United States District Court, W.D. Texas, Austin Division
PROFESSIONAL LIABILITY INSURANCE SERVICES, INC.
HISCOX, INC., et al.
Honorable Lee Yeakel United States District Judge
REPORT AND RECOMMENDATION OF THE UNITED STATES
W. AUSTIN UNITED STATES MAGISTRATE JUDGE.
the Court are Defendant's Motion to Dismiss (Dkt. No. 32)
and Plaintiff's Response (Dkt. No. 36). Defendant did not
file a Reply. The District Court referred the above motion to
the undersigned Magistrate Judge for a report and
recommendation pursuant to 28 U.S.C. § 636(b) and Rule
1(c) of Appendix C of the Local Court Rules.
Professional Liability Insurance Services, Inc.
(“PLIS”) brings this suit against Hiscox, Inc.,
U.S. Risk, Inc. and U.S. Risk, LLC alleging a claim for
copyright infringement. PLIS develops, sells, and administers
insurance programs. PLIS claims that roughly twenty years ago
it invested resources to create an insurance policy and
application titled “Trade Name Restoration Loss of
Business Interruption Policy and Incident Response Insurance
for Food Borne Illness Policy” (the “TNR
Policy”). PLIS alleges that it labeled the TNR Policy
as “Copryrighted” and subsequently was granted a
United States copyright for the policy. PLIS alleges that the
TNR Policy was specially designed and written to certain
specifications based upon PLIS's expertise and has
attracted many customers because of its uniqueness.
has previously alleged that U.S. Risk was infringing upon
PLIS's copyright in the TNR Policy, and filed suit
against it in 2006 and 2015. The suits were settled and U.S.
Risk, as a result, allegedly agreed to modify one of its
infringing policies. In its current Complaint, PLIS alleges
that U.S. Risk hired a former employee of PLIS who had access
to PLIS's proprietary material. PLIS alleges that U.S.
Risk and PLIS's former employee have continued their
misappropriation of PLIS's intellectual property. PLIS
claims that an employee of Hiscox admitted to a U.S. Risk
employee to copying parts of the TNR Policy. PLIS also states
that it has a copy of U.S. Risk's policy, which merely
copies Hiscox's infringing policy. PLIS states that these
policies copy the unique wording and materials of the TNR
Policy, including plagiarizing the definitions in PLIS's
policy. PLIS claims that this copying has damaged PLIS, and
it has demanded that Hiscox and U.S. Risk cease offering the
infringing policies, but they have refused to do so. PLIS
thus filed this lawsuit, and U.S. Risk, Inc. and U.S. Risk,
LLC (collectively, “U.S. Risk”) move to dismiss
the claims against them.
Rule of Civil Procedure 12(b)(6) allows a party to move to
dismiss an action for failure to state a claim upon which
relief can be granted. Fed.R.Civ.P. 12(b)(6). In deciding a
Rule 12(b)(6) motion to dismiss for failure to state a claim,
“[t]he court accepts all well-pleaded facts as true,
viewing them in the light most favorable to the
[nonmovant].” In re Katrina Canal Breaches
Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal
quotation marks omitted), cert. denied, 552 U.S.
complaint attacked by a Rule 12(b)(6) motion does not need
detailed factual allegations in order to avoid dismissal, the
plaintiff's factual allegations “must be enough to
raise a right to relief above the speculative level.”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). The Supreme Court has explained that a court need not
accept as true conclusory allegations or allegations stating
a legal conclusion. Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (“mere conclusions[ ] are not entitled to
the assumption of truth.”). A complaint must contain
sufficient factual matter “to state a claim to relief
that is plausible on its face.” Id. (quoting
Twombly, 550 U.S. at 570). “A claim has facial
plausibility when the [nonmovant] pleads factual content that
allows the court to draw the reasonable inference that the
[movant] is liable for the misconduct alleged.”
succeed on a claim for copyright infringement, the plaintiff
must show “(1) ownership of a valid copyright, and (2)
copying of constituent elements of the work that are
original.” Feist Publ'ns, Inc. v. Rural Tel.
