1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 GUARDIAN ALLIANCE TECHNOLOGIES, No. 2:22-cv-01390 WBS AC INC., 13 Plaintiff, 14 MEMORANDUM AND ORDER RE: v. DEFENDANTS’ MOTION TO DISMISS 15 AND MOTION TO STRIKE MILLER MENDEL, INC. and TYLER 16 MILLER, 17 Defendants. 18 19 ----oo0oo---- 20 Plaintiff Guardian Alliance Technologies, Inc. 21 (“Guardian”) brought this action against defendants Miller 22 Mendel, Inc. and Tyler Miller (collectively, “Miller Mendel”), 23 seeking declarations that two of defendants’ patents are invalid, 24 asserting claims under the Sherman Antitrust Act, 15 U.S.C § 2, 25 and alleging various violations of California state law. (Compl. 26 (Docket No. 1).) Before the court are Miller Mendel’s motion to 27 dismiss the complaint in its entirety (Docket No. 40) and motion 28 to strike Guardian’s state law claims pursuant to California’s 1 anti-SLAPP1 statute, Cal. Civ. Code § 425.16 (Docket No. 41). 2 I. Background & Procedural History2 3 Plaintiff Guardian is a California-based company that 4 creates and sells access to software for managing employee 5 background checks, primarily for government organizations and law 6 enforcement agencies. (Compl. ¶¶ 4, 28.) Defendant Miller 7 Mendel, Inc. is a Seattle-based company that creates and sells 8 access to similar software. (Id. ¶¶ 5, 28.) Defendant Tyler 9 Miller is the Chief Executive Officer of Miller Mendel, Inc. 10 (See Ex. A to Rylander Decl. (Docket No. 40-2 at 8).) 11 In April 2011, Tyler Miller filed a provisional patent 12 application with the U.S. Patent and Trademark Office, U.S. 13 Patent Application No. 61/472,556, covering public safety 14 background investigation management software. (Compl. ¶¶ 48-49.) 15 In April 2012, Miller filed a non-provisional patent application 16 claiming priority to the provisional patent application. (Id. ¶ 17 53.) On June 30, 2015, Miller was issued U.S. Patent No. 18 9,070,098 (the “‘098 Patent”). (Id. ¶ 55.) In May 2015, Miller 19 filed another non-provisional patent application, resulting in 20 the issuance of U.S. Patent No. 10,043,188 (the “‘188 Patent”) on 21 August 7, 2018. (Id. ¶¶ 56, 58.) Tyler Miller licensed both 22 patents to Miller Mendel, Inc. (Id. ¶ 59.) The two patents both 23 concern pre-employment background check software and are similar, 24 sharing a substantial amount of identical claim language. (See 25
26 1 “SLAPP” refers to a “strategic lawsuit against public participation.” 27 2 All facts recited in this Order are as alleged in the 28 Complaint, unless otherwise noted. 1 Compl. ¶ 80; Exs. 1-2 to Compl.) 2 Miller Mendel, Inc. and Tyler Miller have filed several 3 lawsuits in federal district courts alleging that Guardian’s 4 customers infringed the ‘188 Patent through use of Guardian’s 5 software. In October 2018, both Miller Mendel, Inc. and Tyler 6 Miller sued the City of Oklahoma City in the Western District of 7 Oklahoma (the “Oklahoma Action”). See Case No. 5:18-cv-00990 8 (W.D. Okla.).3 In February 2021, Miller Mendel, Inc. sued 9 Washington County, Oregon and the Washington County Sheriff’s 10 Office in the District of Oregon (the “Oregon Action”). See Case 11 No. 3:21-cv-00168 (D. Ore.). In May 2021, Miller Mendel, Inc. 12 and Tyler Miller sued Alaska State Troopers and James E. 13 Cockrell, the Commissioner of the State of Alaska Department of 14 Public Safety, in the District of Alaska (the “Alaska Action”). 15 See Case No. 3:21-cv-00129 (D. Alaska). In December 2021, Miller 16 Mendel, Inc. sued the City of Anna, Texas in the Eastern District 17 of Texas (the “Texas Action”). See Case No. 2:21-cv-00445 (E.D. 18 Tex.). Guardian defended its customers in these actions pursuant 19 to indemnification agreements. (See Compl. ¶¶ 41, 99, 101-103.) 20 In August 2022, Guardian filed the instant action. 21 The court in the Texas Action found that claims 1, 5, 22 and 15 of Miller Mendel’s ‘188 Patent were invalid because they 23 were directed at patent-ineligible matter. See Miller Mendel, 24 Inc. v. City of Anna, Tex., No. 2:21-cv-00445 JRG, 2022 WL 25
26 3 In October 2019, Guardian (as a non-party in the Oklahoma Action) filed a petition with the Patent Trial and 27 Appeal Board (“PTAB”) for inter partes review of the validity of the ‘188 Patent, IPR2020-00031. (Compl. ¶ 119, Ex. 30.) The 28 PTAB denied review on March 26, 2020. (Id.) 1 1437686, at *10 (E.D. Tex. Apr. 14, 2022).4 The court also 2 denied Guardian’s motion for attorney’s fees. Id., 2022 WL 3 2704790, at *6 (E.D. Tex. June 13, 2022). Both decisions were 4 affirmed by the Federal Circuit. See id., 107 F.4th 1345, 1356– 5 57 (Fed. Cir. 2024), cert. denied, 145 S. Ct. 593 (2024). 6 Following the Federal Circuit’s decision, Miller Mendel 7 sought voluntary dismissal of the Oregon Action and the Alaska 8 Action, both of which were closed in January 2025. (See Oregon 9 Action, Docket Nos. 29, 33; Alaska Action, Docket Nos. 46, 50.) 10 The Oklahoma Action remains pending in the Western District of 11 Oklahoma. 12 II. Federal Claims 13 Guardian’s first and second claims seek declarations 14 that the ‘098 and ‘188 patents are unenforceable due to 15 defendants’ inequitable conduct. The third and fourth claims 16 seek declarations that the ‘098 and ‘188 patents are invalid 17 under 35 U.S.C. § 101 et seq. The fifth and sixth claims allege 18 violations of section 2 of the Sherman Act. 19 A. Declaratory Relief Claims (Claims 1, 2, 3, and 4) 20 1. First-to-File Doctrine 21 The first-to-file rule is “a judicially created 22 doctrine of federal comity, which applies when two cases 23 involving substantially similar issues and parties have been 24 filed in different districts.” In re Bozic, 888 F.3d 1048, 1051 25 (9th Cir. 2018) (internal quotation marks and citations omitted). 