Wistron Corporation et al v. Phillip M. Adams & Associates LLC

Filing 81

ORDER by Judge Edward M. Chen granting 52 Plaintiffs' Motion to Dismiss Counts I and II of Defendants' Counterclaim; and denying without prejudice 78 Plaintiffs' Motion for Sanctions (emclc1, COURT STAFF) (Filed on 9/12/2011)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 WISTRON CORPORATION, et al., 9 11 For the Northern District of California United States District Court 10 No. C-10-4458 EMC Plaintiffs, v. PHILLIP M. ADAMS & ASSOCIATES, LLC, et al., 12 ORDER GRANTING PLAINTIFFS’ MOTION TO DISMISS COUNTS I AND II OF DEFENDANTS’ COUNTERCLAIM; AND DENYING WITHOUT PREJUDICE PLAINTIFFS’ MOTION FOR SANCTIONS Defendants. 13 14 (Docket Nos. 52, 78) ___________________________________/ 15 16 17 Plaintiffs in this case are Wistron Corporation, Wistron Infocomm (Texas) Corporation, 18 Wistron Infocomm Technology (America) Corporation, AOpen Incorporated, and AOpen America 19 Incorporated. The Wistron entities are hereinafter collectively referred to as “Wistron” and the 20 AOpen entities as “AOpen.” 21 22 23 Defendants in this case Phillip M. Adams & Associates, LLC, AFTG-TG LLC, and Phillip M. Adams. Defendants are hereinafter collectively referred to as “Adams.” Wistron and AOpen initiated this action against Adams, seeking a declaration that certain 24 patents owned by Adams are not valid and enforceable and that they do not infringe those patents. 25 Adams has filed counterclaims for patent infringement and trade secret misappropriation. Currently 26 pending before the Court is Wistron and AOpen’s motion to dismiss. Having considered the parties’ 27 briefs and accompanying submissions, as well as the oral argument of counsel, the Court hereby 28 1 GRANTS the motion to dismiss. In addition, the Court DENIES without prejudice Wistron and 2 AOpen’s motion for sanctions. 3 I. 4 FACTUAL & PROCEDURAL BACKGROUND As alleged in the first amended complaint (“FAC”), “Wistron Corp. is in the business of 5 designing, developing and manufacturing computer products such as notebook computers, computer 6 peripheral equipment and other electronic products for customers to sell under their own brand 7 name.” FAC ¶ 2. The other Wistron entities are subsidiaries of Wistron Corp. See id. ¶¶ 3-4. As 8 for AOpen Inc., it is also “in the business of manufacturing and selling computer products such as 9 notebook computers and computer peripheral equipment.” Id. ¶ 5. The other AOpen entity is a subsidiary of AOpen Inc. See id. ¶ 6. 11 For the Northern District of California United States District Court 10 As noted above, Wistron and AOpen initiated this litigation, seeking a declaration that 12 certain patents owned by Adams are not valid and enforceable and that they do not infringe those 13 patents. The patents at issue are as follows: ‘002, ‘222, ‘858, ‘752, ‘475, ‘601, ‘203, ‘802, ‘804, and 14 ‘766. 15 In its counterclaims, Adams seeks a declaration that Wistron and AOpen do infringe four of 16 the patents above, i.e., the ‘002, ‘222, ‘858, and ‘802 patents. More specifically, Adams alleges that 17 Wistron and AOpen are both direct infringers and indirect infringers. According to Adams, Wistron 18 and Open have directly infringed “through, among other activities, the manufacture, use, 19 importation, sale and/or offer for sale of computer chips, motherboards, computers and other 20 products, as well as using infringing methods including . . . testing of [Wistron and AOpen] products 21 as part of the manufacturing process.” Countercl. ¶ 91. As for indirect infringement, Adams claims 22 that Wistron and AOpen have (1) “knowingly and intentionally induced others to infringe . . . such 23 as [their] customers and end-users . . . by intentionally aiding, assisting and encouraging their 24 infringement” and (2) “knowingly contributed to the infringement of others . . . such as [their] 25 customers and end-users . . . by supplying their technical know-how and infringing computer chips 26 and motherboards (which are nonstaple articles of commerce having no substantial non-infringing 27 use).” Id. 28 2 1 Adams maintains that, “at a minimum, [the] product AP58 contains an infringing Super I/O 2 controller.”1 Id. ¶ 92. Adams also contends that Wistron and AOpen’s products, or products 3 imported by Wistron or AOpen, “containing a Feature Integrated Systems (‘Fintek’), SMsC, Ali, SiS 4 Super I/O or a Super I/O containing an OPUS-based FDC core or a bridge chipset containing a core 5 of any of the previously identified components infringe one or more of the patents-in-suit.” Id. 6 In addition to a claim for patent infringement, Adams asserts a claim for trade secret 7 misappropriation. Adams contends that its trade secrets are proprietary and confidential test 8 programs and “related technologies” that “allow users to determine, and fix, corruption defects in 9 computers.” Id. ¶ 99. According to Adams, in two prior lawsuits involving different alleged infringers (i.e., Gateway and Winbond), it discovered that the alleged infringers and “other computer 11 For the Northern District of California United States District Court 10 and chip manufacturers in Taiwan had obtained unauthorized and stolen copies of Adams’[s] test 12 programs, design & test technologies and trade secret technologies, and that [the alleged infringers] 13 were using stolen copies of Adams’[s] technologies in their manufacture, assembly, and testing of 14 computer products.” Id. ¶ 97. Adams alleges, upon information and belief, that, like the other 15 alleged infringers, Wistron and AOpen made changes to their product lines based upon the 16 unauthorized use of its stolen test programs and technologies, implying that Wistron and AOpen are 17 part of the group of Taiwan manufacturers engaged in the theft of trade secrets. Id. ¶ 98. 18 19 In the currently pending motion, Wistron and AOpen ask the Court to dismiss both the patent infringement and trade secret misappropriation claims. 20 21 22 II. A. DISCUSSION Legal Standard Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the 23 failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6). A motion to 24 dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks 25 Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). In considering such a motion, a court 26 must take all allegations of material fact as true and construe them in the light most favorable to the 27 1 28 AP58 appears to be an AOpen product only. See Ratinoff Decl., Ex. 4. Adams conceded such at the hearing on the motion to dismiss. 3 1 nonmoving party, although “conclusory allegations of law and unwarranted inferences are 2 insufficient to avoid a Rule 12(b)(6) dismissal.” Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 3 2009). While “a complaint need not contain detailed factual allegations . . . it must plead ‘enough 4 facts to state a claim to relief that is plausible on its face.’” Id. “A claim has facial plausibility when 5 the plaintiff pleads factual content that allows the court to draw the reasonable inference that the 6 defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009); see 7 also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). “The plausibility standard is not akin to 8 a ‘probability requirement,’ but it asks for more than sheer possibility that a defendant acted 9 unlawfully.” Id. B. Patent Infringement 11 For the Northern District of California United States District Court 10 1. 12 In the motion to dismiss, Wistron argues that the allegations in support of the claim for direct Direct Infringement 13 infringement are too conclusory and therefore fail to give adequate notice under Federal Rule of 14 Civil Procedure 8 as to what the suit is about.2 In particular, Wistron contends that Adams’s direct 15 infringement claim is deficient unless and until Adams specifies which products allegedly infringe 16 (except for one product, i.e., the AP58 product which belongs to AOpen only, Adams simply refers 17 to computer chips, motherboards, computers, and “other products”) and provides information as to 18 how they infringe. In response, Adams argues that its allegations are sufficient because they provide 19 the information that is required by Form 18 of the Federal Rules of Civil Procedure and, under Rule 20 84, “[t]he forms in the Appendix suffice under these rules . . . .” Fed. R. Civ. P. 84 (also stating that 21 the forms “illustrate the simplicity and brevity that these rules contemplate”). 22 Numerous district courts have recognized that there is an apparent tension between what 23 Form 18 and what Twombly and Iqbal deem sufficient. See Bender v. LG Elecs. U.S.A., Inc., No. C 24 09-02114 JF (PVT), 2010 U.S. Dist. LEXIS 33075, at *15-16 (N.D. Cal. Mar. 11, 2010) (noting that 25 “it is difficult to reconcile the guidelines set forth in Twombly and Iqbal with Form 18”). For 26 example, Judge Seeborg noted in a 2009 decision that Form 18 seems to require nothing more than 27 conclusory statements, see Elan Microelecs. Corp. v. Apple, Inc., No. C 09-01531 RS, 2009 WL 28 2 AOpen does not move to dismiss the claim for direct infringement. 4 1 2972374, at *2 (N.D. Cal. Sept. 14, 2009), while Twombly and Iqbal clearly reject conclusory 2 allegations as inadequate. See also Lyda v. Fremantle Media N. Am., Inc., No. 10 Civ. 4773 (DAB), 3 2011 U.S. Dist. LEXIS 77540, at *5-6 (S.D.N.Y. July 14, 2011) (noting that, prior to Iqbal, courts – 4 in accordance with Form 18’s predecessor – did not require plaintiffs to identify the specific 5 infringing product or method with particularity but that, after Twombly and Iqbal, several courts 6 have required plaintiffs to make specific allegations about infringing products in their complaints). 7 Most courts, however, have considered Form 18 and Twombly/Iqbal to conflict only with 8 respect to the level of specificity required for the allegedly infringing product. That is, as a general 9 matter, courts do not require a patent holder to explain in any level of detail (beyond Form 18) as to how a product infringes. This makes sense particularly in this District because, under its Patent 11 For the Northern District of California United States District Court 10 Local Rules, a patent holder is obligated to provide infringement contentions shortly after the initial 12 case management conference. See Pat. L.R. 3-1. Therefore, an alleged infringer is given some level 13 of detail about the infringement early on in the case, albeit not at the outset. See Microsoft Corp. v. 14 Phoenix Solns., Inc., 741 F. Supp. 2d 1156, 1159 (C.D. Cal. 2010) (noting that “minimal pleading of 15 direct infringement is sufficient because this Court requires the prompt filing of infringement 16 contentions, which put the party accused of infringement on detailed notice of the basis for the 17 allegations against it”). Accordingly, the Court rejects Wistron’s contention that the patent 18 infringement claim should be dismissed for failure to explain how the alleged products infringe. 19 Wistron, however, has a meritorious argument in favor of dismissal based on Adams’s 20 failure to specify which of its products allegedly infringe. (As noted above, Adams has identified 21 one accused product owned by AOpen.) First, the Court notes that Adams has referred to 22 infringement by “other products” without providing any further identification of such products. This 23 bare reference to “products” is clearly inadequate. See Acco Brands USA LLC v. Hewlett Packard 24 Co., No. SACV 11-275 DOC (MLGx), 2011 U.S. Dist. LEXIS 67420, at *6 (N.D. Cal. June 23, 25 2011) (noting that plaintiff simply alleged that defendants’ “products” infringe; “[w]ithout any sort 26 of factual specificity in the Complaint, Moving Defendants have no notice of the claims they are 27 required to meet and defend”). 28 5 1 Second, notwithstanding the suggestion in Form 18 that specificity is not necessary, most 2 courts have, in the wake of Twombly and Iqbal, required some level of specificity regarding the 3 accused product, i.e., beyond the generic descriptions such as those employed by Adams (“computer 4 chips, motherboards, computers”). Indeed, many courts have even required an exact identification. 5 See Bender v. LG, 2010 U.S. Dist. LEXIS 33075, at *12 (noting that “[s]everal recent district court 6 cases have held that the factual allegations in a patent infringement complaint must identify the 7 specific products accused”); Trading Techs. Int’l, Inc. v. BCG Partners, Inc., No. 10 C 715, 2011 8 U.S. Dist. LEXIS 48399, at *9 (N.D. Ill. May 5, 2011) (noting that, “[a]t a minimum, the plaintiff 9 must plead which of the defendant’s products is at issue”). To the extent Adams argues that providing an exact identification is in conflict with Federal 11 For the Northern District of California United States District Court 10 Circuit precedent, that is not true. In fact, in McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. 12 Cir. 2007) – a decision that post-dated Twombly but pre-dated Iqbal – the patent holder had provided 13 an exact identification of the accused product. All that the Federal Circuit (in interpreting Fifth 14 Circuit pleading requirements) stated in McZeal was that “a plaintiff in a patent infringement suit is 15 not required to specifically include each element of the claims of the asserted patent.”3 Id. at 1357; 16 see also Bender v. Motorola, 2010 U.S. Dist. LEXIS 26076, at *8-9 (concluding that plaintiff read 17 too much into McZeal by claiming that, there, the Federal Circuit reaffirmed the validity of Form 18 18). 19 Accordingly, the Court grants Wistron’s motion to dismiss the direct infringement claim 20 based on a failure to specify which products allegedly infringe. The Court notes that this ruling is 21 consistent with its prior ruling in this case on Adams’s motion to dismiss, in which it held that 22 Wistron and AOpen’s failure to identify the products for which they sought a finding of 23 noninfringement made adjudication of the infringement claim impossible. See Docket No. 31 24 (Order at 19) (stating that, absent identification of the products accused of infringement, there was 25 no case or controversy or sufficient specificity to satisfy Twombly and Iqbal). While the dismissal 26 here is without prejudice – i.e., the Court gives Adams leave to amend to provide the requisite 27 specificity regarding the allegedly infringing products – the Court forewarns Adams that failure to 28 3 This is another reason not to require further detail as to how the accused products infringe. 6 1 provide sufficient specificity in its amended complaint will likely result in a dismissal with 2 prejudice. The issue of the need to identify accused products has now been addressed in this 3 litigation on more than one occasion. 4 5 2. 6 In its FAC, Adams asserts not only a claim for direct infringement but also a claim for 7 indirect infringement. The indirect infringement claim is based on two different theories: (1) 8 inducement of infringement and (2) contributory infringement. 9 Indirect Infringement “[T]o prevail on an inducement claim, [a] patentee must establish ‘first that there has been direct infringement, and second that the alleged infringer knowingly induced infringement and 11 For the Northern District of California United States District Court 10 possessed specific intent to encourage another’s infringement.’” ACCO Brands, Inc. v. ABA Locks 12 Mfr. Co., 501 F.3d 1307, 1312 (Fed. Cir. 2007). In turn, liability for contributory infringement 13 arises where a party “sells a component with knowledge that the component is especially designed 14 for use in a patented invention, and is not a staple article of commerce suitable for substantial non- 15 infringing use.” Spansion, Inc. v. ITC, 629 F.3d 1331, 1353 (Fed. Cir. 2010). 16 In the instant case, although Adams has two different theories of indirect infringement, each 17 theory is predicated on the direct infringer being either a customer of Wistron or AOpen or an end- 18 user of one of their products. See, e.g., AquaTex Indus., Inc. v. Techniche Solns., 419 F.3d 1374, 19 1379 (Fed. Cir. 2005) (noting that, “[a]lthough not directly infringing, a party may still be liable for 20 inducement or contributory infringement of a method claim if it sells infringing devices to customers 21 who use them in a way that directly infringes the method claim”). 22 Wistron and AOpen have made multiple challenges to the two indirect infringement theories, 23 two of which are particularly compelling – i.e., that, for the contribution theory, it is not entirely 24 clear which components are at issue, see Countercl. ¶ 89 (claiming that Wistron and AOpen’s 25 products, or products imported by Wistron or AOpen, “containing a Feature Integrated Systems 26 (‘Fintek’), SMsC, Ali, SiS Super I/O or a Super I/O containing an OPUS-based FDC core or a 27 bridge chipset containing a core of any of the previously identified components infringe one or more 28 7 1 of the patents-in-suit”), and that, for both the inducement and contribution theories, Adams has 2 failed to plead the requisite knowledge. 3 The lack of clarity regarding which components are at issue is essentially the same problem and contribution, there must be an allegation that Wistron and AOpen knew that there was 6 infringement. See, e.g., Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2067 (2011) 7 (stating that inducement to infringe, like contributory infringement, requires knowledge); Fujitsu 8 Ltd. v. Netgear Inc., 620 F.3d 1321, 1330 (Fed. Cir. 2010) (stating that, for contributory 9 infringement, plaintiff “must show that [defendant] ‘knew that the combination for which its 10 components were especially made was both patented and infringing’”). In the counterclaims, 11 For the Northern District of California as discussed above. As for the failure to plead knowledge, it is undisputed that, for both inducement 5 United States District Court 4 Adams pleads knowledge of infringement, but in conclusory terms. Post-Twombly and Iqbal, courts 12 have typically rejected conclusory allegations of knowledge. See Iqbal, 129 S. Ct. at 1954 13 (acknowledging that Federal Rule of Civil Procedure (b) allows intent to be alleged generally but 14 noting that “‘generally’ is a relative term” and, for purposes of Rule 9, “merely excuses a party from 15 pleading discriminatory intent under an elevated pleading standard”; adding that Rule 8 is not 16 satisfied where a party simply “plead[s] the bare elements of his cause of action [and] affix[es] the 17 label ‘general allegation’”); Air Vent, Inc. v. Owens Corning Corp., No. 02: 10-cv-01699, 2011 U.S. 18 Dist. LEXIS 70833, at *15 (W.D. Pa. June 30, 2011) (noting that “the Complaint includes a single 19 conclusory averment that Owens Corning ‘knew or had reason to know’ that the VentSure product 20 would cause contributory infringement of the ‘574 Patent because of the prior business relationship 21 between the parties” but that “the Complaint does not set forth any factual averments which describe 22 why or how such a relationship would have resulted in such specific knowledge by Owens 23 Corning”). Compare Adaptor, Inc. v. Sealing Sys., No. 09-CV-1070, 2010 U.S. Dist. LEXIS 24 139054, at *7-8 (E.D. Wisc. Dec. 29, 2010) (finding knowledge of infringement plausible where 25 patent holder “alleges that Adaptor had knowledge of the patent prior to creating and otherwise 26 using or selling its systems, and that it does not have a license” and “further alleges that [patent 27 holder] gave notice to Adaptor of the alleged infringement, but that Adaptor has nonetheless 28 continued to engage in the complained-of actions”). 8 1 Accordingly, the Court dismisses the indirect infringement claims, both for failure to provide 2 the requisite specificity regarding which components are at issue and failure to plead nonconclusory 3 facts establishing a plausible claim of knowledge. As above, the dismissal is without prejudice such 4 that Adams may have an opportunity to amend to address this deficiency. 5 B. 6 Trade Secret Misappropriation Finally, Adams asserts a trade secrets claim which is based, not on California law, but rather should be dismissed because (1) it is time barred; (2) there are insufficient jurisdictional allegations 9 to support a claim under the Utah statute; and (3) the elements of a trade secret claim have not been 10 adequately pled. The Court does not address the third argument because dismissal – with prejudice 11 For the Northern District of California on Utah law – i.e., the Utah Uniform Trade Secret Act. Wistron and AOpen argue that the claim 8 United States District Court 7 – is proper based on the first two arguments. 12 1. 13 Under Utah law, a claim for trade secret misappropriation has a limitations period of three 14 years. Notably, the statute provides that “[a]n action for misappropriation shall be brought within 15 three years after the misappropriation is discovered or, by the exercise of reasonable diligence, 16 should have been discovered.” Utah Code Ann. § 13-24-7 (emphasis added). Here, Wistron and 17 AOpen contend that Adams’s trade secret claim is untimely because its initial counterclaim 18 containing a trade secret claim was filed on May 23, 2011, see Docket No. 34 (original 19 counterclaim), and, according to Wistron and AOpen, Adams should have discovered their alleged 20 misappropriation more than three years before this date. The Court agrees that the allegations in the 21 counterclaims, judicially noticeable documents (i.e., opinions from another federal court in Utah), 22 and Adams’s own opposition brief establish that Adams, by the exercise of reasonable diligence, 23 should have discovered the alleged misappropriation more than three years before May 23, 2011. 24 Cf. Von Saher v. Norton Simon Museum of Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010) 25 (noting that a claim may be dismissed as time barred under Rule 12(b)(6) when “‘the running of the 26 statute is apparent on the face of the complaint’”). Statute of Limitations 27 According to Adams, it discovered – based on information acquired from two other lawsuits 28 – that multiple computer and chip manufacturers in Taiwan and Asia had obtained unauthorized and 9 company by the name of Winbond. As the federal court in Utah determined, Adams knew or at least 3 had an extremely strong suspicion that Winbond had obtained a copy of the trade secrets by March 4 2004. See Phillip M. Adams & Assocs., LLC v. Winbond Elecs. Corp., No. 1:05-CV-64 TS, 2010 5 U.S. Dist. LEXIS 90491, at *15-16 (D. Utah August 31, 2010). Adams asserts in this litigation that 6 Wistron and AOpen obtained the trade secrets at issue through use of Winbond’s chips. See Opp’n 7 at 9. But given that Adams was on notice of Winbond’s misappropriation in March 2004, it should 8 have discovered well before May 23, 2008 – more than four years later – that Wistron and AOpen 9 used the Winbond chips. Adams maintains that it was not until 2010 that evidence came to light that 10 the Winbond chips were being marketed, labeled, and sold under the marks of other companies. See 11 For the Northern District of California stolen copies of the alleged trade secrets. See Countercl. ¶ 97. One of those manufacturers was a 2 United States District Court 1 id. But this argument is problematic for the same reason articulated by the Utah district court – i.e., 12 Adams did not have to wait until there was a legal certainty that Wistron or AOpen or even other 13 companies used the Winbond chips. See Winbond, 2010 U.S. Dist. LEXIS 90491, at *13-5. Once 14 Adams was on notice of the Winbond chips, it should have discovered through a reasonably diligent 15 investigation that other companies (such as Wistron and AOpen) used the chips. At the hearing 16 herein, counsel for Wistron and AOpen pointed out that chips and other components are numbered 17 or otherwise identifiable and that an exercise of reasonable diligence would have revealed any 18 connection between the alleged Winbond trade theft and Wistron/AOpen. Counsel for Adams failed 19 to meaningfully respond to the due diligence argument. The Court thus dismisses the claim for 20 misappropriation. While it is inclined to do so with prejudice and thus bar any trade theft claim to 21 which a three-year limitation period applies, see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) 22 (stating that, “in dismissing for failure to state a claim under Rule 12(b)(6), ‘a district court should 23 grant leave to amend even if no request to amend the pleading was made, unless it determines that 24 the pleading could not possibly be cured by the allegation of other facts’”), the Court will dismiss on 25 this ground without prejudice. Adams is forewarned, however, that any further assertion of a trade 26 secret claim must be supported by specific factual allegations demonstrating why, even with 27 reasonable diligence, Adams should not have known about Wistron’s and AOpen’s theft of trade 28 10 1 secrets. Furthermore, Adams is forewarned that any factual allegations must be supportable under 2 Federal Rule of Civil Procedure 11. 3 2. 4 Wistron and AOpen argue next that the Court should dismiss the trade secret claim because it Jurisdictional Allegations 5 is based on Utah law and, given the allegations in the counterclaims, there is no factual nexus to 6 Utah – e.g., Adams has no connection to Adams has no connection to Utah (thus no injury was 7 suffered there) and the alleged misappropriation took place in Asia. Wistron and AOpen assert that 8 there is no indication that Utah intended for its laws to be given extraterritorial effect and that 9 allowing the Utah law to be applied extraterritorially would be a violation of due process. In response, Adams does not dispute the lack of a nexus to Utah and simply argues instead that the 11 For the Northern District of California United States District Court 10 trade secret claim should not be dismissed because it does have a trade secret claim of some kind – if 12 not pursuant to Utah law, then the law of another state. In support of its position, Adams cites C&F 13 Packing Co. v. IBP, Inc., 224 F.3d 1296 (Fed. Cir. 2000). 14 The problem for Adams is that C&F is distinguishable from the instant case. In C&F, the 15 plaintiff had asserted a trade secret claim pursuant to Illinois law but the district court concluded that 16 Kansas law was applicable and not Illinois law. The district court therefore dismissed the trade 17 secrets claim. On appeal, the Federal Circuit noted that the plaintiff had presented sufficient facts to 18 demonstrate that the trade secrets claim was plausible under the law of either Kansas or Illinois. 19 (The plaintiff had argued in favor of Illinois law because the defendant transacted business there by 20 operating Pizza Hut franchises in Illinois.) Therefore, the appeals court concluded that the district 21 court should not have dismissed the claim but rather should have tried the case on the merits under 22 whatever law it deemed appropriate. See id. at 1306. The instant case is different from C&F 23 because there is nothing to indicate that Adams has a plausible claim under Utah law. If Utah law is 24 not plausible, then dismissal is appropriate – and with prejudice. 25 26 II. CONCLUSION For the foregoing reasons, the Court grants Wistron and AOpen’s motion to dismiss. More 27 specifically, the following claims are dismissed: (1) the claim for direct infringement (against 28 Wistron only); (2) the claim for indirect infringement (against both Wistron and AOpen); and (3) the 11 1 claim for trade secret misappropriation (against both Wistron and AOpen). The trade secret claim 2 under Utah law is dismissed with prejudice. Adams is given leave to amend the other dismissed 3 claims, including the trade secret claim so long as not based upon Utah law. Any amended 4 counterclaims must be filed within twenty (20) days of the date of this order. Adams is forewarned 5 that any deficiency in the amended infringement claims may well justify a dismissal with prejudice. 6 Because the Court is giving Adams an opportunity to amend its trade secret claim, it shall at 7 this juncture deny – but without prejudice – Wistron and AOpen’s motion for Rule 11 sanctions 8 based on the trade secrets claim. The hearing on the Rule 11 motion is therefore VACATED. 9 This order disposes of Docket Nos. 52 and 78. 11 For the Northern District of California United States District Court 10 IT IS SO ORDERED. 12 13 Dated: September 12, 2011 14 _________________________ EDWARD M. CHEN United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12

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