Case 1:18-cv-02515-RM-KLM Document 31 Filed 04/03/19 USDC Colorado Page 1 of 7
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLORADO
`Judge Raymond P. Moore
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`Civil Action No. 1:18-cv-2515-RM-KLM
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`Nieusma, Inc., d/b/a Supreior Toxicology
`and Personal Wellness, and
`Dr. Joe Nieusma,Ph.D.,
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`Plaintiffs,
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`Affygility Solutions, LLC,
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`______________________________________________________________________________
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`Defendant.
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`ORDER
`______________________________________________________________________________
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`Plaintiff Joe Nieusma, Ph.D., owner of Nieusma, Inc.,1 had a contractual relationship
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`with Defendant Affygility Solutions, LLC, pursuant to which Dr. Nieusma authored written
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`medical materials and reports (“Reports”) that Affygility marketed and sold. (Am. Compl. ¶¶ 1–
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`2, ECF No. 16.) The parties’ relationship progressed from an oral profit-splitting arrangement to
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`a formal, written agreement (“Agreement”) but ended when Affygility canceled the Agreement
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`on February 21, 2018. (Id. ¶¶ 3, 5.) Even so, Nieusma alleges that Affygility continues,
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`unlawfully, to sell the pre-Agreement Reports that he authored but which the company does not
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`own. (Id. ¶ 44.) The focus of this case asks for a narrow judicial determination: Niusma “seeks a
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`declaration that the [ ] Agreement did not transfer to Affygility ownership of the pre-Agreement
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`Reports and their underlying intellectual property.” (Am. Compl. ¶ 49, ECF No. 16.)
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`It appears that Nieusma, Inc., which is not a signatory to the agreement at issue in this case, may not have
`standing to sue, leaving the Court without subject-matter jurisdiction over any claims to the extent that they are
`alleged on behalf of the company. See,e.g., Pierce v. Green Tree Servicing LLC, No. 15-CV-00913-RBJ, 2015
`WL 6689487, at *2 (D. Colo. Nov. 3, 2015), aff’d, 667 F. App’x 294 (10th Cir. 2016) (finding that non-
`signatory did not have standing to bring contract claims); see also Fed. R. Civ. P. 12(h)(3). All subsequent
`references to Nieusma are to the person, and the “parties” only means Nieusma and Affygility.
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`Case 1:18-cv-02515-RM-KLM Document 31 Filed 04/03/19 USDC Colorado Page 2 of 7
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`Nieusma initially filed claims for unjust enrichment, conversion, and declaratory and
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`injunctive relief in the Colorado District Court for Broomfield County. (ECF No. 3.) Affygility
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`removed it here, asserting federal question jurisdiction and preemption by the Copyright Act, 17
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`U.S.C. § 101, et seq. (Notice of Removal, ECF No. 1.) Nieusma then filed an Amended
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`Complaint with a single count for declaratory judgment and moved to remand the matter back to
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`state court. (Remand Motion, ECF No. 17.) Affygility opposes remand and has moved to dismiss
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`on preemption and other grounds. (Mot. to Dismiss, ECF No. 24.) These motions are fully
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`briefed. (ECF Nos. 17, 22, 24, 25, 26, 27.) Because resolution of both motions turns on whether
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`Nieusma’s claims are preempted by the Copyright Act, the Court considers them together.
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`I. BACKGROUND
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`Plaintiff Nieusma, individually and through Nieusma, Inc. (d/b/a Superior Toxicology
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`and Personal Wellness) maintained a close business relationship with Affygility between 2007
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`and 2017. (Am. Compl. ¶ 1.) Since 2007, Nieusma authored Reports, and Affygility marketed,
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`produced, and sold them. (Id. ¶¶ 2, 13.) Between 2012 and 2016, pursuant to an oral agreement,
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`Nieusma and Affygility split the profits from Report sales evenly (50% each). (Id. ¶ 3.)
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`Throughout this period, Nieusma maintained ownership of the Reports and their underlying
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`intellectual property. (Id. ¶ 4.)
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`On February 22, 2016 the parties—all from Colorado—entered into a formal, written
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`Agreement that governed the proceeds of, and rights to, the Reports prepared and sold during the
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`Agreement’s term. (Id. ¶¶ 5, 9–10; Agreement, ECF No. 1-2) Per the Agreement, Nieusma was
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`an independent consultant entitled to payment for his services, and Affygility was entitled to
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`receive all work product. (Agreement § 2.) Regarding that work product, the Agreement states:
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`Consultant [Nieusma] will promptly furnish and disclose to
`Company [Affygility] all materials . . . discovered, prepared or
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`Case 1:18-cv-02515-RM-KLM Document 31 Filed 04/03/19 USDC Colorado Page 3 of 7
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`developed by or for Consultant in the course of or resulting from
`the provision of Services under this Agreement and all intellectual
`property rights and applications relating
`to
`the foregoing
`(collectively the “Work Product”). All right, title and interest in the
`Work Product vests in the Company and is deemed to be a work
`made for hire; and, to the extent it is not considered a work made
`for hire, Consultant hereby assigns Company all right, title and
`interest
`in and
`to such Work Product. Consultant hereby
`irrevocably waives (and to the extent necessary, has caused its
`employees, contractors and others to waive) all rights under all
`laws (of the United States and all other countries) now existing or
`hereafter permitted, with respect to any and all purposes for which
`the Work Product may be used, including without limitation: (a) all
`rights under the United States Copyright Act, or any other
`country’s copyright law, including but not limited to, any rights
`provided in 17 U.S.C. §§ 106 and 106A; (b) any rights of
`attribution and integrity or any other “moral rights of authors”
`existing under statutory, common or any other law.
