“[A]nalysis of this factor should focus not on the number of uses of 3 Plaintiffs’ marks, but on whether Defendants used more of each individual mark than 4 was necessary in terms of font and stylization”
How later courts described this case
- “[A]nalysis of this factor should focus not on the number of uses of 3 Plaintiffs’ marks, but on whether Defendants used more of each individual mark than 4 was necessary in terms of font and stylization”
- stating that well-pleaded factual allegations are accepted as true for purposes of a motion to dismiss
- “Courts have analyzed these claims 23 together because the elements are substantially similar.”
Written by the judges who cited it.
The opinion
O
1
2
3
4
5
6
7
8 United States District Court
9 Central District of California
10
11 XSOLLA (USA), INC., Case № 2:24-cv-02116-ODW (AGRx)
12 Plaintiff,
ORDER GRANTING IN PART AND
13 v.
DENYING IN PART DEFENDANT
14 AGHANIM INC. et al., AGHANIM INC.’S MOTION TO
15 DISMISS [32]
Defendants.
16
17
I. INTRODUCTION
18
Plaintiff Xsolla (USA), Inc. (“Xsolla”) brings this action alleging violation of
19
federal and state trade secrets statutes, federal trademark infringement, interference
20
with prospective economic advantage and contract, unfair competition, and breach of
21
contract against Defendant Aghanim, Inc. (“Aghanim”) and Defendant Tugushev
22
Albert Tagirovich (“Tagirovich”). (First Am. Compl. (“FAC”), ECF No. 25.)
23
Aghanim moves to dismiss Xsolla’s claims against it pursuant to Federal Rules of
24
Civil Procedure (“Rule”) 12(b)(6). (Mot. Dismiss (“Mot.” or “Motion”), ECF
25
No. 32.) For the reasons discussed below, the Court GRANTS IN PART WITH
26
LEAVE TO AMEND and DENIES IN PART Aghanim’s Motion.1
27
28 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the
matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15.
1 II. REQUEST FOR JUDICIAL NOTICE
2 Concurrently with its Motion, Aghanim requests the Court take judicial notice
3 of the fact that the content of certain webpages is publicly disclosed on the internet.
4 (Aghanim Req. Judicial Notice (“RJN”) at 1–2, ECF No. 33.) Elsewhere, Aghanim
5 requests the Court take “judicial notice of the fact Xsolla makes the information
6 contained in Exhibits A through P publicly available.” (Id. at 3.)
7 Specifically, Aghanim asks the Court take judicial notice of the following:
8 (1) twenty-six webpages from Xsolla.com, (id. Exs. A–I, K–O, ECF Nos. 33-1 to 33-
9 9, 33-11 to 33-15), (2) two webpages from Github.com/Xsolla, (id. Ex. J, ECF
10 No. 33-10), and (3) Google.com search results for “Xsolla is an authorized global
11 distributor of,” (id. Ex. P, ECF No. 33-16). Xsolla does not oppose the request or
12 question the authenticity of the webpages. (See generally Opp’n Mot. (“Opp’n”),
13 ECF No. 44.)
14 The Court “may judicially notice a fact that is not subject to reasonable dispute
15 because it: (1) is generally known within the trial court’s territorial jurisdiction; or
16 (2) can be accurately and readily determined from sources whose accuracy cannot
17 reasonably be questioned.” Fed. R. Evid. 201(b).
18 Courts routinely take judicial notice of evidence from an opposing party’s
19 publicly available website where the statements “are not necessarily being introduced
20 for their truth but instead to show that Plaintiff had published this information.”
21 Nelson Bros. Pro. Real Est. LLC v. Jaussi, No. 8:17-cv-00158-DOC (JCGx), 2017 WL
22 8220703, at *3 (C.D. Cal. Mar. 23, 2017) (citing Wolf v. Hewlett Packard Co.,
23 No. 5:15-cv-01221-BRO (GJSx), 2016 WL 7743692, at *2–3 (C.D. Cal. Sept. 1,
24 2016)). Accordingly, the Court GRANTS Defendant Aghanim’s request for judicial
25 notice of the screenshots of Xsolla’s publicly available website, (RJN Exs. A–I, K–O),
26 for the sole fact that Xsolla has made the information publicly available.
27 However, the Court declines to take judicial notice of the GitHub webpages and
28 Google.com search results. (Id. Exs. J, P.) First, the Court is unable to readily
1 determine that Xsolla, as opposed to a third party, made this information publicly
2 available. Second, courts are reluctant to take judicial notice of Google search results
3 because they “are continually changing and thus cannot ‘be accurately and readily
4 determined from sources whose accuracy cannot reasonably be questioned.’”
5 Novation Ventures, LLC v. J.G. Wentworth Co., LLC, No. 2:15-cv-00954-BRO
6 (PJWx), 2015 WL 12765467, at *3 (C.D. Cal. Sept. 21, 2015) (quoting Fed. R.
7 Evid. 201(b)). Third, neither of these webpages would “affect the outcome of this
8 motion.” Migliori v. Boeing N. Am., Inc., 97 F. Supp. 2d 1001, 1004 n.1 (C.D. Cal.
9 2000). Therefore, the Court DENIES Aghanim’s request to take judicial notice of the
10 screenshots of the GitHub webpages and Google search results. (See RJN Exs. J, P.)
11 III. BACKGROUND2
12 Xsolla is a global video game billing and distribution solution company that
13 provides video game developers and publishers with payment, billing, distribution,
14 support, and marketing technology for cross-platform video game businesses. (FAC
15 ¶ 19.) Xsolla offers customers use of various unique technologies, including:
16 worldwide compliance tax algorithms that allow video game
developers and publishers to charge and collect taxes from customers
17
and pay those taxes to government entities;
18
Pay Station, a checkout tool that enables fast, efficient transactions;
19
an algorithm that identifies fraud;
20
Site Builder, a tool that enables developers to create websites that
21 include web-access for in-game purchases;
22 Web Shop, a tool that enables purchases outside of the Apple App
23 Store or Google Play Store;
24 In-Game Services, a set of algorithms that enable developers and
producers to set-up in-game purchase options;
25
26
27
2 All factual references derive from Xsolla’s FAC or attached exhibits, unless otherwise noted. See
28 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (stating that well-pleaded factual allegations are
accepted as true for purposes of a motion to dismiss).
1
Personalization Tools, a series of tools that enable customers to
2 receive player feedback and to optimize monetization; and
3 a series of tools that assist with monetization.
4 (Id. ¶¶ 21–22.)
5 Constantin Andryushchenko (“Andry”), Konstantin Golubitsky (“Golubitsky”),
6 and Tagirovich all previously worked at Xsolla (collectively “Aghanim’s Founders”).
