Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 1 of 24
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW MEXICO
`
`
`
`JEFFREY DAVID BETHEL,
`individually, and as the sole
`member of Santa Performance, LLC
`and SANDIA PERFORMANCE, LLC,
`
`
`
`v.
`
`SANDIA AEROSPACE CORPORATION,
`a New Mexico corporation, DENNIS
`SCHMIDT, and HONEYWELL
`INTERNATIONAL, INC.,
`(BENDIXKING division),
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`20-cv-596 MV/JHR
`
`
`
`
`
`
`
`Plaintiffs,
`
`
`
`
`
`Defendants.
`
`MEMORANDUM OPINION AND ORDER
`
`THIS MATTER comes before the Court on Defendant Honeywell International, Inc.’s
`
`Motion to Dismiss Plaintiff’s Amended Complaint for Failure to State a Claim [Doc. 40]. The
`
`Court, having considered the Motion and relevant law, finds that the Motion is well-taken in part
`
`and will be granted in part and denied in part.
`
`BACKGROUND
`
`
`
`Plaintiff Jeffrey David Bethel independently developed substantial portions of an
`
`innovative new display product for the general aviation marketplace. Doc. 38 ¶ 16. On May 22,
`
`2015, Mr. Bethel entered into an Independent Contractor and Intellectual Property Agreement
`
`(“the Contract”) with Defendant Sandia Aerospace Corporation (“Sandia”) for the purpose of
`
`bringing this newly developed technology to the market. Id. ¶ 19. The new product, described
`
`
`
`1
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 2 of 24
`
`in the Contract as “an aircraft instrument. . . capable of displaying aircraft roll, pitch, airspeed,
`
`and attitude,” was, at the time the Contract was executed, designated “SAI340.” Doc. 1-1 at 1.
`
`Mr. Bethel and Sandia intended for “the remaining required engineering work” on SAI340, or
`
`the “Instrument,” “to be completed under a cooperative effort between Sandia and [Mr.] Bethel.”
`
`Doc. 38 ¶ 20.
`
`
`
`The Contract indicates that development of the Instrument included two components:
`
`“Mechanical Design,” defined to include but not be limited to “mechanical, electrical, and
`
`graphic design”; and “Software,” defined to include but not be limited to “source code, object
`
`code, configuration files, calibration code, and production test code.” Doc. 1-1 at 1. “The
`
`unique and innovative user interface design incorporated into the SAI-340 . . . was fully
`
`implemented in the [S]oftware.” Doc. 38 ¶ 33.
`
`
`
`Pursuant to an “Assignment” provision in the Contract, Mr. Bethel assigned, transferred,
`
`and conveyed to Sandia “all his right, title and interest in the Mechanical Design.” Doc. 1-1 at 2.
`
`Pursuant to a “Software Ownership” provision in the Contract, Mr. Bethel retained “all his right,
`
`title, and interest in the Software, including the associated intellectual property rights (e.g.,
`
`copyright and patent).” Id. at 2. Mr. Bethel registered a copyright for “SAI-340,” effective as of
`
`October 2, 2017. Doc. 1-1 at 10. The Certificate of Registration indicates that SAI-340 is a
`
`“computer program,” and was completed in 2015. Id.
`
`The Contract also contains a “Software License” provision, which states as follows:
`
`Subject to the payment of royalties, Bethel hereby grants to Sandia an exclusive
`license in the Software. Bethel retains no right to use or license the Software in
`any aviation related application. Further, in the event that ownership of the
`Software is to be transferred to a third party, to the extent permitted by law Bethel
`shall insure that such transfer will be subject to the terms of this Agreement.
`
`2
`
`
`
`
`
`
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 3 of 24
`
`Id. Pursuant to a “Royalties” provision, Sandia agreed to pay Mr. Bethel “a royalty of $1,000 . . .
`
`[f]or each Instrument sold by Sandia.” Id. at 3. Pursuant to the Contract, “Sandia would be free
`
`to utilize the conveyed intellectual property for newly developed products but would be required
`
`to make the $1,000 per-unit royalty payment if any product they produced directly incorporated
`
`the same basic feature set as the SAI-340.” Doc. 38 ¶ 24.
