IP Law Daily, COPYRIGHT—D. Md.: Twin-barreled loss for Navy subcontractor over allegedly pilfered software, (Nov 21, 2025)

By Matthew Hersh, J.D.

Claims against the Navy were preempted by the Copyright Act, while claims against the prime contractor were inadequately pleaded.

A software developer who claimed that the Navy unlawfully converted its software by holding onto it and making copies of it could not get around the preemption doctrine by asserting that the Navy also held onto the physical CD in which that software was embedded, a federal judge in the Washington, D.C. area has held. The court, emphasizing that the preemption doctrine “cannot be so easily circumvented,” also found in a separate case that the subcontractor had failed to adequately state copyright infringement and trade secrets claims against the prime contractor (JET Systems, LLC v. J.F. Taylor, Inc., No. 8:24-cv-01628-DKC (D. Md. Nov. 19, 2025)) and (JET Systems, LLC v. U.S., No. 8:25-cv-01218-DKC (D. Md. Nov. 19, 2025)).

The opinion arises out of a complex web of disputes between the U.S. Navy, one of its contractors, and a subcontractor. J.F. Taylor, Inc., or JFTI, is a government contractor that performs design, engineering, and manufacturing for the military. JET Systems, Inc., is a software company that develops and maintains a suite of systems for use in manned and unmanned combat activities. The software package at issue in this case is known as the Adaptive Layer Framework, or ALF.

JFTI was engaged by the Navy to develop prototype computers in connection with an avionics program known as the Mission Computer Adjunct Processor, or MCAP, program. JFTI then hired JET as a subcontractor for the project. But problems arose after JET delivered its software to the Navy. The Navy rejected the software, finding it deficient. JFTI, in turn, terminated JET as a subcontractor. Neither JFTI nor the Navy made any payments to JET under the contract. To make matters worse, JET contends, JFTI and the Navy made copies of its software and used it for training and other purposes.

JET responded to this turn of events by filing a bevy of lawsuits. It first sued JFTI in a Maryland federal court for copyright infringement, theft of trade secrets under the Defend Trade Secrets Act and the Maryland Uniform Trade Secrets Act, and conversion and breach of contract under Maryland law. It then sued the Navy in the federal Court of Claims for copyright infringement and, six months later, brought a second complaint complaint against the Navy in the Court of Claims for breach of contract. (The two claims court cases were eventually consolidated.) Those lawsuits not being enough, JET also brought a third lawsuit against the Navy—this time in the Maryland court—for conversion.

The Maryland federal court dismissed JET’s claim against JFTI in September of this year. With respect to the copyright infringement claim, the court found, JET pleaded infringement only “on information and belief” but did not posit any actual facts—only inferences—supporting its claim. “Nothing in the [] complaint suggests any facts showing Defendant copied the software, such as a later misuse of the software by Defendant or any other party,” the court noted. The trade secrets claim failed for similar reasons, the court found, in that JET “[did] not specify how Defendant allegedly misappropriated the trade secrets.” The common law claims, breach of contract and conversion, also failed.

Two events followed that led to a series of new opinions this week. The Navy moved to dismiss the conversion claim that JET brought against it in the Maryland action. Meanwhile, JET moved for leave to amend its complaint in the lawsuit against JFTI. The court, in opinions issued by the single judge overseeing both cases in Maryland, issued these opinions.

Preemption of conversion claim. The court granted the Navy’s motion to dismiss the conversion claim on grounds that it was preempted by the Copyright Act. Courts in the Fourth Circuit, the court noted, follow the traditional “two-prong inquiry to determine when a state law claim is preempted”: (1) the work in question “must be within the scope of the subject-matter of copyright … and (2) if so, “then a state-law claim is preempted if ‘the rights granted under state law’ are ‘equivalent to’ those protected by federal copyright.” Here, no party contested that the software was within the scope of the Copyright Act. The only question was whether the conduct alleged in the conversion claim involved rights that were “equivalent to” those protected by copyright. The court easily found that they were.

The conversion claim was equivalent to a copyright claim, the court found, because the claim alleged only that the Navy retained the software for a period of time and copied it. It was “plain, then,” the court found, “that “the conversion claim seeks to hold [the Navy] liable for encroaching on one of the exclusive rights granted by the Copyright Act—i.e., the right to use and reproduce the copyrighted work.” Nor did it matter that the Navy retained not only the software but the physical CD in which the software was embedded. “The fact that [the Navy] retained the CD containing the ALF software cannot qualitatively change the nature of the software conversion claim because Congress clearly contemplated that protected works such as software could be embodied in CDs,” the court noted. “Preemption exists to protect the balance Congress struck and cannot be so easily circumvented.”

Motion to amend complaint. The court handed JET a loss in the other Maryland case as well. JET sought leave to amend its complaint against JFTI to add new factual allegations in support of its copyright and trade secrets claims. But amendment would be futile, the court found, because none of the new facts cured the defects in the earlier complaint. The new allegations, the court found, merely summarized evidence already stated elsewhere, added conclusory assertions, added facts that are not relevant, and, in one case, merely restated allegations previously made “on information and belief” to now be made on “reasonable suspicion.” As the court noted, “recasting deficient pleadings through synonyms does not justify amendment.” The motion for leave would be denied.

The Cases are No. 8:25-cv-01218-DKC and No. 8:24-cv-01628-DKC.

Judge: Chasanow, D.

Attorneys: Russell O. Paige (Wilt Toikka Kraft LLP) for JET Systems, LLC. Lyndsay Amelia Gorton (Crowell & Moring LLP) for J.F. Taylor, Inc. Matthew A. Haven (Kramon & Graham, P.A.) for the U.S.

Companies: JET Systems, LLC; J.F. Taylor, Inc.

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