Ticketmaster L.L.C. v. Prestige Entertainment Inc. et al

Filing 32

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTION TO DISMISS 24 by Judge Otis D. Wright, II: Dismissal is with leave to amend, except as to Ticketmasters second claim for copyright infringement to the extent it relies on Defendants TOU violations described in this Order. Should Ticketmaster wish to file an amended complaint, it must do so within twenty-one days of the date of this Order. Ticketmaster must also lodge with the Court, and serve on Defendants, a redlined copy of the amended pleading so that the Court can decipher the amendments to its complaint. (lc). Modified on 1/31/2018 (lc).

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O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 Plaintiff, 12 13 14 15 16 17 18 19 Case № 2:17-CV-07232-ODW (JCx) TICKETMASTER L.L.C., ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [24] v. PRESTIGE ENTERTAINMENT, INC.; PRESTIGE ENTERTAINMENT WEST, INC.; RENAISSANCE VENTURES LLC; NICHOLAS LOMBARDI, an individual; STEVEN K. LICHTMAN, an individual; and DOES 1 through 10, inclusive, Defendants. 20 21 I. INTRODUCTION 22 Plaintiff Ticketmaster LLC (“Ticketmaster”) brings this action against 23 Defendants Prestige Entertainment, Inc. (“Prestige”), Prestige Entertainment West, 24 Inc. (“Prestige West”), Renaissance Ventures LLC (“Renaissance”), Nicholas 25 Lombardi, and Steven K. Lichtman. 26 Ticketmaster alleges claims against Defendants for: (1) breach of contract; (2) 27 copyright infringement in violation of 17 U.S.C. § 101 et seq.; (3) violation of the 28 Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201 et seq.; (4) fraud; (5) (See generally Compl., ECF No. 1.) 1 aiding and abetting fraud; (6) inducing breach of contract; (7) intentional interference 2 with contractual relations; (8) violation of the Computer Fraud and Abuse Act 3 (“CFAA”), 18 U.S.C. § 1030 et seq.; (9) violation of the Computer Data Access and 4 Fraud Act (“CDAFA”), Cal. Pen. Code § 502 et seq.; and (10) violation of the Anti- 5 Scalping Law, N.Y. Arts & Cult. Aff. Law § 25.01 et seq. 6 Defendants Prestige West, Renaissance, Lombardi, and Lichtman1 now move to 7 dismiss the following claims: (1) copyright infringement; (2) violation of the DMCA; 8 (3) violation of the CFAA; (4) violation of the CDAFA; (5) breach of contract; (6) 9 fraud; and (7) the state law claims. 10 II. FACTUAL BACKGROUND2 11 Ticketmaster sells tickets for live entertainment events on behalf of its clients 12 through its website, mobile app, and telephone call centers. (Compl. ¶ 18.) Demand 13 often exceeds the supply of tickets available through Ticketmaster, which can result in 14 intense competition among consumers to purchase tickets for events the moment they 15 are available for sale. (Id. ¶ 19.) In order to make the ticket-buying process fair and 16 equitable for its consumers, Ticketmaster employs various countermeasures. (Id. 17 ¶ 20.) For instance, Ticketmaster limits the number of tickets that may be purchased 18 in a single transaction and regulates the speed with which users may refresh purchase 19 requests. (Id.) Ticketmaster also utilizes various security measures like CAPTCHA 20 to prevent and discourage the use of automated programs—called “bots”—that give 21 an unfair advantage over other consumers in the ticket purchasing process. (Id. ¶ 21.) 22 Users must agree to Ticketmaster’s Terms of Use (“TOU”) before they can 23 view and use Ticketmaster’s website and mobile app. (Id. ¶¶ 24–27; see also Compl., 24 Ex. A.) The TOU grants users a “limited, conditional, no-cost, non-exclusive, non- 25 transferable, non-sub-licensable license to view [Ticketmaster’s] Site and its Content 26 27 28 1 There is no evidence on the docket that Defendant Prestige has been served with this lawsuit, and Prestige does not join in this Motion. 2 All factual references are allegations taken from Plaintiff’s Complaint and accepted as true for purposes of this Motion. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 2 1 to purchase tickets as permitted by these Terms for non-commercial purposes only if” 2 the user agrees not to conduct certain activities. (Compl. ¶ 30.) Those prohibited 3 activities include: 4 5  Modify, adapt, sub-license, translate, sell, reverse engineer, decompile, or disassemble any portion of the Site . . .; 6  Use any robot, spider, offline reader, site search/retrieval application or 7 other manual or automatic device, tool, or process to retrieve, index, data 8 mine or in any way reproduce or circumvent the navigational structure or 9 presentation of the Content or the Site, including with respect to any 10 11 12 CAPTCHA displayed on the Site . . .;  Use any automated software or computer system to search for, reserve, buy or otherwise obtain tickets . . .; 13  Take any action that imposes or may impose (in [Ticketmaster’s] sole 