Facts
- The Bank of New York Mellon (Plaintiff) initiated a foreclosure action against several defendants, including Timothy J. Phillips. [lines="10-13"]
- Timothy J. Phillips raised a defense of statute of limitations and moved for summary judgment to dismiss the action. [lines="19"]
- The previous actions were filed on February 19, 2014, and December 12, 2019, both of which were discontinued. [lines="20"]
- The plaintiff claimed that they revoked the acceleration of the loan by a letter sent to Phillips on July 9, 2018, which was contested in court. [lines="22-24"]
- The court's earlier decision set a hearing to determine if the mailing of the revocation letter complied with the relevant loan and mortgage terms. [lines="23"]
Issues
- Whether the action against Timothy J. Phillips was barred by the statute of limitations. [lines="17"]
- Whether the plaintiff's letter dated July 9, 2018, effectively revoked the acceleration of the loan. [lines="22-24"]
Holdings
- The court granted Phillips' motion for summary judgment, dismissing the action as it violated the statute of limitations. [lines="42"]
- The court found that the purported revocation letter did not revive the statute of limitations, as mailing such a letter does not serve to revive it. [lines="32-33"]
OPINION
TRACKMAN, INC. v. GSP GOLF AB, doing business as GSPro, DAVOR BOGAVAC, SIMULATORGOLFTOUR LLC, and CHAD COOKE
23 Civ. 598 (NRB)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
September 24, 2024
Case 1:23-cv-00598-NRB Document 62 Filed 09/24/24
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Plaintiff Trackman, Inc. (“plaintiff“) is the maker of the golf simulator game Perfect Golf. Among other things, Perfect Golf offers users the ability to virtually play some of the most famous golf courses in the world, including St. Andrews, Pebble Beach, and PGA National. Beginning in the late summer or early fall of 2019, defendants Davor Bogavac (“Bogavac“), his company GSP Golf AB (“GSP” and together with Bogavac, the “GSP Defendants“), Chad Cooke (“Cooke“), and his company SimulatorGolfTour LLC (“SGT” and together with Cooke, the “SGT Defendants“) began taking steps toward creating their own golf simulator game that would compete with Perfect Golf.1 As part of these efforts, defendants allegedly copied key components of plaintiff‘s copyrighted software and, without permission,
Plaintiff subsequently sued defendants, asserting five causes of action, namely: (1) direct copyright infringement; (2) secondary copyright infringement against both Bogavac and Cooke; (3) breach of contract; and (4) false advertising against Cooke and his company SGT. Thereafter, the GSP Defendants filed a motion to dismiss plaintiff‘s breach of contract claim, while the SGT Defendants filed a motion to dismiss all of plaintiff‘s claims. Those two motions to dismiss are the subject of this Memorandum and Order. For the following reasons, we grant the GSP Defendants’ motion, thereby dismissing plaintiff‘s contract claim, but deny the SGT Defendants’ motion, except as to the contract claim. Therefore, plaintiff‘s copyright infringement claims (both direct and secondary), as well as its false advertising claim, survive the motions to dismiss.
BACKGROUND
A. Factual Background2
1. The Parties
Plaintiff is a golf technology company that manufactures launch monitors and develops simulator technology. FAC ¶¶ 1, 13-14. Using a combination of radars and cameras, plaintiff‘s launch monitors track the full trajectory of a golf shot. Id. ¶ 15. Although the launch monitors are portable and can thus be used outdoors on real golf courses, id. ¶ 17, they are also incorporated into plaintiff‘s simulator technology, which allows users to play golf indoors using real clubs and balls in front of an “impact screen” that displays the simulation and keeps golf balls from ricocheting back at the player after they are hit, id. ¶ 20. Plaintiff‘s golf simulator is powered by Virtual Golf 2, a computer program that is the product of a multi-year development project, which began with Perfect Golf, i.e., the software at the center of this dispute. Id. ¶¶ 21, 29-30.
