Energy Intelligence Grp. v. Constellation Energy Generation, LLC
| Decision Date | 23 March 2022 |
| Docket Number | 20-cv-3983,21-cv-5689 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | Energy Intelligence Group, Inc., and Energy Intelligence Group UK Ltd., Plaintiffs/Counterclaim-Defendants, v. Constellation Energy Generation, LLC, Defendant/Counterclaim-Plaintiff. |
Since 2007, Constellation Energy Generation, LLC (“Constellation”), [1] has subscribed to Nuclear Intelligence Weekly (“NIW”) or a predecessor trade periodical published by Energy Intelligence Group Inc., and Energy Intelligence Group (UK) Ltd. (collectively “EIG”). See Countercl. ¶ 9.[2] EIG filed these consolidated copyright infringement actions against Constellation in 2020 and 2021, alleging in both cases that one or more EIG employees forwarded to hundreds of other EIG employees email messages with digital copies of NIW issues attached. See Compl. ¶¶ 29-44, ECF No. 1. After this court denied EIG's motion to dismiss the first complaint for failure to state a claim, 2021 WL 1561711 (Apr. 21, 2021), EIG answered the complaint and pleaded three counterclaims arising under Illinois law: a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 Ill. Comp Stat. § 505/1 et seq., in count I; common law fraud in count II; and fraud in the inducement of EIG's subscription agreements with Constellation in count III. Countercl. ¶¶ 38-53, 54-73, 74-94. Constellation bases its counterclaims on allegations that “EIG's business model is actually predicated on luring customers into subscription agreements, entrapping them in copyright lawsuits, and then extorting massive settlements that have no relationship to the actual value of EIG's publications.” Countercl. ¶ 10.
Before the court is EIG's motion to dismiss Constellation's counterclaims for failure to state a claim upon which relief can be granted. EIG argues that Constellation has not adequately alleged several elements of its counterclaims and that the counterclaims would impose disclosure obligations upon copyright owners that conflict with the notice requirements of the Copyright Act, 17 U.S.C. § 401. See Mem. Supp. Mot. to Dismiss Countercls. 7-13, ECF No. 51-1. For the reasons that follow, the court grants the motion but does not reach EIG's preemption arguments.
EIG filed the first of these consolidated suits, Case No. 20-cv-3983, in July 2020. In October 2021, EIG filed a second infringement action against Constellation, Case No. 21-cv-5689, alleging substantially similar copyright infringement claims based on certificates of copyright registration issued after the first case was filed. Constellation filed an answer asserting counterclaims, and it asserted identical counterclaims in the second suit. See Compl., No. 21-cv-5689, ECF No. 1 (N.D. Ill. Oct. 25, 2021); Ans. 24-45, No. 21-cv-5689, ECF No. 8 (N.D. Ill.Dec. 10, 2021).
This court granted EIG's unopposed motion to reassign the second case as related to the first, see LR 40.4, and consolidated the two cases “for all purposes.” ECF No. 77 (Dec. 14, 2021). After consolidation, the parties agreed that all briefing on the motion to dismiss the counterclaims in No. 20-cv-3983 “shall also apply to the defendant's identical counterclaims in case No. 21-cv-5689.” ECF No. 79 (Jan. 4, 2022). This opinion cites the papers in Case No. 20-cv-3983 for simplicity's sake. The record reflects that consolidated discovery is ongoing under the supervision of Judge McShain. See, e.g., ECF Nos. 90, 92.
EIG disputes many of the factual allegations made in Constellation's counterclaims and argues that certain inferences Constellation draws are unwarranted or misleading. See, e.g., ECF No. 51-1 at 1-3. Consistent with the Rule 12(b)(6) standard, the court recites the facts alleged in the counterclaims in the light most favorable to Constellation and draws all reasonable inferences in Constellation's favor-without vouching for the truth or falsity of the facts alleged. See Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382, 384 (7th Cir. 2010); Cozzi Iron & Metal, 250 F.3d at 574 (citing Gastineau v. Fleet Mortg. Corp., 137 F.3d 490, 493 (7th Cir. 1998)).
EIG allegedly decided in 2005 that its subscription-based business model “was insufficiently profitable in the digital era.” Countercl. ¶ 12. With the approval of its board, EIG implemented a strategy of “aggressively pursuing copyright litigation” to increase profits. Id. To “accomplish this goal, EIG would lure unwitting customers into subscription agreements, aggressively and covertly track their activity, entrap them in copyright lawsuits, and then extract massive windfall settlements not rationally tied to the conduct at issue.” Countercl. ¶ 13. Since 2005, EIG has filed approximately 75 similar lawsuits against subscribers to its publications. Countercl. ¶ 11.
