JOHN A. KRONSTADT District Judge.
Four separate actions are pending involving some or all of the following parties: Biosuccess Biotech, Co., Ltd., a Cayman Islands corporation, Biosuccess Biotech, Co., Ltd., a Nevada Corporation (collectively "Biosuccess"); Zheng Tao Han ("Han"); and Chi-Ming Wu aka Fred Wu ("Wu"); Rich Pharmaceuticals, Inc. ("RPI"); Imagic, LLC ("Imagic"); Richard L. Chang Holdings LLC ("RLC Holdings"); Ben; and Richard. The claims in each action arise from the same business relationships, disputes and intellectual property. The adverse parties in these proceedings are former business partners who have now established competing businesses based on the same intellectual property.
On May 21, 2014, the Court consolidated two of the pending matters. Dkt. 198. On July 24, 2014, the Court consolidated the two others. Dkt. 213. The Court ordered the parties to re-file in the lead case as to consolidated proceedings, all motions that were pending at that time in any of the four actions. All of the motions were then set for hearing on September 15, 2014. Id. The parties complied and also brought other motions to be heard at that hearing.
At the September 15, 2014 hearing, the Court concluded that the more efficient means of addressing the numerous matters at issue was to issue a tentative, written order for review by the parties. On October 15, 2014, the Court issued its tentative order. Dkt. 372. On October 27, 2014, the Court conducted a hearing with respect to the tentative order, and heard arguments by counsel for the parties. Dkt. 378. The matter was taken under submission. By this Order, final rulings are made with respect to all of the matters at issue.
Richard Chang ("Richard")
Richard, Han, and Wu formed Biosuccess. in 2006. Dkt. 116-3 at 3. Richard and Han began discussing the assignment of the '814 Patent to Biosuccess in August 2006. Dkt. 116-4 at 4. The two signed an agreement with Biosuccess in October 2006 assigning their respective rights and interests in the '814 Patent to Biosuccess (the "October 2006 Agreement"). Dkt. 278-3, Ex. 2. The October 2006 Agreement provided that, at the outset, $1 Million would be paid to Richard and Han as reimbursement for their efforts in connection with the research and development of TPA. That Agreement also provided for another payment of $1 Million to them by February 28, 2007. Dkt. 278-3, Ex. 2 § 3.1. Further, the October 2006 Agreement provided
Richard held the title of Chief Science Officer of Biosuccess and, beginning in 2006, became a member of its Board of Directors. Dkt. 280-1, Ex. A & B. Wu has been the CEO and Chairmen of the Board of Biosuccess since 2006. Dkt. 270-3 ¶ 2. Han has been a director and officer of Biosuccess since 2006. Dkt. 270-2 ¶ 4. Ben Chang ("Ben"), who is Richard's son, began working with Biosuccess in 2006. He served in various roles, including President and Chief Operating Officer. Dkt. 277-2 ¶ 8. The parties dispute the amount of annual compensation promised to Ben when he began working for Biosuccess. Dkt. 281-2 at 1.
The business plan of Biosuccess is "to bring drugs based on TPA to market to treat various diseases, starting with acute myelogenous leukemia ("AML") for patients who were refractory to standard therapy, and moving onwards to other diseases like HIV/AIDS and treating the side effects of stroke and other diseases." Dkt. 116-4 ¶ 4. Biosuccess alleges that it has "developed and compiled valuable research and business data considered trade secrets, as well as other confidential information" related to its research of TPA and AML. Dkt. 203 ¶ 17. Biosuccess alleges that its trade-secret information is contained in various documents and electronic files, and that it "takes great care to maintain the secrecy of its trade-secret and other confidential and proprietary information, and to prevent their disclosure to persons outside [Biosuccess], including requiring employees to sign a non-disclosure agreement and abide by the Employee Handbook." Id. ¶ 18. Both Richard and Ben allegedly had access to these trade secrets and confidential business information. Id.
Biosuccess has been involved with two clinical studies. Each involved the use of its trade secrets and other information involving TPA and the '814 Patent. Id. ¶ 19. Biosuccess has not yet obtained approval of the Food and Drug Administration ("FDA") for any medication related to the '814 Patent. Dkt. 205-2.
Among the disputed matters in these proceedings is whether, in mid-2007, the principals of Biosuccess, including Wu, Han, and Richard, agreed to forgo compensation on an interim basis due to the condition of the financial markets and litigation against the company that was pending in Taiwan. Dkt. 270-3 ¶ 5. Richard denies that he agreed to suspend his salary. Dkt. 277-4 ¶ 5. Biosuccess contends that the company was inactive between late 2007 until mid-2011. Id. ¶¶ 14-16. It is also alleged that, in November 2007, Biosuccess sent a letter to Ben stating that his salary would be reduced due to this inactivity. Id. Ex. K. It is also alleged that in June 2011, Biosuccess renewed its operations after receiving investments from certain third parties. Dkt. 249-1, Ex. I ¶¶ 15-16.
In September 2011, Biosuccess, Richard, and Han allegedly entered into a new assignment agreement with respect to the '814 Patent (the "September 2011 Agreement"). Dkt. 270-3 ¶ 6. It is also alleged that, in conjunction with that Agreement, Richard and Han agreed to forgo unpaid compensation in exchange for being able to retain what had been paid to them collectively pursuant to the October 2006 Agreement. Id.
On January 10, 2013, Richard sent a letter to Wu in which he requested certain Biosuccess corporate records. Dkt. 252-4 ¶ 14. On January 18, 2013, Ben and Richard were terminated by Biosuccess. Dkt. 281-2 at 4; Dkt. 280-2 at 4. The parties dispute whether Biosuccess owed any wages to Ben or Richard at the time each was terminated.
Following his termination by Biosuccess, Ben founded RPI and became its CEO. Dkt. 245-3, ¶ 2. In June 2013, Richard assigned certain rights in the '814 Patent to RPI. Dkt. 64 ¶ 14. Ben alleges that the rights Richard assigned to RPI "are not conflicting with anything that Biosuccess is actually working on or that it has worked on." Id. RPI appointed Richard to its Medical Advisory Board in April 2014. Id., Ex. 13.
RPI states that it is a "biopharmeceutical company focused on the development of its lead product, TPA [], for the treatment of [] AML in refractory patients, and the reversal of physical disabilities resulting from stroke." Dkt. 270-4, Ex. 3. According to a statement on RPI's website, TPA is "protected by an issued `use patent' that gives sole right to the Company to use intravenous administration of TPA for therapeutic purposes." Id., Ex. 9.
RPI and Ben have entered an agreement with a contract research organization, Theragene dba Therinova Development ("Therinova"). That firm has agreed to provide RPI with support in connection with the regulatory process related to its business plans. This will include assistance in the submission of an Investigational New Drug ("IND") application to the FDA with respect to "PD-616," which is an RPI product. Dkt. 270-1 at 3. RPI also imports TPA produced by WuXi AppTec Co., Ltd., which is based in Taiwan. Id. RPI has not yet filed any IND applications with the FDA, nor does it have FDA approval to sell or market any new drug that has been developed by using the claims of the '814 Patent. Id. at 4. Ben suggests that he has filed patent applications in 16 foreign countries and in the United States. Dkt. 270-4, Ex. 14. In April 2014, RPI announced that it had received new financing and would use these funds to "commence manufacturing the drug" and to prepare for the filing of an IND with the FDA. Dkt. 270-4, Ex. 8.
