Lumasense Techs., Inc. v. Advanced Eng'g Servs., LLC

LUMASENSE TECHNOLOGIES, INC., Plaintiff, v. ADVANCED ENGINEERING SERVICES, LLC, Defendant.

Case No. 20-cv-07905-WHO

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

March 30, 2021

ORDER DENYING MOTION TO STRIKE AND MOTION TO DISMISS

Re: Dkt. No. 23

INTRODUCTION

In this action, plaintiff LumaSense Technologies, Inc. ("LumaSense") alleges that defendant Advanced Engineering Services, LLC ("AES") infringed several of LumaSense's trademarks and copyrighted materials. AES moves to strike the claims under California's anti-SLAPP rule and dismiss under 12(b)(6), arguing that LumaSense's claims are based exclusively on AES's protected petitioning activity of filing materials in a related and ongoing state court action between the same parties. LumaSense responds that its claims are not based on AES's state court filing. For the reasons discussed below, I conclude that AES's motions are based primarily on a misreading of LumaSense's Complaint. AES's motion to strike and motion to dismiss are DENIED.

BACKGROUND

LumaSense designs and develops sensing technology to detect, measure, and analyze process conditions in power-intensive industries. Dkt. No. 1 ("Compl.") ¶ 7. Its products include fiber optic temperature ("FOT") sensors and non-dispersive infrared ("NDIR") sensors. Id. It designs its sensors so they can be customized for specific customers and applications. Id. ¶ 8. It may perform these customizations and integrations or may sell customers off-the-shelf baseline products that the customers then integrate into their products on their own. Id. It may also work with a third party to pursue new applications for its sensors and assist customers in integrating LumaSense's products. Id. ¶ 15.

In 2013, AES president Akhil Seth approached LumaSense with a business proposal. Id. ¶ 16. Seth allegedly asserted that he had personal relationships with companies in need of FOT and NDIR sensors, understood their specific needs, and could perform customization and integration for these potential users. Id. The parties entered into a Value Added Reseller Agreement ("VAR Agreement") that granted AES a limited license to purchase LumaSense's trademark, copyright, and patent-protected FOT and NDIR sensors, modify them for customer integration, and resell them to a group of agreed-upon customers ("VAR Customers"). Id. ¶ 17.

LumaSense alleges that the VAR Agreement gave AES the exclusive right to sell customized sensors developed under the agreement, but did not preclude LumaSense from continuing to sell its baseline products. It further alleges that the parties did not enter into the VAR Agreement to develop a new product or product lines. Id. ¶ 19.

On August 23, 2018, AES filed a lawsuit against LumaSense in Santa Clara Superior Court, alleging eight different causes of action arising out of the VAR Agreement. Id. ¶ 21. AES's lawsuit includes a claim for misappropriation of trade secrets. Id. ¶ 22. AES alleges that it provided confidential trade secret information to LumaSense under the VAR Agreement and that LumaSense used that information to develop new FOT and NDIR sensors that it sold to VAR Customers without informing or compensating AES. Id.

LumaSense disputes the allegations in the state court action and filed a motion to compel AES to identify the specific trade secrets it disclosed to LumaSense. Id. ¶ 24. In response, AES filed a confidential disclosure statement under seal, which included exhibits purporting to identify AES's trade secrets. Id.

LumaSense alleges that the exhibits AES included with its disclosure statement in state court "contained the protected and registered intellectual property of LumaSense." Id. ¶ 25. It asserts that AES used LumaSense's trademarks on its own and removed LumaSense's trademark identifiers and registered symbols. Id. ¶ 26. For example, AES created a product label for an FOTprobe that included LumaSense's registered trademarks "LumaSense" and "Fluoroptic." Id. ¶ 27. AES also allegedly used LumaSense's registered trademark "LumaSense Technologies" in a "certificate of compliance." Id. ¶ 28. AES allegedly sent the product label and certificate of compliance to at least one customer, AKT America Inc. ("AKT").

LumaSense also alleges that AES attached product drawings to its disclosure statement that directly copied and/or were derived from LumaSense's copyright protected technical drawings. Id. ¶ 30. AES represented to the court that it has provided these drawings to LumaSense. Id. LumaSense alleges that it "raised these concerns and identified the infringing actions performed by AES in the state court proceeding" but that "AES has not amended its Disclosure Statement and continues to claim LumaSense's trademarks and copyrighted works as its own." Id. ¶ 31.

