Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 1 of 10
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`GOOGLE LLC,
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`Plaintiff,
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`v.
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`SONOS, INC.,
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`Defendant.
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`No. C 20-06754 WHA
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`ORDER RE GOOGLE'S MOTION
`FOR LEAVE TO FILE SECOND
`AMENDED COMPLAINT
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`INTRODUCTION
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`Alleged infringer in this action for declaratory judgment of patent noninfringement seeks
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`leave to file a second amended complaint. Patent owner opposes the addition of new state-law
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`claims — breach of contract, breach of the implied covenant of good faith and fair dealing, and
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`conversion. To the extent stated, the motion is GRANTED IN PART AND DENIED IN PART.
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`STATEMENT
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`Rekindled after a stay of nearly a year, this action is yet another pitched battle in the
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`multi-jurisdictional war between alleged infringer Google LLC and patent owner Sonos, Inc.
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`regarding speaker technology. With our parties already embroiled in litigation in the ITC, this
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`district, and in Canada, France, Germany, and the Netherlands, at 12:52 p.m. on September 28,
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`2020, Sonos’s counsel sent Google an email alerting them Sonos would be filing an eighty-
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`seven page patent infringement complaint against the search giant, this time in the United
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`Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 2 of 10
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`States District Court of the Western District of Texas, Waco Division. In an eleventh-hour bid
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`to keep this case out of Texas, at 11:41 p.m. that same day, Google’s counsel filed its own
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`thirteen-page complaint in our district. Early the next day, Sonos filed its action as promised.
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`Sonos, Inc. v. Google LLC, No. C 20-00881 ADA (W.D. Tex.) (Judge Alan D. Albright). A
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`previous order herein stayed this case, allowing Judge Albright to rule on Google’s motion to
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`transfer, but ordered Google to amend its complaint to avoid delay in case this action wound
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`up going forward (Dkt. No. 36 at 5).
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`In the Texas action, Judge Albright denied Google’s transfer motion, and the parties
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`proceeded toward a Markman hearing. However, the Court of Appeals for the Federal Circuit
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`granted Google’s petition for a writ of mandamus, vacated the order denying transfer and
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`directed the district court to grant the motion to transfer to our district (Case No. C 21-07559
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`WHA, “TX Dkt.” Nos. 97, 116). An order herein deemed the newly-transferred action related
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`to this one, and it was accordingly assigned to the undersigned (Dkt. No. 64; TX Dkt. Nos.
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`122, 123). As of now, the cases remain related but not consolidated.
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` Now, Google moves for leave to amend its declaratory judgment complaint. Google
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`seeks to add claims for: (1) declaratory judgment of non-infringement of U.S. Patent No.
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`10,848,885; (2) declaratory judgment of invalidity of all the asserted patents; (3) breach of the
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`parties’ Content Integration Agreement; (4) breach of the implied covenant of good faith and
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`fair dealing; and (5) conversion. Sonos does not contest Google’s revision of its declaratory
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`judgment claims but argues leave to add the latter three state-law claims should be denied.
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`This order follows full briefing and oral argument, held telephonically due to the COVID-19
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`pandemic.
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`ANALYSIS
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`Rule 15 states that leave to amend should be freely given when justice so requires. A
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`district court will consider: (1) bad faith; (2) undue delay; (3) prejudice to the opposing party;
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`(4) futility of amendment; and (5) repeated failure to cure deficiencies despite previous
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`amendments. The touchstone of the evaluation is prejudice to the opposing party and, absent
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`prejudice or a strong showing for another factor, a presumption exists under Rule 15 in favor
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`Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 3 of 10
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`of granting leave to amend. Delay alone cannot justify denying leave to amend, but futility
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`can. District courts will often omit the fifth factor when inapplicable. Foman v. Davis, 371
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`U.S. 178, 182 (1962); Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004); Eminence
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`Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003); Hurn v. Ret. Fund Tr. of
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`Plumbing, Heating and Piping Indus. of S. Cal., 648 F.2d 1252, 1254 (9th Cir. 1981).
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`On futility, “[a] motion to make an amendment is to be liberally granted where from the
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`underlying facts or circumstances, the plaintiff may be able to state a claim.” DCD Programs,
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`Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987) (quotation omitted). As in a motion to
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`dismiss, an amended complaint properly states a claim when the factual allegations permit a
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`reasonable inference, not just speculation, that defendants are liable for the misconduct alleged.
