Case 1:17-cv-08193-JBS-AMD Document 54 Filed 08/13/18 Page 1 of 36 PageID: 807
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`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW JERSEY
`
`
`HONORABLE JEROME B. SIMANDLE
`
`
`Civil Action No.
`17-8193 (JBS/AMD)
`
`
`OPINION
`
`
`
`
`
`FISH KISS LLC & ANNE KLEIN,
`
`
`
`
`Plaintiffs,
`
`
`v.
`
`NORTH STAR CREATIONS, LLC;
`ROOTED MADE; ROOTEDUSA;
`BERNADETTE GODWIN; ERIC
`BERNSTEIN; and JOHN DOES 1-10,
`
`
`
`
`Defendants.
`
`
`APPEARANCES:
`
`Jessie Basner, Esq.
`CLEMENTE MUELLER PA
`P.O. Box 1296
`
`Morristown, NJ 07962
`
`Attorney for Plaintiffs
`
`Robert McKinley, Esq.
`LAULETTA BIRNBAUM LLC
`591 Mantua Blvd., Suite 200
`Sewell, NJ 08080
`
`Attorney for Defendants
`
`
`SIMANDLE, District Judge:
`
`I.
`Introduction
`This case arises out of the alleged copyright infringement
`
`and breach of contract by Defendants North Star Creations, LLC;
`Rooted Made; Rooted USA; Bernadette Godwin, and Eric Bernstein.
`The action was brought by Fish Kiss, LLC, a corporation founded
`
`
`
`1
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`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW JERSEY
`
`
`HONORABLE JEROME B. SIMANDLE
`
`
`Civil Action No.
`17-8193 (JBS/AMD)
`
`
`OPINION
`
`
`
`
`
`FISH KISS LLC & ANNE KLEIN,
`
`
`
`
`Plaintiffs,
`
`
`v.
`
`NORTH STAR CREATIONS, LLC;
`ROOTED MADE; ROOTEDUSA;
`BERNADETTE GODWIN; ERIC
`BERNSTEIN; and JOHN DOES 1-10,
`
`
`
`
`Defendants.
`
`
`APPEARANCES:
`
`Jessie Basner, Esq.
`CLEMENTE MUELLER PA
`P.O. Box 1296
`
`Morristown, NJ 07962
`
`Attorney for Plaintiffs
`
`Robert McKinley, Esq.
`LAULETTA BIRNBAUM LLC
`591 Mantua Blvd., Suite 200
`Sewell, NJ 08080
`
`Attorney for Defendants
`
`
`SIMANDLE, District Judge:
`
`I.
`Introduction
`This case arises out of the alleged copyright infringement
`
`and breach of contract by Defendants North Star Creations, LLC;
`Rooted Made; Rooted USA; Bernadette Godwin, and Eric Bernstein.
`The action was brought by Fish Kiss, LLC, a corporation founded
`
`
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`1
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`by Anne Klein who was later added as a plaintiff (collectively,
`“Plaintiffs”). [Docket Item 14.]
`Citing a lack of specificity as to the copyright claim,
`lack of standing, and lack of an enforceable contract,
`Defendants moved to dismiss all counts of Plaintiffs’ complaint
`pursuant to Fed. R. Civ. P. 12(b)(6) or in the alternative, for
`an order requiring Plaintiffs to submit a more definite
`statement pursuant to Fed. R. Civ. P. 12(e). [Docket Items 13
`(“First Motion to Dismiss”) and 51 (“Second Motion to
`Dismiss”).] Additionally, Defendants have alternatively moved
`for summary judgment under Fed. R. Civ. P. 56 with regard to
`Count 5.
`The issues to be decided include whether violation of the
`scope of an exclusive license can serve as the basis for a
`breach of contract claim; whether the “first sale” doctrine is
`applicable to Plaintiffs’ copyright infringement claims; whether
`Plaintiffs have adequately pled their copyright infringement
`claims; the adequacy of the claims pled against the Individual
`Defendants; whether Plaintiffs state a claim under the Lanham
`Act (or whether summary judgment is warranted on that claim);
`and whether Plaintiffs have standing to pursue a claim under the
`New Jersey Consumer Fraud Act. For the reasons discussed below,
`the Court will grant in part and deny in part Defendants’ Second
`Motion to Dismiss.
