Moonbug Entertainment Limited v. Babybus (Fujian) Network Technology Co., Ltd

Opinion

1 2 3 6 7 MOONBUG ENTERTAINMENT Case No. 21-cv-06536-EMC LIMITED, et al., 8 Plaintiffs, ORDER GRANTING PLAINTIFFS’ 9 MOTION TO STRIKE AFFIRMATIVE v. DEFENSES 10 BABYBUS (FUJIAN) NETWORK Docket No. 389 11 TECHNOLOGY CO., LTD, et al.,

12 Defendants.

13 14 15 On May 9, 2023, Plaintiffs Moonbug Entertainment Limited and Treasure Studio, Inc. 16 (collectively, “Moonbug”) filed a supplemental complaint against Defendants BabyBus Co., Ltd. 17 and BabyBus (Fujian) Network Technology Co., Ltd. (“BabyBus Tech.”) (collectively, 18 “BabyBus”). Docket No. 307. Defendants filed an answer to the supplemental complaint on May 19 23, 2023, asserting, in part, the affirmative defenses of laches and unclean hands. Docket No. 338. 20 Moonbug now moves to strike these affirmative defenses. 22 At summary judgment, the Court found that six of BabyBus’ videos, including the “Yes 23 Yes Playground” video, infringed Moonbug’s copyrights. Docket No. 242 at 10. On March 9, 24 2023, Moonbug discovered that BabyBus was still displaying and performing this video on its 25 Portuguese language channel on YouTube and submitted a takedown notice to YouTube. 26 BabyBus later submitted counter-notifications regarding hundreds of videos where infringement 27 was still in dispute. It also submitted a counter-notification to YouTube stating that the 1 the copyrights of any third party.” On April 3, 2023, YouTube reinstated the video. Moonbug 2 then moved the Court to allow a supplemental complaint, which the Court allowed. Based on 3 these factual allegations, the supplemental complaint included two causes of action: a copyright 4 infringement cause of action, and a copyright misrepresentation cause of action. Docket No. 271- 5 1 ¶¶ 91–99. In its answer to the supplemental complaint, Babybus asserted the affirmative 6 defenses of laches and unclean hands. Docket No. 338 at 19-20. 8 In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007) and Ashcroft v. 9 Iqbal, 556 U.S. 662, 129 S. Ct. 1937 (2009), the U.S. Supreme Court heightened the pleading 10 requirements for stating a claim under Fed. R. Civ. P. 8(a). Neither the Supreme Court nor the 11 Ninth Circuit has ruled on whether the plausibility standard set forth in Twombly applies to stating 12 affirmative defenses. The only circuit court to rule on this issue was the Second Circuit, which 13 held that “Twombly applies to determining the sufficiency of all pleadings, including the pleading 14 of an affirmative defense, but with recognition that, as the Supreme Court explained in Iqbal, 15 applying the plausibility standard to any pleading is a “context-specific” task.” GEOMC Co. v. 16 Calmare Therapeutics Inc., 918 F.3d 92, 98 (2d Cir. 2019). 17 Courts in this district have consistently required affirmative defenses to meet the 18 Twombly/Iqbal standard. See Neo4j, Inc. v. PureThink, LLC, 480 F. Supp. 3d 1071, 1075 (N.D. 19 Cal. 2020) (collecting cases). Accordingly, “[w]hile a defense need not include extensive factual 20 allegations in order to give fair notice, bare statements reciting mere legal conclusions may not be 21 sufficient.” Perez v. Gordon & Wong Law Group, P.C., No. 11-CV-03323-LHK, 2012 WL 22 1029425, at *8 (N.D. Cal. Mar. 26, 2012) (internal quotation and citation omitted); United States 23 v. Acad. Mortg. Corp., No. 16-CV-02120-EMC, 2020 WL 7056017, at *2 (N.D. Cal. Dec. 2, 24 2020). “With a motion to strike, just as with a motion to dismiss, the court should view the 25 pleading in the light most favorable to the nonmoving party.” Platte Anchor Bolt v. IHI, Inc., 352 26 F.Supp.2d 1048, 1057 (N.D. Cal. 2004). 27 2 A. Motion to Strike the Affirmative Defense of Laches 3 1. Laches as a Defense to Legal Relief 4 The Supreme Court has held that laches may not be used to bar a claim for legal relief for 5 copyright infringement brought within the 3-year statute of limitations. Petrella v. Metro- 6 Goldwyn-Mayer, Inc., 572 U.S. 663, 677 (2014). However, Defendants did not raise laches as an 7 affirmative defense to Moonbug’s claim for legal relief. In the answer, Babybus wrote: “[t]he 8 equitable relief Moonbug seeks is barred by the doctrine of laches, including because Moonbug 9 has unreasonably delayed in alleging copyright infringement.” Docket No. 338 at 20:23-24. 