B2b Cfo Partners Llc v. Kaufman

• Decision Date: 08 February 2011
• Docket Number: No. CV 09–2158–PHX–JAT.,CV 09–2158–PHX–JAT.
• Parties: B2B CFO PARTNERS, LLC; et al., Plaintiffs,v.Kenneth A. KAUFMAN; et al., Defendants.
• Court: U.S. District Court — District of Arizona

787 F.Supp.2d 1002

B2B CFO PARTNERS, LLC; et al., Plaintiffs,

v.Kenneth A. KAUFMAN; et al., Defendants.

No. CV 09–2158–PHX–JAT.

United States District Court, D. Arizona.

Feb. 8, 2011.

Stephen Charles Biggs, Richard R. Thomas, Thomas Schern Richardson, PLLC, Mesa, AZ, for Plaintiffs.Charles David Martinez, Sterling Reed Peterson, Brad Alan Denton, Gunderson Denton & Proffitt, PC, Mesa, AZ, for Defendants.

ORDER

JAMES A. TEILBORG, District Judge.

Pending before the Court are Plaintiffs' Second Motion for Partial Summary Judgment (Doc. 99), Defendants' Cross Motion for Partial Summary Judgment on Damages (Doc. 113), and Defendants' Motion to Strike Exhibits from Affidavit of Jerry Mills (Doc. 112). The Court now rules on the Motions.

BACKGROUND

Plaintiffs claim that Plaintiff B2B CFO Partners, LLC (“B2B CFO Partners”) is the largest and most successful CFO business in the United States. A company in the CFO business serves small to medium-sized business owners who need someone with financial expertise beyond that of an accountant or bookkeeper, but who cannot afford, or choose not to hire, a permanent CFO. CFO businesses recruit experienced CFOs to become partners or members in the CFO business, then offer the member CFOs to small and medium-sized companies on a part-time basis.

Plaintiff Jerry Mills drafted a training manual in 2001 that tracked his experience with and vision for a CFO business. He marked the 2001 manual with the following copyright notice: (C) 2001 B2B CFO, LLC. As B2B CFO Partners grew, Mills decided he needed to supplement and update the existing training manual. Mills completed the revisions in 2005.

The revisions documented what Mills had learned over twenty years about the CFO industry. Mills claims he spent 500 to 600 hours researching and 2500 to 3000 hours writing the revised manual. Mills marked the revised manual (the “2005 Manual”) with the following copyright notice: (C) 2005 B2B CFO/CIO, LLP. Mills registered the copyright on the 2005 Manual (No. TXu001617758) on October 13, 2009. The 2001 and 2005 Manuals contain Mills's framework for creating and operating a successful CFO business.

Mills distributed the 2005 Manual only to partners of B2B CFO Partners and only after each partner had signed an operating, or partnership, agreement. Mills believed that making partners sign an operating agreement would adequately maintain the confidentiality of the 2005 Manual.

Mills met Defendant Kenneth Kaufman in 2006. At that time, Kaufman was attempting to run his own personal CFO business in Las Vegas, Nevada. Kaufman became a partner of B2B CFO Partners and signed a partnership agreement on March 24, 2006. After Kaufman became a partner, he received a copy of the 2005 Manual, as well as the B2B CFO Partners sales brochure and other trade materials.

Kaufman worked as a partner with B2B CFO Partners through the end of 2006, but left the company in January 2007. Plaintiffs claim the other partners asked Kaufman to resign, and Defendants claim he left voluntarily left. Some time after Kaufman left B2B CFO Partners, he formed entities to operate in the CFO business, including CFO Wise Inc. and The CFO Wise Promise LLC (collectively, “CFO Wise”).

Kaufman created training manuals for his new CFO business. Plaintiffs claim that Kaufman's 2008 Manual and 2009 Manual (collectively, the CFO Wise Manuals) infringe on Plaintiffs' copyright for the 2005 Manual.

Plaintiffs have filed a Motion for Partial Summary Judgment on the issue of copyright infringement of the 2005 Manual. Plaintiffs also want the Court to enjoin Defendants from using any manual or other product that infringes Plaintiffs' copyright in the 2005 Manual. Defendants have moved for partial summary judgment on the issue of statutory damages and attorneys' fees under the Copyright Act. The Court now rules on the Motions.

