IN THE UNITED STATES DISTRICT COURT
`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
`
`
`
`
`
`
`1:19CV403
`
`
`
`)
`DAVID SILER; DISTINCTIVE HUMAN
`)
`RESOURCES, INC.,
`)
`
`)
` Plaintiffs,
`)
`
`)
` v.
`)
`
`)
`ELGA LEJARZA a/k/a ELGA
`)
`LEJARZA-PENN; MICHAEL PENN;
`)
`LEJARZA COMPLIANCE TRAININGS
`)
`LLC, a limited liability
`)
`company; LEJARZA HR CONSULTING
`)
`LLC, a limited liability
`)
`company,
`)
`
`)
` Defendants.
`
`MEMORANDUM OPINION AND ORDER
`
`THOMAS D. SCHROEDER, Chief District Judge.
`Plaintiffs David Siler and Distinctive Human Resources, Inc.
`(“Distinctive HR”) bring this action against Defendants Elga
`Lejarza a/k/a Elga Lejarza-Penn, Michael Penn, Lejarza Compliance
`Trainings, LLC (“Compliance Trainings”), and Lejarza HR
`Consulting, LLC (“HR Consulting”) for their allegedly unlawful use
`of Plaintiffs’ copyrighted materials. Before the court is
`Defendants’ motion to dismiss, pursuant to Federal Rule of Civil
`Procedure 12(b)(6). (Doc. 11.) The motion is fully briefed (Docs.
`17, 18) and is ready for decision. For the reasons set forth
`below, the motion will be granted in part and denied in part.
`
`
`
`
`
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 1 of 28
`
`
`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
`
`
`
`
`
`
`1:19CV403
`
`
`
`)
`DAVID SILER; DISTINCTIVE HUMAN
`)
`RESOURCES, INC.,
`)
`
`)
` Plaintiffs,
`)
`
`)
` v.
`)
`
`)
`ELGA LEJARZA a/k/a ELGA
`)
`LEJARZA-PENN; MICHAEL PENN;
`)
`LEJARZA COMPLIANCE TRAININGS
`)
`LLC, a limited liability
`)
`company; LEJARZA HR CONSULTING
`)
`LLC, a limited liability
`)
`company,
`)
`
`)
` Defendants.
`
`MEMORANDUM OPINION AND ORDER
`
`THOMAS D. SCHROEDER, Chief District Judge.
`Plaintiffs David Siler and Distinctive Human Resources, Inc.
`(“Distinctive HR”) bring this action against Defendants Elga
`Lejarza a/k/a Elga Lejarza-Penn, Michael Penn, Lejarza Compliance
`Trainings, LLC (“Compliance Trainings”), and Lejarza HR
`Consulting, LLC (“HR Consulting”) for their allegedly unlawful use
`of Plaintiffs’ copyrighted materials. Before the court is
`Defendants’ motion to dismiss, pursuant to Federal Rule of Civil
`Procedure 12(b)(6). (Doc. 11.) The motion is fully briefed (Docs.
`17, 18) and is ready for decision. For the reasons set forth
`below, the motion will be granted in part and denied in part.
`
`
`
`
`
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 1 of 28
`
`
`
`I.
`
`BACKGROUND
`The allegations of the complaint, along with the contents of
`documents of which the court takes judicial notice,1 viewed in the
`light most favorable to Plaintiffs, show the following:
`Siler is the controlling shareholder of Distinctive HR. (Doc.
`1 ¶ 10.) Together, they produce study courses and materials (“Test
`Prep Materials”) designed to help individuals pass a variety of
`human resources certification exams: the Professional in Human
`Resources (PHR) Certification Exam, the Senior Professional in
`Human Resources (SPHR) Certification Exam, the Associate
`Professional in Human Resources (aPHR) Certification Exam, and the
`Global Professional in Human Resources (GPHR) Certification Exam.
`(Id. ¶ 11.) The Test Prep Materials consist of print, audio,
`video, visual, and interactive materials, such as study guides,
`training games, sample tests, and flashcards. (Id. ¶¶ 11, 16-28.)
