Envoy Techs., Inc. v. Northrop Grumman Co.

ENVOY TECHNOLOGIES, INC., Plaintiff, v. NORTHROP GRUMMAN CO., Defendant.

Civil Action No. 19-13976 (FLW)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

April 30, 2020

*NOT FOR PUBLICATION*

OPINION

WOLFSON, Chief Judge:

Plaintiff Envoy Technologies Inc. ("Plaintiff" or "Envoy") brings this copyright infringement action against Defendant Northrop Grumman Corporation ("Defendant" or "Northrop"), for engaging in the alleged unauthorized use of a computer software product that Plaintiff owns. Pending before the Court is Defendant's Motion to dismiss Plaintiff's First Amended Complaint ("FAC" or the "Amended Complaint"), wherein Plaintiff asserts five causes of action, including: (1) fraud; (2) infringement under United States and United Kingdom laws; (3) breach of contract; (4) misappropriation; and (5) unjust enrichment.¹ For the reasons expressed herein, Defendant's Motion to dismiss is GRANTED as to the claims for fraud, misappropriation, and unjust enrichment, and its improperly pled claims under United Kingdomlaw are dismissed without prejudice, but DENIED as to the infringement and breach of contract causes of action.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The following facts are drawn from the FAC and are assumed to be true for the purpose of this Motion. Plaintiff, a Delaware corporation, owns a software product known as XIPX.² FAC, ¶ 5. Defendant is incorporated in Virginia, with a principle place of business in Virginia and the United Kingdom, and it "sells, licenses, and supports various computer hardware and software systems and services" to various private and governmental entities throughout the world. Id. at ¶¶ 6-7.

The Amended Complaint describes a series of transactions that transpired before Plaintiff obtained an ownership interest in XIPC. In particular, according to the documents that are attached as an exhibit to the pleadings,³ Momentum Corporation ("Momentum") is the creator and owner of the original registered copyrights in XIPC. See id. at ¶ 9, Ex. A. However, "[i]n or about 1998," Level 8 Technologies, Inc. ("Level 8") acquired XIPC, "and Momentum executed a written contract that assigned ownership of the copyrights" to Level 8. Id. at ¶ 9. Thereafter, "[i]n or about February 2002," Envoy acquired XIPC, and then Level 8 "executed a writtenassignment assigning the copyrights" to Plaintiff, which has since owned the copyrights in XIPC. Id.

In 2005, Plaintiff and Defendant entered into a three-year licensing agreement, pursuant to which Defendant was permitted to "use and sublicense the XIPC software in specific Northrop supplied systems." Id. at ¶ 11. The licensing agreement included a three-year renewal option, which the parties exercised in 2008, but with updated financial provisions. Id. at ¶¶ 11-12. During this specific timeframe, Defendant "remitted annual usage fees for the XIPC software," and, in exchange, Plaintiff provided "support, bug fixes and upgrades in accordance with" the parties contract. Id. at ¶ 13. Moreover, according to Plaintiff, Northrup "used the [XIPC] software and made copies of it in Virginia," and also integrated the product into "at least the National Automation Finger Identification System," and into another program, "known as IDENTI," "both of which were licensed to one or more entities in the United Kingdom or elsewhere." Id. at ¶ 15.

In 2011, Defendant informed Plaintiff that it was no longer interested in utilizing the XIPC software in its own products, and thus, the parties' licensing agreement was not renewed. Id. at ¶ 18. Moreover, Defendant allegedly explained that it would remove and replace the XIPC software from Northrop's operating platforms with an unspecified "competitive messaging system" before June 2011, in order to avoid increased usage fees that Defendant would have otherwise incurred. Id. at ¶¶ 18-20. Notwithstanding these alleged representations, Plaintiff claims that Defendant "continued to use components of the XIPC software at its offices in Virginia," from where Defendant also authorized the product's improper use overseas, in its United Kingdom offices. Id. at ¶ 22. And, according to the FAC, Defendant has "since further expanded its use . . . of the XIPC software into fields and systems that are outside of those"which were set forth in the parties' agreement, "and that [Plaintiff] would not have licensed for its normal fees, if at all[.]" Id. at ¶ 24.

