Court Opinion

ID: 4765015
Source: CourtListenerOpinion
Date Created: 2021-08-12 18:00:49.616375+00
Date Added: 2024-06-11T08:09:10.321382
License: Public Domain

Case: 20-20523      Document: 00515975891           Page: 1     Date Filed: 08/12/2021

            United States Court of Appeals
                 for the Fifth Circuit                                   United States Court of Appeals
                                                                                  Fifth Circuit

                                                                                FILED
                                                                          August 12, 2021
                                    No. 20-20523                           Lyle W. Cayce
                                                                                Clerk

   Di Angelo Publications, Incorporated,

                                                              Plaintiff—Appellant,

                                        versus

   Jentry Kelley,

                                                              Defendant—Appellee.

                   Appeal from the United States District Court
                       for the Southern District of Texas
                             USDC No. 4:20-CV-115

   Before Higginbotham, Southwick, and Engelhardt, Circuit
   Judges.
   Patrick E. Higginbotham, Circuit Judge:
          This appeal brings a variation on the often-thorny question of whether
   a claim involving a copyright arises under federal law. If Di Angelo
   Publications’ claim to a copyright requires a construction of copyright law,
   there is exclusive federal jurisdiction; but if its claim calls only upon contract
   law, jurisdiction lies with the Texas courts. The district court determined
   that only contract law applied and dismissed Di Angelo’s claim for want of
   federal jurisdiction. Finding federal jurisdiction, we reverse and remand.
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                                        No. 20-20523

                                             I.
          The dispute centers on a book titled “Hooker to Looker; a makeup
   guide for the not so easily offended” (the “Book”). Jentry Kelley, a makeup
   artist with her own cosmetics business, first approached Di Angelo’s
   principal, Sequoia Schmidt, with the idea of publishing the Book to promote
   Kelley’s business. In June 2015, the parties signed a publishing contract (the
   “Contract”) in which Di Angelo agreed to publish and distribute Kelley’s
   then-unwritten Book, with Kelly receiving 50 percent of the net royalties.
   Kelley provided Di Angelo with an initial, three-page manuscript, detailing
   her background in cosmetics and outlining the Book’s topics. According to
   Di Angelo, it then wrote the Book for Kelley while “communicating and/or
   collaborating with Kelley” during the drafting process. This process
   allegedly included Di Angelo’s creation, selection, and arrangement of the
   images appearing in the Book. Nonetheless, the Book Di Angelo distributed
   lists only Jentry Kelley as the holder of the copyright.
          Di Angelo published the Book and sold the initial 1,000-copy print
   run. Kelley then asked Di Angelo to prepare an updated or revised version of
   the Book for sale. Di Angelo alleges that it had prepared the updated work for
   print when it discovered that Kelley was attempting to work directly with Di
   Angelo’s printer, in violation of the Contract, to reduce the costs she would
   incur selling the revised edition.
          Shortly after unsuccessful overtures to the printer, in November 2018,
   Kelley filed a complaint in Harris County, Texas, claiming that Di Angelo
   intentionally misled her regarding the costs of publishing her Book and
   overcharged her for publishing services. Relevant here, Kelley alleged that
   she “is the sole owner of all copyrights, trademark rights, trade secret rights,
   concepts and other intellectual property . . . in the Book.” She further alleged
   that Di Angelo “did not develop any intellectual property or other rights in

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   connection with the Book” and that Di Angelo’s contrary assertions were
   false. At the summary judgment stage, Kelley asked the Harris County court
   to rescind her Contract with Di Angelo as a penalty for the alleged
   misrepresentations. Di Angelo counterclaimed for breach of contract, sworn
   account, quantum meruit, and a judgment declaring “that Kelley failed to
   substantially perform under the Contract.” Among other things, Di Angelo
   alleged that “Kelley has prevented Di Angelo from selling the 2nd edition and
   making a profit therefrom.” The Harris County action is still pending.
            Di Angelo filed this case in the Southern District of Texas in January
   2020. According to Kelley, the filing came on the heels of a November 2019
   ruling in Harris County that granted summary judgment to Kelley on certain
   Di Angelo counterclaims including the declaratory judgment claim.
   Di Angelo’s federal complaint asserts a single claim for relief, titled
   “Declaratory Judgment Of Authorship and Copyright Ownership of the
   Book and Its Update/Sequel.” Specifically, Di Angelo seeks a declaration
   that it “owns copyrights in the [B]ook and its update and those copyrights
   include among other rights, the right of Di Angelo Publications to control the
   printing and distribution of the [B]ook [,] its update,” and any derivative
   works.
            Di Angelo alleges that it “acquired copyrights in the [B]ook” and its
   update by “writing, editing, planning and taking all photographs and making
   all illustrations, and planning, designing, and arranging the layout of the
   [B]ook.” Elsewhere in its complaint, Di Angelo alleges that it “wrote the
   [B]ook, planned and illustrated the [B]ook, prepared the layout for the
   [B]ook,” as well as “planned, took or made, and formatted all of the
   photographs and illustrations in the [B]ook.” Apart from these allegations,
   much of Di Angelo’s complaint describes the contract dispute Kelley
   initiated in state court. Di Angelo contends that an actual controversy has
   arisen between the parties because Kelley has asserted exclusive ownership

