BladeRoom Group Limited et al v. Facebook, Inc., No. 5:2015cv01370 - Document 192 (N.D. Cal. 2017)

Court Description: REDACTED ORDER granting in part and denying in part 114 Motion to Dismiss. Signed by Judge Edward J. Davila on 2/10/2017. (ejdlc1S, COURT STAFF) (Filed on 2/10/2017)

Download PDF

BladeRoom Group Limited et al v. Facebook, Inc. Doc. 192 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION 10 BLADEROOM GROUP LIMITED, et al., 11 Case No. 5:15-cv-01370-EJD United States District Court Northern District of California Plaintiffs, 12 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS v. 13 FACEBOOK, INC., et al., 14 Re: Dkt. No. 114 Defendants. 15 This is a case about data centers, “which are the buildings that house the vast arrays of 16 17 computer servers that form the backbone of the internet and the high-technology economy.” 18 Second Am. Compl. (“SAC’), Dkt. No. 107, at ¶ 1. Plaintiffs BladeRoom Group Limited 19 (“BRG”) and Bripco (UK) Limited (“Bripco”)1 are two English companies who allege that 20 Defendants Facebook, Inc. (“Facebook”), Emerson Electric Co. (“Emerson”), Emerson Network 21 Power Solutions, Inc. and Liebert Corporation2 enticed them to reveal their data center designs and 22 construction methods with promises of acquisition and partnership, only to then copy those 23 designs and methods and pass them off as their own. 24 25 1 26 2 27 28 In this order, BRG and Bripco are referred to collectively as “Plaintiffs.” Emerson Electric Co., Emerson Network Power Solutions, Inc. and Liebert Corporation are referred to collectively as the “Emerson Defendants.” 1 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS Dockets.Justia.com 1 Federal jurisdiction arises pursuant to 28 U.S.C. §§ 1331 and 1332. Presently before the 2 court is Facebook’s Motion to Dismiss the SAC under Federal Rule of Civil Procedure 12(b)(6). 3 Dkt. No. 114. Plaintiffs have filed written opposition to this motion. Having carefully considered 4 the parties’ arguments, the court concludes that most but not all of the SAC withstands a Rule 5 12(b)(6) review. Thus, Facebook’s motion will be granted in part and denied in part for the 6 reasons explained below. 7 I. BACKGROUND 8 A. 9 Plaintiffs developed and perfected a method for manufacturing and installing a type of pre- 10 Plaintiffs and the BladeRoom Technology fabricated data center known as a “BladeRoom.” Id. at ¶ 4. United States District Court Northern District of California 11 12 13 Id. 14 at ¶ 26. Plaintiffs built the first BladeRoom in 2009, and have since built over 40 BladeRooms on 15 four continents. Id. at ¶ 27. 16 Though some of the techniques used to build a BladeRoom are publicly disclosed, 17 Plaintiffs keep others as confidential trade secrets and limit the release of this information in 18 several ways. Id. at ¶¶ 28, 31. They ensure that private disclosure to potential clients, suppliers 19 and others is covered by non-disclosure agreements. Id. at ¶ 31. The computer systems 20 containing the trade secrets are password-protected and the facilities where they are stored are 21 physically secured. Id. Additionally, employee access to trade secrets is limited to only those that 22 need to know of them and is subject to confidentiality agreements. Id. 23 Bripco is the legal owner, and BRG is the licensee, of all right, title and interest in the trade 24 secrets and other confidential information developed by BRG, including the BladeRoom 25 technology. Id. at ¶ 5. 26 27 28 2 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 B. BRG Discusses BladeRoom Technology with Emerson and Facebook In August 2011, BRG entered into 2 Id. at ¶ 34. Emerson executed a non-disclosure 3 agreement before any substantive discussions occurred, 4 . Id. at ¶ 35. BRG then hosted a 5 meeting for several Emerson executives at its factory in England in September, 2011, 6 Id. at ¶ 47. Emerson later informed BRG 7 in October, 2011, . Id. at ¶ 48. 8 BRG also began discussing the BladeRoom technology with Facebook in October, 2011. 9 Id. at ¶ 37. In connection with those discussions, BRG and Facebook entered into a non10 disclosure agreement United States District Court Northern District of California 11 12 13 Id. at ¶ 40. , Facebook “urgently requested” a proposal to supply BladeRooms for a data center in North Carolina. Id. at ¶ 49. 14 BRG provided the proposal in November, 2011, 15 . Id. According to BRG, 16 17 “[f]eedback from Facebook was positive, and Facebook quickly began asking to learn even more details about” BladeRooms. Id. at ¶ 50. BRG representatives met with Facebook in California, 18 and two Facebook representatives met with BRG in England in March, 2012. Id. at ¶ 51. During 19 this trip, BRG took the Facebook representatives on a tour of an operating BladeRoom and 20 21 provided them with additional confidential information. Id. Subsequently, “Facebook continued to request yet more detailed confidential information from BRG,” and “suggested that the next 22 step should be for a team of Facebook design and engineering staff to travel to BRG in England 23 for an in-depth workshop with BRG’s technical teams to enable Facebook to learn more . . . .” Id. 24 at ¶ 52. 