`Included with the Test Prep Materials is access to Plaintiffs’
`Learning Management System (“LMS”), an online platform with test
`prep content. (Id. ¶¶ 16, 18, 27-28.) Most of the component parts
`of the Test Prep Materials are registered with the United States
`
`
`1 The court may consider documents outside the pleadings without
`converting a motion to dismiss into one for summary judgment if those
`documents are “integral to and explicitly relied on in the complaint”
`and their authenticity is unchallenged. Copeland v. Bieber, 789 F.3d
`484, 490 (4th Cir. 2015) (quoting Phillips v. LCI Int’l, Inc., 190 F.3d
`609, 618 (4th Cir. 1999)). Plaintiffs have attached five documents to
`their brief that support their claims and are relied upon in their
`complaint (Docs. 1-1 through 1-5), and their authenticity is
`unchallenged.
`
`
`
`2
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 2 of 28
`
`
`
`Copyright Office.2 (Id. ¶ 33; Doc. 1-1.)
`In April of 2011, Lejarza purchased Plaintiffs’ PHR/SPHR
`audio CD and a one-year self-study online subscription. (Id.
`¶ 62.) In March of 2016, she purchased the same two audio CDs and
`another one-year self-study online subscription. (Id. ¶ 63.) In
`March of 2017, she purchased the 2017 PHR/SPHR self-study course
`bundle with a one-year self-study online subscription. (Id. ¶ 64.)
`And despite passing her human resources Certification exams prior
`to the start of 2018 (id. ¶ 67), in March of 2018 Lejarza purchased
`the 2018 PHR/SPHR self-study course with a one-year online
`subscription. (Id. ¶ 65.)
`Lejarza and Penn are business partners and owners of
`Defendants HR Consulting and Compliance Trainings. (Doc. 1 ¶¶ 81-
`82, 158-64.) Lejarza, either individually or through Compliance
`Trainings, “offers training workshops, seminars, webinars,
`classes, or similar training, educational, or promotional events”
`to help customers pass their human resources certification exams.
`(Id. ¶ 91.) These live workshops are taught by Lejarza, but
`prerecorded materials are also available for purchase. (Id. ¶ 95.)
`On or about July 25, 2018, Distinctive HR received notice
`
`
`2 Defendants note that of the thirty-two copyright registrations provided
`in Doc. 1-1, only two were registered prior to the termination of
`Defendant Lejarza’s service. (Doc. 13 at 6.) However, to bring a
`copyright infringement claim, the works at issue simply must be
`registered prior to commencement of the suit, and not at the time of the
`alleged infringement. 17 U.S.C. § 411(a).
`3
`
`
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 3 of 28
`
`
`
`that Defendants were using the Test Prep Materials “word-for-word”
`in the slideshow presentations as part of Defendants’ workshops
`and were including Plaintiffs’ materials in their on-demand
`materials. (Id. ¶ 108-09.) Distinctive HR’s software also
`recorded Lejarza accessing the self-study site thousands of times
`between May 18, 2017, and August 28, 2018, often with her actions
`overlapping in time. (Id. ¶¶ 70-76.)
`The purchase page of Plaintiffs’ Test Prep Materials provides
`customers this notice:
`[Learning Management System] access is for a single-user
`and is NOT transferable or to be shared with others.
`LMS access is valid for 1 year from the date your order
`is processed. A valid email address and individual’s
`name must be provided for each [name of product ordered]
`ordered. All materials are copyrighted material and may
`not, in whole or in part, be copied, shared, or
`reproduced by any means for any reason without the prior
`written consent of Distinctive Human Resources, Inc.
`Any violation of these terms and conditions will result
`in immediate termination of your access to these
`materials, with no refund provided.
`(Id. ¶ 69.) Plaintiffs allege that Lejarza not only reproduced
`their copyrighted material in her own workshops and on-demand
`materials, but that she also provided her login information to
`staff, volunteers, co-owners, or agents of Compliance Trainings
`and/or HR Consulting. (Id. ¶ 80.)
`On August 27, 2018, Plaintiffs’ counsel sent a cease and
`desist demand to Lejarza and Compliance Trainings, and Lejarza’s
`self-study subscription was terminated on August 28, 2018, for
`
`
`
`4
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 4 of 28
`
`
`
`violations of the user license agreement. (Id. ¶¶ 66, 138.)
`According to Defendants, Lejarza has continued to infringe on
`Plaintiffs’ copyrights following the cease and desist letter. (Id.
`¶ 139.)
`On April 15, 2019, Plaintiffs filed this lawsuit pursuant to
`18 U.S.C. §§ 1331 and 1338(a), under the Copyright Act. (Doc. 1.)
