BHL Boresight, Inc. v. Geo-Steering Solutions, Inc.

Decision Date29 March 2016
Docket NumberCIVIL ACTION NO. 4:15-CV-00627
PartiesBHL BORESIGHT, INC., et al, Plaintiffs, v. GEO-STEERING SOLUTIONS, INC., et al, Defendants.
CourtU.S. District Court — Southern District of Texas

Pending in the above-referenced cause and addressed in this Order are Defendant Geo-Steering Solutions, Inc. and Geo-Steering Solutions USA, Inc's (collectively, "GSSI") Motion to Dismiss for Failure to State a Claim Pursuant to Fed. R. Civ. P. 12(b)(6) (Doc. 18), Plaintiff BHL Boresight, Inc.'s ("BHL") Motion to Dismiss GSSI Defendants' Counterclaim Counts I-III and VI-VIII for Lack of Subject Matter Jurisdiction and/or Failure to State a Claim (Doc. 27), Defendant Statoil Gulf Services LLC's ("Statoil") Motion to Dismiss for Failure to State a Claim Pursuant to Fed. R. Civ. P. 12(b)(6) and Memorandum in Support Thereof (Doc. 28), Defendant Statoil's Motion for Leave of Court to File a Reply Memorandum to Plaintiff BHL's Opposition of Motion to Dismiss (Doc. 48) and Plaintiff's Opposition and Alternative Motion for Leave to File Surreply (Doc. 56).1 Having considered the parties' motions, responses, replies, and the relevant law, the Court concludes that BHL's Motion to Dismiss (Doc. 27), Statoil's Motion for Leave of Court to File a Reply Memorandum (Doc. 48), and BHL's Motion for Leave to File Surreply (Doc. 56) should be GRANTED. GSSI's Motion to Dismiss (Doc. 27) and Statoil's Motion to Dismiss (Doc. 28) are GRANTED in part and DENIED in part.

I. Background

This case arises from a soured business relationship and subsequent claims of license-agreement violations in the highly competitive oil and gas exploration industry. As the leading provider of geosteering software to oil and gas companies, Plaintiff BHL and Defendant Statoil's predecessor-in-interest, Brigham Oil & Gas, L.P. ("Brigham"), enjoyed a mutually beneficial working relationship for many years. (Doc. 1 at ¶ 12.) Pursuant to a 2009 licensing agreement between Brigham and BHL (the "Brigham License Agreement"), BHL provided Brigham access to its proprietary software. (Id.)

Under the terms of the Brigham License Agreement, BHL's software was loaded onto Brigham's computers. (See id. at ¶¶ 9, 12.) Because BHL's software is encrypted, however, Brigham and other licensees are provided with USB "bitlock" hardware devices as an additional security feature. (Id. at ¶ 9.) These bitlocks connect to a single computer, allowing access to the encrypted software on that particular device. (Id.) Since each computer running the software requires a bitlock in order to open the software, the licensee's needs determine the number of bitlocks provided. (Id.)

A number of years into the Brigham-BHL relationship, Statoil acquired Brigham and became a licensee of BHL's software by virtue of the acquisition. (Id. at ¶ 12.) On November 5, 2012, BHL and Statoil amended the Brigham License Agreement to reflect that Statoil would be subject to all terms and conditions of the original agreement between Brigham and BHL. (Id. at ¶ 13.) These terms and conditions included provisions stating that Statoil's rights were limited, third-party consultants could only use BHL's software and bitlocks after executing a separate usage agreement with BHL, and any use beyond the express terms and conditions of any sublicense agreement was automatically void and without authority. (Id. at ¶¶ 15-18.)

Although BHL permits its licensees to use BHL's software with third-party consulting entities, it only does so "[i]n limited cases, and with advanced notice and prior written agreement." (Id. at ¶ 10.) If the consulting entity is a direct competitor in the geosteering software market, the entity is subject to "extensive use restrictions and conditions," including "acknowledgement and protection of BHL's intellectual property." (Id.) In this case, BHL only authorized one consultant, Neset Consulting Services, to use its software with Statoil. (Id. at ¶ 14.) However, in the fall of 2014, BHL discovered that Statoil had provided BHL's software and bitlocks to GSSI—a new geosteering software provider and direct competitor of BHL. (Id. at ¶¶ 21, 23, 25.) When BHL confronted Statoil, it was informed that GSSI was indeed in possession of BHL's bitlocks. (Id. at ¶ 25.)

