United States District Court, D. Maryland
XINIS UNITED STATES DISTRICT JUDGE
before the Court is RoyaltyStat, LLC,
(“RoyaltyStat”) and Dr. Ednaldo Silva's
motion to dismiss IntangibleSpring, Inc.,
(“IntangibleSpring”) and Raul Pacheco
Quintanilla's amended counterclaims. ECF No. 73. The
motion is fully briefed, and a hearing was held on October
15, 2018. For the reasons that follow, the Court grants
RoyaltyStat's motion to dismiss.
is a limited liability company founded by Dr. Ednaldo Silva.
ECF No. 112 ¶ 1. 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. Id. ¶ 11. RoyaltyStat registered
the text of the RoyaltyStat database with the United States
Copyright Office (“781 Registration”) and then
registered the selection, coordination, and arrangement of
data in 2015 (“811 Registration”). ECF No. 1 at
2000, RoyaltyStat hired Raul Pacheco Quintanilla to work on
the RoyaltyStat database. ECF No. 112 ¶ 24; ECF No. 72
¶¶ 13-14. Although RoyaltyStat alleges that Pacheco
was a mere data processor (ECF No. 76 at 6), Pacheco avers
that he was the “primary creator and curator” of
the database until approximately 2004. ECF No. 75 at 3.
Pacheco stopped working for RoyaltyStat entirely in 2011. ECF
No. 112 ¶ 28. The next year, Pacheco founded
IntangibleSpring, a direct competitor of RoyaltyStat.
Id. ¶ 32.
December 23, 2015, RoyaltyStat filed its infringement action,
alleging that IntangibleSpring's database includes
records that Pacheco had impermissibly copied and stolen from
RoyaltyStat's database. ECF No. 1 ¶ 39. After
protracted litigation over the propriety of service, Pacheco
accepted service through counsel on March 16, 2017. ECF Nos.
47, 48. Nearly a year later, IntangibleSpring filed
counterclaims, asserting copyright infringement against
RoyaltyStat for its use of Pacheco's database-related
work (the “Pacheco Work”) that he had performed
while employed for RoyaltyStat. ECF No. 72 ¶ 74-88. The
counterclaims also include companion state law claims of
unfair competition and tortious interference with contractual
and other business relationships. Id. ¶¶
before filing the counterclaims, Pacheco applied on an
expedited basis to the Copyright Office for registration of
his contribution to the RoyaltyStat database. ECF No. 72-2.
The Copyright Office refused Pacheco's registration on
several grounds. Id. The Office explained that it
“does not have an option for registration of a
contribution, or multiple contributions, to an automated
database.” ECF No. 72-2 at 3. Nor could the work be
registered as a contribution to a collective work, given that
the Office could not discern from the application whether the
RoyaltyStat database qualifies as a collective work.
Id. Furthermore, as the Office explained, Pacheco
submitted “three disassociated files that appear to be
separate works.” Id. Finally, the Office noted
formal requirements that were not met, including the failure
to include a descriptive statement. Id.
STANDARD OF REVIEW
ruling on a motion to dismiss brought pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure, the
well-pleaded allegations are accepted as true and viewed most
favorably to the party pursuing the allegations. Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The
Court may also consider documents attached to the motion to
dismiss when “integral to and explicitly relied on in
the complaint, and when the [opposing parties] do not
challenge the document[s'] authenticity.” Zak
v. Chelsea Therapeutics, Int'l, Ltd., 780 F.3d 597,
606-07 (4th Cir. 2015) (quoting Am. Chiropractic
Ass'n v. Trigon Healthcare, Inc., 367 F.3d 212, 234
(4th Cir. 2004) (internal quotation marks omitted).
“Factual allegations must be enough to raise a right to
relief above a speculative level.” Twombly,
550 U.S. at 555. “‘[N]aked assertions' of
wrongdoing necessitate some ‘factual enhancement'
within the complaint to cross ‘the line between
possibility and plausibility of entitlement to
relief.'” Francis v. Giacomelli, 588 F.3d
186, 193 (4th Cir. 2009) (quoting Twombly, 550 U.S.
at 557). “[C]onclusory statements or ‘a formulaic
recitation of the elements of a cause of action will not
[suffice].'” EEOC v. Performance Food Grp.,
Inc., 16 F.Supp.3d 584, 588 (D. Md. 2014) (quoting
Twombly, 550 U.S. at 555).
preliminary matter, the Court must determine which version of
the counterclaims is before the Court. RoyaltyStat argues
that the amended counterclaims are not operative because
Pacheco did not seek leave to amend his original
counterclaims. However, leave of court was not necessary
because under Rule 15 of the Federal Rules of Civil
Procedure, “[a] party may amend its pleading once as a
matter of course within . . . 21 days after service of a
motion under Rule 12(b), (e), or (f).” On March 9,
2018, RoyaltyStat moved to strike the original counterclaims
under Rule 12(f) and 12(b)(6). Pacheco, in response, filed
the amended counterclaims on March 23, 2018, well within the
twenty-one day period provided under the Rule. Accordingly,
the Court will consider the sufficiency of the amended
Right to Bring Suit under 17 U.S.C. § 411(a)
principally argues that IntangibleSpring's infringement
action must fail because its application to the Copyright
Office was insufficient and thus rejected on formal grounds.
17 U.S.C. § 411(a) provides, in pertinent part, that:
[N]o civil action for infringement of the copyright in any
United States work shall be instituted until preregistration
or registration of the copyright claim has been made in
accordance with this title. In any case, however, where the
deposit, application, and fee required for registration have
been delivered to the Copyright Office in proper form and
registration has been refused, the applicant is entitled to
institute a civil action ...