Opinion
CIVIL ACTION NO. SA-03-CA-0465 XR (NN)
February 12, 2004
MEMORANDUM AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
I. Introduction
The matter before the court is the motion to dismiss brought by defendant Bago Luma Collections, Inc. (Docket Entry 7). The motion was filed on July 14, 2003, and seeks dismissal of all the claims contained in plaintiff's complaint on the basis that this court lacks subject matter jurisdiction over the instant action.
Plaintiff's complaint in federal court alleges that defendant Bago Luma Collections, Inc. (hereafter "defendant") hired plaintiff to take photographic images of defendant's merchandise for a catalog. When the photographs were completed, plaintiff sent defendant an invoice which stated, inter alia, that the usage rights to the images were not released until full payment was received. Plaintiff contends that, although full payment was never received in breach of the parties' contract, defendant nevertheless included plaintiffs copyrighted images in defendant's catalog. Consequently, plaintiff asserts that defendant is liable for copyright infringement — as a result of defendant's unauthorized use of plaintiff's images — and breach of contract — as a result of defendant's failure to make full payment in violation of the contract.
Docket Entry 1, at 3.
Id.
Id., at 4.
At the time plaintiff's original complaint was filed in this court, plaintiff's copyright application for the images of defendant's merchandise was pending. Plaintiff has subsequently amended its complaint and alleged therein that the United States Copyright Office received and recorded plaintiff's copyright application, and issued a registration number of VAU582-329 to the images at issue.
Docket Entry 46, ¶ 18; docket entry 48, ¶ 18. Importantly, this court could have dismissed plaintiffs complaint for want of subject matter jurisdiction sua sponte when the copyright applications were pending. See. e.g. Gerig v. Krause Publications, Inc. , 58 F. Supp.2d 1261, 1263 (D, Kan. 1999). Since plaintiff's copyright registration has been processed and completed, however, it would be fufile to dismiss this action without prejudice only to have plaintiff immediately re-file the same action. Accordingly, I recommend that the Court not dismiss the complaint at this time.
Defendant seeks to dismiss the complaint on the basis that this court lacks subject matter jurisdiction over the instant action. Specifically, defendant contends that the essence of the instant action is defendant's alleged breach of contract — not its purported copyright infringement. As such, defendant asserts that this action does not "arise under" the Copyright Act and this court cannot properly exercise subject matter jurisdiction.
Docket Entry 7.
Having reviewed the entire record in this case, including defendant's arguments in favor of dismissal, plaintiff's arguments through its reply to defendant's motion, and the applicable case, statutory, and regulatory law, I have concluded that defendant's motion to dismiss is without merit. Therefore, I recommend that defendant's motion to dismiss be DENIED.
Docket Entry 7.
Docket Entry 8.
I have jurisdiction to enter this Memorandum and Recommendation under 28 U.S.C. § 636(b) and the District Court's Order referring all pretrial matters in this proceeding to me for disposition by order, or to aid in their disposition by recommendation where my authority as a Magistrate Judge is statutorily constrained.
Docket Entry 5.
II. Issue Presented
Does this court have subject matter jurisdiction over the instant action? III. Applicable Legal StandardsA. Dismissal Standard
Defendant's motion to dismiss is brought under Federal Rules of Civil Procedure 12(b)(1). Under Rule 12(b)(1), a plaintiffs claim may be dismissed when the court lacks jurisdiction over the subject matter of that claim. In particular, Rule 12(b)(1) authorizes the dismissal of a case for want of subject matter jurisdiction when the district court lacks the statutory and constitutional power to adjudicate the case. A district court may dismiss a case for want of subject matter jurisdiction on any one of three different bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.
As plaintiff notes, defendant failed to identify the Federal Rule of Civil Procedure upon which it based its motion to dismiss. See Docket Entry 8, ¶ 3, at 2. Because defendant's motion seeks dismissal solely on the basis that this court does not have subject matter jurisdiction over the instant action, it is necessarily predicated on Federal Rule of Civil Procedure 12(b)(1).
