Kabehie v. ZolandKabehie v. Zoland
Lead Opinion
Opinion
This case involves causes of action for breach of contract, fraud and interference with economic relations, arising out of contracts for the purchase of exclusive rights to music compositions. The trial court granted defendants’ motion for judgment on the pleadings on the ground these state law causes of action were preempted by federal copyright law. We conclude that such state law causes of action are preempted by federal copyright law only to the extent they assert rights equivalent to the exclusive rights protected by federal copyright law. State law causes of action are not preempted if they require elements that are qualitatively different from the elements of a federal copyright infringement action. This is the “extra element” test for federal copyright preemption. In the context of a breach of contract cause of action, the extra element is not supplied by the mere breach of a promise giving rise to rights equivalent to copyright protection; the extra element must be a contractual promise creating a right not existing under federal copyright law. We conclude some of the causes of action are preempted and others are not. We reverse with directions to grant the motion in part and deny it in part.
Facts and Procedural Background
Plaintiffs and appellants Seyed E. Kabehie and his production company Pars Video, Inc. (collectively Pars) duplicate, advertise, and sell music cassettes, videotapes, and compact discs. Defendant and respondent Farid Zoland is a music composer
Commencing August 1984, Pars entered into a number of contracts with Avang to purchase Avang’s exclusive rights, titles and interests in several albums of music composed, arranged and produced by Zoland. In addition, Pars purchased third parties’ interests in certain albums of music that had previously been owned by or in partnership with Avang. On December 23, 1989, Pars agreed to pay Avang $24,000 for the exclusive rights to four albums of music. The master recordings for the four albums were to be delivered to Pars by Avang. On January 17, 1995, Pars agreed to pay Avang $25,000 for the exclusive rights to three as yet unrecorded albums of music. The master recordings for the three new albums were to be delivered to Pars by Avang in March, May and July 1995, respectively.
Avang breached the agreements by producing, duplicating, advertising and selling the musical materials covered by the agreements and otherwise interfering with Pars’s property rights in the musical materials. Avang also breached the December 23, 1989 agreement by refusing to deliver the master recordings for three of the four albums to Pars. In August 1995, Avang breached the January 17, 1995 agreement to deliver the master recordings for three new albums of music by failing to deliver any of the master recordings.
On April 1, 1999, Pars filed a first amended complaint against Avang alleging breach of contract, rescission, common counts, accounting, interference with economic relations and fraud. On August 4, 2000, Avang filed a motion for judgment on the pleadings on the ground of preemption by federal copyright law. The trial court granted the motion with leave to amend. No amended complaint was filed. The trial court dismissed the complaint. Pars appealed.
Discussion
Standard of Review
A motion for judgment on the pleadings may be made on the same ground as for a general demurrer, that the pleading at issue fails to state facts sufficient to constitute a legally cognizable claim or defense. (Colberg; Inc. v. State of California ex rel. Dept. Pub. Wks. (1967)
Federal Copyright Law
The 1976 Copyright Act (the Act) extends federal copyright protection to “original works of authorship fixed in any tangible
“ ‘ “[W]hen acting within constitutional limits, Congress is empowered to pre-empt state law by so stating in express terms. [Citation.]” ’ ” (KNB Enterprises v. Matthews (2000)
In this case, the state claims are based on musical works within the subject matter of copyright. We are concerned with only the “right equivalent to copyright” condition. “[I]n essence, a right that is ‘equivalent to copyright’ is one that is infringed by the mere act of reproduction, performance, distribution, or display.” (1 Nimmer on Copyright (2002) § 1.01 [B][l], p. 1-12, ins. omitted (hereinafter Nimmer).) If the act of reproduction, performance, distribution or display will in itself infringe the state-created right, then such right is preempted. (Id. at p. 1-13.) Such a state right is preempted even if the state-created right is broader or narrower than the comparable federal right. (Id. at pp. 1-11 to 1-12.) “But if qualitatively other elements are required, instead of, or in addition to, the acts of reproduction, performance, distribution, or
Nimmer’s analysis of federal copyright preemption is referred to as the “extra element” test. (Balboa Ins. Co. v. Trans Global Equities, supra, 218 Cal.App.3d at p. 1340.) To avoid preemption, the extra element must be one that changes the nature of the action so that it is qualitatively different from a copyright infringement claim. (Ibid.) “In a proper case, the same conduct may support relief under multiple theories. Preemption law, however, requires analysis of each theory to determine whether it contains the necessary qualitatively different extra element distinguishing it from copyright protection.” (Id. at p. 1342, fn. omitted.)
