Bethesda Softworks LLC v. Interplay Entertainment Corporation

Filing 79

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 9/23/10. (sat, Chambers)

Bethesda Softworks LLC v. Interplay Entertainment Corporation

Doc. 79

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BETHESDA SOFTWORKS, LLC v. INTERPLAY ENTERTAINMENT CORPORATION : : : : : MEMORANDUM OPINION Presently pending and ready for resolution in this Civil Action No. DKC 09-2357

trademark action are (1) the motion of Plaintiff/Counterclaim Defendant dismiss Bethesda a Softworks, of LLC the ("Bethesda Softworks") filed to by

portion

counterclaim Interplay

Defendant/Counterclaim

Plaintiff

Entertainment

Corporation ("Interplay") (Paper 24); (2) Interplay's motion for attorneys' Softwork's fees motion and to costs redact (Paper the 46); and of (3) the Bethesda court's

transcript

December 10, 2009 hearing (Paper 55).

The issues have been

fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that

follow, the partial motion to dismiss the counterclaim will be granted in part fees and and denied costs in part, be Interplay's denied, motion for

attorneys'

will

and

Bethesda

Softwork's motion to redact the transcript will be granted.

Dockets.Justia.com

I.

Background For purposes of the partial motion to dismiss, the facts

are

construed

in

favor

of

the

non-moving

party,

Interplay.

Bethesda Softworks is a developer and publisher of video games for personal computers and various console platforms. ¶ 9). (Paper 1

Bethesda Softworks is incorporated in Delaware, with its place of business in Rockville, Maryland. (Id.).

principal

Interplay is a developer, publisher, and licensor of video game software. with its (Id. ¶ 10). principal (Id.). Interplay is incorporated in Delaware, of business in Beverly Hills,

place

California.

This is a trademark case regarding intellectual property rights related to "Fallout," a United States registered Interplay

trademark for computer video games and related goods.

owned the Fallout trademark (the "Fallout mark") when the mark was first issued on August 8, 1998. (Paper 1 ¶ 16). Interplay

first published a Fallout computer game in 1997. 26 ¶ 7). Interplay "Fallout,"

(Paper 11, at

During the time that Interplay owned the Fallout mark, developed, "Fallout manufactured, 2," and and distributed Tactics: the games of

"Fallout

Brotherhood

Steel" (the "Pre-existing Fallout Games"). In June 2004, the parties entered

(Paper 1 ¶ 16). into an Exclusive

Licensing Agreement ("ELA"), under which Interplay granted to 2

Bethesda Softworks exclusive license rights "to future uses of the Fallout property and its associated trademark." (Id. ¶ 8).

Under the ELA, Interplay retained the right to create a Fallout Massively Multiplayer Online Game ("MMOG"). According to

Bethesda Softworks, "An MMOG is a video game made available for online play that supports thousands of players playing the game simultaneously around the world over the Internet, and enables them to compete or cooperate on the game on a massive scale." (Paper 1 ¶ 23). On Purchase ("TLA"). April 4, 2007, the parties a entered into an Asset

Agreement

("APA")

and

Trademark

License

Agreement

Both the APA and the TLA were governed by Delaware (Paper 1, Ex. A (APA)

law, as agreed upon by the parties. § 7.2; Ex. B (TLA) § 13.0). APA, Bethesda Softworks

After the parties entered into the the Fallout mark in the

registered

United States Patent and Trademark Office.

(Paper 1, Ex. D).

The APA allowed Bethesda Softworks to purchase all rights to the Fallout mark for $5,750,000 and gave Interplay the

authority "to exclusively manufacture, have manufactured, sell and distribute" the preexisting Fallout games. Bethesda

Softworks was to have "no financial interest in the sales" of the Pre-existing 11, at 26 Fallout at ¶ Games 10-15; (the Paper 3 "Merchandising 1, Ex. A, at Rights"). § 5.10).

(Paper

Interplay

asserts

that

the

APA

does

not

limit

Interplay's

distribution channels or permit Bethesda Softworks to approve Interplay's distribution agreements for the Pre-existing Fallout Games. the APA (Paper 11, at 27 ¶ 12). and as part of the Interplay adds, "Pursuant to Rights granted to

Merchandising

Interplay, Bethesda Softworks only retained the limited right to review and approve Interplay's packaging and marketing materials to ensure that they do not exploit `any Fallout games or

products . . . developed by or for [Bethesda Softworks]' or `trade upon the look and feel' of the Fallout games developed by Bethesda Softworks." (Id. at 27-28 ¶ 13).

