ORDER DENYING IN PART AND GRANTING IN PART MOTION TO DISMISS, AND DENYING MOTION TO STAY
Breach of Contract
Silergy and Chen’s motion to dismiss MPS’s breach of contract claim is denied.
The breach of contract claim is based on the “Nondisclosure” provision of a settlement agreement reached by the parties to resolve prior litigation. The nondisclosure provision states as follows: “Dr. Chen represents and warrants not to use or disclose any document that contains MPS confidential information, including all documents that Dr. Chen received or sent while he was employed by MPS.” MPS alleges that Chen and Silergy are breaching this nondisclosure provision by “incorporating information obtained from” documents Chen previously stole from MPS “into Silergy’s flip chip package products....”
Silеrgy and Chen respond that there can be no breach of contract as a matter of law because the alleged theft of the documents took place before the parties reached their settlement agreement, and the alleged use of the documents also began before the parties reached thеir settlement agreement. They point to language in the agreement by which MPS releases Chen and Silergy from any claims “relating to actions taken before the Effective Date” of the agreement. And they argue that the continued sale today of any product that stems from use of stolen documents before the date of the settlеment is covered by the release. The absolute best that can be said of this argument is that it raises the possibility that the settlement agreement is ambiguous. The argument perhaps creates some doubt about whether the continued use of previously-stolen documents in connection with the development or sale of flip chip package products could constitute a violation of the agreement not to “use ... any document that contains MPS confidential information.” But “[a] motion to dismiss cannot be granted against a complaint to enforce an ambiguous contract.” Westlands Water Dist. v. U.S. Dep’t of Interior,
Willful Infringement
Silergy’s motion to dismiss MPS’s willful infringement claims is granted. With respect to the '048 patent, MPS has adequately alleged that Silergy had pre-suit knowledge of the patent, but it has not sufficiently alleged that Silergy acted despite an objectively high risk that it was infringing or that Silergy knew of this objectively high risk. With respect to the '758 and '899 patents, MPS has not adequately alleged Silergy’s pre-suit knowledge of the patents, nor has it adequately alleged that Silergy acted willfully in the post-suit time period.
Pre-Suit Knowledge
Silergy and MPS spend the bulk of their energy disputing whether the second amended complaint adequately alleges that Silergy knew about the patents-in-suit before the original complaint was filed. Construing all allegations in thе light most favorable to MPS, the complaint sufficient
As to the '048 patent, MPS alleges that Chen knew of its existence because of his role on MPS’s Patent Committee, which, according to the complаint, “meant that he was aware of MPS’s entire patent pipeline due to his job responsibilities.” SAC ¶ 21. More specifically, MPS alleges that “Chen was involved in approval and oversight of MPS’s patent application that would lead to” to the '048 patent. SAC ¶ 22. While it is true that “knowledge of a patent application does not equal knоwledge of issued patents,” Boundaries Solutions Inc. v. CoreLogic, Inc., No. 5:14-ev-00761-PSG,
However, MPS’s allegations are insufficient to suggest that Silergy knew of the '758 and '899 patents prior to the original complaint. MPS makes the same general allegations that it does with respect to the '048 patent, namely, that Sil-ergy knew of the '758 and '899 patents because of Chen’s role on the MPS patent committee and because Chen and Silergy reviewed MPS’s patent portfolio during settlement negotiations. , But the timing of thesе events renders these allegations implausible. Chen left MPS to form Silergy in February 2008, yet the '758 patent was not issued until October 8, 2012, over four- and-a-half years later. And the '899 was not issued until January 29, 2013, over five years later. Absent specific allegations about Chen’s knowledge of these two patents, the significant time gap between his service on the committee and the date the patents were issued makes it implausible that Chen knew of these patents as a result of his role on the MPS patent committee. Further, neither of these two patents existed when the parties signed the prior settlement agreement on December 6, 2011, so it seems impossible that Chen and Silergy would have leаrned of them through reviewing MPS’s patent portfolio at the time.
Finally, MPS argues that Silergy gained knowledge of the '758 and '899 patents through the filing of the original complaint on November 1, 2013 in the Central District of California.
In sum, MPS has sufficiently alleged that Silergy had pre-suit knowledge of the '048 patent, but it has not raised a рlausible inference that Silergy had pre-suit knowledge of the '758 or '899 patents.
