Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 1 of 21
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF CALIFORNIA
`
`NO. CIV. S-04-482 LKK/DAD
`
`O R D E R
`
`OPTHALMIC IMAGING SYSTEMS,
`a California corporation,
`
`Plaintiff,
`
`v.
`MARK FUKUHARA, an individual;
`DOUGLAS BURLAND, an individual;
`MICHAEL GERKOVICH, an individual;
`STEVEN LEACH, an individual;
`EDMUND PETERSON, an individual;
`DAN SALOMON, an individual; JOE
`SILVA, an individual; DALE BRODSKY,
`an individual; EYEPICTURES, INC., a
`Missouri corporation; JUSTICE
`OPTHALMICS, INC., a Tennessee
`corporation; ZETA DEVELOPMENT LABS,
`INC., a Tennessee corporation; and
`JOHNNY JUSTICE, JR., an individual,
`Defendants.
` /
`
`Pending before the court are Eyepictures, Inc.’s
`(“Eyepictures”) and Dale Brodsky’s (“Brodsky”) motions for
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 2 of 21
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`summary adjudication.1 On December 9, 2004, this court denied
`defendant Michael Gerkovich’s motion to dismiss for lack of
`personal jurisdiction and granted defendants Johnny Justice,
`Jr.’s and Justice Opthalmics, Inc.’s motion to dismiss for lack
`of personal jurisdiction. On March 2, 2005, this court denied
`in part, and granted in part, defendants’ motions to dismiss the
`Lanham Act claims pursuant to Fed. R. Civ. P. 12(b)(6).2
`I.
` BACKGROUND3
`
`Opthalmic Imaging Systems, Inc. (“OIS”), a corporation with
`its principal headquarters and place of business in Sacramento,
`California. It manufactures digital ophthalmic imaging systems
`which integrate "fundus cameras" – specially designed cameras
`used to photograph the human eye. OIS also develops its own
`proprietary software for use with its products. OIS submits
`that it was the first company in the world in this market. OIS
`provides servicing to its customers by entering into a variety
`of service plan contracts. Most of its customers are
`
`1 Defendant Brodsky moves for summary adjudication as to
`causes of action one (copyright infringement), two (Lanham Act
`violations), five (misappropriation of trade secrets), and six
`(interference with contract). Defendant Eyepictures moves for
`summary adjudication as to causes of action one (copyright
`infringement) and two (Lanham Act violations).
`2 The motion was brought by defendants Fukuhara, Burland,
`Gerkovich, Leach, Peterson, Salomon, Silva, Justice, Justice
`Opthalmics, Inc. and Zeta Development Labs, Inc.
`3 Background facts are derived from plaintiffs’ first amended
`complaint.
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 3 of 21
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`ophthalmology practices located throughout the United States.
`OIS asserts that a crucial source of its value and
`profitability lies in its trade secrets, which consist primarily
`of customer lists, manufacturing and design know how, vendor
`information, and servicing “know how.” In order to preserve the
`confidentiality of its trade secrets, OIS requires all employees
`to sign confidentiality agreements which prohibit OIS employees
`from disclosing OIS' trade secrets during and after their
`employment.
`In January 2002, defendant Mark Fukuhara, then the Vice
`President of Operations of OIS, was terminated by the company.
`Over the next year, other OIS employees, including Michael
`Gerkovich, left the company to join Fukuhara in a new business.
`According to OIS, by late spring of 2002, it learned from
`several of its customers that these former employees (“defendant
`employees”) had formed a new business called Imaging Service
`Group, and that, at least in part, their business was providing
`service for customers of OIS’ imaging systems. The business was
`owned principally by defendants Dale Brodsky, Gerkovich, and
`another shareholder. OIS claims that Gerkovich solicited the
`business of OIS customers who were seeking service for their OIS
`imaging systems, and directed these customers to defendant’s new
`business enterprise located in El Dorado Hills, California.
`In the spring of 2003, OIS became aware that some part of
`defendant employees’ business had been acquired by entities
`under the control of defendant Johnny Justice, Jr. (“Justice”),
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 4 of 21
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`a resident of the state of Tennessee and one of the most
`prominent ophthalmic imaging specialists in the United States.
