UNITED STATES DISTRICT COURT
`MIDDLE DISTRICT OF TENNESSEE
`NASHVILLE DIVISION
`
`KRISHNA PATEL, VIJAY PATEL, and )
`ACTAX SOLUTIONS, INC.,
`
`No. 3:13-0701
`Judge Sharp
`
`)
`)
`)
`)
`
`))
`
`)
`
`))
`
`))
`
`Plaintiffs,
`
`v.
`
`TERRELL D. HUGHES, JR., and TRX
`SOFTWARE
`DEVELOPMENT, INC. ,
`
`Defendants.
`
`MEMORANDUM
`
`Pending before the Court in this copyright infringement action is the fully briefed Motion
`
`to Dismiss filed by Defendants Terrell D. Hughes, Jr., and TRX Software Development, Inc.
`
`(Docket No. 15). After setting forth the applicable standard of review, the Court will consider the
`
`parties’ arguments in the order presented by Defendants.
`
`I. STANDARD OF REVIEW
`
`“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted
`
`as true, to ‘state a claim to relief that is plausible on its face.’”Ashcroft v. Iqbal, 556 U.S. 662, 678
`
`(2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). As further explained
`
`in Twombly,
`
`Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement
`of the claim showing that the pleader is entitled to relief,” in order to “give the
`defendant fair notice of what the ... claim is and the grounds upon which it rests,”
`Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 2 L. Ed.2d 80 (1957). While a
`complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed
`factual allegations, ibid.; Sanjuan v. American Bd. of Psychiatry and Neurology,
`
`1
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 1 of 14 PageID #: 417
`
`

`
`Inc., 40 F.3d 247, 251 (7th Cir. 1994), a plaintiff's obligation to provide the
`“grounds” of his “entitle[ment] to relief” requires more than labels and conclusions,
`and a formulaic recitation of the elements of a cause of action will not do, see
`Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932, 92 L. Ed.2d 209 (1986) (on
`a motion to dismiss, courts “are not bound to accept as true a legal conclusion
`couched as a factual allegation”). Factual allegations must be enough to raise a right
`to relief above the speculative level . . .
`
`550 U.S. at 555. “The pleading standard Rule 8 announces does not require ‘detailed factual
`
`allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me
`
`accusation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555).
`
`II. CLAIMS AGAINST MR. HUGHES
`
`Defendants argue that the complaint as to Mr. Hughes should be dismissed in its entirety
`
`because none of the claims assert that he committed any wrongdoing and, even if they did, there is
`
`no allegation that Mr. Hughes is the alter ego of Defendant TRX. In response, Plaintiffs argue that
`
`“[t]he complaint sets forth myriad fact alleging that Doug Hughes participated in the tortious acts
`
`against Plaintiffs,” and “pleading a cause of action to pierce the corporate veil is unnecessary at this
`
`stage in the litigation[.]” (Docket No. 19 at 3).
`
`Defendants are correct that Mr. Hughes is not specifically named in any of the seven counts
`
`of the Complaint. In fact, all of the counts reference only TRX – they do not even reference
`
`Defendants in the plural.
`
`However, the Complaint does allege that Mr. Hughes “is the founder, owner, chief executive
`
`officer, president, and registered agent for TRX,” and that he and TRX also operate or control
`
`various other entities. (Complaint, Docket No. 1 ¶¶ 5 & 6). The Complaint also contains a host of
`
`allegations against Mr. Hughes, including, but not limited to, that he:
`
`(1) met with Plaintiff Vijay Patel “and discussed using Mr. Hughes’s company to
`market and sell or license copies of SalestaxExact, AccountExact, and TaxExact in
`
`2
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 2 of 14 PageID #: 418
`
`

