Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_16-cv-01192/USCOURTS-casd-3_16-cv-01192-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:0271 Patent Infringement

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FILED

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

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11 JAIME MERINO, Case No.: 3:16-cv-01192-BEN-BGS

12 Plaintiff,

ORDER GRANTING MOTION TO

13 v. DISMISS

14 COOL GEAR INTERNATIONAL, LLC,

a Delaware Limited Liability Company, et 15 al.,

16 Defendants.

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Pending before the Court is the Motion to Dismiss filed by Defendants Cool Gear

International, LLC (“Cool Gear”) and Igloo Products Corporation. (Docket No. 10.)

The motion is fully briefed. The Court finds the Motion suitable for determination on the

papers without oral argument, pursuant to Civil Local Rule 7.1 .d. 1. For the reasons set

forth below, the Motion is GRANTED with leave to amend.

BACKGROUND

PlaintiffJaime Merino is the inventor and sole owner ofthe right, title, and interest

in U.S. Patent No. 8,549,492 (the “ ’492” Patent), which is in essence “a straw accessory

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The following overview ofthe relevant facts are drawn from the allegations of

Plaintiffs Complaint. (Docket No. 1.) The Court is not making findings offact.

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for a beverage container.” (Compl. 113.) The ’492 Patent was filed on June 24, 2011,

and issued on June 11, 2013. The ’492 Patent is valid, enforceable, and currently in full

force and effect.

Sometime between late June and early July in 2013, Plaintiff contacted Cool Gear

“to introduce Cool Gear to the [’]492 Patent and to propose a potential product line,

ideas, and marketing concepts to Cool Gear.” {Id. at^f 21.) Cool Gear’s Marketing

Manager appeared receptive and requested more information from Plaintiff about his

invention. Subsequently, on or about July 30, 2013, Plaintiffsent via e-mail a link to a

custom video. The video depicted “product line and marketing concepts” featuring the

’492 Patent, and ways it could be “implemented and applied to Cool Gear’s products.”

{Id. at If 22.)

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On or about August 6,2013, Cool Gear’s Marketing Manager advised Plaintiffthat

“she received the link and that she forwarded it to the appropriate department for

evaluation.” {Id. at 123.) On the same day, Cool Gear’s Senior Product Designer, John

Mason, contacted Plaintiff “regarding working together on Plaintiffs potential product

line and marketing concept involving the [’]492 Patent.” {Id. at 1f 24) Specifically, Mr.

Mason stated, “[t]he Owner of [the] company wanted me to reach out and see what Patent

you hold and see [i]fyou would like to talk about your Product, maybe there is something

we can Work together on [sic]?” {Id.)

Following these communications, Plaintiffunsuccessfully attempted to arrange a

conference call with Cool Gear, and communications between the parties ceased. At an

unidentified time following the correspondence between Plaintiff and Cool Gear, Cool

gear “used the marketing concepts, designs, and technology and began manufacturing,

offering to sell, importing and selling the Accused Products.” {Id. at 126.)

LEGAL STANDARD

Under Federal Rule ofCivil Procedure 12(b)(6), dismissal is appropriate if, taking

all factual allegations as true, the complaint fails to state a plausible claim for reliefon its

face. Fed. R. Civ. P. 12(b)(6); BellAtl. Corp. v. Twombly, 550 U.S. 544, 556-57 (2007);

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Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (requiring plaintiffto plead factual content

that provides “more than a sheer possibility that a defendant has acted unlawfully”);

accordAnticancerInc. v. Xenogen Corp., 248 F.R.D. 278, 282 (S.D. Cal. 2007) (holding

Twombly’s plausibility standard applies to claims, counterclaims, cross-claims, and thirdparty claims). Under this standard, dismissal is appropriate ifthe complaint fails to state

enough facts to raise a reasonable expectation that discovery will reveal evidence ofthe

matter complained of, or ifthe complaint lacks a cognizable legal theory under which

reliefmay be granted. Twombly, 550 U.S. at 556. “A claim is facially plausible ‘when

the plaintiffpleads factual content that allows the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged.’” ZixiangLi v. Kerry, 710 F.3d

995, 999 (9th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). “Threadbare recitals ofthe

elements of a cause of action, supported by mere conclusory statements, do not suffice.”

Iqbal, 556 U.S. at 678.

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14 DISCUSSION

Defendants’ move to dismiss Plaintiffs Second Claim for Relieffor failure to state

a claim. The Second Claim for Relief alleges Cool Gear and Plaintiff entered into an

implied-in-fact contract governed by California law,2 which Cool Gear breached when it

“misappropriated [Plaintiffs] ideas, concepts, prototype designs, and marking

proposals.” (Compl. *ff 41.)

In California, to prevail in an action for breach of an implied-in-fact contract, a

plaintiffmust show: (1) that he or she prepared the work, (2) that he or she disclosed the

work to the offeree for sale, (3) it can be concluded, under all ofthe circumstances

attending disclosure, that the offeree voluntarily accepted the disclosure knowing the

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26 2 Defendants dispute the applicability ofCalifornia law to Plaintiffs breach ofimplied

contract claim, but understandably do not argue that as a basis for dismissing the claims

given that the Court must accept the truth offactual allegations ofthe Complaint at this

stage.

