Royal v. Leading Edge Products, Inc.

• Decision Date: 20 October 1987
• Docket Number: No. 87-1418,87-1418
• Citation: 833 F.2d 1
• Parties: 1987 Copr.L.Dec. P 26,173, 4 U.S.P.Q.2d 1873 James B. ROYAL, Plaintiff, Appellant, v. LEADING EDGE PRODUCTS, INC., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 1

833 F.2d 1

1987 Copr.L.Dec. P 26,173, 4 U.S.P.Q.2d 1873

James B. ROYAL, Plaintiff, Appellant, v. LEADING EDGE PRODUCTS, INC., Defendant, Appellee.

No. 87-1418.

United States Court of Appeals, First Circuit.

Argued Sept. 15, 1987.

Decided Oct. 20, 1987.

Thomas F. Maffei, with whom Scott A. Faust and Choate, Hall & Stewart, Boston, Mass., were on brief, for plaintiff, appellant.

Mark A. Berthiaume, Baltimore, Md., with whom Gary R. Greenberg, P.C. and Goldstein & Manello, Boston, Mass., were on brief, for defendant, appellee.

Before BOWNES, TORRUELLA and SELYA, Circuit Judges.

SELYA, Circuit Judge.

James B. Royal, plaintiff-appellant, felt that he was treated less than royally by his quondam employer, Leading Edge Products, Inc. (Leading Edge), defendant-appellee. He sued, unsuccessfully, in federal district court, and now appeals.

Inasmuch as the district court disposed of this case on Leading Edge's motion to dismiss, Fed.R.Civ.P. 12(b)(1), we accept the factual averments of the complaint as true, and construe those facts in the light most congenial to the appellant's cause. Guessefeldt v. McGrath, 342 U.S. 308, 310, 72 S.Ct. 338, 340, 96 L.Ed. 342 (1952); Chongris v. Board of Appeals, 811 F.2d 36, 37 (1st Cir.), cert. denied, --- U.S. ----, 107 S.Ct. 3266, 97 L.Ed.2d 765 (1987). We eschew, however, any reliance upon "bald assertions, unsupportable conclusions, [or] opprobrious epithets." Id. (citation omitted). Dismissal can be justified only if it clearly appears that no colorable hook exists upon which subject matter jurisdiction can be hung.

I

The defendant is a Massachusetts corporation involved in various facets of the computer industry. According to the complaint, Leading Edge hired Royal in mid-1982 as manager of word processing development. The complaint does not state whether or not there was a written employment contract. In February of 1983, while still in defendant's employ, Royal and a co-worker, one Phil Florence, entered into a royalty agreement with the company. See Appendix. In essence, the pair agreed to develop a distinctive "software package" in exchange for stipulated royalty payments based on future sales. In the appellant's words, "[t]he contractual relationship established between the parties by virtue of the royalty agreement was entirely separate and distinct from their employment relationship." Complaint p 7.

Florence and Royal successfully accomplished their goal before the year was out. As completed, the package was an original work comprising copyrightable subject matter under federal law. Yet, notwithstanding what plaintiff (self-interestedly) describes as the "exceptionally high quality" of the product, id. at p 10, Leading Edge terminated his employment on April 29, 1986. It has not been alleged that the firing was in contravention of any express term of either the royalty agreement or the underlying employment agreement.

Appellant has not been paid royalties for any period after April 29, 1986. Under the royalty contract, no further royalties would be due if he was fired for cause; but, if he was discharged "for no cause," then he would be entitled to royalties for a period of "five (5) years from date of termination." The complaint alleges that he was terminated "without cause." Complaint p 11.

II

The plaintiff's pleading limned four causes of action, viz:

Count I: A request for issuance of a declaratory judgment that Royal was a co-owner of the copyright in the software package as of April 29, 1986, together with an accounting for profits derived since that date.

Count II: A claim for damages for breach of the royalty agreement (nonpayment of royalties).

Count III: An unfair trade practice claim for treble damages under Mass.Gen.L. c. 93A, Sec. 11.

Count IV: A common law damages claim for breach of an implied covenant of good faith and fair dealing.

There is no diversity of citizenship or other basis for federal jurisdiction apart from the existence vel non of some cognizable federal question. Royal concedes that the last three counts of his complaint are dependent entirely on state law, and present no uniquely federal aspects. He endeavors to forge his jurisdictional hook solely on the anvil of Count I. As the plaintiff envisions the universe, the district court had subject matter jurisdiction over that count by virtue of 28 U.S.C. Sec. 1338(a), ¹ thus gaining pendent jurisdiction over the trio of state-law claims. The district court disagreed, and so do we.