Bogavac is the founder, co-owner, and chief executive officer of GSP, which, like plaintiff, is a provider of golf simulator
2. Perfect Golf
In 2015, plaintiff‘s affiliate Perfect Parallel, Inc. released the golf simulator software Perfect Golf, which offers users “an immersive experience centered on high-resolution visuals, accurate ball flight physics developed using state-of-the-art launch monitors, and hyper-realistic gameplay.” Id. ¶ 31. Perfect Golf includes Course Forge, a software that “allows user to design golf courses that can be played in Perfect Golf.” Id. ¶ 34. Since Perfect Golf‘s release in 2015, “users have created hundreds of courses using Course Forge.” Id. In addition to Course Forge, Perfect Golf also includes “an API4 for external tournament sites to be able to fully integrate into Perfect Golf
3. The Perfect Parallel EULA
Individuals who purchase Perfect Golf agree to the terms of the Perfect Parallel End User License Agreement (the “EULA“). Id. ¶ 84; see also ECF No. 43-1 (EULA).5 The EULA grants a “personal, limited, terminable, non-exclusive and non-transferable license to install and use” Perfect Golf, including Course Forge and the underlying API data structures, “on a single computer for personal non-commercial use.”6 EULA at 2. The EULA prohibits the use of any part of Perfect Golf, Course Forge, and the API data structures, “in any way, directly or indirectly,” for the purpose of generating revenue or in exchange for any consideration or value of any kind. Id. This prohibition expressly extends to any “User-Generated Content,” which includes courses created using Course Forge. Id. Finally, as particularly relevant here, the EULA
4. The Perfect Parallel Acquisition
In January 2018, plaintiff acquired Perfect Parallel, including Perfect Golf and all Perfect Parallel‘s software assets and intellectual property rights. FAC ¶ 36. Historically, Perfect Golf had been compatible with various third-party launch monitors, not just those manufactured by plaintiff, but in August 2019, plaintiff announced it would be suspending this feature. Id. ¶ 38. Thus, once that policy went into effect in August 2020, Perfect Golf users were no longer able to fully play the game unless they purchased and used plaintiff‘s launch monitors. Id.
5. Defendants’ Alleged Conduct
Bogavac was an “avid” user of Perfect Golf and “regularly” used Course Forge to design virtual golf courses which he played using Perfect Golf. Id. ¶ 39. After plaintiff announced in August 2019 that it would soon discontinue Perfect Golf‘s compatibility with third-party launch monitors, “Bogavac saw an opportunity.” Id. ¶ 40. Specifically, Bogavac sought make a golf simulator game
First, Bogavac needed to develop golf simulator software to replace Perfect Golf, which he would later call “GSPro.” Id. ¶ 42. To develop GSPro, Bogavac and his associates allegedly “downloaded, accessed, and used Perfect Golf, including Course Forge.” Id. ¶ 51. As part of his development efforts, Bogavac “copied, adapted, and incorporated [plaintiff‘s] copyright-protected software into GSPro,” without permission from plaintiff or Perfect Parallel. Id. For example, Bogavac (and his company GSP) “copied Course Forge code directly into GSPro” and “copied Perfect Golf‘s ‘combine’ feature,” which “enables golfers to identify strengths and weaknesses in their game.” Id. ¶¶ 52-53. In 2020, Bogavac released versions of GSPro, which allowed “users to integrate and use GSPro with other launch monitors” that “compete with [plaintiff‘s] launch monitors.” Id. ¶ 56.
Second, in addition to developing GSPro, Bogavac “needed an online platform to host tournament play by GSPro users.” Id. ¶ 43. To accomplish this, Bogavac closely collaborated with Chad Cooke. Id. ¶ 60. Together, they developed a golf tournament platform
Third, Bogavac needed golf courses for GSPro users to play on the SGT platform. Id. ¶ 44. As plaintiff alleges, by “examining and studying” courses that were created on plaintiff‘s course design platform, Course Forge, defendants “learned how to build [competing software GSPro and SGT] that would play these courses.” Id. ¶ 74. Thereafter, defendants allegedly undertook a “massive coordinated campaign . . . to convert Course Forge-designed courses for play in GSPro.” Id. ¶ 75. By the time a new version of GSPro was released in January 2021, “more than two dozen converted courses were available.” Id. ¶ 76. Plaintiff alleges that “even today, users are playing converted courses on GSPro and SGT.” Id. ¶ 79.
6. The SGT Defendants’ Alleged Misstatements
Plaintiff also alleges that the SGT Defendants have made numerous misleading statements regarding SGT‘s course offerings. See id. ¶ 67. Specifically, Cooke repeatedly promoted on social media and elsewhere that SGT‘s course selection included “iconic, branded courses like St. Andrews in Scotland and various PGA Tour Tournament Players Club courses throughout the United States.” Id. Despite these representations, the SGT Defendants “did not have any licenses, including licenses of trademark rights, required to offer these and other branded courses to the public.” Id. ¶ 69. By contrast, plaintiff had “diligently sought and obtained permission[], including trademark licenses, from the owners of branded golf courses,” including St. Andrews and various PGA Tour courses. Id. ¶ 70. Eventually, in 2023, the trademark owners of the St. Andrews and PGA Tour courses sent cease-and-desist letters to defendants, after which defendants “removed, disabled access to, or renamed the St. Andrews and PGA Tour courses.” Id. ¶ 71. By that point, however, “the damage had been done,” as many customers had already elected to purchase GSPro and SGT rather than plaintiff‘s competing software. Id. ¶ 72.
