WILKINS, Circuit Judge:
Jan J. Rosciszewski appeals orders of the district court dismissing all counts of the complaint except one, remanding the remaining count (Count V) to state court, and awarding attorneys' fees and costs in favor of Arete Associates, Incorporated, David E. Mann, Richard A. Martini, Wilma R. Murphy, and Frank Fernandez (collectively, "Arete"). Rosciszewski maintains that the district court lacked subject matter jurisdiction and therefore erroneously refused to remand the entire action to state court. In addition, Rosciszewski contends that the award of attorneys' fees and costs was inappropriate and excessive. We conclude that subject matter jurisdiction was proper because § 301(a) of the Copyright Act, 17 U.S.C.A. § 301(a) (West 1977), completely preempts Rosciszewski's claim that Arete violated § 18.2-152.3 of the Virginia Computer Crimes Act, Va.Code Ann. § 18.2-152.3 (Michie 1988). However, because we take this opportunity to adopt a legal standard for determining whether an award of attorneys' fees and costs under 17 U.S.C.A. § 505 (West 1977) is appropriate, we vacate the award imposed by the district court and remand for the district court to exercise its discretion utilizing this standard.
During the late 1980s, Physical Dynamics, Incorporated (PDI) engaged primarily in providing technical and computer research services to the United States Department of Defense. PDI developed a copyrighted computer program called ORBIS which was used to analyze military systems. As alleged by Rosciszewski, Appellee Mann, while employed as General Manager of PDI, executed an agreement to keep secret all confidential
Approximately one year prior to the litigation that is the subject of this appeal, PDI filed an action in the United States District Court for the Eastern District of Virginia against Appellees in this action.
In May 1992, Rosciszewski, as an assignee of PDI, filed the present action against Arete in the Circuit Court of Fairfax County, Virginia, attempting to litigate the state-law claims that had not been pursued in the earlier action. Rosciszewski alleged: (Count I) violations of the Virginia Computer Crimes Act, see Va.Code Ann. §§ 18.2-152.1 to .14 (Michie 1988 & Supp.1993); (Count II) violations of the Virginia Uniform Trade Secrets Act, see Va.Code Ann. §§ 59.1-336 to -343 (Michie 1992); (Count III) conspiracy to injure PDI; (Count IV) intentional interference with PDI's contract rights and business expectancies; (Count V) conversion of PDI's corporate funds; (Count VI) breach of fiduciary duties owed to PDI; and (Count VII) disparagement of PDI's business.
Arete removed the action to the United States District Court for the Eastern District of Virginia. Rosciszewski moved to remand the action to state court, arguing that the district court lacked subject matter jurisdiction. Arete responded by moving to dismiss Rosciszewski's complaint on the alternative bases that all of the claims, except Count V, were barred by res judicata as a result of the prior consent decree and were preempted by § 301(a) of the Copyright Act. The district court agreed and granted Arete's motion to dismiss. Denying Rosciszewski's motion to remand the case in its entirety, the district court ordered that the remaining claim, Count V, be remanded to state court. After Rosciszewski filed a notice of appeal, however, the court stayed execution of its remand order. On appeal Rosciszewski does not contend that the district court was in error in holding that the claims, except for Count V, were barred by res judicata. Thus, since no challenge was made to this ruling, if jurisdiction was properly vested in the district court by virtue of preemption, it must stand absent plain error.
Thereafter, Arete moved for attorneys' fees and costs pursuant to 17 U.S.C.A. § 505. The district court awarded $93,354.00 in fees and $3,141.87 in costs; Rosciszewski also appealed from this order. The two appeals have been consolidated before this court.
Rosciszewski maintains that the district court erred in finding that § 301(a) of the Copyright Act preempted the state-law claims alleged in the complaint. In addition, Rosciszewski argues that even if § 301(a) does preempt one of the state-law claims, removal based on the preemption defense was improper because the claim did not arise under federal law. Thus, Rosciszewski concludes, because the district court lacked subject matter jurisdiction, it should have remanded the action to state court without addressing the merits. See Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for S. Cal., 463 U.S. 1, 8, 103 S.Ct. 2841,
Section 301(a) of the Copyright Act states in pertinent part:
17 U.S.C.A. § 301(a) (West 1977). Thus, § 301(a) preempts state-law claims if "the work is within the scope of the `subject matter of copyright' as specified in 17 U.S.C. §§ 102, 103" and "the rights granted under state law are equivalent to any exclusive rights within the scope of federal copyright as set out in 17 U.S.C. § 106." Ehat v. Tanner, 780 F.2d 876, 878 (10th Cir.1985), cert. denied, 479 U.S. 820, 107 S.Ct. 86, 93 L.Ed.2d 39 (1986).
