UIRC-GSA Holdings, LLC v. Rainier GSA Portfolio I, LLC
Filing
140
MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 8/21/2017:Mailed notice(kef, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UIRC-GSA Holdings Inc.,
Plaintiff,
v.
William Blair & Company, L.L.C.,
And Michael Kalt,
Defendants.
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Case No. 15-CV-9518
Hon. Amy St. Eve
MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
On April 12, 2016, Plaintiff UIRC-GSA Holdings, Inc. (“UIRC”) brought its Fourth
Amended Complaint against Defendants William Blair & Company (“Blair”) and Michael Kalt,
collectively, “Defendants,” alleging copyright infringement in violation of 17 U.S.C. § 101 et
seq. and professional negligence. Blair moved to dismiss Plaintiff’s professional negligence
claim—Count VI—pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (R. 91,
Blair’s Mot. to Dismiss.) Kalt moved to dismiss Plaintiff’s contributory and vicarious
infringement claims—Counts IV and V—pursuant to Federal Rule of Civil Procedure 12(b)(6).
(R. 93, Kalt’s Mot. to Dismiss.)1 For the following reasons, the Court denies Kalt’s motion to
dismiss and grants Blair’s motion to dismiss with prejudice.
1
Defendant Blair has also filed a Counterclaim against Plaintiff UIRC and third-party defendant Urban
Investment Research Corporation and a third-party complaint against Rainer Realty Acquisitions GP and
Rainer GSA Portfolio I. The defendants in both those complaints have moved to dismiss certain counts.
The Court will address those motions in a separate opinion.
1
BACKGROUND
Plaintiff is a Delaware Limited Liability Company located in Chicago, Illinois that is in
the business of acquiring and operating properties leased to the U.S. General Services
Administration (“GSA”) to be financed by the sale of bonds through its subsidiaries. (R. 89,
Fourth Am. Compl. ¶ 2.) Defendant Blair is a Delaware Limited Liability Company registered to
do business in Illinois and with an office in Illinois. (Id. ¶ 3.) Blair was Plaintiff’s investment
banker and placement agent in connection with Plaintiff’s bond offering, the proceeds of which it
used to acquire a portfolio of real estate properties. (Id. ¶ 6.) Kalt is an Illinois citizen and
served as Plaintiff’s relationship manager at Blair. (Id. ¶¶ 4, 35.)
Plaintiff alleges that in order to successfully market a bond portfolio to provide the funds
to acquire properties leased to the GSA, Plaintiff created and used a series of documents,
including a Preliminary Private Placement Memorandum (“PPPM IV”), a Final Private
Placement Memorandum (“FPPM IV”), and an Indenture of Trust (“Indenture IV”). (Id. ¶¶ 9,
18, 26.) Plaintiff provided the PPPM IV, FPPM IV, and Indenture IV to Defendant, and
Defendant distributed it to potential investors to market the proposed bond offering. (Id. ¶ 10,
19, 27.) Plaintiff, in compliance with the relevant copyright laws, secured the exclusive rights
and privileges to the copyright for the PPPM IV, FPPM IV, and Indenture IV. (Id. ¶ 10, 21, 29.)
As a result, on July 21, 2015, the U.S. Copyright Office issued to Plaintiff U.S. Copyright Reg.
No. TX 8-069-779 (“‘799 Reg.”) entitled Preliminary Private Placement Memorandum, which
includes additional and revised text to the memorandum. (Id. ¶ 11.) The Copyright Office
issued to Plaintiff similar copyrights for FPPM IV and Indenture IV entitled Final Private
Placement Memorandum (Copyright Reg. No. TX 8-107-571) and Indenture of Trust (Copyright
Reg. No. TX 8-107-552), both of which included additional and revised text. (Id. ¶¶ 20, 28.)
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Plaintiff alleges that it is the owner of all rights, title, and interest in and to the copyrights for
PPPM IV, FPPM IV, and Indenture IV. (Id. ¶¶ 12, 21, 29.)
