finding allegation that defendant induced infringement "by dictating by its . . . instructions to users thereto the manner in which the software is used causing such infringement" insufficient, as plaintiff failed to "[plead] facts as to how [defendant's . . . instruction [was] meant to induce or encourage" the direct infringersSummary of this case from Trans Video Elecs., Ltd. v. Netflix, Inc.
Case No. C 13-2965 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S
MOTION TO DISMISS
Now before the Court is Defendant ATopTech, Inc.'s ("Defendant") motion to dismiss Plaintiff Synopsys, Inc.'s ("Plaintiff") complaint. ECF Nos. 1 ("Compl."), 9 ("MTD"). Defendant moves in the alternative for a more definite statement. The motion is fully briefed, ECF Nos. 24 ("Opp'n"), 32 ("Reply"), and appropriate for decision without oral argument, Civ. L.R. 7-1(b). As explained below, the Court GRANTS Defendant's motion to dismiss.
Plaintiff is an electronic design automation ("EDA") company. Compl. ¶ 2. It creates, manufactures, sells, and licenses products and services that enable circuit designers to create, model, and verify complex integrated circuit designs "from concept to silicon." Id. Among Plaintiff's products are a "static timing analysis tool" called "PrimeTime" and a piece of software called "IC Compiler." Id. ¶¶ 2, 16, 17, 39. PrimeTime "computes the expected timing of a digital circuit without requiring simulation." Id. ¶ 17. It includes "hundreds of . . . input formats and output formats" that "are proprietary to [Plaintiff] and are not part of any open format or standard." Id. ¶ 18. Plaintiff also owns an EDA company called Extreme DA Corporation ("Extreme DA"), the developer of a static timing analysis tool called "GoldTime." Id. ¶¶ 4, 20. GoldTime is similar to (and incorporates parts of) PrimeTime. Id. Plaintiff calls GoldTime and PrimeTime's software and documentation collectively the "Copyrighted Software," but does not make clear whether IC Compiler is included in that group. See id. ¶ 48.
The input formats, which Plaintiff sometimes calls a "command set," are used within larger "scripts" executed by PrimeTime. Id. ¶ 18. PrimeTime provides feedback to the user via output formats. Id. PrimeTime also supports a set of open-source commands ("Synopsys Design Constraints" or "SDC") that is separate from the compilation of Plaintiff-proprietary input formats and are used to provide a standard interface that developers can use to create products that are interoperable with PrimeTime or other SDC-compliant EDA tools. Id. ¶ 19. SDC is available under a free, open-source license. Id.
Plaintiff asserts that its input and output formats, scripts, and technical product documentation for the products described above are all confidential, proprietary trade secrets. Id. ¶ 21. According to Plaintiff, for example, its software and documentation contain proprietary rights notices, and users of Plaintiff's software and documentation are governed by end-user license agreements ("EULAs") that restrict the users' access to and use of Plaintiff's materials. Id. ¶¶ 21-22. Plaintiff also uses a variety of physical and electronic security systems to protect its facilities, websites, computers, and communications systems. Id. ¶ 22. These protective measures include "access cards, password protection systems, encrypted communications technology and vendor, customer and employee non-disclosure agreements." Id.
Plaintiff owns all rights to, and has obtained federal copyright registration for, the PrimeTime and GoldTime software and user documentation. Id. ¶¶ 23-24; Compl. Exs. 1-5 ("Copyright Registrations"). Plaintiff also possesses several patents on technologies and techniques related to integrated circuit design. Id. ¶ 24; Exs. 6 ("'348 Patent"), 7 ("'941 Patent"), 8 ("'127 Patent"), 9 ("'967 Patent") (collectively the "Patents-in-Suit").
Defendant is an EDA company that develops tools for the physical design of integrated circuits at sixty-five nanometers and below. Id. ¶ 3. Among these tools are Defendant's "Aprisa" "place and route" tool and the "Apogee" "floor-planning" tool. Id. Defendant entered two license agreements with Plaintiff: (1) a Connections Program License Agreement (the "CPLA"), and (2) a license agreement related to a method for parametric on-chip variation (the "POCV License") (collectively the "License Agreements"). Id. ¶ 4.
Defendant had originally entered the CPLA with Extreme DA, for use of GoldTime, but Plaintiff acquired Extreme DA -- along with all of its intellectual property and rights under the CPLA -- in June 2010. Id. ¶ 31. The CPLA expired on February 15, 2013. Id. Under the CPLA, Defendant gained access to copies of GoldTime and its documentation (and, by extension, the parts of the PrimeTime software and documentation that were incorporated into GoldTime). Id. According to Plaintiff, the CPLA gave Defendant only a limited license to use GoldTime for "specific interoperability purposes." Id. ¶ 33. Under the CPLA, Defendant was forbidden from incorporating GoldTime into other software products, reverse-engineering GoldTime, copying GoldTime (including the input and output formats), and disclosing any confidential information provided under the CPLA. Id.
Under the POCV License, Defendant gained a limited, non-exclusive license to Extreme DA's proprietary POCV technology, which included the '640 Patent. Id. ¶ 34. Defendant used this technology to test timing effects resulting from manufacturing-related variations in chips (e.g., variations related to process, voltage, or temperature effects during manufacturing). Id. As with the CPLA, Plaintiff obtained all of Extreme DA's rights to the POCV technology, including all of the rights under the POCV License. Id.
Plaintiff alleges that while Defendant was receiving and using Plaintiff's confidential information pursuant to the License Agreements, Defendant "copied portions of the PrimeTime and GoldTime software and documentation into Aprisa user documentation and software." Id. ¶ 35. Plaintiff claims to possess "a small portion of Aprisa documentation -- provided by [Defendant] -- revealing that Aprisa includes proprietary PrimeTime and GoldTime input and output formats." Id. According to Plaintiff, "[t]his copying likely is widespread," as evidenced by Defendant's statements that Aprisa has "excellent correlation with sign-off timing" and "tight correlation" with Plaintiff's PrimeTime software. Id. ¶ 36. Plaintiff contends that "such correlation is not possible without copying significant portions of the PrimeTime software." Id.
Plaintiff also claims that Defendant "improperly accessed and stole other . . . proprietary documentation, by downloading such materials from [Plaintiff's] 'SolvNet' secure website without permission." Id. ¶ 37. SolvNet is a password-protected support website on which Plaintiff "hosts software, user guides, support documentation, and other materials for customers and partners with valid user IDs." Id. ¶ 38. Users who register for SolvNet passwords must abide by various agreements signed by their companies "regarding the confidential nature of all SolvNet content." Id. Plaintiff states that it discovered in 2013 that Defendant had accessed SolvNet and "engaged in unauthorized access to and downloading of articles, FAQs, and other documentation related to PrimeTime and [IC Compiler]." Id. ¶ 39. Plaintiff asserts that such access, downloading, and other use exceeded the scope of Defendant's licenses. Id. Plaintiff alleges that all of Defendant's activity here was undertaken for commercial gain and competitive advantage. Id. ¶ 40.
