United States District Court, C.D. California
MANUFACTURING AUTOMATION AND SOFTWARE SYSTEMS, INC.
KRISTOPHER HUGHES ET AL.
Present: The Honorable Christina A. Snyder
CIVIL MINUTES - GENERAL
DEFENDANTS PCVUE, INC. AND EDWARD NUGENT'S MOTION TO
DISMISS (Dkt. 46, filed March 10, 2017)
December 2, 2016, plaintiff Manufacturing Automation &
Software Systems, Inc. (“plaintiff” or
“MASS Group”) filed this action against
defendants Kristopher Hughes, James Huysentruyt, InformaTrac,
Inc., PcVue, Inc., Edward Nugent, and Does 1-10, inclusive.
Dkt. 1. Plaintiff filed a first amended complaint on January
31, 2017. Dkt. 27 (“FAC”). Plaintiff alleges the
following claims: (1)-(8) copyright infringement of eight
copyrighted works against all defendants; (9) violation of
the Computer Fraud and Abuse Act, 18 U.S.C. §§ 1030
et seq. against Hughes and Huysentruyt; (10)
violation of California's Computer Data Access and Fraud
Act, Cal. Penal Code § 502 against Hughes and
Huysentruyt; (11) misappropriation of trade secrets in
violation of California's Uniform Trade Secrets Act, Cal.
Civ. Code §§ 3426 et seq. against all
defendants; (12) breach of contract against Hughes and
Huysentruyt; (13) interference with prospective economic
advantage against Hughes, Huysentruyt, and InformaTrac; (14)
fraud and deceit against Hughes and Huysentruyt; (15)
conversion against Hughes, Huysentruyt, and Does 1-10; (16)
diversion of corporate opportunities against Hughes and
Huysentruyt; and (17) accounting against all defendants. The
gravamen of plaintiff's complaint is that defendants
wrongfully copied plaintiff's software to produce,
market, and sell a counterfeit version to plaintiff's
customers or potential customers.
March 28, 2017, PcVue and Nugent (the “moving
defendants”) filed the instant motion to dismiss
plaintiff's complaint for lack of personal jurisdiction
and for failure to state a claim against them on which relief
may be granted. Dkt. 50 (“MTD”). Plaintiff filed
its opposition on April 17, 2017, dkt. 51
(“Opp'n”), and the moving defendants filed
their reply on April 24, 2017, dkt. 52 (“Reply”).
carefully considered the parties' arguments, the Court
finds and concludes as follows.
alleges the following facts.
and its founder and CEO, Gamal Balady, have developed,
produced, marketed, and licensed a series of internet-based
software programs that allow customers to track or trace
quantities and precise locations of inventories, equipment,
materials, documents, or people. FAC ¶ 1. These programs
are protected by copyright. Id. Eight of those
copyrighted works, referred to as the “MASS Software,
” are at issue in this matter. Id. Plaintiff
is a California corporation with is principal place of
business in California. Id. ¶ 20 Huysentruyt is
a California resident. Id. ¶ 22. Huysentruyt
began working at MASS Group in 1998 and continued working
there until his resignation on March 3, 2016. Id.
¶ 31. At the time of his resignation, Huysentruyt was
the vice president of sales. Id. Among his
responsibilities was the cultivation of partnerships and
is a California resident. Id. ¶ 21. Hughes was
hired to work at MASS Group in 1999 and continued working
there until his resignation on March 4, 2016. Id.
¶ 30. Hughes served as a software developer and, more
recently, as a senior manager. Id. Among his
responsibilities as senior manager was assuring compliance
with state and federal laws and regulations. Id.
is a California corporation-controlled and owned by Hughes
and Huysentruyt-with its principal place of business in
California. Id. ¶ 23.
began working at MASS Group in 2004 and was terminated in
2007. Id. ¶¶ 25, 32. Nugent served as the
sales lead for the western United States in marketing,
promotion, and sales. Id. In 2005, Nugent signed a
nondisclosure agreement with plaintiff, promising not to
disclose or use any of plaintiff's confidential
information, including the MASS Software or the source or
object codes. Id. Nugent previously resided in
California, and now resides and works in Massachusetts, where
he is an officer and director of PcVue, a corporation
headquartered in Massachusetts. Id. ¶ 25.
until 2015, Nugent maintained regular contact with
Huysentruyt and Hughes in California to discuss various joint
business opportunities for PcVue and MASS Group. Id.
Hughes and Huysentruyt were still officers of MASS Group,
they agreed with Nugent and PcVue to jointly develop a
software solution for the Miami Dade Airport-a PcVue
customer. Id. ¶ 8. Under Nugent and PcVue's
supervision and control, Hughes and Huysentruyt applied MASS
Software, along with PcVue's integrated software, to
provide the Miami Dade Airport with the ability to collect
data and receive reports on the status and condition of the
airport's new passenger trains. Id. ¶ 9.
