Section 301 of the Copyright Act governs all legal claims that "are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106" and "come within the subject matter of copyright as specified by sections 102 and 103." In other words, the Act preempts equivalent common law claims or rights under state statutes.
Plaintiffs Dow Jones & Co., Inc. ("Dow"), McGraw-Hill Companies, Inc.("McGraw-Hill"), and Chicago Board Options Exchange, Inc. ("CBOE") filed a three-count complaint in the Circuit Court of Cook County, Illinois against defendants International Securities Exchange, LLC ("ISE"), an electronic securities exchange that offers options trading, and Options Clearing Corp. ("OCC"), the sole clearing agency for standardized securities options in the United States. Plaintiffs alleged misappropriation, tortious interference with prospective economic advantage, and unfair competition relating to ISE's announcement that it intended to commence unauthorized options trading on DJIA and S & P 500 options in direct competition with the licensed options offered by plaintiff CBOE. Defendant ISE did not have licenses from either Plaintiff Dow or McGraw-Hill to offer these options since plaintiff CBOE holds the exclusive right to offer options on the S & P 500 Index and the DJIA in the United States.
The defendants removed the suit to federal court, claiming that the misappropriation count and the unfair competition count were completely preempted by Section 301 of the Copyright Act. Plaintiffs filed a motion to remand the action back to state court arguing that each of their three claims arises exclusively under state law. The District Court for the Northern District of Illinois looked not only to the Copyright Act itself, but to the statute's legislative history which states unequivocally that "[s]tate law causes of action such as those for misappropriation [and] unfair competition . . . are not . . . preempted under Section 301." The Court analyzed the matter further by asking whether plaintiffs' specific claims satisfied the Copyright Act's two requirements for preemption noted in the first paragraph above, and determined that they did not.
Plaintiffs' misappropriation and unfair competition claims were not based on defendants' threatened use of the published index values as "works of authorship" as that term is defined in Sections 102 and 103. Instead, the Court determined that plaintiffs' claims were based on defendants' intended use of plaintiffs' research and development in creating the indexes as well as the goodwill and reputation associated with plaintiffs and their indexes. The Court also determined that the second preemption requirement was not met as the rights plaintiffs sought to protect did not fall within Section 106. Although the defendants argued that plaintiffs' claims were based on defendants' intended copying and distribution of factual information, the Court found that plaintiffs were not concerned with defendants' intended copying of the index values, but of their use of unlicensed material for profit. Since the Court concluded that the misappropriation and unfair competition claims did not meet the preemption requirements of the Copyright Act, the District Court had no jurisdiction over the matter and, therefore, remanded the case to the Circuit Court of Cook County.
Chicago Board Options Exchange, Inc., et al. v. Intnl. Securities Exchange, LLC, et al., (Slip Op.) 2007 WL 604984 (N.D. Ill., Feb. 23, 2007).
