Lead Opinion
Opinion by Judge SCHROEDER; Dissent by Judge O’SCANNLAIN; Dissent by Judge GOULD.
OPINION
In Hollywood, writers commonly submit copyrighted scripts to producers with the understanding that if the script is used, the producer must compensate the writer for the use of the copyrighted material. But what happens when the producer uses the idea or concept embodied in the script, but doesn’t pay? The Supreme Court of California, in 1956, answered this question by recognizing 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. Desny v. Wilder,
A so-called “Desny claim” has remained viable under California law for over fifty years. See Gunther-Wahl Productions, Inc. v. Mattel, Inc.,
We recently followed Grosso in Benay v. Warner Bros. Entm’t, Inc.,
We again hold that copyright law does not preempt a contract claim where plaintiff alleges a bilateral expectation that he would be compensated for use of the idea, the essential element of a Desny claim that separates it from preempted claims for the use of copyrighted material. We see no meaningful difference between the conditioning of use on payment in Grosso and conditioning use in this case on the granting of a partnership interest in the proceeds of the production. Montz, as did the plaintiffs in Desny and Grosso, has alleged he revealed his concept to defendants reasonably expecting to be compensated, if his concept was used. We conclude that the district court’s judgment dismissing the contractual claim as preempted must be reversed.
Plaintiffs’ complaint also alleged a claim under California law for breach of confidence. The district court dismissed it as preempted, as well, and the panel affirmed. We also reverse the judgment dismissing that claim and remand both for further proceedings.
I. Factual Background
In 1981, Plaintiff Larry Montz, a parapsychologist, conceived of an idea for a television show that would follow a team of paranormal investigators conducting field investigations. As envisioned, each episode would follow the team to different real-world locations, where they would use magnetometers, infrared cameras, and other devices to investigate reports of paranormal activity. According to the complaint, from 1996 to 2003, Montz and Plaintiff Daena Smoller, a publicist and a producer, pitched Montz’s idea to television studios, producers, and their representatives, including representatives of NBC and the Sci-Fi channel. A number of meetings and discussions took place, and Montz and Smoller presented screenplays, videos, and other materials relating to their proposed show. Ultimately, the studios indicated that they were not interested.
Three years later, in November 2006, Montz and Smoller filed a complaint against Pilgrim Films & Television, Inc., NBC Universal Inc., Craig Piligian, Jason Conrad Hawes, and ten unknown defendants in federal district court, alleging copyright infringement, breach of implied contract, breach of confidence, and several other causes of action. According to the complaint, after the meetings with Montz and Smoller, NBC partnered with Piligian and Pilgrim to produce a series on the SciFi Channel based on the plaintiffs’ materials. The show, called Ghost Hunters, starred Hawes as the leader of a team of investigators who travel across the country to study paranormal activity.
Plaintiffs’ complaint specifically alleged that defendants breached an implied-in-fact contract. The complaint described the terms of the agreement:
Plaintiffs communicated their ideas and creative concepts for the “Ghost Hunt*978 ers” Concept to the Defendants, pursuant to the standard custom and practice in the industry with respect to the exchange of creative ideas, under the following terms:
a. that Plaintiffs’ disclosure of their ideas and concepts was strictly confidential;
b. that the Defendants would not disclose, divulge or exploit the Plaintiffs’ ideas and concepts without compensation and without obtaining the Plaintiffs’ consent; and
c. that, by accepting the Plaintiffs’ disclosure of its concept, the Defendants accepted and agreed to abide by the foregoing terms.
Compl. at ¶ 46. The complaint further alleged that plaintiffs presented the concept on the express condition that they made the presentation as an offer to partner with the defendants and that plaintiffs justifiably expected to receive a share of the profits derived from any use of the idea:
The Plaintiffs presented their ideas for the “Ghost Hunter” Concept to the Defendants’ [sic] in confidence, pursuant to the custom and practice of the entertainment industry, for the express purpose of offering to partner with the Defendants in the production, broadcast and distribution of the Concept. Accordingly, the Plaintiffs justifiably expected to receive a share of any profits and credit that might be derived from the exploitation of its ideas and concepts for the Concept.
Id. at ¶ 47. The dissent appears to overlook these clear allegations that compensation was expected in accord with industry practice.
Plaintiffs also alleged that defendants breached their confidential relationship “by taking Plaintiffs’ novel ideas and concepts, exploiting those ideas and concepts, and profiting therefrom to the Plaintiffs’ exclusion....” Id. at ¶ 59. The complaint therefore alleged a claim under California law of breach of confidence.
