Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-01255/USCOURTS-cand-4_04-cv-01255-9/pdf.json

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

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ENREACH TECHNOLOGY, INC., a Delaware

corporation,

Plaintiff,

v.

EMBEDDED INTERNET SOLUTIONS, INC.;

SHENZHEN ZHUOZHUANG NETWORK

TECHNOLOGY, INC.; GUOHONG XU; JING

WU; EMBEDDED INTERNET SOLUTIONS

HOLDINGS LTD.; ZHAOHENG HOLDINGS

LTD.; GUOSHENG XU; ALPHASMART, INC.;

CHANGHONG ELECTRONICS, LTD.; CIRRUS

LOGIC, INC.; INVENTEC CORPORATION;

KYOCERA WIRELESS CORPORATION; OPENTV

CORPORATION; PHILIPS SEMICONDUCTOR

INC.; and XOCECO LTD.,

Defendants.

 /

No. C 04-1255 CW

ORDER DENYING

PLAINTIFF'S

MOTION FOR

SUMMARY JUDGMENT,

GRANTING IN PART

AND DENYING IN

PART THE EIS

DEFENDANTS'

MOTION FOR

SUMMARY JUDGMENT,

AND GRANTING IN

PART AND STAYING

IN PART THE

CUSTOMER

DEFENDANTS'

MOTIONS FOR

SUMMARY JUDGMENT 

Plaintiff Enreach Technology, Inc., has moved for summary

adjudication of the first, second, sixth, seventh, eighth and tenth

causes of action in its fourth amended complaint (FAC) against

Defendants Embedded Internet Solutions, Inc. (EIS), ShenZhen

ZhuoZhuang Network Technology, Inc., GuoHong Xu and Jing Wu (EIS

Defendants). The EIS Defendants oppose the motion and cross-move

for summary adjudication of the second, third, seventh, eighth,

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 1 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 The EIS Defendants' motion for leave to file an amended

cross-motion for summary judgment (Docket No. 195) is GRANTED.

2

ninth and tenth causes of action in the FAC.1 In addition,

Defendants Cirrus Logic, Inc. and AlphaSmart, Inc. jointly move for

summary adjudication of the second, seventh, eighth and tenth

causes of action in the FAC, and Cirrus Logic moves separately for

summary adjudication of the seventh, eighth and tenth causes of

action. Enreach opposes these motions. The matters were heard on

August 12, 2005. Having considered the parties' papers, the

evidence cited therein and oral argument on the motions, the Court

DENIES Enreach's motion for summary judgment, GRANTS in part and

DENIES in part the EIS Defendants' cross-motion for summary

judgment, GRANTS in part and STAYS in part the motion for summary

judgment filed jointly by Cirrus and AlphaSmart, and GRANTS in part

and STAYS in part the motion for summary judgment filed by Cirrus. 

BACKGROUND

Enreach develops and markets embedded software products,

including interactive television services. Embedded software is a

software program for microprocessors that are embedded in a variety

of electronic products such as televisions and cellular telephones. 

Enreach's products are built around a common software platform

called the MicroBrowser, or eBrowser. In late 1997, Xu and Wu

began full-time employment at Enreach as software engineers. In

1998, Xu was promoted to chief software architect. It is not

disputed that at the time Xu and Wu began working for Enreach they

signed an employee confidentiality and proprietary information

agreement. That agreement stated, among other things, as follows:

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 2 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3

I agree at all times during the term of my employment and

during the two year period thereafter to hold in strictest

confidence, and not to use, except for the benefit of the

Company, or to divulge or disclose, directly or indirectly, to

any person, corporation or other entity without written

authorization of the Board of Directors of the Company, any

non-published trade secrets, confidential knowledge, data or

other proprietary information (collectively referred to as

"Confidential Information") obtained by me during my

employment with the Company relating to products, processes,

know-how, designs, formulas, developmental or experimental

work, computer programs, data bases, other original works of

authorship, customer lists, business plans, financial

information or other subject matter pertaining to any business

of the Company. . . . I agree that I will promptly make full

written disclosure to the Company, will hold in trust for the

sole right and benefit of the Company, and will assign to the

Company all my right, title, and interest in and to any and

all inventions, discoveries, developments, improvements,

technology, trade secrets, computer programs, know-how,

designs, formulas, original works of authorship, or any other

confidential materials, data, information or instructions,

technical or otherwise and whether or not patentable or

copyrightable and whether or not reduced to practice relating

to the Company's business (collectively referred to as

"Inventions") which I may solely or jointly conceive or

develop or reduce to practice, or cause to be conceived or

reduced to practice, during the period of time I am in the

employ of the Company.

