CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 1 of 11
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
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`v.
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`Plaintiff,
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`Defendant.
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`Case No. 20-cv-1006 (WMW/BRT)
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`ORDER GRANTING DEFENDANT’S
`MOTION TO DISMISS
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`Britware Consulting, Inc.,
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`Con-Tech Manufacturing, Inc.,
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`This matter is before the Court on Defendant Con-Tech Manufacturing, Inc.’s (Con-
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`Tech) motion to dismiss Plaintiff Britware Consulting, Inc.’s (Britware) complaint for
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`failure to state a claim on which relief can be granted pursuant to Federal Rule of Civil
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`Procedure 12(b)(6). (Dkt. 14.) For the reasons addressed below, the Court grants Con-
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`Tech’s motion and dismisses Britware’s complaint without prejudice.
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`BACKGROUND
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`Britware is a Wisconsin software-development company that developed the
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`proprietary weight-distribution software and source code described in United States
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`Copyright # TX 8-854-123 (Software). Con-Tech is a manufacturer of concrete mixer
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`trucks, and its principal place of business is in Dodge Center, Minnesota.
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`The following facts are recounted in the light most favorable to Britware, the non-
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`moving party. In or about July 2008, Britware agreed to install the Software on a Con-
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`Tech computer, providing a first license for free in exchange for Con-Tech’s promise to
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`pay for future upgrades and additional licenses. Britware upgraded Con-Tech’s copy of
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
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`
`
`
`v.
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`
`
`
`
`
`
`
`
`
`
`Plaintiff,
`
`Defendant.
`
`Case No. 20-cv-1006 (WMW/BRT)
`
`ORDER GRANTING DEFENDANT’S
`MOTION TO DISMISS
`
`
`
`
`
`
`
`
`
`
`
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`
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`Britware Consulting, Inc.,
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`Con-Tech Manufacturing, Inc.,
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`
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`This matter is before the Court on Defendant Con-Tech Manufacturing, Inc.’s (Con-
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`Tech) motion to dismiss Plaintiff Britware Consulting, Inc.’s (Britware) complaint for
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`failure to state a claim on which relief can be granted pursuant to Federal Rule of Civil
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`Procedure 12(b)(6). (Dkt. 14.) For the reasons addressed below, the Court grants Con-
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`Tech’s motion and dismisses Britware’s complaint without prejudice.
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`BACKGROUND
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`Britware is a Wisconsin software-development company that developed the
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`proprietary weight-distribution software and source code described in United States
`
`Copyright # TX 8-854-123 (Software). Con-Tech is a manufacturer of concrete mixer
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`trucks, and its principal place of business is in Dodge Center, Minnesota.
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`The following facts are recounted in the light most favorable to Britware, the non-
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`moving party. In or about July 2008, Britware agreed to install the Software on a Con-
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`Tech computer, providing a first license for free in exchange for Con-Tech’s promise to
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`pay for future upgrades and additional licenses. Britware upgraded Con-Tech’s copy of
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 2 of 11
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`the Software in 2016 and installed the Software on a second Con-Tech computer. At that
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`time, Con-Tech paid Britware for the time Britware expended but not for a software
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`license. In March 2018, one of Con-Tech’s other business lines sought to have the
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`Software installed on additional computers, but Britware refused to do so without a
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`licensing agreement. When the parties failed to reach an agreement, Britware demanded
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`that Con-Tech either pay for the licenses it was using or permit Britware to remove the
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`Software from Con-Tech’s computers. Con-Tech refused either to pay or to allow Britware
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`to remove the Software from Con-Tech’s computers.
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`Britware commenced this action on April 24, 2020, alleging copyright infringement
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`and unjust enrichment. Britware seeks to enjoin Con-Tech’s infringement of the Software
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`and damages. Con-Tech moves to dismiss Britware’s complaint for failure to state a claim
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`on which relief can be granted. Fed. R. Civ. P. 12(b)(6).
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`ANALYSIS
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`To survive a motion to dismiss for failure to state a claim on which relief can be
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`granted, a complaint must allege sufficient facts that, when accepted as true, state a claim
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`to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When
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`determining whether to grant the motion, a district court accepts as true all of the factual
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`allegations in the complaint and draws all reasonable inferences in the plaintiff’s favor.
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`Blankenship v. USA Truck, Inc., 601 F.3d 852, 853 (8th Cir. 2010). The factual allegations
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`must be sufficient to “raise a right to relief above the speculative level” and “state a claim
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`to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 3 of 11
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`(2007); see also McDonough v. Anoka County, 799 F.3d 931, 945 (8th Cir. 2015) (“There
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`is no requirement for direct evidence; the factual allegations may be circumstantial and
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`need only be enough to nudge the claim across the line from conceivable to plausible.”
