Case: 14-10753 Document: 00513100328 Page: 1 Date Filed: 06/30/2015
`
`IN THE UNITED STATES COURT OF APPEALS
`FOR THE FIFTH CIRCUIT
`
`
`
`No. 14-10753
`
`
`
`SPEAR MARKETING, INCORPORATED,
`
`
`
`United States Court of Appeals
`Fifth Circuit
`
`FILED
`June 30, 2015
`
`Lyle W. Cayce
`Clerk
`
` Plaintiff - Appellant
`
`
`v.
`
`BANCORPSOUTH BANK; ARGO DATA RESOURCE CORPORATION,
`
`
`
` Defendants - Appellees
`
`
`
`
`Appeal from the United States District Court
`for the Northern District of Texas
`
`
`
`
`
`Before WIENER, SOUTHWICK, and GRAVES, Circuit Judges.
`WIENER, Circuit Judge:
`Plaintiff-Appellant Spear Marketing, Inc. (“SMI”) brought various Texas
`state law claims against Defendants-Appellees BancorpSouth Bank (“BCS”)
`and ARGO Data Resource Corp. (“ARGO”) (collectively, “Defendants”) in Texas
`state court. SMI’s claims related to Defendants’ alleged theft of trade secrets
`in connection with a software program developed and sold by SMI. Defendants
`removed the case to federal court on the basis of complete preemption by the
`Copyright Act.1 The district court denied SMI’s motion to remand and, after
`
`
`1 See 17 U.S.C. § 301(a).
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 2 Date Filed: 06/30/2015
`
`No. 14-10753
`discovery, granted Defendants’ motion for summary judgment on the merits of
`the claims. SMI appeals both decisions. We affirm.
`
`FACTS AND PROCEEDINGS
`I.
`SMI is a small, family-run business that produces one product for the
`banking industry, a computer program called VaultWorks. VaultWorks helps
`banks manage their cash inventories so that each of their branches has the
`optimum supply of cash available on site. The program enables banks to
`identify surplus cash in vaults and ATMs, track daily cash inventory, and
`eliminate unnecessary cash deliveries to branch and ATM locations.
`Although VaultWorks is a software program, none of SMI’s customers
`has access to the software itself. Instead, “SMI’s customers can only view the
`specific user interface screens and reports they are given access to via the
`internet.”2 Bank branches enter their daily cash information into VaultWorks
`using these interface screens, and VaultWorks’s output data is then displayed
`to those branches. SMI acknowledges that none of its customers was ever
`provided with the source code, object code, or software for VaultWorks.
`BCS was one of SMI’s largest customers. BCS and SMI first entered into
`a one-year agreement for the use of VaultWorks in May 2002. The parties
`extended the agreement several times, the last extension occurring in March
`2010 for a term of two years.
`ARGO, like SMI, develops software for the banking industry. It is
`significantly larger than SMI and offers a range of products. At all relevant
`times, BCS used ARGO’s automatic teller program, BANKPRO Teller. Around
`2004, ARGO began to develop its own cash management program, which
`
`
`2 Spear Mktg., Inc. v. BancorpSouth Bank, No. 3:12-CV-3583-B, 2014 WL 2608485, at
`*1 (N.D. Tex. June 11, 2014).
`2
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 3 Date Filed: 06/30/2015
`
`No. 14-10753
`ARGO envisioned would eventually be bundled with its BANKPRO Teller.
`This product, named Cash Inventory Optimization (“CIO”), uses different
`predictive algorithms than does VaultWorks. Because CIO is installed directly
`on a bank’s computers, it is integrated with the rest of the bank’s operating
`system.3 CIO thus “eliminates ‘the need for branch personnel to manually
`input cash data,’ as bank employees must do with VaultWorks.”4
`Starting in 2008, ARGO began pitching CIO and an upgraded version of
`the BANKPRO Teller system to BCS. BCS demurred on both products until
`March 2010, when it told ARGO that it would be interested in CIO if that
`system could be integrated with the existing version of BANKPRO Teller that
`BCS was then using rather than ARGO’s upgraded replacement product.
