Aventine Renewable Energy Inc. v. Jp Morgan Sec. Inc.

458 Mass. 674

940 N.E.2d 413

AVENTINE RENEWABLE ENERGY, INC., Plaintiff–Appellant,

v.JP MORGAN SECURITIES, INC. and JP Morgan Chase Bank, N.A., Defendants–Appellees.

Supreme Judicial Court of Massachusetts.

OPINION TEXT STARTS HEREEssex.

Susan M. CURTIS, executrix,¹v.HERB CHAMBERS I–95, INC.,² & others.³

SJC–10662.

Argued Oct. 5, 2010.Decided Jan. 18, 2011.

Carol E. Head (Jonathan M. Albano with her), Boston, for Globe Specialty Products, Inc.Edward C. Cooley, Quincy, for Herb Chambers I–95, Inc., & others.Robert S. Wolfe for the plaintiff.Present: MARSHALL, C.J., IRELAND, SPINA, COWIN, CORDY, BOTSFORD, & GANTS, JJ.⁴

GANTS, J.

The plaintiff, Susan M. Curtis, the executrix of the estate of Harold Curtis, filed a complaint in Superior Court against the Chambers defendants (see note 3, supra ) and Globe Specialty Products, Inc. (Globe Specialty), alleging: common-law trade dress (count I), breach of the implied covenant of good faith and fair dealing (count II), interference with advantageous business relations (count III), and unfair and deceptive trade practices in violation of G.L. c. 93A (count IV). A judge dismissed the complaint, concluding that all the claims were preempted by the Federal Digital Millennium Copyright Act, 17 U.S.C. § 301 (2006) (Copyright Act). The Appeals Court affirmed the dismissal of count I, but reversed the dismissal of the remaining counts, and remanded the case. Curtis v. Herb Chambers I–95, Inc., 75 Mass.App.Ct. 662, 670, 672–673, 677, 915 N.E.2d 1121 (2009). We granted the defendants' application for further appellate review. We conclude that § 301 of the Copyright Act preempts all the claims in the complaint, and affirm the dismissal of the complaint.

Background. Harold Curtis, doing business as Harold Curtis & Associates (Curtis), initially filed suit against the defendants in the United States District Court for the District of Massachusetts, asserting infringement under the Copyright Act, and trade dress violations of the Lanham Act, 15 U.S.C. § 1125 (2006), as well as the four State claims. The Federal judge allowed the defendants' motion for summary judgment as to the Federal claims. As to the claim of copyright infringement, the judge concluded that Curtis had “not registered any copyright for the advertisements at issue, and copyright registration is a condition precedent to bringing an infringement action.” As to the Lanham Act claim, the judge concluded that Curtis had failed to make the “vigorous evidentiary showing” needed to prove that the advertisements had acquired secondary meaning, and that secondary meaning was required to recover on a statutory trade dress claim involving product design.⁵ Having dismissed the two Federal claims, the judge declined to exercise supplemental jurisdiction over the State claims, and declared that he would “transfer” the case to the Massachusetts Superior Court. After the case was forwarded and assigned a docket number, a Superior Court judge correctly allowed the defendants' motion to dismiss because a Federal court does not have authority to transfer to a State court a case originally filed in Federal court. See Maher v. GSI Lumonics, Inc., 433 F.3d 123, 125 & n. 2 (1st Cir.2005). Curtis's executrix then filed the instant complaint in Superior Court.⁶

Discussion. We review the allowance of a motion to dismiss de novo. Harhen v. Brown, 431 Mass. 838, 845, 730 N.E.2d 859 (2000). We accept as true the allegations in the complaint and draw every reasonable inference in favor of the plaintiff. Warner–Lambert Co. v. Execuquest Corp., 427 Mass. 46, 47, 691 N.E.2d 545 (1998). Preemption under the Copyright Act determines whether a court has subject matter jurisdiction over the claim under Mass. R. Civ. P. 12(b)(1), 365 Mass. 754 (1974), and whether the allegations state a claim on which relief can be granted under Mass. R. Civ. P. 12(b)(6), 365 Mass. 754 (1974). In making this determination, we look beyond the conclusory allegations in the complaint and focus on whether the factual allegations plausibly suggest an entitlement to relief. See Iannacchino v. Ford Motor Co., 451 Mass. 623, 635–636, 888 N.E.2d 879 (2008).