B. Procedural History
1. The Initial Complaint
On January 24, 2023, plaintiff sued only the GSP Defendants (Bogavac and his company GSP). ECF No. 1. Due to delays in effectuating service, ECF No. 16, the GSP Defendants did not file an answer and assert counterclaims until July 7, 2023, ECF No. 21. The GSP Defendants subsequently filed a pre-motion letter addressing their anticipated motion for partial judgment on the pleadings under
2. The Amended Complaint
On November 15, 2023, plaintiff filed its First Amended Complaint, which asserts five claims, this time against both the GSP Defendants and the SGT Defendants (Cooke and his company SGT). See FAC. First, plaintiff asserts a direct copyright infringement claim against all defendants based on the allegation that after
Second, plaintiff asserts indirect copyright infringement claims against both Bogavac and Cooke because they “knew of and materially contributed to the direct infringements” of one another, their respective companies (GSP and SGT), and their associates. Id. ¶¶ 82-83.
Third, plaintiff asserts a breach of contract claim against all defendants. See id. ¶ 84. On this claim, plaintiff alleges that defendants “engaged in activities” that “do not constitute copying or any other violation of copyright law” but do violate the terms of the Perfect Parallel EULA. Id. ¶ 85. Specifically, defendants’ violating conduct included “reverse engineering -- namely, studying and analyzing [plaintiff‘s] software and the courses created in Course Forge . . . to allow [d]efendants to develop, produce, and distribute GSPro, SGT, and simulator golf courses.” Id.
Finally, plaintiff asserts a false advertising claim under the Lanham Act against the SGT Defendants in light of the “false
3. The Motions to Dismiss
Each set of defendants -- the GSP Defendants and SGT Defendants -- filed a motion to dismiss the First Amended Complaint. On December 15, 2023, the GSP Defendants filed their motion, which seeks to dismiss only plaintiff‘s breach of contract claim on the basis that it is expressly and impliedly preempted by the Copyright Act.8 See ECF No. 42 (“GSP Mot.“). On January 19, 2024, plaintiff filed its response in opposition to the GSP Defendants’ motion to dismiss, ECF No. 47 (“GSP Opp.“), and the GSP Defendants filed their reply on February 9, 2024, ECF No. 48 (“GSP Reply“).
On March 8, 2024, the SGT Defendants filed their motion to dismiss, in which they seek to dismiss all claims asserted against them, namely, the direct copyright infringement claim, the indirect copyright infringement claim against Cooke, the breach of contract claim, and the false advertising claim. See ECF No. 55
LEGAL STANDARD
Defendants collectively seek to dismiss plaintiffs’ First Amended Complaint pursuant to
DISCUSSION
As noted above, the SGT Defendants move to dismiss all the claims asserted against them, whereas the GSP Defendants move only to dismiss plaintiff‘s breach of contract claim. Because the SGT Defendants’ motion implicates all of plaintiff‘s claims, we analyze each claim in turn and address the GSP Defendants’ partial motion to dismiss in the context of the contract claim.
A. Direct Copyright Infringement
First, the SGT Defendants move to dismiss plaintiff‘s direct copyright claim on three distinct grounds, namely: (1) the API data structures at the center of this dispute are not copyrightable; (2) defendants have dispositive license and estoppel defenses; and (3) the statute of limitations bars the claim. SGT Mot. at 7-15. As further set forth below, each of these bases for dismissal is plagued by the same fundamental deficiency: they are not ripe for determination on a motion to dismiss. Therefore, we deny the SGT Defendants’ motion to dismiss plaintiff‘s direct copyright claim against them.
1. API Structures
We begin with the SGT Defendants’ first argument that the API structures at the heart of plaintiff‘s copyright claim are not copyrightable.10 As an initial matter, the API data structures at issue include the shared naming conventions that allows a simulated golf tournament site like SGT (the “server“) both to communicate with software like GSPro (the “client“) and to process data, like how many shots it takes for a player to complete a hole in the golf simulation. SGT Mot. at 9 (citing FAC ¶¶ 35, 56, 65). The SGT Defendants argue that these API data structures, or naming conventions, are not copyrightable because they (1) lack originality; and (2) are “nothing more than a process, system, or method” expressly excluded from protection under the Copyright Act. Id. at 10. For the following reasons, we reject the SGT Defendants’ arguments regarding the API structures.
