Opposition Brief — Entertainment Research Group, Inc. v. Genesis Creative Group, Inc.

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[% Supreme Court, U.S.

-, FILED

capsid FEB 13 1998

In The CLERK

Supreme Court of the United States

October Term, 1997

ENTERTAINMENT RESEARCH GROUP, INC.,

a California corporation,

Petitioner,

VS.

GENESIS CREATIVE GROUP, INC.,

a Michigan corporation;

AEROSTAR INTERNATIONAL, INC.,

a South Dakota corporation,

Respondents.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

BRIEF IN OPPOSITION

THOMAS J. TALLERICO Douctas P. Drayton

Counsel of Record Rosins, Kaplan, MILLER

KIRKLAND W. GAREY & Ciresi, L.L.P.

Topp M. STENERSON 444 Market Street,

Howarp & Howarp Suite 2700

Attorneys, P.C. San Francisco, CA 94111

The Pinehurst Office Center 415-399-1800

1400 N. Woodward Avenue,

Suite 101

Bloomfield Hills, MI

48304-2856

248-645-1483

Counsel for Respondent

Genesis Creative Group, Inc.

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

TABLE OF CONTENTS

Page

Paeenmeeeres A EEE CASE. 22.5. ce ccc eee vescnes 1

A. The Petition Misrepresents the Factual Findings

ee ee eT eer eer Te Ceres 1

B. The Petition Misstates the Applicable California

| PUP ee a ee eee ee eee eee eee eee 2

REASONS FOR DENYING THE WRIT............. 3

A. The Ninth Circuit Properly Applied Existing

Ee ae re ee yee Cee yer eee 3

B. The Ninth Circuit Properly Applied California Law

To ERG’s Breach Of Confidentiality Claim........ 4

I ac he 6 Wh Oa oe a Ree NS owe 8

TABLE OF AUTHORITIES

Page

CasEs

Altotti v. R. Dakin & Co., 831 F.2d 898 (9th Cir.

RFT). «+s 0:09: win'5 mse een 5

Blaustein v. Burton, 9 Cal. App. 3d 161 (1970) ........ 6

Durham Industries, Inc. v. Tomy Corp., 630 F.2d 905

(2d Cig. 1900) .... 5545 se eee ae ee ah xs 4

Entertainment Research Group, Inc. v. Genesis Cre-

ative Group, Inc., 122 F.3d 1211 (9th Cir. 1997)

8 a, » 4, 5, 6, 7

Haring v. Prosise, 462 U.S. 306, 103 S.Ct. 2368, 76

U.Bd.2d 395 (2909)... ccsiccsue ee ee 5

Pembaur v. City of Cincinnati, 475 U.S. 469, 106

S.Ct. 1292, 89 L.Ed.2d 452 (1986)................... 5

Sunset House Distributing Corp. v. Doran, 304 F.2d

251 (Sth Cie. IN... 4

Virginia v. The American Booksellers Ass'n, 484 U.S.

383, 108 S.Ct. 636, 98 L.Ed.2d 782 (1988)........... 5

STATUTES

i? USK. § WA sie 3

a7 USC. § WS ....<.csscue eee 1, 4

RULE

United States Supreme Court Rule 10................ 7

STATEMENT OF THE CASE

This petition seeks review of the Ninth Circuit's

opinion sustaining summary judgment in favor of Defen-

dants Genesis Creative Group, Inc. (“Genesis”) and Aero-

star International, Inc. (“Aerostar”). Petitioner,

Entertainment Research Group, Inc. (“ERG”) seeks

review of two issues addressed by the Ninth Circuit. The

first issue concerns the Ninth Circuit's application of the

for inflatable walkaround costumes. The second concerns

the Ninth Circuit’s application of California state law as it

pertains to a claim for breach of confidentiality.

As detailed below, there is no compelling reason for

this Court to review the Ninth Circuit's Opinion. The

Ninth Circuit correctly held that ERG had no valid copy-

right in any of the costumes at issue. The Ninth Circuit

also correctly stated and applied California law relating

to ERG’s breach of confidentiality claim.

A. The Petition Misrepresents the Factual Findings of

the Ninth Circuit.

The business relationship between Genesis and ERG

commenced in February 1989. By September 1990, more

than 48 ERG-manufactured costumes had been purchased

by Genesis from ERG and then re-sold to Genesis’ cus-

tomers. Those customers included at least 9 different

companies representing 13 different cartoon characters.

Entertainment Research Group, Inc. v. Genesis Creative

Group, Inc., 122 F.3d 1211, 1215 (9th Cir. 1997). On Sep-

tember 28, 1990, Genesis’ employees signed a written

Confidential Disclosure Agreement. Pursuant to the

terms of the agreement, Genesis agreed that it would not

disclose “valuable and proprietary technical informa-

tion.”

