Marketing Info v. Board of Trustees, et al

Filing 18

ORDER granting in part and denying in part 12 Defendant's Motion to Dismiss. Signed by Judge John A. Houston on 02/05/08. (jpp)

Marketing Info v. Board of Trustees, et al

Doc. 18

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA ) ) ) ) ) ) ) ) ) ) ) ) ) Civil No. 06cv1682 JAH (JMA) ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS [Doc. No. 12]

9 MARKETING INFORMATION MASTERS, INC., a California 10 corporation, 11 12 v. Plaintifff,

THE BOARD OF TRUSTEES OF THE 13 CALIFORNIA STATE UNIVERSITY SYSTEM, et. al., 14 Defendants. 15 16

On November 20, 2006, Defendant Board of Trustees of California State University

17 ("Board of Trustees") and Defendant Robert A. Rauch (collectively "Defendants") filed a motion 18 to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff Marketing

19 Information Masters, Inc. ("MIM") filed an opposition on January 4, 2007. Defendants filed 20 a reply on January 10, 2007. After a thorough review of the parties' submissions, the Court 21 GRANTS IN PART AND DENIES IN PART Defendant's motion. 22 23 INTRODUCTION Plaintiff, a California corporation in the business of performing marketing research

24 studies, filed a complaint on August 18, 2006, and an amended complaint ("FAC") on 25 November 8, 2006, alleging copyright infringement, conversion, misappropriation and unfair 26 business practices. The Board of Trustees and Robert A. Rauch, an affiliate with the San Diego 27 State University Center for Hospitality and Tourism Research ("the Center"), were named as 28 defendants. Plaintiff alleges it performed studies of the economic impact of the Holiday Bowl
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Dockets.Justia.com

1 on the San Diego community which it recorded in written reports protected under copyright 2 laws and provided to the Holiday Bowl organization at fees below market rate. FAC ¶ 4 at 2. 3 Plaintiff prepared a report of the impact of the 2003 Holiday Bowl and provided the report 4 to the Holiday Bowl Committee in February 2004. Id. ¶ 6 at 2. After delivering the report, 5 Michael Casinelli, owner of Marketing Information Masters, notified the organization it would 6 need to pay market rates for any additional impact studies. Id. ¶ 7 at 2. Thereafter, the 7 Holiday Bowl organization contracted with the Center to conduct the impact study for the 8 2004 Holiday Bowl. Id. ¶ 8 at 2 -3. Plaintiff alleges the Center copied and plagiarized 9 Plaintiff's 2003 report to prepare the 2004 report. 10 11 Id. ¶ 10 at 3.

DISCUSSION Defendants maintain they are entitled to sovereign immunity and seek dismissal of the

12 action in its entirety and further argue the state law claims are preempted by the Federal 13 Copyright Act. Plaintiff opposes Defendants' motion to dismiss on the grounds that state 14 sovereign immunity is abrogated by the Copyright Clarification Act, Defendant Rauch is not 15 entitled to state sovereign immunity, and Plaintiff's state law claims are not preempted by 16 federal law. 17 I. 18 Legal Standard A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency

19 of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal of a claim 20 under this rule is appropriate only where "it appears beyond doubt that the plaintiff can prove 21 no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 22 355 U.S. 41, 45-46 (1957); Navarro, 250 F.3d at 732. Dismissal is warranted under Rule 23 12(b)(6) where the complaint lacks a cognizable legal theory. Robertson v. Dean Witter 24 Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984); See Neitzke v. Williams, 490 U.S. 319, 326 25 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue 26 of law."). Alternatively, a complaint may be dismissed where it presents a cognizable legal 27 theory yet fails to plead essential facts under that theory. Robertson, 749 F.2d at 534. 28 In reviewing a motion to dismiss under Rule 12(b)(6), the Court must assume the truth 2
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1 of all factual allegations and must construe all inferences from them in the light most favorable 2 to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002); Cahill v. 3 Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However, legal conclusions need 4 not be taken as true merely because they are cast in the form of factual allegations. Ileto v. 5 Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); Western Mining Council v. Watt, 643 F.2d 6 618, 624 (9th Cir. 1981). When ruling on a motion to dismiss, the Court may consider the 7 facts alleged in the complaint, documents attached to the complaint, documents relied upon 8 but not attached to the complaint when authenticity is not contested, and matters of which 9 the Court takes judicial notice. Parrino v. FHP, Inc., 146 F.3d 699, 705-706 (9th Cir. 1998); 10 Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). 11 II. Eleventh Amendment Immunity

