Innospan Corp v. Intuit et al, No. 3:2010cv04422 - Document 123 (N.D. Cal. 2011)

Court Description: ORDER DENYING IN PART AND GRANTING IN PART MOTION FOR LEAVE TO FILE A THIRD AMENDED COMPLAINT by Judge Alsup granting in part and denying in part 79 Motion for Leave to File; granting in part and denying in part 99 Motion to Amend/Correct ; (whalc1, COURT STAFF) (Filed on 3/9/2011)

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Innospan Corp v. Intuit et al Doc. 123 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 No. C 10-04422 WHA INNOSPAN CORP., 11 For the Northern District of California United States District Court 10 12 13 Plaintiff, v. 15 INTUIT, INC., MINT SOFTWARE, INC., SHASTA VENTURES GP, LLC, AARON PATZER, JASON PUTORTI, TOD FRANCIS and DOES 1–20, 16 ORDER DENYING IN PART AND GRANTING IN PART MOTION FOR LEAVE TO FILE A THIRD AMENDED COMPLAINT Defendants. 14 / 17 18 INTRODUCTION 19 In this trademark infringement action, plaintiff Innospan Corporation moves for leave to 20 file a third amended complaint. For the reasons stated below, the motion to file a third amended 21 complaint is DENIED IN PART and GRANTED IN PART. 22 STATEMENT 23 In 2005, Hong-Seok Kim founded Mint Communications, Inc., the predecessor to plaintiff 24 Innospan Corporation (referred to herein as “Mint Com”). Mint Com was engaged in high-speed 25 internet solutions and IT consulting services (Third Amd. Compl. ¶¶ 18, 19). In 2005, Mint Com 26 allegedly hired a graphic designer, May Guo, to develop a logo (id. at ¶ 20). The logo depicts the 27 word “mint” in dark green; a stylized mint leaf tops the letter “I” in the word “mint.” Plaintiff 28 Dockets.Justia.com 1 Innospan Corporation and its related companies have been using the “mint” mark continuously 2 since July 2005. 3 In 2006, John Park, an attorney who represented Mint Com, sent Mint Com’s business Shasta employee Jason Pressman. The e-mail was sent “as a means to open a potential 6 investment discussion with Shasta” (id. at ¶ 25). The e-mail contained a disclaimer within its 7 automated signature which read: “this e-mail message is intended for the personal use of the 8 recipient(s) named above . . . this message may be . . . privileged and confidential . . . if you are 9 not an intended recipient, you may not review, copy or distribute.” The following phrase was 10 printed at the bottom of each page of the business plan: “This document contains confidential 11 For the Northern District of California plans via e-mail to defendant Tod Francis, managing director of Shasta Ventures GP, LLC, and to 5 United States District Court 4 and proprietary information that belongs exclusively to Mint Communications, Inc.” 12 The business plan was forwarded to Rob Coneybeer of Shasta for review. In 13 February 2006, Coneybeer contacted Kim to request another copy of the business plan. Kim 14 replied with a short e-mail with the business plan attached. Kim’s e-mail stated: “I would like to 15 ask you not to share our information with anybody or any [venture capitalists]” (id. at ¶ 30). 16 Plaintiff alleges that Coneybeer replied but did not object to or disagree with the request for 17 confidentiality. Subsequently, Kim met with Coneybeer. At the meeting, Coneybeer allegedly 18 expressed interest in the “mint” mark. Kim sent an additional version of the business plan, 19 marked with a proprietary stamp, in May 2006. 20 Ultimately, Shasta declined to invest in Mint Com around May 2006. About a year later, 21 Shasta invested in defendant Mint Software, Inc., an unrelated business devoted to providing free 22 online personal financial services (id. at ¶¶ 35, 36). Defendant MSI has used several different 23 mint marks in connection with this business between 2006 and 2010. Defendant Intuit, Inc. 24 purchased MSI in 2009. 25 In 2007, MSI hired Jason Putorti to work on its logo design. Plaintiff alleges that 26 “immediately after Rob Coneybeer of Shasta first met with Aaron Patzer [CEO] of Mint Soft,” 27 Mr. Putorti “suddenly changed” the design to one identical to the claimed mark (id. at ¶ 38). 28 Innospan alleges that Shasta sent the business plans, without permission or authorization, to MSI 2 1 and that MSI subsequently used the plans “in connection with the creation of” their own logo (id. 2 at ¶¶ 63, 64). 3 In September 2010, plaintiff filed suit against defendants in the Santa Clara County 4 Superior Court, reciting seven claims: (1) conversion (against Intuit, MSI, and Shasta); 5 (2) infringement of unregistered mark (against Intuit and MSI); (3) common law misappropriation 6 and unfair competition (against Intuit and MSI); (4) state and common law misappropriation and 7 unfair competition (against Shasta); (5) state statutory unfair competition (against, Intuit, MSI and 8 Shasta); (6) declaratory relief (against Intuit and MSI); and (7) unjust enrichment (against MSI 9 and Shasta). Shasta, Intuit, and MSI removed the action to federal court and brought motions to dismiss on all claims. 