Conversion Logic, Inc. v. Measured, Inc. et al, No. 2:2019cv05546 - Document 46 (C.D. Cal. 2019)
Court Description: ORDER GRANTING DEFENDANTS' MOTION TO DISMISS 21 by Judge Otis D. Wright, II: Court GRANTS Defendants Motion to Dismiss certain theories of breach in the second, third, and forth causes of action. Where leave to amend was granted, Conversion has 14 days from the date of this Order to amend its complaint. Defendants must file an answer to the amended complaint, if one is filed, or the remaining claims in the Complaint as it stands in 28 days from the date of this Order. (lc)
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Conversion Logic, Inc. v. Measured, Inc. et al Doc. 46 O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 Case No: 2:19-cv-05546-ODW (FFMx) CONVERSION LOGIC, INC., 12 Plaintiff, 13 v. 14 15 MEASURED, INC., et al., ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS [21] Defendants. 16 17 18 I. INTRODUCTION 19 Plaintiff Conversion Logic, Inc. (“Conversion”) brings an action against 20 Measured, Inc. (“Measured”), Trevor Testwuide (“Testwuide”), Madan Bharadwaj 21 (“Bharadwaj”), and Antonio Magnaghi (“Magnaghi”), (collectively, “Defendants”). 22 (See Compl., ECF No. 1.) Pending before the Court is Defendants’ Motion to Dismiss 23 for failure to state a claim. (Mot. to Dismiss (“Mot.”), ECF No. 21.) For the reasons 24 that follow, the Court GRANTS Defendants’ Motion.1 25 26 27 28 Having carefully considered the papers filed in connection to the instant Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 Dockets.Justia.com II. 1 BACKGROUND 2 Plaintiff Conversion Logic offers software and services analyzing which 3 marketing efforts generate a return on investment. (Compl. ¶ 1.) Testwuide was 4 Conversion’s CEO, and Bharadwaj and Magnaghi were Conversion’s formal advisors. 5 (Compl. ¶ 3.) While at Conversion, Testwuide, Bharadwaj, and Magnaghi had access 6 to Conversion’s scientific and technical trade secrets, including “confidential and 7 proprietary information related to Conversion[’s] machine-learning-based techniques, 8 methodologies, and data-science models.” (Compl. ¶ 4.) The three also had access to 9 Conversion’s sales-related trade secrets including “confidential customer and sales 10 information such as current and prospective customer lists, contact information, 11 pricing information, and contracts.” 12 Conversion had entered into several contracts, which included various convenants, 13 with Testwuide, Bharadwaj, and Magnaghi.2 (Compl. ¶ 4.) Between 2014 and 2017, 14 In 2017, Testwuide left Conversion. (Compl. ¶ 10.) Within weeks, Testwuide 15 and Bharadwaj started Measured, allegedly to compete against Conversion. (Compl. 16 ¶ 10.) 17 secrets to help build Measured. (Compl. ¶ 10.) Testwuide and Bharadwaj also 18 allegedly solicited Conversion’s customers and former employees. (Compl. ¶ 11.) Defendant Magnaghi joined them and allegedly used Conversion’s trade 19 Testwuide entered into a Confidentiality Agreement. (Compl. ¶ 290; Vu Decl. 20 Ex. A (“Confidentiality Agreement”), ECF No. 21-2.) The agreement indicated that 21 Testwuide’s obligation to maintain the confidentiality of Conversion’s trade secrets 22 “will survive expiration or termination of [the Confidentiality Agreement].” (Compl. 23 ¶ 293.) Conversion alleges that Testwuide breached the Confidentiality Agreement by 24 25 Defendants attach copies of the agreements referenced in the Complaint. (Decl. of Jacqueline Vu (“Vu Decl.”) Exs. A–F, ECF No. 21-2.) As Conversion does not object to the consideration of the agreements (Opp’n to Mot (“Opp’n”) 1 n.1, ECF No. 30), and the Court may consider agreements incorporated by reference to the Complaint, the Court considers the six agreements in the disposition of this motion. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) (stating courts may consider documents incorporated by reference). 