Vivid Sites, LLC v. Millsap et al

Filing 39

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Plaintiffs Motion for Leave to file a Sur-reply (Doc. 33 ) and Motion to Incorporate an Exhibit to its Third Amended Complaint (Doc. 35 ) are GRANTED. IT IS FURTHER ORDERED that Defendants' Mot ion to Dismiss Plaintiffs Second Amended Complaint and for an Award of Attorneys' Fees and Costs under the Copyright Act (Doc. 27 ) is GRANTED IN PART AND DENIED IN PART. The motion is granted to the extent it seeks dismissal of this action, and denied to the extent it seeks an award of attorneys' fees and costs. A separate judgment will accompany this Memorandum and Order. IT IS FURTHER ORDERED that Plaintiffs Motion for Leave to File a Third Amended Complaint (Doc. 30 ) it DENIED. Signed by District Judge John A. Ross on 3/29/17. (JAB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

VIVID SITES, LLC,
Plaintiff,
vs.
TIMOTHY MILLSAP, et al.,
Defendants.

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Case No. 4:16-cv-00117-JAR

MEMORANDUM AND ORDER
This matter is before the Court on Defendants Timothy Millsap, Matthew Timme, Daniel
Benninger, and Tri-State Equipment Company, Inc.'s ("Tri-State") (collectively, "Defendants")
Motion to Dismiss Plaintiff Vivid Site, LLC's Second Amended Complaint ("SAC") and for an
. Award of Attorneys' Fees and Costs under the Copyright Act (Doc. 27), Plaintiffs Motion for
Leave to File a Third Amended Complaint (Doc. 30), Plaintiffs Motion for leave to file a Surreply in Opposition to Defendants' Motion to Dismiss (Doc. 33), and Plaintiffs Motion to
Incorporate an Exhibit to its Third Amended Complaint (Doc. 35). As an initial matter, the Court
will grant Plaintiffs Motion for Leave to file a Sur-reply (Doc. 33), and Motion to Incorporate
an Exhibit to its Third Amended Complaint (Doc. 35). For the following reasons, the Court will
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grant in part and deny in part Defendants' motion to dismiss and for an award of attorneys' fees
and costs (Doc. 27); and deny Plaintiffs motion for leave to file a third amended complaint
(Doc. 30).

I. Background
On January 29, 2016, Plaintiff filed its original complaint alleging, inter alia, that
Defendants Millsap, Timme, and Benninger converted source code for Plaintiffs proprietary
Content Management System and Ecommmerce Software ("VS-CMS") and other propriety
software and materials belonging to Plaintiff (Doc. 1). According to Plaintiff, these Defendants
also had accessed its hosting and database servers without its permission (@. In its original
complaint, Plaintiff sought to assert three claims: (1) a copyright infringement claim under the
Copyright Act, see 17 U.S.C. § 501 et seq.; (2) a claim under the Racketeer Influenced and
Corrupt Organizations Act ("RICO"), see 18 U.S.C. § 1961, et seq., based on allegations that
Defendants had committed mail and wire fraud; and (3) a RICO conspiracy claim which was
also based on allegations of mail and wire fraud (@. Defendants moved to dismiss the original
complaint, arguing, inter alia, that Plaintiffs copyright infringement claim was subject to
dismissal because Plaintiff had not registered the VS-CMS source code with the Copyright
Office before bringing suit (Docs. 16-17 & Attach.).
On March 22, 2016, Plaintiff filed its first amended complaint, seeking to assert four
claims: (1) a copyright infringement claim; (2) a claim of unfair competition under Missouri law;
(3) a RICO claim predicated on allegations of mail and wire fraud; and (4) a RICO conspiracy
claim based on allegations of mail and wire fraud (Doc. 18). The next day, Plaintiff filed its
second amended complaint ("SAC"), with Defendants' consent and the Court's leave (Docs. 22,
25-26).
In the now operative SAC, Plaintiff alleges the following facts (Doc. 22). Plaintiff is a
Missouri limited liability company engaged in the business of designing and hosting websites,
including the drafting of proprietary software that enables the creation, design, and hosting of