Plaintiff alleges that Defendants, with full knowledge of Plaintiff’s rights, willfully
infringed on Plaintiff’s copyright by copying original portions of Plaintiff’s copyrighted work for
use in a Confidential Placement Memorandum (“CPM”) in relation to a bond offering issued by
Rainer GSA Portfolio I (“Rainer”) on July 1, 2015. (Id. ¶¶ 13-14, 22, 30.) Specifically, Plaintiff
alleges that Defendant copied almost verbatim both protected and non-protected expression of
Plaintiff’s Indenture IV in the Indenture of Trust that Blair assisted Rainer in drafting for
marketing bonds Rainer used to acquire GSA leased properties. (Id. ¶ 31.) Plaintiff claims that
Defendants also distributed the infringing CPM and Indenture of Trust to potential investors in
Rainer’s bond offering. (Id. ¶¶ 15, 23, 32.)
Plaintiff further alleges that Defendant Kalt was the relationship manager for both
Plaintiff’s bond offering and Rainer’s offering, and engaged in conduct that encouraged or
assisted Blair’s copyright infringement of PPPM IV, FPPM IV, and Indenture IV. (Id. ¶ 36.)
Specifically, Plaintiff alleges that Kalt directed or supervised Blair’s use of Plaintiff’s
copyrighted PPPM IV, FPPM IV, and Indenture IV as a marketing tool with which to solicit
clients and potential clients, including Rainier, to retain Blair as an investment banker. (Id. ¶
37.) According to Plaintiff, Kalt actively encouraged Blair’s infringement by directing Blair
employees and Blair’s outside counsel to use Plaintiff’s copyrighted documents as the “standard”
form for similar transactions, including Rainer’s bond offering documents. (Id. ¶ 38.) Plaintiff
also claims that Kalt personally directed and supervised the creation of the infringing materials
by Blair’s employees and outside attorneys and provided input on particular provisions in the
materials. (Id. ¶ 39.) Plaintiff alleges that Kalt had control over the distribution and use of the
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infringing materials and personally circulated the infringing documents to parties interested in
the Rainer transaction. (Id. ¶¶ 40, 45.) Plaintiff also alleges that, as relationship manager for
both Defendant’s and Rainer’s bond offerings, Kalt had a direct and substantial financial interest
in the alleged infringing activity. (Id. ¶ 44.) Specifically, Plaintiff alleges that Kalt received a
bonus as a direct result of the work Blair did on the Rainer transactions, which was substantially
facilitated by the infringement of Plaintiff’s materials. (Id. ¶ 48.)
LEGAL STANDARD
“A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the
viability of a complaint by arguing that it fails to state a claim upon which relief may be
granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). Under
Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The short and plain statement under Rule
8(a)(2) must “give the defendant fair notice of what the claim is and the grounds upon which it
rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). Under the federal
notice pleading standards, a plaintiff’s “factual allegations must be enough to raise a right to
relief above the speculative level.” Twombly, 550 U.S. at 555. Put differently, a “complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
In determining the sufficiency of a complaint under the plausibility standard, courts must “accept
all well-pleaded facts as true and draw reasonable inferences in the plaintiffs’ favor.” Roberts v.
City of Chicago, 817 F.3d 561, 564 (7th Cir. 2016). In ruling on a Rule 12(b)(6) motion, district
courts may also consider documents attached to the pleadings without converting the motion into
a motion for summary judgment, as long as the documents are referred to in the complaint and
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central to the claims. See Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Indiana,
786 F.3d 510, 528 n. 8 (7th Cir. 2015).
ANALYSIS
I.
Counts IV and V—Contributory and Vicarious Infringement Against Michael Kalt
In Counts IV and V, Plaintiff alleges that Kalt should be held personally liable for
contributory and vicarious infringement because he is a partner at Blair and as Plaintiff’s
relationship manager, he personally supervised and engaged in the infringing activity at issue
here. The Court previously dismissed Plaintiff’s vicarious and contributory infringement claims
in its Third Amended Complaint against Kalt because the conclusory allegations failed to state a
plausible claim for relief, and Kalt argues that Plaintiff’s new allegations in its Fourth Amended
Complaint still fail to make a “special showing” that Kalt was the “moving force” behind the
infringement. (R. 93, Def. Kalt’s Mem. in Supp. of his Mot. to Dismiss 5.)