`Justice is 100% shareholder of defendant Zeta Development Labs,
`Inc. (“Zeta”), a Tennessee Corporation. Zeta also does business
`under the Justice Diagnostic Imaging, Inc. name. OIS alleges
`that Justice, and another company he owns, Justice Ophthalmics,
`Inc. (JOI), were placed on notice of OIS’ concern that the
`defendant employees were misappropriating OIS’ trade secrets and
`confidential information in 2003.
`Late in 2003, OIS gathered evidence showing that the
`defendants had misappropriated OIS’ trade secrets and were using
`them to divert OIS’ customers and business to themselves. OIS
`alleges that defendant Fukuhara, while working for defendants
`Zeta and/or Eyepictures, “authorized the unauthorized loading of
`OIS Winstation software into an imaging system sold to
`Zeta/Eyepictures [sic] customer.” Plaintiff alleges that
`defendant Brodsky, along with others, are liable for
`contributory infringement of OIS’ copyrighted works. Plaintiff
`also maintains that Brodsky and Eyepictures, along with others,
`are vicariously liable for the direct infringement of OIS
`copyrighted works.
`Plaintiff explains that defendants have used false
`statements about their business for the purpose of confusing
`customers about the source and origin of the defendants’
`products and services and disparaging the relative quality of
`OIS’ products and services. Plaintiff also charges Brodsky and
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 5 of 21
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`Eyepictures of misappropriating trade secrets, including copying
`OIS’ customer database and information and using it to solicit
`and contact OIS customers.
`Finally, plaintiff asserts that each of the employee
`defendants who have left OIS signed an employment agreement
`promising to maintain confidentiality of OIS’ trade secrets and
`confidential information. Brodsky and Eyepictures allegedly
`were aware of such agreements and upon information and belief,
`these defendants induced the employees to breach their contracts
`with defendants.
`
`II.
`FACTS4
`A. OIS’ AND EYEPICTURES’ IMAGING SYSTEMS
`Steven Verdoneer, president of OIS, has “done an initial
`inspection of defendants’ imaging systems” this past year.
`Verdoneer Dep. at 59: 20. He “examined the cables,” “the back
`of the computer,” “the video adapter and . . . their hard drive
`directories.” Id. at 61:17-19. Based on such examination,
`Verdoneer concluded that “it appear[ed] their [defendants’]
`software is different than the OIS software.”5 Def.’s SUF 1.
`It is undisputed that OIS receives a one-time payment for
`the license of its software with the sale of its imaging system.
`Def.’s SUF 2. A purchaser of plaintiff’s retinal imaging system
`
`4 Unless otherwise noted, all facts are undisputed.
`5 Verdoneer examined a system of a Florida-based customer who
`had used defendants’ system that was “taken in on trade.”
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 6 of 21
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`is entitled to use the software for an indefinite period of
`time. Def.’s SUF 3. Plaintiff charges sales tax on the price
`of the system as a whole, which includes the software. Def.’s
`SUF 4. The only occasions when plaintiff has asked for a return
`of software is when the digital imaging system is being returned
`to plaintiff. Def.’s SUF 5. Defendants do not dispute that
`they have copied plaintiff’s software in connection with the re-
`loading of the software from one OIS system already owned by a
`customer to another OIS system owned by the same customer.
`Def.’s SUF 5.
`B. DALE BRODSKY AND EYEPICTURES
`Dale Brodsky asserts that he “had no involvement in
`development of a website for Imaging Services Group or any
`knowledge that any of its contents were unfair or misleading.”
`Brodsky Decl. at 3:1-3. Brodsky owned St. Louis Opthalmics
`Equipment, Co., a Missouri-based corporation, and the idea of
`starting Eyepictures in 2000 was his. Brodsky Dep. at 15:7-24;
`23:8-22. At the time of Eyepictures’ incorporation, the
`shareholders of Eyepictures were Brodsky and Mike Gerkovich.
`Id. at 27:10-28. Initially, Eyepictures was funded entirely by
`Brodsky, and he also provided equipment and inventory from St.