11 For the Northern District of California United States District Court 10 A December 2010 order granted motions to dismiss on two of the seven claims: 12 (1) conversion and (2) unjust enrichment. The order gave leave to amend the deficient claims 13 (Dkt. No. 73 at 7, 8). Plaintiff requested further clarification. The clarification order specified 14 that plaintiff’s claim for conversion was dismissed without leave to amend as a matter of law 15 (Dkt. No. 77 at 1). Plaintiff then moved for leave to file a second amended complaint. 16 At the hearing regarding plaintiff’s second amended complaint, plaintiff’s attorney 17 revealed that he had failed to bring all cognizable claims as a result of his misunderstanding of the 18 clarification order (Dkt. No. 98 at 11). Due to this confusion, the Court gave plaintiff one final 19 opportunity to plead its best case. A subsequent January 2011 order instructed plaintiff to “plead 20 factual support for the claims with specificity . . . Pleading generalized legal theories will not be 21 adequate. The burden is on plaintiff to demonstrate an ability to make viable pleadings, and this 22 will be plaintiff’s last chance to do so” (Dkt. No. 96 at 1, 2). 23 Pursuant thereto, plaintiff now moves for leave to file a third amended complaint, reciting 24 thirteen claims: (1) breach of implied contract (against Shasta); (2) conversion of business plans 25 (against Shasta, Intuit and MSI); (3) resulting trust (against Shasta); (4) negligence (against 26 Shasta); (5) infringement of an unregistered trademark (against Intuit and MSI); (6) copyright 27 infringement (against Intuit and MSI); (7) contributory Lanham Act infringement (against Aaron 28 Patzer, Jason Putorti and Tod Francis); (8) contributory copyright infringement (against Aaron 3 1 Patzer, Jason Putorti and Tod Francis); (9) common law misappropriation and unfair competition 2 (against Intuit and MSI); (10) aiding and abetting (against Shasta and Jason Putorti); (11) 3 violation of California Business and Professions Code § 17200; (12) declaratory relief (against 4 Intuit and MSI) and (13) unjust enrichment (against Shasta, Intuit and MSI). 5 6 ANALYSIS 1. REQUEST FOR JUDICIAL NOTICE 7 FRE 201 provides, “[a] judicially noticed fact must be one not subject to reasonable 8 dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or 9 (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.” A court may take judicial notice of documents “whose contents are 11 For the Northern District of California United States District Court 10 alleged in a complaint and whose authenticity no party questions, but which are not physically 12 attached to the [plaintiff’s] pleading.” In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 13 (9th Cir. 1999) (citation omitted). 14 Defendant Shasta seeks judicial notice of Exhibit A, attached to the declaration of 15 Margaret Branick-Abilla (Dkt. No. 108-1). Exhbit A is a series of e-mails between Innospan 16 predecessor Mint Com and Shasta. Plaintiff cites these e-mails in its third amended complaint but 17 does not attach them to the complaint. Plaintiff does not oppose Shasta’s request or question the 18 authenticity of the exhibit. As Exhibit A was previously attached to the sworn declaration of 19 plaintiff’s founder, there is no question as to the authenticity of the document. Because the e- 20 mails’ contents are cited in the complaint and there is no question as to their authenticity, the 21 request for judicial notice is GRANTED. This order takes judicial notice of defendant Shasta’s 22 Exhibit A. 23 2. AMENDED CLAIMS 24 Plaintiff seeks to amend the previously dismissed claims for (1) conversion and (2) unjust 25 enrichment. FRCP 15(a)(2) states that a court should freely give leave to amend when justice so 26 requires. Leave to amend may be denied, however, if the proposed amendment is futile or would 27 be subject to dismissal. Saul v. United States, 928 F2d 829, 843 (9th Cir. 1991). 28 4 1 A. Conversion of Business Plans (against Shasta, Intuit and MSI) 2 Under California law, a claimant must plead three elements to state a claim for 3 conversion: (1) ownership or right to possession of personal property; (2) a defendant’s wrongful 4 interference with the claimant’s possession; and (3) damage to the claimant. PCO, Inc. v. 5 Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, 150 Cal. App. 4th 384, 394 (Cal. 6 Ct. App. 2007). Additionally, a claimant in a conversion action must prove that it did not consent 7 to the defendant’s exercise of dominion over its property. Bank of New York v. Fremont General 8 Corp., 523 F.3d 902, 914 (9th Cir. 2008). grounds that the conversion tort does not extend to intangible intellectual property rights in 11 For the Northern District of California A December 2010 order dismissed plaintiff’s conversion of trademark claim on the 10 United States District Court 9 trademark (Dkt. No. 73 at 3). Instead, the order found that the Lanham Act is the “appropriate 12 legal avenue for trademark infringement, not conversion” (id. at 4). The order dismissed the 13 conversion claim. A subsequent order for clarification specified that the conversion claim was 14 dismissed without leave to amend (Dkt. No. 77 at 1). 