UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

ARGUS & ASSOCIATES, INC.,

Plaintiff,

Case No. 09-11707

v. Hon. Gerald E. Rosen

DELMIA CORPORATION and

DASSAULT SYSTEMES,

Defendants.

_________________________________/

OPINION AND ORDER REGARDING

DEFENDANTS’ MOTION TO DISMISS

At a session of said Court, held in

the U.S. Courthouse, Detroit, Michigan

on February 18, 2010 

PRESENT: Honorable Gerald E. Rosen

Chief Judge, United States District Court

I. INTRODUCTION

Plaintiff Argus & Associates, Inc. commenced this suit in state court in January of

2009, asserting a variety of claims against Defendant Delmia Corporation and its parent

corporation, Defendant Dassault Systemes, arising from the special treatment allegedly

given by Defendants to Plaintiff’s competitors in the licensing and use of Defendants’

copyrighted software. Defendants removed the case to this Court on May 5, 2009, on the

ground that one or more of the claims asserted in Plaintiff’s complaint are completely

preempted by the federal Copyright Act, 17 U.S.C. § 101 et seq.
2

By motion filed on May 21, 2009, Defendants now seek the dismissal of each of

the claims asserted in Plaintiff’s complaint for failure to state a claim upon which relief

can be granted. In support of this motion, Defendants argue that most or all of Plaintiff’s

claims are preempted by the Copyright Act, and are defeated by Plaintiff’s lack of

standing as a non-exclusive licensee of Defendants’ copyrighted software. Alternatively,

to the extent that one or more of Plaintiff’s claims are governed by state law, Defendants

contend that these claims are deficient in various respects. In response, Plaintiff argues

that Defendants have mischaracterized its claims in this case, and that these claims,

properly understood, are neither preempted by the Copyright Act nor deficiently pled.

Defendants’ motion has been fully briefed by the parties. Having reviewed the

parties’ written submissions in support of and opposition to this motion, as well as the

remainder of the record, the Court finds that the pertinent facts, allegations, and legal

issues are sufficiently presented in these materials, and that oral argument would not

assist in the resolution of this motion. Accordingly, the Court will decide Defendants’

motion “on the briefs.” See Local Rule 7.1(e)(2), U.S. District Court, Eastern District of

Michigan. This opinion and order sets forth the Court’s rulings on this motion.

II. FACTUAL BACKGROUND

Defendants’ motion rests exclusively upon the allegations of Plaintiff’s complaint. 

Accordingly, the following recitation of facts derives exclusively from this source, with

Plaintiff’s allegations accepted as true for present purposes.
1

In their motion to dismiss, Defendants contend that Defendant Delmia is the sole author

and copyright holder of the iGrip software, but this disputed issue is not material to the Court’s

disposition of Defendants’ motion. 

2

Each “seat” entitles one user to use the software.

3

Plaintiff Argus & Associates, Inc. is in the business of designing, engineering, and

manufacturing robots and robotic systems for manufacturers in a variety of industries. In

performing this work, Plaintiff’s designers and engineers use a software package known

as “iGrip,” and Defendant Delmia Corporation and its parent corporation, Defendant

Dassault Systemes, are the copyright holders of the iGrip software.1

In December of 2005, Plaintiff entered into a Master License Agreement (“MLA”)

with Defendant Delmia, under which Plaintiff was granted a non-exclusive license to use

38 “seats” of the iGrip software.2

 The MLA imposed upon Plaintiff the obligation to

protect Defendants’ copyright, through such means as (i) Plaintiff’s promise that it would

not allow any third parties to use the software, and (ii) the imposition of a contractual

requirement that Plaintiff purchase enough “seats” of the software to cover each of its

designers and engineers. When Plaintiff signed the MLA, it did so with the

understanding that Defendants would “even the playing field” among their iGrip

customers, and that Defendants would take action to enforce their copyright against any

infringers. (Complaint at ¶ 16.)

