### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 15

- 20084

ULTRAFLO CORPORATION,

Plaintiff

- Appellant

v. PELICAN TANK PARTS, INCORPORATED; THOMAS JOSEPH MUELLER; PELICAN WORLDWIDE, INCORPORATED,

Defendants

- Appellees

Appeal from the United States District Court for the Southern District of Texas

Before STEWART, Chief Judge, and OWEN and COSTA, Circuit Judges

. GREGG COSTA, Circuit Judge: This appeal requires us to again consider the preempt ive force of the Copyright Act. Plaintiff Ultraflo Corporation assert s an unfair competition by misappropriation claim under Texas law alleging that a competitor stole its drawings showing how to design valves and then used the m to make duplicate
valves. We have previously held that copyright preempts this Texas cause of action when the intellectual property at issue is within the subject matter of copyright. Alcatel USA , Inc. v. DGI Techs., Inc. , 166 F.3d 772, 785

– 89 (5th Cir. 1999). Ultraflo contends that its claim escapes preemption because its valve design , when separated from the drawing itself, is a fforded no protection under the C opyright Act

. Because copyright preemption prohibits state interference United States Court of Appeals Fifth Circuit 

### FILED January 11, 2017

Lyle W. Cayce Clerk Case: 15-20084 Document: 00513830789 Page: 1 Date Filed: 01/11/2017No. 15

- 20084

2 with Con g ress’s decision not to grant copyrig ht protection just as much as it protects a decision to provide protection, the district court correctly found that the state claim is preempted.
I. Ultraflo manufacture s butterfly valves used in the transportation industry. W ith the help of its employe e Thomas Mueller , Ultraflo redesign ed
its Model 390 butterfly valve. The new design was recorded in drawings that specify the val ve’s features and measurement s. Mueller ultimately left Ultraflo to work at Pelican

— a competing valve manufacturer . Soon after , Pelican entered the market with a valve that Ultraflo contends was strikingly similar to its own

. Believing that Pelican hired Mueller to gain access to its design drawings
and other intellectual property, Ultraflo sued Pelican and Mueller ( joint ly referred to as Pelican) in state court for conversion, civil conspiracy, unfair competition by misappropriation , and misappropriation of trade secrets.
Pelican sought to remove the case to federal court , arguing that the state claims were preempted by the Copyright Act , but removal was untimely. B ack in state court, Pelican won a motion to dismiss , which argued that the court
lacked jurisdiction as the subject matter of the suit was subject to the copyright
laws , because Ultraflo failed to respond

. Before the state suit was dismissed, Mueller registered valve drawing s with the U.S. Copyright Office and filed a complaint in federal court , seeking declaratory relief that the drawings (1) were copyrightable subject matter, (2) belonged to Mueller , and ( 3) were not “works for hire” under the Copyright Act.
Mueller then voluntarily dismissed his suit in an attempt to encourage
settlement. After t he settlement failed to materialize, Ultraflo fil ed this federal
action

. It again asserted the state tort claims and also sought a declaratory Case: 15-20084 Document: 00513830789 Page: 2 Date Filed: 01/11/2017No. 15

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3 judgment that Mueller was using a copyright that did not belong to him. The
district court sua sponte questioned whether Ultraflo’s state claims were preempted by the Copyright Act. It ordered Ultraflo to file a secon d amended complaint “avoid ing allegations of state law claims that are clea rly preempted by federal law.” That pleading reasserts all of Ultraflo’s state claims and notes that the y arise from Pelican’s “ use of Ultraflo’s [ design ] drawings to make actual valves. ” For example, it alleges that the “ unauthorized activities by Mueller in retaining Ultraflo’s confidential drawings [and] the subsequent use of them by
Pelican

. . . to make competitive valves , constitutes misappropriation of Ultraflo’s valuable t rade secrets.” It further contends that Defendants engaged in unfair competition by mis appropriat ing its “ butterfly valve s , valve features, and components