14 discretion) an unreasonable or disproportionately large load on our 15 infrastructure; 16  Access, reload or refresh transactional event or ticketing pages, or make 17 any other request to transactional servers, more than once during any 18 three-second interval; 19 20 21 22 23 24  Request more than 1,000 pages of the Site in any 24-hour period, whether alone or with a group of individuals;  Reproduce, modify, display, publicly perform, distribute or create derivative works of the Site or the Content;  Reproduce or scan tickets in a format or medium different from that provided by the Site; 25  Decode, decrypt, modify, or reverse engineer any tickets . . .; 26  Use the Site or the Content in an attempt to, or in conjunction with, any 27 device, program or service designed to circumvent any technological 28 3 1 measure that effectively controls access to . . . the Site and/or Content . . . 2 for any purpose. 3 (Id.) The TOU further states that non-compliance with the TOU “constitutes 4 unauthorized reproduction, display, or creation of unauthorized derivative versions of 5 the Site and Content, and infringes [Ticketmaster’s] copyright, trademarks, patents 6 and other rights in the Site and Content.” (Id. ¶ 31.) Ticketmaster has registered 7 copyrights in various aspects of its website and pending applications for copyrights in 8 its mobile apps. (See id. ¶ 28.) Users are also required to agree to a “Code of 9 Conduct” in the TOU and abide by purchasing limits. (Id. ¶¶ 35, 37.) 10 For the past two years, Defendants have been using bots and dummy accounts 11 to navigate Ticketmaster’s website and mobile app to purchase large quantities of 12 tickets. 13 bandwidth, random number and letter generators, and other evasive methods in order 14 to avoid detection by Ticketmaster. (Id. ¶¶ 43–44, 48, 51–54.) Through the use of 15 bots, Defendants are able to purchase and reserve large amounts of tickets in a manner 16 impossible for a human consumer to match. (Id. ¶¶ 45, 46.) Defendants would then 17 reproduce and resell the tickets on third-party platforms, such as StubHub.com, for 18 profit. (Id. ¶¶ 47, 49.) Ticketmaster estimates that over the period from January 2015 19 to September 2016, Defendants made at least 313,528 orders using 9,047 different 20 accounts. (Id. ¶ 55.) (Id. ¶¶ 40–42.) Defendants used colocation facilities with high speed 21 In May 2015, Ticketmaster sent Lombardi, who is affiliated with Prestige, a 22 cease-and-desist letter. (Id. ¶ 56; see also Compl., Ex. E.) Lombardi acknowledged 23 receipt of the letter, but Defendants continued their enterprise. 24 Ticketmaster estimates that, for certain shows, Defendants bought between 30–40% of 25 Ticketmaster’s available inventory. (Id.) (Compl. ¶ 57.) 26 Ticketmaster alleges that Defendants’ conduct has deprived them of revenue 27 and revenue opportunities. (Id. ¶ 67.) Defendants’ use of bots have also required 28 Ticketmaster to divert resources from servicing of other consumers and to continually 4 1 escalate its anti-bot security measures, costing Ticketmaster thousands of dollars in 2 damages. (Id. ¶¶ 70, 71.) 3 III. LEGAL STANDARD 4 A motion to dismiss under either Rule 12(c) or 12(b)(6) is proper where the 5 plaintiff fails to allege a cognizable legal theory or where there is an absence of 6 sufficient facts alleged under a cognizable legal theory. Bell Atl. Corp. v. Twombly, 7 550 U.S. 544, 555 (2007); see also Shroyer v. New Cingular Wireless Serv., Inc., 622 8 F.3d 1035, 1041 (9th Cir. 2010). That is, the complaint must “contain sufficient 9 factual matter, accepted as true, to state a claim to relief that is plausible on its face.” 10 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). 11 Generally, a court should freely give leave to amend a complaint that has been 12 dismissed, even if not requested by the party. See Fed. R. Civ. P. 15(a); Lopez v. 13 Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc). However, a court may deny 14 leave to amend when it “determines that the allegation of other facts consistent with 15 the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. 16 Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). 17 IV. 18 A. DISCUSSION Copyright Infringement 19 Defendants contend that Ticketmaster’s copyright infringement claim should be 20 dismissed because (1) Ticketmaster fails to identify registered or pending copyrights 21 that were infringed and (2) Ticketmaster’s theory of copyright infringement was 22 rejected by the Ninth Circuit in MDY Industries, LLC v. Blizzard Entertainment, Inc., 23 629 F.3d 928 (9th Cir. 2010). 24 1. 