Human Longevity, Inc. v. J. Craig Venter Inst., Inc.

HUMAN LONGEVITY, INC., Plaintiff, v. J. CRAIG VENTER INSTITUTE, INC. andDOES 1-100, inclusive, Defendants.

Case No.: 18cv1656-WQH-LL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

December 18, 2018

ORDER

HAYES, Judge:

The matters before the Court are the Motion to Dismiss (ECF No. 23) and the Motion to File Documents Under Seal (ECF No. 34) filed by Defendant J. Craig Venter Institute, Inc.

I. BACKGROUND

On July 20, 2018, Plaintiff Human Longevity, Inc. (Plaintiff HLI) initiated this action by filing a Complaint for Damages and Injunctive Relief against Defendant J. Craig Venter Institute, Inc. (Defendant JCVI) and doe defendants. (ECF No. 1). Plaintiff brings the following causes of action: (1) misappropriation of trade secrets pursuant to the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 et seq.; (2) conversion; (3) tortious interference with contract; (4) tortious interference with prospective economic advantage; and (5) unfair business practices. Id. at 11-16

On August 3, 2018, the Court denied the motion for a temporary restraining order and the motion for an order to show cause why a preliminary injunction should not be issued filed by Plaintiff HLI. (ECF Nos. 6, 14).

On August 22, 2018, Defendant JCVI filed a Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6). (ECF No. 23).

On September 10, 2018, Plaintiff HLI filed a Response in Opposition (ECF No. 31) to the Motion to Dismiss.

On September 17, 2018, Defendant JCVI filed a Reply (ECF No. 32) in support of the Motion to Dismiss.

On October 15, 2018, Defendant JCVI filed a Notice of Ruling (ECF No. 33), and a Motion to File Documents Under Seal (ECF No. 34).¹

On November 8, 2018, the Court denied (ECF No. 41) the Motion to Disqualify Counsel filed by Plaintiff HLI (ECF No. 8).

II. ALLEGATIONS OF THE COMPLAINT

Plaintiff HLI alleges that it "combines DNA sequencing and expert analysis with machine learning to help change medicine to a more data-driven science." (ECF No. 1 ¶ 6). Plaintiff HLI alleges that "[a]s part of its operations, HLI has developed the 'Health Nucleus,' which combines intelligence platform integrating genomics, advanced clinical imaging and machine learning to provide clients with whole body assessment of potential disease and health risks." Id. ¶ 7. Plaintiff HLI alleges that Defendant JCVI was founded in 1992 under a different name, and "touts itself as a world leader in genomic andbioinformatics research." Id. ¶ 8. J. Craig Venter (Venter) has allegedly served as the Chairman and Executive Officer of JCVI and a member of the JCVI Board of Trustees at all relevant times in this matter. Id. ¶ 2. Plaintiff HLI alleges that Venter was CEO when HLI was founded in 2014. Id. ¶ 9.

In 2016, Venter allegedly signed an agreement to serve as HLI's Executive Chairman and a Proprietary Information and Inventions Agreement (PIIA). Id. ¶ 11. In the PIIA, Venter allegedly agreed that his inventions during employment, "along with all other confidential, 'business, technical, and financial information (including, without limitation, the identity of and information relating to customers or employees)' developed, learned or obtained by Venter during his employment, were considered 'Proprietary Information' and that he would not disclose such information." Id. ¶¶ 12-13. Plaintiff HLI alleges that "Venter agreed to return to HLI all items containing or embodying Proprietary Information" and agreed not to "encourage or solicit any employee of HLI to leave HLI for any reason" for one year after the term of his employment. Id. ¶¶ 14-15. Plaintiff HLI alleges,

During his HLI employment, Venter used [an] HLI-owned computer and server to send e-mails to his JCVI account at jcventer@jcvi.org. . . . Venter would consistently use his jcventer@jcvi.org e-mail for HLI business, including communicating with employees, donors and vendors. In addition, Venter instructed HLI to forward his HLI e-mails at jcventer@humanlongevity.com to his JCVI email address thereby forwarding HLI proprietary and trade secret information directly to JCVI.

Id. ¶ 23.

Plaintiff HLI alleges that during his employment, Venter had access to trade secrets related to Health Nucleus, including "processes and data relating to HLI's development of its Health Nucleus" and "bi-weekly business development updates, leadership updates, executive summaries, and weekly reports of all Health Nucleus activities." Id. ¶ 16.

