Friday, June 06, 2008

Unfair competition and copyright preemption

Rutledge v. High Point Regional Health System, -- F.Supp.2d --, 2008 WL 2264239 (M.D.N.C.)

Plaintiff is a doctor who developed a surgical weight loss procedure, the Mini Gastric Bypass, and various materials for use with the procedure. He registered copyrights for these materials, including a patient information form, a patient consent form, and various manuals. He licenses other doctors to use the materials. The individual defendants are doctors who worked for a health care company with whom Rutledge contracted, and they had access to the copyrighted materials and performed the MGB procedure. In May 2006, the contract with Rutledge ended, but defendants allegedly continue to reproduce, distribute, and display the copyrighted materials on their website and perform the surgery. Rutledge sued for copyright infringement and violation of the North Carolina Unfair and Deceptive Trade Practices Act.

Defendants moved to dismiss the UDTPA count on the ground of §301 copyright preemption. This requires that the state-law rights at issue cover a work within the subject matter of copyright and be equivalent to a right protected by copyright, without any extra element. Everyone agreed that the materials were within the subject matter of copyright.

The key question was whether the UDTPA created rights “equivalent to” copyright rights. If an extra element is required instead of or in addition to reproduction, distribution, or display, etc., there’s no preemption. The extra element must change the nature of the claim, making it qualitatively different from copyright.

The court noted that, when an extra element in an unfair competition claim is found, there’s usually a separate allegation of some specific act of unfair competition (breach of trust, fraud). Usually, courts should look at the required elements of the state claim, but sometimes they have to look at the underlying allegations. Such deeper analysis may be required for UDTPA claims, since the UDTPA is such a broad regulation of unfair and deceptive conduct. Stating a claim under the UDTPA requires an allegation of (1) an unfair or deceptive act or practice, (2) in or affecting commerce, (3) that injured the plaintiff. (2) and (3) aren’t going to be extra elements, and so the question is whether (1) is different from what the Copyright Act covers. Sometimes that will be true, and other times it won’t be.

Rutledge argued that misrepresentation and deception were extra elements that distinguished the state-law cause of action: (1) misrepresentation of the materials as defendants’ own; (2) alteration of the materials; (3) “surreptitious” posting of the originals on the internet; and (4) unauthorized use of the materials. The court found that, to survive preemption, the definition of what constitutes unfairness and deception needed to rest on alleged misconduct separate from acts governed by the Copyright Act.

The misrepresentation claim was nothing more than reverse passing off, “the natural consequences of a Copyright Act violation.” With no separate statement or half-truth, there was no extra element. Alteration, too, was merely an alleged violation of either the derivative works right or, more likely, the reproduction right via substantial similarity. “Surreptitious” posting, however sneakily done in the middle of the night, was also just a copyright violation. Unauthorized “use” requires a pause—“use” is not a copyright right, but to the extent plaintiff meant reproduction, distribution, and display, that’s again just a copyright claim. Plaintiff also alleged use of the materials to perform medical treatment. The court treated this as an allegation of use of the ideas, rather than the expression. The Copyright Act bars protection for ideas, and as part of that preempts idea claims like this where no contractual violation is alleged. (Depending on the claims, “use” could also mean simply consulting the materials, which implicates no copyright rights but is allowed by the first sale doctrine.)


Ethan said...

Your description of the case seems to suggest agreement. Would you feel differently if plaintiff had argued a contract violation was an additional element? It sounds like the facts may foreclose such an argument in this case, as the license had no post-license clauses, ("In May 2006, the contract with Rutledge ended.") but a contract expressly prohibiting post-term-of-license-use could provide just such an extra element, no?

Or is violation of a 'contract not to infringe' just another state-law element that is qualitatively the same as a copyright right?

RT said...

I think there should be more contract preemption than there is, but I agree that a contract can provide an extra element under appropriate circumstances. But I would think the appropriate aim would be to create a noncompetition agreement, or a protection for the licensor's trade secrets. Those aims, while they may deter unlicensed copying, are not targeted at copying or "use" of copyrighted materials as such, but rather at protecting a valuable business model, and so there's no conflict with copyright.