The OpenAI Lawsuit: Dissecting and Refuting All of the Plaintiffs' Claims

MEMORANDUM OF POINTS AND AUTHORITIES

IV. ARGUMENT

C. Plaintiffs’ Claims Fail for Reasons Specific to Each Claim.

6. Plaintiffs Fail to State an Unfair Competition Claim.

Plaintiffs assert an unfair competition claim under (1) the Lanham Act, (2) California’s UCL statute, and (3) common law, all of which are predicated on the OpenAI Entities’ alleged violations of the DMCA, tortious interference with contract relations, false designation of origin, and violations of the CCPA and California’s constitutional right to privacy. (Compl. ¶ 212.) Under any theory, plaintiffs have failed to state a claim.

Plaintiffs’ UCL claim, brought only under the “unlawful” prong, fails because there is no predicate violation. When the underlying legal claim that supports a UCL cause of action fails, “so too will the [] derivative UCL claim.” Yellowcake, Inc. v. Hyphy Music, Inc., No. 1:20-CV0988 AWI BAM, 2021 WL 3052535, at *13 (E.D. Cal. July 20, 2021); see also Eidmann v. Walgreen Co., 522 F. Supp. 3d 634, 647 (N.D. Cal. 2021) (If the “plaintiff cannot state a claim under the predicate law … [the UCL] claim also fails.”) (cleaned up). For reasons discussed in this motion, plaintiffs have not adequately alleged any underlying legal claim.

Plaintiffs’ UCL claim separately fails because plaintiffs have not established that they lack an adequate legal remedy. “Remedies under the UCL are limited to restitution and injunctive relief, and do not include damages.” Silvercrest Realty, Inc. v. Great Am. E&S Ins. Co., No. SACV 11-01197-CJC (ANx), 2012 WL 13028094, at *2 (C.D. Cal. Apr. 4, 2012). To state a viable claim for “equitable restitution for past harm under the UCL,” a plaintiff “must establish that she lacks an adequate remedy at law.” Sonner v. Premier Nutrition Corp., 971 F.3d 834, 844 (9th Cir. 2020) (affirming dismissal where plaintiff failed to allege an inadequate legal remedy). Here, Plaintiffs have not shown that no adequate legal remedy exists.

Plaintiffs also cannot identify any common law or Lanham Act basis for an unfair competition claim separate from their false designation of origin claim. In California, “[t]he common law tort of unfair competition is generally thought to be synonymous with the act of ‘passing off’ one’s goods as those of another.” Sybersound Recs., Inc. v. UAV Corp., 517 F.3d 1137, 1153 (9th Cir. 2008) (explaining the tort provided “an equitable remedy against the wrongful exploitation of trade names and common law trademarks that were not otherwise entitled to legal protection” and expansion of unfair competition law is primarily based in statute) (cleaned up).

The Ninth Circuit “has consistently held that state common law claims of unfair competition and actions pursuant to [the UCL] are ‘substantially congruent’ to claims made under the Lanham Act.” Sebastian Brown Prods. LLC v. Muzooka Inc., No. 15-CV-01720-LHK, 2016 WL 949004, at *15 (N.D. Cal. Mar. 14, 2016) (cleaned up).

Plaintiffs’ common law unfair competition claim therefore also fails because it is premised on the same conduct underlying their deficient false designation of origin claim. (See § IV.C.4, supra.)