Contracts Involving Uncopyrightable Ideas

Copyright does not protect "ideas". It also doesn't protect facts. But if parties agree by contract that one is going to pay another for an idea, that contract may be enforceable. In my mind, prior to doing any research, the lead case on contracts involving ideas is Buchwald v. Paramount Pictures, 1990 WL 357611 (Cal. Superior), 13 U.S.P.Q.2d 1497, 17 Media L. Rep 1257 (Cal. Super. L.A. Co. 1990)(not reported in Cal. Rptr.). When I say "in my mind" - the story of columnist Art Buchwald submitting a 2.5 page treatment to Paramount Pictures, Paramount agreeing to pay him for the idea, and then reneging by making a film called "Coming to America" starring Eddie Murphy based on that idea without paying Buchwald is so memorable.

But when I conducted an "ALLFEDS" search on Westlaw, I found only one case citing the Buchwald case. Beal v. Paramount Pictures Corp., 20 F.3d 454 (11th Cir. 1994). I didn't check the state database. But there were 68 secondary sources citing Buchwald. So it's a case in which the peanut gallery of legal commentators have great interest, but in which the courts have no interest. Over the last month I read Fatal Subtraction: How Hollywood Really Does Business (The Inside Story of Buchwald v. Paramount) by Pierce O'Donnell and Dennis McDougal (Doubleday 1992). It's a pretty good story for a lawyer to read in terms of case strategy, not giving up, and taking risks on some long shot legal theories where a client has really been wronged. O'Donnell had Buchwald's contract involving the story idea upheld and enforced, then turned around and invalidated its "industry standard" net profits provisions as unconscionable (there is a Buchwald II decision).

Arthur Miller, in Common Law Protection for Products of the Mind: An "Idea" Whose Time Has Come, 119 Harv. L. Rev. 703 (January 2006) argues that courts generally require "concreteness" and "novelty" to enforce agreements involving ideas. He provides a good survey of the case law in the area and argues for more federal protection. He claims a gestation period for the article of 56 years - since he was a 2L.

In Cavagnuolo v. Rudin, 1996 WL 79861 (S.D.N.Y.) the court observed that California has no novelty requirement for contracts involving ideas (citing Desny v. Wilder, 299 P.2d 257 (Cal. 1956) nor does New York (citing Apfel v. Prudential-Bach Securities Inc., 81 N.Y.2d 470 (1993).

Where owners of a database used a "shrink-wrap" license to bar licensees from using the database for commercial mailings, the provision was upheld. ProCD Incorporated v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996). Michigan law doesn't require novelty in contract to submit ideas. Wrench LLC v. Taco Bell, 256 F.3d 446 (6th Cir. 2001). In a case criticized by Miller, at least one court let a contract block reverse-engineering because it was forbidden by the license agreement. Bowers v. Baystate Technologies, Inc., 320 F.3d 1317 (Fed. Cir. 2003)(permitting a party to "contract away" a fair use defense of reverse engineering).

California law will create an implied in fact contract in idea submission cases. Levin v. The Gap, 1998 WL 915897 (S.D.N.Y.). But California will require evidence of industry custom to pay for ideas before doing so. Dallier v. Levi Straus & Co., 86 F.3d 1149 (4th Cir. 1996)(unpublished). But for a court to let a plaintiff pursue an implied-in-fact contract, it should be set forth in the complaint. Willis v. Home Box Office, 57 Fed. Appx. 902 (2d Cir. 2003)(unpublished summary order).

Courts struggle with the problem of preemption: the extent to which Copyright law supplants state law in the area of protecting ideas. The law of trade secrets is a related area -protecting "ideas" unprotectable by copyright by keeping them secret or binding a select few through confidentiality agreements.

Copyright Injunctions - Fruit of the Infringing Tree Doctrine (Ch 11)

Chapter 5 of 17 U.S.C. provides for remedies for victims of copyright infringement. Section 502 permits injunctions:

§ 502. Remedies for infringement: Injunctions
(a) Any court having jurisdiction of a civil action arising under this title may, subject to the provisions of section 1498 of title 28, grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.
(b) Any such injunction may be served anywhere in the United States on the person enjoined; it shall be operative throughout the United States and shall be enforceable, by proceedings in contempt or otherwise, by any United States court having jurisdiction of that person. The clerk of the court granting the injunction shall, when requested by any other court in which enforcement of the injunction is sought, transmit promptly to the other court a certified copy of all the papers in the case on file in such clerk’s office.