`
`the United States on behalf of AcTax Solutions”;
`
`(2) “signed a ‘Product Distribution Agreement’ to sell private label versions of
`AccountExact and ClientExact under the TRX name”;
`
`(3) negotiated with others “for the sale of various software products including
`TaxExact to TRX”;
`
`(4) sent a Letter of Intent “to AcTax Solutions on behalf of TRX regarding the sale
`of TaxExact to TRX”;
`
`(5) signed a Software Maintenance Agreement for Tax Exact that “specified payment
`of $20,000 per month to AcTax Solutions for updating TaxExact for new software
`versions and tax code changes” and demanded that Mr. Patel sign it the day it was
`presented;
`
`(6) was required “to pay $30,000 per month for eight years to purchase TaxExact in
`conjunction with the Software Maintenance Agreement” and “understood that
`signing both the Software Maintenance Agreement and the Asset Purchase
`Agreement was needed in order to complete the transaction so that AcTax Solutions
`could draw on the full payment of $50,000 per month to get the software updated”;
`
`(7) sent a “binding ‘Letter of Intent’ to AcTax Solutions reaffirming his desire to buy
`TaxExact on behalf of TRX”;
`
`(8) explained to AcTax Solutions “that he could not pay the $30,000 per month
`according to the proposed terms Asset Purchase Agreement,” and claimed “the
`Software Maintenance Agreement was unenforceable without the accompanying
`Asset Purchase Agreement”;
`
`(9) “announced that he was changing the payment plan” and “instead of paying
`$30,000 per month to AcTax Solutions for the next eight years, he would pay $3,500
`minimum per month for the next eight years, with the difference to be paid each year
`on June 15”;
`
`
`
`(10) “demanded that I-Link transfer control of the domains taxexact.com and
`taxexactpro.com TRX and announced that he would no longer pay any money to
`Vijay Patel”; and
`
`(11) “sent AcTax Solutions a proposed second draft of the Asset Purchase
`Agreement” that “reflected the terms previously declared by Doug Hughes,
`unilaterally reducing the monthly payment from $30,000 per month to $3,500 per
`month.”
`
`3
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 3 of 14 PageID #: 419
`
`

`
`(Id. ¶¶ 23-25, 29-31, 33-36, 38 & 40).
`
`Presumably, the acts attributed to Mr. Hughes were done on behalf of TRX and “[it] follows
`
`that a corporate director, officer or employee, if acting within the scope of their authority for the
`
`interests of the corporation should not be held liable because their action is treated as that of the
`
`corporation.” Rennell v. Through the Green, 2008 WL 695874, at * 8 (Tenn. Ct. App. Mar. 14,
`
`2008) (citing Cambio Health Solutions, LLC v. Reardon, 213 S.W.3d 785, 789 (Tenn. 2006)).
`
`However, a “corporation’s separate identity may be disregarded or ‘pierced’ . . . upon a showing that
`
`it is a sham or a dummy or where necessary to accomplish justice.” Oceanics Sch., Inc. v. Barbpour,
`
`112 S.W.3d 134, 140 (Tenn. Ct. App. 2003). “When piercing the corporate veil, a court may
`
`disregard the corporate entity in order to impose liability against a related entity, such as . . . a
`
`controlling shareholder, where the two entities are in fact identical or indistinguishable[.]” Pamperin
`
`v. Streamline Mfg., Inc. 276 S.W.3d 428, 438 (Tenn. Ct. App. 2008). “‘Furthermore, an alter ego
`
`claim is not by itself a cause of action. Rather, it is a doctrine which fastens liability on the
`
`individual who uses a corporation merely as an instrumentality to conduct his or her own business,
`
`and such liability arises from fraud or injustice perpetrated not on the corporation but on third
`
`persons dealing with the corporation.’” Regions Bank v. JP Realty Partners, Ltd., 912 F. Supp.2d
`
`604, 616 (M.D. Tenn. 2012) (quoting In re RCS Eng’g Prod. Co., Inc., 102 F.3d 223, 226 (6th Cir.
`
`1996)).
`
`In their reply brief, Defendants acknowledge that a claim for alter ego liability need not be
`
`pled as a stand-alone count, but argue that Plaintiffs have failed to demand the veil be pierced and
`
`“have pointed to no facts demonstrating” the corporate veil should be pierced. Instead, Plaintiffs
`
`allegedly “focus[] on Mr. Hughes actions in this capacity as an agent of TRX.” (Docket No. 20 at
`
`4
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 4 of 14 PageID #: 420
`
`