The California Supreme Court has not addressed the issue of federal copyright preemption of state actions. California Courts of Appeal have generally adopted Nimmer’s extra element test for federal copyright preemption. (KNB Enterprises v. Matthews, supra,
Breach of Contract
We must determine whether federal copyright law preempts a state law breach of contract action concerning material within the subject matter of copyright. Using Nimmer’s extra element test, we focus on whether the breach of contract action includes an extra element that makes it qualitatively different from a copyright infringement action, and therefore, avoids preemption. One approach is that breach of contract actions are never preempted. This approach is based on the theory that a breach of contract includes a promise and the existence of the promise is the extra element avoiding preemption. (Taquino v. Teledyne Monarch Rubber (5th Cir. 1990)
We agree with the second approach: A fact-specific analysis of the particular promise alleged to have been breached and the particular right alleged to have been violated. This conclusion is based on the language of the statute, the legislative history of the Act, and the opinions of the majority of courts that have considered the issue.
1. Statutory Construction
In determining whether federal law preempts a state statute, “our sole task is to ascertain the intent of Congress.” (California Federal S. & L. Assn. v. Guerra (1987)
The Act’s express federal preemption was a major change from prior federal copyright law. Prior to 1976, the federal government did not occupy the field of copyright protection. Federal copyright law applied only to some classes of copyrightable materials. For example, the protection of federal copyright law was not available if the material was unregistered or unpublished. State copyright law filled the gaps in the federal copyright law. In 1976, Congress determined that a single federal copyright system was necessary. Congress found that it was harmful for creators of copyrightable materials to be required to meet different standards in the 50 states. In addition, certain aspects of federal copyright law were inconsistent with international copyright law, making international enforcement of copyright difficult. From these considerations, the Act was adopted. (H.R.Rep. No. 94-1476, 2d Sess., p. 129 (1976).)
The purpose of the Act was to create a uniform national copyright law protecting certain rights, such as reproduction, performance, distribution, and display. To the extent enforcement of those protected rights was at issue, the Act preempted all state law, including common law causes of action. However, Congress did not intend to occupy the entire field. Such a broad preemption would have required any action involving materials within the subject matter of copyright to be brought in federal court. Instead, Congress intended to preempt enforcement of the specific rights protected by the Act, but leave to the states the enforcement of other state law rights, such as breach of contract. (H.R.Rep. No. 94-1476, 2d Sess., p. 132 (1976).)