`Based on Defendants’ alleged misconduct, Plaintiffs bring five
`causes of action. Against each Defendant, Plaintiffs claim
`copyright infringement under the Copyright Act, 17 U.S.C. §§ 106,
`501; unfair competition under the Lanham Act, 15 U.S.C. § 1125;
`and common law copyright infringement and unfair and deceptive
`trade practices under the North Carolina Unfair and Deceptive Trade
`Practices Act (“UDTPA”), N.C. Gen. Stat. §§ 75-1.1 et seq. (Id.
`at 22-24, 26-27, 28-32.) Against Lejarza individually, Plaintiffs
`allege breach of contract. (Id. at 24-25.) In lieu of answering,
`Defendants filed the present motion to dismiss, which is fully
`briefed and ready for decision.
`II. ANALYSIS
`Plaintiffs assert, and the parties do not dispute, that the
`court has subject matter jurisdiction under 28 U.S.C. §§ 1331 and
`1338(a), under the Copyright Act. (Doc. 1 ¶ 7.) The court also
`has original jurisdiction over Plaintiffs’ claim of unfair
`competition that is “joined with a substantial and related claim
`under the copyright . . . laws.” 28 U.S.C. § 1338(b). The court
`
`
`
`5
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 5 of 28
`
`
`
`exercises supplemental jurisdiction over all other claims that are
`“so related to claims in the action within such original
`jurisdiction that they form part of the same case or controversy.”
`28 U.S.C. § 1367.
`A.
`Standard of Review
`Defendants move to dismiss Plaintiffs’ claims under Rule
`12(b)(6), arguing that Plaintiffs have failed to state a claim
`upon which relief can be granted. (Doc. 11.) They assert that
`Plaintiffs’ state law claims for breach of contract, unfair and
`deceptive trade practices, and common law copyright infringement
`are preempted by section 301 of the Copyright Act. 17 U.S.C.
`§ 301. (Doc. 13.) They also move to dismiss Plaintiffs’ unfair
`competition claim as duplicative of their copyright infringement
`claim. (Id.) Defendants Lejarza and Penn also assert that
`Plaintiffs’ copyright infringement claim is not cognizable as to
`them individually because Plaintiffs have not alleged sufficient
`facts to pierce the corporate veil. (Id.)
`A motion to dismiss under Rule 12(b)(6) is meant to “test[]
`the sufficiency of a complaint” and not to “resolve contests
`surrounding the facts, the merits of a claim, or the applicability
`of defenses.” Republican Party of N.C. v. Martin, 980 F.2d 943,
`952 (4th Cir. 1992). To survive such a motion, “a complaint must
`contain sufficient factual matter, accepted as true, to ‘state a
`claim to relief that is plausible on its face.’” Ashcroft v.
`
`
`
`6
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 6 of 28
`
`
`
`Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
`Twombly, 550 U.S. 544, 570 (2007)). In considering the motion, a
`court “must accept as true all of the factual allegations contained
`in the complaint,” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per
`curiam), and all reasonable inferences must be drawn in the
`plaintiff’s favor, Ibarra v. United States, 120 F.3d 472, 474 (4th
`Cir. 1997). “Rule 12(b)(6) protects against meritless litigation
`by requiring sufficient factual allegations ‘to raise a right to
`relief above the speculative level’ so as to ‘nudge[] the[] claims
`across the line from conceivable to plausible.’” Sauers v.
`Winston-Salem/Forsyth Cty. Bd. of Educ., 179 F. Supp. 3d 544, 550
`(M.D.N.C. 2016) (alterations in original) (quoting Twombly, 550
`U.S. at 555). Mere legal conclusions are not accepted as true,
`and “[t]hreadbare recitals of the elements of a cause of action,
`supported by mere conclusory statements, do not suffice.” Iqbal,
`556 U.S. at 678.
`B.
`Copyright Infringement
`In their first cause of action, Plaintiffs assert that they
`own the copyrights for their Test Prep Materials, which are
`registered with the United States Copyright Office. (Doc. 1 at
`22.) Attached to their complaint are the certificates of
`registration from the Copyright Office. (Doc. 1-1.) Plaintiffs
`allege that Defendants, without permission or authorization,
`copied Plaintiffs’ Test Prep Materials in a “willful, intentional,
`
`
`
`7
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 7 of 28
`
`
`
`and purposeful [way], in disregard of and with indifference to
`Plaintiffs’ rights.” (Doc. 1 at 22-23.) Defendants do not contest
`that Plaintiffs have sufficiently pleaded a copyright infringement
`claim but instead move to dismiss the claims against Lejarza and
`Penn in their individual capacities, claiming that “the dispute is
`really between the Plaintiffs and the corporate Defendants.” (Doc.
