On the evening of July 17, 2023, the Honorable Beth Labson Freeman of the U.S. District Court for the Northern District for California, in Laatz v. Zazzle, Inc., et al., Case No. 22-cv-04844-BLF, issued a comprehensive twenty-five-page order resoundingly rejecting Defendant Zazzle, Inc.’s second attempt to dismiss Plaintiff Nicky Laatz’s claims that Zazzle stole three of her most popular fonts and the software that renders them, so that Zazzle could allow tens of millions of its customers and others to use the fonts without any compensation to Ms. Laatz. A copy of the Order may be accessed here.

Nicky Laatz is one of the leading custom premium font designers in the world. She painstakingly created her Blooming Elegant Trio of fonts to include an extremely balanced and pleasing handwriting style font, along with two other fonts specially designed to complement each other. They are widely considered by designers to be among the best such fonts available. Nicky Laatz offers licenses to these premium fonts for $17 per user on her website and $20 per user through Creative Market.

Defendant Zazzle, based in Menlo Park, is one of the most profitable online marketplaces for designers looking to create and sell a wide range of customizable items including invitations, business cards, holiday and greeting cards, clothing, art, and office supplies, to the public.

In 2016, a Zazzle employee contacted Nicky Laatz to ask whether she offered perpetual licenses for server-based use for her Blooming Elegant Trio, representing that Zazzle believed its users would love the fonts. Nicky Laatz did not respond to Zazzle’s request for a server-based license because she never offers the type of license that Zazzle would require. As alleged in the case, Zazzle thereafter instructed its senior network engineer to pose as an individual designer and obtain a single-user license for the Blooming Elegant Trio of fonts. In reality the fonts were obtained for Zazzle’s illegal use over its website for use by its tens of millions of designers, users, and customers.

Nicky Laatz filed this action on August 24, 2022 in the U.S. District Court for the Northern District of California, alleging that Zazzle fraudulently and secretly obtained the software for her Blooming Elegant Trio of fonts for use on Zazzle’s website. Nicky Laatz’s claims include fraudulent misrepresentation and concealment, promissory fraud, breach of contract, as well as copyright and trademark infringement.

Seeking to avoid a ruling on the merits, Zazzle filed a motion to dismiss Nicky Laatz’s First Amended Complaint (“FAC”), erroneously claiming that she had not properly asserted the claims against it. The Court disagreed. Finding that Nicky Laatz properly pleaded prima facie claims for copyright infringement, fraud (fraudulent misrepresentation and promissory fraud; concealment), breach of contract, and trademark infringement, Judge Labson Freeman refused to dismiss any of Nicky Laatz’s claims for relief.

Zazzle’s motion to dismiss brazenly contended that Nicky Laatz was entitled to no relief whatsoever based on its claim that the Copyright Act does not protect her custom fonts. At the same time, it also argued that the Copyright Act preempts her state law claims for fraud and breach of contract because, in Zazzle’s estimation, these state-law claims did not assert any rights that are “qualitatively different from the rights protected by copyright.” But the Court rejected such hypocrisy, finding that Nicky Laatz had adequately asserted her claim for copyright infringement, and the Court disregarded Zazzle’s preemption argument, finding that her fraud claims were “not substantially equivalent to a claim for copyright infringement” and that her contract included sufficient additional rights that were “qualitatively different” from the rights protected by the Copyright Act. For example, the Court held, “Plaintiff alleges that the License allowed for private use of the Blooming Elegant Software by only a single user over two computers, and prohibited the purchaser from making the Blooming Elegant Trio available on a shared system … . These restrictions on specific uses of the Blooming Elegant Software go beyond the exclusive reproduction and distribution rights protected by the Copyright Act.”

Regarding whether Zazzle’s actions as alleged constituted copyright infringement, the Court concluded that Zazzle’s “arguments ignore the FAC’s allegations that Zazzle copied the Blooming Elegant Software onto multiple servers and provided access to the software to employees and users … . These allegations sufficiently allege an act of copyright infringement.”

As for fraud, the Court held that Nicky Laatz’s “allegations describing Zazzle’s prior request for a perpetual license for non-personal (i.e., commercial) use … are sufficiently particularized and permit a reasonable inference that Defendants intended to breach the terms of the License at the time of purchase.” The Court also rejected Zazzle’s contention that there was no material concealment because Creative Market permits users to sign up on behalf of a company and does not provide a field to enter an employer’s name as a “red herring.” In sum, the Court stated that it “agrees with the reasoning” of Judge Otis Wright II in Ticketmaster LLC, v. Prestige Ent’t, Inc., 306 F. Supp. 3d 1164 (C.D. Cal. Jan. 31, 2018), and “finds the FAC’s allegations that (1) Alkhatib, [Zazzle’s senior network engineer] on Zazzle’s behalf, misrepresented his status as a single user and promised to abide by the License while intending for Zazzle to breach its terms; (2) Plaintiff relied on her understanding of Alkhatib’s purpose in purchasing the License; and (3) that Plaintiff has been damaged, see FAC ¶¶ 107, 218, are sufficient to plead claims for fraudulent misrepresentation and promissory fraud.”

On August 3, 2023, the Court has scheduled a hearing on Nicky Laatz’s motion for partial summary judgment as to Zazzle’s liability for most of the claims in the case.

Plaintiff is represented by Bartko Zankel Bunzel & Miller, and the team – led by Patrick M. Ryan – includes Steve Steinberg, Chad E. DeVeaux, Sean R. McTigue, Christopher Gribble, and Casey Mathews.

Defendants Zazzle and Mohammed Alkhatib are represented by Quinn Emanuel Urquhart & Sullivan, LLP, including Rachel M. Kassabian, Andrew H. Shapiro, Daniel C. Posner, Olga Slobodyanyuk, and Miranda Hulka.

About Bartko Zankel Bunzel & Miller

Bartko Zankel Bunzel & Miller, established more than 45 years ago, is a San Francisco based boutique law firm with offices in San Diego, Los Angeles, and Chicago, specializing in national and international complex litigation and investigations, as well as real estate and franchising transactions. It is a 45+ lawyer firm dedicated to strategic cutting-edge representation of clients nationally and internationally. Bartko is known for taking cases to trial with its deep bench of experienced trial lawyers and has a multi-decade track record of winning major cases for both plaintiffs and defendants. Bartko’s practice includes representing both plaintiffs and defendants in complex business, intellectual property, antitrust and competition claims, trade secret litigation, anticounterfeiting, complex employment litigation, employment/labor strategic advice and collective bargaining, and real estate litigation, among others. A copy of the Court’s order can be viewed here.

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