Such a project is within the core competency of MASS Group
and the MASS Software is well suited to such a project.
Id. In addition, before and after Hughes' and
Huysentruyt's resignations from MASS Group, Nugent and
PcVue brought to Hughes and Huysentruyt new orders for
Informa Trac's software and services. Id. ¶
February 18 and 22, 2016, Hughes and Huysentruyt respectively
informed Balady that they were resigning as employees of MASS
Group, effective March 3 and 4, 2016. Id. ¶ 34.
Hughes and Huysentruyt stated that they were resigning for
personal reasons, had not begun to look for work elsewhere,
and did not know where they would work next. Id.
However, plaintiff alleges that Hughes and Huysentruyt had
already launched their plan to copy the MASS Software and
sell it as their own through their new company, InformaTrac.
Id. ¶ 35. Hughes and Huysentruyt registered the
domain name for InformaTrac on February 12, 2016-before
giving notice of their resignations. Id. They
incorporated InformaTrac just a few weeks later. Id.
As employees of MASS Group, Hughes and Huysentruyt were
involved in the development of the MASS Software and had full
access to that software and its underlying source and object
codes. Id. ¶ 37. In the year prior to their
resignations, Hughes and Huysentruyt were responsible for
promoting, licensing, and servicing the MASS Software and,
next to Balady, had the most contact with plaintiff's
current and potential customers. Id. ¶ 41. In
the six months before their resignations, Hughes and
Huysentruyt brought in virtually no new customers for
plaintiff as part of defendants' plan to copy the MASS
Software and eliminate plaintiff as an effective competitor
to InformaTrac. Id. ¶ 42. Upon their
resignation, Hughes and Huysentruyt were instructed to return
all company phone records, proprietary or trade secret
information, MASS Software, source and object codes, and any
servers or storage disks containing such intellectual
property. Id. ¶ 48. Hughes and Huysentruyt were
also directed (and agreed) to delete all MASS Software source
and object code information from any computers, servers, or
disks in their possession. Id.
April 2016, Hughes, Huysentruyt, PcVue, and Nugent issued a
joint press release through PcVue's public relations
firm, announcing the formation of a “business
partnership” between InformaTrac and PcVue.
Id. ¶ 11. The press release provided:
PcVue, Inc., a global HMI/SCADA software provider, is pleased
to announce that it has partnered with InformaTrac, Inc., to
offer enhanced traceability for asset management. . . .
InformaTrac Pro software combined with PcVue's
Supervisory Control and Data Acquisition (SCADA) platform
yields a flexible and powerful traceability solution…
“Traceability, whether acquired from equipment or
technologies such as RFID and barcodes, can be now delivered
in real-time and via multi-media reports, ” according
to PcVue's COO, Edward Nugent. Kris Hughes, President of
InformaTrac added, “The partnership bridges the gap
between the Auto-ID and SCADA software strategies and enables
complete traceability solutions. By working together our
companies have achieved a new level of asset monitoring and
tracking software for informed decision making . . . .”
Jim Huysentruyt, VP of Business Development added, “Ed
Nugent and I have been working together on these kinds of
solutions since the early 90s.”
Id. Since March 2016, defendants have (a) prepared
joint marketing materials; (b) jointly marketed products
through PcVue's booths at multiple industry trade shows,
including in San Diego California on January 31, 2017; and
(c) advertised their business alliance and product offerings
on their websites. Id. ¶ 12. PcVue finances
Informa Trac's marketing efforts and serves as an
“integral part of Defendants' joint effort to sell
Informa Trac's infringing software along with PcVue's
complementary software, in California and elsewhere.”
Id. ¶ 13.
information and belief, plaintiff alleges that Hughes and
Huysentruyt are selling counterfeit copies of the MASS
Software to customers and potential customers of MASS Group
under the new corporate identify InformaTrac. Id.
¶ 36. Hughes and Huysentruyt are jointly marketing,
selling, and/or assisting in selling the counterfeit software
with Nugent and PcVue. Id. ¶ 38. On information
and belief, plaintiff alleges that defendants are selling the
counterfeit software using false and misleading statements,
including assertions that defendants acquired legal ownership
of the MASS Software and all rights therein and are
authorized to sell or license the MASS Software as their own.
Id. ¶ 39. On information and belief, plaintiff
alleges that some its actual or potential new customers were
dissuaded from acquiring or renewing licenses for and
discontinued their use of the MASS Software because of
defendants' copyright infringement. Id.