2 26 27 28 2 1 obtaining and refusing to return technical and sales-related trade secrets, soliciting 2 former employees and current advisors of Conversion to join Measured, soliciting 3 clients of Conversion such as AARP, and failing to disclose and assign rights of 4 discoveries and inventions. (Compl. ¶¶ 294–299.) In August 2017, Testwuide also 5 entered into a Separation Agreement with Conversion. (Compl. ¶ 300; Vu Decl. Ex. 6 B (“Separation Agreement”), ECF No. 21-2.) Conversion alleges that Testwuide 7 breached the Separation Agreement by misappropriating technical and sales-related 8 trade secrets, soliciting advisors and former employees of Conversion to work for 9 Measured, and disparaging Conversion both publicly and privately. (Compl. ¶¶ 303– 10 11 305.) Regarding Bharadwaj, on June 15, 2015, he entered into an Advisor Agreement 12 with Conversion. (Compl. ¶ 308; Vu Decl. Ex. C (“Advisor Agreement”), ECF 13 No. 21-2.) 14 Conversion’s technical and sales-related trade secrets, soliciting employees and 15 advisors of Conversion to become employees of Measured, developing and failing to 16 disclose and assign inventions, and providing services to Measured. (Compl. ¶¶ 314– 17 318.) Bharadwaj also entered into two subsequent consulting agreements: the First 18 Consulting Agreement on September 24, 2015 and the Second Consulting Agreement 19 on June 1, 2016. 20 Agreement”), ECF No. 21-2; Vu Decl. Ex. E (“Second Consulting Agreement”), ECF 21 No. 21-2.) 22 Agreement by misappropriating Conversion’s technical and sales-related trade secrets 23 and failing to disclose and assign “inventions, discoveries, improvements, and 24 copyrightable works.” (Compl. ¶¶ 324, 325, 330, 331.) Conversion alleges that 25 Bharadwaj also breached the Second Consulting Agreement by co-founding Measured 26 and offering his services to Conversion’s competition, and by soliciting Conversion’s 27 former employees, advisors, and clients. (Compl. ¶¶ 332–335.) He allegedly breached the Advisor Agreement by misappropriating (Compl. ¶¶ 319, 326; Vu Decl. Ex. D (“First Consulting Bharadwaj allegedly breached both the First and Second Consulting 28 3 1 Regarding Magnaghi, on August 26, 2014, he signed the Advisory Services 2 Letter Agreement. (Compl. ¶ 338; Vu Decl. Ex. F (“Advisor Services Agreement”), 3 ECF No. 21-2.) Magnaghi allegedly breached the Advisor Services Agreement by 4 misappropriating technical and sales-related trade secrets, failing to disclose and 5 assign inventions and other discoveries to Conversion, and providing services to 6 Measured. (Compl. ¶¶ 346–348.) 7 Plaintiff Conversion brings suit against Defendants alleging thirteen causes of 8 action.3 (See Compl. ¶¶ 265–424.) Defendants move to dismiss the breach of contract 9 claims against Testwuide, Bharadwaj, and Magnaghi—the second, third and fourth 10 claims respectively. (See Mot. 1.) III. 11 LEGAL STANDARD 12 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 13 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 14 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To 15 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 16 requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. 17 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 18 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 19 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual matter, 20 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 21 Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). 22 The determination of whether a complaint satisfies the plausibility standard is a 23 “context-specific task that requires the reviewing court to draw on its judicial 24 3 25 26 27 28 The thirteen claims are: (1) Misappropriate of Trade Secrets against all Defendants; (2) Breach of Contract against Testwuide; (3) Breach of Contract against Bharadwaj; (4) Breach of Contract against Magnaghi; (5) Unjust Enrichment and Restitution against Measured; (6) Fraud against Testwuide; (7) Concealment against Testwuide; (8) Conversion against Testwuide; (9) Conversion against Bharadwaj; (10) Conversion against Magnaghi; (11) Intentional Interference with a Contractual Relationship against all Defendants; (12) Intentional Interference with Prospective Economic Advantage against all Defendants; and (13) Breach of Fiduciary Duty against Testwuide. (Compl. ¶¶ 265–424.) 4 1 experience and common sense.” Id. at 679. A court is generally limited to the 2 pleadings and must construe all “factual allegations set forth in the complaint . . . as 3 true and . . . in the light most favorable” to the plaintiff. Lee v. City of Los Angeles, 4 250 F.3d 668, 679 (9th Cir. 2001). But a court need not blindly accept conclusory 5 allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. 