Metabyte, Inc. v. Nvidia Corporation et al

Filing 54

Order by Hon. Samuel Conti granting 45 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 4/22/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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) Case No. 12-0044 SC
)
METABYTE, INC.,
) ORDER GRANTING MOTION TO
) DISMISS
Plaintiff,
)
)
v.
)
)
NVIDIA CORP., DAVID COOK,
)
VIATCHESLAV GOSTRENKO, ANDREI
)
OSNOVICH, MICHAEL YAROSLAVTSEV, )
MIKHAIL KRIVEGA, and DOES 1-5, )
)
Defendants.
)
)
)

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I.

INTRODUCTION

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This is an action for copyright infringement, breach of

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contract, misappropriation of trade secrets, and related causes of

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action, arising out of the alleged theft of computer code by former

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employees of Metabyte Corporation ("Plaintiff").

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Court is the above-captioned Defendants' motion to dismiss

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Plaintiff's complaint.

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motion is fully briefed, ECF Nos. 50 ("Opp'n), 51 ("Reply"), and

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appropriate for decision without oral argument, Civ. L.R. 7-1(b).

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As explained below, the Court GRANTS Defendants' motion.

Now before the

ECF Nos. 1 ("Compl."), 45 ("MTD").

The

1 II.

BACKGROUND

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Plaintiff and Defendant NVIDIA Corporation ("NVIDIA") are both

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software companies that develop and market computer graphics

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software and services, among other things.

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Viatcheslav Gostrenko, Andrei Osnovich, Michael Yaroslavtsev, and

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Mikhail Krivega (the "Individual Defendants") to develop computer

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code for Plaintiff's 3D stereoscopic technology software and device

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driver products.

See Compl. ¶¶ 12-14,

Between 1994 and 1997, Plaintiff hired Defendants David Cook,

Id. ¶ 14.

These products "enable a three-

United States District Court

For the Northern District of California

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dimensional, visually immersive display by presenting images

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separately to the left and right eye through specialized eyeglasses

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that a viewer wears to look at a computer screen."

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specific copyrighted software at issue in this case is called

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"Metabyte Wick3D eyeSCREAM."

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technology and information at issue in this matter was embodied in

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Plaintiff's products also sold under the name "eyeSCREAM."

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14.

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copyright-protected and otherwise proprietary information are the

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"Metabyte Software."

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Id. ¶ 27.

Id.

The

Other proprietary

Id. ¶

Collectively, all of the works embodying any of Plaintiff's

While employed by Plaintiff, the Individual Defendants had

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access to the source code for the Metabyte Software, and all were

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bound by employee confidentiality agreements that prohibited them

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from disclosing Plaintiff's confidential information and required

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them to return all of Plaintiff's property in their possession upon

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leaving Plaintiff's employ.

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Defendants all left Plaintiff between 1999 and 2001 to join NVIDIA,

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which was developing its own 3D stereoscopic software at the time.

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Id. ¶¶ 17-24, 26.

Id. ¶¶ 17-23, 31.

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The Individual

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Plaintiff alleges that when the Individual Defendants joined

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NVIDIA, they copied the code for the Metabyte Software and took it

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to NVIDIA.

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Individual Defendants' knowledge of Plaintiff's proprietary

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technology and the purportedly stolen Metabyte Software source code

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to create copies of the Metabyte Software as well as derivative

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works based on the Metabyte Software.

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ultimately released its own 3D stereoscopic software product in

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early 2009 under the name "GeForce 3D Vision," now just called "3D

United States District Court

For the Northern District of California

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Id. ¶ 29.

Plaintiff asserts that NVIDIA then used the

Id. ¶¶ 13, 30.

NVIDIA

Vision" (the "NVIDIA Software").
In January 2012, Plaintiff sued Defendants, asserting eight

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causes of action based on the facts described above: (i) copyright

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infringement under the Copyright Act, 17 U.S.C. § 101 et seq.; (ii)

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violation of the Federal Computer Fraud and Abuse Act ("CFAA"), 18

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U.S.C. § 1030 et seq.; (iii) breach of contract; (iv) breach of the

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implied covenant of good faith and fair dealing; (v)

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misappropriation of trade secrets under California Civil Code

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section 3426, et seq.; (vi) intentional interference with

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contractual relations; (vii) unfair business practices under

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California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code

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§ 17200 et seq.; and (viii) common law unfair competition.

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Defendants now move to dismiss Plaintiff's claims for

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violation of the CFAA, breach of the implied covenant of good faith

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and fair dealing, intentional interference with contractual

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relations, unfair business practices, and common law unfair

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competition.

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claims for copyright infringement, breach of contract, or

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misappropriation of trade secrets.

MTD at 1.

Defendants do not challenge Plaintiff's

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Id.

Plaintiff, in turn, does

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not oppose dismissal of its claims for breach of the implied

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covenant of good faith and fair dealing, intentional interference

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with contractual relations, or common law unfair competition.

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Opp'n at 2.

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arguments as to Defendants' alleged violations of the CFAA and UCL.

Accordingly, this Order only evaluates the parties'

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7 III.

LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure

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12(b)(6) "tests the legal sufficiency of a claim."

Navarro v.

United States District Court

For the Northern District of California

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Block, 250 F.3d 729, 732 (9th Cir. 2001).

"Dismissal can be based

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on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory."

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Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.

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1988).

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should assume their veracity and then determine whether they

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plausibly give rise to an entitlement to relief."

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Iqbal, 556 U.S. 662, 679 (2009).

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must accept as true all of the allegations contained in a complaint

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is inapplicable to legal conclusions.

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elements of a cause of action, supported by mere conclusory

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statements, do not suffice."

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Twombly, 550 U.S. 544, 555 (2007)).

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generally "limited to the complaint, materials incorporated into

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the complaint by reference, and matters of which the court may take

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judicial notice."

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540 F.3d 1049, 1061 (9th Cir. 2008) (citing Tellabs, Inc. v. Makor

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Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)).

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///

"When there are well-pleaded factual allegations, a court

Ashcroft v.

However, "the tenet that a court

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.
The court's review is

Metzler Inv. GMBH v. Corinthian Colls., Inc.,

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1 IV.

DISCUSSION

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A.

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The CFAA, 18 U.S.C. § 1030 et seq., establishes both civil and

Plaintiff's CFAA Claim

"protected computers," defined in relevant part as computers that

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are "used in or affecting interstate or foreign commerce or

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communication."

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hackers who accessed computers to steal information or to disrupt

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or destroy computer functionality, as well as criminals who

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United States District Court

criminal causes of action for an array of actions concerning

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For the Northern District of California

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possessed the capacity to access and control high technology

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processes vital to our everyday lives."

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Brekka, 581 F.3d 1127, 1130 (9th Cir. 2009).

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recently made clear that the CFAA is not mean to serve as a

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supplement or replacement for misappropriation claims.

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States v. Nosal, 676 F.3d 854, 862-63 (9th Cir. 2012) (en banc).

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To prevail in a civil action under the CFAA, "a private

Id. § 1030(e)(2).

The CFAA is "designed to target

LVRC Holdings LLC v.
The Ninth Circuit has

United

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plaintiff must prove that the defendant violated one of the

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provisions of [section] 1030(a)(1)-(7), and that the violation

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involved [among other things, loss to one or more persons during

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any one year period . . . aggregating at least $5,000 in value]."

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Brekka, 581 F.3d at 1131.

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Plaintiff's CFAA claims are based on the Individual

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Defendants' copying the source code for the Metabyte Software and

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taking it and other property of Plaintiff with them when they left

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Plaintiff's employ.

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the Individual Employees had agreed to various confidentiality

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agreements that required them to maintain the secrecy of

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Plaintiff's property and return any confidential or proprietary

Compl. ¶ 30.

Further, Plaintiffs allege that

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information to Plaintiff upon termination of their employment.

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¶ 31.

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Metabyte Software's secrecy and confidentiality, including using

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clean rooms and limiting access to the Metabyte Software.

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32-33.

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against the Individual Defendants for accessing Plaintiff's

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computers "without authorization or by exceeding authorized

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access," causing damage to Plaintiff as a result.

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55.

United States District Court

For the Northern District of California

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Id.

Plaintiff asserts that it took steps to safeguard the

Id. ¶¶

Based on these facts, Plaintiff alleges CFAA violations

See id. ¶¶ 49-

Plaintiff asserts that this conduct violates sections of the

CFAA that prohibit the following actions:

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"intentionally
access[ing]
a
computer
without authorization or exceeds authorized
access, and thereby obtain[ing] . . .
information from any protected computer."
18 U.S.C. § 1030(a)(2)(C).
"knowingly and with intent to defraud,
access[ing] a protected computer without
authorization,
or
exceed[ing]
authorized
access,
and by means of such conduct
further[ing]
the
intended
fraud
and
obtain[ing] anything of value," subject to
exceptions not relevant to the instant
matter. Id. § 1030(a)(4)
"intentionally
access[ing]
a
protected
computer without authorization, and as a
result of such conduct, recklessly caus[ing]
damage." Id. § 1030(a)(5)(B).
"intentionally
access[ing]
a
protected
computer without authorization, and as a
result of such conduct, caus[ing] damage and
loss." Id. § 1030(a)(5)(C).

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Defendants argue that Plaintiff's CFAA claim is groundless,

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primarily because Plaintiff never alleges that any of the

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Individual Defendants actually accessed Plaintiff's computers

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"without authorization or by exceeding authorized access."

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at 2-5.

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no liability under the CFAA because the CFAA does not prohibit

See MTD

Absent these facts, according to Defendants, there can be

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"improperly disclosing or using confidential information in

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violation of an employment agreement or policy," which, according

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to Defendants, is all Plaintiff's complaint does.

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Further, Defendants argue that NVIDIA as a corporate entity had

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nothing to do with the alleged theft of code and that NVIDIA never

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had access to Plaintiff's computer systems, and so the CFAA could

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not apply to it in any event -- though the Court finds that this

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argument is inapposite, since Plaintiff does not plead a CFAA

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violation as to NVIDIA.

Id. at 4-5.

MTD at 2-5.

Finally, Defendants assert

United States District Court

For the Northern District of California

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that Plaintiff cannot plead harm under the CFAA because Plaintiff

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never shows any damage that would exceed $5,000.

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Id. at 5-6.

To show just how narrow the CFAA is and how much of

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Plaintiff's claim is excluded from the statute's coverage,

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Defendants rely on Nosal, 676 F.3d 854, in which the Ninth Circuit

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held that the CFAA applied narrowly to punish hacking ("the

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circumvention of technological access barriers"), not the

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misappropriation of trade secrets or contravention of use policies.

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Id. at 863.

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their authorized log-in credentials to download proprietary

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information from a confidential database on their employer's

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computer system, and then transferred that information to a

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competitor, in violation of their employer's use restrictions on

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the disclosure of confidential information to third parties or

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using confidential information for any purpose except company

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business.

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prohibits only the unauthorized procurement or alteration of

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information, not its misuse or appropriation, and therefore the

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phrase "exceeds authorized access" in the CFAA "does not extend to

In Nosal, employees of an executive search firm used

See id. at 856.

The Ninth Circuit held that the CFAA

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violations of use restrictions."

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that even if Nosal does not bar Plaintiff's claim, Plaintiff has

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failed to plead harm under the CFAA, since it pleads only

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conclusory assertions as to damage and loss, rendering its

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pleadings insufficient under Iqbal and Twombly.

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Id. at 863-64.

Defendants add

See MTD at 6-7.

The problem with applying Nosal, according to Plaintiff, is

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that Plaintiff has not alleged "exactly how the [Individual

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Defendants] obtained access to the information they took to NVIDIA,

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because [Plaintiff] does not know, at this point, how information

United States District Court

For the Northern District of California

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was obtained."

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hypothetical situations in which the Individual Defendants might

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have undertaken some actionable behavior under the CFAA.

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Plaintiff claims that it cannot describe the precise method by

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which each Individual Defendant obtained access to the contested

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information until after discovery.

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states that it is inappropriate for the Court to assume that Nosal

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bars Plaintiff's CFAA claim before Plaintiff obtains discovery.

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See id. at 5.

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Plaintiff has pled harm, Plaintiff states that it should be offered

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the opportunity to amend its complaint.

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with Plaintiff's assertions as to the necessity of allowing

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Plaintiff to proceed with discovery despite its stated lack of

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knowledge about the Individual Defendants' access to the contested

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information here.

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as a fishing expedition prohibited by Rule 8.

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Opp'n at 4.

Plaintiff proposes several

Id. at 4-5.

However,

Even so, Plaintiff

In opposition to Defendant's arguments about whether

See Reply at 2-3.

Id.

Defendants take issue

Defendants characterize this
Id. at 2.

The Court finds that Plaintiff has not pled facts giving rise

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to a valid claim under the CFAA.

All of Plaintiff's facts suggest

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that even if any Individual Defendant did take any part of the

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Metabyte Software or any other proprietary material with him to

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NVIDIA, his access to that material occurred during his employment

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with Plaintiff.

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conclusory allegations that any Individual Defendant obtained such

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information without authorization or in excess of his

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authorization.

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sign various agreements and took steps to keep its information

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confidential and secret, that is not sufficient to plead a CFAA

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claim after Nosal.

Moreover, Plaintiff never suggests beyond

Even if Plaintiff had the Individual Defendants

See 676 F.3d at 863-64.

Indeed, Plaintiff's

United States District Court

For the Northern District of California

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facts suggest that at times the Individual Defendants had access to

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the information at issue, that access was authorized (even if

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circumscribed) and not exceeded.

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hired to work on the very information presently at issue.

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suggestions that they hacked into Plaintiff's computers to get

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information are implausible.

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Plaintiff would need to allege facts that the Individual Defendants

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accessed information without authorization or exceeded their

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authorization, see id.; Brekka, 581 F.3d at 1131, and not -- as the

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complaint suggests -- that the Individual Defendants merely

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misappropriated information, infringed copyright, or breached a

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contract.

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inclined or permitted to expand it.

They were Plaintiff's employees,

To plead a valid CFAA claim,

The CFAA's scope is narrow, and the Court is not

Accordingly, Plaintiff's CFAA claim is DISMISSED.

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Bare

Plaintiff

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has leave to amend, keeping in mind Rule 11, if Plaintiff is able

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to plead facts giving rise to a valid CFAA claim as described

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above, within the bounds of Nosal and Brekka.

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plead facts about its alleged damages under the CFAA.

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///

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Plaintiff must also

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B.

Plaintiff's UCL Claim

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Plaintiff's UCL claim is pled on the facts described above,

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which Plaintiff alleges constitute unfair competition and unlawful

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and unfair business practices on Defendant NVIDIA's part.

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¶¶ 82-83.

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101 et seq., preempts Plaintiff's UCL claim.1

Compl.

Defendants respond that the Copyright Act, 17 U.S.C. §

State law causes of action are preempted under the Copyright

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Act if two elements are present.

Kodadek v. MTV Networks, Inc.,

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152 F.3d 1209, 1212 (9th Cir. 1998).

"First, the rights that a

United States District Court

For the Northern District of California

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plaintiff asserts under state law must be 'rights that are

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equivalent' to those protected by the Copyright Act."

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17 U.S.C. § 301(a)).

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the 'subject matter' of the Copyright Act as set forth in 17 U.S.C.

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sections 102 and 103."

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Metabyte Software, considered a literary work under the Copyright

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Act, falls within the subject matter of the Copyright Act per 17

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U.S.C. sections 102 and 103.

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dispute whether the rights Plaintiff asserts under the UCL are

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"rights that are equivalent" to those protected by the Copyright

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Act.

Id. (citing

"Second, the work involved must fall within

Id.

The parties do not dispute that the

Opp'n at 5-6; Reply at 4-6.

They

See Opp'n at 5-6; Reply at 4-6.
Plaintiff avers that its UCL claim is based on "allegations of

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contractual breach and misappropriation of trade secrets," claims

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not disputed by Defendant, and that because those causes of action

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"constitute unlawful and unfair practices wholly apart from any

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issue of copyright infringement," the UCL claim is not preempted.

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The Court does not address the parties arguments about whether
California's Uniform Trade Secrets Act ("CUTSA"), Cal Civ. Code §
3476 et seq., preempts Plaintiff's UCL claim because the Court
finds that claim preempted under the Copyright Act.
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Opp'n at 5-6.

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injunction prohibiting the copying and distribution of the Metabyte

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Software -- undisputedly rights protected by the Copyright Act --

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is merely a statement of the remedy requested, not a concession

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that its UCL claim is essentially a copyright claim.

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Further, Plaintiff states that its entitlement to an

Id. at 6.

Defendant responds first that the complaint only alleges

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breach of contract and misappropriation of trade secrets against

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the Individual Defendants -- not NVIDIA -- so those claims cannot

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be the foundation of a UCL claim against NVIDIA, the only Defendant

United States District Court

For the Northern District of California

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accused of violating the UCL.

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argues that Plaintiff's statements about misappropriation of trade

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secrets and the distinction between a remedy requested and a

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violation giving rise to that remedy are red herrings, since

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whatever the violation or remedy, Plaintiff's UCL claim "arises

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solely from the alleged unauthorized use and reproduction of a

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copyrighted work" and is preempted.

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152 F.3d at 1213).

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Defendant is right.

Reply at 5.

Second, Defendant

Id. at 4-5 (citing Kodadek,

Plaintiff's UCL claim is alleged solely

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against NVIDIA, and NVIDIA as a corporate defendant is not alleged

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to have breached any contract, intentionally interfered with any

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contract, or misappropriated any trade secret.

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incorporated allegations as to NVIDIA that remain in Plaintiff's

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complaint are that NVIDIA created and sold products -- the NVIDIA

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Software -- that was substantially similar to the Metabyte Software

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and that included Plaintiff's proprietary information by way of

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direct copies and derivative works, acquired through through the

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Individual Defendants' alleged theft and copying of the Metabyte

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Software.

See Compl. ¶¶ 13, 26, 30, 34, 36.

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The only

Reproduction of

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copyrighted works, preparation of derivative works, and

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distribution of copies to the public are all rights granted under

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the Copyright Act.

17 U.S.C. § 106; Kodadek, 152 F.3d at 1213.

The Court finds that Plaintiff's UCL claim is preempted by the

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Copyright Act.

See Kodadek, 152 F.3d at 1212-13 (citing 1 David

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Nimmer, Nimmer on Copyright § 1.01[B][1][e] at 1-24, n.110 (stating

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that if B is selling B's products and representing to the public

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that they are B's products, a claim by A that B's products

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replicate A's is a disguised copyright infringement claim and is

United States District Court

For the Northern District of California

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preempted)).

That claim is DISMISSED WITH PREJUDICE because under

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the theory Plaintiff has pled, Compl. ¶ 84, no facts would render

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Plaintiff's UCL claim not preempted as a matter of law.

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may seek leave to amend under Rule 15 if it wishes to assert a

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different theory of Defendants' liability under the UCL.

Plaintiff

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V.

CONCLUSION
For the reasons explained above, the Court GRANTS Defendant

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NVIDIA Corporation's motion to dismiss Plaintiff Metabyte

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Corporation's complaint.

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LEAVE TO AMEND, and Plaintiff's UCL claim is DISMISSED WITH

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PREJUDICE.

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signature date to file an amended complaint, or that claim may be

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dismissed with prejudice.

Plaintiff's CFAA claim is DISMISSED WITH

Plaintiff has thirty (30) days from this Order's

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IT IS SO ORDERED.

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Dated: April 22, 2013

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UNITED STATES DISTRICT JUDGE

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