“The sine qua non of copyright is originality. To qualify for copyright protection, a work must be original to the author. Originality, as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied
Here, plaintiff has pleaded sufficient facts to satisfy the “modest” requirements of originality. Weissmann v. Freeman, 868 F.2d 1313, 1321 (2d Cir. 1989). As alleged, plaintiff‘s subsidiary Perfect Parallel spent “years” developing Perfect Golf, a golf game that provides, among other things, “an immersive experience centered on high-resolution visuals” and “hyper-realistic gameplay.” FAC ¶ 31. Perfect Parallel also “built . . . an API for external tournament sites to be able to fully integrate into Perfect Golf for online real-time scoring and tracking.” Id. ¶ 35. Such allegations, at this stage, are more than sufficient to demonstrate that Perfect Parallel both independently developed the subject API structures and made numerous creative decisions in
Tellingly, the SGT Defendants overlook these well-pleaded allegations and instead ask us to determine that plaintiff‘s API structures, which the SGT Defendants append to their motion, lack originality on their face. See SGT Mot. at 10 (citing Declaration of Chad Cooke (“Cooke Decl.“), Ex. 3). Even if we could consider the API structures attached to their motion, the SGT Defendants’ “merits-based argument . . . is premature.” King-Devick Test Inc. v. NYU Langone Hosps., 17 Civ. 9307 (JPO), 2019 WL 78986, at *4 (S.D.N.Y. Jan. 2, 2019). “[C]ourts in this Circuit have concluded that questions of originality are generally ‘inappropriate for determination on a motion to dismiss.‘” Sohm v. Mcgraw-Hill Glob. Educ. Holdings, LLC, 16 Civ. 4255 (WHP), 2016 WL 5061116, at *2 (S.D.N.Y. Sept. 16, 2016) (quoting FragranceNet.com, Inc. v. FragranceX.com, Inc., 679 F. Supp. 2d 312, 320-21 (E.D.N.Y. 2010)).
Next, the SGT Defendants argue that plaintiff‘s copyright infringement claim fails because plaintiff‘s API data structures are a “process” or “method of operation” expressly excluded from copyright protection under the Copyright Act. SGT Mot. at 11-13 (quoting
The SGT Defendants also contend that plaintiff‘s copyright infringement claim should be dismissed because they have established license and estoppel defenses. See Mot. at 13-14. An affirmative defense may be raised on a motion to dismiss under
The Court likewise rejects the SGT Defendants’ request to convert their motion into one for summary judgment. See SGT Mot. at 14. While a district court has discretion to convert a motion to dismiss into one for summary judgment, the “essential inquiry” in exercising such discretion is whether the parties “should reasonably have recognized the possibility that the motion might be converted into one for summary judgment or [whether they were] taken by surprise and deprived of a reasonable opportunity to meet facts outside the pleading.” In re G & A Books, Inc., 770 F.2d 288, 295 (2d Cir. 1985). “Where both parties submit extrinsic evidence in support of their positions, a district court may fairly convert a motion to dismiss into one for summary judgment under
3. Statute of Limitations
Finally, the SGT Defendants assert that plaintiff‘s copyright claim is barred by the statute of limitations. See SGT Mot. at 14-15. The Copyright Act provides a three-year statute of limitations beginning when an infringement claim accrues. See
The SGT Defendants argue that, because the “late summer and early fall of 2019” is more than three years before they were added to this case on November 15, 2023, plaintiff‘s infringement claim against them is untimely on the face of the complaint. SGT Mot. at 15. However, the late summer and early fall of 2019 was only when defendants began taking steps to develop their allegedly
For these reasons, the Court denies the SGT Defendants’ motion to dismiss as to the direct infringement claim against them.
B. Secondary Copyright Infringement
The SGT Defendants also move to dismiss plaintiff‘s claim of secondary copyright infringement against Cooke on the basis that
“To establish secondary infringement claims under a theory of contributory or vicarious infringement, a plaintiff must adequately allege direct infringement by a party other than the defendant.” Hartmann v. Amazon.com, Inc., No. 20 Civ. 4928 (PAE), 2021 WL 3683510, at *6 (S.D.N.Y. Aug. 19, 2021). Once it is established that a third party committed direct copyright infringement, a defendant may be held liable for contributory (or secondary) infringement if he (1) possessed “knowledge of the infringing activity,” and (2) “materially contribute[d] to the infringing conduct of another.” Arista Recs. LLC v. Lime Grp. LLC, 784 F. Supp. 2d 398, 432 (S.D.N.Y. 2011) (quoting Matthew Bender & Co., Inc. v. West Pub. Co., 158 F.3d 693, 706 (2d Cir. 1998)). The knowledge required is constructive, meaning that persons who “know or have reason to know of the direct