15 Despite the clear and repeated rejection of this theory, plaintiff nevertheless proposes 16 another claim for conversion. Plaintiff now alleges that Shasta converted trade secrets consisting 17 of Mint Com’s “business plans, business planning documents, and product plans” all of which 18 were marked with the mint mark (Dkt. No. 99 at 7). 19 Defendants argue that “the proposed amendment still relies on the premise that trademarks 20 can be the subject of a conversion claim” (Intuit Opp. 9, 10). This order agrees. By changing the 21 object of the conversion from “trademark” to “business plans,” plaintiff seeks to anchor its 22 intangible trademark to physical documents. Plaintiff attempts to side-step the fact that intangible 23 intellectual property cannot be subject to conversion as a matter of law. Additionally, plaintiff 24 ignores the specific instructions of the clarification order that plaintiff itself requested. 25 Plaintiff insists that a claim for conversion of business plans is legally supported. In 26 TeraRecon v. Fovia, the plaintiff properly pled conversion of business plans containing trade 27 secrets. 2006 U.S. Dist. LEXIS 48833 at *26–28 (N.D. Cal. July 6, 2006) (Wilken, J.). 28 TeraRecon is not binding; further, it is distinguishable. In that decision, the plaintiff alleged that 5 1 the defendants converted its trade secrets including “business plans and other corporate planning 2 documents; and product plans.” Id. at *31. In the instant action, plaintiff alleges that defendants 3 converted its trade secrets, comprised of “business plans, business planning documents and 4 product plans” (Dkt. No. 99 at 7). Plaintiff does not, however, set forth any facts indicating that 5 the business plans contained trade secrets. Under California law: 6 ‘Trade secret’ means information . . . that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 7 8 9 CAL. CIV. CODE § 3426. Plaintiff does not, for instance, allege that the business plans derived 10 therefore, misplaced. For the Northern District of California United States District Court economic value from being generally unknown. Plaintiff’s reliance on TeraRecon is, 11 12 As the December 2010 order stated, courts within the Ninth Circuit have yet to find 13 “intangible intellectual property rights in a trademark” (Dkt. No. 73 at 3). Since TeraRecon, 14 “subsequent California cases addressing the application of the conversion tort to intangible 15 intellectual property have suggested that this theory should not be expanded to displace other, 16 more suitable law.” Tethys Bioscience, Inc. v. Mintz, et al., No. 09-5115 CW, 2010 WL 2287474, 17 at *7 (N.D. Cal. June 4, 2010) (Wilken, J.) (citation omitted). Again, the more suitable law in the 18 instant action is the Lanham Act. The December 2010 order dismissed the conversion claim 19 without leave to amend because the deficiencies in the complaint could not possibly be cured by 20 amendment. So too here. Innospan’s motion for leave to amend this claim is DENIED. 21 B. Unjust Enrichment (against Shasta and Jason Putorti) 22 The basic elements of unjust enrichment are the “receipt of a benefit and [the] unjust 23 retention of the benefit at the expense of another.” See Lectrodryer v. SeoulBank, 77 Cal. App. 24 4th 723, 726 (Cal. Ct. App. 2000). The December 2010 order found that “a claim for unjust 25 enrichment is properly pled as a claim for a contract implied-in-law” (Dkt. No. 73 at 7). A 26 contract implied-in-law arises where “no actual agreement between the parties occurred, but 27 where a duty is imposed by equity to prevent injustice.” 66 Am. Jur. 2d Restitution and Implied 28 Contracts § 6 (2010). It “does not lie when an enforceable, binding agreement exists defining the 6 1 rights of the parties.” Paracor Fin., Inc. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th 2 Cir. 1996). In California, “restitution may be awarded in lieu of breach of contract damages when 3 the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective 4 for some reason.” McBride v. Boughton, 123 Cal. App. 4th 379, 388 (Cal. Ct. App. 2004). Thus, 5 in order to properly state a claim for unjust enrichment, Innospan would have to either (1) allege 6 that the parties’ rights were not squarely set out in a binding agreement, or (2) allege that an 7 express contract was procured by fraud or was ineffective for some reason. 