Splunk Inc. v. Cribl, Inc.

662 F.Supp.3d 1029

SPLUNK INC., Plaintiff, v. CRIBL, INC. and Clint Sharp, Defendants.

No. C 22-07611 WHA

United States District Court, N.D. California

Signed March 17, 2023

Adam J. Kessel, Pro Hac Vice, Daniel Haran Wade, Pro Hac Vice, Kayleigh E. McGlynn, Pro Hac Vice, Kevin K. Su, Pro Hac Vice, Frank Everett Scherkenbach, Andrew Gordon Pearson, Pro Hac Vice, Fish & Richardson P.C., Boston, MA, Olivia T. Nguyen, Fish & Richardson P.C., Redwood City, CA, for Plaintiff.

Christopher Anthony Mathews, Tigran Guledjian, Valerie Suzanne Roddy, Michael Thomas Zeller, Quinn Emanuel Urquhart & Sullivan, LLP, Los Angeles, CA, for Defendants.

ORDER RE MOTION TO DISMISS

WILLIAM ALSUP, United States District Judge

INTRODUCTION

In this intellectual property dispute, alleged infringers move to dismiss patent and copyright claims. For the following reasons, the motion is GRANTED IN PART and DENIED IN PART.

STATEMENT

Patent and copyright owner Splunk Inc. was founded in 2003 and runs a platform for analyzing large volumes of data. Its flagship product, Splunk Enterprise, "ingests real-time flows of machine data from disparate sources across a distributed environment and indexes that data, regardless of its source or format." This allows customers to "interact with their data through an interface from which they can generate graphs, reports, alerts, dashboards, and visualizations," and "monitor and react to their data in real time" (Compl. ¶¶ 1, 17).

Splunk Enterprise is customizable. Recognizing that customers use different types of data in different ways, Splunk "supports and encourages third parties to develop on top of the Splunk platform," "extending the features and functionality." Through its Technology Alliance Partner ("TAP") program, Splunk grants partners a license to use its software development tools and a limited license to run Splunk Enterprise software for related development (Compl. ¶¶ 22, 24-25).

According to Splunk, some Splunk software is specifically provided for partners to use, such as the "HEC" protocol, which enables partners to send data to, or receive data from, a running copy or "instance" of Splunk Enterprise. Other Splunk software is apparently proprietary, such as the "S2S" or "Splunk-to-Splunk" protocol, which Splunk uses to send data to, or receive data from, Splunk Enterprise and other Splunk software. Splunk alleges that it "does not support use of S2S by third parties, does not publish S2S's source code, and does not document S2S in a manner that facilitates third-party use of this protocol" (Compl. ¶¶ 31-32).

Alleged infringer Cribl, Inc. was founded in 2017 by three former Splunk employees, including alleged infringer and Cribl CEO Clint Sharp. In 2018, Cribl launched its first product, now known as Stream, and joined the TAP program by entering into a TAP agreement with Splunk. Stream and other Cribl products interoperate with Splunk Enterprise. As explained by Splunk with respect to Stream, "Stream sits between a Splunk customer's sources of machine data and that customer's Splunk Enterprise instance. Instead of flowing directly from data sources into Splunk Enterprise, data flows into Stream. Stream can then filter this data before it is passed along to Splunk Enterprise, with a goal of reducing the total volume of data a customer adds to its Splunk Enterprise instance" (Compl. ¶¶ 2-3, 39, 46, 51).

In November 2021, Splunk terminated Cribl's membership in the TAP program, thereby terminating the TAP agreement. Roughly one year later, it filed an 85-page complaint against Cribl and CEO Sharp alleging patent infringement, copyright infringement, and other unfair business practices. According to Splunk, Cribl has infringed patents awarded to Splunk for its foundational innovations, developed and marketed its software by making unlicensed copies of Splunk's copyrighted software, and used misappropriated information to compete unfairly against Splunk. Meanwhile, CEO Sharp "actively participated" in the misappropriation. Among other actions, he purportedly posted a derivative of Splunk's copyrighted source code — "go-S2S" — to his personal webpage on code hosting platform GitHub before leaving Splunk to found Cribl with this source code, replacing Splunk's copyright headers with a false open-source license to obscure unlawful copying before taking the code offline in December 2021 (Compl. ¶¶ 2, 4, 33-37, 42-44, 67; see generally Compl. ¶¶ 119-338).

