Laatz et al v. Zazzle, Inc. et al, No. 5:2022cv04844 - Document 155 (N.D. Cal. 2023)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART 89 PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT. Signed by Judge Beth Labson Freeman on 10/23/2023. (mdllc, COURT STAFF) (Filed on 10/23/2023)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 NICKY LAATZ, et al., Plaintiffs, 8 9 10 United States District Court Northern District of California 11 Case No. 22-cv-04844-BLF v. ZAZZLE, INC., et al., Defendants. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT Re: ECF No. 89 12 13 Plaintiff Nicky Laatz (“Plaintiff”) brings this suit alleging that Defendant Zazzle, Inc. 14 (“Zazzle”), through its employee, Defendant Mohamed Mr. Alkhatib (“Mr. Alkhatib,” and, with 15 Zazzle, “Defendants”), fraudulently obtained a license to use software implementing a trio of fonts 16 created by Plaintiff, and subsequently violated the license by making the fonts available to 17 millions of people, including for commercial use. The operative First Amended Complaint 18 (“FAC”) asserts claims for (1) fraudulent misrepresentation, (2) fraudulent concealment, and (3) 19 promissory fraud, all in violation of Cal. Civ. Code § 1572, as well as (4) federal copyright 20 infringement under 17 U.S.C. § 101, (5) federal trademark infringement under 15 U.S.C. § 1114, 21 and (6) breach of contract. See First Am. Compl. (“FAC”) ¶¶ 175–219, ECF No. 82. 22 Presently before the Court is Plaintiff Nicky Laatz’s (“Plaintiff”) Refiled Motion for 23 Partial Summary Judgment (the “Motion” or “Partial MSJ”), in which Plaintiff seeks summary 24 judgment on all claims in the FAC except that for federal trademark infringement. See Mot. 2, 25 ECF No. 89. Defendants oppose the Motion. See Opp’n, ECF No. 104. Plaintiff filed a reply in 26 support of her Motion, see Reply, ECF No. 106, and Defendants filed objections to Plaintiff’s 27 reply evidence, see Reply Objs., ECF No. 108. The Court heard oral argument on August 3, 2023. 28 Having carefully considered the parties’ respective written submissions, the oral argument 1 of counsel, and the relevant legal authority, the Motion is hereby GRANTED IN PART and 2 DENIED IN PART. 3 I. 4 A. 5 The following facts are undisputed unless noted. 6 7 United States District Court Northern District of California BACKGROUND Factual Background 1. Zazzle’s Business Zazzle operates an online design platform that provides tools its users can use to design 8 and order digital and physical products such as invitations, clothing, holiday cards, and mugs. 9 Decl. of Bobby Beaver in Opp’n to Partial MSJ (“Beaver Decl.”) ¶ 2, ECF No. 102-1. Consumers 10 can purchase products designed and offered on Zazzle by design professionals or use Zazzle’s 11 design customization tool to design a product directly. See id. The design customization tool 12 provides users with access to design features such as fonts, illustrations, templates, icons, shapes, 13 backgrounds, images, filters, and drawing tools. Id. Plaintiff has been a Zazzle designer and store 14 owner since February 2014. Id. ¶ 7. 15 16 2. Font Design and Creation Nearly all font designers use visual design tools—also called font-generating engines, font- 17 generating programs, and font editors—to assist with the design and creation of font software. 18 Decl. of Thomas Phinney in Supp. of Partial MSJ (“Phinney Decl.”) ¶¶ 5, 15, ECF No. 89-50. 19 Within a font-generating engine, a designer may set the on-curve and off-curve reference points 20 that determine the shape of each glyph—i.e., a font representation of a character—within the font. 21 Id. ¶ 17. FontLab is a font-generating engine. See id. ¶ 18. A designer using version 7.1 of the 22 font editor FontLab can “hand code” the on-curve and off-curve reference points for a glyph by (1) 23 viewing the outline of the glyph’s shape on a computer’s visual window display and moving the 24 reference points with her computer pointer; (2) editing numbers in the text representation of the 25 reference points making up a glyph’s outline; or (3) clicking on a given reference point in the 26 visual representation of the glyph and then editing the numbers specifying the coordinates of that 27 point. See id. ¶ 18 & n.1. FontLab also permits a designer to specify numerical values for font- 28 wide variables. Id. ¶ 19. 2 1 2 designer-inputted font data, as well as any other code written by the font designer, into a final 3 executable font software format file that implements the font display on a computer. Id. ¶ 20. 4 5 United States District Court Northern District of California After a designer is satisfied with her font, the font-generating program will compile the 3. Plaintiff’s Fonts Plaintiff derives her primary source of income from creating fonts and selling licenses for 6 limited use of those fonts and associated font software. Decl. of Nicky Laatz in Supp. of Partial 7 MSJ (“Laatz Decl.”) ¶ 3, ECF No. 89-1. She has created over 110 unique fonts. Id. ¶ 2. In 2016, 8 Plaintiff designed and created a trio of fonts—the “Blooming Elegant Trio,” comprised of 9 Blooming Elegant, Blooming Elegant Sans, and Blooming Elegant Hand—along with the software 10 (the “Blooming Elegant Software”) used to implement the Blooming Elegant Trio. Id. ¶ 4. She 11 used FontLab 7.1 to create the Blooming Elegant Trio. Id. ¶ 7; Mot. 2. Plaintiff, when creating 12 the Blooming Elegant Software, “hand coded the designs for individual character/glyph by 13 selecting the ‘on-curve’ and ‘off-curve’ reference points for each individual character/glyph for 14 each font within FontLab. Id. ¶ 9. Plaintiff also “personally hand coded the instructions for how 15 the characters/glyphs should appear next to each other by choosing the values for each of the font- 16 wide variables that FontLab permits a designer to set, such as cap height, letter spacing, ascender 17 height, and descender height.” Id. Additionally, Plaintiff “wrote and inserted custom code that 18 FontLab incorporated into the final packaged Blooming Elegant Trio of fonts that implemented 19 ligatures and stylistic alternate letters for the fonts.” Id. ¶ 10. 