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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
ABARCA HEALTH, LLC and PHARMACY INSURANCE CORPORATION OF AMERICA PLAINTIFFS,
v.
PHARMPIX CORPORATION; HERMINIO JOSÉ CORREA GARCÉS; JANE DOE AND THE CONJUGAL PARTNERSHIP COMPOSED BY THEM; JAIME FIGUEROA TORRES; MARY DOE AND THE CONJUGAL PARTNERSHIP COMPOSED BY THEM; MARTY MARTINEZ FRATICELLI; ANA ROE AND THE CONJUGAL PARTNERSHIP COMPOSED BY THEM; AND MARCOS A. GONZALEZ CARBALLO; SUSAN ROE AND THE CONJUGAL PARTNERSHIP COMPOSED BY THEM
DEFENDANTS.
Civ. No. 11-1218 (GAG)
RE: INJUNCTIVE RELIEF, COPYRIGHT INFRINGEMENT AND DAMAGES
PLAINTIFFS REQUEST JURY TRIAL
MOTION TO DISMISS AND MOTION IN OPPOSITION TO MOTION REQUESTING
PRELIMINARY INJUNCTION
TO THE HONORABLE COURT:
NOW COME Defendants PharmPix Corporation; Martty Martínez Fraticelli;
Marcos González Carballo; Herminio Correa Garcés; Jaime Figueroa Torres, and the
conjugal partnership composed between Jaime Figueroa Torres and Mary Doe, through
their undersigned attorney, and respectfully state, allege and pray:
I. INTRODUCTION
On February 25, 2011, plaintiffs, Abarca Health, LLC (“Abarca”) and Pharmacy
Insurance Corporation of America (“PICA”) filed a complaint against defendants for
several causes of actions, namely; copyright infringement, unfair competition, unlawful
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 1 of 24
2
appropriation and divulgation of trade secrets, breach of contract, and breach of
fiduciary duty. In order to bring their claims before this Honorable Court, plaintiffs have
made unsupported allegations under sections 501 – 504 of the Copyright Act and
section 43(a) of the Lanham Act by claiming that they own two copyrights over a
computer software program named “Pharmacy Agent”, which they allege co-defendants
are somehow infringing. Along with their complaint, plaintiffs have filed a motion
requesting a preliminary injunction to enjoin defendants from continuing the alleged
infringing conduct, where they basically reiterate their claims of infringement against
defendants.
However, it will be proven that plaintiffs’ allegations fail to state a claim for
infringement upon which this court may grant the requested relief. It is evident from
plaintiffs’ allegations, as well as from the exhibits attached to their complaint, that
plaintiffs support their claim solely on speculation and fail to at least identify which
elements, –if any,- of their computer software are being allegedly infringed, and what
elements of defendants’ software cause the alleged infringement. Simply put: plaintiffs’
copyright infringement claims lack ripeness, since they are based on mere allegations
without any evidence to support their claims and furthermore, they do not specify what
part of their software is being allegedly infringed by defendants’ software. As it is
evident by plaintiffs’ discovery request [Docket No. 5], plaintiffs’ claim and
request is nothing more than a fishing expedition and an excuse to sneak into
defendants’ trade secrets and proprietary information.
Moreover, plaintiffs’ allegations are only supported by the suspicious statements
of Mr. Scott Domínguez, one of plaintiffs’ and defendants’ former employees, who,
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among others: (1) was forced to resign for mishandling PICA’s corporate resources; (2)
continued accessing PharmPix’s database and servers after being terminated from his
employment; and (3) provided plaintiffs with unreliable evidence to support a copyright
infringement cause of action. Certainly, Mr. Dominguez’ illegal actions are very
suspicious and make us wonder; what does Mr. Scott Domínguez gain by providing
this kind of misleading information to plaintiffs? Obviously, the forced answer is
that at the very least, he is gaining something from plaintiffs.
Nevertheless, as it will be further discussed in detail, not only plaintiffs are not
entitled to the requested injunctive relief; plaintiffs are not entitled to seek any
remedy before this Court at all. A comprehensive review of plaintiffs’ complaint and
exhibits clearly shows that more than 90% of the allegations set forth in their complaint
are for breach of contract, not under the Copyright or the Lanham Acts. Rather,
plaintiffs’ allegations and exhibits show that their claims arise under state contract law
and, accordingly, they must be heard before the courts of the Commonwealth of Puerto
Rico. Therefore, not only should this Honorable Court deny plaintiffs’ request for
preliminary injunction without the need of a hearing, but to the extent that plaintiffs’ own
complaint lacks a bona fide claim for copyright infringement or unfair competition
against defendants, the same should be dismissed for lack of federal jurisdiction and for
failure to state a claim upon which relief can be granted.
Finally, but certainly not least, we must bring before this Honorable Court’s
attention that the herein appearing defendants have a copyright registration for
their software, which predates any of plaintiffs’ copyright registrations.
