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United States - Copyright Preemption

In Allarcom Pay Television Ltd. v. General Instrument Corp., the Court of Appeals for the Ninth Circuit held that the Copyright Act does not preempt state law claims for unfair competition and interference with contract and with prospective economic advantage arising from defendants' alleged facilitation of the illegal interception of subscription television programming by non-subscribers in Canada.

Plaintiff Allarcom had obtained exclusive authorization from the Canadian government to broadcast English-language, subscription television programming in Western Canada. Plaintiff alleged that defendants, Showtime Networks, Inc., the distributor of similar subscription programming in the United States, and General Instrument Corporation, the producer of "decoder" equipment used to descramble Showtime's satellite signal, were marketing General Instrument's decoders in Canada with knowledge that a significant number of purchasers were modifying such decoders to intercept and descramble Showtime programming. Such illegal interception, plaintiff noted, seriously diminished the market for plaintiff's subscription television services.

The district court dismissed plaintiff's claims under the Federal Communications Act ("FCA") which governs television programming, and further held that plaintiff's claims under California state law for unfair competition and interference with contract and with prospective economic advantage were preempted by both the FCA and the Copyright Act.

On review, the Ninth Circuit affirmed the dismissal of the plaintiff's FCA claims, but reversed the district court's ruling that the state law claims were preempted by federal law. Indeed, the Ninth Circuit held that neither the FCA nor the Copyright Act barred such state law claims. The FCA, the court noted, specifically permits coexistence of state laws which impose the same or additional obligations as the FCA. In this instance, the court found no aspect of plaintiff's state law claims to be in any way contrary to, or limiting of, the FCA.

With respect to alleged copyright preemption, the court first noted that, while the Copyright Act explicitly preempts certain state claims, the Act itself does not apply to extraterritorial acts of infringement. Thus, if the defendant's allegedly infringing acts are viewed as having occurred in Canada, rather than in the United States, then the Copyright Act would not apply, and, hence, plaintiff's state law claims would not be preempted. Pursuant to its recent en banc ruling in Subafilms, Ltd. v. MGM-Pathe Communications Co., the court then observed that, in order for the Copyright Act to apply, the alleged infringement must be "completed entirely in the United States." Here, defendants, at most, initiated or authorized an infringement, which was completed in Canada when the signal was illegally intercepted. Thus, the Copyright Act did not apply and, therefore, cannot preempt the plaintiff's state law claims.

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© Copyright 1997 Ladas & Parry - Posted 8/17/96
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