`Louis Opthalmics. He also provided several cameras, including a
`camera back prototype from Edmund Scientific. Id. at 36:14-
`37:21. Until 2002, Brodsky provided approximately $120,000 for
`the financing of Eyepictures. Id. at 99:24-103:16. After 2002,
`he contributed approximately $300,000, mostly in the form of a
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 7 of 21
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`loan. He borrowed a line of credit from Missouri State Bank
`totaling approximately $200,000, and the rest came from his
`earnings at St. Louis Opthalmic. Id.
`Brodsky served as the officer, president, and secretary of
`Eyepictures’ Board of Directors. Decl. at 41:22-22:8. Brodsky
`also signed the lease for Eyepictures’ El Dorado Hills office.
`Id. at 54:14-55:3. Brodsky contends that he was not aware that
`any of Eyepictures’ employees had signed confidentiality
`agreements with OIS, but he has been told otherwise during the
`course of this litigation. Id. at 68:8-25. Mark Fukuhara, Doug
`Burland, and Mike Gerkovich all worked for Eyepictures. Id. at
`80:4-19. Prior to 2002, Brodsky was aware that Gerkovich was
`affiliated with OIS. Brodsky retained Mark Fukuhara as an
`independent contractor after Mr. Fukuhara’s employment with OIS
`had been terminated. Def.’s SUF 12. However, Brodsky asserts
`that he was not directly involved with the hiring of other
`Eyepictures employees. Def.’s SUF 13. In 2003, Brodsky finally
`sold the assets of Eyepictures to Johnny Justice for a
`significant sum. Davis Decl. 2, Ex. C (copy of purchase
`agreement).
`On approximately December 26, 2002, Brodsky received a
`letter from OIS’ then attorney, Kimberly Mueller. Id. at
`143:14-25. The letter was addressed to Dale Brodsky at St.
`Louis Opthalmic Equipment Company, in which Mueller, counsel for
`plaintiff, requested “assistance in evaluating information
`suggesting that [Brodsky’s] company (including its affiliated
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 8 of 21
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`entities), with its employees and contractors, was
`misappropriating confidential and proprietary information” owned
`by Medivision and OIS. Id.
`Brodsky asserts that he stated during a conference call
`that he “didn’t want anything to do with anybody else’s
`information.” Brodsky Decl. at 95:15-96. Brodsky also
`maintains that he was not involved in the solicitation of
`customers for Eyepictures, Inc. dba Imaging Services Group.
`Def.’s SUF 9. Solicitation letters, however, were sent by
`employees of Eyepictures, Inc., dba Imaging Services Group which
`“outline[ed] available service options provided by ISG.” The
`letters noted that “for the next 60 days ISG is offering a
`specially priced block of 10 hours of telephone support . . . .”
`Def.’s Ex. F. Dale Brodsky maintains that “he never had any
`personal knowledge that anyone affiliated with Eyepictures
`improperly misappropriated any trade secret information
`belonging to plaintiff.” Def.’s SUF 11.
`The website for Eyepictures contains several statements,
`including that Eyepictures employs “best in industry technicians
`who can offer a higher level of service than users of digital
`systems have been experiencing,” and that “our pricing for
`service, repair or training is 25 to 30 percent less than the
`manufacturers [sic] prices . . . [r]eplacement parts are up to
`40 percent less than the manufacturer charges for the same item
`in some instances!” Def.’s Ex. E.
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 9 of 21
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`III.
`SUMMARY JUDGMENT STANDARDS UNDER FED. R. CIV. P. 56
`Summary judgment is appropriate when it is demonstrated
`that there exists no genuine issue as to any material fact, and
`that the moving party is entitled to judgment as a matter of
`law. Fed. R. Civ. P. 56(c); See also Adickes v. S.H. Kress &
`Co., 398 U.S. 144, 157 (1970); Secor Limited v. Cetus Corp., 51
`F.3d 848, 853 (9th Cir. 1995).
`Under summary judgment practice, the moving party
`[A]lways bears the initial responsibility of
`informing the district court of the basis
`for its motion, and identifying those
`portions of "the pleadings, depositions,
`answers to interrogatories, and admissions
`on file, together with the affidavits, if
`any," which it believes demonstrate the
`absence of a genuine issue of material fact.