`
`
`
`In October 2015, Sandia determined that the SAI-340 was complete and ready for
`
`commercial production. Id. ¶¶ 44-45. Sandia thus began to fulfill pre-orders, which were “in the
`
`hundreds of units.” Id. ¶ 45. Sandia “initially complied with their contractual obligation to pay
`
`the $1,000 per unit royalty for each Instrument sold.” Id. ¶ 46.
`
`
`
`In March 2017, representatives of Defendant Honeywell International, Inc. (BendixKing
`
`division) (“Bendix”) approached Sandia about the possibility of creating a Bendix-branded
`
`product variant of the SAI-340, to be named the KI-300. Id. ¶ 47. “Bendix’s own internal
`
`documents, including a Statement of Work, copies of which were sent to Bethel, acknowledged
`
`the technical nature of the desired product and evidenced a clear intent that the product would be
`
`derivative of Bethel’s intellectual property.” Id. ¶ 49. Upon learning that Mr. Bethel, rather than
`
`Sandia, “retained the copyright in major portions of the operational software” of the Instrument,
`
`and “that Sandia was legally bound to pay Bethel a $1,000 per-unit royalty, Bendix approached
`
`Bethel directly in an attempt to negotiate more attractive licensing terms.” Id. ¶ 50. Essentially,
`
`Bendix wanted to pay less money in royalties to Mr. Bethel than the $1,000 per unit as required
`
`by Mr. Bethel’s contract with Sandia. Id. ¶ 51. During the negotiation process, Mr. Bethel
`
`“supplied [to Bendix] copies of the existing Sandia/Bethel licensing agreement.” Id. ¶ 53.
`
`Negotiations between Mr. Bethel and Bendix ultimately failed. Id. ¶ 67.
`
`
`
`3
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 4 of 24
`
`
`
`In July 2017, Bendix launched a marketing campaign at an avionics trade show in
`
`Oshkosh, Wisconsin to promote the KI-300, which was the product of work jointly undertaken
`
`by Bendix and Sandia. Id. ¶¶ 68, 75. The KI-300 units displayed there “were simply reworked
`
`SAI-340 units of Bethel’s design, with a slightly modified bezel and the Bendix corporate logo
`
`painted on the product’s faceplate.” Id. ¶ 70. At the show, Mr. Bethel “personally observed that
`
`the innovative techniques and features of the SAI-340 user interface generated by Bethel’s
`
`software were being directly utilized in the KI-300, with only minor color variations being
`
`applied.” Id. ¶ 71.
`
`
`
`After the launch of the KI-300, Bendix and Sandia entered into an agreement whereby
`
`“Sandia would manufacture the branded KI-300 for Bendix, directly utilizing Bethel’s
`
`intellectual property,” but no royalties would be paid to Mr. Bethel. Id. ¶ 92. Thereafter, Bendix
`
`forbade certain of its staff and third-party contractors from communicating with Mr. Bethel, and
`
`Sandia likewise instructed its employees not to talk to Mr. Bethel or allow him to enter the
`
`Sandia facilities. Id. ¶¶ 95-100.
`
`
`
`For a period of a year or more, Sandia and Bendix “reverse-engineer[ed] Bethel’s
`
`software,” without taking any steps to protect Mr. Bethel’s copyrights therein. Id. ¶¶ 103-04.
`
`Specifically, “Sandia hired a third-party software engineer who was tasked explicitly with
`
`copying Bethel’s user interface, verbatim.” Id. ¶ 105. “Persons at Sandia who were intimately
`
`familiar with Bethel’s source code and who had direct access to Bethel’s source code undertook
`
`the effort to rewrite Bethel’s code, and to remove Bethel’s copyright notifications, and made no
`
`effort whatsoever to ‘clean-room’ or properly attempt to reverse-engineer the design.” Id. ¶ 106.
