Are State Law Claims Preempted by the Copyright Act?

Recently, district courts in Virginia and Illinois applied similar two-prong tests to determine whether state law claims were preempted by the Copyright Act. In Maxient, LLC v. Symplicity Corp., 2014 WL 5422195 (E.D. Va. Oct. 23, 2014), a number of Symplicity’s customers left Symplicity for its competitor, Maxient. Symplicity decrypted these former customers’ passwords, used them to access Maxient’s protected network, and copied and pasted Maxient’s confidential information into a 110 page document (the ‘Maxient Document’). After Maxient filed a state court case with various claims, Symplicity sought to remove the case to federal court on the grounds that Maxient’s claims were preempted by the Copyright Act.

The Maxient district court followed the Fourth Circuit’s two-prong test for determining whether a state law claim is preempted by the Copyright Act – first, the work must be copyrightable subject matter under the Copyright Act, and, second, the rights granted under state law must be equivalent to any rights protected by the Copyright Act. Because the Maxient Document was copyrightable subject matter, the district court’s decision hinged on whether Maxient’s state law claims were “equivalent” to claims for copyright infringement – that is, whether the state law claims do not include any extra elements that change the qualitative nature of the suit.

The district court found preemption with respect to Maxient’s claims for conversion and computer trespass. The claim for conversion required the extra element that a computer be used “without authorization,” which was not qualitatively different than “unauthorized copying,” the core focus of the Copyright Act. While Maxient’s claim for computer trespass required the additional element of “malicious intent,” under Fourth Circuit law, elements such as awareness or intent only alter an action’s scope, not its nature. Regarding Maxient’s claim for computer fraud, the extra element of “false pretenses” added an element of proof that qualitatively changed the nature of the suit. Similar to a trade secrets claim, it required wrong means to obtain information. Thus, the claim for computer fraud was not preempted by the Copyright Act. Finally, Maxient’s claim for use of encryption to further criminal activity required the use of encryption, which the district court considered a qualitatively nature changing element.

In the Illinois action, Dent v. Renaissance Mktg. Corp., 2014 WL 5465006 (N.D. Ill. Oct. 28, 2014), the plaintiffs included six members of the 1985 Chicago Bears, who recorded the song and music video the Super Bowl Shuffle. The plaintiffs entered into a Royalty Agreement which was purportedly assigned prior to its expiration in 1989. When the plaintiffs filed a state court case with various claims, the defendants removed to federal court, claiming preemption under the Copyright Act. The Seventh Circuit test for Copyright Act preemption is the same as the Fourth Circuit’s noted above. To avoid preemption, the state law claim must claim a right that is “qualitatively distinguishable” from the rights protected under the Copyright Act. The inquiry again focused on whether the plaintiffs’ rights under state law were equivalent to those protected by the Copyright Act.

The plaintiffs’ claims for declaratory judgment, injunctive relief, and conversion were preempted by the Copyright Act. While the plaintiffs argued their rights were based on contract, the district court disagreed. The defendants were not a party to the contract. Further, the plaintiffs sought to prevent use of their identities in a particular copyrighted work. Accordingly, no court would be able to grant the plaintiffs any relief without relying on the Copyright Act. Similarly, the crux of the plaintiffs’ conversion claim was the Super Bowl Shuffle itself. This was not qualitatively distinguishable from a claim under the Copyright Act. Once again, any relief granted would have to be based on the Copyright Act, as the contract had already expired.

The remaining claims, for constructive trust, unjust enrichment, and an accounting, were not preempted as they were qualitatively distinct from a copyright claim. The district court contemplated a situation wherein the defendants could have benefitted by representing they had an ongoing affiliation with the plaintiffs. The defendants could have been unjustly enriched as a result of such misrepresentation, requiring an accounting and a constructive trust. The nature of these claims would not turn on the ownership of any copyrighted work, but rather, the relationship between the parties.

These cases reaffirm existing law that where copyrightable subject matter is involved, the viability of state law claims in state court – as opposed to Copyright Act preemption and removal to federal court – will turn on whether the claims are “qualitatively distinguishable” from the rights protected under the Copyright Act, that is, whether the state law claims do include extra elements that change the qualitative nature of the suit from a copyright suit.