`
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`2
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`II. Background
`A. Factual Background
`Plaintiff Anne Klein is the President of Fish Kiss, LLC
`
`(“Fish Kiss”). Fish Kiss is a “small lifestyle brand company
`that specializes in the creation of unique designs and artwork.”
`[Docket Item 45 at 1.] Fish Kiss owns fifty-one artwork designs
`for which each design is copyrighted (Copyright Registration no.
`VA 2-049-471). Id. at 2. Bernadette Godwin (“Godwin”) and Eric
`Bernstein (“Bernstein”)(collectively, “Individual Defendants”)
`are the owners of North Star, LLC (“North Star”). Id. at 15.
`North Star LLC is a manufacturer of textile products. The
`Individual Defendants, North Star, and its subsidiaries,
`RootedUSA and Rooted Made, are collectively referred to as
`“Defendants.” Id. at 2.
`On January 1, 2016, Plaintiffs and Defendants executed a
`one-year license agreement (“License Agreement”) for Fish Kiss
`Artwork. Id. at 3. The License Agreement granted Defendants the
`exclusive right to manufacture and sell Christmas stockings,
`Christmas tree skirts, adult kitchen aprons, cotton tea/dish
`towels and decorative pillows bearing Fish Kiss artwork
`(“Licensed Products”). Id. The term of the License Agreement
`began on January 1, 2016 and continued until January 1, 2017
`with no residual sell-off period after termination. Id. Under
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`the License Agreement, Klein had the right to review and approve
`new iterations of the Licensed Products for sample approval
`before they were permitted to be offered for sale. Id. Under the
`License Agreement, the Licensed Products were to consistently
`bear Fish Kiss branding, labeling, and packaging. Id. at 4.
`Under the Schedule of Artwork annexed to the License Agreement,
`Defendants were to pay Klein royalties of 15% of wholesale cost
`of Christmas stockings, Christmas tree skirts, adult kitchen
`aprons, and cotton tea/dish towels, and 20% of wholesale cost of
`decorative pillows. Id. Defendants were required to remit
`royalty payments within thirty days of the shipment of Licensed
`Products to Defendants’ customers. Id.
`
`Defendants represented to Plaintiffs that they had total
`sales in the amount of $13,895.00 from the Licensed Products
`from January 1, 2016 to December 31, 2016. Id. Plaintiffs allege
`that Defendants have willfully misrepresented the amount of
`sales of Licensed Products to avoid paying Klein appropriate
`royalties due. Id. at 5. As evidence, Plaintiffs submit that, in
`May 2016, Defendants requested an order for 1,000 additional
`wrappers. Id. Defendants sold the wrappers for approximately
`$5.50 to $6.00 each. Id. Plaintiffs allege that the May 2016
`sale alone would equal $5,550 to $6,000 in sales. Id.
`Nevertheless, in September 2016, Defendants sent Plaintiffs a
`proposal for renewal of the license, representing that their
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`year-to-date sales of Licensed Products through August 31, 2016
`amounted only to $5,408. Id. Plaintiffs also point to an email
`Klein received in January 2017 from North Star sales
`representative Dan Kennedy, stating that he alone sold $11,000
`worth of Licensed Products. Id. at 4. Plaintiffs allege that
`they have discovered an additional $10,561.50 in sales of
`Licensed Products unaccounted for in the $13,895 figure
`presented by Defendants. [Id.]
`
`Plaintiffs received payments in the amount of $2,143.65 as
`royalties for the time period of January 1, 2016 to December 31,
`2016. Id. Plaintiffs allege that Defendants did not make royalty
`payments from sales made in November of 2016 until January 28,
`2017, in violation of the License Agreement. Id. at 5.
`Plaintiffs allege that one of Defendants’ customers, Quaile
`Connect, LLC, placed orders for Licensed Products on January 6,
`2017. Id. at 5. Plaintiffs allege that Defendants sold Licensed
`Product to ETShops in February 2017. Id. Plaintiffs allege that
`Defendants posted an unauthorized alteration of a Fish Kiss
`Christmas Tree Skirt on eBay, id., and that Defendants sold new
`iterations of Licensed Products on eBay and Amazon without the
`approval of Plaintiffs. Id. at 6.