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various websites. Defendants Millsap, Timme, and Benninger are all citizens of Missouri; Tristate is a Missouri corporation. According to Plaintiff, between November 2012 and December
2015, Millsap, Timme, and Benninger ''took with them," "misappropriated," and "transferred,
converted and/or diverted" source code for VS-CMS, approximately forty of Plaintiffs
"database backup service/files," and other propriety software and materials belonging to Plaintiff
(Id. at iii! 8-12, 15, 18-19). Plaintiff alleges that Millsap, Timme, and Benninger also accessed its
hosting and database servers without its knowledge or permission, and they did so at Tri-State's
request (Id. at iii! 8-13). In its SAC, Plaintiff seeks to assert three claims: (1) a claim under the
Missouri Uniform Trade Secret Act ("MUTSA"); (2) a RICO claim predicated on mail and wire
fraud; and (3) a RICO conspiracy claim based on mail and wire fraud (Id. at iii! 14-35). As to its
RICO claims, Plaintiff alleges that Defendants Millsap, Timme, and Benninger "converted
and/or diverted" VS-CMS and other trade secrets in furtherance of a "scheme," and that they
"[o]n dates yet unknown put documents in furtherance of the scheme ... in the U.S. Mail, and
thereby committed the crime of Mail Fraud, as defined under 18 U.S.C. § 1341 by mailing the
VS-CMS and trade secrets."

CM:.

at

iii! 27,

33). Plaintiff also claims that, in furtherance of a

"scheme," Defendants Millsap, Timme, and Benninger "on dates yet unknown used the
telephone and internet to transfer the Source Code and Trade Secrets of Vivid Sit[es], and
thereby committed the crime of Wire Fraud, as defined under 18 U.S.C. § 1343 by transmitting
the VS-CMS and trade secrets to Tri-State from Vivid Sites" (Id. at iii! 28, 34).
Defendants now move to dismiss the SAC, and seek an award of attorney's fees under the
Copyright Act (Doc. 27). Plaintiff opposes the motion, and alternatively, moves for leave to file
a third amended complaint (Docs. 29-30). For the following reasons, the Court will dismiss the

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SAC, deny Plaintiffs motion for leave to file a third amended complaint, and deny Defendants'
request for fees and costs under the Copyright Act.

II. Discussion
A. Defendants' Motion to Dismiss the Second Amended Complaint
In support of their motion to dismiss the SAC, Defendants first argue that Plaintiff has
failed to allege sufficient facts to support a claim under MUTSA (Doc. 28 at 5-10). Defendants
further argue that Plaintiff has failed to state any viable RICO claims because (1) RICO claims
cannot be predicated on claims of trade secret misappropriation; and (2) Plaintiff has not pleaded
sufficient facts to support RICO claims predicated on allegations of mail or wire fraud under
Rule 9 of the Federal Rules of Civil Procedure (Id. at 10-16). 1
Plaintiff opposes Defendants' motion, arguing that it has alleged sufficient facts to
support its MUTSA claim, and that it has adequately pleaded its RICO claims based on
violations of the federal mail and wire fraud statutes (Doc. 29 at 6-9). 2
In reply, Defendants reiterate their arguments that Plaintiffs MUTSA claim cannot serve
as a RICO predicate act (Doc. 31 ). Defendants also note that Plaintiff does not dispute that Rule

