Planck LLC v. Particle Media, Inc.

Background

Planck LLC, doing business as Patch Media, operates Patch.com, a local-news website divided into approximately 1,200 local pages. The complaint alleged that Particle Media, Inc., doing business as News Break, and its executives Jeff Zheng and Vincent Wu copied and displayed portions of Patch stories and photographs, used intermediate webpages containing nonpublic story leads, diverted web traffic and advertising revenue, and used Patch content to improve News Break’s search-engine rankings.

The parties had signed a nondisclosure agreement allowing information shared during business negotiations to be used only to evaluate a possible deal. After broader acquisition and licensing discussions failed, the parties discussed sharing COVID-19 content. During technical efforts to create a usable feed, Planck employee Marc Torrence clicked through News Break’s online Terms of Service Agreement. That agreement included a broad content license and required related suits to be brought in Santa Clara County, California. Planck alleged that the agreement was obtained through a false statement that its COVID-specific feed could not be processed and that News Break later used content beyond the COVID-19 material the parties had discussed.

Planck’s amended complaint asserted claims for direct copyright infringement, violations of the Racketeer Influenced and Corrupt Organizations Act and the Digital Millennium Copyright Act, RICO conspiracy, breach of the nondisclosure agreement, and fraudulent inducement to enter the Terms of Service Agreement.

Forum Selection Clause

The court denied Defendants’ request to transfer the case based on the California forum-selection clause. The clause did not apply for two independent reasons. First, Torrence lacked actual or apparent authority to bind Planck to the Terms of Service Agreement, and the clause was communicated only to him rather than reasonably communicated to Planck. The circumstances indicated that Torrence clicked through the agreement as part of a technical effort to share limited COVID-19 content, not to enter a broad content-licensing deal or choose California as the forum for disputes.

Second, the court held that enforcing the clause would be unreasonable, unjust, and the result of overreaching. The court relied on the circumstances of the COVID-19 sharing effort and found no persuasive evidence that Planck’s authorized decisionmakers intended to license large amounts of content or limit litigation to California through the technical troubleshooting process.

Pleading Rulings

The court denied dismissal of the fraudulent-inducement claim. Planck plausibly alleged that Wu falsely stated that the COVID-specific feed could not be ingested, that Defendants made the statement to induce Planck to provide its feeds under the Terms of Service Agreement, and that Planck was harmed by Defendants’ later use of the content. The court also found that the complaint alleged particular facts supporting Defendants’ motive and opportunity to commit fraud.

The court denied dismissal of the copyright claim because the complaint plausibly alleged unauthorized use and because Torrence lacked authority to grant the broad license Defendants relied on. The court likewise denied dismissal of the Digital Millennium Copyright Act claim, finding that Planck adequately alleged that Defendants removed authorship and photograph credits—copyright-management information—from works while knowing, or having reason to know, that the removal would conceal infringement.

The court held that the RICO and RICO-conspiracy claims were sufficiently pleaded. It found that the complaint plausibly alleged criminal copyright infringement as a predicate act, participation by Zheng and Wu in a RICO enterprise, and injury to Planck’s business or property through diverted readers and search-engine traffic. The court also denied dismissal of the breach-of-contract claim because Planck adequately alleged the nondisclosure agreement, its own performance, Defendants’ breach through misuse of confidential information, and resulting harm.

Personal Jurisdiction Over Zheng

The court dismissed the claims against Zheng for lack of personal jurisdiction. The amended complaint alleged that Zheng controlled News Break and participated in one meeting with Planck, but it did not provide enough specific facts showing that he was heavily involved in News Break’s day-to-day operations or personally controlled the alleged wrongful acts connected to New York. The court reached the same conclusion under the personal-jurisdiction provision of the RICO statute.

Disposition

The court denied Defendants’ motion to transfer. It dismissed Zheng for lack of personal jurisdiction and otherwise denied Defendants’ motion to dismiss. Planck was permitted to seek leave to file a further amended complaint by November 24, 2021, with a letter explaining how it could allege sufficient nonconclusory facts about Zheng’s conduct.