Forest Park Pictures pitched its idea for a television show it called “Housecall” to USA Network. Forest Park created and submitted written materials and made an oral presentation to USA Network about a doctor who treats medical patients who cannot pay, gets expelled from the medical community for doing that, then becomes a “concierge” doctor to rich and famous people in Malibu, California. Communication between Forest Park and USA Network about Housecall ended after a few exchanges.
About four years later, USA Network aired its own television show called “Royal Pains,” about a doctor who gets expelled from the medical community for treating patients who cannot pay, then becomes a concierge doctor to rich and famous people in The Hamptons on Long Island, New York. Forest Park sued USA Network for breach of contract. The district court dismissed Forest Park’s suit, holding that it was preempted by the Copyright Act. The Second Circuit Court of Appeals vacated and remanded, holding that the Copyright Act did not preempt Forest Park’s claim and that the complaint alleged an enforceable state law contract.
The district court dismissed Forest Park’s complaint on USA Network’s Fed.R.Civ.P. 12(b)(6) motion. On appeal, the Second Circuit accepted the factual allegations in the complaint as true and drew all reasonable inferences in the plaintiff’s favor. The Copyright Act preemption issue and the breach of contract issue were the two issues addressed by the Second Circuit.
Copyright Act Preemption.
Section 301 of the Copyright Act expressly preempts a state law claim only if (i) the work at issue comes within the subject matter of copyright and (ii) the right being asserted is equivalent to any of the exclusive rights within the general scope of copyright.
(Opinion pdf page 6).
The Second Circuit ruled that Forest Park’s idea for “Housecall” met the subject matter requirement for copyright preemption because the idea was embodied in written works. Ideas aren’t protected by copyright law, but the scope of copyright preemption is greater than the scope of copyright protection.
The reason for our broad interpretation of the scope of copyright preemption is that Congress, in enacting section 301, created a regime in which some types of works are copyrightable and others fall into the public domain. In preempting certain state causes of action, Congress deprived the states of the power to vest exclusive rights in material that Congress intended to be in the public domain.
(Opinion pdf page 8).
The equivalent right analysis saved Forest Park’s claim from copyright preemption. An extra element that differentiates the state cause of action from a copyright cause of action will prevent a state law claim from being preempted by copyright law. Forest Park’s complaint alleged that it “entered into an implied-in-fact agreement with USA Network that required USA Network to pay Forest Park for the use of its idea.” (Opinion pdf page 11). The Second Circuit ruled that Forest Park’s breach of contract claim was qualitatively different from a copyright violation claim.
Firstly, the Copyright Act gives the copyright owner the right to prevent distribution, copying or the creation of derivative works, but does not bestow an express right to receive payment for the use of a work. Secondly, a plaintiff suing under a contract for a failure to pay must prove such extra elements as mutual assent and valid consideration, which is more than proving copying. Thirdly, contract rights are rights that exist between two parties, whereas copyright rights exist against the public at large.
A claim for breach of a contract including a promise to pay is qualitatively different from a suit to vindicate a right included in the Copyright Act and is not subject to preemption.
(Opinion pdf pages 15-16).
Breach of Contract. This suit was brought in federal court in the Southern District of New York on the basis of diversity jurisdiction (i.e., the parties are citizens of different states), not on the basis of federal question jurisdiction (i.e., this is not a copyright infringement case.) Breach of contract claims are decided under state law, not federal law. The Second Circuit had to determine whether New York state law, USA Network’s principal place of business, or California state law, Forest Park’s principal place of business, should be used to decide the case.
In diversity jurisdiction cases, a federal court applies the choice of law rules of the forum state. In this case, since the district court was in New York, the Second Circuit applied New York’s choice of law rules. Courts applying New York choice of law rules first determine whether there is an actual conflict between the laws of the two jurisdictions. If there is a conflict, New York choice of law rules then examine the “center of gravity,” such as the place the contract was made, the place of performance and the domiciles of the parties.
The Second Circuit determined that there might be a conflict between New York law and California law on whether a definite price term is required to form an enforceable contract. The Second Circuit therefore applied the “center of gravity” test and ruled that California law applied. Almost all of the significant contacts between the parties occurred in California, including the only in-person meeting, Forest Park’s disclosure to USA Network, the location of Forest Parks writings and the pitch meeting at USA Network’s California offices.
California has long recognized that an implied-in-fact contract may be created where the plaintiff submits an idea (the offer) that the defendant subsequently uses (the acceptance) without compensating the plaintiff (the breach).
(Opinion pdf pages 19-20).
Forest Park’s complaint alleged facts that, if proven, would establish that USA Network knew or should have known of the implied condition that Forest Park would be paid for the use of its idea.
USA Network argued that any agreement between it and Forest Park was not enforceable because there was no definite price term. The Second Circuit ruled that under California law, contracts without exact price terms will be enforced as long as the parties’ intentions can be determined. In addition, California allows custom, usage and other extrinsic evidence to supply absent terms. Since Forest Park’s complaint alleged that it agreed with USA Network to be paid the industry standard for its idea, that was enough under California law to withstand a motion to dismiss.
The Second Circuit vacated the district court’s ruling and remanded the case to the district court, the Southern District of New York. The district court judge in the Southern District of New York will decide the state law claim by applying California law.
This case is Forest Park Pictures v. Universal Television Network, Inc., Second Circuit Court of Appeals, No. 11-2011-cv.