United States District Court, W.D. Texas, San Antonio Division
ORDER ON MOTION FOR JUDGMENT ON THE PLEADINGS AND
MOTIONS FOR SUMMARY JUDGMENT
ELIZABETH S. ("BETSY") CHESTNEY UNITED STATES
the Court in the above-styled cause of action are the
following four dispositive motions: Defendants Wants2Scrap,
LLC and Michele Parrish's Motion for Judgment on the
Pleadings Pursuant to Fed.R.Civ.P. 12(c) [#58], Defendants
Wants2Scrap, LLC and Michele Parrish's Motion for Summary
Judgment [#61], Plaintiff and Counter-Defendants' Motion
for Partial Summary Judgment or Alternatively to Exclude
Evidence [#62], and Defendants Wants2Scrap, LLC and Michele
Parrish's Supplemental Motion for Summary Judgment [#96].
In reviewing these motions, the Court has also considered the
numerous responses and replies on file pertaining to the
motions [#59, #66, #72, #80, #83, #86, #88, #89, #94, #95,
#97, #98, #99]. The undersigned has authority to enter this
Order as all parties have consented to the jurisdiction of a
United States Magistrate Judge [#17, #18]. See 28 U.S.C.
§ 636(c)(1). For the reasons set forth below, the Court
will (1) grant Defendants' Supplemental Motion for
Summary and dismiss Plaintiff's copyright claim for
failure to obtain a copyright registration prior to filing
suit; (2) order Defendants to show cause as to why their
counterclaims for a declaratory judgment of non-infringement
and claims of copyright infringement and breach of contract
should not be dismissed sua sponte along with Plaintiff's
copyright claim; (3) grant in part Defendants' motion for
judgment on the pleadings and dismiss Plaintiff's
conversion claim as preempted by the Copyright Act; (4) grant
in part Defendants' motion for summary judgment on
Plaintiff's fraud and Texas Free Enterprise and Antitrust
Act claims; and (5) hold in abeyance Plaintiff's and
Counter-Defendants' motion for partial summary judgment
while the Court considers whether to dismiss Defendants'
counterclaims sua sponte after receiving Defendants' show
procedural history of this case begins on October 24, 2017 in
the Northern District of Indiana, where Defendant Want2Scrap,
LLC filed suit seeking a declaration of non-infringement of
copyright and asserting claims of breach of contract,
copyright infringement, and other torts against Mabel Larsen
and the two unincorporated entities through which she
conducts business-Mai Larsen Designs and Creative Scrap
Designs. The following day, Mai Larsen Designs filed this
action against Want2Scrap and its owner Michele Parrish,
asserting claims of copyright infringement, fraud, and theft
by conversion in this district. (Orig. Compl. [#1].) The
Indiana court transferred the Indiana case to this division,
where it was assigned the cause No. 5:18-CV-321-OLG.
Following the transfer, the Court consolidated the Texas and
Indiana cases and designated cause No. 5:17-CV-1084-OLG as
the lead case. (Consolidation Order [#14].)
Mai Larsen Designs subsequently filed her First Amended
Complaint [#15] in the lead case; the parties consented to
the jurisdiction of a United States Magistrate Judge; and the
consolidated action was transfered to the undersigned's
docket on May 22, 2018 [#19]. The undersigned thereafter
realigned the parties post-consolidation, designating Mai
Larsen Designs as Plaintiff (hereinafter
“Larsen”),  Want2Scrap and Michele Parrish as
“Defendants”), and Mabel Larsen, Creative Scrap
Designs, and Mai Larsen Designs (“the Larsen
Parties”) as Counter-Defendants [#31].
