The Supreme Court of the United States has denied a plea[i] to resolve a 20-year circuit split regarding the extent to which the Copyright Act preempts private contracts involving a promise not to copy digital content.  The case stemmed from the petitioner Genius’s allegation that Google copied song lyrics from Genius’s website without permission and used them in connection with Google’s competing website.

The Circuit Courts are divided as to whether the Copyright Act preempts breach-of-contract claims arising from a contractual promise not to copy.  All circuits apply the same preemption test (they examine whether a breach-of-contract claim includes an “extra element” that makes it “qualitatively different” from a copyright infringement claim). They disagree however as to whether the mere existence of a contractual promise itself is an “extra element” sufficient to avoid copyright preemption. One court noted case law on this issue “is not always consistent, either between circuits or within the same circuit”[ii], so confusion and uncertainty regarding this issue will likely continue to occupy district courts throughout the nation.

Petitioner Left Without Recourse for Alleged $50 Million in Losses

As a result of the Supreme Court declining to weigh in, Genius, who sought to recoup an alleged $50 million in losses from Google,[iii] now has no recourse against the company.  

Genius transcribes popular song lyrics and provides those lyrics on its website.[iv]  Because Genius licenses the right to transcribe and display its lyrics from the relevant copyright holders, Genius does not hold any copyright on its content.[v]   Instead, Genius attempts to protect its content through its terms of service, which allegedly secure a website visitor’s promise not to copy its content for competing commercial purposes.[vi]  Google allegedly accepted those terms, but then allegedly stole Genius’s lyrics and used them in connection with its own competing site.[vii]  

When Genius filed its breach-of-contract claim against Google, the trial court held that Genius’ claim was preempted by the Copyright Act, and the Second Circuit agreed.[viii]  Now that the Supreme Court has declined to hear the case, Genius remains hampered by the law.  It cannot sue Google for copyright infringement because it does not own any copyright to its content, but it also cannot sue Google for breach of contract because copyright law preempts its claim. 

Lessons Learned

To avoid the same outcome as Genius, companies should do either or both of the following:

1. Carefully review all of their contracts over copyrightable material to ensure they include relevant forum selection clauses to resolve disputes in the most helpful forums.
2. Ensure that if they do not own any and all copyrights to material protected via contract, then they either obtain (a) copyright assignments over the copyrighted material; or (b) assignments of the right to sue for copyright infringement over such material. 

If you have any questions regarding the decision and what it means for businesses, please contact the authors of this article or your Dinsmore attorney.