nKlosures, Inc. Architects v. Avalon Lodging, LLC

• Court: District Court, C.D. California
• Decided: November 17, 2022
• Docket: 8:22-cv-00459
• Status: Unknown

Opinion

Case 8:22-cv-00459-RSWL-JDE Document Filed 11/17/22 Pagelof25 Page ID #:493

1 ‘QO! 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 | NKLOSURES, INC., CV 22-00459-RSWL-JDEx 13 Plaintiff, DISMISS (41) TO 14 Vv. be AVALON LODGING LLC, et 16] al., 17 Defendants. 3 | _ 19 Plaintiff nKlosure, Inc. (“Plaintiff”) brought this 20 | Action against Defendants Avalon Lodging, LLC 21 (“Defendant Avalon”); Bipin Morari (“Defendant Morari”); 22 | Best Western International, Inc.; W&W Land Design 23 | Consultants, Inc.; Winston Liu, P.E.; and Tom Lau, AIA 24 (collectively, “Defendants”) alleging copyright 25 | infringement, breach of contract, and unfair business 26 | practices. Currently before the Court is Defendants 27 | Avalon and Morari’s Motion to Dismiss [41] (“Motion”). 28 | Having reviewed all papers submitted pertaining to this

Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 2 of 25 Page ID #:494

1 Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the

2 Court GRANTS in part and DENIES in part Defendants’

3 Motion. 4 I. BACKGROUND 5 A. Factual Background 6 Plaintiff’s First Amended Complaint (“FAC”) alleges 7 as follows: 8 On or about May 25, 2014, Plaintiff, a licensed 9 architectural firm, contracted with Mr. Thakor Patel to 10 provide architectural design services for a new 11 Los Angeles hotel. First Am. Compl. (“FAC”) ¶ 12, ECF 12 No. 39. The contract (the “Agreement”) indicated that 13 Plaintiff was the sole author, owner, and copyright 14 holder of the architectural drawings and plans (the 15 “Drawings”) and that once the Planning Department 16 approved the Drawings, Mr. Patel would retain Plaintiff 17 as the architect for the hotel’s construction. Id. 18 Moreover, the Drawings were stamped with language 19 providing that they could not be copied or transmitted 20 without Plaintiff’s express written permission. Id. 21 ¶ 13. 22 After the Drawings were approved, Plaintiff learned 23 in June 2015 that Mr. Patel was selling the hotel 24 project to Defendant Avalon. Id. ¶ 14. In response, 25 Plaintiff’s principal, Mr. Nikhil Kamat (“Mr. Kamat”), 26 reached out to Defendant Avalon’s principal and managing 27 agent, Defendant Morari, to notify him that the Planning 28 Department had approved the Drawings and Plaintiff could 2 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 3 of 25 Page ID #:495

1 continue work on the project. Id. ¶¶ 5, 15. Defendant

2 Morari then asked for a proposal for Plaintiff’s work.

3 Id. ¶ 15. Mr. Kamat made it clear that Plaintiff would 4 only disclose the Drawings in its proposal on the 5 condition that Defendant Avalon could not use the 6 Drawings for the hotel unless Defendant Avalon paid 7 Plaintiff for them and hired Plaintiff as the project 8 architect. Id. 9 Three weeks later, Mr. Kamat sent Defendant Morari 10 an e-mail containing Plaintiff’s proposal. Id. ¶ 17. 11 In the e-mail, Mr. Kamat indicated that Plaintiff was 12 the sole owner, author, and copyright holder of the 13 Drawings created for the hotel, and that upon execution 14 of a contract, Plaintiff would grant Defendant Avalon a 15 license to use the Drawings in the hotel’s construction. 16 Id. In two subsequent phone calls, Defendant Morari 17 told Mr. Kamat that he would review the proposal and get 18 back to him. Id. ¶ 18. Defendant Morari understood 19 that if he decided to use the Drawings, Defendant Avalon 20 would have to pay for them and use Plaintiff as the 21 architect on the project. Id. Thereafter, Defendant 22 Morari went silent and cut off all contact with Mr. 23 Kamat. Id. 24 Several weeks later, Mr. Kamat sent an e-mail to 25 follow up on the proposal, but Defendant Morari did not 26 respond nor contact Plaintiff again. Id. ¶ 19. 27 Mr. Kamat therefore inferred that Defendant Morari was 28 not interested in using the Drawings for the hotel. Id. 3 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 4 of 25 Page ID #:496

