1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 REARDEN LLC, et al., Case No. 22-cv-02464-JST

8 Plaintiffs,

ORDER GRANTING MOTION TO

9 v. DISMISS FOURTH AMENDED

COMPLAINT

10 TWDC ENTERPRISES 18 CORP., et al., Re: ECF No. 80 Defendants. 11

12 13 Before the Court is Defendants TWDC Enterprises 18 Corp. f/k/a The Walt Disney 14 Company, Disney Content Services Co., Inc. d/b/a Disney Pictures Productions, LLC; Walt 15 Disney Pictures; Marvel Studios, LLC; MVL Film Finance LLC; Lucasfilm Ltd. LLC; and Disney 16 Studio Production Services Co., LLC’s (collectively, “Disney”) motion to dismiss Plaintiffs 17 Rearden LLC and Rearden MOVA LLC’s (collectively, “Rearden”) Fourth Amended Complaint. 18 ECF No. 80. The Court will grant the motion with leave to amend. 19 I. BACKGROUND 20 The factual and procedural background of this case is summarized in greater detail in this 21 Court’s prior orders. See ECF Nos. 54, 76. This case is the latest in a longstanding controversy 22 regarding ownership and use of the MOVA Contour Reality Capture program (“MOVA”), which 23 is used to capture high-resolution 3D models of a performer’s face and facial movements, in order 24 to create facial animations for use in the production of movies. ECF No. 77 (“4AC”) ¶¶ 28, 36. 25 This Court initially adjudicated a dispute between Plaintiff Rearden LLC and Shenzhenshi 26 Haitiecheng Science and Technology Company (“SHST”) concerning the ownership of equipment 27 and intellectual property associated with MOVA (“Ownership Litigation”). Shenzhenshi 1 3446585, at *1 (N.D. Cal. Aug. 11, 2017), aff’d, 823 F. App’x 455 (9th Cir. 2020). SHST is a 2 Chinese entity associated with Digital Domain 3.0, Inc. (“DD3”), a visual effects company whose 3 alleged conduct lies at the heart of the case at hand. In the Ownership Litigation, the Court issued 4 a preliminary injunction prohibiting the sale, use, movement, concealment, transfer, or disposal of 5 MOVA Assets by SHST or Virtual Global Holdings Limited (“VGH”) – an entity related to DD3 6 and SHST. See Virtue Glob. Holdings Ltd. v. Rearden LLC, No. 15-cv-00797-JST, 2016 WL 7 9045855, at *2, *10 (N.D. Cal. June 17, 2016). After a bench trial, the Court dissolved the 8 injunction and ruled that “Rearden, not . . . DD3, owns and at all relevant times has owned the 9 MOVA Assets.” SHST, 2017 WL 3446585, at *9. The Court further ordered the return of the 10 assets to Rearden, which included “MOVA Software, Source code, and Output files.” Order 11 Regarding the Return of MOVA Assets 1, SHST, No. 15-cv-00797-JST (N.D. Cal. Oct. 2, 2017), 12 ECF No. 449. The Court appointed a special master to supervise the return of those assets, and the 13 special master, in turn, appointed DisputeSoft as a forensic expert to oversee this process. See 14 Order Appointing Hon. Edward A. Infante (Ret.) as Special Master Pursuant to Federal Rule of 15 Civil Procedure 53, SHST, No. 15-cv-00797-JST (N.D. Cal. June 17, 2019), ECF No. 529; Special 16 Master’s Order Appointing Forensic Expert SHST No. 15-cv-00797-JST (N.D. Cal. Aug. 20, 17 2019), ECF No. 534. 18 In this case, Rearden brings claims of copyright and patent infringement. As relevant to 19 this order, Rearden alleges that Disney contracted with DD3 for facial performance capture 20 services and output works for the films Avengers: Infinity War and Avengers: Endgame, and that 21 following the issuance of the preliminary injunction in the Ownership Litigation, DD3 performed 22 these services using MOVA, including animating the CG characters Thanos, Ebony Maw, and the 23 Hulk. See 4AC ¶¶ 79–95. It alleges that Disney is accordingly liable for vicarious and 24 contributory copyright infringement. Id. 25 This Court has twice previously dismissed Rearden’s copyright infringement claims, on 26 the ground that Rearden failed to plausibly allege that DD3 directly infringed its MOVA copyright 27 by using MOVA to perform facial motion captures services for Avengers: Infinity War and 1 Amended Complaint (“TAC”), this Court granted Rearden “one final chance to amend its 2 copyright infringement claim” and “solely to cure the deficiencies identified by [that] order.” ECF 3 No. 76 at 16. Rearden timely filed its 4AC on April 11, 2024, and Disney now moves to dismiss 4 the 4AC’s claims for contributory and vicarious copyright infringement. See ECF Nos. 77, 80. 