Case 3:14-cv-01279-BR Document 75 Filed 01/13/15 Page 1 of 29
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF OREGON
`
`3:14-CV-01279-BR
`
`OPINION AND ORDER
`
`
`
`ORACLE AMERICA, INC., a
`Delaware Corporation,
`Plaintiff,
`
`v.
`THE OREGON HEALTH INSURANCE
`EXCHANGE CORPORATION, dba
`COVER OREGON, an Oregon
`Limited Liability
`Corporation; THE STATE OF
`OREGON, BY AND THROUGH THE
`OREGON HEALTH AUTHORITY AND
`THE OREGON DEPARTMENT OF
`HEALTH SERVICES; and DOES
`1-25, INCLUSIVE,
`Defendants.
`
`BRENNA K. LEGAARD
`JEFFERY S. EDEN
`Schwabe, Williamson & Wyatt, P.C.
`1211 S.W. Fifth Avenue, Suite 1900
`Portland, OR 97204
`(503) 222-9981
`KAREN JOHNSON-MCKEWAN
`1 - OPINION AND ORDER
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF OREGON
`
`3:14-CV-01279-BR
`
`OPINION AND ORDER
`
`
`
`ORACLE AMERICA, INC., a
`Delaware Corporation,
`Plaintiff,
`
`v.
`THE OREGON HEALTH INSURANCE
`EXCHANGE CORPORATION, dba
`COVER OREGON, an Oregon
`Limited Liability
`Corporation; THE STATE OF
`OREGON, BY AND THROUGH THE
`OREGON HEALTH AUTHORITY AND
`THE OREGON DEPARTMENT OF
`HEALTH SERVICES; and DOES
`1-25, INCLUSIVE,
`Defendants.
`
`BRENNA K. LEGAARD
`JEFFERY S. EDEN
`Schwabe, Williamson & Wyatt, P.C.
`1211 S.W. Fifth Avenue, Suite 1900
`Portland, OR 97204
`(503) 222-9981
`KAREN JOHNSON-MCKEWAN
`1 - OPINION AND ORDER
`
`
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`Case 3:14-cv-01279-BR Document 75 Filed 01/13/15 Page 2 of 29
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`ROBERT S. SHWARTS
`ERIN M. CONNELL
`Orrick, Herrington & Sutcliffe LLP
`The Orrick Building
`405 Howard Street
`San Francisco, CA 94105
`(415) 773-5700
`DORIAN E. DALEY
`DEBORAH K. MILLER
`PEGGY E. BRUGGMAN
`Oracle Corporation
`Legal Department
`500 Redwood Shores, CA 94065
`(650) 506-9534
`Attorneys for Plaintiff
`DAVID B. MARKOWITZ
`PETER H. GLADE
`LISA A. KANER
`DALLAS S. DELUCA
`HARRY B. WILSON
`Markowitz Herbold PC
`Suite 3000 Pacwest Center
`1211 S.W. Fifth Avenue
`Portland, OR 97204-3730
`(503) 295-3085
`Attorneys for Defendants
`
`BROWN, Judge.
`This matter comes before the Court on the State of Oregon's
`Motion (#39) to Dismiss; the Joint Motion (#41) to Dismiss or, in
`the Alternative, to Stay of the State and Cover Oregon; and Cover
`Oregon's Motion (#44) to Dismiss. For the reasons that follow,
`the Court GRANTS the State's Motion to Dismiss; DENIES Cover
`Oregon's Motion to Dismiss; and GRANTS in part and DENIES in part
`the Joint Motion to Dismiss or, in the Alternative, to Stay of
`2 - OPINION AND ORDER
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`the State and Cover Oregon. The Court also GRANTS Oracle
`America, Inc., leave to file a Second Amended Complaint no later
`than January 27, 2015.
`
`
`BACKGROUND
`The following facts are taken from the Amended Corrected
`Complaint and the materials filed in connection with the Motions
`to Dismiss.
`In 2007-2008 the Oregon Department of Human Services (DHS)
`began a project to modernize its technology systems (the
`Modernization Project). To identify potential technology vendors
`to implement the Modernization Project, DHS issued a Request for
`Identification (RFI) in January 2009.