Count I of Rosciszewski's complaint alleges that the unauthorized copying by Arete of PDI's ORBIS computer program violated § 18.2-152.3 of the Virginia Computer Crimes Act.
Section 106 of the Copyright Act "affords a copyright owner the exclusive right to: (1) reproduce the copyrighted work; (2) prepare derivative works; (3) distribute copies of the work by sale or otherwise; and, with respect to certain artistic works, (4) perform the work publicly; and (5) display the work publicly." Computer Assocs. Int'l v. Altai, Inc., 982 F.2d 693, 716 (2d Cir.1992). In order to ascertain whether a specific state cause of action involves a right equivalent to one of those identified in § 106, reference must be made to the elements of the state cause of action. See Trandes Corp., 996 F.2d at 659. State-law claims that infringe one of the exclusive rights contained in § 106 are preempted by § 301(a) if the right defined by state law "`may be abridged by an act which, in and of itself, would infringe one of the exclusive rights.'" Computer Assocs. Int'l, 982 F.2d at 716 (quoting Harper & Row, Publishers, Inc. v. Nation Enters., 723 F.2d 195, 200 (2d Cir.1983), rev'd on other grounds, 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985)). However, "if an `extra
The elements necessary to show a violation of § 18.2-152.3 of the Virginia Computer Crimes Act are: (1) that the defendant "use[d] a computer or computer network;" (2) "without authority;" and (3) "with the intent to ... [o]btain property or services by false pretenses; ... [e]mbezzle or commit larceny; or ... [c]onvert the property of another." Va.Code Ann. § 18.2-152.3; see also id. § 18.2-152.12(A) (providing a civil cause of action for damages to one injured as a result of a violation of the Act).
Rosciszewski's claim under the Virginia Computer Crimes Act does not require proof of elements beyond those necessary to prove copyright infringement of a computer program that make the claim qualitatively different from a copyright infringement claim; the core of both causes of action, in the context of Rosciszewski's claim, is the unauthorized copying of a computer program. Cf. Trandes Corp., 996 F.2d at 658 (holding that a state claim of misappropriation of trade secrets is not preempted by § 301(a) because "the breach of a duty of trust or confidentiality comprises the core of actions for trade secret misappropriation"). That the first element of § 18.2-152.3 requires use of a computer does not qualitatively change the nature of the claim from that of unauthorized copying because, in the context of Rosciszewski's claim, use of the computer is "a necessary condition to [the] copying." 1 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 1.01[B], at 114 n. 62 (1992). Further, the second element of the violation of § 18.2-152.3, requiring that use of the computer be "without authority," does not add a qualitatively different element. The Virginia Computer Crimes Act specifies that "[a] person is `without authority' when he has no right or permission of the owner to use a computer, or, he uses a computer in a manner exceeding such right or permission." Va.Code Ann. § 18.2-152.2 (Michie 1988) (emphasis omitted). Thus, under § 18.2-152.3, unauthorized copying of a computer program, as alleged by Rosciszewski, necessarily involves using the computer without authority. The third element of a § 18.2-152.3 violation, "with the intent to ... [o]btain property or services by false pretenses; ... [e]mbezzle or commit larceny; or ... [c]onvert the property of another," does not add an element qualitatively changing the state claim from one of unauthorized copying; "[a]n action will not be saved from preemption by elements such as awareness or intent, which alter `the action's scope but not its nature.'" Computer Assocs. Int'l, 982 F.2d at 717 (quoting Mayer, 601 F.Supp. at 1535). Consequently, we hold that the protection of computer programs from unauthorized copying granted under § 18.2-152.3 is equivalent to the exclusive right of the copyright owner to reproduce a copyrighted work under the Copyright Act. Therefore, Rosciszewski's cause of action under this section is preempted to the extent that it is based on reproduction of the copyrighted computer program.
Having concluded that § 301(a) of the Copyright Act preempts one of Rosciszewski's claims, we now consider whether removal on the basis of § 301(a) preemption was proper. "[A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States ... where such action is pending." 28 U.S.C.A. § 1441(a) (West Supp.1993). "The district courts ... have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C.A. § 1331 (West Supp.1993). Accordingly,
In order to determine if an action arises under federal law, we must apply the well-pleaded complaint rule. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987). This rule "provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Id. Because "[t]he well-pleaded complaint rule applies to the original jurisdiction of the district courts as well as to their removal jurisdiction," Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for S. Cal., 463 U.S. 1, 10 n. 9, 103 S.Ct. 2841, 2847 n. 9, 77 L.Ed.2d 420 (1983), a plaintiff "may avoid federal jurisdiction by exclusive reliance on state law" in pleading its case, Caterpillar, Inc., 482 U.S. at 392, 107 S.Ct. at 2429.