Finally, Plaintiff states that on November 28, 2012, it invoked "its rights to verify compliance under both [L]icense [A]greements, and thereafter diligently worked to commence and complete the audit." Id. ¶ 41. Plaintiff did so out of an apparent fear that Defendant "wrongfully copied, used, and disclosed portions of the PrimeTime and GoldTime software, and otherwise breached the CPLA and POCV License Agreements." Id. Plaintiff contends that for months it attempted to work with Defendant to establish compliance with the License Agreements, but that Defendant "systematically frustrated and obstructed the audit process." Id. ¶ 42. On May 8, 2013, Plaintiff served Defendant with a notice of default under the POCV License, which Plaintiff contends also put Defendant on notice of Plaintiff's belief that Defendant had "copied proprietary PrimeTime and GoldTime command sets into Aprisa, in violation of the CPLA agreement and [Plaintiff's] valuable intellectual property rights, including those covered by [Plaintiff's] PrimeTime and GoldTime federal copyright registrations." Id. ¶¶ 43-44.
Plaintiff set a June 10 deadline for the completion of its audit. Id. ¶ 45. The deadline passed, and one week later Plaintiff gave Defendant another opportunity to demonstrate "that it had not copied and was in compliance with the license agreements." Id. ¶ 46. Defendant has not done so. Id.
On the basis of these facts, Plaintiff asserts the following twelve causes of action against Defendant:
(1) copyright infringement under the Copyright Act, 17 U.S.C. § 101 et seq.;Defendant now moves to dismiss Plaintiff's complaint, arguing that Plaintiff fails to state claims under any cause of action.
(2) trade secret misappropriation under the California
Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq.;
(3) four counts of patent infringement as to the '348, '941, '127, and '967 Patents;
(4) violation of the Federal Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030(a)(2)(C);
(5) violation of California Penal Code section 502(c)(2), the California Comprehensive Data Access and Fraud Act ("CDAFA");
(6) unfair and unlawful competition under California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq.;
(7) common law misappropriation;
(8) breach of the CPLA; and
(9) breach of the implied covenant of good faith and fair dealing.
III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The allegations made in a complaint must be both "sufficiently detailed to give fair notice to the opposing party of the nature of the claim so that the party may effectively defend against it" and "sufficiently plausible" such that "it is not unfair to require the opposing party to be subjected to the expense of discovery." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).
As explained below, the Court dismisses Plaintiff's complaint -- except portions of its copyright infringement and UCL claims -- with leave to amend. In general, Plaintiff's pleadings are impermissibly vague and conclusory.
A. Copyright Infringement
A plaintiff claiming copyright infringement must plead: (1) ownership of a valid copyright; and (2) that the defendant violated the copyright owner's exclusive rights under the Copyright Act by copying original elements of the work. 17 U.S.C. § 501(a) (2003); Feist Pubs., Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991); Wash. Shoe Co. v. A-Z Sporting Goods, Inc., 704 F.3d 668, 674 (9th Cir. 2012).
Defendant argues that Plaintiff fails to allege facts indicating access to or copying of any portion of the massive amount of source code and documentation of the Copyrighted Software. MTD at 6. Further, Defendant contends that Plaintiff's sole point of specificity as to what Defendant allegedly copied -- Plaintiff's input and output formats -- is insufficient not only because Plaintiff does not specify which formats Defendant copied, but also because copyright does not extend to executable software methods, systems, or processes so long as the line-by-line source code is different, though this is necessarily a fact-dependent conclusion. Id. at 7-8 (citing Oracle Am., Inc. v. Google Inc., 872 F. Supp. 2d 974, 1000 (N.D. Cal. 2012)). Finally, Defendant claims that Plaintiff's allegations are mere speculation, since Plaintiff pleads that "copying likely is widespread" due to Defendant's advertisements that its software has, for example, a "tight correlation" with Plaintiff's software. Id. at 8.
Plaintiff responds that all it must do to survive a motion to dismiss its claim for copyright infringement is to allege ownership and infringement. Opp'n at 3-4. Plaintiff asserts that it did so, providing its copyright registrations and pleading that Defendant had access to the Copyrighted Software and improperly incorporated parts of it into its own software, Aprisa. Id. Plaintiff contends that the "correlation" of Defendant's software with Plaintiff's would not be possible without copying "significant portions" of PrimeTime, and that this is not mere speculation. Id. Plaintiff also claims that it need not plead with particularity either what parts of its own software were copied, or what of Defendant's software actually infringed. Id. Requiring such specificity, according to Plaintiff, would raise factual issues not appropriate for the pleading stage. Id. at 4-5.
The Court finds for Defendant on this point, except as to the input and output formats that Plaintiff claims Defendant infringed in the Aprisa software and documentation. Apart from those works, discussed below, Plaintiff never makes clear what Defendant copied, which makes it impossible for the Court to find Plaintiff's claim plausible. Plaintiff alleges simply that Defendant had access to, copied, and prepared derivative works based on the Copyrighted Software, in contravention of the CPLA. Compl. ¶¶ 32-33, 38-39, 51. Plaintiff asserts that this pleading is enough, as is its allegation that Defendant's quotations about correlation support an inference of copying. See Opp'n at 3-4 (citing Compl. ¶ 36). However, Plaintiff muddles this claim by also asserting that parts of its software and documentation are open-source, which makes its contention that essentially all of its materials are under Plaintiff's copyright protection less plausible. Plaintiff further hamstrings its complaint by simply speculating on how widespread the copying may be, without describing any acts or works that infringe Plaintiff's Copyrighted Software. See Compl. ¶¶ 35-36, 47-55. Plaintiff need not reach any heightened level of particularity for its copyright claims, but those claims must be plausible under Rule 8, Twombly, and Iqbal. See, e.g., Richtek Tech. Corp. v. UPI Semiconductor Corp., No. 09-05659 WHA, 2011 WL 166198, at *3 (N.D. Cal. Jan. 18, 2011) (dismissing copyright infringement claim for failure to identify acts and works constituting infringement); Salt Optics, Inc. v. Jand, Inc., No. SACV 10-0828 DOC, 2010 WL 4961702, at *6 (N.D. Cal. Nov. 19, 2010). Plaintiff must plead some non-speculative facts about what Defendant infringed and how. Accordingly, Plaintiff's copyright infringement claim is DISMISSED with leave to amend, except as to the input and output formats allegedly contained in Defendant's Aprisa software and documentation.
Plaintiff's claim as to those formats is sufficient to state a claim at this point. See Compl. ¶ 35. Plaintiff states, in full, "Synopsys is in possession of a small portion of Aprisa documentation -- provided by ATopTech -- revealing that Aprisa includes proprietary PrimeTime and GoldTime input and output formats." Id. Since Plaintiff has specifically asserted that these input and output formats from PrimeTime and GoldTime documentation are copyrighted and were duplicated in Defendant's materials, this portion of the complaint is sufficient enough, taken as true, for Plaintiff to state a claim for copyright infringement based on that limited set of materials.
