Case3:08-cv-03471-SI Document66 Filed01/28/09 Page1 of 10
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`
`GREGORY SHADE,
`Plaintiff,
`
` v.
`DANIEL PATRICK GORMAN, et al.,
`Defendants.
` /
`
`No. C 08-3471 SI
`ORDER GRANTING IN PART AND
`DENYING IN PART DEFENDANTS’
`MOTION TO DISMISS; DENYING
`DEFENDANT’S ANTI-SLAPP MOTION
`
`On December 12, 2008, the Court heard argument on defendants’ motion to dismiss the
`complaint. For the reasons set forth below, the Court GRANTS in part and DENIES in part the motion
`to dismiss, GRANTS LEAVE TO AMEND, and DENIES defendant’s anti-SLAPP motion.
`
`BACKGROUND
`Plaintiff recorded photographs and video footage while in Central Asia immediately following
`the events of September 11, 2001. In 2003, the parties entered a preliminary agreement regarding
`defendant’s production of a documentary using plaintiff’s raw video footage. On March 15, 2003, the
`parties memorialized their agreement, the scope of which they dispute, in a “Letter of Intent” (“LOI”).
`The LOI allows defendant to use plaintiff’s photographs and video footage to produce a documentary,
`and provides that “[c]ontent will be mutually agreed upon by Greg Shade and Daniel Gorman, with final
`approval by both parties.” Compl., Ex. A. The LOI concludes: “This agreement demonstrates good
`faith intent between the two parties . . . until a full and comprehensive contract is drafted and signed by
`both parties within one week of the signing of this document.” Id.
`Pursuant to the parties’ intent to work together on the production of a documentary, plaintiff
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`For the Northern District of California
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`gave defendant access to various files on his computer. Defendant proposed ideas for the documentary,
`but the parties were unable to come to an agreement. Plaintiff alleges that the parties terminated their
`business dealings in April of 2003. Plaintiff further alleges that in January of 2008 he learned that
`defendant had retained and used plaintiff’s still photographs and video footage without his permission,
`in the creation of a documentary entitled American Hero, which was shown at the San Francisco Indie
`Film Festival in February of 2008.
`
`LEGAL STANDARD
`Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it
`fails to state a claim upon which relief can be granted. The question presented by a motion to dismiss
`is not whether the plaintiff will prevail in the action, but whether the plaintiff is entitled to offer
`evidence in support of the claim. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other
`grounds by Davis v. Scherer, 468 U.S. 183 (1984).
`In answering this question, the Court must assume that the plaintiff’s allegations are true and
`must draw all reasonable inferences in the plaintiff’s favor. See Howard v. Everex Systems, 228 F.3d
`1057, 1060 (9th Cir. 2000). Even if the face of the pleadings suggests that the chance of recovery is
`remote, the Court must allow the plaintiff to develop the case at this stage of the proceedings. United
`States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981).
`If the Court dismisses the complaint, it must then decide whether to grant leave to amend. The
`Ninth Circuit has “repeatedly held that a district court should grant leave to amend even if no request
`to amend the pleading was made, unless it determines that the pleading could not possibly be cured by
`the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (citations and internal
`quotation marks omitted).
`
`DISCUSSION
`
`I.
`
`Motion to dismiss
`A.
`Copyright Infringement
`Plaintiff alleges that he owns copyrights to raw and compiled video footage and still photographs
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`that defendant incorporated into a documentary film titled American Hero. He alleges that he obtained
`registration of his copyrights to the compiled video footage on June 17, 2008, and to the still
`photographs on June 30, 2008. Plaintiff alleges that defendant Gorman violated his copyrights by using
`video footage and photographs in American Hero, and that defendant Framebird is committing ongoing
`violations by featuring a video clip on its website. The alleged infringements began at the latest on
`February 17, 2008 when American Hero was shown at the San Francisco Indie Film Festival. Compl.
`¶ 29.
`
`Defendant moves to dismiss plaintiff’s claims for statutory damages and attorneys’ fees because
`such relief is not available for infringements that commenced before registration. See 17 U.S.C. § 412.
