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HIGHER GEAR GROUP v. ROCKENBACH CHEVROLET SALES

August 19, 2002

THE HIGHER GEAR GROUP, INC., PLAINTIFF,
V.
ROCKENBACH CHEVROLET SALES, INC., GAIL VITOLS, INDIVIDUALLY, AND AUTO EDIRECT.COM, INC., DEFENDANTS.



The opinion of the court was delivered by: Castillo, District Judge.

  MEMORANDUM OPINION AND ORDER

Plaintiff The Higher Gear Group, Inc. ("Higher Gear") sues Defendants Rockenbach Chevrolet Sales, Inc. ("Rockenbach"), Gail Vitols and Auto eDirect.Com, Inc. ("Auto eDirect") for copyright infringement under the Federal Copyright Act of 1976, 17 U.S.C. § 101 et seq., trade secret misappropriation under the Illinois Trade Secrets Act, 765 ILCS 1065/2, breach of contract, unfair competition, civil conspiracy and tortious interference with contract relations.*fn1 Currently before the Court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. For the reasons that follow, Defendants' motion to dismiss is granted in part and denied in part. (R. 9-1.)

RELEVANT FACTS

Higher Gear and Auto eDirect develop and sell automobile dealership computer software. Higher Gear developed the computer software at issue in this case and licensed it to Rockenbach. On September 29, 1999, Higher Gear and Rockenbach entered into a software license agreement whereby Rockenbach agreed to use Higher Gear's software "only for internal business operations." (R. 1-1, Compl. ¶ 7.) Rockenbach also agreed not to permit software use for the benefit of third parties, not to re-license or sell the software and not to copy or create derivative works of the software. Id. Higher Gear claims that despite contractual obligations Vitols allowed Auto eDirect to view, access and copy Higher Gear's software. Furthermore, Higher Gear alleges that Auto eDirect developed designs, features, logic and computer code derived from Higher Gear's software.

On March 15, 2002, Higher Gear filed suit against Rockenbach, Vitols and Auto eDirect. Higher Gear claims that all three Defendants violated the Federal Copyright Act (count I) and the Illinois Trade Secrets Act ("ITSA") (count II). In addition, Higher Gear sues Rockenbach for breach of contract (count III), Vitols and Auto eDirect for unfair competition and civil conspiracy (counts IV and V) and Auto eDirect for tortious interference with contract relations (count VI). Currently before this court is Defendants' motion to dismiss counts II through VI for failure to state a claim upon which relief can be granted. Defendants argue that Higher Gear's state claims are preempted by the Federal Copyright Act, 17 U.S.C. § 301(a), and/or the Illinois Trade Secret Act, 765 ILCS 1065/8.

LEGAL STANDARDS

A motion to dismiss tests the sufficiency of the complaint, not the merits of the suit. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). When considering a motion to dismiss, the Court views all facts alleged in the complaint, as well as any inferences reasonably drawn from those facts, in the light most favorable to Plaintiff. Autry v. Northwest Premium Servs., 144 F.3d 1037, 1039 (7th Cir. 1998). The Court will also consider facts asserted in Plaintiffs response to the motion to dismiss as long as they are consistent with the allegations found in the complaint. See Help at Home, Inc. v. Med. Capital, L.L.C., 260 F.3d 748, 752-53 (7th Cir. 2001) (citation and quotation omitted). We will grant a motion to dismiss only if Plaintiff can prove no set of facts entitling her to relief. Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 432 (7th Cir. 1993).

ANALYSIS

I. Preemption under 17 U.S.C. § 301(a)

Defendants argue that all of Higher Gear's state claims (counts II through IV) should be dismissed because the conditions for preemption under 17 U.S.C. § 301(a) have been satisfied. Plaintiff, on the other hand, contends that its state claims should not be preempted because they require additional elements that qualitatively differ from the elements necessary to prove copyright infringement.

The Federal Copyright Act preempts state causes of actions that are equivalent to copyright infringement claims. 17 U.S.C. § 301(a). The Seventh Circuit, interpreting § 301(a), developed a two-prong test to preempt claims. Balt. Orioles, Inc. v. Major League Baseball Players Ass'n., 805 F.2d 663, 674 (7th Cir. 1986). First, a court must determine that the work in which the right is asserted is fixed in tangible form and comes within the subject matter of copyright. Id. Second, the rights granted under state law must be equivalent to the exclusive rights established by federal copyright law in § 106. Id. A state right is `equivalent' to the rights established by federal copyright law if it is violated by the exercise of any of the rights set forth in § 106, which includes the right to reproduce (whether in original or derivative form), distribute, perform and display the copyrighted material. Id. at 676-77. Furthermore, a state right is `equivalent' if it requires additional elements to make out a cause of action, but the additional elements do not differ in kind from those necessary for copyright infringement. Id. at 678.

It is well established that computer software is fixed in a tangible medium of expression and within the subject matter of copyright. See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1453 (7th Cir. 1996). The legislative history of the Federal Copyright Act indicates that computer programs are considered copyrightable as literary works. See Firoozye v. Earthlink Network, 153 F. Supp.2d 1115, 1124-25 (N.D.Cal. 2001). Therefore, the first condition for preemption has been satisfied. As such, the Court will proceed with a discussion of whether counts II through VI assert claims that are `equivalent' to the exclusive rights established by federal copyright law. Because counts II through VI contain elements that differ from those necessary to prove a copyright infringement claim, the Court will determine if the additional elements differ in kind from those necessary for copyright infringement — i.e. ownership of a valid copyright and copying of constituent elements of the work that are original. See Susan Wakeen Doll Co., Inc., v. Ashton Drake Galleries, 272 F.3d 441, 450 (7th Cir. 2001). The Court will not preempt the state causes of action if the additional elements change the nature of the copyright infringement claim. See Computer Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992). To determine if an element changes the nature of a copyright action, it may be necessary to consider the allegations supporting a claim as well as the rights sought to be enforced. See Stephen & Hayes Constr., Inc. v. Meadowbrook Homes, Inc., 988 F. Supp. 1194, 1198 (N.D.Ill. 1998); see also Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F. Supp. 1523, 1533-34 (S.D.N.Y. 1985).

II. Trade Secret Misappropriation (Count II)

To state a claim for misappropriation under the ITSA, a plaintiff must show that: (1) she has a trade secret; (2) defendant misappropriated the trade secret; and (3) defendant used the trade secret for business purposes. See Composite Marine Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1265-66 (7th Cir. 1992). Misappropriation of a trade secret occurs when a person acquires a trade secret by improper means or discloses a trade secret in breach of a duty of confidentiality. See American Antenna Corp. v. Amperex Electronic Corp., 190 Ill. App.3d 535, 137 Ill.Dec. 417, 546 N.E.2d 41, 44 (1989). Improper means includes ...


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