5 II. LEGAL STANDARD 6 To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a 7 complaint must contain “a short and plain statement of the claim showing that the pleader is 8 entitled to relief.” Fed. R. Civ. P. 8(a)(2). Dismissal “is appropriate only where the complaint 9 lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” 10 Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). “[A] complaint 11 must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible 12 on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 13 550 U.S. 544, 570 (2007)). Factual allegations need not be detailed, but the facts must be “enough 14 to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. 15 “A claim has facial plausibility when the plaintiff pleads factual content that allows the 16 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 17 Ashcroft, 556 U.S. at 678. While this standard is not “akin to a ‘probability requirement’ . . . it 18 asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting 19 Twombly, 550 U.S. at 556). “Where a complaint pleads facts that are ‘merely consistent with’ a 20 defendant’s liability, it ‘stops short of the line between possibility and plausibility of entitlement to 21 relief.’” Id. (quoting Twombly, 550 U.S. at 557). 22 In determining whether a plaintiff has met the plausibility requirement, a court must 23 “accept all factual allegations in the complaint as true and construe the pleadings in the light most 24 favorable” to the plaintiff. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). In so doing, “a 25 court may not look beyond the complaint to a plaintiff’s moving papers, such as a memorandum in 26 opposition to a defendant’s motion to dismiss.” Schneider v. California Dep’t of Corr., 151 F.3d 27 1194, 1197 n.1 (9th Cir. 1998) (emphasis omitted). However, the Court “may . . . consider 1 document; (2) the document is central to the plaintiff's claim; and (3) no party questions the 2 authenticity of the document.” United States v. Corinthian Colleges, 655 F.3d 984, 999 (9th Cir. 3 2011) (quoting Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006)). Finally, a plaintiff may 4 “plead[] facts alleged upon information and belief where the facts are peculiarly within the 5 possession and control of the defendant or where the belief is based on factual information that 6 makes the inference of culpability plausible.” Soo Park v. Thompson, 851 F.3d 910, 928 (9th Cir. 7 2017) (quoting Arista Records, LLC v. Doe 3, 603 F.3d 110, 120 (2d Cir. 2010)). 8 III. DISCUSSION 9 A. Direct Copyright Infringement 10 In order to bring a claim against Disney for secondary copyright infringement, Rearden 11 must plead facts sufficient to plausibly allege direct copyright infringement by a third party—in 12 this case, DD3. See, e.g., VHT, Inc. v. Zillow Grp., Inc., 918 F.3d 723, 731 (9th Cir. 2019). This 13 Court has twice dismissed Rearden’s claims for failing to adequately allege direct infringement. 14 See ECF Nos. 54, 76. The Court now considers whether Rearden’s amendments to the 4AC cure 15 the deficiencies identified in those orders. 16 As with the TAC, the 4AC alleges that DD3 directly infringed Rearden’s copyright in 17 MOVA in animating certain CG characters during the production of Avengers: Infinity War and 18 Avengers: Endgame. See 4AC ¶ 86. The 4AC makes four broad categories of factual allegations 19 to support this claim, all of which relate to DD3 files recovered and returned by DisputeSoft in 20 connection with the Ownership Litigation. First, Rearden alleges that among the returned files, it 21 has identified “listings and metadata” for files it believes to be MOVA capture files for Josh 22 Brolin, the actor who played Thanos in Avengers: Infinity War and Avengers: Endgame. 