Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 1 of 11 PageID #:1384
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`))
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`))
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`) No. 09 C 1814
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`FURSTPERSON, INC.,
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`Plaintiff,
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`v.
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`ISCOPIA SOFTWARE, INC.,
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`))
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`)
`Defendant.
`_______________________________________________________
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`))
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`))
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`))
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`))
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`)
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`ISCOPIA SOFTWARE, INC.,
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`Counter-Plaintiff
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`v.
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`FURSTPERSON, INC., et al.,
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`Counter-Defendants.
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`MEMORANDUM OPINION
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`SAMUEL DER-YEGHIAYAN, District Judge
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`This matter is before the court on Plaintiff/Counter-Defendant FurstPerson,
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`Inc.’s (FurstPerson) motion to dismiss Counts III and V of Defendant/Counter-
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`Plaintiff Iscopia Software, Inc.’s (Iscopia) counterclaim. For the reasons stated
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`below, we grant the motion to dismiss in its entirety.
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`1
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`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`))
`
`))
`
`) No. 09 C 1814
`)
`
`FURSTPERSON, INC.,
`
`Plaintiff,
`
`v.
`
`ISCOPIA SOFTWARE, INC.,
`
`))
`
`)
`Defendant.
`_______________________________________________________
`
`))
`
`))
`
`))
`
`))
`
`)
`
`ISCOPIA SOFTWARE, INC.,
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`Counter-Plaintiff
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`v.
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`FURSTPERSON, INC., et al.,
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`Counter-Defendants.
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`MEMORANDUM OPINION
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`SAMUEL DER-YEGHIAYAN, District Judge
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`This matter is before the court on Plaintiff/Counter-Defendant FurstPerson,
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`Inc.’s (FurstPerson) motion to dismiss Counts III and V of Defendant/Counter-
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`Plaintiff Iscopia Software, Inc.’s (Iscopia) counterclaim. For the reasons stated
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`below, we grant the motion to dismiss in its entirety.
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`1
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 2 of 11 PageID #:1385
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`BACKGROUND
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`In 2002 FurstPerson entered into an agreement (Agreement) with Sand-Ho
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`Software, Inc. (Sand-Ho) under which FurstPerson was authorized to use Sand-Ho’s
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`internet-based psychometric testing service and, in connection with the Agreement,
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`Iscopia agreed to provide technical and development support and to host
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`FurstPerson’s backup data server. The Agreement was in effect December 1, 2004,
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`through November 30, 2005, and automatically renewed in December 2005 and
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`December 2006. On August 31, 2007, Iscopia allegedly provided notice to
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`FurstPerson that Iscopia would not renew the Agreement for a new term beginning in
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`December 2007. Despite such notice, Iscopia allegedly continued providing services
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`under the Agreement after December 2007. FurstPerson claims that beginning in
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`2008, it began experiencing service problems with the Iscopia system. In February
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`2008 Iscopia allegedly presented FurstPerson with notice of a price increase and
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`FurstPerson allegedly rejected the proposed price increase. The parties allegedly
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`engaged in ongoing negotiations and in September 2008 FurstPerson experienced a
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`system outage for the Iscopia services lasting approximately 20 hours. The outage
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`allegedly caused significant harm to FurstPerson’s business. For example,
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`FurstPerson allegedly lost one major client due to the outage. In October 2008,
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`FurstPerson and Iscopia allegedly engaged in further negotiations regarding a new
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`2
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 3 of 11 PageID #:1386
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`long-term agreement. Problems allegedly continued with the operation of the Iscopia
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`systems. FurstPerson claims that in early December 2008, it entered into a
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`temporary agreement with Iscopia because FurstPerson feared that Iscopia would
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`terminate its services and thus cause further interference with FurstPerson customer
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`relationships. FurstPerson claims that on December 16, 2008, under financial
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`pressure and duress, it entered into a written revised agreement (Revised Agreement)
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`with Iscopia. FurstPerson contends that due to Iscopia’s demands for price increases,
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`FurstPerson decided to create its own technology platform. FurstPerson claims that
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`it expended its own time and resources to develop the technology and did not use any
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`of Iscopia’s source codes, trade secrets, or technology.