26 “Under that rule, the second district court has the discretion to 27 4 The other claims contained in the patent were not at 28 issue. 1 transfer, stay, or dismiss the second case in the interest of 2 efficiency and judicial economy.” Id. at 1051-52 (internal 3 quotation marks and citation omitted). To determine whether to 4 apply the rule, a district court considers three factors: 5 “chronology of the lawsuits, similarity of the parties, and 6 similarity of the issues.” Kohn Law Grp., Inc. v. Auto Parts 7 Mfg. Miss., Inc., 787 F.3d 1237, 1240 (9th Cir. 2015). “When 8 applying the first-to-file rule, courts should be driven to 9 maximize ‘economy, consistency, and comity.’” Id. (quoting Cadle 10 Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 604 (5th Cir. 11 1999)); see also Pacesetter Sys. Inc. v. Medtronic, Inc., 678 12 F.2d 93, 95 (9th Cir. 1982) (explaining that the first-to-file 13 rule “is not a rigid or inflexible rule to be mechanically 14 applied, but rather is to be applied with a view to the dictates 15 of sound judicial administration”). 16 The only related action that remains pending is the 17 Oklahoma Action, which was filed prior to this case. There, both 18 Miller Mendel, Inc. and Tyler Miller are plaintiffs, and Guardian 19 has defended its indemnitee, the City of Oklahoma City. (See 20 Compl. ¶ 99.) In the Oklahoma Action, Miller Mendel, Inc. and 21 Tyler Miller seek a declaration that they did not engage in 22 inequitable conduct or patent fraud with respect to their 23 patents, including the ‘188 Patent. (See Oklahoma Action, Docket 24 No. 139-1 ¶ 17, No. 104 ¶ 34.) There is “substantial overlap” 25 between those claims and Guardian’s first and second claims in 26 this action, which also concern alleged fraud or inequitable 27 conduct by Miller Mendel. See Kohn Law Grp., 787 F.3d at 1241. 28 However, in this action, Guardian also asserts that the entirety 1 of the ‘188 and ‘098 patents are invalid because they cover 2 unpatentable subject matter. No parallel claims concerning 3 patentability are asserted in the Oklahoma Action. Dismissal of 4 the claims in this action seeking declarations that the patents 5 cover unpatentable material would therefore be unwarranted. 6 The inequitable conduct claims might be appropriate to 7 stay given their similarity to the parallel claim in the Oklahoma 8 Action. A transfer of this action to the Western District of 9 Oklahoma is also a possibility. However, neither party has 10 requested a stay or transfer, and it is not clear to the court 11 whether a stay or transfer would be prudent here. The judge in 12 the Oklahoma Action previously held that patent infringement 13 claims cannot be asserted against Guardian in the Western 14 District of Oklahoma due to improper venue. (See Oklahoma 15 Action, Docket No. 103.) While no such infringement claims are 16 asserted against Guardian here, as Guardian is the plaintiff, it 17 is possible that Miller Mendel could assert a counterclaim to 18 that effect. 19 Further, Guardian represented in a status report to the 20 Oklahoma court that it intended to file a motion to transfer the 21 remaining Oklahoma claims to this court. (See Oklahoma Action, 22 Docket No. 142.) Miller Mendel apparently anticipates the filing 23 of such a motion to transfer, as the instant motion to dismiss 24 before this court states that the remaining Oklahoma claims 25 against Guardian “are pending transfer to [the Eastern District 26 of California] for ultimate resolution.” (Docket No. 40 at 20.) 27 Given these circumstances, the court will not order a 28 stay or transfer at this time. However, either party may file a 1 motion requesting a stay or transfer in favor of the Oklahoma 2 Action. 3 For the foregoing reasons, claims one through four will 4 not be dismissed based on the first-to-file doctrine. 5 2. Standing under Declaratory Judgment Act 6 The Declaratory Judgment Act provides that “[i]n a case 7 of actual controversy within its jurisdiction . . . any court of 8 the United States, upon the filing of an appropriate pleading, 9 may declare the rights and other legal relations of any 10 interested party seeking such declaration, whether or not further 11 relief is or could be sought.” 28 U.S.C. § 2201(a). 12 In the patent or trademark infringement context, “a 13 plaintiff has standing to seek declaratory relief of non- 14 infringement if he demonstrates ‘a real and reasonable 15 apprehension that he will be subject to liability’ if he 16 continues with his course of conduct.” See San Diego Cnty. 17 Credit Union v. Citizens Equity First Credit Union, 65 F.4th 18 1012, 1023 (9th Cir.), cert. denied, 144 S. Ct. 190 (2023) 19 (quoting Societe de Conditionnement en Aluminium v. Hunter Eng’g 20 Co., 655 F.2d 938, 944–45 (9th Cir. 1981)). “Such an 21 apprehension can exist even absent an explicit threat to sue.” 22 Id. 23 Guardian has established a “real and reasonable 24 apprehension” of patent infringement proceedings sufficient to 25 establish standing under the Declaratory Judgment Act. Indeed, 26 the threat of patent enforcement litigation by