Case: 1:06-cv-06427 Document #: 62 Filed: 07/16/07 Page 1 of 13 PageID #:358
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`06 C 6427
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`HENRY VAUGHN,
`Plaintiff,
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`v.
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`ROBERT KELLY,
`Defendant.
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`MEMORANDUM AND ORDER
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`Henry Vaughn, a former employee of R. Kelly, contends that he is entitled to half of the
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`proceeds from Kelly’s popular song and video “Step in the Name of Love.” Kelly’s motion to
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`dismiss Vaughn’s breach of oral contract, unjust enrichment, and fraud claims for failure to state
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`a claim is before the court. For the following reasons, Kelly’s motion is denied.
`1
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`I.
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`Background
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`The following facts are drawn from Vaughn’s amended complaint. Vaughn is a
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`songwriter, vocalist, and musician who has expertise in the dance style known as Steppin’. In
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`late 2001, while working as part of Kelly’s security team during a European tour, Vaughn
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`proposed that he and Kelly jointly create and release a song and video featuring Steppin’. Kelly
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`asked Vaughn to “[t]each [Kelly] the Steppin’ dance, [w]ork with Defendant Kelly to develop a
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`concept for a video revolving around the Steppin’ dance . . . . and [a]ssist Defendant Kelly with a
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` These claims are raised in Counts III-V, respectively, of the amended complaint.
`1
`Vaughn previously remanded his remaining claims (Counts I and II, which raise battery and false
`imprisonment claims).
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` Because the amended complaint supercedes the original complaint, the court will not
`2
`consider allegations from that complaint. See, e.g., 188 LLC v. Trinity Indus., Inc., 300 F.3d 730,
`736 (7th Cir. 2002). The court also will not consider factual allegations made by Vaughn in
`response to the motion to dismiss which are at odds with the factual allegations in the amended
`complaint. See, e.g., Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984).
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`song based on the dance Steppin’.” Amended Complaint at ¶ 51. In consideration for these
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`services, Kelly agreed to pay Vaughn one-half of the money he earned from the release of the
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`song and/or video.
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`Pursuant to this verbal contract, Vaughn “provided his time, talents, and experience” to
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`Kelly. Id. at ¶ at 78. Specifically, Vaughn taught Kelly how to step, provided him with
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`information regarding “the culture behind the Steppin’ movement” that Kelly used to write the
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`lyrics to the “Step in the Name of Love,” and “assisted Defendant Kelly in establishing the
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`concept for the song and video.” Id. at ¶¶ 55, 57. The video featured Kelly using the “moves and
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`dance steps [Vaughn] taught him.” Id. at ¶ 59. “Without [Vaughn] tendering Defendant Kelly
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`the concept for a song revolving around Steppin’, and without [Vaughn’s] efforts, talents, time
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`and assistance, . . . the song ‘Step in the Name of Love’ and the video for the single would not
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`have become a reality.” Id. at ¶ 66. Indeed, Vaughn contends that Kelly acknowledged his
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`contributions by speaking the following words on the single “Dedicated to Uncle Henry Love:
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`Thank you! Ohh, I love you[.] Thank you.” Id. at ¶ 68.
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`Vaughn filed a motion to remand, contending that none of his claims implicated the
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`Copyright Act. Based on the original complaint, which was the operative document because
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`jurisdiction is determined at the time of removal, the court found that Vaughn’s unjust
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`enrichment claim was preempted because it concerned works that came within the subject matter
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`of copyright and sought relief equivalent to the rights protected by the Copyright Act. Having
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`found that jurisdiction was proper, the court did not consider whether the remaining claims for
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`breach of oral contract and fraud were preempted as well. Kelly presently seeks to dismiss all of
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`the remaining claims, contending that they are preempted by the Copyright Act and, as such, are
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`either time-barred or non-compensable works-for-hire.
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`II.
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`Discussion
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`A.
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`Standard on 12(b)(6) Motion to Dismiss
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`In ruling on a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), the court must
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`assume the truth of all facts alleged in the complaint, construing the allegations liberally and
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`viewing them in the light most favorable to the plaintiff. See, e.g., McMath v. City of Gary, 976
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`F.2d 1026, 1031 (7th Cir. 1992). Dismissal is properly granted only if it is clear that no set of
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`facts which the plaintiff could prove consistent with the pleadings would entitle the plaintiff to
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`relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). However, the court is neither bound by the
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`plaintiff’s legal characterization of the facts, nor required to ignore facts set forth in the
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`complaint that undermine the plaintiff’s claims. Scott v. O’Grady, 975 F.2d 366, 368 (7th Cir.
