Proofpoint, Inc. et al v. Vade Secure, Incorporated et al

Filing 335

ORDER GRANTING PLAINTIFFS' MOTION TO DISMISS COUNTERCLAIMS; AFFORDING DEFENDANTS LEAVE TO AMEND. The counterclaims are dismissed. Should the Vade Defendants wish to file amended counterclaims for the purpose of curing any of the deficiencies, they shall file such amended counterclaims no later than December 4, 2020. Signed by Judge Maxine M. Chesney on November 16, 2020. (mmclc1, COURT STAFF) (Filed on 11/16/2020)

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Case 3:19-cv-04238-MMC Document 335 Filed 11/16/20 Page 1 of 4 1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 PROOFPOINT, INC., et al., Plaintiffs, 8 v. 9 10 VADE SECURE, INCORPORATED, et al., 11 United States District Court Northern District of California Case No. 19-cv-04238-MMC ORDER GRANTING PLAINTIFFS' MOTION TO DISMISS COUNTERCLAIMS; AFFORDING DEFENDANTS LEAVE TO AMEND Defendants. 12 13 Before the Court is plaintiffs Proofpoint, Inc. ("Proofpoint") and Cloudmark LLC's 14 ("Cloudmark") Motion, filed September 18, 2020, "to Dismiss Vade Defendants' 15 Counterclaims." Defendants Vade Secure, Incorporated and Vade Secure SASU 16 (collectively, "Vade Defendants") have filed opposition, to which plaintiffs have replied. 17 Having read and considered the papers filed in support of and in opposition to the motion, 18 the Court rules as follows.1 19 The Vade Defendants' "Answer, Affirmative and Other Defenses, and 20 Counterclaims to the First Amended Complaint" ("Counterclaims") contains six 21 counterclaims, each of which is based on allegations that Cloudmark made false 22 statements about the Vade Defendants to one of its customers ("Customer 1")2 and that 23 Proofpoint made false statements about the Vade Defendants to one of its customers 24 25 26 27 28 1 2 By order filed November 10, 2020, the Court took the matter under submission. By order filed September 30, 2020, the Court granted the Vade Defendants' motion to file under seal the names of the customers to whom the allegedly false statements were made. Case 3:19-cv-04238-MMC Document 335 Filed 11/16/20 Page 2 of 4 1 ("Customer 2").3 For the reasons stated below, the Court finds the Vade Defendants 2 have failed to allege sufficient facts to support a finding that the challenged statements 3 were false. 4 The first set of statements relate to the Vade Defendants' assertedly having misappropriated plaintiffs' trade secrets. In that regard, the Vade Defendants allege, 6 Cloudmark told Customer 1 that Cloudmark had "uncovered evidence that the Vade 7 Defendants misappropriated Plaintiffs' alleged trade secrets and incorporated those into 8 all of Vade's products" (see Counterclaims ¶ 19) (emphasis in original), and Proofpoint 9 told Customer 2 that "all of Vade Inc.'s products were developed using Plaintiffs' alleged 10 trade secrets" (see Counterclaims ¶ 22), which statements the Vade Defendants allege 11 United States District Court Northern District of California 5 are "false" (see Counterclaims ¶¶ 19, 22). As plaintiffs point out, however, the Vade 12 Defendants do not allege facts sufficient to support such assertion. In particular, they do 13 not allege facts to support a finding that plaintiffs did not uncover evidence that the Vade 14 Defendants' products all incorporated plaintiffs' trade secrets or facts to support a finding 15 that their products were not all developed using plaintiffs' trade secrets. See Ashcroft v. 16 Iqbal, 556 U.S. 662, 678 (2009) (holding courts "are not bound to accept as true a legal 17 conclusion couched as a factual allegation") (internal quotation and citation omitted). 18 The remaining statements concern the Vade Defendants' ability to financially 19 withstand the instant lawsuit. In particular, the Vade Defendants allege, Cloudmark told 20 Customer 1, that, "in Vade Inc.'s and Vade SASU's . . . current financial condition, Vade 21 could not withstand defending this lawsuit and would be bankrupt in the near term" (see 22 Counterclaims ¶ 19), and Proofpoint told Customer 2 that "Vade was not financially 23 stable, and that defending this lawsuit would easily bankrupt Vade" (see Counterclaims 24 ¶ 22), which statements the Vade Defendants likewise allege are "false" (see 25 26 27 28 3 The six counterclaims are "Defamation," "Commercial Disparagement," "Intentional Interference With Prospective Economic Advantage," "Unfair Competition Under California Business & Professions Code § 17200," "Monopolization – Section 2 of the Sherman Act – 15 U.S.C. § 2," and "Attempted Monopolization – Section 2 of the Sherman Act – 15 U.S.C. § 2." 