`
`
`
`In November 2018, “Sandia and Bendix started the full production, manufacture, and sale
`
`of the KI-300,” and paid no royalties to Mr. Bethel. Id. ¶ 110. Mr. Bethel purchased a KI-300;
`
`
`
`4
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 5 of 24
`
`Sandia did not report the sale to him or pay him any royalty based on that purchase. Id. ¶¶ 111-
`
`12. Sandia also stopped making royalty payments to Mr. Bethel on sales of the SAI-340. Id. ¶
`
`114. Although Sandia “has continued to manufacture and sell hundreds of both the SAI-340 and
`
`KI-300 instruments that directly utilize Bethel’s licensed intellectual property,” no royalties have
`
`been paid to Mr. Bethel. Id. ¶ 115.
`
`
`
`As a result, on June 22, 2020, Mr. Bethel commenced the instant action, filing a
`
`complaint against Sandia, Dennis Schmidt, who is the owner of Sandia, and Bendix. Doc. 1.
`
`Subsequently, on November 23, 2020, Mr. Bethel filed his First Amended Complaint (“FAC”)
`
`for Copyright Infringement, Breach of Contract, Breach of the Covenant of Good Faith and Fair
`
`Dealing, Intentional Interference with Contract and Interference with Prospective Contractual
`
`Relations, Civil Conspiracy, Alter Ego, Fraudulent Misrepresentation, Conversion, Unjust
`
`Enrichment, Constructive Trust, Prima Facie Tort and Punitive Damages [Doc. 38]. Bendix filed
`
`a motion to dismiss all counts of the FAC asserted against it, which Mr. Bethel opposes.
`
`Bendix’s motion is now before the Court.
`
`STANDARD
`
`Under Rule 12(b)(6), the Court may dismiss a complaint for “failure to state a claim upon
`
`which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “The nature of a Rule 12(b)(6) motion
`
`tests the sufficiency of the allegations within the four corners of the complaint.” Mobley v.
`
`McCormick, 40 F.3d 337, 340 (10th Cir. 1994). When considering a Rule 12(b)(6) motion, the
`
`Court must accept as true all well-pleaded factual allegations in the complaint, view those
`
`allegations in the light most favorable to the plaintiff, and draw all reasonable inferences in the
`
`plaintiff’s favor. Smith v. United States, 561 F.3d 1090, 1097 (10th Cir. 2009), cert. denied, 130
`
`S. Ct. 1142 (2010).
`
`
`
`5
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 6 of 24
`
`“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
`
`accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556
`
`U.S. 662, 678 (2009) (citations omitted). “A claim has facial plausibility when the plaintiff
`
`pleads factual content that allows the court to draw the reasonable inference that the defendant is
`
`liable for the misconduct alleged.” Id. “Where a complaint pleads facts that are ‘merely
`
`consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and
`
`plausibility of entitlement to relief.’” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557
`
`(2007)).
`
`The Court in Iqbal identified “two working principles” in the context of a motion to
`
`dismiss. Id. First, “the tenet that a court must accept as true all of the allegations contained in a
`
`complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of
`
`action, supported by mere conclusory statements, do not suffice.” Id. Accordingly, Rule 8 “does
`
`not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Id.
`
`at 678-79. “Second, only a complaint that states a plausible claim for relief survives a motion to
`
`dismiss.” Id. at 679; see Twombly, 550 U.S. at 570 (holding that a plaintiff must “nudge” her
`
`claims “across the line from conceivable to plausible”). Accordingly, “where the well-pleaded
`
`facts do not permit the court to infer more than the mere possibility of misconduct, the complaint
`
`has alleged – but it has not shown – that the pleader is entitled to relief.” Id. (citation omitted).
`
`In keeping with these two principles, the Court explained,
`
`a court considering a motion to dismiss can choose to begin by identifying
`pleadings that, because they are no more than conclusions, are not entitled to the
`assumption of truth. When there are well-pleaded factual allegations, a court
`should assume their veracity and then determine whether they plausibly give rise
`to an entitlement to relief.”
`
`Id. at 679.
