United States District Court, S.D. New York
OPINION & ORDER
A. ENGELMAYER, District Judge.
Software Group USA, LLC ("Enigma"), a developer of
computer security products, brings this action against
Malwarebytes, Inc. ("Malwarebytes"), which Enigma
claims is its direct competitor in the anti-malware and
internet security market. Enigma markets SpyHunter, its
leading anti-malware program; Malwarebytes markets
Malwarebytes Anti-Malware ("MBAM"), which detects
and removes malware on consumers' personal computers.
Enigma alleges that, in October 2016, Malwarebytes revised
MBAM's threat detection criteria to identify its
competitor Enigma's products-including SpyHunter-as
threats to consumers. Malwarebytes did so, Enigma claims, to
damage Enigma's reputation and to disrupt or disable
Enigma's products on consumers' computers, so as to
give Malwarebytes an unfair advantage. Enigma brings claims
against Malwarebytes for false advertising in violation of
the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and under New
York law for tortious interference with contractual
relations, tortious interference with business relations, and
for violating New York General Business Law § 349.
now moves to dismiss Enigma's First Amended Complaint
("FAC") under Federal Rules of Civil Procedure
12(b)(2) and 12(b)(6) or, in the alternative, to transfer
this case to the Northern District of California pursuant to
28 U.S.C. § 1404. For the reasons that follow, the Court
grants the motion to transfer and declines to reach the
motion to dismiss.
alleges that Enigma is a Florida limited liability company
that develops and markets computer security software. FAC
¶¶ 2, 35. Its computer security products
"detect and remove malicious software
(i.e., malware), which includes, inter
alia, viruses, spyware and adware; enhance internet
privacy; and eliminate other security threats."
Id. ¶ 2. Enigma's flagship anti-malware
product is called "SpyHunter." Id. ¶
is a Delaware corporation, headquartered in Santa Clara,
California, that is a competitor of Enigma's in the
computer security products market. Id. ¶¶
4, 36. Its flagship anti-malware product is
"Malwarebytes Anti-Malware" or "MBAM."
Id. ¶ 4. MBAM detects "Potentially
Unwanted Programs" or "PUPs" on consumers'
computers. Id. ¶ 5. MBAM automatically
quarantines these PUPs and flags them for consumers as
"threats." Id. MBAM presents consumers
with a list of its "Threat Scan Results, " with
each "threat" preselected for removal from the
consumer's computer. Id.
Enigma's Earlier Lawsuit Against Bleeping Computer
January 2016, Enigma filed, in this Court, a lawsuit against
Bleeping Computer LLC ("Bleeping"). See Enigma
Software Group USA, LLC v. Bleeping Computer LLC et al,
No. 16 Civ. 57, Dkt. 1. Enigma alleged that Bleeping, a New
York company, was affiliated with Malwarebytes and would
promote Malwarebytes' MBAM product and earn a commission
from Malwarebytes when consumers, through a link on
Bleeping's website, bought MBAM. FAC ¶ 22. Enigma
accused Bleeping of falsely disparaging Enigma's
products, while instructing consumers to uninstall or not
install Enigma's products and encouraging consumers to
purchase MBAM. Id. ¶ 23. On July 8, 2016, the
Court granted in part and denied in part Bleeping's
motion to dismiss. 194 F.Supp.3d 263 (S.D.N.Y. 2016).
discovery in its lawsuit against Bleeping, Enigma served a
subpoena on Malwarebytes. Enigma sought documents regarding
the extent of Malwarebytes' involvement in Bleeping's
alleged scheme. FAC ¶ 24. The deadline to respond to the
subpoena was in October 2016. Id. ¶¶ 7,
25. In 2017, while discovery was ongoing, Enigma and Bleeping
settled, and the Court dismissed, Enigma's lawsuit.
See 16 Civ. 57, Dkts. 70-72.
2016: Malwarebytes' Products Begin Identifying
Enigma's as Threats
2008 and October 4, 2016, Malwarebytes products had never
identified Enigma products as PUPs, or as any other form of
malware, and had never quarantined or interfered with the
installation of Enigma products. Id. ¶ 6.
October 5, 2016, one week before the deadline to respond to
Enigma's subpoena in the suit against Bleeping,
Malwarebytes revised the criteria its MBAM software used to
identify PUPs. Id. ¶¶7, 25. Before then,
Malwarebytes had last changed its PUP criteria in 2013.
Id. The new criteria identified SpyHunter, and
another Enigma product, "RegHunter, " as PUPs.