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The parties dispute whether a RICO claim can be predicated on allegations of trade
secret misappropriation or copyright infringement claims (Docs. 28 at 11-13; 28 at 8-9; 31 at 2-4;
33.l at 2-3). The Court need not address this issue, as Plaintiff does not-in its original, first
amended, second amended, or proposed third amended complaints-purport to assert a RICO
claim predicated on a claim of trade secret misappropriation. Instead, Plaintiff has consistently
and specifically identified the federal mail and wire fraud statutes as the predicate offenses on
which it seeks to base its RICO claims (Docs. 1 at iii! 26-27, 32-33; 18 at iii! 29-30, 35-36; 22 at
ifif 27-28, 33-34; 30.2 at ifif 33-34, 39-40). The parties also disagree as to whether Plaintiffs
MUTSA claim is subject to dismissal because it is preempted by the Copyright Act. The Court
need not resolve this issue given its dismissal of the SAC on other grounds.
2
Plaintiff attached an affidavit by David Black, Plaintiffs CEO, to its memorandum in
opposition to Defendant's motion to dismiss (Doc. 29.1); the parties dispute whether the Court
should consider its contents. The Court has reviewed Mr. Black's affidavit, and concludes that
none of the averments set forth therein would change the Court's rulings on any of the motions
now pending before the Court.
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9's heightened pleading requirement applies to its RICO claims, and argue that there is no
independent basis to support federal jurisdiction over Plaintiffs MUTSA claim (MJ. In surreply, Plaintiff contends that its MUTSA claim is a predicate act under RICO, that it has met
Rule 9's heightened pleading requirement by pleading its RICO claims with particularity, and
that it has stated a cognizable MUTSA claim (Doc. 33.1). For the following reasons, the Court
will dismiss the SAC.
Plaintiffs RICO claims
First, the Court concludes that Plaintiff has failed to state viable RICO claims. "Section
1962 of the RICO Act makes it 'unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to
conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a
pattern of racketeering activity or collection of unlawful debt."' Crest Constr. II, Inc. v. Doe, 660
F.3d 346, 353 (8th Cir. 2011) (quoting Nitro Distrib., Inc. v. Alticor, Inc., 565 F.3d 417, 428 (8th
Cir. 2009)). "RICO provides a private right of action for any person 'injured in his business or
property by reason of a violation of its substantive prohibitions." Dahlgren v. First Nat'l Bank
of Holdrege, 533 F.3d 681, 689 (8th Cir. 2008) (quoting 18 U.S.C. § 1964(c)).
To establish a civil RICO claim, a plaintiff must show "(1) conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity." Sedima S.P.R.L. v. Imrex Co., 473 U.S. 479,
496 (1985). A "pattern of racketeering activity" requires the commission of at least two
racketeering acts, or "predicate" offenses, over a ten-year period. 18 U.S.C. § 1961(5); see also
Sedima, 473 U.S. at 488 (discussing "predicate acts").
Mail fraud in violation of 18 U.S.C. § 1341, and wire fraud in violation of 18 U.S.C.
§ 1343, both qualify as "racketeering activity" under RICO. See 18 U.S.C. § 1961(1). A plaintiff

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seeking to state a civil RICO claim predicated on allegations of mail or wire fraud must,
consistently with Rule 9, "state with particularity the circumstances constituting [the] fraud." See
Fed. R. Civ. P. 9(b); Crest Constr. II, 660 F.3d at 353, 358 (applying Rule 9's particularity
requirement to allegations of mail and wire fraud underlying civil RICO claim); Murr Plumbing,
Inc. v. Scherer Bros. Fin. Servs., Co., 48 F.3d 1066, 1069-70 (8th Cir. 1995) (same). In other
words, a plaintiff must plead the "who, what, when, where, and how" of his RICO claims. Crest
Constr. II, 660 F.3d at 353 (quoting Summerhill v. Terminix, Inc., 637 F.3d 877, 880 (8th Cir.
2011)).
The elements of mail fraud under 18 U.S.C. §1341 are "(1) a scheme to defraud by means
of material false representations or promises, (2) intent to defraud, (3) reasonable foreseeability
that the mail would be used, and (4) that the mail was used in furtherance of some essential step
in the scheme." United States v. Louper-Morris, 672 F.3d 539, 555 (8th Cir. 2012) (quoting
United States v. Bryant, 606 F.3d 912, 917 (8th Cir. 2010)). A scheme to defraud "need not be
fraudulent on its face, but 'must involve some sort of fraudulent misrepresentations or omissions
reasonably calculated to deceive persons of ordinary prudence and comprehension."' United
States v. Goodman, 984 F.2d 235, 237 (8th Cir. 1993) (quoting Kehr Packages, Inc. v. Fidelcor,
Inc., 926 F.2d 1406, 1415 (3d Cir. 1991)). Notably, the scheme must involve some affirmative
misrepresentation or active concealment manifesting an intent to deceive. Id. (citing United
States v. McNeive, 536 F.2d 1245, 1251 (8th Cir. 1976)); see also Goodman, 984 F.2d at 237
("[T]he essence of a scheme is a plan to deceive persons as to the substantial identity of the
things they are to receive in exchange."). A defendant's use of the mail, standing alone, is
insufficient to support a RICO claim predicated on allegations of mail fraud. See Louper-Morris,
672 F.3d at 556; Dahlgren, 533 F.3d at 689. "The elements of wire fraud under 18 U.S.C. § 1343