See Home Builders Association of Mississippi. Inc., v. City of Madison , 143 F.3d 1006, 1010 (5th Cir. 1998).
See Clark v. Tarrant County , 798 F.2d 736, 741 (5th Cir. 1986) (citing Williamson v. Tucker. 645 F.2d 404, 413 (5th Cir.), cert. denied , 454 U.S. 897 (1981)).
B. Overview of Jurisdiction Under the Copyright Act
The issue before the court is whether the Copyright Act confers federal subject matter jurisdiction over the instant action. Regarding jurisdictional issues, the Copyright Act provides:
17 U.S.C. § 101, et seq.
The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases.
Thus, the Copyright Act confers exclusive, original jurisdiction to the federal courts over all actions "arising under" the Act.
In 1964, the Second Circuit analyzed the Copyright Act's "arising under" language in the context of a "hybrid" case — a case which sought relief for both copyright infringement and breach of contract claims. The court articulated a test by which a federal court could determine whether it had jurisdiction over a hybrid case, holding that an action
T.B. Harms v. Eliscu , 339 F.2d 823 (2nd Cir. 1964).
`arises under' the Copyright Act if and only if the complaint is for a remedy expressly granted by the Act . . . 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.
Id. , at 828.
Notably, the Fifth Circuit has consistently embraced this test.
Goodman v. Lee , 815 F.2d 1030 (5th Cir. 1987). See also Kane v. Nace Internat'l , 117 F. Supp.2d 592, 594 (S.D. Tex. 2000).
V. Analysis
Defendant moves to dismiss the instant action on the basis that this court lacks subject matter jurisdiction over plaintiff's claims. Specifically, defendant contends:
If Bago Luma had paid the remaining sum of $1,456.38, then Bago Luma's alleged use and distribution of the photographs and catalogue would unquestionably have been authorized. Thus, Plaintiff's allegation of copyright infringement is merely incidental to the breach of contract claim and collections lawsuit.
Docket Entry 7, at 2.
In support of its motion to dismiss, defendant cited several out of circuit cases which stood for the proposition that a federal court does not have subject matter jurisdiction over an action when the claims for copyright infringement are merely incidental because the essence of the action lies in a breach of contract. The problem with defendant's position is that it is based on antiquated case law which has been expressly rejected by the majority of circuits, including the very circuit which authored the opinion on which defendant relies.
Docket Entry 7, citing USAR Systems. Inc. v. Brain Works. Inc. , 887 F. Supp. 84 (S.D. N.Y. 1995); Malinowski v. Playboy Enterprises, Inc. , 706 F. Supp. 611 (N.D. Ill. 1989).
Defendant's position finds its origins in the Schoenberg v. Shapolsky Publishers case. In Schoenberg , the Second Circuit addressed the issue of
Schoenberg v. Shapolsky Publishers , 971 F.2d 926 (2nd Cir. 1992). See also USAR Systems, Inc. , 887 F. Supp. 84-85, citing Schoenberg , 971 F.2d, at 931. Notably, the other case upon which defendant relies — Malinowski v. Playboy Enterprises. Inc. , 706 F. Supp. 611 — was decided eleven years before Bassett v. Mashantucket Pequot Tribe , the case which effectively overturned Schoenberg. See Bassett v. Mashantucket Pequot Tribe. 204 F.3d 343 (2nd Cir. 2000). See also discussion, below.
whether a claim asserting infringement as a result of a breach of a contract licensing or assigning a copyright arises under the Copyright Act.
Id. , at 931.
To answer the question, the Court in Schoenberg examined its previous decision in the T.B. Harms case and formulated a three-part test to determine when a federal court can assert jurisdiction over an action which includes both contract and copyright infringement claims: (1) whether the plaintiff's infringement claim was merely `"incidental"' to the contract claims; (2) if not, whether, "the complaint alleges a breach of a condition to, or a covenant of, the contract licensing or assigning the copyright;" and (3) whether
T.B. Harms , 339 F.2d 823.
Schoenberg , at 932.
