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Gatan, Inc. v. Nion Co.

United States District Court, N.D. California

March 31, 2017

GATAN, INC., Plaintiff,
v.
NION COMPANY, Defendant.

          ORDER DENYING MOTION TO DISMISS THIRD AMENDED COMPLAINT RE: DKT. 120, 121

          PHYLLIS J. HAMILTON United States District Judge

         Before the court is defendant Nion Company's motion to dismiss the third amended complaint. The matter is fully briefed and suitable for decision without oral argument. Accordingly, the hearing set for April 5, 2017 is VACATED. Having read the parties' papers and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court DENIES the motion for the following reasons.

         BACKGROUND

         A. Factual Background

         The court has reviewed the facts of this case in detail in its prior orders. See Dkt. 55, 106. In brief, plaintiff Gatan, Inc. (“Gatan”) is a manufacturer of components used in electron microscopes, including spectrometers. Defendant Nion Company (“Nion”) is a manufacturer of electron microscopes. Historically, Nion did not manufacture its own spectrometers, but instead would buy third-party spectrometers for use in its microscopes.

         The parties' dispute centers on a February 2, 2010 “Reseller Agreement” between Gatan and Nion (the “Agreement”). Pursuant to the Agreement, the parties worked together to modify a Gatan spectrometer for integration into a Nion microscope for Arizona State University (“ASU”). Gatan accuses Nion of breaching the contract and misusing confidential information divulged under the terms of the Agreement.

         B. Procedural History

         The original complaint was filed on April 25, 2015. Dkt. 1. After Nion filed a motion to dismiss, Dkt. 17, Gatan withdrew its original complaint and filed the first amended complaint (“FAC”) on July 20, 2015. Nion again moved to dismiss the FAC, arguing that the breach of contract claim-which relied on paragraph 16 of the Agreement-was preempted by California Business and Professions Code section 16600 (“section 16600”), which prohibits enforcement of non-compete clauses. The court granted the motion to dismiss on November 18, 2015. Dkt. 32. The court gave leave to amend, however, so that Gatan could plead that a “trade secret exception” to section 16600 saved its breach of contract claim. See Dkt. 33.

         The second amended complaint (“SAC”) followed, asserting four causes of action. The first claim was for breach of contract, alleging that Nion competed with Gatan in violation of paragraph 16 of the Reseller Agreement. The second claim was also for breach of contract: Gatan argued that Nion did not provide spectrometer specifications to Gatan before developing its own spectrometer, violating the procedure set forth in paragraph 16. The third claim alleged that Nion's actions violated the implied duty of good faith and fair dealing. The fourth claim was for declaratory relief based on paragraph 15 of the Agreement, which provides that Nion shall grant Gatan a nonexclusive license to “[a]ll discoveries and developments that [Nion] may conceive, develop, or acquire, whether alone or with others, arising out of the incorporation of [Gatan's spectrometer] into [Nion's] systems (collectively, ‘Developments').” Gatan alleged that Nion had refused to grant it a license to all of the “Developments.”

         On March 23, 2016, the court heard a motion to dismiss the SAC. The central issues were whether paragraph 16 was preempted by section 16600, and whether the “trade secret exception” could save the breach of contract claims. On March 30, 2016, the court granted the motion to dismiss in part. Dkt. 55. The court ruled that the alleged “trade secret exception” did not apply because paragraph 16 was not “necessary to protect” Gatan's trade secrets, which were protected by separate provisions of the Agreement-specifically paragraphs 12 and 13. Id. at 5-6. Accordingly, the court dismissed the first three causes of action. The court denied the motion to dismiss the declaratory relief claim regarding paragraph 15, however.

         On January 5, 2017, the court granted Gatan's motion for leave to file a third amended complaint in part. Dkt. 106. The proposed complaint sought to assert new claims for breach of contract based on paragraphs 12 and 13 of the Reseller Agreement, as well as a new claim for misappropriation of trade secrets. The court found that although Gatan unduly delayed in asserting these claims, it would permit the amendment in light of the lack of substantial prejudice to Nion. Id. at 7-9.

         C. Allegations in the Third Amended Complaint

         Gatan filed its third amended complaint (“TAC”) on January 26, 2017. Dkt. 115. The TAC asserts four claims: (1) misappropriation of trade secrets; (2) breach of paragraphs 12-14 of the Agreement regarding “confidential information”; (3) breach of paragraph 15 of the Agreement regarding the developments license; and (4) declaratory relief with respect to the developments license.

         The factual background is the same as alleged in previous complaints. Gatan is a manufacturer of spectrometers, including the Enfinium (a.k.a. the “Quefina”), which is based on the technology of the GIF Quantum, an imaging energy filter. TAC ¶¶ 13-14. In the past, Nion did not market or sell its own spectrometers. TAC ¶ 15. In October 2009, Nion approached Gatan to collaborate on an electron microscope for ASU. TAC ¶ 16. The project required Gatan to provide Nion with a partially assembled spectrometer, which Nion would then modify with Gatan's help. Id. Because the collaboration would require Gatan to disclose confidential information, Gatan received assurances from Nion's President (and former Gatan employee), Dr. Ondrej Krivanek, that Nion “won't have any problems signing on the dotted line that Nion will never make a spectrometer [unless] it turned out we needed to go beyond what Gatan is doing.” TAC ¶¶ 18-19.

         1. The Reseller Agreement

         On February 2, 2010, Nion entered into the Reseller Agreement with Gatan. TAC ¶ 20. The key provisions for the purposes of this motion are paragraphs 12, 13, and 15. Paragraph 12 broadly defines the term “Confidential Information”:

12. Confidential Information. In the course of performing services for Gatan, [Nion] . . . will acquire, obtain, or have access to confidential and/or proprietary information relating to Gatan . . . including, without limitation, (a) information, ideas, inventions, designs, plans, prototypes, concepts, processes, formulations, specifications, materials, samples, applications, records, and technical and statistical data related to or used in connection with the design, development, manufacture, advertising, marketing, distribution, and sale of Gatan's products and the operation of its businesses; (b) computer software, programs, applications, systems, and data . . .; and (e) trade secrets (all such information hereinafter referred to as “Confidential Information”) . . . .

TAC Ex. A at 3.

         Paragraph 13 limits Nion's use of “Confidential Information, ” providing that Nion may not disclose or use Gatan's confidential information except in furtherance of the Agreement:

13. Use of Confidential Information. [Nion] shall hold and maintain strictly confidential all Confidential Information, and shall not at any time . . . directly or indirectly disclose or use any such Confidential Information, howsoever obtained or acquired, or compile, duplicate, develop or adapt such Confidential Information for any purpose, other than strictly incidental to, and solely in furtherance and with the scope of, the Agreement. . . .

TAC Ex. A at 3.

         Paragraph 13 goes on to prohibit Nion from creating any products that compete with Gatan or to “otherwise use” Confidential Information for commercial purposes:

[Nion] agrees that it will not directly or indirectly create any products . . . or other technologies . . . at any time sold, marketed, used, or developed by Gatan . . . or otherwise use any Confidential Information for commercial purposes or in any manner detrimental to Gatan or its affiliates. . . .

Id.

         Finally, paragraph 15 requires that Nion grant to Gatan a non-exclusive license to any “Developments” ...


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