Chapter 14 Contract Formation Read the Case below and discuss the key points that relate to the contract formation covered in the chapter.

Contract Formation MONTZ v.PILGRIM FILMS & TELEVISION, INC. 649 F.3d 975 (9th Cir. 2011) Larry Montz was a parapsychologist (a person who studies paranormal or psychic phenomena). He conceived of a reality television show that would follow paranormal investigators as they investigate reports from different locations. Montz, along with his publicist, Smoller, pitched the idea to NBC Universal, which indicated no interest. According to Montz, NBC then partnered with Pilgrim Films to produce a series for the Sci-Fi Channel called Ghost Hunters that was derived from Montz's idea. He sued, alleging that NBC and Pilgrim breached an implied-in-fact contract to pay for the use of the reality show concept. The defendants argued that Montz's allegation was actually an improper attempt to control an idea that would be unprotectable under copyright law. The court had to determine whether the contract claim was clear and distinct. SCHROEDER, CIRCUIT JUDGE.: Plaintiffs' complaint specifically alleged that defendants breached an implied-in-fact contract. The complaint described the terms of the agreement: Plaintiffs communicated their ideas and creative concepts for the Ghost Hunters Concept to the Defendants, pursuant to the standard custom and practice in the industry with respect to the exchange of creative ideas, under the following terms: a. that Plaintiffs' disclosure of their ideas and concepts was strictly confidential; b. that the Defendants would not disclose, divulge or exploit the Plaintiffs' ideas and concepts without compensation and without obtaining the Plaintiffs' consent; and c. that, by accepting the Plaintiffs' disclosure of its concept, the Defendants accepted and agreed to abide by the foregoing terms. The complaint further alleged that plaintiffs presented the concept on the express condition that they made the presentation as an offer to partner with the defendants and that plaintiffs justifiably expected to receive a share of the profits derived from any use of the idea. Writers in the Hollywood film industry often submit scripts to producers, or set up meetings with them, in the hope of selling them scripts and concepts for movies. The practice has carried over into television. Since the writer is looking for someone to turn the written work into an entertainment production, writers often pitch scripts or concepts to producers with the understanding that the writer will be paid if the material is used. Since an idea cannot be copyrighted, a concept for a film or television show cannot be protected by a copyright. But the concept can still be stolen if the studio violates an implied contract to pay the writer for using it. In Desny, the California Supreme Court recognized [that] a writer and producer form an implied contract under circumstances where both understand that the writer is disclosing his idea on the condition that he will be compensated if it is used. There, defendant Billy Wilder, famed director of Sunset Boulevard and Witness for the Prosecution, allegedly entered into an implied contractual arrangement that was initiated when the plaintiff telephoned Wilder's office and pitched a movie idea to Wilder's secretary who, along with Wilder, understood Wilder was to pay if he used the story. Wilder produced a film, Ace in the Hole, allegedly based on the idea plaintiff had pitched for a movie inspired by the life story of Floyd Collins who was trapped [in a cave] and made sensational news for two weeks. Wilder allegedly failed to compensate the plaintiff, and the California Supreme Court held that, given the entertainment industry norms, the plaintiff had sufficiently pled the breach of an implied contract to pay for use of his idea. The issue here is whether copyright law now preempts such claims. The Copyright Act of 1976 expressly preempts state claims where the plaintiff's work come[s] within the subject matter of copyright and the state law grants legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright. [T]he major focus of litigation has been on the second prong of the preemption test: whether the asserted state right is equivalent to any of the exclusive rights within the general scope of copyright. To survive preemption, a state cause of action must assert rights that are qualitatively different from the rights protected by copyright. In [a similar case], we held that the rights created under California law emanating from Desny were qualitatively different from the rights protected by federal copyright law because a Desny claim includes an added element: an agreement to pay for use of the disclosed ideas. Contract claims generally survive preemption because they require proof of such an extra element. The extra element, the implied agreement of payment for use of a concept, is a personal one, between the parties. This approach not only accords with the Copyright Act's preemption guidelines, but it also recognizes the gap that would otherwise exist between state contract law and copyright law in the entertainment industry. The Desny innovation serves to give some protection for those who wish to find an outlet for creative concepts and ideas but with the understanding that they are not being given away for free. Without such legal protection, potentially valuable creative sources would be left with very little protection in a dog-eat-dog business. See Woody Allen, Crimes and Misdemeanors (Orion Pictures 1989) (Show business is worse than dog-eat-dog. It's dog-doesn't-return-other-dog's-phone-calls.). Thus we were correct when we observed that [c]ontract law, whether through express or implied-in-fact contracts, is the most significant remaining state-law protection for literary or artistic ideas. Benay, 607 F.3d at 629. Plaintiffs' claim for breach of confidence also survives copyright preemption. The claim protects the duty of trust or confidential relationship between the parties, an extra element that makes it qualitatively different from a copyright claim. Defendants argue that the complaint fails to allege sufficient facts to make out a claim for breach of implied contract. They assert that it lacks any allegation (1) that Montz and Smoller disclosed their idea for sale, (2) that they expected to be reasonably compensated for the idea, and (3) that defendants knew the conditions on which it was offered. Yet the complaint makes all three allegations. Defendants similarly argue that Montz and Smoller failed to allege sufficient facts to make out their claim for breach of confidence. They argue that there is no allegation (1) that plaintiffs disclosed confidential and novel information, and (2) that defendants knew it was supposed to be kept confidential. But the complaint clearly contains these allegations as well. The judgment of the district court is reversed and the matter remanded for further proceedings on plaintiffs' remaining claims.