1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 PROVIDENCE PUBLICATIONS, LLC, a No. 1:24-cv-00109-KES-BAM California limited liability company, 12 Plaintiff, 13 ORDER DENYING DEFENDANT’S v. MOTION TO DISMISS 14 HUB INTERNATIONAL INSURANCE (Doc. 23) 15 SERVICES, INC., a California corporation d/b/a HUB INTERNATIONAL FRESNO, 16 Defendant. 17

18 19 Plaintiff Providence Publications, LLC (“Providence”), brings this action against 20 defendant Hub International Insurance Services, Inc. (“Hub”), alleging willful infringement under 21 the Copyright Act of 1976,

et seq. Doc. 22 (“FAC”). In a prior order, the court 22 dismissed Providence’s first complaint because the complaint alleged Hub had a subscription to 23 receive Providence’s copyrighted publications but did not sufficiently allege that Hub’s further 24 copying of the publications exceeded the scope of that license. See Doc. 21 (“Order”) at 5–7. 25 Hub now moves to dismiss the FAC, asserting that Providence has failed to sufficiently show that 26 Hub exceeded the scope of any license, and that this is “essentially a contract case” and the FAC 27 fails to establish the existence of a “valid, enforceable agreement.” Doc. 23 (“Second MTD”). 28 This court has subject matter jurisdiction over this action because federal courts are vested with 1 exclusive jurisdiction in copyright cases.

(a). For the reasons set forth below, 2 the court denies Hub’s motion to dismiss. 3 I. Background1 4 Plaintiff Providence is the publisher of a newsletter titled Workers’ Comp Executive 5 (“WCE”) which features original articles about occupational health and safety issues. FAC ¶¶ 8– 6 9. Providence publishes and distributes new editions of WCE to its subscribers approximately 7 twenty-two times per year via email.

. Providence offers three types of subscriptions 8 to WCE: “(1) single copy subscriptions; (2) multi-copy subscriptions for a specific number of 9 copies for a specific number of identified recipients; and (3) enterprise subscriptions, for internal 10 use by an entire subscriber institution.”

. Providence is the exclusive copyright owner for 11 each issue of WCE and each article appearing in WCE.

¶¶ 11–12. Defendant Hub is an 12 insurance and financial services provider located in Fresno, California.

. Hub has 13 subscribed to WCE since January 2007, and the WCE newsletters were electronically delivered to 14 Hub’s Regional President, Michael Der Manouel.

¶¶ 21–23. 15 On January 23, 2024, Providence filed a complaint against Hub alleging willful copyright 16 infringement.

Providence alleges that Hub has engaged in copyright infringement since it 17 first subscribed to WCE in January 2007.

. 18 According to Providence’s analysis of its email data from the delivery of WCE to Der 19 Manouel, Hub copied and distributed multiple WCE issues to its employees.

¶¶ 26–29. The 20 April 11, 2023, issue was forwarded to employees “at least 40 separate times,” the April 25, 2023, 21 issue was forwarded “at least 29 separate times,” and the June 14, 2023, issue was forwarded “at 22 least 40 separate times.”

¶¶ 28–29. The complaint does not allege that Hub forwarded WCE 23 newsletters to anyone other than Hub’s employees. Rather, Providence contends that Hub’s 24 “pattern of routine and substantial forwarding indicates systematic copying and distributing of 25 WCE” to Hub’s employees, and that each incident of this constitutes willful copyright 26 infringement.

. Providence asserts that it only recently learned of Hub’s forwarding 27 1 This recitation of facts is taken from Providence’s FAC. These allegations are assumed to be 28 true for the purposes of the pending motion. 1 of the WCE issues, and that it is unable to uncover the full extent because “plaintiff’s records 2 capture only limited data” and “defendant’s email servers and computer systems are highly secure 3 . . . and cannot be accessed by the general public or by plaintiff.”

