International Motor Contest Ass'n, Inc. v. Staley

434 F.Supp.2d 650

INTERNATIONAL MOTOR CONTEST ASSOCIATION, INC., an Iowa corporation, Plaintiff, v. Todd Allen STALEY, individually and d/b/a United States Racing Association, and d/b/a United States Modified Touring Series; and United States Modified Touring Series, Inc., an Iowa corporation, Defendants.

No. C 05-3080-MWB.

United States District Court, N.D. Iowa, Central Division.

June 19, 2006.

COPYRIGHT MATERIAL OMITTED

Bruce L. Braley, Dutton Braun Staack & Hellman, Waterloo, IA, Richard A Bartolomei, Bartolomei & Lange, PLC, Des Moines, IA, for Plaintiff.

Robert A. Nading, II, Nading Law Firm, Ankeny, IA, for Defendants.

MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S MOTION TO DISMISS COUNTERCLAIMS AND MOTION TO STRIKE AFFIRMATIVE DEFENSES, and DEFENDANTS' MOTIONS TO STRIKE PORTIONS OF PLAINTIFF'S MOTIONS AND REPLY BRIEF

BENNETT, District Judge.

TABLE OF CONTENTS
I. INTRODUCTION ..................................................................653
     A. Allegations In The Complaint ...................................... 653
     B. The Defendants' Challenged Defenses And Counterclaims ............. 654
     C. The Motions Before The Court .......................................656
 II. ANALYSIS ............................................................. 656
     A. The Defendants' Motions To Strike Improper References.............. 656
        1. Arguments of the parties ....................................... 656
        2. Applicable standards............................................ 657
        3. Application of the standards.................................... 658
     B. IMCA's Motion To Strike Affirmative Defenses ...................... 659
        1. Arguments of the parties ....................................... 659
        2. Applicable standards ........................................... 661
        3. Application of the standards ................................... 662
           a. Does the Noerr-Pennington doctrine bar the challenged
affirmative defenses? ..................................... 662
           b. Are "misuse of copyright" and "unclean hands" defenses to
copyright infringement actions? ........................... 663
               i. The "misuse of copyright" defense ....................... 663
              ii. The "unclean hands" defense ............................. 666
           c. Has either defense been adequately pleaded? ................. 667
               i. The "misuse" defense as pleaded ......................... 667
              ii. The "unclean hands" defense as pleaded .................. 670
           d. Specific allegations ........................................ 671
     C. IMCA's Motion To Dismiss Counterclaims ............................ 671
        1. Arguments of the parties ....................................... 672
        2. Applicable standards ........................................... 673
        3. Application of the standards ................................... 675
           a. Abuse of process under Iowa law ............................. 675
           b. Sufficiency of the defendants' pleadings .................... 677
           c. Does the Noerr-Pennington doctrine stand as an insuperable
bar?....................................................... 678
III. CONCLUSION........................................................... 680

The motions now before the court in this case ask the court to decide what defenses and counterclaims the defendants can assert to the plaintiff's claims of copyright infringement and what allegations the court can properly consider in deciding that question. One of the principal issues is whether the Noerr-Pennington doctrine bars the defendants' affirmative defenses of "misuse" of copyright and "unclean hands" and their counterclaims of abuse of process.

I. INTRODUCTION

A. Allegations In The Complaint

In a Complaint filed December 30, 2005, plaintiff International Motor Contest Association, Inc. (IMCA), alleges that it is an Iowa corporation, with its principal place of business in Vinton, Benton County, Iowa. IMCA alleges that it was organized in 1915 and, therefore, is the oldest sanctioning body for automobile racing in the United States. IMCA alleges that its franchisees operate in the United States and Canada as promoters to stage and conduct automobile racing events under the rules and regulations of the IMCA in which only IMCA licensed drivers may compete. IMCA alleges, further, that it is the holder of numerous copyrights for its "Official Rules."¹

IMCA alleges that individual defendant Todd Allen Staley, a resident of Webster City, Hamilton County, Iowa, is also in the business of promoting racing events. IMCA alleges that Staley is or was, at times material to this litigation, doing business as United States Racing Association (USRA) and as United States Modified Touring Series (USMTS). IMCA alleges, further, that corporate defendant United States Modified Touring Series, Inc. (USMTS, Inc.), is an Iowa corporation, which was administratively dissolved on August 5, 2002, but reinstated on April 23, 2004, and that Staley is its president and corporate agent. IMCA alleges that Staley did business as USMTS, Inc., during the period that the corporation was administratively dissolved. IMCA alleges that, at all times material to its Complaint, Staley was promoting racing events and soliciting promoters as part of the USMTS race series and soliciting promoters and race track operators to agree to promote and conduct weekly races sanctioned under the USRA rules.