The TLA provided that Interplay could develop a MMOG based on Fallout, contingent upon meeting two development and

financing conditions.

(Paper 1, Ex. B, § 2.1).

The TLA stated

that Interplay must begin the "full-scale development of its FALLOUT MMOG" and have "secured financing for the FALLOUT MMOG in an amount no less than $30,000,000" within twenty-four months of the effective date of the TLA. (Id. § 2.3). The TLA

provided that if Interplay did not fulfill either of the two conditions, Interplay would "immediately lose and permanently forfeit its license rights under the [TLA] and the license

rights automatically shall end, be void and otherwise terminate

4

on the anniversary date of the second year after the Effective Date and [the TLA] shall no longer remain in effect." (Id.).

Interplay sent a letter to Bethesda Softworks on April 2, 2009, which stated that Interplay had complied with the

conditions of the TLA. Interplay Interplay in had response failed on to

Bethesda Softworks sent a letter to April meet 7, 2009, TLA's which stated that under

the

preconditions

Section 2.3. license forfeited

Bethesda Softworks's letter also stated that "all under the [TLA] have are been and permanently otherwise

agreements and

automatically

ended,

void

terminated" and told Interplay to immediately cease using the Fallout mark. Bethesda (Paper 1 ¶ 34). Softworks filed a complaint in this court on

September 8, 2009, which alleged that Interplay violated the APA and that the TLA is no longer valid. Bethesda Softworks's

complaint contained claims for declaratory judgment, preliminary and permanent injunctions, trademark infringement, unfair

competition and false designation of origin, accounting, common law trademark infringement, unfair competition, and breach of contract as to the APA and the TLA. court held a hearing on Bethesda (Paper 1, at 16-26). Softworks's The

preliminary

injunction motion on December 10, 2009, and denied the motion. (Papers 38 and 43). 5

Interplay filed its answer and counterclaims on October 11, 2009. contract (Paper 11). related to Interplay's counterclaims are breach of the APA (Count I), breach of contract

related to the TLA (Count II), declaratory relief (Count III), breach of the implied covenant of good faith and fair dealing (Count IV), rescission and accounting (Count V), and tortious interference with prospective economic advantage (Count VI). Section 3.13 of the APA required Interplay to list all outbound licenses it had granted in the Fallout intellectual property to any person. (Paper 11 at 28 ¶ 18). Section 5.12 of

the APA provided that if Bethesda Softworks was not satisfied with Interplay's disclosures under Section 3.13, Bethesda (Id. at ¶

Softworks had the option to cancel the transaction. 20). when

Interplay asserts that it complied with the APA's terms it identified to Bethesda Softworks a license it had

granted to Glutton Creeper Games ("Glutton") for the creation of a Fallout pen-and-paper role-playing game based on the

preexisting Fallout games.

(Id. at ¶ 19).

Interplay alleges

that Bethesda Softworks did not cancel the APA transaction or object to the Glutton game license before executing the APA. (Id. at 29 ¶ 21). Interplay contends that, in August 2007, Bethesda Softworks sent a cease-and-desist letter to Glutton, which demanded that 6

Glutton stop its development of the pen-and-paper role-playing game because it violated the ELA between Interplay and Bethesda Softworks. (Id. at ¶ 22). Glutton sued Interplay in the

Superior Court for the County of Los Angeles County, California, alleging breach of contract. Additionally, Interplay alleges that Bethesda Softworks

sent a letter to GameTap LLC ("GameTap"), with whom Interplay was negotiating a content licensing agreement to permit GameTap to distribute Interplay's preexisting Fallout games over its

digital download network. allegedly stated that

In the letter, Bethesda Softworks Interplay materially breached its

agreement with Bethesda Softworks and that Interplay did not possess the rights to distribute or sell the preexisting Fallout games. On November 9, 2009, Bethesda Softworks filed a partial motion to dismiss Interplay's counterclaims for breach of the implied covenant of good faith and fair dealing (Count IV), rescission (Count V), and tortious interference with prospective economic advantage (Count VI). (Paper 24). On January 19,

2010, Bethesda Softworks filed a motion to redact the transcript of the December 10, 2009 preliminary injunction hearing to seal certain statements regarding trade secrets. (Paper 55). On

December 28, 2009, Interplay filed a motion for attorneys' fees 7

and costs related to the preliminary injunction hearing. 46). II. Partial Motion to Dismiss Counterclaim A. Standard of Review

(Paper

The purpose of a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) complaint. (4th Cir. is to test the sufficiency of the plaintiff's

See Edwards v. City of Goldsboro, 178 F.3d 231, 243 1999). Except in certain specified cases, a

plaintiff's complaint need only satisfy the "simplified pleading standard" of Rule 8(a), Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513 (2002), which requires a "short and plain statement of the claim showing that the pleader is entitled "Rule blanket to relief." still of

Fed.R.Civ.P. requires a

8(a)(2). `showing,'

Nevertheless, rather than a

8(a)(2)

assertion,

entitlement to relief." 544, 555 n.3 (2007).

