Category Archives: breach of contract

When is a Breach of Contract Claim in NY Preempted by the Copyright Act?

What state law claims are preempted by the federal law embodied in the Copyright Act?  This question was recently addressed in Stadt v. Fox News Network LLC, 719 F.Supp.2d 312 (S.D.N.Y. 2010).

In that case, Kenneth Stadt (“Stadt”), a video owner, filed a lawsuit against Fox News Network (“Fox”), a cable television network, for among other things, copyright infringement and breach of contract.  Stadt was the exclusive owner of a video that he registered with the United States Copyright Office that depicts a famous couple on vacation (“Video”).  Stadt and Fox entered into a written License Agreement (“Agreement”) in which Fox was given the sole right to air the Video on its network within a one month period.  See Id. at 316.

Stadt alleged that Fox promised to stop using the Video upon expiration of the License, and in exchange for that promise Stadt allowed Fox to broadcast the Video with a “Fox Business Exclusive” credit on the screen. However, Stadt claimed that Fox continued to make use of the Video and credit after the Agreement expired.  Fox moved to dismiss all the claims except the copyright claim, stating that “the claims are preempted by section 301 of Title 17 of the United States Code (the Copyright Act), fail to state a claim as a matter of law, or both.” Id. at 315.

The Court relied on Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004) to determine when the Copyright Act shall preempt state law. Id. at 317.  In Briarpatch, the Second Circuit held that the Copyright Act exclusively governs a claim when:

(1) the particular work to which the claim is being applied falls within the type of works protected by the Copyright Act . . .; and

(2) the claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law….

See Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004).

The Briarpatch Court further stated that the first prong of this test is called the “subject matter requirement,” and the second prong is called the “general scope requirement.”  The general scope requirement is satisfied only when the state-created right may be abridged by an act that would, by itself, infringe one of the exclusive rights provided by federal copyright law.  The state law claim must not include any extra elements that make it qualitatively different from a copyright infringement claim.  Additionally, the Briarpatch Court explained that to determine whether a claim is qualitatively different, it will look at “what [the] plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced.” Stadt, 719 F.Supp.2d at 317-18 (citing Briarpatch Ltd. v. Phoenix Pictures, Inc., 373 F.3d 296 (2d Cir. 2004)).

The Stadt Court stated that it takes a ‘restrictive view’ of what qualifies as an extra element sufficient to shield the claim from copyright preemption.  Nevertheless, ‘a state law claim is qualitatively different if it requires such elements as breach of fiduciary duty, or possession and control of chattels.” Stadt, 719 F.Supp.2d at 318.

To establish breach of contract in New York, a plaintiff must 1) confirm the existence of an agreement; 2) show that plaintiff has adequately performed pursuant to that contract; 3) show that the accused has breached the contract; and 4) show that there are damages.  See Id. 

The Stadt Court found that the “subject matter” requirement for federal preemption to apply was met because the subject matter of Stadt’s breach of contract claim related to the continued use of a video that was governed by the Copyright Act.  However, the “general scope” requirement was not satisfied because Stadt’s claim that Fox continued to make use of the credit following expiration of the Agreement added an “extra element that render[ed Stadt’s] breach of contract claim qualitatively different from a claim for copyright infringement.” Hence, that additional aspect of the claim was not governed by the Copyright Act.  Id. at 320-21.  In other words, the additional allegation of continued use of the credit went beyond what the Copyright Act governs and therefore survives preemption.  See Id. at 321.  Ultimately, the Stadt Court denied Fox’s motion to dismiss the breach of contract claim since only part of the claim was preempted by the Copyright Act.  See Id. at 324.

The preemption of state laws by the Copyright Act is an issue every claimant should be aware of when preparing causes of actions for a complaint involving intellectual property matters.  One should take heed of the two-step prong courts rely on in evaluating when claims meet the criteria for preemption.

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