In this case, plaintiff plainly alleges sufficient facts to demonstrate that Cooke is secondarily liable for his company‘s direct infringement. As an initial matter, plaintiff alleges that Cooke “is the owner, single member, and manager of [SGT].” FAC ¶ 5. Although the SGT Defendants correctly observe that “ownership alone” may be insufficient to establish secondary liability, SGT Mot. at 16-17 (citing Coach, Inc. v. Cont‘l Gift, 2012 WL 13162344, at *5 (E.D.N.Y. Aug. 24, 2012)), plaintiff alleges far more involvement from Cooke than mere ownership. For example, the complaint states that Cooke “personally directed [SGT‘s] conduct,” FAC ¶ 97, including by “carefully orchestrat[ing] and coordinat[ing]” infringement efforts with other defendants, id. ¶ 45. Additionally, plaintiff asserts that Cooke himself “downloaded, installed, accessed, and used” plaintiff‘s Perfect
C. Breach of Contract
As discussed above, plaintiff asserts that defendants breached the Perfect Parallel EULA (the licensing agreement) by engaging in reverse engineering of Perfect Golf and courses created in Course Forge. See id. ¶¶ 108-17. Unlike the other claims, both sets of defendants -- the GSP Defendants and the SGT Defendants -- move to dismiss plaintiff‘s breach of contract claim. The GSP Defendants’ position, which the SGT Defendants also adopt, is that the Copyright Act expressly and impliedly preempts plaintiff‘s contract claim. See GSP Mot. at 7-23; SGT Mot. at 18-19. Express, or statutory, preemption “preempts state law claims
1. Express Preemption
Before we can address defendants’ express preemption argument, a brief review of the EULA is necessary. As discussed above, any person who purchases Perfect Golf (including Course Forge and the API data structures) must agree and is subject to the EULA. See FAC ¶ 84. Plaintiff‘s breach of contract claim is based on a single provision of the EULA (the “Reverse Engineering Provision” or “RE Provision“), which provides:
Notwithstanding the grant to you of a limited license to use the Software set as set forth in Section 3, above,17 you may not: . . . decompile, disassemble, reverse engineer, or otherwise attempt to derive the source code, underlying ideas, or algorithms of the Software.
EULA at 3 (emphases added). Plaintiff alleges that defendants violated this provision by “studying and analyzing [plaintiff‘s] software and the courses created in Course Forge in order to learn details of design, construction, and operation -- to allow [d]efendants to develop, produce, and distribute GSPro, SGT, and simulator golf courses.” FAC ¶ 85. Elsewhere, plaintiff contends that “[b]y examining and studying Course Forge-created courses -- without at first copying them -- [d]efendants learned how to build . . . GSPro and tournament platform SGT that would play these courses.”18 Id. ¶ 74. Put simply, plaintiff claims that defendants breached the RE Provision by “studying and analyzing” plaintiff‘s software as part of its efforts to develop its own competing golf simulator software that would be compatible with Course Forge courses and third-party hardware.
On and after January 1, 1978, all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.
a. Subject Matter Requirement
The first prong of the express preemption inquiry, which has been labeled the “subject matter” requirement, “looks at the work that would be affected by the plaintiff‘s exercise of a state-created right, and requires (as an essential element of preemption) that the work ‘come within the subject matter of copyright as specified by sections 102 and 103.‘” Id. (quoting
Here, plaintiff‘s claim is that defendants breached the EULA by reverse engineering plaintiff‘s software.19 See FAC ¶ 113. Thus, since the underlying work at issue is software, it falls squarely within the subject matter of copyright because software has been deemed a “literary work” under
b. Equivalence Requirement
The second prong of the express preemption inquiry, referred to as the “equivalence” or “general scope” requirement, “looks at the right being asserted (over a work that comes within the ‘subject matter of copyright‘) and requires (for preemption to apply) that the right be ‘equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106.‘” Jackson, 972 F.3d at 43 (quoting
“Even if a claim otherwise satisfies the general scope requirement, a claim is not preempted if it ‘include[s] any extra elements that make it qualitatively different from a copyright infringement claim.‘” ML Genius Holdings LLC v. Google LLC, No. 20-3113, 2022 WL 710744, at *3 (2d Cir. Mar. 10, 2022) (quoting Briarpatch, 373 F.3d at 305), cert denied, 143 S. Ct. 2658 (2023). “To determine whether a claim is qualitatively different, we look at what the plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced.” Briarpatch, 373 F.3d at 306 (quotations and alterations omitted). Critically, the Second Circuit has admonished that the “extra element” inquiry is not “mechanical” but instead “requires a holistic evaluation of the nature of the rights sought to be enforced, and a determination whether the state law action is qualitatively different from a copyright infringement claim.”