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`In February 2009, there were allegedly additional problems with the Iscopia
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`system and FurstPerson claims it learned that Iscopia improperly programmed its
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`technology resulting in thousands of errors for users. FurstPerson contends that
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`since Iscopia had made such mistakes, it had not performed its obligations under the
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`Revised Agreement and FurstPerson provided notice of its intent to terminate the
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`Revised Agreement. FurstPerson then allegedly terminated the Revised Agreement.
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`FurstPerson contends that Iscopia then attempted to steal FurstPerson’s customers by
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`sending them a letter that informed them that Iscopia could begin offering its services
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`to them. In October 2006, Iscopia allegedly filed for a patent application in regard to
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`3
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 4 of 11 PageID #:1387
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`its services. FurstPerson contends that as part of the patent application process,
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`Iscopia published on the internet confidential FurstPerson information.
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`FurstPerson claims that Iscopia continues to threaten to interrupt further service and
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`using confidential information gained from FurstPerson to solicit business from
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`FurstPerson’s customers. FurstPerson seeks a preliminary injunction to prevent such
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`continued alleged wrongdoing by Iscopia. FurstPerson includes in its complaint a
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`breach of contract claim (Count I), a declaratory judgment claim (Count II), a
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`tortious interference with contractual relationship claim (Count III), a trade secret
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`misappropriation claim relating to FurstPerson’s customer list (Count IV), a trade
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`secret misappropriation claims relating to FurstPerson’s newly developed technology
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`(Count V), and an unfair competition claim (Count VI).
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`Iscopia has also filed a counterclaim against FurstPerson, Jeff Furst (Furst),
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`the President of FurstPerson and Michelle Cline (Cline), a Vice President of
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`FurstPerson, contending that Iscopia honored its obligations under the Revised
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`Agreement. Iscopia contends that FurstPerson has wrongfully failed to pay Iscopia
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`for prior services. Iscopia also contends that FurstPerson used Iscopia’s technology
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`and trade secrets, and data to formulate FurstPerson’s new system that is intended to
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`eliminate the need for Iscopia’s services. Iscopia also contends that FurstPerson has
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`infringed upon Iscopia’s copyright. Iscopia includes in its counterlaim a breach of
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`4
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 5 of 11 PageID #:1388
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`contract claim brought against FurstPerson (Count I), an Illinois Trade Secrets Act,
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`765 ILCS 1065/1 et seq., claim brought against all Counter-Defendants (Count II), a
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`copyright infringement claim brought against all Counter-Defendants (Count III), a
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`Computer Fraud and Abuse Act, 18 U.S.C. § 1030, claim brought against all
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`Counter-Defendants (Count IV), and a Lanham Act, 15 U.S.C. §§ 1051 et seq., claim
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`brought against all Counter-Defendants (Count V). FurstPerson now moves to
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`dismiss Count III of the counterclaim and Count V in the counterclaim to the extent
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`that it is brought against Furst and Cline individually.
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`LEGAL STANDARD
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`In ruling on a motion to dismiss, a court must “take all of the factual
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`allegations in the complaint as true” and make reasonable inferences in favor of the
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`plaintiff. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009); Thompson v. Ill. Dep’t of
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`Prof’l Regulation, 300 F.3d 750, 753 (7th Cir. 2002). To defeat a motion to dismiss
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`brought pursuant to Federal Rule of Civil Procedure 12(b)(6), “a complaint must
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`contain sufficient factual matter, accepted as true, to state a claim to relief that is
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`plausible on its face.” Iqbal, 129 S.Ct. at 1949 (internal quotations omitted)
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`(emphasis in original)(quoting in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
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`570 (2007)); Hecker v. Deere & Co., 569 F.3d 708, 710-11 (7th Cir. 2009)(stating
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`5
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 6 of 11 PageID #:1389
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`that “Iqbal reinforces Twombly’s message that ‘[a] claim has facial plausibility when
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`the plaintiff pleads factual content that allows the court to draw the reasonable
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`inference that the defendant is liable for the misconduct alleged’”)(quoting in part
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`Iqbal, 129 S.Ct. at 1949). A plaintiff is not required to “plead facts that, if true,
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`establish each element of a ‘cause of action. . . .’” See Sanjuan v. Amer. Bd. of
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`Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994)(stating that “[a]t
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`this stage the plaintiff receives the benefit of imagination, so long as the hypotheses
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`are consistent with the complaint” and that “[m]atching facts against legal elements
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`comes later”).
