In an important decision for the entertainment industry, the Second Circuit held that a claim under state law for breach of implied contract, including a promise to pay, is not preempted by the Federal Copyright Act.
In 2010, a suit was brought by Forest Park Pictures against Universal Television Network, Inc. (the television production arm of NBCUniversal, a subsidiary of Comcast Corp., which controls USA Network), for breach of contract over USA Network’s show Royal Pains. Forest Park alleged that in 2005, it developed an idea for a show called “Housecall,” in which a doctor, after being expelled from the medical community for treating patients who could not pay, moves to Malibu to attend to the rich and famous. Forest Park developed storylines and character bios, and pitched the concept to an executive at USA Network. Although nothing materialized after the meeting, in 2009, USA Network began airing Royal Pains, a show that focuses on the life of a “concierge doctor” providing medical services to the wealthy residents of the Hamptons. Forest Park brought suit against Universal for breach of contract.
The U.S. District Court for the Southern District of New York held that Forest Park’s claims were preempted by the Federal Copyright Act because the allegations entailed theft of uncopyrightable idea and granted Universal’s motion to dismiss.
The Second Circuit reversed by holding that a claim for breach of an implied contract, including a promise to pay, is not preempted by the Federal Copyright Act because even though uncopyrightable material may fall within the subject matter of the Copyright Act, there are qualitative differences between a contract claim and a copyright-violation claim. Unlike contract law, the Copyright Act does not provide an express right for the copyright owner to receive payment for the use of the work. Thus, the Second Circuit concluded that an implied contract, including a promise to pay, was formed when Forest Park pitched their concept to USA Network, and USA Network’s failure to compensate Forest Park for Royal Pains gave rise to a cause of action not subject to preemption.
Generally, under a claim for breach of an implied contract, when an idea is submitted and accepted for review, as Forest Park asserted here, there is an expectation that if there material is later used, the writer will receive compensation. In fighting these implied contract claims, networks have previously argued that the state-based contract claims are pre-empted by federal copyright law. Now, with this latest Second Circuit decision, this poses a new challenge for networks in defending themselves against similar idea-theft lawsuits, and they will likely pay more attention to see how the suit plays out on remand to the Southern District of New York.