Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-02000/USCOURTS-cand-4_04-cv-02000-59/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MONOLITHIC POWER SYSTEMS, INC., a

Delaware corporation,

Plaintiff,

v.

O2 MICRO INTERNATIONAL LIMITED, a

Cayman Island corporation,

Defendant.

 /

AND RELATED COUNTERCLAIMS, CROSSCLAIMS AND THIRD-PARTY CLAIMS.

 /

No. C 04-2000 CW

(consolidated with

No. C 06-2929 CW)

ORDER GRANTING IN

PART O2 MICRO'S

MOTION TO STRIKE

MPS' COUNTERCLAIMS

AND TO STRIKE OR

DISMISS MPS' THIRDPARTY COMPLAINT AND

DENYING IT IN PART

O2 Micro International Limited moves to strike, dismiss or

sever claims and allegations against it contained in Monolithic

Power Systems, Inc.'s counterclaims and third-party complaint. 

Monolithic Power Systems, Inc. (MPS) opposes the motion. The

matter was decided on the papers. Having considered the parties'

papers, the Court grants O2 Micro's motion to strike or dismiss

Case 4:04-cv-02000-CW Document 587 Filed 10/18/06 Page 1 of 12
United States District Court

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1

On October 11, 2006, the Court signed O2 Micro's stipulated

dismissal with prejudice of its claim concerning the '129 patent.

2

MPS' third-party complaint, but grants only in part O2 Micro's

motion to strike allegations in MPS' counterclaims, striking MPS'

common law fraud allegations. 

BACKGROUND

O2 Micro filed this suit in the Eastern District of Texas,

accusing MPS of infringing O2 Micro's U.S. Patent No. 6,804,129

(the '129 patent).1 MPS denied liability and counterclaimed

against O2 Micro for declaratory judgment of non-infringement,

invalidity and unenforceability, unfair competition, intentional

interference with contractual relations and current economic

relationships, and intentional interference with prospective

economic advantage. 

O2 Micro amended its complaint, asserting that other corporate

entities infringed the '129 patent and that some of those corporate

entities also infringed O2 Micro's U.S. Patent No. 6,396,722 (the

'722 patent) and its U.S. Patent No. 6,259,615 (the '615 patent). 

One of these corporate entities was Compal Electronics, Inc., a

Taiwanese corporation that manufacturers and sells computer

notebooks. O2 Micro alleges that Compal infringes the patents-insuit by the manufacture, sale and offer for sale of notebook

computers incorporating MPS' inverter controller chips. Compal

buys from Delta Electronics, Inc. (DEI) inverter modules used to

light cold cathode fluorescent lamps in notebook computers. DEI

manufactures its inverter modules using MPS' inverter control

chips. 

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Compal filed a third-party complaint against DEI, alleging

breach of warranties of title and non-infringement, merchantability

and fitness for a particular purpose and breach of its obligation

to defend, indemnify and hold Compal harmless against claims of

patent infringement. DEI then filed a cross-claim against MPS for

indemnity for any liability that DEI might have to Compal. 

In response, MPS filed a counterclaim against DEI for breach

of contract and misappropriation of trade secrets, alleging that

DEI breached a Non-Disclosure Agreement that it entered into with

MPS and that it gave away MPS' trade secrets to O2 Micro. In the

same pleading, MPS included a third-party complaint against O2

Micro. MPS later amended its third-party complaint, alleging the

following five claims: (1) trade secret misappropriation;

(2) unfair competition under California Civil Code § 17200 and

Texas common law; (3) intentional interference with economic

advantage under California common law; (4) negligent interference

with economic advantage under California common law; and

(5) interference with prospective business relationships under

Texas common law. 

In May, 2006, the action was transferred to this Court. It

was consolidated with an action MPS brought in this district

against O2 Micro for a declaratory judgment finding the '722 patent

invalid and not infringed. 

LEGAL STANDARD

I. Motion to Dismiss

A motion to dismiss for failure to state a claim will be

denied unless it appears that the plaintiff can prove no set of

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facts which would entitle it to relief. Conley v. Gibson, 355 U.S.

41, 45-46 (1957); Fidelity Fin. Corp. v. Federal Home Loan Bank of

San Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986). All material

allegations in the complaint will be taken as true and construed in

the light most favorable to the plaintiff. NL Indus., Inc. v.

Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). When granting a motion

to dismiss, a court is generally required to grant a plaintiff

leave to amend, even if no request to amend the pleading was made,

unless amendment would be futile. Cook, Perkiss & Liehe, Inc. v.

N. Cal. Collection Serv. Inc., 911 F.2d 242, 246-47 (9th Cir.

1990). 

II. Motion to Strike

Pursuant to Federal Rule of Civil Procedure 12(f), the Court

may strike from a pleading “any insufficient defense or any

redundant, immaterial, impertinent or scandalous matter.” The

purpose of a Rule 12(f) motion is to avoid spending time and money

litigating spurious issues. See Fantasy, Inc. v. Fogerty, 984 F.2d

1524, 1527 (9th Cir. 1993), rev'd on other grounds, 510 U.S. 517

(1994). Matter is immaterial if it has no essential or important

relationship to the claim for relief plead. See id. at 1527. 

Matter is impertinent if it does not pertain and is not necessary

to the issues in question in the case. See id.

DISCUSSION

I. MPS' Counterclaims

O2 Micro moves to strike all or part of paragraphs 49-53, 72-

73, 82-83 and 91-92. These paragraphs contain the following

allegations:

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O2 Micro claims that the Taiwan patent stems from the same

application that O2 Micro filed in the United States for the

'615 patent . . . . [T]he Examiner issued an Office Action

rejecting all pending claims in the '615 patent application. 

On or about July 26, 2000 (about three weeks after the USPTO

had rejected the '615 patent application's claims), O2 Micro

filed the application for the Taiwan patent in the Taiwan

Patent Office (the Taiwan Intellectual Property Office, or

"TIPO"). With its Taiwan patent application, O2 Micro filed

the original claims from the '615 patent application (the very

claims that USPTO rejected). . . . O2 Micro did not inform

the TIPO about the USPTO's rejection or disclose to the TIPO

any of the prior art that the USPTO had relied upon in

rejecting the original claims. O2 Micro did so even though

Taiwan Patent Law, Article 22 III, required O2 Micro to

include the prior art in the specification. . . . 

O2 Micro and/or its attorneys deliberately withheld material

information from the TIPO, with the intent to deceive the

TIPO, in order to obtain the allowed claims of the Taiwan

patent . . . .

O2 Micro sought and obtained a preliminary injunction against

MPS in Taiwan based on the Taiwan patent, prohibiting MPS from

engaging in certain activities as to two MPS products. 

Subsequently, O2 Micro instituted legal proceedings in Taiwan

on the Taiwan patent against certain of MPS's customers for

their purchase and/or use of MPS's products. 

O2 Micro perpetrated fraud on the USPTO by deliberately

failing to disclose material prior art and best mode

information during the prosecution of the '016 application and

the '417 application. Had O2 Micro disclosed this

information, the '129 patent would not have issued, at least

not in its current form. O2 Micro's knowing submission to the

TIPO of claims that had already been rejected by the USPTO

similarly constitutes fraud. . . .

O2 Micro obtained patents through fraud on the USPTO and on

the TIPO and has attempted to enforce these fraudulently

obtained patents through litigation, threatened litigation,

improper settlement demands, and baseless threats of

litigation. In addition, O2 Micro misappropriated MPS's

confidential information and/or trade secrets, including

through persuading customers to breach confidentiality

agreements with MPS, and has engaged in a pattern or practice

of threatening to initiate litigation against customers,

distributors, and suppliers of MPS without a good-faith belief

in the validity of its claims and without intending in good

faith to initiate the threatened litigation. Through these

actions, O2 Micro has attempted to impermissibly expand the

scope of its patent grants and such conduct constitutes patent

misuse. . . . The acts of O2 Micro alleged herein constitute

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2

In its reply, O2 Micro states that it seeks to strike

paragraphs 72, 76-77, 82-84 and 91-93. Its notice of motion,

however, provides that it moves to strike paragraphs 49-53, 72-73,

82-83 and 91-92 only; similarly, its proposed order mentions

paragraphs 49-53, 72-73, 82-83 and 91-92, and no other paragraphs.

6

fraud in violation of the United States Patent Act, U.S.C.

§ 101 et seq., California common law, and the patent laws of

the Republic of China. 

According to O2 Micro, these allegations are insufficient, as a

matter of law, to support MPS' unfair competition and intentional

interference claims.

