Synopsys, Inc. v. Atoptech, Inc

Filing 42

Order by Hon. Samuel Conti granting in part and denying in part 9 Motion to Dismiss.(sclc2, COURT STAFF) (Filed on 10/24/2013)

1
2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE NORTHERN DISTRICT OF CALIFORNIA

8
9

United States District Court

For the Northern District of California

SYNOPSYS, INC.
10
Plaintiff,
11
v.

12

ATOPTECH, INC.
13
Defendant.
14
15
16

)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)

Case No. C 13-2965 SC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT'S
MOTION TO DISMISS

17
18
19

I.

20

INTRODUCTION
Now before the Court is Defendant ATopTech, Inc.'s

21

("Defendant") motion to dismiss Plaintiff Synopsys, Inc.'s

22

("Plaintiff") complaint.

23

Defendant moves in the alternative for a more definite statement.

24

The motion is fully briefed, ECF Nos. 24 ("Opp'n"), 32 ("Reply"),

25

and appropriate for decision without oral argument, Civ. L.R. 7-

26

1(b).

27

dismiss.

28

///

ECF Nos. 1 ("Compl."), 9 ("MTD").

As explained below, the Court GRANTS Defendant's motion to

1

II. BACKGROUND
Plaintiff is an electronic design automation ("EDA") company.

2
3

Compl. ¶ 2.

It creates, manufactures, sells, and licenses products

4

and services that enable circuit designers to create, model, and

5

verify complex integrated circuit designs "from concept to

6

silicon."

7

analysis tool" called "PrimeTime" and a piece of software called

8

"IC Compiler."

9

expected timing of a digital circuit without requiring simulation."

Id.

Among Plaintiff's products are a "static timing

Id. ¶¶ 2, 16, 17, 39.

PrimeTime "computes the

United States District Court

For the Northern District of California

10

Id. ¶ 17.

It includes "hundreds of . . . input formats and output

11

formats" that "are proprietary to [Plaintiff] and are not part of

12

any open format or standard."

13

EDA company called Extreme DA Corporation ("Extreme DA"), the

14

developer of a static timing analysis tool called "GoldTime."

15

¶¶ 4, 20.

16

PrimeTime.

17

and documentation collectively the "Copyrighted Software," but does

18

not make clear whether IC Compiler is included in that group.

19

id. ¶ 48.

Id. ¶ 18.

Plaintiff also owns an

Id.

GoldTime is similar to (and incorporates parts of)
Id.

Plaintiff calls GoldTime and PrimeTime's software

See

The input formats, which Plaintiff sometimes calls a "command

20
21

set," are used within larger "scripts" executed by PrimeTime.

Id.

22

¶ 18.

23

Id.

24

("Synopsys Design Constraints" or "SDC") that is separate from the

25

compilation of Plaintiff-proprietary input formats and are used to

26

provide a standard interface that developers can use to create

27

products that are interoperable with PrimeTime or other SDC-

28

compliant EDA tools.

PrimeTime provides feedback to the user via output formats.
PrimeTime also supports a set of open-source commands

Id. ¶ 19.

SDC is available under a free,

2

1

open-source license.

Id.

Plaintiff asserts that its input and output formats, scripts,

2
3

and technical product documentation for the products described

4

above are all confidential, proprietary trade secrets.

5

According to Plaintiff, for example, its software and documentation

6

contain proprietary rights notices, and users of Plaintiff's

7

software and documentation are governed by end-user license

8

agreements ("EULAs") that restrict the users' access to and use of

9

Plaintiff's materials.

Id. ¶¶ 21-22.

Id. ¶ 21.

Plaintiff also uses a

United States District Court

For the Northern District of California

10

variety of physical and electronic security systems to protect its

11

facilities, websites, computers, and communications systems.

12

22.

13

protection systems, encrypted communications technology and vendor,

14

customer and employee non-disclosure agreements."

15

Id. ¶

These protective measures include "access cards, password

Id.

Plaintiff owns all rights to, and has obtained federal

16

copyright registration for, the PrimeTime and GoldTime software and

17

user documentation.

18

Registrations").

19

technologies and techniques related to integrated circuit design.

20

Id. ¶ 24; Exs. 6 ("'348 Patent"), 7 ("'941 Patent"), 8 ("'127

21

Patent"), 9 ("'967 Patent") (collectively the "Patents-in-Suit").

22

Defendant is an EDA company that develops tools for the

Id. ¶¶ 23-24; Compl. Exs. 1-5 ("Copyright

Plaintiff also possesses several patents on

23

physical design of integrated circuits at sixty-five nanometers and

24

below.

25

and route" tool and the "Apogee" "floor-planning" tool.

26

Defendant entered two license agreements with Plaintiff: (1) a

27

Connections Program License Agreement (the "CPLA"), and (2) a

28

license agreement related to a method for parametric on-chip

Id. ¶ 3.

Among these tools are Defendant's "Aprisa" "place

3

Id.

1

variation (the "POCV License") (collectively the "License

2

Agreements").

Id. ¶ 4.

Defendant had originally entered the CPLA with Extreme DA,

3
4

for use of GoldTime, but Plaintiff acquired Extreme DA -- along

5

with all of its intellectual property and rights under the CPLA --

6

in June 2010.

7

Id.

8

and its documentation (and, by extension, the parts of the

9

PrimeTime software and documentation that were incorporated into

Id. ¶ 31.

The CPLA expired on February 15, 2013.

Under the CPLA, Defendant gained access to copies of GoldTime

United States District Court

For the Northern District of California

10

GoldTime).

11

only a limited license to use GoldTime for "specific

12

interoperability purposes."

13

was forbidden from incorporating GoldTime into other software

14

products, reverse-engineering GoldTime, copying GoldTime (including

15

the input and output formats), and disclosing any confidential

16

information provided under the CPLA.

17

Id.

According to Plaintiff, the CPLA gave Defendant

Id. ¶ 33.

Under the CPLA, Defendant

Id.

Under the POCV License, Defendant gained a limited, non-

18

exclusive license to Extreme DA's proprietary POCV technology,

19

which included the '640 Patent.

20

technology to test timing effects resulting from manufacturing-

21

related variations in chips (e.g., variations related to process,

22

voltage, or temperature effects during manufacturing).

23

with the CPLA, Plaintiff obtained all of Extreme DA's rights to the

24

POCV technology, including all of the rights under the POCV

25

License.

26

Id. ¶ 34.

Defendant used this

Id.

As

Id.

Plaintiff alleges that while Defendant was receiving and using

27

Plaintiff's confidential information pursuant to the License

28

Agreements, Defendant "copied portions of the PrimeTime and

4

1

GoldTime software and documentation into Aprisa user documentation

2

and software."

3

portion of Aprisa documentation -- provided by [Defendant] --

4

revealing that Aprisa includes proprietary PrimeTime and GoldTime

5

input and output formats."

6

copying likely is widespread," as evidenced by Defendant's

7

statements that Aprisa has "excellent correlation with sign-off

8

timing" and "tight correlation" with Plaintiff's PrimeTime

9

software.

Id. ¶ 35.

Id. ¶ 36.

Plaintiff claims to possess "a small

Id.

According to Plaintiff, "[t]his

Plaintiff contends that "such correlation is

United States District Court

For the Northern District of California

10

not possible without copying significant portions of the PrimeTime

11

software."

12

Id.

Plaintiff also claims that Defendant "improperly accessed and

13

stole other . . . proprietary documentation, by downloading such

14

materials from [Plaintiff's] 'SolvNet' secure website without

15

permission."

16

website on which Plaintiff "hosts software, user guides, support

17

documentation, and other materials for customers and partners with

18

valid user IDs."

19

passwords must abide by various agreements signed by their

20

companies "regarding the confidential nature of all SolvNet

21

content."

22

Defendant had accessed SolvNet and "engaged in unauthorized access

23

to and downloading of articles, FAQs, and other documentation

24

related to PrimeTime and [IC Compiler]."

25

asserts that such access, downloading, and other use exceeded the

26

scope of Defendant's licenses.

27

Defendant's activity here was undertaken for commercial gain and

28

competitive advantage.

Id.

Id. ¶ 37.

SolvNet is a password-protected support

Id. ¶ 38.

Users who register for SolvNet

Plaintiff states that it discovered in 2013 that

Id.

Id. ¶ 40.

5

Id. ¶ 39.

Plaintiff

Plaintiff alleges that all of

1

Finally, Plaintiff states that on November 28, 2012, it

[A]greements, and thereafter diligently worked to commence and

4

complete the audit."

5

apparent fear that Defendant "wrongfully copied, used, and

6

disclosed portions of the PrimeTime and GoldTime software, and

7

otherwise breached the CPLA and POCV License Agreements."