12 A. Copyright Infringement Claim 13 Defendants maintain the copyright claim must be dismissed, because they are entitled

14 to Eleventh Amendment Immunity. 15 1. 16 Legal Standard The Eleventh Amendment provides a state immunity from suit unless the state consents

17 to be sued or Congress validly overrides the state's immunity. See Green v. Mansour, 474 18 U.S. 64, 68 (1985). In order to determine whether a state's immunity has been validly

19 overridden by Congress, the court looks to two factors: (1) whether Congress expressed a clear 20 intent to override the state's immunity and (2) whether Congress acted pursuant to a 21 constitutional grant of authority. See Blatchford v. Native Village,501 U.S. 775, 786 (1991); 22 Seminole Tribe of Florida v. Florida, 517 U.S. 44, 55 (1996) (citations omitted). Congress 23 may not validly abrogate State immunity under Article I of the Constitution. See id.

24 However, Congress does have the ability to abrogate state sovereign immunity under the 25 enforcement clause of the Fourteenth Amendment. See Fitzpatrick v. Bitzer, 427 U.S. 445, 26 456 (1976); Florida Prepaid v. College Savings Bank, 527 U.S. 627, 637(1999). Under §5 of 27 the Fourteenth Amendment, Congress has the power of enforcement but not the power to 28 deem an action a constitutional violation. The Supreme Court outlined a test for determining 3
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1 whether an act constitutes a valid exercise of Congress's powers under § 5 of the Fourteenth 2 Amendment in City of Boerne v. Flores, 521 U.S. 507 (1997), known as the "congruence and 3 proportionality" test. The test was further clarified in Florida Prepaid. In order "to invoke §5, 4 [Congress] must identify conduct transgressing the Fourteenth Amendment's substantive 5 provisions, and it must tailor its legislative scheme to remedying or preventing such conduct." 6 Florida Prepaid, 527 at 639. 7 2. Analysis 8 The Copyright Remedy Clarification Act ("CRCA") was passed with the intent to 9 subject states to liability for copyright infringement. The Copyright Clarification Act, Hearing 10 before the Subcommittee on Patents, Copyrights and Trademarks, Pla's Exh. A at 8 (Doc. No. 11 13). Pursuant to the CRCA, the Copyright Act was modified to state: 12 13 14 15 Any State, any instrumentality of a State, and any officer or employee of a State or instrumentality of a State ...shall not be immune, under the Eleventh Amendment ...from suit in Federal Court...for a violation of any of the exclusive rights of a copyright owner ... 17 U.S.C.A. section 511(a) (1994). Defendants contend the CRCA was not passed pursuant to a constitutional grant of

16 power, and therefore does not validly provide a waiver of Eleventh Amendment Immunity. 17 Specifically, Defendants argue the CRCA was improperly passed by Congress based upon 18 Article I of the Constitution. Furthermore, Defendants argue the CRCA fails as a Fourteenth 19 Amendment enactment because Congress did not identify a pattern of copyright infringement 20 by states, Congress did not limit the scope of the CRCA, and Congress did not consider 21 alternative methods through which copyright holders may obtain relief. 22 Plaintiff argues that the CRCA is a valid abrogation of the state's sovereign immunity, 23 because it was enacted pursuant to Congress's enforcement power under the Fourteenth 24 Amendment. 25 Neither the Supreme Court, nor the Ninth Circuit has addressed the issue of whether 26 the CRCA is a valid abrogation of state sovereign immunity. However, the Supreme Court 27 struck down as unconstitutional two similar "remedy clarification" acts involving intellectual 28 property rights; the Patent and Plant Remedy Clarification Act and the Trademark Remedy 4