25 To establish copyright infringement, a plaintiff must allege: (1) ownership of a 26 valid copyright; and (2) copying of the original elements of the work. L.A. Printex 27 Indus., Inc. v. Aeropostale, Inc., 676 F.3d 841, 846 (9th Cir. 2012). Copyright Infringement Pleading Requirements 28 5 1 Ticketmaster alleges that it owns registered or pending copyrights in various 2 aspects of its website and mobile apps. 3 IAC/InterActiveCorp, 606 F.3d 612, 621 (9th Cir. 2010) (receipt of a completed 4 application satisfies the registration prerequisite for an action for copyright 5 infringement). Among those copyrights are Ticketmaster’s website ticket purchase 6 pages and its mobile apps. (See Compl. ¶ 28.) Ticketmaster also alleges that, by 7 navigating the pages to purchase tickets, Defendants have viewed and therefore copied 8 the entirety of thousands of pages from the Ticketmaster website and mobile apps. 9 (See id. ¶¶ 40, 48, 65, 88.) Cf. Cosmetic Ideas, Inc. v. 10 These allegations are not sufficient to meet the second requirement to plead 11 copyright infringement. In Perfect 10, Inc. v. Amazon, Inc., 508 F.3d 1146, 1169 (9th 12 Cir. 2007), the Ninth Circuit recognized that the automatic copies created from 13 viewing webpages are likely fair use. “The copying function performed automatically 14 by a user’s computer to assist in accessing the Internet is a transformative use . . . 15 Such automatic background copying has no more than a minimal effect on [plaintiff’s] 16 rights, but a considerable public benefit.” Id. Ticketmaster has not alleged sufficient 17 facts showing that Defendants’ copying was anything more than the automatic 18 background copying that occurs when users browse the internet. 19 Ticketmaster’s cited cases do not advance its argument. The Ninth Circuit has 20 recognized that loading “software into a computer constitutes the creation of a copy 21 under the Copyright Act.” MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 22 519 (9th Cir. 1993). 23 websites. Indeed, the court in MAI Systems noted that not all copies made onto a 24 computer constitute copying for the purposes of the Copyright Act. 991 F.2d at 519 25 (“We recognize that these authorities are somewhat troubling since they do not specify 26 that a copy is created regardless of whether the software is loaded into the RAM, the 27 hard disk or the read only memory (‘ROM’).”). MAI Systems, however, addressed computer software, not 28 6 Ticketmaster also cites to 1 Ticketmaster L.L.C. v. RMG Techs., Inc., 507 F. Supp. 2d 1096, 1105–06 (C.D. Cal. 2 2007). RMG, however, was decided before Perfect 10. 3 A court must determine whether to grant leave to amend when dismiss a claim. 4 Schreiber, 806 F.2d at 1401 (9th Cir. 1986). Leave to amend may be denied when 5 “allegation of other facts consistent with the challenged pleading could not possibly 6 cure the deficiency.” Id. The Court will therefore consider whether infringement of 7 Ticketmaster’s TOU could constitute copyright infringement. 8 2. 9 A “copyright owner who grants a nonexclusive, limited license ordinarily 10 waives the right to sue licensees for copyright infringement, and it may sue only for 11 breach of contract.” Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1121 12 (9th Cir. 1999) (citations and quotations omitted). “However, if the licensee acts 13 outside the scope of the license, the licensor may sue for copyright infringement.” 14 MDY, 629 F.3d at 939. But “the potential for copyright infringement exists only 15 where the licensee’s action (1) exceeds the license’s scope (2) in a manner that 16 implicates one of the licensor’s exclusive statutory rights.” Id. at 940. “[F]or a 17 licensee’s violation of a contract to constitute copyright infringement, there must be a 18 nexus between the condition and the licensor’s exclusive rights of copyright.” Id. at 19 941. Otherwise, a copyright holder “could designate any disfavored conduct during 20 [use] as copyright infringement.” Id. 21 Copyright Infringement and Terms of Use Contractual terms that limit a license’s scope are conditions, while all other 22 license terms are covenants. See id. at 939. 23 copyright infringement, while breaches of covenants are only actionable under 24 contract law. Id. “[C]onditions and covenants are distinguished according to state 25 contract law, to the extent consistent with federal copyright law and policy.” Id. 26 Under California law, “[a] covenant is a promise to do or refrain from doing a specific 27 act. A condition is a qualification to the parties’ obligations; if it occurs, the interest is 28 terminated or enlarged.” San Mateo Cmty. Coll. Dist. v. Half Moon Bay Ltd. P’ship, 7 Breaches of conditions constitute 1 65 Cal. App. 4th 401, 411 (1998). “A condition is created by the mutual assent of the 2 parties and is binding on both, while a covenant is binding on the covenantor only.” 3 Id. 4 5 Ticketmaster contends that the following restrictions and protocols in the TOU are conditions: 6  Copying from the Site or Apps for “non-commercial purposes”; 7  Copying fewer than 1,000 pages of the Site in any 24-hour period; 8  Making fewer than 800 reserve requests on the Site in any 