20 On February 18, 2021, Plaintiff, through counsel, applied to the United States Copyright 21 Office to register Plaintiff’s copyrights in the font software for the Blooming Elegant Trio. Decl. 22 of Stephen C. Steinberg in Supp. of Partial MSJ (“Steinberg Decl.”) ¶ 2, ECF No. 89-14. On July 23 16, 2021, the United States Copyright Office approved the registration of Plaintiff’s copyrights for 24 each of the Blooming Elegant Trio of fonts. Id. ¶ 4. The registration certificates for the Blooming 25 Elegant Trio all show an effective date of February 18, 2021, and a first publication date of 26 February 16, 2016. See Steinberg Decl., Exhs. 7–9. Additionally, the United States Patent and 27 Trademark Office has issued a registration certificate, dated January 25, 2022, for the mark 28 “BLOOMING ELEGANT” for use in connection with downloadable printing fonts, typeface fonts 3 1 recorded on magnetic media, and printing fonts that can be downloaded provided by means of 2 electronic transmission. Steinberg Decl. ¶ 5; see id. at Exh. 10. 3 United States District Court Northern District of California 4 4. Licensing Via Creative Market Since 2016, Plaintiff has offered the Blooming Elegant Trio and Blooming Elegant 5 Software for licensing through Creative Market, an online marketplace. Laatz Decl. ¶¶ 3, 13. 6 Plaintiff’s Creative Market shop offering page (the “Shop Page”) includes a link to Creative 7 Market’s Terms of Service (the “Service Terms”) and a link to Creative Market’s Licenses FAQ 8 (the “License FAQ”). Id. ¶ 13; see Steinberg Decl., Exh. 22 (Shop Page), Exh. 23 (FAQ), Exh. 25 9 (Service Terms). To license the Blooming Elegant Trio and Blooming Elegant Software from 10 Creative Market, a purchaser must set up a Creative Market account, which requires the user to 11 agree to Creative Market’s Terms of Service (the “Service Terms”). Laatz Decl. ¶ 16; see 12 Steinberg Decl., Exh. 24 (Account Page). The Service Terms incorporate Creative Market’s 13 License Terms (the “License Terms”). Laatz Decl. ¶ 16; see Steinberg Decl., Exhs. 25 (Service 14 Terms), 26 (License Terms). The License FAQ includes a link to the License Terms. See 15 Steinberg Decl., Exh. 26. 16 The parties dispute which of the above documents constitute a license for the Blooming 17 Elegant Trio and Blooming Elegant Software (a “Blooming Elegant License”). Plaintiff alleges 18 and continues to assert that the Blooming Elegant License consists of the Shop Page, the License 19 FAQ, the Service Terms, and the License Terms. See FAC ¶¶ 60–65; Mot. 3. Defendants do not 20 submit a specific combination of documents, but state that the Blooming Elegant License may 21 only include the License Terms. See Opp’n 12. 22 A user may purchase a Blooming Elegant License for $20 via Plaintiff’s shop on Creative 23 Market. Laatz Decl. ¶ 13. Plaintiff asserts that a Blooming Elegant License has at all times only 24 permitted an individual, single-seat license. Id. ¶ 33. Each user who purchases a Blooming 25 Elegant License receives an email from Creative Market that contains links to (1) download the 26 Blooming Elegant Software and (2) view the License FAQ. Id.; see, e.g., Steinberg Decl., Exh. 27 13, at 8–9. 28 4 1 Purchase of Blooming Elegant License 2 On November 2, 2016, a Zazzle employee, Monica McGhie, contacted Plaintiff through 3 Creative Market to ask whether Plaintiff offered a perpetual license for server-based use for the 4 Blooming Elegant Trio that Zazzle could house on its internal servers and offer on its design 5 customization tool. Laatz Decl. ¶ 30; see id. at Exh. 5. The Zazzle employee told Plaintiff that 6 Zazzle users can work with fonts stored on Zazzle’s internal servers, but are not able to download 7 a copy of the font code. See Laatz Decl., Exh. 5. Plaintiff claims that she “never enter[s] into 8 perpetual server-based licenses for my fonts that allow the licensee’s end users (and their end 9 user’s end users) to sell products they themselves created with free access . . . to my font,” and 10 11 United States District Court Northern District of California 5. therefore she did not respond to the Zazzle employee’s inquiry. Laatz Decl. ¶ 52. Plaintiff sold over 10,000 licenses through Creative Market between January 1, 2017 and 12 May 30, 2017, nearly 1,000 of which were for the Blooming Elegant Software. See Laatz Decl. ¶ 13 48. During that period, on or about May 4, 2017, Mr. Alkhatib purchased a Blooming Elegant 14 License through Creative Market. Decl. of Mohamed Mr. Alkhatib in Opp’n to Partial MSJ 15 (“Alkhatib Decl.”) ¶ 3, ECF No. 102-7. Mr. Alkhatib is a senior network engineer at Zazzle, and 16 states that he purchased the license on Zazzle’s behalf and used a Zazzle company credit card to 17 do so. See id. ¶¶ 1, 3. Mr. Alkhatib signed up for a Creative Market account, which required him 18 to provide his first and last names and an email address. Id. ¶ 4. There was no field on the 19 Creative Market account creation page or on the Offering Page that allowed Mr. Alkhatib to enter 20 the name of a company as a purchaser, or to enter the name of an employer. Id.; see also 21 Steinberg Decl., Exh. 24. Mr. Alkhatib entered a work email address, mo@zazzle.com, when he 22 signed up for a Creative Market account. Alkhatib Decl. ¶ 4. Following his purchase of the 23 Blooming Elegant License, Mr. Alkhatib received an email receipt from Creative Market with a 24 link to download the Blooming Elegant License from Creative Market. Id. ¶ 6; see id. at Exh. 4. 25 He then downloaded the Blooming Elegant Software for Zazzle. Alkhatib Decl. ¶ 8. 26 27 28 6. Use of Blooming Elegant Trio on Zazzle’s Platform Zazzle does not display, distribute, or share font software to its users while they use Zazzle’s online design tool, and it never displayed the Blooming Elegant Software to its users. 