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State Regulatory Registry, LLC v. Bartholomew

United States District Court, D. Colorado

September 27, 2019

STATE REGULATORY REGISTRY, LLC, a Washington, D.C. limited liability company, Plaintiff,
v.
BILLY GLENN BARTHOLOMEW, an individual, MTI SERVICES CORPORATION, a Colorado corporation, and CAREY GREEN, an individual, Defendants.

          ORDER

          PHILIP A. BRIMMER Chief United States District Judge

         This matter is before the Court on Plaintiff's Motion for Partial Summary Judgment [Docket No. 58] and Defendant Green's Motion for Partial Summary Judgment [Docket No. 72]. The Court has jurisdiction under 28 U.S.C. § 1331.

         I. BACKGROUND[1]

         Plaintiff State Regulatory Registry, LLC (“SRR”) operates the Nationwide Mortgage Licensing System and Registry (“NMLS”). Docket No. 58 at 2, ¶ 1. In this role, plaintiff develops and administers the SAFE Mortgage Loan Originator National Test (“SAFE MLO Test”), which is a national licensing examination that tests the competency of potential mortgage loan originators. Id., ¶ 2. The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”) requires that mortgage loan originators pass the SAFE MLO Test to be licensed. Id., ¶ 3.

         To develop questions used in the SAFE MLO Test, plaintiff relies upon Subject Matter Experts (“SEES”), who are members of the mortgage loan origination community who volunteer to review test questions used on the exam. Id. at 3, ¶ 8.[2] Some of the questions in the SAFE MLO Test are the subject of three copyright registrations by plaintiff with the United States Copyright Office - the '646, '308, and '249 copyrights. Id. at 4, ¶ 15. Plaintiff takes significant measures to ensure the confidentiality of its test questions, such as storing questions in a secure database with limited access rights and implementing both video and audio surveillance of test takers. Id., ¶ 17. Test takers must sign an agreement to maintain the confidentiality of the test. Id. at 5-6, ¶¶ 28, 31. Plaintiff also requires SEES to sign confidentiality agreements agreeing to “keep strictly confidential” all test items and verifying that the SEES have no conflicts of interest. Id. at 4, ¶ 17; id. at 5, ¶ 21. If a test question becomes publicly known, it cannot be used on an examination and it loses its value to plaintiff. Id. at 4, ¶ 14. Further, because plaintiff reuses its test questions, advance access to those questions may give a test taker an unfair advantage on the exam. Id. at 3, ¶ 5.

         Defendant MTI Services Corporation (“MTI”) is an NMLS-approved mortgage educator. Id. at 5, ¶¶ 22-23. Among its test preparation materials, MTI offers for sale practice SAFE MLO Test questions. Id., ¶ 24. Defendant Carey Green was an MTI customer in 2013 and purchased testing materials containing MTI's practice questions. Id. at 6, ¶ 30. While an MTI customer, Green took screen shots of MTI materials, including MTI practice test questions. Id., ¶ 32. In March 2013, Green sat for the SAFE MLO Test. Id., ¶ 31. Green was aware that he had an obligation to keep the test materials confidential. Id. Moreover, at one point, Green also received eight to ten test questions from a fellow test taker that the individual had remembered. Id., ¶ 34.

         In 2013, Green launched a website at PasstheSafeExam.com that offered for sale practice questions for the SAFE MLO Test. Id., ¶ 33. Approximately ninety percent of the questions provided on Green's site were based on MTI's questions. Id.[3]Green received feedback from his customers noting the similarities between his questions and the SAFE MLO Test, including: (1) “You were right my friend, several of the questions on the exam were word for word on your practice test. How did you do that?”; (2) “I even saw some of the exact questions today as I was testing”; (3) “The practice quizzes really helped because some were actually on the test”; and (4) “I couldn't believe how many of the questions I saw on my test were similar to your practice test questions.” Id. at 8, ¶ 46.

         Defendant Billy Glenn Bartholomew, a former SAFE MLO Test taker, id. at 5, ¶ 28, has been employed with MTI since 2016. Id., ¶ 25.[4] Bartholomew offers tutoring services to individuals who have failed the SAFE MLO Test. Id., ¶ 27. Bartholomew worked with plaintiff as an SME on its National Test Maintenance Committee. Id. at 3, ¶ 9. Committee members are assigned to draft new test questions, which are reviewed by the full committee for approval. Id., ¶ 12.[5] During committee meetings, existing test questions are reviewed to ensure that they remain accurate and up-to-date. Id., ¶¶ 10-11.[6] These meetings have traditionally been held online, with meeting facilitators and committee members participating via a secure internet-based platform or by telephone. Id. at 6, ¶ 35. To ensure the confidentiality of these meetings, committee members are instructed to participate from a “private or semi-private location” and are instructed not to allow others to view their computer screens or listen to the conference call. Id., ¶ 36.