1 On or about June 22, 2020, Mr. Kamat saw an

2 advertisement for the sale of a hotel that had since

3 been constructed on the property and recognized the 4 design as his own. Id. ¶ 21. He also learned that 5 Defendant Avalon had hired Defendant W&W Land Design 6 Consultant, Inc. (“W&W”) for the next stage of project 7 development and that Defendants had used Plaintiff’s 8 preliminary schematic design and drawings in the hotel’s 9 construction. Id. Sometime thereafter, Plaintiff 10 learned that the Drawings were included in a Power Point 11 presentation (the “Presentation”) marketing the 12 property. Id. ¶ 20. 13 On January 13, 2022, Plaintiff filed a copyright 14 application for the Drawings and the United States 15 Copyright Office granted Copyright Registration 16 Certificate No. VA 2-282-647 for the Drawings five days 17 later. Id. ¶¶ 24-25. 18 B. Procedural Background 19 Defendants filed the instant Motion [42] on September 20 8, 2022. Plaintiff opposed [48] the Motion on October 21 4, 2022. Defendants replied [49] on October 7, 2022. 22 II. DISCUSSION 23 A. Legal Standard 24 Federal Rule of Civil Procedure 12(b)(6) allows a 25 party to move for dismissal of one or more claims if the 26 pleading fails to state a claim upon which relief can be 27 granted. Fed. R. Civ. P. 12(b)(6). A complaint must 28 “contain sufficient factual matter, accepted as true, to 4 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 5 of 25 Page ID #:497

1 state a claim to relief that is plausible on its face.”

2 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation

3 omitted). Dismissal is warranted for a “lack of a 4 cognizable legal theory or the absence of sufficient 5 facts alleged under a cognizable legal theory.” 6 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 7 (9th Cir. 1988) (citation omitted). 8 In ruling on a Rule 12(b)(6) motion, a court may 9 generally consider only allegations contained in the 10 pleadings, exhibits attached to the complaint, and 11 matters properly subject to judicial notice. Swartz v. 12 KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A court 13 must presume all factual allegations of the complaint to 14 be true and draw all reasonable inferences in favor of 15 the non-moving party. Klarfeld v. United States, 944 16 F.2d 583, 585 (9th Cir. 1991). The question is not 17 whether the plaintiff will ultimately prevail, but 18 whether the plaintiff is entitled to present evidence to 19 support its claims. Jackson v. Birmingham Bd. of Educ., 20 544 U.S. 167, 184 (2005) (quoting Scheuer v. Rhodes, 21 416 U.S. 232, 236 (1974)). While a complaint need not 22 contain detailed factual allegations, a plaintiff must 23 provide more than “labels and conclusions” or “a 24 formulaic recitation of the elements of a cause of 25 action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 26 (2007). However, “a well-pleaded complaint may proceed 27 even if it strikes a savvy judge that actual proof of 28 those facts is improbable, and ‘that a recovery is very 5 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 6 of 25 Page ID #:498

1 remote and unlikely.’” Id. at 556 (quoting Scheuer v.

2 Rhodes, 416 U.S. 232, 236 (1974)). 3 B. Analysis 4 1. Judicial Notice 5 Before turning to the merits of Defendants’ Motion, 6 the Court should first address Defendants’ request for 7 judicial notice. A court may take judicial notice of an 8 adjudicative fact that is “not subject to reasonable 9 dispute because it: (1) is generally known within the 10 trial court’s territorial jurisdiction; or (2) can be 11 accurately and readily determined from sources whose 12 accuracy cannot reasonably be questioned.” Fed. R. 13 Evid. 201(b). Matters of public record may be 14 judicially noticed, but disputed facts contained therein 15 may not. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 16 988, 999 (9th Cir. 2018). “[A]ccuracy is only part of 17 the inquiry under Rule 201(b).” Id. “A court must also 18 consider—and identify—which fact or facts it is noticing 19 from” the documents. Id. 20 Here, Defendants filed a request seeking judicial 21 notice of the following twelve documents1: (A) the 22 May 25, 2014 Agreement (the “Agreement”) between 23 Plaintiff and Mr. Patel; (B) Plaintiff’s initial state- 24 court complaint in Case No. 20BBCV00441 (the “State 25 Case”); (C) The Los Angeles Superior Court (“LASC”) 26 1 The documents are attached to the Request for Judicial 27 Notice as exhibits and are referred to here by their exhibit 28 letter. 6 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 7 of 25 Page ID #:499

1 September 3, 2021 Order in the State Case; 2 (D) Plaintiff’s first-amended complaint in the State

3 Case; (E) The LASC December 16, 2021 Order in the State 4 Case; (F) Plaintiff’s second-amended complaint, in the 5 State case; (G) the demurrer and request for judicial 6 notice Defendants filed in the State Case; (H) the 7 LASC’s March 23, 2022 tentative ruling on Defendants’ 8 demurrer; (I) Plaintiff’s voluntary dismissal of the 9 State Case; (J) Plaintiff’s responses to Defendants’ 10 Special Interrogatory No. 49, Request for Admission No. 11 32, and Form Interrogatory 17.1; (K) Plaintiff’s 12 supplemental responses to Defendants’ Request for 13 Admission Nos. 40-41; (L) The Presentation Plaintiff 14 referred to in the FAC. See generally Req. for Judicial 15 Notice (“RJN”), ECF No. 42; RJN, Exs. A-L, ECF Nos. 42-1 16 through 42-12. 17 a. Documents Subject to Judicial Notice 18 Exhibits B through I are court filings and records 19 in related proceedings and are thus properly subject to 20 judicial notice. See Reyn’s Pasta Bella, LLC v. Visa 21 USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006) (taking 22 judicial notice of pleadings, memoranda, and other court 23 documents from related litigation). The Court takes 24 judicial notice of the existence of these proceedings, 25 their filing dates, Plaintiff’s claims, and the court’s 26 dispositions. See Limcaco v. Wynn, 27 No. 220CV11372RSWLMAAX, 2021 WL 5040368, at *5 (C.D. 28 Cal. Oct. 29, 2021). The Court should not, however, 7 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 8 of 25 Page ID #:500