Id. ¶ 9. As a result, if a consumer had
SpyHunter or RegHunter on his or her computer and then
downloaded or scanned that computer with MBAM, MBAM would
automatically quarantine the Enigma products and identify
them to the consumer as PUPs. Id. ¶ 10. Once
the products were quarantined, the consumer would not be able
to launch or use SpyHunter or RegHunter, even if the consumer
attempted to "restore" those programs, unless the
consumer undertook a series of "additional steps that
may not be readily apparent to, or understood by, a novice
user." Id. Alternatively, if a consumer had
MBAM on his or her computer and then attempted to download or
install SpyHunter or RegHunter, MBAM would block the
installation of the Enigma products, again regardless whether
the consumer tried to "restore" the products from
quarantine. Id. ¶ 11.
October 19, 2016, Malwarebytes acquired an anti-adware
product called "AdwCleaner, " which ostensibly
"identif[ies] and remove[s] PUPs, adware, toolbars, and
other unwanted software for its users." Id.
¶ 12. At the time Malwarebytes acquired it, AdwCleaner
did not identify SpyHunter or RegHunter as PUPs. Id.
¶ 13. On or about October 27, 2016, AdwCleaner began
identifying SpyHunter and RegHunter as PUPs. Id.
¶ 14. AdwCleaner then quarantined and blocked these
products just as MBAM did. Id.
alleges that Malwarebytes falsely identified Enigma's
products as threats. In truth, it alleges, these products are
"legitimate and pose no security threat to users'
consumers." Id. It alleges that Malwarebytes
purposely revised its criteria to target Enigma's
products for the purpose of "harming [Enigma] by,
inter alia, interfering with [Enigma's] current
and prospective customer base, injuring [Enigma's]
business, and retaliating against [Enigma] for its lawsuit
against Bleeping." 7<i. ¶ 8.
alleges that, as a result of Malwarebytes' "bad
faith campaign" against Enigma, id. ¶ 34,
Enigma has suffered "immediate harm ... in the form of
lost sales and revenue" and "irreparable harm to
[Enigma's] business reputation, " id.
October 7, 2016, Enigma filed the complaint. Dkt. 1. The
action was initially referred to this Court as possibly
related to Enigma's lawsuit against Bleeping. In a
Statement of Relatedness filed with the Court, Enigma
explained the relationship between these lawsuits. It noted
that, as alleged, "[b]oth defendants are acting in
concert to harm the plaintiff, " "[b]oth cases
involve harm to consumers as a result of the defendants'
false advertising, defamation, and unfair competition, "
and "[t]he plaintiff seeks similar injunctive relief
against" both Bleeping and Malwarebytes. Dkt. 5. Enigma
also explained that Malwarebytes was already a subpoenaed
witness in the case against Bleeping and that Bleeping would
be a witness in this case against Malwarebytes. Id.
On October 13, 2016, this Court accepted the action as
related to the pending lawsuit against Bleeping.
November 16, 2016, Malwarebytes filed a motion to dismiss the
complaint or transfer the case, Dkt. 17, and a request for
judicial notice, Dkt. 20. On November 17, 2016, the Court
issued an order stating that it would resolve the request for
judicial notice, if opposed, in the course of resolving the
motion to dismiss. Dkt. 29.
December 7, 2016, Enigma filed the FAC. Dkt. 34. On December
28, 2016, Malwarebytes filed a motion to dismiss the FAC or
transfer the case, Dkt. 37, and, in support, a memorandum of
law, Dkt. 38 ("Def. Br."), and the declaration of
Mark Harris, Dkt. 39 ("Harris Decl."). Also on
December 28, 2016, Malwarebytes filed a request for judicial
notice in support of its motion to dismiss or transfer, Dkt.
40, and the supporting declarations of Nathan Scott, Dkt. 41
("Scott Decl."), and Tyler Newby, Dkt. 42
January 11, 2017, Enigma filed one memorandum of law in
opposition to the motions to dismiss or transfer, Dkt. 49
("PI. Br."), and another in opposition to the
request for judicial notice, Dkt. 45. That same day, Enigma
filed a motion to strike, Dkt. 46, and a motion for leave to
file supplemental allegations to the FAC, Dkt. 50.
January 18, 2017, Malwarebytes filed a reply memorandum of
law. Dkt. 53 ("Def. Rep. Br.").
January 25, 2017, Malwarebytes filed one memorandum of law in
opposition to the motion to strike, Dkt. 56, and another in
opposition to the motion for leave to file supplemental
allegations to the FAC, Dkt. 57.
February 3, 2017, the Court held argument on the motion to
dismiss or transfer. Just one day prior, on February 2, 2017,
the parties to the lawsuit against Bleeping had notified the
Court that ...