Guardian Alliance Technologies, Inc. v. Miller Mendel, Inc.

Opinion

----oo0oo---- GUARDIAN ALLIANCE TECHNOLOGIES, No. 2:22-cv-01390 WBS AC INC., Plaintiff, MEMORANDUM AND ORDER RE: v. DEFENDANTS’ MOTION TO DISMISS MILLER MENDEL, INC. and TYLER Defendants. ----oo0oo---- Plaintiff Guardian Alliance Technologies, Inc. (“Guardian”) brought this action against defendants Miller Mendel, Inc. and Tyler Miller (collectively, “Miller Mendel”), seeking declarations that two of defendants’ patents are invalid, asserting claims under the Sherman Antitrust Act, 15 U.S.C § 2, and alleging various violations of California state law. (Compl. (Docket No. 1).) Before the court are Miller Mendel’s motion to dismiss the complaint in its entirety (Docket No. 40) and motion to strike Guardian’s state law claims pursuant to California’s anti-SLAPP1 statute, Cal. Civ. Code § 425.16 (Docket No. 41). I. Background & Procedural History2 Plaintiff Guardian is a California-based company that creates and sells access to software for managing employee background checks, primarily for government organizations and law enforcement agencies. (Compl. ¶¶ 4, 28.) Defendant Miller Mendel, Inc. is a Seattle-based company that creates and sells access to similar software. (Id. ¶¶ 5, 28.) Defendant Tyler Miller is the Chief Executive Officer of Miller Mendel, Inc. (See Ex. A to Rylander Decl. (Docket No. 40-2 at 8).) In April 2011, Tyler Miller filed a provisional patent application with the U.S. Patent and Trademark Office, U.S. Patent Application No. 61/472,556, covering public safety background investigation management software. (Compl. ¶¶ 48-49.) In April 2012, Miller filed a non-provisional patent application claiming priority to the provisional patent application. (Id. ¶ 53.) On June 30, 2015, Miller was issued U.S. Patent No. 9,070,098 (the “‘098 Patent”). (Id. ¶ 55.) In May 2015, Miller filed another non-provisional patent application, resulting in the issuance of U.S. Patent No. 10,043,188 (the “‘188 Patent”) on August 7, 2018. (Id. ¶¶ 56, 58.) Tyler Miller licensed both patents to Miller Mendel, Inc. (Id. ¶ 59.) The two patents both concern pre-employment background check software and are similar, sharing a substantial amount of identical claim language. (See

1 “SLAPP” refers to a “strategic lawsuit against public participation.” 2 All facts recited in this Order are as alleged in the Complaint, unless otherwise noted. Compl. ¶ 80; Exs. 1-2 to Compl.) Miller Mendel, Inc. and Tyler Miller have filed several lawsuits in federal district courts alleging that Guardian’s customers infringed the ‘188 Patent through use of Guardian’s software. In October 2018, both Miller Mendel, Inc. and Tyler Miller sued the City of Oklahoma City in the Western District of Oklahoma (the “Oklahoma Action”). See Case No. 5:18-cv-00990 (W.D. Okla.).3 In February 2021, Miller Mendel, Inc. sued Washington County, Oregon and the Washington County Sheriff’s Office in the District of Oregon (the “Oregon Action”). See Case No. 3:21-cv-00168 (D. Ore.). In May 2021, Miller Mendel, Inc. and Tyler Miller sued Alaska State Troopers and James E. Cockrell, the Commissioner of the State of Alaska Department of Public Safety, in the District of Alaska (the “Alaska Action”). See Case No. 3:21-cv-00129 (D. Alaska). In December 2021, Miller Mendel, Inc. sued the City of Anna, Texas in the Eastern District of Texas (the “Texas Action”). See Case No. 2:21-cv-00445 (E.D. Tex.). Guardian defended its customers in these actions pursuant to indemnification agreements. (See Compl. ¶¶ 41, 99, 101-103.) In August 2022, Guardian filed the instant action. The court in the Texas Action found that claims 1, 5, and 15 of Miller Mendel’s ‘188 Patent were invalid because they were directed at patent-ineligible matter. See Miller Mendel, Inc. v. City of Anna, Tex., No. 2:21-cv-00445 JRG, 2022 WL

3 In October 2019, Guardian (as a non-party in the Oklahoma Action) filed a petition with the Patent Trial and Appeal Board (“PTAB”) for inter partes review of the validity of the ‘188 Patent, IPR2020-00031. (Compl. ¶ 119, Ex. 30.) The PTAB denied review on March 26, 2020. (Id.) 1437686, at *10 (E.D. Tex. Apr. 14, 2022).4 The court also denied Guardian’s motion for attorney’s fees. Id., 2022 WL 2704790, at *6 (E.D. Tex. June 13, 2022). Both decisions were affirmed by the Federal Circuit. See id., 107 F.4th 1345, 1356– 57 (Fed. Cir. 2024), cert. denied, 145 S. Ct. 593 (2024). Following the Federal Circuit’s decision, Miller Mendel sought voluntary dismissal of the Oregon Action and the Alaska Action, both of which were closed in January 2025. (See Oregon Action, Docket Nos. 29, 33; Alaska Action, Docket Nos. 46, 50.) The Oklahoma Action remains pending in the Western District of Oklahoma. II. Federal Claims Guardian’s first and second claims seek declarations that the ‘098 and ‘188 patents are unenforceable due to defendants’ inequitable conduct. The third and fourth claims seek declarations that the ‘098 and ‘188 patents are invalid under 35 U.S.C. § 101 et seq. The fifth and sixth claims allege violations of section 2 of the Sherman Act. A. Declaratory Relief Claims (Claims 1, 2, 3, and 4) 1. First-to-File Doctrine The first-to-file rule is “a judicially created doctrine of federal comity, which applies when two cases involving substantially similar issues and parties have been filed in different districts.” In re Bozic, 888 F.3d 1048, 1051 (9th Cir. 2018) (internal quotation marks and citations omitted). “Under that rule, the second district court has the discretion to 4 The other claims contained in the patent were not at issue. transfer, stay, or dismiss the second case in the interest of efficiency and judicial economy.” Id. at 1051-52 (internal quotation marks and citation omitted). To determine whether to apply the rule, a district court considers three factors: “chronology of the lawsuits, similarity of the parties, and similarity of the issues.” Kohn Law Grp., Inc. v. Auto Parts Mfg. Miss., Inc., 787 F.3d 1237, 1240 (9th Cir. 2015). “When applying the first-to-file rule, courts should be driven to maximize ‘economy, consistency, and comity.’” Id. (quoting Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 604 (5th Cir. 1999)); see also Pacesetter Sys. Inc. v. Medtronic, Inc., 678 F.2d 93, 95 (9th Cir. 1982) (explaining that the first-to-file rule “is not a rigid or inflexible rule to be mechanically applied, but rather is to be applied with a view to the dictates of sound judicial administration”). The only related action that remains pending is the Oklahoma Action, which was filed prior to this case. There, both Miller Mendel, Inc. and Tyler Miller are plaintiffs, and Guardian has defended its indemnitee, the City of Oklahoma City. (See Compl. ¶ 99.) In the Oklahoma Action, Miller Mendel, Inc. and Tyler Miller seek a declaration that they did not engage in inequitable conduct or patent fraud with respect to their patents, including the ‘188 Patent. (See Oklahoma Action, Docket No. 139-1 ¶ 17, No. 104 ¶ 34.) There is “substantial overlap” between those claims and Guardian’s first and second claims in this action, which also concern alleged fraud or inequitable conduct by Miller Mendel. See Kohn Law Grp., 787 F.3d at 1241. However, in this action, Guardian also asserts that the entirety of the ‘188 and ‘098 patents are invalid because they cover unpatentable subject matter. No parallel claims concerning patentability are asserted in the Oklahoma Action. Dismissal of the claims in this action seeking declarations that the patents cover unpatentable material would therefore be unwarranted. The inequitable conduct claims might be appropriate to stay given their similarity to the parallel claim in the Oklahoma Action. A transfer of this action to the Western District of Oklahoma is also a possibility. However, neither party has requested a stay or transfer, and it is not clear to the court whether a stay or transfer would be prudent here. The judge in the Oklahoma Action previously held that patent infringement claims cannot be asserted against Guardian in the Western District of Oklahoma due to improper venue. (See Oklahoma Action, Docket No. 103.) While no such infringement claims are asserted against Guardian here, as Guardian is the plaintiff, it is possible that Miller Mendel could assert a counterclaim to that effect. Further, Guardian represented in a status report to the Oklahoma court that it intended to file a motion to transfer the remaining Oklahoma claims to this court. (See Oklahoma Action, Docket No. 142.) Miller Mendel apparently anticipates the filing of such a motion to transfer, as the instant motion to dismiss before this court states that the remaining Oklahoma claims against Guardian “are pending transfer to [the Eastern District of California] for ultimate resolution.” (Docket No. 40 at 20.) Given these circumstances, the court will not order a stay or transfer at this time. However, either party may file a motion requesting a stay or transfer in favor of the Oklahoma Action. For the foregoing reasons, claims one through four will not be dismissed based on the first-to-file doctrine. 2. Standing under Declaratory Judgment Act The Declaratory Judgment Act provides that “[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). In the patent or trademark infringement context, “a plaintiff has standing to seek declaratory relief of non- infringement if he demonstrates ‘a real and reasonable apprehension that he will be subject to liability’ if he continues with his course of conduct.” See San Diego Cnty. Credit Union v. Citizens Equity First Credit Union, 65 F.4th 1012, 1023 (9th Cir.), cert. denied, 144 S. Ct. 190 (2023) (quoting Societe de Conditionnement en Aluminium v. Hunter Eng’g Co., 655 F.2d 938, 944–45 (9th Cir. 1981)). “Such an apprehension can exist even absent an explicit threat to sue.” Id. Guardian has established a “real and reasonable apprehension” of patent infringement