Shande v. Zoox, Inc.

Background

Tavershima Shande alleged that he worked for Zoox as a Staff Technical Artist from January 2017 through March 2022. He used Zoox-supplied software to create digital street scenes for autonomous-vehicle training. During the same period, he created digital urban scenery for videogames, referred to in the opinion as the “Content,” using his own time and, according to his allegations, his own equipment without Zoox’s materials or technology. He registered a copyright in the Content and sold it through Epic Games, Inc.’s Unreal Engine marketplace.

Zoox asserted that the Content infringed its rights and demanded that Shande stop selling it. After Shande refused, Zoox terminated his employment. Zoox then sent Epic a takedown notice under the Digital Millennium Copyright Act (DMCA). Epic suspended sales, and Shande submitted a counter-notice. Zoox did not file a copyright-infringement lawsuit within the resulting 10-day period, and Epic restored the Content for sale. Shande also alleged that Zoox made additional statements to Epic asserting that Zoox owned the Content and that Epic could face liability if it did not remove it.

Shande asserted seven claims: declaratory relief; knowing misrepresentation under the DMCA; copyright infringement; violations of contract and public policy under California Labor Code section 2870; intentional interference with contractual relations; intentional interference with prospective economic advantage; and violation of California’s unfair competition law.

Motions and ruling

Zoox moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, to dismiss Claims 2, 3, and 4. Zoox also filed a special motion to strike Claims 5, 6, and 7 under California’s anti-SLAPP statute, which can remove claims based on protected speech or petitioning activity. Alternatively, Zoox asked the court to dismiss those three claims under Rule 12(b)(6). Zoox did not expressly address Claim 1, but the court said that claim depended on the other claims because the Declaratory Judgment Act provides a remedy rather than an independent basis for jurisdiction.

The court granted Zoox’s motion to dismiss as to all claims in the first amended complaint. It granted leave to amend Claims 1, 2, 5, 6, and 7, and granted the motion without leave to amend as to Claims 3 and 4.

Claim 2: DMCA misrepresentation

A claim under 17 U.S.C. § 512(f) requires allegations that a takedown notice contained a material misrepresentation, caused a takedown, and was submitted with subjective bad faith. The court found it unclear whether Zoox acted with subjective bad faith. The allegations indicated that Zoox consistently claimed ownership under the work-made-for-hire doctrine. If Zoox subjectively believed the statements in its notice, the court explained, Zoox could not be liable even if the statements ultimately proved untrue. The court therefore granted dismissal of Claim 2 with leave to amend so Shande could clarify the alleged bad faith.

Claim 3: Copyright infringement

The court held that Shande’s copyright theory was not viable. Shande alleged that Zoox infringed his exclusive distribution right by asserting ownership and causing Epic to suspend sales. The court explained that, in the Ninth Circuit, infringement of the distribution right requires actual dissemination of a work or an offer to distribute it. Shande did not allege that Zoox distributed or authorized distribution of the Content. Because amendment would be futile, the court granted dismissal of Claim 3 without leave to amend.

Claim 4: California Labor Code section 2870

Section 2870 limits the enforcement of employment-agreement provisions assigning an employee’s rights in an invention to an employer, subject to specified exceptions. Shande alleged that Zoox’s assertion of ownership violated section 2870 and the parties’ Employee Proprietary Information and Invention Assignment Agreement. The court held that section 2870 does not create an independent right of action. Because amendment would be futile, the court granted dismissal of Claim 4 without leave to amend.

Claims 5, 6, and 7: State-law claims and anti-SLAPP motion

Claims 5, 6, and 7 concerned alleged communications in which Zoox misrepresented its rights to the Content and caused Epic to suspend sales. Shande clarified that these claims were based on communications after the DMCA takedown process, rather than on the takedown notice itself. For purposes of the anti-SLAPP motion, Shande conceded that those communications qualified as protected speech activity. The court therefore found that Zoox satisfied the first step of the anti-SLAPP analysis.

The court did not decide the second step of the anti-SLAPP motion. It found that the first amended complaint did not identify the communications forming the basis of Claims 5, 6, and 7. Without that information, the court could not determine whether the claims were preempted by the DMCA or barred by California’s litigation privilege. The court also found the claims inadequately pleaded because Shande had not alleged facts showing interference with contractual or prospective economic relationships or unfair business practices.

The court therefore granted Zoox’s alternative Rule 12(b)(6) motion as to Claims 5, 6, and 7 with leave to amend. It deferred consideration of the anti-SLAPP motion pending amendment and terminated that motion without prejudice to renewal, if appropriate, after Shande filed an amended pleading.

Disposition

The court stated that any amended complaint was due by September 8, 2023, and that amendment was limited to the deficiencies identified in the order. Shande could not add new claims or parties without prior court permission. The order terminated ECF 32.