Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_09-cv-05115/USCOURTS-cand-4_09-cv-05115-3/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1338 Copyright Infringement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

TETHYS BIOSCIENCE, INC.,

Plaintiff,

 v.

MINTZ, LEVIN, COHN, FERRIS, GLOVSKY

AND POPEO, P.C. and IVOR R. ELRIFI,

Defendants. /

No. C 09-5115 CW

ORDER GRANTING IN

PART AND DENYING IN

PART DEFENDANTS’

MOTION TO DISMISS

AND DENYING

DEFENDANTS’ MOTION

TO STRIKE

(Docket No. 22)

Defendants Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

(Mintz Levin) and Ivor R. Elrifi move to dismiss Plaintiff Tethys

Bioscience, Inc.’s First Amended Complaint (1AC) in its entirety

and to strike Plaintiff’s request for punitive damages. Plaintiff

opposes the motions. The motions were taken under submission on

the papers. Having considered the papers submitted by the parties,

the Court GRANTS in part Defendants’ Motion to Dismiss and DENIES

it in part. Defendants’ Motion to Strike is DENIED. 

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BACKGROUND

Plaintiff, a Delaware corporation with a primary place of

business in Emeryville, California, is a biotechnology company. 

Defendant Mintz Levin is a law firm incorporated under the laws of

Massachusetts. Defendant Elrifi is the co-chair of Mintz Levin’s

intellectual property practice. Plaintiff does not allege specific

conduct by Elrifi. However, its averments refer to Mintz Levin and

Elrifi collectively. 

Plaintiff engaged Defendants to prosecute domestic and

international patent applications for a method that purportedly

identifies biological markers that indicate whether a person is

likely to develop diabetes. Defendants are also prosecuting patent

applications on behalf of American Type Culture Company (ATCC). 

ATCC seeks protection of a method that putatively identifies the

probability that a person will develop diabetes, which Plaintiff

maintains is similar to its method and constitutes “competing

intellectual property.” 1AC ¶ 32(c). Defendants did not inform

Plaintiff that they were concurrently prosecuting ATCC’s

applications. 

Plaintiff claims that Defendants disclosed its confidential

intellectual property to ATCC. Plaintiff asserts that it

“carefully protected the confidentiality of the scientific and

technical features of [its technology] and its future research

plans to preserve and maximize its research lead relative to much

larger and well-funded companies, and to minimize the prior art

impact of its initial inventions on later-filed improvement

inventions.” 1AC ¶ 14. To this end, Plaintiff avers that it did

not give permission to Defendants to divulge information regarding

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its technology 

to any person or agency except (a) to the United

States Patent and Trademark Office, and associated local

counsel in connection with filing patent applications for

Tethys, (b) to the World Intellectual Property

Organization in connection with an international

application for Tethys under the Patent Cooperation

Treaty and (c) via mandatory publication of Tethys patent

applications when required by law, or expressly

pre-approved by Tethys. 

1AC ¶ 8. 

Plaintiff contends that similarities in language used in its

patent applications and in those of ATCC demonstrate that improper

disclosure occurred. For instance, Defendants filed Plaintiff’s

provisional patent application with the United States Patent and

Trademark Office (PTO) on October 11, 2005; they filed ATCC’s

application on September 1, 2006. Both applications contain nearly

identical language under the “Diagnostics and Prognostic Methods”

section. Compare 1AC, Ex. A 9:9-18:5 with 1AC, Ex. B 9:22-17:18. 

Plaintiff asserts that other sections of ATCC’s application are

also materially similar to its own. Based on the shared language,

Plaintiff maintains that Defendants must have improperly disclosed

its proprietary information because, at that time, ATCC could not

have obtained the material from another source. 