proceedings sufficient to establish standing under the Declaratory Judgment Act. Indeed, the threat of patent enforcement litigation by Miller Mendel is about as “real” as it gets. Miller Mendel has already filed multiple lawsuits against Guardian’s indemnified customers concerning the validity or infringement of the ‘188 Patent, leading to protracted litigation including appeal to the Federal Circuit. Although the prior suits have not included the ‘098 Patent, the two patents are closely related, and Miller Mendel previously sent a letter to Guardian stating that “further investigation will become necessary” if Guardian did not ensure non-infringement of the ‘098 Patent (Ex. 19 to Compl.). See Chesebrough-Pond’s, Inc. v. Faberge, Inc., 666 F.2d 393, 395–96 (9th Cir. 1982) (plaintiff had standing under Declaratory Judgment Act where it filed suit three years following letter threatening to oppose trademark application before the Patent and Trademark Office) (cited with approval in Citizens Equity, 65 F.4th at 1026). Accordingly, the declaratory relief claims will not be dismissed for lack of standing. B. Sherman Act Claims (Claims 5 and 6) Guardian brings two claims under § 2 of the Sherman Act. The fifth claim alleges attempted monopolization of the relevant market via sham litigation. See Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 987 (9th Cir. 1979). The sixth claim alleges attempted monopolization of the relevant market via fraud on the U.S. Patent and Trademark Office. See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965). Miller Mendel argues that both Sherman Act claims fail on the ground of issue preclusion, and that the sixth claim alleging fraud fails to satisfy the particularity requirements of Federal Rule of Civil Procedure 9(b).5 1. Issue Preclusion “Issue preclusion, or collateral estoppel, ‘bars successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment,’ even if the issue recurs in the context of a different claim.” Hansen v. Musk, 122 F.4th 1162, 1173 (9th Cir. 2024) (quoting Taylor v. Sturgell, 553 U.S. 880, 892 (2008)). “For issue preclusion to apply, the party seeking preclusion must show ‘(1) the issue at stake was identical in both proceedings; (2) the issue was actually litigated and decided in the prior proceedings; (3) there was a full and fair opportunity to litigate the issue; and (4) the issue was necessary to decide the merits.’” Id. (quoting Howard v. City of Coos Bay, 871 F.3d 1032, 1041 (9th Cir. 2017)). Miller Mendel argues that issue preclusion applies to the Sherman Act claims based on the attorney’s fees decision from the Texas Action. There, the district court found that attorney’s fees were not warranted under 35 U.S.C. § 285, which authorizes fees for patent cases only in “exceptional” circumstances. The court found that the case was not

5 Miller Mendel further argues that both Sherman Act claims must be dismissed due to Guardian’s failure to plead that Miller Mendel possessed monopoly power over the market. This argument is baseless. In addition to extensive allegations concerning anti-competitive behavior, Guardian specifically alleges that Miller Mendel “was able to capture a dominant position quickly and is currently the dominant Market participant, controlling at least 70% of the total dollars expended annually by public safety agencies for public safety background investigation management software.” (Compl. ¶ 29.) “exceptional” because “finding the ‘188 Patent ineligibl[e] at the 12(c) stage” did not mean Miller Mendel’s arguments to the contrary were “frivolous or objectively unreasonable,” and “Miller Mendel was entitled to believe that the ‘188 Patent was valid after it was examined and allowed by the [U.S. Patent and Trademark Office].” 2022 WL 2704790, at *6. Issue preclusion is not applicable based on the attorney’s fees decision in the Texas Action. The Texas court merely made the “factual determination” that the case was not exceptional such that fees were warranted. See id., at *2. This issue is obviously not “identical” to the questions of whether Miller Mendel acted fraudulently in acquiring the patents or pursued sham patent litigation in violation of the Sherman Act. See Sec. & Exch. Comm’n v. Stein, 906 F.3d 823, 829 (9th Cir. 2018) (whether issues involve “application of the same rule of law” is relevant to determining whether issues are “identical”). Further, the Texas decision fails the fourth requirement for issue preclusion to apply, as attorney’s fees are not a merits issue; to the contrary, by the time the court in the Texas Action considered Guardian’s request for attorney’s fees, it had already issued a decision on the merits. See 598 F. Supp. 3d 486. Accordingly, the Sherman Act claims are not subject to issue preclusion. 