Monolithic Power Sys. v. Meraki Integrated Circuit(Shenzhen) Tech.

MONOLITHIC POWER SYSTEMS, INC. AND CHENGDU MONOLITHIC POWER SYSTEMS CO., LTD., Plaintiffs, v. MERAKI INTEGRATED CIRCUIT (SHENZHEN) TECHNOLOGY, LTD. AND PROMATE ELECTRONIC CO., LTD., Defendants.

Civil No. 6:20-CV-008876-ADA

United States District Court, W.D. Texas, Waco Division

September 1, 2021

ORDER DENYING IN-PART AND GRANTING IN PART DEFENDANT'S MOTION TO DISMISS

ALAN D. ALBRIGHT UNITED STATES DISTRICT JUDGE.

Came on for consideration this date is Defendant Meraki Integrated Circuit (Shenzhen) Technology, LTD.'s (“Meraki”) Motion to Dismiss Claims I through VI (against Meraki) from the First Amended Complaint for lack of personal jurisdiction under Rule 12(b)(2), for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure, and for preemption of Claims V and VI (tortious inference and unfair competition) under the Texas Uniform Trade Secrets Act, Tex Civ. Prac. &Rem Code Ann. § 134A.007. Def.'s Mot., ECF No. 22. Meraki further moved to dismiss Claims III-VI, citing a forum selection clause in the Confidentiality Agreements between MPS and Meraki's founders. Id. The Motion was filed on December 29 2020. Id.

Plaintiffs Monolithic Power Systems and Chengdu Monolithic Power Systems (together, “MPS”) filed their Response on January 12, 2021. Pls.' Resp., ECF No. 28. Meraki filed its Reply on January 19, 2021. Def.'s Reply, ECF No. 29. After careful consideration of the Motion, the Parties' briefs and the applicable law, the Court DENIES Defendant Meraki's Motion to Dismiss in part, but GRANTS WITHOUT PREJUDICE the Motion to Dismiss claims of willful, induced, and contributory infringement.

I. BACKGROUND

MPS filed this lawsuit on September 25, 2020, alleging patent infringement, trade secret misappropriation, tortious interference, and unfair competition. ECF No. 1. Meraki is a Chinese company located in Shenzhen that sells power chip products in China. Def.'s Mot. at 1-2. Meraki has no offices, employees, agents, or business in Texas. Id. Its co-founders Mr. Wei (Wayne) Dong and Ms. Lin (Elaine) Sheng previously worked for MPS before starting Meraki. Pls.' Resp. at 1. Mr. Dong, relocated to China in March 2017 and Ms. Sheng moved to China in July 2017, and started working at Meraki in January 2018 as its Chief Technology Officer. Id. at 3.

MPS alleges that Meraki infringed upon U.S. Patent Nos. 8, 400, 790 (“the '790 Patent”) and 10, 432, 104 (“the '104 Patent”). First Am. Compl., ECF No. 21. According to MPS, these patents generally relate to the field of synchronous rectification. Id. at ¶¶ 15-16. MPS alleges that the Mr. Dong and Ms. Sheng stole trade secrets while employed by MPS, and used those trade secrets to establish a competing corporation, Meraki. See generally, id. at ¶¶ 3-18. Meraki now files the instant Motion arguing the Court lacks personal jurisdiction over it and that MPS has not properly alleged its claims in a way that survives a Rule 12(b)(6) Motion to Dismiss. See, generally, Def.'s Mot.

II. LEGAL STANDARD

A. Personal jurisdiction via a directed activity toward the forum

Because Texas's long-arm statute reaches to the limits of the Federal Constitution, the only question to assess is whether exercising personal jurisdiction offends due process. Hascore USA, Inc. v. N. Am. Hoganas, Inc., Case No. SA-13-CA-466-OLG, 2013 WL 12183224, at *2 (W.D. Tex., Aug. 23, 2013). In the patent context, courts determining whether specific jurisdiction exists use the Federal Circuit's test and consider whether: (1) the defendant purposefully directed its activities at residents of the forum; (2) the claim arises out of or relates to those activities; and (3) the assertion of personal jurisdiction is reasonable and fair. Nuance Comm's, Inc. v. Abbyy Software House, 626 F.3d 1222, 1231 (Fed. Cir. 2010).

