Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-00482/USCOURTS-caed-2_04-cv-00482-10/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:101 Copyright Infringement

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

OPTHALMIC IMAGING SYSTEMS,

a California corporation,

NO. CIV. S-04-482 LKK/DAD

Plaintiff,

v. O R D E R

MARK FUKUHARA, an individual;

DOUGLAS BURLAND, an individual;

MICHAEL GERKOVICH, an individual;

STEVEN LEACH, an individual;

EDMUND PETERSON, an individual;

DAN SALOMON, an individual; JOE

SILVA, an individual; DALE BRODSKY,

an individual; EYEPICTURES, INC., a

Missouri corporation; JUSTICE

OPTHALMICS, INC., a Tennessee

corporation; ZETA DEVELOPMENT LABS,

INC., a Tennessee corporation; and

JOHNNY JUSTICE, JR., an individual,

Defendants.

 /

Pending before the court are Eyepictures, Inc.’s

(“Eyepictures”) and Dale Brodsky’s (“Brodsky”) motions for

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1 Defendant Brodsky moves for summary adjudication as to

causes of action one (copyright infringement), two (Lanham Act

violations), five (misappropriation of trade secrets), and six

(interference with contract). Defendant Eyepictures moves for

summary adjudication as to causes of action one (copyright

infringement) and two (Lanham Act violations).

2 The motion was brought by defendants Fukuhara, Burland,

Gerkovich, Leach, Peterson, Salomon, Silva, Justice, Justice

Opthalmics, Inc. and Zeta Development Labs, Inc. 

3 Background facts are derived from plaintiffs’ first amended

complaint.

2

summary adjudication.1 On December 9, 2004, this court denied

defendant Michael Gerkovich’s motion to dismiss for lack of

personal jurisdiction and granted defendants Johnny Justice,

Jr.’s and Justice Opthalmics, Inc.’s motion to dismiss for lack

of personal jurisdiction. On March 2, 2005, this court denied

in part, and granted in part, defendants’ motions to dismiss the

Lanham Act claims pursuant to Fed. R. Civ. P. 12(b)(6).2 

I. 

 BACKGROUND3

Opthalmic Imaging Systems, Inc. (“OIS”), a corporation with

its principal headquarters and place of business in Sacramento,

California. It manufactures digital ophthalmic imaging systems

which integrate "fundus cameras" – specially designed cameras

used to photograph the human eye. OIS also develops its own

proprietary software for use with its products. OIS submits

that it was the first company in the world in this market. OIS

provides servicing to its customers by entering into a variety

of service plan contracts. Most of its customers are

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ophthalmology practices located throughout the United States. 

OIS asserts that a crucial source of its value and

profitability lies in its trade secrets, which consist primarily

of customer lists, manufacturing and design know how, vendor

information, and servicing “know how.” In order to preserve the

confidentiality of its trade secrets, OIS requires all employees

to sign confidentiality agreements which prohibit OIS employees

from disclosing OIS' trade secrets during and after their

employment. 

In January 2002, defendant Mark Fukuhara, then the Vice

President of Operations of OIS, was terminated by the company. 

Over the next year, other OIS employees, including Michael

Gerkovich, left the company to join Fukuhara in a new business. 

According to OIS, by late spring of 2002, it learned from

several of its customers that these former employees (“defendant

employees”) had formed a new business called Imaging Service

Group, and that, at least in part, their business was providing

service for customers of OIS’ imaging systems. The business was

owned principally by defendants Dale Brodsky, Gerkovich, and

another shareholder. OIS claims that Gerkovich solicited the

business of OIS customers who were seeking service for their OIS

imaging systems, and directed these customers to defendant’s new

business enterprise located in El Dorado Hills, California. 

In the spring of 2003, OIS became aware that some part of

defendant employees’ business had been acquired by entities

under the control of defendant Johnny Justice, Jr. (“Justice”),

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a resident of the state of Tennessee and one of the most

prominent ophthalmic imaging specialists in the United States. 