Likewise, Plaintiff asserts that improper disclosure occurred

with regard to its international patent application under the

Patent Cooperation Treaty (PCT). Defendants filed Plaintiff’s PCT

application with the World Intellectual Property Organization

(WIPO) on October 11, 2006; they represented to Plaintiff that the

application would be published in the public domain between April

and October, 2007. On March 28, 2007, Defendants filed ATCC’s PCT

application with the WIPO. Like those in the United States patent

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applications, the “Diagnostic and Prognostic Methods” sections of

Plaintiff’s and ATCC’s PCT applications are nearly identical,

compare 1AC, Ex. C 23:4-41:5 with 1AC, Ex. D 17:8-36:28, although

there is slightly less overlap than in the domestic patent

applications. And, as with its domestic application, Plaintiff

maintains that ATCC could not have obtained the language from any

other source. Plaintiff also suggests that the invention claimed

in ATCC’s PCT application could not have been based on the work

that ATCC asserts it undertook. Plaintiff asserts that ATCC had

“zero relevant original experimental evidence” and that the only

basis for its invention “is the copied Tethys Technology.” 1AC

¶ 25. Finally, Plaintiff asserts that, by causing “a significant

portion of the Tethys Technology to be published in a PCT

application on behalf of ATCC before filing US and PCT applications

for Tethys on April 18, 2008,” Defendants created “prima facia

prior art against Tethys improvement inventions that limit the

scope of claims thereon.” 1AC ¶ 23. 

Plaintiff discovered ATCC’s PCT application in May, 2008 and

terminated its relationship with Defendants on May 29, 2008. 

Plaintiff asserts claims against Defendants for breach of

fiduciary duties and conversion. Plaintiff maintains that

Defendants caused damage in excess of $75,000 by, among other

things, failing to compensate it for the use of its intellectual

property; causing a reduction in the value of its intellectual

property; placing it in a “lesser economic position of an inventor

faced with competing intellectual property,” 1AC ¶ 32(c); requiring

it to expend resources to protect its intellectual property and to

hire new counsel. Plaintiff seeks punitive damages, asserting that

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Defendants committed fraud and engaged in oppression. 

On December 9, 2009, the Court granted Defendants’ first

motion to dismiss, concluding that many of Plaintiff’s allegations

concerning its damages were impermissibly vague and that Defendants

could not “convert” a patent application. Plaintiff filed its 1AC

on January 15, 2010, and Defendants brought the current motion on

February 12. 

DISCUSSION

I. Dismissal under Rule 12(b)(1)

Defendants argue that Plaintiff’s claims must be dismissed

under Rule 12(b)(1) because they are not ripe for review. In

particular, Defendants assert that, because the PTO has not ruled

on the patent applications of Plaintiff or ATCC, Plaintiff’s

injuries are speculative. 

Dismissal is appropriate under Rule 12(b)(1) when the district

court lacks subject matter jurisdiction over the claim. Fed. R.

Civ. P. 12(b)(1). When, as here, a defendant attacks a plaintiff’s

complaint on its face, allegations must be taken as true and all

inferences must be drawn in the plaintiff’s favor. Wolfe v.

Strankman, 392 F.3d 358, 362 (9th Cir. 2004). Because ripeness

pertains to a federal court’s subject matter jurisdiction, it is

properly raised in a Rule 12(b)(1) motion to dismiss. Chandler v.

State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010)

(citations omitted). 

A “‘claim is not ripe for adjudication if it rests upon

contingent future events that may not occur as anticipated, or

indeed may not occur at all.’” Bova v. City of Medford, 564 F.3d

1093, 1095 (9th Cir. 2009) (quoting Texas v. United States, 523

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1 Defendants make several arguments based on the patent

applications attached to Plaintiff’s amended complaint. However,

as discussed in further detail below, these assertions do not show

that Plaintiff’s claim is impermissibly speculative. 

6

U.S. 296, 300 (1998)). 

Plaintiff pleads that it has suffered various forms of damage,

including a decrease in the value of its technology and business,

arising from Defendants’ alleged disclosure of its confidential

information. Because these allegations must be taken as true,

Plaintiff’s action is ripe for review.1

 Plaintiff alleges and may

be able to prove that it sustained current and certain injury. 

