Harolds Stores, Inc. v. Dillard Department Stores, Inc.
44 Fed. R. Serv. 746, 82 F.3d 1533, 34 Fed. R. Serv. 3d 1608 (1996)
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Rule of Law:
The federal Copyright Act does not preempt a state law claim if the state law requires proof of an extra element that is qualitatively different from the elements required for copyright infringement, such as an act in restraint of trade.
Facts:
- Harold’s Stores, Inc. ('Harold’s') designed, manufactured, and sold women's clothing featuring its own original, copyrighted fabric designs, which it marketed as exclusive to its stores.
- In May 1993, Harold's discovered that Dillard Department Stores, Inc. ('Dillard') was selling skirts with fabric patterns identical to copyrighted designs Harold's had sold in previous seasons.
- The Dillard skirts were priced significantly lower, at $28.00-$30.00, compared to Harold’s original prices of $78.00-$80.00.
- Dillard's merchandise managers had purchased skirts from Harold's and instructed their manufacturer, Cannontex, to use them as 'inspiration' to copy the print fabric designs and styles.
- Harold's sent Dillard a demand letter to cease selling the infringing garments, but Dillard did not remove the merchandise from its stores.
- After Harold’s filed suit, Dillard reduced the price of the infringing skirts to below cost, at approximately $12.00.
Procedural Posture:
- Harold’s Stores, Inc. and CMT Enterprises, Inc. sued Dillard Department Stores, Inc. in federal district court.
- The complaint alleged copyright infringement, violation of the Oklahoma Antitrust Act, and violation of the Oklahoma Unfair Sales Act.
- Dillard moved for partial summary judgment, arguing federal copyright law preempted the state antitrust claim; the district court denied the motion.
- Dillard stipulated before trial that it had infringed 19 of Harold's copyrights.
- A jury trial on damages resulted in a verdict for Harold’s on all three claims.
- The district court entered judgment, which was later amended to adjust damages.
- Dillard filed a renewal motion for judgment as a matter of law, which the district court denied.
- The district court also denied Harold's separate motion for a permanent injunction.
- Dillard, as appellant, appealed the judgment to the U.S. Court of Appeals for the Tenth Circuit.
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Issue:
Does § 301 of the federal Copyright Act preempt a claim under the Oklahoma Antitrust Act when the state claim is based on the same act of copyright infringement but requires proof of an additional element, namely, an act in restraint of trade?
Opinions:
Majority - Judge Baldock
No, the federal Copyright Act does not preempt the Oklahoma Antitrust Act claim because the state law requires proof of an extra element not required for a copyright infringement claim. To determine preemption, the court applies a two-part test, focusing on whether the state law rights are equivalent to the exclusive rights granted by federal copyright law. This equivalency is analyzed using the 'extra element' test. A claim for copyright infringement requires proof of (1) ownership of a valid copyright and (2) copying of the original elements. In contrast, a claim under the Oklahoma Antitrust Act requires proving (1) an act that (2) is in restraint of trade. The 'restraint of trade' element, which requires showing that the defendant's conduct prejudiced public interests by unduly restricting competition, is the 'extra element.' This additional proof makes the state claim qualitatively different from the federal copyright claim, thus saving it from preemption.
Analysis:
This decision reinforces the viability of the 'extra element' test as the standard for copyright preemption analysis under § 301. It clarifies that plaintiffs can pursue state law claims alongside federal copyright claims, even when both arise from the same infringing conduct, so long as the state claim addresses a different legal wrong, such as anticompetitive harm rather than just the violation of exclusive copyrights. This provides a broader set of remedies for creators, especially against infringers who use copying as a tool for unfair competition. The court's additional holding that Oklahoma's antitrust law can reach unilateral conduct also broadens the scope of that state's statute.
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