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   of all rights in the Book and its update and seeks rescission of the Contract,
   which if granted, would give Kelley sole control over the Book’s sale and
   distribution absent a declaration of Di Angelo’s copyrights.
          Kelley moved to dismiss Di Angelo’s declaratory relief claim under
   Rules 12(b)(1) and 12(b)(6). Kelley argued that the claim did not give rise to
   federal jurisdiction because it was premised solely on her alleged breach of
   the Contract, a controversy governed by Texas law. Kelley further argued the
   federal filing as an end-run around rulings against Di Angelo in the Harris
   County case. Kelley went on to argue that Di Angelo’s claim would fail on its
   merits because the Contract conclusively established that Kelley alone
   authored the Book. Di Angelo responded that its claim was distinct from any
   claims or counterclaims asserted in state court because it was premised on a
   dispute over who wrote the Book, not on the terms of the Contract. In Di
   Angelo’s view, resolution of this authorship dispute requires the district
   court to interpret federal copyright law, including the definitional and
   ownership provisions in 17 U.S.C. §§ 101 & 201, which the state court lacks
   jurisdiction to address.
          The district court agreed with Kelley on the jurisdictional question
   and granted the motion to dismiss. 1 Although the district court acknowledged
   that certain ownership claims require interpretation of the Copyright Act, 2 it
   determined that here “the disputed ownership and authorship of the Book
   hinges on the terms of the Contract.” 3 The district court explained that while
   the “Contract does not explicitly provide for ownership of copyrights,” it

          1
           Di Angelo Publ’ns, Inc. v. Kelley, No. CV H-20-115, 2020 WL 5884659, at *3 (S.D.
   Tex. Aug. 28, 2020).
          2
              Id. at *2 (citing Goodman v. Lee, 815 F.2d 1030, 1031 (5th Cir. 1987)).
          3
              Id. at *2.

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   “refers to Kelley as the author of the Book.” 4 The district court further noted
   that Di Angelo’s complaint was heavy on contract-related allegations
   including that “Kelley acted ‘contrary to the terms of the contract’” and that
   “the Contract . . . provides Kelley a buyout option of Di Angelo’s rights.” 5
   As Di Angelo’s claim sounded in contract, the dispute did not require
   construction of the Copyright Act and, thus, did not arise under federal law. 6
   The district court declined to reach Kelley’s arguments that Di Angelo failed
   to state a claim under Rule 12(b)(6) or that the court should abstain from
   hearing the dispute while the Harris County case was pending. 7 Di Angelo
   appealed.
                                                 II.
          We review a district court’s decision to dismiss under Rule 12(b)(1)
   de novo. 8 Di Angelo, as the party asserting federal jurisdiction, has the
   burden of “alleg[ing] a plausible set of facts establishing jurisdiction.” 9
   Where, as here, “the district court rules on jurisdiction without resolving
   factual disputes . . . we consider the allegations in the plaintiff’s complaint as
   true and review whether the district court’s application of the law is
   correct.” 10 Generally, we affirm a dismissal under 12(b)(1) only if “‘it

          4
              Id.
          5
              Id.
          6
              Id.
          7
              Id. at n.10.
          8
              In re S. Recycling, L.L.C., 982 F.3d 374, 379 (5th Cir. 2020).
          9
              Laufer v. Mann Hosp., L.L.C., 996 F.3d 269, 271 (5th Cir. 2021).
          10
               Id. at 271-72 (internal quotations omitted).

