<b><i>Commentary: </i>Keeping Copyright Preemption on Track</b>

The bedrock of the film industry is the protection afforded by the Copyright Act, as without it all is for naught ' no one would spend more than a few dollars to make a film if it could not be protected. It is thus necessary for us to jealously guard the proper application of the Copyright Act and we should have qualms when copyright cases go off track. One critical aspect of the Copyright Act is the degree to which it preempts state law.

The general rule is that the owner of a work that comes within the scope of the Copyright Act must seek protection under that Act, not under state law, in order to provide uniform results. There are, unfortunately, two glaring instances of entire lines of copyright preemption cases that have run off the rails, albeit in different directions: one line expanding preemption and one line shrinking it, in each case beyond what was intended by the statute.

Implied-in-Fact v. Implied-at-Law

The cases that have erroneously shrunk copyright preemption have all done so by permitting plaintiffs to bypass the Copyright Act and to sue under state law for an alleged implied-in-fact contract. Under state law, an implied-in-fact contract is created when the conduct of the parties is reasonably interpreted as creating a binding contract.

One problem is that the cases often confuse implied-at-law contracts (there is no actual contract, but the court just does what it thinks is right) with implied-in-fact contracts (there is an actual contract implied through conduct). The courts often use the sloppy ambiguous terminology of “implied contract” without specifying which type they mean. While a suit for an actual implied-in-fact contract under state law should be permitted, a suit for an implied-at-law contract should be preempted by the Copyright Act.

Even when the courts clearly mean an implied-in-fact contract, they often overlook basic contract law. The key to finding an implied-in-fact contract is that the parties must have implicitly reached mutual agreement on all material issues, usually including the price. (See, Restatement 2d Contracts, Section 33.)

California case law has gone beyond that to permit the courts to imply a “reasonable price” when it was clear that both parties intended to form a contract, but this has been extended beyond the breaking point by cases that overlook the requirement of mutual intent to form a contract and find implied-in-fact contracts (and then imply a “reasonable price”) even when there was a rejection by one party of an intent to form any contract, much less a price. At that point, there is simply no distinction between an implied-at-law contract and an implied-in-fact contract.

For egregious examples of this line of cases, the Ninth and Second Circuits recently permitted state law implied-in-fact contract claims to be brought by plaintiffs who had merely run around submitting TV series ideas to various people, none of whom evidenced an intent to form any contact or ever discussed any payment, much less a price.

Very recently, in Forest Park Pictures v. Universal Television Network Inc., 11-2011 (2nd Cir. 2012), the Second Circuit permitted a plaintiff that submitted a treatment for a proposed television series to avoid copyright preemption by alleging an implied-in-fact contract, even in the face of the fact that the defendant evidenced no intent to enter into any contract at all and thus never discussed the price or any other terms of the alleged contract. In Montz v. Pilgrim Films & Television Inc., 606 F.3d 1153 (9th Cir. 2010), the Ninth Circuit went even further and found an implied-in-fact contract even though the plaintiff had never met with the defendant and thus had not discussed any terms of the alleged contract.

This is the most common fact pattern in Hollywood, and these plaintiff's should be required to make their claims under the Copyright Act (and comply with its requirements) or not at all. If plaintiffs can circumvent the requirements of the Copyright Act by merely alleging an implied-in-fact contract, despite rejection by one party of the intent to form any contract, and thus with no agreement on any material terms, then copyright preemption is a dead letter.

Expanding Copyright

On the other side of the coin, many cases are expanding copyright preemption beyond reason and are using it to knock out bona fide claims that have nothing to do with copyright. This line of cases started back in the 1980s when baseball players on the Baltimore Orioles sued a network for supposedly violating their right of publicity by broadcasting the games. See, Baltimore Orioles Inc. v. Major League Baseball Players Association, 805 F.2d 663 (7th Cir. 1986). The appeals court should have held that the players had given their implied consent to such broadcasts when they accepted being overpaid for running around on a baseball field, but instead the court used the unfortunate rationale of copyright preemption to knock out the claims, on the theory that the players didn't own the copyright to the broadcasts and thus could not complain. While the end result in that case was fine, the rationale of the case has caused endless mischief as it has now been dutifully followed to its logical extreme by a number of other cases.

For example, if I take your picture on the street and put it on cans of dog food, you would hopefully have a solid claim against me for violating your right of publicity. However, under the Baltimore Orioles line of cases, I could successfully defend your claim on the basis of copyright preemption; you can't sue for violation of your right of publicity under state law due to copyright preemption and you can't win under the Copyright Act because you don't own the photo. This is obviously copyright preemption run amuck, because copyright preemption was meant to apply to claims brought by whoever owns a work within the scope of the Copyright Act, not to third parties. But this result has now happened quite frequently, as it is an irresistible defense.

Conclusion

So let's hope that copyright preemption gets back on an even keel where it belongs. If you get caught on the wrong side of a copyright preemption case, perhaps you could make the points mentioned in this article to get the judge to follow the intent of the law.