`
`Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here
`the nonmoving party will bear the burden of proof at trial on a
`dispositive issue, a summary judgment motion may properly be
`made in reliance solely on the 'pleadings, depositions, answers
`to interrogatories, and admissions on file.'" Id. Indeed,
`summary judgment should be entered, after adequate time for
`discovery and upon motion, against a party who fails to make a
`showing sufficient to establish the existence of an element
`essential to that party's case, and on which that party will
`bear the burden of proof at trial. See id. at 322. "[A]
`complete failure of proof concerning an essential element of the
`nonmoving party's case necessarily renders all other facts
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 10 of 21
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`immaterial." Id. In such a circumstance, summary judgment
`should be granted, "so long as whatever is before the district
`court demonstrates that the standard for entry of summary
`judgment, as set forth in Rule 56(c), is satisfied." Id. at
`323.
`
`If the moving party meets its initial responsibility, the
`burden then shifts to the opposing party to establish that a
`genuine issue as to any material fact actually does exist.
`Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
`586 (1986); See also First Nat'l Bank of Ariz. v. Cities Serv.
`Co., 391 U.S. 253, 288-89 (1968); Secor Limited, 51 F.3d at 853.
`In attempting to establish the existence of this factual
`dispute, the opposing party may not rely upon the denials of its
`pleadings, but is required to tender evidence of specific facts
`in the form of affidavits, and/or admissible discovery material,
`in support of its contention that the dispute exists. Fed. R.
`Civ. P. 56(e); Matsushita, 475 U.S. at 586 n.11; See also First
`Nat'l Bank, 391 U.S. at 289; Rand v. Rowland, 154 F.3d 952, 954
`(9th Cir. 1998). The opposing party must demonstrate that the
`fact in contention is material, i.e., a fact that might affect
`the outcome of the suit under the governing law, Anderson v.
`Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Owens v. Local
`No. 169, Assoc. of Western Pulp and Paper Workers, 971 F.2d 347,
`355 (9th Cir. 1992) (quoting T.W. Elec. Serv., Inc. v. Pacific
`Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987), and
`that the dispute is genuine, i.e., the evidence is such that a
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`reasonable jury could return a verdict for the nonmoving party,
`Anderson, 477 U.S. 248-49; see also Cline v. Industrial
`Maintenance Engineering & Contracting Co., 200 F.3d 1223, 1228
`(9th Cir. 1999).
`In the endeavor to establish the existence of a factual
`dispute, the opposing party need not establish a material issue
`of fact conclusively in its favor. It is sufficient that "the
`claimed factual dispute be shown to require a jury or judge to
`resolve the parties' differing versions of the truth at trial."
`First Nat'l Bank, 391 U.S. at 290; See also T.W. Elec. Serv.,
`809 F.2d at 631. Thus, the "purpose of summary judgment is to
`'pierce the pleadings and to assess the proof in order to see
`whether there is a genuine need for trial.'" Matsushita, 475
`U.S. at 587 (quoting Fed. R. Civ. P. 56(e) advisory committee's
`note on 1963 amendments); see also International Union of
`Bricklayers & Allied Craftsman Local Union No. 20 v. Martin
`Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985).
`In resolving the summary judgment motion, the court
`examines the pleadings, depositions, answers to interrogatories,
`and admissions on file, together with the affidavits, if any.
`Rule 56(c); See also In re Citric Acid Litigation, 191 F.3d
`1090, 1093 (9th Cir. 1999). The evidence of the opposing party
`is to be believed, see Anderson, 477 U.S. at 255, and all
`reasonable inferences that may be drawn from the facts placed
`before the court must be drawn in favor of the opposing party,
`see Matsushita, 475 U.S. at 587 (citing United States v.
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`Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam)); See also
`Headwaters Forest Defense v. County of Humboldt, 211 F.3d 1121,
`1132 (9th Cir. 2000). Nevertheless, inferences are not drawn
`out of the air, and it is the opposing party's obligation to
`produce a factual predicate from which the inference may be
`drawn. See Richards v. Nielsen Freight Lines, 602 F. Supp.
`1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898, 902 (9th
`Cir. 1987).