Court denied Defendants' motion to dismiss
Plaintiff's First Amended Complaint [#28], and Larsen
filed a Second Amended Complaint on December 12, 2018 [#41],
again asserting claims of copyright infringement (Count I),
fraud (Count II), fraud in the inducement (Count III), theft
by deception and conversion (Count IV), and conspiracy and
unfair competition in violation of the Texas Free Enterprise
and Antitrust Act (Counts V and VI). Larsen's Second
Amended Complaint alleges that Mai Larsen Designs is a
designer of chipboard embellishment and craft designs for use
in homemade scrapbooks that are original works that may be
copyrighted under federal law. (Second Am. Compl. [#41] at
¶ 4.) Larsen accuses Defendants of infringing its
copyrights by: selling her designs on Want2Scrap's
website, at trade shows, and directly to retailers; failing
to compensate Larsen for her designs as promised in an oral
agreement between the parties; and harassing Larsen on social
media to prevent her from competing with Want2Scrap in the
sale of scrapbook designs and chipboard products.
(Id. at ¶¶ 4-9.)
response, Defendants filed Counterclaims on December 26, 2018
[#42], seeking a declaratory judgment of non-infringement of
copyright against the Larsen Parties (Count I); alleging a
claim of breach of contract against Larsen (Count II); and
asserting claims against the Larsen Parties for copyright
infringement (Count III), tortious interference with business
relations (Count IV), unfair competition (Count V), inducing
copyright infringement (Count VI), and defamation (Count
VII). Defendants allege that Want2Scrap and Larsen entered
into a copyright license agreement whereby Want2Scrap was
granted an exclusive license to Larsen's artwork that
allowed Defendants to use all of the works at issue in this
lawsuit. (Counterclaim [#42] at ¶ 73.) Defendants
contend that Want2Scrap fullfilled all of its obligations
under the copyright license agreement, but Larsen breached
her contractual duties by advertising, selling, or
distributing works substantially similar to the licensed
works without Want2Scrap's permission. (Id. at
¶¶ 137-38.) Defendants further allege that the
Larsen Parties made false and misleading statements about
Want2Scrap to its prospective customers and publicized false
statements harmful to the interests of Want2Scrap.
(Id. at ¶¶ 148, 163.)
filed a motion for judgment on the pleadings pursuant to Rule
12(c) on March 7, 2019 [#58], arguing that Larsen's
fraud, conversion, and unfair competition claims are all
preempted by the Copyright Act and must be dismissed.
Defendants thereafter filed a motion for summary judgment on
March 14, 2019 [#61], arguing that Larsen's copyright
claims fail as a matter of law because the parties'
copyright license agreement operates as a complete defense to
copyright infringement; there is no evidence of any oral
agreement to compensate Larsen for its designs; and Larsen
fails to allege an antitrust injury under the Texas Free
Enterprise and Antitrust Act. The Larsen Parties filed a
Motion for Partial Summary Judgment on the same day [#62],
arguing that the identified copyright license agreement is
unenforceable and seeking summary judgment on all of
Defendants' counterclaims that are based on the agreement
(the request for declaratory judgment and claims for breach
of contract, copyright infringement, and inducing copyright
infringement) or, alternatively, seeking an order excluding
the agreement from evidence admitted at trial.
Court held a pretrial status conference in this case on April
24, 2019, at which it heard argument on these three
dispositive motions. At the close of the hearing,
Defendants' counsel alerted the Court to a recent Supreme
Court decision, Fourth Estate Public Benefit Corp. v.
Wall-Street.com, LLC, __U.S.__, 139 S.Ct. 81 (2019),
which interprets the Copyright Act's statutory
preconditions to filing a civil suit under the Act. The Court
ordered briefing on the impacts, if any, of Fourth
Estate on the instant case. In response, Defendants
filed their supplemental motion for summary judgment [#96] on
May 2, 2019, which argues that Larsen's copyright claims
must be dismissed for failure to obtain registered copyrights
prior to instituting this lawsuit. All four dispositive
motions are ripe for the Court's resolution.
Judgment on the Pleadings
12(c) of the Federal Rules of Civil Procedure provides:
“After the pleadings are closed-but early enough not to
delay trial-a party may move for judgment on the
pleadings.” Fed.R.Civ.P. 12(c). The standard for
dismissal under Rule 12(c) is the same as that for dismissal
for failure to state a claim under Rule 12(b)(6). Johnson
v. Johnson, 385 F.3d 503, 529 (5th Cir. 1999).
survive a motion to dismiss under Rule 12(b)(6), “a
complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting 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.”