`B. Procedural Background
`
`
`On February 9, 2017, Plaintiffs sent a letter to Defendants
`alleging that Defendants violated the copyrights and demanded
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`5
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`that Defendants cease manufacture, sale, and distribution of the
`Licensed Products. Id. at 7. The letter also requested a
`recalculation of Defendant’s sales of Licensed Products as well
`as proper payment of royalties. Id. at 8.
`
`Plaintiffs subsequently filed the original complaint on
`October 12, 2017. [Docket Item 1.] Count 1 alleges a breach of
`contract for Defendants’ failure to make timely royalty
`payments. Id. at 10. Count 2 alleges breach of contract for
`Defendants’ failure to cease use and sale of licensed products
`upon termination of the license. Id. at 11. Count 3 alleges
`breach of contract for Defendants’ failure to obtain approval of
`modified licensed products prior to distribution as well as
`failure to include Fish Kiss branding, labeling, and packaging.
`Id. at 12. Counts 4 and 5 allege copyright infringement for
`Defendant’s violation of the license agreement under 12 U.S.C.
`§ 504(b) and for violation of Plaintiffs’ exclusive rights under
`12 U.S.C. § 106, respectively. Id. at 18. Count 6 alleges
`vicarious and/or contributory liability for copyright
`infringement against the Individual Defendants. Id. at 18. Count
`8 alleges False Advertising under the Lanham Act, 15 U.S.C.
`§ 1125(a)(1), in connection with Defendants using a “Made in
`America” designation on the Licensed Products, as Plaintiffs
`allege that Defendants manufactured Licensed Products at least
`partially outside the United States. Id. at 19. Count 9 alleges
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`violations of the New Jersey Consumer Fraud Act, N.J.S.A. 56-8-2
`(“CFA”), in connection with the “Made in America” designation.
`
`Defendants then filed a motion to dismiss several of
`Plaintiffs’ claims pursuant to Fed. R. Civ. P. 12(b)(6) for
`failure to state a claim upon which relief may be granted.
`[Docket Item 13 (“First Motion to Dismiss”).] With regard to
`Counts 8 and 9, Defendants asserted in the First Motion to
`Dismiss that they manufacture all of their products in a
`facility in Medford, New Jersey. Id. at 16. Defendants requested
`dismissal of Count 8 for failure to state a claim or, in the
`alternative, summary judgment pursuant to Fed. R. Civ. P. 56.
`Id. at 13. Defendants also sought dismissal of Count 9 for lack
`of standing. Id. at 16. Defendants argued that because the
`Licensing Agreement was between Anne Klein and Defendants
`[Docket Item 1-11], Fish Kiss did not have standing as the real
`party in interest under Fed. R. Civ. P. 17(a) with regard to the
`contractual claims. [Docket Item 13 at 7.] Defendants also
`requested dismissal of Plaintiffs’ copyright claims (Counts 4 &
`5) pursuant to the first sale doctrine, 17 U.S.C. § 109(a). Id.
`at 10. Defendants requested dismissal (or, in the alternative, a
`more definite statement of a pleading pursuant to Fed. R. Civ.
`P. 12(e)) with regards to Plaintiff’s copyright infringement
`claims (Counts 4-6). Id. at 12. Defendants also requested
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`dismissal of Count 6 (claims against the Individual Defendants).
`Id.1
`
`In lieu of a Response, Plaintiffs filed their First Amended
`Complaint (“FAC”) on December 20, 2017. [Docket Item 14.] In it,
`Anne Klein was named as a plaintiff, which addressed Defendants’
`arguments under Fed. R. Civ. P. 17(a) as to Fish Kiss’s
`standing. Id. The FAC specified which copyrighted materials were
`allegedly being infringed (namely: products bearing Fish Kiss’s
`Alabama, Arizona, California, Colorado, Connecticut, Delaware,
`Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa,
`Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan,
`Minnesota, Missouri, Montana, Nebraska, New Hampshire, New
`Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma,
`Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Vermont,
`Virginia, West Virginia, Wisconsin, and Wyoming designs). Id. at
`9. Plaintiff withdrew Counts 8 and 9 without prejudice and
`reserved the right to reinstate the claims upon the discovery of
`further corroborating evidence. Id. at 19. Subsequently,
`Plaintiffs filed a Response in Opposition to Defendants’ Motion
`
`
`1 Defendants’ Second Motion to Dismiss no longer moves to dismiss
`Count Six (against the Individual Defendants). [Docket Item 51-
`1.] However, in the interests of addressing all arguments raised
`by Defendants and to the extent that filing the Answer to the
`FAC did not moot Defendants’ First Motion to Dismiss, the Court
`addresses this argument at Section IV.D., infra.
