Case 3:19-cv-01637-CCC Document 42 Filed 09/25/19 Page 1 of 14
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF PUERTO RICO
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`CIVIL 19-1637CCC
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`E-STEPS, LLC
`Plaintiff
`vs
`AMERICAS LEADING FINANCE,
`LLC; TRAKSECURE CORP.;
`NICOLAS KOGAN, JANE DOE and
`their conjugal partnership; CAROLA
`ACUM, JOHN DOE and their
`conjugal partnership; VICTOR
`GARCIA PORRATA, SUSAN ROE
`and their conjugal partnership; LUIS
`O’FARRIL, JANE ROE and their
`conjugal partnership;
`CORPORATION ABC;
`PARTNERSHIP DEF; LIMITED
`LIABILITY COMPANY GHI
`Defendants
`
`OPINION AND ORDER
`
`On July 2, 2019, plaintiff e-Steps, LLC filed a Complaint (d.e. 1) against
`America’s Leading Finance, LLC (“ALF”), Traksecure, Corp. (“Traksecure”),
`and employees and executives of each company for copyright infringement,
`violations of the Defense Trade Secrets Act (“DTSA”), and claims under Puerto
`Rican law. The claims relate to “Total Control GPS,” a vehicle tracking
`software program that plaintiff developed and that was allegedly copied by
`defendants. Before the Court are ALF’s Motion to Dismiss (d.e. 18) filed
`July 19, 2019 and co-defendants Traksecure, Víctor García Porrata, Luis
`O’Farril, Conjugal Partnership García Roe, and Conjugal Partnership
`O’Farril Roe’s Motion to Dismiss (d.e. 34) filed August 16, 2019. Both Motions
`to Dismiss make essentially the same arguments: that plaintiff failed to state
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`a valid claim for copyright infringement under FRCP 12(b)(6), and that the
`Court lacks subject matter
`jurisdiction over
`the DTSA claim under
`FRCP 12(b)(1).
`
`I.
`
`STANDARD OF REVIEW
`FRCP 12(b)(1) “provides the vehicle by which a party may challenge the
`court's subject matter jurisdiction.” UBS Financial Services Inc. v. Asociacion
`de Empleados del Estado Libre Asociado de Puerto Rico, 223 F.Supp. 3d 134,
`136-37 (D.P.R. 2016).
` When reviewing motions
`to dismiss under
`Rule 12(b)(1), courts follow a similar standard to other motions under
`Rule 12(b) and "credit the non-movant's well-pled factual allegations and draw
`all reasonable inferences in the non-movant's favor.” Id. “If it appears at any
`time that the Court lacks the statutory or constitutional power to adjudicate the
`case, the suit must be dismissed.” Id.; Arbaugh v. Y&H Corp., 546 U.S. 500,
`514 (2006).
`“To survive a motion to dismiss [under Rule 12(b)(6)], a complaint must
`contain sufficient factual matter, accepted as true, to 'state a claim to relief that
`is plausible on its face.' 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. 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.” Ashcroft v. Iqbal, 556 U.S. 662,
`678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The
`Court must accept all non-conclusory factual allegations in the Complaint as
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`true, and draw any reasonable inferences in favor of the plaintiff.
`Ocasio-Hernandez v. Fortuno-Burset, 640 F.3d 1, 12 (1st Cir. 2011).
`
`II.
`
`APPLICABLE LAW
`A.
`Copyright
`In order to establish a claim for copyright infringement, the plaintiff bears
`the burden of showing “‘(1) ownership of a valid copyright, and (2)
`[unauthorized] copying of constituent elements of the work that are original.’”
`Lotus Dev. Corp. v. Borland Int'l, Inc., 49 F.3d 807, 813 (1st Cir.1995), aff'd by
`an equally divided court, 516 U.S. 233 (1996) (quoting Feist Public'ns, Inc. v.
`Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991)).
`“To show ownership of a valid copyright, a plaintiff bears the burden of
`proving that the work, when viewed as a whole, is original and that he has
`complied with the requisite statutory formalities.” Saenger Org., Inc. v.