Bell Atl. Corp. v. Twombly, 550 U.S.

That showing must consist of more than "a

formulaic recitation of the elements of a cause of action" or "naked assertion[s] v. Iqbal, devoid 129 of S.Ct. further 1937, factual 1949 enhancement."

Ashcroft

(2009)(internal

citations omitted). In its determination, the court must consider all well-pled allegations in a complaint as true, Albright v. Oliver, 510 U.S. 266, 268 (1994), and must construe all factual allegations in 8

the light most favorable to the plaintiff.

See Harrison v.

Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999)(citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)). The court need not, however, accept unsupported

legal allegations, Revene v. Charles County Comm'rs, 882 F.2d 870, 873 (4th Cir. 1989), legal conclusions couched as factual allegations, Iqbal, 129 S.Ct. at 1950, or conclusory factual allegations devoid of any reference to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). See also 2009). to Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir.

"[W]here the well-pleaded facts do not permit the court more than the mere possibility of misconduct, the

infer

complaint has alleged, but it has not `show[n] . . . that the pleader is entitled to relief.'" Iqbal, 129 S.Ct. at 1950

(quoting Fed.R.Civ.P. 8(a)(2)).

Thus, "[d]etermining 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." B. 1. Analysis Breach of Implied Covenant of Good Faith and Fair Dealing Id.

Bethesda Softworks argues that Interplay's counterclaim for breach of the implied covenant of good faith and fair dealing should be dismissed. Bethesda Softworks first asserts that this 9

claim

is

duplicative

of

Interplay's

breach

of

contract

allegations.

(Paper 24, Attach. 1, at 5).

Second, Bethesda

Softworks contends that Interplay's allegations do not establish that Bethesda Softworks did anything more than exercise "The its

contractual

rights.

Bethesda

Softworks

states,

implied

covenant may not be used to invent contractual obligations that are in conflict with the purpose of the contract as a whole." (Paper 24, Attach. 1, at 6) (citing Alliance Data Sys. Corp. v. Blackstone Capital Partners, V L.P., 963 A.2d 746, 770 (Del.Ch. 2009)). Finally, Bethesda Softworks maintains that Interplay

alleges no injury attributable to Bethesda Softworks's conduct. (Paper 24, at 7). Bethesda by Softworks is argues, its "The of only the

cognizable

injury

alleged

Interplay

loss

Glutton Creeper license.

However, the Glutton Creeper license (Id.).

was expressly forbidden by the terms of the 2004 [ELA]."

Interplay counters that it has stated a claim for breach of the implied covenant of good faith and fair dealing. contends that Bethesda Softworks breached three Interplay implied

contractual obligations. specifically require

First, "[e]ven though the TLA does not Bethesda Softworks to acknowledge

Interplay's compliance with the TLA, because Interplay's rights under the TLA require that Interplay meet certain conditions, it should be implied that Bethesda Softworks will in good faith 10

acknowledge Interplay's compliance with the TLA." 4).

(Paper 34, at

Interplay asserts that Bethesda Softworks breached this obligation because Bethesda Softworks did not

implied

acknowledge Interplay's compliance but instead sent a letter on April 7, 2009 that refused to acknowledge that Interplay had fulfilled the TLA's conditions. Glutton Bethesda Second, Creeper "[b]ecause Games as a the APA

specifically licensee at

identified the time

Fallout APA,

Softworks

executed

the

Bethesda Softworks should not be permitted to seek to prevent Interplay from pursuing such relationships and agreements with Glutton Creeper." Softworks breached (Id. at 5). this Interplay contends that Bethesda obligation because Bethesda

implied

Softworks sent a letter to Glutton in August 2007, demanding that Glutton cease and desist its development of a pen-and-paper Fallout game. And, third, "as the for APA does not limit

Interplay's Fallout

distribution or

channels

the

Interplay-developed to approve

games

permit

Bethesda

Softworks

Interplay's subsequent distribution agreements for such games, it should be implied that Bethesda Softworks will not seek to prevent Interplay with from Game (Id.). Tap pursuing [sic] such or any relationships other that and

agreements

potential Bethesda

distributor."

