388 F. Supp. 3d 1133
N.D. Cal.2019Background
- AlterG, a medical-device maker of patented Differential Air Pressure (DAP) treadmills, alleges three former employees (Whalen, Allen, Bean) left, formed Boost, and used AlterG confidential information to develop the Boost One.
- AlterG alleges ten causes of action including patent infringement, trade secret misappropriation (DTSA), breach of confidentiality agreements, breach of fiduciary duty, interference claims, Lanham Act false advertising, trade libel, UCL, and conspiracy.
- Key factual allegations: the individuals signed confidentiality/non‑disclosure agreements; Whalen and Allen worked on AlterG’s Low‑Cost Platform Project (LCPP); Boost launched the Boost One in 2017 and sold ~20 units; AlterG alleges Boost One copies patented features and that defendants made false statements denigrating AlterG.
- Defendants moved to dismiss under Rule 12(b)(6) for failure to plead claims with required particularity and to show requisite elements (e.g., direct infringement elements, specific trade secrets, contract terms, targeted false statements).
- The court dismissed all claims (some with prejudice, most without) and granted leave to amend for the patent, trade secret, breach of contract, fiduciary duty, interference, Lanham Act, and trade libel claims; dismissed UCL unfair/fraudulent prongs and standalone conspiracy with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Patent infringement (direct, indirect, willful) | Boost One practices AlterG patents and willful copying warrants enhanced damages | Complaint fails to plead that Boost practices every element (e.g., weight‑calibration and height‑adjustment limitations); no adequate direct infringement pleaded | Dismissed without prejudice; direct infringement inadequately pleaded; indirect and willful claims fail as direct infringement prerequisite not met |
| Trade secret misappropriation (DTSA) | Defendants used LCPP confidential learnings and other proprietary engineering/marketing data to build Boost One | Alleged trade secrets are overly broad, categorical, and not pleaded with required particularity | DTSA claim dismissed without prejudice for lack of particularity; court permits amendment and finds DTSA standing where use occurred after DTSA enactment |
| Breach of contract (confidentiality agreements) | Individual defendants breached confidentiality clauses by using AlterG information in Boost products | Complaint fails to plead essential contract terms or specify the confidential information breached | Dismissed without prejudice; plaintiff must attach or plead essential terms and specify the protected information |
| False advertising (Lanham Act §43(a)) | Defendants made specific false product and safety claims and misrepresented FDA approval/market adoption | Pleading fails Rule 9(b): does not identify who made each statement, where/when, or dissemination into commerce | Lanham Act claim dismissed without prejudice for failure to plead who/when/where under Rule 9(b) and insufficient advertising/dissemination detail |
| UCL (unlawful, unfair, fraudulent) | Defendants’ unlawful acts (trade secret misappropriation, false advertising) and unfair practices harmed AlterG and consumers; seeks restitution for misappropriated proprietary information | Lacks UCL standing/reliance for fraud prong; unfair prong requires harm comparable to antitrust threat; restitution limited to plaintiff’s property interest | Unlawful prong dismissed without prejudice (predicate claims may be amended); unfair and fraudulent prongs dismissed with prejudice (no standing/reliance and no antitrust‑level wrongdoing); restitution theory as to proprietary information remains viable |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must state plausible claim for relief)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Levitt v. Yelp! Inc., 765 F.3d 1123 (9th Cir. 2014) (two‑step pleading analysis for plausibility)
- Laitram Corp. v. Rexnord, Inc., 939 F.2d 1533 (Fed. Cir. 1991) (failure to meet any single claim limitation negates infringement)
- In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323 (Fed. Cir. 2012) (indirect infringement requires direct infringement)
- Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923 (2016) (willful infringement and enhanced damages require underlying infringement)
- Alta Devices, Inc. v. LG Elecs., Inc., 343 F. Supp. 3d 868 (N.D. Cal. 2018) (DTSA/CUTSA trade secret pleading requires particularity and specific technology identification)
- Cel‑Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163 (1999) (UCL "unfair" prong and its relation to antitrust policy)
- Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003) (UCL restitution limited to money/property in which plaintiff has vested interest)