Effects Associates, Inc. v. Cohen

• Citation: 817 F.2d 72
• Decision Date: 08 May 1987
• Docket Number: No. 86-5997,86-5997
• Parties: 1987 Copr.L.Dec. P 26,094, 2 U.S.P.Q.2d 1718 EFFECTS ASSOCIATES, INC., Plaintiff-Appellant, v. Larry COHEN, Larco Productions, Inc., and New World Pictures, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 72

817 F.2d 72

1987 Copr.L.Dec. P 26,094, 2 U.S.P.Q.2d 1718

EFFECTS ASSOCIATES, INC., Plaintiff-Appellant, v. Larry COHEN, Larco Productions, Inc., and New World

Pictures, Defendants-Appellees.

No. 86-5997.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 4, 1987.

Decided May 8, 1987.

John B. Overton, Sausalito, Cal., for plaintiff-appellant.

Vincent Cox, Los Angeles, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before KENNEDY, SKOPIL and KOZINSKI, Circuit Judges.

KOZINSKI, Circuit Judge:

We consider whether a district court may entertain a copyright infringement claim where the complaint also alleges an oral promise between the parties that may amount to an assignment or license for use of the copyrighted works.

Facts

Appellant Effects Associates, Inc. (Effects) is the creator of several original motion picture special effects shots embodied in filmstrip form. Effects brought suit against appellee Larry Cohen and/or Larco Productions, Inc. (Cohen) and appellee New World Pictures (New World) for copyright infringement. Effects alleges that Cohen incorporated its special effects shots into a feature film called The Stuff, and entered into an agreement with New World under which New World would copy and distribute the film containing appellant's works.

Effects makes a separate claim for fraud and deceit. It alleges that Cohen promised to pay Effects for use of its works; made several payments that amounted to less than what Effects demanded; and negotiated, but failed to sign, an agreement to discharge Cohen's outstanding obligations with respect to Effects' works.

Relying on this court's decision in Topolos v. Caldeway, 698 F.2d 991 (9th Cir.1983), the district court dismissed the action. It held that Effects' claims did not "arise under" federal law because the principal and threshold issue to be resolved was a question of state contract law.

Discussion

Federal courts have exclusive jurisdiction over actions arising under federal copyright laws. 28 U.S.C. Sec. 1338(a) (1982). However, we have consistently held that an action does not arise under the federal copyright laws merely because its subject matter happens to involve a copyright. Topolos, 698 F.2d at 993; see Dolch v. United California Bank, 702 F.2d 178, 180 (9th Cir.1983). Rather, an action arises under the federal copyright laws

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.

T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir.1964) (Friendly, J.), cert. denied, 381 U.S. 915, 85 S.Ct. 1534, 14 L.Ed.2d 435 (1965).

Here, Effects seeks a remedy expressly provided by the Copyright Act. The complaint pleads the elements of copyright infringement: ownership of the copyright, copying by the defendant and distribution for exhibition. The inclusion of a single paragraph (for purposes of pleading a separate claim for fraud and deceit) alluding to an oral promise concerning the use of Effects' works, does not transform Effects' infringement claim into one for breach of contract. Effects pleads neither a valid transfer of its copyright, nor the existence of a license for the use of its works. It simply does not rely on an agreement between the parties; to the contrary, it charges that Cohen's oral representations amounted to fraud. To be sure, Effects might have chosen to rely instead on the oral agreement and brought suit for breach of contract. However, plaintiff is master of his claim and in some cases will have the choice of framing his action either as one for infringement or for breach of contract. See The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 411, 57 L.Ed. 716 (1913).

It may well turn out that Effects has alienated its interest in the copyright, in which case defendants would be entitled to prove that the alleged oral promise constituted an assignment or a license. ¹ However, a claim "arises under" federal law for purposes of federal question jurisdiction on the basis of a well-pleaded complaint, not from anticipation of possible affirmative defenses. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 43, 53 L.Ed. 126 (1908) (plaintiff may not invoke original federal jurisdiction by anticipating a defense raising a federal question); C. Wright, A. Miller & E. Cooper, 13B Federal Practice and Procedure Sec. 3566 (1984). Conversely, federal question jurisdiction is not defeated by reference to potential affirmative defenses raising questions of state law. Effects' claim "is for a remedy expressly granted by the Act, e.g., a suit for infringement," T.B. Harms, 339 F.2d at 828, and the complaint raises no claims...