7 (Id. ¶¶ 29, 34, 36, 44–46.) Golubitsky started as a Team Lead more than a decade ago,
8 later serving as CTO and then CEO of Xsolla. (Id. ¶ 29.) Andry began working at
9 Xsolla in 2016 before becoming CEO of Xsolla Labs, an Xsolla subsidiary. (Id. ¶ 34.)
10 Tagirovich joined as CTO of Xsolla Labs in 2023. (Id. ¶ 36.)
11 Most Xsolla employees sign confidentiality agreements, and all employees sign
12 Xsolla’s employee handbook. (Id. ¶ 27.) Also, each of Aghanim’s Founders signed
13 documents with confidentiality clauses. (Id. ¶¶ 30, 35, 38.) Golubitsky signed an
14 employment agreement that had a confidentiality clause upon his promotion to CTO
15 in 2020. (Id. ¶¶ 30–31.) In 2022, Golubitsky and Andry both signed an employee
16 handbook, which warns that employees who improperly disclose confidential
17 information “may be subject to disciplinary action, up to and including termination of
18 employment.” (Id. ¶ 32.) When Tagirovich started at Xsolla, he signed an agreement
19 stating that neither Xsolla nor Tagirovich “shall disclose any confidential information
20 of the other” and that both parties “acknowledge entering into a separate
21 nondisclosure agreement relating to the confidential information.” (Id. ¶ 38.)
22 While at Xsolla, Aghanim’s Founders had access to Xsolla’s most sensitive
23 customer, product, pricing, and technical information. (Id. ¶¶ 29, 34, 40.) Xsolla
24 believes that in late-2022 through June 2023, Aghanim’s Founders downloaded,
25 copied, and/or forwarded Xsolla’s internal and highly sensitive documents for
26 themselves, including information relating to Xsolla’s technologies, customers, and
27 pricing. (Id. ¶ 41.) Aghanim’s Founders used these trade secrets and confidential
28 information to found Aghanim, a competitor of Xsolla. (Id. ¶ 46.)
1 Xsolla contends that Aghanim used Xsolla’s confidential information to rapidly
2 develop its video game service and payment platform, which includes offerings
3 identical to Xsolla’s. (Id. ¶¶ 49, 55–57, 59.) Xsolla claims that Aghanim could not
4 have developed its offerings so quickly without using Xsolla’s trade secrets and
5 confidential information. (Id. ¶¶ 58, 60, 64.)
6 Xsolla alleges that Aghanim targeted Xsolla’s customers by stealing its
7 customer-specific pricing information and using it to undercut Xsolla’s pricing. (Id.
8 ¶ 54.) Xsolla further claims that Aghanim used Xsolla’s customer information to
9 interfere with Xsolla’s customer relationships. (Id. ¶ 61.)
10 Just a few months after Aghanim’s Founders left Xsolla, Aghanim began
11 soliciting investors and advertising itself as the “new Xsolla.” (Id. ¶ 48.) Aghanim’s
12 advertising prominently featured Aghanim’s Founders’ past employment. (Id. ¶ 52.)
13 Aghanim included Xsolla in its materials and advertised similar technology and
14 services as Xsolla, leading Xsolla’s customers to question whether the companies
15 were affiliated. (Id. ¶¶ 53, 62.) Some Xsolla customers inquired into the relationship
16 between the companies, resulting in awkward conversations about Aghanim and its
17 founders and significant efforts to address customer confusion. (Id. ¶ 53.) Aghanim
18 also meta-tagged its website with “Xsolla” so that its site would appear in search
19 results related to Xsolla. (Id. ¶ 62.)
20 On March 14, 2024, Xsolla filed a complaint against Aghanim. (Compl., ECF
21 No. 1.) On April 19, 2024, Xsolla filed its FAC, which, among other things, added
22 Tagirovich as a defendant. (FAC ¶ 12.) Xsolla alleges (1) violation of the Defend
23 Trade Secrets Act (“DTSA”), 18 U.S.C § 1836, et seq., (2) violation of the California
24 Uniform Trade Secrets Act (“CUTSA”), California Civil Code section 3426,
25 (3) intentional interference with prospective economic advantage, (4) negligent
26 interference with prospective economic advantage, (5) intentional interference with
27 contract, (6) violation of California’s Unfair Competition Law (“UCL”), California
28 Business and Professional Code section 17200, et seq., (7) federal trademark
1 infringement in violation of the Lanham Act, 15 U.S.C. § 1114, and (8) breach of
2 contract. (FAC ¶¶ 56–114.) Aghanim now moves to dismiss all claims made against
3 it in the FAC.3 (Mot.) The Motion is fully briefed. (Opp’n; Reply, ECF No. 47.)
4 IV. LEGAL STANDARD
5 A. Motion to Dismiss
6 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable
7 legal theory or insufficient facts pleaded to support an otherwise cognizable legal
8 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). To
9 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading
10 requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v.
11 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to
12 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly,
13 550 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual
14 matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal,
15 556 U.S. at 678 (internal quotation marks omitted).
16 The determination of whether a complaint satisfies the plausibility standard is a
17 “context-specific task that requires the reviewing court to draw on its judicial
18 experience and common sense.” Id. at 679. A court is generally limited to the
19 pleadings and must construe all “factual allegations set forth in the complaint . . . as
20 true and . . . in the light most favorable” to the plaintiff. Lee v. City of Los Angeles,
21 250 F.3d 668, 679 (9th Cir. 2001). However, a court need not blindly accept
22 conclusory allegations, unwarranted deductions of fact, and unreasonable inferences.
23 Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).
24 B. Leave to Amend
25 Where a district court grants a motion to dismiss, it should generally provide
26 leave to amend unless it is clear the complaint could not be saved by any amendment.
27
28 3 Xsolla brings all but the eighth cause of action against Aghanim. Xsolla asserts six causes of
action against Tagirovich. As of the time of this Order, Tagirovich has not responded to the FAC.
1 See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d
2 1025, 1031 (9th Cir. 2008). Leave to amend may be denied when “the court
3 determines that the allegation of other facts consistent with the challenged pleading
4 could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture
5 Co., 806 F.2d 1393, 1401 (9th Cir. 1986). Thus, leave to amend “is properly
6 denied . . . if amendment would be futile.” Carrico v. City & County of San
7 Francisco, 656 F.3d 1002, 1008 (9th Cir. 2011).
8 V. DISCUSSION
9 Aghanim moves to dismiss each of the seven causes of action Xsolla asserts
10 against it. Aghanim argues that Xsolla fails to sufficiently allege its first and second
11 claims for misappropriation. Next, Aghanim contends that the CUTSA preempts
12 Xsolla’s third, fourth, and fifth claims for interference, and its sixth claim for violation
13 of the UCL. Aghanim also argues that Xsolla fails to adequately plead these claims.
