Streamcast Networks v. Skype Technologies, S.A.
| Decision Date | 19 January 2007 |
| Docket Number | No. CV 06-391 FMC (Ex).,CV 06-391 FMC (Ex). |
| Citation | 547 F.Supp.2d 1086 |
| Court | U.S. District Court — Central District of California |
| Parties | STREAMCAST NETWORKS, INC., Plaintiff, v. SKYPE TECHNOLOGIES, S.A., et al., Defendants. |
Charles S. Baker, David L. Burgert, Eric D. Wade, Porter and Hedges, Houston, TX, Daniel J. Woods, Gary S. Sedlik, Matthew P. Lewis, White & Case, Los Angeles, CA, for Plaintiff.
Benjamin F. Chapman, Joseph S. Leventhal, Michael G. Rhodes, Philip C. Tencer, Cooley Godward Kronish, San Diego, CA, Lance A. Etcheverry, Peter Bradley Morrison, Thomas J. Nolan, Skadden Arps Slate Meagher and Flom, Mark A. Albert, Roderick G. Dorman, Hennigan Bennett & Dorman, Los Angeles, CA, James A. Sedivy, Jeffrey P. Alpert, Jeffrey F. Gersh, Gershkaplan, Encino, CA, for Defendants.
ORDER GRANTING MOTION # 1 OF DEFENDANTS NIKLAS ZENNSTROM, SHARMAN NETWORKS, LTD., KEVIN BERMEISTER, BRILLIANT DIGITAL ENTERTAINMENT, INC, JOLTID LTD., JOLTID OU. LA GALIOTE, B.V., AND INDIGO INVESTMENTS, B.V. TO DISMISS PLAINTIFF'S SECOND AMENDED COMPLAINT
This matter is before the Court on Defendants Niklas Zennstrom, Sharman Networks, Ltd., Kevin Bermeister, Brilliant Digital Entertainment, Inc., Joltid Ltd., Joltid OU, La Galiote, B.V., and Indigo Investments, B.V.'s Motion (# 1) to Dismiss Plaintiffs Second Amended Complaint (docket no. 155), filed on December 4. 2006. The Court has read and considered the moving, opposition and reply documents submitted in connection with the Motion. The Court deems this matter appropriate for decision without oral argument. See Fed.R.Civ.P. 78; Local Rule 7-15. According, the hearing set for January 22, 2007 is removed from the Court's calendar. For the reasons and in the manner set forth below, Defendants' Motion is GRANTED, with prejudice.
Plaintiff, StreamCast Networks, Inc. ("StreamCast") seeks relief for injuries ansing out of Defendants' purported orchestration of "an elaborate over-seas shell game in an attempt to steal and wrongfully profit from technology that rightfully belongs to StreamCast." Second Amended Complaint ("SAC") ¶ 1. StreamCast alleges that, on or about March 22, 2001, it entered into a license agreement with Defendant Kazaa, B.V. ("Kazaa") for the rights in and to a peer-to-peer ("P2P") software application known as FastTrack. Id. ¶¶ 26, 30. In or about April 2001, StreamCast began distributing the FastTrack software to the public under the brand name "Morpheus," which allowed end users to search for, find, and download almost any type of digital file over the Internet. Id. ¶ 31.
StreamCast continued to operate the Morpheus FastTrack network with great success until February 25, 2002, when Defendant Kazaa and others, acting pursuant to a premeditated plan, allegedly activated a hidden "disabling" feature within the FastTrack software, effectively shutting down the network. Id. ¶¶ 34-35, 45. Overnight, StreamCast's entire Morpheus user base of over 28 million people was "tunneled" to Defendant Sharman Networks, Ltd. ("Sharman Networks"), which had recently acquired the FastTrack P2P technology from Kazaa. Id. ¶¶ 43, 46.
StreamCast alleges that the transfer of the FastTrack technology from Kazaa to Sharman Networks occurred in violation of a provision in the March 22, 2001 license agreement providing StreamCast with a right of first refusal in the purchase of FastTrack and/or any other assets of Kazaa. Id. ¶¶ 29-30, 43. StreamCast further alleges that the resultant increase in the Sharman Networks/Kazaa user base created a "networks effect" momentum "that no other P2P market, company, technology or network was able to match," such that Sharman Networks/Kazaa "achieved undeniable world dominance of the file-sharing market." Id. ¶¶ 49-50.
In an attempt to revive its Morpheus network and regain its former market share, StreamCast promptly searched for a new (non-FastTrack) file-sharing program. Id. ¶ 51. It eventually settled on "Gnutella," which used a "broadcast query algorithm rather than super nodes," making it slower to respond to user searches than FastTrack. Id. Although many users returned to Morpheus upon its re-launch (in March 2002), they quickly became frustrated and "swung away" to Kazaa or "later new entrants." Id. ¶ 52.
StreamCast continued to operate the Morpheus network using Gnutella, albeit with fewer users, until February 2004, when it added the ability for its users to also connect to the eDonkey and G2 P2P networks. Id. ¶ 56. In September of 2004, it acquired a new P2P file-sharing technology platform based upon a technology called Skyris, that allowed users to connect to Gnutella, eDonkey, G2 and a new "Neo Network." Id. As a result of this effort, StreamCast has been able to re-build its Morpheus user base back up to 6 million unique monthly users. Id. ¶ 57.