23 Specifically, Rearden alleges that it has identified a spreadsheet that describe metadata and file 24 paths for these files, including file paths that include the word “mova” in the folder structure. See 25 4AC ¶¶ 41–49.1 Second, Rearden alleges that it has identified three messages from DD3’s internal 26 messaging software called “Diffusion,” which also reference the word “mova” on dates 27 1 corresponding with Avengers: Infinity War and Avengers: Endgame. See id. ¶ 50. Third, Rearden 2 alleges that it has identified a set of Maya2 files containing or reflecting a capture of Mark Ruffalo, 3 the actor who played the Hulk in Avengers: Infinity War and Avengers: Endgame (the “Ruffalo 4 Maya Files”). Rearden alleges that the Ruffalo Maya Files “contain[] substantial amounts of 5 copied Mova source code” and have “creation dates ranging from August 11, 2016 through 6 September 22, 2016[,]” after the issuance of the SHST Preliminary Injunction and consistent with 7 the production timeline of Avengers: Infinity War and Avengers: Endgame. See id. ¶¶ 52–57. 8 Fourth, and finally, Rearden alleges that it has identified another Maya file returned by DD3 for 9 the character Ebony Maw, who appeared only in Avengers: Infinity War and Avengers: Endgame 10 (the “Ebony Maw Maya File”). Rearden alleges that the Ebony Maw Maya File “includes over 11 100 MEL script references to ‘mova’ . . . , as well as extensive references to external files named 12 according to Mova naming conventions that are loaded into RAM when the Ebony Maw Maya 13 File is opened in Maya.” Id. ¶¶ 58–60. Rearden further alleges that “[t]he Ebony Maw Maya File 14 has source code that includes identical elements and calls to standard Mova objects such as 15 ‘mova_cache_md,’ ‘mova_originalHeadMotion,’ ‘mova_cache_publish_set,’ 16 ‘movaDeformedBlend,’ and ‘MOVA_XFORM_rotatex,’” which are identical to elements that 17 appear in files that were indisputably created using MOVA. Id. ¶ 60. 18 The Court begins with the first and second categories of allegations, which are unchanged 19 from Rearden’s TAC and Second Amended Complaint (“SAC”). Compare 4AC ¶¶ 41–50 with 20 TAC ¶¶ 41–50. This Court has already found these allegations insufficient to plausibly allege 21 direct infringement, and the Court need not repeat itself here. See ECF No. 54 at 6 (finding 22 allegations of folder and file-path names and internal messages containing “MOVA” “insufficient 23 to support a reasonable inference that MOVA was operated for facial captures or for processing 24 25 2 “Maya is a widely used computer graphics program developed and sold by Autodesk. A .ma 26 file, or Maya animation file, is a plain text project file that contains art asset data, along with commands and/or scripts. A .ma file is typically created, edited, and executed in connection with 27 the production of 3D graphics content.” Rearden LLC v. Walt Disney Co., No. 17-CV-04006-JST, 1 captures into output works.”). 2 The 4AC’s third category of allegations regarding the Ruffalo Maya Files are also 3 substantially similar to those in the TAC; in the TAC, Rearden alleged that it had identified a 4 singular Ruffalo Maya File that contained substantial amounts of MOVA source code and that 5 “[o]n information and belief, based on the date of creation of the Ruffalo Maya File and other 6 indications of its purpose, the Ruffalo Maya File was used to animate The Hulk in at least one of 7 Avengers: Infinity War and Avengers: Endgame.” TAC ¶ 53. This Court found those allegations 8 insufficient, as the TAC had failed to allege what the “date of creation” or “other indications of 9 purpose” were, leaving the Court to speculate as to how those facts could support a plausible 10 inference of direct infringement. See ECF No. 76 at 5–6. Rearden’s 4AC attempts to cure this 11 deficiency by alleging that the now multiple Ruffalo Maya Files have creation dates “ranging from 12 August 11, 2016, through September 22, 2016[,]” which are consistent with the production 13 timeline of at least, Avengers: Infinity War. See 4AC ¶ 54–57. The Court finds these 14 amendments, taken as true on a motion to dismiss, support a plausible inference that the Ruffalo 15 Maya Files were created using MOVA, during a time period consistent with production of at least 16 Avengers: Infinity War. 17 Disney argues that these allegations are still insufficient, because the DD3 contract for 18 Avengers: Infinity War was only for facial motion work for Thanos, and not The Hulk; that the 19 contract also barred DD3 from using MOVA for this work; and if DD3 had used MOVA to 20 animate The Hulk, there would have been terabytes of files, not just the few that