United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND
BETH LABSON FREEMAN, District Judge.
Before the Court is Defendant MBC FZ-LLC's Motion to Dismiss Complaint filed pursuant to Federal Rule of Civil Procedure 12(b)(6) on March 27, 2014. (Def.'s Mot., ECF 19) The Court heard oral argument on the motion on June 19, 2014, after which it took the matter under submission. Based on the parties' respective written submissions and the oral argument of counsel, for the reasons stated herein, Defendant's motion is GRANTED with leave to amend.
Plaintiff AJ Management Consulting, LLC ("Plaintiff") develops technology solutions for cloud computing and licenses those solutions and applications to clients worldwide. (Compl. ¶¶ 5-6, ECF 1) Two such solutions are "CloudTV, " "a set of cloud-based and mobile technologies" that enable users to take advantage of social media opportunities in television, ( id. ¶ 7), and "timePlay, " a "cloud-enabled digital story telling" application, ( id. ¶ 8).
On November 17, 2011, Plaintiff and Defendant MBC FZ-LLC ("Defendant") entered into an agreement to license the CloudTV application ("CloudTV Agreement"). ( Id. ¶ 9) Under the CloudTV Agreement, Defendant agreed to pay an annual fee for ten user licenses, payable on the effective date of the agreement and then at the beginning of each successive term year. ( Id. ¶ 10; see also id. Exh. B ("CloudTV Ag.") Sched. A-B) The CloudTV Agreement provided Defendant with the right to terminate the agreement at any time without cause, upon providing Plaintiff with written notice thirty days in advance of termination. (Compl. ¶ 10; CloudTV Ag. § 5.2) The CloudTV Agreement also contains a choice of law provision stating that "[t]his Agreement shall be governed by and construed in accordance with the laws in force in the United Arab Emirates." (CloudTV Ag. § 10.15)
On December 11, 2012, Defendant notified Plaintiff in writing that it wished to terminate the CloudTV Agreement. (Compl. ¶ 21) Plaintiff alleges that because the effective termination date would have been January 11, 2013-30 days from the date of Defendant's written notice of termination-Defendant "was liable to pay the Plaintiff $28, 800" for the licenses for 2013. ( Id. ¶ 23) Defendant has allegedly not paid this amount. ( Id. ¶ 24)
On May 10, 2012, the parties entered into a second agreement, this time for services in connection with the development of a custom application for use in conjunction with Defendant's television series "Omar, " a historical Arab television drama series produced and broadcast by Defendant (the "Omar Agreement"). ( Id. ¶¶ 12-13; see also id. Exh. D ("Omar Ag.")) Plaintiff alleges that the purpose of the Omar Agreement was to provide Defendant "with a license to use the timePlay application along with certain services to customize the timePlay application for use on mobile devices for use in connection with Defendant's Omar' series." (Compl. ¶ 14)
Consistent with this purpose, the Omar Agreement states, as background to the agreement, that "MBC wishes to engage AJ to provide certain system configuration, license and development services in relation to the [Omar] Application." (Omar Ag.) The Omar Agreement contains provisions detailing the parties' respective intellectual property rights to the contracted works. ( Id. §§ 6.1-6.4) The Omar Agreement also includes a choice of law provision stating that "[t]his Agreement shall be governed by and construed in accordance with the laws in force in the United Arab Emirates." ( Id. § 10.15) Plaintiff alleges that it performed its obligations under the Omar Agreement by completing and delivering the "Omar App" to Defendant "in a timely manner, " whereupon Defendant launched the application in connection with its "hugely popular and successful television series Omar.'" ( Id. ¶ 16) Plaintiff does not allege that Defendant failed to pay Plaintiff the agreed upon service fees for developing the Omar App. ( See Omar Ag. Sched. B)
Plaintiff registered the source code for the timePlay application with the United States Copyright Office, with an effective registration date of January 15, 2013. ( Id. ¶ 8; see also id. Exh. A) The Omar App is alleged to be a customized version of the timePlay application. (Compl. ¶ 14) The Omar App source code, when delivered by Plaintiff, contained a notice declaring Plaintiff's ownership of the copyright to "Omar TimePlay App-Version 5.0.4 Web 980×768 with iFrame (Released Jul 20, 7:32 AM)." ( Id. ¶ 17) The notice also warned that "Removing This Notice Revokes Your License Agreement." ( Id. ) The source code further states: "Authorised Redistributions of source code and assets must retain the above copyright notice, this list of conditions and the following disclaimer." ( Id. )
Defendant allegedly removed this copyright notice from the Omar App source code shortly after receiving it from Plaintiff. ( Id. ) Although Plaintiff brought this removal to Defendant's attention, Defendant never re-inserted the copyright notice, and continued to distribute the Omar App, which was "downloaded by hundreds of thousands of users worldwide." ( Id. ¶ 19) Plaintiff alleges that because the Omar App is a customized version of the timePlay application, Defendant's use and distribution of the Omar App was necessarily subject to a license to use and distribute the timePlay application. ( Id. ¶¶ 14-15) The operative license is alleged to be an End User License Agreement found on Plaintiff's website (the "timePlay EULA"). ( Id .; see also id. Exh. E) Plaintiff alleges that Defendant's removal of the copyright notice revoked Defendant's license and, as such, Defendant's continued distribution of the Omar App infringes Plaintiff's copyright in timePlay. (Compl. ¶ 20)
II. LEGAL STANDARDS
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock Inc., 349 F.3d 1191, 1199-200 (9th Cir. 2003). Dismissal under Rule 12(b)(6) may be based on either the "lack of a cognizable legal theory" or on "the absence of sufficient ...