`ARGO discussed this concern internally and, on April 1, 2010, emailed BCS
`that this integration would be possible.
`Also around April 1, 2010, SMI contacted ARGO to see if it would be
`interested in acquiring SMI. ARGO expressed interest, representing that it
`neither had nor was currently developing a cash management product similar
`to VaultWorks. On the strength of ARGO’s expression and representations,
`SMI arranged to demonstrate VaultWorks to ARGO, which it did over the
`phone and online on April 6. During this demonstration, which lasted
`approximately one hour, SMI disclosed confidential business and technical
`information about VaultWorks. After a few more exchanges, ARGO lost
`interest in acquiring SMI and stopped responding to SMI’s emails.
`Through the rest of 2010, ARGO continued marketing CIO to BCS.
`Finally, in early January 2011, BCS agreed to license CIO from ARGO. The
`two companies conducted a lengthy implementation process that lasted the
`
`
`3 See id. at *3.
`4 Id. (citation omitted).
`
`3
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 4 Date Filed: 06/30/2015
`
`No. 14-10753
`rest of the year. During this time, BCS sent ARGO various screenshots of the
`VaultWorks user interface because ARGO needed historical cash usage data
`from BCS’s branches to troubleshoot CIO’s forecasting function. That data was
`readily accessible from the VaultWorks output screens for each branch.
`CIO was finally implemented successfully at the end of 2011, and BCS
`“notified SMI on January 12, 2012 of its intention not to renew the VaultWorks
`Agreement.”5 That agreement thus expired in February 2012.
`In September 2012, SMI filed this suit against Defendants in Texas state
`court, alleging ten causes of action: violation of the Texas Theft Liability Act
`(“TTLA”), misappropriation of trade secrets, conversion, unjust enrichment,
`fraud, constructive fraud, breach of contract, tortious interference, unfair
`competition, and civil conspiracy. SMI claimed that Defendants had stolen
`both technical and business trade secrets related to VaultWorks.
`Defendants removed the case to federal court on the ground that SMI’s
`claims were completely preempted by the Copyright Act. SMI then amended
`its state court petition (“Original Petition”) to delete its conversion claim and
`remove various references to copying and distribution. It then moved for
`remand, contending that removal had been improper because none of its claims
`were preempted. SMI explained in its opening brief that it voluntarily
`abandoned its conversion claim “[t]o narrow the issues in this lawsuit” and that
`it removed portions of its TTLA claim related to copying of trade secrets “even
`though this district’s own precedent holds [those portions] are not preempted
`by the Copyright Act.” The district court denied SMI’s motion, holding that
`the conversion and TTLA claims were completely preempted. The court did
`not consider whether SMI’s remaining claims were preempted, choosing
`instead to exercise supplemental jurisdiction over them per 28 U.S.C. § 1367.
`
`
`5 Id. at *6.
`
`4
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 5 Date Filed: 06/30/2015
`
`No. 14-10753
`After discovery, Defendants filed a motion for summary judgment,
`seeking dismissal of all of SMI’s remaining claims. The district court granted
`this motion, holding that “SMI ha[d] failed to establish that genuine factual
`disputes exist for certain essential elements of its nine Texas state law claims,
`and as such, summary judgment in Defendants’ favor [wa]s warranted.”6 SMI
`timely appealed the summary judgment order and the order denying its motion
`to remand.
`
`II.
`
`ANALYSIS
`
`A.
`
`Denial of SMI’s Motion to Remand
`1.
`Standard of Review
`“We review the denial of a motion to remand to state court de novo.”7
`Under this standard, “[a]ny underlying findings of fact are subject to review
`for clear error.”8
`2.