24-hour 9 10 11 12 13 period;  Copying transactional event or ticketing pages no more than once during any three-second interval;  Reproducing tickets in the same format or medium as provided by the Site; 14  Not modifying any portion of the Site to create derivative works; 15  Not using any robot, spider, or other device, tool, or process to reproduce 16 the Site or its Content, and thereby violate the reproduction limits of the 17 license; 18 19 20 21 22 23 24 25  Not using any automated software or computer system to obtain tickets or other items available on the Site for the same reasons;  Not taking any action that may impose an unreasonably large load on Ticketmaster’s computer infrastructure;  Not decoding or reverse engineering any tickets or underlying algorithms or barcodes used on or in the production of tickets on the Site; and  Not trying to circumvent any technological measure that effectively controls access to, or the rights in, the Site or Content. 26 (See Opp’n 7, ECF No. 25; see also Compl. ¶ 30.) Although Ticketmaster’s TOU 27 asserts that these terms are “conditions,” whether a term is a condition depends on 28 “the whole contract, its purpose, and the intention of the parties . . .” JMR Constr. 8 1 Corp. v. Envtl. Assessment & Remediation Mgmt., Inc., 243 Cal. App. 4th 571, 596 2 (2015) (citations and quotations omitted); see also Pac. Allied v. Century Steel Prods., 3 162 Cal. App. 2d 70, 79–80 (1958) (conditions are disfavored by the law). In the 4 “Violation of these Terms” section, the TOU states: “[Ticketmaster] may investigate 5 any violation of these Terms [and] [i]f that happens, [the user] may no longer use the 6 Site or any Content.” (Compl., Ex. A 5.) The use of “may” demonstrates that the 7 TOU only imposes covenants, not conditions. 8 “terminated or enlarged” if a violation occurs because the parties’ interests do not 9 change unless and until Ticketmaster chooses to act. Half Moon Bay, 65 Cal. App. 10 4th at 411. Such promises are not conditions. Ticketmaster fails to satisfy the first 11 prong of MDY. Neither party’s obligations are 12 In addition, some of the terms of Ticketmaster’s TOU do not satisfy the second 13 prong of MDY—whether the breach implicates an exclusive right of copyright. Use of 14 bots or automatic software, for instance, does not implicate an exclusive right of 15 copyright and cannot constitute the basis of copyright infringement. MDY, 629 F.3d 16 at 941. Similarly, Ticketmaster’s limitations on the amount of times Defendants may 17 request pages of the Website, send ticket reservation requests, or refresh transactions 18 also do not implicate any exclusive right of copyright. These limitations serve to limit 19 the number of transactions or to reduce server load. Cf. Perfect 10, 508 F.3d at 1169– 20 70 (automatic cache copies decreases network latency and minimize unnecessary 21 bandwidth usage). 22 Accordingly, the Court GRANTS Defendants’ Motion to Dismiss Plaintiff’s 23 claim for copyright infringement. Dismissal is without leave to amend to the extent 24 that Plaintiff’s copyright infringement claim is based on Defendants’ use of bots, by 25 exceeding the TOU limitations on the number of page refreshes or ticket requests, or 26 by placing imposing a large load on Ticketmaster’s servers. 27 28 9 1 B. Digital Millennium Copyright Act The DMCA provides that: “[n]o person shall circumvent a technological 2 3 measure that effectively controls access to a [copyrighted] work.” 17 U.S.C. 4 § 1201(a)(1). Circumvention means to “descramble a scrambled work, decrypt an 5 encrypted work, or otherwise avoid, bypass, remove, deactivate, or impair a 6 technological measure, without the authority of the copyright owner.’” 17 U.S.C. 7 § 1201(a)(3)(A); see also Disney Enters. v. VidAngel, Inc., 869 F.3d 848, 863 (9th Cir. 8 2017). Copyright infringement is not required to state a claim under 17 U.S.C. 9 § 1201(a)(1). MDY, 629 F.3d at 950. 10 As stated above, Ticketmaster alleged that it has a copyright in various aspects 11 of its website and mobile apps. (Compl. ¶ 28.) In order to access those copyrighted 12 pages, Defendants must bypass security measures, including CAPTCHA and 13 “splunk,” unique identifiers for ticket purchasers used to determine if users are 14 exceeding purchase limits. (Id. ¶¶ 21, 22.) According to Ticketmaster, Defendants 15 circumvent these security measures by using bots or “CAPTCHA farm” laborers. (Id. 16 ¶¶ 51–53, 103.) These allegations are sufficient to state a claim under the DMCA. Defendants first argue that Ticketmaster’s allegations are too vague to state a 17 18 claim. 19 circumvention claim. Ticketmaster only needs to allege facts that, accepted as true, 20 “state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678. 