`In February 2009 Oracle submitted a response to the RFI.
`At some point in 2009 the Oregon Legislature created the
`Oregon Health Authority (OHA) as a division of DHS.
`On March 23, 2010, Congress enacted the Patient Protection
`and Affordable Care Act (ACA), Public Law No. 111–148, 124 Stat.
`119 (2010), and thereby established legal foundations for states
`either to create health-insurance exchanges (HIX) or to use an
`HIX developed by the federal government.
`In October 2010 the United States Department of Health and
`Human Services (HHS) announced it would offer Early Innovator
`grants to states to design and to implement the information
`
`3 - OPINION AND ORDER
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`technology infrastructure needed to operate the HIX required by
`the ACA. The State of Oregon determined an Early Innovator Grant
`would provide it with the opportunity to combine the
`Modernization Project with a project to create an HIX for the
`State.
`In February 2011 HHS awarded the State an Early Innovator
`Grant to implement an HIX. The State then began seeking a
`company to provide both the Modernization Project and an HIX.
`Throughout 2010 and 2011 OHA employees attended numerous
`presentations and demonstrations by Oracle related to its ability
`to provide the Modernization Project and the HIX. The State,
`through DHS/OHA, subsequently decided to use Oracle to complete
`the Modernization Project and the HIX (the Oracle Solution).
`Although the State did not contract with Oracle directly, it
`contracted with Mythics, Inc., a corporation that works with
`Oracle to distribute and to sell Oracle products and to provide
`consulting on the implementation and integration of Oracle’s
`products.
`On June 30, 2011, the State entered into an agreement with
`Mythics and executed the Mythics License and Services Agreement
`(MLSA). Although Oracle did not sign the MLSA, Oracle was named
`as a third-party beneficiary of the MLSA.
`The MLSA did not provide for the actual purchase of Oracle
`products and services, but instead provided a contractual
`
`4 - OPINION AND ORDER
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`framework to govern the purchase of Oracle products and services.
`Actual purchases were made through a series of purchase orders
`submitted pursuant to the MLSA.
`In June 2011 the Oregon Legislature passed legislation
`creating the Oregon Health Insurance Exchange Corporation (Cover
`Oregon)1 as a public corporation and an independent unit of the
`State. Oregon Revised Statute § 741.002(1)(a) provides Cover
`Oregon shall "[a]dminister a health insurance exchange in
`accordance with federal law to make qualified health plans
`available to individuals and groups throughout this state."
`Also on June 30, 2011, DHS/OHA executed a Statement of Work
`that provided Mythics and Oracle would "assist" DHS and OHA with
`the “installation, implementation, configuration, and
`customization of the Oracle Policy Automation 10.2 components to
`support benefit eligibility processing and full determination for
`various state programs” and the HIX.
`In August 2011 DHS and OHA executed a purchase order with
`Oracle for the purchase of licenses for the Oracle Solution, the
`hardware on which to run the software, and consulting services to
`begin planning and implementing the Oracle Solution.
`Between June 30, 2011, and July 11, 2013, the State and
`Mythics executed 20 purchase orders under the MLSA for the
`
`1 On October 1, 2012, the Oregon Health Insurance Exchange
`Corporation adopted the name Cover Oregon.
`5 - OPINION AND ORDER
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`purchase of Oracle hardware, software, and services.
`In November 2011 DHS and OHA entered into the Oracle License
`Service Agreement (OHA OLSA) with Oracle. Like the MLSA, the OHA
`OLSA did not provide for the actual purchase of Oracle products
`and services but instead provided a contractual framework
`governing the purchase of Oracle products and services. Actual
`purchases were made through a series of purchase orders submitted
`pursuant to the OHA OLSA.
`Between November 30, 2011, and May 29, 2014, DHS and OHA
`executed 23 purchase orders under the OHA OLSA.
`In December 2012 OHA began to transition the HIX-IT Project
`to Cover Oregon.
` As noted, Cover Oregon was not a party to the MLSA or the
`Oracle-OHA Agreements. On March 14, 2013, therefore, Cover
`Oregon executed an Oracle License and Services Agreement (Cover
`Oregon OLSA) with Oracle. Like the MLSA and the OHA OLSA, the
`Cover Oregon OLSA did not provide for the purchase of Oracle
`products and services but instead provided a contractual
`framework governing the purchase of Oracle products and services.