`Time-of-Filing Rule
`The district court considered SMI’s motion to remand by evaluating the
`Original Petition for grounds for removal. SMI asserts that the district court
`should have considered SMI’s amended complaint (“Amended Complaint”), in
`which SMI dropped its conversion claim and deleted language accusing
`Defendants of copying VaultWorks. Defendants counter that removal is
`assessed according to the time-of-filing rule.
`“[J]urisdictional facts are determined at the time of removal, and
`consequently post-removal events do not affect that properly established
`jurisdiction.”9 It is this court’s established precedent that once a case is
`
`
`6 Id. at *19.
`7 Energy Mgmt. Servs., LLC v. City of Alexandria, 739 F.3d 255, 257 (5th Cir. 2014)
`(quoting Roland v. Green, 675 F.3d 504, 511 (5th Cir. 2012)).
`8 Camsoft Data Sys., Inc. v. S. Elecs. Supply, Inc., 756 F.3d 327, 333 (5th Cir. 2014).
`9 Louisiana v. Am. Nat. Prop. & Cas. Co., 746 F.3d 633, 636 (5th Cir. 2014).
`5
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 6 Date Filed: 06/30/2015
`
`No. 14-10753
`properly removed, the district court retains jurisdiction even if the federal
`claims are later dropped10 or dismissed.11 In Brown v. Southwestern Bell
`Telephone Co., we held that “[w]hen a defendant seeks to remove a case, the
`question of whether jurisdiction exists is resolved by looking at the complaint
`at the time the petition for removal is filed.”12 We noted that “when there is a
`subsequent narrowing of the issues such that the federal claims are eliminated
`and only pendent state claims remain,
`federal
`jurisdiction
`is not
`extinguished.”13 We wrote a thorough and definitive explanation of this issue
`in Hook v. Morrison Milling Co.:
`Before analyzing our appellate jurisdiction over this appeal, we first
`note that the district court’s subject matter jurisdiction was proper at all
`times. To begin with, this case was properly removed pursuant to 28
`U.S.C. § 1446. Hook’s original petition alleged, inter alia, that she was
`wrongfully discharged in retaliation for filing a workers’ compensation
`claim. . . . MMC’s removal of Hook’s claims was unquestionably proper.
`Furthermore, Hook’s subsequent deletion of her wrongful discharge
`claim does not render MMC’s removal improper. We have stated on
`several occasions that a post-removal amendment to a petition that
`deletes all federal claims, leaving only pendent state claims, does not
`divest the district court of its properly triggered subject matter
`jurisdiction. In a jurisdictional inquiry, we look at the complaint as it
`existed at the time the petition for removal was filed, regardless of any
`subsequent amendments to the complaint.14
`Nothing cited by SMI disturbs this conclusion. First, SMI relies on 28
`U.S.C. § 1447(c), which requires a district court to remand an action “[i]f at any
`
`
`10 See, e.g., Lone Star OB/GYN Assocs. v. Aetna Health Inc., 579 F.3d 525, 528 (5th
`Cir. 2009) (“Once the case is removed, a plaintiff’s voluntary amendment to a complaint will
`not necessarily defeat federal jurisdiction . . . .”); Brown v. United Parcel Serv., Inc., No. 99-
`10092, 2000 WL 1701739, at *1 n.1 (5th Cir. Oct. 31, 2000) (unpublished).
`11 See, e.g., Giles v. NYLCare Health Plans, Inc., 172 F.3d 332, 339 (5th Cir. 1999) (“A
`district court, in its discretion, may remand supplemental state law claims when it has
`dismissed the claims that provide the basis for original jurisdiction.”).
`12 901 F.2d 1250, 1254 (5th Cir. 1990) (emphasis added).
`13 Id. (emphasis added).
`14 38 F.3d 776, 779–80 (5th Cir. 1994) (emphases added) (footnotes omitted) (citations
`omitted).
