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OpenRisk, LLC v. MicroStrategy Services Corp.

United States Court of Appeals, Fourth Circuit

November 13, 2017

OPENRISK, LLC, Plaintiff - Appellant,
v.
MICROSTRATEGY SERVICES CORPORATION, Defendant-Appellee. OPENRISK, LLC, Plaintiff - Appellant,
v.
MICROSTRATEGY SERVICES CORPORATION, Defendant-Appellee.

          Argued: September 14, 2017

         Appeals from the United States District Court for the Eastern District of Virginia, at Alexandria. Anthony John Trenga, District Judge. (1:15-cv-01451-AJT-TCB)

         ARGUED:

          Francis Gilbert Gleason, Jr., GLEASON & GLEASON, P.C., Ashland, Massachusetts, for Appellant.

          Mark Thomas Stancil, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER & SAUBER LLP, Washington, D.C., for Appellee.

         ON BRIEF:

          Kathryn S. Zecca, Donald Burke, Shai D. Bronshtein, ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER & SAUBER LLP, Washington, D.C., for Appellee.

          Before WYNN, FLOYD, and HARRIS, Circuit Judges.

          PAMELA HARRIS, CIRCUIT JUDGE

         In 2011, OpenRisk, LLC contracted with MicroStrategy Services Corporation to create a cloud environment that would host OpenRisk data and programming. But soon after, OpenRisk faced insolvency, and three of its principal officers resigned. At issue in this case is whether MicroStrategy wrongfully continued to provide services to OpenRisk's ex-employees after they had left and formed a new company, Spectant Group LLC.

         In particular, OpenRisk alleges that at the direction of its recently departed officers and without its knowledge, MicroStrategy copied and transferred data from the OpenRisk cloud environment to a new environment established for Spectant. And then, according to OpenRisk, MicroStrategy deleted the data from OpenRisk's environment, without the notice of termination required by the parties' contract. When OpenRisk became aware of the copying and deletion of its data, it sued MicroStrategy for computer fraud under Virginia's Computer Crimes Act and for other state-law violations.

         The district court granted summary judgment almost entirely in MicroStrategy's favor. The primary issue now on appeal is whether the district court correctly held that the federal Copyright Act preempts OpenRisk's computer fraud claims. We agree with the district court that it does. We further agree that MicroStrategy is entitled to summary judgment on OpenRisk's other claims against it. Accordingly, we affirm the district court's judgment in its entirety.

         I.

         A.

         OpenRisk was a start-up company that ceased operations in 2011, shortly after the resignation of three of its key employees: President Craig Ott, Chief Technology Officer Shajy Mathai, and Chief Scientist Richard Murnane. This dispute arises out of MicroStrategy's dealings with the three employees, before and, critically, after their resignations.

         Ott, Mathai, and Murnane began their relationship with MicroStrategy even before they formed OpenRisk, using MicroStrategy-licensed software to develop a computer program that would allow insurance companies to analyze exposure to natural disasters. Their business model included the creation of a web-based platform that customers could access on the "cloud, " or via the internet. To further this effort, they partnered with investors to establish OpenRisk in January 2011, and in September 2011, OpenRisk contracted with MicroStrategy for "cloud services."

         Under the parties' contract, MicroStrategy agreed to provide OpenRisk with access to space on MicroStrategy's servers - a "cloud environment" - on which OpenRisk would store data and run the software it was licensing. In exchange, OpenRisk agreed to make initial payments to MicroStrategy of $15, 000 on October 31 and November 30, 2011, followed by quarterly payments of $63, 000 thereafter, totaling approximately $1.26 million over the contract's five-year term.

         But at the time it entered into this contract with MicroStrategy, OpenRisk was already in dire financial straits. When OpenRisk was unable to close negotiations with a new investor, Ott, Mathai, and Murnane all resigned from OpenRisk and formed a new company, Spectant. And with MicroStrategy's help, OpenRisk alleges, they took OpenRisk's data with them.

         Specifically, OpenRisk points in its complaint to two key acts by MicroStrategy. First, on December 13, 2011, just hours after receiving a cease-and-desist letter from OpenRisk urging it to "cease and refrain from doing any work and making any efforts to commercialize the OpenRisk property with [Ott, Mathai, and Murnane], " J.A. 1068-70, MicroStrategy copied the data from the OpenRisk cloud environment and transferred it to a new environment created for Spectant. And second, on or around January 11, 2012, and after OpenRisk failed to make its first quarterly payment under the contract, MicroStrategy deleted the entire OpenRisk environment and all of its ...


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