2. Rule 9(b) Federal Rule of Civil Procedure 9(b) states: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Rule 9(b) “demands that the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (cleaned up). “Averments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” Id. Miller Mendel argues that Guardian fails to plead with particularity that Miller Mendel “intended to defraud” the Patent and Trademark Office. This argument is entirely meritless. Rule 9(b) states that “intent . . . may be alleged generally,” which Guardian has done. (See, e.g., Compl. ¶ 148 (“Defendants have attempted to monopolize the Market with the specific intent to do so through their fraudulent misrepresentations and omissions to the [Patent and Trademark Office]”).) The complaint also adequately sets out the “who, what, when, where, and how” of the alleged fraud. Guardian alleges that in the course of obtaining the ‘098 and ‘188 patents, Miller Mendel “deliberately and purposefully withheld material information” from the Patent and Trademark Office, including “information about third-party prior art systems of which Defendants were aware.” (Compl. ¶ 34.) The complaint further alleges that Miller Mendel learned of the prior art at issue in 2011, prior to filing the patent applications; details the relevant patent application processes; states that Miller Mendel failed to “file an information disclosure statement [concerning the prior art] with the [Patent and Trademark Office] (despite their continuing duty of disclosure under 37 C.F.R. § 1.56 to do so)”; points to specific steps during the application process where Miller Mendel allegedly failed to disclose the prior art information, even including quotes from patent application materials that Guardian contends are misleading; and alleges that had the Patent and Trademark Office been made aware of the information at issue, Miller Mendel would not have received the patents. (See id. ¶¶ 51-78.) Accordingly, Guardian’s claim alleging fraud on the Patent and Trademark Office satisfies the particularity requirements of Rule 9(b). III. State Law Claims Guardian alleges unfair competition in violation of California Business and Professions Code § 17200; false advertising in violation of Business and Professions Code § 17500; tortious interference with contract; tortious interference with prospective economic advantage; and trade libel. Miller Mendel argues that these claims are barred by the California anti-SLAPP law and should therefore be stricken. Miller Mendel also argues that these claims should be dismissed because they are subject to California’s litigation privilege, are barred by Noerr-Pennington immunity,6 and fail to state a claim. A. Anti-SLAPP Motion to Strike A strategic lawsuit against public participation (“SLAPP”) is a “civil lawsuit that is aimed at preventing

6 This doctrine takes its name from the first two cases that the Supreme Court considered in this jurisprudential line. See E. R.R. Presidents’ Conf. v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers of America v. Pennington, 381 U.S. 657 (1965). citizens from exercising their political rights or punishing those who have done so.” Simpson Strong-Tie Co. v. Gore, 49 Cal. 4th 12, 21 (2010). “While SLAPP suits masquerade as ordinary lawsuits such as defamation and interference with prospective economic advantage, they are generally meritless suits brought primarily to chill the exercise of free speech or petition rights by the threat of severe economic sanctions against the defendant, and not to vindicate a legally cognizable right.” Id. (internal quotation marks omitted). California’s anti-SLAPP statute, Cal. Code. Civ. Proc. § 425.16, “authorize[s] the filing of a special motion to strike to expedite the early dismissal of these unmeritorious claims.” Id. The anti-SLAPP statute is subject to an exemption for commercial speech. An action arises from commercial speech and is therefore exempt from the anti-SLAPP law when (1) “the cause of action is against a person primarily engaged in the business of selling or leasing goods or services;” (2) “the cause of action arises from a statement or conduct by that person consisting of representations of fact about that person’s or a business competitor’s business operations, goods, or services;” (3) “the statement or conduct was made either for the purpose of obtaining approval for, promoting, or securing sales or leases of, or commercial transactions in, the person’s goods or services or in the course of delivering the person’s goods or services;” and (4) “the intended audience for the statement or conduct” is “‘an actual or potential buyer or customer, or a person likely to repeat the statement to, or otherwise influence, an actual or potential buyer or customer.’” See id. at 30 (quoting Cal. Code. Civ. Proc. § 425.17(c)). The commercial speech exemption applies here. First, Miller Mendel is primarily engaged in the business of selling goods or services, namely their background check software. Second, Guardian’s claims arise in part from representations of fact that Miller Mendel made to Guardian’s customers concerning Guardian’s product, for example that “[t]hrough the