New Ninth Circuit Rulings on Implied-Contract Claims Provide Guidance for Idea-Submission Cases

By Amanda Bronstad

A ruling by the U.S. Court of Appeals for the Ninth Circuit involving the 2003 Tom Cruise movie The Last Samurai clarified for the first time in 40 years how a writer of a finished script with copyrightable elements can successfully bring a contract claim against a studio for stealing his or her idea. Benay v. Warner Bros. Entertainment Inc., 08-55719.

The appellate ruling applied existing case law dating to the 1960s, says Gregory Sater, a partner at Los Angeles-based Rutter Hobbs & Davidoff, who frequently handles idea-submission claims and was not involved in the case. “In copyright, you have to show access, which is really use, and a substantial similarity of
protected expression. In idea submission, you need to show use, and the way you show use is by showing it was used. The way you show it is by substantial similarity. It sounds like the same as copyright, but it's not,” he says. “This is very helpful to get a new case that flushes it out.”

The case was brought by Aaron and Matthew Benay, who wrote and received a copyright for a screenplay called The Last Samurai. They sued Warner Bros. Entertainment Inc., a division of Time Warner Inc., among other defendants, claiming that the producers of the film copied their screenplay after meeting with them in 2000. The Benays cited two theories: federal copyright infringement and breach of an implied-in-fact contract under California law. The latter is used to bring idea-submission claims. A federal judge in Los Angeles granted summary judgment to Warner Bros. as to both claims, but the Ninth Circuit reversed on the contract claim.

The appeals court said that the script and the film had several differences that undermined a copyright claim, but had other similarities that aren't necessarily copyrightable. For instance, both involved an American war veteran who travels to Japan, where he trains the Imperial Army in modern warfare and fights against the samurai. Both stories were set during the Satsuma Rebellion of 1877 and both relied heavily on Saigo Takamori, the purported real-life “last samurai.”

“Defendants argue that because the Benays submitted a completed screenplay we must analyze their contract claim in the same manner as their copyright claim,” the court noted. Relying on its 2004 decision in Grosso v. Miramax Film Corp., the appeals court refuted that argument, concluding that “the analysis of similarity under an implied-in-fact contract claim is different from the analysis of a copyright claim, even where the plaintiff has submitted a full copyright-protected script.”

In Grosso, the Ninth Circuit found that a writer who failed to prove that Miramax infringed on his copyrighted script could still press a state contract claim because federal copyright laws did not preempt it. The ruling opened the door for writers to bring idea-submission claims against the studios.

[Editor's note: The California Court of Appeal subsequently upheld a state superior court finding that there was no implied-in-fact contract to obligate Miramax to use writer Jeff Grosso's script, The Shell Game, when producing the movie The Rounders. Grosso v. Miramax Film Corp., B193872 (Cal.Ct.App. 2007). According to the state appeals court: "Plaintiff simply mailed his script to Gotham [Entertainment Group,] after reading in a writer's market guide that Gotham accepted unsolicited material. There was no response from Gotham at all. There were no communications between plaintiff and Gotham. Nor was there any communication between plaintiff and defendants, including Miramax. There was no evidence of any communication between Gotham and defendants with respect to plaintiff's ideas. There was no opinion testimony presented as to the custom in the industry. There is no evidence defendants did or said anything prior to disclosure to indicate a willingness to pay for the disclosure.”]

Sylvia Havens, a partner at Marder Havens & Saunders in Los Angeles, whose partner, John Marder, handled the Grosso case, represents the Benays. She says that she was particularly pleased with the Ninth Circuit's findings regarding the two-year statute of limitations on an implied-contract claim ' an issue she has been fighting for decades. Studios have argued that the start of production triggers the statute of limitations, while writers insist the statute starts to run once the film gets released to the public. The Ninth Circuit agreed with the writers. Had the court ruled otherwise, it would have had a devastating effect on writers hoping to sue, Havens says.

“The worst-case scenario is if a studio knows it can steal a writer's ideas, the studio announces it's going to do it, they put it in production, and then they wait for two years until they produce it,” she says. “Once they release it to the public, they don't get sued because it's barred.”

An attorney for Warner Bros., Jaime Marquart, a partner at Baker Marquart Crone & Hawxhurst in Los Angeles, referred calls to a Warner Bros. spokeswoman. The spokeswoman did not return a call for comment.