That Plaintiff’s harm could be enhanced or mitigated by the PTO’s

decision does not render its claims unripe. Although Defendants

may disagree on whether damage has actually occurred, this does not

render Plaintiff’s claims non-justiciable. 

Defendants cite Jennings v. Auto Meter Products, in which the

Seventh Circuit affirmed the dismissal of a plaintiff’s state law

claims on ripeness grounds because the PTO had not ruled on his

patent application. 495 F.3d 466, 477 (7th Cir. 2007). There, the

plaintiff had alleged that the defendants fraudulently misled the

patent examiner into believing that he was not the inventor of the

claimed invention. Id. at 469. Because the plaintiff’s patent

application had not been ruled on, the court found his damages

“entirely speculative.” Id. at 476. The court opined that, if

Jennings ultimately received a patent, “any potential damages he

claims to have suffered from the inability to get a patent

disappear.” Id. 

Jennings is distinguishable because Plaintiff does not base

its damage solely on whether it receives a patent. As noted above,

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it has plead forms of existing damage that do not turn on the PTO’s

decision. If Plaintiff seeks to recover damages based on any

pending PTO action, it may move to stay this action in the interim. 

However, as plead, Plaintiff’s amended complaint presents a

sufficiently defined controversy that is justiciable. 

Plaintiff’s claims are ripe for review. Accordingly,

Defendants’ motion to dismiss under Rule 12(b)(1) is denied. 

II. Dismissal under Rule 12(b)(6)

A complaint must contain a “short and plain statement of the

claim showing that the pleader is entitled to relief.” Fed. R.

Civ. P. 8(a). Dismissal under Rule 12(b)(6) for failure to state a

claim is appropriate only when the complaint does not give the

defendant fair notice of a legally cognizable claim and the grounds

on which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555

(2007). In considering whether the complaint is sufficient to

state a claim, the court will take all material allegations as true

and construe them in the light most favorable to the plaintiff. NL

Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). 

However, this principle is inapplicable to legal conclusions;

“threadbare recitals of the elements of a cause of action,

supported by mere conclusory statements,” are not taken as true. 

Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949-50 (2009)

(citing Twombly, 550 U.S. at 555).

A. Claim for Breach of Fiduciary Duty

To maintain a claim for a breach of fiduciary duty, a

plaintiff must allege: “(1) existence of a fiduciary duty;

(2) breach of the fiduciary duty; and (3) damage proximately caused

by the breach.” Stanley v. Richmond, 35 Cal. App. 4th 1070, 1086

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(1995). The “relation between attorney and client is a fiduciary

relation of the very highest character.” Am. Airlines v. Sheppard,

Mullin, Richter & Hampton, 96 Cal. App. 4th 1017, 1044 (2002)

(citation omitted). 

Plaintiff alleges that Defendants breached their fiduciary

duty by prosecuting ATCC’s patent applications, which it maintains

constituted the representation of an adverse interest, and by

disclosing its confidences. Defendants argue that Plaintiff fails

to plead a cognizable breach of any fiduciary duty and damage. 

1. Conduct Constituting Breach of Fiduciary Duty

Although they do not create an independent right of action,

the Rules of Professional Conduct of the State Bar of California,

“together with statutes and general principles relating to other

fiduciary relationships, ‘help define the duty component of the

fiduciary duty which an attorney owes to his client.’” Id. at 1032

(citing Mirabito v. Liccardo, 4 Cal. App. 4th 41, 45 (1992)). 

Duties of loyalty and confidentiality inhere in the fiduciary

relationship between an attorney and a client. See Flatt v.

Superior Court, 9 Cal. 4th 275, 288-89 (1994) (discussing duty of

loyalty); Cal. Bus. & Prof. Code § 6068(e)(1) (providing duty of

confidentiality for attorneys). 

