IN THE UNITED STATES DISTRICT COURT
` FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
`LIVE FACE ON WEB, LLC,
`Plaintiff,
`
`))
`
`v.
`
`ABSONUTRIX, LLC, et al.,
`Defendants.
`
`))
`
`))
`
`MEMORANDUM OPINION AND RECOMMENDATION
`OF UNITED STATES MAGISTRATE JUDGE
`This case comes before the undersigned United States
`Magistrate Judge for a recommendation on Defendants’ “Motion to
`Dismiss for Failure to State a Claim” (Docket Entry 11) (the
`“Motion”). For the reasons that follow, the Court should deny the
`Motion.
`
`BACKGROUND
`Live Face on Web, LLC (“LFOW”), commenced this action against
`Absonutrix,
`LLC,
`and
`Himanshu
`Nautiyal
`(collectively,
`“Defendants”), alleging copyright infringement. (See Docket Entry
`1 (the “Complaint”), ¶¶ 1-3, 42.) According to the Complaint:
`“LFOW is a developer and owner of ‘live person’ software,
`which is an original work of authorship independently created by
`LFOW (‘LFOW Software’).” (Id., ¶ 11.) “The LFOW Software allows
`a company to display a video of a ‘walking’ and ‘talking’ personal
`host who introduces a website to an online visitor. The personal
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`1:17cv937
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`))
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`host is, in effect, a website spokesperson for the specific company
`for whom the video has been created. Typically, the website
`spokesperson explains a company’s products and/or services and
`directs a visitor’s attention to a particular product or aspect of
`the website.” (Id., ¶ 12.) “The LFOW Software seeks to enhance a
`website by using a real spokesperson to capture, hold and prolong
`the attention of the average online visitor, enhancing the ability
`of the website to advertise specific goods and services.” (Id.,
`¶ 14.)
`“Generally speaking, the LFOW Software can be implemented by
`LFOW’s customers by modifying the HTML code of the LFOW customer’s
`website. An HTML script tag is embedded in the HTML code of the
`LFOW customer’s website, which links the LFOW customer’s website to
`a copy of the LFOW Software.” (Id., ¶ 15.) “Regardless of the
`particular webserver(s) where the LFOW Software is stored, the
`functionality and result is the same. When a web browser is
`directed to a website linked to the LFOW Software, the embedded
`HTML script tag is read by the web browser and causes the automatic
`distribution of a copy of the LFOW Software. The LFOW Software is
`automatically saved by the web browser into cache, and/or a hard
`drive(s), and loaded into computer memory and/or RAM (random access
`memory). As a result of the distribution of the LFOW software, the
`specific website spokesperson video is automatically launched and
`displayed to advertise on the associated website.” (Id., ¶ 16.)
`
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`LFOW owns a registered copyright in the LFOW Software. (Id.,
`¶ 19.)
`“Defendants own, operate and/or control the website
`http://www.absonutrix.com/ (‘Defendants’ Website’).” (Id., ¶ 20.)
`“Upon information and belief, Defendants have used a website
`spokesperson
`video
`to
`promote
`their
`products
`and/or
`services. . . . [I]n order to display the website spokesperson
`video on Defendants’ Website, Defendants used, copied and
`distributed, without permission, [an] infringing version of the
`LFOW Software, thereby infringing upon LFOW’s rights in its
`copyrighted work.” (Id., ¶¶ 22-23.)
`“[T]o implement and distribute the infringing version of the
`LFOW Software, the Defendants’ Website was modified by or on behalf
`of Defendants . . . .” (Id., ¶ 25.) Specifically, source code on
`Defendants’ Website “links the Defendants’ Website to the file
`‘ip_player.js’, which is an infringing version of the LFOW
`Software, which was stored for Defendants on the webserver(s) for
`www.tweople.com.” (Id., ¶ 26.) “As a result of the modifications
`to the Defendants’ Website . . . when a web browser retrieves a
`page from the Defendants’ Website, a copy of the infringing version
`of the LFOW Software is distributed by Defendants to the website
`visitor and stored on the visitor’s computer in cache, memory,
`and/or its hard drive. Accordingly, each visit to the Defendants’
`Website is a new act of copyright infringement.” (Id., ¶ 28.) In
`
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`sum, LFOW contends that, in modifying their website to link to the
`“ip_player.js” file stored on a third-party server, Defendants
`engaged in “direct, indirect and/or vicarious infringement of
`registered copyright(s).” (Id., ¶ 42.)