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are identical to the elements of mail fraud except that wire fraud involves interstate wire
communications rather than mail." United States v. Cole, 721 F.3d 1016, 1021 (8th Cir. 2013)
(citing Louper-Morris, 672 F.3d at 555).
The Court concludes that Plaintiff has failed to state a RICO claim predicated on
allegations of mail fraud, as it has not alleged that Defendants participated in a scheme to
defraud Plaintiff. See Louper-Morris, 672 F.3d at 555. In the various iterations of its complaint,
Plaintiff has alleged that Defendants stole, misappropriated, transferred, and converted its
intellectual property. It has not, however, alleged that Defendants fraudulently misrepresented
any material fact or actively concealed a material fact in connection with the theft of Plaintiffs
intellectual property. Goodman, 984 F .2d at 23 7. Plaintiff also has not identified who utilized the
mail, what was placed in the mail, or when the mail was used in furtherance of the alleged
scheme. See Crest Constr. II, 660 F.3d at 359 (district court properly dismissed RICO count
predicated on allegations of mail and wire fraud because complaint did not identify the "who,
where, when and how" of the alleged fraud); Nitro Distrib., 565 F.3d at 428-29 (RICO claim was
properly dismissed for failure to set forth predicate acts of mail and wire fraud where complaint
alleged in very general terms that the defendant engaged in racketeering that "involved the use of
the interstate telephone and the U.S. mails on a number of occasions").
The Court also concludes that Plaintiff has failed to state a viable RICO claim predicated
on its allegations of wire fraud. See Crest Constr. II, 660 F.3d at 359; Nitro Distrib., 565 F.3d at
428-29. Specifically, Plaintiff has not alleged any facts to support an inference that Defendants
participated in a scheme whereby they sought to defraud Plaintiff by means of material false
representations or promises, that they made any false representations or promises in connection
with the scheme, or that they used telephones or the internet in furtherance of the scheme. See

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Cole, 721 F.3d at 1021; Goodman, 984 F.2d at 237. In addition, Plaintiff has alleged in general
terms that "[i]n a scheme using interstate telephone lines" Defendant's Millsap, Timme, and
Benninger "transferred, converted and/or diverted" Plaintiffs intellectual property; it has not,
however, identified the "who, what, or when" of any use of a telephone or the internet in
furtherance of the scheme. Crest Constr. II, 660 F.3d at 359; Nitro Distrib., 565 F.3d at 428-29.
Thus, Plaintiffs RICO claims are subject to dismissal because they do not adequately allege a
pattern of racketeering, i.e., that Defendants committed at least two racketeering acts, or
"predicate" offenses, over a ten-year period. See Craig Outdoor Adver., Inc. v. Viacom Outdoor,
Inc., 528 F.3d 1001, 1028 (8th Cir. 2008) (failure to establish any element of a RICO claim
means the entire claim fails). Given its failure to plead the requisite predicate acts necessary to
support RICO claims based on its allegations of mail and wire fraud, Plaintiffs RICO conspiracy
claim is also subject to dismissal for failure to state a claim. Beck, 529 U.S. at 504-06 (RICO
conspiracy claim requires pleading of predicate acts).
Plaintiffs Claims under Missouri Law
In light of the dismissal of Plaintiffs federal RICO claims, and in the interests of judicial
economy, convenience, fairness and comity, the Court will decline to exercise its supplemental
jurisdiction over Plaintiffs MUTSA claim, which seeks relief under Missouri law. See Thomas
v. United Steelworkers Local 1938, 743 F.3d 1134, 1141 (8th Cir. 2014) (after dismissing all
claims over which it has original jurisdiction, a district court nevertheless maintains broad
discretion to exercise supplemental jurisdiction over remaining state law claims); Crest Constr.
II, 660 F.3d at 359 (affirming district court's decision not to exercise supplemental jurisdiction
over remaining state law claims after it dismissed the only claim over which it had original
jurisdiction, a RICO claim); Quinn v. Ocwen Fed. Bank FSB, 470 F.3d 1240, 1249 (8th Cir.

