Second Circuit: No Preemption of Implied Contract Claim

The Copyright Act doesn't preempt a lawsuit over the idea for the television show Royal Pains, the U.S. Court of Appeals for the Second Circuit recently ruled. A unanimous appellate panel vacated and remanded a dismissal of the case by Judge Colleen McMahon of the Southern District of New York. The appeals court found that the plaintiffs' implied contract claim was not preempted and was adequately pleaded. Forest Park Pictures v. Universal Television Network Inc., 11-2011 (2nd Cir. 2012).

The Second Circuit thus joined the Ninth Circuit, which last year ruled that such idea theft claims against studios are not necessarily preempted. Seven other circuits have ruled that at least some contract claims involving the subject matter of copyright are not preempted. Actor Hayden Christensen, his brother Tove and their production company, Forest Park Pictures, brought the case against Universal Television in July 2010, alleging breach of an implied contract. They claimed Universal Television created Royal Pains based on a concept they pitched to the defendant without compensating them.

According to the Second Circuit ruling, the plaintiffs pitched their idea by mail and then in person to Universal Television division USA Network. The plaintiffs claim they developed their idea in 2005 for a show called Housecall, about a 'concierge' doctor who makes house calls on rich and famous patients in Malibu, CA. The doctor switched to this practice structure 'after being expelled from the medical community for treating patients who could not pay.'

Forest Park submitted character biographies, themes and storylines to USA Network. The parties' communication stopped soon after the pitch. Four years later, USA Network aired Royal Pains, which used the same concept but was based in the Hamptons.

District Judge McMahon dismissed the case in May 2011. Finding it to be preempted by copyright law, she wrote: 'Plaintiffs' breach-of-implied contract claim based on his alleged right to be compensated for the use of his idea for a television series is equivalent to the exclusive rights protected by copyright law and is therefore preempted by the Copyright Act.'

Circuit Judge John M. Walker Jr. wrote the Second Circuit's opinion, joined by appellate Judges Debra Ann Livingston and Reena Raggi. The Second Circuit ruled that Forest Park's claim is not preempted and that the plaintiffs pleaded an enforceable contract under California state law that survives a dismissal motion.

Judge Walker wrote that preemption would require that the work is 'within the subject matter of copyright' and that the complaint seeks to vindicate a legal or equitable right equivalent to any rights within the general scope of copyright law. He noted that there are several qualitative differences between the plaintiffs' claim and a copyright violation claim. First, the Copyright Act does not give owners an express right for payment for the use of a work. Second, plaintiffs in contract cases must prove extra elements beyond use or copying. Third, a breach-of-contract claim 'asserts rights only against the contractual counterparty, not the public at large,' Judge Walker wrote.

Judge Walker noted that '[a] number of our sister circuits have accordingly concluded that at least some contract claims involving the subject matter of copyright do not contest rights that are the equivalent of rights under the Copyright Act, and thus are not preempted.' He cited rulings from the Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Eleventh and Federal circuits.

'The alleged contract does not simply require USA Network to honor Forest Park's exclusive rights under the Copyright Act (assuming the material at issue to be copyrightable); it requires USA Network to pay for the use of Forest Park's ideas. A claim for breach of a contract including a promise to pay is qualitatively different from a suit to vindicate a right included in the Copyright Act and is not subject to preemption,' Judge Walker wrote.

Judge Walker agreed with Forest Park that California law governs the contract for several reasons. He noted that the sole face-to-face meeting and Forest Park's written and oral disclosure of its idea took place there, the series was located there, and two out of the three plaintiffs are California residents. He also noted that California law allows an implied-in-fact contract with 'an open price term to be filled in by industry standards.' Judge Walker added that 'although Forest Park does not allege that it expressly conditioned disclosure on a promise of payment, the Complaint alleges facts that, if proven, would establish that USA Network knew or should have known such a condition was implied.'

'Because Forest Park has alleged an enforceable implied-in-fact contract including a promise of payment for the disclosure of its idea, its claim is not preempted by the Copyright Act and therefore the district court erred in dismissing the Complaint,' Judge Walker concluded.

Forest Park's lawyer, David Marek, a partner at New York-based Liddle & Robinson, says it's notable that the Second Circuit reached the same decision as the Ninth Circuit in its 2011 en banc ruling in Montz v. Pilgrim Films & Television Inc., 606 F.3d 1153 (9th Cir. 2010), on the copyright preemption issue: 'I do think these decisions give writers and other people who are creating things some measure of protection or at least an avenue to bring a claim if they feel their ideas are being used without them being compensated.'

The types of communication Marek's client had with Universal Television are common in the television industry, he says. 'Those communications, because they're only ideas, are often not protected by the Copyright Act.'

Neither NBC Universal Media LLC, nor Susan Weiner of NBC Universal Media, who argued the defendant's case at the Second Circuit, responded to requests for comment. Robert Penchina, a New York partner at Levine Sullivan Koch & Schulz, who also represented Universal Television, referred questions to his client.

Allison Brehm, a Los Angeles partner at Drye & Warren, who isn't involved in the case, says the ruling is disappointing because there's no split with the Ninth Circuit on copyright preemption of idea theft claims arising from the breach of an implied-in-fact contract: 'The problem with these cases going forward is that more often than not the studios actually win based on a showing that the plaintiff's work and the defendant's work are not substantially similar.'

Brehm also says that 'without the defensive tactic of copyright preemption, there's no way to get rid of these cases at an early stage without going through time-consuming discovery.' It's not easy for plaintiffs to make the showing of substantial similarity between the works required by many courts, Brehm says. 'So there's still a tough road ahead as far as prevailing on those claims.' (Also see Schuyler Moore's commentary on implied contract claims and copyright preemption in this issue.)

