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UIRC-GSA Holdings, Inc. v. William Blair & Co., L.L.C.

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

March 29, 2017

UIRC-GSA Holdings Inc., Plaintiff,
William Blair & Company, L.L.C., And Michael Kalt, Defendants.


          AMY J. ST. EVE, District Court Judge

         On October 11, 2016, Plaintiff UIRC-GSA Holdings, Inc. (“JCI”) brought the present Complaint against Defendants William Blair & Company (“Blair”) and Michael Kalt, collectively, “Defendants, ” alleging copyright infringement in violation of 17 U.S.C. § 101 et seq. and professional negligence. Both Blair and Kalt moved to dismiss Plaintiff's Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court denies Blair's motion to dismiss and grants Kalt's motion to dismiss without prejudice.


         Plaintiff is a Delaware Limited Liability Company located in Chicago, Illinois that is in the business of acquiring and operating properties leased to the U.S. General Services Administration (“GSA”) to be financed by the sale of bonds through its subsidiaries. (R. 62, Third Am. Compl. ¶ 2.) Defendant Blair is a Delaware Limited Liability Company registered to do business in Illinois and with an office in Illinois. (Id. ¶ 3.) Blair was Plaintiff's investment banker and placement agent in connection with Plaintiff's bond offering, the proceeds of which were used to acquire a portfolio of real estate properties. (Id. ¶ 6.) Kalt is an Illinois citizen and was Plaintiff's relationship manager at Blair. (Id. ¶¶ 6, 35.)

         Plaintiff alleges that in order to successfully market a bond portfolio to provide the funds to acquire properties leased to the GSA, Plaintiff created and used a series of documents, including a Preliminary Private Placement Memorandum (“PPPM IV”), a Final Private Placement Memorandum (“FPPM IV”), and an Indenture of Trust (“Indenture IV”). (Id. ¶¶ 9, 18, 26.) Plaintiff provided the PPPM IV, FPPM IV, and Indenture IV to Defendant, and Defendant distributed it to potential investors to market the proposed bond offering. (Id. ¶ 10, 19, 27.) Plaintiff, in compliance with the relevant copyright laws, secured the exclusive rights and privileges to the copyright for the PPPM IV, FPPM IV, and Indenture IV. (Id. ¶ 10, 21, 29.) As a result, on July 21, 2015, the U.S. Copyright Office issued to Plaintiff U.S. Copyright Reg. No. TX 8-069-779 (“‘799 Reg.”) entitled Preliminary Private Placement Memorandum, which includes additional and revised text to the memorandum. (Id. ¶ 11.) The Copyright Office issued to Plaintiff similar copyrights for FPPM IV and Indenture IV entitled Final Private Placement Memorandum (Copyright Reg. No. TX 8-107-571) and Indenture of Trust (Copyright Reg. No. TX 8-107-552), both of which included additional and revised text. (Id. ¶¶ 20, 28.) Plaintiff alleges that it is the owner of all rights, title, and interest in and to the copyrights for PPPM IV, FPPM IV, and Indenture IV. (Id. ¶¶ 12, 21, 29.)

         Plaintiff alleges that Defendants, with full knowledge of Plaintiff's rights, willfully infringed on Plaintiff's copyright by copying original portions of Plaintiff's copyrighted work for use in a Confidential Placement Memorandum (“CPM”) in relation to a bond offering issued by Rainer GSA Portfolio I (“Rainer”) on July 1, 2015. (Id. ¶¶ 13-14, 22, 30.) Specifically, Plaintiff alleges that Defendant copied almost verbatim both protected and non-protected expression of Plaintiff's Indenture IV in the Indenture of Trust that Blair assisted Rainer in drafting for marketing bonds Rainer used to acquire GSA leased properties. (Id. ¶ 31.) Plaintiff claims that Defendants also distributed the infringing CPM and Indenture of Trust to potential investors in Rainer's bond offering. (Id. ¶¶ 15, 23, 32.) Plaintiff further alleges that Defendant Kalt was the relationship manager for both Plaintiff's bond offering and Rainer's offering, and engaged in conduct that encouraged or assisted Blair's copyright infringement of PPPM IV, FPPM IV, and Indenture IV. (Id. ¶ 36.)