Thus, the language of the Act supports a conclusion that Congress intended to preempt most breach of contract actions, but not all. (Durgom v. Janowiak, supra,
2. Legislative History
In construing a statute, “ ‘[b]oth the legislative history of the statute and the wider historical circumstances of its enactment may be considered in ascertaining the legislative intent.’ ” (Kane v. Hurley, supra,
Before the bill was sent to the floor of the House of Representatives, several additional state-created rights were added to the list of examples immune from preemption, including misappropriation. (1 Nimmer, supra, § 1.01[B][l][f][i], p. 1-28.2.) During the debate of the bill on the floor of the House, concerns were raised about the list of nonpreempted state law causes of action in the Act. An amendment to the bill deleting the list from the Act was proposed in order to prevent the list from inadvertently nullifying federal preemption. The proponent of the amendment was concerned that an enumerated state law could be so broad as to render federal preemption meaningless. (Remarks of Rep. Seiberling (122 Cong. Rec. H.10910 (daily ed. Sept. 22, 1976)).) Ultimately, “this specific list of examples was deleted, and no list appears in the version of § 301 that was enacted as part of the Copyright Act in 1976.” (Architectronics, Inc. v. Control Systems, Inc., supra,
Thus, the legislative history supports the conclusion that most, but not all, breach of contract actions are preempted by the Act. Congress was apparently concerned that a list of specific nonpreempted causes of action could be overbroad and inadvertently exclude from preemption actions Congress intended to preempt. Congress instead chose to utilize an “equivalent to copyright” preemption test rather than a specific list of nonpreempted actions. In deleting the list, however, Congress did not intend to indicate that the actions previously included in the list were always preempted. (1 Nimmer, supra, § 1.10[B][l][f][i], p. 1-28.2; contra, Wolff v. Institute of Elec. & Electronics Eng. (S.D.N.Y. 1991)
As the legislative history suggests, Congress intended to preempt breach of contract causes of action that protect rights equivalent to any of the rights protected by federal copyright law. Therefore, although most breach of contract causes of action would not be preempted, Congress removed the blanket exemption for specific state causes of action, such as breach of contract, in order that any action equivalent to a copyright infringement action would be preempted.
3. Case Law
A survey of the relevant case law indicates that breach of contract causes of action are generally found not to be preempted; however, the various courts have used different analytical structures when considering preemption of breach of contract actions. (Lennon v. Seaman (S.D.N.Y. 1999)
A. Never Preempted
A few courts have concluded that breach of contract actions are never preempted by federal copyright law, because the promise to perform the contract automatically constitutes the extra element that makes the action qualitatively different from a copyright infringement action. (Taquino v. Teledyne Monarch Rubber, supra,
Nimmer too appears to state in his treatise that the promise inherent in a contract is the extra element that prevents preemption of a breach of contract cause of action. (1 Nimmer, supra, § 1.01[B][l][a], p. 1-15.) “[A] breach of contract action ... is not predicated upon a right that is ‘equivalent to any of the exclusive rights within the general scope of copyright. . . .’ This for the reason that a contract right may not be claimed unless there exists an element in addition to the mere acts of reproduction, performance, distribution or display. That additional element is a promise (express or implied) upon the part of the defendant.” (4 Nimmer, supra, § 16.04[C], p. 16-25, ins. omitted.) “Without a promise there is no contract, while a promise on the part of one who engages in unlicensed reproduction or distribution is not required in order to constitute him a copyright infringer.” (1 Nimmer, supra, at § 1.01[B][l][a], p. 1-15, fns. omitted.) Nimmer reiterates that, although the preemption language of the Act is arguably broad enough to refer to breach of contract causes of action, because contract rights are founded on promises, they are not equivalent to copyright. (Id. at p. 1-15, in. 68.1.)
However, despite the passages quoted above, Nimmer notes, “at times a breach of contract cause of action can serve as a subterfuge to control nothing other than the reproduction, adaptation, public distribution, etc. of works within the subject matter of copyright.” (1 Nimmer, supra, § 1.01[B][l][a], p. 1-19.) “[I]t thus appears that the rule safeguarding contract causes of action against copyright pre-emption is less than categorical. Although the vast majority of contract claims will presumably survive scrutiny . . . nonetheless pre-emption should continue to strike down claims that, though denominated ‘contract,’ nonetheless complain directly about the reproduction of expressive materials.” (Id. at p. 1-22, fhs. omitted.)