1 take judicial notice of these documents for the truth of

2 the matters asserted therein. See Lee v. City of Los

3 Angeles, 250 F.3d 668, 690 (9th Cir. 2001); Garber v. 4 Heilman, No. CV 08-3585-DDP (RNB), 2009 WL 409957, at *1 5 (C.D. Cal. Feb. 18, 2009). 6 b. Documents Subject to Incorporation by 7 Reference 8 Under the judicially created incorporation by 9 reference doctrine, “[a] court may consider evidence on 10 which the complaint ‘necessarily relies’ if: (1) the 11 complaint refers to the document; (2) the document is 12 central to the plaintiff's claim; and (3) no party 13 questions the authenticity of the copy attached to the 14 12(b)(6) motion.” Marder v. Lopez, 450 F.3d 445, 448 15 (9th Cir. 2006). 16 Exhibit A is the Agreement between Plaintiff and 17 Mr. Patel. See RJN, Ex. A. Plaintiff’s FAC also 18 extensively referenced the Agreement. See FAC ¶¶ 12-13. 19 Plaintiff did not question Exhibit A’s authenticity in 20 its Opposition and instead asserted that the license it 21 granted to Mr. Patel in the Agreement did not transfer 22 to Defendants. See Opp’n 3:26-4:11. The Agreement is 23 therefore central to Plaintiff’s infringement claim, so 24 the Court may incorporate Exhibit A by reference into 25 its analysis of the current Motion. 26 Exhibit L is the Presentation allegedly used to 27 market the property that included the Drawings. See FAC 28 ¶ 20. Neither party questions Exhibit L’s authenticity, 8 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 9 of 25 Page ID #:501

1 and Plaintiff references the Presentation in its FAC.

2 See FAC ¶ 20. Absent direct evidence of copying, a

3 plaintiff asserting copyright infringement must prove 4 that a defendant had “access” to the underlying work. 5 See Three Boys Music Corp. v. Bolton, 212 F.3d 477, 481 6 (9th Cir. 2000). Thus, because Plaintiff alleges that 7 the Presentation provided Defendants with access to the 8 Drawings, the document is central to the infringement 9 claim. The Court may therefore also incorporate the 10 Presentation by reference into its analysis of the 11 current Motion. 12 Since the Court incorporates by reference 13 Exhibits A and L, judicial notice is not necessary. See 14 Rainville v. Anthem Um Servs., No. 18-cv-07099-RS, 2019 15 WL 13203765, at *2 n.2 (N.D. Cal. Feb. 12, 2019). 16 c. Documents Not Subject to Judicial Notice or 17 Incorporation by Reference 18 Exhibit J and Exhibit K purportedly contain 19 Plaintiff’s discovery responses in the related state 20 court proceedings, and Defendants rely on the responses 21 to undermine Plaintiff’s allegations. See RJN, Exs. J & 22 K; Defs.’ Mot. to Dismiss (“Mot.”). However, a court 23 may only judicially notice an adjudicative fact if it is 24 not subject to reasonable dispute because it: “(1) is 25 generally known within the trial court’s territorial 26 jurisdiction; or (2) can be accurately and readily 27 determined from sources whose accuracy cannot reasonably 28 be questioned.” Fed. R. Evid. 201(b). A document is 9 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 10o0f25 Page ID #:502

1] “self-authenticating” — and therefore deemed not subject 2] to reasonable dispute - if it requires no extrinsic 3 | evidence of genuineness to be admitted as evidence. 4] United States v. Alvirez, 831 F.3d 1115, 1123 (9th Cir. 5 | 2016). Discovery responses are not self-authenticating 6 | documents. See United Safeguard Distribs. Ass’n, Inc. 7 Jv. Safeguard Bus. Sys., Inc., 145 F. Supp. 3d 932, 942 8] (C.D. Cal. 2015) (“Discovery items . . . are not proper 9 {| subjects for judicial notice because they are not ‘self- 10 | authenticating’ and thus cannot be verified.”); Garber 11] sv. Heilman, No. CV 08-3585-DDP (RNB), 2009 WL 409957, at 1249 *1 (C.D. Cal. Feb. 18, 2009); Brown v. Allstate Ins. 13] Co., 17 F. Supp. 2d 1134, 1138 (S.D. Cal. 1998) 14 (refusing to judicially notice requests for admissions 15 | because “[t]he court proceeds with particular caution 16 J with respect to a request for judicial notice, when, as 17 J] here, it is urged so to resolve a fundamental, 18 | dispositive factual dispute”). Therefore, the Court 19 | should deny Defendants’ request for judicial notice for 20 | Exhibits J and K. 21 2. Copyright Act Claim 22 a. The Court Need Not Determine Whether 23 Defendants Possessed a License 24 A motion to dismiss challenges a complaint’s 25 | sufficiency, so it is generally inappropriate to raise an affirmative defense in a 12(b) (6) motion. Scott v. 27 | Kuhlmann, 746 F.2d 1377, 13788 (9th Cir. 1984). 28 | Therefore, to survive a motion to dismiss, plaintiffs do 10

Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 11 of 25 Page ID #:503

1 not need to plead “on the subject of affirmative

2 defenses.” Rivera v. Peri & Sons Farms, Inc., 735 F.3d

3 892, 902 (9th Cir. 2013). Rather, only when a 4 complaint’s allegations suffice to establish an 5 affirmative defense can a defendant properly raise the 6 defense in a 12(b)(6) motion. Id.; Sams v. Yahoo! Inc., 7 713 F.3d 1175, 1179 (9th Cir. 2013). The existence of a 8 license is an affirmative defense to a copyright 9 infringement claim. Worldwide Church of God v. 10 Philadelphia Church of God, Inc., 227 F.3d 1110, 1114 11 (9th Cir. 2000). 12 Here, Defendants assert that the Agreement granted 13 them an express, or at least an implied, license to use 14 the Drawings. Mot. 11:21-24. However, Defendants were 15 not a party to the Agreement. See RJN, Ex. A. Instead, 16 they contend that Mr. Patel transferred the Agreement’s 17 license to a third-party, RSP, who in turn sold the 18 land, drawings, and license to them. Id. at 11:13-20. 19 But the Ninth Circuit has held that a licensee cannot 20 transfer a copyright license without authorization. 21 Harris v. Emus Recs. Corp., 734 F.2d 1329, 1334 (9th 22 Cir. 1984) (“A licensee, however, had no right to re- 23 sell or sublicense the rights acquired unless he has 24 been expressly authorized to do so.”) (quoting M. NIMMER, 25 NIMMER ON COPYRIGHT § 10.01[c][4] (1983)). The Court 26 should not consider the express license defense because 27 the FAC and Agreement provide no evidence that Plaintiff 28 11 Case 8:22-cv-00459-RSWL-JDE Document Filed 11/17/22 Page 12o0f25 Page ID #:504

1] authorized the license’s transfer. See generally FAC; 2] RUN, EX. A. 3 Alternatively, copyright owners can grant 4 | nonexclusive licenses by implication. Foad Consulting 5] Grp., Inc. v. Azzalino, 270 F.3d 821, 826 (9th Cir. 6 | 2001). However, “implied licenses” are, by their very 7 | nature, implied. Consequently, courts generally resolve 8 | questions concerning implied licensing at summary 9 | Judgment — and not on motions to dismiss — because they 10 | require factual inquiry and analysis. Erwin v. Sestero, 11 J No. CV143890RSWLPJWX, 2014 WL 12591480, at *3 (C.D. Cal. 12 | Dec. 18, 2014); see, e.g., Effects Associates, Inc. v. 13 | Cohen, 908 F.2d 555, 559 (9th Cir. 1990) (establishing 14 | the three-element Effects Test to determine whether an 15 | implied license exists). 16 Here, the Court declines to determine whether 17 | Defendants possessed an implied license to use the 18 | Drawings because the affirmative defense is not apparent 19 | from the FAC’s allegations and the Agreement. See Sams, 20 □ 713 F.3d at 1179 (maintaining that to serve as a basis 21] for dismissal, affirmative defenses should be “apparent 22 | from the face of the complaint”). For example, the 23 | Effects Test’s third prong asks whether the licensor 24 | intended for the licensee to copy and distribute the 25 | work. See Asset Mktg. Sys., Inc. v. Gagnon, 542 F.3d 26] 748, 755 (9th Cir. 2008). Plaintiff explicitly alleged 274] that (1) the Agreement contained a clause restricting 28 | Mr. Patel’s right to copy or disseminate the Drawings 12

Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 13 of 25 Page ID #:505

1 and (2) Plaintiff told Defendants that it was the “sole

2 owner, author, and copyright holder” of the Drawings and

3 would only grant them a license for their use “upon 4 execution of [a] contract.” FAC ¶¶ 13, 17. The 5 Agreement further provides, in pertinent part, that 6 “[Plaintiff] is, at all times, the author, owner and 7 copyright holder of all drawings . . . for this Project 8 [and] . . . [Plaintiff] grants the Owner a license to 9 use the [Drawings] for the limited purpose of this 10 Project only.” RJN, Ex. A at 5 (emphasis added). Thus, 11 the FAC’s allegations and incorporated Agreement do not 12 clearly establish an implied license, particularly 13 considering that the Agreement purported to limit the 14 license’s scope and transferability. See id. 15 In sum, although the Agreement granted Mr. Patel an 16 express license to use the Drawings, the Court need not, 17 on a motion to dismiss, determine whether he transferred 18 (or legally could transfer) the license to Defendants 19 when they purchased the hotel project. Additionally, 20 the Court should refrain from determining whether 21 Defendants possess an implied license because the FAC’s 22 allegations and the Agreement do not obviously establish 23 the defense. See Gomez v. Quicken Loans, Inc., 629 F. 24 App’x 799, 801 (9th Cir. 2015) (“An affirmative defense 25 cannot serve as a basis for dismissal unless it is 26 obvious on the face of the complaint.”). 27 /// 28 /// 13 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 14 of 25 Page ID #:506

