Opinion
NOT TO BE PUBLISHED
Alameda County Super. Ct. No. HG05237216
Jones, P. J.
Defendant and appellant SanDisk Corporation (SanDisk) appeals the order denying its special motion to strike plaintiff and respondent STMicroelectronics, Inc.’s (ST) cause of action for unfair competition. In its motion, brought under the anti-SLAPP statute (Code Civ. Proc., § 425.16), SanDisk contends ST’s unfair competition claim arises from SanDisk’s protected activity of prosecuting patent infringement claims against ST in federal tribunals, and that ST did not demonstrate a probability of prevailing on its unfair competition claim.
SLAPP is an acronym for strategic lawsuit against public participation. (See City of Cotati v. Cashman (2002) 29 Cal.4th 69, 72, fn. 1 (City of Cotati).) All further section references are to the Code of Civil Procedure.
BACKGROUND
The background information is taken from ST’s present action and SanDisk’s anti-SLAPP motion.
In 1983 Eliyahou Harari founded a company called Wafer Scale Integration, Inc. (WSI), which designed and sold programmable system devices, including memory systems and nonvolatile memories. On February 22, 1984, he signed an “Employee Agreement Regarding Confidentiality & Inventions” (1984 inventions agreement). Under the agreement he agreed to maintain the confidentiality of WSI’s proprietary information; to assign inventions “made or conceived [] during the term of [his] employment” that “relate[d] in any way to or are useful in [WSI’s] business as presently conducted or as conducted at any future time during [his] employment;” to cooperate with WSI “during and after [his] employment in the procurement and maintenance” of patents, copyrights, and other intellectual property; and not to engage in other employment or consulting without WSI’s written agreement.
On February 27, 1984, Harari executed a “Key Employee Agreement” with WSI, by which he agreed to a four year term of employment. Under the agreement WSI was granted an option to retain him as a consultant “in [his] area of expertise or special competence” following the termination of his employment.
WSI was designing and developing “flash memory” products while Harari was an officer and/or director of WSI. Flash memory is a kind of semiconductor memory used in a wide variety of computers and electronic devices.
On February 29, 1988, Harari and WSI executed an agreement by which Harari agreed, at WSI’s direction, to resign his employment with WSI. (1988 agreement). Under the agreement Harari further agreed to be available as requested by WSI to provide consulting services for 11 months following his termination. The consulting would be “in the areas of strategic partnerships, present and/or future foundries or pilot lines, investor relations and financing, personnel and administration.” It further provided that “[c]onsultation in the areas of current and new technology, new devices, or new products and markets will be specifically excluded except by” mutual agreement of Harari and WSI. Harari further agreed to be bound by, and comply with the terms of the 1984 employee and inventions agreement.
In 1988 Harari founded SanDisk, which markets and sells flash memory products.
On March 21, 1989, Harari tendered his resignation as a director of WSI. He requested that his resignation be backdated to March 15, 1989.
On December 15, 1992, the United States Patent and Trademark Office issued patent number 5,172,338 to SanDisk as assignee of inventors Harari and Sanjay Mehrotra (the ‘338 patent). The ‘338 patent issued from an application filed April 11, 1990, which was a continuation-in-part of an abandoned application filed April 13, 1989.
On December 10, 1996, the patent office issued patent number 5,583,812 to inventor Harari (the ‘812 patent). The ‘812 patent derived from an application filed June 8, 1988. In May 2001, Harari assigned his interest in the ‘812 patent to SanDisk.
On February 17, 1998, the patent office issued patent number 5,719,808 to inventors Harari, Mehrotra, and Robert Norman. (the ‘808 patent). The ‘808 patent derived from an application filed April 13, 1989. In April 1989, the inventors assigned their interest in the ‘808 patent to SanDisk.
We deferred ruling on SanDisk’s December 11, 2006, request to take judicial notice of the ‘338, ‘812, and ‘808 patents, a May 11, 2001, patent office recordation of assignment document, and the record in its petition for writ of mandate, A115427, until we ruled on the merits of the case. We now deny the request.
On July 27, 2000, WSI merged with ST. Pursuant to their agreement, ST succeeded to all rights and property of WSI. As a result of the merger, WSI is no longer a separate legal entity from ST.
On October 15, 2004, SanDisk filed actions against ST in the United States International Trade Commission and in the United States District Court for the Northern District of California alleging infringement of the ‘338 patent.
On February 4, 2005, ST filed an action against SanDisk in the United States District Court for the Eastern District of Texas, alleging infringement of the ‘816, ‘581, ‘720, ‘768, ‘626, and ‘184 patents, which it owned by right of assignment of their inventors.