Justice is 100% shareholder of defendant Zeta Development Labs,

Inc. (“Zeta”), a Tennessee Corporation. Zeta also does business

under the Justice Diagnostic Imaging, Inc. name. OIS alleges

that Justice, and another company he owns, Justice Ophthalmics,

Inc. (JOI), were placed on notice of OIS’ concern that the

defendant employees were misappropriating OIS’ trade secrets and

confidential information in 2003. 

Late in 2003, OIS gathered evidence showing that the

defendants had misappropriated OIS’ trade secrets and were using

them to divert OIS’ customers and business to themselves. OIS

alleges that defendant Fukuhara, while working for defendants

Zeta and/or Eyepictures, “authorized the unauthorized loading of

OIS Winstation software into an imaging system sold to

Zeta/Eyepictures [sic] customer.” Plaintiff alleges that

defendant Brodsky, along with others, are liable for

contributory infringement of OIS’ copyrighted works. Plaintiff

also maintains that Brodsky and Eyepictures, along with others,

are vicariously liable for the direct infringement of OIS

copyrighted works.

Plaintiff explains that defendants have used false

statements about their business for the purpose of confusing

customers about the source and origin of the defendants’

products and services and disparaging the relative quality of

OIS’ products and services. Plaintiff also charges Brodsky and

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4 Unless otherwise noted, all facts are undisputed.

5 Verdoneer examined a system of a Florida-based customer who

had used defendants’ system that was “taken in on trade.”

5

Eyepictures of misappropriating trade secrets, including copying

OIS’ customer database and information and using it to solicit

and contact OIS customers. 

Finally, plaintiff asserts that each of the employee

defendants who have left OIS signed an employment agreement

promising to maintain confidentiality of OIS’ trade secrets and

confidential information. Brodsky and Eyepictures allegedly

were aware of such agreements and upon information and belief,

these defendants induced the employees to breach their contracts

with defendants. 

II.

FACTS4

A. OIS’ AND EYEPICTURES’ IMAGING SYSTEMS

Steven Verdoneer, president of OIS, has “done an initial

inspection of defendants’ imaging systems” this past year. 

Verdoneer Dep. at 59: 20. He “examined the cables,” “the back

of the computer,” “the video adapter and . . . their hard drive

directories.” Id. at 61:17-19. Based on such examination,

Verdoneer concluded that “it appear[ed] their [defendants’]

software is different than the OIS software.”5 Def.’s SUF 1. 

It is undisputed that OIS receives a one-time payment for

the license of its software with the sale of its imaging system. 

Def.’s SUF 2. A purchaser of plaintiff’s retinal imaging system

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is entitled to use the software for an indefinite period of

time. Def.’s SUF 3. Plaintiff charges sales tax on the price

of the system as a whole, which includes the software. Def.’s

SUF 4. The only occasions when plaintiff has asked for a return

of software is when the digital imaging system is being returned

to plaintiff. Def.’s SUF 5. Defendants do not dispute that

they have copied plaintiff’s software in connection with the reloading of the software from one OIS system already owned by a

customer to another OIS system owned by the same customer. 

Def.’s SUF 5. 

B. DALE BRODSKY AND EYEPICTURES

Dale Brodsky asserts that he “had no involvement in

development of a website for Imaging Services Group or any

knowledge that any of its contents were unfair or misleading.”

Brodsky Decl. at 3:1-3. Brodsky owned St. Louis Opthalmics

Equipment, Co., a Missouri-based corporation, and the idea of

starting Eyepictures in 2000 was his. Brodsky Dep. at 15:7-24;

23:8-22. At the time of Eyepictures’ incorporation, the

shareholders of Eyepictures were Brodsky and Mike Gerkovich. 

Id. at 27:10-28. Initially, Eyepictures was funded entirely by

Brodsky, and he also provided equipment and inventory from St.

Louis Opthalmics. He also provided several cameras, including a

camera back prototype from Edmund Scientific. Id. at 36:14-

37:21. Until 2002, Brodsky provided approximately $120,000 for

the financing of Eyepictures. Id. at 99:24-103:16. After 2002,

he contributed approximately $300,000, mostly in the form of a

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loan. He borrowed a line of credit from Missouri State Bank

totaling approximately $200,000, and the rest came from his

earnings at St. Louis Opthalmic. Id. 