21 However, there are no heightened pleading requirements for a DMCA Defendants also argue that CAPTCHA and splunk are not “technological 22 measures” as defined under the DMCA. 23 Defendants acknowledge, a CAPTCHA prevents a user from proceeding further to 24 gain access to copyrighted pages. CAPTCHA is therefore a “technological measure 25 that effectively controls access to a [copyrighted] work.” 17 U.S.C. § 1201(a)(1). By 26 using bots or CAPTCHA farms, Defendants are “avoiding” CAPTCHA without the 27 authority of Ticketmaster. The fact that legitimate users can complete a CAPTCHA in 28 an identical manner is irrelevant—legitimate users do so with “the authority of 10 This argument is unpersuasive. As 1 [Ticketmaster]” and thus do not violate the DMCA. 17 U.S.C. § 1201(a)(3)(A). 2 Whether a method of circumvention has innocent uses is irrelevant—the DMCA is 3 concerned with the circumvention itself, not the method. 4 colocation facilities and other methods, such as deleting tracking tools like “cookies,” 5 are also actionable under the DMCA if used to circumvent Ticketmaster’s 6 technological measures. Accordingly, the Court DENIES Defendants’ Motion to 7 Dismiss Ticketmaster’s DMCA claim. 8 C. Defendants’ use of Computer Fraud and Abuse Act 9 The CFAA prohibits computer trespass by those who are not authorized users 10 or who exceed authorized use. Facebook, Inc. v. Power Ventures, 844 F.3d 1058, 11 1065–66 (9th Cir. 2016) (citing 18 U.S.C. § 1030(a)(2)(C)). 12 provides two ways of committing the crime of improperly accessing a protected 13 computer: (1) obtaining access without authorization; and (2) obtaining access with 14 authorization but then using that access improperly.” Musacchio v. United States, 136 15 S. Ct. 709, 713 (2016). “Any person who suffers damage or loss by reason of a 16 violation of this section” has a private right of action. 18 U.S.C. § 1030(g). “The statute thus 17 “Congress enacted the CFAA in 1984 primarily to address the growing 18 problem of computer hacking . . .” United States v. Nosal, 676 F.3d 854, 858 (9th Cir. 19 2012). In order to avoid criminalizing a wide range of innocent conduct, the Ninth 20 Circuit narrowly interpreted the CFAA’s prohibitions against computer access 21 “without authorization” to apply to “outside hackers (individuals who have no 22 authorized access to the computer at all)” and “exceeds authorized access” to “inside 23 hackers (individuals whose initial access to a computer is authorized but who access 24 unauthorized information or files).” Id. (emphasis in original). Recognizing that 25 terms of use are often “vague and generally unknown [and] website owners retain the 26 right to change the terms at any time and without notice,” the CFAA’s prohibition 27 against “exceed[ing] authorized access . . . does not extend to violations of use 28 restrictions.” Id. at 863. Rather, “‘exceeds authorized access’ in the CFAA is limited 11 1 to violations of restrictions on access to information, and not restrictions on its use.” 2 Id. at 864 (emphasis in original). 3 In Facebook, Inc. v. Power Ventures, Inc., 844 F.3d 1058, 1067 (9th Cir. 2016), 4 the Ninth Circuit reiterated that “a violation of the terms of use of a website—without 5 more—cannot establish liability under the CFAA.” However, “a defendant can run 6 afoul of the CFAA when he or she has no permission to access a computer or when 7 such permission has been revoked explicitly.” Id. For example, the plaintiff in 8 Facebook expressly rescinded permission by sending a cease-and-desist letter 9 demanding that the defendant stop using its website and by imposing blocks on the 10 defendant’s IP addresses. Id. at 1068. 11 In this case, the issue is whether Defendants lacked authorization or exceeded 12 their authorization when using Ticketmaster’s website or mobile apps. Ticketmaster 13 contends that Defendants lacked or exceeded their authorization by violating its TOU, 14 even after it sent Defendants a cease-and-desist letter outlining the alleged violations. 15 However, “[t]he mention of the terms of use in the cease and desist letter is not 16 dispositive.” 17 Defendants either lacked authorization to access its website, or that Defendants 18 exceeded such authorization. Facebook, 844 F.3d at 1067 n.3. Ticketmaster must show that 19 Ticketmaster has not shown that it rescinded permission from Defendants to use 20 its website. In its cease-and-desist letter, Ticketmaster outlined Defendants’ TOU 21 violations, including Defendants’ use of bots or automated software, imposing a large 22 load on Ticketmaster’s infrastructure, requesting more than 1,000 pages in a 24-hour 23 period, making more than 800 ticket reservation requests in a 24-hour period, and 24 circumventing CAPTCHA. (See Compl., Ex. E 3.) Ticketmaster then demanded that 25 “[Lombardi], Prestige, and any other companies or individuals under [Lombardi’s] 26 direction or control cease and desist from any further violations of Ticketmaster’s 27 rights.” (Id. at 4.) These