Raz Imports, Inc. v. Regency Int'l Bus. Corp.

RAZ IMPORTS, INC., Plaintiffs, v. REGENCY INTERNATIONAL BUSINESS CORP., Defendant.

Civil Action No. 3:19-CV-01855-E

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION

August 5, 2020

MEMORANDUM OPINION AND ORDER

Before the Court is the Motion to Dismiss the Second and Third Counts of Plaintiff Raz Imports Inc.'s Complaint filed by Defendant Regency International Business Corp. (Regency) (Doc. No. 11). Having carefully considered the motion, the parties' briefing, and applicable law, the Court concludes the motion should be GRANTED.

BACKGROUND

The following facts are from the complaint and its attachments (Doc. No. 1). RAZ Imports Inc. (RAZ) and Regency are both wholesale importers of seasonal merchandise. In approximately August 2016, RAZ personnel began developing a "Marshmallow Spray concept and drawings of several marshmallow-based products" for its Christmas collection. On or about August 26, 2016, RAZ finalized development of the RAZ Marshmallow Spray design (RAZ Marshmallow Spray), and a vendor began production shortly thereafter.

In January 2017, RAZ displayed the RAZ Marshmallow Spray at its Dallas Market Center showroom. Defendant Regency also maintains a Dallas Market Center showroom and, therefore, had access to the RAZ Marshmallow Spray while it was on display. RAZ also alleges Regency had access to a photograph of the RAZ Marshmallow Spray, which was labelled 24" Marshmallow Pick, on the public portion of RAZ's website several times between January and June 2017. And, in March 2017, RAZ published a "Fall and Winter Wholesale Catalog 2017" that included photographs of the RAZ Marshmallow Spray and a "Marshmallow Garland," each of which was described as a "RAZ Exclusive." The catalog also generally provided notice that the "catalog and all items within are copyrighted by RAZ Imports, Inc., their licensees or their manufacturers."

In approximately July 2017, Regency worked with one of RAZ's vendors, Qingdao Home Arts, Inc. (Artime), to create a copy of the RAZ Marshmallow Spray without RAZ's authorization. Regency and Artime finalized a "substantially similar work" in September 2017. RAZ became aware of the unauthorized copy and asked Artime to stop marketing versions of the design. RAZ offered Artime an opportunity to manufacture the RAZ Marshmallow Spray and provided physical samples to Artime in October 2017. Ultimately, RAZ did not select Artime as a supplemental vendor. Artime advised that it would cease marketing its versions of the design, but indicated two of its customers, one of which was Regency, had received samples.

RAZ obtained a Certificate of Registration with the United States Copyright Office, effective December 27, 2017, for the "Marshmallow Spray," which is described as a sculpture (Doc. 1-1).¹ In January 2018, RAZ discovered Regency was displaying and selling at least two products (the Accused Products) that were substantially similar to the RAZ Marshmallow Spray. RAZobtained images of the Accused Products from Regency's website. The image of one of the products, model number MTX62104, is labelled 33" Sugared Marshmellow Spray.²

In this action, RAZ asserts claims for copyright infringement and violations of the Digital Millennium Copyright Act (DMCA), 17 U.S.C. § 1201, et seq. Regency moves to dismiss the DMCA claims for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).

LEGAL STANDARD

Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). Rule 12(b)(6) authorizes a court to dismiss a plaintiff's complaint for "failure to state a claim upon which relief can be granted." Id. In considering a Rule 12(b)(6) motion to dismiss, "[t]he court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks and citations omitted). The court's review is limited to the complaint, its proper attachments, and documents attached to the motion to dismiss that are central to the claim and referenced by the complaint. See Lone Star Fund V (U.S.) v. Barclays Bank, N.A., 594 F.3d 383, 387 (5th Cir. 2010).

To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead "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). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim isfacially plausible if the plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "The plausibility standard ... asks for more than a sheer possibility that a defendant has acted unlawfully." Id. Thus, a claim "is implausible on its face when 'the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct.'" Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 796 (5th Cir. 2011) (quoting Iqbal, 556 U.S. at 679).

