IP Law Daily Copyright claim dismissed against former employee in municipal bond market
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Monday, April 19, 2021

Copyright claim dismissed against former employee in municipal bond market

By Brian Craig, J.D.

The complaint fails to allege that the copyrighted works are protected by technological measures and that the former employee somehow circumvented those measures to obtain access.

FMHUB, a company that through its web platform MuniHub provides financial deal marketing solutions for the municipal bond market, failed to state a valid claim for relief against a former employee under the Digital Millennium Copyright Act (DMCA), according to the federal district court in Trenton, New Jersey. In dismissing the DMCA claim, the court concluded that the amended complaint fails to allege that the confidential information protected by passwords was the same copyrighted works that the former employee allegedly accessed to support a claim under the DMCA. The court also found that the amended complaint is devoid of any allegations that the former employee actually took steps to circumvent the technological measures in place to protect the copyrighted works. While the court also dismissed various state law claims against the former employee, the court limited the scope of claims brought under the Computer Fraud and Abuse Act (FMHUB, LLC v. Muniplatform, LLC, April 15, 2021, Wolfson, F.).

FMHUB filed an action against MuniPlatform and a former employee for violation of the DMCA, the Computer Fraud and Abuse Act (CFAA), and various state law claims. The former employee worked as a consultant for business development. In August 2020, the court dismissed the DMCA and CFAA claims against the former employee. On September 9, 2020, FMHUB filed an amended complaint with additional allegations to support the CFAA and DMCA claims. The former employee filed a motion to dismiss the amended complaint.

CFAA. The court limited the scope of the CFAA claim only to alleged unauthorized access of the back-end, development infrastructure of the plaintiff’s website. The court recognized that a circuit split has emerged as to the type of conduct required to state a civil claim under the CFAA. The Seventh Circuit has held that an employee exceeds his authorized access when he accesses files after breaching the duty of loyalty to his employer. Under the CFAA, an individual who is authorized to use a computer for certain purposes but goes beyond those limitations is considered by the CFAA as someone who has exceeded authorized access. Here, the complaint alleges that the former employee was never permitted to access the back-end, development infrastructure of the plaintiff’s website. The complaint alleges that the former employee accessed these components from 2017 to present, and used the information for personal benefit and the formation of MuniPlatform. Therefore, the court limited the CFAA claim only to the former employee’s alleged unauthorized access of the back-end, development infrastructure of the plaintiff’s website.

DMCA. Next, the court dismissed the DMCA claim because the complaint fails to show that the works were protected and that the measure was circumvented to gain access. Under the DMCA, a plaintiff must allege (1) that the work was protected under the Copyright Act; (2) that the copyrighted work was protected by a technological measure that effectively controls access; and, (3) that the measure was "circumvented" in order to obtain access. A plaintiff must meet an initial burden of pleading factual allegations that the information allegedly obtained was protected by copyright. Here, the complaint fails to allege that the confidential information protected by passwords was the same copyrighted works that the former employee allegedly accessed in violation of the DMCA. In addition, the complaint is devoid of any allegations that the former employee actually took steps to circumvent the technological measures in place to protect the copyrighted works. The amended complaint fails to allege that the copyrighted works are protected by technological measures and that the former employee somehow circumvented those measures to obtain access to the copyrighted works. Accordingly, the court dismissed the DCMA claim.

Other claims. The court also dismissed state law claims for tortious interference with contract, tortious interference with prospective economic or contractual relationship, and conversion against the former employee. Finally, the court dismissed the former employee’s motion to strike the pleadings and motion for sanctions.

This case is No. 3:19-cv-15595-FLW-DEA.

Attorneys: Justin M. Klein (Marks & Klein, LLP) for FMHUB, LLC d/b/a MuniHub. Sam Maybruch (Arbus, Maybruch & Goode, LLC) for MuniPlatform, LLC.

Companies: FMHUB, LLC d/b/a MuniHub; MuniPlatform, LLC

MainStory: TopStory Copyright TechnologyInternet GCNNews NewJerseyNews

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