Accordingly, the ownership rights that flow from defendants’ registration are far
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 3 of 24
4
superior to those alleged by plaintiffs and this register constitutes prima facie
evidence of such rights. Likewise, defendants’ prior copyright registration
defeats the prima facie evidence standard that plaintiffs must show, and as such,
they cannot meet the burden to prove their copyright infringement claims.
II. ARGUMENT
A. GROUNDS FOR DISMISSAL
1) The Copyright infringement standard.
Plaintiffs cannot meet their burden to prove that a preliminary injunction is
warranted against defendants, due to the fact that their copyright infringement
allegations are not ripe, since they have not shown: (1) ownership of a valid copyright,
and (2) copying of constituent elements of the work that are original. See Feist
Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 1296, 113
L.Ed.2d 358 (1991); see also Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d
1147, 1160 n. 19 (1st Cir.1994); Concrete Mach. Co. v. Classic Lawn Ornaments, Inc.,
843 F.2d 600, 605 (1st Cir.1988). (Our emphasis) To show ownership of a valid
copyright and therefore satisfy Feist's first prong, a plaintiff must prove that the work as
a whole is original and that the plaintiff complied with applicable statutory formalities.
See Engineering Dynamics, Inc. v. Structural Software, Inc., 26 F.3d 1335, 1340 (5th
Cir.1994). The plaintiff must then prove that the copying of copyrighted material was so
extensive that it rendered the offending and copyrighted works substantially similar. See
Engineering Dynamics, 26 F.3d at 1341.
Works are substantially similar within the intendment of copyright law if they are
so alike that the later (unprotected) work can fairly be regarded as appropriating the
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 4 of 24
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original expression of the earlier (protected) work. See Yankee Candle Co. v.
Bridgewater Candle Co., 259 F.3d 25, 33 (1st Cir.2001). “A copyright plaintiff must
establish specifically that the allegedly infringing work is substantially similar to
the plaintiff’s work with regard to its protected elements. Thus, in an action for
infringement, it must be determined both whether the similarities between the works are
substantial from the point of view of the lay observer and whether those similarities
involve copyrightable material.” Oravec v. Sunny Isles Luxury Ventures, L.C., 527 F.3d
1218, 1224, 86 U.S.P.Q. 2d 1661 (11th Cir. 2008). (Our emphasis)
In the case at hand, plaintiffs cannot prove the requisite infringement because,
first, defendants have a valid copyright registration over their software, which in fact
predates those of plaintiffs. (See Exhibit 1) Second, there is no evidence that
defendants have violated any of the exclusive rights listed on 1 U.S.C. §106. According
to the complaint, at different times between 2005 and 2009, co-defendants Martty
Martínez, Marcos González, Herminio Correa, and Jaime Figueroa worked for PICA
and, and during said time, some of them helped develop the Pharmacy Agent.
However, plaintiffs contend that once co-defendants Martínez, González, Correa, and
Figueroa left PICA and eventually created PharmPix, they developed a computer
software program that, in plaintiffs’ opinion, infringes upon its copyrights of the
Pharmacy Agent software.
Nevertheless, plaintiffs have not produced a single shred of evidence in support
of their claim or allegations about what parts of their software are being copied; they
have not even showed their software and have not described in what way, if any,
defendants are infringing said copyrighted work. Moreover, plaintiffs have not made
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 5 of 24
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any allegations about what aspects are similar; they only make allegations of
functionality which are not protected by copyright law.
If plaintiffs have not even asserted to have personally seen the alleged infringing
work, how can then they ascertain that the works at issue “are so alike”? We must point
out that this case does not revolve around any two products which can be distinguished
by a lay observer, such as a plush toy or the lyrics to a song; this is about highly
technological products which are composed of thousands of lines and codes, some of
which may not even be copyrightable. However, as we already established, general
allegations are not enough to support a copyright infringement claim. Accordingly, by
failing to draft a well pleaded complaint, plaintiffs have not put this Court, or defendants,
in a position to determine if the alleged infringement is upon the software’s source code
or any other of its components. Therefore, plaintiffs’ allegations fail to state a claim
upon which relief can be granted.
Further, given the fact that plaintiffs do not have firsthand knowledge of their own
infringement claims, they blindly rely on the speculations drawn by Mr. Scott
Domínguez, who alleges to have worked on what he thought to be “an essentially exact
copy” of plaintiffs’ Pharmacy Agent. (Exhibit B of the complaint, ¶ 11). Nevertheless,
Mr. Dominguez’ allegations are so unbelievable that they deserve no credibility from this
Court.
First, Mr. Dominguez was asked by co-defendant Herminio Correa to resign to
his job at PICA after he was discovered using corporate time and resources to advance
his personal interests by launching vitualitpr.com, which is still up and running and
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 6 of 24
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serves as his consulting business’ website.1 (See Exhibit 2) Second, Dominguez was
eventually given a second chance, this time to work directly for defendants at PharmPix
but was also fired on December 6, 2010, after the poor performance shown as a
Director of IT Infrastructure during the preceding weeks and because of his continued
absenteeism. Furthermore, PharmPix discovered that while away from its premises and
even after discharged of his duties, Mr. Dominguez installed remote access programs to
log in to PharmPix’s systems from outside of PharmPix’s premises, and indeed
accessed PharmPix systems through different user accounts. (See Exhibit 4) Mr.