Cribl and CEO Sharp (together, "alleged infringers") now move to dismiss patent and copyright claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Specifically, they move to dismiss: (1) all claims for willful and indirect patent infringement against Cribl; (2) all claims for patent infringement against Cribl based on ineligibility of all asserted patents; (3) all claims for indirect copyright infringement against Cribl and CEO Sharp; and (4) a claim for violation of the Digital Millennium Copyright Act Section 1202 against CEO Sharp. The claims will be taken up in turn. This order follows full briefing and oral argument.

ANALYSIS

To survive a motion to dismiss, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "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 v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 570, 127 S.Ct. 1955). At the pleading stage, a district court "accept[s] all factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). A "legal conclusion couched as a factual allegation," however, may be disregarded. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955).

1. WILLFUL AND INDIRECT PATENT INFRINGEMENT.

Splunk alleges that Cribl committed willful patent infringement and both forms of indirect patent infringement (induced and contributory infringement) of all five asserted patents: U.S. Patent Nos. 9,208,206; 9,762,443; 10,805,438; 10,255,312; and 9,838,467.

According to alleged infringers, Splunk's willful and indirect infringement claims against Cribl should be dismissed because Splunk has not pleaded that Cribl had pre-suit knowledge of the asserted patents, let alone pre-suit knowledge of their infringement. Alleged infringers emphasize that Splunk has failed to assert that it sent Cribl a notice letter, much less that anyone at Cribl was personally aware of the asserted patents. Instead, Splunk "merely implies" that Cribl gained knowledge of the asserted patents because its co-founders and some of its employees previously participated in Splunk's patent program (Br. 1). According to alleged infringers, this is insufficient when "general knowledge of a patentee's portfolio does not plausibly allege actual notice of a particular patent" (Br. 1-2). Splunk counters that it has alleged pre-suit knowledge not based on general knowledge of a patent portfolio but rather "extensive factual allegations," such as:

(1) Cribl was founded by ex-Splunkers who managed Splunk software products that practice the patents Cribl infringes (e.g., Compl. ¶¶ 89-93, 116-118); (2) this software is marked as practicing the asserted patents (id. ¶ 114); (3) Cribl has been a customer/user of the software since it was founded (id. ¶¶ 22-29; 69-78); (4) Cribl copied this software (id. ¶ 118); and (4) [sic] Cribl's founders and employees were aware of Splunk's patent-marking page when it copied and used this software (id. ¶¶ 116-118).

(Opp. 22-23). This order agrees with alleged infringers that such allegations are too attenuated to support a showing of pre-suit knowledge.

To establish willful infringement, a patent owner must prove knowledge of the asserted patents and knowledge of their infringement. Although the jury decides willfulness, willfulness only goes to the jury if it was properly framed by the pleadings. Seeing that no additional pleading requirements have been expounded since the legal standard for willful infringement was clarified in Halo Electronics, Inc. v. Pulse Electronics, Inc., 579 U.S. 93, 136 S.Ct. 1923, 195 L.Ed.2d 278 (2016), knowledge of the asserted patents and knowledge of their infringement should be pleaded with plausibility. Sonos, Inc. v. Google LLC, 591 F. Supp. 3d 638, 643 (N.D. Cal. 2022), leave to appeal denied, 2022 WL 1486359 (Fed. Cir. May 11, 2022). Because both forms of indirect infringement also require such knowledge, the "foregoing ground rules concerning the adequate pleading of willful infringement . . . apply with parallel force to the parallel issues for indirect infringement." Id. at 647. In other words, knowledge of the asserted patents and knowledge of their infringement should be pleaded with plausibility for indirect infringement claims as well.

Prior orders have explained the need for a notice letter in almost all circumstances. See id. at 643-44; Sonos, Inc. v. Google LLC, 2022 WL 2046828, at *3 (N.D. Cal. June 7, 2022); MasterObjects v. Amazon.com, Inc., 2021 WL 4685306, at *7 (N.D. Cal. Oct. 7, 2021). The practice of establishing pre-suit knowledge through a cease-and-desist letter that calls out patent claims and how accused products infringe should be encouraged to give an alleged infringer a meaningful opportunity to cease infringement or get a license before a lawsuit commences. (That such a letter may provoke a declaratory relief suit in a district of that alleged infringer's choosing does not excuse the failure to send one.) Although there are circumstances in which pre-suit knowledge is properly alleged despite the absence of a notice letter, "the complaint will generally not be adequate to serve as notice...