Westhoff Vertriebsges mbH v. Berg

• Court: District Court, S.D. California
• Decided: September 6, 2023
• Docket: 3:22-cv-00938
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 WESTHOFF VERTRIEBSGES MBH, a Case No. 22-cv-0938-BAS-SBC German Limited Liability Company, 12 ORDER: Plaintiff, 13 v. (1) GRANTING PLAINTIFF’S 14 CONVERTED RULE 12(b)(6) CHRISTOPHER BERG, an individual; 15 MOTION AND DISMISSING BLUESKYE CREATIVE, INC., a DEFENDANTS’ AMENDED 16 California Corporation, COUNTERCOMPLAINT (ECF 17 Defendants. Nos. 13, 29);

18 (2) DISMISSING COUNTS 2 19 THROUGH 8 OF PLAINTIFF’S COUNTERCOMPLAINT AND 20 TERMINATING DEFENDANTS’ 21 RULE 12(b)(6) MOTION AS MOOT (ECF Nos. 21, 22); and 22

23 (3) DENYING DEFENDANTS’ MOTION TO STRIKE (ECF No. 24 31) 25

27 28 1 In 2014, Plaintiff Westhoff Vertriebsges mbH (“Westhoff”), a German-based flower 2 breeding company, entered an oral independent services contract (“Contract”) with San 3 Diego-based marketing agency Defendant BlueSkye Creative, Inc. (“BlueSkye”), of which 4 Defendant Christopher Berg (“Berg” and, together with BlueSkye, “Defendants”) is the 5 president. (See Second Am. Compl. (“SAC”) ¶¶ 10–30, ECF No. 1-4.) Until 2018, 6 Defendants provided Westhoff with a broad swath of marketing, advertising, and sales 7 services, in exchange for $8,000 per month and reimbursement of out-of-pocket business 8 expenses. Westhoff alleges that, in 2017, Defendants began embezzling funds that were 9 earmarked for Westhoff-related costs to cover Berg’s personal expenses. (Id. ¶¶ 13–19.) 10 Westhoff further avers that Defendants forged financial statements to conceal their 11 embezzlement and substantiate fraudulent business expenses. (Id. ¶¶ 20–30.) After 12 discovering Defendants’ purported embezzlement, Westhoff commenced suit. (See 13 generally id.) 14 But the issues presently before this Court do not arise out of the marquee claims in 15 this action. Instead, they pertain to a collateral but related dispute concerning Westhoff’s 16 continued use of marketing materials that contain photographs of Westhoff’s flowers, 17 which Berg took while BlueSkye served as Westhoff’s lead North American marketing, 18 advertising, and sales agent. Defendants claim Westhoff has no right to continue to use or 19 distribute BlueSkye’s materials now that it is no longer a client. Accordingly, in an 20 Amended Countercomplaint, Defendants allege Westhoff has committed direct and 21 indirect infringement under the Copyright Act and unfair business practices in violation of 22 California Business and Professions Code § 17200. (See Defs.’ Am. Countercompl. 23 (“ACC”) ¶¶ 37–56, ECF No. 13.) Westhoff retorts with its own Countercomplaint. (See 24 generally Pl.’s Countercomplaint (“CC”), ECF No. 2.) That pleading asserts eight separate 25 counterclaims. Most of those counterclaims seek declaratory judgments of non- 26 infringement, effectively to invalidate Defendants’ mirror image counterclaims of 27 infringement under the Copyright Act. (Pl.’s CC ¶¶ 20–30.) 28 1 Now before the Court are two competing dispositive motions. Westhoff moves 2 under Federal Rule of Civil Procedure (“Rule”) 12(c) for judgment on the pleadings to 3 dismiss for failure to state a claim Defendants’ Amended Countercomplaint. (Pls.’ Mot., 4 ECF No. 29; see also Mem. in Supp. of Pls.’ Mot., ECF No. 29-1.) Defendants move under 5 Rule 12(b)(6) for dismissal of Counts Two through Eight of Westhoff’s Countercomplaint. 6 (Defs.’ Mot., ECF No. 22; see Mem. in Supp. of Defs.’ Mot., ECF No. 22-1.) In addition, 7 Defendants also move to strike from the record Counts Two through Eight and their 8 supporting allegations pursuant to California Code of Civil Procedure § 425.16, commonly 9 known as the Anti-Strategic Lawsuits Against Public Participation (“Anti-SLAPP”) law. 10 (Anti-SLAPP Mot., ECF No. 31; see Mem. in Supp. of Anti-SLAPP Mot., ECF No. 31-1.) 11 These motions all are fully briefed. (ECF Nos.25–28, 32, 34–35.)1 12 The motions before the Court are suitable for determination on the papers submitted 13 and without oral argument.2 See Fed. R. Civ. P. 78(b); Civ.L.R. 7.1(d)(1). For the reasons 14 set forth below, the Court: (1) CONVERTS Westhoff’s Motion from a Rule 12(c) motion 15 into a Rule 12(b)(6) motion; (2) GRANTS Westhoff’s Motion (ECF No. 29) and 16 DISMISSES Defendants’ Amended Countercomplaint (ECF No. 13); (3) DISMISSES 17 AS MOOT Counts Two through Eight of Westhoff’s Countercomplaint (ECF No. 21) and 18 TERMINATES Defendants’ Motion to Dismiss Counts Two through Eight of Westhoff’s 19

20 1Westhoff appears to misapprehend that its motion to dismiss Defendants’ Initial 21 Countercomplaint, filed July 11, 2022 at ECF No. 7, still is pending. (See ECF No. 53 at 1:8–13.) It is not. That motion became moot when Defendants filed their Amended Countercomplaint. See Forsyth v. 22 Humana, Inc., 114 F.3d 1467, 1474 (9th Cir. 1997) (“[A]n amended complaint supersedes the original, the latter being treated thereafter as nonexistent.”), overruled in part on other grounds by Lacey v. 23 Maricopa Cnty., 693 F.3d 896 (9th Cir. 2012) (en banc). 2 Westhoff moves unopposed for a Case Management Conference, which the Court construes as a 24 request for a hearing on the pending Motions. (ECF No. 43.) Notably, neither Westhoff nor Defendants 25 adhered to the typical procedures for seeking a hearing delineated in Section 4(B) of the Hon. Cynthia A. Bashant’s Standing Order for Civil Cases, which requires the movant to request a hearing in the motion 26 itself. Moreover, Westhoff does not explain what new circumstances necessitate a hearing. Rather, Westhoff appears to seek determination on the three, interrelated pending motions at a hearing, as opposed 27 to by written order, so that it can obtain this Court’s ruling on an expedited basis. Because the Court finds that a hearing is unnecessary given the briefing before it, the Court DENIES Westhoff’s request. (ECF 28 1 Countercomplaint (ECF No. 22) and Westhoff’s Motion for Leave to File a Sur-reply for 2 the same reason; and (4) DENIES Defendants’ Anti-SLAPP Motion (ECF No. 31). 3 I. BACKGROUND 4 A. Factual History3 5 Westhoff is a German-based, family-owned and operated flower breeding company. 6 (SAC ¶ 9.) It is “a well-respected finished grower and leading innovator in breeding 7 genetics that benefit growers, retailers, and consumers alike in Europe, the United States, 8 and all over the world.” (Id.) Westhoff’s Chief Executive Officer (“CEO”) is Christian 9 Westhoff, who is not a party in this case. (Defs.’ ACC ¶ 9.) Berg, a San Diego resident, 10 is the president of BlueSkye, “an award-winning marketing agency devoted exclusively to 11 the horticulture market.” (Id. ¶ 1–2.) He also is “an experienced photographer.” (Id. ¶¶ 2, 12 14.) 13 In 2014, Westhoff and BlueSkye entered an oral independent services contract 14 (previously defined as “Contract”). (Defs.’ ACC ¶ 10.) The Contract contemplated that, 15 “in exchange for $8,000 per month and reimbursement for out-of-pocket expenses,” 16 BlueSkye would “effectively handle[] the entirety of Westhoff’s North American business 17 operations,” namely its marketing, advertising, and sales functions. (Id. ¶ 12; SAC ¶ 93.) 18 Specifically, the Contract called for BlueSkye to: (1) “market and sell Westhoff products 19 at trade shows”; (2) “review and identify potential grower and retail customers”; (3) 20 “develop and market new products”; (4) “attend sales calls”; (5) “provide product 21 demonstrations and presentations”; (6)” arrange cutting shipments”; (7) “develop programs 22 for future Westhoff customers”; (8) “evaluate trial products”; (9) “produce advertisements 23 for placement in trade magazines and the like”; and (10) “create [a] publicly accessible[,] 24 English-based North American website, Facebook account/page, and other social media 25 accounts where Westhoff could market and sell[] its products and generate consumer 26 goodwill.” (Defs.’ ACC ¶ 11; SAC ¶ 93.) 27

