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IP/Entertainment Case Law Updates

Montz v. Pilgrim Films & Television, Inc.

Ninth Circuit affirms dismissal of plaintiffs’ state law claims for breach of implied contract and breach of confidence on grounds that such claims are preempted by the Copyright Act.

Plaintiffs Larry Montz, a parapsychologist, and Daena Smoller, a publicist, pitched an idea for a reality show about “paranormal investigators” to defendants NBC Universal and the Sci-Fi Channel “for the express purpose of offering to partner . . . in the production, broadcast and distribution of the Concept.” The defendants were allegedly not interested in the show. Plaintiffs filed suit against the defendants after the defendants produced and broadcast the show Ghost Hunters about a team of investigators who travel across the country to study paranormal activity. The complaint included claims for copyright infringement, breach of an implied contract, and breach of confidence. The defendants moved to dismiss the two state law claims as preempted by the Copyright Act. The district court agreed and dismissed these claims. The plaintiffs appealed and the Ninth Circuit affirmed.

The complaint alleged that (1) by producing and broadcasting Ghost Hunters, the defendants breached an “implied agreement not to disclose, divulge or exploit the Plaintiffs’ ideas and concepts without the express consent of the Plaintiffs, and to share with the Plaintiffs . . . the profits and credit for their idea and concepts”; and (2) the defendants breached the plaintiffs’ confidence “[b]y taking the Plaintiffs’ novel ideas and concepts, exploiting those ideas and concepts, and profiting therefrom to the Plaintiffs’ exclusion.”

Section 301(a) of the Copyright Act provides:

[A]ll legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103 . . . are governed exclusively by this title. . . . [N]o person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.

According to the court, for a state law claim to survive preemption, the claim must assert rights in “works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright” as specified by 17 U.S.C. §§ 102 and 103, and the rights asserted under state law must be “equivalent” to the exclusive rights of copyright owners specified by 17 U.S.C. § 106.

The court first addressed the plaintiffs’ breach of implied contract claim. The district court ruled that the claim--which asserts rights in screenplays, videos, and other tangible media presented by the plaintiffs to the defendants--comes within the “subject matter of copyright” and thus satisfies the first condition for preemption. The plaintiffs did not challenge that ruling on appeal, so the Ninth Circuit limited its inquiry to whether the state law claim satisfied the second condition--whether the rights asserted under the claim are “equivalent” to the exclusive rights of copyright owners under § 106.

Section 106 confers upon copyright owners the exclusive rights to reproduce, to distribute, and to display original works of authorship, and to prepare works derived from the originals. Section 106 also gives copyright owners the exclusive right to authorize such reproduction, distribution, display, and preparation. Under Laws v. Sony Music Entm’t, Inc., 448 F.3d 1134 (9th Cir. 2006), to survive preemption, “the state cause of action must protect rights which are qualitatively different from the copyright rights. The state claim must have an extra element which changes the nature of the action.”

The court reiterated the plaintiffs’ breach of implied contract claim: “[t]he Plaintiffs presented their ideas for the Ghost Hunter Concept to the Defendants[] in confidence . . . for the express purpose of offering to partner with the Defendants in the production, broadcast and distribution of the Concept”; that “by accepting the Plaintiffs’ disclosure of its concept,” the defendants agreed that they “would not disclose, divulge or exploit the Plaintiffs’ ideas and concepts without compensation and without obtaining the Plaintiffs’ consent”; and that “by producing and broadcasting the Concept,” “[t]he Defendants breached their implied agreement not to disclose, divulge or exploit the Plaintiffs’ ideas and concepts without the express consent of the Plaintiffs, and to share with the Plaintiffs . . . the profits and credit for their idea and concepts.”

According to the court, the gravamen of the claim is that the defendants used the plaintiffs’ work, without authorization, to create (and then profit from) a new television program. “The rights asserted by the plaintiffs under the implied contract are thus equivalent to the rights of copyright owners under § 106--namely, the exclusive rights to use and to authorize use of their work.”