6 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 7 Where a district court grants a motion to dismiss, it should generally provide 8 leave to amend unless it is clear the complaint could not be saved by any amendment. 9 See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 10 1025, 1031 (9th Cir. 2008). IV. 11 DISCUSSION 12 Defendants move to dismiss Conversion’s second, third and fourth claims 13 primarily because clauses in the six agreements at issue violate the California 14 Business and Professions Code section 16600. (See Mot.9.) Conversion preliminarily 15 argues that, even if those clauses were invalid, the motion should be denied as 16 Conversion has adequately plead alternative unchallenged grounds for a breach of 17 contract against Testwuide, Bharadwaj, and Magnaghi. (Opp’n 3–5.) Conversion 18 alternatively asserts that the clauses are in fact valid under current California law. 19 (Opp’n 6–20.) The Court addresses the arguments in turn. 20 A. Alternative Allegations of Breach 21 Conversion asserts that the Defendants’ motion is procedurally unsound, 22 because it challenges some but not all of Conversion’s allegations of breach of 23 contract. 24 challenge its allegations that Testwuide, Bharadwaj, and Magnaghi misappropriated 25 its trade secrets or that Testwuide disparaged Conversion. (Opp’n 4.) Defendants 26 reply that they “challenge [only] the legal sufficiency of Conversion’s breach of 27 contract claims to the extent that they are based on restrictive covenants” in 28 contravention to the law. (Opp’n 3–5.) For instance, Conversion notes that Defendants do not (Reply in Supp. of Mot. (“Reply”) 3, ECF No. 31.) 5 1 Defendants further contend that allegations based on the unlawful contract terms are 2 separable from those allegations seeking to enforce valid contractual provisions. 3 (Reply 4.) 4 Where a complaint “groups together multiple theories and operative facts 5 which, if independently found to be valid, could each give rise to a right enforceable 6 in the courts,” each claim should be addressed separately. Doe v. Napa Valley Unified 7 Sch. Dist., No. 17-CV-03753-SK, 2018 WL 4859978, at *3 (N.D. Cal. Apr. 24, 2018) 8 (internal quotation marks omitted); Bautista v. Los Angeles Cty., 216 F.3d 837, 840 9 (9th Cir. 2000) (stating claims founded on a separate transaction or occurrence are 10 properly stated in separate counts). Here, Conversion alleges several theories of breach based on several different 11 12 contracts for each Defendant. (See Compl. ¶¶ 289–349.) Each theory involves 13 different transactions or occurrences. For instance, allegations showing Testwuide 14 made disparaging remarks about Conversion would show a breach of the covenant not 15 to make such comments but would fail to demonstrate breach of the employee or 16 customer non-solicitation provisions. However, sufficient proof of either theory may 17 adequately give rise to a breach of contract claim. Accordingly, the Court may 18 consider each theory independently in determining whether Conversion has 19 sufficiently alleged a claim and dismiss allegations and theories that are barred by the 20 California Business and Professions Code section 16600. See Hill v. Opus Corp., 841 21 F. Supp. 2d 1070, 1082 (C.D. Cal. 2011) (dismissing a claim to the extent that the 22 plan is covered and preempted by ERISA while permitting the claim based on non- 23 ERISA plans to proceed). The Court now addresses whether certain provisions in the 24 contracts are void. 25 B. Non-Solicitation of Employees or Consultants Provision 26 Defendants move to dismiss the breach of contract claim against Testwuide and 27 Bharadwaj on the basis of the non-solicitation of employees or consultant clauses in 28 6 1 the Confidentiality Agreement and the Second Consulting Agreement because the 2 clauses are void. (Mot. 11, 20.) 3 California Business and Professions Code section 16600 provides that, 4 “[e]xcept as provided in this chapter, every contract by which anyone is restrained 5 from engaging in a lawful profession, trade, or business of any kind is to that extent 6 void.” Cal. Bus. & Prof. Code § 16600. The California Supreme Court has found that 7 “section 16600 prohibits employee noncompetition agreements unless the agreement 8 falls within a statutory exception.” Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937, 9 942 (Cal. 2008). In AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., the 10 California appellate court extended Edwards to find that a provision for 11 “nonsolicitation of employee” was void under section 16600. 28 Cal. App. 5th 923, 12 935 (2018). Though California appellate courts have distinguished AMN’s application 13 of Edwards, such courts have consistently concurred with AMN’s reasoning as applied 14 to employee agreements. Quidel Corp. v. Superior Court, 39 Cal. App. 5th 530, 539 15 (2019). 16 supported by the policy: California courts have consistently declared this provision an 17 expression of public policy to ensure that every citizen shall retain the right to pursue 18 any lawful employment and enterprise of their choice.” Id. (internal quotation marks 19 omitted). “The strict application of section 16600 in the employment context is 20 In AMN, the court found void the “broadly worded provision prevent[ing] 21 individual defendants, for a period of at least one year after termination of 22 employment with [plaintiff], from either ‘directly or indirectly’ soliciting or recruiting, 23 or causing others to solicit or induce, any employee of [plaintiff].” AMN, 28 Cal. 24 App. 5th at 936. 25 defendants from practicing their chosen profession because it restricted who the 26 employee could work with in their new position. Id. The Court reasoned that the provision restrained individual 27 The provisions at issue here mirror the provision discussed in AMN. The 28 Confidentiality Agreement prohibits Testwuide for a period of one year following his 7 1 termination from Conversion from “directly or indirectly” “employing, engaging or 2 soliciting” any employee who was an employee of Conversion during the 3 twelve-month period immediately prior to the termination of his employment. 4 (Confidentiality Agreement ¶ 5.) 5 Bharadwaj was prohibited during the period he was providing services to Conversion 6 and for one year thereafter from “directly or indirectly, anywhere in the world, 7 solicit[ing] for employment . . . any Conversion employee.” (Second Consulting 8 Agreement ¶ 10.) As in AMN, both provisions restrain Testwuide and Bharadwaj, 9 respectively, from engaging in their profession by restricting who may work alongside 10 them. Furthermore, the provision in the Confidentiality Agreement not only bars 11 soliciting Conversion’s employees, but also prohibits hiring Conversion’s 12 employees—a stricter restraint than in AMN. The Second Consulting Agreement states that 13 Conversion relies on Loral Corp. v. Moyes to assert that certain non-solicitation 14 provisions may be valid and argues that Edwards did not supersede the reasoning in 15 Moyes. 174 Cal. App. 3d 268 (1985); (Opp’n 6–7.) However, in AMN, the court 16 stated that it “doubt[ed] the continuing viability of Moyes post-Edwards” as “the 17 Edwards court found section 16600 ‘unambiguous’ . . . [and] ‘if the Legislature 18 intended the statute to apply only to restraints that were unreasonable or overbroad, it 19 could have included language to that effect.’” AMN, 28 Cal. App. 5th at 938–39 20 (citing Edwards, 44 Cal. 4th at 950). Districts courts following AMN have declined to 21 follow Moyes. See WeRide Corp. v. Kun Huang, 379 F. Supp. 3d 834, 852 (N.D. Cal. 22 2019) (citing Barker v. Insight Glob., LLC, No. 16-CV-07186-BLF, 2019 WL 23 176260, at *3 (N.D. Cal. Jan. 11, 2019)). “[T]he Court is not persuaded that the 24 secondary ruling in AMN finding the non-solicitation provision invalid under [Moyes] 25 based upon those employees’ particular job duties abrogates or limits the primary 26 holding [which finds the clause violates section 16600].” Id. (emphasis added). 27 The Court finds the non-solicitation provisions at issue here at least as broad as 28 those in AMN. Further, given the strong California public policy to permit lawful 8 1 employment and enterprise of choice, the Court finds the provisions void. 2 Accordingly, the Court GRANTS without leave to amend the motion to dismiss the 3 second and third causes of action as to the breach of contract claims premised on the 4 employee non-solicitation provisions. 