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`1992).
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`B.
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`Vaughn’s Unjust Enrichment Claim
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`1.
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`Preemption
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`The court previously held that Vaughn’s unjust enrichment claim, as pleaded in the
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`original complaint, was equivalent to one protected by the Copyright Act and thus was
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`preempted by the Copyright Act. The question before the court today is whether the unjust
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`enrichment claim, as pleaded in the amended complaint, is also preempted.
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`Section 301 of the Copyright Act preempts state law based causes of action that are
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`equivalent to copyright infringement claims. 17 U.S.C. § 301(a). Specifically, it provides that:
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`[A]ll legal or equitable rights that are equivalent to any of the exclusive rights
`within the general scope of copyright . . . in works of authorship that are fixed in a
`tangible medium of expression and come within the subject matter of copyright
`. . . 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.
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`Id.
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`As the court noted in its first order addressing preemption, the Seventh Circuit has set
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`forth a two-part test to determine whether a state law claim is equivalent to one protected by the
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`Copyright Act: (1) the work at issue must be fixed in a tangible form and come within the
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`subject matter of copyright as specified in §§ 102 and 103 of the Copyright Act (the subject
`3
`4
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`matter prong); and (2) the right asserted must be equivalent to any of the rights specified in
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` Section 102 grants copyright protection to “original works of authorship fixed in any
`3
`tangible medium of expression,” including sound recordings and musical, choreographic, and
`audiovisual works. 17 U.S.C. § 102(a). However, it also provides that copyright protection for
`an original work of authorship does not “extend to any idea, procedure, process, system, method
`of operation, concept, principle, or discovery, regardless of the form in which it is described,
`explained, illustrated, or embodied in such work.” 17 U.S.C. § 102(b).
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` Section 103 specifies that compilations and derivative works are entitled to copyright
`4
`protection, but works using copyrighted materials unlawfully are not entitled to protection. 17
`U.S.C. § 103(a). It further states that “the copyright in a compilation or derivative work extends
`only to the material contributed by the author of such work, as distinguished from the preexisting
`material employed in the work, and does not imply any exclusive right in the preexisting
`material. The copyright in such work is independent of, and does not affect or enlarge the scope,
`duration, ownership, or subsistence of, any copyright protection in the preexisting material.” 17
`U.S.C. § 103(b).
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`§ 106 of the Copyright Act (the equivalence prong). ProCD, Inc. v. Zeidenberg, 86 F.3d 1447,
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`1453 (7th Cir. 1996); Baltimore Orioles, Inc. v. Major League Baseball Players Ass’n, 805 F.2d
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`663, 674 (7th Cir. 1986).
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`Vaughn does not challenge the court’s prior ruling that “Step in the Name of Love” and
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`its accompanying video satisfy the subject matter prong of the preemption test. However, he
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`contends that the allegations in the amended complaint show that the equivalence prong has not
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`been satisfied. In support, he asserts that he merely proposed the concept for the song, taught
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`Kelly to step, told Kelly about the Steppin’ culture, and discussed concepts to be used in the
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`video. According to Kelly, these contributions are not enough to show that he is attempting to
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`assert a right that is equivalent to a right specified in the Copyright Act.
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`The problem with this argument is that it is inconsistent with the allegations in the
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`amended complaint, which are essentially the same as those in the original complaint. As noted
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`above, a litigant cannot amend his complaint in response to a motion to dismiss. Car Carriers,
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`Inc. v. Ford Motor Co., 745 F.2d at 1107. Instead, he is bound by the allegations of the operative
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`complaint. Moreover, the court gave Vaughn an opportunity to amend his complaint a second
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`time, and Vaughn elected not to do so. He thus is bound by the allegations in the amended
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`complaint and cannot rely on completely different factual allegations in his response to the
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`motion to dismiss. Because for preemption purposes the amended and original complaint’s
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` Section 106 states that a copyright owner has the exclusive right to reproduce the
`5
`copyrighted work, prepare derivative works based upon the copyrighted work, distribute copies
`of the copyrighted work to the public by sale or other transfer of ownership, and perform or
`display the copyrighted work publicly. 17 U.S.C. § 106.
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` In this regard, the court notes that it need not and hence will not reach the issue of
`6
`whether the allegations in Vaughn’s response to the motion to dismiss actually satisfy the
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`allegations are essentially identical, Vaughn’s unjust enrichment claim, as pleaded in the
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`amended complaint, is preempted for the reasons stated by the court when it considered the
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`original complaint.
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`2.