25 BRG alleges that soon after the March, 2012, meeting in England, one of the attending 26 Facebook representatives met with an Emerson Network Power executive 27 28 3 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS . Id. at ¶ 53. 1 , Emerson contacted 2 BRG and sought to reopen discussions, to which BRG agreed. Id. Emerson told BRG, however, 3 that a group of individuals other than the ones who had visited BRG in 2011 . Id. Emerson proposed that several of its representatives visit BRG’s 4 5 6 facilities in June, 2012. Id. at ¶ 54. On May 29th and May 30, 2012, BRG attended a meeting with Facebook at its data center campus in Prineville, Oregon, and was told the purpose of the meeting was to “survey and 8 physically see the functionality of a Facebook data center and meet Facebook’s lead architect and 9 engineers.” Id. at ¶ 56. Third party architects and contractors also attended. Id. Facebook told 10 BRG it would request a proposal for an expansion of the Prineville data center campus and asked 11 United States District Court Northern District of California 7 BRG to present and discuss BladeRoom technology, which it did. Id. at ¶ 57. BRG alleges that 12 unbeknownst to it at the time, Facebook had already agreed that its construction contractor Id. at ¶ 58. 13 14 BRG’s previously discussed in-depth workshop with Facebook occurred in England 15 between June 19th and June 21, 2012, during which BRG revealed additional confidential 16 information. Id. at ¶¶ 60, 61. A meeting between BRG and Emerson, during which BRG also 17 revealed confidential information, occurred at the same time. Id. at ¶ 64. To maintain the 18 confidentiality of the respective discussions, BRG ensured the two companies’ representatives 19 were separated during their visits. Id. 20 But despite BRG’s efforts, representatives from Facebook and Emerson did engage in a 21 “pre-arranged, clandestine meeting” in London on June 21, 2012, and “compared notes” on what 22 each had learned from their meetings with BRG. Id. at ¶ 68. Facebook also continued to indicate 23 an interest in partnering with BRG and requested more information and proposals. Id. at ¶ 69. 24 C. 25 Facebook never placed an order for BladeRooms. Id. at ¶ 71. Instead, BRG alleges that 26 27 28 Facebook and Emerson Allegedly Misappropriate the BladeRoom Technology Facebook and Emerson 4 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS Id. at ¶ 74. 1 2 Id. at ¶¶ 75, 80. On 3 4 January 16, 2013, Emerson publicly announced that it was launching a new business focusing on 5 “serving the needs of massive data centers” using “customized, highly scalable, and often modular 6 infrastructures.” Id. at ¶ 78. And in May, 2014, Facebook announced it had chosen Emerson to 7 construct a pre-fabricated, modular data center in Sweden, which it alleges will be constructed 8 using appropriated BladeRoom technology. Id. at ¶ 113. 9 D. Facebook’s Disclosure of BRG Confidential Information BRG alleges that after Emerson’s announcement, Facebook began revealing BRG’s 10 United States District Court Northern District of California 11 confidential information through its initiative called the “OpenCompute Project,” the goal of 12 which “is to give the public ‘full access to the[] specifications’ used by Facebook in its data 13 centers in order to ‘spark a collaborative dialogue” about how to improve its approach to data 14 centers.” Id. at ¶¶ 83, 84. BRG alleges that on January 28, 2014, a Facebook representative made 15 a public presentation at an OpenCompute forum and referred to the BladeRoom technology as one 16 the “rapid deployment data center” (“RDDC”) method created by Facebook. Id. at ¶ 89. The 17 same Facebook representative also authored and published an OpenCompute blog post that 18 allegedly included details of the BladeRoom technology. Id. at ¶ 100. 19 E. 20 Plaintiffs initiated this action on March 23, 2015, and the court granted in part and denied 21 in part Facebook’s motion to dismiss the original complaint. Dkt. No. 59. Plaintiffs then filed an 22 amended complaint and, later, the SAC. Dkt. Nos. 62, 107. This motion followed. 23 24 II. The Instant Action LEGAL STANDARD Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient 25 specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which 26 it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). 