Micro Data Base Systems v. Nellcor Puritan-Bennett

• Decision Date: 03 August 1998
• Docket Number: No. 4:97 CV 4 AS.,4:97 CV 4 AS.
• Citation: 20 F.Supp.2d 1258
• Parties: MICRO DATA BASE SYSTEMS, INC., Plaintiff and Counter-Defendant, v. NELLCOR PURITAN-BENNETT, INC. and Puritan-Bennett Corp. Defendants and Counterclaimants.
• Court: U.S. District Court — Northern District of Indiana

20 F.Supp.2d 1258

MICRO DATA BASE SYSTEMS, INC., Plaintiff and Counter-Defendant, v. NELLCOR PURITAN-BENNETT, INC. and Puritan-Bennett Corp. Defendants and Counterclaimants.

No. 4:97 CV 4 AS.

United States District Court, N.D. Indiana, Hammond Division.

August 3, 1998.

Susan K Roberts, William P. Kealey, Ann Marie W. Waldron, Stuart and Branigin, Lafayette, IN, for plaintiff.

Gary P. Price, Peter S. French, John A. Broyles, Lewis and Kappes, Indianapolis, IN, Tammy J. Meyer, Mark E. Walker, Lewis and Wagner, Indianapolis, IN, for Nellcor Puritan Bennett, Inc., Puritan-Bennett Corp., Nellcor Puritan Bennett, Inc., defendants.

Susan K. Roberts, William P. Kealey, Ann Marie W. Waldron, Stuart and Branigin, Lafayette, IN, for Micro Data Base Systems, Inc., counter-defendant.

MEMORANDUM AND ORDER

ALAN SHARP, District Judge.

I. Procedural History

This cause is before this court on defendant Nellcor Puritan Bennett, Inc. ("Nellcor")'s motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim, filed May 19, 1998, and on plaintiff Micro Data Base Systems, Inc. ("MDBS")'s motion for leave to amend complaint, filed June 2, 1998. Both parties have responded to the other's motions and have briefed the issues. Thus, this court is now ready to rule.

II. Facts

MDBS is a data base software manufacturer located in West Lafayette, Indiana. Nellcor is now a subsidiary of Mallinckrodt, Incorporated, one of the world's largest medical supply manufacturers, and is the result of a merger between Nellcor, Incorporated and Puritan-Bennett Corporation in 1995. In 1988, MDBS and Nellcor, as its predecessor Puritan-Bennett, negotiated an agreement which would allow Nellcor to use MDBS' database software, then known as "MDBS III," in its own products. In December 1996, MDBS filed suit against Nellcor in Tippecanoe (County, Indiana) Superior Court, asserting violations of Indiana's trade secret law and breach of contract. Nellcor removed the cause to this court in January, 1997 pursuant to this court's diversity jurisdiction under 28 U.S.C. § 1332. On June 12, 1997, MDBS amended its complaint and asserted claims of copyright infringement, misappropriation of trade secrets, conversion, deception, breach of contract and unjust enrichment. Nellcor has moved here to dismiss the copyright infringement claim for lack of subject matter jurisdiction under FED. R.CIV.P. 12(b)(1) and to dismiss the trade secrets, conversion, deception, and unjust enrichment claims for failure to state a claim under FED.R.CIV.P. 12(b)(6).

III. Analysis

A. 12(b)(1) Motion

Nellcor has filed a motion to dismiss the copyright infringement claim under Rule 12(b)(1) of the Federal Rules of Civil Procedure. There are two types of challenges to jurisdiction which may be made under Rule 12(b)(1): (1) a facial attack that challenges the sufficiency of the allegations of jurisdiction in the pleadings on their face; and (2) a factual attack that challenges the truth of the jurisdictional facts alleged in the pleadings. United States v. Ritchie, 15 F.3d 592, 598 (6th Cir.), cert. denied, 513 U.S. 868, 115 S.Ct. 188, 130 L.Ed.2d 121 (1994); Freiburger v. Emery Air Charter, Inc., 795 F.Supp. 253 (N.D.Ill.1992). When reviewing a motion raising a facial attack, the court must accept the well-pleaded allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir.1995). This standard is similar to that applied in a motion to dismiss under Rule 12(b)(6). Brown v. Keystone Consolidated Industries, Inc., 680 F.Supp. 1212, 1215 (N.D.Ill.1988). Thus, a case may be dismissed on a facial challenge only if it is clear from the complaint that a federal question was raised solely for the purpose of obtaining jurisdiction or where a federal claim is insubstantial and frivolous. Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946); Peckmann v. Thompson, 966 F.2d 295, 297 (7th Cir.1992).

