Case3:10-cv-05696-CRB Document80 Filed04/22/11 Page1 of 13
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`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`AMARETTO RANCH BREEDABLES,
`LLC,
`
`Plaintiff,
`
` v.
`OZIMALS, INC, et al.,
`Defendants.
` /
`
`No. C 10-05696 CRB
`ORDER GRANTING IN PART AND
`DENYING IN PART MOTION TO
`DISMISS
`
`This is a copyright case between business competitors who sell virtual animals in the
`virtual world known as Second Life. The case started when Plaintiff Amaretto Ranch
`Breedables filed a Complaint and sought a temporary and preliminary restraining order
`preventing Linden Research, Inc. from removing Amaretto’s virtual horse product line from
`the Second Life world in response to a Digital Millennium Copyright Act (“DMCA”)
`Takedown Notification sent to Second Life by Defendant Ozimals, Inc. This Court granted
`Amaretto’s request for a TRO and ultimately issued a preliminary injunction requiring
`Ozimals to withdraw all DMCA Takedown Notifications from Second Life and to file no
`further notifications.
`Presently before the Court is Ozimals’s Motion to Dismiss the Second through Fifth
`causes of action in Amaretto’s First Amended Complaint (“FAC”).1 Dkt. 72. Specifically,
`
`1 Ozimals does not move to dismiss Amaretto’s cause of action for declaratory judgment.
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`For the Northern District of California
`For the Northern District of California
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`United States District Court
`United States District Court
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`I.
`
`Ozimals moves to dismiss Amaretto’s claims for (1) misrepresentation under 17 U.S.C. §
`512(f); (2) tortious interference with prospective business advantage; (3) unfair competition
`under California Business and Professions Code § 17200; and (4) misuse of copyright under
`17 U.S.C. § 102(B).
`Ozimals’s Motion is GRANTED in part and DENIED in part. Specifically:
`•
`The section 512(f) claim is DISMISSED with prejudice.
`•
`The tortious interference with contract claim is DISMISSED without prejudice.
`•
`The Motion to Dismiss is DENIED in all other respects.
`•
`The Preliminary Injunction shall REMAIN IN EFFECT.
`BACKGROUND2
`Second Life is a virtual world operated by Linden. FAC (dkt. 68) ¶ 15. Users can
`create three dimensional environments through the use of tools offered by Linden. Id. ¶ 16.
`One such tool is the Linden Scripting Language (“LSL”), a universal coding language used
`to add functionality to virtual objects. Id. Linden owns the copyright to LSL. Id.
`Creators of virtual objects can set “permissions” that allow varying degrees of
`interaction and/or alteration of an object. Id. ¶ 17. Setting “permissions” at the proper level
`is important because many creators sell their objects in virtual stores in Second Life for real
`world currency. Id. ¶ 18.
`One type of popular user-created object sold in Second Life is the breedable animal.
`Id. ¶ 19. Essentially, these objects mimic the life cycle of a real animal; they eat to survive,
`sleep, and replicate. Id. Amaretto created a breedable horse and associated virtual horse
`food, both of which it sells in Second Life. Id. ¶ 20. Amaretto competes in the market of
`virtual animal sellers with Ozimals, which owns and sells virtual breedable bunnies. Id. ¶
`22-23.
`In early November 2010, Ozimals sent Amaretto a “cease-and-desist” letter alleging
`that (1) Amaretto’s virtual horses were a “virtual clone” of Ozimals’s virtual bunnies and (2)
`
`2 As this case comes before the Court on a motion to dismiss, the facts are set forth in the light
`most favorable to Amaretto and drawn from the FAC and judicially noticeable materials.
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`Case3:10-cv-05696-CRB Document80 Filed04/22/11 Page3 of 13
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`Amaretto was infringing Ozimals’s copyrights. Id. ¶ 23. The assertions in the cease-and-
`desist letter were false. See id. ¶ 23-24. Ozimals made similar false statements to “other
`members of the Second Life community.” Id. ¶ 25. Amaretto responded to Ozimals’s cease-
`and-desist letter in late November 2010, asserting that it was not and could not be infringing
`any valid copyrights. Id. ¶ 26.
