Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 1 of 9 Page ID #:4476
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page1of9 Page ID #:4476
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`Present: The Honorable R.GARY KLAUSNER, UNITED STATES DISTRICT JUDGE
`
`Sharon L. Williams
`
`Deputy Clerk
`
`Not Reported
`
`Court Reporter / Recorder
`
`N/A
`
`Tape No.
`
`Attorneys Present for Plaintiff:
`
`Attorneys Present for Defendant:
`
`Not Present
`
`Not Present
`
`Proceedings:
`
`(IN CHAMBERS)Order Re: Motion for Leaveto file a Second Amended
`Complaint (DE 94)
`
`I.
`
`INTRODUCTION
`
`On April 20, 2017, Fulfillium Inc. (“Fulfillium’”) filed a Complaint for trade secret
`misappropriation and patent infringement against ReShape Medical, Inc. The Complaint wasfirstfiled
`in the U.S. District Court for the District of Delaware and transferred to this Court on November9,
`2017. Fulfillium filed a First Amended Complaint (“FAC”) on November20, 2017, in responseto the
`Delawaredistrict court’s dismissal of its trade secret claims with leave to amend. (See Order Re: Mot. to
`Dismiss, ECF No. 33.) ReShape Medical, Inc. then filed a motion to dismiss Fulfilltum’s FAC, which
`this Court denied. (See Order Re: Mot. to Dismiss FAC, ECF No. 74.)
`
`Fulfillium previously sought leave to add SV Health Investors, LLC (“SV Health”) and an
`additional patent infringement claim on October 10, 2017 and February 5, 2018, respectively. At the
`March 19, 2018 scheduling conference, the Court procedurally struck the motions and directed
`Fulfillium to refile any requests for leave to amendin a single motion. (ECF No. 89.) In accordance
`with this Court’s order, Fulfillium filed the present motion for leave to file a Second Amended
`Complaint (“SAC”). As before, Fulfillium seeks leave to add an additional patent infringement claim
`and to add SV Health as a defendant. In addition, Fulfilltum seeks to add ReShape Lifesciences, Inc.
`(“ReShape Lifesciences”) as a defendant.
`
`For the following reasons, the Court GRANTSin part and DENIESin part Fulfillium’s
`motion for leave to amend.
`
`II.
`
`FACTUAL BACKGROUND
`
`A.
`
`Current Factual Allegations
`
`The following facts are alleged in the FAC.
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 2 of 9 Page ID #:4477
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 2of9 Page ID #:4477
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`Fulfillium owns twopatents titled “Methods, Devices, and Systems for Obesity Treatment:” U.S.
`Patent Nos. 9,456,915 (“the ’915 Patent’’) and the 9,445,930 (“the ’930 Patent”). Both are directed to a
`bariatric medical device and procedure to treat obesity conceived of by Dr. Richard D.Y. Chen
`(“Chen”), whereby a balloon device is inserted into a person’s stomach to safely reduce the stomach’s
`volume and impedethe flow of ingested food. The United States Patent and Trademark Office (“PTO”)
`issued the 915 and ’930 Patents on October 4, 2016 and September 20, 2016, respectively.
`
`Chen formed Fulfillium in 2004 to develop and market his balloon device. When raising venture
`capital in Fulfillium’s early stages, Chen met with employees at SV Life Sciences, which later became
`SV Health, and Sprout Partners, which later reformed as New LeafVenture Partners (“New Leaf”).'
`During these meetings, Chen disclosed such trade secrets as Fulfillium’s preferred clinical trial design
`and regulatory approval strategy. Chen always ensuredthe disclosures were subject to oral or written
`agreements of confidentiality.
`
`Chen eventually met with George Wallace (“Wallace”), a venture partner for SV Health, to
`negotiate the terms and conditions under which Wallace would work with Fulfillium. The negotiations
`fell apart when Wallace demanded a greater than 25% stake in Fulfillium after the first round of
`financing. Chen neverdisclosed anytrade secrets to Wallace.
`
`Rather than work with Fulfillium, decision makers in SV Health launched Abdominis, Inc in
`2005 with Wallace as CEO. SV Health and New Leaf funded Abdominis, Inc., provided direct guidance
`in its development, and controlled its operations through board membership. Abdominis, Inc. waslater
`renamed ReShape Medical,Inc.
