The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
ORDER DENYING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT
Defendants move for partial summary judgment under Fed. R. Civ. P. 56 and ask the Court (1) strike portions of Plaintiff's First Amended Complaint; (2) dismiss all counts against Defendant Frost individually; and (3) dismiss the willful infringement claim against both Defendants. After re-briefing, oral argument, and supplemental briefing, the Court DENIES Defendants' motion.
On February 13, 2007, the U.S. Patent and Trademark Office ("PTO") issued U.S. Patent No. 7,177,874 (the '874 Patent), entitled "System and Method for Generating and Processing results Data in a Distributed System." Plaintiff is the sole inventor and owner of the '874 Patent, acquiring all rights by virtue of assignment from his now-defunct company XPrime.
In 2003, Plaintiff's company, XPrime, employed Defendant Frost as the Chief Executive Officer for a brief period. At that time, Plaintiff alleges he had invented and filed a patent application for the technology described in the '874 Patent in the area of distributed database architecture. Plaintiff alleges, as Chief Executive Officer, Frost had access to confidential information and documents from Plaintiff and other XPrime employees.
In 2003, XPrime terminated Defendant Frost. Following the termination, Defendant Frost, XPrime, and Plaintiff entered into a "Confidential Settlement Agreement and Mutual Release of All Claims and Mutual Release of Contractual Rights and Obligations" (Agreement). The Agreement included a mutual release of claims with the following language:
Frost . . . and XPrime for itself . . . or affiliated entities of XPrime, past and present, including ... Cary Jardin . . . unconditionally, irrevocably and absolutely release . . . all claims related in any way to the transactions or occurrences between them to date, to the fullest extent permitted by law, including, but not limited to, Frost's relationship with XPrime . . . [and] all other losses, liabilities, claims, charges, demands and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any way connected with Frost's relationship with XPrime. This release is intended to have the broadest possible application . . ..
(Settlement Agreement, ¶ 2.1, Doc. No. 26, under seal.) Frost and Plaintiff signed this release on July 30, 2003.
Shortly after leaving XPrime, Frost formed a new company Datallegro, Inc. At Datallegro, Frost allegedly copied, used, and incorporated Plaintiff's intellectual property into Datallegro products. This infringing use allegedly continues until this day.
Plaintiff alleges Defendants have committed patent infringement and willful infringement of the patent. Plaintiff bases his patent infringement claim upon Datallegro's and Frost's past, current, and future infringement of the '874 Patent. Plaintiff bases his willful infringement claim upon allegations Frost copied intellectual property during his employment at XPrime and then used this intellectual property when he moved to Datallegro.
On August 12, 2008, Plaintiff filed a complaint with a jury demand. On September 22, 2008, Defendants filed a motion to strike portions of Plaintiff's First Amended Complaint and to Dismiss Certain Counts. (Doc. No. 23.) Defendants attached a Settlement Agreement which purportedly barred claims. On November 4, 2008, the Court converted the motion into a motion for summary judgment and ordered rebriefing. (Doc. No. 33.)Defendants filed their new motion, Plaintiff opposed, and Defendants filed a reply. (Doc. No. 34, 35, 36.) On December 22, 2008, the Court heard oral argument and ordered letter briefing on an issue of state law.
Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A dispute is "genuine" when "the evidence presented is such that a jury applying [the appropriate] evidentiary standard could reasonably find for either the plaintiff or the defendant." See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
The moving party bears the initial burden of establishing the absence of a genuine issue of material fact. See Celotex, 477 U.S. at 323. Once the movant meets the Rule 56 requirement, the burden shifts to the non-moving party, who "must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256. The non-moving party cannot merely rest on mere allegations or denials of his pleadings, but rather must designate specific facts showing there is a genuine issue for trial. Celotex, 477 U.S. at 325. "[F]ederal law always governs the validity of releases of federal causes of action." Petro-Ventures, Inc. v. Takessian, 967 F.2d 1337, 1340 (9th Cir. 1992) (citation omitted).
The basis of this motion for partial summary judgment is Defendants' argument the Agreement precludes reliance on any alleged pre-agreement misconduct to support Plaintiff's claims. Because this is the sole basis for the motion, the facts material to this motion are those facts surrounding Frost's employment with XPrime and the Agreement. There are no issues of material fact as to the validity of the Agreement because Plaintiff does not challenge the Agreement's execution, present extrinsic evidence of its meaning, and does not dispute the document's contents. Further, the parties do not dispute Mr. Jardin worked for XPrime and left that employment in 2003. Finally, the parties do not dispute the '874 patent was issued in 2007 to XPrime. A "settlement agreement is a contract, of course, and its interpretation is a matter of law." Mays v. United States Postal Service, 995 F.2d 1056, 1059 (Fed. Cir. 1993). The remaining issues involve disputes over the proper interpretation of the Agreement, which are questions of law.
A. Agreement Applies to Plaintiff
Plaintiff argues he was not party to the Agreement, therefore, not bound by its express terms.
Defendants argue Plaintiff is bound as either a successor-in-interest or as an explicitly named party in the Agreement. Plaintiff is named as a releasing ...