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ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority

United States District Court, M.D. Tennessee, Nashville Division

March 31, 2015

ACS TRANSPORT SOLUTIONS, INC., Plaintiff,
v.
NASHVILLE METROPOLITAN TRANSIT AUTHORITY Defendant.

MEMORANDUM

KEVIN H. SHARP, District Judge.

Before the Court is Defendant Nashville Metropolitan Transit Authority's ("MTA") Motion to Dismiss for forum non conveniens (Docket No. 26). Defendant originally filed a Motion to Dismiss for Improper Venue (Docket No. 18), which the Court denied without prejudice in an Order dated July 18, 2014 (Docket No. 25), because Federal Rule of Civil Procedure 12(b)(3) is not the correct motion to enforce a forum selection clause. Plaintiff ACS Transport Solutions Inc. ("ACS") filed a Response in Opposition to the Motion to Dismiss (Docket No. 30), to which Defendant filed a reply (Docket No. 31). For the reasons set forth below, Defendant's Motion to Dismiss will be denied.

I. SUMMARY OF THE FACTS

As set forth in the Court's prior Order, Defendant engaged Plaintiff to supply certain communications systems for Nashville's public bus system. Defendant purchased a Computer Aided Dispatch and Automated Vehicle Locator (CAD/AVL) system and other on-board systems from Plaintiff in 2007, as memorialized in the "CAD/AVL Contract." (Docket No. 27-1).[1] In 2009, Plaintiff also provided a real-time passenger information system, as set forth in the "Sign Contract." (Docket No. 27-3). Both the CAD/AVL Contract and the Sign Contract (collectively "the Contracts") contained a forum selection clause specifying Davidson County courts.[2]

Additionally, the Parties entered into two "End-User Software License Agreements" (the "License Agreements") concurrently with the Contracts, in 2007 and 2009 respectively. (Docket Nos. 27-2 & 27-4). These granted Defendant "non-exclusive, non-transferable, non-assignable license to use the Licensor Software only in conjunction with its use and operation of the System." (Docket No. 27-2 at 1 & Docket No. 27-4 at 1).[3] Each also contained a forum selection clause specifying the state courts of Tennessee.[4]

Defendant terminated the Contracts on September 25, 2012. The Amended Complaint asserts that "MTA abruptly removed ACS staff from MTA premises... and have since denied ACS system access. Soon after expelling ACS workers from its facility, MTA sent ACS a notice of termination of the CAD/AVL Contract and the Sign Contract." (Docket No. 15 at 3).

Plaintiff claims that termination of the Contracts also terminated Defendant's right to use Plaintiff's software under the License Agreements. Through counsel, Plaintiff notified Defendant that any subsequent use of the software was unlicensed. However, Plaintiff asserts, Defendant has continued to use the software without permission and without paying for this use, thus infringing on Plaintiff's copyrighted material in violation of federal law.

In response to Plaintiff's copyright claim, Defendant seeks to enforce the forum selection clause contained in the Contracts and License Agreements. Defendant argues that Plaintiff has improperly brought its claim before this Court, citing "an exception" to federal courts' exclusive jurisdiction over claims arising from the Copyright Act where "the copyright claim is in actuality a contract claim predicated on rights derived from a contract." (Docket No. 27 at 5). Because "the federal Copyright Act plays only a tangential role in ACS's copyright infringement claim regarding whether MTA has a license to continue to use ACS's copyrighted software, " and in light of the forum selection clause, Defendant concludes Tennessee state courts are the proper venue. (Id. at 8).

II. APPLICATION OF LAW

Federal courts have exclusive jurisdiction of claims arising under the Copyright Act. See 28 U.S.C.A. § 1338(a) ("The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights."). However, this jurisdiction does not extend to all questions in which a copyright "may be the subject matter of the controversy." Combs v. Plough, Inc., 681 F.2d 469 (6th Cir. 1982) (quoting New Marshall Engine Co. v. Marshall Engine Co., 223 U.S. 473, 478 (1912) (considering the jurisdiction of the federal courts in the patent context)).

"[A] case arises under' federal law in only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.'" Harper v. AutoAlliance Intern. Inc., 392 F.3d 195, 202-03 (6th Cir. 2004) (citing Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27-28 (1983)). To satisfy this standard, the Amended Complaint must contain a short and plain statement of the claim showing that Plaintiff is entitled to relief. See FED. R. CIV. P. 8(a)(2). It must also provide the Defendant with fair notice of Plaintiff's claim, as well as the grounds upon which it rests. See Conley v. Gibson, 355 U.S. 41, 47, (1957); Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir. 1976). While the complaint need not present detailed factual allegations, to be cognizable it must provide more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not suffice. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

In the copyright infringement context, Plaintiff must plead two elements: (1) ownership of a valid copyright in the material at issue; and (2) violation by Defendant of an exclusive right that Plaintiff holds in that material. See 17 U.S.C.A. § 501(a); Feist Publ'n Inc. v. Rural Tel. Serv. Co. Inc., 499 U.S. 340, 361 (1991). Computer programs are protected under the Copyright Act as "literary works." See 17 U.S.C. § 102(a); Digital Filing Sys., LLC v. Aditya Intern., 323 Fed.Appx. 407, 418 (6th Cir. 2009).

Defendant argues the Parties' dispute is essentially one of contract interpretation: when and how the License Agreements can be terminated. It cites Minor Miracle Prods. LLC v. Starkey for the proposition that "if the original claim centers around an issue where state law would govern, " then "a state court may indeed exercise jurisdiction... even where there are incidental factual questions of copyright ownership or control." 2012 WL 112593, at *5 (Tenn. Ct. App. Jan. 12, 2012) (internal citations omitted). This case relies on the Tennessee Supreme Court's decision in Hold Stitch Fabric Mach. Co. v. May Hosiery Mills, which held that "where an action is brought on a contract of which a patent is the subject matter, either to enforce the contract or to annul it, the case arises on the contract and not under patent laws, and the state court has jurisdiction." 195 S.W.2d 18, 21 (Tenn. 1946).

Review of this persuasive authority reveals it is distinguishable from the matter currently before the Court. In Minor Miracle, the court characterized the complaint as alleging "breach of fiduciary duty..., breach of contract, and conversion." 2012 WL 112593, at *6. It concluded that "[s]imply because the product to be produced... was copyrightable" did not convert "this state law action into one involving a copyright claim that must be brought in federal court." Id . Similarly, the Tennessee Supreme Court in Hold Stitch considered claims involving "damages for a breach of... ...


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