5 1 See Decl. of Jason Li in Opp’n to Partial MSJ (“Li Decl.”) ¶¶ 3–4, ECF No. 102-6. Font software 2 resides exclusively on Zazzle’s servers. Id. ¶ 3. A Zazzle user could set Zazzle’s online design 3 tool to render the Blooming Elegant Trio of fonts, without the user needing to independently 4 obtain the Blooming Elegant Software. See Decl. of Patrick Ryan in Supp. of Partial MSJ (“Ryan 5 Decl.”), Exh. 3 (“Beaver Dep. Tr. (Vol. 1)”) at 47:12–48:15; Steinberg Decl., Exhs. 17, 20. United States District Court Northern District of California 6 The parties dispute whether Plaintiff was aware that Zazzle offered the Blooming Elegant 7 Trio on its website. Plaintiff states that she was unaware of the offering until August 25, 2020, 8 when a Zazzle user contacted Plaintiff via Plaintiff’s website to request assistance with using the 9 Blooming Elegant Trio on Zazzle. Laatz Decl. ¶ 49. Zazzle contends that it has repeatedly sent 10 promotional emails to Zazzle users, including Plaintiff, that included images of products featuring 11 at least one of the Blooming Elegant Trio of fonts. Beaver Decl. ¶ 9; see id. at Exh. 1. Zazzle also 12 publicly announced to its creative community in October 2017 the deployment of 68 new fonts on 13 Zazzle, including the Blooming Elegant Trio. Beaver Decl. ¶ 10; see id. at Exh. 2. 14 15 7. Communications Between Plaintiff and Zazzle In July 2017, Plaintiff created an informal partnership with her husband, John Laatz. Laatz 16 Decl. ¶ 26. John Laatz manages Plaintiff’s business affairs. Decl. of John Laatz in Supp. of 17 Partial MSJ (“J. Laatz Decl.”) ¶ 1. On August 26, 2020—one day after Plaintiff received the 18 request for assistance with the Blooming Elegant Trio—Mr. Laatz emailed Zazzle’s copyright 19 division, stating that Plaintiff did not grant software-as-a-service (“SaaS”) licenses and requesting 20 that Zazzle provide proof of a license that Zazzle believed permitted it to host the Blooming 21 Elegant Trio. Id. ¶ 2; see id. at Exh. A. In-house counsel for Zazzle, Liana Larson, replied that 22 same day and informed Mr. Laatz that Zazzle was continuing to locate records, but that it had 23 purchased the Blooming Elegant font family from Creative Market in May 2017, and that internal 24 notes indicated Zazzle “purchased a license for unlimited use of the font trio for $20.00.” See id. 25 at Exh. A. 26 Mr. Laatz again emailed Zazzle on January 21, 2021 to demand that Zazzle provide a 27 license granting rights to use the Blooming Elegant font in a SaaS or template service. J. Laatz 28 Decl. ¶ 3; see id. at Exh. B. Ms. Larson responded that same day and provided the receipt for Mr. 6 1 Alkhatib’s May 4, 2017 license purchase. See id. Mr. Laatz then informed Zazzle that the 2 purchased license did not cover Zazzle’s use. See J. Laatz Decl. ¶ 4. Zazzle replied to Mr. Laatz 3 on January 26, 2021, and stated that Zazzle hosted all fonts on its internal servers, so that users 4 never had access to its fonts. See id. ¶ 5; id. at Exh. D. On September 30, 2021, Plaintiff’s counsel sent a letter to Zazzle stating that Zazzle’s United States District Court Northern District of California 5 6 continued use of the Blooming Elegant Trio violated Plaintiff’s intellectual property rights, and 7 that Plaintiff was prepared to take legal action against Zazzle. Steinberg Decl. ¶ 6; see id. at Exh. 8 11; see also Beaver Decl. ¶ 4. Between October 2021 and January 2022, counsel for Plaintiff and 9 Zazzle communicated by email regarding Zazzle’s use of the Blooming Elegant Trio. See 10 Steinberg Decl. ¶¶ 8–13; id. at Exhs. 13–14; Beaver Decl. ¶ 5. With the exception of a January 27, 11 2022 letter from Zazzle with the notation “Confidential; For Settlement Purposes Only,” the 12 parties dispute whether these communications constituted settlement discussions. See Steinberg 13 Decl. ¶¶ 10–12 (stating that only the January 27 letter was a settlement communication); Beaver 14 Decl. ¶ 5 (describing all communications with Plaintiff’s counsel following demand letter as “a 15 series of settlement discussions”). The communications did not result in a settlement. See Laatz 16 Decl. ¶ 54. 17 B. 18 Plaintiff filed this lawsuit against Zazzle and Mr. Alkhatib on August 24, 2022, see Procedural History 19 Compl., ECF No. 1, and filed the FAC on March 14, 2023, see FAC. Defendants moved to 20 dismiss on March 31, 2023. See ECF No. 86. On April 7, 2023, Plaintiff filed the pending Partial 21 MSJ. The Court denied Defendants’ motion to dismiss on July 17, 2023, see ECF No. 124, and 22 heard oral argument on the Partial MSJ on August 3, 2023, see ECF No. 139. Defendants filed an 23 answer to the FAC on August 30, 2023, to which Zazzle appended a counterclaim against Plaintiff 24 in which it seeks declaratory relief regarding the alleged invalidity of Plaintiff’s copyrights 25 regarding the Blooming Elegant Trio. See ECF No. 144. Plaintiff has filed a motion to dismiss 26 Zazzle’s counterclaim, which is set for hearing on February 29, 2024. See ECF No. 148. 27 II. 28 EVIDENTIARY OBJECTIONS Defendants object to the following evidence attached to Plaintiff’s Motion: (1) Steinberg 7 1 Decl., ¶¶ 6–7 and Exh. 12, at 1–4, pursuant to Federal Rule of Evidence 408(a)(2) regarding 2 compromise negotiations; (2) Laatz Decl. ¶¶ 53.a, 53.d, for lack of personal knowledge and lack 3 of foundation pursuant to Federal Rule of Evidence 602; and (3) J. Laatz Decl. ¶ 6, pursuant to 4 Federal Rule of Evidence 801, as inadmissible hearsay. See Opp’n 7. Defendants additionally 5 object to the three declarations and accompanying exhibits submitted with Plaintiff’s Reply as 6 improper reply evidence. See Reply Objs. 1–5. Plaintiff asserts that the evidence submitted with 7 her Motion is admissible,1 and objects to Paragraphs 6–12 of the Beaver Declaration, as well as 8 Exhibits 1–4 thereto, as lacking authenticity and foundation and containing and constituting 9 inadmissible hearsay. See Reply 15. The Court rules on the evidentiary objections as follows: • United States District Court Northern District of California 10 Steinberg Decl., ¶¶ 6–7 and Exh. 12, at 1–4: DENIED as to Paragraph 6, and 11 otherwise GRANTED. Paragraph 7 and pages 1 through 4 of Exhibit 12 to the 12 Steinberg Declaration are inadmissible compromise negotiations, and will be 13 stricken from the record. See Fed. R. Evid. 408(a)(2). • 14 Laatz Decl. ¶¶ 53.a, 53.d: DENIED. The subparts of Paragraph 53 are not 15 statements of fact, but rather hypothetical circumstances to which Plaintiff would 16 respond in a particular manner. See generally Laatz Decl. ¶ 53. • 17 J. Laatz Decl. ¶ 6: GRANTED as inadmissible hearsay. The Court will not consider this evidence. 