14 Finally, Aghanim asserts that Xsolla’s seventh claim for federal trademark
15 infringement fails because Aghanim’s use of Xsolla’s mark was permissible. The
16 Court addresses each cause of action in turn.
17 A. Misappropriation Claims (Counts I and II)
18 Xsolla alleges Aghanim misappropriated trade secrets in violation of the DTSA
19 and CUTSA. (FAC ¶¶ 66–93.) These statutes “share the same pleading requirements
20 for the identification of trade secrets.” Alta Devices, Inc. v. LG Elecs., Inc., 343
21 F. Supp. 3d 868, 881 (N.D. Cal. 2018); see also InteliClear, LLC v. ETC Glob.
22 Holdings, Inc., 978 F.3d 653, 657 (9th Cir. 2020) (“Courts have analyzed these claims
23 together because the elements are substantially similar.”). To assert a trade secret
24 misappropriation claim, a plaintiff must allege that: (1) the plaintiff owned a trade
25 secret, (2) the defendant misappropriated, which (3) damaged the plaintiff.
26 InteliClear, LLC, 978 F.3d at 657–58. Aghanim moves to dismiss misappropriation
27 claims for Xsolla’s failure to adequately plead each of these elements. (Mot. 6–13.)
28
1 1. Trade Secrets
2 To adequately plead the existence of a trade secret, a plaintiff must describe the
3 trade secret with sufficient particularity. Cisco Sys., Inc. v. Chung, 462 F. Supp. 3d
4 1024, 1047 (N.D. Cal. 2020). Additionally, a plaintiff must allege that the information
5 derives independent economic value from its secrecy and the owner has “taken
6 reasonable measures to keep such information secret.” 18 U.S.C. § 1839(3)(A)–(B);
7 see also Cal. Civ. Code. § 3426.1(d)(1)–(2).
8 a. Sufficient Particularity
9 “[A] plaintiff need not spell out the details of the trade secret.” Cisco Sys., Inc.,
10 462 F. Supp. 3d at 1047. However, “it must describe the subject matter of the trade
11 secret with sufficient particularity to separate it from matters of general knowledge in
12 the trade . . . , and to permit the defendant to ascertain at least the boundaries within
13 which the secret lies.” Id. (internal quotation marks omitted) (collecting cases).
14 “Allegations that set out purported trade secrets in broad, categorical terms that are
15 merely descriptive of the types of information that generally may qualify as
16 protectable trade secrets’ are insufficient to state a claim.” Novation Sols., Inc. v.
17 Issuance Inc., No. 2:23-cv-00696-WLH (KSx), 2023 WL 5505908, at *7 (C.D. Cal
18 June 27, 2023) (emphasis omitted). A plaintiff may also “not simply rely upon
19 ‘catchall’ phrases or identify categories of trade secrets they intend to pursue at trial.”
20 InteliClear, LLC, 978 F.3d at 658.
21 Xsolla alleges fourteen categories of purported trade secrets:
22 (a) customer lists, customer-specific pricing information, and other
customer information; (b) pricing strategies for app purchases outside of
23
the Apple App Store and the Google Play store; (c) Pay Station (plug-in
24 video game checkout tool); (d) worldwide tax compliance algorithms;
25 (e) Site Builder platform; (f) Personalization Tools; (g) In-Game
Services; (h) Web Shop; (i) Marketing Solutions; (j) Xsolla Login;
26 (k) Player segmentation and analysis algorithms; (l) Xsolla’s game
27 developer hiring tool for its customers; (m) Xsolla’s marketing agency
matching tool; and (n) Xsolla’s integration platform for third-party apps.
28
1 (FAC ¶ 67.) Xsolla groups these alleged trade secrets into two types: (1) technical
2 information and (2) customer information and pricing. Xsolla describes the
3 misappropriated technical information to include the “research, development, testing,
4 algorithms, specifications, and applications” associated with its:
5 (i) worldwide tax compliance algorithm; (ii) Pay Station; (iii) Site
6 Builder platform4; (iv) Personalization Tools; (v) In-Game Services;
(vi) Web Shops; (vii) Marketing Solutions; (viii) Player segmentation and
7
analysis algorithm; (ix) game developer hiring tool for its customers;
8 (x) marketing agency matching tool; and (xi) integration platform for
third-party apps.
9
10 (Id. ¶ 77.) And Xsolla alleges Aghanim misappropriated its following customer
11 information and pricing:
12 (i) proprietary pricing structure for regular, high-volume, and long-term
customers; (ii) customer list and preferences information;
13
(iii) information regarding confidential contracts with customers;
14 (iv) pricing for its suite of tools and services offered to video game
developers and producers; (v) customer feedback about various services
15
and pricing; (vi) customer pitches and customized presentations made to
16 potential customers; and (vii) sales data and insights derived therefrom.
17 (Id. ¶ 71.)
18 While Xsolla is correct that it must only sufficiently plead one trade secret for
19 its claims to survive, (Opp’n 10–11), the Court nevertheless evaluates the technical
20 information trade secrets before turning to customer information and pricing.
21 i. Technical Information
22 Aghanim argues Xsolla’s technical information are not trade secrets because
23 they “are disclosed at length in its publicly available information.” (Mot. 7.) In
24 support, Aghanim cites numerous webpages from Xsolla’s website that describe the
25 features of its various offered applications and services. (Id. (citing RJN Exs. A–K).)
26 Xsolla counters that its FAC “makes clear that Xsolla’s trade secrets are its non-public
27
28 4 Xsolla also identifies the “technical code information” associated with its Site Builder platform.
(FAC ¶ 77c.)
1 research and development, and its back-end technical coding and algorithms that
2 cause the service offerings to work.” (Opp’n 11.)
3 The Court agrees with Xsolla. Xsolla alleges misappropriation of the “research,
4 development, testing, algorithms, specifications, and applications associated with”
5 each category of technical information. (FAC ¶ 77.) None of Aghanim’s exhibits
6 disclose the research, development, testing, algorithms, or specifications of the alleged
7 trade secrets. (See RJN Exs. A–K.) And while, on its own, the term “applications”
8 may be viewed to include the publicly available information about the uses of these
9 tools, Xsolla elsewhere makes clear that it is referring to back-end technologies and
10 information used to make the specified tools. (See, e.g., FAC ¶ 59d (“Aghanim’s
11 billing engine tool is based on Xsolla’s trade secret and confidential information on
12 how to develop such a billing tool.”).) In other words, Xsolla targets its
13 misappropriation claims at Aghanim’s use of Xsolla’s internal, proprietary information
14 to create tools like Xsolla’s, not at Aghanim’s offering of similar tools. (See id. ¶ 47
15 (“Xsolla did not have many concerns because it assumed that Aghanim would take
16 years to lawfully build a platform similar to Xsolla’s.”).)
17 With one exception, the Court finds Xsolla alleges its technical information
18 trade secrets with sufficient particularity. Xsolla does not simply allege its trade
19 secrets include “research, development, testing, algorithms, specification, and
20 applications.” (FAC ¶ 77); see Rescue 1 Fin., LLC v. Complete Debt Relief, LLC,
21 No. 8:23-cv-00982-CJC (KESx), 2023 WL 6373884, at *4 (C.D. Cal. Aug. 24, 2023),
22 (finding “research and development of new or improved products and services,”
23 “technical data,” and “software data,” to be “simply too broad for the Court—or
24 Defendants—to understand what they mean”), opinion clarified, 2024 WL 3081923
25 (C.D. Cal. Jan. 29, 2024). Rather, Xsolla goes further by identifying specific
26 technologies whose research, development, testing, algorithms, specification, and
27 applications are trade secrets. (See FAC ¶ 77); e.g., Advanced BioTech, LLC v.
