Round To Fit, LLC v. Reimer

          ORDER

          JAMES R. SWEENEY II JUDGE

         Under the Copyright Act, an employer is deemed to be the initial author of a “work made for hire, ” and thereby the initial owner of the copyright in the work. In order for this Court to render a declaration of authorship or ownership, an independent basis for federal jurisdiction beyond the Declaratory Judgment Act must exist. The Court now considers whether, when authorship and ownership in a copyright under the work made for hire doctrine by virtue of an employee acting within the scope of the employee's employment is asserted, the determination of authorship arises under the Copyright Act; for the reasons stated herein, it does. Thus, this Court has original subject matter jurisdiction over the Declaratory Judgment claim, and supplemental jurisdiction over the Plaintiff's state law claims and Defendant's motion must be denied.

         This matter is before the Court on Defendant Jonathan Reimer's Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c). (ECF No. 33.) Plaintiff Round to Fit, LLC (“R2Fit”) brought this action under the Copyright Act of 1976, 17 U.S.C. § 101 et seq. (the “Copyright Act”), the Indiana Uniform Trade Secrets Act, Ind. Code § 24-2-3-1 et seq., the Indiana Crime Victims Recovery Act, Ind. Code § 34-24-3-1, and Indiana common law. R2Fit seeks a declaratory judgment from the Court confirming R2Fit's authorship and ownership of the copyright at issue, as well as all other appropriate relief for R2Fit's state law claims. This Court has jurisdiction over R2Fit's federal-law claim pursuant to 28 U.S.C. § 1338 and supplemental jurisdiction over its state-law claims pursuant to 28 U.S.C. § 1367. After carefully reviewing the pleadings, motion, response, and reply, the Court concludes that Reimer's motion should be DENIED for the following reasons.

         I. Legal Standard

         Federal Rule of Civil Procedure 12(c) permits a party to move for judgment after the parties have filed a complaint and an answer. A challenge to subject matter jurisdiction falls within the ambit of Rule 12(b)(1). Rule 12(b)(1) and Rule 12(c) motions are analyzed under the same standard as a motion to dismiss under Rule 12(b)(6). Silha v. ACT, Inc., 807 F.3d 169, 173-74 (7th Cir. 2015). Pisciotta v. Old Nat'l Bancorp., 499 F.3d 629, 633 (7th Cir. 2007); Frey v. Bank One, 91 F.3d 45, 46 (7th Cir. 1996). Under Rule 12(b)(6), a complaint must allege facts that are “enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Although “detailed factual allegations” are not required, mere “labels, ” “conclusions, ” or “formulaic recitation[s] of the elements of a cause of action” are insufficient. Id. In other words, the complaint must include “enough facts to state a claim to relief that is plausible on its face.” Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (internal citation and quotation marks omitted). To be facially plausible, the complaint must allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).

         Like a Rule 12(b)(6) motion, the court will grant a Rule 12(c) motion only if “it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief.” N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998) (quoting Craigs, Inc. v. Gen. Elec. Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993)). The factual allegations in the complaint are viewed in a light most favorable to the non-moving party; however, the court is “not obliged to ignore any facts set forth in the complaint that undermine the plaintiff's claim or to assign any weight to unsupported conclusions of law.” Id. (quoting R.J.R. Serv., Inc. v. Aetna Cas. & Sur. Co., 895 F.2d 279, 281 (7th Cir. 1989)).

         “Copyright . . . vests initially in the author or authors of [a] work.” 17 U.S.C. § 201(a). “In the case of a work made for hire, the employer . . . for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.” 17 U.S.C. § 201(b). “[A] work for hire can arise through one of two mutually exclusive means, one for employees and one for independent contractors, and . . . the classification of a particular hired party should be made with reference to agency law.” Cmty. for Creative Non-Violence v. Reid, 490 U.S. 730, 743 (1989).

         II. Background

         The following allegations are taken from R2Fit's Complaint (ECF No. 1.) and are accepted as true for purposes of deciding the pending motion, consistent with the applicable standard of review. The Court also considers the documents (ECF No. 1-1 - 1-6) attached to R2Fit's Complaint, which are part of the Complaint for all purposes and may be considered by the Court in ruling on the Motion without converting it to one for summary judgment. Tierney v. Vahle, 304 F.3d 734, 738 (7th Cir. 2002) (citing Fed.R.Civ.P. 10 (c)).