On April 22, 2005, SanDisk filed a counterclaim in the Eastern District of Texas action, alleging ST’s infringement of its ‘812 and ‘808 patents.
Present Action
On October 14, 2005, ST filed the present action against Harari and SanDisk. It alleged causes of action for breach of fiduciary duty, breach of written contract, and fraud against Harari (counts one, two, and three, respectively); conversion and unjust enrichment against both defendants (counts four and six (six mislabeled Fifth count)), and inducing breach of contract and unfair competition against SanDisk (counts five (mislabeled Fourth count) and seven (mislabeled Sixth count)). The gravamen of the complaint was that Harari breached his fiduciary duty and other legal obligations while an employee and/or consultant of WSI.
The complaint contains seven actual causes of action, but it duplicates the heading “Fourth Count.” As a result of that typographical error, what should be denominated the fifth, sixth, and seventh counts are mistakenly denominated fourth, fifth, and sixth counts.
Specifically, ST alleged that while still serving as a director and consultant to WSI, Harari filed four patent applications, and he filed two applications three weeks after tendering his resignation as a director of WSI but before the Board of Directors accepted his resignation. ST further alleged that Harari did not disclose these six patent applications to anyone at WSI; that he knew or conceived of and worked on the ideas for the patents at least while a director and/or consultant and possibly during his earlier tenure as an employee and officer; and that he actively worked on the preparation of the patent applications during his tenure as a director and/or consultant and concealed this activity from WSI. All six patent applications concerned ideas and designs that would have benefited the design and development being done on flash memory at WSI.
Anti-SLAPP Motion
SanDisk filed an anti-SLAPP motion to strike ST’s seventh cause of action for unfair competition, which ST had brought under Business and Professions Code section 17200. It argued that ST’s section 17200 claim arose from SanDisk’s exercise of its right to petition and free speech, insofar as ST alleged that it suffered “injury-in-fact based on the ‘substantial funds [it was] forced to expend to defend itself against SanDisk’s [patent] infringement actions.’ ” Thus, argued SanDisk, “[t]here can be no doubt that the pending patent infringement lawsuits filed by SanDisk against ST form the gravamen of ST’s [Business and Professions Code] Section 17200 cause of action.” It further argued that ST could not establish a probability of prevailing on its section 17200 cause of action because (1) its claim was barred by California’s litigation privilege (Civ. Code, § 47, subd. (b)), (2) filing a patent infringement action does not constitute unfair competition as a matter of law; and (3) ST had not pled entitlement to restitution or injunction, the remedies accorded by section 17200. Therefore, SanDisk argues, ST cannot prevail on the merits.
The trial court denied the anti-SLAPP motion because the gravamen of the Business and Professions Code section 17200 claim arose from SanDisk’s failure to assign patents to ST that allegedly properly belonged to ST. It did not arise from an act taken by SanDisk in furtherance of its right of petition or free speech—the act of filing its patent infringement actions.
The court also denied SanDisk’s motion to transfer venue from Alameda County to Santa Clara County. SanDisk filed a petition for writ of mandate in this court to command the superior court to vacate both orders. We issued an alternative writ commanding the superior court to set aside and vacate the order denying the motion to transfer venue and enter a new order granting the motion to transfer venue to Santa Clara County Superior Court, or, alternatively, show cause why a peremptory writ should not issue. However, we declined to grant any relief as to the order denying SanDisk’s anti-SLAPP motion.
DISCUSSION
SanDisk reiterates on appeal the contentions it made to the trial court: ST’s unfair competition claim brought under Business and Professions Code section 17200 arises from SanDisk’s protected activity of prosecuting its patent infringement lawsuits, and ST cannot demonstrate a probability of prevailing on its section 17200 claim. We conduct an independent review of the trial court’s order because the issues are purely ones of law that we consider de novo. (San Ramon Valley Fire Protection Dist. v. Contra Costa County Employees’ Retirement Assn. (2004) 125 Cal.App.4th 343, 352.)
The Anti-SLAPP Statute
The anti-SLAPP statute provides: “A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).)
To prevail on an anti-SLAPP motion, the defendant must first make a threshold showing that the challenged cause of action arises from an act in furtherance of the right of petition or free speech in connection with a public issue. This is the first prong in anti-SLAPP analysis. (Navellier v. Sletten (2002) 29 Cal.4th 82, 88 (Navellier).) If the defendant meets this burden, the plaintiff must then demonstrate that it has a probability of prevailing on its claim, the second prong of anti-SLAPP analysis. (Ibid.) If the plaintiff cannot meet this burden, the trial court must strike the cause of action. (Integrated Healthcare Holdings, Inc. v. Fitzgibbons (2006) 140 Cal.App.4th 515, 522.)
