Free Reply to Opposition - District Court of California - California

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HAROLD J. MCELHINNY (CA SBN 66781) [email protected] MORRISON & FOERSTER LLP 425 Market Street San Francisco, California 94105-2482 Telephone: 415.268.7000 Facsimile: 415.268.7522 KENNETH A. KUWAYTI (CA SBN 145384) [email protected] MARC DAVID PETERS (CA SBN 211725) [email protected] MORRISON & FOERSTER LLP 755 Page Mill Road Palo Alto, CA 94304-1018 Telephone: 650-813-5600 Facsimile: 650-494-0792 Attorneys for Defendants ADVANCED MICRO-FABRICATION EQUIPMENT, INC. CHINA, ADVANCED MICRO-FABRICATION EQUIPMENT, INC. ASIA, and ADVANCED MICROFABRICATION EQUIPMENT INC. UNITED STATES DISTRICT COURT

14 NORTHERN DISTRICT OF CALIFORNIA 15 SAN JOSE DIVISION 16 17 APPLIED MATERIALS, INC., 18 Plaintiff, 19 v. 20 21 22 23 Defendants. 24 25 26 27 28
AMEC CHINA'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FAC CASE NO. C07-05248 JW (PVT) pa-1229389

Case No.

C 07-05248 JW (PVT)

AMEC CHINA'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS APPLIED'S FIRST AMENDED COMPLAINT Date: February 25, 2008 Time: 9:00 a.m. Ctrm: 8, 4th Floor

ADVANCED MICRO-FABRICATION EQUIPMENT, INC. CHINA, ADVANCED MICRO-FABRICATION EQUIPMENT, INC. ASIA, ADVANCED MICRO-FABRICATION EQUIPMENT INC.,

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TABLE OF CONTENTS Page INTRODUCTION ........................................................................................................................ 1 I. APPLIED HAS NOT ESTABLISHED THAT THIS COURT HAS PERSONAL JURISDICTION OVER AMEC CHINA........................................................ 1 A. Applied Must Point to Admissible Evidence and Well-Pled Allegations to Meet its Burden. ................................................................................................................ 2 B. Applied's Claims Do Not Arise out of AMEC China's Minimal Contacts with California. ................................................................................................................. 2 C. Applied Cannot Establish AMEC China Purposefully Directed Any Relevant Activities Toward California ............................................................................. 2 D. Exercise of Jurisdiction Here Would be Unreasonable................................................... 10 CONDUCT IN CHINA DOES NOT ESTABLISH A CAUSE OF ACTION UNDER THE CALIFORNIA UNIFORM TRADE SECRETS ACT ................................ 10

III. APPLIED'S SECOND, THIRD AND FOURTH CAUSES OF ACTION ARE PREEMPTED ............................................................................................................ 12 IV. THE CASE SHOULD BE DISMISSED ON FORUM NON CONVENIENS GROUNDS ......................................................................................................................... 15

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TABLE OF AUTHORITIES Page CASES AirDefense, Inc. v. AirTight Networks, Inc., No. C 05-04615 JF, 2006 WL 2092053 (N. D. Cal. July 26, 2006) ..................................... 14 Am. Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 428 (2d Cir. 1971)....................................................................................................3 Amazon.com, Inc. v. Kalayjian, 2001 U.S. Dist. LEXIS 4924 (W.D. Wash. Feb. 20, 2001) .................................................... 3 Arch Aluminum & Glass Co. v. Haney, 964 So. 2d 228 (Fla. Dist. Ct. App. 2007) .......................................................................... 6, 7 Bancroft & Masters, Inc., v. Augusta Nat'l Inc., 223 F.3d 1082 (9th Cir. 2000)............................................................................................. 5, 6 Brainerd v. Governors of the Univ. of Alberta, 873 F.2d 1257 (9th Cir. 1989)................................................................................................. 5 Calderv. Jones, 465 U.S. 783 (1984) ................................................................................................................ 5 Callaway Golf Co. v. Dunlop Slazenger Group Ams., Inc., 318 F. Supp. 2d 216 (D. Del. 2004) ................................................................................ 13, 14 Casualty Assurance Risk Insurance Brokerage Co. v. Dillon, 976 F.2d 596 (9th Cir. 1992)...................................................................................................3 CE Distribution, LLC v. New Sensor Corp., 380 F.3d 1107 (9th Cir. 2004)................................................................................................. 5 Chaplin v. Greyhound Lines, Inc., No. C-94-3799 MHP, 1995 WL 419741 (N.D. Cal. July 3, 1995) ................................. 11, 12 China Tech. Global Corp. v. Fuller, Tubb, Pomeroy & Stokes, No. C 05-01793 JW, 2005 WL 1513153 (N.D. Cal. June 27, 2005) ...................................... 2 Convolve, Inc. v. Compaq Computer Corp., No. 00cv5141(GBD), 2006 U.S. Dist. LEXIS 13848 (S.D.N.Y. Mar. 29, 2006).................13 Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482 (9th Cir. 1993)................................................................................................. 10 CyberSell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997)...................................................................................................4 Diamond Multimedia Sys., Inc. v. Sup. Ct., 19 Cal. 4th 1036 (1999) .................................................................................................. 10, 11 Digital Envoy, Inc. v. Google, Inc., 370 F. Supp. 2d 1025 (N.D. Cal. 2005) .......................................................................... 13, 15 Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244 (1968)................................................................................................... 8 Directory Dividends, Inc. v. SBC Commc'ns, Inc., No. 01-CV-1974, 2003 U.S. Dist. LEXIS 19560 (E.D. Pa. Oct. 23, 2003)............................ 4

