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Nebraska Department of Education and Data Management Company Continue Copyright Battle

Update on eScholar LLC and the Nebraska Department of Education Case

On April 13, 2020, we reported on a suit between eScholar LLC ("eScholar" or the "Company"), a provider of education data management software, and the Nebraska Department of Education (the "Department"). Since then, the case has been mired in the pleadings stage due to an arm-wrestle of motions and briefs.

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In its original Complaint and an Amended Complaint including further details, eScholar asserts that the Department violated copyright law and contract law by reverse-engineering education data management software licensed from eScholar. According to eSolar, the Department had recently cancelled its license with eScholar. Soon after the cancellation, the Company found that the Department was using new software, purportedly developed in-house by the Department, that substantially resembled eScholar's software in key aspects.

The Company claims that the resemblance is demonstrable and that the design of the original software is not obvious; therefore, the Department clearly appropriated eScholar's intellectual property and is now using it for free. As a result, the Department is seeking a preliminary injunction forbidding the Department from using the software, $15,000,000 in damages, and attorneys' fees.

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Before the filing of the amended complaint, the Court filed an Order to Show Cause against eScholar, compelling it to explain why the case should not be dismissed for lack of subject matter jurisdiction under the 11th Amendment. The Company's response asserts that the Department contractually consented to jurisdiction and thus waived its sovereign immunity and that the Company's various legal claims are admissible under supplemental jurisdiction and other exceptions. The Department's response, in turn, asserts its immunity to the copyright claims, refutes case law relied on by eScholar, and asserts that under Nebraska law, its immunity can only be waived by a legislative act. The Company next filed a brief to reply that federal law, not Nebraska law would govern the waiver and that its own interpretation of case law was indeed correct.

After requesting more time to file a responsive pleading, the Department filed a Motion to Dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. Its brief backing up this motion rehashes similar arguments to those made in its response to the Order to Show Cause. The Company has been granted additional time to reply and must file a brief before June 19th.