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`Statute of Limitations
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`According to Kelly, once Vaughn’s unjust enrichment claim is characterized as one
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`arising under the Copyright Act, it must be dismissed with prejudice because it is untimely. In
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`support, Kelly notes that the amended complaint alleges that Vaughn and Kelly agreed to
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`co-create the song and video in October of 2001 and that the song was included on Kelly’s 2002
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`album Loveland. He concludes that Vaughn must have known from the time the song was
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`released that he had the right to share in any profits, so the statute of limitations began to run in
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`2002.7
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`The Copyright Act contains a three-year statute of limitations. See 17 U.S.C. § 507(b).
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`Thus, if the clock began to tick at some point in 2002 when the album containing “Step in the
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`Name of Love” was released, Vaughn’s 2006 complaint is untimely. Vaughn, however, says the
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`clock began ticking when he realized that Kelly had reneged on his promise to pay him half the
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`proceeds from the song and video, and that this date was well within the three year limitations
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`period. Alternatively, he contends that his claim is timely because Kelly’s failure to pay him is a
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`continuing violation.
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`equivalency prong.
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` Kelly makes a similar argument about the video, but the amended complaint does not
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`specify when that was released. Instead, it focuses on the song, alleging that it was included on
`the 2002 Loveland album and was remixed and became a hit in connection with Kelly’s 2003
`Chocolate Factory album.
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`“A co-author knows that he or she jointly created a work from the moment of its
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`creation.” Merchant v. Levy, 92 F.3d 51, 56 (2d Cir. 1996). However, this is not the moment at
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`which the statute of limitations begins to run, as copyright claims based on co-authorship accrue
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`when a plaintiff knows or has reason to know of his injury. Id. This happens when the co-author
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`plainly and expressly repudiates co-ownership. See Zuill v. Canadian, 80 F.3d 1366, 1369 (9th
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`Cir. 1996); see also Netzer v. Continuity Graphic Assocs., Inc., 963 F.Supp. 1308, 1315
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`(S.D.N.Y.1997) (statute runs when the co-owner expressly asserts sole authorship or ownership);
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`Price v. Fox Entertainment Group, Inc., 473 F.Supp.2d 446, 455-56 (S.D.N.Y. 2007) (although a
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`co-author knows that he or she jointly created a work at the time it is created, only an express
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`assertion of sole authorship or ownership starts the copyright statute of limitations). This
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`principle applies generally to copyright claims, not just claims based on co-ownership. See
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`Estate of Burne Hogarth v. Edgar Rice Burroughs, Inc., 342 F.3d 149, 165 n.18 (2d Cir. 2003)
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`(“accrual occurred when the claimant became aware that she had sustained the injury of not
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`receiving royalties”).
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`Based on the allegations in the complaint, which the court must accept as true, the court
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`declines to find that the release of the 2002 album with “Step in the Name of Love” or the release
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`of the remixed version of the song in a 2003 album without any concomitant payments to
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`Vaughn rise to the level of an express repudiation of co-ownership. In other words, because the
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`time that Vaughn should have reasonably known that Kelly was not going to pay him is a fact
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`question, Kelly’s motion to dismiss based on the statute of limitations must be denied.
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`In this regard, the court declines to speculate as to when Vaughn should have realized that
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`Kelly was not going to pay him royalties as this issue cannot be resolved at the motion to dismiss
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`stage. Thus, the court will not consider Vaughn’s alternative statute of limitations argument (a
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`continuing violations theory) and, instead, will turn to Kelly’s fallback Copyright Act argument,
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`which is that Vaughn’s claims are barred by the work-for-hire doctrine.
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`3.
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`Work Made For Hire
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`A “work made for hire” is:
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`(1) a work prepared by an employee within the scope of his or her employment; or
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`(2) a work specially ordered or commissioned for use as a contribution to a
`collective work, as a part of a motion picture or other audiovisual work, as a
`translation, as a supplementary work, as a compilation, as an instructional text, as
`a test, as answer material for a test, or as an atlas, if the parties expressly agree in
`a written instrument signed by them that the work shall be considered a work
`made for hire.
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`17 U.S.C. § 101; Gaiman v. McFarlane, 360 F.3d 644, 650 (7th Cir. 2004).
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`If Vaughn’s contributions are a work made for hire, he cannot state a claim under the
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`Copyright Act because Kelly’s alleged promise to pay him half the proceeds from the song and
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`video was never reduced to writing. See 17 U.S.C. § 201(b) (“In the case of a work made for
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`hire, the employer or other person for whom the work was prepared is considered the author for
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`purposes of this title, and, unless the parties have expressly agreed otherwise in a written
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`instrument signed by them, owns all of the rights comprised in the copyright”).
