Softketeers, Inc. v. Regal W. Corp.

• Decision Date: 27 December 2022
• Docket Number: 8:19-CV-00519-JWH (JDEx)
• Parties: SOFTKETEERS, INC., Plaintiff, v. REGAL WEST CORPORATION d/b/a REGAL LOGISTICS, a Washington corporation; VU HO INC., a California corporation; THAI TRAN INC., a California corporation; DON MAI INC., a California corporation; RANDY NEEVES, an individual; VU HO, an individual; THAI QUOC TRAN, an individual; DON MAI, an individual; TRUNG NGOC DOAN, an individual; and DONG BAO PHAM, an individual, Counterclaimants, v. SOFTKETEERS, INC., a California corporation, and MINH KHAI NGUYEN, an individual, Counterdefendants.
• Court: U.S. District Court — Central District of California

SOFTKETEERS, INC., Plaintiff, v. REGAL WEST CORPORATION d/b/a REGAL LOGISTICS, a Washington corporation; VU HO INC., a California corporation; THAI TRAN INC., a California corporation; DON MAI INC., a California corporation; RANDY NEEVES, an individual; VU HO, an individual; THAI QUOC TRAN, an individual; DON MAI, an individual; TRUNG NGOC DOAN, an individual; and DONG BAO PHAM, an individual, Counterclaimants, v. SOFTKETEERS, INC., a California corporation, and MINH KHAI NGUYEN, an individual, Counterdefendants.

No. 8:19-CV-00519-JWH (JDEx)

United States District Court, C.D. California

December 27, 2022

FINDINGS OF FACT AND CONCLUSIONS OF LAW FOLLOWING BENCH TRIAL ON COUNTERDEFENDANTS' FIFTH COUNTERCLAIM SIXTH COUNTERCLAIM, AND SEVENTH COUNTERCLAIM, AND DEFENDANTS' FIFTH AFFIRMATIVE DEFENSE, SIXTH AFFIRMATIVE DEFENSE, AND TWELFTH AFFIRMATIVE DEFENSE

JOHN W. HOLCOMB UNITED STATES DISTRICT JUDGE

I. BACKGROUND

This lawsuit has begun to rival the fabled fictional case of Jarndyce and Jarndyce in terms of the time complexity, and resources expended by the parties and the Court.^[1] The case arises out of a dispute over the use and ownership of software designed for warehousing and logistics applications.^[2] From 2000 to 2019, Plaintiff and Counterdefendant Softketeers, Inc. created and maintained several computer software programs used by Defendant and Counterclaimant Regal West Corporation (doing business as Regal Logistics), a third-party logistics company. Regal provides warehousing, cross-docking, transportation, and assembly and repackaging services.^[3] Regal terminated its relationship with Softketeers on February 1, 2019.^[4]

Softketeers commenced this action in March 2019, asserting claims for relief for, inter alia, copyright infringement, trade secret misappropriation, and breach of contract.^[5] In response, Regal and its fellow Defendants and Counterclaimants^[6] raised numerous affirmative defenses and counterclaims against Softketeers and its principal owner, Counterdefendant Minh Nguyen.^[7]Related to those claims and defenses are the following 10 copyright registrations that Softketeers obtained from the U.S. Copyright Office:^[8]

• TXu 2-130-748 (MyWMS's unpublished back-end);

• TXu 2-130-747 (YMS);

• TXu 2-130-746 (RF Systems);

• TXu 2-130-648 (WMS VB 6.0);

• TXu 2-130-025 (WMS Services);

• TXu 2-130-024 (TMS);

• TXu 2-129-947 (WMS C#);

• TXu 2-129-946 (WMS VB.NET);

• TX008730600 (MyWMS's public front-end); and

• TX008720835 (TMS Mobile iOS).^[9]

Of those works, the first eight-the TXu registrations-are unpublished, and the last two-the TX registrations-are published.

After several years of pretrial litigation, the parties proceeded to trial in September 2021.^[10] The parties agreed that certain matters would be tried to the jury while others would be tried to the Court.^[11] The latter included the following claims and defenses of Defendants and Counterclaimants:

• their fifth counterclaim for a declaratory judgment that Regal owns the software copyright;

• their sixth counterclaim for a declaratory judgment that Counterdefendants' copyright registrations are invalid due to fraud on the U.S. Copyright Office;

• their seventh counterclaim for a declaratory judgment that Regal has an implied license to use, retain, and modify the software;

• their fifth affirmative defense of copyright misuse;

• their sixth affirmative defense of fraud on the Copyright Office; and

• their twelfth affirmative defense of equitable estoppel.

On the first day of trial, Softketeers moved to dismiss without prejudice its copyright infringement claim regarding the two published works, Registration Nos. TX008730600 and TX008720835.^[12] Accordingly, the jury did not consider those copyright registrations when Softketeers tried its claim for copyright infringement.^[13]

On September 23, the jury rendered a verdict that was almost entirely in favor of Softketeers and Minh Nguyen.^[14] The parties subsequently provided briefing on the counterclaims and affirmative defenses to be tried by this Court,^[15] and they also filed several additional post-trial motions.^[16] The Court conducted a hearing on November 30, during which Defendants confirmed that they briefed their motion under Rule 50(a) of the Federal Rules of Civil Procedure^[17] merely to preserve their positions on various issues. Accordingly, the Court ruled from the bench and denied Defendants' Rule 50(a) motion.^[18] The Court then asked the parties for supplemental briefing regarding the implications of that ruling on the outstanding counterclaims and affirmative defenses. On December 3, Softketeers filed their supplemental brief,^[19] and Defendants responded a week later.^[20] The Court issued a tentative order and conducted a hearing on January 11, 2022.