`Nationwide Ins. Licensing Assocs., Inc., 119 F.3d 55, 59 (1st Cir. 1997). A
`certificate of copyright registration is prima facie evidence that the registered
`material is copyrightable, and shifts the burden to the defendant to
`demonstrate why the copyright is not valid. Id.; 17 U.S.C. § 410(c). The types
`of works subject to copyright protection are limited by 17 U.S.C. § 102(b):
`(b)
`In no case does copyright protection for an original work of
`authorship extend to any idea, procedure, process, system,
`method of operation, concept, principle, or discovery,
`regardless of the form in which it is described, explained,
`illustrated, or embodied in such work.
`The seminal case is Baker v. Selden, 101 U.S. 99 (1879), which concerned
`copyright protection for an accounting system described in the plaintiff’s book.
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`The Court found that while the specific words the author used to describe the
`accounting system were copyrighted, the system itself could not be
`copyrighted; this type of work “can only be secured, if it can be secured at all,
`by letters-patent.” Id. at 104.
`In addition, “[t]he doctrine of scènes à faire denies copyright protection
`to elements of a work that are for all practical purposes indispensable, or at
`least customary, in the treatment of a given subject matter.” Coquico, Inc. v.
`Rodriguez-Miranda, 562 F.3d 62, 68 (1st Cir. 2009).
`Once ownership of a valid copyright has been established, the plaintiff
`must establish copying. “[T]he plaintiff must show that his work was ‘actually
`copied,' either by ‘direct evidence of copying or by indirect evidence, including
`access to the copyrighted work, similarities that are probative of copying
`between the works, and expert testimony.’” Laureyssens v. Idea Grp., Inc.,
`964 F.2d 131, 140 (2d Cir. 1992).” After establishing actual copying, the
`plaintiff must also show that the allegedly infringing work bears “substantial
`similarity” to the copyrighted work. Id.
`“It is well settled by now that computer programs are afforded copyright
`protection as literary works.” Lotus, 49 F.3d at 813. “Literal” copying cases,
`where the source code or object code of a program is copied word for word,
`are relatively straightforward. However, courts have struggled to apply
`copyright protections to the “nonliteral” or non-written aspects of computer
`programs. The difficulty lies in distinguishing between the expressive aspects
`of computer programs, which can be protected, and functional aspects, which
`cannot.
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`The controlling case in the First Circuit is Lotus, 49 F.3d. In Lotus, the
`defendant admitted that it had directly copied a menu command hierarchy from
`the plaintiff’s software. Defendant had therefore not independently developed
`the menu command hierarchy, and the two hierarchies were more than merely
`substantially similar -- they were identical. Despite the uncontested evidence
`of copying, the Court held that a menu command hierarchy is not copyrightable
`because it is a “method of operation” under 17 U.S.C. § 102(b). The Court
`stated that while the menu command hierarchy might contain some expressive
`aspects, such as the names assigned to different commands, the fact that it
`was a method of operation rendered its expressive aspects uncopyrightable.
`While other circuits have declined to follow Lotus’ holding that “anything that
`performs a function is necessarily uncopyrightable,” Oracle Am., Inc. v. Google
`Inc., 750 F.3d 1339, 1357 (Fed. Cir. 2014), this interpretation of copyright law
`controls in the First Circuit.
`A party who does not personally violate a copyright may be liable for acts
`of infringement by third parties when it “infringes contributorily by intentionally
`inducing or encouraging direct infringement” or “infringes vicariously by
`profiting from direct infringement while declining to exercise a right to stop or
`limit it.” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913,
`930 (2005).
`
`Defense Trade Secrets Act
`B.
`The Defense Trade Secrets Act (“DTSA”) provides that “[a]n owner of a
`trade secret that is misappropriated may bring a civil action under this
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`subsection if the trade secret is related to a product or service used in, or
`intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836(b)(1).
`The interstate commerce requirement is jurisdictional. See Gov't Employees
`Ins. Co. v. Nealey, 262 F. Supp. 3d 153, 172 (E.D. Pa. 2017) (citing H.R. Rep.
`NO. 114–529, at 9). To plead a cause of action under the DTSA, the plaintiff
`must allege that a trade secret was misappropriated; that he took reasonable
`measures to keep the information secret; and that the information has
`independent economic value. See 18 U.S.C. §§ 1836(b)(1), 1839(3); Allscripts
`Healthcare, LLC v. DR/Decision Res., LLC, 386 F. Supp. 3d 89,
`94 (D. Mass. 2019).
