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Cary A. Jardin v. Datallegro

July 29, 2011

CARY A. JARDIN,
PLAINTIFF,
v.
DATALLEGRO, INC. AND STUART FROST DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: (1) GRANTING DEFENDANTS' JOINT MOTION TO DISMISS , CLAIM III; (2) DENYING AS MOOT DEFENDANT FROST'S SPECIAL MOTION TO STRIKE CLAIM III; and (3) DENYING DEFENDANT FROST'S MOTION TO DISMISS CLAIMS I AND II [Doc. Nos. 45, 46, 47]

Presently before the Court are three motions to dismiss or strike portions of Plaintiff Cary A. Jardin's First Amended Complaint, filed by Defendants Stuart Frost and DATAllegro, Inc. For the reasons stated below, the Court (1) GRANTS Defendants' joint motion to dismiss count III [Doc. No. 45], (2) DENIES AS MOOT Defendant Frost's special motion to strike count III pursuant to California's anti-SLAPP statute [Doc. No. 46], and (3) DENIES Defendant Frost's motion to dismiss counts I and II [Doc. No. 47].

BACKGROUND

The factual background of this case is discussed in the Court's April 12, 2011 Order and will not be repeated here. Jardin's initial complaint alleged six causes of action. Claims I and II arose under federal patent law, and sought to correct inventorship and ownership of U.S. Patent Number 7,818,349 (the "'349 patent"). Claims III through VI arose under California common law, and stemmed from Defendants' alleged misappropriation of Jardin's intellectual property: conversion, constructive trust, accounting and unjust enrichment, and slander of title. Defendants jointly moved (1) for a more definite statement with regard to Claims I and II, and (2) to dismiss claims III through VI. The Court denied Defendants' motion for a more definite statement but granted their motion to dismiss claims III through VI, concluding Jardin's claims under California law were preempted by the California Uniform Trade Secrets Act ("CUTSA"), California Civil Code § 3426 et seq. [Doc. No.

Shortly after Defendants answered the remaining claims in the initial complaint, Jardin filed a motion for leave to amend, seeking to allege an amended claim for slander of title under California law, ostensibly under a new legal theory. Over Defendants' objections, the Court granted Jardin's request. On May 18, 2011, Jardin filed the FAC, alleging three causes of action: (I) correction of inventorship of the '349 patent, under 35 U.S.C. § 256; (II) a declaration that Jardin is an owner of the '349 patent; and (III) slander of title, under California law. [Doc. No. 40.] Defendants now jointly move to dismiss claim III, or, alternatively, to strike all related references to nonpublic information. [Doc. No. 45] Defendant Frost also moves separately to dismiss claims I and II, and to strike claim III under California Civil Procedure Code § 425.16, California's Anti-SLAPP provision. [Doc. Nos. 46 &

LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Block, 250 F.3d 729, 731 (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 Dept., 901 F.2d 696, 699 (9th Cir. 1990) (citation omitted).

The Court must accept all factual allegations pleaded in the complaint as true and construe them and draw all reasonable inferences in favor of the nonmoving party. See Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). The complaint, however, must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1940 (2009).

The Court need not accept "legal conclusions" as true. See Iqbal, 129 S. Ct. at 1949. "[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citation omitted).

"[D]ismissal with prejudice is proper" where "the defect appears to not be curable by amendment." Whitty v. First Nationwide Mortg. Corp., No. 05-CV-1021, 2007 WL 628033, at *6 (S.D. Cal. Feb. 26, 2007) (citing Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1108 (9th Cir. 2003).

DISCUSSION

Defendants' Joint Motion to Dismiss Claim III for Slander of Title "California's Uniform Trade Secrets Act 'occupies the field' of common law claims based on the misappropriation of a trade secret." Mattel, Inc. v. MGA Entertainment, Inc., ---F. Supp. 2d---, 2011 WL 1114250, at *44 (C.D. Cal. Jan. 5, 2011) (quoting K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 Cal. App. 4th 939, 954 (2009)). Thus, CUTSA preempts all claims resting on allegations of the misappropriation of confidential information. Id.; see also Silvaco Data Sys. v. Intel Corp.,184 Cal. App. 4th 210, 236 (2010) ("CUTSA provides the exclusive civil remedy for conduct falling within its terms, so as to supersede other civil remedies 'based upon misappropriation of a trade secret.'" (quoting Cal. Civ. Code § 3426.7 (a)-(b))), overruled on other grounds, Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (2011). "A claim cannot simply depend on a 'different theory of liability' to survive [CUTSA's] supersessive effect." Mattel, 2011 WL 1114250, at *44 (citing K.C. Multimedia, 171 Cal. App. 4th at 957-59). Rather, to avoid preemption, a claim "must be based on more than 'the same nucleus of facts'" as a claim for misappropriation of trade secrets. Id. (quoting K.C. Multimedia, 171 Cal. App. 4th at 958). Thus, "'[i]f there is no material distinction between the wrongdoing alleged in a CUTSA claim and that alleged in a different claim, the CUTSA preempts the other claim.'" Gabriel Techs. Corp. v. Qualcomm Inc., No. 08cv1992, 2009 WL 3326631, at *11 (S.D. Cal Sept. 3, 2009) (quoting Convolve, Inc. v. Compaq Computer Corp., 2006 WL 839022, at *6 (S.D.N.Y. Mar. 31, 2006) (applying California law)) (internal alterations omitted). Put another way, to avoid CUTSA preemption, a claim must "retain sufficient independent facts" to be viable after the "'trade secret' facts are removed." See Gabriel Techs., 2009 WL 3326631, at *12.

