Opinion
CIVIL ACTION 17-2386-BLS1
03-22-2018
ACACIA COMMUNICATIONS, INC. v. VIASAT, INC.
MEMORANDUM OF DECISION AND ORDER ON MOTION TO DISMISS
Mitchell H. Kaplan, Justice of the Superior Court
The plaintiff, Acacia Communications, Inc. (Acacia), brings this action against the defendant, ViaSat, Inc. (ViaSat) to recover damages that it allegedly sustained as a result of a letter that ViaSat wrote to an industry standard setting organization, Optical Internetworking Forum (OIF). Acacia alleges that it submitted a technical standard to OIF based upon Acacia’s own technology which, if adopted, would result in substantial competitive advantages to Acacia. It contends that the letter falsely implies that Acacia’s submission contains technology that belongs to ViaSat, and, as a consequence of the letter, OIF may reject Acacia’s submission. Acacia’s amended complaint is pled in eight counts: (1) commercial disparagement; (2) libel; (3) slander of title; (4) unfair competition (G.L. c. 93A § 11); (5) intentional interference with advantageous relations; (6) intentional interference with contractual relations; (7) declaratory judgment of no trade secret misappropriation; and (8) declaratory judgement of no breach of contract. The case is presently before the court on ViaSat’s motion to dismiss Counts 1 through 4 for failure to state a claim on which relief may be granted. See Mass. R. Civ. P. 12(b)(6).
For the following reasons, ViaSat’s motion to dismiss is DENIED as to Counts 1 through 3 and ALLOWED as to Count 4, but with leave to file an amended complaint with respect to that Count.
BACKGROUND
The following facts are taken from the allegations in the Complaint and the letter, which is an exhibit to it, and assumed to be true for the purposes of this motion to dismiss.
In 2017, Acacia submitted a proposal to the Optical Internetworking Forum (" OIF" ), a standard-setting organization in the field of computer networking, to adopt, as a standard, Acacia’s technical submission for the design of integrated circuit chips using Soft Decision Forward Error Correction (" SDFEC" ). At the time of Acacia’s submission, Acacia and ViaSat were engaged in litigation in federal district court in San Diego, California (" the California Action" ). In the California Action, ViaSat alleges that some years ago it developed SDFEC for Acacia pursuant to a licensing agreement which provided that ViaSat would own the SDFEC technology and Acacia would pay it royalties for its use. However, Acacia made unauthorized use of the licensed technology without paying royalties. ViaSat asserts claims of breach of the licensing agreement and misappropriation of trade secrets against Acacia.
On July 25, 2017, ViaSat wrote a letter to representatives of OIF (the Letter). The Letter began by describing the California Action. It acknowledged that Acacia denied ViaSat’s allegations and explained that the parties were there engaged in discovery. The Letter went on to say:
We understand that Acacia is advocating that the OIF adopt a 15% overhead SDFEC as an industry standard. ViaSat developed a 15% overhead SDFEC for Acacia under the License Agreement, and ViaSat believes that its intellectual property may be incorporated in what Acacia is representing as its 15% overhead SDFEC. If so, the SDFEC being touted by Acacia to IOF would, in fact, belong to ViaSat. Acacia has represented to ViaSat that the SDFEC it is proposing to OIF is its own independently developed intellectual property, but we have not been able to verify whether that is the case.
In order to protect the rights of all parties, ViaSat requests that OIF refrain from seeking, receiving, or reviewing Acacia’s SDFEC, pending resolution of the dispute between ViaSat and Acacia.
Any disclosure or use of Acacia’s proposed SDFEC may constitute the misappropriation of ViaSat’s trade secrets, as well as a breach of the License Agreement. The receipt or use of such information may also subject additional parties to potential liability to ViaSat.
Before, ViaSat sent this letter, Acacia told ViaSat that it had independently developed the technology submitted to OIF; it was not the SDFEC that Acacia had developed under the licensing agreement. Nonetheless, ViaSat " maliciously" sent the letter to OIF.
There is no allegation suggesting that Acacia provided ViaSat with any means to verify Acacia’s contention.
Acacia alleges that " as a direct result of ViaSat’s actions, Acacia has suffered loss of sales, property, business opportunities, and reputation." The Complaint, however, does not appear to allege that OIF took any specific action in response to receiving the Letter. Indeed, it does not contain a specific allegation of the loss of any identified business opportunity.
The Complaint also alleges that ViaSat made " false, deceptive, and misleading statements" to other " industry groups" and " current and prospective business partners and customers." However, it does not allege what these statements were or who actually received them. The court finds these allegations to constitutue speculation and legal conclusions, as opposed to allegations of fact, and they have played no role in the court’s resolution of the pending motion.
