CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 1 of 26
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
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`INCOME ALLOCATION, LLC an Indiana
`Limited Liability Company,
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`Plaintiff,
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`v.
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`TRUCHOICE FINANCIAL GROUP, LLC
`a Minnesota Limited Liability Company,
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`Defendant.
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`Case No. 22-CV-343 (JWB/JFD)
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`ORDER
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`This case is before the Court on Plaintiff Income Allocation, LLC’s (“Income
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`Allocation”) Renewed Motion for Leave to File a First Amended Complaint. (Dkt. No. 35.)
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`The Court heard oral argument on December 15, 2022. (Hr’g Mins., Dkt. No. 47.) Paul
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`Godfread, Esq. represented Income Allocation and Katherine Razavi, Esq. represented
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`Defendant Truchoice Financial Group (“TruChoice”). (Id.)
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`The Court stayed discovery in this case on December 9, 2022 (Order, Dkt. No. 46;
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`Order, Dkt. No. 54) because the sole member of Income Allocation, Mr. Gaylor, was
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`hospitalized following a major medical event (Joint Mot. Stay Disc. 1, Dkt. No. 44). Mr.
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`Gaylor’s condition made it impossible for him to participate in discovery. (Id.). The stay
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`expired on June 6, 2023. (Order, Dkt. No. 54.) In light of the stay’s expiration, the Court
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`issues this ruling on the pending motion. The Court grants in part and denies in part the
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`Motion to Amend, as set forth below.
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 2 of 26
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`I.
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`BACKGROUND1
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`TruChoice provides training and other services to financial professionals. (Pl.’s
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`Renewed Mot. Amend Compl., Ex. 2 (“Proposed Am. Compl.”) ¶ 11, Dkt. No. 35-2) Mr.
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`Gaylor is a financial advisor and the creator of several wealth management products and
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`services. (Id. ¶¶ 12–13.) Mr. Gaylor is also a published author, and he released a “web-
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`based software and application” based on the principles in his book, which contained
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`calculators that customers could use to estimate their retirement income or compare
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`investment portfolios. (Id. ¶¶ 15–16.) He also produced a “whiteboard video” based on his
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`book and an unspecified number of his other products. (Id. ¶ 21.) Mr. Gaylor registered a
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`copyright for the book (the ‘427 copyright) in January 2016 but his company, Income
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`Allocation, did not register the copyright for the software and app until September 2022 (the
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`‘532 copyright). (Id. ¶¶ 15, 17.) Income Allocation, U.S. Copyright Office,
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`https://cocatalog.loc.gov/cgi-bin/Pwebrecon.cgi?Search_Arg=TX0008211427&Search
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`_Code=REGS&PID=etDrIjJKiu_ctkH5wI3OJ9BALs8q&SEQ=20230608164957&CNT=
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`25&HIST=1 (Jan. 14, 2016); Computer Program for Income Allocation and Equivalent
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`Portfolio
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`Value,
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`U.S.
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`Copyright
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`Office,
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`https://cocatalog.loc.gov/cgi-
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`bin/Pwebrecon.cgi?v1=1&ti=1,1&Search%5FArg=TX0009173532&Search%5FCode=RE
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`1 Because the Court applies the standard for a motion to dismiss in evaluating whether the
`proposed amendment is futile, this background recites the facts as alleged by Income
`Allocation. See Hager v. Ark. Dep’t of Health, 735 F.3d 1009, 1013 (8th Cir. 2013) (stating
`legal standard for evaluating a motion to dismiss).
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` 2
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 3 of 26
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`GS&CNT=25&PID=GW2TNIBNCnzP2VImW_3CedLeyo8I&SEQ=20230601111014&S
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`ID=4 (Sept. 26, 2022, supplemented Nov. 28, 2022).
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`A. The Mutual Termination Agreement
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`Mr. Gaylor founded Income Allocation, Tradewinds Financial Group, Inc.