`8
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`to Dismiss on December 20, 2017, addressing the other arguments
`in Defendants’ First Motion to Dismiss. [Docket Item 15.]
`
`Defendants filed an Answer to the FAC (including the
`assertion of counterclaims against Plaintiffs). [Docket Item
`16.]
`In apparent service of attempting to reinstate their false
`
`advertising claims, Plaintiffs contacted Defendants’ cloth and
`fabric supplier via email on April 4, 2018, inquiring whether
`their “canvas material in both optic white and white is also
`milled in the U.S.A.” [Docket Item 40-6 at 12]. In response, the
`supplier stated that they “do not have any canvas fabrics that
`are Made in the USA. This is due to the lack of woven mills that
`exist in the USA today.” Id.
`
`By leave of the Court [Docket Item 44], Plaintiffs filed
`their Second Amended Complaint on May 14, 2018. [Docket Item 45
`(“SAC”).] In light, apparently, of the information gained from
`the April 4, 2018 email exchange, Plaintiffs reinstated as
`Counts 7 and 8 their False Advertising and Unfair Trade
`Practices claims under the Lanham Act, § 43(a), and the CFA,
`N.J.S.A. § 56:8-2, respectively. Id. at 15-16.
`
`Because the SAC is now the operative Complaint in this
`case, the Court restates its claims, briefly:
`1. Breach of Contract Against NSC Defendants (for
`failure to pay and make timely royalties due)
`[Docket Item 45 at 9-10];
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`2. Breach of Contract Against NSC Defendants (for
`failure to cease use of Fish Kiss Artwork and Sale
`of Licensed Product upon Termination of the
`Agreement) [id. at 10];
`3. Breach of Contract Against the NSC Defendants (for
`failure to obtain approval of licensed products
`prior to distribution; failure to include Fish Kiss
`branding, labeling, and packaging; and unauthorized
`modification of Fish Kiss artwork) [id. at 10-11];
`4. Copyright Infringement Against the NSC Defendants
`(for copyright infringement of Fish Kiss Kentucky
`artwork) [id. at 11-13];
`5. Copyright Infringement Against the NSC Defendants
`(for copyright infringement of Fish Kiss artwork)
`[id. at 13-15];
`6. Vicarious and/or Contributory Copyright
`Infringement Against Defendants Godwin and
`Bernstein [id. at 15];
`7. False Advertising under the Lanham Act, § 43(a)
`Against the NSC Defendants [id. at 15-16]; and
`8. “Violation of N.J. Unfair Trade Practices Act (N.J.
`§ 56:8-2)” Against the NSC Defendants [id. at 16-
`17].
`
`In response, Defendants filed the Second Motion to Dismiss
`
`the SAC (along with a brief in support of that Motion) on June
`29, 2018. [Docket Item 51.] The Second Motion (to dismiss the
`SAC) is, for all intents and purposes, identical to the motion
`to dismiss Plaintiffs’ original complaint; it omits only
`Defendants’ motion to dismiss the case on the grounds that Fish
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`Kiss (but not Klein) lacked standing.5 Again, in the interests of
`clarity, the Court restates its essential arguments:
`1. Count Two should be dismissed for failure to state
`a claim because there can be no breach of contract
`after the License Agreement terminated;
`2. Counts Four through Six should be dismissed under
`the “first sale” doctrine;
`3. Counts Three through Six should also be dismissed
`for failure to allege sufficient detail about the
`nature of the alleged infringement;
`4. Count Seven should be dismissed because Plaintiffs’
`claim of false advertising on Defendants’ claim
`that the products are “made in the USA” or “made in
`America” cannot be sustained where the only
`allegation is that the materials used to make
`Defendants’ products did not themselves come from
`the USA, but the products themselves were made in
`the USA;
`5. Count Eight should be dismissed either for the same
`reasons as Count Seven, or because Plaintiffs lack
`standing to bring a claim under the New Jersey
`Consumer Fraud Act because they are not consumers.