`On December 1, 2010, Ozimals filed with Linden a DMCA Takedown Notification
`pursuant to 17 U.S.C. § 512(c)(3). Id. ¶ 27. The Notification sought, among other things, the
`removal from Second Life of Amaretto’s virtual “food” and “water.” Had the takedown
`occurred, the virtual horses would have “died” from “starvation” and/or “thirst” within 72
`hours. Id. ¶ 28. A takedown would have caused a significant disruption in Amaretto’s
`business during a critical selling season. Id. ¶ 33.
`Among other actions in response to the DMCA Takedown Notification, Amaretto
`eventually sought and obtained from this Court preliminary relief in the form of an injunction
`requiring Ozimals to withdraw all pending DMCA notifications concerning Amaretto’s
`horses. Id. ¶ 32; see also Dec. 21, 2010 Order (dkt. 29); Jan. 7, 2011 Order (dkt. 49).
`Meanwhile, Ozimals filed a copyright infringement action against Amaretto in the United
`States District Court for the Northern District of Alabama on December 20, 2010. See
`Complaint (dkt. 1) Ozimals v. Amaretto Ranch Breedables, LLC, 2:10 cv-03520-KOB. That
`Complaint has not been served.
`At the Court’s direction, the parties engaged in preliminary discovery designed to
`determine whether Amaretto copied Ozimals’s code when Amaretto created the virtual
`horses. It was the Court’s hope that early exchange of code might shed light on the merits of
`Ozimals’s allegation that Amaretto violated its copyrights and perhaps facilitate early
`resolution of this and the related copyright infringement action in Alabama. The parties
`exchanged that discovery. Although it appears that they agree that no literal copying
`occurred, they disagree as to whether nonliteral copying occurred. See Joint Case
`Management Statement (dkt. 70) at 15 (“The Sylint Group [(Ozimals’s expert)] did not find
`wholesale copying of the written source code from among the files it examined. Instead, The
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`Sylint Group found Ozimals code produced certain traits, while Plaintiff’s code produced the
`same traits using a different set of written code.”).
`Ozimals has now moved to dismiss each of Amaretto’s claims other than its claim for
`declaratory relief.3 As mentioned above, those claims are for (1) misrepresentation under 17
`U.S.C. § 512(f); (2) tortious interference with prospective business advantage; (3) unfair
`competition under California Business and Professions Code § 17200; and (4) misuse of
`copyright under 17 U.S.C. § 102(B).
`II.
`LEGAL STANDARD
`A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims
`alleged in a complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-2000 (9th Cir. 2003).
`Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a “short and plain
`statement of the claim showing that the pleader is entitled to relief.” “Detailed factual
`allegations” are not required, but the Rule does call for sufficient factual matter, accepted as
`true, to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 129 S. Ct.
`1937. 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)).
`According to the Supreme Court, “a claim has facial plausibility when the plaintiff pleads
`factual content that allows the court to draw the reasonable inference that the defendant is
`liable for the misconduct alleged.” Id. at 1949-50. Whether a complaint states a plausible
`claim is a “context-specific task that requires the reviewing court to draw on its judicial
`experience and common sense.” Id. at 1950.
`III. DISCUSSION
`A.
`The Section 512(f) Misrepresentation Claim Is Not Viable Because No
`Takedown Occurred
`Section 512(f) provides in pertinent part as follows.
`Any person who knowingly materially misrepresents under this
`section – (1) that material or activity is infringing . . . shall be liable
`for any damages, including costs and attorneys’ fees, incurred by the
`alleged infringer, by any copyright owner or copyright owner’s
`
`3 Amaretto’s claim for declaratory relief seeks a declaration “that its products do not infringe
`[Ozimals’s] alleged copyrights, or any other exclusive rights that [Ozimals] might assert under state or
`federal law, and that Defendants copyrights are not valid or enforceable.” FAC (dkt. 68) ¶ 39.
