marketing v medizine 05-18-10

8/9/2019 Marketing v Medizine 05-18-10

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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK----------------------------------------xMARKETING TECHNOLOGY SOLUTIONS, INC.,

Pla in t i f f , 09 Civ. 8122 (LMM)- aga ins t - MEMORANDUM AND ORDER

MEDIZINE LLC, DANIEL BRANDT,MICHAEL ROWSOM and ETRUVIAN, INC.,Defendants.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ x McKENNA, D. J . ,

1.

USDCSDNYDOCUMENTELECTRONICALLY FILEDDOC #: ----,._.,..--_DATE FILED: J:11i!!ZDlfJ

In t h i s act ion , p l a i n t i f f Marketing Technology Solut ions ,Inc. ("MTS") asse r t s t ha t i t s former employee, defendant Brandt(ac t ing a t t imes through h is company, defendant eTruvian, Inc .("eTruvian") ) , and another former employee, defendant Rowsom, haveac ted together for the benef i t of defendant MediZine LLC("MediZine"), a compet i tor of MTS, by, among o ther th ings ,t r a ns f e r r ing to MediZine t rade sec re t s of MTS and i n f r ing ing MTS'copyr ights .

Both MTS and MediZine presen t hea l th- re la ted informat ionon in te rac t ive websi tes ; users can put ques t ions to the websi tes ,and the websi te s can put ques t ions to the users ; based on theusers ' input , the programs present adver t i s ing , s pe c i f i c toind iv idua l users ' i n t e r e s t s , from heal th care supp l i e rs such aspharmaceut i ca l manufacturers . "So, fo r example, if I were to go on

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e i the r the p l a i n t i f f ' s websi t e or MediZine's websi te and theques t ion [ to the user] was . . . what concerns you have, and I say

have diabetes , they might ask fo l low-up ques t ions and then theypresent an ad t ha t i s r e levan t to t ha t concern ." (Tr . , Dec. 4,2009, a t 11 [counsel to MediZine].)

2.

This case involves t h ree computer programs t ha t w i l l berefer red to below.

"Promotion Serving Plat form Software" ("PSP") re fe r s tosoftware developed and used by MTS, descr ibed in paragraph 2 of i t scomplaint . " iConnect" i s a computer program, developed bydefendant s Brandt and eTruvian, used by MediZine from about 2007 toabout September 30, 2009, descr ibed in paragraph 8 of thecomplaint . MTS asse r t s ownership of PSP and iConnect (the l a t t e ras a work made fo r hi re by Brandt, and has reg i s te red copyr ights inPSP, in MTS' name (Compl. Ex. B, Regis t r a t ion No. TX6-938-819, anda rev is ion thereof , Compl. Ex. C., Regis t r a t ion No. TX6-938-643);MTS has not reg i s te red copyright in iConnect . "New MediZineSoftware" ("NMS") re fe r s to sof tware , developed by MG LLC d /b /aTranzact , used by MediZine from October 1, 2009. (Phares Decl . ,Ex. 0 en 4; Ex. C a t 12.) The iConnect program was, a l l eged ly ,developed fo r MediZine by defendant Brandt , a t l ea s t in pa r t whileBrandt was employed by MTS. (Compl. en 6.)

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3.

MediZine moves fo r orders (i) dismissing MTS' Counts Iand I I , fo r copyr ight in f r ingement of PSP and iConnect ,re spec t ive ly , pursuant to Fed. R. Civ. P. 56, ( i i ) dismiss ing MTS'Count VII, a l l eg ing unauthor ized computer access in v io l a t i on of 18u.S.C. 1030, pursuant to id . 12(b) (6) , and ( i i i ) dismiss ing a l lof the o the r cla ims of such complain t (which are a l l eged unders t a t e law) pursuant to 28 U.S.C. 1367 (c ) (3).1

MTS moves fo r den ia l of MediZine's Rule 56 motionpursuant to Rule 56( f ) , or, in the a l t e r na t i ve , fo r a continuancepursuant to Rule 56(f) (2) .