28 1 Defendants and Westhoff agree the Contract conferred BlueSkye with wide 2 discretionary latitude to perform its contractual obligations. (Defs.’ ACC ¶ 12; SAC ¶ 92.) 3 “Westhoff entrusted [BlueSkye] with exclusive access to its North American accounts, and 4 to make broad discretionary business decisions[,] including budgeting, investment 5 strategies, allocation of marketing resources, and strategic partnership on behalf of 6 Westhoff in North America.” (Defs.’ ACC ¶ 12 (quoting SAC ¶ 92) (alterations added); 7 see id. ¶ 11 (alleging BlueSkye essentially served as “Westhoff’s de facto Chief Operating 8 Officer” (“COO”) for its North American business operations (quoting SAC ¶ 93)).) 9 Defendants allege “Westhoff did not ask BlueSkye to create photographs as part of 10 its marketing services, or otherwise.” (Defs.’ ACC ¶ 13.) Had Westhoff done so, 11 Defendants allege it would have cost Westhoff “between $1,500 and $2,500 per day . . . 12 and $300 to $3,000 per photograph,” in addition to the Contract price. (Id. ¶ 17.) And, 13 according to Defendants, it was neither “necessary [n]or required” for BlueSkye to take 14 photographs of Westhoff’s varietals in order to create marketing materials pursuant to the 15 Contract. (Id.) Westhoff allegedly “expected BlueSkye to use Westhoff’s own 16 photographs to perform [its marketing] services,” which BlueSkye did. (Id. ¶ 13.) But 17 Berg felt that “Westhoff[‘s] photographs did not meet BlueSkye[’s] standards,” and he 18 “believed he could create photographs of a higher quality than Westhoff’s.” (Defs.’ ACC 19 ¶ 14.) So, during each year of the Contract, Berg took hundreds of photographs of 20 Westhoff’s floral varietals (“Photographs”) (Defs.’ ACC ¶¶ 14–15, 20); the Photographs 21 are annexed as Exhibit H to the Amended Countercomplaint (ECF No. 13-9). 22 Using those Photographs, BlueSkye created “Variety Catalog[s]” in 2017 and 2018, 23 respectively (“Catalogs” and, together with the Photographs, the “Works”). (See Defs.’ 24 ACC ¶¶ 20, 32.) Paragraph 32 provides links to both Catalogs. (Id. ¶ 32.) Moreover, 25 BlueSkye published the Photographs to a website that it created, maintained, and 26 controlled, called “Westflowers.us” (the “Website”). (Defs.’ ACC ¶ 16.) Defendants aver 27 that only Berg possessed credentials to modify the Website and access the Photographs 28 stored there. (Id.) The Amended Countercomplaint contains contradictory allegations 1 concerning BlueSkye’s use of the Works. On the one hand, some allegations suggest the 2 Photographs were used to market BlueSkye’s business, and not Westhoff’s. (Id. ¶ 14 3 (“BlueSkye used [] Berg’s photographs, as work made for hire by a BlueSkye employee, 4 to keep with BlueSkye’s standards and reputation in the industry, and in the marketing of 5 its own marketing services as it serves many clients, not just Westhoff.”); id. ¶ 15 6 (“BlueSkye created marketing materials (that incorporated Mr. Berg’s photographs) that 7 BlueSkye itself, not Westhoff, used and distributed through its marketing including, for 8 example only and without limitation, in BlueSkye power point presentations, trade show 9 banners, displays, ads online and in print, and sell sheets.”).) On the other hand, 10 Defendants imply in some places and flatly admit in others that BlueSkye used the 11 Photographs to market Westhoff products. (See id. ¶ 15 (“BlueSkye . . . decided how and 12 when BlueSkye used [] Berg’s photographs, in lieu of Westhoff photographs.”); id. ¶ 16 13 (alleging BlueSkye stored Photographs on a Website, the name of which is a portmanteau 14 of Westhoff); id. ¶ 32 (alleging Photographs are used in Westhoff’s Catalogs).) 15 Towards the end of the parties’ business relationship in 2018, Christian Westhoff 16 asked Berg to transfer the Website to a German domain hosted by Westhoff’s friend in 17 order to save costs. (Defs.’ ACC ¶ 16 (averring Christian Westhoff requested the Website 18 be moved to “Westflowers.de”).) Berg complied. (Id.) But after the transfer, Berg no 19 longer could access the Website using his credentials. (See id.) In essence, Defendants 20 allege that Westhoff tricked them into handing over control to the Website and delivering 21 the Photographs. (Id.) 22 BlueSkye terminated its business relationship with Westhoff in October 2018. 23 (Defs.’ ACC ¶ 23 (“Westhoff often fell behind on payments, among other problems.”).) 24 Since then, “Westhoff has . . . used each BlueSkye [P]hotograph and its two [C]atologs as 25 its own online and otherwise in marketing materials without BlueSkye’s authorization and 26 without payment to BlueSkye.” (Id. ¶ 25.) As to the Photographs, Defendants aver that 27 Westhoff continues to use the Photographs on the Website, which it now controls, to 28 advertise its floral varietals. (Id. ¶¶ 26–27.) Westhoff makes those Photographs available 1 for download to wholesale purchasers for their own marketing purposes. (Id. ¶ 31 (alleging 2 Westhoff “allows its varietal licensees to download” from the Website “BlueSkye’s 3 [P]hotographs to use to [advertise] and sell Westhoff flowers”).) Furthermore, Defendants 4 allege “Westhoff has . . . copied and continues to copy” the Catalogs, “which Westhoff 5 offers to the public on [its Website] and in print.” (Id. ¶ 32.) 6 In September 2021, BlueSkye registered copyrights for the Works (“Copyrights”). 7 (Defs.’ ACC ¶ 20.)4 BlueSkye did not license or assign its copyrights to Westhoff. (Id. ¶ 8 24.) 9 B. Procedural History 10 While this case was pending in San Diego Superior Court, Defendants filed their 11 Initial Countercomplaint on May 11, 2022. (Defs.’ Initial CC (“ICC”), ECF No. 1-4.) The 12 Initial Countercomplaint asserts three claims: (1) direct infringement of the Copyrights 13 under the Copyright Act; (2) indirect infringement—vicarious and contributory—of the 14 Copyrights under the Copyright Act; and (3) unfair business practices in violation of 15 California Business and Professions Code § 17200, premised upon the same allegations of 16 infringement and defamation. On June 24, 2022, Defendants removed the action to this 17 Court pursuant to 28 U.S.C. § 1338. (Not. of Removal (“Not.”) ¶ 2, ECF No. 1.) Westhoff 18 moved under Rule 12(b)(6) to dismiss Defendants’ Initial Countercomplaint on July 11, 19 2022, arguing Defendants failed to state a single cognizable claim. (ECF No. 7.) 20 21 22 4 The registrations, which are annexed as Exhibits A through G to the Amended Countercomplaint, are as follows: 23 Title of Work Registration Number Registration Date 2014 Variety Photos VA0002267723 September 2, 2021 24 2015 Variety Photos VA0002267721 September 2, 2021 2016 Variety Photos VA0002267720 September 2, 2021 25 2017 Variety Photos VA0002267631 September 2, 2021 26 2018 Variety Photos VA0002267722 September 2, 2021 2017–2018 Variety Catalog TX0009007447 September 2, 2021 27 2018–2019 Variety Catalog TX0009007448 September 2, 2021

28 1 In response, Defendants filed their Amended Countercomplaint. (See generally 2 Defs.’ ACC.) The amendments mainly provide additional detail about the scope of the 3 Contract, how the Photographs were created, how BlueSkye used those Photographs, and 4 what Defendants’ expectations were concerning Westhoff’s rights respecting the 5 Photographs. (See id.) The claims asserted in the Amended Countercomplaint are identical 6 to the prior iteration of that pleading. (See id. ¶¶ 37–56.) 7 On October 18, 2022, Westhoff filed its Answer to Defendants’ Amended 8 Countercomplaint. (See generally Ans., ECF No. 20.) That same day, Westhoff also filed 9 a Countercomplaint of its own. (See generally Pl.’s CC.) Counts Two through Eight seek 10 declaratory judgments invalidating Defendants’ “counterclaims for copyright infringement 11 against Westhoff under the copyright laws of the United States, 17 U.S.C. § 101 et seq.” 12 (See id. ¶¶ 43, 49, 55, 61, 67, 73, 79.) These Counts rely on Westhoff’s assertion that 13 Defendants purportedly forged the Copyrights’ certificates of registration that were 14 annexed to the Initial Countercomplaint.5 (See id. ¶ 21 (“Importantly, the counterclaims 15 filed by Defendants include forged copyright registration certificates, which constitutes 16 intentional fraudulent misrepresentations to the court regarding the ownership of the 17 copyrights since they were not ‘[t]rue and correct copies.’” (citing Defs.’ ICC ¶ 16)).) To 18 demonstrate the purported forgery, Westhoff compares the certificates annexed to 19 Defendants’ Initial Countercomplaint with those attached to their Amended 20 Countercomplaint, and notes several differences. (See id. ¶¶ 22–30 (comparing each of the 21 seven certificates of registration).) Westhoff asserts that Defendants’ alleged forgery bars 22 them from pressing infringement claims as to each of the seven Copyrights under the 23 “inequitable conduct and unclean hands doctrine[s].” (Id. ¶¶ 42–83.) 24 25 26 5 Count One of Westhoff’s Countercomplaint asserts copyright infringement with respect to 27 another set of pictures. In essence, Westhoff alleges Defendants use copyrighted photographs, which belong to Westhoff and depict Westhoff’s flowers, in marketing endeavors for competing flower 28 1 The parties have submitted competing motions to dispose of the respective 2 Countercomplaints. First, Defendants move under Rule 12(b)(6) to dismiss Counts Two 3 through Eight of Westhoff’s Countercomplaint. (See generally Defs.’ Mot.) They argue 4 Westhoff cannot state claims for either inequitable conduct or unclean hands because 5 BlueSkye owns the registrations for the Copyrights at issue; the certificates annexed to 6 Defendants’ Initial Countercomplaint were corrupted, not forged; and Defendants 7 remediated the error by attaching accurate certificates to their Amended Countercomplaint. 8 (See generally Mem. in Supp. of Defs.’ Mot.) Westhoff opposes (Opp’n to Defs.’ Mot., 9 ECF No. 25), Defendants reply (Reply to Defs.’ Mot., ECF No. 26), and Westhoff moves 10 to file a sur-reply (Mot. for Leave to File Sur-reply, ECF No. 27). 11 Second, Westhoff moves under Rule 12(c) for judgment on the pleadings to dismiss 12 Defendants’ Amended Countercomplaint for failure to state a claim. (See generally Pl.’s 13 Mot.) Westhoff argues that it has an unlimited and irrevocable implied license to use the 14 Works for marketing purposes. Because Westhoff’s use of the Works following 15 BlueSkye’s termination comports with that implied license, Defendants’ counterclaims for 16 which infringement is the lynchpin all fail. (See generally Mem. in Supp. of Pl.’s Mot.) 17 Westhoff further contends that Defendants’ Amended Countercomplaint is bereft of 18 allegations to support a defamation claim. (Id.) Defendants oppose (Opp’n to Pl.’s Mot., 19 ECF No. 30) and Westhoff replies (Reply to Pl.’s Mot., ECF No. 32).6 20