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`Kelly suggests that Vaughn worked for him, so any contribution must be a work made for
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`hire. This is an overstatement of the work made for hire doctrine, under which “all authorship
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`and ownership rights in a copyrighted work vest in the employer where the work was created by
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`an employee within the scope of employment.” 17 U.S.C. § 101; Thomas & Thomas Architects,
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`Ltd. v. Cyrus Homes, Inc., No. 97 C 6936, 1998 WL 321463, at *3 (N.D. Ill. Jun. 12, 1998). To
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`determine if a particular work was “prepared by an employee within the scope of employment”
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`for purposes of § 101, the court must apply the general common law of agency. Community for
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`Creative Non-Violence v. Reid, 490 U.S. 730, 740-41 (1989).
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`An employee’s conduct is within the scope of his employment if: “(a) it is of the kind he
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`is employed to perform; (b) it occurs substantially within the authorized time and space limits;
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`[and] (c) it is actuated, at least in part, by a purpose to serve the master.” Martin v. City of
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`Indianapolis, 982 F.Supp. 625, 633 (S.D. Ind. 1997), quoting Restatement (Second) of Agency §
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`228(1) (1958). However, “[t]he fact that an employee is in the general employment of the
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`employer does not create an inference that the conduct in question was within the employee’s
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`scope of employment.” Id., citing Restatement (Second) of Agency § 228 cmt. b.
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`Here, the amended complaint alleges that Kelly employed Vaughn as a security guard.
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`The court finds that the alleged dancing/musical collaboration between Kelly and Vaughn is
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`outside the scope of a security guard’s employment. See id. at 633-34 (act of creating an artistic
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`metal sculpture was outside the scope of employment of an employee who was responsible for
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`“translating designs submitted by clients to forms suitable for metal fabrication, more in the
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`nature of engineering, not the creation of original works of art”). Thus, Kelly’s motion to
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`dismiss based on the work made for hire doctrine is denied.
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`This means that Vaughn’s unjust enrichment claim survives, except that it is preempted
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`by the Copyright Act and as such, is in fact a request for relief under the Copyright Act. If
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`Vaugh wishes to proceed with this claim, he must amend his complaint to allege a Copyright Act
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`claim, as the court and Kelly cannot react to Vaughn’s unjust enrichment/Copyright Act claim in
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`a meaningful way if they do not know what sort of copyright claim, if any, Vaughn wishes to
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`pursue.
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`C.
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`Vaughn’s Breach of Oral Contract Claim
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`The court next considers whether Vaughn’s state law claims for breach of an oral contract
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`is, in fact, actually a federal copyright claim. The Seventh Circuit has held that rights created by
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`contract are not necessarily “equivalent to any of the exclusive rights within the general scope of
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`copyright” law. ProCD, Inc. v. Zeidenberg, 86 F.3d at 1454. However, a private contract is
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`nevertheless within the scope of the Copyright Act if enforcing it would result in “withdraw[ing]
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`. . . information from the public domain.” Id. at 1455.
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`Kelly argues that Vaughn is asserting that he is a co-author and that the rights of a co-
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`author are governed exclusively by the Copyright Act. Vaughn, on the other hand, contends that
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`he merely supplied the idea for the song and accompanying video and is not attempting to claim
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`the rights of a co-author. It is true that Vaughn’s allegations in the amended complaint are broad
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`and could be construed as stating a co-authorship claim. However, the court must construe the
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`allegations in the light most favorable to Vaughn, so it will not read the amended complaint in
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`the limited manner suggested by Kelly.
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`A contributor does not gain a co-owner copyright interest unless his contribution is
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`independently copyrightable. Natkin v. Winfrey, 111 F.Supp.2d 1003, 1010 (N.D.Ill. 2000); see
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`also Erickson v. Trinity Theatre, Inc., 13 F.3d 1061, 1070-71 (7th Cir. 1994) (“To qualify as an
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`author, one must supply more than mere direction or ideas” so “[a] collaborative contribution
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`will not produce a joint work, and a contributor will not obtain a co-ownership interest, unless
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`the contribution represents original expression that could stand on its own as the subject matter
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`of copyright”). It is thus possible for Vaughn’s claim to exist outside of the Copyright Act.8
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`The Seventh Circuit has held that rights created by contract are generally not equivalent
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`to exclusive rights within the scope of the Copyright Act. ProCD, Inc. v. Zeidenberg, 86 F.3d at
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`1454. Thus, in ProCD, a producer of computer software filed a copyright action against users of
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`its software who had downloaded telephone information from the plaintiff’s software and placed
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`the listings on the Internet. The Seventh Circuit noted that the Copyright Act governs the
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`author’s rights against strangers. In contrast, a private contract between the author and another
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`person affects only the parties to the contract and thus does not create an exclusive right arising
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`under the Copyright Act. It then concluded that the contract at issue was not preempted by the
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`Copyright Act because respecting a two-party contract neither interfered with the national
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`objectives of the Copyright Act nor forced any information to be withdrawn from the public
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`domain. Id.