Rearden has 21 identified. See ECF No. 80 at 12–13. These arguments are not persuasive; they raise factual 22 disputes that, even if true, do not preclude the possibility that the Ruffalo Maya Files were created 23 using MOVA after the issuance of the SHST preliminary injunction and during production of 24 Avengers: Infinity War. Similarly, Disney’s arguments that the 4AC’s creation date allegations 25 are contradicted by the metadata of the files themselves, and Rearden’s own prior representations, 26 see ECF No. 80 at 11 n.4; ECF No. 83 at 5 n.1, 2, fail because they raise a factual dispute as to the 27 creation dates of these files, which need not be resolved on a motion to dismiss. Finally, Disney 1 created using MOVA or another performance capture system.” ECF No. 80 at 13 (quotation 2 omitted). This argument misstates the 4AC’s allegations that the Ruffalo Maya Files contain 3 facial animation elements that can be used to generate a 3D model using MOVA or other software. 4 See 4AC ¶ 53. Nothing in this allegation suggests a concession that the Ruffalo Maya Files may 5 have been created with such “other software,” and the immediately preceding paragraph alleges 6 that the files “contain[] substantial amounts of copied Mova Source code . . . .” Id. ¶ 52. 7 Ultimately, on a motion to dismiss, the Court must take as true well-pled allegations of the 8 complaint. Here, Rearden’s allegations, when viewed in this light, plausibly state a claim that 9 DD3 created the Ruffalo Maya Files using MOVA, and did so during the production of at least, 10 Avengers: Infinity War. 11 Similarly, Rearden’s new allegations regarding the Ebony Maw Maya File, taken as true 12 and construed in the light most favorable to Rearden, support a plausible inference that at some 13 point during production of Avengers: Infinity War and/or Avengers: Endgame, DD3 used MOVA 14 software to animate at least the Ebony Maw character. This Court previously dismissed as 15 insufficient allegations regarding the Ebony Maw Maya File in the TAC, because in the TAC 16 Rearden alleged that a screenshot of the Ebony Maw Maya File contained some naming 17 conventions using the word “mova”. See ECF No. 76 at 7. In that order, the Court found that 18 “[a]llegations that a Maya file of the Ebony Maw character used the word ‘mova’ in its naming 19 conventions, without more, is insufficient to establish a reasonable inference that the file itself 20 contained MOVA source code . . . . ” Id. 21 The allegations of the 4AC are sufficient to cross that threshold. Specifically, the 4AC 22 alleges that the Ebony Maw Maya File itself contains “100 MEL script references to ‘mova’” and 23 extensive elements that are identical to those used by MOVA to call objects such as 24 “mova_cache_md,” “mova_originalHeadMotion,” “mova_cache_publish_set,” 25 “movaDeformedBlend,” and “MOVA_XFORM_rotatex”. 4AC ¶ 60. In other words, the Ebony 26 Maw Maya File does not merely use the word “mova” in some naming conventions, rather it 27 allegedly contains extensive references to elements in the MOVA software, and is identical in 1 dismiss, support a plausible inference that DD3 used MOVA to create the Ebony Maw Maya File 2 and therefore directly infringed Reardens’ copyright in MOVA during the production of Avengers: 3 Infinity War and Avengers: Endgame. 4 However, the 4AC does not merely claim that DD3 infringed Rearden’s copyright by using 5 MOVA to create some Maya files such as the Ruffalo Maya Files or the Ebony Maw Maya File. 6 Rather, Rearden argues that these facts suggest that DD3 used MOVA extensively to animate 7 characters during production of Avengers: Infinity War and Avengers: Endgame, and/or that DD3 8 copied substantial amounts of MOVA source code into its own Masquerade facial motion capture 9 software such that Masquerade is either an unauthorized copy or unauthorized derivative work of 10 MOVA. See 4AC ¶¶ 64. Because such allegations are integral to Rearden’s secondary 11 infringement claims against Disney, the Court finds it necessary to address them here first. 12 The Court finds neither claim plausible in view of the facts plead in the 4AC. Specifically, 13 the 4AC alleges that in the course of returning files from DD3, DisputeSoft has “identified 14 millions of Mova Source Code files in DD3’s possession—for which recovery is not yet complete 15 after five years[.]” 