4 .After rec iproca l expedi ted discovery by MTS and MediZine,

MTS' exper t , Dr. Benjamin Goldberg, examined the ques t ion whether"any l i t e r a l or n o n - l i t e r a l elements of MTS's source code fo r i t sPSP sof tware were copied in to e i t h e r the iConnect source code orthe Tranzact source code. u (Goldberg Report , Oct . 26, 2009, 8.)2

1 There i s no t comple te d iver s i ty in t h i s case because both MTS andMediZine a re Delaware c o rp o ra t io n s . (Compl. ':II':II 16, 17.)2 "Source codeu r e f e r s to "a s e r i e s of i n s t ru c t i o n s wr i t t en in acomputer language such as COBOL, BASIC o r FORTRAN,u So f t e l Inc . v. Dragon

Med. & S c i e n t i f i c Corom's., In c . , 11 8 F.3d 955, 958 n .3 (2d Cir . 1997)(c i t ing Computer Assocs . Int'l, Inc . v. A l t a i , I n c . , 98 2 F.2d 693, 698(2 d Ci r . 1992) ) . "Once the source code has been comple ted, th e seconds tep i s to t r an s l a t e or ' compi le ' it in to objec t code . u A l t a i , 98 2 F.2da t 698. " 'Obj e c t code ' i s a machine-readable binary t r an s l a t i o n ofsource code . u So f t e l , 118 F.3d a t 959 n . 4 ) . "Source codeu and "ob jec tcodeu are " the l i t e r a l elements of computer programs. u A l t a i , 982 F.2da t 702. Both l i t e r a l and n o n - l i t e r a l elements of a computer program maybe pro tec t ed by copyr igh t . u Id . a t 701-02.

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MTS, on the bas i s of Dr. Goldberg 's Report, hasiden t i f i ed tw o ways in which, it argues , iConnect i n f r inges PSP.Fi r s t , according to Dr. Goldberg, a f i l e - - re fe r red to by thepar t i e s as "engine. jsH - - in PSP "was copied v i r tua l ly wholesalein to the iConnect code. H (Goldberg R e p o r t ' 23.) Second, " [n]onl i t e r a l aspects of the PSP code were also copied in to the iConnectcode" ( id. , 24) ; MTS re fe r s to the r e levan t port ion of the PSPprogram as the "Campaign Ranking Code. H (See, ~ Tr . , Dec. 4,2009, a t 41.) "Although the code t ha t computes the ranking of eachcampaign i s wri t t en in a d i f fe ren t language in the iConnectsoftware than in the PSP software, the tw o codes perform the samecomputation in the same ser i es of s teps and produce the samer e s u l t . " (Goldberg R e p o r t ' 25.)

5.

MTS' Count I asse r t s MediZine 's infr ingement of MTS'copyr ights in PSP on the bas i s of MediZine's copying from PSP, iniConnect, of the "engine. j s H f i l e ( l i t e r a l ly ) and the CampaignRanking Code (non- l i t e ra l ly ) .

In a copyright case, as in any other , to obta in summaryjudgment, a party must demonstrate t ha t " the p leadings , thediscovery and disc losure mater ia l s on f i l e , and any a f f i dav i t s showt ha t there i s no genuine i s sue as to any mater ia l fac t and t ha t themovant i s en t i t l ed to judgment as a mat te r of law. H Fed. R. Civ.P. 56(c) . "The cour t 'must draw a l l reasonable inferences and

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resolve a l l ambigu i t i es in favor of the non-moving p a r t y . ' " Cast leRock Ent 'ment , Inc. v. Caro l Pub. Group, Inc . , 150 F.3d 132, 137(2d Cir . 1998) (quot ing Garza v. Marine Transp. Lines , Inc . , 861F.2d 23, 26 (2d Cir . 1988)) .

To s u s t a in a claim o f copyr igh t in f r ingement , ap l a i n t i f f must demonstra te f i r s t t h a t a copyr igh tedwork was ac tua l ly cop ied , and second, t h a t th ecopying amounted to an improper o r unlawfulappropr i a t ion . A f t e r proving t h a t th e copyrightedwork was ac tua l ly copied , a p l a i n t i f f muste s t a b l i sh t ha t th e copying was improper o r unlawfulby showing t h a t th e second work bears a" su b s t a n t i a l s i m i l a r i t y " to pro tec t ed express ion inthe copyrighted work.

Nihon Keiza i Shimbun, Inc . v. Comline Bus. Data, In c . , 166 F.3d 65,69-70 (2d Cir . 1999) (quoting Repp v. Webber, 132 F.3d 882, 889 (2dCir . 1997) (o ther c i t a t i o n s omi t t ed ) ) .

