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`IN THE UNITED STATES DISTRICT COURT
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`FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`Google, Inc.,
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` v.
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`Plaintiff,
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`Affinity Engines, Inc.,
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`Defendant.
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`I. INTRODUCTION
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`NO. C 05-0598 JW
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`ORDER GRANTING IN PART
`AND DENYING IN PART
`DEFENDANT'S MOTION TO
`DISMISS AND/OR STAY
`PROCEEDINGS
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`Plaintiff Google, Inc. ("Google" or "Plaintiff") sued Defendant Affinity Engines, Inc. ("AEI" or
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`"Defendant") in this Court seeking damages for copyright infringement and a declaratory judgment as
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`to the ownership of the intellectual property at issue. Previously, AEI sued Google in a now pending
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`action in Santa Clara Superior Court for, inter alia, trade secret misappropriation and common law
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`misappropriation. At issue in both cases is the ownership of a software code used for social
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`networking websites. Defendant now seeks to stay the federal action pending final judgment in the
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`state action. Additionally, Defendant seeks a FED. R. CIV. P. 12(b)(6) dismissal of Plaintiff's claims
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`for declaratory judgment and attorneys' fees. Defendant also requests that the Court dismiss Plaintiff's
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`Lanham Act claim, which Plaintiff voluntarily omitted from its Amended Complaint, with prejudice.
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`On May 5, 2005, Plaintiff requested that the Court consider its Surreply, also submitted at that
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`time. Pursuant to Civil L. R. 7-3(d), the Court need not and will not consider that Surreply.
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`A hearing on Defendant's motion was set for May 9, 2005. However, the Court finds it
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`appropriate to take the motion under submission for decision based on the papers pursuant to Civil L.
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`R. 7-1(b). For the reasons stated below, Defendant's motion is granted in part and denied in part.
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`For the Northern District of California
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`United States District Court
`United States District Court
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`Case5:05-cv-00598-JW Document40 Filed08/12/05 Page2 of 12
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`II. BACKGROUND
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`Plaintiff Google is "the world's leading Internet search company," providing "search-related
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`services for a variety of web-based applications." (Plaintiff's Amended Complaint for Copyright
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`Infringement and Declaratory Relief, hereinafter "FAC," Docket Item No. 8, at ¶ 10.) Defendant AEI
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`provides web-based social networking services for university alumni associations. (FAC ¶ 11.)
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`In November 2001, Orkut Buyukkokten and Tyler Ziemann, then Stanford students, created
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`Club Nexus, a social networking website for Stanford students (AEI's State Complaint, Exhibit A to
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`the Declaration of Rory G. Bens in Support of Affinity Engines, Inc.'s Motion to Dismiss and/or Stay
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`Proceedings, hereinafter "AEI's State Complaint," Docket Item No.13, at ¶ 11). On April 30, 2002,
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`Ziemann and Buyukkokten signed a Retention Agreement in which they agreed to assign to the as yet
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`unformed AEI, which would evolve from Club Nexus, "all inventions and all improvements to
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`inventions relating to the Club Nexus technology." (AEI's State Complaint ¶¶ 12-14.) On August 5,
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`2002, they incorporated AEI, becoming majority stockholders and members of the board of directors.
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`(AEI's State Complaint ¶ 14.) A few weeks later, Buyukkokten assigned to AEI "all of his rights, title,
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`and interest in Club Nexus and the social networking technology he had created with Ziemann,"
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`including "all rights in any trade secrets or other confidential and proprietary information related to
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`the technology" and "[a]ll intellectual property rights relating to the Technology . . . as may exist now
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`or hereafter come into existence." (AEI's State Complaint ¶ 16.)
