Opinion
Case No. 20-cv-05709-JSW
2020-11-02
EPISTAR CORPORATION, Plaintiff, v. The REGENTS OF the UNIVERSITY OF CALIFORNIA, Defendant.
Eric William Benisek, Jeffrey Treadwell Lindgren, Richard Craig Vasquez, Esq., Vasquez Benisek & Lindgren LLP, Walnut Creek, CA, for Plaintiff. Shawn G. Hansen, Conor Collins McNamara, Penney Paneeze Azizi, Seth David Levy, Nixon Peabody LLP, San Francisco, CA, Neal James Gauger, Nixon Peabody LLP, Los Angeles, CA, for Defendant.
Eric William Benisek, Jeffrey Treadwell Lindgren, Richard Craig Vasquez, Esq., Vasquez Benisek & Lindgren LLP, Walnut Creek, CA, for Plaintiff.
Shawn G. Hansen, Conor Collins McNamara, Penney Paneeze Azizi, Seth David Levy, Nixon Peabody LLP, San Francisco, CA, Neal James Gauger, Nixon Peabody LLP, Los Angeles, CA, for Defendant.
ORDER DENYING MOTION TO DISMISS
Re: Dkt. No. 19
JEFFREY S. WHITE, United States District Judge
Now before the Court is Defendant the Regents’ of the University of California ("Regents") motion to dismiss. The Court finds this motion suitable for disposition without oral argument. See N.D. Civ. L.R. 7-1(b). Accordingly, the hearing set for December 4, 2020, is HEREBY VACATED. Having carefully reviewed the parties’ papers, considered their arguments, and the relevant legal authority, the Court hereby DENIES the Regents’ motion to dismiss.
BACKGROUND
This matter arises from a contractual right to sue a third party who infringes a licensed patent. Epistar is the premier global supplier of LEDs that specializes in high-brightness LED products. (Compl. ¶ 7-8.) Between 2009 and 2012, Epistar began conversing with the Solid-State Lighting and Energy and Electricity Center ("SSLEEC") , a department at the Regents’ University of California Santa Barbara. (Id. ¶ 10.) SSLEEC captured Epistar's attention because it had several top researchers in the LED field, one of which is Dr. Shuji Nakamura, the 2014 Nobel Prize Laureate for inventing the blue LED. (Id. ) SSLEEC's purpose is to provide a forum for cross-disciplinary collaboration between University of California researchers and industry members to address the most challenging problems in solid-state lighting. (Id. ) The Regents chose Epistar as a sponsor because of its investment, research, and manufacturing successes as a world leader in the LED industry. (Id. ¶ 11.) The two parties entered an arrangement where the university's researchers could interact with an industry leader, while allowing Epistar to access SSLEEC's research and intellectual property. (Id. ¶ 12.)
SSLEEC was formerly named the Solid-State Lighting and Energy Electronics Center. (Compl. ¶ 10.)
In 2012, SSLEEC showed Epistar the technology underlying U.S. Patent Nos. 8,022,423 and 7,687,813 referred to as the Standing Transparent Mirror-Less light-emitting diode ("STML Patents"). (Id. ¶ 13.) After several months of discussion, the parties executed a license making Epistar the exclusive licensor for the STML Patents. (Id. ¶ 14.) Epistar alleged that under the exclusive license, "the Regents granted Epistar all rights to license and collect royalties, and to sue any infringers of the patents, in order that the patented invention could be developed and utilized so that the general public could enjoy the benefits of the invention." (Id. ) Epistar further alleged that "the Regents expressly agreed that if it learned of potential infringement of claims relating to the STML Patents, it would provide Epistar formal written notice of the infringement and provide Epistar with any evidence of such infringement available to it, which Epistar could use in pursuing an infringement claim. Any recovery or settlement received in connection with any such infringement claim was to be shared between Epistar and the Regents." (Id. ¶ 16.)
