IP Law Daily, COPYRIGHT—E.D. Tex.: Texas court orders injunction, asset freeze against individuals who purloined certification exam questions, (Jun 3, 2022)

By Ursula Furi-Perry, J.D.

A test prep company showed evidence of infringement by the several individuals, along with irreparable harm, to warrant a preliminary injunction and asset freeze.

An exam preparation company filed suit against several individuals for copyright infringement of its technology certification exam questions. The federal district court in Marshall, Texas, held that the test prep company showed evidence of infringement by the defendant, along with irreparable harm, justifying the grant of a preliminary injunction. Moreover, the court held that an asset freeze was necessary to preserve the test prep company’s right to equitable relief (Prep Solutions, Ltd. v. Leicht, June 2, 2022, Gilstrap, J.).

Background. Exam preparation firm Prep Solutions, Ltd. filed suit in the U.S. District Court for the Eastern District of Texas against several individuals for copyright infringement of its technology certification exam questions. After a show cause hearing in May 2022, the court granted a temporary restraining order. The test prep company filed a request to convert that order into a preliminary injunction and also asked the court to freeze the defendants’ assets.

In determining whether a preliminary injunction was warranted, the court reviewed whether the test prep company could prove: (1) a substantial likelihood of success on the merits, (2) a substantial threat of irreparable injury if the injunction is not issued, (3) that the threatened injury if the injunction is denied outweighs any harm that will result if the injunction is granted, and (4) that the grant of an injunction will not disserve the public interest.

Likelihood of success. First, the court held that Prep Solutions had shown the existence of a valid copyright in the examination questions at issue. The company presented certificates of registration for each of the 14 exams it claimed were infringed by the defendants. Moreover, the test prep company showed evidence of infringement by the defendants, having presented evidence that individuals with the same names had accessed Prep Solution’s exams, and that over 500 nearly identical questions subsequently appeared on the defendants’ websites. Accordingly, the court found that Prep Solutions met its burden to show a likelihood of copying and that this first factor weighed in favor of issuing a preliminary injunction.

Irreparable harm. Next, the court found that Prep Solutions made a sufficient showing of irreparable harm, with each infringing download resulting in lost business opportunities and depleting the goodwill Prep Solutions has built up in the marketplace, as the defendants offered all 14 exams and hundreds of allegedly copyrighted questions for free or at a steeply discounted price. The risk of irreparable harm to Prep Solutions outweighed any minimal harm placed upon the individual defendants. Lastly, the court held that granting the preliminary injunction served the public’s interest in preserving rights provided by federal copyright law.

Asset freeze. The court held that an asset freeze was necessary to preserve the test prep company’s equitable relief. Prep Solutions argued that the frozen funds in the defendants’ PayPal accounts represented only a small portion of the revenue derived from their ten-month period of infringement, and thus the court should order them to remit $735,000 into escrow. The court agreed, finding that the frozen funds were linked to the defendants’ allegedly infringing conduct such that an asset freeze would preserve the test company’s equitable remedy. Moreover, Prep Solutions had sufficiently shown a likelihood of dissipation of the funds to justify an asset freeze.

Conclusion. The court granted the request for a preliminary injunction and enjoined the defendants from distributing, using, or selling practice exam questions registered by Prep Solutions. The court also ordered the defendants’ PayPal accounts to remain frozen and enjoined them from selling or transferring assets.

The Case is No. 2:22-cv-00123-JRG-RSP.

Attorneys: Bradley Jarrett (McKool Smith, PC) for Prep Solutions, Ltd. David W. Reynolds (Diamond McCarthy LLP) for Daniel Leicht.

Companies: Prep Solutions, Ltd.

Cases: Copyright TechnologyInternet TexasNews