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`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF TEXAS
`DALLAS DIVISION
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`§§
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`§§
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`§ CIVIL ACTION NO. 3:11-CV-0403-B
`§
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`GLOBERANGER CORPORATION
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` Plaintiff,
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`v.
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`§§
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`§
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`SOFTWARE AG, et. al.,
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` Defendants.
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`MEMORANDUM OPINION AND ORDER
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`Before the Court is Plaintiff GlobeRanger Corporation’s (“GlobeRanger”) Motion to Remand
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`(doc. 10). Having considered the Motion, the Court finds that it should be and hereby is DENIED.
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`I.
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`BACKGROUND1
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`This case concerns Defendants Software AG-Germany, Software AG- USA, Inc., Software
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`AG, Inc., Naniq Systems, LLC, and Main Sail, LLC, (collectively the “Defendants”) alleged
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`misappropriation of GlobeRanger’s trade secrets related to the GlobeRanger RFID Solution, a radio
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`frequency identification (“RFID”) system. (Pl.’s Original Pet. ¶¶ 21-27). By way of background,
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`GlobeRanger uses its RFID software platform, along with necessary hardware, to create custom-
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`tailored GlobeRanger RFID Solutions for its customers. (Id.). GlobeRanger alleges that it was
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`denied an opportunity to present its RFID Solution to the Naval Supply Chief Information Officer
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`1The background facts are derived from undisputed facts gleaned from the parties' court papers. Where
`there may be a dispute over a stated fact the Court has so indicated by claiming the fact as one stated by
`that party to be true.
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`Case 3:11-cv-00403-B Document 27 Filed 08/11/11 Page 2 of 10 PageID 240
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`due to misconduct by Defendants.(Id. at 53, 68). Additionally, GlobeRanger alleges that Defendants
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`used their access to GlobeRanger’s RFID Solution technology to reverse-engineer the program and
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`create and market their own RFID Solution. (Id. at 42, 44, 88-93).
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`On February 24, 2011 GlobeRanger filed suit in state court, asserting claims of
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`misappropriation of trade secrets, conversion, unfair competition, conspiracy, and tortious
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`interference against Defendants. (Pl.’s Original Pet. ¶¶ 95-119). Defendants removed the action
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`to this Court from the Dallas County Court at Law No. 1 on March 1, 2011, alleging that
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`GlobeRanger’s state law claims are preempted by the Copyright Act. (Def.’s Notice of Removal 2).
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`Plaintiff GlobeRanger filed its Motion to Remand (doc. 10) on March 25, 2011. The Motion being
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`ripe, the Court now turns to the merits of its decision.2
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`II.
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`LEGAL STANDARDS
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`A. Motion to Remand
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`A defendant may remove an action filed in state court to federal court if the case could have
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`originally been filed in federal court. 28 U.S.C. § 1441(a). Federal subject matter jurisdiction is
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`limited, and federal courts may entertain only those cases involving a question of federal law or those
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`where parties are of diverse citizenship. See 28 U.S.C. §§ 1331-32. Because the removal statute is
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`strictly construed, any ambiguities are construed against removal. Manguno v. Prudential Prop. &
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`Cas. Ins. Co., 276 F.3d 720, 723 (5th Cir. 2002); see also Acuna v. Brown & Root, Inc., 200 F.3d 335,
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`2 Previously, on December 3, 2010, GlobeRanger filed an almost identical action in federal court, assigned
`to this Court. (Case No. 3:10-CV-2464-B) GlobeRanger later voluntarily dismissed the case without
`prejudice on February 24, 2011. (Doc. 22 Feb. 24, 2011).
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`Case 3:11-cv-00403-B Document 27 Filed 08/11/11 Page 3 of 10 PageID 241
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`339 (5th Cir. 2000) (stating that doubts regarding removal are resolved against federal jurisdiction).
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`The party invoking federal jurisdiction has the burden of establishing it. De Aguilar v. Boeing Co.,
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`47 F.3d 1404, 1408 (5th Cir. 1995). The district court may “pierce the pleadings” and consider
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`outside evidence in determining whether remand is appropriate. See Burden v. Gen’l Dynamics Corp.,
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`60 F.3d 213, 216-17 (5th Cir. 1995). However, the Court must limit its consideration of outside
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`evidence to factual issues related to jurisdiction. Id. If at any point during the course of litigation “it
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`appears that the [federal] district court lacks subject-matter jurisdiction, the case shall be
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`remanded.” 28 U.S.C. § 1447(c).