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`Federal Rule of Civil Procedure 12(b)(1) requires a court to dismiss an action
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`when it lacks subject matter jurisdiction. United Phosphorus, Ltd. v. Angus
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`Chemical Co., 322 F.3d 942, 946 (7th Cir. 2003). If the concern of the court or party
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`challenging subject matter jurisdiction is that “subject matter jurisdiction is not
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`evident on the face of the complaint, the motion to dismiss pursuant to Rule 12(b)(1)
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`would be analyzed as any other motion to dismiss, by assuming for purposes of the
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`motion that the allegations in the complaint are true.” Id.; see also Ezekiel v. Michel,
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`66 F.3d 894, 897 (7th Cir. 1995)(stating that when reviewing a motion to dismiss
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`brought under Rule 12(b)(1), this court “must accept as true all well-pleaded factual
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`allegations, and draw reasonable inferences in favor of the plaintiff”). However, if
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`6
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 7 of 11 PageID #:1390
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`the complaint appears on its face to indicate that the court has subject matter
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`jurisdiction, “but the contention is that there is in fact no subject matter jurisdiction,
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`the movant may use affidavits and other material to support the motion.” United
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`Phosphorus, Ltd., 322 F.3d at 946. For the purpose of determining subject matter
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`jurisdiction, this court “‘may properly look beyond the jurisdictional allegations of
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`the complaint and view whatever evidence has been submitted on the issue to
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`determine whether in fact subject matter jurisdiction exists.’” Ezekiel, 66 F.3d at 897
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`(quoting Capitol Leasing Co. v. Federal Deposit Insurance Corp., 999 F.2d 188, 191
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`(7th Cir. 1993)). The burden of proof in regards to a Rule 12(b)(1) motion is “on the
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`party asserting jurisdiction.” United Phosphorus, Ltd., 322 F.3d at 946.
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`I. Copyright Infringement Claim (Count III)
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`DISCUSSION
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`FurstPerson contends that this court lacks subject matter jurisdiction over the
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`copyright infringement claim brought by Iscopia since it is undisputed that Iscopia
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`has not yet obtained a registration for its copyrights. Pursuant to 17 U.S.C. § 411(a)
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`(Section 411(a)), “no civil action for infringement of the copyright in any United
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`States work shall be instituted until preregistration or registration of the copyright
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`claim has been made. . . .” 17 U.S.C. § 411(a). As the parties point out, there is no
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`7
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 8 of 11 PageID #:1391
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`controlling precedent regarding the issue of whether a copyright registration is a
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`jurisdictional prerequisite for a copyright infringement claim. Iscopia asks the court
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`to adopt the position that its applications for copyright registrations are sufficient to
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`provide this court with jurisdiction over its copyright infringement claim.
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`FurstPerson argues that this court lacks subject matter jurisdiction since Iscopia’s
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`applications have not been approved and there has not been any acknowledgment of
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`Iscopia’s ownership over the information at issue. We conclude that the mere
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`application for a copyright registration is not sufficient to support a copyright
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`infringement claim. See Brooks-Ngwenya v. Indianapolis Public Schools, 564 F.3d
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`804, 806 (7th Cir. 2009)(indicating that “[t]he Supreme Court has granted certiorari
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`to decide whether compliance with the registration requirements is a precondition to
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`the subject-matter jurisdiction of the federal courts”); Automation By Design, Inc. v.