`Plaintiff concedes that he may not recover statutory damages and attorneys’ fees for any pre-registration
`infringement, but contends that he may recover such relief for post-registration infringement. However,
`the Ninth Circuit recently held that “Section 412(2) mandates that, in order to recover statutory
`damages, the copyrighted work must have been registered prior to commencement of the infringement,
`unless the registration is made within three months after first publication of the work.” Derek Andrew,
`Inc. v. Poof Apparel Corp., 528 F.3d 696, 699 (9th Cir. 2008). The same holds true for recovery of
`attorneys’ fees. Id. Thus, because the alleged infringement began on February 17, 2008, which is more
`than three months before plaintiff obtained registration of the copyrights, plaintiff may not recover
`statutory damages or attorneys’ fees under the Copyright Act, and the Court GRANTS defendant’s
`motion in this respect.
`Defendant also moves to dismiss plaintiff’s claims for actual damages and injunctive relief. The
`complaint seeks “actual damages” “to be proven at the time of trial.” Compl. ¶¶ 38, 40. In his
`opposition, plaintiff asserts that he is entitled to recover as damages the $50,000 he allegedly spent to
`produce the video footage and still photographs. Defendant contends that these are not the type of
`damages that are available under the Copyright Act. The Court finds it unnecessary and premature to
`resolve these questions at the pleading stage. The complaint simply seeks actual damages to be proven
`at the time of trial. If plaintiff prevails on the copyright claim, the Court will address the issue of
`damages at that time.
`Similarly, defendant moves to dismiss plaintiff’s claim for injunctive relief on the ground that
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`it is overbroad and inconsistent with the purpose of the Copyright Act, which provides an exception for
`fair use. Defendant also contends that plaintiff is not entitled to injunctive relief because the allegations
`that plaintiff will suffer irreparable injury and that plaintiff has no adequate remedy at law are
`unsupported by facts. The Court finds that these arguments are premature as they go to whether plaintiff
`is ultimately entitled to any injunctive relief. Accordingly, to the extent defendant seeks to dismiss
`plaintiff’s claims for actual damages and injunctive relief under the Copyright Act, the Court DENIES
`defendant’s motion.1
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`Computer Fraud and Abuse Act
`B.
`The Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030, makes it unlawful for anyone
`to access a protected computer without authorization, or in excess of authorized access, and thereby
`obtain, alter or damage information or data. Defendant contends that plaintiff has “pled himself out of
`a CFAA claim” because although the complaint alleges that defendant accessed plaintiff’s computer
`“without authorization,” the complaint also alleges facts admitting that initial access of his computer
`system was authorized. See Compl. ¶ 23. In response, plaintiff asserts that the complaint was
`“intended” to allege that defendant exceeded authorization because although plaintiff gave defendant
`permission to use the computer, plaintiff did not give defendant permission to obtain and remove
`information from that computer. The Court finds that read as a whole, the complaint sufficiently alleges
`an “exceeding authorization” claim.
`Defendant also argues that plaintiff did not plead fraud with particularity. “In alleging fraud or
`mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice,
`intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P.
`9(b). The Ninth Circuit has interpreted this rule to require pleadings to specify “the time, place, and
`nature of the alleged fraudulent activities.” Moore v. Kayport Package Exp., Inc., 885 F.2d 531, 540
`(9th Cir. 1989). Defendant argues that plaintiff’s complaint merely restates the CFAA’s legal standard
`and does not provide particularity as to the nature or circumstances of the alleged fraud.
`
`1 Plaintiff concedes that the “claim” for injunctive relief is not a separate claim but really a
`request for a remedy.
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`The Court disagrees. Plaintiff alleges that defendant accessed his computer without
`authorization, and that he stole plaintiff’s property with the intent to make a film against plaintiff’s
`authorization. The Court finds that plaintiff has complied with Rule 9(b), and defendant’s motion to
`dismiss under this rule is accordingly DENIED.