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`(“Tradewinds”), and 3-Mentors, Inc. (Id. ¶ 12.) The book, software, and app were the
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`subject of several license agreements between Mr. Gaylor, these entities, and GamePlan
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`Financial Marketing, LLC. (Id. ¶¶ 22–23.) Those agreements were assigned to TruChoice
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`and subsequently terminated in a “mutual termination agreement” (“MTA”) executed in
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`2021 by Mr. Gaylor, Tradewinds, and Truchoice. (Id. ¶¶ 24, 26–27.) The MTA stated that
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`Tradewinds owned the trademarks “Income Allocation,” “Equivalent Portfolio Value” and
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`“EPV.” (Id. ¶ 28.) Mr. Gaylor owned all the rights in his book, the whiteboard video—a
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`derivative work of the book—and intellectual property he created outside the scope of the
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`agreements which the MTA was replacing (called “Background IP.”). (Id. ¶ 27, 29–31. But
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`see id. ¶ 29 (claiming that the MTA stated that Tradewinds and Mr. Gaylor together owned
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`the “Background IP”).) The MTA stated that TruChoice would stop using the “Background
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`IP” the day that the MTA was effective and would stop using the book and whiteboard video
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`by March 14, 2021. (Id. 33–34.) The MTA went into effect on January 13, 2021. (Id. ¶ 27.)
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`Later, Mr. Gaylor and Tradewinds assigned their rights under the MTA to Income
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`Allocation. (Id. ¶ 32.)
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`B. The Infringement and Subsequent Litigation
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`After the licenses granted under the MTA expired, Income Allocation learned that
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`TruChoice was still using Mr. Gaylor’s work. (Id. ¶¶ 34–39.) For example, it produced a
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 4 of 26
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`digital copy of the book and made it available to TruChoice customers. (Id. ¶ 36.) TruChoice
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`also continued to use the “Background IP” and the whiteboard video. (Id. ¶ 34, 37.) In
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`February 2022, Income Allocation sued TruChoice for breach of contract, copyright
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`infringement, contributory copyright infringement, false designation of origin, trademark
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`infringement, conversion, and violation of the Minnesota Deceptive Trade Practices Act
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`(Minn. Stat. § 325D.44 (2022)). (Id. at ¶¶ 44–201.) The undersigned held a settlement
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`conference in September 2022, but the parties were unable to reach a resolution, and
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`discovery started in earnest. (Hr’g Mins., Dkt. No. 29; Decl. Katherine S. Razavi ¶ 4, Dkt.
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`No. 41.)
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`On the afternoon of November 1, 2022—the last day for the parties to amend their
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`pleadings—counsel for Income Allocation left a voicemail for counsel for TruChoice,
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`notifying her that Income Allocation intended to file an amended complaint and asking if
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`her client would object to amendments. (Razavi Decl. ¶ 5.) Counsel for TruChoice replied
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`by email at 6:26 that evening, saying that without any notice of what the proposed
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`amendments were, her client could not respond. (Id. ¶ 6.)2 At 9:09 pm, Income Allocation
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`then filed a motion to amend the complaint to include additional copyright infringement
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`claims, federal and state trade secret misappropriation claims, and an unjust enrichment
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`claim. (Pl.’s Mot. to Am. Compl., Dkt. No. 32; Id., Ex. A ¶¶ 44–201.)
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`2 Counsel for Income Allocation later explained that he did not provide a summary or copy
`of these proposed amendments because they were still being finalized when he called
`counsel for TruChoice. (Id. at 7.)
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 5 of 26
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`Income Allocation’s filings did not comply with the District of Minnesota Local
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`Rules or the Electronic Case Filing Procedure Guidelines, which are incorporated by
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`reference into the Local Rules. D. Minn. LR 5.1; (Dkt. No. 34). Income Allocation did not
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`file a memorandum of law, meet and confer statement, or proposed order.3 See LR
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`7.1(b)(1)(A) (requiring the moving party to file and serve such documents simultaneously
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`with their motion); (Pl.’s Mot. Amend Compl., Dkt. No. 32 (including only a motion)).
