Rearden LLC v. TWDC Enterprises 18 Corp.

Background

The dispute concerns ownership and use of the MOVA Contour Reality Capture program, which captures high-resolution three-dimensional models of a performer’s face and facial movements for use in movie facial animation. In an earlier round of this dispute, the court ruled that Rearden owned the MOVA assets and ordered their return.

Rearden alleged that Disney contracted with Digital Domain 3.0, Inc. to provide facial-performance-capture services and output works for Avengers: Infinity War and Avengers: Endgame. Rearden alleged that, after an earlier injunction involving the MOVA assets, Digital Domain used MOVA to animate characters including Thanos, Ebony Maw, and the Hulk. Rearden sought to hold Disney liable for contributory and vicarious copyright infringement.

This was Rearden’s Fourth Amended Complaint. The court had previously dismissed its copyright claims because Rearden had not plausibly alleged that Digital Domain directly infringed the MOVA copyright. Disney moved to dismiss the Fourth Amended Complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not plausibly state a legally valid claim.

Direct Copyright Infringement

The court held that Rearden’s new allegations plausibly supported direct infringement by Digital Domain in limited circumstances. In particular, allegations about the Ruffalo Maya Files supported an inference that those files were created using MOVA during a period consistent with production of at least Avengers: Infinity War. Allegations about the Ebony Maw Maya File—including numerous references to MOVA and elements identical to those used by MOVA—also supported an inference that Digital Domain used MOVA to create that file.

The court rejected Rearden’s broader theories. It found implausible the allegations that Digital Domain used MOVA extensively throughout production of the two films or copied substantial amounts of MOVA source code into its Masquerade software. The court reasoned that Rearden had identified only a limited number of files and references among the thousands of files returned and the millions reviewed by the forensic expert.

Contributory Copyright Infringement

Contributory infringement requires knowledge of another party’s infringement and either material contribution to or inducement of that infringement. The court found that Rearden did not plausibly allege that Disney knew or had reason to know of Digital Domain’s specific acts of infringement.

The court held that Disney’s notice of an earlier preliminary injunction showed, at most, knowledge of Rearden’s copyright in MOVA—not knowledge that Digital Domain was using MOVA during work on the two films. Rearden’s allegations that Disney continued to employ people who had worked with MOVA supported only general awareness of a possibility of infringement. The court also found insufficient allegations that Disney received the particular files containing the alleged infringement.

The court further held that hiring Digital Domain and personnel with prior MOVA experience did not plausibly show that Disney materially contributed to or induced infringement. The Fourth Amended Complaint did not support Rearden’s assertion that Disney directed Digital Domain to use MOVA or used contractual restrictions as a cover for such direction.

Vicarious Copyright Infringement

Vicarious infringement requires a defendant to have the legal right and practical ability to control the direct infringer and to receive a direct financial benefit from the infringement. Rearden alleged that Disney could review Digital Domain’s work and require changes or cancel services.

The court found that these allegations did not plausibly show that Disney could identify or control the alleged infringement. The complaint did not allege that the specific Maya files were included in the weekly reports Disney received, that those reports mentioned MOVA, or that it would have been practical for Disney to review Digital Domain’s software source code. Given the limited number of files that plausibly reflected direct infringement among millions reviewed, the court found it implausible that Disney could have identified and controlled those instances.

Disposition and Amendment

The court dismissed the Fourth Amended Complaint based on the deficiencies in Rearden’s secondary copyright-infringement allegations. It granted Disney’s motion to dismiss with leave to amend. Rearden may file another amended complaint within 21 days, solely to cure the deficiencies identified in the order. The order states that failure to amend, or failure to cure those deficiencies, will result in dismissal with prejudice.