`
`8). They also quote Oceanic Schools in both their opening and reply brief for the proposition that
`
`“[t]he party wishing to pierce the corporate veil has the burden of presenting facts demonstrating
`
`that it is entitled to this equitable relief.” Oceanics Sch., 112 S.W.4d at 140.
`
`No doubt, the circumstances under which a corporate veil will be pierced are “rare,”
`
`Pamperin, 276 S.W.3d at 436, and “[t]o pierce the corporate veil . . the plaintiff must show that a
`
`shareholder exercised complete control over a subsidiary and used that control to commit fraud or
`
`a wrong,” Cambio, 213 S.W.3d at 790. But the time for “making that showing,” or “presenting fact
`
`demonstrating” entitlement to that relief, is not at the pleading stage.
`
`That said, Rule 8 of the Federal Rules of Civil Procedure requires that a pleading contain “a
`
`short and plain statement of the claim showing that the pleader is entitled to relief[.]” Fed. R. Civ.
`
`P. 8(a)(2). This requirement is “intended to give the defendant fair notice of what the claim is and
`
`the grounds upon which it rests.” Twombly, 550 U.S. at 555 (quoting Conley, 355 U.S. at 47).
`
`As the Complaint is presently drafted, and notwithstanding the numerous allegations against
`
`Mr. Hughes, there is no claim against him and no suggestion as to the grounds for holding him
`
`liable. In fact, in their response brief, Plaintiff acknowledge that they “have not yet sought to pierce
`
`the corporate veil,” but “explicitly reserve their right to do so, either by subsequent motion or by
`
`amending the pleadings.” (Docket No. 19 at 4 n.5). While that may be possible in theory, in
`
`practice there are no claims against Mr. Hughes that he must defend.
`
`The Motion to Dismiss as to Mr. Hughes will be granted. However, because Plaintiff request
`
`leave in their response brief to amend their Complaint if necessary, and because “[t]he court should
`
`freely give leave when justice so requires,” Fed. R. Civ. P. 15(a)(2), Plaintiffs will be afforded an
`
`opportunity to file an Amended Complaint to allege actual claims against Mr. Hughes.
`
`5
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 5 of 14 PageID #: 421
`
`

`
`III. STANDING FOR COPYRIGHT INFRINGEMENT CLAIM
`
`Under the Copyright Act, “[t]he legal or beneficial owner of an exclusive right under a
`
`copyright is entitled . . . to institute an action for any infringement of that particular right committed
`
`while he or she is the owner of it.” 15 U.S.C. § 501(b). “A claim of copyright infringement requires
`
`proof of ‘(1) ownership of a valid copyright, and (2) copying of constituent elements of the work
`
`that are original.’” ATC Distrib. Grp., Inc. v. Whatever It Takes Transmissions & Parts, Inc., 402
`
`F.3d 700, 705 (6th Cir. 2005) (quoting, Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361
`
`(1991)).
`
`Defendants argue that Mrs. Krishna Patel owns the copyright at issue in this case, and she
`
`is the only Plaintiff who has standing to bring that claim. In response, Plaintiffs argue:
`
`Notwithstanding the fact that the copyright registration identifies AcTax as the
`author of record, and both Vijay and AcTax are named contacts for rights and
`permissions to the copyright as reflected on the copyright registration (Dkt. # 1-13),
`Defendants’ assertion of lack of standing reinforces the fact that Krishna Patel’s (the
`copyright owner) infringement claim should not be dismissed because Defendants
`concede that one of the named plaintiffs owns the copyright. Plaintiffs deny that
`Vijay Patel and AcTax do not have standing to assert copyright infringement.
`Additionally, Vijay Patel and AcTax assert tort claims against Defendants.
`
`(Docket No. 16 at 6).
`
`“The party seeking to invoke federal jurisdiction bears the burden to demonstrate standing
`
`and he ‘must plead its components with specificity.’” Daubenmire v. City of Columbus, 507 F.3d
`
`383, 388 (6th Cir. 2007) (quoting Coyne v. Am. Tobacco Co., 183 F.3d 488, 494 (6th Cir.1999)).
`
`Here, the Complaint alleges that “[a]ll of the ownership rights and copyrights in TaxExact,
`
`AccountExact, ClientExact, and SalestaxExact developed by AcTax InfoTech vested in Krishna
`
`Patel.” (Docket No. 1, Complaint ¶ 13). That allegation references Exhibit 6, a letter attached to the
`
`Complaint in which Mr. Patel states that “all rights, title and interest subsisting throughout the world
`
`6
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 6 of 14 PageID #: 422
`
`