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TABLE OF AUTHORITIES (continued) Page Doe v. Unocal Corp., 248 F.3d 915 (9th Cir. 2001)...................................................................................................2 Drayton Enterprises, L.L.C. v. Dunker, 142 F. Supp. 2d 1177 (D.N.D. 2001) ..................................................................................4, 9 Eldorado Stone, LLC v. Renaissance Stone, Inc., No. 04cv2562 JM (CAB), 2007 US Dist. LEXIS 60885 (S.D. Cal. Aug. 20, 2007) ..................................................................................................................................... 15 ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617 (4th Cir. 1997)............................................................................................... 3, 4 Facebook, Inc. v. ConnectU LLC, No. C07-01389 RS, 2007 U.S. Dist. LEXIS 61962 (N.D. Cal. Aug. 13, 2007) ..................... 6 FMC Corp. v. Varco Int'l, Inc., 677 F.2d 500 (5th Cir. 1982)...................................................................................................5 General Steel Domestic Sales, LLC v. Suthers, No. Civ. 2-06-411 LKK/KJM, 2007 U.S. Dist. LEXIS 19231 (E.D. Cal. Mar. 2, 2007) ................................................................................................................................... 4 Guang Dong Light Headgear Factory Co., Ltd. v. ACI Int'l, Inc., No. 03-4165-JAR, 2007 U.S. Dist. LEXIS 33497 (D. Kan. May 4, 2007) ........................... 5 Harris Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., 328 F.3d 1122 (9th Cir. 2003)................................................................................................. 5 Lake v. Lake, 817 F.2d 1416 (9th Cir. 1987)................................................................................................. 2 N. Alaska Salmon Co. v. A.J. Pillsbury, 174 Cal. 1 (1916) ...................................................................................................... 10, 11, 12 Norwest Mortgage, Inc. v. Sup. Ct., 72 Cal. App. 4th 214 (1999) ................................................................................................. 12 Nucor Corp. v. Bell, 482 F. Supp. 2d 714 (D. S.C. 2007).................................................................................. 9, 10 Panavision Int'l L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998)................................................................................................. 6 Pavlovich v. Sup. Ct., 29 Cal. 4th 262 (2002) ............................................................................................................ 6 Portrait Displays, Inc. v. Speece, No. C-04-1501 RMW, 2004 U.S. Dist. LEXIS 18595 (N.D. Cal. Sept. 3, 2004) ..................6 PostX Corp. v. Secure Data in Motion, Inc., No. C02-04483 SI, 2004 U.S. Dist. LEXIS 24260 (N.D. Cal. Nov. 20, 2004) .................... 15 Sarkes Tarzian, Inc. v. Audio Devices, Inc., 166 F. Supp. 250 (C.D. Cal. 1958).......................................................................................... 7 Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797 (9th Cir. 2004)....................................................................................... 1, 2, 3, 5

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TABLE OF AUTHORITIES (continued) Page Speyer v. Avis Rent A Car System, Inc., 415 F. Supp. 2d 1090 (S.D. Cal. 2005) ................................................................................. 12 Thermal Components Co v. Griffith, 98 F. Supp. 2d 1224 (D. Kan. 2000) ....................................................................................... 5 Wenz v. Memery Crystal, 55 F.3d 1503 (10th Cir. 1995)................................................................................................. 2 Yahoo! Inc. v. La Ligue Contre Le Racisme et L'Antisemitisme, 433 F.3d 1199 (9th Cir. 2006)................................................................................................. 6 STATUTES Cal. Bus. & Prof. Code § 16600 ................................................................................................... 8 Cal. Civ. Code § 3426.7 .............................................................................................................. 13