`
`III.
`
`ANALYSIS
`A.
`Copyright
`Defendants seek to dismiss the copyright claims under FRCP 12(b)(6)
`for failure to state a claim. E-Steps filed and obtained three copyright
`registrations: a registration effective on February 21, 2019 for “Total Control
`GPS” (d.e. 1-2); a registration effective on April 17, 2019 for “Total Control
`GPS Installer Certificate” (d.e. 1-3), and a registration effective on May 16,
`2019 for “Total Control GPS - Functional Specifications” (d.e. 1-4). Each of
`these registrations purports to protect different elements of e-Steps' creation.
`As plaintiff has submitted registrations of copyright, the burden to disprove the
`validity of the copyright shifts to the defendants, who argue that the allegedly
`infringed materials are not copyrightable under 18 U.S.C. § 1836 102(b).
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`If the material is not protected, then the copyright is invalid, and the
`Court’s inquiry must end. If the copyright is valid, the Court must move to the
`second step and determine whether plaintiff has sufficiently plead that the
`material has been copied by defendants.
`
`“Total Control GPS”
`1.
`As a preliminary matter, e-Steps’ Complaint suffers from a lack of
`specificity about what is covered by the “Total Control GPS” copyright. E-Steps
`references several different programs, and it is unclear how they all fit together:
`“Business Process Procedure” (d.e. 1, para. 30); “Total Control Fleet
`Management Cloud Service” (para. 32); and “Total Control GPS- Web Portal”
`(para. 46). The Complaint alleges that “e-Steps’ copyrighted material are
`components of the ‘Total Control Fleet Management Cloud Service’” (para. 33),
`without specifying exactly which components are copyrighted. In making all
`reasonable inferences in favor of the plaintiff, the Court shall assume that all
`of the above programs, including both functional and expressive aspects, are
`included under the “Total Control GPS” copyright.
`Defendants move to dismiss plaintiff's copyright claim because a
`“procedure, process, system, [or] method of operation” may not be copyrighted
`under 18 U.S.C. § 102(b); see also Lotus, 49 F.3d (a process or system may
`not be copyrighted, even if it includes expressive elements). Though the “Total
`Control GPS” program may contain expressive elements, the Complaint
`alleges only that its functions were replicated by the defendants. For
`instance:
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`69.
`
`91.
`
`46. The protected assets include the copyrighted functional
`specifications the copyrighted software known as Total
`Control GPS – Web Portal which provides the following
`functionality ... [lists functions]
`. . .ALF . . . stated that the tracking services provided by
`TRAKSECURE had to be the same as those provided by
`e-STEPS with the same platform functionality, following the
`same procedures that e-STEPS had designed as part of the
`technologies offered under its contract.
`90. ALF dismantled not only the Total Control platform, its
`functionality and its processes, but the very nature of
`e-STEPS business and services . . .
`. . .TRAKSECURE added other modules to its base tracking
`program, copied e-STEPS' solutions,
`functional
`specifications, know-how and structure.
`104. ALF also misappropriated the copyrighted technologies, the
`confidential information gathered from e-STEPS and its trade
`secrets, all of which were protected under the contract, and
`used them to develop, in-house, tracking and/or debt
`collection applications, which it could not have done without
`violating the clause that restrained ALF from copying the
`technologies consisting of trade secrets offered by e-STEPS
`as part of the contracted location service.
`115. The instructions that Robles was giving TRAKSECURE at
`defendants' behest were intended to cause TRAKSECURE's
`system to behave in the same way that e-STEPS did.
`functional
`In
`this way, TRAKSECURE used
`the
`specifications used for the e-STEP copyright and infringed
`that copyright and misappropriated e-STEPS’ trade secrets.
`128. As stated generally above, while TRAKSECURE was
`infringing e-STEPS rights, ALF was doing its own share
`when it started developing, in-house, other platforms in its
`collections department that would feed from the tracking
`service provided by e-STEPS as a contracted service and
`protected from replication.
`139. On information and belief, currently, ALF and TRAKSECURE
`use, operate and commercially exploit for their economic
`benefit platforms, applications, software, mobile apps, which
`functional
`are based on e-STEPS’ copyrighted
`
`127.
