Asset Vision, LLC et al v. Fielding et al

Filing 50

MEMORANDUM DECISION AND ORDER. IT IS ORDERED: Brad Hall & Associates, Inc.'s Motion to Dismiss First Amended Complaint 27 is GRANTED in part and DENIED in part. Plaintiffs may file an Amended Complaint on or before 12/31/2013. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (st)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
ASSET VISION, LLC, an Idaho limited
liability company, and DEER VALLEY
TRUCKING INC., an Idaho corporaiton,

Case No. 4:13-cv-00288-BLW
MEMORANDUM DECISION AND
ORDER

Plaintiffs,
v.
CREG FIELDING, an individual, BRAD
HALL, an individual, COLE HALL, an
individual, and BRAD HALL &
ASSOCIATES, INC., an Idaho
corporation,
Defendants.

INTRODUCTION
The Court has before it Brad Hall & Associates, Inc.’s Motion to Dismiss First
Amended Complaint (Dkt. 27).
LEGAL STANDARD
Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement
of the claim showing that the pleader is entitled to relief,” in order to “give the defendant
fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964 (2007). While a complaint
attacked by a Rule 12(b)(6) motion to dismiss “does not need detailed factual

MEMORANDUM DECISION AND ORDER - 1

allegations,” it must set forth “more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Id. at 555. To survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to
“state a claim to relief that is plausible on its face.” Id. at 570. A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556.
The plausibility standard is not akin to a “probability requirement,” but it asks for more
than a sheer possibility that a defendant has acted unlawfully. Id. Where a complaint
pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the
line between possibility and plausibility of ‘entitlement to relief.’ ” Id. at 557.
The Supreme Court identified two “working principles” that underlie Twombly in
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). First, the court need not accept as true, legal
conclusions that are couched as factual allegations. Id. Rule 8 does not “unlock the
doors of discovery for a plaintiff armed with nothing more than conclusions.” Id. at 67879. Second, to survive a motion to dismiss, a complaint must state a plausible claim for
relief. Id. at 679. “Determining whether a complaint states a plausible claim for relief
will . . . be a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id.
Providing too much in the complaint may also be fatal to a plaintiff. Dismissal may
be appropriate when the plaintiff has included sufficient allegations disclosing some
absolute defense or bar to recovery. See Weisbuch v. County of L.A., 119 F.3d 778, 783,

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n. 1 (9th Cir. 1997) (stating that “[i]f the pleadings establish facts compelling a decision
one way, that is as good as if depositions and other . . . evidence on summary judgment
establishes the identical facts”).
A dismissal without leave to amend is improper unless it is beyond doubt that the
complaint “could not be saved by any amendment.” Harris v. Amgen, Inc., 573 F.3d 728,
737 (9th Cir. 2009. The Ninth Circuit has held that “in dismissals for failure to state a
claim, a district court should grant leave to amend even if no request to amend the
pleading was made, unless it determines that the pleading could not possibly be cured by
the allegation of other facts.” Cook, Perkiss and Liehe, Inc. v. Northern California
Collection Service, Inc., 911 F.2d 242, 247 (9th Cir. 1990). The issue is not whether
plaintiff will prevail but whether he “is entitled to offer evidence to support the claims.”
Diaz v. Int’l Longshore and Warehouse Union, Local 13, 474 F.3d 1202, 1205 (9th Cir.
2007)(citations omitted).
BACKGROUND
Defendant Creg Fielding, a former employee of Deer Valley Trucking, helped
develop source code for tracking, ticketing, and managing oil field trucking services. The
source code is called Asset Vision. Plaintiffs allege that they registered the copyright for
Asset Vision, and that defendants have infringed on it. Plaintiffs filed their Complaint
alleging copyright infringement and related claims on July 2, 2013. They filed their
Amended Complaint about a month later. Defendant, Brad Hall & Associates, Inc.
(“BH&A”) now asks the Court to dismiss the claims against it.

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ANALYSIS
1.

