Edward Eliscu was one of two lyricists who added words to music composed by Vincent Youmans for use in the motion picture "Flying Down to Rio." Both lyricists assigned their rights to the studio, RKO. A music publisher subsequently claimed that Eliscu assigned rights to it. The publisher produced a transfer agreement, but the agreement was not signed by Eliscu, who denied he had ever executed such an agreement. Eliscu filed suit in New York state court seeking a declaration that he was the owner of his proportionate share of the renewal rights and seeking an accounting of money from exploitation of the work, based on his position that he had not signed the agreement.
Seven weeks later, the music publisher filed in federal court a single count action for infringement and seeking a declaration that it owned Eliscu’s renewal interest. Eliscu moved to dismiss for failure to state a claim and for lack of subject matter jurisdiction. The parties submitted affidavits, prompting Judge Weinfeld to convert the motion into one for summary judgment.
Looking at the facts pled in the complaint, District Judge Weinfeld held that "no matter how viewed, the claim in substance seeks to enforce the alleged 1933 agreement by Eliscu, [and] as part of the relief it seeks, to assign to the plaintiff in the renewed copyrights." This was certainly correct: everything turned on whether the agreement produced by the publisher was valid or fraudulent. That was an issue purely of state law. Judge Weinfeld was correct in finding that plaintiff could not obtain jurisdiction by pleading that if his title was established, defendant was infringing its title. This pointed out another problem with plaintiff’s complaint. There was no allegation that Eliscu had exploited the work, and therefore he could not be infringing. Nor did the declaration for ownership of the renewal copyright interest advance matters since plaintiff’s ownership claim was purely contractual, and was not based on any construction or interpretation of the renewal provisions of the Copyright Act: if the assignment was valid, the renewal interest was conveyed; if it was not, plaintiff had no claim. The case was, therefore, one of enforcing the contract, and that dispute was properly the subject of the earlier-filed state court action.
The Second Circuit, per Judge Friendly, affirmed, but took exception to what it perceived to be Judge Weinfeld’s construction of arising under jurisdiction as being limited to infringement actions:
"[T]he jurisdictional statute does not speak in terms of infringement, and the undoubted truth that a claim for infringement 'arises under' the Copyright Act does not establish that nothing else can. Simply as a matter of language, the statutory phrasing would not compel the conclusion that an action to determine who owns a copyright does not arise under the Copyright Act, which creates the federal copyright with an implied right to license and an explicit right to assign. But the gloss afforded by history and good sense leads to that conclusion as to the complaint in this case."
The final sentence referred to the historical cutting back on the broad construction of subject matter jurisdiction left open by Osborn v. Bank of United States. The reference to the Copyright Act as having created the cause of action is to Justice Holmes’ opinion in American Well Works. Had the court of appeals’ opinion stopped there, all would have been well-enough. Indeed, the circuit noted that plaintiff’s claim was not within Holmes’ creation test, and that the claim did not fall with Smith v. Kansas City Title & Trust Co.’s need to determine the meaning or application of the Copyright Act. That should have been the end of the matter. Judge Friendly ventured much further.
Mindful of the hazards of formulation in this treacherous area," the court of appeals held that an action "arises under" the Copyright Act if and only if "the complaint is for a remedy expressly granted by the Act, e.g., a suit for infringement or for the statutory royalties for record reproduction . . . , or asserts a claim requiring construction of the Act, as in De Sylva [v. Ballentine, 351 U.S. 570 (1956)], or, at the very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim. The general interest that copyrights, like all other forms of property, should be enjoyed by their true owner is not enough to meet this last test."
Judge Friendly set forth two acceptable vehicles for subject matter jurisdiction, and one possible vehicle. The two acceptable vehicles are: (1) a claim for a remedy expressly granted by the Copyright Act, "e.g., a suit for infringement or for the statutory royalties for record reproduction;" and (2) a claim requiring construction of the Copyright Act. As a possible vehicle, he listed "a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim." This formulation does not encapsulate, neatly at least, the governing Supreme Court case law (at that time or subsequently), and its choice of terminology is confusing, especially "remedy." Does this term refer to the old English forms of action where a cause of action was inseparable from the remedy sought? Or, does the term refer to a cause of action as one through which plaintiff is entitled, generally, to a particular type of remedy?
The Supreme Court formulation is more simply stated: subject matter jurisdiction exists if the cause of action is created by the Copyright Act (American Well Works) or if plaintiff’s right to relief under its well-pleaded claim requires resolution of a substantial question of copyright law (Christianson).