Miller Mendel is 27 about as “real” as it gets. Miller Mendel has already filed 28 multiple lawsuits against Guardian’s indemnified customers 1 concerning the validity or infringement of the ‘188 Patent, 2 leading to protracted litigation including appeal to the Federal 3 Circuit. Although the prior suits have not included the ‘098 4 Patent, the two patents are closely related, and Miller Mendel 5 previously sent a letter to Guardian stating that “further 6 investigation will become necessary” if Guardian did not ensure 7 non-infringement of the ‘098 Patent (Ex. 19 to Compl.). See 8 Chesebrough-Pond’s, Inc. v. Faberge, Inc., 666 F.2d 393, 395–96 9 (9th Cir. 1982) (plaintiff had standing under Declaratory 10 Judgment Act where it filed suit three years following letter 11 threatening to oppose trademark application before the Patent and 12 Trademark Office) (cited with approval in Citizens Equity, 65 13 F.4th at 1026). Accordingly, the declaratory relief claims will 14 not be dismissed for lack of standing. 15 B. Sherman Act Claims (Claims 5 and 6) 16 Guardian brings two claims under § 2 of the Sherman 17 Act. The fifth claim alleges attempted monopolization of the 18 relevant market via sham litigation. See Handgards, Inc. v. 19 Ethicon, Inc., 601 F.2d 986, 987 (9th Cir. 1979). The sixth 20 claim alleges attempted monopolization of the relevant market via 21 fraud on the U.S. Patent and Trademark Office. See Walker 22 Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 23 177 (1965). 24 Miller Mendel argues that both Sherman Act claims fail 25 on the ground of issue preclusion, and that the sixth claim 26 alleging fraud fails to satisfy the particularity requirements of 27 28 1 Federal Rule of Civil Procedure 9(b).5 2 1. Issue Preclusion 3 “Issue preclusion, or collateral estoppel, ‘bars 4 successive litigation of an issue of fact or law actually 5 litigated and resolved in a valid court determination essential 6 to the prior judgment,’ even if the issue recurs in the context 7 of a different claim.” Hansen v. Musk, 122 F.4th 1162, 1173 (9th 8 Cir. 2024) (quoting Taylor v. Sturgell, 553 U.S. 880, 892 9 (2008)). “For issue preclusion to apply, the party seeking 10 preclusion must show ‘(1) the issue at stake was identical in 11 both proceedings; (2) the issue was actually litigated and 12 decided in the prior proceedings; (3) there was a full and fair 13 opportunity to litigate the issue; and (4) the issue was 14 necessary to decide the merits.’” Id. (quoting Howard v. City of 15 Coos Bay, 871 F.3d 1032, 1041 (9th Cir. 2017)). 16 Miller Mendel argues that issue preclusion applies to 17 the Sherman Act claims based on the attorney’s fees decision from 18 the Texas Action. There, the district court found that 19 attorney’s fees were not warranted under 35 U.S.C. § 285, which 20 authorizes fees for patent cases only in “exceptional” 21 circumstances. The court found that the case was not 22
23 5 Miller Mendel further argues that both Sherman Act claims must be dismissed due to Guardian’s failure to plead that 24 Miller Mendel possessed monopoly power over the market. This argument is baseless. In addition to extensive allegations 25 concerning anti-competitive behavior, Guardian specifically alleges that Miller Mendel “was able to capture a dominant 26 position quickly and is currently the dominant Market 27 participant, controlling at least 70% of the total dollars expended annually by public safety agencies for public safety 28 background investigation management software.” (Compl. ¶ 29.) 1 “exceptional” because “finding the ‘188 Patent ineligibl[e] at 2 the 12(c) stage” did not mean Miller Mendel’s arguments to the 3 contrary were “frivolous or objectively unreasonable,” and 4 “Miller Mendel was entitled to believe that the ‘188 Patent was 5 valid after it was examined and allowed by the [U.S. Patent and 6 Trademark Office].” 2022 WL 2704790, at *6. 7 Issue preclusion is not applicable based on the 8 attorney’s fees decision in the Texas Action. The Texas court 9 merely made the “factual determination” that the case was not 10 exceptional such that fees were warranted. See id., at *2. This 11 issue is obviously not “identical” to the questions of whether 12 Miller Mendel acted fraudulently in acquiring the patents or 13 pursued sham patent litigation in violation of the Sherman Act. 14 See Sec. & Exch. Comm’n v. Stein, 906 F.3d 823, 829 (9th Cir. 15 2018) (whether issues involve “application of the same rule of 16 law” is relevant to determining whether issues are “identical”). 17 Further, the Texas decision fails the fourth requirement for 18 issue preclusion to apply, as attorney’s fees are not a merits 19 issue; to the contrary, by the time the court in the Texas Action 20 considered Guardian’s request for attorney’s fees, it had already 21 issued a decision on the merits. See 598 F. Supp. 3d 486. 22 Accordingly, the Sherman Act claims are not subject to issue 23 preclusion. 24 2. Rule 9(b) 25 Federal Rule of Civil Procedure 9(b) states: “In 26 alleging fraud or mistake, a party must state with particularity 27 the circumstances constituting fraud or mistake. Malice, intent, 28 knowledge, and other conditions of a person’s mind may be alleged 1 generally.” Rule 9(b) “demands that the circumstances 2 constituting the alleged fraud be specific enough to give 3 defendants notice of the particular misconduct so that they can 4 defend against the charge and not just deny that they have done 5 anything wrong.