. ”
Pelican subsequently filed a motion to dismiss on preemption grounds

. The district court agreed that all but Ultraflo’s trade secret claim were preempted by the copyright laws

. 1 In response, Ultraflo filed a third amended complaint that removed the preempted state claims and added a claim of copyright infringement

. Pelican filed yet another motion to dismiss , seeking dismissal of the new copyright
claim

. The district court denied the motion because Ultraflo alleged “ that Defendants infringed the drawings, not by taking the physical drawings, but by taking their intangible intellectual property, us ing it to make their own drawings and butterfly valve, and thereby infringing on Ultraflo’s exclusive rights to reproduce its copyrighted work and to prepare derivative products based on the copyrighted work. ”

1 The court’s ruling on the trade secret claim accords with our subsequent decision in GlobeRanger Corp. v. Software AG United States of Am., Inc. , which h eld that a claim under Texas trade secret law is not preempted

. 836 F.3d 477, 486

– 88 (5th Cir. 2016). Case: 15-20084 Document: 00513830789 Page: 3 Date Filed: 01/11/2017No. 15

- 20084

4 The case proceeded to trial on the copyright a nd trade secret claims, both of which the j ury rejected

. After trial, Ultraflo moved under Rule 50(b) for judgment as a matt er of law, or, alternatively, a new trial , on the ground that the unfair competition claim was not preempted

. Finding that this wa s not the

proper procedural vehicle to seek reconsideration of the pretrial dismissal of
the unfair competition claim , the c ourt treated the motion as one asserted
under Rule 59

. It declined to change its earlier ruling finding preemption.
II. Ultraflo’s appeal does not challenge the jury’s rejection of its copyright

a nd trade secret claims. It seeks only reversal of the pretrial dis missal of the unfair competition by misappropriation claim on preemption grounds.
Pelican asserts that Ultraflo waived its right to challenge t he pretrial preemption ruling by not raising the issue during trial in a number of ways. According to Pelican, Ultraflo needed to request a jury charge on the dismissed
state law claims , introduce an offer of proof to show t he evidence that supported them, and seek entry of judgment as a matter of law on the state claims under Rule 50(a) before the case was submitted to the jury. The delay and expense resulting from such futile measures is not required to preserve appellate review of a pretrial dismissal. 2 The final judgment rule prevented Ultraflo from appealing the Rule 12 dismissal until

now

. See Dig

. Equip. Corp. v. Desktop Direct , Inc. , 511 U.S. 863, 868 (1994) (explaining that the rule provides that “a party is entit led to a single appeal, to be deferred until final judgment has been entered ”). Indeed, Ultraflo

2 C onfusion may have arisen from Ultraflo filing a post

- trial Rule 50(b) motion for judgment on the pleadings raising the preemption issue . The district co urt correctly noted that this was not a proper motion to challenge the pretrial dismissa l of claims. As discussed infra , however, that is not because the same motion should have been asserted during trial. There was no need to do anything during or after trial to preserve appellate review of the Rule 12 dismissal. Case: 15-20084 Document: 00513830789 Page: 4 Date Filed: 01/11/2017No. 15

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5 followed the proper procedure by omitting the dismissed claims from its third amended complaint. Lincoln Gen. Ins. Co. v. U.S. Auto Ins. Servs., Inc. , 787 F.3d 716, 724 (5th Cir. 2015) ( noting that requiring the repleading of claims dismissed with prejudice would be at odds with judicial efficiency and might be sanctionable). As those state claims were no longer part of the live pleading in the case, Ultra f lo could not have taken any of the actions with respect to them during trial that Pelican urges. But it is still allowed to appeal a dismissal with prejudice of claims asserted in its earlier pleadings. Id. (explaining that w hen a pretrial dismissal of a claim is “on the merits or with prejudice, the plaintiff may appeal that ruling without needing to include the claim in a later amended complaint”).
III.
We thus may consider the merits of Ultraflo’s appeal: whether its unfair competit ion by misappropria tion claim is preempted by the Copyright Act.
We review this question de novo