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`Also on August 5, 2002, Google hired Buyukkokten with the knowledge, according to AEI, of
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`AEI's ownership of the software at issue. (FAC ¶ 12; AEI's State Complaint ¶ 21.) At that time, Orkut
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`Buyukkokten "signed an employment and inventions assignment agreement" in which "he assigned to
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`Google a present property interest in any technology he invented on or after August 5, 2002 that relates
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`to Google's anticipated business interests," including web-based social networking services. (FAC ¶¶
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`12-13.) Also, Buyukkokten granted to Google a license to certain other materials authored by
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`Buyukkokten before August 5, 2002, including a right to use any materials incorporated by
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`Buyukkokten into a Google product. (FAC ¶ 14.) Google alleges that "[w]hile employed at Google,
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`Case5:05-cv-00598-JW Document40 Filed08/12/05 Page3 of 12
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`Buyukkokten wrote" the social networking software code "inCircle" and other related codes. (FAC ¶
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`16.) Google allegedly holds a valid, enforceable, registered copyright to the inCircle software. (FAC
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`¶¶ 26-27.) Thus, Google allegedly owns the inCircle software pursuant to the Copyright Act's work
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`for hire doctrine and the August 5, 2002 Agreement. (FAC ¶ 16.) Google alleges in this action that
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`AEI and its counsel were aware of these facts of ownership and, notwithstanding, violated 17 U.S.C. §
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`106 by reproducing and distributing copies of the inCircle software and creating and distributing
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`derivative works. (FAC ¶¶ 17-19, 28-29.)
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`On March 8, 2004, AEI sent Google a letter claiming that AEI owned the inCircle software
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`and that Google had improperly copied and used it for their "orkut.com" website. (FAC ¶ 20.)
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`Subsequently, AEI threatened suit for infringement. (FAC ¶ 21.) On May 25, 2004, AEI filed suit in
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`Santa Clara Superior Court, alleging misappropriation of trade secrets, common law
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`misappropriation, breach of fiduciary duty, breach of written contract, breach of the covenant of good
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`faith and fair dealing, intentional interference with contractual relations, intentional interference with
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`prospective economic advantage, conversion, fraud and deceit, constructive fraud, common law unfair
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`competition, and unfair competition under CAL. BUS. & PROF. CODE § 17200 et seq. (FAC ¶¶ 22, 24;
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`AEI's State Complaint.) AEI's Complaint did not include a claim for copyright infringement. (AEI's
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`State Complaint.) Google alleges that in November 2004 AEI "improperly obtained a copyright
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`registration in the inCircle code." (FAC ¶ 23.) Google further alleges that AEI has refused Google's
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`requests that it promise not to file a copyright claim against Google in the future. (FAC ¶ 24.)
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`A. Request to Stay
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`III. STANDARDS
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`"[I]n certain circumstances, a federal court may stay its proceedings in deference to pending
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`state proceedings. This doctrine 'rest[s] on considerations of '[w]ise judicial administration, giving
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`regard to conservation of judicial resources and comprehensive disposition of litigation.''" Nakash v.
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`Marciano, 882 F.2d 1411, 1415 (9th Cir. 1989) (citations omitted). Thus, it is sometimes referred to
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`as the "wise judicial administration exception." See Silberkleit v. Kantrowitz, 713 F.2d 433, 436 (9th
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`For the Northern District of California
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`United States District Court
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`Case5:05-cv-00598-JW Document40 Filed08/12/05 Page4 of 12
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`Cir. 1983). However, in the Ninth Circuit, federal courts have "no discretion to stay proceedings as to
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`claims within exclusive federal jurisdiction under the wise judicial administration exception. . . .
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`[The] exception to the exercise of federal jurisdiction may be invoked only 'when both the federal and
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`state courts have concurrent jurisdiction over particular claims.'" Id. (citing Turf Paradise, Inc. v.
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`Arizona Downs, 670 F.2d 813, 820-21 (9th Cir. 1981)).
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`B. Motion to Dismiss under Rule 12(b)(6)
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`The strict standard for granting a motion to dismiss under Rule 12(b)(6) is set forth in Conley
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`v. Gibson, 355 U.S. 41 (1957). A motion to dismiss under Rule 12(b)(6) must not be granted "unless
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`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
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`entitle him to relief." Id. at 45-46. As the Ninth Circuit Court of Appeals has observed, a "motion to
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`dismiss for failure to state a claim is viewed with disfavor and is rarely granted." Gilligan v. Jamco
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`Develop. Corp., 108 F.3d 246, 249 (9th Cir. 1997).