Plaintiff alleges that Defendants violated their duty of

loyalty by representing the adverse interests of ATCC. In

particular, Plaintiff cites California Rule of Professional Conduct

3-310(C), which provides that attorneys shall not, without the

informed written consent of each client:

(1) Accept representation of more than one client in a

matter in which the interests of the clients potentially

conflict; or

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(2) Accept or continue representation of more than one

client in a matter in which the interests of the clients

actually conflict; or

(3) Represent a client in a matter and at the same time

in a separate matter accept as a client a person or

entity whose interest in the first matter is adverse to

the client in the first matter.

The United States Patent and Trademark Office Code of Professional

Responsibility contains a similar prohibition, which bars the

representation of adverse parties unless “it is obvious that the

practitioner can adequately represent the interest of each and if

each consents to the representation after full disclosure of the

possible effect of such representation on the exercise of the

practitioner's independent professional judgment on behalf of

each.” 37 C.F.R. § 10.66(a), (c). 

Defendants do not dispute that they did not disclose to

Plaintiff their representation of ATCC or seek consent. Instead,

they assert that their representation of ATCC cannot be considered

adverse because the inventions of Plaintiff and ATCC are

“fundamentally different.” Mot. at 7. The Court declines to make

such a determination on the limited record before it. It is not

evident from the differences identified by Defendants that their

representation of ATCC did not create even a potential conflict

with Plaintiff’s interests, for which disclosure and consent was

required. If all inferences are drawn in Plaintiff’s favor, it has

plead a breach of a duty of loyalty. 

Plaintiff also plead that Defendants violated their duty of

confidentiality by, among other things, disclosing information on

its provisional patent application to ATCC. Plaintiff’s claim

appears to rest primarily on Defendants’ alleged copying of

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2 Although not binding on the Court, the State Bar of

California defines a client secret as “any information obtained by

the lawyer during the professional relationship, or relating to the

representation, which the client has requested to be inviolate or

the disclosure of which might be embarrassing or detrimental to the

client.” State Bar of Cal., Formal Op. No. 1993-133.

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information from its applications for use on those of ATCC.

Defendants assert that this information was not confidential

because it constituted “high-level background information 

that . . . those of ordinary skill in the art already know.” Mot.

at 16. On the limited record for this motion, the Court is not

persuaded. Plaintiff pleads that it did not give permission to

Defendants to disclose any information it provided.2

 Defendants’

argument, if accepted, would empower an attorney to determine what

constitutes secret information and, if the attorney so decided,

enable the disclosure of a client’s confidences with impunity. 

Further, even if skilled artisans may have had general knowledge

concerning the allegedly copied information, it does not follow

that the manner in which Plaintiff presented its invention in its

provisional patent application was publicly known. Defendants cite

Jack Winter, Inc. v. Koratron Co., 50 F.R.D. 225 (N.D. Cal. 1970),

which concerned the scope of the attorney-client privilege but does

not require a contrary result. The court concluded that some

communications made for the purposes of preparing a patent

application are non-privileged because they are intended to be

disclosed to PTO. Id. at 228-29. The court did not, however,

address an attorney’s duty of confidentiality, which is broader

than the attorney-client privilege. Dietz v. Meisenheimer &

Herron, 177 Cal. App. 4th 771, 786 (2009). 

Accordingly, Plaintiff sufficiently pleads that Defendants

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breached their duties of loyalty and confidentiality. 

2. Damage

Plaintiff pleads seven forms of damage, which can be grouped

into five categories: (1) “reasonable compensation” for

unauthorized use of its intellectual property, 1AC ¶ 32(a);

(2) decrease in the market value of its business and intellectual

property, 1AC ¶ 32(b)-(d); (3) expenditure of resources to mitigate

Defendants’ damage to its intellectual property, 1AC ¶ 32(e);

(4) disgorgement of fees unjustly received by Defendants, 1AC

¶ 32(f); and (5) reimbursement of fees paid to new counsel for

services already rendered by Defendants, 1AC ¶ 32(g). Defendants

argue that none of these categories constitutes cognizable damage. 