4AC ¶ 64 (emphasis in original). Similarly, the 4AC alleges that Rearden has 16 received a spreadsheet of potential files in DD3’s possession, that contains at least 8,395 rows of 17 entries. See id. ¶ 43. And, on February 28, 2023 in the Ownership Litigation, Rearden 18 represented to this Court that “[s]ince 2016, DD3 has returned many thousands of MOVA files 19 that contain images and video of studio actors (so-called ‘STUDIO’ files) to Rearden with no 20 restrictions.” SHST, ECF No. 602 at 9.3 In all of these files, Reardens’ 4AC puts forth allegations 21 of, at most, the single Ebony Maw Maya File and small number of Ruffalo Maya Files that could 22 plausibly have been created using MOVA during the relevant time period, and about twenty 23 additional Thanos files containing the word “mova” in file names or folder paths. See 4AC ¶¶ 43– 24

25 3 The Court may take notice judicial notice of publicly available filings in related cases. Reyn’s Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2010); see also DEPCOM 26 Power, Inc. v. CSUN Solar, Inc., No. 18-CV-00729-JST, 2020 WL 5176193, at *3 (N.D. Cal. July 30, 2020) (taking sua sponte notice of court filings, but not accepting the matters asserted therein 27 as true). Rearden’s 4AC makes multiple allegations as to the status of DisputeSoft’s forensic 1 49; 52–60. Likewise, Rearden alleges that among a spreadsheet of at least 683 entries, it has 2 identified a total of three “diffusion” messages that reference “mova” in the relevant time period. 3 See id. ¶ 50. 4 Based on these allegations, the Court finds it implausible that DD3 used MOVA 5 extensively during production of Avengers: Infinity War and Avengers: Endgame. If DD3 truly 6 used MOVA extensively to animate characters in those movies, there would be ample other 7 evidence of such use in the form of other files and references. That Rearden has only identified 8 such limited examples among the thousands of files it has received and millions that DisputeSoft 9 has reviewed leads this Court to conclude that such extensive use is implausible. Likewise, the 10 Court does not find it plausible to infer, from the Ebony Maw Maya File’s references to MOVA 11 elements and naming conventions, that DD3’s Masquerade software contained substantial 12 amounts of MOVA source code. If that were the case, then DD3’s files would be replete with 13 other examples of similar Maya files that reference those MOVA elements and naming 14 conventions. Absent further factual support, Rearden’s allegation that Masquerade is an 15 unauthorized copy or derivative work of MOVA results from nothing more than conclusory 16 speculation. 17 Accordingly, the Court finds that the 4AC sufficiently alleges that DD3 directly infringed 18 the MOVA copyright by using MOVA to create certain files such as the Ruffalo Maya Files or 19 Ebony Maw Maya File during production of Avengers: Infinity War and Avengers: Endgame. 20 However, the Court does not find plausible Rearden’s conclusory allegations that these limited 21 examples support the inference that DD3 used MOVA extensively during production of those 22 movies, or that DD3 copied MOVA source code to create its Masquerade software. 23 B. Indirect Copyright Infringement 24 Having found that the 4AC as adequately alleged direct copyright infringement by DD3, 25 the Court turns to Rearden’s allegations that Disney should be secondarily liable for said conduct. 26 Rearden alleges that Disney should be liable for both contributory copyright infringement and 27 vicarious copyright infringement. See 4AC ¶¶ 85–95. 1 1. Contributory Infringement 2 “Contributory liability requires that a party (1) has knowledge of another’s infringement 3 and (2) either (a) materially contributes to or (b) induces that infringement.” VHT, 918 F.3d at 745 4 (internal quotation and citation omitted)). The first element is satisfied where “the secondary 5 infringer know[s] or has reason to know of direct infringement,” Louis Vuitton Malletier, S.A. v. 6 Akanoc Sols., Inc., 658 F.3d 936, 943 (9th Cir. 2011) (quoting A&M Records, Inc. v. Napster, Inc., 7 239 F.3d 1004, 1020 (9th Cir. 2001)), but “requires more than a generalized knowledge . . . of the 8 possibility of infringement,” Luvdarts, LLC v. AT & T Mobility, LLC, 710 F.3d 1068, 1072 (9th 9 Cir. 2013). 10 Rearden has failed to allege facts to support a plausible inference that Disney knew or had 11 reason to know of DD3’s alleged acts of direct infringement. The 4AC’s sole allegations of 12 knowledge are the following paragraphs:

13 69. On information and belief, Defendants were fully aware that DD3 used unauthorized Contour output files created using the stolen and 14 copyrighted Mova software, or using software that included copied source code from the stolen and copyrighted Mova software without 15 Rearden’s authorization, to capture and/or animate Thanos, Hulk or Smart Hulk, Ebony Maw, and other characters in Avengers: Infinity 16 War and in Avengers: Endgame.

17 70. On information and belief, Defendants knew that DD3 continued to use employees involved with MOVA Technology, including Greg 18 LaSalle, Jonathan Berry, and Lucio Moser, to perform visual effects work on Avengers: Infinity War and in Avengers: Endgame, and 19 raised no objections to their doing so.

20 . . .

21 85. Disney had actual knowledge of DD3’s specific acts of infringement at least by virtue of having notice of the Preliminary 22 Injunction Order, and despite that Order continued to induce, cause, and materially contribute to DD3’s infringement. 23 24 4AC ¶¶ 69–70, 85. Discarding Rearden’s conclusory allegations, the Court is left with only two 25 factual allegations—that Disney knew or had reason to know of DD3’s purported infringement 26 because it had notice of the SHST preliminary injunction, and that Disney knew or had reason to 27 know of DD3’s purported infringement because it continued to use employees “involved with 1 effects work on Avengers: Infinity War and [] Avengers: Endgame[.]” Id. ¶ 70. 2 These allegations are plainly insufficient to establish that Disney had the requisite 3 knowledge, actual or constructive, of DD3’s “specific acts of infringement.” Napster, 239 F.3d at 4 1021; see also Luvdarts, 710 F.3d at 1072–73 (“In Napster, . . . the court emphasized that ‘actual 5 knowledge of specific acts of infringement’ is required for contributory infringement liability. . . . 6 Willful blindness of specific acts would establish knowledge for contributory liability.”). To 7 begin with, notice of the SHST preliminary injunction meant that Disney knew of Rearden’s 8 copyright in MOVA, but is irrelevant to whether Disney knew or had reason to know of DD3’s 9 purported use of MOVA while working on Avengers: Infinity War or Avengers: Endgame. As for 10 Disney’s continued use of DD3 employees such as LaSalle, Berry, or Moser, who were “involved 11 in MOVA Technology,” at most these allegations support an inference that Disney had a 12 “generalized knowledge . . . of the possibility of infringement[,]” and not the requisite knowledge 13 of the specific acts of infringement. See Ludvarts, 710 F.3d at 1072. 14 Rearden argues that Disney had knowledge of DD3’s infringement because “DD3 was 15 required to and/or did ‘submit elements and work in progress to the Producer on at least a weekly 16 basis to allow the Producer to order refinements and adjustments.’ ” ECF No. 83 at 16 (citing 17 4AC ¶ 91). For example, Rearden argues that Disney knew or had reason to know of DD3’s 18 infringement in the Ebony Maw Maya File, because “[w]hen loaded into Maya for inspection, the 19 Ebony Maw Maya File’s pervasive references to Mova would immediately jump out at the user, as 20 the screenshots in the 4AC show.” Id. (citing 4AC ¶¶ 62–63). However, Rearden has not alleged 21 facts sufficient for the Court to infer that the Ebony Maw Maya File, or as-yet unknown files like 22 it, were ever provided to Disney such that Disney would have had the opportunity to inspect them. 23 Again, among the millions of files reviewed by DisputeSoft, or thousands of files it has returned, 24 Rearden has only identified a few files that reflect plausible direct infringement by DD3. In light 25 of the limited scope of Rearden’s direct infringement allegations, it is not plausible that Disney 26 had actual or constructive knowledge of these limited instances of infringement, merely by virtue 27 of its receipt generally of elements and work in progress. 