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Cohen v. Versatile Studios, Inc.

United States District Court, S.D. New York

April 21, 2014

JEFF COHEN, d/b/a Blue Engine Solutions Team, Plaintiff,
v.
VERSATILE STUDIOS, INC., DOES 1-10, Defendants.

OPINION AND ORDER

VALERIE CAPRONI, District Judge.

Versatile Studios, Inc., hired Jeff Cohen to develop a database application. Cohen now seeks, inter alia, a declaratory judgment that he owns the copyright to the programming code used to create that database ("the code"). Versatile disclaims any interest in the database created by Cohen or its software code. That being the case, even though there is subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1338, there is no "case or controversy" for the purposes of Article III of the United States Constitution. Defendants' motion to dismiss is therefore GRANTED. Defendants' motion for costs is, however, DENIED.

BACKGROUND

In early 2012, Cohen agreed to develop a database for One Drop, Inc., a non-party to these proceedings but a close affiliate of Versatile. Compl. ¶ 6. Nearly one year later, Cohen agreed to develop a similar database for Versatile for approximately $11, 000. Id. ¶ 8. In May 2013 - three months later - Versatile asked Cohen to turn over the programmer's password, which would enable Versatile "to edit, examine, or copy the code." Lannin Decl. Ex. C. Although Versatile initially framed its request as part of a routine collection of all usernames and passwords, Versatile quickly acknowledged that it was unhappy with Cohen's work. Id. Cohen declined to turn over the password, instead offering to "fix bugs free of charge, with no expiration date." Id. Cohen indicated that his reluctance to relinquish the password stemmed from his belief that "the architecture of the database [was his] intellectual property." Id.

Cohen's assertion of ownership in the intellectual property rights underlying the database set off a war of words between the parties; Versatile asserted that it owned the code because it paid Cohen to build the database, and Cohen asserted that he owned the code because the parties' contract did not specify that Versatile would own the code. Lannin Decl. Ex. C. The war of words culminated with Versatile notifying Cohen that litigation was imminent. Compl. ¶¶ 15-19.

That threat led Cohen to file the first lawsuit. Cohen's case was filed on June 7, 2013, in the United States District Court for the Central District of California, seeking (1) declaratory judgment that Cohen owns a copyright in the code, (2) declaratory judgment that Cohen's agreement with Versatile did not require Cohen to give Versatile access to the code, and (3) $8, 600 that Cohen alleges is due to him under the contract. A few days later, Versatile filed suit against Cohen in state court in New York for, inter alia, breach of contract. In November 2013, on defendant's motion for transfer, the federal case was transferred from California to this Court. Lannin Decl. Ex. B.

Versatile immediately filed a motion to dismiss the Complaint for lack of subject matter jurisdiction. Briefing was delayed while the parties discussed the possibility of Plaintiff's dismissing the suit voluntarily, apparently predicated on the possibility that Versatile would stipulate that it does not own the code. See, e.g., J. Cohen Decl. ¶ 9; see also Dos Santos Decl. 2 ¶¶ 29, 38. The case was not voluntarily dismissed, and Defendant now asks the Court to rule on its motion to dismiss. For the reasons stated below, the motion to dismiss is granted.

DISCUSSION

I. Subject matter jurisdiction

"Determining the existence of subject matter jurisdiction is a threshold inquiry, and a claim is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Morrison v. Nat'l Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (internal quotation marks and citation omitted), aff'd, 561 U.S. 247 (2010). "A plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000).

A. This case "arises under" federal copyright laws

Versatile challenges the jurisdiction of this Court to decide Cohen's claim that he owns the copyright to the code. Cohen asserts that his claim seeking a declaratory judgment as to ownership of the code "arises under" United States copyright laws such that 28 U.S.C. §§ 1331 and 1338 vest jurisdiction in this Court.[1] "The presence or absence of federal question jurisdiction is governed by the well-pleaded complaint rule... [which] provides that federal question jurisdiction exists only when the plaintiff's own cause of action is based on federal law." Marcus v. AT&T Corp., 138 F.3d 46, 52 (2d Cir. 1998). "[I]f, but for the availability of the declaratory judgment procedure, the federal claim would arise only as a defense to a state created action, jurisdiction is lacking.'" Garanti Finansal Kiralama A.S. v. Aqua Marine and Trading, Inc., 697 F.3d 59, 67 (2d Cir. 2012) (quoting Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 16 (1983)).

In T.B. Harms Co. v. Eliscu, Judge Friendly articulated a two-pronged test for determining when a claim "arises under" federal copyright laws. 339 F.2d 823, 826-27 (2d Cir. 1964); s ee, e.g., Fed. Treasury Enter. Sojuzplodoimport v. Spirits Int'l N.V., 623 F.3d 61, 70 (2d Cir. 2010); Murray Eng'g, P.C. v. Windermere Props. LLC, No. 12-cv-0052(JPO), 2013 WL 1809637, at *2 (S.D.N.Y. Apr. 30, 2013). That test provides that, even in the context of a declaratory judgment, "a suit arises under' the Copyright Act if:

(1) The Complaint is for a remedy expressly granted by the Act, e.g. a suit for infringement or for the statutory ...

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