As an initial matter, Defendants contend that Plaintiff must

prove that its conduct is the “but for” cause of any damage. They

cite Viner v. Sweet, which states that “a plaintiff in a . . .

malpractice action must show that but for the alleged malpractice,

it is more likely than not that the plaintiff would have obtained a

more favorable result.” 30 Cal. 4th 1232, 1244 (2003). To extend

application of this causation standard to Plaintiff’s breach of

fiduciary duty claim, Defendants cite Lazy Acres Market, Inc. v.

Tseng, which states that the causes of action for legal malpractice

and breach of fiduciary duty by an attorney are the same. 152 Cal.

App. 4th 1431, 1435-36 (2007). Plaintiff responds that “but for”

causation applies only to claims for legal malpractice, not those

for a breach of fiduciary duty, and asserts that Lazy Acres

discussed “but for” causation in the context of the plaintiffs’

legal malpractice claim. Plaintiff does not, however, cite

authority that precludes applying the “but for” causation standard

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 “California has definitively adopted the substantial factor

test of the Restatement Second of Torts for cause-in-fact

determinations.” Rutherford v. Owens-Illinois, Inc., 16 Cal. 4th

953, 968 (1997). In Viner, the court discussed the relationship

between the “but for” and “substantial factor” tests of causation,

stating that “the ‘substantial factor’ test subsumes the

traditional ‘but for’ test of causation.” 30 Cal. 4th at 1240. 

The court explained that, where “concurrent independent causes”

exist, a plaintiff could prove causation by showing that the

defendant’s action was a “substantial factor” in bringing about the

alleged harm. Id.; see also Rutherford, 16 Cal. 4th at 968. 

Concurrent independent causes “are multiple forces operating at the

same time and independently, each of which would have been

sufficient by itself to bring about the harm.” Viner, 30 Cal. 4th

at 1240.

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or otherwise require application of another test. Nor has

Plaintiff plead or argued that “concurrent independent causes” led

to its injury.3 Even if it did, Plaintiff must prove that

Defendants’ conduct was a “substantial factor” in bringing about

the alleged harm. See Viner, 30 Cal. 4th at 1240. 

Plaintiff sufficiently pleads the damage element of its claim. 

It avers that Defendants’ actions caused the decrease in value of

its intellectual property and business, which led it to expend

resources to mitigate such harm. Plaintiff alleges that the loss

in value arises from the uncertainty created by ATCC’s patent

applications, the loss of its “sole inventor” status and the

lessening of the “prior art impact” of its intellectual property

“on any patents ATCC may obtain.” 1AC ¶ 32(b)-(d). Echoing their

arguments concerning ripeness, Defendants assert that Plaintiff’s

claim of damage based on the risk of ATCC obtaining a patent is too

speculative or contingent to suffice as a legal basis for harm. 

However, it is not clear, as a matter of law, that Plaintiff could

not prove any concrete, current loss of value to its technology or

business caused by Defendants’ alleged misconduct. If all

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inferences are taken in favor of Plaintiff, these theories support

its claim. Provided Plaintiff can prove this alleged decrease in

value caused it harm, its expenditure of resources to prevent

additional injury and payment of attorneys’ fees to replace

Defendants as counsel may constitute additional damage. See Am.

Airlines, 96 Cal. App. 4th at 1044 (stating that plaintiff

established damage by proving “it spent $8,174 in attorney fees to

prevent” harm that could be caused by defendant). 

Plaintiff’s other theories of damage, however, are not legally

cognizable. Plaintiff pleads that it “is entitled

to reasonable compensation for the use of its confidential and

proprietary information.” 1AC ¶ 32(a). However, a request for

compensation does not constitute damage for the purposes of

Plaintiff’s breach of fiduciary duty claim. At most, Plaintiff

pleads that it is entitled to damages in the form of “reasonable

compensation.” However, “damages” typically refers to “the

monetary sum that the plaintiff may be awarded as compensation for”

an injury, which must be distinguished from the element of

“damage,” or injury, that is required to state a claim for breach

of a fiduciary duty. Lueter v. California, 94 Cal. App. 4th 1285,

1302-03 (2002). Plaintiff points to no authority providing that

its request for “reasonable compensation” satisfies the damage

element of its claim. 