The agreement also incorporated California Labor Code section 2870,

which states as follows:

Any provision in an employment agreement which provides that

an employee shall assign, or offer to assign, any of his or

her rights in an invention to his or her employer shall not

apply to an invention that the employee developed entirely on

his or her own without using the employer's equipment,

supplies, facilities, or trade secret information except for

those inventions that either: (1) Relate at the time of

conception or reduction to practice of the invention to the

employer's business, or actual or demonstrably anticipated

research or development of the employer. (2) Result from any

work performed by the employee for the employer.

The parties do not dispute that, in late 1998 or early 1999,

Xu began working on Enreach's MicroBrowser project. The EIS

Defendants submit evidence which Enreach does not dispute that Xu 

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 3 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

was never involved in the core design of the MicroBrowser source

code.

It is not disputed that, in January, 1999, Xu and Wu formed an

Internet-based company called CyberAnts. It is also not disputed

that shortly after Xu and Wu formed CyberAnts, and while Xu was

still employed by Enreach, they began to develop and write source

code for Internet browser applications. In his sworn declaration,

Xu states that these browser applications were related to a webbased fitting room that would allow customers to order customtailored clothes online. Enreach does not dispute that it did not

at the time develop any similar web-based applications. Also in

his sworn declaration, Xu states that he initially developed the

source code for these applications by downloading and then

experimenting with public domain source code relating to the basic

functionality of web-based applications and utility functions. He

further states that he did not use the MicroBrowser source code in

writing the generic source code for CyberAnts. The EIS Defendants

submit evidence, which Enreach does not dispute, that Xu developed

this source code during his personal time and using his personal

computer equipment.

Enreach proffers undisputed evidence that, on August 1, 1999,

Xu and Wu changed the name of CyberAnts to EIS. Enreach also

submits undisputed evidence that, on September 4, 1999, EIS

completed an investment brochure which stated, among other things,

that the company planned to become a leader in the market for

embedded Internet browser products. The brochure also described in

general terms several functions and features of EIS's browser; it

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 4 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 5

is not disputed that MicroBrowser contained functions and features

similar to those described in EIS's brochure. 

On September 17, 1999, Xu left Enreach. It is not disputed

that, when he left Enreach, Xu had a copy of the MicroBrowser

source code on his personal laptop. The EIS Defendants submit

undisputed evidence that Xu had copied the source code onto his

laptop with Enreach's knowledge before he took a business trip to

Germany on behalf of the company. On November 11, 1999, Wu left

Enreach.

According to Xu's declaration, he began to write source code

for the EIS embedded Internet browser, called iPanel, only after he

left Enreach, and EIS did not complete a working model of iPanel

until June, 2000. It is not disputed that EIS received copyright

registrations for nine modules of source code relating to iPanel in

July, 2000. The EIS Defendants acknowledge that Xu had begun to

write the source code contained in six of those modules prior to

leaving Enreach, but Xu states that this source code was "extremely

basic and performed only standard, utility functions found in any

Internet program."

Enreach submits evidence of similarities between iPanel and

MicroBrowser; its expert, Yan Feng, states that iPanel has, among

other things, similar modular structure, a similar method of flow

control, and uses the same freeware vendors as does MicroBrowser. 

The EIS Defendants submit evidence through their expert Robert

Wedig that only three files in the current EIS source code are

"questionably similar" to files in the Enreach code, and this

represents less than one-one hundredth of one percent of the number

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 5 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 6

of files in the EIS code and less than one-tenth of one percent of

the number of files in the Enreach code.