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`B. Supplemental Jurisdiction
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`Federal courts are vested with supplemental jurisdiction when, having original jurisdiction
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`over a federal claim, additional state claims “are so related to claims in the action within such
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`original jurisdiction that they form part of the same case or controversy under Article III of the
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`United States Constitution.” 28 U.S.C. § 1367(a). The federal court may exercise supplemental
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`jurisdiction over state law claims that “derive from a common nucleus of operative fact.” United
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`Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966). If a plaintiff’s state and federal claims are
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`of such a character “that he would ordinarily be expected to try them all in one judicial proceeding,
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`then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole.”
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`Id.
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`III.
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`ANALYSIS
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`In their Notice of Removal, Defendants claim that although Plaintiff’s Original Petition does
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`not include a copyright claim, the causes of action asserted are preempted by the Copyright Act.
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`(Def.’s Notice of Removal 2-5).
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`Federal courts have exclusive original jurisdiction over claims of copyright infringement.
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`Goodman v. Lee, 815 F.2d 1030, 1031 (5th Cir. 1987) (citing 28 U.S.C. § 1338(a)). The Copyright
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`Act generally preempts state law claims that are equivalent to any of the exclusive rights created by
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`the copyright law. 17 U.S.C. § 301(a). In determining whether a state law claim is preempted by
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`the federal copyright law, the Court applies a two-prong test. Carson v. Dynegy, Inc., 344 F.3d 446,
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`456 (5th Cir. 2003)(citing Daboub v. Gibbons, 42 F.3d 285, 288-89 (5th Cir. 1995)). First, the Court
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`determines whether the claim falls within the subject-matter of copyright. Id. Next, the Court looks
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`to whether the state law cause of action protects rights that are “equivalent” to any of the exclusive
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`rights protected by copyright, which include rights to reproduce, distribute, perform, and display the
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`copyrighted work. 17 U.S.C. § 106; Carson, 344 F.3d at 456. A state-created right is equivalent to
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`these rights “if the mere act of reproduction, distribution, or display infringes it.” Taquino v. Teledyne
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`Monarch Rubber, 893 F.2d 1488, 1501 (5th Cir. 1990) (citations omitted). The “extra-element” test
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`is used to determine whether the protected rights under state law are equivalent to the rights
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`protected under the Copyright Act. A state claim is equivalent if it involves “‘elements that would
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`not establish qualitatively different conduct by the defendants than the elements for an action under
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`the Copyright Act.’” Daboub, 42 F.3d at 290 (quoting Quincy Cablesystems, Inc. v. Sully’s Bar, Inc.,
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`650 F.Supp. 838, 850 (D.Mass. 1986)).
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`Case 3:11-cv-00403-B Document 27 Filed 08/11/11 Page 5 of 10 PageID 243
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`A. Subject-Matter Jurisdiction
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`The Court must first determine whether the GlobeRanger RFID Solution falls within the
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`subject-matter of the Copyright Act, which states:
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`(a) Copyright protection subsists . . . in original works of authorship fixed in any
`tangible medium of expression, now known or later developed, from which they can
`be perceived, reproduced, or otherwise communicated, either directly or with the aid
`of a machine or device. . .
`(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.
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`17 U.S.C. § 102 (a-b).
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`Here, Defendants argue that GlobeRanger’s suit is preempted by the Copyright Act because
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`computer programs are protected by the Copyright Act, and GlobeRanger’s claims are based on
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`Defendant’s improper access to and use of GlobeRanger’s computer software. (Def.’s Notice of
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`Removal 2-5). GlobeRanger maintains in its Motion to Remand that the Defendants stole its “ideas
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`and processes,” not its computer software or program. (Pl.’s Mot. Remand 16).
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`In its Original Petition, GlobeRanger alleges that Defendants reverse-engineered
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`GlobeRanger’s software codes. (Pl.’s Original Pet. ¶¶ 75-85). Defendants argue that the act of
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`reverse-engineering necessarily falls within the scope of the Copyright Act because only tangible
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`expressions of ideas and processes can be reverse-engineered, not the ideas and processes themselves.
