Rearden LLC v. Walt Disney Co., Case No. 17–cv–04006–JST

• Decision Date: 21 February 2018
• Docket Number: Case No. 17–cv–04192–JST, Case No. 17–cv–04191–JST,Case No. 17–cv–04006–JST
• Citation: 293 F.Supp.3d 963
• Parties: REARDEN LLC, et al., Plaintiffs, v. The WALT DISNEY COMPANY, et al., Defendants. Rearden LLC, et al., Plaintiffs, v. Twentieth Century Fox Film Corporation, et al., Defendants. Rearden LLC, et al., Plaintiffs, v. Paramount Pictures Corporation, et al., Defendants.
• Court: U.S. District Court — Northern District of California

293 F.Supp.3d 963

REARDEN LLC, et al., Plaintiffs,

v.The WALT DISNEY COMPANY, et al., Defendants.

Rearden LLC, et al., Plaintiffs,

v.Twentieth Century Fox Film Corporation, et al., Defendants.

Rearden LLC, et al., Plaintiffs,

v.Paramount Pictures Corporation, et al., Defendants.

Case No. 17–cv–04006–JST

Case No. 17–cv–04191–JST

Case No. 17–cv–04192–JST

United States District Court, N.D. California.

Signed February 21, 2018

Rio Shaye Pierce, Hagens Berman Sobol Shapiro LLP, Berkeley, CA, Mark S. Carlson, Steve W. Berman, Pro Hac Vice, Hagens Berman Sobol Shapiro LLP, Seattle, WA, for Plaintiffs.

Kelly Max Klaus, Rohit K. Singla, Elia Herrera, Munger Tolles & Olson LLP, San Francisco, CA, Glenn Douglas Pomerantz, John L. Schwab, Munger Tolles & Olson LLP, Los Angeles, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS TO DISMISS

JON S. TIGAR, United States District Judge

Now before the Court are the consolidated motions to dismiss by all the defendants in these three consolidated cases. The Court will grant the motions in part and deny them in part.

I. BACKGROUND

This action centers on the MOVA Contour Reality Capture Program ("MOVA Contour" or "MOVA"), which—as the name suggests—is a program for capturing the motion of the human face to create images used in motion pictures. Unlike previous motion capture technologies, the MOVA Contour Program "precisely captures and tracks the 3D shape and motion of a human face to sub-millimeter precision." No. 17–cv–04006 JST ECF No. 1 ("Disney Compl.") ¶ 22; No. 17–cv–04191 JST ECF No. 1 ("Fox Compl.") ¶ 22; No. 17–cv–04192 JST ECF No. 1 ("Paramount Compl.") ¶ 20. The MOVA Contour system captures "an actor's performance frame-by-frame, and then creates original Contour Program output files based on the performance, frame-by-frame." Disney Compl. ¶ 27; Fox Compl. ¶ 27; Paramount Compl. ¶ 25. The output files can be used for many different applications, such as "retargeting" the actor's face onto another real or fictional face. Disney Compl. ¶ 33; Fox Compl. ¶ 36; Paramount Compl. ¶ 34.

In many ways, this case is the successor to an earlier litigation between Rearden ETC. Beginning in February 2015, Rearden LLC engaged in a dispute with Shenzhenshi Haitiecheng Science and Technology Company ("SHST") over the ownership of the physical equipment and intellectual property associated with the MOVA technology.¹ See Shenzhenshi, et al. v. Rear den, et al., No. 15–CV–00797 JST, ECF No. 1 (N.D. Cal. Feb. 20, 2015). SHST is a Chinese entity associated with Digital Domain 3.0 Inc. ("DD3"). See Shenzhenshi, et al. v. Rearden, et al., No. 15–CV–00797 JST, ECF No. 427, 2017 WL 3446585 (N.D. Cal. Aug. 11, 2017). On August 11, 2017, this Court found that "VGH does not own the Mova Assets because Rearden owns them." See id. at 18.

Now, Plaintiffs Rearden LLC and Rearden Mova LLC (collectively, "Rearden") bring suit against movie studios who allegedly contracted with DD3 "to provide facial performance capture services and output files made with the patented MOVA Contour system and methods." Disney Compl. ¶ 93; Fox Compl. ¶ 95; Paramount Compl. ¶ 92. Rearden alleges that this technology was used in major motion picture films including Beauty and the Beast , Deadpool , and Terminator: Genisys . Disney Compl. ¶ 105; Fox. Compl. ¶ 111; Paramount Compl. ¶ 92.