`Finally, to demonstrate a genuine issue, the opposing party
`"must do more than simply show that there is some metaphysical
`doubt as to the material facts. . . . Where the record taken as
`a whole could not lead a rational trier of fact to find for the
`nonmoving party, there is no 'genuine issue for trial.'"
`Matsushita, 475 U.S. at 587 (citation omitted).
`IV.
`ANALYSIS
`Defendant Eyepictures moves for summary judgment on
`plaintiff’s first and second causes of action (copyright
`infringement and Lanham Act violations, respectively). Defendant
`Brodsky moves for summary judgment on these two causes of action
`as well as on plaintiff’s fifth and sixth causes of action
`(misappropriation of trade secrets and interference with
`contract, respectively). As explained further below, the court
`must deny the motions as to each cause of action.
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 13 of 21
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`A. FIRST CAUSE OF ACTION: COPYRIGHT INFRINGEMENT (BRODSKY AND
`EYEPICTURES)
`
`Plaintiffs must satisfy two requirements to present a prima
`facie case of copyright infringement: (1) they must show
`ownership of the allegedly infringed material and (2) they must
`demonstrate that the alleged infringers violate at least one
`exclusive right granted to copyright holders under 17 U.S.C.
`§ 106.6 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013
`(9th Cir. 2001).
`////
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`6 Section 106 states:
`Subject to sections 107 through 122, the owner of
`copyright under this title has the exclusive rights to
`do and to authorize any of the following:
`(1) to reproduce the copyrighted work in copies or
`phonorecords;
`(2) to prepare derivative works based upon the
`copyrighted work;
`(3) to distribute copies or phonorecords of the
`copyrighted work to the public by sale or other transfer
`of ownership, or by rental, lease, or lending;
`(4) in the case of literary, musical, dramatic, and
`choreographic works, pantomimes, and motion pictures and
`other audiovisual works, to perform the copyrighted work
`publicly;
`(5) in the case of literary, musical, dramatic, and
`choreographic works, pantomimes, and pictorial, graphic,
`or sculptural works, including the individual images of
`a motion picture or other audiovisual work, to display
`the copyrighted work publicly; and
`(6) in the case of sound recordings, to perform the
`copyrighted work publicly by means of a digital audio
`transmission.
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`Plaintiff brings a copyright infringement claim against
`defendants because they allege that defendants assisted OIS
`customers by copying OIS software from one computer to another
`owned by the customer. Def.’s SUF 5. Put differently,
`defendants helped OIS customers “load existing software - their
`existing review station software on another computer.” Fukuhara
`Dep. at 161: 20-23. According to Fukuhara, defendants “imaged a
`hard drive [containing OIS software] onto another computer and
`sent the hard drive and computer back” to the customer. Id. at
`162:3-6. See also Burland Dep. at 132:22-133: 16 ([Eyepictures]
`made a copy of software one time to load for a client’s
`system.). Plaintiff contends that this copying, without OIS’
`authorization, is copyright infringement. Defendants contend
`that their actions are protected under the First Sale Doctrine,
`codified at 17 U.S.C § 109(a).7 I cannot agree.
`a. First Sale Doctrine
`“The first sale doctrine provides that where a copyright
`owner parts with title to a particular copy of that copyright
`work, he divests himself of his exclusive right to vend that
`particular copy.” United States v. Wise, 550 F.2d 1180 (9th
`Cir. 1977). In Mirage Editions, Inc. v. Albuquerque A.R.T. Co.,
`
`7 17 U.S.C. § 109 states in pertinent part:
`(a) Notwithstanding the provisions of section 106(3),
`the owner of a particular copy or phonorecord lawfully
`made under this title, or any person authorized by such
`owner, is entitled, without the authority of the
`copyright owner, to sell or otherwise dispose of the
`possession of that copy or phonorecord.
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`856 F.2d 1341, 1344 (9th Cir. 1988), copyright owners brought
`suit against a tile seller who transferred artworks from a
`commemorative book to individual ceramic tiles for sale to
`public. The court held that such action constituted “derivative
`works” and infringed the copyrights of the book. The Ninth
`Circuit explained that under the first sale doctrine, appellant
`can “purchase a copy of the Nagel book and subsequently alienate
`its ownership in that book . . .” but that “the right to
`transfer applies only to the particular copy of the book which
`appellant has purchased and nothing else.” Id. at 1344. In
`sum, the first sale doctrine vests the copy owner with statutory
`privileges under the Act which operate as limits on the
`exclusive rights of the copyright owners as to that particular
`copy.