5 C. Non-Solicitation of Customers Provision 6 Defendants also move to dismiss the breach of contract claims against 7 Testwuide and Bharadwaj premised on the non-solicitation of customers provisions in 8 the Confidentiality Agreement and the Second Consulting Agreement because 9 Defendants contend the clauses are void. (Mot. 12, 20.) The Confidentiality 10 Agreement states that Testwuide may not directly or indirectly solicit for a period of 11 one year after the termination of his employment from Conversion “a customer or 12 vendor or prospective customer or vendor of the Company.” 13 Agreement ¶ 5.) The Second Consulting Agreement states that Bharadwaj may not, 14 during the period he was providing services to Conversion and for one year thereafter, 15 “directly or indirectly, anywhere in the world, solicit . . . companies known to 16 [Bharadwaj] to be a customer or prospective customer of Conversion.” (Second 17 Consulting Agreement ¶ 10.) 18 The previously-discussed public policy apply here. (Confidentiality In Dowell v. Biosense 19 Webster, Inc., the California Court of Appeals found the customer non-solicitation 20 provision at issue “broadly worded” and restrained the employees from practicing 21 their chosen profession, similar to other provisions that had been found void under 22 section 16600. 179 Cal. App. 4th 564, 575 (2009). 23 Conversion contends that the customer non-solicitation provisions are valid 24 under the trade-secret exception. (Opp’n 10–12.) 25 “doubt[ed] the continued viability of the common law trade secret exception to 26 covenants not to compete,” although it did not reach that question. Dowell, 179 Cal. 27 App. 4th at 575. The court ultimately determined that the provision at issue was so 28 broadly worded that it could not be “narrowly tailored or carefully limited to the 9 However, the Dowell court 1 protection of trade secrets.” Id. (finding overbroad the provision prohibiting 2 employees “for a period of 18 months postemployment from soliciting any business 3 from, selling to, or rendering any service directly or indirectly to any of the accounts, 4 customers or clients with whom they had contact during their last 12 months of 5 employment.”) 6 In The Ret. Grp. v. Galante, the California appellate court took a different 7 approach. In Galante, the court recognized the “tension” between section 16600 and 8 trade secrets but nonetheless found that section 16600 barred a court from 9 “specifically enforcing . . . a contractual clause purporting to ban a former employee 10 from soliciting former customers.” 176 Cal. App. 4th 1226, 1238 (2009). The court 11 reasoned that the conduct was enjoinable because it was wrongful independent of the 12 contractual provision and arose to tortious heights by using trade secret information to 13 identify and solicit existing customers. Id. at 1237 (“[I]t is not the solicitation of the 14 former employer’s customers, but is instead the misuse of trade secret information, 15 that may be enjoined.”) 16 tortiously misuses trade-secrets, and Conversion alleges a separate cause of action for 17 misappropriation of its trade secrets against all three individual defendants. (See 18 Compl. ¶¶ 265–88.) Therefore, the Court does not address that analysis under breach 19 of contract claim. Per Galante, remedy may be granted for conduct that 20 However, as for Conversion’s breach of contract claim, the Court finds as in 21 Dowell, the provisions in the Confidentiality Agreement and the Second Consulting 22 Agreement are overly broad and could not be narrowly construed to protect trade- 23 secrets alone. 