Here, MediZine assumes, fo r purposes of t he p re sen tmotion, t ha t MTS has es t ab l i s h ed t h a t it has a va l id copyr igh t inPSP and t ha t the re was copying by MediZine. (Tr . , Dec. 4, 2009, a t11.)

6.

As to th e claim o f in f r ingement based on th e inc lus ion iniConnect o f "e n g i n e . j s , " MediZine 's responsive argument i s t h a t th epresence of th e few l i nes o f code compris ing "eng ine . j e" i s deminimis.

"To e s t a b l i sh t h a t th e in f r ingement o f a copyr igh t i s deminimis, and the re fo re not ac t ionab le , t he a ll eged i n f r i n g e r mustdemonstra te t h a t th e copying of the pro tec t ed mater ia l i s so

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t r i v i a l 'a s to f a l l below the quant i t a t ive threshold of s ubs t a n t i a ls imi la r i ty , which i s always a required element of act ionablecopying . ' " Sandoval v. New Line Cinema Corp. , 147 F.3d 215, 217(2 d Cir . 1998) (quoting Ringgold v. Black Ent ' ment Televis ion,Inc . , 126 F.3d 70, 74 (2d Cir . 1997))

In Sandoval, a scene in a motion pic ture showed a l i gh tbox with photographic t ransparencies ( ten of which werereproduct ions of the p l a i n t i f f ' s se l f -po r t r a i t s ) at tached to i t .147 F.3d a t 216.

At approximate ly one hour and seventeen minutesin to the movie, the l i gh t box i s turned on,allowing l i gh t to pass through the non-opaquepor t ions of the t ransparencies posted on the box.During the next minute and a ha l f , the l i gh t boxand Sandoval ' s pic tures , or port ions of each, arebr ie f ly v i s i b l e in eleven d i f fe ren t camera shots .The longes t unin ter rupted view of the l i gh t boxl a s t s s ix seconds, but the box i s otherwisev i s i b l e , in whole or in par t , fo r a t o t a l ofapproximately 35.6 seconds. The photographs neverappear in focus, and except fo r tw o of the shots ,are seen in the d i s t an t background, oftenobst ructed from view by one of the ac tors . Inthese tw o shots , f igu res in the photographs arebare ly d i sce rnab le , with one sho t l a s t i ng fo r fourseconds and the o ther fo r tw o seconds. Moreover,in one of the shots , a f te r one and a ha l f seconds,th e photograph i s completely obs t ructed by a propin the scene.

Id . The Court of Appeals concluded tha t the use in the motionpic ture of the p l a i n t i f f ' s works was de minimis, so t ha t no causeof act ion lay for copyright infr ingement . Id. a t 218.

The Court of Appeals in Sandoval pointed out t ha t the" inquiry in to the subs tan t ia l s imi la r i ty between a copyrighted work

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and the al legedly infr inging work must be made on a case-by-casebas i s , as there are no br i gh t - l i ne ru les fo r what c ons t i t u t e ssubstantial s imilari ty ." Id . a t 217. Sandoval also notes t ha tcour ts wil l look a t " the amount of the copyrighted work t ha t wascopied," i d . , and fu r the r po in t s out t ha t , in th e case of v i sua lworks, "obse rvabi l i ty of th e copyrighted work in the al legedlyin f r ing ing work" i s re levant . Id . (c i ta t ion omit ted) . The SecondCircu i t has also sa id , it must , however, be added, t ha t " thequant i t a t ive analys is of tw o works must always occur in the shadowof t he i r qual i t a t ive na ture . " Nihon, 166 F.3d a t 71.

MediZine 's "eng ine . j s " argument i s l a rge ly quant i t a t ive :it argues t ha t "PSP cons i s t s of 953,612 l ines of code, and iConnectconta ins 233,751 l i ne s of code. Of those , only 437 l ines of codeare even al legedly s imi la r . " (Def. Mem. a t 7 (c i t a t ionsomitted) .) 3 MTS' exper t s t a t e s tha t " [ t ]he code in engine . j sdr ives much of the user in te r face when a user i s answering surveyques t ions concerning heal th and medication i s sues . " (GoldbergReport 22; see also MTS Reply Mem. a t 8.)

