Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 1 of 17 Page ID #:1096
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`Date February 18, 2021
`Case No. CV 20-7872-GW-PVCx
`Title
`Nantworks, LLC, et al. v. Bank of America Corporation, et al.
`
`Present: The Honorable GEORGE H. WU, UNITED STATES DISTRICT JUDGE
`Javier Gonzalez
`Terri A. Hourigan
`Tape No.
`Deputy Clerk
`Court Reporter / Recorder
`Attorneys Present for Plaintiffs:
`Attorneys Present for Defendants:
`Todd M. Briggs
`George C. Lombardi
`James R. Asperger
`Michael S. Elkin
`PROCEEDINGS:
`TELEPHONIC HEARING ON DEFENDANTS BANK OF AMERICA
`CORPORATION AND BANK OF AMERICA, N.A.'S PARTIAL
`MOTION TO DISMISS PLAINTIFFS' FIRST AMENDED
`COMPLAINT [50; U/S 53; and SCHEDULING CONFERENCE
`
`The Court’s Tentative Ruling is circulated and attached hereto. Court hears oral argument. For reasons
`stated on the record, Defendants’ Motion is continued to February 25, 2021 at 8:30 a.m. The parties are
`to meet and confer, and attempt to resolve.
`
`The scheduling conference is continued to February 25, 2021 at 8:30 a.m. The parties are to file a joint
`scheduling report by noon on February 22, 2021.
`
`CV-90 (06/04)
`
`CIVIL MINUTES - GENERAL
`
`Page 1 of 1
`
`Initials of Preparer
`
`JG
`
`:
`
`20
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 2 of 17 Page ID #:1097
`
`Nantworks, LLC et al v. Bank Of America Corporation et al; Case No. 2:20-cv-07872-GW-(PVCx)
`Tentative Ruling on Motion to Dismiss Following Supplemental Briefing
`
`
`I. Background
`
`Plaintiffs NantWorks, LLC and Nant Holdings IP, LLC (collectively, “NantWorks”) sued
`Defendants Bank of America Corporation and Bank of America, N.A. (collectively, “Bank of
`America”) and currently asserts twelve claims for relief: eight claims of patent infringement
`(Counts 1 through 8); one copyright infringement claim (Count 9); a claim for violating the federal
`Defend Trade Secrets Act (“DTSA”) (Count 10); a claim for violating the California Uniform
`Trade Secrets Act (“CUTSA”) (Count 11); and a claim for breach of contract under New York and
`California law (Count 12). See generally First Amended Complaint (“FAC”), Docket No. 40.
`Before the Court is Bank of America’s partial motion to dismiss NantWork’s non-patent claims,
`i.e., Counts 9 through 12. See Defendants’ Partial Motion to Dismiss Plaintiffs’ First Amended
`Complaint (“Motion”), Docket No. 53 (filed under seal).
`NantWorks’ claims are based on the allegation that Bank of America misappropriated its
`image recognition technology for use in the Bank’s mobile check deposit product. See FAC ¶ 13.
`NantWorks alleges that one of Bank of America’s executives observed a demonstration of this
`image recognition technology in 2010,1 and approached NantWorks regarding a partnership
`involving image recognition solutions for mobile devices. See id. ¶ 14. The parties entered into a
`series of agreements enabling Bank of America to evaluate NantWorks’ image recognition
`technology for Bank of America’s potential use in its mobile check deposit software. See id. ¶ 23.
`The agreements purportedly provided NantWorks’ confidential technical information to Bank of
`America for the limited purpose of evaluating NantWorks’ technology. See id. The parties then
`entered into a collaboration agreement in 2011, which similarly limited Bank of America’s use of
`the image recognition technology and required Bank of America to return or destroy any
`confidential information upon the agreement’s termination. See id. ¶ 24. NantWorks allegedly
`agreed to develop a mobile check deposit solution addressing the issues exhibited by Bank of
`America’s existing system with the understanding that if NantWorks’ solution performed better
`
`
`1 The FAC refers to Plaintiff NantWorks and its predecessor entities collectively as “NantWorks.” See FAC
`¶ 14, n.1. According to the FAC, NantWorks was formed in 2011 and, through predecessor companies, “acquired a
`number of image recognition companies, including IPPLEX in August 2010 and Evryx in February 2011.” See id.