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`In ruling on a motion to dismiss, the Court must accept as true all material allegations in the
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`complaint, as well as reasonable inferences to be drawn from them. Leatherman v. Tarrant County
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`Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993); Pareto v. FDIC, 139 F.3d 696,
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`699 (9th Cir. 1998). However, the court need not accept as true conclusory allegations or legal
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`characterizations. Pareto, 139 F.3d at 699. Also, the court need not accept unreasonable inferences
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`or unwarranted deductions of fact. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.
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`2001).
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`IV. DISCUSSION
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`A. This Court Has No Discretion to Stay Google's Copyright Infringement Claim Because
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`There Is Exclusive Federal Jurisdiction
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`1. There is exclusive federal jurisdiction in this case because it arises out of federal copyright
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`law.
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`Under 28 U.S.C. § 1338(a), federal courts have exclusive jurisdiction in actions arising out of
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`the federal Copyright Act. 28 U.S.C. § 1338(a) (1982) ("The district courts shall have original
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`jurisdiction of any civil action arising under any Act of Congress relating to . . . copyrights . . . . Such
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`jurisdiction shall be exclusive of the courts of the states in . . . copyright cases"); Vestron, Inc. v.
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`Home Box Office Inc., 839 F.2d 1380, 1381 (9th Cir. 1988) ("federal courts have exclusive
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`jurisdiction over actions that arise under federal copyright law").
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`The Ninth Circuit uses a well-known test for determining whether an action arises under of the
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`Copyright Act:
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`[A]n action arises under the federal copyright laws 'if and only if the complaint is for a remedy
`expressly granted by the Act, . . . or asserts a claim requiring construction of the Act, . . . or, at
`the very least and perhaps more doubtfully, presents a case where a distinctive policy of the
`Act requires that federal principles control the disposition of the claim.'
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`Effects Assocs., Inc. v. Cohen, 817 F.2d 72, 73 (9th Cir. 1987) (citations omitted); see also Vestron,
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`839 F.2d at 1381 (citing Effects, 817 F.2d at 73).
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`Plaintiff's action seeks a remedy expressly granted by the Copyright Act. Plaintiff seeks an
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`injunction, damages, profits, costs, and attorneys' fees, pursuant to §§ 502, 504 and 505 of the
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`Copyright Act. (FAC at 6:5-22; Copyright Act §§ 502, 504, & 505.) Plaintiff's complaint also asserts
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`a claim requiring construction of the Copyright Act by invoking the following issues: initial ownership
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`of the copyright (17 U.S.C. § 201(a)), works made for hire (17 U.S.C. § 201(b)), priority between
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`conflicting copyright transfers (17 U.S.C. § 205(d)), and execution of transfers of copyright ownership
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`(17 U.S.C. § 204(a)). (Plaintiff's Opposition to Defendant's Motion to Dismiss and/or Stay
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`Proceedings, hereinafter, "Plaintiff's Opposition," at 7:16-9:17.) Therefore, Plaintiff's action arises
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`under the Copyright Act and triggers exclusive federal jurisdiction.
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`Defendant argues briefly that, because ownership is the main issue in Google's case, Plaintiff's
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`case does not, in fact, arise under federal law. (See Defendant's Reply at 7:23-8:8, 9:14.) This
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`argument fails. Defendant's argument rests on the rule that, in some cases, "when . . . ownership is the
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`sole question for consideration . . . federal courts [are] without jurisdiction." Topolos v. Caldewey,
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`698 F.2d 991, 994 (9th Cir. 1983). "Where the copyright infringement follows 'automatically' after
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`determining the ownership question, the federal court is without jurisdiction." Franklin v. Cannon
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`Films, Inc., 654 F.Supp. 133, 135 (9th Cir. 1987) (citation omitted).
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`Yet, as in Vestron, "this argument, applied to this case, ignores the rule that [the defendant's]
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`defense does not affect jurisdiction conferred by the complaint." Vestron, 839 F.2d at 1382. Vestron
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`explains the rule:
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`[w]e determine whether an action arises under federal copyright law by reference to the well-
`pleaded complaint rule. '[W]hether a case is one arising under . . . a law . . . of the United
`States . . . must be determined from what necessarily appears in the plaintiff's statement of his
`own claim in the [complaint], unaided by anything alleged in anticipation or avoidance of
`defenses. . . .