`6
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 7 Date Filed: 06/30/2015
`
`No. 14-10753
`time before final judgment it appears that the district court lacks subject
`matter jurisdiction.”15 But this “any time” language regarding jurisdictional
`defects must be read in tandem with the first sentence of the subsection, which
`requires that motions to remand on the basis of procedural defects be brought
`within thirty days of removal. When § 1447(c) is read in its entirety, it is clear
`that this rule does nothing more than specify the time in which remands for
`jurisdictional or procedural defects may be instituted; it contains no
`substantive provisions whatsoever.
`Second, SMI quotes the Supreme Court’s decision in Grupo Dataflux v.
`Atlas Global Group, L.P. as limiting the time-of-filing rule to diversity cases,16
`but nothing in that case suggests that the rule is not equally applicable to
`federal question cases. And again, SMI ignores our direct precedent
`catalogued above.
`Third, SMI relies on the Third Circuit’s decision in New Rock Asset
`Partners, L.P. v. Preferred Entity Advancements, Inc., which held that, in a case
`in federal court solely because of the involvement of the Resolution Trust
`Corporation (“RTC”), subsequent dismissal of the RTC did affect federal
`jurisdiction.17 But New Rock stands for the very limited proposition that 12
`U.S.C. § 1441a(l)(1), which allowed removal of cases when the RTC was a
`party, could not support retaining jurisdiction once the RTC ceased to be a
`party.18 The decision makes no pronouncements as to that case’s applicability
`
`
`15 28 U.S.C. § 1447(c).
`16 541 U.S. 567, 570–71 (2004) (“This time-of-filing rule is hornbook law (quite
`literally) taught to first-year law students in any basic course on federal civil procedure. It
`measures all challenges to subject-matter jurisdiction premised upon diversity of citizenship
`against the state of facts that existed at the time of filing—whether the challenge be brought
`shortly after filing, after the trial, or even for the first time on appeal.” (footnote omitted)).
`17 101 F.3d 1492, 1495, 1503 (3d Cir. 1996).
`18 12 U.S.C. § 1441a(l)(1) was repealed by the Dodd-Frank Wall Street Reform and
`Consumer Protection Act, Pub. L. No. 111-203, § 364(b), 124 Stat. 1376, 1555 (2010).
`7
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 8 Date Filed: 06/30/2015
`
`No. 14-10753
`to other federal question cases.19 Moreover, the Third Circuit is in the minority
`on this issue,20 and, in an analogous case involving the FDIC, we firmly
`rejected New Rock’s very small exception to the time-of-filing rule.21
`We conclude that the district court was correct to consider only the
`Original Petition when deciding SMI’s motion to remand. SMI has conflated
`the question whether the initial removal was proper—which follows the time-
`of-filing rule—with the question whether the district court should, in its
`discretion, remand the case when the federal claims disappear as the case
`progresses.22 SMI’s motion sought remand under § 1447(c) and contended that
`removal had been improper, so the relevant record was the Original Petition.
`3.
`Complete Preemption
`We turn now to the question whether the Original Petition provided a
`basis for federal jurisdiction. Defendants removed this case on the ground that
`17 U.S.C. § 301(a), which establishes the exclusivity of the federal Copyright
`Act, completely preempts SMI’s claims. Although preemption is usually a
`defense and thus not a basis for removal, when “the pre-emptive force of a
`[federal] statute is so ‘extraordinary’ that it converts an ordinary state
`common-law complaint into one stating a federal claim for purposes of the well-
`pleaded complaint rule,” removal is proper.23 In GlobeRanger Corp. v.
`
`
`19 Furthermore, the Third Circuit went on to allow continued supplemental
`jurisdiction under 28 U.S.C. § 1367. See New Rock, 101 F.3d at 1510–11.
`20 See Adair v. Lease Partners, Inc., 587 F.3d 238, 242 (5th Cir. 2009) (“In the minority
`is the Third Circuit, which holds that original federal jurisdiction ceases with the dismissal
`of a FIRREA federal corporation and only supplemental jurisdiction remains.”).
