Media.net Advertising FZ-LLC v. Netseer Inc.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS; AND DENYING DEFENDANT’S MOTION TO STRIKE DOCKET NO. 84

          EDWARD M. CHEN United States District Judge.

         Previously, the Court denied Defendant's motion for summary judgment but granted its motion to dismiss. Docket No. 69. With respect to the motion to dismiss, the Court gave Plaintiff leave to amend its claims for copyright infringement and unfair competition (California Business & Professions Code § 17200). Id. Plaintiff subsequently filed a second amended complaint (“SAC”) in which it repled the copyright infringement and § 17200 claims. Docket No. 76. Defendant has now moved to dismiss those claims. In the alternative, Defendant has moved to strike portions of the SAC. Id. Having considered the parties' briefs, as well as the oral argument of counsel, the Court hereby GRANTS in part and DENIES in part Defendant's motion to dismiss. The Court further DENIES Defendant's motion to strike.

         I. FACTUAL & PROCEDURAL BACKGROUND

         Plaintiff is a provider of online contextual-advertising services and offers its customers a website-based advertisement creation platform (the “Platform”), which allows its users to create custom advertisements. SAC 76 ¶¶ 1, 21, 24. Website publishers using the Platform can place a Media.net ad unit on their websites so that when a website visitor clicks on the ad unit, the visitor is taken to a “search results page” which displays relevant advertisements. Id. ¶ 26. Plaintiff published the original version of its search results page (“Original Media.net Results Page”) in February 2014. Id. ¶ 29.

         Defendant is a competing contextual-advertising provider. SAC ¶¶ 39-40. Defendant also provides advertising units that its customers can place on their websites. Id. ¶ 40. As with Plaintiff's Platform, when a user clicks on Defendant's advertising unit, the user is directed to a search results page that offers relevant advertisements. Id. ¶ 41. Plaintiff alleges Defendant directly copied a substantial portion of Plaintiff's hypertext markup language (“HTML”) code and used it to create Defendant's own search results page which is substantially similar to Plaintiff's. Id. ¶¶ 43-47.

         As indicated above, previously, Defendant challenged Plaintiff's first amended complaint (“FAC”) in a motion to dismiss. The Court granted the motion in part but gave Plaintiff leave to amend its copyright infringement claims and its § 17200 claim. Docket No. 69. With respect to the copyright claims, the Court concluded that “portions of Plaintiff's HTML code” were copyrightable, specifically, the portions that contained “classes” and “comments.” Id. at 14:11-27. However, the Court found that the copyright claims, as alleged, were not adequately pled because, inter alia, Plaintiff failed to “identify each portion of the HTML code Defendant allegedly infringed.” Id. at 18:16-18. As for the § 17200 claim, the Court held that, as alleged, it was deficient because it was preempted by the Copyright Act. Id. at 27:12-14. The Court gave Plaintiff leave to amend the copyright infringement and § 17200 claims to cure the above deficiencies. Id. at 29:3-8.

         Plaintiff thereafter filed its SAC. With respect to the copyright claims, the SAC is largely the same as the FAC. For example, like the FAC, the SAC contains the same table of “several examples of NetSeer's infringement.” SAC ¶ 48. The only new substantive allegation in the SAC is the statement that Defendant “viewed and copied all or substantial portions of the Media.net result page source code.” Id. ¶ 60. As for the § 17200 claim, Plaintiff has revised its allegations, now focusing on Defendant's alleged “misrepresentation and omissions of material fact” to Plaintiff's existing and potential clients that amounted to “unfair or fraudulent business acts.” Id. ¶¶ 104, 107.

         II. DISCUSSION

         A. Motion to Dismiss

         1. Legal Standard

         Defendant first moves to dismiss the newly pled copyright infringement and § 17200 claims pursuant to Federal Rule of Civil Procedure 12(b)(6). Under that rule, a party may seek dismissal based on failure to state a claim. A Rule 12(b)(6) motion tests the sufficiency of a complaint, asking whether a plaintiff has alleged “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). Although a complaint need not contain “detailed factual allegations, ” a complaint that contains merely “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Rather, “'[f]actual allegations must be enough to raise a right to relief above the speculative level.'” Williams v. Gerber Prod. Co., 552 F.3d 934, 938 (9th Cir. 2008) (quoting Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678; see also Twombly, 550 U.S. at 556. “The plausibility standard is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.

         In ruling on a Rule 12(b)(6) motion, courts “accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Courts may dismiss a claim “only if it appears beyond doubt that the plaintiff could prove no set of facts in support of his claim which would entitle him to relief.” Cook v. Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011) (internal quotation marks omitted).

         2. Copyright Infringement Claims

         As noted above, when the Court granted Defendant's motion to dismiss the copyright claims as pled in the FAC, it gave Plaintiff leave to amend. The Court specifically instructed Plaintiff that, to cure the deficiency in the FAC, it had “to identify each portion of the HTML code Defendant allegedly infringed and to allege facts ...