ENIGMA SOFTWARE GROUP USA, LLC V. MALWAREBYTES, INC., No. 21-16466 (9th Cir. 2023)
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Plaintiff Enigma Software Group USA LLC (“Enigma”), a computer security software provider, sued a competitor, Defendant-Appellee Malwarebytes, Inc. (“Malwarebytes”), for designating its products as “malicious,” “threats,” and “potentially unwanted programs” (“PUPs”). Enigma’s operative complaint alleged a false advertising claim under Section 43(a) of the Lanham Act, 15 U.S.C. Section 1125(a)(1)(B), and tort claims under New York law. Malwarebytes moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion, concluding that all of Enigma’s claims were insufficient as a matter of law.
The Ninth Circuit affirmed in part and reversed in part. In the context of this case, the panel concluded that when a company in the computer security business describes a competitor’s software as “malicious” and a “threat” to a customer’s computer, that is more a statement of objective fact than a non-actionable opinion. It is potentially actionable under the Lanham Act, provided Enigma plausibly alleges the other elements of a false advertising claim. The panel disagreed with the district court and concluded that Malwarebytes is subject to personal jurisdiction in New York. As this action was initially filed in New York, the law of that state properly applies.
Because the panel held that the Lanham Act and NYGBL Section 349 claims should not have been dismissed, the panel concluded that the tortious interference with business relations claim should similarly not have been dismissed. The panel agreed with the district court regarding the dismissal of the claim for tortious interference with contractual relations, however, and affirmed the dismissal of that claim.
Court Description: Lanham Act The panel affirmed in part and reversed in part the district court’s judgment dismissing a lawsuit brought by Enigma Software Group USA LLC, a computer security software provider, against its competitor Malwarebytes, Inc. for designating its products as “malicious,” “threats,” and “potentially unwanted programs”; and remanded for further proceedings.
Enigma’s operative complaint alleged a false advertising claim under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), and tort claims under New York law. Dismissing the motion under Fed. R. Civ. P. 12(b)(6), the district court concluded that all of Enigma’s claims were insufficient as a matter of law.
The district court primarily based the dismissal on its conclusion that Malwarebytes’s designations of Enigma’s products were “non-actionable statements of opinion.” The panel disagreed with that assessment. In the context of this case, the panel concluded that when a company in the computer security business describes a competitor’s software as “malicious” and a “threat” to a customer’s computer, that is more a statement of objective fact than a non-actionable opinion. It is potentially actionable under the Lanham Act provided Enigma plausibly alleges the other elements of a false advertising claim. The district court held that the tort claims under New York law failed because Malwarebytes was not properly subject to personal jurisdiction in New York. That meant Enigma’s claim for relief under New York General Business Law (NYGBL) § 349 failed because that statute did not apply to the alleged misconduct. The panel disagreed and concluded that Malwarebytes is subject to personal jurisdiction in New York. As this action was initially filed in New York, the law of that state properly applies.
The common law claims for tortious interference with contractual relations and tortious interference with business relations were also dismissed by the district court. Those torts are recognized as actionable under California law, as they are under New York law, but the district court concluded that Enigma failed to allege essential elements for those claims under California law. The contractual relations claim failed because Enigma did not identify a specific contractual obligation with which Malwarebytes interfered. The business relations claim was dismissed because that claim required an allegation of independently wrongful conduct, and that requirement was not satisfied following the dismissal of the Lanham Act and NYGBL § 349 claims. Because the panel held that the Lanham Act and NYGBL § 349 claims should not have been dismissed, the panel concluded that the tortious interference with business relations claim should similarly not have been dismissed. The panel agreed with the district court regarding dismissal of the claim for tortious interference with contractual relations, however, and affirmed the dismissal of that claim.
Concurring, Court of International Trade Judge Baker wrote separately to touch on choice of law. He wrote that ordinarily the application of a transferor jurisdiction’s law carries with it the choice-of-law rules of that jurisdiction, but here the parties did not address the choice of law beyond the dispute over whether personal jurisdiction existed in the Southern District of New York. The opinion assumes—as the parties did in their briefing by not addressing choice of law—that under New York choice-of-law rules, New York substantive law applies to Enigma’s state-law claims, save for the claims based on Malwarebytes’ transactions with customers outside of New York.
Judge Bumatay dissented. He wrote that the Lanham Act protects against false or misleading representations of fact, but flagging a competitor’s products as “potentially unwanted,” a “threat,” or “malicious” is no expression of fact—these are subjective statements, not readily verifiable, which means they are opinions. He wrote that by treating these terms as actionable statements of fact under the Lanham Act, the court sends a chilling message to cybersecurity companies—civil liability may now attach if a court later disagrees with your classification of a program as “malware.” He wrote that Enigma’s failure to allege a misstatement of fact is also dispositive on its state-law claims.
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