Interplay

maintains

Softworks breached this implied obligation by sending a letter 11

to GameTap that stated that Interplay had materially breached its agreement with Bethesda Softworks and that Interplay did not possess the rights to distribute or sell the preexisting Fallout games. Maryland follows the choice-of-law rule of lex loci

contractus, and because breach of the implied covenant of good covenant of good faith and fair dealing is considered a quasicontract claim, the governing law of the contract controls.

Baker v. Sun Co., Inc., 985 F.Supp. 609, 610-11 (D.Md. 1997). Subject to two exceptions not implicated here, Maryland courts will respect choice-of-law provisions found in contracts.

Jackson v. Pasadena Receivables, Inc., 398 Md. 611, 618 (Md. 2007). them. The APA and TLA provide that the laws of Delaware govern (Paper 1, Ex. A (APA) § 7.2; Ex. B, (TLA) § 13.0).

Accordingly, Delaware law governs Interplay's claim for breach of the implied covenant of good faith and fair dealing. The covenant of good faith and fair dealing is implied in every agreement in Delaware. Co., 878 A.2d 434, 442 Dunlap v. State Farm Fire & Cas. 2005). The covenant requires

(Del.

parties "in a contractual relationship to refrain from arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits of the

12

contract."

Wilgus v. Salt Pond Inv. Co., 498 A.2d 151, 159 The Supreme Court of Delaware has explained:

(Del.Ch. 1985).

The covenant is "best understood as a way of implying terms in the agreement," whether employed to analyze unanticipated developments or to fill gaps in the contract's provisions. Existing contract terms control, however, such that implied good faith cannot be used to circumvent the parties' bargain, or to create a "freefloating duty . . . unattached to the underlying legal document." Thus, one generally cannot base a claim for breach of the implied covenant on conduct authorized by the terms of the agreement. Dunlap, 878 A.2d at 442 (internal citations omitted). To state a claim for breach of the implied covenant, a plaintiff "must allege a specific implied contractual

obligation, a breach of that obligation by the defendant, and resulting damage to the plaintiff." Kuroda v. SPJS Holdings,

L.L.C., 971 A.2d 872, 888 (Del.Ch. 2009) (citing Fitzgerald v. Cantor, No. C.A. 16297-NC, 1998 WL 842316, at *1 (Del.Ch. Nov. 10, 1998)). sufficient. "General allegations of bad faith conduct are not Rather, the plaintiff must allege a specific

implied contractual obligation and allege how the violation of that obligation denied the plaintiff the fruits of the contract. Consistent with its narrow purpose, the implied covenant is only rarely invoked successfully." Id. (citing Superior Vision

13

Servs., Inc. v. ReliaStar Life Ins. Co., No. Civ.A. 1668-N, 2006 WL 2521426, at *6 (Del.Ch. Aug. 25, 2006)). Interplay's alleges: 42. Bethesda materially breached each agreement's Implied Covenants of Good Faith and Fair Dealing by, among other things, attempting to unilaterally terminate Interplay's rights under the APA and TLA, interfering with Interplay's attempts to exercise its Merchandising Rights, interfering with Interplay's business relationships with its distributors, and interfering in Glutton Creeper's game license after its disclosure and Bethesda's failure to object to the license prior to closing the APA. 43. As a direct and proximate result of Bethesda's wrongful conduct, Interplay has suffered, is suffering, and will continue to suffer substantial damages and irreparable harm in an amount to be proven at trial. (Paper 11 ¶¶ 42-43). Interplay has not stated a claim for breach of the implied covenant of good faith and fair dealing. implied contractual obligation under the First, there is no TLA for Bethesda claim for breach of the implied covenant

Softworks to "in good faith acknowledge Interplay's compliance with the TLA." If Bethesda Softworks breached the TLA, it did Second,

so by breaching the express provision of Section 2.3.

the APA does not have an implied obligation that "Bethesda will not seek to prevent Interplay from pursuing such relationships 14

and

agreements

with

Game

Tap

or

any

other

potential

distributor," because Section 5.10 of the APA expressly protects Interplay's distribution rights. Third, while there is no express provision in the APA that determines whether Interplay was allowed to grant a license to Glutton imply a for a pen-and-paper Fallout game, Interplay for may not

free-floating

contractual

obligation

Bethesda

Softworks to honor any licenses that pre-dated the APA and that were disclosed in Part 3.13 of the Disclosure Schedule to the APA. Bethesda Softworks to has correctly was not pointed under out the that ELA

Interplay's before the

license APA was

Glutton

valid

executed.

