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RoyaltyStat, LLC v. Intangiblespring, Corp.

United States District Court, D. Maryland

January 10, 2018

ROYALTYSTAT, LCC, Plaintiff,
v.
INTANGIBLESPRING CORP. et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          PAULA XINIS UNITED STATES DISTRICT JUDGE.

         Pending before the Court is a partial Motion to Dismiss filed by Defendants Raul Pacheco Quintanilla and Defendant Institute for IntangibleSpring Corporation. The issues are fully briefed and the Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. The Court GRANTS in part and DENIES in part the Defendants' motion.

         I. BACKGROUND

         Plaintiff RoyaltyStat, LCC (“RoyaltyStat”) is a limited liability company organized under the laws of the State of Maryland. RoyaltyStat provides its clients with a database of intellectual property royalty rates used for pricing and valuation in connection with litigation, corporate bankruptcy, business development, and mergers and acquisitions. ECF No. 1 at ¶ 5. On May 7, 2009, Plaintiff registered the text of the RoyaltyStat database, the “RoyaltyStat Royalty Tableau, ” with the United States Copyright Office, ECF No. 1 at Exhibit C. Plaintiff also currently seeks copyright registration in the “[s]election, coordination, and arrangement in material and data” and the “original text, material and data, ” for the 2015 RoyaltyStat Royalty Tableau, ECF No. 1 at Exhibit D.

         Defendant Institute for IntangibleSpring Corp. (“IntangibleSpring”) is a corporation organized under the laws of the Republic of Panama. Defendant Raul Pacheco Quintanilla (“Pacheco”), a resident of Mexico, previously worked as an independent contractor for RoyaltyStat and is a shareholder of IntangibleSpring. ECF No. 36. Pacheco was terminated for supposedly embezzling funds from Plaintiff. ECF No. 1 at ¶¶ 27 & 28. Plaintiff alleges that on three separate occasions in 2010 and 2011, prior to Pacheco's termination, Pacheco downloaded RoyaltyStat's customer list and proprietary data, and then formed a competitor business in August 2012, IntangibleSpring, and some time thereafter began using this information in violation of the Copyright Act, Lanham Act, Maryland Uniform Trade Secrets Act, and common law contract claims. See generally ECF No. 1. Plaintiff first learned of Defendants' use of Plaintiff's business information in April 2013, and filed this suit on December 23, 2015. Id.

         II. STANDARD OF REVIEW

         A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is properly granted when the complaint fails to include sufficient factual allegations to render the plaintiff's claims facially plausible or permit reasonable inference that the defendant is liable for the alleged misconduct. See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). A court may also grant a 12(b)(6) motion on statute of limitations grounds, but “only ‘if the time bar is apparent on the face of the complaint.' ” Semenova v. Maryland Transit Admin., 845 F.3d 564, 567 (4th Cir. 2017) (quoting Dean v. Pilgrim's Pride Corp., 395 F.3d 471, 474 (4th Cir. 2005). In assessing the complaint, the Court takes as true all well-pleaded factual allegations and makes all reasonable inferences in the favor of the plaintiff. Philips v. Pitt Cty. Mem. Hosp., 572 F.3d 176, 180 (4th Cir. 1999).

         Although the plaintiff's well-pleaded facts are afforded deference at this stage, the Court does not credit legal conclusions, even when the plaintiff purports them to be allegations of fact. See Iqbal, 556 U.S. at 678-79; Giarrantano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). From the facts averred, the Court must be able to infer “more than the mere possibility of misconduct”; the complaint must contain factual pleadings that show the plaintiff is entitled to relief. See Ruffin v. Lockheed Martin Corp., 126 F.Supp.3d 521, 526 (D. Md. 2015) (quoting Iqbal, 556 U.S. at 678), aff'd 659 F. App'x 744 (4th Cir. 2016).

         The Court may properly take judicial notice of matters in documents attached to the complaint where incorporated and authentic. See Fed. R. Civ. P. 10(c); see also Blankenship v. Manchin, 471 F.3d 523, 526 n. 1 (4th Cir. 2006). Here, the Court will consider the 2009 copyright registration of Plaintiff's database, TX0007233781 (the “‘781 Registration”), because this document is authentic, incorporated by the Complaint, and integral to both Plaintiff's claims and Defendants' proffered affirmative defenses.

         III. ANALYSIS

         a. Count 1: Violation of the Copyright Act, 17 U.S.C. § 101 et seq.

         The Copyright Act protects “original works of authorship fixed in any tangible medium of expression.” 17 U.S.C. § 102. “This protection commences as soon as the original work is created and fixed in some tangible form . . . [and a] copyright owner may seek judicial enforcement of his property rights against subsequent infringers, so long as he has registered the work with the Copyright Office prior to filing the copyright infringement action.” Metropolitan Reg'l Info. Sys., Inc. v. American Home Realty Network, Inc. (“MRIS”), 722 F.3d 591, 596 (4th Cir. 2013). To state a prima facie case for copyright infringement, a plaintiff must allege facts establishing that (1) plaintiff owned copyrighted material and (2) the infringer copied protected elements of that material. Ale House Mgmt., Inc. v. Raleigh Ale House, Inc., 205 F.3d 137, 143 (4th Cir. 2000); Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 801 (4th Cir. 2001) (stating that “[t]o establish a claim for copyright infringement, a plaintiff must prove that it owned a valid copyright and that the defendant copied the original elements of that copyright.”).

         A copyright certificate of registration constitutes “prima facie evidence of the validity of the copyright and of the facts stated in the certificate.” 17 U.S.C. § 410(c). A plaintiff may establish that defendant copied its protected material either directly or indirectly with proof that “the defendant had access to the plaintiff's work and produced a work that is substantially similar to the plaintiff's work.” M. Kramer Mfg. Co., Inc. v. Andrews, 783 F.2d 421, 445 (4th Cir. 1986). Here, Plaintiff alleges that its database content is protected by a copyright, the ‘781 Registration, and that Pacheco's copying the contents into the IntangibleSpring database infringed upon the ‘781 Registration. 17 U.S.C. § 501; ECF No. 1. at ¶¶ 42-48. Thus, Plaintiff has stated a claim properly for copyright infringement.

         Defendants raise three arguments in opposition. First, Defendants contend that because the RoyaltyStat database is no more than a “collection of facts obtained from SEC filings, ” the database lacks the requisite “originality” to be copyrightable under Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 359-60 (1991). See ECF No. 49-1 at 8. Second, Defendants assert that because Plaintiff's copyright is for text only, Plaintiff may not claim copyright protection for the database itself. ECF No. 49-1 at ...


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