`Defendant also argues that plaintiff’s claim is barred by the two-year statute of limitations under
`18 U.S.C. § 1030(g), which requires that any action under the CFAA be brought within two years of the
`discovery of the damage. Plaintiff alleges that he did not know that defendant had removed files from
`plaintiff’s computer until he learned that defendant had made American Hero. Defendant contends that
`plaintiff’s claim of delayed discovery of the alleged computer fraud is conclusory and “highly
`implausible.” Def.’s Mot. Dismiss at 11. The Court finds that whether plaintiff’s CFAA claim is time-
`barred raises factual issues that are inappropriate for resolution on the pleadings. After discovery
`defendant may renew the timeliness arguments in a motion for summary judgment.
`
`Breach of Contract
`C.
`Plaintiff alleges that the parties entered into an agreement memorialized as the “Letter of Intent”
`(“LOI”). See Compl., Ex. A. The LOI states that “[c]ontent [of the documentary] will be mutually
`agreed upon by Greg Shade and Daniel Gorman, with final approval by both parties.” Compl., Ex. A.
`Plaintiff contends that defendant breached this agreement when he created, published and distributed
`American Hero without plaintiff’s authorization or consent, without a final written agreement in place,
`and for purposes other than those the LOI contemplated. Defendant responds that “[b]y its plain terms,
`the LOI, signed in 2003, was a non-binding agreement to negotiate in good faith for a one week period
`of time.” Def.’s Mot. Dismiss at 9. Defendant highlights an excerpt of the LOI which states that the
`agreement represents the parties’ good faith intent “until a full and comprehensive contract is drafted
`and signed by both parties within one week of the signing of this document.” Compl., Ex. A.
`To support its position, defendant relies on Beck v. American Health Group International, 211
`Cal. App. 3d 1555, 1562 (1989). In Beck, the California Court of Appeal summarized the relevant
`principles of contract law as follows:
`Whether a writing constitutes a final agreement or merely an agreement to make an
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`agreement depends primarily upon the intention of the parties. In the absence of
`ambiguity this must be determined by a construction of the instrument taken as a whole.
`Preliminary negotiations or an agreement for future negotiations are not the functional
`equivalent of a valid, subsisting agreement. A manifestation of willingness to enter into
`a bargain is not an offer if the person to whom it is addressed knows or has reason to
`know that the person making it does not intend to conclude a bargain until he has made
`a further manifestation of assent. Thus, where it is part of the understanding between the
`parties that the terms of their contract are to be reduced to writing and signed by the
`parties, the assent to its terms must be evidenced in the manner agreed upon or it does
`not become a binding or completed contract. The words of a written instrument are
`generally to be understood in their ordinary and popular sense. The objective intent as
`evidenced by the words of the instrument, not the parties’ subjective intent, governs our
`interpretation.
`Id. (citations and quotations omitted). In Beck, the court concluded that a preliminary letter between
`the parties, which they represented as an “outline for our future agreement,” did not constitute a
`contract, particularly because it concluded: “When we have a draft, we will discuss it, and hopefully
`shall have a completed contract and operating unit in the very near future.” Id. at 1563.
`Here, the “Letter of Intent,” by its very title, appears not to be a contract itself, but rather it
`embodies the parties’ intent to enter a contract. The LOI concludes: “This agreement demonstrates
`good faith intent between the two parties . . . until a full and comprehensive contract is drafted and
`signed by both parties within one week of the signing of this document.” Compl., Ex. A (emphasis
`added). Pursuant to California contract law, the Court finds that the “objective intent as evidenced by
`the words of the instrument,” Beck, 211 Cal. App. 3d at 1562, rather than the parties’ subjective intent,
`demonstrates that the LOI is not a binding contract. Rather, it constitutes a preliminary agreement that
`expired when the parties failed to sign a “full and comprehensive contract.” Compl., Ex. A.
`Accordingly, the Court GRANTS defendant’s motion to dismiss plaintiff’s sixth claim for breach of
`contract.
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`Property Claims
`D.
`Defendant moves to dismiss plaintiff’s third, fourth, fifth, seventh, and ninth claims for relief.
`Plaintiff concedes that the claims for “seizure, impoundment and return” (third claim), and “replevin”
`(ninth claim) are not stand-alone causes of action, but rather remedies for the copyright cause of action.
`Accordingly, the Court GRANTS defendant’s motion to dismiss these claims, but will allow plaintiff
`to seek such relief under the copyright claim. See 17 U.S.C. § 503.