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INTRODUCTION AMEC China's contacts with California are minimal, and Applied does not argue that the Court has general jurisdiction here. Applied has not established specific jurisdiction either, because it has not shown that its claims arise out of AMEC China's California contacts, or that AMEC China purposefully directed its activities towards California. If any tort occurred, it took place in China, and AMEC China cannot be said to have "expressly aimed" its conduct at California when it makes no California sales and Applied is a global company whose sales in Asia exceed those in the United States. If there was any express aiming at all, it was at Asia, not California. Applied's argument that there is jurisdiction because it is headquartered in California and developed its intellectual property here has consistently been rejected by the courts. In an attempt to save its jurisdictional argument, Applied focuses primarily on the issue of employee solicitation. But Applied has not submitted any evidence to support its claim, and the allegations in the complaint are conclusory at best. Moreover, Applied has not cited to a single case finding that lawful solicitation would support jurisdiction over the claims at issue here. To the extent there is jurisdiction, Applied has no claim under California's UTSA because all of the alleged misappropriation took place outside of California. And its three remaining causes of action are preempted because they are based on misappropriation of trade secrets. I. APPLIED HAS NOT ESTABLISHED THAT THIS COURT HAS PERSONAL JURISDICTION OVER AMEC CHINA

Applied concedes that it cannot support a general jurisdiction theory. (Opp. at 8 n.5.) Applied is thus left to argue that the Court has specific jurisdiction over AMEC China. The test for specific jurisdiction has three requirements: the defendant must purposefully direct its activities or consummate some transaction with the forum or perform some act by which it purposefully avails itself of the privilege of conducting activities in the forum; the claim must be one which arises out of or relates to defendant's contacts with the forum; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable. Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004) (citing Lake v.
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Lake, 817 F.2d 1416, 1421 (9th Cir. 1987)). Applied's brief only addresses purposeful direction, and fails to demonstrate that the other two requirements are satisfied. AMEC China has shown that these other requirements are not met as well. Applied's claims do not arise out of AMEC China's minimal California contacts and the exercise of jurisdiction would not be reasonable. A. Applied Must Point to Admissible Evidence and Well-Pled Allegations to Meet its Burden.

In order to defeat AMEC China's motion, Applied must make a prima facie case of specific jurisdiction. Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001). This burden is not 8 as light as Applied contends. Only well-pled allegations, as distinguished from mere conclusory 9 allegations, must be accepted as true. China Tech. Global Corp. v. Fuller, Tubb, Pomeroy & 10 Stokes, No. C 05-01793 JW, 2005 WL 1513153, at *3 (N.D. Cal. June 27, 2005) (quoting Wenz v. 11 Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995)). 12 13 14 15 16 17 18 19 20 21 22 23 California. To meet the purposeful direction requirement, Applied must establish three things: (1) 24 an intentional act; (2) expressly aimed at the forum state; and (3) causing harm that the defendant 25 knows is likely to be suffered in the forum state. Schwarzenegger, 397 F.3d at 803. Applied has 26 not met its burden as to the last two of these factors. 27 28
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B.

Applied's Claims Do Not Arise out of AMEC China's Minimal Contacts with California.

Applied's claims do not arise out of AMEC China's forum-related contacts. Applied pled that the alleged misappropriation occurred in China, not California. (FAC ¶¶ 5, 8, 38, 40, 42-43.) AMEC China's contacts with California are negligible. It sells no products in California, or even in the United States; its business is entirely foreign. AMEC China's most significant contact with California is its occasional use of suppliers located in the Northern District. (See Du Decl. (Doc. # 99) at ¶ 6.) It is undisputed that this contact has nothing to do with the claims here, and Applied thus fails to meet the second requirement for specific jurisdiction. C. Applied Cannot Establish AMEC China Purposefully Directed Any Relevant Activities Toward California

Applied also has not shown that AMEC China purposefully directed its activities toward