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 6 (9th Cir. 2009) (cleaned up). “Averments of fraud must be 7 accompanied by ‘the who, what, when, where, and how’ of the 8 misconduct charged.” Id. 9 Miller Mendel argues that Guardian fails to plead with 10 particularity that Miller Mendel “intended to defraud” the Patent 11 and Trademark Office. This argument is entirely meritless. Rule 12 9(b) states that “intent . . . may be alleged generally,” which 13 Guardian has done. (See, e.g., Compl. ¶ 148 (“Defendants have 14 attempted to monopolize the Market with the specific intent to do 15 so through their fraudulent misrepresentations and omissions to 16 the [Patent and Trademark Office]”).) 17 The complaint also adequately sets out the “who, what, 18 when, where, and how” of the alleged fraud. Guardian alleges 19 that in the course of obtaining the ‘098 and ‘188 patents, Miller 20 Mendel “deliberately and purposefully withheld material 21 information” from the Patent and Trademark Office, including 22 “information about third-party prior art systems of which 23 Defendants were aware.” (Compl. ¶ 34.) The complaint further 24 alleges that Miller Mendel learned of the prior art at issue in 25 2011, prior to filing the patent applications; details the 26 relevant patent application processes; states that Miller Mendel 27 failed to “file an information disclosure statement [concerning 28 the prior art] with the [Patent and Trademark Office] (despite 1 their continuing duty of disclosure under 37 C.F.R. § 1.56 to do 2 so)”; points to specific steps during the application process 3 where Miller Mendel allegedly failed to disclose the prior art 4 information, even including quotes from patent application 5 materials that Guardian contends are misleading; and alleges that 6 had the Patent and Trademark Office been made aware of the 7 information at issue, Miller Mendel would not have received the 8 patents. (See id. ¶¶ 51-78.) Accordingly, Guardian’s claim 9 alleging fraud on the Patent and Trademark Office satisfies the 10 particularity requirements of Rule 9(b). 11 III. State Law Claims 12 Guardian alleges unfair competition in violation of 13 California Business and Professions Code § 17200; false 14 advertising in violation of Business and Professions Code § 15 17500; tortious interference with contract; tortious interference 16 with prospective economic advantage; and trade libel. Miller 17 Mendel argues that these claims are barred by the California 18 anti-SLAPP law and should therefore be stricken. Miller Mendel 19 also argues that these claims should be dismissed because they 20 are subject to California’s litigation privilege, are barred by 21 Noerr-Pennington immunity,6 and fail to state a claim. 22 A. Anti-SLAPP Motion to Strike 23 A strategic lawsuit against public participation 24 (“SLAPP”) is a “civil lawsuit that is aimed at preventing 25
26 6 This doctrine takes its name from the first two cases that the Supreme Court considered in this jurisprudential line. 27 See E. R.R. Presidents’ Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers of America v. 28 Pennington, 381 U.S. 657 (1965). 1 citizens from exercising their political rights or punishing 2 those who have done so.” Simpson Strong-Tie Co. v. Gore, 49 Cal. 3 4th 12, 21 (2010). “While SLAPP suits masquerade as ordinary 4 lawsuits such as defamation and interference with prospective 5 economic advantage, they are generally meritless suits brought 6 primarily to chill the exercise of free speech or petition rights 7 by the threat of severe economic sanctions against the defendant, 8 and not to vindicate a legally cognizable right.” Id. (internal 9 quotation marks omitted). California’s anti-SLAPP statute, Cal. 10 Code. Civ. Proc. § 425.16, “authorize[s] the filing of a special 11 motion to strike to expedite the early dismissal of these 12 unmeritorious claims.” Id. 13 The anti-SLAPP statute is subject to an exemption for 14 commercial speech. An action arises from commercial speech and 15 is therefore exempt from the anti-SLAPP law when (1) “the cause 16 of action is against a person primarily engaged in the business 17 of selling or leasing goods or services;” (2) “the cause of 18 action arises from a statement or conduct by that person 19 consisting of representations of fact about that person’s or a 20 business competitor’s business operations, goods, or services;” 21 (3) “the statement or conduct was made either for the purpose of 22 obtaining approval for, promoting, or securing sales or leases 23 of, or commercial transactions in, the person’s goods or services 24 or in the course of delivering the person’s goods or services;” 25 and (4) “the intended audience for the statement or conduct” is 26 “‘an actual or potential buyer or customer, or a person likely to 27 repeat the statement to, or otherwise influence, an actual or 28 potential buyer or customer.’” See id. at 30 (quoting Cal. Code. 1 Civ. Proc. § 425.17(c)). 2 The commercial speech exemption applies here. First, 3 Miller Mendel is primarily engaged in the business of selling 4 goods or services, namely their background check software. 