`
`
`
`1
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 3 of 17 Page ID #:1098
`
`than Bank of America’s solution, Bank of America would incorporate NantWorks’ solution into
`its mobile banking application and compensate NantWorks for use of the technology and
`intellectual property. See id. ¶ 25.
`In 2012, NantWorks allegedly provided Bank of America with demonstration applications
`containing NantWorks’ proprietary mobile check deposit technology. See id. ¶¶ 26, 27. Bank of
`America purportedly tested its own mobile check deposit software against NantWorks’ software,
`which demonstrated that NantWorks’ technology was superior. See id. ¶ 28. Nevertheless, Bank
`of America allegedly released the first commercial version of its mobile banking application with
`its own mobile check deposit software in July 2012. See id. ¶ 29. Bank of America continued to
`express interest in implementing NantWorks’ technology. See id. ¶ 30. In early 2013, NantWorks
`shared additional information about its mobile check deposit solution with Bank of America,
`including developer manuals and header files. See id. ¶ 31. NantWorks alleges that the header
`files included information that allowed Bank of America to incorporate NantWorks’ mobile check
`deposit technology into its own mobile checking application. See id. Bank of America purportedly
`began expressing less interest after receiving this information, and ceased communications about
`the project. See id. ¶ 32. NantWorks believed that Bank of America had decided to develop its
`own mobile check deposit technology, and that Bank of America would honor its agreements to
`cease all use of and return or destroy NantWorks’ confidential information. See id. ¶ 33.
`
`In 2018, NantWorks allegedly discovered that Bank of America had continued to use the
`mobile check deposit software NantWorks provided in 2013. See id. ¶ 34. NantWorks had
`initiated an investigation to determine whether companies, including Bank of America, were using
`its patented technologies, and discovered a software development database that was used for
`testing and debugging during the development of NantWorks’ mobile check deposit software. See
`id. The database purportedly recorded certain reports regarding when and from what networks
`NantWorks’ software was accessed and used. See id. NantWorks allegedly discovered a large
`number of reports from 2014, 2015, 2016, 2017, and 2018, and information within the reports
`indicated the use of NantWorks’ software originated from Bank of America networks. See id. ¶
`35.
`
`NantWorks alleges that Bank of America accessed and used NantWorks’ mobile check
`deposit software hundreds of times during those years “to gain an understanding of how
`NantWorks’ software functioned and acquire trade secrets within NantWorks’ software.” See id.
`
`
`
`2
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 4 of 17 Page ID #:1099
`
`¶ 36. Bank of America then purportedly incorporated and used NantWorks’ trade secrets in
`different versions of its own mobile check deposit software. See id. There were several instances
`where a high number of reports originating from Bank of America networks were followed by
`changes to Bank of America’s software that significantly improved its mobile check deposit
`functionality. See id. ¶ 37. The software development database allegedly continued to receive
`reports into the spring of 2018, but stopped after NantWorks discovered the reports and requested
`a meeting with Bank of America to discuss its unauthorized use of NantWorks’ intellectual
`property. See id. ¶ 38.
`
`NantWorks filed a complaint in August 2020 and a First Amended Complaint in November
`2020, after Bank of America filed its first partial motion to dismiss NantWorks’ non-patent claims.
`See Docket Nos. 1, 23, 40. Bank of America filed the instant partial motion to dismiss on
`December 2, 2020. See Motion. NantWorks filed an opposition brief, see Opposition to Partial
`Motion to Dismiss (“Opp’n”), Docket No. 56, and NantWorks filed a reply brief. See Reply in
`Support of Partial Motion to Dismiss (“Reply”), Docket No. 62 (filed under seal).