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2006) (discussing factors district courts should consider when deciding whether to exercise
supplemental jurisdiction after dismissing all federal claims). For the aforementioned reasons,
the Court will dismiss Plaintiffs SAC in its entirety.
B. Plaintiffs Motion for Leave to File a Third Amended Complaint

In lieu of dismissal of this action, Plaintiff seeks leave to amend its complaint for a third
time (Doc. 30). In its proposed third amended complaint ("TAC"), Plaintiff seeks to assert five
claims: (1) a MUTSA claim; (2) a copyright infringement claim under the Copyright Act; (3) a
RICO claim predicated on mail and wire fraud; (4) a RICO conspiracy claim based on mail and
wire fraud; and (5) a claim of unfair competition under Missouri law (Doc. 30.2). Plaintiff has
attached to its proposed TAC (1) a copy of its application for registration of "VividSites CMS
(VS-CMS)" submitted to the Copyright Office on January 25, 2016 (Doc. 30.1 at 2-5); (2) a
document indicating that Plaintiffs application for registration of VS-CMS was "pending" on
April 28, 2016 (Doc. 30.1 at 1); and (3) a copy of a registration certificate issued by the
Copyright Office for "VividSites CMS (VS-CMS)" reflecting a January 25, 2016 "effective
date" (Doc. 35.1). According to Plaintiff, it omitted its copyright infringement claim from its
SAC because counsel was unaware that ''through other counsel [Plaintiff] had applied to
register" the VS-CMS software with the Copyright Office (Doc. 30).
Defendants oppose Plaintiffs motion for leave to amend, arguing, inter alia, that the
recently issued Copyright registration does not remedy Plaintiffs failure to complete its
copyright registration before it filed this lawsuit, that Plaintiffs proposed MUTSA and unfair
competitions claims lack an independent basis for federal jurisdiction, and that the SAC fails to
state viable claims under the Copyright Act, RICO, MUTSA, or Missouri common law (Doc.
34).

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Leave to amend should be freely granted when justice so requires. Fed. R. Civ. P. 15(a).
In other words, leave to amend should "normally be granted absent good reason for denial. The
classic 'good reasons' for rejecting an amendment are: 'undue delay, bad faith or dilatory
motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice
to the non-moving party, or futility of amendment."' Popp Telcom v. Am. Sharecom, Inc., 210 ·
F.3d 928, 943 (8th Cir. 2000). Amendment is futile when, inter alia, the amended complaint
could not withstand a motion to dismiss. Holloway v. Dobbs, 715 F.2d 390, 395 (8th Cir. 1983)
(per curiam).
The Court will deny Plaintiffs motion for leave to amend its complaint for a third time.
Initially, the Court notes that amendment would be futile as to Plaintiffs RICO claims because
the proposed TAC does not remedy the SAC's failure to adequately plead mail or wire fraud as
predicate offense, as discussed more fully above. See id.; see also Crest Constr. II, 660 F.3d at
353. The Court also notes that amendment of Plaintiffs complaint to reassert a copyright
infringement claim may also be futile. The Copyright Act "requires copyright holders to register
their works before suing for copyright infringement." Reed Elsevier, Inc. v. Muchnick, 559 U.S.
154, 157, 163-69 (2010) (the Copyright Act's registration requirement is a non-jurisdictional
precondition to filing a copyright infringement claim); see also 17 U.S.C. § 41l(a) (no civil
action for copyright infringement in any U.S. work shall be instituted until preregistration or
registration of the copyright claim has been made). Here, Plaintiff applied for registration of the
VS-CMS source code before it filed its original complaint; however, the Copyright Office did
not approve the application and issue Plaintiff a registration until after this lawsuit had been
initiated. At this stage of the proceeding, it is unclear whether Plaintiffs proposed copyright
infringement claim would be subject to dismissal based on its failure to complete the registration