`Specifically, purchases were made through a series of Oracle
`ordering documents and Cover Oregon purchase orders submitted
`pursuant to the Cover Oregon OLSA.
`In order for Oregonians to obtain insurance for 2014 as
`required by the ACA, Cover Oregon established the goal of
`
`6 - OPINION AND ORDER
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`launching the HIX by October 1, 2013. The HIX, however, was not
`ready to launch at that time. Throughout 2013 and into 2014
`Oracle and Cover Oregon worked to make the Oregon HIX useable and
`effective.
`On August 8, 2014, Oracle filed a Complaint in this Court
`against Cover Oregon, 3:14-CV-1279-BR (the Federal Action),
`asserting claims for breach of contract and quantum meruit in
`which Oracle alleged Cover Oregon has not paid for all of the
`services that Oracle rendered, “continue[s] to use Oracle’s work
`product[,] and . . . has transferred some or all of that work
`product to others in violation of the parties’ written
`agreements.” In the Federal Action Oracle based the Court’s
`jurisdiction on diversity.
`On August 22, 2014, Oregon Attorney General Ellen Rosenblum,
`the State of Oregon, and Cover Oregon filed an action in Marion
`County Circuit Court (the State Action) against Oracle, Mythics,
`and six Oracle employees2 alleging claims for fraud; breach of
`contract; breach of the Oregon False Claims Act (OFCA), Oregon
`Revised Statute § 180.750, et seq.; and violations of Oregon
`Racketeer Influenced and Corrupt Organizations Act (ORICO),
`Oregon Revised Statute § 166.715, et seq.
`Also on August 22, 2014, Cover Oregon filed in the Federal
`
`2 The Oracle employees are Stephen Bartolo, Thomas Budnar,
`Kevin Curry, Safra Catz, Brian Kim, and Ravi Puri.
`7 - OPINION AND ORDER
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`Action a Motion to Dismiss for Failure to State a Claim and
`Failure to Join Necessary and Indispensable Party. Specifically,
`Cover Oregon asserted this Court must dismiss the Federal Action
`because Oracle failed to sue the State of Oregon, a necessary and
`indispensable party.
`On September 8, 2014, Oracle filed an Amended Complaint3 in
`the Federal Action against Cover Oregon and the State in which
`Oracle asserted claims for copyright infringement (against Cover
`Oregon and the State), breach of contract (against Cover Oregon),
`breach of the implied covenant of good faith and fair dealing
`(against Cover Oregon), and quantum meruit (against Cover Oregon
`and the State).
`On September 18, 2014, this Court denied Cover Oregon’s
`Motion to Dismiss (#15) in the Federal Action as moot and
`directed Cover Oregon and/or the State to file any motions
`against the Amended Corrected Complaint no later than October 2,
`2014.
`
`On September 25, 2014, Oracle and Safra Catz removed the
`State Action to this Court (3:14-CV-1532-BR).
`In the Federal Action on October 2, 2014, the State filed a
`Motion to Dismiss; Cover Oregon filed a Motion to Dismiss; and
`the State and Cover Oregon filed a Joint Motion to Dismiss or, in
`
`3 On September 17, 2014, Oracle filed an Amended Corrected
`First Amended Complaint (#33) to correct the parties’ names.
`8 - OPINION AND ORDER
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`the Alternative, to Stay.
`On October 16, 2014, Plaintiffs filed a Motion to Remand the
`State Action.
`On November 21, 2014, the Court, among other things, heard
`oral argument on the Motion to Remand. At oral argument the
`Court granted the Motion to Remand. On November 25, 2014, the
`Court issued an Opinion and Order formally granting the Motion to
`Remand and remanding the State Action to Marion County Circuit
`Court.
`On December 2, 2014, Oracle once again removed the State
`Action to federal court (6:14-CV-1926-BR), and on December 8,
`2014, Oracle filed Motions to Consolidate in the State and
`Federal Actions.