The gist of the complaint is that Harold Curtis “designed and produced unique and distinctive printed promotional materials used by automobile dealerships to conduct direct mail campaigns and advertise dealership sales events.” Between May and November, 2000, he contracted with and sold marketing services using these distinctive and unique advertising materials to the Chambers defendants. In November, 2000, Globe Specialty approached Curtis and offered to print and distribute the advertising materials that he was selling to the automobile dealerships, but he declined the offer. Beginning in February, 2001, Globe Specialty distributed and published marketing materials for the Chambers defendants that, “[t]o an ordinary observer ... were substantially similar to those produced by Curtis,” and the Chambers defendants ceased doing business with Curtis. Curtis demanded in writing that the defendants terminate their conduct, but the demand was ignored. Because the promotional materials published and distributed by Globe Specialty for the Chambers defendants were used so often in the same marketing areas served by other Curtis automobile dealership clients, Curtis could no longer sell his promotional materials and services to the automobile dealerships in these marketing areas.

Under the preemption provision of the Copyright Act, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright and that come within the subject matter of copyright are governed exclusively by the Act. 17 U.S.C. § 301(a). “[N]o person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.” Id.⁷ To prevail on a motion to dismiss a State law claim based on preemption under the Act, a defendant must show, first, that the work at issue falls within the type of works protected by the Copyright Act (subject matter requirement), and, second, that the State law claim asserts a legal or equitable right equivalent to an exclusive right granted under § 106 of the Act (equivalency requirement). See Lee v. Mt. Ivy Press, L.P., 63 Mass.App.Ct. 538, 548, 827 N.E.2d 727 (2005); National Basketball Ass'n v. Motorola, Inc., 105 F.3d 841, 848 (2d Cir.1997). Because there is no dispute that the advertising materials at issue in the State law claims meet the subject matter requirement, the central issue in this case is the interpretation and application of the equivalency requirement.

A State law claim rests on a legal or equitable right that is equivalent to an exclusive right granted under the Copyright Act where: (1) an act that abridges the right would, by itself, infringe an exclusive right provided by Federal copyright law, e.g., an act of reproduction, performance, distribution, or display; and (2) the State law claim includes no “extra element” that “changes the ‘nature of the action so that it is qualitatively different from a copyright infringement claim’ ” (emphasis in original). Computer Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir.1992) ( Altai ), quoting Mayer v. Josiah Wedgwood & Sons, 601 F.Supp. 1523, 1535 (S.D.N.Y.1985). See 1 M.B. Nimmer & D. Nimmer, Copyright § 1.01[B] [1], at 1–11—1–13 (2010) (Nimmer) (“right that is ‘equivalent to copyright’ is one that is infringed by the mere act of reproduction, performance, distribution, or display ... [b]ut if qualitatively other elements are required, .... in order to constitute a state-created cause of action, then the right does not lie ‘within the general scope of copyright’ ”). To determine whether a claim is qualitatively different, we look at “what [the] plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced.” Altai, supra, quoting 1 R.M. Milgrim, Trade Secrets § 2.06A[3], at 2–150 (1992). “[T]he mere fact that a state law requires scienter as a condition to liability, whereas the Copyright Act does not, cannot save the state law from pre-emption.” 1 Nimmer, supra at 1–11—1–12. See Altai, supra.

In the context of this case, the equivalency requirement can be stated somewhat differently. A State law claim is qualitatively different from a copyright infringement claim if the plaintiff can prevail even though the plaintiff holds no copyright or right equivalent to copyright in the advertising materials. Because Curtis cannot prevail on any of the four State law claims without a right equivalent to copyright, the Copyright Act preempts each of the four claims. We address each separately.

Curtis's common-law trade dress claim (count I) essentially alleges that Globe Specialty and the Chambers defendants produced materials that imitated his advertisement design and represented it as their own. This is characterized in the law as “reverse passing off,” a variant of an unfair competition claim. See Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 27 n. 1, 123 S.Ct. 2041, 156 L.Ed.2d 18 (2003) (defining reverse passing off); 1 Nimmer, supra at § 1.01[B][1][e], at 1–35—1–36. But this reverse passing off claim can succeed only if Curtis held a right equivalent to copyright that could prevent the defendants from copying his advertising design and passing it off as their own. Therefore, the nature of the claim is not qualitatively different from copyright infringement, and so is preempted. See Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1213 (9th Cir.1998) (reverse passing off claims preempted); Rutledge v. High Point Regional Health Sys., 558 F.Supp.2d 611, 621 n. 4 (M.D.N.C.2008) (collecting cases, stating, “Courts nationwide recognize that the Copyright Act preempts claims of ‘reverse passing off’ brought under state laws governing unfair and deceptive trade practices”). “State claims of reverse...