`21 See Bank One Tex. Nat’l Ass’n v. Morrison, 26 F.3d 544, 547–48 (5th Cir. 1994) (per
`curiam).
`22 See Giles v. NYLCare Health Plans, Inc., 172 F.3d 332, 339 (5th Cir. 1999); Bentley
`v. Tarrant Cty. Water Control & Improvement Dist. No. One, No. 94-41044, 1995 WL 534726,
`at *2 (5th Cir. 1995) (unpublished).
`23 GlobeRanger Corp. v. Software AG, 691 F.3d 702, 705 (5th Cir. 2012) (quoting
`Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987)) (internal quotation mark omitted).
`8
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 9 Date Filed: 06/30/2015
`
`No. 14-10753
`Software AG, we held that § 301(a) “completely preempts the substantive
`field.”24
`We use a two-part test to determine whether a state law claim is
`preempted by the Copyright Act:
`First, the claim is examined to determine whether it falls “within the
`subject matter of copyright” as defined by 17 U.S.C. § 102. And second,
`“the cause of action is examined to determine if it protects rights that
`are ‘equivalent’ to any of the exclusive rights of a federal copyright, as
`provided in 17 U.S.C. § 106.”25
`A claim must satisfy both prongs of this test to be preempted.26 If any claim is
`preempted, however, the entire action may be removed.27 Applying this test,
`the district court held that SMI’s TTLA and conversion claims were at least
`partially preempted by § 301(a). It then exercised supplemental jurisdiction
`over the remainder of SMI’s state law claims.
`a.
`Subject Matter of Copyright
`The statutory basis for complete copyright preemption is found in 17
`U.S.C. § 301(a), which states:
`[A]ll 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 . . . 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.28
`Section 102(a) extends federal copyright protection to “original works of
`authorship fixed in any tangible medium of expression.”29 Section 102(b)
`
`24 Id. at 706.
`25 Carson v. Dynegy, Inc., 344 F.3d 446, 456 (5th Cir. 2003) (footnote omitted) (citation
`omitted) (quoting Daboub v. Gibbons, 42 F.3d 285, 289 (5th Cir. 1995)).
`26 See id.
`27 See GlobeRanger, 691 F.3d at 706.
`28 17 U.S.C. § 301(a) (emphasis added).
`29 Id. § 102(a).
`9
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 10 Date Filed: 06/30/2015
`
`No. 14-10753
`excludes from copyright protection “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.”30
`The parties dispute whether § 301(a) preemption extends to all works
`satisfying the requirements of § 102(a), even those that also contain
`noncopyrightable material as defined in § 102(b). SMI asserts that it carefully
`defined its trade secrets to include only “know-how, ideas, procedures,
`processes, systems, methods of operation, and concepts,” thus excluding them
`from the subject matter of copyright. Defendants counter that the first element
`of the preemption analysis focuses not on the copyrightability of the expression
`at issue, but on whether the alleged work is the type of work described in 17
`U.S.C. § 102. According to Defendants, the relevant inquiry is whether the
`property at issue—in this case, a software program—is an original, fixed work
`under § 102(a). If it is, then it does not matter if it also contains elements that
`are unprotected under § 102(b).
`We have never definitively addressed this interaction of § 301(a) and
`§ 102. GlobeRanger, our most recent foray into copyright preemption, appears
`to touch on the issue, but the claims in that case involved actual physical acts,
`not just software:
`The current case contains plausible allegations that extend beyond
`software. For example, one part of GlobeRanger’s petition alleges that
`“Defendants could see how GlobeRanger went about actually deploying
`on site, how it set up its readers, how it tagged its product, how it
`incorporated business process into the design of the warehouse, and how
`it had trained sailors.”31
`
`
`30 Id. § 102(b). Section 103, which is not relevant to this case, extends copyright
`protection to compilations and derivative works. Id. § 103.
