The Southern District of New York recently refused to
dismiss a breach of contract counterclaim asserted by the Estate of Mario Puzo
against Paramount Pictures. Paramount
Pictures Corp. v. Puzo, 2012 U.S. Dist. LEXIS 139827 (S.D.N.Y. Sept. 26,
2012) [enhanced version available to lexis.com subscribers].
The counterclaim is part of Paramount's copyright infringement lawsuit, which was
filed after the Estate's publication of The
Family Corleone, a prequel to The
In 1969, Mario Puzo granted Paramount "any and all
copyrights ... [in The Godfather] and
all rights now known or hereafter accruing therein and thereto, forever and
throughout the world ...." The parties, however, struck language that would have
granted Paramount the right to "publish said work and/or any versions or
adaptations thereof, or any part or parts thereof, and to vend copies
thereof." The latter language is central to the dispute.
The New York court granted Paramount's motion to dismiss counterclaims
for cancellation, rescission, and tortious interference. However, Paramount also
moved to dismiss the Estate's breach of contract claim on the grounds of
The Estate asserted that the obligation Paramount attempted
to avoid, refused to perform, and actually failed to perform was its
obligation, arising out of the implied covenant of good faith and fair dealing,
not to interfere with the book publishing rights reserved in Puzo. Because Paramount did not move to dismiss the
Estate's breach of contract claim for any reason other than preemption, the New
York court took no position on whether or not the Estate's theory of breach was
On the question of preemption, the New York court determined
that the contract claim was not preempted. The second prong of the preemption
test ("general scope requirement") looks to determine if "the claim seeks
to vindicate legal or equitable rights that are equivalent to one of the bundle
of exclusive rights already protected by copyright law." The parties deeply
contested whether the general scope requirement was satisfied.
The New York court cited Forest
Park Pictures v. Universal TV Network, Inc., 683 F.3d 424 (2d Cir. N.Y.
2012) [enhanced version available to lexis.com subscribers],
in which the Second Circuit denied preemption because the breach of contract
claim had three qualitative differences with the copyright claim: (1) it
involved a right not provided for by the Copyright Act (i.e., receipt of
payment for the use of a work); (2) it required proof of elements beyond use or
copying (i.e., mutual assent and valid consideration); and (3) it involved a
right held only against the network and not a right held against the world. The
New York court determined that each of the three qualitative differences
identified in Forest Park were present.
Accepting the Estate's construction of the 1969 Agreement,
the contract did not simply require Paramount to honor the Estate's exclusive rights
under the Copyright Act. Rather, it required Paramount to comply with a
separate contractual obligation (i.e., not to engage in conduct violative of
the implied covenant of good faith and fair dealing). It was the alleged
violation of the latter obligation that formed the basis of the Estate's breach
of contract claim. Consequently, the claim was not preempted.
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