DISCUSSION
I. Standard for Motion to Dismiss
When evaluating the legal sufficiency of a complaint pursuant to Mass. R. Civ. P. 12(b)(6), the court accepts as true all factual allegations in the complaint and all reasonable inferences that may be drawn in the plaintiff’s favor. Berish v. Bornstein, 437 Mass. 252, 267 (2002). To survive a motion to dismiss, a complaint must set forth the basis of the plaintiff’s entitlement to relief with " more than labels and conclusions." Iannacchino v. Ford Motor Co., 451 Mass. 623, 635-636 (2008), quoting Bell A. Corp. v. Twombly, 127 S.Ct. 1955, 1964-1965 (2007). While factual allegations need not be detailed, they " must be enough to raise a right to relief above the speculative level ...." Id., quoting Bell A. Corp., 127 S.Ct. at 1964-1965. At the pleading stage, a complaint must set forth " factual ‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief ...." Id., quoting Bell A. Corp., 127 S.Ct. at 1966.
II. The Related Elements of Claims for Commercial Disparagement, Libel and Slander of Title
Massachusetts has adopted the Restatement (Second) of Torts § 623A formul ation of a claim for commercial disparagement. See HipSaver, Inc. v. Kiel, 464 Mass. 517, 523 (2013) (Hipsaver ) (citing Dulgarian v. Stone, 420 Mass. 843 (1995) ). In order successfully to plead a claim for commercial disparagement, the plaintiff must demonstrate that a defendant:
(1) published a false statement to a person other than the plaintiff; (2) " of and concerning" the plaintiff’s products or services; (3) with knowledge of the statement’s falsity or with reckless disregard of its truth or falsity; (4) where pecuniary harm to the plaintiff’s interests was intended or foreseeable; and (5) such publication resulted in special damages in the form of pecuniary loss.HipSaver, 464 Mass. at 523.
Massachusetts has also adopted the elements of a claim for libel set out in the Restatement (Second) of Torts § 558. McAvoy v. Shufrin, 401 Mass. 593, 597 (1988). " The elements of a libel case are a false and defamatory written communication of and concerning the plaintiff." Id. However, a plaintiff can also " recover for a truthful defamatory statement published in writing ... with actual malice, G.L. c. 231, § 92, except as confined by the requirements of the First Amendment to the United States Constitution." White v. Blue Cross and Blue Shield of Mass., Inc., 442 Mass. 64, 66 n.4 (2004).
The elements of a claim for slander of title are that the defendant engaged in a " disparagement of a person’s title to real or personal property." Robbins v. Hingham Mut. Fire Ins. Co., 2017 WL 729749 at *5 (Mass.App.Ct. 2017). Massachusetts courts have yet to address whether a claim of slander of title may be based on the disparagement of a plaintiff’s ownership of intellectual property, but courts in other states have addressed the issue with varying approaches. See Novell, Inc. v. Vigilant Ins. Co., 2010 WL 1734771 (D. Utah 2010); See also Compris Techs., Inc. v. Techwerks, Inc., 618 S.E.2d 664 (Ga. Ct.App. 2005); and see Jardin v. DATAllegro, Inc., (S.D. Cal. 2011). As one court has explained, the tort of slander of title has typically been applied to real property. It may, nonetheless, apply to intellectual property when the claim is predicated on intellectual property in which the plaintiff may assert title. This means there must be an underlying patent, license, copyright or some other form of legal ownership attached to the intellectual property at issue. Novell, Inc. v. Vigilant Ins. Co., 2010 WL 1734771 (D. Utah 2010). In the present case, the Complaint does not specify the nature of the ownership interest that Acacia has in the intellectual property in question. Rather, it simply alleges that the Letter " calls into question Acacia’s title to the submission" to OIF. Reading this allegation in the light most favorable to Acacia, the court finds that the Complaint has adequately alleged a property right that could, if the other elements of the claim are satisfied, satisfy this element of a claim for slander of title. Were this claim asserted independently of claims for libel and commercial disparagement, the court would look more closely at the question of whether Massachusetts would apply this tort to intellectual property of the type adverted to in the Complaint.
In consequence, while there are some differences in the elements of the claims asserted in Counts I through III, each survives a motion to dismiss, if the Letter contains a defamatory, false statement. See HipSaver, 464 Mass. at 523 n. 6 and n. 7 (where the SJC explains that: " The line between commercial disparagement and defamation often is difficult to draw.... The two causes [of action] may merge when a disparaging statement about a product reflects on the reputation of the business that made distributed, or sold it...., defamation is found only where the imputation fairly implied is that the plaintiff is dishonest or lacking in integrity; " but also that " more stringent requirements were imposed upon the plaintiff seeking to recover for [commercial disparagement] in three important respects- falsity of the statement, fault of the defendant and proof of damage." ) (Internal quotations and citations omitted).