28 BioWorld USA, Inc., No. 1:19-cv-01215-NONE (SKOx), 2020 WL 5797929, at *4
1 (E.D. Cal. Sept. 29, 2020) (finding plaintiff sufficiently pleaded trade secrets where
2 complaint identified formulations of specific products); Calsoft Labs, Inc. v.
3 Panchumarthi, No. 19-cv-04398-NC, 2020 WL 512123, at *7 (N.D. Cal. Jan. 31,
4 2020) (distinguishing insufficient allegations concerning “proprietary training data
5 and programs valuable in the field of technology consulting and staffing” from
6 sufficient allegations that “allow[] the inference that the source code and other data
7 were related to” specific products or services).
8 In contrast to the well-pleaded allegations supporting most of the technical
9 information trade secrets, Xsolla does not sufficiently allege its Xsolla Login is a trade
10 secret. In its FAC, Xsolla mentions this tool twice, and fails in either instance to
11 provide more than a conclusory allegation that Xsolla Login is a trade secret. (See
12 FAC ¶¶ 59b, 77j.) Therefore, the Court finds that Xsolla describes its technical
13 information with sufficient particularity, excepting the Xsolla Login tool.
14 ii. Customer Information and Pricing
15 Similar to its arguments regarding the technical information, Aghanim contends
16 Xsolla’s customer information and pricing are not trade secrets because Xsolla has
17 publicized this information. With respect to Xsolla’s customer lists, Aghanim cites
18 Xsolla’s website, which identifies numerous customers and the Xsolla products those
19 customers use. (RJN Exs. M–N.)5 As to Xsolla’s pricing information, Aghanim notes
20 Xsolla’s website highlights products used by “dozens of customer[s].” (Mot. 8 (citing
21 RJN Ex. N).) Aghanim also cites the “5%. ONE PRICE.” advertisement on Xsolla’s
22 website to argue pricing information is not a trade secret. (RJN Ex. O; see Mot. 8.)
23 Xsolla does not allege that a list of its customers in isolation—without
24 additional client information—is a trade secret. (See FAC ¶ 69 (“This information is
25 not merely a list of actual and potential customers.”).)6 Instead, Xsolla contends that
26
5 Aghanim also cites Google search results, (RJN Ex. P), which the Court declines to judicially
27
notice.
28 6 In its Opposition, Xsolla indicates it does not consider “a list of all current and former Xsolla
customers” to be trade secrets. (Opp’n 22.)
1 client-specific information, such as contact information, pricing, and preferences, are
2 trade secrets. (Id. ¶¶ 69–71.) With respect to customer contact information, the RJN
3 exhibits do not “show[] that someone could also obtain those clients’ direct contact
4 information.” Wixen Music UK Ltd. v. Transparence Ent. Grp. Inc., No. 2:21-cv-
5 02663-MEMF (MRWx), 2023 WL 9004931, at *8 (C.D. Cal. Oct. 10, 2023). Also,
6 that Xsolla may highlight products used by some of its customers does not mean it has
7 publicized all the products used by those customers. See id. Moreover, while Xsolla
8 appears to advertise “one price for everything” on its website, (RJN Ex. O), the Court
9 finds Xsolla alleges that its customized customer pricing is not publicly available
10 through its claims that it “customize[s] its pricing,” (FAC ¶ 69), and “has negotiated
11 special, preferred pricing with long-term and high-volume customers,” (id. ¶ 70).
12 Aghanim next contends that Xsolla fails to allege its customer information and
13 pricing with sufficient particularity to qualify as a trade secret. (Mot. 9.) Various
14 courts have evaluated this issue within this very context. For example, in Vendavo,
15 Inc. v. Price f(x) AG, the court held that plaintiff failed to allege its trade secret claim
16 with sufficient particularity where the plaintiff alleged its trade secrets to include:
17 source code, customer lists and customer related information, pricing
18 information, vendor lists and related information, marketing plans and
strategic business development initiatives, ‘negative knowhow’ learned
19
through the course of research and development, and other information
20 related to the development of its price-optimization software, including
ideas and plans for product enhancements.
21
22 No. 17-cv-06930-RS, 2018 WL 1456697, at *3–4 (N.D. Cal. Mar. 23, 2018). In
23 comparison, in Navigation Holdings, LLC v. Molavi, the court found plaintiffs had
24 sufficiently alleged trade secrets that they described as:
25 confidential information about their clients in their files and databases.
26 This information is not only a list of potential clients, but a compilation
of price information about proven clients that often includes each client’s
27
name, address, telephone number, contact person and private email
28 address. Plaintiffs’ database contains client information that Plaintiffs
have gathered over the entire history of their operations, which span not
1
only many years but hundreds of thousands of hours of research,
2 including prior order/pricing information. Many of the clients are regular
3 and frequent consumers of Plaintiffs’ services and have been so for years.
4 445 F. Supp 3d 69, 77 (N.D. Cal. 2020). Here, some of Xsolla’s allegations are like
5 the detailed descriptions in Navigation Holdings, while others are simply generalized
6 categories of information like those in Vendavo.
7 Xsolla provides detailed descriptions of its pricing, alleging “[i]t has spent
8 countless hours developing confidential and proprietary pricing schemes tailored to
9 the needs of the individual video game developers and publishers . . . which took
10 many years and significant effort and testing to develop.” (FAC ¶ 25.) It does the
11 same for its customer information, which it describes as “compilation of information
12 about established customers that includes information such as each customer’s name,
13 specific contact persons, specific contact information, including addresses, telephone
14 numbers, and emails, and details about the customer’s products and how they use
15 Xsolla’s offerings.” (Id. ¶ 69.)
16 Thus, the Court finds that Xsolla sufficiently alleges the following customer
17 information and pricing trade secrets: (i) proprietary pricing structure for regular,
18 high-volume, and long-term customers; (ii) customer list7 and preferences
19 information; (iii) information regarding Xsolla’s confidential contracts with
20 customers; (iv) pricing for its suite of tools and services offered to video game
21 developers and producers; and (v) Xsolla’s customer feedback about various services
22 and pricing. (Id. ¶ 71); see Cherokee Chem. Co. v. Frazier, No. 2:20-cv-1757-MWF
23 (ASx), 2020 WL 8410432, at *4 (C.D. Cal. Dec. 14, 2020) (finding allegations “are
24 more similar to the detailed description in Navigation Holdings than the broad,
25 generalized categories of information listed in Vendavo”); Logistics Guys Inc. v.
26 Cuevas, No. 2:23-cv-01592-DAD (CSKx), 2024 WL 3011216, at *7 (E.D. Cal.
27 June 13, 2024) (“[C]onfidential customer-related information including customer lists
28
7 As noted, this does not include a list of Xsolla’s customers in isolation.
1 and contact information, pricing guidelines, historical purchasing information, and
2 customers’ business needs/preferences are routinely given trade secret protection.”
