Cypress Semiconductor Corporation v. Fujitsu Semiconductor Limited

Filing 36

Order by Judge Lucy H. Koh Denying #8 Application for Temporary Restraining Order and Preliminary Injunction. (lhklc1S, COURT STAFF) (Filed on 2/25/2020)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
Northern District of California

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CYPRESS SEMICONDUCTOR
CORPORATION,

Case No. 20-CV-00193-LHK
ORDER DENYING APPLICATION
FOR TEMPORARY RESTRAINING
ORDER AND PRELIMINARY
INJUNCTION

Plaintiff,
v.

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FUJITSU SEMICONDUCTOR LIMITED,
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Re: Dkt. No. 8

Defendant.

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Before the Court is Plaintiff Cypress Semiconductor Corporation’s (“Cypress”) ex parte

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application for a temporary restraining order (“TRO”) and preliminary injunction (“TRO

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Application”). ECF No. 8. Because the Court found that proceeding ex parte was unwarranted,

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the Court ordered Plaintiff to serve Defendant Fujitsu Semiconductor Limited (“FSL”) with the

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TRO Application on January 9, 2020. ECF No. 11. Following service, FSL entered a special

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appearance to oppose the TRO Application on January 22, 2020. ECF No. 19 (“Opp’n”). Cypress

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filed a reply on January 28, 2020, ECF No. 22 (“Reply”). Having considered the submissions of

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the parties, the relevant law, and the record in this case, the Court DENIES Cypress’s application

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for a TRO and preliminary injunction.

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Case No. 20-CV-00193-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY
INJUNCTION

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United States District Court
Northern District of California

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I. LEGAL STANDARD
The standard for issuing a temporary restraining order is identical to the standard for
issuing a preliminary injunction. Brown Jordan Int’l, Inc. v. Mind's Eye Interiors, Inc., 236 F.
Supp. 2d 1152, 1154 (D. Haw. 2002); Lockheed Missile & Space Co., Inc. v. Hughes Aircraft Co.,
887 F. Supp. 1320, 1323 (N.D. Cal. 1995). “A plaintiff seeking a preliminary injunction must
establish that [it] is likely to succeed on the merits, that [it] is likely to suffer irreparable harm in
the absence of preliminary relief, that the balance of equities tips in [its] favor, and that an
injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).
The party seeking the injunction bears the burden of proving these elements. Klein v. City of San
Clemente, 584 F.3d 1196, 1201 (9th Cir. 2009). “A preliminary injunction is ‘an extraordinary
and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries
the burden of persuasion.’” Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012).
II. DISCUSSION
As an initial matter, the Court has serious concerns about whether it has personal
jurisdiction over FSL. The Ninth Circuit has held that “it would be inappropriate for a district
court to enter any injunction . . . without first considering whether personal jurisdiction could be
asserted over the defendant.” Butte Min. PLC v. Smith, No. 92-36890, 1994 WL 192428 (9th Cir.
1994) (citing Alaska v. Native Village of Venetie, 856 F.2d 1384, 1389 (9th Cir.1988), and Enter.
Int’l, Inc. v. Corporacion Estatal Petrolera Ecuatoriana, 762 F.2d 464, 470–71 (5th Cir. 1585)).
Cypress concedes that FSL is a Japanese corporation, Compl. ¶ 10; the photomasks that are
the subject of the dispute are located in Japan, TRO Appl. ¶ 10; the applicable agreements are
governed by Japanese law, TRO Appl. ¶ 19; and the parties are bound by an agreement to arbitrate
in Tokyo, Japan under the rules of the Japan Commercial Arbitration Association, Compl. ¶ 5.
See ECF No. 11 at 2. Moreover, Cypress acknowledges that it has failed to serve the summons
and complaint on FSL pursuant to the Hague Service Convention. See Am. Compl. at 8 n.5. FSL
has in fact moved to dismiss the complaint on the basis of improper service. See ECF No. 23. In
response, Cypress has conceded that it will serve the summons and amended complaint on FSL
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Case No. 20-CV-00193-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY
INJUNCTION