We agree with Nimmer’s proviso. The promise alleged to have been breached in a breach of contract action does not always make the contract action qualitatively different from a copyright infringement action. If the promise was simply to refrain from copying the material or infringing the rights protected by copyright, then the promisor has promised nothing more than that which was already required under federal copyright law. The promise not to infringe adds nothing to a breach of contract action for copyright infringement. A breach of contract action based on this type of promise must be preempted in order to prevent parties from circumventing federal copyright law and nullifying the preemption provided for in 17 United States Code section 301. Otherwise, the copyright owner or licensee would be required to determine the rights available under the different contract laws in the various states, defeating the purpose of establishing one federal copyright system. “The troubling aspect of [the analysis that the promise inherent in every contract is the extra element] is that conceivably
B. Fact-specific Analysis
The majority of courts that have considered the breach of contract/federal copyright preemption issue have used a fact-specific analysis. Many courts have concluded that the particular promise alleged to have been breached was not the equivalent of copyright and therefore the breach of contract action was not preempted. (National Car Rental v. Computer Associates, supra, 991 F.2d at pp. 429-430 [breach of promise not to use computer program to process third party’s data]; Acorn Structures, Inc. v. Swantz (4th Cir. 1988)
Similarly, other courts have concluded on the facts presented that the particular promise alleged to have been breached in the contract action is the equivalent of one or more of the rights protected under copyright and the promise cannot be the extra element distinguishing the contract action from a copyright infringement action. These courts have found preemption. (American Movie Classic v. Turner Entertainment Co. (S.D.N.Y. 1996)
We agree with the majority view. The mere breach of the promise inherent in every contract does not constitute the requisite extra element unless the promise creates a right qualitatively different from copyright. A right that is qualitatively different from copyright includes a right to payment, a right to royalties, or any other independent covenant. These qualitatively different rights constitute the requisite extra element. These breach of contract actions are not preempted by federal copyright law. If, however, the promise is equivalent to copyright, the breach of the promise is not the extra element making the action qualitatively different from copyright. In such a case, there is simply no consideration for the promise. The promisor has merely agreed to do that which the promisor is already obligated to do under federal copyright law.
Pars’s Contract Causes of Action
In this case, Pars alleged seven breach of contract causes of action based on the rights to seven different musical compilations. For each breach of contract cause of action to survive preemption, Pars was required to allege an element beyond unauthorized reproduction or distribution. Moreover, that element must have made the state claim qualitatively different from a copyright infringement claim.
In the first, second, third, fifth, and sixth breach of contract causes of action, Pars alleged that it purchased the exclusive rights to musical compilations and Avang breached the agreements by “producing, duplicating, selling, advertising and otherwise marketing and distributing such musical materials and copies thereof in various forms, by claiming ownership of and otherwise interfering with [Pars’s] property rights in such musical materials.” These are simply the reproduction and distribution rights protected by federal copyright law. There is no “extra element” alleged that makes the causes of action qualitatively different from a copyright infringement action. Therefore, these causes of action are preempted.
Pars’s fourth cause of action for breach of contract alleges that in addition to unauthorized reproduction and distribution
The seventh cause of action for breach of the January 17, 1995 agreement alleges that Avang failed to deliver three musical compilations as provided under the parties’ agreement. This cause of action does not allege the unauthorized reproduction of expressive materials. We conclude there is no preemption of the seventh cause of action. As a result, the eighth cause of action for rescission of the January 17, 1995 agreement is also not preempted.
Pars’s Fraud Cause of Action
In the fraud cause of action, Pars additionally alleged that prior to entering into each agreement, Avang made certain representations. It represented that it owned the rights, titles and interests in each album and each of the musical works contained in the album. It promised to transfer the rights to Pars, including the master recordings and the rights to all revenues derived from the sale of each album and the musical work contained therein. It promised not to duplicate or sell the music in any form. However, in fact, Avang did not own the rights, titles and interest to the albums; did not intend to transfer the rights to Pars exclusively; and intended to produce and sell the music in various forms and interfere with Pars’s business. Avang made the representations with the intent to defraud Pars.