`13 at 13.) Defendants argue that the factual allegations do not
`support piercing the corporate veil as to Compliance Trainings and
`HR Consulting. (Doc. 18 at 4-5.) Plaintiffs respond that
`“[p]iercing the LLC or Corporate Veil is not the only way an
`individual can be liable in a lawsuit” and further argue that they
`have “made numerous claims” against both Lejarza and Penn
`individually. (Doc. 17 at 10.)
`“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). A defendant
`may infringe a copyright either directly, contributorily, or
`vicariously. Live Face on Web, LLC v. Absonutrix, LLC, No.
`1:17cv937, 2018 WL 2121627, at *2 (M.D.N.C. May 8, 2018). “Direct
`infringement of a copyright ‘requires conduct by a person who
`causes in some meaningful way an infringement.’” Id. (quoting
`CoStar Grp., Inc. v. LoopNet, Inc., 373 F.3d 544, 549 (4th Cir.
`
`
`
`8
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 8 of 28
`
`
`
`2004) (emphasis in original)). As to indirect theories of
`infringement, the Fourth Circuit has stated:
`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,
`too . . . . Under a theory of vicarious liability, a
`defendant who has the right and ability to supervise the
`infringing activity and also has a direct financial
`interest in such activities is similarly liable.
`
`CoStar Grp., 373 F.3d at 550 (quoting Gershwin Publ’g Corp. v.
`Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971))
`(internal quotation marks omitted).
`Under this scope of potential liability for copyright
`infringement, it is apparent that Plaintiffs have pleaded
`sufficient facts to state a claim against the individual
`Defendants. Plaintiffs allege that Lejarza was the only individual
`authorized to access the copyrighted Test Prep Materials and
`infringed on Plaintiffs’ copyright when she personally shared the
`Test Prep Materials with others and used them in workshops that
`she herself taught. Plaintiffs also allege that Penn is an owner
`of both Compliance Trainings and HR Consulting and “takes an active
`role in [their] management and business.” (Doc. 1 at 20-21.) They
`further allege that Penn profits off the infringing activity.
`(Id.) Viewed in the light most favorable to Plaintiffs, these
`allegations are sufficient to plausibly claim that Lejarza
`directly infringed on Plaintiffs’ rights under the Copyright Act
`
`
`
`9
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 9 of 28
`
`
`
`and that Penn may be liable under an indirect theory of
`infringement. See Bradshaw v. Am. Inst. for History Educ., No.
`12-1367(RBK/KMW), 2013 WL 1007219, *5 (D.N.J. Mar. 13, 2013)
`(finding it possible for an individual to be held personally liable
`for copyright infringement despite his status as a corporate
`employee); see also Lauratex Textile Corp. v. Allton Knitting
`Mills, Inc., 519 F. Supp. 730, 733 (S.D.N.Y. 1981) (“Where an
`individual directly causes a corporate defendant to infringe and
`personally participates in the acts constituting the infringement,
`he is jointly and severally liable for the infringement.”).
`Therefore, Defendants’ motion to dismiss the copyright
`infringement claim against these individual Defendants will be
`denied.
`Preemption
`C.
`Plaintiffs allege that Defendants infringed on their common
`law copyright and engaged in unfair or deceptive trade practices
`under the North Carolina UDTPA and engaged in unfair competition
`under the Lanham Act, 15 U.S.C. § 1125. They further allege that
`Lejarza breached her contract with Distinctive HR. Defendants
`move to dismiss, claiming that each of these claims is preempted
`by the Copyright Act. Plaintiffs oppose this motion.
`By aid of the Supremacy Clause of the United States
`Constitution, the Copyright Act preempts all state law rights that
`are “equivalent” to rights under federal copyright law. 17 U.S.C.
`
`
`
`10
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 10 of 28
`
`
`
`§ 301(a). In passing the Copyright Act, “Congress precluded state-
`law actions to enforce rights protected by federal copyright law
`in the clearest and most unequivocal language possible, so as to
`avoid the development of any vague borderline areas between State
`and Federal protection.” OpenRisk, LLC, v. Microstrategy Servs.
