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Bekaert Progressive Composites Corp. v. Wave Cyber Ltd.

April 5, 2007


The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge


This trademark infringement matter is before the court on defendant Timothy Heberer's ("Heberer") Motion To Dismiss Fourth Cause of Action ("Motion") alleging unfair competition and false advertising under the statutory and common law of California, on grounds those claims are purportedly preempted by the federal Copyright Act. Plaintiff Bekaert Progressive Composites Corporation ("Bekaert") filed Opposition, and Heberer filed a Reply. Pursuant to Civil Local Rule 7.1(d)(1), the court finds the issues appropriate for decision on the papers and without oral argument. For the reasons discussed below, the Motion is DENIED.

Bekaert, a developer, manufacturer, and seller of pressure filtration vessels used to purify and desalinate water, sues two foreign corporations and Heberer in this action alleging six causes of action arising out of alleged copying of Bekaert's unique vessel design and copyrighted written material it uses on the vessels' end cap nameplate.*fn1 Heberer is alleged to be a corporate officer of one or both of the named corporate defendants with an ownership interest in one or both. No defendant has yet answered the Complaint. Heberer, on his own behalf, moves to dismiss "that portion of the plaintiff's fourth claim for state law unfair competition which alleges the unlawful copying and use of copyrightable materials." Reply 1:17-18. He contends "part of the plaintiff's state law unfair competition claim merely alleges that the defendant supposedly copied the plaintiff's copyrightable materials, and thus is based on the very same conduct underlying the copyright infringement claim," and is "therefore preempted as a matter of law, and should be dismissed without leave to amend, since it doesn't qualitatively change the nature of the action." Mot. 1:20-25. There is no dispute the federal Copyright Act is implicated by Bekaert's claims, and the Complaint alleges a separate cause of action for copyright infringement.

In support of his Motion, Heberer relies on Summit Machine Tool Mfg. Corp. v. Victor CNC Systems, 7 F.3d 1434 (9th Cir. 1993) and Kodadek v. MTV Networks, Inc., 152 F.3d 1209, 1212-13 (9th Cir. 1998). In Summit, the plaintiff alleged false designation of origin under the Lanham Act, unfair competition under California statutory and common law, intentional interference with contract, and intentional interference with prospective economic advantage. The Summit court reviewed and affirmed a judgment in favor of defendant following a bench trial at which, in pertinent part, the court held that to the extent plaintiff sought to protect its lathe designs, its unfair competition claims were preempted by federal patent and copyright laws.*fn2 In Kodadek, plaintiff sued to protect his drawings. On review of summary judgment in favor of the defendant on the unfair competition claim under CAL. BUS. & PROF. CODE §§ 17200, et seq., the Kodadek court found preemption because the plaintiff expressly based his unfair competition claim solely on rights equivalent to those protected by the federal copyright laws.

A state law cause of action is preempted by the Copyright Act if two elements are present. First, the rights that a plaintiff asserts under state law must be "rights that are equivalent" to those protected by the Copyright Act. 17 U.S.C. § 301(a) . . . Second, the work involved must fall within the "subject matter" of the copyright Act as set forth in 17 U.S.C. §§ 102 and 103.

Kodadek, 152 F.3d at 1212 (citation omitted).

Preemption analysis involves determining whether the state law claim contains an element not shared by the federal law; an element which changes the nature of the action "so that it is qualitatively different from a copyright [or patent] infringement claim." Balboa Ins. Co. v. Trans Global Equities, 218 Cal.App.3d 1327, 1340, 267 Cal.Rptr. 787 (1990); Del Madera Properties v. Rhodes & Gardner, Inc., 820 F.2d 973, 977 (9th Cir.1987) [overruled on other grounds]. Therefore, if copying the lathe or the plans for the lathe in itself infringes the state-created right, then the state-created right is preempted. Balboa, 218 Cal.App.3d at 1339-40, 267 Cal.Rptr. 787. Thus, "preemption law ... requires analysis of each theory [of unfair competition] to determine whether it contains the necessary qualitatively different extra element distinguishing it from copyright [or patent] protection." Id. at 1342, 267 Cal.Rptr. 787; see also Del Madera, 820 F.2d at 977.