, 32–33. 4 On July 8, 2024, the court granted Hub’s motion to dismiss without prejudice. Doc. 21 5 (“Order”).2 In its initial complaint, Providence acknowledged that Hub subscribed to WCE but 6 did not state which of the three subscription types – single copy subscription, multi-copy 7 subscription, or enterprise subscription – Hub possessed. See

at 5–7. As the Order noted:

8 [A] copyright infringement claim requires the plaintiff to allege facts showing “ownership of a copyright and a copying of [a] protectable 9 expression beyond the scope of the license.” The complaint omits key facts regarding the scope of the license between the parties, and 10 thus fails to state a claim. 11

at 7 (quoting MAI Systems Corp. v. Peak Computer, Inc.,

(9th Cir 1993)). 12 Providence timely filed the FAC on July 18, 2024, and cured the deficiency identified in 13 its original complaint. Providence now alleges that Hub possessed a single copy subscription, 14 and that each instance of Hub’s forwarding of the newsletters constituted copyright infringement 15 because that was beyond the scope of the license. See FAC ¶¶ 21–22. 16 On August 1, 2024, Hub filed a new motion to dismiss, asserting that the FAC is 17 inadequate because it fails to state sufficient facts showing that the subscription agreement is a 18 valid, enforceable contract and fails to show that it satisfies California’s statute of frauds. Second 19 MTD. Hub argues that, because the scope of the license is pivotal to whether Providence can 20 state a claim for copyright infringement, this is “essentially a contract case” and Providence must 21 do more to establish the other terms of the contract. See

at 9–13. Providence filed an 22 opposition, Doc. 24 (“Opp’n”), and Hub replied, Doc. 25 (“Reply”). 23 II. Legal Standard 24 The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal 25 sufficiency of the complaint. N. Star Int’l v. Ariz. Corp. Comm’n,

(9th Cir. 26

27 2 The Order granted Hub’s motion to dismiss the complaint for failure to plead facts sufficiently alleging the scope of Hub’s license. Order at 4–7. The Order did not adopt Hub’s second 28 argument, which was based on the statute of limitations. See id. at 7, 9–10. 1 1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of 2 sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901

(9th Cir. 1990). A plaintiff is required to allege “enough facts to state a claim to 4 relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,

(2007). “A 5 claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw 6 the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. 7 Iqbal,

(2009). The complaint must contain facts that “nudge [the plaintiff’s] 8 claims across the line from conceivable to plausible.” Twombly,

. 9 In determining whether a complaint states a claim on which relief may be granted, the 10 court accepts as true the allegations in the complaint and construes the allegations in the light 11 most favorable to the plaintiff. Hishon v. King & Spalding,

(1984). However, 12 the court need not assume the truth of legal conclusions cast in the form of factual allegations. 13 Iqbal,

. While Rule 8(a) does not require detailed factual allegations, “it demands 14 more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”

. A 15 pleading is insufficient if it offers mere “labels and conclusions” or “a formulaic recitation of the 16 elements of a cause of action.” Twombly,

; see also

(“Threadbare 17 recitals of the elements of a cause of action, supported by mere conclusory statements, do not 18 suffice.”). Moreover, it is inappropriate to assume that the plaintiff “can prove facts that it has 19 not alleged or that the defendants have violated the . . . laws in ways that have not been alleged.” 20 Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters,

, 526 21 (1983). 22 III. Discussion and Analysis 23 The FAC sufficiently alleges that Providence owned a valid copyright to the WCE 24 newsletters, and that Hub copied protected aspects of Providence’s copyrighted work. See 25 Unicolors, Inc. v. Urb. Outfitters Inc.,

(9th Cir. 2017). Hub does not challenge 26 the sufficiency of these allegations. The issue raised on the motion to dismiss is whether 27 Providence sufficiently alleges that Hub exceeded the scope of its license – its annual 28 subscription to the WCE newsletters – when it further copied and distributed the newsletters. 1 Furthermore, Hub argues that this is “essentially a contract case” and that the FAC fails to show 2 the existence of a valid, enforceable contract. See Second MTD at 5–7. Hub’s argument rests on 3 a flawed foundation. Although Hub’s actions might also constitute breach of contract based on 4 the alleged violation of the terms of its license, Providence states a claim only for copyright 5 infringement. FAC ¶¶ 40–49. 6 “Enforcing a copyright license ‘raises issues that lie at the intersection of copyright and 7 contract law.’” MDY Industries, LLC v. Blizzard Ent., Inc.,

(9th Cir. 2010) 8 (quoting Sun Microsystems, Inc. v. Microsoft Corp.,

(9th Cir. 1999)). “A 9 copyright owner who grants a nonexclusive, limited license ordinarily waives the right to sue 10 licensees for copyright infringement, and it may sue only for breach of contract.”