18 • 19 Supplemental Declaration of Nicky Laatz ¶¶ 59, 60, 63–65, 82–85, and Exhibit 8 20 thereto, ECF Nos. 106-1, 106-2: DENIED as to Exhibit 8; otherwise GRANTED. 21 The Court will not consider the legal conclusions and argument contained in these 22 portions of the declaration. • 23 Supplemental Declaration of Stephen Steinberg ¶ 30 and Exhibit 29, ECF Nod. 24 106-3, 106-4: DENIED. Although the information at issue does not appear to have 25 strong probative value, there is a sufficient foundation for the evidence and the 26 paragraph does not contain improper argument. 27 28 The Court denied Plaintiff’s request for leave to respond to Defendants’ objections to her reply evidence. See ECF Nos. 109, 110. 8 1 • 1 2 not disclose Mr. Garrie as an expert. See Rojas v. Bosch Solar Energy Corp., 2022 3 WL 717567, at *4 (N.D. Cal. March 9, 2022). The Court will not consider this 4 evidence. • 5 Beaver Decl. ¶¶ 6–12 and Exhibits 1–4: GRANTED as to Exhibits 1–4 to the 6 extent the exhibits are offered for the truth of their contents, rather than the 7 existence of the communications at issue. Otherwise DENIED. There is a 8 sufficient foundation for the statements and exhibits. 9 10 United States District Court Northern District of California Declaration of Daniel Garrie, ECF No. 106-9: GRANTED because Plaintiff did III. LEGAL STANDARD Summary judgment is proper where the pleadings and evidence demonstrate “there is no 11 genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law.” 12 Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The current version of 13 Rule 56 authorizes a court to grant “partial summary judgment” to dispose of less than the entire 14 case and even just portions of a claim or defense. See Fed. R. Civ. P. advisory committee's note, 15 2010 amendments; Ochoa v. McDonald's Corp., 133 F. Supp. 3d 1228, 1232 (N.D. Cal. 2015). 16 As such, a court can, “when warranted, selectively fillet a claim or defense without dismissing it 17 entirely.” Id. 18 The moving party “always bears the initial responsibility of informing the district court of 19 the basis for its motion, and identifying those portions of the pleadings and admissions on file, 20 together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of 21 material fact.” Id. at 323. If the moving party makes such a showing, the burden then shifts to the 22 nonmoving party to produce evidence supporting its claims or defenses. Nissan Fire & Marine 23 Ins. Co. v. Fritz Cos., Inc., 210 F.3d 1099, 1103 (9th Cir. 2000). In judging evidence at the 24 summary judgment stage, the Court “does not assess credibility or weigh the evidence, but simply 25 determines whether there is a genuine factual issue for trial.” House v. Bell, 547 U.S. 518, 559–60 26 (2006). A fact is “material” if it “might affect the outcome of the suit under the governing law,” 27 and a dispute as to a material fact is “genuine” if there is sufficient evidence for a reasonable trier 28 of fact to decide in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 9 1 248 (1986). Summary judgment must be denied if “a fair-minded jury could return a verdict for 2 the [non-moving party] on the evidence presented.” Anderson, 477 U.S. at 252. 3 IV. United States District Court Northern District of California 4 DISCUSSION Plaintiff argues that she is entitled to summary judgment on her contract claim, her three 5 fraud-based claims, and her copyright infringement claim. See Mot. 1. Defendants initially 6 counter that summary judgment is improper as to all of Plaintiff’s claims because there are triable 7 issues of fact as to whether Plaintiff’s claims are all time-barred by the statute of limitations. See 8 Opp’n 8–9. Defendants further argue that Plaintiff is not entitled to summary judgment on her 9 state law claims because there are triable issues of fact as to whether Plaintiff has standing to bring 10 the claims, and because the state law claims are preempted by the Copyright Act. See id. at 9–11. 11 Lastly, Defendants argue that Plaintiff cannot show the necessary elements of any of her claims. 12 See id. at 12–25. The Court first briefly addresses Defendants’ arguments regarding the statute of 13 limitations, Plaintiff’s standing, and preemption under the Copyright Act, before turning to the 14 parties’ arguments on each of the five claims for which Plaintiff seeks summary judgment. Defendants’ Statute of Limitations, Standing, and Preemption Arguments 15 A. 16 Defendants begin their opposition to Plaintiff’s Partial MSJ with affirmative arguments 17 that Plaintiff’s claims are time-barred under the statute of limitations, and that Plaintiff cannot 18 bring her state law claims because she lacks standing to raise them and they are preempted by the 19 Copyright Act. See Opp’n 8–11. Defendants have preserved their arguments for affirmative 20 relief, but the Court will not consider these arguments in this decision, which concerns only the 21 question of whether Plaintiff has shown that the undisputed facts establish Plaintiff’s claims for 22 breach of contract, fraudulent misrepresentation, fraudulent concealment, promissory fraud, and 23 copyright infringement. The Court now turns to the arguments on Plaintiff’s claims at issue. 24 B. 25 Plaintiff asserts a claim for breach of contract against both Zazzle and Mr. Alkhatib, Breach of Contract (Claim 6) 26 alleging that Defendants breached the terms of the Blooming Elegant License by downloading, 27 copying and installing the Blooming Elegant Trio and Blooming Elegant Software onto multiple 28 Zazzle servers; allowing persons other than Mr. Alkhatib to access and use the Blooming Elegant 10 1 Trio and Blooming Elegant Software; sharing and redistributing the Blooming Elegant Trio and 2 Blooming Elegant Software; and failing to pay the price prescribed by the license for each unique 3 user who was provided access to the Blooming Elegant Trio and Blooming Elegant Software. See 4 FAC ¶¶ 211–219. United States District Court Northern District of California 5 The parties agree that California law applies to Plaintiff’s claim. See Mot. 11; Opp’n 13. 