VIA Technologies, Inc. (a California corporation) et al v. ASUS Computer International et al

Filing 211

ORDER GRANTING 200 MOTION FOR LEAVE TO AMEND THE COMPLAINT. Signed by Judge Beth Labson Freeman on 2/7/2017. (blflc4, COURT STAFF) (Filed on 2/7/2017)

1
2
3

UNITED STATES DISTRICT COURT

4

NORTHERN DISTRICT OF CALIFORNIA

5

SAN JOSE DIVISION

6
7

VIA TECHNOLOGIES, INC. (A
CALIFORNIA CORPORATION), et al.,

8

Plaintiffs,

11

ORDER GRANTING LEAVE TO
AMEND THE COMPLAINT

v.

9
10

Case No. 14-cv-03586-BLF

ASUS COMPUTER INTERNATIONAL, et
al.,

[Re: ECF 200]

United States District Court
Northern District of California

Defendants.
12
Before the Court is VIA Technologies, Inc., a California corporation, VIA Technologies,

13
14

Inc., a Taiwan corporation, and VIA Labs, Inc., a Taiwan corporation (collectively, “VIA”)’s

15

motion for leave to file a third amended complaint (“TAC”) adding a claim under the federal

16

Defend Trade Secrets Act. Mot. 2, ECF 200 (citing 18 U.S.C. §§ 1836, et seq. (“DTSA”)).

17

Pursuant to Civ. L.R. 7-1(b), the Court finds VIA’s motion for leave to amend suitable for

18

submission without oral argument and hereby VACATES the hearing scheduled for April 13,

19

2017. As set forth below, the Court finds that the factors weigh in favor of granting leave and

20

hereby GRANTS the motion.

21
22

I.

BACKGROUND
VIA brings this suit against ASUS Computer International, a California corporation

23

(“ACI”), ASUSTeK Computer Inc., a Taiwan corporation (“ASUS-TW”), and ASMedia

24

Technology Inc., a Taiwan corporation (“ASM”) (collectively, “ASUS”), for allegedly infringing

25

VIA’s patents and misappropriating VIA’s intellectual property relating to USB technology.

26

Second Am. Compl., ¶¶ 1-2, ECF 70 (“SAC”). The SAC was filed on July 10, 2015, which ASUS

27

answered on August 7, 2015. Mot. 2. VIA served initial document requests relating to its trade

28

secret claim in July 2015. ASUS filed a motion to stay trade secret discovery, which this Court

1

subsequently denied on December 4, 2015. ECF 82, 108. Thereafter, ASUS started production of

2

data relating to sales of products that allegedly incorporated VIA’s trade secrets (“Trade Secret

3

Products”). Mot. 2.
VIA contends that ASUS should have sales data well into the third quarter of 2016, after

5

the May 11, 2016 effective date of the DTSA, and before the November 18, 2016 fact discovery

6

cutoff and the December 19, 2016 expert disclosure deadline. Id. at 2-3. However, VIA was not

7

aware of any produced data reflecting such sales until the production made by ASUS on

8

December 22, 2016. Id. at 3. According to ASUS, the documents pertaining to United States

9

sales data into the third quarter of 2016 were produced on November 16, 2016 and on December

10

22, 2016 in supplemental productions. Opp’n 4, ECF 206. VIA does not dispute that pertinent

11
United States District Court
Northern District of California

4

sales data production was first made on November 16, 2016 but explains that it had inadvertently

12

overlooked those sales data, thinking that the November 16, 2016 production was a mere “re-

13

produc[tion].” Reply 3, ECF 207.

14

On December 28, 2016, VIA asked ASUS to stipulate to an amendment to add a claim

15

under the DTSA, a request that ASUS refused. Mot. 3. VIA then filed the instant motion on

16

January 4, 2017. Mot.

17
18

II.

LEGAL STANDARD
Where, as here, the Court’s scheduling orders do not set a deadline for amendments to the

19

pleadings, a motion for leave to amend is evaluated under Rule 15. Soto v. Castlerock Farming &

20

Transp., Inc., No. 09-00701, 2011 WL 3489876, at *2 (E.D. Cal. Aug. 9, 2011) (“When the

21

scheduling order does not set a deadline for amendment, Rule 16’s good cause standard does not

22

apply.” (citations omitted)).

23

Rule 15 provides that “[t]he court should freely give leave [to amend] when justice so

24

requires.” Fed. R. Civ. P. 15(a)(2). In deciding whether to grant leave to amend, the Court must

25

consider the factors set forth by the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and

26

discussed at length by the Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048

27

(9th Cir. 2009). A district court ordinarily must grant leave to amend unless one or more of the

28

Foman factors is present: (1) undue delay, (2) bad faith or dilatory motive, (3) repeated failure to
2

1

cure deficiencies by amendment, (4) undue prejudice to the opposing party, and (5) futility of

2

amendment. Eminence Capital, 316 F.3d at 1052. “[I]t is the consideration of prejudice to the

3

opposing party that carries the greatest weight.” Id. However a strong showing with respect to

4

one of the other factors may warrant denial of leave to amend. Id.