In early 2001, Enreach contacted the Santa Clara County

District Attorney's Office seeking a criminal investigation of EIS

and Xu. In June, 2001, an investigator from the District

Attorney's Office interviewed Xu and several other EIS employees. 

During his interview, Xu stated that he had not used Enreach source

code in creating source code for EIS and that he did not begin

writing source code specifically for iPanel until after he left

Enreach. The District Attorney's Office did not pursue criminal

charges against Xu or EIS.

It is not disputed that, in September, 2001, EIS released

iPanel. Along with the nine copyright registrations, the iPanel

core code is also the subject of several pending patent

applications. Defendant ShenZhen ZhuoZhuang makes and sells iPanel

products. AlphaSmart and Cirrus have licensed iPanel from EIS.

Enreach filed its initial complaint against the EIS Defendants

on March 30, 2004. In the FAC, which it filed on January 28, 2005,

Enreach added AlphaSmart, Cirrus and several other Defendants which

it alleges have licensed iPanel source code. The FAC alleges the

following causes of action: (1) breach of contract (against Xu and

Wu), (2) declaratory judgment that Enreach is the owner of the

iPanel registrations (against all Defendants), (3) declaratory

judgment that Enreach is the owner of the pending iPanel patent

applications (against the EIS Defendants), (4) fraudulent

concealment of inventions (against Xu and Wu), (5) breach of

covenant of good faith and fair dealing (against Xu and Wu), 

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 6 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 7

(6) breach of fiduciary duty (against Xu and Wu), (7) unjust

enrichment (against all Defendants), (8) copyright infringement

(against all Defendants), (9) unfair competition (against the EIS

Defendants), and (10) unfair competition (against all Defendants).

On February 18, 2005, Enreach filed its motion for summary

judgment. On March 8, 2005, the Court granted a motion to continue

the summary judgment hearing filed by the EIS Defendants and denied

without prejudice as premature Enreach's summary judgment motion. 

At a case management conference on April 8, 2005, the Court

reinstated Enreach's summary judgment motion and scheduled

briefing. The Court also set November 18, 2005 as the fact

discovery cut-off for the Defendants, including Cirrus and

AlphaSmart, that were added in the FAC. On June 17, 2005, Cirrus

and AlphaSmart filed their joint motion for summary judgment, and

Cirrus filed its summary judgment motion.

LEGAL STANDARD

Summary judgment is properly granted when no genuine and

disputed issues of material fact remain, and when, viewing the

evidence most favorably to the non-moving party, the movant is

clearly entitled to prevail as a matter of law. Fed. R. Civ. P.

56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986);

Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir.

1987).

The moving party bears the burden of showing that there is no

material factual dispute. Therefore, the court must regard as true

the opposing party's evidence, if supported by affidavits or other

evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 7 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 8

F.2d at 1289. The court must draw all reasonable inferences in

favor of the party against whom summary judgment is sought. 

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

587 (1986); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d

1551, 1558 (9th Cir. 1991). 

Material facts which would preclude entry of summary judgment

are those which, under applicable substantive law, may affect the

outcome of the case. The substantive law will identify which facts

are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986).

Where the moving party does not bear the burden of proof on an

issue at trial, the moving party may discharge its burden of

showing that no genuine issue of material fact remains by

demonstrating that "there is an absence of evidence to support the

nonmoving party's case." Celotex, 477 U.S. at 325. The moving

party is not required to produce evidence showing the absence of a

material fact on such issues, nor must the moving party support its

motion with evidence negating the non-moving party's claim. Id.;

see also Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 885 (1990);

Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991),

cert. denied, 502 U.S. 994 (1991). If the moving party shows an

absence of evidence to support the non-moving party's case, the

burden then shifts to the opposing party to produce "specific

evidence, through affidavits or admissible discovery material, to

show that the dispute exists." Bhan, 929 F.2d at 1409. A complete

failure of proof concerning an essential element of the non-moving

party's case necessarily renders all other facts immaterial. 

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 8 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 9

Celotex, 477 U.S. at 323.

