court with subject-matter jurisdiction over Weitzman’s declaratory judgment suit.
Regarding the possibility that copyright holders may not register their copyrights to avoid declaratory judgment actions, the court stated “[a]lthough we recognize that our holding may place alleged infringers of unregistered copyrights in an awkward position—i.e., they cannot seek a federal declaratory judgment to clear up whether their actions are infringing even though the copyright holder threatens future infringement litigation—we nonetheless are bound by the law of this circuit.”
Weitzman also argued that its declaratory judgment claim should be heard as MRI could assert state law claims that are essentially the same as claims arising under the Copyright Law. The court disagreed, noting that federal subject-matter jurisdiction could only exist if the state claim was “completely preempted” by the copyright law and not merely a defense under the Copyright Act (such as § 117(a)).