5 Second, Guardian’s claims arise in part from representations of 6 fact that Miller Mendel made to Guardian’s customers concerning 7 Guardian’s product, for example that “[t]hrough the way 8 [Guardian’s software] operates and their Terms of Service and 9 Privacy Policy, [customers] have no first-level control over 10 [their] applicants’ data,” leading customers to “likely lose 11 control over public records law exemptions, ability to object to 12 discovery requests and also, in general, lose security over the 13 applicants’ data.” (See Ex. 28 to Compl.) Third, the statements 14 at issue were made for the purpose of persuading Guardian’s 15 customers or potential customers to use Miller Mendel’s software 16 rather than Guardian’s. For example, the above statement 17 concerning the purported security failures of Guardian’s software 18 was disseminated in emails sent directly to several of Guardian’s 19 customers that asked the customers to “cease use” of Guardian’s 20 software. Those emails also represented that Guardian’s software 21 infringed on Miller Mendel’s patent, thereby presenting Miller 22 Mendel’s software as an alternative to Guardian’s product. (See 23 id.) Finally, the statements at issue were made either directly 24 to Guardian’s potential customers (see id.) or disseminated to an 25 intended audience that included Guardian’s actual or potential 26 customers (see Ex. 30 to Compl.). Accordingly, Guardian’s state 27 law claims are subject to the commercial speech exemption and 28 1 Miller Mendel’s anti-SLAPP motion to strike will be denied.7 2 B. Noerr-Pennington Immunity 3 The Noerr-Pennington doctrine, which is derived from 4 the Petition Clause of the First Amendment, “provides that those 5 who petition any department of the government for redress,” 6 including the judicial branch, “are generally immune from . . . 7 liability for their petitioning conduct.” See B&G Foods N. Am., 8 Inc. v. Embry, 29 F.4th 527, 535 (9th Cir. 2022) (internal 9 quotation marks omitted). Noerr-Pennington applies to state law 10 claims. Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 11 991, 1007 (9th Cir. 2008). 12 The Noerr-Pennington doctrine does not grant immunity, 13 however, where the “sham exception” applies. See Kaiser Found. 14 Health Plan, Inc. v. Abbott Lab’ys, Inc., 552 F.3d 1033, 1044 15 (9th Cir. 2009). To fall under the sham exception, the 16 litigation at issue must be “objectively baseless in the sense 17 that no reasonable litigant could realistically expect success on 18 the merits.” Prof. Real Estate Inv’rs, Inc. v. Columbia Pictures 19 Indus., Inc., 508 U.S. 49, 60 (1993). If the lawsuit is 20 objectively baseless, the court “examine[s] the litigant’s 21 subjective motivation” to determine whether the lawsuit “conceals 22 an attempt to interfere directly with the business relationships 23 7 Miller Mendel’s reply brief does not engage with the 24 elements of the commercial speech exemption, instead appearing to argue in circular fashion that because the claims at issue fall 25 within the scope of the anti-SLAPP statute, they do not qualify for the commercial speech exemption therefrom. If Miller 26 Mendel’s brief is trying to argue anything more than that, the 27 court is unable to understand that argument. Further, at oral argument, counsel failed to rebut Guardian’s showing that the 28 elements of the commercial speech exemption are satisfied. 1 of a competitor through the use of the governmental process -- as 2 opposed to the outcome of that process -- as an anticompetitive 3 weapon.” Id. at 60-61 (cleaned up). 4 The Ninth Circuit has explained that in a case 5 involving a “fraudulently obtained patent, that which immunized 6 the [patent enforcement litigation] from . . . liability (the 7 patent) is, in effect, a nullity because of the underlying 8 fraud.” Hydranautics v. FilmTec Corp., 70 F.3d 533, 538 (9th 9 Cir. 1995) (quoting Liberty Lake Invs., Inc. v. Magnuson, 12 F.3d 10 155 (9th Cir. 1993)). Accordingly, where intentional fraud in 11 the procurement of the patent is alleged, dismissal at the 12 pleadings stage pursuant to the Noerr-Pennington doctrine is 13 improper. See id. Put differently, “[o]bjective baselessness 14 may be shown by demonstrating that the ‘infringement action [is] 15 based on a fraudulently obtained patent.’” Shenzhen Smoore Tech. 16 Co. v. Next Level Ventures, LLC, No. 2:22-cv-07646, 2024 WL 17 5317246, at *7 (C.D. Cal. Dec. 4, 2024) (quoting Hydranautics, 70 18 F.3d at 538). See also Kaiser Found. Health Plan, 552 F.3d at 19 1045 (the “fraud or misrepresentation” warranting application of 20 the sham exception to Noerr-Pennington can include fraud 21 “directed to the federal Patent and Trademark Office [], not 22 merely to a court”). 23 Because Guardian has plausibly alleged that Miller 24 Mendel (1) engaged in intentional fraud in obtaining the patent 25 underlying the enforcement litigation (see Compl. ¶¶ 33-78), and 26 (2) intended the litigation to interfere with Guardian’s business 27 relationships (see id. ¶¶ 12-18, 95-127), dismissal of the state 28 law claims (to the extent they are premised on that litigation) 1 is not warranted under Noerr-Pennington. See Shenzhen Smoore, 2 2024 WL 5317246, at *7 (declining to grant immunity under Noerr- 3 Pennington at the pleadings stage where complaint alleged that 4 defendant knew the patent at issue was obtained fraudulently and 5 pursued a patent enforcement action nonetheless).8 6 C. Litigation Privilege 7 Miller Mendel asserts that Guardian’s state law claims 8 are barred because they are premised on communications subject to 9 California’s litigation privilege, Cal. Civ. Code § 47. “[T]he 10 privilege applies to any communication (1) made in judicial or 11 quasi-judicial proceedings; (2) by litigants or other 12 participants authorized by law; (3) to achieve the objects of the 13 litigation; and (4) that have some connection or logical relation 14 to the action.” Silberg v. Anderson, 50 Cal. 3d 205, 212 (1990). 