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AtPac, Inc. v. Aptitude Solutions

April 28, 2010

ATPAC, INC., A CALIFORNIA CORPORATION, PLAINTIFF,
v.
APTITUDE SOLUTIONS, INC., A FLORIDA CORPORATION, COUNTY OF NEVADA, A CALIFORNIA COUNTY, AND GREGORY J. DIAZ, AN INDIVIDUAL, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO DISMISS, MOTION FOR JUDGMENT ON THE PLEADINGS, AND MOTION TO STRIKE

Plaintiff AtPac, Inc. ("AtPac") filed this action against defendants Aptitude Solutions, Inc. ("Aptitude"), County of Nevada, and Gregory J. Diaz alleging breach of contract, misappropriation of trade secrets, copyright infringement, and violation of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030 et seq. Defendants move to dismiss and move for judgment on the pleadings on plaintiff's fourth cause of action pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(c) for failure to state a claim upon which relief can be granted, and to strike plaintiff's prayer for statutory damages for its third cause of action for copyright infringement pursuant to Rule 12(f) because plaintiff is not entitled to statutory damages as a matter of law.

I. Factual and Procedural Background

AtPac provides software and consulting services related to county clerk-recorder information imaging systems. (Compl. ¶ 3.) These systems are computer-based and designed to, inter alia, electronically receive, store, and organize information that is within the purview of a county clerk-recorder and store images of relevant documents associated with this information. (Id.) AtPac's clerk-recorder imaging information software is distributed under the mark "CRiis." (Id.) In 1999, AtPac allegedly entered into a License Agreement with County of Nevada for the CRiis software and related services to help County of Nevada electronically maintain and organize public information. (Id. ¶ 12.) The License Agreement was allegedly amended between 2001 and 2006, the most recent of which extended the term of the License Agreement until June 30, 2010. (Id. ¶ 13.)

The License Agreement allegedly provides, inter alia, that AtPac retains title to the software, that the software is trade secrets and that County of Nevada will not release or disclose the information to third parties (Id. ¶ 14), that County of Nevada will notify AtPac immediately of any known or suspected unauthorized use or access of the CRiis software (Id. ¶ 16), and that all documents provided to County of Nevada may not be reproduced by County of Nevada (Id. ¶ 17). California law governs the License Agreement. (Id. ¶ 22.)

In November 2008, Diaz, the Clerk-Recorder of County of Nevada, allegedly notified AtPac that County of Nevada intended to terminate the License Agreement and obtain the services of Aptitude, one of AtPac's competitors. (Id. ¶ 23.) Diaz allegedly rejected AtPac's offer to help County of Nevada extract the data from AtPac's files and convert it to a form usable by Aptitude. (Id.) Diaz allegedly represented in a January 8, 2008 letter that County of Nevada would extract the data from the AtPac files on its own, and that County of Nevada would not provide AtPac's trade secret information to Aptitude or save the trade secret and proprietary information. (Id. ¶¶ 24-25.) On January 13, 2009, County of Nevada allegedly ratified an indemnification agreement between Aptitude and County of Nevada, indemnifying Aptitude for claims related to "extraction and migration of County data for the system conversion." (Id. ¶ 26.)

AtPac alleges that County of Nevada did not perform the data extraction itself, and that it instead provided Aptitude with AtPac's trade secret and copyright-protected information. (Id. ¶¶ 28-30.) Specifically, AtPac alleges that Diaz and County of Nevada copied and provided this information through e-mail communications and through a public, non-secure file transfer protocol ("FTP") site entitled "Aptitude FTP" without AtPac's authorization. (Id. ¶¶ 29-33.) Diaz and County of Nevada allegedly provided Aptitude with "full and unfettered access" to the server located in County of Nevada's offices on which AtPac trade secret information and the CRiis source code are stored without AtPac's authorization. (Id. ¶ 34.)

Plaintiff filed its Complaint on February 3, 2010, (Docket No. 1) and Aptitude and Diaz filed their Answer on March 19, 2010. (Docket No. 10.) Presently before the court are County of Nevada's motion to dismiss plaintiff's fourth cause of action for violation of the CFAA (Docket No. 13) and Aptitude and Diaz's motion for judgment on the pleadings on plaintiff's fourth cause of action for violation of the CFAA, as well as each defendant's motion to strike plaintiff's prayer for statutory damages.

II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff needs to plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57).

Judgment on the pleadings is appropriate after the pleadings have closed when, on the face of those pleadings, accepting the allegations of the non-moving party as true, no material issue of fact remains to be resolved. See Fed. R. Civ. P. 12(c); Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1990). Under such circumstances, the moving party can obtain judgment as a matter of law. Hal Roach Studios, 896 F.2d at 1550. "Generally, district courts have been unwilling to grant a Rule 12(c) dismissal 'unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law.'" Doleman v. Meiji Mut. Life Ins. Co., 727 F.2d 1480, 1482 (9th Cir. 1984) (quoting 5A C. Wright & A. Miller, Federal Practice and Procedure: Civil, § 1368 at 690 (1969)).

On a motion for judgment on the pleadings, the factual allegations of the non-moving party are taken as true. Doleman, 727 F.2d at 1482 (citing Austad v. United States, 386 F.2d 147, 149 (9th Cir. 1967)). A Rule 12(c) motion is therefore essentially equivalent to a Rule 12(b)(6) motion to dismiss and consequently, a district court may "dispos[e] of the motion by dismissal rather than judgment."*fn1 Sprint Telephony PCS, L.P. v. County of San Diego, 311 F. Supp. 2d 898, 902-03 (S.D. Cal. 2004). "[D]ismissal can be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Sprint Telephony, 311 F. Supp. 2d at 902-03; see also Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). The court will therefore evaluate defendants' motions together.

In general a court may not consider items outside the pleadings upon deciding a motion to dismiss or motion for judgment on the pleadings, but may consider items of which it can take judicial notice. Heliotrope Gen., Inc. v. Ford Motor Co., 189 F.3d 971, 981 n.18 (9th Cir. 1999) (internal citations omitted); Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts "not subject to reasonable dispute" because they are either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201. County of Nevada has submitted a Request for Judicial Notice ("RJN") (Docket No. 15) that contains a copy of the U.S. Copyright Office's web page showing that AtPac registered its CRiis software for copyright on January 26, 2010. (RJN Ex. A.) The court will take judicial notice of this exhibit because the record is generated by an official government website such that its accuracy is not reasonably in dispute. See, e.g., Edejer v. DHI Mortg. Co., No. 09-1302, 2009 WL 1684714, at *4 (N.D. Cal. June 12, 2009); Piazza v. EMPI, Inc., No. 07-954, 2009 WL 590494, at *4 (E.D. Cal. Feb. 29, 2008); see also Denius v. Dunlap, 330 F.3d 919, 926-27 (7th Cir. 2003) (taking judicial notice of information on official government website).

A. Motions to Dismiss Plaintiff's Fourth Cause of Action for Violation of the CFAA

As a preliminary matter the court notes that the motions are substantively identical, and will therefore only refer to and cite County of Nevada's motion ...


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