Emergy Inc. v. Better Meat Co.

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Emergy Inc., Plaintiff, v. The Better Meat Co., et al., Defendants.

No. 2:21-cv-02417-KJM-CKD

United States District Court, E.D. California

October 11, 2022

ORDER

The court summarized the history and nature of this matter in a previous order:

Emergy Inc. and The Better Meat Co. have both filed lawsuits in this court concerning their respective intellectual property rights in a mycelium-based meat substitute. On December 17, 2021, Better Meat filed a complaint against Emergy and an Emergy investor. See generally Compl ECF No. 1, Case No. 2:21-cv-02338-KJM-CKD. Ten days later and seven days after being served with Better Meat's complaint, Emergy filed this lawsuit against Better Meat and a former employee. See generally Compl., ECF No. 1 Case No. 2:21-cv-02417-KJM-CKD. Emergy alleges Better Meat stole its technique for generating a mycelium-based meat substitute. Better Meat alleges Emergy's claims are a baseless attempt to sabotage a competitor.

Order, ECF No. 38. In that same order, the court concluded Emergy's claims in its second-filed lawsuit are compulsory counterclaims, see id. at 2-3 (citing Fed.R.Civ.P. 13(a)); the court also tentatively concluded it would “direct Emergy to file the claims it attempted to assert [in its second-filed lawsuit] as counterclaims in Better Meat's lawsuit,” id. at 3. Before doing so, the court “provide[d] the parties an opportunity to show cause . . . why this approach is not superior to consolidation while fully meeting the parties' and the court's needs.” Id. The parties have now submitted supplemental briefing in response to the court's order. See ECF Nos. 39 & 40.

Emergy has two principal arguments against the court's proposed approach. First, Emergy argues the approach “could force Emergy to defend itself against statute of limitations challenges.” Emergy Suppl. Br. at 11. Emergy does not specify which of its state and federal claims might be subject to such challenges. In any event, the court disagrees Emergy's compulsory counterclaims may face this hurdle. See Malaivanh v. Humphreys Coll., No. 16-1081-KJM, 2017 WL 3503386, at *2 (E.D. Cal. Aug. 16, 2017) (explaining federal law permits tolling of compulsory counterclaims from moment plaintiff files complaint, and California rules “toll the counterclaim's statute of limitations from the moment [plaintiff] file[s] her original complaint regardless of the counterclaim's factual relatedness to the complaint”); ZF Micro Devices, Inc. v. TAT Capital Partners, Ltd., 5 Cal.App. 5th 69, 84-85 (2016), as modified (Nov. 30, 2016) (“[The statute of limitations] is a bar to the defendant's affirmative claim only if the period has already run when the complaint is filed. The filing of the complaint suspends the statute during the pendency of the action, and the defendant may set up his or her claim by appropriate pleading at any time.”).

Second, Emergy argues dismissing its claims and requiring it to re-file them as counterclaims in Better Meat's lawsuit “would set off a chain of unnecessary and duplicative work for both the parties and the Court.” Emergy Suppl. Br. at 11. Specifically, Emergy laments having to “re-package” its claims as counterclaims and participate in the motion to dismiss briefing that would likely follow, which in turn would force the court “to, once again, review, administratively track, potentially hold argument on, and rule on each of these filings.” Id. To address Emergy's efficiency concerns, the court addresses Better Meat's pending motion to dismiss below, while confirming its determination that Emergy's claims should proceed as counterclaims in Better Meat's first-filed suit.

I. BETTER MEAT'S 12(B)(6) MOTION TO DISMISS

A. Legal Standard

A motion to dismiss under Rule 12(b)(6) may be granted if the complaint lacks a “cognizable legal theory” or if its factual allegations do not support a cognizable legal theory. Godecke v. Kinetic Concepts, Inc., 937 F.3d 1201, 1208 (9th Cir. 2019) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988)). The court assumes all factual allegations are true and construes “them in the light most favorable to the nonmoving party.” Steinle v. City & Cnty. of San Francisco, 919 F.3d 1154, 1160 (9th Cir. 2019) (quoting Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995)). If the complaint's allegations do not “plausibly give rise to an entitlement to relief,” the motion must be granted. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

A complaint need contain only a “short and plain statement of the claim showing that the pleader is entitled to relief,” Fed.R.Civ.P. 8(a)(2), not “detailed factual allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). But this rule demands more than unadorned accusations; “sufficient factual matter” must make the claim at least plausible. Iqbal, 556 U.S. at 678. In the same vein, conclusory or formulaic recitations of elements do not alone suffice. Id. (citing Twombly, 550 U.S. at 555). This evaluation of plausibility is a context-specific task drawing on “judicial experience and common sense.” Id. at 679.