21 6 Defendants filed their Opposition one day late. (Reply to Rule 12(c) Mot. at 1 n.1.) However, the Court construes the portion of Defendants’ opposition that seeks to explain the delinquency as a motion 22 to extend under Rule 6(b). (See Opp’n to Pl.’s Mem. at 6 n.1.) Upon consideration of the relevant four- factor test, the Court finds Defendants’ proffered explanation for the delay amounts to excusable neglect 23 under Rule 6(b). See Ahanchian v. Xenon Pictures, Inc., 624 F.3d 1253, 1261 (9th Cir. 2010) (enumerating four-factor equitable test for determining excusable neglect under Rule 6(b), and opining that “[Rule 6(b)], 24 like all the Federal Rules of Civil Procedure, is to be liberally construed to effectuate the general purpose 25 of seeing that cases are tried on the merits”); Jones v. Cnty. of San Diego, No. 20CV1989-GPC(DEB), 2022 WL 126115, at *1 (S.D. Cal. Jan. 13, 2022) (“[Rule] 6(b) permits a court, at its discretion, to accept 26 a late filing when the movant’s failure to meet the deadline was the result of excusable neglect.”); see also Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 392 (1993) (“[I]t is clear that 27 ‘excusable neglect’ under Rule 6(b) is a somewhat ‘elastic concept’ and is not limited strictly to omissions caused by circumstances beyond the control of the movant.”). Hence, the Court declines Westhoff’s 28 1 Finally, Defendants move to strike Counts Two through Eight of Westhoff’s 2 Countercomplaint and their supporting allegations under California’s Anti-SLAPP law. 3 (See generally Mem. in Supp. of Anti-SLAPP Mot.) Westhoff opposes (Opp’n to Anti- 4 SLAPP Mot., ECF No. 34) and Defendants reply (Reply to Anti-SLAPP Mot., ECF No. 5 35). 6 II. ANALYSIS 7 A. The Court Converts Westhoff’s Rule 12(c) Motion to a Rule 12(b)(6) Motion 8

9 Resolution of Westhoff’s Motion first serves this Court’s and the parties’ interest in 10 efficiency. If Defendants’ counterclaims of infringement counterclaims fall, Westhoff’s 11 mirror-image declaratory judgment counterclaims are moot. See, e.g., E-Tool Dev., Inc. v. 12 Maxim Integrated Prods., Inc., No. 3:17-CV-0720-PK, 2018 WL 2208428, at *1 (D. Or. 13 May 14, 2018). Thus, despite being the second-filed Motion, it only makes sense to address 14 Westhoff’s Motion first. See Landis v. N. Am. Co., 299 U.S. 248, 254 (1936). 15 However, Defendants seek to cut Westhoff off at its knees as a matter of procedure 16 on the ground that Westhoff prematurely moved for judgment on the pleadings pursuant to 17 Rule 12(c). (Opp’n to Pl.’s Mot. at 16:4–17:2.) They are correct. 18 Rule 12(c) provides, “After the pleadings are closed—but early enough not to delay 19 trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c). Pleadings 20 are considered closed when all the required or permitted pleadings under Rule 7(a) have 21 been served and filed. Doe v. United States, 419 F.3d 1058, 1061 (9th Cir. 2005). Rule 22 7(a) lists seven permissible pleadings: (1) a complaint, (2) an answer to a complaint, (3) 23 an answer to a counterclaim designated as a counterclaim, (4) an answer to a crossclaim, 24 (5) a third-party complaint, (6) an answer to a third-party complaint, and (7) if the court 25 orders one, a reply to an answer. Fed. R. Civ. P. 7(a)(1)–(7). A motion to dismiss is not 26 considered a “pleading” within the meaning of Rule 7(a). Tahoe-Sierra Pres. Council, Inc. 27 v. Tahoe Reg’l Planning Agency, 216 F.3d 764, 788 (9th Cir. 2000), overruled in part on 28 other grounds by Gonzalez v. Arizona, 677 F.3d 383 (9th Cir. 2022); see Walter v. Drayson, 1 Civ. No. 06-0568 SOM/KSC, 2007 WL 951539, at *1 (D. Haw. Mar. 27, 2007) (collecting 2 authorities); In re Bear Stearns Cos., Inc. Secs., Derivative, & ERISA Litig., 763 F. Supp. 3 2d 423, 581 (S.D.N.Y. 2011) (citing Rule 7(a); collecting authorities). 4 Defendants have not filed an “answer” to Westhoff’s Countercomplaint. They have 5 filed only a motion to dismiss. Hence, the pleadings in this case are not yet “closed,” and 6 it was procedurally improper for Westhoff to bring its Motion under Rule 12(c). See 7 Tahoe-Sierra Pres. Council, 216 F.3d at 788 (holding that a motion to dismiss is not a 8 pleading under Rule 7(a)). 9 However, this determination does not spell the end for Westhoff’s efforts to dispose 10 of Defendants’ Amended Countercomplaint on the pleadings. “District courts have broad 11 discretion and the ‘inherent authority to manage their dockets and courtrooms with a view 12 toward the efficient and expedient resolution of cases.’” Dean v. Colgate Palmolive Co., 13 772 F. App’x 561 (Mem.) (9th Cir. 2019) (quoting Dietz v. Bouldin, 578 U.S. 40, 47 14 (2016))7; Landis, 299 U.S. at 254 (opining that “every court” wields “inherent” power “to 15 control disposition of the cases on its docket with the economy of time and effort for itself, 16 for counsel, and for litigants”). Incidental to that “inherent authority” is the district courts’ 17 power to convert a motion for judgment on the pleadings under Rule 12(c) into a motion 18 to dismiss under Rule 12(b)(6). See Terlato Wine Grp., Ltd. v. Walsh, No. 06 C 2521, 2006 19 WL 2494794, at *2 (N.D. Ill. Aug. 24, 2006) (“Although the rule is that a party may move 20 for a Rule 12(c) judgment after the pleadings have closed (i.e. the parties have filed the 21 complaint and answer), Murray Household Bank (SB), N.A., 386 F. Supp. 2d 993, 995 22 (N.D. Ill. 2005), the court may convert a Rule 12(c) motion into a Rule 12(b)(6) motion to 23 dismiss where the 12(c) motion is filed prematurely. U.S. ex rel. Bidani v. Lewis, No. 97 24 C 6502, 2001 WL 1609377, at *4 (N.D. Ill. Dec. 14, 2001).”); Geltman v. Verity, 716 F. 25 Supp. 491, 492 (D. Colo. 1989) (“[A] motion for judgment on the pleadings filed before 26 the answer may be treated as a motion to dismiss.” (citation omitted)). 27 7 Citation to this unpublished Ninth Circuit opinion is appropriate under Ninth Circuit Rule 36- 28 1 Efficient and expedient resolution of this case is served by conversion. Whether 2 Westhoff’s motion is channeled through Rule 12(c) or Rule 12(b)(6), the same standard 3 governs. See, e.g., Landmark Am. Ins. Co. v. Navigators Ins. Co., 354 F. Supp. 3d 1078, 4 1081 (N.D. Cal. 2018) (observing a Rule 12(c) motion for failure to state a claim “faces 5 the same test as a motion under Rule 12(b)(6)). Hence, the legal issues that the parties raise 6 and that the Court must address in connection with Westhoff’s Motion are unchanged by 7 conversion. And as previously mentioned, it would be most efficient for this Court to 8 resolve Defendants’ counterclaims of infringement before Westhoff’s counterclaims 9 seeking declaratory judgments finding non-infringement of the same Copyrights. See, e.g., 10 E-Tool Dev., 2018 WL 2208428, at *1 (“Plaintiff’s claims of patent infringement are 11 dismissed with prejudice, and Defendant’s counterclaim for declaratory judgment that its 12 EE-Sim Tool does not infringe upon the Patent is dismissed as moot.”); Pom Wonderful 13 LLC v. Hubbard, No. CV 13-6917 RGK (JPRx), 2016 WL 5920103, at *2 (C.D. Cal. June 14 29, 2016) (“The first counterclaim (declaratory judgment of non-infringement) is now 15 moot because this Court ruled that Pur has infringed Pom Wonderful’s ‘POM’ mark.”). 16 Finally, given that Westhoff’s motion has been pending since March 2023 and that 17 this Court has a preference to resolve motions on the merits, the Court finds that it is 18 warranted to convert Westhoff’s Motion and consider it, despite its procedural impropriety. 19 Cf. Henneberry v. City of Newark, No. 13-cv-5238-TSH, 2018 WL 5310791, at *1 (N.D. 20 Cal. Oct. 25, 2018) (“While Plaintiff’s motion is untimely, the parties’ motions in limine 21 have been pending for over six months and Defendants were able to file their opposition 22 after the deadline. As the motion has been fully briefed and the Court’s preference is to 23 resolve motions on the merits, the Court will consider Plaintiff’s motion.”).8 Thus, it would 24