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`All factual allegations rate as true, but legal conclusions merely couched as fact may be
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`disregarded. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S.
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`544, 555 (2007).
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`The three state-law claims in Google’s proposed second amended complaint arose from
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`the parties’ collaboration on “cloud queue technology” between 2013 and 2015. Pursuant to
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`the parties’ Content Integration Agreement (“CIA”), Google retained all ownership rights for
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`any intellectual property arising out of the collaboration. Google alleges that during the
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`collaboration it shared with Sonos the idea (as well as technical details and API designs) for a
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`music queue unfettered from any specific playback device and maintained primarily in the
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`cloud. But Sonos, in contravention of the agreement, allegedly incorporated this technology
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`that rightfully belonged to Google into its U.S. Patents Nos. 9,967,615 and 10,779,033
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`(Proposed Sec. Amd. Compl. ¶¶ 21–34).
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`Sonos does not contend that Google added these allegations in bad faith, that amendment
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`would prejudice Sonos, or that Google has repeatedly failed to cure deficiencies in its
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`pleadings (Opp. 1–2). Rather, Sonos focuses on undue delay, including the statute of
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`limitations, and futility, including whether a patent can be the subject of a conversion claim.
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`Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 4 of 10
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`1.
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`THE STATUTE OF LIMITATIONS AND UNDUE DELAY.
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`Google contends it brought its motion promptly after the stay on this action was lifted.
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`Sonos, in opposition, argues that the new claims are time-barred and, even if permissible under
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`the relevant statute of limitations, Google improperly delayed in bringing claims regarding an
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`agreement signed in 2013.
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`We start with whether the new claims are time barred. The parties agree a three-year
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`statute of limitations applies to Google’s conversion claim while a four-year cap is placed on
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`its breach of contract and breach of the implied covenant of good faith and fair dealing claims.
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`See Cal. Code Civ. Proc. §§ 337(a), 338(c). Generally, the statute of limitations will begin to
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`run after the cause of action accrues, “when the claim is complete with all of its elements.”
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`Slovensky v. Friedman, 142 Cal. App. 4th 1518, 1528–29 (Cal. Ct. App. 2006), as modified
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`(citation omitted); Cal. Code Civ. Proc. § 312. But accrual may be postponed in certain
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`circumstances, such as until the plaintiff discovers, or has reason to discover, the claim.
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`Slovensky, 142 Cal. App. 4th at 1529; see also 3 Witkin Cal. Proc., Actions § 543 (6th ed.,
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`2021).
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`Google says that “it had no reason to suspect that Sonos was breaching the CIA or
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`converting its cloud queue technology until Sonos provided notice of alleged infringement on
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`September 28, 2020” (Reply Br. 8). Sonos argues an October 2016 presentation put Google on
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`notice of its state-law claims. The presentation referenced U.S. Patent Application No.
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`14/520,566, which has the same specification as the ’033 and ’615 patents. The presentation
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`also included a slide on U.S. Patent No. 9,363,255 and specifically used the phrase “cloud
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`queue” (Opp. 12–13). Upon this record, this order cannot conclude that the October 2016
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`presentation marked the point where Google discovered, or should have discovered, that Sonos
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`had violated the CIA and converted the cloud queue technology. Generally, knowledge of a
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`patent family or patent portfolio does not equate to knowledge of a specific patent. See
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`MasterObjects, Inc. v. Amazon.com, Inc., No. C 20-08109 WHA, 2021 WL 4685306, at *3
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`(N.D. Cal. Oct. 7, 2021) (Judge William Alsup). And, a single reference to the (as yet still-
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`ambiguous) term “cloud queue” does not conclusively demonstrate that the statute of
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`Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 5 of 10
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`limitations began to run. Questions abound that Sonos will have ample opportunity to explore
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`as this action proceeds. The same reasoning applies to the IP License Model document Sonos
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`sent to Google in July 2018 (Richter Decl. Exh. C). Discovery will either sharpen Sonos’s
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`point, or it will not.
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`We next turn to Sonos’s broader argument that Google unduly delayed in bringing its
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`state-law claims. Google contends that its state-law claims are timely because they “are based
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`on Google’s diligent investigation that it performed in the Texas Action in response to Sonos’s
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`allegations” (Br. 7). In opposition, Sonos argues: “At no point during the twelve months of
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`litigation in Texas did Google raise these claims of breach and conversion against Sonos.