III. The Defamation Based Claims
As noted above, commercial disparagement, libel, and slander of title is each a defamation based cause of action which has as an element a false statement published to a third-party.
In Scholz v. Delp, 473 Mass. 242, 249 (2015), the Supreme Judicial Court (SJC) summarized the elements of a defamation claim as follows: (1) the defendant made a statement concerning the plaintiff to a third party (publication); (2) the statement could damage the plaintiff’s reputation in the community; (3) the defendant was at fault for making the statement; and (4) the statement caused economic loss or is one of the specific circumstances actionable without economic loss (of which libel is one). The SJC also explained that the predicate statement must be a false, factual statement and not pure opinion. As will be seen, this motion to dismiss turns on whether the Letter simply states ViaSat’s pure opinion or it may be interpreted as implying an allegedly false fact. The court will briefly address the first four elements of a defamation claim and then turn to the difficult question of whether the Letter states an allegedly false fact or only a derogatory opinion.
Publication occurs when a defendant communicates the defamatory statement to a third-party; it occurs when a " defamatory communication is transmitted to even one person other than the plaintiff." White v. Blue Cross & Blue Shield of Mass., 442 Mass. 64, 69 (2004); see, also, Phelan v. May Dept. Stores Co., 443 Mass. 52, 56 (2004). Clearly, the Letter constitutes publication.
The second element is that the statement is capable of damaging the plaintiff’s reputation in the community, i.e., that it could hold the plaintiff up to " scorn, hatred, ridicule or contempt, in the minds of any considerable and respectable segment in the community." Phelan, 443 Mass. at 56. A statement made to members of a technology standard setting organization that Acacia is claiming that it developed technology actually developed for it by another firm undoubtedly meets this requirement.
The third element, the defendant’s fault, is met by Acacia’s allegation that ViaSat knew this statement to be false, but this element would also be satisfied by allegations suggesting that ViaSat acted negligently in sending the Letter. See Downey v. Chutehall Constr., 86 Mass.App.Ct. 660, 664 (2014) (Downey ).
The fourth element, economic loss, can be satisfied by either demonstrating actual economic loss or pleading a claim that is actionable without demonstrated economic loss. As noted above, a claim of libel is such a claim. See Ravnikar v. Bogojavlensky, 438 Mass. 627, 630 (2003). This exception to the requirement that resulting damage be pled and proved does not apply to commercial disparagement, and perhaps to slander of title as well. The allegations of economic loss in the Complaint are very vague and conclusory- there is no allegation that OIF elected not to adopt Acacia’s technology as a result of the Letter, or the loss of any other identified business. However, they are minimally adequate to survive a motion to dismiss those two counts.
In Downey, the Appeals Court reflected on the difficulty of separating fact from opinion in certain cases:
To determine whether the statement in question is defamatory, the court must decide whether it is an assertion of fact or opinion. The distinction is often subtle and difficult, particularly at the summary judgment stage. King v. Globe Newspaper Co., 400 Mass. 705, 709 (1987), cert. denied, (1988), quoting from Janklow v. Newsweek, Inc., 788 F.2d 1300, 1302 (8th Cir.), cert. denied, 479 U.S. 883249 (1986) (" It is hard to draw a bright line between ‘fact’ and ‘opinion’ " ). The determination is considered a question of law only when it is unambiguous. See ibid . See also Driscoll v. Board of Trustees of Milton Academy, 70 Mass.App.Ct. 285, 296 (2007); Gray v. St. Martin’s Press, Inc., 221 F.3d 243, 248 (1st Cir. 2000), cert. denied, 531 U.S. 107 (2001). In contrast, " the determination whether a statement is a factual assertion or a statement of pure opinion is a question of fact if the statement reasonably can be understood both ways." King v. Globe Newspaper Co., supra . See Aldoupolis v. Globe Newspaper Co., 398 Mass. 731, 733-734 (1986). Therefore, in a defamation action, " the defendant is entitled to summary judgment if the challenged statement cannot reasonably be construed as a statement of fact." King v. Globe Newspaper Co., supra. " However, if a statement is susceptible of being read by a reasonable person as either a factual statement or an opinion, it is for the jury to determine." Aldoupolis v. Globe Newspaper Co., supra.
