Sellers of Qualibee AI software lose copyright and DMCA claims against the buyer; royalty claim goes to arbitration

The decision

The memorandum opinion and order is Document 32 in Larsen v. Ovation-Worldwide Holdings, LLC, No. 1:26-cv-00486 (JGK) (S.D.N.Y.), filed October 21, 2026 by Judge John G. Koeltl. It decided the defendants' motion to dismiss the amended complaint under Federal Rule of Civil Procedure 12(b)(6). The plaintiffs are Erik Larsen and Roman Gorin. The defendants are Ovation-Worldwide Holdings, LLC and its Chief Executive Officer, James Whaley. (Op. 1 to 2.)

Background

According to the amended complaint, as summarized in the opinion, Gorin created the Qualibee software codebase in 2023, part of an artificial intelligence product for qualitative market research called Qualibee.AI. On January 3, 2024 the parties signed a Contract of Acquisition under which Ovation "agrees to acquire Qualibee.AI and its Assets" and the plaintiffs "agree to transfer all rights, titles, and interests" in it. The price was a non-cash employment and royalty arrangement in Appendix A, with a 10% royalty on qualifying sales, and Appendix B gave the plaintiffs a buy-back option under which rights to the source code would revert to them in listed circumstances. The plaintiffs allege that Ovation repeatedly failed to make quarterly royalty payments, paid only small amounts when it did pay, and did not provide accounting information when asked. In September 2025 they sought to revoke the defendants' use of Qualibee, and on November 14, 2025 they registered Qualibee with the U.S. Copyright Office. They allege, on information and belief, that Ovation, under Whaley's supervision, continued to reproduce, adapt, and distribute the Qualibee.ai platform without their authorization. (Op. 2 to 5.)

The amended complaint pleaded five counts: copyright infringement against Ovation (Count I), a DMCA claim under 17 U.S.C. 1202 against Ovation (Count II), contributory and vicarious infringement against Whaley (Count III), unjust enrichment against both defendants (Count IV), and, in the alternative, breach of contract against Ovation (Count V). The plaintiffs argued the contract gave Ovation only a revocable implicit license, with ownership to pass once Ovation met its obligations. (Op. 1 to 2, 5 to 6, 8 to 9.)

What the court decided

The court held that the plaintiffs identified no unambiguous language making Ovation's performance a condition precedent to the transfer, that the phrases "agrees to acquire" and "agree to sell and transfer" do not create a condition precedent because the parties satisfied their duty to agree by signing, and that no language in the contract purports to grant Ovation only a license. It reasoned that the buy-back provision presupposes Ovation already owned the copyright, and it rejected the argument that the contract was ambiguous. It concluded that the contract transferred copyright ownership in Qualibee to Ovation at signing, so the plaintiffs could not state claims for direct, contributory, or vicarious infringement. (Op. 8 to 12.)

On the DMCA count, the court held that copyright management information naming Ovation as the owner was not false, that omitting the plaintiffs was not unauthorized, and that the plaintiffs did not plausibly plead the intent or knowledge required under 17 U.S.C. 1202(a) and (b). It held the unjust enrichment claim preempted by the Copyright Act because it rests on unauthorized reproduction, distribution, and adaptation and adds no qualitatively different element. (Op. 13 to 17.)

Counts I through IV were dismissed with prejudice. The court denied the motion as to the breach of contract count, held it subject to the contract's arbitration clause, ordered the parties to arbitrate it, and, at the plaintiffs' request, stayed the case pending arbitration under 9 U.S.C. 3 and 4. The parties must report within 30 days on their arrangements to arbitrate, and the court said it would retain jurisdiction to appoint an arbitrator under 9 U.S.C. 5 if they cannot agree on a method. (Op. 6, 17 to 19 and n.6.)

Registration record

The Copyright Office public catalog lists registration TXu002511822 for "Qualibee.ai Software Codebase (Developer-Authored Components)," a computer file registered November 14, 2025, naming Roman Gorin as author and claimant and Erik Paul Larsen as claimant.