The Supreme Court has held that “[o]ne infringes contributorily by intentionally inducing
or encouraging direct infringement . . . and infringes vicariously by profiting from direct
infringement while declining to exercise a right to stop or limit it.” Metro-Goldwyn-Mayer
Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930–31 (2005) (citations omitted). Specifically, to
sustain a claim for contributory copyright infringement, the plaintiff must prove the defendant
engaged in “personal conduct that encourage[d] or assist[ed] the infringement.” Flava Works,
Inc. v. Gunter, 689 F.3d 754, 757 (7th Cir. 2012). To sustain a claim for vicarious copyright
infringement, the plaintiff must prove that “the defendant: (1) at all material times possessed the
right and ability to supervise the infringing activity; and (2) has a direct financial interest in the
infringer’s activity.” Frerck v. John Wiley & Sons, Inc., No. 11-CV-2727, 2014 WL 3512991, at
*9 (N.D. Ill. July 14, 2014). Additionally, as the parties agree, the seminal Seventh Circuit case
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of Dangler v. Imperial Mach. Co., 11 F.2d 945 (7th Cir. 1926), still provides the governing law
regarding whether corporate officers can be held personally liable for their corporation’s
infringement. In Dangler, the court explained:
In the absence of some special showing, the managing officers of a corporation are not
liable for the infringements of such corporation, though committed under their general
direction. . . It is when the officer acts willfully and knowingly— that is, when he
personally participates in the manufacture or sale of the infringing article (acts other than
as an officer), or when he uses the corporation as an instrument to carry out his own
willful and deliberate infringements, or when he knowingly uses an irresponsible
corporation with the purpose of avoiding personal liability— that officers are held jointly
with the company.
Id. at 947.
Here, Plaintiff’s new allegations are sufficient to support its vicarious and contributory
infringement claims at this stage under both Dangler and the specific standards for contributory
and vicarious liability. Plaintiff has alleged that Kalt personally circulated the infringing
materials and actively encouraged and personally directed Blair employees and Blair’s outside
counsel to use the infringing materials to solicit other clients, including Rainer, in part because
Kalt had a direct financial interest in acquiring these new clients. (Fourth Am. Compl. ¶¶ 37-40,
48.) These allegations meet the Dangler standard because they sufficiently allege that Kalt acted
“willfully and knowingly” and that he “personally participated in the manufacture or sale” of the
infringing materials. Dangler, 11 F.2d at 947.2 Therefore, under Dangler, viewing the
allegations in the light most favorable to Plaintiff, Plaintiff has sufficiently stated personal
infringement claims against Kalt pursuant to Rule 8(a). See Syscon, Inc. v. Vehicle Valuation
2
As Plaintiff notes in its Response, the Dangler requirements are disjunctive. A plaintiff need only show
that a corporate officer “personally participate[d] in the manufacture or sale of the infringing article” or
“use[d] the corporation as an instrument to carry out his own willful and deliberate infringements,” or
“use[d] an irresponsible corporation with the purpose of avoiding personal liability.” Dangler, 11 F.2d at
947 (emphasis added). Here, Plaintiff has made the first showing and need not make a showing of the
other Dangler requirements.
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Servs., Inc., 274 F. Supp. 2d 975, 977 (N.D. Ill. 2003) (denying motion to dismiss personal
infringement claim because plaintiff “alleged a level of personal participation in the allegedly
infringing activities,” thus meeting the Dangler standard).