On February 22, 2013, Richard brought an action against Biosuccess seeking declaratory relief in connection with non-provisional patent applications. Dkt. 1. Biosuccess answered the complaint and brought several counterclaims: (i) declaratory relief; (ii) breach of contract for failure to fulfill duties; (iii) breach of contract for misrepresentations in connection with certain international patent applications; (iv) fraud; (v) negligent misrepresentation; (vi) unjust enrichment; and (vii) breach of fiduciary duty. Dkt. 30.
On February 20, 2014, Biosuccess filed a motion for judgment on the pleadings as to
On January 1, 2014, Biosuccess brought an action against Ben, RPI, Imagic, and RLC Holdings. Its complaint presented 13 causes of action: (i) patent infringement; (ii) copyright infringement; (iii) misappropriation of trade secrets; (iv) breach of fiduciary duty; (v) statutory unfair competition; (vi) common law unfair competition; (vii) violation of Cal.Penal Code Section 502; (viii) trespass to chattels; (ix) inducing breach of contract; (x) inducing breach of fiduciary duty; (xi) conversion; (xii) conspiracy; and (xiii) aiding and abetting. Dkt. 203.
On April 2, 2014, the defendants in the action brought a motion to dismiss all of the claims. CV 14-0310, Dkt. 30. On May 16, 2014, the Court denied the motion to dismiss except as to the claim for patent infringement. CV 14-310, Dkt. 38. The dismissal was with leave to amend with "specific allegations as to the claimed infringement to make [Biosuccess's] indirect infringement claims plausible." Id. at 5.
On January 3, 2014, Richard brought an action against Biosuccess, Han, and Wu in the Santa Clara County Superior Court. It presented six causes of action: (i) interference with prospective economic advantage; (ii) securities fraud under California Corporations Code 25400(D); (iii) violation of the California Labor Code; (iv) breach of contract; (v) quantum meruit and (vi) declaratory relief. CV 14-4511, Dkt. 1. On January 28, 2014, the defendants in the action removed the case to the Northern District of California based on diversity jurisdiction. CV 14-4511, Dkt. 1.
Biosuccess and Han brought separate counterclaims against Richard. The first amended counterclaim of Biosuccess included the following causes of action: (i) correction of inventorship; (ii) misappropriation of trade secrets; (iii) breach of fiduciary duty; (iv) unfair competition pursuant to California Business and professions Code section 17200; (v) common law unfair competition; (vi) conversion; and (vii) breach of contract based on an alleged failure to maintain confidentiality. Dkt. 232. Five of these are almost identical to the counterclaims brought in the consolidated case CV 14-0310.
Han's first amended counterclaim asserts the following causes of action: (i) correction of inventorship; (ii) negligent mismanagement; (iii) fraud; and (iv) negligent misrepresentation. Dkt. 233.
On May 7, 2014, the defendants brought a motion to transfer the action to this District. CV 14-4511, Dkt. 33. On May 8, 2014, Richard brought a motion to dismiss the counterclaims because they duplicated the claims brought by the same parties in the action pending here. CV 14-4511, Dkt. 35. On June 4, 2014, the District Court in the Northern District granted the defendant's motion to transfer. CV 14-4511, Dkt. 54.
On January 3, 2014, Ben brought an action in the Santa Clara Superior Court against Biosuccess, Han, and Wu. There, he asserted the following claims: (i) violations of the California Labor Code; (ii) breach
On May 7, 2014, the defendants moved to transfer the action to the Central District. CV 14-4446, Dkt. 24. On May 8, 2014, Ben moved to dismiss the counterclaims because that they duplicated the claims previously brought in this District. CV 14-4446, Dkt. 27. On May 30, 2014, the motion to transfer was granted. CV 14-4446, Dkt. 43.
On May 21, 2014, the Court consolidated the actions designated as CV 13-1340 and CV 14-0310, with CV 13-1340 designated as the lead case. Dkt. 198 at 3. The Court set a trial date of September 30, 2014. Id.
On July 24, 2014, the Court added the actions designated CV 14-4511 and CV 14-4446 to the consolidated proceeding. Dkt. 213. With the consent of the parties, the Court reset the September 30, 2014 trial as a bench trial as to the following issues: (i) which of the two patent assignment agreements is operative (the "Applicable Agreement"); and once that determination is made; (ii)(a) whether Richard can unilaterally cancel, rescind or otherwise terminate the Applicable Agreement without the consent of Han, and (b) whether the transfer of patent rights under section 5.1 of the Applicable Agreement in dependent on the tender of all consideration set forth in section 3.1 (together, "Phase One"). Id.
After the decision by the Court in Phase One, the parties have agreed that they will engage in good faith settlement discussions. Id. The parties were also ordered to file, by October 17, 2014, a joint statement setting forth the schedule for the remaining issues in dispute ("Phase Two"). Id. Except for issues decided in Phase One, after the decision in Phase One is issued, "fact and expert discovery shall reopen as to the claims and counterclaims asserted by all Parties against each other in the Second Phase." Id. If the parties do not settle the matters following the decision in Phase One, a bench trial of the remaining issues will proceed on February 17, 2015. Id.
The Phase One trial was continued to January 20, 2015. Dkt. 376.
The following motions, all of which were originally set for hearing on September 15, 2014, are addressed in this Order:
Pursuant to Fed.R.Civ.P. 8(a), a "pleading that states a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief...." A party may move to dismiss a claim for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). The complaint must state facts sufficient to show that a claim for relief is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The complaint need not contain detailed factual allegations, but must provide more than a "formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. "The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are `merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal citations and quotations omitted). Dismissal is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008).
In considering a motion brought pursuant to Fed.R.Civ.P. 12(b)(6), the court must assume that allegations in the challenged complaint are true and construe the complaint in the light most favorable to the non-moving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-338 (9th Cir. 1996). However, the court need not accept as true allegations that contradict matters properly subject to judicial notice or presented in an exhibit or "allegations that
A motion for summary judgment must be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Facts are material if they affect the outcome of the suit under the substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "[S]ummary judgment will not lie if the dispute about a material fact is `genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. A party seeking summary judgment bears the initial burden of identifying those portions of the record that it contends demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the party meets that burden, the non-moving party must present evidence or otherwise rebut the evidence proffered by the moving party in a manner sufficient to show a triable issue of fact.
Where the moving party will have the burden of proof on an issue at trial, that party must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. See Celotex Corp., 477 U.S. at 331, 106 S.Ct. 2548 (Brennan, J., dissenting). On an issue as to which the nonmoving party will have the burden of proof, the movant can prevail if there is an absence of evidence to support the nonmoving party's claims. See id. If the moving party meets its initial burden, the nonmoving party must set forth "specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250, 106 S.Ct. 2505.
Evidence presented by the parties at the summary judgment stage must be admissible. See Fed.R.Civ.P. 56(c)(2). In reviewing the record, a court does not make credibility determinations or weigh conflicting evidence. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. Rather, it draws all inferences in the light most favorable to the nonmoving party. Id.; see also T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir.1987). Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. See Thornhill Pub. Co., Inc. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 738 (9th Cir.1979).
