Trade Secret Misappropriation Defeats Maze of Copyright Preemption Claims

GlobeRanger is a software company that specializes in radio frequency identification (RFID) technology.  GlobeRanger RFID solutions focus on inventory management, allowing users to filter, process and store inventory information in real time.  Pursuant to a contract through the Department of Defense, GlobeRanger installed RFID technology solutions at three Navy bases.  The Navy then decided to consolidate into an enterprise-wide RFID solution to be run from one location.  The Navy awarded the contract to Software AG and ordered GlobeRanger to stop its work.  GlobeRanger sued Software AG for misappropriating its trade secrets, alleging that Software AG accessed some of GlobeRanger’s data, manuals and software while working on the Navy contract.

GlobeRanger initially filed its lawsuit against Software AG in federal court.  Software AG objected, arguing lack of federal court jurisdiction, so GlobeRanger dismissed its federal lawsuit and filed in state court.  Software AG then decided that the lawsuit belonged in federal court and removed the case to federal court.  The district court denied GlobeRanger’s motion to remand and ruled that GlobeRanger’s misappropriation claims were preempted by the Copyright Act.  GlobeRanger appealed that decision to the Fifth Circuit, which reversed and remanded the case to the district court. (GlobeRanger I).  Software AG appealed to the Fifth Circuit in the second appeal after a $15 million jury verdict in GlobeRanger’s favor.  Software AG argued that GlobeRanger’s trade secret claim was preempted by federal copyright right law, but that even if the trade secret claim was not preempted, the federal court lacked jurisdiction due to the lack of a federal law claim.  The Fifth Circuit ruled that GlobeRanger’s trade secret claim was not preempted, but that GlobeRanger’s dropped conversion claim was preempted and supported the required federal jurisdiction.

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Not All Copyright Ownership Disputes Get Decided in Federal Court

It has long been established in this Circuit that a title dispute is a traditional state court property dispute which does not necessarily confer federal copyright jurisdiction.  If it were otherwise, then every copyright title dispute could be brought in federal court. That said, many copyright ownership disputes clearly do arise under the Copyright Act.  For example, a dispute that turns on whether a copyrighted work was created independently or as a ‘work made for hire’ is an ownership dispute that unquestionably arises under the Copyright Act.

(Opinion pdf page 4). 

Federal courts have exclusive jurisdiction (i.e., power to decide the case) over copyright cases.  State courts do not have jurisdiction to decide federal copyright issues.  What determines whether a copyright ownership dispute is simply a contractual issue to be decided in state court or whether it is a copyright issue to be decided in federal court?

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