Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00505/USCOURTS-caed-2_07-cv-00505-4/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 28:1331 Fed. Question: Trademark

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

BYLIN HEATING SYSTEMS, INC., a

California corporation, doing

business as BYLIN ENGINEERED

SYSTEMS; ROOF ICE MELT SYSTEMS

INCORPORATED, an Oregon

Corporation,

CASE NO. 2:07-CV-00505-FCD-KJM

Plaintiffs,

v. MEMORANDUM AND ORDER

M&M GUTTERS, LLC, a Utah

Limited Liability Company;

THERMAL TECHNOLOGIES, INC., a

Utah Corporation; ROOF ICE

MELT SYSTEMS, INC.; and DOES 1

through 10, INCLUSIVE,

Defendants.

THERMAL TECHNOLOGIES, INC., a 

Utah corporation,

Counterclaimant,

v.

BYLIN HEATING SYSTEMS, INC., a

California corporation, doing

business as BYLIN ENGINEERED

SYSTEMS; ROOF ICE MELT SYSTEMS

INCORPORATED, an Oregon

Corporation,

Counterdefendants.

v.

ROBERT BYLIN, an individual,

Third-Party Defendant. ________________________________

Case 2:07-cv-00505-FCD-KJM Document 33 Filed 03/18/08 Page 1 of 13
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1 All further references to a “Rule” are to the Federal

Rules of Civil Procedure.

2 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs. 

E.D. Cal. L.R. 78-230(h).

2

This matter comes before the court on counterdefendants

Bylin Heating Systems, Inc., Bylin Engineered Systems, Roof Ice

Melt Systems, Inc.’s and third party defendant Robert Bylin’s

(collectively “Bylin”) motion to dismiss counterclaimant Thermal

Technologies, Inc.’s (hereinafter “Thermal Technologies”) fourth

and fifth counterclaims pursuant to Rule 12(b)(6) of the Federal

Rules of Civil Procedure.1 For the reasons set forth below,2

Bylin’s motion is GRANTED in part and DENIED in part.

BACKGROUND

Bylin is the exclusive licensee of United States Patent No.

5,391,858 (hereinafer “the 858 patent”). (Complaint, filed Mar.

14, 2007, ¶ 10). The 858 patent is a snow and ice melting

apparatus that incorporates a heat cell for placement on roof

structures to prevent the formation of ice dams and icicles. 

(Id. ¶ 10). Bylin filed a complaint against Thermal Technologies

and M&M Gutters, alleging the defendants infringed the 858

patent. (Id. ¶ 16). Bylin’s Second Amended Complaint asserts

claims for Patent Infringement, Trademark and Trade Name

Infringement, False Designation of Origin, False Advertising,

Unfair Competition and Federal Domain Name Infringement. (Second

Amended Complaint, filed Aug. 10, 2007, ¶¶ 27-60). Thermal

Technologies answered the complaint and counterclaimed against

Bylin on November 15, 2007. 

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3

In its counterclaim, Thermal Technologies asserts that

Robert Bylin contacted several of Thermal Technologies’

distributors and/or purchasers (hereinafter “distributors”) and

informed them that Bylin had filed suit against Thermal

Technologies for patent and trademark infringement. (Third Party

Complaint, filed Nov. 15, 2007, (“Compl.”), ¶ 94). Thermal

Technologies alleges Bylin told the distributors that Bylin knew

the lawsuit against Thermal Technologies had no merit, but that

Bylin wanted to injure Thermal Technologies. (Compl. ¶ 95). 

Thermal Technologies further alleges that Bylin in bad faith

threatened litigation against the distributors to unfairly

compete against Thermal Technologies. (Id. ¶ 97). 

Thermal Technologies alleges five counterclaims against

Bylin: Invalidity of Patent, Non-infringement of Patent,

Invalidity and Non-infringement of Trademark, Unfair Competition,

and Intentional Interference with Prospective Economic Advantage. 