The

ELA

expressly

assigned

Bethesda Softworks all the rights to use the Fallout mark apart from Interplay's rights to own the Fallout trademark, brand, and the Pre-existing Fallout Games, develop a MMOG, and use the "SPECIAL Rules" system to develop, create, promote, and sell non-Fallout video games or products. The ELA granted Bethesda

Softworks the exclusive right to "derivative products" of the licensed Fallout mark, and stated: ... With the single and sole exceptions of the Pre-existing Fallout Games and the MMOG referenced above, no Interplay game or Interplay licensed property, using the SPECIAL rules or not using the SPECIAL rules, shall use, exploit, or reference the Fallout name, trademark or brand in any way or manner, nor shall Interplay use any other 15

property, characteristic, or asset of, or associated with, Fallout and/or the Fallout brand, nor shall Interplay develop, license or exploit any game of any type featuring a post-apocalyptic setting or genre (all such restrictions, prohibitions, and limitations being referred to as ("Interplay limitations)[)]. (Paper 24, Attach. 3, at ¶¶ 2-3).1 APA superseded the ELA. The parties agree that the

But Interplay's act of disclosing its

license to Glutton on the APA's Disclosure Schedule did not create an obligation for Bethesda Softworks to honor that

license going forward.

Under the APA, Interplay retained the

right exclusively to manufacture, have manufactured, sell and distribute the Pre-existing Fallout Games. Bethesda Softworks's

action of sending Glutton a cease-and-desist letter did not deny Interplay the fruits of the contract because it did not

interfere with Interplay's express Merchandising Rights under the contract. covenant Interplay's of good counterclaim faith and for breach of will the be

implied

fair

dealing

"In deciding a Rule 12(b)(6) motion, the court will consider the facts stated in the complaint and the documents attached to the complaint. The court may also consider documents referred to in the complaint and relied upon by plaintiff in bringing the action." Abadian v. Lee, 117 F.Supp.2d 481, 485 (D.Md. 2000)(citing Biospherics, Inc., v. Forbes, Inc., 989 F.Supp. 748, 749 (D.Md. 1997), aff'd, 151 F.3d 180 (4th Cir. 1998)). Bethesda did not attach the ELA to its complaint and Interplay did not attach the ELA to its countercomplaint. Both parties reference the ELA in their pleadings, however, so the court may consider it without converting Bethesda's motion to one for summary judgment. 16

1

dismissed. 2. Tortious Interference with Prospective Economic Advantage

Bethesda Softworks asserts that a party must allege the following elements to state a claim for tortious interference with prospective economic advantage: (1) intentional and willful acts; (2) calculated to cause damage to the plaintiffs in their lawful business; (3) done with the unlawful purpose to cause such damage and loss, without right or justifiable cause on the part of the defendants (which constitutes malice); and (4) actual damage and loss resulting. (Paper 24, Attach. 1, at 8) (quoting Audio Visual Assocs., Inc. v. Sharp. Elec. Corp., 210 F.3d 354, 261 (D.Md. 2000)). Interplay counters that Delaware standard for tortious The

interference with prospective business opportunity applies. Delaware elements are: (a) the reasonable probability of a business opportunity; (b) the intentional interference by defendant with that opportunity; (c) proximate causation and (d) damages, all of which must be considered in light of a defendant's privilege to compete or protect his business interests in a fair and lawful manner. (Paper 34, at 7) (citing DeBonaventura v. Nationwide

Mutual

Insurance Company, 428 A.2d 1151, 1153 (1981)). Interplay argues that it has alleged facts for all of the elements of a tortious interference with prospective economic 17

advantage claim under Delaware law.

Interplay contends that it

had probable business opportunities because it (1) had granted a license to Glutton for the creation of a Fallout pen-and-paper role playing game and (2) it was negotiating a content licensing agreement to permit GameTap to distribute Interplay's Pre(Id.

existing Fallout Games over its digital download network. at 8).

