Arkeyo LLC v. Saggezza, Inc.
MEMORANDUM Opinion and Order Signed by the Honorable Franklin U. Valderrama: For the reasons stated in the Opinion and Order, the Court denies Defendant's motion to dismiss 10 . The Court directs Defendant to answer the complaint on or before 06/24/2021. Mailed notice (axc).
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
Judge Franklin U. Valderrama
MEMORANDUM OPINION AND ORDER
Plaintiff Arkeyo, LLC (Arkeyo) creates software that interacts with coin
counting machines located in banks and retail locations. Arkeyo has filed suit against
Saggezza, Inc. (Saggezza), alleging Saggezza misappropriated Arkeyo’s trade secrets
and infringed Arkeyo’s copyrights in Arkeyo’s proprietary software. R. 1, Compl. 1
Saggezza moves to dismiss the complaint pursuant to Federal Rules of Civil
Procedure 12(b)(7) and 12(b)(6). R 11, Mot. Dismiss at 3. For the reasons that follow,
the Court denies Saggezza’s Rule 12(b)(7) motion and denies its Rule 12(b)(6) motion.
Arkeyo created a coin counting system for Republic First Bank (Republic),
Metro Bank PLC (Metro), and Metro US. Compl. ¶ 9. 2 This system consisted of a
Cummins-Allison Corp. (Cummins) “small footprint bin” counting machine and
to the docket are indicated by “R.” Followed by the docket number or filing name,
and where necessary, a page or paragraph citation.
Court accepts as true all of the well-pleaded facts in the Complaint and draws all
reasonable inferences in favor of Arkeyo. See Platt v. Brown, 872 F.3d 848, 851 (7th Cir.
Arkeyo’s software installed in the machine. Id. ¶ 10. It also included an Arkeyosupplied computer, which connected to the machine and contained additional
software Arkeyo created for communicating with the machine and two printers
attached to the machine. Id. Arkeyo deployed the system at Metro US in 2009 and at
Republic in 2010, where the machines were known as “Money Magic Machines.” Id.
¶ 13. According to Arkeyo, there was a contract between Arkeyo and Metro that was
effective as of April 20, 2010 (the Metro Agreement). Id. ¶ 12.
Arkeyo describes its relationship with Metro US and Republic as follows:
Arkeyo would purchase the small footprint bin machines from Cummins, resell them
to Metro US and Republic, and then license its software to Metro US and Republic.
Compl. ¶ 14. Additionally, Arkeyo retained Cummins to perform maintenance and
repairs on the small footprint bin machines but Arkeyo itself would maintain and
repair other components of its system. Id. After Metro US was sold, Arkeyo ceased
providing it services. Id. ¶ 15. In 2010, Arkeyo then began deploying its system for
Metro locations in England, setting up a similar purchase, resale, license, and
maintenance and repair relationship. Id. ¶¶ 16, 20.
Pursuant to the Metro Agreement, Metro agreed to pay Arkeyo service and
license fees for all Cummins coin counting machines installed in Great Britain for a
period of ten years. Compl. ¶ 18. The Metro Agreement prohibits Metro from making
derivative works from, or reverse engineering any of the software Arkeyo licensed to
Metro for the purpose of developing any other coin counting machines. Id. ¶ 19. From
2009 through 2016, Arkeyo developed successive versions of its software, and in 2014,
Arkeyo made its system available to Metro in conjunction with a new Cummins coin
counting machine, the MM2 machine. Id. ¶ 21. As part of these processes, Arkeyo
provided its software’s source code, and the software in object code or “executable
form” to Cummins. Id. To facilitate the development of the MM2 machine, Arkeyo
also provided to Cummins computers storing or containing portions of Arkeyo’s
software. Id. ¶ 23. Effective October 3, 2017, Arkeyo obtained copyright registration
certificate No. TXu 2-049-886 with respect to its software’s source code. Id. ¶ 28.