However, if the challenge to jurisdiction is factual, no presumption of truthfulness applies to the plaintiffs factual allegations, and the court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. Ritchie, 15 F.3d at 598. The court may receive competent evidence such as affidavits, deposition testimony and the like in order to determine the factual dispute. Land v. Dollar, 330 U.S. 731, 735 n. 4, 67 S.Ct. 1009, 1011 n. 4, 91 L.Ed. 1209 (1947). Thus, when faced with a factual challenge, the court "may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Capitol Leasing Co. v. F.D.I.C., 999 F.2d 188, 191 (7th Cir.1993).

Nellcor specifically challenges whether the copyright claim was registered prior to the filing of the amended complaint. MDBS has asserted that the copyright claims violated here are based on the MDBS IV product, which is a successor version of the MDBS III product, which was copyrighted in 1985. Additionally, MDBS has moved to amend the complaint to include the allegation that it registered the MDBS IV product in July, 1997. Following this court's earlier decision in Haan Crafts Corp. v. Craft Masters, Inc., 683 F.Supp. 1234 (N.D.Ind.1988), this court will grant the motion to amend the complaint. Additionally, the court finds that the second amended complaint adequately pleads the registration requirement for the copyright claim. Thus, the motion to dismiss on this count will be denied.

B. 12(b)(6) Motions

By moving under Fed.R.Civ.P. 12(b)(6) for dismissal, the defendant asserts that even assuming the plaintiff's allegations are true, the complaint fails to state a claim upon which relief can be granted. This rule contains only one of several "filters" used by the courts to separate "those suits that should receive plenary consideration from those that should not." Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir.1987). The rule's capacity to save the parties' and the court's resources is obvious.

However, this court must be especially careful when faced with a motion for dismissal. The court should accord the plaintiff's complaint a reasonably tolerant reading, because

the dismissal of the suit under 12(b)(6) could preclude another suit based on any theory that the plaintiff might have advanced on the basis of the facts giving rise to the first action.

Id. (citing American Nurses' Association v. State of Illinois, 783 F.2d 716, 726-27 (7th Cir.1986)). See also, Wright v. Bosch Trucking Co., 804 F.Supp. 1069, 1071 (C.D.Ill. 1992); Stewart v. RCA Corp., 790 F.2d 624, 632 (7th Cir.1986). As stated by the Stewart court, a complaint "almost barren of facts" may comprise claims of a specific category if read liberally. Stewart, 790 F.2d at 632.

Dismissal of a complaint is appropriate only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). See also, Dawson v. General Motors Corp., 977 F.2d 369, 372 (7th Cir.1992). This court must accept the well-pleaded factual allegations of the complaint as true and "construe such allegations in favor of the plaintiff." Roots Partnership v. Lands' End, Inc., 965 F.2d 1411, 1416 (7th Cir.1992). As a point of clarification, the court notes that it is required to accept only factual allegations; "it is not required to accept legal conclusions that may be alleged or that may be drawn from the pleaded facts." Milwaukee v. Saxbe, 546 F.2d 693, 704 (7th Cir.1976); see also, Reichenberger v. Pritchard, 660 F.2d 280, 282 (7th Cir.1981).

To escape dismissal "[a] plaintiff need not set out in detail the facts upon which a claim is based, but must allege sufficient facts to outline the cause of action." Marmon Group, Inc. v. Rexnord, Inc., 822 F.2d 31, 34 (7th Cir.1987) (citations omitted). "The complaint cannot be amended by the briefs filed by the plaintiff in opposition to a motion to dismiss." Gomez, 811 F.2d at 1039.

Likewise, the defendant may not "attempt to refute the complaint or to present a different set of allegations" in its 12(b)(6) challenge. Id. The defendant's attack must be against the sufficiency of the complaint; it "must demonstrate that the plaintiff's claim, as set forth by the complaint, is without legal consequence." Id.

Nellcor has moved to dismiss the trade secrets, conversion, deception, and unjust enrichment claims in the amended complaint because it asserts that the claims are preempted under 17 U.S.C. § 301(a). That section states as follows:

... all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, ... are governed by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.

MDBS argues that its claims fall within the exception enunciated in 17 U.S.C. § 301(b)(3), which states as follows:

(b) Nothing in this title annuls or limits any rights or remedies under the common law or statutes of any State with respect to —

(3) activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106.

The Seventh Circuit has fashioned a two-part test to determine if a right under state law is preempted by the Copyright Act. In Baltimore Orioles v. Major League Baseball Players, 805 F.2d 663 (7th Cir.1986), the court explained...