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Applied cannot establish that AMEC China is expressly targeting California, or that harm is likely to be suffered here, because AMEC China's customer base is in Asia, not California. (Peters Decl. (Doc. #57) at ¶¶ 2-6 & Exs. A-E.) It is undisputed that AMEC China is not registered to do business in California and makes no sales here. (Du Decl. at ¶ 7.) There is no express aiming where a defendant uses allegedly misappropriated information to seek sales outside of the forum state. Schwarzenegger, 374 F.3d at 807 (no express aiming despite Schwarzenegger's California residency where advertising was targeted at Ohio, not California). In ESAB Group, Inc. v. Centricut, Inc., 126 F.3d 617, 625 (4th Cir. 1997), a trade secret case, the Fourth Circuit refused to find that the defendants "intentionally targeted" South Carolina, where the defendants' sales were primarily focused on customers throughout the U.S. and Canada. Applied attempts to avoid the import of AMEC China's lack of California sales by arguing that Applied is "a California-based company." (Opp. at 10.) But this simplistic argument has been repeatedly rejected by the courts because "[s]uch a theory would always make jurisdiction appropriate in a plaintiff's home state, for the plaintiff always feels the impact of the harm there. ESAB, 126 F.3d at 626. For example, in Casualty Assurance Risk Insurance Brokerage Co. v. Dillon, 976 F.2d 596, 601 (9th Cir. 1992), the Ninth Circuit rejected the plaintiffs' argument that the " `effects' of libel are felt and jurisdiction therefore exists wherever the plaintiff resides," holding that such a rule "would undermine the notions of reasonableness, fair play, and substantial justice." Similarly, in Amazon.com, Inc. v. Kalayjian, the court refused to find that it had jurisdiction over a trademark dispute simply because the defendant was aware that Amazon.com used the trademark at issue and that its headquarters were located in Washington. 2001 U.S. Dist. LEXIS 4924 at *10 (W.D. Wash. Feb. 20, 2001); see also Am. Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 428, 432-35 (2d Cir. 1971) (where Michigan corporation induced New York plaintiffs' sales employees to leave plaintiffs and use confidential information to solicit plaintiffs' customers in Kentucky and Pennsylvania, location of injury was where plaintiffs lost business, not New York). Just as importantly, the fact that Applied is headquartered in California does not justify a finding of express aiming or harm because Applied is a global company with offices around the
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world, and derives more revenue from China and Southeast Asia than it does the United States. (Declaration of Kenneth Kuwayti in Support of AMEC Inc.'s and AMEC China's Motions To Dismiss Applied's FAC, ("Kuwayti Decl."), Exs. A & B.) Applied's CEO has publicly stated that "most of its sales come from outside North America." (Id., Ex. C.) As the Ninth Circuit noted in CyberSell, Inc. v. Cybersell, Inc., 130 F.3d 414, 420 (9th Cir. 1997), the effects test does not "apply with the same force to [a corporation] as it would to an individual, because a corporation `does not suffer harm in a particular geographic location in the same sense that an individual does.'" If AMEC China's actions were expressly aimed anywhere, they were aimed at Asia, not California. See Directory Dividends, Inc. v. SBC Commc'ns, Inc., No. 01-CV-1974, 2003 U.S. Dist. LEXIS 19560 at *14-15 (E.D. Pa. Oct. 23, 2003) (no express aiming where plaintiff did business nationwide). Applied contends nonetheless that AMEC China is targeting California because its intellectual property is located here and was developed in California. However, courts have declined to find that a plaintiff can obtain jurisdiction in its home state simply because it is alleging misappropriation of trade secrets that are located there. For example, in General Steel Domestic Sales, LLC v. Suthers, No. Civ. 2-06-411 LKK/KJM, 2007 U.S. Dist. LEXIS 19231 at *18-19 (E.D. Cal. Mar. 2, 2007), the plaintiff alleged that when the defendant allegedly stole data and provided it to the Colorado attorney general, who then provided it to the Sacramento DA, this was "done in order to hurt plaintiff's business in California, and caused harm in California." The court rejected the argument, finding that defendants' conduct "involved only the Colorado AG" and was therefore "not expressly aimed at California." In Drayton Enterprises, L.L.C. v. Dunker, 142 F. Supp. 2d 1177, 1184 (D. N.D. 2001), the court found that allegations of trade secret misappropriation and interference with contract were not enough, without more, to establish jurisdiction in plaintiffs' home state of North Dakota under the effects test, even though, "[s]urely, the brunt of any injury will be felt in North Dakota."1 And in ESAB, the Fourth Circuit
1

Contrary to Applied's suggestion, there is no special jurisdictional rule for interference with contract. (Opp. at 12.) In the three cases Applied cites, jurisdiction was analyzed on a factspecific basis under the three-part test, and the location of the contract was not considered to be a particularly important factor. The cases are readily distinguishable on their facts. In Harris
(Footnote continues on next page.)

