The Copyright Act Preempts State Law Causes of Action: Why the OpenAI Lawsuit Should Be Dismissed

MEMORANDUM OF POINTS AND AUTHORITIES

IV. ARGUMENT

B. The Copyright Act Preempts Several State Law Causes of Action

Action. Federal law preempts Plaintiffs’ claims for tortious interference in a contractual relationship, unjust enrichment, and unfair competition, and accordingly, provides another basis for dismissal.

Preemption under Section 301 of the Copyright Act applies if (1) “the ‘subject matter’ of the state law claim falls within the subject matter of copyright as described in 17 U.S.C. §§ 102 and 103” and (2) “whether the rights asserted under state law are equivalent to the rights contained in 17 U.S.C. § 106, which articulates the exclusive rights of copyright holders.”

Maloney v. T3Media, Inc., 853 F.3d 1004, 1010 (9th Cir. 2017) (cleaned up). Courts have concluded that the Copyright Act precludes the following:

• Tortious interference with a contract. Plaintiffs claim that the OpenAI Entities have “wrongfully interfered with the business interests and expectations of Plaintiffs … by improperly using Copilot to create Derivative Works that compete against” Plaintiffs’ works. (Compl. ¶ 189.) This, in essence, boils down to an allegation that is “not qualitatively different from [a] copyright infringement” claim.

See Media.net Advert. FZ-LLC v. NetSeer, Inc., 156 F. Supp. 3d 1052, 1072 (N.D. Cal. 2016) (concluding preemption where plaintiff alleged that defendant directly copied plaintiff’s code to create its own product and “undermined [p]laintiff’s relationship with Microsoft by representing that [its] products could work just as well”).

• Unjust enrichment. The Copyright Act preempts Plaintiffs’ unjust enrichment claim because the crux of this claim asserts that OpenAI improperly benefitted from using Licensed Materials to create Derivative Works. Del Madera Props. V. Rhodes & Gardner, Inc., 820 F.2d 973, 977 (9th Cir. 1987) (finding preemption because an “implied promise not to use or copy materials within the subject matter of copyright is equivalent” to the Copyright Act’s protections); Firoozye v. Earthlink Network, 153 F. Supp. 2d 1115, 1126 (N.D. Cal. 2001) (finding preemption where plaintiff alleged defendant improperly benefitted from using copyrighted software and “that a contract should be implied in law (e.g., a quasi-contract [] or unjust enrichment claim)”).

• Unfair Competition. To the extent Plaintiffs’ claims are based on preempted state law claims, the derivative claim must also fail. See Sulit v. Sound Choice Inc., No. C06-00045 MJJ, 2006 WL 8442163, at *7 (N.D. Cal. Nov. 14, 2006) (“State law causes of action for unfair competition based on misappropriation of copyrighted material are preempted,” but, where the state claim acts as “a tort of ‘passing off,’ it is not preempted.”).