Interplay asserts that Bethesda Softworks intentionally with those opportunities which by sending that and a cease-andstop a

interfered desist

letter its

to

Glutton,

demanded game, that

Glutton by

developing letter to

Fallout

pen-and-paper represented

sending did

GameTap,

which

Interplay

not

possess the rights to distribute or sell the preexisting Fallout games. (Id.). Additionally, Interplay contends that it alleged

proximate causation because it pled that Glutton, because of Bethesda Softworks's conduct, sued Interplay for breach of

contract, which deprived Interplay of current and prospective benefits. (Id.). Furthermore, Interplay notes that it alleged

the following damages: (1) Interplay incurred attorneys' fees, costs, and damages in resolving the of lawsuit the occasioned and by (2)

Bethesda Interplay

Softworks's was

repudiation of current

license,

deprived

and

prospective

financial

benefits and has and will continue to suffer economic damages. (Id. at 8-9). Finally, Interplay states that it alleged that 18

Bethesda Softworks was not competing or protecting its business interests in a fair and lawful manner because Bethesda Softworks did not object to the Glutton game license before it executed the APA and because the APA does not provide that Bethesda

Softworks could terminate some of Interplay's rights under the APA, including the Merchandising Rights. Bethesda Softworks replies that (Id. at 9). Interplay's allegations

regarding tortious interference are deficient to state a claim under Maryland or Delaware law because "Interplay fails to

identify a single prospective business opportunity or economic advantage that was adversely affected by Bethesda Softworks's allegedly tortious conduct." (Paper 45, at 6).

It is unclear whether Maryland or Delaware law should apply to evaluate Interplay's claim for tortious interference with

prospective economic advantage. notes,

Bethesda Softworks correctly

Maryland applies the doctrine of lex loci delicti to tort claims, so that such claims "are to be determined by the law of the state in which the alleged tort took place." Philip Morris, Inc. v. Angeletti, 752 A.2d 200, 230 (Md. 2000). Interplay's Counterclaim is silent as to where Bethesda's alleged torts occurred, and therefore it is unclear which state law should apply [to] its claim for tortious interference with prospective economic advantage.

19

(Paper 24, Attach. 2, at 8 n. 5). not stated a claim under Maryland

In any event, Interplay has or Delaware law. Under

Maryland law, Interplay has not alleged that Bethesda Softworks sent the letters to Glutton or GameTap without right or

justifiable cause or with malice. has not alleged with by a reasonable because

Under Delaware law, Interplay probability its license of to a business was

opportunity prohibited

Glutton ELA.

Glutton

the

Considering

Interplay's

allegations

regarding Glutton in light of Bethesda Softworks's privilege to protect its business interests in a fair and lawful manner, Interplay with Under has not that alleged that Bethesda have Softworks reasonably not interfered expected. that

business either

Interplay law,

could

state's

Interplay

has

alleged

Bethesda Softworks's actions proximately caused any damage to its relationship with GameTap. Bethesda Softworks's letter Interplay does not allege that caused GameTap to refuse to

distribute the Pre-existing Fallout Games. general tortious allegation conduct that to Bethesda

Finally, Interplay's "has engaged ongoing in and

Softworks

interfere relations

with with

Interplay's current

prospective

business

and

potential

customers and distributors" lacks the factual specificity, such as the customers' and distributors' names, required to state a plausible claim for relief under Rule 12(b)(6). 20 (Paper 11, at

33

¶

50).

Therefore, with

Interplay's economic

claim

for

tortious will be

interference

prospective

advantage

dismissed for failure to state a claim. 3. Rescission

Bethesda Softworks argues that Interplay's rescission claim should be dismissed because Interplay waived its right to

rescission of the APA and TLA.

Bethesda Softworks asserts that

Interplay did not demand rescission within a reasonable time of what Interplay alleges were Bethesda Softworks's breaches of the contracts and therefore has waived its right to the remedy. (Paper 24, Attach. 1, at 11). Bethesda Softworks cites Ryan v.

Tad's Enterprises, Inc., 709 A.2d 682, 699 (Del.Ch. 1996), in which the Court of Chancery of Delaware noted, "It is a wellestablished right to principle rescission Bethesda of by equity that a plaintiff in waives the it."

excessive

delay

seeking v.

Additionally,

Softworks

quotes

Gaffin

Teledyne,

Inc., Civ. A. No. 5786, 1990 WL 195914, at *18 (Del.Ch. 1990), aff'd in part and rev'd in part, 611 A.2d 467 (Del. 1992), in which the Court of Chancery stated, "It is plaintiff's burden to prove promptness, not defendant's to prove delay." Softworks contends that Interplay alleged that Bethesda Bethesda

Softworks breached the APA in August 2007 and that Interplay did

21

not

demand

rescission

until

it

filed

its

counterclaims

on

October 17, 2009.

(Paper 24, at 11). Bethesda Softworks argues that Interplay

Alternatively,

does not have a legal basis for seeking rescission in this case. (Id.). Interplay asserts that Bethesda Softworks's termination

of Interplay's rights amounts to a "failure of consideration," but Interplay has kept the $5,750,000 in consideration that

Bethesda Softworks paid under the APA.