way [Guardian’s software] operates and their Terms of Service and Privacy Policy, [customers] have no first-level control over [their] applicants’ data,” leading customers to “likely lose control over public records law exemptions, ability to object to discovery requests and also, in general, lose security over the applicants’ data.” (See Ex. 28 to Compl.) Third, the statements at issue were made for the purpose of persuading Guardian’s customers or potential customers to use Miller Mendel’s software rather than Guardian’s. For example, the above statement concerning the purported security failures of Guardian’s software was disseminated in emails sent directly to several of Guardian’s customers that asked the customers to “cease use” of Guardian’s software. Those emails also represented that Guardian’s software infringed on Miller Mendel’s patent, thereby presenting Miller Mendel’s software as an alternative to Guardian’s product. (See id.) Finally, the statements at issue were made either directly to Guardian’s potential customers (see id.) or disseminated to an intended audience that included Guardian’s actual or potential customers (see Ex. 30 to Compl.). Accordingly, Guardian’s state law claims are subject to the commercial speech exemption and Miller Mendel’s anti-SLAPP motion to strike will be denied.7 B. Noerr-Pennington Immunity The Noerr-Pennington doctrine, which is derived from the Petition Clause of the First Amendment, “provides that those who petition any department of the government for redress,” including the judicial branch, “are generally immune from . . . liability for their petitioning conduct.” See B&G Foods N. Am., Inc. v. Embry, 29 F.4th 527, 535 (9th Cir. 2022) (internal quotation marks omitted). Noerr-Pennington applies to state law claims. Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1007 (9th Cir. 2008). The Noerr-Pennington doctrine does not grant immunity, however, where the “sham exception” applies. See Kaiser Found. Health Plan, Inc. v. Abbott Lab’ys, Inc., 552 F.3d 1033, 1044 (9th Cir. 2009). To fall under the sham exception, the litigation at issue must be “objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.” Prof. Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993). If the lawsuit is objectively baseless, the court “examine[s] the litigant’s subjective motivation” to determine whether the lawsuit “conceals an attempt to interfere directly with the business relationships 7 Miller Mendel’s reply brief does not engage with the elements of the commercial speech exemption, instead appearing to argue in circular fashion that because the claims at issue fall within the scope of the anti-SLAPP statute, they do not qualify for the commercial speech exemption therefrom. If Miller Mendel’s brief is trying to argue anything more than that, the court is unable to understand that argument. Further, at oral argument, counsel failed to rebut Guardian’s showing that the elements of the commercial speech exemption are satisfied. of a competitor through the use of the governmental process -- as opposed to the outcome of that process -- as an anticompetitive weapon.” Id. at 60-61 (cleaned up). The Ninth Circuit has explained that in a case involving a “fraudulently obtained patent, that which immunized the [patent enforcement litigation] from . . . liability (the patent) is, in effect, a nullity because of the underlying fraud.” Hydranautics v. FilmTec Corp., 70 F.3d 533, 538 (9th Cir. 1995) (quoting Liberty Lake Invs., Inc. v. Magnuson, 12 F.3d 155 (9th Cir. 1993)). Accordingly, where intentional fraud in the procurement of the patent is alleged, dismissal at the pleadings stage pursuant to the Noerr-Pennington doctrine is improper. See id. Put differently, “[o]bjective baselessness may be shown by demonstrating that the ‘infringement action [is] based on a fraudulently obtained patent.’” Shenzhen Smoore Tech. Co. v. Next Level Ventures, LLC, No. 2:22-cv-07646, 2024 WL 5317246, at *7 (C.D. Cal. Dec. 4, 2024) (quoting Hydranautics, 70 F.3d at 538). See also Kaiser Found. Health Plan, 552 F.3d at 1045 (the “fraud or misrepresentation” warranting application of the sham exception to Noerr-Pennington can include fraud “directed to the federal Patent and Trademark Office [], not merely to a court”). Because Guardian has plausibly alleged that Miller Mendel (1) engaged in intentional fraud in obtaining the patent underlying the enforcement litigation (see Compl. ¶¶ 33-78), and (2) intended the litigation to interfere with Guardian’s business relationships (see id. ¶¶ 12-18, 95-127), dismissal of the state law claims (to the extent they are premised on that litigation) is not warranted under Noerr-Pennington. See Shenzhen Smoore, 2024 WL 5317246, at *7 (declining to grant immunity under Noerr- Pennington at the pleadings stage where complaint alleged that defendant knew the patent at issue was obtained fraudulently and pursued a patent enforcement action nonetheless).8 C. Litigation