15 The privilege “applies to any publication or other communication 16 . . . whether or not the publication is made in the courtroom or 17 in court pleadings, and whether or not any function of the court 18 or its officers is involved.” Rothman v. Jackson, 49 Cal. App. 19 4th 1134, 1140 (2d Dist. 1996). If a “statement is made with a 20 good faith belief in a legally viable claim and in serious 21 contemplation of litigation, then the statement is sufficiently 22 8 Miller Mendel also argues that “federal patent law 23 preempts state-law tort liability for a patentholder’s good faith conduct in communications asserting infringement of its patent 24 and warning about potential litigation.” See Lite-Netics, LLC v. Nu Tsai Cap. LLC, 60 F.4th 1335, 1343 (Fed. Cir. 2023). However, 25 state claims “can survive federal preemption” when they are “based on a showing of ‘bad faith’ action in asserting 26 infringement.” See id. The “bad faith” analysis is identical to 27 the sham exception’s “objectively baseless” prong, see id. (citing Columbia Pictures, 508 U.S. at 60), and therefore does 28 not require separate discussion. 1 connected to litigation and will be protected by the litigation 2 privilege.” Blanchard v. DIRECTV, Inc., 123 Cal. App. 4th 903, 3 919 (2d Dist. 2004). 4 Guardian has alleged sufficient conduct not protected 5 by the litigation privilege to survive dismissal. First, 6 Guardian’s claims rely not only on Miller Mendel’s infringement 7 litigation, but also the patent application process itself. The 8 litigation privilege “is intended to assure utmost freedom of 9 communication between citizens and public authorities whose 10 responsibility is to investigate and remedy wrongdoing.” Hagberg 11 v. California Fed. Bank, 32 Cal. 4th 350, 360 (2004) (emphasis in 12 original). As the Ninth Circuit explained in Mindys Cosmetics, 13 Inc. v. Dakar, an application to the Patent and Trademark Office 14 does not serve that purpose, because such an application is “not 15 filed in anticipation of litigation, nor [i]s it intended to 16 instigate official investigation into wrongdoing.” See 611 F.3d 17 590, 600 (9th Cir. 2010) (citing Hagberg, 32 Cal. 4th at 369); 18 see also NICOR, Inc. v. SourceBlue, LLC, No. 2:21-cv-05876, 2023 19 WL 6866329, at *25 (C.D. Cal. Aug. 30, 2023) (claim alleging that 20 defendant “[sought] a patent based on stolen proprietary 21 information” may not be barred by the litigation privilege). 22 Second, Guardian’s claims are also premised in part on 23 communications arguably disseminated to a broader audience. The 24 complaint alleges that Miller Mendel published an “open letter 25 regarding serious public concerns” about Guardian’s software on 26 Miller Mendel’s website. (Compl. ¶ 118; Ex. 29 to Compl.) While 27 there is no binding authority on point, several “California 28 courts have made clear that the privilege ‘does not encompass 1 publication to the general public,’” for example social media 2 posts or press releases. See Therabody, Inc. v. Hyper Ice, Inc., 3 No. 8:24-cv-00378, 2024 WL 5316364, at *8 (C.D. Cal. Oct. 31, 4 2024) (quoting GetFugu, Inc. v. Patton Boggs LLP, 220 Cal. App. 5 4th 141, 153 (2d Dist. 2013)). Such efforts to “‘publicize the 6 alleged misdeeds’” of the opposing party by making statements 7 “directed to the public as a whole” might not be covered by the 8 litigation privilege. See id., at *7-8 (quoting GetFugu, 220 9 Cal. App. 4th at 153); see also Cap Exp., LLC v. Zinus, Inc., No. 10 2:21-cv-07148, 2023 WL 6381821, at *6 (C.D. Cal. Sept. 28, 2023) 11 (“‘Public mudslinging’ in the form of Defendants’ communications 12 accusing [the plaintiff] of unlawful infringement are not 13 afforded ‘the same protections which section 47(b) gives to court 14 processes.’”) (quoting Rothman, 49 Cal. App. 4th at 1146). But 15 see UCP Int’l Co. Ltd. v. Balsam Brands Inc., 420 F. Supp. 3d 16 966, 982–83 (N.D. Cal. 2019) (citing Weiland Sliding Doors & 17 Windows, Inc. v. Panda Windows & Doors, LLC, 814 F. Supp. 2d 18 1033, 1041 (S.D. Cal. 2011)) (litigation privilege protected 19 statements concerning infringement litigation made on website 20 whose intended audience was customers). 21 Third, Miller Mendel’s statements both directly to 22 customers and on the Miller Mendel website concerned not only the 23 patent infringement litigation, but also other unrelated issues 24 concerning Guardian’s software -- for instance, the statement 25 discussed above pertaining to the software’s alleged security 26 flaws. Statements about Guardian’s product entirely unrelated to 27 patent infringement do not have a connection or logical relation 28 to the infringement litigation. See NICOR, 2023 WL 6866329, at 1 *25 (litigation privilege did not apply where alleged statements 2 were “not limited to enforcing patent rights”); Tri-Star Elecs. 3 Int’l, Inc. v. Preci-Dip Durtal SA, No. 08-cv-04226, 2011 WL 4 13176071, at *8 (C.D. Cal. May 27, 2011) (litigation privilege 5 did not apply to allegedly false “gratuitous disparaging 6 statements” about the quality of plaintiff’s products, as those 7 statements “do not serve the objects of the litigation because 8 [they have] nothing to do with the alleged infringement”). 