8

Plaintiff contends that for months it attempted to work with

9

Defendant to establish compliance with the License Agreements, but

10

United States District Court

invoked "its rights to verify compliance under both [L]icense

3

For the Northern District of California

2

that Defendant "systematically frustrated and obstructed the audit

11

process."

12

with a notice of default under the POCV License, which Plaintiff

13

contends also put Defendant on notice of Plaintiff's belief that

14

Defendant had "copied proprietary PrimeTime and GoldTime command

15

sets into Aprisa, in violation of the CPLA agreement and

16

[Plaintiff's] valuable intellectual property rights, including

17

those covered by [Plaintiff's] PrimeTime and GoldTime federal

18

copyright registrations."

19

Id. ¶ 42.

Id. ¶ 41.

Plaintiff did so out of an

Id.

On May 8, 2013, Plaintiff served Defendant

Id. ¶¶ 43-44.

Plaintiff set a June 10 deadline for the completion of its

20

audit.

21

Plaintiff gave Defendant another opportunity to demonstrate "that

22

it had not copied and was in compliance with the license

23

agreements."

24
25
26

Id. ¶ 45.

Id. ¶ 46.

Defendant has not done so.

Id.

On the basis of these facts, Plaintiff asserts the following
twelve causes of action against Defendant:
(1)

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

27
28

The deadline passed, and one week later

(2)

trade secret misappropriation under the California

6

1

Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et

2

seq.;

3

(3)

'127, and '967 Patents;

4
5

(4)

violation of the Federal Computer Fraud and Abuse Act
("CFAA"), 18 U.S.C. § 1030(a)(2)(C);

6
7

four counts of patent infringement as to the '348, '941,

(5)

violation of California Penal Code section 502(c)(2), the

8

California Comprehensive Data Access and Fraud Act

9

("CDAFA");

United States District Court

For the Northern District of California

10

(6)

unfair and unlawful competition under California's Unfair

11

Competition Law, Cal. Bus. & Prof. Code § 17200 et

12

seq.;

13

(7)

common law misappropriation;

14

(8)

breach of the CPLA; and

15

(9)

breach of the implied covenant of good faith and fair
dealing.

16
17

Defendant now moves to dismiss Plaintiff's complaint, arguing that

18

Plaintiff fails to state claims under any cause of action.

19
20
21

III.

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure

22

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

Navarro v.

23

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

24

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

25

sufficient facts alleged under a cognizable legal theory."

26

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

27

1988).

28

should assume their veracity and then determine whether they

"Dismissal can be based

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

7

1

plausibly give rise to an entitlement to relief."

Ashcroft v.

2

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

3

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

4

is inapplicable to legal conclusions.

5

elements of a cause of action, supported by mere conclusory

6

statements, do not suffice."

7

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

8

complaint must be both "sufficiently detailed to give fair notice

9

to the opposing party of the nature of the claim so that the party

However, "the tenet that a court

Threadbare recitals of the

Id. (citing Bell Atl. Corp. v.
The allegations made in a

United States District Court

For the Northern District of California

10

may effectively defend against it" and "sufficiently plausible"

11

such that "it is not unfair to require the opposing party to be

12

subjected to the expense of discovery."

13

1202, 1216 (9th Cir. 2011).

Starr v. Baca, 652 F.3d

14
15

IV. DISCUSSION

16

As explained below, the Court dismisses Plaintiff's complaint

17

-- except portions of its copyright infringement and UCL claims --

18

with leave to amend.

19

impermissibly vague and conclusory.

In general, Plaintiff's pleadings are

20

A.

Copyright Infringement

21

A plaintiff claiming copyright infringement must plead: (1)

22

ownership of a valid copyright; and (2) that the defendant violated

23

the copyright owner's exclusive rights under the Copyright Act by

24

copying original elements of the work.

25

Feist Pubs., Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361

26

(1991); Wash. Shoe Co. v. A-Z Sporting Goods, Inc., 704 F.3d 668,

27

674 (9th Cir. 2012).

28

17 U.S.C. § 501(a) (2003);

Defendant argues that Plaintiff fails to allege facts

8

1

indicating access to or copying of any portion of the massive

2

amount of source code and documentation of the Copyrighted

3

Software.

4

sole point of specificity as to what Defendant allegedly copied --

5

Plaintiff's input and output formats -- is insufficient not only

6

because Plaintiff does not specify which formats Defendant copied,

7

but also because copyright does not extend to executable software

8

methods, systems, or processes so long as the line-by-line source

9

code is different, though this is necessarily a fact-dependent

MTD at 6.

Further, Defendant contends that Plaintiff's

United States District Court

For the Northern District of California

10

conclusion.

11

872 F. Supp. 2d 974, 1000 (N.D. Cal. 2012)).

12

claims that Plaintiff's allegations are mere speculation, since

13

Plaintiff pleads that "copying likely is widespread" due to

14

Defendant's advertisements that its software has, for example, a

15

"tight correlation" with Plaintiff's software.

16

Id. at 7-8 (citing Oracle Am., Inc. v. Google Inc.,
Finally, Defendant

Id. at 8.

Plaintiff responds that all it must do to survive a motion to

17

dismiss its claim for copyright infringement is to allege ownership

18

and infringement.

19

providing its copyright registrations and pleading that Defendant

20

had access to the Copyrighted Software and improperly incorporated

21

parts of it into its own software, Aprisa.

22

that the "correlation" of Defendant's software with Plaintiff's

23

would not be possible without copying "significant portions" of

24

PrimeTime, and that this is not mere speculation.

25

also claims that it need not plead with particularity either what

26

parts of its own software were copied, or what of Defendant's

27

software actually infringed.

Opp'n at 3-4.

Plaintiff asserts that it did so,

Id.

Id.

Plaintiff contends

Id.

Plaintiff

Requiring such specificity,

28

9

1

according to Plaintiff, would raise factual issues not appropriate

2

for the pleading stage.

Id. at 4-5.

3

The Court finds for Defendant on this point, except as to the

4

input and output formats that Plaintiff claims Defendant infringed

5

in the Aprisa software and documentation.

6

discussed below, Plaintiff never makes clear what Defendant copied,

7

which makes it impossible for the Court to find Plaintiff's claim

8

plausible.

9

copied, and prepared derivative works based on the Copyrighted

Apart from those works,

Plaintiff alleges simply that Defendant had access to,

United States District Court

For the Northern District of California

10

Software, in contravention of the CPLA.

Compl. ¶¶ 32-33, 38-39,

11

51.

12

allegation that Defendant's quotations about correlation support an

13

inference of copying.

14

However, Plaintiff muddles this claim by also asserting that parts

15

of its software and documentation are open-source, which makes its

16

contention that essentially all of its materials are under

17

Plaintiff's copyright protection less plausible.

18

hamstrings its complaint by simply speculating on how widespread

19

the copying may be, without describing any acts or works that

20

infringe Plaintiff's Copyrighted Software.

21

47-55.

22

particularity for its copyright claims, but those claims must be

23

plausible under Rule 8, Twombly, and Iqbal.

24

Tech. Corp. v. UPI Semiconductor Corp., No. 09-05659 WHA, 2011 WL

25

166198, at *3 (N.D. Cal. Jan. 18, 2011) (dismissing copyright

26

infringement claim for failure to identify acts and works

27

constituting infringement); Salt Optics, Inc. v. Jand, Inc., No.

28

SACV 10-0828 DOC, 2010 WL 4961702, at *6 (N.D. Cal. Nov. 19, 2010).

Plaintiff asserts that this pleading is enough, as is its

See Opp'n at 3-4 (citing Compl. ¶ 36).

Plaintiff further

See Compl. ¶¶ 35-36,

Plaintiff need not reach any heightened level of

10

See, e.g., Richtek

1

Plaintiff must plead some non-speculative facts about what

2

Defendant infringed and how.

3

infringement claim is DISMISSED with leave to amend, except as to

4

the input and output formats allegedly contained in Defendant's

5

Aprisa software and documentation.

6

Accordingly, Plaintiff's copyright

Plaintiff's claim as to those formats is sufficient to state a

7

claim at this point.

See Compl. ¶ 35.

Plaintiff states, in full,

8

"Synopsys is in possession of a small portion of Aprisa

9

documentation -- provided by ATopTech -- revealing that Aprisa

United States District Court

For the Northern District of California

10

includes proprietary PrimeTime and GoldTime input and output

11

formats."

12

these input and output formats from PrimeTime and GoldTime

13

documentation are copyrighted and were duplicated in Defendant's

14

materials, this portion of the complaint is sufficient enough,

15

taken as true, for Plaintiff to state a claim for copyright

16

infringement based on that limited set of materials.

17

Id.