`On December 10, 2014, the Court entered Orders in the State
`and Federal Actions in which it concluded it was premature for
`the Court to decide the Motions to Consolidate due to the various
`outstanding Motions to Dismiss pending in the Federal Action.
`On December 19, 2014, the Court heard oral argument in the
`Federal Action on the State’s Motion to Dismiss; the Joint Motion
`to Dismiss or, in the Alternative, to Stay of the State and Cover
`Oregon; and Cover Oregon's Motion to Dismiss. At oral argument
`the Court granted the State's Motion to Dismiss, denied Cover
`Oregon's Motion to Dismiss, and took the Joint Motion to Dismiss
`under advisement.
`
`9 - OPINION AND ORDER
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`STATE OF OREGON’S MOTION (#39) TO DISMISS
`As the Court noted at oral argument, the Court concludes at
`the time that Congress enacted the Copyright Remedy Clarification
`Act (CRCA), Pub.L. 101-553, 104 Stat. 2749 (1990), Congress did
`not have authority under Article I of the United States
`Constitution to abrogate the states’ sovereign immunity to
`copyright claims. See Seminole Tribe of Florida v. Florida, 517
`U.S. 44, 72 (1996)("The Eleventh Amendment restricts the judicial
`power under Article III, and Article I cannot be used to
`circumvent the constitutional limitations placed upon federal
`jurisdiction. Petitioner's suit against the State of Florida
`must be dismissed for a lack of jurisdiction.").
`In addition, as the Court also concluded at oral argument,
`when Congress enacted the CRCA, it did not validly abrogate the
`states’ sovereign immunity to copyright actions pursuant to
`Section 5 of the Fourteenth Amendment to the United States
`Constitution. See Chavez v. Arte Publico Press, 204 F.3d 601,
`604 (5th Cir. 2000). See also Issaenko v. Univ. of Minn.,
`No. 13–3605 (JRT/SER), 2014 WL 4954646, at *11 (D. Minn.
`Sept. 30, 2014), and the cases cited in Issaenko.
`Finally, as the Court concluded at oral argument, the State
`did not waive its sovereign immunity in the Federal Action when
`it brought the State Action in state court alleging state-law
`claims. The Court notes Oracle relies on Competitive
`
`10 - OPINION AND ORDER
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`Technologies v. Fujitsu Limited, 286 F. Supp. 2d 1118, 1129 (N.D.
`Cal. 2003), for the proposition that when "a state invokes the
`jurisdiction of the federal courts, it waives sovereign immunity
`not only as to the state's claims, but also as to counterclaims
`that arise out of the same transaction or occurrence, that is,
`compulsory counterclaims." Here, however, it was Oracle that
`filed this Federal Action, and the State did not invoke the
`jurisdiction of this Court in the Federal Action.
`Accordingly, the only other basis on which Oracle relies to
`urge the Court to find the State waived its sovereign immunity in
`this Federal Action is the venue provision found in the OHA OLSA.
`As the Court noted at oral argument, however, Oracle has not
`established on this record that its claim against the State for
`copyright infringement as alleged falls within the scope of the
`OHA OLSA contractual provision. In particular, the Court notes
`the sole reference to the OHA OLSA in Oracle’s Amended Corrected
`Complaint is a parenthetical in ¶ 31 regarding claims arising
`from the Cover Oregon OLSA, which states: "The same language
`appears in a November 30, 2011 OLSA that Oracle entered into with
`DHS and OHA before Cover Oregon took over responsibility for the
`HIX project, a contract that Oregon's Department of Justice also
`reviewed and approved." Moreover, all of the allegations in the
`copyright claim (¶¶ 44-49 of the Amended Corrected Complaint)
`refer to violations of the Cover Oregon OLSA and do not reference
`
`11 - OPINION AND ORDER
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`the OHA OLSA.
`The Court, therefore, concludes Oracle has not established
`the State waived sovereign immunity from the copyright claims in
`this action via the venue provision in the OHA OLSA.
`Accordingly, as stated on the record at the December 19, 2014,
`hearing, the Court grants the State’s Motion to Dismiss. The
`Court concludes, however, that the record does not necessarily
`establish Oracle would be unable to cure any such defect upon
`amendment. In the exercise of its discretion pursuant to Federal
`Rule of Civil Procedure 15, the Court grants Oracle leave to file
`a Second Amended Complaint to the extent that it can allege facts
`to establish that the State waived sovereign immunity for the
`copyright claim in this Federal Action pursuant to the venue
`clause in the OHA OLSA.