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`Income Allocation’s notice of hearing was attached as an exhibit to the motion, and not as
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`an independent filing, in violation of the Electronic Case Filing Guidelines (“ECF
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`Guidelines”). United States District Court District of Minnesota, Electronic Case Filing
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`Procedures
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`Guide:
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`Civil
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`Cases
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`10
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`(May
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`16,
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`2023),
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`https://www.mnd.uscourts.gov/sites/mnd/files/Civil-ECF-Procedures-Guide.pdf
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`(“[A]ttorneys should file their motions in the following order as separate docket entries
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`. . . .”); LR 5.1 (“Electronic filing and service are governed by . . . . the civil and criminal
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`Electronic Case Filing Procedures Guides.).
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`The Court ordered Income Allocation to correct its errors, including its failure to
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`meet and confer with opposing counsel and its failure to submit a separate memorandum of
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`3 The Local Rules require counsel to file proposed orders on CM/ECF and email an editable
`copy of their orders to chambers. LR 7.1(b)(1)(“[T]he moving party must file and serve the
`following documents simultaneously . . . proposed order (an editable copy of which must
`be emailed to chambers).”) Counsel for Income Allocation emailed a proposed order to
`chambers, as required by LR 7.1(b)(1)(F) but did not file the order on CM/ECF. Counsel
`argues that the rule “does not expressly require . . . duplicative submission of a proposed
`order via both mail and ECF filing.” (Pl.’s Reply Mem. 9.) In fact, that is exactly what the
`rules and the CM/ECF guidelines require.
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 6 of 26
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`law, before 5:00 pm on November 4. (Id.) On November 4, Counsel filed a renewed motion
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`with several exhibits,4 including a proposed order, meet and confer statement, memorandum
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`of law, and notice of hearing. While the proposed amendments to the complaint were
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`identical (compare Pl.’s Mot. Amend Compl., Ex. B, Dkt. No. 32-2 with Pl.’s Renewed
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`Mot. Amend. Compl., Ex. 2, Dkt. No. 35-2) they were supported by a memorandum of law
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`(Dkt. No. 38) that counsel did not file with the initial motion on November 1. TruChoice
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`opposes the motion to amend the complaint as untimely and futile. (Def.’s Mem. Opp’n
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`Mot. Amend Compl., Dkt. No. 40.)
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`II.
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`LEGAL STANDARD
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`Leave to amend a pleading after the time to amend of right has expired is governed
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`by Federal Rule of Civil Procedure 15(a)(2), which provides that “a party may amend its
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`pleading only with the opposing party’s written consent or the court’s leave. The court
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`should freely give leave when justice so requires.” This is a capacious standard, but it is not
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`a boundless one. Courts may deny leave to amend for “compelling reasons such as undue
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`delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments
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`previously allowed, undue prejudice to the non-moving party, or futility of the amendment.”
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`4 Counsel again failed to file the documents as separate document entries but corrected this
`error on November 9. (Dkt. Nos. 36–39.)
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`Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008) (citing Moses.com
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`Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1065 (8th Cir. 2005)).
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`A proposed amendment to a complaint is futile if “the amended complaint could not
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`withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure.”
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`Cornelia I. Crowell GST Tr. v. Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008). Rule
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`12(b)(6) requires dismissal when a complaint fails “to state a claim to relief that is plausible
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`on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The plaintiff need not
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`plead “detailed factual allegations,” but mere “labels and conclusions” or “a formulaic
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`recitation of the elements of a cause of action will not do.” Id. at 555. For a claim to be
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`facially plausible, the plaintiff must allege “factual content that allows the court to draw the
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`reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
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`Iqbal, 556 U.S. 662, 678 (2009). In applying this standard, the Court accepts the factual
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`allegations as true and views them in the light most favorable to the plaintiff. Healy v. Fox,
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`46 F.4th 739, 744 (8th Cir. 2022).