Privilege Miller Mendel asserts that Guardian’s state law claims are barred because they are premised on communications subject to California’s litigation privilege, Cal. Civ. Code § 47. “[T]he privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” Silberg v. Anderson, 50 Cal. 3d 205, 212 (1990). The privilege “applies to any publication or other communication . . . whether or not the publication is made in the courtroom or in court pleadings, and whether or not any function of the court or its officers is involved.” Rothman v. Jackson, 49 Cal. App. 4th 1134, 1140 (2d Dist. 1996). If a “statement is made with a good faith belief in a legally viable claim and in serious contemplation of litigation, then the statement is sufficiently 8 Miller Mendel also argues that “federal patent law preempts state-law tort liability for a patentholder’s good faith conduct in communications asserting infringement of its patent and warning about potential litigation.” See Lite-Netics, LLC v. Nu Tsai Cap. LLC, 60 F.4th 1335, 1343 (Fed. Cir. 2023). However, state claims “can survive federal preemption” when they are “based on a showing of ‘bad faith’ action in asserting infringement.” See id. The “bad faith” analysis is identical to the sham exception’s “objectively baseless” prong, see id. (citing Columbia Pictures, 508 U.S. at 60), and therefore does not require separate discussion. connected to litigation and will be protected by the litigation privilege.” Blanchard v. DIRECTV, Inc., 123 Cal. App. 4th 903, 919 (2d Dist. 2004). Guardian has alleged sufficient conduct not protected by the litigation privilege to survive dismissal. First, Guardian’s claims rely not only on Miller Mendel’s infringement litigation, but also the patent application process itself. The litigation privilege “is intended to assure utmost freedom of communication between citizens and public authorities whose responsibility is to investigate and remedy wrongdoing.” Hagberg v. California Fed. Bank, 32 Cal. 4th 350, 360 (2004) (emphasis in original). As the Ninth Circuit explained in Mindys Cosmetics, Inc. v. Dakar, an application to the Patent and Trademark Office does not serve that purpose, because such an application is “not filed in anticipation of litigation, nor [i]s it intended to instigate official investigation into wrongdoing.” See 611 F.3d 590, 600 (9th Cir. 2010) (citing Hagberg, 32 Cal. 4th at 369); see also NICOR, Inc. v. SourceBlue, LLC, No. 2:21-cv-05876, 2023 WL 6866329, at *25 (C.D. Cal. Aug. 30, 2023) (claim alleging that defendant “[sought] a patent based on stolen proprietary information” may not be barred by the litigation privilege). Second, Guardian’s claims are also premised in part on communications arguably disseminated to a broader audience. The complaint alleges that Miller Mendel published an “open letter regarding serious public concerns” about Guardian’s software on Miller Mendel’s website. (Compl. ¶ 118; Ex. 29 to Compl.) While there is no binding authority on point, several “California courts have made clear that the privilege ‘does not encompass publication to the general public,’” for example social media posts or press releases. See Therabody, Inc. v. Hyper Ice, Inc., No. 8:24-cv-00378, 2024 WL 5316364, at *8 (C.D. Cal. Oct. 31, 2024) (quoting GetFugu, Inc. v. Patton Boggs LLP, 220 Cal. App. 4th 141, 153 (2d Dist. 2013)). Such efforts to “‘publicize the alleged misdeeds’” of the opposing party by making statements “directed to the public as a whole” might not be covered by the litigation privilege. See id., at *7-8 (quoting GetFugu, 220 Cal. App. 4th at 153); see also Cap Exp., LLC v. Zinus, Inc., No. 2:21-cv-07148, 2023 WL 6381821, at *6 (C.D. Cal. Sept. 28, 2023) (“‘Public mudslinging’ in the form of Defendants’ communications accusing [the plaintiff] of unlawful infringement are not afforded ‘the same protections which section 47(b) gives to court processes.’”) (quoting Rothman, 49 Cal. App. 4th at 1146). But see UCP Int’l Co. Ltd. v. Balsam Brands Inc., 420 F. Supp. 3d 966, 982–83 (N.D. Cal. 2019) (citing Weiland Sliding Doors & Windows, Inc. v. Panda Windows & Doors, LLC, 814 F. Supp. 2d 1033, 1041 (S.D. Cal. 2011)) (litigation privilege protected statements concerning infringement litigation made on website whose intended audience was customers). Third, Miller Mendel’s statements both directly to customers and on the Miller Mendel website concerned not only the patent infringement litigation, but also other unrelated issues concerning Guardian’s software -- for instance, the statement discussed above pertaining to the software’s alleged security flaws. Statements about Guardian’s product entirely unrelated to patent infringement do not have a connection or logical relation to the infringement litigation. See NICOR, 2023 WL 6866329, at *25 (litigation privilege did not apply where alleged statements were “not limited to enforcing patent rights”); Tri-Star Elecs. Int’l, Inc. v. Preci-Dip Durtal SA, No. 08-cv-04226, 