         “A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the viability of a complaint by arguing that it fails to state a claim upon which relief may be granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). Under Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must “give the defendant fair notice of what the claim is and the grounds upon which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). Under the federal notice pleading standards, a plaintiff's “factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Put differently, a “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In determining the sufficiency of a complaint under the plausibility standard, courts must “accept all well-pleaded facts as true and draw reasonable inferences in the plaintiffs' favor.” Roberts v. City of Chicago, 817 F.3d 561, 564 (7th Cir. 2016). In ruling on a Rule 12(b)(6) motion, district courts may also consider documents attached to the pleadings without converting the motion into a motion for summary judgment, as long as the documents are referred to in the complaint and central to the claims. See Geinosky v. City of Chicago, 675 F.3d 743, 745 n. 1 (7th Cir. 2012).


         I. Counts I-III-Copyright Infringement

         To establish copyright infringement, a plaintiff is required to prove two elements: “(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Muhammad-Ali v. Final Call, Inc., 832 F.3d 755, 760 (7th Cir. 2016), cert. denied sub nom. Final Call, Inc. v. Muhammad-Ali, 137 S.Ct. 681 (2017) (quotations omitted). As to the second requirement, due to the rarity of direct evidence of copying, “a plaintiff may prove copying by showing that the defendant had the opportunity to copy the original (often called ‘access') and that the two works are ‘substantially similar, ' thus permitting an inference that the defendant actually did copy the original.” Peters v. West, 692 F.3d 629, 633 (7th Cir. 2012); see also Nova Design Build, Inc. v. Grace Hotels, LLC, 652 F.3d 814, 817-18 (7th Cir. 2011). The Court focuses on the “substantially similar” aspect of this requirement because it is determinative.[1] The substantially similar test, also known as the “ordinary observer” test, requires the Court to consider “whether the accused work is so similar to the plaintiff's work that an ordinary reasonable person would conclude that the defendant unlawfully appropriated the plaintiff's protectable expression by taking material of substance and value.” Incredible Tech., Inc. v. Virtual Tech., Inc., 400 F.3d 1007, 1011 (7th Cir. 2005) (citation omitted). The Seventh Circuit has recently simplified the test for substantial similarity, namely, whether “the two works share enough unique features to give rise to a breach of the duty not to copy another's work.” Peters, 692 F.3d at 633-34. “The test for substantial similarity is an objective one.” JCW Inv., Inc. v. Novelty, Inc., 482 F.3d 910, 916 (7th Cir. 2007).[2]

         Certain types of expression, however, are not protectable under copyright law. It is “a fundamental tenet of copyright law that the idea is not protected, but the original expression of the idea is.” JCW Inv., 482 F.3d at 917. Put differently, the “Copyright Act protects the expression of ideas, but exempts the ideas themselves from protection.” Seng-Tiong Ho v. Taflove, 648 F.3d 489, 497 (7th Cir. 2011) (citation omitted). As the Supreme Court has explained:

The idea/expression dichotomy is codified at 17 U.S.C. § 102(b): “In no case does copyright protec[t] ... any idea, procedure, process, system, method of operation, concept, principle, or discovery ... described, explained, illustrated, or embodied in [the copyrighted] work.” “Due to this [idea/expression] distinction, every idea, theory, and fact in a copyrighted work becomes instantly available for public exploitation at the moment of publication”; the author's expression alone gains copyright protection.

Golan v. Holder, 565 U.S. 302, 328-29 (2012) (citation omitted). “This limitation on copyright protection promotes the purpose of the Copyright Act by assuring ‘authors the right to their original expression, ' but also by ‘encourag[ing] others to build freely upon the ideas and information conveyed by a ...

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