Case3:14-cv-05226-RS Document53 Filed08/25/15 Page1 of 5
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`Case No. 14-cv-05226-RS
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`ORDER GRANTING MOTION TO
`DISMISS, WITH LEAVE TO AMEND
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`HEATHER CASTRO, et al.,
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`Plaintiffs,
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`v.
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`CALICRAFT DISTRIBUTORS, LLC, et al.,
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`Defendants.
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`This action arises in the context of the dissolution of a business relationship between
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`former plaintiff Heather Castro and defendant Amy Barr, who jointly formed and operated
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`defendant Calicraft Distributors, LLC, a distributor of so-called “craft” beers. In 2014, Ms. Castro
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`elected to withdraw from the business and the LLC, to spend more time with her infant child. A
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`controversy then arose regarding Calicraft’s rights to continued use of a software program known
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`as CELR, that had been developed by Heather Castro’s husband and co-plaintiff, JP Castro. In
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`this action, JP Castro asserts copyright, trademark, and unfair competition claims arising from
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`Calicraft’s ongoing use of CELR and/or a “derivative” referred to as “Virtual CELR.”
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`Heather Castro has dismissed all of her claims in this action, in light of a pending case in
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`state court addressing those matters. Defendants’ motion to dismiss the remaining claims
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`advanced by JP Castro has been submitted without oral argument, pursuant to Civil Local Rule 7-
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`1(b). The motion will be granted, with leave to amend.
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`Case3:14-cv-05226-RS Document53 Filed08/25/15 Page2 of 5
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`1. Copyright
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`Rule 8 of the Federal Rules of Civil Procedure provides that to state a claim, a pleading
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`must contain, among other things, “a short and plain statement of the claim showing that the
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`pleader is entitled to relief.” The first part of this requirement—“a short and plain statement of the
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`claim” —cannot be read without reference to the second part —“showing that the pleader is
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`entitled to relief.” The Supreme Court has made clear that while “showing” an entitlement to
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`relief does not require “detailed factual allegations,” it does “demand[] more than an unadorned,
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`the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (citing
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`Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Thus, “[a] pleading that offers ‘labels
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`and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’
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`[citation.] Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
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`enhancement.’” Id.
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`The Iqbal court explained that the Twombly decision rested on two separate “working
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`principles.”
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`First, the tenet that a court must accept as true all of the allegations
`contained in a complaint is inapplicable to legal conclusions.
`Threadbare recitals of the elements of a cause of action, supported
`by mere conclusory statements, do not suffice. Id., at 555, 127 S.Ct.
`1955 (Although for the purposes of a motion to dismiss we must
`take all of the factual allegations in the complaint as true, we “are
`not bound to accept as true a legal conclusion couched as a factual
`allegation” (internal quotation marks omitted)). Rule 8 marks a
`notable and generous departure from the hyper-technical, code-
`pleading regime of a prior era, but it does not unlock the doors of
`discovery for a plaintiff armed with nothing more than conclusions.
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`Iqbal, 129 S. Ct. at 1949-50.
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`The second principle of Twombly is that even where a complaint pleads more than legal
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`conclusions, it still may not be sufficient.
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`Second, only a complaint that states a plausible claim for relief
`survives a motion to dismiss. Id., at 556, 127 S.Ct. 1955.
`Determining whether a complaint states a plausible claim for relief
`will, as the Court of Appeals observed, be a context-specific task
`that requires the reviewing court to draw on its judicial experience
`and common sense. 490 F.3d, at 157-158. But where the well-
`pleaded facts do not permit the court to infer more than the mere
`ORDER GRANTING MOTION TO DISMISS
`CASE NO. 14-cv-05226-RS
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`Case3:14-cv-05226-RS Document53 Filed08/25/15 Page3 of 5
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`Id. at 1950.
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`possibility of misconduct, the complaint has alleged—but it has not
`“show[n]” — “that the pleader is entitled to relief.” Fed. Rule Civ.
`Proc. 8(a)(2).
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`Here, JP Castro has pleaded that (1) he is the owner of the registered copyright in CELR,
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`an original work of authorship, and (2) defendants are continuing to use an “unauthorized copy” of
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`CELR, including a derivative version created by defendants, “Virtual CELR.” Standing alone,
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`such allegations might suffice to state a claim for copyright infringement. See generally, Ellison
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`v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004) (“a plaintiff who claims copyright infringement
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`must show: (1) ownership of a valid copyright; and (2) that the defendant violated the copyright
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`owner's exclusive rights under the Copyright Act.”). Read in the context of the presently-pleaded
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`allegations of the complaint, however, it is apparent that JP Castro granted defendants a royalty-
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`free license to use CELR, and that his theory of infringement depends on the existence of
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`conditions attached to that license that cause it to be no longer in force.