Brodsky served as the officer, president, and secretary of

Eyepictures’ Board of Directors. Decl. at 41:22-22:8. Brodsky

also signed the lease for Eyepictures’ El Dorado Hills office. 

Id. at 54:14-55:3. Brodsky contends that he was not aware that

any of Eyepictures’ employees had signed confidentiality

agreements with OIS, but he has been told otherwise during the

course of this litigation. Id. at 68:8-25. Mark Fukuhara, Doug

Burland, and Mike Gerkovich all worked for Eyepictures. Id. at

80:4-19. Prior to 2002, Brodsky was aware that Gerkovich was

affiliated with OIS. Brodsky retained Mark Fukuhara as an

independent contractor after Mr. Fukuhara’s employment with OIS

had been terminated. Def.’s SUF 12. However, Brodsky asserts

that he was not directly involved with the hiring of other

Eyepictures employees. Def.’s SUF 13. In 2003, Brodsky finally

sold the assets of Eyepictures to Johnny Justice for a

significant sum. Davis Decl. 2, Ex. C (copy of purchase

agreement).

On approximately December 26, 2002, Brodsky received a

letter from OIS’ then attorney, Kimberly Mueller. Id. at

143:14-25. The letter was addressed to Dale Brodsky at St.

Louis Opthalmic Equipment Company, in which Mueller, counsel for

plaintiff, requested “assistance in evaluating information

suggesting that [Brodsky’s] company (including its affiliated

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entities), with its employees and contractors, was

misappropriating confidential and proprietary information” owned

by Medivision and OIS. Id.

Brodsky asserts that he stated during a conference call

that he “didn’t want anything to do with anybody else’s

information.” Brodsky Decl. at 95:15-96. Brodsky also

maintains that he was not involved in the solicitation of

customers for Eyepictures, Inc. dba Imaging Services Group. 

Def.’s SUF 9. Solicitation letters, however, were sent by

employees of Eyepictures, Inc., dba Imaging Services Group which

“outline[ed] available service options provided by ISG.” The

letters noted that “for the next 60 days ISG is offering a

specially priced block of 10 hours of telephone support . . . .” 

Def.’s Ex. F. Dale Brodsky maintains that “he never had any

personal knowledge that anyone affiliated with Eyepictures

improperly misappropriated any trade secret information

belonging to plaintiff.” Def.’s SUF 11. 

The website for Eyepictures contains several statements,

including that Eyepictures employs “best in industry technicians

who can offer a higher level of service than users of digital

systems have been experiencing,” and that “our pricing for

service, repair or training is 25 to 30 percent less than the

manufacturers [sic] prices . . . [r]eplacement parts are up to

40 percent less than the manufacturer charges for the same item

in some instances!” Def.’s Ex. E.

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9

III.

SUMMARY JUDGMENT STANDARDS UNDER FED. R. CIV. P. 56

Summary judgment is appropriate when it is demonstrated

that there exists no genuine issue as to any material fact, and

that the moving party is entitled to judgment as a matter of

law. Fed. R. Civ. P. 56(c); See also Adickes v. S.H. Kress &

Co., 398 U.S. 144, 157 (1970); Secor Limited v. Cetus Corp., 51

F.3d 848, 853 (9th Cir. 1995).

Under summary judgment practice, the moving party

[A]lways bears the initial responsibility of

informing the district court of the basis

for its motion, and identifying those

portions of "the pleadings, depositions,

answers to interrogatories, and admissions

on file, together with the affidavits, if

any," which it believes demonstrate the

absence of a genuine issue of material fact.

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here

the nonmoving party will bear the burden of proof at trial on a

dispositive issue, a summary judgment motion may properly be

made in reliance solely on the 'pleadings, depositions, answers

to interrogatories, and admissions on file.'" Id. Indeed,

summary judgment should be entered, after adequate time for

discovery and upon motion, against a party who fails to make a

showing sufficient to establish the existence of an element

essential to that party's case, and on which that party will

bear the burden of proof at trial. See id. at 322. "[A]

complete failure of proof concerning an essential element of the

nonmoving party's case necessarily renders all other facts

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immaterial." Id. In such a circumstance, summary judgment

should be granted, "so long as whatever is before the district

court demonstrates that the standard for entry of summary

judgment, as set forth in Rule 56(c), is satisfied." Id. at

323.