According to the complaint, Plaintiff’s understanding as to Defendants’ promised

“even” treatment of iGrip customers stemmed from extensive discussions between the

parties in the months leading up to the execution of the MLA. In particular, Plaintiff
4

allegedly notified Defendants in late 2004 that other iGrip customers were infringing

Defendants’ copyright by sharing only one “seat” of the product among their employees

or using a demonstration version of the software. (See id. at ¶¶ 17-18.) At subsequent

meetings in the remainder of 2004 and early 2005, Plaintiff complained to Defendants’

representatives that “it would continue to lose substantial business opportunities if

Defendants refused to protect their copyright in the iGrip software.” (Id. at ¶ 19.) In

response, Defendants’ representatives “advised Plaintiff on several occasions that

Defendants would not institute an action to halt the copyright infringement,” and they

instead recommended that Plaintiff take its allegations of infringement to the Federal

Bureau of Investigation (“FBI”). (Id. at ¶¶ 20, 23.)

Pursuant to Defendants’ suggestion, Plaintiff passed its information regarding

infringement of Defendants’ software to the FBI. The FBI commenced an investigation,

and asked Plaintiff to refrain in the meantime from instituting litigation against any party

involved in the investigation. In late 2008, Plaintiff was advised that the FBI had

completed its investigation and that no further action would be taken. Plaintiff then

commenced this suit against Defendants in January of 2009, asserting claims of (i)

vicarious copyright infringement, (ii) breach of a duty of good faith and fair dealing, (iii)

tortious interference with contracts, business relations, or expectancies, (iv) unfair

competition, (v) breach of contract, and (vi) fraud in the inducement.

III. ANALYSIS

A. The Standards Governing Defendants’ Motion
5

Through the present motion, Defendants seek the dismissal of each of the claims in

Plaintiff’s complaint for “failure to state a claim upon which relief can be granted.” Fed.

R. Civ. P. 12(b)(6). When considering a motion brought under Rule 12(b)(6), the Court

must construe the complaint in the light most favorable to the plaintiff and accept all wellpled factual allegations as true. League of United Latin American Citizens v. Bredesen,

500 F.3d 523, 527 (6th Cir. 2007). Yet, “the tenet that a court must accept as true all of

the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v.

Iqbal, 129 S. Ct. 1937, 1949 (2009). Moreover, “[w]hile a complaint attacked by a Rule

12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s

obligation to provide the grounds of his entitlement to relief requires more than labels and

conclusions, and a formulaic recitation of the elements of a cause of action will not do.” 

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1964-65 (2007)

(internal quotation marks, alteration, and citations omitted). Rather, to withstand a

motion to dismiss, the complaint’s factual allegations, accepted as true, “must be enough

to raise a right to relief above the speculative level,” and to “state a claim to relief that is

plausible on its face.” Twombly, 550 U.S. at 555, 570, 127 S. Ct. at 1965, 1974. “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.” 

Iqbal, 129 S. Ct. at 1949.

B. Plaintiff’s Claim of Vicarious Copyright Infringement Is Preempted by the

Federal Copyright Act, and Is Subject to Dismissal for Lack of Standing.
6

As noted earlier, the removal of this case to this Court was premised upon

Defendants’ contention that one or more of Plaintiff’s claims are completely preempted

by the federal Copyright Act, thereby permitting the recharacterization of these claims as

arising under federal law. See Ritchie v. Williams, 395 F.3d 283, 285-87 (6th Cir. 2005)

(discussing the doctrine of complete preemption, and holding that the Copyright Act is

among the federal statutes that have such complete preemptive force). In seeking the

dismissal of Count I of Plaintiff’s complaint, captioned “Vicarious Infringement of

Copyright,” Defendants argue that this claim is governed by, and arises under, federal

copyright law. Defendants further contend that Plaintiff, as a non-exclusive licensee, is

precluded under federal copyright law from pursuing a claim of vicarious copyright

infringement. The Court agrees on both scores.

