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Ilab Solutions LLC v. Idea Elan, LLC

United States District Court, D. Massachusetts

April 1, 2015

iLAB SOLUTIONS LLC, Plaintiff,
v.
IDEA ELAN, LLC and MASILAMANI ELANGOVAN, individually and d/b/a IDEA ELAN, INC., Defendants.

MEMORANDUM AND ORDER

ALLISON D. BURROUGHS, District Judge.

I. Introduction

Plaintiff iLab Solutions, LLC ("iLabs"), a web-based management software services company, filed this action against a competitor, Idea Elan, LLC and its owner, Masilamani Elangovan ("Mr. Elangovan"), individually and doing business as Idea Elan, Inc. (together, "Defendants" or "Idea Elan"), alleging that Idea Elan copied material from iLabs' website, published it on Idea Elan's website, attempted to pass it off as Idea Elan's own material, and made false and misleading statements on Idea Elan's website in order to compete unlawfully with iLabs. Based on this alleged conduct, iLabs brings five claims against Idea Elan: copyright infringement (Count I), false advertising under the Lanham Act (Count II), misleading advertising under G.L. c. 266, § 91 (Count III), unfair or deceptive acts or practices under G.L. c. 93A ("Chapter 93A") (Count IV), and unfair competition (Count V).

Before the Court is Idea Elan's partial motion to dismiss Count IV of iLabs' complaint (the Chapter 93A claim) for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, on the ground that the complaint does not sufficiently allege that the unfair or deceptive conduct "primarily and substantially" took place in Massachusetts, as required by G.L. c. 93A, § 11 ("Section 11"). [ECF No. 17.] For the reasons explained in this Memorandum and Order, Idea Elan's partial motion to dismiss is DENIED without prejudice to renewal before trial.

II. Summary of Relevant Factual Allegations

In its complaint [ECF No. 1], iLabs makes the following factual allegations, which the Court accepts as true for purposes of a motion to dismiss.

iLabs is a Massachusetts company headquartered in Boston, Massachusetts. [Id. ¶¶ 6, 9.] iLabs provides web-based management software services to academic research institutions throughout the country, including NIH-funded universities, research hospitals, and independent institutes. [Id. ¶ 9.] iLabs maintains a website that it uses to market to prospective clients and owns a federally registered copyright in its webpages. [Id. ¶¶ 10, 15.] The copyrighted materials were created and are maintained in Massachusetts. [Id. ¶ 5.]

Idea Elan is a software company that competes with iLabs for software services, targeting the same customer base throughout the United States. [Id. ¶¶ 16, 21.] Idea Elan, LLC is a Virginia company, and its owner, Mr. Elangovan, is a Virginia resident. [Id. ¶¶ 7-8, 17.]

In October 2014, iLabs discovered substantially similar copies of iLabs' copyrighted materials on Idea Elan's website. [Id. ¶ 22.] Additionally, Idea Elan's website made false and misleading statements about Idea Elan's service capabilities and customers. [Id. ¶¶ 30-33.] These statements harmed iLabs by (1) giving the marketplace a false impression that Idea Elan is more experienced and successful than it is and has greater proven capabilities than is has, and (2) causing iLabs to lose business. [Id. ¶ 34.] iLabs does not specify in its complaint where the business was lost (that is, where any lost customers were located). However, iLabs alleges that "a substantial part of the events or omissions giving rise to the claims occurred in this District where Defendants have committed infringing acts and false advertising, and continue to do business and to commit infringing acts and false advertising." [Id. ¶ 3.] iLabs further alleges that Idea Elan transacts business in Massachusetts, including attempting to solicit business from research institutions and universities in Massachusetts, and that Idea Elan uses its website to target Massachusetts customers. [Id. ¶ 4.]

III. Discussion

A. Legal Standard - Motion to Dismiss

On a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court accepts as true all well-pleaded facts in the light most favorable to the plaintiff and draws all reasonable inferences from those facts in favor of the plaintiff. United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 384 (1st Cir. 2011). Under the liberal notice pleading standard of Rule 8(a)(2) of the Federal Rules of Civil Procedure, a plaintiff is required to submit "a short and plain statement of the claim" in order to give the defendant "fair notice" of the claim and the grounds upon which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Although notice pleading does not require detailed factual allegations, "more than labels and conclusions" are required to survive a motion to dismiss. Id . A "formulaic recitation of the elements of a cause of action" is not enough. Id . The facts alleged must "raise a right to relief above the speculative level." Id . The plaintiff must "nudge[] [the] claims across the line from conceivable to plausible, " or the claims will be dismissed. Id. at 570.

B. iLabs Has Stated a Valid Claim for a Violation of Chapter 93A

Idea Elan has moved to dismiss iLabs' Chapter 93A claim on the ground that the complaint does not sufficiently allege that the unfair or deceptive conduct "primarily and substantially" took place in Massachusetts. Section 11 of the Massachusetts Consumer Protection Act, which governs commercial transactions between businesses, provides: "No action shall be brought or maintained... unless the actions and transactions constituting the alleged... unfair or deceptive act or practice occurred primarily and substantially within the commonwealth." G.L. c. 93A, § 11, eighth par. The statute further provides that "the burden of proof shall be upon the person ...


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