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Lifesize, Inc. v. Chimene

United States District Court, W.D. Texas, Austin Division

April 26, 2017

LIFESIZE, INC., Plaintiff,
BEAU CHIMENE, Defendant.



         Before the Court is Defendant Beau Chimene's Motion to Dismiss, (Dkt. 13). Having reviewed the pleadings, the relevant case law, and the factual record, the Court issues the following order.


         Plaintiff Lifesize, Inc. (“Plaintiff”) is a Delaware corporation with its principal place of business in Austin, Texas. Plaintiff is in the business of developing hardware, software, and equipment for audio, web, and video conferencing and related services. Defendant Beau Chimene (“Defendant”) is an individual residing in Austin, Texas. He was an employee of Plaintiff's purported predecessor in interest, Lifesize Communications, Inc., formerly known as KMV Technologies Inc. He is currently employed by Logitech.

         Defendant began working for KMV Technologies (“KMV”) as a senior engineer on February 23, 2004. In this capacity, he managed a team that developed and maintained the company's audio subsystems, hardware, and software and was privy to sensitive technological information. As a condition of his employment, Defendant executed an Employee Proprietary Information and Inventions Agreement (“Inventions Agreement”). The Inventions Agreement provided, among other things, that Defendant would keep confidential KMV's proprietary and confidential information during his employment and at all times thereafter, and that he would assign to KMV all intellectual property he developed during his employment. It also required him to return all company property upon the termination of his employment. The Inventions Agreement stated that these obligations would bind Defendant's successors and be for the benefit of KMV, its successors, and its assigns.

         At some point thereafter, KMV changed its name to Lifesize Communications, Inc. (“LCI”). LCI was acquired by Logitech in 2009 and continued its business first as a subsidiary and later as a division of Logitech. Defendant asserts that he became an employee of Logitech in January 2010 and was required to sign an “Employee Agreement Regarding Proprietary Information and Inventions” (the “2009 Employee Agreement”) that had provisions similar to those in Defendant's 2004 Inventions Agreement with KMV.

         After the acquisition of LCI by Logitech, Defendant continued to serve as manager of the audio team for the LCI subsidiary. During this time, Defendant led the effort to make significant developments of LCI's speakerphone and related products. Two years of these efforts culminated in the release of LCI's second-generation speakerphone on February 28, 2012. According to Plaintiff, LCI's second-generation speakerphone represented a significant advancement in the quality and performance of speakerphones.

         Plaintiff alleges that, unbeknownst to the LCI team, Logitech had another team concurrently developing a speakerphone and videoconferencing system that would compete directly with LCI's second-generation speakerphone and videoconferencing system. Logitech announced its system, the ConferenceCam CC3000e (“the CC3000e”), in January 2014. According to Plaintiff, the CC3000e was plagued with problems, received poor reviews, and was generally perceived to be an inferior product compared to LCI's system. Following the purportedly unsuccessful release of the CC3000e, Plaintiff alleges that Logitech employees responsible for the CC3000e's development began reaching out to LCI's employees, including Defendant, to seek advice on how to improve the performance of their product. The LCI management was reluctant to share its intellectual property to assist in the development of a competing product. When Defendant sought approval to share information with Logitech employees, LCI management denied his request.

         In or around October 2014, Defendant tendered his resignation from his employment at Logitech, indicating that he would leave his position at LCI to pursue other interests. Defendant retained a company-issued laptop and two engineering notebooks when he left.

         In December 2015, Logitech spun off Lifesize, Inc., Plaintiff here, as a separate business entity. The record shows that Plaintiff is distinct from LCI, which remains fully owned by Logitech, though it appears Plaintiff carries on largely the same business which LCI had previously. As part of the spin-off, the parties executed an Intellectual Property Agreement (the “2015 IPA”), transferring certain technology and intellectual property (“IP”) from Logitech and its affiliates (presumably including LCI) to Plaintiff and licensing a portion of the transferred IP back to Logitech. The IP encompassed within this agreement was all IP relating to Plaintiff's business, including videoconferencing devices such as its second-generation speakerphone.