         During an early 2017 virtual committee meeting, in which Bartholomew participated, the meeting facilitators heard the sound of a cellular telephone camera at 8, ¶ 25. MTI and Green dispute this statement on the basis that Bartholomew “testified that his only role with MTI in 2016 was teaching continuing education courses. Docket No. 92 at 3, ¶ 25; Docket No. 98 at 3, ¶ 25. Bartholomew, when asked his job title, stated “[a]ccording to the business card they gave me I think it says education director.” Docket No. 58-12 at 4, 21:10-12. The Court does not find that Bartholomew's job title is a material fact for purposes of this motion. taking photographs. Id., ¶ 37. The facilitators immediately stopped the meeting and informed participants that the test was confidential and copyright protected. Id. at 7, ¶ 38. They further instructed that the test was not to be photographed or shared outside of the meeting. Id.

         At a subsequent virtual meeting on May 15, 2017, in which Bartholomew again participated, Bartholomew was observed via his computer web camera taking photographs of his computer screen. Id., ¶ 39. This occurred after a number of test questions had been displayed on the screen. Id. The facilitators took a video of Bartholomew's actions and ended the meeting. Id. Bartholomew admitted to taking multiple photographs of test questions during this meeting, id., ¶ 40, [7] but claims that he took photographs of the screen to make up for his poor eyesight, as he was having difficulty seeing the screen and could enlarge the photographs to render them readable. Docket No. 84 at 6-7, ¶¶ 11-13. Plaintiff disputes Bartholomew's explanation because “Bartholomew has produced no medical records or documents to verify his vision problems . . . [and] never told anyone he was having difficulty viewing the screen during virtual meetings.” Docket No. 99 at 4, ¶ 11-13.

         In the course of investigating the matters at issue in this lawsuit, plaintiff purchased SAFE MLO Test preparation materials from MTI and Green. Docket No. 58 at 7, ¶ 43. Plaintiff claims that it has identified 81 test questions that have been infringed by defendants. Id., ¶ 44.[8] These 81 test questions are the only questions for which plaintiff seeks summary judgment on its copyright claims. See id.

         Plaintiff filed this lawsuit on July 28, 2017. Docket No. 1. It asserts claims for (1) copyright infringement as to all defendants; (2) contributory copyright infringement as to Bartholomew; (3) common law misappropriation of trade secrets as to all defendants; (4) misappropriation of trade secrets under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1831 et seq.; (5) breach of contract as to all defendants; and (6) tortious interference with a contract as to MTI and Green. Docket No. 132 at 19-29.

         On December 5, 2018, plaintiff filed a motion for partial summary judgment, seeking judgment in its favor on its copyright infringement, contributory copyright infringement, common law and federal law trade secret misappropriation claims and on its breach of contract claim against Bartholomew. Docket No. 58 at 8-19. Each defendant separately filed a response. See Docket No. 84 (Bartholomew's response); Docket No. 92 (MTI's response); and Docket No. 98 (Green's response). On December 13, 2018, Green filed an amended motion for partial summary judgment. Docket No. 72. Green seeks summary judgment entered in his favor on plaintiff's copyright infringement and trade secret misappropriation claims. Id. at 4-6. Plaintiff filed a response, Docket No. 88, but Green did not file a reply.

         II. LEGAL STANDARD

         Summary judgment is warranted under Federal Rule of Civil Procedure 56 when the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A disputed fact is “material” if under the relevant substantive law it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). Only disputes over material facts can create a genuine issue for trial and preclude summary judgment. Faustin v. City & Cty. of Denver, 423 F.3d 1192, 1198 (10th Cir. 2005). An issue is “genuine” if the evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997).

