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Malibu Media LLC v. Thal

United States District Court, N.D. Illinois, Eastern Division

December 15, 2016

MALIBU MEDIA, LLC, Plaintiff,
v.
MATTHEW THAL, Defendant.

          MEMORANDUM OPINION AND ORDER

          Harry D. Leinenweber, Judge

         Before the Court is Plaintiff Malibu Media, LLC's (“Malibu Media”) Motion to Dismiss Defendant Matthew Thal's (“Thal”) Counterclaims [ECF No. 26] pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons stated herein, the Motion is granted.

         I. BACKGROUND

         The following facts are contained in Thal's Answer and Counterclaims and are presumed true for purposes of deciding the motion to dismiss. See, Forrest v. Universal Sav. Bank, F.A., 507 F.3d 540, 542 (7th Cir. 2007). The Court also takes judicial notice of background facts. See, Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).

         Malibu Media brought a copyright infringement lawsuit against Thal. The company accuses Thal of distributing via BitTorrent 24 of its copyrighted pornographic movies. Thal counterclaims, alleging essentially that Malibu Media is a copyright “troll, ” or an entity that “makes more income from suing and settling with copyright infringers than it does from the licensed distribution or display of its works.” See, ECF No. 24 (Def.'s Countercls.) ¶¶ 3-4, 20. See also, Matthew Sag, Copyright Trolling, An Empirical Study, 100 Iowa L. Rev. 1105, 1108 (defining copyright trolling) and Malibu Media, LLC v. Doe, 2015 U.S. Dist. LEXIS 87751, at *9-10 (S.D.N.Y. July 6, 2015) (citing Sag and taking note of Malibu Media's corporate strategy).

         As is relevant for the purposes of this Motion, Thal alleges that Malibu Media “seeded” its own movies on BitTorrent. See, Malibu Media, LLC v. Doe, 291 F.R.D. 191, 193-94 (N.D. Ill. 2013) (explaining how BitTorrent works). That is, Malibu Media was the original uploader of its movies on BitTorrent, making the content available “in order to encourage BitTorrent users to download the seeded works, and thereby become more lucrative targets for Malia Media's copyright infringement lawsuits.” Def.'s Countercls. ¶ 19. According to Thal, this behavior “entrap[s] individuals into downloading copies of Malibu Media's works” and so violates two consumer protection statutes under Illinois law, the Illinois Uniform Deceptive Trade Practices Act (the “IDTPA”) and the Illinois Consumer Fraud and Deceptive Business Practices Act (the “ICFA”). Id. at ¶¶ 49-60.

         II. ANALYSIS

         Malibu Media raises five separate arguments as to why Thal's counterclaims should be dismissed under Rule 12(b)(6). They include: (1) the Copyright Act preempts Thal's state-law claims; (2) the ICFA does not reach Malibu Media's out-of-state conduct; (3) Thal cannot make out the elements of an ICFA cause of action; (4) Thal did not plead sufficient facts; and (5) Thal's IDTPA claims fails because Thal has not requested injunctive relief nor alleged any likely future injury. The first two arguments, if accepted, would require dismissal with prejudice, and the Court addresses them first.

         A. Copyright Preemption

         The Copyright Act does not preempt Thal's claims. In arguing that it does, Malibu Media seems to confuse Thal's counterclaims with its own case for copyright infringement.

         In a usual case where the issue of copyright preemption arises, a copyright owner brings suit against an infringer, alleging violations of the Copyright Act and some state statutes. In such a situation, the defendant may argue that the state claims are preempted by the Copyright Act. See, e.g., Defined Space, Inc. v. Lakeshore E., LLC, 797 F.Supp.2d 896, 897-98 (N.D. Ill. 2011) (photographer sued the defendants for violations of the Copyright Act and Illinois consumer protection statutes when they used his photographs without attribution); Natkin v. Winfrey, 111 F.Supp.2d 1003, 1005 (N.D. Ill. 2000) (similar); and Cyber Websmith, Inc. v. ADA, No. 09-CV-6198, 2010 U.S. Dist. LEXIS 80206, at *1-3 (N.D. Ill. Aug. 4, 2010) (suing for copyright infringement and violation of the IDTPA on the allegation that the defendants were “operating Internet websites comprised of HTML website pages, text, graphics, and photographs that have been copied directly from Plaintiff's copyrighted website templates”). Courts in the Seventh Circuit apply a two-part test to see if the state-law claims indeed are preempted. See, 17 U.S.C. § 301(a) and Balt. Orioles, Inc. v. Major League Baseball Players Ass'n, 805 F.2d 663, 674 (7th Cir. 1986) (laying out the test). In general, a state law is not preempted when it regulates conduct that is “qualitatively distinguishable from that governed by federal copyright law - i.e., conduct other than reproduction, adaptation, publication, performance, and display.” Toney v. L'Oreal USA, Inc., 406 F.3d 905, 910 (7th Cir. 2005).

         This case is far from the typical copyright preemption case. Thal is not claiming that he owns the copyright to anything, including the movies that he is accused of distributing. He is not bringing a copyright infringement claim against Malibu Media. Neither is he alleging that Malibu Media violated any right qualitatively similar to a “reproduction, adaptation, publication, performance, or display” right as guaranteed under the Copyright Act. Rather, Thal alleges that Malibu Media entraps others into violating copyright law by making its movies available on a medium known for facilitating piracy. The allegation is analogous to that in which a shopper complains that a store owner places easy-to-break goods in hard-to-see places and then charges people for damaged goods. The claims have little to do with copyright law and are not preempted by the Copyright Act.

         Malibu Media rests its preemption case on the argument that Thal's counterclaims “are nothing more than an attempt to escape liability for copyright infringement.” Even if this were so, the company has cited no case showing that this is a basis for finding preemption. Moreover, it is not true that Thal would avoid liability for his alleged copyright infringement if his own counterclaims were allowed to proceed. Because copyright infringement does not require intent to infringe, Thal may be liable as an infringer even if Malibu Media violated consumer protection statutes in the way Thal alleges. See, Bennett v. Flash 1-Hour Foto, No. 94 C 1322, 1994 U.S. Dist. LEXIS 6704, at *5-6 (N.D. Ill. May 17, 1994) (stating that “intent to infringe is not relevant to infringement” and “knowledge of a lack of authorization is not required for a violation of copyright law”).

         B. Jurisdictional ...


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