`31 GlobeRanger, 691 F.3d at 708 (emphasis added).
`10
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 11 Date Filed: 06/30/2015
`
`No. 14-10753
`We thus held that at least some of the plaintiff’s claims were not preempted.32
`But GlobeRanger did not squarely address the question whether processes and
`systems that had been fixed in a tangible medium of expression are included
`in the subject matter of copyright.33
`Neither do our other copyright preemption cases shed much light on the
`instant question. Many of our decisions rest on the second (“equivalency”)
`element of the preemption test,34 sometimes because the parties concede the
`subject-matter element.35 In fact, only two of our cases discuss the subject
`matter of copyright at any length. First, Alcatel USA, Inc. v. DGI Technologies,
`Inc. came close
`to concluding
`that
`“the use of uncopyrightable
`information . . . contained within . . . copyrightable works” does not prevent
`preemption.36 Second, we held in Brown v. Ames that a musician’s name and
`likeness do not fall within the subject matter of copyright because a persona is
`not an original work produced by an author.37 The distinguishing feature of
`Brown was that the misappropriation claim involved the use of a
`fundamentally intangible concept.38
`
`32 See id. at 709.
`33 There is some limited Fifth Circuit support for the idea that § 301(a) preempts more
`than the Copyright Act protects. See Real Estate Innovations, Inc. v. Hous. Ass’n of Realtors,
`Inc., 422 F. App’x 344, 348–49 (5th Cir. 2011) (per curiam) (unpublished) (“Though perhaps
`counter-intuitive, it is settled that the absence of a copyright registration does not preclude
`the application of the doctrine of preemption that exists under the Copyright Act.”).
`34 See Carson v. Dynegy, Inc., 344 F.3d 446, 456 (5th Cir. 2003); Comput. Mgmt.
`Assistance Co. v. Robert F. DeCastro, Inc., 220 F.3d 396, 404 (5th Cir. 2000); Taquino v.
`Teledyne Monarch Rubber, 893 F.2d 1488, 1501 (5th Cir. 1990).
`35 See Real Estate Innovations, 422 F. App’x at 349; Daboub v. Gibbons, 42 F.3d 285,
`289 (5th Cir. 1995).
`36 166 F.3d 772, 786 (5th Cir. 1999) (emphasis omitted). But, in Alcatel, the plaintiff
`“consistently framed its misappropriation count in the context of [the defendant’s] use of its
`firmware, operating system software and DSP manuals”—all tangible media—and failed to
`object to the district court’s jury instruction on the defendant’s “use of these works” rather
`than on the “specific pieces of information contained in them.” Id.
`37 201 F.3d 654, 658 (5th Cir. 2000).
`38 See id. at 659 (comparing names and likenesses to vocal styles, which are also
`fundamentally unfixed and not copyrightable).
`11
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 12 Date Filed: 06/30/2015
`
`No. 14-10753
`Looking to other circuits, we find a clear and lopsided split. The
`Second,39 Fourth,40 Sixth,41 and Seventh Circuit,42 as well as the Ninth Circuit
`en banc,43 all recognize that, for the purpose of preemption under § 301(a),
`ideas fixed in tangible media fall within the subject matter of copyright. Only
`the Eleventh Circuit disagrees, holding that “[i]deas are substantively
`ineligible for copyright protection and, therefore, are categorically excluded
`from the subject matter of copyright” even if “expressed in a tangible
`medium.”44
`The venerable treatise Nimmer on Copyright agrees with the majority of
`circuits: “Though the matter is not without controversy, [Nimmer] concludes
`that the better view is that ideas do fall within the subject matter of copyright
`for purposes of pre-emption (albeit pre-emption may still be avoided on the
`basis of lack of equivalence).”45 This treatise notes that “the majority position
`in the courts comports with legislative history.”46 Furthermore, Nimmer
`points to two policy justifications for this position: (1) Congress made a policy
`decision to exclude ideas from federal copyright protection, so “state laws that
`
`
`39 Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 430 (2d
`Cir. 2012); see also Nat’l Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 849 (2d Cir. 1997)
`(“Copyrightable material often contains uncopyrightable elements within it, but Section 301
`preemption bars state law misappropriation claims with respect to uncopyrightable as well
`as copyrightable elements.”).