`
`SV Health and New Leaf provided Wallace and ReShape Medical, Inc. with Fulfillium’s
`technology andtrade secrets, including three key aspects ofhis clinical trial playbook. ReShape
`Medical, Inc. used that informationto raise capital, design a competing product and procedure design
`(the “ReShape Balloon” device and treatment method), and develop a successful Food and Drug
`Administration (“FDA”) clinicaltrial design. The ReShape Balloon device infringes on claims 1, 2, and
`4-27of Fulfillium’s ’915 Patent and claims 1, 2, 4-19, 21-27, and 30 of the ’930 Patent. In general,
`these claims relate to the gastric balloon structure, including the use of a flexible central spine, and a
`valve structure that introducesfluid to inflate the balloon chambersafter the device is inserted in the
`patient’s stomach. ReShape Medical, Inc. began commercial operations after it obtained pre-market
`FDAapprovalin July 2015. In so doing, ReShape shut Fulfillium out of the market.
`
`' The Court will refer to both SV Life Sciences and Sprout Partners by their current names (SV Health and New Life)
`throughout this Order.
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 3 of 9 Page ID #:4478
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 3of9 Page ID #:4478
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`B.
`
`Proposed Additional Allegations
`
`In its proposed SAC,Fulfillium seeks to allege the following additionalfacts.
`
`SV Health and its predecessor SV Life Sciences haveatall relevant times held one or more seats
`on ReShape Medical, Inc.’s board of directors. SV Health’s website describes its investors as “hands-on
`business partners” who “work hands-on with [their] portfolio companiesastrusted advisers and partners
`from formation to exit” and whose experience allows them to “workas true partners with [their
`entrepreneurs, and develop strong relationships with them through the full life cycle of their ventures.”
`(Proposed SAC § 6, Mot. for Leave to Amend Ex. 1, ECF No. 94-3.) Because SV Health andits
`predecessor“directed, controlled, actively induced and/or conspired with ReShape Medical, Inc., and
`subsequently ReShape Medical LLC,”to take the actionsat issue.
`
`EnteroMedics, Inc. acquired ReShape Medical, Inc. on October 2, 2017, and later renamed itself
`ReShapeLifesciences. A new entity, ReShape Medical LLC,resulted from the merger. ReShape
`Medical LLC and ReShape Lifesciences now hold ReShape Medical, Inc.’s liabilities. ReShape Medical
`LLC and ReShapeLifesciences also continueto sell the infringing ReShape Balloon.
`
`Fulfillium filed a continuation application for additional claims relating to its gastric balloon
`device. The PTO issuedthe resulting patent, U.S. Patent No. 9,808,367 (“the ’367 Patent”), on
`November 7, 2017 — about seven months after Fulfillium broughtits original complaint. Fulfillium
`alleges that the ReShape Balloon also infringes on claims 1, 2, 4-7, 11, 12, and 16-21 of the ’367
`Patent.
`
`Il.
`
`JUDICIAL STANDARD
`
`Pursuant to Federal Rule of Civil Procedure 15, “[a] party may amendits pleading once as a
`matter of course before being served with a responsive pleading .
`.
`.
`. [but in] all other cases, a party may
`amendits pleading only with the opposing party’s written consent or the court’s leave.” Fed. R. Civ. P.
`15(a). The Court should “freely give leave when justice so requires.” Jd.
`
`The Supreme Court has held that “undue delay, bad faith or dilatory motive on part of movant,
`repeated failure to cure deficiencies by amendmentspreviously allowed, undue prejudice to opposing
`party by virtue of allowance of amendment, and futility of amendment”are sufficient reasons for a
`district court to deny leave. Foman v. Davis, 371 U.S. 178, 182 (1962); Howey v. United States, 481
`F.2d 1187, 1190 (9th Cir. 1973). Absent a showing of any of the above reasons for denying leave, “there
`exists a presumption under Rule 15(a) in favor of granting leave to amend.” Eminence Capital, LLCv.
`Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 4 of 9 Page ID #:4479
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 4of9 Page ID #:4479
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`IV.