2 Case 3:19-cv-04238-MMC Document 335 Filed 11/16/20 Page 3 of 4 1 Counterclaims ¶¶ 19, 22). As plaintiffs point out, however, the Vade Defendants fail to 2 identify the particular assertions they contend are false, let alone facts to support a 3 finding of falsity. 4 Plaintiffs further argue neither statement is actionable because both constitute 5 opinions rather that assertions of fact. See GetFugu, Inc. v. Patton Boggs LLP, 220 Cal. 6 App. 4th 141, 155-56 (2013) (holding that, "although statements of fact may be 7 actionable as libel, statements of opinion are constitutionally protected") (internal 8 quotation and citation omitted). Although, ordinarily, "[w]hether challenged statements 9 convey the requisite factual imputation is . . . a question of law," a court, in making such a determination, must "consider the totality of the circumstances." See id. at 156. Here, 11 United States District Court Northern District of California 10 the statements could be read as no more than predictions or expectations on the part of 12 plaintiffs as to what would happen as a result of the filing of the instant action, see id. at 13 155-56, and their reference to "bankrupt[cy]" could be considered no more than a 14 dramatic figure of speech. See Ferlauto v. Hamsher, 74 Cal. App. 4th 1394, 1401 (1999) 15 (holding "rhetorical hyperbole" is type of statement not "provably false" and, 16 consequently, not actionable). Nevertheless, in the absence of the Vade Defendants' 17 having identified the particular false assertion(s) of fact in the challenged statements, and 18 with only a general description of the context in which the statements were made, the 19 Court is not in a position at this time to determine whether the statements constitute 20 opinions or assertions of fact. Even assuming they qualify as the latter, however, the 21 Vade Defendants, as discussed above, fail to allege facts sufficient to plead a claim 22 based thereon. 23 Lastly, to the extent the Vade Defendants bring claims under the Sherman Act, 24 plaintiffs argue the claims are subject to dismissal for an additional reason, namely, the 25 failure to sufficiently define a requisite market. "In order to state a valid claim under the 26 Sherman Act, a plaintiff must allege that the defendant has market power within a 27 'relevant market,'" specifically, a "product market." See Newcal Indus., Inc. v. Ikon Office 28 Solution, 513 F.3d 1038, 1044-45 (9th Cir. 2008). Here, the Vade Defendants define the 3 Case 3:19-cv-04238-MMC Document 335 Filed 11/16/20 Page 4 of 4 1 relevant product market as "e-mail filtering products for Tier 1 B2C ISPs capable of 2 monitoring and filtering at least 1 million email accounts at the same time." (See 3 Counterclaims ¶ 52.a.) Plaintiffs argue such an alleged market is deficient as it is defined 4 by reference to customers, rather than by products. See Newcal Indus., 513 F.3d at 5 1045 (holding "consumers do not define the boundaries of the market; the products or 6 producers do"). Although the Vade Defendants assert they are not defining the market 7 by reference to customers, their proposed market includes, as plaintiffs point out, a 8 reference to a type of customer, specifically, "Tier 1 B2C ISPs." (See Counterclaims 9 ¶ 52a.) If the market the Vade Defendants are alleging is not dependent on a reference 10 to Tier 1 B2C ISPs, the reference thereto should be removed. CONCLUSION United States District Court Northern District of California 11 12 For the reasons stated above, plaintiffs' motion to dismiss the Vade Defendants' 13 counterclaims is hereby GRANTED, and the counterclaims are hereby DISMISSED. 14 Should the Vade Defendants wish to file amended counterclaims for the purpose of 15 curing any of the above-referenced deficiencies, they shall file such amended 16 counterclaims no later than December 4, 2020. 17 IT IS SO ORDERED. 18 19 Dated: November 16, 2020 MAXINE M. CHESNEY United States District Judge 20 21 22 23 24 25 26 27 28 4

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