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   appears certain that the plaintiff cannot prove any set of facts in support of
   his claim that would entitle plaintiff to relief.’” 11
              The parties agree that there is federal jurisdiction over Di Angelo’s
   declaratory judgment claim only if it raises an issue arising under copyright
   law. 12 A claim arises under copyright law in three circumstances: “‘[1] if the
   complaint is for a remedy expressly granted by the Act . . . or [2] asserts a
   claim requiring constructi[on] of the Act, . . . or, [3] at the very least and
   perhaps more doubtfully, presents a case where a distinctive policy of the Act
   requires that federal principles control the disposition of the claim.’” 13 Only
   the second of these—construction of the Copyright Act—is implicated
   here. 14

              11
             See Williams On Behalf of J.E. v. Reeves, 954 F.3d 729, 734 (5th Cir. 2020)
   (quoting Gilbert v. Donahoe, 751 F.3d 303, 307 (5th Cir. 2014)).
              12
              Additionally, the Declaratory Judgment Act requires an actual controversy
   before a plaintiff like Di Angelo can seek declaratory relief. See 28 U.S.C. § 2201(a). In the
   intellectual property context, this requires a showing that “the declaratory plaintiff has a
   real and reasonable apprehension of litigation and . . . the declaratory plaintiff has engaged
   in a course of conduct that brings it into adversarial conflict with the declaratory
   defendant.” Tex. v. W. Pub. Co., 882 F.2d 171, 175 (5th Cir. 1989). Kelley does not dispute
   that an actual controversy exists between the parties, and the district court seems to have
   assumed that one existed. Regardless, Di Angelo is likely correct that the requisite
   controversy exists: Kelley alleged in Harris County that she “is the sole owner of all
   copyrights . . . in the Book,” and Di Angelo has alleged that it “is preparing to publish the
   material that is subject to [Kelley’s] copyright.” W. Pub. Co., 882 F.2d at 176.
              13
                   Goodman, 815 F.2d at 1031 (quoting T. B. Harms Co. v. Eliscu, 339 F.2d 823, 826
   (2d Cir. 1964)).
              14
              See Di Angelo Publ’ns, 2020 WL 5884659, at *2 (“Di Angelo does not assert its
   claim involves copyright infringement or statutory royalties or that this is a case where a
   distinctive policy of the Act requires that federal principles control. [] Therefore, the Court
   turns to whether Di Angelo’s complaint asserts a claim that requires construction of the
   Copyright Act.”) (internal quotations omitted).

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           Di Angelo argues that resolving the dispute over who owns the
   copyrights in the Book and its update requires reference to federal copyright
   law. Claims of ownership in a copyright do not invariably arise under
   copyright law. It is well established that where a party holds a copyright by
   virtue of an assignment or similar contractual arrangement, state law is
   determinative of ownership. 15 But claims of copyright ownership grounded
   in authorship touch on federal concerns. Section 201(a) of the Copyright Act
   provides that “[c]opyright in a work protected under this title vests initially
   in the author or authors of the work.” 16 “An author gains ‘exclusive rights’
   in her work immediately upon the work’s creation, including rights of
   reproduction, distribution, and display,” and thus registration is not a
   prerequisite to an author holding a copyright. 17
           As early as 1987, we held in Goodman v. Lee “that exclusive federal
   district court jurisdiction exists in an action for a declaratory judgment to
   establish joint authorship of a copyrighted work” because such a claim
   “clearly involves the application and interpretation of the copyright
   ownership provisions.” 18 Since Goodman, our sister courts of appeals have

           15
             See T.B. Harms, 339 F.2d at 828 (“[T]he federal grant of a patent or copyright
   has not been thought to infuse with any national interest a dispute as to ownership or
   contractual enforcement turning on the facts or on ordinary principles of contract law.”).
           16
                17 U.S.C. § 201.
           17
              Fourth Est. Pub. Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881, 887 (2019);
   see also Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 165 (2010) (“[N]either § 1331, which
   confers subject-matter jurisdiction over questions of federal law, nor § 1338(a), which is
   specific to copyright claims, conditions its jurisdictional grant on whether copyright
   holders have registered their works before suing for infringement.”).
           18
              Goodman, 815 F.2d at 1031-32 (emphasis added). Contrary to Kelley’s
   suggestion, the Copyright Act’s lack of a definition of authorship does not defeat the
   conclusion that authorship claims require construction of the Act. As our sister court
   noted, such a position is “without merit” because it rests on “the mistaken impression that