Although the statute appears to give courts wide discretion in determining what terms of an injunction are reasonable, courts have narrowly tailored the available relief. The majority view is set forth in Kepner-Tregoe, Inc. v. Leadership Software, 12 F.3d 527 (5th Cir. 1994). That case was a "reverse-engineering case" in which a substantially similar infringing copy of licensed materials was created by a licensee. Then the licensee "surgically removed" infringing portions. The district court found, and the Fifth Circuit affirmed, that this "child of the infringement" could be enjoined from distribution because it still retained substantially similar selection and arrangement. But the Circuit court unequivocally struck down any attempts of the district court to enjoin future distribution of versions that might be non-infringing. A number of courts have struck down attempts to punish the infringer's "head start" gained by making infringing intermediate copies. See Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772 (5th Cir. 1999); Sony Computer Entertainment, Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 2000). The Fifth Circuit made clear in Kepner-Tregoe that even if a licensee breached a license agreement by engineering its own competing software, that portion of the license agreement forbidding such activity might be void because such contracts are preempted by the Copyright Act. 12 F.3d at 538 citing Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 268-70 (5th Cir. 1988). Overreaching with your copyright, such as using it to protect uncopyrightable devices, is "copyright misuse" and is grounds for striking down an injunction. See, e.g., Alcatel, supra.

A plaintiff may have success in getting courts to enjoin non-copyrightable benefits or "fruits" gained from its infringing actions. See, e.g., Epic Metals Corp. v. Souliere, 181 F.3d 1280 (11th Cir. 1999). However, the majority of cases reject this approach, particularly in the area of reverse engineering where an infringing copy was made to develop a competing product or compatible device. See, e.g., Kepner-Tregoe.

Practice Tip for Lawyers: In seeking an injunction, there is a temptation to ask for the moon. A narrowly-tailored request for relief that focuses on actual infringing activities and copies stands a greater likelihood of being granted. Overreaching, even where supported by contractual language may backfire and subject you to claims of copyright misuse, particularly where the contract contravenes the Copyright Act.

Copyright for Labor Lawyers: The Work for Hire Doctrine (Ch 7)

Does an employee, independent contractor, or corporate officer own original copyrightable materials authored by that person in conjunction with the relationship to the employer? We look to 17 U.S.C. Section 101 (the Copyright Act's definitional section) as a starting point:

A “work made for hire” is—
(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities. * * *

So, the employer owns the work if it is made by an employee "within the scope of employment" or if there is a written agreement (for certain works). To determine whether an individual was an employee, we look to the federal common law of agency, which was spelled out in a copyright case involving a sculpture called Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989). The factors (the "Reid factors") considered include:
- the hiring party's right to control the manner and means by which the product is accomplished;
- the skill required;
-the source of the instrumentalities and tools;
- the location of the work;
- the duration of the relationship between the parties;
- whether the hiring party has the right to assign additional projects to the hired party;
- the extent of the hired party's discussion over when and how long to work;
- the method of payment;
- the hired party's role in hiring and paying assistants;
- whether the work is part of the regular business of the hiring party;
- the provision of employee benefits;
- tax treatment of the hired party

The Second Circuit in Eisenberg v. Advance Relocation & Storage, Inc., 237 F.3d 111 (2000) applied the Reid factors (the federal common law of agency) to determine whether a hired person is an employee or independent contractor for purposes of applying the Civil Rights Act of 1964, 42 U.S.C. Section 200e ("Title VII"). In Eisenberg, the court noted that the parties could agree whether or not an employee would have intellectual rights to copyrightable work product, but that Title VII antidiscrimination protections could not be bargained away.