From 2010 through 2016, both Arkeyo and Metro performed in accordance with
the Metro Agreement, and Metro expressed its satisfaction with Arkeyo’s
performance. Compl. ¶ 31. In January 2016, Metro met with personnel from Saggezza
and Cummins to discuss how to duplicate Arkeyo’s software to enable Metro to
replace Arkeyo with Saggezza, another software company, as Metro’s software
vendor. Id. ¶ 32. In March 2016, Saggezza asked Metro to provide Saggezza with one
of the touch screen computers, loaded with Arkeyo’s software. Id. ¶ 33. At some point
in March 2016, Metro provided Saggezza a touchscreen computer with Arkeyo’s
software. Id. ¶ 35. On or about May 11, 2016, Metro terminated the Metro Agreement.
Id. ¶ 44. On December 4, 2016, Metro confirmed that it considered that the Metro
Agreement was terminated as of November 11, 2016, and that it no longer intended
to pay Arkeyo for the use of its software. Id. ¶ 46.
Arkeyo subsequently filed a complaint against Saggezza asserting claims for
misappropriation under the Defend Trade Secrets Act of 2016 (the DTSA) (Count I);
conversion (Count II); tortious interference with contractual relations (Count III);
tortious interference with prospective contractual relations (Count IV); copyright
infringement (Count V); and contributory copyright infringement (Count VI). Compl.
Saggezza now moves to dismiss the complaint pursuant to Federal Rules of Civil
Procedure 12(b)(6) and 12(b)(7). R. 10, Mot. Dismiss.
Standard of Review
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the
complaint. Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811,
820 (7th Cir. 2009). Under Rule 8(a)(2), a complaint must include only “a short and
plain statement of the claim showing that the pleader is entitled to relief.” FED. R.
CIV. P. 8(a)(2). To survive a motion to dismiss, a complaint need only contain factual
allegations, accepted as true, sufficient to “state a claim to relief that is plausible on
its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). “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. The allegations “must be enough
to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The
allegations that are entitled to the assumption of truth are those that are factual,
rather than mere legal conclusions. Iqbal, 556 U.S. at 678–79.
Under Rule 12(b)(7), the movant seeks dismissal “based on the failure to join a
necessary party as required by Federal Rule of Civil Procedure 19.” Ochs v. Hindman,
984 F. Supp. 2d 903, 906 (N.D. Ill. 2013). The movant “bears the burden of
demonstrating that the absent party is a necessary and indispensable party that
must be joined.” Id. Even though the purpose of Rule 19 is to “permit joinder of all
materially interested parties to a single lawsuit so as to protect interested parties
and avoid waste of judicial resources,” dismissal is not the preferred outcome. Askew
v. Sheriff of Cook Cnty., 568 F.3d 632, 634 (7th Cir. 2009) (internal citations omitted).
The Court will address the motion to dismiss under Rule 12(b)(7) first and then
Saggezza’s 12(b)(6) motion.
I. Request to Strike
Before turning to the merits of the motion, the Court first addresses Saggezza’s
request to strike. In its Reply, Saggezza asks the Court to strike Arkeyo’s Response
because it is 25 pages in length, in violation of the Northern District of Illinois Local
Rule 7.1. R. 26, Reply at 2. Additionally, Saggezza points out that the Response lacks
a table of contents or a table of authorities. Id.
Local Rule 7.1 limits the page number of a response brief to 15 pages. It cannot
be disputed that not only is the Response over the page limit by ten pages, not an
inconsiderate number of pages, but that Arkeyo failed to seek leave of Court to file a
brief in excess of the page limitation. 3 The Court agrees with Saggezza that the
Response violates Local Rule 7.1. Accordingly, the Court will only consider the
Response up to and including page fifteen. The Court, having disposed of this
preliminary matter, now turns to the motion itself.
fails to use page numbers in its Response. As such, the Court cites to the CM/ECF
page numbers for its Response.