Dominguez also requested a password change request to PharmPix’s “DynDNS”
technology service provider in order to gain access to PharmPix’s backups and
confidential data. (See Exhibit 5) As if it were not enough, on December 17, 2011 Mr.
Dominguez again tried to log in to PharmPix systems through several user accounts,
but given the fact that PharmPix took protective measures and immediately blocked him
out of PharmPix’s systems, these last attempts failed. (See Exhibits 4 and 6)
Conveniently, he did not mention any of this in his statement.
Now, a few months after his dismissal and intrusive acts, Mr. Dominguez
miraculously resurfaces as the closest and only contact to the alleged infringing
program and serves as a witness for plaintiffs, who are in fact PharmPix’s biggest
competitors and are only interested in searching upon defendants’ trade secrets.
Nonetheless, it is more than certain that if there is one person likely to intrude and copy
another’s private property it is Mr. Dominguez. As anticipated, we keep asking
ourselves: what does Mr. Scott Domínguez gain for intruding into defendants’
1 While at PICA, Mr. Dominguez had access to every server, given the fact that he was a “system administrator”.
See also Exhibit 3: Mr. Dominguez’ profile in LinkedIn at http://www.linkedin.com/in/scottdominguez. Ironically,
Mr. Dominguez’ professional profile does not make any reference to his previous work experience at PICA.
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 7 of 24
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systems and afterwards providing misleading information to plaintiffs?
Obviously, we have to presume that at the very least, he is being somehow
remunerated by plaintiffs or has some sort of interest in the outcome of this case.
Moreover, not only Mr. Dominguez is biased against defendants and might have
possibly copied its trade secrets, but his expertise field is not in software programming
or development, but rather in infrastructure management and disaster recovery.
Therefore, it is outrageous for Mr. Dominguez to state that defendants solicited him any
copies of PICA’s proposals, when he was especially hired because of his qualifications
as a disaster recovery expert. (See Exhibit 3 - linkdn) Likewise, said qualifications do
not render him as a reliable source to adequately describe the whole complexity of
defendants’ computer program. Even assuming arguendo that he is qualified to do so,
it is beyond belief that after four (4) years he can remember every single aspect of both
plaintiffs’ and defendants’ respective computer programs’ thousands of codes and
conclude that they are identical. However, it is at the same time contradictory how
Domínguez can draw such a serious conclusion but not make any specific description of
both softwares in his statement under penalty of perjury. More so, it is unbelievable
how plaintiffs take his testimony at face value and rely on it to build their copyright
infringement claims, but do not allege in their complaint what are those aspects of both
programs that are similar, or how defendants’ copyrighted software infringes upon
plaintiffs’ software.
As it is evident, Mr. Domínguez’ testimony is in itself insufficient to prove
plaintiffs’ case. Again, nothing in his testimony may lead the Court to determine that
defendants infringe plaintiffs’ copyrights because there is simply no mention as to which
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 8 of 24
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are the protected elements of plaintiffs’ software, or how and when were they allegedly
infringed by defendants. Thus, plaintiffs’ copyright claims are nothing more than
unsupported speculative conclusions that render the instant case unripe. Accordingly,
plaintiffs fail to make allegations enough as to put this Court in position to identify what
parts of the softwares are similar. Again, mere allegations are not enough to show the
existence copyright infringement, particularly, when plaintiffs’ own motion requesting an
expedited discovery clearly shows that they do not have evidence to support their
claims. As such, their complaint is a mere fishing expedition.
(i) The software functionality argument.
In the declaration under penalty of perjury provided by Mr. Dominguez, he
alleges that both programs at issue are similar because they have the same
functionality. First of all, the fact that both softwares may perform the same functions
does not imply that substantial similarity exists among them, or that plaintiffs’ software
was actually copied by defendants. Second, it is a matter of patent law, not copyright
law, to protect the functionality aspects of a work of art. In cases like the one at issue,
said determination is controlling, for a “computer software is essentially utilitarian in
nature”, see Computer Associates International Inc. v. Altai Inc., 982 F.2d 693 (2nd Cir.
1992). Its non-creative portions are not susceptible to copyright protection. Accordingly,
“those elements of a computer program that are necessarily incidental to its function
are…unprotectable.” Id. at p. 705. Consequently, if plaintiffs seek protection for the
functionality of their software, then plaintiffs needed to obtain a patent over said
process; but that is not the case at hand because no patent exists for any aspect their
software. Therefore, if what plaintiffs believe is being infringed is their software’s
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 9 of 24
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functionality, then this Honorable Court need not make any further analysis.
2) Plaintiffs’ lack of federal jurisdiction and their failure to state a claim upon which a remedy can be granted.