8 Innospan alleges that there was no binding written or oral agreement between plaintiff and 9 any of the defendants which would have squarely set forth the parties’ rights. In fact, “there were no agreements between Shasta and MintCom/Innospan or between [MSI]/Intuit and 11 For the Northern District of California United States District Court 10 MintCom/Innospan” (Third Amd. Compl. ¶ 124). Defendants argue that plaintiff cannot cure the 12 claim by merely admitting that there was no contract (Intuit Opp. 11). Not so. Plaintiff alleges 13 that there were no agreements setting forth the rights of the parties; this is sufficient to plead a 14 contract implied-in-law. The Court cannot tell yet whether the actual circumstances would 15 warrant implying a duty in equity to prevent injury. As the action moves forward, we will see 16 whether the circumstances are compelling enough to compel the exercise of equity. 17 Defendant Shasta argues that since the misappropriation claim was dismissed as to Shasta, 18 the proposed amendment, which rests on the misappropriation claim, should be denied as to 19 Shasta (Dkt. No. 106 at 22, 23). The possibility of unjust enrichment relief, however, does not 20 rest on any one claim. Rather, at the end, the Court must consider whether the circumstances, in 21 their totality, warrant such relief. At least for purposes of preserving it as a mode of possible 22 relief, the motion to amend the unjust enrichment claim is GRANTED. 23 3. 24 NEW CLAIMS Plaintiff also moves to add new claims for (1) breach of implied contract; (2) resulting 25 trust; (3) negligence; (4) contributory trademark infringement; (5) copyright infringement; 26 (6) contributory copyright infringement; and (7) aiding and abetting. 27 28 Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” A plaintiff’s obligation to provide the 7 1 grounds of his entitlement to relief requires more than “labels and conclusions, and a formulaic 2 recitation of the elements of a cause of action will not do . . . . Factual allegations must be enough 3 to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 127 S. Ct. 4 1955, 1964–65 (2007) (citations omitted). A complaint must proffer “enough facts to state a 5 claim for relief that is plausible on its face.” Id. at 1986–87. 6 In the instant action, the pleading requirement is further heightened by the Court’s 7 January 2011 order requiring plaintiff to “plead factual support for the claims with specificity. . . . 8 Pleading generalized legal theories will not be adequate. The burden is on plaintiff to 9 demonstrate an ability to make viable pleadings, and this will be plaintiff’s last chance to do so” (Dkt. No. 96 at 1, 2). 11 For the Northern District of California United States District Court 10 A. 12 Plaintiff would add a claim for an implied-in-fact contract to keep certain information 13 confidential. A contract implied-in-fact arises when the assent of the parties is manifested by 14 conduct rather than words. This claim fails. The only mention of confidentiality in the 15 January 31 e-mail appeared in the e-mail’s automated signature which read: “this e-mail message 16 is intended for the personal use of the recipient(s) named above . . . this message may 17 be . . . privileged and confidential . . . if you are not an intended recipient, you may not review, 18 copy or distribute.” This automated signature did not, however, create a binding contract to keep 19 the contents confidential. The purpose of such a signature is merely to advise the recipient that 20 the communication is potentially privileged. While an implied contract is created through 21 conduct rather than words, there must be intent to contract. There is no meeting of the minds or 22 intent to contract based on this boilerplate disclaimer. Thus, there can be no implied-in-fact 23 contract based on the January 31 e-mail. 24 Breach of Implied Contract (Against Shasta) Plaintiff alternatively argues that the implied-in-fact contract was created in the 25 February 2006 e-mail in which plaintiff requested: “I would like to ask you not to share our 26 information with anybody or any [venture capitalists].” By the time plaintiff made this request, 27 however, Coneybeer had already received the business plan from Mint Com’s counsel in the 28 January 31 e-mail. By plaintiff’s own admission, the February 2006 e-mail merely contained a 8 1 “condensed version” of the business plan that was already in Coneybeer’s possession. Plaintiff 2 cannot expect to retroactively attach a duty of confidentiality where none existed before. 3 It is trickery to send an unsolicited business plan to someone the sender thinks is a 4 potential business investor and then to foist confidentiality duties on that recipient without his 5 agreement in advance. If the sender wants to keep the information confidential, he must extract 6 the promise to do so before revealing the alleged crown jewels. Because Shasta’s receipt of the 7 initial business plan was not conditioned on any agreement of confidentiality, this order holds that 8 the subsequent e-mail did not create an implied-in-fact contract. This order rejects plaintiff’s 9 theory of retroactive bootstrapping. Plaintiff argues that because the business plan itself was marked as “proprietary” and 11 For the Northern District of California United States District Court 10 “confidential,” defendant implicitly agreed to maintain confidentiality (Dkt. No. 114 at 3). A rote 12 stamp cannot, in and of itself, create an implied-in-fact contract. Thus, this argument too must 13 fail. Again, plaintiff should have extracted a promise up front rather than to trust the crown 14 jewels to chance and litigation. 