`40 U.S. ex rel. Berge v. Bd. of Trustees of the Univ. of Ala., 104 F.3d 1453, 1463 (4th
`Cir. 1997).
`41 Stromback v. New Line Cinema, 384 F.3d 283, 300 (6th Cir. 2004); Wrench LLC v.
`Taco Bell Corp., 256 F.3d 446, 455 (6th Cir. 2001).
`42 ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1453 (7th Cir. 1996).
`43 Montz v. Pilgrim Films & Television, Inc., 649 F.3d 975, 979 (9th Cir. 2011) (en
`banc) (“[S]tate-law protection for fixed ideas falls within the subject matter of copyright and
`thus satisfies the first prong of the statutory preemption test, despite the exclusion of fixed
`ideas from the scope of actual federal copyright protection.”).
`44 Dunlap v. G&L Holding Grp., Inc., 381 F.3d 1285, 1297 (11th Cir. 2004).
`45 1 MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT § 1.01[B][2][c]
`(Matthew Bender, Rev. Ed.).
`46 5 NIMMER, supra note 45, § 19D.03[A][2][b].
`12
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 13 Date Filed: 06/30/2015
`
`No. 14-10753
`protect fixed ideas trench upon” this deliberate exclusion; and (2) “if ideas were
`deemed outside the ‘scope’ of copyright protection—so that state laws
`protecting them could never be considered pre-empted—the result would be
`that state law could be used to protect . . . even those ideas embodied in
`published literary works.”47
`The Fourth Circuit’s explanation in U.S. ex rel. Berge v. Board of Trustees
`of the University of Alabama aligns with Nimmer.48 In noting that § 102(b)
`excludes ideas from protection but that § 301(a) preempts everything that falls
`within the scope of copyright, the court remarked simply that “scope and
`protection are not synonyms.”49 It went on to observe that “the shadow
`actually cast by the Act’s preemption is notably broader than the wing of its
`protection.”50 The position of the majority of circuits clearly delineates
`between the purpose of federal copyright preemption and that of federal
`copyright protection. Congress intended the Copyright Act to protect some
`expressions but not others, and it wrote § 301(a) to ensure that the states did
`not undo this decision:
`[O]ne function of § 301(a) is to prevent states from giving special
`protection to works of authorship that Congress has decided should be
`in the public domain, which it can accomplish only if “subject matter of
`copyright” includes all works of a type covered by sections 102 and 103,
`even if federal law does not afford protection to them.51
`
`
`47 Id.
`48 104 F.3d 1453, 1463 (4th Cir. 1997).
`49 Id.
`50 Id.
`51 Wrench LLC v. Taco Bell Corp., 256 F.3d 446, 455 (6th Cir. 2001) (quoting ProCD,
`Inc. v. Zeidenberg, 86 F.3d 1447, 1453 (7th Cir. 1996)).
`13
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 14 Date Filed: 06/30/2015
`
`No. 14-10753
`Finding this reasoning is persuasive,52 we join the majority position and
`hold that state law claims based on ideas fixed in tangible media are preempted
`by § 301(a).