LumaSense brings claims for copyright infringement, trademark infringement, false designation of origin, and common law unfair competition. Id. ¶¶ 32-64. AES moves to strike the Complaint under California's Anti-SLAPP rule and to dismiss the action under 12(b)(6). Dkt. No. 23-1 ("Mot.").

LEGAL STANDARD

I. MOTION TO STRIKE

California Code of Civil Procedure 425.16 "was enacted to allow early dismissal of meritless first amendment cases aimed at chilling expression through costly, time-consuming litigation." Metabolife Int'l, Inc. v. Wornick, 264 F.3d 832, 839 (9th Cir. 2001). These lawsuits are also known as "Strategic Lawsuits Against Public Participation," or "SLAPPs." Makaeff v. Trump Univ., LLC, 715 F.3d 254, 261 (9th Cir. 2013). Under section 425.16 a party may file an "anti-SLAPP motion" to strike "a cause of action based on an act in furtherance of [the] right to petition or free speech." Metabolife, 264 F.3d at 840 (internal quotations omitted).

In ruling on an anti-SLAPP motion, a court engages in a two-step process. Equilon Enterprises v. Consumer Cause, Inc., 29 Cal.4th 53, 67 (2002). Under step one, the court assesses whether the moving party has made "a prima facie showing that the lawsuit arises from an act in furtherance of its First Amendment right to free speech." Nat'l Abortion Federation v. Center forMedical Progress, Case No. 15-cv-03522-WHO, 2015 WL 5071977, at *3 (N.D. Cal. Aug. 27, 2015).

At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached.

Baral v. Schnitt, 1 Cal. 5th 376, 398 (2016).

If the moving party can establish step one, the burden shifts to the non-moving party which must then show a reasonable probability that it will prevail on its claim. Makaeff, 715 F.3d at 261. "For a plaintiff to establish a probability of prevailing on a claim, he must satisfy a standard comparable to that used on a motion for judgment as a matter of law." Price v. Stossel, 620 F.3d 992, 1000 (9th Cir. 2010). This standard requires that a claim be dismissed if the plaintiff presents an insufficient legal basis, or if no reasonable jury would find in its favor. Metabolife, 264 F.3d at 840; see also Price, 620 F.3d at 1000 (an anti-SLAPP motion will be granted if the plaintiff "presents an insufficient legal basis for the claims or when no evidence of sufficient substantiality exists to support a judgment for the plaintiff.") (internal quotations omitted).

II. MOTION TO DISMISS

Under Federal Rule of Civil Procedure ("FRCP") 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the plaintiff pleads facts that "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). There must be "more than a sheer possibility that a defendant has acted unlawfully." Id. While courts do not require "heightened fact pleading of specifics," a plaintiff must allege facts sufficient to "raise a right to relief above the speculative level." See Twombly, 550 U.S. at 555, 570.

In deciding whether the plaintiff has stated a claim upon which relief can be granted, theCourt accepts the plaintiff's allegations as true and draws all reasonable inferences in favor of the plaintiff. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). However, the court is not required to accept as true "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." See In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008).

DISCUSSION

I. MOTION TO STRIKE

AES moves to strike all four of LumaSense's claims under California's anti-SLAPP rule, arguing that the claims arise out of AES's protected first amendment activity of filing materials in an ongoing state court action. See Mot. at 4-6, 13. LumaSense opposes the motion arguing that: (1) California's anti-SLAPP rule does not apply to the three federal claims; and (2) the one California claim arises out of AES's general infringement and misuse of LumaSense's intellectual property, not the state court filing. Opp. at 4-6. As discussed in more detail below, California's anti-SLAPP rule does not apply to federal causes of action and LumaSense's single California cause of action does not arise out of AES's protected litigation activity. Accordingly, I will deny AES's motion to strike.

The Ninth Circuit has made clear that California's "anti-SLAPP statute does not apply to federal law causes of action." Hilton v. Hallmark Cards, 599 F.3d 894, 901. AES does not dispute this in its...