1 to DD3’s purported direct infringement. Rearden argues that the 4AC alleges inducement or 2 material contribution because Disney hired DD3 to perform facial motion capture for Avengers: 3 Infinity War and Avengers: Endgame, including personnel such as LaSalle, Berry, and Moser. See 4 ECF No. 83 at 17–18. But the bare allegations that Disney hired individuals who had experience 5 working with MOVA in the past does not suffice to plead that Disney “substantially assist[ed]” 6 DD3’s purported direct infringement. See Louis Vuitton Malletier, S.A. v. Akanoc Sols., Inc., 658 7 F.3d 936, 943 (9th Cir. 2011). Apparently recognizing this, Rearden argues that “the complaint 8 alleges that Defendants directed DD3 to use MOVA, but used a contract to cover up its direction.” 9 ECF No. 83 at 17–18. However, the Court finds no support for this assertion in the 4AC. Rearden 10 has not plausibly alleged that Disney knew or had reason to know of DD3’s purported use of 11 MOVA during Avengers: Infinity War and Avengers: Endgame, much less that Disney instructed 12 DD3 to do so. There is likewise no factual support for Rearden’s speculation that Disney 13 contractually barred DD3 from using MOVA as merely misdirection. Disregarding these 14 conclusory allegations, the 4AC does not plausibly allege that Disney induced or materially 15 contributed to DD3’s purported direct infringement here. 16 Accordingly, because Rearden has failed to plausibly allege that Disney had either the 17 requisite knowledge of DD3’s purported direct infringement, or materially contributed and/or 18 induced such infringement, Rearden has failed to state a claim for contributory copyright 19 infringement. 20 2. Vicarious Infringement 21 Vicarious copyright infringement requires “that the defendant exercises the requisite 22 control over the direct infringer and that the defendant derives a direct financial benefit from the 23 direct infringement.” Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007). 24 Under Ninth Circuit law, “a defendant exercises control over a direct infringer when he has both a 25 legal right to stop or limit the directly infringing conduct, as well as the practical ability to do so.” 26 Perfect 10, 508 F.3d at 1173. The Ninth Circuit has consistently held that a party lacks the 27 practical ability to control infringing conduct if it lacks the practical ability to identify infringing 1 1173–74; VHT, 918 F.3d at 746. 2 The 4AC alleges that Disney had the legal right and practical ability to control DD3’s 3 infringing conduct because “[o]n information and belief, the contract between DD3 and Disney 4 . . . requires that DD3 design all ‘[s]hots and composited elements’ ‘pursuant to Producer’s 5 requirements,’ and requires that DD3 submit elements and work in progress to the Producer on at 6 least a weekly basis to allow the Producer to order refinements and adjustments.” 4AC ¶ 91. It 7 further alleges that Disney thus “had the authority and practical ability to observe and evaluate 8 services provided by [DD3] and—if [it] deemed those services inadequate, improper, or 9 unlawful—require [DD3] to remedy the services or cancel [DD3’s] provision of services.” Id. 10 As pled, the 4AC does not plausibly allege that Disney, by virtue of its contractual right to 11 review “composited shots,” “elements,” or “work in progress,” had the practical ability to identify 12 DD3’s purported direct infringement. Notably, while the 4AC alleges that Disney was entitled to, 13 and in fact, received weekly reports including elements and work in progress shots, it does not 14 contain any allegations that individual Maya files like the Ebony Maw Maya File were included in 15 these weekly reports, such that Disney would have occasion to notice DD3’s purported use of 16 MOVA. Nor does the 4AC allege that these weekly reports contained any mention of MOVA, 17 such that Disney had the practical ability to recognize that DD3 was using MOVA in any capacity. 18 Finally, to the extent that Rearden alleges that DD3’s “Masquerade” software contained 19 substantial amounts of MOVA source code, the 4AC contains no allegations that it would have 20 been practical for Disney to review the source code of DD3’s software to police whether DD3 was 21 infringing Rearden’s copyright in developing its own software. 