         Where “the moving party does not bear the ultimate burden of persuasion at trial, it may satisfy its burden at the summary judgment stage by identifying a lack of evidence for the nonmovant on an essential element of the nonmovant's claim.” Bausman v. Interstate Brands Corp., 252 F.3d 1111, 1115 (10th Cir. 2001) (internal quotation marks omitted) (quoting Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998)). “Once the moving party meets this burden, the burden shifts to the nonmoving party to demonstrate a genuine issue for trial on a material matter.” Concrete Works of Colo., Inc. v. City & Cty. of Denver, 36 F.3d 1513, 1518 (10th Cir. 1994). The nonmoving party may not rest solely on the allegations in the pleadings, but instead must designate “specific facts showing that there is a genuine issue for trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) (internal quotation marks omitted). “To avoid summary judgment, the nonmovant must establish, at a minimum, an inference of the presence of each element essential to the case.” Bausman, 252 F.3d at 1115. When considering a motion for summary judgment, a court must view the evidence in the light most favorable to the non-moving party. Id. However, where, as here, there are cross motions for summary judgment, the reasonable inferences drawn from affidavits, attached exhibits, and depositions are rendered in the light most favorable to the non-prevailing party. Jacklovich v. Simmons, 392 F.3d 420, 425 (10th Cir. 2004). Furthermore, “[w]hen the parties file cross motions for summary judgment, we are entitled to assume that no evidence needs to be considered other than that filed by the parties, but summary judgment is nevertheless inappropriate if disputes remain as to material facts.” Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000) (internal quotation marks omitted).

         III. ANALYSIS

         Plaintiff argues that it is entitled to summary judgment on its copyright infringement, contributory copyright infringement, and trade secret misappropriation claims. It also contends that it is entitled to summary judgment on its breach of contract claim against Bartholomew. Green argues that he is entitled to summary judgment on plaintiff's copyright infringement and misappropriation of trade secrets claims.

         A. Preliminary Evidentiary Matters

         In its opposition to plaintiff's motion for summary judgment, MTI argues that plaintiff has no competent evidence of substantial similarity between the copyrighted works and the alleged infringing works because (1) plaintiff's accused questions comparison chart (“comparison chart”) [Docket No. 58-5] is inadmissible hearsay and (2) the comparison chart is barred by the best evidence rule. Docket No. 92 at 10-12.

         Plaintiff attached to its motion for summary judgment a “Comparison Chart of Actual SAFE MLO Test Questions and Infringing Questions from Defendants' Practice Materials, ” which sets out a copyrighted question, its registration number, a purportedly infringing MTI practice question, and, if applicable, the allegations regarding when MTI and Green infringed upon the question or the alleged date that Bartholomew had access to that question. See Docket No. 58-5. Accompanying the comparison chart is a declaration of Peter Marks, plaintiff's Vice President of Mortgage Testing and Education Programs, in which he discussed the creation of the comparison chart. See, e.g., Docket No. 58-1 at 9, ¶ 37. Plaintiff also submitted with its reply [Docket No. 103] an additional declaration from Mr. Marks, in which he discusses the development of the comparison chart in more detail. Docket No. 103-1.

         First, MTI argues that the comparison chart “is comprised of testimony as to the contents of business records, but nothing more.” Docket No. 92 at 11. It contends that “Marks' declaration [does not] contain any basis to assert personal knowledge of the contents of the records he summarizes in the chart.” Id. at 11-12. MTI argues that the accused chart is hearsay because it is offered to prove the truth of the matter asserted - namely, that “each document that was reviewed to compile the chart” shows that (1) plaintiff owns the accused questions and (2) plaintiff owns the copyrights to the accused questions. Id. at 12.

         It is unclear whether MTI challenges only the comparison chart or Mr. Marks' declaration discussing the chart as well. Nevertheless, the Court finds that they both may be considered on this motion for summary judgment. “At the summary judgment stage, the parties need not submit evidence in a form admissible at trial; however, the content or the substance of the evidence must be admissible.” Bryant v. Farmers Ins. Exchange, 432 F.3d 1114, 1122 (10th Cir. 2005). “An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). Thus, “if [the] evidence is presented in the form of an affidavit, the Rules of Civil Procedure specifically require a certain type of admissibility, i.e., the evidence must be based on personal knowledge.” Bryant, 432 F.3d at 1122. MTI, however, makes no argument that plaintiff could not present this evidence in a form that would be admissible at trial - “the only appropriate basis on which to raise an evidentiary objection at the summary judgment phase.” Securities & Exchange Comm'n v. Mahabub, No. 15-cv-2118-WJM-MLC, 2017 WL 6555039, at *2 (D. Colo. Dec. 22, 2017).