Kalt argues, without citing any case law other than Dangler, that Plaintiff’s allegations
fail because Plaintiff does not allege that Kalt is an “officer” of Blair. (R. 93, Kalt’s Mot. to
Dismiss 5-6.) Kalt has not identified any cases in which a court dismissed individual
infringement claims solely because the plaintiff failed to allege that the individual defendant was
an officer. While Dangler is typically invoked when a plaintiff attempts to hold a corporate
officer personally liable for his or her corporation’s infringement solely due to his or her role as
an officer and not because of any personal involvement in the infringement, where an employee
with supervisory power personally directs and participates in infringing activity, courts will
allow individual infringement claims to stand, even if the plaintiff did not specifically allege that
the defendant was a corporate officer. See, e.g., Desmond v. Chicago Boxed Beef Distributors,
Inc., 921 F. Supp. 2d 872, 886 (N.D. Ill. 2013) (noting that there is no requirement that employee
must be an officer to be held liable as a contributory infringer and denying motion to dismiss);
Nordstrom Consulting, Inc. v. M & S Techs., Inc., No. 06 C 3234, 2006 WL 2931677, at *2
(N.D. Ill. Oct. 12, 2006) (denying motion to dismiss with regard to individual non-officer
defendant because he personally participated in infringing activity); Do It Best Corp. v. Passport
Software, Inc., No. 01 C 7674, 2004 WL 1660814, at *15 (N.D. Ill. July 23, 2004) (denying
motion to dismiss under Dangler where individual defendant was not an officer because he
personally participated in infringement and noting that the case law does not suggest “that one
must be an officer in order to be held liable as a contributory infringer.”) (emphasis in original).
Here, Plaintiff has alleged that Kalt is a Managing Director of Blair, that he personally
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participated in and directed the infringing activity, and that he personally profited from the use of
the infringing materials with other clients. Regardless of whether Kalt’s formal title is “officer,”
these allegations, like those in Desmond, Do It Best, and Nordstrom, are sufficient to support a
claim for personal copyright infringement.
Kalt also argues that Plaintiff’s personal infringement claim fails because Plaintiff has
failed to allege that Kalt “act[ed] other than as an officer” or outside the scope of his duties as an
investment banker at Blair. Dangler, 11 F.2d at 947. Again, Kalt’s argument fails to recognize
that Dangler’s rule protects corporate officers from liability for merely taking high-level actions
necessary to operate the corporation, but that were removed from day-to-day activities and were
not related to any infringing activity. See Powder Power Tool Corp. v. Powder Actuated Tool
Co., 230 F.2d 409 (7th Cir. 1956) (individual defendant was president of company but merely
provided capital for formation and acted in advisory role and was not liable because he “did
nothing beyond the scope of his duties as president of the [] company.”). Indeed, courts in this
district have rejected the argument that “even if an officer personally participates in the
manufacture or infringement, such acts cannot lead to liability unless they fall outside of the
officer’s job description.” C.S.B. Commodities, Inc. v. Urban Trend (HK) Ltd., 626 F. Supp. 2d
837, 859 (N.D. Ill. 2009). In C.S.B. Commodities, the court rejected the argument that the
plaintiff needed to allege actions taken outside the scope of the individual defendant’s
employment because the plaintiff sufficiently alleged that the individual defendant had a
personal and active involvement in the “manufacture or sale of the infringing product, and thus
was not simply acting as an officer of his company.” Id. at 860. See also Nordstrom, 2006 WL
2931677 (individual defendant was president but also allegedly took active role in infringing
activities); Do It Best, 2004 WL 1660814 (corporate counsel allegedly knew about, directed and
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participated in acts that furthered infringement sufficient). Here, as discussed above, Plaintiff
has alleged that Kalt was personally involved in the infringing activity. These allegations
support its individual infringement claims.
Plaintiff’s new allegations are also sufficient under the specific standards for contributory
and vicarious liability. With regard to vicarious infringement, Plaintiff now alleges that Kalt
supervised the alleged infringing activity and had a direct financial interest in and received a
personal financial benefit from the infringing activity—specifically, that he received a bonus as a
direct result of the work he did on the Rainer transactions, which used the infringing materials.
