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Cave Consulting Group, Inc. v. Truven Health Analytics Inc.

United States District Court, N.D. California

April 24, 2017



          SUSAN ILLSTON United States District Judge.

         On April 14, 2017, the Court held a hearing on defendant's motion to dismiss the second, third, fourth, fifth, and sixth causes of action (the “non-patent claims”) from plaintiff's third amended complaint. For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART defendant's motion, and GRANTS leave to amend. Any amended complaint must be filed no later than May 8, 2017.


         On May 14, 2015, plaintiff Cave Consulting Group, Inc. sued defendant Truven Health Analytics, Inc., alleging infringement of U.S. Patent No. 8, 340, 981 and U.S. Patent No. 8, 768, 726. Dkt. No. 1 ¶ 4. CCGroup's complaint was amended once as of right on July 15, 2017 and again by stipulation on November 18, 2015. Leave to file a Third Amended Complaint was granted on December 22, 2016, but prior to filing that complaint plaintiff sought and was granted (over defense opposition) a further amended complaint. On February 21, 2017, CCGroup filed a third amended complaint (“TAC”), adding claims for misappropriation of trade secret under the California Uniform Trade Secret Act (“CUTSA”), the Michigan Uniform Trade Secret Act (“MUTSA”), and the federal Defend Trade Secret Act (“DTSA”); claims for unfair competition under the California Unfair Competition Law, California common law, Michigan common law, and the federal Lanham Act; and claims for intentional interference with prospective economic advantage under California common law and Michigan common law. TAC (Dkt. No. 159) ¶¶ 65-92.

         The additional claims against Truven arise from conduct that apparently occurred in Pennsylvania and Rhode Island. In December 2016, Truven produced in discovery e-mails that allegedly show that in 2014 CCGroup was competing for a Truven client located in Pennsylvania. TAC ¶¶ 14-36. The TAC alleges that after Truven's senior account director informed a Truven vice president that the account might be in jeopardy, the vice president asked if the account director could acquire the materials CCGroup had presented to the client. Id. The account director responded that he could. Id. The account director first asked one of the client's employees for copies of the presentation materials but the employee declined to turn over any materials. Id. The account director then reached out to a contact in Rhode Island who worked at a business that had formerly used CCGroup's services. Id. The contact e-mailed the account director a copy of CCGroup's confidential presentation materials and the account director emailed the presentation to the vice president, asking the vice president to keep the presentation materials confidential. Id.

         According to CCGroup, the confidential presentation materials contain trade secret information about CCGroup's software products. Id. ¶ 29. Upon obtaining the presentation materials, Truven's vice president and account manager reviewed and discussed them. See Id. ¶¶ 27, 28. According to CCGroup, Truven then used the confidential materials to prepare for a meeting with the client that apparently took place in Pennsylvania in August 2014. Id. ¶ 35. The client chose to remain with Truven. Id.

         After the client meeting, a Truven vice president shared the confidential materials with another Truven employee in April 2015. Id. ¶ 36. CCGroup alleges that Truven continues to use the alleged trade secrets to date. Specifically, CCGroup claims that “[o]n information and belief, Truven has continued to use CCGroup's IP after securing the [client's] business, ” and “[o]n information and belief, Truven has also used CCGroup's IP in competing against CCGroup for potential customers other than [the client], including for the purpose of developing products and modifying existing products to be more competitive with CCGroup's offering.” Id. ¶ 36.


         I. Personal Jurisdiction

         Federal Rule of Civil Procedure 12(b)(2) permits a court to dismiss a complaint for failure to state personal jurisdiction. Fed.R.Civ.P. 12(b)(2). “Where a defendant moves to dismiss a complaint for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that jurisdiction is appropriate.” Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir. 1990). When the motion is based only on the pleadings, “the plaintiff need only make a prima facie showing of jurisdictional facts.” Id. Allegations that are unchallenged are taken as true and conflicts between the pleadings are resolved in plaintiff's favor. AT & T v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). Because “the issue of personal jurisdiction with respect to non-patent counts is not intimately linked to patent law, ” Ninth Circuit law determines whether personal jurisdiction obtains. See Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1201 (Fed. Cir. 2003).

         II. Failure to State a Claim

         Federal Rule of Civil Procedure 12(b)(6) permits a court to dismiss a cause of action for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This “facial plausibility” standard requires a plaintiff to allege facts that add up to “more than a sheer possibility that a defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While courts do not require “heightened fact pleading of specifics, ” a plaintiff must allege facts sufficient to “raise a right to relief above the speculative level.” Twombly, 550 U.S. at 544, 555.

         In deciding whether a plaintiff has stated a claim upon which relief can be granted, the court must assume that the plaintiff's allegations are true and must draw all reasonable inferences in the plaintiff's favor. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). If the court dismisses the complaint, it must then decide whether to grant leave to amend. The Ninth Circuit has “repeatedly held that a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (citations and internal quotation marks omitted).


         I. Jurisdiction

         A. Personal Jurisdiction

         Defendant argues that the Court lacks personal jurisdiction for plaintiff's non-patent claims.[1] Mot. (Dkt. No. 167) at 15. Plaintiff's opposition to defendant's motion only argues that the Court has general and specific jurisdiction. However, at oral argument plaintiff contended that the Court could also exercise pendent personal jurisdiction over plaintiff's non-patent claims. As discussed below, the Court finds that exercising pendent personal jurisdiction over plaintiff's claims is appropriate in this case.[2]

         “If personal jurisdiction exists over one claim, but not others, the district court may exercise pendent personal jurisdiction over any remaining claims that arise out of the same ‘common nucleus of operative facts' as the claim for which jurisdiction exists.” Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015) (citing Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1181 (9th Cir. 2004)). “Whether to exercise pendent personal jurisdiction is committed to the sound discretion of the district court.” CE Distribution, LLC v. New Sensor Corp., 380 F.3d 1107, 1113 (9th Cir. 2004).

         Defendant does not dispute that the Court has personal jurisdiction over plaintiff's patent infringement claims. Exercising pendent personal jurisdiction over the non-patent claims is appropriate because of the factual overlap between the patent and non-patent claims, and because it is in the interest of judicial efficiency. Both the patent and non-patent claims concern the same products and technology: defendant allegedly misappropriated trade secrets pertaining to plaintiff's MarketBasket system and plaintiff's MarketBasket system practices the ‘726 patent that defendant is allegedly infringing. Plaintiff's Rule 26(a) disclosures for the patent claims also identify as possible witnesses six of defendant's employees who also allegedly misappropriated plaintiff's trade secrets. In Action Embroidery, the Ninth Circuit emphasized that the interests of “judicial economy, avoidance of piecemeal litigation, and overall convenience of the parties” animate the pendent personal jurisdiction doctrine. Action Embroidery, 368 F.3d at 1180. In order to avoid multiple lawsuits involving the same parties and products, the Court finds it appropriate to exercise pendent personal jurisdiction over plaintiff's non-patent claims.

         B. Subject ...

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