9 While some of the conduct at issue may well be covered 10 by the litigation privilege, Guardian has provided sufficient 11 allegations of unprivileged conduct to survive dismissal. 12 D. Failure to State a Claim 13 1. Tortious Interference with Contract (Claim 9) 14 The elements of a claim for intentional interference 15 with contractual relations are “(1) a valid contract between 16 plaintiff and a third party; (2) defendant’s knowledge of this 17 contract; (3) defendant’s intentional acts designed to induce a 18 breach or disruption of the contractual relationship; (4) actual 19 breach or disruption of the contractual relationship; and (5) 20 resulting damage.” hiQ Labs, Inc. v. LinkedIn Corp., 31 F.4th 21 1180, 1191 (9th Cir. 2022) (quoting Pac. Gas & Elec. Co. v. Bear 22 Stearns & Co., 50 Cal. 3d 1118, 1126 (1990)). “‘[I]t is not 23 necessary that the defendant’s conduct be wrongful apart from the 24 interference with the contract itself.’” Salon Supply Store, LLC 25 v. Creative Nail Design, Inc., No. 14-cv-01083, 2015 WL 11438492, 26 at *8 (S.D. Cal. June 19, 2015) (quoting Quelimane Co. v. Stewart 27 Title Guar. Co., 19 Cal. 4th 26, 55 (1998)). 28 Defendants argue that they cannot be held liable for 1 tortious interference with contract because they acted with a 2 legitimate business purpose, namely protecting their patents. 3 “Under California law, a legitimate business purpose 4 can indeed justify interference with contract, but not just any 5 such purpose suffices.” hiQ Labs, 31 F.4th at 1192 (citing 6 Quelimane, 19 Cal. 4th at 55-56). “Rather, interference with 7 contract is justified only when the party alleged to have 8 interfered acted ‘to protect an interest that has greater social 9 value than [e]nsuring the stability of the contract’ interfered 10 with.” Id. at 1193 (quoting Imperial Ice Co. v. Rossier, 18 Cal. 11 2d 33, 35 (1941)). Accordingly, California courts determining 12 whether a business purpose justifies interference with contract 13 balance “‘the importance, social and private, of the objective 14 advanced by the interference against the importance of the 15 interest interfered with, considering all circumstances including 16 the nature of the actor’s conduct and the relationship between 17 the parties.’” Id. (quoting Herron v. State Farm Mut. Ins. Co., 18 56 Cal. 2d 202, 206, (1961)). “Considerations include whether 19 the means of interference involve no more than recognized trade 20 practices, and whether the conduct is within the realm of fair 21 competition,” but “[t]he determinative question is whether the 22 business interest is pretextual or asserted in good faith.” Id. 23 (internal quotation marks and citations omitted). 24 Defendants state in conclusory fashion that patent 25 enforcement qualifies as a legitimate business purpose, but cite 26 no California authorities for that proposition, nor do they 27 engage with the applicable balancing test. More importantly, 28 there are allegations of bad faith in Miller Mendel’s enforcement 1 of the patents, which indicates that the legitimate business 2 purpose defense may not apply. See id. at 1193 (“The 3 determinative question is whether the business interest is 4 pretextual or asserted in good faith.”). Miller Mendel therefore 5 has not met its burden for establishing that this “affirmative 6 justification defense” applies. See id. at 1192. Accordingly, 7 Guardian’s claim for tortious interference with contract will not 8 be dismissed based on the legitimate business purpose defense.
9 2. Tortious Interference with Prospective Economic Advantage (Claim 10) 10 11 Tortious interference with prospective economic 12 advantage consists of “knowing[] interfere[nce]” with an 13 “economic relationship between the plaintiff and some third 14 party, which carries the probability of future economic benefit 15 to the plaintiff.” Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 16 5th 1130, 1141 (2020) (cleaned up). “Unlike intentional 17 interference with existing contractual relations, interference 18 with prospective economic advantage requires a plaintiff to 19 allege an act that is wrongful independent of the interference 20 itself.” CRST Van Expedited, Inc. v. Werner Enters., Inc., 479 21 F.3d 1099, 1108 (9th Cir. 2007) (citing Della Penna v. Toyota 22 Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 392-93 (1995)). 23 In addition to the “legitimate business purpose” 24 defense already rejected above, Miller Mendel argues that 25 Guardian fails to plead an independently wrongful act. “[A]n act 26 is independently wrongful if it is unlawful, that is, if it is 27 proscribed by some constitutional, statutory, regulatory, common 28 law, or other determinable legal standard.” Id. (quoting Korea 1 Supply, 29 Cal. 4th at 1159). Here, Guardian has alleged 2 independently wrongful conduct, including the alleged false 3 statements made to its customers. See Visto Corp. v. Sproqit 4 Techs., Inc., 360 F. Supp. 2d 1064, 1067 (N.D. Cal. 2005) 5 (defendant pled “the element of independently wrongful conduct 6 because it has alleged that [the plaintiff]’s allegations of 7 patent infringement are false and/or defamatory”). Accordingly, 8 Guardian’s claim for tortious interference with prospective 9 economic advantage will not be dismissed.