5

III.

DISCUSSION

6

The factor of “repeated failure to cure deficiencies by amendment” does not apply here

7

because it is not relevant to the present circumstances and neither party discusses this factor in

8

their submissions. However, the Court finds that the remaining factors weigh in favor of granting

9

leave to amend for reasons set forth below.

10

United States District Court
Northern District of California

11

A.

Undue Delay; and Bad Faith or Dilatory Motive
VIA argues that it has acted diligently and in good faith in seeking this amendment. Mot.

12

5. According to VIA, the DTSA was enacted on May 11, 2016 and would only be applicable to

13

wrongful conduct occurring prior to its enactment if the conduct continues after May 11, 2016. Id.

14

(citing Syntel Sterling Best Shores Mauritius Ltd. v. Trizetto Grp., Inc., No. 15-211, 2016 WL

15

5338550, at *6 (S.D.N.Y. Sept. 23, 2016)). VIA contends that it filed the instant motion within

16

two weeks of the December 22, 2016 production, after receiving evidence that suggests that ASUS

17

continued to violate the DTSA after its enactment. Mot. 6; Reply 3. It did not think ASUS’s

18

November 16, 2016 production would contain such evidence, in part because ASUS had allegedly

19

characterized it as a mere “re-produc[tion].” Reply 3.

20

In opposition, ASUS contends that the request to add the DTSA claim should have been

21

raised in November and not six weeks afterwards, when VIA raised this issue for the first time

22

with ASUS on December 28, 2016. Opp’n 4-5. ASUS also claims that VIA acted in bad faith by

23

meeting and conferring during the holiday period and then filing the instant motion in the middle

24

of expert rebuttal period. Id. at 6.

25

The Court finds neither undue delay nor bad faith on VIA’s part. Although VIA could

26

have raised the issue in November, instead of December, if it had known about the sales data in

27

the November production, the additional four weeks, as opposed to two weeks, do not necessarily

28

make the delay undue. There is also no demonstration of bad faith, as VIA represents that it had
3

1

misunderstood the November production as a “re-production” and met and conferred with ASUS

2

promptly after finding relevant documents in the December production. Whether that

3

misunderstanding with respect to the November production was solely due to VIA’s mistake, or in

4

part, due to ASUS’s representation, is not material to this instant motion. The Court thus finds

5

that there is no undue delay or bad faith. Nonetheless, even if the delay was substantial, this factor

6

alone is not a sufficient ground for denial of leave to amend. E.g., United States v. Webb, 655

7

F.2d 977, 980 (9th Cir. 1981) (noting that “delay alone no matter how lengthy is an insufficient

8

ground for denial of leave to amend”).

9
10

B.

Undue Prejudice to ASUS
VIA contends that ASUS cannot carry the burden of showing prejudice because “the

United States District Court
Northern District of California

11

proposed DTSA claim is based on the same nucleus of facts” as the existing claim pursuant to the

12

California Uniform Trade Secret Act (“CUTSA”) in the SAC. Mot. 6. VIA further underscores

13

ASUS’s inability to articulate any specific prejudice during the meet and confer process leading up

14

to this motion. Id. at 7. ASUS counters that despite the similarities between the DTSA and the

15

CUTSA, there remain differences in the statutes, which give rise to prejudice against them. Opp’n

16

6. According to ASUS, the DTSA provides for “an ex parte seizure remedy,” not available under

17

CUTSA. Id. at 6 (citing 18 U.S.C. § 1836(b)(2)). ASUS further states that DTSA allows a jury to

18

determine the monetary claims, where CUTSA reserves the determination of reasonable royalties

19

for the judge. Opp’n 6 (citing 18 U.S.C. § 1836(b)(3)(B); Cal. Civ. Code § 3426.3). ASUS

20

contends that given that this case has already been pending since 2014, the additional discovery

21

necessary to prepare for the new claim would only exacerbate the delay. Id. at 7.

22

“The party opposing amendment bears the burden of showing prejudice,” which ASUS

23

fails to do here. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). The thrust

24

of ASUS’s contentions is that there are some differences between the CUTSA and the DTSA and

25

that additional discovery might be necessary. However, ASUS’s general lamentation fails to

26

identify the specific additional discovery the parties would need to undertake that is specific for

27

the DTSA claim but not for the CUTSA claim, and the additional amount of time that might be

28

needed. E.g., Chrimar Sys. Inc v. Cisco Sys. Inc, No. 13-01300-JSW, 2016 WL 520948, at *3
4

1

(N.D. Cal. Feb. 10, 2016) (in granting leave to amend, noting that the opposing party provided

2

only generality in support of finding prejudice). Although some additional discovery may be

3

needed, ASUS’s admission that “VIA would be seeking the same relief that it’s currently seeking

4

under the CUTSA, under the same set of facts” undercuts the argument that the additional

5

discovery would be substantial. Opp’n 7.

