By: Scott Hervey with summer associate James Brannen

Recently the 9th Circuit heard an appeal involving the network and producers of the TV program “Ghost Hunters” and two individuals who claimed that the network stole their idea. Parapsychologist Larry Montz and publicist Daena Smoller maintain that in 1981 they conceived of and created written materials, including a screenplay, about a new reality television program featuring a team of investigators who use high tech equipment to study and occasionally debunk paranormal activity.

 Montz and Smoller pitched their screenplay to representatives of NBC and the Syfy Channel “for the express purpose of offering to partner . . . in the production, broadcast and distribution of the [program].”  Montz and Smoller claimed that the screenplay and other material presented to NBC executives served as the basis for the program “Ghost Hunters” which is about a team of investigators who travel the country to study paranormal activities with the aid of infrared cameras, decibel-meters, and other high tech devices.  For some, the spooky part of this case has nothing to do with paranormal activities, but rather the way in which the Court distinguished the facts and circumstances in this case from Grosso v. Miramax Film Corp., (2004) and Desny v. Wilder, (1956) and held that certain claims for breach of implied contract are preempted by the Copyright Act.

In Desny, the plaintiff Victor Desny wrote a script depicting the real life story of Floyd Collins, a boy who made headlines after he was trapped in a cave eighty feet under ground.  In an effort to market his script, Desny called Billy Wilder, a writer, producer and director at Paramount Pictures. Desny could not get through to Wilder and subsequently stripped his scrip to the bare facts so that Wilder’s secretary could copy it in short-hand over the phone.  After reading his synopsis, Desny told Wilder’s secretary that Wilder and Paramount could use the script only if they paid him a reasonable amount for doing so.  Shortly thereafter, Wilder created his own movie script mirroring Densy’s. Because Densy’s script was based on historical facts, and because Desny only conveyed the bare minimum of those facts to Wilder’s secretary, both parties conceded for the purpose of the appeal that the synopsis was not sufficiently original to form the basis of a federal copyright claim. The Court, however, held that Densy stated sufficient facts to establish the existence of an implied-in-fact contract between the parties. While this synopsis would most likely find itself shuffled into the category of “unprotected facts and ideas” under federal copyright law, the court held that “the policy that precludes protection of an abstract idea by copyright does not prevent its protection by contract.’” 

In 2003 the 9th Circuit re-affirmed Desny’s applicability in light of the preemption conditions embodied in the Copyright Act of 1976.  In Grosso, the plaintiff, Jeff Grosso, authored a screenplay about a group of friends planning to heist the cashier at a poker tournament in order to save their companion from a vindictive loan shark. After Grosso allegedly sent a copy of this screenplay to Miramax Films, Miramax released a movie titled “Rounders.” “Rounders” follows the story of a former gambling addict turned law school student who reverts back to his gambling to bail a friend out of trouble. Grosso sued on the grounds of copyright infringement and breach of an implied contract. On Appeal, the 9th Circuit affirmed the district court’s decision to dismiss Grosso’s federal copyright claim for lack of substantial similarities between his screenplay and Miramax’s film. The court then turned their attention to the issue of preemption regarding Grosso’s state-law implied contract claim.  Noting that a Desny breach of implied contract analysis is controlling, the court held that federal law did not preempt Grosso’s state-law claim because the rights he asserted under the state-law claim were not “equivalent” to those rights conveyed under federal copyright laws. The court clarified its position noting that these rights were not equivalent because they were not based on payment for “the idea itself, but for the services of conveying that idea.”

There are two conditions necessary for federal copyright law to preempt a state law claim.  First, the state-law claim must assert rights that are fixed in a tangible medium of expression and within the subject matter scope of federal copyright law. Second, those rights asserted under state law must be “equivalent” to those rights conferred to copyright owners under the Copyright Act of 1976. After holding that Montz and Smoller’s screenplays, videos, and other media satisfied the first condition the court turned its attention to whether their rights under the state-law implied contract claim were “equivalent” to those enjoyed under the Copyright Act. 

Montz’s claim for breach of implied contract alleged 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 [program],” “[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.”  The Court distinguished this from Desny and Grosso where the implied promise in those cases was to pay for the use of the plaintiffs’ work, while here Montz’s claim is that the defendants used his work, without authorization, to create (and then profit from) a new television program. Because the rights asserted by Montz under the implied contract are equivalent to the rights of copyright owners under § 106—namely, the exclusive rights to use and to authorize use of their work, the Court held that Montz and Smoller’s claim was preempted by federal copyright law. 

Yet Montz and Smoller, like Desny and Grosso, did expect to receive a share of the profits derived from the use of their ideas. However, this expectation, the Court stated, was not based on the belief that Montz and Smoller would profit from the sale of their script, but was merely derivative of their asserted right to retain exclusive control of their work while in a partnership with NBC. And, because their expectation to maintain control over their work was “equivalent” to those rights embodied in the Copyright Act, Montz and Smoller’s state law claim was preempted by federal copyright laws.

The 9th Circuit made it clear that those distributing their works of authorship who expect to retain control of those works and partner in production will no longer be able to turn to state breach of contract laws. Had Montz and Smoller’s primary intention been to sell their script to NBC rather than maintain control over it, the Court would likely have found a properly plead implied contract claim under Desny and Grosso.