II. Procedural Background
Defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. The district court granted in part and denied in part the defendants’ motion. The court concluded that the complaint alleged facts sufficient to state a federal copyright claim, but that federal copyright law preempted the plaintiffs’ state-law claims. The court dismissed the state-law claims with prejudice and without leave to amend.
Plaintiffs amended their copyright claim and added Universal Television Networks as a defendant. Subsequently, the parties stipulated to the voluntary dismissal of the amended copyright claim with prejudice. With no remaining claims to be adjudicated, the district court entered final judgment in favor of the defendants. The plaintiffs timely appealed the dismissal of their breach of implied contract and breach of confidence claims.
On June 3, 2010, the three-judge panel affirmed, holding both claims preempted by federal copyright law. Montz v. Pilgrim Films & Television, Inc.,
III. California Implied-in-Fact Contract Law
Writers in the Hollywood film industry 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
In Desny, the California Supreme Court recognized that a writer and producer form an implied contract under circumstances where both understand that the writer is disclosing his idea on the condition that he will be compensated if it is used.
IV. Copyright Preemption
The Copyright Act of 1976 expressly preempts state claims where the plaintiffs work “comefs] within the subject matter of copyright” and the state law grants “legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright.” 17 U.S.C. § 301(a); see Grosso,
For preemption purposes, ideas and concepts that are fixed in a tangible medium fall within the scope of copyright. See Nimmer § 19D.03[A][3]. We agree with Nimmer that state-law protection for fixed ideas falls within the subject matter of copyright and thus satisfies the first prong of the statutory preemption test, despite the exclusion of fixed ideas from the scope of actual federal copyright pro
Accordingly, the major focus of litigation has been on the second prong of the preemption test: whether the asserted state right is equivalent to any of the exclusive rights within the general scope of copyright. See Grosso,
The California Courts of Appeal have uniformly concluded that Desny claims are not preempted because they flow from agreements and understandings different from the monopoly protection of copyright law. See Rokos v. Peck,
In recent years, litigation has, not surprisingly, moved to the federal courts where defendants have hoped for greater success in pressing for copyright preemption. See Glen L. Kulik, Copyright Preemption: Is This the End of Desny v. Wilder?, 21 Loy. L.A. Ent. L.Rev. 1, 14 (2000) (“[B]ecause idea submission cases are now regularly removed to federal court, it is unlikely state courts will address the issue.” (footnote omitted)). Defendants were initially quite successful in federal court. See, e.g., Selby v. New Line Cinema Corp.,
In a later case, however, a district court held that an implied-in-fact contract claim survived Copyright Act preemption because it was substantively different from a copyright claim: “[T]he whole purpose of the contract was to protect Plaintiffs rights to his ideas beyond those already
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. See Woody Allen, CRIMES AND MISDEMEANORS (Orion Pictures 1989) (“Show business is worse than dog-eat-dog. It’s dog-doesn’t-return-other-dog’s-phoneealls.”). Thus we were correct when we observed that “[c]ontract law, whether through express or implied-in-fact contracts, is the most significant remaining state-law protection for literary or artistic ideas.” Benay,
Plaintiffs’ claim for breach of confidence also survives copyright preemption. The claim protects the duty of trust or confidential relationship between the parties, an extra element that makes it qualitatively different from a copyright claim. See Computer Assocs. Int’l, Inc. v. Altai, Inc.,
V. Sufficiency of the Complaint as to the Breach of Implied Contract and Breach of Confidence Claims
Defendants argue that the complaint fails to allege sufficient facts to make out a claim for breach of implied contract. They assert that it lacks any allegation (1) that Montz and Smoller disclosed their idea for sale, (2) that they expected to be reasonably compensated for the idea, and (3) that defendants knew the conditions on which it was offered. Yet the complaint makes all three allegations and closely tracks the complaint we found sufficient in Grosso.
Defendants similarly argue that Montz and Smoller failed to allege sufficient facts to make out their claim for breach of confidence. They argue that there is no allegation (1) that plaintiffs disclosed “confidential and novel information,” and (2) that defendants knew it was supposed to be kept confidential. See Entm’t Research Grp., Inc. v. Genesis Creative Grp., Inc.,
VI. Conclusion
The judgment of the district court is REVERSED and the matter REMANDED for further proceedings on plaintiffs’ remaining claims.