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

586 (1986); See also First Nat'l Bank of Ariz. v. Cities Serv.

Co., 391 U.S. 253, 288-89 (1968); Secor Limited, 51 F.3d at 853. 

In attempting to establish the existence of this factual

dispute, the opposing party may not rely upon the denials of its

pleadings, but is required to tender evidence of specific facts

in the form of affidavits, and/or admissible discovery material,

in support of its contention that the dispute exists. Fed. R.

Civ. P. 56(e); Matsushita, 475 U.S. at 586 n.11; See also First

Nat'l Bank, 391 U.S. at 289; Rand v. Rowland, 154 F.3d 952, 954

(9th Cir. 1998). The opposing party must demonstrate that the

fact in contention is material, i.e., a fact that might affect

the outcome of the suit under the governing law, Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Owens v. Local

No. 169, Assoc. of Western Pulp and Paper Workers, 971 F.2d 347,

355 (9th Cir. 1992) (quoting T.W. Elec. Serv., Inc. v. Pacific

Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987), and

that the dispute is genuine, i.e., the evidence is such that a

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reasonable jury could return a verdict for the nonmoving party,

Anderson, 477 U.S. 248-49; see also Cline v. Industrial

Maintenance Engineering & Contracting Co., 200 F.3d 1223, 1228

(9th Cir. 1999).

In the endeavor to establish the existence of a factual

dispute, the opposing party need not establish a material issue

of fact conclusively in its favor. It is sufficient that "the

claimed factual dispute be shown to require a jury or judge to

resolve the parties' differing versions of the truth at trial." 

First Nat'l Bank, 391 U.S. at 290; See also T.W. Elec. Serv.,

809 F.2d at 631. Thus, the "purpose of summary judgment is to

'pierce the pleadings and to assess the proof in order to see

whether there is a genuine need for trial.'" Matsushita, 475

U.S. at 587 (quoting Fed. R. Civ. P. 56(e) advisory committee's

note on 1963 amendments); see also International Union of

Bricklayers & Allied Craftsman Local Union No. 20 v. Martin

Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985).

In resolving the summary judgment motion, the court

examines the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any. 

Rule 56(c); See also In re Citric Acid Litigation, 191 F.3d

1090, 1093 (9th Cir. 1999). The evidence of the opposing party

is to be believed, see Anderson, 477 U.S. at 255, and all

reasonable inferences that may be drawn from the facts placed

before the court must be drawn in favor of the opposing party,

see Matsushita, 475 U.S. at 587 (citing United States v.

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Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam)); See also

Headwaters Forest Defense v. County of Humboldt, 211 F.3d 1121,

1132 (9th Cir. 2000). Nevertheless, inferences are not drawn

out of the air, and it is the opposing party's obligation to

produce a factual predicate from which the inference may be

drawn. See Richards v. Nielsen Freight Lines, 602 F. Supp.

1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898, 902 (9th

Cir. 1987).

Finally, to demonstrate a genuine issue, the opposing party

"must do more than simply show that there is some metaphysical

doubt as to the material facts. . . . Where the record taken as

a whole could not lead a rational trier of fact to find for the

nonmoving party, there is no 'genuine issue for trial.'" 

Matsushita, 475 U.S. at 587 (citation omitted).

IV.

ANALYSIS

Defendant Eyepictures moves for summary judgment on

plaintiff’s first and second causes of action (copyright

infringement and Lanham Act violations, respectively). Defendant

Brodsky moves for summary judgment on these two causes of action

as well as on plaintiff’s fifth and sixth causes of action

(misappropriation of trade secrets and interference with

contract, respectively). As explained further below, the court

must deny the motions as to each cause of action.

