En Banc 9th Cir. Holds State Law Claims Against NBC Are Not Preempted

Bloomberg BNA’s Patent Trademark & Copyright Journal® is the IP industry’s premier news service, offering customizable, objective, timely, and reliable news coverage and commentary from leading...

Federal copyright law does not preempt a state law contract claim by a scriptwriter who alleges that he disclosed an idea for a television program to a production company with the understanding that he would be compensated for use of the idea, the U.S. Court of Appeals for the Ninth Circuit, sitting en banc, ruled May 4 in a 7-4 decision (Montz v. Pilgrim Films & Television Inc., 9th Cir., No. 08-56954, 5/4/11).

Taking issue with the circuit panel's judgment upholding the district court's dismissal of the claim as preempted, the court applied a state-law doctrine derived from a 1950s case involving famed movie maker Billy Wilder.

The court also restored the plaintiff's claim for breach of confidence, which had been dismissed as preempted by the trial court.

Parapsychologist Alleges Sci-Fi Channel Stole Show Idea.

In the early 1980s, parapsychologist Larry Montz conceived of a reality TV program in which cameras would follow a team of people investigating purported paranormal activity. From 1996 to 2003, Montz and publicist-producer Daena Smoller sought to find a TV production company to produce a show based on the idea. During that time, Montz and Smoller pitched the idea in a series of meetings with NBC Universal Inc. and its subsidiary the Sci-Fi channel (now known as Syfy). NBC and Sci-Fi rejected the pitch, but in 2004, Sci-Fi began airing Ghost Hunters, a program with a similar concept.

In 2006, Montz sued NBC Universal Inc., as well as other parties involved in the production of Ghost Hunters--Pilgrim Films and Television Inc., Craig Piligian, Jason Conrad Haws, and Universal Television Networks. The complaint alleged unauthorized use of their copyrighted work, and they also brought claims under California state law for breach of implied contract and breach of confidence.

NBC moved for dismissal of the state law claims under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief is available under the law.

Judge Florence-Marie Cooper of the U.S. District Court for the Central District of California dismissed the two state law claims as preempted by the Copyright Act. The district court also dismissed the copyright claim and entered judgment in NBC's favor.

On appeal, a three-judge panel of the Ninth Circuit affirmed the lower court's refusal to permit Montz to amend his claim and held that absent an implied promise of payment, neither a breach of implied contract nor a breach of confidence over an offer of partnership in a television concept could withstand preemption under the Copyright Act's preemption provision at 17 U.S.C. § 301(a). Montz v. Pilgrim Films and Television Inc., 606 F.3d 1153, 94 USPQ2d 1885 (9th Cir. 2010) (80 PTCJ 204, 6/11/10).

The panel opinion said that the state law claims were equivalent to copyright claims and lacked any “extra element,” which is required to survive preemption.

The Ninth Circuit ordered an en banc rehearing of the appeal.

DesnyContract-Based Claims Recalled.

Judge Mary M. Schroeder reviewed the history of so-called Desny claims, first recognized by the California Supreme Court in Desny v. Wilder, 46 Cal. 2d 715, 299 P.2d 257, 110 USPQ 433 (1956), a case involving Samuel “Billy” Wilder, the famous director of films such as Sunset Boulevard (1950) and Witness for the Prosecution (1957). In that case, Victor Desny argued that he had pitched an idea to Wilder, who had used it as the basis for Wilder's first film flop, 1951's Ace in the Hole, starring Kirk Douglas.

The Desny recognized, in Schroeder's words, “an implied contractual right to compensation when a writer submits material to a producer with the understanding that the writer will be paid if the producer uses the concept.”

According to the court, this type of claim comes from a decades-long practice in the Hollywood film and television industries. The court summarized the purpose of the Desny claim:  

Writers … often submit scripts to producers, or set up meetings with them, in the hope of selling them scripts and concepts for movies. The practice has carried over into television. Since the writer is looking for someone to turn the written work into an entertainment production, writers often pitch scripts or concepts to producers with the understanding that the writer will be paid if the material is used. Since an idea cannot be copyrighted, a concept for a film or television show cannot be protected by a copyright. … But the concept can still be stolen if the studio violates an implied contract to pay the writer for using it. 

 

 

 

Thus, Desny recognized a claim for an implied contract under such circumstances, when both the writer making a pitch and the production company hearing it understood that the disclosure of the idea was conditioned on compensation should the idea bet used in a production.

NBC's Preemption Argument Fails.

NBC argued that such a state law claim is preempted under Section §301(a), which bars claims under state law that are (1) within the subject matter of copyright, and (2) equivalent to any of the Copyright Act's exclusive rights.

