Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-01230/USCOURTS-azd-2_14-cv-01230-0/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 28:1338 Copyright Infringement

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WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Stremor Corp., 

Plaintiff, 

v. 

Brandon Wirtz; Blackwater Ops, 

Defendant.

No. CV-14-01230-PHX-NVW

ORDER 

Before the Court is Defendants’ Motion to Add as Counterdefendants William 

Irvine, Stephen Melzer, and Mark Allen (Doc. 64). 

I. BACKGROUND 

Plaintiff Stremor Corp. is an Arizona corporation that develops and sells software 

programs that are distributed, licensed, and used via the Internet. It claims ownership of 

a natural language processing (“NLP”) technology and a separate program named 

“Stremor-Cache,” which is used to enhance the performance of Stremor’s NLP 

technology through caching. 

Defendant Brandon Wirtz is the sole proprietor of Blackwater Ops. Wirtz has 

applied for U.S. copyright registration for certain software products. Blackwater Ops 

holds the right to license Wirtz’s products. From approximately February 2012 to May 

2014, Wirtz was employed by Stremor as its Chief Technology Officer. 

When Wirtz joined Stremor, he brought with him software technology and 

allowed Stremor to use certain aspects of the technology to improve the performance of 

certain aspects of Stremor’s NLP technology. Stremor claims that it assessed Wirtz’s 

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software technology and then developed Stremor-Cache “starting from scratch.” Stremor 

alleges that Stremor-Cache is completely new source code and “Stremor’s NLP 

technology is an original work resulting from independent design and creative and 

inventive efforts of Stremor’s employees.” Stremor further alleges that the codes of 

Wirtz’s technology and Stremor-Cache are distinctly different, and Stremor does not 

infringe, induce infringement, or contribute to any valid and enforceable copyrights held 

by Defendants. Stremor alleges that Wirtz has made false claims of copyright 

infringement to potential clients and companies with which Stremor has existing or 

potential relationships. 

Wirtz seeks leave to add as counterdefendants William Irvine, Stephen Melzer, 

and Mark Allin, officers and board members of Stremor. Wirtz alleges that the proposed 

counterdefendants were involved in or otherwise approved actions against Wirtz, 

including fraud, wrongful termination, unfair competition/trade secret misappropriation, 

direct and indirect copyright infringement, and negligent representation. The proposed 

counterdefendants were previously named as defendants in state court litigation by Wirtz, 

which apparently Wirtz dismissed after Stremor initiated this federal court action on June 

4, 2014. On June 9, 2014, Wirtz filed an answer with a counterclaim for copyright 

infringement and injunctive relief. On June 11, 2014, Stremor filed its first amended 

complaint, adding Blackwater as a defendant. Stremor’s initial complaint and the first 

amended complaint both alleged two counts: (1) Declaratory Judgment of NonInfringement of Copyright and (2) Temporary Restraining Order and Preliminary 

Injunction. On June 12, 2014, a preliminary injunction hearing was held during which 

the parties reached an agreement that was stated on the record and filed on June 13, 2014. 

On July 25, 2014, Stremor filed its Second Amended Verified Complaint for 

Declaratory Judgment (Doc. 48), which alleges three counts: (1) “Declaratory Judgment 

of Non-Infringement of Copyright”; (2) “Breach of Contract—Section 5 of At-Will 

Employment, Non-Disclosure, and Non-Competition Agreement”; and (3) “Preliminary 

Injunction and Permanent Injunction.” It alleges original jurisdiction relating to 

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copyrights under 28 U.S.C. §§ 1331 and 1338(a). It does not allege supplemental 

jurisdiction under 28 U.S.C. § 1367. 