A. Inequitable conduct in the United States Patent and

Trademark Office (PTO) 

First, O2 Micro argues that MPS' allegations concerning

inequitable conduct in the PTO should be stricken because they are

preempted by federal patent laws.2 O2 Micro notes that it is well

settled that an alleged act of inequitable conduct alone cannot

form the basis of an independent tort claim under State law because

of federal preemption. Semiconductor Energy Lab. Co., Ltd. v.

Samsung Elecs. Co., Ltd., 204 F.3d 1368, 1382 (Fed. Cir. 2000). 

O2 Micro acknowledges that State law tort claims are not

preempted by federal law "if they include additional elements not

found in the federal patent law cause of action and if they are not

an impermissible attempt to offer patent-like protection to subject

matter addressed by federal law." Rodime PLC v. Seagate Tech.,

Inc., 174 F.3d 1294, 1306 (Fed. Cir. 1999) (finding that tortious

interference and unfair competition claims premised on a patentee's

bad faith in obtaining or enforcing a patent are not preempted by

federal law). Nonetheless, it contends that MPS' counterclaims

assert that O2 Micro's alleged acts of inequitable conduct,

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standing alone, are grounds for its State law tortious interference

and unfair competition claims. The Court does not agree. See Dow

Chemical Co. v. Exxon Corp., 139 F.3d 1470, 1476 (Fed. Cir. 1998)

(disagreeing with the district court's conclusion that "a claim of

unfair competition predicated in part on inequitable conduct could

not, as a matter of law, succeed" and "that this particular state

law cause of action turned 'solely' on inequitable conduct"). MPS

is not bringing its State law claims based on its inequitable

conduct allegations alone. Rather, MPS' unfair competition and

intentional interference claims are based only in part on O2

Micro's alleged bad-faith conduct before the PTO. 

The Court will not strike any allegations concerning

inequitable conduct in the PTO.

B. Inequitable conduct in the TIPO

Next, O2 Micro argues that MPS' allegations of inequitable

conduct in the TIPO should be stricken based on the act-of-State

doctrine. MPS responds that the act-of-State doctrine does not

require the Court to strike the allegations because O2 Micro's 

alleged fraudulent conduct before the TIPO was not an "official

action" of the Taiwanese government.

Under the act-of-State doctrine, an action will be barred only

if an official act of a foreign sovereign was performed within its

own territory and the relief sought or the defense interposed in

the action would require a federal court to declare invalid that

official act. Credit Suisse v. U.S. Dist. Ct., 130 F.3d 1342, 1346

(9th Cir. 1997). Thus, the act-of-State doctrine does not apply

where "sovereign activity merely formed the background to the

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dispute or in which the only governmental actions were the neutral

application of the laws." Clayco Petroleum Corp. v. Occidental

Petroleum Corp., 712 F.2d 404, 406 (9th Cir. 1983). 

O2 Micro contends that the grant of the Taiwan patent by the

TIPO to O2 Micro was an official act of a foreign sovereign

performed within its own territory; it further contends that the

relief MPS seeks, and the inequitable conduct defense it alleges,

would require the Court to declare invalid or unenforceable the

TIPO's official act. But, as MPS notes, the granting of patents

"is not the kind of governmental action contemplated by the act of

state doctrine." Mannington Mills, Inc. v. Congoleum Corp., 595

F.2d 1287 (3d Cir. 1979). O2 Micro argues that Mannington Mills is

factually distinguishable. The factual differences, however, do

not alter the Third Circuit's conclusion that "the mere issuance of

patents by a foreign power" does not constitute "an act of state,

as that term has developed under case law." Id. at 1293-94. As

O2 Micro points out, the Ninth Circuit has not addressed whether

the grant of a patent by a foreign government and its subsequent

enforcement implicates the act-of-State doctrine. In the absence

of Ninth Circuit authority, the Court finds persuasive the

conclusions concerning patents reached in Mannington Mills. Thus,

the act-of-State doctrine is inapplicable. 

O2 Micro argues that, even if the act-of-State doctrine does

not apply, MPS' unfair competition and intentional interference

claims raise comity considerations that this Court should take into

account in deciding whether to exercise jurisdiction. The comity

considerations at issue in this case, however, do not weigh against

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the Court's jurisdiction over MPS' claims. 

The Court will not strike any allegations concerning O2

Micro's inequitable conduct in the TIPO.