IMCA alleges that the USRA rules, however, were copied from IMCA's rules and regulations, that the defendants represented that the IMCA rules were their own, and that the defendants reproduced, published, and used the IMCA rules, either unchanged or with minor changes rendering them strikingly and substantially similar to IMCA's rules, as the rules of the USRA for the defendants' financial gain. IMCA contends that such infringement of its copyrighted rules continued despite two notices to cease and desist such conduct. IMCA alleges that it has sustained and will continue to sustain damages and irreparable harm from the loss in value of its exclusive rights under its copyrights. Therefore, in a single claim for relief from copyright infringement, IMCA prays for judgment against the defendants for actual and statutory damages; temporary and permanent injunctions; an accounting of all uses, reproductions, copies, memorializations, publications, and disseminations of copyrighted works of IMCA; reasonable attorney fees and the costs of this suit; and such other statutory, legal, and equitable relief as the court deems just and proper.

B. The Defendants' Challenged Defenses And Counterclaims

In an Answer and Counterclaims filed March 22, 2006, the defendants deny IMCA's copyright infringement claim. The defendants assert, inter alia, that rules of a contest cannot be copyrighted. In addition, they assert several affirmative defenses, of which the third and fourth are of interest here, because IMCA has challenged them, as well as two Counterclaims for "abuse of process," one by Staley against IMCA, and one by USMTS, Inc., against IMCA, which IMCA has also challenged. The court will consider these challenged affirmative defenses and Counterclaims in more detail.

In their Third Affirmative Defense, the defendants allege, in essence, "[t]hat the complaint of the Plaintiff I.M.C.A. has been brought not to protect any claimed copyright it owns or claims to own, but [to] harass, oppress and damage the Defendants and to force the Defendants out of business or to coerce the Defendants into selling [their] businesses to the Plaintiff, I.M.C.A." Defendants' Answer, Third Affirmative Defense, ¶ 5. The allegations of improper conduct upon which this defense is based include the following: threatening defendants with a lawsuit for rights far beyond the limited monopoly granted by IMCA's copyrights amounting to abuse and misuse of a copyright; asserting claims in this lawsuit as efforts to eliminate the defendants as competitors and to increase IMCA's profits on contracts with suppliers, manufacturers, and distributors of racing tires and other racing parts; claiming that IMCA's copyright prohibits anyone from making reference to parts required under IMCA's rules, including demands that the defendants cease using the IMCA logo or acronym or making any unauthorized use of or reference to IMCA approved products, which demands the defendants contend were made with the purpose and intent to keep any racer who purchased and used IMCA mandated products from racing in USMTS events; using its baseless lawsuit to increase its market share in the stock car race sanctioning business by burdening the defendants with the costs of defense; and fixing prices for racing tires its members are required to buy. See id. at ¶ 6-11. The defendants contend that the abuse and misuse of any claimed copyright bars any recovery or relief IMCA seeks on its copyright infringement claim.

In their Fourth Affirmative Defense, the defendants assert "What if the Plaintiff I.M.C.A. is found to have a valid copyright on rules, the Plaintiff I.M.C.A.'s copyright does not extend to keeping others from using those rules, i.e. holding racing events that utilize the rules [in] which Plaintiff I.M.C.A. claims to hold a copyright certificate." Defendants' Answer, Fourth Affirmative Defense, ¶ 1. Thus, the defendants assert that IMCA has "unclean hands" and is attempting to use legal proceedings to protect an improper extension of its claimed copyright and that a court in equity should withhold its aid to IMCA, because IMCA's actions are contrary to the public interest. Id. at ¶¶ 3-4. The defendants again assert that the efforts of IMCA that are contrary to the public interest include attempting to control 60-70 percent of a specific racing tire market and price fixing in violation...