Believing that GSSI used this unrestricted and unauthorized access to develop its own geosteering software program (Id. at ¶ 24), BHL initiated this action. BHL brings claims against Statoil and GSSI for violations of the Computer Fraud and Abuse Act ("CFAA") and Electronic Communications Privacy Act ("ECPA") (Counts I-III), unjust enrichment (Count V), and civil conspiracy (Count VIII). (Id. at ¶¶ 28-51, 60-64, 77-80.) BHL also alleges misappropriation of trade secrets (Count IV) and civil theft (Count VII) against GSSI and breach of contract (Count VI) against Statoil. (Id. at ¶¶ 52-59, 65-76.) GSSI has asserted counterclaims against BHL for: request for declaratory judgment of independent creation of the GSSI software (Count I), request for declaratory judgment that the GSSI software is an original work (Count II), request for declaratory judgment that GSSI did not copy BHL's software in creating GSSI's software (Count III), Lanham Act violation (Count IV), common law unfair competition (Count V), state antitrust violation (Count VI), tortious interference with existing contract (Count VII), and tortious interference with prospective business relationships (Count VIII). (Doc. 19 at ¶¶ 10-56.) Allparties have filed motions to dismiss under either Rule 12(b)(1) or 12(b)(6), which are now ripe for adjudication. (Docs. 18, 27, 28.)

II. Legal Standard
A. 12(b)(1)

Federal courts are of limited jurisdiction, possessing only those powers conferred by the Constitution and Congress. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994); Halmekangas v. State Farm Fire & Cas. Co., 603 F.3d 290, 292 (5th Cir. 2010). Consequently, if the court lacks either the constitutional or statutory authority to adjudicate a claim, then the claim shall be dismissed. Krim v., Inc., 402 F.3d 489, 494 (5th Cir. 2005) (citations omitted). The requirement that jurisdiction be established as a threshold matter "spring[s] from the nature and limits of the judicial power of the United States" and is "inflexible and without exception." Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382 (1884).

Motions filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure allow a party to challenge the subject matter jurisdiction of the district court to hear a case. Fed. R. Civ. P. 12(b)(1). Because ensuring that a federal court has proper jurisdiction "is fundamental and necessary before touching the substantive claims of a lawsuit," Arena v. Graybar Elec. Co., Inc., 669 F.3d 214, 223 (5th Cir. 2012), "[w]hen a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (per curiam) (citing Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977)).

In examining a Rule 12(b)(1) motion, the district court may consider matters of fact which may be in dispute. Id. (citing Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir. 1981)). Lack of subject matter jurisdiction may be found in any one of three instances: (1) the complaintalone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts. Id. (citing Barrera-Montenegro v. United States, 74 F.3d 657, 659 (5th Cir. 1996)). The burden of proof lies with the party asserting jurisdiction. Choice Inc. of Tex. v. Greenstein, 691 F.3d 710, 714 (5th Cir. 2012) (citations omitted). A 12(b)(1) motion should only be granted "if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle plaintiff to relief." Ramming, 281 F.3d at 161 (citing Home Builders Ass'n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998)).

B. 12(b)(6)

Motions to dismiss for failure to state a claim are appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim. Fed. R. Civ. P. 12(b)(6). Under the Federal Rules, a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This requirement exists in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests," Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (internal citation marks omitted). Although Rule 8's pleading standard "does not require 'detailed factual allegations,' it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly at 550 U.S. at 555).

"To survive a motion to dismiss [for failure to state a claim], a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Id. at 678 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when a court can draw the reasonable inference that the defendant is liable for the misconduct alleged based on thefactual content pled." Id. at 678 (citing Twombly, 550 U.S. at 556). In determining plausibility, courts first disregard "formulaic recitation[s] of the elements" of the legal claim as conclusory. Id. at 678. The court then assumes the truth of all factual allegations and determines whether those factual allegations allege a plausible claim. See id. "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at...

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