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Raju v. Murphy

United States District Court, S.D. Mississippi.

February 28, 2019

Seshadri Raju, Plaintiff,
Erin Murphy, Defendant.

          Before Carlton W. Reeves, District Judge .



         On October 31, 2018, the Court entered an Order denying without prejudice Dr. Seshadri Raju's motion to amend. Docket No. 139. Now before the Court is Raju's renewed motion. Docket No. 140. The proposed amendment adds a party, Medtronic Vascular, Inc. (“Medtronic”), and six substantive claims: (1) copyright infringement (2) federal misappropriation of trade secrets, (3) state misappropriation of trade secrets, (4) tortious interference with contract, (5) civil conspiracy, and (6) unauthorized access to a computer network.[1] Dr. Erin Murphy argues that each of the proposed claims are futile and as such, the amendment should be denied.


         Legal Standard

         Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes dismissal of actions that fail “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “A district court may deny leave to amend a complaint if the amendment would be futile.” Myers v. CitiMortgage, Inc., 557 Fed. App'x 296, 297 (5th Cir. 2014).

         When considering a motion to dismiss under Rule 12(b)(6), the Court accepts the plaintiff's factual allegations as true and makes reasonable inferences in the plaintiff's favor. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plaintiff's claims must be plausible on their face, which means there is “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted). Since Iqbal, the Fifth Circuit has clarified that the Supreme Court's “emphasis on the plausibility of complaint's allegations does not give district courts license to look behind those allegations and independently assess the likelihood that the plaintiff will be able to prove them at trial.” Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787, 803 n. 44 (5th Cir. 2011).

         The Court now turns to the claims.


         Copyright Infringement

         Murphy argues that the copyright infringement claim is deficient because (1) the Copyright Act does not protect Raju's surgical procedures, (2) there is no allegation of the ownership of a valid copyright, (3) there is no allegation of actionable copying, and (4) there are no alleged damages.

         “To prove copyright infringement, a plaintiff must establish (1) ownership of a valid copyright; (2) factual copying; and (3) substantial similarity.” Nola Spice Designs, L.L.C. v. Haydel Enters., Inc., 783 F.3d 527, 549 (5th Cir. 2015) (citation omitted). The Copyright Act does not extend protection “to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” 17 U.S.C. § 102(b).

         Murphy's first argument is unpersuasive. Raju is alleging a copyright violation over the use of his surgical videos, not his surgical procedures. See Docket No. 140-1 at ¶ 67. Copyright protection extends to Raju's surgical videos. See Concentro Labs., L.L.C. v. Practice Wealth, Ltd., 623 Fed. App'x 251, 252 (5th Cir. 2015) (“a copyright in a form or a video outlining a particular procedure does not extend to the procedure itself”).

         As for the second argument, Raju submitted to the Court a copy of his application for copyright registration of his surgical videos and receipts for fees paid. He is awaiting the issuance of registration certificates. Murphy claims that this is insufficient to allege ownership of a valid copyright, but the Fifth Circuit disagrees. “A plaintiff has complied with the statutory formalities when the Copyright Office receives the plaintiff's application for registration, fee and deposit.” Lakedreams v. Taylor, 932 F.2d 1103, 1108 (5th Cir. 1991). “[T]he Fifth Circuit has held that ‘defects resulting from lack of registration are cured when the registration is filed, even if after suit is filed.'” Hervey v. Keltman Pharm., Inc., No. 3:12-CV-625-CWR-FKB, 2015 WL 4673773, at *3 (S.D.Miss. Aug. 6, 2015) (citing One Treasure Ltd., Inc. v. Richardson, 202 Fed.Appx. 658, 661 (5th Cir. 2006)). Raju, therefore, has alleged ownership of a valid copyright.

         Next, Murphy claims that because Raju has alleged only that Murphy took a surgical video without permission, rather than actually using it in Murphy's or Medtronic's own work, or any substantial similarity, Raju has failed to allege actionable copying. Actionable copying consists of the last two elements of a copyright infringement claim: (1) factual copying, i.e., “whether the alleged infringer . . . actually used the copyrighted material in his own work, and (2) substantial similarity between the two works.” See Spear Mktg., Inc. v. BancorpSouth Bank, 791 F.3d 586, 598 n. 62 (5th Cir. 2015) (quotation marks and citations omitted). Factual copying can be shown through direct or circumstantial evidence. See Armour v. Knowles, 512 F.3d 147, 152 (5th Cir. 2007). In Raju's proposed complaint, he alleges that the stolen video was used to develop Medtronic's venous stent program. See Docket No. 140-1 at ¶¶ 17, 29, 69. This is sufficient to allege actionable copying.

         Raju may amend his complaint to include a copyright infringement claim.


         Misappropriation of Trade Secrets-Defend Trade Secrets Act (DTSA)

         The proposed complaint also alleges a misappropriation of trade secrets claim under federal law. Murphy argues that Raju fails to state a viable claim because (1) Raju's vein stents and stenting procedures are not trade secrets as defined by the Code, (2) there is no allegation that Raju's purported trade secrets were misappropriated, and (3) there are no alleged damages.

         Before discussing the merits of Murphy's arguments, we must first return to whether good cause exists under Rule 16(b). In Raju's first motion to amend, he claimed that part of the reason he failed to timely seek amendment was because “the actions of Dr. Murphy and Medtronic could not have been known prior to filing the Complaint or the deadline to . . . amend.” Docket No. 111. Raju alleged that subpoenaed documents contain emails from Murphy to Medtronic wherein Murphy discloses Raju's trade secrets.[2]

         Upon further review of the original complaint, however, the facts that give rise to this trade secret claim against Murphy were in fact known to Raju before the amendment deadline. In the original complaint, Raju alleges that Murphy disclosed confidential information, including trade secrets, which were exclusive to Raju, . . . without the express written authorization of Raju. See Docket No. 1-1 at ¶¶ 11, 15.

         The documents subpoenaed from Medtronic allegedly reveal more disclosures of trade secrets and a conspiracy between Murphy and Medtronic to steal those trade secrets. Still, Raju was certainly aware that Murphy had disclosed trade secrets before the amendment deadline.

         Good cause under Rule 16(b) is shown by considering: “(1) the explanation for the failure to timely move to amend; (2) the importance of the amendment; (3) potential prejudice in allowing the amendment; and (4) the availability of a continuance to cure such prejudice.” Alford v. Kuhlman Corp., No. 3:07-CV-756-HTW-LRA, 2010 WL 1257844, at *1 (S.D.Miss. Mar. 26, 2010) (citing S&W Enter. v. Southtrust Bank, 315 F.3d. 533 (5th Cir. 2003)) (brackets omitted). The Court “does not mechanically count the number of factors that favor each side.” EEOC v. Serv. Temps, Inc., No. 3:08-CV-1552-D, 2009 WL 3294863, at *3 (N.D. Tex. Oct. 13, 2009).

         Raju's failure to include a misappropriation of trade secrets claim at the outset of this case suggests a lack of diligence, but the last three factors weigh in favor of granting leave to amend for the reasons stated in the Court's previous Order. See Docket No. 139. Considering the four factors as a whole, the Court finds that Raju has met the good cause standard despite his knowledge of facts sufficient to have alleged a misappropriation of trade secrets claim before the deadline.

         A private right of action is allowed for misappropriation of trade secret claims where a plaintiff sufficiently alleges: (1) the existence of a trade secret; (2) misappropriation of the trade secret; and (3) the trade secret's relation to a product or service used in, or intended for use in, interstate or ...

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