1 b. The Court Tolls the Statute of 2 Limitations

3 Under the Copyright Act, a plaintiff must commence 4 an infringement action within three years of the claim 5 accruing. 17 U.S.C. § 507(b). The Ninth Circuit has 6 adopted “the discovery rule,” which holds that a claim 7 “accrues” when the copyright holder “has knowledge of a 8 violation or is chargeable with such knowledge.” Roley 9 v. New World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 10 1994). In other words, the three-year clock begins when 11 a plaintiff discovers the infringement, so long as the 12 plaintiff’s prior unawareness of the infringement was 13 reasonable under the circumstances. Polar Bear Prods., 14 Inc. v. Timex Corp., 384 F.3d 700, 706 (9th Cir. 2004); 15 see also Starz Ent., LLC v. MGM Domestic Television 16 Distrib., LLC, 39 F.4th 1236, 1246 (9th Cir. 2022) 17 ([B]ecause the discovery rule is an exception to the 18 general incident of injury rule, . . . the three-year 19 limitations period begins only when the copyright holder 20 knows or should have known of the infringing act.”). 21 Ultimately, “precisely when a claim accrues is a 22 question of fact.” Starz Ent., LLC v. MGM Domestic 23 Television Distrib., LLC, No. CV 20-4085-DMG (KSX), 2021 24 WL 566500 (C.D. Cal. Jan. 5, 2021), motion to certify 25 appeal granted, No. CV 20-4085-DMG (KSX), 2021 WL 945237 26 (C.D. Cal. Feb. 22, 2021), and aff’d, 39 F.4th 1236 (9th 27 Cir. 2022) (holding the parties should pursue discovery 28 to determine whether the pleadings accurately reflected 14 Case 8:22-cv-00459-RSWL-JDE Document Filed 11/17/22 Page15o0f25 Page ID #:507

1] when a claim accrued). Because factual issues cannot be 2 4] resolved at the pleadings stage, a court should only 3 | find a copyright claim time-barred on a motion to 4] dismiss if no reasonable finder of fact could conclude 5 | that a copyright plaintiff’s lack of knowledge of 6 | infringement prior to its alleged discovery was 7 | reasonable under the circumstances. Mavrix Photo, Inc. 8 FT v. Rant Media Network, LLC, No. CV197270DMGAFMX, 2020 WL 9 7 8028098, at *3 (C.D. Cal. Nov. 2, 2020). 10 In its Motion, Defendants contend that Plaintiff 11] “could have easily checked the records of the City of 12] L.A. and learned that Defendant Avalon’s new architects 13 | had submitted plans from scratch for the new 5-story 14 | hotel by August of 2015.”*% Mot. 28:9-12. Indeed, 15 J constructive knowledge can trigger the statute of 16] Limitations, and “suspicion” of infringement “place[s] 17 | upon [the plaintiff] a duty to investigate further into 18 | possible infringements of [its] copyrights.” Wood v. 19 | Santa Barbara Chamber of Commerce, Inc., 7/05 F.2d 1515, 207 1521 (9th Cir. 1983); Oracle Am., Inc. v. Hewlett 21] Packard Enter. Co., 971 F.3d 1042, 1047 (9th Cir. 2020). 22] “[A] plaintiff is deemed to have had constructive 23 24 2 Defendants assert that Plaintiff reasonably should have recognized infringement from “scratch-made” architectural plans 25 | for a hotel with a different number of stories than the one Plaintiff had designed. Mot. 28:9-12. Defendants cannot have it 26 | both ways; either Defendants’ hotel design infringed on the 27 Drawings — and thus Plaintiff should have recognized the hotel as its own design — or Defendants generated an entirely independent 299 | design. 15