Serv. Co., Inc., 499 U.S. 340, 361 (1991); Vallery
v. Am. Girl, L.L.C., 697 Fed.Appx. 821, 823 (5th Cir.
2017). In order to establish “copying, ” a
plaintiff must show “factual copying and substantial
similarity.” Guzman v. Hacienda Records and
Recording Studio, 808 F.3d 1031, 1037 (5th Cir. 2015).
In addition, “factual copying may be inferred from (1)
proof that the defendant had access to the copyrighted work
prior to the creation of the infringing work, and (2)
probative similarity.” Positive Black Talk Inc. v.
Cash Money Records, Inc., 394 F.3d 357, 368 (5th Cir.
2004). If “access” cannot be shown, the plaintiff
may prove factual copying by “showing a ‘striking
similarity' between the two works that the similarity
could only be explained by actual copying.” Armor
v. Knowles, 512 F.3d 147, 152 n.3 (5th Cir. 2007).
Finally, even if copying is established, it must be legally
actionable. “To determine whether an instance of
copying is legally actionable, a side-by-side
comparison must be made between the original and the copy to
determine whether a layman would view the two works as
‘substantially similar.'” Creations
Unlimited, Inc. v. McCain, 112 F.3d 814, 816 (5th Cir.
the Plaintiff has pled enough facts to survive a motion to
dismiss. Regarding the first prong-ownership of a valid
copyright-U.S. Risk argues that PLIS's complaint fails
because it is a complaint about four short words or phrases,
rather than a copyright on its insurance policy as a whole.
However, as PLIS rightly argues, it does not base its claim
merely on the ownership of the short words and phrases, but
rather is arguing that the Defendants' “Restaurant
Contamination” policy infringes upon Plaintiff's
copyrighted TNR policy, or overall policy. PLIS in its
Complaint “asserts that Defendants' conduct
constitutes an infringement of its TNR policy in violation of
Title 17 U.S.C. § 500.” Dkt. No. 21 at 5.
to the second prong, PLIS has also pled enough facts to plead
a claim that U.S. Risk copied constituent elements of the
work that are original. PLIS alleges that U.S. Risk had
access to the copyrighted work prior to the creation of its
own infringing policy by way of Defendant Hiscox's
policy. PLIS further alleges that, according to a
communication between employees at Hiscox and U.S. Risk in
February 2016, Hiscox admitted that it copied parts of
PLIS's policy. Dkt. No. 21 at 4. Finally, PLIS, at this
stage, has pled enough facts to show that the copying is
legally actionable. PLIS's complaint alleges enough
facts, including through a side-by-side comparison of select
definitions from its policy and U.S. Risk's allegedly
infringing policy, to show that the two works are
substantially similar. Therefore, PLIS has pled enough
factual material to allow the Court to draw the reasonable
inference that the Defendants are liable for a claim of
Defendants argue that Plaintiff's claim must be dismissed
because PLIS cannot sue for claims it already settled.
However, a court may dismiss a claim under Rule 12(b)(6) only
“if a successful affirmative defense appears
clearly on the face of the pleadings.”
Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th
Cir. 1986) (emphasis added). In order to dismiss a claim, the
affirmative defense must be almost unquestionable as a
defendant is “not entitled to dismissal under Rule
12(b)(6) . . . unless the [plaintiffs] have ‘pleaded
[themselves] out of court by admitting to all of the elements
of the defense.'” Smallwood v. Bank of
Am., 2012 WL 32654, at *2 (N.D.Tex. Jan. 6, 2012)
(quoting Sivertson v. Clinton, No. 3:11-CV-0836-D,
2011 WL 4100958 at *2 (N.D. Tex. Sept. 14, 2011)). Here, at
least at this stage, it not unquestioned whether the
settlement agreement U.S. Risk is relying on for its argument
is or is not applicable to this dispute. U.S. Risk argues in
their Motion to Dismiss that the settlement agreement is
clearly applicable because the previous settlement ...