27 28 5 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 The factual allegations in the complaint “must be enough to raise a right to relief above the 2 speculative level” such that the claim “is plausible on its face.” Id. at 556-57. A complaint that 3 falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief 4 can be granted. Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only 5 where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable 6 legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). When deciding whether to grant a motion to dismiss, the court must generally accept as 7 8 true all “well-pleaded factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009). The court 9 must also construe the alleged facts in the light most favorable to the plaintiff. See Retail Prop. Trust v. United Bhd. of Carpenters & Joiners of Am., 768 F.3d 938, 945 (9th Cir. 2014) 11 United States District Court Northern District of California 10 (providing the court must “draw all reasonable inferences in favor of the nonmoving party” for a 12 Rule 12(b)(6) motion). However, “courts are not bound to accept as true a legal conclusion 13 couched as a factual allegation.” Iqbal, 556 U.S. at 678. Also, the court usually does not consider any material beyond the pleadings for a Rule 14 15 12(b)(6) analysis. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 16 (9th Cir. 1990). Exceptions to this rule include material submitted as part of the complaint or 17 relied upon in the complaint, and material subject to judicial notice. See Lee v. City of Los 18 Angeles, 250 F.3d 668, 688-69 (9th Cir. 2001). 19 III. DISCUSSION 20 Facebook moves to dismiss all the claims asserted in the SAC. Each is discussed below. 21 A. 22 The California Uniform Trade Secrets Act (“CUTSA”), codified at California Civil Code § Misappropriation of Trade Secrets 23 3426 et seq., “creates a statutory cause of action for the misappropriation of a trade secret.” 24 Brescia v. Angelin, 172 Cal. App. 4th 133, 143 (2009). A “trade secret” is “information, including 25 a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives 26 independent economic value, actual or potential, from not being generally known to the public or 27 28 6 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject 2 of efforts that are reasonable under the circumstances to maintain its secrecy.” Cal. Civ. Code § 3 3426.1(d). “Misappropriation” includes the “[a]cquisition of a trade secret of another by a person 4 who knows or has reason to know that the trade secret was acquired by improper means.” Cal. 5 Civ. Code § 3426.1(b). “Improper means” includes “theft, bribery, misrepresentation, breach or 6 inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other 7 means” but excludes “[r]everse engineering or independent derivation alone.” Cal. Civ. Code § 8 3426.1(a). 9 To state a claim under CUTSA, a plaintiff must demonstrate: “(1) the plaintiff owned a trade secret, (2) the defendant acquired, disclosed, or used the plaintiff’s trade secret through 11 United States District Court Northern District of California 10 improper means, and (3) the defendant’s actions damaged the plaintiff.” Cytodyn, Inc. v. 12 Amerimmune Pharms., Inc., 160 Cal. App. 4th 288, 297 (2008). 13 i. Ownership of Trade Secrets 14 Facebook argues that neither BRG nor Bripco can maintain a claim for misappropriation of 15 trade secrets for different reasons. As to BRG, Facebook contends its status as a licensee does not 16 satisfy the ownership element of the claim. As to Bripco, Facebook argues the SAC does not 17 describe how it was damaged by the alleged misappropriation. These arguments are 18 unconvincing. 19 20 a. BRG In arguing that misappropriation claims are properly limited only to owners and not 21 licensees, Facebook focuses primarily on authority that simply echoes the claim’s elements. For 22 example, Facebook relies on the district court’s opinion in Nextdoor.com, Inc.v. Abhyanker, No. 23 C-12-5667 EMC, 2013 U.S. Dist. LEXIS 101440, at *27, 2013 WL 3802526 (N.D. Cal. July 19, 24 2013), in which the court observed that “[i]n order to bring a viable claim for misappropriation of 25 trade secrets, [the plaintiff] must own the trade secrets in question.” This statement, however, is 26 not reflective of the legal proposition for which Facebook cites it. Instead, the statement’s 27 28 7 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 supporting citation denotes it is merely recognition of the first element of a prima facie 2 misappropriation claim under CUTSA, which is traditionally and perhaps over-simplistically 3 phrased in terms of “ownership.” Nextdoor.com, 2013 U.S. Dist. LEXIS 101440, at *27 (citing 4 Sargent Fletcher, Inc. v. Able Corp., 110 Cal. App. 4th 1658, 1665 (2003)). As such, neither 5 Nextdoor.com nor the state appellate case it cites hold that trade secret misappropriation claims 6 can only be asserted by