10 Accordingly, Moonbug’s motion to strike the defense of laches as to legal relief is DENIED as 11 moot. 12 2. Laches as a Defense to Equitable Relief 13 a. Extraordinary Circumstances 14 The Supreme Court held in Patrella that laches is theoretically available as an affirmative 15 defense to copyright but should only bar relief in “extraordinary circumstances.” Petrella, 572 16 U.S. at 685. Defendants make the following allegations in support of their laches defense: (1) that 17 Moonbug unreasonably delayed in alleging copyright infringement, (2) that Moonbug failed to 18 mitigate damages by failing to reply to BabyBus’ erroneous counter-notification submitted on 19 March 20, 2023, despite having knowledge by early March 2023 that the video in question did in 20 fact infringe, (3) that Moonbug intentionally timed the litigation to coincide with BabyBus’ IPO, 21 by filing soon after BabyBus submitted its IPO application materials to the Shenzhen Stock 22 Exchange. The Court need not reach the question of whether these allegations are sufficient to 23 plead laches because there is an alternate ground on which to dispose of this motion. 24 b. Willful Infringement Exception 25 Even if laches applied, the Ninth Circuit has held that willful infringement is an exception 26 to latches. Danjaq LLC v. Sony Corp., 263 F.3d 942, 957 (9th Cir. 2001). “For purposes of the 27 willfulness exception to laches, just as for the willfulness augmentation of statutory copyright 1 conduct constitutes copyright infringement.”” Id. 2 BabyBus has conceded willful infringement of the “Frame by Frame” Registrations by six 3 of the accused videos as well as four compilations that include them. MSJ Order Docket No. 242. 4 The affirmative defense of laches is therefore not available to BabyBus. Accordingly, Plaintiffs’ 5 motion to strike the affirmative defense of laches is GRANTED, and the laches defense is 6 DISMISSED with prejudice. 7 B. Motion to Strike the Affirmative Defense of Unclean Hands 8 The Ninth Circuit has endorsed the application of the doctrine of unclean hands as a 9 defense to a copyright infringement claim. See Supermarket of Homes, Inc. v. San Fernando 10 Valley Bd. of Realtors, 786 F.2d 1400, 1408 (9th Cir. 1986). Unclean hands “bars relief to a 11 plaintiff who has violated conscience, good faith or other equitable principles in his prior conduct. 12 [and] requires balancing the alleged wrongdoing of the plaintiff against that of the defendant. 13 Certified Nutraceuticals, Inc. v. Avicenna Nutraceutical, LLC, 821 F. App’x 701, 703 (9th Cir. 14 2020) (internal citations omitted). In Certified, the Ninth Circuit clarified that injury to the 15 defendant is not required in order to establish a defense of unclean hands. Id. Therefore, it is 16 sufficient to demonstrate that “(1) the plaintiff’s conduct is inequitable, and (2) the conduct relates 17 to the subject matter of the plaintiff’s claims. Japan Telecom, Inc. v. Japan Telecom Am. Inc., 287 18 F.3d 866, 870 (9th Cir. 2002). Babybus appears to assert the unclean hands defense as to the 19 copyright infringement cause of action in Moonbug’s First Amended Complaint in addition to the 20 copyright infringement and copyright misrepresentation causes of action in the Supplemental 21 Complaint. This order disposes of this defense as to all three claims. 22 1. Unclean Hands Defense to Copyright Infringement Claims 23 Babybus makes two allegations in support of Defendants’ unclean hands defense. First, 24 BabyBus accuses Moonbug of engaging in “a years-long campaign of sending erroneous, 25 knowingly false, and/or misleading DMCA takedown notices targeting BabyBus’ YouTube 26 channels and hundreds of BabyBus videos.” Answer, Docket No. 338 at 22:3-10. As an example, 27 BabyBus alleges that Moonbug submitted seven takedown notices in relation to 24 videos in 1 takedown were infringement of Babybus’ videos themselves, not any of Moonbug’s videos, 2 characters, or other protectable elements. This was supposedly done by attaching the link to the 3 Babybus-owned Super JoJo video to the DCMA notice. In essence, Babybus contends that, read 4 literally, some of Moonbug’s DCMA notices accused Babybus’ videos of infringing themselves. 