demands admonish Defendants for violating the TOU, but 28 do not actually revoke access authority. Cf. Facebook, 844 F.3d at 1067; Craigslist, 12 1 Inc. v. 3Taps, Inc., 964 F. Supp. 2d 1178, 1184 (N.D. Cal. 2013). Indeed, 2 Ticketmaster’s Complaint is wholly devoid of any allegations suggesting that 3 Ticketmaster took steps to prevent Defendants from future access. For example, 4 Ticketmaster did not allege that they shut down Defendants’ accounts or attempted to 5 block their IP addresses. See Facebook, 844 F.3d at 1067. Rather, Ticketmaster’s 6 cease-and-desist letter appears to imply that Defendants could continue to use 7 Ticketmaster’s website so long as they abide by the TOU. 8 Therefore, Ticketmaster must base its CFAA claim on the second prong—that 9 Defendants exceeded their authorization to use its website. In the Ninth Circuit, 10 “exceed authorization” claims require some showing that defendants are “inside 11 hackers” who accessed unauthorized information or files. Nosal, 676 F.3d at 863. 12 However, Ticketmaster’s allegations are limited to Defendants’ TOU violations. 13 Nosal precludes such claims. 14 Ticketmaster relies on United States v. Lowson, No. 10-114, 2010 WL 9552416 15 (D.N.J. Oct. 12, 2010), for the proposition that violating code-based restrictions 16 satisfies the requirement that CFAA claims based on terms of use violations must 17 plead “more.” See Facebook, 844 F.3d at 1067 (“violation of the terms of use of a 18 website—without more—cannot establish liability under the CFAA.”) 19 however, has little persuasive weight as an out-of-circuit case decided before Nosal 20 and Facebook. Moreover, Lowson is distinguishable. In Lowson, the defendants 21 accessed unauthorized information when they “allegedly acquired source code the 22 vendors used to protect their website.” 2010 WL 9552416, at *2. The Lowson 23 defendants were also charged with “implementing ‘hacks’ and ‘backdoors’ to enable 24 automated programs to purchase tickets.” Id. at *5. By contrast, Ticketmaster’s 25 allegations in this case are limited to bot and automated software use. Ticketmaster 26 does not allege that Defendants gained access to unauthorized information. 27 28 13 Lowson, For these reasons, the Court GRANTS Defendants’ Motion to Dismiss 1 2 Ticketmaster’s CFAA claim with leave to amend.3 3 D. California’s Computer Data Access and Fraud Act The CDAFA is California’s state-law analogue to the CFAA. 4 Under the 5 CDAFA, “any person who commits any of the following acts is guilty of a public 6 offense . . . knowingly and without permission uses or causes to be used computer 7 services . . .” Cal. Pen. Code § 502(c)(3). “In contrast to the CFAA, the [CDAFA] 8 does not require unauthorized access.” U.S. v. Christensen, 828 F.3d 763, 789 (9th 9 Cir. 2016) (emphasis in original). “A plain reading of the statute demonstrates that its 10 focus is on unauthorized taking or use of information.” Id. The parties appear to 11 agree that, in this case, there is no distinction between the CFAA’s prohibition against 12 unauthorized access and the CDAFA’s prohibition against unauthorized use. (See 13 Mot. 21; Opp’n 20–21.) 14 Oracle USA, Inc. v. Rimini St., Inc., 879 F.3d 948, 2018 WL 315568 (9th Cir. 15 2018), is directly on point. In Oracle, the Ninth Circuit held “that taking data using a 16 method prohibited by the applicable terms of use, when the taking itself generally is 17 permitted, does not violate the CDAFA.” 18 disapproved of the method—automated downloading—by which [defendant] took 19 [plaintiff’s] proprietary information,” but defendant is only liable if it was not 20 authorized to take and use the information that it downloaded. Id. Id. at *10. “[Plaintiff] obviously 21 Here, as explained above, Ticketmaster never withdrew authorization to use its 22 website. Ticketmaster’s cease-and-desist letter only expressed its disapproval of the 23 method by which Defendants accessed the website. This is insufficient to state a 24 claim under the CDAFA. For these reasons, the Court GRANTS Defendants’ Motion 25 to Dismiss Ticketmaster’s CDAFA claim with leave to amend.4 26 27 28 3 Because Ticketmaster’s CFAA claim is dismissed and is capable of amendment, the Court declines to address Defendants’ remaining arguments. 4 Ticketmaster also argues that circumventing technical barriers, like CAPTCHA, constitutes improper use. (See Opp’n 21 (citing In re Facebook Privacy Litig., 791 F. Supp. 2d 705, 715 (N.D. 14 1 E. Breach of Contract 2 Defendants argue that Ticketmaster’s breach of contract claim should be 3 dismissed because it fails to adequately plead damages. Specifically, Defendants 4 argue that Ticketmaster’s liquidated damages provision is unenforceable and 5 Ticketmaster does not adequately allege compensatory damages. 6 1. 