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`authorized licensee, or by a service provider, who is injured by such
`misrepresentation, as the result of the service provider relying upon
`such misrepresentation in removing or disabling access to the material
`or activity claimed to be infringing . . . .
`17 U.S.C. § 512(f) (emphasis added).
`Ozimals argues that, because Linden never removed the horses from Second Life,
`Amaretto cannot have been “injured . . . as the result of the service provider . . . removing or
`disabling access to the material . . . claimed to be infringing.” Id. (emphasis added); Mot. to
`Dismiss (dkt. 72) at 4-5; see also Lenz v. Universal Music Corp., No. C. 07-3783 JF, 2010
`WL 702466 at *10 (N.D. Cal. Feb. 25, 2008) (“A fair reading of the statute, the legislative
`history, and similar statutory language indicates that a § 512(f) plaintiff’s damages must be
`proximately caused by the misrepresentation to the service provider and the service
`provider’s reliance on the misrepresentation.”) (emphasis in original).
`Amaretto argues that applying section 512 as written and thereby excluding claims
`where, as here, no takedown occurred, is inconsistent with the legislative purpose of
`“deter[ing] knowingly false allegations to service provides in recognition that such
`misrepresentations are detrimental to the rights holders, service providers, and Internet
`users.” S. Rep. 105-190, May 11, 1998 at 49; Opp’n to Mot. to Dismiss (dkt. 74) at 3.
`Amaretto is right that limiting suits for damages to those caused by an actual takedown is a
`less effective deterrent than allowing suits based merely on the filing of a false Takedown
`Notification. But the statute is unambiguous in entitling an alleged infringer to damages
`caused “as the result of the service provider . . . removing or disabling access to the material .
`. . .” 17 U.S.C. § 512(c). Moreover, that limitation does not create so perverse a result as to
`suggest that this Court ought to read the phrase “as the result of the service provider . . .
`removing or disabling access” out of the statute. See Lenz, 2010 WL 702466 at *10 (quoting
`Quilter & Urban, Efficient Process or “Chilling Effects”? Takedown Notices Under Section
`512 of the Digital Millennium Copyright Act, 22 SANTA CLARA COMPUTER & HIGH TECH.
`L.J. 621, 631 (2006) (“The alleged infringers are to be protected from mistaken takedowns
`and misuse of this rather remarkable extra-judicial process principally through a
`counternotice procedure . . . . [T]he vast majority of § 512 notices likely are never subject to
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`the scrutiny of a court. In part, this was precisely the point behind § 512: the efficient
`removal of infringing materials from the Internet in a fair process, with (in most cases) no
`need for court review.”).
`Amaretto attempts to distinguish Lenz in two primary ways. Although both
`distinctions exist, they do not justify ignoring the plain language of section 512(c) limiting
`damages to those caused by an actual takedown.
`First, Amaretto points out that, in Lenz, the plaintiff did not dispute the existence of a
`valid copyright. Opp’n to Mot. to Dismiss (dkt. 74) at 4. But this is a distinction that fails to
`create a meaningful difference. The plaintiff in Lenz argued that, notwithstanding the
`existence of a valid copyright, the Takedown Notification at issue in that case was still
`flawed under section 512 because the plaintiff was engaged in fair use. Second Am. Compl.,
`07-3783-JF ¶ 34 (“Lenz’s use of the Prince song ‘Let’s Go Crazy’ is a self-evident non-
`infringing fair use under 17 U.S.C. § 107.”). Thus, in both Lenz and here, the plaintiff is
`contesting the validity of the Takedown Notification.
`Second, Amaretto notes that, unlike in Lenz, this case involves one competitor issuing
`a Takedown Notification directed toward another competitor. Opp’n to Mot. to Dismiss (dkt.
