CASE 0:06-cv-01633-ADM-AJB Document 28 Filed 10/13/06 Page 1 of 7
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
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`AEI Fund Management, Inc.,
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`Plaintiff,
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`v.
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`The Geneva Organization, Inc.,
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`MEMORANDUM OPINION
`AND ORDER
`Civil No. 06-1633 ADM/AJB
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`Defendant.
`______________________________________________________________________________
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`Bruce H. Little, Esq., Lindquist & Vennum P.L.L.P., Minneapolis, MN, argued on behalf of
`Plaintiff.
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`Christopher W. Madel, Esq. and David J. Wallace-Jackson, Esq., Robins, Kaplan, Miller &
`Ciresi L.L.P., Minneapolis, MN, argued on behalf of Defendant.
`______________________________________________________________________________
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`I. INTRODUCTION
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`On September 22, 2006, oral argument before the undersigned United States District
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`Judge was heard on Defendant The Geneva Organization, Inc.’s (“Geneva”) Motion to Dismiss
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`[Docket No. 7]. In its Complaint [Docket No. 1], Plaintiff AEI Fund Management, Inc. (“AEI”)
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`alleges that Geneva has committed copyright infringement under the Copyright Act of 1976, 17
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`U.S.C. § 101 et seq., and unfair competition under the common law of Minnesota. For the
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`reasons set forth herein, Geneva’s Motion to Dismiss is granted in part and denied in part.
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`II. BACKGROUND1
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`AEI, a Minnesota corporation, creates, sells, and manages investment programs in
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`commercial real estate. Compl. ¶¶ 1, 7. In 1992, AEI was among the first real estate firms to
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`1 In considering a motion to dismiss, the pleadings are construed in the light most
`favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
`Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
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`CASE 0:06-cv-01633-ADM-AJB Document 28 Filed 10/13/06 Page 2 of 7
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`offer securitized tenant-in-common (“TIC”) interests in its properties to real estate owners
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`completing tax-deferred exchanges under Section 1031 of the Internal Revenue Code. Section
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`1031 allows owners of investment or business real estate to defer taxes on the sale of such
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`property if the proceeds are used to purchase property of like kind. Id. ¶¶ 7-8; I.R.C. §
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`1031(a)(1).
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`Over a number of years, AEI designed documents and contracts necessary for securities
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`firms to sell TIC property interests. Compl. ¶ 9. These documents included Co-Tenancy
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`Ownership Covenants, Co-Tenancy Management Agreements, and Purchase Agreements, which
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`AEI refers to collectively as “TIC Transaction Documents.” Id. Based on its TIC Transaction
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`Documents, in March 2003 AEI received the first favorable TIC Section 1031 Private Letter
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`Ruling from the IRS. Id. ¶ 11.
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`On November 7, 2005, AEI registered its TIC Transaction Documents with the Copyright
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`Office and was awarded the following Copyright Registration Numbers: TXu1-263-538 for the
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`“AEI Co-Tenancy Management Agreement with Effective Date of 8/25/03,” TXu1-263-539 for
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`the “AEI TIC Purchase Agreement with Effective Date of 9/15/03,” and TXu1-263-540 for the
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`“AEI Co-Tenancy Ownership Covenants with Effective Date of 1/13/03.” Id. Exs. A-C;
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`Wallace-Jackson Decl. [Docket No. 10] Ex. A.2 The certificates of registration note that AEI’s
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`copyrighted TIC Transaction Documents are derivative works. Compl. Exs. A-C. Specifically,
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`the certificates indicate that AEI has authored “Additional Text” that it has added to “Standard
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`2 AEI attached the certificates of registration to its Complaint but did not attach copies of
`the TIC Transaction Documents. This Court may examine the copies provided by Geneva,
`however, because the TIC Transaction Documents were specifically referenced in the Complaint
`as a ground for AEI’s claims against Geneva. Moses.com Sec., Inc. v. Comprehensive Software
`Sys., 406 F.3d 1052, 1063 n.3 (8th Cir. 2005).
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`2
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`CASE 0:06-cv-01633-ADM-AJB Document 28 Filed 10/13/06 Page 3 of 7
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`Legal Language.” Id.