`
`COVER OREGON’S MOTION (#44) TO DISMISS
`Cover Oregon asserts in its Motion to Dismiss that if the
`Court dismisses the State from the Federal Action, the Court
`should also dismiss the Federal Action against Cover Oregon
`pursuant to Federal Rules of Civil Procedure 12(b)(7) and 19
`because the State is an indispensable party.
`As the Court noted at oral argument, however, the Court
`concludes it is premature at this early stage to find
`conclusively that there is not any way Cover Oregon could fairly
`
`12 - OPINION AND ORDER
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`litigate the issues in this matter in the event the Court
`ultimately dismisses the State from this litigation.
`Accordingly, the Court denies Cover Oregon’s Motion to Dismiss as
`premature with leave to renew at a later time on a fully-
`developed record that makes clear Cover Oregon cannot adequately
`litigate its own interests or represent the State's interests or
`that the State will be prejudiced by the Court's rulings in this
`matter.
`
`THE JOINT MOTION (#41) TO DISMISS
`OR, IN THE ALTERNATIVE, TO STAY OF
`THE STATE OF OREGON AND COVER OREGON
`The State and Cover Oregon assert in their Joint Motion that
`the Court should dismiss Oracle’s copyright claim because
`(1) Cover Oregon paid for the services it ordered, and,
`therefore, it has a license to use and to distribute the Cover
`Oregon OLSA copyright assets and/or (2) the copyright-
`infringement claim actually lies in contract rather than in
`copyright. The State and Cover Oregon also assert the Court
`should dismiss Oracle’s claims for quantum meruit because (1) a
`quasi-contract cannot be implied against Cover Oregon and/or
`(2) Oracle has not satisfied the federal pleading standards.
`
`I.
`
`Standards
`To survive a motion to dismiss, a complaint must
`contain sufficient factual matter, accepted as
`13 - OPINION AND ORDER
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`true, to “state a claim to relief that is
`plausible on its face.” [Bell Atlantic v.
`Twombly, 550 U.S. 554,] 570, 127 S. Ct. 1955. 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. at 556.
`. . . The plausibility standard is not akin to a
`“probability requirement,” but it asks for more
`than a sheer possibility that a defendant has
`acted unlawfully. Ibid. 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. at 557, 127 S. Ct.
`1955 (brackets omitted).
`Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). See also Bell
`Atlantic, 550 U.S. at 555-56. The court must accept as true the
`allegations in the complaint and construe them in favor of the
`plaintiff. Din v. Kerry, 718 F.3d 856, 859 (9th Cir. 2013).
`"In ruling on a 12(b)(6) motion, a court may generally
`consider only allegations contained in the pleadings, exhibits
`attached to the complaint, and matters properly subject to
`judicial notice." Akhtar v. Mesa, 698 F.3d 1202, 1212 (9th Cir.
`2012)(citation omitted). A court, however, "may consider a
`writing referenced in a complaint but not explicitly incorporated
`therein if the complaint relies on the document and its
`authenticity is unquestioned." Swartz v. KPMG LLP, 476 F.3d 756,
`763 (9th Cir. 2007)(citation omitted).
`II. Copyright Claim
`As noted, the State and Cover Oregon assert the Court should
`dismiss Oracle’s copyright claim because (1) Cover Oregon paid
`14 - OPINION AND ORDER
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`for the services it ordered, and, therefore, it has a license to
`use and to distribute the Cover Oregon OLSA copyright assets
`and/or (2) the copyright-infringement claim actually lies in
`contract rather than in copyright.
`A.
`Payment for Services
`In its claim for copyright infringement Oracle alleges
`in pertinent part:
`44. Oracle owns all right title and interest in
`the copyrights to the Cover Oregon OLSA Copyright
`Assets software code, as well as all claims for
`infringement thereof.