25 8 This Court is unmoved by Defendants’ argument that the converted Motion is untimely under 26 Rule 12(b). (See Defs.’ Opp’n at 16 n.3.) As numerous federal district courts in California have held, Rule 12(h)(2) creates an exception that permits “defenses [under Rule 12(b)(6)] for failure to state a claim 27 [to] be presented at any time up to and including trial.” Wilson-Combs v. Cal. Dep’t of Consumer Affairs, 555 F. Supp. 2d 110, 1113 n.3 (E.D. Cal. 2008); WPP Luxembourg Gamma Three Sarl v. Spot Runner, 28 1 run counter to the orderly and coherent resolution of the instant case to deny Westhoff’s 2 motion on purely procedural grounds. 3 Accordingly, the Court CONVERTS Westhoff’s Motion to one brought under Rule 4 12(b)(6). 5 B. Westhoff Prevails on its Motion to Dismiss Defendants’ Amended Countercomplaint for Failure to State a Claim 6

7 Defendants’ Amended Countercomplaint lodges three counterclaims against 8 Westhoff. The first two assert direct and indirect infringement of the Copyrights under the 9 Copyright Act, 17 U.S.C. § 101 et seq. (See Defs.’ ACC ¶¶ 37–51.) The third asserts 10 unfair business practices, in violation of California Business and Professions Code 11 § 17200. (Id. ¶¶ 52–56.) That claim is premised upon not only Westhoff’s alleged 12 infringement, but also upon Defendants’ averment that Westhoff’s CEO defamed them. 13 (See id. ¶ 54.) For the reasons stated below, Defendants fail to plausibly state any one of 14 these claims. 15 1. Legal Standard 16 Rule 12(b)(6) tests the legal sufficiency of the allegations underlying the claims in a 17 complaint. See Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The procedural 18 posture at Rule 12(b)(6) requires the court to accept all factual allegations pleaded in the 19 complaint as true and to construe those allegations, and draw all reasonable inferences 20 therefrom, in favor of the plaintiff. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 21 (9th Cir. 1996). A Rule 12(b)(6) dismissal may be based on either a ‘lack of cognizable 22 legal theory’ or ‘the absence of sufficient facts alleged under a cognizable legal theory.’” 23 Johnson v. Riverside Healthcare Sys. LP, 534 F.3d 1116, 1121 (9th Cir. 2008) (quoting 24 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990)). 25 To avoid Rule 12(b)(6) dismissal, a complaint must plead sufficient factual 26 allegations to “state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 556 27 U.S. 662, 678 (2008) (internal quotation marks and citations omitted). “A claim has facial 28 plausibility when the plaintiff pleads factual content that allows the court to draw the 1 reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678. 2 Detailed factual allegations are not required, but “[t]hreadbare recitals of the elements of a 3 cause of action, supported by mere conclusory statements, do not suffice.” Id. The “mere 4 possibility of misconduct” or “unadorned, the defendant-unlawfully harmed me 5 accusation[s]” fall short of meeting this plausibility standard. Id. at 678–79. “Determining 6 whether a complaint states a plausible claim is context specific, requiring the reviewing 7 court to draw on its experience and common sense.” Id. at 680 (citing Bell Atl. Corp. v. 8 Twombly, 550 U.S. 544, 556 (2007)). 9 “Dismissal under Rule 12(b)(6) on the basis of an affirmative defense is proper only 10 if the defendant shows some obvious bar to securing relief on the face of the complaint.” 11 ASARCO, LLC v. Union Pacific R. Co., 765 F.3d 999, 1004 (9th Cir. 2014); Sams v. Yahoo! 12 Inc., 713 F.3d 1175, 1179 (9th Cir. 2013) (“[T]he assertion of an affirmative defense may 13 be considered properly on a motion to dismiss where the ‘allegations in the complaint 14 suffice to establish’ the defense.” (quoting Jones v. Bock, 549 U.S. 199, 215 (2007)); 15 Durnford v. MusclePharm Corp., 907 F.3d 595, 603 n.8 (9th Cir. 2018). “If, from the 16 allegations of the complaint as well as any judicially noticeable materials, an asserted 17 defense raises disputed issues of fact, dismissal under Rule 12(b)(6) is improper.” 18 ASARCO, 765 F.3d at 1004 (citing Scott v. Kuhlmann, 746 F.2d 1377, 1378 (9th Cir. 1984) 19 (per curiam)). But, if “the plaintiff pleads itself out of court—that is, admits all the 20 ingredients of an impenetrable defense”—then dismissal at the pleading stage on the basis 21 of an affirmative defense rests on solid ground. Boquist v. Courtney, 32 F.4th 764, 774 22 (9th Cir. 2022). 23 2. Defendants’ Counterclaims Based Upon Copyright Infringement Fail as a Matter of Law 24

25 Westhoff contends that the counterclaims for which infringement of the Copyrights 26 is the lynchpin all fail because Defendants granted Westhoff an unlimited and irrevocable 27 implied license to use the Works to market, advertise, and sell its flowers. (Mem. in Supp. 28 Pl.’s Mot. at 4:27–5:2.) Defendants contend that Westhoff holds no such implied license. 1 (Opp’n to Pl.’s Mot. at 16:5–23:15.) Alternatively, Defendants claim that even if Westhoff 2 holds an implied license, it has since been revoked. (Id. at 23:17–24:18.) 3 Implied license is an affirmative defense to both direct and indirect copyright 4 infringement. See Worldwide Church of God v. Phila. Church of God, Inc., 227 F.3d 1110, 5 1114 (9th Cir. 2000) (direct infringement); A&M Records, Inc. v. Napster, Inc., 239 F.3d 6 1004, 1025–26 (9th Cir. 2001) (indirect infringement); see also Rescue v. Walters, No. 7 C20-5700JLR, 2021 WL 22591, at *4 (W.D. Wash. Jan. 4, 2021) (observing that a license 8 to use copyrighted work need not be in writing to be valid—it may be granted orally or 9 inferred through the parties’ conduct and the circumstances surrounding the transaction at 10 issue).9 The party who raises an implied license to evade infringement liability bears the 11 burden of establishing the affirmative defense’s existence. Furie v. Infowars, LLC, 401 F. 12 Supp. 3d 952, 968 (C.D. Cal. 2019). 13 The question whether an implied license exists is to be “determined by the licensor’s 14 objective intent at the time of the creation and delivery of the copyrighted work as 15 manifested by the parties’ conduct.” Signorelli v. N. Coast Brewing Co., Inc., No. 5:18- 16 cv-2914-EJD, 2019 WL 2569582, at *3 (N.D. Cal. June 21, 2019) (citing Asset Mktg. Sys., 17 Inc. v. Gagnon, 542 F.3d 748, 756 (9th Cir. 2008)). To decipher the putative licensor’s 18 “objective intent,” district courts in the Ninth Circuit apply a three-factor test, which Effects 19 Associates, Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990), delineates (the “Effects test”). 20 Under the Effects test, an implied license exists when “(1) a person (the licensee) requests 21 the creation of the work, (2) the creator (the licensor) makes the particular work and 22 delivers it to the licensee who requested it, and (3) the licensor intends that the licensee- 23 requestor copy and distribute his work.” Gagnon, 542 F.3d at 754–55 (quoting I.A.E., Inc. 24 v. Shaver, 74 F.3d 768, 776 (7th Cir. 1996)). Importantly, “[t]he last prong of the Effects 25 test . . . is not limited to copying and distribution”; district courts are to ascertain the intent 26

27 9 Oral and implied licenses can be nonexclusive only. See Radio Television Espanola S.A. v. New World Entm’t, Ltd., 183 F.3d 922, 929 (9th Cir. 1999). Westhoff does not contend it holds an exclusive 28 1 of the putative licensor respecting all the “protected right[s] at issue.” Id. at 755. Here, 2 that includes Westhoff’s retention, use, and modification of the Works. See id. 3 a. Defendants Granted Westhoff an Unlimited Implied License 4