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of VS-CMS before filing this lawsuit. There is currently a split among the U.S. Courts of
Appeals as to whether the Copyright Act's registration requirement is satisfied upon a plaintiffs
filing of a registration application, or instead upon the Copyright Office's subsequent approval or
rejection of the application. Some courts have concluded that a plaintiff need only file a complete
application for registration with the Copyright Office before bringing a copyright infringement
suit. See Cosmetic Ideas, Inc. v. IAC/Interactivecorp., 606 F.3d 612, 616-23 (9th Cir. 2010);
Chicago Bd. of Educ. v. Substance, Inc., 354 F.3d 624, 631 (7th Cir. 2003); Apple Barrel Prods.,
Inc. v. Beard, 730 F.2d 384, 386-87 (5th Cir. 1984). Other courts have concluded that a plaintiff
can file suit only after its application for registration has been approved or rejected by the
Copyright Office. See La Resolana Architects, PA v. Clay Realtors Angel Fire, 416 F.3d 1195,
1200-08 (10th Cir. 2005), abrogated on other grounds by Muchnick, 559 U.S. at 154; see M.G.B.
Homes, Inc. v. Ameron Homes, Inc., 903 F.2d 1486, 1489 (11th Cir. 1990). It appears that the
Eighth Circuit Court of Appeals has not yet squarely addressed this issue. Therefore, to the
extent Plaintiff seeks to reassert a copyright infringement claim, it is not entirely clear whether
amendment would be futile.
The Court notes however that Plaintiff sought to assert a copyright infringement claim in
its original complaint; that it omitted the copyright infringement claim from its first and second
amended complaints based on Defendants' argument that it had not yet registered the VS-CMS
source code with the Copyright Office; and that it now seeks to reassert its copyright
infringement claim, alleging that it has only recently learned that it had filed an application with
the Copyright Office before filing this lawsuit and that the application has since been approved.
Notably, Plaintiff has not explained its failure to reasonably inquire as to whether it had applied
for registration of VS-CMS before bringing this action, nor has it explained why it did not

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investigate whether an application had been filed even after Defendants put it on notice of the
registration issue in its motion to dismiss the original complaint. Plaintiffs delay in inquiring as
to whether it had filed an application to register the VS-CMS source code with the Copyright
Office was, at best, dilatory. For all of these reasons, the Court will deny Plaintiffs motion for
leave to file a third amended complaint. See Popp Telcom, 210 at 943.
C. Defendants' Request for Fees and Costs under the Copyright Act
Defendants seek an award of attorney's fees and costs under the Copyright Act, citing 17
U.S.C. § 505 (Doc. 27). According to Defendants, they are entitled to attorney's fees and costs
because they are prevailing parties, given Plaintiffs decision to drop its copyright infringement
claim from its SAC. In support of their request for fees and costs, Defendants emphasize that
Plaintiffs failed to register the VS-CMS source code before initiating this suit. They further
argue that, after learning that its copyright claim was subject to dismissal for failure to register,
Plaintiff "unreasonably multiplied the proceedings and abused the judicial process by filing
multiple amended complaints attempting to mask its real cause of action with preempted state
law claims" (Docs. 28 at 16-17; 31 at 13-14). Plaintiff opposes Defendants' request for fees and
costs, claiming that it relied on Defendants' statement that the VS-CMS source code had not
been registered when it omitted its copyright infringement claim from the SAC, and that it now
seeks to revive that claim based on its discovery that an application for registration had in fact
been filed on its behalf before it filed this lawsuit (Doc. 33.1 at 7-8). Plaintiff also argues that
Defendants have admitted that they conspired to misappropriate its propriety materials (@.
Section 505 authorizes the Court to award a reasonable attorney's fee to the prevailing
party. 17 U.S.C. § 505. "The decision to award attorneys' fees to a prevailing party under§ 505
is a matter for the district court's 'equitable discretion,' to be exercised in an evenhanded manner