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`AEI alleges that within the past three years Geneva has obtained AEI’s TIC Transaction
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`Documents and copied substantial operative portions to compete with AEI in the sale of Section
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`1031 TIC exchanges. Compl. ¶¶ 13-14. AEI asserts Geneva secured a favorable Private Letter
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`Ruling in December 2004 for its securitized TIC sales based on documents containing a
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`substantial amount of text copied verbatim from AEI’s TIC Transaction Documents. Id. ¶¶ 15-
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`17. After learning of Geneva’s copying, AEI demanded in November 2005 that Geneva cease
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`and desist from using the copied documents and infringing on AEI’s copyrights. Id. ¶ 17. After
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`Geneva refused its demand, AEI filed its Complaint on May 1, 2006, alleging that Geneva has
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`infringed and will continue to infringe AEI’s copyrights in its TIC Transaction Documents by
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`copying material subject to its copyrights. Id. ¶¶ 22, 24. AEI also alleges that Geneva’s copying
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`of AEI’s TIC Transaction Documents constitutes unfair competition under Minnesota common
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`law. Id. ¶ 28.
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`A.
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`Pleading and Motion to Dismiss Standards
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`III. DISCUSSION
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`Under Rule 8(a) of the Federal Rules of Civil Procedure, pleadings setting forth a claim
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`for relief must include “a short and plain statement of the claim showing that the pleader is
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`entitled to relief.” “The essential function of notice pleading ‘is to give the opposing party fair
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`notice of the nature and basis or grounds for a claim, and a general indication of the type of
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`litigation involved.’” N. States Power Co. v. Fed. Transit Admin., 358 F.3d 1050, 1056-57 (8th
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`Cir. 2004) (citation omitted).
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`Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to
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`CASE 0:06-cv-01633-ADM-AJB Document 28 Filed 10/13/06 Page 4 of 7
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`dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P.
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`12(b)(6). In considering a motion to dismiss, the pleadings are construed in the light most
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`favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
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`Hamm v. Groose, 15 F.3d at 112; Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn.
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`1993). Any ambiguities concerning the sufficiency of the claims must be resolved in favor of the
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`nonmoving party. Ossman, 825 F. Supp. at 880. “A motion to dismiss should be granted as a
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`practical matter . . . only in the unusual case in which the plaintiff includes allegations that show
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`on the face of the complaint that there is some insuperable bar to relief.” Frey v. City of
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`Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995).
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`B.
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`AEI’s Copyright Infringement Claim
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`To state a claim for copyright infringement, a party must allege: (1) ownership of a valid
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`copyright, and (2) copying of constituent elements of the work that are original. Feist Publ’ns,
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`Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). In its Complaint, AEI alleges ownership
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`of valid copyrights in the TIC Transaction Documents and attaches the certificates of
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`registration, which “constitute prima facie evidence of the validity of the copyright[s] and of the
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`facts stated in the certificate[s].” 17 U.S.C. § 410(c). AEI also alleges that Geneva has copied
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`copyrightable (i.e. original) subject matter. Having pled both necessary elements, AEI has
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`sufficiently stated a claim for relief premised upon copyright infringement.
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`Geneva’s arguments to the contrary are unavailing. Geneva’s main argument is that
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`AEI’s TIC Transaction Documents are not copyrightable because they lack originality. More
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`specifically, Geneva asserts that the “Additional Text” that AEI added to “Standard Legal
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`Language” amounts to trivial changes that result in unoriginal legal boilerplate. The standard for
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`CASE 0:06-cv-01633-ADM-AJB Document 28 Filed 10/13/06 Page 5 of 7
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`originality, however, is low: “It is not necessary that the work be novel or unique, but only that
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`the work have its origin with the author—that it be independently created. Little more is
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`involved in this requirement than ‘a prohibition of actual copying.’” West Publ’g Co. v. Mead
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`Data Cent., Inc., 799 F.2d 1219, 1223 (8th Cir. 1986) (citations omitted). AEI alleges that by
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`adding “Additional Text” to “Standard Legal Language” it has independently created its TIC
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`Transaction Documents to offer a new securities product. Given the low threshold required for
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`originality, and the prima facie evidence AEI has provided as to the validity of its copyrights,
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`AEI’s Complaint contains allegations of originality sufficient to survive a motion to dismiss.