In Count I of the complaint, Plaintiff alleges that Defendants are liable for

vicarious infringement of their own copyright in the iGrip software, by virtue of their

failure to exercise their alleged power of supervision and control over the infringing

activities of their customers. As both sides agree, the courts have recognized a theory of

vicarious liability for copyright infringement, provided that the defendant “enjoys a direct

financial benefit from the infringing activity and has the right and ability to supervise the

infringing activity.” Bridgeport Music, Inc. v. Rhyme Syndicate Music, 376 F.3d 615, 621

(6th Cir. 2004) (internal quotation marks and citation omitted). Plaintiff here alleges that

Defendants exercised the requisite degree of supervision or control over the activities of

their infringing customers, in light of their close relationship with their “sales partners”
3

The complaint does not identify any statute or body of law, whether state or federal,

under which this claim purportedly arises. Plaintiff’s response to Defendants’ motion is

similarly unhelpful, characterizing Count I as “a common law business tort,” (Plaintiff’s

Response Br. at 8), but failing to indicate whether this is a state or federal common law claim.

7

that have infringed the iGrip copyright. (See Complaint at ¶ 30.)

It is quite clear, as a threshold matter, that Plaintiff’s claim of vicarious copyright

infringement arises under federal copyright law. This claim would not have arisen but for

some alleged transgression of the rights that the Copyright Act confers upon Defendants

as owners of the copyright in the iGrip software. While it is true, as Plaintiff points out,

that “the Copyright Act does not expressly impose liability on anyone other than direct

infringers,” the courts nonetheless “have long recognized that in certain circumstances,

vicarious or contributory liability will be imposed.” Fonovisa, Inc. v. Cherry Auction,

Inc., 76 F.3d 259, 261 (9th Cir. 1996); see also Metro-Goldwyn-Mayer Studios Inc. v.

Grokster, Ltd., 545 U.S. 913, 930, 125 S. Ct. 2764, 2776 (2005) (explaining that the

theory of vicarious infringement is a “doctrine[] of secondary liability” that “emerged

from common law principles and [is] well established in the law”). Accordingly, Count I

arises under the Copyright Act, with federal common law supplying the particular theory

of liability advanced in this claim — i.e., a theory of vicarious liability asserted against a

party other than the alleged direct infringers.

It is equally clear that this claim of vicarious copyright infringement, even if pled

under state law,3

 would fit comfortably within the scope of the Copyright Act’s

preemption provision. Under this provision, “all legal or equitable rights that are
8

equivalent to any of the exclusive rights within the general scope of copyright . . . are

governed exclusively by” the Copyright Act, and “no person is entitled to any such right

or equivalent right in any such work under the common law or statutes of any State.” 17

U.S.C. § 301(a). As the Sixth Circuit has explained, a state-law claim is preempted under

§ 301(a) if (i) the work at issue is within the scope of the subject matter of copyright, and

(ii) the rights claimed under state law are equivalent to any of the exclusive rights

conferred under the Copyright Act. Wrench LLC v. Taco Bell Corp., 256 F.3d 446, 453

(6th Cir. 2001).

These two prerequisites to § 301 preemption are met here. The claim asserted in

Count I of the complaint concerns the alleged misuse of the iGrip software, which plainly

is a work within the scope of the subject matter of copyright — indeed, the software

actually is copyrighted. Next, the right claimed in Count I is the right to enjoy the full

and fair value of the license Plaintiff purchased under the parties’ Master License

Agreement (“MLA”), with Plaintiff alleging that this value has been diminished by

Defendants’ failure to take action against the infringing activities of their other iGrip

customers. The rights to regulate the distribution and use of a copyrighted work through

a license are among the exclusive rights conferred under the Copyright Act. See 17

U.S.C. § 106; see also S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989)

(“A licensee infringes the owner’s copyright if its use exceeds the scope of its license.”). 