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6 Section 106 states:

Subject to sections 107 through 122, the owner of

copyright under this title has the exclusive rights to

do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or

phonorecords;

(2) to prepare derivative works based upon the

copyrighted work;

(3) to distribute copies or phonorecords of the

copyrighted work to the public by sale or other transfer

of ownership, or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and

choreographic works, pantomimes, and motion pictures and

other audiovisual works, to perform the copyrighted work

publicly;

(5) in the case of literary, musical, dramatic, and

choreographic works, pantomimes, and pictorial, graphic,

or sculptural works, including the individual images of

a motion picture or other audiovisual work, to display

the copyrighted work publicly; and

(6) in the case of sound recordings, to perform the

copyrighted work publicly by means of a digital audio

transmission.

13

A. FIRST CAUSE OF ACTION: COPYRIGHT INFRINGEMENT (BRODSKY AND 

EYEPICTURES)

Plaintiffs must satisfy two requirements to present a prima

facie case of copyright infringement: (1) they must show

ownership of the allegedly infringed material and (2) they must

demonstrate that the alleged infringers violate at least one

exclusive right granted to copyright holders under 17 U.S.C. 

§ 106.6 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013

(9th Cir. 2001).

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7 17 U.S.C. § 109 states in pertinent part:

(a) Notwithstanding the provisions of section 106(3),

the owner of a particular copy or phonorecord lawfully

made under this title, or any person authorized by such

owner, is entitled, without the authority of the

copyright owner, to sell or otherwise dispose of the

possession of that copy or phonorecord.

14

Plaintiff brings a copyright infringement claim against 

defendants because they allege that defendants assisted OIS

customers by copying OIS software from one computer to another

owned by the customer. Def.’s SUF 5. Put differently,

defendants helped OIS customers “load existing software - their

existing review station software on another computer.” Fukuhara

Dep. at 161: 20-23. According to Fukuhara, defendants “imaged a

hard drive [containing OIS software] onto another computer and

sent the hard drive and computer back” to the customer. Id. at

162:3-6. See also Burland Dep. at 132:22-133: 16 ([Eyepictures]

made a copy of software one time to load for a client’s

system.). Plaintiff contends that this copying, without OIS’

authorization, is copyright infringement. Defendants contend

that their actions are protected under the First Sale Doctrine,

codified at 17 U.S.C § 109(a).7 I cannot agree.

a. First Sale Doctrine

“The first sale doctrine provides that where a copyright

owner parts with title to a particular copy of that copyright

work, he divests himself of his exclusive right to vend that

particular copy.” United States v. Wise, 550 F.2d 1180 (9th

Cir. 1977). In Mirage Editions, Inc. v. Albuquerque A.R.T. Co.,

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856 F.2d 1341, 1344 (9th Cir. 1988), copyright owners brought

suit against a tile seller who transferred artworks from a

commemorative book to individual ceramic tiles for sale to

public. The court held that such action constituted “derivative

works” and infringed the copyrights of the book. The Ninth

Circuit explained that under the first sale doctrine, appellant

can “purchase a copy of the Nagel book and subsequently alienate

its ownership in that book . . .” but that “the right to

transfer applies only to the particular copy of the book which

appellant has purchased and nothing else.” Id. at 1344. In

sum, the first sale doctrine vests the copy owner with statutory

privileges under the Act which operate as limits on the

exclusive rights of the copyright owners as to that particular

copy. 

The instant case does not involve a sale of software. 

Instead, defendants, with the customer’s consent, allegedly

copied OIS’ software for a customer from one computer to another

computer for that same customer’s use. Defendants maintain that

the right to transfer or sell lies with OIS’ former customer

because it applies to that same copy of software, and thus, the

first sale doctrine applies. That argument is unavailing. The

first sale doctrine allows for the transfer of just one copy of

a copyrighted work. Based on the record, it is unclear whether

only one copy of the software existed after defendants copied

OIS’ software from one computer to another, or whether, as a

result of defendants’ conduct, there are now two copies of the

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8 Conceivably, defendants may have destroyed the original

copy after the copying was completed. The court attempted to

clarify with defendants’ counsel during oral argument whether the

original copy of the software was destroyed after being copied to

a second computer, but counsel stated that he was not certain.