(quoting 11 Sun Microsystems,

(internal quotations omitted)). “However, if the licensee acts 12 outside the scope of the license, the licensor may sue for copyright infringement.”

(citing Sun 13 Microsystems,

). As the Court of Appeals for the Federal Circuit explained:

14 Consider a license in which the copyright owner grants a person the right to make one and only one copy of a book with the caveat that 15 the licensee may not read the last ten pages. Obviously, a licensee who made a hundred copies of the book would be liable for copyright 16 infringement because the copying would violate the Copyright Act’s prohibition on reproduction and would exceed the scope of the 17 license. Alternatively, if the licensee made a single copy of the book, but read the last ten pages, the only cause of action would be for 18 breach of contract, because reading a book does not violate any right protected by copyright law. 19 Storage Tech. Corp. v. Custom Hardware Eng’g & Consulting, Inc.,

, 1315–16 20 (Fed. Cir. 2005). 21 The situation here aligns with the first hypothetical considered in Storage Tech because 22 the FAC alleges that the copyright owner, Providence, granted a license to Hub to receive “one 23 and only one copy” and that Hub allegedly made many more copies.

Assuming these and the 24 other allegations in the FAC to be true, Providence has stated a claim for copyright infringement. 25 Hub is mistaken that this is “essentially a contract case.” Second MTD at 9. Hub bases 26 its argument on the contention that “[in] any case involving a contract, the existence of a valid 27 and enforceable agreement is a dispositive threshold issue.”

(emphasis added). Hub cites 28 1 only one case, Kravich v. Wells Fargo Home Mortg.,

, at *6 (E.D. Cal. Feb. 11, 2 2010), to support its contention. Kravich is not on point because it involved a breach of contract 3 claim, not copyright infringement. See

While a plaintiff must show the existence of a valid, 4 enforceable contract when the plaintiff asserts a breach of contract claim, see

Providence does 5 not seek to recover for breach of contract. Hub cites no authority to support its argument that, to 6 prevail on its copyright claim, a plaintiff must plead facts to establish the facial plausibility of a 7 breach of contract claim that the plaintiff does not assert in its complaint. 8 Hub’s statute of frauds argument also rests upon the mistaken premise that this is 9 “essentially a contract case.” See Second MTD at 9, 11–13. California’s statute of frauds 10 requires certain contracts to be “in writing and subscribed by the party to be charged” to be 11 enforceable.

(a). “State statutes of frauds serve a purely evidentiary 12 function—to prevent enforcement through fraud or perjury of fictitious agreements.” Konigsberg 13 Int’l, Inc. v. Rice,

(9th Cir. 1994). Hub argues that Providence was required to 14 allege that the agreement was in writing, and because Providence did not do so, it has not stated a 15 claim. See Reply at 7–8. However, this argument faces the same essential problem: Although 16 Providence alleges that Hub had an annual subscription to receive one copy of each WCE issue, 17 Providence does not seek to enforce the contract; it seeks to enforce its exclusive right to 18 reproduce its work under the Copyright Act.3 Providence asserts a violation of the Copyright Act 19 rather than a breach of contract, and the subscription is relevant insofar as it would be a defense to 20 the copyright action if it licensed Hub to make additional copies. The FAC alleges clearly that 21 Hub’s subscription did not authorize any such copying. To the extent Hub disagrees with the

22 3 The cases Hub relies on in its statute of frauds argument do not support dismissal of the FAC. 23 For example, in Konigsberg, the plaintiff alleged that the defendant author had conveyed to the plaintiff the right to create a teleplay based on one of her copyrighted novels.

. 24 However, the parties never signed a contract transferring ownership of that right; the plaintiff contended only that there was an oral agreement.

When the author later refused to allow the 25 plaintiff to exercise its purported right to extend within the option period, the plaintiff brought an action seeking a declaratory judgment that it owned the television rights.