`
`[Docket Item 51-1 at 4-5.]
`Plaintiffs then filed a Memorandum in Opposition to
`Defendants’ Motion to Dismiss Plaintiffs’ SAC. [Docket Item 52.]
`The arguments raised in Plaintiffs’ memorandum are largely
`identical to those in the previous memorandum [Docket Item 15]
`submitted in opposition to Defendants’ previous motion to
`dismiss. A small, but notable, addition to the current
`memorandum is Plaintiffs’ assertion that Defendants’ contention
`
`
`5 To the extent that this claim is pressed, the Court finds this
`argument unpersuasive in light of Plaintiffs’ addition of Klein
`as a Plaintiff and denies the Motion to Dismiss as to these
`grounds.
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`that Plaintiffs do not have a claim under N.J.S.A. § 56-8-19 is
`moot. [Docket Item 52 at 23.]
`Plaintiff also argues that “Defendants are now attempting
`to object to claims identical to those which it has already
`answered. [Docket Item 16.] Accordingly, such objections should
`be considered waived.” [Docket Item 52 at 7.] The Court
`disagrees. While a motion to dismiss pursuant to Fed. R. Civ. P.
`12(b)(6) must be filed before an Answer, the defense that a
`complaint fails to state a claim upon which relief may be
`granted is not waived by the filing of an Answer. See Fed. R.
`Civ. P. 12(h)(2) (“Failure to state a claim upon which relief
`can be granted . . . may be raised: (A) in any pleading allowed
`or ordered under Rule 7(a); (B) by a motion under Rule 12(c); or
`(C) at trial.”). While Defendants’ Second Motion is styled a
`motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6), the
`standard for such a motion is identical to the standard for
`considering a motion for judgment on the pleadings pursuant to
`Fed. R. Civ. P. 12(c), which the Federal Rules explicitly
`contemplate the filing of, even after a defendant has filed an
`answer, in order to pursue the defense that the complaint fails
`to state a claim upon which relief may be granted. See also
`Commentary to Rule 12, Fed. R. Civ. P. (“A Rule 12(b)(6) motion
`is a pre-answer motion; by definition, once the defendant
`answers, it is no longer possible to file a pre-answer motion.
`
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`Nonetheless, lawyers often file ‘Rule 12(b)(6)’ motions after
`answering. When this occurs, the sensible path for the court to
`take is to treat the motion as having been made under Rule
`12(c).”)(citing, inter alia, Turbe v. Gov’t of V.I., 938 F.2d
`427, 428 (3d Cir. 1991)). Since there is no practical difference
`between the standards under Rule 12(b)(6) and Rule 12(c), the
`Court will address the motion as briefed under Rule 12(b)(6),
`addressing the Second Amended Complaint.
`Accordingly, the Court will proceed to consider the merits
`of the arguments of the parties.
`
`
`III. Standard of Review
`When considering a motion to dismiss a complaint for
`
`failure to state a claim, Fed. R. Civ. P. 12(b)(6), the Court
`must accept all well-pleaded allegations in the complaint as
`true and view them in the light most favorable to the non-moving
`party. A motion to dismiss may be granted only if the plaintiff
`has failed to set forth fair notice of what the claim is and the
`grounds upon which it rests that make such a claim plausible on
`its face. Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
`Although Rule 8 does not require "detailed factual allegations,"
`it requires "more than an unadorned, the-defendant-unlawfully-
`harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678
`(2009)(citing Twombly, 550 U.S. at 555).
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`For Rule 12(b)(6) motions for copyright infringement
`claims, such a claim will not be dismissed where a plaintiff
`adequately states a claim of “ownership of a valid copyright;
`and . . . unauthorized copying.” Levey v. Brownstone Inv. Group,
`LLC, No. 11-395(ES), 2013 WL 3285057 at *6 (D.N.J. June 26,
`2013), aff’d, 590 F. App’x 132 (3d Cir. 2014).
