743 F.Supp.3d 737
W.D.N.C.2024Background
- goTRG, a reverse logistics and technology company, provided Lowe’s with proprietary software for handling merchandise returns under a contract effective from 2019, amended in 2020.
- The software and related services were governed by an Application Services & Professional Services Agreement (ASPSA) and an amended Statement of Work (SOW), with intellectual property protections and a license fee for use after termination.
- goTRG alleges Lowe’s improperly accessed proprietary information, used it to develop a competing application ('My Red Vest'), and terminated the SOW before its end date, without paying the license fee.
- goTRG filed suit for breach of contract, copyright infringement, violation of the federal Defend Trade Secrets Act (DTSA), violation of the North Carolina Trade Secrets Protection Act (NCTSPA), and unjust enrichment.
- Lowe’s moved to dismiss all claims, arguing preemption by the Copyright Act and failure to state a claim.
- The court decided some claims survive the motion to dismiss, but dismissed the NCTSPA claim for lack of particularity about misappropriation location, allowing goTRG to amend that claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Copyright Act Preemption (all claims except copyright) | Claims involve proprietary info/methods not covered by copyright; contract had extra elements (e.g., promise to pay) | Claims are equivalent to copyright and thus preempted | Not preempted — breach, DTSA, unjust enrichment survive; NCTSPA partially preempted for copyrightable elements |
| Adequacy of Breach of Contract Claim | Contract terms breached (misappropriation, failure to pay license) are sufficiently alleged | Not enough specificity in describing breach or the provisions breached | Sufficiently pled—claim proceeds |
| Adequacy of Copyright Infringement Pleading | Defendant had access and resulting software is substantially similar | Insufficient detail to allege infringement | Complaint plausibly alleges both access and substantial similarity—claim proceeds |
| Adequacy of Trade Secret Pleadings (DTSA & NCTSPA) | Trade secrets identified with particularity, reasonable security alleged, misappropriation claimed | Insufficient identification and improper venue for NCTSPA | DTSA claim sufficient, NCTSPA dismissed (can amend to fix venue pleading) |
| Adequacy of Unjust Enrichment Pleading | Lowe’s benefited from use of proprietary info after contract ended | Not enough specific facts to show unjust benefit | Adequately pled as alternative to contract—the claim proceeds |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (articulating plausibility pleading standard for federal complaints)
- Ashcroft v. Iqbal, 556 U.S. 662 (clarifies plausibility standard in Rule 12(b)(6) context)
- Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (standard for copyright ownership and infringement)
- United States ex rel. Berge v. Bd. of Trs. of the Univ. of Ala., 104 F.3d 1453 (lays out copyright preemption two-prong test)
- Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655 (copyright preemption of state law claims and scope of copyright subject matter)
- Acorn Structures, Inc. v. Swantz, 846 F.2d 923 (promise to pay is an extra element to avoid preemption)
- Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789 (presumption of copyright infringement using access and substantial similarity)