5 Application of the Effects test to Defendants’ infringement allegations reveals that 6 Defendants, indeed, have pleaded themselves out of court. See, e.g., Boquist, 32 F.4th at 7 774. Even when construed in a light most favorable to Defendants, their averments 8 plausibly illustrate Defendants’ objective intent to grant Westhoff permission to retain, use, 9 and distribute the Works in its marketing endeavors, notwithstanding Defendants’ 10 continued involvement as Westhoff’s independent contractor. 11 i. Did Westhoff Request the Works? 12 The first prong of the Effects test inquires whether the putative licensee requested 13 creation of the copyrighted works. See Gagnon, 542 F.3d at 754–55. The parties appear 14 united in the analytical framework that they contend governs this question. They both 15 essentially assert that it can be said that Westhoff “requested” the Works only if the 16 Contract covered production of those Works. (See Mem. in Supp. of Pl.’s Mot. at 6:21– 17 7:20; Opp’n to Pl.’s Mot. at 18:15–20.) The Court agrees this is an appropriate starting 18 point to assess the first Effects factor. See Foad Consulting Grp., Inc. v. Azzalino, 270 F.3d 19 821, 828 (9th Cir. 2001) (noting that contract can be evidence of a relationship giving rise 20 to implied copyright license); Shaver, 74 F.3d at 776 (analyzing “the language of the 21 contract itself” and “the scope of the work” performed thereunder to determine intent); 22 Johnson v. Jones, 149 F.3d 494, 500 (6th Cir. 1998) (determining intent from unsigned 23 contract); accord N.A.D.A. Servs. Corp. v. Bus. Data of Va., Inc., 651 F. Supp. 44, 49 (E.D. 24 Va. 1986) (“The creation of an implied license, as in the creation of any implied contract, 25 requires a meeting of the minds.”). 26 From there, the parties diverge. Defendants contend that because the Contract did 27 not explicitly cover photography services, the Contract excludes the Works. (See Opp’n 28 to Pl.’s Mot. at 18:12–19.) That is, while the Contract delineates several discrete tasks 1 BlueSkye was paid to perform to market, advertise, and sell Westhoff’s flowers, 2 “photography” is not one of them. (Id.) Rather, Defendants aver Berg took the 3 Photographs “on [his] own initiative.” (Id. at 10:8 (citing Defs.’ ACC ¶ 14).) Conversely, 4 Westhoff avers that the Amended Countercomplaint itself “pleads that Defendants created 5 [the Photographs] for Westhoff pursuant to the services Westhoff hired BlueSkye to 6 perform.” (Reply in Supp. of Pl.’s Mot. at 3:18–24.) The Contract called for BlueSkye to 7 “develop and market new products,” “produce advertisements,” and create a website. (See 8 Defs.’ ACC ¶ 11 (citing SAC ¶ 93).) Westhoff’s line of business is selling flowers. 9 Westhoff asserts that “[f]lowers are ornamental aesthetic products and customers need to 10 see what they are buying, so photographic representations are instrumental in the flower 11 industry.” (See Mem. in Supp. of Pl.’s Mot. at 7:5–12; see also id. at 10:14–16 12 (“Defendants’ own work creating Westhoff’s website required including photographs of 13 Westhoff’s flower products so that Westhoff’s customers can see the flower products they 14 are buying from Westhoff since flowers are aesthetic centerpieces.”).) Hence, Defendants’ 15 creation of the Photographs and marketing materials featuring those Photographs in 16 marketing materials, e.g., the Catalogs and the Website, fall squarely within Defendants’ 17 services delineated in the Contract. 18 Courts typically apply the Effects test flexibly, allowing the parties’ objective intent 19 to lead the way. See John G. Danielson, Inc. v. Winchester-Conant Props., Inc., 322 F.3d 20 26, 40 (1st Cir. 2003) (“The touchstone for finding an implied license to use copyrighted 21 [work] is intent.”); see also Melville B. Nimmer & David Nimmer, Nimmer on Copyright 22 § 10.03[A][7] at 10-55 (2013) (admonishing against inflexible application of Effects test). 23 Defendants’ rigid focus upon the absence of an explicit request from Westhoff to create 24 the specific Works is incongruent with this principle. Moreover, Defendants’ proposed 25 approach contravenes the Ninth Circuit’s decision in Falcon Enterprises, Inc. v. Publishers 26 Service, Inc., 438 F. App’x 579 (9th Cir. 2011).10 In that case, the defendant publisher 27 10 Citation to this unpublished Ninth Circuit opinion is appropriate under Ninth Circuit Rule 36- 28 1 received and routinely published images created and delivered by the plaintiff licensee over 2 a four-year period. Id. at 581. It was undisputed in Falcon that the defendant had never 3 explicitly requested the specific images. Id. Nevertheless, the Falcon court held the 4 absence of an express request did not impede satisfaction of the first Effects test prong, for 5 the parties’ conduct filled that void. Id. (“Although Falcon did not produce its content at 6 Publishers’ specific request, . . . for years Falcon sent images to satisfy Publishers’ ongoing 7 demand for content and Publishers regularly published the content that Falcon supplied.”). 8 Westhoff’s argument rings truest to the general principles governing implied 9 licensure and Ninth Circuit precedent. The Contract, the parties’ conduct, and common 10 sense all illustrate that Westhoff “requested” the Works for the purpose of the Effects test. 11 Defendants allege that Westhoff paid BlueSkye $8,000 monthly—and covered 12 business-related expenses—for it to, inter alia, “develop and market new products,” 13 “produce advertisements for placement in trade magazines and the like,” and “create [a] 14 publicly accessible[,] English-based North American website, Facebook account/page, and 15 other social media accounts where Westhoff could market and sell[] its products and 16 generate consumer goodwill.” (Id. ¶ 11 (quoting SAC ¶ 93).) The Contract is silent as to 17 whether BlueSkye’s services included photographs of Westhoff’s flowers to use in the 18 marketing materials it was engaged to create. But the Contract’s broad delegation of 19 practically all Westhoff’s marketing, advertising, and sales functions in North America to 20 BlueSkye leads only to the plausible inference that BlueSkye had discretion to do what it 21 needed—within the bounds of reason—to create marketing materials worthy of the 22 consideration paid for them. (See id. ¶¶ 11–13.) This includes taking Photographs of the 23 very products Westhoff retained BlueSkye to advertise, and incorporating those 24 Photographs in the marketing materials Westhoff paid BlueSkye to create. 25 Furthermore, as in Falcon, the parties’ conduct—as alleged in the Amended 26 Countercomplaint—supports a finding that Westhoff satisfied the first prong of the Effects 27 test. See 438 F. App’x at 581. Defendants allege that Berg took Photographs of Westhoff’s 28 line of flowers each year of the parties’ four-year business relationship. (Defs.’ ACC ¶ 20 1 (alleging Berg took “Variety Photos” in 2014, 2015, 2016, 2017, and 2018).) And 2 Defendants allege that they published those Photographs to the Website and used them to 3 create two Catalogs—both the Website and Catalogs being explicit marketing deliverables 4 under the terms of the Contract. Defendants do not allege that they ever informed Westhoff 5 that the Photographs were not included within BlueSkye’s services under the Contract. 6 Nor do Defendants allege that they ever sought additional payment from Westhoff for the 7 Photographs beyond the amount they were paid and reimbursed each month. Thus, the 8 parties’ conduct suggests that the Works were produced in response to a request. 9 Finally, Defendants’ conclusory allegation Berg created the Photographs on his 10 “own initiative” requires the suspension of common sense. Berg did not take photographs 11 of flowers and then solicit Westhoff to market on its behalf through BlueSkye. Cf. Taylor 12 Holland LLC v. MVMT Watches, Inc., No. 2:15-CV-3578-SVW-JC, 2016 WL 6892097, at 13 *5 (C.D. Cal. Aug. 11, 2016). The Photographs were taken after Westhoff retained his 14 Company, BlueSkye, to advertise the very flowers featured in the Works. Indeed, the only 15 reasonable inference permitted by Defendants’ allegations is that Berg had access to 16 Westhoff’s flowers because he had been engaged by Westhoff to market them. Defendants 17 do not allege Berg bought the Westhoff flowers he photographed or that Berg asked 18 permission to take the Photographs in connection with his own artistic endeavors. Rather, 19 Defendants aver Berg created the Photographs while he was performing services under the 20 Contract as BlueSkye’s president and employee. And while Defendants make much to do 21 about the artistic freedom Berg allegedly retained in choosing when, where, and how to 22 photograph Westhoff’s products (see Defs.’ ACC ¶¶ 13, 15), that speaks to the wide 23 discretion Defendants allegedly possessed to create and stylize Westhoff’s marketing 24 materials. It does not support the assertion that the Photographs somehow are divorced 25 from the marketing services Defendants promised to perform as part of the Contract (Id. 26 ¶¶ 13–14). 27 28 1 ii. Did Defendants Deliver the Works? 2 The second prong of the Effects test asks whether the putative licensor “delivered” 3 to the putative licensee the works at issue. See Gagnon, 542 F.3d at 754–55. 4 Photographs: Defendants aver that “BlueSkye did not deliver [the] [P]hotographs 5 to Westhoff.” (Defs.’ ACC ¶ 15.) Rather, Defendants assert that Westhoff attained the 6 Photographs through trickery. (Opp’n to Pl.’s Mot. at 20:21–23:1.) Upon closer 7 examination, Defendants’ allegations respecting the Photographs do not support the story 8 they attempt to tell in their Opposition. 9 Defendants allege that one of BlueSkye’s discrete obligations under the Contract 10 was to create a “publicly accessible . . . North American website . . . where Westhoff could 11 market and sell[] its products and generate consumer goodwill.” (Defs.’ ACC ¶ 11.) After 12 entering the Contract, and while BlueSkye served as Westhoff’s principal marketer in 13 North America, Defendants created the Website. (Id. ¶ 16.) The Website housed the 14 Photographs of Westhoff’s flowers and the Website’s name—Westflowers.com—was a 15 portmanteau of the Westhoff brand, facts the Court finds significant. (Id.) Nevertheless, 16 Defendants appear to allege that the Website was part of BlueSkye’s own marketing 17 endeavor, and not connected with its marketing services for Westhoff. (See id. ¶ 14; but 18 see id. ¶¶ 15, 32.) Yet, when requested by Christian Westhoff to hand over credentials to 19 the Website so that it could be transferred to a German domain, where it would be stored 20 at cheaper cost, Defendants did not balk. They dutifully obliged, and gave Westhoff access 21 to the Website and the Photographs stored thereon. (Id.) 22 Based on these averments, the assertion that Defendants did not deliver the 23 Photographs but were instead duped into providing Westhoff with access does not add up. 24 Why would Defendants honor a request to hand over the credentials of their own Website, 25 purportedly having nothing to do with the services provided to Westhoff under the 26 Contract? And why would Westhoff bear the costs of upkeeping the Website’s domain— 27 or have an interest in pursuing cheaper domain options—if the Website was not developed 28 to serve Westhoff but instead pertained purely to BlueSkye’s own marketing endeavors? 1 The Amended Countercomplaint contains no explanations for these critical questions. 2 Even when read in a light most favorable to Defendants, the Amended Countercomplaint’s 3 allegations support only one reasonable inference: Defendants transferred the Website to 4 Westhoff because it was one of the deliverables that BlueSkye had explicitly promised 5 Westhoff under the Contract and, therefore, had no basis to deny Westhoff’s CEO’s 6 request. And when Defendants did that, they also delivered the Photographs of Westhoff’s 7 flowers. 8 Catalogs: Unlike the Photographs, Defendants do not allege that Westhoff obtained 9 the Catalogs from the Website. Indeed, they do not specifically allege how Westhoff 10 obtained the Catalogs in 2017 and 2018, but they acknowledge in their Amended 11 Countercomplaint that Westhoff did, indeed, possess them prior to termination. (See Defs.’ 12 ACC ¶¶ 32, 34.) Therefore, on the face of the pleading, the only plausible explanation for 13 how Westhoff obtained the Catalogs is that Defendants delivered them. 14 iii. Did Defendants’ Conduct Objectively Manifest an Intent to Grant an Implied License? 15