On this point, Defendant contends that the Court should find as a matter of law that the input and output formats are not protected under copyright, citing the decision in Oracle v. Google, 872 F. Supp. 2d at 997, in support of this contention. That decision came at the end of a long bench trial, and the facts as to the input and output formats in that case had been fully developed on the record. See id. at 997-98. At the pleading stage, the Court declines to make a finding as a matter of law as to input and output formats in general. This holding does not, of course, preclude Defendant from making a later motion on this matter.
Plaintiff's copyright infringement claim based on alleged infringement of Plaintiff's input and output formats in Defendant's Aprisa software and documentation is undisturbed. The rest of the claim is DISMISSED with leave to amend.
B. Trade Secret Misappropriation
To plead a claim for trade secret misappropriation under the California Uniform Trade Secrets Act ("CUTSA"), Cal. Civ. Code § 3426 et seq., a plaintiff must assert (1) the existence of a trade secret, and (2) misappropriation of the trade secret. See, e.g., DocMagic, Inc. v. Ellie Mae, Inc., 745 F. Supp. 2d 1119, 1145 (N.D. Cal. 2010); Cal. Civ. Code § 3426.1(b). A trade secret is "information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." Cal. Civ. Code § 3426.1.
Before a defendant is compelled to respond to a complaint upon claimed misappropriation or misuse of a trade secret and to embark on discovery which may be both prolonged and expensive, the complainant should describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons who are skilled in the trade, and to permit the defendant to ascertain at least the boundaries within which the secret lies.Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244, 253 (Cal. Ct. App. 1968). A plaintiff alleging trade secret misappropriation need not "spell out the details of the trade secret" but must identify the trade secret with sufficient particularity to give defendants "reasonable notice of the issues which must be met at the time of trial and to provide reasonable guidance in ascertaining the scope of appropriate discovery." Id. at 252-53.
Plaintiff argues that Diodes is inapposite because it predates CUTSA and a later codification of a rule moving the obligation to identify the precise trade secrets from the pleading stage to the discovery stage. See Opp'n at 7. The Court is not convinced on this point: "[F]ederal courts in the Ninth Circuit look to Diodes for guidance on the applicable pleading standard for claims brought under the CUTSA." Pellerin v. Honeywell, Int'l, Inc., 877 F. Supp. 2d 983, 988 n.1 (S.D. Cal. 2012); see also Farhang v. Indian Inst. of Tech., Kharagpur, No. 08-02658 RMW, 2010 WL 2228936, at *13 (citing Diodes, 260 Cal. App. 2d at 253).
Defendant argues that Plaintiff neither identifies any trade secrets nor pleads facts that Defendant acquired a trade secret through "improper means" or other circumstances that would give rise to CUTSA liability. MTD at 8. According to Defendant, Plaintiff's complaint simply points to everything Plaintiff has created and claims everything is a trade secret. See id. at 9 (citing Compl. ¶¶ 18, 21-22, 33-35, 37-38, 40, 42, 44). Further, Defendant claims that because Plaintiff deposited its documentation with the Copyright Office, that material would no longer constitute trade secrets because such deposits are public. Id.
Plaintiff responds that its complaint specifically identifies the misappropriated trade secrets as information disclosed and subject matter claimed in Plaintiff's several copyright registrations, including all of the material related to PrimeTime, IC Compiler, GoldTime, and their documentation. Id. at 6-7 (citing Compl. ¶¶ 16-18, 20-21, 24-30, 39). Plaintiff then argues that it did allege that Defendant used improper means to acquire the trade secrets, since it pled that Defendant breached the parts of the License Agreements that forbid it from incorporating Copyrighted Software into its own products and from disclosing confidential information under the License Agreements. Id. at 8 (citing Compl. ¶ 33). Plaintiff also notes that it alleged that Defendant "improperly accessed and stole other . . . proprietary documentation by downloading such materials from [Plaintiff's] 'SolvNet' secure website without permission." Id. (quoting Compl. ¶ 37). Plaintiff further states that it took reasonable measures to protect its trade secrets' secrecy by redacting source code submissions from its Copyright Office filings and employing confidentiality agreements, but Plaintiff contends that in any event, this would be a factual issue inappropriate for resolution on a motion to dismiss. Id. at 8-9.
The Court finds for Defendant on this point. First, Plaintiff's complaint is impermissibly conclusory. For instance, Plaintiff alleges that "its trade secrets at issue in this case, which [have] been copied and misappropriated by [Defendant], relates to [Plaintiff's] PrimeTime, GoldTime, and IC Compiler products. Such information includes [Plaintiff's] proprietary input and output formats, scripts, and technical product documentation, which generally are not publicly known, and derive value from being secret." Compl. ¶ 21. Other pleadings refer explicitly to Plaintiff's publicly available patents, which Plaintiff improperly refers to as trade secrets. See Opp'n at 7 (citing Compl. ¶¶ 25-29). These are conclusions of law disguised as factual pleadings, and they do not state claims under Twombly and Iqbal. Materials are not trade secrets just because Plaintiff says they are: there must be some minimally plausible factual explanation for why trade secret protection applies.
Farhang held that a patent application cited in an otherwise vague pleading regarding trade secrets could give reasonable notice of the scope of a purported trade secret. See 2010 WL 2228936, at *13. However, the patent applications in Farhang were unpublished and not publicly available. Plaintiff's patents have issued and been published. "[I]t is well established that disclosure of a trade secret in a patent places the information comprising the secret into the public domain. Once the information is in the public domain and the element of secrecy is gone, the trade secret is extinguished . . . ." Ultimax Cement Mfg. Corp. v. CTS Cement Mfg. Corp., 587 F.3d 1339, 1355 (Fed. Cir. 2009) (citation and quotations omitted).
Second, it is impossible for the Court, let alone Defendant, to determine where trade secret protection begins and ends as to any of this material (e.g., non-redacted portions of public documents, open-source code, and so forth). Plaintiff's complaint is too sweeping and vague for Defendant to be on notice of what trade secrets are at issue and where the boundary between those secrets and general knowledge might lie. See Farhang, 2010 WL 2228936, at *13 (citing Diodes, 260 Cal. App. 2d at 253).
Plaintiff does refer, as in its copyright infringement claim, to "input and output formats" being protected trade secrets, see ¶¶ 18-21, which is an iota more precise than the rest of Plaintiff's claims, but the Court finds that Plaintiff's pleading as to how these formats are protected by trade secret law are impermissibly conclusory. Plaintiff need not spell out every detail of its trade secrets, but its vague references to an enormous array of potential sources do not suffice to survive Defendant's motion to dismiss. On this point, unlike in Plaintiff's copyright claim, more is necessary. For example, examining the manuals filed under seal, the Court cannot determine which parts of Plaintiff's code and documentation are supposed to be trade secrets and which parts are publicly available, open source commands. See, e.g., Compl. ¶ 19 (PrimeTime includes open source commands that are distinct from Plaintiff's proprietary code).