Since Plaintiff has specifically asserted that

On this point, Defendant contends that the Court should find

18

as a matter of law that the input and output formats are not

19

protected under copyright, citing the decision in Oracle v. Google,

20

872 F. Supp. 2d at 997, in support of this contention.

21

decision came at the end of a long bench trial, and the facts as to

22

the input and output formats in that case had been fully developed

23

on the record.

24

Court declines to make a finding as a matter of law as to input and

25

output formats in general.

26

preclude Defendant from making a later motion on this matter.

See id. at 997-98.

That

At the pleading stage, the

This holding does not, of course,

27

Plaintiff's copyright infringement claim based on alleged

28

infringement of Plaintiff's input and output formats in Defendant's

11

1

Aprisa software and documentation is undisturbed.

2

The rest of the

claim is DISMISSED with leave to amend.

3

B.

Trade Secret Misappropriation

4

To plead a claim for trade secret misappropriation under the

5

California Uniform Trade Secrets Act ("CUTSA"), Cal. Civ. Code §

6

3426 et seq., a plaintiff must assert (1) the existence of a trade

7

secret, and (2) misappropriation of the trade secret.

8

DocMagic, Inc. v. Ellie Mae, Inc., 745 F. Supp. 2d 1119, 1145 (N.D.

9

Cal. 2010); Cal. Civ. Code § 3426.1(b).

See, e.g.,

A trade secret is

United States District Court

For the Northern District of California

10

"information, including a formula, pattern, compilation, program,

11

device, method, technique, or process, that: (1) derives

12

independent economic value, actual or potential, from not being

13

generally known to the public or to other persons who can obtain

14

economic value from its disclosure or use; and (2) is the subject

15

of efforts that are reasonable under the circumstances to maintain

16

its secrecy."

17

Cal. Civ. Code § 3426.1.

Before a defendant is compelled to respond to a complaint
upon claimed misappropriation or misuse of a trade secret
and to embark on discovery which may be both prolonged
and expensive, the complainant should describe the
subject matter of the trade secret with sufficient
particularity to separate it from matters of general
knowledge in the trade or of special knowledge of those
persons who are skilled in the trade, and to permit the
defendant to ascertain at least the boundaries within
which the secret lies.

18
19
20
21
22
23
24

Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244, 253 (Cal. Ct. App.

25

1968). 1

26

1

27
28

A plaintiff alleging trade secret misappropriation need

Plaintiff argues that Diodes is inapposite because it predates
CUTSA and a later codification of a rule moving the obligation to
identify the precise trade secrets from the pleading stage to the
discovery stage. See Opp'n at 7. The Court is not convinced on
this point: "[F]ederal courts in the Ninth Circuit look to Diodes

12

1

not "spell out the details of the trade secret" but must identify

2

the trade secret with sufficient particularity to give defendants

3

"reasonable notice of the issues which must be met at the time of

4

trial and to provide reasonable guidance in ascertaining the scope

5

of appropriate discovery."

6

Id. at 252–53.

Defendant argues that Plaintiff neither identifies any trade

7

secrets nor pleads facts that Defendant acquired a trade secret

8

through "improper means" or other circumstances that would give

9

rise to CUTSA liability.

MTD at 8.

According to Defendant,

United States District Court

For the Northern District of California

10

Plaintiff's complaint simply points to everything Plaintiff has

11

created and claims everything is a trade secret.

12

(citing Compl. ¶¶ 18, 21-22, 33-35, 37-38, 40, 42, 44).

13

Defendant claims that because Plaintiff deposited its documentation

14

with the Copyright Office, that material would no longer constitute

15

trade secrets because such deposits are public.

16

See id. at 9
Further,

Id.

Plaintiff responds that its complaint specifically identifies

17

the misappropriated trade secrets as information disclosed and

18

subject matter claimed in Plaintiff's several copyright

19

registrations, including all of the material related to PrimeTime,

20

IC Compiler, GoldTime, and their documentation.

21

Compl. ¶¶ 16-18, 20-21, 24-30, 39).

22

did allege that Defendant used improper means to acquire the trade

23

secrets, since it pled that Defendant breached the parts of the

24

License Agreements that forbid it from incorporating Copyrighted

25

Software into its own products and from disclosing confidential

26
27
28

Id. at 6-7 (citing

Plaintiff then argues that it

for guidance on the applicable pleading standard for claims brought
under the CUTSA." Pellerin v. Honeywell, Int'l, Inc., 877 F. Supp.
2d 983, 988 n.1 (S.D. Cal. 2012); see also Farhang v. Indian Inst.
of Tech., Kharagpur, No. 08-02658 RMW, 2010 WL 2228936, at *13
(citing Diodes, 260 Cal. App. 2d at 253).

13

1

information under the License Agreements.

Id. at 8 (citing Compl.

2

¶ 33).

3

"improperly accessed and stole other . . . proprietary

4

documentation by downloading such materials from [Plaintiff's]

5

'SolvNet' secure website without permission."

6

¶ 37).

7

to protect its trade secrets' secrecy by redacting source code

8

submissions from its Copyright Office filings and employing

9

confidentiality agreements, but Plaintiff contends that in any

Plaintiff also notes that it alleged that Defendant

Id. (quoting Compl.

Plaintiff further states that it took reasonable measures

United States District Court

For the Northern District of California

10

event, this would be a factual issue inappropriate for resolution

11

on a motion to dismiss.

Id. at 8-9.

The Court finds for Defendant on this point.

12

First,

13

Plaintiff's complaint is impermissibly conclusory.

14

Plaintiff alleges that "its trade secrets at issue in this case,

15

which [have] been copied and misappropriated by [Defendant],

16

relates to [Plaintiff's] PrimeTime, GoldTime, and IC Compiler

17

products.

18

input and output formats, scripts, and technical product

19

documentation, which generally are not publicly known, and derive

20

value from being secret."

21

explicitly to Plaintiff's publicly available patents, which

22

Plaintiff improperly refers to as trade secrets.

23

(citing Compl. ¶¶ 25-29). 2

24

2

25
26
27
28

For instance,

Such information includes [Plaintiff's] proprietary

Compl. ¶ 21.

Other pleadings refer

See Opp'n at 7

These are conclusions of law disguised

Farhang held that a patent application cited in an otherwise
vague pleading regarding trade secrets could give reasonable notice
of the scope of a purported trade secret. See 2010 WL 2228936, at
*13. However, the patent applications in Farhang were unpublished
and not publicly available. Plaintiff's patents have issued and
been published. "[I]t is well established that disclosure of a
trade secret in a patent places the information comprising the
secret into the public domain. Once the information is in the
public domain and the element of secrecy is gone, the trade secret

14

1

as factual pleadings, and they do not state claims under Twombly

2

and Iqbal.

3

says they are: there must be some minimally plausible factual

4

explanation for why trade secret protection applies.

5

Materials are not trade secrets just because Plaintiff

Second, it is impossible for the Court, let alone Defendant,

any of this material (e.g., non-redacted portions of public

8

documents, open-source code, and so forth).

9

is too sweeping and vague for Defendant to be on notice of what

10

United States District Court

to determine where trade secret protection begins and ends as to

7

For the Northern District of California

6

trade secrets are at issue and where the boundary between those

11

secrets and general knowledge might lie.

12

2228936, at *13 (citing Diodes, 260 Cal. App. 2d at 253).

13

Plaintiff's complaint

See Farhang, 2010 WL

Plaintiff does refer, as in its copyright infringement claim,

14

to "input and output formats" being protected trade secrets, see ¶¶

15

18-21, which is an iota more precise than the rest of Plaintiff's

16

claims, but the Court finds that Plaintiff's pleading as to how

17

these formats are protected by trade secret law are impermissibly

18

conclusory.

19

secrets, but its vague references to an enormous array of potential

20

sources do not suffice to survive Defendant's motion to dismiss.

21

On this point, unlike in Plaintiff's copyright claim, more is

22

necessary.

23

the Court cannot determine which parts of Plaintiff's code and

24

documentation are supposed to be trade secrets and which parts are

25

publicly available, open source commands.

Plaintiff need not spell out every detail of its trade

For example, examining the manuals filed under seal,

See, e.g., Compl. ¶ 19

26
27
28

is extinguished . . . ." Ultimax Cement Mfg. Corp. v. CTS Cement
Mfg. Corp., 587 F.3d 1339, 1355 (Fed. Cir. 2009) (citation and
quotations omitted).

15

1

(PrimeTime includes open source commands that are distinct from

2

Plaintiff's proprietary code).

3

As to the question of whether Plaintiff's Copyright Office

4

filings are covered by trade secret protection, the Court cannot

5

make a broad finding at this point.

6

material and now claims that material as trade secrets, Plaintiff's

7

claims fail, since that material is publicly accessible.