16 At the third and final prong of the Effects test, this Court must probe whether 17 Defendants’ conduct manifested their intent to grant Westhoff an implied license to retain, 18 use, and distribute BlueSkye’s Works. See Gagnon, 542 F.3d at 754–55. Westhoff, 19 therefore, must demonstrate that the Amended Countercomplaint’s allegations indicate that 20 Defendants “create[d] [the Works] with knowledge and intention that [they] will be used 21 by [Westhoff]” to market, advertise, and sell its flowers. See Bangkok Broad. & T.V. Co., 22 Ltd. v. IPTV Corp., 742 F. Supp. 2d 1101, 1111 (C.D. Cal. 2010). 23 The Ninth Circuit instructs district courts to “focus primarily” on the putative 24 licensor’s “objective intent at the time of the creation and delivery [of the work].” Corbello 25 v. DeVito, 777 F.3d 1058, 1067 (9th Cir. 2015) (quoting Gagnon, 542 F.3d at 756). To 26 guide courts in this inquiry, the Ninth Circuit delineated three considerations in Gagnon: 27 (a) the length of the parties’ relationship; (b) the existence of written restrictions on the use 28 of the works; and (c) the putative licensor’s conduct at the time of delivery (the “Gagnon” 1 factors). 542 F.3d at 755; see also Everett v. MX Elecs. Mfg., Inc., No. 8:22-cv-0802-JVS 2 (ADSx), 2022 WL 17078203, at *3 (C.D. Cal. Sept. 14, 2022). 3 Length of Relationship: The first Gagnon factors focuses on the length of the 4 parties’ relationship and nature of the transaction. “[A] short-term, discrete transaction 5 indicates that the parties only intended the creator’s work to be a discrete contribution and 6 that others could use the work in future products.” Taylor Holland, 2016 WL 6892097, 7 at *6 (citing Reinicke v. Creative Empire LLC, 38 F. Supp. 3d 1192, 1200 (S.D. Cal. 2014)). 8 By contrast, a long-term relationship suggests that the parties contemplated the licensor 9 would continue to be involved in future projects and, therefore, militates against finding an 10 implied license. Id. (citing Fontana v. Harra, No. CV 12-10708 CAS (JCGx), 2013 WL 11 990014, at *6 (C.D. Cal. Mar. 12, 2013)). 12 At first blush, this factor appears to weigh against an implied license. Defendants 13 provided marketing, advertising, and sales services to Westhoff for approximately four 14 years. (Defs.’ ACC ¶¶ 10, 23.) And the tasks Defendants performed were far from 15 discrete: BlueSkye effectively served as “Westhoff’s de facto [COO] of its North 16 American business operations,” (id. ¶ 12 (quoting SAC ¶ 93).) 17 But the Gagnon factors should not be applied rigidly. They are elastic enough to 18 leave room for those instances where the normative assumptions that underpin the Gagnon 19 factors do not adequately explain the putative licensor’s objective intent as manifested by 20 the Contract and its conduct. Cf. Gagnon, 542 F.3d at 756 (“The [long-term] relationship 21 of the parties indicates neither an intent to grant nor deny a license without Gagnon’s future 22 involvement.”); Fontana, 2013 WL 990014, at *8 (“[T]he three factor test does not fit this 23 case, and as in [Gagnon, 542 F.3d at 756], the alleged ongoing relationship between the 24 parties, by itself, is not probative of their intent.”). Indeed, “[i]n some cases, an ongoing 25 relationship between the parties is not probative of their intent.” Taylor Holland, 2016 WL 26 6892097, at *6 n.14 (collecting authorities). This is one of those cases. 27 Here, as in Gagnon, “every objective fact concerning the transaction” besides the 28 length of Westhoff and BlueSkye’s relationship supports the finding of an implied license. 1 542 F.3d at 756 (quoting Effects, 908 F.2d at 559 n.6). Westhoff retained BlueSkye to 2 provide a broad spectrum of marketing, advertising, and sales-related services, and 3 conferred BlueSkye with wide discretion and ultimate decision-making authority in the 4 provision of those services. Each year of the four-year relationship, Berg created 5 Photographs of Westhoff’s flowers, which he and his company had been hired to market, 6 and incorporated those Photographs into marketing materials—namely the Website and the 7 Catalogs—that BlueSkye had been explicitly hired to create. Defendants do not allege that 8 the Contract excludes photography services. Nor do Defendants allege that they ever 9 informed Westhoff the photography services they had provided year after year was separate 10 from the Contract. Hence, the ongoing nature of the parties’ relationship is not probative 11 of Defendants’ intent to limit Westhoff’s use of the Works in future marketing endeavors. 12 Use of Written Contracts: An implied license cannot override express terms of a 13 written contract. See, e.g., Oracle Am., Inc. v. Terix Computer Co., Inc., No. 5:13-cv-3385- 14 PSG, 2015 WL 2090191, at *8 (N.D. Cal. May 5, 2015); Spiegler v. Home Depot U.S.A., 15 Inc., 552 F. Supp. 2d 1036, 1054 (C.D. Cal. 2008). Defendants correctly concede that the 16 absence of any written agreement between the parties weighs in favor of a finding of 17 implied license.11 (Defs.’ Opp’n at 22:26–23:1.) 18 Defendants’ Conduct at the Time of Delivery: The third consideration is whether 19 Defendants’ conduct at the time they delivered the work objectively indicates intent to 20 grant a license to Westhoff to use the Works for marketing purposes. Reinicke, 38 F. Supp. 21 3d at 1201. 22 “Consent to use the copyrighted work need not be manifested verbally and may be 23 inferred based on silence where the copyright holder knows of the use and encourages it.” 24