As to the question of whether Plaintiff's Copyright Office filings are covered by trade secret protection, the Court cannot make a broad finding at this point. If Plaintiff filed unredacted material and now claims that material as trade secrets, Plaintiff's claims fail, since that material is publicly accessible. See, e.g., KEMA, Inc. v. Koperwhats, No. C-09-1587 MMC, 2010 WL 726640, at *4 (N.D. Cal. Mar. 1, 2010) (holding that source code filed with the Copyright Office and not redacted can destroy secrecy required under California trade secret law). Plaintiff argues that the Copyright Office restricts access to deposited material, but that is not quite true: the Copyright Office indeed places restrictions on requests for reproductions, 37 C.F.R. § 202.20(d), but the same restrictions do not necessarily apply to access and inspection. See 17 U.S.C. § 705(b); see also 37 C.F.R. § 201.2(b)(1) (providing for public "inspection [at the Copyright Office] of . . . material deposited in connection with a completed copyright registration"). The Court cannot as a matter of law say that restrictions on copying will necessarily protect all publicly filed documents, when those documents are readily accessible for public inspection. See KEMA, 2010 WL 726640, at *4. Plaintiff claims that it redacted some of its source code from the Copyright Office filings, which could serve to protect trade secrets in some cases, 37 C.F.R. § 202.20(c)(2)(vii), but without even slightly more detailed pleadings the Court cannot determine which parts of Plaintiff's publicly filed materials may be trade secrets and which are not.
Plaintiff's pleadings, unsupported by more facts, fail to provide a reasonable basis for inferring that the formats are protected by trade secret law and therefore fail to "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Plaintiff's trade secret misappropriation claim is DISMISSED with leave to amend, per the guidelines given above. If Plaintiff is concerned about maintaining its trade secrets' confidentiality, Plaintiff may identify the alleged trade secrets in a sealed filing.
C. Common Law Misappropriation
Plaintiff asserts a claim for common law misappropriation based on the allegation that Defendant improperly acquired, used, and disclosed Plaintiff's Copyrighted Software and confidential and proprietary information, including materials accessed and downloaded from SolvNet. Compl. ¶¶ 113-118. Plaintiff makes this claim in the alternative, "[t]o the extent that any portion of [its] Copyrighted Software is found not to be protectable under copyright or found not to be protectable trade secrets." Id. ¶ 113.
First, Defendant argues that this claim is preempted by CUTSA because CUTSA preempts claims "based on the same nucleus of operative facts" as trade secret claims, regardless of whether the material in question meets the definition of a trade secret. MTD at 12 (citing K.C. Multimedia, Inc. v. Bank of America Tech. & Ops., Inc., 171 Cal. App. 4th 939, 962 (Cal. Ct. App. 2009); SunPower Corp. v. SolarCity Corp., No. 12-CV-694 LHK, 2012 WL 6160472, at *4-6 (N.D. Cal. Dec. 11, 2012)). Second, Defendant contends that the Copyright Act preempts this claim, since the Copyright Act preempts state law causes of action if the work involved falls within the Copyright Act's subject matter and the rights the plaintiff asserts under state law are equivalent to those established in the Copyright Act. MTD at 13 (citing 17 U.S.C. § 301(a)).
Plaintiff responds that neither statute preempts its common law misappropriation claim. Opp'n at 9-10. First, Plaintiff argues that preemption is a factual issue inappropriate for resolution at this stage, and that in any event, the facts at issue under the common law misappropriation claim are different from the ones supporting the trade secret misappropriation claim. Id. at 10-11. Second, Plaintiff argues that the Copyright Act does not preempt the common law misappropriation claim because that cause of action contains an "extra element" beyond what copyright law requires: breach of a confidential relationship. Id. at 11-12. As to both statutory preemption theories, Plaintiff argues that this claim must survive in any event because Plaintiff pled it in the alternative. Id. at 10-12.
The Court does not need to reach the copyright preemption issue, because the Court finds that CUTSA preempts Plaintiff's common law misappropriation claim. As a threshold matter, the Court does not find this to be an inappropriate factual dispute. It is a pleading issue and is therefore entirely appropriate for resolution on a Rule 12(b)(6) motion. See SunPower, 2012 WL 6160472, at *4-6 (resolving a similar dispute on the pleadings). Moreover, preempted claims are not saved from preemption just because they are pled in the alternative. Lewis v. Activision Blizzard, Inc., C 12-1096 CW, 2012 WL 5199505, at *4 (N.D. Cal. Oct. 22, 2012). In this case, as explained below, even if the Court had found that portions of the Copyrighted Software were not protectable under copyright or trade secret law -- which it did not, as those dismissals were on pleading grounds -- Plaintiff's claim would still be preempted.
In reference to preemption:
The preemption inquiry for those causes of action not specifically exempted by § 3426.7(b) focuses on whether other claims are not more than a restatement of the same operative facts supporting trade secret misappropriation . . . If there is no material distinction between the wrongdoing alleged in a [C]UTSA claim and that alleged in a different claim, the [C]UTSA claim preempts the other claim.Farmers Ins. Exch. v. Steele Ins. Agency, Inc., No. 2:13-CV-00784-MCE-DAD, 2013 WL 3872950, at *7 (E.D. Cal. July 25, 2013) (quoting Convolve, Inc. v. Compaq Comp. Corp., No. 00 CV 5141(GBD), 2006 WL 839022, at *6 (S.D.N.Y. Mar. 31, 2006) (internal quotations omitted) (applying California law)).
Plaintiff's argument on this point is that its common law misappropriation claim is based on a different set of facts than its CUTSA claim. Opp'n at 10. Plaintiff contends that its common law misappropriation claim covers "additional proprietary technical documents from SovlNet, materials which are not alleged to comprise [Plaintiff's] misappropriation claim under CUTSA." Id. at 11. The Court cannot discern this distinction from the pleadings.
Plaintiff's trade secret misappropriation claim, Compl. ¶¶ 57-65, is so vague that it appears to encompass just about every piece of material Plaintiff has ever created or acquired, leading that claim to bleed into its common law misappropriation claim to the point that the two become indistinct and overlapping. Plaintiff's CUTSA claim refers only to "trade secrets," which Plaintiff indiscriminately defines throughout its complaint as (so far as the Court can tell) code and documentation related to PrimeTime, GoldTime, and IC Compiler, all of which -- except the IC Compiler material -- would appear to be part of Plaintiff's Copyrighted Software. See, e.g., id. ¶¶ 18-21, 41-44. Plaintiff alleges its common law misappropriation claim in terms of its "Copyrighted Software and confidential and proprietary information, including those materials improperly accessed and downloaded from SolvNet." See id. ¶¶ 113-114. Plaintiff contends that the SolvNet materials were different from those at issue in the CUTSA misappropriation claim, but while SolvNet may not be mentioned specifically in Plaintiff's trade secret sections, throughout the complaint Plaintiff never distinguishes the material on SolvNet from anything else it claims to be a protected work. See, e.g., Compl. ¶¶ 37-40. This all suggests that Plaintiff's trade secret and common law misappropriation claims concern the same material.
