The opinion of the court was delivered by: SUSAN ILLSTON, District Judge
ORDER GRANTING PLAINTIFF'S AND COUNTERDEFENDANTS' MOTION FOR
SUMMARY ADJUDICATION OF ANTITRUST CONSPIRACY CLAIMS
On April 22, 2005, the Court heard oral argument
oncounterdefendants PostX and Mayfield's motion for summary
adjudication of Sigaba's first, third, and fifth counterclaims.
Having carefully considered the arguments of counsel and the
papers submitted, the Court hereby GRANTS the motion for the
reasons set forth below.
On September 13, 2002, PostX Corporation ("PostX") filed a
complaint for patent infringement against Secure Data In Motion,
d/b/a Sigaba ("Sigaba"). On September 29, 2003 and November 25,
2003, the Court granted Sigaba's motions for summary judgment of
non-infringement of United States Patent No. 6,477,647 ("the '647
Patent") and U.S. Patent No. 6,014,688 (" the '688 patent"). The
Federal Circuit affirmed without opinion on November 15, 2004. On
February 4, 2004, the Court granted summary judgment for
defendants on PostX's claim for misappropriation of trade secrets
under the Uniform Trade Secrets Act ("UTSA") because of PostX's
failure to adequately disclose the trade secrets at issue in that
claim. This left for resolution defendant's three antitrust counterclaims and one false
In its counterclaims, Sigaba alleges that PostX initiated the
patent suit against it for improper and anticompetitive purposes.
Sigaba's Answer and Counterclaims ¶ 20. In August 2000, officers
of both companies met to explore business opportunities and
entered into a Non-Disclosure Agreement. Id. at ¶ 14. After
these discussions ended, PostX and Sigaba remained competitors in
the market for "non-PKI-based Secure Document Delivery Systems,"
particularly for the business of Bank of America. Id. at ¶ 10,
16. On about August 28, 2002, Bank of America signed a contract
to purchase Sigaba's secure document delivery system. Id. at ¶
According to the counterclaims, PostX learned that it had lost
the Bank of America contract to Sigaba and, on September 12,
2002, sent a fax to Bank of America informing the bank that it
had filed a patent infringement suit against Sigaba, and posted a
press release on its website announcing the filing of its suit.
Id. at ¶ 18-19. PostX did not actually file the patent
infringement suit until September 13, 2002. Id. at ¶ 19. Sigaba
alleges that, because of the 2000 meeting between the companies,
PostX knew that Sigaba's products did not infringe the `688
patent, and in fact PostX's Chief Technology Officer admitted
that the suit had no technical merit. Id. at ¶ 21-22. After a
second patent, the `647 patent, was issued to PostX in November
2002, PostX filed a second patent infringement suit against
Sigaba, which Sigaba also claims is sham litigation. Id. at ¶
23. According to Sigaba's counterclaims, PostX conspired with
counterdefendant the Mayfield Funds ("Mayfield" or "the Mayfield
Funds") and attempted to monopolize the market for "non-PKI-based
Secure Document Delivery Systems." Id. at ¶¶ 10-11.
The Mayfield Funds are the investment vehicles for a venture
capital firm that invested in PostX multiple times since 1998 and
has owned approximately 20% of PostX's stock during this time.
Decl. of Yogen Dalal ("Dalal Decl.") at ¶ 4. Mayfield has the
right to appoint a director of PostX, and Mayfield managing
director Yogen Dalal served on PostX's board from November 1998
to September 2002. PostX and Mayfield also entered into a
Management Rights Agreement ("MRA") which gave Mayfield the
right, among others, to: "consult with and advise management of
PostX on significant business issues, including management's
proposed annual and quarterly operating plans," and stated that
"if [Mayfield] is not represented on PostX's Board of Directors,
PostX shall invite a representative of [Mayfield] to attend all
meetings of its Board of Directors in a non-voting observer capacity . . . [who] may participate in
discussions of matters brought to the Board provided that the
representative will recuse himself or herself from discussions
that involve conflict of interest between PostX and Mayfield."
Dalal Decl., Ex. A at PXT 0089751. According to Sigaba, this MRA
granted unique rights to Mayfield that exceeded those guaranteed
other PostX investors. Def.'s Opp'n at 2:22-24.