For similar reasons, Plaintiff’s allegation that Defendants

were “unjustly enriched” and its related request for disgorgement

of “all attorney’s fees paid by Tethys to the Mintz Levin

Defendants related in any way to the Tethys Technology” do not

constitute averments of damage. 1AC ¶ 32(f). In Slovensky v.

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Friedman, the court concluded that a plaintiff’s claim for breach

of fiduciary duty failed because, although she had sought a remedy

for disgorgement of fees, she had not proven damage for which

disgorgement was warranted. 142 Cal. App. 4th 1518, 1535-36

(2006). Plaintiff offers no authority requiring a different

conclusion. Thus, because it is a remedy and not an injury,

Plaintiff’s request for disgorgement of attorneys’ fees does not

satisfy the damage element of its claim.

Accordingly, Plaintiff’s theory that it suffered a decrease in

the value of its intellectual property satisfies the damage element

of its claim. So long as it can prove this damage, the expenditure

of resources to prevent additional harm and the payment of fees to

hire new counsel can constitute additional injury. However,

Plaintiff’s claim is dismissed to the extent that it asserts damage

based on its requests for “reasonable compensation” and

disgorgement; these are requests for remedies, not types of harm. 

B. Conversion Claim

Under California law, a claim for conversion requires a

plaintiff to allege (1) “ownership or right to possession of

property;” (2) a defendant’s wrongful act toward the property,

causing interference with the plaintiff’s possession; and

(3) damage to the plaintiff. PCO, Inc. v. Christensen, Miller,

Fink, Jacobs, Glaser, Weil & Shapiro, LLP, 150 Cal. App. 4th 384,

394 (2007). A plaintiff must allege the following to show that a

property right exists: “First, there must be an interest capable of

precise definition; second, it must be capable of exclusive

possession or control; and third, the putative owner must have

established a legitimate claim to exclusivity.” Kremen v. Cohen,

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337 F.3d 1024, 1030 (9th Cir. 2003) (quoting G.S. Rasmussen &

Assocs., Inc. v. Kalitta Flying Serv., Inc., 958 F.2d 896, 906 (9th

Cir. 1992)). 

In its original complaint, Plaintiff alleged conversion of its

patent applications. In its order on Defendants’ first motion to

dismiss, the Court concluded that Plaintiff did not satisfy the

Kremen test because it did not plead a legitimate claim to

exclusivity. In addition, Plaintiff failed to provide authority

that a patent application could be converted. 

Plaintiff now pleads it has the rights of ownership and

possession of its patent applications and the intangible

intellectual property contained therein. It avers that Defendants

interfered with its alleged properties by “(1) copying them without

permission . . . , and (2) providing the copied property to a third

party . . . .” 1AC ¶ 38. Plaintiff asserts that “the owner of the

patent has established his legitimate claim to exclusivity by

filing the application with the patent office.” Opp’n at 22. This

argument is unpersuasive. A patent, not a patent application,

grants an individual exclusivity over the invention claimed. See

35 U.S.C. § 154(a). And although Kremen recognized that intangible

property could be converted, subsequent California cases addressing

the application of the conversion tort to intangible property have

suggested that this theory should not be expanded to “displace

other, more suitable law.” Fremont Indem. Co. v. Fremont Gen.

Corp., 148 Cal. App. 4th 97, 124 (2007); see also Silvaco Data Sys.

v. Intel Corp., ___ Cal. App. 4th ___, 2010 WL 1713241, at *17 n.21

(2010). For this reason, the Court declines to extend the tort of

conversion to encompass claims concerning the copying of patent

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applications, which would implicate federal patent law. Cf. Meeker

v. Meeker, 2004 WL 2554452, at *6 (N.D. Cal.) (declining to extend

conversion tort “to reach the intangible intellectual property

rights in a trademark”).