(Id. ¶¶ 99-121). Bylin seeks to dismiss Thermal Technologies’

fourth and fifth counterclaims of unfair competition and

intentional interference with prospective economic advantage. 

(Mot. to Dismiss, filed Dec. 21, 2007, (“Mot.”) at 2). Bylin

argues that the fourth and fifth counterclaims must be dismissed

because the conduct alleged in support of those claims is

absolutely privileged under California Civil Code § 47(b). (Mot.

at 2).

STANDARD

On a motion to dismiss, the allegations of the complaint

must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give plaintiff the benefit of

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every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int’l Ass’n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff

need not necessarily plead a particular fact if that fact is a

reasonable inference from facts properly alleged. See id. 

Nevertheless, it is inappropriate to assume that the

plaintiff “can prove facts which it has not alleged or that the

defendants have violated the . . . laws in ways that have not

been alleged.” Associated Gen. Contractors of Calif., Inc. v.

Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983). 

Moreover, the court “need not assume the truth of legal

conclusions cast in the form of factual allegations.” United

States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th

Cir. 1986).

Ultimately, the court may not dismiss a complaint in which

the plaintiff has alleged “enough facts to state a claim for

relief that is plausible on its face.” Bell Atlantic Corp. v.

Twombly, 127 S. Ct. 1955, 1974 (2007). Only where a plaintiff

has not “nudged [his or her] claims across the line from

conceivable to plausible,” is the complaint properly dismissed. 

Id. “[A] court may dismiss a complaint only if it is clear that

no relief could be granted under any set of facts that could be

proved consistent with the allegations.” Swierkiewicz v. Sorema

N.A., 534 U.S. 506, 514 (2002) (quoting Hudson v. King &

Spalding, 467 U.S. 69, 73 (1984)). 

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5

ANALYSIS

A. Choice of Law

Counterclaims four and five arise under the common law of

the states of Utah and California and under California Business

and Professions Code §§ 17200 and 17500. Thermal Technologies

asserts that counterclaims four and five should be evaluated

under federal common law and not, as Bylin contends, under

California Civil Code § 47(b). (Mot. at 4). 

Federal Rule of Evidence 501 requires application of

California Civil Code § 47(b). Federal Rule of Evidence 501

provides: “In civil actions and proceedings, with respect to an

element of a claim or defense as to which state law supplies the

rule of decision, the privilege of a . . . person . . . shall be

determined in accordance with state law.” Fed. R. Evid. 501. 

Federal law should not supercede that of the states in

substantive areas such as privilege. See Home Indem. Co. v. Lane

Powell Moss & Miller, 43 F.3d 1322, 1328 (9th Cir. 1995) (finding

that because state law supplied the rule of decision with respect

to the claims, state privilege rules had to be applied).

Furthermore, when a state law cause of action “does not

present an obstacle to the execution and accomplishment” of the

federal patent laws, the state law cause of action survives. See

Dow Chemical Co. v. Exxon Corp., 139 F.3d 1470, 1475 (Fed. Cir.

1999). Federal patent misuse laws do not preempt state law

tortious interference claims when the underlying wrong involves

bad faith marketplace conduct by the patentee. See id.; see also

Zenith Electronics Corp. v. Exzec, Inc., 182 F.3d 1340, 1355

(Fed. Cir. 1999) (holding that state tort claims, including

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3 California Civil Code § 47(b) does not apply to Utah

common law. California Civil Code § 47(b) is only applicable to

the extent the fourth and fifth counterclaims arise under

California common law and California Business and Professions

Code §§ 17200 and 17500. Bylin has not proffered any grounds to

dismiss these claims to the extent they arise under Utah common

law. 

6

tortious interference claims, based on publicizing a patent in

the marketplace are not preempted by the patent laws if the

claimant can show that the patent holder acted in bad faith in

its publication of the patent). 