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`Raybestos Products Co., 463 F.3d 749, 753 n.1 (7th Cir. 2006)(stating that
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`“[r]egistration is not a condition of copyright protection, but is necessary before an
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`infringement suit may be filed in court”); Gaiman v. McFarlane, 360 F.3d 644, 655
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`(7th Cir. 2004)(stating that “an application to register must be filed, and either
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`granted or refused, before suit can be brought” for a copyright-based action); Pickett
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`v. Prince, 207 F.3d 402, 404 (7th Cir. 2000)(stating that “registration not being a
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`precondition to copyright protection, 17 U.S.C. § 408(a), though it is a precondition
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`8
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 9 of 11 PageID #:1392
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`to a suit for copyright infringement”). We agree with the other rulings in this district
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`that have dismissed copyright infringement claims based on a lack of subject matter
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`jurisdiction where the plaintiffs lacked copyright registrations. See, e.g., Nova
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`Design Build, Inc. v. Grace Hotels, LLC, Case Number 07 C 6369, 5/15/08
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`Memorandum Opinion (DE 52); Markovitz v. Camiros, Ltd., 2003 WL 21517364, at
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`*2 (N.D. Ill. 2003)(stating that “[t]he failure to obtain copyright registration bars a
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`plaintiff from bringing suit under the Copyright Act”); Leventhal v. Schenberg, 2004
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`WL 1718512, at *2 (N.D. Ill. 2004)(stating that the court was “without subject matter
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`jurisdiction, and the Complaint must be dismissed”). Therefore, since Iscopia has
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`not yet obtained a registration for its copyrights, we grant the motion to dismiss the
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`copyright infringement claim in the counterclaim (Count III).
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`II. Lanham Act Claims (Count V)
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`FurstPerson argues that Iscopia has not sufficiently pled a Lanham Act claim
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`against Furst and Cline individually. FurstPerson contends that to hold individuals
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`liable under the Lanham Act, there must be a special showing of improper motives
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`by the individuals acting outside the scope of their corporate duties. FurstPerson
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`cites in support Dangler v. Imperial Mach. Co., 11 F.2d 945, 946 (7th Cir. 1926).
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`Dangler provides that for individual liability there must be involvement “willfully
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`9
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 10 of 11 PageID #:1393
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`and knowingly-that is, when [the individual] personally participates in the
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`manufacture or sale of the infringing article (acts other than as an officer), or when
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`he uses the corporation as an instrument to carry out his own willful and deliberate
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`infringements, or when he knowingly uses an irresponsible corporation with the
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`purpose of avoiding personal liability-that officers are held jointly with the
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`company.” Drink Group, Inc. v. Gulfstream Communications, Inc., 7 F. Supp. 2d
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`1009, 1010 (N.D. Ill. 1998)(quoting Dangler, 11 F.2d at 947); see also, e.g., Specht
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`v. Google, Inc., 2009 WL 2407749, at *4 (N.D. Ill. 2009)(citing Dangler and
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`Panther Pumps & Equipment Co. v. Hydrocraft, Inc., 468 F.2d 225 (7th Cir. 1972)
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`for the proposition that “[a]s a general rule, corporate officers are not held personally
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`liable for infringement by their corporation when they are acting within the scope of
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`their duties”); Syscon, Inc. v. Vehicle Valuation Services, Inc., 274 F. Supp. 2d 975,
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`976 (N.D. Ill. 2003)(stating that “Dangler remains the law of this Circuit”). Iscopia
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`contends that it has provided sufficient allegations concerning the personal
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`involvement of Furst and Cline in Paragraphs 52, 55, 58, 59, 89, 90, and 101 of the
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`Counterclaim. While such paragraphs detail the alleged personal involvement of
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`Furst and Cline in the alleged wrongdoing, they do not plausibly suggest the type of
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`willful conduct outside the scope of their duties that is necessary for individual
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`liability. See Specht, 2009 WL 2407749, at *4 (holding that allegations of personal
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`10
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`Case: 1:09-cv-01814 Document #: 70 Filed: 09/10/09 Page 11 of 11 PageID #:1394
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`involvement were not sufficient to state a claim); Drink Group, Inc., 7 F. Supp. 2d at
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`1010)(noting the “absence of allegations that, at the time of incorporation, [the
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`individual defendants] were motivated by some improper purpose or acting outside
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`the scope of their corporate duties”). Therefore, we grant the motion to dismiss the
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`Lanham Act claim (Count V) in the counterclaim to the extent that it is brought
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`against Furst and Cline individually.
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`CONCLUSION
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`Based on the foregoing analysis, we grant FurstPerson’s motion to dismiss the
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`copyright infringement claim (Count III) and the Lanham Act claim (Count V) in the
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`counterclaim to the extent that it is brought against Furst and Cline individually.
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`___________________________________
`Samuel Der-Yeghiayan
`United States District Court Judge
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`Dated: September 10, 2009
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`11
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