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conditions on which it was tendered (i.e. the offeree must have the opportunity to reject

the attempted disclosure ifthe conditions were unacceptable), and (4) the reasonable

value ofthe work. Aliotti v. Dakin & Co., 831 F.2d 898, 902 (9th Cir. 1987) (citing Faris

v. Enberg, 97 Cal.App.3d 309, 318 (1979)). The parties dispute whether the Complaint

sufficiently alleges the first, second, and third elements. The Court finds the third

element is alleged inadequately

As set forth above, the first element requires a showing that Plaintiffprepared the

disputed work.3 Aliotti, 831 F.2d at 902; Faris, 97 Cal.App.3d at 318. The Complaint

alleges that Plaintiffis the inventor and sole owner ofthe right, title, and interest in the

492” Patent. (Compl. Tf 13.) Sometime in 2013, “Plaintiff contacted Cool Gear to

introduce Cool Gear to the ’492 Patent and propose a potential product line, ideas, and

marketing concepts.” {Id. at ^ 21.) Cool Gear allegedly used Plaintiffs “marketing

concepts, designs, and technology.” {Id. at 26.) The Court finds these facts satisfy the

pleading requirement for the first element (i.e. that Plaintiffprepared the disputed work).

The second element requires a showing that Plaintiff disclosed his work for sale.

Aliotti, 831 F.2d at 902; Faris, 97 Cal.App.3d at 318. The Complaint alleges that

Plaintiffsent Cool Gear’s Marketing Manager the video link “in expectation ofreturn of

fair compensation.” (Compl. 22.) Plaintiff also alleges he “provid[ed] Cool Gear

information regarding the ’492 Patent on expectation offair compensation.” (Compl. f

25.) The information included Plaintiffs “prototypes, marketing concepts or ideas.”

{Id.) Defendants argue that “[tjhere was no reason for Cool Gear to think the asserted

work -the video - was an offer for sale to Defendants.” (Defs.’ Reply at 4.) Defendants

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3 The Court notes Defendants’ Reply asserted that “the first Desny element requires

actual use of a disclosed idea.” (Defs.’ Reply at 1.) However, Defendants’ cited to their

own Motion, and Plaintiffs Opposition, which effectively state that the first element

requires Plaintiff demonstrate he prepared the disputed product or work. {Id.) The Court

finds this is the correct statement ofthe law. Aliotti, 831 F.2d at 902; Faris, 97

Cal.App.3d at 318.

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also argue that Plaintiffs disclosure “was an invitation and enticement to enter into a

future business relationship, e.g. a license for his purportedly patented device.” {Id. at at

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Defendants’ arguments are misplaced. Defendants cite two cases, Alitotti v. R.

Dakin & Co, supra, and Faris v. Enberg, supra, for the proposition that “the mere hope[]

ofentering into a future business relationship” is not sufficient to demonstrate that the

disclosure was made for sale. {Id. at 3.) The Court’s reading ofthose cases results in a

different conclusion. In Alitotti, the court upheld summary judgment for defendant after

reviewing the record and finding evidence that the plaintiff “made her presentation to

Dakin not to sell her designs herself, but to help persuade Dakin to buy Favorite Things”

(the toy manufacturer she worked for). Id., 831 F.2d at 899, 902. In Faris, the court

upheld summary judgment for the defendant because the evidence demonstrated that the

plaintiff “never intended to submit the property for sale and did not tell [the defendant]

that he was submitting it for sale.” Id., 97 Cal.App.3d at 319. In both cases, the courts

relied on actual evidence (in the form of affidavits or deposition transcripts) to find that

no triable issue ofmaterial fact existed as to the plaintiffs’ lack ofintentions to make his

or her disclosures for sale.

Plaintiffhas, perhaps unartfully, alleged that he disclosed the video link containing

his “potential product line, ideas, and marketing concepts” regarding the ’492 Patent with

the expectation offair compensation (i.e. for sale). (Compl. 21-22.) Nevertheless, for

purposes of a motion to dismiss, the Court must accept these allegations as true. See

Jordan-Benel v. Universal City Studios, Inc., No. CV 14-5577-MWF(MRWx), 2015 WL

9694896, at *2 (C.D. Cal. February 13, 2015). The Court finds the Complaint’s facts

sufficient plead facts as to the second element. The next element, however, is

inadequately pled.

The third element requires a showing that, under all the circumstances attending

Plaintiffs disclosure to Cool Gear, it can be concluded that Cool Gear voluntarily

accepted the disclosure knowing the conditions on which it was tendered. Aliotti, 831

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F.2d at 902; Faris, 97 Cal.App.3d at 318. Defendants contend that the Complaint does

not allege specific facts to permit a reasonable inference that Cool Gear voluntarily

accepted Plaintiffs disclosure ofhis video link knowing that the disclosure was

conditioned on an agreement to pay him for use of any ofthe concepts or marketing ideas

contained within it. The Court agrees.

