IP Law Daily, COPYRIGHT—N.D. Cal.: Claims against TikTok for copyright infringement and trade secret misappropriation survive motion to dismiss, (Jul 24, 2024)

By WK Editorial Staff

Beijing Meishe Network Technology Co., Ltd. alleged its former employee disclosed its copyrighted source code to TikTok.

The U.S. District Court for the Northern District of California granted in part and denied in part a motion to dismiss claims alleging that TikTok Inc., TikTok Pte. Ltd., ByteDance Ltd., BytDance Inc., ByteDance Ltd. (TikTok, collectively) failed to sufficiently allege that TikTok used source code disclosed by a former employee. The court granted the motion as to the Lanham Act claim with leave to amend and denied the motion as to the copyright infringement and trade dress misappropriation claims (Beijing Meishe Network Technology Co., Ltd. v. TikTok Inc., No. 23-cv-06012-SI (N.D. Cal. July 23, 2024)).

Background. The lawsuit involves a dispute between two Chinese companies. Beijing Meishe Network Technology Co., Ltd., (Meishe) owns several Chinese copyrights covering the source code for a specific type of video- and audio-editing software. The copyright owner came to believe that one of its former employees disclosed that source code to TikTok, which used the code to develop a video-editing functionality that was then implemented into the current version of the popular social media platform.

The copyright owner sued ByteDance Ltd. and other corporate entities behind TikTok in the Waco division of the Western District of Texas, alleging copyright infringement, false advertisement under the Lanham Act, misappropriation of trade secrets under the Defend Trade Secrets Act and Texas law, and common law unjust enrichment. The trial court denied TikTok’s motion to transfer the case to the Northern District of California, but the Fifth Circuit reversed and ordered transfer. Once in the California court, TikTok moved to dismiss, alleging Meishe owner did not adequately state claims under the Copyright Act, the Lanham Act, the Digital Millennium Copyright Act, or the Defend Trade Secrets Act. The court granted TikTok’s motion with leave to amend.

Meishe filed its fourth amended complaint, alleging four causes of action against TikTok: copyright infringement, violation of the Digital Millennium Copyright Act, misappropriation of trade secrets, and Lanham Act false advertisement. TikTok moved to dismiss the fourth amended complaint for failure to state a claim upon which relief can be granted.

Copyright infringement claim. The court first looked to the copyright infringement claim and sought to determine whether Meishe plausibly pled access to copyrighted works created after the former employee left Meishe. Meishe alleged that, in addition to source code developed by Meishe during the employee’s tenure, TikTok’s source code also contains identical, verbatim copies of source code developed after the employee’s departure. This code did not exist in its source code during the employee’s tenure, Meishe alleged. However, Meishe submitted a visual comparison of the source code of Meishe’s app with the source code of TikTok’s app. Based on this comparison, the court found it reasonable to infer that portions of the source code in TikTok’s app alleged to be copied verbatim from Meishe’s app were not in existence prior to the employee’s departure.

TikTok contended that even if Meishe did allege this striking similarity, its complaint provides no plausible allegations of striking similarities from any other asserted copyrights created after the employee left Meishe. However, the court found Meishi’s additional factual allegations sufficient to plausibly allege striking similarity with at least one work created after the employee left Meishe; thus, it held it is reasonable to infer that TikTok had access to other copyrighted source code created after the employee left Meishe. TikTok presented no controlling authority indicating that Meishe must plead striking similarity as to each source code work at this pleading stage. The court denied TikTok’s motion to dismiss based on this argument.

The court next asked whether Meishe had sufficiently alleged that its copyrighted works are exempted from the registration requirement of 17 U.S.C. §411. Meishe alleged its copyrighted works are computer source code files that have never been made publicly available and have never been published; thus, he copyrighted works are all unpublished foreign works, it argued. The court denied TikTok’s motion to dismiss as to the registration requirement, finding that Meishe plausibly alleged that its copyrighted works were first published solely in China if published and authored solely by Chinese nationals if unpublished.

DMCA Act violation. court next sought to determine whether Meishe adequately pleaded a violation of the DMCA Act. Meishe alleged in its fourth amended complaint that each of its asserted source code modules contain copyright management information (CMI), including a copyright notice, a reservation of rights, the “birth date,” ownership, and authorship. IT alleges that TikTok replaced Meishe’s CMI with its own CMI. IT alleged many of TikTok’s source code module names are identical to its module names with the exception of a small prefix modification that TikTok’s matching source code modules. The court next found that Meishe plausibly alleged sufficient facts to support the reasonable inference that TikTok knew or had reasonable basis to know that the removal or alteration of CMI would aid infringement. Further, the court determined Meishe’s new allegations plausibly pleaded the required mental state. Finally, the court found it could not conclude as a matter of law at this pleading stage that Meishe’s claims should be dismissed on the basis that it failed to support a plausible claim that the software allegedly copied by TikTok is identical to its own. Thus, the court denied TikTok’s motion to dismiss based on the DMCA.

DTSA claim. In its previous order, the court granted Meishe leave to amend to clarify whether the trade secrets alleged include anything other than those trade secrets. Meishe in its fourth amended complaint alleged that its trade secrets also include Meishe’s copyrighted works, including the non-public source code modules included as an exhibit in its fourth amended complaint. Meishe also alleged trade secrets related to its confidential internal plans for future development of Meishe software and which portions of its software were most likely to be popular if incorporated into audio/video creation and editing features in smart phone and other applications. Meishe alleged its asserted trade secrets are identified with specificity in an interrogatory response. Despite TikTok’s argument that Meishe’s new allegations are deficient “because it is impossible to discern where any alleged trade secret begins and ends.” The court found Meishe’s additional trade secret allegations sufficiently particular and denied TikTok’s motion to dismiss the additional trade secret allegations.

TUTSA claim. The court held that Meishe was not required to replead its Texas Uniform Trade Secrets Act claim under the analogous California Uniform Trade Secrets Act.

Lanham Act claim. The court agreed with TikTok that Meishe did not plausibly allege commercial speech for purposes of a Lanham Act claim. The court relied on Ninth Circuit precedent stating that, where the facts present a close question, strong support that the speech should be characterized as commercial speech is found where the speech is an advertisement, the speech refers to a particular product, and the speaker has an economic motivation. Here, the court found, the alleged statements are not about defendants’ specific products but rather about its policies generally. Thus, the court granted the motion to dismiss Meishe’s Lanham Act Claim with leave to amend.

The Case is No. 23-cv-06012-SI.

Judge: Illston, S.

Attorneys: Charles R. Flores (Flores Law PLLC) for Beijing Meishe Network Technology Co., Ltd. Anna Balishina Naydonov (White & Case LLP) for TikTok Inc., TikTok Pte. Ltd., ByteDance Ltd., BytDance Inc., and ByteDance Ltd.

Companies: Beijing Meishe Network Technology Co., Ltd.; TikTok Inc.; TikTok Pte. Ltd.; ByteDance Ltd.; BytDance Inc.; ByteDance Ltd.

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