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refused to find specific jurisdiction over a misappropriation of trade secrets claim in the plaintiff's home state because the defendants sales were not targeted there. 126 F.3d at 625; see also FMC Corp. v. Varco Int'l, Inc., 677 F.2d 500, 502 n.3 (5th Cir. 1982) (where the claim is wrongful use of lawfully acquired trade secrets, the injury-causing conduct occurs where the secret is used). Applied argues that jurisdiction is appropriate because AMEC China "should have been aware" that the alleged misappropriation would harm a California-based company, citing to two District of Kansas cases, Guang Dong and Thermal Components. But both of these cases expressly base their holdings on the premise that the defendant "should have reasonably foreseen" that its actions would harm the plaintiff in the forum state. Guang Dong Light Headgear Factory Co., Ltd. v. ACI Int'l, Inc., No. 03-4165-JAR, 2007 U.S. Dist. LEXIS 33497 at *18, 22 (D. Kan. May 4, 2007); Thermal Components Co v. Griffith, 98 F. Supp. 2d 1224, 1230 (D. Kan. 2000). This Tenth Circuit rule is directly contrary to the U.S. Supreme Court's holding in Calder v. Jones, as well as the law of the Ninth Circuit, and the California Supreme Court. In Calder, a libel case, the Supreme Court held that the "mere fact that [defendants] can `foresee' that the [allegedly libelous] article will be circulated and have an effect in [the forum state] is not sufficient for an assertion of [specific personal] jurisdiction." 465 U.S. 783, 789 (1984). The Ninth Circuit is in accord: "We construed Calder to require `something more' than mere foreseeability in order to justify the assertion of personal jurisdiction in California over the Georgia defendant." Schwarzenegger, 374 F.3d at 805 (citing Bancroft & Masters, Inc., v. Augusta Nat'l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000)). And the California Supreme Court has made clear that, under the California long-arm statute, "[m]erely asserting that a defendant knew or should have known that his intentional acts would cause harm in the forum state is not enough
(Footnote continued from previous page.)

Rutsky & Co. Ins. Servs. v. Bell & Clements Ltd., the court only applied the effects test after it had already concluded, in contrast to this case, that the defendant had "purposefully availed itself of the benefit and privilege of conducting activities in California" over a five year period. 328 F.3d 1122, 1131 (9th Cir. 2003) (citation omitted). In Brainerd v. Governors of the Univ. of Alberta, the alleged communications to Arizona defaming the plaintiff professor were the basis for asserting liability in the case. 873 F.2d 1257, 1258-60 (9th Cir. 1989). In CE Distribution, LLC v. New Sensor Corp., jurisdiction was found based on the defendants "awareness of the harm to CE's exclusive business located in Arizona." 380 F.3d 1107, 1111 (9th Cir. 2004).
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to establish jurisdiction under the effects test." Pavlovich v. Sup. Ct., 29 Cal. 4th 262, 270-71 (2002). Applied's opposition totally ignores the location of the alleged wrong, because to do otherwise would be to concede there is no jurisdiction. In fact, Applied does not allege that any of the allegedly wrongful conduct took place in California. The foundation for all of Applied's claims is the alleged misappropriation of trade secrets. Yet Applied has provided no evidence to demonstrate that the alleged misappropriation, whether it took the form of acquisition, disclosure or use, occurred in California. Applied pleads that its trade secrets were acquired by its employees "while employed by Applied" (FAC ¶ 8), so the only potential tortious acts are disclosure and use, which could only have taken place in China (e.g., FAC ¶¶ 31, 37).2 A Florida court rejected specific jurisdiction in a well-reasoned case remarkably similar to this one. In Arch Aluminum & Glass Co. v. Haney, the defendant hired the Florida plaintiff's national sales manager, who took with him a confidential business plan for the Phoenix region that "contained all of [the plaintiff's] customer names, prior sales, and future sales projections for the Phoenix area." 964 So. 2d 228, 231 (Fla. Dist. Ct. App. 2007). The defendant used this information to open a competing business in Nevada and target plaintiff's customers in the Western states. Id. The court held that "[t]he `focal point' of the effects of the misappropriation was in the west where Desert Glass competed with Arch. It was not directed at Florida, nor did it seek the benefits of Florida law or affect Florida consumers in any way." Id. at 235. The court held that the facts showed there were "no minimum contacts between Desert Glass and Florida.
2

Applied's citation to Portrait Displays is inapposite because there, unlike here, the misappropriation occurred in the forum state. Portrait Displays, Inc. v. Speece, No. C-04-1501 RMW, 2004 U.S. Dist. LEXIS 18595 at *18-19 (N.D. Cal. Sept. 3, 2004). Facebook is similarly distinguishable because the defendant used a computer program to illicitly log onto Facebook's California servers and the accounts of California residents. Facebook, Inc. v. ConnectU LLC, No. C07-01389 RS, 2007 U.S. Dist. LEXIS 61962 at *4, 6-7 (N.D. Cal. Aug. 13, 2007). Yahoo, Inc., Bancroft & Masters, and Panavision -- which are not trade secret cases but are cited for the proposition that the alleged targeting here "easily exceeds" that in cases where jurisdiction has been found -- also do not apply. Opp. at 11. In each of those cases, the court found that defendants' conduct outside California was intended to induce the plaintiff to take some action in the state, a fact that is completely absent here. See Yahoo! Inc. v. La Ligue Contre Le Racisme et L'Antisemitisme, 433 F.3d 1199, 1209 (9th Cir. 2006); Bancroft & Masters, 223 F.3d at 1087; Panavision Int'l L.P. v. Toeppen, 141 F.3d 1316, 1319 (9th Cir. 1998). 6

