Zomm, LLC v. Apple Inc., 391 F. Supp. 3d 946

Background

Zomm sued Apple alleging breach of a confidentiality agreement, common-law unfair competition (CLUC), and patent infringement related to Zomm's Wireless Leash/Plus and the ’895 patent.
Zomm's FAC alleges Apple began exploiting Zomm’s confidential information in December 2011 through November 2016.
The Wireless Leash Plus was released November 2011 and the ’895 patent had a March 2011 prior publication; the confidentiality agreement excluded information in publicly available sources or independently developed information.
The court determined the FAC failed to plead exploitation of confidential information occurring before December 2011, so the breach-of-contract claim was deficient but leave to amend was granted.
Zomm’s CLUC claim was pleaded as misappropriation of “intellectual property and technology”; the court treated this as asserting patent or trade-secret-based wrongdoing.
The court dismissed non-patent claims (with leave to amend) and stayed the patent claim pending inter partes review (IPR) on Apple’s petitions (IPR instituted on two petitions; a third petition’s institution decision was pending).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether FAC pleads breach of confidentiality	Zomm: Apple used Zomm’s confidential information beginning Dec 2011	Apple: information was public or reverse-engineerable and excluded by the agreement	Dismissed for failure to allege exploited confidential information; leave to amend granted
Whether CLUC claim survives preemption/supersession	Zomm: CLUC alleges deceptive conduct (Apple "baited" Zomm) distinct from trade-secret claim	Apple: CLUC is preempted by federal patent law (as to patent-based theory) and superseded by CUTSA for trade-secret/information misappropriation; fraud-based allegation must satisfy Rule 9(b)	CLUC preempted by patent law to the extent it alleges patent infringement; CUTSA supersedes CLUC because deceptive-fraud allegations not pleaded with Rule 9(b) particularity; dismissal with leave to amend
Whether fraud/baiting allegation pleads with particularity under Rule 9(b)	Zomm: alleged deceptive inducement supports CLUC and avoids CUTSA	Apple: allegation ‘‘baited’’ sounds in fraud and lacks the who/what/when/where/how required by Rule 9(b)	Court: fraud allegation insufficiently particular; Rule 9(b) not met
Whether to stay patent claim pending IPR	Zomm: opposed stay or argued case progressed such that stay is improper	Apple: IPR petitions filed; institution likely; stay conserves resources and may simplify issues	Court: granted stay as to the first two instituted IPRs (case early, IPR likely to simplify, limited prejudice); third petition pending, may affect timing

Key Cases Cited

K.C. Multimedia, Inc. v. Bank of Am. Tech. & Operations, Inc., 171 Cal. App. 4th 939 (Cal. Ct. App.) (CUTSA supersession and "nucleus of facts" test)
Silvaco Data Sys. v. Intel Corp., 184 Cal. App. 4th 210 (Cal. Ct. App.) (discussing when common-law claims are displaced by CUTSA)
Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (Cal.) (noting Silvaco was disapproved on other grounds but cited for context)
Mattel, Inc. v. MGA Entertainment, Inc., 782 F. Supp. 2d 911 (C.D. Cal.) (holding CUTSA supersedes claims based on misappropriation of confidential information)
Angelica Textile Servs., Inc. v. Park, 220 Cal. App. 4th 495 (Cal. Ct. App.) (common-law tort survives CUTSA only if not based on trade-secret existence)
Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir.) (Rule 9(b) particularity requirements)
Edwards v. Marin Park, Inc., 356 F.3d 1058 (9th Cir.) (pleading the time, place, and content of alleged misrepresentations)
Kearns v. Ford Motor Co., 567 F.3d 1120 (9th Cir.) (the who, what, when, where, and how standard for fraud pleadings)
Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097 (9th Cir.) (Rule 9(b) applied to fraud-based claims)
Ethicon, Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir.) (district courts’ inherent power to stay proceedings, including pending PTO proceedings)