15 The Ninth Circuit has made clear that there must be bargained-for consideration for an 16 implied contract to exist: “[t]he party claiming breach must show that, in return for the promise, it 17 conferred some benefit the other party was not already entitled to receive, or suffered some 18 prejudice it was not already bound to endure.” Kremen v. Cohen, 337 F.3d 1024, 1028 (9th 19 Cir. 2003) (citing CAL. CIV. CODE § 1605). Plaintiff argues that it conferred a benefit upon 20 Shasta when it sent the business plan and that Shasta was “never entitled to receive” this benefit 21 (Dkt. No. 114 at 3). Plaintiff alternatively argues that Mint Com “suffered some prejudice” when 22 it sent Shasta the second business plan. For the following reasons, these arguments fail. 23 First, plaintiff says that Shasta was not entitled to receive the business plan — but 24 plaintiff sent Shasta the business plan freely and voluntarily in hopes that it would inspire Shasta 25 to invest in Mint Com. In other words, plaintiff had no intent to confer a benefit on Shasta — 26 rather, plaintiff was soliciting Shasta. Second, plaintiff does not allege what exact benefit Shasta 27 allegedly derived from the business plan; it merely parrots the language of the Kremen decision. 28 Third, plaintiff vaguely alleges that Mint Com “spent resources” to send the second business plan. 9 1 This is simply not credible. Once again, Mint Com voluntarily chose to send the second business 2 plan. Plaintiff cannot now charge defendant for whatever expenses it incurred in doing so. 3 Plaintiff’s motion as to the breach of implied contract claim is DENIED. 4 B. 5 Plaintiff states a claim for a “resulting trust.” A resulting trust is generally not a claim, 6 rather it is “an equitable remedy designed to prevent unjust enrichment and to ensure that legal 7 formalities do not frustrate the original intent of the transacting parties.” 76 Am. Jur. 2d. 8 Trusts § 135 (2010). Some California courts, however, have allowed parties to bring a claim for a 9 resulting trust. See, e.g., Fidelity Nat’l Title Ins. Co. v. Schroeder, 179 Cal.App.4th 834, 850 11 For the Northern District of California United States District Court 10 Resulting Trust (against Shasta) (Cal. Ct. App. 2009). Plaintiff states that, despite having voluntarily sent business plans to Shasta, it never 12 intended for Shasta to take “beneficial interests in any information or the business plans itself” 13 and that a resulting trust should be imposed in the interest of justice (Dkt. No. 99 at 7). 14 Defendants argue that in order to create a resulting trust, the parties must have the intent to create 15 a trust. True, “a resulting trust carries out and enforces the inferred intent of the parties.” Lloyds 16 Bank California v. Wells Fargo Bank, 187 Cal.App.3d 1038, 1042 (Cal. Ct. App. 1986). Plaintiff 17 does not allege that the parties had any intent to create a trust. Instead, plaintiff maintains that 18 lack of intent does not bar the imposition of a resulting trust under Lloyds Bank; plaintiff is 19 plainly mistaken. See also Calistoga Civic Club v. City of Calistoga, 143 Cal. App. 3d 111, 117 20 (Cal. Ct. App. 1983). The language of those decisions unequivocally supports the opposing view. 21 A trust implied without regard for the parties’ intent is properly pled as a constructive trust. 22 13 Witkin, Summary 10th Trusts, § 1, p. 566 (2005). Plaintiff’s resulting trust claim, 23 therefore, fails. 24 Again, before sending the supposed crown jewels for inspection, plaintiff should have 25 extracted a promise of confidentiality or trust up front, rather than merely teeing up a lawsuit. 26 The motion to add this claim is DENIED. 27 28 10 1 C. Negligence (against Shasta) 2 Presumably due to error on plaintiff’s part, paragraphs 70–74, which fall under the 3 subheading “negligence,” merely read “[deleted]” (Third Amd. Compl. ¶¶70–74). It is unclear 4 whether plaintiff meant to bring a negligence claim and accidentally deleted it or if plaintiff 5 considered bringing a negligence claim and decided against it. Plaintiff has failed to offer any 6 explanation for the deleted portions, despite having the opportunity to do so in the reply brief. As 7 such, leave to add the new claim for negligence is DENIED. 8 D. Contributory Trademark Infringement (against Aaron Patzer, Jason Putorti, and Tod Francis) 9 Liability for trademark infringement and unfair competition may extend beyond those 10 tortious activity. See William R. Warner & Co. v. Eli Lilly & Co., 265 U.S. 526, 530–31 (1924) For the Northern District of California United States District Court who directly infringe, to include those contributory infringers who knowingly cooperate in 11 12 (applying common law concept of contributory infringement). If a manufacturer or distributor 13 intentionally induces another to infringe a trademark, or has reason to know is engaged in 14 trademark infringement, the manufacturer or distributor is contributorily responsible for any harm 15 done as result of the deceit. Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982). 16 Plaintiff asserts that defendants Aaron Patzer, Jason Putorti and Tod Francis are 17 contributorily liable for trademark infringement. Defendant Tod Francis is the managing director 18 of Shasta. Defendant Aaron Patzer is the CEO of MSI. Jason Putorti is the former lead designer 19 at MSI. Plaintiff argues that each of these defendants is liable because “[A] corporate officer or 20 director is, in general, personally liable for all torts which he authorizes or directs or in which he 21 participates, notwithstanding that he acted as an agent of the corporation and not on his own 22 behalf.” Comm. for Idaho’s High Desert, Inc. v. Yost, 92 F.3d 814, 823 (9th Cir. 1996). Plaintiff 23 fails, however, to allege any facts demonstrating that defendants “authorized,” “directed,” or 24 “participated” in trademark infringement. Instead, plaintiff offers unsubstantiated accusations 25 and conclusory theories, none of which proves persuasive. For example, plaintiff asserts that “it 26 is more likely than not that Mr. Francis was the guru director” and “actively advised MSI in its 27 adoption and use of the infringing trademarks” (Dkt No. 99 at 10). While a court “must take all 28 11 1 of the factual allegations in the complaint as true,” it is “not bound to accept as true a legal 2 conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949–50 (2009). 3 Defendants aver that they had no knowledge of plaintiff’s trademark prior to the 4 independent creation of the MSI mint leaf logo. Plaintiff offers no facts to rebut defendants’ 5 sworn declarations. Defendants also submit substantial exhibits detailing the creative process by 6 which MSI adopted the mint leaf logo. Particularly persuasive are the documents detailing the 7 development of MSI’s mark between January and September of 2007 (Dkt. No. 111). These 8 documents include e-mails, mock-ups and numerous iterations of the mint mark as well as 9 detailed discussions between defendants and other MSI employees collaborating to develop 11 For the Northern District of California United States District Court 10 the mark. Tellingly, plaintiff offers no evidence to refute these documents. Instead, plaintiff 12 suggests that defendants have withheld or tampered with documents in the discovery process 13 (Dkt. No. 113 at 2). This order has considered the evidence plaintiff offers to support this 14 contention and found it to be mere speculation and supposition without proof. This order, 15 therefore, disregards plaintiff’s unfounded accusations, in favor of the proof that does exist. 16 Plaintiff’s reliance on Louis Vuitton Malletier S.A. v. Akanoc Solutions is misplaced 17 because the decision not binding; further, it is distinguishable. 2010 U.S. Dist. 18 LEXIS 85266 JW, at *50 (N.D. Cal. March 19, 2010) (Ware, J.). That decision dealt with the 19 question of whether a corporate officer could be held personally liable for tortious acts committed 20 in his professional capacity. The decision found that the corporate officer was liable because he 21 had “complete control,” “principal decision-making authority,” and “was clearly the ‘central 22 figure’ in the challenged corporate activity.” Id. at *51–52. Plaintiff offers no facts to support 23 the contention that Mr. Patzer, Mr. Francis or Mr. Putorti ever had this level of control or input. 24 Defendants’ mere involvement in the development of the mark is insufficient to establish 25 “complete control” or “principal decision-making authority.” Based on the foregoing, plaintiff’s 26 motion to add a claim for contributory trademark infringement is DENIED. 27 28 12 1 E. 2 In order to state a claim for direct copyright infringement, plaintiff must satisfy two 3 requirements: “(1) [plaintiff] must show ownership of the allegedly infringed material and 4 (2) [plaintiff] must demonstrate that the alleged infringers violated at least one exclusive right 5 granted to copyright holders under 17 U.S.C. § 106.” A & M Records, Inc. v. Napster, 6 Inc., 239 F.3d 1004, 1013 (9th Cir. 2001). 7 Copyright Infringement (against Intuit and MSI) To demonstrate ownership, plaintiff offers evidence that its application for copyright 8 registration is pending with the U.S. Copyright Office (Dkt. No. 28-1 at 46). Defendant Intuit 9 argues that plaintiff has not demonstrated ownership but, by defendant’s own admission, this prong is satisfied where plaintiff has completed an application to register its subject matter with 11 For the Northern District of California United States District Court 10 the copyright office. See Cosmetic Ideas, Inc. v. IAC/InteractiveCorp, et al., 606 F.3d 612, 621 12 (9th Cir. 2010). Thus, plaintiff satisfies the first prong. 