2011 WL 13176071, at *8 (C.D. Cal. May 27, 2011) (litigation privilege did not apply to allegedly false “gratuitous disparaging statements” about the quality of plaintiff’s products, as those statements “do not serve the objects of the litigation because [they have] nothing to do with the alleged infringement”). While some of the conduct at issue may well be covered by the litigation privilege, Guardian has provided sufficient allegations of unprivileged conduct to survive dismissal. D. Failure to State a Claim 1. Tortious Interference with Contract (Claim 9) The elements of a claim for intentional interference with contractual relations are “(1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” hiQ Labs, Inc. v. LinkedIn Corp., 31 F.4th 1180, 1191 (9th Cir. 2022) (quoting Pac. Gas & Elec. Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990)). “‘[I]t is not necessary that the defendant’s conduct be wrongful apart from the interference with the contract itself.’” Salon Supply Store, LLC v. Creative Nail Design, Inc., No. 14-cv-01083, 2015 WL 11438492, at *8 (S.D. Cal. June 19, 2015) (quoting Quelimane Co. v. Stewart Title Guar. Co., 19 Cal. 4th 26, 55 (1998)). Defendants argue that they cannot be held liable for tortious interference with contract because they acted with a legitimate business purpose, namely protecting their patents. “Under California law, a legitimate business purpose can indeed justify interference with contract, but not just any such purpose suffices.” hiQ Labs, 31 F.4th at 1192 (citing Quelimane, 19 Cal. 4th at 55-56). “Rather, interference with contract is justified only when the party alleged to have interfered acted ‘to protect an interest that has greater social value than [e]nsuring the stability of the contract’ interfered with.” Id. at 1193 (quoting Imperial Ice Co. v. Rossier, 18 Cal. 2d 33, 35 (1941)). Accordingly, California courts determining whether a business purpose justifies interference with contract balance “‘the importance, social and private, of the objective advanced by the interference against the importance of the interest interfered with, considering all circumstances including the nature of the actor’s conduct and the relationship between the parties.’” Id. (quoting Herron v. State Farm Mut. Ins. Co., 56 Cal. 2d 202, 206, (1961)). “Considerations include whether the means of interference involve no more than recognized trade practices, and whether the conduct is within the realm of fair competition,” but “[t]he determinative question is whether the business interest is pretextual or asserted in good faith.” Id. (internal quotation marks and citations omitted). Defendants state in conclusory fashion that patent enforcement qualifies as a legitimate business purpose, but cite no California authorities for that proposition, nor do they engage with the applicable balancing test. More importantly, there are allegations of bad faith in Miller Mendel’s enforcement of the patents, which indicates that the legitimate business purpose defense may not apply. See id. at 1193 (“The determinative question is whether the business interest is pretextual or asserted in good faith.”). Miller Mendel therefore has not met its burden for establishing that this “affirmative justification defense” applies. See id. at 1192. Accordingly, Guardian’s claim for tortious interference with contract will not be dismissed based on the legitimate business purpose defense.

2. Tortious Interference with Prospective Economic Advantage (Claim 10) Tortious interference with prospective economic advantage consists of “knowing[] interfere[nce]” with an “economic relationship between the plaintiff and some third party, which carries the probability of future economic benefit to the plaintiff.” Ixchel Pharma, LLC v. Biogen, Inc., 9 Cal. 5th 1130, 1141 (2020) (cleaned up). “Unlike intentional interference with existing contractual relations, interference with prospective economic advantage requires a plaintiff to allege an act that is wrongful independent of the interference itself.” CRST Van Expedited, Inc. v. Werner Enters., Inc., 479 F.3d 1099, 1108 (9th Cir. 2007) (citing Della Penna v. Toyota Motor Sales, U.S.A., Inc., 11 Cal. 4th 376, 392-93 (1995)). In addition to the “legitimate business purpose” defense already rejected above, Miller Mendel argues that Guardian fails to plead an independently wrongful act. “[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” Id. (quoting Korea Supply, 29 Cal. 4th at 1159). Here, Guardian has alleged independently wrongful conduct, including the alleged false statements made to its customers. See Visto Corp. v. Sproqit Techs., Inc., 360 F. Supp. 2d 1064, 1067 (N.D. Cal. 2005) (defendant pled “the element of independently wrongful conduct because it has alleged that [the plaintiff]’s allegations of patent infringement are false and/or defamatory”). Accordingly, Guardian’s claim for tortious interference with prospective economic advantage will not be dismissed.