Several years later, Epistar learned about the Regents’ lawsuits against various makers of a type of LED bulb, which Epistar claims potentially infringes on the STML Patents. According to the complaint, "[o]n or about September 5, 2019, Epistar notified the Regents that Epistar [had] learned from the Internet that the Regents [had] initiated a widely publicized series of lawsuits against numerous makers of a popular product known as an LED filament bulb (hereafter the "filament bulb lawsuits"). Epistar complained that the lawsuits appeared to target product makers that the Regents’ lawyers alleged infringed elements of patents owned by Regents which appeared to have certain claims which are [sic] identical to the claim language in the STML Patents. Stated another way, assuming the veracity of the Regents’ claims in the filament bulb lawsuits, the Regents knew that the accused infringers in the filament bulb lawsuits were also infringing the STML Patents exclusively licensed to Epistar." (Id. ¶ 18.) "Over the past year, Epistar and the Regents disagreed in a series of letters and emails about the respective scope of the patents that the Regents were asserting in the filament bulb lawsuits, and of the STML Patents." (Id. ¶ 19.) Epistar has sued the Regents for breach of contract and declaratory relief. (Id. at 7-8.) One of Epistar's theories under its breach of contract claim is that "[t]he Regents breached the license agreement by failing to formally notify Epistar of known or suspected infringers, as required by the Exclusive License." (Id. ¶ 32.) Epistar asks the Court, in part, to enjoin the Regents from exercising any rights under the license that belong to Epistar. (Id. at 10.) The Regents now move to dismiss only the theory that the Regents breached its duty by failing to formally notify Epistar of the potential infringement in the filament bulb lawsuits. (Mot. at 1.)
ANALYSIS
A. LEGAL STANDARD
A motion to dismiss is proper under Federal Rule of Civil Procedure 12(b)(6) where the pleadings fail to state a claim upon which relief can be granted. The complaint is liberally construed in the light most favorable to the non-moving party and all material allegations in the complaint are taken to be true. Sanders v. Kennedy , 794 F.2d 478, 481 (9th Cir. 1986). However, even under the liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2), "a plaintiff's obligation to provide the ‘grounds’ of his ‘entitlement to 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, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citing Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ).
A plaintiff must not merely allege conduct that is conceivable but must instead allege "enough facts to state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955. "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 556, 127 S.Ct. 1955 ). If the allegations are insufficient to state a claim, a court should grant leave to amend, unless amendment would be futile. See Reddy v. Litton Indus. Inc. , 912 F.2d 291, 296 (9th Cir. 1990).
B. THE REGENTS’ MOTION TO DISMISS IS DENIED.
As a preliminary matter, the Court will determine whether the photos of the filament LEDs in the Regents’ motion and the attached STML Patents can be considered for purposes of this motion. "Generally, district courts may not consider material outside the pleadings when assessing the sufficiency of a complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure." Khoja v. Orexigen Therapeutics, Inc. , 899 F.3d 988, 998 (9th Cir. 2018) (citing Lee v. City of Los Angeles , 250 F.3d 668, 688 (9th Cir. 2001) ). The incorporation-by-reference doctrine allows a court to "treat[ ] certain documents as though they are part of the complaint itself." Id. at 1002. A "defendant may seek to incorporate a document into the complaint ‘if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff's claim." Id. (quoting United States v. Ritchie , 342 F.3d 903, 908 (9th Cir. 2003) ). Because the complaint refers extensively to the filament LEDs and the STML patents, the Court finds these documents can be considered for purposes of this motion.
Turning to the motion's merits, the Regents argue that there are no facts to support that it had and breached a duty to notify Epistar that the products in the filament bulb lawsuits infringed Epistar's rights to the STML patents. (Mot. at 6-7.) Epistar disagrees. It argues that is has alleged sufficient facts to show that the Regents knew the products in the filament bulb lawsuits infringed its license to the STML Patents and that the Regents failed to notify them of the suspected infringement. (Opp. at 5.)