`The instant case does not involve a sale of software.
`Instead, defendants, with the customer’s consent, allegedly
`copied OIS’ software for a customer from one computer to another
`computer for that same customer’s use. Defendants maintain that
`the right to transfer or sell lies with OIS’ former customer
`because it applies to that same copy of software, and thus, the
`first sale doctrine applies. That argument is unavailing. The
`first sale doctrine allows for the transfer of just one copy of
`a copyrighted work. Based on the record, it is unclear whether
`only one copy of the software existed after defendants copied
`OIS’ software from one computer to another, or whether, as a
`result of defendants’ conduct, there are now two copies of the
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`software.8 Because the first sale doctrine provides an owner
`with the exclusive right to only one copy of a copyrighted work,
`and because the court cannot determine that defendants had in
`possession only one copy of the software after it was copied,
`defendants have failed to demonstrate that the first sale
`doctrine protects them from a trademark infringement claim.
`Defendants’ motion for summary adjudication as to trademark
`infringement must be denied.
`B. SECOND CAUSE OF ACTION: LANHAM ACT VIOLATIONS9(BRODSKY AND
`EYEPICTURES)
`
`Defendants contend that solicitation letters sent out by
`Douglas Burland in 2002 and that statements made on Eyepictures’
`website do not constitute Lanham Act Violations. As plaintiff
`correctly notes, following the court’s order on defendants’
`motion to dismiss filed on March 2, 2005, there remained two
`
`8 Conceivably, defendants may have destroyed the original
`copy after the copying was completed. The court attempted to
`clarify with defendants’ counsel during oral argument whether the
`original copy of the software was destroyed after being copied to
`a second computer, but counsel stated that he was not certain.
`9 To state a prima facie claim under the Lanham Act § 43(a)
`for false advertising, the plaintiff must show that: (1) defendant
`made a false statement of fact in an advertisement about its own
`or another's product; (2) the statement actually deceived or has
`the tendency to deceive a substantial segment of its audience; (3)
`the deception is material, in that it is likely to influence the
`purchasing decision; (4) the defendant caused its false statement
`to enter interstate commerce; and (5) the plaintiff has been or is
`likely to be injured as a result of the false statement, either by
`direct diversion of sales from itself to defendant or by a
`lessening of the goodwill associated with its products. Southland
`Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997)
`(citing Cook, Perkiss and Liehe, Inc. v. Northern Cal. Collection
`Serv., Inc., 911 F.2d 242, 244 (9th Cir.1990)).
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`Case 2:04-cv-00482-LKK-DAD Document 193 Filed 12/19/05 Page 17 of 21
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`false advertising claims for which defendants Eyepictures and
`Brodsky could be held liable: (1) that solicitation letters sent
`by Doug Burland failed to identify that Burland was not
`identified with OIS,10 and (2) that the defendants’ statements
`regarding their prices for service could fall into the ambit of
`false advertising.11
`As plaintiff accurately explains, defendants have not
`introduced any evidence concerning the truth or falsity of these
`statements, or resolve their ambiguity.12 Rather, as plaintiff
`points out, the defendants merely reargue that the statements
`are not actionable as a matter of law. See Repl. Br. (“[T]he
`defendants maintain that they [false advertising claims] are not
`actionable as a matter of law.”). The court has previously held
`these causes of action are cognizable.
`
`10 Specifically, plaintiff alleges that the defendants made
`and used “false and deceptive statements about their own business
`and the business of OIS . . for the purpose of confusing customers
`about the source and origin of the defendants’ products and
`services and disparaging the relative quality of OIS’s products and
`services.” Compl. at 25-26. According to plaintiff, the letter was
`deceptive because defendants failed to state that Burland was not
`affiliated with OIS. Compl. at ¶86(a).