Case 8:22-cv-00459-RSWL-JDE Document Filed 11/17/22 Page 16o0f25 Page ID #:508

1] knowledge if it had enough information to warrant an 2] investigation which, if reasonably diligent, would have 3 | led to discovery of the [claim].” Pincay v. Andrews, 4] 238 F.3d 1106, 1110 (9th Cir. 2001). 5 Here, however, Plaintiff alleged that Defendants 6 | failed to follow up on its proposal to execute a 7 | contract that would grant Defendants a license for the 8 | Drawings and make Plaintiff the lead architect for 9 | construction. FAC G7 15-19. On a motion to dismiss, 10 | the Court should not impose a duty to investigate upon a 11] plaintiff unless the complaint clearly evidences the 12 | plaintiff’s suspicion or constructive knowledge of 13 J] infringement. See Von Saher v. Norton Simon Museum of 14] Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010) (“[A] 15 | complaint cannot be dismissed unless it appears beyond 16 | doubt that the plaintiff can prove no set of facts that 17 | would establish the timeliness of the claim.”). Unlike 18 J in Wood, where a plaintiff had filed a similar lawsuit 19 | many years prior, thus evidencing suspicion, the FAC 20 | here does not demonstrate that Plaintiff suspected 21 7 infringement before Mr. Kamat viewed the hotel 22 | advertisement in 2020. See Wood, 705 F.2d at 1521; FAC 237 2 21. Any evidence to the contrary can be revealed in 24 | discovery and would properly be considered on a motion 25 | for summary judgment. 26 Therefore, presuming the FAC’s factual allegations 27] as true, the Court should find that a reasonable fact 28 | finder could believe that Plaintiff first discovered the 16

Case 8:22-cv-00459-RSWL-JDE Document Filed 11/17/22 Page17of25 Page ID #:509

1] alleged infringement on or about June 22, 2020, and that 2] its prior unawareness was reasonable. Thus, the Court 3 | applies the discovery rule, tolls the statute of 4] limitations, and holds that Plaintiff timely filed its 5 | claim under the Copyright Act. 6 In summary, the Court need not determine on the 7 | current Motion whether Defendants’ license defense has 8] merit. The Court also applies the discovery rule and tolls the statute of limitations, thus rendering the 10 J claim timely filed. The Court therefore DENIES 11] Defendants’ Motion to Dismiss the copyright infringement 12 | claim. 13 3. Breach of Contract Claim 14 a. Plaintiff’s Breach of Contract Claim Is Not 15 Preempted by the Copyright Act 16 The Copyright Act preempts a state law claim if the 17 | underlying work falls within the “subject matter” of the 18 | Act and the rights the plaintiff asserts under state law 19 | are equivalent to those protected by the Act. Kodadek 20 J v. MTV Networks, Inc., 152 F.3d 1209, 1212 (9th Cir. 21471998). “For preemption purposes, ideas and concepts 22 4] that are fixed in a tangible medium fall within the 23 | scope of copyright.” Montz v. Pilgrim Films & 24] Television, Inc., 649 F.3d 975, 979 (9th Cir. 2011). 25 Here, Plaintiff alleged it provided Defendants a 26 | copy of the Drawings in its e-mail proposal, so the work 27 | at issue was fixed in a tangible medium. See FAC {7 18, 28 7 35. Therefore, the Drawings fall within the subject 17

Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 18o0f25 Page ID#:510

1] matter afforded protection by the Copyright Act. See 24 Kodadek, 152 F.3d at 1212. 3 Next, “[t]o survive preemption, the state cause of 4] action must protect rights that are qualitatively 5 | different from the rights protected by copyright: the 6 | complaint must allege an ‘extra element’ that changes 7 | the nature of the action.” Grosso v. Miramax Film 8] Corp., 383 F.3d 965, 968 (9th Cir. 2004), opinion 9 | amended on denial of reh’g, 400 F.3d 658 (9th Cir. 10 2005). For a breach of contract claim, courts look to 11] the rights created by the contract and determine whether 12 ] they “differ from the prohibition of unauthorized 13 | reproduction, performance, distribution, or display of 14 | work protected under copyright law.” Rumble, Inc. v. 15 J] Daily Mail & Gen. Tr. PLC, No. CV 19-08420-CJC (EX), 16 § 2020 WL 2510652, at *3 (C.D. Cal. Feb. 12, 2020). 17 Here, no express contract exists, but Plaintiff 18 | alleged that its correspondence with Defendants created 19 J an implied-in-fact contract. See FAC 7 39. ™“[W]here an 20 | idea is furnished by one party to another, a contract 21] sometimes may be implied even in the absence of an 22 | express promise to pay.” Grosso, 383 F.3d at 967. 23 | “California law allows for recovery for the breach of an 24 | implied-in-fact contract when the recipient of a 25 | valuable idea accepts the information knowing that 26 | compensation is expected, and subsequently uses the idea 27 | without paying for it.” Landsberg v. Scrabble Crossword 28 | Game Players, Inc., 802 F.2d 1193, 1196 (9th Cir. 1986). 18

Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 19 of 25 Page ID #:511

1 This implied promise to pay suffices as an “extra

2 element” for preemption purposes. Grosso, 383 F.3d

3 at 968. 4 Plaintiff alleged that Defendants knew it disclosed 5 the Drawings on the condition that Defendants could not 6 use them unless Defendants paid for them and hired 7 Plaintiff as the architect for construction. FAC ¶ 15. 8 Taken as true, this understanding constitutes an extra 9 element enabling the breach of contract claim to avoid 10 preemption under the Copyright Act. See Landsberg, 11 802 F.2d at 1196-97; see also Grosso, 383 F.3d at 968 12 (finding a plaintiff’s disclosure of his playscript to 13 defendants evidenced a bilateral expectation of 14 compensation which constituted an extra element for 15 preemption purposes). 16 b. Plaintiff Pled Sufficient Facts to 17 Establish a Prima Facie Breach of Contract 18 Claim 19 Under California law, a plaintiff must plead the 20 same elements for a breach of an implied-in-fact 21 contract claim as for the breach of an express contract. 22 Marshall & Swift/Boeckh, LLC v. URS Corp., No. 23 CV0804375GAFSSX, 2009 WL 10668449, at *21 (C.D. Cal. 24 Aug. 26, 2009). Therefore, Plaintiff must plead 25 (1) that a valid contract existed; (2) Plaintiff’s 26 performance, or excused nonperformance, of the contract; 27 (3) Defendants’ breach; and (4) resulting damages. To 28 state a Desny claim for breach of an implied-in-fact 19 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 200f 25 Page ID#:512

1] contract,? a plaintiff must allege that the plaintiff 2 (1) prepared the work, (2) disclosed the work to the 3 | defendant for sale, and (3) did so under circumstances 4] from which it could be concluded that the defendant 5 | voluntarily accepted the disclosure knowing the 6 | conditions on which it was tendered and the reasonable 7} value of the work. Grosso, 383 F.3d at 967. 8 Here, Plaintiff alleges the following: (1) it 9 | created the Drawings; (2) Mr. Kamat disclosed the 10 | Drawings to Defendant Morari in its June 26, 2015, 11] proposal; and (3) Mr. Kamat told Defendant Morari over 12 | the phone and in his June 26, 2015 e-mail that if 13 | Defendant Avalon wanted to use the Drawings, it would 14 | have to pay for them and hire Plaintiff as the hotel 15 J architect. FAC @@ 12-13, 17-18. Plaintiff further 16 J alleges that on the phone calls, the two principals 17 | discussed what drawings would be provided. Id. Given 18 | Plaintiff’s allegations regarding the parties’ telephone 19 | communication and Mr. Kamat’s e-mail indicating that 20 | Plaintiff would only grant a license for the Drawings 21 3The Supreme Court of California originally created the 22 | concept of implied-in-fact contracts to protect film writers from being deprived of the ideas they pitch to studio producers 23 without just compensation. See Desny v. Wilder, 299 P.2d 257 (Cal. 1956). Courts have since applied the concept to various 24 | types of intellectual property disclosure, including patent technology, website designs, and toys. See, e.g., JBF Interlude 25 2009 Ltd. v. Quibi Holdings LLC, No. 220CV02250CASSKX, 2020 WL 6203555 (C.D. Cal. Oct. 19, 2020); Riggs v. MySpace, Inc., 444 F. 26 App’x 986 (9th Cir. 2011); Gunther-Wahl Prods., Inc. v. Mattel, Inc., 128 Cal. Rptr. 2d 50 (2002). Therefore, the Court should 27 find that architectural design disclosure can also form an implied-in-fact contract. 28 20

Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 21 of 25 Page ID #:513

1 use upon execution of a contract, the Court should find

2 that the FAC sufficiently alleged that Defendant Morari

3 understood the condition on which Plaintiff tendered the 4 Drawings. See id. ¶¶ 17-18; JBF, 2020 WL 6203555, at *6 5 (holding that a defendant’s interest in “purchasing” 6 disclosed technology sufficiently implied that he knew 7 he had to pay for it). 8 In sum, Plaintiff sufficiently alleged it formed an 9 implied-in-fact contract, it performed by delivering the 10 Drawings in the proposal, and Defendants breached the 11 implied-in-fact contract by using the Drawings without 12 compensating Plaintiff for their use. See FAC ¶¶ 17-19, 13 21, 23. Plaintiff also alleged Defendants’ breach 14 caused Plaintiff harm and damages in an amount to be 15 proved at trial. FAC ¶¶ 41-42. Therefore, Plaintiff 16 has sufficiently pled a prima facie breach of contract 17 case to survive a motion to dismiss. 18 c. Plaintiff’s Breach of Implied-in-Fact 19 Contract Claim Is Plausible on Its Face 20 In the Motion, Defendants asserted that Plaintiff’s 21 own statements prove that Plaintiff never provided the 22 Drawings to Defendant Avalon at all. Id. at 22:28-23:1. 23 Defendants relied on two purported excerpts from 24 Plaintiff’s discovery responses in the previous state 25 action to undermine the FAC.4 Id. 21:4-26. However,

26 4 Defendants’ first contention – that in its response to 27 Special Interrogatory No. 49, Plaintiff said it failed to take steps to protect the Drawings because it “was unaware that 28 Defendants had possession of the [D]rawings” - appears in Exhibit 21 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 22 of 25 Page ID #:514

