Montz v. Pilgrim Films & Television, Inc.
98 U.S.P.Q. 2d (BNA) 1569, 649 F.3d 975, 76 A.L.R. 6th 709 (2011)
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Rule of Law:
A state-law claim for breach of an implied-in-fact contract is not preempted by the federal Copyright Act when the claim alleges a bilateral expectation that the creator would be compensated for the use of their disclosed idea, as this agreement constitutes an 'extra element' qualitatively different from the rights protected by copyright.
Facts:
- In 1981, Larry Montz, a parapsychologist, conceived an idea for a television show about a team of paranormal investigators.
- From 1996 to 2003, Montz and his publicist, Daena Smoller, pitched this idea to various television studios and producers, including representatives of NBC and the Sci-Fi channel.
- During these meetings, Montz and Smoller presented screenplays, videos, and other materials related to their proposed show.
- Montz and Smoller allege these disclosures were made with the understanding, based on industry custom, that they were offering to partner with the defendants and expected compensation and credit if the concept was used.
- The studios and producers initially indicated they were not interested in the idea.
- Subsequently, NBC and the Sci-Fi Channel, in partnership with Pilgrim Films & Television, Inc., and producer Craig Piligian, developed and broadcast a show titled 'Ghost Hunters'.
- The broadcasted show, 'Ghost Hunters', featured a team of investigators traveling to study paranormal activity, which Montz and Smoller claimed was based on their pitched concept and materials.
Procedural Posture:
- Larry Montz and Daena Smoller sued Pilgrim Films & Television, Inc., and others in U.S. District Court, alleging copyright infringement and state-law claims for breach of implied contract and breach of confidence.
- The defendants filed a motion to dismiss for failure to state a claim.
- The district court dismissed the state-law claims with prejudice, ruling they were preempted by the federal Copyright Act.
- The parties subsequently stipulated to the dismissal of the remaining federal copyright claim, leading to a final judgment in favor of the defendants.
- Plaintiffs Montz and Smoller (appellants) appealed the dismissal of their state-law claims to the U.S. Court of Appeals for the Ninth Circuit.
- A three-judge panel of the Ninth Circuit affirmed the district court's dismissal.
- The Ninth Circuit then voted to rehear the case en banc.
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Issue:
Does the federal Copyright Act preempt California state-law claims for breach of an implied-in-fact contract and breach of confidence where the plaintiffs allege the defendants used their pitched television show idea without compensation after an implied agreement was formed?
Opinions:
Majority - Judge Schroeder
No. The Copyright Act does not preempt the state-law claims for breach of an implied-in-fact contract or breach of confidence. A state-law contract claim is not preempted if it includes an 'extra element' that makes it qualitatively different from a copyright infringement claim. Here, the implied agreement that Montz would be compensated if his idea was used constitutes such an extra element. This agreement creates a personal right between the contracting parties, distinct from the monopolistic rights against the world that copyright law protects. Following the precedent of Desny v. Wilder and Grosso v. Miramax Film Corp., the court holds that the bilateral expectation of payment transforms the claim from one asserting a right exclusively protected by copyright to a contractual claim that survives preemption. Similarly, the breach of confidence claim survives because it protects the duty of trust or a confidential relationship between the parties, which is also an extra element not covered by copyright law.
Dissenting - Judge O'Scannlain
Yes. The Copyright Act preempts Montz's state-law claims because they assert rights equivalent to those protected by copyright. Montz alleges the defendants breached an implied agreement not to use or exploit his ideas 'without his consent.' The right to authorize or refuse to authorize the use of a work is the fundamental right granted to a copyright owner under § 106 of the Copyright Act. Unlike the plaintiff in Grosso who agreed to sell an idea for payment, Montz sought to partner and retain control, making this a claim about unauthorized use, which is the essence of copyright infringement. Allowing this claim to proceed under state law would permit plaintiffs to circumvent the stricter 'substantial similarity' standard of federal copyright law, thereby upsetting the balance Congress established.
Dissenting - Judge Gould
Yes. The majority's decision will lead to impractical and improvident results. By allowing an implied contract claim that functionally mirrors a copyright claim to survive preemption, the court undermines the goal of a uniform federal copyright system. This ruling creates legal uncertainty for production companies and networks, who will now face the 'chaotic prospect' of meeting conflicting federal and state standards on what is essentially a copyright issue. Permitting such nebulous state-law claims circumvents federal preemption and unsettles the stable expectations necessary for the entertainment industry to operate.
Analysis:
This en banc decision solidifies the Ninth Circuit's precedent that California's 'Desny claim' for breach of an implied-in-fact contract is not preempted by federal copyright law. It affirms that the promise to pay for an idea is a legally distinct 'extra element' that separates the claim from one of pure copyright infringement. The ruling provides a crucial avenue of protection for creators in the entertainment industry, allowing them to pitch ideas with the expectation of compensation based on industry customs. However, the strong dissents highlight the persistent tension in this area of law, arguing that such state claims can undermine the uniformity of the federal copyright system by allowing plaintiffs to pursue what are essentially infringement claims under more lenient state-law standards.