(Fourth Am. Compl. ¶ 48.) At the pleading stage, these allegations meet the vicarious liability
standards. Seals v. Compendia Media Grp., 290 F. Supp. 2d 947, 954 (N.D. Ill. 2003) (noting
that plaintiff might not be able to demonstrate at trial the direct benefit received by individual
defendant, but denying motion to dismiss because plaintiff sufficiently alleged that profits from
infringing activity were passed through to defendants).
Plaintiff’s allegations are also sufficient with regard to contributory infringement because
Plaintiff has alleged specific details about how Kalt encouraged and assisted the infringement.
Specifically, Plaintiff now alleges that Kalt personally supervised the creation of the infringing
materials and had consistent input during the drafting process. (Fourth Am. Compl. ¶ 39.)
Plaintiff also alleges that Kalt directed or supervised Blair’s use of the infringing materials,
which he knew were created for Plaintiff’s bond offering, in efforts to solicit clients to retain
Blair and Kalt as an investment banker for other offerings and that Kalt personally circulated the
infringing materials to potential clients. (Id. ¶¶ 37-38, 40.) Again, at the pleading stage, these
allegations are sufficient to meet the contributory liability standards. Smith v. Mikki More, LLC,
21 F. Supp. 3d 276, 282 (S.D.N.Y. 2014) (denying motion to dismiss contributory infringement
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claim because plaintiff sufficiently alleged that defendant was “active participant” in infringing
activity).
In sum, accepting all well-pleaded facts as true and drawing reasonable inferences in the
Plaintiff’s favor, Plaintiff’s new allegations plausibly state a claim, at least at the pleading stage,
for contributory and vicarious infringement. Accordingly, the Court denies Kalt’s motion to
dismiss Plaintiff’s contributory and vicarious infringement claims against him.
II.
Count VI—Professional Negligence
In Count VI, Plaintiff alleges that Defendants breached their duty of care to Plaintiff by
using Plaintiff’s copyrighted materials to benefit themselves and other clients and harmed
Plaintiff’s interests in doing so. In its Motion to Dismiss, Blair argues that the Court should
dismiss Count VI for two reasons: (1) because Illinois courts do not recognize professional
negligence claims against investment bankers, and (2) the federal Copyright Act preempts the
professional negligence claims in this case. The Court addresses the preemption argument first
because it is dispositive.
Blair argues that the federal Copyright Act preempts Plaintiff’s professional negligence
claim because that claim is functionally equivalent to its copyright claims and involves alleged
conduct that falls completely under the protections of the Copyright Act. Plaintiff contends that
its professional negligence claim is not preempted because it requires additional elements that
qualitatively differ from the elements necessary to prove copyright infringement.
The Federal Copyright Act preempts state causes of actions that are equivalent to
copyright infringement claims. 17 U.S.C. § 301(a). The Seventh Circuit, interpreting § 301(a),
developed a two-prong test to determine preemption. Balt. Orioles, Inc. v. Major League
Baseball Players Ass’n., 805 F.2d 663, 674 (7th Cir. 1986). First, a court must determine that
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the work in which the right is asserted is “fixed in tangible form and comes within the subject
matter of copyright as specified in [federal copyright law] § 102.” Id. Second, the rights granted
under state law must be equivalent to the exclusive rights established by federal copyright law in
§ 106. Id. “A state right is ‘equivalent’ to the rights established by federal copyright law if it is
violated by the exercise of any of the rights set forth in § 106, which includes the right to
reproduce (whether in original or derivative form), distribute, perform and display the
copyrighted material.” Higher Gear Grp., Inc. v. Rockenbach Chevrolet Sales, Inc., 223 F.
Supp. 2d 953, 956–57 (N.D. Ill. 2002) (citing Balt. Orioles, 805 F.2d at 676–77). Additionally, a
state right may be ‘equivalent’ if it requires additional elements to make out a cause of action,
but the additional elements do not differ in kind from those necessary for copyright infringement.
Id. at 957 (citing Balt. Orioles, 805 F.2d at 678.)
