Website terms of service – enforceable or preempted?

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White & Case Technology Newsflash

There is a deepening circuit split on whether the US Copyright Act preempts contract claims arising from terms of service. A recent petition to the US Supreme Court by a song lyrics website highlights this, with potentially broad implications for the enforceability of website terms of service.

Background

Genius compiles user-generated information for its database of song lyrics. Genius does not itself own the copyrights in the lyrics—those are created and owned by songwriters and music publishers, and Genius licenses rights in the lyrics from the copyright owners. But Genius's website, like many websites, has terms of service that prohibit, among other things, unauthorized scraping of data and other content.

In 2019, Genius filed a complaint in New York state court accusing defendants of scraping lyrics from Genius's site and displaying them in search results. The complaint alleged state law claims, including breach of contract, unfair competition, and unjust enrichment. In response, the defendants removed the case to federal court on the grounds that Genius's claims were, in fact, claims for copyright infringement disguised as state law claims. The defendants then moved to dismiss the complaint as "preempted" by the Copyright Act.

The district court granted defendants' motion, dismissing the case.1 The Second Circuit affirmed the dismissal.2

The Copyright Act's preemption doctrine

Copyright protection in the United States arises exclusively under federal law. The Copyright Act broadly preempts state law claims involving rights that are "equivalent to any of the exclusive rights within the general scope of copyright" and that "come within the subject matter of copyright."3

The Second Circuit found that these two prongs were satisfied to preempt Genius's claims: 

  1. Equivalence and general scope.  The right being claimed was equivalent to an exclusive right within the general scope of copyright because Genius sought to stop the reproduction and derivative use of copyrighted material.4  The court rejected Genius's argument that the contract claim—which requires mutual assent and valid consideration, and which Genius asserted only against the contractual counterparty (not the public at large)—is qualitatively different from a copyright claim.5
  2. Subject matter.  The claims came within the subject matter of copyright because song lyrics are protectable by copyright. The court rejected Genius's argument that transcriptions of the lyrics, as opposed to the lyrics themselves, are not copyrightable, holding that a work may still be within the subject matter of copyright even if does not meet the requirements for copyright protection.6

A deepening circuit split

The Second Circuit added to a circuit split over whether, and to what extent, the Copyright Act preempts state law contract claims.

The Second Circuit joins the Sixth Circuit in its approach to copyright preemption of state contract law claims. Most courts use the "extra element" test to determine the equivalence prong of the two-part test; if there is no "extra element" beyond the elements required for copyright infringement, the claim is equivalent to a copyright claim and preempted.7  The Second and Sixth Circuits have taken the approach that the existence of a contract does not necessarily create an "extra element" that saves the claim from preemption.8

Other circuits have taken a different approach. In Bowers, for example, the Federal Circuit (applying First Circuit law) held that the Copyright Act did not preempt contract law claims when the plaintiff sued a software developer that purchased and reverse-engineered software, in violation of the shrink-wrap license that came with the purchased product.9  The court concluded that "the Copyright Act does not preempt contractual constraints on copyrighted articles,"10 even though reverse-engineering unprotectable ideas is permitted as fair use under the Copyright Act.11 The court relied, in part, on Seventh Circuit case law for the proposition that "the mutual assent and consideration required by a contract claim render that claim qualitatively different from copyright infringement."12

Implications

Whether and to what extent website terms of service are enforceable or preempted has important implications. If the Supreme Court agrees to hear the Genius appeal, its decision could affect businesses that rely on terms of service and other contracts to protect their data and content. Upholding the Second Circuit may result in ending or significantly limiting contract law protections for a large amount of material available online. Reversing could have the opposite effect—greatly expanding contract law protections as another enforcement tool.

1 See Genius Media Group v. Google LLC, No. 19-cv-7279, 2020 U.S. Dist. LEXIS 173196, at *1 (E.D.N.Y. Aug. 10, 2020).
2 See ML Genius Holdings LLC v. Google LLC, No. 20-3113, 2022 U.S. App. LEXIS 6206 (2d Cir. Mar. 10 2022).
3 17 U.S.C. § 301.
4 See ML Genius Holdings, 2022 U.S. App. LEXIS 6206, at *8-9.
5 See id. at *9-11.
6 See id. at *4-5.
7 See Ritchie v. Williams, No. 03-1279, 395 F.3d 283, 287 n.3 (6th Cir. Jan. 11, 2005).
8 See id. at 287-88.
9 See Bowers v. Baystate Techs., Inc., 320 F.3d 1317 (Fed. Cir. 2003).
10 Id. at 1324.
11 Id. at 1325.
12 Id.

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