A. “Arising From”
It is undisputed that filing a complaint is an exercise of the constitutional right of petition and falls under section 425.16. (A.F. Brown Electrical Contractor, Inc. v. Rhino Electric Supply, Inc. (2006) 137 Cal.App.4th 1118, 1125.) However, it does not follow that any claim associated with a party’s litigation-related activities is subject to the anti-SLAPP statute. The defendant must demonstrate that the present claim arises from the defendant’s litigation activities. The mere fact the plaintiff’s present action was filed after the asserted protected activity, e.g., the filing of defendant’s earlier lawsuit, does not mean the present action arose from the defendant’s activity for purposes of the anti-SLAPP statute. (City of Cotati, supra, 29 Cal.4th at pp. 76-77.) “[T]hat a cause of action arguably may have been ‘triggered’ by protected activity does not entail that it is one arising from such. [Citation.] In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant’s protected free speech or petitioning activity.” (Navellier, supra, 29 Cal.4th at p. 89.) In other words, prong one is measured by whether the defendant’s protected activity is the gravamen or principal thrust of the plaintiff’s complaint. (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 193.)
In deciding whether section 425.15’s “arising from” requirement is met, a court considers “ ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ ” (§ 425.16, subd. (b); Navellier, supra, 29 Cal.4th at p. 89.)
B. Application
An examination of ST’s cause of action for unfair competition in the context of its entire complaint confirms that this cause of action is not based on SanDisk’s earlier patent infringement litigation itself. It is based on SanDisk’s alleged misappropriation of intellectual property that belongs to ST.
Count seven, ST’s cause of action for unfair competition under Business and Professions Code section 17200, specifically incorporates by reference the previous 96 paragraphs of its complaint, 49 of which are identified as “facts common to all counts.” The first “common fact” alleges that the “claims” “for relief at issue in this case had their genesis in Harari’s breach of [ ] fiduciary and other legal obligations while an employee, officer and/or director of” ST’s predecessor-in-interest, WSI. The common facts alleged outline Harari’s relationship to WSI, his contractual obligations to WSI to maintain confidentiality regarding proprietary information belonging to WSI during and after his employment there, his contractual and fiduciary obligation to disclose to WSI all inventions he made or conceived during his employment and to assign to WSI all his rights to such inventions; and his failure to disclose or assign to WSI four patent applications he filed while a director and consultant to WSI.
ST’s factual allegations common to all counts further set forth Harari’s failure to disclose to the WSI Board of Directors after he tendered his resignation but before the Board accepted it that he filed two other patent applications related to objects then under development at WSI; his founding of competitor SanDisk while a director of WSI; his assignment of the six patents to SanDisk, “thereby benefiting a company in direct competition with WSI,” with resulting injury to ST, WSI’s successor-in-interest; and SanDisk’s 2004 actions in the Northern District of California and the United States International Trade Commission for infringement of patent ‘338 and its 2005 counterclaim in the Eastern District of Texas for infringement of patents ‘812 and ‘808.
The cause of action for unfair competition begins at paragraph 97 by incorporating these general facts as well as all paragraphs of the preceding six causes of action. It then alleges:
“98. Harari had contractual and fiduciary obligations to assign the patent applications which led to issuance of the ‘338, ‘812, and ‘808 patents to WSI. Had Harari complied with his contractual and fiduciary obligations, ST, as WSI’s successor-in-interest would be the current owner of the ‘338, ‘812, and ‘808 patents which SanDisk is presently asserting against ST, as well as a large number of additional patents which issued or claim priority from applications which should have been assigned to WSI.
“99. SanDisk has sued ST for infringement of the ‘338, ‘812, and ‘808 patents—patents which rightfully should be assigned to ST as successor-in-interest to WSI.
“100. SanDisk’s patent infringement actions based on patents that it improperly obtained to the detriment of ST constitute an unfair or unlawful business practice in violation of [] Business & Professions Code § 17200 et seq.
“101. ST has suffered injury in fact and has lost money as a direct result of defendants’ unfair or unlawful business practices, including, at least, the substantial funds which ST has been forced to expend to defend itself against SanDisk’s infringement actions.