"If the court does not grant all the relief requested by the motion, it may enter an order stating any material fact — including an item of damages or other relief — that is not genuinely in dispute and treating the fact as established in the case." Fed. R.Civ.P. 56(g).
RPI, Imagic, RLC Holdings, Ben and Richard (collectively in this section, the "Chang Parties"), brought a motion for partial summary judgment in consolidated case CV 14-0310 (in this section, the "Motion"). The Motion addresses the patent infringement claim brought by Biosuccess. Dkt. 253, 254. Biosuccess contends that RPI's use of TPA constitutes infringement of the '814 Patent.
Under 35 U.S.C. § 271(a), "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent." 35 U.S.C. § 271(a). Although the Chang Parties have not made, sold, offered to sell or imported into the United States any invention claimed by the '814 Patent, there is evidence sufficient to raise a triable issue of fact as to whether they have used or imported TPA in a manner that constitutes infringement.
Richard claims to have assigned certain rights under the '814 Patent to RPI. Such an assignment would not itself provide a basis for the claimed infringement. However, RPI's website, which states that RPI is "protected by an issued `use patent' that gives it sole right to the Company to use the intravenous administration of TPA for therapeutic purposes" presents evidence sufficient to create a triable issue of fact as to the claimed infringement. See Auyang Decl., Dkt. 270-4 ¶ 10, Ex. 9.
The claimed infringement of the'814 Patent by the Chang Parties turns on whether their use of TPA falls within the safe harbor exemption of 35 U.S.C. § 271(e)(1) (the "Safe Harbor Exemption").
The present record shows that there is a genuine issue of material fact with respect to whether the use of TPA by the Chang Parties falls within the Safe Harbor Exemption. The First Amended Complaint (in this section, the "FAC") (Dkt. 203), ¶¶ 38-40, alleges that RPI's agreement with Therinova to develop the "US FDA IND Submission Package for Rich Pharmaceutical's product PD-616" is directly related to submitting information to the FDA. The evidence presented provides support for the claim that this occurred. If so, this conduct appears to be within the Safe Harbor Exemption for patent infringement. However, the FAC also claims that RPI imported TPA into the United States through WuXiu and that this conduct is not protected, i.e., falls outside of the Safe Harbor Exemption. FAC ¶¶ 47-49. The Chang Parties have not presented evidence sufficient to establish that this importation of TPA was for the sole purpose of developing information to submit to the FDA.
This case is similar. Biosuccess has presented evidence that supports a claim that RPI has imported and used pharmaceutical TPA for reasons that go beyond seeking FDA approval. RPI's 10-K states that "the Company intends to expand its patents through the addition of indications for use and adding protection in appropriate countries." Id. ¶ 13, Ex. 12. An email written by Ben states that he has filed patent applications in 16 countries and the United States. Id. ¶ 16, Ex. 15. The Chang Parties respond that activities outside of the United States cannot constitute patent infringement and cite Pellegrini v. Analog Devices, Inc., 375 F.3d 1113 (Fed. Cir.2004). This position is unpersuasive. Pellegrini held that components that are manufactured outside the United States and never shipped to or from the United States cannot be "supplie[d] or cause[d] to be supplied in or from the United States"
Biosuccess has also presented evidence that the Chang Parties have begun the manufacturing of a drug in San Diego. This includes press releases of RPI as well as certain presentations that have been made on behalf of the Chang Parties. Id.; Auyang Decl., ¶¶ 8, 16, Ex. 7, 15. Although this manufacturing could relate to seeking FDA approval, the present record shows that there is a triable issue of fact as to that issue. For example, one RPI press release appears to distinguish its manufacturing efforts in San Diego and its work related to the filing of an IND. See Dkt. 270-4, Ex. 8 ("The proceeds from the financing will be used by the Company to commence manufacturing the drug, to engage a Contract Research Organization (CRO) to assist the Company with the preparation and filing of an IND (investigation new drug) submission to the Food and Drug Administration (FDA) ..."). A presentation by RPI includes the statement that among its goals for 2013 was to "manufacture [the] drug in San Diego, USA." Id., Ex. 15.
For all of these reasons, factual issues remain as to whether the conduct of the Chang Parties in their use of the '814 Patent falls within the Safe Harbor Exemption.
"Liability for inducement must be predicated on direct infringement." Limelight Networks, Inc. v. Akamai Technologies, Inc., ___ U.S. ___, 134 S.Ct. 2111, 2114, 189 L.Ed.2d 52 (2014). Because there are factual issues with respect to the claims of direct infringement of the '814 Patent by the Chang Parties, a fortiori, such issues are presented as to the inducement claims.
Both damages and injunctive relief are available as remedies against a party that has infringed a patent. 35 U.S.C. §§ 283-84. Factual issues are presented with respect to whether Biosuccess has a basis to seek such relief if it were shown that the Chang Parties infringed the '814 Patent.
The Chang Parties argue that, as a matter of law, Biosuccess cannot recover lost profits because it is not currently selling, and has never sold, any product that incorporates the '814 Patent. This argument is based on a misstatement of the
There are several recognized methods for calculating a reasonable royalty. One "focuses on the infringer's projections of profit for the infringing product." Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed.Cir.2009). Another, a "more common approach, called the hypothetical negotiation or the `willing licensor-willing license' approach, attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began." Id. That Biosuccess has not stated a precise amount of damages that it may seek does not change this analysis for purposes of the Motion.
"[A] plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006).
Biosuccess is not required to have manufactured or sold products based on the '814 Patent to demonstrate irreparable harm as a result of the alleged conduct of the Chang Parties. This is only one factor to be considered in determining whether such relief is appropriate. See Paice LLC v. Toyota Motor Corp., 504 F.3d 1293, 1303 (Fed.Cir.2007) (denying permanent injunction in part because there was no threat that plaintiff would lose name recognition or market share because it did not actually manufacture any goods). Further, "`traditional equitable principles do not permit such broad classifications' as presuming that a patentee cannot establish irreparable harm based on a patentee's "willingness to license its patents" or `its lack of commercial activity in practicing the patents.'" eBay, 547 U.S. at 393, 126 S.Ct. 1837. Accord Presidio Components, Inc. v. Am. Technical Ceramics Corp., 702 F.3d 1351, 1363 (Fed.Cir.2012) ("Even without practicing the claimed invention, the patentee can suffer irreparable injury. Direct competition in the same market is certainly one factor suggesting strongly the potential for irreparable harm without enforcement of the right to exclude.") ("The district court correctly found [the Patentee's] unwillingness to license favored finding irreparable injury"); Broadcom Corp. v. Qualcomm Inc., 543 F.3d 683, 703 (Fed.Cir.2008) ("Broadcom provided evidence of irreparable harm, despite the fact that it does not currently practice the claimed inventions").