7 California law applies a two-part test to determine whether liquidated damages 8 provisions are valid: (1) fixing the amount of actual damages must be impracticable or 9 extremely difficult; and (2) the amount selected must “represent a reasonable 10 endeavor by the parties to estimate a fair compensation for the loss sustained.” Util. 11 Consumers’ Action Network, Inc. v. AT&T Broadband of S. Cal., 135 Cal. App. 4th 12 1023, 1029 (2006) (quoting Rice v. Schmid, 18 Cal. 2d 382, 385–86 (1941)). Whether 13 a “reasonable endeavor was made depends on both (1) the motivation and purpose in 14 imposing the charges, and (2) their effect.” Id. Liquidated damages provisions in 15 standard form contracts are not presumptively unenforceable. Id. at 1038. Liquidated Damages 16 Here, the damages associated with Defendants’ alleged activity include costs 17 that can be readily fixed, as well as costs that are difficult to determine. Infrastructure 18 costs, such as additional security measures and monitoring costs, are easily calculable. 19 But Ticketmaster also alleged costs associated with loss of consumer goodwill and 20 deterrence. (Compl. ¶¶ 65, 71.) These costs are impracticable or extremely difficult 21 to fix. Therefore, Ticketmaster has satisfied the first element. 22 The second element is similarly satisfied. Ticketmaster’s liquidated damages 23 provision sets liquidated damages at $0.25 per page request or reserve request made in 24 excess of 1,000 pages or 800 reserve requests per 24-hour period. The high threshold 25 26 27 28 Cal. 2011)).) However, the cases Ticketmaster cites for this propsition all predate the Ninth Circuit’s recent decisions in Christensen and Oracle. Moreover, the technical barriers in cases that apply such a presumption do more than impede access—they attempt to prevent access entirely. See, e.g., Facebook, Inc. v. Power Ventures, Inc., No. C 08-05780, 2010 WL 3291750, at *11 (N.D. Cal. July 20, 2010) (plaintiff blocked IP addresses). 15 1 before the liquidated damages provision applies suggests that there is no improper 2 motive or purpose behind the provision.5 3 Ticketmaster’s liquidated damages provision appears enforceable. At this stage of the proceedings, 4 2. 5 As explained above, Ticketmaster has alleged that it suffered damages in the 6 form of infrastructure costs, loss of consumer goodwill, and costs associated with 7 deterrence. These costs are sufficient to allege compensatory damages. See Rent-a- 8 Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th 9 Cir. 1991) (loss of goodwill is a compensable injury). Compensatory Damages 10 Defendants contend that Ticketmaster’s compensatory damages are speculative 11 because Ticketmaster profits off of Defendants’ activity. (See Mot. 28.) According to 12 Defendants, Ticketmaster only cancels orders when it is clear that those tickets can be 13 resold. 14 purchases. (Id.) Defendants’ theory, however, is itself speculative. On a motion to 15 dismiss, the Court can only consider the facts alleged in Ticketmaster’s Complaint. 16 See Iqbal, 556 U.S. at 678 (2009). For these reasons, the Court DENIES Defendants’ 17 Motion to Dismiss Ticketmaster’s breach of contract claim. 18 F. Fraud Defendants contend that Ticketmaster failed to satisfy the requirements of 19 20 Otherwise, Ticketmaster simply pockets the proceeds of Defendants’ Federal Rule of Civil Procedure 9(b) and plead the elements of promissory fraud. 21 Where the plaintiff’s claim sounds in fraud, the complaint must comply with 22 Federal Rule of Civil Procedure 9(b)’s heightened pleading standard. Mendiondo v. 23 24 25 26 27 28 5 Defendants point out that in 2007, Ticketmaster set its liquidated damages rate to $10 per page request in excess of 1,000 per 24-hour period. (See Mot. 27 (citing Ticketmaster, LLC v. RMG Techs., Inc., 2007 WL 3084480 (C.D. Cal. June 25, 2007)).) Defendants contend that the large discrepancy between the current rate and the 2007 rate demonstrates that the liquidated damages provisions are not reasonably calculated. But the fact that the rate differs is not dispositive— liquidated damages provisions are permitted because damages are difficult to calculate. Furthermore, the fact that the current rate is now 40 times lower than the previous amount suggests that Ticketmaster made an effort to make the provision reasonable. 16 1 Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008); Bly-Magee v. Cal., 2 236 F.3d 1014, 1018 (9th Cir. 2001). Rule 9(b) requires the party alleging fraud to 3 “state with particularity the circumstances constituting fraud,” Fed. R. Civ. P. 9(b), 4 including “the who, what, when, where, and how of the misconduct charged.” Ebeid 5 ex rel. United States v. Lungwitz, 616 F.3d 993, 998 (9th Cir. 2010) (internal quotation 6 marks omitted); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). 