Digital Envoy Inc., v. Google Inc.,

Filing 223

MOTION for Leave to File Digital Envoy's Motion for Reconsideration filed by Digital Envoy,Inc.,. (Blackman, Brian) (Filed on 7/6/2005)

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Digital Envoy Inc., v. Google Inc., Doc. 223 Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 1 of 16 1 P. CRAIG CARDON, Cal. Bar No. 168646 BRIAN R. BLACKMAN, Cal. Bar No. 196996 2 KENDALL M. BURTON, Cal. Bar No. 228720 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP 3 Four Embarcadero Center, 17th Floor San Francisco, California 94111-4106 4 Telephone: 415-434-9100 Facsimile: 415-434-3947 5 TIMOTHY H. KRATZ (Admitted Pro Hac Vice) 6 LUKE ANDERSON (Admitted Pro Hac Vice) MCGUIRE WOODS, L.L.P 7 1170 Peachtree Street, N.E., Suite 2100 Atlanta, Georgia 30309 8 Telephone: 404.443.5500 Facsimile: 404.443.5751 9 Attorneys for DIGITAL ENVOY, INC. 10 11 12 13 14 DIGITAL ENVOY, INC., 15 16 v. Plaintiff/Counterdefendant, UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION Case No. C 04 01497 RS DIGITAL ENVOY'S MOTION UNDER CIVIL L.R. 7-9(a) FOR LEAVE TO FILE ITS MOTION FOR RECONSIDERATION Date: Courtroom: No Hearing Set [L.R 7-9(d)] 4, 5th Floor 17 GOOGLE, INC., 18 19 20 21 22 23 24 25 26 27 28 W02-SF:5BB\61460349.1 Defendant/Counterclaimant. The Honorable Richard Seeborg DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Dockets.Justia.com Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 2 of 16 1 2 3 I. 4 II. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 III. 3. 2. c. a. b. TABLE OF CONTENTS Page INTRODUCTION AND BACKGROUND.......................................................................... 1 CITATION OF AUTHORITY.............................................................................................. 1 A. B. C. CIVIL L.R. 7-9(a) ..................................................................................................... 1 Emergence of New Material Fact.............................................................................. 2 Manifest Failure to Consider Material Facts or Dispositive Legal Arguments ................................................................................................................. 3 1. The Court Erred in Finding that Identical Facts Formed the Basis for the Dismissed Claims. ................................................................................... 3 Claim I: Misappropriation of Trade Secrets Under California Civil Code 3426 et seq. .................................................................. 4 Claim III: Statutory Unfair Competition Under California Business Code 17200 et seq. .......................................................... 4 Claim V: Unjust Enrichment............................................................. 6 The Court Erred in Finding that Digital Envoy Did Not Argue that the Dismissed Claims were Based on Different Facts .................................. 7 The Court erred in finding that Digital Envoy and Google are not competitors for the purpose of the Lanham Act claim.................................. 8 CONCLUSION ................................................................................................................... 11 -iW02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 3 of 16 1 2 Federal Cases 3 4 TABLE OF AUTHORITIES Advanced Cardiovascular Systems, Inc. v. SciMed Life Systems, 101 F. Supp. 2d 1257 (N.D. Cal. 1999) .................................................................................... 2 5 Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) .................................................................................................................. 3 6 Callaway Golf Co. v. Dunlop Slazenger Group America, Inc., 7 318 F. Supp. 2d 216 .............................................................................................................. 6, 7 8 Coastal Abstract Service, Inc. v. First American Title Insurance Company 173 F.3d 725 (9th Cir. 1999)............................................................................................. 10, 11 9 Halicki v. United Artists Communications, Inc. 10 812 F.2d 1213 (9th Cir. 1987)................................................................................................. 10 11 Kournikova v. General Media Communications, Inc., 278 F. Supp. 2d 1111 (C.D. Cal. 2003)................................................................................... 10 12 Lamothe v. Atlantic Recording Corp., 13 847 F.2d 1403 (9th Cir. 1988)................................................................................................. 10 14 North Pacifica, LLC v. City of Pacifica, 234 F. Supp. 2d 1053 (N.D. Cal. 2002) .................................................................................... 2 15 Waits v. Frito-Lay, Inc., 16 978 F.2d 1093 (9th Cir. 1992)............................................................................................. 