`
`IV. Discussion
`A. Breach of Contract
`Defendants seek dismissal of Count 2 (Failure to Cease
`
`Use/Sale of Licensed Products upon termination of Agreement)
`under Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon
`which relief can be granted. Defendants argue that because the
`license terminated on January 1, 2017, any actions taken after
`that date are not in violation of the contract. They submit that
`this is so on the theory that, if there is no contract, there
`can be no violation of the contract. Defendants have widely
`missed the mark.
`Count 2 is not premised upon a “normal” contractual
`violation, but rather a violation of the scope of an exclusive
`license. “[I]n an exclusive license, the copyright holder
`permits the licensee to use the protected material for a
`specific use and further promises that the same permission will
`not be given to others. The licensee violates the copyright by
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`exceeding the scope of this license.” Morgan v. Hawthorne Homes,
`Inc., No. 04-cv-1809, 2009 U.S. Dist. LEXIS 31456, 2009 WL
`1010476, at *12 (W.D. Pa. Apr. 14, 2009)(quoting Effects Assoc.,
`Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir.1990)). Here, the
`license terminated on January 1, 2017. Therefore, any use of the
`copyrighted materials after January 1, 2017 would be sufficient
`to state a claim for violation of the scope of the license, and
`therefore for a violation of Plaintiffs’ copyrights. As
`previously stated, Plaintiffs allege that the “contract” is the
`license. Neither party has denied their assent to the License
`Agreement.
`Having established that Plaintiffs plausibly plead that the
`scope of the license was violated, Defendants’ motion for
`dismissal of Count 2 must be denied.
`B. First Sale Doctrine
`Defendants assert that Counts 4 through 6 (copyright
`
`infringement) should be dismissed pursuant to the first sale
`doctrine. [Docket Item 13 at 10.] The first sale doctrine,
`codified at 17 U.S.C. § 109(a), prevents the copyright owner
`from controlling future transfers of a particular copy of a
`copyrighted work after he has transferred its "material
`ownership" to another. Columbia Pictures v. Aveco, Inc., 800
`F.2d 59, 63-64 (3d Cir. 1986)(citing Columbia Pictures Indus. v.
`Redd Horne, 749 F.2d 154, 159 (3d Cir. 1984)). “Once the
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`copyright owner places the copyrighted item in the stream of
`commerce by selling it, he has exhausted his exclusive statutory
`right to control its distribution.” Quality King Distribs. v.
`L'anza Research Int'l, 523 U.S. 135, 152 (1998).
`However, Defendants’ argument is once again misplaced
`because this was not a sale or disposal of a copy. Again,
`Plaintiffs allege that Plaintiffs and Defendants entered into a
`licensing agreement. The licensor “can still bring suit for
`copyright infringement if the licensee’s use goes beyond the
`scope of the nonexclusive license.” See MacLean Associates, Inc.
`v. Wm. M. Mercer-Meidinger-Hansen, Inc., 952 F.2d 769, 779 (3d
`Cir. 1991); Carlin v. Bezos, 649 F. App’x 181 (3d Cir. 2016);
`Grant Heilman Photography, Inc. v. John Wiley & Sons, Inc., 864
`F. Supp. 2d 316, 325 (E.D.Pa. 2012)(“When a licensee exceeds the
`scope of a license granted by the copyright holder, the licensee
`is liable for infringement.”). Here, Defendants’ alleged use of
`the Licensed Products after January 1, 2017, is sufficient to
`state a claim that Defendants exceeded the scope of the license.
`In Video Pipeline, Inc. v. Buena Vista Home Enter.,
`Inc., 192 F. Supp. 2d 321 (D.N.J. 2002), the defendant argued
`that its actions of creating its own clip previews from those
`provided by the plaintiff and subsequently allowing customers of
`its retailer clients to view them online was protected by the
`first sale doctrine. Id. at 332. The court found the argument to
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`be misplaced because the defendant “[was] not a retailer who has
`lawfully purchased copies of the plaintiffs’ product and
`therefore entitled to the protection afforded by the first sale
`doctrine.” Id. The court found that the defendant “provide[d]
`no support for the argument that one in a license agreement is
`entitled to the protection of the first sale doctrine defense
`that may be afforded to the other party.” Id. at 333. The same
`conclusion applies here. Defendants have misconstrued a license
`for the legal sale that would be necessary for invocation of the
`first sale doctrine.
