Logicease Solutions Inc. et al v. Softworks AI, LLC

Filing 37

ORDER RE MOTION TO DISMISS. Signed by Judge James Donato on 1/7/2022. (jdlc3, COURT STAFF) (Filed on 1/7/2022)

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Case 3:21-cv-00830-JD Document 37 Filed 01/07/22 Page 1 of 2 1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 LOGICEASE SOLUTIONS INC., et al., Plaintiffs, 8 Re: Dkt. No. 23 SOFTWORKS AI, LLC, Defendant. 11 United States District Court Northern District of California ORDER RE MOTION TO DISMISS v. 9 10 Case No. 3:21-cv-00830-JD 12 13 Declaratory judgment plaintiffs Logicease Solutions Inc. (LSI) and SitusAMC Holdings 14 Corp. (Situs) move to dismiss defendant Softworks AI, LLC’s (SWAI) counterclaims. Dkt. No. 15 23. The parties’ familiarity with the record is assumed. The motion is denied. 16 1. Interference with Contract. Situs says that it was not a “stranger to the agreement” 17 when it acquired LSI because LSI could transfer its rights and obligations under the contract to 18 Situs. Dkt. No. 23 at 7. Not so. Although LSI could assign its rights and obligations, Situs points 19 to no allegations that LSI actually did so. See Asahi Kasei Pharma Corp. v. Actelion Ltd., 222 20 Cal. App. 4th 945, 961 (Cal. App. Ct. 2013). In addition, an economic interest in the contract does 21 not necessarily defeat a claim of tortious interference. See Caliber Paving Co., Inc. v. Rexford 22 Indus. Realty & Mgmt., Inc., 54 Cal. App. 5th 175, 181-83 (Cal. App. Ct. 2020); see also United 23 Nat’l Maint., Inc. v. San Diego Convention Ctr., Inc., 766 F.3d 1002 (9th Cir. 2014). The tortious 24 interference claim against Situs will go forward. 25 2. Misappropriation of Trade Secrets. Dismissal of the fourth, fifth, sixth, and 26 seventh claims is denied for LSI and Situs. To plead and prove a claim of misappropriation of 27 trade secrets, under both federal and California state law, SWAI must establish that (1) it had a 28 trade secret, (2) LSI and Situs misappropriated the trade secret, and (3) the misappropriation Case 3:21-cv-00830-JD Document 37 Filed 01/07/22 Page 2 of 2 1 caused SWAI damage. InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657-58 (9th 2 Cir. 2020); Sargent Fletcher, Inc. v. Able Corp., 100 Cal. App. 4th 1658, 1667 (Cal. App. Ct. 3 2003). For federal and state law purposes, misappropriation means acquisition of a trade secret by 4 a person who knows the trade secret was acquired by improper means, or disclosure or use of a 5 trade secret of another without express or implied consent. See 18 U.S.C. §1839(5); Cal. Civ. 6 Code § 3426.1(b). 7 SWAI has plausibly alleged that LSI and Situs misappropriated a trade secret. SWAI’s counterclaims indicate that LSI disclosed its trade secrets to Situs. See, e.g., Dkt. No. 19 at ¶ 12. 9 SWAI has alleged facts showing LSI improperly requested that SWAI provide it with confidential 10 information even after LSI knew that it intended to breach its contract with SWAI. Id. at ¶ 11. It 11 United States District Court Northern District of California 8 may be, as LSI suggests, that LSI could safely disclose trade secrets to Situs after Situs acquired it, 12 but SWAI says that LSI continued to request confidential information after LSI was acquired by 13 Situs. Id. SWAI also alleges that LSI and Situs used the trade secrets to get a competitive 14 advantage over SWAI’s product, develop Situs’s own product, and replace the custom product 15 SWAI was making for LSI. Id. at ¶¶ 49, 57, 65, 72. Consequently, SWAI has adequately pleaded 16 its claims for misappropriation of trade secrets against both Situs and LSI. 17 18 IT IS SO ORDERED. Dated: January 7, 2022 19 JAMES DONATO United States District Judge 20 21 22 23 24 25 26 27 28 2

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