The first prong of the preemption analysis is satisfied here because Plaintiff’s state law
professional negligence claim asserts rights in the PPPM IV, FPPM IV, and Indenture IV, which,
as Plaintiff itself argued in previous briefing, fall within the general subject matter protected
under federal copyright law. The Seventh Circuit has held that “[a]s long as a work fits within
one of the general subject matter categories of section 102 and 103, . . . [section 301(a) ] prevents
the States from protecting it even if it fails to achieve Federal copyright because it is too minimal
or lacking in originality to qualify.” Balt. Orioles, 805 F.2d at 676 (citing House Report at 131,
reprinted in 1976 U.S. Code Cong. & Ad. News at 5747). Here, regardless of whether the
works at issue ultimately embody creative expression, Plaintiff’s allegations asserted that the
PPPM IV, FPPM IV, and Indenture IV are original works of authorship that are fixed in tangible
form and thus fall within the general subject matter categories protected under the Copyright
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Act. 17 U.S.C.A. § 102 (“Copyright protection subsists . . . in original works of authorship fixed
in any tangible medium of expression.”)
The Court’s preemption analysis thus turns on whether the rights granted under Plaintiff’s
professional negligence claim are equivalent to the exclusive rights established by federal
copyright law. In its professional negligence claim, Plaintiff alleges that Defendants3 had a duty
of care as Plaintiff’s investment banker to act in Plaintiff’s best interest and refrain from taking
any action that would harm Plaintiff’s interest and Defendants breached that duty by using the
alleged infringing materials to their own benefit and to Plaintiff’s harm. While the parties did
not identify any case law analyzing copyright preemption of professional negligence claims,
courts analyzing copyright preemption in the context of claims regarding a similar duty of care
or negligence have found that such claims were preempted where the duty of care or negligence
claims are based entirely on the underlying copyright infringement.
In Gary Friedrich Enterprises, LLC v. Marvel Enterprises, Inc., 713 F. Supp. 2d 215,
227–28 (S.D.N.Y. 2010), for example, the court considered whether copyright law preempted the
plaintiff’s negligence claim, in which the plaintiff alleged that the defendant breached the duty of
care it owed to the plaintiff by infringing on the plaintiff’s intellectual property. The Court
found that copyright law preempted the plaintiff’s negligence claim because the negligence claim
essentially “restate the plaintiff’s copyright infringement claim” and failed to “assert an ‘extra
element’ beyond the rights protected by federal copyright.” Id. See also Marvullo v. Gruner &
3
In its opposition brief, Plaintiff acknowledges that its professional negligence claim, Count VI, is
ambiguous as to whether both Kalt is a party as well as Blair and propose to amend the claim to more
clearly include Kalt should the Court deny Blair’s motion to dismiss. As discussed more fully below,
however, Plaintiff’s proposed amendment is moot because federal copyright law preempts Plaintiff’s
professional negligence claim against both Blair and Kalt.
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Jahr AG & Co., No. 98 Civ. 5000, 2001 WL 40772, at *7 (S.D.N.Y. Jan. 17, 2001) (finding
same).
Similarly, in Dielsi v. Falk, 916 F. Supp. 985, 992-93 (C.D. Cal. 1996), in addition to
alleging copyright infringement, the plaintiff brought a negligence claim alleging that the
defendant negligently failed to compensate the plaintiff for the use of his script. The Court
found that copyright law preempted the plaintiff’s negligence claim because the “claim merely
re-characterizes a copyright infringement claim as one for negligence.” Id. The Court explained
that “[b]ecause the essential allegation is still that [the] Defendants unlawfully copied [the]
Plaintiff’s ideas, it is still a copyright infringement claim,” and noted that although the plaintiff
claimed the negligence claim involved an additional element involving the defendant’s mental
state, that purported element did not make the claim qualitatively different from the copyright
infringement claim. Id. See also Idema v. Dreamworks, Inc., 162 F. Supp. 2d 1129, 1190–91
(C.D. Cal. 2001), aff’d in part, dismissed in part, 90 F. App’x 496 (9th Cir. 2003) (finding claim
of breach of implied promises claim was preempted because it “depends on the same conduct
which underpins their copyright claims”); Bridgeport Music, Inc. v. 11C Music, 154 F. Supp. 2d
1330, 1335 (M.D. Tenn. 2001) (preempting negligence claim because it “simply echoes the
copyright claims Plaintiffs have asserted elsewhere, arguing in essence that the Defendants had a
“duty” to avoid infringing and that they “breached” that duty by, in fact, infringing.”);
Watermark Publishers v. High Tech. Sys., No. 95-3839-IEG, 1997 U.S. Dist. LEXIS 22512, at
*15 (S.D. Cal. June 18, 1997) (preempting a negligence claim because any duty to protect
another from copyright infringement came from protection of copyright law).
