Cyph, Inc. v. Zoom Communication, Inc.

• Court: District Court, N.D. California
• Decided: May 17, 2022
• Docket: 4:22-cv-00561
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 CYPH, INC., Case No. 22-cv-00561-JSW

8 Plaintiff, ORDER GRANTING, IN PART, 9 v. MOTION TO DISMISS, WITH LEAVE TO AMEND AND CONTINUING CASE 10 ZOOM VIDEO COMMUNICATIONS, MANAGEMENT CONFERENCE INC., Re: Dkt. No. 19 11 Defendant.

12 13 Now before the Court for consideration is the motion to dismiss filed by Zoom Video 14 Communications, Inc. (“Zoom”). The Court has considered the parties’ papers, relevant legal 15 authority, and the record in this case, and it HEREBY GRANTS, IN PART, Zoom’s motion, with 16 leave to amend. 17 BACKGROUND 18 According to Plaintiff Cyph, Inc. (“Cyph”), its founders invented “the best solution” for 19 end-to-end encryption (“E2EE”) enabled “communication and media platform[s], which allows 20 uncensored communications and information exchanges.” (Id. ¶¶ 15-16.) Cyph alleges that E2EE 21 technology is a technology that provides stronger privacy protection because it allows individual members of a dialogue to encrypt their 22 message to others and decrypt a message to them without intervention of a system administrator. E2EE is an essential 23 component in confidential online meetings. 24 (Id. ¶ 10.) 25 Zoom “provides a video communication platform to anyone with internet access, around 26 the world” and offers products and services such as video conferencing, webinars, chats, and 27 phone systems. According to Cyph, Zoom uses E2EE encryption and could not have provided 1 No. 9,948,625 (the “’625 Patent”), No. 10,701,047 (the “’047 Patent”), No. 10,020,946 (the “’946 2 Patent”), No. 9,794,070 (the “’070 Patent”), No. 10,003,465 (the “’465 Patent”), and No. 3 9,906,369 (the “’369 Patent”) (collectively the “Asserted Patents”). (Compl. ¶¶ 2-3, 14 & n.3, 18- 4 23, 29, 36-87, Exs. G-L.) In addition to alleging that Zoom directly infringes each of the Asserted 5 Patents, Cyph brings claims for induced infringement and contributory infringement.1 6 Cyph defines the term “Zoom Products” to include: Zoom Meetings; Zoom Marketplace; 7 Zoom Video Webinars; Zoom Chat; Zoom Phone System; Zoom Events; Zoom Rooms and 8 Workspaces; and Zoom Developer Program. (Compl. ¶ 29.) Cyph also alleges that “Zoom users 9 can participate in Zoom Products, using Zoom Apps [i.e., “Zoom’s communications services”], 10 Zoom Devices [hardware devices Zoom sells to individuals and businesses], or through a standard 11 web browser.” (Id. ¶ 31; see also id. ¶¶ 29-30.) Zoom also sells subscription packages (“Zoom 12 Plans”), which allow subscribers to “initiate Zoom Products as a host and/or enjoy broader 13 functions than non-subscriber users, including E2EE enabled communication[.]” (Id. ¶¶ 32-33.) 14 The Court will address additional facts as necessary in the analysis. 15 ANALYSIS 16 A. Applicable Legal Standards. 17 Zoom moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). A motion to 18 dismiss is proper under Federal Rule of Civil Procedure 12(b)(6) where the pleadings fail to state a 19 claim upon which relief can be granted. A court’s “inquiry is limited to the allegations in the 20 complaint, which are accepted as true and construed in the light most favorable to the plaintiff.” 21 Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). Even under the liberal pleading 22 standard of Rule 8(a)(2), “a plaintiff’s obligation to provide ‘grounds’ of his ‘entitle[ment] to 23 relief’ requires more than labels and conclusions, and formulaic recitation of the elements of a 24 cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing 25 1 Cyph argues, but does not allege, that Zoom purchased Keybase, Inc., which “implemented 26 a network that used [Cyph’s] patented E2EE solution, and that “Zoom adopted the infringing Keybase solution.” (Opp. Br. at 2.) Because those facts are not alleged in the Complaint, the 27 Court considers them only for purposes of evaluating whether it would be futile to grant Cyph 1 Papasan v. Allain, 478 U.S. 265, 286 (1986)). Pursuant to Twombly, a plaintiff cannot merely 2 allege conduct that is conceivable but must instead allege “enough facts to state a claim to relief 3 that is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads 4 factual content that allows the court to draw the reasonable inference that the defendant is liable 5 for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 6 U.S. at 556). 7 In a patent case, a plaintiff cannot satisfy the pleading standards set forth in Twombly and 8 Iqbal “by reciting the claim elements and merely concluding that the accused protect has those 9 elements. There must be some factual allegations that, when taken as true, articulate why it is 10 plausible that the accused product infringes the patent claim.” Bot M8 LLC v. Sony Corp. of Am., 11 4 F.4th 1342, 1353 (Fed. Cir. 2021) (internal quotations and citations omitted).2 A patentee “need 12 not prove its case at the pleadings stage”; it also is not required “to plead infringement on an 13 element-by-element basis.” Id. at 1352; see also Phonometrics, Inc. v. Hospitality Franchise 14 System, Inc., 203 F.3d 790, 794 (Fed. Cir. 2000). Instead, the patentee must allege sufficient facts 15 to “place the potential infringer on notice of what activity is going accused of infringement.” Bot 16 M8, 4 F.4th at 1352. “The level of detail required in any given case will vary depending upon a 17 number of factors, including the complexity of the technology, the materiality of any given 18 element to practicing the asserted claim(s), and the nature of the allegedly infringing device.” Id. 19 at 1353. 20 B. The Parties’ Evidence. 21 As a general rule, “a district court may not consider any material beyond the pleadings in 22 ruling on Rule 12(b)(6) motion.” Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994), overruled 23 on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002) (citation 24 omitted). However, the Court may consider “documents incorporated into the complaint by 25 reference, and matters of which [the Court] may take judicial notice.” Tellabs, Inc. v. Makor 26