On appeal, Pars contends the fraud cause of action is not preempted. We agree. “Under the extra element test, it is clear that federal copyright law does not preempt state causes of action alleging fraud .... Fraud involves ‘the extra element of misrepresentation.’ [Citation.]” (Gladstone v. Hillel (1988)
Pars’s Other Causes of Action
Pars’s ninth and tenth causes of action for money had and received and an accounting attempt to recover proceeds from Avang’s unauthorized reproduction and distribution of the material. Because these causes of action are not qualitatively different from a copyright infringement action, they are preempted. (See Motown Record Corp. v. George A. Hormel & Co. (C.D.Cal. 1987)
Pars’s causes of action for intentional interference with obligation of contract (11th), intentional interference with economic relations (12th), and negligent interference with prospective economic advantage (13th) are also preempted, because the interfering conduct alleged is simply the reproduction and distribution of the musical materials covered by the written agreements. (Motown Record Corp. v. George A. Hormel & Co., supra,
The judgment of dismissal and the order granting the motion for judgment on the pleadings are reversed. The trial court is directed to enter a new and different order granting the motion as to the first, second, third, fifth, sixth, ninth, 10th, 11th, 12th and 14th causes of action and denying the motion as to the fourth, seventh, eighth and 14th causes of action. Appellants Seyed E. Kabehie and Pars Video, Inc., are awarded their costs on appeal.
Armstrong, J., concurred.
Notes
A federal action between the parties, commenced May 2001, is pending.
Section 106 provides in pertinent part “the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: [If] (1) to reproduce the copyrighted work. . . ; [If] (2) to prepare derivative works based upon the copyrighted work; [10 (3) to distribute copies ... to the public by sale or other transfer of ownership, or by rental, lease, or lending; ffl] (4) [if applicable] to perform the copyrighted work publicly; [f] (5) [if applicable] to display the copyrighted work publicly; and [f| (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.” (17 U.S.C. § 106.)
Section 301(a) provides: “On and after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.” (17 U.S.C. § 301(a).)
A report of the House of Representatives explained that the examples were initially included “to illustrate rights and remedies that are different in nature from the rights comprised in a copyright and that may continue to be protected under State common law or statute. The evolving common law rights of ‘privacy,’ ‘publicity,’ and trade secrets, and the general laws of defamation and fraud, would remain unaffected as long as the causes of action contain elements, such as an invasion of personal rights or a breach of trust or confidentiality, that are different in kind from copyright infringement. Nothing in the bill derogates from the rights of the parties to contract with each other and to sue for breaches of contract; however, to the extent that the unfair competition concept known as ‘interference with contract relations’ is merely the equivalent of copyright protection, it would be preempted.” (H.R.Rep. No. 94-1476, 2d Sess., p. 132 (1976).)
The legislative history of the Act has been described as “confusing, even ambiguous” (Balboa Ins. Co. v. Trans Global Equities, supra,
Several authorities have ascribed a third classification to Wolff v. Institute of Elec. & Electronics Eng., supra,
One court has concluded contract rights are not equivalent to copyright, because contract rights are not exclusive rights that may be asserted against the world. (ProCD, Inc. v. Zeidenberg (7th Cir. 1996)
Because the contracts at issue in this case concerned copyrightable material, we do not analyze the proper application of the two-part preemption test in a breach of contract case based on material that comes within the scope of copyright, but is expressly not copyrightable under federal copyright law. (See Lipscher v. LRP Publications, Inc. (11th Cir. 2001)
Another line of cases exists concerning the breach of implied-in-fact contracts. Courts have similarly applied a fact-specific analysis to determine whether breach of implied-in-fact contract actions are preempted by federal copyright law and found that the breach of a promise to pay is not equivalent to copyright. (Wrench LLC v. Taco Bell Corp. (6th Cir 2001)
One case purports to rely on the holding of Architectronics, Inc. v. Control Systems, Inc., supra,
Concurrence Opinion
I concur.