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Desert Glass operates exclusively in the western United States. It does not compete for customers in Florida or have any business interests in this state." Id. This case is just like Arch Aluminum, substituting China and California in place of Nevada and Florida. Applied alleges that AMEC China recruited employees to go to China and is using its secrets in China. Applied does not allege that any misappropriation occurred in California. AMEC China operates exclusively in Asia. It does not compete for any customers in California or have any business interests in California. The focal point of the effects of the alleged torts is China, not California. AMEC China does not have minimum contacts with this forum. To try to make up for the absence of any wrongdoing in California or conduct aimed at this state by any of the Defendant companies, Applied repeatedly argues that Gerald Yin incorporated AMEC China before he retired from Applied, claiming that, when Mr. Yin "announced his `retirement' at the age of 60, after 36 years of employment capped by a thirteenyear career at Applied, he had already -- unbeknownst to Applied -- formed AMEC China." (Opp. at 3.) This claim is false. As Applied must know, Dr. Yin retired from the company on January 31, 2004 -- a retirement that was celebrated with a party thrown by Applied that more than 150 people attended. While Dr. Yin technically remained on Applied's payroll until August so he could be paid for his accrued vacation and sick leave, his departure from the company in January is confirmed by his Employee Exit Package Termination Certification, in which Dr. Yin certified that he had returned all Applied confidential documents on January 20, 2004. (Kuwayti Decl., Ex. H.) This was months before any AMEC entity was allegedly formed. (See Opp. at 3.) (These events, and others from Applied's FAC, are shown in the timeline attached hereto as Exhibit A.) There was thus nothing improper about Dr. Yin's departure. "An employee may, after retiring, compete with his former employer in the same business or even for the same custom." Sarkes Tarzian, Inc. v. Audio Devices, Inc., 166 F. Supp. 250, 264 (C.D. Cal. 1958). Perhaps more importantly, however, this allegation has nothing to do with any of the claims in this lawsuit. Applied chose to dismiss Dr. Yin from the action, along with the other three individuals it had sued for misappropriation, because their presence in this suit destroyed diversity
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jurisdiction. Having voluntarily dismissed Dr. Yin to obtain jurisdiction in this Court, Applied cannot try to rely on his alleged conduct as a basis for its jurisdiction claim now. Applied also places heavy reliance on the alleged recruiting of Applied employees in California. As an initial matter, there is absolutely nothing wrong with hiring a competitor's employees. Id. ("There is no tort if, by legal means, one induces an employee to sever his employment with another."). California has a statutorily-expressed public policy in favor of employee mobility. Cal. Bus. & Prof. Code § 16600. "The interests of the employee in his own mobility and betterment are deemed paramount to the competitive business interests of the employers, where neither the employee nor his new employer has committed any illegal act accompanying the employment change." Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244, 255 (1968). In its brief, Applied contends that "[t]he entire platform from which AMEC committed these torts was built on contacts with California." (Opp. at 12.) But it has not submitted a single piece of evidence to support this claim. The allegations in its complaint are equally conclusory: Applied contends that the Defendants "seeded their companies with a multitude of former Applied employees, ranging from Applied corporate vice presidents to technologists and engineers" and that it "estimates that at least 30 of its former employees are now employed by the Defendants." (FAC ¶ 6, 35.) Entirely absent from the complaint, and from the evidence submitted in opposition to this motion, is any description (or