`45. An express condition precedent to any license
`to Cover Oregon was that it was required to pay
`for all services rendered under the OLSA. That
`express condition precedent has not been satisfied
`because Cover Oregon has not paid for all of the
`services rendered under the OLSA. Accordingly,
`Cover Oregon has no license at all for the Cover
`Oregon OLSA Copyright Assets code and is not
`authorized to reproduce, prepare derivative works
`of, distribute, or publicly display those works,
`or to authorize others to do so.
`46. By continuing to operate the Cover Oregon
`website, Cover Oregon is violating Oracle's
`exclusive rights to reproduce and publicly display
`the work.
`47. By transferring source code to the control of
`OHA and DHS for further development, Cover Oregon
`has unlawfully distributed the Cover Oregon OLSA
`Copyright Assets work, and has unlawfully
`authorized others to prepare derivative works
`based on the Cover Oregon OLSA Copyright Assets
`work.
`48. By accepting the transfer of source code from
`Cover Oregon and exercising dominion and control
`over a project to augment that code, OHA and DHS
`have violated Oracle's exclusive rights to
`15 - OPINION AND ORDER
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`reproduce and to prepare derivative works of Cover
`Oregon OLSA Copyright Assets.
`49. Oracle has been actually and irreparably
`harmed by the actions of Cover Oregon in using,
`reproducing, distributing and preparing derivative
`works of the code without authorization.
`Defendants have benefitted [sic] from code for
`which they have not paid.
`Am. Corrected Compl. at ¶¶ 44-49.
`Cover Oregon asserts Oracle’s claim for copyright
`infringement fails “because Cover Oregon has a license for the
`Cover Oregon OLSA Copyright Assets.” Specifically, Cover Oregon
`asserts courts have held “[generally, a ‘copyright owner who
`grants a nonexclusive license to use his copyrighted material
`waives his right to sue the licensee for copyright infringement’
`and can sue only for breach of contract.” Sun Microsystems, Inc.
`v. Microsoft Corp., 188 F.3d 1115, 1121 (9th Cir. 1999)(quoting
`Graham v. James, 144 F.3d 229, 236 (2d Cir. 1998)). See also
`John G. Dandelion, Inc. v. Winchester-Conant Prop., Inc., 322
`F.3d 26, 40 (1st Cir. 2003)(“Uses of the copyrighted work that
`stay within the scope of a nonexclusive license are immunized
`from infringement suits.”). Cover Oregon notes Oracle alleges in
`its Amended Corrected Complaint that an “express condition
`precedent to any license to Cover Oregon was that it was required
`to pay for all services rendered under the OLSA.” Am. Corrected
`Compl. ¶ 45. The condition precedent that Oracle relies on
`appears in the Cover Oregon OLSA and provides:
`
`16 - OPINION AND ORDER
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`Upon payment for services, you have the
`non-exclusive, nonassignable, royalty free,
`perpetual, limited right to use for your internal
`business operations anything developed by Oracle
`and delivered to you under this agreement;
`however, certain deliverables may be subject to
`additional license terms provided in the ordering
`document.
`Am. Corrected Compl., Ex. A § C. Oracle also alleges in its
`Amended Corrected Complaint that Cover Oregon did not meet the
`alleged condition precedent because Cover Oregon has not paid for
`all of the services rendered under the OLSA. Cover Oregon, in
`turn, asserts Oracle’s claim for copyright infringement fails
`because Cover Oregon paid for the services it ordered, and,
`therefore, it had a license to use and to distribute the Cover
`Oregon OLSA copyrighted assets.
`Although both Cover Oregon and Oracle go to
`considerable lengths to argue and then to rebut the assertion of
`payment for services and an existing license, that is not a
`proper analysis on a motion to dismiss. As noted, the Supreme
`Court and the Ninth Circuit have made clear that to survive a
`motion to dismiss, a complaint need only contain “factual content
`that allows the court to draw the reasonable inference that the
`defendant is liable for the misconduct alleged.” Ashcroft v.