Copyright Claim
BH&A first asks the Court to dismiss Plaintiffs’ copyright infringement claim. To

prevail on a copyright infringement claim, a plaintiff “must demonstrate (1) ownership of
a valid copyright, and (2) copying of constituent elements of the work that are original.”
Benay v. Warner Bros. Entertainment, Inc., 607 F.3d 620, 624 (9th Cir. 2010) (Internal
citations and quotations omitted). For purposes of this motion, BH&A concedes element
one – that Plaintiffs have alleged ownership of a valid copyright. BH&A argues only that
Plaintiffs have not asserted a valid claim that BH&A copied the constituent elements of
the work.
A.

Copying

In most infringement suits, answering the question of whether copying has
occurred requires a comparison of the plaintiff’s work with the allegedly infringing work
to determine whether they are “substantially similar” or “virtually identical,” depending
on the scope of the plaintiff’s copyright. Mattel, Inc. v MGA Entm’t, Inc., 616 F.3d 904,
913-14 (9th Cir. 2010). Ninth Circuit precedent on how the Court should address indirect
evidence of copying is somewhat disjointed. Some cases indicate that “[a]bsent evidence
of direct copying, proof of infringement involves fact-based showings that the defendant
had ‘access’ to the plaintiff’s work and that the two works are ‘substantially similar.’”
Funky Films, Inc. v. Time Warner Entertainment Co., L.P., 462 F.3d 1072, 1076 (9th Cir.
2006) (Internal quotation and citation omitted). See also Shaw v. Lindheim, 919 F.2d

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1353 (9th Cir. 1990). The more recent Ninth Circuit case, Mattel, Inc. v. MGA
Entertainment, Inc., 616 F.3d 904 (9th Cir. 2010), also requires an initial finding of
“access,” and then takes a similar, but somewhat different, approach to the “similarly
situated” question.
(1)

Access

The allegations in the Amended Complaint focus primarily on Fielding, asserting
that he helped develop the copyrighted source code. It essentially alleges that Fielding,
who had access to the source code per his involvement in developing it, later marketed,
sold, distributed or otherwise made it available for third-party use through a program
based on the same source code. Amended Complaint, ¶¶ 22-24, Dkt. 12.
The Amended Complaint further alleges that all defendants, which would include
BH&A, also marketed, sold, distributed or otherwise made the source code available for
third-party use through similar programs. Although the Amended Complaint could be a
little more clear about the relationship between Fielding and BH&A, it seems apparent
Plaintiffs are alleging that BH&A gained access to the copyrighted material through
Fielding. These allegations may not be enough to survive summary judgment, but they
are enough to sufficiently allege BH&A had access to the copyrighted material to survive
the motion to dismiss.
(2)

Substantial Similarity

BH&A next argues that the Amended Complaint does not sufficiently allege that
the programs used or sold by them are substantially similar to the protectable elements of

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Asset Vision’s source code. As noted above, Ninth Circuit precedent on how the Court
should address indirect evidence of copying is somewhat disjointed. According to Funky
Films, “[t]he substantial-similarity test contains an extrinsic and intrinsic component.” Id.
at 1077. At the summary judgment stage, “courts apply only the extrinsic test; the
intrinsic test, which examines an ordinary person’s subjective impressions of the
similarities between two works, is exclusively the province of the jury.” Id. at 1077; see
also Benay, 607 F.3d at 624.
The more recent Ninth Circuit case, Mattel, Inc. v. MGA Entertainment, Inc., 616
F.3d 904 (9th Cir. 2010), takes a slightly different approach. It also applies the two-part
extrinsic/intrinsic test. However, in Mattel, the Ninth Circuit did not say that the two-part
extrinsic/intrinsic inquiry is the process for determining whether the products are
“substantially similar.” Instead, it stated that at the initial extrinsic stage, the Court must
“examine the similarities between the copyrighted and challenged works and then
determine whether the similar elements are protectable or unprotectable.” Id. at 913.
Ideas, standard features, and unoriginal components are not protectable. Id. After filtering
them out, “what’s left is the author’s particular expression of an idea, which most
definitely is protectable.” Id. (emphasis removed).
To make that determination, the Mattel court stated that a court must begin by
considering the breadth of the copyright protection. It noted that because others may
legally copy a work’s ideas and other unprotectable elements, the Court must start “by
determining the breadth of the possible expression of those ideas.” Mattel, 616 F.3d at