`
`DISCUSSION
`
`Asan initial matter, the Court notes the parties agree to substitute current defendant ReShape
`Medical, Inc. with ReShape Medical LLC. The Court accordingly ORDERS ReShape Medical LLC
`be substituted for ReShape Medical, Inc. as the named defendant. The Court will refer to the defendant,
`including each ofits predecessorentities, as “ReShape” for the remainderofthis order.
`
`ReShape opposes Fulfillium’s motion for leave to amendto allege infringement of the ’367
`Patent, to add SV Health as a defendant, and to add ReShape Lifesciences as a defendant. The Court
`addresses the arguments against each proposed amendment in turn.
`
`A.
`
`Leave to Amendto Allege Infringementof the ’367 Patent
`
`Fulfillium seeks leave to amendso that it can add a claim of infringement of the 367 Patent.
`ReShape argues that the proposed amendmentis futile, sought in bad faith, and prejudicial.
`
`1.
`
`Futility
`
`A proposed amended complaint is futile if it would be immediately “subject to dismissal” under
`Rule 12(b)(6). Novak v. United States, 795 F.3d 1012, 1020 (9th Cir. 2015) (quoting Steckman v. Hart
`Brewing, Inc., 143 F.3d 1293, 1298 (9th Cir. 1998)). To survive a motion under Rule 12(b)(6), a
`complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to reliefthat is
`plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Be// Ati. Corp. v. Twombly,
`550 U.S. 554, 570 (2007)).
`
`ReShapeargues granting leave to add a claim for infringement of the ’367 Patent would be futile
`for two reasons.First, the patent is unenforceable because of inequitable conduct. Second, the patentis
`unenforceable because a part-ownerof the ’367 Patent did not sign the terminal disclaimeras required to
`obviate a double patenting rejection.
`
`a.
`
`Inequitable Conduct
`
`A patent is unenforceable for inequitable conductif an applicant fails to disclose material
`information with an intent to deceive the Patent Examiner. Exergen Corp. v. Wal-Mart Stores, Inc., 575
`F.3d 1312 (Fed. Cir. 2009). Burying a reference known to be material inalist of other references with
`no attempt to highlight it for the Examiner can be probative ofintent to deceive, although it does not
`conclusively prove inequitable conduct. Molins PLC v. Textron, Inc., 48 F.3d 1172, 1184 (Fed. Cir.
`1995). In Molins, patent applicants realized they had neglected to cite material prior art. Soon after, the
`applicants submitted a supplemental documentlisting 94 references, including the omitted material
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 5 of 9 Page ID #:4480
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page5of9 Page ID #:4480
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`reference. The examinerindicated he consideredall of the cited prior art before issuing the patent. Under
`these facts, the Federal Circuit found insufficient evidence ofintent.
`
`ReShape argues Fulfillium intentionally buried amongst 167 other referencesa citation to
`material office actions in which the Examinerrejected tworelated patent applications for lack of written
`description support. It is undisputed, however, that Fulfillium referenced those office actions on the first
`pageof an Information Disclosure Statementfiled with its application and further provided PDF copies
`of the office actions to the Examiner. In addition, the Examiner indicated that she considered the office
`actions at issue. On these facts, the Court cannot say Fulfillium engaged in inequitable conductsuch that
`it would be futile to permit Fulfillium to assert a claim for infringement of the ’367 Patent.
`
`b.
`
`Terminal Disclaimer
`
`A provisional double patenting rejection wasfiled during prosecution of the ’367 Patent,
`triggering a requirementfor all application owners to sign a terminal disclaimerto cure (or “obviate’’)
`the rejection. See Manual of Patent Examining Procedure (“MPEP”) § 1490; Applied Materials, Inc. v.
`Semiconductor Materials Am. Inc., 98 F.3d 1563, 1576-77 (Fed. Cir. 1996). Fulfillium filed a terminal
`disclaimerin which it was the sole signatory. The ’367 Patentis a continuation of U.S. Patent
`Application No. 11/282,224 (“the ’224 application”), entitled Wireless Breach Detection. Chen assigned
`to Sensurtec,Inc. all right, title, and interest in the ’224 application, the invention described therein, and
`in any patents “which may hereafter be granted on the same.” Thus, ReShape argues Sensuretec,Inc.is
`a co-ownerof the ’367 Patent and was required to sign the terminal disclaimer. Because Sensuretec, Inc.