II. Motion to Dismiss Under Rule 12(b)(7)
The purpose of Rule 19 is to “permit joinder of all materially interested parties
to a single lawsuit so as to protect interested parties and avoid waste of judicial
resources.” Moore v. Ashland Oil, Inc., 901 F.2d 1445, 1447 (7th Cir. 1990). Analysis
of a whether a party is a necessary party proceeds in two steps under Rule19. Askew,
568 F.3d at 635. First, a court determines whether a party, subject to service of
process and whose joinder will not deprive the court of subject-matter jurisdiction,
must be joined as a party. Id. A party is necessary if: “(A) in that person's absence,
the court cannot accord complete relief among existing parties; or (B) that person
claims an interest relating to the subject of the action and is so situated that disposing
of the action in the person's absence may: (i) as a practical matter impair or impede
the person's ability to protect the interest; or (ii) leave an existing party subject to a
substantial risk of incurring double, multiple, or otherwise inconsistent obligations
because of the interest.” FED. R. CIV. P. 19(a)(1). Second, if a court determines that
the party is “necessary,” Rule 19(a)(2) provides that the court must order that order
that the person be made a party. Askew, 568 F.3d at 635 (citing FED. R. CIV. P.
Saggezza moves to dismiss the complaint for Arkeyo’s failure to join Metro as
a necessary party to this lawsuit. R. 11, Memo. Dismiss at 5. Saggezza contends that
the majority of the allegations in the complaint involve the alleged misconduct of
Metro and Cummins. As an initial matter, Saggezza points out that Arkeyo had a
contractual relationship with Metro, not Saggezza. Id. (citing Compl. ¶ 12). Next,
Saggezza notes that Metro provided a copy of Arkeyo’s Software to Saggezza. Id.
(citing Compl. ¶ 33). It was Metro personnel, according to Arkeyo, along with
Saggezza and Cummins personnel, that met to discuss the duplication of the Metro
Software to enable Metro to replace Arkeyo with Saggezza as Metro’s software
vendor. Compl. ¶ 32. Arkeyo’s allegations of damages, notes Saggezza, revolve around
Metro’s alleged use of Arkeyo’s software. Memo. Dismiss at 5. Therefore, concludes
Saggezza, Metro is a necessary party and Arkeyo’s failure to join Metro is prejudicial
to Saggezza. Id; see also Reply at 5 (citing Cognis Corp. v. Chemcentral Corp., 430 F.
Supp. 2d 806, 809 (N.D. Ill. 2006)).
Arkeyo responds that Metro is not a necessary party because Metro is a joint
tortfeasor with Saggezza with respect to Arkeyo’s DTSA, conversion, and copyright
infringement claims. R. 16, Resp. at 9. As a joint tortfeasor, asserts Arkeyo, Metro is
not a required party that must be joined, citing Salton, Inc. v. Philips Domestic
Appliances and Pers. Care B.V., 391 F.3d 871, 880 (7th Cir. 2004); Pasco Int'l
(London) Ltd. v. Stenograph Corp., 637 F.2d 496, 503–05 (7th Cir. 1980); XPO
Logistic, Inc. v. Gallatin, 2013 WL 3835358, at *3 (N.D. Ill. July 24, 2013); TABFG,
LLC v. Pfeil, 2009 WL 1209019, at *3 (N.D. Ill. May 1, 2009). Id. at 8–9. As for
Arkeyo’s tortious interference claims, Arkeyo maintains that Metro is an absent party
with whom Arkeyo is in contractual privity and, therefore, not a necessary party,
citing Salton, Inc., 391 F.3d at 880; Pasco Int'l (London) Ltd., 637 F.2d at 503–05. Id.
It is plain, based on the allegations of the complaint, that Metro may be a joint
tortfeasor with Saggezza with respect to Arkeyo’s DTSA, conversion, and copyright
infringement claims. “It has long been the rule that it is not necessary for all joint
tortfeasors to be named as defendants in a single lawsuit.” Tempes v. Synthes, 498
U.S. 5, 7 (1990). After all, under the principle of joint and several liability, “the victim
of a tort is entitled to sue any of the joint tortfeasors and recover his entire damages
from that tortfeasor.” Salton, Inc., 391 F.3d at 877. Therefore, a joint tortfeasor not
joined in a lawsuit is not a person in whose absence complete relief cannot be accorded
within the meaning of Rule 19 and therefore, is not an indispensable party to the
action. See Pasco Int'l (London) Ltd., 637 F.2d at 505. As the Salton court explained,
if all joint tortfeasors automatically were required to be joined, “the rule that joint
tortfeasors are not by virtue of their jointness indispensable parties . . . would be
overthrown.” 391 F.3d at 880.