¶¶ 43-44. On information and belief, Hughes and
Huysentruyt contacted numerous current and prospective
customers and offered to replace the MASS Software with the
infringing InformaTrac Software. Id. ¶ 45.
Defendants accessed and exploited-and, on information and
belief, continue to access and exploit-plaintiff's
confidential customer contact information. Id.
alleges that defendants engaged in a conspiracy to: (a)
misappropriate the source and object codes for the Mass.
Software, along with other proprietary items and related
information; (b) copy and convert to themselves
plaintiff's intellectual property, including
plaintiff's business and marketing plans, marketing
materials, trade secrets, customer contact information,
financial information, and personnel documents (“MASS
Assets”); (c) utilize the MASS Assets to launch and
operate InformaTrac; (d) misrepresent and conceal material
facts from plaintiff and Balady; (e) market InformaTrac
Software in combination with PcVue's products; and (f)
represent to potential InformaTrac Software licensees that
defendants are the lawful owner of that software.
Id. ¶ 49. Nugent and PcVue partially financed,
supervised, and controlled this conspiracy by: (a) wrongfully
allowing defendants to exploit the MASS Assets; (b)
defrauding plaintiff; and (c) interfering with
plaintiff's contractual and business relations.
Id. ¶ 50.
asserts eight claims of copyright infringement against
defendants, including PcVue and Nugent, for infringing on the
following copyrighted works: U.S. Copyright No. TX 8-233-219
(“Work 1”); U.S. Copyright App. No. 1-4192462946
(“Work 2”); U.S. Copyright App. No. 1-4192462853
(“Work 3”); U.S. Copyright App. No. 1-4192462795
(“Work 4”); U.S. Copyright App. No. 1-4192462747
(“Work 5”); U.S. App. Copyright No. 1-4192462679
(“Work 6”); U.S. Copyright App. No. 1-4192462581
(“Work 7”); and U.S. Copyright App. No.
2-4189662157 (“Work 8”) (collectively,
“Works”). See generally FAC. With
respect to each copyrighted work, plaintiff alleges:
Defendants' infringing works “copy, ” i.e.
are identical or virtually identical, and substantially
similar to, the quantitatively and qualitatively distinct,
important, and recognizable, nonfunctional and protectable
portions of Plaintiff's Copyrighted Work[s 1-8],
including the literal elements of Plaintiff's Work[s
1-8], i.e. the source and object codes, as well as the
nonliteral and nonfunctional elements of Plaintiff's
Work[s 1-8], including but not limited to the structure,
sequence and organization, appearance of the user interface,
screens, fields, arrangement and sequencing of fields.
Id. ¶¶ 54, 72, 90, 108, 126, 144, 162,
180. Plaintiff specifies that the “protectable
elements” of its Works “do not include any
procedures, processes, systems, or methods of operation for
Plaintiff's software products, such matters only alleged
as Plaintiff's Trade Secrets, defined and alleged
hereinbelow.” See, e.g., id. ¶
55. Defendants did not seek or receive permission or consent
to copy any portion of plaintiff's Works and copied them
willfully and maliciously. See, e.g., id.
¶ 56. Plaintiff alleges that defendants acted jointly
and that “each” defendant induced, caused, or
materially contributed to the infringing conduct of one
another such that they should be found contributorily liable
for the acts of the others. See, e.g., id.
¶¶ 61-62. In addition, each defendant had the right
and ability to control the other infringers and derived a
direct benefit from that infringement such that each
defendant should be found vicariously liable. See,
e.g., id. ¶ 63.
asserts a claim of misappropriation of trade secrets as
against PcVue and Nugent, along with the other defendants.
Id. ¶¶ 212-37. Plaintiff defines
“Trade Secrets” to mean “the procedures,
processes, systems, methods of operation for Plaintiff's
software products, customer identifications, private phone
numbers and email addresses, individual customer product
needs and specifications, market studies, special business
practices and private bank account information.”
Id. ¶ 213. Plaintiff enjoys an advantage over
its existing and potential competitors because of the Trade
Secrets that it has acquired through years of research and
investigation. Id. ¶ 214. Plaintiff has made
and continues to make reasonable efforts to preserve the
confidentiality of its Trade Secrets and requires its
employees-including Hughes, Huysentruyt, and Nugent-to sign
nondisclosure agreements. Id. ¶ 216. Plaintiff
alleges that, without its consent, defendants misappropriated
plaintiff's Trade Secrets when Hughes and Huysentruyt
downloaded and copied digital files containing Trade Secrets
in the final months of their employment. Id.