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1 Clarification Act. See Florida Prepaid 527 at 627; College Savings Bank v. Florida Prepaid 2 Postsecondary Education Expense Fund, 527 U.S. 666 (1999). In Florida Prepaid, the 3 Supreme Court found Congress identified no pattern of patent infringement by the states and 4 barely considered availability of state remedies thus failing to support "the proposition that 5 Congress sought to remedy a Fourteenth Amendment violation in enacting the Patent Remedy 6 Act." 527 U.S. at 642-47. The Court in College Savings Bank, found the right to be free from 7 a business competitor's false advertising and the right to be secure in one's business interests 8 did not qualify as property rights protected by the due process clause, and therefore the 9 Trademark Remedy Clarification Act, which was enacted to remedy those deprivations, was 10 not a valid abrogation of Eleventh Amendment immunity. 527 U.S. at 672-75. 11 The Fifth Circuit, the only circuit court addressing the issue, has held that the CRCA 12 is not a proper exercise of Congress' power under §5 of the Fourteenth Amendment, and 13 therefore is not a valid abrogation of state sovereign immunity. Chavez v. Arte Publico Press,
th 14 204 F.3d 601,608 (5 Cir. 2000). Applying the analytical framework of Florida Prepaid, the

15 court found that Congress, in its enactment of the CRCA, failed to uncover a pattern of 16 constitutional violations by states regarding infringement of the copyright act, failed to 17 consider alternative methods of obtaining relief, and failed to limit the reach of the CRCA in 18 any manner. Id. at 605 - 608. 19 This Court agrees that the CRCA does not constitute a valid abrogation of state 20 sovereign immunity. Based upon the clear language of the CRCA, this Court finds Congress 21 intended to abrogate States' immunity through its enactment. The CRCA specifically states 22 Eleventh Amendment immunity does not apply in cases of copyright infringement. See 17 23 U.S.C. § 511(a). However, this Court finds the CRCA was not passed pursuant to a valid 24 exercise of Fourteenth Amendment enforcement powers. 25 According to the Fifth Circuit in Chavez, the relevant inquiry for determining whether 26 the CRCA constitutes a valid exercise of Congress's Fourteenth Amendment powers is: 27 (1) whether there is a pattern of copyright infringement by states; (2) whether adequate state 28 remedies for copyright infringement exist; and (3) the coverage of the legislation. Chavez, 204 5

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1 F.3d at 605 (citing Florida Prepaid, 527 U.S. at 640 - 645. This Court concurs with the Fifth 2 Circuit's application of the analytical framework presented in Florida Prepaid to the CRCA. 3 In its enactment of the CRCA, Congress considered several factors, including incidents of past 4 infringement by states as well as anticipation of future infringement by states. Hearing 5 Documents for the CRCA, Pla's Exh A-C (Doc. No. 13). Anecdotal evidence was considered 6 along with eight recent cases involving state infringement of copyrights. See id.; Pla's Exh. A 7 at 17. Witnesses also provided examples of states refusing to negotiate over licenses, 8 photocopying copyrighted material, and copying parts of books where permission from the 9 copyright owner was denied. Pla's Exh. A at 23, 27; Exh. B at 29. The testimony and 10 evidence demonstrated at most sporadic violations, not widespread violations by states. 11 Furthermore, the committee notes there was no evidence of "any significant number of 12 wholesale takings of copyright rights by States and State entities." Kastenmeier Testimony, 13 Pla's Exh. B at 6. Additionally, Ralph Oman, Register of Copyrights, reported during his 14 testimony that states are "respectful of the copyright law" and he believes they will remain so. 15 Pla's Exh. A at 8. As noted by the Fifth Circuit in Chavez, the reports and testimony do not 16 demonstrate a pattern of unremedied copyright infringement by states. 204 F.3d at 606. 17 Instead, the testimony describes the potential for violations by states if they were not held 18 accountable for copyright infringement. As such, there is no evidence of a pattern of copyright 19 infringement by the states. 20 Additionally, the evidence demonstrates the committee minimally considered adequacy 21 of state remedies. There are references in the testimony to the exclusivity of jurisdiction over 22 copyright actions in Federal court. See e.g. Oman Statement, Exh. A at 7.; Exh. A at 18, 26; 23 Exh. B at 9; Comments of National Music Publisher's Association, Inc. Exh. C (Part 1) at 34; 24 Exh. C (Part 2) at 2. However, the discussion regarding available remedies focuses primarily 25 on the inadequacy of injunctive relief. There is minimal discussion of waivers by the state and, 26 as noted by the Fifth Circuit, no discussion of other state remedies such as breach of contract 27 claims. 28 Finally, the coverage of the CRCA is not sufficiently narrow to address conduct that