Metro, as a joint tortfeasor, is not a necessary party with respect to Arkeyo’s
DTSA, conversion, and copyright infringement claims. Similarly, Metro is not a
necessary party with respect to Arkeyo’s tortious interference claims. Indeed,
Saggezza does not advance any cogent argument on this point. Furthermore,
Saggezza has failed to explain how Metro’s absence will impair its ability to protect
an interest, or that it will be exposed to a substantial risk of multiple or inconsistent
obligations. See FED. R. CIV. P. 19(a)(1)(B). Therefore, Metro does not qualify as a
necessary party or an indispensable party under Rule 19(a), and the Court denies
Saggezza’s Rule 12(b)(7) motion.
The Court, having dispensed with Saggezza’s Rule 12(b)(7) motion, now turns
to Saggezza’s Rule 12(b)(6) motion to dismiss.
Motion to Dismiss Under Rule 12(b)(6)
A. Count I - DTSA Claim
In Count I, Arkeyo asserts a claim of trade secret misappropriation under
Section 1829(5)(A) of the DTSA. Comp. ¶¶ 58–65. Saggezza maintains that Arkeyo
fails to sufficiently plead a DTSA cause of action. Memo. Dismiss at 6–7. The Court
agrees with Arkeyo that the claim is sufficiently pled.
To state a claim for misappropriation under the DTSA, a plaintiff must allege
that “(1) there are trade secrets (2) that were misappropriated” by the defendant.
Molon Motor and Coil Corp. v. Nidec Motor Corp., 2017 WL 1954531, at *3 (N.D. Ill.
May 11, 2017). Pursuant to the DTSA, a trade secret includes:
[A]ll forms of technical . . . or engineering . . . information, including . . . codes,
whether tangible or intangible, and whether or how stored, compiled, or
memorialized physically, electronically . . . , or in writing if—
(A) the owner thereof has taken reasonable measures to keep such information
(B) the information derives independent economic value, actual or potential,
from not being generally known to, and not being readily ascertainable through
proper means by, another person who can obtain economic value from the
disclosure or use of the information[.]
18 U.S.C. § 1839(3).
Saggezza moves to dismiss Count I for failure to state a claim arguing that
what Arkeyo alleges is a reverse engineering claim, which does not violate the DTSA
because a reverse engineered secret is not “misappropriated.” Memo. Dismiss at 6–7.
Saggezza argues that pursuant to 18 U.S.C. § 1839(6)(B), the term “improper means”
“does not include reverse engineering, independent derivation, or other lawful means
of acquisition." Id. at 7. For support, Saggezza relies on Automation by Design, Inc. v.
Raybestos Prods. Co., 463 F.3d 749, 762 (7th Cir. 2006), in which the Seventh Circuit
held that there is no bar to reverse engineering a machine if it is not patented, and
Confold Pac., Inc. v. Polaris Indus., 433 F.3d 952, 959 (7th Cir. 2006), in which the
Seventh Circuit held that reverse engineering and independent discovery is a
complete defense to claims of copyright infringement and trade secrets
The singular issue raised by Saggezza’s motion to dismiss Count I is whether
Arkeyo has pled “misappropriation.” A “reverse engineering” claim, insists Saggezza,
does not qualify as “misappropriation. Memo. Dismiss at 7. The Court finds
Saggezza’s reliance on Automation by Design, Inc. and Confold Pac., Inc. is misplaced
for several reasons. First, Automation by Design, Inc. and Confold Pac., Inc. were
both decided at the summary judgment stage, not on a Rule 12(b)(6) motion to
dismiss. 463 F.3d at 751; 433 F.3d at 954. Second, and most importantly, neither case
involved claims under the DTSA or misappropriation of trade secrets. Rather, the
issue in Automation by Design, Inc. was whether the defendant infringed on the
plaintiff’s copyright and breached the license agreement between the parties when it
hired a third party to duplicate an assembly machine that the plaintiff had designed
and built for the defendant. 463 F.3d at 751. The court, turning to Indiana contract
law to resolve the dispute, held that the agreement allowed the defendant the right
to hire a third party to duplicate the plaintiff’s machinery. Id. at 758.