Where the moving party bears the burden of proof on an issue

at trial, it must, in order to discharge its burden of showing that

no genuine issue of material fact remains, make a prima facie

showing in support of its position on that issue. See UA Local 343

v. Nor-Cal Plumbing, Inc., 48 F.3d 1465, 1471 (9th Cir. 1994). 

That is, the moving party must present evidence that, if

uncontroverted at trial, would entitle it to prevail on that issue. 

See id.; see also Int’l Shortstop, Inc. v. Rally's, Inc., 939 F.2d

1257, 1264-65 (5th Cir. 1991). Once it has done so, the non-moving

party must set forth specific facts controverting the moving

party's prima facie case. See UA Local 343, 48 F.3d at 1471. The

non-moving party's "burden of contradicting [the moving party's]

evidence is not negligible." Id. This standard does not change

merely because resolution of the relevant issue is "highly fact

specific." See id.

DISCUSSION

I. EIS Defendants

A. Breach of Contract Claim

Enreach argues that there is undisputed evidence that Xu and

Wu conceived iPanel and reduced it to practice while they were

employed at Enreach, thereby breaching the confidentiality and

assignment provisions of the employment agreement that they each

signed when they began working for the company. As evidence,

Enreach cites (1) the brochure that EIS had completed by September

4, 1999 which described in general terms the planned embedded

browser that would become iPanel, and (2) the source code contained

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 9 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 10

in six of the nine modules for which EIS has copyright

registrations that the EIS Defendants acknowledge Xu worked on

while still employed at Enreach. Enreach also cites the

similarities between the MicroBrowser and iPanel source code that

were identified by its expert.

Opposing Enreach's motion for summary adjudication of this

claim, the EIS Defendants argue that the iPanel source code was not

subject to the Enreach employment agreements. Xu states in his

declaration that the source code he developed while still employed

at Enreach related to low-level utilities and the basic

functionality necessary for any web-based application, and that he

derived it from public domain source code. Xu also states that he

originally developed this initial source code for the purpose of

using it for an online clothes-shopping and custom-fitting web

site, and that he wrote the code on his personal time and using his

own computer equipment. He states that he did not begin writing

source code specifically for iPanel until after he left Enreach and

that he did not use any MicroBrowser code in doing so; the EIS

Defendants note that it is not disputed that EIS did not have a

working model of iPanel until June, 2000, nine months after Xu left

Enreach, and seven months after Wu left.

Thus, there is a material factual dispute whether the iPanel

source code identified by Enreach falls within the exception

described in California Labor Code section 2870. Enreach's motion

for summary adjudication of its first cause of action for breach of

contract is denied.

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 10 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 11

B. Claims for Declaratory Judgment that Enreach is Owner of

EIS's Intellectual Property

The parties cross-move for summary adjudication of Enreach's

second and third causes of action for declaratory judgment that it

has ownership rights in the nine copyright registrations of iPanel

source code and the pending iPanel-related patent applications. 

These claims arise out of Enreach's allegations and evidence that

Xu and Wu conceived of and created iPanel while still employed at

Enreach, and thus were contractually obliged to assign to Enreach

the iPanel copyrights and patent applications. Enreach again cites

the September, 1999 brochure, which described an EIS embedded

browser, and the undisputed evidence that Xu developed part of six

of the nine copyrighted modules while still employed at Enreach.

However, as discussed above, there is a material dispute 

(1) whether Xu and Wu breached their employment contracts with

Enreach and (2) regarding the extent to which Xu developed iPanelspecific source code while still employed at Enreach.

The EIS Defendants argue that they are entitled to summary

judgment on these claims because even if Enreach could prove that

Xu and Wu did breach their employment contracts, Enreach would not

have an ownership interest in EIS's intellectual property. The EIS

Defendants cite Arachnid, Inc. v. Merit Indus., Inc., 939 F.2d

1574, 1580-81 (Fed. Cir. 1991), in which the court ruled that an

agreement to assign future inventions not yet developed could not

serve as the basis for transfer of legal title to those inventions. 

However, the Arachnid court held that such promises to assign "may

vest the promisee in equitable rights in those inventions once

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 11 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 12

made." Id. (emphasis in original). In its second and third causes

of action, Enreach alleges that EIS's registrations are the

intellectual property of Enreach that Xu and Wu hold in trust for

the sole right and benefit of Enreach. Thus, Enreach is seeking

equitable remedies under these claims, which the Arachnid court

held it may do.