13 Plaintiff has also satisfied the second prong by alleging that defendant has violated its 14 right to reproduce the protected subject matter (Third Amd. Compl. ¶ 91). Defendant Intuit 15 argues that plaintiff has failed to allege specific facts supporting any copying of the work. In 16 order to demonstrate copying, a party must show: (1) that the works in question are substantially 17 similar in their protected elements and (2) that the infringing party had access to the copyrighted 18 work. Rice v. Fox Broad. Co., 330 F.3d 1170, 1174 (9th Cir. 2003) (citation omitted). Plaintiff 19 does not merely allege that the disputed logos are “similar”; plaintiff alleges that they are 20 “identical” (Third Amd. Compl. ¶ 40). Plaintiff also alleges that defendant Intuit “had access” to 21 the claimed mark through Tod Francis of Shasta. Thus, the second prong is satisfied and plaintiff 22 has adequately stated a claim for copyright infringement. 23 Defendant Intuit seeks to undermine plaintiff’s claim by suggesting that the mint mark is 24 not copyrightable subject matter. Because that issue is currently pending before the U.S. 25 Copyright Office, this order does not consider whether plaintiff’s mark meets the criteria for 26 copyrightable subject matter. Plaintiff’s motion to add a new claim for copyright infringement 27 is GRANTED. 28 13 1 F. Contributory Copyright Infringement (against Aaron Patzer, Jason Putorti, and Tod Francis) 2 “One infringes contributorily by intentionally inducing or encouraging direct 3 infringement.” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 930 (2005). 4 Our court of appeals has interpreted this to mean that “one contributorily infringes when he 5 (1) has knowledge of another’s infringement and (2) either (a) materially contributes to or 6 (b) induces that infringement. Perfect 10, Inc., v. Visa Int’l Serv., Ass’n, 494 F.3d 788, 795 (9th 7 Cir.2007). To state a claim for contributory infringement, plaintiff must allege facts showing that 8 defendant induced, caused, or materially contributed to the infringement. Id. at 796. 9 Plaintiff fails to allege facts demonstrating that defendants induced, caused, or materially 10 example, plaintiff states that Aaron Patzer “intentionally induced and/or encouraged Mint Soft to For the Northern District of California United States District Court contributed to the alleged infringement. Instead, plaintiff merely asserts legal conclusions. For 11 12 directly infringe” (Third Amd. Compl. ¶ 94). Plaintiff offers no support whatsoever for this 13 allegation. These conclusory allegations of law are insufficient to state a claim. 14 Plaintiff again alleges that Mr. Patzer, Mr. Francis and Mr. Putorti are personally liable as 15 corporate officers relying on Louis Vuitton, a decision that is not binding and has been 16 distinguished above. Because plaintiff fails to allege facts showing that defendants induced, 17 caused, or materially contributed to copyright infringement, the motion to add a claim for 18 contributory copyright infringement is DENIED. 19 G. Aiding and Abetting (against Shasta and Jason Putorti) 20 Aiding and abetting focuses on whether a defendant knowingly gives “substantial 21 assistance” to someone who performs wrongful conduct. 15A C.J.S. Conspiracy § 3 (2010). 22 Liability may be imposed on one who aids and abets the commission of an intentional tort if the 23 person (1) knows the other’s conduct constitutes a breach of duty and gives substantial assistance 24 or encouragement to the other to so act or (2) gives substantial assistance to the other in 25 accomplishing a tortious result and the person’s own conduct, separately considered, constitutes a 26 breach of duty to the third person. Casey v. U.S. Bank Nat’l Ass’n, 127 Cal. App. 4th 1138, 144 27 (Cal. Ct. App. 2005). 28 14 1 Plaintiff does not adequately state a claim for aiding and abetting. First, it is not clear does not allege facts supporting the contention that Shasta and Mr. Putorti gave substantial 4 assistance or encouragement to MSI in their adoption of the mark. True, “aiding and abetting 5 liability under California law, as applied by the California state courts, requires a finding of actual 6 knowledge, [but] not specific intent.” Marcelos v. Dominguez, 2008 U.S. Dist. LEXIS 91155, 7 at *25 (N.D. Cal, July 18, 2008). Still, in Marcelos, the complaint “describe[d] in detail the 8 involvement” of the parties accused of wrongdoing. Id. at *26. By contrast, here the complaint 9 merely hints at misconduct. Plaintiff alleges that “immediately after Rob Coneybeer of Shasta 10 first met with Aaron Patzer [CEO] of Mint Soft,” Mr. Putorti “suddenly changed” the design to 11 For the Northern District of California which of the thirteen claims defendants are alleged to have aided and abetted. Second, plaintiff 3 United States District Court 2 one identical to the claimed mark (Third Amd. Compl. ¶ 38). This general inference of 12 wrongdoing is insufficient, particularly in light of this court’s admonishment to “plead factual 13 support for the claims with specificity” (Dkt. No. 96 at 1, 2). As to the aiding and abetting claim, 14 the motion is DENIED. 