8

e.g., KEMA, Inc. v. Koperwhats, No. C-09-1587 MMC, 2010 WL 726640,

9

at *4 (N.D. Cal. Mar. 1, 2010) (holding that source code filed with

If Plaintiff filed unredacted

See,

United States District Court

For the Northern District of California

10

the Copyright Office and not redacted can destroy secrecy required

11

under California trade secret law).

12

Copyright Office restricts access to deposited material, but that

13

is not quite true: the Copyright Office indeed places restrictions

14

on requests for reproductions, 37 C.F.R. § 202.20(d), but the same

15

restrictions do not necessarily apply to access and inspection.

16

See 17 U.S.C. § 705(b); see also 37 C.F.R. § 201.2(b)(1) (providing

17

for public "inspection [at the Copyright Office] of . . .

18

deposited in connection with a completed copyright registration").

19

The Court cannot as a matter of law say that restrictions on

20

copying will necessarily protect all publicly filed documents, when

21

those documents are readily accessible for public inspection.

22

KEMA, 2010 WL 726640, at *4.

23

some of its source code from the Copyright Office filings, which

24

could serve to protect trade secrets in some cases, 37 C.F.R. §

25

202.20(c)(2)(vii), but without even slightly more detailed

26

pleadings the Court cannot determine which parts of Plaintiff's

27

publicly filed materials may be trade secrets and which are not.

Plaintiff argues that the

material

See

Plaintiff claims that it redacted

28

16

Plaintiff's pleadings, unsupported by more facts, fail to

1

protected by trade secret law and therefore fail to "raise a right

4

to relief above the speculative level."

5

Plaintiff's trade secret misappropriation claim is DISMISSED with

6

leave to amend, per the guidelines given above.

7

concerned about maintaining its trade secrets' confidentiality,

8

Plaintiff may identify the alleged trade secrets in a sealed

9

filing.

10

United States District Court

provide a reasonable basis for inferring that the formats are

3

For the Northern District of California

2

C.

11

Plaintiff asserts a claim for common law misappropriation

Twombly, 550 U.S. at 555.

If Plaintiff is

Common Law Misappropriation

12

based on the allegation that Defendant improperly acquired, used,

13

and disclosed Plaintiff's Copyrighted Software and confidential and

14

proprietary information, including materials accessed and

15

downloaded from SolvNet.

16

claim in the alternative, "[t]o the extent that any portion of

17

[its] Copyrighted Software is found not to be protectable under

18

copyright or found not to be protectable trade secrets."

19

113.

20

Compl. ¶¶ 113-118.

Plaintiff makes this

Id. ¶

First, Defendant argues that this claim is preempted by CUTSA

21

because CUTSA preempts claims "based on the same nucleus of

22

operative facts" as trade secret claims, regardless of whether the

23

material in question meets the definition of a trade secret.

24

at 12 (citing K.C. Multimedia, Inc. v. Bank of America Tech. &

25

Ops., Inc., 171 Cal. App. 4th 939, 962 (Cal. Ct. App. 2009);

26

SunPower Corp. v. SolarCity Corp., No. 12-CV-694 LHK, 2012 WL

27

6160472, at *4-6 (N.D. Cal. Dec. 11, 2012)).

28

contends that the Copyright Act preempts this claim, since the

17

MTD

Second, Defendant

1

Copyright Act preempts state law causes of action if the work

2

involved falls within the Copyright Act's subject matter and the

3

rights the plaintiff asserts under state law are equivalent to

4

those established in the Copyright Act.

5

U.S.C. § 301(a)).

6

MTD at 13 (citing 17

Plaintiff responds that neither statute preempts its common

7

law misappropriation claim.

Opp'n at 9-10.

First, Plaintiff

8

argues that preemption is a factual issue inappropriate for

9

resolution at this stage, and that in any event, the facts at issue

United States District Court

For the Northern District of California

10

under the common law misappropriation claim are different from the

11

ones supporting the trade secret misappropriation claim.

12

10-11.

13

preempt the common law misappropriation claim because that cause of

14

action contains an "extra element" beyond what copyright law

15

requires: breach of a confidential relationship.

16

to both statutory preemption theories, Plaintiff argues that this

17

claim must survive in any event because Plaintiff pled it in the

18

alternative.

Id. at

Second, Plaintiff argues that the Copyright Act does not

Id. at 11-12.

Id. at 10-12.

19

The Court does not need to reach the copyright preemption

20

issue, because the Court finds that CUTSA preempts Plaintiff's

21

common law misappropriation claim.

22

Court does not find this to be an inappropriate factual dispute.

23

It is a pleading issue and is therefore entirely appropriate for

24

resolution on a Rule 12(b)(6) motion.

25

6160472, at *4-6 (resolving a similar dispute on the pleadings).

26

Moreover, preempted claims are not saved from preemption just

27

because they are pled in the alternative.

28

Blizzard, Inc., C 12-1096 CW, 2012 WL 5199505, at *4 (N.D. Cal.

18

As a threshold matter, the

See SunPower, 2012 WL

Lewis v. Activision

As

1

Oct. 22, 2012).

2

Court had found that portions of the Copyrighted Software were not

3

protectable under copyright or trade secret law -- which it did

4

not, as those dismissals were on pleading grounds -- Plaintiff's

5

claim would still be preempted.

6

In this case, as explained below, even if the

In reference to preemption:

7
8
9

United States District Court

For the Northern District of California

10
11

The preemption inquiry for those causes of action not
specifically
exempted
by §
3426.7(b) focuses
on
whether other claims are not more than a restatement
of the same operative facts supporting trade secret
misappropriation . . . If there is no material
distinction between the wrongdoing alleged in a
[C]UTSA claim and that alleged in a different claim,
the [C]UTSA claim preempts the other claim.

12
Farmers Ins. Exch. v. Steele Ins. Agency, Inc., No. 2:13-CV-0078413
MCE-DAD, 2013 WL 3872950, at *7 (E.D. Cal. July 25, 2013)
14
(quoting Convolve, Inc. v. Compaq Comp. Corp., No. 00 CV 5141(GBD),
15
2006 WL 839022, at *6 (S.D.N.Y. Mar. 31, 2006) (internal quotations
16
omitted) (applying California law)).
17
Plaintiff's argument on this point is that its common law
18
misappropriation claim is based on a different set of facts than
19
its CUTSA claim.

Opp'n at 10.

Plaintiff contends that its common

20
law misappropriation claim covers "additional proprietary technical
21
documents from SovlNet, materials which are not alleged to comprise
22
[Plaintiff's] misappropriation claim under CUTSA."

Id. at 11.

The

23
Court cannot discern this distinction from the pleadings.
24
Plaintiff's trade secret misappropriation claim, Compl. ¶¶ 5725
65, is so vague that it appears to encompass just about every piece
26
of material Plaintiff has ever created or acquired, leading that
27
claim to bleed into its common law misappropriation claim to the
28

19

1

point that the two become indistinct and overlapping.

2

CUTSA claim refers only to "trade secrets," which Plaintiff

3

indiscriminately defines throughout its complaint as (so far as the

4

Court can tell) code and documentation related to PrimeTime,

5

GoldTime, and IC Compiler, all of which -- except the IC Compiler

6

material -- would appear to be part of Plaintiff's Copyrighted

7

Software.

8

common law misappropriation claim in terms of its "Copyrighted

9

Software and confidential and proprietary information, including

See, e.g., id. ¶¶ 18-21, 41-44.

Plaintiff's

Plaintiff alleges its

United States District Court

For the Northern District of California

10

those materials improperly accessed and downloaded from SolvNet."

11

See id. ¶¶ 113-114.

12

were different from those at issue in the CUTSA misappropriation

13

claim, but while SolvNet may not be mentioned specifically in

14

Plaintiff's trade secret sections, throughout the complaint

15

Plaintiff never distinguishes the material on SolvNet from anything

16

else it claims to be a protected work.

17

This all suggests that Plaintiff's trade secret and common law

18

misappropriation claims concern the same material.

Plaintiff contends that the SolvNet materials

See, e.g., Compl. ¶¶ 37-40.

The Court can therefore see no distinction between those two

19
20

claims, except that Plaintiff pled the common law misappropriation

21

claim in the alternative.

22

Plaintiff's allegations, this pleading distinction is meaningless:

23

there is no way to distinguish Plaintiff's common law

24

misappropriation claim from its CUTSA claim.

25

same facts.

26

with leave to amend, if Plaintiff can distinguish it from its trade

27

secret misappropriation claim.

28

///

Absent any real distinction among any of

CUTSA preempts this claim.

20

They are based on the

It is therefore DISMISSED

1

D.

CFAA

2

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

3

criminal causes of action for an array of activities concerning

4

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

5

are "used in or affecting interstate or foreign commerce or

6

communication."

7

hackers who accessed computers to steal information or to disrupt

8

or destroy computer functionality, as well as criminals who

9

possessed the capacity to access and control high technology

Id. § 1030(e)(2).