`
`
`
`6
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 7 of 24
`
`DISCUSSION
`
`
`
`In the FAC, Mr. Bethel asserts the following claims against Bendix: copyright
`
`infringement, contributory copyright infringement, intentional interference with contract and
`
`prospective contractual relations, civil conspiracy, unjust enrichment, constructive trust, prima
`
`facie tort, and punitive damages. On the instant motion to dismiss, Bendix argues that Mr.
`
`Bethel has failed to state a claim upon which relief can be granted as to each of these counts.
`
`The Court addresses each count in turn.
`
`I.
`
`Copyright Claims
`
`A.
`
`Direct Copyright Infringement
`
`
`
`In Count I, Mr. Bethel asserts that, based on the facts as outlined above, Sandia and
`
`Bendix used his copyrighted material without authorization, directly or contributorily infringed
`
`on his rights to his copyrighted software, and made “derivative works based on his copyrighted
`
`material . . . by reverse engineering [his] copyrighted source code and by grossly exceeding their
`
`authority conveyed under the parties’ licensing agreement,” all in violation of 17 U.S.C. §§ 106
`
`and 501. Doc. 38 ¶¶ 137-139. To state a claim of copyright infringement, a plaintiff must allege
`
`two elements: “(1) “ownership of a valid copyright, and (2) copying of constituent elements of
`
`the work that are original.” Craft Smith, LLC v. EC Design, LLC, 969 F.3d 1092, 1099 (10th Cir.
`
`2020) (citation omitted). To adequately allege the first element, a plaintiff must allege facts that,
`
`if proven, would “demonstrate ownership of a valid copyright in the allegedly infringed work.”
`
`Id. “Often, a party accomplishes this by producing a certificate of registration from the
`
`Copyright Office.” Id. The second element “consists of two components.” Id. at 1101. First,
`
`the plaintiff must allege “factual copying,” and second, the plaintiff must allege “substantial
`
`similarity between the allegedly infringing work and the elements of the copyrighted work that
`
`
`
`7
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 8 of 24
`
`are legally protected.” Id. “Factual copying” includes the reproduction of the copyrighted work,
`
`the preparation of derivative works based on the copyrighted work, and the distribution of copies
`
`of the copyrighted work to the public. 17 U.S.C. § 106. Further, to adequately allege “factual
`
`copying,” a plaintiff may allege facts that, if proven, would demonstrate either “that the
`
`defendant copied his program” or that “the defendant had access to the copyrighted program and
`
`there are probative similarities between the copyrighted material and the allegedly copied
`
`material.” Gates Robber Co. v. Bando Chem. Indus., 9 F.3d 823 (10th Cir. 1993).
`
`
`
`As to the first element of his copyright claim, namely, ownership of a valid copyright,
`
`Mr. Bethel alleges that he registered a copyright for SAI-340. Mr. Bethel has also submitted a
`
`copy of that registration to the Court. As noted above, this is sufficient to satisfy Mr. Bethel’s
`
`pleading requirement as to the first element of his copyright claim.
`
`While Bendix does not dispute Mr. Bethel’s allegation or the existence of his copyright in
`
`SAI-340, it nonetheless argues that Mr. Bethel has not adequately alleged ownership of a valid
`
`copyright. In support of that argument, Bendix notes that Mr. Bethel’s copyright extends only to
`
`“a computer program that is supposedly the source code for the SAI-340 device.” Doc. 40 at 5.
`
`And, pointing to Mr. Bethel’s allegation that he “observed that the techniques and features of the
`
`SAI-340 user interface generated by [his] software were being directly utilized in the KI-300,”
`
`Bendix concludes that Mr. Bethel’s assertions of copying apply only to elements of the KI-300
`
`that are not source code, and thus are not within the scope of Mr. Bethel’s copyright protection.
`
`Id.
`
`This argument, however, “misapplie[s] copyright infringement’s first element, which
`
`requires only the existence of a valid copyright in the allegedly infringed [] work as a whole.”