Thus, the claim in Count I cannot be resolved without determining the precise scope of

the licenses granted by Defendants to Plaintiff and their other iGrip customers, licenses
4

Notably, Plaintiff has not challenged Defendants’ appeal to the doctrine of “complete

preemption” as the basis for the removal of this case to this Court. By way of explanation for its

apparent acquiescence in the removal of this action, Plaintiff states in its response to Defendants’

motion that Defendants’ “notice of removal was not procedurally defective.” (Plaintiff’s

Response Br. at 8-9 n.5.) Yet, this lack of a procedural defect would not have precluded Plaintiff

from moving to remand for lack of subject matter jurisdiction. See 28 U.S.C. § 1447(c). 

Moreover, to the extent that Plaintiff cites 28 U.S.C. § 1338(b) as a possible basis for the Court’s

subject matter jurisdiction, (see Plaintiff’s Response Br. at 8-9 n.5), a necessary predicate to

jurisdiction under this provision is a “claim under the copyright, patent, plant variety protection

or trademark laws,” 28 U.S.C. § 1338(b). Evidently, then, Plaintiff has conceded that it has

asserted at least one claim arising under federal copyright law.

9

which represent exercises of the rights enjoyed by Defendants under the Copyright Act. 

Moreover, Plaintiff alleges in Count I that Defendants owed “a duty to protect their

copyright on the iGrip software for the benefit of [their] licensees.” (Complaint at ¶ 29). 

The source of this posited duty, at least under the allegations of Count I, could only be the

Copyright Act and any corresponding federal common-law principles, where § 301(a)

provides that the rights enjoyed (and any attendant duties owed) by Defendants under the

iGrip copyright are governed exclusively by federal copyright law. The Court finds,

therefore, that any state-law claim arguably asserted in Count I of the complaint is

preempted under § 301(a) of the Copyright Act, and that the removal of this vicarious

copyright infringement claim to federal court was authorized under the doctrine of

“complete preemption.” See Ritchie, 395 F.3d at 286-87.4

Finally, the Court agrees with Defendants that Plaintiff, as a non-exclusive

licensee of the iGrip software, lacks standing to pursue a claim of vicarious copyright

infringement under federal copyright law. As Defendants point out, the law is wellsettled that only copyright owners and exclusive licensees have standing to bring a claim
5

Even if Plaintiff had standing to bring this claim, Defendants note the implausibility of

the premise underlying this claim — namely, that Defendants have infringed their own

copyright, even if only vicariously through their iGrip customers. “It is elementary that the

lawful owner of a copyright is incapable of infringing a copyright interest that is owned by him.” 

Cortner v. Israel, 732 F.2d 267, 271 (2d Cir. 1984); see also Derminer v. Kramer, 386 F.

Supp.2d 905, 912 (E.D. Mich. 2005). Thus, as least so far as the Copyright Act is concerned,

Defendants would be within their rights to authorize or acquiesce in the discounted (or even free)

use of their iGrip software by certain of their customers, and they could not be held liable for

copyright infringement by doing so. This, then, provides an additional basis for the dismissal of

Plaintiff’s claim of vicarious copyright infringement.

10

of copyright infringement. See, e.g., Latin American Music Co. v. Archdiocese of San

Juan of the Roman Catholic & Apostolic Church, 499 F.3d 32, 41-42 (1st Cir. 2007);

I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir. 1996); Coyne’s & Co. v. Enesco, LLC,

565 F. Supp.2d 1027, 1044 (D. Minn. 2008). Although the cases applying this principle

generally involve claims against direct infringers, Plaintiff has not suggested why the

Copyright Act might confer broader standing upon non-exclusive licensees to pursue

claims of infringement, so long as they are proceeding under a theory of vicarious rather

than direct liability. Nor has Plaintiff cited any case law in which a non-exclusive

licensee was permitted to bring such a claim. Consequently, the Court finds that

Plaintiff’s claim of vicarious copyright infringement must be dismissed.5

C. Plaintiff’s Remaining Claims Are Not Encompassed by the Doctrine of

Complete Preemption, and the Court Declines to Exercise Supplemental

Jurisdiction Over These State-Law Claims.