`In response to the Complaint, Defendants moved to dismiss,
`contending, first, that the allegations in the Complaint do not
`state a plausible claim for copyright infringement under Rule
`12(b)(6) of the Federal Rules of Civil Procedure (the “Rules”), and
`second, that any alleged copyright infringement occurred outside
`the three-year statute of limitations. (See Docket Entry 12 at 6,
`8.) LFOW filed a response to the Motion (Docket Entry 14), to
`which Defendants replied (Docket Entry 15).
`DISCUSSION
`I. Failure to State a Claim
`In support of the Motion, Defendants contend that LFOW’s
`allegations of “‘use[], cop[ying] and distribut[ion]’ of the code
`in question” constitute factually “unsupported conclusions” that
`fail to satisfy Rule 8’s pleading standards. (Docket Entry 15 at
`2 (brackets in original); see also Docket Entry 12 at 6 (“[The
`Complaint] does not provide facts supporting the conclusory and
`formulaic labels of copying and use by Absonutrix.”).)
`To survive a motion to dismiss under Rule 12(b)(6), a
`complaint must contain sufficient factual allegations “to ‘state a
`claim to relief that is plausible on its face.’” Ashcroft v.
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`Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
`Twombly, 550 U.S. 544, 570 (2007)). To qualify as plausible, a
`claim needs sufficient factual content to support a reasonable
`inference of the defendant’s liability for the alleged misconduct.
`Id. Facts that remain “‘merely consistent with’” liability fail to
`establish a plausible claim for relief. Id. (quoting Twombly, 550
`U.S. at 557). However, a complaint need not contain detailed
`factual recitations, as long as it provides the defendant “fair
`notice of what the claim is and the grounds upon which it rests.”
`Twombly, 550 U.S. at 555 (internal quotation marks and alteration
`omitted).
`In reviewing a motion to dismiss, the Court must “accept the
`facts alleged in the complaint as true and construe them in the
`light most favorable to the plaintiff.” Coleman v. Maryland Court
`of Appeals, 626 F.3d 187, 189 (4th Cir. 2010), aff’d sub nom.,
`Coleman v. Court of App. of Md., 566 U.S. 30 (2012). The Court
`must also “draw all reasonable inferences in favor of the
`plaintiff.” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc.,
`637 F.3d 435, 440 (4th Cir. 2011) (internal quotation marks
`omitted). However, the Court “will not accept ‘legal conclusions
`couched as facts or unwarranted inferences, unreasonable
`conclusions, or arguments.’” United States ex rel. Nathan v.
`Takeda Pharm. N. Am., Inc., 707 F.3d 451, 455 (4th Cir. 2013)
`(quoting Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir.
`
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`2012)). “At bottom, determining whether a complaint states . . .
`a plausible claim for relief . . . will ‘be a context-specific task
`that requires the reviewing court to draw on its judicial
`experience and common sense.’” Francis v. Giacomelli, 588 F.3d
`186, 193 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 679).
`“To establish a claim for copyright infringement under the
`Copyright Act of 1976, 17 U.S.C. § 101 et seq., a plaintiff must
`prove that it possesses a valid copyright and that the defendant
`copied elements of its work that are original and protectable.”
`Copeland v. Bieber, 789 F.3d 484, 488 (4th Cir. 2015). “[T]he
`Copyright Act grants the copyright holder ‘exclusive’ rights to use
`and to authorize the use of his work in five qualified ways,
`including reproduction of the copyrighted work in copies.” Sony
`Corp. v. Universal City Studios, Inc., 464 U.S. 417, 432-33 (1984).
`Direct infringement of a copyright “requires conduct by a person
`who causes in some meaningful way an infringement.” CoStar Grp.,
`Inc. v. LoopNet, Inc., 373 F.3d 544, 549 (4th Cir. 2004) (emphasis
`in original). A defendant may also infringe a copyright indirectly
`under the theories of contributory and vicarious infringement. See
`id. at 550. “Under a theory of contributory infringement, ‘one
`who, with knowledge of the infringing activity, induces, causes or
`materially contributes to the infringing conduct of another’ is
`liable for the infringement. Under a theory of vicarious
`liability, a defendant who ‘has the right and ability to supervise
`
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`the infringing activity and also has a direct financial interest in
`such activities’ is similarly liable.” Id. (citation omitted)
`(quoting Gershwin Publ’g Corp. v. Columbia Artists Mgmt., Inc., 443
`F.2d 1159, 1162 (2d Cir. 1971)).