B. Personal jurisdiction under a stream-of-commerce theory

The stream-of-commerce doctrine “recognizes that a defendant may purposefully avail itself of the protection of a state's laws-and thereby [ ] subject itself to personal jurisdiction-by sending its goods rather than its agents into the forum.” In re: Depuy Orthopaedics, Inc., 888 F.3d at 753. Under Fifth Circuit law, sufficient minimum contacts exist so long as “the defendant delivered the product into the stream of commerce with the expectation that it would be purchased by or used by consumers in the forum state.” Ainsworth v. Moffett Eng'g, Ltd., 716 F.3d 174, 177 (5th Cir. 2013) (quoting Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374 (5th Cir. 1987)). In other words, “mere foreseeability or awareness [is] a constitutionally sufficient basis for personal jurisdiction if the defendant's product made its way into the forum state while still in the stream of commerce.” Id. (quoting LuvN' care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 470 (5th Cir. 2006)); Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 419 (5th Cir. 1993).

Even so, it is important that “[t]he defendant's contacts [with the forum state] must be more than ‘random, fortuitous, or attenuated, or [the result] of the unilateral activity of another party or third person.'” ITL Int'l, Inc. v. Constenla, S.A., 669 F.3d 493, 498 (5th Cir. 2012). Finally, this Court must resolve all undisputed facts submitted by the plaintiff, as well as all facts contested in the affidavits, in favor of jurisdiction. Luv N' care, Ltd., 438 F.3d at 469 (citing Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir. 1982)).

C. Motion to Dismiss under Rule 12(b)(6)

In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court accepts all well-pleaded facts as true, viewing them in the light most favorable to the nonmovant. In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). However, a court need not blindly accept each and every allegation of fact; properly pleaded allegations of fact amount to more than just conclusory allegations or legal conclusions “masquerading as factual conclusions.” Taylor v. Books A. Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 56 U.S. 652, 678 (2009).

To survive the motion to dismiss, a nonmovant must plead enough facts to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at 570. The court determines whether the plaintiff has stated both a legally cognizable and plausible claim; the court should not evaluate the plaintiff's likelihood of success. Lone Star Fund V. (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). Based upon the assumption that all the allegations in the complaint are true, the factual allegations must be enough to raise a right to relief above the speculative level. Twombly, 550 U.S. at 555.

III. ANALYSIS

A. This Court's exercise of personal jurisdiction over Meraki is proper

In its Motion, Meraki argues that its single contact in Texas, an independent distributor's provision of free product samples in response to a “MPS-related” entity, does not create a constitutionally adequate basis for personal jurisdiction. Def.'s Mot. at 1. Meraki asserts that it “designs, makes, and sells its power chip products in China and has never purposefully sold products to any customer based in the United States-let alone Texas-nor has it intended or encouraged its power chip products to arrive at a location within Texas.” Id. at 5. It further claims that when selling its power chips in China, “Meraki generally has no knowledge about where its customers eventually sell their final products that integrate [its] power chips.” Id. Meraki finally argues asserting personal jurisdiction would be unreasonable because subjecting a foreign company to United States law would impose a heavy burden and, in light of regional COVID-19 cases, “would make it even more burdensome for Meraki to defend itself in this forum.” Id. at 89.

In Response, MPS argues specific jurisdiction exists because Meraki has the requisite minimum contacts in this forum and exercising jurisdiction would be fair and reasonable. Pls.' Resp. at 4. MPS claims that Meraki's activities were purposefully directed to this forum because Meraki instructed one of its distributors, Promate, to import a sample of the Accused Products to a potential customer, Sawblade, in Austin. Id. MPS acknowledges these products were not sold but stresses that Meraki imported and offered for sale the Accused Products in this forum. Id. at 5. MPS argues that there is no de minimis exception to personal jurisdiction and that the “importation or sale of a single infringing product is enough to confer personal jurisdiction over the defendant.” Id.

MPS also advances a stream-of-commerce theory of personal jurisdiction. Id. at 7. Because Meraki's customers in the United States (Lenovo and Delta) have a well-established and sizeable presence, MPS argues that is sufficient to support prima facie showing that Meraki knew or should have known that the Accused Products would end up in the second largest state in the country, Texas. Id. at 7-8. Lastly, MPS argues that asserting personal jurisdiction over Meraki would be fair and reasonable because Texas has an interest in discouraging injuries that occur in the state (here, the alleged infringement). Id. at 10. As to the concerns surrounding the COVID-19 pandemic, MPS asserts there are many precautions that can be taken to mitigate the risks and safely litigate the case in this forum. Id.

The Court must first determine if Meraki purposefully directed its activities at residents in this forum. Nuance Comm's, Inc, 626 F.3d at 1231. The Court finds that it has. As MPS points out in its briefing, myriad cases exist of courts asserting personal jurisdiction over defendants...