During that hearing, Softketeers orally moved to dismiss its claim for copyright infringement for those two published works with prejudice. Defendants responded by filing a notice of non-opposition to that motion, so long as it did not affect their right to pursue their counterclaims.^[21] The Court subsequently granted Softketeers's motion.^[22] On January 21, 2022, Softketeers filed a notice of voluntary cancellation of its copyright registrations for TX008730600 and TX008720835.^[23]

After considering the briefs filed in support and opposition, as well as the arguments made by counsel during the various hearings, the Court finds in favor of Softketeers on each affirmative defense and in favor of Softketeers and Minh Nguyen on each counterclaim, except with regard to two copyright registrations with respect to which the Court lacks jurisdiction, as explained below.

II. LEGAL STANDARD

As a general matter, parties in a civil lawsuit may waive or withdraw their Seventh Amendment right to a jury trial and request that certain claims be tried by the court. See Palmer v. Valdez, 560 F.3d 965, 968 (9th Cir. 2009); Fed.R.Civ.P. 38(d). In those circumstances, the Court serves as the trier of fact. Fed.R.Civ.P. 52(a). In this case, the Court serves in that capacity with respect to Defendants' affirmative defenses and Counterclaimants' counterclaims that are the subject of this Order. Defendants bear the burden of “prov[ing] the elements of [an] affirmative defense by a preponderance of the evidence.” United States v. Beasley, 346 F.3d 930, 935 (9th Cir. 2003). Similarly, in their counterclaims for declaratory relief, Counterclaimants bear the burden of proving their entitlement to a declaratory judgment under the same standard. Cf. Medtronic, Inc. v. Mirowski Fam. Ventures, LLC, 571 U.S. 191, 199 (2014).

When both legal claims and equitable claims exist in a case, the jury's implied findings on legal claims are controlling. See GTE Sylvania Inc. v. Continental T.V., Inc., 537 F.2d 980, 986 n.7 (9th Cir. 1976) (“When issues common to both legal and equitable claims are to be tried together, the legal issues are to be tried first, and the findings of the jury are binding on the trier of the equitable claims.”).

Moreover, even when parties ask the court to try claims that do not clearly sound in equity, the jury's verdict constrains the court's factual findings, especially when the verdict is not advisory. See, e.g., Consol. Rail Corp. v. Grand Trunk W. R. Co., 2012 WL 3731741, at *2 (E.D. Mich. Aug. 29, 2012) (in a case where some claims were decided by the jury and a claim for declaratory judgment was submitted to the court, the district court held that it was “required to take into account the jury verdict and is precluded from issuing findings of fact that contradict the jury's decision”); see also Westinghouse Elec. Corp. v. Gen. Cir. Breaker & Elec. Supply Inc., 106 F.3d 894, 901 (9th Cir. 1997) (affirming the district court in drawing “inferences from the verdicts to determine the issues that the presumptively rational jurors must have determined, and then used those implicit findings of fact as the basis for judgment as to certain issues”); Ag Servs. of Am., Inc. v. Nielsen, 231 F.3d 726, 731 (10th Cir. 2000) (holding that the court “must consider what findings are explicit or necessarily implied by the verdict”). However, when the verdict is advisory in nature, “the Court is free to accept or reject the advisory jury's findings, in whole or in part, and is obligated to make its own independent assessment of the issues submitted to the advisory jury.” Hannibal Pictures, Inc. v. Sonja Prods., LLC, 2009 WL 10673572, at *1 (C.D. Cal. Aug. 31, 2009), aff'd, 432 Fed.Appx. 700 (9th Cir. 2011).

When interpreting jury verdicts, the Court must assume that the jury followed its instructions faithfully. See Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 604 (1985).

III. DISCUSSION

A. Counterclaimants' Fifth Counterclaim

In their fifth counterclaim, Counterclaimants seek a declaratory judgment that Regal owns the copyright rights to the software at issue in this case.^[24]Counterclaimants argue that Regal is the exclusive owner of the software,^[25]either on account of the work-for-hire doctrine^[26] or the loaned servant doctrine.^[27] In the alternative, Counterclaimants contend that the evidence shows that Regal is, at a minimum, a co-author and, therefore, a co-owner of the copyright rights to the software.^[28]

1. The Two Published Works at Issue

Before reaching the merits of those arguments, Softketeers's decision to cancel two of its copyright registrations-TX008730600 (MyWMS's public front-end) and TX008720835 (TMS Mobile iOS), both of which are published works-raises a question of whether this Court retains jurisdiction over a counterclaim involving their ownership.

The Declaratory Judgment Act provides that “[i]n a case of actual controversy within its jurisdiction . . . any court of the...