25 11 Defendants argue that Count One in Westhoff’s Countercomplaint—which asserts claims for 26 copyright infringement as to other copyrighted photographs belonging to Westhoff—“strongly indicates Westhoff and BlueSkye both intended to limit the other’s use of their respective photographs.” (Defs.’ 27 Opp’n to Pl.’s Mot at 23:2–7.) It does not. Westhoff’s counterclaims filed approximately four years after Berg created the last Work is not indicative of the parties’ “intent at the time of the creation and delivery” 28 1 Field v. Google Inc., 412 F. Supp. 2d 1106, 1116 (D. Nev. 2006). The allegations in the 2 Amended Countercomplaint indicate that, at the time of delivery, Defendants knew full 3 well that Westhoff used the Works to market its products. Indeed, BlueSkye, itself, used 4 the works on Westhoff’s behalf. (See Defs.’ ACC ¶¶ 15, 32.) Crucially, Defendants do 5 not allege they communicated to Westhoff any limitation on its use of the Works at the 6 time of delivery. See Beijing Zhongyi Zhongbiao Elec. Info. Tech. Co. Ltd. v. Microsoft 7 Corp., 655 F. App’x 564, 566 (9th Cir. 2016) (affirming district court’s dismissal, with 8 prejudice, of plaintiff’s claim defendant infringed license by exceeding its scope where 9 pleading did not show “intent to limit the license’s scope”)12; Castro v. Calicraft Distribs., 10 LLC, No. 14-CV-5226-RS, 2015 WL 5042225, at *3 (N.D. Cal. Aug. 25, 2015) (dismissing 11 copyright infringement claim on basis of implied license where the complaint contained 12 “no allegations that . . . a limitation was communicated to defendants”); Signorelli, 2019 13 WL 2569582, at *3 (“Having failed to express any intent to limit the implied license, 14 [defendant] received an unlimited implied license to [plaintiff’s] work.”). Defendants’ 15 silence speaks volumes. See Field, 412 F. Supp. 2d at 1116. 16 In sum, application of the Effects test to Defendants’ allegations in their Amended 17 Countercomplaint reveals that Defendants’ objectively intended to grant Westhoff an 18 unlimited implied license to use BlueSkye’s Works in marketing, advertising, and selling 19 Westhoff flowers. 20 b. The Unlimited Implied License is Irrevocable 21 An implied license is limited in duration if the licensor revokes it. See, e.g., Berster 22 Techs., LLC v. Christmas, No. S-11-1541 KJM JFM, 2012 WL 33031, at *9 (E.D. Cal. Jan. 23 6, 2012) (holding that a licensor’s filing a copyright infringement action amounts to 24 revocation (citing Carson v. Dynegy, Inc., 344 F.3d 446, 452 (5th Cir. 2003))). But not all 25 implied licenses are revocable. An implied license is revocable only “where no 26

27 12 Citation to this unpublished Ninth Circuit opinion is appropriate under Ninth Circuit Rule 36- 3(b). 28 1 consideration has been given for the license.” Keane Dealer Servs., Inc. v. Harts, 968 F. 2 Supp. 944, 947 (S.D.N.Y. 1997) (citing, inter alia, Avtec Sys., Inc. v. Peiffer, 21 F.3d 568, 3 574 n.12 (4th Cir. 1994)). However, an implied license that is “accompanied by 4 consideration” is irrevocable. Gagnon, 542 F.3d at 758 (collecting authorities); Reinicke, 5 38 F. Supp. 3d at 1203–04 (“If consideration is paid, a license is irrevocable because a 6 nonexclusive license supported by consideration is a contract. If an implied license 7 accompanied by consideration were revocable at will, the contract would be illusory.” 8 (citations omitted)). 9 Defendants allege that Westhoff paid BlueSkye $8,000 per month for the duration 10 of the Contract and also covered BlueSkye’s business-related expenses. (Defs.’ ACC ¶ 11 12.) In exchange, BlueSkye promised to perform a variety of marketing services, including 12 but not limited to, creating the Website and producing advertisements for Westhoff 13 flowers, like the Catalogs. (Id.) Defendants contend, however, that the amount it was 14 compensated does not cover the Photographs, which BlueSkye subsequently incorporated 15 into the Website and Catalogs. (Opp’n to Pl.’s Mot. at 23:15–24:13.) 16 The tactic Defendants seek to employ has been tried and rejected before. Several 17 times, the Ninth Circuit has quashed post hoc attempts by creators who claim the 18 compensation they received covered their labor but not the actual works produced. See 19 Gagnon, 542 F.3d at 756–57 (“[I]t defies logic that AMS would have paid Gagnon for his 20 programming services if AMS could not have used the programs without further payment 21 pursuant to a separate licensing agreement that was never mentioned in the TSA, and never 22 otherwise requested at the time.”); Effects, 908 F.2d at 558–59 (“To hold that Effects did 23 not at the same time [as creating the work at defendant’s request and handing it over to 24 defendant] convey a license to use the footage . . . would mean that plaintiff’s contribution 25 to the film was of minimal value, a conclusion that can’t be squared with the fact that Cohen 26 paid Effects almost $56,000 for this footage.”); see also Yates v. Adams, No. 15-cv-4912- 27 JD, 2017 WL 783520, at *3 (N.D. Cal. Mar. 1, 2017) (rejecting creator’s argument the 28 compensation “he received was only for his labor, and not for the software itself”). 1 Defendants’ argument is entitled to this same fate. This Court has already found the Works 2 were incidental to the marketing services and products BlueSkye provided to Westhoff 3 under the Contract. 4 Accordingly, the Court finds that Westhoff paid Defendants for marketing services 5 that included the Works and, therefore, the implied license granted to Westhoff is an 6 irrevocable one. 7 c. Westhoff’s Use and Distribution of the Works Does Not Exceed the Scope of the Implied License 8

9 Defendant’s own allegations—construed in their favor—indicate that Westhoff 10 possesses an unlimited, irrevocable implied license to use the Works for marketing 11 purposes. None of Westhoff’s alleged uses of the Works overstep the scope of implied 12 license it attained. Westhoff uses the Photographs and Catalogs on its Website to market 13 its own products. (See Defs.’ ACC ¶¶ 26–27; see also id. ¶ 32 (alleging Westhoff makes 14 Photographs and Catalogs available in print).) And consistent with the Contract, Westhoff 15 makes the marketing materials containing the Photographs available for download to 16 purchasers of its flowers, to aid and assist those purchasers in their own marketing 17 endeavors. (Id. ¶ 31; see also id. ¶ 11 (identifying as two of BlueSkye’s several 18 obligations: (1) “develop programs for future Westhoff customers” and (2) “create “ [a] 19 publicly accessible[,] English-based North American website . . . where Westhoff could 20 market and sell[] its products and generate consumer goodwill”).) 21 Accordingly, the Court GRANTS Westhoff’s Motion to the extent it seeks dismissal 22 of Defendants’ counterclaims under the Copyright Act and its state law counterclaim 23 premised upon the same allegations of copyright infringement. 24 3. Defendants Fail to State a Claim for Defamation 25 Having dismissed Defendants’ counterclaims based on infringement, the Court turns 26 next to the surviving segment of Defendants’ lone remaining counterclaim under California 27 Business and Professions Code § 17200 et seq. premised upon defamation. (Defs.’ ACC 28 ¶ 54 (“Westhoff has defamed BlueSkye and [] Berg and continues to defame BlueSkye and 1 [] Berg.”).) Under California law, defamation “involves the intentional publication of a 2 statement of fact which is false, unprivileged, and has a natural tendency to injure or which 3 causes special damage.” Gilbert v. Sykes, 147 Cal. App. 4th 13, 27 (2007). 4 Defendants allege that Christian Westhoff—Westhoff’s CEO—“made knowingly 5 false statements to a board member of a BlueSkye client (and a competitor to Westhoff) 6 that BlueSkye and/or Mr. Berg engaged in fraud to cause Westhoff to pay for personal 7 expenses and other financial misdeeds—knowing these accusations are false—for the 8 express purpose of discouraging the client to work with BlueSkye.” (Id. ¶ 36.) But 9 Defendants’ counterclaim is not lodged against Christian Westhoff: only Westhoff— 10 Christian Westhoff’s employer—is a Counterdefendant. 11 California law is clear that employers are not strictly or automatically liable for the 12 intentional torts of their employees. See Farmers Ins. Grp. v. Cnty. of Santa Clara, 13 11 Cal. 4th 992, 1004 (1995) (“Notwithstanding the generally broad view given to scope 14 of employment determinations, the law is clear that an employer is not strictly liable for all 15 actions of its employees [and officers] during work hours”). And while California law 16 enunciates several broadly construed principles that permit vicarious liability, see Rivera 17 v. Nat’l R.R. Passenger Corp., 331 F.3d 1074, 1080 (9th Cir. 2003) (respondeat superior); 18 Dickinson v. Cosby, 37 Cal. App. 5th 1138, 1158 (2019) (ratification), Defendants do not 19 allege which, if any, doctrine they seek to invoke. Nor do Defendants allege any facts that 20 track with a cognizable theory that would permit liability for defamation to extend from 21 Westhoff’s CEO to Westhoff itself. 22 Because the Court cannot assume the existence of theories or facts not alleged in the 23 Amended Countercomplaint, Defendants fail to state an unfair business practices 24 counterclaim against Westhoff. See Iqbal, 556 U.S. at 679. Accordingly, the Court 25 GRANTS Westhoff’s Motion to the extent it seeks dismissal of Defendants’ § 17200 26 counterclaim based on defamation and DISMISSES the Amended Countercomplaint in its 27 entirety. 28 1 * * * * 2 Having dismissed Defendants’ counterclaims, the Court must ascertain whether such 3 dismissal should be with or without prejudice. The Court dismisses Defendants’ 4 counterclaims based on copyright infringement WITH PREJUDICE, for further 5 amendments would be futile. Defendants already had two opportunities to proffer failsafe 6 allegations that would prevent Westhoff from demonstrating the existence of an unlimited 7 and irrevocable implied license. See Boquist, 32 F.4th at 774 (instructing that only if the 8 claimant’s own allegations “admit[]all the ingredients of an impenetrable defense” is an 9 affirmative defense a basis for dismissal on the pleadings). Yet, Defendants still pleaded 10 themselves out of court in their Amended Countercomplaint. See Bonin v. Calderon, 11 59 F.3d 815, 845 (9th Cir. 1995) (in determining whether to allow amendment, the court 12 considers “futility of amendment and whether the party has previously amended his 13 pleadings’); Mir v. Fosburg, 646 F.2d 342, 347 (9th Cir. 1980) (“[A] district court has 14 broad discretion to grant or deny leave to amend, particularly where the court has already 15 given plaintiff one or more opportunities to amend his complaint.”). 16 However, dismissal of Defendants’ § 17200 counterclaim based on Christian 17 Westhoff’s alleged defamation is WITHOUT PREJUDICE. The Court cannot say at this 18 juncture whether amendment would be futile. Indeed, to correct the deficiencies observed 19 by this Court, Defendants merely must proffer allegations adequate to invoke a cognizable 20 theory of vicarious liability or add Christian Westhoff as a Counterdefendant to this action. 21 C. Counts Two through Eight of Westhoff’s Countercomplaint are Moot 22