`Corp., 876 F.3d 518, 523 (4th Cir. 2017) (internal quotation marks
`and citation omitted). Section 301(a) of the Copyright Act
`provides:
`[A]ll legal or equitable rights that are equivalent to
`any of the exclusive rights within the general scope of
`copyright . . . in works of authorship that are fixed in
`a tangible medium of expression and come within the
`subject matter of copyright . . . are governed
`exclusively by this title . . . . [N]o person is
`entitled to any such right or equivalent right in any
`such work under the common law or statutes of any State.
`17 U.S.C. § 301(a). Thus, § 301 “sets up a two-prong inquiry to
`determine when a state law claim is preempted.” United States ex
`rel. Berge v. Bd. of Tr., 104 F.3d 1453, 1463 (4th Cir. 1997).
`Courts must consider “(1) whether the claim ‘falls within the
`subject matter of copyright’ and (2) whether the claim ‘protects
`rights that are equivalent to any of the exclusive rights of a
`federal copyright.’” Tire Eng’g and Distribution, LLC v. Shandong
`Linglong Rubber Co., 682 F.3d 292, 309 (4th Cir. 2012) (quoting
`Carson v. Dynegy, Inc., 344 F.3d 446, 456 (5th Cir. 2003)).
`“[B]oth prongs of [this] two-factor test must be satisfied for
`preemption to occur” id., and the “shadow actually cast by the
`
`
`
`11
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 11 of 28
`
`
`
`Act’s preemption is notably broader than the wing of its
`protection,” Berge, 104 F.3d at 1463.
`
`Defendants do not challenge that Plaintiffs claims fall
`within the first prong, the subject matter of copyright. See 17
`U.S.C. §§ 102 (defining subject matter of copyright), 103
`(defining copyright for compilations and derivative works). As to
`the second prong, § 106 of the Copyright Act grants a copyright
`owner the exclusive right to “(1) reproduce the work, (2) prepare
`derivative works based on the work, (3) distribute copies of the
`work, (4) perform the work publicly, and (5) display the work
`publicly.” Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655,
`659 (4th Cir. 1993). To determine if the equivalency requirement
`is satisfied, the Fourth Circuit applies the “extra element” test:
`State-law claims that infringe one of the exclusive
`rights contained in § 106 are preempted by § 301(a) if
`the right defined by state law may be abridged by an act
`which, in and of itself, would infringe one of the
`exclusive rights . . . . However, if an extra element is
`required instead of or in addition to the acts of
`reproduction, performance, distribution or display, in
`order to constitute a state-created cause of
`action, . . . there is no preemption, provided that the
`extra element changes the nature of the action so that
`it is qualitatively different from a copyright
`infringement claim.
`Rosciszewski v. Arete Assocs., Inc., 1 F.3d 225, 229-30 (4th Cir.
`1993) (internal quotation marks and citations omitted). “In short,
`the Copyright Act preempts state law claims that lack an extra
`element which would make them qualitatively different from a
`
`
`
`12
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 12 of 28
`
`
`
`copyright infringement claim.” Pan-Am. Prods. Holdings, LLC v.
`R.T.G. Furniture Corp., 825 F. Supp. 2d 664, 691 (M.D.N.C. 2011)
`(internal quotation marks and citations omitted).
`In applying the “extra element” test, the Fourth Circuit has
`cautioned that “[t]o determine whether a particular cause of action
`involves rights equivalent to those set forth in § 106, the
`elements of the causes of action should be compared, not the facts
`pled to prove them.” Trandes Corp., 996 F.2d at 659. However,
`where the elements require broad misconduct, such as an “unfair”
`or “deceptive” trade practice, the court must necessarily examine
`the allegations of the underlying claim to ascertain whether the
`nature of the claim differs qualitatively from a Copyright Act
`claim. See, e.g., Pan-Am. Prods., 825 F. Supp. 2d at 692 (quoting
`Rutledge v. High Point Reg’l Health Sys., 558 F. Supp. 2d 611, 618
`(M.D.N.C. 2008)).
`1.