' Amanda Bronstad is a Staff Reporter for The National Law Journal, an ALM affiliate publication of Entertainment Law & Finance.

”'

The Ghost Hunters Decision

By Stan Soocher

To determine whether an implied-in-fact contract allegation is preempted by federal copyright law, the U.S. Court of Appeals for the Ninth Circuit ' in a case involving the TV series Ghost Hunters ' differentiated between an alleged promise to pay and a purported right to share in profits by “offering to partner.” Montz v. Pilgrim Films & Television Inc., 08-56954.

Parapsychologist plaintiff Larry Montz, and his publicist, Daena Smoller, filed a federal suit in the Central District of California, alleging that, between 1996 and 2003, they had pitched Montz's concept for a reality TV series about “paranormal investigators” to NBC Universal and to what is now the SyFy Channel. According to the complaint, NBC instead joined with co-defendant Pilgrim Films and Television to produce Ghost Hunters for the NBC-owned SyFy. The plaintiffs' causes of action were copyright infringement and state claims that included breach of implied-in-fact contract. The district court ruled that Montz and Smoller could proceed with the infringement claim but dismissed the state law claims. The plaintiffs and the defendants later agreed on voluntary dismissal of the infringement claim.

Affirming the lower court's preemption finding, the Ninth Circuit observed: “The gravamen of the claim is that the defendants used the plaintiffs' work, without authorization, to create (and then profit from) a new television program. The rights asserted by the plaintiffs under the implied contract are thus equivalent to the rights of copyright owners under [17 U.S.C.] '106 ' namely, the exclusive rights to use and to authorize use of their work.”

Montz and Smoller had relied on Grosso v. Miramax Film Corp., 383 F.3d 965 (9th Cir. 2004), in which the appeals court decided that an implied-contract claim withstood federal copyright preemption. As did Grosso, the Montz court referred to the classic California Supreme Court decision in Desny v. Wilder, 46 Cal.2d 715 (Cal. 1956), that defined the elements of a viable implied contract. Citing Grosso's explanation of the Desny test, Montz noted: “[T]he plaintiff must plead that he 'prepared the work [at issue], disclosed the work to the offeree for sale, and did so under circumstances from which it could be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work.'”

According to the Montz court: “Contrary to the plaintiffs' assertion, however, the present case is distinguishable from Grosso. There, the plaintiff allegedly disclosed his idea to the defendants for the express purpose of offering it for sale; the defendants allegedly accepted the offer and, in return, made an implied promise to pay for use of the idea. Here, by contrast, the plaintiffs allegedly disclosed their work to the defendants 'for the express purpose of offering to partner ' in the production, broadcast and distribution of the Concept'; the defendants allegedly rejected the offer but, in return, made an implied promise 'not to disclose, divulge or exploit the Plaintiffs' ideas and concepts without the express consent of the Plaintiffs.” (Emphases added.) The nature of the implied contracts in the two cases is thus fundamentally different.”

But Montz and Smoller additionally alleged they had a right to share in profits and credit from the TV project, which they argued constituted an “extra element” to defeat preemption. But the Ninth Circuit pointed out that the “mere mention of such a right” wasn't “enough to 'qualitatively distinguish' the plaintiffs' breach-of-implied-contract claim from a copyright claim. ' The plaintiffs expected to receive a share of the profits and credit for use of their work, but only because they expected, as any copyright owner would, that their work would not be used without their permission.”

Thus, a key take-away from Montz is that alleging an implied promise to share in profits isn't the same as alleging an implied promise by a defendant to pay (whether a project is profitable or not). Under Montz, it may also be that “offering to partner” isn't the same as Desny's implied-contract requirement of “offering for sale.”

' Stan Soocher is the Editor-in-Chief of Entertainment Law & Finance.

In 2004, the U.S. Court of Appeals for the Ninth Circuit decided that state implied-in-fact contract claims weren't preempted by federal copyright law. Grosso v. Miramax Film Corp. , 383 F.3d 965 (9th Cir. 2004). The ruling resulted in a predictable increase in idea-submission suits over TV and film productions. But few judicial opinions since have cited Grosso. In June 2010, however, the Ninth Circuit issued two decisions ' with differing results ' that, by also drawing from precedents from decades before, illuminate how a court should consider the elements of an implied-contract case.