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`Plaintiff’s fourth claim is for an accounting, the fifth claim is for unjust enrichment, and the
`seventh claim is for conversion. Defendant contends that to the extent these claims relate to intellectual
`property as opposed to physical property, they are preempted by the Copyright Act. Plaintiff appears
`to concede that point, and only contends that the claim for conversion, insofar as it seeks return of
`plaintiff’s physical property, is not preempted. See Opposition at 12:5-12.
`The Copyright Act expressly preempts any state law or claim asserting “rights equivalent to any
`of the exclusive rights” granted under the Act.2 17 U.S.C. § 301. In general, to determine whether a
`state law claim is preempted by the Copyright Act, the Court must determine: (1) whether the “subject
`matter” of the state law claim falls within the subject matter of copyright; and (2) whether the rights
`asserted in the state law claim are “equivalent” to the rights granted by the Copyright Act. Laws v. Sony
`Music Entertainment, Inc., 448 F.3d 1134, 1137-38 (9th Cir. 2006). To survive preemption under the
`second element of the test, plaintiff’s cause of action must have an “extra element” which changes the
`nature of his action from a copyright claim. Valente-Kritzer Video v. Pinckney, 881 F.2d 772, 776 (9th
`Cir.1989).
`The Court finds that plaintiff’s claims for an accounting and unjust enrichment are preempted
`because the gravamen of these claims is that defendant surreptitiously copied plaintiff’s raw footage and
`photographs, used those materials to make American Hero, and that defendant has benefitted as a result.
`As such, these claims rest on the same facts, and assert the same rights, as plaintiff’s copyright claim.
`See Firoozye v. Earthlink Network, 153 F.Supp.2d 1115, 1128 (N.D. Cal. 2001) (dismissing unjust
`enrichment claim without prejudice on a 12(b)(6) motion because “plaintiff's unjust enrichment claim,
`which at its core alleges that the defendants unfairly benefitted from their unauthorized use of
`WebStash, is equivalent to the rights protected in section 106 of the Copyright Act and is therefore
`preempted.” ); Zito v. Steeplechase Films, Inc., 267 F.Supp.2d 1022, 1027 (N.D. Cal. 2003) (dismissing
`claim on a 12(b)(6) motion because “[w]hile a claim for unjust enrichment may require proof that a
`benefit was conferred on the defendant, where the unjust enrichment arises from defendants'
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`2 The exclusive rights granted under the Copyright Act include the rights: “to reproduce the
`copyrighted works in copies,” “to prepare derivative works based upon the copyrighted work,” “to
`distribute copies . . . to the public,” and “to display the copyrighted work publicly.” 17 U.S.C. § 106.
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`unauthorized use of a copyrighted work, such an extra element does not qualitatively change the rights
`at issue, the rights the plaintiff holds in the copyrighted work, and does not avoid preemption.” ).
`A conversion claim seeking the return of tangible property is not preempted. Oddo v. Ries, 743
`F.2d 630, 635 (9th Cir. 1984). “While conversion is generally immune from preemption because it
`involves tangible property, conversion actions seeking only damages for reproduction of the property
`– not return of tangible property – are preempted by the Copyright Act.” Mktg. Info. Masters, Inc. v.
`Bd. of Tr. of Calif. State Univ., 552 F. Supp. 2d 1088, (S.D. Cal. 2008) (citing Firoozye v. Earthlink
`Network, 153 F. Supp. 2d 1115, 1130 (N.D. Cal.2001)). As alleged, plaintiff’s conversion claim appears
`solely to seek damages. See Compl. at 13 (“For damages according to proof, plus interest at the legal
`rate.”). However, plaintiff’s opposition states that plaintiff seeks the return of tangible property, and
`the Court notes that the complaint seeks such relief under the replevin “cause of action” (“[t]he
`immediate return of Stolen Property, including inter alia, the raw and compiled video footage and still
`photographs. . . .”). Compl. at 13. Accordingly, the Court GRANTS plaintiff leave to amend the
`conversion claim to seek the return of plaintiff’s tangible property. As amended, that claim would not
`be preempted because it seeks an “extra element” beyond the federal copyright claims. See
`Valente-Kritzer Video, 881 F.2d at 776.3
`
`II.