`
`including copyright” with regard to the “computer software and/or software source codes pertaining
`
`to the products Taxexact, Taxexact-pro, Accountexact, Clientexact and SalesTax, developed by
`
`[AcTax]” belong to Mrs. Patel “in perpetuity.” (Docket No. 1-8 at 2). The Complaint also alleges
`
`that “Krishna Patel owns the U.S. copyright to the source code for Tax Exact as it existed in 2007.”
`
`(Docket No. 1, Complaint ¶ 19). That allegation references Exhibit 11, which appears to be a
`
`printout from the United States Copyright Office that indicates the TaxExact copyright was
`
`transferred to Mrs. Patel. (Docket No. 1-1 at 2-3).
`
`The allegations in the Complaint and the exhibits attached thereto all point to Mrs. Patel as
`
`the copyright owner of the source code in question. Although AcTax as the author may have
`
`initially owned the copyright, “[t]he ownership of a copyright may be transferred in whole or in part
`
`by any means of conveyance . . .”. 17 U.S.C. § 201(d)(1). Further, although Plaintiffs have the
`
`burden to establish standing, they wholly fail to explain how being named as contacts for rights and
`
`permissions amounts to an ownership of a copyright.
`
`Accordingly, Defendants’ Motion to Dismiss will be granted insofar as they claim that
`
`Plaintiff Vijay Patel and AcTax Solutions lack standing to pursue a copyright claim.
`
`IV. COPYRIGHT PREEMPTION AND COUNTS II-V
`
`In Counts II through V of the Complaint, Plaintiffs bring claims for common law conversion,
`
`violations of the Tennessee Consumer Protection Act (“TCPA”), and unjust enrichment. Defendants
`
`seek dismissal of those claims, asserting that the rights asserted therein are legally equivalent to the
`
`exclusive rights provided by § 106 of the Copyright Act and are, therefore, preempted. In so
`
`arguing, Defendants write:
`
`Section 301 of the Copyright Act “broadly preempts state law claims, and
`federal law vests exclusive jurisdiction over such preempted copyright claims in the
`
`7
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 7 of 14 PageID #: 423
`
`

`
`federal courts.” Ritchie v. Williams, 395 F.3d 283, 285 (6th Cir. 2005). Section 301
`explicitly states that, “all legal or equitable rights that are equivalent to any of the
`exclusive rights within the general scope of copyright as specified in § 106 in works
`of authorship that . . . 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) (emphasis added).
`
`As the Sixth Circuit has explained: “The Copyright Act is unusually broad
`in its assertion of federal authority. Rather than sharing jurisdiction with the state
`courts as is normally the case, the statute expressly withdraws from the state courts
`any jurisdiction to enforce the provisions of the Act and converts all state common
`or statutory law ‘within the general scope of copyright’ into federal law to be
`uniformly applied throughout the nation.” Ritchie, 395 F.3d at 286. Further, the
`“subject matter of copyright is broader than the scope of its protection.” Stromback
`v. New Line Cinema, 384 F.3d 283, 300-01 (6th Cir. 2004).
`
`*
`
`*
`
`*
`
`When determining whether a particular claim is preempted under 17 U.S.C.
`§ 301, a court must examine two factors. First, does the work come within the scope
`of “the subject matter of copyright” as set forth in Section 102 and 103 of the
`Copyright Act? See Stromback, 384 F.3d at 300. Second, are the rights granted
`under the asserted state law claim equivalent to any of the exclusive rights within the
`scope of federal copyright protection? See id.
`
`(Docket No. 16 at 7-8). Defendants then go on to discuss the subject matter and equivalency
`
`requirements, and raise specific arguments as to why each of Counts II through V are preempted.
`
`In response, Plaintiffs agree to “withdraw the claims made in Counts II through V” insofar
`
`as they are brought by Mrs. Patel. (Docket No. 19 at 10). As to Mr. Patel and AcTax, Plaintiffs
`
`assume for the sake of argument that neither can assert any rights in the copyright, but argue that
`
`their state-law claims are not preempted:
`
`By asserting the state law torts in Counts II-V, Vijay and AcTax are asserting their
`rights as beneficiaries of the property, especially the lost monthly rate and royalty
`payments. (Dkt. # 1, ¶¶ 63, 69, 74, 79, 80.) Even though they may not own the
`copyrighted material, their license to use it and benefit from it gives them grounds
`to assert their state law claims beyond the scope of copyright law. Thus, Defendants’
`assertion boils down to this: Vijay and AcTax are both prevented from pleading
`
`8
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 8 of 14 PageID #: 424
`
`

