Amaretto Ranch Breedables, LLC v. Ozimals, Inc.
790 F.Supp.2d 1024, 2011 U.S. Dist. LEXIS 52796, 98 U.S.P.Q. 2d (BNA) 1898 (2011)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Liability for knowing misrepresentation under 17 U.S.C. § 512(f) requires an actual removal or disabling of access by the service provider, and the California litigation privilege does not shield extra-judicial DMCA notices or statements made to unrelated third parties. While copyright misuse can be asserted as an affirmative claim, a tortious interference claim requires specific factual allegations of disrupted relationships to be plausibly pleaded.
Facts:
- Linden Research, Inc. operates Second Life, a virtual world where users can create and sell virtual objects using the Linden Scripting Language (LSL).
- Amaretto Ranch Breedables (Amaretto) created and sells virtual breedable horses and associated virtual horse food in Second Life, competing in this market.
- Ozimals, Inc. (Ozimals) is a competitor that owns and sells virtual breedable bunnies in Second Life.
- In early November 2010, Ozimals sent Amaretto a cease-and-desist letter falsely alleging that Amaretto’s virtual horses were a “virtual clone” of Ozimals’s bunnies and infringed its copyrights, and Ozimals made similar false statements to other members of the Second Life community.
- On December 1, 2010, Ozimals filed a DMCA Takedown Notification with Linden, seeking the removal of Amaretto’s virtual “food” and “water,” which would have caused Amaretto’s virtual horses to “die” within 72 hours and significantly disrupted Amaretto’s business.
- Preliminary discovery determined that Amaretto did not literally copy Ozimals’s code, but the parties disagreed as to whether nonliteral copying occurred.
Procedural Posture:
- Plaintiff Amaretto Ranch Breedables filed a Complaint in the United States District Court for the Northern District of California against Defendant Ozimals, Inc.
- Amaretto sought and was granted a temporary restraining order (TRO) preventing Linden Research, Inc. (Second Life operator) from removing Amaretto’s virtual horse product line from Second Life in response to a DMCA Takedown Notification from Ozimals.
- The District Court subsequently issued a preliminary injunction requiring Ozimals to withdraw all DMCA Takedown Notifications concerning Amaretto’s horses and to file no further notifications.
- Ozimals filed a copyright infringement action against Amaretto in the United States District Court for the Northern District of Alabama on December 20, 2010, which had not been served.
- Ozimals filed a Motion to Dismiss the Second through Fifth causes of action in Amaretto’s First Amended Complaint (FAC) in the U.S. District Court for the Northern District of California.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
1. Does 17 U.S.C. § 512(f) impose liability for misrepresentation in a DMCA Takedown Notification when no actual takedown or disabling of access by the service provider has occurred? 2. Does California's litigation privilege bar state law claims for tortious interference and unfair competition based on DMCA Takedown Notifications and other public statements made by a competitor? 3. Are allegations of tortious interference with prospective business advantage sufficiently pleaded when they consist of conclusory statements about lost sales without identifying specific lost contracts or disrupted relationships? 4. Can copyright misuse be brought as an independent claim for relief, rather than solely as an affirmative defense to copyright infringement?
Opinions:
Majority - Charles R. Breyer
1. No, 17 U.S.C. § 512(f) does not impose liability for misrepresentation in a DMCA Takedown Notification if no actual takedown or disabling of access by the service provider has occurred. The plain language of the statute explicitly limits damages to those incurred “as the result of the service provider relying upon such misrepresentation in removing or disabling access to the material.” The court acknowledged that this interpretation might be a less effective deterrent against false notifications, but it is bound by the unambiguous statutory text and declined to read out the explicit requirement of an actual takedown. The court rejected Amaretto’s attempts to distinguish the controlling precedent, Lenz v. Universal Music Corp., finding the statutory language paramount. Thus, Amaretto’s claim for misrepresentation under 17 U.S.C. § 512(f) is dismissed with prejudice. 2. No, California's litigation privilege does not bar Amaretto's state law claims for tortious interference and unfair competition, as those claims were pleaded. The court found that DMCA Takedown Notifications are not communications made in a judicial or quasi-judicial proceeding, as the DMCA procedure is designed to avoid court involvement, and thus fall outside the privilege. Furthermore, Amaretto’s allegations of statements made by Ozimals to “other members of the Second Life community” were not protected because they were not intended to achieve the objects of litigation and were made to non-participants, consistent with Rothman v. Jackson. Therefore, the motion to dismiss based on the litigation privilege is denied. 3. No, the allegations of tortious interference with prospective business advantage are not sufficiently pleaded. Amaretto’s statements, such as being “informed and believes that Defendants induced those existing and potential customers to purchase alternative products” and “falsely disparaged…a substantial cause of prospective purchasers…choosing to purchase others,” were conclusory restatements of the claim’s elements. Applying the pleading standards of Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly, the court found these allegations insufficient to establish facial plausibility, citing Sybersound Records, Inc. v. UAV Corp., which required specific allegations of lost contracts or failed negotiations. The court distinguished TYR Sport, Inc. v. Warnaco Swimwear, Inc. as relying on pre-Twombly/Iqbal authority and not applicable Ninth Circuit precedent. Thus, the tortious interference claim is dismissed without prejudice. 4. Yes, copyright misuse can be brought as an independent claim for relief in this case. Acknowledging a split among district courts on this issue, the court found an affirmative claim of copyright misuse to be appropriate, particularly in cases like this seeking declaratory judgment, aligning with cases such as Apple Inc. v. PsyStar Corp. While copyright misuse ordinarily acts as an affirmative defense precluding enforcement during the period of misuse, it does not invalidate the copyright or typically support a claim for damages. Therefore, the motion to dismiss the copyright misuse claim is denied.
Analysis:
This decision provides critical clarification on several intellectual property and tort issues in the context of virtual worlds and online content. It reinforces the strict interpretation of DMCA Section 512(f), making it clear that an actual takedown is a prerequisite for damages, potentially limiting its effectiveness as a deterrent against abusive notices from competitors. The case also delineates the boundaries of California's litigation privilege, confirming that extra-judicial actions like DMCA notices and broad public statements to non-parties are generally not protected, offering recourse for targets of such actions. Furthermore, it underscores the heightened pleading standards for tort claims under Twombly and Iqbal, requiring specific factual allegations of harm for claims like tortious interference, moving beyond mere conclusory statements. Finally, it aligns with a growing trend among some district courts by affirming that copyright misuse can be an independent claim, providing plaintiffs with a proactive tool to challenge overbroad assertions of copyright.
