Masimo Corp. v. Sotera Wireless
| Decision Date | 09 December 2020 |
| Docket Number | Case No. 19-cv-01100-BAS-NLS |
| Court | U.S. District Court — Southern District of California |
| Parties | MASIMO CORPORATION, Plaintiff, v. SOTERA WIRELESS; HON HAI PRECISION INDUSTRY CO., LTD., Defendants. |
(1) GRANTING IN PART DEFENDANT HON HAI'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT (ECF No. 62);
Plaintiff Masimo Corporation ("Masimo") filed this patent infringement action on June 12, 2019 against Defendants Sotera Wireless, Inc. ("Sotera") and Hon Hai Precision Industry Co. Ltd. ("Hon Hai") (collectively, "Defendants").1 (Compl., ECF No. 1.) The Court previously granted Hon Hai's Motion to Dismiss Plaintiff's Complaint on May 8,2020. (See Order Granting Mot. to Dismiss.) Plaintiff then filed a First Amended Complaint ("FAC") on June 8, 2020. (ECF No. 52.) Hon Hai now brings a Motion to Dismiss Plaintiff's FAC ("Motion") for failing to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). (Mot., ECF No. 62.) The Court finds the Motion suitable for determination without oral argument. See CivL.R. 7.1(d)(1). For the reasons stated below, the Court GRANTS IN PART Hon Hai's Motion.
(Id. ¶ 53.) Masimo alleges that Hon Hai "directly or indirectly controlled Sotera's activities" to make, use, offer to sell, and/or sell this system within the United States and is involved in the manufacturing and supply of the components—such as batteries, housings, circuit boards, cables, and sensors—that comprise the system. (Id. ¶¶ 54-55.) Plaintiff further claims that Hon Hai collects data from the ViSi Mobile device in the United States and markets the ViSi Mobile Monitoring System as a "smart hospital product" on the U.S.-based website for Foxconn Health Technology Business Group. (Id. ¶¶ 56-57.)
Specifically, the FAC includes allegations that Hon Hai directly and contributorily infringed the claims of Masimo's patents related to ViSi Mobile and that it is vicariously liable for Sotera's infringing conduct. To this end, Masimo adds several allegations in theFAC regarding alter ego and agency theories of liability, as well as its direct and contributory infringement claims as they relate to Hon Hai, which are described in more detail in Section III, infra. (See id. ¶¶ 20-52.)
Masimo again seeks monetary relief against both Defendants and equitable relief against Sotera, Hon Hai, and "officers, agents, servants, employees, attorneys and all others in active concert and/or participation with them" for the alleged infringement of each of its nine patents. (See FAC, Prayer for Relief.)
A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001).3 The court must accept all factual allegations pleaded in the complaint as true and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations; rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556); see also City of Oakland v. Wells Fargo & Co., 972 F.3d 1112, 1135 (9th Cir. 2020) (citing Swierkiewicz v. Sorema N. A., 534 U.S. 506, 515 (2002)) ("It is important to note that thiscase reaches us at the motion to dismiss stage, where Oakland has the burden of meeting a plausibility standard, not a reasonable probability or more-likely-than-not standard.").
Nonetheless, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)) (alteration in original). A court need not accept "legal conclusions" as true. Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557) ("Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of 'entitlement to relief.'"). Further, despite the deference the court must pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged." See Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).
As a general rule, a court freely grants leave to amend a complaint that has been dismissed. Fed. R. Civ. P. 15(a); Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). However, leave to amend may be denied when "the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency." Schreiber Distrib. Co., 806 F.2d at 1401 (citing Bonanno v. Thomas, 309 F.2d 320, 322 (9th Cir. 1962)).
Hon Hai moves to dismiss all claims. First, Hon Hai argues that the amended allegations "do not meet the pleading standards for vicarious infringement." (Mem. of P. & A. at 1.) As to Masimo's alter ego theory of liability, Hon Hai states that it fails because "(1) Masimo does not allege any facts supporting the conclusion that Sotera is a sham that exists solely as an inequitable vehicle for fraud; and (2) the facts Masimo alleges are insufficient to show that Sotera and Hon Hai have a unity of interest and ownership." (Id. at 1-2.) As to Masimo's agency claims, Hon Hai argues that there are insufficient facts tosupport "that Hon Hai controls day-to-day operations of Sotera." (Id.) Lastly, Hon Hai moves for dismissal of the direct and contributory infringement claims because, it argues, "Masimo conflates Hon Hai and its affiliates." (Id. at 2.)
The Court first addresses the evidentiary issues raised by the documents submitted in support of the parties' briefings before turning to the claims for direct and vicarious liability.
The parties once again submit materials outside the pleadings to support their arguments at the dismissal stage. Hon Hai attaches its annual report to show that its many affiliated legal entities use the "Foxconn" name. (Mem. of P. & A. at 1 n.1 (citing Annual Rep., Ex. A to Decl. of Ying Lu ("Lu Decl."), ECF No. 62-3); Reply in supp. of Mot. ("Reply") at 9-10, ECF No. 69 (citing Webpage, Ex. B to Decl. of Hua Chen ("Chen Decl."), ECF No. 69-1).) It also attaches exhibits to its Reply to show that Sotera is insured and therefore not undercapitalized. (Reply at 3-4 .) Masimo includes multiple exhibits to support its argument that Hon Hai has sufficient control over and involvement in Sotera's operations to be held liable for infringement and to support its allegations that Hon Hai seeks to have Sotera file bankruptcy in bad faith. (See generally, Opp'n to Mot. to Dismiss ("Opp'n"), ECF No. 68; see also Exs. 1-8, 10 to Decl. of Baraa Kahf, ECF No. 67-1 (filed under seal), Ex. 9 to Kahf Decl., ECF No. 68-1.)
"[W]hen the legal sufficiency of a complaint's allegations is tested by a motion under Rule 12(b)(6), '[r]eview is limited to the complaint.'" Lee v. City of Los Angeles, 250 F. 3d 668, 688 (9th Cir. 2001) (quoting Cervantes v. City of San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993)). If a court considers documents extraneous to the pleadings on a 12(b)(6) motion, the court must treat the motion as a motion for summary judgment under Rule 56. Fed. R. Civ. P. 12(d). However, "[t]here are two exceptions to this rule: the incorporation-by-reference doctrine and judicial notice under Federal Rule of Evidence 201." Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998 (9th Cir. 2018); see also United States v.Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) ().
Judicial notice permits a court to notice an adjudicative fact if it is "not subject to reasonable dispute." Fed. R. Evid. 201(b). A fact is not subject to reasonable dispute if it is "generally known" or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Id. 201(b)(1)-(2). The court may take judicial notice on its own. Id. 201(c)(1). "Facts subject to judicial notice may be considered on a motion to dismiss." Maiman v. Talbott, No. SACV 09-0012 AG (ANx), 2011 WL 13065750, at *2 (C.D. Cal. Aug. 29, 2011) (citing Mullis v. U.S. Bankr. Ct., 828 F.2d 1385 (9th Cir. 198...
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