United States District Court, S.D. California
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS SECOND AMENDED COUNTERCLAIM AND GRANTING MOTION FOR LEAVE TO FILE AMENDED COMPLAINT
BARRY TED MOSKOWITZ, Chief District Judge.
Counterdefendants American Shooting Center, Inc., the Recce Group, Inc., and Marc Halcon have filed a motion to dismiss the Second Amended Counterclaim. American Shooting Center, Inc., and the Recce Group, Inc., have also filed a motion for leave to file an Amended Complaint. For the reasons discussed below, the motion to dismiss is GRANTED IN PART and DENIED IN PART, and the motion for leave to amend the Complaint is GRANTED.
This dispute concerns videos and other course materials used by Keiko Arroyo and Patrick Sweeney in providing high threat protection training, including a GI-Bill-funded protection training class at MiraCosta College.
Plaintiff American Shooting Center, Inc. ("ASC"), is in the business of providing specialty-training courses for security, medical procedures and protection, among other things. (Compl. ¶ 22.) Arroyo was an employee of ASC from October of 2002 to February 2005. (Compl. ¶ 23.) Sweeney worked for ASC from September 23, 2002 to April 13, 2004, and was hired again as a full-time employee on or about September 20, 2006. (Compl. ¶ 24.)
ASC alleges that as part of his work duties, Sweeney was to prepare training courses and training procedures for use by ASC. (Compl. ¶ 25.) The courses included videos and photographs of training and various security and medical scenarios, as well as materials for class instruction. (Id.) ASC explains that it terminated Sweeney in October of 2012, after ASC learned that Sweeney was working with Arroyo in a competing business to provide training courses using ASC's videos, photographs, and courses without ASC's knowledge. (Compl. ¶¶ 30-31.) According to ASC, Sweeney had been operating a competing business against ASC since 2007 while receiving compensation from ASC in the approximate amount of $75, 000 per year. (Compl. ¶ 36.)
In its Complaint, ASC asserts claims for: (1) copyright infringement; (2) secondary infringement of copyright; (3) unfair competition under California common law; (4) violation of Cal Bus. & Prof Code § 17200; (5) tortious interference with contractual relations; (6) intentional interference with prospective economic relations; (7) negligent interference with prospective economic relations; (8) unjust enrichment; (9) fraud; (10) violation of Cal. Penal Code § 496; (11) declaratory judgment; and (12) request for preliminary injunction.
Arroyo and Sweeney claim that Sweeney was hired by ASC/Marc Halcon in 2006 to bid and manage the renewal of a Navy contract. (Second Amended Counterclaim ("SAC") ¶ 21.) Arroyo and Sweeney allege that at all times, ASC and Halcon were aware that Sweeney had his own separate endeavors, including authoring and devising courses to teach threat protection to civilians. (SAC ¶¶ 23-24.) In January of 2010, Arroyo referred Sweeney to MiraCosta College's Community Services Division for purposes of the two of them working together to provide a training program to the school. (SAC ¶ 28.) Subsequently, Sweeney and Arroyo provided MiraCosta College with a training program where Arroyo taught the security guard and firearms subjects and Sweeney taught the four day bodyguard module. (SAC ¶ 29.) This course began to be taught five or six times per year. (Id.)
In or around April of 2012, MiraCosta College requested that Sweeney and Arroyo provide a GI-Bill-funded protection training class for the College. (SAC ¶ 32.) According to Sweeney and Arroyo, this work had nothing to do with Sweeney's employment with ASC or Halcon. (Id.) Sweeney did contact Halcon to see if ASC would be interested in being paid as a supplier to provide training facility premises for the course. (SAC ¶ 33.) Halcon agreed to rent the facility to Sweeney and Arroyo for the course. (Id.) Halcon also agreed to rent the facility so that Sweeney and Arroyo could create a promotional video for the MiraCosta College training class. (SAC ¶ 34.)
The SAC asserts the following claims against ASC, Halcon, and the Recce Group, Inc.: (1) declaratory relief; (2) copyright registration fraud; (3) civil conspiracy; (4) unfair competition under California common law; (5) unfair competition - Cal. Bus. & Prof. Code § 17200; (6) tortious interference with contractual relations; (7) intentional interference with prospective economic relations; (8) negligent interference with prospective economic relations; (9) unjust enrichment; (10) fraud; (11) defamation; (12) trade libel; (13) breach of covenant of good faith and fair dealing; (14) [reserved]; (15) concealment/fraudulent inducement of contract; and (16) injunction.
A. Motion to Dismiss Second Amended Counterclaim
Counterdefendants move to dismiss all of the counterclaims except for the first counterclaim for declaratory relief. As discussed below, the Court denies the motion as to the eleventh counterclaim for defamation, grants the motion in part as to the second counterclaim for copyright registration fraud, and grants the motion as to the remaining counterclaims.
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should be granted only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept. , 901 F.2d 696, 699 (9th Cir. 1988). When reviewing a motion to dismiss, the allegations of material fact in plaintiff's complaint are taken as true and construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington , 51 F.3d 1480, 1484 (9th Cir. 1995). Although detailed factual allegations are not required, factual allegations "must be enough to raise a right to relief above the speculative level." Bell Atlantic v. Twombly , 550 U.S. 544, 555 (2007). "A plaintiff's obligation to prove the grounds' of his entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not show[n] that the pleader is entitled to relief." Ashcroft v. Iqbal , 565 U.S. 662, 679 (2009) (internal quotation marks omitted). Only a complaint that states a plausible claim for relief will survive a motion to dismiss. Id.
2. Copyright Registration Fraud (Second Counterclaim)
Counterclaimants allege that ASC and Halcon sought copyright registration on training materials that were authored by and belonged to Sweeney. (SAC ¶ 51.) According to the SAC, ASC/Halcon knew that the materials were not created pursuant to a work-made-for-hire and that ASC had no right to copyright the materials. (SAC ¶ 53.) Nevertheless, Counterclaimants allege, ASC and Halcon fraudulently filed for copyright registration of the materials in dispute. (Id.)
Counterdefendants argue that this claim should be dismissed because (1) fraud on the Copyright Office is not a stand-alone claim, and (2) Counterclaimants have failed to provide factual support for their assertion that they have been prejudiced by the alleged fraud.
Although fraud on the Copyright Office is normally an affirmative defense to copyright infringement, not a cause of action, courts have allowed accused infringers to bring a claim for declaratory judgment that a copyright is invalid based on fraud on the Copyright Office. See, e.g., Gomba Music, Inc. v. Avant, 2014 WL 6669182, ___ F.Supp. 3d ___ (E.D. Mich. Nov. 24, 2014); Shirokov v. Dunlap, Grubb & Weaver, PLLC , 2012 WL 1065578 (D. Mass. March 27, 2012). However, damages are not available on a claim for fraud on the Copyright Office. Shirokov , 2012 WL 1065578, at *31.
The SAC alleges that Counterclaimants have suffered harm from the alleged fraud on the Copyright Office and are entitled to compensation. (SAC ¶ 54.) The SAC also asks that the copyrights in dispute be invalidated. (Id.) To the extent that Counterclaimants seek damages on their claim for fraud on the Copyright Office, their claim is dismissed. However, the ...