`II. Legal Standard
`Bank of America brings its partial motion to dismiss under Federal Rules of Civil
`Procedure 12(b)(1) and 12(b)(6). See Motion at 4-5.
`A. Rule 12(b)(1)
`Dismissal pursuant to Rule 12(b)(1) is appropriate where either the complaint or evidence
`extrinsic to the complaint demonstrates that the court lacks subject matter jurisdiction over the
`action. See Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). Standing pertains to a
`court’s subject matter jurisdiction, and therefore is properly the subject of a Rule 12(b)(1)
`motion. See White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000).
`“Article III of the Constitution requires that a plaintiff have standing before a case may be
`adjudicated.” Covington v. Jefferson Cnty., 358 F.3d 626, 637 (9th Cir. 2004). For Article
`III standing, a plaintiff must show: (1) she has suffered an “injury in fact” that is (a) concrete and
`particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly
`traceable to the defendant’s challenged action; and (3) it is likely, as opposed to merely speculative,
`that the injury will be redressed by a favorable decision. See, e.g., Nuclear Info. & Res. Serv. v.
`Nuclear Regulatory Comm’n, 457 F.3d 941, 949 (9th Cir. 2006); Lujan v. Defenders of Wildlife,
`504 U.S. 555, 560-61 (1992).
`
`
`
`3
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 5 of 17 Page ID #:1100
`
`B. Rule 12(b)(6)
`Under Rule 12(b)(6), a defendant may move to dismiss for failure to state a claim upon
`which relief can be granted. Fed. R. Civ. P. 12(b)(6). A complaint may be dismissed for failure
`to state a claim for one of two reasons: (1) lack of a cognizable legal theory; or (2) insufficient
`facts under a cognizable legal theory. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see
`also Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008) (“Dismissal
`under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or
`sufficient facts to support a cognizable legal theory.”). The court must construe the complaint in
`the light most favorable to the plaintiff, accept all allegations of material fact as true, and draw all
`reasonable inferences from well-pleaded factual allegations. Gompper v. VISX, Inc., 298 F.3d 893,
`896 (9th Cir. 2002); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001),
`amended on denial of reh’g, 275 F.3d 1187 (9th Cir. 2001); Cahill v. Liberty Mutual Ins. Co., 80
`F.3d 336, 337-38 (9th Cir. 1996).
`The court is not required to accept as true legal conclusions couched as factual allegations.
`Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Where a plaintiff facing a 12(b)(6) motion has pleaded
`“factual content that allows the court to draw the reasonable inference that the defendant is liable
`for the misconduct alleged,” the motion should be denied. Id.; Sylvia Landfield Trust v. City of
`Los Angeles, 729 F.3d 1189, 1191 (9th Cir. 2013). But if “the well-pleaded facts do not permit
`the court to infer more than the mere possibility of misconduct, the complaint has alleged – but it
`has not show[n] . . . the pleader is entitled to relief.” Iqbal, 556 U.S. at 679 (citations omitted).
`III. Discussion
`A. Copyright Infringement Claim (Count 9)
`NantWorks’ copyright infringement claim is based on its mobile check deposit software,
`known as its “Advanced Mobile Deposit Software.” See FAC ¶ 187. Bank of America argues that
`NantWorks lacks standing to assert this claim for copyright infringement because the FAC
`establishes that NantWorks does not own the copyright to the Advanced Mobile Deposit Software.
`See Motion at 6.