. GlobeRanger Corp. v. Software AG United States of Am., Inc. , 691 F.3d 702, 705 (5th Cir. 2012). Section 301 of the Copyright Act preempts state law claims that fall
within t he general scope of federal copyright law

. Alcatel , 166 F.3d at 785. It provides that: all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103

. . . are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State. 17 U.S.C. § 301 (a)

. This text is the source of the two

- part test we use to determine if the Copyright Act preempts a state law cause of action. Alcatel , 166 F.3d at 785

– 8 6. Courts first ask whether the intellectual property at issue Case: 15-20084 Document: 00513830789 Page: 5 Date Filed: 01/11/2017No. 15

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6 is within the subject matter of copyright

. Id. If it is, the n a state law claim is

preem pted if it protects rights in that property that are equivalent to any of the exclusive rights within the general scope of copyright. Id.
A

. The subject matter inquiry requires us to determin e what intellectual property Ultraflo is seeking to protect. The design drawings themselves are undoubtedly within the scope of copyright protection; 3 they were the basis for the copyright infringement claim Ultraflo took to trial. But the unfair competition claim is not based on Pelican’s copying the drawings. Ultraflo instead alleges that Pelican used the drawings to make replica valves. Because
th e valve design

— the work in which Ultraflo asserts a right

— is what was allegedly misappropria ted, Ultraflo argues that its claim does not seek protection for a work protected by the copyright laws. Ultraflo is correct that its valve design is not protected under the Copyright Act : it is either a useful article 4 or an idea

. 5 Were the question

3 Section 102 of the Copyright Act provides that “[w]orks of authorship include . . . pictorial, graphic, and sculptural works.” 17 U.S.C. § 102. Section 101 defines “pictorial, graphic, a nd sculptural works” to include “ technical drawings.” 17 U.S.C. § 101. And d esign drawings are considered copyrightable technical drawings. See Taquino v. Teledyne Monarch Rubber , 893 F.2d 1488, 1501 (5th Cir. 1990) (treating engineering drawings as copyrightable); M

–

I LLC v. Stelly , 733 F. Supp. 2d 759, 782 (S.D. Tex. 2010) (treating tool design drawings as copyrightable).

4 A useful article i s “an article having an intrinsic ut ilitarian function that is not merely to portray the appearance of the article or to convey information.” 17 U.S.C. § 101. Section 101 further states that “the design of a useful article, as defined in this section, shall be considered a pictorial, graph ic, or sculptural work [that is , copyrightable] only if, and only to the extent that, such design incorporates pictorial, graphic, or sculptural features that can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.” Id. Neither party disputes that the Model 390 butterfly valve design includes only utilitarian features and thus is not subject to copyright protection

. 5 “ I n no case does copyright protection for an original work of authorship extend to any idea [or] concept

. . . regardless of the form in which it is described, explained, illustrated, or embodied in such work. ” 17 U.S.C. § 102(b). Case: 15-20084 Document: 00513830789 Page: 6 Date Filed: 01/11/2017No. 15

- 20084

7 simply whether the work in which Ultraflo asserts a right is protected under the Copyright Act , its argument would carry the day. The preemption statute, however, sweeps more broadly. It preempts state protection of works that fall within the subject matter (that is, the scope ) of copyright , regardless whether the work s are actually afforded protection under the Copyright Act. Spear Mktg

. , Inc. v. BancorpSouth Ban k
, 791 F.3d 586, 596

– 97 (5th Cir. 2015)

. “ [ S ] cope and protection are not synonyms

. ” Id. at 596 (quoting U.S. ex rel. Berge v. Bd

. of Trs

. of the Univ

. of Ala. , 104 F.3d 1453, 1463 (4th Cir. 1997) )

. As the Fourth Circuit put it, “the shadow actually cast by the Act’s preemption is notably broader than the wing of its protection.” U.S. ex rel. Berge , 104 F.3d at 1463.
This distinction led us to hold in Spear Marketing that state claims based

on ideas fixed in a tangible medium of expression fall within th e subject matter of copyright even though copyright law does not protect the mere ideas