`Common Law Copyright Infringement
`Plaintiffs plead that in addition to the federal copyright
`protection their Test Prep Materials enjoy under 17 U.S.C. §§ 106
`and 501, Plaintiffs also have a common law copyright that
`Defendants have infringed. (Doc. 1 at 28-29.) Plaintiffs do not
`explain, either in the complaint or their briefing, the nature of
`the common law protection they claim. Defendants argue that this
`claim simply mirrors Plaintiffs’ copyright claim and is preempted.
`(Doc. 13 at 9.) Defendants also note that Plaintiffs bring this
`
`
`
`13
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 13 of 28
`
`
`
`claim in the alternative and argue that if the copyright
`infringement claim survives, the common law copyright infringement
`claim should be dismissed. (Id. at ¶¶ 205-211.) Plaintiffs
`disagree, arguing, without explication, only that the federal
`rules permit them to plead in the alternative. (Doc. 17 at 3-4.)
`The federal rules do permit Plaintiffs to state claims in the
`alternative, regardless of whether those claims are consistent.
`Fed. R. Civ. P. 8(d)(2)-(3). But Plaintiffs have not met their
`burden under Local Rule 7.2 to provide an argument as to the merit
`of their claim. L.R. 7.2(a)(4) (requiring briefs to contain
`argument, with reference to all statutes, rules, and authorities
`relied upon). In the absence of any explanation, the court
`nevertheless has the obligation to determine whether the motion to
`dismiss is merited. See Local Rule 7.3(k); Gardendance, Inc. v.
`Woodstock Copperworks, Ltd., 230 F.R.D. 438, 449 (M.D.N.C. 2005).
`Defendants are correct that Plaintiffs’ common law claim is
`preempted by the Copyright Act. The common law claim has at its
`core the same allegedly copyrighted materials that make up
`Plaintiffs’ statutory copyright infringement claim and plainly
`falls within the scope of copyright. Plaintiffs claim common law
`copyright protection over “all of the collective and individual
`components of the Test Prep Materials.” (Doc. 1 ¶ 34.) While
`these components, collectively and individually, could contain
`uncopyrightable material, Plaintiffs fail to explain how they are
`
`
`
`14
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 14 of 28
`
`
`
`not all related to Plaintiffs’ test prep content and therefore
`fall within the scope of copyright. Forest Park Pictures v.
`Universal Television Network, Inc., 683 F.3d 424, 429 (2d Cir.
`2012) (“[W]orks may fall within the subject matter of copyright,
`and thus be subject to preemption, even if they contain material
`that is uncopyrightable under section 102 [of the Copyright
`Act].”); Berge, 104 F.3d at 1463 (”[S]cope and protection are not
`synonymous. Moreover, the shadow actually cast by the [Copyright]
`Act’s preemption is notably broader than the wing of its
`protection.”). See Urbont v. Sony Music Entm’t., 831 F.3d 80, 94-
`95 (2d Cir. 2016) (affirming district court’s dismissal of common
`law copyright infringement claim on preemption grounds).
`Therefore, Defendants’ motion to dismiss Plaintiffs’ common
`law copyright claim will be granted, but without prejudice because
`Plaintiffs have defaulted on providing any substantive argument.
`2.
`Breach of Contract
`Plaintiffs allege that they contracted with Lejarza for her
`purchase of an individual license to Defendants’ online self-study
`course. (Doc. 1 at 24-25.) Lejarza allegedly breached the
`contract by allowing more than one person to access Plaintiffs’
`online system, used copyrighted content from the online system in
`her own study courses, shared her login information with others,
`and provided Test Prep Materials to third parties. (Id. at 25.)
`Defendants move to dismiss this claim, arguing that it is preempted
`
`
`
`15
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 15 of 28
`
`
`
`by the Copyright Act. They argue that each alleged breach is
`equivalent to a right protected by the Copyright Act and is
`therefore preempted. (Doc. 13 at 7-9.) Plaintiffs’ one-line
`response is: “Beyond what is stated in Plaintiffs’ Complaint,
`Plaintiffs make no argument towards whether or not Plaintiffs’
`claim for Breach of Contract is preempted by the Copyright Act.”
`(Doc. 17 at 6.)
`Here, too, Plaintiffs have failed to provide a substantive
`response to Defendants’ motion, in violation of Local Rule
`7.2(a)(4). It is not the job of the court to become an advocate
`for a non-responding party under such circumstances. Emrich v.