(Id. at 12).

Interplay responds that its rescission claim is timely and that Bethesda Softworks's laches defense is not a proper basis for dismissal. (Paper 34, at 12). Interplay asserts,

"Interplay's counterclaims allege in substance, if not in form, that Bethesda Softworks never intended to honor any of

Interplay's rights under the APA or TLA . . ." so "Interplay should be entitled to rescind the APA and TLA . . . ." 13-14). Interplay also argues that Bethesda (Id. at is

Softworks

attempting to terminate a portion of the APA, but that the APA "must stand or fall as an entirety" and be rescinded entirely. (Id. at 14). Interplay's rescission claim is a prayer for a specific type of relief, as with its claim for an accounting, that is not a cause of action. If Interplay ultimately prevails on any

claims, the court will consider at that time whether rescission 22

is an appropriate remedy.

Furthermore, it is not appropriate to

consider Bethesda Softworks's laches affirmative defense at this time. An affirmative defense, such as laches, is not ordinarily

considered on a motion to dismiss because the plaintiff is not required to negate it in its complaint. The purpose of a motion

to dismiss under Rule 12(b)(6) is to "test the legal adequacy of the complaint, and not to address the merits of any affirmative defenses." Richmond, Fredericksburg & Potomac R.R. Co. v.

Forst, 4 F.3d 244, 250 (4th Cir. 1993). defenses complaint on a 12(b)(6) motion the only

"A court may consider the of a face of the

`when

clearly

reveals

existence

meritorious

affirmative defense.'"

E. Shore Markets, Inc. v. J.D. Assoc.

Ltd. P'ship, 213 F.3d 175, 185 (4th Cir. 2000); see also 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1357, at 348 49 (2d ed. 1990). The Delaware courts

agree that a laches defense is not a proper basis for dismissal. See Abry Partners V, L.P. v. F & W Acquisition LLC 891 A.2d 1032 (Del.Ch. 2006). Therefore, Bethesda Softworks's motion to

dismiss Interplay's counterclaim for rescission will be denied. III. Motion to Redact Transcript Bethesda Softworks seeks to redact the transcript of the December 10, 2009 of a preliminary particular injunction game 23 not hearing at issue about in the this

"development

proceeding," information

including about the

"confidential timing of game

and

trade

secret financial

development,

budgets, number of employees working on production and other information concerning the current development of this game." (Paper 55, at 2). Bethesda Softworks specifically requests that

the following lines be redacted: Page 54, lines 21-25; Page 69, line 15 through Page 70, line 9; Page 94, lines 8-16; Page 96, lines 6-15; and Page 137, line 19 through Page 138, line 12. Interplay has not opposed Bethesda Softworks's request. Bethesda Softworks's motion will be treated as a motion to seal. Bethesda Softworks's motion must comply with Local Rule

105.11, which provides: Any motion seeking the sealing of pleadings, motions, exhibits or other papers to be filed in the Court record shall include (a) proposed reasons supported by specific factual representations to justify the sealing and (b) an explanation why alternatives to sealing would not provide sufficient protections. The Court will not rule upon the motion until at least 14 days after it is entered on the public docket to permit the filing of objections by interested parties. Materials that are the subject of the motion shall remain temporarily sealed pending a ruling by the Court. If the motion is denied, the party making the filing will be given an opportunity to withdraw the materials. There is also a well-established common law right to inspect and copy judicial records and documents. 24 See Nixon v. Warner

Communications, Inc., 435 U.S. 589, 597 (1978).

If competing

interests outweigh the public's right of access, however, the court may, in its discretion, seal those documents from the public's view. See In re Knight Publishing Co., 743 F.2d 231,

235 (4th Cir. 1984). Furthermore, prior to sealing any documents, the court must provide notice of counsel's request to seal and an opportunity to object to the request the before making its decision. courtroom deciding Id. at Id. or the 234.

Either

notifying the

persons

present in

in

the of

docketing issue"

motion satisfy

"reasonably the notice

advance

will

requirement.

Finally, the court should consider less-drastic alternatives, such as filing redacted versions of the documents. If the court

decides that sealing is appropriate, the court should provide reasons, supported by specific factual findings, for its

decision to seal and for rejecting alternatives. Bethesda Softworks argues that it has

Id. at 235. "spent years

determining the confidential and trade secret business plans for this game, and has kept the particulars of its plans and

production confidential" and that "[p]ublishing the transcript through, for example, Pacer, would that provide they Plaintiff's use in

competitors

valuable

information

could

competition with Plaintiff."