`Section 501(b) of the 1976 Copyright Act provides that “[t]he legal or beneficial owner of
`an exclusive right under a copyright is entitled, subject to the requirements of section 411, to
`institute an action for any infringement of that particular right committed while he or she is the
`owner of it.” 17 U.S.C. § 501(b). Accordingly, “[t]o be entitled to sue for copyright infringement,
`
`
`
`4
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 6 of 17 Page ID #:1101
`
`the plaintiff must be the legal or beneficial owner of an exclusive right under a copyright.” See
`Silvers v. Sony Pictures Entm’t, Inc., 402 F.3d 881, 884 (9th Cir. 2005) (en banc) (quotation
`omitted). However, a copyright owner may transfer, in writing, any of the exclusive rights
`enumerated in 17 U.S.C. § 106. See id. at 885 (“Exclusive rights in a copyright may be transferred
`and owned separately”); 17 U.S.C. § 204(a) (“A transfer of copyright ownership, other than by
`operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the
`transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly
`authorized agent.”). The right to sue is not an exclusive right under 17 U.S.C. § 106. See Silvers,
`402 F.3d at 884.
`The FAC alleges the following:
`its subsidiary [NantMobile] LLC,
`187. NantWorks,
`through
`registered a version of its mobile check deposit software (“Advanced
`Mobile Deposit Software v. 1.0”) with the United States Copyright
`Office. A copy of the record of registration, Copyright Registration
`No. TX0008852717, is attached as Exhibit I.
`188. NantWorks LLC, owns and has a valid copyright in the
`NantWorks’ Advanced Mobile Deposit Software v. 1.0. NantMobile
`assigned its ownership rights in the NantWorks’ Advanced Mobile
`Deposit Software v. 1.0 to NantWorks prior to the filing of this
`action.
`See FAC ¶¶ 187, 188.
`The record of registration attached to the FAC lists NantMobile LLC (“NantMobile”) as
`the copyright owner of the Advanced Mobile Deposit Software v. 1.0. See id. Exh. I. Bank of
`America correctly notes that NantMobile is not a party to this case, see Motion at 7, and that
`copyright ownership by a subsidiary does not confer ownership on the parent corporation. See
`Reply at 4, n.5; see also Disenos Artisticos E Industriales, S.A. v. Costco Wholesale Corp., 97 F.3d
`377, 380 (9th Cir. 1996) (“DAISA owns the copyright, not Lladro Comercial or Lladro USA. It
`is true that DAISA is a subsidiary of Lladro Comercial, but that does not mean that the parent owns
`the copyright.”). NantWorks therefore does not own the copyright in the Advanced Mobile
`Deposit Software v. 1.0 simply because NantMobile is its subsidiary.
`Accordingly, the only way NantWorks would have standing to bring a claim for infringing
`the Advanced Mobile Deposit Software v. 1.0 copyright would be if NantMobile assigned to
`NantWorks, in writing, any of the exclusive rights enumerated in 17 U.S.C. § 106. See Silvers,
`402 F.3d at 884-85; 17 U.S.C. § 204(a). The FAC alleges that “NantMobile assigned its ownership
`
`
`
`5
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 7 of 17 Page ID #:1102
`
`rights in the NantWorks’ Advanced Mobile Deposit Software v. 1.0 to NantWorks prior to the
`filing of this action.” See FAC ¶ 188. However, Bank of America attaches to the instant motion
`an August 26, 2020 agreement – produced by NantWorks in this matter to confirm its copyright
`ownership – granting NantWorks “the right to assert any legal causes of action” that NantMobile
`may currently possess. See Exhibit 1 to Declaration of E. Danielle T. Williams in Support of
`Partial Motion to Dismiss (“Williams Decl.”), Docket No. 54 (filed under seal). Because the
`agreement does not transfer any exclusive rights enumerated in 17 U.S.C. § 106, and because the
`“bare assignment of an accrued cause of action” is insufficient to create standing to bring a
`copyright infringement claim under 17 U.S.C. § 501(b), this agreement does not establish that
`NantWorks has standing. See Silvers, 402 F.3d at 890.