On June 19, 2019, Plaintiff filed the instant suit against Defendant, as a result of the alleged improper and unauthorized use of the XIPC software. On September 1, 2019, Plaintiff filed an Amended Complaint, asserting infringement claims under the laws of the United States and United Kingdom, in addition to four common law causes of action. In the instant matter, Defendant moves to dismiss Plaintiff's FAC, first arguing that Plaintiff has not pled a proper infringement claim. Second, Defendant contends that federal preemption bars Plaintiff's state law claims, and that, as an independent basis, Plaintiff has not stated a viable claim for breach of contract and unjust enrichment. Third, Defendant maintains that this Court lacks jurisdiction to adjudicate the remaining claims under the laws of the United Kingdom. Plaintiff opposes the Motion.

II. DISCUSSION

A. STANDARD OF REVIEW

Under Fed. R. Civ. P. 12(b)(6), a complaint can be dismissed for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In reviewing a dismissal motion, courts "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citation and quotations omitted). Under this standard, the factual allegations set forth in a complaint "must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Indeed, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v.Iqbal, 556 U.S. 662, 678 (2009). "[A] complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).

However, Rule 12(b)(6) only requires a "short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555. The complaint must include "enough factual matter (taken as true) to suggest the required element. This does not impose a probability requirement at the pleading stage, but instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element." Phillips, 515 F.3d at 234 (citation and quotations omitted); Covington v. Int'l Ass'n of Approved Basketball Officials, 710 F.3d 114, 118 (3d Cir. 2013) ("[A] claimant does not have to set out in detail the facts upon which he bases his claim. The pleading standard is not akin to a probability requirement; to survive a motion to dismiss, a complaint merely has to state a plausible claim for relief.") (quotations and citations omitted).

In sum, under the current pleading regime, when a court considers a dismissal motion, three sequential steps must be taken: first, "it must take note of the elements the plaintiff must plead to state a claim." Connelly v. Lane Constr. Corp., 809 F.3d 780, 787 (3d Cir. 2016) (citation, quotations, and bracketsomitted). Next, the court "should identify allegations that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. (citations and quotations omitted). Lastly, "when there are well-pleaded factual allegations, the court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. (citations, quotations and brackets omitted); Robinson v. Family Dollar, Inc., 679 Fed. Appx. 126, 132 (3d Cir. 2017).

B. INFRINGEMENT

First, Defendant moves to dismiss Count II of the FAC—an infringement claim arising from Northrop's alleged unauthorized use of the XIPC software. FAC, ¶ 35. To assert such a claim, a litigant is required to allege the following elements: "(1) ownership of a valid copyright; and (2) unauthorized copying of original elements of the plaintiff's work." Dun & Bradstreet Software Services, Inc. v. Grace Consulting, 307 F.3d 197, 206 (3d Cir. 2002); see Feist Pub'lns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). Moreover, it is axiomatic that the "[o]wnership of a copyright is freely transferrable by 'any means of conveyance or by operation of law.'" Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 827 (3d Cir. 2011) (quoting 17 U.S.C. § 201(d)); see Day to Day Imps., Inc. v. FH Group Int'l, Inc., No. 18-14105, 2019 U.S. Dist. LEXIS 110081, at *7 (D.N.J. July 2, 2019) (citation omitted).

At the outset, I note that Defendant does not contest that the element of unauthorized use has been adequately pled; rather, the instant dispute centers on whether Plaintiff has sufficiently pled ownership of the XIPC software. On that issue, Plaintiff points to Exhibit A of the pleadings, which includes two Certificates of Recordation ("Registrations") that Momentum, as the then-current owner of XIPC, filed in 2000 with the United States Copyright Office. See FAC, ¶ 9, Ex. A. Moreover, Plaintiff avers that it acquired the rights to XIPC through a series of transactions that are alleged in Paragraph 9 of the FAC: "[i]n or about 1998, XIPC was acquired by Level 8 Technologies, Inc. and Momentum executed a written contract that assigned ownership of Ex. A to Level 8 Technologies, Inc. In or about February 2002, XIPC was acquired by Envoy, and ...