C. California common law fraud

Finally, O2 Micro argues that the Court should strike MPS'

allegations, in paragraphs 83 and 92, that the acts of O2 Micro

constitute fraud in violation of California common law. MPS

responds that it is not bringing a claim against O2 Micro for

common law fraud. It does not explain why, in that case, these

allegations are material or pertinent. The Court finds that the

allegations of common law fraud are immaterial and impertinent and

thus shall be stricken pursuant to Federal Rule of Civil Procedure

12(f). 

II. MPS' Third-Party Claims

O2 Micro moves to strike or dismiss MPS' third-party

complaint. Under Federal Rule of Civil Procedure 14(a), any party

may move to strike a third-party claim.

Rule 14(a) provides that "a defending party, as a third-party

plaintiff, may cause a summons and complaint to be served upon a

person not a party to the action who is or may be liable to the

third-party plaintiff for all or part of the plaintiff's claim

against the third-party plaintiff.” As the Ninth Circuit

instructs, a "third-party claim may be asserted only when the third

party's liability is in some way dependent on the outcome of the

main claim and is secondary or derivative thereto." Stewart v. Am.

Int'l Oil & Gas Co., 845 F.2d 196, 199-200 (9th Cir. 1988) 

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(affirming dismissal of third-party complaint when it failed to

show the requisite derivative or secondary liability on the part of

the third-party defendants). Quoting Professors Wright and Miller,

the court in Stewart explained, "The crucial characteristic of a

Rule 14 claim is that the defendant is attempting to transfer to

the third-party defendant the liability asserted against him by the

original plaintiff. The mere fact that the alleged third-party

claim arises from the same transaction or set of facts as the

original claim is not enough." Id. at 200 (quoting 6 Wright &

Miller, Fed. Practice & Proc. § 1446 at 257 (1971 ed.)).

MPS does not argue that its third-party claims are derivative

or secondary to DEI's indemnification claim such that they could

have been brought as third-party claims under Rule 14(a). Rather,

it accuses O2 Micro of employing a "hyper-technical" pleading

requirement. MPS argues that because the claims in its third-party

complaint are well-plead counterclaims they should not be dismissed

merely because they are mislabeled as third-party claims. But that

argument is not supported by the authority MPS cites. In Reiter v.

Cooper, 507 U.S. 258, 273 (1993), the Supreme Court treated

counterclaims mislabeled as affirmative defenses as properly plead;

it did not treat counterclaims mislabeled as third-party claims as

properly plead. MPS quotes the Wright and Miller treatise, noting

that "courts generally have ignored the nomenclature actually used

by the pleader and have treated the claim as if it had been

properly labeled." 6 Wright & Miller, Fed. Practice & Proc. § 1407

(2006 ed.). The section quoted, however, concerns the mislabeling 

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of counterclaims and cross-claims, not the mislabeling of thirdparty claims. 

Furthermore, MPS' filing of third-party claims, instead of

filing additional counterclaims, does not appear to be an

inadvertent mistake of nomenclature. MPS fails to explain why it

mislabeled its counterclaims as third-party claims, nor does it

provide the Court with good cause for treating its third-party

claims as properly plead counterclaims. As O2 Micro notes, prior

to transfer, the court in the Eastern District of Texas informed

the parties that, after November 18, 2005, the parties would be

allowed to amend their claims only with a successful motion for

leave to do so. Instead of timely moving to amend its

counterclaims to assert a trade secret misappropriation claim, MPS

filed its third-party complaint against O2 Micro on December 19,

2005 without leave of court. Almost a month later, MPS amended its

third-party complaint, again without seeking leave to amend, adding

additional claims against O2 Micro. 

The Court strikes MPS' third-party complaint. Because the

Court grants O2 Micro's motion on this ground, it need not address

O2 Micro's remaining arguments.

CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART O2 Micro's

Motion to Strike MPS' Counterclaims and DENIES it IN PART. 

Specifically, the Court strikes "California common law" in

paragraphs 83 and 92, but it does not strike the allegations in

MPS' counterclaims of inequitable conduct in the PTO and TIPO. The 

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party Complaint. The Court strikes MPS' third-party complaint

against O2 Micro. 

IT IS SO ORDERED.

Dated: 10/18/06 

CLAUDIA WILKEN

United States District Judge

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