For the foregoing reasons, the parties' cross-motions for

summary adjudication of the second and third causes of action for

declaratory judgment are denied.

C. Breach of Fiduciary Duty Claim

Enreach moves for summary adjudication of the FAC's sixth

cause of action, against Xu and Wu, for breach of fiduciary duty. 

In California, a fiduciary of a corporation is defined as "an

officer who participates in management of the corporation,

exercising some discretionary authority." GAB Bus. Servs., Inc. v.

Lindsey & Newsom Claim Servs., Inc., 83 Cal. App. 4th 409, 420-21

(2000), overruled on other grounds by Reeves v. Hanlon, 33 Cal. 4th

1140 (2004).

Here, Enreach submits no argument or evidence that Wu was ever

an officer with any discretionary authority at Enreach. Enreach

does argue that Xu, as chief software architect, meets the standard

for a fiduciary; it submits evidence in the form of a declaration

by its chief executive officer Bo Wu that Xu managed a team of

twenty software engineers. However, this does not amount to

evidence that Xu was an officer at Enreach or that he participated

in the management of the corporation. And, in opposition to

Enreach's motion for summary adjudication of this claim, the EIS

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 12 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 13

Defendants submit undisputed evidence that, while Xu did manage the

projects and schedules of the software engineers, they reported

directly to Bo Wu and not to Xu. 

For the foregoing reasons, Enreach's motion for summary

adjudication of its sixth cause of action for breach of fiduciary

duty is denied.

D. Unjust Enrichment Claim

The parties cross-move for summary adjudication of the FAC's

seventh cause of action for unjust enrichment. As the EIS

Defendants note, unjust enrichment is not a valid cause of action

in California. See McBride v. Boughton, 106 Cal. App. 4th 379, 387

(2004) ("Unjust enrichment is not a cause of action, or even a

remedy, but rather a general principle, underlying various legal

doctrines and remedies.").

Enreach cites no case law holding that a party may plead a

cause of action for unjust enrichment. Instead, Enreach appears to

argue that its unjust enrichment claim is based upon a theory of

constructive trust: if Wu and Xu breached the employment contract,

a constructive trust should be imposed upon EIS covering the iPanel

source code. Enreach does request in its second and third causes

of action that the Court impose a constructive trust on the iPanelrelated intellectual property.

The Court has denied the parties' cross-motions for summary

adjudication of the second and third causes of action, and Enreach

may pursue a constructive trust remedy on those claims. However,

because unjust enrichment is not a valid cause of action in

California, the EIS Defendants are entitled to summary adjudication

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 13 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 14

of the FAC's seventh cause of action for unjust enrichment.

E. Copyright Infringement Claim

The parties cross-move for summary adjudication of the FAC's

eighth cause of action for copyright infringement. "In order to

establish infringement, two elements must be proven: (1) ownership

of a valid copyright, and (2) copying of constituent elements of

the work that are original." Rice v. Fox Broadcasting Co., 330

F.3d 1170, 1174 (9th Cir. 2002). However, "even where the fact of

copying is conceded, no legal consequences will follow from that

fact unless the copying is substantial. . . . In addition to

copying, it must be shown that this has been done to an unfair

extent." Newton v. Diamond, 388 F.3d 1189, 1193 (9th Cir. 2004)

(internal citations omitted). Where there is no evidence of direct

copying, a plaintiff may establish copying by showing that the

defendant had access to the work in question and that the two works

are "substantially similar" in idea and expression. Smith v.

Jackson, 84 F.3d 1213, 1218 (9th Cir. 1996).

Enreach argues first that it is the rightful owner of the nine

EIS copyright registrations relating to iPanel. Second, Enreach

argues that EIS directly copied Enreach's MicroBrowser source code,

and it submits evidence through its expert Mr. Feng of several

similarities in the source code of iPanel and MicroBrowser,

including between the browsers' modular structures, methods of flow

control, and freeware vendors. And, Enreach argues that the direct

copying is not de minimis.