On August 29, 2014, Wirtz and Blackwater filed answers to the Second Amended 

Complaint for Declaratory Judgment and counterclaims. On September 8, 2014, the 

answers and counterclaims were stricken for failure to obtain leave of Court to add 

counterdefendants. On September 19, 2014, Wirtz and Blackwater filed the instant 

motion to do so and lodged their proposed answers and counterclaims. The proposed 

pleadings include two federal copyright infringement claims and fourteen additional 

claims, which appear to be based on state law and employment-related agreements 

between Wirtz and Stremor.1

 On October 13, 2014, Stremor responded to Defendants’ 

motion to add counterdefendants. On October 23, 2014, Defendants filed a reply in 

support of their motion. 

II. ANALYSIS 

Stremor opposes Stremor’s motion to add counterdefendants for several reasons, 

including that the Court lacks supplemental jurisdiction over Defendants’ state law 

claims. It also contends that, even if the Court has supplemental jurisdiction, it should 

decline to exercise it because Wirtz’s state law counterclaims will predominate over the 

narrow issues raised in Stremor’s copyright infringement action. 

“[I]n any civil action of which the district courts have original jurisdiction, the 

district courts shall have supplemental jurisdiction over all other claims that are so related 

to claims in the action within such original jurisdiction that they form part of the same 

case or controversy under Article III of the United States Constitution.” 28 U.S.C. 

§ 1367(a). “A state law claim is part of the same case or controversy when it shares a 

 1

 Proposed Counterclaim III is titled “Misappropriation of Trade Secrets Under 

Federal and Arizona Law, A.R.S. § 401” and refers to “unfair trade practices in violation 

of the Arizona Uniform Trade Secrets Act and Federal law” without identifying the 

“Federal law” involved. Other proposed counterclaims include fraud, negligent 

misrepresentation, breach of contract, etc. 

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‘common nucleus of operative fact’ with the federal claims and the state and federal 

claims would normally be tried together.” Bahrampour v. Lampert, 356 F.3d 969, 978 

(9th Cir. 2004). 

Stremor describes its Second Amended Complaint as “a fairly straightforward and 

narrow claim” requiring “a fairly narrow and technical scope of litigation arising from a 

fairly narrow sets [sic] of facts and conduct.” It states: “All of Wirtz’s [state law] claims 

arise from his pre-termination employment status, while, to the contrary, Stremor’s 

claims arise from a narrow analysis of software packages, which ultimately may turn on a 

question of law as to whether infringement exists.” (Doc. 69 at 5.) Stremor’s assertion 

that the numerous facts regarding Wirtz’s employment are irrelevant to the copyright 

infringement question is corroborated by Wirtz’s motion to strike specific paragraphs of 

the first amended complaint. (Doc. 39.) Wirtz contended then, before Stremor added a 

breach of contract claim, that “the substance of the claim brought by Plaintiff involves 

the question as to whether Plaintiff’s technology utilizes Defendant’s intellectual property 

and whether any such use is valid.” Wirtz objected to Stremor including factual 

allegations about the parties’ employment relationship that were “distracting and 

ultimately irrelevant to the claims.” The Court agrees with both parties and finds 

Stremor’s federal copyright infringement claim and its state law breach of contract claim 

do not share a “common nucleus of operative fact” and thus are not so related that they 

form part of the same case or controversy necessary for supplemental jurisdiction. 

Likewise, Defendants’ proposed state law counterclaims are not so related that they form 

part of the same case or controversy as Stremor’s and their federal copyright 

infringement claims. 

Even if the Court had supplemental jurisdiction over Stremor’s state law claim, it 

would decline to exercise jurisdiction. “The district courts may decline to exercise 

supplemental jurisdiction over a claim under [28 U.S.C. § 1367(a)] if . . . the claim 

substantially predominates over the claim or claims over which the district court has 

original jurisdiction.” 28 U.S.C. § 1367(c)(2). “In exercising its discretion to decline 

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supplemental jurisdiction, a district court must undertake a case-specific analysis to 

determine whether declining supplemental jurisdiction comports with the underlying 

objective of most sensibly accommodating the values of economy, convenience, fairness 

and comity.” Bahrampour, 356 F.3d at 978 (internal quotation marks and citations 

omitted). Although Stremor describes its Second Amended Complaint as “a fairly 

straightforward and narrow claim,” more than 30 of its 96 paragraphs allege facts related 

to Wirtz’s employment and unrelated to the “narrow analysis of software packages” 

required to determine copyright infringement. Trying the parties’ employment and 

contractual disputes will be fact intensive, involving who said what to whom and with 

what economic consequences in a complicated market. Trying the federal copyright 

infringement claims likely will involve expert analysis of program code with limited fact 

witness testimony, thus requiring minimal fact discovery and no analysis of “personal 

animus.” Trying these claims together would not accommodate the values of economy 

and convenience. 