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1 violates the due process clause of the Fourteenth Amendment. The Supreme Court in Florida 2 Prepaid noted that a state's negligent act does not violate the due process clause and the 3 legislative history of the Patent Remedy Act suggested Congress enacted the legislation "in 4 response to a handful of instances of patent infringement that do not necessarily violate the 5 Constitution." 527 U.S. at 645-56. The Court found the provisions of the Act, which did not 6 require any showing of intent to infringe, were not sufficiently tailored to remedy 7 unconstitutional behavior. Id. at 646. The discussion in Florida Prepaid teaches "that a 8 deprivation, to fit the meaning of the due process clause, must be intentional.. ." Chavez, 204 9 F.3d at 607. Like patent infringement, copyright infringement does not require a showing of 10 intent. See Florida Prepaid 527 U.S. at 645; Chavez, 204 F.3d at 607. Congress failed to 11 limit the reach of the CRCA to infringement which violates the due process clause of the 12 Fourteenth Amendment. As such, the CRCA is not proportionate to ends legitimate under § 13 5 of the Fourteenth Amendment. 14 This Court finds the CRCA fails to meet the "congruence and proportionality" test and 15 is not a valid exercise of Congress's power under § 5 of the Fourteenth Amendment. 16 Accordingly, Defendant Board of Trustees and Robert A. Rauch, in his official capacity, are 17 entitled to immunity. 18 3. 19 a. 20 Individual Capacity Suit Against Defendant Rauch Legal Standard State sovereign immunity extends to government officials that are sued for damages in

21 their official capacity. Cary v. White, 457 U.S. 85 (1982); Edelman v. Jordan, 415 U.S. 651 22 (1974). An individual capacity suit against a government official is one that directly attaches 23 that individual's assets and is one that will not lead to monetary liability of the state. 24 Kentucky v. Graham, 473 U.S. 159, 168 (1985). The deciding factor for ascertaining whether 25 a suit is an official capacity suit or an individual capacity suit is not how the suit is labeled by 26 the plaintiff, but rather the nature of the suit. Larson v. Domestic & Foreign Commerce Corp., 27 337 U.S. 682, 714 (1948). Where the suit is in fact against the individual, the individual is 28 not automatically immune from suit by virtue of the fact that the act was undertaken in the 7

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1 course of his or her employment. Id. Based on this finding, the Fourth Circuit has held that 2 a public relations director of a state university director may be held liable for committing 3 copyright infringement in the course of her employment. See Richard Anderson Photography
th 4 v. Brown, 852 F.2d 114 (4 Cir. 1988).