I t may be granted t ha t the "eng ine . j s " code i s aqua n t i t a t i ve ly very small pa r t of the programs of which it i s apar t . At the same t ime, there i s no s ubs t a n t i a l dispute t ha t itperforms a r e a l funct ion in a t l ea s t the PSP program. The

3 MediZine adds t ha t these l i ne s o f code do not serve a func t ion iniConnect . (Id. a t 7-8 . )7



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smal lness a lone i s not enough by i t s e l f to avoid l i a b i l i t y . Nihon,166 F.3d a t 71-72. The qua l i t a t ive value in the equat ion , on thepresen t record , however, remains an i s sue of f ac t . "A de minimisdefense does not apply where the qua l i t a t ive va lue of the copyingi s mate r i a l . " Dun & Brads t r ee t Software Servs . , Inc . v. GraceConsul t ing , Inc . , 307 F.3d 197, 208 (3d Cir . 2002).

7.

As to the Campaign Ranking Code, MediZine ' s argument i st ha t it i s merely an "algori thm" (Tr . , Dec. 4, 2009, a t 9, andpassim) 4 , or a "process" or "method of opera t ion" wi th in themeaning of 17 U.S.C. 102(b) . (MediZine Mem. a t 5-6 . )

Sect ion 102(b) of the Copyright Act provides t h a t " Inno case does copyr ight pro tec t ion fo r an or ig ina l work ofauthorsh ip extend to any idea , procedure , process , system, methodof opera t ion , concept , pr inc ip le , or discovery , regardless of theform in which it i s descr ibed , expla ined , i l l u s t r a t e d , or embodiedin such work." 17 U.S.C. 102(b) .

"Sect ion 102(b) assumes the exis tence of a pro tec t ed work- - 'an or ig ina l work of authorsh ip ' - - but caut ions t ha t pro tec t ionfo r such an or ig ina l work of authorsh ip does not extend to anyunprotec t ible components contained there in , or to concept s ,procedures , processes , systems, and methods of opera t ion . " 2

4 MTS a l so a t t imes r e f e r s to th e Campaign Ranking Code as an"a lg o r i th m." (T r . , Dec. 4, 2009, a t 46, and pass im. )

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Will iam F. Pat ry , Pat ry on Copyright 4.30, a t 4-108 (2009)( footnotes omit ted) The reason fo r excluding i deas , procedures ,processes , sys tems, methods of opera t ion , concepts , p r i n c i p l e s ord iscover ies from copyr igh t pro tec t ion " i s to avoid monopoly powerbeing exerc ised in an ac ross - the -boa rd manner, t ha t i s , withoutregard to the par t i cu l a r c ha ra c t e r i s t i c s of any ind iv idua l work."Id . a t 4-109; see a l so , At t i a v. Soc 'y of N.Y. Hosp. , 20 1 F.3d 50,53-55 (2d Cir . 1999); Al ta i , 982 F.2d a t 708; Apple Computer, Inc .v. Frankl in Computer Corp. , 714 F.2d 1240, 1252-53 (3d Cir . 1983).

Sect ion 102(b) does not use the word "a lgor i thm," but theword has been used in copyr igh t case law. See Torah Soft Ltd. v.Drosnin, 136 F.Supp.2d 276, 291 (S.D.N.Y. 2001) ("Analgori thm i s c l e a r ly a method of opera t ion which cannot beprotected."S Never the less , it w i l l be c l e a re r to use the languageof Sec t ion 102(b) r a t h e r than the word "a lgor i thm" in cons ider ing

S The term i s a l so used in the pa ten t contex t . "A procedure fo rso lv ing a given type of mathematical problem i s known as an ' a lgor i thm. ' "Gottschalk v. Benson, 409 u.s. 63, 65 (1972); Diamond v. Diehr, 450 U.S.175, 185-86 & n.9 (1981).I t i s not a t a l l c l e a r t ha t the i d en t i f i ca t io n of a component ofa computer program as an "a lgor i thm" ends the ana lys i s . "AI thoughalgor i thms are t yp ica l ly perce ived as i nd iv idua l components of a sof twaredes ign, they have a number of component par t s which are organized in toa coherent whole. Moreover, a lgor i thms , conceptua l ly speaking, determinethe behavior of the programs t ha t embody them. Viewed in t h i s way, evenind iv idual algori thms seem to be among the aspec ts o f programs t h a t couldbe pro tec ted wi th in an i n d u s t r i a l compi la t ion framework." Samuelson,Davis, Kapor & Reichman, A Manifes to Concerning the Legal Pro tec t ion ofComputer Programs, 94 Colum. L. Rev. 2308, 2383 (1994) ( foo tnotesomit ted) . Those authors def ine an "a lgor i thm" as " 'a prescr ibed se t ofwel l -def ined , unambiguous ru les or processes fo r the so lu t ion of aproblem in a f i n i t e number of s t e p s . ' " Id . a t 2321 n. 37 (quot ingWebster ' s New World Dict ionary of Computer Terms (3d ed. 1988)) .