10 3. Unfair Competition and False Advertising (Claims 7 and 8) 11 12 The Unfair Competition Law (“UCL”) prohibits any 13 unlawful, unfair, or fraudulent business act or practice. Cal. 14 Bus. & Prof. Code § 17200. The false advertising law makes it 15 unlawful to disseminate “untrue or misleading” statements with 16 the “intent . . . to dispose of real or personal property or 17 perform services.” Cal. Bus. & Prof. Code § 17500. 18 To have standing under both the UCL and false 19 advertising law, a plaintiff must: “(1) establish a loss or 20 deprivation of money or property sufficient to qualify as injury 21 in face, i.e., economic injury, and (2) show that that economic 22 injury was the result of, i.e., caused by, the unfair business 23 practice or false advertising that is the gravamen of the claim.” 24 Kwikset Corp. v. Superior Court, 246 Cal. 4th 310, 332 (2011). 25 Guardian has successfully stated a claim under the UCL. 26 The UCL “borrows violations of other laws and treats them as 27 unlawful practices that the unfair competition law makes 28 independently actionable.” Cel-Tech Commc’ns, Inc. v. Los 1 Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). Because 2 Guardian has adequately pled the federal and state claims 3 discussed above, it has also adequately pled its UCL claim. See 4 Dairy, LLC v. Milk Moovement, Inc., No. 2:21-cv-02233 WBS AC, 5 2023 WL 3437426, at *15 (E.D. Cal. May 12, 2023). Further, 6 Guardian has adequately pled economic injury in connection with 7 its underlying claims, for example, by explaining that Miller 8 Mendel’s anticompetitive conduct enabled it to capture some of 9 Guardian’s market share and customers, including at least one 10 customer who had already entered into a contract with Guardian. 11 (See Compl. ¶ 32.) Accordingly, Guardian’s UCL claim will not be 12 dismissed. 13 However, Guardian has failed to establish standing for 14 its false advertising claim. While Guardian points to certain 15 allegedly false or misleading statements Miller Mendel made to 16 the public and to Guardian’s customers (see Compl. ¶¶ 115-121), 17 it fails to provide allegations concerning the economic injury 18 caused by those statements specifically. Accordingly, Guardian’s 19 false advertising claim will be dismissed. 20 4. Trade Libel (Claim 11) 21 Under California law, “[t]rade libel is the publication 22 of matter disparaging the quality of another’s property, which 23 the publisher should recognize is likely to cause pecuniary loss 24 to the owner.” ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 25 993, 1010 (4th Dist. 2001) (citing Leonardini v. Shell Oil Co., 26 216 Cal. App. 3d 547, 572 (3d Dist. 1989)). It encompasses “all 27 false statements concerning the quality of services or product of 28 a business which are intended to cause that business financial 1 harm and in fact do so.” Leonardini, 216 Cal. App. 3d at 572. 2 To state a claim for trade libel, plaintiff must plead 3 special damages. Therabody, 2024 WL 5316364, at *10 (collecting 4 cases). Similarly to the false advertising claim, the trade 5 libel claim fails due to Guardian’s failure to plead economic 6 damages in connection with the allegedly false statements at 7 issue, as opposed to damages caused by Miller Mendel’s alleged 8 anticompetitive conduct as a whole.9 Accordingly, Guardian’s 9 claim for trade libel will be dismissed. 10 IT IS THEREFORE ORDERED that defendants’ motion to 11 strike (Docket No. 41) be, and the same hereby is, DENIED. 12 IT IS FURTHER ORDERED that defendants’ motion to 13 dismiss (Docket No. 40) be, and the same hereby is, GRANTED only 14 as to the eighth claim for false advertising and eleventh claim 15 for trade libel. The motion is DENIED in all other respects. 16 Plaintiff has 14 days from the date of this Order to file an 17 amended complaint, if it can do so consistent with this Order. 18 Within 21 days of the issuance of this Order, the 19 parties shall file a joint status report addressing (1) whether 20 this court should issue a pretrial scheduling order, and if so 21 what dates the parties desire and any other information required 22 under Federal Rule of Civil Procedure 26(f) (see Docket No. 6); 23 9 Guardian appears to recognize that its complaint fails 24 to plead economic damages for purposes of the false advertising and trade libel claims, as it has provided a declaration 25 addressing this issue (see Anthony Decl. (Docket No. 43)) and all but conceded the issue during oral argument. However, the 26 declaration provided is not judicially noticeable and is 27 therefore inappropriate for consideration at the pleadings stage. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th 28 Cir. 2018). ee IE ON IN IIE IER IRI IRIE IS III ROI OE RI OE
1 (2) whether the parties wish to proceed to settlement 2 discussions, and if so whether they would like the court to refer 3 the matter to the court’s Voluntary Dispute Resolution Program 4 (“VDRP”) or a settlement conference with a magistrate judge; and 5 (3) any other matter of which the parties think the court should 6 | be informed. dh ble (hi. 7 | Dated: April 30, 2025 Pi he Vi (eh 9 UNITED STATES DISTRICT JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26