DMCA

A copyright owner has the exclusive right to reproduce and distribute copies of its work. 17 U.S.C. § 106. The DMCA protects a copyright owner from another's knowing and intentional misuse of "copyright management information" (CMI) to induce, enable, facilitate, or conceal infringement. 17 U.S.C. § 1202(a),(b). As relevant here, CMI includes "any of the following information conveyed in connection with copies or phonorecords of a work or performances or displays of a work, including in digital form, ...:

(1) [t]he title and other information identifying the work, including the information set forth on a notice of copyright[,]

(2) [t]he name of, and other identifying information about, the author of the work[, and]

(3) [t]he name of, and other identifying information about, the copyright owner of the work, including the information set forth in a notice of copyright."

Id. § 1202(c)(1). Copyrighted works on which CMI claims are based commonly consist of images and recordings, but a claim also can be based on falsification or removal of CMI from other works, including architectural plans, news articles, and drawings. See Fischer v. Forrest, 286 F. Supp.3d 590, 608 (S.D.N.Y. 2018), aff'd, Nos. 18-2955 & 2959-CV, 2020 WL 4457943 (2d Cir. Aug. 4, 2020) (citing BanxCorp v. Costco Wholesale Corp., 723 F. Supp. 2d 596, 609 (S.D.N.Y. 2010)).

Section 1202(a) prohibits a person from knowingly providing, distributing, or importing for distribution, false CMI "with the intent to induce, enable, facilitate, or conceal infringement." Id. § 1202(a). Thus, to state a claim for a violation of section 1202(a), RAZ must plausibly allege that Regency (1) knew CMI was false, and (2) provided, distributed, or imported to distribute the false CMI with the intent to induce, enable, facilitate, or conceal an infringement. Aaberg v. Francesca's Collections, Inc., No. 17-CV-115 (AJN), 2018 WL 1583037, at *6 (S.D.N.Y. Mar. 27, 2018).

Section 1202(b)(1) prohibits a person from intentionally removing or altering any CMI without permission from the copyright owner knowing or having reasonable grounds to know that it will induce, enable, facilitate, or conceal infringement. Id. § 1202(b)(1). Section 1202(b) also prohibits (1) distributing or importing for distribution CMI knowing the CMI has been removed or altered without authority of the copyright owner or the law and (2) distributing or importing for distribution works, copies of works, or phonorecords knowing CMI has been removed or altered without authority of the copyright owner or the law. Id. § 1202(b)(2), (3). To state a claim for CMI removal or alteration, RAZ must allege "(1) the existence of CMI on the [infringed work]; (2) removal and/or alteration of that [CMI]; and (3) that the removal and/or alteration was done intentionally." Mango v. BuzzFeed, Inc., 356 F. Supp.3d 368, 376 (S.D.N.Y. 2019) (internal citations omitted).

ANALYSIS

RAZ alleges the "Marshmallow Spray" title and RAZ's identity as the RAZ Marshmallow Spray "author, owner or source" constitute CMI. In Count Two, RAZ asserts Regency violated DMCA section 1202(a) by providing "false CMI in connection with the Accused Products." In Count Three, RAZ asserts violations of section 1202(b) based on Regency's altering the title of the copyrighted work to "Marshmellow Spray" and removing any indication RAZ is the author, owner,or source of the work. RAZ, however, does not complain that Regency falsified, removed, or altered CMI on or from the RAZ Marshmallow Spray.

Although case law interpreting section 1202(a) is sparse, some district courts have concluded there is no violation for falsification of CMI under circumstances similar to those present in this case. In Faulkner Press, L.L.C. v. Class Notes, L.L.C., 756 F. Supp.2d 1352, 1359-60 (N.D. Fla. 2010), the defendant copied materials from the plaintiff's electronic textbook into note packages. The defendant's name and information were placed on the note packages; the note packages did not include CMI that the plaintiff had printed on its electronic textbook boxes and in the textbook software. Id. The court determined that, although incorporating the plaintiff's materials into the note packages might have constituted copyright infringement, the defendant did not violate section 1202(a) by printing its name and information on the products the defendant generated. Id. at 1359-60. See also Park v. Skidmore, Owings & Merrill LLP, No. 17-CV-4473 (RJS), 2019 WL 9228987, at *11 (S.D.N.Y. Sept. 30, 2019) (defendant did not violate section 1202(a) by claiming authorship over 1 WTC, even if 1 WTC was improperly derivative of plaintiff's Cityfront '99).

RAZ alleges the Accused Products are substantially similar to the RAZ Marshmallow Spray, and there is no doubt...