Jardin's initial claim for slander of title alleged that Defendants (a) misappropriated Jardin's confidential information; (b) used that misappropriated information to apply for a patent; and (c) identified Frost as the sole inventor of the invention claimed in the '349 patent-i.e., failed to disclose to the USPTO Jardin's role in developing the patent's underlying technology. In the initial complaint, Jardin claimed property interests in the allegedly misappropriated intellectual property as well as the '349 patent. [See Doc. No. 1 ¶¶ 177, 180.] Because the core of Jardin's claim was that Frost misappropriated Jardin's confidential information, the Court dismissed the claim as preempted by CUTSA, but granted Jardin leave to amend if he could "identify a cognizable property interest that lies outside of trade secret law." [Doc. No. 30, at 6.]

Repackaging his slander of title claim under a new legal theory, Jardin now alleges the same underlying facts, but claims a property interest in only the '349 patent-the "CLAIMED INVENTION." [See FAC ¶¶ 1-99, 126-30.] He claims the alleged slander actually occurred when Defendants knowingly misrepresented to the USPTO that Frost, rather than Jardin, was the sole inventor. [See Pl.'s Opp'n, at 10 ("[Claim III] does not address false statements made prior to the filing of the patent applications, but is instead directed to the false statements of sole inventorship made subsequent to the filings.").] Jardin's legal claim of inventorship, however, still stems from his factual allegation that Frost used confidential information he obtained from Jardin in the application for the '349 patent. In other words, Jardin still alleges Frost misappropriated confidential information, that the '349 patent incorporates the allegedly misappropriated information, and that, as a result, Jardin should be counted as the sole inventor and owner-or at least a co-inventor and co-owner-of the '349 patent. Although the factual allegations of misappropriation underlie his claim of ownership of the '349 patent, Jardin attempts to avoid CUTSA preemption by focusing his slander of title claim on Defendants' identification of Frost as the sole inventor during the patent application process.

To support his characterization of the slander of title claim, Jardin relies heavily on two cases: HIF Bio, Inc. v. Yung Shin Pharms. Indus. Co., 600 F.3d 1347, 1355 (Fed. Cir. 2010), and Gabriel Technologies Corp. v. Qualcomm Inc., No. 08cv1992-MMA (POR), 2009 WL 3326631, at *11 (S.D. Cal. Sept. 3, 2009). In HIF Bio, the plaintiffs alleged several claims, including correction of inventorship and ownership of several patents, as well as a claim for slander of title under California law. The district court granted the defendants' motions to dismiss under Rules 12(b)(1) and 12(b)(6), holding that the plaintiffs' claims for "rights of inventorship and ownership of inventions . . . are valid state law claims." The district court also declined to exercise supplemental jurisdiction over those and other state law claims, including the claim for slander of title, and thus remanded the case to state court. See 600 F.3d at 1350-51. On appeal, the Federal Circuit held that the district court erred in concluding that the plaintiffs' claim for correction of inventorship presented a valid state law claim, because "the field of federal patent law preempts any state law that purports to define rights based on inventorship." Id. at 1352-53 (internal quotation marks omitted). Moreover, "[b]ecause inventorship is a unique question of patent law, the cause of action arises under [28 U.S.C.] § 1338(a)."*fn1 Id. at 1353 (citing Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 809 (1988)). Addressing the remaining causes of action under state law, the Federal Circuit held that the district court also had jurisdiction over the slander of title claim because it necessarily depended on the resolution of an issue under federal patent law-namely, whether the "defendants' public statements of inventorship are false and caused the plaintiffs' damage." Id. at 1354-55.

Jardin reads HIF Bio to "expressly permit[]" claims for slander of title and to establish that such claims do not stem from allegations of trade secret misappropriation. [Pl.'s Opp'n, at 4.] But HIF Bio does not establish, as a matter of law, that CUTSA cannot preempt a claim for slander of title.

Indeed, HIF Bio does not discuss CUTSA or what may constitute an allegation of trade secret misappropriation. HIF Bio held only that the district court had jurisdiction to hear the plaintiff's claim. Here, ...


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