AFL Telecommunications LLC v. SurplusEQ.com Incorporated et al

Filing 64

ORDER denying 56 Motion to Dismiss Counts/Claims. Signed by Judge David G Campbell on 4/9/2012.(NVO)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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AFL Telecommunications LLC,
Plaintiff,

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ORDER

vs.

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No. CV11-1086-PHX-DGC

SurplusEQ.com, Inc., Tech Sales, LLC, and
Daniel Parsons and Jane Doe Parsons,

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Defendant.

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On January 27, 2012, Plaintiff AFL Telecommunications LLC (“AFL”) filed a

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First Amended Complaint (“FAC”). Doc. 55. Defendants have filed a motion to dismiss

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Count 4. Doc. 56. Plaintiff has responded (Doc. 58) and Defendants have replied

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(Doc. 59). Neither party has requested oral argument. For the reasons that follow, the

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Court will deny the motion.

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I.

Background.

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AFL is a wholly-owned subsidiary of Fujikura Ltd. (“Fujikura”), a Japanese

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manufacturer of fiber optic equipment. One of Fujikura’s products is a fusion splicer, a

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device that it sells under the FUJIKURA trademark.

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American licensee for Fujikura fusion splicers.

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related equipment online. Each Fujikura fusion splicer contains operating software that is

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installed on the splicers during the manufacturing and licensed in the country to which it

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is shipped.

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AFL is the exclusive North

Defendants sell fusion splicers and

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II.

Standard.

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When analyzing a complaint for failure to state a claim to relief under

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Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light

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most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th

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Cir. 2009) (citation omitted). Legal conclusions couched as factual allegations are not

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entitled to the assumption of truth, Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009), and

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therefore are insufficient to defeat a motion to dismiss for failure to state a claim, In re

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Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010) (citation omitted). To avoid a

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Rule 12(b)(6) dismissal, the complaint must plead “enough facts to state a claim to relief

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that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This

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plausibility standard “is not akin to a ‘probability requirement,’ but it asks for more than

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a sheer possibility that a defendant has acted unlawfully.” Iqbal, 129 S. Ct. at 1949

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(quoting Twombly, 550 U.S. at 556). “[W]here the well-pleaded facts do not permit the

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court to infer more than the mere possibility of misconduct, the complaint has alleged –

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but it has not ‘show[n]’ – ‘that the pleader is entitled to relief.’” Id. at 1950 (quoting Fed.

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R. Civ. P. 8(a)(2)).

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III.

Analysis.

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To establish a prima facie case of copyright infringement, a plaintiff must show

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(1) ownership of the allegedly infringed material and (2) a violation of at least one

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exclusive right granted to copyright holders under 17 U.S.C. § 106. A & M Records v.

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Napster, Inc., 239 F.3d 1004, 1013 (9th Cir. 2001).

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distributed fusion splicers in the United States which incorporated the Fujikura operating

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software. Defendants make two primary arguments to support dismissal of this claim:

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(1) AFL has not adequately alleged ownership of a valid copyright on the operating

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software at the time of the alleged infringement, and (2) AFL has not adequately alleged

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how Defendants infringed the copyright.

AFL alleges that Defendants

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A.

Ownership.

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AFL’s claim of ownership arises from a combination of (1) Fujikura’s ownership
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of a copyright and (2) Fujikura’s licensing to AFL of the exclusive right to distribute the

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copyrighted work in the United States. A work is copyrightable under the Copyright Act

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when it is original and fixed in a tangible medium. 17 U.S.C. § 102(a). “Original, as the

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term is used in copyright, means only that the work was independently created by the

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author (as opposed to copied from other works), and that it possess at least some minimal

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degree of creativity.” Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 345

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(1991). AFL alleges that all versions of the operating software since its creation in 2008

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“constitute original works of authorship that were created by Fujikura employees, who

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wrote the code constituting the software in Japan and within the scope of their

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employment.” Doc. 55 ¶75. An employer owns the copyright to any copyrightable work

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created by employees within the scope of their employment. 17 U.S.C. § 101 (definition

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of “work made for hire”). AFL has sufficiently alleged that the operating software is

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owned by Fujikura and is copyrightable.

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The Copyright Act provides that “no action for infringement . . . shall be instituted

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until preregistration or registration of the copyright claim has been made in accordance

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with this title.” 17 U.S.C. § 411(a). On May 26, 2011, Fujikura obtained U.S. Copyright

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Registration No. TX 7-400-942, which covers version 1.32b of the operating software for

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the splicers.