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whether MediZine 's n o n - l i t e r a l copying of th e Campaign Ranking Codei s or can be a v io la t ion o f MTS' copyr igh t in PSP.

I t i s necessary f i r s t to understand what the CampaignRanking Code i s . Recognizing t ha t " the value in a program l i e s ini t s behav io r , " Samuelson, supra, note 5 a t 2323, t ha t means whatthe program does .

According to MTS' expe r t , the Campaign Ranking Codecomputes " the order in which campaigns (of fers re la ted topharmaceut ical products) appear on a web page - - based on a rankingfunc t ion appl ied to each campaign," and i s "v i r t ua l l y i de n t i c a l inthe PSP and iConnect code." (Goldberg R e p o r t ' 24.) "Although thecode t h a t computes th e ranking o f each campaign i s wri t t en in ad i f f e r e n t language in the iConnect sof tware than in the PSPsof tware , the two codes perform th e same computa t ion in th e samese r i e s of s teps and produce the same r e su l t . " (Id.' 25.) The PSPcode " i t e r a t e s over each campaign, computing the campaign 's rank byf i r s t computing the previous day ' s take ra te , which i s th e numbero f t akes ( i . e . , th e number o f t imes th e o f fe r wa s signed up fo rdivided by th e number of views) fo r t ha t campaign." ( Id . ) With ar e l a t i ve ly smal l var i a t ion , the iConnect code does the same th ing .(Id . , 26.) Counsel fo r MTS has expressed the " idea" of theCampaign Ranking Code:

The algori thm [Campaign Ranking Code] t h a t i s a ti s sue here i s th e one t ha t determines how many adso r what ads the user sees , the o rder in which theyappear . From a business s tandpoint t h i s i s how MTS

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makes money. This i s what d i f fe ren t i a t e s the MTSplatform from o ther onl ine lead genera t ionpla t forms. This i s th e algori thm t ha t determineshow MTS pr ices i t s se rv ices and how MTS nego t ia teswith i t s c l i en t s in terms of the way in which t h e i rcampaigns and t h e i r ads are going to appear .

(Tr . , Dec. 4, 2009, a t 47.)MediZine does not show t ha t the pro tec tab le express ion

cla imed by MTS in th e Campaign Ranking Code "was d ic ta t ed bycons idera t ions of ef f i c i ency , so as to be necessa r i ly inc iden ta l to[the] idea ; requi red by f ac to r s ex te rna l to the program i t s e l f ; ortaken from the publ ic domain and hence i s nonprotec tableexpress ion ." A l t a i , 982 F.2d a t 707.

Nor i s the Campaign Ranking Code a means of givingi n s t ruc t ions to a computer , as was th e menu command hie ra rchy inLotus Development Corp. v. Borland I n t ' l , In c . , 49 F.3d 807 (1stCir . 1995), but , r a t h e r , guides th e PSP's in te rac t ion with use rs o fthe websi t e .

And, s ign i f i c a n t ly fo r purposes of th e presen t motion,MediZine has no t shown t ha t the idea of th e Campaign Ranking Codei s not only one of a number of ways to express t ha t idea , and socopyr ightable . See Apple, 714 F. 2d a t 1253 (" I f o ther programs canbe wri t t en or created which perform the same func t ion as an Apple ' sopera t ing system program, then t ha t program i s an express ion of th eidea and hence copyr igh tab le . " )

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For the reasons so fa r se t fo r th , MediZine 's motion fo rsummary judgment dismiss ing Count I of the complaint i s denied.

9.

MediZine 's motion fo r summary judgment dismiss ing CountI I i s granted .

