We will be discussing one Ninth Circuit case and one California Court of Appeal case during our weekly SoCal IP Institute meeting on Monday, September 17, 2012. Brief synopses are presented below.

Petrella v. Metro-Goldwyn-Mayer, Inc., Case Nos. 10-55834 (9th Cir. August 29, 2012) (attached).

Petrella sued Metro-Goldwyn-Mayer and other movie studios for copyright infringement, as well as unjust enrichment and accounting. Petrella alleged that defendants infringed her purported interest in a book and two screenplays that together formed the basis for the 1980 motion picture “Raging Bull.”

The Ninth Circuit held that plaintiff’s copyright infringement claim was barred by laches and therefore the Court did not reach the merit of the claim itself.  The Court also held that, because laches was an equitable defense, the district court was correct in holding that laches also barred plaintiff’s unjust enrichment and accounting claims. The Court further held that the district court did not abuse its discretion in denying defendant’s sanctions and attorney’s fees motions because the denial was based on a lack of evidence of infringement but solely on the ground that plaintiff’s claims were barred by laches

Fillpoint, LLC. v. Maas, Case No. G045057 (Cal. Ct. App. August 24, 2012) (attached).

Michael Maas was an employee of Crave Entertainment Group, Inc., which was acquired by Handleman Company.  As part of the acquisition, Maas executed a stock purchase agreement selling all of his stock in Crave to Handleman.  The stock purchase agreement contained a three-year non-compete clause.  Maas also entered into a new employment agreement with Crave containing a one-year non-compete, customer non-solicit, and employee non-solicit covenants, all of which would begin to run upon the termination of his employment. The stock purchase agreement included an integration clause referencing the form employment agreement. Additionally, Maas’ employment agreement referred back to the stock purchase agreement and stated that the stock purchase agreement would prevail in the event of any conflict between the agreements.

Maas eventually resigned from Crave three years after the acquisition and about six months later, began working for a competitor of Crave.  Fillpoint, LLC, which had acquired Crave from Handleman, brought suit against Maas for breach of his employment agreement. The Superior Court of Orange County concluded that: (1) the covenants in the stock purchase agreement and the employment agreement were separate; and (2) the covenants not to compete and not to solicit in the employment agreement were unenforceable under California’s general rule against such covenants (Business and Professions Code Section 16600).

On appeal, the Court of Appeal for the Fourth District found that the trial court erred in its conclusion that the covenants in the stock purchase agreement and the employment agreement were separate.  The Court of Appeal held that the agreements must be read together as an integrated agreement because of the cross references between the stock purchase agreement and employment agreement.  Furthermore, the two agreements were part of a single transaction because they were entered into between the same parties and around the same time. The Court then determined that the covenants in the employment agreement were intended to restrict Maas’ right to pursue his profession in the future and, thus, did not meet Section 16601’s limited exception.  For these reasons, the Court held that the covenants in the employment agreement could not “be reconciled with California’s strong public policy permitting employees the right to pursue a lawful occupation of their own choice” and were unenforceable.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, September 17, 2012 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Noelle Attalla by 9 am Monday morning.