“102. The continuing wrongful conduct of defendants, as alleged above, unless and until restrained by order of this Court, will cause great and irreparable harm to ST.”
The cause of action for unfair competition, read in the context of the complaint as a whole, does not reasonably manifest a cause of action that was based on an act SanDisk took in furtherance of its right of petition, i.e., the filing of its patent infringement actions. The gravamen of ST’s complaint is that Harari misappropriated or wrongfully transferred patents to SanDisk that by right belonged to WSI, and, by extension, to ST; SanDisk was aware of the misappropriation; and the two defendants were unjustly benefiting therefrom. The cause of action for unfair competition, the seventh and final cause of action in the complaint, is simply one of the several theories under which ST expressed its legal entitlement to a remedy for that wrong.
SanDisk bases its contention that ST’s unfair competition cause of action “arose from” SanDisk’s protected activity in paragraphs 100 and 101 of ST’s complaint. As SanDisk paraphrases/quotes these paragraphs: “ ‘SanDisk’s patent infringement actions’ against ST are alleged to ‘constitute an unfair or unlawful business practice’ in violation of Section 17200” [referring to paragraph 100 of ST’s complaint; see, ante], and “ST pleads that it has suffered injury-in-fact based on ‘the substantial funds which ST has been forced to expend to defend itself against SanDisk’s infringement actions’ ” [referring to paragraph 101].
Relying on section 425.10, subdivision (a)(1), SanDisk asserts that ST cannot transmogrify its unfair competition cause of action based on SanDisk’s protected activity, i.e., filing the patent infringement actions, into a cause of action based on unprotected activity by having the court or SanDisk “scour [the preceding] 96 paragraphs of allegations in an attempt to identify some inchoate, but unarticulated, unfair competition claim while ignoring the one that was pled.”
As edited by SanDisk and isolated from the rest of the cause of action, these sentences could imply that ST’s unfair competition cause of action “arose from,” i.e., was directly based on, SanDisk’s right of petition. However, when all the paragraphs of the unfair competition cause of action (paragraphs 97-102) are read in their entirety, in relation to one another, and in relation to the complaint as a whole, the cause of action can be seen to have arisen from the underlying controversy that prompted SanDisk’s federal patent infringement actions—who was the rightful owner of the patents? It did not arise from the infringement actions themselves.
Paragraph 98 reiterates earlier assertions that ST would be the owner of the three patents SanDisk presently asserts it owns, as well as others, but for Harari’s breach of his obligation to assign them to WSI.
Paragraph 99 reiterates that the patents that form the basis of SanDisk’s suit should be assigned to ST.
Noticeably omitted from SanDisk’s edited quote of paragraph 100 is the italicized phrase: “SanDisk’s patent infringement actions based on patents that it improperly obtained to the detriment of ST constitute an unfair or unlawful business practice in violation of” Business and Professions Code section 17200 (emphasis added). While perhaps not a model of grammatical precision, the sentence, when read together with the balance of the cause of action, asserts that the unfair business practice is SanDisk’s improper acquisition of the patents; it is not the filing of the infringement actions.
Paragraph 102, the final paragraph of the unfair competition cause of action, states: “The continuing wrongful conduct of defendants, as alleged above, unless and until restrained by order of this Court, will cause great and irreparable harm to ST.” The above alleged “wrongful conduct” refers to Harari’s breach of his obligation to assign the patents to WSI, and SanDisk’s improper acquisition of these patents, not SanDisk’s patent infringement actions.
The prayer bears out such a reading. It seeks the relief “That ownership of all patents which issued or claim priority from the applications filed by Harari during and after his tenure as an officer and/or director of WSI, which should have properly been assigned to WSI, be assigned to [ST], as the sole owner if Harari is the sole inventor or as a co-owner if Harari is a co-inventor.” The unfair competition statutory scheme specifically provides for restitutionary relief. (Bus. & Prof. Code, § 17203.) It permits a court to restore property acquired through unfair practices to a person with a vested interest in the property. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1147-1149.) Patents have the attributes of personal property (35 U.S.C. § 261). ST, as WSI’s successor-in-interest, conceivably had a vested interest in the disputed patents through Harari’s contractual obligation to assign them to WSI. Thus, ST’s prayer for restitution stems from the unfair practice of misappropriation and wrongful acquisition of the patents.
Business and Professions Code section 17203 states: “Any person who engages, has engaged, or proposed to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments . . . as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition . . . as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.”