`
`Craft Smith, 969 F.3d at 1100. “[B]ecause element one concerns only the existence of a valid
`
`
`
`8
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 9 of 24
`
`copyright in the allegedly infringed work, [this Court] concludes that it is satisfied.” Id. at 1101.
`
`This conclusion “takes us to the next step, that is, examining the scope of this valid copyright,”
`
`which is resolved “in element two.” Id.
`
`As to the first component of the second element, namely, factual copying, Mr. Bethel
`
`alleges that Bendix and Sandia’s KI-300 units, which they displayed and promoted at an avionics
`
`trade show, “were simply reworked SAI-340 units of Bethel’s design,” with only slight
`
`modifications, and that Mr. Bethel “personally observed that the innovated techniques and
`
`features of the SAI-340 user interface generated by Bethel’s software were being directly utilized
`
`in the KI-300,” again with only minor variations. These allegations, if proven, would establish
`
`that Sandia and Bendix reproduced Mr. Bethel’s design and software. Further, Mr. Bethel
`
`alleges that Sandia and Bendix “reverse-engineer[ed] Bethel’s software,” which involved hiring
`
`a third-party software engineer to copy Mr. Bethel’s “user interface” and having Sandia staff,
`
`who were familiar with and had direct access to Mr. Bethel’s source code, “rewrite Bethel’s
`
`code.” These allegations, if proven, would establish that Sandia and Bendix prepared derivative
`
`works based on his copyrighted work. Finally, Mr. Bethel alleges that Sandia and Bendix
`
`manufactured and sold the KI-300. This allegation, if proven, would establish that Sandia and
`
`Bendix distributed copies of Mr. Bethel’s copyrighted work to the public. These allegations thus
`
`plausibly allege “factual copying.”
`
`Bendix nonetheless argues that Mr. Bethel fails to adequately plead factual copying.
`
`According to Bendix, the FAC fails to allege how it “either directly copied or had access to [Mr.
`
`Bethel’s] copyrighted work or “any facts that would support a finding of factual copying . . . by
`
`[Bendix].” Doc. 40 at 6. These contentions are belied by the allegations described above, which
`
`detail the ways in which Sandia and Bendix, together, accessed Mr. Bethel’s copyrighted code,
`
`
`
`9
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 10 of 24
`
`copied that code, reworked it, and used it to create, manufacture, and sell the KI-300.
`
`As to the second component of the second element, namely, substantial similarity
`
`between the allegedly infringing work and the elements of the copyrighted work that are legally
`
`protected, Mr. Bethel alleges that the “user interface” of the KI-300 was a “verbatim” copy of
`
`Mr. Bethel’s “user interface.” Mr. Bethel further alleges that the KI-300, as promoted at the July
`
`2017 avionics trade show, was simply a “reworked” SAI-340 “of Bethel’s design,” with slight
`
`modifications. Mr. Bethel also alleges that he “personally observed that the innovative
`
`techniques and features of the SAI-340 user interface generated by Bethel’s software were being
`
`directly utilized in the KI-300,” with only minor variations.
`
`In contesting the sufficiency of these allegations, Bendix asserts that Mr. Bethel would
`
`not have been “able to deduce infringement of copyrighted software code when he ‘observed’ the
`
`SAI-340 user interface,” because none “of the graphical features or interface for the SAI-340”
`
`were covered by Mr. Bethels’ copyright, which applied only to “the source code of the SAI-340
`
`device.” Doc. 40 at 5. In other words, Bendix argues that, even if Mr. Bethel noted similarities
`
`between the KI-300 and the SAI-340, those similarities did not relate to any of the legally
`
`protected elements of the SAI-340. This argument, however, raises a fact issue rather than a
`
`pleading issue. Whether Mr. Bethel ultimately can prove his allegations or whether, as Bendix
`
`argues, the similarities between the SAI-340 and the KI-300 are elements outside the scope of
`
`Mr. Bethel’s copyright protections is a question of fact not properly before the Court on the
`
`instant motion to dismiss.