The Court can therefore see no distinction between those two claims, except that Plaintiff pled the common law misappropriation claim in the alternative. Absent any real distinction among any of Plaintiff's allegations, this pleading distinction is meaningless: there is no way to distinguish Plaintiff's common law misappropriation claim from its CUTSA claim. They are based on the same facts. CUTSA preempts this claim. It is therefore DISMISSED with leave to amend, if Plaintiff can distinguish it from its trade secret misappropriation claim.
The CFAA, 18 U.S.C. § 1030 et seq., establishes both civil and criminal causes of action for an array of activities concerning "protected computers," defined in relevant part as computers that are "used in or affecting interstate or foreign commerce or communication." Id. § 1030(e)(2). The CFAA is "designed to target hackers who accessed computers to steal information or to disrupt or destroy computer functionality, as well as criminals who possessed the capacity to access and control high technology processes vital to our everyday lives." LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1130 (9th Cir. 2009). The Ninth Circuit has recently made clear that the CFAA is not meant to serve as a supplement or replacement for misappropriation claims. United States v. Nosal, 676 F.3d 854, 862-63 (9th Cir. 2012) (en banc).
To prevail in a civil action under the CFAA, "a private plaintiff must prove that the defendant violated one of the provisions of [section] 1030(a)(1)-(7), and that the violation involved [among other things, loss to one or more persons during any one year period . . . aggregating at least $5,000 in value]." Brekka, 581 F.3d at 1131.
Defendant relies in large part on Nosal, 676 F.3d at 854, in which the Ninth Circuit held that the CFAA applied narrowly to punish hacking ("the circumvention of technological access barriers"), not the misappropriation of trade secrets or contravention of use policies. 676 F.3d at 863. In Nosal, employees of an executive search firm used their authorized log-in credentials to download proprietary information from a confidential database on their employer's computer system, and then transferred that information to a competitor, in violation of their employer's use restrictions on the disclosure of confidential information to third parties or using confidential information for any purpose except company business. See id. at 856. The Ninth Circuit held that the CFAA prohibits only the unauthorized procurement or alteration of information, not its misuse or appropriation, and therefore the phrase "exceeds authorized access" in the CFAA "does not extend to violations of use restrictions." Id. at 863-64.
The Court finds that Plaintiff has not stated a CFAA claim. It is true that some courts have held that the CFAA applies to access restrictions that are contractual, as well as technological restrictions. See Weingand v. Harland Fin. Solutions, Inc., No. C 11-3109 EMC, 2012 WL 2327660, at *3 (N.D. Cal. June 19, 2012); see also Nosal, 676 F.3d at 864 (distinguishing between access restrictions and use restrictions, but not the form of the restrictions); Craigslist Inc. v. 3Taps Inc., -- F. Supp. 2d --, 2013 WL 1819999, at *3-4 (N.D. Cal. Apr. 30, 2013) (noting Nosal's distinction). But other courts have asserted that statutes like the CFAA apply only to breaches of technical barriers. See, e.g., In re Facebook Privacy Litig., 791 F. Supp. 2d 705, 715-16 (N.D. Cal. 2011) (holding, in a California Penal Code section 502 case, that the rule of lenity requires interpreting access "without permission" to apply only to access exceeding technical barriers); Facebook, Inc. v. Power Ventures, Inc., No. C 08-05780-JW, 2010 WL 3291750, at *11 (N.D. Cal. July 20, 2010) (same).
Neither the Ninth Circuit nor Congress has fully explored the limits of this nuanced distinction. However, it is clear to the Court that Nosal's discussion of the differences between CFAA-actionable unauthorized access or procurement and non-CFAA misuse or misappropriation requires plaintiffs to plead, clearly and plausibly, that whatever access restriction they allege was not simply a use prohibition disguised as a limit on access. Nosal, 676 F.3d at 863-64; see also Craigslist Inc., 2013 WL 18199999, at *4 (holding that framing a contractual prohibition in terms of "access" was insufficient to state a CFAA claim because the contractual prohibition depended on the accessor's purpose and did not govern "who may access information, what information may be accessed, or the methods by which information may be access"). In other words, the state of CFAA doctrine in the Ninth Circuit suggests that while a breach of a contractual provision may in some cases be enough to allege unauthorized access, see Craigslist Inc., 2013 WL 1819999, at *4, such an alleged breach must be pled with enough clarity and plausibility to state that access itself -- not just a particular use -- was prohibited.
Plaintiff fails to plead sufficient facts to support an allegation of unauthorized access either by breach of contract or by technical means. Plaintiff's sparse allegations simply state that Defendant breached its license when it accessed SolvNet and downloaded "articles, FAQs, and other documentation" relating to software for which Defendant had a license. Compl. ¶¶ 38-39. The allegation that this activity exceeded authorized access, even though Plaintiff does not suggest that Defendant was not allowed to access SolvNet or that Plaintiff had restricted or revoked Defendant's access prior to Defendant's use of SolvNet, is implausible. Further, Plaintiff does not allege with any believable precision what restricted material Defendant downloaded, given the competing allegation that Defendant had rights to use PrimeTime and GoldTime. Absent facts stating that Defendant "has no rights, limited or otherwise, to access the computer in question," Brekka, 581 F.3d at 1133, Plaintiff's mere allegation that Defendant breached a license agreement does not sufficiently indicate that Defendant breached an access prohibition under the CFAA.
Accordingly, Plaintiff's CFAA claim is DISMISSED with leave to amend.
Plaintiff asserts a claim under the CDAFA, which prohibits "[k]nowingly access[ing] and without permission tak[ing], copy[ing], or mak[ing] use of any data from a computer, computer system, or computer network, or tak[ing] or copy[ing]any supporting documentation, whether existing or residing internal or external to a computer, computer system, or computer network."
Defendant moves to dismiss Plaintiff's section 502 claim for the same reasons as the CFAA claim. Defendant argues that Plaintiff fails to plead unauthorized access under the CFAA or access "without permission" under the CDAFA. See MTD at 14-17. Plaintiff responds that it properly alleged Defendant's accessing SolvNet without permission, as described above, and that Defendant cannot use the License Agreements' authorization to argue that it had permission to access SolvNet. Opp'n at 18. Plaintiff adds that the CDAFA does not require that "access" be without permission: the statutory language requires only that taking, copying, or making use of the accessed data be without permission. Id. at 18-19.