9, 10 17 Docketed Cases 18 Desert Outdoor Advertising v. City of Oakland, No. C03-10788 .......................................................................................................................... 2 19 20 Federal Statutes 21 15 U.S.C. 1125(a)(1)(A) ............................................................................................................... 9 22 State Statutes 23 Cal. Bus. & Prof. Code 17200 et seq........................................................................................................................ 2, 4 24 17203...................................................................................................................................... 4 25 Cal. Civ. Code 3426........................................................................................................................................ 2 26 3426 et seq.............................................................................................................................. 4 3426.7(b) ............................................................................................................................ 5, 7 27 3426(b)(2)(B)(ii) .................................................................................................................... 4 28 -iiW02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 4 of 16 1 Civil Local Rule 7-9(a) ......................................................................................................................................... 1 2 7-9(b) ................................................................................................................................... 2, 12 3 Miscellaneous 4 The Lanham Act Section 43(a) ....................................................................................................................... 9, 10 5 Section 43(a)(1)(B) ........................................................................................................... 10, 11 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -iiiW02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 5 of 16 1 Pursuant to Local Rule 7-9(a) for the Northern District of California, 2 Plaintiff/Counterdefendant Digital Envoy, Inc. ("Digital Envoy") files this Motion for Leave to 3 File its Motion for Reconsideration. 4 5 I. INTRODUCTION AND BACKGROUND On February 7, 2005, Google filed a Motion for Partial Summary Judgment. See Google 6 Inc.'s Notice of Motion and Motion for Partial Summary Judgment on Counts II, III, IV and V of 7 the Amended Complaint ("Google's Motion"). After extensive briefing and a hearing, the Court 8 issued an Order on May 20, 2005, granting Google partial summary judgment on counts II 9 (Lanham Act), III (statutory unfair competition), IV (common law unfair competition), and V 10 (unjust enrichment). See Order Denying Google's Motion for Summary Judgment and Granting 11 Google's Motion for Partial Summary Judgment ("Order"). The Court noted that the bases for 12 granting summary judgment were that: (1) Digital Envoy's claims III, IV, and V were based on 13 identical facts as those that formed the basis for Digital Envoy's claim 1 (misappropriation of trade 14 secrets); and (2) Digital Envoy and Google were not competitors, thereby barring Digital Envoy 15 from bringing an action against Google under the Lanham Act. See Order. 16 Digital Envoy now files this Motion for Leave to File Its Motion for Reconsideration, 17 under Civil. L.R. 7-9(a). 18 19 A. 20 21 22 23 24 25 26 See Civil L.R. 7-9(b); Desert Outdoor Advertising v. City of Oakland, No. C03-10788 MJJ (N.D. 27 Cal. 2005); North Pacifica, LLC v. City of Pacifica, 234 F. Supp. 2d 1053 (N.D. Cal. 2002); 28 -1W02-SF:5BB\61460349.1 II. CIVIL L.R. 7-9(a) CITATION OF AUTHORITY Reconsideration of a court order is proper where: (1) a material difference in fact or law exists from that which was presented to the Court before entry of the order for which reconsideration is sought, and the moving party has diligently filed this motion; or a new material fact emerged or a change of law occurred since the issuance of the order; or there was a manifest failure by the Court to consider material facts or dispositive legal arguments that were presented to the Court. (2) (3) DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 6 of 16 1 Advanced Cardiovascular Systems, Inc. v. SciMed Life Systems, 101 F. Supp. 2d 1257 (N.D. Cal. 2 1999). Here, Digital Envoy submits that: 3 4 5 6 7 B. 8 new material facts have emerged since the issuance of the order; and there was a manifest failure to consider material facts or dispositive legal arguments. These circumstances thus justify reconsideration of the Court's Order. Emergence of New Material Fact Since the Order, Google has now stipulated to the authenticity of certain key documents 9 (hereafter the "Ray Sydney e-mails"). See Joint Stipulation (Exh. A to Declaration of John 10 Lockett); GOOG 09696 - GOOG 09698 (Exh. B to Declaration of John Lockett). The stipulation 11 now places the email