23 In response to Defendants’ counterclaims alleging that it infringed upon the 24 Copyrights in violation of the Copyright Act, Westhoff asserted seven counterclaims of its 25 own. Counts Two through Eight of Westhoff’s Countercomplaint seek declaratory 26 judgments of non-infringement as to each of the Copyrights, which, if granted, would 27 invalidate Defendants’ “counterclaims for copyright infringement against Westhoff under 28 1 the copyright laws of the United States, 17 U.S.C. § 101 et seq.” (See id. ¶¶ 43, 49, 55, 61, 2 67, 73, 79.) 3 “A federal court has no authority to issue a declaratory judgment apart from that 4 authority granted it by the Declaratory Judgment Act, which requires by its terms that an 5 ‘actual controversy’ exists between the parties before the court.” Gladwell Governmental 6 Servs., Inc v. Cnty. of Marin, No. C-04-3332 SBA, 2005 WL 2656964, at *1 (N.D. Cal. 7 Oct. 17, 2005) (citing 28 U.S.C. § 2201; Aetna Life Ins. v. Haworth, 300 U.S. 227, 240 8 (1937)); Benitec Aus. Ltd v. Nucleonics, Inc., 495 F.3d 1340, 1343 (Fed. Cir. 2007) 9 (holding that the party asserting claims under the Declaratory Judgment Act bears the 10 burden of demonstrating the facts alleged involve a “substantial” controversy of “sufficient 11 immediacy” to warrant a declaratory judgment (citing MedImmune, Inc. v. Genentech, Inc., 12 549 U.S. 118 (2007))). The “actual controversy” must be extant through all stages of 13 litigation, not just at the time the claims are filed. See Arizonans for Official English v. 14 Arizona, 520 U.S. 43, 67 (1997). Courts routinely find “that declaratory relief claims are 15 moot when their mirror image counterclaims are dismissed with prejudice.” See 16 QuickLogic Corp. v. Konda Techs., Inc., No. 5:21-cv-4657-EJD, 2023 WL 5182598, at *4 17 (N.D. Cal. Aug. 11, 2023). 18 Because the Court has dismissed with prejudice Defendants’ mirror image 19 counterclaims of direct and indirect infringement under the Copyright Act, Westhoff’s 20 responsive counterclaims for non-infringement are moot. Cf. QuickLogic, 2023 WL 21 5182598, at *4 (dismissing as moot non-infringement declaratory judgment counterclaims 22 on the ground mirror image infringement claims were dismissed with prejudice); E-Tool 23 Dev., 2018 WL 2208428, at *1 (similar); Pom Wonderful, 2016 WL 5920103, at *2 24 (similar). Accordingly, the Court DISMISSES AS MOOT Counts Two through Eight of 25 Westhoff’s Countercomplaint and TERMINATES Defendants’ Motion for the same 26 reason.13 27

28 1 D. Defendants’ Anti-SLAPP Motion is Inapplicable to the Counterclaims and Allegations They Seek to Strike 2

3 Defendants move to strike from the record Counts Two through Eight of Westhoff’s 4 Countercomplaint, as well as their supporting factual allegations. (Anti-SLAPP Mot.) This 5 Motion is brought under California’s Anti-SLAPP statute—not Rule 12(f). (Id. at 2:7–13 6 (citing Cal. Civ. Proc. Code § 425.16).) 7 California’s Anti-SLAPP statute is intended to “provide a procedural remedy to 8 dispose of lawsuits that are brought to chill the valid exercise of constitutional rights.” 9 Rusheen v. Cohen, 37 Cal. 4th 1048, 1055–56 (2006). The Anti-SLAPP law provides, in 10 relevant part: 11 A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United 12 States Constitution or the California Constitution in connection with a public 13 issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will 14 prevail on the claim. 15 16 Cal. Civ. Proc. Code § 425.16. Anti-SLAPP motions are not limited to attacks on entire 17 claims, but may also “attack parts of a count, including specific allegations amounting to a 18 claim.” Newport Harbor Offices & Marina, LLC v. Morris Cerullo World Evangelism, 19 23 Cal. App. 5th 28, 43 (2018); Sheley v. Harrop, 9 Cal. App. 5th 1147, 1175 (2017) 20 (“Allegations of a protected activity supporting stricken claims are to be eliminated from 21 the complaint, unless they also support a distinct claim on which the plaintiff has shown a 22 probability of prevailing.”). 23 California’s anti-SLAPP “does not apply to federal law causes of action.” Hilton v. 24 Hallmark Cards, 599 F.3d 894, 900–01 (9th Cir. 2010); Doe v. Gangland Prods., Inc., 730 25 F.3d 946, 955 (9th Cir. 2013); but see Globetrotter Software, Inc. v. Elan Computer Grp., 26 Inc., 63 F. Supp. 2d 1127, 1130 (N.D. Cal. 1999) (“[T]he anti-SLAPP statute may be 27 applied to state law claims which, as in this case, are asserted pendent to federal question 28 claims.” (citing Erie R. Co. v. Tompkins, 304 U.S. 64 (1938); United States ex rel. 1 Newsham v. Lockheed Missiles & Space Co., Inc., 190 F.3d 963 (9th Cir. 1999)). Counts 2 Two through Eight seek declaratory judgment based on the federal Declaratory Judgment 3 Act. (See Pl.’s CC ¶ 1 (“Westhoff seeks declaratory judgment of inequitable conduct and 4 unclean hands preventing enforcement of Defendants’ registered copyrights pursuant to 28 5 U.S.C. §§ 2201 and 2202.”); see Gladwell Governmental Servs., 2005 WL 2656964, at *1 6 (holding that federal courts lack authority “to issue a declaratory judgment apart from that 7 authority granted it by the Declaratory Judgment Act”). California’s Anti-SLAPP statute, 8 therefore, is inapposite to these causes of action. Cf. Finato v. Keith Fink & Assocs., No. 9 2:16-CV-6713-RGK-AJW, 2017 WL 10716999, at *5 (C.D. Cal. May 5, 2017) (denying 10 Anti-SLAPP motion directed at claims under the Declaratory Judgment Act); Summit 11 Media LLC v. City of Los Angeles, 530 F. Supp. 2d 1084, 1095 (C.D. Cal. 2008) (“CBSO’s 12 single counter claim is brought under 28 U.S.C. § 2201 . . ., which is a federal cause of 13 action seeking declaratory relief. The cause of action for which Plaintiff seek[s] anti- 14 SLAPP relief involves exclusively federal law claims. Therefore, the California statute is 15 not an applicable relief.”); Mireskandari v. Daily Mail & Gen. Trust PLC, No. CV 12-2943 16 MMM (SSx), 2013 WL 12114762, at *9 n.37 (similar). 17 Accordingly, the Court DENIES Defendants’ Anti-SLAPP Motion.14 18 III. CONCLUSION 19 For the aforementioned reasons, the Court: 20 1. GRANTS Westhoff’s Motion (ECF No. 29) and DISMISSES Defendants’ Amended Countercomplaint (ECF No. 13). 21

22 2. GRANTS Defendants LEAVE TO AMEND their counterclaim of unfair business practices under California Business and Professions Code § 17200 23 to the extent it is premised on defamation only. All the remaining claims in 24 Defendants’ Amended Countercomplaint are dismissed WITH PREJUDICE. 25 26 14 The Court also DENIES as procedurally improper Westhoff’s request for Rule 11 sanctions, 27 which it posits at the end of its Opposition. (See Opp’n to Anti-SLAPP Mot. at 9:2–7); see Fed. R. Civ. P. 11(c)(2) (“A motion for sanctions must be made separately from any other motion and must describe 28 I 7 3. DISMISSES AS MOOT Counts Two through Eight of Westhoff’s Countercomplaint (ECF No. 21) and TERMINATES Defendants’ Motion to 3 Dismiss (ECF No. 22) and Westhoff’s Motion for Leave to file a Sur-reply 4 (ECF No. 27) for the same reason. > 4. DENIES Defendants’ Anti-SLAPP Motion (ECF No. 31). 6 7 5. ORDERS Defendants to file their Second Amended Countercomplaint by no later than September 28, 2023, and Westhoff to respond by no later than 8 October 19, 2023. 9 10 IT IS SO ORDERED. / jl +7. f f 11 || DATED: September 6, 2023 Lin A (By “uAADd Hog. Cynthia Bashant 12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ~3A2>L