6 The essential elements of a breach of contract claim under California law are “(1) the contract, (2) 7 plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to 8 plaintiff therefrom.” Wall St. Network, Ltd. v. N.Y. Times Co., 164 Cal. App. 4th 1171, 1178 9 (2008) (internal quotations and citation omitted). Plaintiff argues that the parties entered into a 10 valid contract, that she fully performed, that Zazzle breached the contract, and that Plaintiff 11 suffered damages. See Mot. 7–10. Defendants respond that there are disputed issues of fact as to 12 the contract’s formation and terms, any breach of the alleged contract, and Mr. Alkhatib’s 13 individual liability. See Opp’n 11–16. 14 15 1. Formation and Existence of Contract – Mutual Assent Contract formation and construction are questions of law. See Wall Data Inc. v. L.A. Cnty. 16 Sheriff’s Dep’t, 447 F.3d 769, 786 (9th Cir. 2006) (citation omitted). The formation of a contract 17 requires (1) parties capable of contracting, (2) the consent of those parties, (3) a lawful object, and 18 (4) a sufficient cause or consideration. See Cal. Civ. Code § 1550. The only asserted dispute 19 regards the second element, i.e., whether there was mutual consent to the same terms of the 20 contract. See Opp’n 12–14. Plaintiff alleges that the contract—the Blooming Elegant License—is 21 comprised of the Shop Page, the License FAQ, the Service Terms, and the License Terms, see 22 FAC ¶¶ 60–65, and she argues that Defendants assented to the combined terms of these 23 documents, see Mot. 11–16. Plaintiff further contends that Defendants breached terms contained 24 in the License FAQ and the License Terms. See id. at 6–7. Defendants respond that there are 25 disputes of fact as to which documents constituted the contract and whether there was mutual 26 assent to the terms of the License FAQ and License Terms. See Opp’n 12–14. 27 28 The question at hand is whether Mr. Alkhatib’s actions in purchasing the Blooming Elegant Trio and Blooming Elegant Software demonstrated mutual assent to the Service Terms, 11 1 License Terms, License FAQ, and Shop Page—and particularly to the License Terms and License 2 FAQ, which contain the allegedly breached terms. “Mutual assent may be manifested by written 3 or spoken words, or by conduct, and acceptance of contract terms may be implied through action 4 or inaction.” Knutson v. Sirius XM Radio Inc., 771 F.3d 559, 565 (9th Cir. 2014) (internal 5 quotation marks and citations omitted). “Thus, ‘an offeree, knowing that an offer has been made 6 to him but not knowing all of its terms, may be held to have accepted, by his conduct, whatever 7 terms the offer contains.’” Id. (citation omitted). United States District Court Northern District of California 8 a. Clickwrap and Browsewrap 9 “Contracts formed on the Internet come primarily in two flavors: ‘clickwrap’ . . . 10 agreements, in which website users are required to click on an ‘I agree’ box after being presented 11 with a list of terms and conditions of use; and ‘browsewrap’ agreements, where a website's terms 12 and conditions of use are generally posted on the website via a hyperlink at the bottom of the 13 screen.” Nguyen v. Barnes & Noble, Inc., 763 F.3d 1171, 1175–76 (9th Cir. 2014) (citation 14 omitted). “Courts routinely find clickwrap agreements enforceable.” Oberstein v. Live Nation 15 Ent., Inc., 60 F.4th 505, 513 (9th Cir. 2023) (citation omitted); see also Houtchens v. Google LLC, 16 --- F. Supp. 3d ---, 2023 WL 122393, at *3 (N.D. Cal. Jan. 6, 2023) (“Courts in the Ninth Circuit 17 and other circuits acknowledge that mutual assent manifests when internet users accept 18 ‘clickwrap’ agreements.”) (citation omitted). Browsewrap agreements are not treated similarly. 19 “Because no affirmative action is required by the website user to agree to the terms of a contract 20 other than his or her use of the website, the determination of the validity of the browsewrap 21 contract depends on whether the user has actual or constructive knowledge of a website's terms 22 and conditions.” Nguyen, 763 F.3d at 1176. “[A]n enforceable agreement may be found where 23 ‘(1) the website provides reasonably conspicuous notice of the terms to which the consumer will 24 be bound; and (2) the consumer takes some action, such as clicking a button or checking a box, 25 that unambiguously manifests his or her assent to those terms.’” Oberstein, 60 F.4th at 515. 26 Here, Mr. Alkhatib began the process of purchasing the Blooming Elegant License by 27 signing up for a Creative Market account. See Alkhatib Decl. ¶ 4. The Creative Market account 28 creation page would have appeared as follows: 12 1 2 3 4 5 6 7 8 9 10 United States District Court Northern District of California 11 12 13 See Steinberg Decl., Exh. 24. The word “terms” in the sentence above the “Create Account” 14 button is a hyperlink to the Service Terms. See id. Courts have routinely found that such 15 hyperlinks constitute reasonably conspicuous notice of terms, and that clicking a button such as 16 the “Create Account” button is sufficient to manifest assent to those terms. See, e.g., Houtchens, 17 2023 WL 122393, at *4 (finding party assented to hyperlinked terms where checking a box was 18 required to create account); Swift v. Zynga Game Network, Inc., 805 F. Supp. 2d 904, 911–12 19 (N.D. Cal. 2011) (finding party assented to contract where user was required to and did click on 20 “Accept” button directly above statement that clicking on button served as assent to hyperlinked 21 terms of service). The Court accordingly finds that Defendants agreed to the Service Terms, 22 which in turn expressly incorporate the License Terms in clear language on the first page, see 23 Steinberg Decl., Exh. 25, so that both the Service Terms and License Terms are included within 24 the terms of the Blooming Elegant License. See Oberstein, 60 F.4th at 515. 