Becton, Dickinson & Co. v. Cytek Biosciences Inc.

BECTON, DICKINSON AND COMPANY, Plaintiff, v. CYTEK BIOSCIENCES INC., et al., Defendants.

Case No. 18-cv-00933-MMC

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

May 21, 2018

ORDER GRANTING DEFENDANT CYTEK'S MOTION TO DISMISS; GRANTING INDIVIDUAL DEFENDANTS' MOTION TO DISMISS; AFFORDING LEAVE TO AMEND

Re: Dkt. Nos. 23, 24

Before the Court are the following two motions, both filed March 9, 2018: (1) defendant Cytek Biosciences Inc.'s ("Cytek") Motion to Dismiss, brought pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure; and (2) defendants Ming Yan ("Yan"), Alfred Riley ("Riley"), David Vrane ("Vrane"), Zhenyu Zhang, erroneously sued herein as Stephen Zhang ("Zhang"), Zhenxiang Gong ("Gong"), Alex Zhong ("Zhong"), Maria Jaimes ("Jaimes"), Gil Reinin ("Reinin"), and Janelle Shook's ("Shook") (collectively, "Individual Defendants") Motion to Dismiss and Joinder in Cytek's Motion to Dismiss, likewise brought pursuant to Rule 12(b)(6). Plaintiff Becton, Dickson and Company ("Becton") has filed a "Combined Opposition" to the above-referenced motions, to which Cytek and the Individual Defendants have separately replied. The Court, having read and considered the papers filed in support of and in opposition to the motions, rules as follows.

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BACKGROUND¹

Becton is a "medical technology company" that "manufactures and sells a broad range of medical supplies, devices, laboratory equipment, and diagnostic products" (see Compl. ¶ 8), including flow cytometers (see id. ¶ 36).² The Individual Defendants are former Becton employees, all of whom worked on "flow cytometry development projects" at Becton (see id. ¶ 56), and, with the exception of Reinin, "downloaded" files from Becton (see id. ¶¶ 77-112) before their departures from the company, which departures took place between January 2015 and October 2016 (see id. ¶¶ 11-28). After their departures, the Individual Defendants began working at Cytek, a "company providing service, upgrades, and technical support to flow cytometers developed by other companies, including [Becton]." (See id. ¶ 130).

"Before approximately March 2017, Cytek . . . did not produce or sell any of its own cytometers." (See id. ¶ 132.) "On or about March 2017, . . . Cytek launched its first flow cytometery system, the DxP Athena™" (see id. ¶ 137), and, "[o]n or about June 7, 2017, Cytek launched another flow cytometery system, the Cytek Aurora™," which system, according to Becton, "shares striking similarities with [a] spectral flow cytometer previously in development at [Becton] by Yan and other Individual Defendants" (see id. ¶ 138).

Based on the above events, Becton asserts the following ten Claims for Relief: (1) "Misappropriation/Threatened Misappropriation of Trade Secrets Under the Defend Trade Secrets Act of 2016"; (2) "Aiding and Abetting the Defend Trade Secrets Act of 2016"; (3) "Misappropriation/Threatened Misappropriation of Trade Secrets Under the California Uniform Trade Secrets [Act]"; (4) "Violation of California Unfair Competition Law"; (5)"Breach of Contract"; (6) "Breach of Implied Covenant of Good Faith and Fair Dealing"; (7) "Inducing Breach of Contract"; (8) "Unjust Enrichment"; (9) "Breach of Confidence"; and (10) "Common Law Conversion."

By the instant motions, Cytek seeks dismissal of all claims asserted against it, namely, the First through Fourth, and Seventh through Tenth Claims for Relief, and the Individual Defendants, along with joining in Cyteks motion, move separately to dismiss the First and Second Claims for Relief on additional grounds, as well as to dismiss the Fifth and Sixth Claims for Relief, which two claims are brought only against the Individual Defendants.

LEGAL STANDARD

Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure "can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). Rule 8(a)(2), however, "requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). Consequently, "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations." See id. Nonetheless, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." See id. (internal quotation, citation, and alteration omitted).

In analyzing a motion to dismiss, a district court must accept as true all material allegations in the complaint, and construe them in the light most favorable to the nonmoving party. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). "To survive a motion to dismiss, a complaint must contain sufficient factual material, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "Factual allegations must be enough to raise a right to relief above the speculative level[.]" Twombly, 550 U.S. at 555.Courts "are not bound to accept as true a legal conclusion couched as a factual allegation." See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted).