`did not sign the disclaimer, ReShape argues it is unenforceable and Fulfillium must seek reissue of the
`patent before it can enforceit.
`
`Fulfillium disputes that Sensuretec, Inc. owns any interest in the ’367 Patent. Indeed, it appears
`the ’224 application and the invention it describes relate solely to wireless breach detection, while the
`°367 Patent ultimately traces back to a separate chain of patents — owned wholly by Fulfillium — that
`relate to gastric devices and methods for obesity treatment. (See Pl.’s Reply at 8, ECF No. 100.) In
`addition, even if the terminal disclaimer were ineffective, ReShapecites no authority for its contention
`that Fulfillium can cure the rejection only by seeking reissue of the 367 Patent. As Fulfillium argues in
`its Reply, the Federal Circuit has indicated that an applicant can file a terminal disclaimer for an issued
`patent to overcomeinvalidity based on double patenting. Perricone v. Medicis Pharm. Corp., 432 F.3d
`1368, 1375 (Fed. Cir. 2005).
`
`2.
`
`Bad Faith
`
`“Tn the context of a motion for leave to amend,‘bad faith’ means acting with intent to deceive,
`harass, mislead, delay, or disrupt.” Bad faith implies an improper motive in seeking leave amend, such
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`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`as adding a defendantfor the sole purpose of destroying the court’s jurisdiction, see Sorosky v.
`Burroughs Corp., 826 F.2d 794, 805 (9th Cir. 1987), or “seeking to prolongthelitigation by adding new
`but baseless legal theories,” Griggs v. Pace American Grp., Inc., 170 F.3d 877, 881 (9th Cir. 1999).
`
`ReShape’s badfaith allegations stem from a June 1 meeting held to discuss the possibility of
`early settlement. According to ReShape,it provided Fulfillium with a detailed presentation of its
`defenses, includingthat the allegedly infringed patents are unenforceable for inequitable conduct
`because Fulfillium failed to properly disclose material information in the underlying applications.
`ReShape arguesthat Fulfillium rushedto file the 367 Patent application two weeks later in an attempt
`to cure the deficiencies ReShapeidentified in the meeting. ReShape continuesto assert that each of the
`Fulfillium patents at issue are fraudulent, unenforceable, and being used to harass ReShape. Fulfillium
`counters that all of its applications properly made the required disclosures, and that regardless it planned
`to apply for the ’367 Patent application long before the June 1 meeting.
`
`Fulfillium’s previous claims of patent infringement survived a motion to dismiss, and as
`explained above, Fulfillium’s claim regarding the ’367 Patentis likewise not immediately subject to
`dismissal. As Fulfillium appears to have a goodfaith basis for its claim, the Court will not deny leave to
`amend on this ground.
`
`3.
`
`Prejudice
`
`The opposing party bears the burden of showing that granting leave to amend will result in
`prejudice. DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987) (citing Beeck v. Aqua-
`slide ‘N’ Dive Corp., 562 F.2d 537, 540 (8th Cir. 1977)). In general, “[t]he need for additional discovery
`is insufficient by itself to deny a proposed amended pleading.” Jn re Circuit Breaker Litig., 175 F.R.D.
`547, 551 (C.D. Cal. 1997). However, the Ninth Circuit has found undue prejudice where an amendment
`would raise different legal theories and require proofof different facts such that it would necessitate
`substantial additional discovery at a late stage in the litigation. See AmerisourceBergen Corp. v. Dialysis
`West, Inc., 465 F.3d 946, 953 (9th Cir. 2006).
`
`The FAC already alleges infringement of 26 claims of the 915 Patent and 26 claims of the 930
`Patent. Now,Fulfillium seeks to assert infringement of an additional 14 claims of the ’367 Patent.
`ReShape arguesthat the addition of 14 patent claims to the 52 already asserted would be too large a
`burden because each new patent claim requires separate analysis and investigation. The Court disagrees.