With respect to Enreach's first theory, as discussed above,

there is a material factual dispute whether Enreach has any

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 14 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 15

equitable rights to EIS's copyright registrations. 

With respect to Enreach's second theory, the EIS Defendants'

expert Dr. Wedig states that there is minimal evidence of direct

code copying; the similar code amounts to a fraction of a percent

of the source code comprising the two companies' browsers. Dr.

Wedig also states that the similarities between the source codes in

the companies' browsers encompass only unprotectable expression

because they involve basic and standard methods used by those

versed in the arts of computer programming and code writing.

The parties have submitted competing evidence through their

experts relating to whether there is sufficient evidence of direct

copying and whether the iPanel code is substantially similar in

idea and expression to the MicroBrowser code. Thus, the parties'

cross-motions for summary adjudication of the FAC's eighth cause of

action for copyright infringement are denied.

F. Unfair Competition Law Claims

The parties cross-move for summary adjudication of the FAC's

ninth and tenth causes of action for unfair competition. The ninth

cause of action, asserted against only the EIS Defendants, is based

in part upon Enreach's allegations of copyright infringement and in

part upon Xu and Wu's alleged failure to assign their work relating

to iPanel in accordance with their employment agreements. The

tenth cause of action, against all Defendants, is based upon

Enreach's remaining allegations of, among other things, copyright

infringement and breach of the covenant of good faith and fair

dealing.

The unfair competition law “embraces anything that can

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 15 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 16

properly be called a business practice and that at the same time is

forbidden by law.” Korea Supply Co. v. Lockheed Martin Corp., 29

Cal. 4th 1134, 1135 (Cal. 2003). In other words, section 17200 et

seq. “borrows” violations from other laws and makes them

independently actionable as unfair business practices. Id.

To the extent that the ninth cause of action for unfair

competition is based upon allegations of copyright infringement, it

is preempted by federal law. The Copyright Act states that it

exclusively governs "all legal or equitable rights that are

equivalent to any of the exclusive rights within the general scope"

of the Act and states further that "no person is entitled to any

such right or equivalent right in any such work under the common

law or statutes of any State." 17 U.S.C. § 301(a). In Kodadek v.

MTV Networks, Inc., 152 F.3d 1209, 1212 (9th Cir. 1998), the Ninth

Circuit ruled that the plaintiff's unfair competition law claim,

which was based solely upon its claim for copyright infringement,

was preempted.

As the EIS Defendants note, the FAC's first cause of action

for breach of contract, the only other allegation upon which the

ninth cause of action is based, is asserted against only Xu and Wu. 

Thus, the Court grants the EIS Defendants' motion for summary

adjudication of the ninth cause of action against EIS and ShenZhen

ZhuoZhuang, but denies it with respect to the ninth cause of action

against Xu and Wu arising out of Enreach's breach of contract

claim.

The FAC's tenth cause of action for unfair competition is

based upon "misappropriation of trade secrets, fraud, breach of

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 16 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 17

contract, breach of fiduciary duty, breach of covenant of good

faith and fair dealing, unjust enrichment, and/or copyright

infringement." Enreach's claims for fraud and trade secret

misappropriation were dismissed as time-barred, without leave to

amend, by the State court. Moreover, a common law cause of action

based upon allegations of trade secret misappropriation is

preempted by the Uniform Trade Secrets Act. See Digital Envoy,

Inc. v. Google, Inc., 370 F. Supp. 2d 1025, 1035 (N.D. Cal. 2005). 

And, the Court has granted the EIS Defendants' motion for summary

adjudication of Enreach's claims for unjust enrichment and has

ruled that an unfair competition law claim based upon alleged

copyright infringement is preempted. Enreach's remaining causes of

action upon which this claim is based -- breach of contract, breach

of covenant of good faith and fair dealing and breach of fiduciary

duty -- are asserted against only Xu and Wu.