For all of the foregoing reasons, notwithstanding the absence of evidence of sales by Biosuccess, a factual issue is presented with respect to whether the Chang Parties and Biosuccess are in direct competition to develop products. In this setting, that Biosuccess is unwilling to license the '814
The Chang Parties have moved to dismiss portions of the patent infringement claim brought by Biosuccess in the FAC. The arguments presented in support of this motion overlap significantly with those they presented in support of their Motion for Partial Summary Judgment re Patent Infringement Claim. That motion has been denied. Accordingly, the present motion has been largely resolved.
The Chang Parties contend that the allegations by Biosuccess do not meet the Twombly/Iqbal pleading standards. Their position is not persuasive. Biosuccess makes specific allegations that RPI and Ben have provided TPA to third parties, including Dr. Roger Stair, for use in clinical studies. It has also alleged that this conduct infringed claim 1 of the '814 Patent. FAC, Dkt. 203 ¶¶ 64-65. The FAC also identifies those whom Biosuccess contends have been induced by the Chang Parties to infringe the '814 Patent. It then makes clear that the claims of inducement claims are being advanced as to both RPI and Ben. See id.
For all the foregoing reasons, the Motion to Dismiss is DENIED (Dkt. 205) to the extent it is premised on the patent infringement claim brought by Biosuccess.
Biosuccess and Han (collectively in this section, the "Biosuccess Parties") brought separate counterclaims against Richard in the action designated as CV 14-4511. The first amended complaint of (in this section, the "Biosuccess FAC") asserts the following causes of action: (i) correction of inventorship; (ii) misappropriation of trade secrets; (iii) breach of fiduciary duty; (iv) unfair competition under Cal. Bus. and Prof.Code § 17200; (v) unfair competition under California common law; (vi) conversion; and (vii) breach of contract for failing to preserve the confidentiality of certain information. Biosuccess FAC, Dkt. 232. Five of the seven counterclaims in the Biosuccess FAC overlap with the counterclaims brought in CV 14-0310. In an effort to address these duplicative claims efficiently, they are considered together with counterclaims (ii)-(iv) in consolidated case CV 14-0310. Therefore, the Court GRANTS Richard's Motion to Dismiss (Dkt. 234) claims (ii)-(iv) of the Biosuccess FAC, with leave to amend the present complaint in consolidated case CV 14-0310 to include the relevant allegations against Richard and to add him as a party. This means that the arguments made in Richard's Motion to Dismiss as to these five counterclaims are addressed in Section IX, infra.
Han's first amended counterclaims (the "Han FAC") (Dkt. 233) include "General Allegations" that are largely identical to those presented in the Biosuccess FAC. The Han FAC asserts the following causes of action: (i) correction of inventorship; (ii) negligent mismanagement; (iii) fraud; and (iv) negligent misrepresentation. Dkt. 233. Both Han and Richard agree that claims (ii)-(iv) of the Han FAC are substantially similar to the counterclaims brought by Biosuccess in CV 13-1340. Dkt. 234 at 8-9; Dkt. 272 at 10-11; see Dkt. 26. In an effort to address these duplicative claims efficiently, the Court
The Biosuccess FAC and the Han FAC seek to remove Richard as an inventor of the '814 Patent and designate Han as its sole inventor. Dkt. 234 ¶¶ 83-89; Dkt. 233 ¶¶ 83-89. Richard argues that it would be inequitable to allow Biosuccess to seek a correction 14 years after the application was made. Dkt. 234 at 4-5. This position is unpersuasive. Richard cites no supporting authority. Moreover, Richard seeks similar declaratory relief in his sixth cause of action. It seeks a declaration that Han was not a co-inventor of the '814 Patent. Id. 35 U.S.C. § 256 does provide any time limit for issuing a certificate correcting a named inventor error. Therefore, Richard's Motion to Dismiss Count I of the Biosuccess FAC and Count I of the Han FAC (Dkt. 234) is DENIED.
Han, Wu, and the Biosuccess entities (collectively in this section, "the Biosuccess Parties") brought counterclaims against Ben in CV 14-4446. Dkt. 263. Both parties agree that these counterclaims duplicate those brought in CV 14-0310, in which Ben is a party. Dkt. 240 at 3-6; Dkt. 273 at 1. Therefore, Ben's motion to dismiss the counterclaims of the Biosuccess Parties (Dkt. 240) is GRANTED, without prejudice to their being pursued in CV 14-0310.
RPI, Imagic, RLC Holdings, and Ben (collectively in this section the "Chang Parties") brought this motion (in this section, the "Motion") with respect to the First Amended Complaint of Biosuccess (in this section the "FAC") (Dkt. 203) in consolidated case CV 14-0310.
The basis for the Common Law Claims is the confidential and proprietary information that the Chang Parties allegedly misappropriated and used to compete with Biosuccess. The allegations in the FAC related to this alleged use include that the Chang Parties took documents from Biosuccess
"CUTSA provides the exclusive civil remedy for conduct falling within its terms, so as to supersede other civil remedies `based upon misappropriation of a trade secret.'" Silvaco Data Sys. v. Intel Corp., 184 Cal.App.4th 210, 236, 109 Cal.Rptr.3d 27 (2010) (citing § 3426.7(a)-(b)). "CUTSA includes a specific provision concerning preemption" set forth in Cal. Civ. Code § 3426.7. K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 Cal.App.4th 939, 954, 90 Cal.Rptr.3d 247 (2009). Section 3426.7 provides:
"Section 3426.7 thus expressly allows contractual and criminal remedies, whether or not based on trade secret misappropriation. At the same time, § 3426.7 implicitly preempts alternative civil remedies based on trade secret misappropriation." K.C. Multimedia Inc., 171 Cal. App.4th at 954, 90 Cal.Rptr.3d 247. Common law claims are preempted by CUTSA if they are "based on the same nucleus of facts as the misappropriation of trade secrets' claim for relief." Digital Envoy, Inc. v. Google, Inc., 370 F.Supp.2d 1025, 1035 (N.D.Cal.2005). "If there is no `material distinction' between the wrongdoing alleged in a [C]UTSA claim and that alleged in a different claim, the [C]UTSA preempts the other claim." Convolve, Inc. v. Compaq Computer Corp., 2006 WL 839022, at *6 (S.D.N.Y. Mar. 31, 2006) (applying California law).
In support of its Common Law Claims, Biosuccess has failed to allege wrongdoing that is distinct from the alleged improper use of trade secrets. Thus, it has alleged that the Chang Parties misappropriated documents from Biosuccess and provided them to a competitor (FAC ¶¶ 41-42), deleted information from Biosuccess computers without authorization (FAC ¶ 22), attempted to induce Han to leave Biosuccess (FAC ¶ 26), and took steps to establish a competing business by exploiting its intellectual property. FAC ¶ 38. Dkt. 203. See Digital Envoy, 370 F.Supp.2d at 1035 (common law claims preempted by CUTSA where they "were based on the identical facts alleged in its claim for misappropriation of trade secrets"). Although the FAC does not refer to "trade secrets" within its allegations in support of the Common Law Claims, Biosuccess does not sufficiently distinguish the references to "trade secrets" and "confidential and proprietary business information" in the FAC. Id. It is unclear from the FAC how the "confidential and proprietary business information" is distinct from the alleged "trade secrets" that were taken. Thus, Biosuccess has failed to comply with the ruling on the prior motion to dismiss (See CV 14-0310, Dkt. 38) because it has not made allegations showing that its Common Law claims are based on facts that are distinct from those alleged in support of its CUTSA claim.