`Iqbal, 556 U.S. at 679. For purposes of this Motion, the Court
`must accept as true the allegations in the Amended Corrected
`Complaint and construe them in favor of Oracle. See Din, 718
`F.3d at 859. The Supreme Court and Ninth Circuit have held
`17 - OPINION AND ORDER
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`"[c]opyright infringement claims have two basic elements:
`‘(1) ownership of a valid copyright, and (2) copying of
`constituent elements of the work that are original.'" Seven Arts
`Filmed Entm’t Ltd. v. Content Media Corp. PLC, 733 F.3d 1251,
`1254 (9th Cir. 2013)(quoting Feist Publ'ns, Inc. v. Rural Tel.
`Serv. Co., 499 U.S. 340, 361 (1991)). Oracle alleges in its
`Amended Corrected Complaint that it owns the copyrights at issue;
`that Cover Oregon has unlawfully used Oracle’s copyrighted
`materials; and that “Cover Oregon has not paid for all of the
`services rendered under the OLSA[, and, therefore], Cover Oregon
`has no license . . . for the Cover Oregon OLSA Copyright Assets
`code.”
`
`On this record, therefore, the Court concludes Oracle
`has sufficiently alleged a claim for copyright infringement.
`Accordingly, the Court declines to dismiss Oracle’s copyright
`claims on the basis of failure to state a claim.
`B.
`Nature of the Copyright Claims
`The State and Cover Oregon also assert the Court should
`dismiss Oracle’s copyright-infringement claim because that claim
`lies in contract rather than in copyright. Specifically, the
`State and Cover Oregon note a copyright owner generally waives
`its right to sue the licensee for copyright infringement when the
`copyright owner has granted the licensee a nonexclusive license
`to use copyrighted work. The State and Cover Oregon concede
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`18 - OPINION AND ORDER
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`“[i]f . . . a license is limited in scope and the licensee acts
`outside the scope, the licensor can bring an action for copyright
`infringement.” Sun Microsystems, 188 F.3d at 1121.
`Nevertheless, the State and Cover Oregon assert they did not act
`outside of the nonexclusive license granted to them by Oracle,
`and, therefore, Oracle may not bring a claim for copyright
`infringement. The State and Cover Oregon rely on MDY Industries,
`LLC v. Blizzard Entertainment, Inc., 629 F.3d 928 (9th Cir.
`2010), to support their assertion.
`In MDY Industries the Ninth Circuit held the “potential
`for [copyright] infringement exists only [when] the licensee’s
`action (1) exceeds the license’s scope (2) in a manner that
`implicates one of the licensor’s exclusive statutory rights.”
`Id. at 940. In MDY Industries the Ninth Circuit reviewed the
`district court’s decision at summary judgment, including an
`analysis of the scope of the license at issue and the licensor’s
`statutory rights as developed by evidence in the record. Here,
`however, a motion to dismiss is before the Court. As noted,
`therefore, Oracle must only plead factual content that allows the
`Court to draw a reasonable inference that the State and Cover
`Oregon are liable for the misconduct alleged, and the Court must
`take the allegations of the Amended Corrected Complaint as true.
`Oracle has alleged Cover Oregon and the State exceeded the scope
`of the license. Specifically, Oracle points out that the terms
`
`19 - OPINION AND ORDER
`
`
`
`Case 3:14-cv-01279-BR Document 75 Filed 01/13/15 Page 20 of 29
`
`of the license limited Cover Oregon to “using” the copyright
`assets. Oracle also alleges Cover Oregon distributed, copied,
`and authorized preparation of derivative works. The Court,
`therefore, concludes Oracle has stated a claim for copyright
`infringement that does not, as alleged, lie solely in contract.
`Accordingly, on this record the Court denies the Joint
`Motion of the State and Cover Oregon to dismiss Oracle’s
`copyright-infringement claim on the ground of failure to state a
`claim.
`III. Quantum Meruit
`The State and Cover Oregon assert the Court should dismiss
`Oracle’s claim for quantum meruit because (1) a quasi-contract
`cannot be implied against the State or Cover Oregon and/or
`(2) Oracle’s quantum meruit claim does not satisfy federal
`pleading standards. Because the Court agrees a quasi-contract
`cannot be implied against the State or Cover Oregon in this
`matter, the Court declines to address the second basis on which
`the State and Cover Oregon seek dismissal of the quantum meruit
`claim.
