United States District Court, N.D. California, San Francisco Division
ORDER DISMISSING COPYRIGHT AND TRADE-SECRETS COUNTER
CLAIMS AND STRIKING AFFIRMATIVE DEFENSES OTHER THAN THOSE
BASED ON UNCLEAN HANDS RE: ECF NO. 60
BEELER, UNITED STATES MAGISTRATE JUDGE
case and the three cases consolidated with it generally
involve competing claims of design-patent theft related to a
golf club - the XE1 - and a golf training aid - the Speed
plaintiffs (Jonathan Wang and Golf BestBuy) and the
defendants (Timothy Oyler and Golf Tailor) both claim to have
designed the golf club and training aid; both claim the other
stole their designs. In this case, the plaintiffs seek relief
under U.S. copyright statutes (17 U.S.C. § 101 et
seq.), among other laws, arguing that the defendants
used copies of the plaintiffs' designs to counterfeit the
golf club and golf aid. The defendants countersued the plaintiffs
with six claims for declaratory relief regarding the
copyright-infringement claims (based on inequitable conduct
in the form of the plaintiffs' theft of the
defendants' trade secrets) and one claim of trade-secrets
theft in violation of the California Uniform Trade Secrets
Act (“CUTSA”), Cal. Civ. Code §§ 3426-
plaintiffs move to (1) dismiss the copyright counterclaims
under Rule 12(b)(6) on the ground that the defendants do not
adequately plead inequitable conduct as an affirmative
defense, (2) strike the second affirmative defense of
“Patent Damages Barred;” and (3) dismiss the
defendants' trade-secrets counterclaim under Rule
12(b)(6) for failure to plausibly plead facts showing
trade-secrets theft. The court strikes the affirmative defense
of “Patent Damages Barred, ” strikes the
inequitable-conduct defense to the extent that the defense is
predicated on a theory of an implied license or permission,
and denies the motion to strike the unclean-hands defense.
The court grants the motion to dismiss the counterclaims,
primarily because Mr. Wang's alleged bad acts happened
after Golf Tailor publicly disclosed its trade secrets
through product sales and also because the allegations of
conspiracy are conclusory.
case involves the design rights embodied in two products. The
first is a golf club and the second is a golf “training
aid.” The plaintiffs call the club the “Wang Golf
Club, ” which defendant Golf Tailor has manufactured
and sold (originally under a legitimate contract) as its own
“XE1 Wedge.” The plaintiffs claim that Golf Tailor sold
a “CSi Wedge” as an unauthorized derivative of
the XE1. The
training aid is called the “Speed
The parties' competing claims are the same for both
products. The plaintiffs and the defendants claim that the
other party stole their designs, produced and sold knockoffs,
and thus misappropriated their intellectual property in the
XE1 and Speed Whip.
Jonathan Wang designs golfing equipment, including clubs and
“training aids.” He is the founder of plaintiff
GolfBestBuy, Inc. Mr. Wang claims to have filed three
copyright applications related to the Wang Golf Club: (1)
U.S. Copyright Office Case No. 1-4461451449 (the
“'449 Drawing”); (2) No. 4461451644 (the
“'644 Drawing”); and (3) No. 4459918566 (the
“'566 CAD Drawing”). He claims to have seven copyright
applications on a line of related clubs: (4) Nos.
1-4459919064, 1-4461451494, and 1-4461451569 (collectively,
the “'569 Drawing”); and (5) Nos.
1-4461451689, 1-4461451744, and 1-4461451779 (the
“'799 Drawing”). Finally, in addition to these
“technical drawings, ” Mr. Wang claims to have
“created prototypes” of the Wang Golf Club;
photographs of these prototypes are also in dispute
Wang registered his copyrights in February
to the plaintiffs: “Defendants acquired copies of Mr.