The Chang Parties rely on Silvaco Data Systems v. Intel Corp., 184 Cal.App.4th 210, 109 Cal.Rptr.3d 27 (2010) to argue that Biosuccess's pleadings are inadequate.
The court then explained:
Id.
Here, the conduct alleged in the FAC in support of the Common Law Claims fails to plead a property interest that is other than a trade secret. The alleged interest pleaded includes tangible documents and a computer that the Chang Parties allegedly misappropriated and provided to a competitor of Biosuccess. However, Biosuccess fails to plead how these tangible documents and computer contained information that is different from the trade secrets alleged elsewhere.
The FAC alleges that there was a wrongful attempt to induce Han to leave Biosuccess for a competing business. This is not the basis for a cognizable claim. The Chang Parties failed to induce Han to leave Biosuccess. In addition, the "gravamen" of the alleged wrongful conduct in support of its Common Law claims is based on the taking of what Biosuccess now refers to as "confidential and proprietary business information." However, once again, Biosuccess has failed to plead how this "confidential and proprietary business information" is distinct from its "trade secrets."
The Chang Parties also rely on Diamond Power Int'l v. Davidson, 540 F.Supp.2d 1322 (N.D.Ga.2007). Davidson applied the Georgia Trade Secrets Acts, which does not have the same savings clause as the one in the CUTSA. The CUTSA clause exempts "other civil remedies that are not based upon misappropriation of a trade secret." See Cal. Civ.Code § 3426.7(b)(2). Further, the plaintiff in Davidson sought recovery under its conversion claim "for precisely the same conduct and resulting injury as [the plaintiff] alleged was caused by the misappropriation of its trade secrets: the taking of supposedly proprietary information." Id. at 1346 The court determined that "if a claim seeks to remedy an injury caused not by the misappropriation of proprietary information, but by separate conduct-such as the misappropriation of physical property or the improper
CUTSA preemption can extend to "confidential information" other than trade secrets. See SunPower Corp. v. SolarCity Corp., 2012 WL 6160472, at *6 (N.D.Cal. Dec. 11, 2012) ("CUTSA supersedes claims based on the misappropriation of information, regardless of whether such information ultimately satisfies the definition of trade secret"). In SunPower, the court concluded that,
Id. at *5 (internal citations omitted).
SunPower specifically noted that the plaintiff's common law claims would not be preempted by CUTSA if the plaintiff could allege facts showing that "the [non-trade secret proprietary] information ... was made property by some provision of positive law, ... on grounds that are qualitatively different from the grounds upon which trade secrets are considered property," or that "it can otherwise be concluded that [the plaintiff's] Non-Trade Secret Claims allege wrongdoing that is `material[ly] distinct[ ] [from] the wrongdoing alleged in a[C]UTSA claim ...'" 2012 WL 6160472 at *9.
Here, the claims of the Biosuccess Parties are premised upon a claimed right to information that was not generally known to the public. Biosuccess has failed to plead how the physical property taken, i.e., documents and computer, have any value other than through the trade secrets contained within them. Although Biosuccess alleges that there was an attempt to interfere with contractual relations, this is peripheral to the alleged misappropriation of confidential and proprietary business information. Biosuccess fails to demonstrate how this information is distinct from trade secrets or contains a separate property right such that it is not preempted by CUTSA. Accordingly, the Motion is GRANTED with respect to the Common Law Claims. Biosuccess is granted leave to amend to the extent it can in good faith allege facts demonstrating a property right on grounds "qualitatively different from the grounds upon which trade secrets are considered property." See SunPower, 2012 WL 6160472 at *9.
In the alternative, the Chang Parties seek summary judgment as to these same claims. The Chang Parties rely on Fed. R.Civ.P. 12(d), which provides that,
The Chang Parties do not specify those claims as to which they seek summary judgment. The Statement of Uncontroverted Facts and Conclusions of Law cites only to information regarding the patent infringement claim. It does not mention the Common Law Claims. Therefore, it does not "identify each claim for relief on which the moving party seeks summary judgment and the legal grounds for summary judgment" as required by the Court's Standing Orders.
For these reasons, the Chang Parties have not met the requirements of a motion for summary judgment. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ("Of course, a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.").
Biosuccess and Han (collectively in this section, the "Biosuccess Parties") brought a motion (in this section, the "Motion") for partial summary judgment. They argue that there is no genuine issue of material fact with respect to whether Richard can unilaterally terminate the operative assignment of the '814 Patent to Biosuccess, i.e., without the consent of Han. Dkt. 248 at 1. Biosuccess and Han contend that he cannot. If the Motion is granted, the assignment to Biosuccess of all rights, title, and interest in the '814 Patent would remain in place. Id. This determination would affect claims in three cases: Richard's claim for declaratory relief in the lead case, CV 13-1340; Richard's claim for declaratory relief in consolidated case CV 14-4511; and the claim for patent infringement asserted by Biosuccess in consolidated case CV 14-0310. The effect of the Motion on the Biosuccess claim is a determination of its standing to advance patent infringement claims arising from the '814 Patent.
As noted, there are two versions of the agreement pursuant to which Richard and Han assigned their respective rights to the '814 Patent to Biosuccess. Dkt. 248 at 4. is the October 2006 Agreement and the other is the September 2011 Agreement. Among the issues in these actions is a determination of which of these agreements is operative. Id.; see Dkt. 144 at 10-14.
The October 2006 Agreement provides for a payment of $1 Million to Richard and Han when the Agreement is signed, with an additional $1 Million payment to them by February 28, 2007. As to the second payment, the October 2006 Agreement provides, "50% of which is for the patent right described in Article 1.3," and the
The September 2011 Agreement provides for a $1 Million payment to Richard and Han "when the clinical trial phase II for leukemia is completed in the US," and an additional $1 Million payment to them "when the FDA approves the [new drug application] for leukemia ..." Id. at 1. In the Prior Order, the Court determined that there was a genuine issue of material fact as to whether the October 2006 Agreement or the September 2011 Agreement controls. Id. at 14. That Order stated that "because it cannot be determined as a matter of law that the October 2006 Agreement is the operative one, it cannot be determined on the present motion whether that agreement was breached." Id. Thus, there remained a factual issue with respect to Richard's claim that, "because Biosuccess paid [Richard] none of the money which was consideration for his assignment of these IP rights ... the assignment terminates and all rights revert to [Richard] for failure of consideration and condition precedent to the assignment of rights." Id. at 10, 14.
There are also factual issues with respect to the present Motion. There is evidence that Richard and Han agreed to act jointly under both agreements. Both state that Richard and Han will be "jointly referred to as ASSIGNOR" throughout the agreement. Dkt. 278-3, Ex. 1 & Ex. 2. Both refer to the "ASSIGNOR" in each section as a single entity. See, e.g., id. ("§ 2.1 — ASSIGNOR represents and warrants that it is the owner of the Patent Rights and the Know-How ..."). And, the termination language in both agreements provides:
Id.