`NantWorks’ opposition brief does not address the Ninth Circuit holding in Silvers. Instead,
`NantWorks argues that the agreement is not attached to the FAC or referenced therein, and that
`Bank of America therefore improperly relies on it to dispute the well-pleaded facts of copyright
`ownership. See Opp’n at 4. The Court would agree with Bank of America that NantWorks
`incorporated the agreement by reference into the FAC and that NantWorks’ copyright claim
`depends on it. See Motion at 8, n.1. Under the doctrine of incorporation by reference, courts may
`consider evidence on which the complaint relies if: (1) the complaint refers to the document; (2)
`the document is central to the plaintiff’s claim; and (3) no party questions the authenticity of the
`document. See Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006); Davis v. HSBC Bank Nevada,
`N.A., 691 F.3d 1152, 1159-60 (9th Cir. 2012). NantWorks alleges that “NantMobile assigned the
`ownership rights in the NantWorks’ Advanced Mobile Deposit Software v. 1.0 to NantWorks prior
`to the filing of this action,” thus referencing a written agreement, as any such assignment must be
`in writing. See FAC ¶ 188; 17 U.S.C. § 204(a). The agreement is central to the copyright claim,
`as NantWorks must establish that NantMobile transferred any of exclusive rights enumerated in
`17 U.S.C. § 106 in order to assert the claim. NantWorks does not contest the authenticity of the
`agreement, as it produced the agreement to Bank of America to confirm NantWorks’ copyright
`ownership. See Exhibit 2 to Williams Decl., Docket No. 50-3. The Court thus is entitled to
`consider the agreement.2
`
`
`2 See also Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (courts may take judicial notice of documents
`whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically
`attached to the plaintiff’s pleading).
`
`
`
`6
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 8 of 17 Page ID #:1103
`
`NantWorks contends that Bank of America improperly reads the assignment agreement “as
`necessarily standing alone and conclusively proving that NantWorks merely received the right to
`sue from its subsidiary NantMobile.” See Opp’n at 5-6. But NantWorks does not refer to another
`agreement in which NantMobile assigned to NantWorks exclusive rights under 17 U.S.C. § 106,
`and does not expressly state that any such agreement exists. Further, it is NantWorks’ burden to
`establish standing. See WildEarth Guardians v. U.S. Dept. of Agric., 795 F.3d 1148, 1154 (9th
`Cir. 2015). And while NantWorks states that discovery “will reveal additional evidence including
`further relevant agreements between NantMobile and NantWorks and evidence of their corporate
`relationship,” vaguely alluding to “further relevant agreements” is insufficient to meet that burden.
`At the January 25, 2021 hearing on the instant motion, counsel for NantWorks stated that
`there are “other agreements that make it crystal clear without a doubt that NantWorks is the owner
`of the copyright registration” and offered to submit those documents to the Court. See Transcript
`of January 25, 2021 Motion to Dismiss Hearing, Docket No. 71, at 25:12-26:12. The Court thus
`allowed the parties to file supplemental briefing and continued the hearing as to this issue to
`February 18, 2021. See Minutes of January 25, 2021 Telephonic Hearing, Docket No. 68, at 1.
`NantWorks filed its supplemental brief on February 1, 2021, see Plaintiffs’ Supplemental Brief
`Regarding Defendants’ Partial Motion to Dismiss First Amended Complaint (“NantWorks’ Suppl.
`Br.”), Docket No. 73, and Bank of America filed a response brief on February 8, 2021. See
`Defendants’ Response to Plaintiffs’ Supplemental Brief Regarding Defendants’ Partial Motion to
`Dismiss First Amended Complaint (“Bank of America’s Suppl. Br.”), Docket No. 74.