25 Whether the License FAQ constitutes “reasonably conspicuous” terms to which 26 Defendants demonstrated assent is less clear. Plaintiff argues that the email receipt sent to Mr. 27 Alkhatib, see Alkhatib Decl., Exh. 4, was sufficient to convey the terms of the License FAQ 28 because it contained a link to the License FAQ. See Mot. 15–16; Reply 9. As Defendants note, 13 United States District Court Northern District of California 1 both of the cases upon which Plaintiff relies for this proposition are inapt because they involved 2 email confirmations of orders placed by telephone. See Silverman v. Move Inc., 2019 WL 3 2579343, at *11 (N.D. Cal. June 24, 2019); Herkenrath v. Move, Inc., 2018 WL 10705782, at *1 4 (C.D. Cal. Aug. 21, 2018). Plaintiff does not provide, and the Court has not found, further support 5 for holding that a post-purchase link can constitute a contract term where the purchaser has 6 already manifested assent to other terms. The evidence further shows that Plaintiff’s Shop Page 7 on Creative Market and the License Terms both contained links to the License FAQ. The Shop 8 Page link is toward the bottom of the page, just above user comments, and the Court cannot 9 conclude that its placement provided reasonably conspicuous notice. See Steinberg Decl., Exh. 10 22. The License Terms display the question “Have questions or need more clarification?” 11 followed by a link to the License FAQ. See id. at Exh. 26. Courts have found that there is no 12 assent to terms where a user would have to click through two optional links to view a given term, 13 particularly where the second link is not clearly described as containing contract terms. See 14 Savetsky v. Pre-Paid Legal Servs., Inc., 2015 WL 604767, at *4–5 (N.D. Cal. Feb. 12, 2015) 15 (finding no assent to terms where “a consumer would only receive actual notice if he clicked 16 through two optional links” and read to the seventh page to find the term, and noting that the link 17 to terms was described as “More Plan Details,” as reasonable person “could easily conclude that 18 ‘More Plan Details’ are . . . [not] additional terms and conditions”). Under these circumstances, 19 the Court cannot say that Plaintiff has established Defendants’ assent to any terms contained in the 20 License FAQ. Nor has Plaintiff provided sufficient briefing or argument as to Defendant’s assent 21 to any terms in the Shop Page. 22 b. Summary Adjudication 23 The Court discussed with the parties at oral argument the question of whether the Court 24 may grant summary adjudication on the issue of mutual assent. The current version of Rule 56 25 authorizes a court to grant “partial summary judgment” to dispose of less than the entire case and 26 even just portions of a claim or defense. See Fed. R. Civ. P. advisory committee's note, 2010 27 amendments; Ochoa, 133 F. Supp. 3d at 1232 (“Now the Court can, when warranted, selectively 28 fillet a claim or defense without dismissing it entirely.”). Further, the Ninth Circuit has held that a 14 United States District Court Northern District of California 1 district court may determine the existence of mutual assent, which is generally a question of fact, 2 because “whether a certain set of facts is sufficient to establish a contract is a question of law.” 3 Oberstein, 60 F.4th at 517. Defendants requested that the Court not decide the issue of mutual 4 assent, arguing that they had not had sufficient notice to brief the issue because Plaintiff did not 5 request summary adjudication of any issue. This argument holds weight with respect to the Shop 6 Page and the License FAQ, but the parties both provided sufficient briefing regarding the account 7 creation page and the assent manifested as to the License Terms and Service Terms. Accordingly, 8 the Court will hold that Plaintiff has established Defendants’ assent to the License Terms and 9 Service Terms, but that Plaintiff has failed to establish at this stage that the Shop Page and License 10 FAQ were part of the contract. 11 2. Breach by Defendants 12 Plaintiff argues that Defendants breached the License Terms when the Blooming Elegant 13 Software was uploaded to Zazzle’s servers and when Zazzle rendered the Blooming Elegant Trio 14 for Zazzle users. See Mot. 6–10. Defendants counter that the License Terms prohibited more than 15 one user from downloading the software, or the upload of the software to more than two 16 computers, and that Plaintiff has not established either event. See Opp’n 14–15. 17 The License Terms provided that the licensee had a “non-transferable right to use, modify, 18 and reproduce the Item” (previously defined as the licensed “digital content”), see Steinberg Decl., 19 Exh. 26, at 2; the licensee could not “redistribute the original files in any way,” id. ¶ 1; the 20 licensee was to use the Blooming Elegant Software “in an unlimited number of [p]rojects on a one 21 seat per license basis,” id. ¶ 2; the licensee could “incorporate the Item into other content and 22 make a derivative work from it,” id. ¶ 4; the licensee could not “sublicense, resell, share, transfer, 23 or otherwise redistribute the Item,” id. ¶ 5; the licensee could not “make the Item available on a 24 digital asset management system, shared drive, or the like for the purposes of sharing or 25 transferring the Item” or “permit an end user of the end product to extract the Item and use it 26 separately,” id. ¶ 6; and the licensee could not “publicly display the Item: (a) as a standalone file 27 in any digital format on the internet; or (b) in any digital format without . . . prevent[ing] the 28 unauthorized use of the Item by third parties,” id. ¶ 8. See Mot. 6–7. 