In general, where two parties co-own a patent, each has the authority to license or use the patented technology without the consent of the other. 35 U.S.C. § 262 ("In the absence of any agreement to the contrary, each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention... without the consent of and without accounting to the other owners."). However, co-owners may agree to limit their respective, independent rights, including through a contract providing that they will only act jointly with respect to their assignment. "Construction of patent assignment agreements is a matter of state contract law." Mars, Inc. v. Coin, Acceptors, Inc., 527 F.3d 1359, 1370 (Fed.Cir.2008). Here, the law of New Jersey applies.
Where an agreement is executed by more than one promisor, there is a "presumption at law of a joint obligation." Heuer v. Rubin, 1 N.J. 251, 255, 62 A.2d 812 (1949). "Words of express joinder are not necessary ...; but, on the other hand, there should be words of severance in order to create a several responsibility." Alpaugh v. Wood, 53 N.J.L. 638, 644, 23 A. 261 (1891). However, this presumption "is rebuttable and every contract must be interpreted in the light of the intent of the parties and the purpose which they sought
Id. (quoting Atlantic Northern Airlines, Inc. v. Schwimmer, 12 N.J. 293, 301, 96 A.2d 652 (1953)).
"[A]n agreement ... must be accorded a rational meaning in keeping with the express general purpose." J.L. Davis & Associates v. Heidler, 263 N.J.Super. 264, 271, 622 A.2d 923 (App.Div.1993). "Effect, if possible, will be given to all parts of the instrument and a construction which gives a reasonable meaning to all its provisions will be preferred to one which leaves a portion of the writing useless or inexplicable." Id.
The parties disagree as to the intent of Richard and Han at the time that they entered the October 2006 and November 2011 Agreements. The Biosuccess Parties contend that Richard and Han intended "jointly [to] assign[] to Biosuccess all the rights, title, and interests in the '814 Patent," and therefore unilateral termination was not contemplated. Dkt. 248 at 10; see Denker v. Twentieth Century-Fox Film Corp., 10 N.Y.2d 339, 345, 223 N.Y.S.2d 193, 179 N.E.2d 336 (1961) ("where several persons are arrayed on the same side of a transaction — as joint contractors, joint purchasers, or joint vendors ... one of them alone cannot repudiate or terminate the contract, or obtain its rescission, without the consent or against the objections of the others."). To support this interpretation, the Biosuccess Parties cite sections in both agreements that vest rights in an Assignor, which is described in singular terms. Thus, the power to terminate each agreement is vested in an "Assignor" (§ 5.3), the assignment of rights is made by an "Assignor" (p. 1), any notice or communication provided under the agreements is to be sent to "Richard L. Chang & Zheng Tao Han" for "Assignor" (§ 9.1); and (iv) unallocated amounts paid by Biosuccess under the agreements are to be paid to the "Assignor" rather than to Richard and/or Han (§ 3.1).
Richard contends that the intent of the parties in using the single assignor language in the agreements was only to make them easier to draft and understand, and that each party intended to maintain his individual rights, including the right to terminate the agreements. Dkt. 278 at 13. Richard also contends that there is a bad faith exception to the rule that co-owners cannot rescind a contract without joining all co-owners. See Denker v. Twentieth Century-Fox Film Corp., 10 N.Y.2d 339, 346, 223 N.Y.S.2d 193, 179 N.E.2d 336 (1961) ("The presence of fraud or bad faith may well enlarge the right of one of several co-parties to a contract to act alone and procure a rescission."). He also argues that, prior signing the October 2006 Agreement, he and Han entered a separate oral agreement through which Han
Id.
The Biosuccess parties argue that Richard's claim as to an oral agreement must be disregarded because it conflicts with his prior deposition testimony. See Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266 (9th Cir.1991) ("A party cannot create an issue of fact by an affidavit contradicting his prior deposition testimony"). Richard testified that he and Han had "no official agreement. No official. Before I promise him half and half, 50/50, but when I (inaudible) of American, you know, for the patent, I pay all hundred percent of patent... Everything I paid." Dkt. 304 at 5; Liang Decl., Ex. 3. When asked to describe the unofficial agreement, Richard responded, "he deserve [sic] nothing, because I pay [sic] all the things." Id. He later added, "so I told you for this 50/50 spread it's not fair. I have to negotiate with him. He probably get two percent. I get 98 percent. I do all other things." Id. Later in his testimony, Richard stated:
Id.
Richard also testified that he did not discuss the October 2006 Agreement with Han: "I'm his teacher, but I don't have to tell this thing — tell him to sign. Sometime I repeat, like, tell him to sign. Not — not for this contract. If he can't — if he can't handle with this contract, he better quit." Id.
This testimony does not necessarily conflict with Richard's present claim about an oral agreement. Some of it is ambiguous; some is confusing. The testimony could be interpreted to mean that, before Richard and Han entered the October 2006 Agreement with Biosuccess, they ended their oral agreement to share profits equally. Thus, the statements "I have to negotiate with him. He probably get two percent. I get 98 percent. I do all other things" may refer to a prior "unofficial" agreement between Han and Richard. The testimony that Richard would "do all other things" related to the interests in the '814 Patent, could refer to an oral agreement pursuant to which Han would be a co-owner without operational responsibilities.
The interpretation of the October 2006 and November 2011 Agreements raises certain factual issues. They include the intent of the parties based on their communications. Another material issue of fact exists with
The Prior Order concluded that there was a material issue of fact presented with respect to which of the two agreements is in place. A bench trial on that issue is scheduled. The Prior Order also concluded that, due to this fact issue, summary judgment was not appropriate with respect to whether there was a breach of the operative assignment agreement. If the October 2006 Agreement controls, then there would have been a failure by Biosuccess to comply with the terms of the agreement because it required an initial payment of $1 Million that Biosuccess, and only $250,000 was paid. See Dkt. 278-3, Ex. 1 § 3.1.a.
The Chang Parties contend that there is a material issue of fact with respect to whether payment under either agreement was a condition precedent to the full assignment of the patent rights. Section 5.1 of both agreements could be read to suggest that the assignment itself was conditioned upon a payment by Biosuccess. Dkt. 278-3, Ex. 1 & Ex. 2, § 5.1 ("[t]he Agreement shall be considered to be completed in terms of assignment of patent right and right of patent application to the ASSIGNEE as soon as the fulfillment of Article 3.1.a and 3.1.b by the ASSIGNEE, unless terminated sooner pursuant to the provisions of this Agreement."). However, a condition precedent "must be expressed in clear language or it will be construed as a promise." Liberty Mut. Ins. Co. v. President Container, Inc., 297 N.J.Super. 24, 34, 687 A.2d 760 (App. Div.1997); Marsa v. Metrobank for Sav., F.S.B., 825 F.Supp. 658, 664 (D.N.J.1993), aff'd sub nom. Marsa v. Metrobank Fin. Grp., Inc., 26 F.3d 122 (3d Cir.1994).