`
`Plaintiffs defeat Defendants’ argument based on the first
`sale doctrine by pleading they did not sell any of the
`copyrighted work to Defendants. The Second Amended Complaint
`does not contain any indication that such a sale took place;
`indeed, the allegation that Plaintiffs and Defendants entered
`into a Licensing Agreement suggests that there was no sale,
`which would be necessary for invocation of the first sale
`doctrine. In any case, it is not apparent from the SAC that the
`first sale doctrine affords the protection to Defendants that
`they claim it does. The motion to dismiss as to Counts 4 through
`6 shall, therefore, be denied.
`
`C. Copyright Infringement: Sufficiency of Factual Pleadings
`
`Defendants also seek dismissal for Counts 4 through 6 on
`alternative grounds by asserting that Plaintiffs have not
`
`
`
`17
`
`
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`Case 1:17-cv-08193-JBS-AMD Document 54 Filed 08/13/18 Page 18 of 36 PageID: 824
`
`provided adequate information about Plaintiffs’ copyright
`applications in order to survive a Rule 12(b)(6) motion.
`Defendants rely on Bradshaw v. American Institute for History
`Educ., No. 12-1367, 2013 U.S. Dist. LEXIS 34566, at *10 (D.N.J.
`Mar. 13, 2013), citing Gee v. CBS, Inc., 471 F. Supp. 600
`(E.D.Pa. 1979), in their assertion that Plaintiffs did not
`provide sufficient information about the copyright
`registrations, what the materials looked like, or that the act
`of the defendant gave rise to their claims, and the time period
`the acts allegedly occurred within, sufficient to withstand a
`12(b)(6) motion.
`Gee established a relatively high standard for successfully
`pleading a claim of copyright infringement in requiring a
`statement of “which specific original work is the subject of the
`copyright claim, that plaintiff owns the copyright, that the
`work in question has been registered in compliance with the
`statute and by what acts and during what time defendant has
`infringed the copyright.” Gee, 471 F. Supp. at 643. “Plaintiffs
`must also allege that each work is suitably registered, provide
`registration numbers.” Id. at 644.
`However, the Third Circuit no longer applies the Gee
`standard for adequately pleading a claim of copyright
`infringement, after its underpinnings have been substantially
`weakened.
`
`
`
`18
`
`
`
`Case 1:17-cv-08193-JBS-AMD Document 54 Filed 08/13/18 Page 19 of 36 PageID: 825
`
`Illustratively, in Richard Feiner & Company, Inc. v. Larry
`Harmon Pictures Corp., 38 F. Supp. 2d 276 (S.D.N.Y. 1999) the
`court stated that the defendant, “relie[d] on Gee for the
`proposition that the complaint must be dismissed for failure to
`attach the copyright certificates or to provide the registration
`numbers. However, Gee relies heavily on a section from Moore’s
`Federal Practice, Second Edition, that has been deleted in the
`more recent edition.” 38 F. Supp.2d at 280. The Court notes the
`weakened persuasive power of Gee and turns, then, to recent
`guidance from the Third Circuit about pleading standards for
`copyright claims.
`The Third Circuit opinion affirming Levey v. Brownstone
`Inv. Group, LLC, 590 F. App’x 132 (3d Cir. 2014), applied a
`“broader” standard to copyright claims, stating all a plaintiff
`must establish is “ownership of a valid copyright; and . . .
`unauthorized copying.” Id. at 135. See also Kennedy v. Creditgo,
`LLC, No. 15-1790 (JBS-KMW), 2015 U.S. Dist. LEXIS 161461, at *4
`(D.N.J. Dec. 2, 2015)(To state a copyright claim, plaintiff must
`allege “(1) ownership of a valid copyright; and (2) unauthorized
`copying of original elements of the plaintiff's work.”)(quoting
`Dun & Bradstreet Software Servs. v. Grace Consulting, Inc., 307
`F.3d 197, 206 (3d Cir. 2002)). In Kennedy, the plaintiff’s
`copyright registration number was found to be sufficient for the
`purpose of showing ownership of a valid copyright. Id. at 4.