`Here, Defendants maintain that the Complaint’s allegations
`fall short because they “simply do not assert that the code was
`ever actually displayed to visitors or copied to any visitor’s
`computer; the facts stated in the Complaint merely allege that it
`was possible that the Absonutrix website displayed the software.”
`(Docket Entry 15 at 1-2 (emphasis in original).) “[T]he Complaint
`does not . . . allege facts[] that the website was actually
`accessed, the link to the allegedly infringing code activated, or
`the video image supplied to the user’s computer . . . .” (Id. at
`3.) Stated another way, Defendants argue that, because the
`Complaint did not expressly allege that any visitors accessed
`Defendants’ Website, the Complaint’s allegations of “‘use[],
`cop[ying] and distribut[ion]’” (id. at 2) constitute conclusory
`labels.
`This line of argument lacks merit, as LFOW has alleged
`sufficient factual material to survive a motion to dismiss. At
`this stage of the proceedings, the Court must “accept the facts
`alleged in the [C]omplaint as true and construe them in the light
`most favorable to the plaintiff,” Coleman, 626 F.3d at 189, and
`must also “draw all reasonable inferences in favor of the
`
`-7-
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`plaintiff.” E.I. du Pont de Nemours & Co., 637 F.3d at 440
`(internal quotation marks omitted).
`Here, the Complaint alleges that Defendants’ Website linked to
`an infringing version of the LFOW Software, as well as that, when
`a visitor accessed Defendants’ Website, “a copy of the infringing
`version of the LFOW Software [wa]s distributed . . . to the website
`visitor and stored on the visitor’s computer in cache, memory
`and/or its hard drive.” (Docket Entry 1, ¶ 28.) Additionally, the
`Complaint states that “Defendants actively induced end users to
`visit Defendants’ Website, and thereafter distributed the
`infringing version of the LFOW Software to end users (e.g. website
`visitors) numerous times.” (Id., ¶ 36 (emphasis added).)
`“Defendants have caused, enabled and/or facilitated the
`infringement by, inter alia, distributing copies of the accused
`software to each visitor . . . .” (Id., ¶ 37 (emphasis added).)
`The Complaint may not allege verbatim that “the code was . . .
`actually displayed to visitors or copied to any visitor’s computer”
`(Docket Entry 15 at 2 (emphasis in original)), but it need not to
`satisfy Rule 8. Taken in the light most favorable to LFOW, the
`Complaint’s language gives rise to a reasonable inference that
`users actually visited Defendants’ Website, and therefore that
`copying and distribution of the LFOW Software occurred.
`Defendants further argue that the Complaint’s factual
`allegations fail to establish that Defendants, rather than
`
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`tweople.com, committed any infringement. (See Docket Entry 12 at
`6-7.) In support, Defendants rely on Flava Works, Inc. v. Gunter,
`689 F.3d 754 (7th Cir. 2012). (Docket Entry 12 at 6-7.) In that
`case, the plaintiff sued the owner of “myVidster,” a website that
`allows users to share links to videos that other users can then
`watch on their computers. See Flava Works, 689 F.3d at 756. The
`1
`plaintiff, “Flava,” argued that by providing this service,
`myVidster committed contributory infringement. Id. at 757. The
`court, however, observed that,
`as long as the visitor makes no copy of the copyrighted
`video that he is watching, he is not violating the
`copyright owner’s exclusive right . . . “to reproduce the
`copyrighted work in copies” and “distribute copies . . .
`of the copyrighted work to the public.” His bypassing
`Flava’s pay wall by viewing the uploaded copy is
`equivalent to stealing a copyrighted book from a
`bookstore and reading it. That is a bad thing to do (in
`either case) but it is not copyright infringement. The
`infringer is the customer of Flava who copied Flava’s
`copyrighted video by uploading it to the Internet.
`
`Id. (citation omitted) (quoting 17 U.S.C. § 106(1), (3)).
`Defendants analogize their situation to myVidster’s. (See
`Docket Entry 12 at 7.) “Like myVidster in Flava Works, the
`
` myVidster operates as follows: “Patrons of myVidster find
`1
`videos on the Internet, and if they want to make them available to
`other patrons of myVidster . . . [they] “bookmark” (note) them on
`myVidster’s website. Upon receiving the bookmark myVidster
`automatically requests the video’s “embed code” from the server
`that hosts (that is, stores) the video. . . . The embed code
`contains the video’s web address plus instructions for how to
`display the video. Armed with that code, myVidster creates a web
`page that makes the video appear to be on myVidster’s site. . . .