In the interim, Defendants Zennstrom and Friis, with assistance from Defendant Bermiester and unknown others, formed a Luxembourg company called Skype Technologies ("Skype"). Id. ¶ 60. These same individuals then orchestrated a transfer of the "source code" and "core" FastTrack technology to Skype, which Skype adapted to offer internet-based voice communications ("VoIP") services to consumers worldwide. Id. ¶¶ 59-61.
On September 5, 2005, eBay, Inc. ("eBay") purchased Skype for a price in excess of $4.1 billion. Id. ¶ 63. Shortly thereafter, on January 20, 2006, StreamCast filed its Original Complaint in this action for (1) violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"); (2) breach of contract; (3) civil conspiracy; (4) unfair competition (Cal. Bus. & Prof.Code § 17200 et seq.); (5) fraudulent transfer under Cal. Civ.Code § 3439.01 et seq.; (6) unjust enrichment (7) constructive trust; (8) declaratory judgment; (9) interference with contract; (10) interference with prospective economic advantage; and (11) conversion. The following individuals and entities were named as Defendants: (1) Skype Technologies, S.A.; (2) Niklas Zennstrom; (3) Janus Friis; (4) Kazaa, B.V.; (5) Joltid, Ltd., (6) Joltid OU; (7) Blastoise, Ltd.; (8) Bluemoon OU; (9) LA Galiote, B.V.; (10) Indigo Investments, B.V.; (11) Brilliant Digital Entertainment, Inc.; (12) Sharman Networks, Ltd.; (13) Kevin Bermiester; and (14) John Does 1-10 inclusive.
Streamcast filed a First Amended Complaint ("FAC") on May 22, 2006, adding additional Defendants Mark Dyne; Altnet, Inc.; Fasttrack, B.V.; Consumer Empowerment, B.V.; Murray Markiles; LEF Interactive PTY, Ltd.; Eurocapital Advisors, LLC; and Nicole Hemming. The FAC also added new causes of action for (1) violation of the RICO; (2) conspiracy to restrain trade in violation of § 1 of the Sherman Act and §§ 4 and 16 of the Clayton Act; and (3) conspiracy to monopolize, attempt to monopolize and monopolization in violation of § 2 of the Sherman Act and §§ 4 and 16 of the Clayton Act.
On September 14, 2006, the Court issued three separate Orders addressing various Defendants' motions to dismiss. First, the Court Granted Defendants Mark Dyne, Murray Markiles, and Altnet, Inc.'s Motion to Dismiss Plaintiffs First Amended Complaint on Statute of Limitations Grounds, thereby dismissing StreamCast's First through Fourth and Sixth through Fourteenth causes of action against said Defendants. Second, the Court Granted in Part and Denied in Part Defendants Brilliant Digital Entertainment, Inc. and Kevin Bermeister's Motion to Dismiss, dismissing StreamCast's Sixth (civil conspiracy), Ninth (unjust enrichment), Tenth (constructive trust). Twelfth (intentional interference with contract), Thirteenth (intentional interference with prospective economic advantage) and Fourteenth (conversion) causes of action against said Defendants. Finally, pursuant to the Court's Order Granting Defendants Mark Dyne, Murray Markiles, Kevin Bermeister, Brilliant Digital Entertainment, Inc. and Altnet, Inc.'s Motion to Dismiss Plaintiffs First Amended Complaint under Fed.R.Civ.P. 12(b)(6), StreamCast's First and Second claims for relief under the RICO were dismissed with prejudice as to Defendants Bermeister and Brilliant Digital Entertainment, Inc. Concomitantly, StreamCast was granted leave to amend its antitrust claims (Third and Fourth causes of action), to allege, if possible "the existence of a relevant geographic and product market in which trade was unreasonably restrained or monopolized."
On November 2, 2006, StreamCast filed the SAC, asserting all fourteen of its prior causes of action against various combinations of the remaining nineteen Defendants, consistent with the Court's September 14, 2006 Orders.2 By means of the instant motion, Defendants Niklas Zennstrom, Sharman Networks, Ltd., Kevin Bermeister, Brilliant Digital Entertainment, Inc., Joltid Ltd., Joltid OU, La Galiote, B.V., and Indigo Investments, B.V. (hereinafter "Moving Defendants") seek to dismiss the Third and Fourth (antitrust) causes of action on the grounds that Plaintiff has failed to rectify the pleading defects identified in the Court's prior order and/or has otherwise failed to state a claim upon which relief can be granted. They further request that the Court decline to exercise supplemental jurisdiction over the remaining state law claims.
Rule 12(b) (6) of the Federal Rules of Civil Procedure permits a defendant to seek dismissal of a complaint that "fail[s] to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). The Court will not dismiss claims for relief unless the plaintiff cannot prove any set of facts in support of the claims that would entitle him to relief. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir.2002); see also Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1295 (9th Cir.1998). All material factual allegations in the complaint are assumed to be true and construed in the light most favorable to the plaintiff. Nursing Home...
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