5 Second, Babybus contends that Moonbug is to blame for its filing of an inaccurate counter-notice 6 because Moonbug failed to alert Babybus to the fact that the video at issue in that particular 7 DMCA takedown request had been deemed to infringe by this Court’s summary judgment order. 8 The Court need not reach the question of whether these actions satisfy the inequitable 9 conduct prong of the unclean hands analysis because they lack the necessary nexus to the merits of 10 this case to satisfy the second prong of the analysis. See King.com Ltd. V. 6 Waves, LLC, No. C- 11 13-3977 MMC, 2014 WL 12704998, at *1 (N.D. Cal. July 11, 2014). In King.com, defendants 12 alleged that: (1) elements of plaintiff’s games are “commonplace,” (2) plaintiffs’ games were 13 “derived by plaintiff from existing games,” and (3) plaintiff “has a history of doing exactly what it 14 now claims defendants have done.” Id. The district court found that the allegations were not 15 “directly related to the merits of the controversy between the parties[.]” Id. (quoting Dream 16 Games of Arizona, Inc. v. PC Onsite, 561 F.3d 983, 990 (9th Cir. 2009)). 17 In Dream Games, the Ninth Circuit stated in dicta that the unclean hands defense has been 18 recognized when plaintiff misused the process of the courts by falsifying a court order or evidence, 19 or by misrepresenting the scope of his copyright to the court and opposing party. Dream Games at 20 991. The Ninth Circuit held in Dream Games that the plaintiff operating its online gaming 21 company illegally did not give rise to an unclean hands defense as to a trademark claim because it 22 did not bear on the merits of the case between the parties. Id. at 991-92. Accordingly, there must 23 be a tight nexus between the allegedly inequitable conduct and the merits of the case before the 24 Court, which Babybus has not sufficiently alleged. Even if Moonbug submitted misleading 25 DMCA takedown requests to YouTube, that does not directly bear on the merits of the copyright 26 infringement dispute before the Court. The motion to strike the affirmative defense of unclean 27 hands as to the copyright infringement causes of action is GRANTED, and the unclean hands 1 2. Unclean Hands Defense to Copyright Misrepresentation Claim 2 The unclean hands analysis with respect to the copyright misrepresentation claim asserted 3 in the Supplemental Complaint yields the same result. The alleged “campaign” of erroneous 4 DMCA takedown notices does not include the takedown notice for the Portuguese “Yes Yes 5 Playground” video at issue in the Supplemental Complaint. Therefore, this assertedly inequitable 6 conduct does not relate to the Supplemental Complaint and is inapposite. As to Babybus’ second 7 allegation, the Court is not aware of any case, and Babybus has not cited one, where an unclean 8 hands defense was based on the failure of a plaintiff to notify the defendant of the defendant’s own 9 infringement. Even if it did, the DMCA takedown request itself served to notify Babybus of the 10 claim of infringement. Accordingly, Plaintiffs’ motion to strike the affirmative defense of unclean 11 hands as to the copyright misrepresentation cause of action is GRANTED, and the unclean hands 12 defense is DISMISSED with prejudice. 14 For the foregoing reasons, Plaintiffs’ motion to strike is GRANTED, and the affirmative 15 defenses of laches and unclean hands are DISMISSED. The Court urges the parties to use their 16 limited time wisely throughout the upcoming trial. 17 This order disposes of Docket No. 389. 18 20 21 Dated: June 21, 2023 22 23 ______________________________________ EDWARD M. CHEN 24 United States District Judge 25 26 27