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`(Def.’s Notice of Removal 5). GlobeRanger counters that Defendants already possessed
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`webMethods, a software platform capable of implementing an RFID system. (See Pl.’s Original Pet.
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`¶ 34). GlobeRanger further argues that the GlobeRanger RFID Solution is different for every client.
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`(Pl.’s Mot. Remand 10-11). As a result, GlobeRanger argues, Defendants did not steal the tangible,
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`Case 3:11-cv-00403-B Document 27 Filed 08/11/11 Page 6 of 10 PageID 244
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`creative expression of a particular GlobeRanger RFID Solution. Rather, they stole the intangible
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`research, development, skills, labor, reputation and expenditures used to create a variety of
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`GlobeRanger RFID Solutions. (Id. at 12).
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`It is well-settled that computer software falls within the scope of copyright protection.
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`Computer Mgmt. Assistance Co. v. Robert F. DeCastro, Inc., 220 F.3d 396, 400 (5th Cir. 2000)(citing
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`Vault Corp. v. Quaid Software, Ltd., 847 F.2d 255, 259 (5th Cir. 1988)). The plaintiff in Alcatel USA,
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`Inc. v. DGI Technologies, Inc., 166 F.3d 772, 789 (5th Cir. 1999), argued that its misappropriation and
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`infringement claims against a competitor were not preempted by the Copyright Act because they
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`were based on facts contained within copyrightable software, rather than on the copyrightable
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`software itself. Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 789 (5th Cir. 1999). The
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`Fifth Circuit disagreed, holding that the plaintiff undermined its argument against preemption by
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`basing its misappropriation claim on the competitor’s use of and reliance on the plaintiff’s software,
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`firmware, and manuals in developing the competing product. Id.
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`Here, GlobeRanger’s arguments against preemption under the first prong of the subject-
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`matter analysis likewise fall short of their mark. In its Motion to Remand, GlobeRanger characterizes
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`Defendants’ alleged misconduct according to the process developed by GlobeRanger rather than the
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`software. However, GlobeRanger’s Original Petition alleges that Defendants conspired to
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`unlawfully acquire the GlobeRanger RFID Solution developed for the Navy, that Defendants
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`“gain[ed] unlawful access to GlobeRanger’s data dictionary and workflows,” and that Defendants
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`reverse-engineered code from the GlobeRanger RFID Solution. (See Pl.’s Original Pet. ¶¶ 75-77, 81-
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`82, 85). From this language, the Court determines that this action centers on the software and not
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`the process, and thus is within the subject matter of the Copyright Act. See 17 U.S.C. § 102(a);
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`Computer Mgmt. Assistance Co., 220 F.3d at 400.
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`B. Claims Equivalent to Exclusive Rights Granted by Copyright Act
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`Having determined that GlobeRanger’s claims fall within the subject-matter of the Copyright
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`Act, the Court next applies the equivalency test to each of GlobeRanger’s claims. If an asserted state
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`law claim protects rights equivalent to the rights protected under the Copyright Act, it is preempted
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`and this Court has original exclusive jurisdiction over the claim. See Carson, 344 F.3d at 456. The
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`“extra element” test is used to evaluate the equivalency of rights. Id. Under the test, “if ‘one or more
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`qualitatively different elements are required to constitute the state-created cause of action being
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`asserted, then the right granted under state law does not lie within the general scope of copyright,
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`and preemption does not occur.’” Id. If the core of a state law theory of recovery is the same as the
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`interests clearly protected by the Copyright Act — the wrongful copying, distribution or presentation
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`of the copyrighted material — then the elements are not qualitatively different than the elements
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`for an action under the Copyright Act. See Daboub, 42 F.3d at 289-90 (5th Cir. 1995); see also Sony
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`Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 450 (1984)(recognizing that the purpose
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`of the Copyright Act “is to create incentives for creative effort.”).
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`To prevail on a misappropriation claim under Texas law, the plaintiff must establish that “‘(1)
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`a trade secret exists; (2) Defendants acquired the trade secret by breach of a confidential relationship
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`or other improper means; and (3) Defendants used the trade secret without authorization.’” Gen.