messages in proper condition for use as evidence to support Digital Envoy's 12 dismissed claims, namely, for statutory unfair competition (Count III), Cal. Bus. & Prof. Code, 13 17200 et seq., common law unfair competition (Count IV), and unjust enrichment (Count V). The 14 Ray Sidney emails show how Google actively attempted to discourage others from obtaining geo15 targeting from Digital Envoy, specifically by encouraging third parties only to obtain geo16 targeting from Google. The email messages expressly note that third parties should "forget about 17 having to try any geotargeting on their own side," further asking "why would they want to do their 18 own geotargeting if they don't have to?" See GOOG 009876 and GOOG 009696. This type of 19 behavior by Google obstructed Digital Envoy's business by diverting third-parties away from 20 Digital Envoy to Google, despite the fact that Google was using Digital Envoy's technology to 21 perform geotargeting. Such obstructive behavior forms the basis of the dismissed claims. 22 Insofar as Ray Sidney's email message is unrelated to Digital Envoy's misappropriation 23 claim pursuant to Cal. Civ. Code, 3426, the dismissed claims are no longer based on identical 24 facts as those that form the basis for the misappropriation. 25 26 27 28 -2W02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 7 of 16 1 C. 2 Manifest Failure to Consider Material Facts or Dispositive Legal Arguments Digital Envoy also submits that there was a manifest failure to consider material facts and 3 dispositive legal arguments. For purposes of summary judgment, all facts must be viewed in the 4 light most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 5 (1986). Therefore, all facts should have been viewed in the light most favorable to Digital Envoy 6 as the non-moving party. As discussed in greater detail below, the Court failed to consider all 7 facts in the light most favorable to Digital Envoy. 8 9 10 1. The Court Erred in Finding that Identical Facts Formed the Basis for the Dismissed Claims. The Court found that Digital Envoy's statutory unfair competition, common law unfair 11 competition, and unjust enrichment claims were preempted by Digital Envoy's claim for 12 misappropriation under the California Uniform Trade Secrets Act (CUTSA) on the grounds that 13 Digital Envoy's "common law claims [are] based on the identical nucleus of operative facts as 14 those alleged in the misappropriation claims." See Order at 12 (emphasis added). In fact, 15 however, the factual bases for Digital Envoy's claims arise from different subsets of the general 16 facts alleged in the Complaint. 17 In its Complaint, Digital Envoy set forth all of the facts relevant to each of its claims at the 18 beginning. The Order correctly observed that all of the factual allegations in the complaint were 19 re-alleged for the statutory unfair competition claim (III), common-law unfair competition claim 20 (IV), and the unjust enrichment claim (V). See Amended Complaint. However, the factual bases 21 for these claims were not identical to the factual basis for the misappropriation claim. See Digital 22 Envoy's Opposition Motion, p.9. Although all of the allegations for claim I were incorporated by 23 reference into claims III, IV, and V, different subsets of those allegations - i.e., different operative 24 facts - formed the basis for each of the various claims. 25 The Order failed to recognize that several of Digital Envoy's claims arose apart from the 26 trade secret analysis, which is only one component of the misappropriation claim. In particular, 27 the Order failed to acknowledge that the dismissed claims arose separately from Google's acts that 28 -3W02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 8 of 16 1 were wholly independent from Google's misappropriation of Digital Envoy's trade secret - the 2 basis for the allegations in claim I. 3 4 5 a. Claim I: Misappropriation of Trade Secrets Under California Civil Code 3426 et seq. "Misappropriation means . . . use of a trade secret of another without express or implied 6 consent by a person who: At the time of . . . use, knew or had reason to know that his or her 7 knowledge of the trade secret was: Acquired under circumstances giving rise to a duty to . . . limit 8 its use." Cal. Civ. Code, 3426(b)(2)(B)(ii). 