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Fortinet Inc. v. Fireeye Inc.

United States District Court, N.D. California, San Jose Division

September 30, 2014

FORTINET INC., Plaintiff,
v.
FIREEYE INC., Defendant.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS [Re: Dkt. No. 45]

EDWARD J. DEVILA, District Judge.

Presently before the court is Defendant FireEye, Inc.'s ("Defendant") Motion to Dismiss Plaintiff Fortinet, Inc.'s ("Plaintiff") First Amended Complaint ("FAC"). The court found this matter suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and previously vacated the hearing. Having fully reviewed the parties' briefing, and for the foregoing reasons, the court GRANTS IN PART AND DENIES IN PART Defendant's Motion to Dismiss.

I. BACKGROUND

Plaintiff is a worldwide provider of network security appliances and unified threat management solutions. FAC at ¶ 8. Through its research and development, it has obtained patents for its network security innovations. Id . at ¶ 9. Defendant is Plaintiff's competitor in the network security industry. Id . at ¶ 10.

In its FAC, Plaintiff alleges that since 2008, Defendant has hired at least eleven employees who worked for Plaintiff ("Plaintiff employees"). Id . at ¶ 12. While working for Plaintiff, these employees acquired sensitive and valuable trade secret information about Plaintiff's customers, partners, products, and personnel. Id . at ¶ 13. Plaintiff allegedly required its employees to sign an employment agreement swearing them to secrecy. Id . at ¶¶ 14-15. The agreement also prohibited them from inducing other employees to leave Plaintiff and from soliciting Plaintiff's clients. Id . at ¶16. When these employees left to work for Defendant, they allegedly took confidential trade secret information to benefit Defendant. Id . at ¶ 13.

Plaintiff alleges three instances in which its employees took trade secrets with them. First is the example of the "Law Firm Account, " in which a Plaintiff employee signed an engagement letter with Defendant in August 2012, unbeknownst to Plaintiff. Id . at ¶ 20. While still working for Plaintiff, this employee received internal confidential emails regarding an account with a large international law firm. Id . This employee forwarded relevant emails relating to this account and containing trade secret information to his personal email address. Id . This employee then left Plaintiff for Defendant. Id . at ¶ 24. Second is the example of the "International Distributor, " in which another Plaintiff employee who was a contact and liaison with a certain distributor left to work for Defendant in August 2012. Id . at ¶¶ 25, 28. Shortly after beginning to work for Defendant, this employee began contacting and soliciting the distributor on Defendant's behalf, attempting to forge a new relationship based on Plaintiff's trade secrets about this distributor. Id . at ¶¶ 28, 29. Third is the example of the "Salesforce Database, " in which numerous Plaintiff employees accessed Plaintiff's sales database at higher-than-normal frequencies to obtain information regarding sales, leads, customers, distributors, pricing, and other confidential sales information. Id . at ¶ 34. Plaintiff alleges that as their departure dates neared, employees who logged into the database only occasionally during the normal course of their employment began to secretly log in with urgency. Id . Two of these employees logged into the database on their last day with Plaintiff, and one logged in two days after leaving Plaintiff. Id.

Furthermore, Plaintiff alleges that Defendant's current Vice President of Product Management was Plaintiff's former Vice President of Product Management and Product Marketing. Id . at ¶ 43. Defendant has allegedly hired this employee and others who are aware of Plaintiff's patent portfolio, and Defendant has used that information to infringe on Plaintiff's patents. Id . at ¶¶ 43-44, 53-54, 63-64, 73-74, 83-84, 93-94.

Plaintiff commenced the instant action on August 22, 2012 in the United States District Court, District of Delaware. See Dkt. No. 1. In September 2012, Plaintiff filed its First Amended Complaint. See Dkt. No. 8. In May 2013, District Judge Sue L. Robinson from the District of Delaware granted Defendant's Motion to Transfer Venue to the Northern District of California. See Dkt. Nos. 30, 31. In June 2013, this case was transferred to this court and assigned to the undersigned judge. See Dkt. Nos. 32, 38. In July 2013, Defendant filed the instant Motion to Dismiss. See Dkt. No. 45. Plaintiff filed an opposition brief, and Defendant filed a reply brief. See Dkt. Nos. 49, 54. No hearing was held.

In its First Amended Complaint, Plaintiff alleges the following claims: (1) patent infringement on six patents; (2) misappropriation of trade secrets; (3) intentional interference with contractual relations; and (4) intentional interference with prospective economic advantage and/or relations.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient specificity to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007) (citation omitted). A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr. , 521 F.3d 1097, 1104 (9th Cir. 2008). Moreover, the factual allegations "must be enough to raise a right to relief above the speculative level" such that the claim "is plausible on its face." Twombly , 550 U.S. at 556-57.

When deciding whether to grant a motion to dismiss, the court generally "may not consider any material beyond the pleadings." Hal Roach Studios, Inc. v. Richard Feiner & Co. , 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). The court must accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal , 556 U.S. 662, 679 (2009). The court must also construe the alleged facts in the light most favorable to the plaintiff. Love v. United States , 915 F.2d 1242, 1245 (9th Cir. 1988).