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`specifications and/or are and/or behave substantially
`similar to e-STEPS’ Copyrighted Work.
`(d.e. 1) (emphasis added).
`E-Steps does not allege that defendants engaged in literal copying by
`copying object code or source code. Rather, e-Steps alleges a nonliteral
`violation by which defendants ALF and Traksecure copied aspects of “Total
`Control GPS” to create a substantially similar competing software. In other
`words, plaintiff claims only that defendants’ program shares the same functions
`or behaviors as “Total Control GPS.” Therefore, plaintiff’s allegation that
`defendants had access to and modeled their new software after “Total Control
`GPS” is inapposite, as the functions, processes, and systems purportedly
`copied are not protected by copyright law. Defendants have met their burden
`of demonstrating that “Total Control GPS” is not a valid copyright because the
`material is not copyrightable.
`Even if the Court assumes, arguendo, that the functional aspects of
`“Total Control GPS” are protected under copyright law, plaintiff’s claim would
`still fail at the second step because the Complaint fails to state how “Total
`Control GPS” and the allegedly infringing softwares are substantially similar.
`Plaintiff generally alleges that the infringing software programs perform tracking
`and debt collection functions. However, the fact that the programs perform
`similar functions is not sufficient evidence of substantial similarity to survive a
`motion to dismiss. The few specific similarities pointed to - such as the fact
`that both GPS tracking programs provide digital receipts (d.e. 1, para. 116) and
`include photos of cars (para. 124) - are elements “that are for all practical
`purposes indispensable, or at least customary, in the treatment of” vehicle
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`tracking, and are therefore unprotected due to the doctrine of scènes à faire.
`Coquico, Inc. v. Rodríguez-Miranda, 562 F.3d 62, 68 (1st Cir. 2009).
`Accordingly, plaintiff’s Complaint does not meet the minimum pleading
`standards required to survive a motion to dismiss pursuant to FRCP 12(b)(6).
`Because the plaintiff alleges copying of functional aspects of software
`that are not protected by copyright law, plaintiff’s copyright claim as to “Total
`Control GPS” must be dismissed.
`
`“Total Control GPS - Functional Specifications”
`2.
`“Total Control GPS - Functional Specifications” sets forth how the “Total
`Control GPS” program should behave, and is registered under a separate
`copyright. Plaintiff alleges that defendants have used these functional
`specifications to create their own software, which behaves similarly to “Total
`Control GPS.” While the literal words of a functional specification may be
`copyrighted, the system it describes cannot be; as discussed infra, the system
`itself falls under the exclusion of 18 U.S.C. § 102(b). Accordingly, for the same
`reasons that apply to the “Total Control GPS” claim, plaintiff’s copyright
`infringement claim as to “Total Control GPS - Functional Specifications” must
`be dismissed.
`
`“Total Control GPS Installer Certificate”
`3.
`“Total Control GPS Installer Certificate” (“Certificate”) is a document
`produced by the “Total Control GPS” system to verify that GPS tracking has
`been installed on a specified vehicle:
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`57. One of the essential outputs produced by e-STEPS’ platform
`was a certification of installation [“The certificate”] of the GPS
`without which the loan money could not be disbursed. This
`certificate was wholly and originally designed by e-STEPS,
`but most important, all its information fields are gathered
`from the complex database structure within the platform and
`are the result of the functional specifications, workflow and
`underlying structure designed originally by e-STEPS,
`copyrighted and protected.
`
`(d.e. 1).
`The only characteristics of the Certificate described in the Complaint are
`the above-mentioned “information fields.” Plaintiff provides no description of
`other, more expressive elements of the Certificate, such as format, text, or
`graphics. Because defendant alleges copying only as to the functional
`elements of the document, the Court finds that it is uncopyrightable under
`18 U.S.C. § 102(b).
`Even assuming, arguendo, that plaintiff holds a valid copyright as to the
`Certificate, its claim would still fail at the second prong, where plaintiff must
`allege copying. Plaintiff alleges Traksecure programmers were shown the
`Certificate and took a picture of it (d.e. 1, paras. 117-119), and that
`Traksecure's system subsequently began to produce a substantially similar
`document (para. 121). However, beyond bare legal conclusions, plaintiff fails
`to identify any specific similarities between the two documents. Due to the
`failure to allege any facts in support of substantial similarity, plaintiff’s claim as
`to the Certificate fails to meet the plausibility standard as to copying by
`defendants and must be dismissed.