Similarly, the issues in Confold Pac., Inc. were whether the defendant
breached a non-disclosure agreement with the plaintiff by copying the plaintiff’s
design and whether the defendant unjustly enriched itself by exploiting the plaintiff’s
design. 433 F.3d at 954–57. The plaintiff contended that the defendant had designed
a shipping container allegedly based on a design the plaintiff had submitted to the
defendant in response to a request for proposals. Id. The court held that the contract
did not afford the plaintiff its desired confidentiality rights. Id. at 956–57. It also held
that the plaintiff’s misappropriation claim was really a claim for infringement of a
design that it did not patent, and, accordingly, was preempted by patent law. Id. at
In short, the Court finds that Saggezza fails to advance any authority that
Arkeyo’s complaint fails to state a cause of action under the DTSA. Therefore, the
Court denies Saggezza’s motion to dismiss with respect to Count I.
B. Preemption by the Copyright Act
In Count II, Arkeyo brings a conversion claim against Saggezza for one or more
touchscreen computers with the Arkeyo’s software installed. Compl. ¶¶ 66–70. In
Counts V and VI, Arkeyo asserts a copyright infringement claim and a contributory
copyright infringement claim against Saggezza. Id. ¶¶ 85–97. Saggezza argues that
the Copyright Act preempts each of these claims. Memo. Dismiss at 12–13. The Court
addresses each in turn.
Section 301 of the Copyright Act preempts all state and common law causes of
action that provide for rights “equivalent to any of the exclusive rights within the
general scope of the copyright . . . .” Cyber Websmith, Inc. v. Am. Dental Ass’n, 2010
WL 3075726, at *2 (N.D. Ill. Aug. 4, 2010) (quoting 17 U.S.C. § 301(a)). Moreover,
common law causes of action are generally preempted when they seek damages that
are identical to those sought for copyright infringement. Bucklew v. Hawkins, Ash,
Baptie & Co., LLP, 329 F.3d 923, 934 (7th Cir. 2003).
1. Count II - Conversion Claim
Saggezza argues that Count II is preempted because Arkeyo’s conversion claim
is based on Saggezza’s alleged unauthorized use of its source code and depends on the
rights set forth in 17 U.S.C. § 106. Memo. Dismiss at 13. For support, Saggezza relies
on Seng-Tiong Ho v. Taflove, 648 F.3d 489, 502 (7th Cir. 2011), in which the Seventh
Circuit held the conversion claim focused on the defendants’ unauthorized
publishing, not possession, of the protected work. Because publishing is a right under
the Copyright Act, it preempted the conversion claim. It also relies on Bucklew v.
Hawkins, 329 F.3d 923, 932–34 (7th Cir. 2003), in which the Seventh Circuit held
that the Copyright Act’s preemption clause forbade states to add sanctions for a
wrongful act identical to a violation of the Copyright Act. Id.
The essence of Saggezza’s argument is that a claim for conversion will not lie
for intangible property. Saggezza is correct. “Illinois courts do not recognize an action
for conversion of intangible rights.” Am. Nat’l Ins. Co. v. Citibank, N.A., 543 F.3d 907,
910 (7th Cir. 2008); see also Bilut v. Nw. Univ., 692 N.E. 2d 1327, 1334–35 (Ill. Ct.