3 (internal quotation marks omitted)).
4 Unlike the well-pleaded allegations supporting most of the customer
5 information and pricing, Xsolla fails to sufficiently allege its (i) customer pitches and
6 customized presentations made to potential customers, and (ii) sales data and insights
7 derived therefrom are trade secrets. These allegations are “broad” and “categorical,”
8 like in Vendavo, Inc., 2018 WL 1456697, at *3, and Xsolla does not provide detailed
9 descriptions of this information that “permit the defendant to ascertain at least the
10 boundaries within which the secret lies.” Cisco Sys., Inc., 462 F. Supp. 3d at 1047.
11 b. Independent Economic Value
12 Next, Aghanim argues Xsolla fails to plead its trade secrets have independent
13 economic value. “To have independent economic value, a trade secret must be
14 sufficiently valuable and secret to afford an actual or potential economic advantage
15 over others.” Id. at 1052. This pleading standard is not high. Calendar Rsch. LLC v.
16 StubHub, Inc., No. 2:17-cv-04062-SVW (SSx), 2017 WL 10378336, at *4 (C.D. Cal.
17 Aug. 16, 2017). A plaintiff claiming “a competitor could use th[e] information to
18 market itself more effectively” adequately pleads independent economic value.
19 Nelson Bros. Pro. Real Est., 2017 WL 8220703, at *5.
20 Aghanim objects on similar grounds as it does to whether Xsolla adequately
21 alleges a trade secret: Xsolla’s trade secrets cannot have independent economic value
22 because they are publicly available. (Mot. 9–10.) However, because the trade secrets
23 are not publicly available, the Court rejects this argument and finds Xsolla plausibly
24 alleges independent economic value throughout its FAC.
25 c. Reasonable Measures
26 Lastly, Aghanim argues Xsolla fails to plead a trade secret because it did not
27 take “reasonable measures to keep” its information secret, as required under federal
28 and state law. 18 U.S.C. § 1839(3)(A)–(B); see also Cal. Civ. Code. § 3426.1(d)(1)–
1 (2). Aghanim contends Xsolla did not take “consistent measures to protect” its trade
2 secrets, including by failing to allege that customers signed NDAs or employees
3 signed confidentiality agreements for the entirety of their employment. (Mot. 11.)
4 Neither federal nor state law “require[s] . . . confidential information be kept
5 completely clandestine or mandate the use of non-disclosure agreements in all
6 instances.” Bal Seal Eng’g, Inv. v. Nelson Prods., Inc., No. 8:13-cv-01880-JLS
7 (KESx), 2018 WL 4697255, at *5 (C.D. Cal. Aug. 3, 2018). Nor do these statutes
8 “dictate a particular level of secrecy,” such as confidentiality agreements. Id.; see also
9 Nelson Bros. Pro. Real Est. LLC, 2017 WL 8220703, at *5 (“[C]ourts in the Ninth
10 Circuit have found reasonable effort even in the absence of a nondisclosure
11 agreement.” (collecting cases)). At bottom, this is a “fact-intensive” analysis, and
12 “[e]fforts at maintaining secrecy need not be extreme, just reasonable under the
13 circumstances.” InfoSpan, Inc. v. Emirates NBD Bank PJSC, No. 8:11-cv-1062-JVS
14 (ANx), 2015 WL 13357646, at *3 (C.D. Cal. May 6, 2015).
15 The Court finds Xsolla adequately alleges that it made reasonable efforts to
16 maintain the secrecy of its trade secrets. Most employees sign confidentiality
17 agreements, and all employees sign “the Xsolla Employee Handbook which includes
18 language detailing the importance of confidentiality to Xsolla.” (FAC ¶ 27.) This
19 handbook informs employees about the “extreme[] important[ce]” of not disclosing
20 confidential information to competitors, including the very information Xsolla alleges
21 are trade secrets, “pricing, products and new product development, software . . . ,
22 computer programs . . . [and] customers.” (Id. ¶ 32.) It also warns of the potential
23 consequences of disclosing such information, including termination. (Id.). This is
24 sufficient at this stage to establish reasonable measures. See Zoom Imaging Sols., Inc.
25 v. Roe, No. 2:19-cv-01544-WBS (KJNx), 2022 WL 4025293, at *7 (E.D. Cal. Sept. 2,
26 2022) (holding that, although employee handbook was not a contract, handbook that
27 “contained a policy for employees to keep” information confidential was sufficient to
28 permit plaintiff’s claim to survive summary judgment).
1 The FAC is sufficient, even though Xsolla omits that Golubitsky and Andry
2 signed confidentiality agreements when they first joined Xsolla. Ultimately, Xsolla
3 alleges Golubitsky and Andry (and Tagirovich) all signed confidentiality agreements
4 before they are alleged to have taken Xsolla’s trade secrets. (FAC ¶¶ 30, 35, 41.)
5 Finally, Xsolla was not required to allege it required its customers to keep
6 Xsolla’s trade information confidential. As noted, Xsolla alleges the technical
7 information is research and back-end technology; customers do not have access to this
8 information. And while an individual customer may have access to some of its own
9 customer information and pricing, as alleged, none of the customers had access to the
10 customer information and pricing of all Xsolla’s customers. Therefore, at this stage,
11 Xsolla’s failure to allege that it took measures to ensure its customers kept their
12 respective information and pricing confidential does not defeat its allegations that it
13 took reasonable measures to protect its customer information and pricing.
14 Because Xsolla has sufficiently alleged a trade secret that has independent
15 economic value, which it made reasonable efforts to keep secret, the Court concludes
16 Xsolla has alleged it owned a trade secret.
17 2. Misappropriation
18 Aghanim contends Xsolla fails to allege Aghanim misappropriated trade
19 secrets. (Mot. 13–15.) Under both the DTSA and the CUTSA, “misappropriation”
20 means either (1) the “[a]cquisition of a trade secret by another person who knows or
21 has reason to know that the trade secret was acquired by improper means;” or (2) the
22 “[d]isclosure or use of a trade secret of another without express or implied consent.”
23 18 U.S.C. § 1839(5); Cal. Civ. Code § 3426.1(b).
24 Aghanim principally argues Xsolla fails to allege Aghanim improperly acquired
25 or used the trade secret information.8 Despite allegations seemingly made in the FAC
26 to the contrary, (e.g., FAC ¶¶ 84, 86), Xsolla now asserts it “has not alleged Aghanim
27
28 8 Aghanim asserts that Xsolla’s providing product and service information on its website defeats its
misappropriation claim. (Mot. 13.) As explained, the Court rejects this argument.
1 itself improperly acquired its trade secrets.” (Opp’n 17.) Thus, the Court turns to
2 whether Xsolla has alleged Aghanim’s improper use.