24 without leave to amend the motion to dismiss the second and third causes of action 25 as to the breach of contract claims premised on the customer non-solicitation 26 provisions. Accordingly, the Court finds the provisions void and GRANTS 27 28 10 1 D. Non-Competition Provision 2 Defendants move to dismiss the breach of contract claim against Bharadwaj and 3 Magnaghi premised on non-competition clauses in the Second Consulting Agreement 4 and the Advisor Services Agreement because Defendants contend the clauses are void. 5 (Mot. 20, 23.) Per the Second Consulting Agreement, Bharadwaj may not “provide 6 services to companies known to be a customer or a prospective customer of 7 [Conversion] that are directly competitive to Conversion[’s] offerings” while he 8 provides services to Conversion and for one year after he desists. (Second Consulting 9 Agreement ¶ 10.) Magnaghi was allegedly bound by the Advisor Services Agreement 10 which required him to notify Conversion in writing “prior to performing any services 11 for or otherwise participating in a company developing or commercializing new 12 services, methods, or devices which may be competitive with [Conversion].” 13 (Advisor Services Agreement ¶ 9.) 14 Courts have repeatedly found that provisions prohibiting competition violate 15 public policy and are accordingly void. See Dowell, 179 Cal. App. 4th at 575 (finding 16 the customer non-solicitation provision void); Metro Traffic Control, Inc. v. Shadow 17 Traffic Network, 22 Cal. App. 4th 853, 859 (1994) (“Section 16600 has specifically 18 been held to invalidate employment contracts which prohibit an employee from 19 working for a competitor when the employment has terminated . . . .”). However, 20 where a noncompete provision bars competitive conduct while still employed, courts 21 have found them permissible, especially as the prohibition likely protects an 22 employer’s trade secrets. See W. Air Charter, Inc. v. Schembari, No. CV 17-00420- 23 AB (KSx), 2017 WL 10638759, at *8 (C.D. Cal. Oct. 6, 2017) (“[S]ection 7.4 [which 24 prohibits competition during employment] is a provision that is necessary to protect 25 Plaintiff’s trade secrets”); Sevigny v. DG Fastchannel, Inc., No. CV 11-9197 CAS 26 (JEMx), 2011 WL 6149284, at *5 (C.D. Cal. Dec. 12, 2011) (“[Section 16600] is 27 typically applied to invalidate ‘certain far-reaching postemployment covenants not to 28 compete.’”) 11 1 Here, Conversion asserts that Bharadwaj and Magnaghi engaged in competitive 2 conduct in contravention to the noncompete provisions in issue while they were still 3 consulting for Conversion. 4 inconsistent regarding whether Bharadwaj and Magnaghi still consult for Conversion 5 and unclear whether Bharadwaj and Magnaghi were consulting for Conversion when 6 they engaged in the allegedly competitive behavior. (Compare Compl. ¶¶ 329, 341 7 with Compl. ¶¶ 332, 348.) (Opp’n 12.) However, Conversion’s allegations are 8 Accordingly, the Court GRANTS with leave to amend Defendants’ Motion to 9 Dismiss as to the third and fourth causes of action to the extent these breach of 10 contract claims are premised on the non-competition provisions. The Court grants 11 leave to amend to the extent Conversion can plead that Bharadwaj and Magnaghi 12 breached the non-competition provisions while still providing services to Conversion. 13 E. Assignment of Intellectual Property 14 Defendants move to dismiss the breach of contract claim against Testwuide, 15 Bharadwaj, and Magnaghi premised on the assignment clauses in the Confidentiality 16 Agreement, the First and Second Consulting Agreement, and the Advisor Services 17 Agreement because Defendants argue these clauses are void. (Mot. 15, 17, 23.) 18 Intellectual property assignment provisions in employment contracts have been 19 upheld when limited to inventions that are based on the employer’s confidential 20 information. See Winston Research Corp. v. Minnesota Mining & Mfg. Co., 350 F.2d 21 134 (9th Cir. 1965); but see Applied Materials, Inc. v. Advanced Micro-Fabrication 22 Equip. (Shanghai) Co., 630 F. Supp. 2d 1084, 1090 (N.D. Cal. 2009) (striking the 23 assignment clause that targeted any inventions “relate[d] to former employees’ work 24 with [employer]” since such a clause would “encompass[] both inventions based on 25 confidential employer information and inventions relating to former . . . employees’ 26 work in the broad field of semiconductor research and manufacturing”) (internal 27 quotations omitted). “As long [as] the assignment [of ideas and inventions] does not 28 12 1 extend to post-employment work, it is generally enforceable.” Mattel, Inc. v. MGA 2 Entm’t, Inc., 782 F. Supp. 2d 911, 946 (C.D. Cal. 2011). 