B. Discussion

Emergy asserts ten claims. Six claims are against Better Meat and Augustus Pattillo: (1) trade secret misappropriation under the federal Defend Trade Secrets Act (DTSA) (18 U.S.C. § 1836), see Compl. ¶¶ 85-101; (2) trade secret misappropriation under the California Uniform Trade Secret Act (CUTSA) (Ca. Civ. Code § 3426), see id. ¶¶ 102-119; (3) unfair competition (Cal. Bus. & Prof. Code § 17200), see id. ¶¶ 120-124; (4) unjust enrichment, see id. ¶¶ 125-128; (5) correction of inventorship (35 U.S.C. § 256), see id. ¶¶ 129-135; and (6) conversion, see Id. ¶¶ 136-142. Two claims are against Pattillo only: (7) breach of contract, see id. ¶¶ 143-153; and (8) breach of implied contract, see id. ¶¶ 154-159. And two claims are against Better Meat only:

(9) inducement to breach of contract, see id. ¶¶ 160-167; and (10) tortious interference, see id. ¶¶ 168-169.

Better Meat and Pattillo move to dismiss nine of Emergy's claims, excluding only the breach of contract claim against Pattillo. Better Meat packages its arguments into four categories, addressing Emergy's (1) inventorship claims, see Mot. at 15-19; (2) conversion claim, see id. at 19-20; (3) misappropriation claims, see id. at 20-21; and (4) remaining common-law claims, see id. at 21-26. The court addresses these arguments below.

1. Emergy's Inventorship Claims

Invoking 35 U.S.C. § 256, Emergy requests that its co-founders, Drs. Tyler Huggins and Justin Whiteley, be substituted as the inventors of the '137 patent or added as joint inventors. See Compl. ¶¶ 129-135. Section 256 states:

(a) CORRECTION.-Whenever through error a person is named in an issued patent as the inventor, or through error an inventor is not named in an issued patent, the Director may, on application of all the parties and assignees, with proof of the facts and such other requirements as may be imposed, issue a certificate correcting such error.

(b) PATENT VALID IF ERROR CORRECTED.-The error of omitting inventors or naming persons who are not inventors shall not invalidate the patent in which such error occurred if it can be corrected as provided in this section. The court before which such matter is called in question may order correction of the patent on notice and hearing of all parties concerned and the Director shall issue a certificate accordingly.

35 U.S.C. § 256. This section “provides a cause of action to interested parties to have the inventorship of a patent changed to reflect the true inventors of the subject matter claimed in the patent.” Fina Oil & Chem. Co. v. Ewen, 123 F.3d 1466, 1471 (Fed. Cir. 1997). Specifically, it “addresses two types of inventorship errors-misjoinder and nonjoinder.” CODA Dev. S.R.O. v. Goodyear Tire & Rubber Co., 916 F.3d 1350, 1358 (Fed. Cir. 2019) (citation omitted).

“Misjoinder is the error of naming a person as an inventor who is not an inventor; nonjoinder is the error of omitting an inventor.” Id. (citation omitted). “Through claims of misjoinder and nonjoinder together, § 256 allows complete substitution of inventors.” Id. (internal quotation marks, citations, and footnote omitted).

Before analyzing Emergy's inventorship claims, the court first outlines the relevant factual allegations.

a) Background

Drs Huggins and Whiteley founded Emergy in 2015. Compl. ¶ 12. They were Ph.D. students at the time. Id. As Ph.D. students, Huggins and Whiteley published articles and won multiple awards for their research on mycelium. Id. Between October 2016 and May 2017, Augustus Pattillo expressed interest in Dr. Huggins' work and repeatedly asked about job opportunities with Emergy, including twice offering to work for Emergy without pay. Id. ¶¶ 1923. Pattillo had a bachelor's degree in Environmental Studies/Ecology and Evolutionary Biology from the University of Colorado Boulder, id. ¶ 19, but he did not have professional training as a microbiologist or prior experience cultivating or processing mycelium, id. ¶ 39. Emergy eventually offered Pattillo a job as a “junior lab technician intern” and later selected him for a research fellowship. Id. ¶¶ 18, 24-25, 32-36. As a condition of his employment, Emergy required Pattillo to sign a nondisclosure agreement (NDA). Id. ¶¶ 24-25, 29. Emergy began sharing confidential information with Pattillo in May 2017, shortly after Pattillo returned the signed NDA. Id. ¶¶ 29-31.

Pattillo began his fellowship with Emergy in October 2017. Id. ¶ 36. Because Pattillo “was not a professionally trained microbiologist, nor did he have any prior experience using methods of cultivating or processing mycelium like those used by Emergy,” his work was “confined to being trained on how to...