¶¶ 219-20. On information and belief, plaintiff
avers that Nugent and PcVue urged Hughes and Huysentruyt to
share those files with Nugent and PcVue for defendants'
mutual use. Id. ¶ 219. On information and
belief, plaintiff alleges that Hughes and Huysentruyt
disclosed the Trade Secrets to Nugent and PcVue, which then
exploited those Trade Secrets in the process of selling
PcVue's products and services along with the integrated
products and services of InformaTrac. Id. ¶
229. Defendants knew or had reason to know that the Trade
Secrets they acquired constituted protectable trade secrets
that had independent economic value, were not generally known
to the public, and were the subject of plaintiff's
reasonable efforts to ensure the secure the secrecy of such
information. Id. ¶ 231.
plaintiff asserts a claim for accounting against PcVue and
Nugent, along with the other defendants. Id.
defendant moves to dismiss for lack of personal jurisdiction
under Federal Rule of Civil Procedure 12(b)(2), the plaintiff
bears the burden of demonstrating that the court may properly
exercise personal jurisdiction over the defendant. Pebble
Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).
Where, as here, a court decides such a motion without an
evidentiary hearing, the plaintiff need only make a prima
facie showing of jurisdictional facts to withstand the motion
to dismiss. Ballard v. Savage, 65 F.3d 1495, 1498
(9th Cir. 1995); Doe v. Unocal Corp., 27 F.Supp.2d
1174, 1181 (C.D. Cal. 1998), aff'd, 248 F.3d 915
(9th Cir. 2001). The plaintiff's alleged version of the
facts is taken as true for purposes of the motion if not
directly controverted. AT & T v. Compagnie Bruxelles
Lambert, 94 F.3d 586, 588 (9th Cir. 1996);
Unocal, 27 F.Supp.2d at 1181. If the defendant
adduces evidence controverting the allegations, however, the
plaintiff may not rely on his pleadings, but must “come
forward with facts, by affidavit or otherwise, supporting
personal jurisdiction.” Scott v. Breeland, 792
F.2d 925, 927 (9th Cir. 1986) (quoting Amba Mktg. Servs.,
Inc. v. Jobar Int'l, Inc., 551 F.2d 784, 787 (9th
Cir. 1977)). Any “conflicts between the facts contained
in the parties' affidavits must be resolved in
[plaintiff's] favor for purposes of deciding whether a
prima facie case for personal jurisdiction exists.”
AT & T, 94 F.3d at 588-89 (quotation marks
personal jurisdiction exists if (1) it is permitted by the
forum state's long-arm statute and (2) the
“exercise of that jurisdiction does not violate federal
due process.” Pebble Beach, 453 F.3d at
1154-55 (citing Fireman's Fund Ins. Co. v. Nat'l
Bank of Coops., 103 F.3d 888, 893 (9th Cir. 1996)).
long-arm jurisdictional statute is coextensive with federal
due process requirements, so that the jurisdictional analysis
under state law and federal due process are the same. Cal.
Civ. Proc. Code § 410.10; Roth v. Garcia
Marquez, 942 F.2d 617, 620 (9th Cir. 1991). In order for
a court to exercise personal jurisdiction over a nonresident
defendant, that defendant must have “minimum
contacts” with the forum state so that the exercise of
jurisdiction “does not offend traditional notions of
fair play and substantial justice.” Int'l Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945). Depending
on the nature of the contacts between the defendant and the
forum state, personal jurisdiction is characterized as either
general or specific.
court may assert general jurisdiction over foreign
(sister-state or foreign-country) corporations to hear any
and all claims against them when their affiliations with the
State are so ‘continuous and systematic' as to
render them essentially at home in the forum State.”
Goodyear Dunlop Tires Operations, S.A. v. Brown, 564
U.S. 915, 919 (2011). Whether a defendant's contacts are
sufficiently substantial, continuous, and systematic for an
exercise of general jurisdiction depends upon a
defendant's “[l]ongevity, continuity, volume,
economic impact, physical presence, and integration into the
state's regulatory or economic markets.” Mavrix
Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1224
(9th Cir. 2011) (quoting Tuazon v. R.J. Reynolds Tobacco
Co., 433 F.3d 1163, 1172 (9th Cir. 2006)); see also
Bancroft & Masters, Inc. v. Augusta Nat. Inc., 223
F.3d 1082, 1086 (9th Cir. 2000) (“Factors to be taken
into consideration are whether the defendant makes sales,
solicits or engages in business in the state, serves the
state's markets, designates an agent for service of
process, holds a license, or is incorporated there.”).
Occasional sales to residents of the forum state are
insufficient to create general jurisdiction. See Brand v.
Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir. 1986). This
standard is exacting, “because a finding of general
jurisdiction permits a defendant to be haled into court in
the forum state to answer for any of its activities anywhere
in the world.” Schwarzenegger v. Fred Martin Motor
Co., 374 F.3d 797, 801 (9th Cir. 2004).