27 2 Prior to 2015, a patentee generally could satisfy the requisite pleading standards by 1 Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007). Zoom submits two exhibits to support its 2 motion: a Zoom white paper entitled “E2E Encryption for Zoom Meetings” dated December 15, 3 2020 (“E2E”); and a February 2021 version of its Security Guide (“Security Guide”). 4 (Declaration of Andrew T. Jones, ¶¶ 3-4, Exs. A-B.) Cyph does not dispute that those documents 5 are authentic, and it relies on each of those documents to support its claims. Therefore, the Court 6 may consider them under the incorporation by reference doctrine. 7 Cyph also submits a number of exhibits in support of its motion, including claim charts 8 attached to a demand letter. (Declaration of Carl Brundidge (“Brundidge Decl.”).) The Court did 9 not consider Exhibits 1 through 3.b, 5 and 6 to resolve the motion. Exhibits 4a through 4e are 10 materials published by Zoom that Cyph referenced in its claim charts. The Court will consider 11 them under the incorporation by reference doctrine. 12 C. The Court Grants, in Part, and Denies, in Part, Zoom’s Motion. 13 Zoom argues that Cyph’s allegations are too vague and conclusory to satisfy Twombly and 14 do not provide it with sufficient notice the activities accused of infringing the Asserted Patents. 15 According to Zoom: (1) Cyph fails to identify the accused products; and (2) fails to include facts 16 to show how Zoom’s products purportedly infringe the Asserted Patents. 17 1. The Accused Products. 18 Zoom describes its product suite to include “Zoom Meetings, Zoom Video Webinars, 19 Zoom Rooms, and Zoom Phone[.]” (Brundige Decl., Ex. 4d at 1.)3 The Court concludes that 20 Cyph sufficiently identifies the products and services that allegedly infringe the Asserted Patents 21 and will address whether Cyph sufficiently identifies how each of those products infringe in the 22 following section. 23 2. Alleged Infringement. 24 Each of the Asserted Patents are directed to methods or systems and methods. “Direct 25 infringement under § 271(a) occurs where all steps of a claimed method are performed by or 26