In the seminal case, Desny v. Wilder, 46 Cal.2d 715 (1956), the California

Supreme Court held that, to satisfy the third element of a breach ofimplied-in-fact

contract claim, a plaintiffhad to show: (1) that he or she “clearly conditioned his offer to

convey the idea upon an obligation to pay for it ifit is used by the offeree,” (2) that the

offeree, “know[s] the condition before he knows the idea,” and (3) that the offeree

voluntarily accepts the disclosure on the conditioned basis. Id. at 739. “If disclosure

occurs before it is known that compensation is a condition ofits use,... no contract will

be implied.” Aliotti, 831 F.2d at 902 (9th Cir. 1987) (quoting Landsberg v. Scrabble

Crossword Game Players, Inc., 802 F.2d 1193, 1196 (9th Cir. 1986.)

Throughout the Complaint, Plaintiffstates his expectations for payment for Cool

Gear’s use ofthe ideas he disclosed in the video link. However, nowhere in the

Complaint does Plaintiff allege any facts that Cool Gear knew that it would be obligated

to pay Plaintifffor use ofthe disclosed ideas. The only specific allegations regarding

Cool Gear’s communications to Plaintiff are that:

- After Plaintiff contacted Cool Gear “to introduce Cool Gear to the ’492 Patent

and to propose a potential line, ideas, and marketing concepts to Cool Gear,”

Cool Gear’s Marketing Manager asked for more information regarding

[Plaintiffs] patented product.” (Compl. fflf 21-22.)

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23 After Plaintiffsent Cool Gear a video link that disclosed Plaintiffs ideas and

marketing concepts, Cool Gear’s Senior Product Designer contacted Plaintiffto

request more information about Plaintiffs patent to see ifthey could discuss

whether “there was something they could work together on.” (Id. ^ 24.)

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Moreover, nowhere in the Complaint does Plaintiff allege Cool Gear expressed or

implied their knowledge that Plaintiffs disclosure was conditioned on a promise to pay

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for use ofthe ideas contained within it. Instead, the Complaint merely alleges, “[o]n

information and belief, on or about August 6, 2013, Cool Gear’s Senior Product Designer

voluntarily accepted the disclosure ofthe idea, knowing the implicit conditions on which

the idea was tendered.” (Compl. Tf 45.) As stated above, “[tjhreadbare recitals ofthe

elements of a cause of action, supported by mere conclusory statements, do not suffice.”

Iqbal, 556 U.S. at 678.

Based on the facts alleged in the Complaint, the Court cannot draw a reasonable

inference that Cool Gear voluntarily accepted the video link knowing the conditions upon

which they were tendered.4 Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013)

(quoting Iqbal, 556 U.S. at 678). Therefore, Plaintiffs Complaint fails to set forth a basis

for the third element ofhis claim for breach of an implied-in-fact contract. Defendants’

Motion to Dismiss this claim is GRANTED.

Finally, Plaintiff requests leave to amend his complaint if the Court determines

dismissal is warranted. Leave to amend under Rule 15(a)(2) should be “freely give[n]...

whenjustice so requires.” Fed. R. Civ. P. 15(a)(2). The Ninth Circuit “has noted on several

occasions . . . that the Supreme Court has instructed the lower federal courts to heed

carefully the command ofRule 15(a),... by freely granting leave to amend when justice

so requires.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). “This

policy is ‘to be applied with extreme liberality.’” Eminence Capital, LLC v. Aspeon, Inc.,

316 F.3d 1048, 1051 (9th Cir. 2003) (quoting Owens v. Kaiser Found. Health Plan, Inc.,

244 F.3d 708, 712 (9th Cir. 2001)).

Courts consider “undue delay, bad faith, dilatory motive, repeated failure to cure

deficiencies by previous amendments, undue prejudice to the opposing party, and futility

ofthe proposed amendment” in deciding whetherjustice requires granting leave to amend

under Rule 15. Moore v. Kayport Package Express, Inc., 885 F.2d 531, 538 (9th Cir.

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27 4 Indeed, Plaintiffhas not even alleged what the implied contracts terms were, only that

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1989) (citing Foman v. Davis, 370 U.S. 178,182 (1962)). Although each factor may

warrant consideration, “prejudice to the opposing party ... carries the greatest weight.”

Eminence Capital, 316 F.3d at 1052. None ofthese factors weigh against granting leave.

Accordingly, Plaintiffs request for leave to amend is GRANTED.

CONCLUSION

For the reasons set forth above, Defendants’ Motion to Dismiss the Second Claim

for Reliefis GRANTED, with leave to amend. Any amended complaint must be filed

within ten (10) days ofthis Order. IfPlaintiff elects not to amend, the case shall proceed

on the Complaint as to the remaining claim for relief.

IT IS SO ORDERED.

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12 DATED: January , 2017

0L&&QER T. BENITEZ

nited States District Judge 13

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