Kabehie v. Zoland

125 Cal.Rptr.2d 721

102 Cal.App.4th 513

Seyed E. KABEHIE et al., Plaintiffs and Appellants, v. Farid ZOLAND et al., Defendants and Respondents.

No. B148827.

Court of Appeal, Second District, Division 5.

September 26, 2002.

Thomas N. Cano, Woodland Hills, for Plaintiffs and Appellants.

Law Offices of Steven T. Lowe and Steven T. Lowe, Los Angeles, for Defendants and Respondents.

GRIGNON, Acting P.J.

This case involves causes of action for breach of contract, fraud and interference with economic relations, arising out of contracts for the purchase of exclusive rights to music compositions. The trial court granted defendants' motion for judgment on the pleadings on the ground these state law causes of action were preempted by federal copyright law. We conclude that such state law causes of action are preempted by federal copyright law only to the extent they assert rights equivalent to the exclusive rights protected by federal copyright law. State law causes of action are not preempted if they require elements that are qualitatively different from the elements of a federal copyright infringement action. This is the "extra element" test for federal copyright preemption. In the context of a breach of contract cause of action, the extra element is not supplied by the mere breach of a promise giving rise to rights equivalent to copyright protection; the extra element must be a contractual promise creating a right not existing under federal copyright law. We conclude some of the causes of action are preempted and others are not. We reverse with directions to grant the motion in part and deny it in part.

FACTS AND PROCEDURAL BACKGROUND

Plaintiffs and appellants Seyed E. Kabehie and his production company Pars Video, Inc. (collectively Pars) duplicate, advertise, and sell music cassettes, videotapes, and compact discs. Defendant and respondent Farid Zoland is a music composer and producer. Zoland and defendant and respondent Mehin Abadani conduct business together through their production company, defendant and respondent Avang Music Company (collectively Avang).

Commencing August 1984, Pars entered into a number of contracts with Avang to purchase Avang's exclusive rights, titles and interests in several albums of music composed, arranged and produced by Zoland. In addition, Pars purchased third parties' interests in certain albums of music that had previously been owned by or in partnership with Avang. On December 23, 1989, Pars agreed to pay Avang $24,000 for the exclusive rights to four albums of music. The master recordings for the four albums were to be delivered to Pars by Avang. On January 17, 1995, Pars agreed to pay Avang $25,000 for the exclusive rights to three as yet unrecorded albums of music. The master recordings for the three new albums were to be delivered to Pars by Avang in March, May and July 1995, respectively.

Avang breached the agreements by producing, duplicating, advertising and selling the musical materials covered by the agreements and otherwise interfering with Pars's property rights in the musical materials. Avang also breached the December 23, 1989 agreement by refusing to deliver the master recordings for three of the four albums to Pars. In August 1995, Avang breached the January 17, 1995 agreement to deliver the master recordings for three new albums of music by failing to deliver any of the master recordings.

On April 1, 1999, Pars filed a first amended complaint against Avang alleging breach of contract, rescission, common counts, accounting, interference with economic relations and fraud. On August 4, 2000, Avang filed a motion for judgment on the pleadings on the ground of preemption by federal copyright law. The trial court granted the motion with leave to amend. No amended complaint was filed. The trial court dismissed the complaint. Pars appealed.¹

DISCUSSION

Standard of Review

A motion for judgment on the pleadings may be made on the same ground as for a general demurrer, that the pleading at issue fails to state facts sufficient to constitute a legally cognizable claim or defense. (Colberg, Inc. v. State of California ex rel. Dept. Pub. Wks. (1967) 67 Cal.2d 408, 411-412, 62 Cal.Rptr. 401, 432 P.2d 3; Sofias v. Bank of America (1985) 172 Cal.App.3d 583, 586, 218 Cal. Rptr. 388; Code Civ. Proc, § 438, subd. (c)(1)(B)(ii).) Our review is guided by the same rules governing the review of the sustaining of a general demurrer. "`We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.' [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]" (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) Where a plaintiff is given leave to amend and chooses not to do so, we examine the complaint only to find whether it states a cause of action, not to determine whether plaintiff might have been able to state one. (Pavlovsky v. Board of Trade (1959) 171 Cal.App.2d 110, 115, 340 P.2d 63.)

