Symantec Corp. v. Zscaler, Inc.

• Decision Date: 23 March 2018
• Docket Number: Case No. 17-cv-04426-JST
• Parties: SYMANTEC CORPORATION, Plaintiff, v. ZSCALER, INC., Defendant.
• Court: U.S. District Court — Northern District of California

SYMANTEC CORPORATION, Plaintiff, v. ZSCALER, INC., Defendant.

Case No. 17-cv-04426-JST

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

March 23, 2018

ORDER GRANTING MOTION TO STRIKE AND MOTION TO DISMISS

Re: ECF Nos. 149, 155

I. INTRODUCTION

Plaintiff Symantec Corporation filed this case alleging patent infringement against Defendant Zscaler, Inc. ECF No. 1. Symantec alleges that Zscaler infringed the claims of seven patents, U.S. Patent Nos. 6,279,113 ("the '113 patent"), 7,203,959 ("the '959 patent"), 7,246,227 ("the '227 patent"), 7,392,543 ("the '543 patent"), 7,735,116 ("the '116 patent"), 8,181,036 ("the '036 patent"), and 8,661,498 ("the '498 patent"). Id. at 3-4. Before the Court is Zscaler's motion to dismiss for failure to state a claim under 35 U.S.C. § 101 as to two full patents, and one claim of a third patent. ECF No. 142. Specifically, Zscaler seeks to dismiss Symantec's patent infringement claims for the '959 patent, the '227 patent, and Claim 5 of the '116 patent because the claims are directed to patent-ineligible subject matter. ECF No. 149 at 2. Id. at 2. Also before the Court is Symantec's motion to strike the portion of Zscaler's motion to dismiss which argues for dismissal of Claim 5 of the '116 patent because Zscaler failed to comply with Rule 12(g) of the Federal Rules of Civil Procedure, and failed to disclose this ground in its invalidity contentions. ECF No. 155. For the following reasons, the Court GRANTS the motion to strike, and GRANTS the remaining portions of the motion to dismiss.

II. BACKGROUND

Plaintiff Symantec develops and sells security assistance products and other internet tools. ECF No. 18 at 5. Symantec initially offered only security products which resided on a client's computer, but then as technology developed, Symantec offered cloud-based security. ECF No. 10 at 5. Defendant Zscaler, a competitor, is "an information security startup" which developed a "cloud-based network-security platform." Id.

Symantec originally filed this case in the District of Delaware on December 12, 2016. ECF No. 1. Zscaler quickly filed both a motion to dismiss under 35 U.S.C. § 101 and a motion to transfer venue. ECF Nos. 9, 11. The Delaware court heard argument on the motion to dismiss. ECF No. 24. The parties exchanged discovery, including several sets of interrogatories, subpoenas and requests for production of documents. See, e.g., ECF Nos. 25, 60, 62. The District of Delaware then granted the motion to transfer, and transferred the case to this Court. ECF No. 67.¹ Symantec filed a First Amended Complaint. ECF No. 139. Zscaler then filed the present motion to dismiss in lieu of answering that complaint. ECF No. 149.

III. SYMANTEC'S MOTION TO STRIKE

Before turning to the motion to dismiss, the Court must first address Symantec's motion to strike that motion. ECF No. 155. Symantec's motion is directed at Zscaler's motion to dismiss Claim 5 of the '116 patent ("Claim 5"). Symantec argues that (1) Rule 12(g)(2) prohibits Zscaler from raising its § 101 defense for Claim 5 in its second Rule 12(b)(6) motion to dismiss because the defense was not raised in its first motion, and (2) Zscaler's new invalidity theory is "barred" because Zscaler failed to disclose the theory in its invalidity contentions.

As just noted, Zscaler filed a motion to dismiss Symantec's original complaint. That motion did not make a § 101 argument regarding Claim 5. Before the Court could adjudicate Zscaler's first motion, however, Symantec filed an amended complaint which asserts only Claim 5 from the '116 patent, in an effort to avoid Zscaler's '116 patent invalidity contentions. ECF No. 161 at 6. This Court - without considering or needing to consider this history - vacated Zscaler'sfirst motion to dismiss as moot. ECF No. 155 at 9; ECF No. 138. Zscaler then filed the present, second motion to dismiss, which argues that Claim 5 should be dismissed as invalid. ECF No. 149.

Symantec argues that the Court should strike the portion of Zscaler's motion to dismiss regarding Claim 5 because Zscaler failed to challenge Claim 5 in its first motion to dismiss as required by Rule 12(g) of the Federal Rules of Civil Procedure. ECF No. 153 at 23. That rule provides:

Limitation on Further Motions. Except as provided in Rule 12(h)(2) or (3), a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion.

Fed. R. Civ. P. 12(g)(2). Zscaler responds that the Court should nonetheless consider its Claim 5 argument because it would "help[] promote the goals set forth in Rule 1, i.e. to 'secure the just, speedy, and inexpensive determination of every action and proceeding.' ECF No. 161 at 8 (citing In re Apple Iphone Antitrust Litig., 846 F.3d 313, 318 (9th Cir. 2017)). Moreover, it argues, the pending motion is "the first motion to dismiss by Zscaler to be considered on the merits by the Court," not a second motion prohibited by Rule 12(g)(2). ECF No. 161 at 8.

