In vacating a district court’s grant of a motion to dismiss a breach of contract action against a television studio, the U.S. Court of Appeals for the Second Circuit held that the Copyright Act does not preempt a breach of an implied-in-fact contract that included a promise to pay for an idea.  Forest Park Pictures v. Universal Television Network, Inc., Case No. 11-2011-cv (2d Cir., June 26, 2012) (Walker, J.).  The decision makes it more difficult for television and movie studios to obtain summary dismissal of suits claiming idea theft.

In 2005, Forest Park Pictures and brothers Tove and Hayden Christensen (of Star Wars fame) formulated an idea for a television show about a doctor who caters to the rich and famous in Malibu, California as a “concierge” house call doctor.  They created a written series treatment for the idea, including character biographies, themes and stories, which they mailed to a representative at USA Network, a division of Universal Television Network, Inc.

Forest Park and the brothers requested and met with USA Network’s representatives to pitch their show.  Within a week discussions ceased and the parties stopped communications.  Several years later, USA Network produced a show “Royal Pains,” about a doctor who caters to the rich and famous in the Hamptons. 

Forest Park and the brothers sued USA Network for breach of an implied-in-fact contract for failing to pay for the show idea.  USA Network moved to dismiss the complaint on the grounds that the Copyright Act preempted the claim and that the contract claim was too vague to be enforced.  The district court agreed and dismissed the complaint without addressing the contract issue.  Forest Park appealed. 

Holding that breach of an implied-in-fact contract is not preempted by the Copyright Act, the 2d Circuit vacated the decision of the district court. The 2d Circuit noted that the Copyright Act preempts a state law claim only if the work at issue comes within the subject matter of copyright and if the right being asserted in the claim is equivalent to any of the exclusive rights granted under copyright law. Because the subject of the claim, i.e., the ideas presented in Forest Park’s treatment, were fixed in a writing, the work was found to be within the subject matter of copyright, thereby meeting the first requirement for preemption.  The “equivalency requirement,” however, was not met because “[a] claim for breach of a contract including a promise to pay is qualitatively different from a suit to vindicate a right included in the Copyright Act and is not subject to preemption.”

With respect to the breach of contract issue, the 2d Circuit decided that California law was applicable to determine whether Forest Park pleaded an enforceable implied-in-fact contract, as nearly all of the activity related to the alleged contract took place in the state of California, including the location of the plaintiffs’ meeting with USA Network and the physical location of the written series treatment. The 2d Circuit then cited the Desny v. Wilder decision, which California courts have used to recognized implied-in-fact contracts since the 1950s if a plaintiff can prove that an idea was submitted on the condition that the plaintiff would be paid for use of the idea and the defendant knew or should have know of that condition.

In its complaint, Forest Park alleged that it is standard in the entertainment industry to receive compensation for the use of a party’s pitched ideas. Because Forest Park alleged facts that, if proven, would establish that USA Network knew or should have known that Forest Park submitted its series treatment based on a promise of payment, the 2d Circuit found the complaint alleged an enforceable contract.  Accordingly, the district court’s decision was vacated and remanded for further proceedings on the contract issue.

Practice Note:  Television and movie studios hoping to exit breach of contract suits alleging idea theft early on now face a new challenge.  Going forward, this decision, which disposes of the copyright pre-emption argument, may force studios to litigate the merits of a breach of contract claim.