`
`copyright infringement and are barred from any remedy to the torts committed
`against them. This de facto bar of claims does not comport with the statute, and thus
`the pre-emption doctrine does not apply to Vijay or AcTax. Since Defendants did
`not assert that Vijay or AcTax failed to state a claim, their claims in Counts II
`through V should remain as tort claims arising from Defendants’ acts against Vijay
`and AcTax.
`
`(Docket No. 19 at 10).
`
`Plaintiffs’ half-hearted argument, devoid of legal authority to support their position, is
`
`unhelpful. Stripped to its essence, their argument is that because Mr. Patel and AcTax do not own
`
`the copyright, the state law claims for conversion, unjust enrichment, and violations of the TCPA
`
`are not preempted.
`
`Section 301 of the Copyright Act contains a preemption provision that states as follows:
`
`(a) all legal or equitable rights that are equivalent to any of the exclusive rights
`within the general scope of copyright as specified by section 106 in works of
`authorship that are fixed in a tangible medium of expression and come within the
`subject matter of copyright as specified by sections 102 and 103, whether . . .
`published or unpublished, are governed exclusively by this title. Thereafter, no
`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 (emphasis added). “Congress explained what the statute made obvious: ‘[t]he
`
`intention of section 301 is to preempt and abolish any rights under the common law or statutes of
`
`a State that are equivalent to copyright and that extend to works, within the scope of the Federal
`
`copyright law.” Laws v. Sony Music Ent., Inc., 448 F.3d 1134, 1137 (9th Cir. 2006) (quoting H.R.
`
`Rep. No. 94–1476 at 130 (1976)). “State laws may also be impliedly preempted by the Copyright
`
`Act if they create rights that could be violated by the exercise of one of the five “exclusive [federal]
`
`rights” granted to copyright owners—reproduction, derivation, distribution, public performance, and
`
`public display, see 17 U.S.C. § 106—or if they otherwise undermine the Copyright Act's
`
`fundamental purpose of providing a uniform system for protecting original expression for the benefit
`
`9
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 9 of 14 PageID #: 425
`
`

`
`of society at large.” Landham v. Lewis Galoob Toys, Inc. 227 F.3d 619, 623 (6th Cir. 2000).
`
`By effectively conceding Mrs. Patel’s ability to pursue Count II through V, Plaintiffs seek
`
`to use Mr. Patel and Am Tax to do what Mrs. Patel cannot do directly – avoid possible preemption
`
`because they are not the copyright owners. But, in keeping with the Act’s intent to “prevent and
`
`abolish any rights under the common law” that parallel the copyright laws, the statute states that “no
`
`person is entitled” to pursue state law claims that are the equivalent of copyright claims. Allowing
`
`Mr. Patel and AcTax to pursue claims which may be preempted runs afoul of the “fundamental
`
`purpose of providing a uniform system” that protects original works. See Jules Jordan Video, Inc.
`
`v. 144942 Canada, Inc., 617 F.3d 1145, 1154-55 (9th Cir. 2010) (“Whether a claim is preempted
`
`under Section 301 does not turn on what rights the alleged infringer possesses, but on whether the
`
`rights asserted by the plaintiff are equivalent to any of the exclusive rights within the general scope
`
`of the copyright . . . . If a plaintiff asserts a claim that is the equivalent of a claim for infringement
`
`of a copyrightable work, that claim is preempted, regardless of what legal rights the defendant might
`
`have acquired”); Somerson v. McMahon, 956 F. Supp.2d 1345, 1356 (N.S. Ga. 2012) (For purposes
`
`of preemption, “proof of copyright ownership is not necessary because copyright preemption applies
`
`to works that are within the subject matter of copyright,” and “[t]herefore, the Court may properly
`
`find that plaintiff's state law claim for a violation of his right to publicity is preempted without
`
`requiring WWE to prove that it owns the copyrights to the video recording”).
`
`Turning to the specific claims, and in the absence of any arguments to the contrary, the Court
`
`will dismiss Counts II through V because they are preempted by the Copyright Act.
`
`Count II is a claim for conversion. Conversion is “an appropriation of another tangible
`
`property to one’s use and benefit,” White . Empire Exp., Inc., 395 S.W.3d 696, 720 (Tenn. Ct. App.
`
`10
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 10 of 14 PageID #: 426
`
`