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`In this case, the alleged oral contract between Vaughn and Kelly governed the division of
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`profits from any song and video based on Vaughn’s interaction with Kelly about Steppin’. This
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`is the case whether Vaughn was an integral part of creating the song and video (per the amended
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`complaint) or merely contributed the idea for the song and video (per Vaughn’s brief, which
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`improperly attempts to retreat from the allegations in the amended complaint). As in ProCD, the
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`alleged agreement regarding profits from the song and video does not necessarily implicate the
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` The court also notes that its task at this point is to decide whether the Copyright Act
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`preempts Vaughn’s breach of oral contract claim, not whether Vaughn has stated a viable co-
`authorship claim under the Copyright Act. Thus, Kelly’s brief, which assumes that Vaughn is a
`co-author, puts the cart before the horse.
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`Copyright Act because that agreement is not directed at the “right to reproduce the copyrighted
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`work, prepare derivative works based upon the copyrighted work, distribute copies of the
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`copyrighted work to the public by sale or other transfer of ownership, and perform or display the
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`copyrighted work publicly.” 17 U.S.C. § 106.
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` Moreover, if the court were to enforce the alleged contract, no information would be
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`withdrawn from the public domain because the contract merely apportions the profits between
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`Kelly and Vaughn. See Royal v. Leading Edge Products, Inc., 833 F.2d 1, 3-4 (1st Cir. 1987)
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`(breach of contract claim was not preempted because “if the royalty agreement stands, then the
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`plaintiff’s sole remedy for the breach of it would be money damages and the Copyright Act need
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`not be construed”); see also Gail Green Licensing & Design Ltd. v. Accord, Inc., No. 05 C 5303,
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`2006 WL 2873202, at *6 (N.D. Ill. Oct 5, 2006) (a claim that the defendants breached a
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`contractual duty of confidentiality is not the equivalent of any of the exclusive rights copyright
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`holders have under the Copyright Act and thus was not preempted). For all of these reasons, the
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`court finds that Vaughn’s breach of contract claim is not preempted by the Copyright Act.
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`D.
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`Vaughn’s Fraud Claim
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`With respect to Vaughn’s fraud claim, Kelly contends that any request for profits
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`necessarily arises under the Copyright Act. However, § 301 of the Copyright Act does not
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`necessarily preempt common law fraud claims. Do It Best Corp. v. Passport Software, Inc., No.
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`01 C 7674, 2004 WL 1660814, at *5 n.22 (N.D. Ill. Jul. 23, 2004) (collecting cases). Indeed, as
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`the court’s colleague observed in Do it Best, the legislative history and treatises have rejected the
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`argument that fraud claims are always preempted. Id., quoting H.R. Rep. No. 94-1476 (1976),
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`reprinted in 1976 U.S.C.C.A.N. 5659, 5748 (“[T]he general laws of defamation and fraud . . .
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`remain unaffected as long as the causes of action contain elements . . . that are different in kind
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`from copyright infringement”); 1 Melville B. Nimmer & David Nimmer, Nimmer On Copyright
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`§ 1.01[B][1][3], pp. 1-27 (2004) (“[T]he element of misrepresentation or deception . . . is no part
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`of a cause of action for copyright infringement. Thus, there is no preemption of the state law of
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`fraud”). Accordingly, the court declines to accept Kelly’s invitation to hold that all fraud claims
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`are necessarily copyright claims. This means that Vaughn’s fraud claim is not preempted.
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`III.
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`Conclusion
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`For the reasons discussed above, Kelly’s motion to dismiss [50 & 53] is denied. In light
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`of the court’s holding that Vaughn’s unjust enrichment claim is preempted by the Copyright Act
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`and as such, is in fact a request for relief under the Copyright Act, if Vaughn wishes to proceed
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`with this claim, he must amend this count to seek relief under the Copyright Act. Any second
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`amended complaint must be filed by August 13, 2007, consistent with this order and counsels’
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`Rule 11 obligations. If Vaughn does not file a second amended complaint, the court will assume
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`he wishes to dismiss his unjust enrichment/Copyright Act claim with prejudice and will enter an
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`order accordingly.
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`DATE: July 16, 2007
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`__________________________________
`Blanche M. Manning
`United States District Judge
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