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`(Id. § 5.) Nieusma alleges that while this language “transferred ownership of the Reports and
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`related intellectual property that he created during the term, and only during the term, of the [ ]
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`Agreement to Affygility[,]” he never transferred ownership rights in the pre-Agreement Reports
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`he authored. (Am. Compl. ¶¶ 21, 29 (emphasis in original).)
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`On February 21, 2018, Affygility terminated the Agreement in accordance with its rights.
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`(Id. ¶ 24; Agreement § 2.) However, the company continued to market and sell Nieusma’s
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`Reports—including pre-Agreement Reports (i.e., those authored before February 22, 2016)—
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`without paying him. (Am. Compl. ¶¶ 26, 36.) On May 3, 2017, Nieusma’s counsel sent a letter to
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`Affygility, in which Nieusma reiterated he owns all of the pre-Agreement Reports, requested
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`compensation for the post-termination Report sales, and intimated that Affygility could not sell
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`his pre-Agreement Reports any longer. (Id. ¶¶ 28–29.) Affygility responded by asserting that it
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`owns all of the Reports, including all of the pre-Agreement Reports, and refused to compensate
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`Nieusma for post-Agreement sales. (Id. ¶ 30.) The company continues to sell the pre-Agreement
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`Reports and keep all of the proceeds despite Nieusma’s position that he owns the rights to those
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`Case 1:18-cv-02515-RM-KLM Document 31 Filed 04/03/19 USDC Colorado Page 4 of 7
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`Reports and his demands that Affygility cease. (Id. ¶ 41.) Based on this, “Nieusma seeks a
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`declaration that the [ ] Agreement did not transfer to Affygility ownership of the pre-Agreement
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`Reports and their underlying intellectual property.” (Id. ¶ 49.)
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`II. ANALYSIS
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`Affygility wants this case dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for the same
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`reason it believes remand is improper.2 The company is convinced that Nieusma’s claim invokes,
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`and is therefore preempted by, the Copyright Act. The Court disagrees, finds that the Colorado
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`District Court for Broomfield County is the only appropriate forum for this suit, and does not
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`consider the merits, if any, of the motion to dismiss.
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`A defendant may remove a state action to federal court if it is one over which the federal
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`court has original jurisdiction. 28 U.S.C. § 1441(a). But the party invoking federal jurisdiction
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`bears the burden of proving such jurisdiction exists. Steel Co. v. Citizens for a Better Env’t, 523
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`U.S. 83, 104 (1998). “If at any time before final judgment it appears that the district court lacks
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`subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c). Here, because all
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`parties are from Colorado, there is no diversity of citizenship, and the Court can only hear this
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`dispute if it arises under federal law. 28 U.S.C. § 1331 (federal question); see also 28 U.S.C. §
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`1332 (diversity of citizenship). The single remaining claim here seeks a declaratory judgment
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`pursuant to Colo. Rev. Stat. Ann. § 13-51-106 and C.R.C.P. 57, which are state procedural
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`statutes permitting a contracting party to have a question of the contract’s construction or its
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`rights thereunder determined by a court. Even though clearly stated in terms of state law,
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`Affygility is convinced that this claim actually seeks enforcement of Nieusma’s right to sell
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`certain Reports and is therefore preempted by the Copyright Act.
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`In addition to its preemption argument, the motion to dismiss alternatively argues that Nieusma cannot cure the
`pleadings by amendment and that, at any rate, the declaratory judgment claim fails based on the terms of the
`Agreement. (See generally ECF No. 24.)
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`Case 1:18-cv-02515-RM-KLM Document 31 Filed 04/03/19 USDC Colorado Page 5 of 7
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`Federal law provides copyright in original works of authorship fixed in any tangible
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`medium of expression, including in literary works. 17 U.S.C. § 102. Unless the author has agreed
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`otherwise, or a limitation applies, he has certain exclusive rights with respect to his works, such
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`as to reproduce and distribute copies of those works to the public by sale or other means. 17
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`U.S.C. § 106. But not only does the Copyright Act provide certain rights, it “preempts
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`enforcement of any state cause of action which is equivalent in substance to a federal copyright
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`infringement claim.” Harolds Stores, Inc. v. Dillard Dep’t Stores, Inc., 82 F.3d 1533, 1542 (10th
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`Cir. 1996); see also 17 U.S.C. § 301(a) (“[A]ll legal or equitable rights that are equivalent to any
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`of the exclusive rights within the general scope of copyright as specified by section 106 . . . and
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`come within the subject matter of copyright . . . are governed exclusively by” federal copyright
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`law.). Parsing the relevant inquiry apart, the Copyright Act preempts a state claim if (1) the work
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`is within the scope of the copyright subject matter; and (2) the rights granted under state law
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`are equivalent to any exclusive rights within the scope of federal copyright as set out in 17
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`U.S.C. § 106. Harolds Stores, Inc., 82 F.3d at 1542–43 (citing Gates Rubber Co. v. Bando Chem.