even an allegation) of solicitation that took place in California, an identification of the thirty individuals now working at AMEC China, when they were recruited, whether they were even working in California or for Applied at the time, or a description of their tie to the allegedly misappropriated trade secrets.3 The allegations relating to the four individuals Applied that does identify in its Complaint (referred to as the "AMEC Employees") are instructive. Applied acknowledges that AMEC Applied's purported excuse for this failure is that it has not received sufficient discovery. (Opp. at 16 n.7.) But much of this evidence, such as identification of the departed employees, is within Applied's own control. And if the alleged recruiting was as widespread as Applied suggests, there should be evidence of that effort already in Applied's possession, including from current Applied employees who were recruited by AMEC who declined to leave Applied.
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founder Steve Chen left Applied in November 2003, at least five months before AMEC China was incorporated. (FAC ¶ 24.) Applied alleges that Ryoji Tokada left Applied even earlier, in January 2003. (Id. ¶ 26.) Applied has mischaracterized the retirement date of Dr. Yin, who, as noted above, left the company in January 2004. The fourth, Lee Luo, is the only individual alleged to have still been working at Applied after AMEC China was formed, but Mr. Luo worked at Applied until January 2006 (id. ¶ 26), which means he did not participate in the allegedly wrongful filing of the Chinese patent applications in 2005. (Id. ¶¶ 37, 42.) In fact, it is hardly surprising that some former Applied employees would be working for AMEC China. Applied is the largest company in this industry, and boasts that it "has been the world's leading semiconductor equipment manufacturer since 1992." Joint Case Management Conference Statement (Doc. # 96, filed 1/21/08) at 2:2-3. AMEC states on its website that it employs more than 14,500 people worldwide.4 In an industry characterized by high mobility and relatively few players, Applied itself no doubt employs hundreds of individuals, if not more, who have worked for its competitors. Every one of its senior officers worked elsewhere before coming to Applied, including its President and CEO, Michael Splinter (Intel Corporation) and the General Manager of Applied's Silicon Systems Group (Novellus). (Kuwayti Decl., Ex. I.)5 In addition to failing to cite any factual evidence supporting its solicitation claim, Applied has not cited to a single case, from California, the Ninth Circuit or anywhere else holding that lawful recruiting of employees in a forum state is a sufficient basis for finding specific jurisdiction over trade secret misappropriation or any of the other claims in this lawsuit. Applied cites to dicta from Drayton, stating that if the defendant "`entered' North Dakota to `entice' the employee away ...`the case for jurisdiction might well be stronger.'" 142 F. Supp. 2d at 1184. The only solicitation case it cites to is Nucor Corp. v. Bell, 482 F. Supp. 2d 714, 720 (D. S.C. 2007). But in Nucor, there was an express non-solicitation agreement, and jurisdiction was based See http://www.appliedmaterials.com/about/index.html. Applied has also undergone several widely publicized mass layoffs, terminating thousands of people in the relevant timeframe--and just recently laid off a thousand more. (Peters Decl. (Doc. # 48), Exs. D-F; Kuwayti Decl., Ex. C.) One of these laid-off employees was Ryoji Todaka, who worked at another company in Japan for more than a year before coming to AMEC China.
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on an ex-employee's solicitation in the forum state in violation of that agreement. Id. at 722-23. Further, in Nucor, unlike here, there was evidence that trade secret material was improperly downloaded by one of the solicited employees in the forum state. Id. at 720. In sum, because Applied has failed to establish that any wrongful actions took place in or targeted California, the Court cannot exercise specific jurisdiction. D. Exercise of Jurisdiction Here Would be Unreasonable.

