Enigma Software Group USA, LLC v. Malwarebytes Inc.

260 F. Supp. 3d 401
District Court, S.D. New York·Decided May 12, 2017·No. 16 Civ. 7885 (PAE)·Published·Cited by 35 cases

Opinion

OPINION & ORDER

Paul A. Engelmayer, United States District Judge

Enigma Software Group USA, LLC (“Enigma”), a developer of computer security products, brings this action against Malwarebytes, Inc. (“Malwarebytes”), which Enigma claims is its direct competitor in the anti-malware and internet security market. Enigma markets SpyHunter, its leading ánti-malware program; Mal-warebytes markets Malwarebytes Anti-Malware (“MBAM”), which detects and removes malware on consumers’ personal computers. Enigma alleges-that, in October 2016, Malwarebytes revised MBAM’s threat detection criteria to identify its competitor Enigma’s products — including SpyHunter — as threats to consumers. Mal-warebytes did so, Enigma claims, to damage Enigma’s reputation and to disrupt or disable Enigma’s products on consumers’ computers, so as to give Malwarebytes an unfair advantage. Enigma brings claims against Malwarebytes for false advertising in violation of the Lanham Act, 15 U.S.C. [404] § 1125(a)(1)(B), and under New York law for tortious interference with contractual relations, tortious interference with business relations, and for violating New York General Business Law § 349.

Malwarebytes now moves to dismiss Enigma’s First Amended Complaint (“FAC”) under'Federal Rules of Civil Procedure 12(b)(2) and. 12(b)(6) or, in the alternative, to transfer this case to the Northern District of California pursuant to 28 U.S.C. § 1404. For the reasons that follow, the Court grants the motion to transfer and declines to reach the motion to dismiss.

I. Background

A, Factual Background1

1. The Parties

The FAC alleges that Enigma is a Florida limited liability company that develops and markets computer security software. FAC ¶¶ 2, 35. Its computer security products “detect! ] and remove! ] malicious software (ie., malware), which includes, inter alia, viruses, spyware and adware; enhance!] internet privacy; and eliminate!] other security threats.” Id. ¶ 2. Enigma’s flagship anti-malware product is called “SpyHunter.” Id. ¶ 4.

Malwarebytes is a Delaware corporation, headquartered in Santa Clara, California, that is a competitor of Enigma’s in the computer security products market. Id. ¶¶ f 4, 36. Its flagship anti-malware product is “Malwarebytes Anti-Malware” or “MBAM.” Id. ¶ 4. MBAM detects “Potentially. Unwanted Programs” or “PUPs” on consumers’ computers. Id. ¶ 5. MBAM automatically quarantines these PUPs and flags them for consumers as “threats.” Id. MBAM presents consumers with a list of its “Threat Scan Results,” with each “threat” preselected for removal from the consumer’s computer. Id.

2. Enigma’s Earlier Lawsuit Against Bleeping Computer LLC

In January 2016, Enigma filed, in this Court, a lawsuit against Bleeping Computer LLC (“Bleeping”). See Enigma Software Group USA, LLC v. Bleeping Computer LLC et al., No. 16 Civ. 57, Dkt. 1. Enigma alleged that Bleeping, a New York company, was affiliated with Malwarebytes and would promote Malwarebytes’ MBAM product and earn a commission from Mal-warebytes when consumers, through a link [405] on Bleeping’s website, bought MBAM. FAC ¶22. Enigma accused Bleeping of falsely disparaging Enigma’s . products, while instructing consumers to uninstall or not install Enigma’s products and encouraging consumers to purchase MBAM. Id. ¶ 23. On July 8, 2016, the Court granted in part and denied in part Bleeping’s motion to dismiss. 194 F.Supp.3d 263 (S.D.N.Y. 2016).

During discovery in its lawsuit against Bleeping, Enigma served a subpoena on Malwarebytes. Enigma sought documents regarding the extent of Malwarebytes’ involvement in Bleeping’s alleged scheme. FAC ¶ 24. The deadline to respond to the subpoena was in October 2016, Id. ¶¶ 7, 25. In 2017, while discovery was ongoing, Enigma and Bleeping settled, and the Court dismissed, Enigma’s lawsuit. See 16 Civ. 57, Dkts. 70-72.

3. 2016: Malwarebytes’ Products Begin Identifying Enigma’s as Threats

Between 2008 and October 4, 2016, Mal-warebytes products had never identified Enigma products as PUPs, or as any other form of malware, and had never quarantined or interfered with the installation of Enigma products. Id. ¶ 6.

On October 5, 2016, one week before the deadline to respond to Enigma’s subpoena in the suit against Bleeping, Malwarebytes revised the criteria its MBAM software used to identify PUPs. Id. ¶¶ 7, 25. Before then, Malwarebytes had last changed its PUP criteria-in 2013. Id. The new criteria identified SpyHunter, and another Enigma product, “RegHunter,” as PUPs. Id. ¶ 9. As a result, if a consumer had SpyHunter or RegHunter on his or her computer and then downloaded or scanned that computer with MBAM, MBAM would automatically quarantine the Enigma products and identify them to the consumer as PUPs. Id. ¶ 10. Once the products were quarantined, the consumer would not be able to launch or use SpyHunter or RegHunter, even if the consumer attempted to “restore” those programs, unless the consumer undertook a series of “additional steps that may not be readily apparent to, or understood by, a novice user.” Id. Alternatively, if a consumer had MBAM on his or her computer and then attempted to download or install SpyHunter or RegHunter, MBAM would block the installation of the Enigma products, again regardless whether the consumer tried to “restore” the products from quarantine. Id. ¶ 11.

On October-19, 2016, Malwarebytes acquired an . anti-adware • product called “AdwCleaner,” which ostensibly “identifies] and remove[s] PUPs, adware, tool-bars, and. other unwanted software for its users.” Id. ¶ 12. At the time Malwarebytes acquired it, AdwCleaner did not identify .SpyHunter or RegHunter as PUPs. Id. ¶ 13. On, or about October 27, 2016, Adw-Cleaner began .identifying. SpyHunter and ■RegHunter as PUPs. Id. ¶ 14. AdwCleaner then quarantined and blocked these products just as MBAM did. Id.

The FAC alleges that Malwarebytes falsely identified Enigma’s products as threats. In truth, it alleges, these products are “legitimate and pose no security threat to users’ consumers.” Id. It alleges that Malwarebytes purposely revised its. criteria to target Enigma’s products for the purpose of “harming [Enigma] by, inter alia, interfering with [Enigma’s] current and prospective customer base, injuring [Enigma’s] business, and retaliating against [Enigma] for its lawsuit against Bleeping.” Id. ¶ 8.

The FAC alleges that, - as a result, of Malwarebytes’ “bad faith campaign” against .Enigma, id. ¶ 34, Enigma has suffered “immediate harm ... in the form of lost sales and revenue” and “irreparable [406] harm to [Enigma’s] business reputation,” id. ¶ 20.

B. Procedural History

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Enigma Software Group USA, LLC v. Malwarebytes Inc., 260 F. Supp. 3d 401 (S.D.N.Y. 2017).

260 F. Supp. 3d 401 (Enigma Software Group USA, LLC v. Malwarebytes Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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