Plaintiffs’ unripe infringement claims come as no surprise, however, for plaintiffs’
real claims arise under Puerto Rico contract law. Their only interest in alleging copyright
infringement and requesting an expedited discovery is a mere pretext to gain federal
jurisdiction and to sneak into defendants trade secrets by creatively labeling their
complaint as arising under the Copyright Act. Nonetheless, the First Circuit has
addressed this issue before by pertinently stating that:
In order to gain access to a federal forum, a litigant must allege particulars which raise some substantial federal issue. This meager helping of facts served up by this plaintiff do not meet the standards for such a bill of fare. Though “that which we call a rose by another name would smell as sweet,” W. Shakespeare, Romeo and Juliet (1595), we must parse causes of action as they are, not as the pleader might fondly wish they were. “The jurisdiction of the federal district courts cannot be manipulated by the simple expedient of creative labeling” [citation omitted]… We will not assume jurisdiction over what is essentially a garden-variety contract dispute, notwithstanding [sic] [plaintiffs] heroic efforts to costume it in the guise of a copyright action. Royal v. Leading Edge Products, Inc., 833 F.2d 1, 5 (1st Cir. 1987) (Our emphasis.) A simple look over the facts averred in plaintiffs’ complaint and the corresponding
exhibits, show that plaintiffs seek remedies for an alleged breach of co-defendants
duties under their non-compete and confidentiality agreements, as well as for allegedly
breaching their fiduciary duties as officials of PICA. As it can be seen, plaintiffs fairly
elaborate in detail their contractual breaches claims, but fail to do the same with regard
to their copyright claims. Plaintiffs claim is in essence one for breach of contract.
Therefore, given the fact that plaintiffs’ claim does not present a federal question, that
no diversity exists among the parties, and due to plaintiffs’ failure to properly elaborate
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 10 of 24
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their copyright infringement theory this Court lacks subject matter jurisdiction. As such,
the above captioned case must be heard by the courts of the Commonwealth of Puerto
Rico.
According to the above, this Court is faced with a clear contractual dispute
slightly dressed as a copyright dispute. Nevertheless, “an aroma of copyright” is
insufficient to make an action one arising under the Copyright Act. See Muse v. Mellin,
212 F.Supp. 315, 316; 339 F.2d 888. Accordingly, and contrary to plaintiffs’
expectations, “[t]he word copyright is not so compelling as to invoke federal jurisdiction
upon its mere mention.” See Tbn. Shaw v. Kastner, 151 Misc. 2d 654, 573 NY2d 595,
598 (Sup. 1991).
Fed. R. Civ. P. 8(a) establishes in pertinent part that “[a] pleading that states a
claim for relief must contain: (1) a short and plain statement of the grounds for the
court’s jurisdiction, unless the court already has jurisdiction and the claim needs
no new jurisdictional support.” (Our emphasis) With regards to copyright infringement
claims, a complaint alleging copyright infringement complies with Fed. R. Civ. P. 8(a)
when the plaintiff asserts: (1) which specific original works form the subject of the
copyright claim; (2) that the plaintiff owns the copyrights in the works; (3) that the
copyrights have been registered in accordance with the statute; and (4) by what acts
[and] during what time the defendant infringed the copyright. Jacobs v. Carnival Corp.,
2009 WL 856637, 4 (S.D.N.Y. 2009). (Our emphasis) Hence, plaintiff must include
sufficient factual allegations that explain how the defendant copied, displayed or
distributed infringing copies of a copyrighted work. Mere factual allegations will not
suffice. Miller v. Facebook, 2010 WL 1292708. (Our emphasis) Otherwise, “conclusory
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 11 of 24
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pleading of jurisdictional and factual allegations invites a motion to dismiss.” Kema v.
Kopwerwhats, 2010 WL 726640.
Plaintiffs’ copyright claims prove deficient and evidently do not comply with Fed.
R. Civ. P. 8(a). As it was broadly discussed in previous sections, it is evident from
plaintiffs’ allegations, as well as from the exhibits attached to their complaint, that their
copyright claims are based solely on speculation. It is also evident since they are
requesting discovery in order to support their claims. Nonetheless, although plaintiffs
must establish specifically that the allegedly infringing work is substantially similar to its
work with regard to its protected elements2, plaintiffs have not produced a single
shred of evidence in support thereof; they have not produced the alleged copyrighted
software and have not described in what way, if any, defendants are infringing the
same. They have not even asserted to have personally seen the alleged infringing
work. By failing to draft a well pleaded complaint, plaintiffs have not put this Court, or
defendants, in a position to determine what elements of their computer program are
allegedly being copied.
Therefore plaintiffs have not stated a claim upon which relief can be granted
under Fed. R. Civ. P. 12(b)(6), but rather they have only pleaded conclusory allegations
with no supporting evidence. However, “[a] court is not bound to credit bald assertions,
unsupportable conclusions and opprobrious epithets woven into the fabric of the
complaint.” In re Colonial Mortgage Bankers, Corp., 324 F.3d 12, 15 (2003). It is then
pertinent to recur to the 6th Circuit’s decision in National Business Development
Services, Inc. v. American Credit Educ. and Consulting Inc., 299 Fed. Appx. 509 (2008).