III. DISCUSSION

A. Patent Infringement Claims

In the FAC, Plaintiff alleges six claims for patent infringement-one claim for each patent. FAC at ¶¶ 39-98. Defendant's Motion to Dismiss addresses patent infringement under six theories of liability: (1) direct infringement; (2) induced infringement; (3) contributory infringement; and (4) willful infringement. Dkt. No. 45-1 at 10, 11, 13, 14. Each theory of liability will be addressed in turn.

1. Direct Infringement

In its motion, Defendant argues that mere reliance on Form 18 allegations of direct infringement may not be sufficient to survive a motion to dismiss. Mot. to Dismiss, Dkt. No. 45-1 at 10. Alternatively, it argues that at the very least, Plaintiff must plead the information required by Form 18. Id . at 11. It argues that Plaintiff failed to sufficiently identify the component or functionality of Defendant's malware systems that allegedly infringed Plaintiff's patents. Id . Plaintiff, however, argues that its allegations are in compliance with Form 18 because it has pled direct infringement on a per-patent, per-claim and per-product basis. Opp., Dkt. No. 49 at 5-6. It also argues that at the pleading stage, where only fair notice and plausibility are at issue rather than the merits of the case, it is not necessary to allege specific "component or functionality" within the accused products and the ways in which the component satisfies claim language. Id . at 7.

Form 18, Complaint for Patent Infringement, is an appendix of the Federal Rules of Civil Procedure. It sets forth a sample complaint and requires the following:

(1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that defendant has been infringing the patent by "making, selling, and using [the device] embodying the patent;" (4) a statement that the plaintiff has given the defendant notice of its infringement; and (5) a demand for an injunction and damages.

K-Tech Telecomm., Inc. v. Time Warner Cable, Inc. , 714 F.3d 1277, 1283 (Fed. Cir. 2013) (citing McZeal v. Sprint Nextel Corp. , 501 F.3d 1354, 1357 (Fed. Cir. 2007)). "A complaint containing just enough information to satisfy a governing form may well be sufficient under Twombly and Iqbal." K-Tech Telecomm. , 714 F.3d at 1284. "Form 18 in no way relaxes the clear principle of Rule 8, that a potential infringer be placed on notice of what activity or device is being accused of infringement." Id.

Here, Plaintiff alleges that he owns six patents: (1) the 135 patent titled "Systems and Methods for Updating Content Detection Devices and Systems, " issued in November 2011; (2) the 933 patent titled "Systems and Methods for Content Type Classifications, " issued in June 2012; (3) the 974 patent titled "Systems and Methods for Content Type Classification, " issued in August 2009; (4) the 543 patent titled "Systems and Methods for Categorizing Network Traffic Content, " issued in July 2011; (5) the 483 patent titled "Systems and Methods for Updating Content Detection Devices and Systems, " issued in November 2011; and (6) the 205 patent titled "Systems and Methods for Updating Content Detection Devices and Systems, " issued in September 2012. FAC at ¶¶ 40, 50, 60, 70, 80, 90.

Plaintiff also alleges that Defendant makes, uses, sells, offers for sale, and/or imports into the United States devices that embody Plaintiff's patents, thereby: (1) Defendant's Malware Protection Cloud infringes the 135, 483, and 205 patents; (2) Defendant's Malware Protection System(s) and Virtual Execution (VX) Engine infringes the 933 and 974 patents; and (3) Defendant's Malware Analysis System and Virtual Execution (VX) Engine infringes the 543 patent. Id . at ¶¶ 42, 52, 62, 72, 82, 92.

Plaintiff has sufficiently pled a direct infringement theory of liability to satisfy Form 18 and Rule 8 pleading standards because it has alleged sufficient facts to put Defendant on notice of what devices are accused of infringing Plaintiff's patents. At this time, it is not necessary for Plaintiff to identify the specific component or functionality that allegedly infringed on the patents.

2. Induced Patent Infringement

With the exception of the 205 patent, Defendant argues that Plaintiff's allegations are conclusory because Plaintiff fails to allege the identity of any third party who directly infringes the asserted patents or any specific infringing activity by such third party. Dkt. No. 45-1 at 12. It also argues that Plaintiff failed to show that Defendant possessed the requisite specific intent to encourage others' infringement of any of the patents. Id . at 13. Plaintiff, however, argues that it has sufficiently pled the identity of third party infringers, as well as Defendant's knowledge and intent for indirect infringement. Dkt. No. 49 at 9-13.

As to the 205 patent, Defendant argues that inducement allegations are facially implausible given that this patent was issued three days before Plaintiff filed its amended complaint. Dkt. No. 45-1 at 13. Moreover, it argues that Plaintiff admitted the patent was issued after the employee left Plaintiff, and Plaintiff does not allege that this employee continued ...


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