`
`Bendix also contends that Mr. Bethel fails “to identify the protectable elements that have
`
`been copied contentions.” Doc. 40 at 6. This contention is unavailing, as Mr. Bethel does
`
`identify which elements of his copyright are similar to the KI-300, namely, the “user interface”
`
`
`
`10
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 11 of 24
`
`and “design,” and states that these elements are protected by his copyright, as they were
`
`manifestations of the utilization of his software in the KI-300. Accordingly, Mr. Bethel’s
`
`allegations are sufficient to plausibly plead that his copyrighted software code was infringed.
`
`Further, Bendix denies the accuracy of Mr. Bethel’s well-pleaded factual allegations,
`
`arguing that it did not “incorporate[e] any of the copyrighted software into any Honeywell or
`
`BendixKing product.” Doc. 47 at 3. But denying the substance of Mr. Bethel’s allegations is
`
`misplaced on the instant motion to dismiss. “[A] Rule 12(b)(6) motion tests [only] the
`
`sufficiency of the allegations within the four corners of the complaint.” Mobley, 40 F.3d at 340.
`
`
`
`Finally, Bendix argues that Mr. Bethel is foreclosed from bringing a copyright
`
`infringement claim because, pursuant to the Software License Provision of the Contract, he
`
`granted Sandia an exclusive license in the Software of the SAI-340. Doc. 40 at 6. As Bendix
`
`appears to acknowledge, a copyright owner is not foreclosed from bringing a copyright
`
`infringement claim in the face of an exclusive license; rather, she may bring such a claim where
`
`“the licensee exceeds the scope of the copyright license.” Evolution, Inc. v. SunTrust Bank, 342
`
`F. Supp. 3d 943, 953 (D. Kan. 2004) (emphasis in original); see also Yamashita v. Scholastic
`
`Inc., 936 F.3d 98, 105 (2d Cir. 2019) (“[W]hen the existence of a license is not in question, a
`
`copyright holder must plausibly allege that the defendant exceeded particular terms of the
`
`license.”) (emphasis in original). Bendix contends that Mr. Bethel cannot plausibly allege that
`
`Sandia exceeded the scope or terms of the license because the Software License Provision
`
`“allowed for transfer of ownership of the Software to a third party,” and the grant of an exclusive
`
`license to Sandia “qualifies” as such a contemplated “transfer of the ownership rights granted
`
`under the Copyright Act. Doc. 40 at 7. Based on these contentions, Bendix concludes that “any
`
`use of the copyright by Bendix[] is proper under the sublicensing rights that Sandia was clearly
`
`
`
`11
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 12 of 24
`
`granted under the license.” Id.
`
`Bendix’s argument reflects a misreading the Software License provision. This provision
`
`does not transfer ownership of Mr. Bethel’s copyrighted software to Sandia; indeed, it would be
`
`nonsensical if it did, as elsewhere the Contract specifically provides that Mr. Bethel retains “all
`
`his right, title, and interest in the Software, including the associated intellectual property rights.”
`
`To the contrary, the Software License provision states that “in the event that ownership of the
`
`Software is to be transferred to a third party” – ostensibly by Mr. Bethel, who explicitly retained
`
`ownership of the Software – “Bethel shall insure that such transfer will be subject to the terms of
`
`this Agreement.” In other words, the Software License provision directs Mr. Bethel to ensure
`
`that, if he decides to transfer his ownership rights in the Software to a third party, any such
`
`transfer protects Sandia’s license to the Software.
`
`Accordingly, nothing in the Software License provision transfers Mr. Bethel’s ownership
`
`in the Software to Sandia, gives Sandia “sublicensing rights” to the Software, or otherwise
`
`allows for “use of the copyright” by Bendix. Doc. 40 at 6-7. It follows that Bendix cannot point
`
`to the Software License provision as foreclosing Mr. Bethel’s claim that, together with Bendix,
`
`Sandia exceeded the scope or terms of its license in the Software by copying that Software and
`
`using it for the KI-300. Mr. Bethel’s copyright infringement claim thus is not subject to
`
`dismissal on the basis that he granted Sandia an exclusive license in the Software.
`
`B.
