Second Circuit Court of Appeals breathes new life into "theft-of-idea" claims; finds implied contract claim NOT preempted

Posted by Charles Colman

A long time ago, in a blog post far, far away, LAW OF FASHION wrote about the so-called "idea/expression dichotomy."  This core principle of copyright law is embodied in 17 U.S.C. § 102(b), which states, in part:

 

"In no case does copyright protection for an original work of authorship extend to any idea [or] concept..., regardless of the form in which it is described, explained, illustrated, or embodied in such work."

 

Thus, as LOF explained:

 

"[I]f someone writes a book about clever ways of 'sneaking' vegetables into children's food, and someone else decides to write a book with the same goal but different recipes to use on the unwitting and undernourished children, has the first writer's copyright been infringed?  Nope and nope (again, on appeal.)  At least, not when the 'total look and feel of the two works' -- that is, the expression of the underlying idea -- is readily distinguishable."

 

But LOF included a caveat about the existence of "a resilient state-law doctrine called 'theft of idea,' which is typically premised on a theory of implied contract -- namely, 'I'll share my idea with you under the mutual understanding that, if you like it, you'll pay me in order to use it.'"  LAW OF FASHION ® noted that courts had often been forced to decide whether such claims are "preempted" by the Copyright Act, and observed that the "leading federal circuit court precedent on point" had found no preemption of such claims.

 

That "leading precedent" has since been replaced with an en banc decision in a Ninth Circuit case called Montz v. Pilgrim Films, but the basic principle remained the same... at least, in the states covered by the Ninth Circuit's jurisdiction -- most importantly, California.

 

New York federal district courts, however, more or less unanimously stuck to the notion (Montz notwithstanding, as mere "persuasive precedent") that "theft of idea" claims, however characterized, were indeed preempted by the Copyright Act.  See, e.g., Clarida and Bernstein, "New York and California Courts Split on Preemption of Idea Claims," New York Law Journal (Jul. 15, 2011).

 

No longer.  While "persuasive precedent" (like decisions from other circuits' appellate courts) can be disregarded by district courts, "controlling precedent" is -- as the term suggests -- binding.  And there is now controlling precedent in the Second Circuit (whose jurisdiction includes New York) -- in the form of Hayden Christensen et al.'s lawsuit against USA Networks, captioned Forest Park Pictures v. Universal Television Network, 11-CV-2011 (2d Cir. Jun. 26, 2012) -- that more or less aligns New York federal courts with those in California.

 

In its June 26th decision in Forest Park Pictures, the Second Circuit states unequivocally that when a plaintiff "actually allege[s] the elements of an enforceable contract (whether express or implied-in-fact, including offer, acceptance, and consideration, in addition to adequately alleging the defendant's breach of the contract ... [such a claim] is qualitatively different from a suit to vindicate a right included in the Copyright Act and is not subject to preemption."

 

Just to be clear, this is a big deal, especially for people who make their living pitching ideas for TV shows and whatnot to networks.  (But yet another caveat: the decision could still be reversed or revised en banc, and could conceivably be appealed to the Supreme Court.  The first scenario is more likely, especially in light of SCOTUS's denial of certiorari in Montz v. Pilgrim Films last year.  It's difficult to imagine how the Second Circuit's agreement with the Ninth Circuit would change the high court's mind about whether this issue is deserving of its time and attention, since one of the main reasons the Supreme Court grants appeals -- though, admittedly, not the only reason -- is to resolve so-called "circuit splits.")

 

Interestingly, the Second Circuit panel in Forest Park Pictures tacks on a footnote to the portion quoted above that might make some copyleftist types giddy; specifically, the Court mentions in passing that it "need not here consider whether even a promise to pay may be insufficient to avoid preemption in circumstances where, through contracts of adhesion or similar instruments, a plaintiff uses such promises to create a de facto monopoly at odds with federal copyright policy...."  (Emphasis added.) Although the Second Circuit (unlike the Fourth and the Ninth Circuits) has not explicitly adopted the doctrine of "copyright misuse," [note that the Omega case discussed at the linked blog post is on appeal -- again] the language in the Court's footnote sounds awfully copyright misuse-y to me. At the very least, you can bet it will be quoted in just about every copyleftist-type brief filed in the Southern District of New York from now until... well, whenever the Second Circuit finally (wo)mans up and expressly recognizes the existence of the copyright misuse defense.  [Key an eye out for the academic article I'm cooking up on this subject....]

 

So what does all of this have to do with fashion, you ask?  A little... not much... a lot...?  Only time will tell.  But some developments in intellectual property are so important that they demand coverage on this blog, despite a tenuous (or even non-existent) connection with fashion.  After all, (wo)man cannot live on Louis Vuitton lawsuits alone -- though LV is certainly giving it the old college try.

 

[This post is for entertainment and informational purposes only, and does not constitute legal advice or create an attorney-client relationship among any individuals or entities. Any views expressed in this post or at the linked web pages are those of the relevant writer(s) on a particular date, and should not necessarily be attributed to this writer, his law firm, its agents, or its clients. Neither LAW OF FASHION nor any person or entity associated with it can or will warrant the thoroughness or accuracy of the content here or at the linked sites.]