Uphoff v. Geofrey Lemond and Capture Design Ventures 03

Background

The case began as two separate lawsuits that the court consolidated under File No. 25-cv-4128. Geoffrey LeMond and Capture Design Ventures 03, LLC alleged that LeMond and John Uphoff formed a partnership to develop online games of chance using blockchain technology. The alleged partnership developed games including Prize, TokenWars, and Packs.com, using partnership funds, assets, and hired developers.

LeMond alleged that, during negotiations between the partnership and Roobet, Uphoff began communicating privately with Matt Duea and later joined Roobet. According to the complaint, Uphoff then gained control of partnership domains, deleted partnership records, and helped develop Packdraw for Roobet. LeMond alleged that Packdraw was similar to Prize and incorporated visual, design, and possibly software elements from partnership games.

LeMond asserted counterclaims against Uphoff concerning copyright ownership and profits. He also asserted claims against Uphoff and other defendants for breach of fiduciary duty, civil conspiracy, aiding and abetting a breach of fiduciary duty, misappropriation of trade secrets under federal and Minnesota law, and unjust enrichment.

Legal standard

The defendants moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to plausibly state a legal claim, and Rule 12(c), which permits judgment on the pleadings. The court accepted the complaints’ well-pleaded factual allegations as true and drew reasonable inferences in LeMond’s favor. The court assessed whether the allegations plausibly supported relief, not whether LeMond had already proved his claims.

LeMond’s copyright counterclaims

The court denied Uphoff’s motion as to Count I, which alleged that the games were works made for hire owned by the partnership. Under the Copyright Act, a work made for hire prepared by an employee within the scope of employment is generally owned by the employer or other person for whom it was prepared. The court found plausible allegations that Uphoff was hired to develop the games, used partnership assets, worked on game development for roughly three years, could be assigned additional projects, and worked with other developers paid with partnership funds.

The court rejected Uphoff’s argument that Uphoff’s status as a partner necessarily prevented him from also being an employee for copyright purposes. The court explained that partner and employee status are not automatically mutually exclusive under the common law of agency. The court therefore denied the motion as to Count I.

The court granted the motion as to Count II, which alleged that the partnership owned the copyrights “by operation of law.” The court explained that copyright transfers by operation of law generally involve limited circumstances such as intestate succession, corporate mergers or dissolutions, and bankruptcy, and that the alleged corporate-opportunity theory did not constitute such a transfer. Count II was dismissed without prejudice.

The court denied the motion as to Count III, which alleged that Uphoff and the partnership shared a joint ownership interest and that Uphoff had to account for profits. Joint authorship requires independently copyrightable contributions and an intent to be co-authors. The court found plausible the allegations that Uphoff contributed technical models, software, and blockchain code while LeMond contributed visual and experiential design. The court permitted an inference that LeMond’s design contributions could include tangible elements rather than merely ideas or suggestions.

Breach of fiduciary duty

The court denied the motion to dismiss Count I of the complaint, which alleged that Uphoff breached fiduciary duties owed to LeMond, the partnership, and the partnership’s investors. The court found plausible three theories: Uphoff usurped a partnership business opportunity and competed with the partnership; failed to account for property, profits, or benefits derived from partnership property; and concealed his work developing Packdraw.

The court relied on allegations that Roobet had negotiated with the partnership about developing Prize and had contemplated investing in game development; that Uphoff was hired after those negotiations; that LeMond agreed to Uphoff’s temporary work for Roobet based on a representation that Uphoff would address infrastructure issues; and that Uphoff later imported partnership files into the Packdraw design file. The court also considered allegations that Uphoff restricted LeMond’s access to partnership information, deleted records, and developed Packdraw while giving the impression that he remained committed to the partnership.

Civil conspiracy

The court granted the motion as to Count II of the complaint, which alleged that Uphoff, Duea, and Roobet conspired to accomplish Uphoff’s breach of fiduciary duties. The court found that the allegations concerning Duea—including private communications with Uphoff, the contractor arrangement, and an instruction to keep LeMond away from Packdraw—did not plausibly show an agreement to pursue an unlawful purpose. The allegations were equally consistent with lawful conduct.

The court also found insufficient the allegations that Brennan, Temiz, and Roobet directed or supported Uphoff’s use of partnership designs. The court determined that allegations made on information and belief, without sufficient supporting facts, did not plausibly establish a meeting of the minds. Count II was dismissed without prejudice.

Aiding and abetting

The court denied the motion as to Count III of the complaint, which alleged that Duea and Roobet aided and abetted Uphoff’s breach of fiduciary duties. The court found plausible allegations that Duea and Roobet knew about Uphoff’s relationship with the partnership, knew or could infer that he owed duties to it, and substantially assisted him by hiring him and enabling him to take the partnership’s place in developing games for Roobet.

Trade-secret claims

The court granted the motion as to Counts IV and V, which asserted claims under the Minnesota Uniform Trade Secrets Act and the federal Defend Trade Secrets Act. Both statutes require plausible allegations that the information was not generally known or readily ascertainable, had value because of its secrecy, and was subject to reasonable efforts to maintain secrecy.

The court found that the complaint described the alleged trade secrets at too high a level. Although LeMond later characterized the alleged secrets as an integrated collection of materials concerning Prize, TokenWars, and Packs.com stored in private repositories, the complaint did not adequately allege that information about TokenWars and Packs.com had been misappropriated. For Prize, the complaint did not plausibly allege that the relevant designs, economic model, user-interface information, or blockchain techniques were not generally known, or that the partnership took sufficient steps to protect their secrecy. Counts IV and V were dismissed without prejudice.

Unjust enrichment

The court denied the motion as to Count VI, which alleged unjust enrichment. The court explained that unjust enrichment is generally unavailable when an adequate legal remedy exists, but determined that breach-of-fiduciary-duty claims do not displace unjust-enrichment claims. Because the alleged property could include material not covered by the trade-secret statutes, and because the fiduciary-duty and aiding-and-abetting claims survived, the court allowed the unjust-enrichment claim to proceed.

Disposition

The court ordered that Uphoff’s Motion to Dismiss Counterclaims was GRANTED IN PART and DENIED IN PART: it was granted as to Count II and denied as to Counts I and III, with Count II dismissed without prejudice.

The court separately ordered that the defendants’ Motion to Dismiss the Complaint was GRANTED IN PART and DENIED IN PART: it was granted as to Counts II, IV, and V and denied as to Counts I, III, and VI, with Counts II, IV, and V dismissed without prejudice. The remaining claims were allowed to proceed to discovery.