9 To state a prima facie claim under the Lanham Act § 43(a)

for false advertising, the plaintiff must show that: (1) defendant

made a false statement of fact in an advertisement about its own

or another's product; (2) the statement actually deceived or has

the tendency to deceive a substantial segment of its audience; (3)

the deception is material, in that it is likely to influence the

purchasing decision; (4) the defendant caused its false statement

to enter interstate commerce; and (5) the plaintiff has been or is

likely to be injured as a result of the false statement, either by

direct diversion of sales from itself to defendant or by a

lessening of the goodwill associated with its products. Southland

Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997)

(citing Cook, Perkiss and Liehe, Inc. v. Northern Cal. Collection

Serv., Inc., 911 F.2d 242, 244 (9th Cir.1990)). 

16

software.8 Because the first sale doctrine provides an owner

with the exclusive right to only one copy of a copyrighted work,

and because the court cannot determine that defendants had in

possession only one copy of the software after it was copied,

defendants have failed to demonstrate that the first sale

doctrine protects them from a trademark infringement claim.

Defendants’ motion for summary adjudication as to trademark

infringement must be denied.

B. SECOND CAUSE OF ACTION: LANHAM ACT VIOLATIONS9(BRODSKY AND 

EYEPICTURES)

Defendants contend that solicitation letters sent out by

Douglas Burland in 2002 and that statements made on Eyepictures’

website do not constitute Lanham Act Violations. As plaintiff

correctly notes, following the court’s order on defendants’

motion to dismiss filed on March 2, 2005, there remained two

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10 Specifically, plaintiff alleges that the defendants made

and used “false and deceptive statements about their own business

and the business of OIS . . for the purpose of confusing customers

about the source and origin of the defendants’ products and

services and disparaging the relative quality of OIS’s products and

services.” Compl. at 25-26. According to plaintiff, the letter was

deceptive because defendants failed to state that Burland was not

affiliated with OIS. Compl. at ¶86(a). 

11 Plaintiff brought suit to challenge representations found

in a website concerning defendants’ expertise. Those statements

include that (1) defendants provided “‘Best in Industry’

technicians who can offer a higher level of service than users of

digital systems have been experiencing,” (2) defendants could

provide “[s]ignificantly reduced support and repair costs,” and

that (3) pricing for “service, repair, or training” would be 25 to

30 percent less, impliedly, than OIS.

12 Defendants, without citing to any evidence, argue that

customers would not have thought that Doug Burland was sending the

solicitation letter on behalf of OIS when he was, in fact, already

working for Eyepictures. 

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false advertising claims for which defendants Eyepictures and

Brodsky could be held liable: (1) that solicitation letters sent

by Doug Burland failed to identify that Burland was not

identified with OIS,10 and (2) that the defendants’ statements

regarding their prices for service could fall into the ambit of

false advertising.11

As plaintiff accurately explains, defendants have not

introduced any evidence concerning the truth or falsity of these

statements, or resolve their ambiguity.12 Rather, as plaintiff

points out, the defendants merely reargue that the statements

are not actionable as a matter of law. See Repl. Br. (“[T]he

defendants maintain that they [false advertising claims] are not

actionable as a matter of law.”). The court has previously held

these causes of action are cognizable. 

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Regarding the solicitation letters, the court found that

defendants’ solicitous statements contained in the letter sent

by Burland make ambiguous suggestions which are actionable under

the Lanham Act. Order at 8. Regarding the website statements,

the court held that the statement regarding “service, repair, or

training” for “25 to 30 percent less” is measurable and specific

enough to be actionable under the law. In short, the previous

March 2, 2005 order is the law of the case, “and this court, as

well as the litigants, are bound thereby.” See Rio Grande

Western Ry. Co. v. Stringham, 239 U.S. 44 (1915). Defendants’

motion as to this cause of action must be denied.

C. FIFTH CAUSE OF ACTION: MISAPPROPRIATION OF TRADE SECRETS 

(BRODSKY)

Defendants bring their fifth cause of action for trade

secret misappropriation. A prima facie claim for

misappropriation of trade secrets requires the plaintiff to

demonstrate: (1) the plaintiff owned a trade secret, (2) the

defendant acquired, disclosed, or used the plaintiff's trade

secret through improper means, and (3) the defendant's actions

damaged the plaintiff. See Cal. Civ. Code § 3426.1. In their

complaint, plaintiffs allege that defendants misappropriated

trade secrets by making unauthorized copies of OIS information,

testing and manufacturing OIS’ imaging systems, using

confidential information relating to servicing of OIS systems by

former OIS technicians and soliciting OIS customers using such

confidential and proprietary information. Compl. at 33-34. 