Turning to the remaining five counts of Plaintiff’s complaint, Defendants contend

that most of these claims, too, are preempted by the Copyright Act, and therefore fail on

the same grounds as Count I. The Court, however, finds that these remaining claims
11

cannot properly be recharacterized as arising under federal copyright law, and it declines

to exercise supplemental jurisdiction over these state-law claims now that Plaintiff’s sole

federal claim has been dismissed.

As discussed earlier, a claim is preempted under § 301 of the Copyright Act if it

involves a work within the scope of the subject matter of copyright, and the rights sought

to be vindicated under state law are equivalent to any of the exclusive rights conferred

under the Copyright Act. Because each of Plaintiff’s claims involves the copyrighted

iGrip software, the Court assumes, for present purposes, that the first prong of this

preemption standard is met. The question, then, is “whether the state common law or

statutory [claims] at issue assert[] rights that are the same as those protected under § 106

of the Copyright Act.” Wrench LLC, 256 F.3d at 455. Stated differently, under this socalled “equivalency” prong of the § 301 inquiry, “[e]quivalency exists if the right defined

by state law may be abridged by an act which in and of itself would infringe upon one of

the exclusive rights” conferred by the Copyright Act. 256 F.3d at 456. The courts also

have considered whether a state-law claim requires a showing of an “extra element” that

“changes the nature of the action so that it is qualitatively different from a copyright

infringement action.” 256 F.3d at 456.

Turning first to Plaintiff’s contract-based claims — including Count V, a breach of

contract claim, and Count II, alleging that Defendants breached an implied covenant of

good faith and fair dealing — the Court finds that these claims do not satisfy the

“equivalency” prong of the test for § 301 preemption. These claims rest upon allegations
6

The Court, of course, expresses no view as to the availability or viability of any such

defense.

12

that the parties entered into a contractual agreement under which Defendants either

expressly or implicitly promised to enforce their copyright rights even-handedly against

all of their customers. In contrast to the claim of vicarious copyright infringement in

Count I, Plaintiff’s contract-based claims do not posit any sort of duty arising under

copyright law to enforce any of the exclusive rights conferred under § 106 of the

Copyright Act. Rather, in support of Counts II and V, Plaintiff alleges that Defendants

breached contractual obligations to treat Plaintiff the same as all of their other customers

in licensing the use of their iGrip software. To prevail in these claims, Plaintiff would

have to establish the existence and breach of such an express or implied contractual

obligation, and these are “extra elements” that render these claims qualitatively different

from a claim of copyright infringement. See Wrench LLC, 256 F.3d at 456. If federal

copyright law figured in any way in the resolution of these claims, it would only be

defensively, with Defendants free to argue that copyright law precludes or trumps any

otherwise binding contractual promise to enforce the rights conferred under § 106.6

 Any

such defensive invocation of federal copyright law would not support the

recharacterization of Plaintiff’s contract-based claims as arising under federal law.

Next, the Court finds that Plaintiff’s Count III claim of tortious interference also

survives § 301 preemption. In support of this claim, Plaintiff alleges that Defendants

intentionally interfered with its current or anticipated business relationships with its
7

The parties dispute whether Plaintiff’s state-law claims are governed by New York or

Michigan law, but the courts of both states recognize this same element of a tortious interference

claim.

8

The Court recognizes that the Sixth Circuit has found that state-law tortious interference

claims generally “are held to be preempted because the rights asserted in such claims are not

qualitatively different from the rights protected by copyright.” Stromback v. New Line Cinema,

384 F.3d 283, 306 (6th Cir. 2004). Yet, this general rule is meant to encompass claims by

copyright holders that a defendant has interfered with business relationships or expectancies by

engaging in the “unauthorized reproduction, distribution, performance or display” of a

copyrighted work. Stromback, 384 F.3d at 306 (internal quotation marks and citation omitted). 