15 United States District Court Northern District of California 1 Plaintiff argues that deposition testimony establishes that the Blooming Elegant Software 2 is on at least two of Zazzle’s servers and potentially on more than 50, that servers respond to 3 millions of user requests, and that at least two Zazzle employees had access to the Blooming 4 Elegant Software. See Mot. 8. Having examined the record, the Court concludes that the evidence 5 before the Court indicates that Mr. Alkhatib purchased and downloaded the Blooming Elegant 6 Software, see Alkhatib Decl. ¶¶ 4, 8; that Zazzle uses at least two servers in providing any service, 7 see Beaver Dep. Tr. (Vol. 1) 29:16–25; that Zazzle’s San Francisco data center held at least 50 8 servers in 2017, see id. at 165:15–166:10; that Mr. Beaver did not know specifically how many 9 Zazzle employees could access font software housed on Zazzle’s servers, although he “would 10 assume [at least] two,” see id. at 35:8–36:13; and that the “‘technological mechanics of how 11 Zazzle is able to utilize [] font software’ ‘could [be] explain[ed] . . . [as users] basically providing 12 general instructions to [Zazzle], which in turn will use font software and all sorts of other kinds of 13 software in order to render text or images or general site functionality,” see id. at 41:15–42:10; and 14 that Zazzle does not display, distribute, or share font software, including the Blooming Elegant 15 Software, to or with its users while they use Zazzle’s online design tool, see Li Decl. ¶¶ 3–4. 16 This evidence, without additional facts and technical context, does not establish that 17 Zazzle’s use of the Blooming Elegant Software and Blooming Elegant Trio breached any of the 18 terms highlighted by Plaintiff. Plaintiff has instead put before the Court factual determinations 19 made by other courts regarding, for example, the function of servers. See, e.g., Mot. 8 (citing 20 Mformation Techs., Inc. v. Res. in Motion Ltd., 2010 WL 702447, at *7 (N.D. Cal. Feb. 25, 21 2010)); Reply 9–10 (citing Ogunsalu v. Nair, 2006 WL 8447969, at *4 (S.D. Cal. May 5, 2006); 22 Tumbleweed Commc’ns Corp. v. Paypal, Inc., 2003 WL 25784508, at *3 (N.D. Cal. Nov. 6, 23 2003); Matter of Search of Info. Associated with [Redacted]@gmail.com, 2017 WL 2480752, at 24 *11 (D.D.C. Jun. 2, 2017)). Plaintiff has not requested judicial notice of these holdings—nor do 25 the factual determinations appear properly subject to notice under Federal Rule of Evidence 26 201(b)—and although Plaintiff’s breach of contract claim appears strong, the Court cannot 27 conclude on the record presently before it that Defendants breached the License Terms as a matter 28 of law. The Court will thus deny summary judgment on Plaintiff’s claim for breach of contract. 16 3. 1 2 Plaintiff argues that she is entitled to bring a claim against Mr. Alkhatib because he 3 executed a contract on Zazzle’s behalf without disclosing his agency status. See Mot. 10. 4 Defendants counter that Plaintiff “fails to prove her breach of contract claim against Mr. Alkhatib 5 because, as a matter of well-settled law, ‘an agent acting on behalf of a disclosed principal cannot 6 be held personally liable on the contract.’” Opp’n 15 (quoting F.D.I.C. v. Frankel, 2011 WL 7 5975262, at *5 (N.D. Cal. Nov. 29, 2011)). 8 9 United States District Court Northern District of California Claim Against Mr. Alkhatib The evidence indicates that (1) Creative Market’s account creation page does not provide a field in which a user may disclose an employer, see Alkhatib Decl. ¶ 4; see also Steinberg Decl., 10 Exh. 24; (2) Mr. Alkhatib entered a work email address, mo@zazzle.com, into the email field 11 when he signed up for the Creative Market account he used to purchase the Blooming Elegant 12 License, Alkhatib Decl. ¶ 4; (3) Mr. Alkhatib received the receipt for his purchase, which 13 contained the software download link, at the same work email address, see Alkhatib Decl., Exh. 4; 14 (4) the Service Terms include a warranty that “[i]f you open a Creative Market account on behalf 15 of an organization or other entity, then . . . (ii) you represent and warrant that you are an 16 authorized representative of the entity with the authority to bind the entity to these Terms, and that 17 you agree to these Terms on the entity’s behalf,” Steinberg Decl., Exh. 25; and (5) Creative 18 Market does not provide Plaintiff with the email address or billing information of any user who 19 purchases a Blooming Elegant License, see Laatz Decl. ¶¶ 35–36. Plaintiff argues that it was not 20 her duty to investigate the existence of an agency relationship, so that any disclosure made by Mr. 21 Alkhatib was insufficient. See Reply 3 (citing W.W. Leasing Unlimited v. Comm. Stand. Title Ins. 22 Co., 149 Cal. App. 3d 792, 795 (1983)). Based on the above evidence, the Court finds that there 23 are disputed facts as to whether Mr. Alkhatib was a disclosed agent of Zazzle, and will therefore 24 deny summary judgment on Plaintiff’s claim against Mr. Alkhatib for breach of contract. 25 C. 26 Plaintiff asserts claims for fraudulent misrepresentation, fraudulent concealment, and Fraud Claims (Claims 1–3) 27 promissory fraud against Defendants under California Civil Code § 1572, which codifies common 28 law fraud. See FAC ¶¶ 175–195. “‘The elements of fraud . . . are (a) misrepresentation (false 17 United States District Court Northern District of California 1 representation, concealment, or nondisclosure); (b) knowledge of falsity (or “scienter”); (c) intent 2 to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” Small v. 3 Fritz Cos., Inc., 30 Cal. 4th 167, 173 (2003) (citation omitted). Plaintiff argues that Monica 4 McGhie’s November 2, 2016 message inquiring about purchasing a perpetual server-based license 5 of the Blooming Elegant Trio shows that Defendants misrepresented or omitted their true intent 6 when Mr. Alkhatib purchased the Blooming Elegant License; that Defendants intended to breach 7 the terms of the Blooming Elegant License; that Defendants intended for Plaintiff to rely on their 8 misrepresentations and omissions; that Plaintiff justifiably relied on the misrepresentations and 9 omissions; and that Plaintiff has been harmed. See Mot. 16–20. Plaintiff additionally points to a 10 statement by Ms. Larson made during what Defendants contend were confidential settlement 11 negotiations. See Mot. 19; Opp’n 7. Defendants counter that Plaintiff has not submitted any 12 evidence on multiple elements, and that McGhie’s message does not establish any of the elements. 