It does not follow, however, that the tort of conversion

cannot protect any intangible intellectual property. Plaintiff

cites TeraRecon, Inc. v. Fovia, Inc., in which the Court recognized

that, under Kremen, a plaintiff could plead a conversion claim for

“computer code, confidential information concerning its customers

and potential customers, business plans and other corporate

planning documents, and products plans.” 2006 WL 1867734, *9 (N.D.

Cal.). However, the conversion claim plead in TeraRecon did not

involve the copying of material for which the plaintiff sought

patent protection. The other cases cited by Plaintiff also did not

concern the conduct alleged here. See, e.g., G.S. Rasmussen &

Associates, 958 F.2d at 903 (conversion of certificate granted by

FAA that conferred rights on plaintiff); Infuturia Global Ltd. v.

Sequus Pharmaceuticals, Inc., 2009 WL 440477, at *5 (N.D. Cal.)

(conversion of rights granted under contract).

Plaintiff does not state a claim of conversion based on its

allegations that Defendants copied its patent applications. 

Accordingly, the Court dismisses Plaintiff’s conversion claim with

prejudice. 

III. Motion to Strike Request for Punitive Damages

Plaintiff seeks punitive damages based on its claims for

breach of fiduciary duty, alleging that Defendants committed

oppression and fraud. 

In California, a plaintiff may seek punitive damages if, in an

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action not arising from a breach of contract, “it is proven by

clear and convincing evidence that the defendant has been guilty of

oppression, fraud, or malice.” Cal. Civ. Code § 3294(a). 

“Oppression” is defined as “despicable conduct that subjects a

person to cruel and unjust hardship in conscious disregard of that

person's rights.” Id. § 3294(c)(2). “Fraud” is “an intentional

misrepresentation, deceit, or concealment of a material fact known

to the defendant with the intention on the part of the defendant of

thereby depriving a person of property or legal rights or otherwise

causing injury.” Id. § 3294(c)(3). 

Defendants do not challenge Plaintiff’s request for punitive

damages to the extent it rests on oppressive conduct, apparently

conceding that Plaintiff’s pleadings are sufficient. Thus,

Plaintiff may seek punitive damages to the extent that its request

is based on Defendants’ oppressive conduct.

Defendants argue that Plaintiff has not plead fraud in

accordance with Rule 9(b). In particular, they complain that

Plaintiff has not plead the “times, dates, places or other details”

of their alleged fraudulent activity. Reply at 15. However,

Plaintiff appears to seek punitive damages for its breach of

fiduciary duty claim based on a failure to disclose material facts. 

In cases involving non-disclosures, a modified pleading standard

applies “on account of the reduced ability in an omission suit ‘to

specify the time, place, and specific content’ relative to a claim

involving affirmative misrepresentations.” In re Apple & AT & TM

Antitrust Litig., 596 F. Supp. 2d 1288, 1310 (N.D. Cal. 2008)

(quoting Falk v. Gen. Motors Corp., 496 F. Supp. 2d 1088, 1099

(N.D. Cal. 2007)). Plaintiff’s failure to plead the time, date and

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place of Defendants’ alleged non-disclosures does not defeat its

request for punitive damages. Plaintiff pleads specific facts it

considers material, about which Defendants knew but failed to

disclose. Plaintiff also avers scienter and intent generally, as

allowed under Rule 9(b). Thus, Plaintiff may seek punitive damages

based on fraud. 

Accordingly, Defendants’ motion to strike Plaintiff’s request

for punitive damages is denied. 

CONCLUSION

For the foregoing reasons, the Court GRANTS in part

Defendants’ Motion to Dismiss and DENIES it in part. (Docket No.

22.) Plaintiff’s claim for conversion is dismissed with prejudice. 

Defendants’ Motion to Strike is DENIED. A case management

conference is scheduled for June 22, 2010 at 2:00 p.m.

IT IS SO ORDERED.

Dated: June 4, 2010 

CLAUDIA WILKEN

United States District Judge

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