SanDisk argues that the unfair practices cause of action arises solely from its protected activity of filing the patent infringement actions because ST did not plead any facts alleging that SanDisk had engaged in unfair competition by acquiring patents that should have been assigned to WSI; rather, its cause of action singled out the three patents on which SanDisk had filed its infringement actions.
The unfair competition cause of action is not so limited. While those three patents are specifically identified, the cause of action also alleges that, but for Harari’s breach of his contractual and fiduciary obligations, ST would also be the owner of a “large number of additional patents” that should have been assigned to WSI. Elsewhere in the preceding paragraphs of the complaint—again, incorporated by reference—ST alleges that Harari assigned to SanDisk 50 patents that resulted from applications he filed while affiliated with WSI.
SanDisk argues that the four year statute of limitations for Business and Professions Code section 17200 claims demonstrates that ST’s unfair competition cause of action arises from its protected activity of filing the patent infringement actions. It asserts that ST’s complaint reveals that the only unfair actions alleged to have taken place in the four year time frame were SanDisk’s patent infringement actions.
We reiterate that ST’s cause of action for unfair competition is based on misappropriation or wrongful assignment of patents and SanDisk’s improper obtaining of them. If this wrongful assignment and improper acquisition occurred beyond the statute of limitations applicable to a claim of unfair competition, the cause of action may be subject to a demurrer, but that does not avoid the conclusion that the unfair competition claim “arise from” appellants’ alleged misappropriation and improper acquisition. In a challenge to the sufficiency of the allegations, ST would be entitled to argue why the unfair competition cause of action is not time-barred, or be given the opportunity to amend its complaint to allege facts that bring the cause of action within the statute of limitations.
SanDisk argues that even if ST’s unfair competition claim is viewed as a “mixed” cause of action directed to protected and unprotected activities, the protected activities were “not merely incidental” to the claim.
“Where both constitutionally protected and unprotected conduct is implicated by a cause of action, a plaintiff may not ‘immunize’ a cause of action challenging protected free speech or petitioning activity from [an anti-SLAPP motion] by the artifice of including extraneous allegations concerning nonprotected activity. [Citation.] Thus, when allegations of nonprotected activity are incidental or collateral to a plaintiff’s claim challenging primarily the exercise of the rights of free speech or petition, they may be disregarded in determining whether the cause of action arises from protected activity. Conversely, if the allegations of protected activity are only incidental to a cause of action based essentially on nonprotected activity, the mere mention of the protected activity does not subject the cause of action to an anti-SLAPP motion.” (Scott v. Metabolife Internat., Inc. (2004) 115 Cal.App.4th 404, 414; see also Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 672.)
ST’s reference to SanDisk’s patent infringement actions in its unfair competition cause of action is, at most, tangential to the central thrust of ST’s claim. ST is not seeking redress from SanDisk for its petitioning activities. It seeks a remedy for the injuries it allegedly has sustained or will sustain as a result of SanDisk’s misappropriation of the patents that Harari should have assigned to ST but allegedly wrongfully assigned to SanDisk. Those alleged injuries occurred or will occur regardless of whether SanDisk filed the patent infringement actions. The reference to the infringement actions is relevant only as illustrative of SanDisk’s alleged misappropriation of the patents.
We conclude that ST’s cause of action for unfair competition did not arise out of SanDisk’s protected activity of filing patent infringement actions. Therefore, we do not reach the second prong of the anti-SLAPP analysis, because the burden did not shift to ST to demonstrate a probability of prevailing on its unfair competition cause of action.
SanDisk asserts on appeal that its objections to statements in ST’s opposition to the anti-SLAPP motion and to the admissibility of statements in ST’s complaint were improperly overruled. This assertion is mooted by our conclusion because these assertedly objectionable statements pertain to the second prong of an anti-SLAPP analysis.
DISPOSITION
The order denying SanDisk’s special motion to strike is affirmed.
We concur: Gemello, J. Needham, J.
As discussed, post, the unfair competition cause of action is one of seven causes of action in ST’s present complaint.
In response, the superior court entered an order granting the change of venue. Thereafter, we discharged the alternative writ, dismissed SanDisk’s petition as moot as to the venue ruling, and denied it as to the anti-SLAPP motion.
This statute does not assist SanDisk. It states that “A complaint . . . shall contain . . . [¶] (1) [a] statement of the facts constituting the cause of action, in ordinary and concise language.” A complaint, like ST’s, that sets out factual allegations common to all counts and which then incorporates those factual allegations in each count by reference, pleads its claim in compliance with section 425.10 subdivision (a)(1). Realleging the facts with each count would be contrary to the “concise” pleading requirement.