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`(internal quotation marks omitted)). Although a plaintiff may rely on a reasonable
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`expectation that discovery will produce evidence of the alleged activity, a plaintiff must do
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`more than offer “labels and conclusions” or a “formulaic recitation of the elements of a
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`cause of action.” Twombly, 550 U.S. at 555. Legal conclusions that are couched as factual
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`allegations are insufficient. See Iqbal, 556 U.S. at 678.
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`Britware advances two claims for relief (1) a copyright-infringement claim pursuant
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`to 17 U.S.C. §§ 106 et seq. and (2) a state-law claim for unjust enrichment. An analysis of
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`each claim follows.
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`I.
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`Copyright Infringement
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`Con-Tech argues that Britware’s copyright-infringement claim must be dismissed
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`because Britware authorized Con-Tech’s use of the Software. “The elements of copyright
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`infringement are (1) ownership of a valid copyright and (2) copying of original elements
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`of the copyrighted work.” Warner Bros. Entm’t, Inc. v. X One X Prods., 644 F.3d 584, 595
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`(8th Cir. 2011). The Copyright Act grants copyright owners the exclusive right, among
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`others, “to distribute copies or phonorecords of the copyrighted work to the public by sale
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`or other transfer of ownership.” 17 U.S.C. § 106(3).
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`A copyright owner’s exclusive rights are limited by the first-sale doctrine.
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`17 U.S.C. § 109(a). The first-sale doctrine limits a copyright holder’s rights after a “sale”
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 4 of 11
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`(transfer of ownership) of a protected work. See Action Tapes, Inc. v. Mattson, 462 F.3d
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`1010, 1012 (8th Cir. 2006); see also UMG Recordings, Inc. v. Augusto, 628 F.3d 1175,
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`1179 (9th Cir. 2011). The first-sale doctrine provides that “the owner of a particular copy
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`. . . lawfully made under this title, or any person authorized by such owner, is entitled,
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`without the authority of the copyright owner, to sell or otherwise dispose of the possession
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`of that copy.” 17 U.S.C. § 109(a) (emphasis added). Despite its distinctive name, the
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`doctrine applies not only when a copy is first sold, but also when a copy is given away.
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`UMG Recordings, 628 F.3d at 1179. Once the copyright owner places a copyrighted item
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`in the stream of commerce, he or she has exhausted his or her exclusive statutory right to
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`control its distribution. See Quality King Distribs., Inc. v. L’anza Rsch. Int’l, Inc., 523 U.S.
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`135, 152 (1998).
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`With respect to a computer program, the first-sale doctrine does not permit an owner
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`of a particular copy to rent, lease, or lend that copy for commercial gain. 17 U.S.C.
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`§ 109(b)(1)(A). Copyright law permits the owner of a legal copy of a copyrighted work to
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`use the copy in any way the owner desires as long as the owner does not infringe on the
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`copyright owner’s exclusive rights. See 17 U.S.C. § 106.
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`Britware alleges that it has a valid, registered copyright in the Software and that
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`Con-Tech infringed Britware’s copyright in the Software by violating one of Britware’s
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`exclusive rights, as enumerated in the Copyright Act. See id. (listing six categories of
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`exclusive rights in copyrighted works). Although Britware does not precisely cite which
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`of the statutorily enumerated exclusive rights Con-Tech allegedly has infringed, Britware
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 5 of 11
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`alleges that Con-Tech “has infringed [Britware’s] exclusive rights in the [Software] by
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`copying and using the [Software] without paying an appropriate license fee.”
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`Notwithstanding Britware’s vague allegation of “copying,” the facts alleged in the
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`complaint are limited to Con-Tech’s retention of the two copies of the Software that
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`Britware installed on Con-Tech’s computers. Britware does not allege that Con-Tech made
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`additional copies of the Software. As such, there is no plausible allegation of copying or
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`reproduction in violation of Section 106(1) of the Copyright Act. 17 U.S.C. § 106(1).
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`Britware also alleges that Con-Tech has infringed Britware’s copyright by the
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`unauthorized retention and use of the Software. According to the complaint, Britware
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`provided Con-Tech with “the first license for free” in exchange for Con-Tech’s promise to
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`buy upgrades and licenses in the future. And Britware subsequently provided Con-Tech
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`with a second copy of the Software without charging Con-Tech for the Software.
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`The facts alleged in this case are similar to those in UMG Recordings. 628 F.3d at
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`1180–81. In UMG Recordings, the plaintiff gave away free promotional copies of compact
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`discs, commonly known as CDs, with an attached disclaimer that the CDs were for
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`promotional use only, not for sale. Id. at 1177–78. The more detailed disclaimer provided:
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`This CD is the property of the record company and is licensed
`to the intended recipient for personal use only. Acceptance of
`this CD shall constitute an agreement to comply with the terms
`of the license. Resale or transfer of possession is not allowed
`and may be punishable under federal and state laws.