27 3 In its opposition, Cyph suggests that its overarching theory is that the “Zoom platform” on 1 attributable to a single entity.” Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020, 2 1022 (Fed. Cir. 2015). If more than one actor is involved “in practicing the steps, a court must 3 determine whether the acts of one are attributable to the other such that a single entity is 4 responsible for the infringement.” Id. In Akamai, the Federal Circuit determined that may occur: 5 (1) when an “entity directs or controls others’ performance”; or “(2) where the actors form a joint 6 enterprise.” Id. 7 Claim 1 of the ‘625 Patent, entitled “Encrypted Group Communication Method,” describes 8 a method comprising, inter alia, “generating a shared symmetric key to begin a communication 9 session among a group of users by a first user[.]” Cyph alleges that Zoom Products, “for example 10 Zoom’s web meeting system, Zoom online meeting via Zoom Apps, Zoom chats, and webinar 11 program, are responsible for generating a shared symmetric key to begin a communication session 12 among a group of users by a first user.” (Compl. ¶ 40 (emphasis added); see also id. ¶¶ 41-43.) 13 Those allegations, and similar allegations throughout the Complaint, would not satisfy the 14 pleading requirements under Twombly because they do nothing more than allege Zoom infringes 15 by reciting the relevant claim language verbatim. See, e.g., Bot M8, 4 F.4th at 1353. 16 Cyph argues that the facts Disc Disease Solutions, Inc. v. VHG Solutions, Inc., are 17 analogous to the facts here and show the Complaint fairly places Zoom on notice of how it 18 allegedly infringes the Asserted Patents. 888 F.3d 1256, 1257 (Fed. Cir. 2018). In Disc Disease, 19 the Federal Circuit noted that the technology was simple: a spinal brace with an inflatable band 20 that expanded to provide traction to the spine. The plaintiff accused three of the defendants’ 21 products and attached photographs to the complaint. Id. at 1258, 1260. The court determined the 22 “disclosures and allegations” were sufficient to place the defendant on notice and held the district 23 court erred in dismissing the complaint. Similarly in BOT M8, in two of the patents at issue, the 24 patents required that a fault inspection program be completed before a game is started. 4 F.4th at 25 1348. 26 The Federal Circuit concluded the plaintiff had alleged sufficient facts to state claim for 27 one of those patents, where it recited the claim language incorporating those limitations and then 1 detected.” 4 F.4th at 1356. The error messages in question, such as “cannot access system 2 storage”, gave rise to a reasonable inference that the fault inspection program was completed 3 before the game started. Id. 4 The technology in this case does not appear equivalent to the spinal brace at issue in Disc 5 Disease, and the number of patents and claims at issue also distinguishes the facts here from the 6 facts in that case. Cyph argues that the claim charts attached to the Complaint and the citations to 7 Zoom source documents and other materials within those charts provide the requisite factual 8 allegations. These claim charts suffer from the same flaws as the body of the Complaint, i.e. Cyph 9 recites the claim limitations verbatim, and states Zoom products contain those limitations. 10 Although Cyph has cited to source documents, those citations do not necessarily coincide with the 11 claim language at issue. 12 For example, the claim chart for the ’047 Patent includes the following discussion of Claim 13 1:

14 generating a shared symmetric key to begin a Zoom Products generate a shared symmetric 15 communication session among a group of key to begin a communication session among users by a first user, a group of users by a first user. 16 For example, Zoom meeting operates by 17 establishing a secured communication among users who know a meeting key (MK) set by a 18 leader (first user). 19 See ZSG – “Application security” and “Chat 20 encryption” 2; “End-to-end encryption” 4. 21 (Compl., Ex. H.) 22 The section of the ZSG that is headed “Application Security” states that “Zoom can 23 encrypt all real-time media content at the application layer using Advanced Encryption Standard 24 (AES).” (Brundidge Decl., Ex. 4(d), Zoom Security Guide at 2.) Thus, unlike the error messages 25 in BOT M8, that reference does not provide any additional information of how the Zoom Meeting 26 product operates. In its opposition, however, Cyph refers to a different section on page 2 of 27 Zoom’s Security Guide with the heading “Role Based User Security, which states that the meeting 1 limitation. (Compare Opp. Br. at 12 with Zoom Security Guide at 2.) Although Cyph need not 2 plead its claims on an element-by-element basis, the Court concludes Cyph’s allegations are not 3 equivalent to the allegations that were found sufficient in Disc Disease or the allegations that were 4 sufficient in BOT M8.4 5 Zoom also argues that each of the claims require the user – rather than Zoom – to perform 6 steps of the claimed methods and that Cyph fails to include allegations that the actions of Zoom’s 7 customers can be attributed to Zoom. Cyph responds that Zoom is raising an improper argument 8 about the merits of the case. It states the allegations demonstrate that Zoom, “through its 9 communication platform of Zoom designed clients and servers practices every step of the claims 10 of the Assert Patent [sic] as written,” and cites to a portion of the ’465 Patent’s specification as an 11 example. (Opp. Br. at 10-11.) The Court disagrees that Zoom’s argument is a merits argument. 12 In addition, the example cited is not included in the claim chart for the ’465 Patent. Finally, 13 Cyph’s argument fails to explain how the allegations show either (1) how Zoom rather than its 14 customers practices each step of the claimed methods or (2) how Zoom’s customer’s actions can 15 be attributed to Zoom under Akamai. 16 Accordingly, the Court GRANTS, IN PART, Zoom’s motion. Cyph must be able to allege 17 an act of direct infringement to support its claims for contributory and induced infringement, and 18 the Court also grants the motion to dismiss those claims. Because the Court cannot say it would 19 be futile, it will grant Cyph leave to amend. 20 CONCLUSION 21 For the forgoing reasons, the Court GRANTS, IN PART, AND DENIES, IN PART 22 Zoom’s motion to dismiss. Cyph may file an amended complaint by no later than June 6, 2022, 23 and Zoom shall answer or otherwise respond by June 27, 2022. 24 // 25 // 26 // 27 ] The Court CONTINUES the initial case management conference set for June 3, 2022 to 2 || July 8, 2022 at 11:00 a.m. The parties’ case management conference statement shall be due by 3 || July 1, 2022. 4 IT ISSO ORDERED. _ 5 || Dated: May 17, 2022 {| te 6 \ l / JEPRREY/S /WHIT 7 United Sypies Distri/A Judge 8 / 9 10 1]

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