422 F. App'x 344
5th Cir.2011Background
- REI alleges infringement and related claims arising from Norsworthy’s software and allegedly competing online versions from 2002 onward.
- Norsworthy granted REI exclusive Marketing and Sales rights to VS/REMS-Re/Minder software in 1992; the registered copyright at issue may not cover the Windows version REI argues about.
- REI marketed and supported the software from 1992 until contract termination in October 2005; subsequent web-based versions were allegedly distributed without REI’s permission.
- REI filed a pro se complaint with multiple amendments naming numerous defendants; district court granted many dismissals and held REI lacked standing to sue on copyright.
- REI later alleged fraud, RICO, breach of contract, conversion, and other claims; the district court dismissed under 12(b)(1)/(6) and sua sponte for remaining defendants.
- On appeal, the Fifth Circuit affirmed, addressing standing, preemption, RICO, leave to amend, and sua sponte dismissal issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue for copyright infringement | REI owns exclusive rights under the contract; registration not required for standing. | REI lacks registration/ownership of the at-issue software; standing denied. | REI has standing to enforce the exclusive marketing rights as to the software. |
| Copyright registration and claims processing | Registration not required for standing; lack of registration should not doom ability to state a claim. | No registration for the VS/REMS/RE/Minder for Windows, so claim fails as to that software. | Without proper registration for the specific software, REI’s copyright infringement claim fails; dismissal proper. |
| Copyright preemption of breach of contract | State-law breach of contract claims can coexist with copyright claims and are not preempted. | BREACH claims are preempted by §301 when they mirror exclusive rights in 102/106. | Breach of contract claim is not preempted; however, REI’s breach claim is dismissed for failure to state a contract between the parties. |
| Copyright preemption of fraudulent conversion | Fraudulent conversion based on software rights should be cognizable. | Conversion claims involve tangible property and are not preempted; however, here claims rely on intangible software distributions. | Fraudulent conversion claim is preempted because it rests on distribution of the copyrighted software (intangible property). |
| RICO pleading and enterprise requirement | Defendants engaged in a pattern of racketeering and formed a RICO enterprise. | Plaintiff failed to plead an ongoing enterprise; allegations were conclusory. | RICO claims were properly dismissed for failure to plead an enterprise and other elements. |
| Leave to amend and sua sponte dismissal | REI should be allowed to amend again to cure deficiencies; notice required for sua sponte dismissal. | Four prior amendments were enough; dismissal appropriate and notice not required here. | District court did not abuse its discretion; leave to amend denied and remaining claims affirmed. |
Key Cases Cited
- Reed Elsevier, Inc. v. Muchnick, 130 S. Ct. 1237 (U.S. 2010) (registration is a claims-processing requirement, not jurisdictional)
- Arguello v. Conoco, Inc., 330 F.3d 355 (5th Cir. 2003) (standing de novo review)
- Forsyth v. Barr, 19 F.3d 1527 (5th Cir. 1994) (court may affirm on any valid ground in the record)
- Carson v. Dynegy, Inc., 344 F.3d 446 (5th Cir. 2003) (preemption requires subject matter within copyright and rights equivalent to exclusive rights)
- Taquino v. Teledyne Monarch Rubber, 893 F.2d 1488 (5th Cir. 1990) (breach of contract is not preempted by the Copyright Act)
- Daboub v. Gibbons, 42 F.3d 285 (5th Cir. 1995) (preemption analysis for conversion claims)
- Crowe v. Henry, 43 F.3d 198 (5th Cir. 1995) (RICO enterprise requirements)
- White v. Johnson, 429 F.3d 572 (5th Cir. 2005) (standard for de novo review of sua sponte dismissals)
- Lozano v. Ocwen Fed. Bank, FSB, 489 F.3d 636 (5th Cir. 2007) (fairness in sua sponte dismissal requires notice and opportunity to respond)
- Jacquez v. Procunier, 801 F.2d 789 (5th Cir. 1986) (fair opportunity to present best case before dismissal)