Postr-Suit Conduct — '758 and '899 patents
Silergy argues that if MPS cannot allege that Silergy had pre-suit knowledge of the patents, then, by definition, MPS cannot maintain a willfulness claim based on post-suit conduct because Silergy has not sought a preliminary injunction. For this proposition Silergy quotes a sentence from In re Seagate,
Nonetheless, some courts seem to have interpreted this sentence as reflecting the adoption by the Federal Circuit of a rule that a plaintiff may not state a claim for willful infringement based on a defendant’s post-suit conduct if the plaintiff has not moved for a preliminary injunction to bar the defendant from continuing to infringe. In other words, some courts appear to have interpreted the Federal Circuit’s statement in Seagate as creating a rule that á plaintiff waives the right to pursue a claim for willful infringement based on post-suit conduct if it does not move for a preliminary injunction (at least unless circumstances somehow change later in the litigation that would justify adding a willful infringement claim). See, e.g., McRO, Inc. v. Namco Bandai Games Am., Inc.,
But it’s not clear why there should be any relationship between the decision by a patentee to refrain from seeking a preliminary injunction and the question of whether a defendant is willfully infringing after a lawsuit is filed. In other words, it’s
A better way to think about the issue is this: a plaintiff can state a claim for post-filing willful infringement so long as the plaintiff alleges, in an amended complaint and with sufficient particularity, that there is an objectively high risk the defendant is continuing to infringe and the defendant knows or should know of that objectively high risk. That, after all, is what a plaintiff must prove to prevail on a willful infringement claim. i4i Ltd. P’ship v. Microsoft Corp.,
Presumably courts would reach this сonclusion with some frequency in cases where only post-filing willfulness has been found and where the plaintiff didn’t seek interim relief. But there are plenty of reasons, unrelated to the merits, why a plaintiff might not seek a preliminary injunction, and any inquiry about the propriety of a plaintiffs decision to refrain from seeking interim relief is highly fact-dependеnt. See, e.g., HTC Corp. v. Tech. Props. Ltd.,
Adequacy of MPS’s Allegations
With this understanding, the question with respect to the '758 and '899 patents is whether MPS has, in its second amended complaint, alleged with sufficient particularity that Silergy continues to engage in the accused conduct despite knowing of an objectively high likelihood that it is infringing. The question is similar with respect to the '048 patent, because even though MPS has sufficiently alleged that Silergy had рre-suit knowledge of this patent, MPS must still allege that Silergy
MPS’s allegations do not raise a plausible inference that Silergy аcted despite knowing of an objectively high risk that it was infringing. Instead, MPS’s allegations are mostly a boilerplate recitation of the legal elements of the claim. SAC ¶¶ 41, 51, and 61. So even though MPS has sufficiently alleged Silergy’s pre-suit knowledge of the '048 patent, and even though MPS’s failure to seek a preliminary injunction does not prevent it from asserting а post-filing willful infringement claim with respect to the '758 and '899 patents, MPS has not alleged with sufficient particularity that the defendants acted with the requisite state of mind. In other words, MPS has not, in its allegations relating to willful infringement, included any facts that would allow a trier of fact to conclude that the defendants acted with a level of intent that is more culpable than the typical infringer. See Vasudevan Software,
Therefore, Silergy’s motiоn to dismiss MPS’s willful infringement claim is granted with respect to all three patents-in-suit. Dismissal is with partial leave to amend. With respect to its claim for pre-filing willful infringement of the '758 and '899 patents, dismissal is without leave to amend because it is impossible that MPS could allege, in good faith and at this stage, pre-filing knowledge of those patents (although discovery could give rise to a motion for leave to amend). With respect to its claim for pre-filing willful infringement of the '048 patent, MPS has leave to file an amended complaint within 14 days of the date of this order.
With respect to its claims for post-filing willful infringement of all three patents, MPS also has leave to file an amended complaint. MPS may amеnd its complaint with respect to post-filing willful infringement within the above-referenced 14-day period, or it may pursue discovery before deciding whether to add more detailed allegations of post-filing willful infringement. If it elects the latter, the Court will grant MPS leave to amend the complaint for this purpose (and the defendants will of course have the opportunity to move to dismiss the claims).
Induced and Contributory Infringement
The defendants’ motion to dismiss MPS’s induced and contributory infringement claim is denied in part and granted in part. For the '048 patent, it is denied in full. For the '758 and '899 patents, it is granted with respect to the pre-suit time period, because, as discussed above, MPS has not plausibly alleged the defendants’ knowledge of these two patents. See Global-Tech Appliances, Inc. v. SEB S.A.,
Service of Chen
MPS attempted to serve Chen through Michael Grimm, who represented Chen, in Chen’s personal capacity, at the mediation bеtween the parties. It appears Grimm was acting as Chen’s agent and could accept service on Chen’s behalf. See Warner Bros. Records. v. Golden W. Music Sales,
Motion to Stay
The defendants’ motion to stay the litigation is denied without prejudice to refiling that motion if the PTAB decides to institute inter partes review.
IT IS SO ORDERED.
Notes
. MPS also alleges that the defendants have pre-suit knowledge by virtue of a letter that MPS sent to the defendants on October 31, 2013. But MPS sued the defendants the next day, so it’s hard to imagine how this letter could possibly satisfy the pre-suit knowledge requirement.