Contrary to ERG’s contentions, Genesis never agreed

to become the exclusive manufacturer’s representative, or

any type of representative, for ERG. The undisputed evi-

dence before the Ninth Circuit clearly established that

Genesis had purchased different types of costumes from

ERG and re-sold them at varying markups to Genesis’

customers and not ERG’s customers. Id. at 1225-26.

The Ninth Circuit held as a matter of law that based

upon the undisputed evidence ERG could never establish

that it conveyed any confidential or novel information to

Genesis. Id. at 1227-28. Thus, contrary to ERG’s conten-

tion, Genesis could not have provided Aerostar with any

secret or proprietary information belonging to ERG. Peti-

tioner’s Brief at p. 3.

B. The Petition Misstates the Applicable California

Law.

ERG contends that a different test is applied, under

California law, for tort claims of breach of confidence as

opposed to claims for breach of written confidentiality

agreements. ERG contends that the Ninth Circuit applied

an erroneous tort standard when, in fact, the claim was

for breach of a written Confidential Disclosure Agree-

ment. As discussed below, the Ninth Circuit properly

applied California law when it analyzed ERG’s breach of

confidentiality claim.

REASONS FOR DENYING THE WRIT

A. The Ninth Circuit Properly Applied Existing Copy-

right Law To Inflatable Walkaround Costumes.

The costumes at issue are sculptural works as

defined by the Copyright Act, 17 U.S.C. § 102(5). See

Entertainment Research, 122 F.3d at 1221. The Ninth Circuit

correctly stated that “any aspects of ERG’s costumes that

are purely functional, utilitarian or mechanical, will not

be given copyright protection.” Id.

While it is true that theatrical and motion picture

works, as well as software programs, are derivative

works, it is not true that the Ninth Circuit’s opinion in

this case will foster litigation or even impact these other

works as ERG suggests. The Ninth Circuit found that the

costumes at issue were functional and that any artistic

differences between the preexisting works and the ERG

costumes were merely trivial and not copyrightable. Id. at

1222.

The copying of the Pillsbury Doughboy performed

by ERG to create costumes is different from the transfor-

mation of copyrighted literary works into theatrical or

motion picture works or the manipulation of software

codes. In the first instance, ERG was hired to manufac-

ture exact replicas of the preexisting copyrighted charac-

ters. In the later, original perceivable ideas and concepts

are added to preexisting copyrighted works. It is the lack

of originality that distinguishes ERG’s costumes from

theatrical productions, motion pictures and derivative

software.

The Ninth Circuit properly applied the Second Cir-

cuit’s test as set forth in Durham Industries, Inc. v. Tomy

Corp., 630 F.2d 905 (2d Cir. 1980). Contrary to the conten-

tions of ERG, the Ninth Circuit did not establish a new

test. Nor is there any inconsistency between the Durham

test and the Copyright Act, 17 U.S.C. § 103. Furthermore,

regardless of the test applied, the Ninth Circuit found

that ERG’s costumes lacked the originality necessary for

1222-24. More importantly, the Ninth Circuit did not

ignore its precedent, as petitioner claims. Petitioner’s

Brief at p. 6. The Ninth Circuit expressly distinguished its

decision in Sunset House Distributing Corp. v. Doran, 304

F.2d 251 (9th Cir. 1962). Id. at 1219. Its opinion is limited

to costumes that “were based on preexisting works that

were copyrighted and owned by the ultimate pur-

chasers.” Id. Thus, there is no reason for the Court to

review the Ninth Circuit’s ruling with respect to the

derivative copyright issue.

B. The Ninth Circuit Properly Applied California Law

To ERG’s Breach Of Confidentiality Claim.

ERG’s attempt to link the California state law claim

to its derivative copyright claim is a transparent attempt

to convince the Court that there is a compelling reason to

review this case. ERG argues in its petition that the Ninth

Circuit somehow analyzed ERG’s breach of confiden-

tiality claim in light of the Court’s disposition of ERG’s

derivative copyright claim. The Ninth Circuit did nothing

of the sort. Rather, the Ninth Circuit analyzed ERG’s

derivative copyright claim, see Entertainment Research, 122

F.3d at 1217-24, and then set forth a separate part of the

opinion dealing exclusively with the state law issue. Id. at

1226.

The Supreme Court's long-standing policy is to defer

to the lower federal courts on determinations of state law.