`
`2012), and “a conversion claim will usually survive preemption.” Stromback, 384 F.3d at 305.
`
`However, “an action for the conversion of intangible personal property is not recognized in
`
`Tennessee,” and where “a claim centers on an intangible right [in property] . . . as opposed to an
`
`allegedly unlawful retention” of that property, “it is preempted.” Wells v. Chattanooga Bakery, Inc.
`
`2014 WL 1259153, at *7 (Tenn. Ct. App. Mar. 25, 2014).
`
`Here, Plaintiffs’ conversion claim centers on TRX’s use and sale of their “source code and
`
`software” – they do not seek the return of personal property. The Court finds their conversion claim
`
`preempted. See WJ Global LLC v. Farrell, 941 F. Supp.2d 688, 693 (E.D.N.C. 2013) (“a conversion
`
`claim will be preempted by the Copyright Act if the plaintiff has alleged only the unlawful retention
`
`of intellectual property rights and not the unlawful retention of a tangible object embodying the
`
`work” and, thus, plaintiff’s conversion claim was preempted where it related to the copying of
`
`source codes and software); Merchant Transaction Sys., Inc. v. Nelcela, Inc., 2007 WL 723001, at
`
`* 19 (D. Ar. July 28, 2009) (where conversion claim was focused on reproduction, copying and
`
`misuse of software and did “not allege the conversion of tangible property such as disks [and] files,”
`
`conversion claims was preempted); Tegg Corp. v. Beckstorm Elec. Corp., 650 F. Supp.2d 413, 434
`
`(E. D. Pa. 2008) (where plaintiff filed conversion claim and sought “to protect its copyrighted
`
`software and databases, recover for their unauthorized distribution and reproduction, and enforce
`
`its right to control the use of such property,” claim was “functionally equivalent” to copyright claim
`
`and preempted); Vigilante.com, Inc. v. Argus Test.com, Inc., 2005 WL 2218405, at * 15 (D. Or.
`
`Sept. 26, 2005) (“allegation that defendants exercised dominion and control over [plaintiff’s]
`
`software by downloading the source code does not qualify as an extra element to avoid Copyright
`
`. . . preemption.”).
`
`11
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 11 of 14 PageID #: 427
`
`

`
`For much the same reason, Plaintiffs’ unjust enrichment claim as pled in Count V is also
`
`preempted. The Copyright Act preempts unjust enrichment claims to they extent that they “fall
`
`within the scope of the ‘subject matter of copyright,’ as specified in 17 U.S.C. §§ 102 [&] 103” and
`
`where the “claim depends on nothing more than the unauthorized use” of the material. Tastefully
`
`Simple, Inc. v. Two Sisters Gourmet, LLC, 134 F. App’x 1, 4 (6th Cir. 2005).
`
`Here, Plaintiffs allege that “TRX is liable for unjust enrichment and quantum meruit under
`
`Tennessee common law because it accepted the benefits of Plaintiffs’ software and/or program
`
`without paying an appropriate price for the software and/or program.” (Docket No. 1, Complaint
`
`¶ 76). This claims is preempted.
`
`Plaintiffs’ claims under the TCPA are also preempted. In Count III for deceptive trade
`
`practices, Plaintiffs allege that “TRX has sold the TaxExact software and/or program to customers
`
`. . . under the presumption that TRX was acting on a license or with other legal rights to sell the
`
`software[.]” (Id. ¶ 67). In Count IV for unfair competition, Plaintiffs allege Defendants “sold the
`
`software and/or program” without permission, “or items alleged to be Plaintiff’s software and/or
`
`program using Plaintiff’s trade names, symbols, or designs for the products,” and have done so “to
`
`deceive unwitting customers into paying bargain prices for what they believed was a respected
`
`product[.]” (Id. ¶¶ 71-73). However, TCPA claims that allege “Defendant created confusion as
`
`to the source of the ideas and techniques that were produced” and that “lead consumers to believe
`
`these were Defendant’s ideas and work,” are “precisely equivalent to the rights” protected under the
`
`Copyright Act. Hamlin v. Trans-Dapt of Cal., Inc., 584 F. Supp. 2d 1050 1061 (M.D. Tenn. 2008);
`
`see also R.W. Beck, Inc. v. E3 Consul., LLC, 577 F.3d 1133, 1149 (10th Cir. 2009) (“state law
`
`claims that rely on the misappropriation branch of unfair competition are preempted” and deceptive
`
`12
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 12 of 14 PageID #: 428
`
`

