Fortinet, Inc. v. Forescout Techs.

ORDER DENYING PLAINTIFF'S MOTION TO DISMISS COUNTERCLAIMS

Docket No. 115

EDWARD M. CHEN UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

In this action, Defendant Forescout Technologies, Inc. (“Forescout”) counterclaims against Plaintiff Fortinet, Inc. (“Fortinet”), alleging that Fortinet infringed six of its patents and tortiously interfered with its business relations.

Pending before the Court is Fortinet's motion to dismiss Forescout's counterclaim. Fortinet argues that four of Forescout's patents claimed ineligible subject matter under 35 U.S.C. § 101 and that Forescout's claim for tortious interference should be dismissed due to: (1) lack of subject matter jurisdiction, (2) federal law preemption of the state claim, and (3) failure to state a plausible claim. For the following reasons, the Court DENIES Fortinet's motion to dismiss.

A. Factual Background

Fortinet sells cybersecurity products, software, and services to large institutional customers. Docket No. 67 at 1. Forescout is a competitor of Fortinet in the cybersecurity market and owns U.S. Patent No. 8, 590, 004 (“the ‘004 Patent”) (Method and System for Dynamic Security Using Authentication Server); Patent No. 10, 652, 116 (“the ‘116 Patent”) (Device Classification); Patent No. 10, 530, 764 (“the ‘764 Patent”) (Post-Connection Client Certificate

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Authentication); Patent No. 6, 363, 489 (“the ‘489 Patent”) (Method for Automatic Intrusion Detection and Deflection in a Network); and Patent No. 10, 652, 278 (“the ‘278 Patent”) (Compliance Monitoring). Counterclaim at 53, 55, 57, 60.

On February 9, 2020, Forescout publicly announced a major acquisition in which Advent International (“Advent”), a global private equity investor, would acquire all outstanding shares of Forescout. Id. at 43. One business day before Advent was scheduled to close the acquisition, Fortinet filed its Complaint, then allegedly engaged in a campaign to smear Forescout. Id. Fortinet allegedly told CRN, an industry news source, that Fortinet:

[D]oesn't take litigation lightly and has only engaged in lawsuits to protect its intellectual property on seldom occasions when it is left no alternative But Forescout's wrongful incorporation of Fortinet's intellectual property into its product offerings is material and goes to the heart of Fortinet's business

Id. at 46.

Forescout further alleges that Fortinet falsely raised doubts on Forescout's financial solvency to “existing and potential customers.” Id. Fortinet's major accounts manager distributed a sample email used to “target folks looking at or using ForeScout, ” which stated the following:

With (insert company name) 's up and coming investment in (insert NAC, zero trust security, whatever way you would like to describe the project) I wanted to insure you were aware of the ongoing legal problems and future of Forescout. In short, Fortinet has filed lawsuit against Forescout for patent infringement related to technology held within FortiNAC. Their acquisition by Advent and bid to be taken private was put on hold resulting in Forescout now filing a lawsuit against Advent all this leaving Forescout on uncertain ground financially. This information is all public and can information on it is readily accessible.” - From here, you could include any of the various links to articles detailing the situation with Forescout, the financial comparison or any other info you think would resonate. Below are some [links to articles about Forescout's legal problems caused by Fortinet][.]

Id. at 46-47.

B. Procedural Background

Fortinet alleged infringement of three patents in its original Complaint and two additional patents in its Amended Complaint. Docket No. 1; Docket No. 67. In November 2020 and June 2021, the Court granted in part and denied in part Forescout's motions to dismiss which argued

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that the patents claimed ineligible subject matter and were, therefore, invalid under § 101. Docket No. 24; Docket No. 71.

In July 2021, Forescout brought counterclaims against Fortinet, alleging infringement of six patents, as well as a claim for tortious interference based on extrajudicial statements made by Fortinet. On August 17, 2021, Fortinet moved to dismiss the counterclaims, including the ‘116, ‘764, ‘489, and ‘278 Patents.

