Laatz v. Zazzle, Inc.

Background

Nicky Laatz alleged that she created three fonts—the Blooming Elegant Trio—and the software used to implement them. She alleged that Zazzle employee Mohamed Alkhatib purchased a standard, single-user license through Creative Market at Zazzle’s direction, while concealing that he was acting for Zazzle. According to the First Amended Complaint, Alkhatib or Zazzle then copied the font software onto multiple Zazzle servers and made it available through Zazzle’s design tool to employees, designers, users, and customers.

The First Amended Complaint asserted six claims: fraudulent misrepresentation, fraudulent concealment, promissory fraud, copyright infringement, trademark infringement involving the “BLOOMING ELEGANT” mark, and breach of contract. Defendants moved to dismiss all six claims under Federal Rule of Civil Procedure 12(b)(6), which requires dismissal when a complaint does not allege enough facts to support a legally valid claim.

Request for Judicial Notice and Incorporated Documents

The court granted Defendants’ request to consider Exhibits 1, 3, 4, and 5. Exhibit 1 was an excerpt from the Copyright Office’s Compendium; Exhibits 3 and 4 were screenshots of Creative Market’s sign-up pages; and Exhibit 5 was Alkhatib’s license-purchase receipt. The court denied the request as to Exhibit 2, a legal news article, because its contents could not be accurately verified and its existence was not relevant to whether the complaint adequately stated claims.

Copyright Infringement

The court distinguished between a typeface design, which is not copyrightable, and font software, which may be copyrightable if it contains sufficient original computer instructions. Laatz alleged that she selected individual glyph reference points, chose font-wide variables, and wrote and inserted custom code for features such as ligatures and stylistic alternate letters.

The court held that these allegations plausibly supported Laatz’s ownership of a valid copyright in the Blooming Elegant Software. Although Defendants raised serious questions about whether Laatz contributed enough to qualify as the software’s author, the court treated that issue as a factual question that could not be resolved at the pleading stage.

The court also found that Laatz plausibly alleged unauthorized copying. The complaint alleged that the software was copied onto multiple Zazzle servers and made available to employees and users even though the license covered one user and installation on up to two computers used by that end user. The court further concluded that the allegations about the Morgana font permitted a reasonable inference that its software was copied from, or was an unauthorized derivative of, the Blooming Elegant Software. The copyright claim therefore could proceed.

Copyright Act and State-Law Claims

Defendants argued that the Copyright Act preempted, meaning displaced, Laatz’s three fraud claims and her contract claim. The court rejected that argument. It found that the fraud claims involved alleged misrepresentations made to obtain the license before the alleged infringement, making them different from copyright claims. It also found that the license imposed specific use restrictions—such as limiting use to one user and prohibiting placement on a shared system—that were qualitatively different from copyright’s reproduction and distribution rights. The court therefore held that the Copyright Act did not preempt Laatz’s state-law claims.

Breach of Contract

For purposes of the motion, the court accepted four documents—the Creative Market Service Terms, License Terms, Shop Page, and License FAQ—as comprising the relevant license. The court rejected Defendants’ argument that Laatz could not sue because she was not a party to that license. Her name appeared on the Shop Page, and the court found it reasonable to infer that she was the “Shop Owner” and seller identified in the license documents.

The court also rejected Defendants’ argument that Alkhatib could not be sued for breach of contract because he was acting as Zazzle’s agent. Under the rule discussed by the court, an agent who contracts for an undisclosed or unidentified principal may be treated as a party to the contract. The court concluded that the documents did not establish as a matter of law that Zazzle’s identity as the principal had been disclosed to Laatz. The breach-of-contract claim was therefore sufficient to survive dismissal.

Fraud Claims

The court held that the complaint adequately pleaded fraudulent misrepresentation and promissory fraud. It alleged that Alkhatib agreed to a single-user license, concealed that he was a Zazzle employee acting for Zazzle, and entered into the license so Zazzle could make the software available for broader use. The court found that Laatz adequately alleged reliance, intent to deceive, and resulting damage. It also concluded that the allegations were detailed enough to satisfy Rule 9(b), which requires fraud to be pleaded with particularity, including the basic details of who, what, when, where, and how.

The court likewise allowed the fraudulent-concealment claim to proceed. It found that the complaint plausibly alleged a duty to disclose because Defendants allegedly knew that the concealed information was important and not reasonably discoverable by Laatz. The court also found that the complaint adequately alleged concealment of the fact that Zazzle obtained the software through Alkhatib’s single-user purchase after Laatz had refused to grant Zazzle the broader license it sought.

Trademark Infringement

Defendants argued that the complaint itself established the defense of nominative fair use, which can permit use of another party’s trademark to identify that party’s product. The court stated that the defense applies when the product cannot readily be identified without the mark, only as much of the mark as reasonably necessary is used, and the use does not suggest sponsorship or endorsement.

The court held that it could not decide from the complaint whether Zazzle used only as much of the “BLOOMING ELEGANT” mark as necessary or whether Zazzle’s use suggested Laatz’s sponsorship or endorsement. The trademark claim therefore was not subject to dismissal at this stage.

Disposition

The court denied Defendants’ Motion to Dismiss the First Amended Complaint. It did not decide ultimate liability or damages.