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`Google even filed its own counterclaims to Sonos’s related complaint in the Texas action, but
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`included no breach or conversion claim” (Opp. 14).
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`Google dismisses Sonos’s argument, explaining that the CIA incorporated a forum-
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`selection clause requiring any litigation arising out of the parties’ collaboration to occur in
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`California (Reply Br. 12–13). So the argument goes, Google could not raise its counterclaims
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`in Texas, and could not bring new claims in this action while the matter was stayed. This
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`order, nevertheless, remains skeptical. In this action, Google explicitly cited the CIA in its
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`opposition to Sonos’s motion to dismiss or transfer, yet apparently had yet to connect the dots
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`in time to include the claims in its first amended complaint (Dkt. No. 28 at 4–5). The
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`convenient timing of Google’s discovery of these claims hence seems a continuation of the
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`gamesmanship it previously exhibited when its counsel burned the midnight oil to file this
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`action before Sonos filed its complaint in Texas. Amendment now serves to raise the stakes
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`and strategically adjust this litigation. Nevertheless, this order finds that while Google
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`conceivably delayed, Sonos has not demonstrated that Google unduly delayed. This order also
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`reminds Sonos that Google is not alone in its gamesmanship in these matters.
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`We thus move on to consider the strength of Sonos’s showing that Google’s amendments
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`would be futile.
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`2.
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`FUTILITY.
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`Sonos makes many futility arguments. We consider each in turn.
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`Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 6 of 10
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`First, Sonos argues that Google could not have invented the technology recited in the
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`‘033 patent because, even though the patent claims were amended in 2019, the patent
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`specification is from 2011, and thus predates the parties’ collaboration (Opp. 7). Patent claims,
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`as Sonos reminds us, must be supported by their specification. 35 U.S.C. § 112. Sonos then
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`makes the further argument that, assuming Google can show that the 2011 specification for the
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`’033 patents does not adequately describe the inventions per Section 112, the “breach and
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`conversion claims would be nullified, as there can be no breach or conversion from an invalid
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`patent” (Opp. 8). These arguments are non-starters. Nothing precludes Google from pleading
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`in the alternative. FRCP 8(d). In addition, patent owners will often stretch a specification
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`when they amend the patent claims during prosecution.
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`Second, Sonos says that Judge Albright found the ’615 and ’033 patents had no relation
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`to the CIA (Opp. 10). Sonos’s argument on this point fail to persuade. As an initial matter, the
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`Federal Circuit vacated the transfer order when it granted Google’s petition for a writ of
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`mandamus (TX Action Dkt. No. 116). Moreover, even considering the transfer order’s
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`reasoning, at that point in the Texas action, “Google [did] not argue that the ownership
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`provisions of the CIA provide Google with ownership of or a license to the patented
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`technology” (TX Action Dkt. No. 97 at 8). Now, of course, Google has changed its tune.
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`Moreover, the burden on a motion to amend is different from a motion to transfer, where the
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`moving party “bears a heavy burden of demonstrating why the factors [considered in a motion
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`to transfer] clearly favor such a change” (id. at 5, cleaned up, emphasis in original).
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`Third, Sonos cites U.S. Patent Nos. 9,232,277 and 9,674,587 for the argument that Sonos
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`expressly disclosed the concept of a cloud queue well before the parties’ collaboration (Opp.
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`10–11). As explained, however, this argument cannot demonstrate at this point in the
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`proceedings that Google’s claims are futile. It is for a later day to determine whether the
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`specific cloud queue technology that Google alleges Sonos wrongfully took for itself is the
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`same as the invention Sonos argues is recited in the ’277 and ’587 patents.
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`Fourth, Sonos argues that Google’s cloud queue allegations have no bearing on the ’615
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`patent, which does not contain the “remote playback queue” claim limitation and issued more
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`than a year before the 2019 amendment to the ’033 patent (Opp. 8). Google’s allegations
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`regarding the ’615 patent are indeed limited. It notes that the integration of Google Play
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`Music with Sonos’s ecosystem was the subject of the CIA, and that Sonos’s second amended
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`complaint in the Texas action alleges the music service infringes the ’615 patent (see Proposed
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`Sec. Amd. Compl. ¶ 33). But Google provides no further factual allegations on this point.