Generally, federal preemption is a defense to a plaintiff's action, and as such, "it does not appear on the face of a well-pleaded complaint." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). Consequently, it "does not authorize removal to federal court." Id. In certain circumstances, however, "the preemptive force of [federal law] 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.'" Caterpillar, Inc., 482 U.S. at 393, 107 S.Ct. at 2430 (quoting Metropolitan Life Ins. Co., 481 U.S. at 65, 107 S.Ct. at 1547). This so-called complete preemption occurs when "an area of state law has been [so] completely pre-empted, [that] any claim purportedly based on th[e] pre-empted state law is considered ... a federal claim." Id.
The parties correctly acknowledge that Rosciszewski's complaint alleges only violations of state law. Arete nevertheless maintains that removal was proper because the Copyright Act is one of those areas of federal law that so completely preempts state law that it converts claims purportedly based on state law into claims under the Copyright Act. Having previously concluded that § 301(a) of the Copyright Act preempts Rosciszewski's claim that Arete violated the Virginia Computer Crimes Act by copying PDI's ORBIS computer program, we must resolve whether the complete preemption doctrine made removal proper.
In Metropolitan Life Insurance Co., 481 U.S. at 63-67, 107 S.Ct. at 1546-48, the Supreme Court upheld removal of state-law causes of action that came within the scope of § 502(a)(1)(B) of ERISA, 29 U.S.C.A. § 1132(a)(1)(B) (West 1985 & Supp.1993), and that were preempted by § 514(a), 29 U.S.C.A. § 1144(a) (West 1985). The Court stated that, despite "the unique pre-emptive force of ERISA," it nevertheless "would be reluctant to" infer that the preemptive force of ERISA is so extraordinary as to convert state causes of action into "federal claim[s] for purposes of the well-pleaded complaint rule," absent clearly expressed congressional intent. Id. at 65, 107 S.Ct. at 1547. Thus, in deciding whether the preemptive force of the Copyright Act is so extraordinary that a state-law claim, preempted by § 301(a), becomes federal in nature, the focus of our inquiry must be congressional intent. See id.; see also 13B Charles A. Wright et al., Federal Practice and Procedure § 3566 (Supp.1993) ("[T]he Supreme Court gives great weight to the intent of Congress" in
In Metropolitan Life Insurance Co., the Court found congressional intent expressed through the fact that in § 502(f)
We likewise conclude that Congress intended that actions pre-empted by § 301(a) of the Copyright Act be regarded as arising under federal law. First, Congress employed a broad mandatory preemption provision for causes of action equivalent to copyright claims. See 17 U.S.C.A. § 301(a). Concerning this provision, Congress has stated, "The declaration ... in section 301 is intended to be stated in the clearest and most unequivocal language possible, so as to foreclose any conceivable misinterpretation of its unqualified intention that Congress shall act preemptively." H.R.Rep. No. 1476, 94th Cong., 2d Sess. 130 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5746. Thus, Congress has clearly indicated that state-law claims which come within the subject matter of copyright law and which protect rights equivalent to any of the exclusive rights within the scope of federal copyright law, such as Rosciszewski's claim that Arete copied PDI's copyrighted ORBIS computer program, should be litigated only as federal copyright claims.
Second, 28 U.S.C.A. § 1338(a) (West 1976) provides in pertinent part, "The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to ... copyrights.... Such jurisdiction shall be exclusive of the courts of the states in ... copyright cases." Congress, therefore, afforded exclusive jurisdiction over copyright claims to the district courts, while providing for concurrent jurisdiction in state and federal courts over LMRA and ERISA actions. Compare 28 U.S.C.A. § 1338(a) with 28 U.S.C.A. § 1337 (West Supp.1993) and 29 U.S.C.A. § 1132(f). Thus, although Congress did not use language virtually identical to that contained in the jurisdictional provisions governing suits under the LMRA or ERISA, we view the grant of exclusive original jurisdiction over copyright claims to the district courts as strong evidence that Congress intended copyright litigation to take place in federal courts. Cf. Holman v. Laulo-Rowe Agency, 994 F.2d 666, 669 (9th Cir.1993) (refusing to apply complete preemption doctrine to suit raising only state-law claims because although the Federal Crop Insurance Act of 1978 granted exclusive jurisdiction to federal district courts over actions by or against the Federal Crop Insurance Corporation, that entity was not a party to the lawsuit).