`
`Contributory Infringement
`
`
`
`In Count IV, Mr. Bethel asserts a claim of contributory copyright infringement, alleging
`
`that Bendix induced the infringement of his copyrights. Doc. 38 ¶ 164. A defendant can be
`
`“secondarily liable for another’s copyright infringement under principles of vicarious and
`
`contributory liability.” Diversey v. Schmidly, 738 F.3d 1196, 1204 (10th Cir. 2013).
`
`
`
`12
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 13 of 24
`
`“[C]ontributory liability attaches when the defendant causes or materially contributes to
`
`another’s infringing activities and knows of the infringement.” Id.
`
`
`
`Bendix argues that this claim must be dismissed, because it presupposes “that someone
`
`directly infringe the asserted copyright.” Doc. 40 at 8. According to Bendix, Mr. Bethel “cannot
`
`prove direct infringement,” and thus “there can be no claim against [Bendix] for contributory
`
`infringement.” Id. As discussed above, however, the Court finds that Mr. Bethel has stated a
`
`(direct) copyright infringement claim. Accordingly, Bendix has proposed no valid basis for
`
`dismissal of Mr. Bethel’s contributory infringement claim.
`
`II.
`
`State Law Claims
`
`A.
`
`Intentional Interference with Contract and Prospective Contractual Relations
`
`
`
`
`
`In Count IV, Mr. Bethel asserts claims of intentional interference with contract and
`
`interference with prospective contractual relations. In support of those claims, Mr. Bethel
`
`alleges that “[p]erformance of the contract Bethel had with the parties involved herein has been
`
`impaired or refused, materially and intentionally, through the actions of the Defendants”
`
`(including Bendix). Doc. 38 ¶ 162. Further, Mr. Bethel alleges that the Defendants (including
`
`Bendix), “have played an active and substantial part in causing Bethel to lose the benefits of his
`
`contract and/or potential future contracts with various parties involved herein and possibly with
`
`others in the market space related to his intellectual property.” Id. ¶ 163.
`
`
`
`Under New Mexico law, to adequately allege intentional interference with an existing
`
`contract against Bendix, Mr. Bethel must state facts that, if proven, would demonstrate that (1)
`
`Bendix had knowledge of a contract between Mr. Bethel and Sandia, (2) performance of the
`
`contract was refused, (3) Bendix played an active and substantial part in causing Mr. Bethel to
`
`lose the benefits of the contract, (4) damages flowed from the breached contract, and (5) Bendix
`
`
`
`13
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 14 of 24
`
`induced the breach without justification and privilege. Guest v. Berardinelli, 195 P.3d 353, 363
`
`(N.M. Ct. App. 2008). Similarly, to adequately allege intentional interference with prospective
`
`contractual relations against Bendix, Mr. Bethel must show that Bendix damaged him by either
`
`(1) inducing or otherwise causing Sandia not to enter into or continue a prospective relation with
`
`Mr. Bethel or (2) preventing Mr. Bethel from acquiring or continuing a prospective relation with
`
`Sandia. Id. “To prove either cause of action, [Mr. Bethel] must demonstrate that [Bendix]
`
`interfered either through improper means or improper motive.” Id. (citation omitted).
`
`
`
`Mr. Bethel alleges that he supplied to Bendix copies of the contract between Mr. Bethel
`
`and Sandia, that Sandia stopped making royalty payments as required by the contract, and that
`
`damages flowed to Mr. Bethel from the loss of royalties. Accordingly, three of the elements of
`
`his interference with existing contract claim are adequately alleged. As Bendix argues, however,
`
`Mr. Bethel does not allege facts that, if proven, would demonstrate that Bendix played an active
`
`and substantial part in causing Sandia to cease paying royalties to Mr. Bethel under their
`
`contract. Doc. 40 at 8. In response to Bendix’s motion, Mr. Bethel argues that Sandia refused to
`
`perform its agreement with Bethel “as a direct consequence of [Bendix’s] actions.” Doc. 45 at
`
`15. But nowhere in the FAC does Mr. Bethel tie Bendix’s actions, namely collusion with Sandia
`
`to use Mr. Bethel’s software “as its own” and cutting Mr. Bethel out of its agreement with
`
`Sandia, to Sandia’s decision to cease making royalty payments to Mr. Bethel on sales of the SAI-
`
`340.
