Ninth Circuit Upholds Script Writer’s Implied Contract Claim under California State Law

Montz v. Pilgrim Films  addresses a script writer’s worst fear in shopping a script around to producers.  The court framed the issue:

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?

(pdf page 3)

The Facts

Plaintiff Larry Montz is a parapsychologist who developed an idea for a television show about a team of paranormal investigators conducting field investigations in various real-world locations.  The investigators would use tools such as magnetometers and infrared cameras to investigate paranormal activity reports.  Montz and publicist/producer Plaintiff Daena Smoller pitched the idea to NBC, the Sci-Fi channel and others, presenting screenplays, videos and other materials, from 1996 to 2003.  The studios were not interested.  In 2006, Plaintiffs filed sued in federal court against Defendants over the television show Ghost Hunters, a show about a team of investigators travelling the country to examine paranormal activity. 

The complaint alleged breach of an implied-in-fact contract and breach of confidence by Defendants.  Defendants brought a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted.  “Failure to state a claim” means that even if all of the plaintiff’s factual allegations are true, the plaintiff still fails to indicate why she is entitled to a legal remedy.  The district court determined that the complaint alleged sufficient facts to state a federal copyright claim, but that the state law claims were preempted by federal copyright law.  The state law claims were dismissed with prejudice and without leave to amend.  “Dismissed with prejudice” means that the court has made a final determination on the merits of the case and that the plaintiff may not refile the lawsuit.  “Without leave to amend” means that the plaintiff may not amend the complaint to better state her claims. 

Plaintiffs amended the copyright claim to add Universal Television Networks, then stipulated (agreed) to a dismissal of the amended copyright claim with prejudice.  There were no remaining claims, so the district court entered judgment in the Defendants’ favor.  On appeal, the three-judge panel affirmed the district court’s decision.  A majority of the active Ninth Circuit judges voted to rehear the case en banc, leading to the court’s current decision dated May 4, 2011.

California Implied-in-Fact Contract Law

Desny v. Wilder is a 1956 Supreme Court of California ruling “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.”  (pdf page 3)  In Desny, the plaintiff phoned director Billy Wilder’s office and pitched a movie idea to Wilder’s secretary.  The secretary and Wilder both understood that Wilder was to pay the plaintiff if he used the story.  Wilder produced the film Ace in the Hole, allegedly based on the idea Desny pitched to his secretary, without compensating Desny.  The trial court granted summary judgment in favor of Wilder, but was overruled on appeal.  The California Supreme Court considered the entertainment industry norms in holding that Desny sufficiently pled a claim for breach of implied contract.

The court in the present case also considered the entertainment industry practice of submitting scripts to producers, attempting to sell scripts or ideas.

Since an idea cannot be copyrighted, a concept for a film or television show cannot be protected by a copyright.  17 U.S.C. §102.  But the concept can still be stolen if the studio violates an implied contract to pay the writer for using it.

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Copyright Preemption is a two prong test

Preemption” is the principle arising out of the Supremacy Clause of the U.S. Constitution that the Constitution, and the federal laws made pursuant to it, are “the supreme law of the land” and that federal law displaces state law when there is a conflict between the two.  The Copyright Act preempts state law claims when

  • The plaintiff’s work comes 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).

Even though copyright protection does not extend to ideas under 17 USC §102, the preemption aspect of copyright law does extend to state law that attempts to protect ideas.  The scope of copyright preemption is broader than the scope of copyright protection, creating an area that is not protected by copyright law but that copyright preemption law prevents state law from protecting.

The court indicated that most litigation focuses on the second prong of the preemption test. 

To survive preemption, a state cause of action must assert rights that are qualitatively different from the rights protected by copyright.

(pdf page 9)

An extra element can make the qualitative difference that prevents the preemption principle from applying.  In Desny, the extra element was “an agreement to pay for the use of the disclosed ideas.”  An implied agreement of payment for the use of a concept is a personal agreement between the parties and can only be effective between the parties.  Such an agreement contrasts with and is unlike the public monopoly created by copyright law.  A contract’s purpose is to provide greater protection than is available under the Copyright Act.  The Desny ruling allows creators to share their concepts and ideas “with the understanding that they are not being given away for free.”  (pdf page 11)  The court noted that without the protection provided by Desny, there would be very little protection for some potentially valuable creative resources.

Contract law, whether through express or implied-in-fact contracts, is the most significant remaining state-law protection for literary or artistic ideas.

(pdf page 12)

The court ruled that Plaintiff’s breach of confidence claim also survives copyright preemption.  The duty of trust or the confidential relationship is an extra element in the breach of confidence claim that makes it qualitatively different from a copyright claim.

The court reversed and remanded the district court’s judgment.  Circuit Judge Schroeder wrote the majority opinion.  Judges Kozinski, Reinhardt, Thomas, Wardlaw, Paez, and Smith joined.

O’Scannlain’s dissent. 

Circuit Judge O’Scannlain disagreed with the majority’s ruling on the second prong of the preemption test.  He did not think that the rights Plaintiffs tried to protect were qualitatively different from the rights protected by 17 U.S.C. §106, namely the rights to reproduce, distribute, display and prepare derivative works.  He thought that Plaintiffs tried to exercise a right to exclude, which is more than an agreement to be paid for the use of ideas.  Since Plaintiffs did not offer to sell the ideas outright, their claims did not meet the requirements for a breach of implied contract under Desny

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.

(pdf page 19)

O’Scannlain did not think Plaintiffs authorized the use of their work.  He also thought that providing greater protection against the unauthorized use of copyrighted material than is provided by the Copyright Act is inconsistent with the objectives of Congress.

O’Scannlain thinks that the breach of confidence claims fails for the same reason as the breach of implied contract claim – that it seeks to protect the exclusive rights of copyright owners.

Judges Gould, Tallman and Bea joined O’Scannlain’s dissent.

Circuit Judge Gould joined O’Scannlain’s dissent, but also wrote a short dissent of his own.  His main point was that express contracts should be allowed to proceed under state law, but that implied contracts that functionally look like copyright claims should not.