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The Act Group, Inc. v. Hamlin

United States District Court, D. Arizona

September 17, 2014

The ACT Group, Inc., Plaintiff,
v.
James Hamlin, et al., Defendants. James Hamlin, et al., Counter-Claimant,
v.
The ACT Group, Inc., Counter-Defendant.

ORDER

STEPHEN M. McNAMEE, District Judge.

Pending before the Court is Counter-Defendant The ACT Group, Inc.'s ("ACT") motion for summary judgment against Counter-Claimant James Hamlin ("Hamlin" or "Mr. Hamlin"), which is fully briefed. (Docs. 107-08, 111-12, 114.) Also pending is Defendant WaterFurnace International Inc.'s ("WaterFurnace") motion for summary judgment, which is fully briefed. (Docs. 115-16, 118-19, 124-25.) After reviewing and considering the briefs, the Court will deny WaterFurnace's motion for summary judgment and grant ACT's motion for summary judgment.[1]

I. WATERFURNACE'S MOTION FOR SUMMARY JUDGMENT

Background and Procedural History

The following facts are undisputed unless otherwise noted. ACT provides training and education services to Heating, Ventilation and Air Conditioning ("HVAC") distributors, dealers and their representatives nationwide. (Doc. 47.) In the course of its business, ACT developed copyrighted sales training materials, which it labeled " The Works, " containing both sales training materials and written hand-outs. (Docs. 100-4 at 1-6, 90-1, 90-2.) The Works consists of the titles " No Pressure Selling " and " Trane Boot Camp: A Comprehensive Study Guide to In-Home Sales. " (Id.)

ACT owns a federal copyright issued by the United States Copyright Office, Certificate of Registration No. TX 000479930 dated June 9, 1998, for the materials entitled " No Pressure Selling. " (Doc. 100-4.) ACT owns a federal copyright, Certificate of Registration No. TX 7-489-546 dated February 29, 2012, also for " No Pressure Selling. " (Id.) ACT owns a federal copyright, Certificate of Registration No. TX 7-489-595 dated February 29, 2012, for the materials entitled " Trane Boot Camp: A Comprehensive Study Guide to In-Home Sales. " (Doc. 116-4.) The Works is comprised of three valid copyright registrations owned by ACT, Certificate of Registration numbers TX 7-489-546, TX 7-489-595, and TX 4-799-830. (Doc. 100-4.)

In 2002, ACT entered into an non-exclusive independent contract with Mr. Hamlin for Hamlin to serve as one of its national sales trainers. (Doc. 108-1 at 2-3.) In December 2010, WaterFurnace independently contracted with Mr. Hamlin, also as a sales trainer. (Doc. 115 at 4.) WaterFurnace is a geothermal manufacturer and distributor of HVAC systems that provides its own sales training to HVAC dealers and representatives. (Id.) Subsequently, in May 2011, Mr. Hamlin left ACT informing them that he had decided to work exclusively for WaterFurnace. (Doc. 108-1 at 3.)

It is undisputed that Mr. Hamlin had access to The Works while he worked as a sales trainer for ACT. (Doc. 108-1.) According to ACT, Mr. Hamlin utilized ACT Group's proprietary sales training concepts and materials when he left ACT to perform similar sales training services for WaterFurnace, making a sales training presentation for WaterFurnace entitled " Smarter Sales Training. " (Doc. 90-3.) In ACT's FAC (Doc. 47), it alleged that Mr. Hamlin copied ACT's copyrighted materials and now uses materials that are, as a whole substantially similar to The Works, and that some of the materials used by Mr. Hamlin are identical to The Works. (Compare Doc. 90-1 and 90-2 with 90-3.) ACT further alleged that WaterFurnace directly infringed its copyright of The Works for its own advantage. (Doc. 47 at 7-9.)

Following discovery, Mr. Hamlin moved for summary judgment on ACT's direct copyright infringement claim. (Doc. 89.) Mr. Hamlin first argued that The Works is not entitled to copyright protection because it only used common ideas, techniques, and phrases of the sales industry and that there was nothing unique or original about The Works that would entitle it to copyright protection. (Id. at 5-6.) Next, Mr. Hamlin claimed that even if The Works was entitled to copyright protection, he did not infringe on the copyright because substantially all of the portions of The Works that ACT claimed he copied are just common phrases in the public domain, and not subject to copyright protection. (Id.)