         The Court finds that Mr. Marks' declaration is based on personal knowledge. Mr. Marks, as plaintiff's vice president, claims to have personal knowledge of the company's test offerings, copyrights, and business records. See Docket No. 58-1; Bryant, 432 F.3d at 1123 (finding that supervisor had sufficient personal knowledge of audit data based on her position as supervisor and on declaration that she reviewed all relevant audit records).[9] Mr. Marks further demonstrates a personal knowledge of the information contained in the comparison chart. Docket No. 58-1 at 9, ¶ 37. As such, Mr. Marks' personal knowledge allows him to introduce the comparison chart. The Court finds that the comparison chart is not barred for this reason.[10] See State Office Sys., Inc. v. Olivetti Corp. of Am., 762 F.2d 843, 845 (10th Cir. 1985) (finding that district court did not abuse its discretion in determining that president and plaintiff company's testimony about summary evidence satisfied foundational requirement of proving that the summary was based on business records admissible under Rule 803(6)).

         The Court also finds that the comparison chart is not barred by the best evidence rule, which provides that “[a]n original writing, recording, or photograph is required in order to prove its content unless these rules or a federal statute provides otherwise.” Fed.R.Evid. 1002. Again, MTI makes no argument that the underlying evidence contained in the chart could not be admitted at trial. MTI's best-evidence-rule argument is based on a contention that “Marks' testimony is inadmissible to prove the contents” of the copyrights. Docket No. 92 at 13. As set out above, this is incorrect, as Mr. Marks can competently testify as to plaintiff's copyrights because he has personal knowledge regarding the certificates, which would be self-authenticating, see ABKCO Music, Inc. v. Sagan, 2017 WL 3236443, at *4 (S.D.N.Y. July 31, 2017), and which test questions the copyrights cover. Further, as Mr. Marks explained, [11] plaintiff's test questions are stored in a secure electronic database. Docket No. 103-1 at 4, ¶ 8.[12] Plaintiff does not maintain individual tests or copyright individual tests. Id., ¶ 10. Rather, it periodically registers its database of test questions in use. Id., ¶¶ 10-11. Because the underlying contents of the chart are admissible at trial, the Court finds that the chart does not violate the best evidence rule. The Court will consider plaintiff's comparison chart in its summary judgment analysis.[13]

         B. Copyright Infringement

         To prevail on a copyright infringement claim, a plaintiff must demonstrate that (1) the plaintiff owns a valid copyright, and (2) the defendant copied the protectable elements of the work. Enterprise Mgmt. Ltd., Inc. v. Warrick, 717 F.3d 1112, 1117 (10th Cir. 2013).

         1. Ownership of Copyright

         “A plaintiff's presentation of a certificate of registration from the U.S. Copyright Office usually constitutes prima facie evidence of a valid copyright and of the facts stated in the certificate.” Palladium Music v. EatSleepMusic, Inc., 398 F.3d 1193, 1196 (10th Cir. 2005) (citing 17 U.S.C. § 410(c)). The defendant has the burden of overcoming this presumption of validity. Id. A defendant can overcome the presumption with a showing that (1) the certificate contains inaccurate information; (2) “the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate”; and (3) “the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration.” 17 U.S.C. § 411(b)(1).

         It is undisputed that certain SAFE MLO Test questions are the subject of three copyright registrations - the '646, '308, and '249 copyrights. Docket No. 58 at 4, ¶ 15. MTI argues that plaintiff's copyrights are invalid because it knowingly misrepresented to the U.S. Copyright Office that it was the sole author of the '646 and '308 copyrights even though, according to MTI, many of the questions contained in those copyrights had been previously published. Docket No. 92 at 14. Specifically, it contends that at least 32 of the questions appearing on these copyrights were authored by another testing company, Pearson VUE, [14] and that plaintiff knew that Pearson VUE had published those questions before plaintiff acquired them. Id. at 15. In support, it cites to those 32 questions, produced by plaintiff in discovery, that were authored by Pearson VUE and were allegedly included in plaintiff's copyright applications. See Docket No. 91-2. Thus, according to MTI, plaintiff knowingly misrepresented its authorship of the questions in its application to the Copyright Office, and its copyrights are accordingly invalid. Docket No. 92 at 15. Plaintiff counters that it “has taken steps to ensure that only questions authored by [plaintiff] are registered, ” and, after reviewing its registered items, none of the 32 questions referenced by MTI were included in its copyright registrations. Docket No. 103 at 7.[15]

         While plaintiff may have indicated in its initial comparison chart produced in discovery that it was pursuing infringement claims based on 32 questions authored by a different entity, implying that it had obtained copyright protection for those questions, MTI has produced no credible evidence demonstrating that any question contained in plaintiff's copyright application was authored by another person. MTI has failed to meet its burden of demonstrating that the copyright applications contained inaccurate information so as to defeat the presumption of validity that stems from plaintiff's copyright registrations. The evidence before the Court demonstrates that no genuine issue of material fact exists as to the validity of plaintiff's '646, '308, and '249 copyrights.[16]