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Plaintiffs assert that defendants “with knowledge of the scheme

and plan of the defendants’ business enterprise . . . conspired

together and rendered assistance to the defendants’ conspiracy.” 

In addition, Brodsky allegedly was one of the defendants who

initiated the conspiracy in or about 2002, and also “aided and

abetted the enterprise of the defendants [sic] scheme . . . .”

Id. at 34-35. 

Defendant Brodsky argues that the court should grant

summary judgment as to this claim because he did not conspire

with the other defendants to misappropriate any trade secrets

because he had no knowledge of any misappropriation. The

contention cannot support a motion for summary judgment.

Under California law, knowledge and intent “may be inferred

from the nature of the acts done, the relation of the parties,

the interest of the alleged conspirators, and other

circumstances.” See Wyatt v. Union Mortgage Co., 24 Cal.3d 773

(1979). Defendant argues that he had no knowledge of any

misappropriation, relying primarily on the fact that he

established a policy that the defendants would not

misappropriate any of the plaintiff’s trade secret information. 

Defendants’ evidence is hardly dispositive of the issue. 

Rather, plaintiff tenders sufficient evidence to raise a dispute

as to knowledge. 

Specifically, plaintiff submits evidence that Brodsky is

the shareholder, chief director, and chief officer of

Eyepictures and that he hired Gerkovich and Fukuhara, who hired

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the other employees who formerly were affiliated with plaintiff.

Brodsky Decl. at ¶4. Plaintiff also tenders evidence showing

that he was given notice of potential misappropriation in 2002

by OIS’ counsel and nevertheless continued operating it until

April 2003, when he sold the business for a significant gain. 

Based on these facts, plaintiff argues that one may infer that

Brodsky had knowledge that misappropriation may have occurred

and that he was participating in such misappropriation by

funding Eyepictures and by hiring away OIS former employees who

misappropriated trade secrets. Plaintiff has raised a triable

issue as to this claim. Accordingly, defendants’ motion as to

the fifth cause of action is denied. 

D. SIXTH CAUSE OF ACTION: INTERFERENCE WITH CONTRACT

The elements for an intentional interference with 

contractual relations claim are: (1) a valid contract between

the plaintiff and a third party; (2) the defendant's knowledge

of this contract; (3) the 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. Quelilmane Co., Inc. v.

Stewart Title Guaranty Co. et al., 19 Cal.4th 26, 32 (1998). 

Defendant Brodsky argues he was unaware of any binding

agreements between plaintiff and Eyepictures’ employees and that

he did not induce anyone to breach such agreements. Defendant

merely cites to his own deposition where he maintains that he

never had any personal knowledge that anyone affiliated with

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Eyepictures was bound by a restrictive employment agreement. He

also states that Mark Fukuhara assured him that no Eyepictures

employees were bound by any employment agreements and that he

believed Fukuhara. Brodsky Dep. at 2:15-26. Plaintiff,

however, points out that Mark Fukuhara, a critical employee at

Eyepictures, received notice through a letter sent by OIS’

counsel stating that ”most if not all of the former OIS

employees signed valid employment and confidentiality agreements 

. . . .” Davis Decl. 1, Ex. D. As plaintiff notes, a trier of

fact could choose to disregard Brodsky’s testimony and conclude

based on this letter that he had knowledge of OIS’ contracts

with its former employees and that he nevertheless continued to

partake in interfering with such contracts. In sum, it remains

disputed whether Brodsky was unaware of any binding agreements

between plaintiff and Eyepictures’ employees. Brodsky’s motion

as to this cause of action must also be denied.

For the reasons stated above, defendants’ motions for

summary adjudication are DENIED.

IT IS SO ORDERED. 

DATED: December 16, 2005.

/s/Lawrence K. Karlton 

LAWRENCE K. KARLTON

SENIOR JUDGE

UNITED STATES DISTRICT COURT

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