1 because the discovery responses in Exhibits J and K are

2 not properly subject to judicial notice, the Court

3 should not determine whether the statements therein 4 render Plaintiff’s breach of contract claim implausible. 5 See Swartz, 476 F.3d at 763 (“In ruling on a 12(b)(6) 6 motion, a court may generally consider only allegations 7 contained in the pleadings, exhibits attached to the 8 complaint, and matters properly subject to judicial 9 notice.”); Safeguard, 145 F. Supp. 3d at 942 (“Discovery 10 items . . . are not proper subjects for judicial notice 11 because they are not ‘self-authenticating’ and thus 12 cannot be verified.”). Presuming all the factual 13 allegations in the FAC to be true – including that 14 Plaintiff e-mailed the Drawings to Defendant Morari – 15 Plaintiff has pled a breach of implied-in-fact contract 16 claim that is plausible on its face. Consequently, the 17 Court DENIES Defendants’ motion to dismiss Plaintiff’s 18 implied-in-fact contract claim. 19 4. The Court Dismisses Plaintiff’s Unfair 20 Competition Law Claim Without Leave to Amend 21 In its Opposition, Plaintiff requested that the 22 Court dismiss its unfair competition law (“UCL”) claim, 23 “subject to the unlikely scenario of [P]laintiff seeking 24 leave from the Court to reassert [the] claim.” Opp’n 25 J. Id. at 21:12-13. However, Defendants’ second example – that 26 in response to form interrogatory 17.1, Plaintiff claimed it “did not know and could not have known that Defendants had obtained 27 [the Drawings]” – did not appear in the documents attached to the 28 Motion. See RJN, Ex J & K. 22 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 23 0f 25 Page ID #:515

1] 7:22-24. In its Reply, Defendants accepted the 2] concession. Reply 10:1. Therefore, the Court GRANTS 3 | Defendants’ motion to dismiss Plaintiff’s UCL claim. 4 Plaintiff requested that the Court dismiss the UCL 5 | claim with leave to amend. Opp’n 7:23. “Where a motion 6 | to dismiss is granted, a district court must decide 7 | whether to grant leave to amend.” Winebarger v. 8 | Pennsylvania Higher Educ. Assistance Agency, 411 F. 97 Supp. 3d 1070, 1082 (C.D. Cal. 2019). “The court should 10 | give leave [to amend] freely when justice so requires.” 11] Fed. R. Civ. P. 15(a) (2). In the Ninth Circuit, “Rule 12 7 15’s policy of favoring amendments to pleadings should 13 | be applied with ‘extreme liberality.’” United States v. 14 | Webb, 655 F.2d 977, 979 (9th Cir. 1981). Against this 15 | extremely liberal standard, the Court may consider “the 16 | presence of any of four factors: bad faith, undue delay, 17 | prejudice to the opposing party, and/or futility.” 18 | Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 199 712 (9th Cir. 2001). 20 Here, leave to amend should be denied. Plaintiff 21 7 admits it cannot “identify any material relief uniquely 22 | available under the UCL that would justify extensive 23 | argument and litigation activity to carry forward this 24 | separate cause of action” and therefore it is “unlikely” 25] to reassert the UCL claim in the future. See Opp’n 26] 7:18-23. Given these statements and Plaintiff's 27 | previous amendment, it is clear that amendment would be 28 | futile. 23

Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 24 of 25 Page ID #:516

1 “The district court’s discretion to deny leave to

2 amend is particularly broad where plaintiff has

3 previously amended the complaint.” Allen v. City of 4 Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990). Here, 5 Plaintiff filed three state court complaints alleging 6 its unfair business practices claim, and it has already 7 amended its complaint in federal court once. See RJN, 8 Exs. B, D, F, ECF Nos. 42-2, 42-4. Thus, Plaintiff has 9 had multiple opportunities to refine its claim. Yet 10 Plaintiff concedes that despite its amendment, its claim 11 should not proceed and that is unlikely it can cure its 12 claim. Opp’n 7:23-24. Plaintiff’s statements ring 13 true. It is unlikely Plaintiff would reassert its UCL 14 claim, because amending Plaintiff’s claim would not make 15 available relief that is not already sought under 16 Plaintiff’s other claims. Therefore, the Court should 17 find that granting leave to amend would be futile. See 18 In re Vantive Corp. Sec. Litig., 283 F.3d 1079 (9th Cir. 19 2002) (holding that because plaintiffs had three 20 opportunities to plead their case, it was not 21 unreasonable for the district court to conclude that it 22 would be pointless to provide another chance to amend). 23 The Court therefore GRANTS Defendants’ Motion to Dismiss 24 the UCL claim without leave to amend. 25 /// 26 /// 27 /// 28 /// 24 Case 8:22-cv-00459-RSWL-JDE Document 51 Filed 11/17/22 Page 25 of 25 Page ID #:517

1 III. CONCLUSION 2 Based on the foregoing, the Court DENIES

3 Defendants’ Motion to Dismiss the copyright infringement 4 and breach of contract claims and GRANTS Defendants’ 5 Motion to Dismiss the UCL claim without leave to amend. 6 7 IT IS SO ORDERED. 8 9 DATED: November 17, 2022 _ _ _ _ _ _ _ _/S_/ _R_O_N_A_L_D_ S_.W__. _LE_W________ HONORABLE RONALD S.W. LEW 10 Senior U.S. District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25