The CFAA is "designed to target

United States District Court

For the Northern District of California

10

processes vital to our everyday lives."

LVRC Holdings LLC v.

11

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

12

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

13

supplement or replacement for misappropriation claims.

14

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

15

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

The Ninth Circuit has

United

16

plaintiff must prove that the defendant violated one of the

17

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

18

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

19

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

20

Brekka, 581 F.3d at 1131.

21

Plaintiff alleges that Defendant violated section

22

1030(a)(2)(C) of the CFAA.

Compl. ¶ 95.

That section prohibits

23

"intentionally access[ing] a computer without authorization or

24

exceeds authorized access, and thereby obtain[ing] . . .

25

information from any protected computer."

26

1030(a)(2)(C).

27

Compl. ¶¶ 95-98, is deficient because the Ninth Circuit has made

28

clear that the CFAA, meant to target malicious hackers, prohibits

18 U.S.C. §

Defendant contends that Plaintiff's CFAA claim,

21

1

unauthorized access but not unauthorized use, which is what

2

Plaintiff's complaint charges.

3

argues that Plaintiff equivocates between allegations of

4

"unauthorized" access versus "exceeded authorized access," which

5

Defendant contends is legally significant; that Plaintiff pled no

6

facts about Defendant's alleged access to Plaintiff's computer

7

network SolvNet; and that Plaintiff's allegations describe legally

8

insufficient violations of use restrictions rather than violations

9

of access prohibitions.

See MTD at 14-15.

Id. at 15.

Defendant also

Plaintiff contends that its

United States District Court

For the Northern District of California

10

license agreement and other agreements, like its privacy policy,

11

were sufficient to restrict Defendant's "access" to SolvNet.

12

Opp'n at 17 (citing Compl. ¶¶ 37-39, 94-98).

13

See

Defendant relies in large part on Nosal, 676 F.3d at 854, in

14

which the Ninth Circuit held that the CFAA applied narrowly to

15

punish hacking ("the circumvention of technological access

16

barriers"), not the misappropriation of trade secrets or

17

contravention of use policies.

18

employees of an executive search firm used their authorized log-in

19

credentials to download proprietary information from a confidential

20

database on their employer's computer system, and then transferred

21

that information to a competitor, in violation of their employer's

22

use restrictions on the disclosure of confidential information to

23

third parties or using confidential information for any purpose

24

except company business.

25

that the CFAA prohibits only the unauthorized procurement or

26

alteration of information, not its misuse or appropriation, and

27

therefore the phrase "exceeds authorized access" in the CFAA "does

28

not extend to violations of use restrictions."

676 F.3d at 863.

See id. at 856.

22

In Nosal,

The Ninth Circuit held

Id. at 863-64.

1

Plaintiff responds that Defendant's reliance on Nosal is

2

misplaced because, while that case admittedly distinguished access

3

from use restrictions, Plaintiff insists that what it imposed on

4

Defendant was an access restriction via the license agreements.

5

See Opp'n at 17-18.

6

Defendant agreed to abide by the terms of Plaintiff's Privacy

7

Policy, EULA, and other agreements with Plaintiff regarding

8

confidentiality of SolvNet content prohibits Defendant from

9

accessing SolvNet material for which it lacks a license, rendering

Plaintiff contends that the fact that

United States District Court

For the Northern District of California

10

any such access a violation of the CFAA.

11

According to Plaintiff, when Defendant downloaded "articles, FAQs,

12

and other documentation related to PrimeTime and [IC Compiler],"

13

Defendant's access, downloading, and use of those materials went

14

beyond the scope of its licenses with Plaintiff and therefore

15

breached the CFAA.

16

Compl. ¶¶ 38-39.

Id.

The Court finds that Plaintiff has not stated a CFAA claim.

17

It is true that some courts have held that the CFAA applies to

18

access restrictions that are contractual, as well as technological

19

restrictions.

20

11-3109 EMC, 2012 WL 2327660, at *3 (N.D. Cal. June 19, 2012); see

21

also Nosal, 676 F.3d at 864 (distinguishing between access

22

restrictions and use restrictions, but not the form of the

23

restrictions); Craigslist Inc. v. 3Taps Inc., -- F. Supp. 2d --,

24

2013 WL 1819999, at *3-4 (N.D. Cal. Apr. 30, 2013) (noting Nosal's

25

distinction).

26

the CFAA apply only to breaches of technical barriers.

27

In re Facebook Privacy Litig., 791 F. Supp. 2d 705, 715-16 (N.D.

28

Cal. 2011) (holding, in a California Penal Code section 502 case,

See Weingand v. Harland Fin. Solutions, Inc., No. C

But other courts have asserted that statutes like

23

See, e.g.,

1

that the rule of lenity requires interpreting access "without

2

permission" to apply only to access exceeding technical barriers);

3

Facebook, Inc. v. Power Ventures, Inc., No. C 08-05780-JW, 2010 WL

4

3291750, at *11 (N.D. Cal. July 20, 2010) (same).

5

Neither the Ninth Circuit nor Congress has fully explored the

6

limits of this nuanced distinction.

However, it is clear to the

7

Court that Nosal's discussion of the differences between CFAA-

8

actionable unauthorized access or procurement and non-CFAA misuse

9

or misappropriation requires plaintiffs to plead, clearly and

United States District Court

For the Northern District of California

10

plausibly, that whatever access restriction they allege was not

11

simply a use prohibition disguised as a limit on access.

12

676 F.3d at 863-64; see also Craigslist Inc., 2013 WL 18199999, at

13

*4 (holding that framing a contractual prohibition in terms of

14

"access" was insufficient to state a CFAA claim because the

15

contractual prohibition depended on the accessor's purpose and did

16

not govern "who may access information, what information may be

17

accessed, or the methods by which information may be access").

18

other words, the state of CFAA doctrine in the Ninth Circuit

19

suggests that while a breach of a contractual provision may in some

20

cases be enough to allege unauthorized access, see Craigslist Inc.,

21

2013 WL 1819999, at *4, such an alleged breach must be pled with

22

enough clarity and plausibility to state that access itself -- not

23

just a particular use -- was prohibited.

Nosal,

In

24

Plaintiff fails to plead sufficient facts to support an

25

allegation of unauthorized access either by breach of contract or

26

by technical means.

27

that Defendant breached its license when it accessed SolvNet and

28

downloaded "articles, FAQs, and other documentation" relating to

Plaintiff's sparse allegations simply state

24

1

software for which Defendant had a license.

Compl. ¶¶ 38-39.

The

2

allegation that this activity exceeded authorized access, even

3

though Plaintiff does not suggest that Defendant was not allowed to

4

access SolvNet or that Plaintiff had restricted or revoked

5

Defendant's access prior to Defendant's use of SolvNet, is

6

implausible.

7

believable precision what restricted material Defendant downloaded,

8

given the competing allegation that Defendant had rights to use

9

PrimeTime and GoldTime.

Further, Plaintiff does not allege with any

Absent facts stating that Defendant "has

United States District Court

For the Northern District of California

10

no rights, limited or otherwise, to access the computer in

11

question," Brekka, 581 F.3d at 1133, Plaintiff's mere allegation

12

that Defendant breached a license agreement does not sufficiently

13

indicate that Defendant breached an access prohibition under the

14

CFAA.

15
16

Accordingly, Plaintiff's CFAA claim is DISMISSED with leave to
amend.

17

E.

CDAFA

18

Plaintiff asserts a claim under the CDAFA, which prohibits

19

"[k]nowingly access[ing] and without permission tak[ing],

20

copy[ing], or mak[ing] use of any data from a computer, computer

21

system, or computer network, or tak[ing] or copy[ing]any supporting

22

documentation, whether existing or residing internal or external to

23

a computer, computer system, or computer network."

24

Defendant moves to dismiss Plaintiff's section 502 claim for

25

the same reasons as the CFAA claim.

26

Plaintiff fails to plead unauthorized access under the CFAA or

27

access "without permission" under the CDAFA.

28

Plaintiff responds that it properly alleged Defendant's accessing

25

Defendant argues that

See MTD at 14-17.

1

SolvNet without permission, as described above, and that Defendant

2

cannot use the License Agreements' authorization to argue that it

3

had permission to access SolvNet.

4

that the CDAFA does not require that "access" be without

5

permission: the statutory language requires only that taking,

6

copying, or making use of the accessed data be without permission.

7

Id. at 18-19.

8
9

Opp'n at 18.

Plaintiff adds

Defendant cites a recent case from this Court, which held that
the rule of lenity required limiting the CDAFA's "without

United States District Court

For the Northern District of California

10

permission" language to apply only to the circumvention of

11

technical barriers, since to apply it more broadly -- for example,

12

to breaches of a license agreement -- would be unconstitutionally

13

vague.