App. 1998) (holding that under Illinois law, conversion requires actions involving
physical property and that the Copyright Act did not preempt the plaintiff’s
conversion claim where the plaintiff alleged theft of a physical paper copy of her
research). True, that a conversion claim for Arkeyo’s software may fail and be
preempted because of the intangible nature of software. See Meyer Tech. Sols., LLC
v. Kaegem Corp., 2017 WL 4512918, at *3 (N.D. Ill. Oct. 10, 2017) (agreeing with the
plaintiff that the defendant’s counterclaim for conversion must be dismissed because
software is intangible property and not amenable to conversion). In fact, in its Reply,
Saggezza relies on AutoMed Techs., Inc. v. Eller, 160 F. Supp. 2d 915, 922 (N.D. Ill.
2001) for additional support (Reply at 8), but this case is distinguishable because it
involved a misappropriation claim software, i.e., intangible property. Here, however,
Arkeyo contends that its conversion claim is centered on the touchscreen computer,
a tangible item, that Saggezza allegedly took. Compl. ¶ 67. The court’s analysis in
AutoMed Techs., Inc. does not aid the Court in resolving this case. Therefore, at this
juncture, the Court cannot say that the claim is grounded on recoupment of intangible
property, and accordingly the Copyright Act does not preempt Arkeyo’s conversion
claim. See Onvi, Inc. v. Radius Project Dev., Inc., 2020 WL 4607242, at *8 (N.D. Ill.
Aug. 11, 2020) (denying motion to dismiss conversion claim of CAD files).
2. Counts V & VI - Copyright Claims
Saggezza next argues that Counts V and VI (copyright claims) are preempted
because they are premised on and depend on the rights set forth in 17 U.S.C. § 106.
Memo. Dismiss at 13 (citing Higher Gear Grp., Inc. v. Rockenbach Chevrolet Sales,
Inc., 223 F. Supp. 2d 953, 957 (N.D. Ill. 2002) (holding that the claim for tortious
interference with contractual relations was preempted where the claim was based on
copyrightable literary works (computer programs/software) and was not qualitatively
different than the unauthorized copying)).
The Court finds that Counts V and VI are not preempted. Counts V and VI are
federal copyright claims, which fall under the Copyright Act itself. See First Comics,
Inc. v. World Color Press, Inc., 672 F. Supp. 1064, 1066 (N.D. Ill. 1987) (noting that
the Copyright Act does not preempt causes of action based on federal law). The only
case cited by Saggezza, Higher Gear Grp., Inc., is distinguishable as in that case the
defendants only argued that the plaintiff’s state law claims, including a tortious
interference claim, were preempted. 223 F. Supp. 2d 953 at 956–57. Thus, Counts II,
V, and VI are not preempted.
The Court, having determined that Counts II, V and VI are not preempted,
now turns to Saggezza’s Rule 12(b)(6) motion to dismiss based on pleading sufficiency.
C. Count II - Conversion Claim
In Count II, Arkeyo asserts a common law conversion claim against Saggezza
for one or more touchscreen computers with Arkeyo’s software installed. Compl. ¶¶
Under Illinois law, to state a claim for conversion, a plaintiff must allege that:
“(1) he has a right to the property; (2) he has an absolute and unconditional right to
the immediate possession of the property; (3) he made a demand for possession; and
(4) defendant wrongfully and without authorization assumed control, dominion, or
ownership over the property.” Sys. Am., Inc. v. Providential Bancorp, Ltd., 2006 WL
463314, at *6 (N.D. Ill. Feb. 24, 2006).
First, Saggezza cites First Weber Grp., Inc. v. Horsfall, 738 F.3d 767, 773 (7th
Cir. 2013) for the elements of a conversion claim (Memo. Dismiss at 7), but this case
is inapplicable because it involved Wisconsin, not Illinois, law. Second, Saggezza
summarily asserts that Arkeyo does not sufficiently allege each required element for
conversion, but, in doing so, suggests a list of factors that do not align with the
required elements for a conversion claim. Memo. Dismiss at 8. In short, Saggezza
fails to advance any argument under Illinois law evincing how Arkeyo’s conversion
The Court finds that that Arkeyo has sufficiently pled the first two and the
fourth elements of a conversion claim. Even though Arkeyo does not allege that it
made a demand upon Saggezza, under Illinois law, “a demand is unnecessary to
establish a conversion where another independent action of conversion is
established.” Russell Dean, Inc. v. Maher, 2018 WL 4679573, at *9 (N.D. Ill. Sept. 28,
2018) (internal quotations and citations omitted). In its complaint, separate from the
conversion of the touchscreen computers, Arkeyo alleges that Saggezza also
developed its own software based on Arkeyo’s software, which was intended to replace
it, and provided that back to Metro on the coin counting machines. Compl. ¶¶ 36–37,
