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Thursday, October 4, 2012

District Court Rules on Paramount's Motion to Dismiss Puzo Estate's Counterclaims

The United States District Court for the Southern District of New York recently awarded a partial win to the Estate of Mario Puzo (author of the popular novel “The Godfather”) when it denied Paramount Pictures Corp.’s (Paramount) motion to dismiss the Estate’s breach of contract counterclaim, which Paramount claimed was preempted by the Copyright Act. The win was indeed partial in that the District Court dismissed the Estate’s remaining counterclaims.  The issue at the heart of the parties' dispute, whether book publishing rights to all sequels were among the rights that Puzo sold to Paramount, was not before the court on Paramount’s motion to dismiss.

SDNYThe Estate's breach of contract claim is based on a 1969 Agreement between Puzo Sr. and Paramount, (the details of which we recently blogged about here), through which Paramount claims that Puzo signed over all publishing rights regarding any sequel to “The Godfather.”   Based on some language that the parties left out of the 1969 agreement, the Estate reads Paramount's rights more narrowly and alleges that Paramount repudiated and breached the 1969 Agreement when it interfered with rights allegedly reserved in the Estate. In fact, the District Court noted, the Estate is seeking to characterize as repudiation conduct that simply contradicted the Estate's narrow reading of Paramount's contractual rights.  Under New York law, such conduct does not constitute a repudiation unless a party advances an untenable contract interpretation in order to avoid its contractual obligations.  The Court hinted that there was no evidence that Paramount had ever sought to escape its contractual obligations and thus seems to have tipped its hand that it sees no merit in the Estate's breach of contract claim.  However, as Paramount did not move to dismiss on that basis, the court moved on to the preemption issue.  

The District Court rejected Paramount's argument that federal copyright law preempts the Estate's breach of contract claim.  The elements required to prove the Estate’s claim differ from those needed to establish copyright infringement.  Instead of proof of a valid copyright and copying of protected elements of a copyrighted work, the Estate must establish that Paramount had a contractual obligation not to interfere with its exercise of book publishing rights and that Paramount breached that obligation.  Moreover, the Court pointed out,  “a copyright is a right against the world,” providing for exclusive rights in the holder. In contrast, the Estate’s claimed right is one that creates a potential liability in Paramount if it should breach. Everyone else can do as they please.

In sum, because the Estate’s claim focuses on a contractual obligation outside federal copyright law, it is not preempted and Paramount’s motion to dismiss the Estate's breach of contract claim on that basis was denied.

[Christina Phillips and JT]

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