Webpass Inc. v. Banth
5:14-cv-02291
N.D. Cal.Dec 18, 2014Background
- Webpass provides high-speed Internet service and alleges it developed proprietary, confidential information (network design, customer lists/pricing, marketing, proposals, R&D strategies).
- Aftab Banth was employed by Webpass from Oct. 2012 to Feb. 2013 and acknowledged an employee handbook confidentiality/non-disclosure policy.
- After termination, Banth and Rick Peters formed Squareplanet; Webpass alleges they possess and used Webpass’s trade secrets to run competing ISP services.
- Webpass sued Defendants for: (1) Lanham Act Section 43(a) violations (false advertising/false designation of origin), (2) misappropriation of trade secrets under CUTSA, (3) California unfair competition (Bus. & Prof. Code § 17200), (4) intentional interference with prospective economic advantage, and (5) breach of contract.
- Banth moved to dismiss under Rule 12(b)(6). The court heard argument and granted the motion, dismissing all five claims without prejudice and allowing 14 days to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Lanham Act (false advertising/false designation of origin) | Defendants used Webpass technology/marketing and misrepresented origin, causing consumer confusion and reverse passing off | Complaint fails to plead any specific false statement, trademark use, or facts showing likelihood of confusion | Dismissed; leave to amend — no plausible Lanham Act claim pleaded |
| CUTSA (trade-secret misappropriation) | Webpass alleges defendants acquired and used proprietary information that is economically valuable and secret | Complaint fails to allege how the information derives independent economic value from being secret or factual steps taken to maintain secrecy | Dismissed; leave to amend — trade secret elements not plausibly alleged |
| State common-law unfair competition & intentional interference | Claims rest on defendants’ alleged misappropriation and wrongful acts tied to trade secrets | CUTSA preempts common-law claims based on the same nucleus of facts | Dismissed as preempted; leave to amend |
| Breach of contract (confidentiality/non-disclosure in employee handbook) | Banth agreed as a condition of employment to comply with handbook confidentiality obligations | Complaint does not plead the handbook or the contract terms with sufficient clarity to establish a contract | Dismissed; leave to amend — contract formation/terms not pleaded |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (legal-conclusion pleading standard)
- Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th Cir.) (elements of false advertising claim)
- Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (unregistered marks and § 43(a) protection principles)
- Smith v. Montoro, 648 F.2d 602 (9th Cir.) (reverse passing off described)
- New W. Corp. v. NYM Co. of Cal., 595 F.2d 1194 (9th Cir.) (likelihood of confusion test under § 43(a))
- Cytodyn, Inc. v. Amerimmune Pharm., Inc., 160 Cal. App. 4th 288 (Cal. Ct. App.) (elements of CUTSA claim)
- DVD Copy Control Ass'n Inc. v. Bunner, 116 Cal. App. 4th 241 (Cal. Ct. App.) (trade-secret definition and secrecy requirement)
- Navarro v. Block, 250 F.3d 729 (9th Cir.) (12(b)(6) standard)
- Balistreri v. Pacifica Police Dep't, 901 F.2d 696 (9th Cir.) (dismissal where no cognizable legal theory)