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`Indus., Ltd., 9 F.3d 823, 847 (10th Cir. 1993)). The pre-Agreement Reports authored by Nieusma
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`and being sold by Affygility, as original works, are within the scope of copyright. Thus, the only
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`question is whether the rights sued upon here “are equivalent to any exclusive rights within the
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`scope” of federal law.
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`A state cause of action is not equivalent to exclusive rights provided by federal law if it
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`“requires an extra element, beyond mere copying, preparation of derivative works, performance,
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`distribution or display.” SCO Grp., Inc. v. Int’l Bus. Machines Corp., 879 F.3d 1062, 1080 (10th
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`Cir. 2018) (quoting Gates Rubber Co., 9 F.3d at 847; emphasis in original). In such case, “the
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`state cause of action is qualitatively different from, and not subsumed within, a copyright
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`infringement claim and federal law will not preempt the state action.” Gates Rubber Co., 9 F.3d
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`at 847. Put another way, a claim is not preempted if it requires a plaintiff “to establish proof
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`beyond that required to demonstrate a violation of the exclusive rights protected by” the
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`Copyright Act. Harolds Stores, Inc., 82 F.3d at 1544 (10th Cir. 1996). In SCO Grp., Inc., the
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`Tenth Circuit evaluated whether a misappropriation claim under New York law required an
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`“‘extra element’ beyond the elements of a federal copyright infringement claim” such that it was
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`not preempted. 879 F.3d at 1080. As the court made clear, a copyright infringement claim
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`requires only two showings of a plaintiff: that (1) he “owns a valid copyright” and (2) the
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`defendant “copied protectable elements of the copyrighted work.” Id. (quoting Paycom Payroll,
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`LLC v. Richison, 758 F.3d 1198, 1204 (10th Cir. 2014). On the other hand, the court noted that
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`misappropriation claims under New York law require a victim to demonstrate the defendant’s
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`bad faith—a requirement beyond scienter that typically involves showing fraud, deception, or
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`abuse of a fiduciary or confidential relationship. Id. Contrasting the elements of the respective
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`claims, the circuit found the “extra element” test satisfied with respect to the misappropriation
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`claim and refused to find it preempted. Id. at 1081; see also Gates Rubber Co., 9 F.3d at 847–48
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`(same result analyzing the “extra element” contained in a Colorado misappropriation claim).
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`Here, there is no doubt that Nieusma believes (1) he is the proper owner of the pre-
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`Agreement Reports and (2) Affygility has been unlawfully selling them in violation of his rights
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`thereto. Latching onto these allegations, Affygility’s reticence to remand equivocates Nieusma’s
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`claim with one seeking to establish his rights to reproduce or distribute copies of those Reports.
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`(ECF No. 22, at 6.) But this interpretation expands the focus of Nieusma’s remaining claim,
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`which is qualitatively different from, and requires elemental proof beyond, copyright
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`infringement. All Nieusman asks is whether the Agreement transferred to Affygility any of his
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`rights in the pre-Agreement Reports. Finding the correct answer does not require any showing of
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`infringement but does require a thorough analysis of the Agreement and, potentially, the parties’
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`conduct. This narrow question of contract interpretation is not a federal one, and the Colorado
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`District Court for Broomfield County is certainly equipped to answer it. See Long v. Cordain,
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`343 P.3d 1061, 1065 (Colo. App. 2014) (“[A] state court may resolve a dispute over copyright
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`ownership if the issue turns on the interpretation of a contract.”). Moreover, even a favorable
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`resolution of his declaratory judgment claim will not afford Nieusma with a remedy
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`comprehended by the Copyright Act. See 17 U.S.C. §§ 502 (injunctions), 503 (impoundment),
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`504 (damages and profits), 505 (costs and attorneys’ fees); see also Jasper v. Bovina Music, Inc.,
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`314 F.3d 42, 46 (2d Cir. 2002) (“[I]f the case concerns a dispute as to ownership of a copyright,
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`and the issue of ownership turns on the interpretation of a contract, the case presents only a state
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`law issue, and, unless the complaint asserts a remedy expressly granted by the Copyright Act,
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`federal jurisdiction is lacking, in the absence of diversity jurisdiction.”). Without a basis in
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`federal law to move forward, the Court lacks subject-matter jurisdiction.
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`III. CONCLUSION
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`For the foregoing reasons, the motion to remand (ECF No. 17) is GRANTED and this
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`case is REMANDED to the Colorado District Court for Broomfield County. The motion to
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`dismiss (ECF No. 24) is DENIED AS MOOT for lack of subject-matter jurisdiction.
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`DATED this 3d day of April, 2019.
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`BY THE COURT:
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`____________________________________
`RAYMOND P. MOORE
`United States District Judge
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