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maintain the current action because the alleged infringement occurred in 2009. AFL cites

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two cases which adopt the “effective registration doctrine” and hold that a plaintiff need

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not produce a separate registration relating to a pre-existing work in order to maintain an

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action for infringement of the preexisting work. See Streetwise Maps v. Vandam, Inc.,

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159 F.3d 739, 747 (2d Cir. 1998) (holding that “the registration certificate relating to the

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derivative work . . . will suffice to permit [the plaintiff] to maintain an action for

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infringement based on defendants’ infringement of the pre-existing work”); Salestraq

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Am., LLC v. Zyskowski, 635 F. Supp. 2d 1178, 1181 (D. Nev. 2009) (holding that a

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registration of a 2008 version of a compilation of floor plans and locations was sufficient

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to maintain an action for infringement of the 2007 unregistered version).

Plaintiff argues that the 2011 copyright registration is insufficient to

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Defendants rely on an Eleventh Circuit case which holds that when the registration

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of a work entirely fails to identify the unregistered preexisting work in the copyright

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registration, an action for infringement of the unregistered preexisting work cannot be

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maintained. Oravec v. Sunny Isles Luxury Ventures, L.C., 527 F.3d 1218, 1229-30 (11th

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Cir. 2008). Oravec recognized, however, that cases applying the effective registration

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doctrine all involve “derivative or collective works that incorporated material from

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unregistered preexisting works.” Id. at 1229.

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In this case, the FAC alleges that “[a]lthough each new numbered version [of the

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operating software] incorporates some original, copyrightable content not included in the

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immediately preceding version, all versions share substantial original, copyrightable

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content.” Doc. 55 ¶ 76. It is reasonable to infer from this allegation that each successive

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version incorporates the preceding versions. Given this allegation, the Court concludes

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that the law stated in Streetwise and Salestraq should be applied in this case. In addition

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to those cases, other courts have held that registration of a derivative work permits legal

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actions on preceding versions of the work. See, e.g., In re Indep. Serv. Orgs. Antitrust

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Litig., 964 F. Supp. 1469, 1473 (D. Kan. 1997) (holding that registration of derivative

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service manuals and software was sufficient to allow infringement claim based on

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preexisting works authored by same party); Greenwich Film Prods. v. DRG Records,

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Inc., 833 F. Supp. 248, 251-52 (S.D.N.Y. 1993) (holding that registration for motion

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picture was sufficient to cover musical compositions contained therein where plaintiff

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owned copyrights in both); 2 Melville B. Nimmer & David Nimmer, Nimmer on

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Copyright § 7.16[B][2][c] (2008) (“When the same party owns the derivative or

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collective work plus the underlying elements incorporated therein, its registration of the

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former is sufficient to permit an infringement action on the underlying parts, whether

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they be new or preexisting.”) (citation and internal quotation marks omitted)).

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The Court also notes that in Oravec the plaintiff sought to assert copyright

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infringement of unregistered three-dimensional models of an architectural work based on

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registration of architectural drawings. 527 F.3d at 1230. In Streetwise, the plaintiff was
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asserting infringement of prior unregistered street maps based on a registration of a later

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version of the same map. 159 F.3d at 747. The allegations in the FAC suggest that an

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updated version of the splicer operating software is more like the street maps in

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Streetwise – some or all of the prior versions are still part of the work.

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The FAC alleges that Fujikura “grants to AFL the right to bring suit for

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infringement, including infringement claims existing as of the date of the agreement.”

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Doc. 55 ¶ 77. AFL argues that this allegation is sufficient to allow AFL to pursue an

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infringer for infringement that occurred prior to the assignment. The Court agrees. See

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Co-Opportunities, Inc. v. Nat’l Broadcasting Co., Inc., 510 F. Supp. 43, 46-47 (N.D. Cal.

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1981) (assignment of existing causes of action entered into after commencement of

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litigation was valid to transfer accrued claims back to the filing of the complaint).

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2.

Infringement.

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Defendants argue that AFL does not plausibly allege how they violated any

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exclusive and protectable right. In particular, Defendants argue that it is impossible to

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determine whether the products that it allegedly sold included the original aspects of the

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copyrighted software or even part of the software. AFL has alleged that Defendants

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distributed fusion splicers in the U.S. which incorporated Fujikura’s operating software.

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Doc. 55 ¶ 78. The exclusive rights granted to a copyright owner are found in § 106 of the

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Copyright Act, and include the exclusive right to distribute the copyrighted work. 17

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U.S.C. § 106(3). Accepting AFL’s allegations as true, as the Court must at this stage,

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AFL has adequately alleged a violation of its exclusive right to distribute.

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IT IS ORDERED that Defendants motion to dismiss (Doc. 56) is denied.

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Dated this 9th day of April, 2012.

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