Id. Although a complaint “does not need
detailed factual allegations, ” the “allegations
must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555.
The allegations pleaded must show “more than a sheer
possibility that a defendant has acted unlawfully.”
Iqbal, 556 U.S. at 678.
a court must accept “all well-pleaded facts as true,
viewing them in the light most favorable to the
plaintiff.” Martin K. Eby Const. Co. v. Dallas Area
Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004).
However, a court need not credit conclusory allegations or
allegations that merely restate the legal elements of a
claim. Chhim v. Univ. of Texas at Austin, 836 F.3d
467, 469 (5th Cir. 2016) (citing Iqbal, 556 U.S. at
678). In short, a claim should not be dismissed unless the
court determines that it is beyond doubt that the plaintiff
cannot prove a plausible set of facts that support the claim
and would justify relief. Twombly, 550 U.S. at 570.
judgment is appropriate under Rule 56 of the Federal Rules of
Civil Procedure only “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.” Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986); see
also Fed. R. Civ. P. 56(c). A dispute is genuine only if
the evidence is such that a reasonable jury could return a
verdict for the nonmoving party. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).
party moving for summary judgment bears the initial burden of
“informing the district court of the basis for its
motion, and identifying those portions of [the record] which
it believes demonstrate the absence of a genuine issue of
material fact.” Catrett, 477 U.S. at 323. Once
the movant carries its burden, the burden shifts to the
nonmoving party to establish the existence of a genuine issue
for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986); Wise v. E.I.
Dupont de Nemours & Co., 58 F.3d 193, 195 (5th Cir.
1995). The non-movant must respond to the motion by setting
forth particular facts indicating that there is a genuine
issue for trial. Miss. River Basin Alliance v.
Westphal, 230 F.3d 170, 174 (5th Cir. 2000). The parties
may satisfy their respective burdens by tendering
depositions, affidavits, and other competent evidence.
Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.
1992). The Court will view the summary judgment evidence in
the light most favorable to the non-movant. Rosado v.
Deters, 5 F.3d 119, 123 (5th Cir. 1993).
the non-movant has been given the opportunity to raise a
genuine factual issue, if no reasonable juror could find for
the non-movant, summary judgment will be granted.”
Westphal, 230 F.3d at 174. However, if the party
moving for summary judgment fails to satisfy its initial
burden of demonstrating the absence of a genuine issue of
material fact, the motion must be denied, regardless of the
nonmovant's response. Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).
Court will grant Defendants' supplemental motion for
summary judgment and dismiss Larsen's claim for copyright
infringement for failure to obtain a copyright registration
prior to filing this lawsuit. The Court will also (1) grant
in part Defendants' motion for judgment on the pleadings
and dismiss Larsen's conversion claim as preempted under
the Copyright Act and (2) grant in part Defendants'
motion for summary judgment as to Larsen's claims of
fraud and claims under the Texas Free Enterprise and
Antitrust Act. These rulings result in the dismissal of all
of the claims asserted by Larsen in her Second Amended
Defendants' counterclaims, the Court will hold in
abeyance Plaintiff's partial motion for summary judgment
while the Court considers whether to dismiss Defendants'
request for declaratory judgment of non-infringement and
counterclaims of copyright infringement and breach of
contract sua sponte along with Larsen's
copyright infringement claim in light of the Supreme
Court's decision in Fourth Estate.
Defendants' Supplemental Motion for Summary Judgment
seek dismissal of Larsen's claim of copyright
infringement (Count I of the Second Amended Complaint) on the
basis that Plaintiff failed to satisfy the statutory
precondition to bringing suit under the Copyright Act as
interpreted by the Supreme Court's recent decision in
Fourth Estate Public Benefit Corp. v. Wall-Street.com,
LLC, --U.S.--, 139 S.Ct. 881 (2019). The Court ...