`
`The ’367 Patentis directed to the samegastric balloon device as the 915 and ’930 Patents. All
`three patents are from the same patent family; they have the sametitle, inventors, and assignee. The
`ReShapeBalloonis alleged to infringe all three patents. ReShape has not shown that the ’367 Patent
`would raise different legal theories or require proof of different facts such that it could not be fully
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 7 of9 Page ID #:4482
`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`prepared to litigate when the trial date arrives in seven months. See Fund Tr. ofPlumbing, Heating &
`Piping Indus. ofS. Cal., 648 F.2d 1252, 1254 (9th Cir. 1981) (finding no prejudice where the operative
`facts remained the same and the opposing party “should be fully preparedto litigate” the newly added
`claim).
`
`4.
`
`Conclusion
`
`Because ReShape has shown no adequate reason to deny leave to amend, the Court GRANTS
`Fulfillium leave to amendto assert a claim for infringement of the ’367 Patent.
`
`B.
`
`Leave to Amend to Add SV Health as a Defendant
`
`Fulfillium also seeks leave to amend to add SV Health as a defendant. In opposition, ReShape
`argues that adding SV Health as a defendantis futile because the factual allegations are insufficient to
`support any basis ofliability for the alleged trade secret misappropriation or patent infringement.
`
`To state a cause of action for trade secret misappropriation, a plaintiff must plead that “(1) the
`plaintiff owneda trade secret, (2) the defendant acquired, disclosed, or used the plaintiff's trade secret
`through improper means, and (3) the defendant’s actions damagedthe plaintiff.” Cytodyn, Inc. v.
`Amerimmune Pharm., Inc., 160 Cal. App. 4th 288, 297 (2008); see Cal. Civ. Code § 3426.1(b). The
`Court already held in a previous order that Fulfillium adequately alleged that aspects ofits clinical trial
`playbookare trade secrets, and ReShape doesnot dispute that damages are adequately pled. (See Order
`Re: Motion to Dismiss FAC at 6, ECF No. 74.) Thus,at issue is whether Fulfillium pleads sufficient
`facts to support SV Health’s involvementin the alleged misappropriation.
`
`Fulfillium alleges that Chen disclosed Fulfillium’s trade secrets to SV Health subject to a
`confidentiality agreement, that SV Health then proceeded to launch ReShape, that ReShape used
`Fulfillium’s trade secrets to develop a clinicaltrial design for a competing product, and that SV Health
`wasthe only possible source of those trade secrets. In addition, Fulfillium asserts that SV Health
`directed, induced, or conspired with ReShape to misappropriate Fulfillium’s trade secrets. In support,
`Fulfillium alleges that SV Health appointed oneofits venture partners, Wallace, as ReShape’s CEO,
`maintained membership on ReShape’s board, and professed on its website that it works “hands on” with
`its portfolio companies as “true partners.” Theseallegations are sufficient to implicate SV Health in the
`alleged misappropriation.
`
`? With the exception of the statements on SV Health’s website, which appear to provide little if any evidence of SV Health’s
`actual conductin this case, these facts were known to Fulfillium from the outset of the litigation, and are already pled in the
`FAC.Givenits knowledge of SV Health’s alleged involvement,it is unclear why Fulfillium did not sue SV Health originally.
`
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`
`UNITED STATES DISTRICT COURT
`
`CENTRAL DISTRICT OF CALIFORNIA
`
`CIVIL MINUTES - GENERAL
`
`Case No.
`
`2:17-cv-08419-RGK-PLA
`
`Date May 23, 2018
`
`Title
`
`Fulfillium, Inc. v. ReShape Medical, Inc.
`
`While the trade secret misappropriation claim is explicitly asserted against “Defendants” and
`includes factual allegations against SV Health, none ofthe three patent infringementclaims in the
`proposed SACincludeanyallegations directly against SV Health. Those claims refer only to “ReShape
`Medical LLC and ReShape Lifescience’s infringement.” (See, e.g., Proposed SAC §§ 55-57, 119, Mot.
`to AmendEx. 1, ECF No. 94-3.) Likewise, Fulfillium’s Motion and Reply both appear to argue only that
`SV Health maybeliable for trade secret misappropriation. (See Pl.’s Mot. at 8, ECF No. 94-1; Pl.’s
`Reply at 11, ECF No. 100.) In the absence of any clear allegations of patent infringement against SV
`Health, the Court agrees that it would be futile to assert a patent infringement claim against them.