`NantWorks now requests that the Court dismiss the copyright infringement claim without
`prejudice, as NantWorks seeks to withdraw that claim “[i]n the interest of focusing the claims
`currently before this Court.” See NantWorks’ Suppl. Br. at 1. Bank of America contends that the
`Court should dismiss the claim with prejudice and cites cases wherein courts dismissed copyright
`claims with prejudice because the plaintiff failed to establish standing. See Bank of America’s
`Suppl. Br. at 2; see also Contra Piracy v. Does 1-2919, No. C-13-01133 EDL, 2013 WL 3828771
`at *4 (N.D. Cal. July 23, 2013) (dismissing plaintiff’s copyright claim with prejudice for lack of
`standing because plaintiff only held “the bare right to sue for copyright infringement”); Microhits,
`Inc. v. Deep Dish Prods., Inc., No. CV-10-36 PA (Ex), 2011 WL 13143434, at *2 (C.D. Cal. Jan.
`6, 2011) (dismissing copyright claim with prejudice for lack of standing where the plaintiff failed
`to provide “the document transferring the copyright at issue”); Righthaven LLC v. Choudhry, No.
`
`
`
`7
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 9 of 17 Page ID #:1104
`
`2:10-cv-02155-MMD-PAL, 2013 WL 3242711, at *2 (D. Nev. June 24, 2013) (dismissing
`copyright claim with prejudice because an agreement “revealed that [plaintiff] did not own the
`copyright at issue”).
`The Court would agree with Bank of America that it has discretion to dismiss NantWorks’
`copyright claim for lack of standing without leave to amend. See Bank of America’s Suppl. Br. at
`2; see also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139-40, 1145 (9th Cir. 2003)
`(affirming district court’s order dismissing copyright claim without leave to amend because
`plaintiff did not own the copyrights at issue and therefore did not have standing to sue for
`infringement).3
`As such, because NantWorks still has not provided any basis for the existence of an
`agreement conferring the necessary rights, the Court would dismiss NantWorks’ copyright
`infringement claim without leave to amend.4 The Court therefore need not address Bank of
`America’s remaining arguments as to NantWorks’ copyright infringement claim.
`B. Trade Secret Claims (Counts 10 and 11)
`Bank of America contends that the Court should dismiss NantWorks’ trade secret claims
`under the DTSA and CUTSA because: (1) they are untimely; (2) they are not pleaded with
`particularity; and (3) the CUTSA claim is preempted by the federal Copyright Act. See Motion at
`11-18.
`1. Whether NantWorks’ DTSA and CUTSA Claims are Timely
`Bank of America first argues that NantWorks’ trade secret claims are time-barred. See
`Motion at 11-14. A plaintiff may not bring a DTSA claim “later than 3 years after the date on
`which the misappropriation with respect to which the action would relate is discovered or by the
`exercise of reasonable diligence should have been discovered.” 18 U.S.C. § 1836(d). Similarly,
`a plaintiff must bring a CUTSA claim “within three years after the misappropriation is discovered
`or by the exercise of reasonable diligence should have been discovered.” Cal. Civ. Code § 3426.6.
`
`3 The Court also notes that NantWorks cited Kadva Patidar 42 Gam Samaj v. Cnty. of Riverside, 777 F.
`App’x 215, 217 (9th Cir. 2019) for the premise that dismissal without prejudice is appropriate here. See NantWorks’
`Suppl Br. at 1. The Ninth Circuit in that case construed the district court’s dismissal to be without prejudice because
`the district court did not specify whether it was with or without prejudice. However, the Ninth Circuit also held that
`the district court correctly determined that it lacked subject matter jurisdiction and “did not abuse its discretion by
`denying [plaintiff] leave to amend the complaint as any amendment would have been futile.” See Kadva Patidar, 777
`F. App’x 215 at 217.
`4 The dismissal without leave would only be as to the current situation. The Court expresses no opinion as
`to whether a subsequent change of events could provide Nantworks with the necessary standing.
`
`
`
`8
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 10 of 17 Page ID #:1105
`
`Under both statutes, “a continuing misappropriation constitutes a single claim.” See id.; 18 U.S.C.