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`Secondary Copyright Infringement
`4.
`As the plaintiffs have failed to plead sufficient facts to support a cause of
`action for primary copyright infringement, the claim that ALF engaged in
`secondary copyright infringement by providing Traksecure access to
`copyrighted materials must also fail.
`As plaintiffs have failed to meet the pleading standard required to survive
`a motion to dismiss under FRCP 12(b)(6), defendant ALF’s Motion to Dismiss
`is GRANTED (d.e. 18) as to plaintiff’s First Claim for Relief.
`
`Defense Trade Secrets Act
`B.
`Defendants move for dismissal under FRCP 12(b)(1), lack of subject
`matter jurisdiction, on the basis that plaintiff’s Complaint does not meet the
`jurisdictional requirements of the DTSA. Specifically, defendants argue that
`plaintiff’s Complaint must fail because it does not allege that “the trade secret
`is related to a product or service used in, or intended for use in, interstate or
`foreign commerce.” 18 U.S.C. § 1836.
`Defendants are correct that e-Steps does not make any allegations as
`to interstate commerce in the Complaint. E-Steps first addresses the issue of
`interstate commerce in its Oppositions to Motion to Dismiss (d.e. 33; d.e. 41),
`where it responds that the interstate commerce requirement has been met
`because the GPS software requires the use of the internet and satellites to
`function. E-Steps cites to United States v. Lewis, 554 F.3d 208, 215
`(1st Cir. 2009) where the Court of Appeals held that “the government may
`satisfy the interstate commerce element by proving that child pornography
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`images were transmitted over the Internet.” The statute at issue in
`Lewis,18 U.S.C. § 2252(a)(2), requires that images be “shipped or transported
`via interstate commerce.” The Court found that downloading an image from
`the internet meets this standard, even if the image originated in the same state
`where it was later downloaded. However, 18 U.S.C. § 1836 has a different
`jurisdictional element: the product related to a trade secret must be “used or
`intended to be used in interstate commerce,” not merely “shipped or
`transported.” Plaintiff offers no case law in support of importing a standard
`developed in a criminal child pornography case into a civil trade secret action.
`Further, doing so would expand the jurisdiction of the DTSA to any product
`which requires an internet connection to function, which Court declines to do.
`The Complaint itself states that both plaintiff and defendant ALF are LLCs
`registered to do business in Puerto Rico, and that the purpose of the GPS
`software designed by e-Steps was to assist ALF in tracking the cars that it
`financed. The plaintiff does not allege that the GPS software is used or
`intended to be used in any other state or country, or that the cars tracked by
`GPS ever leave Puerto Rico. “Total Control GPS” was explicitly created for
`use in Puerto Rico, an island, and in the absence of any facts in support, the
`Court cannot infer that the software is used or intended to be used anywhere
`else.
`
`The Court finds that even considering its Oppositions, plaintiff has failed
`to sufficiently plead the interstate commerce prong of the DTSA. Accordingly,
`defendant ALF’s Motion to Dismiss is GRANTED (d.e. 18) as to plaintiff’‘s
`Second Claim for Relief, alleging DTSA violations.
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`Claims Under Puerto Rican Law
`C.
`As the Court has dismissed all federal causes of action, it declines to
`exercise jurisdiction over the remaining causes of action under the laws of
`Puerto Rico. Accordingly, defendant ALF’s Motion to Dismiss is GRANTED
`(d.e. 18) as to the causes of action stated at the Third and Fourth Claims for
`Relief, without prejudice.
`
`IV. CONCLUSION
`Defendant ALF’s Motion to Dismiss (d.e. 18) is GRANTED. Defendants
`Traksecure, Víctor García Porrata, Luis O'Farril, Conjugal Partnership
`García Roe, and Conjugal Partnership O'Farril Roe's Motion to Dismiss
`(d.e. 34) is MOOT. Judgment shall be entered by separate order.
`SO ORDERED.
`At San Juan, Puerto Rico, on September 25, 2019.
`
`S/CARMEN CONSUELO CEREZO
`United States District Judge
`
`