Defendant cites a recent case from this Court, which held that the rule of lenity required limiting the CDAFA's "without permission" language to apply only to the circumvention of technical barriers, since to apply it more broadly -- for example, to breaches of a license agreement -- would be unconstitutionally vague. In re Facebook Privacy, 791 F. Supp. 2d at 716. Other courts have concurred with this ruling, absent definitive clarification from the legislature or courts of appeal, but there is some disagreement on the point. Compare In re Google Android Consumer Privacy Litig., No. 11-MD-02264 JSW, 2013 WL 1283236, at *11-12 (N.D. Cal. Mar. 26, 2013) (only technical breaches are actionable under the CDAFA), and Facebook, Inc. v. Power Ventures, Inc., 844 F. Supp. 2d 1025, 1036 (N.D. Cal. 2012) (same), with Weingang, 2012 WL 2327660, at *4-6 (discussing split authority on whether the CDAFA should only apply to technical breaches, but not deciding which split to adopt), and Facebook, Inc. v. ConnectU LLC, 489 F. Supp. 2d 1087, 1090-91 (N.D. Cal. 2007) (holding that a defendant's access to a plaintiff's website by using information voluntarily supplied by authorized users was "without permission" and a violation of the CDAFA).
In support of its contention that a contract alone can prohibit access per the CDAFA, Plaintiff cites Therapeutic Research Faculty v. NBTY, Inc., 488 F. Supp. 2d 991, 998-99 (E.D. Cal. 2007), which held that while some of the defendants' employees' access to the plaintiffs' computers was authorized, some was not, so the plaintiffs could state a CDAFA claim as to the unauthorized accessors. Specifically, in Therapeutic Research, a corporation bought a single-user software license -- limited specifically to a single, individual employee of the corporation -- and shared not only among multiple employees but also with at least one other corporation. See id. at 993-94. The Court does not find this case compelling, since the contract at issue there specifically precluded access for a large category of users. The same is not the case here.
The court finds Plaintiff's allegations do not provide enough detail to be plausible. Although Plaintiff pleads that Defendant's access or use of the material in question, large portions of the complaint are describe how Defendant was licensed to use much of the material at issue here. Defendant also apparently had access to SolvNet unless some contractual term was clear enough to prohibit access or there was some technical prohibition. In this context, alleging that the License Agreements and other contracts Defendant had entered forbade Defendant from using SolvNet is conclusory and not plausible. Plaintiff must explain how the License Agreements and its other user agreements with Defendant were enough to put Defendant on notice that its access to SolvNet was "without permission."
Since there are many ways for Plaintiff to repair its CDAFA claim, the Court DISMISSES this claim with leave to amend.
F. Breach of Contract and Breach of the Implied Covenant
Plaintiff asserts claims for breach of contract and breach of the implied covenant of good faith and fair dealing against Defendant, based on Defendant's alleged breaches of the CPLA's confidentiality and proper use provisions, as well as Defendant's alleged refusal to comply with Plaintiff's attempts to verify its compliance with the CPLA. See Compl. ¶¶ 121-25, 127-132.
i. Breach of Contract
"To state a cause of action for breach of contract, a party must plead  the existence of a contract,  his or her performance of the contract or excuse for nonperformance,  the defendant's breach, and  resulting damage." Mora v. U.S. Bank, N.A., No. 11-6598 SC, 2012 WL 2061629, *6 (N.D. Cal. June 7, 2012) (citing Harris v. Rudin, Richman & Appel, 74 Cal. App. 4th 299, 307 (Cal. Ct. App. 1999)). Additionally, if the plaintiff alleges the existence of a contract, the plaintiff may set forth the contract verbatim, attach it as an exhibit, or plead it according to its legal effect. See Lyons v. Bank of America, N.A., No. 11-01232 CW, 2011 WL 3607608, at *2 (N.D. Cal. Aug. 15, 2011).
Plaintiff has pled the existence of a contract and its performance of it. However, Plaintiff's allegation of breach is deficient. Plaintiff's pleadings on this point are sufficient only as to Defendant's alleged copying of GoldTime's input and output formats, which are the only portions of GoldTime that Plaintiff adequately alleges Defendant copied. Other parts of Plaintiff's allegations are insufficiently vague and conclusory because, as discussed above, Plaintiff does not explain what other parts of the software were copied, or how? Defendant breached any confidentiality clause. These deficiencies make it impossible for the Court to find Plaintiff's claim of breach plausible. Separately, the parties' dispute over whether Defendant continued to use GoldTime's input and output formats after its license's expiration in February 2013 is a factual dispute, inappropriate for decision on a motion to dismiss. However, as noted below, this does not save the claim, because Plaintiff fails to allege damages. See MTD at 17; Opp'n at 13 n.5.
The more significant pleading deficiency of Plaintiff's breach of contract claim is this failure to allege damages. Plaintiff merely states that Defendant "sought commercial gain and competitive advantage by accessing and using [Plaintiff's] proprietary information to develop its products, including [Defendant's] Aprisa, which incorporate and are derived from [Plaintiff's] confidential information and trade secrets." Compl. ¶ 40; see also Opp'n at 13. Plaintiff did not make this allegation as part of its breach of contract claim, see Compl. ¶¶ 120-25, but even if it had, it does not assert that Plaintiff was damaged by Defendant's seeking commercial gain or competitive advantage -- the mere fact that Defendant sought those things does not indicate harm to Plaintiff. Plaintiff's breach of contract claim is DISMISSED with leave to amend, so that Plaintiff can more plausibly explain the alleged breach and how it damaged Plaintiff.
ii. Breach of Implied Covenant
"The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made." Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 349 (Cal. 2000). The covenant "cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement." Id. at 349-50. The elements of a claim for breach of the covenant of good faith and fair dealing are:
(1) the plaintiff and the defendant entered into a contract; (2) the plaintiff did all or substantially all of the things that the contract required him to do or that he was excused from having to do; (3) all conditions required for the defendant's performance had occurred; (4) the defendant unfairly interfered with the plaintiff's right to receive the benefits of the contract; and (5) the defendant's conduct harmed the plaintiff.Woods v. Google, Inc., 889 F. Supp. 2d 1182, 1194 (N.D. Cal. 2012) (citing Judicial Counsel of California Civil Jury Instructions § 325 (2011)).
Plaintiff alleges that it had a right to confidentiality under the CPLA, that the CPLA contained an implied covenant of good faith and fair dealing, and that Defendant breached the implied covenants by failing to maintain the confidentiality of Plaintiff's proprietary information and by failing to comply with Plaintiff's attempts to verify Defendant's compliance with the CPLA. Compl. ¶¶ 127-129. Plaintiff asserts that it was harmed by this behavior beyond mere breaches of the CPLA, because Defendant allegedly maintained its relationship with Plaintiff to gain access to Plaintiff's confidential material, and that Defendant, in bad faith, frustrated Plaintiff's attempts to ensure confidentiality and compliance with the CPLA. Id. ¶¶ 130-31. Defendant argues that the CPLA included no "audit right" or "right to verify compliance," and that Plaintiff's breach of the implied covenant claim constitutes nothing but a breach of contract claim because Plaintiff's allegations of bad faith or "independently wrongful" conduct are conclusory allegations, devoid of facts to support the claim. See MTD at 18, Reply at 11.