The plain text of Rule 12(g) prohibits a party from filing a second motion to dismiss on a ground that was available but omitted from an earlier motion to dismiss. Fed. R. Civ. P. 12(g)(2). Accordingly, other courts in this district have concluded that a defendant who filed a motion to dismiss may not file a second motion to dismiss asserting defenses that could have been asserted in the first motion. Romo v. Wells Fargo Bank, N.A., No. 15-CV-03708-EMC, 2016 WL 3523779, at *2 (N.D. Cal. June 28, 2016) ("Newly asserted argument . . . which [a defendant] failed to assert in its prior Rule 12(b)(6) motion, may not properly be considered."); Northstar Fin. Advisors Inc. v. Schwab Investments, 135 F. Supp. 3d 1059, 1070 (N.D. Cal. 2015) ("To summarize, under Rule 12(g)(2) and Rule 12(h)(2), a party that seeks to assert a defense that was available but omitted from an earlier Rule 12 motion can only do so in a pleading, a Rule 12(c) motion, or at trial."); Fed. Agr. Mortg. Corp. v. It's A Jungle Out There, Inc., No. C 03-3721 VRW, 2005 WL 3325051, at *5 (N.D. Cal. Dec. 7, 2005) (citing Wright & Miller, 5D FederalPractice & Procedure § 1388, at 491-92 (3d ed 2004)²).

However, the Ninth Circuit recently announced a more flexible and efficiency-oriented view of a district court's ability to review arguments offered for the first time in a second motion to dismiss. Affirming Judge Gonzalez Rogers's decision to hear an argument in a motion to dismiss that could have been brought in an earlier motion, the Ninth Circuit reasoned that Rule 12(g) should be read in light of the Federal Rules of Civil Procedure's policy favoring "just, speedy, and inexpensive determination" of actions. In re Apple, 846 F.3d at 318. The court noted that had the district court not considered the argument at that time, defendant would simply have waited until later in the litigation to file a different motion, thereby delaying resolution of the proceeding with no corresponding benefit. Id. at 320. Accordingly, that court concluded that the district court did not err, because the defendant's motion did not "appear to have been filed for any strategically abusive purpose" and considering the motion "materially expedited the district court's disposition of the case." Id.³; see also Application of Rule 12(g)—In General, 5C Fed. Prac. & Proc. Civ. § 1385 (3d ed.) ("On the other hand, in a limited number of cases the district court has exercised its discretion to permit a second preliminary motion to present a Rule 12(b)(6) defense, although it was technically improper to do so."). Other courts in this district have also considered second motions to dismiss raising new arguments where doing so would serve the interests of judicial economy. Evans v. Arizona Cardinals Football Club, LLC, 231 F. Supp. 3d 342, 351 (N.D. Cal. 2017); Cover v. Windsor Surry Co., No. 14-CV-05262-WHO, 2016 WL 520991, at *4 (N.D. Cal. Feb. 10, 2016) ("But judicial economy favors proceeding with the motion on its merits despite its technical deficiencies."); Amaretto Ranch Breedables, LLC v. Ozimals, Inc., No. 10-cv-05696-CRB, 2011 WL 2690437, at *2 n.1 (N.D. Cal. July 8, 2011).Here, the Court likewise concludes that a more flexible approach should govern, and that Rule 12(g) does not bar the Court's consideration of Zscaler's Claim 5 argument.

However, there is a more fundamental hurdle to this Court's review of Zscaler's Claim 5 argument: Zscaler failed to raise the argument in its invalidity contentions. As required by local rule, Zscaler served its invalidity contentions on Symantec on November 17, 2017. ECF No. 155-1. Patent L.R. 3-3 required that Zscaler's "[i]nvalidity contentions . . . contain . . . [a]ny ground of invalidity based on 35 U.S.C. § 101." Patent L.R. 3-3. Zscaler's Patent L.R. 3-3(d) disclosure did not contain any 35 U.S.C. § 101 invalidity ground for Claim 5 of the '116 Patent. ECF No. 155-1 at 3-4. Ex. 1 at 52-53.

Because Zscaler had not disclosed invalidity contentions for Claim 5 at the time it filed its motion to dismiss, it had no right to seek dismissal on this ground. Good Tech. Corp. v. Mobileiron, Inc., No. 5:12-CV-05826-PSG, 2015 WL 3866019, at *2 (N.D. Cal. May 4, 2015) ("Maybe things would be different if at some point MobileIron had sought leave to amend its invalidity contentions.") (declining to consider motion for judgment on the pleadings as to unserved invalidity contentions). To hold otherwise would undermine the policies behind the Court's patent local rules, as well as the more general rule that "any invalidity theories not disclosed pursuant to Local Rule 3-3 are barred . . . from presentation at trial." MediaTek Inc. v. Freescale Semiconductor, Inc., No. 11-CV-5341 YGR, 2014 WL 690161, at *1 (N.D. Cal. Feb. 21, 2014); see also Radware, Ltd. v. F5 Networks, Inc., 147 F. Supp. 3d 974, 982 (N.D. Cal. 2015). Accordingly, the motion to strike is granted.⁴

IV. ZSCALER'S ...