As we wade into this analysis, we note that we are far from the first court to grapple with whether the Copyright Act expressly preempts a breach of contract claim. To the contrary, it is widely recognized that this question “has proven especially challenging” for courts in this district. Piuggi v. Good for You Prods. LLC, --- F. Supp. 3d ---, No. 23 Civ. 3665 (VM), 2024 WL 3274638, at *14 (S.D.N.Y. July 2, 2024) (citing cases). In particular, there has been widespread “disagreement among the district courts in this Circuit about how [the] ‘[extra] elements’ test applies to a breach of contract claim, with courts reaching divergent conclusions” regarding this issue. Dow Jones & Co., Inc. v. Juwai Ltd., No. 21 Civ. 7284 (PKC), 2023 WL 2561588, at *7 (S.D.N.Y. Mar. 17, 2023); see also Canal+ Image UK Ltd. v. Lutvak, 773 F. Supp. 2d 419, 442 n.5 (S.D.N.Y. 2011) (noting that “Courts of Appeals are also divided on this issue“). Some courts have held that “the extra element that saves a contract claim from preemption
Courts following the first approach -- that the contractual promise is itself the requisite extra element -- have (perhaps unsurprisingly) concluded that similar contractual prohibitions on reverse engineering are not preempted by the Copyright Act. For example, in Bowers v. Baystate Technologies, Inc., 320 F.3d 1317, 1326 (Fed. Cir. 2003), the plaintiff asserted breach of contract claims against the defendant for allegedly violating a “broad[]” prohibition on reverse engineering embodied in the plaintiff‘s shrink-wrap license agreements. Id. 1326. The U.S. Court of Appeals for the Federal Circuit rejected the defendant‘s express preemption argument and held the plaintiff‘s contract claims escaped such preemption. See id. Following the reasoning of “most courts to examine this issue,” the Federal Circuit explained that “mutual assent and consideration required by a contract claim” (i.e., the promise itself) “render that claim qualitatively different from copyright infringement.” Id. 1324-25 (citing, e.g., ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)). This approach, if we were to follow it, invariably leads to the conclusion that plaintiff‘s contract claim is not expressly preempted by the Copyright Act -- like any two parties to a contract, the parties here necessarily exchanged “mutual assent and consideration,” which, under the Bowers line of cases, is sufficient to avoid express preemption.
However, as defendants correctly observe, the Second Circuit recently rejected the “promise-is-sufficient” approach reflected in Bowers. See GSP Mot. at 21-22. In ML Genius Holdings, the plaintiff published song lyrics with permission from the relevant copyright holders. 2022 WL 710744, at *1, n.3. The defendants then allegedly copied those song lyrics and licensed them to Google, which was among the named defendants, in direct violation of the plaintiff‘s terms of service agreement. Id. *4. The plaintiff subsequently brought breach of contract claims, alleging that the defendants “breache[d] [plaintiff‘s] Terms of Service regarding the copying and reproduction of [plaintiff‘s] [c]ontent.” Id. In response to the defendants’ express preemption argument, the plaintiff contended, consistent with Bowers, that its breach of contract claims could not be preempted “because those claims require it to plead mutual assent and valid consideration.” Id. (quotations omitted). In other words, the plaintiff argued the promise itself was the extra element necessary to save its contract claims from preemption. But the Second Circuit explicitly rejected that argument, reasoning that a contractual promise alone is “not sufficient . . . to avoid preemption” because such a “per se rule that all breach of contract claims are exempt from preemption . . . would be in tension with [the Court‘s] precedent holding that the general scope inquiry is ‘holistic.‘” Id. (quoting Jackson, 972 F.3d at 44 n.17). Applying what seems to be a more fact-sensitive analysis, the Second Circuit held the plaintiff‘s contract claim was indeed preempted because “the right [the plaintiff] seeks to protect is coextensive with an exclusive right already safeguarded by the [Copyright] Act -- namely, control over reproduction and derivative use of copyrighted material.” Id. (quotations and alterations omitted).
Plaintiff points to five allegations in its complaint in support of its argument that its contract claim is qualitatively different from a copyright infringement claim. See GSP Opp. at 21 (citing FAC ¶¶ 74, 85, 113, 117). However, two of these allegations must be disregarded at the outset because they assert, in wholly conclusory terms, that plaintiff‘s contract claim is not based on defendants’ copying activities. See FAC ¶ 85 (“Defendants engaged in activities, which do not constitute copying or any other violation of copyright law, in violation of the Perfect Parallel EULA.“); id. ¶ 117 (“[Plaintiff] does not allege contract claims for Defendants’ copying activities, which are the subject of [plaintiff‘s] copyright infringement claims.“). After setting aside these allegations, see Sacerdote v. N.Y. Univ., 9 F.4th 95, 107 (2d Cir. 2021), we turn our focus to the remaining three allegations cited by plaintiff: (1) “[d]efendants’ unlawful”
conduct included reverse engineering -- namely, studying and analyzing [plaintiff’s] software and the courses created in Course Forge . . . to allow [d]efendants to develop, produce, and distribute GSPro, SGT, and simulator golf courses, FAC ¶ 85; (2) “[d]efendants studied and analyzed [plaintiff’s] software” and “undertook these activities to allow them to develop and distribute GSPro, SGT, and golf courses,” id. ¶ 113; and (3) “[b]y examining and studying Course Forge-created courses -- without at first copying them -- [d]efendants learned how to build golf simulator software GSPro and tournament platform SGT that would play these courses,” which they did “for commercial gain, to build their businesses,” id. ¶ 74.
