IP Law Daily, COPYRIGHT—W.D. Mich.: Both parties’ motions to dismiss denied in case on rights to software, (Feb 13, 2026)

By Thomas K. Lauletta, J.D.

The employee brought a counterclaim against his former employer, alleging that the company had unlawfully retained control over his custom software.

The U.S. District Court in Lansing, Michigan, denied motions filed by plaintiff Lothamer Tax Resolution and defendant former employee Paul Kimmel in a case involving software. Each party filed a conversion claim against the other, based on the premise that the opposing party violated the federal Copyright Act because they allegedly copied and retained software owned by the other. The court held that the Copyright Act does not forbid the mere unauthorized possession of copyrighted software. Therefore, the Copyright Act did not preempt the parties’ conversion claims and, as a result, their respective motions to dismiss were both denied. The court also denied the former employee’s motion for leave to amend his original complaint, finding that the proposed amendments would be futile (Lothamer Tax Resolution, Inc. v. Kimmel, No. 1:25-cv-00579-HYJ-SJB (W.D. Mich. Feb. 9, 2026)).

Defendant Paul Kimmel was a former employee of plaintiff Lothamer Tax Resolution (the “employer” or the “company”).

Motion for leave to amend. The employee’s initial suit alleged that his employer, in violation of Michigan’s Whistleblowers’ Protection Act (“WPA”) retaliated against him by terminating him because he intended to report the company’s alleged unlawful acts. The Court dismissed the WPA counterclaim because the employee did not allege facts indicating that he put his employer on notice that he was going to report the company’s illegal acts. The court also had dismissed the employee’s counterclaim that the employer violated the Federal False Claims Act (“FCA”) by allegedly obtaining a loan from the federal government and then firing the employee because he discovered and opposed the company’s alleged fraud.

The court rejected the employee’s motion for leave to amend his WPA claim because even with additional information provided, his claim was insufficient to state a claim under the WPA because it was insufficient to establish employer notice as the employee only indicated that he wanted the company to self-report the WPA violation, not that the employee was about to report the violation.

The court also rejected the employee’s motion to amend his FCA claim, holding that the employee had not indicated to the company that he opposed any violation of the FCA.

Employee’s motion to dismiss. The employer had brought claims for common law and statutory conversion against the employee, alleging that he unlawfully took home copies of its software and refused to return the software after his employment ended. The employee moved for dismissal of the company’s conversion claims arguing that these claims were preempted by federal law because the company alleged violations of the Copyright Act, that is, the unauthorized copying and retention of software.

The court noted that the Copyright Act does not provide a remedy for unauthorized possession of a person’s copyrighted work. Thus, the employer’s conversion claims for unauthorized retention of its software are not cognizable under the Copyright Act, these claims were not preempted, and the employee’s motion to dismiss was denied.

Employer’s motion to dismiss. The employee brought a counterclaim against the employer for statutory conversion, alleging that the company had retained control over the employee’s custom software. The employer argued that this counterclaim was preempted because it covers the same subject matter as, and is equivalent to a claim under, the Copyright Act.

The court noted again that a conversion claim based on retention of software is not preempted because the Copyright Act does not create a right to exclusive possession. Thus, for the same reasons that the Court denied the employee’s motion to dismiss, it also denied the employer’s motion to dismiss.

Court action. The court denied the employee’s motion to amend and denied both parties’ motions to dismiss.

The Case is No. 1:25-cv-00579-HYJ-SJB.

Judge: Jarbou, H.

Attorneys: Barrett Young (Butzel Long PC) for Lothamer Tax Resolution, Inc. Paul Kimmel, pro se.

Companies: Lothamer Tax Resolution, Inc.

Cases: Copyright MichiganNews