Constellation cites a 2007 internal email from an EIG employee describing a portion of its copyright enforcement program as “entrapment” (EIG disputes this inference and argues that the employee's comments are taken out of context). Countercl. ¶ 14. Constellation also points to a 2009 EIG internal marketing report and subsequent policy changes indicating that EIG was ratcheting up its enforcement efforts (EIG disputes some of these inferences as well). See Countercl. ¶¶ 16-20. EIG has staff dedicated to managing its “copyright scheme” and offers a $5, 000 bonus to any EIG employee who identifies an opportunity for copyright litigation, with an additional $5, 000 payment if the litigation produces a monetary recovery. See Countercl. ¶¶ 18-20 ().
By 2009, EIG had begun aggressively using copyright protection software to track its subscribers. See Countercl. ¶¶ 32-34. The email tracking data on which EIG's complaints against Constellation are based, see Compl. ¶¶ 35-38, was harvested using that software, see Countercl. ¶ 35. The software provided EIG with actual notice of Constellation's allegedly infringing activity in 2018 or earlier, “but, upon information and belief, [EIG] delayed filing suit until July of 2020 to increase its claimed statutory damages.” Countercl. ¶ 35 ; see also Countercl. ¶¶ 36-37.
Constellation alleges that EIG's “copyright litigation scheme” has been “wildly successful, allowing EIG to increase its profits even while its subscription business was declining.” Countercl. ¶¶ 21, 24. EIG touts its publications on its website but does not disclose that “[n]early all of EIG's profit comes not from the subscription fees that its customers pay for EIG's publications, but from its aggressive pursuit of copyright litigation against those customers.” Countercl. ¶¶ 23-24.
Constellation also pleads, “On information and belief, EIG's written subscription agreements are purposefully vague in order to confuse and mislead customers like [Constellation] as to what is and is not permissible.” Countercl. ¶ 25; see also Countercl. ¶¶ 25- 29 (quoting certain allegedly vague and confusing provisions). Further, “Upon information and belief, EIG knows that its customers lack clarity about what is permissible under EIG's written and unwritten policies, but intentionally does not properly educate customers so that it can entrap those customers in litigation that is substantially more profitable to EIG than the customers' subscriptions.” Countercl. ¶ 31. Constellation identifies categories of false or misleading statements made by EIG:
In both written and oral communications with [Constellation] employees located in Illinois, EIG concealed, suppressed, and/or omitted material information, including but not limited to the facts that (1) EIG intends to entrap its customers in copyright litigation, (2) EIG seeks to aggressively pursue its customers for copyright violations, (3) EIG seeks to obtain windfall settlements from its customers, (4) EIG's business model is predicated on suing its customers in copyright litigation, (5) EIG incentivizes its employees to uncover potential copyright lawsuits by paying up to $10, 000 bonuses, (6) EIG incentivizes other employees by offering them a cut of any proceeds generated through copyright litigation, (7) EIG derives nearly all of its profits from copyright litigation, and (8) EIG electronically tracks its customers' usage of EIG's subscriptions for the purpose of instituting litigation.
Countercl. ¶ 42; see also Countercl. ¶¶ 57, 77 (substantially similar allegations). EIG omitted this information, or made misrepresentations about it, from its written and oral communications with Constellation. See Countercl. ¶¶ 42-46, 60-63 ().
The court applies the same standard to a Rule 12(b)(6) motion to dismiss a counterclaim as it does on a motion to dismiss a complaint for failure to state a claim. See Cozzi Iron & Metal, Inc. v. U.S. Office Equip., Inc., 250 F.3d 570, 574 (7th Cir. 2001). To survive a Rule 12(b)(6) motion to dismiss, a pleading must “state a claim to relief that is plausible on its face.” Ashcroft v Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); Katz-Crank v. Haskett, 843 F.3d 641, 646 (7th Cir. 2016) (quoting Twombly, 550 U.S. 544, 570 (2007)). A complaint satisfies this standard when its factual allegations “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555-56 (citations omitted); see also Atkins v. City of Chi., 631 F.3d 823, 832 (7th Cir. ...
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