Even viewed in the light most favorable to plaintiff, these allegations reveal that plaintiff’s contract claim is nothing more than a thinly veiled attempt to cloak what is, at bottom, a claim for copyright infringement. While plaintiff focuses solely on the purported reverse engineering activities of “studying and analyzing,” it completely disregards the other parts of the same allegations, which answer the more important and dispositive question about those activities: to what end were defendants engaging in them? As the remainder of plaintiff’s allegations tell us, “defendants undertook [those] activities [i.e., studying
Our conclusion is supported by recent case law following the Second Circuit‘s ML Genius decision. In IBM Corp., the plaintiff
D. False Advertising
The Lanham Act prohibits misrepresentations “in commercial advertising or promotion” of “the nature, characteristics, qualities, or geographic origin” of goods.
1. Falsity
A plaintiff bringing a false advertising claim must show falsity. See Apotex Inc. v. Acorda Therapeutics, 823 F.3d 51, 63 (2d Cir. 2016). There are two ways to do so. “First, a plaintiff can demonstrate that the challenged advertisement is literally false, i.e., false on its face.” Id. (quotations omitted).
a. Literal Falsity
Plaintiff claims the SGT Defendants’ statements that “iconic, branded golf courses were available for simulator play on SGT” are false on their face because the SGT Defendants lacked the licenses necessary to offer those courses on their simulator in a legal manner. SGT Opp. at 22 (citing FAC ¶¶ 67-71, 86, 120). This argument is insufficient to establish literal falsity. To be literally false, plaintiff would have to allege that, contrary to the SGT Defendants’ representations, the “iconic, branded golf courses” were not actually available for simulator play on SGT. However, plaintiff’s own allegations show the exact opposite: that those courses were indeed available for play on SGT albeit without the requisite authorization (i.e., licenses) from those courses. See FAC ¶¶ 67-69. Indeed, precisely because the SGT Defendants
b. Implied Falsity
Although plaintiff has not demonstrated that the SGT Defendants’ representations were literally false, it may still succeed on a Lanham Act false advertising claim under an implied falsity theory.24 “Typically, to demonstrate implied falsity, a plaintiff must present evidence of consumer deception or confusion.” Merck Eprova AG v. Brookstone Pharm., LLC, 920 F. Supp. 2d 404, 418 (S.D.N.Y. 2013). That is, “a district court must rely on extrinsic evidence [of consumer deception or
Here, plaintiff alleges sufficient facts to support its claim that the SGT Defendants’ representations caused customer confusion. As plaintiff alleges, the SGT Defendants repeatedly touted the availability of iconic, branded courses for play on SGT, falsely suggesting that SGT had the requisite licenses -- and indeed endorsement -- from those courses. See FAC ¶¶ 67-68, 72, 86. In plaintiff’s view, consumers relied on these implicitly false statements and were drawn to SGT (and GSPro) as a direct
Additionally, “where a plaintiff adequately demonstrates that a defendant has intentionally set out to deceive the public, and the defendant‘s deliberate conduct in this regard is of an egregious nature, a presumption arises that consumers are, in fact, being deceived.” Johnson & Johnson * Merck Consumer Pharm. Co. v. Smithkline Beecham Corp., 960 F.2d 294, 298-99 (2d Cir. 1992) (quotations omitted). Here, although plaintiff does not expressly rely on this theory of confusion, there are enough facts to suggest that such theory may be viable. For example, plaintiff alleges that the SGT Defendants (1) knew that they did not have the requisite authorization to make available the trademarked courses; (2) made a litany of statements on social media and elsewhere suggesting that they had such authorization; and (3) made these statements with the intention of influencing “a significant number of users” to purchase SGT subscriptions and GSPro downloads on the basis that they could play “at some of the most coveted courses
2. Materiality
In addition to establishing falsity, plaintiff must also establish materiality -- that the SGT Defendants “misrepresented an inherent quality or characteristic of the product.” Nat‘l Basketball Ass‘n v. Motorola, Inc., 105 F.3d 841, 855 (2d Cir. 1997) (quotations omitted). “In other words, the allegedly false statement must be likely to influence purchasing decisions.” Int‘l Code Council, Inc. v. UpCodes Inc., 43 F.4th 46, 63 (2d Cir. 2022) (quotations omitted). Thus, the materiality inquiry “analyzes whether [the consumer] confusion . . . related to an inherent quality of the product, such that they would influence consumers’ purchasing decisions.” Id. at 64 n.10. The Second Circuit has “declared that plaintiffs should be given the opportunity to develop their evidence to demonstrate materiality” such that materiality “generally cannot be determined on consideration of a motion to dismiss.” Id. at 64 (quotations omitted).
