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by Dabney Carr
In Maxient, LLC v. Symplicity Corp., Case No. 1:14CV1184, 2014 U.S. Dist. LEXIS 150542 (E.D.Va. Oct. 23, 2014) (found here) [an enhanced version of this opinion is available to lexis.com subscribers], Maxient, a developer of web-based software for student conduct records management, claimed that a competitor, Symplicity, posed as a customer to access its proprietary website and gain access to Maxient’s trade secrets. Maxient brought suit in state court alleging violations of the Virginia Trade Secrets Act and the Virginia Computer Crimes Act (VCCA) and a claim for unlawful use of encryption in criminal activity. Symplicity removed the case on the grounds that the Copyright Act preempted all of Maxient’s claims other than the claim under the Trade Secrets Act. On a Motion to Remand, Judge Trenga held that Maxient’s claims under the VCCA for using a computer to convert software and for computer trespass were preempted but held that a separate VCCA claim for using a computer to obtain property under false pretenses and Maxient’s claim for the unlawful use of encryption in criminal activity were not.
Judge Trenga followed a two-step analysis to determine whether the Copyright Act preempted Maxient’s claims. First, he quickly determined that the computer software at issue was “within the scope of the subject matter of copyright.” The second prong, however, required a determination of whether Maxient’s state law causes of action included elements instead of or in addition to acts of reproduction that would constitute copyright violations.
Judge Trenga noted that, while not dispositive, the gravamen of Maxient’s claim was the misappropriation of trade secrets through unlawful competitive intelligence gathering. Maxient did not claim that Symplicity accessed or copied any software or source code and did not claim any copyright protection over the information that Symplicity accessed.
Regardless, Judge Trenga held that one of Maxient’s VCCA claims for computer fraud and its VCCA claim for computer trespass were preempted. The preempted computer fraud claim imposed liability for the unauthorized use of a computer to convert property. Under Fourth Circuit law, a claim for conversion of intellectual property without any claim of the retention of a tangible object embodying the work is preempted. U.S. ex rel. Berge v. Board of Trustees of the Univ. of Alabama, 104 F.3d 1453, 1463 (4th Cir. 1997) [enhanced version]. The only element of the preempted VCCA claim beyond that necessary to prove copyright infringement was the use of a computer, which the Fourth Circuit has held does not add a qualitatively different element. Rosciszewski v Arete Assocs., Inc., 1 F.3d 225, 230 (4th Cir. 1993) [enhanced version].
Likewise, Judge Trenga held that Maxient’s claim for computer trespass was preempted because the only element of that claim beyond those required to prove copyright infringement was the use of a computer and “malicious intent.” The Fourth Circuit held in Rosciszewski, however, that “awareness or intent” altered an action’s scope but not its nature, and so is still in the nature of a claim for wrongful copying.
Maxient’s other VCCA claim for computer fraud, however, included the element of obtaining property under false pretenses, and so was not preempted. Likewise, Maxient’s claim for unlawful use of encryption to further criminal activity was likewise not preempted. The Court declined to exercise supplemental jurisdiction over the non-preempted claims or Maxient’s trade secret claim and so remanded those claims to state court.
Read more at Virginia IP Law by Troutman Sanders LLP.
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