Epistar also reasons that the Regents knew of the infringement because of the latter's Rule 11 investigation. (Opp. at 5, 7.) The Court declines to consider this fact because the complaint contains no factual allegations to support this, nor does Epistar provide a cite to the record.
Here, the Court finds that Epistar has alleged sufficient facts to state a claim under its failure to notify theory. To prove a breach of contract claim, Epistar must show: (1) the existence of a contract; (2) performance by the plaintiff or excuse for nonperformance; (3) the defendant's breach; (4) and damages. Buschman v. Anesthesia Bus. Consultants LLC , 42 F. Supp. 3d 1244, 1250 (N.D. Cal. 2014). Epistar alleged that the Regents had executed a license making Epistar the exclusive licensor to the STML patents. (Compl. ¶ 14.) Under that license, the Regents granted Epistar the right "to sue any infringers of the patents, in order that the patented invention could be developed and utilized so that the general public could enjoy the benefits of the invention." (Id. ) Epistar further alleged that "the Regents expressly agreed that if it learned of potential infringement of claims to the STML Patents, it would provide Epistar formal written notice of the infringement and provide Epistar with any evidence of such infringement available to it, which Epistar could use in pursuing an infringement claim." (Id. ¶ 16 (emphasis added).) According to Epistar, upon learning about the Regents’ filament bulb lawsuit, it complained to the Regents that its lawsuits target LED products that "have certain claims which are [sic] identical to the claim language in the STML Patents." (Id. ¶ 18.) Epistar then alleged that over the following year, the parties disagreed in numerous correspondence "about the scope of the patents that the Regents were asserting in the filament bulb lawsuits, and of the STML Patents." (Id. ¶ 19.)
Construing these factual allegations in the light most favorable to Epistar and assuming they are true, it is reasonable to infer that the Regents knew of the potential infringement and failed to notify Epistar of such. Important here is Epistar's language in the allegation that triggers the Regents’ duty to notify. Epistar alleged that the duty to notify would be triggered if the Regents learned about "potential infringement,"—not that the Regents must know about actual infringement as a matter of law. (Id. ¶ 16.) Epistar has done that when it plead that certain claims of the filament LED products were identical to the claim language in the STML patents. While the parties disagree about the patents’ scope, which may ultimately determine whether the Regents breached a duty to notify, that issue shall be saved for summary judgment or trial after the parties have had an opportunity to engage in the discovery process. Epistar has thus plead sufficient facts to survive this motion to dismiss.
The Regents assert that Epistar "alleges nothing more than the conclusion that ‘the Regents knew that the accused infringers were also infringing the STML Patents exclusively licensed to Epistar.’ " (Reply at 4 (quoting Compl. ¶ 18); Mot. at 7.) The Regents further assert that Epistar echoes these same conclusory allegations in paragraph 32 of the complaint, "where it alleges without facts the conclusion that ‘[t]he Regents breached the license agreement by failing to formally notify Epistar of known or suspected infringers, as required by the Exclusive License.’ " (Reply at 4 (quoting Compl. ¶ 32).) The Court finds these arguments lack merit, because the Regents cherry-picked these conclusory statements from paragraphs 18 and 32 while consciously ignoring the factual allegations in paragraphs 14, 16, 18, and 19 that support Epistar's conclusions.
Moreover, the Regents further contend that Epistar has not alleged sufficient facts to identify the specific products or claim charts that would show STML patents are being infringed. (Opp. at 6; Reply at 4.) The Regents rely on two cases for this proposition: Tessera, Inc. v. UTAC (Taiwan) Corp. , No. 10-CV-04435-EJD, 2012 WL 1067672, at *1 (N.D. Cal. 2012 Mar. 28, 2012) and Bender v. LG Electronics U.S.A., Inc. , No. C 09-02114 JF (PVT), 2010 WL 889541, at *1 (N.D. Cal. Mar. 11, 2010). In essence, the Regents ask the Court to establish a higher pleading standard for a breach of contract claim where the breach is premised on potential patent infringement. These cases do not support that proposition, and the Court declines to do so.