`74) at 4. Although Amaretto’s concerns about the anti-competitive use of Takedown
`Notifications seem legitimate, if Congress wanted to carve out an exception from the damage
`limitation in section 512 for claims by business competitors it could have done so.
`Thus, this Court dismisses Amaretto’s section 512 claim with prejudice because no
`takedown occurred.
`B.
`As Pleaded, the Litigation Privilege Does Not Bar the Tortious
`Interference and Unfair Competition Claims
`Ozimals argues that California’s litigation privilege bars Amaretto’s claims because
`they are based on protected litigation activity – namely, Ozimals’s cease-and-desist letter,
`Takedown Notifications, and publications about those activities. Mot. to Dismiss (dkt. 72) at
`4-5; see also Cal. Civ. Code § 47. Amaretto makes two arguments against application of the
`litigation privilege. First, that it does not apply in federal court. Second, that, even if it does
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`apply in federal court, Ozimals’s communications here are not protected. Amaretto’s second
`argument is persuasive.
`1.
`The Litigation Privilege Can Bar Pendent State Law Claims
`Amaretto cites Religious Technology Center v. Wollersheim for the proposition that
`the litigation privilege does not apply in federal question cases with pendent state law claims.
`971 F.3d 364, 367 n.10 (9th Cir. 1992) (“[I]n federal question cases, the law of privilege is
`governed by the principles of the common law as they may be interpreted by the courts of the
`United States in light of reason and experience.”). But Religious Technology Center stands
`for the uncontroversial rule that California’s litigation privilege does not apply to federal
`claims. It does not stand for the proposition that the litigation privilege does not apply to
`pendent state claims. Id. Moreover, California’s litigation privilege is not an evidentiary
`privilege. Rather, it is an immunity under California law from liability for certain types of
`conduct. Oren Royal Oaks Venture v. Greenberg, Bernhard, Weiss & Karma, Inc., 42 Cal.
`3d 1157, 1168 (1986) (“The privileges of Civil Code section 47, unlike evidentiary privileges
`which function by the exclusion of evidence [], operate as limitations upon liability.”)
`(citations omitted) (emphasis in original).
`Accordingly, California’s litigation privilege can potentially bar Amaretto’s pendent
`state law claims.
`2.
`
`The Litigation Privilege Is Not A Bar to Amaretto’s Pendent State
`Law Claims, Because, as Pleaded, Those Claims Arise Out of
`Unprotected Activity
`Amaretto’s tortious interference and unfair business practices claims stem primarily
`from (1) the DMCA Takedown Notifications sent by Ozimals to Linden and (2) statements
`and publications by Ozimals to the public about Amaretto’s alleged infringement.
`California’s litigation privilege protects communications (1) made in judicial or quasi-
`judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve
`the objects of the litigation; and (4) that have some connection or logical relation to the
`action. See Silberg v. Anderson, 50 Cal. 3d 205, 219 (1990). The privilege has been
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`construed broadly to protect “any publication [that] has a reasonable relation to the action
`and is permitted by law . . . .” Albertson v. Raboff, 46 Cal. 2d 375, 380-81 (1956).
`Taking the facts in the light most favorable to Amaretto, Ozimals’s Takedown
`Notification and other publications (other than the cease-and-desist letter sent to Amaretto)
`fall outside the scope of the litigation privilege. With respect to the Takedown Notifications,
`they are not communications made in a judicial or quasi-judicial proceeding. Indeed, the
`DMCA procedure is designed to avoid court involvement. See Lenz, 2010 WL 702466 at
`*10. The other statements made by Ozimals that form the basis of Amaretto’s claims are, as
`pleaded, not privileged because they were not intended to achieve the objects of the litigation
`and some might even have occurred before litigation commenced. See Silberg, 50 Cal. 3d at
`219. Specifically, Amaretto alleged that Ozimals made statements about Amaretto’s alleged
`infringement to people unconnected to any ongoing litigation and not for the purpose of
`advancing any object of litigation. “[A]t or about the time Defendants sent their cease-and-
`desist letter to Amaretto, Defendants were also sending correspondence to other members of
`the Second Life community making similarly false claims that Defendants had certain
`copyrights and that Amaretto was infringing them with its Horse Product Line.” FAC (dkt.