See Haring v. Prosise, 462 U.S. 306, 314 n.8, 103 S.Ct. 2368,

76 L.Ed.2d 595 (1983); Virginia v. The American Booksellers

Ass'n, 484 U.S. 383, 394-399, 108 S.Ct. 636, 98 L.Ed.2d 782

(1988); Pembaur v. City of Cincinnati, 475 U.S. 469, 484 n.13,

106 S.Ct. 1292, 89 L.Ed.2d 452 (1986). No reason exists to

depart from this policy in this case.

Even without this Court’s policy not to review state

law questions, ERG’s argument fails. The Ninth Circuit

properly applied California law to ERG’s breach of confi-

dentiality claim. ERG relies upon Aliotti v. R. Dakin & Co.,

831 F.2d 898, 902 (9th Cir. 1987) for the proposition that

California law “applies a different set of standards to a

claim of breach of confidentiality contract then it does to a

claim under a ‘breach of confidence’ tort.” Petitioner’s

Brief at p. 10 (emphasis in original). ERG misreads Aliotti.

The Aliotti court analyzed two separate issues: one for an

implied in-fact contract; and one for breach of confidence.

See Aliotti, 831 F.2d at 902. The Ninth Circuit was well

aware of the Aliotti opinion. It even cited it. Entertainment

Research, 122 F.3d at 1227-28.

Furthermore, the Ninth Circuit recognized that a

breach of confidence claim under California law “is based

upon the concept of an implied obligation or contract

between the parties that confidential information will not

be disclosed.” Entertainment Research, 122 F.3d at 1226-27

(citations omitted, citing both California and federal

authority) (emphasis added). ERG’s attempted reliance

upon Blaustein v. Burton, 9 Cal. App. 3d 161 (1970) is

misplaced. Blaustein concerns the disclosure of an

abstract idea, and whether there was a promise to pay for

the idea before its disclosure. In this case, ERG did not

disclose “ideas” to Genesis, and more importantly, Gene-

sis never agreed to pay ERG before ERG disclosed any

information relating to the costumes.! Indeed, ERG had

already sold the costumes to Genesis and others before

the Disclosure Agreement was even signed. Entertainment

Research, 122 F.3d at 1215. The Ninth Circuit properly

applied the law to the facts of this case.

ERG then claims that: “the Ninth Circuit overlooked

the undisputed fact that the parties had made an express

agreement by way of the Confidential Disclosure Agree-

ment signed by ERG and Genesis.” Petitioner's Brief at p.

11. ERG makes this statement without citation. ERG’s

assertion is in direct conflict with the Ninth Circuit's

opinion. The Ninth Circuit expressly recognized the exis-

tence of the Confidential Disclosure Agreement between

the parties and further described it at footnote 11. See

Entertainment Research, 122 F.3d at 1226 & n.11. The Ninth

Circuit also addressed the existence of the Confidential

Disclosure Agreement when it discussed ERG’s claim that

certain price information was wrongfully disclosed. Id. at

1228.

‘ In this case, the sole purpose of the confidentiality

agreement was to facilitate further discussions between Genesis

and ERG to determine whether the parties would enter into an

agency agreement. Entertainment Research, 1222 F.3d at 1226.

Genesis paid no consideration to ERG upon entering into the

Confidential Disclosure Agreement.

Ee a

ERG then makes yet another unsupported claim that:

“[t]he Ninth Circuit seems to feel, given that it held that

ERG did not hold any copyright protection, that propri-

etary and secret information, designated at such, cannot

be allowed to stand - a dangerous precedent.” Peti-

tioner’s Brief at p. 11. Again, ERG makes this statement

without citation to the Ninth Circuit’s opinion. Even a

cursory reading of Section III of the Ninth Circuit’s opin-

ion on the breach of confidentiality claim reveals that the

Ninth Circuit did not “backward reason” the breach of

confidentiality claim from its ruling on the derivative

In fact, the Ninth Circuit stated the exact opposite. To

wit, “Information need not be protectable either as a

trade secret .. . or by copyright law . . . to be the subject

of a breach of confidentiality claim.” Entertainment

Research, 122 F.3d at 1227 (citations omitted). Despite this,

ERG cites this Court to a series of trade secret opinions

which have no bearing on this case to further attempt to

confuse the issue presented for review. The Ninth Cir-

cuit’s opinion properly applied California law to ERG’s

breach of confidentiality claim and further analyzed it

entirely separate from ERG’s derivative copyright claim.

ERG has failed to identify any compelling reason to

grant its petition. Absent such a reason the petition

should be denied. United States Supreme Court Rule 10.

CONCLUSION

For the reasons given above, the petition should be

denied. -

Respectfully submitted,

THomas J. TALLERICO Douctas P. Drayton

Counsel of Record Rosins, Kaptan, MILter &

KIRKLAND W. GAREY Ciresi, L.L.P.

Topp M. STENERSON ~444 Market Street,