The Court agrees with Defendant. First, as to Plaintiff's allegation that Defendant breached the implied covenant by refusing to allow Plaintiff to audit Defendant's compliance, Plaintiff never alleged that the CPLA contained any clause that granted it a right to verify Defendant's compliance, and breaches of the implied covenant apply only to "benefits of the agreement actually made." Guz, 24 Cal. 4th at 349. Plaintiff cannot simply add a contractual term after the fact.
Second, Plaintiff's assertions of bad faith are unacceptably conclusory, because Plaintiff simply asserts -- without supporting facts -- that Defendant acted in bad faith and for independently wrongful purposes. See Compl. ¶¶ 130-31. This is defective pleading under Twombly and Iqbal.
Finally, Plaintiff does allege that Defendant breached the confidentiality provisions of the CPLA, but this allegation is duplicative of Plaintiff's breach of contract claim. "If the allegations in a breach of implied covenant claim do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated." Malcolm v. JP Morgan Chase Bank, N.A., No. 09-CV-4496, 2010 WL 934252, *6 (N.D. Cal. Mar. 15, 2010) (quoting Schulken v. Wash. Mut. Bank, No. 09-CV-02708, 2009 WL 4173525 (N.D. Cal. Nov. 19, 2009)); see also Dunkel v. eBay Inc., No. 12-CV-01452-EJD, 2013 WL 415584, at *9-10 (N.D. Cal. Jan. 31, 2013). Nothing in Plaintiff's breach of implied covenant claim suggests that this claim is at all different from Plaintiff's breach of contract claim.
Accordingly, Plaintiff's breach of the implied covenant claim is DISMISSED with leave to amend.
The UCL prohibits unfair competition, including, inter alia, "any unlawful, unfair or fraudulent business act." Cal. Bus. & Prof. Code § 17200. "Because [section 17200] is written in the disjunctive, it establishes three varieties of unfair competition--acts or practices which are unlawful, or unfair, or fraudulent." Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554 (Cal. Ct. App. 2007).
Plaintiff brings its UCL claim under the unlawful and unfair prongs of the UCL, having conceded that it does not allege violation of the fraudulent prong. See Opp'n at 15 n.6. Plaintiffs can plead a UCL violation under the "unlawfulness" prong by pleading that a business practice violated a predicate federal, state, or local law. See Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (Cal. 1999) (citing State Farm Fire & Cas. Co. v. Superior Court, 45 Cal. App. 4th 1093, 1103 (Cal. Ct. App. 1996)). For UCL unfairness claims brought by competitors instead of consumers, California courts have held that the UCL requires the competitor plaintiff to allege an incipient violation of an antitrust law or that law's policy or spirit "because [the unfair practice's effect] are comparable to a violation of the law, or that otherwise significantly threatens or harms competition." Id. at 187.
Plaintiff's UCL unlawfulness claim alleges that Defendant's conduct violated "numerous state and federal statutes and codes," including the CFAA, the CDAFA, and laws pertaining to improper use of proprietary and confidential materials. Compl. ¶¶ 108-09. As noted above, all of these claims failed and are dismissed, except -- as a pleading matter -- Plaintiff's copyright infringement claim as to the input and output formats in Defendant's Aprisa software and documentation. Plaintiff's UCL claim is DISMISSED with leave to amend except as to that predicate copyright claim.
As to both Plaintiff's UCL unlawfulness and unfairness claims, Defendant disputes their predication on a breach of contract claim. Defendant is correct that a breach of contract alone cannot be the predicate of a UCL unfairness or unlawfulness claim unless the breach also constitutes conduct that was unlawful, unfair, or fraudulent, see Arce v. Kaiser Found. Health Plan, Inc., 181 Cal. App. 4th 471, 489-90 (Cal. Ct. App. 2010), but Plaintiff's UCL claims are not based solely on a breach of contract. To the extent that those claims rely on Plaintiff's breach claim, they are DISMISSED, as are Plaintiff's UCL claims based on any other dismissed claim.
Plaintiff's UCL unfairness claim primarily asserts that Defendant's alleged access to and copying of Plaintiff's confidential materials, as well as its subsequent refusal to verify a lack of anti-competitive conduct, are actionable anti-competitive behaviors covered by the UCL. See Opp'n at 16; Compl. ¶¶ 6-7, 35-36. Plaintiff also contends that its statement of a claim under the CDAFA supports a UCL unfairness claim, see Opp'n at 16, but the Court has dismissed that predicate claim. As vague as Plaintiff's allegations are, the UCL cognizes them as being sufficient to state a claim at this stage of litigation -- at least for consumers. See Williams v. Gerber Prods. Co., 552 F.3d 934, 938-39 (9th Cir. 2008) (dismissals in UCL cases are rare and generally fact-dependent); Cel-Tech, 20 Cal. App. 4th at 181 (the UCL was intentionally framed in broad, sweeping terms). Plaintiff appears to rely mainly on the breadth of the UCL's unfairness prong on this point. See Opp'n at 16-17.
However, Defendant is correct that when a defendant in a UCL unfairness case is a competitor of a plaintiff (as opposed to being a consumer), a business practice is unfair only if it "threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition." Cel-Tech, 20 Cal. App. 4th at 187. In this case, Plaintiff has not alleged or even suggested a violation of the letter, policy, or spirit of an antitrust law. See id.; see also Drum v. San Fernando Valley Bar Assoc., 182 Cal. App. 4th 247, 254-55 (Cal. Ct. App. 2010). Accordingly, the Court finds that Plaintiff has failed to state a UCL unfairness claim. This claim is DISMISSED with leave to amend.
H. Patent Infringement
Plaintiff asserts claims against Defendant for direct, contributory, induced, and willful infringement of the Patents-in-Suit, based on Defendant's products Aprisa and, as to two patents, Apogee. See Compl. ¶¶ 67, 74, 81, 88. Plaintiff asserts that Defendant's products infringe by operating "in a manner that infringes [the asserted patent]," id., and that Defendant "has been, is currently, and unless enjoined, will continue to actively induce, encourage or contribute to the infringement of [each Patent-in-Suit]," id. ¶¶ 68, 75, 82. According to Plaintiff, Defendant induces and contributes to its customers' patent infringement by providing allegedly infringing products and "by dictating by its design and instructions to users thereto the manner in which the software is used causing such infringement." Id.