3 Here, the assignment provision in the Confidentiality Agreement Conversion 4 seeks to enforce against Testwuide states that all inventions shall be the sole and 5 exclusive property of the Company. (Confidentiality Agreement ¶ 3.) “Invention” is 6 defined (in relevant part) as “all Inventions . . . conceived or developed by Employee 7 while employed with the Company or within one (1) year following termination of 8 such employment which relate to or result from the actual or anticipated business, 9 work, research or investigation of the Company or any of its Affiliates.” 10 (Confidentiality Agreement ¶ 3.) This provision not only extends the assignment 11 provision beyond the length of the employment but also includes broad language 12 sweeping up inventions and discoveries unrelated to Conversion’s proprietary 13 information. The Court therefore finds this clause void. Accordingly, the Court 14 GRANTS without leave to amend the motion to dismiss Conversion’s second cause 15 of action against Testwuide on this basis. 16 The First Consulting Agreement between Conversion and Bharadwaj similarly 17 states that “[t]he obligations of [Bharadwaj] set forth in [the section about IP 18 Assignment] (including, without limitation, the assignment obligation) will continue 19 beyond the termination of [Bharadwaj]’s engagement with [Conversion].” 20 Consulting Agreement ¶ 7.6.) As above, the Court finds this clause void as well. 21 Accordingly, the Court GRANTS without leave to amend the motion to dismiss 22 Conversion’s third cause of action against Bharadwaj on this basis. (First 23 The Second Consulting Agreement between the two does not require 24 Bharadwaj to assign his rights beyond termination and instead states that 25 “[i]mmediately upon the end of the Term . . . the consultant will deliver all such files 26 and Work Product to Conversion” and requires Bharadwaj assign rights to inventions 27 created “under or in performing the Services under [the Second Consulting 28 Agreement].” (Second Consulting Agreement ¶¶ 9(b), (c).) As the provision limits 13 1 the assignment requirement to his work as a consultant for Conversion, the Court does 2 not find the provision void. However, the Court GRANTS with leave to amend the 3 motion to dismiss Conversion’s third cause of action against Bharadwaj on this basis, 4 for failure to state a claim as Conversion’s Complaint is devoid of any detail. 5 Conversion simply alleges “Bharadwaj breached the Second Consulting Agreement to 6 the extent that he developed any work product that arose out of or resulted from his 7 performance under the Agreement.” (Compl. ¶ 331.) Conversion fails to allege that 8 Bharadwaj developed a work product without assigning it to Conversion and such 9 bald allegation cannot give adequate notice. Ashcroft, 556 U.S. at 678. 10 Finally, the Advisor Services Agreement Conversion seeks to enforce against 11 Magnaghi states that “[i]nventions . . . conceived or developed by Employee while 12 employed with the Company or within one (1) year following termination of such 13 employment which relate to or result from the actual or anticipated business, work, 14 research or investigation of the Company or any of its Affiliates” shall be assigned to 15 Conversion. (Advisor Services Agreement ¶ 7(a).) Again, this provision not only 16 extends the assignment provision beyond the length of the employment but also 17 includes broad language sweeping up inventions and discoveries unrelated to 18 Conversion’s proprietary information. The Court therefore finds this clause void. 19 Accordingly, the Court GRANTS without leave to amend the motion to dismiss 20 Conversion’s fourth cause of action against Magnaghi on this basis. 21 22 23 24 25 26 27 28 14 V. 1 CONCLUSION 2 For the reasons discussed above, the Court GRANTS Defendants’ Motion to 3 Dismiss certain theories of breach in the second, third, and forth causes of action (ECF 4 No. 21). Where leave to amend was granted, Conversion has 14 days from the date of 5 this Order to amend its complaint. Defendants must file an answer to the amended 6 complaint, if one is filed, or the remaining claims in the Complaint as it stands in 28 7 days from the date of this Order 8 9 IT IS SO ORDERED. 10 11 December 13, 2019 12 13 14 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15
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