In determining whether an assertion is a statement of fact or opinion, " the test to be applied ... requires that the court examine the statement in its totality in the context in which it was uttered or published. The court must consider all the words used, not merely a particular phrase or sentence. In addition, the court must give weight to cautionary terms used by the person publishing the statement. Finally, the court must consider all of the circumstances surrounding the statement, including the medium by which the statement is disseminated and the audience to which it is published." Cole v. Westinghouse Bdcst. Co., 386 Mass. 303, 309, cert. denied, 459 U.S. 1037 (1982), quoting from Information Control Corp. v. Genesis One Computer Corp., 611 F.2d 781, 784 (9th Cir. 1980).86 Mass. at 663-664.
In an earlier case, Lyons v. Globe Newspaper Co., 415 Mass. 258, 263 (1993) (Lyons ), the SJC considered when opinions may be the predicate for defamation actions. It reconfirmed its support for the approach adopted in § 566 of Restatement (Second) Torts (1977) for determining when statements expressed as opinions may support a defamation claim:
[a] defamatory communication may consist of a statement in the form of an opinion, but a statement of this nature is actionable only if it implies the allegation of undisclosed defamatory facts as the basis for the opinion..., under this rule, [a] simple expression of opinion based on disclosed or assumed nondefamatory facts is not itself sufficient for an action of defamation, no matter how unjustified and unreasonable the opinion may be or how derogatory it is. But an expression of opinion that is not based on disclosed or assumed facts and therefore implies that there are undisclosed facts on which the opinion is based, is treated differently. Thus if I write, without more, that a person is an alcoholic, I may well have committed a libel prima facie; but it is otherwise if I write that I saw the person take a martini at lunch and accordingly state that he is an alcoholic.
In Lyons, the SJC also responded to the plaintiff’s contention that the then recent decision of the United States Supreme Court, Milkovich v. Lorain Journal Co., 457 U.S. 1 (1990) (Milkovich ) required a departure from the principles articulated in § 566. Id. at 265. In Milkovich, the Supreme Court reversed the dismissal of a libel claim with the following explanation of when an opinion may be held to be libelous:
If a speaker says, " In my opinion John Jones is a liar," he implies a knowledge of facts which lead to the conclusion that Jones told an untruth. Even if the speaker states the facts upon which he bases his opinion, if those facts are either incorrect or incomplete, or if his assessment of them is erroneous, the statement may still imply a false assertion of fact. Simply couching such statements in terms of opinion does not dispel these implications; and the statement, " In my opinion Jones is a liar," can cause as much damage to reputation as the statement, " Jones is a liar." As Judge Friendly aptly stated: " [It] would be destructive of the law of libel if a writer could escape liability for accusations of [defamatory conduct] simply by using, explicitly or implicitly, the words ‘I think.’ "Id. at 18-19. The SJC explained that Milkovitch did not expressly address a situation in which all of the facts on which an opinion was based were " fully disclosed," but in it the Supreme Court cited, with approval, many cases holding that " statements clearly recognizable as pure opinion because their factual premises are revealed" will not support claims of libel. Lyons, 415 Mass. at 267. In consequence, an opinion which discloses all of the facts on which it is based is not defamatory.
With these principle in mind, the court turns to the present case. To begin, it is necessary to look at the totality of the Letter and to have in mind its recipient- OIF, an industry organization interested in selecting a software standard for certain applications. For purposes of this motion to dismiss, the court will therefore assume an audience of technologically sophisticated readers conversant in the implications that may be drawn from the matters expressed in the Letter.
The pivotal statement in the Letter questions the origin of the technology Acacia submitted to OIF: " ViaSat believes that its intellectual property may be incorporated in what Acacia is representing as its 15% overhead SDFEC." Clearly, that statement is expressed as a " belief" not an unequivocal statement of fact. Further, ViaSat also explains in the next sentence that Acacia has told ViaSat that it developed this SDFEC itself, although ViaSat goes on to say that it has not verified Acacia’s assertion.
On the other hand, the Letter begins by explaining that ViaSat has sued Acacia for theft of its SDFEC intellectual property (which also contains the 15% overhead attribute) in the California Action. It then closes by warning the reader that it is prepared to bring similar litigation against recipients of its stolen trade secrets: " The receipt or use of [ViaSat’s 15% overhead SDFEC] may also subject additional parties to potential liability to ViaSat."
