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A copyright registration application and all statements therein are protected by California’s litigation privilege, the U.S. District Court for the Central District of California ruled May 17 in a dispute over the rights to software. The issue, the court said, “is apparently a question of first impression” ( Nestle USA Inc. v. Virtual Integration Technology, C.D. Cal., No. CV 00-01144 DDP, 5/17/00). Nestle USA Inc. entered into a consulting services agreement with a software developer, Virtual Integration Technology. The agreement stipulates that Nestle is the owner of all programs and materials “prepared and/or produced specifically in the performance” of the agreement, and that Nestle has the right to obtain copyrights in those materials. The agreement also provides that VIT retains all rights to its own software products. A dispute developed regarding the ownership of the “KPI Application Software” that was produced for Nestle by VIT. Nestle claimed exclusive rights under the agreement, and alleged that VIT sold the software to others without Nestle’s permission. VIT alleged that it retained all rights to the software pursuant to the agreement because it merely customized preexisting software for Nestle’s needs. VIT also asserted that Nestle wrongfully interfered with VIT’s attempts to sell the software to other customers. Nestle subsequently filed a copyright registration for the KPI Application Software. It then filed suit against VIT alleging copyright infringement and breach of contract. VIT responded with a number of counterclaims against Nestle. Nestle moved to dismiss certain of those counterclaims on the ground that those claims were based on Nestle’s application for a copyright registration, and that Nestle’s application was absolutely privileged under California’s litigation privilege, Calif. Civil Code �47(b). QUESTION OF FIRST IMPRESSION Whether a copyright registration application and all statements therein are protected by the litigation privilege “is apparently a question of first impression,” Judge Dean D. Pregerson wrote for the court. The privilege, the court explained, “applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” Further, the court said, the privilege “encompasses communications ‘required or permitted by law in the course of a judicial proceeding to achieve the objects of the litigation, even though the publication is made outside the courtroom and no function of the court or its officers is invoked.’” Where it applies, the court continued, the privilege bars all state tort suits except malicious prosecution actions. Any doubt as to whether the privilege applies is resolved in favor of applying it. Nestle argued that its copyright application was absolutely privileged as a communication made in connection with a judicial proceeding. The court agreed. “A copyright registration is a ‘jurisdictional prerequisite’ to a copyright infringement action,” and is thus “closely related to and in furtherance of an anticipated infringement action,” it said. The court also took judicial notice of the facts that the application was filed shortly before litigation commenced and was signed by counsel for Nestle. VIT asserted that the litigation privilege did not apply because the registration had both litigation and nonlitigation purposes. It cited Stacy & Witbeck Inc. v. San Francisco, 47 Cal. App. 4th 1 (Cal. Ct. App. 1996), which concerned the submission, by a contractor, of an administrative claim to a public agency for alleged overages. When the claim was denied, the contractor sued for breach of contract and the public agency counterclaimed under the state’s False Claims Act. The court held that the administrative claim served both a litigation purpose, as a document of damages alleged in the action, and a nonlitigation purpose, as a request for compensation under the contract. The privilege was held not to apply to the claim because it “fulfilled two independent functions and served dual purposes.” Here, the court rejected VIT’s argument that, under Stacy, a copyright application is not privileged. First, it noted, the California Supreme Court has not adopted Stacy‘s dual purpose test, but requires only that a prelitigation communication have “some relation to an anticipated lawsuit.” The court also found Stacy distinguishable from the present action. It acknowledged that a copyright action serves nonlitigation purposes, such as notifying the public of the registrant’s assertion of ownership. “However, unlike the contractor’s claim in Stacy, a copyright application is a necessary prerequisite to judicial action.” Accordingly, the court ruled, “applying the litigation privilege to a copyright application is necessary to protect access to the judicial system.”

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