The court distinguished this holding from Grosso v. Miramax Film Corp., 383 F.3d 965 (9th Cir. 2004). The court explained that Grosso involved a particular type of breach of implied contract claim, the elements of which the California Supreme Court elucidated in Desny v. Wilder, 46 Cal. 2d 715 (Cal. 1956). To state a Desny claim, the plaintiff must plead that he “prepared the work [at issue], disclosed the work to the offeree for sale, and did so under circumstances from which it could be concluded that the offeree voluntarily accepted the disclosure knowing the conditions on which it was tendered and the reasonable value of the work.” Grosso, 383 F.3d at 967 (citing Faris v. Enberg, 97 Cal. App. 3d 309 (Ct. App. 1979)). The court continued by stating that the complaint in Grosso alleged that the plaintiff had given the defendants an idea for a movie “with the understanding and expectation . . . that [he] would be reasonably compensated for its use by Defendants.” In the Grosso decision handed down by the Ninth Circuit, the court said that the defendants’ “implied promise to pay” for use of the plaintiff’s idea constituted “an ‘extra element’ for preemption purposes” and the court accordingly held that the plaintiff’s Desny claim survived preemption under § 301.

The court explained that in the case at hand, the plaintiffs allegedly disclosed their work to the defendants “for the express purpose of offering to partner . . . in the production, broadcast and distribution of the Concept” and the defendants allegedly rejected the offer but, in return, made an implied promise “not to disclose, divulge or exploit the Plaintiffs’ ideas and concepts without the express consent of the Plaintiffs.” The court summed up by stating that “[t]he nature of the implied contracts in the two cases is thus fundamentally different. Whereas the breach of the alleged agreement in Grosso violated the plaintiff’s right to payment on a sale, the breach of the alleged agreement in this case violated the plaintiffs’ exclusive rights to use and to authorize use of their work--rights equivalent to those of copyright owners under § 106.”

The court rejected the plaintiffs’ assertion that their breach of implied contract claim contained an extra element which was that the defendants violated their right to receive a share of the profits and credit for their idea and concepts. The court interpreted this assertion to mean that the right to receive a share of the profits and credit is beyond the scope of § 106. “[T]he plaintiffs’ expectation of profits and credit was premised on the fact that they would retain control over their work, whether in partnership with the defendants or not. The plaintiffs’ right to receive a share of the profits and credit is thus merely derivative of the rights fundamentally at issue: the plaintiffs’ exclusive rights to use and to authorize use of their work. The plaintiffs’ claim is ‘part and parcel of a copyright claim,’ and the presence of a right to receive a share of the profits and credit does not ‘transform the nature of the action.’” The court therefore held that that the plaintiffs’ breach of implied contract claim is preempted by federal copyright law, and that the district court properly dismissed the claim.

Turning to the breach of confidence claim, the court held that this claim “simply echoes the allegations of the breach of implied contract claim, which we have already deemed preempted.” The court also affirmed the district court’s denial of leave to amend the complaint. The Ninth Circuit has previously held that in granting a motion to dismiss before a responsive pleading is served, a district court may cut off a party’s right to amend as a matter of course if “the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Albrecht v. Lund, 845 F.2d 193 (9th Cir. 1988). The Ninth Circuit held that, even though the district court did not make written findings in support of its denial of leave to amend, no such findings were necessary “because the court’s decision makes clear that no allegation of other facts consistent with the complaint could possibly cure the deficiency.” According to the court, the plaintiffs’ claim could be cured only by adding an “extra element” to each claim that transforms the nature of the action. “The plaintiffs cannot effect such a transformation, however, without alleging facts inconsistent with the challenged complaint. To state a viable Desny claim, for example, the plaintiffs would have to allege that they offered their work for sale. But such an allegation would be contrary to the challenged complaint, which states that they made an offer only of partnership in the ‘production, broadcast and distribution of the Concept.’ We are therefore satisfied that the district court did not abuse its discretion by denying the plaintiffs leave to amend.”