Planck LLC v. Particle Media, Inc.

• Decision Date: 03 November 2021
• Docket Number: 20 Civ. 10959 (LGS)
• Parties: PLANCK LLC, Plaintiff, v. PARTICLE MEDIA, INC. et al., Defendants.
• Court: U.S. District Court — Southern District of New York

PLANCK LLC, Plaintiff,
v.
PARTICLE MEDIA, INC. et al., Defendants.

No. 20 Civ. 10959 (LGS)

United States District Court, S.D. New York

November 3, 2021

OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:

Defendants Particle Media, Inc. d/b/a News Break (“News Break”), Jeff Zheng and Vincent Wu move to transfer venue or, alternatively, to dismiss the First Amended Complaint (“FAC”) of Plaintiff Planck LLC d/b/a Patch Media (“Patch”). For the reasons set forth below, Defendants' motions to dismiss are denied, except that Defendant Zheng is dismissed.

I. BACKGROUND

The following facts are taken from the FAC and are assumed to be true only for purposes of this motion. See R.M. Bacon, LLC v. Saint-Gobain Performance Plastics Corp., 959 F.3d 509, 512 (2d Cir. 2020).

Plaintiff operates Patch.com, a website divided into approximately 1, 200 pages known as “patches, ” each of which provides local news, event listings, classified ads, weather and other information for localities across the United States. Plaintiff generates revenue through web advertising. Plaintiff drives web traffic to its sites through social media, email subscriptions and by contracting with news aggregators, such as Yahoo and Google News, which place links to Plaintiff's site on their news pages. Plaintiff also uses technical processes to ensure that its content is ranked highly in search engine results.

1

Defendants operate a competing service called News Break, which the FAC alleges “alters, copies, and delivers to its customers substantial infringing excerpts from Patch stories, including copyrighted photographs.” Defendants Wu and Zheng are News Break's Chief Operating Officer and Chief Executive Officer, respectively.

In 2019, Defendants approached Plaintiff regarding an acquisition or content sharing deal. The parties entered into a non-disclosure agreement (the “NDA”). The NDA provides that any information shared during the course of negotiations could be used by the counterparty only for “the exclusive purpose of evaluating the possibility” of a business deal. The NDA also provides that the parties were not licensing each other's intellectual property and that the NDA could not be modified except in a writing “specifying with particularity the nature and extent” of any modification. The NDA contains a New York choice of law and forum selection clause. Pursuant to the NDA, Plaintiff provided Defendants with information regarding Plaintiff's (1) processes for sourcing, organizing and distributing local news content and optimizing that content for visibility in search engine results; (2) features by which users could generate content and (3) specific features that drive user engagement.

Discussion of an acquisition was not fruitful, but the parties continued to discuss a possible deal whereby Defendants would license some of Plaintiff's content. In late 2019, the parties exchanged drafts of a potential licensing contract but did not reach any agreement. In early 2020, the parties resumed negotiations, and Plaintiff's president, Warren St. John, “orally agreed on behalf of Patch that, as a public service, News Break could use certain of Patch's Covid-19 content.” An email from St. John to Wu contained a link to specific types of COVID-19 content nationwide -- article headlines, summaries, image thumbnails, geographical information and links to the Patch.com website. Wu responded that information in this linked

2

feed could not be “ingested by our tech system” and requested that Plaintiff replace it. Wu added a News Break technical employee to the email, who explained that the feed was provided in a format incompatible with News Break's systems. During a subsequent call, Wu suggested that Plaintiff provide a general feed of all headlines, which Defendants could filter for COVID-19 content, rather than the nationwide COVID-specific data linked in the email. St. John sent Wu a link to one such feed, asking “[C]an your team check this feed structure to see if it might work?”

St. John then delegated resolution of further technical issues to Plaintiff's IT employee Marc Torrence, stating that he was “[a]dding Marc Torrence from Patch Product [to the email chain], to help us get you a feed that works for you.” As part of that process, Defendants asked Torrence to create a “publisher profile” with the News Break service and link all 1, 200 of Plaintiff's local feeds, or patches, to that master profile, so that they could be ingested at News Break for purposes of sharing COVID content.