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by considering factors such as whether the lawsuit was frivolous or unreasonable, the losing
litigant's motivations, the need in a particular case to compensate or deter, and the purposes of
the Copyright Act." Action Tapes, Inc. v. Mattson, 462 F.3d 1010, 1014 (8th Cir. 2006) (citing
Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 & n.9 (1994)). The Court may not award attorney's
fees "as a matter of course," but must instead make "a more particularized, case-by-case
assessment." Kirtsaeng v. John Wiley & Sons, Inc., 136 S. Ct. 1979, 1985 (2016) (citing Fogerty,
510 U.S. at 533). The Court also may not treat prevailing plaintiffs and prevailing defendants any
differently, as defendants should be encouraged to litigate meritorious defenses to the same
extent plaintiffs should be encouraged to litigate meritorious claims of infringement. Id. (citing
Fogerty, 510 U.S. at 527). Moreover, the Court should give "substantial weight" to the objective
reasonableness of the arguments and positions taken by the losing party, while also taking into
account all other relevant factors. Id. at 1984-89.
The Court will deny Defendants request for attorney's fees and costs. In light of the
aforementioned circuit split on the issue of the Copyright Act's registration requirement and the
apparent absence of binding authority from the Eighth Circuit on the issue, the Court concludes
that Plaintiffs attempt to bring a copyright infringement claim was not objectively unreasonable.
See Action Tapes, 462 F.3d at 1014. Moreover, even if the Court were to assume the objective
unreasonableness of Plaintiffs initiation of this lawsuit after it had applied for registration but
before its application was approved by the Copyright Office, the Court would nevertheless
decline to award attorney's fees or costs in this case. See Kirtsaeng, 136 S. Ct. at 1989 (a court
may deny fees under the Copyright Act even where the losing party offered unreasonable
arguments). Plaintiffs claims were not frivolous, and there is no indication that Plaintiff
harbored any improper motivations while litigating this case. Moreover, an award of fees and

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costs would not be consistent with the purposes of the Copyright Act, as the Copyright Office
has allowed Plaintiff to register the VS-CMS source code during the pendency of this
proceeding. Under the facts of this particular case, the Court sees no need to compensate
Defendants or to deter Plaintiff. The Court also notes that the now operative complaint does not
include a claim under the Copyright Act. For these reasons the Court will deny Defendants'
request for attorney's fees and costs under the Copyright Act. See id.; Fogerty, 510 U.S. at 534.
D. Conclusion
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs Motion for Leave to file a Sur-reply (Doc.
33) and Motion to Incorporate an Exhibit to its Third Amended Complaint (Doc. 35) are
GRANTED.
IT IS FURTHER ORDERED that Defendants' Motion to Dismiss Plaintiffs Second
Amended Complaint and for an Award of Attorneys' Fees and Costs under the Copyright Act
(Doc. 27) is GRANTED IN PART AND DENIED IN PART. The motion is granted to the
extent it seeks dismissal of this action, and denied to the extent it seeks an award of attorneys'
fees and costs. A separate judgment will accompany this Memorandum and Order.
IT IS FURTHER ORDERED that Plaintiffs Motion for Leave to File a Third
Amended Complaint (Doc. 30) it DENIED.
Dated this 29th day of March, 2017.

.ROSS
D STATES DISTRICT JUDGE

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