41. Accordingly, Arkeyo need not allege a demand.
In its Reply, Saggezza challenges the status of the property at issue and its
ownership. Reply at 7–8. But this attempt ignores the principle that the Court cannot
resolve a factual dispute at the motion to dismiss stage and must construe the briefs
and the complaint in Arkeyo’s favor. See McFarland-Lawson v. Ammon, 847 Fed.
Appx. 350, 350 (7th Cir. 2021) (citing Air Line Pilots Ass’n, Int’l v. Dep’t of Aviation
of City of Chi., 45 F.3d 1144, 1154 (7th Cir. 1995)).
As a result, the Court denies the motion with respect to Count II.
D. Count III - Claim for Tortious Interference with Contractual Relations
In Count III, Arkeyo brings a tortious interference with contractual relations
claim against Saggezza. Compl. ¶¶ 71–77. Under Illinois law, to state a claim for
tortious interference with a contract, a plaintiff must allege: “(1) the existence of a
valid and enforceable contract between the plaintiff and a third party; (2) defendant's
awareness of the contract; (3) defendant's intentional and unjustified inducement of
a breach; (4) defendant's wrongful conduct caused a subsequent breach of the contract
by the third party; and (5) damages.” Cunliffe v. Wright, 51 F. Supp. 3d 721, 741 (N.D.
Saggezza contends that Arkeyo cannot establish Saggezza acted with the
specific intent of harming Arkeyo’s contract with Cummins, or that Saggezza acted
without privilege or justification. Memo. Dismiss at 9–10. Saggezza explains that
Saggezza did not intend to harm any contractual relations but was hired to perform
a task to reach a predetermined result. Id. at 10.
The Court first notes that Saggezza incorrectly construes Arkeyo’s claim as
interference with a Cummins contract, when instead, Arkeyo’s allegations are
premised on Saggezza’s interference with Arkeyo’s contract with Metro. Specifically,
(Compl. ¶ 72); (2) Saggezza was aware of the contract (id.); (3) Saggezza took
purposeful action to interfere and caused the termination of Arkeyo’s contract with
Metro by assisting Metro in breaching the contract by enabling Metro to use the
Replacement Application (id. ¶ 73); (4) Metro did breach the contract as a result of
Saggezza’s facilitation of the reverse engineering (id. ¶ 75); and (5) Arkeyo requests
compensatory damages (id. ¶ 77). Thus, Arkeyo has sufficiently pled a claim for
tortious interference with contractual relations, and the Court denies the motion with
respect to Count III.
E. Count IV - Claim for Tortious Interference with Prospective
In Count IV, Arkeyo brings a tortious interference with prospective contractual
relations claim against Saggezza. Compl. ¶ 79. The elements for tortious interference
with prospective contractual relations are: (1) that the plaintiff had a reasonable
expectation of entering into a valid business relationship, (2) that the defendant knew
of this expectancy, (3) that the defendant purposefully interfered to prevent the
expectancy from being fulfilled, and (4) that damages to the plaintiff resulted from
the interference. Cook, 141 F.3d at 327.
Saggezza argues that Arkeyo cannot state such a claim, but its memorandum
is devoid of any legal authority discussing this cause of action. Instead, Saggezza
comingles its position with its arguments addressing Arkeyo’s claim for tortious
interference with contractual relations, and does not provide an independent basis
for challenging this claim. Memo. Dismiss at 8–10. Saggezza does not address which
element is missing from the complaint, and “[i]t is not the role of this court to research
and construct the legal arguments open to parties, especially when they are
represented by counsel.” Vertex Refining, NV, LLC v. Nat’l Union Fire Ins. Co. of
Pittsburgh, 374 F. Supp. 3d 754, 765 (N.D. Ill. 2019) (citing Doherty v. City of Chi., 75
F.3d 318, 324 (7th Cir. 1996), amended (Mar. 28, 1996)). Therefore, because Saggezza
does not properly advance any arguments for dismissal of this claim, the Court denies
Saggezza’s motion to dismiss with respect to Count IV.