3. Unfair Competition and False Advertising (Claims 7 and 8) The Unfair Competition Law (“UCL”) prohibits any unlawful, unfair, or fraudulent business act or practice. Cal. Bus. & Prof. Code § 17200. The false advertising law makes it unlawful to disseminate “untrue or misleading” statements with the “intent . . . to dispose of real or personal property or perform services.” Cal. Bus. & Prof. Code § 17500. To have standing under both the UCL and false advertising law, a plaintiff must: “(1) establish a loss or deprivation of money or property sufficient to qualify as injury in face, i.e., economic injury, and (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” Kwikset Corp. v. Superior Court, 246 Cal. 4th 310, 332 (2011). Guardian has successfully stated a claim under the UCL. The UCL “borrows violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). Because Guardian has adequately pled the federal and state claims discussed above, it has also adequately pled its UCL claim. See Dairy, LLC v. Milk Moovement, Inc., No. 2:21-cv-02233 WBS AC, 2023 WL 3437426, at *15 (E.D. Cal. May 12, 2023). Further, Guardian has adequately pled economic injury in connection with its underlying claims, for example, by explaining that Miller Mendel’s anticompetitive conduct enabled it to capture some of Guardian’s market share and customers, including at least one customer who had already entered into a contract with Guardian. (See Compl. ¶ 32.) Accordingly, Guardian’s UCL claim will not be dismissed. However, Guardian has failed to establish standing for its false advertising claim. While Guardian points to certain allegedly false or misleading statements Miller Mendel made to the public and to Guardian’s customers (see Compl. ¶¶ 115-121), it fails to provide allegations concerning the economic injury caused by those statements specifically. Accordingly, Guardian’s false advertising claim will be dismissed. 4. Trade Libel (Claim 11) Under California law, “[t]rade libel is the publication of matter disparaging the quality of another’s property, which the publisher should recognize is likely to cause pecuniary loss to the owner.” ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1010 (4th Dist. 2001) (citing Leonardini v. Shell Oil Co., 216 Cal. App. 3d 547, 572 (3d Dist. 1989)). It encompasses “all false statements concerning the quality of services or product of a business which are intended to cause that business financial harm and in fact do so.” Leonardini, 216 Cal. App. 3d at 572. To state a claim for trade libel, plaintiff must plead special damages. Therabody, 2024 WL 5316364, at *10 (collecting cases). Similarly to the false advertising claim, the trade libel claim fails due to Guardian’s failure to plead economic damages in connection with the allegedly false statements at issue, as opposed to damages caused by Miller Mendel’s alleged anticompetitive conduct as a whole.9 Accordingly, Guardian’s claim for trade libel will be dismissed. IT IS THEREFORE ORDERED that defendants’ motion to strike (Docket No. 41) be, and the same hereby is, DENIED. IT IS FURTHER ORDERED that defendants’ motion to dismiss (Docket No. 40) be, and the same hereby is, GRANTED only as to the eighth claim for false advertising and eleventh claim for trade libel. The motion is DENIED in all other respects. Plaintiff has 14 days from the date of this Order to file an amended complaint, if it can do so consistent with this Order. Within 21 days of the issuance of this Order, the parties shall file a joint status report addressing (1) whether this court should issue a pretrial scheduling order, and if so what dates the parties desire and any other information required under Federal Rule of Civil Procedure 26(f) (see Docket No. 6); 9 Guardian appears to recognize that its complaint fails to plead economic damages for purposes of the false advertising and trade libel claims, as it has provided a declaration addressing this issue (see Anthony Decl. (Docket No. 43)) and all but conceded the issue during oral argument. However, the declaration provided is not judicially noticeable and is therefore inappropriate for consideration at the pleadings stage. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018). ee IE ON IN IIE IER IRI IRIE IS III ROI OE RI OE

(2) whether the parties wish to proceed to settlement discussions, and if so whether they would like the court to refer the matter to the court’s Voluntary Dispute Resolution Program (“VDRP”) or a settlement conference with a magistrate judge; and (3) any other matter of which the parties think the court should be informed. dh ble (hi. Dated: April 30, 2025 Pi he Vi (eh UNITED STATES DISTRICT JUDGE 9 26