Edgenet Inc. v. Aisbl

• Decision Date: 27 September 2010
• Docket Number: Case No. 09–CV–65.
• Citation: 742 F.Supp.2d 997
• Parties: EDGENET, INC., Plaintiff,v.GS1 AISBL, GS1 U.S., Inc., 1SYNC, Inc., and American Hardware Manufacturers Association, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

742 F.Supp.2d 997

EDGENET, INC., Plaintiff,

v.GS1 AISBL, GS1 U.S., Inc., 1SYNC, Inc., and American Hardware Manufacturers Association, Defendants.

Case No. 09–CV–65.

United States District Court, E.D. Wisconsin.

Sept. 27, 2010.

Howard B. Schoenfeld, Joseph A. Ranney, Sandy Swartzberg, Jascha B. Walter, Dewitt Ross & Stevens SC, Brookfield, WI, J. Kevin McCall, R. Douglas Rees, Sean P. Tarantino, Jerold S. Solovy, Jenner & Block LLP, Chicago, IL, M. Andrew Skwierawski, Matthew W. O'Neill, Robert H. Friebert, S. Todd Farris, Friebert Finerty & St. John SC, Milwaukee, WI, for Plaintiff.Joseph S. Goode, Michael D. Fischer, Mark M. Leitner, Kravit Hovel & Krawczyk SC, Mollie Ambrose Newcomb, John P. Fredrickson, Boyle Fredrickson SC, Milwaukee, WI, Michael Dockterman, Craig M. White, Paul T. Olszowka, Peter N. Moore, Wildman Harrold Allen & Dixon LLP, Michael A. Nicolas, Tonya G. Newman, William P. Farrell, Jr., Neal Gerber & Eisenberg LLP, Chicago, IL, Arthur Gollwitzer, III, Austin, TX, for Defendants.

ORDER

J.P. STADTMUELLER, District Judge.

This case involves a host of claims made by a business against a competitor, as well as related standards-setting bodies and business leagues. In an effort to make something stick, plaintiff Edgenet, Inc., appears to have taken the kitchen-sink approach in its Second Amended Complaint (Docket # 43). Plaintiff has alleged seemingly every claim it can imagine: monopolization, racketeering, conspiracy, copyright infringement, misappropriation of trade secrets, consumer fraud, common law misappropriation, and unjust enrichment. In response, defendants GS1 U.S., Inc. (“GS1 U.S.”) and 1 SYNC, Inc. (“1 SYNC”) have filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) (Docket # 56), supported by a brief (Docket # 57) that fights fire with fire by offering up its own kitchen-sink approach. Defendants American Hardware Manufacturers Association (“AHMA”) and GS1 AISBL join in the motion (Docket # 's 58, 59). The brief challenges nearly every aspect of every claim, leaving the court to determine to what extent this action will proceed, if at all. In conformance with the analysis below, the court will grant in part and deny in part defendants' motion to dismiss, allowing Counts VI and VII, the copyright infringement and misappropriation of trade secrets claims, to survive.

FACTUAL BACKGROUND

In order to set the stage, the court will first outline the facts alleged in the complaint. Plaintiff is an information technology company that, among other things, operates “data pools” that aggregate, organize, and deliver data for clients. (Second Am. Compl. ¶ 3). A data pool acts as a central repository, allowing trading partners to share product data. See id. at ¶ 19. As the operator, plaintiff contracts with retailers as well as suppliers. Id. Plaintiff builds and maintains data pools for retailers containing data related to products they sell. Id. Additionally, suppliers also provide product data to plaintiff. Id. Retailers may then subscribe to particular suppliers' data pools, operated by plaintiff, and have that product data added to the retailer's data pool, also operated by plaintiff. Id. In order to standardize product data, many entities participate in the Global Data Synchronisation Network (“GDSN”). Id. at ¶ 18. The GDSN synchronizes product data between interconnected data pools. Data Synchronisation (GDSN), GS1, http:// www. gs 1. org/ gdsn/ ds (last visited Sept. 13, 2010). The GDSN works by: (1) a seller registering product and company information in a data pool; (2) a portion of that data is sent to a global registry; (3) the buyer subscribes to receive a seller's product information through its own data pool; and (4) the seller's data pool shares the information with the buyer's data pool. How Does GDSN Work, GS1, http:// www. gs 1. org/ gdsn/ ds/ how (last visited Sept. 13, 2010); see also (Second Am. Compl. ¶ 19). Defendant GS1 AISBL controls the GDSN and the certification process that data pool operators such as plaintiff must undergo in order to operate a “GS1–GDSN certified” data pool. Id. at ¶ 18, 20. GS1 AISBL also controls the Global Standards Management Process (“GSMP”) used to develop product description standards for use in the GDSN. Id. at ¶ 20. In order to participate in the GDSN, a company must obtain a GS1–assigned “company prefix.” Id. at ¶ 21. For a U.S. business to obtain a company prefix, it must do so through defendant GS1 U.S., which is an independent member organization of GS1 AISBL, but also allegedly the “U.S. arm” of GS1 AISBL. Id. at ¶¶ 6, 10, 21.