`§ 1836(d). That is, “the continued improper use or disclosure of a trade secret after defendant’s
`initial misappropriation is viewed . . . as part of a single claim of ‘continuing misappropriation’
`accruing at the time of the initial misappropriation.” See Cadence Design Sys., Inc. v. Avant!
`Corp., 29 Cal. 4th 215, 218 (2002).
`NantWorks alleges that Bank of America misappropriated its trade secrets from 2014 until
`the spring of 2018. See FAC ¶¶ 38, 207, 217. Accordingly, Bank of America argues that the
`CUTSA claim arose in 2014 and the DTSA claim arose in 2016. See Motion at 13-14; see also
`Veronica Foods Co. v. Ecklin, No. 16-cv-07223-JCS, 2017 WL 2806706, at *13 (N.D. Cal. June
`29, 2017) (“[T]he DTSA applies only to ‘any misappropriation of a trade secret . . . for which any
`act occurs on or after [May 11, 2016,] the date of the enactment of [the] Act.’”) (quoting the Defend
`Trade Secrets Act of 2016, Pub. L. No. 114-153, 130 Stat. 376, 381-82 (May 11, 2016)). Because
`NantWorks did not file its initial complaint until August 2020, Bank of America contends that
`both claims fall outside the applicable statute of limitations, which expired in 2017 for the CUTSA
`claim and 2019 for the DTSA claim. See Motion at 13-14.
`NantWorks responds that the statute of limitations for either claim does not begin to run
`until the misappropriation is discovered or by the exercise of reasonable diligence should have
`been discovered, and that it did not discover the misappropriation until 2018. See Opp’n at 10, 13;
`see also 18 U.S.C. § 1836(d), Cal. Civ. Code § 3426.6. NantWorks alleges that in 2013, Bank of
`America expressed less interest in the mobile check deposit software project and ultimately ceased
`communications about it. See FAC ¶ 32. As such, because development of the software had
`ceased in 2013, NantWorks no longer had reason to access, and did not access, the development
`database used for testing and debugging the mobile check deposit software. See id. ¶ 34. Years
`later, NantWorks allegedly began an investigation to determine whether companies were using its
`patented technologies, and reviewed materials relating to its prior collaboration with Bank of
`America as part of the investigation, including the mobile check deposit software NantWorks had
`provided Bank of America. See id. The review purportedly led NantWorks to discover, in early
`2018, the development database, which recorded certain reports when NantWorks’ software was
`being accessed and used. See id. A large number of reports generated from 2014 to 2018 seemed
`to originate from Bank of America networks. See id. ¶ 35.
`NantWorks alleges that, based on its analysis of the timing of the reports in relation to the
`
`
`
`9
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 11 of 17 Page ID #:1106
`
`changes made to Bank of America’s mobile check deposit software, there were several instances
`where a high number of reports originating from Bank of America networks were followed by
`changes that significantly improved Bank of America’s mobile check deposit functionality. See
`id. ¶ 37. The software development database allegedly continued to receive reports into the spring
`of 2018, but stopped after NantWorks requested a meeting with Bank of America to discuss its
`unauthorized use of NantWorks’ intellectual property. See id. ¶ 38. Accordingly, NantWorks
`alleges that Bank of America accessed and used NantWorks’ mobile check deposit software “to
`gain an understanding of how NantWorks’ software functioned and acquire trade secrets within
`NantWorks’ software.” See id. ¶ 36. Bank of America purportedly incorporated NantWorks’ trade
`secrets in its own mobile check deposit software. See id.