         2. Copying of the Protected Work[17]

         “A plaintiff may prove copying either with direct evidence or by showing the alleged infringer had access to the copyrighted work and ‘there are probative similarities between the copyrighted material and the allegedly copied material.'” Warrick, 717 F.3d at 1117 (quoting La Resolana Architects, PA v. Reno, Inc., 555 F.3d 1171, 1178 (10th Cir. 2009)). “Direct evidence usually requires a witness to the physical act of copying.” Civility Experts Worldwide v. Molly Manners, LLC, 167 F.Supp.3d 1179, 1189 (D. Colo. 2016) (internal quotation omitted). Because “[d]irect proof of copying is rare, ” “plaintiffs will typically rely on the indirect method of proof.” Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 833 (10th Cir. 1993).

         a. Access

         To establish the first prong of the indirect method of proving copyright infringement - access to the copyrighted work - a plaintiff must show that “the defendant had a reasonable opportunity to view or an opportunity to copy the allegedly infringed work.” La Resolana, 555 F.3d at 1178 (internal quotation marks and alteration marks omitted). If the plaintiff is unable to demonstrate access, access may be inferred if the works are “strikingly similar” - in other words, if the similarity between the works is “so striking that the possibilities of independent creation, coincidence and prior common source are, as a practical matter, precluded.” Id. at 1179 (internal quotations omitted).

         Plaintiff argues that defendants' access to its copyrighted materials is apparent: (1) both Bartholomew and Green had access to the copyrighted questions when they sat for the SAFE MLO Test; (2) Bartholomew spent time on plaintiff's National Test Maintenance Committee, which allowed him to review numerous SRR test questions; (3) Bartholomew admitted to taking photographs of test questions during a committee meeting; (4) MTI had access to the copyrighted work by virtue of its relationship with Bartholomew and its interactions with its test-taking customers; (5) Green received eight to ten SRR test questions from a customer who had taken the examination; and (6) MTI and Green sold practice test questions that are “probatively similar” to plaintiff's questions. Docket No. 58 at 11-12. MTI and Bartholomew do not deny that they had access to the copyrighted materials. See Docket Nos. 84 and 92. Green argues that “[t]here is no evidence that [he] ever had any access to materials identified as being subject to the Plaintiff's copyright.” Docket No. 98 at 4.

         i. Sitting for the Exam

         Plaintiff first argues that Bartholomew and Green had access to the copyrighted questions because they sat for the SAFE MLO Test. In similar cases where copyright infringement allegations are based upon alleged copying of standardized test questions, courts have found access to the copyrighted questions where an alleged infringer sat for the examination. See Nat'l Bd. of Med. Examiners v. Optima Univ. LLC, 2011 WL 7615071, at *6 (W.D. Tenn. Sept. 29, 2011) (“When taking the exams, [defendants] had the opportunity to view secure USMLE material”); Assoc. of Am. Med. Colleges v. Mikaelian, 571 F.Supp. 144, 150 (E.D. Pa. 1983) (defendant had access to MCAT questions when he took the test on eight occasions).

         However, to establish access, plaintiff must show that “the defendant had a reasonable opportunity to view or an opportunity to copy the allegedly infringed work.” La Resolana, 555 F.3d at 1178 (emphasis added). In Mikaelian, the court specifically noted that the individual defendant had access to the copyrighted materials because, on five of the occasions that he took the test, “he took the MCAT from test booklets containing these questions [that were allegedly infringed].” 571 F.Supp. at 150. Here, plaintiff has not proven that, when Bartholomew or Green took the SAFE MLO Test, they accessed one or more of the allegedly infringed questions that are the subject of this summary judgment motion. For example, plaintiff has not set out the date that Bartholomew sat for the SAFE MLO Test. See Docket No. 58. Bartholomew testified that he took the test in 2007 or 2008. Docket No. 58-12 at 3, 18:10-11. But plaintif f has made no allegation - let alone proven - that Bartholomew accessed any of the questions at issue in plaintiff's summary judgment motion during this examination. See Docket No. 58; see also Docket No. 58-5. Further, Green sat for the test in March 2013. Docket No. 58 at 6, ¶ 31. But Green disputes that he had access to any of the copyrighted materials when he took that test. Docket No. 98 at 4. Again, plaintiff has not made any allegation that Green accessed one of the questions at issue here when he sat for the examination. See Docket No. 58. The Court finds that plaintiff cannot establish the individual defendants' access to the copyrighted questions at issue here solely because they took the SAFE MLO Test.

         ii. Test ...


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