Wang's six designs - including the '449 and '644
Drawings - from [Golf Gifts & Gallery], a distributor of
golf merchandise that regularly sells products designed by
Mr. Wang.” Mr. Wang provided Golf Gifts &
Gallery with two prototype golf clubs and photographs of the
prototypes because the defendants expressed interest in
buying the clubs from Golf Gifts & Gallery. The defendants acquired
the prototypes and photographs from Golf Gifts &
Golf Tailor proceeded to buy the subject clubs for about a
year and then started counterfeiting them. Once it had a source
manufacturing the counterfeits, Golf Tailor stopped buying
the authorized clubs. The plaintiffs sold the XE1-branded
inventory that had been earmarked for Golf
When the plaintiffs did this, Golf Tailor sued them (in
Washington federal court) for unfair competition and false
designation of origin.
defendants tell a different story. In April 2015, Golf
Tailor's CEO Tim Oyler asked Golf Gifts & Gallery to
manufacture the Speed Whip (“designed through
instruction and direction by Mr. Oyler . . . with Mr. Oyler
directing all design modifications”) for Golf Tailor to
sell to distributers and consumers. “Around July 2014, and
concurrently with the manufacture of the Speed Whip, ”
Golf Tailor hired Golf Gifts & Gallery to “prepare
CAD drawings based on Mr. Oyler's design for a new golf
club, ” the XEI, again for Golf Tailor to sell to end
“As with the Speed Whip, [Golf Tailor and Mr. Oyler
disclosed] the confidential XE1 information” to Golf
Gifts & Gallery.
Tailor specifies its “confidential design
information” as “emails, texts, and conversations
containing proprietary information about the design and
manufacture of the XE1 and Speed Whip products. This
information is referred to herein as the “Golf Tailor
Trade Secrets.” It alleges that it took reasonable steps
to maintain the secrecy of the trade secrets - in part by
telling Golf Gifts & Gallery that the information was
confidential and agreeing with Golf Gifts that information
would be disclosed only to manufacture the products - in
order to maintain its competitive advantage for its
to the defendants, Golf Gifts & Gallery told Golf Tailor
that it would manufacture the Speed Whip and XE1 at its own
facility in China. Instead, it contracted with third-party
manufacturer Kingstar to manufacture the
Mr. Wang is the president of Kingstar and obtained a Chinese
design patent for the XE1design; he later used this patent to
obtain the patent that issued as U.S. Patent D766,
also obtained a Chinese design patent for the Speed Whip,
used it to file an expedited patent application in the U.S.,
and obtained the patent that issued as U.S. Patent D769,
patents are the subject of the related patent
relevant dates for the patent applications are undisputed and
are as follows: (1) XE1: application for Chinese Patent No.
2015304 filed October 24, 2015, and application for U.S.
Patent No. D766, 388 filed March 16, 2016; and (2) Speed
Whip: application for Chinese Patent No.201620118508 filed
April 11, 2016, and application for U.S. Patent No. D769, 390
filed July 14, 2016.
Tailor began selling the XE1 “on or about June 24,
2015” and began selling the Speed Whip “on or
about March 2016.”
overall timeline relevant to the litigation thus is this:
Timeline for XE1
June 24, 2015
Golf Tailor begins publicly selling XE1 golf club
October 24, 2015
Mr. Wang files Chinese Patent No. 20153041454
March 16, 2016
Mr. Wang files U.S. Patent No. D766, 388
February 22, 2017
Mr. Wang registers copyrights
Timeline for Speed Whip
Golf Tailor begins publicly selling Speed Whip
April 11, 2016
Mr. Wang files Chinese Patent No. 201630118508
July 14, 2016
Mr. Wang files U.S. Patent No. D769, 390
February 22, 2017
Mr. Wang registers copyrights
Tailor begins publicly selling Speed Whip April 11, 2016 Mr.
Wang files Chinese Patent No. 201630118508 July 14, 2016 Mr.
Wang files U.S. Patent No. D769, 390 February 22, 2017 Mr.
Wang registers copyrights Golf Tailor brings six
counterclaims for a “Declaratory Judgment of
Non-Infringement” based on the defendants'
inequitable conduct, implied permission, or acquiescence for
six drawings: (1) the '499 Drawing; (2) the '644
Drawing; (3) the prototype photographs; (4) the '566 CAD
Drawing; (5) the '569 Drawing; and (6) the '644
In its seventh counterclaim, it charges theft of trade
secrets involving the XE1 and the Speed Whip, in violation of
CUTSA (Cal. Civ. Code §§
plaintiffs then moved to dismiss the defendants'
counterclaims and to strike the second and third affirmative
defenses: “Patent Damages Barred” and
court notes this procedural context. When the plaintiffs
filed their motion, the operative complaint was the initial
The defendants' defenses and counterclaims were in the
Second Amended Answer, Affirmative Defenses, Counterclaims,
and Third-Party Complaint.The plaintiffs answered it and filed
their motion. The parties briefed the motion
plaintiffs then filed an amended complaint, the defendants
filed a superseding responsive pleading and counterclaims,
and the plaintiffs answered. The pending motion thus is directed at a
pleading replaced by an amended pleading. In all relevant
respects, the two pleadings are the same. The court thus
cites the Second Amended Answer, Affirmative Defenses,
Counterclaims, and Third-Party Complaint because the parties
cite it in their papers, the outcome is the same, and a
different approach would unnecessarily burden the parties,
who would have to update their papers.