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`Universal Sys., Inc. v. HAL, Inc., 500 F.3d 444, 449 (5th Cir. 2007). The Fifth Circuit explains that
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`“[i]n contrast to federal copyright law, which focuses on the value of creativity, [Texas]
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`misappropriation law is specifically designed to protect the labor – the so-called ‘sweat equity’ – that
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`goes into creating a work.” Alcatel, 166 F.3d at 788 (emphasis in original). However, the Fifth
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`Circuit held that if the “acts that form the basis of [a] misappropriation claim touch on interests
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`clearly protected by the Copyright Act” then the claim is preempted. Id. at 789.
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`At the core of GlobeRanger’s misappropriation of trade secrets claim are allegations that
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`Defendants wrongfully copied and misused GlobeRanger’s RFID Solution software. (See Pl.’s
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`Original Pet. ¶¶ 81, 84, 97). GlobeRanger alleges that Defendants’ deliberate misappropriation of
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`its trade secrets and proprietary information destroyed the competitive advantage GlobeRanger
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`obtained by spending considerable time and money on development. (See id. at ¶¶ 21-27, 93). Since
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`a Texas misappropriation of trade secrets claim shares the same purpose as the Copyright Act and
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`protects the same interests, the Court finds that GlobeRanger’s misappropriation of trade secrets
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`claim is preempted by the Copyright Act.
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`The Court next addresses GlobeRanger’s unfair competition claim. Under Texas law, unfair
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`competition “is the umbrella for all statutory and nonstatutory causes of action arising out of business
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`conduct which is contrary to honest practice in industrial or commercial matters.” Taylor Pub. Co.
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`v. Jostens, Inc., 216 F.3d 465, 486 (5th Cir. 2000)(quoting American Heritage Life Ins. Co. v. Heritage
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`Life Ins. Co., 494 F.2d 3, 14 (5th Cir. 1974). The cause of action “requires that the plaintiff show an
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`illegal act by the defendant which interfered with the plaintiff’s ability to conduct its business.” Id.
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`In a per curiam opinion, the Fifth Circuit recognized that “state-law claims of unfair
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`competition . . . are preempted by section 301(a) of the Copyright Act.” West v. Perry, 392 Fed.
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`Appx. 328, 328-39 (5th Cir. 2010) (per curiam); see also MicroSource, Inc. v. Superior Signs, Inc.,
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`1998 WL 119537, at *2 (N.D. Tex. 1998)(citing Daboub, 42 F.3d at 289)(finding that because
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`plaintiff alleged that defendants wrongfully copied and distributed the plaintiff’s software, the unfair
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`competition claim satisfied the Daboub test and was preempted). At the center of GlobeRanger’s
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`unfair competition cause of action is the allegation that Defendants wrongfully copied and misused
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`its software. Accordingly, GlobeRanger’s unfair competition claim fails the “extra element” test, and
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`the claim is preempted by the Copyright Act.
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`GlobeRanger’s tortious interference, conversion, and conspiracy causes of action derive from
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`the same nucleus of operative fact as the events giving rise to the misappropriation and unfair
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`competition claims (Pl.’s Original Pet. ¶¶100-105, 110-113). Accordingly, the Court may exercise
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`supplemental jurisdiction over them and need not address whether each of those claims is
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`independently preempted by the Copyright Act. See 28 U.S.C. § 1367(a); Gibbs, 383 U.S. at 725.
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`IV.
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`CONCLUSION
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`GlobeRanger’s claims for misappropriation of trade secrets and unfair competition are
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`preempted by the Copyright Act and are subject to this Court’s jurisdiction. Additionally,
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`GlobeRanger’s state-law claims for tortious interference, conversion, and conspiracy are subject to
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`supplemental jurisdiction because they share a common nexus of operative facts with the preempted
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`claims. For these reasons, the Court DENIES Plaintiff GlobeRanger’s Motion to Remand this case
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`and declines to award costs under 28 U.S.C. § 1447(c).
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`SO ORDERED.
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`SIGNED August 11, 2011
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`_________________________________
`JANE J. BOYLE
`UNITED STATES DISTRICT JUDGE
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