`Colvin, 90 F. Supp. 3d 480, 486 (M.D.N.C. 2015) (warning that a
`party should not expect the court to do the work it elected not to
`do). However, as noted above, the court must nevertheless
`determine whether the motion to dismiss has merit. See Local Rule
`7.3(k); Gardendance, Inc., 230 F.R.D. at 449.
`Plaintiffs’ contract claim is based on Lejarza’s allegedly
`improper actions as they relate to Plaintiffs’ copyrighted
`material and is within the scope of copyright. To complete the
`preemption analysis, the court must apply the “extra element” test
`to determine whether the rights protected under a breach of
`contract claim in North Carolina are equivalent to the rights
`protected under the Copyright Act. To establish a breach of
`contract under North Carolina law, a plaintiff must show the
`
`
`
`16
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 16 of 28
`
`
`
`existence of a valid contract and a breach of that contract. Long
`v. Long, 588 S.E.2d 1, 4 (N.C. Ct. App. 2003). “Although the vast
`majority of contract claims will not be preempted under the
`Copyright Act, courts must examine the precise contract right being
`asserted.” Pan-Am Prods., 825 F. Supp. 2d at 694. Where the
`alleged acts supporting a breach of contract claim are equivalent
`to rights protected under § 106 of the Copyright Act, the breach
`of contract claim will be preempted. See Madison River Mgmt. Co.
`v. Bus. Mgmt. Software Corp., 351 F. Supp. 2d 436, 444 (M.D.N.C.
`2005) (finding plaintiff’s breach of contract claims preempted
`because they all “emanate[d] from the alleged wrongful
`reproduction and distribution of” copyrighted work.)
`In the present case, some of Plaintiffs’ breach of contract
`allegations appear to be equivalent to rights protected under the
`Copyright Act. Section 106 grants copyright holders the exclusive
`right to reproduce copyrighted material, distribute copies of that
`material, and display or authorize the display of that material
`publicly. 17 U.S.C. § 106. By allegedly using Plaintiffs’ content
`in her own materials, Lejarza impermissibly reproduced the Test
`Prep Materials and displayed them publicly. Plaintiffs’
`allegation that Lejarza provided portions of the Test Prep
`Materials to others is equivalent to a violation of Plaintiffs’
`exclusive right to distribute copies of their work. By sharing
`her login information and allowing others to access the online
`
`
`
`17
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 17 of 28
`
`
`
`course, Lejarza made the self-study course available to others and
`distributed access to the copyrighted material. However,
`Plaintiffs also allege that purchasers of their products receive
`a notice stating, in relevant part, “LMS access is for a single-
`user and is NOT transferrable or to be shared with others.” (Doc.
`1 ¶ 69.) The notice further states that the purchased materials
`“may not, in whole or in part, be copied, shared, or reproduced by
`any means for any reason without [Distinctive HR’s] prior written
`consent.” (Id.) The Copyright Act allows for the fair use of
`copyrighted material, 17 U.S.C. § 107, but the provisions that
`Lejarza allegedly agreed to when purchasing Plaintiffs’ products
`provide a private standard for acceptable use. A breach of
`contract claim arising from “private law governing fair use . . .
`makes the claim qualitatively different from a simple copyright
`case, in which there is no ‘private law’ defining what is and is
`not fair use.” See Lowry’s Reports, Inc. v. Legg Mason, Inc., 271
`F. Supp. 2d 737, 756-57 (D. Md. 2003) (citation omitted).
`No party has provided the underlying contract between Lejarza
`and Plaintiffs, and the burden is on Defendants to show that all
`provisions of the contract alleged in Plaintiffs’ complaint are
`preempted. Defendants have failed to do so. Due to inadequate
`briefing, the court is unable to decide the motion without
`undertaking the work for the parties. Because justice is invoked,
`not dispensed, Defendants’ motion to dismiss will be denied without
`
`
`
`18
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 18 of 28
`
`
`
`prejudice.
`North Carolina UDTPA
`3.
`Plaintiffs contend that Defendants engaged in unfair and
`deceptive trade practices in violation of the UDTPA, N.C. Gen.