The language of § 5.1 is not sufficiently clear to establish by itself that there was a condition precedent. Nor has it been shown that there is no factual issue as to whether the parties intended to impose a condition precedent. See Old Colony Trust Co. v. City of Omaha, 230 U.S. 100, 118, 33 S.Ct. 967, 57 L.Ed. 1410 (1913) ("Generally speaking, the practical interpretation of a contract by the parties to it for any considerable period of time before it comes to be the subject of controversy is deemed of great, if not controlling, influence."). For example, the assignment of the '814 Patent to Biosuccess was recorded, and Biosuccess spent several million dollars to research and develop these patent rights; Richard knew of and participated in these undertakings. Dkt. 304 at 3. This type of conduct could demonstrate that, under the terms of either of the agreements, payment was not a condition precedent. This possibility arises from that fact that full payment was not made under either contract yet Biosuccess operated as if the assignment had already been made.
For the foregoing reasons, material issues of fact remain as to whether Richard can unilaterally terminate the operative '814 Patent assignment to Biosuccess, i.e., without the consent of Han. Accordingly, the Motion is DENIED.
Han, Wu, and Biosuccess (collectively in this section, "The Biosuccess Parties") brought a motion for summary judgment in CV 14-4511 and CV 14-446 with respect to the claims brought by Ben and Richard pursuant to Sections 558 and 1174 of the California Labor Code. Dkt. 249. The Biosuccess Parties make two arguments: (i) Ben and Richard lack standing to bring
Summary judgment is proper as to the claims brought by Ben and Richard pursuant to Sections 558 and 1174 of the Labor Code. They lack standing to bring them. Section 558(a) provides:
Cal. Lab.Code § 558(a).
Section 558(b) authorizes the Labor Commissioner to issue a citation to an employer for violating any provision in Section 558 or for violating any Industrial Welfare Commission wage order regulating hours and days of work.
Section 1174 provides that
The Private Attorney General Act ("PAGA") permits "an aggrieved employee to initiate a private civil action on behalf of himself or herself and other current or former employees to recover civil penalties if the Labor and Workforce Development Agency ("LWDA") does not do so." Caliber Bodyworks, Inc. v. Superior Ct., 134 Cal.App.4th 365, 370, 36 Cal.Rptr.3d 31 (2005); see Cal. Lab.Code § 2699(a). As a prerequisite to bringing a PAGA claim in a judicial proceeding for a violation of a provision of Section 2699.5, an employee must first exhaust certain administrative requirements. These are set forth in Section 2699.3 of the Labor Code. Kemp v. Int'l Bus. Machines Corp., 2010 WL 4698490 (N.D.Cal. Nov. 8, 2010); see Caliber, 134 Cal.App.4th at 370, 36 Cal.Rptr.3d 31.
Section 2699.3 provides that employees must take the first step of giving "written notice by certified mail to the [LWDA] and the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support
It is undisputed that the Changs failed to exhaust the required administrative remedies prior to commencing this action. Id. ¶ 14. Thus, there is no evidence that they gave the required notice or that the LWDA declined to pursue them or did not respond to them. Plaintiffs' contend that they were not required to exhaust the administrative processes, citing Section 218 of the Labor Code and Dunlap v. Superior Court, 142 Cal.App.4th 330, 47 Cal.Rptr.3d 614 (2006). This position is unpersuasive. Section 218 is part of Division 2, Part 1, Article 1 of the Labor Code. It provides that "[n]othing in this article shall limit the right of any wage claimant to sue directly or through an assignee for any wages or penalty due him under this article." However, Article 1 includes only Sections 200-244 of the Code. Therefore, it does not apply to Sections 558 and 1174. Similarly, Dunlap held that there is no requirement to exhaust administrative remedies with respect to claims that employees could pursue directly prior to the enactment of PAGA. 142 Cal.App.4th at 340-43, 47 Cal.Rptr.3d 614. Claims under Sections 558 and 1174 are not within this category. See Caliber, 134 Cal.App.4th at 376, 36 Cal.Rptr.3d 31; Kamar, 2008 WL 2229166, at *14; Reynolds, 36 Cal.4th at 1089, 32 Cal.Rptr.3d 483, 116 P.3d 1162.
For these reasons, the Motion is GRANTED with respect to Plaintiffs' claims under Sections 558 and 1174.
Section 201(a) of the Labor Code provides that, "[i]f an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately." Section § 203(a) provides that
Ben argues that his employment agreement (in this section, "Ben's Agreement") provides for the annual payment of $239,400 in salary and benefits. He claims that, during his employment between 2007 and 2012, the Biosuccess Parties failed to pay at least $419,233 of these amounts. Dkt. 252 at 5; Def. Statement of Genuine Issues of Material Fact, Dkt. 281-2 at 1. Ben contends that Wu never provided him with a duplicate or facsimile copy of Ben's Agreement, and that Ben lost the electronic
Ben also contends that Wu assured him that he would be compensated for his work with Biosuccess. Dkt. 277-2 ¶ 10. The Biosuccess Parties contend that in 2006, Ben signed an agreement with Wu that provided for an annual salary of $216,000 (the "2006 Agreement"). Dkt. 270 ¶ 4, Ex. B. The Biosuccess Parties contend that, as of November 2007, Ben's salary was reduced. This change was memorialized in a letter sent by Wu to Ben in November 2007. Dkt. 281 at 12; Dkt. 281-2 at 2. The letter stated that Biosuccess would "no longer be able to pay [Ben] as much as mutually agreed in 2006 ..." and that "the company will try all efforts to pay [him] at least 1/3 of the compensation previously agreed upon until further notice ..." Dkt. 281-1 Ex. F ¶ 5, Ex. A. The Biosuccess Parties argue that this decrease in salary was the result of the suspension of the operations of Biosuccess from mid-2007 until mid-2011. Dkt. 281 at 10-12; Dkt. 281-1, Ex. G; Dkt. 270, Ex. A.
Ben disputes that the terms of his employment were modified by the letter. Statement of Genuine Disputes, Dkt. 277-4 ¶ 7. He contends that, although he received sporadic payments of portions of his salary, he never received the promised payments. Dkt. 281-2 at 4. Ben contends that he was paid $148,717 in 2007, $183,871 in 2008, $167,094 in 2009, $154,159 in 2010, $182,609 in 2011 and $148,317 in 2012. Dkt. 281-1, Ex. M. The Biosuccess parties contend that Ben was paid in accordance with the terms of Ben's Agreement as modified by the November 2007 letter. Id. The Biosuccess Parties contend that Ben was actually overpaid in 2011 and 2012. Dkt. 281 at 14; see Dkt. 281-1, Ex. M; Ex. F at ¶¶ 9, 10, Ex. D.
The foregoing shows that there are genuine issues of material facts with respect to whether Ben received the amounts due to him under Ben's Agreement. These include the effect, if any, of the November 2007 letter, as well as the amounts paid to Ben. Therefore, Ben's Motion for Summary Judgment on Unpaid Wages (Dkt. 252) is DENIED.
The result is the same with respect to Richard's motion for summary judgment as to his claims for unpaid wages. Richard contends that the October 2006 Agreement provided that Biosuccess would pay him an annual salary of $125,000.