To create that profile, Torrence had to click through an online Terms of Service Agreement (“TOS Agreement”). Pursuant to that agreement, the profile applicant (1) granted Defendants a non-exclusive license to publish the applicant's content on Defendants' site and (2) permitted Defendants to display advertisements in connection with that content, use that content to promote their own services and publish that content to third-party platforms. The TOS Agreement contains a California choice of law and forum selection clause: “The laws of the State of California shall govern these Terms. You agree that any suit arising from the Services must take place in a court located in Santa Clara, California.” After Defendants were able to ingest Plaintiff's general feeds for COVID-19 purposes, the parties continued discussions of a broader licensing deal but did not reach any agreement.

3

Defendants have published links to Plaintiff's stories that did not involve COVID-19. When users clicked on such links, they were taken to intermediate pages displaying the lead of Plaintiff's story -- which Plaintiff does not make publicly available -- along with a link to Plaintiff's website. Use of such intermediate pages: (1) creates confusing results in search engines by misattributing Plaintiff's content to Defendants; (2) permits Defendants to generate advertising revenue from pages containing Plaintiff's non-public leads; (3) reduces traffic to Plaintiff's website from users who learned enough from the non-public lead; (4) artificially inflates Defendants' ranking in search engines, as Defendants' pages containing Plaintiff's content receive more user visits and (5) permits Defendants to provide Plaintiff's content to third parties.

The FAC alleges that Defendants obtained this content by (1) reading and extracting content from Plaintiff's website with automated computer bots (“scraping”), an effort that was aided by Defendants' use of data that Plaintiff disclosed pursuant to the NDA and (2) using the feeds provided by Torrence when troubleshooting the COVID data sharing issue.

The FAC asserts federal causes of action for direct copyright infringement (Count One), violation of the Racketeer Influenced and Corrupt Organization Act (“RICO”), 18 U.S.C. § 1962(c) (Count Two), conspiracy to engage in racketeering activity, 18 U.S.C. § 1962(d) (Count Three) and violation of the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1202(b) (Count Four). The FAC also asserts state law claims for breach of contract with respect to the NDA (Count Five) and fraudulent inducement to enter into the TOS Agreement (Count Six).

Defendants argue that (1) the copyright, RICO, DMCA and fraudulent inducement claims arise under the TOS Agreement, and should be transferred to the Northern District of California

4

per that agreement's forum selection clause; (2) all of Plaintiff's claims should be dismissed for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) and (3) the claims against Defendant Zheng should be dismissed for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2).

II. LEGAL STANDARDS

A. Pleading Requirements

On a motion to dismiss, a court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the non-moving party, Montero v. City of Yonkers, 890 F.3d 386, 391 (2d Cir. 2018), but gives “no effect to legal conclusions couched as factual allegations, ” Stadnick v. Vivint Solar, Inc., 861 F.3d 31, 35 (2d Cir. 2017). To withstand a motion to dismiss, a pleading “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting BellAtl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678. It is not enough for a plaintiff to allege facts that are consistent with liability; the complaint must “nudge[]” claims “across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. “To survive dismissal, the plaintiff must provide the grounds upon which his claim rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.'” ATSICommc'ns, Inc. v. ShaarFund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at 555). In ruling on a motion to dismiss, the court may consider: (1) the complaint; (2) documents attached to the complaint, quoted therein or incorporated by reference and (3) documents upon which the plaintiff relies and which are integral to the complaint.

5

Halebian v. Berv, 644 F.3d 122, 130 n.7 (2d Cir. 2011); accordBergesen v. Manhattanville College, No. 20 Civ. 3689, 2021 WL 3115170, at *2 (S.D.N.Y. July 20, 2021).

B. Forum Selection Clauses and Venue

Enforcement of a forum selection clause is governed by a four-part test:

(1) whether the clause was reasonably communicated to the party resisting enforcement; (2) whether the clause is mandatory or permissive, i.e., whether the parties are required to bring any dispute to the designated forum or simply permitted to do so; and (3) whether the claims and parties involved in the suit are subject to the forum selection clause. If the forum clause was communicated to the

...