`
`
`
`19
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`Similarly, Plaintiffs have provided a valid copyright
`registration number for the subject works (VA 2-049-471); for
`that reason, the Court finds that Plaintiffs have adequately
`alleged the elements of a copyright claim and denies Defendants’
`Motion to Dismiss on those grounds.
`D. Vicarious and Contributory Liability for Individual
`Defendants
`
`
`Count 6 concerns vicarious and contributory liability in
`the context of copyright infringement. Defendants argue that
`Plaintiffs will have to pierce the corporate veil of the LLC in
`order to make Defendants Godwin and Bernstein vicariously and
`contributorily liable. Veil piercing occurs when a court
`“impose[s] liability on an individual or entity normally subject
`to the limited liability protections of the corporate form.” The
`Mall at IV Group Props., LLC v. Roberts, No. 02-4692, 2005 U.S.
`Dist. LEXIS 31860, 2005 WL 3338369, at *3 (D.N.J. Dec. 8, 2005).
`In order for a court to pierce the corporate veil under New
`Jersey law, "a plaintiff must show that: (1) one corporation is
`organized and operated as to make it a mere instrumentality of
`another corporation, and (2) the dominant corporation is using
`the subservient corporation to perpetrate fraud, to accomplish
`injustice, or to circumvent the law." Bd. of Trustees of
`Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d
`164, 171 (3d Cir. 2002)(citing Craig v. Lake Asbestos of Quebec,
`
`
`
`20
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`
`Ltd., 843 F.2d 145, 149 (3d Cir. 1988)); see also Holzli v.
`Deluca Enterprises, No. 11-6148, 2012 U.S. Dist. LEXIS 38880,
`2012 WL 983693, at 2 (D.N.J. Mar. 21, 2012). Furthermore, "[a]n
`individual may be liable for corporate obligations if he was
`using the corporation as his alter ego and abusing the corporate
`form in order to advance his personal interests." Sean Wood, LLC
`v. Hegarty Grp., Inc., 422 N.J. Super. 500, 518 (N.J. App. Div.
`2011)(emphasis added).
`The factors necessary for piercing the veil, generally, in
`the context of the abuse of the corporate structure are not
`alleged in the SAC. However, contributory and vicarious
`liability is treated differently in the context of copyright
`infringement. As this Court has previously stated:
`An individual may be personally liable for vicarious
`infringement if that person “has the right and ability
`to supervise the infringing activity and also has a
`direct financial interest in such activities.”
`Gershwin Publishing Corp. v. Columbia Artists
`Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971).
`Also, an individual who might otherwise be protected
`by the corporate veil may be liable for contributory
`infringement if, with knowledge of the infringement,
`he “induces, causes or materially contributes to the
`infringing conduct of another.” Id. at
`1162. See Columbia Pictures Industries, Inc. v. Aveco,
`Inc., 800 F.2d 59, 64 (3d Cir. 1986)(corporate
`officers who provide the site and facilities for known
`infringing activity and ignored repeated requests to
`cease and desist infringing activities held liable for
`contributory liability).
`
`Arista Records, Inc. v. Flea World, Inc., No. 03-2670 (JBS),
`2004 U.S. Dist. LEXIS 29591, at *24-25 (D.N.J. July 12, 2004).
`
`
`
`21
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`
`Plaintiffs submit that they have adequately alleged that Godwin
`and Bernstein are appropriate parties to be held liable for
`vicarious infringement in their personal capacities because they
`allege that Godwin and Bernstein “had the right and ability to
`supervise the infringing conduct and because they had a direct
`financial interest in the infringing conduct.” [Docket Item 45
`at 15]. The Court finds this pleads a plausible basis for
`vicarious liability of Godwin and Bernstein for infringing
`conduct at this early stage of the case.
`Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th
`Cir. 1996) and UMG Recordings, Inc. v. Sinnott
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