Dissenting Opinion
dissenting:
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 Pilgrim implicitly prom
A state law claim is preempted if the rights asserted under state law “come within the subject matter of copyright,” as described in 17 U.S.C. §§ 102 and 103, and are “equivalent” to the exclusive rights of copyright owners specified in 17 U.S.C. § 106. 17 U.S.C. § 301(a); see also Laws v. Sony Music Entm’t, Inc.,
A
Montz’s breach-of-implied-contract claim consists of the following allegations: (1) “[t]he Plaintiffs presented their ideas for the ‘Ghost Hunter’ Concept to the Defendants[ ] in confidence, pursuant to the custom and practice of the entertainment industry, for the express purpose of offering to partner with the Defendants in the production, broadcast and distribution of the Concept,” (2) “by accepting the Plaintiffs’ disclosure of its concept,” the defendants agreed that they “would not disclose, divulge or exploit the Plaintiffs’ ideas and concepts without compensation and without obtaining the Plaintiffs’ consent,” (3) “the Plaintiffs justifiably expected to receive a share of any profits and credit that might be derived from the exploitation of [their] ideas and concepts,” and (4) “by producing and broadcasting the Concept,” “[t]he Defendants breached their implied agreement not to disclose, divulge or exploit the Plaintiffs’ ideas and concepts without the express consent of the Plaintiffs, and to share with the Plaintiffs ... the profits and credit for their idea and concepts.” (emphasis added).
To distinguish itself from a copyright claim, a state law claim “must protect rights which are qualitatively different from the copyright rights.” Laws,
Under section 106, a copyright owner has the exclusive rights to reproduce, to distribute, and to display the copyrighted work, as well as to prepare derivative works based on the copyrighted work. 17 U.S.C. § 106. Section 106 also provides a copyright owner with the exclusive rights
B
With respect, I suggest the majority does not appreciate the significance of Montz’s refusal to authorize Pilgrim to use the ideas embodied in his materials.
To be sure, many copyright owners choose to sell the right to control their work. But a copyright holder may turn down money — or accept less money — in exchange for retaining more control over, and more involvement with, his work. For instance, Matt Damon and Ben Affleck famously refused to sell the rights to Good Will Hunting until they were promised starring roles in the film. See Bernard Weinraub, The Script is Modest, But Not the Buzz, N.Y. Times, Nov. 20, 1997, at El. Such is the case here: Montz did not offer to sell his idea to Pilgrim; he offered “to partner” with Pilgrim in the show’s “production and distribution.” And when that offer was refused, Montz received an implied promise that Pilgrim would not use the ideas embodied in his materials without his consent.
Thus, Montz does not claim to have sold the rights to the ideas embodied in his materials, as did the plaintiff in Grosso v. Miramax Film Corp.,
“[M]irror[ing] the requirements of Desny,” the complaint in Grosso alleged the plaintiff had submitted a movie script to the defendants “with the understanding and expectation ... that [he] would be reasonably compensated for its use by Defendants.” Id. (internal quotation marks omitted). We concluded that the defendants’ “implied promise to pay” for use of the idea embodied in the script constituted “an ‘extra element’ for preemption purposes.” Id. at 968. The subject of the implied contract, then, was the sale of the plaintiffs idea. The plaintiff asserted that he had “disclosed [his] work to the offeree for sale,” and that, by using the ideas embodied in his work, the offeree had implicitly agreed to pay for it. Id. at 967.
By contrast, Montz alleges that he retained his rights as a copyright owner. Montz “presented [his] ideas for the ‘Ghost Hunter’ Concept to the Defendants[ ] ... for the express purpose of offering to partner with the Defendants in the production, broadcast and distribution of the Concept.” Pilgrim rejected the offer but allegedly promised implicitly not to use Montz’s ideas “without [his] consent.” Therefore, according to the complaint, Pilgrim did not promise to pay for the use of Montz’s ideas. Rather, it promised (implicitly) to respect Montz’s rights to the production, distribution, and broadcast of his work. Put differently, it promised to respect the rights afforded to Montz by the Copyright Act.
