Enigma Software Group USA, LLC v. Malwarebytes Inc.

Background

Enigma alleged that Malwarebytes, a competing anti-malware software company, changed its criteria in October 2016 and began labeling Enigma’s SpyHunter 4 and RegHunter 2 programs as potentially unwanted programs (PUPs) and threats. Malwarebytes’ products allegedly quarantined, blocked, and prevented users from installing or using Enigma’s programs. Enigma also alleged that Malwarebytes later treated SpyHunter 5 and Enigma-related websites similarly.

Enigma asserted four claims: (1) violation of § 43(a) of the Lanham Act, which addresses false or misleading commercial statements; (2) violation of New York General Business Law § 349; (3) tortious interference with contractual relations; and (4) tortious interference with business relations. Malwarebytes moved to dismiss the Second Amended Complaint under the federal pleading rules.

Choice of Law and Personal Jurisdiction

Because the case had been transferred from the Southern District of New York, the court first considered whether New York had personal jurisdiction over Malwarebytes. The court concluded that it did not. It found that Malwarebytes’ relevant conduct occurred in California, where it developed and applied its PUP criteria and maintained the website distributing its software. The allegations that New York residents used Malwarebytes’ products, that some New York customers reported blocked Enigma programs, and that several Malwarebytes employees worked in New York did not establish sufficient contacts with New York.

The court also found that Malwarebytes did not specifically target New York and was not physically present there for purposes of the relevant New York long-arm provision. Because New York lacked personal jurisdiction, the court held that California law applied to the state-law claims.

Claims

Lanham Act. The court held that Enigma did not adequately allege that Malwarebytes’ labels—such as “malicious,” “threats,” and PUPs—were verifiably false statements of fact rather than subjective opinions. The court noted that Malwarebytes disclosed criteria for its classifications and allowed users to quarantine or restore detected programs. It therefore dismissed Enigma’s Lanham Act claim.

New York General Business Law § 349. The court dismissed this claim because New York law did not apply. It also stated that, even if New York law applied, the claim would fail because it relied on the same allegations as the Lanham Act claim, and the challenged opinions were not actionable under that statute.

Tortious interference with contractual relations. Applying California law, the court found that Enigma failed to identify a specific contractual obligation with which Malwarebytes interfered. It also found that Enigma did not adequately plead an independently wrongful act interfering with users’ at-will agreements. The court noted that Malwarebytes provided instructions allowing users to continue using or exclude detections of Enigma’s programs. The court dismissed this claim.

Tortious interference with business relations. The court held that Enigma failed to allege independently wrongful conduct beyond the alleged interference itself. Because Enigma’s Lanham Act and New York General Business Law claims failed, the court granted dismissal of this claim as well.

Other Rulings

The court granted Malwarebytes’ requests for judicial notice of various court filings, press releases, letters, webpages, and product screenshots. For the webpages, the court took notice that Malwarebytes published the statements but did not accept the truth of those statements merely because they appeared on the webpages.

Disposition

The court granted Malwarebytes’ motion to dismiss. It dismissed all of Enigma’s claims without leave to amend, finding that further amendment would be futile because Enigma had already amended its claims and the court’s analysis rested substantially on the conclusion that Malwarebytes’ labels were non-actionable opinions.