15 4. 16 OTHER CLAIMS Defendant Shasta argues that plaintiff’s claim for statutory unfair competition under 17 Section 17200 fails for reasons cited in their previous motion to dismiss. The Section 17200 18 claim survived the motion to dismiss and plaintiff has made no substantive amendments to this 19 claim. Thus, an opposition to a motion for leave to file a third amended complaint is not the 20 appropriate avenue for attacks on this claim. The same is true of the common law unfair 21 competition claim and the claim for declaratory relief, both of which survived the motion to 22 dismiss and have not been substantively altered in the third amended complaint. Defendant can 23 bring a summary judgment motion on these claims in the future. 24 5. 25 OTHER PROPOSED AMENDMENTS Defendant Intuit contends that plaintiff’s proposed third amended complaint contains 26 amendments that are not addressed or justified in plaintiff’s motion (Intuit Opp. 22). Intuit takes 27 issue specifically with two proposed changes. 28 15 1 First, in the first amended complaint, plaintiff stated that Innospan founder Kim 2 developed the mark in June 2005. By contrast, the proposed change states that Mint Com 3 developed the mark and subsequently assigned the mark to Innospan. Defendant states that 4 “plaintiff must explain the fundamental change in allegations before it is allowed leave to amend 5 them” (Intuit Opp. 22). Not so. Under the Federal Rules, plaintiff is permitted to plead 6 inconsistently, and “[t]he inconsistency may lie either in the statement of the facts or in the legal 7 theories adopted.” 2A MOORE’S FEDERAL PRACTICE 8.32, at 8-214 to 8-215 (2d ed. 1994). 8 9 Relying on Reddy v. Litton, defendant argues that the amended complaint may only allege “other facts consistent with the challenged pleading.” Reddy v. Litton Indus., Inc., 912 F.2d 291 (9th Cir. 1990) (citing Schreiber Distrib. Co. v. Serv Well Furniture Co., 806 F.2d 1393, 1401 11 For the Northern District of California United States District Court 10 (9th Cir. 1986). Defendant, however, misconstrues the case law. Reddy cited to Schreiber for the 12 proposition that “[i]f a complaint is dismissed for failure to state a claim, leave to amend should 13 be granted unless the court determines that the allegation of other facts consistent with the 14 challenged pleading could not possibly cure the deficiency.” This language does not support 15 defendant’s contention that plaintiff can only allege consistent facts in the proposed third 16 amended complaint. Based on the foregoing, the proposed factual amendment is GRANTED. 17 Second, plaintiff adds to the prayer for relief, requesting a judicial declaration that “the 18 trademark that Defendant Mint Software Inc.’s registered with the USPTO is invalid.” Plaintiff 19 also requests a court order directing the USPTO to “invalidate, withdraw and revoke” MSI’s 20 trademark. Plaintiff does not, however, allege any facts in the complaint that would justify these 21 requests. Additionally, despite the January 2011 order’s clear instruction, plaintiff fails to address 22 these amendments in its memorandum. The proposed amendments to the prayer for relief 23 are DENIED. 24 25 CONCLUSION The motion for leave to file a third amended complaint is DENIED IN PART and GRANTED 26 IN PART. Specifically, the motion is DENIED as to the proposed claims for conversion of business 27 plans, breach of implied contract, resulting trust, negligence, contributory trademark 28 infringement, contributory copyright infringement, aiding and abetting and the proposed changes 16 1 to the prayer for relief. The motion is GRANTED as to the proposed claims for unjust enrichment 2 and copyright infringement, as well as the proposed factual amendment. 3 The following claims for relief remain in the case: (1) violation of Section 17200; 4 (2) unregistered trademark infringement; (3) declaratory relief; (4) unjust enrichment; 5 (5) copyright infringement; and (6) common law unfair competition and misappropriation. As 6 stated in the January 2011 order, plaintiff now has exhausted its opportunity to plead new claims 7 or amend existing claims. Plaintiff must file the third amended complaint in strict conformity 8 with this order — with no further embellishments — by NOON ON FRIDAY, MARCH 18, 2011. If 9 plaintiff attempts to slip unauthorized material in, as it did with the conversion claim discussed above, then counsel will likely be sanctioned. Counsel should get cracking and complete 11 For the Northern District of California United States District Court 10 discovery on time. There will be no further motions to dismiss. Defendants must serve their 12 answers by NOON ON MONDAY, MARCH 28, 2011. 13 14 IT IS SO ORDERED. 15 16 Dated: March 8, 2011 WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 17

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