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913. “If there’s a wide range of expression (for example, there are gazillions of ways to
make an aliens-attack movie), then copyright protection is ‘broad’ and a work will
infringe if it’s ‘substantially similar’ to the copyrighted work.” Id. at 913-14. “If there’s
only a narrow range of expression (for example, there are only so many ways to paint a
red bouncy ball on blank canvas), then copyright protection is ‘thin’ and a work must be
‘virtually identical’” to the copyrighted work Id. at 914. The Mattel court went on to state
that “[t]he standard for infringement – substantially similar or virtually identical –
determined at the ‘extrinsic’ stage is applied at the ‘intrinsic’ stage.” Id. at 914 (citing
Apple Computer, Inc., v. Microsoft Corp., 35 F.3d 1435, 1443 (9th Cir. 1994). “There –
[at the intrinsic stage] – we ask, most often of juries, whether an ordinary reasonable
observer would consider the copyrighted and challenged works substantially similar (or
virtually identical).” Id.
This Court wrestled with these nuances in its recent decision in Scentsy, Inc. v.
B.R. Chase, LLC, 942 F.supp.2d 1045 (D.Idaho 2013). The Court makes this observation,
and gives the parties this background, for two reasons here. First, to inform the parties
about the potential issues which may arise on summary judgment. Second, and more
important to the pending motion, the Court makes these observations to make clear that
these are issues which should be addressed at summary judgment, not on a motion to
dismiss. Here, the Court is only concerned with whether the pleadings are sufficient to
state a valid claim for copyright infringement. The Court finds that they are.

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Although Plaintiffs may not have identified portions of the Asset Vision source
code which were specifically copied, Plaintiffs allege that the programs used by the
defendants perform substantially the same function as, and were based on or incorporated
into, the Asset Vision source code. These allegations are sufficient to allege that the
works are substantially similar or virtually identical to survive a motion to dismiss.
2.

Contributory Infringement Claim
To prove contributory copyright infringement, a plaintiff must prove that the

defendant “(1) knew of the direct infringement; and (2) they either induced, caused, or
materially contributed to the infringing conduct.” Luvdarts, LLC v. AT&T Mobility, LLC,
710 F.3d 1068, 1072 (9th Cir. 2013) (Internal citation omitted). Here, the Amended
Complaint does nothing more than recite the law and make a conclusory statement that
BH&A provided Asset Vision source code to third parties.
To establish the defendant knew of the direct infringement “requires more than a
generalized knowledge . . . of the possibility of infringement.” Id. at 1072. Contributory
liability requires actual knowledge of specific acts of infringement. Id. Asset Vision
makes no specific allegation that BH&A had the requisite knowledge of infringement by
a third party. Id. Likewise, Asset Vision fails to identify any specific third party who
directly infringed the claimed copyright. Moreover, Asset Vision makes no specific
allegation of how BH&A induced these unidentified third parties to infringe the
copyright. Under these circumstances, the Court will grant the motion to dismiss the
contributory infringement claim.

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3.

Preemption of State Law Claims
The federal Copyright Act expressly preempts state common law and statutory

claims arising under rights within the subject matter of the Copyright Act. 17 U.S.C. §
301. BH&A argues that both Plaintiffs’ tortious interference and civil conspiracy claims
are preempted by the Copyright Act.
The Ninth Circuit has adopted a two-part test to determine whether a state law
claim is preempted by the Copyright Act. First, a court must “determine whether the
‘subject matter’ of the state law claim falls within the subject matter of copyright as
described in 17 U.S.C. §§ 102 and 103.” Laws v. Sony Music Entertainment, Inc., 448
F.3d 1134, 1137 (9th Cir. 2006). If it does, the court must then “determine whether the
rights asserted under state law are equivalent to the rights contained in 17 U.S.C. § 106,
which articulates the exclusive rights of copyright holders.” Id. at 1138.
A.