Similarly, Defendants’ proposed counterclaims include fourteen state law claims 

that are not part of the same case or controversy, but even if they were, the Court would 

decline to exercise supplemental jurisdiction because they would substantially 

predominate over the federal claims. Moreover, based on Defendants’ proposed 

pleading, it appears unlikely that Defendants will allege that the proposed individual 

counterdefendants, Irvine, Melzer, and Allin, have individual liability for Stremor’s 

copyright infringement actions. 

In summary, the Court has original jurisdiction over Count One of the Second 

Amended Verified Complaint for Declaratory Judgment (Doc. 48). This narrow claim is 

limited to whether Stremor has infringed Wirtz’s2

 purported federal copyrights in specific 

software technology and does not include alleged violations of “any other federal or state, 

 2

 None of the pleadings have yet alleged facts showing that Blackwater Ops is a 

proper party for either side’s copyright infringement claims. 

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statute, or common laws” despite a passing reference to such. Count Two of the Second 

Amended Verified Complaint for Declaratory Judgment claims breach of an employment 

contract, a state law claim over which the Court does not have supplemental jurisdiction 

and would decline to exercise supplemental jurisdiction for the reasons stated herein. 

Count Three of the Second Amended Verified Complaint for Declaratory Judgment seeks 

injunctive relief against Wirtz for conduct inconsistent with the declaratory judgment 

sought in Count One. Until Stremor obtains a declaratory judgment of non-infringement, 

it is premature for Stremor to seek injunctive relief to prevent actions that Wirtz may or 

may not be entitled to take. Therefore, the Second Amended Verified Complaint for 

Declaratory Judgment (Doc. 48) will be dismissed with leave to file a further amended 

complaint alleging only its narrow claim for declaratory judgment regarding copyright 

infringement. 

If Plaintiff files a further amended complaint, Defendants may file a responsive 

pleading that conforms to the Court’s findings in this Order. That is, the Court does not 

have supplemental jurisdiction over state law claims regarding Wirtz’s employment 

relationship with Stremor. Further, Defendants may not add counterdefendants to this 

litigation without seeking leave of the Court and alleging a factual basis for each 

proposed counterdefendant’s liability under each of Defendants’ federal copyright 

infringement claims. 

These findings have rendered moot many of the parties’ arguments, e.g., whether 

under these circumstances Defendants are entitled to add counterdefendants without leave 

of court, whether joinder of the proposed counterdefendants is required, whether the 

proposed counterclaims are futile, etc. 

IT IS THEREFORE ORDERED that in this narrow copyright infringement action 

the Court does not have supplemental jurisdiction over state law claims related to 

Plaintiff Stremor Corp.’s employment of or relationship with Defendant Brandon Wirtz. 

IT IS FURTHER ORDERED that the Second Amended Verified Complaint for 

Declaratory Judgment (Doc. 48) is dismissed with leave to file by December 19, 2014, a 

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further amended complaint alleging only a claim for declaratory judgment of noninfringement of copyright and only facts directly relevant to the claim. 

IT IS FURTHER ORDERED that if Plaintiff files a further amended complaint by 

December 19, 2014, Defendants may file a responsive pleading by January 9, 2015. 

 IT IS FURTHER ORDERED that Defendants’ Motion to Add as 

Counterdefendants William Irvine, Stephen Melzer, and Mark Allen (Doc. 64) is denied 

as moot. 

Dated this 4th day of December, 2014. 

Neil V. Wake

United States District Judge

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