The grant of exclusive jurisdiction to the federal district courts over civil actions arising under the Copyright Act, combined with the preemptive force of § 301(a), compels the conclusion that Congress intended that state-law actions preempted by § 301(a) of the Copyright Act arise under federal law.
Rosciszewski next challenges the award of attorneys' fees and costs to Arete. The district court awarded Arete $93,354.00 in attorneys' fees and $3,141.87 in costs pursuant to § 505 of the Copyright Act, which provides in pertinent part:
17 U.S.C.A. § 505 (West 1977).
Rosciszewski first claims that no award under § 505 was proper because the action was not one under Title 17. Rosciszewski maintains that the complaint alleged only violations of the laws of Virginia and that, therefore, § 505 is inapplicable. Rosciszewski offers no authority for this argument, and we do not find it persuasive. Rather, we conclude that when § 301(a) completely preempts a state-law claim, it becomes a federal claim under Title 17. Cf. Metropolitan Life Ins. Co., 481 U.S. at 67, 107 S.Ct. at 1548 (holding that suit alleging state-law claims that were completely preempted by ERISA "is necessarily federal in character"). Section 505, therefore, is applicable.
Rosciszewski next contends that a district court must find that the plaintiff's suit was frivolous or pursued in bad faith before an award of attorneys' fees to a prevailing defendant is permitted. Although some courts have imposed such a requirement as a condition to a prevailing defendant's receiving an award under § 505, see Video Views, Inc. v. Studio 21, Ltd., 925 F.2d 1010, 1022 (7th Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 181, 116 L.Ed.2d 143 (1991); Bibbero Sys., Inc. v. Colwell Sys., Inc., 893 F.2d 1104, 1108 (9th Cir.1990); Roth v. Pritikin, 787 F.2d 54, 57 (2d Cir.1986), other courts have rejected such a requirement, see Lieb v. Topstone Indus., 788 F.2d 151, 155-56 (3d Cir.1986); Cohen v. Virginia Elec. & Power Co., 617 F.Supp. 619 (E.D.Va.1985), aff'd on other grounds, 788 F.2d 247 (4th Cir.1986). The Supreme Court recently granted certiorari to resolve the split in the circuits. See Fogerty v. Fantasy, Inc., ___ U.S. ___, 113 S.Ct. 2992, 125 L.Ed.2d 687 (1993).
Because we find "no indication either in statutory language or legislative history that bad faith should be a prerequisite to a fee award, we decline to" condition an award of attorneys' fees under § 505 to a prevailing defendant on a finding that the plaintiff pursued copyright litigation in bad faith. Lieb,
As noted by the district court, this court has not heretofore specifically addressed the standard a district court should apply in exercising its discretion to award attorneys' fees and costs under § 505. We now take this opportunity to do so. In deciding whether to award attorneys' fees and costs under § 505, the district court should consider, and make findings with respect to, the following factors. First, the district court should evaluate the motivation of the parties. Lieb, 788 F.2d at 156. While a finding of willful infringement or bad faith on the part of the opposing party properly may be considered by the district court, the presence or absence of such motivation is not necessarily dispositive. Id. Second, the district court should weigh the objective reasonableness of the legal and factual positions advanced. Id. The court may consider, for example, whether the positions advanced by the parties were frivolous, on the one hand, or well-grounded in law and fact, on the other. Third, the court should consider "the need in particular circumstances to advance considerations of compensation and deterrence." Id. In evaluating this factor, the court may find relevant, among other circumstances, the ability of the non-prevailing party to fund an award. Finally, these enumerated factors are not intended as an exhaustive list; the district court may also weigh any other relevant factor presented. Id.
Although the district court found an award of attorneys' fees and costs to Arete justified by Rosciszewski's concession that the majority of the claims forwarded were barred by res judicata, it did not have the benefit of our holding today establishing the factors that should be considered in making this determination. We therefore remand for the district court to consider whether an award to Arete under § 505 is appropriate under this standard.
In sum, we conclude that § 301(a) of the Copyright Act preempts Rosciszewski's claim that Arete violated § 18.2-152.3 of the Virginia Computer Crimes Act by copying PDI's ORBIS computer program and that claims preempted by § 301(a) of the Copyright Act arise under federal law for purposes of applying the well-pleaded complaint rule. Thus, removal from state to federal court of state-law claims that are preempted by § 301(a) of the Copyright Act is proper. Accordingly, we hold that removal of Rosciszewski's action to federal district court was proper and, therefore, that the district court had jurisdiction to dismiss Counts I, II, III, IV, VI, and VII on the basis of res judicata.
AFFIRMED IN PART; VACATED AND REMANDED IN PART.
29 U.S.C.A. § 1132(f) (West 1985).