Here, Plaintiff attempts to differentiate its professional negligence claim from its
copyright claims by emphasizing that its professional negligence claim requires the extra element
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of a breach of a duty of care, which is not required by its copyright claims. Like in the case law
cited above, however, where the plaintiffs attempted to reframe copyright claims as negligence
claims based on a breached duty of care, here, Plaintiff’s professional negligence allegations
“merely re-characterize [its] copyright infringement claim as one for negligence.” Dielsi, 916 F.
Supp. at 992-93. Plaintiff’s essential allegations in this professional negligence claim—that
Defendants used Plaintiff’s copyrighted materials to benefit themselves and their clients and at
Plaintiff’s expense—are copyright infringement claims that are protected under the federal
Copyright Act. As the court stated in Bridgeport Music, 154 F. Supp. 2d at 1335, Plaintiff’s
professional negligence claim “simply echoes the copyright claims Plaintiff[] ha[s] asserted
elsewhere, arguing in essence that the Defendants had a “duty” to avoid infringing and that they
“breached” that duty by, in fact, infringing.” Plaintiff’s asserted state right is thus not
qualitatively different than and is equivalent to its copyright claims, and accordingly, federal
copyright law preempts its professional negligence claim.
Plaintiff’s reliance on Higher Gear Group, 223 F. Supp. 2d at 957-58, which it mentions
only briefly in a one sentence parenthetical, is unpersuasive. In Higher Gear Group, the court
found that copyright law did not preempt the plaintiff’s trade secret misappropriation claim
because the misappropriation claim was based on trade secrets that the defendant obtained via a
licensing agreement which the defendant disclosed to a competitor despite promising not to share
the trade secrets in the licensing agreement. Id. Thus, unlike here, where Plaintiff’s professional
negligence claim essentially re-states its copyright claims without any qualitative differences, in
Higher Gear Group, the plaintiff’s misappropriation claim was based on specific trade secrets
and a duty of confidentiality conferred upon the defendant in a written agreement. The claim
thus had substantive elements unrelated to whether the material was subject to copyright and
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whether the defendant infringed upon that copyright. The holding in Higher Gear Group is thus
not applicable here.
Accordingly, the Court grants Blair’s motion to dismiss Plaintiff’s professional
negligence claim because federal copyright law preempts that claim.4 The Court dismisses
Plaintiff’s professional negligence claim with prejudice because Plaintiff’s allegations still fail
despite multiple opportunities to plead a viable claim. Agnew v. Nat'l Collegiate Athletic Ass’n,
683 F.3d 328, 347–48 (7th Cir. 2012) (leave to amend not granted when party has had multiple
opportunities to amend and has failed to cure a defective claim).
CONCLUSION
For these reasons, the Court denies Kalt’s motion to dismiss Plaintiff’s contributory and
vicarious infringement claims and grants Blair’s motion to dismiss Plaintiff’s professional
negligence claim with prejudice.
Dated: August 21, 2017
ENTERED
______________________________
AMY J. ST. EVE
United States District Court Judge
4
Because the Court finds that copyright law preempts Plaintiff’s professional negligence claim, it need
not address the parties’ arguments about whether a professional negligence claim against an investment
bank exists under Illinois law.
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