3 In support of its argument, Aghanim contends the Court should not credit
4 Xsolla’s allegations made “upon information and belief.” (Opp’n 14.) The Ninth
5 Circuit has adopted the Second Circuit’s view that the “Twombly plausibility
6 standard . . . does not prevent a plaintiff from pleading facts alleged upon information
7 and belief where the facts are peculiarly within the possession and control of the
8 defendant or where the belief is based on factual information that makes the inference
9 of culpability plausible.” Soo Park v. Thompson, 851 F.3d 910, 928 (9th Cir. 2017)
10 (quoting Arista Recs., LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010)).
11 The Court finds Xsolla’s “information and belief” allegations do not meet this
12 standard, and, thus, the Court cannot consider them for purposes of this Motion. With
13 respect to the technical information, Xsolla asserts, among other things, “[o]n
14 information and belief,” Aghanim’s Founders “downloaded, copied, and/or forwarded
15 internal and highly sensitive documents from Xsolla,” (FAC ¶ 41; see id. ¶¶ 42, 44,
16 58, 85), and Aghanim used that information to develop its products, (id. ¶¶ 59–60;
17 64). Xsolla does not allege or demonstrate that these facts “are peculiarly within the
18 possession and control of the defendant.” Soo Park, 851 F.3d at 928 (quoting Arista
19 Recs., LLC, 604 F.3d at 120). For example, Xsolla does not explain any investigation
20 it took to determine that Aghanim’s Founders did these things, or why it is unable to
21 track the purported downloading or forwarding through its internal systems. Nor has
22 Xsolla shown its “belief is based on factual information that makes the inference of
23 culpability plausible.” Soo Park, 851 F.3d at 928 (quoting Arista Recs., LLC,
24 604 F.3d at 120). Xsolla even bases its allegation that the only way Aghanim could
25 offer the misappropriated features so quickly is by using Xsolla’s trade secrets “on
26 information and belief.” (FAC ¶ 64.)
27 Xsolla’s “information and belief” allegations concerning customer information
28 and pricing fare no better. Xsolla alleges:
On information and belief, beginning as early as August 2023, Aghanim
1
focused its marketing towards soliciting Xsolla’s existing customers.
2 Aghanim’s standard marketing solicitation informed the Xsolla customer
3 of Aghanim’s upcoming launch of a product with extremely similar
features to Xsolla, but at a reduced cost. It is believed that these prices
4
directly undercut Xsolla’s pricing, even for its largest customers. Xsolla
5 does not publish or otherwise make its pricing known. The only way
Aghanim could have effectively undercut Xsolla’s pricing for similar
6
products and services was through the theft of confidential and trade
7 secret information – including specifically its customer-specific pricing.
8 Indeed, Aghanim’s founders had unrestricted access to all of Xsolla’s
customized pricing and cost structure allowing Aghanim to undercut
9 directly Xsolla for the purpose of converting customers while still
10 maintaining the maximum amount of profit.
11 (Id. ¶ 54 (emphasis added).) Xsolla fails to allege how these facts are peculiarly in
12 Aghanim’s control or why it cannot find out these facts from Xsolla’s existing
13 customers. Nor has Xsolla alleged other facts that make the inference of culpability
14 “plausible,” rather than “merely possible.” 2Tee Couture, Inc. v. By Together,
15 No. 2:14-cv-07735-R (PJWx), 2014 WL 12577077, at *1 (C.D. Cal. Dec. 16, 2014)
16 (first citing Iqbal, 556 U.S. at 678; and then citing Twombly, 550 U.S. at 570).
17 Without these “information and belief” allegations, Xsolla does not adequately
18 allege misappropriation. Xsolla alleges that Aghanim’s Founders accessed Xsolla’s
19 trade secrets, (FAC ¶ 74), Aghanim offered “eerily identical” services to Xsolla, (id.
20 ¶ 56), and Aghanim developed its applications “in record time,” (id. ¶ 57). Without
21 more, these allegations do not support a plausible inference that Aghanim
22 misappropriated Xsolla’s trade secrets. See, e.g., Brown v. Adidas Int., 938 F. Supp.
23 628, 634 (S.D. Cal. 1996) (“Allegations of similarity, without more, do not support a
24 claim of misappropriation of trade secrets.”); but see Applied Biological Lab’ys, Inc.
25 v. Diomics Corp., No. 3:20-cv-2500-AJB (LLx), 2021 WL 4060531, at *5 (S.D. Cal.
26 Sept. 7, 2021) (finding allegations of similarity sufficient where defendant “has no
27 prior experience” in the field). As such, the Court determines that Xsolla fails to state
28
1 a claim for misappropriation under the DTSA and CUTSA. At the same time, the
2 Court does not find amendment would be futile.
3 Accordingly, the Court GRANTS Defendant Aghanim’s Motion and
4 DISMISSES Plaintiff’s first and second causes of action against Defendant Aghanim
5 WITH LEAVE TO AMEND.
6 B. Interference with Prospective Economic Advantage, Interference with
7 Contract, and Unfair Competition (Counts III, IV, V, and VI)
8 Aghanim argues CUTSA preempts Xsolla’s third claim (intentional interference
9 with prospective economic advantage), fourth claim (negligent interference with
10 prospective economic advantage), fifth claim (intentional interference with contract),
11 and sixth claim (unfair competition) because each is based on the same facts as the
12 misappropriation of trade secret claims. (Mot. 16–18.) “CUTSA was enacted
13 with . . . California’s legislative intent to occupy the entire field of misappropriation of
14 trade secrets.” MedImpact Healthcare Sys., Inc. v. IQVIA Inc, No. 19-cv-01865-GPC
15 (LL), 2020 WL 5064253, at *16 (S.D. Cal. Aug. 27, 2020) (collecting cases). The
16 statute “serves to preempt all claims premised on the wrongful taking and use of
17 confidential business and proprietary information,” regardless of whether that
18 information is a trade secret. Teva Pharm. USA, Inc. v. Health IQ, LLC, No. 8:13-cv-
19 00308-CJC (RNBx), 2013 WL 12132029, at *5 (C.D. Cal. Apr. 29, 2013). As such,
20 CUTSA preempts Xsolla’s common law claims to the extent they arise from the “same
21 nucleus of facts as trade secret misappropriation.” K.C. Multimedia, Inc. v. Bank of
22 Am. Tech. & Ops., Inc., 171 Cal. App. 4th 939, 962 (2009). Thus, the Court examines
23 the elements and allegations for each claim and dismisses those Xsolla cannot assert
24 without the facts supporting trade secret misappropriation. See id. at 959.