Here, the fourth and fifth counterclaims arise out of state

law and thus, state privilege law controls. There is no federal

law that supercedes California’s substantive litigation privilege

law and therefore, state law must supply the rule of decision. 

In addition, Thermal Technologies alleges that Bylin acted in bad

faith when it contacted distributors about Thermal Technologies’

potential patent misuse. Because Thermal Technologies has

adequately alleged bad faith, federal patent misuse laws do not

preempt their state law tortious interference and unfair

competition claims. Thus, California privilege law will supply

the rule of law in regards to the claims brought under California

law.3

B. Application of California Civil Code § 47(b)

Thermal Technologies alleges that its claims are based on

Bylin’s pattern and practice of anti-competitive behavior in the

market. (Opposition to Mot., filed Feb. 7, 2008, (“Opp.”) at 9). 

Thermal Technologies asserts that Bylin’s anti-competitive

behavior is noncommunicative conduct and therefore, California

Civil Code § 47(b) is inapplicable. Bylin contends the basis for

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counterclaims 4 and 5 are communicative in nature because the

allegations center upon the letters Bylin sent to distributors,

which they assert are protected by the litigation privilege. 

(Reply, filed Feb. 14, 2008, (“Reply”) at 7-8). Because Thermal

Technologies’ complaint does not clearly distinguish whether the

counterclaims are based solely on the statements made by Bylin or

whether the claims arise out of the broader pattern and practice

of anti-competitive behavior, the court must analyze each in

turn.

1. Communicative Acts 

Bylin asserts that the fourth and fifth counterclaims arise

out of communications between Bylin and Thermal Technologies’

distributors that were made in connection to this lawsuit. Bylin

contends the communications were intended to disclose the

impending lawsuit and to inform the distributors they would be

potentially responsible parties in the action. (Mot. at 7-8). 

Bylin argues that regardless of whether the communications were

made before or after the complaint was filed, California Civil

Code § 47(b) defeats counterclaims four and five because the

communications are significantly related to the litigation and

therefore, encompassed by the litigation privilege. (Reply at

5).

California Civil Code § 47(b) provides that a “publication

or broadcast” made as part of a “judicial proceeding” is

privileged. The privilege applies to any communication “(1) made

in judicial or quasi-judicial proceedings; (2) by litigants or

other participants authorized by law; (3) to achieve the objects

of the litigation; and (4) that have some connection or logical

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8

relation to the action.” Silberg v. Anderson, 50 Cal. 3d 205,

212 (Cal. 1990). California’s litigation privilege encompasses

not only statements made in pleadings or testimony, but also

prelitigation communications, statements made prior to the filing

of a lawsuit, whether in preparation for anticipated litigation

or to investigate the feasibility of filing a lawsuit. Hagberg

v. California Federal Bank, 32 Cal. 4th 350, 361 (Cal. 2004). 

To be protected by the litigation privilege, a communication

must be “in furtherance of the objects of the litigation.” 

Silberg, 50 Cal. 3d at 219. This requires that the communication

be “connected with, or have some logical relation to” the action

and that “it not be extraneous to the action.” Id. at 219-220.

The litigation privilege unequivocally applies to

communications to third parties with a substantial interest in

the outcome of pending litigation. See Sharper Image Corp. v.

Target Corp., 425 F. Supp. 2d 1056, 1077-78 (N.D. Cal. 2006). In

Sharper Image, the plaintiff sued the defendant for patent and

trademark infringement. The defendant filed a counterclaim based

on e-mails the plaintiff sent to third parties, who purchased the

allegedly infringing product from the defendant, informing them

of the lawsuit and asking them not to carry the defendant’s 

product. Id. The court held that the litigation privilege

barred the defendant’s counterclaim for tortious interference

with economic advantage. Id. at 1079. The Sharper Image court

explained that where a third party purchases a product that is

the subject of an infringement action, a communication to that

party informing it of a pending action has a logical relation to

the action because the third party clearly has an interest in the

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litigation. Id. Thus, the court held that any communication

made after the lawsuit was initiated is privileged under

California Civil Code § 47(b).