5 b. 6

Analysis Plaintiff alleges that Defendant Rauch and the Center copied and plagiarized Plaintiff's

7 survey without permission. FAC ¶ 10 at 3. At the time of the alleged copyright infringement, 8 Defendant Rauch was the acting director of the Center and oversaw the preparation of the 9 2004 study and report. Id. ¶ 9 at 3, ¶ 33 at 7. Plaintiff further alleges Defendant Rauch was 10 "affiliated" with the Center for Hospitality and Tourism, but admits it "does not know whether 11 Mr. Rauch was an employee of San Diego State University or an outside consultant." Id. ¶ 20 12 at 5. According to the FAC, Rauch has "actively advertised and promoted [his] involvement 13 in and preparation of the" 2004 study and has "generated contracts for further and additional 14 work." Id. ¶ 44, 8. Plaintiff asserts Mr. Rauch engaged in the wrongful acts in both his 15 individual and official capacity. Id. ¶ 20 at 5. 16 Defendants allege the FAC demonstrates the real defendant is the Trustees, not Rauch, 17 as Plaintiff makes no distinction between Rauch's and the Trustees's acts and Plaintiff fails to 18 allege when, where or how Rauch engaged in a wrongful act in his individual capacity. They 19 further argue Defendant Rauch acted purely in his official capacity, and therefore is protected 20 from suit by the Eleventh Amendment. Specifically, Defendants argue that the actions 21 undertaken by Defendant Rauch were during the course of his employment, for the benefit of 22 his employer, the state university, and therefore, the suit against Defendant Rauch is in his 23 official capacity and is disallowed. Plaintiff argues that Defendant Rauch is subject to suit 24 because Plaintiff is suing Defendant Rauch in his individual capacity, as well as his official 25 capacity as demonstrated by the allegations he personally committed copyright infringement. 26 Based upon the FAC, which includes allegations that Rauch personally engaged in the 27 infringing behavior, the Court finds Plaintiff seeks relief from Rauch in his individual capacity 28 as well as official capacity. Accordingly, Rauch is not entitled to sovereign immunity from the 8

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1 suit seeking relief against him in his individual capacity. 2 B. State Law Claims 3 Plaintiff asserts state law claims against Defendants pursuant to pendant or 4 supplemental jurisdiction. Eleventh Amendment immunity extends to claims brought against 5 a state in federal court under supplemental jurisdiction. See Raygor v. Regents of the 6 University of Minnesota, 534 U.S. 533, 541-41 (2002). Absent a waiver, Defendants are 7 entitled to immunity. Plaintiff fails to address this issue entirely, much less demonstrate a 8 waiver. Accordingly, the state law claims shall be dismissed against the Board of Trustees and 9 Defendant Rauch in his official capacity. 10 II. 11 13 A. 14 Preemption of State Law Claims Defendants contend that Plaintiff's conversion, misappropriation, and unfair business

12 practices claims under state law are preempted by 17 U.S.C. § 301(a). Legal Standard Section 301(a) states that all legal rights stemming from copyright ownership are to be

15 governed by federal law. The Ninth Circuit employs a two-part test to determine whether a 16 claim is preempted by the Copyright Act. Laws v. Sony Music Entertainment, Inc., 448 F.3d
th th 17 1134 (9 Cir. 2006); Kodadek v. MTV, 152 F.3d 1209 (9 Cir. 1998); Del Madera Properties th 18 v. Rhodes and Gardner, Inc., 820 F.2d 973 (9 Cir. 1987) (overruled on other grounds). First,

19 preemption will only occur if the work in question falls within the scope of the Copyright Act 20 as set forth in 17 U.S.C. §§102, 103. Id. Second, the specific state law rights claimed must 21 be commensurate to rights that are protected by the Copyright Act in 17 U.S.C. § 301(a). Id. 22 "A `right which is equivalent to copyright' is one which is infringed by the mere act of 23 reproduction, performance, distribution, or display." Balboa v. Trans Global, 218 Cal.App.3d 24 1327(1990)(Quoting 1 Nimmer on Copyright §1.01[b] at pages 1-12). If the state law contains 25 an element that is not present in the Copyright Act which materially changes the cause of 26 action, the state law claim will not be preempted. Balboa, 218 Cal.App.3d 1327. 27 B. 28 Analysis Plaintiff asserts claims for conversion, misappropriation, and unfair business practices

