Monthly Archives: November 2010

Cal. Appeals affirms dismissal without leave to amend of IP conversion claim

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Filed under Conversion of IP, Preemption

Karls v. Wachovia Trust Company, et al., CGC-09-487535 (Cal. 1st App. October 27, 2010) (unpublished).

The plaintiff allegedly devised a corporate tax strategy. By some means not alleged, defendants came upon plaintiff‘s idea and used it to obtain foreign tax credits. Plaintiff brought a single claim for conversion, seeking compensatory damages in the amount of tax credit that the defendants were able to claim as a result of their use of plaintiff‘s idea and punitive damages. Defendant Wachovia filed a demurrer, and Wells Fargo filed a motion for judgment on the pleadings, both of which were granted without leave to amend.

The defendants asserted that the complaint must be dismissed because it only alleged conversion of an idea, and because the plaintiff did not allege how defendants have substantially interfered with plaintiff‘s dominion over his own idea. The plaintiff argued that the conversion claim was proper because the tax structure was too complicated to be comprehended separate from the paper on which it was written. The plaintiff argued that, like Leonaro da Vinci‘s painting The Mona Lisa, the tax structure was an idea that could not be understood without reference to the tangible written presentation that he prepared prior to defendant‘s alleged conversion.

The Court of Appeals (Margulies, Rivera, Dondero writing) found that an idea does not qualify as property subject to conversion even if the idea is reduced to a writing:

It is apparent that the plaintiffs in the instant action were not seeking to recover the value of the particular items of personal property in defendants‘ possession but were seeking to recover damages for the value of a creative design allegedly appropriated by defendants. Plaintiffs made no attempt whatever to establish that the personal property in defendants‘ possession, consisting of one set of plaintiffs‘ plans, was of any value in itself. It may be inferred from the evidence that the value of one set of plans would be equal to the printing costs. Plaintiffs likewise made no attempt to show that they suffered any detriment from the loss of the one set of plans. The gravamen of plaintiffs‘ cause of action was the allegedly wrongful appropriation by defendants of a creative idea or design. The trial court was obviously correct in holding that the case should be submitted to the jury solely on the theory of copyright infringement and not on the conversion count. (Oakes v. Suelynn Corp. (1972) 24 Cal.App.3d 271, 279 (Oakes).)

In sum, while an action for conversion may be entirely appropriate in the context of paintings and other tangible mediums of artistic expression, under the rationales of Oakes and Melchior the tort is not available to plaintiffs suing for infringement on their intellectual property rights, regardless of whether the concepts at issue have been memorialized in a writing.

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E.D. Cal. finds 512(f) “knowing misrepresentation” in contradictions in copyright registration application

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Filed under Architectural Design, DMCA, Useful Article

Design Furnishings, Inc. v. Zen Path LLC, 2:10-02765 WBS GGH (E.D. Cal. Oct. 20, 2010)

Design Furnishings and Zen Path sold wicker furniture from the same manufacturer on eBay. Zen Path, the defendant, sent a cease and desist to Design Furnishings, the declaratory judgment plaintiff, stating that Design Furnishings’ sale of the furniture infringed Zen Path’s exclusive rights granted under the Copyright and Patent Acts, and that the photos Design Furnishings used to market the furniture on Ebay infringed Zen Path’s copyrights. Design Furnishings stopped using the photos, but continued to sell the furniture.

Zen Path then allegedly sent a series of sixty-three takedown notices to Ebay, claiming that the sale of the furniture infringed its exclusive rights. Zen Path also filed copyright registration applications for four different furniture collections. Zen Path filed the registrations as “sculpture/3-D artwork, Ornamental Design” and attached pictures of the furniture. (A picture of one of the deposits is below.)

Design Furnishings filed an action in state court, which was later removed to federal court, which included claims for (1) misrepresentation of intellectual property infringement in violation of 17 U.S.C. § 512(f) of the Digital Millennium Copyright Act (“DMCA”), (2) tortious interference with a contract, (3) tortious interference with prospective economic advantage, (4) a violation of California’s Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200-17210, and (5) declaratory and injunctive relief.

Knowing misrepresentation

17 U.S.C. 512(f) of the DMCA provides, inter alia, that any person who knowingly materially misrepresents that “material or [an] activity is infringing,” “shall be liable for any damages, including costs and attorneys’ fees, incurred by the alleged infringer.” The Court noted, citing Rossi v. Motion Picture Ass’n of Am., Inc., 391 F.3d 1000, 1005 (9th Cir. 2004), that “Liability does not extend to when “an unknowing mistake is made, even if the copyright owner acted unreasonably in making the mistake. Rather, there must be a demonstration of some actual knowledge of misrepresentation on the part of the copyright owner.”

The Court, nonetheless, granted Design Furnishings’ motion for a temporary restraining order that barred Zen Path from issuing additional DMCA takedown notices. The Court found that it could draw an inference of “knowing misrepresentation” from contradictions in the defendant’s copyright registration applications:

Here, defendant’s applications for copyright protection claimed the works were sculptures or 3-D artwork or ornamental designs, indicating that defendant knew the limits of copyright protection. The pictures of the furniture, though, suggest that defendant impermissibly sought protection of the “industrial design” of the furniture. Moreover, the internal contradiction in the applications raises a strong inference that defendant subjectively knew it did not have a copyright infringement claim when it notified eBay. Accordingly, the court finds that plaintiff has a likelihood of success on the merits.

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