Faced with an identical factual pattern as in the case at issue, the court noted:
2 See Oravec v. Sunny Isles Luxury, LC. 527 F. 3d 1218, 1224 (2008).
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 12 of 24
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In the instant case, Plaintiff’s complaint contains a blanket assertion of entitlement to relief, but does not contain any factual allegations supporting that assertion. There is neither (1) an identification of a work produced by Defendants that infringes upon Plaintiff’s copyrighted work, nor (2) a description of the manner in which Defendant’s works infringe upon Plaintiff’s work… [T]he Court is not required to accept Plaintiff’s bare legal conclusions. Plaintiff’s complaint amounts to no more than a speculative claim that Defendants may have produced some work that in some way infringed upon Plaintiff’s works. This pleading is insufficient, and Plaintiff’s action must be dismissed. Id, at 511-512. (Our emphasis.)
Again, plaintiffs have engaged in conclusory pleading of jurisdictional and factual
allegations, and as such their complaint warrants a motion to dismiss.
(i) Unfair competition under the Lanham Act and under the Puerto Rico Trademark Law, Law Number 169 of December 16, 2009.
Moreover, not only plaintiffs have attempted to gain federal jurisdiction by
invoking the Copyright Act, but they have also invoked Section 43(a) of the Lanham
Act3 and Article 27(A)(2) of the Puerto Rico Trademark Law4 in an attempt to frame their
theory for unfair competition. However, said attempt again proves how plaintiffs
intermingle with different kinds of intellectual property provisions in order to draw
confusion and to keep covering what undoubtedly constitutes allegations of a breach of
contract that, as a matter of law, must be evaluated in state court. Plaintiffs allege that
“the illegal misuse of proprietary information constitutes an interference with Abarca’s
goodwill and reputation, which has caused and continues to cause damages to
plaintiffs, as a software product developed and created by plaintiffs is misrepresented
as PharmPix’s”. (Docket No. 1, ¶ 64) (Our emphasis)
Notwithstanding plaintiffs’ contentions, the cited provisions are designed to
protect trademarks. A trademark is any word, name, symbol, or device used by a
3 15 USC Sec. 1125.
4 Law Number 169 of December 16, 2009.
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 13 of 24
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manufacturer or seller “to identify his goods and distinguish them from those
manufactured or sold by others. See Lanham Act §45. This is problematic for plaintiffs
because, given the fact that the functionality of their softwares cannot be protected
through a copyright and they have not applied for a patent either, we must presume
then that what plaintiffs intend to protect are the source codes and other components
that altogether configure their software. Nonetheless, different from non-technological
products, such as a cereal brand, a cookie, or hair gel, etc., an encoded source code or
those remaining algorithms and alike components that configure a software can never
be a source of origin because its end user will never be able to see it and thus, consider
it as a source of origin. But then again, if plaintiffs have not described what parts of
their software have been allegedly infringed, how can a consumer identify a
software as that of plaintiffs’? More so, how can a consumer be confused among
plaintiffs’ and defendants’ softwares if plaintiffs do not describe how they may be alike?
Hence, plaintiffs’ reliance on the aforementioned provisions also falls short for they do
not apply to the case at hand.
In light of the foregoing, plaintiffs’ complaint should be dismissed by this Court
because the only federal elements to their claims are unripe, unfounded and unsuitable;
drafted for the sole purpose of acquiring federal jurisdiction, harassing defendants and
scouting into their trade secrets.
B) GROUNDS FOR A PRELIMINARY INJUNCTION We incorporate by reference the arguments previously discussed in previous
sections as if fully restated herein.
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 14 of 24
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Section 410(c) of the Copyright Act, 17 U.S.C. § 410(c), specifically states that
“[i]n any judicial proceedings the certificate of a registration made before or within five
years after the first publication of the work shall constitute prima facie evidence of the
validity of the copyright and the facts stated in the certificate” (capitalization omitted). As
the legal or beneficial owner of an exclusive right under Copyright Law, Plaintiff is
entitled to institute an action for infringement pursuant to Section 501 of the Copyright
Act, 17 U.S.C. § 501. Injunctive relief is among the remedies afforded to Plaintiff in the
case of infringement, whereby Section 502 of the Copyright Act, 17 U.S.C. § 502, allows
any court having jurisdiction over a copyright claim to grant temporary and final
injunctions on such terms as it may deem will reasonably prevent or restrain
infringement of a copyright.