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1 under California state law. With respect to Plaintiff's conversion claim, Plaintiff alleges it is 2 the owner of "tangible materials and intangible ideas" created by Plaintiff in connection with 3 the work on various economic impact studies and reports, including questionnaires and work 4 papers. FAC ¶ 58 at 10. Plaintiff further alleges Defendants "interfered with Plaintiff's right, 5 title, and interest" to the work and their acts constitute conversion. Id. ¶¶ 59, 60 at 10. With 6 respect to Plaintiff's misappropriation claim, Plaintiff alleges the tangible and intangible 7 property "not expressly incorporated into the economic impact reports prepared by Plaintiff 8 constitutes confidential, proprietary and trade secret information owned by Plaintiff" and 9 derives it value from not being known to the public. Id. ¶¶ 64, 65 at 11. Plaintiff alleges 10 Defendant used the confidential and proprietary information and trade secrets in preparing 11 the 2004 report, which constitutes misappropriation. Id. ¶¶ 67, 68 at 11. With respect to 12 Plaintiff's unfair business practices claim, Plaintiff alleges Defendants received unjust 13 enrichment through "unlawful and unfair business practices" pursuant to California Business 14 and Professions Code § 17200 et seq. Complaint ¶ 77 - 81 at 12. 15 Defendant argues the conversion and misappropriation claims, as alleged, fall within the 16 purview of section 301, because they involve copyright subject matter. Specifically, Defendant 17 argues the claims seek relief for the ideas and concepts giving rise to the 2003 survey. 18 Defendants maintain Plaintiff's state law claims which seek relief for theft of ideas, text and 19 concepts giving rise to the 2003 survey fall within the scope of the Copyright Act and are 20 therefore preempted. 21 Because Defendant completely fails to address the unfair competition claim, the motion 22 is denied as to that claim. 23 Plaintiff maintains the preemption argument is based upon a misinterpretation of the 24 nature of its state claims and explains the misappropriation and conversion claims seek relief 25 for the theft of the methodologies for evaluation, the questionnaires developed by Plaintiff, 26 work papers generated while conducting the impact studies and "other intangible property and 27 ideas" not contained in the 2003 survey. This property, Plaintiff argues, is not just ideas in 28 the 2003 survey, but is separate and distinct property. 10

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In reply, Defendants contend Plaintiff's assertions in the opposition attempt to bolster

2 the FAC are not relevant to a motion brought pursuant 12(b)(6) which tests the sufficiency 3 of the complaint, not the opposition. Defendants further argue, even with the additional 4 information, the state law claims are still preempted. Specifically, Defendants maintain the 5 tangible property, questionnaires and work papers are only valuable to the extent they contain 6 intellectual property subject to copyright law. 8 1. The Scope of the Copyright Act 9 Upon review of the FAC, Plaintiff seeks relief for the theft of "tangible materials," 10 including questionnaires and work papers" and "intangible ideas." FAC ¶ 58. The Court finds, 11 the tangible property which includes, questionnaires and work papers are "tangible works of 12 authorship" within the scope of the Copyright Act. See Del Madera Properties; see also 17 13 U.S.C. §§ 101, 102. Furthermore, the questionnaires and work papers were created in 14 connection with the copyrighted economic impact studies. 15 Although "ideas" are excluded from copyright protection, courts have determined 16 "ideas" contained in copyrighted material are within the scope of the Copyright Act, because 17 the scope of the Act is broader than the protection. See U.S. Ex. Rel. Berge v. Trustees of the
th 18 University of Alabama, 104 F.3d 1453 (4 Cir. 1997) (finding state claim for conversion for

Additionally, Defendants maintain the

7 intangible property and ideas fall under the Copyright Act.

