Bounce Exchange, Inc. v. Zeus Enterprise Ltd
Filing
41
MEMORANDUM OPINION & ORDER....Plaintiffs October 29, 2015 motion to amend is granted, subject to the conditions described above. As noted, the Court reserves on the issue of futility with respect to the two DMCA claims. If, however, those claims survive, plaintiff must show why any discovery, beyond that already taken under the July 20 Order and pursuant to this Opinion and Order, would be necessary. (Signed by Judge Denise L. Cote on 12/3/2015) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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BOUNCE EXCHANGE, INC.,
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Plaintiff,
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-v:
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ZEUS ENTERPRISE LTD. d/b/a YIELDIFY,
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Defendant.
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15cv3268 (DLC)
MEMORANDUM
OPINION & ORDER
APPEARANCES:
For plaintiff Bounce Exchange, Inc.:
Kristen McCallion
Michael F. Autuoro
FISH & RICHARDSON P.C.
601 Lexington Ave., 52nd Floor
New York, NY 10022
For defendant Zeus Enterprise Ltd. d/b/a Yieldify:
Edward J. DeFranco
QUINN EMANUEL URQUHART & SULLIVAN, LLP
51 Madison Ave., 22nd Floor
New York, NY 10001
DENISE COTE, District Judge:
On April 24, 2015, plaintiff filed this action asserting a
single claim of copyright infringement, asserting that the
defendant’s software source code infringed the plaintiff’s
source code.
complaint.
On June 16, plaintiff filed its first amended
That amendment altered the description of the
defendant but did not add any other claims.
Pursuant to a
motion of October 29, plaintiff now seeks permission to file a
second amended complaint (“SAC”).
That motion is granted, with
conditions.
Before reviewing those conditions, a brief description of
the procedural history of this action is warranted.
At an
initial conference of July 17, the parties informed the Court
that they were prepared to engage in settlement discussions.
In
the event the case did not settle, the plaintiff explained that
it anticipated taking roughly four depositions; the defendant
anticipated needing roughly five depositions.
The Court set a schedule that permitted the parties to
pursue settlement discussions, if necessary with the assistance
of the Magistrate Judge, and to commence discovery in earnest on
October 2, 2015, in the event no settlement had been reached by
that date.
Accordingly, as memorialized in an Order of July 20,
initial disclosures were due October 16, and the plaintiff’s
contention interrogatories addressed to the manner in which the
defendant’s code allegedly copied the plaintiff’s code are due
December 4.
Fact discovery will conclude on March 25, 2016.
Expert discovery closes May 27, 2016. 1
It appears that the parties served initial disclosures on
In their joint case management plain, the parties had proposed
that fact and expert discovery close on April 22, 2016.
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October 16, but have taken no other discovery.
The plaintiff
has served no document demands or interrogatories, and has
served no deposition notices.
Plaintiff obtained new counsel in August.
Incoming counsel
filed a notice of substitution on August 17.
In its motion of October 29, plaintiff seeks to add eight
causes of action.
The additional claims are for violation of
the Digital Millennium Copyright Act (“DMCA”) and for secondary
liability under the Copyright Act, as well as infringement
claims under the laws of four foreign countries.
The defendant
opposes the amendment on the ground that there is no personal
jurisdiction over the defendant, which is a British corporation,
for the four foreign-law claims; that this is not a convenient
forum for litigation of the foreign-law claims; that the
additional claims under the DMCA and the Copyright Act are
futile; and that the defendant would be prejudiced by this
untimely amendment.
Personal jurisdiction must be adequately pleaded for each
claim asserted.
See, e.g., Sunward Elecs., Inc. v. McDonald,
362 F.3d 17, 24 (2d Cir. 2004).
Defendant has not disputed that
the Court has personal jurisdiction over it for any but the four
foreign-law claims.
fails.
Its argument with respect to those claims
Personal jurisdiction over these four claims depends
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upon New York’s long-arm statute and the Due Process Clause.
See Eades v. Kennedy, PC Law Offices, 799 F.3d 161, 168 (2d Cir.
2015).
The defendant does not contend that the assertion of
personal jurisdiction would run afoul of the Due Process Clause.
Jurisdiction under the long-arm statute, N.Y. CPLR §
302(a)(3)(ii), has five elements:
First, that defendant committed a tortious act outside
the State; second, that the cause of action arises
from that act; third, that the act caused injury to a
person or property within the State; fourth, that
defendant expected or should reasonably have expected
the act to have consequences in the State; and fifth,
that defendant derived substantial revenue from
interstate or international commerce.
LaMarca v. Pak–Mor Mfg. Co., 95 N.Y.2d 210, 214 (2000); accord
Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450 F.3d
100, 106 (2d Cir. 2006).
The plaintiff alleges that the defendant contacted the
plaintiff, whose offices are in New York, and requested a
demonstration of and information about the plaintiff’s software.
The plaintiff provided the defendant with non-public information
about its software, which the defendant wrongfully used in its
international business to compete with the plaintiff’s New-Yorkbased business.
This is sufficient to show that the defendant
should have reasonably expected its acts to have consequences in
New York.
See, e.g., Troma Entm't, Inc. v. Centennial Pictures
Inc., 729 F.3d 215, 218 (2d Cir. 2013).