court held a hearing on November 2, 2017.
plaintiffs move to dismiss the counterclaims under Federal
Rule of Civil Procedure 12(b)(6) for failure to state a claim
and move to strike the second and third affirmative defenses
under Rule 12(f).
12(b)(6) motion to dismiss for failure to state a claim tests
the legal sufficiency of a complaint. Navarro v.
Block, 250 F.3d 729, 732 (9th Cir. 2001). A claim will
normally survive a motion to dismiss if it offers a
“short and plain statement . . . showing that the
pleader is entitled to relief.” See Fed. R.
Civ. P. 8(a)(2). This statement “must contain
sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.'”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “A claim has facial plausibility when the
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. “The plausibility standard is not akin to a
‘probability requirement, ' but it asks for more
than a mere possibility that a defendant has acted
unlawfully.” Id. (quoting Twombly,
550 U.S. at 556). “Where a complaint pleads facts that
are ‘merely consistent with' a defendant's
liability, it ‘stops short of the line between
possibility and plausibility of ‘entitlement to
relief.''” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 557).
considering a Rule 12(b)(6) motion, the court must accept as
true all factual allegations in the complaint as well as all
reasonable inferences that may be drawn from such
allegations. LSO, Ltd. v. Stroh, 205 F.3d 1146, 1150
n. 2 (9th Cir. 2000). Such allegations must be construed in
the light most favorable to the nonmoving party. Shwarz
v. United States, 234 F.3d 428, 435 (9th Cir. 2000).
“[W]hen a written instrument contradicts allegations in
the complaint to which it is attached, ” however,
“the exhibit trumps the allegations.” Gamble
v. GMAC Mortg. Corp., 2009 WL 400359, *3 (N.D. Cal. Feb.
18, 2009) (quoting N. Ind. Gun & Outdoor v. City of
South Bend, 163 F.3d 449, 454 (7th Cir. 1998)).
pleading standards of Iqbal and Twombly
apply as well to counterclaims and affirmative defenses.
See Barnes v. AT&T Pension Ben. Plan-Nonbargained
Program, 718 F.Supp.2d 1167, 1170-71 (N.D. Cal. 2010).
“The key to determining the sufficiency of pleading an
affirmative defense is whether it gives plaintiff fair notice
of the defense.” Id. at 1171 (quoting
Wyshak v. City Nat'l Bank, 607 F.2d 824, 827
(9th Cir. 1979)). Affirmative defenses that do not meet these
standards may be struck under Rule 12(f). See Id. at
1170-71; see also MIC Prop. and Cas. Corp. v. Kennolyn
Camps, Inc., No. 5:15-cv-00589-EJD, 2015 WL 4624119, at
*2 (N.D. Cal. Aug. 3, 2015) (“In this district at
least, a defendant provides ‘fair notice” of an
affirmative defense by meeting the pleading standard
articulated in Federal Rule of Civil Procedure 8, as further
refined by” Twombly and Iqbal.).
court may strike from a pleading an insufficient defense or
any redundant, immaterial, impertinent, or scandalous
matter.” Fed.R.Civ.P. 12(f). “The function of a
[Rule 12(f)] motion to strike is to avoid the unnecessary
expenditures that arise throughout litigation by dispensing
of any spurious issues prior to trial.” Rosales v.
FitFlop USA, LLC, 882 F.Supp.2d 1168, 1178 (S.D. Cal.