In Tessera , the plaintiff and the defendant entered into a patent license agreement where the defendant agreed that it would pay royalties to the plaintiff if the former made products as outlined in the contract. 2012 WL 1067672, at **1-2. The relevant parts of the complaint alleged that the defendant had not paid royalties it owed; that the defendant sent a letter announcing it would stop paying royalty payments; that the plaintiff had satisfactorily performed under the contract; and that the defendant did not intend to pay royalties, which constituted a material, anticipatory breach. Id. , at *2. The defendant argued, as the Regents do here, that the plaintiff needed to "plead facts supporting a reasonable inference of patent infringement in order to state its claim for breach of contract." Id. , at *1. The district court rejected that proposition, astutely explaining: "At this stage of the litigation, the court would be remiss to accept [the defendant's] contention a matter of law.... Resolution of the contract questions in this case will likewise require consideration of various kinds of evidence .... The contract interpretation question will wait until summary judgment or trial." Id. , at *2. The district court went on to hold that the plaintiff failed to plead sufficient facts to show it was entitled to relief. Id. Because the agreement made clear that the defendant's duty to pay royalties was conditioned on it making the agreed upon product, the district court explained that the complaint failed to allege, at the least, that the defendant made a product that would have triggered the obligation to pay royalties. Id.
The Regents reliance on Tessera is erroneous and, frankly, misrepresents the district court's analysis. The quoted language the Regents purport to be the district court's endorsement of a higher pleading standard was the court merely reciting the defendant's argument. It is telling that the Regents inexplicably omit any reference to the following paragraph where the district court expressed concern in adopting the defendant's proposed higher pleading requirement. The Court agrees with Tessera that "[r]esolution of the contract questions in this case will likewise require consideration of various kinds of evidence[.]" 2012 WL 1067672, at *2 ; see also Khoja , 899 F.3d at 1003 (noting the prohibition against resolving factual disputes at the pleading stage). Further, unlike the complaint in Tessera , Epistar has identified the filament LED bulbs as the product that triggered the Regents’ duty to notify.
The Regents’ reliance on Bender is also unavailing. In Bender , the plaintiff sued several large electronic corporations for patent infringement. 2010 WL 889541, at *1. The complaint made conclusory allegations that the corporations had infringed on broad sweeping categories of products (e.g., cell phones, computers, lab equipment, etc.) but did not identify a specific product line or product part. Id. , at *2. The district court held the complaint failed to state a claim for relief because of the vague allegations. Id. , at **3, 6. It went on to note that in a patent infringement case, a plaintiff should at least plead with "enough specificity to give the defendant notice of what products or aspects of products allegedly infringe." Id. , at *5 (emphasis added).
Bender is thus unhelpful for several reasons. First, the claim in this case is for breach of contract, not for patent infringement. What Epistar must plead for a breach of contract claim differs from what is required in a patent infringement case. As discussed above, Epistar has done just that. Second, unlike the complaint in Bender , Epistar has identified the products at issue—the filament LED bulbs. While a breach of contract claim conditioned upon a showing of potential infringement is unique, Epistar has pled sufficient facts with enough specificity to give the Regents notice that the filament LEDs in the filament bulb lawsuits are potentially infringing on the STML Patents. See also Skaff v. Meridien N. Am. Beverly Hills, LLC , 506 F.3d 832, 841 (9th Cir. 2007) (noting the purpose of Federal Rule of Civil Procedure 8 is "to give the defendant fair notice of the factual basis of the claim[.]"). Tellingly, it appears Epistar pled facts with enough specificity to place the Regents on notice, seeing that the latter attached photos of the filament LED bulbs that are at issue here. (Mot. at 4-5.)
Accordingly, the Court concludes that Epistar has alleged sufficient facts to state a claim for breach of contract under a failure to notify theory.
CONCLUSION
For the above reasons, the Court DENIES the Regents’ motion to dismiss.