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`Arguing against this result, Geneva cites O. W. Donald v. UARCO Bus. Forms, 478 F.2d
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`764 (8th Cir. 1973), and O. W. Donald v. Zack Meyer’s T.V. Sales and Serv., 426 F.2d 1027
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`(5th Cir. 1970), as examples of cases where copyrights in legal forms where held invalid for lack
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`of originality. However, neither UARCO nor Zack Meyer’s was decided in the context of a
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`motion to dismiss. Instead, in both cases courts found the copyrights invalid only after
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`considering evidence presented at trial. In the present case, Geneva asserts that AEI’s TIC
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`Transaction Documents lack originality, but at this early stage of the proceedings, no evidence in
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`the record supports that assertion. Discovery is necessary so the parties can produce evidence
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`identifying the alleged copyrightable text and evidence of its originality.3
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`Geneva also argues that AEI’s copyrights are invalid under the merger doctrine, which
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`3 In support of its Motion to Dismiss, Geneva attaches documents that allegedly show the
`text AEI considers original, based on AEI’s cease and desist letter. Wallace-Jackson Decl. The
`Court has not relied on these documents, however, because AEI’s cease and desist letter,
`although referenced in the Complaint, is not a ground for AEI’s claims against Geneva. Whereas
`the TIC Transaction Documents are central to AEI’s copyright infringement claim, the cease and
`desist letter is collateral to the claim.
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`CASE 0:06-cv-01633-ADM-AJB Document 28 Filed 10/13/06 Page 6 of 7
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`provides that “copyright protection will be denied to even some expressions of ideas if the idea
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`behind the expression is such that it can be expressed only in a very limited number of ways.”
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`The Toro Co. v. R & R Prods. Co., 787 F.2d 1208, 1212 (8th Cir. 1986). The merger doctrine is
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`closely related to 17 U.S.C. 102(b), which states that “copyright protection for an original work
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`of authorship [does not] extend to any idea, procedure, process, system, method of operation,
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`concept, principle, or discovery, regardless of the form in which it is described, explained,
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`illustrated, or embodied in such work.” In essence, Geneva’s merger doctrine argument is that if
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`copyright protection is granted to AEI’s TIC Transaction Documents, then AEI will have a
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`monopoly in TIC transactions since it will have a copyright in the language necessary to
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`effectuate such transactions.
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`Any resolution of whether the merger doctrine is applicable to the instant facts is
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`premature at this early stage of the proceedings. A motion to dismiss tests only the sufficiency
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`of the allegations in the complaint. Evaluation of Geneva’s merger doctrine argument, however,
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`requires weighing evidence, currently absent from the record, regarding the feasibility of
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`alternative TIC transaction language. Fact development by discovery is necessary before
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`Geneva’s merger doctrine argument can be considered.
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`Because AEI has sufficiently stated a claim for copyright infringement, Geneva’s Motion
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`to Dismiss is denied as to AEI’s copyright infringement claim.
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`C.
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`AEI’s Unfair Competition Claim
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`Geneva argues that copying legal language in AEI’s contracts and TIC Transaction
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`Documents does not constitute unfair competition. Furthermore, Geneva asserts that AEI’s state
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`law unfair competition claim is preempted by section 301 of the federal Copyright Act. AEI
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`CASE 0:06-cv-01633-ADM-AJB Document 28 Filed 10/13/06 Page 7 of 7
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`concedes that, as pled, its unfair competition claim may be preempted by the Copyright Act, and
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`requests the opportunity to amend its Complaint to re-plead its unfair competition claim. Mem.
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`of Law in Opp. to Mot. to Dismiss [Docket No. 19] at 2 n.1. Given the early stage of this
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`litigation, Geneva will not be prejudiced if AEI is allowed to amend its unfair competition claim.
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`Therefore, Geneva’s Motion to Dismiss is granted on AEI’s unfair competition claim as
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`currently pled. However, AEI is granted leave to file an amended complaint restating an
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`appropriate unfair competition claim.
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`IV. CONCLUSION
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`Based upon the foregoing, and all the files, records, and proceedings herein, IT IS
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`HEREBY ORDERED that Geneva’s Motion to Dismiss [Docket No. 7] is GRANTED IN
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`PART AND DENIED IN PART. AEI may amend its Complaint to restate an appropriate
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`unfair competition claim.
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`BY THE COURT:
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` s/Ann D. Montgomery
`ANN D. MONTGOMERY
`U.S. DISTRICT JUDGE
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`Dated: October 13, 2006.
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