2012) (citing Sidney-Vinstein v. A.H. Robins Co.,
697 F.2d 880, 885 (9th Cir. 1983)). Striking is appropriate
if it “will make trial less complicated or eliminate
serious risks of prejudice to the moving party, delay, or
confusion of the issues.” Sliger v. Prospect
Mortg., 789 F.Supp.2d 1212, 1216 (E.D. Cal. 2011).
under Rule 12(f) speaks to the relevance of challenged
allegations. “‘Immaterial' matter is that
which has no essential or important relationship to the claim
for relief or the defenses being pleaded.” Fantasy,
Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993),
rev'd on other grounds, 510 U.S. 517 (1994)
(quotation omitted). Where a movant challenges allegations as
immaterial, “[a] court must deny the motion to strike
if there is any doubt whether the allegations in the
pleadings might be relevant in the action.” Oracle
Am., Inc. v. Micron Tech., Inc., 817 F.Supp.2d 1128,
1132 (N.D. Cal. 2011). “[G]enerally, ” then,
courts grant such a motion “only where ‘it is
clear that the matter to be stricken could have no possible
bearing on the subject matter of the litigation.'”
Rosales, 882 F.Supp.2d at 1179 (quoting Walters
v. Fid. Mortg. of Cal., 730 F.Supp.2d 1185, 1196 (E.D.
Cal. 2010) (citing in turn Lilley v. Charren, 936
F.Supp. 708, 713 (N.D. Cal. 1996)).
a rule, motions to strike are regarded with disfavor because
striking is such a drastic remedy; as a result, such motions
are infrequently granted.” Amini Innovations Corp.
v. McFerran Home Furnishings, Inc., 301 F.R.D. 487,
489-90 (C.D. Cal. 2014) (citing Freeman v. ABC Legal
Servs., Inc., 877 F.Supp.2d 919, 923 (N.D. Cal. 2012)
(citing in turn Stanbury Law Firm v. IRS, 221 F.3d
1059, 1063 (8th Cir. 2000)). “[W]hen ruling on a motion
to strike, ” the court accepts the challenged
allegations as true and “must liberally construe”
those allegations “in the light most favorable”
to the non-moving pleader. Stearns v. Select Comfort
Retail Corp., 763 F.Supp.2d 1128, 1140 (N.D. Cal. 2010);
see, e.g., Multimedia Patent Trust v. Microsoft
Corp., 525 F.Supp.2d 1200, 1211 (S.D. Cal. 2007)
(“In determining a motion to strike, a district court
must view the pleadings in the light most favorable to the
California Uniform Trade Secrets Act
court previously dismissed the defendants' trade-secrets
counterclaim claim under the federal Defend Trade Secrets Act
(“DTSA”), 18 U.S.C. § 1836. The DTSA applies
only to misappropriations that occur on or after May 11,
2016, the DTSA's date of enactment. Cave Consulting
Grp., Inc. v. Truven Health Analytics Inc., No.
15-CV-2177-SI, 2017 WL 1436044, *3 (N.D. Cal. Apr. 24, 2017);
accord, e.g., Avago Techs. U.S. Inc. v. Nanoprecision
Prods., Inc., No. 16-CV-3737-JCS, 2017 WL 412524, * 8
(N.D. Cal. Jan. 31, 2017). The court held that to the extent
that product sales preceded DTSA's enactment, the
date-of-enactment issue precluded a DTSA claim. The dismissal was
without prejudice to the defendants' raising a California
state a claim for trade-secrets theft under CUTSA, a
defendant must plead the existence of a trade secret, and the
misappropriation of it. Cal. Civ. Code § 3426.1(b);
see AccuImage Diagnostics Corp. v. Terarecon, Inc.,
260 F.Supp.2d 941, 950 (N.D. Cal. 2003). The defendants
plausibly plead the existence of their trade secrets in the
form of their proprietary and secret designs, their efforts
to retain secrecy, and their communication of confidentiality
to Golf Gifts & Gallery. As the court held, the
allegations “are at least minimally sound under Rule
8(a)(2) and 12(b)(6).” But the defendants did not plead the
misappropriation of the trade secrets. The timeline in the
Statement demonstrates that the defendants' alleged use
of the trade secrets happened after Golf Tailor publicly
disclosed the trade secrets through its product sales. There
can be no unlawful misappropriation after public disclosure
of the secret. In re Providian Credit Card Cases, 96
Cal.App.4th 292, 304 (2002) (“[p]ublic disclosure, that
is the absence of secrecy, is fatal to the existence of a
trade secret”); Kavanagh v. Tuller, No.
16-CV-01937-H (BGS), 2017 WL 1496436, at *4 (S.D. Cal. Apr.
26, 2017) (dismissing with prejudice trade secret claim
because claimant admitted she publically disclosed her
product through marketing and sales); Hosp. Mktg.
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