`[T]he video is being transmitted directly from the server on which
`the video is stored to the viewer’s computer.” Id. at 757.
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`allegedly infringing code is embedded and the Seventh Circuit made
`clear that this is not copyright infringement.” (Id.) However,
`Flava Works does not stand for the proposition that embedding code
`that enables the transfer of copyrighted material never constitutes
`copyright infringement. Rather, the Flava Works court rested its
`reasoning on the fact that viewers of Flava’s videos using
`myVidster did not make copies of the videos on their computers.
`See Flava Works, 689 F.3d at 757. As such, myVidster’s actions did
`not increase the amount of copyright infringement occurring and
`they therefore could not incur liability for contributory
`infringement. See id. at 757-58.
`By contrast, LFOW’s Complaint specifically alleges that, when
`a user visits Defendants’ Website, “a copy of the infringing
`version of the LFOW Software is distributed . . . to the website
`visitor and stored on the visitor’s computer . . . . Accordingly,
`each visit to the Defendants’ Website is a new act of copyright
`infringement.” (Docket Entry 1, ¶ 28.) That allegation materially
`distinguishes Flava Works from the instant case.
`In sum, Defendants have not shown that LFOW’s Complaint fails
`to state a claim.
`II. Statute of Limitations
`Defendants also contend that any alleged infringement falls
`outside the Copyright Act’s statute of limitations. (See Docket
`Entry 12 at 8.) Specifically, they note that the most recent copy
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`of Defendants’ Website that LFOW provides dates back to May 17,
`2014. (See id. at 9.) LFOW did not commence the lawsuit until
`October 17, 2017, and the Complaint does not expressly allege
`infringement occurring after May 17, 2014. (See generally Docket
`Entry 1.) Accordingly, Defendants argue, the Complaint falls
`outside the Copyright Act’s three-year statute of limitations.
`(See Docket Entry 12 at 8-9 (citing 17 U.S.C. § 507(b)).)
`A motion to dismiss generally “cannot reach the merits of an
`affirmative defense, such as the defense that the plaintiff’s claim
`is time-barred. But in the relatively rare circumstances where
`facts sufficient to rule on an affirmative defense are alleged in
`the [C]omplaint, the defense may be reached by a motion to dismiss
`filed under Rule 12(b)(6). This principle only applies, however,
`if all facts necessary to the affirmative defense ‘clearly appear[]
`on the face of the [C]omplaint.’” Goodman v. Praxair, Inc., 494
`F.3d 458, 464 (4th Cir. 2007) (quoting Richmond, Fredericksburg &
`Potomac R.R. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993)).
`The instant case does not appear to present an example of
`those “rare circumstances,” id. Defendants base their argument on
`the fact that the Complaint “points to [Defendants’ Website’s]
`source code from May 17, 2014,” as well as that the Complaint
`attached “tweople.com code that [Defendants’] Website code links
`to, which is dated October 24, 2013.” (Docket Entry 12 at 9.)
`However, it does not “clearly appear[] on the face of the
`
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`[C]omplaint,” Richmond, Fredericksburg & Potomac R.R., 4 F.3d at
`250, that May 17, 2014, represents the last occasion on which
`Defendants’ Website contained a link to the infringing LFOW
`Software. By its express terms, the Complaint provides the copy of
`the code “[b]y way of example” (Docket Entry 1, ¶ 20), implying
`that Defendants’ Website contained the link to tweople.com on other
`dates. Moreover, the Complaint itself states that “Defendants
`unlawfully and continuously used the infringing version of the LFOW
`Software on Defendants’ Website” (id., ¶ 34 (emphasis added)), and
`“distributed the infringing version of the LFOW Software . . .
`numerous times” (id., ¶ 36 (emphasis added)). Accordingly, taking
`the Complaint’s allegations in the light most favorable to LFOW,
`Defendants’ Website could plausibly have linked to tweople.com on
`October 17, 2014, or later.
`In any event, the United States Court of Appeals for the
`Fourth Circuit has declared that “[t]he limitations period for
`bringing copyright infringement claims is three years after the
`claims accrues. And a claim accrues when ‘one has knowledge of a
`violation or is chargeable with such knowledge.’” Lyons P’ship,
`L.P. v. Morris Costumes, Inc., 243 F.3d 789, 796 (4th Cir. 2001)
`(quoting Hotaling v. Church of Jesus Christ of Latter-Day Saints,
`118 F.3d 199, 202 (4th Cir. 1997)). Defendants would have the
`Court ignore the foregoing authority on the grounds that:
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`(1) “[t]he Supreme Court has very clearly stated that a
`copyright infringement claim ‘arises or “accrues” when an
`infringing act occurs’” (Docket Entry 12 at 8 (quoting Petrella v.