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4W02-SF:5BB\61460349.1 Digital Envoy's claim I for misappropriation is supported by the following facts: CUTSA 1) use of 2) a trade secret 3) of another 4) without express or implied consent 5) by a person who 6) at the time of use 7) knew or had reason to know that his or her knowledge of the trade secret was acquired under circumstances giving rise to a duty to limit its use FACTS 1) geo-targeting advertisements and searches using 2) the proprietary Database Libraries 3) of Digital Envoy 4) beyond the scope of the license 5) by Google who 6) during the effective period of the license 7) knew or should have known that the agreement strictly limited the use of Digital Envoy's Database Library b. Claim III: Statutory Unfair Competition Under California Business Code 17200 et seq. "[U]nfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising . . . ." Cal. Bus. and Prof. Code 17203. Unlike claim I for misappropriation, claim III for statutory unfair competition is supported by the following facts: CAL. BUS. AND PROF. CODE 17203 1) business act 2) unfair FACTS 1) generating revenue through Google's advertising programs 2) by deliberately stealing Digital Envoy's potential market in violation of the license DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 9 of 16 1 As shown here, the only element in common between claim III and claim I is the fact that 2 Google violated the licensing contract. In addition, Google engaged in a campaign to discourage 3 prospective Digital Envoy customers from obtaining a license from Digital Envoy. This was in 4 violation of the license and contrary to the assurances made by Google representatives during 5 negotiations prior to execution of the license. Additionally, this was in violation of the assurances 6 made by Google representatives during the effective period of the license. These acts, which are 7 independent of the misappropriation claim, form the bases for Digital Envoy's statutory unfair 8 competition claim. In other words, Google's improper use, which underlies Digital Envoy's 9 misappropriation claim, is distinct from Google's active discouragement of Digital Envoy's 10 potential customers, which underlies Digital Envoy's statutory unfair competition claim. 11 Among other things, the "trade secret" component is wholly absent from the unfair 12 competition claim. It is axiomatic that statutory unfair competition is not a claim that is based 13 upon misappropriation of a trade secret when the statutory unfair competition claim is wholly 14 devoid of the "trade secret" element. 15 Given the absence of the "trade secret" element, the statutory unfair competition claim and 16 the misappropriation claim cannot be based on the identical nucleus of operative facts, as recited 17 in the Order. It was therefore erroneous to find that the basis for statutory unfair competition is 18 identical to the basis for misappropriation, because one or more elements of misappropriation are 19 wholly absent from the elements of statutory unfair competition. 20 Given that Digital Envoy's statutory unfair competition claim is independent of the "trade 21 secret" element, the CUTSA cannot supersede Digital Envoy's statutory unfair competition claim. 22 See Cal. Civ. Code 3426.7(b) ("This title does not affect . . . other civil remedies that are not 23 based upon misappropriation of a trade secret"). In addition, as shown here, even if the Court 24 were to find that the Database Libraries are not trade secrets, Digital Envoy could still recover 25 26 27 28 -5W02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 10 of 16 1 under statutory unfair competition, as that claim is based on Google's deliberate stealing of Digital 2 Envoy's potential market in violation of the license.1 3 Therefore, the facts underlying claim III for violation statutory unfair competition are not 4 coterminous with the facts underlying claim I for misappropriation of trade secrets. In that regard, 5 Digital Envoy requests that the Court reconsider its finding that the misappropriation claim 6 preempted the statutory unfair competition claim. 7 8 c. Claim V: Unjust Enrichment "Unjust enrichment is a term used to characterize the result or effect of a failure to make 9 restitution of or for property or benefits received under circumstances that give rise to a legal or 10 equitable obligation to account for them." Callaway Golf, 318 F. Supp. 2d at 221. 11 12 13 14 15 16 17 Again, the "trade secret" component is wholly missing from the unjust enrichment claim. Claim V (unjust enrichment) is supported by the following facts: UNJUST ENRICHMENT 1) a failure to make restitution 2) for benefits received 3) under circumstances that give rise to a legal or equitable obligation to account for them FACTS 1) Google's failure to pay Digital Envoy 2) for revenue derived 3) under an obligation that required Google to execute a separate license for third-party advertising 18 Additionally, all of the other elements of the misappropriation claim are absent from the unjust 19 enrichment claim. It is obvious that unjust enrichment is not a claim that is based upon 20 misappropriation of a trade secret, when the factual basis for unjust enrichment is not coextensive 21 with the factual basis for misappropriation. 