`68) ¶ 25. Rothman v. Jackson, 49 Cal. App. 4th 1134, 1141 (1996) (“Statements to
`nonparticipants in the action are generally not privileged under Section 47(b).”).4 Thus,
`Amaretto has pleaded enough to sidestep the litigation privilege bar, at least for now.
`Ozimals may reassert this defense in a summary judgment motion depending on what
`discovery reveals on this issue.
`C.
`The Tortious Interference Claim Is Dismissed Without Prejudice Because
`it is Not Plausibly Pleaded
`The allegations supporting Amaretto’s tortious inference claim are not sufficient to
`state a claim.
`
`4 Ozimals argues that Abraham v. Lancaster Community Hosp., 217 Cal. App. 3d 796, 823-24
`(1990) shows that the litigation privilege should apply here. Not so. The publications of the allegedly
`damaging statements made to third parties in Abraham were (1) “a report [in a newspaper] of the
`pleadings in [a] federal complaint” and (2) communication “of the allegations [in the complaint] within
`the” community. Id. at 823. Here, Amaretto alleges that Ozimals’s statements to third parties were not
`mere restatements of the content of court pleadings. See FAC (dkt. 68) ¶ 25.
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`•
`
`The elements of a tortious interference with prospective economic advantage claim are
`as follows:
`(1) an economic relationship between the plaintiff and some third
`party, with the probability of future economic benefit to the plaintiff;
`(2) the defendant’s knowledge of the relationship; (3) intentional
`[wrongful] acts on the part of the defendant designed to disrupt the
`relationship; (4) actual disruption of the relationship; and (5) economic
`harm to the plaintiff proximately caused by the acts of the defendant.
`Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1151 (2008) (quoting Korea Supply
`Co. v. Lockheed Martin Corp., 63 P.3d 937, 950 (Cal. 2003)).
`Amaretto’s allegations in support of its intentional interference claim are as follows:
`•
`[B]y broadcasting false claims of infringement and invoking the DMCA
`without justification, Defendants clearly intended to damage Amaretto’s
`product sales during the crucial holiday season and, at the same time, to bolster
`the Defendants’ sales of their own, supposedly “legitimate” products. Despite
`the injunctive relief Amaretto has received thus far, Defendants’ conduct has
`already caused and will continue to cause irreparable harm to Amaretto’s
`business and reputation . . . .
`Defendants knew of Plaintiff’s business and economic relations with existing
`and potential purchaser [sic] of its Amaretto Horse Product Line and that
`Plaintiff’s expectancy of additional sales to existing customers and new sales to
`new customers would be disrupted by Defendants’ repeated knowing
`misrepresentations to members of Second Life that Plaintiff’s products were
`infringing Defendants’ supposed copyrights. By causing current and
`prospective customers to question the legitimacy of Plaintiff’s products,
`Plaintiff is informed and believes that Defendants induced those existing and
`potential customers to purchase alternative products to Plaintiff’s, thereby
`harming Plaintiff.
`Defendants . . . falsely disparaged the quality of Plaintiff’s products and [that]
`was a substantial cause of prospective purchasers of those products instead
`choosing to purchase others.
`FAC (dkt. 68) ¶¶ 14, 47, 48.
`Amaretto’s allegations are little more than a conclusory restatement of the elements of
`a tortious interference claim. The critical allegations as to the existence of an “economic
`relationship between the plaintiff and some third party,” “actual disruption of the
`relationship,” and resulting “economic harm” are simply that (1) “Plaintiff is informed and
`believes that Defendants induced those existing and potential customers to purchase
`alternative products to Plaintiff’s, thereby harming Plaintiff”; and (2) “Defendants . . . falsely
`disparaged the quality of Plaintiff’s products and [that] was a substantial cause of prospective
`
`•
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`purchasers of those products instead choosing to purchase others.” Id. ¶¶ 47-48. This is not
`enough.