The Copyright Act doesn't preempt a lawsuit over the idea for the television show Royal Pains, the U.S. Court of Appeals for the Second Circuit recently ruled. A unanimous appellate panel vacated and remanded a dismissal of the case by Judge Colleen McMahon of the Southern District of New York. The appeals court found that the plaintiffs' implied contract claim was not preempted and was adequately pleaded. Forest Park Pictures v. Universal Television Network Inc., 11-2011 (2nd Cir. 2012).

The Second Circuit thus joined the Ninth Circuit, which last year ruled that such idea theft claims against studios are not necessarily preempted. Seven other circuits have ruled that at least some contract claims involving the subject matter of copyright are not preempted. Actor Hayden Christensen, his brother Tove and their production company, Forest Park Pictures, brought the case against Universal Television in July 2010, alleging breach of an implied contract. They claimed Universal Television created Royal Pains based on a concept they pitched to the defendant without compensating them.

According to the Second Circuit ruling, the plaintiffs pitched their idea by mail and then in person to Universal Television division USA Network. The plaintiffs claim they developed their idea in 2005 for a show called Housecall, about a 'concierge' doctor who makes house calls on rich and famous patients in Malibu, CA. The doctor switched to this practice structure 'after being expelled from the medical community for treating patients who could not pay.'

Forest Park submitted character biographies, themes and storylines to USA Network. The parties' communication stopped soon after the pitch. Four years later, USA Network aired Royal Pains, which used the same concept but was based in the Hamptons.

District Judge McMahon dismissed the case in May 2011. Finding it to be preempted by copyright law, she wrote: 'Plaintiffs' breach-of-implied contract claim based on his alleged right to be compensated for the use of his idea for a television series is equivalent to the exclusive rights protected by copyright law and is therefore preempted by the Copyright Act.'

Circuit Judge John M. Walker Jr. wrote the Second Circuit's opinion, joined by appellate Judges Debra Ann Livingston and Reena Raggi. The Second Circuit ruled that Forest Park's claim is not preempted and that the plaintiffs pleaded an enforceable contract under California state law that survives a dismissal motion.

Judge Walker wrote that preemption would require that the work is 'within the subject matter of copyright' and that the complaint seeks to vindicate a legal or equitable right equivalent to any rights within the general scope of copyright law. He noted that there are several qualitative differences between the plaintiffs' claim and a copyright violation claim. First, the Copyright Act does not give owners an express right for payment for the use of a work. Second, plaintiffs in contract cases must prove extra elements beyond use or copying. Third, a breach-of-contract claim 'asserts rights only against the contractual counterparty, not the public at large,' Judge Walker wrote.

Judge Walker noted that '[a] number of our sister circuits have accordingly concluded that at least some contract claims involving the subject matter of copyright do not contest rights that are the equivalent of rights under the Copyright Act, and thus are not preempted.' He cited rulings from the Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Eleventh and Federal circuits.

'The alleged contract does not simply require USA Network to honor Forest Park's exclusive rights under the Copyright Act (assuming the material at issue to be copyrightable); it requires USA Network to pay for the use of Forest Park's ideas. A claim for breach of a contract including a promise to pay is qualitatively different from a suit to vindicate a right included in the Copyright Act and is not subject to preemption,' Judge Walker wrote.

Judge Walker agreed with Forest Park that California law governs the contract for several reasons. He noted that the sole face-to-face meeting and Forest Park's written and oral disclosure of its idea took place there, the series was located there, and two out of the three plaintiffs are California residents. He also noted that California law allows an implied-in-fact contract with 'an open price term to be filled in by industry standards.' Judge Walker added that 'although Forest Park does not allege that it expressly conditioned disclosure on a promise of payment, the Complaint alleges facts that, if proven, would establish that USA Network knew or should have known such a condition was implied.'

'Because Forest Park has alleged an enforceable implied-in-fact contract including a promise of payment for the disclosure of its idea, its claim is not preempted by the Copyright Act and therefore the district court erred in dismissing the Complaint,' Judge Walker concluded.

Forest Park's lawyer, David Marek, a partner at New York-based Liddle & Robinson, says it's notable that the Second Circuit reached the same decision as the Ninth Circuit in its 2011 en banc ruling in Montz v. Pilgrim Films & Television Inc. , 606 F.3d 1153 (9th Cir. 2010), on the copyright preemption issue: 'I do think these decisions give writers and other people who are creating things some measure of protection or at least an avenue to bring a claim if they feel their ideas are being used without them being compensated.'

The types of communication Marek's client had with Universal Television are common in the television industry, he says. 'Those communications, because they're only ideas, are often not protected by the Copyright Act.'

Neither NBC Universal Media LLC, nor Susan Weiner of NBC Universal Media, who argued the defendant's case at the Second Circuit, responded to requests for comment. Robert Penchina, a New York partner at Levine Sullivan Koch & Schulz, who also represented Universal Television, referred questions to his client.

Allison Brehm, a Los Angeles partner at Drye & Warren, who isn't involved in the case, says the ruling is disappointing because there's no split with the Ninth Circuit on copyright preemption of idea theft claims arising from the breach of an implied-in-fact contract: 'The problem with these cases going forward is that more often than not the studios actually win based on a showing that the plaintiff's work and the defendant's work are not substantially similar.'

Brehm also says that 'without the defensive tactic of copyright preemption, there's no way to get rid of these cases at an early stage without going through time-consuming discovery.' It's not easy for plaintiffs to make the showing of substantial similarity between the works required by many courts, Brehm says. 'So there's still a tough road ahead as far as prevailing on those claims.' (Also see Schuyler Moore's commentary on implied contract claims and copyright preemption in this issue.)