14

courts have concurred with this ruling, absent definitive

15

clarification from the legislature or courts of appeal, but there

16

is some disagreement on the point.

17

Consumer Privacy Litig., No. 11-MD-02264 JSW, 2013 WL 1283236, at

18

*11-12 (N.D. Cal. Mar. 26, 2013) (only technical breaches are

19

actionable under the CDAFA), and Facebook, Inc. v. Power Ventures,

20

Inc., 844 F. Supp. 2d 1025, 1036 (N.D. Cal. 2012) (same), with

21

Weingang, 2012 WL 2327660, at *4-6 (discussing split authority on

22

whether the CDAFA should only apply to technical breaches, but not

23

deciding which split to adopt), and Facebook, Inc. v. ConnectU LLC,

24

489 F. Supp. 2d 1087, 1090-91 (N.D. Cal. 2007) (holding that a

25

defendant's access to a plaintiff's website by using information

26

voluntarily supplied by authorized users was "without permission"

27

and a violation of the CDAFA).

28

In re Facebook Privacy, 791 F. Supp. 2d at 716.

Other

Compare In re Google Android

In support of its contention that a contract alone can

26

1

prohibit access per the CDAFA, Plaintiff cites Therapeutic Research

2

Faculty v. NBTY, Inc., 488 F. Supp. 2d 991, 998-99 (E.D. Cal.

3

2007), which held that while some of the defendants' employees'

4

access to the plaintiffs' computers was authorized, some was not,

5

so the plaintiffs could state a CDAFA claim as to the unauthorized

6

accessors.

7

bought a single-user software license -- limited specifically to a

8

single, individual employee of the corporation -- and shared not

9

only among multiple employees but also with at least one other

Specifically, in Therapeutic Research, a corporation

United States District Court

For the Northern District of California

10

corporation.

11

compelling, since the contract at issue there specifically

12

precluded access for a large category of users.

13

the case here.

14

See id. at 993-94.

The Court does not find this case

The same is not

The Court cannot find, as a matter of law, that Plaintiff does

15

not state a claim under the CDAFA solely because Plaintiff relies

16

on the alleged breach of a license agreement instead of a technical

17

breach.

18

under the CDAFA for pleading reasons.

19

SolvNet users "must abide by 'the terms of the Privacy Policy and

20

the end user license agreement and other agreements with

21

[Plaintiff]' that his or her company signed 'regarding the

22

confidential nature of all SolvNet content.'

23

must only access and download materials for which their company has

24

a license."

25

[Plaintiff] discovered that [Defendant] accessed SolvNet and

26

engaged in unauthorized access to and downloading of articles,

27

FAQs, and other documentation related to PrimeTime and [IC

28

Compiler].

However, Plaintiff's complaint does not state a claim

Compl. ¶ 38.

Plaintiff pleads that

This means that users

Plaintiff then states that "[i]n 2013,

[Defendant's] downloading and other use of these

27

1

materials was beyond the scope of its licenses with [Plaintiff.]"

2

Id. ¶ 39.

3

The court finds Plaintiff's allegations do not provide enough

4

detail to be plausible.

Although Plaintiff pleads that Defendant's

5

access or use of the material in question, large portions of the

6

complaint are describe how Defendant was licensed to use much of

7

the material at issue here.

8

to SolvNet unless some contractual term was clear enough to

9

prohibit access or there was some technical prohibition.

Defendant also apparently had access

In this

United States District Court

For the Northern District of California

10

context, alleging that the License Agreements and other contracts

11

Defendant had entered forbade Defendant from using SolvNet is

12

conclusory and not plausible.

13

License Agreements and its other user agreements with Defendant

14

were enough to put Defendant on notice that its access to SolvNet

15

was "without permission."

16
17

Plaintiff must explain how the

Since there are many ways for Plaintiff to repair its CDAFA
claim, the Court DISMISSES this claim with leave to amend.

18

F.

Breach of Contract and Breach of the Implied Covenant

19

Plaintiff asserts claims for breach of contract and breach of

20

the implied covenant of good faith and fair dealing against

21

Defendant, based on Defendant's alleged breaches of the CPLA's

22

confidentiality and proper use provisions, as well as Defendant's

23

alleged refusal to comply with Plaintiff's attempts to verify its

24

compliance with the CPLA.

25
26

i.

See Compl. ¶¶ 121-25, 127-132.

Breach of Contract

"To state a cause of action for breach of contract, a party

27

must plead [1] the existence of a contract, [2] his or her

28

performance of the contract or excuse for nonperformance, [3] the

28

1

defendant's breach, and [4] resulting damage."

2

N.A., No. 11-6598 SC, 2012 WL 2061629, *6 (N.D. Cal. June 7, 2012)

3

(citing Harris v. Rudin, Richman & Appel, 74 Cal. App. 4th 299, 307

4

(Cal. Ct. App. 1999)).

5

existence of a contract, the plaintiff may set forth the contract

6

verbatim, attach it as an exhibit, or plead it according to its

7

legal effect.

8

2011 WL 3607608, at *2 (N.D. Cal. Aug. 15, 2011).

9

Mora v. U.S. Bank,

Additionally, if the plaintiff alleges the

See Lyons v. Bank of America, N.A., No. 11-01232 CW,

Plaintiff has pled the existence of a contract and its

United States District Court

For the Northern District of California

10

performance of it.

11

deficient.

12

as to Defendant's alleged copying of GoldTime's input and output

13

formats, which are the only portions of GoldTime that Plaintiff

14

adequately alleges Defendant copied.

15

allegations are insufficiently vague and conclusory because, as

16

discussed above, Plaintiff does not explain what other parts of the

17

software were copied, or how? Defendant breached any

18

confidentiality clause.

19

the Court to find Plaintiff's claim of breach plausible.

20

Separately, the parties' dispute over whether Defendant continued

21

to use GoldTime's input and output formats after its license's

22

expiration in February 2013 is a factual dispute, inappropriate for

23

decision on a motion to dismiss.

24

does not save the claim, because Plaintiff fails to allege damages.

25

See MTD at 17; Opp'n at 13 n.5.

26

However, Plaintiff's allegation of breach is

Plaintiff's pleadings on this point are sufficient only

Other parts of Plaintiff's

These deficiencies make it impossible for

However, as noted below, this

The more significant pleading deficiency of Plaintiff's breach

27

of contract claim is this failure to allege damages.

28

merely states that Defendant "sought commercial gain and

29

Plaintiff

1

competitive advantage by accessing and using [Plaintiff's]

2

proprietary information to develop its products, including

3

[Defendant's] Aprisa, which incorporate and are derived from

4

[Plaintiff's] confidential information and trade secrets."

5

¶ 40; see also Opp'n at 13.

6

as part of its breach of contract claim, see Compl. ¶¶ 120-25, but

7

even if it had, it does not assert that Plaintiff was damaged by

8

Defendant's seeking commercial gain or competitive advantage -- the

9

mere fact that Defendant sought those things does not indicate harm

Compl.

Plaintiff did not make this allegation

United States District Court

For the Northern District of California

10

to Plaintiff.

11

with leave to amend, so that Plaintiff can more plausibly explain

12

the alleged breach and how it damaged Plaintiff.

13

ii.

Plaintiff's breach of contract claim is DISMISSED

Breach of Implied Covenant

14

"The covenant of good faith and fair dealing, implied by law

15

in every contract, exists merely to prevent one contracting party

16

from unfairly frustrating the other party's right to receive the

17

benefits of the agreement actually made."

18

Inc., 24 Cal. 4th 317, 349 (Cal. 2000).

19

impose substantive duties or limits on the contracting parties

20

beyond those incorporated in the specific terms of their

21

agreement."

22

the covenant of good faith and fair dealing are:

23
24
25
26
27
28

Id. at 349-50.

Guz v. Bechtel Nat.
The covenant "cannot

The elements of a claim for breach of

(1) the plaintiff and the defendant entered
into a contract; (2) the plaintiff did all
or substantially all of the things that the
contract required him to do or that he was
excused
from
having
to
do;
(3)
all
conditions
required
for
the
defendant's
performance had occurred; (4) the defendant
unfairly interfered with the plaintiff's
right
to
receive
the
benefits
of
the
contract; and (5) the defendant's conduct
harmed the plaintiff.

30

1

Woods v. Google, Inc., 889 F. Supp. 2d 1182, 1194 (N.D. Cal. 2012)

2

(citing Judicial Counsel of California Civil Jury Instructions §

3

325 (2011)).

4

Plaintiff alleges that it had a right to confidentiality under

5

the CPLA, that the CPLA contained an implied covenant of good faith

6

and fair dealing, and that Defendant breached the implied covenants

7

by failing to maintain the confidentiality of Plaintiff's

8

proprietary information and by failing to comply with Plaintiff's

9

attempts to verify Defendant's compliance with the CPLA.