Comparing the Supreme Court’s formulation to T.B. Harms’ reveals the latter’s shortcomings. T.B. Harms’ first category may be intended to be equivalent to American Well Works, but by using "remedy," T.B. Harms invites attention away from whether the claim is one for a right created by the Copyright Act and toward non-dispositive issues such as remedial measures for violation of the right. For example, is a claim that requests an injunction a copyright claim merely because an injunction is sought? The answer is no. As a state court observed in denying a motion to dismiss in favor of federal jurisdiction: "The suit does not turn into one for copyright infringement because there is a request for an injunction; injunctive relief may be, and often is demanded with declaratory relief pursuant to state law." Is a claim that seeks an accounting of defendants’ profits a copyright claim? The answer here too is no, since disgorgement of ill-gotten gains is common in many state law actions, such as unfair competition. Is a claim that seeks statutory damages under section 504(c) a copyright claim merely because, in the prayer for relief, that measure of damages is sought? Here, statutory damages are an uncommon remedy, and certainly when asked for in the amounts provided by Section 504(c), unique to that section, but a state cause of action is not transformed into a federal cause of action merely by requesting statutory damages.
Either the cause of action is one arising under the Copyright Act or it isn’t. If it isn’t, asking for monetary damages found uniquely under the Act does not change the elements of the cause of action. The correct approach is to determine whether plaintiff’s complaint actually pleads the elements required for an infringement action – if so, one would expect the prayer for relief to request infringement, rather than contract remedies, but it is the cause of action that determines whether jurisdiction exists. Yet, one reads numerous opinions in copyright cases, citing T.B. Harms, finding subject matter jurisdiction based on the damages sought.
If, as in T.B. Harms, the only issue to be resolved is whether the contract assigning copyright rights is fraudulent, the cause of action does not become a copyright cause of action merely because plaintiff asks for statutory damages, for the breach or for that matter an injunction against future infringement for the breach (as plaintiff in T.B. Harms did). T.B. Harms held to the contrary on the facts, and thus Judge Friendly’s use of "remedy" was an unfortunate linguistic lapse, an error heightened by the example he gave of "statutory royalties for record reproduction." The reference to "statutory royalties for record reproduction" did not concern claims for unpaid royalties due under a contract, but rather to the mechanical reproduction compulsory license for nondramatic music works embodied in phonorecords, then contained in §1(e) of the 1909 Act and now contained in Section 115 of the 1976 Act. Failure to pay these royalties results in loss of the compulsory license, thereby automatically rendering the person who makes the reproductions an infringer (unlike a contractual failure to pay royalties).
Judge Friendly’s first category should, nevertheless, be understood as a reiteration of American Well Works’ "creation" test: does the Copyright Act create the cause of action that forms the basis of the claim? This prong of T.B. Harms appears, however, to be considerably narrower than American Well Works, encompassing only infringement actions. Questions involving other issues arising under the Copyright Act, such as claims to authorship, renewal rights, and the like fall under "a claim requiring construction" of the Act. Judge Friendly erroneously viewed these claims as falling with Smith v. Kansas City Title & Trust. Smith, though, permitted federal subject matter jurisdiction over admitted state claims where resolution of those claims required resolution of a substantial question of federal law. In the case of a declaratory judgment action by an individual who asserts he or she is the author or co-author of a copyright by virtue of his or contributions, the issue involves a construction of the Copyright Act – what is the nature of authorship – and arises only under the Copyright Act.
Ironically, given his criticism of Judge Weinfeld, Judge Friendly made the same mistake in narrowing American Well Works to infringement actions, rather than also encompassing as it surely does, these other issues. Smith, which Judge Friendly cited as support, was a state law action in which violation of federal law supplied the necessary element of illegality for establishing the state claim. The examples given by Judge Friendly, however, all involved exclusively federal issues. Judge Friendly simply misunderstood Smith.
Judge Friendly’s third category, one where "federal law may govern what might seem to be an issue of local law because the federal interest is dominant," might be relevant in cases where, for example, at issue is a federal policy concerning renewal rights being conveyed in a contract. Ordinarily, whether an agreement adequately assigns a property right, even a federally created one, involves only state rules of contract construction. However, given the paternalistic underpinnings of much of the Copyright Act, reflected in measures adopted by Congress to ensure authors do not inadvertently convey their copyright interests, courts have created a federal common law of renewal conveyance requiring a heightened level of specificity in order to fulfill Congress’s objectives. A dispute over whether a contract conveyed renewal rights thus implicates federal common law. Another example arises when there is a need to interpret whether the writing requirement of Section 204(a) has been complied with.
I just had a district court rule in Los Angeles that ownership of a copyright and other similar issues was a state court of action.
ReplyDeleteThis was very suprising to me.
The issues were whether a work was for hire or not, etc.
Surprising to me too
ReplyDelete