Summit, 7 F.3d at 1439-40; see Del Madera, 820 F.2d at 977 (a claim will survive preemption if "the state cause of action [protects] rights which are qualitatively different from copyright rights. . . . The state claim must have an 'extra element' which changes the nature of the action").

California's unfair competition law implicates a "broad range of claims" (Balboa, 218 Cal.App.3d at 1341), "explicitly extends to any 'unlawful, unfair or deceptive business practice,' " and " 'the Legislature, in our view, intended by this sweeping language to permit tribunals to enjoin on-going wrongful business conduct in whatever context such activity might occur. . . .' " Summit, 7 F.3d at 1440 n.3, quoting Barquis v. Merchant's Collection Ass'n, 7 Cal.3d 94, 111 (1972). "The myriad branches of California's unfair competition law involve different elements and raise different issues." Summit, 7 F.3d at 1440 ("the breadth and analytical vagueness of [California's] unfair competition law complicates the preemption analysis greatly"), quoting Balboa, 218 Cal.App.3d at 1341. Preemption analysis, accordingly, requires the court to "precisely identify the nature of [plaintiff's] claims." Id.

Bekaert argues no portion of its Count IV claim is preempted by the Copyright Act, identifying three elements it has pled in that claim which cannot be asserted under the Copyright Act: "(1) misappropriation of goodwill; (2) misrepresentation via imitation for purposes of diverting business; and (3) misrepresentation via false and misleading advertising." Opp. 3:15-20. Moreover, Bekaert argues Heberer "ignores that Count IV is not based on the nameplate alone, but also the trade dress which includes the nameplate." Opp. 4:3-4.

Misappropriation is one branch of California's unfair competition law. . . . California's common law tort of misappropriation has three elements: "(1) the plaintiff has invested substantial time and money in development of its ... 'property'; (2) the defendant has appropriated the [property] at little or no cost; and (3) the plaintiff has been injured by the defendant's conduct." Self Directed, 908 F.2d at 467 (quoting Balboa, 218 Cal.App.3d at 1342, 267 Cal.Rptr. 787).

Summit, 7 F.3d at 1441, citing Balboa, 218 Cal.App.3d at 1342, and quoting Self Directed Placement Corp. v. Control Data Corp., 908 F.2d 462, 467 (9th Cir. 1990).

Bekaert distinguishes Summit on grounds its Count IV "does not merely allege misappropriation of the time and effort in developing Bekaert's trade dress and nameplate, but rather alleges the misappropriation of the goodwill associated with the trade dress and nameplate." Opp. 6:12-14. Bekaert distinguishes Kodadek on grounds that plaintiff "did not plead a claim based upon misrepresentation of goodwill, deliberate imitation to divert business resulting in unjust enrichment, and false advertising," as Bekaert pleads in its Count IV, but rather alleged conduct not qualitatively different from a copyright claim: defendants "have been publishing and placing on the market for sale products bearing the images subject to the copyright ownership of the plaintiff and has thereby been engaging in unfair trade practices and unfair competition against plaintiffs [sic] and to plaintiffs' [sic] irreparable damage." Opp. 6:15-26, quoting Kodadek, 152 F.3d at 1212.

Heberer relies on the "incorporation by reference" of all preceding paragraphs in the first paragraph of Count IV ( Compl. ¶ 58) as the foundation for his preemption argument. Reply 1:18-21. To the extent he also contends the other allegations of that cause of action (e.g., misappropriation of good will, misrepresentation by imitation to divert business) are insufficient to supply "extra elements" beyond the rights asserted that are equivalent to those protected by the Copyright Act, his own cited authority defeats his argument because the misappropriation and misrepresentation allegations in that cause of action are adequate to avoid preemption. See Summit, 7 F.3d 1434; Kodadek, 152 F.3d 1209; see also ValenteKritzer Video v. Pinckney, 881 F.2d 772, 776 (9th Cir. 1989)1976) (reversing a district court's finding on summary judgment that plaintiff's fraud claim was substantially equivalent to the rights afforded owners and exclusive licensees of copyrighted works under the Copyright Act and was ...

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