Defendant concedes that the lenient pleading standard for direct patent infringement protects Plaintiff's direct infringement claim at this stage. MTD at 21 n.5. However, Defendant asserts that Plaintiff's allegations of contributory, induced, and willful patent infringement all fail because Plaintiff does not adequately plead that Defendant knew of the Patents-in-Suit before the complaint was filed, or that Defendant's software at issue here lacks substantial non-infringing uses or is made or adapted for infringement of the Patents-in-Suit. Id. at 21-23.
i. Induced Infringement
To state a claim for inducement of infringement, a plaintiff must allege sufficient facts -- subject to Twombly and Iqbal -- to raise the reasonable inference that the defendant knowingly induced infringement and possessed specific intent to encourage another's infringement. See In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1339 (Fed. Cir. 2012). Plaintiff alleges that Defendant induced or encouraged infringement by providing products "designed and intended to enable" infringement and "by dictating by its design and instructions to users thereto the manner in which the software is used causing such infringement." Compl. ¶¶ 68, 75, 82, 89. Defendant argues that these are impermissible legal conclusions couched as factual allegations, and that Plaintiff does not allege the element of pre-suit knowledge of the patents. MTD at 22-23. Plaintiff asserts that it put Defendant on notice of the Patents-in-Suit at least by May 8, 2013, via a warning letter, or by November 28, 2012, when it contacted Defendant regarding suspected infringement. Opp'n at 20- 21 (citing Compl. ¶¶ 44). Plaintiff also contends that its allegations about Defendant's design and instructions, Compl. ¶¶ 68, 75, 82, 89, are sufficient to satisfy the relevant pleading standards. Id.
Defendant notes that it is not aware of a November 28, 2012 letter, but only of a November 20, 2012 letter. The parties do not further address this point, so the Court analyzes only the November 20, 2012 letter.
The Court does not find that any of the correspondence Plaintiff references put Defendant on notice of the Patents-in-Suit. Defendant attached copies of these letters in a declaration supporting its reply brief, and the Court takes judicial notice of these copies under Federal Rule of Evidence 201, because the letters are incorporated by reference into Plaintiff's complaint. See Compl. ¶¶ 41, 44; ECF No. 33 ("Drummond Decl.") Exs. B ("May 8 Ltr."), C ("Nov. 20 Ltr."). The May 8 Letter refers to alleged copying of proprietary command sets, and the November 28 Letter does not refer to any copying at all. Thus, the Court is left only with Plaintiff's allegations that Defendant "had knowledge and notice of the [Patents-in-Suit]," Compl. ¶¶ 68, 75, 82, 89, which are merely legal conclusions pled as factual allegations.
The Court finds Plaintiff's other allegations of inducement conclusory. Plaintiff need only provide bare facts supporting its claim, and it certainly need not prove its claim at the pleading stage, but descriptions of the Patents-in-Suit and Defendant's products, coupled with bare pleadings of the elements of these infringement claims, do not suffice to allow the Court to make a reasonable inference of Defendant's intent to induce infringement. See Compl. ¶¶ 68, 75, 82, 89. Plaintiff could, for example, have pled facts as to how Defendant's design or instruction were meant to induce or encourage Defendant, but Plaintiff's Complaint simply states that Defendant "induced, encouraged or contributed to its customers' direct infringement by providing, selling or offering for sale the Aprisa software that is designed and intend to [work in a manner infringing the Patents-in-Suit]." Id. Plaintiff has not sufficiently alleged that Defendant induced infringement of the Patents-in-Suit.
Accordingly, Plaintiff's induced infringement claims are DISMISSED with leave to amend.
ii. Contributory Infringement
To state a claim for contributory infringement, a plaintiff must allege sufficient facts to raise the reasonable inference that the defendant sells or offers to sell a material or apparatus (1) for use in practicing a patented process, (2) that is material to practicing the invention, (3) that has no substantial non-infringing uses, and (4) is known by the party "to be especially made or especially adapted for use in an infringement of such patent." In re Bill of Lading, 681 F.3d at 1337. Plaintiff contends that the Court should make the inference that Defendant contributed to others' infringement of the Patents-in-Suit because Plaintiff's complaint does not indicate that Defendant's products have substantial non-infringing uses. Opp'n at 19-20 (citing Compl. ¶¶ 68, 75, 82, 89). Defendant argues that it is Plaintiff's burden to allege that Defendant's accused software lacks substantial non-infringing uses or is especially made or adapted for infringement of the Patents-in-Suit, and that Plaintiff failed to do so. MTD at 21-22; Reply at 14-15.
Per above, the Court finds that Plaintiff fails to allege that Defendant knew that any of its software was made or adapted for infringement of any of the Patents-in-Suit, which leads to a finding here that Plaintiff has failed to allege that Defendant's software was designed to infringe any particular patent. See Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1326 (Fed. Cir. 2010) (plaintiffs must plead, among other things, knowledge of the patent in order to plead a contributory infringement claim). Further, while Plaintiff does not have to prove its claims at the pleading stage, Plaintiff has failed to raise the reasonable inference that Defendant's software has no substantial non-infringing uses. Plaintiff does not have to explain everything that Defendant's software does, but when Plaintiff's complaint is so vague as to its own claims and Defendant's products, the Court cannot find that Defendant's software has no substantial non-infringing uses.
Plaintiff's contributory infringement claims are DISMISSED with leave to amend.
iii. Willful Infringement
To state a claim for willful infringement, a plaintiff must plead sufficient facts to raise the reasonable inference that the defendant "was aware of the asserted patent, but nonetheless acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." i4i Ltd. P'ship v. Microsoft Corp., 598 F.3d 831, 861 (Fed. Cir. 2010) (citation omitted). Plaintiffs need only make out a bare assertion of knowledge of an issued patent, but mere recitation of elements is insufficient. see Avocet Sports Tech., Inc. v. Garmin Int'l, Inc., No. C 11-04049 JW, 2012 WL 1030031, at *3 (N.D. Cal. Mar. 22, 2012).
As stated above, Plaintiff fails to allege that Defendant was aware of the Patents-in-Suit. Further, Plaintiff's allegations of willfulness amount to nothing more than recitation of that claim's elements:
[Defendant's] acts of direct and indirect infringement are willful, as [Defendant] knew or should have known of the [Patents-in-Suit] and that making, using, offering to sell and selling within the United States, or importing into the United States, its Aprisa or Apogee software products would infringe the [Patents-in-Suit], but acted despite an objectively high likelihood that such activities would infringe the patent.Compl. ¶¶ 69, 76, 83, 90. Such pleadings are insufficient to state a claim for willful infringement. Plaintiff's willful infringement claims are therefore DISMISSED with leave to amend.
As explained above, the Court GRANTS in part and DENIES in part Defendant ATopTech Inc.'s motion to dismiss Plaintiff Synopsys, Inc.'s complaint. All of Plaintiff's claims except its copyright infringement claim based on its proprietary input and output formats and its UCL unlawfulness claim predicated on that alleged infringement are DISMISSED with leave to amend.
Plaintiff may file an amended complaint within thirty (30) days of this Order's signature date. Failure to do so may result in dismissal of this action with prejudice.
IT IS SO ORDERED.
UNITED STATES DISTRICT JUDGE