RoyaltyStat, LLC v. IntangibleSpring, Corp.
8:15-cv-03940
D. MarylandJan 10, 2018Background
- RoyaltyStat, LLC operates a paid database of intellectual property royalty rates and registered the 2009 text of its database with the U.S. Copyright Office (the ‘781 Registration); it also sought registration for 2015 material.
- Raul Pacheco worked as an independent contractor for RoyaltyStat, downloaded customer lists and proprietary data in 2010–2011, was later terminated, and subsequently became a shareholder in IntangibleSpring, formed in 2012.
- RoyaltyStat alleges Pacheco and IntangibleSpring used/copied RoyaltyStat’s database content and customer list in a competing database and solicited RoyaltyStat customers at lower prices.
- RoyaltyStat sued in December 2015 asserting (1) copyright infringement, (2) Lanham Act false advertising, and (3) violation of the Maryland Uniform Trade Secrets Act (MUTSA).
- Defendants moved to dismiss under Rule 12(b)(6), raising originality/copyright scope, failure to plead interstate commerce for the Lanham Act claim, and statute-of-limitations defenses.
- The Court considered the ‘781 Registration on the pleadings and ruled: copyright and MUTSA claims survive dismissal; Lanham Act claim dismissed without prejudice for pleading defects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Copyright infringement — originality and scope | RoyaltyStat pleads original, edited, and unique textual expression and alleges verbatim copying and copying of selection/arrangement | Database is unoriginal compilation of public SEC data; registration covers only "text," not the database | Denied dismissal: pleadings sufficiently allege protectable original text and copying; claim timely. |
| Statute of limitations — copyright and discovery | RoyaltyStat argues accrual began when it discovered IntangibleSpring’s use in April 2013 and suit filed within § 507(b) period | Defendants argue plaintiff knew or should have known as early as 2010–2011 (termination/embezzlement) | Denied dismissal: accrual not shown on face of complaint; discovery alleged April 2013 so within limitations. |
| Lanham Act — false advertising (§ 1125(a)) | RoyaltyStat alleges defendants falsely represented comparable quality at lower price and solicited customers, causing diversion | Defendants say allegations are speculative, based on information and belief, and fail to allege interstate commerce | Granted dismissal without prejudice: complaint fails to plead the interstate-commerce element; leave to amend. |
| MUTSA misappropriation and limitations | RoyaltyStat contends downloads became actionable only when defendants used/disclosed the data in IntangibleSpring; discovery in April 2013 triggers 3‑year claim period | Defendants contend downloads in 2010–2011 should have started limitations clock | Denied dismissal: misappropriation occurred upon disclosure/use in IntangibleSpring; discovery date in complaint supports timeliness. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: courts accept well‑pleaded facts but not legal conclusions)
- Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991) (originality requirement for copyright protection)
- MRIS v. Am. Home Realty Network, 722 F.3d 591 (4th Cir. 2013) (registration prerequisite and enforcement principles in database contexts)
- PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111 (4th Cir. 2011) (elements for Lanham Act false advertising claims)
- Semenova v. Md. Transit Admin., 845 F.3d 564 (4th Cir. 2017) (12(b)(6) dismissal on statute-of-limitations grounds only when time bar is apparent on face of complaint)
- Sokol Crystal Prods., Inc. v. DSC Commc’n Corp., 15 F.3d 1427 (7th Cir. 1994) (limitations accrual does not begin when trade secrets are lawfully obtained but when they are later disclosed/used)