I n i t i a l l y , MediZine argued t ha t the fac t t ha t copyr ightin iConnect had not been reg i s te red deprived t h i s Court ofj u r i sd i c t i on under 17 U.S.C. 411(a) (MediZine Mem. a t 10-11) ,which the Second Circui t , in In re Li te ra ry Works in E lec t ron icDatabases Copyright L i t i g . , held to be a " j u r i s d i c t i o n a lpre requis i t e to a copyright infr ingement s u i t . " 509 F.3d 116, 125(2d Cir . 2007) (footnote omit ted) . In Reed Elsevier , Inc. v .Muchnick, 130 s. Ct. 1237 (2010), however, the Supreme Courtreversed the Second Circui t , concluding t ha t 17 U.S.C. 411(a)"does not impl ica te the subj ect -mat ter j u r i sd i c t i on of federa lc our t s . " (Id . a t 1248.)

The Supreme Court did not conclude, on the o ther hand,t ha t 17 U.S.C. 411(a) was to be ignored. I t recognized t ha t t ha tsec t i on ' s " reg i s t r a t i on requirement i s a precondi t ion to f i l i ng aclaim t ha t does not r e s t r i c t a f edera l cour t ' s subj ec t -mat t e rju r i sd ic t ion" ( id. a t 1241), and express ly decl ined to addresswhether the s t a tu to ry reg i s t ra t ion requirement was a "mandatoryprecondi t ion to s u i t t ha t d i s t r i c t cour ts m a y o r should

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enforce sua sponte by dismiss ing copyr igh t in f r ingement c la imsinvolving unreg i s te red works ." (Id . a t 1249.)

The language of 17 U.S.C. 411(a) i s c l e a r , MTS has notshown t ha t it comes within any of the excep t ions to th er eg i s t r a t i on requirement noted by th e Supreme Cour t in ReedElsev ie r (see 130 S. Ct. a t 1246) , and summary judgment i s gran tedd i smiss ing Count 11. 6

10.

MediZine moves fo r dismissal , pursuant to Fed. R. Civ. P.12(b) (6) , of Count VII of the complaint , a l leg ing th e v io la t ion of18 U.S.C. 1030, the Computer Fraud and Abuse Act ("CFAA").

"In dec id ing whether a complaint s t a t e s a cla im, a ' cou r tmust accep t th e mater ia l fac t s a l leged in th e complaint as t rue andcons t rue a l l reasonable infe rences in the p l a i n t i f f ' s f avor . ' "Phelps v. Kapnolas, 308 F.3d 180, 184 (2d Cir . 2002) (quot ingHer nand e z v. Cough1 in , 18 F . 3d 133 , 13 6 (2d Ci r . 19 94 ) ) . " Tosu rv i ve d ismis sa l , the p l a i n t i f f must provide th e grounds uponwhich h is cla im r e s t s through fac tua l a l l ega t ions s u f f i c i e n t ' t ora i se a r i gh t to r e l i e f above the specula t ive l eve l . ' "Comm's, Inc . v. The Shaar Fund, Ltd . , 493 F.3d 87, 98 (2d Cir .

The Court does not ac t sua sponte . Th e pa r t i e s have taken theoppor tuni ty to give t h e i r views on Reed Elsev ier to the Court in wri t ing .See Ms. Finguerra-DuCharme 's l e t t e r to the Court of March 4, 2010, andMs. Phares ' l e t t e r to the Court of the same da te .

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2007) (quot ing Bel l Atl . Corp. v. Twombly, 550 u. S. 544, 555(2007)) ( footnote omit ted) .

The CFAA provides t ha t : "Any person who su f f e r s damageor l o ss by reason of a v io la t ion of t h i s sec t ion may main ta in ac i v i l ac t ion aga ins t the v io l a to r to obta in compensatory damagesand in j u n c t i ve r e l i e f or o ther equ i tab le r e l i e f . " 18 U.S.C. 1030(g) . The s t a t u t e fu r the r provides t ha t : "A c i v i l ac t ion fo ra v io la t ion of t h i s sec t ion may be brought only if the conductinvolves 1 of the f ac to r s se t fo r th in subc lauses ( I ) , ( I I ) , ( I I I ) ,(IV), or (V) of subsec t ion (c) (4) (A) (i) . " Id .