Plaintiff here does not (and cannot) claim that Defendants have interfered with any business

relationships or expectancies arising from any interest Plaintiff holds in the iGrip copyright,

because it is undisputed that Plaintiff holds no such interest. Thus, the general rule stated in

Stromback is not applicable here.

13

manufacturing customers by failing to take action to enforce their iGrip copyright against

Plaintiff’s competitors. To sustain this claim, Plaintiff cannot show simply that its

business relationships or expectancies were harmed by some action (or inaction) by

Defendants in the enforcement of their copyright rights. Rather, Plaintiff must establish

that Defendants acted with an improper motive or through improper means to interfere

with an existing or expected relationship between Plaintiff and one or more of its

customers. See Diario El Pais, S.L. v. Nielsen Co., No. 07CV11295, 2008 WL 4833012,

at *7 (S.D.N.Y. Nov. 6, 2008); BPS Clinical Laboratories v. Blue Cross & Blue Shield of

Michigan, 217 Mich. App. 687, 552 N.W.2d 919, 925 (1996).7

 This extra element of

improper motive or means serves to take this claim outside the scope of § 301

preemption, as it entails a showing beyond Defendants’ mere exercise of (or failure to

exercise) any rights it might possess under federal copyright law as owner of the iGrip

copyright.8
9

The Court notes that Defendants do not argue in their motion that Plaintiff’s fraudulent

inducement claim is preempted by the Copyright Act. (See Defendants’ Motion, Br. in Support

at 10 (asserting that “excluding Plaintiff’s fraudulent inducement cause of action (Count VI),

each of Plaintiff’s remaining state law claims” is preempted).) 

14

Finally, Plaintiff’s remaining two state-law claims survive § 301 preemption on

essentially the same grounds. In Count IV, Plaintiff alleges that Defendants have

engaged in unfair competition through the misuse of a trade secret. The Sixth Circuit has

explained that “misappropriation of trade secrets claims are not preempted because they

require proof of a confidential relationship, which provides the extra element required to

survive preemption.” Stromback, 384 F.3d at 303. In Count VI, Plaintiff alleges that it

was fraudulently induced to enter into the MLA by Defendants’ misrepresentation that

they would take action to protect their copyrighted iGrip software. This claim requires a

showing of a number of elements — including misrepresentation of a material fact,

fraudulent intent, and reasonable reliance — that would play no part in an ordinary

copyright infringement action, and that render this claim qualitatively different from an

infringement claim under federal copyright law. See Shuptrine v. McDougal Littell, 535

F. Supp.2d 892, 895-97 (E.D. Tenn. 2008).9

Accordingly, only Count I of Plaintiff’s complaint can be characterized as arising

under federal law. Plaintiff’s remaining claims are governed by state law, with issues of

federal copyright law arising (if at all) only defensively. Because the Court has dismissed

the sole claim in this case that lies within its federal question jurisdiction, it declines to
15

 exercise supplemental jurisdiction over Plaintiff’s remaining claims, but instead elects to

remand these claims to state court. See 28 U.S.C. § 1367(c)(3).

IV. CONCLUSION

For the reasons set forth above, 

NOW, THEREFORE, IT IS HEREBY ORDERED that Defendants’ May 21, 2009

motion to dismiss (docket #6) is GRANTED IN PART, as to Count I of Plaintiff’s

complaint, and is otherwise DENIED WITHOUT PREJUDICE. Upon the dismissal of

Count I of the complaint, the remainder of this case will be remanded to state court.

s/Gerald E. Rosen 

Chief Judge, United States District Court

Dated: February 18, 2010

I hereby certify that a copy of the foregoing document was served upon counsel of record

on February 18, 2010, by electronic and/or ordinary mail.

s/Ruth Brissaud 

Case Manager