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Javo Beverage Co., Inc. v. California Extraction Ventures, Inc.

United States District Court, S.D. California

December 2, 2019



          Hon. Cathy Ann Bencivengo United States District Judge.

         This matter comes before the Court on Defendants California Extraction Ventures, Inc.'s (“CEV”) and Stephen Corey's (collectively “Defendants”) motion to dismiss. [Doc. No. 7.] The motion has been fully briefed and the Court finds it suitable for determination on the papers submitted. See S.D. Cal. CivLR 7.1(d)(1). Defendants' request for oral argument [Doc. No. 25] is therefore denied. For the reasons set forth below, Defendants' motion to dismiss is denied.

         I. BACKGROUND[1]

         Since 1993, Plaintiff Javo Beverage Co., Inc. (“Javo”) has been engaged in the business of coffee, tea, and botanical extracts, ingredients, and flavor systems, which are sold across the country. [Doc. No. 1 at ¶ 13.[2] Javo researched and developed a proprietary process for its manufacture of extracts of coffee, tea, and other botanicals which includes, among other things, introducing purified, deionized water within particular temperature and pressure ranges into a proprietary columnar extraction vessel containing an extractable material (e.g., roasted coffee) that has been ground into multiple particle sizes and specially packed into the vessel into which deionized water is introduced, eventually resulting in a pure, concentrated extract flowing from the top of the vessel. [Doc. No. 1 at ¶¶ 1, 14.] Javo alleges it has continually maintained this process as a proprietary trade secret within the industry. [Id.] Defendant Corey was an original co-founder of Javo and its predecessors, and a principal inventor of Javo's trade secret extraction process. [Id. at ¶ 2.] During his time as an employee, Corey assigned all rights and interests he may have had in the proprietary process to Javo through his Employment Agreement (“EA”) and the associated Employee Confidentiality and Invention Assignment Agreement (“CIAA”), executed on December 5, 2001. [Id. at ¶ 3.]

         On January 24, 2011, Javo commenced a Chapter 11 bankruptcy proceeding to, among other things, restructure its debt. [Id. at ¶ 42.] In or about August 2011, Javo terminated Corey without cause because of the elimination of his position due to the restructuring under the bankruptcy plan. [Id. at ¶ 47.]

         Kurt Toneys, a former President/CEO of one of Javo's predecessors, is now involved with Defendant CEV as its current CEO, alongside Defendant Corey who is CEV's current President. [Id. at ¶ 7, 22.] Javo alleges that Corey and CEV misused Javo's trade secrets and other confidential information to benefit CEV, constituting a breach of Corey's EA and CIAA with Javo, when Corey improperly disclosed the information in publicly-available patent applications he filed with the United States Patent and Trademark Office and assigned to CEV. [Id. at ¶¶ 15, 18.] CEV offered and sold securities to fund, at least in part, the preparation and filing of Corey's provisional patent application, U.S. Pat. App. No. 62/134, 497, which Corey filed on March 17, 2015 (the “'497 Provisional Application”). [Id. at ¶ 49-50.] The '497 Provisional Application lists Corey as the inventor and contains terminology frequently used by Corey at Javo and refers to “Javo” processes in certain figures. [Id. at ¶ 51.] Thus far, Corey has obtained seven issued patents and has seven additional published patent applications all claiming priority to Corey's '497 Provisional Application which have all been assigned to CEV. [Id. at ¶ 65.] According to the complaint, the issued patents and published patent applications disclose material that substantially describes and overlaps with the proprietary confidential information and trade secrets of Javo, constituting a violation of Corey's obligations to refrain from disclosing confidential information of Javo and to transfer all interest in any inventions to Javo. [Id. at ¶ 66.]

         On May 30, 2019, Javo demanded, among other things, that Defendants immediately assign rights in the patents and applications claiming priority to the '497 Provisional Application. [Id. at ¶ 68.] Javo then filed its complaint on September 26, 2019, alleging: (1) Misappropriation of Trade Secrets Under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836, et seq.; (2) Misappropriation of Trade Secrets Under the California Uniform Trade Secrets Act (“CUTSA”), Cal. Civ. Code §§ 3426-3426.11; (3) Declaratory Judgment of Ownership of the Patents; and (4) Intentional Interference with Contractual Relations.


         At the motion to dismiss stage a court may consider materials incorporated into the complaint or matters of public record, without converting the motion to dismiss into a motion for summary judgment. Coto Settlement v. Eisenberg., 593 F.3d 1031, 1038 (9th Cir. 2010) (citation omitted); see also Federal Rules of Evidence 201(b): “The court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”

         Defendants request the Court take judicial notice of the patent applications and the corresponding patents that are implicated in this case. [Doc. No. 7-2.] Javo filed a statement of non-opposition to Defendants' request for judicial notice. [Doc. No. 11.] Accordingly, the Court takes judicial notice of Defendants' exhibits.


         To survive a motion to dismiss under Rule 12(b)(6), “a complaint 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 Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Thus, the Court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). On the other hand, the Court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678; see also Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001) (“Conclusory allegations of law are insufficient to defeat a motion to dismiss”). Nor is the Court “required to accept as true allegations that contradict exhibits attached to the Complaint or . . . allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). A claim may be dismissed under Rule 12(b)(6) on the grounds that it is barred by the applicable statute of limitations when “the running of the statute is apparent on the face of the complaint.” Huynh v. Chase Manhattan Bank, 465 F.3d 992, 996 (9th Cir. 2006) (quotations omitted).


         Defendants contend that Javo's complaint is time-barred. In addition, Defendants contend that Javo's claim for intentional interference with contractual relations is preempted by the California Uniform Trade Secrets Act ...

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