A contract claim is qualitatively different from a copyright infringement claim and should not be preempted unless the contract claim is based upon the enforcement or determination of federal copyright law. Thus, I do not agree with the majority’s “fact-specific analysis” to determine the existence of preemption.
I concur in the majority’s determination in this case as to the noncontractrelated claims. I also concur in the majority’s conclusion with respect to the contract and contract-related claims because the pleadings of those causes of action are deficient. The allegations in the complaint show that in some instances plaintiffs did not have a contractual relationship with defendants in connection with the musical properties. It appears that in some instances the transferors just transferred whatever rights they had; plaintiffs did not plead explicitly that they had all rights in the properties. Plaintiffs did not plead that there was any promise or agreement, express or implied, that defendants would not use the properties. It is unclear if the copyrights were transferred or whether plaintiffs owned them. It is also unclear if the alleged breaches of contracts are based on defendants’ violations of copyrights or of other contractual obligations.
Thus, based on these deficiencies, plaintiffs have failed to state facts sufficient to constitute a claim. On this ground I agree with the affirmance of the judgment on the pleadings as to the purported contract and contract-related claims.
I do not believe that the “fact-specific analysis” applied by the majority should be employed to determine whether or not there is preemption. Many court decisions do not support the majority’s formulation. (See, e.g., Lipscher v. LRP Publications, Inc. (11th Cir. 2001)
Moreover, the legislative history of the federal copyright law, a history that is “puzzling and unreliable,” does not support the “fact-specific analysis.” (Architectronics, supra,
A widely used authority, Nimmer on Copyright, states that “[A] breach of contract action (whether such contract involves a mere idea or a fully developed literary work) is not predicated upon a right that is ‘equivalent to any of the exclusive rights within the general scope of copyright. . .’ This for the reason that a contract right may not be claimed unless there exists an element in addition to the mere acts of reproduction, performance, distribution or display. That additional element is a promise (express or implied) upon the part of the defendant.” (4 Nimmer on Copyright (2002) The Law of Ideas, § 16.04[C], p. 16-25, ins. omitted (Nimmer).)
Professor Paul Goldstein, in his highly regarded work on copyright, presents an even broader concept of the contract exemption from federal copyright preemption. He states, “Contract law is a good example of a state law that will be immune from preemption under the extra element test. Contract law may be employed to prohibit the unauthorized reproduction, distribution, performance or display of a work. But, in addition to these acts, contract law requires the plaintiff to prove the existence of a bargained-for exchange—something it need not prove in a cause of action for copyright infringement.” (3 Goldstein, Copyright (2002 supp.) § 15.2.1, p. 15:12.)
A number of courts have stated that contract claims are qualitatively distinct from copyright infringement and therefore are not preempted. (See, e.g., Video Pipeline, supra, 210 F.Supp.2d at pp. 566-567; Lipscher, supra, 266 F.3d at pp. 1318-1319; Expediters, supra,
Because of these variations, Nimmer has pointed out “that the rule safeguarding contract causes of action against copyright pre-emption is less than categorical.” He adds, however, that “the vast majority of contract claims will presumably survive scrutiny . . . ,”
In my view, a claim that the reproduction or use of expressive material breaches a contract should not be preempted on the ground that the breach also violates the copyright law unless resort to the substantive federal copyright law is required in order to ascertain the rights of the parties under the contract. This approach resolves the dilemma presented by the court in Selby v. New Line Cinema Corp. (C.D.Cal. 2000)
In National Car Rental, supra,
Nimmer goes on to state that “. . . nonetheless pre-emption should continue to strike down claims that, though denominated ‘contract,’ nonetheless complain directly about the reproduction of expressive materials.” (1 Nimmer, supra, § 1.01 [B][l][a] at p. 1-22, fii. omitted.) This statement appears to be inconsistent with other pronouncements in the work. (See 4 Nimmer, supra, § 16.04[C], p. 16-25, fn. omitted.)