The first report that follows is on the Ninth Circuit's ruling in an implied-contract case, over the movie The Last Samurai, that allows the plaintiffs to proceed with their state law claim and determined “there may be evidence in the record from which a reasonable fact-finder could find unauthorized use by the Defendants.” The second report analyzes the other recent Ninth Circuit ruling, which concluded that an implied-contract claim brought over the TV series Ghost Hunters was preempted by federal copyright law.

The Last Samurai Decision

By Amanda Bronstad

A ruling by the U.S. Court of Appeals for the Ninth Circuit involving the 2003 Tom Cruise movie The Last Samurai clarified for the first time in 40 years how a writer of a finished script with copyrightable elements can successfully bring a contract claim against a studio for stealing his or her idea. Benay v. Warner Bros. Entertainment Inc., 08-55719.

The appellate ruling applied existing case law dating to the 1960s, says Gregory Sater, a partner at Los Angeles-based Rutter Hobbs & Davidoff, who frequently handles idea-submission claims and was not involved in the case. “In copyright, you have to show access, which is really use, and a substantial similarity of
protected expression. In idea submission, you need to show use, and the way you show use is by showing it was used. The way you show it is by substantial similarity. It sounds like the same as copyright, but it's not,” he says. “This is very helpful to get a new case that flushes it out.”

The case was brought by Aaron and Matthew Benay, who wrote and received a copyright for a screenplay called The Last Samurai. They sued Warner Bros. Entertainment Inc., a division of Time Warner Inc., among other defendants, claiming that the producers of the film copied their screenplay after meeting with them in 2000. The Benays cited two theories: federal copyright infringement and breach of an implied-in-fact contract under California law. The latter is used to bring idea-submission claims. A federal judge in Los Angeles granted summary judgment to Warner Bros. as to both claims, but the Ninth Circuit reversed on the contract claim.

The appeals court said that the script and the film had several differences that undermined a copyright claim, but had other similarities that aren't necessarily copyrightable. For instance, both involved an American war veteran who travels to Japan, where he trains the Imperial Army in modern warfare and fights against the samurai. Both stories were set during the Satsuma Rebellion of 1877 and both relied heavily on Saigo Takamori, the purported real-life “last samurai.”

“Defendants argue that because the Benays submitted a completed screenplay we must analyze their contract claim in the same manner as their copyright claim,” the court noted. Relying on its 2004 decision in Grosso v. Miramax Film Corp., the appeals court refuted that argument, concluding that “the analysis of similarity under an implied-in-fact contract claim is different from the analysis of a copyright claim, even where the plaintiff has submitted a full copyright-protected script.”

In Grosso, the Ninth Circuit found that a writer who failed to prove that Miramax infringed on his copyrighted script could still press a state contract claim because federal copyright laws did not preempt it. The ruling opened the door for writers to bring idea-submission claims against the studios.

[Editor's note: The California Court of Appeal subsequently upheld a state superior court finding that there was no implied-in-fact contract to obligate Miramax to use writer Jeff Grosso's script, The Shell Game, when producing the movie The Rounders. Grosso v. Miramax Film Corp., B193872 (Cal.Ct.App. 2007). According to the state appeals court: "Plaintiff simply mailed his script to Gotham [Entertainment Group,] after reading in a writer's market guide that Gotham accepted unsolicited material. There was no response from Gotham at all. There were no communications between plaintiff and Gotham. Nor was there any communication between plaintiff and defendants, including Miramax. There was no evidence of any communication between Gotham and defendants with respect to plaintiff's ideas. There was no opinion testimony presented as to the custom in the industry. There is no evidence defendants did or said anything prior to disclosure to indicate a willingness to pay for the disclosure.”]

Sylvia Havens, a partner at Marder Havens & Saunders in Los Angeles, whose partner, John Marder, handled the Grosso case, represents the Benays. She says that she was particularly pleased with the Ninth Circuit's findings regarding the two-year statute of limitations on an implied-contract claim ' an issue she has been fighting for decades. Studios have argued that the start of production triggers the statute of limitations, while writers insist the statute starts to run once the film gets released to the public. The Ninth Circuit agreed with the writers. Had the court ruled otherwise, it would have had a devastating effect on writers hoping to sue, Havens says.

