No Software Copyright Infringement Without Allegedly Copied Work

A California court has dismissed a plaintiff's claim for copyright infringement because the plaintiff failed to allege that the defendant had actually copied the allegedly infringed software.  Operational Risk Management LLC v. Union Bank, N.A., No. C 12-0584 (N.D. Cal. May 15, 2012).  This may seem like an obvious conclusion.  Nonetheless, the facts of this case, and the plaintiff's (unsuccessful) arguments, are interesting.

The plaintiff, ORM, had licensed its risk-management software to the defendant, Union Bank.  The defendant subsequently gave notice that it intended to terminate the license.  The plaintiff then alleged that the defendant was attempting to create its own risk-management software using the plaintiff's intellectual property, including the licensed software and related documentation.  According to the plaintiff, “any replacement software that [the defendant's contractor] develops which uses 'the proprietary structure, sequence and organization of the Software . . . without authorization would be a derivative work infringing [the plaintiff's] copyrighted work.'”  The plaintiff further asserted that even if the defendant had not yet infringed its copyrighted work, any future software developed by the defendant's contractor would infringe.

The plaintiff's allegations were insufficient to survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).  Pleading copyright infringement requires alleging that the defendant copied the allegedly infringed work.  This requirement can be met by alleging that the defendant had access to the work, and that there is a substantial similarity between the allegedly infringed work and the allegedly infringing work.  Here, however, there was no allegedly infringing work “because ORM has not alleged that Union Bank has created another work.”  Hypothetical allegations that the defendants might infringe the plaintiff's copyright at some point in the future were insufficient to sustain a cause of action for copyright infringement.

Further, the plaintiff's copyright infringement claim was not justiciable under the Declaratory Judgment Act.  The Court could not “issue a declaration that Union Bank has infringed ORM's copyright based on [ORM's] conjecture that Union Bank may do so in the future.”

Accordingly, the plaintiff's copyright infringement claim was dismissed.  The plaintiff's other claims, for breach of contract, violation of California's unfair competition statute, and unjust enrichment, were not at issue and were not dismissed.