19 "ideas" contained in copyrighted doctoral thesis is preempted by the Copyright Act); Entous 20 v. Viacom Intern., Inc., 151 F.Supp.2d 1150 (C.D.Cal. 2001); Selby v. New Line Cinema 21 Corp., 96 F.Supp.2d 1053 (C.D.Cal. 2001); Firoozye v. Earthlink Network, 153 F.Supp.2d 22 1115 (N.D.Cal. 2001). The Court finds the "intangible ideas" generated in connection with 23 the impact studies, as alleged in the complaint, are also within the scope of the Copyright Act. 24 Accordingly, the first prong of the test is met. 25 2. Equivalent to Right Protected Under the Copyright Act 26 Defendants fail to identify the elements of the claims they argue are preempted, and 27 do not articulate how or why Plaintiff's conversion, and misappropriation of trade secrets, 28 implicate rights that are equivalent to the rights federal copyright law protects. However, the 11

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1 Court has reviewed the allegations and determines the claims are equivalent to the copyright 2 claim. 3 To state a claim for conversion under California law, a plaintiff must establish: (1) the 4 plaintiff's ownership or right to possession of certain property; (2) the defendant's conversion 5 of the property by a wrongful act or disposition of property rights; and (3) damages. Oakdale 6 Village Group v. Fong, 43 Cal.App.4th 539, 543-44 (1996). While conversion is generally 7 immune from preemption because it involves tangible property, conversion actions seeking 8 only damages for reproduction of the property - not return of tangible property - are preempted 9 by the Copyright Act. Firoozye v. Earthlink Network, 153 F.Supp.2d 1115, 1130 (N.D.Cal. 10 2001). As alleged, Plaintiff is not seeking the return of property, but damages for its use. The 11 rights asserted in the conversion claim are the same as those protected by the Copyright Act. 12 As such, the second prong of the test is met and the conversion claim is preempted. 13 The tort of misappropriation under California law generally involves an issue of secrecy. 14 Plaintiff does allege Defendant used its confidential, proprietary trade secret information in 15 preparing its report. However, Plaintiff makes no allegation that Defendant disclosed the 16 confidential information. Accordingly, Plaintiff's misappropriation of trade secret claim lacks 17 the "`extra element' of `disclosure' of a secret in contravention of a specific duty to keep that 18 information confidential." Idema v. Dreamworks, Inc., 162 F.Supp.2d 1129, 1195 (C.D.Cal. 19 2001). As such, the misappropriation claim, as alleged, is preempted by the Copyright Act. 20 3. Amending the FAC 21 Plaintiff requests leave to amend its complaint to assert sufficient allegations supporting 22 its state law claims in the event the Court finds the claims are preempted. Defendant opposes 23 the request, arguing Plaintiff should not be given a third bite at the apple. 24 25 26 27 // 28 12

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The Court finds it appropriate to dismiss the preempted state law claims without

2 prejudice and to provide Plaintiff an opportunity to amend. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 JOHN A. HOUSTON United States District Judge DATED: February 5, 2008 4. 3. 2. 3. 1. CONCLUSION AND ORDER IT IS HEREBY ORDERED: Defendant's motion to dismiss is GRANTED IN PART AND DENIED IN PART. It is GRANTED as to the claims against the Board of Trustees and Defendant Rauch in his official capacity, and the conversion claim and misappropriation claim. The motion is DENIED as to the claims against

Defendant Rauch in his individual capacity and the unfair competition claim. The Board of Trustees is DISMISSED with prejudice. All claims against Defendant Rauch in his official capacity are DISMISSED with prejudice. The conversion claim and the misappropriation claim against Defendant Rauch in his individual capacity are DISMISSED without prejudice. Plaintiff's request for leave to amend to cure the deficiencies of his state law claims is GRANTED. Plaintiff shall file a second amended complaint no later than February 25, 2008.

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