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   reached a consensus: competing authorship claims require “the application
   of the Copyright Act” and thus state a federal claim. 19 Indeed, this appears
   to be the unanimous view among the courts of appeal that have squarely
   addressed the question. 20 Courts have reached this conclusion in a variety of
   circumstances, including cases involving claims for declaratory judgment 21
   and cases where at least some portion of the parties’ business relationship
   was covered by an adjacent contract. 22 Importantly, neither the presence of a
   related contract nor contract claims is dispositive of whether a valid copyright
   claim has been pled. As the Second Circuit explained, the T.B. Harms test—
   the basis for each aforementioned decision—“obviated the need for courts

   courts ‘construe’ only those terms already defined in a statute.” Merchant v. Levy, 92 F.3d
   51, 55-56 (2d Cir. 1996).
           19
              See, e.g., Severe Recs., LLC v. Rich, 658 F.3d 571, 582 (6th Cir. 2011) (“[W]e now
   join our sister circuits and adopt the “prevailing view that disputed claims about whether
   there is co-authorship require[s] application of the Copyright Act[,]” which is a dispute
   properly adjudicated in federal court.”) (internal citation omitted); Cambridge Literary
   Props., Ltd. v. W. Goebel Porzellanfabrik G.m.b.H. & Co. KG., 510 F.3d 77, 86 (1st Cir. 2007)
   (“All of the federal circuit courts of appeal that have addressed the issue, including this
   one, agree that a determination of copyright ownership based on a disputed allegation of
   co-authorship presents a federal question that arises under, and must be determined
   according to, the Copyright Act.”) (collecting cases); Gaiman v. McFarlane, 360 F.3d 644,
   652–53 (7th Cir. 2004); Merchant, 92 F.3d at 55 (citing 3 Melville B. Nimmer &
   David Nimmer, Nimmer on Copyright, § 12.01[A] at 12–13 (1994)) (“better
   view” that “in an action for a declaratory judgment to establish the plaintiff as the
   defendant’s co-author and for an accounting based thereon, . . . federal jurisdiction is
   exclusively [sic]”); Sullivan v. Naturalis, Inc., 5 F.3d 1410, 1414 (11th Cir. 1993).
           20
              Severe Recs., LLC, 658 F.3d at 582 (quoting Cambridge Literary Props., 510 F.3d
   at 86) (“All of the federal circuit courts of appeal that have addressed the issue . . . agree
   that a determination of copyright ownership based on a disputed allegation of co-authorship
   presents a federal question that arises under, and must be determined according to, the
   Copyright Act.”).
           21
                See, e.g., Severe Recs., LLC, 658 F.3d at 582; Merchant, 92 F.3d at 55.
           22
               See, e.g., Sullivan, 5 F.3d at 1414 (reversing district court’s determination that
   plaintiffs’ claim arose only under contract law).

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   to determine at the outset of litigation whether copyright claims were
   incidental to contract claims.” 23 Instead, what counts under T.B. Harms is
   “what is alleged on the face of the complaint.” 24
            Although Di Angelo muddles its complaint with contract allegations
   aplenty, it also alleges that it “acquired copyrights in the [B]ook” by
   “writing, editing, planning and taking all photographs and making all
   illustrations, and planning, designing, and arranging the layout of the
   [B]ook.” Di Angelo alleges that it made these same contributions both to the
   original Book and its update. Although the complaint uses neither the term
   “joint work” nor “co-author,” it is nigh impossible to read Di Angelo’s
   allegations that it “wrote the [B]ook . . . and illustrated the [B]ook” while
   “communicating and/or collaborating with Kelley” without concluding that
   Di Angelo is alleging, at minimum, co-authorship of the Book. 25
   Consequently, Di Angelo’s complaint appears to state a cognizable copyright
   claim.
            Kelley contends that this is merely an appearance and that the
   question of authorship sounds in contract, not federal law. It bears repeating
   that the Contract never expressly vests a copyright or any intellectual

            23
                 Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343, 349 (2d Cir. 2000).
            24
                 Id.
            25
              In fact, Di Angelo seems to be pursuing the even bolder argument that it alone
   was the author, so it alone owns the copyrights in the Book. This despite Di Angelo’s own
   allegations, acknowledging that Kelley made some contributions to the Book. Evidence also
   indicates that the copyright for the Book is formally registered to Kelley. These issues
   pertain more to the merits than to the limited jurisdictional question on appeal, but it bears
   noting that even a copyright registered to Kelley would not preclude Di Angelo from
   claiming to be a co-author: “A copyright registration, standing alone, does not serve as
   repudiation of joint authorship because coauthors are not expected to investigate the
   copyright register for competing registrations.” 18 Am. Jur. 2d Copyright and Literary
   Property § 69.