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`If a party attempts to amend or supplement a complaint after the deadline to do so in
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`a court’s scheduling order has passed, it must show “good cause” to amend the scheduling
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`order under rule 16(b)(4). Schnuck Markets, Inc. v. First Data Merch. Servs. Corp., 852
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`F.3d 732, 740 (8th Cir. 2017) (citing Sherman, 532 F.3d at 716). “[T]he primary measure”
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`of good cause is “the movant’s diligence in attempting to comply with the scheduling
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`order.” Id. But courts may consider other factors if they wish. Marks v. Bauer, No. 20-CV-
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`1913 (ADM/JFD), 2021 WL 6050309 at *2 (D. Minn. Dec. 21, 2021) (noting that Eighth
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`Circuit precedent does not require diligence for a finding of good cause and that courts may
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`consider other factors such as prejudice to the non-movant, justifications for the
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`amendment, the amendment’s importance, and whether the non-moving party’s actions
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`caused the need to amend). The Court must first find good cause to modify the scheduling
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`order before considering whether an amended complaint should be allowed. Shank v.
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`Carleton Coll., 329 F.R.D. 610, 614 (D. Minn. 2019) (“Rule 16(b)(4) must be addressed
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`first . . . . Rule 16 opens the door to Rule 15.”)
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`III. ANALYSIS
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`TruChoice argues that Income Allocation’s motion to amend the complaint was
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`untimely and futile. The Court respectfully disagrees as to timeliness and agrees, in part, as
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`to futility.
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`A. Income Allocation’s Motion to Amend Was Timely Filed.
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`TruChoice alleges that when Income Allocation filed “a new motion and a new
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`memorandum, with new facts and new arguments” on November 4, in response to the
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`Court’s November 2 order, it should have shown good cause for its late filing. (Def.’s Mem.
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`Opp’n at 7–8.) TruChoice urges the Court to deny the motion as untimely because Income
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`Allocation failed to show good cause to move the deadline. (Id. at 16–18 (citing D. Minn.
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`LR 1.3).) It insists that such an outcome would not be “harsh or unfair” because Income
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`Allocation “waited until the last minute, rushed to draft and file a motion, skipped the meet
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`and confer requirement, and failed to comply with the Local Rules.” (Id. at 20.) Income
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`Allocation responds that because it timely filed its original motion on November 1, it met
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`the deadline in the scheduling order and it need not show good cause to amend that deadline.
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`(Pl.’s Mem. Supp. 1, 7–8, Dkt. No. 35-6.) It also argues that its original filing followed the
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`Local Rules, because it was not possible to file a meet and confer statement simultaneously
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`with its motion because opposing counsel was not available to meet and confer—on the
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`afternoon of the last day to amend the complaint. (Pl.’s Reply Mem. Supp. 9, Dkt. No. 43,
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`(citing LR 7.1(a)(1)(A)).)
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`The Court rejects Income Allocation’s claims and accepts TruChoice’s assertion that
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`the Local Rules were violated because Income Allocation was in a last-minute rush to get
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`its motion to amend filed. There is no doubt that Income Allocation’s November 1 filings
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`violated Local Rule 7.1 and the ECF Guidelines. This Court had the discretion to impose
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`“appropriate sanctions” for these violations under Local Rule 1.3. R.A.D. Servs. LLC v. State
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`Farm Fire & Cas. Co., 60 F.4th 408, 412 (8th Cir. 2023) (“The district court has
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`considerable discretion in applying its local rules.” (quoting Buffets, Inc. v. Leischow, 732
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`F.3d 889, 895 (8th Cir. 2013))). It chose instead to give Income Allocation a short extension
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`of time to file its moving papers in compliance with the Local Rules. (Def.’s Mem. Opp’n
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`17.) The Order stated:
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`The Court has reviewed the filings in support of Plaintiff’s Motion to Amend
`Complaint [Dkt. No.] 32 and finds that the Motion does not comply with D.
`Minn. LR 7.1 in several respects. Therefore, by 5:00 p.m. on 11/04/2022,
`counsel shall file a separate meet and confer statement, separate
`memorandum of law, and a proposed order (the Court has received the copy
`sent to chambers but no copy has been filed), or the Court will deny the
`motion without prejudice for failure to follow D. Minn. LR 7.1(a) and (b)(1).
`If the Defendants do not oppose the motion, the parties may proceed by
`stipulation.