`In Sybersound Records, the Ninth Circuit affirmed dismissal of a tortious interference
`claim under similar circumstances. The plaintiff alleged that the defendants intended to and
`did disrupt the plaintiff’s business relationships with its customers “by engaging in the
`wrongful acts of misrepresenting to the Customers that the Corporation Defendants are
`paying all royalties required under their licensing contracts, and that [the plaintiff] does not
`have valid licenses for its songs.” 517 F.3d at 1151. The Ninth Circuit found insufficient the
`“conclusory” allegations that the plaintiff “has been harmed because its ongoing business and
`economic relationships with Customers have been disrupted.’ [The plaintiff] does not allege,
`for example, that it lost a contract nor that a negotiation with a Customer failed.” Id.; see
`also DocMagic, Inc. v. Ellie Mae, Inc., 745 F. Supp. 2d 1119, 1154 (N.D. Cal. 2010) (“[The
`intentional interference with prospective economic advantage] cause of action must be
`dismissed for failure to identify at least one specific, ongoing business relationship that was
`disputed . . . .”); Silicon Knights, Inc. v. Crystal Dynamics, Inc., 983 F. Supp. 1303, 1312
`(N.D. Cal. 1997). Amaretto’s allegations in support of its tortious interference claim are of a
`similarly conclusory nature. They do not allege any particular lost contracts or failed
`negotiations or even a failure to meet reasonable sales projections that can be plausibly tied
`to Ozimals’s actions. See FAC (dkt. 68) ¶¶ 14, 47, 48.
`In support of its argument that its allegations are sufficiently pleaded, Amaretto relies
`principally on TYR Sport, Inc. v. Warnaco Swimwear, Inc., 679 F. Supp. 2d 1120, 1139-40
`(C.D. Cal. 2009). That case concerned allegations by TYR Sport that Speedo was engaged in
`a course of conduct designed to mislead consumers into believing that Speedo’s swimwear
`was superior to TYR’s. In finding TYR’s tortious interference allegations sufficient to state
`a claim, the court noted that (1) the “Federal Rules do not require that [a] complaint allege
`the specific third party or class of third parties with whom he claims to have had a valid
`business expectancy”; and (2) it is sufficient to allege “that such an [economic] expectancy
`existed and that [defendants] purposefully interfered with it.” Id.; see also Sebastian Int’l v.
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`Russolillo, 128 F. Supp. 2d 630, 637 (C.D. Cal. 2001) (sufficient to allege “some customers”
`may stop purchasing plaintiff’s hair products because they “lost their salon appeal” when
`made available in retail stores).
`TYR Sport is not compelling authority for allowing Amaretto’s tortious inference
`claim to proceed as pleaded. Although the level of pleading detail here is in some respects
`similar to that in TYR Sport, the Court does not find TYR Sport persuasive. It relied
`primarily on two cases – one from the Central District of California and the other from the
`Seventh Circuit – that were decided pre-Twombly/Iqbal. 679 F. Supp. 2d at 1139-40 (citing
`Sebastian Int’l, 128 F. Supp. 2d at 637; Cook v. Winfrey, 141 F.3d 322, 328 (7th Cir. 1998)).
`Further, it did not cite Sybersound Records, seemingly applicable Ninth Circuit authority.
`Accordingly, Amaretto’s tortious interference claim is dismissed in its entirety without
`prejudice.5 To the extent Amaretto seeks to base the tortious interference claim on fraud, it
`must re-plead that fraud with particularity under Rule 9.6
`E.
`The Unfair Business Practices Claim is Viable
`Amaretto’s Unfair Business Practices Claim is plausibly pleaded. As such, Ozimals’s
`Motion to Dismiss that claim is DENIED.
`F.
`The Copyright Misuse Claim Is Viable
`Copyright misuse is ordinarily an affirmative defense to a claim for copyright
`infringement. Practice Mgmt. Info. Corp. v. Am. Med. Ass’n, 121 F.3d 516, 520 (9th Cir.