“The worst-case scenario is if a studio knows it can steal a writer's ideas, the studio announces it's going to do it, they put it in production, and then they wait for two years until they produce it,” she says. “Once they release it to the public, they don't get sued because it's barred.”

An attorney for Warner Bros., Jaime Marquart, a partner at Baker Marquart Crone & Hawxhurst in Los Angeles, referred calls to a Warner Bros. spokeswoman. The spokeswoman did not return a call for comment.

' Amanda Bronstad is a Staff Reporter for The National Law Journal, an ALM affiliate publication of Entertainment Law & Finance.

”'

The Ghost Hunters Decision

By Stan Soocher

To determine whether an implied-in-fact contract allegation is preempted by federal copyright law, the U.S. Court of Appeals for the Ninth Circuit ' in a case involving the TV series Ghost Hunters ' differentiated between an alleged promise to pay and a purported right to share in profits by “offering to partner.” Montz v. Pilgrim Films & Television Inc., 08-56954.

Parapsychologist plaintiff Larry Montz, and his publicist, Daena Smoller, filed a federal suit in the Central District of California, alleging that, between 1996 and 2003, they had pitched Montz's concept for a reality TV series about “paranormal investigators” to NBC Universal and to what is now the SyFy Channel. According to the complaint, NBC instead joined with co-defendant Pilgrim Films and Television to produce Ghost Hunters for the NBC-owned SyFy. The plaintiffs' causes of action were copyright infringement and state claims that included breach of implied-in-fact contract. The district court ruled that Montz and Smoller could proceed with the infringement claim but dismissed the state law claims. The plaintiffs and the defendants later agreed on voluntary dismissal of the infringement claim.

Affirming the lower court's preemption finding, the Ninth Circuit observed: “The gravamen of the claim is that the defendants used the plaintiffs' work, without authorization, to create (and then profit from) a new television program. The rights asserted by the plaintiffs under the implied contract are thus equivalent to the rights of copyright owners under [17 U.S.C.] '106 ' namely, the exclusive rights to use and to authorize use of their work.”

Montz and Smoller had relied on Grosso v. Miramax Film Corp. , 383 F.3d 965 (9th Cir. 2004), in which the appeals court decided that an implied-contract claim withstood federal copyright preemption. As did Grosso , the Montz court referred to the classic California Supreme Court decision in Desny v. Wilder , 46 Cal.2d 715 (Cal. 1956), that defined the elements of a viable implied contract. Citing Grosso's explanation of the Desny test, Montz noted: “[T]he plaintiff must plead that he 'prepared the work [at issue], disclosed the work to the offeree for sale, and did so under circumstances from which it could be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work.'”

According to the Montz court: “Contrary to the plaintiffs' assertion, however, the present case is distinguishable from Grosso. There, the plaintiff allegedly disclosed his idea to the defendants for the express purpose of offering it for sale; the defendants allegedly accepted the offer and, in return, made an implied promise to pay for use of the idea. Here, by contrast, the plaintiffs allegedly disclosed their work to the defendants 'for the express purpose of offering to partner ' in the production, broadcast and distribution of the Concept'; the defendants allegedly rejected the offer but, in return, made an implied promise 'not to disclose, divulge or exploit the Plaintiffs' ideas and concepts without the express consent of the Plaintiffs.” (Emphases added.) The nature of the implied contracts in the two cases is thus fundamentally different.”

But Montz and Smoller additionally alleged they had a right to share in profits and credit from the TV project, which they argued constituted an “extra element” to defeat preemption. But the Ninth Circuit pointed out that the “mere mention of such a right” wasn't “enough to 'qualitatively distinguish' the plaintiffs' breach-of-implied-contract claim from a copyright claim. ' The plaintiffs expected to receive a share of the profits and credit for use of their work, but only because they expected, as any copyright owner would, that their work would not be used without their permission.”

Thus, a key take-away from Montz is that alleging an implied promise to share in profits isn't the same as alleging an implied promise by a defendant to pay (whether a project is profitable or not). Under Montz, it may also be that “offering to partner” isn't the same as Desny's implied-contract requirement of “offering for sale.”

' Stan Soocher is the Editor-in-Chief of Entertainment Law & Finance.