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`The Court’s order did not limit Income Allocation to re-filing its inadequate moving papers.
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`The Court required it to comply with Local Rule 7.1, which necessarily demanded that
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`Income Allocation draft a memorandum to support its proposed amendments. Having issued
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`this Order, the Court will not penalize Income Allocation (by denying the re-filed motion
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`and supporting documents as untimely) for complying with it.
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`Counsel for Income Allocation reported that he had no document to share with
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`opposing counsel before leaving the voicemail at 2:40 pm on the day the amendments were
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`due, and that his tardiness was due in part to his client’s vacation. (Id.) This entire situation
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`could have been avoided had Income Allocation’s counsel started work on the amendments
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`reasonably promptly after the “new developments” on which the amendments are based
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`became known, in September 2022. (See Pl.’s Reply Mem. 10 (arguing that amendments
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`are necessary due to “new developments” unknown until September 2022).) Waiting until
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`the afternoon of the day of a deadline to attempt to contact opposing counsel, then claim
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`that a meet-and-confer was not possible due to opposing counsel’s unavailability does
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`violence to the impossibility exception to LR 7.1’s meet and confer requirement. See LR
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`7.1(a)(1)(A). This situation is compounded by Income Allocation’s counsel not having a
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`draft amended complaint that TruChoice’s counsel could review until after 9:00 pm on the
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`day the amended complaint was due.
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`The obligation to meet and confer before filing motions is a serious obligation. Not
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`only is meeting and conferring a professional courtesy, it is also a rule of the Court, and one
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`with an important purpose. Meeting and conferring is “intended to lead to a meaningful,
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`pre-motion-filing exchange of views between the parties to a lawsuit, and, if possible, to a
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`full or partial resolution of the matter(s) that are the subject of a contemplated motion.”
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`Marks v. Bauer, No. 20-CV-1913 (ADM/JFD), 2021 WL 6050309, at *3 (D. Minn. Dec.
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`21, 2021) (quoting Magistrate Judge John F. Docherty’s Practice Pointers and
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`Preferences, https://www.mnd.uscourts.gov/judges-practice-pointers, at 3 (last visited Feb.
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`8, 2023)). The habit of meeting and conferring streamlines motion practice, which reduces
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`the burden on the parties, counsel, and the courts. Going forward, the Court expects that the
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`parties will timely meet and confer in good faith, as required by the rules of the Court.
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`B. Some, but Not All, of Income Allocation’s Proposed Amended Claims are Futile.
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`A claim is futile if it fails “to state a claim to relief that is plausible on its face.” See
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`Cornelia I. Crowell GST Tr., 519 F.3d at 782; Bell Atl. Corp., 550 U.S. at 570. TruChoice
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`argues that none of the claims asserted in the amended complaint—six new copyright
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`infringement claims, two new trade secret misappropriation claims, and an unjust
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`enrichment claim—are plausible. (Def.’s Mem. Opp’n 8.) The Court finds that Income
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`Allocation has plausibly alleged that TruChoice copied the book by making and distributing
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`an unauthorized e-book version, and by distributing the whiteboard video, but it has not
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`adequately pleaded the other copyright claims, trade secret misappropriation claims, or the
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`unjust enrichment claim.
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`i. Income Allocation’s Copyright Claims are Futile Except as they
`Relate to Unauthorized Copying of the E-Book and Whiteboard
`Video.
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`The Copyright Act grants “the author of an original work a bundle of exclusive
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`rights” in that work. Andy Warhol Found. for the Visual Arts, Inc. v. Goldsmith, 143 S. Ct.
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`1258, 1273 (2023) (internal quotations omitted) (citing U.S. Const. art. 1, § 8, cl. 8). One of
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`the exclusive rights is the right to make a derivative work, which is “a work based upon one
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`or more preexisting works.” 17 U.S.C. § 106(2) (granting the right), § 101 (defining
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`derivative work); Mulcahy v. Cheetah Learning LLC, 386 F.3d 849, 852 (8th Cir. 2004).