Id.
the breach is so material as to create a right of rescission in the grantor. If the breach would create a right of rescission, then the asserted claim arises under the Copyright Act.
Id., at 933.
Thus, the Schoenberg test was directed at determining whether the copyright infringement claim constituted the essence of the action.
In 2000, the Second Circuit revisited the Schoenberg decision and concluded that the Schoenberg test was "unworkable." Specifically, in the Bassett decision, the Second Circuit held that the Schoenberg test
Bassett, 204 F.3d. at 352.
left a class of plaintiffs who suffered copyright infringement bereft of copyright remedies. Plaintiffs whose federal lawsuits were dismissed for lack of subject matter jurisdiction on the ground that their copyright claims were `incidental to' their contract claims had no way either to obtain an adjudication of infringement or to obtain relief provided by the Copyright Act, because the Act confers exclusive jurisdiction over copyright claims on federal courts . . . Such plaintiffs would be deprived of the injunctive relief, impoundment remedies, statutory damages, and attorneys fees provided by the Act.
Id., at 348.
In addition to the aforementioned failings of the Schoenberg test, the Bassett Court observed that the three-part test
had the added defect of requiring a court to make findings at the outset of the litigation that could not be discerned from the complaint but instead required a deep understanding of the dispute not usually gained until the case had been heard at trial.
Id.,
In urging a return to the T.B. Harms test, the Bassett court noted that said test
avoids problems that result from the essence-of-the-dispute test, namely that T.B. Harms ( sic) ensured that plaintiffs who sought copyright remedies that depended on a prior showing of contractual entitlement would not be left without the remedies promised by the Copyright Act. T.B. Harms ( sic) also obviated the need for courts to determine at the outset of the litigation whether copyright claims were incidental to contract claims — a difficult determination to make even after discovery and trial, and one that cannot be made reliably on the basis of the complaint alone.
Id., at 349.
In the instant case, defendant clearly predicates its motion to dismiss on the outdated Schoenberg test, urging that the essence of plaintiff's complaint is a contract dispute. Moreover, the face of plaintiff's complaint asserts claims for copyright infringement and requests remedies "expressly granted" by the Copyright Act, including injunctive relief and statutory damages. Following prevailing and clearly controlling case law, I recommend that the court conclude that subject matter jurisdiction exists and that defendant's motion to dismiss be DENIED.
See Docket Entry 7.
See Docket Entry 1, at 5-6,7-10. See also T.B. Harms 339 F.2d, at 828.
VI. Recommendation
Based on the foregoing, it is my recommendation that defendant's motion to dismiss (Docket Entry 7) be DENIED. As previously discussed, plaintiff has properly pled the requisite allegations to establish federal subject matter jurisdiction over the instant action.VII. Instructions for Service and Notice of Right to Object/Appeal
The United States District Clerk shall serve a copy of this Report and Recommendation on each and every party either (1) by certified mail, return receipt requested, or (2) by facsimile if authorization to do so is on file with the Clerk. According to 28 U.S.C. § 636(b)(1) and FED. R. Civ. P. 72(b), any party who desires to object to this report must serve and file written objections to the Report and Recommendation within ten (10) days after being served with a copy unless this time period is modified by the District Court. A party filing objections must specifically identify those findings, conclusions, or recommendations to which objections are being made and the basis for such objections; the District Court need not consider frivolous, conclusive, or general objections. Such party shall file the objections with the Clerk of the Court, and serve the objections on all other parties and the Magistrate Judge. A party's failure to file written objections to the proposed findings, conclusions, and recommendations contained in this report shall bar the party from a de novo determination by the District Court. Additionally, any failure to file written objections to the proposed findings, conclusions, and recommendations contained in this Report and Recommendation within ten (10) days after being served with a copy shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the District Court.
See Thomas v. Arn , 474 U.S. 140, 149-52 (1985); Acuña v. Brown Root, Inc. , 200 F.3d 335, 339 (5th Cir. 2000), cert. denied , 530 U.S. 1229 (2000).
Douglass v. United Servs. Auto. Ass'n. , 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).