When litigation is not yet underway, statements may still be

privileged pursuant to § 47(b) if they relate to litigation that

“is contemplated in good faith and under serious consideration.” 

Action Apartment Assn., Inc. v. City of Santa Monica, 41 Cal. 4th

1232, 1251 (2007). However, the court will not extend “a

privilege to persons who attempt to profit from hollow threats of

litigation.” See Action, 41 Cal. 4th at 1251; see also Fuhrman

v. Cal. Satellite Sys., 179 Cal. App. 3d 408, 422 n.5 (1986)

(disapproved of on other grounds by Silberg, 50 Cal. 3d at 219). 

Moreover, whether communications are made in good faith and

actual contemplation of litigation often require factual

determinations. See Visto Corp. v. Sproqit Techs., Inc., 360 F.

Supp. 2d 1064, 1070 (N.D. Cal. 2005) (finding there were factual

questions as to whether prelitigation demand letters fell under

the litigation privilege); see also Reid-Ashman Mfg. v. Swanson

SemiConductor Serv., L.L.C., No. 06-6693, 2007 U.S. Dist. LEXIS

37665, at *35 (N.D. Cal. May 10, 2007) (holding that fact

questions remain as to prelitigation statements). 

In this case, the statements at issue were allegedly made to

distributors by Bylin, warning distributors that Bylin had a

lawsuit against Thermal Technologies and threatening to bring the

distributors into the lawsuit. (Compl. ¶¶ 89-98). Some of the

communications that allegedly form the basis of the state law

claims were made on March 3, 2007, just before Bylin filed its

complaint against Thermal Technologies. (Id. ¶¶ 89-92). Other

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4 The subsequent suit that ensued shortly after the

prelitigation communications is certainly a factor. See Visto, 360 F. Supp. 2d at 1070; cf. Laffer v. Levinson, Miller, Jacobs &

Phillips, 34 Cal. App. 4th 117, 124 (Cal. Ct. App. 1995) (one

factor supporting inference of a lack of good faith is subsequent

failure to file suit). However, the subsequent suit is one

factor among many to consider in the good faith and serious

contemplation analysis. The litigation privilege does not apply

as a matter of law merely because a subsequent suit is filed. 

10

statements were allegedly made after the filing of the lawsuit.

(Id. ¶ 94). 

Bylin’s communications to distributors after the complaint

was filed on March 14, 2007 have a sufficient “connection or

logical relation” to the action to fall under the privilege set

forth in § 47(b). Thermal Technologies’ distributors are third

parties that clearly have an interest in the litigation. 

Distributors’ supply of the product may be interrupted if the

action is successful, and the distributors may themselves face

legal liability if the product is found to infringe. See Sharper

Image, 425 F. Supp. 2d at 1079; see also Reid-Ashman, 2007 U.S.

Dist. LEXIS 37665, at *35. Because the distributors possess a

substantial interest in the outcome of the litigation, Bylin’s

communications with the distributors after the initiation of the

lawsuit are privileged, and Thermal Technologies cannot allege

state tort claims based solely on these communications.

There remains a factual question, however, as to whether

Bylin was seriously and in good faith contemplating litigation

when it made the statements prior to the initiation of the

action.4

 Thermal Technologies alleges that Bylin has a history

of asserting bad faith threats of infringement litigation against

its competitors in order to intentionally monopolize the industry

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and to lessen competition in the relevant market. (Compl. ¶¶ 67,

113, 118-20). Thermal Technologies further asserts that Bylin

acted in bad faith when Bylin informed distributors its case had

no merit, but that Bylin wanted to injure Thermal Technologies. 