Tortious Interference Claim

The first prong of the preemption test is easily satisfied with regard to the tortious
interference claim. The Asset Vision source code is the subject matter of Plaintiffs’
tortious interference claim. Nothing in the Amended Complaint suggests that the subject
matter of the tortious interference claim extends beyond that – which is also the subject
matter of copyright.
The second prong of the preemption test is also satisfied. The exclusive right to
use or distribute the Asset Vision source code forms the basis of the tortious interference
claim. That is, Plaintiffs allege that BH&A interfered with their exclusive right to

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distribute the Asset Vision software. To the extent Plaintiffs have an exclusive right to
distribute the Asset Vision software, that right is conferred by the Copyright Act.
The elements of a claim for tortious interference in Idaho are “(1) the existence of
a valid economic expectancy, (2) knowledge of the expectancy on the part of the
interferer, (3) intentional interference inducing termination of the expectancy, (4) the
interference was wrongful by some measure beyond the fact of the interference itself, and
(5) resulting damage to the plaintiff whose expectancy has been disrupted.” Wesco
Autobody Supply, Inc. v. Ernest, 243 P.3d 1069, 1081 (Idaho 2010). In this case,
Plaintiffs’ claimed economic expectancy is to be the exclusive source from which
customers can obtain or use the Asset Vision source code. Such a right is conferred by
the Copyright Act. Accordingly, if Plaintiffs have the exclusive right to distribute the
Asset Vision source code, and if BH&A violated that right by distributing it, BH&A’s
conduct would fall squarely within the subject matter of the Copyright Act. Thus, the
rights asserted under state law are equivalent to the rights contained in 17 U.S.C. § 106,
which articulates the exclusive rights of copyright holders. Accordingly, the Court will
dismiss the tortious interference claim because it is preempted by the Copyright Act.
B.

Civil Conspiracy

Like the tortious interference claim, the first prong of the preemption test is easily
satisfied with regard to the civil conspiracy claim. The Asset Vision source code is the
subject matter of Plaintiffs’ civil conspiracy claim. As with the tortious interference

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claim, nothing in the Amended Complaint suggests that the subject matter of the civil
conspiracy claim extends beyond that – which is also the subject matter of copyright.
The second prong is likewise satisfied. The alleged wrongful act in the conspiracy
claim is copyright infringement. Such conduct would be a violation of the Copyright Act.
Moreover, in Idaho, a claim for civil conspiracy requires “an agreement between two or
more to accomplish an unlawful objective or to accomplish a lawful objective in an
unlawful manner.” Taylor v. McNichols, 243 P.3d 642, 660 (Idaho 2010). Notably,
though, “[c]ivil conspiracy is not, by itself, a claim for relief. The essence of a cause of
action for civil conspiracy is the civil wrong committed as the objective of the
conspiracy, not the conspiracy itself.” Id. The Amended Complaint makes no allegations
of wrong other than the allegations that BH&A infringed on Plaintiffs’ copyright.
Therefore, the rights asserted under state law are equivalent to the rights contained in 17
U.S.C. § 106, which articulates the exclusive rights of copyright holders. Laws, 448 F.3d
at 1138. Accordingly, the Court will also dismiss the civil conspiracy claim.
4.

Leave to Amend
In accordance with Ninth Circuit precendent, the Court will grant Asset Vision

leave to amend its Amended Complaint on the contributory infringement claim because
the Court has not determined that the pleading could not possibly be cured by the
allegation of other facts. Cook, Perkiss and Liehe, Inc. v. Northern California Collection
Service, Inc., 911 F.2d 242, 247 (9th Cir. 1990). If Plaintiffs amend their complaint, they
must make more specific allegations that BH&A had the requisite specific knowledge of

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infringement, identify any specific third parties who directly infringed the claimed
copyright, and allege how BH&A induced these unidentified third parties to infringe the
copyright.
With respect to the state law claims, the Court will not grant leave to amend. The
Amended Complaint could not be cured as to these claims – they are preempted by the
Copyright Act.
ORDER
IT IS ORDERED:
1.

Brad Hall & Associates, Inc.’s Motion to Dismiss First Amended
Complaint (Dkt. 27) is GRANTED in part and DENIED in part as
explained above. Plaintiffs may file an Amended Complaint on or before
December 31, 2013.

DATED: December 17, 2013

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

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