In i t s br i e f , MTS sugges t s t ha t th e compla int in tends toa s s e r t a claim under 18 U.S.C. 1030 subsec t ions (a) (2 ) (C) and(a ) (4) and as to th e (c ) (4) (A) (i) fac to r , it cla ims t h a t th econduct involved i s t ha t descr ibed in (c ) (4) (A) (i) (1) . (MTS Mem.a t 17-18.)

18 U.S.C. 1030 (a) (2) (C) sub jec t s to l i a b i l i t y"[w]hoever i n t e n t iona l ly accesses a computer withoutau thor iza t ion or exceeds author ized access , and thereby obta ins

informat ion from any protected computer ." Id . (a) (4)sub jec t s to l i a b i l i t y

[w]hoever knowingly and with i n t e n t todef raud , accesses a pro tec ted computer withoutau thor iza t ion , or exceeds author ized access , and bymeans of such conduct fu r the rs th e in tended f raudand obta ins anything of value, unless th e ob jec t ofth e f raud and the th ing obtained cons i s t s only ofth e use of th e computer and the value of such usei s not more than $5,000 in any I -year pe r iod .

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A "pro tec ted computer" under the CFAA inc ludes a computer"which i s used in or af fec t ing i n t e r s t a t e or fore ign commerce orcommunication, inc luding a computer loca ted out s ide the UnitedSta tes t h a t i s used in a manner t h a t a f f e c t s i n t e r s t a t e o r fore igncommerce or communication of the United Sta t e s . " 1030 (3) (2) (B) .

The (c) (4) (A) (i) f ac to r apparent ly r e l i e d on by MTS i s ,in a c i v i l context , " loss to 1 or more persons dur ing any 1-yearper iod aggregat ing a t l e a s t $5,000 in va lue . " 18 U.S.C. 1030 (c) (4) (A) (i) (I) .

Th e CFAA def ines both "damage" and " l oss . " "[T]he term'damage' means any impairment to the i n t eg r i t y o r a v a i l a b i l i t y ofdata , a program, a system or informat ion ." Id . 1030 (e) (8) .

[T]he term " los s " means any reasonable cos t to anyvic t im, inc luding the cos t o f responding to anof fense , conduct ing a damage assessment , andres to r ing the da ta , program, system, or in fo rmat ionto i t s condi t ion pr io r to the offense , and anyrevenue l o s t , cos t i ncur red , or other consequent ia ldamages incurred because of i n t e r ru p t i o n o fse rv ice .

Id . (e) (11) .The term " los s " has been const rued to mean "a cos t of

i nves t iga t ing or remedying damage to a computer, or a cos t incurredbecause the computer ' s se rv ice was i n t e r ru p t e d . " Nexans Wires S.A.v. Sark-USA, In c . , 319 F.Supp.2d 468, 475 (S.D.N.Y. 2004). " [L]os trevenue due to l o s t business oppor tun i ty" does not come within thes t a tu to ry de f in i t i on of " los s , " id . a t 477, and " the los s o f

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bus iness due to defendants ' eventual use of th e informat ion , r a t he rthan a l os s of bus iness because of computer impairment, was too fa rremoved from computer damage to count toward the j u r i s d i c t i o n a lt h re shold . " Id . a t 477 (d i scuss ing the cou r t ' s holding inRegis ter . com, Inc. v. Verio, Inc . , 126 F.Supp.2d 238, 252 n.12(S.D.N.Y. 2000), a f f ' d 356 F.3d 393 (2d Cir . 2004)).7 " In sum,revenue l o s t because the informat ion was used to unfa i r ly competea f t e r ext rac t ion from a computer does not appear to be the type of' l o s s ' contempla ted by the s t a t u t e . " Nexans, 31 9 F.Supp.2d a t 478.

MediZine argues t ha t MTS has not a l l eged (and cannotal lege) t ha t Brandt accessed MTS' computer(s) without author i za t ionor in excess of author i za t ion , because of the broad access Brandthad as an employee. (MediZine Mem. a t 13-14.) In l i g h t of theEmployment Agreement between Brandt and MTS, and i t s broadconf iden t i a l i t y sec t ion (see Complaint Ex. A, 5), in the Cour t ' sview, Brand t ' s access to MTS' computer(s) exceeded h is author izeduse . EF Cul tu ra l Travel BV v. Explor ica , I nc . , 274 F.3d 577, 58184 (1s t Cir . 2001).8

7 In Regis te r .com, Circu i t Judge Fred Parker ' s d r a f t d i s s e n t ( thec i rcumstances r esu l t ing in the pUbl ica t ion o f which are se t fo r th a t 356F.3d a t 395 n.1) s t a t e s : "We agree with the (near) unanimous view t h a tany c i v i l ac t ion under the CFAA invo lv ing 'damage o r l o s s , ' must sa t i s fythe $5,000 th re sho ld . " 356 F.3d a t 43 9 (quot ing 18 U.S.C. 1030(g) andc i t ing id . (e ) (8) (A)) (other c i t a t i o n s o mi t t e d ) .