Plaintiff HLI alleges that during his employment, Venter had access to trade secrets related to HLI's ongoing business, including "identity and contact information [for]financing or potential financing sources, including . . . high-net-worth individuals" and "negotiating terms and strategies for potential transactions." Id. Plaintiff HLI further alleges that such trade secrets include "[t]he identity and contact information of clients and potential client[s] . . . including . . . high-net-worth individuals such as Hollywood actors and actresses, corporate executives, NFL team owners, philanthropists and politicians"; "employee contact and compensation information"; "research data, studies, imaging, as well as client results and prognoses"; "HLI's-owned Lenovo laptop computer"; "internal financial reports on HLI's business operations and future forecasts"; audits and industry reports, "including analysis of market competitors"; and "plans, projections and negotiations regarding the potential expansion of [HLI's] business operations." Id. Plaintiff HLI alleges that "[t]he identification of investors who have the ability and the willingness to fund is the lifeblood of HLI. . . . HLI has expended considerable time and resources developing investor and customer lists with the identities and contact information of individuals who are interested in investing in or purchasing HLI's services." Id. ¶ 18.

In mid-May of 2018, Venter allegedly presented a one-sided, self-serving "rush investor deal" giving a new investor "rights that had already been granted to another party." Id. ¶ 28. On May 24, 2018, the HLI Board considered the deal, and "[a]t that point, the HLI Board voted to terminate Venter from HLI. They then communicated Venter's termination to him." Id. ¶ 28. The investor allegedly "pulled out of the HLI deal." Id. ¶ 32.

Following his termination, Venter allegedly "abruptly left the HLI corporate offices with his HLI-owned computer" and "immediately began using the HLI computer and server to communicate to the public [and] solicit HLI investors and employees" in order to "begin development of a program to directly compete with HLI's Health Nucleus." Id. ¶¶ 29, 35. Venter allegedly "used the HLI computer, accessed and sent . . . internal privileged communications involving Series C and Asia JV Series A Docs"; invited "an HLI Board member . . . to his home in Nantucket using the HLI computer"; emailed the potential investor from the failed May deal; and met "with as many as 9 HLI employees," one ofwhom "resign[ed] from HLI to join JCVI." Id. ¶¶ 31-33. Venter allegedly "[u]s[ed] the HLI-owned computer and server" to "sen[d] HLI trade secret and proprietary information as well as HLI internal communications to hired counsel." Id. ¶ 36.

Plaintiff HLI seeks general, special, and punitive damages, appropriate alternative statutory damages, disgorgement, injunctive relief, seizure of the laptop, legal costs, and interest and fees. Id. at 17.

III. APPLICABLE STANDARD

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." In order to state a claim for relief, a pleading "must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Dismissal under Rule 12(b)(6) "is proper only where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory." Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (quotation omitted).

Stating a claim for relief "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to dismiss, a court must accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). "[A]ccepting all factual allegations in the complaint as true and drawing 'all reasonable inferences in favor of the nonmoving party,'" the plaintiff's "allegations must 'plausibly suggest an entitlement to relief.'" Gregg v. Haw., Dep't of Pub. Safety, 870 F.3d 883, 886-87 (9th Cir. 2017) (first quoting TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir. 1999); then quoting Iqbal, 556 U.S. at 681).

"The standard at this stage of the litigation is not that plaintiff's explanation must be true or even probable." Starr v. Baca, 652 F.3d 1202, 1216-17 (9th Cir. 2011). The plaintiff's explanation must instead be plausible, which requires alleging "facts tending to exclude the possibility" that the defendant's "alternative explanation is true." Eclectic Props. E. v. Marcus & Millichap Co., 751 F.3d 990, 996-97 (9th Cir. 2014)("[E]stablishing only a 'possible' entitlement to relief . . . [does] not support further proceedings."); see also In re Century Aluminum Co. Sec. Litig., 729 F.3d 1104, 1105 (9th Cir. 2013) ("To render their explanation plausible, plaintiffs must do more than allege facts that are merely consistent with both their explanation and defendants' competing explanation.").

IV. DISCUSSION

Defendant JCVI contends that the Complaint does not state a claim under the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 et seq. (DTSA), because Plaintiff HLI fails to identify trade secrets with sufficient particularity. Defendant JCVI further contends Plaintiff HLI fails to adequately allege that Defendant JCVI improperly acquired, disclosed, or used any trade...