7 “Rule 9(b) serves to give defendants adequate notice to allow them to defend against 8 the charge and to deter the filing of complaints as a pretext for the discovery of 9 unknown wrongs, to protect professionals from the harm that comes from being 10 subject to fraud charges, and to prohibit plaintiffs from unilaterally imposing upon the 11 court, the parties and society enormous social and economic costs absent some factual 12 basis.” In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1405 (9th Cir. 1996) (citations, 13 brackets, and internal quotation marks omitted). 14 In California, promissory fraud consists of the following elements: (1) a 15 promise without any intention of performing it; (2) intent to deceive or intent to 16 induce the party to whom it was made to enter into the transaction; (3) reasonable 17 reliance by the party to whom it was made; (4) the party making the promise did not 18 perform; and (6) the party to whom the promise was made was injured. Regus v. 19 Schartkoff, 156 Cal. App. 2d 382, 389 (1957). 20 Ticketmaster alleges that every time Defendants created an account, they 21 assented to the TOU with the intent to breach the TOU by using bots and automated 22 software to purchase large quantities of tickets. 23 Ticketmaster also alleges that it relied on these representations and sold Defendants 24 tickets, resulting in damage to its reputation, loss of advertising revenue, and 25 increased infrastructure costs. (Id. ¶¶ 8, 23, 65, 67, 70, 71.) These allegations satisfy 26 Rule 9(b) and California’s pleading requirements for promissory fraud. (See Compl. ¶¶ 113–23.) 27 Defendants argue that Ticketmaster failed to adequately plead intent because 28 Ticketmaster does not allege when it entered into a contract with Defendants. (Mot. 17 1 32.) This argument is unavailing. Ticketmaster alleged that Defendants had the 2 requisite intent to defraud every time Defendants created an account. For these 3 reasons, the Court DENIES Defendants’ Motion to Dismiss Ticketmaster’s fraud 4 claims. 5 G. State Law Claims 6 Defendants contend that Ticketmaster’s remaining state law claims should be 7 dismissed for lack of subject matter jurisdiction and personal jurisdiction as to 8 Renaissance, Lombardi, and Lichtman (collectively, “Foreign Defendants”). (Mot. 9 33–34.) 10 Defendants do not contest that Ticketmaster’s state law claims arise out of the 11 same case or controversy as its federal claims. Because Ticketmaster has stated a 12 claim under the DMCA and its CFAA claim is capable of amendment, the Court will 13 exercise supplemental jurisdiction over the state law claims pursuant to 28 U.S.C. 14 § 1367. 15 A federal court may exercise personal jurisdiction over a defendant if he or she 16 has “minimum contacts” with the relevant forum and if the exercise of jurisdiction 17 does not offend “traditional notions of fair play and substantial justice.” Int’l Shoe 18 Co. v. Washington, 326 U.S. 310, 316 (1945). 19 analyzed according to a three-prong test: Specific personal jurisdiction is 20 (1) The non-resident defendant must purposefully direct his activities or 21 consummate some transaction with the forum or resident thereof; or 22 perform some act by which he purposefully avails himself of the 23 privilege of conducting activities in the forum, thereby invoking the 24 benefits and protections of its laws; 25 (2) the claim must be one which arises out of or relates to the defendant's 26 forum-related activities; and 27 (3) the exercise of jurisdiction must comport with fair play and 28 substantial justice, i.e. it must be reasonable. 18 1 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). 2 Defendants only contest the first two prongs. (See Mot. 34.) 3 The Foreign Defendants have purposefully availed themselves of this forum by 4 buying large amounts of tickets through Ticketmaster, which is headquartered in Los 5 Angeles. (Compl. ¶ 10.) The Foreign Defendants’ ticket purchases also form the 6 basis of Ticketmaster’s claims. Ticketmaster has sufficiently alleged that this Court 7 has specific personal jurisdiction over the Foreign Defendants. Accordingly, the 8 Court DENIES Defendants’ Motion to Dismiss Ticketmaster’s state law claims for 9 lack of jurisdiction. 10 V. CONCLUSION 11 For the reasons discussed above, the Court GRANTS IN PART and DENIES 12 IN PART Defendants’ Motion to Dismiss. (ECF No. 24.) Dismissal is with leave to 13 amend, except as to Ticketmaster’s second claim for copyright infringement to the 14 extent it relies on Defendants’ TOU violations described in this Order. 15 Ticketmaster wish to file an amended complaint, it must do so within twenty-one days 16 of the date of this Order. Ticketmaster must also lodge with the Court, and serve on 17 Defendants, a redlined copy of the amended pleading so that the Court can decipher 18 the amendments to its complaint. 19 20 IT IS SO ORDERED. 21 22 January 31, 2018 23 24 25 26 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 27 28 19 Should

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