`When we apply this principle to SMI’s claims, we see that the technical
`trade secrets found within VaultWorks fall within the subject matter of
`copyright. First, computer software is a tangible medium protected by the
`Copyright Act.53 Second, SMI claims as trade secrets, inter alia, “the selection
`of categories of input data used by VaultWorks . . . [and] selection of categories
`of output data to be generated by VaultWorks.” Although some of these may
`be ideas, they are “fixed,” so to speak, in the VaultWorks software user
`interface. As the crux of SMI’s case is that ARGO stole its trade secrets by
`(1) enticing SMI to perform a demo of its software to ARGO, as part of an
`acquisition pitch, and (2) receiving screenshots of VaultWorks from BCS
`during the implementation of CIO, SMI cannot dispute that these ideas have
`appeared in a tangible medium. And as the tangible medium falls within the
`subject matter of copyright as defined in § 102(a), so do the specific trade
`secrets contained within it.
`b.
`Equivalency of Copyright Protection and State Law Claims
`Having established that SMI’s trade secrets fall within the subject
`matter of copyright, the next step in the complete preemption analysis is the
`equivalency test: We examine SMI’s causes of action “to determine if [they]
`protect[] rights that are ‘equivalent’ to any of the exclusive rights of a federal
`
`
`52 Cf. Daboub v. Gibbons, 42 F.3d 285, 288 (5th Cir. 1995) (“Section 301(a)
`accomplishes the general federal policy of creating a uniform method for protecting and
`enforcing certain rights in intellectual property by preempting other claims.” (emphasis
`added)).
`53 See Eng’g Dynamics, Inc. v. Structural Software, Inc., 26 F.3d 1335, 1341 (5th Cir.
`1994), opinion supplemented on denial of reh’g, 46 F.3d 408 (5th Cir. 1995).
`14
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 15 Date Filed: 06/30/2015
`
`No. 14-10753
`copyright.”54 The district court held that SMI’s conversion and TTLA claims
`were completely preempted, and we agree.
`In the conversion section of the Original Petition, SMI claimed that it
`owned “certain physical property, documents, and confidential information
`pertaining to VaultWorks” and “certain trade secrets pertaining to [its]
`proprietary ideas, processes, and/or other methodologies of VaultWorks.” SMI
`then contended that Defendants “knowingly or intentionally, with malice, and
`without SMI’s consent, exercised dominion and control over SMI’s property.”
`To the extent that SMI’s claim alleges conversion of physical property, it
`is not preempted by § 301(a).55 Physical property—as opposed to intellectual
`property fixed in a tangible medium—does not fall within the scope of interests
`protected by the Copyright Act.56 As for intangible property, we have held
`“that claims for conversion of intangible property are preempted.”57 Thus,
`SMI’s conversion claim, to the extent it alleges conversion of intangible
`“confidential information” and “certain trade secrets,” is preempted.
`SMI’s TTLA claim, as advanced in its Original Petition, consists of three
`allegations: (1) Defendants “stole[] SMI’s physical property, documents, and
`confidential information”; (2) they “copied objects, materials, devices or
`substances, including writings representing SMI’s confidential information”;
`and (3) they “communicated and transmitted SMI’s confidential information.”
`Although we have never applied the equivalency test to claims under the Texas
`
`
`54 Carson v. Dynegy, Inc., 344 F.3d 446, 456 (5th Cir. 2003) (quoting Daboub, 42 F.3d
`at 289).
`55 See id. at 457.
`56 See id. (noting that a state law protecting rights in physical property does not
`obstruct the purpose of the Copyright Act).
`57 GlobeRanger Corp. v. Software AG, 691 F.3d 702, 709 (5th Cir. 2012) (citing Daboub,
`42 F.3d at 289–90); see also Real Estate Innovations, Inc. v. Hous. Ass’n of Realtors, Inc., 422
`F. App’x 344, 350 (5th Cir. 2011) (per curiam) (unpublished); Alcatel USA, Inc. v. DGI Techs.,
`Inc., 166 F.3d 772, 786 (5th Cir. 1999); Taquino v. Teledyne Monarch Rubber, 893 F.2d 1488,
`1501 (5th Cir. 1990).
`15
`
`

`
` Case: 14-10753 Document: 00513100328 Page: 16