ANALYSIS AND CONCLUSION

Legal Standard

Summary judgment is appropriate when “there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law.” F.R.Civ.P. 56(a). A party asserting that a fact cannot be or is genuinely disputed must support that assertion by “citing to particular parts of materials in the record,” including depositions, affidavits, interrogatory answers or other materials, or by “showing that materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.” F.R.Civ.P. 56(c)(1). Thus, summary judgment is mandated “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Initially, the movant bears the burden of pointing out to the Court the basis for the motion and the elements of the causes of action upon which the non-movant will be unable to establish a genuine issue of material fact. Id. at 323, 106 S.Ct. 2548. The burden then shifts to the non-movant to establish the existence of material fact. Id. The non-movant “must do more than simply show that there is some metaphysical doubt as to the material facts” by “com [ing] forward with ‘specific facts showing that there is a genuine issue for trial.’ ” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting F.R.Civ.P. 56(e) (1963) (amended 2010)). A dispute about a fact is “genuine” if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The non-movant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Id. at 247–48, 106 S.Ct. 2505. However, in the summary judgment context, the Court construes all disputed facts in the light most favorable to the non-moving party. Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir.2004).

Plaintiffs' Motion for Summary Judgment

For Plaintiffs to establish copyright infringement, they must prove: “(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Feist Publ'n, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). The Court reaches the issue of infringement only if Plaintiffs demonstrate that the 2005 Manual is entitled to copyright protection.

With respect to the first element, Plaintiffs undisputedly registered the copyright for the 2005 Manual with the United States Copyright Office on October 13, 2009. Plaintiffs' certificate of registration entitles them to a “rebuttable presumption of originality” for the 2005 Manual. Ets–Hokin v. Skyy Spirits, Inc., 225 F.3d 1068, 1075 (9th Cir.2000) (internal citations omitted). To overcome the presumption of validity, Defendants must show why the 2005 Manual is not copyrightable. Id. at 1076. The presumption of validity does not extend to infringement, the second element of a copyright claim. Smith v. Jackson, 84 F.3d 1213, 1219 (9th Cir.1996).

Defendants argue that the 2005 Manual is not entitled to copyright protection because it lacks the requisite originality. They assert that the Manual contains only general business ideas and concepts, which are not protected by copyright law.

To qualify for copyright protection, a work must be original to the creator. Feist, 499 U.S. at 345, 111 S.Ct. 1282. “Original,” in copyright parlance, means “only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity.” Id. (citing M. Nimmer & D. Nimmer, Copyright §§ 2.01[A], [B] (1990)). The requisite level of creativity is “extremely low; even a slight amount will suffice. The vast majority of works make the grade quite easily, as they possess some creative spark, no matter how crude, humble or obvious it might be.” Id. (internal citations omitted). So, while facts are not copyrightable, factual compilations can be protected by copyright. Id. at 348, 111 S.Ct. 1282.

Even if a work is copyrighted, protection may not extend to every element of the work. Id. A copyright does not cover the facts and ideas included in a work. Id. at 349, 111 S.Ct. 1282. It is the author's organization and expression of the facts or ideas contained in the work that enjoys copyright protection. Id.; see also Allen v. Academic Games League of Am., 89 F.3d 614, 617 (9th Cir.1996). “Thus, ideas contained in a copyrighted work may be freely used so long as the copyrighted expression is not wholly appropriated.” Allen, 89 F.3d at 617.

The Court finds that the 2005 Manual is entitled to copyright protection. Plaintiffs have a valid copyright for the 2005 Manual, which creates a presumption of validity and originality. Ets–Hokin, 225 F.3d at 1075. Defendants have not demonstrated the invalidity of that copyright. While the 2005 Manual may contain some general business ideas, Mills's expression and organization of those ideas possesses sufficient originality to warrant copyright protection. Mills spent many hours organizing and drafting the 2001 Manual and the revisions for the 2005 Manual. He made choices regarding which concepts and ideas to include in the Manuals and how to express those concepts.

The Court finds as a matter of law that the 2005 Manual is entitled to copyright protection. The Court therefore must determine whether Plaintiffs have demonstrated as a matter of law that Defendants copied elements of the 2005 Manual that are original, the second element of a copyright infringement claim.

Because direct evidence of copying is not available in most cases, plaintiffs may prove copying by showing that the defendant had access to the subject work and that the two...