Compl. ¶¶

United States District Court

For the Northern District of California

10

127-129.

11

beyond mere breaches of the CPLA, because Defendant allegedly

12

maintained its relationship with Plaintiff to gain access to

13

Plaintiff's confidential material, and that Defendant, in bad

14

faith, frustrated Plaintiff's attempts to ensure confidentiality

15

and compliance with the CPLA.

16

that the CPLA included no "audit right" or "right to verify

17

compliance," and that Plaintiff's breach of the implied covenant

18

claim constitutes nothing but a breach of contract claim because

19

Plaintiff's allegations of bad faith or "independently wrongful"

20

conduct are conclusory allegations, devoid of facts to support the

21

claim.

22

Plaintiff asserts that it was harmed by this behavior

Id. ¶¶ 130-31.

Defendant argues

See MTD at 18, Reply at 11.

The Court agrees with Defendant.

First, as to Plaintiff's

23

allegation that Defendant breached the implied covenant by refusing

24

to allow Plaintiff to audit Defendant's compliance, Plaintiff never

25

alleged that the CPLA contained any clause that granted it a right

26

to verify Defendant's compliance, and breaches of the implied

27

covenant apply only to "benefits of the agreement actually made."

28

Guz, 24 Cal. 4th at 349.

Plaintiff cannot simply add a contractual

31

1
2

term after the fact.
Second, Plaintiff's assertions of bad faith are unacceptably

3

conclusory, because Plaintiff simply asserts -- without supporting

4

facts -- that Defendant acted in bad faith and for independently

5

wrongful purposes.

6

pleading under Twombly and Iqbal.

7

See Compl. ¶¶ 130-31.

This is defective

Finally, Plaintiff does allege that Defendant breached the

8

confidentiality provisions of the CPLA, but this allegation is

9

duplicative of Plaintiff's breach of contract claim.

"If the

United States District Court

For the Northern District of California

10

allegations in a breach of implied covenant claim do not go beyond

11

the statement of a mere contract breach and, relying on the same

12

alleged acts, simply seek the same damages or other relief already

13

claimed in a companion contract cause of action, they may be

14

disregarded as superfluous as no additional claim is actually

15

stated."

16

2010 WL 934252, *6 (N.D. Cal. Mar. 15, 2010) (quoting Schulken v.

17

Wash. Mut. Bank, No. 09–CV–02708, 2009 WL 4173525 (N.D. Cal. Nov.

18

19, 2009)); see also Dunkel v. eBay Inc., No. 12-CV-01452-EJD, 2013

19

WL 415584, at *9-10 (N.D. Cal. Jan. 31, 2013).

20

Plaintiff's breach of implied covenant claim suggests that this

21

claim is at all different from Plaintiff's breach of contract

22

claim.

23
24

Malcolm v. JP Morgan Chase Bank, N.A., No. 09–CV–4496,

Nothing in

Accordingly, Plaintiff's breach of the implied covenant claim
is DISMISSED with leave to amend.

25

G.

UCL

26

The UCL prohibits unfair competition, including, inter alia,

27

"any unlawful, unfair or fraudulent business act."

28

Prof. Code § 17200.

Cal. Bus. &

"Because [section 17200] is written in the

32

1

disjunctive, it establishes three varieties of unfair competition--

2

acts or practices which are unlawful, or unfair, or fraudulent."

3

Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 1554

4

(Cal. Ct. App. 2007).

5

Plaintiff brings its UCL claim under the unlawful and unfair

6

prongs of the UCL, having conceded that it does not allege

7

violation of the fraudulent prong.

8

Plaintiffs can plead a UCL violation under the "unlawfulness" prong

9

by pleading that a business practice violated a predicate federal,

See Opp'n at 15 n.6.

United States District Court

For the Northern District of California

10

state, or local law.

11

Cellular Tel. Co., 20 Cal. 4th 163, 180 (Cal. 1999) (citing State

12

Farm Fire & Cas. Co. v. Superior Court, 45 Cal. App. 4th 1093, 1103

13

(Cal. Ct. App. 1996)).

14

competitors instead of consumers, California courts have held that

15

the UCL requires the competitor plaintiff to allege an incipient

16

violation of an antitrust law or that law's policy or spirit

17

"because [the unfair practice's effect] are comparable to a

18

violation of the law, or that otherwise significantly threatens or

19

harms competition."

20

See Cel–Tech Commc'ns, Inc. v. Los Angeles

For UCL unfairness claims brought by

Id. at 187.

Plaintiff's UCL unlawfulness claim alleges that Defendant's

21

conduct violated "numerous state and federal statutes and codes,"

22

including the CFAA, the CDAFA, and laws pertaining to improper use

23

of proprietary and confidential materials.

24

noted above, all of these claims failed and are dismissed, except -

25

- as a pleading matter -- Plaintiff's copyright infringement claim

26

as to the input and output formats in Defendant's Aprisa software

27

and documentation.

28

to amend except as to that predicate copyright claim.

Compl. ¶¶ 108-09.

As

Plaintiff's UCL claim is DISMISSED with leave

33

1

As to both Plaintiff's UCL unlawfulness and unfairness claims,

2

Defendant disputes their predication on a breach of contract claim.

3

Defendant is correct that a breach of contract alone cannot be the

4

predicate of a UCL unfairness or unlawfulness claim unless the

5

breach also constitutes conduct that was unlawful, unfair, or

6

fraudulent, see Arce v. Kaiser Found. Health Plan, Inc., 181 Cal.

7

App. 4th 471, 489-90 (Cal. Ct. App. 2010), but Plaintiff's UCL

8

claims are not based solely on a breach of contract.

9

that those claims rely on Plaintiff's breach claim, they are

To the extent

United States District Court

For the Northern District of California

10

DISMISSED, as are Plaintiff's UCL claims based on any other

11

dismissed claim.
Plaintiff's UCL unfairness claim primarily asserts that

12
13

Defendant's alleged access to and copying of Plaintiff's

14

confidential materials, as well as its subsequent refusal to verify

15

a lack of anti-competitive conduct, are actionable anti-competitive

16

behaviors covered by the UCL.

17

36.

18

the CDAFA supports a UCL unfairness claim, see Opp'n at 16, but the

19

Court has dismissed that predicate claim.

20

allegations are, the UCL cognizes them as being sufficient to state

21

a claim at this stage of litigation -- at least for consumers.

22

Williams v. Gerber Prods. Co., 552 F.3d 934, 938-39 (9th Cir. 2008)

23

(dismissals in UCL cases are rare and generally fact-dependent);

24

Cel-Tech, 20 Cal. App. 4th at 181 (the UCL was intentionally framed

25

in broad, sweeping terms).

26

breadth of the UCL's unfairness prong on this point.

27

16-17.

See Opp'n at 16; Compl. ¶¶ 6-7, 35-

Plaintiff also contends that its statement of a claim under

As vague as Plaintiff's

See

Plaintiff appears to rely mainly on the

28

34

See Opp'n at

However, Defendant is correct that when a defendant in a UCL

1
2

unfairness case is a competitor of a plaintiff (as opposed to being

3

a consumer), a business practice is unfair only if it "threatens an

4

incipient violation of an antitrust law, or violates the policy or

5

spirit of one of those laws because its effects are comparable to

6

or the same as a violation of the law, or otherwise significantly

7

threatens or harms competition."

8

187.

9

violation of the letter, policy, or spirit of an antitrust law.

Cel-Tech, 20 Cal. App. 4th at

In this case, Plaintiff has not alleged or even suggested a

United States District Court

For the Northern District of California

10

See id.; see also Drum v. San Fernando Valley Bar Assoc., 182 Cal.

11

App. 4th 247, 254-55 (Cal. Ct. App. 2010).

12

finds that Plaintiff has failed to state a UCL unfairness claim.

13

This claim is DISMISSED with leave to amend.

Accordingly, the Court

14

H.

Patent Infringement

15

Plaintiff asserts claims against Defendant for direct,

16

contributory, induced, and willful infringement of the Patents-in-

17

Suit, based on Defendant's products Aprisa and, as to two patents,

18

Apogee.

19

Defendant's products infringe by operating "in a manner that

20

infringes [the asserted patent]," id., and that Defendant "has

21

been, is currently, and unless enjoined, will continue to actively

22

induce, encourage or contribute to the infringement of [each

23

Patent-in-Suit]," id. ¶¶ 68, 75, 82.

24

Defendant induces and contributes to its customers' patent

25

infringement by providing allegedly infringing products and "by

26

dictating by its design and instructions to users thereto the

27

manner in which the software is used causing such infringement."

28

Id.

See Compl. ¶¶ 67, 74, 81, 88.