25 1. Intentional and Negligent Interference with Prospective Economic
Advantage (Counts III and IV)
26
27 Under California law, to assert a claim for intentional interference with
28 prospective economic advantage, a plaintiff must allege: (1) an economic relationship
1 between the plaintiff and a third party, “with the probability of future economic
2 benefit to the plaintiff”; (2) “the defendant’s knowledge of the relationship”; (3) the
3 defendant’s intentional acts “designed to disrupt the relationship”; (4)” actual
4 disruption of the relationship”; and (5) “economic harm to the plaintiff proximately
5 caused by the” defendant’s acts. CRST Van Expedited, Inc. v. Werner Enters., Inc.,
6 479 F.3d 1099, 1108 (9th Cir. 2007) (quoting Korea Supply Co. v. Lockheed Martin
7 Corp., 29 Cal. 4th 1134, 1153 (2003)). “The elements are the same for negligent
8 interference, except the plaintiff must also allege that the defendant owed her a duty of
9 care, and that the defendant was negligent, rather than intentional, in its conduct.”
10 Weintraub Fin. Servs., Inc. v. Boeing Co., No. 2:20-cv-03484-MWF (GJSx),
11 2020 WL 6162801, at *7 (C.D. Cal. Aug. 7, 2020) (citing J’Aire Corp. v. Gregory,
12 24 Cal. 3d 799 (1979)).
13 Here, Xsolla premises its interference claims on Aghanim “using improperly
14 obtained and confidential information about the contact information for Xsolla
15 customers to solicit these customers.” (FAC ¶ 98.) In its CUTSA claim, Xsolla
16 alleges this very same “contact information” is a trade secret. (Id. ¶ 69 (alleging
17 customer “contact persons” and “contact information” are “confidential information”);
18 Opp’n 22 (“describing trade secrets compilation of customer . . . contact
19 information”).) Similarly, in its prospective interference claims, Xsolla alleges
20 Aghanim’s acts “include using information Aghanim’s Founders obtained from Xsolla
21 to reach out to specific contacts from Xsolla customers.” (FAC ¶ 98.) Xsolla makes
22 an identical allegation in its CUTSA claim: Aghanim “used Xsolla’s trade secrets
23 for . . . soliciting and poaching Xsolla’s customers.” (Id. ¶ 84.)
24 As such, the “wrongful acts alleged by” Xsolla—improper use of Xsolla’s trade
25 secrets to solicit Xsolla’s customers—“plainly and exclusively spell out only trade
26 secrets misappropriation.” Neuman v. B2 Brands, Inc., No. 5:07-cv-01025-MLG,
27 2010 WL 11596467, at *8 (C.D. Cal. Feb. 17, 2010). Because Xsolla’s “claims
28 cannot survive without the ‘trade secret facts,’” id., CUTSA preemption applies.
1 Accordingly, the Court GRANTS Aghanim’s Motion and dismisses its claims for
2 intentional and negligent interference with prospective economic advantage claims
3 WITH LEAVE TO AMEND.
4 2. Intentional Interference with Contract (Count V)
5 To plead a claim for intentional interference with contract under California law,
6 a plaintiff must allege: “(1) a valid contract between plaintiff and a third party;
7 (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to
8 induce a breach or disruption of the contractual relationship; (4) actual breach or
9 disruption of the contractual relationship; and (5) resulting damage.” 3500 Sepulveda,
10 LLC v. Macy’s W. Stores, Inc., 980 F.3d 1317, 1325–26 (9th Cir. 2020) (quoting
11 Quelimane Co. v. Stewart Title Guar. Co., 19 Cal.4th 26, 77 (1998)).
12 Xsolla vaguely refers to “Aghanim’s conduct,” (FAC ¶ 112), and “wrongful
13 acts,” (id. ¶ 113), without additional detail. Xsolla further alleges Aghanim “knew of”
14 Xsolla’s customer contracts and “intended to disrupt the[ir] performance.” (Id. ¶ 112.)
15 The “gravamen of the wrongful conduct” for this and the UCL claims is the same: the
16 wrongful use of Xsolla’s trade secrets. K.C. Multimedia, Inc., 171 Cal. App. 4th
17 at 961. Xsolla therefore fails “to allege an intentional interference with contract claim
18 that arises out of a set of operative facts distinct from those relied upon to support its
19 trade secret misappropriation claims,” Cisco Sys., Inc., 462 F. Supp. 3d at 1058–59,
20 and CUTSA preemption applies. As such, the Court GRANTS Aghanim’s Motion
21 and dismisses Xsolla’s claim for intentional interference with contract WITH LEAVE
22 TO AMEND.
23 3. Unfair Competition (Count VI)
24 The UCL prohibits any “unlawful, unfair or fraudulent business act or practice.”
25 Cal. Bus. & Prof. Code § 17200. Xsolla alleges that Aghanim violated the UCL,
26 including by “us[ing] confidential customer information,” “solicit[ing] of Xsolla
27 customers,” and misrepresenting its “independent capabilities to develop video game
28 payment and support platforms.” (FAC ¶¶ 117–18.) Each of these allegations is
1 “clearly based on the same nucleus of operative facts as the CUTSA claim.”
2 Deerpoint Grp., Inc. v. Agrigenix, LLC, 345 F. Supp. 3d 1207, 1238 (E.D. Cal. 2018).
3 In contrast, Xsolla separately alleges Aghanim “improper[ly] reference[d]”
4 Xsolla’s name in solicitation of customers and advertisement on its website, and
5 “falsely and misleadingly advertised its capabilities and technological developments
6 to compete with Xsolla.” (Id. ¶¶ 117c–d, 118.) These claims are not based on the
7 same facts as the CUTSA claim. Therefore, the Court finds CUTSA “partially
8 preempts the UCL claim.” Id. As such, Xsolla’s UCL allegations concerning
9 misappropriation are preempted, but those concerning improper references and
10 misrepresentations are not.
11 Because Xsolla’s UCL claim is not entirely preempted, the Court turns to
12 Aghanim’s argument that Xsolla fails to establish standing because it does not allege it
13 suffered an injury in fact. (Mot. 19.)
14 To establish standing under the UCL, a plaintiff must “(1) establish a loss or
15 deprivation of money or property sufficient to qualify as injury in fact, i.e., economic
16 injury, and (2) show that that economic injury was the result of, i.e., caused by, the
17 unfair business practice or false advertising that is the gravamen of the claim.”
18 Kwikset Corp. v. Superior Ct., 51 Cal. 4th 310, 322 (2011) (emphasis omitted). As the
19 California Supreme Court has noted, “[t]here are innumerable ways in which
20 economic injury from unfair competition may be shown.” Id. at 323. But a mere
21 “conclusory and vague assertion that [a plaintiff] ‘lost money’” is insufficient to state
22 a claim. Amara v. Nationstar Mortg. LLC, No 5:19-cv-01153-AB (SSx), 2020 WL
23 11648206, at *18 (C.D. Cal. Mar. 16, 2020); see also Day v. Cal. Lutheran Univ.,
24 No. 22-55825, 2023 WL 4893650, at *2 (9th Cir. Aug. 1, 2023) (“[A]llegation that
25 [plaintiff] ‘lost money’ in the form of ‘compensation’ is conclusory, and without more,
26 insufficient to establish standing to pursue her UCL claim.”). Rather, a plaintiff must
27 plead “specific facts showing how he was economically injured.” Pitre v. Wal-Mart
28
1 Stores, Inc., No. 8:17-cv-01281-DOC (DFMx), 2017 WL 11093619, at *4 (C.D. Cal.
2 Nov. 8, 2017).
3 Xsolla conclusorily alleges that Aghanim’s wrongful actions caused Xsolla to
4 “suffer[] injury in fact, including without limitation, damages . . . , as well as loss of
5 profits, customers, employees, goodwill, property, and prospective economic
6 advantage.” (FAC ¶ 120; see Opp’n 25.) Because Xsolla’s UCL allegations in
7 connection with misappropriation of its trade secrets are preempted, the economic
8 injury must relate to the allegations of improper references and misrepresentation. In
9 this regard, Xsolla alleges only that Aghanim is “directly benefitting” from using
10 Xsolla’s name on its website. (FAC ¶ 62; see Opp’n 25.) This fails to identify
11 economic injury to Xsolla. Xsolla fails to establish standing to assert a UCL claim.