II. REQUEST FOR JUDICIAL NOTICE

Pursuant to Federal Rule of Evidence 201(b), "[t]he court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." On a motion to dismiss, the court may also "consider materials incorporated into the complaint" when "the complaint necessarily relies upon a document or the contents of the document are alleged in a complaint, the document's authenticity is not in question and there are no disputed issues as to the document's relevance." Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010). This is true even if "the plaintiff does not explicitly allege the contents of that document in the complaint." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). The court "must take judicial notice if a party requests it and the court is supplied with the necessary information." Fed. R. Evid. 201(c)(2). However, courts "cannot take judicial notice of the contents of documents for the truth of the matters asserted therein when the facts are disputed." Cal. Sportfishing Prot. All. v. Shiloh Grp., LLC, 268 F.Supp.3d 1029, 1038 (N.D. Cal. 2017) ; see also Lee v. City of Los Angeles, 250 F.3d 668, 689–90 (9th Cir. 2001) (courts may not take judicial notice of disputed facts stated in public records).

Defendants request the Court judicially notice ten exhibits that the complaint incorporates by reference: (1) the March 27, 2013 letter; (2) the Beauty and the Beast motion picture DVD/Blu-ray disc set containing a featurette titled "Beauty of a Tale;" (3) an article with an embedded video entitled "Watch the crazy way ‘Beauty and the Beast ’ turned Dan Stevens into a monster"; (4) the Deadpool motion picture DVD/Blu-ray disc set containing a featurette titled "From Comics to Screen...to Screen: MAGIC!"; (5) the Fantastic Four motion picture Blue-ray disc containing a featurette titled "Powering up: Superpowers of the Fantastic Four ;" (6) an article titled "Fantastic Five"; (7) the Terminator: Genisys DVD/Blu-ray disc set containing a featurette titled "Upgrades: VFX of Terminator Genisys "; (8) an article titled "Terminator Genisys : Sheldon Stopsack—VFX Supervisor—MPC"; (9) a video titled "Terminator Genisys : Creating a Fully Digital Schwarzenegger"; and (10) a video titled "How Benjamin Button Got His Face." ECF No. 37.² Rearden does not oppose these requests. The court will take judicial notice of the materials included and referenced in Exhibits 1 to 10.

III. LEGAL STANDARD

While a complaint need not contain detailed factual allegations, facts pleaded by a plaintiff must be "enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual matter that, when accepted as true, states a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. While this standard is not a probability requirement, "[w]here a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (internal quotation marks and citation omitted). In determining whether a plaintiff has met this plausibility standard, the Court must "accept all factual allegations in the complaint as true and construe the pleadings in the light most favorable" to the plaintiff. Knievel, 393 F.3d at 1072. If the motion to dismiss is granted, the court should grant leave to amend "even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995) (internal quotation marks and citation omitted).

IV. DISCUSSION

A. Copyright Infringement

To establish copyright infringement Plaintiff must prove (1) ownership of a copyright, and (2) copying of protectable expression by Defendants. See Design Data Corp. v. Unigate Enter., Inc., 847 F.3d 1169, 1173 (9th Cir. 2017). Defendants generally argue that Rearden's copyright claims fail because Rearden "cannot show that the copyright in the software program extends to the output files; and even if it could, Rearden cannot show that the CG characters or the movies are derivative works of the film." ECF No. 36 at 14. Rearden responds that it plausibly alleges that the MOVA Contour program performs substantially all the operations in creating the output and that this is enough to plead a plausible claim that Rearden is the author of the output. ECF No. 47 at 12–13. Rearden also argues that the "complaint includes detailed allegations explaining how the CG characters in defendants' films, incorporate, and are therefore derived from, the MOVA Contour program's outputs." Id. at 20.

The Ninth Circuit recently acknowledged that some authorities "suggest that the copyright protection afforded a computer program may extend to the program's output if the program ‘does the lion's share of the work’ in creating the output and the user's role is so ‘marginal’ that the output reflects the program's contents." Design Data Corp. v. Unigate Enter., Inc., 847 F.3d 1169, 1173 (9th Cir. 2017) (quoting Torah Soft Ltd. v. Drosnin, 136 F.Supp.2d 276, 283 (S.D.N.Y. 2001) ). The program at issue in Design Data produced two and three dimensional drawings and models of structural steel components and generated files that contained information related to a project. Design Data Corp. v. Unigate Enter., Inc., 63 F.Supp.3d 1062, 1063–64 (N.D. Cal. 2014), aff'd in part, rev'd in part, 847 F.3d 1169 (9th Cir. 2017). The plaintiff argued that the program's copyright extended to its outputs, including the files and images generated by the program. Id. at 1067. The district court held that the files and other documents produced by the program are not covered by the copyright and that the drawings might be copyrightable "but they are not automatically entitled to protection as the output" of the program. Id. at 1068.

On appeal the Ninth Circuit left open the question of whether copyright extends to a program's output. See id. at 1173. ("Assuming, without deciding, that copyright...