an owner, and Facebook has not cited any other authority from California 7 federal or state courts explicitly finding as much. This issue has been addressed by courts outside this circuit, however. They have 8 9 “generally come to the same conclusion: a party has standing to bring a trade secrets claim if it has possession of the trade secret.” Williams-Sonoma Direct, Inc. v. Arhaus, LLC, 304 F.R.D. 520, 11 United States District Court Northern District of California 10 527 (W.D. Tenn. 2015) (emphasis added); accord Metso Minerals Indus. v. FLSmidth-Excel LLC, 12 733 F. Supp. 2d 969, 978 (E.D. Wis. 2010). Those courts reason that “fee simple ownership” as 13 an element of a trade secret misappropriation claim “may not be particularly relevant” because 14 “the ‘proprietary aspect’ of a trade secret flows, not from the knowledge itself, but from its 15 secrecy.” DTM Research, L.L.C. v. AT&T Corp., 245 F.3d 327, 332 (4th Cir. 2001). “It is the 16 secret aspect of the knowledge that provides value to the person having the knowledge.” Id. 17 “While the information forming the basis of a trade secret can be transferred, as with personal 18 property, its continuing secrecy provides the value, and any general disclosure destroys the value.” 19 Id. 20 The logic underlying these out-of-circuit opinions is persuasive and equally applicable 21 here. Since CUTSA defines a trade secret as information that “[d]erives independent economic 22 value, actual or potential, from not being generally known to the public or to other persons who 23 can obtain economic value from its disclosure or use,” the better focus for determining whether a 24 party can assert a misappropriation claim is on that party’s possession of secret knowledge, rather 25 than on the party’s status as a true “owner.” See DaimlerChrysler Servs. v. Summit Nat’l, No. 02- 26 71871, 2006 U.S. Dist. LEXIS 32049, at *26-27, 2006 WL 1420812 (E.D. Mich. May 22, 2006), 27 28 8 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 aff’d, 289 F. App’x 916 (6th Cir. 2008); see also DTM Research, 245 F.3d at 332 (“[O]ne ‘owns’ 2 a trade secret when one knows of it, as long as it remains a secret.”). 3 Here, though Plaintiffs allege that Bripco owns the trade secrets and BRG is a licensee, 4 they also allege that Plaintiffs’ licensing arrangement obligates BRG to maintain the 5 confidentiality of the secrets. SAC, at ¶ 30. In addition, Plaintiffs have allegedly employed 6 several mechanisms to limit the public disclosure of confidential information. Id. at ¶ 31. The 7 court finds these allegations sufficiently demonstrate that BRG possesses non-disclosed 8 knowledge and may therefore “demand remedies as provided by [CUTSA] against those who 9 ‘misappropriate’ the knowledge,” even though it is a licensee. DTM Research, 245 F.3d at 332. Facebook’s challenge to BRG’s trade secret misappropriation claim based on lack of ownership is 11 United States District Court Northern District of California 10 therefore rejected. 12 13 b. Bripco Facebook argues Bripco’s misappropriation claim must be dismissed because the damages 14 allegations are inadequately pled under Rule 8. Specifically, Facebook takes seemingly 15 contradictory positions that, on the one hand, “the SAC contains no factual allegations as to how 16 [Bripco] . . . was damaged,” and on the other, that the allegation describing how Bripco was 17 harmed is too conclusory. This argument fails. 18 A claim is plausible on its face “when the plaintiff pleads factual content that allows the 19 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” 20 Iqbal, 556 U.S. at 678. The Ninth Circuit employs a two-step process for evaluating a pleading for 21 plausibility: 22 23 24 25 26 First, to be entitled to the presumption of truth, allegations in a complaint or counterclaim may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively. Second, the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation. Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014). 27 28 9 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 “In all cases, evaluating a complaint’s plausibility is a ‘context-specific’ endeavor that 2 requires courts to ‘draw on . . . judicial experience and common sense.’” Levitt v. Yelp! Inc., 765 3 F.3d 1123, 1135 (9th Cir. 2014) (quoting Eclectic Props., 751 F.3d at 995-96). 4 Looking to the SAC, Facebook’s first position that the pleading lacks any allegations of 5 Bripco’s damages is unsupportable because it does, in fact, contain such an allegation. And its 6 second position fares no better, because Plaintiffs allege in the SAC that Facebook “damaged the 7 market for [Bripco’s] licensing of its trade secret to others.” SAC, at ¶ 137. That allegation is 8 sufficient under Rule 8 because it is more than just a recitation of the damages element; to the 9 contrary, the allegation notifies Facebook of a particular form of damages at issue in this action that can be explored through discovery. Moreover, this allegation, if assumed true, suggests 11 United States District Court Northern District of California 10 Bripco’s entitlement to relief because it satisfies the third element of a misappropriation claim. 