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`The preexisting work is “recast, transformed, or adapted” in the derivative work that results.
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`17 U.S.C. § 101. A derivative work can infringe a copyright if it incorporates parts of a
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`copyrighted work and is substantially similar to the copyrighted work. Bar-Meir v. N. Am.
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`Die Cast Ass’n, 176 F. Supp. 2d 944, 949 (D. Minn. 2001), aff’d, 53 F. App’x 396 (8th Cir.
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`2002); see also 3 Melville B. Nimmer and David Nimmer, Nimmer on Copyright § 3.01
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`(2022) (“A work is not derivative unless it has substantially copied from a prior work”);
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`Mulcahy, 386 F.3d at 853 (citing Nimmer on Copyright). Thus, if a person makes a work
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`based on a copyrighted work that is substantially similar to the original, they have made a
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`derivative work. If the person does so without permission from the copyright owner of the
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`original work, they have infringed on that owner’s copyright. Id. at 852 (citing 17
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`U.S.C. § 501(a)).
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`Both parties agree that to adequately plead copyright infringement, Income
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`Allocation must allege “(1) ownership of a valid copyright and (2) copying of the constituent
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`elements of the work that are original.” Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S.
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`340, 361 (1991); MPAY Inc. v. Erie Custom Comput. Applications, Inc., 970 F.3d 1010,
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`1016 (8th Cir. 2020); Nelson v. PRN Prods., Inc., 873 F.2d 1141, 1142 (8th Cir. 1989)
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`(Def.’s Mem. Opp’n 23–24; Pl.’s Reply Mem. 7.) Income Allocation’s proposed amended
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`complaint alleges that TruChoice violated both the ‘427 copyright and the ‘532 copyright
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`by using software made from the Background IP (intellectual property not covered by the
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`agreements that the MTA terminated), by copying the book into an e-book, by generating
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`reports for customers using the software made from the Background IP, by showing the
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`whiteboard video, and by distributing these derivative works for others to access. (Proposed
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`Am. Compl. ¶¶ 54–106.) TruChoice argues that the amended copyright claims fail to plead
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`either ownership of a valid copyright or copying of a copyrighted work and urges the Court
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`to reject the amendments as futile. (Def.’s Mem. Opp’n 24.)
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`a. Income Allocation Has Plausibly Alleged Ownership of a
`Valid Copyright for the ‘427 Copyright, but not the ‘532
`Copyright.
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`A certificate of copyright registration “made before or within five years after first
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`publication of the work” establishes a rebuttable presumption of valid ownership of a
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`copyright. 17 U.S.C. § 410(c); Taylor Corp. v. Four Seasons Greetings, LLC, 315 F.3d
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`1039, 1042 (8th Cir. 2003). TruChoice argues that because Income Allocation did not
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`receive the certificate of registration for the ‘532 copyright until over eight years after the
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`computer program was first published, it is not entitled to the statutory presumption of
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`validity. (Def.’s Mem. Opp’n 25.)5 TruChoice is correct. In reviewing the copyright
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`registration6 for the ‘532 copyright, the Court found that the reported date of publication
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`5 Income Allocation also alleged that the registration was facially invalid because it claimed
`that Income Allocation LLC created the computer program in 2014, which would have
`been impossible because the LLC was not organized until 2021. (Def.’s Mem. Opp’n 27.)
`The registration has since been supplemented to state that eToolsHQ created the computer
`program and transferred the copyright to Income Allocation by written agreement.
`(Declaration of Michael T. Fluhler ¶ 19, Dkt. No. 43-1.) Both the original copyright
`registration and its supplement were filed more than five years after the first-publication
`date of April 30, 2014, and therefore this subsidiary dispute over facial invalidity does not
`change the Court’s analysis.