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`Vestron, 839 F.2d at 1381 (quoting Franchise Tax Bd. of California v. Construction Laborers Vacation
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`Trust, 463 U.S. 1, 10 (1983)). "[F]ederal question jurisdiction is not defeated by reference to
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`potential affirmative defenses raising questions of state law [in cases where the plaintiff's] claim 'is
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`for a remedy expressly granted by the Act.'" Effects, 817 F.2d at 73. "If [the plaintiff's] complaint
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`makes out a bona fide [copyright] infringement claim, then the federal court has jurisdiction." Vestron,
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`839 F.2d at 1381.
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`In Vestron, even where the defendant "admit[ted] the allegedly infringing acts, so that
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`ownership [was] the sole contested issue," the court still found that the claim was properly one for
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`copyright infringement because the complaint made out a "bona fide infringement claim," as it sought a
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`remedy expressly granted by the Copyright Act. See Vestron, 839 F.2d at 1381-1382.
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`Therefore, AEI's argument is defeated by the fact that Google makes a "bona fide infringement
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`claim" by seeking a remedy expressly granted by the Copyright Act and stating a claim requiring
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`construction of the Act. The substantial presence of an ownership issue in this case does not negate
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`exclusive federal jurisdiction.
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`Therefore, there is exclusive federal jurisdiction of Plaintiff's claim.
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`//
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`2. Where the court has exclusive federal jurisdiction, a case cannot be stayed pending state
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`court action.
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`Defendant AEI points out that federal courts, under certain circumstances, have inherent
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`Case5:05-cv-00598-JW Document40 Filed08/12/05 Page7 of 12
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`authority to stay federal cases that raise issues similar to those in an earlier, pending state case. This,
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`however, is not such a federal case.
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`Defendant contends that this inherent authority exists regardless of whether the federal court
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`has exclusive or concurrent jurisdiction of the case to be stayed. Yet, Defendant cites no controlling
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`cases to support this erroneous assertion. For example, Defendant relies on Summa Four v. AT&T
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`Wireless Servs., 994 F. Supp. 575 (D. Del. 1998), a patent case. (Reply at 4:24, 9:22-13:27.) Yet
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`this Court looks to Ninth Circuit law to decide copyright cases, while patent cases are governed by
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`Federal Circuit law. Compare Junker v. Eddings, 396 F.3d 1359, 1363 (Fed. Cir. 2005) (noting "[t]he
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`issue here 'pertains uniquely to patent law' . . . and therefore, we review the district court's
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`determination under Federal Circuit law") (citing Duro-Last, Inc. v. Custom Seal, Inc., 321 F.3d 1098,
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`1106 (Fed. Cir. 2003)) with Atari Games Corp. v. Nintendo of America Inc., 975 F.2d 832, 837 (Fed.
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`Cir. 1992) ("To resolve issues of copyright law, [courts] appl[y] the law as interpreted by the
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`regional circuits, in this case, the United States Court of Appeals for the Ninth Circuit"); see also 28
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`U.S.C. § 1295(a)-(a)(1).