. 791 F.3d at 597. The parties disputed whether copyright preemption extended to state claims protectin g the noncopyrightable material

— i deas

— contained in copyrightable works

— a software program

. Id. at 594. In finding that it did,
we noted that to allow states to protect fixed ideas would intrude upon Congress’s exclusion in section 102(b) of ideas from federal copyright protection. Id. at 596 (citing 5 M ELVILLE B. N IMMER & D AVID N IMMER , N IMMER

ON C OPYRIGHT § 19D.03[A][2][ b] )

. The result should be no different for the valve design that Congress also chose to exclude from copyright protection. 6 Indeed, the exclusion of useful articles from copyright pro tection is a corollary of the idea

- expression

6 A copyright treatise reaches the same conclusion in considering the preemption question for another type of subject matter that is excluded from copyright protection : typeface. H OWARD B. A BRAMS , T HE L AW OF C OPYRIGHT § 6:22 (2016) (concluding that if “Con gress deliberately made certain classes of subject matter ineligible for federal copyright protection, as was clearly the case for typeface designs, then . . . the state law is preempted”). Case: 15-20084 Document: 00513830789 Page: 7 Date Filed: 01/11/2017No. 15

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8 dichotomy that Spear Marketing rejected as a basis for the dividing line of when copyright preemption applies. See Mazer v. Stein , 347 U.S. 201, 217 (1954); Durham Indus. v. Tomy Corp. , 630 F.2d 905, 913 (2d C ir. 1980) ( “Just as copyright protection extends to expression but not ideas, copyright protection extends only to the artistic aspects, but not the mechanical or utilitarian features, of a protected work.” ). Congress’s exercise of its power under the Cop yright Clause to not provide protection for the embodiment of
idea s in useful articles is entitled to preemptive force. Allowing state law to protect such works would undermine the “deliberate exclusion” of such subject matter from the federal copyright s cheme. Spear Mktg. , 791 F.3d at 596.
B

. T hat the valve design is within the subject matter of copyright does not , on its own , mean that the state claim is preempted. As mentioned at the outset, the stat e law must also seek to protect rights equivalent to those

“ within the general scope of copyright

. ” 17 U

. S

. C

. § 301 . This is determ ined by the “extra elements” tes t, which looks at whether “one or more qualitatively different elements are required to con stitute the state

- created cause of action being asserted.” Alcatel , 166 F.3d at 787. If so, the state law protects rights different than those that the C opyright Act protects and there is no preemption. Id. We have previously held that Texas ’s unfair competition by misappropriation cause of action 7 does not afford protection materially different from federal copyright law. Id. at 787

– 89. In doing so, we rejected Alcatel’s attempt to satisfy the extra elements test by pointing to the state

7 The elements of Texas’s unfair competition by misappropriation are: (1) the creation by a plaintiff of a product through extensive time, labor, skill, and money; (2) the use of that product by defendant in competition with plaintiff; and (3) commercial damage to the plaintiff. U.S. Sporting Prods., Inc. v. Johnny St ewart Game Calls, Inc. , 865 S.W.2d 214, 218 (Tex. App.

— Waco 1993, writ denied). Case: 15-20084 Document: 00513830789 Page: 8 Date Filed: 01/11/2017No. 15

- 20084

9 tort’s ele ments of sweat equity and use against a competitor. Id

. With respect to the former, we concluded “the time, labor, skill, and money expended by the author in creating the work are necessarily contemplated in [] copyright , ”
which requires independent creation. Id. at 789. As to the latter, we held that reproduction or derivate use of a copyright by a competitor would suffice to show copyright infringement. 8 Id. Ultraflo attempts to get around Alcatel by focusing on the special copyright status of drawings depicting useful articles

. Although the Copyright Act provides the owner of such a drawing the exclusive right to reprod uce the drawing itself, it does not grant the exclusive right to use th e drawing to make
the useful article depicted