`
`The Court accordingly GRANTSFulfillium’s motion for leave to amend to add SV Health as a
`defendant only asto its trade secret misappropriation claim. To the extent Fulfillium intendedto assert a
`patent infringement claim against SV Health,it is not permitted to do so.
`
`Cc.
`
`Leave to Amend to Add ReShapeLifesciences as a Defendant
`
`Fulfillium also seeks leave to add ReShape Lifesciences as a Defendant. ReShape again argues
`that doing so would befutile, as Fulfillium pleads insufficient facts to hold ReShape Lifesciences
`directly liable for any wrongdoingorto holdit liable for the alleged acts of its subsidiary.
`
`A parent corporation is generally not liable for the acts of its subsidiaries. United States v.
`Bestfoods, 524 U.S. 51, 61 (1998). To hold a parent companyliable for its subsidiaries’ infringement or
`misappropriation, the plaintiff must show the circumstancesjustify “piercing the corporate veil,” such as
`if the parent company wasan alter ego of the subsidiary or controlled the conduct of the subsidiary. A.
`Stucki Co. v. WorthingtonInds., Inc., 849 F.2d 593, 596 (Fed. Cir. 1988).
`
`ReShapearguesthat Fulfillium improperly attempts to imposeliability for patent infringement
`on ReShapeLifesciences merely becauseit is ReShape’s parent company. The Court agreesthat
`Fulfillium cannot seek to hold ReShape Lifesciences liable for ReShape’s infringement underthe facts
`alleged. Fulfillium, however, alleges that ReShape Lifesciences itself is now selling the infringing
`ReShape Balloon. Indeed, the ReShape Balloon is promoted and offered for sale on ReShape
`Lifesciences’ website. Whether Fulfillium can ultimately prove that ReShape Lifesciences committed
`patent infringement remains to be seen, but its allegations are sufficient to state a plausible claim.
`
`Asto trade secret misappropriation, Fulfillium’s proposed SAC merely alleges that ReShape
`Lifesciences acquired ReShape’s liabilities through the merger andthat it might continue to rely on or
`
`However, ReShape does not argue that Fulfillium’s delay was undueor prejudicial, and the Court finds SV Health would
`havetimeto prepare for litigation if added as a defendantat this stage.
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`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 9 of 9 Page ID #:4484
`Case 2:17-cv-08419-RGK-PLA Document 113 Filed 05/23/18 Page 9of9 Page ID #:4484
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`UNITED STATES DISTRICT COURT
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`CENTRAL DISTRICT OF CALIFORNIA
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`CIVIL MINUTES - GENERAL
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`Case No.
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`2:17-cv-08419-RGK-PLA
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`Date May 23, 2018
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`Title
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`Fulfillium, Inc. v. ReShape Medical, Inc.
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`profit from ReShape’s misappropriation. It does not allege any act of misappropriation by ReShape
`Lifesciences, nor doesit allege any facts to support piercing the corporate veil. Thus, the proposed trade
`secret misappropriation claim against ReShape Lifesciences would be immediately subject to dismissal.
`Permitting this amendment would befutile.
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`The Court accordingly GRANTSFulfillium leave to amendto assert a patent infringement claim
`against ReShape Lifesciences, but DENIESleaveto assert a trade secret misappropriation claim against
`ReShape Lifesciences.
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`V.
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`CONCLUSION
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`For the foregoing reasons, the Court GRANTSin part and DENIESin part Fulfillium’s
`motion for leave to amendas follows:
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`The Court GRANTSleave to amendto allege infringementof the ’367 Patent;
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`The Court GRANTSleave to amendto allege trade secret misappropriation against SV Health,
`but DENIESleave to amendto allege patent infringement against SV Health; and
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`The Court DENIESleave to amendto allege trade secret misappropriation against ReShape
`Lifesciences, but GRANTSleave to amendto allege patent infringement against ReShape
`Lifesciences.
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`Plaintiffs shall file an SAC in accordance with the above within two days of this Order.
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`IT IS SO ORDERED.
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`Initials of Preparer
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`CV-90 (06/04)
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`CIVIL MINUTES - GENERAL
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`Page 9 of 9
`RESHAPE 1022
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`RESHAPE 1022
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