22 In that regard, the misappropriation claim and the unjust enrichment claim are not based on 23 the identical nucleus of operative facts, as recited in the Order. It was erroneous to find that the 24 basis for the unjust enrichment claim was identical to the basis for misappropriation claim, since 25 26 27 28 -6W02-SF:5BB\61460349.1 1 In Callaway Golf Co. v. Dunlop Slazenger Group Am., Inc., 318 F. Supp. 2d 216, 220-221, the court held that the factual basis for a misappropriation claim was identical to the factual basis for a negligence claim because "if Dunlop loses its misappropriation claim with respect to the Felipe binder, it could not recover in its negligence claim." However, unlike Callaway Golf, Digital Envoy's claims do not rise and fall together, thereby evincing that they are not based on the same underlying facts. DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 11 of 16 1 one or more elements of the misappropriation claim were wholly absent from the elements of the 2 unjust enrichment claim. 3 Given that the unjust enrichment claim is independent of the "trade secret" element, the 4 California Uniform Trade Secrets Act (CUTSA) cannot supersede the claim for unjust enrichment. 5 See Cal. Civ. Code 3426.7(b). Additionally, as shown here, even if Digital Envoy's 6 misappropriation claim fails because the Court finds that the Database Libraries are not trade 7 secrets, Digital Envoy could still recover for unjust enrichment because the unjust enrichment 8 claim is immaterial to whether or not the Database Libraries are trade secrets. In that regard, the 9 unjust enrichment claim is independent of whether or not the Database Libraries are trade secrets. 10 This case is therefore distinguishable from Callaway Golf, in which the court found the 11 opposite - namely, that the trade secret was necessary to sustain the preempted claims. See 12 Callaway Golf, 318 F. Supp. 2d at 219-220. Specifically, the Court noted that the preempted 13 claims were wholly dependent on the trade secret. Id. at 218 ("if the information at issue 14 constitutes trade secrets, Dunlop's common law claims are preempted by CUTSA, and if the 15 information at issue does not constitute trade secrets, because the information was in the public 16 domain or developed by Callaway, then Dunlop has no ownership right in the information."). 17 Here, Digital Envoy's claim for unjust enrichment is entirely independent of the status of 18 the Database Libraries. In other words, Digital Envoy is entitled to recover for Google's use of the 19 Database Libraries, in violation of the Agreement, regardless of whether the Database Libraries 20 are in fact trade secrets. 21 Thus, the unjust enrichment claim is not based on the same facts as the misappropriation 22 claim. In that regard, Digital Envoy requests that the Court reconsider its finding that the 23 misappropriation claim preempted the unjust enrichment claim. 24 25 26 2. The Court Erred in Finding that Digital Envoy Did Not Argue that the Dismissed Claims were Based on Different Facts The Order further notes that a "review of Digital's amended complaint reveals that its third, 27 fourth, and fifth claims for relief are based on the identical facts alleged in its claim for 28 -7W02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 12 of 16 1 misappropriation of trade secrets. Indeed, Digital does not argue otherwise in its opposition." 2 Order at 13. 3 In fact, Digital Envoy explicitly argued that the underlying facts for claims III (statutory 4 unfair competition), IV (common law unfair competition), and V (unjust enrichment) were distinct 5 from the underlying facts for claim I (misappropriation). Specifically, Digital Envoy presented the 6 following arguments: 7 8 9 10 11 12 13 14 15 16 17 5. 4. 3. 2. 1. Digital Envoy specifically argued that the dismissed claims were "not . . . predicated on the technology or data actually being a trade secret." Digital Envoy's Opposition Brief at 9. Digital Envoy specifically argued that each claim turned on specific factual nuances pertinent to the claim (i.e., each claim had different factual bases). Id. Digital Envoy specifically argued that the statutory unfair competition claim was based on Google's active discouragement of third-parties from licensing the technology from Digital Envoy, which is not a factual basis for Digital Envoy's misappropriation claim. Id. Digital Envoy specifically argued that the common law unfair competition claim was based on Google improperly obtaining the benefit of Digital Envoy's good will, which is not a factual basis for Digital Envoy's misappropriation claim. Id. Digital Envoy specifically argued that the unjust enrichment claim was based on Google's failure to pay Digital Envoy for its ill-gotten revenue, which is not a factual basis for Digital Envoy's misappropriation claim. Id. 18 In short, Digital Envoy expressly argued that the dismissed claims did not share the same factual 19 bases as the misappropriation claim. In that regard, Digital Envoy requests that the Court 20 reconsider its ruling on the preemption issues. 