(Id. at 2-3). 25

Because Bethesda

Softworks's motion is unopposed and because the lines Bethesda Softworks seeks to redact do, in fact, relate to the development of a game not at issue in this case, Bethesda Softworks's motion to seal will be granted. The following lines of the December

10, 2009 transcript will be redacted: Page 54, lines 21-25; Page 69, line 15 through Page 70, line 9; Page 94, lines 8-16; Page 96, lines 6-15; and Page 137, line 19 through Page 138, line 12. IV. Motion for Attorneys' Fees and Costs Interplay moves for attorneys' fees and costs that it

incurred in defending against Bethesda Softworks's motion for preliminary injunction. Interplay asserts that Section 35 of

the Lanham Act, 15 U.S.C. § 1117(a), provides in pertinent part that "[t]he court in exceptional cases may award reasonable

attorney fees to the prevailing party" and that this case is exceptional because Bethesda Softworks continued to seek a

preliminary injunction even after it became clear that it did not have evidence to support its motion. (Paper 57, at 5, 8).

Interplay also argues that it is a "prevailing party" within the meaning of Section 1117 of the Lanham Act. (Id. at 15).

Bethesda Softworks responds that an award of costs would be unwarranted and an award of attorneys' fees is untimely because Interplay is not yet a "prevailing party" as the court has not reached the merits of the case. 26 (Paper 58, at 11-12).

Furthermore, Bethesda Softworks asserts that even if Interplay were a "prevailing party," it should not receive attorneys' fees because this is not an "exceptional case" under the Lanham Act. (Id. at 17). At this stage of the litigation, it is premature to award Interplay States, attorneys' fees and costs. courts, Courts follow of the the United

including

the

federal

"American

Rule," meaning that each party to a lawsuit must bear its own attorneys' fees unless there is an express statutory

authorization to the contrary. 424, 429 (1983). bear its own

Hensley v. Eckerhart, 461 U.S.

Under the American Rule, each party must also costs except a limited number of

litigation

enumerated costs (e.g., filing fees and deposition transcripts) that are awarded to a prevailing party under Rule 54(d) of the Federal Rules of Civil Procedure. Interplay is not a

"prevailing party" because the legal relationship between the parties was not altered by the court's denial of Bethesda

Softworks's motion for a preliminary injunction.

See Sole v.

Wyner, 551 U.S. 74, 82 (2007) (holding that "[t]he touchstone of the prevailing party inquiry . . . is the material alteration of the legal relationship of the parties in a manner which Congress sought to promote in the fee statute" and declining to find the plaintiff a prevailing party where it obtained a preliminary, 27

but not permanent, injunction).

Furthermore, this is not an Section 35(a) of the

exceptional case under the Lanham Act.

Lanham Act provides that a court may award attorneys' fees to the prevailing party in "exceptional cases." 15 U.S.C.

§ 1117(a).

An award of attorneys' fees is equally available to The Scotch Whisky Ass'n

prevailing plaintiffs and defendants.

v. Majestic Distilling Co., Inc., 958 F.2d 594, 599 (4th Cir. 1992), cert. denied, 506 U.S. 862 (1992) (noting that a finding of bad faith on the part of a plaintiff is not necessary for a prevailing prevailing faith). defendant plaintiff to prove show an "exceptional" defendant case, acted yet in a

must

the

bad

A case is exceptional when the conduct of the losing Id.

party is "malicious, fraudulent, deliberate, and willful." at 600. case is

Other factors to be considered in determining whether a exceptional and failure include to cite economic coercion, law. groundless Ale House

arguments,

controlling

Mgmt., Inc. v. Raleigh Ale House, Inc., 205 F.3d 137, 144 (4th Cir. 2000). Here, a Interplay has not shown to that Bethesda its

Softworks

pursued

preliminary

injunction

enforce

trademark rights because of malice or fraud. shown that Bethesda Softworks engaged in

Nor has Interplay economic coercion,

pursued groundless arguments, or failed to cite controlling law.

28

Therefore, Interplay's motion for attorneys' fees and costs will be denied. V. Conclusion For the foregoing reasons, Plaintiff's partial motion to dismiss Defendant's counterclaim will be granted in part and denied in part, Defendant's motion for attorneys' fees and costs will be denied, and Plaintiff's motion to redact the transcript will be granted. A separate Order will follow.

/s/ DEBORAH K. CHASANOW United States District Judge

29