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Wrench Ltd. Liab. Co. v. Taco Bell Corp. - 256 F.3d 446 (6th Cir. 2001)


Under 17 U.S.C.S. § 301, a state common law or statutory claim is preempted if: (1) the work is within the scope of the subject matter of copyright, as specified in 17 U.S.C.S. §§ 102103; and, (2) the rights granted under state law are equivalent to any exclusive rights within the scope of federal copyright as set out in 17 U.S.C.S. § 106. This preemption analysis has been described as encompassing a "subject matter requirement" and a "general scope" or "equivalency" requirement. 


Plaintiffs, creators of a "Psycho Chihuahua" character and their company, brought suit against defendant Taco Bell, a national fast food chain, claiming breach of implied contract and various torts related to Taco Bell's alleged use of their ideas. The United States District Court for the Western District of Michigan granted defendant Taco Bell summary judgment upon finding that the Copyright Act, 17 U.S.C.S. § 301, preempted all of plaintiffs' claims, including those based on breach of an implied-in-fact contract. P Plaintiffs argued, inter alia, that the district court erred in its preemption analysis under both the "subject matter" and "equivalency" prongs of 17 U.S.C.S. § 301(a), and that their ideas and concepts lacked novelty as a matter of law.


Did the Copyright Act preempt the claim on state law based on a breach of an implied-in-fact contract?




The court of appeals reversed summary judgment on finding that the district court erred with respect to the equivalency prong of the preemption analysis; the plaintiffs' state law implied-in-fact contract claim was not preempted by the Copyright Act. Specifically, the court noted that defendant did not claim that it was aware of plaintiffs' ideas prior to disclosure and thus, summary judgment was inappropriate on the ground that plaintiffs failed to show that their ideas were novel or original. The gist of appellants' state law implied-in-fact contract claim is breach of an actual promise to pay for appellants' creative work.  It is not the use of the work alone but the failure to pay for it that violates the contract and gives rise to the right to recover damages.  Thus, the state law right is not abridged by an act which in and of itself would infringe one of the exclusive rights granted by 17 U.S.C.S. § 106, since the right to be paid for the use of the work is not one of those rights. The judgment of the district court was reversed and remanded where federal copyright law did not preempt plaintiffs' state law breach of an implied-in-fact contract claim where the claim was based on defendant's failure to pay for their ideas, not infringement under the Copyright Act.

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