`
`trade practices claims may also be preempted); Fergon Architects LLC v. Oakley Home Builders,
`
`Inc., 2014 WL 340035, at *4 (N.D. Ill. Jan. 30, 2014) (even though a state law claim under the
`
`Illinois Uniform Deceptive Trade Practices Act . . . incorporates the additional element of
`
`“confusion to the consumer,” that element does not make it qualitatively different from a claim of
`
`copyright infringement”).
`
`Accordingly, Plaintiffs’ state law claims for conversion, unjust enrichment, and violations
`
`of the TCPA as set forth in Counts II through V will be dismissed.
`
`V. COPYRIGHT INFRINGEMENT
`
`Defendants move to dismiss the copyright claim, arguing that the Complaint fails to state a
`
`claim because
`
`it fails to include sufficient facts to support the legal conclusion that “TRX has
`infringed and continues to infringe the copyrights belonging to Plaintiffs.” See
`Compl. at ¶ 55. The only facts supporting the claim of copyright infringement
`contained in the Complaint are found in paragraphs 48-51. The Complaint alleges
`that Ms. Patel obtained a copy of the source code that I-Link allegedly was using to
`build TRX’s software, and that it included a number of source code files that
`“contain calls to modules named within variations of [Ms. Patel’s 2007] version of
`TaxExact.” Id. at ¶ 48. There is no allegation in the Complaint that Ms. Patel ever
`obtained access to TRX’s source code, no allegation that Plaintiffs have reviewed
`TRX’s source code, and no allegation that TRX ever used the I-Link version that she
`examined. Instead, the Complaint asks the reader to jump to the unsupported position
`that TRX therefore infringed Ms. Patel’s code.
`
`(Docket No. 16 at 14). Moreover, Defendants argue, “even if the Court were to overlook the failure
`
`of Plaintiffs to connect the dots between Ms. Patel reviewing I-Link’s code and their assertion that
`
`TRX therefore committed copyright infringement, the Complaint fails to identify which elements
`
`of Ms. Patel’s software are original, which elements TRX allegedly copied [and] also fails to
`
`identify the specific version I-Link allegedly infringed.” Id at 15.
`
`Connecting the dots may not be as difficult as Defendants claim because the Complaint
`
`13
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 13 of 14 PageID #: 429
`
`

`
`contains two screenshots, the first of which purports to capture “AcTax Solutions’ original
`
`copyrighted source code,” and the second of which purports to capture “TRX’s copied version,”
`
`both of which are prefaced with the notice: “Copyright (C) 1996 Actax Infotech Pvt. Ltd.” (Docket
`
`No. 1, Complaint ¶ 50). Moreover, the Complaint alleges that, after Plaintiffs filed a complaint
`
`about I-Link with the local police in Ahmedabad, India, police confiscated workstations and servers
`
`and returned them to Plaintiffs, that Mrs. Patel thereby “obtained a copy of the source code being
`
`used to provide copied versions of TaxEact to TRX” which showed copying, and that Plaintiffs were
`
`informed by investigating officers that I-Link “employees had been instructed to continue updating
`
`and rebranding TaxExact and providing access to the software to TRX for sale to U.S. customers
`
`by TRX.” (Id. ¶¶ 44-48).
`
`Of course, these are nothing but allegations, but they are accepted as true for present
`
`purposes and are sufficient to make the copyright claim plausible. Mrs. Patel’s copyright claim is
`
`all the more plausible when one considered that “[w]here there is no direct evidence of copying, a
`
`plaintiff may ‘establish an inference of copying by showing (1) access to the allegedly-infringed
`
`work by the defendant(s) and (2) a substantial similarity between the two works at issue.’” Jones v.
`
`Bilge, 558 F.3d 485, 490-91 (6th Cir. 2009) (quoting Ellis v. Diffie, 177 F.3d 503, 506 (6th
`
`Cir.1999)). Accordingly, her copyright claim will not be dismissed.
`
`VI.
`
`On the basis of the foregoing, the Court will enter an Order that grants in part and denies in
`
`part Defendants’ Motion to Dismiss.
`
`____________________________________
`KEVIN H. SHARP
`UNITED STATES DISTRICT JUDGE
`
`14
`
`Case 3:13-cv-00701 Document 21 Filed 09/16/14 Page 14 of 14 PageID #: 430