21 22 23 3. The Court erred in finding that Digital Envoy and Google are not competitors for the purpose of the Lanham Act claim. In the Order, the Court dismissed Digital Envoy's Lanham Act claim on the grounds that 24 Digital Envoy did not have standing to sue since it was not a "competitor" of Google. See Order 25 at 14. The Court reached this conclusion based on representations made by Digital Envoy in the 26 context of this Court's analysis of a proposed protective order that it was not a "competitor" of 27 Google. See Order Denying Request to Modify Protective Order. Digital Envoy respectfully 28 submits that the definition of "competitor" for purposes of Lanham Act analysis is not the same as -8W02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 13 of 16 1 the definition of "competitor" used in Brown Bag protective order analysis. One can be in 2 competition with another party for purposes of the Lanham Act while not being a competitor as 3 that term is used in Brown Bag.2 4 The Ninth Circuit has long recognized that a party need not be in competition with another 5 party in order to bring suit under the Lanham Act a party need only have suffered competitive 6 injury in order to have standing to sue. The Ninth Circuit addressed this precise issue in Waits v. 7 Frito-Lay, Inc. 978 F.2d 1093 (9th Cir. 1992). In Waits, a singer whose unique voice was 8 imitated in an advertisement without his consent brought suit under 15 U.S.C. 1125(a)(1)(A). 9 The defendant argued that because the plaintiff [a singer] was not a competitor of the defendant [a 10 potato chip company], the plaintiff "is not in competition with the defendants [and] cannot sue 11 under the Lanham Act." Waits, 978 F.2d at 1107. The Waits court rejected this argument out of 12 hand, holding that "[t]o have standing under the Lanham Act . . . the plaintiff need not be in actual 13 competition with the alleged wrongdoer. The dispositive question in determining standing is 14 whether the plaintiff has a reasonable interest to be protected against false advertising." Id. at 15 1108. Thus, the court held that a singer could suffer competitive harm from a potato chip 16 company, despite the fact that a singer and a potato chip company are not competitors. 17 Furthermore, the Waits court made clear that its holding was not limited to "false 18 advertisement" cases such as that one. The court cited a reverse palming-off case for the 19 proposition that a party who is not in direct competition with another party but who suffers 20 competitive harm as a result of another's unfair business practices does have standing to sue under 21 the Lanham Act. Id. at 1107 ("Moreover, the plaintiff under section 43(a) need not be in actual 22 23 24 25 26 27 28 -9W02-SF:5BB\61460349.1 2 Contemporaneously with the filing of this motion, Digital Envoy has filed a Motion for Protective Order in which in requests that the Court withdraw the current protective order in effect and adopt the Proposed Protective Order submitted by Google in January 10, 2005, in its Letter Brief Regarding Amending Protective Order. Digital Envoy's makes this motion on the grounds that the parties are competitors, at least for Lanham Act purposes, and Digital Envoy is willing to submit to the more restrictive protective proposed by Google in January if this concession will persuade the Court to grant Digital Envoy's Motion for Reconsideration. DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 14 of 16 1 competition with the alleged wrongdoer") (citing Smith v. Montoro, 648 F.2d 602, 607 (9th Cir. 2 1981)). 3 The Order states that "the case [Digital Envoy] relies upon in support of the adequacy of its 4 false advertising claim confirms that the parties must be competitors in the relevant market in 5 cases involving false designation of origin under the Lanham Act." Order at 14. That case is 6 Lamothe v. Atlantic Recording Corp., 847 F.2d 1403, 1406 (9th Cir. 1988). Lamothe, in turn, cites 7 as authority Halicki v. United Artists Communications, Inc., for its holding that a Lanham Act 8 plaintiff must show a competitive injury in order to have standing. 812 F.2d 1213, 1214 (9th Cir. 9 1987). 10 The Waits opinion, which came five years after the Ninth Circuit's ruling in Halicki, 11 expanded the definition of "competitive injury". The Waits court, in reconciling the broad 12 definition of "competition" in Smith with the narrower definition in Halicki, held: 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Waits, 978 F.2d at 1108. See also Kournikova v. General Media Communications, Inc., 278 F. Supp. 2d 1111, 1117 (C.D. Cal. 2003) (holding that "the Court must determine whether or not the two parties vie for the same dollars from the same consumer group, and whether the conduct of the defendant, if true, could be said to create a `competitive injury'"). The Court cites Coastal Abstract Service, Inc. v. First American Title Insurance Company for the proposition that "the Ninth Circuit has held that in order to constitute a false advertising claim for purposes of the Lanham Act, the statement must be made `by a defendant who is in commercial competition with the plaintiff.'" 