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`While the complaint asserts the term of the license was limited to the time in which
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`Heather Castro continued to be employed by Calicraft, there are no allegations that such a
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`limitation was communicated to defendants, nor are there other allegations of fact sufficient to
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`explain how such a term was incorporated in the license, either expressly or by implication. Cf.
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`Asset Mktg. Sys., Inc. v. Gagnon, 542 F.3d 748, 757 (9th Cir. 2008)(finding post hoc statement of
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`intent to limit license term insufficient in light of “all other objective manifestations of intent to
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`grant [defendant] an unlimited license.”) Additionally, in correspondence attached as an exhibit to
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`the complaint, counsel for Heather Castro (now representing JP Castro) expressly characterized
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`the license as a “perpetual royalty-free license.” See Dkt. No. 21-3, ECF p. 68 (emphasis added).
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`Ordinarily, a license is a defense to copyright infringement, such that the burden of
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`pleading and proving its existence and scope falls to the defendant. Because the existence of the
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`defense appears on the face of the complaint, however, plaintiff must plead facts showing his
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`claim is nonetheless plausible. Whether plaintiff will be able to do so, remains to be seen. While
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`neither the Gagnon decision nor counsel’s apparent concession that the license was “perpetual” is
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`ORDER GRANTING MOTION TO DISMISS
`CASE NO. 14-cv-05226-RS
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`Case3:14-cv-05226-RS Document53 Filed08/25/15 Page4 of 5
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`dispositive, both represent substantial hurdles. Plaintiff must plead, in good faith, facts showing
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`either that a limitation of the term of the license was expressly communicated to defendants or that
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`there are sufficient “objective manifestations of intent” to infer such a limitation. Defendants
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`should bear in mind, however, that plaintiff need not prove his case at the pleading stage. As
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`such, a final resolution of this highly fact-dependent issue may not be possible through further
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`challenges to the pleading, in the event plaintiff is able to provide at least some meaningful
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`allegations of fact supporting his claim that license term was intended to be co-extensive with
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`Heather Castro’s employment. The claim for copyright infringement is dismissed, with leave to
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`amend.
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`2. Trademark
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`JP Castro contends that defendants have used the CELR trademark, and the allegedly
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`confusingly-similar mark “Virtual CELR” in derogation of his rights under common law and the
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`Lanham Act. The complaint includes conclusory assertions that defendants are using the marks
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`“in interstate commerce” and in a manner “confusing to the public.” As defendants point out,
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`however, CELR is alleged in the complaint to be a software product for use in the management of
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`the business. While plaintiff’s opposition brief asserts that defendants’ “use of CELR was
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`communicated to [Calicraft’s] customers,” such facts are not alleged, nor reasonably inferable,
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`from the present averments of the complaint. Accordingly, the trademark claim is dismissed, with
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`leave to amend.1
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`1 Relying on Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, (2003) and
`Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1144 (9th Cir. 2008) defendants further
`argue that plaintiff cannot allege both copyright and Lanham Act claims. At least at this juncture,
`however, defendants have failed to show how there is a conflict between the scope of plaintiff’s
`trademark claims and copyright law. See Luxul Tech. Inc. v. Nectarlux, LLC, 78 F. Supp. 3d 1156
`(N.D. Cal. 2015) (explaining that while Dastar and Sybersound each rejected Lanham Act claims
`that would circumvent copyright law, “the Court is not persuaded that Plaintiff’s Lanham Act
`claims are precluded merely because Plaintiff also alleges copyright infringement.”)
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`ORDER GRANTING MOTION TO DISMISS
`CASE NO. 14-cv-05226-RS
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`Case3:14-cv-05226-RS Document53 Filed08/25/15 Page5 of 5
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`3. Unfair Competition
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`Plaintiff has presently failed to show a basis for pursuing a claim under an unfair
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`competition theory that would not either be preempted by, or duplicative of, his copyright and
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`Lanham Act claims. The claim is therefore dismissed. While plaintiff may amend the claim if he
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`has a good faith basis to do so, he should carefully consider whether a separate count is viable.
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`4. Attorney fees and punitive damages
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`In light of the dismissal of the claims for relief, defendants’ separate challenge to the
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`prayer for attorney fees and punitive damages is moot. In any amended complaint, however,
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`plaintiff should reassert such claims only in the event there is a factual basis to do so.
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`The motion to dismiss is granted. Any amended complaint shall be filed within 20 days of
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`the date of this order. The Case Management Conference is continued to October 1, 2015.
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`______________________________________
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`RICHARD SEEBORG
`United States District Judge
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`ORDER GRANTING MOTION TO DISMISS
`CASE NO. 14-cv-05226-RS
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`IT IS SO ORDERED.
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`Dated: August 25, 2015
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