. See 17 U.S.C. § 113(b) (“ This title does not afford, to the owner of copyright in a work that portrays a useful article as such, any greater or lesser rights with respect to the making, distribution, or display of the useful
artic le so portrayed than those afforded to such works under the law . . . . ” ) ; 1
N IMMER , supra , § 2A.12. At first blush , it thus appears that Ultraflo’s unfair competition by misappropriation claim protect s a right that federal copyright
does not: exclusive u s e of the copyrightable design drawings to make the depicted valves

. A gain, however, the preemption inquiry operates on a more general level. The question is not whether state law provides a right identical to federal copyright law, but whether state law provides a right akin to those

“ within the general scope of copyright as specified by section 106

. ” 17 U.S.C. § 301 (emphasis added). A mong t he exclusive rights generally provided to

8 Ultraflo also contends that unfair competition by misappropriation is qualitatively different because it requires intent to engage in dishonest conduct. That a state law r equires scienter as a conditi on to liability, however, does not save the state law from preemption. See R.W. Beck, Inc. v. E3 Consulting, LLC , 577 F.3d 1133, 1148

– 49 (10th Cir. 2009) (holding that the addition of a scienter element did not render defendan t’s unfair competition claim qualitatively different from copyright infringement). Case: 15-20084 Document: 00513830789 Page: 9 Date Filed: 01/11/2017No. 15

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10 copyright holders in secti on 106 is the right to make derivative use of copyrighted works . 17 U.S.C. § 106

. State claims protecting against such use by another thus are preempted by Section 301. See Alcatel, 166 F.3d at 789 (holding that plaintiff’s unfair competition by misappr opriation claim was preempted by the Copyright Act when plaintiff alleged defendant stole its software, used it to make microprocessors, and then distributed the microprocessors in competition with plaintiff) ; M

–

I LLC v. Stelly , 733 F. Supp. 2d 759, 784

– 85 (S.D. Tex. 2010) (holding that plaintiff’s unfair competition by misappropriation claim, alleging defendant used, without permission, plaintiff’s tool design drawings to make a competing product, did not supply a qualitatively different element and thus w as preempted). Indeed, section 113(b), by carving out use of technical drawings to make useful articles from copyright protection, recognizes th at such derivative use may otherwise be protected by the copyright laws. Similar to what we saw with the subject matter inquiry, the “equivalent rights” inqu iry thus looks not at the rights Congress actually provided but at the type of rights it ha s the power to confer

. Withholding a particular right is part of the balance Congress st r uck between the need fo r copyright incentives and the value in public access to ideas. See H.R. R EP

. N O

. 94

- 1476, at 105 (1976), reprinted in 1976 U.S.C.C.A.N. 5659 , 5720 ( explaining that Congress, through section 113(b), reaffirmed the longstanding idea

- expression dichotomy , w hich provides that ideas contained in copyrighted works are free to the public unless otherwise protected by patent law )

. Section 113(b) , as a particular application of the idea

- expression dichotomy, also plays a role in demarcating the boundary between c opyright and patent law. Id .; see generally
Baker v. Selden , 101 U.S. 99 (1879). To allow state law protection in this area that Congress excluded from the ambit of copyright thus would run afoul of the

“ ‘ familiar doctrine ’ that the federal policy ‘ may not be set a t naught , or its Case: 15-20084 Document: 00513830789 Page: 10 Date Filed: 01/11/2017No. 15

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11 benefits denied ’ by the state law.” Sears, Roebuck & Co. v. Stiffel Company , 376 U.S. 225, 228 (1964) (quoting Sola Elec. Co. v. Jefferson Elec. Co. , 317 U.S. 172, 176 (1942))

.

* * * The district court correctly held that the Copyright Act preempted Ultraflo’s unfair competition claim. The judgment is AFFIRMED. Case: 15-20084 Document: 00513830789 Page: 11 Date Filed: 01/11/2017