         Shortly after the spin-off, Plaintiff became aware that Defendant had accepted employment with Logitech. Plaintiff alleges that Defendant was or is working on Logitech's conference room products. Concerned that Defendant may be using its confidential information to develop competing products, Plaintiff requested written confirmation from Defendant that he would not disclose any confidential information to Logitech, that he had not retained any material containing its confidential information, and that he is not developing or assisting in the development of audio hardware, software, or subsystems for Logitech's competing products. Plaintiff received a response from Logitech's Deputy General Counsel on April 20, 2016. The response indicated that Defendant had not retained any of Plaintiff's materials and that Logitech had instructed Defendant not to disclose any confidential information in his work at Logitech. It contained no response to Plaintiff's request that Defendant not work on competing videoconferencing products.

         On May 4, 2016, Logitech's outside counsel contacted Plaintiff and revealed that Defendant had retained the laptop and two engineering notebooks that had been provided to Defendant while he was working at LCI. According to Plaintiff, Defendant used these items during the time he was engaged in developing LCI's second-generation speakerphone. Logitech returned the notebooks on or around May 23, 2016. Plaintiff alleges that the notebooks contained a trove of trade secrets from four years of Defendant's work at LCI. Logitech also returned the laptop, but not before Defendant provided it to Logitech's computer forensics expert, who deleted all files created or modified after November 17, 2014-a date roughly coinciding with the end of Defendant's work with LCI. The forensics expert also copied the deleted files, and has so far allegedly prevented Plaintiff from accessing them.

         Plaintiff alleges that Logitech has refused its requests to reassign Defendant to work in an area that would not risk the disclosure of Plaintiff's trade secrets, and that Logitech refuses to provide assurances that Defendant is not working on developing competing products. Plaintiff asserts that Logitech has taken the position that it is entitled to use Plaintiff's IP in the creation of its competing products, pursuant to the terms of the IP Agreement executed as part of the spin-off of Plaintiff from Logitech.

         Plaintiff has filed the instant lawsuit against Defendant, though not Logitech, alleging misappropriation of trade secrets, breach of contract, theft, conversion, trespass to personal property, and violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Defendant moves to dismiss these claims under Rules 12(b)(1) and 12(b)(6), arguing that the Plaintiff lacks standing to assert them and, alternatively, that the allegations fail to state a claim on which relief may be granted.


         I. Rule 12(b)(1)

         A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) calls into question the federal court's subject-matter jurisdiction. There are three avenues for a movant to demonstrate a lack of jurisdiction: (1) on the face of the complaint alone; (2) the complaint supplemented by undisputed facts in the record; and (3) the complaint supplemented by undisputed facts and the court's resolution of disputed facts. Montez v. Dep't of Navy, 392 F.3d 147, 149 (5th Cir. 2004). The burden of demonstrating that jurisdiction exists rests at all times with the party invoking the court's jurisdiction. Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001).

         Where a jurisdictional challenge is raised, the court is generally “free to weigh the evidence and resolve factual disputes in order to satisfy itself that it has the power to hear the case.” Montez, 392 F.3d at 149. “However, where issues of fact are central both to subject matter jurisdiction and the claim on the merits, . . . the trial court must assume jurisdiction and proceed to the merits.” Id. at 150 (finding that the issue of respondeat superior was central to plaintiffs' negligence claim and inappropriate for resolution under Rule 12(b)(1)).

         II. Rule 12(b)(6)

         When evaluating a motion to dismiss for failure to state a claim under Rule 12(b)(6) the complaint must be liberally construed in favor of the plaintiff and all facts pleaded therein must be taken as true. Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164 (1993); Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). Although Federal Rule of Civil Procedure 8 mandates only that a pleading contain a “short and plain statement of the claim showing that the pleader is entitled to relief, ” this standard demands more than unadorned accusations, “labels and conclusions, ” “a formulaic recitation of the elements of a cause of action, ” or “naked assertion[s]” devoid of “further factual enhancement.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Id. at 570. “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).

         The court must initially identify pleadings that are no more than legal conclusions not entitled to the assumption of truth, then assume the veracity of well-pleaded factual allegations and determine whether those allegations plausibly give rise to an entitlement to relief. If not, the complaint has alleged-but it has not show[n]-that the pleader is entitled to relief. Iqbal, 556 U.S. at 679 (quoting Fed.R.Civ.P. 8(a)(2)). Throughout this process, the court “must consider the complaint in its entirety, as well as other sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to dismiss, in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).


         The Court first addresses Defendant's jurisdictional arguments and then turns to Defendant's motion to dismiss for failure to state a claim.