`11 Plaintiff brought suit to challenge representations found
`in a website concerning defendants’ expertise. Those statements
`include that (1) defendants provided “‘Best in Industry’
`technicians who can offer a higher level of service than users of
`digital systems have been experiencing,” (2) defendants could
`provide “[s]ignificantly reduced support and repair costs,” and
`that (3) pricing for “service, repair, or training” would be 25 to
`30 percent less, impliedly, than OIS.
`12 Defendants, without citing to any evidence, argue that
`customers would not have thought that Doug Burland was sending the
`solicitation letter on behalf of OIS when he was, in fact, already
`working for Eyepictures.
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`Regarding the solicitation letters, the court found that
`defendants’ solicitous statements contained in the letter sent
`by Burland make ambiguous suggestions which are actionable under
`the Lanham Act. Order at 8. Regarding the website statements,
`the court held that the statement regarding “service, repair, or
`training” for “25 to 30 percent less” is measurable and specific
`enough to be actionable under the law. In short, the previous
`March 2, 2005 order is the law of the case, “and this court, as
`well as the litigants, are bound thereby.” See Rio Grande
`Western Ry. Co. v. Stringham, 239 U.S. 44 (1915). Defendants’
`motion as to this cause of action must be denied.
`C. FIFTH CAUSE OF ACTION: MISAPPROPRIATION OF TRADE SECRETS
`(BRODSKY)
`
`Defendants bring their fifth cause of action for trade
`secret misappropriation. A prima facie claim for
`misappropriation of trade secrets requires the plaintiff to
`demonstrate: (1) the plaintiff owned a trade secret, (2) the
`defendant acquired, disclosed, or used the plaintiff's trade
`secret through improper means, and (3) the defendant's actions
`damaged the plaintiff. See Cal. Civ. Code § 3426.1. In their
`complaint, plaintiffs allege that defendants misappropriated
`trade secrets by making unauthorized copies of OIS information,
`testing and manufacturing OIS’ imaging systems, using
`confidential information relating to servicing of OIS systems by
`former OIS technicians and soliciting OIS customers using such
`confidential and proprietary information. Compl. at 33-34.
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`Plaintiffs assert that defendants “with knowledge of the scheme
`and plan of the defendants’ business enterprise . . . conspired
`together and rendered assistance to the defendants’ conspiracy.”
`In addition, Brodsky allegedly was one of the defendants who
`initiated the conspiracy in or about 2002, and also “aided and
`abetted the enterprise of the defendants [sic] scheme . . . .”
`Id. at 34-35.
`Defendant Brodsky argues that the court should grant
`summary judgment as to this claim because he did not conspire
`with the other defendants to misappropriate any trade secrets
`because he had no knowledge of any misappropriation. The
`contention cannot support a motion for summary judgment.
`Under California law, knowledge and intent “may be inferred
`from the nature of the acts done, the relation of the parties,
`the interest of the alleged conspirators, and other
`circumstances.” See Wyatt v. Union Mortgage Co., 24 Cal.3d 773
`(1979). Defendant argues that he had no knowledge of any
`misappropriation, relying primarily on the fact that he
`established a policy that the defendants would not
`misappropriate any of the plaintiff’s trade secret information.
`Defendants’ evidence is hardly dispositive of the issue.
`Rather, plaintiff tenders sufficient evidence to raise a dispute
`as to knowledge.
`Specifically, plaintiff submits evidence that Brodsky is
`the shareholder, chief director, and chief officer of
`Eyepictures and that he hired Gerkovich and Fukuhara, who hired
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`the other employees who formerly were affiliated with plaintiff.
`Brodsky Decl. at ¶4. Plaintiff also tenders evidence showing
`that he was given notice of potential misappropriation in 2002
`by OIS’ counsel and nevertheless continued operating it until
`April 2003, when he sold the business for a significant gain.
`Based on these facts, plaintiff argues that one may infer that
`Brodsky had knowledge that misappropriation may have occurred
`and that he was participating in such misappropriation by
`funding Eyepictures and by hiring away OIS former employees who
`misappropriated trade secrets. Plaintiff has raised a triable
`issue as to this claim. Accordingly, defendants’ motion as to
`the fifth cause of action is denied.
`D. SIXTH CAUSE OF ACTION: INTERFERENCE WITH CONTRACT
`The elements for an intentional interference with
`contractual relations cla