Nevertheless, the SGT Defendants contend that Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003), and its progeny preclude plaintiff’s false advertising claim.26 SGT Mot. at 23-24. Dastar “addresses the interplay between copyright -- which protects authors’ rights in their creations -- and unfair competition laws [namely, the Lanham Act] -- which protect consumers from, inter alia, confusion as to the origin of goods.” Vaad L‘Hafotzas Sichos, Inc. v. Krinsky, 133 F. Supp. 3d 527, 538 (E.D.N.Y. 2015). In that case, a film company copied a documentary series that had passed into the public domain onto videotapes that it then sold under its own name. See Dastar, 539 U.S. at 27-28. Production companies that owned the exclusive rights to the series
The question before the Court was whether “origin of goods,” as used in
As the SGT Defendants observe, some courts “have extended the Supreme Court‘s ruling [in Dastar] to preclude Lanham Act claims premised upon false representations of licensing status.” SGT Mot. at 24 (quoting Micro/sys, Inc. v. DRS Techs., Inc., No. 13-cv-08575, 2015 WL 12748631, at *2 (C.D. Cal. Feb. 18, 2015)). The most notable example of this application is Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137 (9th Cir. 2008), in which sellers of karaoke recordings misrepresented to their customers that their recordings were “100% licensed,” i.e., that they held the underlying rights to the songs on the recordings, even though, for at least some songs, the sellers held “no licenses at all.” Id. at 1141. On this basis, the plaintiff sued the sellers for false advertising under
Courts in this district have adopted similar reasoning. For example, in Agence France Presse v. Morel, 769 F. Supp. 2d 295 (S.D.N.Y. 2011), a professional photojournalist asserted a false advertising claim against news outlets for falsely representing that they were authorized to use certain of his photographs. Id. at 308. In light of Dastar, however, the district court dismissed the claim because such misrepresentations did not concern “the nature, characteristics, qualities, or geographic origin” of the photographs. Id. The court explained that the photojournalist
Contrary to the SGT Defendants’ argument, this line of cases has no bearing on, and certainly does not foreclose, plaintiff’s false advertising claim. The rationale animating Dastar and its progeny is to clearly bifurcate the distinct set of protections offered by the Lanham and Copyright Acts. Said otherwise, Dastar and the like are concerned about impermissibly blurring the lines between trademark and copyright law. Plaintiff‘s false advertising claim, however, does not implicate any such concerns. To the contrary, plaintiff‘s claim is based solely on the SGT Defendants’ misleading statements regarding the licensing of trademarked courses, not the licensing of expressive copyrighted (or copyrightable) material. Unlike Dastar and its progeny, the misrepresentations at issue have nothing to do with claims of authorship of an expressive work or creation of an invention. Plaintiff does not contend, for example, that the SGT Defendants failed to credit plaintiff with creating the simulated version of courses like St. Andrews. That allegation is properly the subject of plaintiff’s copyright claim. Similarly, plaintiff does not
3. Injury
Finally, the SGT Defendants assert, albeit briefly, that plaintiff fails to establish that plaintiff suffered any injury as a result of the allegedly false advertising. SGT Mot. at 23. However, this argument is unavailing. Plaintiff claims that the various misrepresentations about SGT‘s course offerings “resulted in the diversion of sales from [plaintiff].” SGT Opp. at 24 (citing FAC ¶¶ 67-68, 72, 86, 125). For example, plaintiff alleges that “[u]sers who otherwise would have purchased [plaintiff‘s] launch monitors and used [plaintiff‘s] software for simulator play were diverted to buy SGT memberships and purchase GSPro as a consequence of [the SGT Defendants‘] false and misleading statements.” FAC ¶ 86. This and comparable allegations in the
CONCLUSION
For the foregoing reasons, the GSP Defendants’ motion to dismiss is granted in full and SGT Defendants’ motion is granted as to plaintiff’s breach of contract claim and denied as to all other claims. Accordingly, plaintiff’s breach of contract claim is the only claim that is dismissed, and its other four claims -- a direct copyright infringement claim, two secondary copyright infringement claims, and a false advertising claim -- survive the SGT Defendants’ motion. The Clerk of Court is respectfully directed to terminate the motions pending at ECF Nos. 41 and 53.
SO ORDERED.
Dated: September 24, 2024
New York, New York
NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE