VasoNova, Inc. v. Grunwald et al
Filing
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ORDER GRANTING IN PART AND DENYING IN PART COUNTERDEFENDANTS' MOTIONS TO DISMISS COUNTERCLAIMS AND VACATING HEARING by Judge William Alsup [granting in part and denying in part 99 Motion to Dismiss; granting in part and denying in part 100 Motion to Dismiss]. (whasec, COURT STAFF) (Filed on 12/11/2012)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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VASONOVA, INC., a Delaware corporation,
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For the Northern District of California
United States District Court
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Plaintiff,
v.
SORIN GRUNWALD, an individual, ROMEDEX
INTERNATIONAL SRL, a Romanian company,
and BARD ACCESS SYSTEMS, INC., a Utah
corporation,
Defendants.
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/
ROMEDEX INTERNATIONAL SRL, a Romanian
company, and SORIN GRUNWALD, an individual,
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ORDER GRANTING IN
PART AND DENYING
IN PART COUNTERDEFENDANTS’
MOTIONS TO DISMISS
COUNTERCLAIMS AND
VACATING HEARING
Counterclaimants,
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No. C 12-02422 WHA
v.
VASONOVA, INC., a Delaware corporation,
TELEFLEX, INC., a Delaware corporation,
and TELEFLEX MEDICAL, INC., a California
corporation,
Counterdefendants.
_________________________________________/
INTRODUCTION
In this intellectual property dispute involving a catheter-guidance product,
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counterdefendant and third-party defendants move to dismiss all counterclaims. For the reasons
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stated below, the motions are GRANTED IN PART AND DENIED IN PART.
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STATEMENT
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1.
THE COMPLAINT.
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Plaintiff VasoNova, Inc., is a developer and manufacturer of medical devices (First Amd.
system that would allow physicians to efficiently place catheters without the need for an x-ray
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(id. at ¶¶ 13, 20). VasoNova hired defendant Sorin Grunwald as its chief technology officer to
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aid in developing this system (id. at ¶ 1). Through his role as CTO, Grunwald was “intimately
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involved in every aspect of the development of VasoNova’s VPS (Vascular Positioning System)
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product,” which uses both internal ECG and Doppler sonogram signals to locate the tip of
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a venous catheter as it is inserted. As VasoNova began attracting investors, it entered into
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For the Northern District of California
Compl. ¶ 1). In its early days as a start-up, VasoNova sought to develop and commercialize a
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United States District Court
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confidentiality agreements with its employees. Grunwald signed a confidentiality, invention
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assignment, and arbitration agreement. Additionally, upon Grunwald’s resignation from
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VasoNova, he signed a separation agreement, which reaffirmed his agreement to abide by the
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terms of the confidentiality agreement (id. at ¶¶ 18–20).
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After his resignation from VasoNova, Grunwald began filing patent applications for a
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product called “Sapiens TLS,” which locates the position of a tip of a venous catheter using
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only ECG signals. After obtaining the patents, Grunwald incorporated Romedex International
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SRL in Romania and assigned the patents to his newly created company (id. at ¶¶ 37, 41).
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Romedex then sold the Sapiens technology to Bard Access Systems, Inc., a competitor of
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VasoNova. Via earlier arguments, VasoNova herein claims ownership of the Sapiens
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technology and alleges that Grunwald developed the technology while still employed at
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VasoNova. Grunwald denies these claims.
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Prior to the sale of Sapiens to Bard, Romedex was in negotiations with Teleflex Medical,
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Inc., on behalf of Teleflex, Inc., regarding acquisition of Romedex. Teleflex Medical signed a
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non-disclosure agreement and conducted due diligence. Teleflex’s efforts to acquire Romedex
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failed and negotiations ended without the culmination of an agreement (Grunwald Decl. ¶ 10).
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Teleflex then acquired VasoNova in January 2011 (id. at ¶ 12). Teleflex is now VasoNova’s
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parent company.
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In November 2010, VasoNova obtained FDA clearance for its VPS product that employs
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the Sapiens technology (Grunwald Decl. ¶ 13). Teleflex has begun marketing VasoNova’s VPS
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product under Teleflex’s name in the United States and Europe (id. at 17). VasoNova is seeking
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relief from Grunwald, Romedex, and Bard regarding the ownership and use of the Sapiens
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technology.
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2.
THE COUNTERCLAIMS.
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Following the filing of plaintiff’s first amended complaint, defendants Grunwald and
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Romedex filed counterclaims against VasoNova, Teleflex Medical, and Teleflex (collectively
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“counterdefendants”).
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For the Northern District of California
United States District Court
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A.
Romedex’s Counterclaims.
Romedex alleges that Teleflex Medical and Teleflex “engaged in misrepresentations
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concerning the intent behind their dealings with Romedex” (Dkt. No. 76 (“RCC”) ¶ 36).
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In October 2009, Romedex and Teleflex Medical entered into a confidentiality agreement
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regarding Teleflex Medical’s intent to distribute Sapiens and acquire certain assets related to
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Sapiens (ibid.). Pursuant to this agreement, from October 2009 to September 2010, Romedex
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allegedly disclosed significant confidential information and trade secrets to Teleflex Medical
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related to catheter tip placement technologies and “ECG-only” catheter guidance (id. at ¶ 24).
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Ultimately, Romedex declined to enter into a transaction with Teleflex and Teleflex Medical.
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In December 2010, Romedex sold Sapiens to Bard (id. at ¶ 15). In January 2011, Teleflex
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acquired VasoNova.
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Romedex alleges that Teleflex was negotiating an acquisition deal with VasoNova
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since the beginning of 2010 and that instead of “negotiating in good faith to possibly acquire
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Romedex technology, the intent was to either get the technology at a below-market price or,
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if Romedex did not take the deal, simply disclose the technology to VasoNova” (id. at ¶¶ 26, 36).
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Romedex points to the fact that in November 2010, VasoNova filed a provisional patent
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application allegedly containing confidential information which Romedex had earlier
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disclosed to Teleflex Medical and Teleflex under the confidentiality agreement (id. at 28).
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Romedex alleges that VasoNova knowingly accepted Romedex’s confidential information from
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Teleflex Medical.
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B.
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Grunwald’s Counterclaims.
In his amended counterclaims, defendant Grunwald alleges that he represented in good
Pursuant to California Labor Code Section 2870, Grunwald alleges that he was not required
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to disclose or assign to VasoNova any of his Sapiens technology or patent applications.
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According to Grunwald’s counterclaims, VasoNova allowed Grunwald time to work “outside”
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of VasoNova. During this time, Grunwald started to evaluate an “ECG-only” catheter guidance
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system after VasoNova repeatedly represented to him that such an “ECG-only” system was not
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For the Northern District of California
faith to Bard and Romedex that he was the rightful owner of the intellectual property at issue.
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United States District Court
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related to VasoNova’s business and was not in VasoNova’s interest at that time (Dkt. No. 85
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(“GCC”) ¶ 12).
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Grunwald also alleges that he created the trademark and trade name “VasoNova” (id. at
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¶ 26). Prior to the founding of VasoNova, Inc., Grunwald began using the name “VasoNova”
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to brand devices that he was developing. Grunwald conducted evaluation studies to demonstrate
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products and market research in conjunction with the products (ibid.). Grunwald registered the
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domain name “vasonova.com” in his own name with his own money (id. at ¶ 27). In December
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2005, Grunwald and VasoNova, Inc., allegedly entered into an oral contract regarding the use
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of the “VasoNova” trademark by VasoNova, Inc. Under this contract, VasoNova, Inc., was
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permitted to use the “VasoNova” trademark free of charge so long as VasoNova, Inc., was
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not acquired by another company (id. at ¶ 28). In 2009 when Grunwald left VasoNova, Inc.,
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the company registered the “VasoNova” trademark in its own name, which it then purported
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to sell to Teleflex for $2.8 million (id. at ¶ 33). Grunwald alleges that he was (and still is) the
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rightful owner of the “VasoNova” trademark.
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ANALYSIS
Counterdefendants now move to dismiss all counterclaims for lack of standing and failure
to state a claim. Specifically, counterdefendants move to dismiss all of Bard’s counterclaims —
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trade secret misappropriation, breach of contract, fraud, and declaratory judgment; and
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Grunwald’s counterclaims — breach of contract and declaratory judgment.
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Lack of Article III standing requires dismissal for lack of subject-matter jurisdiction
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under Rule 12(b)(1). Simmonds v. Credit Suisse Sec., 638 F.3d 1072, 1082 (9th Cir. 2011).
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Article III standing requires the demonstration of three elements: (1) plaintiff suffered an
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“injury in fact” that is concrete and particularized and actual or imminent, not conjectural or
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hypothetical; (2) the injury is fairly traceable to the challenged action of defendant; and (3) it is
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likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.
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Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). For purposes of ruling on a motion
to dismiss for lack of standing, all material allegations of the complaint are accepted as true
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For the Northern District of California
United States District Court
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and the complaint is construed in favor of the complaining party. Standing “in no way depends
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on the merits of the plaintiff’s contention that particular conduct is illegal.” Warth v. Seldin,
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422 U.S. 490, 500–01 (1975).
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A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged
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in the complaint. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995).
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All material allegations of the complaint are taken as true and considered in the light most
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favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 340 (9th Cir.
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1996). A complaint, on its face, needs to be plausible, meaning that “the plaintiff [must] plead[]
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factual content that allows the court to draw the reasonable inference that the defendant is liable
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for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This “requires more
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than labels and conclusions, and a formulaic recitation of the elements of a cause of action will
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not do. Factual allegations must be enough to raise a right to relief above the speculative level.”
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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). Where a court
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dismisses for failure to state a claim pursuant to Rule 12(b)(6), it should normally grant leave
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to amend unless it determines that the pleading could not possible be cured by the allegation of
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other facts. Cook, Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir.
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1990).
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To state a claim under the California Uniform Trade Secrets Act, a plaintiff must plead
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facts sufficient to show that: (1) the plaintiff owned a trade secret; (2) the defendant acquired,
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disclosed, or used the plaintiff’s trade secret through improper means; and (3) the defendant’s
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actions damaged the plaintiff. Sargent Fletcher, Inc. v. Able Corp., 110 Cal. App. 4th 1658,
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1665 (2003). Citing Memory Corp. V. Ky. Oil Tech., N.V., 2006 WL 3734384 (N.D. Cal.
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Dec. 18, 2006) (Judge Ronald M. Whyte), counterdefendants argue that Romedex lacks
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Article III standing and/or failed to sufficiently plead its counterclaim for trade secret
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misappropriation because Romedex no longer owns any interest in the intellectual property at
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For the Northern District of California
United States District Court
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ROMEDEX’S TRADE SECRET MISAPPROPRIATION COUNTERCLAIM.
issue. This order disagrees.
In Memory, the counterclaimant sued the counterdefendant for trade secret
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misappropriation that occurred years prior when the counterclaimant was not the owner
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of the trade secrets. Because the counterclaimant was not the trade secret owner when
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the misappropriation was alleged to have occurred, the counterdefendant argued that the
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counterclaimant only had standing if each of its assignments in chain of title expressly conveyed
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pre-existing causes of action. The district court disagreed and held that “it makes more sense to
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allow the current owner to sue for past misappropriation than a prior owner.” Id. at 3. In doing
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so, however, the court explicitly noted that “California courts have not explicitly addressed,
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whether, by default, causes of action for trade secret misappropriation are transferred with the
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trade secrets themselves. The statute, however, is silent as to the issue.” Ibid.
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Since Memory, the California courts have addressed this issue. In Jasmine Networks v.
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Superior Court, 180 Cal. App. 4th 980, 987 (2009), the California Court of Appeal rejected the
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defendant’s argument that the plaintiff lacked standing to bring a trade secret misappropriation
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claim because the plaintiff sold its rights in the alleged trade secrets. In doing so, the court
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explicitly rejected the defendant’s efforts to “conjure up a current ownership rule,” and noted
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the “complete absence of authority adopting or even proposing such a [current ownership] rule.”
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Id. at 996. This order agrees and similarly declines to write into the statute a requirement that is
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not there.
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Counterdefendants also argue that Romedex has failed to identify “any injury in fact
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that [it] has suffered with respect to the alleged misappropriation of trade secrets claim” (Dkt.
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No. 100 at 7). Romedex alleges that it suffered damages as a result of the misappropriation
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(RCC ¶¶ 44–48). At this stage of the litigation, such damage allegations are sufficient.
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A plaintiff’s allegation that he has, as a “direct and proximate result” of defendant’s violation,
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“sustained special and general damages” suffices to withstand a Rule 12(b)(6) motion. Jenkins
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v. Commonwealth Land Title Ins. Co., 95 F.3d 791, 799 (9th Cir. 1996). Accordingly,
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counterdefendants’ motion to dismiss Romedex’s trade secret misappropriation counterclaim
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is DENIED.
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BREACH OF CONTRACT COUNTERCLAIMS.
A.
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For the Northern District of California
United States District Court
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Romedex.
Teleflex Medical argues that Romedex retains no standing to sue under the purported
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confidentiality agreement because possession and rights in all Sapiens assets were transferred to
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Bard. Teleflex Medical, however, offers no authority for the proposition that current ownership
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of confidential information is necessary to maintain a breach of contract claim. “Once entered
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into, a contract gives rise to an obligation or legal duty, enforceable in an action law.” Witkin
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Summary of Cal. Law § 1 (10th Ed. 2005). Thus, Teleflex Medical’s obligation to comply with
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the alleged confidentiality agreement arises out of the agreement itself and is not contingent on
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whether Romedex currently owns the confidential information.
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Romedex alleges that: (1) it entered into a confidentiality agreement with Teleflex
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Medical; (2) Teleflex Medical breached the agreement by disclosing information to VasoNova,
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a third-party; and (3) Romedex was damaged as a result. Accordingly, Romedex has standing to
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pursue its breach of contract counterclaim. See Durell v. Sharp Healthcare, 183 Cal. App. 4th
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1350, 1367 (2010). Counterdefendants’ motion to dismiss Romedex’s breach of contract claim
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is DENIED.
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B.
Grunwald.
Grunwald alleges that he and VasoNova entered into an oral contract that “allowed
Vasonova, Inc., the company, to use Grunwald’s ‘Vasonova’ trade name and trademark free
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of charge so long as VasoNova, Inc., was not acquired by another company” (GCC ¶ 28).
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Counterdefendants argue that because Grunwald failed to allege any consideration from
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VasoNova for this alleged free use of the mark, his breach of contract counterclaim must fail
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(Dkt. No. 108 at 7). This order agrees.
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Under California law, consideration is an essential element of a contract. CAL. CIV.
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CODE § 1550. “A contract is supported by sufficient consideration if there is some benefit
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to the promisor or detriment to the promisee.” Sandrini v. Branch, 32 Cal. App. 2d 707,
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709 (1939). Grunwald failed to plead any consideration or mutual obligation given to him in
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exchange for VasoNova’s agreement to restrict its use of the trademark subject to Grunwald’s
terms and conditions. Although Grunwald alleges that in the event VasoNova was acquired
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For the Northern District of California
United States District Court
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by another company, he “would be willing to negotiate a sales price,” standing alone, this does
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not constitute valid consideration. Consequently, Grunwald has not pled the existence of a valid
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contract. Counterdefendants’ motion to dismiss Grunwald’s breach of contract claim is therefore
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GRANTED.
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3.
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The elements of fraud under California law are: (1) a misrepresentation; (2) with
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knowledge of its falsity; (3) with the intent to induct another’s reliance on the misrepresentation;
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(4) justifiable reliance; and (5) resulting damage. Kearns v. Ford Motor Co., 567 F.3d 1120,
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1126 (9th Cir. 2009). Under Rule 9(b), fraud-based claims must be pled with “particularity.”
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Thus, “[a]verments of fraud must be accompanied by the who, what, when, where and how
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of misconduct charged” to give defendants notice of the particular conduct they must defend.
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Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (internal quotations
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omitted).
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FRAUD.
This order finds that Romedex has failed to satisfy Rule 9(b)’s heightened pleading
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standards. The counterclaim makes the general assertion that “Teleflex Medical and Teleflex
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engaged in misrepresentations concerning the intent behind their dealings with Romedex”
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(RCC ¶ 36). The counterclaim, however, does not identify who made the alleged
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representations, when and where these misrepresentations were made, or what was specifically
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said. Furthermore, Romedex failed to plead why the alleged representation that Teleflex
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Medical “negotiat[ed] in good faith to possibly acquire Romedex technology,” was false when
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made. Romedex admits that it was Romedex, and not Teleflex, who ultimately declined to enter
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into a transaction. Furthermore, Teleflex did not acquire VasoNova until after Romedex opted to
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sell the assets to Bard. Accordingly, Romedex has failed to plead specific facts in accordance
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with Rule 9(b). Counterdefendants’ motion to dismiss Romedex’s fraud claim is GRANTED.
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4.
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Under the Declaratory Judgment Act (28 U.S.C. 2201), a court may assert jurisdiction
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For the Northern District of California
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DECLARATORY RELIEF.
over any “actual controversy.” Aetna Life Ins. v. Haworth, 300 U.S. 227, 239–41 (1937).
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Romedex.
Romedex seeks declaratory judgment that it was the rightful owner of the Grunwald
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patent applications and Sapiens assets before they were assigned to Bard (RCC at 31).
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Counterdefendants argue that because Romedex concedes that it no longer owns any of the
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Sapiens assets, it lacks standing to bring any claim requesting a declaration of prior ownership of
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those assets (Dkt. No. 100 at 8). Because all of the parties involved in this action have presented
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claims related to the intellectual property at issue, this order cannot say that Romedex can prove
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no set of facts that would entitle it to declaratory judgment. Accordingly, counterdefendants’
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motion to dismiss Romedex’s claims for declaratory judgement is DENIED.
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B.
Grunwald.
Grunwald seeks declaratory relief regarding (1) intellectual property ownership as to
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the patent applications, and (2) ownership of the trade name and trademark “VasoNova” (GCC
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¶¶ 42, 50). For the same reasons discussed above, counterdefendants’ motion to dismiss
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Grunwald’s counterclaim regarding ownership as to the patent applications is DENIED.
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As to the declaratory relief sought regarding the trademark, counterdefendants argue
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that because the amended answer fails to allege that Grunwald used the “VasoNova” mark in any
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kind of commercial activity, his counterclaim must fail.
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It is axiomatic in trademark law that the standard test of ownership
is priority of use. To acquire ownership of a trademark, it is not
enough to have invented the mark first or even to have registered it
first; the party claiming ownership must have been the first to
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actually use the mark in the sale of goods or services. Therefore, a
party pursuing a trademark claim must meet a threshold “use in
commerce” requirement.
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Rearden LLC v. Rearden Commerce, Inc., 683 F.3d 1190, 1203 (9th Cir. 2012) (internal citations
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omitted).
element of display. Id. at 1204. In determining whether the two prongs have been satisfied,
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our court of appeals generally follows a “totality of the circumstances” approach, reflecting a
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movement away from the previous approach requiring the “actual use of the mark in the sale
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of goods or services.” Id. at 1205. Accordingly, “evidence of actual sales, or lack thereof, is
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not dispositive in determining whether a party has established ‘use in commerce’ within the
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For the Northern District of California
The “use in commerce” requirement includes (1) an element of actual use, and (2) an
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United States District Court
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meaning of the Lanham Act.” Ibid. Instead, our court of appeals has acknowledged the potential
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relevance of non-sales activity when analyzing the “use in commerce” requirement.
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Grunwald alleges facts that, under the totality of the circumstances, support his argument
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that he is the owner of the “VasoNova” trademark. For example, Grunwald alleges that prior to
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the existence of VasoNova, Inc., he began to use the name “VasoNova” to brand devices he was
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developing, as well as conducting evaluation studies to demonstrate these products (GCC ¶ 26).
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He also alleges that he conducted market research in connection with these products, and created
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the domain name “vasonova.com” (id. at ¶¶ 26, 27). Because the issue of whether Grunwald
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used the trademark in commerce is highly factual, it is impossible to say that, at this stage of the
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litigation, declaratory relief will not be in order. Similarly, this order need not determine
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whether Grunwald abandoned the trademark or whether the alleged trademark contract amounts
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to a naked license. Consequently, counterdefendants’ motion to dismiss Grunwald’s claim for
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declaratory relief regarding trademark ownership is DENIED.
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CONCLUSION
For the reasons set forth above, counterdefendants’ motions to dismiss all counterclaims
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are GRANTED IN PART AND DENIED IN PART. Specifically, counterdefendants’ motions to
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dismiss Grunwald’s breach of contract counterclaim and Romedex’s fraud counterclaim are
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GRANTED. Countercomplainants may seek leave to amend and will have 21 CALENDER DAYS
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from the date of this order to file a motion, noticed on the normal 35-day calender, for leave to
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file amended counterclaims. A proposed amended complaint must be appended to the motion
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and counterclaimants must plead their best case. The motion should clearly explain how the
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amendment to the counterclaims cure the deficiencies identified herein.
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The hearing scheduled for DECEMBER 20, 2012, is VACATED.
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IT IS SO ORDERED.
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WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
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For the Northern District of California
United States District Court
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Dated: December 11, 2012.
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