`
`A claim for quantum meruit is a quasi-contractual
`claim. Robinowitz v. Pozzi, 127 Or. App. 464, 467
`(1994). The elements of the claim are a benefit
`conferred, awareness by the recipient that a
`benefit has been received, and judicial
`recognition that, under the circumstances, it
`would be unjust to allow retention of the benefit
`without requiring the recipient to pay for it.
`Verizon Nw., Inc. v. Main St. Dev., Inc., 693 F. Supp. 2d 1265,
`20 - OPINION AND ORDER
`
`
`
`Case 3:14-cv-01279-BR Document 75 Filed 01/13/15 Page 21 of 29
`
`1275 (D. Or. 2010)(quotations and citations omitted).
`The State and Cover Oregon point out that DHS/OHS as state
`agencies and Cover Oregon as a public corporation can only act
`pursuant to statutory authority. See Ochoco Constr., Inc. v.
`Dep’t of Land Conservation & Dev., 295 Or. 422, 426 (1983). See
`also Davis v. Nye Ditch Users Imp. Dist., 247 Or. App. 266, 272
`(2011)(Improvement districts organized as public corporations are
`creatures of statute and have "only the powers conferred by the
`legislature."). The statute creating and authorizing Cover
`Oregon, however, only permits Cover Oregon to form or to enter
`into contracts in a particular manner. Specifically, Oregon
`Revised Statute § 741.250(2) provides Cover Oregon’s “board of
`directors or the executive director of the corporation may
`contract with any state agency or other qualified person or
`entity for the performance of such duties, functions and powers
`as the board or executive director considers appropriate.”
`Oregon statutes do not give Cover Oregon the authority to enter
`into contracts in an manner other than that noted in
`§ 741.250(2). Similarly, DHS and OHA are subject to statutes and
`rules governing their contracting authority. Neither agency is
`permitted to "approve a contract before the contract has been
`reviewed for legal sufficiency and approved by the Attorney
`General." Or. Rev. Stat. § 279A.140(2)(b). Section 291.047(1)
`provides information technology contracts are not binding on DHS
`
`21 - OPINION AND ORDER
`
`
`
`Case 3:14-cv-01279-BR Document 75 Filed 01/13/15 Page 22 of 29
`
`and OHA until the Attorney General has approved the contracts for
`legal sufficiency. To obtain Attorney General approval, the
`contract must be "reduced to written form" and contain on its
`face "all the essential elements of a legally binding contract."
`Or. Admin. R. § 137-045-0015(4)(a), (c).
`Cover Oregon also notes because it received a “substantial
`federal grant” and was using funds “supplied entirely from the
`federal government” to develop the HIX, Cover Oregon was subject
`to federal rules governing its ability to contract with vendors,
`including the requirement “that every purchase order or other
`contract includes any clauses required by Federal statutes and
`executive orders and their implementing regulations.” 45 C.F.R.
`§ 92.36(a).
`Thus, according to the State and Cover Oregon, because
`DHS/OHS and Cover Oregon lacked the statutory authority to enter
`into contracts in any manner other than those specified under
`Oregon statute and in various federal regulations, they cannot be
`held liable in quasi-contract for agreements that allegedly arose
`without complying with the procedures required in DHS/OHS and
`Cover Oregon’s authorizing statutes and the federal regulations
`governing federal grantees. The State and Cover Oregon rely on
`Wegroup PC /Architects & Planners v. State, 131 Or. App. 346
`(1994), to support their assertion that they may not be bound by
`such quasi-contracts. In Wegroup the plaintiff alleged
`
`22 - OPINION AND ORDER
`
`
`
`Case 3:14-cv-01279-BR Document 75 Filed 01/13/15 Page 23 of 29
`
`the State frustrated the negotiation term of the
`contract, which required the State to bargain and
`formalize its request for added work. Because
`[plaintiff] had contracted to do all the design
`from the beginning to the end, the architects
`could not blithely refuse the State's directions.
`Therefore, an implied-in-fact promise arose in the
`existing contract to pay the reasonable value of
`the services requested and rendered.
`Id. at 354. The Oregon Court of Appeals rejected the plaintiff's
`argument as follows:
`The general doctrine unquestionably is that when
`one receives the benefit of another's work
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