Addressing whether the U.S. Copyright Act would pre-empt a claim for misappropriation under California state law, the U.S. Court of Appeals for the Ninth Circuit vacated the ruling of the lower court and found that the state claim could proceed. Stewart Title of California Inc. v. Fidelity National Title Co., Case No. 06-55955 (9th Cir., May 19, 2008) (Pollak, J., sitting by designation) (non-precedential).
In Stewart, plaintiff Stewart Title of California (Stewart), a real estate service company, sued defendant Fidelity National Title (Fidelity) for copyright infringement, unfair competition and misappropriation for using sales contract and disclosure forms substantially identical to Stewart's. Fidelity moved for summary judgment, arguing that Stewart's forms were based upon forms prepared in 1998 by another company—the now-disbanded Southern Counties Escrow. Stewart maintained that Southern Counties Escrow had assigned Stewart copyright in the forms.
The district court granted summary judgment on the copyright claims and judgment on the pleadings on state law claims. Stewart appealed.
The Ninth Circuit vacated the district court's granting of summary judgment, finding that the district court had not sufficiently resolved the issue of whether Fidelity had standing to challenge the assignment, nor whether Stewart had adequately proven the requisite written confirmation of a prior oral assignment as required by the Copyright Act to execute an assignment.
Except for Stewart's state misappropriation claim, the Ninth Circuit affirmed the lower court's grant of judgment on the pleadings with regard to Stewart's other state law claims as pre-empted under the Copyright Act. As for the misappropriation claim, as the Court explained, the Copyright Act pre-empts "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright." The rights protected under the Copyright Act include the rights of reproduction, preparation of derivative works, distribution and display. If a state law claim contains an extra element that makes the right asserted qualitatively different from those protected under the Copyright Act, the state law claim is not pre-empted by the Copyright Act. The misappropriation claim, the court found, included the extra element of protection against improper use, thereby making the rights protected by the state law qualitatively different from those afforded in the Copyright Act. Thus, with respect to the misappropriation claim, the court vacated the district court's grant of judgment on the pleadings and remanded for further proceedings.
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