12 Though Facebook would like more detail about how its purported conduct harmed Bripco’s 13 licensing market, those specifics are not required at the pleading stage. See StreamCast Networks, 14 Inc. v. IBIS LLC, No. CV 05-04239, 2006 U.S. Dist. LEXIS 97607, at *16, 2006 WL 5720345 15 (C.D. Cal. May 2, 2006) (“Under Rule 8, the fact of damage-and the type of damage-can be 16 alleged in conclusory terms.”); see also Mintel Learning Tech., Inc. v. Ambow Educ. Holding, 17 Ltd., No. 5:11-CV-01504-EJD, 2012 U.S. Dist. LEXIS 30953, at *7, 2012 WL 762126 (N.D. Cal. 18 Mar. 8, 2012) (“While omitting facts as to a necessary element of the cause of action may often 19 render a claim insufficient, the failure to specifically plead the amount of harm or the mechanism 20 of causation is not necessarily fatal to a complaint.”). 21 22 23 24 In sum, Bripco’s damages allegations are not so implausible or speculative so as to render them inadequate under Rule 8. ii. Secrecy Turning to the second element of a misappropriation claim, Facebook argues the SAC’s 25 allegations show that Plaintiffs failed to undertake reasonable efforts to maintain the secrecy of the 26 BladeRoom technology because they disclosed it to third-party architects and contractors at the 27 28 10 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 meeting in Prineville, Oregon in May, 2012. In response, Plaintiffs emphasize the SAC’s 2 allegation that those third parties were of Facebook and SAC, at ¶ 57. They also argue that a decision on the 3 4 reasonableness of Plaintiffs’ efforts to maintain the secrecy of their trade secret information is a 5 fact that question that cannot be decided on a motion to dismiss. 6 It is true that “[s]ecrecy is an essential characteristic of information that is protectable as a 7 trade secret.” Altavion, Inc. v. Konica Minolta Sys. Lab., Inc., 226 Cal. App. 4th 26, 57 (2014). It 8 is also well established that “‘[i]f an individual discloses his trade secret to others who are under 9 no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.’” Id. (quoting In re Providian Credit Card Cases, 96 Cal. 11 United States District Court Northern District of California 10 App. 4th 292, 304 (2002)). 12 But at the same time, CUTSA’s definition of what can constitute a “trade secret” does not 13 require that confidential information be kept completely clandestine or mandate the use of non- 14 disclosure agreements in all instances. In fact, CUTSA does not dictate a particular level of 15 secrecy needed to maintain the character of information as a trade secret. Instead, CUTSA 16 requires efforts at secrecy that are “reasonable under the circumstances.” Cal. Civ. Code § 17 3426.1(d). Moreover, it includes the acquisition of information by misrepresentation as a type of 18 “improper means” that can constitute misappropriation. Cal. Civ. Code § 3426.1(a). 19 In light of how these key terms are defined, Plaintiffs’ argument is the more persuasive - at 20 least for this motion. Construing the SAC in Plaintiffs favor, they contend that Facebook 21 essentially enticed BRG to disclose confidential information to Facebook and third parties in May, 22 2012, by misrepresenting the true purpose of the meeting. To that end, Plaintiffs allege that 23 Facebook told BRG that it would be asked to submit a bid for an expansion of the Prineville data 24 center, while in actuality Facebook had already agreed that its own contractors would submit a 25 substantially lower bid for the same work. SAC, at ¶¶ 57, 58. The allegations also suggest that 26 BRG believed the third parties attending the meeting were 27 28 11 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS , and it did not employ additional confidentiality measures for that 1 2 reason. Id. at ¶ 57. Thus, though Facebook’s argument regarding voluntary disclosure is certainly 3 appealing and may ultimately prevail depending on what is revealed through an investigation of 4 the facts, Plaintiffs theory that its efforts at secrecy were reasonable under the circumstances is 5 plausible enough to overcome a motion to dismiss. 