8 Th e Second C i r c u i t ' s decis ion in United Sta te s v. Morris , 928 F.2d504 (2d Cir . 1991), see EF Cul tu ra l Trave l , 274 F.3d a t 582 n .10 , doesnot r equ i r e a d i f f e r e n t r e s u l t . Here, it i s a l l eged t h a t Brandt vio la ted18 U.S.C. 1030(a) (4) by access ing a computer with the i n t en t to def raudand t he re i s no suggest ion t h a t Brandt was au thor i zed to def raud h is

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In i t s reply b r i e f , bu t not in i t s i n i t i a l b r i e f ,MediZine argues t ha t it cannot be held v ica r ious ly l i ab l e fo rconduct by Brandt in v io la t ion of the CFAA. (MediZine Reply Mem.a t 11-12.) Even if t ha t i s so - - because, as MediZine asse r t s ,"Brandt was an independent con t rac to r to MediZine and not anemployee or agent" ( id . a t 11) - - the argument f a i l s to t ake in tocons idera t ion th e fac t t ha t th e complaint a l l eg es t h a t MediZine,eTruvian and Rowsom conspi red with Brandt to i n t e n t iona l ly exceedBrand t ' s author ized access to MTS' computer(s) .

In any even t , s ince the argument was ra i sed only in areply memorandum, the Court does not decide it on th e presen trecord .

* * *

While th e Cour t does not conclude t ha t MTS cannot a l l egea claim under the CFAA, it i s c l e a r t ha t th e presen t complaint doesnot adequately a l lege such a claim, in tw o pa r t i c u l a r s : (1) thecomplaint must a l l ege the pa r t i c u l a r provis ions of the CFAA t h a tMTS claims to have been v io l a t ed , as wel l as the Sect ion1030 (c) (4) (A) (i) f ac to r (s) which MTS claims to have been involved,wi th fac t s to suppor t the s t a tu to ry a l l e g a t i o n s ; and (2) th ecomplaint must also a l lege with some p a r t i c u l a r i t y the "damage" and

employer.Morris, a criminal case under an ear l i e r version of the CFAA,focused on whether the defendan t had accessed a federal governmentcomputer without authorizat ion not on whether he had exceededauthorizat ion.17



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" loss" (as def ined in the CFAA) claimed to be involved, with,moreover, fac t s showing t ha t the $5,000 threshold of Sec t ion1030 (a) (4) i s sa t i s f i ed .

Count VI I i s dismissed. MTS i s to submit an amendedcompla int amending Count V II only, within 20 days of the da tehereof .

11.

Since Count I remains pending, MediZine ' s motion fo rd ismissal of the s t a t e la w counts i s denied.

12.

For the foregoing reasons: (i) defendants ' motion fo rsummary judgment dismissing Count I i s denied; ( i i ) defendants 'motion fo r summary judgment dismissing Count II i s granted; ( i i i )defendants ' motion fo r dismissal of Count V II fo r f a i l u re to s t a t ea claim i s granted , with leave to p l a i n t i f f to replead t ha t Countwithin 20 days ; and (iv) defendants ' motion to dismiss a l l s t a t ela w claims fo r lack of sub jec t mat te r ju r i sd ic t ion i s denied.

P l a i n t i f f ' s motion fo r r e l i e f under Fed. R. Civ. P. 56(f)i s denied as moot. 9

SO ORDERED.Dated: Apr i l Z-3, 2010Lawrence M. McKennaU.S.D.J .

The pa r t i e s are to complete a l l discovery not l a t e r thanSeptember 30, 2010.The p ar t i e s are to advise the Court with in 10 days of the da tehereof as to what pa r t s hereof requi re redact ion pr i o r to publ ic f i l i n g .18


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