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`6 The Court may consider public records in determining whether a claim is futile because
`it applies the same standard as on a motion to dismiss, where courts may take judicial notice
`of public records. Stahl v. U.S. Dep’t Agric., 327 F.3d 697, 700 (8th Cir. 2003) (“The
`district court may take judicial notice of public records and may thus consider them on a
`(footnote continued on next page)
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 14 of 26
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`was April 30, 2014, meaning that the presumption of validity would only apply if the ‘532
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`copyright was registered on or before April 30, 2019. But the ‘532 copyright was registered
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`on September 26, 2022, more than seven months after this litigation started, and more than
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`three years after the five-year window for the presumption of validity closed. Computer
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`Program for Income Allocation and Equivalent Portfolio Value, U.S. Copyright Office,
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`https://cocatalog.loc.gov/cgi-bin/Pwebrecon.cgi?v1=1&ti=1,1&Search%5FArg=TX000
`
`9173532&Search%5FCode=REGS&CNT=25&PID=GW2TNIBNCnzP2VImW_3CedLe
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`yo8I&SEQ=20230601111014&SID=4 (Sept. 26, 2022, supplemented Nov. 28, 2022);
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`(Proposed Am. Compl. ¶ 17). Thus, the ‘532 copyright is not entitled to a presumption of
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`validity, but that does not mean it is automatically invalid. Thimbleberries, Inc. v. C & F
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`Enters., Inc., 142 F. Supp. 2d 1132, 1137 (D. Minn. 2001). The court must exercise its
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`“discretion to decide what evidentiary weight to accord the registration certificate in
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`judging whether plaintiff has established the requisite originality and protectability of its
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`work.” Id.
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`Income Allocation alleges that the ‘532 registration covers the “Background
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`Software,” which it defines as the “web-based software and application . . . based on
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`income planning techniques” from the book including calculators (the Income Allocation
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`Calculator and the Equivalent Portfolio Value (EPV) Calculator) and individualized reports
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`for customers. (Proposed Am. Compl. ¶¶ 16–18). The proposed amended complaint alleges
`
`
`motion to dismiss.”); Amen El v. Schnell, No. 20-CV-1327 (DSD/ECW), 2022 WL
`1110981, at *7 (D. Minn. Jan. 31, 2022), R&R adopted, 2022 WL 766402 (D. Minn. Mar.
`14, 2022), aff'd, No. 22-2115, 2022 WL 17228817 (8th Cir. July 29, 2022).
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 15 of 26
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`neither that the software was original nor that it was protectable under U.S. Copyright law.
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`Without such facts, and without the presumption of validity from a timely copyright
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`registration, the Court finds that Income Allocation’s ‘523 copyright “case collapses on its
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`own merit.” 3 Melville B. Nimmer and David Nimmer, Nimmer on Copyright § 12.11
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`(2022). The ‘427 copyright, however, is presumptively valid and TruChoice has not
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`attempted to rebut that presumption, so it may be the basis for an infringement claim, if
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`Income Allocation adequately alleges copying.
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`b. Income Allocation Has Plausibly Alleged Copying in the E-
`book and the Whiteboard Video.
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`The second element of copyright infringement is copying. A party can prove
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`copying by “demonstration of access (by the alleged infringer) and substantial similarity
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`(between the works at issue).” Moore v. Columbia Pictures Indus., Inc., 972 F.2d 939, 941–
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`42 (8th Cir. 1992). The Eighth Circuit recently described the test for substantial similarity:
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`First, there must be similarity of ideas, which must be “evaluated
`extrinsically, focusing on [the] objective similarities . . . of the works.”
`Rottlund Co. v. Pinnacle Corp., 452 F.3d 726, 731 (8th Cir. 2006). Second,
`if the ideas are similar, they must be similarly expressed, meaning that an
`“ordinary, reasonable person” would think that “the total concept and feel of
`the [designs] in question are substantially similar.” Hartman v. Hallmark
`Cards, Inc., 833 F.2d 117, 120–21 (8th Cir. 1987) (referring to this as “the
`intrinsic test”). Without similarity in ideas and expression, there is no
`infringement. See id. at 120.
`
`Designworks Homes, Inc. v. Thomson Sailors Homes, L.L.C., 9 F.4th 961, 963–64 (8th Cir.
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`2021) (alterations and omissions in original).