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pursuant to the Hague Service Convention. See ECF No. 33 (“Am. Compl.”) at 8 n.5. Thus, at

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this time, it is not clear whether FSL has properly been served and whether this Court in fact has

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personal jurisdiction over FSL. See SEC v. Ross, 504 F.3d 1130, 1138 (9th Cir. 2007) (“[S]ervice

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of process is the means by which a court asserts its jurisdiction over the person.”). Nonetheless,

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the Court will continue to assess whether Cypress has met the standard for issuance of a TRO and

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preliminary injunction.

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Based on the record before the Court, Cypress has not established that it is likely to

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succeed on the merits. Cypress’s sole cause of action in this case is based on “breach, anticipatory

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breach or repudiation of contract.” Am. Compl. at 7. Because Japanese law governs the contracts
at issue, see TRO Appl. ¶ 19, the parties each supplied an opinion from Japanese counsel

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United States District Court
Northern District of California

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discussing the viability of Cypress’s claim. See ECF Nos. 7-2 (“Pl.’s Opinion”), 19-8 (“Defs.’

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Opinion”). Specifically, in support of Cypress’s TRO Application, Cypress’s U.S. counsel

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declined to themselves make any substantive arguments about Japanese law. Instead Cypress’s

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counsel provided a letter from two attorneys familiar with Japanese law, who are located,

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unsurprisingly, in Japan. See, e.g., ECF No. 7-2. However, Cypress’s opinion letter fails to

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establish that Cypress will likely succeed on the merits. Instead, the letter merely states that

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Cypress “has reasonable grounds to demand that FSL not destroy, remove, or otherwise impair

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the photomasks.” Opp’n at 14 (quoting ECF No. 7-2 at 6) (emphasis added). Merely having

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“reasonable grounds” for its demands is a far cry from Cypress showing that Cypress is likely to

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succeed on the merits.

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However, that Cypress has not established its likelihood of success on the merits is not

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alone dispositive. “[T]he Ninth Circuit weighs [the Winter] factors on a sliding scale, such that

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where there are only ‘serious questions going to the merits’—that is, less than a ‘likelihood of

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success’ on the merits—a preliminary injunction may still issue so long as ‘the balance of

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hardships tips sharply in the plaintiff’s favor’ and the other two factors are satisfied.” Short v.

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Brown, 893 F.3d 671, 675 (9th Cir. 2018). Yet, even assuming that Cypress has established

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Case No. 20-CV-00193-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY
INJUNCTION

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“serious questions going to the merits,” Cypress has again failed to show that it meets another

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required factor: specifically, that irreparable harm is likely. “[P]laintiffs seeking preliminary relief

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[must] demonstrate that irreparable injury is likely in the absence of an injunction”; otherwise,

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preliminary injunctive relief is inappropriate. Winter, 555 U.S. at 22.

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Cypress’s theory of irreparable harm rests on its assertion that FSL has threatened to
destroy “photomasks” used by Cypress to manufacture computer chips used in “certain analog

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semiconductor products and microcontroller products,” (collectively, “AM Products”). See ECF

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No. 8-2 (“Croll Decl.”) at ¶¶ 2, 11. Cypress claims that it would take millions of dollars and

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“many months” to recreate the photomasks. Id. ¶ 12. Cypress further alleges that, beginning on

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November 12, 2019, FSL demanded payment of $3.5 million for the photomasks and that, as of

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United States District Court
Northern District of California

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December 2, 2019, FSL threatened to destroy the photomasks if Cypress did not make the

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demanded payment. Id. ¶¶ 13, 14. Cypress argues that, without access to the photomasks,

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Cypress would be unable to manufacture the AM Products to sell to Cypress’s clients, which

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“could result in a loss of confidence in Cypress by its customers.” Id. ¶ 17.