6

The cases cited by ASUS are inapposite so they do not compel a different conclusion.

7

E.g., Lockheed Martin Corp. v. Network Sols., Inc., 194 F.3d 980, 986 (9th Cir. 1999) (denying

8

leave to amend because “Lockheed sought to add complaints regarding new domain-name

9

registrants which would require NSI to conduct discovery on each new registrant”); Kaplan v.
Rose, 49 F.3d 1363, 1370 (9th Cir. 1994) (denying leave to amend because the new theories were

11
United States District Court
Northern District of California

10

added during the pendency of a summary judgment motion and the facts giving rise to the

12

amendment were known to the litigant since the beginning of the case); Texaco, Inc. v. Ponsoldt,

13

939 F.2d 794, 798-99 (9th Cir. 1991) (denying leave because of undue delay, “eight months after

14

the district court granted summary judgment against [the movant]”).

15
16

C.

Futility of the Amendment

VIA contends that the DTSA claim as set forth in the proposed TAC is adequately pled,

17

alleging, for example, VIA’s reasonable measures to keep the trade secret information secret, the

18

trade secret’s independent economic value, and ASUS’s use of the trade secrets. Mot. 7 -8; Ex. A.

19

VIA also represents that the proposed DTSA claim is based on the same factual allegations as the

20

SAC’s CUTSA claim. Id. at 8.

21

ASUS claims that the DTSA claim is not necessary because it is “duplicative of existing

22

claims.” Opp’n 7 (citing Bonin v. Calderon, 59 F.3d 815, 846 (9th Cir. 1995)). ASUS also argues

23

that this Court has already exercised its supplemental jurisdiction, rendering moot VIA’s argument

24

that the addition of the DTSA claim is to ensure federal jurisdiction. Opp’n 7.

25

“[A] proposed amendment is futile only if no set of facts can be proved under the

26

amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Miller

27

v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). The Ninth Circuit has alternatively

28

stated that the test of whether amendment would be futile is “identical to the one used when
5

1

considering the sufficiency of a pleading challenged under Rule 12(b)(6).” Id.; see Utterkar v.

2

Ebix, Inc., No. 14-02250-LHK, 2015 WL 5027986, at *8 (N.D. Cal. Aug. 25, 2015).
The Court finds that the proposed DTSA claim is not futile. ASUS does not argue that the

3
4

proposed DTSA claim is insufficient when evaluated under Rule 12(b)(6) but only that it is

5

duplicative. However, whether the claim is duplicative is not the proper standard and ASUS’s

6

reliance on Bonin is misplaced. Opp’n 7; Reply 4-5. In a federal habeas case, the Bonin court

7

affirmed the lower court’ denial of a motion for leave to amend the petition because the newly

8

added theories were not based on new facts and the petitioner provided “no satisfactory

9

explanation for his failure to fully develop his contentions originally.” 59 F.3d at 845. The court
further noted that the certain of the petitioner’s “proposed amendments are either duplicative or

11
United States District Court
Northern District of California

10

patently frivolous, or both.” Id. at 846. Here, VIA has an explanation for why the DTSA claim

12

was not added to the original complaint, namely that the DTSA was only enacted in May 11, 2016

13

and the facts supporting the allegedly continuing trade secret misappropriation past May 11, 2016

14

were not made available to VIA until November 2016. As such, Bonin has limited application

15

here.
At least one court, on a motion for leave to amend, has allowed a party to allege a state law

16
17

trade secret cause of action concurrently with a claim under DTSA, and this Court finds it

18

persuasive. E.g., Syntel Sterling, 2016 WL 5338550, at *4 (granting leave to add the DTSA claim

19

and noting that the existing claims of misappropriation under New York state law are closely

20

related to the proposed amendments). ASUS has provided no arguments distinguishing Syntel

21

Sterling from the present case. Moreover, ASUS’s contention, relating to whether VIA is adding a

22

DTSA claim only to preserve federal jurisdiction, is immaterial to the instant motion and does not

23

affect the Court’s determination here.

24
25

IV.

ORDER

26

For the foregoing reasons, the Court GRANTS VIA’s motion for leave to amend the SAC

27

only to add the proposed DTSA claim, as set forth in Exhibit A of this motion. VIA shall file the

28

TAC attached to its motion as Exhibit A, ECF 200-2, as a separate docket entry on or before
6

1

February 10, 2017.

2
3
4
5

Dated: February 7, 2017
______________________________________
BETH LABSON FREEMAN
United States District Judge

6
7
8
9
10

United States District Court
Northern District of California

11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
7