InSync, a provider of on-line training courses and materials, licensed some of its materials to American Society for Training and Development (“ASTD”) to enable them to deliver training virtually in light of the Covid pandemic and ensuing shutdowns. Under the license, ASTD could not use InSync’s materials to generate its own competitive offerings. When ASTD terminated the agreement in June 2021 and began offering competitive services the next day, InSync filed suit, claiming breach of contract and copyright infringement, fraud in the inducement, and violation of New Hampshire’s Consumer Protection Act (unfair competition).
After receiving discovery from ASTD, InSync moved to amend the complaint, and ASTD objected on the grounds of futility. Judge LaPlante granted InSync’s motion as to the copyright, contract and unfair competition claims, but denied the motion on to the fraud claim. He found that InSync’s allegations of similarity between its materials and ASTD’s, which was alleged based on publicly-available course descriptions and excerpts, sufficiently pled copyright infringement, because the court could draw reasonable inferences beyond mere speculation as to similarity and copying. He denied the motion with respect to fraud because the fraud claim requires facts that show that ASTD intended to copy InSync’s materials and develop its own offerings in violation of the contract at the time the contract was entered into. While the speed with which ASTD developed its competing products and services supports an inference that ASTD decided to use the materials in breach of the agreement at some point while the agreement was in effect, there were not sufficient specific facts to show that this decision was made prior to or at the point of execution of the agreement. Finally, Judge LaPlante rejected ASTD’s argument that the unfair competition claim was preempted by the Copyright Act. Preemption does not occur where the state cause of action requires an extra element beyond mere copying, preparation of a derivative work, or other act specifically prohibited by the copyright statute. Two of the bases pled as violations of the Consumer Protection Act – ASTD’s continued use of InSync’s materials after termination of the license agreement and continued infringement of InSync’s copyright – allege the same misconduct underlying the copyright claim and offer no extra elements. The third basis, however – that ASTD entered into and/or remained a party to the license agreement to use InSync’s course materials for ASTD’s own commercial purposes –includes the required extra element of remaining party to the agreement under false pretenses, that ASTD wanted to continue to have access to the materials to produce its own course materials.
SHARE THIS POST