The bedrock of the film industry is the protection afforded by the Copyright Act, as without it all is for naught ' no one would spend more than a few dollars to make a film if it could not be protected. It is thus necessary for us to jealously guard the proper application of the Copyright Act and we should have qualms when copyright cases go off track. One critical aspect of the Copyright Act is the degree to which it preempts state law.

The general rule is that the owner of a work that comes within the scope of the Copyright Act must seek protection under that Act, not under state law, in order to provide uniform results. There are, unfortunately, two glaring instances of entire lines of copyright preemption cases that have run off the rails, albeit in different directions: one line expanding preemption and one line shrinking it, in each case beyond what was intended by the statute.

Implied-in-Fact v. Implied-at-Law

The cases that have erroneously shrunk copyright preemption have all done so by permitting plaintiffs to bypass the Copyright Act and to sue under state law for an alleged implied-in-fact contract. Under state law, an implied-in-fact contract is created when the conduct of the parties is reasonably interpreted as creating a binding contract.

One problem is that the cases often confuse implied-at-law contracts (there is no actual contract, but the court just does what it thinks is right) with implied-in-fact contracts (there is an actual contract implied through conduct). The courts often use the sloppy ambiguous terminology of “implied contract” without specifying which type they mean. While a suit for an actual implied-in-fact contract under state law should be permitted, a suit for an implied-at-law contract should be preempted by the Copyright Act.

Even when the courts clearly mean an implied-in-fact contract, they often overlook basic contract law. The key to finding an implied-in-fact contract is that the parties must have implicitly reached mutual agreement on all material issues, usually including the price. (See, Restatement 2d Contracts, Section 33.)

California case law has gone beyond that to permit the courts to imply a “reasonable price” when it was clear that both parties intended to form a contract, but this has been extended beyond the breaking point by cases that overlook the requirement of mutual intent to form a contract and find implied-in-fact contracts (and then imply a “reasonable price”) even when there was a rejection by one party of an intent to form any contract, much less a price. At that point, there is simply no distinction between an implied-at-law contract and an implied-in-fact contract.

For egregious examples of this line of cases, the Ninth and Second Circuits recently permitted state law implied-in-fact contract claims to be brought by plaintiffs who had merely run around submitting TV series ideas to various people, none of whom evidenced an intent to form any contact or ever discussed any payment, much less a price.

Very recently, in Forest Park Pictures v. Universal Television Network Inc., 11-2011 (2nd Cir. 2012), the Second Circuit permitted a plaintiff that submitted a treatment for a proposed television series to avoid copyright preemption by alleging an implied-in-fact contract, even in the face of the fact that the defendant evidenced no intent to enter into any contract at all and thus never discussed the price or any other terms of the alleged contract. In Montz v. Pilgrim Films & Television Inc. , 606 F.3d 1153 (9th Cir. 2010), the Ninth Circuit went even further and found an implied-in-fact contract even though the plaintiff had never met with the defendant and thus had not discussed any terms of the alleged contract.

This is the most common fact pattern in Hollywood, and these plaintiff's should be required to make their claims under the Copyright Act (and comply with its requirements) or not at all. If plaintiffs can circumvent the requirements of the Copyright Act by merely alleging an implied-in-fact contract, despite rejection by one party of the intent to form any contract, and thus with no agreement on any material terms, then copyright preemption is a dead letter.

Expanding Copyright

On the other side of the coin, many cases are expanding copyright preemption beyond reason and are using it to knock out bona fide claims that have nothing to do with copyright. This line of cases started back in the 1980s when baseball players on the Baltimore Orioles sued a network for supposedly violating their right of publicity by broadcasting the games. See , Baltimore Orioles Inc. v. Major League Baseball Players Association , 805 F.2d 663 (7th Cir. 1986). The appeals court should have held that the players had given their implied consent to such broadcasts when they accepted being overpaid for running around on a baseball field, but instead the court used the unfortunate rationale of copyright preemption to knock out the claims, on the theory that the players didn't own the copyright to the broadcasts and thus could not complain. While the end result in that case was fine, the rationale of the case has caused endless mischief as it has now been dutifully followed to its logical extreme by a number of other cases.

For example, if I take your picture on the street and put it on cans of dog food, you would hopefully have a solid claim against me for violating your right of publicity. However, under the Baltimore Orioles line of cases, I could successfully defend your claim on the basis of copyright preemption; you can't sue for violation of your right of publicity under state law due to copyright preemption and you can't win under the Copyright Act because you don't own the photo. This is obviously copyright preemption run amuck, because copyright preemption was meant to apply to claims brought by whoever owns a work within the scope of the Copyright Act, not to third parties. But this result has now happened quite frequently, as it is an irresistible defense.

Conclusion

So let's hope that copyright preemption gets back on an even keel where it belongs. If you get caught on the wrong side of a copyright preemption case, perhaps you could make the points mentioned in this article to get the judge to follow the intent of the law.