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`A person who is making a work that is derivative of a copyrighted work is
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`substantially copying from, and making a work substantially similar to, the original, so
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 16 of 26
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`courts apply the substantial similarity test when determining whether producing a derivative
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`work has infringed the rights of the original copyright holder. See My Pillow, Inc. v. Ontel
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`Prod. Corp., No. 19-CV-903 (JNE/HB), 2020 WL 1977287, at *8 (D. Minn. Apr. 3, 2020),
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`R&R adopted, No. 19-CV-0903 (JNE/HB), 2020 WL 1976478 (D. Minn. Apr. 24, 2020)
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`(applying substantial similarity test). TruChoice argues that Income Allocation has failed to
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`plausibly allege that TruChoice used works derivative of the book protected by the ’427
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`copyright because it has not shown in what ways the derivative software, e-book, reports,
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`or the whiteboard video are substantially similar to the book. (Def.’s Mem. Opp’n 28.)
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`Count II of the proposed amended complaint alleges that the ‘427 copyright gives
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`it exclusive rights to produce works derived from the book. (Proposed Am. Compl. ¶ 56.)
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`It claims that TruChoice is using “Derivative Software,” which it defines as the
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`“Background IP and derivative works thereof.” (Id. at ¶ 34.) Income Allocation then
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`defines “Background IP” as “intellectual property originating outside the term of or created
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`independently of the Tradewinds Agreements.” (Id. at ¶ 29.) This definitional tangle makes
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`it difficult to tell precisely what Income Allocation is claiming, but upon close review it
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`appears most likely to the Court that Income Allocation believes that TruChoice is using
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`software that is a derivative work of (i.e. substantially copied from) the book in violation
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`of the ‘427 copyright. TruChoice correctly points out that this claim is bereft of any factual
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`assertions that would make it plausible. There is no discussion of the software in the
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`proposed amended complaint, nor what portions of the book were copied to make it.
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`Further, because the definition of “Derivative Software” encompasses the definition of
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`“Background IP,” which itself is a term so broad that it could include anything from source
`
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 17 of 26
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`code to presentations, the Court cannot determine what it is that the software does. This
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`confusion poses an insurmountable challenge to finding Income Allocation’s claims
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`plausible. The Court finds that Income Allocation’s amended count two is implausible and
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`thus futile.
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`In Count III of the proposed amended complaint, Income Allocation again alleges
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`that it has the exclusive right to produce works derivative of the 2015 book (Proposed Am.
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`Compl. ¶¶ 15, 68.) It goes on to allege that the e-book is a derivative work of the print book
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`because it is “adapted from Plaintiff’s copyrighted Book.” (Id. ¶ 71.) It claims that
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`TruChoice had access to the book as early as 2016 and produced an exact copy of the entire
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`book after the deadline the MTA set for TruChoice to stop using Mr. Gaylor’s “Background
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`IP.” (Id. ¶¶ 36, 72–75.) The term “Background IP” was defined in the original complaint
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`as including the ‘427 copyright covering the book and the definition has not changed in the
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`proposed amended complaint. (Compare Compl. ¶ 27, Dkt. No. 1 with Proposed Am.
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`Compl. ¶ 29.) In sum, Income Allocation alleges that TruChoice made copies of the book
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`after it agreed not to use it. (Proposed Am. Compl. ¶¶ 15, 28, 31–33, 51–56.) TruChoice
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`does not challenge this claim as futile, only the part of Count III that alleges infringement
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`of the ‘523 copyright. The Court has already found that the ‘523 copyright is not
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`presumptively valid, that Income Allocation has to plead the validity of the ‘523 copyright
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`absent that presumption, and that Income Allocation did not do so. (Def.’s Mem. Opp’n
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`26.) Thus, Count III of the proposed amended complaint is not futile, but only to the extent
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`it relies on the ‘427 copyright; Income Allocation has alleged a presumptively valid
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`copyright, alleged that TruChoice had access to the book, and alleged that TruChoice
`
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`CASE 0:22-cv-00343-JWB-JFD Doc. 61 Filed 06/09/23 Page 18 of 26
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`copied the book in its entire