The en banc court disagreed. California common law has concluded that there is an extra element to Desny claims that makes them unequivalent to claims under federal copyright law, namely, the implication that the parties have entered into a personal agreement requiring that use of the idea in question will be compensated, the en banc court said. This, according to California decisions, distinguishes such claims from the type of claims sanctioned by the Copyright Act.

The court pointed to the holding in Grosso v. Miramax Film Corp., 383 F.3d 965, 72 USPQ2d 1543 (9th Cir. 2004), amended 400 F.3d 658 (9th Cir. 2005), cert. denied 546 U.S. 824 (2005) (70 PTCJ 627, 10/7/05), that such a Desny claim was not preempted by federal copyright law. Grosso agreed with the state law jurisprudence, which concluded that the point of a Desny claim is that it is substantially different from a copyright law claim.

The court also cited the ruling in court noted, Benay v. Warner Bros. Entertainment Inc., 607 F.3d 620, 95 USPQ2d 1165 (9th Cir. 2010) (80 PTCJ 228, 6/18/10), that a script that was not sufficiently similar to a motion picture to constitute copyright infringement might still be sufficiently similar to the movie to support a breach of contract claim under state law.

Ruling that the claim was not preempted, the court said:  

This approach not only accords with the Copyright Act's preemption guidelines, but it also recognizes the gap that would otherwise exist between state contract law and copyright law in the entertainment industry. The Desny innovation serves to give some protection for those who wish to find an outlet for creative concepts and ideas but with the understanding that they are not being given away for free. Without such legal protection, potentially valuable creative sources would be left with very little protection in a dog-eat-dog business. 

 

 

 

The court also held that the breach of confidence action was not preempted, on the basis that there was an extra element making it qualitatively different from a copyright claim, namely the existence of a duty of trust or confidential relationship between the parties.

Finally, the court rejected NBC's argument that Montz had failed to adequately plead the breach of implied contract and breach of confidence claims. The court thus reversed the district court and remanded the matter for further proceedings.

The court's opinion was joined by Chief Judge Alex Kozinski, and Judges Stephen Reinhardt, Sidney R. Thomas, Kim McLane Wardlaw, Richard A. Paez, and Milan D. Smith Jr.

Dissenting Opinions.

Judge Diarmuid F. O'Scannlain--joined by Judges Ronald M. Gould, Richard C. Tallman, and Charlos T. Bea--dissented, stating that the breach of implied contract claim was no different from a copyright infringement claim. The dissent said:  

Montz does not claim to have sold his rights as a copyright owner. To the contrary, he alleges that he retained those rights, and that [NBC] implicitly promised not to use or to disclose his ideas without his consent. As the district court properly held, an action to enforce a promise not to use or to disclose ideas embodied in copyrighted material without authorization asserts rights equivalent to those protected by the Copyright Act. 

 

 

 

The dissent focused on the idea that Montz was essentially asserting that his copyrighted work was used without his authorization, making his claim indistinguishable from a copyright infringement claim. The dissent said:  

[T]he majority does not appreciate the significance of Montz's refusal to authorize [NBC] to use the ideas embodied in his materials. This is not the same as authorizing [NBC] to use his ideas so long as it pays him. A copyright is not just the right to receive money upon the use of a work; it is “the right to control the work, including the decision to make the work available to or withhold it from the public.” 

 

 

 

According to the dissent, Montz, like any copyright infringement plaintiff, expected that his copyrighted work would not be used without authorization, and his complaint amounted to nothing more than unauthorized use of that work.

To the extent that the majority suggested that the Desny doctrine “provide[s] greater protection against the unauthorized use of copyrighted material than is afforded under the Copyright Act,” the dissent said that this is exactly the kind of state law that is preempted. It is within the purview of Congress to determine the scope of copyright protection and Section 301(a) prevents state law from stepping in and redrawing the line.

Similarly, the dissent also found the breach of confidence claim indistinguishable from a copyright claim.

The majority responded by stating that the dissent “appears to overlook [the] clear allegations that compensation was expected in accord with industry practice.” The dissent “misses the point when it tries to limit protection to those who seek payment, and exclude the plaintiffs who want a piece of the action,” the majority said.

Gould, one of the dissenters, added a separate brief statement of dissent criticizing the concept of implied contracts.

Montz was represented by Howard B. Miller of Girardi Keese, Los Angeles. NBC and the other defendants were represented by Gail Migdal Title of Katten Muchin Rosenman, Los Angeles.

By Anandashankar Mazumdar