Opinion ID: 657247
Heading Depth: 3
Heading Rank: 1

Heading: Federal Preemption of the Trade Secret Claims

Text: 107 Bando contends that the district court incorrectly considered Gates' state law misappropriation claim because the claim was preempted by 17 U.S.C. Sec. 301. Section 301(a) provides that: 108 (a) On and after January 1, 1978, 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of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title.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. 109 17 U.S.C. Sec. 301(a) (emphasis added). However, Sec. 301(a) is qualified by Sec. 301(b), which provides in relevant part: 110 (b) Nothing in this title annuls or limits any rights or remedies under the common law or statutes of any State with respect to-- 111 (1) subject matter that does not come within the subject matter of copyright as specified by sections 102 and 103, including works of authorship not fixed in any tangible medium of expression; or 112 (2) any cause of action arising from undertakings commenced before January 1, 1978; 113 (3) activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106; ... 114 .... 115 17 U.S.C. Sec. 301(b) (Supp.1993). 116 Thus, a state common law or statutory claim is preempted by Section 301 if: (1) the work is within the scope of the 'subject matter of copyright' as specified in 17 U.S.C. Secs. 102 and 103; and (2) the rights granted under state law are equivalent to any exclusive rights within the scope of federal copyright as set out in 17 U.S.C. Sec. 106. Ehat v. Tanner, 780 F.2d 876, 878 (10th Cir.1985), cert. denied, 479 U.S. 820, 107 S.Ct. 86, 93 L.Ed.2d 39 (1986) (citing Harper & Row Publishers, Inc. v. Nation Enterprises, 723 F.2d 195, 199-200 (2d Cir.1983), rev'd on other grounds, 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985)). 117 In its amended complaint, Gates alleged that the use of the proprietary data, engineering formula, and the code of the Design Flex and the Life in Hours computer programs constitute a misappropriation of the trade secret [sic] of The Gates Rubber Company as stated in the Colorado Uniform Trade Secrets Act, C.R.S. 7-74-102(2). Aplt.Apx. at 8. The parties do not dispute that the computer programs at issue in this case fall within the subject matter of copyright as specified by 17 U.S.C. Secs. 102 and 103. Accordingly, the question before us is whether the rights granted by those provisions of the Colorado Uniform Trade Secrets Act, Colo.Rev.Stat. 7-74-102(2), upon which Gates relies, are equivalent to any of the exclusive rights granted by the Copyright Act, 17 U.S.C. Secs. 102-103. 118 Section 106 of the Copyright Act grants to the copyright owner the exclusive rights to: (i) reproduce the copyrighted work; (ii) prepare derivative works; (iii) distribute copies of the work; (iv) perform the work publicly; and (v) display the work publicly. 17 U.S.C. Sec. 106 (1977 and Supp.1993). In order to determine whether Gates' misappropriation claim asserts rights equivalent to those delineated in Section 106, we refer to the elements of the state law cause of action. Federal law will preempt a state-created right if that right may be abridged by an act which, in and of itself, would infringe one of the exclusive rights established by federal law. G.S. Rasmussen & Assoc. v. Kalitta Flying Service, Inc., 958 F.2d 896, 904 (9th Cir.1992), cert. denied, --- U.S. ----, 113 S.Ct. 2927, 124 L.Ed.2d 678 (1993). However, if a state cause of action requires an extra element, beyond mere copying, preparation of derivative works, performance, distribution or display, then the state cause of action is qualitatively different from, and not subsumed within, a copyright infringement claim and federal law will not preempt the state action. Computer Associates International, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2nd Cir.1992). 119 Under Colorado law, to prove misappropriation of a trade secret, a plaintiff must show: (i) that he or she possessed a valid trade secret, (ii) that the trade secret was disclosed or used without consent, and (iii) that the defendant knew, or should have known, that the trade secret was acquired by improper means. 25 The breach of a duty of trust or confidence is the gravamen of such trade secret claims and supplies the 'extra element' that qualitatively distinguishes such trade secret causes of action from claims for copyright infringement that are based solely on copying. 26 Computer Associates International, Inc. v. Altai, Inc., 982 F.2d 693, 717 (2nd Cir.1992); Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655, 660 (4th Cir.1993); S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1090 n. 13 (9th Cir.1989); Restatement (First) of Torts Sec. 757 cmt. a (1939). Because Gates' claim for trade secret misappropriation under the Colorado Uniform Trade Secrets Act requires proof of a breach of trust or confidence--proof that is not required under the Copyright Act--Gates' state law claims are not preempted by federal law. 120 The appellants suggest that this court's opinion in Ehat v. Tanner, 780 F.2d 876 (10th Cir.1985), cert. denied, 479 U.S. 820, 107 S.Ct. 86, 93 L.Ed.2d 39 (1986), compels a different result. We disagree. The cause of action in Ehat sought damages for the reproduction and distribution of copyrighted notes from individuals who had no part in the misappropriation of the materials. Moreover, it was not necessary under the common law claims asserted in Ehat that the plaintiff show a breach of trust or confidence.