The Court previously determined that a genuine issue of material fact is presented with respect to whether the October 2006
Cuadra v. Millan, 17 Cal.4th 855, 859, 72 Cal.Rptr.2d 687, 952 P.2d 704 (1998) disapproved of on other grounds, Samuels v. Mix, 22 Cal.4th 1, 91 Cal.Rptr.2d 273, 989 P.2d 701 (1999) (emphasis in original). Actions for final wages not paid as required by [Cal. Lab.Code] sections 201 and 202 are governed by [California Code of Civil Procedure ("CCP")] section 338, subdivision (a), which provides that a three-year statute of limitations applies to "[a]n action upon a liability created by statute, other than a penalty or forfeiture." Pineda v. Bank of Am., N.A., 50 Cal.4th 1389, 1395, 117 Cal.Rptr.3d 377, 241 P.3d 870 (2010). "[Cal. Lab.Code] section 203(b) contains a single, three-year limitations period governing all actions for section 203 penalties irrespective of whether an employee's claim for penalties is accompanied by a claim for unpaid final wages." Pineda v. Bank of Am., N.A., 50 Cal.4th 1389, 1398, 117 Cal.Rptr.3d 377, 241 P.3d 870, 876 (2010).
Certain of Plaintiffs' claims under Sections 201, 203, 218.5, and 226 were first made after the three-year limitations period. Plaintiffs contend that the amounts due to them between 2007 and 2011 should be treated as past due amounts rather than as unpaid salary. However, Plaintiffs have cited neither statutory nor case law support for this novel position. Nor do they present evidence to support the theory that the promised salary was to compensate Plaintiffs for something other than the work that they performed for Biosuccess.
Also unpersuasive is Plaintiffs' claim that the operative limitations period should be tolled:
McDonald v. Antelope Valley Cmty. Coll. Dist., 45 Cal.4th 88, 99, 84 Cal.Rptr.3d 734, 194 P.3d 1026 (2008) (internal citations omitted). "[T]he doctrine applies when an injured person has several legal remedies and, reasonably and in good faith, pursues one." Id. at 100, 84 Cal.Rptr.3d 734, 194 P.3d 1026 (internal quotations omitted). Thus, "it may apply where one action stands to lessen the harm that is the subject of a potential second action; where administrative remedies must be exhausted before a second action can proceed; or where a first action, embarked upon in good faith, is found to be defective for some reason." Id. Equitable tolling is applied generally "only if [the petitioner] shows (1) that he has been pursuing his rights diligently, and (2) that some extraordinary circumstance stood in his way" and prevented timely filing. Holland v. Florida, 560 U.S. 631, 649, 130 S.Ct. 2549, 177 L.Ed.2d 130 (2010) (applying equitable tolling principles in the context of habeas corpus petitions).
In support of their equitable tolling argument, Plaintiffs rely on case law with respect to equitable estoppel. However,
Lantzy v. Centex Homes, 31 Cal.4th 363, 383, 2 Cal.Rptr.3d 655, 73 P.3d 517, 532 (2003), as modified (Aug. 27, 2003) (internal quotations omitted).
There is no evidence that Plaintiffs were pursuing other legal or administrative remedies diligently during the limitations period and that this justified their failure timely to file certain of their present claims. However, equitable estoppel is derived "from the equitable principle that no man [may] profit from his own wrongdoing in a court of justice." Id. Thus, a person
Id. (internal quotations omitted).
There are factual disputes with respect to whether the Biosuccess Parties made repeated assurances to Plaintiffs that they would be paid for their work. Dkt. 277 at 5; Dkt. 277-2 ¶ 10; Dkt. 251-4, ¶ 16; Dkt. 280 at 10; see Dkt. 280-1, Ex. D ¶ 14. The
Richard's declaration describes assurances he claims to have received from Biosuccess See Dkt. 251-4, ¶ 16 ("Mr. Wu personally assured me that I would be compensated for my work at Biosuccess. I had further assurance of payment from Defendants and each of them as signatories to both the First Agreement in August 2006 and the Final Agreement in October 2006...."). No similar evidence about claimed assurances was included in Ben's initial declaration submitted in support of his motion for summary judgment. Dkt. 251-4. However, in his later declaration, which accompanied Plaintiffs' opposition to the present motion for summary judgment on the labor claims, Ben added the following:
Dkt. 277-2 ¶ 10.
To the extent that the failure to include this evidence in the prior motion raises credibility issues, it is appropriate to address them at trial, rather than through the present motion. Thus, there is not a sufficient showing that they should be disregarded or stricken, in part because they parallel the timely-filed statements by Richard. For these reasons, triable issues of fact are presented as to whether the untimely filing of certain claims should be excused under the doctrine of equitable estoppel.
For the foregoing reasons, the Motion for Summary Judgment of the Biosuccess Parties on Labor Claims (Dkt. 249) with respect to the claims of Ben and Richard under sections 201, 203, 218.5, and 226 is GRANTED IN PART and DENIED IN PART.
(1) Counter-defendants' Motion to Dismiss, or in the Alternative, Summary Judgment (Dkt. 205) is GRANTED IN PART and DENIED IN PART. See Sections IV and VIII.
(2) Plaintiff's Motion to Dismiss the Biosuccess Parties' counterclaims (Dkt. 240) is GRANTED, without prejudice, claims that are substantively the same will be addressed in 14CV-0310. See Section VII.
(3) Plaintiff's Motion to Dismiss (Dkt. 234) is GRANTED IN PART and DENIED IN PART. Plaintiff's motion to dismiss is GRANTED with respect to claims (ii)-(iv) of Han's counterclaims, with leave to amend the complaint in the lead case CV 13-1340 to add Han as a party and thereby update the relevant claims. Plaintiff's motion to dismiss is GRANTED with respect to claims (ii)-(iv)of Biosuccess's counterclaims, with leave to amend the consolidated case CV 14-0310 FAC to include the relevant allegations against Richard and to add Richard as a party to the consolidated case CV 14-0310. Plaintiff's motion to dismiss is DENIED with respect to claim (i) of Biosuccess's counterclaims and claim (i) of Han's counterclaims. See Section VI.
(5) The Motion for Partial Summary Judgment of the Biosuccess Parties with respect to the Labor Claims of Ben and Richard (Dkt. 249) is GRANTED to the extent they are premised upon sections 558 and 1174, and is DENIED to the extent they are premised on sections 201, 203, 218.5, and 226. See Section X.
(6) The Motion to Dismiss Richard's Declaratory Relief Claim in his Complaint re Inventorship or, in the Alternative, Motion for Summary Judgment (Dkt. 250) is MOOT. See Section VIII.
(7) Richard's Motion for Summary Judgment on Unpaid Monies (Dkt. 251) is DENIED. See Section X.
(8) Ben's Motion for Summary Judgment on Unpaid Wages (Dkt. 252) is DENIED. See Section X.
(9) The request of Biosuccess for relief under Fed.R.Civ.P. 56(d) is DENIED, and Counter-defendants' Motion for Partial Summary Judgment re Patent Infringement Claim (Dkt. 253) is DENIED without prejudice. See Section V.
(10) The Request to Strike Unauthenticated Letter (Dkt. 279) is MOOT. See Section VIII.
Because Richard's motion to dismiss has been denied, the motion to dismiss Richards declaratory relief claim (Dkt. 250) is moot. Richard also brought a motion to strike appendix A of Biosuccess's motion to dismiss Richard's declaratory relief claim (Dkt. 250). Dkt. 279. That motion is also moot.