The district court 26 dismissed the plaintiff’s claim because the parties had not signed a written, enforceable 27 agreement, and the Ninth Circuit affirmed.

at 356–58. Konigsberg is unhelpful to Hub because the relief the plaintiff in that case sought was a court order holding that it possessed an 28 enforceable contract. See

Konigsberg was therefore a contract case, unlike this one. 1 FAC’s allegations concerning the terms of the license, that is an affirmative defense Hub may 2 assert in this case, but for purposes of Hub’s motion to dismiss, the FAC’s factual allegations 3 must be presumed to be true. See Hishon,

. 4 Hub relies on this court’s citation in its prior order to Bourne v. Walt Disney Co.,

(2d Cir. 1995), regarding the scope of the license being a necessary element of a copyright 6 infringement claim where the complaint alleges that the defendant possessed a license for the 7 copyrighted works. See Order at 5. The Bourne decision noted that any copyright infringement 8 case involving the question of whether a defendant exceeded the scope of its license “present[s] 9 the court with a question that essentially is one of contract: whether the parties’ license agreement 10 encompasses the defendant’s activities.” Bourne,

. Hub also relies on Bourne’s 11 statement that “[j]ust as in an ordinary contract action, the party claiming a breach carries the 12 burden” of proving that the defendant’s use was unauthorized.

However, this discussion in 13 Bourne addressed the plaintiff’s burden at trial, not at the pleadings stage. See

To sufficiently 14 state a claim of copyright infringement by an acknowledged licensee, the complaint need only 15 plausibly allege that the licensee exceeded the scope of its license, which the FAC here does. 16 Even if Hub were correct that the subscription agreement did not constitute a “valid, 17 enforceable contract,” see Second MTD at 5, 11–13, it would be of no consequence to the legal 18 adequacy of Providence’s complaint because each act of forwarding would still constitute 19 copyright infringement. Whether Hub possessed a valid single-copy subscription or no 20 subscription at all, the court would still be able “to draw the reasonable inference that the 21 defendant is liable for the misconduct alleged.” Iqbal,

. Providence’s claim has 22 “facial plausibility” either way. See

23 This conclusion is consistent with the court’s prior order. See Order. The court required 24 Providence to clarify the type of subscription Hub possessed because the initial complaint alleged 25 a three-tier subscription model – two of which (multi-copy and enterprise) would have 26 presumably permitted Hub to make copies of WCE for its employees – and the complaint 27 acknowledged that Hub possessed some unspecified type of subscription. See Order at 5 (“Given 28 the complaint’s acknowledgement that defendant possessed a subscription, and that certain 1 | subscriptions would authorize a subscriber to provide the WCE newsletters to its employees, the 2 || scope of defendant’s subscription is a necessary fact that the complaint must also establish.” 3 | (citations omitted) (emphasis added)). Given that the initial complaint acknowledged that Hub 4 | had a license (the subscription), and that two of the three possible types of licenses would have 5 || permitted Hub to engage in the alleged copying, Providence was required to also allege the type 6 | of license Hub possessed—only then would it be clear that the alleged forwarding was not 7 || permitted by the terms of the license. See Menzel v. Scholastic, Inc., No. 17-cv-05499-EMC, 8 |

, at *4 n.1 (N.D. Cal. Mar. 19, 2018) (“[B]ecause [the plaintiff] admitted in his 9 | complaint that license agreements do exist, he must include in his complaint allegations that, e.g., 10 || the licenses have been exceeded.”). Essentially, Providence was required to allege how many 11 | copies Hub’s subscription authorized Hub to make and distribute. The FAC does that. It 12 | sufficiently alleges that, for each relevant year, Hub had an annual single-use subscription that did 13 | not allow it to make any copies of the copyrighted works, and that Hub nonetheless repeatedly 14 | copied the copyrighted works. See FAC 9 21-22. The FAC sufficiently alleges a claim for 15 || copyright infringement. 16 | IV. Conclusion and Order 17 Based upon the foregoing, defendant’s motion to dismiss, Doc. 23, is DENIED. 18 19 | IT IS SO ORDERED. _ 20 Dated: _ October 4, 2024 4A . UNITED STATES DISTRICT JUDGE

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