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These allegations are insufficient to establish irreparable harm, i.e., that “irreparable injury

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is likely in the absence of an injunction.” See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7,

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22 (2008). Cypress’s only allegation that it would suffer more than just compensable economic

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loss is Cypress’s assertion that it would lose the confidence of its customers. Croll Decl. ¶ 17.

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However, Cypress acknowledges that it in fact has an alternative: payment of $3.5 million to

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retain the photomasks. Id. ¶ 13. Cypress’s concession that it can avoid any interruption in its

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manufacturing process, prevent its loss of “millions in revenue,” and prevent the loss of its

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customers’ confidence by rendering payment of $3.5 million defeats any claim of irreparable

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harm. See TRO Appl. ¶ 21; Croll Decl. ¶¶ 13–14. Courts have found “irreparable harm” claims to

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be overly speculative where the aggrieved party has alternative options. See, e.g., Brisette v.

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Arnold, No. 2:16-cv-0208 GEB GGH P, 2016 WL 1670559 (E.D. Cal. Apr. 27, 2016) (finding any

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claimed harm speculative even if movant “may find fault with [his] alternatives”). This alternative

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Case No. 20-CV-00193-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY
INJUNCTION

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payment would not itself constitute irreparable harm. As the United States Supreme Court has

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explained:

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The key word in this consideration is irreparable. Mere injuries, however substantial,
in terms of money, time and energy necessarily expended in the absence of a stay,
are not enough. The possibility that adequate compensatory or other corrective relief
will be available at a later date, in the ordinary course of litigation, weighs heavily
against a claim of irreparable harm.

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Sampson v. Murray, 415 U.S. 61, 90 (1974) (quoting Va. Petroleum Jobbers Ass'n v. Fed. Power

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Comm'n, 259 F.2d 921, 925 (D.C. Cir. 1958)). Any harm suffered by Cypress would be a

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temporary economic injury because Cypress has the “possibility [of] adequate compensatory or

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other corrective relief” if it prevails on its claims under its agreements with FSL. See Sampson,
415 U.S. at 90. Accordingly, because Cypress has no evidence that irreparable harm, as opposed

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United States District Court
Northern District of California

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to temporary economic loss, is likely, Cypress is not eligible for preliminary relief. See Winter,

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555 U.S. at 12.

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Moreover, as the Court has noted, the parties contracted to arbitrate in Tokyo, Japan, under

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the rules of the Japan Commercial Arbitration Association, and under the laws of Japan. Although

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Cypress has been aware of FSL’s $3.5 million demand since November 12, 2019, and FSL’s

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alleged threat to destroy the photomasks since December 2, 2019, see ECF No. 8-2 at ¶¶ 13, 14,

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Cypress has still failed to initiate arbitration. Instead, Cypress has repeatedly assured the Court

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that Cypress intends to commence arbitration in the “near future” to resolve the parties’ dispute.

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See Compl. ¶ 16 (filed Jan. 9, 2020); Reply at 2 (filed Jan. 28, 2020); Am. Compl. ¶ 16 (filed Feb.

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24, 2020). Ironically, Cypress also states that it “has delayed unilaterally initiating the arbitration

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in the hope of reaching a mutually acceptable way to do so without involving this Court.” Id. at 2

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n.5. Cypress’s delay in commencing arbitration undermines Cypress’s claim of imminent,

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irreparable harm.

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In light of Cypress’s failure to establish a likelihood of success on the merits or a

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likelihood of irreparable harm, the Court need not consider the remaining Winter factors. See

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Short, 893 F.3d at 675 (holding that, where a plaintiff has shown less than a likelihood of success

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Case No. 20-CV-00193-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY
INJUNCTION

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on the merits, a preliminary injunction may not issue unless the remaining three factors are

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satisfied).

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III. CONCLUSION

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For the foregoing reasons, Plaintiff’s application for a temporary restraining order and a
preliminary injunction is DENIED.

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IT IS SO ORDERED.

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Dated: February 25, 2020

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______________________________________
LUCY H. KOH
United States District Judge

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United States District Court
Northern District of California

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Case No. 20-CV-00193-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY
INJUNCTION