United States District Court, N.D. California
DANIEL J. KANE and MESA PHOTONICS, LLC, Plaintiffs,
KENNETH W. DELONG, FEMTOSOFT TECHNOLOGIES, LLC, SWAMP OPTICS, LLC, Defendants.
ORDER GRANTING DEFENDANTS KENNETH W. DELONG AND FEMTOSOFT TECHNOLOGIES, LLC'S MOTION TO DISMISS THE FIRST ACTION IN THE AMENDED COMPLAINT
(Dkt. No. 20)
KANDIS A. WESTMORE, Magistrate Judge.
On December 20, 2013, Defendants Kenneth W. Delong and Femtosoft Technologies, LLC (collectively "Femtosoft") filed a motion to dismiss the first and second causes of action in Plaintiffs Daniel J. Kane and Mesa Photonics, LLC's amended complaint. (Def.'s Mot. to Dismiss, "Def.'s Mot., " Dkt. No. 20.) On February 20, 2014, the Court held a hearing, and after careful consideration of the parties' arguments, for the reasons set forth below, the Court GRANTS Femtosoft's Motion to Dismiss with leave to amend.
Plaintiff Daniel J. Kane is the inventor of U.S. Patent No. 7, 130, 052 ("the 052 Patent") and founder and CEO of co-plaintiff Mesa Photonics, LLC (collectively "Mesa"). (Am. Compl., Dkt. No. 17 ¶¶ 7-8.) On October 22, 2012, Plaintiffs sued Femtosoft and Kenneth W. Delong (collectively "Femtosoft") for infringement of the 052 Patent by its QuickFrog and QuickFrog Lite software products. ( Kane v. Delong, Case No. 3:12-cv-05437-EMC (N.D. Cal.) (the "California Action").) (Am. Compl. ¶¶ 9-10.)
On June 12, 2013, Mesa and Femtosoft attended a settlement conference and agreed to settle the California Action on terms that were read into the record. (Am. Compl. ¶ 11.) On August 5, 2013, Mesa and Femtosoft entered into a written settlement agreement, which contained an integration clause, and superseded any prior agreements. (Settlement Agreement, Def.'s Request for Judicial Notice, "RJN, " Dkt No. 21, Ex. 1 ¶ 7.)
Per the Settlement Agreement, Femtosoft agreed that it would "not make, use, sell, offer to sell or distribute QuickFrog, QuickFrog Lite or similar products anywhere in the world or contribute or induce infringement of the 052 Patent." (Settlement Agreement ¶ 1). Femtosoft also represented that it had "control over all of the source code for QuickFrog and QuickFrog Lite products." (Settlement Agreement at 1.) Femtosoft further agreed to "demand the return of any and all master disks having any code for QuickFrog, QuickFrog Lite or similar products in the possession or control of Professor Rick Trebino or Swamp Optics, LLC." (Settlement Agreement ¶ 2.) The Settlement Agreement stated that Femtosoft represented that they were not in privity with Rick Trebino or with Swamp Optics. (Settlement Agreement at 1.) The Settlement Agreement further provided that Femtosoft "shall have the right to deliver software for purchases completed before June 12, 2013" and "shall have the right to support customers that existed prior to June 12, 2013 but not to distribute or sell QuickFrog, QuickFrog Lite or similar products to such customers." (Settlement Agreement ¶ 1.)
On October 28, 2013, Plaintiffs filed a complaint in federal court against Kenneth W. Delong, Femtosoft, and Swamp Optics for breach of the settlement agreement on the grounds that Femtosoft continued selling QuickFrog software through Swamp Optics. (Am. Compl. ¶¶ 32-35.) Plaintiffs allege that Swamp Optics was the primary sales agent for QuickFrog software, and that Femtosoft's QuickFrog software was custom designed for Swamp's GRENOUILLE system. (Am. Compl. ¶ 16.) On information and belief, Plaintiffs contend that Swamp Optics performed many other functions and services on Femtosoft's behalf related to QuickFrog, including setting retail and distributor pricing, negotiating with distributors, performing service calls, and attending industry conferences to promote QuickFrog. (Am. Compl. ¶¶ 25-28.) Plaintiffs allege that Swamp Optics is an actual or apparent agent of Femtosoft.
On November 25, 2013, Femtosoft moved to dismiss the two causes of action alleged against it. In response, Plaintiffs filed their first amended complaint. (Dkt. No. 17.) On December 20, 2013, Femtosoft filed a motion to dismiss the first cause of action for breach of the settlement agreement and the second cause of action for breach of implied covenant of good faith and fair dealing.
II. LEGAL STANDARD
A. Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6)
The Federal Rules of Civil Procedure require a complaint to contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. Pro. 8(a)(2). However, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, (1957)).
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. A motion to dismiss a complaint under Rule 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 732 (9th Cir. 2001).
In considering a 12(b)(6) motion, the court must "accept as true all of the factual allegations contained in the complaint, " Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citation omitted), and may dismiss the case "only where there is no cognizable legal theory" or there is an absence of "sufficient factual matter to state a facially plausible claim to relief." Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)) (quotation marks omitted).
A claim has facial plausibility when a plaintiff "pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citation omitted). "Threadbare recitals of the elements of a cause of action" and "conclusory statements" are not adequate. Id. at 678; see also Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996) ("However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim."). "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.... When a complaint pleads facts that are merely consistent with a ...