It is also important to keep context in mind, i.e., " the circumstances surrounding the statement" and " the audience to which it was published." Downey, 86 Mass. at 664 The Letter was not sent to criticize a public figure engaged in political debate at a political convention, as was the case in Lyons, nor did it contain cartoons and editorials critical of the public actions of a sitting governor, as in King . Rather, it involves the commercial interests of software firms who are direct competitors. Allowing this claim to proceed does not risk " [t]he suppression of ideas that would be occasioned by allowing the courts, rather than the ‘marketplace of ideas,’ to judge expressions of opinion such as those challenged [in Lyons and King which would be] repugnant to this constitutional guarantee of free speech." Lyons, 415 Mass. at 268.
The specific question raised by this motion is whether the Letter suggests the existence of undisclosed " incorrect" facts. Reading the allegations of the Complaint and the Letter in the light most favorable to Acacia, the court concludes that it may. The letter is sent to technologically sophisticated readers involved in selecting an industry standard SDFEC. It begins by describing the California Action in which ViaSat claims that Acacia has stolen its trade secrets involving the SDFEC that ViaSat developed. It points out a similarity between Acacia’s submission to OIF and the SDFEC that ViaSat developed for Acacia. It threats suit against those that might receive or use its allegedly stolen trade secrets. A finder of fact might find that the Letter reasonably implies that ViaSat has engaged in a technical analysis confirmatory of its belief " that its intellectual property may be incorporated in what Acacia is representing as its 15% overhead SDFEC." If no such analysis was done, or, theoretically, if one was done and it was inconsistent with this belief, a fact finder could reasonably infer an undisclosed " incorrect fact" and therefore that the opinion that Acacia had submitted technology to OIF, stolen from ViaSat, as its own was defamatory.
ViaSat argues that, under Lyons, if a defendant discloses a correct fact which supports its opinion, it is immune from suit for defamation, even if it knows of the existence of other facts which make the defamatory opinion untrue. For example, a statement that I think the plaintiff is an alcoholic because I saw him order a martini at lunch, could not be the basis for a libel claim, even if the defendant also saw the defendant give the drink to another person and heard him say: " I never drink at lunch." The court disagrees with that interpretation of Lyon . Rather, under these circumstances, as explained by the Supreme Court in Milkovitch, the failure to disclose other directly relevant facts known to the defendant inconsistent with an obviously defamatory opinion will support a claim.
IV. Count 4- Unfair Competition (
M.G.L. 93A, § 11)
Generally stated, G.L. 93A, § 11 establishes a cause of action for any person who engages in trade or commerce and who suffers any loss of money or property as a result of another person, engaged in trade or commerce, using an unfair method of competition or an unfair or deceptive act or practice. The last paragraph of § 11 (par. 8), provides that:
No action shall be brought or maintained under this section unless the actions and transactions constituting the alleged unfair method of competition or the unfair or deceptive act or practice occurred primarily and substantially within the commonwealth. For the purposes of this paragraph, the burden of proof shall be upon the person claiming that such transactions and actions did not occur primarily and substantially within the commonwealth.
The unfair method of competition or unfair or deceptive act or practice occurred " primarily and substantially" in Massachusetts when " the center of gravity of the circumstances that give rise to the claim is primarily and substantially within the Commonwealth." Kuwaiti Danish Comp. Co. v. Digital Equip Corp., 438 Mass. 459, 473 (2003).
The court agrees with ViaSat, that the Complaint contains no allegations that would support a finding that the " center of gravity" of the circumstances alleged is primarily and substantially in Massachusetts. The only allegation concerning the nexus between the claim asserted and Massachusetts is that Acacia has its corporate headquarters in the Commonwealth, and that is certainly insufficient. Interestingly, Federal Courts have dismissed Chapter 93A claims for failure to plead facts establishing the geographic requirement. See e.g., Iantosca v. Benistar Admin. Servs., Inc., 738 F.Supp.2d 212, 220 (D. Mass. 2010). However, there are apparently no published opinions from Massachusetts courts doing so. It is peculiar to dismiss a case for failure to plead a fact that the defendant must prove to avoid liability, which generally involves an affirmative defense. Nonetheless, the statutory language provides that no action may be " brought" unless this geographic nexus exists. Therefore, a plaintiff may be expected to plead facts sufficient to suggest that the center of gravity of the offending conduct occurred primarily and substantially in Massachusetts, even though having pled them, the plaintiff does not have a burden of proving them.
Accordingly, Count 4 will be dismissed with an opportunity to replead within 30 days facts sufficient to show that the requisite geographic nexus with Massachusetts exists.
ORDER
For the foregoing reasons, Defendant’s Motion to Dismiss Counts 1-3 is DENIED and the Defendant’s Motion to Dismiss Count 4 is GRANTED with leave for the Plaintiff to amend and re-plead this count within thirty (30) days from the date of this order.