F. Count V - Claim for Copyright Infringement
In Count V, Arkeyo asserts a copyright infringement claim against Saggezza.
Compl. ¶¶ 85–90. The Court agrees with Arkeyo that the claim is sufficiently pled.
To state a cause of action for copyright infringement, a plaintiff must allege:
“(1) ownership of a valid copyright, and (2) copying of constituent elements of the
work that are original.” Janky v. Lake Cnty. Convention and Visitors Bureau, 576
F.3d 356, 361 (7th Cir. 2009) (internal citations omitted). “A certificate of registration
from the U.S. Register of Copyrights constitutes prima facie evidence of the validity
of a copyright.” Wildlife Express Corp. v. Carol Wright Sales, Inc., 18 F.3d 502, 507
It is undisputed that Arkeyo’s complaint satisfies the first prong of a copyright
infringement claim as Arkeyo obtained copyright registration certificate No. TXu 2049-886 with respect to the source code to Arkeyo’s software. Compl. ¶ 28. Therefore,
Arkeyo has established a presumption that the copyright is valid. Wildlife Express
Corp., 18 F.3d at 507. It is the second prong that is the subject of Saggezza’s motion
to dismiss. Saggezza contends that Arkeyo has failed to set forth any specific
allegations that any portion of Arkeyo’s source code was actually copied by Saggezza
and that Arkeyo should have to plead, with specificity, the specific code it claims was
copied. Memo. Dismiss at 11–12. The Court disagrees. Arkeyo alleges that Saggezza
“engaged in unauthorized copying, distribution and display of Arkeyo’s software, and
has created unauthorized derivative works from Arkeyo’s software, both within the
United States and abroad, in contravention of the United States Copyright Act.”
Compl. ¶ 86.
Additionally, Saggezza again attempts to engage in another factual dispute,
suggesting that Arkeyo’s source code is only similar in function to Saggezza’s source
code, and, as a result, Arkeyo cannot claim that the source code itself was copied.
Memo. Dismiss at 11–12. But, again, the Court must look to the allegations in the
complaint and not resolve factual disputes at this stage. See McFarland-Lawson, 847
Fed. Appx. at 350. Arkeyo’s allegations are sufficient to state a valid copyright
infringement claim. Therefore, the Court denies the motion to dismiss with respect
to Count V.
G. Count VI - Claim for Contributory Copyright Infringement
In Count VI, Arkeyo brings a contributory copyright infringement claim
against Saggezza. Compl. ¶¶ 91–97. To state a valid claim for contributory copyright
infringement, a plaintiff first must allege a valid direct copyright claim. Denison v.
Larkin, 64 F. Supp. 3d 1127, 1135 (N.D. Ill. 2014). Then, “[l]iability for contributory
infringement will be imposed when a defendant, with knowledge of the infringing
activity, induces, causes or materially contributes to the infringing conduct of
another.” Bell v. Chi. Cubs Baseball Club, LLC, 2020 WL 550605, at *4 (N.D. Ill. Feb.
Saggezza again comingles its arguments attacking this claim with its
statements arguing for dismissal of the copyright infringement claim. Memo. Dismiss
at 10–12. It provides no independent basis for dismissing this claim, and the Court
cannot construct Saggezza’s legal argument for it. See Vertex Refining, NV, LLC, 374
F. Supp. 3d at 765. Accordingly, the Court denies the motion to dismiss with respect
to Count VI.
For the foregoing reasons, the Court denies Saggezza’s motion to dismiss with
respect to Rule 12(b)(7) and Rule 12(b)(6). The Court directs Saggezza to answer the
complaint on or before 06/24/2021.
Dated: June 3, 2021
United States District Judge
Franklin U. Valderrama
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