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   property right in either party. But, as Kelley points out, the Contract
   addresses her as the “author.” From this, she concludes that the Contract
   plainly does not contemplate the ghostwriting arrangement alleged by
   Di Angelo. Indeed, the district court listed the Contract’s references to
   Kelley as the “author” among its reasons for concluding that Di Angelo had
   pled only a contractual claim. 26 At this stage, we are not persuaded that the
   term “author” carries the determinative significance Kelley assigns it.
          Put simply, neither the Contract’s use of “author” nor its more
   general terms preclude Di Angelo from adducing facts that would make it a
   statutory author for purposes of 17 U.S.C. § 201(a). The Contract does not
   define author, and the word’s common meaning can apply to multiple parties
   who collaboratively engage in producing one creative work, a possibility
   expressly contemplated by copyright law. 27 And contrary to Kelley’s
   suggestion, the terms of the Contract lend some support to the notion that
   the Book would be produced collaboratively.
          In addition to traditional editing, proofing, and distribution services,
   the Contract specifies that Kelley paid Di Angelo for services described as
   “manuscript development” and “elaboration on [the] base manuscript.”
   The Book is no tome, but at 124 pages, it grew considerably from the three-
   page manuscript Kelley originally submitted. On this limited record, it is
   plausible to infer that the manuscript’s transformation into a book of sorts is
   attributable, at least partially, to the “development” and “elaboration”
   services expressly provided for in the Contract. In this sense, the Contract

          26
               Di Angelo Publ’ns, 2020 WL 5884659, at *2.
          27
            See 17 U.S.C. § 101 (defining “joint work” as “a work prepared by two or more
   authors with the intention that their contributions be merged into inseparable or
   interdependent parts of a unitary whole”).

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   itself permits the inference that the parties’ envisioned Di Angelo making
   substantive contributions to the work.
           But the Contract may not even be the final word on the matter. We
   note that the document lacks a merger or integration clause, thus allowing for
   the possibility that the parties’ agreement extended beyond the terms which
   they reduced to writing. 28 Accordingly, the Contract alone is not dispositive
   of the jurisdictional question.
           In a similar vein, the rights Di Angelo seeks to vindicate through a
   declaratory judgment invite further comment. Di Angelo seeks a declaration
   of its copyright so that it may control the “use,” “printing and distribution
   of the [B]ook and its update.” Although these are rights the holder of a
   copyright would enjoy, 29 they also seem to be rights that Di Angelo enjoys
   under the Contract, the terms of which dictate that Kelley shall not “proceed
   with business ventures that directly or indirectly affect the business services
   Di Angelo Publications is providing.” If Di Angelo could vindicate the same
   rights without reference to copyright law, then one might question whether
   the claim truly arises under copyright law or whether the federal proceeding
   ought to be stayed in favor of the earlier-filed state lawsuit. But viewing the
   allegations in the light most favorable to Di Angelo, we conclude that at least
   some of the rights referenced in Di Angelo’s complaint are not co-extensive
   with its rights under the Contract. Specifically, rights in the Book’s update
   are not expressly addressed by the Contract’s terms.

           28
             See, e.g., Digby v. Texas Bank, 943 S.W.2d 914, 929 (Tex. App. El Paso 1997, writ
   denied) (holding that when parties neglect to include a merger clause, Texas courts are not
   precluded from considering extrinsic evidence).
           29
                See 17 U.S.C. § 106.

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          Although that document contains a passing reference to a second print
   run of the original Book, none of the agreement’s terms deal with the
   possibility of an update or revision to the Book, such as the one Di Angelo
   allegedly prepared before the parties’ breakdown in relations. Thus, a
   declaration of Di Angelo’s copyright in the updated work could permit it to
   exercise rights with respect to that work that it would not enjoy under the
   Contract. For instance, a declaration could allow Di Angelo to profit from the
   Book’s update, which according to its state court complaint, Kelley currently
   prevents it from doing.
                                          III.
          The district court confined its dismissal order to the jurisdictional
   question, and the parties generally limited their briefing and oral arguments
   to this issue, so we limit our holding accordingly. At the same time as we hold
   that Di Angelo’s claim necessarily implicates 17 U.S.C. § 201, it bears
   mentioning that subsection (a)’s definition of “Initial ownership” is not the
   only portion of that statute with apparent relevance to the facts at hand.
   Subsection (b), which defines “Works made for hire,” may address the
   merits disputes to which the parties allude. We leave to the parties and the
   district court the applicability of this section.
          We VACATE the district court’s order dismissing Di Angelo’s
   declaratory judgment claim and REMAND the case for further proceedings
   consistent with this opinion.

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