22 Rearden argues that Disney “absolutely had the ability to see that DD3 was continuing to use 23 Jonathan Berry and continuing to provide Maya files with Mova references” and the MOVA 24 references “were big flashing signs that should have jumped out at Defendants . . . .” ECF No. 83 at 25 18. These arguments fail for several reasons. First, to the extent that Disney had the ability to control 26 who was working on Avengers: Infinity War and/or Avengers: Endgame at DD3, Rearden has pled no 27 facts to suggest that LaSalle, Berry, or Moser were in fact the individuals at DD3 who created the 1 limit[ed] the directly infringing conduct.” Perfect 10, 508 F.3d at 1173. Similarly, Rearden’s 2 argument that the MOVA references in the Ebony Maw Maya File “were big flashing signs that 3 should have jumped out at Defendants” is undermined by the fact that Rearden has only identified 4 one such file with these MOVA references in the many millions of files DisputeSoft has reviewed. 5 This argument presumes that Disney either had the occasion to open that specific file in the Maya 6 software during its review process, or that Disney would have had the practical ability to request, 7 and review, every single such file created by DD3 in the course of its work on Avengers: Infinity 8 War and Avengers: Endgame. Neither is plausible in light of the allegations in the 4AC. 9 Again, Rearden’s arguments as to practical ability are predicated upon its allegations that 10 DD3’s use of MOVA was either extensive, or that DD3 effectively copied MOVA into 11 Masquerade, such that Disney could easily identify infringing conduct in the “entire Infinity War 12 production[.]” ECF No. 83 at 18–19. But the Court has already rejected Rearden’s allegations of 13 such extensive direct infringement as implausible. See Section III (A), supra. The facts as alleged 14 in the 4AC—that among millions of files reviewed by DD3 over the course of many years, 15 Rearden has only managed to identify four files that were plausibly created using MOVA—simply 16 does not support a plausible inference that Disney would have had the practical ability to identify 17 or control these limited instances of direct infringement. Because ferreting out these few instances 18 in the entire production of the two Avengers films would be “beyond hunting for a needle in a 19 haystack,” VHT, 918 F.3d at 746, Rearden has failed to adequately plead a claim for vicarious 20 copyright infringement. 21 C. Leave to Amend 22 Disney requests that this Court dismiss the 4AC with prejudice, arguing that further 23 amendment would be futile. See ECF No. 80 at 19–20. Rearden argues that the Court should 24 grant it leave to amend if this Order finds sufficient its direct infringement allegations but not its 25 secondary infringement allegations. See ECF No. 83 at 19–20. 26 This Court’s prior Order granted Rearden “one final chance to amend its copyright 27 infringement claim, wherein Rearden must be willing to make its averments without caveat and/or 1 citations omitted). However, that order stated that “Rearden may file an amended complaint . . . 2 solely to cure the deficiencies identified by th[at] order” and that “[fJailure to do so .. . shall result 3 in dismissal with prejudice.” Jd. at 16. Rearden, in its 4AC, has cured the deficiency in its direct 4 || infringement allegations that resulted in dismissal of its TAC. Accordingly, because the Court 5 |} now dismisses the 4AC based on inadequacies in Reardens secondary infringement allegations, in 6 || the interest of fairness the Court will grant Rearden one more opportunity to remedy those 7 deficiencies. 8 CONCLUSION 9 For the foregoing reasons, Disney’s motion to dismiss is granted with leave to amend. 10 || Rearden may file an amended complaint within twenty-one days of this order solely to cure the 11 deficiencies identified by this order. Failure to do so, or to cure the deficiencies identified in this 12 || order, shall result in dismissal with prejudice. 13 IT IS SO ORDERED. 14 || Dated: December 20, 2024 . .

IS JON S. TIGA

Q 16 nited States District Judge

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