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Maxient, LLC v. Symplicity Corp.

United States District Court, E.D. Virginia, Alexandria Division

October 23, 2014

Maxient, LLC, Plaintiff,
v.
Symplicity Corp., Ariel M. Friedler, Alok K. Dhir, & Matthew Kelley, Defendants

Page 593

For Maxient, LLC, a Virginia limited liabilty company, Plaintiff: Bernard Joseph DiMuro, Stephen Lybrook Neal, Jr., LEAD ATTORNEYS, Miles Jarrad Wright, Taylor Sumner Chapman, DiMuro Ginsberg PC, Alexandria, VA.

For Symplicity Corporation, a Delaware corporation, Ariel Manuel Friedler, an individual resident of the Commonwealth of Virginia, Alok Kumar Dhir, an individual resident of the State of Maryland, Matthew Kelley, an individual resident of the State of Connecticut, Defendants: David William O'Brien, LEAD ATTORNEY, Crowell & Moring LLP, Washington, DC.

Page 594

MEMORANDUM OPINION

Anthony J. Trenga, Uniteg States District Judge.

The defendants removed this case from state court on the grounds that plaintiff's state law claims for misappropriation of trade secrets and computer fraud were completely preempted by the federal Copyright Act. The case is presently before the Court on Plaintiff's Motion to Remand to State Court [Doc. No. 16]. For reasons stated herein, the Court concludes that two of plaintiff's four challenged state law claims are not preempted by the Copyright Act, while two are preempted by the Copyright Act. The Plaintiff's motion to remand will therefore be GRANTED in part and DENIED in part.

I. Background

Plaintiff Maxient LLC (" Maxient" ) and Defendant Corporation (" Symplicity" ) are Virginia-based companies that develop and provide competing web-based software to institutions of higher education for student conduct records management (" SCRM" ). As alleged in the Complaint, Symplicity, acting through defendants Fiedler, its Chief Executive Officer, Dhir, its Chief Technology Officer, and Kelly, its Director of Sales, unlawfully accessed password protected confidential information that Maxient made available on its web-site based network to its SCRM software customers. Defendants' activities became the subject of a federal criminal investigation and in May and June 2014, Defendants Friedler, Dhir and Kelly pled guilty to violating the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.

On August 12, 2014, Plaintiff filed its four count Complaint in the Circuit Court for Arlington County, alleging violations of the Virginia Trade Secrets Act, Virginia Code § 59.1-336 (Count I), and the Virginia Computer Crimes Act (" VCCA" ), Virginia Code § 18.2-152.3 (Count II-computer fraud), Virginia Code § 18.2-152.4 (Count III- computer trespass) and Virginia Code § 18.2-152.15 (Count IV-unlawful use of encryption in criminal activity). On September 8, 2014, Defendants' filed a Notice of Removal to this Court on the grounds that the Copyright Act, 17 U.S.C. § 301(a), completely preempted Counts II-IV.[1] On September 26, 2014, Plaintiff

Page 595

filed a motion to remand this action to the Circuit Court for Arlington. On October 17, 2014, the Court held a hearing on this motion, following which the Court took the motion under advisement.

II. Standard of Review

There is a strong presumption against removal jurisdiction. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). The removing defendant has the burden to establish a proper basis for removal and " [f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992); see also Lontz v. Tharp, 413 F.3d 435, 441 (4th Cir. 2005) (removal jurisdiction must be construed strictly). This burden is particularly heavy where removal is premised on the doctrine of " complete preemption." Under that doctrine, " ...if the subject matter of a putative state law claim has been totally subsumed by federal law--such that state law cannot even treat on the subject matter--then removal is appropriate." 413 F.3d at 439-40. " Defendants' burden, then, is to demonstrate that a federal statute indisputably displaces any state cause of action over a given subject matter." Id. at 440. To remove successfully under the doctrine of complete preemption, a moving defendant must therefore establish that Congress intended to extinguish the asserted state law claims by making the federal cause of action exclusive; and " ...reasonable doubts must be resolved against the complete preemption basis for it." Id.

The Copyright Act provides that the exclusive remedy for a violation of the rights within the scope of a copyright.[2] Based on this express declaration of congressional intent, the Copyright Act can preempt certain state law claims, and therefore serve as the basis for removal. However, in order to determine whether a state law claim is preempted by the Copyright Act, there is a " ... two-prong inquiry to determine when a state law claim is preempted: first, the work must be within the scope of the 'subject-matter of copyright' as specified in 17 U.S.C. § § 102, 103, and second, the rights granted under state law must be equivalent to any exclusive rights within the scope of federal ...


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