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`Crucially, law of the Federal Circuit and the Ninth Circuit differ on the point at issue. In the
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`Federal Circuit, in special circumstances district courts may have discretion to stay federal cases to
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`defer to pending state proceedings. See Summa Four v. AT&T Wireless Servs., 994 F. Supp. 575,
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`585 (D. Del. 1998) (applying Federal Circuit law and holding that, even where there was exclusive
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`federal jurisdiction, "this case presents the extremely rare circumstance where a stay should be
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`granted in deference to the . . . state court litigation.") In the Ninth Circuit, however, district courts
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`may never do so: "[T]he district court has no discretion to stay proceedings as to claims within
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`exclusive federal jurisdiction under the wise judicial administration exception. . . . [The] exception to
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`the exercise of federal jurisdiction may be invoked only 'when both the federal and state courts have
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`concurrent jurisdiction over particular claims.'" Silberkleit v. Kantrowitz, 713 F.2d 433, 436 (9th
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`Cir.1983) (citing Turf Paradise, Inc. v. Arizona Downs, 670 F.2d 813, 820-21 (9th Cir. 1981)); see
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`also Minucci v Agrama, 868 F2d 1113, 1115 (9th Cir. 1989) (following Silberkleit and holding that
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`defendants were not entitled to a stay of federal copyright infringement claim pending resolution of
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`state claim because federal jurisdiction was exclusive). Even one of the cases used by Defendant
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`explains this distinction:
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`In determining what th[e] criteria should be [for granting a stay in a patent case in order to
`defer to a state court proceeding], the Court starts with the proposition that by definition the
`plaintiff has no remedy in a non-federal forum and therefore, the 'virtually unflagging
`obligation of the federal courts to exercise the jurisdiction given them,' see Colorado River,
`424 U.S. at 817 (citations omitted), is raised to another level. That level is so high that other
`circuit courts of appeal which have considered the question in a non-patent context have held
`an action based on exclusive jurisdiction may never be stayed. See Minucci v. Agrama, 868
`F.2d 1113 (9th Cir.1989) (copyright claim).
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`Summa Four, 994 F.Supp. at 582 (D. Del.,1998) (citations in original) (emphases added). This case
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`points out that "other circuit courts of appeal," notably the Ninth Circuit as seen in Minucci, never
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`allow a federal court to stay a case where there is exclusive federal jurisdiction in a non-patent
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`context. Defendant ignores this statement in attempting to prove an antipodal proposition. The Court
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`reminds Defendant that misrepresentation of the law may be grounds for sanctions pursuant to FED. R.
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`CIV. P. 11(b).
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`Where the Court has exclusive federal jurisdiction, it cannot stay a proceeding pending the
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`resolution of a state court action. Therefore, the Court DENIES AEI's request to stay.
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`B. Plaintiff's Prayer for Attorneys' Fees Is Dismissed
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`Defendant's Motion seeks to dismiss Plaintiff's prayer for attorneys' fees. In an action brought
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`under the Copyright Act:
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`[N]o award of statutory damages or of attorney’s fees . . . shall be made for—(1) any
`infringement of copyright in an unpublished work commenced before the effective date of its
`registration; or (2) any infringement of copyright commenced after first publication of the work
`and before the effective date of its registration, unless such registration is made within three
`months after the first publication of the work.
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`17 U.S.C. § 412.
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`Defendant argues correctly that because Plaintiff registered its copyright well after Defendant's
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`alleged infringement and publication of the allegedly infringing work, 17 U.S.C. § 412 prohibits any
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`award of attorneys' fees.1 (See AEI's Motion to Dismiss/Stay Proceedings at 11:1-19.) Therefore, the
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`Court strikes Plaintiff's prayer for attorneys' fees.
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`C. Plaintiff's Declaratory Judgment Claim Is Dismissed
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`Defendant seeks a Rule 12(b)(6) dismissal of Plaintiff's Declaratory Judgment Claim. The
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`Court GRANTS Defendant's request.
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`"In the declaratory judgment context, the normal principle that federal courts should adjudicate
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`claims within their jurisdiction yields to considerations of practicality and wise judicial
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`administration." Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995). "Consistent with the
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`nonobligatory nature of the remedy, a district court is authorized, in the sound exercise of its
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`discretion, to . . . dismiss an action seeking a declaratory judgment." Id. (citation omitted). Yet, a
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`district court should not refuse to adjudicate a declaratory judgment claim when other federal claims
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`are joined in the action. See Government Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir.
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`1998) (en banc) ("when other claims are joined with an action for declaratory relief . . . the district
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`court should not . . . decline to entertain the claim for declaratory relief"); see also Snodgrass, M.D. v.
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`Provident Life & Accident Insurance Co., 147 F.3d 1163, 1167-68 (9th Cir. 1998). Additionally, the
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`declaratory judgment claim must not be frivolous: "[i]t should go without saying that a declaratory
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`judgment action must serve some purpose in resolving a dispute." Exxon Shipping Co. v. Airport
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`Depot Diner, Inc., 120 F.3d 166, 168 (9th Cir. 1997).