Nonetheless, it is well established that a preliminary injunction is an extraordinary
and drastic remedy that should not be granted unless the movant, by a clear showing,
carries the burden of persuasion. See, Wright & Miller, Federal Practice and Procedure,
(2nd Ed. 1995) Volume 11A, Chapter 9, §2948, p. 129-130. (Our emphasis.) Over time,
the First Circuit has crafted a four-part framework for use in determining whether to
grant or deny preliminary injunctive relief in a copyright case. Under this formulation,
trial courts must consider: (i) the likelihood that the movant will succeed on the merits;
(ii) the possibility that, without an injunction, the movant will suffer irreparable harm; (iii)
the balance of relevant hardships as between the parties; and (iv) the effect of the
court's ruling on the public interest. Coquico, Inc. v. Rodriguez-Miranda, 562 F.3d 62, 65
(1st Cir. 2009); Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, 115 (1st
Cir. 2006).
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1) Plaintiffs are not likely to succeed on the merits.
For the reasons set forth in prior sections, plaintiffs have not met the burden of
proof necessary for the issuance of a preliminary injunction; general allegations are not
enough to support a copyright infringement claim. As it is evident, defendants have a
valid copyright certificate over its software, which in fact predates those of plaintiffs.
Likewise, there is no evidence that defendants have violated any of the exclusive rights
listed on 1 U.S.C. §106. On the other hand, it is undisputed that: (1) plaintiffs have not
produced a single shred of evidence in support of their claim; (2) they have not
produced the alleged copyrighted work; and (3) they have not described in what
way, if any, defendants are infringing plaintiffs’ software; and (4) they have not
even asserted to have seen the alleged infringing work, and as such cannot attest
that the works at issue are similar. Accordingly, plaintiffs have not put this Court, or
defendants, in a position to determine the essence of the alleged infringement and
therefore are not likely to succeed on the merits of their copyright infringement claims.
Moreover, plaintiffs’ infringement allegations are only supported by the
speculations drawn by Mr. Scott Domínguez, whose allegations deserve no credibility
from this Court, due to the barely credible nature of its testimony, and his evident
animosity towards defendants. Again, if Mr. Dominguez’ testimony were to be granted
certain level of credibility, it is also a proven fact that he makes no mention as to which
are the protected elements of plaintiffs’ software, or how and when they were allegedly
infringed, or even how they are similar, other than they may be functionality alike.
Likewise, his testimony also proves deficient for in his opinion, the softwares at issue
have similar functionality, an aspect which must be analyzed under patent law, not
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 16 of 24
17
copyright law. Therefore, Mr. Domínguez’ testimony is in itself insufficient to prove
plaintiffs’ case. Nothing in his testimony may lead the Court to determine that
defendants infringe plaintiffs’ copyrights. Thus, plaintiffs are not likely to succeed on the
merits of their copyright infringement claims.
2) Plaintiffs will not suffer irreparable harm if injunctive relief is not granted.
As shown in preceding sections, plaintiffs’ claims are insufficient to obtain federal
jurisdiction and to show a likelihood of success on the merits. The fact that plaintiffs
have requested an expedited discovery further supports defendants’ contention that
their claim is merely speculative, as they have no evidence to support defendants’ claim
for copyright infringement. Accordingly, plaintiffs will not suffer irreparable harm if
injunctive relief is not granted. How can then they be at risk of suffering irreparable harm
if they cannot meet their burden of establishing that they are likely to succeed on the
merits?
In the recent case of Coquico, Inc. v. Rodriguez-Miranda, 562 F.3d 62 (1st Cir.
2009), cited by plaintiff in its Memorandum of Law, the First Circuit established that:
The propriety of preliminary injunctive relief depends on an amalgam of four factors: (i) the likelihood that the movant will succeed on the merits; (ii) the possibility that, without an injunction, the movant will suffer irreparable harm; (iii) the balance of relevant hardships as between the parties; and (iv) the effect of the court's ruling on the public interest. Borinquen Biscuit Corp. v. M.V. Trading Corp., 443 F.3d 112, 115 (1st Cir. 2006). The first of these four factors normally weighs heaviest in the decisional scales. New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir. 2002). That is especially true in copyright cases because the resolution of the other three factors often turns on the plaintiff's likelihood of success. See, e.g., Concrete Mach. Co. v. Classic Lawn Orns., Inc., 843 F.2d 600, 611-12 (1st Cir. 1988). Most importantly, in the aftermath of the recent eBay case the presumption of
irreparable harm in the context preliminary injunctions regarding intellectual property
Case 3:11-cv-01218-GAG Document 25 Filed 03/17/11 Page 17 of 24
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has been seriously questioned and limited, even where there is a showing of likelihood
of success. eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388, 390, 126 S. Ct. 1837,
164 L. Ed. 2d 641 (2006).
In fact, the Second Circuit has stated that the effect of eBay is that courts now
must take into consideration all four factors when determining whether to issue an
injunction for copyright infringement. On Saliger v. Colting, 607 F.3d 68, 82 (2d Cir. N.Y.
2010), the Second Circuit stated: “[a]fter eBay, however, courts must not simply
presume irreparable harm”. See eBay, 547 U.S. at 393. Rather, plaintiffs must show
that, on the facts of their case, the failure to issue an injunction would actually
cause irreparable harm. Salinger v. Colting, 607 F.3d at 82. (Our emphasis) The
correct standard, thus, is that the Court’s inquiry may end if a plaintiff fails to establish
probability of success on the merits, but not the other way around; the inquiry cannot
end with a finding of probability of success on the merits. See New Comm Wireless
Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir. 2002) The Court must examine all
factors and afford them their due weight.