The Court denies Enreach's motion for summary adjudication of

its tenth cause of action, and grants the EIS Defendants' motion

with respect to EIS and ShenZhen ZhuoZhuang. The Court denies the

EIS Defendants' motion for summary adjudication of the tenth cause

of action against Xu and Wu arising out of the FAC's claims for

breach of contract, breach of the covenant of good faith and fair

dealing and breach of fiduciary duty.

II. Customer Defendants

Cirrus and AlphaSmart move jointly for summary adjudication of

the second, seventh, eighth and tenth causes of action in the FAC,

and Cirrus moves separately for summary adjudication of the

seventh, eighth and tenth causes of action.

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 17 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 18

A. Claims for Declaratory Judgment that Enreach has

Ownership Rights in EIS's Copyright Registrations

Cirrus and AlphaSmart argue that there is no actual

controversy to support Enreach's second cause of action as against

them. A copyright action for declaratory judgment "presents a

justiciable case or controversy if the defendant's actions have

caused the declaratory judgment plaintiff to harbor a real and

reasonable apprehension that he will be subject to liability if he

continues to manufacture his product." Xerox Corp. v. Apple

Computer, Inc., 734 F. Supp. 1542, 1546 (N.D. Cal. 1990), citing

Hal Roach Studios v. Richard Feiner & Co., 883 F.2d 1429 (9th Cir.

1989).

Here, Cirrus and AlphaSmart submit evidence that they have

claimed no ownership interest in the iPanel copyright

registrations, and that they have taken no action that would cause

Enreach to harbor a reasonable apprehension that it would be

subject to liability for copyright infringement. They submit

further evidence, which Enreach does not dispute, that Enreach has

acknowledged that Cirrus has made no claim of ownership in the EIS

copyrights. And Enreach states in its opposition brief that it

does not contend that "that AlphaSmart or Cirrus is claiming

ownership of the EIS registrations."

Enreach argues that a controversy with respect to AlphaSmart

and Cirrus exists because, if Enreach is found to have equitable

rights to the EIS copyrights, AlphaSmart and Cirrus may be liable

for copyright infringement. However, that does not satisfy the

test for declaratory judgment justiciability set forth in Xerox. 

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 18 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 19

734 F. Supp. at 1546. Thus, Cirrus and AlphaSmart's motion for

summary adjudication of the second cause of action for declaratory

judgment of ownership of the EIS copyright registrations is

granted.

B. Unjust Enrichment Claim

As discussed above, Enreach may not pursue a cause of action

for unjust enrichment. Thus, the motions for summary adjudication

of the FAC's seventh cause of action are granted.

C. Copyright Infringement Claim

Cirrus and AlphaSmart argue in both summary judgment motions

that the Court lacks subject matter jurisdiction over Enreach's

claim for copyright infringement (eighth cause of action) because

the gravamen of the FAC is that EIS's copyright registrations are

invalid. If those registrations are invalid, argue Cirrus and

AlphaSmart, they cannot form the basis of an infringement claim.

However, Enreach does not allege that the copyright

registrations for the nine iPanel source code modules are invalid,

but rather that it holds equitable rights to those registrations

because Xu and Wu breached their employment contracts and failed to

assign the iPanel copyrights to Enreach. Thus, these Defendants'

argument is not well-taken.

Cirrus and AlphaSmart also argue that there is no evidence to

support Enreach's claim for unjust enrichment based on copyright

infringement because there is no evidence to support Enreach's

allegations that AlphaSmart or Cirrus knew or should have known

that the code they licensed from EIS was misappropriated. Enreach

responds that it has not yet conducted discovery with respect to

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 19 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 20

its claim that Cirrus and AlphaSmart knew or had reason to know

that iPanel had been misappropriated when they licensed the product

from EIS and contends that without discovery it cannot adequately

oppose the motion on these grounds. 

Cirrus argues in its separate motion for summary judgment that

it cannot be liable for copyright infringement because (1) it has

never sold any product containing the accused iPanel software to

any of its customers, and (2) it manufactured only a single

development board containing the accused iPanel software, and thus

its alleged infringement was de minimis and not actionable as a

matter of law. Enreach again submits evidence that it has not yet

had the opportunity to conduct discovery relating to whether Cirrus

has sold products containing iPanel code or the extent to which it

used iPanel in its demonstration boards. Enreach contends that

without discovery it cannot adequately oppose the motion on these

grounds.