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`Google also cites a single statement by a single lawyer for Sonos describing the ’615 patent as
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`a “cloud queue patent” (Proposed Sec. Amd. Compl. ¶ 31, citing Dkt. No. 38 at 17:3–8).
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`Regarding that allegation, Sonos now says that this reference by counsel was inadvertent (Opp.
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`9). Even crediting counsel’s representation, Google has provided insufficient factual matter to
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`state a claim that Sonos impermissibly incorporated Google’s cloud queue technology into the
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`’615 patent. See Iqbal, 556 U.S. at 678. As currently alleged, Google’s state-law claims as
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`they relate to the ’615 patent are futile.
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`Fifth, Sonos argues that the conversion claim is futile because the tort does not apply to
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`intangible intellectual property like a patent. Under California law, the elements of a
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`conversion claim are: (1) ownership or right to possession of personal property; (2) a
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`defendant’s wrongful interference with the claimant’s possession; and (3) damage to the
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`claimant. See McCafferty v. Gilbank, 249 Cal. App. 2d 569, 576 (Cal. Ct. App. 1967). The
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`rule at common law was that the unauthorized taking of an intangible property interest that is
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`not merged with or reflected in tangible property is not actionable as conversion. Thrifty-Tel v.
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`Bezenek, 46 Cal. App. 4th 1559, 1565 (Cal. Ct. App. 1996). Over the past several decades,
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`however, California law has viewed the tort more expansively:
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`In some circumstances, newer economic torts have developed that
`may better take into account the nature and uses of intangible
`property, the interests at stake, and the appropriate measure of
`damages. On the other hand, if the law of conversion can be
`adapted to particular types of intangible property and will not
`displace other, more suitable law, it may be appropriate to do so.
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`Fremont Indem. Co. v. Fremont Gen. Corp., 148 Cal. App. 4th 97, 124–26 (Cal. Ct. App.
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`2007); see also 5 Witkin Summary of Cal. Law, Torts § 814 (11th ed., 2021).
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`Our court of appeals has broadly construed the types of property — intangible and
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`otherwise — that can properly be the subject of a conversion claim under California law.
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`“Property is a broad concept,” and so “[w]e apply a three-part test to determine whether a
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`property right exists: ‘First, there must be an interest capable of precise definition; second, it
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`must be capable of exclusive possession or control; and third, the putative owner must have
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`established a legitimate claim to exclusivity.’” Kremen v. Cohen, 337 F.3d 1024, 1029–30 (9th
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`Cir. 2003) (quoting G.S. Rasmussen & Assocs., Inc. v. Kalitta Flying Serv., Inc., 958 F.2d 896,
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`903 (9th Cir.1992)). Kremen accordingly reasoned that domain names may be subject to a
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`conversion claim. Ibid.
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`Pursuant to Kremen, district courts in our circuit have held that intangible, intellectual
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`property such as trademarks, copyrights, source code, and the right to commercialize a patent
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`can all be subject to a conversion claim under California law. See Infuturia Global Ltd. v.
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`Sequus Pharmas., Inc., No. C 08-04871 SBA, 2009 WL 440477, at *5 (N.D. Cal. Feb. 23,
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`2009) (Judge Saundra B. Armstrong) (patent rights), aff’d, 414 Fed. App’x 61 (9th Cir. 2011);
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`English & Sons, Inc. v. Straw Hat Restaurants, Inc., 176 F. Supp. 3d 904, 921–23 (N.D. Cal.
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`2016) (Magistrate Judge Laurel Beeler) (trademarks, copyright); Ali v. Fasteners for Retail,
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`Inc., 544 F. Supp. 2d 1064, 1072 (E.D. Cal. 2008) (Judge George P. Schiavelli) (source code).
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`The intangible invention protected by a patent clearly meets all three elements of
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`protectable property established by Kremen. This order accordingly agrees with the analogous
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`decisions of district courts judges in our circuit and finds that patents can properly be the
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`subject of a conversion claim under California law so long as the application of the tort does
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`not “displace other, more suitable law.” Fremont Indem., 148 Cal. App. 4th at 124; see also
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`Tethys Bioscience, Inc. v. Mintz, Levin, Cohn, Glovskey and Popeo, P.C., No. C 09–05115
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`CW, 2010 WL 2287474, at *7 (N.D. Cal. June 4, 2010) (Judge Claudia Wilken); Innospan
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`Corp. v. Intuit, Inc., No. C 10-04422 WHA, 2011 WL 856265, at *4 (N.D. Cal. Mar. 9, 2011)
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`(Judge William Alsup).