In the dispute at hand, plaintiff specifically aggregates, categorizes, and serves up what it terms “basic supply-chain data,” such as product measurements, as well as “marketing data,” which may include images or certain product-specific information. Id. at ¶ 3. Supply-chain data is standardized through the GDSN, whereas marketing data is essentially proprietary. Id. at ¶¶ 26–27. Collectively, the court will refer to the combination of supply-chain and marketing data as “product data.” In order to provide marketing data, plaintiff developed the “Collection Taxonomy and Attributes” (“Master Collection”) to aggregate, organize, and distribute product data. Id. at ¶ 26. The Master Collection consists of a “collection taxonomy,” which is a system of organization that places products into a variety of categories and sub-categories, as well as “attributes” that detail various properties of a product. Id. In addition to cataloguing product properties, the attributes also include questions that plaintiff asks to collect the data, whether such questions are mandatory or optional, and the format of potential answers. Id. at ¶¶ 26–29. The Master Collection is the subject of federal copyright registration. Id. at ¶ 26, 32.

Defendant 1 SYNC is a wholly-owned subsidiary of defendant GS1 U.S., and operates data pool services accounting for approximately 85% of GS1–registered products in the United States. Id. at ¶¶ 6, 11, 22. Both GS1 U.S. and 1SYNC are currently tax-exempt non-profit organizations under 26 U.S.C. § 501(c)(6). Id. at ¶¶ 4, 22, 40, 41, 43. In the past, 1 SYNC has focused on collecting and delivering only supply-chain data, whereas plaintiff invested in developing data pools and systems to collect and deliver marketing data in addition to GDSN supply-chain data. Id. at ¶¶ 23–25. According to plaintiff, because of its innovative provision of marketing data, defendants GS1 AISBL, GS1 U.S., and 1SYNC began to see plaintiff as a threat and so set about to eliminate competition from plaintiff in a number of ways. Id. at ¶ 39. First, plaintiff alleges that GS1 U.S. and 1 SYNC have falsely represented themselves as non-profit business leagues to the U.S. Internal Revenue Service (“IRS”). Id. at ¶¶ 41–53. As a result, plaintiff alleges that GS1 U.S. and 1 SYNC have abused their tax-exempt status to maintain a monopoly over the data pool market. Id. at ¶¶ 54–61. GS1 U.S. and 1 SYNC allegedly initiated a project intended to develop marketing data to add to the GDSN in an attempt to eliminate competition from other data pool providers that provide proprietary solutions, such as plaintiff. Id. at ¶¶ 55–59. Plaintiff alleges that GS1 U.S. and 1SYNC then set about effectuating this plan by engaging in exclusionary conduct, including the issuing of a press release stating their ability to satisfy the attribute needs of Home Depot, which had recently switched to plaintiff, through the GDSN. Id. at ¶ 60. According to plaintiff, this statement was false. Id. at ¶ 61.

Next, plaintiff alleges that GS1 U.S. and 1 SYNC abused their control over a standard-setting initiative to add the Master Collection to the GDSN. Id. at ¶ 62–63. Around November 2006, defendants GS1 U.S., 1SYNC and AHMA began the Hardlines & Electronics Attribute Initiative (“HEAI”) in order to add marketing data to the GDSN. Id. at ¶ 64. The HEAI is allegedly intended to maintain monopoly power over the data pool market. Id. at ¶ 65. The process sought to develop marketing attributes to then be reviewed and approved by industry before implementation in the GDSN. Id. at ¶ 67. The project was slow to implement its first round of attributes—it took nearly fourteen months to develop marketing data for washing machines alone. Id. at ¶¶ 68–72. As a result, the defendants moved to shift the standard-setting process from AHMA control to a smaller, GS1–controlled group with less industry participation. Id. at ¶¶ 75–76.

What appears to be the heart of plaintiff's complaint, however, occurred in 2008 when GS1 U.S., 1 SYNC and AHMA allegedly received a spreadsheet or series of spreadsheets (“Spreadsheet”) containing taxonomy categories and marketing attributes for a number of products. Id. at ¶ 77. The Spreadsheet is allegedly derived from the Master Collection. Id. GS1 U.S. then allegedly took the Spreadsheet and created a derivative work which was used to expedite addition of taxonomy categories and marketing attributes to the GDSN. Id. at ¶¶ 78–95. During this process of expedited addition, GS1 U.S., 1SYNC and AHMA allegedly made false representations regarding participation in the standard-setting process in order to conceal the source of the new standards, as well as to induce standard-setting participants to vote in favor of accepting new standards. Id. at ¶¶ 80, 83–88. Further, the process also resulted in GS1 AISBL, GS1 U.S. and 1 SYNC causing AHMA to publish communications and documents containing copyrighted material to the GS1 website. Id. at ¶¶ 84–90, 93.

Finally, plaintiff alleges that GS1 AISBL, GS1 U.S., and 1SYNC continue to: falsely represent the source of the new marketing data; threaten to continue to misuse plaintiff's proprietary information; and that GS1 U.S. and 1 SYNC continue to misrepresent and abuse their tax-exempt status. Id. at ¶¶ 101–07.

LEGAL STANDARD

A motion to dismiss under Federal Rule...