The Court disagreed, denying Mr. Hamlin's motion for summary judgment. (Doc. 126.) The Court first found that The Works was entitled to copyright protection. (Id.) As to Mr. Hamlin's contention that ACT could not establish direct infringement, the Court applied the Ninth Circuit's two-part substantially similar test from Smith v. Jackson , 84 F.3d 1213, 1218 (9th Cir. 1996). (Id.) The Court made an "objective comparison of specific expressive elements" focusing on the "articulable similarities" between the two works. (Id.) The Court found that Mr. Hamlin had access to The Works and that The Works and Smarter Sales Training were "substantially similar in idea and in expression of the idea." (Id.) The Court found that ACT established the "extrinsic test." (Id.) Regarding application of the second prong, the "intrinsic test, " the Court found that such a determination was for the jury, and denied Mr. Hamlin's motion for summary judgment on direct infringement. (Id.); see Shaw v. Lindheim , 919 F.2d 1353, 1358 (9th Cir. 1990).

In the same order, the Court denied ACT's motion for leave to file a second amended complaint alleging two indirect copyright infringement claims, a claim for "vicarious infringement" and a claim for "contributory infringement." (Id.) WaterFurnace now moves for summary judgment contending that ACT lacks evidence that it directly infringed The Works copyright; ACT moves for summary judgment on Mr. Hamlin's counterclaim for invasion of privacy.

Standard of Review

Summary Judgment

A court must grant summary judgment if the pleadings and supporting documents, viewed in the light most favorable to the nonmoving party, show "that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett , 477 U.S. 317, 322-23 (1986); Jesinger v. Nevada Fed. Credit Union , 24 F.3d 1127, 1130 (9th Cir. 1994). Substantive law determines which facts are material. See Anderson v. Liberty Lobby , 477 U.S. 242, 248 (1986); see also Jesinger , 24 F.3d at 1130. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson , 477 U.S. at 248. The dispute must also be genuine, that is, the evidence must be "such that a reasonable jury could return a verdict for the nonmoving party." Id .; see Jesinger , 24 F.3d at 1130.

A principal purpose of summary judgment is "to isolate and dispose of factually unsupported claims." Celotex , 477 U.S. at 323-24. Summary judgment is appropriate against a party who "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id . at 322; see also Citadel Holding Corp. v. Roven , 26 F.3d 960, 964 (9th Cir. 1994). The moving party need not disprove matters on which the opponent has the burden of proof at trial. See Celotex , 477 U.S. at 323. The party opposing summary judgment may not rest upon the mere allegations or denials of the party's pleadings, but must set forth "specific facts showing that there is a genuine issue for trial." See Matsushita Elec. Indus. Co. v. Zenith Radio , 475 U.S. 574, 586-87 (1986) (quoting Fed.R.Civ.P. 56(e) (1963) (amended 2010)); Brinson v. Linda Rose Joint Venture , 53 F.3d 1044, 1049 (9th Cir. 1995). The non-movant's bare assertions, standing alone, are insufficient to create a material issue of fact and defeat a motion for summary judgment. Anderson , 477 U.S. at 247-48.

Discussion

Direct Infringement

In order to prove direct copyright infringement, ACT must prevail on both prongs: "(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Feist Publ'n, Inc. v. Rural Tel. Serv. Co., Inc. , 499 U.S. 340, 361 (1991); 17 U.S.C. §§ 106, 501 (2012). The word "copying" is shorthand for the infringing of any of the copyright owner's exclusive rights under 17 U.S.C. § 106 (2012).[2] See S.O.S. Inc. v. Payday, Inc. , 886 F.2d 1081, 1085 n.3 (9th Cir. 1989). The Court only reaches the issue of direct infringement if ACT establishes that The Works is entitled to copyright protection.

WaterFurnace alleges that The Works is not entitled to copyright protection. (Doc. 115 at 2.) As the Court has already discussed and summarized, Mr. Hamlin presented this same argument in his motion for summary judgment, which the Court rejected. (Docs. 89, 126.) The Court again finds as a ...


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