III

The plaintiff asserts that his claim for a declaratory judgment is rooted in federal copyright law, thus triggering the jurisdictional snare of Sec. 1338(a). But, that is a ketchup bottle of an argument: it looks full at first glance, but it is surpassingly difficult to get anything out of it.

It is settled beyond peradventure that an action does not "arise under" the federal copyright laws merely because it relates to a product that is the subject of a copyright. See Topolos v. Caldewey, 698 F.2d 991, 993 (9th Cir.1983). The question of whether the suit "arises under" the copyright law is considerably more sophisticated. The most frequently cited test is that formulated by the Second Circuit, along the lines that:

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 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. The general interest that copyrights, like all other forms of property, should be enjoyed by their true owner is not enough to meet this last test.

T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir.1964), cert. denied, 381 U.S. 915, 85 S.Ct. 1534, 14 L.Ed.2d 435 (1965). Royal acknowledges that Harms sets forth the applicable standard, but urges that the first count of his complaint "asserts a claim requiring construction of the Act," id., because it implicates the so-called work-made-for-hire doctrine.

A brief explanation is in order. The Copyright Act defines a "work made for hire" in relevant part as one "prepared by an employee within the scope of his or her employment." 17 U.S.C. Sec. 101. ² The Act further provides that:

In the case of a work made for hire, the employer ... is considered the author ..., and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.

17 U.S.C. Sec. 201(b).

Royal admits that the copyright to the software package inured to his employer, Leading Edge, by virtue of the work-made-for-hire doctrine. He contends, however, that appellee's ensuing breach of the royalty agreement--the refusal to pay Royal royalties past the date he was cashiered--entitled him to rescind the agreement and to regain his ownership rights. But in our view, there is less to this argument than meets the eye. Royal's assertions grow out of his purported contract rights and "arise under" state law. The work-made-for-hire doctrine is, at best, only tangentially implicated. Indeed, it is not even mentioned in the complaint.

At bottom, there are only two possibilities: if the royalty agreement stands, then the plaintiff's sole remedy for the breach of it would be money damages--and the Copyright Act need not be construed. If, however, as plaintiff suggests, the royalty agreement is subject to rescission because of defendant's material breach thereof, then that agreement would vanish. We would be left with no "written instrument" signed by the parties, 17 U.S.C. Sec. 201(b), and the employer would be "considered the author" in the absence of such an instrument. Id. Either way, appellant would have no statutorily-based ownership rights. So, as to the jurisdictional question, Royal finds himself in a classic no-win situation.

In an effort to avoid the seemingly inexorable result of this logic, plaintiff points to some indications in a few district court cases that, since an employer's status qua copyright proprietor can be conceptualized as stemming from a presumed agreement between employer and employee--"I will give you a job; you will give me the copyright"--then a breach of that "unspoken bargain" would entitle the employee to rescind the employment agreement and reclaim the copyright. See, e.g., Black v. Pizza Time Theatres, Inc., 1983 Copyright L.Rep. (CCH) p 25,569 (N.D.Cal.1983) ; Brown v. Cosby, 433 F.Supp. 1331, 1343 (E.D.Pa.1977); Hughey v. Palographics Co., 189 U.S.P.Q. (BNA) 527, 529-31 (D.Colo.1976). See also 1 M. Nimmer, Nimmer On Copyright Sec. 5.03[E] (1986). Yet, we need not probe too deeply into the somewhat dubious provenance of this theory. Assuming without deciding that such an exception may come into play in a proper case, Royal does not profit.

In this instance, there is scant reason to imply any arrangement between employer and employee as to ownership of the copyright. The royalty agreement makes clear that the trade-off for the proprietary copyright interest is not a job, but the payment of royalties. See Appendix. That unambiguous compact occupies the field. It makes explicit provision with respect to what consequences will flow from termination of the author's employment--whether for cause, without cause, or in the event of Royal's voluntary departure. See id. Reversion of the copyright is not among those consequences. Where, as here, the contract itself is clear, courts must be loath to presume added promises out of thin air. Cf., e.g., Mathewson Corp. v. Allied Marine Industries, Inc., 827 F.2d 850, 855-56 (1st Cir.1987); Allied Communications Corp. v. Continental Cellular Corp., 821 F.2d 69, 73-74 (1st Cir.1987). The express terms of Royal's bargain with the company leave no room for unstated conditions to creep into the deal.

Furthermore, the plaintiff has described the...