6 Furthermore, Facebook’s assertion that the misappropriation claim is “defective” because 7 the SAC “does not distinguish the information that was disclosed from any protectable trade 8 secrets” is misplaced and the case it relies on, Top Agent Network, Inc. v. Zillow, Inc., No. 14-cv- 9 04769-RS, 2015 U.S. Dist. LEXIS 161556, 2015 WL 7709655 (N.D. Cal. Apr. 13, 2015), is inapposite. This argument presumes either facts not alleged or the validity of a preceding 11 United States District Court Northern District of California 10 argument: that whatever information was disclosed at the May, 2012, meeting no longer qualifies 12 as a trade secret. But Plaintiffs do not allege that BRG’s presentation consisted of protectable and 13 non-protectable information, as the plaintiff did in Top Agent Network, and the court has rejected 14 the argument that the SAC fails to plausibly allege reasonable efforts at secrecy. 15 16 17 18 Accordingly, the trade secret misappropriation claim is not subject to dismissal because of allegations describing the disclosure of confidential information to third parties. iii. Inadequate Allegations of Misappropriation In its final challenge to the misappropriation claim, Facebook argues it must be dismissed 19 because Plaintiffs have not articulated what trade secrets allegedly provided to Facebook were 20 actually misappropriated. As the court understands it, Facebook advocates for a level of pleading 21 requiring the plaintiff to specifically identify in a complaint the mechanism of misappropriation 22 for each and every asserted trade secret. The court disagrees that Rule 8 requires that type of 23 detail. See Eclectic Props., 751 F.3d at 996. 24 Here, the SAC contains enough factual information to provide Facebook with “fair notice” 25 of how and when it allegedly misappropriated all of the trade secrets described in that pleading, 26 such that additional allegations on that topic are not mandated by Rule 8. The current allegations 27 28 12 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 adequately inform Facebook of what is asserted against it for the purpose of proceeding with 2 discovery. 3 4 Since all of its arguments are unsuccessful, Facebook’s motion to dismiss the misappropriation of trade secrets claim will be denied. 5 B. 6 Plaintiffs allege that Facebook violated § 43(a) of the Lanham Act by falsely claiming that Lanham Act 7 it and its contractors performed the architectural, engineering, and design services that led to the 8 RDDC. Facebook moves to dismiss this claim on two grounds. First, it argues that § 43(a) does 9 not prohibit the copying of ideas. Second, it argues the SAC is devoid of facts alleging a 10 commercial use. Facebook is correct on both points. United States District Court Northern District of California 11 Section 43(a) of the Lanham Act imposes liability on “[a]ny person who, on or in 12 connection with any goods or services . . . uses in commerce any word, term, name, symbol, or 13 device, or any combination thereof, or any false designation of origin, false or misleading 14 description of fact, or false or misleading representation of fact,” which is likely to confuse or 15 deceive as to the origin of those goods and services. 15 U.S.C. § 1125(a). This language is broad 16 enough to permit “reverse passing off” claims, where “[t]he producer misrepresents someone 17 else’s goods or services as his own.” Dastar v. Twentieth Century Fox Film Corp., 539 U.S. 23, 18 28-30 (2003). But it also has two notable and important limitations. 19 First, the Supreme Court has held that the phrase “origin of goods” only “refers to the 20 producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, 21 or communication embodied in those goods.” Id. at 37. This is because the protections of the 22 Lanham Act “were not designed to protect originality or creativity” in the same way as copyright 23 and patent laws. Id. (emphasis preserved). 24 Second, the Lanham Act only applies in circumstances involving a “commercial 25 transaction” in which “the trademark is being used to confuse potential consumers.” Bosley Med. 26 Inst., Inc. v. Kremer, 403 F.3d 672, 676 (9th Cir. 2005). Indeed, “‘the Lanham Act seeks to 27 28 13 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 prevent consumer confusion that enables a seller to pass off his goods as the goods of another . . . . 2 Trademark infringement protects only against mistaken purchasing decisions and not against 3 confusion generally.’” Id. at 677 (quoting Lang v. Ret. Living Publ’g Co., Inc., 949 F.2d 576, 4 582-83 (2d Cir. 1991)) (emphasis preserved). 