`The Court would find that NantWorks adequately pleaded it did not discover the alleged
`trade secret misappropriation until 2018. There appears to be no reason NantWorks reasonably
`was expected to monitor the development database for the mobile check deposit software after the
`project terminated in 2013. The Court is unpersuaded by Bank of America’s argument that
`“NantWorks was on notice of the alleged misappropriation as of 2014, when the accused software
`was publicly released.” See Reply at 8-9.5 NantWorks’ allegation – based on a review of database
`reports in 2018 – that Bank of America “incorporated and used the NantWorks trade secrets” in
`“the commercially available versions of its mobile check deposit software that [Bank of America]
`has provided to its customers from 2014 to the present” does not establish that NantWorks was on
`notice of the alleged trade secret misappropriation in 2014. See id. (quoting FAC ¶¶ 207, 217).
`Similarly unavailing is Bank of America’s argument that “NantWorks had a duty to
`investigate its claims not later than October 2016 when it allegedly notified Bank of America that
`NantWorks’ patents covering the very same technology were ‘applicable’ to Bank of America’s
`mobile check deposit software.” See Reply at 8-9. The FAC states that in October 2016,
`NantWorks informed Bank of America of all the patents at issue in this matter. See FAC ¶ 57. It
`does not state that NantWorks informed Bank of America that the patents were applicable to Bank
`of America’s mobile check deposit software. See id. Instead, NantWorks alleges that because it
`informed Bank of America of all the asserted patents, Bank of America “had knowledge of each
`
`5 The Court notes that Bank of America did not raise any arguments regarding when NantWorks was “on
`notice” of the alleged misappropriation until its reply brief. District courts need not consider arguments raised for the
`first time in a reply brief, as responding parties do not have an opportunity to respond. See Zamani v. Carnes, 491
`F.3d 990, 997 (9th Cir. 2007). While the Court will address the arguments here, it will not do so going forward.
`
`
`
`10
`
`

`

`Case 2:20-cv-07872-GW-PVC Document 80 Filed 02/18/21 Page 12 of 17 Page ID #:1107
`
`of the Asserted Patents by October 2016, and knowledge that each of the Asserted Patents,
`including the ‘529 and ‘252 patents that it had been aware of since at least 2011, were applicable
`to [Bank of America’s] mobile check deposit solution. See id. That NantWorks informed Bank
`of America of the patents does not, as Bank of America argues, put NantWorks on notice that Bank
`of America misappropriated NantWorks’ trade secrets at that time. See Reply at 9.
`Bank of America cites cases holding that a publicly-available patent application that
`disclosed trade secrets put a plaintiff on notice of misappropriation. See, e.g., Wang v. Palo Alto
`Networks, Inc., No. C 121-05579 WHA, 2014 WL 1410346, at *6 (N.D. Cal. Apr. 11, 2014)
`(finding it was “crystal clear here that the contents of the ‘566 patent application revealed the
`alleged trade secrets in question” and holding, as a matter of law, this finding was dispositive and
`plaintiff’s trade secrets claim was time-barred as a result). Here, it is unclear at this stage in the
`litigation whether any of Bank of America’s patent applications contained NantWorks’ trade
`secrets. Further, given the allegation that “NantWorks believed that [Bank of America] had
`decided to continue to develop its own mobile check deposit technology” after 2013, the fact that
`NantWorks had actual notice of Bank of America’s mobile check deposit software does not trigger
`the statute of limitations. See FAC ¶ 33; Reply at 9. As such, construing the FAC in the light most
`favorable to Plaintiffs and accepting all allegations of material fact as true, the Court would agree
`with NantWorks that it would be premature to conclude NantWorks was not reasonably diligent
`in investigating its potential trade secret claims. See Opp’n at 11-12; see also HiRel Connectors,
`Inc. v. United States, 465 F. Supp. 2d 984, 992 (C.D. Cal. 2005) (“The reasonableness of Plaintiff’s
`efforts to discover the misappropriators (and what would have been discovered through reasonably
`diligent efforts) is a determination that must ultimately be made by the trier of fact.”).
`2. Whether NantWorks’ DTSA and CUTSA Claims are Pleaded with Particularity
`Bank of America next contends th