`Metro-Goldwyn-Mayer, Inc., 572 U.S. ___, ___, 134 S. Ct. 1962, 1969
`(2014)) (internal bracket omitted)); and
`(2) “the ‘notice’ proposition was dicta in both cited Fourth
`Circuit cases” (id. at 10).
`Neither of these rationales warrants entry of judgment for
`Defendants. As to the first, the Supreme Court’s ruling on which
`Defendants rely acknowledged (but did not overrule) authority in
`which federal appellate courts broadly recognized, “as an
`alternative to the incident of injury rule, a ‘discovery rule,’
`which starts the limitations period when ‘the plaintiff discovers,
`or with due diligence should have discovered, the injury that forms
`the basis for the claim.’” Petrella, 572 U.S. at ___ n.4, 134 S.
`Ct. at 1969 n.4 (quoting William A. Graham Co. v. Haughey, 568 F.3d
`425, 433 (3d Cir. 2009) (citing cases, including Lyons P’ship));
`see also SCA Hygiene Prods. Aktiebolag v. First Quality Baby
`Prods., LLC, ___ U.S. ___, ___, 137 S. Ct. 954, 962 (2017) (“[I]n
`Petrella, we specifically noted that ‘we have not passed on the
`question’ whether the Copyright Act’s statute of limitations is
`governed by such a [discovery] rule.” (quoting Petrella, 572 U.S.
`at ___ n.4, 134 S. Ct. at 1969 n.4)). Second, the Supreme Court
`did not construe the Fourth Circuit’s position on the discovery
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`rule as mere dicta; rather, the Supreme Court described the Fourth
`Circuit as (like eight other circuits) “hav[ing] adopted . . .
`[the] ‘discovery rule,’” Petrella, 572 U.S. at ___ n.4, 134 S. Ct.
`at 1969 n.4 (quoting Third Circuit opinion which, in turn, listed
`Lyons P’ship as one of “eight of [its] sister circuits [to] have
`applied the discovery rule to civil actions under the Copyright
`Act,” Haughey, 568 F.3d at 433).
`Consistent with the foregoing considerations, district courts
`in the Fourth Circuit have continued to follow the endorsement of
`the discovery rule in Lyons P’ship and Hotaling, even after
`Petrella. See RoyaltyStat, LLC v. IntangibleSpring Corp., Civil
`Action No. PX 15-3940, 2018 WL 348151, at *3 (D. Md. Jan. 10,
`2018); Topline Sols., Inc. v. Sandler Sys., Inc., Civil Action No.
`ELH-09-3102, 2017 WL 1862445, at *21 (D. Md. May 8, 2017); see also
`Mitchell v. Capitol Records, LLC, 287 F. Supp. 3d 673, 677 (W.D.
`Ky. 2017) (“Since Petrella, the courts interpreting [its] footnote
`[4] have largely decided that the discovery rule remains viable in
`the circuits that had previously applied it.”). This Court should
`do likewise. See generally Awuah v. Coverall N. Am., Inc., 554
`F.3d 7, 11 (1st Cir. 2009) (“Given that the Supreme Court has not
`clearly spoken, the interests of predictability are served by
`respecting [a federal appellate court’s] prior language . . . .”).
`As LFOW has observed, “[w]hen [it] discovered [] Defendants’
`infringement is a question of fact to be determined at a later
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`date. There is no allegation or suggestion in the Complaint that
`[LFOW] discovered Defendants’ infringement more than three years
`before filing suit.” (Docket Entry 14 at 13.) Accordingly, the
`Court should not dismiss the Complaint as untimely (at least not at
`this juncture).
`
`CONCLUSION
`The Complaint states a claim for copyright infringement and
`Defendants have not established as a matter of law that said claim
`falls outside the statute of limitations.
`IT IS THEREFORE RECOMMENDED that Defendants’ Motion to Dismiss
`for Failure to State a Claim (Docket Entry 11) be denied.
` /s/ L. Patrick Auld
` L. Patrick Auld
` United States Magistrate Judge
`
`May 8, 2018
`
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