5 These limitations fatally undermine Plaintiffs’ “reverse passing off” claim. Though they 6 argue the claim is based on a misrepresentation about the origin of the services needed to create 7 the BladeRoom technology rather than the technology itself, Plaintiffs fail to allege or 8 convincingly argue exactly how Facebook is offering those services in a commercial transaction, 9 such that there is opportunity for consumers to make “mistaken purchasing decisions” of those services. Id. at 679 (“[T]he appropriate inquiry is whether [the defendant] offers competing 11 United States District Court Northern District of California 10 services to the public.”) (emphasis preserved). The conclusory allegation that Facebook 12 “competes with BRG as a data center design provider and innovator” does not provide that 13 explanation and, in any event, is not entitled to a presumption of truth. SAC, at ¶ 148. Nor do the allegations describing how Facebook has publicly shared its designs assist in 14 15 that regard. See, e.g., id. at ¶ 85 (“Facebook claims to share its data center designs and 16 information openly with the public . . . .”). Even if it is true as Plaintiffs allege that Facebook 17 made a public disclosure in an effort to reduce its data center costs, and even assuming that sort of 18 effort can satisfy the Lanham Act’s “commercial transaction” requirement, there is no allegation 19 that Facebook publicly shared any related services with that same motivation.3 20 Since the allegations of falsely-designated services do not support a “reverse passing off” 21 theory, the only other allegations relevant to the claim are those stating that Facebook has falsely 22 asserted the origin of the RDDC method. But those allegations, which are focused on 23 misrepresentation in connection with an idea or concept rather than on a good or service, are 24 25 26 27 28 For this reason, Plaintiffs’ comparison of their allegations to those examined by the Seventh Circuit in M. Arthur Gensler Jr. & Assocs. v. Strabala, 764 F.3d 735 (2014), is ineffective. The limited facts discussed in the opinion indicate that the defendant, an architect, was actually offering services in connection with the alleged misrepresentation. 14 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 3 1 2 equally insufficient under the holding of Dastar. For these reasons, Plaintiffs have not stated a plausible claim for a violation of § 43(a) of 3 the Lanham Act. Though the court doubts Plaintiffs can ever do so in light of the factual scenario 4 described in the SAC, it will nonetheless dismiss the claim with leave to amend to allow them an 5 opportunity to restate the claim if they believe they can. See Krainski v. Nevada ex rel. Bd. of 6 Regents of Nevada Sys. of Higher Educ., 616 F.3d 963, 972 (9th Cir. 2010) (“Dismissal without 7 leave to amend is improper unless it is clear, upon de novo review, that the complaint could not be 8 saved by any amendment.”). 9 10 C. Unfair Competition Law The Unfair Competition Law (“UCL”) prohibits business practices that are unlawful, United States District Court Northern District of California 11 unfair, or fraudulent. Cal. Bus. & Prof. Code § 17200. “Its purpose ‘is to protect both consumers 12 and competitors by promoting fair competition in commercial markets for goods and services,’” 13 and its language is framed broadly in service of that purpose. Kwikset v. Super. Ct., 51 Cal. 4th 14 310, 320 (2011) (quoting Kasky v. Nike, Inc., 27 Cal.4th 939, 949 (2002)). 15 Two of the UCL’s three “prongs” are relevant to Plaintiffs’ claim. The first is the 16 “unlawful” prong, which “borrows violations of other laws and treats them as independently 17 actionable.” Daugherty v. Am. Honda Motor Co., Inc., 144 Cal. App. 4th 824, 837 (2006). 18 “Virtually any law - federal, state or local - can serve as a predicate for an action” under the 19 UCL’s unlawful prong. Smith v. State Farm Mut. Ins. Co., 93 Cal. App. 4th 700, 718 (2001). The 20 second is the “unfair” prong. California courts have struggled to define exactly what constitutes 21 an “unfair” business practice, and often apply different tests depending on whether the action is 22 involves consumers or competitors. Drum v. San Fernando Valley Bar Assn., 182 Cal. App. 4th 23 247, 253 (2010). But any standard that is applied must accomplish the UCL’s inclusive purpose, 24 which authorizes a cause of action to “a person who has suffered injury in fact and has lost money 25 or property as a result of the unfair competition.” Cal. Bus. & Prof. Code § 17204. 26 27 28 Facebook moves to dismiss Plaintiffs’ claim under the “unlawful” prong of the UCL 15 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 because it relies on the allegations underlying the CUTSA and Lanham Act claims, which it 2 argues also fail. Because Plaintiffs’ CUTSA claim survives this motion, so does its UCL claim to 3 the extent it is based on those same allegations. As to the claim under the “unfair” prong, Facebook argues it is deficient because Plaintiffs 5 do not allege they are consumers or competitors of Facebook in the area of data center technology. 