`Stat. § 75-1.1 et seq. (Doc. 1 at 29-31). Defendants move to
`dismiss, arguing that Plaintiffs’ UDTPA claim is merely a copyright
`infringement claim in disguise. (Doc. 13 at 11.) They further
`argue that even if the claim is not preempted by the Copyright
`Act, Plaintiffs have failed to allege sufficient facts to state a
`claim under the UDTPA. (Id. at 12.) Plaintiffs do not dispute
`that the relevant works are within the subject matter of copyright
`but argue only that preemption fails because their UDTPA claim
`alleges “palming off” and therefore involves an “extra element”
`that makes it qualitatively different from a copyright
`infringement claim. (Doc. 17 at 9-10.)
`“In order to establish a prima facie claim for unfair trade
`practices, a plaintiff must show: (1) defendant committed an unfair
`or deceptive act or practice, (2) the action in question was in or
`affecting commerce, and (3) the act proximately caused injury to
`the plaintiff.” Dalton v. Camp, 548 S.E.2d 704, 711 (N.C. 2001).
`While it may appear that a UDTPA claim does not require an “extra
`element” beyond that required to show copyright infringement, “it
`is possible for a claim under the UDTPA ‘to rest on conduct apart
`from that comprising the Copyright Act claim.’” Andrews v.
`
`
`
`19
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 19 of 28
`
`
`
`Daughtry, No. 1:12-cv-00441, 2013 WL 664564, at *11 (M.D.N.C. Feb.
`22, 2013) (quoting Pan-Am. Prods., 825 F. Supp. 2d at 698).
`“Common examples of extra elements in unfair competition claims
`that typically avoid preemption include breach of fiduciary duty,
`breach of a confidential relationship, and palming off of the
`defendant's products as those of the plaintiff's.” Rutledge, 558
`F. Supp. 2d at 617 (internal quotation marks and citation omitted).
`Additional elements that are not preempted include UDTPA claims
`founded on misrepresentation or deception. Innovative Med.
`Prods., Inc. v. Felmet, 472 F. Supp. 2d 678, 683 (M.D.N.C. 2006).
`In the end, what constitutes unfairness or deception to support a
`UDTPA claim “must rest on sufficient alleged misconduct separate
`from, and not controlled by, the Copyright Act, in order to
`survive.” Rutledge, 558 F. Supp. 2d at 620.
`Here, the allegations underlying Plaintiffs’ UDTPA claim are
`all equivalent to rights protected under the Copyright Act.
`Plaintiffs argue that they allege “palming off” as an extra
`element, but their complaint does not bear this out. “‘Passing
`off,’ also known as ‘palming off,’ occurs when a defendant
`misrepresents its products as those of the plaintiff.” Rutledge,
`558 F. Supp. 2d at 620 (citing Felmet, 472 F. Supp. 2d at 683-84).
`“Reverse passing off,” also known as “reverse palming off,” occurs
`when either (1) “the wrong doer removes the name or trademark on
`another party's product and sells that product under a name chosen
`
`
`
`20
`
`Case 1:19-cv-00403-TDS-JEP Document 19 Filed 11/21/19 Page 20 of 28
`
`
`
`by the wrongdoer” or (2) “the wrongdoer . . . removes or otherwise
`obliterates the name of the manufacturer or source and sells the
`product in an unbranded state.” Id. (citing Scheduled Airlines
`Traffic Offices, Inc. v. Objective, Inc., 180 F.3d 583, 591 n.4
`(4th Cir. 1999)) (internal quotation marks omitted). Whereas
`palming off has an extra element that distinguishes a UDTPA claim
`from one of copyright infringement, the same is not true for
`reverse palming off, and the C
Accessing this document will incur an additional charge of $.
After purchase, you can access this document again without charge.
Accept $ Charge
Still Working On It
This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.
Give it another minute or two to complete, and then try the refresh button.
A few More Minutes ... Still Working
It can take up to 5 minutes for us to download a document if the court servers are running slowly.
Thank you for your continued patience.
This document could not be displayed.
We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.
Your account does not support viewing this document.
You need a Paid Account to view this document. Click here to change your account type.
Your account does not support viewing this document.
Set your membership
status to view this document.
With a Docket Alarm membership, you'll
get a whole lot more, including:
- Up-to-date information for this case.
- Email alerts whenever there is an update.
- Full text search for other cases.
- Get email alerts whenever a new case matches your search.
One Moment Please
The filing “” is large (MB) and is being downloaded.
Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.
Your document is on its way!
If you do not receive the document in five minutes, contact support at support@docketalarm.com.
Sealed Document
We are unable to display this document, it may be under a court ordered seal.
If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.
Access Government Site
