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JustMed, Inc. v. Byce - 600 F.3d 1118 (9th Cir. 2010)


An action "arises under" the Copyright Act if and only if the complaint is for a remedy expressly granted by the Act, e.g., a suit for infringement or for the statutory royalties for record reproduction, 17 U.S.C.S. § 101, or asserts a claim requiring construction of the Act or, at the very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim. In summary, the T.B. Harms test requires the district court to exercise jurisdiction if: (1) the complaint asks for a remedy expressly granted by the Copyright Act; (2) the complaint requires an interpretation of the Copyright Act; or (3) federal principles should control the claims. The T.B. Harms test is essentially a reiteration of the well-pleaded complaint rule that federal jurisdiction exists only when a federal question is presented on the face of a properly pleaded complaint.


A dispute arose over whether plaintiff, a small technology start-up company, owned the source code developed for its product. Its informal employment practices raised questions as to whether defendant-appellant Michael Byce was an employee when he developed the source code. The company sued defendant, asserting state law claims including misappropriation of a trade secret and conversion. Defendant counterclaimed, seeking a judgment that he was the sole owner under the Copyright Act. The U.S. District Court for the District of Idaho entered judgment for the company. Defendant appealed.


Did plaintiff company own the source code developed for its product?




The district court did not err in holding that defendant was an employee and that the source code was a work made for hire; the contemplated indefinite duration of the relationship, the tasks defendant did for the company, the fact that defendant earned a salary from the company, and the nature of the company's business all supported the finding that defendant was an employee. The company's failure to comply with federal and state employment or tax laws was more likely attributable to the start-up nature of the business than to defendant's alleged status as an independent contractor. However, the court reversed as to the company's misappropriation claim because, besides filing for a copyright and threatening to withhold the source code, defendant made no other "use" of the source code (rather, defendant obtained leverage over negotiations with the company by deleting all copies of the source code from the company's computers, giving defendant exclusive possession). Nothing brought defendant's inappropriate conduct beyond the realm of simple conversion into that of misappropriation of a trade secret.

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