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`Id. Despite the disclaimer, the defendant acquired a number of these promotional CDs and
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`sold them online. Id. at 1178. The plaintiff sued the defendant for copyright infringement,
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 6 of 11
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`and the defendant invoked the first-sale doctrine as a defense. Id. at 1179. The court held
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`that the promotional delivery of CDs did not create a license between the parties, and the
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`recipients of the promotional CDs “were entitled to use or dispose of them in any manner
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`they saw fit.” Id. at 1180. The court’s decision that the recipients of the promotional CDs
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`were not bound by a license, but rather acquired ownership, was based on the nature of the
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`transaction. Id. (observing that “the mere labeling of an arrangement as a license rather
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`than a sale, although it [is] a factor to be considered, [is] not by itself dispositive of the
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`issue”).
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`The same question is presented here. Did Britware create a license by giving copies
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`of the Software to Con-Tech, or did Britware transfer ownership of the copies to Con-
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`Tech? To resolve this question, the Court must look at the nature of the transactions as
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`alleged.
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`While the complaint alleges that Britware gave Con-Tech a license to use the
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`Software, none of the facts in the complaint support this conclusion. Britware gave Con-
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`Tech the first copy of the Software in 2008, and it was not until March 2018 that Britware
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`demanded that Con-Tech pay for a license. Between 2008 and 2018, Con-Tech
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`occasionally sought support for and discussed additional customizations to the Software.
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`Thus, Britware knew that Con-Tech was using the Software continuously. Another
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`allegation that supports a transfer of ownership is that in 2016 Britware upgraded the
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`Software, according to Con-Tech’s desires, and installed another copy of the Software on
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`a newer Con-Tech computer. Con-Tech paid Britware for the time Britware expended to
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 7 of 11
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`provide this upgrade, and Britware allowed Con-Tech to continue using the Software
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`without paying for a license.
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`In addition, there is no alleged agreement for a return of the Software to Britware,
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`nor did Britware program a trial period into the Software, in which Con-Tech’s ability to
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`use the Software would terminate absent payment. See Vernor v. Autodesk, Inc., 621 F.3d
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`1102, 1111–12 (9th Cir. 2010) (holding that the absence of use restrictions on a computer
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`program demonstrates that a user is an owner of a copy of the program rather than a
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`licensee). Although the failure to program use restrictions into the Software does not, by
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`itself, establish a transfer of ownership, it is another indication that Britware’s actions
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`demonstrate a transfer of ownership, rather than a license.
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`That Britware allowed Con-Tech to use the Software, knowingly, for almost ten
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`years before asking Con-Tech to enter a paid license agreement, combined with Britware
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`willingly upgrading and installing the Software on Con-Tech’s computer in 2016, leads to
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`only one plausible legal conclusion: that Britware transferred ownership of those copies of
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`the Software to Con-Tech. See Twombly, 550 U.S. at 555 (holding that factual allegations
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`must be enough to raise a right to relief above the speculative level that is plausible on its
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`face).
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`Britware labeling the transaction as a license does not make it one when the conduct
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`of the parties demonstrates a transfer of ownership. UMG Recordings, 628 F.3d at 1180.
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`Even when all reasonable inferences are construed in favor of Britware, the complaint
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`establishes that Britware transferred ownership of the copies of the Software to Con-Tech.
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 8 of 11
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`Because Britware transferred ownership of the copies of the Software to Con-Tech, Con-
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`Tech is authorized to use those copies provided that Con-Tech does not infringe Britware’s
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`exclusive rights under the Copyright Act. See 17 U.S.C. § 106.
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`For these reasons, the facts alleged in Britware’s complaint do not support a
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`plausible claim that Con-Tech has violated any of Britware’s exclusive rights to the
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`Software. Accordingly, Britware’s copyright-infringement claim is dismissed without
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`prejudice.
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`II.
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`Unjust Enrichment
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`The parties also dispute whether Britware’s unjust-enrichment claim must be
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`dismissed because it is preempted by the Copyright Act.
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`The Copyright Act provides the exclusive source of protection for all legal rights
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`and equitable rights that are equivalent to any of the exclusive rights within the general
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`scope of copyright. Nat’l Car Rental Sys., Inc. v. Comput. Assocs. Int’l., Inc., 991 F.2d
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`426, 428 (8th Cir. 1993). The Copyright Act preempts a state-law claim when (1) the work
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`at issue is within the subject matter of copyright and (2) the state-law right is equivalent to
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`any of the exclusive rights within Section 106 of the Copyright Act. Id. If the state-created
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`cause of action requires an additional element instead of or in addition to the acts of
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`reproduction, performance, distribution or display, then the right does not lie within the
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`general scope of copyright and there is no preemption. See id. at 431.