(Id. ¶¶ 88-95). Assuming Thermal Technologies’ allegations are

true, Bylin’s prelitigation communications to distributors have

no “connection or logical relation” to the action. Deliberate

misrepresentations intended to harm Thermal Technologies are not

communications made “in furtherance of the objects of

litigation,” nor are they made “in good faith and under serious

consideration.” Silberg, 50 Cal. 3d at 219; Action, 41 Cal. 4th

at 1251. Whether Bylin’s prelitigation communications with

distributors were “hollow threats” made solely to harm Thermal

Technologies and to unfairly compete against Thermal Technologies

are questions of fact. Therefore, factual findings are necessary

to determine whether (1) Bylin made any threats of litigation

against Thermal Technologies’ distributors and (2) whether those

threats of litigation were made in good faith and under serious

consideration.

Therefore, to the extent that the fourth and fifth claims

are based solely on the communications between Bylin and Thermal

Technologies’ distributions, Bylin’s motion to dismiss is GRANTED

with respect to claims arising out of the statements made after

the complaint was filed and DENIED with respect to claims arising

out of the statement made prior to the initiation of the lawsuit. 

2. Non-communicative Acts

Thermal Technologies asserts that Bylin’s communications

with distributors are not simply communications, but rather are

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evidence of Bylin’s misconduct in unlawfully procuring patent

rights and attempting to create a monopoly, both of which are

noncommunicative conduct. (Opp. at 9). Thermal Technologies

alleges that Bylin’s bad faith threats of litigation are part of

a broader pattern and practice of tortious and anti-competitive

conduct. (Id.)

California Civil Code § 47(b) applies only to communicative

acts, not non-communicative conduct. Jacob B. v. County of

Shasta, 40 Cal. 4th 948, 957 (Cal. 2007). The threshold question

in determining whether the litigation privilege applies is

“whether the defendant’s conduct was communicative or noncommunicative.” Id. If the gravamen of the action is an

“independent, non-communicative, wrongful act,” then California

Civil Code § 47(b) does not apply. Id. For example, an

attorney’s act of counseling his or her client is covered, even

if it is alleged that the attorney made misrepresentations during

the course of such communications. Rubin v. Green, 4 Cal. 4th

1187, 1195-1196 (Cal. 1993). However, pure conduct, such as

eavesdropping is not covered. Id. The key is to determine

whether the injury alleged resulted from an act that was

communicative in nature, and thus whether the litigation

privilege applies. See Rusheen v. Cohen, 37 Cal. 4th 1048, 1058

(Cal. 2007); see also Rubin, 4 Cal. 4th at 1196. 

Whether the statements were made before or after the lawsuit

was filed does not affect the analysis of whether the gravamen of

the claims were communicative or non-communicative in nature. As

set forth above, the claims are dismissed to the extent they

arise out of statements made after the filing of the complaint. 

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However, to the extent that Bylin’s communications with

distributors are evidence of an overall pattern and practice of

unlawfully procuring patent rights and creating a monopoly, the

litigation privilege does not apply. Unlawfully procuring patent

rights and attempting to create a monopoly are non-communicative

in nature. Such anti-competitive conduct is not privileged under

California Civil Code § 47(b). See Meridian Project Sys. v.

Hardin Constr. Co., 404 F. Supp. 2d 1214, 1223 (E.D. Cal. 2005). 

Therefore, to the extent the fourth and fifth counterclaims are

based upon a pattern and practice of tortious and anticompetitive conduct, merely evidenced in part by the

communications asserted in the complaint, Bylin’s motion to

dismiss is DENIED. 

CONCLUSION

For the foregoing reasons, Bylin’s motion to dismiss Thermal

Technologies’ counterclaims arising under California law is

GRANTED in part and DENIED in part. The motion to dismiss is

GRANTED to the extent the counterclaims are based solely upon

statements made after Bylin filed the complaint in this action. 

The motion is DENIED to the extent the claims are based upon

statements made before the complaint was filed and to the extent

such counterclaims are based upon on the alleged pattern and

practice of anti-competitive behavior in the market.

 IT IS SO ORDERED.

DATED: March 18, 2008

 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

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