`1997). The doctrine “forbids the use of the [copyright] to secure an exclusive right or limited
`monopoly not granted by the [Copyright] Office and which is contrary to public policy to
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`5 Amaretto represented to the Court during oral argument on the motion to dismiss that it could
`amend to add additional facts.
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`6 With respect to the tortious interference claim, Amaretto alleges, among other things, that
`Ozimals (1) made “knowing misrepresentations to members of Second Life that [Amaretto]’s products
`were infringing [Ozimals]’s supposed copyrights”; (2) “falsely disparaged the quality of [Amaretto]’s
`products . . . .”); and (3) “claim[ed] – in repeated representations to the Second Life community,
`excepting [Ozimals]’s DMCA notice – that all of [Amaretto]’s products infringe [Ozimals]’s alleged
`copyrights.” FAC (dkt. 68) ¶ 47-48, 51. These allegations are “grounded in fraud.” See Kearns v. Ford
`Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009); Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1103-1104
`(9th Cir. 2003). As such, that fraud must be pleaded with the requisite particularity.
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`grant.” Altera Corp. v. Clear Logic, Inc., 424 F.3d 1079, 1090 (9th Cir. 2005) (quoting
`Alcatel USA, Inc. v. DGI Techs, Inc., 166 F.3d 772, 792 (5th Cir. 1999)). If a court finds
`that a copyright holder misused its copyright, it does not “invalidate the copyright, but
`precludes its enforcement during the period of misuse.” Practice Mgmt., 121 F.3d at 520 n.9.
`Amaretto’s FAC includes a claim for copyright misuse. FAC ¶¶ 55-60. There is no
`consensus on whether copyright misuse can be brought as an independent claim (as opposed
`to as an affirmative defense) and district courts come down on both sides of the issue.
`Compare Apple Inc., v. PsyStar Corp., No. C 08-03251, 2009 WL 303046 (N.D. Cal. Feb. 6,
`2009) (allowing misuse counterclaim); Elec. Data Sys. Corp. v. Computer Assoc. Int’l, Inc.,
`802 F. Supp. 1463, 1465-66 (N.D. Tex. 1992) (denying defendant’s motion to dismiss a
`copyright misuse claim); Midwest Tape v. Recorded Books, No. 3:09 CV 2176, 2010 WL
`1258101 at *1 (N.D. Ohio Mar. 26, 2010) (allowing an independent claim of copyright
`misuse “because the Complaint seeks declaratory judgment”); Adobe Systems Incorp. v.
`Norwood, No. C 10-03564, 2011 WL 845923 (N.D. Cal. Mar. 8, 2011); Adobe Systems
`Incorp. v. Kornrumpf, No. C 10-02769, 2011 WL 181375 (N.D. Cal. Jan. 19, 2011) with
`Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 269 F. Supp. 2d 1213, 1225-27 (C.D.
`Cal. 2003); Ticketmaster v. RMG Tech., Inc., 536 F. Supp. 2d 1191, 1198-99 (C.D. Cal.
`2008).
`In this Court’s view, an affirmative claim of copyright misuse is appropriate in this
`case, and Ozimals’s motion to dismiss that claim is DENIED.7
`//
`//
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`7 Although an independent claim for copyright misuse is proper, Amaretto cannot recover
`damages. “Many district courts have held that copyright misuse does not support a claim for damages.”
`Adobe Sys. Inc, 2011 WL 845923 at *4.
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`IV. CONCLUSION
`For the foregoing reasons, Ozimals’s Motion to Dismiss (dkt. 72) is GRANTED in
`part and DENIED in part, as set forth above.
`IT IS SO ORDERED.
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`Dated: April 22, 2011
`
`
`CHARLES R. BREYER
`UNITED STATES DISTRICT JUDGE
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`G:\CRBALL\2010\5696\Order granting in part and denying mtd.wpd
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