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`Anti-SLAPP
`Defendant moves to strike plaintiff’s state law claims under California’s “Anti-SLAPP”
`(strategic lawsuit against public participation) statute. See Cal. Code of Civ. P. § 425.16. The
`California anti-SLAPP statute permits defendants to bring a “special motion to strike” if a cause of
`action against them arises “from any act . . . in furtherance of the . . . right of petition or free speech .
`. . in connection with a public issue,” unless “the plaintiff has established that there is a probability that
`the plaintiff will prevail on the claim.” Cal. Code Civ. Proc. § 425.16(b)(1). “In making its
`determination, the court shall consider the pleadings, and supporting and opposing affidavits stating the
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`3 Defendant also contends that the conversion claim is time-barred. For the reasons stated
`earlier, the Court finds that whether this claim is untimely raises factual matters that the Court cannot
`resolve at this stage of the litigation. Defendant may renew this contention after discovery.
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`facts upon which the liability or defense is based.” Id. at § 425.16(b)(2). If a defendant prevails in
`bringing a motion to strike, that defendant “shall be entitled to recover his or her attorney’s fees and
`costs.” Id. § 425.16(c). Although it is a state statute, California’s anti-SLAPP protections apply to state
`law claims brought in federal court. United States ex rel. Newsham v. Lockheed Missiles & Space Co.,
`190 F.3d 963, 971-73 (9th Cir. 1999). In evaluating an anti-SLAPP motion, courts engage in a two-part
`inquiry. “First, a defendant must make an initial prima facie showing that the plaintiff’s suit arises from
`an act in furtherance of the defendant’s rights of petition or free speech . . . Second, once the defendant
`has made a prima facie showing, the burden shifts to the plaintiff to demonstrate a probability of
`prevailing on the challenged claims.” Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1110 (9th Cir. 2003).
`Defendant argues that because plaintiff’s suit arises from defendant’s creation, publication and
`use of a documentary film, which falls within the scope of defendant’s First Amendment rights, the
`Anti-SLAPP statute applies to all of plaintiff’s claims. Plaintiff argues that the free speech guarantees
`under the state and federal constitutions do not confer a right to distribute stolen materials or materials
`in violation of copyright law.
`The Court concludes that even assuming defendant has made a prima facie showing that this suit
`arises from defendant’s constitutionally protected speech, plaintiff has met his burden of showing a
`probability of prevailing on the remaining state law claim, conversion. The California Supreme Court
`has emphasized that the plaintiff’s burden is minimal. “[I]n order to establish the requisite probability
`of prevailing . . . the plaintiff need only have stated and substantiated a legally sufficient claim.”
`Navellier v. Sletten, 29 Cal. 4th 82, 88 (2002) (internal citations and quotations omitted). “Put another
`way, the plaintiff must demonstrate that the complaint is both legally sufficient and supported by a
`sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the
`plaintiff is credited.” Wilson v. Parker, Covert & Chidester, 28 Cal. 4th 811, 821 (2002). “Only a
`cause of action that satisfies both prongs of the anti-SLAPP statute – i.e., that arises from protected
`speech or petitioning and lacks even minimal merit – is a SLAPP, subject to being stricken under the
`statute.” Navellier, 29 Cal. 4th at 89. Here, if plaintiff’s evidence is believed, defendant obtained
`and/or copied plaintiff’s footage and photographs without plaintiff’s permission, used those materials
`to make American Hero, and retains possession of those materials to this day. This Court finds that
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`plaintiff has made a sufficient showing to defeat defendant’s anti-SLAPP motion.
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`CONCLUSION
`For the foregoing reasons and for good cause shown, the Court hereby GRANTS in part and
`DENIES in part defendant’s motion to dismiss, and GRANTS plaintiff leave to amend. Plaintiff shall
`file an amended complaint by February 6, 2009. The Court DENIES defendant’s anti-SLAPP motion
`to strike. (Docket No. 27).
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`IT IS SO ORDERED.
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`Dated: January 28, 2009
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`SUSAN ILLSTON
`United States District Judge
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