173 F.3d 725, 735 (9th Cir. 1999). Coastal Abstract holds that in order to have standing to bring a false advertising under Section 43(a)(1)(B) of the Lanham Act, the plaintiff must be "in commercial competition with [the] plaintiff." Id. Here, however, Digital Envoy's claim is not a false advertising claim under section (a)(1)(B) but is a -10W02-SF:5BB\61460349.1 To interpret Halicki as suggested by the defendants, for the broad proposition that only competitors have standing under section 43(a) regardless of the type of claim asserted, would create an impermissible conflict with Smith, where we held that actual competition is unnecessary. . . .We find that Smith and Halicki may be reconciled, and we begin with the basic principal that both embody: that standing under section 43(a) exists where the interest asserted by the plaintiff is a commercial interest protected by the Lanham Act. DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 15 of 16 1 false designation of origin claim brought under section (a)(1)(A). See Lamothe, 847 F. 2d 1403, 2 1406 (9th Cir. 1988). (holding that the Lanham Act claims cover two distinct types of conduct: (a) 3 palming off; and (2) false advertising). Digital Envoy has never contended that it is advancing a 4 false advertising claim brought pursuant to Section 43(a)(1)(B). Rather, Digital Envoy has always 5 contended that this is palming-off case. See Digital Envoy's Opposition Brief at 15 ("In sum, 6 throughout the Amended Complaint, Digital Envoy alleges that Google, without any legal or 7 contractual right to do so, is selling Digital Envoy's technology as its own. Such behavior 8 amounts to express and/or implied reverse palming off of Digital Envoy's technology."). 9 Coastal Abstract clearly does not overturn the holdings in Smith and Waits. To the extent it 10 distinguishes them, it does so only with regard to (a)(1)(B) false advertising claims and not with 11 regard to (a)(1)(A) palming off claims. Accordingly, Digital Envoy has alleged a competitive 12 injury at the hands of unfair competition on the part of Google. As such, it has standing to bring a 13 claim under the Lanham Act. 14 In light of this case law, Digital Envoy respectfully requests this Court withdraw the Order 15 dismissing Digital Envoy's Lanham Act claim, and, in turn, Digital Envoy is willing to be bound 16 by Google's original proposed protective order limiting dissemination of extremely confidential 17 competitive information. 18 19 III. CONCLUSION In ruling on Google's Motion for Partial Summary Judgment, the Court looked to the 20 structure of the Amended Complaint. See Order at 13 ("A review of Digital's amended complaint 21 reveals that its third, fourth, and fifth claims for relief are based on the identical facts alleged in its 22 claim for misappropriation of trade secrets."). While each of the counts in the Amended 23 Complaint did re-allege all of the underlying facts there is no requirement that a complaint 24 specifically dissect each count into its respective elements, since all this is required for notice 25 pleadings are allegations that are sufficient to place the defendant on notice. 26 Digital Envoy submits that, in reviewing Google's Motion, the facts should have been 27 viewed in a light most favorable to Digital Envoy. In other words, rather than merely looking to 28 the structure of the allegations in the Amended Complaint, each of the underlying facts should -11W02-SF:5BB\61460349.1 DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION Case 5:04-cv-01497-RS Document 223 Filed 07/06/2005 Page 16 of 16 1 have been examined to determine whether statutory unfair competition, common law unfair 2 competition, and unjust enrichment were based on facts that were coterminous with the facts that 3 formed the basis for misappropriation. 4 Digital Envoy specifically argued that claims III (statutory unfair competition), IV 5 (common law unfair competition), and V (unjust enrichment) were based on different facts than 6 those that formed the basis of claim I (misappropriation). Digital Envoy's Opposition Brief at p.9. 7 The Order erroneously notes the following. First, that the underlying facts for all of these claims 8 was identical. See Order at 12-13. Second, that Digital Envoy never argued otherwise. See Order 9 at 13. 10 In view of the specific showings above, as required by Rule 7-9(b), Digital Envoy 11 respectfully moves this Court for leave to file its motion for reconsideration 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -12W02-SF:5BB\61460349.1 DATED: July 6, 2005 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP By /s/ Brian Blackman P. CRAIG CARDON BRIAN R. BLACKMAN TIMOTHY H. KRATZ (Admitted Pro Hac Vice) MCGUIRE WOODS, L.L.P 1170 Peachtree Street, N.E., Suite 2100 Atlanta, Georgia 30309 Telephone: 404.443.5706 Facsimile: 404.443.5751 Attorneys for DIGITAL ENVOY, INC. DIGITAL ENVOY'S MOTION FOR LEAVE TO FILE MOTION FOR RECONSIDERATION

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