In a balanced analysis of the traditional factors, perhaps the single most
important prerequisite for the issuance of a preliminary injunction is a demonstration
that the applicant will suffer irreparable harm if it is not granted. See, Wright & Miller,
supra, §2948.1, p. 139. The burden of demonstrating that a denial of interim injunctive
relief would cause irreparable harm is placed squarely upon the movant. See,
Narragansett Tribe v. Guilbert, 934 F. 2d 4, 6 (1st Cir. 1991). This burden is substantial.
“Speculative injury does not constitute irreparable injury sufficient to warrant
granting a preliminary injunction.” Caribbean Marine Servs v. Baldrige, 844 F.2d
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668, 674 (9th Cir. 1988). (Our emphasis) Moreover, speculative injury is not
sufficient; there must be more than an unfounded fear on the part of the
applicant. See, Public Service Co. of New Hampshire v. Town of Newbury, 835 F. 2d
380, 383 (1st Cir. 1987). (Our emphasis.) To establish irreparable harm, a plaintiff needs
to show, at least, that its legal remedies are inadequate. See, Ross-Simons of Warwick,
Inc. v. Baccarat, Inc. (1st Cir. 1996). Also, plaintiff must establish that it stands to suffer a
substantial injury that is not accurately measurable or adequately compensable by
money damages. Ross-Simons v. Baccarat, 102 F. 2d at 16, citing Multi-Channel TV
Cable Co. v. Charlottesville Quality Cable Operating Co., 22 F. 3d 546, 551 (4th Cir.
1994). In that sense, even the threat of loss of most of an applicant’s business may not
be enough to show irreparable harm. See, Instant Air Freight Co. v. C.F. Air Freight,
Inc., 882 F. 2d 797 (3rd Cir. 1989).
In the case at hand, plaintiffs’ irreparable harm arguments do not transcend the
level of a speculative injury. Furthermore, it is undisputed that since day one plaintiffs
have not even shown or described what constituent elements of their Pharmacy Agent
are allegedly being infringed. Accordingly, how can then plaintiffs be awarded a
presumption of irreparable harm if they cannot even prove the existence of substantial
similarity? Moreover, plaintiffs resume their irreparable harm theory by saying that:
If a preliminary injunction is not granted, PharmPix would be allowed to infringe on Abarca’s copyright on a daily basis, by using protected software without any authorization or license, through the hundreds or thousands of transactions that it would be processing with Abarca’s “Pharmacy Agent” software. A preliminary injunction is the only way that, at this time, this Court will be assured that PharmPix does not commit future and daily infringements, which will have a substantial and irreparable effect on Abarca’s competitive position in the market, potential loss of future business, all of which would result in a severe and adverse effect on Abarca’s goodwill in the market.”
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(Plaintiffs’ memorandum of law, Docket 4-1, at ¶ 2)(Our emphasis)
Ironically, contrary to plaintiffs’ allegations, they have not always been in the
Pharmacy Benefit Manager (PBM) market. (See Exhibit 7) It was not until 2010 after co-
defendants resigned at PICA and when Abarca acquired PICA’s intellectual property
that plaintiffs entered into the PBM business. Therefore, it is outrageous for plaintiffs –
new competitors in the PBM services industry- to speculate as to the possible damage
that their position in the market would suffer. Moreover, it is beyond belief how they
speculate on defendants’ potential “hundreds or thousands of transactions”, when
PharmPix is a relatively small company that is practically beginning operations.
3) Defendants’ injuries far outweigh any harm that Plaintiffs may suffer if a Preliminary Injunction is not granted.
Plaintiffs rely on Concrete v. Machinery Co., Inc. v. Classic Lawn Ornaments, Inc.
843 F.2d 600 (1st Cir. 1988) interpretation of the balance of hardships with regards to
businesses which are “exclusively based on an infringing activity”. Accordingly, without
presenting any evidence to those effects, plaintiffs firmly conclude that “PharmPix
has been able to conduct its operations based on the Pharmacy Agent software it
unlawfully copied.” (Docket No. 4 at p. 20, ¶ 2). Nonetheless, as shown before,
plaintiffs’ conclusions are based on mere speculations for they do not have firsthand
knowledge of their own allegations. However, even assuming for the sake of argument
that plaintiffs would suffer an injury if a preliminary injunction is not granted, it is
defendants who will definitely suffer real and greater injuries if they are enjoined from
using their software. Defendants who will be forced to expose confidential information
and trade secrets due to plaintiffs’ vicious and unsupported speculations. Also, if
enjoined from using their copyrighted software, defendants’ business operations will
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cease and such, will definitely suffer irreparable harm. Clearly, defendants’ damages
will far exceed any possible damage that plaintiffs may face.