II.LEGAL STANDARD

The Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). A complaint that fails to meet this standard may be dismissed pursuant to the Federal Rule of Civil Procedure 12(b)(6). See Fed. R. Civ. P. 12(b)(6). To overcome a Rule 12(b)(6) motion to dismiss after the Supreme Court's decisions in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 (2007), a plaintiff's “factual allegations [in the complaint] 'must . . . suggest that the claim has at least a plausible chance of success.” Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014). The court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). However, “allegations in a complaint . . . may not simply recite the elements of a cause of action [and] must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Levitt, 765 F.3d at 1135. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft, 556 U.S. at 678. “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.

III. DISCUSSION

A. Patent Subject Matter Eligibility Under § 101

Under the Patent Act of 1952, patents are “presumed valid.” 35 U.S.C. § 282(a). “As such, an alleged infringer asserting an invalidity defense pursuant to § 101 bears the burden of

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proving invalidity by clear and convincing evidence.” Cisco Sys., Inc. v. Uniloc USA, Inc., 386 F.Supp.3d 1185, 1190 (N.D. Cal. 2019) (citing Microsoft Corp. v. I4I Ltd. P'ship, 564 U.S. 91, 95, 131 (2011)). “Patent eligibility under 35 U.S.C. § 101 is ultimately an issue of law” but “may contain underlying issues of fact.” Berkheimer v. HP Inc., 881 F.3d 1360, 1365 (Fed. Cir. 2018). “Like other legal questions based on underlying facts, ” patent eligibility “may be, and frequently has been, resolved on a Rule 12(b)(6) or (c) motion where the undisputed facts . . . require a holding of ineligibility under the substantive standards of law.” SAP Am., Inc. v. InvestPic, LLC, 898 F.3d 1161, 1166 (Fed. Cir. 2018). Thus, “[although claim construction is often desirable, and may sometimes be necessary, to resolve whether a patent claim is directed to patent-eligible subject matter, ” it is not “an inviolable prerequisite to a validity determination under § 101, ” and may be eschewed “[w]here the court has a full understanding of the basic character of the claimed subject matter.” Voip-Pal.Com, Inc. v. Apple Inc., 375 F.Supp.3d 1110, 1124 (N.D. Cal. 2019).

Section 101 defines the scope of patent-eligible subject matter. It provides: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor.” 35 U.S.C. § 101. Patents may not be obtained for “laws of nature, natural phenomena, [or] abstract ideas.” Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208, 217 (2014). In Alice, the Supreme Court established a two-step test that district courts must apply in a patent eligibility analysis under §101.

At step one, the court must “determine whether the claims at issue are directed to a patent-ineligible concept, ” i.e., a law of nature, natural phenomenon, or an abstract idea. Id. at 218. If so, then the court moves to step two, which “considers] the elements of each claim both individually and 'as an ordered combination' to determine whether [any] additional elements 'transform the nature of the claim' into a patent-eligible application” of the ineligible subject matter. Id. at 217 (quoting Mayo Collaborative Servs. v. Prometheus Lab'ys, Inc., 566 U.S. 66, 78-79 (2012)).

While the precise contours of what constitutes an “abstract idea” under step one remains elusive, the Supreme Court has identified algorithms, mathematical formulae, “fundamental economic practice[s] long prevalent in our system of commerce, ” and other “method[s] of

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organizing human activity” as impermissibly abstract. Alice, 573 U.S. at 218-20 (citing Bilski v. Kappos, 561 U.S. 593, 599 (2010)). To determine whether the claims at issue are directed to one of those patent-ineligible concepts, the courts “look to whether the claims . . . focus on a specific means or method that improves the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery.” McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299, 1314 (Fed. Cir. 2016).

Merely applying an “abstract idea . . . on a generic computer” does not satisfy step one. Bascom Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1348 (Fed. Cir. 2016). Nor does “[limiting the invention to a technological environment” such as the Internet transform an otherwise abstract idea into non-abstract one. Berkheimer, 881 F.3d at 1367. According to the Federal Circuit, a computer-based patent should...