The work-for-hire provisions of the Copyright Act have been applied in a wide variety of employment contexts:

- rejecting a claim that the author of a screenplay was an employee of a purported co-author/co-producer, Price v. Fox Entertainment Group, Inc., 2007 WL 241390 (S.D.N.Y)(SAS)

- rejecting a claim that a woman who walked into a recording studio and sang a countermelody for Jay-Z created a "work-for-hire" (applying the 5 "strongest" of the 13 Reid factors) Ulloa v. Universal Music & Video Dist. Corp., 303 F. Supp.2d 409 (S.D.N.Y. 2004)

- rejecting a teacher's claim that his Fourth Amendment rights to be free from illegal seizures was violated by confiscation of teaching materials created while he was a teacher and finding no copyright interest, Shaul v. Cherry Valley-Springfield Central School Dist., 363 F.3d 177 (2d Cir. 2004

- in a case involving the executor of her will, analyzing choreographer Martha Graham's relationship to her eponymous foundation at varying points in her career and making different findings as to whether works were "works-for-hire" depending on how she worked and was paid during her lifetime, Martha Graham School and Dance Foundation, Inc. v. Martha Graham Center of Contemporary Dance, Inc., 380 F.3d 624 (2d Cir. 2004)

- permitting copyright infringement claims against former employee who took, modified and sold on behalf of competitor a copy of software, Jamison Business Systems, Inc. v. Unique Software Support Corp., 2005 WL 1262095 (E.D.N.Y.)

- denying summary judgment motion made against police union employee who wrote songs such as "Rudy the Fox" and "Badillo Beat" for childhood abduction awareness programs. Brower v. Martin, 446, F. Supp.2d 232 (S.D.N.Y. 2006)

As former employers increasingly seek to use the Copyright Act's damages and attorneys fees for theft of corporate materials, labor and employment lawyers will be confronted with these issues.

First Sale Doctrine as A Defense to Copyright Infringement (Ch 12)

When you purchase a book, you can read it, then resell it to someone else. There's quite a traffic in used books. Other copies of works subject to copyright may be resold, such as a CD containing a sound recording.

In Brilliance Audio, Inc. v. Haights Cross Communications, Inc. ---F.3d ---, 2007 WL 188103 (6th Cir. 2007) a case discussed on the Patry Copyright Blog, the Sixth Circuit analyzed the first sale doctrine in both the trademark and the copyright context. Brilliance produced audiobooks. Haights Cross purchased a copy of Brilliance's sound recording. It then repackaged the copy, and offered the copy for rental.

Generally speaking, one may rent a copyrighted work that one has purchased. The two exceptions, elaborated at 17 U.S.C.A. Section 119 involve sound recordings and software. In other words, if you buy a musical recording or a copy of Microsoft Office, you can't rent those copies out.

The Sixth Circuit found that on the trademark claims, the plaintiff's actions fell within two exceptions to the trademark first sale doctrine: (1) the plaintiff alleged a repackaging without adequate notice to the consumer and (2) the repackaged materials using the plaintiff's trademark were materially different from those produced and labelled by the plaintiff.

The Sixth Circuit also found that Section 119's rental exception to the first sale doctrine did not apply to sound recordings based on literary works, but only sound recordings based on musical works. The lone dissenting judge pointed the majority to the plain language of Section 119 which appears to ban rentals of all sound recordings.

The Sixth Circuit noted that this was a case of first impression. It will be interesting to see whether a rental market will suddenly spring up around the works of Bill Cosby, George Carlin, Richard Pryor, Robin Williams and other works of comic genius that do not incorporate music.

Procedural Note: The District Court dismissed plaintiff's claims on a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure "because the defense of first sale appeared on the face of the complaint." The Sixth Circuit construed the complaint broadly and in the light most favorable to the plaintiff and reversed. The Sixth Circuit did not criticize the maneuver of moving to dismiss under Rule 12(b)(6) based on a defense appearing on the face of the complaint.

Practice Tip: Where your client has legally purchased copies of works that were manufactured with the authority of the copyright holder, you may assert the first sale doctrine. If factual allegations appearing on the face of the complaint support assertion of the first sale doctrine, consider a motion to dismiss. NB. Be careful about resales in the U.S. of products manufactured abroad. The first sale doctrine may not in certain circumstances extinguish all distribution rights of the copyright holder in these products.