         R2Fit manufactures and sells specialized exercise equipment that utilizes data from proprietary software to provide the user with a customized workout. (ECF No. 1 ¶ 6.) In October 2016, R2Fit hired Reimer to work as a personal trainer to R2Fit clients. (ECF No. 1 ¶ 10.) A few months after Reimer joined R2Fit, R2Fit contracted with a third-party software development company, SpaceTech Corporation (“SpaceTech”), to upgrade its proprietary software. (ECF No. 1 ¶ 15.) Reimer grew interested in helping R2Fit further develop and upgrade its software and expressed his desire to assist R2Fit and SpaceTech with the software upgrade project (the “project”). (ECF No. 1 ¶¶ 15-19.) Accordingly, R2Fit expanded the scope of Reimer's employment to allow Reimer to work on the project and included Reimer's involvement in the project in the “Software Development Contract” R2Fit executed with SpaceTech. (ECF No. 1 ¶ 19; ECF No. 1 ¶ 24.)

         R2Fit promoted Reimer to Chief Technology Officer in January 2017, despite Reimer's lack of formal training in software development or any other related subject matter. (ECF No. 1 ¶ 16; ECF No. 1 ¶ 26.) In around March 2017, R2Fit became concerned that SpaceTech may be unable to finish the project to R2Fit's satisfaction. (ECF No. 1 ¶ 29.) But, Reimer informed R2Fit's Chief Executive Officer that he could finish the project without SpaceTech, if R2Fit provided him “additional training and resources.” (ECF No. 1 ¶ 30.)

         In March 2017, R2Fit accepted Reimer's proposition and terminated its business relationship with SpaceTech. (ECF No. 1 ¶ 31.) R2Fit terminated the services contract between it and SpaceTech and made final payment to SpaceTech to “obtain the source code for the software [SpaceTech] had . . . developed up to that point.” (ECF No. 1 ¶ 31.) Following R2Fit's final payment to SpaceTech, SpaceTech sent the source code (“software code”) to R2Fit's CEO, Ariel Huskins (“Huskins”), who shared it with Reimer. (ECF No. 1 ¶ 32.) R2Fit then provided Reimer the requested “paid mentor, [ ]educational resources, and [ ]company computer” to facilitate Reimer's continued work on the project. (ECF No. 1 ¶ 34.) Reimer worked on the project from April 2017 to October 2017, writing and rewriting the software code for R2Fit's upgraded software. (ECF No. 1 ¶ 35.) Other R2Fit employees assisted Reimer in the writing and rewriting of the code, which proceeded under Huskins' direction. (ECF N. 1 ¶¶ 36-37.) R2Fit paid Reimer for his work on the project. (ECF No. 1 ¶¶ 38-39.)

         In August 2017, Reimer “abruptly decided” that “because of his efforts” he owned the software code and demanded additional compensation to “license” the software to R2Fit. (ECF No. 1 ¶ 40.) R2Fit's CEO demanded that Reimer return the software code to R2Fit, but Reimer refused, stating that he would only return the software code if R2Fit provided him additional compensation. (ECF No. 1 ¶ 41.) R2Fit refused to provide Reimer additional compensation, and on November 7, 2017, R2Fit terminated Reimer's employment. (ECF No. 1 ¶ 42.) In a letter confirming Reimer's termination, R2Fit demanded that Reimer return to R2Fit “any and all confidential information and company property in his possession.” (ECF No. 1 ¶ 43.) Reimer refused to return the software code, stating in his reply letter that “R2Fit believes it owns software that I have written; It does not.” (ECF No. 1-5.) Rather, Reimer “alleged he wrote [the software] ‘on [his] own time and using [his] personal computer.'” (ECF No. 1 ¶ 44.) R2Fit then filed the present suit seeking a declaratory judgment confirming R2Fit as the rightful “author and copyright owner of the software/source code under the 'works made for hire‘ doctrine of the Copyright Act, 17 U.S.C § 101” and alleging several state law violations related to Reimer's possession of the software code.

         III. ...