35

Plaintiff asserts that

According to Plaintiff,

1

Defendant concedes that the lenient pleading standard for

2

direct patent infringement protects Plaintiff's direct infringement

3

claim at this stage.

4

that Plaintiff's allegations of contributory, induced, and willful

5

patent infringement all fail because Plaintiff does not adequately

6

plead that Defendant knew of the Patents-in-Suit before the

7

complaint was filed, or that Defendant's software at issue here

8

lacks substantial non-infringing uses or is made or adapted for

9

infringement of the Patents-in-Suit.

United States District Court

For the Northern District of California

10
11

i.

MTD at 21 n.5.

However, Defendant asserts

Id. at 21-23.

Induced Infringement

To state a claim for inducement of infringement, a plaintiff

12

must allege sufficient facts -- subject to Twombly and Iqbal -- to

13

raise the reasonable inference that the defendant knowingly induced

14

infringement and possessed specific intent to encourage another's

15

infringement.

16

Sys. Patent Litig., 681 F.3d 1323, 1339 (Fed. Cir. 2012).

17

Plaintiff alleges that Defendant induced or encouraged infringement

18

by providing products "designed and intended to enable"

19

infringement and "by dictating by its design and instructions to

20

users thereto the manner in which the software is used causing such

21

infringement."

22

these are impermissible legal conclusions couched as factual

23

allegations, and that Plaintiff does not allege the element of pre-

24

suit knowledge of the patents.

25

that it put Defendant on notice of the Patents-in-Suit at least by

26

May 8, 2013, via a warning letter, or by November 28, 2012, when it

27

contacted Defendant regarding suspected infringement.

See In re Bill of Lading Transmission & Processing

Compl. ¶¶ 68, 75, 82, 89.

Defendant argues that

MTD at 22-23.

28

36

Plaintiff asserts

Opp'n at 20-

1

21 (citing Compl. ¶¶ 44). 3

2

allegations about Defendant's design and instructions, Compl. ¶¶

3

68, 75, 82, 89, are sufficient to satisfy the relevant pleading

4

standards.

Plaintiff also contends that its

Id.

5

The Court does not find that any of the correspondence

6

Plaintiff references put Defendant on notice of the Patents-in-

7

Suit.

8

supporting its reply brief, and the Court takes judicial notice of

9

these copies under Federal Rule of Evidence 201, because the

Defendant attached copies of these letters in a declaration

United States District Court

For the Northern District of California

10

letters are incorporated by reference into Plaintiff's complaint.

11

See Compl. ¶¶ 41, 44; ECF No. 33 ("Drummond Decl.") Exs. B ("May 8

12

Ltr."), C ("Nov. 20 Ltr.").

13

copying of proprietary command sets, and the November 28 Letter

14

does not refer to any copying at all.

15

with Plaintiff's allegations that Defendant "had knowledge and

16

notice of the [Patents-in-Suit]," Compl. ¶¶ 68, 75, 82, 89, which

17

are merely legal conclusions pled as factual allegations.

The May 8 Letter refers to alleged

Thus, the Court is left only

The Court finds Plaintiff's other allegations of inducement

18
19

conclusory.

Plaintiff need only provide bare facts supporting its

20

claim, and it certainly need not prove its claim at the pleading

21

stage, but descriptions of the Patents-in-Suit and Defendant's

22

products, coupled with bare pleadings of the elements of these

23

infringement claims, do not suffice to allow the Court to make a

24

reasonable inference of Defendant's intent to induce infringement.

25

See Compl. ¶¶ 68, 75, 82, 89.

Plaintiff could, for example, have

26
27
28

3

Defendant notes that it is not aware of a November 28, 2012
letter, but only of a November 20, 2012 letter. The parties do not
further address this point, so the Court analyzes only the November
20, 2012 letter.

37

1

pled facts as to how Defendant's design or instruction were meant

2

to induce or encourage Defendant, but Plaintiff's Complaint simply

3

states that Defendant "induced, encouraged or contributed to its

4

customers' direct infringement by providing, selling or offering

5

for sale the Aprisa software that is designed and intend to [work

6

in a manner infringing the Patents-in-Suit]."

7

not sufficiently alleged that Defendant induced infringement of the

8

Patents-in-Suit.

9

United States District Court

For the Northern District of California

10

Plaintiff has

Accordingly, Plaintiff's induced infringement claims are
DISMISSED with leave to amend.
ii.

11
12

Id.

Contributory Infringement

To state a claim for contributory infringement, a plaintiff

13

must allege sufficient facts to raise the reasonable inference that

14

the defendant sells or offers to sell a material or apparatus (1)

15

for use in practicing a patented process, (2) that is material to

16

practicing the invention, (3) that has no substantial non-

17

infringing uses, and (4) is known by the party "to be especially

18

made or especially adapted for use in an infringement of such

19

patent."

20

contends that the Court should make the inference that Defendant

21

contributed to others' infringement of the Patents-in-Suit because

22

Plaintiff's complaint does not indicate that Defendant's products

23

have substantial non-infringing uses.

24

Compl. ¶¶ 68, 75, 82, 89).

25

burden to allege that Defendant's accused software lacks

26

substantial non-infringing uses or is especially made or adapted

27

for infringement of the Patents-in-Suit, and that Plaintiff failed

28

to do so.

In re Bill of Lading, 681 F.3d at 1337.

Plaintiff

Opp'n at 19-20 (citing

Defendant argues that it is Plaintiff's

MTD at 21-22; Reply at 14-15.

38

1

Per above, the Court finds that Plaintiff fails to allege that

2

Defendant knew that any of its software was made or adapted for

3

infringement of any of the Patents-in-Suit, which leads to a

4

finding here that Plaintiff has failed to allege that Defendant's

5

software was designed to infringe any particular patent.

6

Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1326 (Fed. Cir. 2010)

7

(plaintiffs must plead, among other things, knowledge of the patent

8

in order to plead a contributory infringement claim).

9

while Plaintiff does not have to prove its claims at the pleading

See

Further,

United States District Court

For the Northern District of California

10

stage, Plaintiff has failed to raise the reasonable inference that

11

Defendant's software has no substantial non-infringing uses.

12

Plaintiff does not have to explain everything that Defendant's

13

software does, but when Plaintiff's complaint is so vague as to its

14

own claims and Defendant's products, the Court cannot find that

15

Defendant's software has no substantial non-infringing uses.

16

Plaintiff's contributory infringement claims are DISMISSED

17

with leave to amend.

18

iii.

19

Willful Infringement

To state a claim for willful infringement, a plaintiff must

20

plead sufficient facts to raise the reasonable inference that the

21

defendant "was aware of the asserted patent, but nonetheless acted

22

despite an objectively high likelihood that its actions constituted

23

infringement of a valid patent."

24

Corp., 598 F.3d 831, 861 (Fed. Cir. 2010) (citation omitted).

25

Plaintiffs need only make out a bare assertion of knowledge of an

26

issued patent, but mere recitation of elements is insufficient.

27

see Avocet Sports Tech., Inc. v. Garmin Int'l, Inc., No. C 11-04049

28

JW, 2012 WL 1030031, at *3 (N.D. Cal. Mar. 22, 2012).

i4i Ltd. P'ship v. Microsoft

39

As stated above, Plaintiff fails to allege that Defendant was

1
2

aware of the Patents-in-Suit.

3

willfulness amount to nothing more than recitation of that claim's

4

elements:

5

Further, Plaintiff's allegations of

[Defendant's] acts of direct and indirect infringement
are willful, as [Defendant] knew or should have known of
the [Patents-in-Suit] and that making, using, offering to
sell and selling within the United States, or importing
into the United States, its Aprisa or Apogee software
products would infringe the [Patents-in-Suit], but acted
despite
an
objectively
high
likelihood
that
such
activities would infringe the patent.

6
7
8
9

United States District Court

For the Northern District of California

10

Compl. ¶¶ 69, 76, 83, 90.

11

a claim for willful infringement.

12

claims are therefore DISMISSED with leave to amend.

Such pleadings are insufficient to state
Plaintiff's willful infringement

13
14
15

V.

CONCLUSION
As explained above, the Court GRANTS in part and DENIES in

16

part Defendant ATopTech Inc.'s motion to dismiss Plaintiff

17

Synopsys, Inc.'s complaint.

18

copyright infringement claim based on its proprietary input and

19

output formats and its UCL unlawfulness claim predicated on that

20

alleged infringement are DISMISSED with leave to amend.

21

All of Plaintiff's claims except its

Plaintiff may file an amended complaint within thirty (30)

22

days of this Order's signature date.

23

in dismissal of this action with prejudice.

Failure to do so may result

24
25

IT IS SO ORDERED.

26
27

Dated: October 24, 2013
UNITED STATES DISTRICT JUDGE

28

40