The majority asserts that there is “no meaningful difference between the conditioning of use on payment in Grosso and conditioning use in this case on the granting of a partnership interest in the proceeds of the production.” Maj. Op. at 977. This was never the issue. The Montz panel did not rely on the difference between seeking compensation in the form of a lump sum versus a percentage of profits. Rather, it relied on the difference between authorizing the use of one’s work in exchange for money, and not authorizing the use of one’s work at all. See Montz v. Pilgrim Films & Television, Inc.,
The majority insists that by limiting implied contract protection to those who authorize the use of their work in exchange for consideration, “the dissent misses the point.” Maj. Op. at 981. But it is not clear just what point I am missing. If the point is to fill “the gap that would otherwise exist between state contract law and copyright law,” id. at 981, then I suggest that a focus on authorization is entirely appropriate. Where a copyright owner authorizes the use of his work, but does not receive the consideration he was promised, he has a contract claim; where a copyright owner does not authorize the use of his work, but, nonetheless, someone uses it to produce a substantially similar work, he has a copyright claim.
If, however, “the point” is to provide greater protection against the unauthorized use of copyrighted material than is afforded under the Copyright Act, then it is a point I am glad to miss, as it is inconsistent with the objectives of Congress. The Copyright Act strikes a balance between the property rights of copyright owners, and the expressive rights of the rest of the creative community, by permitting copyright suits only where “there is substantial similarity between the protected elements” of the two works. Benay v. Warner Bros. Entm’t, Inc.,
II
Montz’s breach-of-confidence claim also asserts rights equivalent to the rights protected by the Copyright Act. The complaint states that “the Plaintiffs’ disclosure of their ideas and concepts [was] strictly confidential,” and that “[b]y taking the Plaintiffs’ novel ideas and concepts, exploiting those ideas and concepts, and profiting therefrom to the Plaintiffs’ exclusion, the Defendants breached their confidential relationship with the Plaintiffs.” Such claim simply echoes the allegations of the breach-of-implied-contract claim. Indeed, the alleged breach-of-confidence stems from the alleged violation of the very rights contained in section 106' — the exclusive rights of copyright owners to use and to authorize use of their work.
The majority relies on two elements to distinguish the rights asserted in Montz’s breach-of-confidence claim from the rights protected by the Copyright Act. First, the breach-of-confidence claim requires Montz to show that Pilgrim disclosed confidential material (i.e., the ideas embodied in
Because Montz’s breach-of-confidence claim is not qualitatively different from a copyright claim, it is preempted.
Ill
Montz does not allege that he sold the ideas embodied in his Ghost Hunters materials to Pilgrim and that Pilgrim simply failed to make good on its promise to pay. Instead, he alleges that Pilgrim used the ideas embodied in Montz’s copyrighted material without his permission. Because the Copyright Act protects such equivalent rights, I respectfully dissent.
Notes
. Although the allegations specific to Montz’s breach-of-implied-contract claim refer only to “ideas” and "concepts” — which in the abstract are not subject to copyright protection, see 17 U.S.C. § 102(b) — it is clear from the complaint that Montz presented his "ideas” and "concepts” through television screenplay treatments, video, and other ancillary preproduction materials. Such materials qualify for copyright protection under section 102(a) as "original works of authorship fixed in [a] tangible medium of expression.” Accordingly, the district court and the majority are correct that the rights asserted under Montz's breach-of-implied-contract claim "come within the subject matter of copyright” as described in section 102.
. Indeed, the majority apparently reads Montz's complaint as alleging that he authorized Pilgrim to use his idea so long as it paid him a share of the profits. See Maj. op. at 977 ("Montz ... has alleged he revealed his concept to defendants reasonably expecting to be compensated, if his concept was used.”); id. (stating that use of Montz's idea was conditioned “on the granting of a partnership interest in the proceeds of the production”); cf. id., at 977. (implying that Montz's idea was submitted "with the understanding that if the script is used, the producer must compensate” him). These statements overlook the fact that Montz did not just want money; he wanted to be involved in the show’s production. And he presumably was not going to authorize Pilgrim to use his idea unless this condition was met.
. Montz argues that, at the very least, this Court should remand with instructions to
Dissenting Opinion
dissenting:
I join Judge O’Scannlain’s dissent. I emphasize my concern with the improvident practical results that the majority decision will likely engender. The “extra element” argument is impractical for an “implied” claim like this. Although an express contract claim can proceed under state law, courts should be cautious about implying a contract claim in circumstances where the claim functionally looks like a copyright claim. See Daboub v. Gibbons,
Under such a legal regime, film production and network companies face the chaotic prospect of having to meet conflicting federal and state standards on essentially the same question, a result the Copyright Act aimed to avoid. Studio and network ventures need stable law that does not unsettle expectations. The majority’s decision, however, will lead to uncertainty by making state law — with its ambiguity, variability, and volatility — available to litigants who bring nebulous state law claims that in substance assert rights in the nature of copyright. Hence, I respectfully dissent.