Federal Copyright Law

The 1976 Copyright Act (the Act) extends federal copyright protection to "original works of authorship fixed in any tangible medium of expression." (17 U.S.C. § 102(a).) Works of authorship include musical works. (Ibid) Section 106 of the Act grants the copyright owner exclusive rights to reproduce, adapt, distribute, perform, and display the copyrighted work. (17 U.S.C. § 106.)²

"`"[W]hen acting within constitutional limits, Congress is empowered to preempt state law by so stating in express terms. [Citation.]"'" (KNB Enterprises v. Matthews (2000) 78 Cal.App.4th 362, 368, 92 Cal.Rptr.2d 713.) Section 301, subdivision (a) of the Act³ expressly preempts state laws that protect "legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by [section 106]." (Balboa Ins. Co. v. Trans Global Equities (1990) 218 Cal.App.3d 1327, 1339, 267 Cal.Rptr. 787.) Section 301, subdivision (b) represents the obverse of subsection (a), allowing states to regulate "activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by [section 106]." (17 U.S.C. § 301(b).) The Act does not preempt all state common law affecting copyright material, but only state common law meeting two conditions. (United States Golf Assn. v. Arroyo Software Corp. (1999) 69 Cal.App.4th 607, 621, 81 Cal. Rptr.2d 708.) "Thus, for preemption to occur under the Act, two conditions must be met: first, the subject of the claim must be a work fixed in a tangible medium of expression and come within the subject matter or scope of copyright protection ..., and second, the right asserted under state law must be equivalent to the exclusive rights contained in section 106." (Fleet v. CBS, Inc. (1996) 50 Cal.App.4th 1911, 1918-1919, 58 Cal.Rptr.2d 645; accord, KNB Enterprises v. Matthews, supra, 78 Cal.App.4th at p. 369, 92 Cal. Rptr.2d 713.)

In this case, the state claims are based on musical works within the subject matter of copyright. We are concerned with only the "right equivalent to copyright" condition. "[I]n essence, a right that is `equivalent to copyright' is one that is infringed by the mere act of reproduction, performance, distribution, or display." (1 Nimmer on Copyright (Rel.57) § 1.01[B][1], p. 1-12 [fns. deleted; hereinafter Nimmer].) If the act of reproduction, performance, distribution or display will in itself infringe the state-created right, then such right is preempted. (Id. at p. 1-13.) Such a state right is preempted even if the state-created right is broader or narrower than the comparable federal right. (Id at pp. 1-11-1-12.) "But if qualitatively other elements are required, instead of, or in addition to, the acts of reproduction, performance, distribution, or display, in order to constitute a state-created cause of action, then the right does not lie `within the general scope of copyright,' and there is no pre-emption." (Id. at p. 1-13.)

Nimmer's analysis of federal copyright preemption is referred to as the "extra element" test. (Balboa Ins. Co. v. Trans Global Equities, supra, 218 Cal.App.3d at p. 1340, 267 Cal.Rptr. 787.) To avoid preemption, the extra element must be one that changes the nature of the action so that it is qualitatively different from a copyright infringement claim. (Ibid.) "In a proper case, the same conduct may support relief under multiple theories. Preemption law, however, requires analysis of each theory to determine whether it contains the necessary qualitatively different extra element distinguishing it from copyright protection." (Id. at p. 1342, 267 Cal.Rptr. 787, fn. omitted.)

The California Supreme Court has not addressed the issue of federal copyright preemption of state actions. California courts of appeal have generally adopted Nimmer's extra element test for federal copyright preemption. (KNB Enterprises v. Matthews, supra, 78 Cal.App.4th at p. 373, 92 Cal.Rptr.2d 713; Fleet v. CBS, Inc., supra, 50 Cal.App.4th at p.1924, 58 Cal.Rptr.2d 645; Balboa Ins. Co. v. Trans Global Equities, supra, 218 Cal.App.3d at p. 1340, 267 Cal.Rptr. 787.) However, no California Court of Appeal has applied the extra element test in the context of a breach of contract cause of action. (Compare Durgom v. Janowiak (1999) 74 Cal. App.4th 178, 186-187, 87 Cal.Rptr.2d 619 [breach of contract action for failure to pay royalties did not involve use of underlying copyrighted material and was therefore not preempted by federal copyright law].)

Breach of Contract

We must determine whether federal copyright law preempts a state law breach of contract action concerning material within the subject matter of copyright. Using Nimmer's extra element test, we focus on whether the breach of...