Screenwriters who unsuccessfully pitch their idea for a movie or television show to producers can sue them for damages if they later use the same concept for their own show, a federal appeals court has ruled.

In a 7-4 decision Wednesday, the Ninth U.S. Circuit Court of Appeals in San Francisco reinstated a suit by two people who accused NBC and a production company of stealing their idea for a show about psychic phenomena that became "Ghost Hunters," a staple of the SyFy channel.

The court reaffirmed and broadened its 2004 ruling allowing suits against studios for allegedly misappropriating concepts from writers. The companies argued that such claims exceeded the scope of federal copyright law and were joined by other television networks and the Motion Picture Association of America.

"It's a big issue for the entertainment industry," said Graham LippSmith, a lawyer for the plaintiffs. "It means the little guy is still going to be protected, people trying to find their way into the entertainment industry."

Lawyers for the studios were unavailable for comment. They could appeal to the U.S. Supreme Court.

The suit was filed by Larry Montz, who describes himself as a parapsychologist, or researcher into psychic abilities, and Daena Smoller, a publicist and producer. They said they met with representatives of NBC, SyFy and other studios between 1996 and 2003, trying to interest them in a show about investigators traveling with high-tech equipment to track reports of paranormal activity.

They accused NBC in 2006 of using their materials and ideas to team up with Pilgrim Films and produce "Ghost Hunters," about a crew that investigates sites said to be haunted.

Montz and Smoller said the studio had promised to keep their discussions confidential, and had implicitly agreed to pay them for any use of the material and make them partners in the production. The suit seeks an unspecified share of the revenue, LippSmith said.

A federal judge and a three-judge appeals court panel dismissed the suit, saying copyright law does not protect ideas and concepts, only writings and other works of authorship.

But after the full appeals court ordered a rehearing, a majority of Wednesday's panel said the suit was broader than a copyright claim because it claimed that the studio had violated a contract with the two plaintiffs and sought compensation under state law, a right recognized by the California Supreme Court since 1956.

The state law provides "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," said Judge Mary Schroeder in the majority opinion.

"Without such legal protection, potentially valuable creative sources would be left with very little protection in a dog-eat-dog business."

Dissenting Judge Diarmuid O'Scannlain said the suit's central goal was not payment but partnership in the production and a ban on unauthorized use of the material. A court could issue those orders only if the studio had violated the plaintiffs' copyrights, O'Scannlain said, noting that Montz and Smoller were not claiming copyright violations.

E-mail Bob Egelko at begelko@sfchronicle.com.

This article appeared on page D - 1 of the San Francisco Chronicle