13 See Opp’n 16–23. 14 As the Court stated at oral argument, there remains in this case a great amount of factual 15 dispute regarding the necessary showing for fraud. For example, Plaintiff has not even submitted 16 evidence that Ms. McGhie informed anyone else at Zazzle that Plaintiff had not responded to the 17 message inquiring about perpetual server-based licenses, or that any Zazzle employee believed 18 that Plaintiff’s failure to respond to the message meant that Plaintiff would not grant such a 19 license. This is not like the case cited by Plaintiff in support of granting summary judgment on a 20 fraud claim, see Mot. 17–18, where the plaintiffs presented compelling evidence of telephone 21 conversations containing direct misrepresentations, and where a defendant responded to the 22 plaintiffs’ propounded interrogatories by invoking his Fifth Amendment right against self- 23 incrimination. See Albergo v. Immounosyn Corp., 2012 WL 12953736, at *3–4 (S.D. Cal. June 24 19, 2012). Instead, as counsel for Plaintiff conceded at oral argument, Plaintiff has not even 25 deposed Ms. McGhie. See Aug. 3, 2023 Hr’g Tr. 20:5–23. Defendants, on the other hand, have 26 submitted a declaration from Mr. Alkhatib stating that he had no intention to defraud Plaintiff, and 27 that he openly used his Zazzle email address and credit card in purchasing the Blooming Elegant 28 Software. See Alkhatib Decl. ¶ 9. Drawing all inferences in favor of Defendants, as the non18 United States District Court Northern District of California 1 moving party, the Court finds that Plaintiff has failed to establish, at a minimum, Defendants’ 2 intent to defraud. Because Plaintiff has not established this element, which is necessary for each 3 of her fraud claims, the Court need not examine the remaining elements, and will deny Plaintiff’s 4 motion for summary judgment on her fraud claims. 5 D. 6 Plaintiff asserts that Zazzle has infringed her copyrights to the Blooming Elegant Software Copyright Infringement (Claim 4) 7 by including the Blooming Elegant Trio in its design customization tool, and by reproducing and 8 distributing the Morgana font, which Plaintiff alleges also infringes on Plaintiff’s copyrights. See 9 FAC ¶¶ 196–203. Plaintiff argues that she should receive a presumption of validity based on her 10 certificates of registration, that the Blooming Elegant Software is copyrightable, and that Zazzle 11 infringed by copying the Blooming Elegant Software onto its servers. See Mot. 21–25. Zazzle 12 counters that Plaintiff is not entitled to the statutory presumption of validity because she did not 13 register her copyrights within five years of first publication, that there is a genuine dispute as to 14 whether the work done by Plaintiff to create the Blooming Elegant Trio is sufficient to validate her 15 copyrights in the Blooming Elegant Software, and that Plaintiff has not established an actual 16 violation of an exclusive right. See Opp’n 23–25. 17 A certificate of registration from the Copyright Office made within five years of first 18 publication is prima facie evidence of the validity of the copyright. See Micro Star v. Formgen 19 Inc., 154 F.3d 1107, 1110 (9th Cir. 1998); 17 U.S.C. § 410(c). The district court has discretion to 20 weight the evidence of a certificate of registration made thereafter. See 17 U.S.C. § 410(c). 21 Plaintiff’s certificates of registration are dated five years and two days after the date of first 22 publication. See Steinberg Decl., Exhs. 7–9. Here, the arguments as to the proper weight of the 23 certificates of registration are fairly insignificant because even if the Court considered the 24 certificates to be prima facie evidence of validity, Defendants have presented substantial evidence 25 to rebut the presumption. Most importantly, a software expert retained by Zazzle has opined that 26 Plaintiff’s actions in creating the Blooming Elegant Trio using FontLab 7.1 did not create original 27 computer software, but instead used existing software to create a font. See Decl. of Christopher 28 Rucinski in Opp’n to Partial MSJ (“Rucinski Decl.”) ¶¶ 9–18, ECF No. 102-12. Plaintiff has also 19 1 proffered the opinions of two experts, one in the font industry and the other in font licensing, 2 design and distribution, both of which state that Plaintiff’s actions resulted in a copyrightable 3 software. See Decl. of Stuart Sandler in Supp. of Partial MSJ (“Sandler Decl.”) ¶¶ 2, 6, 20–25; 4 Decl. of Thomas Pinney in Supp. of Partial MSJ (“Pinney Decl.”) ¶¶ 3, 13–17, 21–26. One 5 declaration expressly disagrees with the opinions presented by Defendants’ expert. See Pinney 6 Decl. ¶¶ 24–26. Given the conflicting expert testimony, the Court cannot conclude as a matter of 7 law that Plaintiff’s copyrights are valid. Plaintiff therefore has not established that there is no 8 dispute of material fact related to her copyright infringement claim, and the Court will deny 9 summary judgment on the claim. 10 United States District Court Northern District of California 11 12 V. CONCLUSION For the foregoing reasons, the Court hereby ORDERS as follows: 1. Plaintiff’s motion for partial summary judgment on her claim for breach of contract 13 is GRANTED IN PART as to the issue of whether Defendants demonstrated 14 mutual assent to the Service Terms and the License Terms, and otherwise 15 DENIED, including with respect to Plaintiff’s claim against Mr. Alkhatib based on 16 his alleged status as an undisclosed agent. 17 18 19 20 21 22 2. Plaintiff’s motion for partial summary judgment on her claims for fraudulent misrepresentation, fraudulent concealment, and promissory fraud is DENIED. 3. Plaintiff’s motion for partial summary judgment on her claim for copyright infringement is DENIED. IT IS SO ORDERED. Dated: October 23, 2023 23 24 Beth Labson Freeman United States District Judge 25 26 27 28 20

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