6 Though Facebook cites cases, including this court’s prior dismissal order, that ostensibly support 7 such a limitation on who can bring claim for “unfair” practices, further review of the relevant 8 authority reveals that this type of categorical restriction is inappropriate given the UCL’s 9 comprehensive purpose. Notably, nothing in the UCL’s text limits claims only to consumers or 10 competitors, though both types of plaintiffs can certainly qualify under its language. See In re 11 United States District Court Northern District of California 4 Pomona Valley Med. Grp., 476 F.3d 665, 675 (9th Cir. 2007) (“As the California courts have 12 explained, the unfair competition statute is not limited to ‘conduct that is unfair to competitors.’”). 13 Instead, the UCL more broadly requires the plaintiff demonstrate a loss of money or property as a 14 result of unfair competition. Kwikset, 51 Cal. 4th at 322. 15 Plaintiffs’ claim under the “unfair” prong endures under this more liberal examination. 16 Plaintiffs list in the SAC several practices that are plausibly unfair, including allegations that 17 Facebook released information related to the BladeRoom technology through OpenCompute, 18 which they also allege damaged their licensing markets and emboldened their competitors. The 19 court finds these allegations sufficiently describe how Plaintiffs lost money as a result of 20 Facebook’s purportedly unfair business practices. And though Facebook suggests otherwise, this 21 conduct describes much more than a breach of a contract. 22 In addition, the court rejects Facebook’s argument that the UCL claim is preempted by 23 CUTSA. This form of preemption applies to a claim “based on the same nucleus of facts as the 24 misappropriation of trade secrets claim for relief.” K.C. Multimedia, Inc. v. Bank of America 25 Tech. & Operations, Inc., 171 Cal. App. 4th 939, 954 (2009). A claim is not preempted, however, 26 “if it is based upon alleged facts beyond trade secret misappropriation.” Titan Global LLC v. 27 28 16 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 Organo Gold Int’l, Inc., No.: 12-CV-2104-LHK, 2012 U.S. Dist. LEXIS 171484, at *30, 2012 WL 2 6019285 (N.D. Cal. Dec. 2, 2012). Here, Plaintiffs’ UCL allegations - in particular those alleging 3 Facebook’s public disclosure of Plaintiffs’ technology - go well beyond those that constitute the 4 acts of trade secret misappropriation. Therefore, the UCL claim is not preempted by CUTSA. 5 D. 6 Facebook moves to dismiss the breach of contract claim, at least as asserted by Bripco, Breach of Contract 7 because it was not a party to the non-disclosure agreement between BRG and Facebook. Though 8 that is true, Bripco’s breach of contract claim is not subject to dismissal for that reason because a 9 “‘contract made by an agent for an undisclosed principal is for most purposes the contract of the principal and it may sue . . . thereon,’” unless the principal is excluded by the terms of the 11 United States District Court Northern District of California 10 agreement. Total Recall Techs. v. Luckey, 2016 U.S. Dist. LEXIS 5659, at *11, 2016 WL 199796 12 (N.D. Cal. Jan. 16, 2016) (quoting Tom Trading, Inc. v. Better Blue, Inc., 26 Fed. Appx. 733, 735 13 (9th Cir. 2002)). Here, the terms of the non-disclosure agreement do not exclude Bripco. Furthermore, the 14 15 fact that Bripco licensed its trade secrets to BRG, who in turn revealed that information to 16 Facebook under the alleged protections of a non-disclosure agreement, at least implies that BRG 17 was acting in the capacity as Bripco’s agent during the transaction. See Pearson Educ., Inc. v. 18 Alahmad, No. 2:12-cv-2936-KJM-CKD, 2013 U.S. Dist. LEXIS 53991, at *15, 2013 WL 19 1641533 (E.D. Cal. Apr. 16, 2013) (citing Parrish v. Nat’l Football League Players Ass’n, 534 F. 20 Supp. 2d 1081, 1097 (N.D. Cal. 2007)). Because it is still plausibly pled, Facebook’s second 21 attempt to dismiss the breach of contract claim will be denied. 22 IV. 23 ORDER Based on the foregoing, Facebook’s Motion to Dismiss (Dkt. No. 114) is GRANTED IN 24 PART and DENIED IN PART. The motion is GRANTED as to the third cause of action for 25 violation of § 43(a) of the Lanham Act, which is DISMISSED WITH LEAVE TO AMEND. The 26 motion is DENIED in all other aspects. 27 28 17 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS 1 To be clear, Plaintiffs are permitted leave to amend only the claim for violation of the 2 Lanham Act, and any amended complaint must be filed on or before February 28, 2017. 3 Plaintiffs may not add new claims or new parties solely by virtue of this order. 4 5 If no amended complaint is filed by February 28, 2017, Facebook shall file an Answer to the SAC on or before March 15, 2017. 6 7 8 9 10 IT IS SO ORDERED. Dated: February 10, 2017 ______ __________ __ EDWARD J. DAVILA United States District Judge ___________ 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 18 Case No.: 5:15-cv-01370-EJD ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION TO DISMISS

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.