         I. Defendant's Rule 12(b)(1) Motion

         Defendant argues that the Court has no subject-matter jurisdiction over this case because Plaintiff lacks standing to pursue its claims. Standing, of course, is an indispensable component of subject-matter jurisdiction. Roman Catholic Diocese of Dall. v. Sebelius, 927 F.Supp.2d 406, 415 (N.D. Tex. 2013) (citing Xerox Corp. v. Genmoora Corp., 888 F.2d 345, 350 (5th Cir. 1989)). Thus, if Plaintiff indeed lacks standing, the Court must dismiss its claims.

         Defendant's standing arguments go to each of Plaintiff's claims and primarily arise from the peculiar history and relationship between Logitech and Plaintiff. For example, with respect to Plaintiff's theft, conversion, breach of contract, and Computer Fraud and Abuse Act claims- predicated largely on Defendant's retention of a laptop and two engineering notebooks-Defendant argues that Plaintiff lacks standing because Logitech, not Plaintiff, purchased and owns those items. Similarly, Defendant argues that Logitech, not Plaintiff, holds the rights arising under his 2004 Inventions Agreement with KMV, and that Plaintiff cannot assert a claim for breach of that contract because it was never assigned to Plaintiff. Finally, Defendant alleges that Plaintiff can assert no claim for misappropriation of trade secrets because Plaintiff “never employed [Defendant] and never owned the Laptop and notebooks, ” and thus presumably cannot establish that Defendant wrongfully acquired Plaintiff's trade secrets. (Def.'s Mot. Dismiss, Dkt. 13, at 9). The Court will evaluate each of Defendant's arguments in turn.

         A. Counts 1 & 2: Misappropriation of Trade Secrets

         Defendant's arguments concerning Plaintiff's lack of standing to assert misappropriation of trade secrets claims are a bit unclear. While he argues that a plaintiff can bring a misappropriation claim under state and federal law only if he or she has an enforceable property interest in a trade secret, he does not seem to contest that Plaintiff here has some enforceable property interest in the trade secrets at issue. Instead, Defendant appears to argue that he did not obtain the trade secrets stored within the laptop and notebooks by improper means because Logitech, not Plaintiff, owned those items, and because Logitech, not Plaintiff, was his employer and owner of the trade secrets when he accessed them.

         To the extent Defendant does contest Plaintiff's ownership of the trade secrets, it is clear from the record that Logitech transferred to Plaintiff the trade secrets that form the basis of Plaintiff's claims. The 2015 IPA between Logitech and Plaintiff provided that “Logitech . . . hereby transfers, assigns and conveys to Company all of Logitech's right, title and interest in and to (i) the Transferred Patents, Transferred Trademarks and Transferred Other IP . . . and (ii) the Transferred Technology. . . .” (2015 IPA, Dkt. 13-4, at 99). Transferred Other IP is defined as “items of Other IP owned by Logitech or any of its Affiliates . . . and that are embodied by any Technology listed on Schedule D.” (Id.). Other IP is, in turn, defined as “Intellectual Property Rights other than Patents, Domain Names and Trademarks.” Next, the 2015 IPA defines Intellectual Property Rights as “all rights arising out of the following . . . (i) patents . . . (ii) trade-secret rights and all other rights in confidential business or technical information, (iii) copyrights . . . (iv) domain names . . . and (v) any similar or equivalent rights to any of the foregoing . . . .” (Id. at 97-98 (emphasis added)). Schedule D to the 2015 IPA, which defines the class of Transferred Other IP, includes the second-generation speakerphone that is at issue here. (Schedule D, Dkt. 18-7, at 41). Thus, the 2015 IPA unambiguously (though perhaps convolutedly) transfers from Logitech to Plaintiff the trade secrets relevant to Plaintiff's second-generation speakerphone.

         Defendant's remaining arguments concerning the entity that employed him and owned the laptop and notebooks address whether Defendant acquired the trade secrets through improper means. (See Def, 's Mot. Dismiss, Dkt. 13, at 7 (“[Plaintiff's] misappropriation of trade secrets claims are premised on the allegation that [Defendant] acquired through improper means [Plaintiff's] trade secrets, breaching contractual duties to return notebooks and the Laptop.”)). As such, these are arguments of contested facts attacking an essential element of Plaintiff's claim and are inappropriately considered on a Rule 12(b)(1) motion. See Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006) (“[I]f subject-matter jurisdiction turns on contested facts, the trial judge may be authorized to review the evidence and resolve the dispute on her own . . . . If satisfaction of an essential element of a claim for ...

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