A person reviewing a screenplay, script, or other creative work might understand the risk of a future copyright claim if the copyright holder believes his material was used without permission. However, there is an additional risk of other claims that a copyright holder might bring in this situation: one claim is breach of an implied contract. Although a breach of an implied contract claim may appear as if it is of secondary importance to the primary copyright claim, it can be a trap that leads to significant litigation expenses.
In many instances, the Copyright Act bars or "pre-empts" state law claims brought by the same party concerning the same copyrighted work at issue. However, in a recent decision, Benay v. Warner Bros. Entm't Inc., a federal appeals court determined that an alleged breach of implied contract claim was not preempted by the Copyright Act because the plaintiff had asserted an "extra element." The extra element was the allegation that there was an implied agreement between the parties that the defendants would pay for the plaintiff's ideas. This left the defendant defending two different claims with different standards to determine liability. As a result, the costs of defending the lawsuit will likely be significantly higher than if it had to only defend a single copyright infringement claim.
A possible way to decrease the risk of a breach of implied contract claim is, where applicable, to put in place a non-disclosure agreement between the parties before any information is shared. The non-disclosure agreement should not only include the standard provision not to disclose each parties' intellectual property, but also clarify whether or not there is an agreement to pay for the ideas within the subject work. Of course, a non-disclosure agreement creates a contractual obligation with respect to that agreement, but at least the parties will have control over its terms, as well as its duration, and, as a result, any dispute concerning it would likely be less costly than litigating a breach of implied contract claim.
>> The Bottom Line
If you are already entering into a non-disclosure agreement relating to protectable copyrighted material, or if a non-disclosure agreement is otherwise an option, you may be able to reduce your risk of additional and potentially costly claims by including a provision stating that there was not also an implied agreement to pay for the copyright holder's ideas.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