12 As such, the Court GRANTS Aghanim’s Motion and dismisses Xsolla’s UCL
13 claim WITH LEAVE TO AMEND.
14 C. Federal Trademark Infringement (Count VIII)
15 Aghanim argues that Xsolla’s seventh and final claim against it for federal
16 trademark infringement should be dismissed because its use of Xsolla’s mark was
17 permitted. (Mot. 21–22.)
18 In trademark infringement cases, a plaintiff must establish: (1) ownership of a
19 trademark right and (2) “that the defendant’s use of the mark is likely to cause
20 consumer confusion.” Network Automation, Inc. v. Advanced Sys. Concepts, Inc.,
21 638 F.3d 1137, 1144 (9th Cir. 2011). Aghanim invokes the normative fair use
22 defense, arguing its use of Xsolla’s mark does not create a likelihood of confusion.
23 (Mot. 21–22.)
24 The nominative fair use doctrine applies “where a defendant uses the mark to
25 refer to the trademarked good itself.” Adobe Sys. Inc. v. Christenson, 809 F.3d 1071,
26 1081 (9th Cir. 2015). A defendant raising this defense must prove the following:
27 (1) the product is one not readily identifiable without use of the trademark”;
28 (2) defendant used “only so much of the mark . . . as is reasonably necessary to
1 identify the product;” and (3) defendant “must do nothing that would, in conjunction
2 with the mark, suggest sponsorship or endorsement by the trademark holder.” Applied
3 Underwriters, Inc. v. Lichtenegger, 913 F.3d 884, 893 (9th Cir. 2019). “If the
4 nominative use of a mark satisfies these three factors, then there is no infringement.”
5 Id. “Although it is a rare situation in which granting a motion to dismiss is
6 appropriate when a case involves questions of consumer confusion,” courts dismiss
7 trademark infringement claims when it is clear on the face of the complaint that a
8 defendant’s “alleged infringement constituted nominative fair use.” Id. at 897
9 (internal quotation marks omitted).
10 Xsolla claims that Aghanim infringed its mark. Xsolla alleges “Aghanim’s
11 founders . . . prominently featured (on multiple occasions) their past employment at
12 Xsolla.” (FAC ¶ 52.)9 Moreover, Xsolla asserts Aghanim “plastered” Xsolla’s mark
13 “all over Aghanim’s materials,” causing customers “to wonder whether the companies
14 were affiliated or otherwise part of the same entity” and resulting in “customers
15 inquir[ing] as to the relationship between the two companies.” (Id. ¶ 53.) Finally,
16 Xsolla alleges its “name is prominently displayed on the home page of the Aghanim
17 website, leading some customers to believe the companies are connected or affiliated
18 with one another.” (Id. ¶ 62.)
19 Aghanim’s use of Xsolla’s mark featuring the Aghanim Founders’ past
20 employment is nominative fair use. First, Aghanim’s Founders’ former employer is
21 not one readily identifiable without the use Xsolla’s trademark. See New Kids on the
22 Block v. News Am. Publ’g, Inc., 971 F.2d 302, 306–08 (9th Cir. 1992) (“It is no more
23 reasonably possible, however, to refer to the New Kids as an entity than it is to refer to
24 the Chicago Bulls, Volkswagens or the Boston Marathon without using the
25 trademark.”) Second, the FAC and its exhibits make clear Xsolla has failed to allege
26
9 This includes Xsolla’s claim that Aghanim “published press releases signaling a relationship
27
between” Xsolla’s mark and Aghanim. (FAC ¶ 124.) Xsolla submits two press releases with its
28 First Amended Complaint, both of which reference “Xsolla” solely to identify Aghanim’s Founders’
past employer. (Id. Ex. B, ECF No. 25-2; Opp’n 28 n.4.)
1 Aghanim used more than necessary of Xsolla’s mark. See Applied Underwriters, Inc.,
2 913 F.3d at 895 (“[A]nalysis of this factor should focus not on the number of uses of
3 Plaintiffs’ marks, but on whether Defendants used more of each individual mark than
4 was necessary in terms of font and stylization”). Third, nothing in reference to a
5 former employer could reasonably suggest sponsorship or endorsement of that former
6 employer.
7 In contrast, Aghanim’s alleged “plaster[ing]” of Xsolla’s mark all over its
8 materials and prominently displaying Xsolla’s mark on Aghanim’s website, (FAC
9 ¶¶ 53, 62), does not amount to fair use. Accepting these allegations as true, as the
10 Court must at this stage, Xsolla pleads sufficient facts that use of its marks led
11 consumers to reasonably conclude it sponsored or endorsed Aghanim and its products.
12 Accordingly, the Court DENIES Aghanim’s Motion with respect to the
13 trademark claim.
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
1 VI. CONCLUSION
2 For the reasons discussed above, the Court GRANTS IN PART AND
3 || DENIES IN PART Aghanim’s Motion to Dismiss. (ECF No. 32.) Specifically, the
4|| Court GRANTS Aghanim’s Motion and DISMISSES Xsolla’s first (violation of the
5 || DTSA), second (violation of CUTSA), third (intentional interference with prospective
6 || economic relations), fourth (negligent interference with prospective economic
7 || relations), fifth (intentional interference with contract), and sixth (violation of the
8 | UCL) causes of action WITH LEAVE TO AMEND. The Court DENIES
9 || Aghanim’s Motion as to Xsolla’s seventh (trademark infringement) cause of action.
10 If Xsolla wishes to amend, it must file a Second Amended Complaint no later
11 || than twenty-one days from the date of this Order, in which case Aghanim shall answer
12 | or otherwise respond within fourteen days of the filing. If Xsolla does not timely
13 | amend, the dismissal of the first, second, third, fourth, fifth, and sixth causes of action
14 || shall be deemed a dismissal with prejudice as of the lapse of the deadline to amend,
15 || and the case against Aghanim will proceed as to the seventh cause of action.
16
17 IT IS SO ORDERED.
18
19 September 10, 2024 N .
20 a“
21 See |
OTIS D. HT,
33 UNITED STATES DISTRICT JUDGE
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