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`To state a claim for unjust enrichment under Minnesota law, a plaintiff “must show
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`that the defendant has knowingly received or obtained something of value for which the
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 9 of 11
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`defendant in equity and good conscience should pay.” Caldas v. Affordable Granite &
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`Stone, Inc., 820 N.W.2d 826, 838 (Minn. 2012) (internal quotation marks omitted),
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`superseded by statute on other grounds as recognized in Hall v. City of Plainview, 954
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`N.W.2d 254, 270–71 (Minn. 2021). To prevail, the plaintiff must demonstrate that the
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`defendant received a benefit from the efforts or obligations of the plaintiff and that the
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`defendant “was unjustly enriched in the sense that the term unjustly could mean illegally
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`or unlawfully.” Id. (internal quotation marks omitted).
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`Britware’s unjust-enrichment claim is based entirely on the contention that Con-
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`Tech “knowingly received the benefits of Plaintiff’s Software without providing just
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`compensation” for use of the Software. It would be unjust for Con-Tech to continue using
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`the Software without compensation, Britware alleges. Con-Tech counters that Britware’s
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`unjust enrichment claim is preempted because Con-Tech is an authorized user of the copies
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`of the Software that Britware installed on Con-Tech’s computers.
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`This Court joins the majority of courts that have addressed the issue and concludes
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`that state-law unjust-enrichment claims are preempted by the Copyright Act. See Issaenko
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`v. Univ. of Minn., 57 F. Supp. 3d 985, 1025–26 (D. Minn. 2014) (collecting cases). An
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`unjust-enrichment claim that is based on a violation of rights protected by the Copyright
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`Act rests within the Copyright Act’s field of preemption. Id. at 1026. Although actual
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`enrichment is an element of an unjust-enrichment claim that is not required for a copyright-
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`infringement claim, that distinction cannot avoid preemption. Id. “While a claim for unjust
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`enrichment may require proof that a benefit was conferred on the defendant, where the
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 10 of 11
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`unjust enrichment arises from defendants’ unauthorized use of a copyrighted work, such
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`an extra element does not qualitatively change the rights at issue, the rights the plaintiff
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`holds in the copyrighted work, and does not avoid preemption.” Id. (quoting Zito v.
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`Steeplechase Films, Inc., 267 F. Supp. 2d 1022, 1027 (N.D. Cal. 2003)).
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`Britware’s reliance on Mahavisno v. Compendia Bioscience, Inc., is unpersuasive.
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`See No. 13-12207, 2014 WL 340369, at *1 (E.D. Mich. Jan. 30, 2014). At issue in
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`Mahavisno was whether the Copyright Act preempts an unjust-enrichment claim. The
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`district court concluded that the plaintiff’s unjust-enrichment claim “is fairly characterized
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`as an implied-in-fact contract claim” that “requires [the plaintiff] to prove an extra element
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`beyond what the copyright infringement claims require [the plaintiff] to establish.” Id.
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`at *7. The presence of an “extra element” was sufficient to conclude that the plaintiff’s
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`claim was not preempted by the Copyright Act. Id. The facts of Mahavisno are readily
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`distinguishable from those at issue here. The plaintiff’s complaint in Mahavisno plausibly
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`alleged an implied-in-fact contract. Id. Here, Britware’s complaint does not include a
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`breach-of-contract claim.
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`Britware’s unjust-enrichment claim rests solely on an alleged violation of its rights
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`protected by the Copyright Act. For this reason, the unjust-enrichment claim is preempted.
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`See Issaenko, 57 F. Supp. 3d at 1026 (concluding that when “unjust enrichment claims are
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`based upon the violation of rights protected by the Copyright Act, they ‘sound [ ] squarely
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`in copyright infringement’ and are therefore preempted” (quoting Ott v. Target Corp., 153
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`CASE 0:20-cv-01006-WMW-BRT Doc. 38 Filed 03/25/21 Page 11 of 11
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`F. Supp. 2d 1055, 1067 (D. Minn. 2001))). Accordingly, Britware’s unjust-enrichment
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`claim is dismissed without prejudice.
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`ORDER
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`Based on the foregoing analysis and all the files, records and proceedings herein, IT
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`IS HEREBY ORDERED:
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`1.
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`Defendant Con-Tech Manufacturing, Inc.’s motion to dismiss, (Dkt. 14), is
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`GRANTED.
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`2.
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`Plaintiff Britware Consulting, Inc.’s complaint, (Dkt. 1), is DISMISSED
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`WITHOUT PREJUDICE.
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`LET JUDGMENT BE ENTERED ACCORDINGLY.
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`Dated: March 25, 2021
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`
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`s/Wilhelmina M. Wright
`Wilhelmina M. Wright
`United States District Judge
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