Enreach's opposition to Cirrus' and AlphaSmart's motions for

summary adjudication of this claim is, in effect, a request

pursuant to Federal Rule of Civil Procedure 56(f) to stay summary

adjudication of this claim pending further discovery. The district

court should deny or continue a motion for summary judgment if the

opposing party makes a good faith showing by affidavit that the

continuance is necessary to obtain facts essential to oppose the

motion. State of California v. Campbell, 138 F.3d 772, 779 (9th

Cir. 1998) (citing McCormick v. Fund American Cos., Inc., 26 F.3d

869, 885 (9th Cir. 1994)). Parties seeking a continuance must

show: "(1) that they have set forth in affidavit form the specific

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 20 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 21

facts that they hope to elicit from further discovery, (2) that the

facts sought exist, and (3) that these sought-after facts are

'essential' to resist the summary judgment motion." Campbell, 138

F.3d at 779.

Enreach's affidavit is sufficient to meet the Rule 56(f)

standard. Enreach may, within sixty days of the date of this

order, file a supplemental brief of not longer than ten pages

opposing Cirrus' and AlphaSmart's motion for summary adjudication

of Enreach's eighth cause of action for copyright infringement. 

Cirrus and AlphaSmart may file a supplemental reply brief on their

joint motion of not longer than five pages one week later. Cirrus

may file a supplemental reply brief on its separate motion of not

longer than five pages one week later as well. The matter will be

decided on the papers.

D. Unfair Competition Claim

As discussed above, Enreach may pursue its tenth cause of

action for unfair competition based only upon its allegations of

breach of contract, breach of the covenant of good faith and fair

dealing and breach of fiduciary duty, which it asserts against only

Xu and Wu. As discussed above, Enreach's claims for unfair

competition based upon its allegations of copyright infringement

and trade secret misappropriation are preempted, and it has not

asserted against Cirrus or AlphaSmart the remaining claims upon

which it bases its tenth cause of action. Thus, Cirrus and

AlphaSmart's motions for summary adjudication of the FAC's tenth

cause of action are granted.

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 21 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 22

CONCLUSION

For the foregoing reasons, the Court DENIES Enreach's motion

for summary judgment (Docket No. 78), GRANTS in part and DENIES in

part the EIS Defendants' cross-motion for summary judgment (Docket

No. 143), GRANTS in part and STAYS in part the motion for summary

judgment filed jointly by Cirrus and AlphaSmart (Docket No. 137),

and GRANTS in part and STAYS in part the motion for summary

judgment filed by Cirrus (Docket No. 140). The EIS Defendants'

motion for summary adjudication of the second, third and eighth

causes of action is denied; its motion for summary adjudication of

the ninth and tenth causes of action against Xu and Wu is also

denied. The EIS Defendants' motion for summary adjudication of the

seventh cause of action is granted; their motion for summary

adjudication of the ninth and tenth causes of action against EIS

and ShenZhen ZhuoZhuang is also granted. The motion for summary

adjudication filed jointly by Cirrus and AlphaSmart is granted with

respect to the second, seventh and tenth causes of action and

stayed with respect to the eighth cause of action. Cirrus' motion

for summary adjudication of the seventh and tenth causes of action

is granted. Cirrus' motion for summary adjudication of the eighth

claim is stayed. The parties may brief this issue further as set

forth above.

The Court GRANTS the EIS Defendants' motion for leave to file

their amended cross-motion for summary judgment (Docket No. 195). 

The Court DENIES as moot Enreach's motion to strike new arguments

it alleges were made in the EIS Defendants' reply brief (Docket No.

214); the Court did not consider any new arguments. The Court also

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 22 of 23
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 23

DENIES as moot the parties' joint stipulation staying discovery and 

scheduling order deadlines pending summary judgment orders (Docket

No. 267).

IT IS SO ORDERED.

Dated: 9/22/05

 

CLAUDIA WILKEN

United States District Judge

Case 4:04-cv-01255-CW Document 269 Filed 09/22/05 Page 23 of 23