Framework MI, Inc. v. CVS Health Corporation

Background

Framework MI, Inc. alleged that CVS Health Corporation, CVS Pharmacy, Inc., Caremark RX, LLC, and ProCare Pharmacy, LLC doing business as Encompass RX improperly accessed and copied Framework’s proprietary pharmacy-management software. Framework asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, misappropriation of trade secrets, copyright infringement, and unjust enrichment.

Framework alleged that it had contracted with Encompass RX, LLC to provide services and license its software. It also alleged that Framework and CVS entered into a mutual nondisclosure agreement during discussions about a possible business arrangement. Framework claimed that CVS prolonged those discussions to obtain access to confidential information and later used the software in its pharmacy network. Framework later voluntarily dismissed Encompass from the action.

CVS moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim, to dismiss Framework’s non-copyright state-law claims.

Copyright Preemption

The court applied section 301 of the Copyright Act. Under that provision, a state-law claim is preempted when it concerns material within the general subject matter of copyright and seeks rights equivalent to copyright rights, such as the rights to reproduce, adapt, distribute, perform, or display a work. A state-law claim can avoid preemption if it includes an additional element that makes it qualitatively different from copyright infringement.

The court held that Framework’s claims met the subject-matter requirement because they concerned source code and other material within the broad category of copyrightable works. The court also held that the claims were based on the alleged accessing, copying, and use of the copyrighted software.

Individual Claims

Breach of Contract

Framework alleged that CVS breached the Framework-Encompass contract and the Framework-CVS nondisclosure agreement. The court held that Framework did not allege with enough specificity when or how CVS breached a nondisclosure obligation. In particular, Framework did not identify a third party to whom CVS allegedly disclosed the software. The court therefore found that Framework had not stated a viable breach-of-contract claim. The court also held that, to the extent the claim was based on copying the software, it was preempted because that conduct was not legally different from copyright infringement.

Implied Covenant of Good Faith and Fair Dealing

Framework alleged that CVS prolonged negotiations and represented that the parties were close to an agreement in order to gain access to Framework’s products. The court held that the alleged harm—CVS’s reproduction of the copyrighted work for its own purposes—was the same harm covered by copyright law. The court further explained that alleged bad faith or intent did not provide the required additional element. The court therefore dismissed this claim.

Misappropriation of Trade Secrets

Framework alleged that CVS accessed, discovered, and copied trade secrets, including specific software code. The court held that these allegations were indistinguishable from the copyright allegations and therefore preempted. Separately, the court found that Framework did not identify the alleged trade secrets with enough specificity and instead relied largely on general descriptions or literal aspects of the copyrighted work. The court therefore held that this claim was preempted.

Unjust Enrichment

Framework alleged that CVS benefited by using Framework’s software without consent or compensation. The court held that this claim was also indistinguishable from the copyright-infringement claim. The additional allegation that CVS was unjustly enriched did not make the claim qualitatively different, so the claim was preempted.

Disposition

The court granted CVS’s motion to dismiss the state-law claims. The conclusion states that the motion was granted, and the opinion’s claim-by-claim analysis says that the contract, implied-covenant, trade-secret, and unjust-enrichment claims were dismissed. The order did not rule on Framework’s copyright claim and did not state that the dismissed claims were dismissed with or without prejudice.

Judge Naomi Reice Buchwald signed the memorandum and order on June 11, 2021.