Likewise, plaintiffs’ real intentions are to sneak into defendants’ software and its
several components (including its source code), which undisputedly constitutes
PharmPix’s biggest trade secret. In other words, the real goal behind plaintiffs’ fishing
expedition is to improve their own software at defendants’ expense. However, in a fair
balance of hardships defendants cannot be compelled to help plaintiffs’ in such an
endeavor because their objective is to unfairly compete with defendants given the fact
that they do not possess the necessary human resources to improve their software on
their own.
Moreover, contrary to plaintiffs’ contentions, PharmPix does not base its
operations on infringing activities, but rather, the creation of its software is the result of
arduous and pain staking efforts which have lead them to obtain a valid copyright for
their software, a copyright registration that predates plaintiffs’ copyrights for their
Pharmacy Agent. PharmPix has invested over $600,000 to develop its software, and a
result of said investments of time, resources and money, PharmPix has earned the right
to secure the ownership over its valuable software program with numerous licensing
and commercial prospects. Therefore, should this Honorable Court grant any credibility
to plaintiffs’ unfounded allegations, it is defendants who will be prevented from
generating revenue by licensing their product to their currently enrolled clients, and
potential ones, and thus be forced to close its operations. In other words, all of the rights
PharmPix was granted through the issuance of its copyright certificate will be worthless.
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Thus, defendants’ injuries will far outweigh those injuries that will allegedly be suffered
by plaintiffs and as a result, the balance of hardships shifts in favor of defendants.
4) The effect of the court's ruling on the public interest.
Since Congress has elected to grant certain exclusive rights to the owner of a copyright in a protected work, it is virtually axiomatic that the public interest can only be served by upholding copyright protections and, correspondingly, prevent the misappropriation of the skills, creative energies, and resources which are invested in the protected work. Coquico, Inc. v. Rodriguez Miranda, 2007 U.S. Dist. LEXIS 76570 at 15-16, citing Apple Computer Inc. 714 F.2d at 1255. (Our emphasis)
Not only plaintiffs have failed to show likelihood of success on the merits in the
case at hand, but their request for a preliminary injunction will have an adverse effect on
the public interest for the very same reasons on which they support their argument.
Although plaintiffs may have been issued with copyright certificates over their
computer software, it is not less of a fact that defendants themselves were also issued a
copyright certificate for their own computer software, which, as previously shown,
predates plaintiffs’ certificates and constitutes prima facie evidence of their rights over
their software. Nevertheless, plaintiffs seek to enjoin defendants from exercising their
granted rights by raising false and speculative allegations supported only by the biased,
unreliable, and inexpert testimony of an individual who evidently only cares about
nothing more than his own interests. Accordingly, how can the skills, creative energies,
and resources invested by defendants in their own copyrighted software be
safeguarded if defendants are enjoined from exploiting it because of Mr. Dominguez’
vicious and false testimony? How can then the public interest be best served if
defendants’ copyright protections are not upheld due to plaintiffs’ vague and speculative
unsupported allegations? Certainly, not by punishing defendants by striping them off of
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their legally acquired copyrights and by allowing plaintiffs to scout into their trade
secrets trough their meritless copyright infringement claims.
III. CONCLUSION
As it has been proven, plaintiffs’ allegations and exhibits show that their claims
arise under state contract law and accordingly, must not be entertained by this Court as
it lacks subject matter jurisdiction. Plaintiffs have brought an unripe, unsupported
copyright infringement claim before this Court in order to invoke this Honorable Court’s
jurisdiction, and have clearly failed to meet their burden of properly alleging a copyright
claim. They have not identified what parts of the software are similar, they have ignored
the rights granted to defendants’ through their previously issued copyright registration,
and have solely relied on the speculations of a person whose credibility and partiality
are questioned by many factors. By no means have either plaintiffs or their witness
identified which elements –if any- of plaintiffs’ computer software are being infringed,
and what elements of defendants’ software cause the alleged infringement, because
simply, no copyright infringement exists.
In light of the foregoing, this Honorable Court should deny plaintiffs’ request for
preliminary injunction and concurrently dismiss their complaint for lack of federal
jurisdiction and for failure to state a claim upon which a relief can be granted.
WHEREFORE, defendants hereby respectfully request from this Honorable
Court that an order be entered denying plaintiffs’ request for a preliminary injunction and
further dismissing plaintiffs’ complaint for lack of federal jurisdiction and for their failure
to state a remedy upon which relief can be granted.
RESPECTFULLY SUBMITTED
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In San Juan, Puerto Rico on this March 17th, 2011.
IT IS HEREBY CERTIFIED that on this date, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system that will send notification of such filling to the attorneys of record.
s/Samuel F. Pamias-Portalatin
Samuel F. Pamias-Portalatin USDC No. 220309
Hoglund & Pamias, P.S.C. 256 Eleanor Roosevelt Street San Juan, Puerto Rico 00918 Telephone: 787-772-9200 Facsimile: 787-772-9533 E-mail: [email protected]
Attorney for Defendants
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