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`In this case, adjudicating Plaintiff's declaratory judgment claim will add no burden to the
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`Court. The Court will necessarily determine the ownership issue in the concomitant copyright
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`infringement claim. Thus, no "considerations of practicality and wise judicial administration" suggest
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`that this Court should dismiss the declaratory judgment claim. Nor is the claim patently frivilous, as it
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`may be seeking to give Plaintiff security against a future infringement suit that was "threatened" by
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`AEI. (See FAC ¶ 21.)
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`Therefore, the Court declines to dismiss Plaintiff's declaratory judgment claim.
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`1 Plaintiff's Opposition does not oppose this argument. (See Plaintiff's Opposition.)
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`D. Plaintiff's Lanham Act Claim Is Not Dismissed With Prejudice
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`Defendant argues that Plaintiff's Lanham Act Claim should be dismissed with prejudice
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`because it was alleged in Plaintiff's Original Complaint but not in its voluntarily amended FAC. The
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`Court rejects this argument.
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`Defendant relies on a statement originally from London v. Coopers & Lybrand, 644 F.2d 811,
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`814 (9th Cir. 1981): "a plaintiff waives all causes of action alleged in the original complaint which
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`are not alleged in the amended complaint." Defendant also points to King v. Atiyeh, 814 F.2d 565 (9th
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`Cir. 1987), which uses a similar phrase.2
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`Unlike in this case, however, in London and King, the courts required the plaintiffs to amend
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`their complaints. See London, 644 F.2d at 811-19; King, 814 F.2d at 565-68. The courts in those
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`cases did not hold that claims in an original complaint that were not dismissed but rather voluntarily
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`amended could never be resurrected. On the contrary, courts may allow a plaintiff to reallege a
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`voluntarily withdrawn claim. See e.g., Southwest Forest Indus., Inc. v. Westinghouse Elec. Corp., 422
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`F.2d 1013, 1015 (9th Cir. 1970) In Southwest Forest, the plaintiff "voluntarily abandoned its
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`warranty count" after defendant moved for summary judgment on that issue. Id. "Then, literally on the
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`eve of trial, Southwest filed a motion to amend its complaint to reallege the warranty theory." Id.
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`Even under those circumstances, the Court did not deem that claim waived. See id.
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`In this case, Plaintiff omitted the Lanham Act Claim voluntarily.3 Therefore, the London rule
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`does not apply, and it may be possible to resurrect the claim. Accordingly, the Court declines to
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`dismiss Plaintiff's Lanham Act Claim with prejudice.
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`//
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`V. CONCLUSION
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`For the foregoing reasons, the Court DENIES Defendant's request to stay. The Court strikes
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`2 "All causes of action alleged in an original complaint which are not alleged in an amended
`complaint are waived." King, 814 F.2d at 567.
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`3 Moreover, unlike in Southwest Forest, Plaintiff's Lanham Act Claim was not even challenged
`by Defendant.
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`For the Northern District of California
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`United States District Court
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`Case5:05-cv-00598-JW Document40 Filed08/12/05 Page11 of 12
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`Plaintiff's claim for attorneys' fees. Additionally, the Court DENIES Defendant's motion to dismiss
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`Plaintiff's declaratory judgment claim and declines to dismiss Plaintiff's Lanham Act claim with
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`prejudice.
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`Dated: August 12, 2005
`05cv598dis
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`/s/ James Ware
`JAMES WARE
`United States District Judge
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`For the Northern District of California
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`United States District Court
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`Case5:05-cv-00598-JW Document40 Filed08/12/05 Page12 of 12
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`THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:
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`Colleen Bal cbal@wsgr.com
`David H. Kramer dkramer@wsgr.com
`Gabriel M. Ramsey gramsey@orrick.com
`George Hopkins Guy hopguy@orrick.com
`James A. DiBoise jdiboise@wsgr.com
`Peter J. O'Rourke porourke@orrick.com
`Rory Bens rbens@orrick.com
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`Dated: August 12, 2005
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`Richard W. Wieking, Clerk
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`By: /jwchambers/
`Ronald L. Davis
`Courtroom Deputy
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