According to PostX, Dr. Dalal took a sabbatical from late June
through September 2002. Dalal Decl. ¶ 8; Decl. of Allen Morgan
("Morgan Decl.") ¶ 8. Allen Morgan, a managing director of
Mayfield, had been attending PostX board meetings as a non-voting
observer during the late spring and summer of 2002. Before
Dalal's departure, Sigaba alleges that Dalal led the PostX board
in its decision to fire the current CEO and replace him with
Thampy Thomas in June 2002. Def.'s Opp'n at 4:19; 5:3. Thomas
developed a "counteroffensive" strategy to win the Bank of
America business, which included the patent lawsuit. According to
Sigaba, PostX sought the "agreement, approval and backing of
Mayfield" to initiate the lawsuit by involving Allen Morgan in
the decision-making process. Specifically, Thomas, Morgan, and
PostX CTO Cayce Ullman held a one-hour conference call on
September 12, 2002, during which they reached agreement that
PostX would file the sham suit. Decl. of John L. Cooper, Ex. P
(Thomas Depo.) at 335:20-336:18. No other PostX board members
participated in this call. Id. at 304:1-9.
Then, on September 13, 2002, at 9:00 a.m., the PostX board
voted to (1) remove Dalal as the Mayfield representative on the
PostX board and appoint Mr. Morgan as a PostX director, and (2)
approve the filing of the lawsuit. Cooper Decl., Ex. CC at PXT
0087030. The PostX board made Morgan's appointment effective
September 11, 2002 by a resolution stating "[t]hat all actions
taken by Allen Morgan from and after September 11, 2002, and his
participation in all deliberations of the Board from and after
that date, are hereby ratified, approved and confirmed as taken
in his capacity as a member of the Board." Id. at 0087029.
Morgan states that he attended the board meetings prior to
September 13, 2002 as a non-voting observer, and became a
director of PostX on September 11, 2002, "for the purpose of
casting a vote at the September 13, 2002 PostX Board meeting."
Morgan Decl. ¶ 8. When Dr. Dalal returned from sabbatical at the
beginning of October 2002, he replaced Morgan as a director of
PostX. Id. at ¶ 11.
Sigaba alleges that this conduct by PostX and Mayfield reveals
their anticompetitive objectives in filing the sham litigation.
In addition, it contends that Mayfield materially contributed to
the anticompetitive conduct "pledg[ing] continuing support" to PostX and thereby helping to
finance the litigation. Cooper Decl., Ex. G (Dean Mayer Depo.) at
428:20-22. Mayfield provided $1 million in PostX's December 2002
round of financing and $1.5 million in an August 2003 financing
for PostX's operating expenses, which would include the
litigation expenses for the Sigaba suit. Id., Ex. A (Dalal
Depo.) at 274:15-275:8.
Now before the Court is a motion by PostX and the Mayfield
Funds for summary adjudication of three of defendant's
counterclaims: (1) for "restraint of trade" under Section 1 of
the Sherman Act; (2) for "conspiracy to attempt monopolization"
under Section 2 of the Sherman Act; and (3) for declaratory
relief as to these claims.
Summary judgment or adjudication is proper when "the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." Fed.R.Civ.P.
In a motion for summary judgment, "[if] the moving party for
summary judgment meets its initial burden of identifying for the
court those portions of the materials on file that it believes
demonstrate the absence of any genuine issues of material fact,
the burden of production then shifts so that the non-moving party
must set forth, by affidavit or as otherwise provided in Rule 56,
specific facts showing that there is a genuine issue for trial."
See T.W. Elec. Service, Inc., v. Pac. Elec. Contractors
Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp.
v. Catrett, 477 U.S. 317, 106 S. Ct. 317 (1986)). In judging
evidence at the summary judgment stage, the court does not make
credibility determinations or weigh conflicting evidence, and
draws all inferences in the light most favorable to the
non-moving party. See T.W. Electric, 809 F.2d at 630-31
(citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 106 S. Ct. 1348 (1986)); Ting v. United
States, 927 F.2d 1504, 1509 (9th Cir. 1991). The evidence
presented by the parties must be admissible. Fed.R.Civ.P.
56(e). Conclusory, speculative testimony in affidavits and moving
papers is insufficient to raise genuine issues of fact and defeat
summary judgment. Thornhill Publ'g Co., Inc. v. GTE Corp.,
594 F.2d 730, 738 (9th Cir. 1979). DISCUSSION
PostX and Mayfield bring this motion for summary adjudication
of Sigaba's first and third counterclaims, which allege a
conspiracy to violate §§ 1 and 2 of the Sherman Act, and the
fifth counterclaim, which seeks declaratory relief. The gravamen
of Sigaba's allegations is that PostX's patent suit constituted
sham litigation prosecuted for an anticompetitive purpose, and
that Mayfield and PostX together conspired to initiate and
finance the suit. PostX and Mayfield contend that these
counterclaims must be dismissed because, under the
"intracorporate conspiracy doctrine," PostX and Mayfield were
legally incapable of an antitrust conspiracy because ...