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Defendant’s argument that the foreign-law claims in the
amendment are futile on the ground of forum non conveniens is
similarly unavailing.
In addressing a forum non conveniens
argument, “[a] court must [first] consider whether an adequate
alternative forum exists.
If so, it must balance two sets of
factors”: “public interest factors,” like the administrative
difficulties associated with court congestion and the local
interest in having localized controversies decided at home, and
“private interest factors” like ease of access to evidence and
the cost of willing witnesses’ attendance.
Iragorri v. United
Techs. Corp., 274 F.3d 65, 73-74 (2d Cir. 2001).
Defendant
proposes the courts of the United Kingdom, Ireland, Germany, and
Australia as plausible alternative forums for the four foreignlaw claims.
But, plaintiff is headquartered in New York and
many of the witnesses Yieldify identified in its initial
disclosures are in New York.
Hearing the four parallel foreign-
law claims in four separate foreign jurisdictions would entail
considerably more expense and difficulty than trying them with
the plaintiff’s five American-law claims here.
Accordingly, the
defendant has not shown that the plaintiff’s “chosen forum is .
. .
genuinely inconvenient and the alternate forum[s] [are]
significantly preferable,” Iragorri, 274 F.3d at 74–75 (citation
omitted), and the plaintiff’s choice of forum will not be
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disturbed.
See Martinez v. Bloomberg LP, 740 F.3d 211, 218 (2d
Cir. 2014) (“[T]he plaintiff's choice of forum should rarely be
disturbed.” (citation omitted)).
Defendant argues that the two secondary copyright liability
claims are futile because they lack the requisite specificity.
Claims of contributory copyright infringement require a showing
that the defendant authorized the infringing use.
Softel, Inc.
v. Dragon Med. & Sci. Commc'ns, Inc., 118 F.3d 955, 971 (2d Cir.
1997).
The SAC alleges that the defendant actively and
knowingly sells infringing software that is distributed through
intermediaries to end users.
Claims of vicarious infringement
require a showing that the defendant had a “right and ability to
supervise that coalesced with an obvious and direct financial
interest in the exploitation of copyrighted materials.”
(citation omitted).
Id.
Plaintiff alleges that the defendant is the
owner of the allegedly infringing software, retains control over
and supervises the use of that software after it is sold to
intermediaries and distributed to end users, and that it profits
directly from those sales.
Because these allegations adequately
state claims for contributory infringement and vicarious
infringement, respectively, defendant has not shown that are
futile.
See IBEW Local Union No. 58 Pension Trust Fund &
Annuity Fund v. Royal Bank of Scotland Grp., PLC, 783 F.3d 383,
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389 (2d Cir. 2015).
Defendant also argues that the two DMCA
claims fail to satisfy statutory requirements to state a claim.
The Court reserves decision on this issue.
Under Rule 15, leave to amend is freely granted.
It may be
denied, however, where there is “undue delay, bad faith,
futility of amendment, [or] perhaps most important, [] resulting
prejudice to the opposing party.”
AEP Energy Servs. Gas Holding
Co. v. Bank of Am., N.A., 626 F.3d 699, 725 (2d Cir. 2010)
(citation omitted).
The defendant has shown that this motion to amend may have
been filed in bad faith and with dilatory motives.
The core of
the plaintiff’s lawsuit against defendant remains the claim
contained in its initial pleading and it has taken no discovery
to advance that claim.
As a result, the claims it seeks to add
to this action have not been prompted by its review of any
discovery materials.
Moreover, the defendant asserts that it
will be bringing a motion to dismiss the copyright infringement
claim on the grounds that the copyrights at issue are invalid
and/or that the defendant has not engaged in infringing
activity.
Should the defendant succeed in that motion practice,
the plaintiff does not dispute that that decision would be
dispositive of the claims it seeks to add through this proposed
amendment.
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The parties dispute the extent of prejudice that the
defendant would suffer from the addition of eight claims to the
lawsuit.
While the defendant vaguely asserts that the
additional discovery required would be “inevitably protracted”
and “lengthy, expensive, and time consuming,” the plaintiff
contends that the defendant’s fears are “vastly overblown.”
For
its part, however, the plaintiff does not explain precisely what
additional discovery it would need or address the effect of the
amendment on the current schedule.
Accordingly, the amendment will be permitted on the
condition that the plaintiff and defendant can litigate the
claims in the SAC within the parameters set forth in the July 20
scheduling order.
This assumes that the scope of any document
demands and interrogatories that the plaintiff may serve in this
action will be largely restricted to those that are tethered to
the claim presented in its initial complaint, that it will take
no more than approximately four depositions, and that it will
move with sufficient diligence to complete fact discovery by
March 25, 2016.
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CONCLUSION
Plaintiff’s October 29, 2015 motion to amend is granted,
subject to the conditions described above.
As noted, the Court
reserves on the issue of futility with respect to the two DMCA
claims.
If, however, those claims survive, plaintiff must show
why any discovery, beyond that already taken under the July 20
Order and pursuant to this Opinion and Order, would be
necessary.
Dated:
New York, New York
December 3, 2015
__________________________________
DENISE COTE
United States District Judge
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