`
`Without any allegations that, if proven, would establish that Sandia’s treatment of Mr.
`
`Bethel vis-à-vis the contract between them was actually “the direct consequence” of Bendix’s
`
`actions, there is inadequate factual support for Mr. Bethel’s conclusory allegation that Bendix
`
`played an active and substantial part in causing Bethel to lose the benefits of his contract with
`
`
`
`14
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 15 of 24
`
`Sandia. And because the FAC does not adequately allege that Bendix induced Sandia’s breach
`
`in the first instance, it follows that the FAC does not adequately allege that it did so without
`
`justification and privilege. According, Mr. Bethel does not adequately allege against Bendix
`
`either the third element or the fifth element of his interference with existing contract claim. That
`
`claim thus must be dismissed as against Bendix.
`
`
`
`For the same reasons, Mr. Bethel’s allegations are insufficient to support his claim of
`
`intentional interference with prospective contractual relations. The FAC is devoid of factual
`
`allegations that, if proven, would show that Bendix’s conduct induced or otherwise caused
`
`Sandia to discontinue its relationship with Mr. Bethel or decline to commence any unidentified
`
`new relationship with Mr. Bethel, or prevented Mr. Bethel from acquiring or continuing any
`
`unidentified prospective relationship with Sandia. Accordingly, his interference with prospective
`
`contractual relations claim also must be dismissed as against Bendix.
`
`B.
`
`Prima Facie Tort
`
`In Count XI, Mr. Bethel asserts a claim of prima facie tort. In support of that claim, he
`
`alleges that “Defendants have intentionally and maliciously refused to abide by the terms of their
`
`contract with Bethel for pretextual and baseless reasons.” Doc. 38 ¶ 205. To adequately allege a
`
`prima facie tort claim, a plaintiff must state facts that, if proven, would demonstrate “(1) an
`
`intentional and lawful act; (2) an intent to injure the plaintiff; (3) injury to the plaintiff as a result
`
`of the intentional act; (4) and the absence of sufficient justification for the injurious act.”
`
`Beaudry v. Farmers Ins. Exch., 412 P.3d 1100, 1104 (N.M. 2018) (citation omitted). A prima
`
`facie tort claim is “used to address wrongs that otherwise escape categorization, but should not
`
`be used to evade stringent requirements of other established doctrines of law.” Bogle v. Summit
`
`Inv. Co., LLC, 107 P.3d 520, 529 (N.M. Ct. App. 2005) (emphasis added) (citation omitted).
`
`
`
`15
`
`

`

`Case 1:20-cv-00596-MV-JHR Document 53 Filed 02/16/23 Page 16 of 24
`
`Bendix argues that because Mr. Bethel’s allegations address only the failure to abide by
`
`the contract between Sandia and Mr. Bethel, and because Bendix was not a party to that contract
`
`and therefore had no obligation to abide by that contract, those allegations are insufficient to
`
`allege an intentional and lawful act by Bendix. Doc. 40 at 11. In his response, Mr. Bethel
`
`contends that “all of the preceding paragraphs of the Amended Complaint were also incorporated
`
`into the prima facie tort claim,” and that those paragraphs describe “unjustified intentional acts
`
`by [Bendix] that were designed to and did injure [him].” Doc. 45 at 23.
`
`A claim for prima facie tort, however, is not adequately pleaded where it is “supported by
`
`identical facts [] used to support the other causes of action within the plaintiff’s complaint.”
`
`Healthsource, Inc. v. X-Ray Assoc. of N.M., 116 P.3d 861, 872 (N.M. Ct. App. 2005); Hill v.
`
`Cray Research, 864 F. Supp. 1070, 1080 (D.N.M. 1991) (dismissing prima facie tort claim
`
`where, in support of that claim, the plain