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`In its proposed second amended complaint, Google alleges:
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`Google, not Sonos, conceived of the cloud queue idea. Thus,
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`Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 9 of 10
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`Google should have been named as an inventor and owner, and has
`a right to possession of, any patents arising from or related to the
`cloud queue technology
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`(Proposed Sec. Amd. Compl. ¶ 110). Google asserts both ownership and inventorship as part
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`of its conversion claim. For issues of ownership, state law generally controls, but inventorship
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`is exclusively a matter of federal patent law. See Jim Arnold Corp. v. Hydrotech Sys., Inc., 109
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`F.3d 1567, 1572 (Fed. Cir. 1997); see also 8 Donald S. Chisum, Chisum on Patents § 22.02
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`(2021).
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`This order finds Google’s conversion claim not futile and permissible as to its allegations
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`regarding ownership of the cloud queue technology and the ’033 and ’615 patents that
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`allegedly contain that technology. Google plausibly asserts that it conceived of the cloud
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`queue technology around 2013, it shared source code and other information on the technology
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`with Sonos as part of their technical collaboration, and that Sonos converted the technology by
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`not assigning ownership of the ’033 and ’615 patents to Google as mandated by the CIA. As
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`Google alleges in its proposed second amended complaint, Sonos specifically revised the ’033
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`patent claims during prosecution to include limitations related to a cloud queue in an
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`amendment dated November 1, 2019 (Proposed Sec. Amd. Compl. ¶ 31).
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`As to inventorship, however, the Patent Act has several provisions more suitable than
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`conversion for determining the proper inventor of the ’615 and ’033 patents. See 35 U.S.C. §
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`102(f) (pre-AIA); id. § 256; Hess v. Advanced Cardiovascular Sys., 106 F.3d 976, 980 (Fed.
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`Cir. 1997). As it stands, Google’s conversion claim is futile to the extent it states a claim as to
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`inventorship.
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`Finally, Google adds in a claim Sonos violated the implied covenant of good faith and
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`fair dealing. That claim, however, is duplicative of plaintiff's breach of contract claim. The
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`undersigned has held that, absent those limited circumstances where a breach of a consensual
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`contract term is not claimed or alleged, the only justification for asserting a separate cause of
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`action for breach of the implied covenant is to obtain a tort recovery. See Nasseri v. Wells
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`Fargo Bank, N.A., 147 F. Supp. 3d 937, 943 (N.D. Cal. 2015) (citation omitted). “If the
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`allegations do not go beyond the statement of a mere contract breach and, relying on the same
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`Case 3:20-cv-06754-WHA Document 111 Filed 01/21/22 Page 10 of 10
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`alleged acts, simply seeks the same damages or other relief already claimed in a companion
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`contract cause of action, they may be disregarded as superfluous as no additional claim is
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`actually stated.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App. 3d 1371, 1395
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`(Cal. Ct. App. 1990).
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`So too here. Google’s claim for breach of the implied covenant of good faith and fair
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`dealing parrots its breach of contract claim and seeks the same relief. Leave to file a separate
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`claim for breach of the implied covenant of good faith and fair dealing is DENIED. The
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`allegations will be treated as part of the contract claim.
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`CONCLUSION
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`For the reasons stated, Google’s motion is GRANTED IN PART AND DENIED IN PART.
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`Google’s new declaratory judgment claims and its breach of contract claim may proceed. A
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`separate claim for breach of the implied covenant of good faith and fair dealing will not be
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`permitted, but the allegations will be treated as part of the breach of contract claim. The
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`restitution claim may proceed as to ownership, but not as to inventorship, and may only
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`proceed as to the ’033 patent and not as to the ’615 patent. Google must file a second amended
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`complaint in conformity with this order by FEBRUARY 4 AT NOON.
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`IT IS SO ORDERED.
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`Dated: January 21, 2022.
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`WILLIAM ALSUP
`UNITED STATES DISTRICT JUDGE
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