The US Court of Appeals for the Fifth Circuit determined that a
plaintiff could not use a state law claim for unfair competition to
protect a valve design, because federal copyright law preempts such
a claim. Ultraflo Corp. v. Pelican Tank Parts, Inc., Case
No. 15-20084 (5th Cir., Jan. 11, 2017) (Costa, J.).
An Ultraflo employee designed a new butterfly valve for use in
the transportation industry and recorded that new valve design in
drawings. Pelican, an Ultraflo competitor, later hired the
employee. Pelican also began selling a similar butterfly valve.
Ultraflo believed that Pelican hired the former Ultraflo employee
to access Ultraflo's valve design, so Ultraflo filed a claim
for state unfair competition by misappropriation.
The Fifth Circuit concluded that federal copyright law preempted
Ultraflo's state law claim. The Court reached its conclusion
using a two-part test: (1) "whether the intellectual property
at issue is within the subject matter of copyright," and if
so, (2) whether the state law claim protects rights that are
"equivalent to any of the exclusive rights within the general
scope of copyright."
For the first part of the test, Ultraflo argued that it sought
to protect its valve designs, and that copyright law does not
protect valve designs. The Fifth Circuit agreed with Ultraflo that
copyright law does not protect "useful articles" or
"ideas," and that the valve designs could be useful
articles because they have "an intrinsic utilitarian
function" that is not merely to convey information. The Court
further agreed that the valve designs could qualify as ideas. The
Court did not specify which category the valve designs fell into,
but determined that since one of these categories applied, the
valve designs were not entitled to copyright protection.
The Fifth Circuit explained, however, that even though copyright
law did not protect the valve designs, those designs still
satisfied the first part of the test by being "within the
subject matter of copyright." Copyright law determines what is
entitled to protection as much as it determines what is not
entitled to protection. In this case, the valve designs were not
entitled to protection. As the Court explained, the valve designs
were within the world of copyright law, but copyright law refused
to protect them.
The Fifth Circuit also determined that the second part of the
test was satisfied because Ultraflo's claim for unfair
competition was equivalent to a copyright claim. For Ultraflo, the
elements of a copyright claim were materially the same as the
elements of a claim for unfair competition by misappropriation. The
Court rejected Ultraflo's argument that the unfair competition
claim was different because it sought to protect use of the valve
design drawings to make the valves, whereas copyright law would not
protect against that use. The Court explained that while copyright
law could theoretically protect this use, Congress decided that it
should not. This illustrates the idea-expression dichotomy. Patents
protect ideas, and copyrights protect expressions. As the Court
explained, Ultraflo's claim would have been an end run around
The decision by a federal jury in Dallas, Texas, to award $500 million to the plaintiffs in a case involving VR technology – despite the jury's conclusion that the defendants had not misappropriated...
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