DISCUSSION

As noted, each of Becton's claims is challenged by one or more of the named defendants. The Court addresses each such claim below.

A. Misappropriation of Trade Secrets (First and Third Claims for Relief)

The elements of a misappropriation of trade secrets claim under the Defend Trade Secrets Act ("DTSA") and California Uniform Trade Secrets Act ("CUTSA") are essentially the same. Under either statute, the owner of "information" that the owner has made "reasonable" efforts to keep secret and which "derives independent economic value . . . from not being generally known to" other persons, must show the defendant's wrongful "acquisition[,] . . . disclosure or use" thereof. See 18 U.S.C. §§ 1836, 1839; Cal. Civ. Code § 3426.1, 3426.3; see also Veronica Foods Co. v. Ecklin, No. 16-CV-07223-JCS, 2017 WL 2806706, at *12 (N.D. Cal. June 29, 2017) (noting the definitions of "trade secret" and "misappropriation" in CUTSA are "substantially identical to the definitions of those terms in the DTSA").

Defendants argue Becton has failed to adequately identify the trade secrets, i.e., the information, on which its misappropriation claims are based, and, further, that Becton has failed to allege any act of misappropriation occurring on or after the date of the DTSA's enactment.

1. Identification of Trade Secrets

Although, to plead a claim for misappropriation, a "plaintiff need not spell out the details of the trade secret" on which its claim is based, see Space Data Corp. v. X, No. 16-CV-03260-BLF, 2017 WL 5013363, at *2 (N.D. Cal. Feb. 16, 2017) (internal quotation and citation omitted), such plaintiff must "describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons . . . skilled in the trade," see Imax Corp. v. Cinema Techs., Inc., 152 F.3d 1161, 1164-65 (9th Cir. 1998) (internal quotation, citation, andemphasis omitted).

Here, in support of its claims, Becton alleges each individual defendant, with the exception of Reinin, downloaded one or more categories of information, for example, "design review templates" (see Compl. ¶ 83), "fluidics design files" see id. ¶ 88), and "source code files" (see id. ¶ 97; see also ¶¶ 77, 92, 102, 107, 112). Such allegations are, however, too broadly stated to identify the trade secrets on which Becton's claims are based. See, e.g., Space Data Corp., 2017 WL 5013363, at *2 (holding "high-level overview" of plaintiff's trade secrets, such as "data on the propagation of radio signals from stratospheric balloon-based transceivers," failed to satisfy requirements of Rule 8).³ Moreover, a number of the categories are preceded by the phrases "such files included" and "such as," thereby further expanding the scope of the allegations in which the categories are contained. (See, e.g., Compl. ¶¶ 83, 88.)⁴

Becton's reliance on paragraph 61 of the Complaint, which paragraph provides "[e]xamples of confidential and proprietary information related to Project Newton⁵ and other [Becton] flow cytometry products" (see Compl. ¶ 61; see also id. ¶ 154 (setting forth same examples)), likewise is unavailing. Given the inclusion of the phrase "and other [Becton] flow cytometry products" (see id. ¶ 61), Becton's reference to "Project Newton"does not, contrary to Becton's argument, serve to narrow the examples listed thereafter, and, in any event, there is no allegation that any of the defendants acquired, disclosed, or used any such information.⁶

Accordingly, Becton's First and Third Claims for Relief will be dismissed with leave to amend.

2. Applicability of DTSA

The DTSA applies to the "misappropriation of a trade secret . . . for which any act occurs on or after the date of [its] enactment," specifically, May 11, 2016. See Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, 130 Stat. 376, 381-82 (May 11, 2016). In addressing claims brought thereunder, a number of district courts have held the DTSA applies to wrongful use that began prior to the DTSA's enactment if such use continues to occur after its enactment. See Veronica Foods Co., 2017 WL 2806706, at *13 (citing cases); see e.g., Cave Consulting Grp., Inc. v. Truven Health Analytics, Inc., No. 15-CV-02177-SI, 2017 WL 1436044 at *4 (N.D. Cal. Apr. 24, 2017) (holding "[n]othing suggests that the DTSA forecloses a use-based theory simply because the trade secret being used was misappropriated before the DTSA's enactment"). Where, however, a defendant discloses information to a person or entity prior to the DTSA's enact...