AMEC does challenge the reasonableness of the exercise of jurisdiction in this case. Courts generally look at seven factors when determining reasonableness: (1) the extent of the defendants' purposeful interjection into the forum state's affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of conflict with the sovereignty of the defendants' state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum. Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1487-1488 (9th Cir. 1993). AMEC China's sole California contact is the occasional use of California suppliers, making its purposeful interjection minimal, at best. The remaining factors favor AMEC China, as described in AMEC Inc.'s forum non conveniens argument. Exercise of jurisdiction here would thus be unreasonable. Because Applied fails to meet the third requirement for specific jurisdiction, the action should be dismissed. II. CONDUCT IN CHINA DOES NOT ESTABLISH A CAUSE OF ACTION UNDER THE CALIFORNIA UNIFORM TRADE SECRETS ACT

Applied does not appear to contend that California's UTSA applies extraterritorially. As the California Supreme Court held in Diamond Multimedia, while a state has the power to 22 legislate conduct outside of its boundaries, "`the presumption is that it did not intend to give its 23 statutes any extraterritorial effect. The intention to make the act operative, with respect to 24 occurrences outside the state, will not be declared to exist unless such intention is clearly 25 expressed or reasonably to be inferred from the language of the act or from its purpose, subject 26 matter of history.'" Diamond Multimedia Sys., Inc. v. Sup. Ct., 19 Cal. 4th 1036, 1059 (1999) 27 (quoting N. Alaska Salmon Co. v. A.J. Pillsbury, 174 Cal. 1, 4 (1916)). Applied does not point to 28
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anything in California's UTSA or its legislative history to suggest that California's UTSA was intended to have extraterritorial effect. Instead, Applied argues that "injury to California residents is sufficient for application of California law." (Opp. at 18.) That is not the law. Essentially, Applied is arguing that a person or corporation resident in California is entitled to have California law applied to every transaction or event that occurs anywhere in the world, regardless of its connection to California. But the extraterritoriality analysis is focused on conduct, not residency. As the California Supreme Court stated in Diamond Multimedia, "[t]he presumption against extraterritoriality is one against an intent to encompass conduct occurring in a foreign jurisdiction in the prohibitions and remedies of a domestic statute." 19 Cal.4th at 1060 (emphasis in original). Thus, the court held that outof-state purchasers could bring an action under California Corporations Code section 25400 for stock whose price was affected by market manipulation that occurred in California. Id. at 1059. Where the alleged conduct took place out of state, Applied's claim of California residency does not justify the extraterritorial application of a statute. In Chaplin v. Greyhound Lines, Inc., for example, the court found that the plaintiff, an Oakland resident, could not bring a claim under California's Unruh Act. No. C-94-3799 MHP, 1995 WL 419741, *5 (N.D. Cal. July 3, 1995). The plaintiff's claim was based on having to leave a bus en route to her home in California after the driver insisted that her children give up their seats for other passengers -- an act she alleged was racially motivated. Id. at *1. The plaintiff characterized her claim as "a course of conduct which began in El Paso but continued and caused injury in California for the succeeding three weeks." Id. at *5. The court disagreed, finding that plaintiff's injury from her late arrival in Oakland "cannot [] be characterized as a discrete action," but was "more accurately described as an injury resulting from actions taken in Texas" and thus beyond the reach of the statute. Id. Similarly, in the Alaska Salmon case, the California Supreme Court found that the Worker's Compensation Act did not apply to a plaintiff who entered into a contract for employment in San Francisco with a San Francisco company for salmon fishing in Alaska, because the occurrence giving rise to the injury took place entirely out of state. N. Alaska Salmon, 174 Cal. at 1-2.
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The cases Applied cites do not hold that injury to a California resident is enough to justify application of a statute that has no extraterritorial effect. Rather, they hold only that a statute is given effect when the conduct or injury occurs within the state of California. But injury does not occur wherever a plaintiff is resident. For example, in Norwest Mortgage, Inc. v. Sup. Ct., 72 Cal. App. 4th 214, 217 (1999), there was injury to class members in California because the UCL cause of action arose out of insurance that they were forced to take for trusts and mortgages "encumbering California real estate." In discussing Norwest, the court in Speyer v. Avis Rent A Car System, Inc., 415 F. Supp. 2d 1090, 1099 (S.D. Cal. 2005), explained that Norwest "stand[s] for the proposition that the UCL applies to wrongful conduct that occurs out-of-state but results in injury in California, regardless of the injured party's citizenship." The Speyer court emphasized that injury does not occur in California simply because a plaintiff is resident there. The UCL claim in Speyer arose out of improper concession fees for car rentals. The court held that to the extent the California plaintiffs were claiming they were "injured by unfair concession fee charges, any injury suffered may have occurred out-of-state where the rental vehicle was located and the transaction was completed." Id.6 Here, there is no claim that defendants improperly acquired Applied's trade secrets in California or made sales in this state. Similar to Speyer, Chaplin, and Alaska Salmon, Applied has no claim under California's UTSA because the alleged injury did not occur in California. Applied's argument that the allegedly wrongful conduct "substantially occurred" in California (Opp. at 17) is unsupported by the facts or even by Applied's FAC. If any misappropriation took place, it occurred in China, so California's UTSA does not apply. III. APPLIED'S SECOND, THIRD AND FOURTH CAUSES OF ACTION ARE PREEMPTED

Applied's second, third and fourth causes of action for conversion, unfair competition, and interference with contract, are preempted under California's Uniform Trade Secrets Act because 25 26 27 28
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Applied also cites Nat'l Notary Ass'n v. U.S. Notary, No. D038278, 2002 Cal. App. Unpub. LEXIS 1947 (June 7, 2002). But this state appellate decision is not certified for publication, and distinguishes Norwest on the grounds that the conduct "was not committed wholly outside the state." Id. at *13. 12

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each cause of action is based upon the alleged misappropriation of trade secrets. Applied seeks to minimize the preemptive effect of California's UTSA. (Opp. at 18.) However, the statute "has been interpreted as having a broad preemptive effect similar to the model UTSA." Convolve, Inc. v. Compaq Computer Corp., No. 00cv5141(GBD), 2006 U.S. Dist. LEXIS 13848, *21 (S.D.N.Y. Mar. 29, 2006) (applying California law). Consistent with the language of the statute, which provides that the only civil remedies not displaced are those that are "not based upon misappropriation of a trade secret," Cal. Civ. Code § 3426.7, courts have consistently held that all causes of action that are "based on" a misappropriation of trade secrets are preempted. See, e.g., Digital Envoy, Inc. v. Google, Inc., 370 F. Supp. 2d 1025, 1033 (N.D. Cal. 2005). "In other words, if the operative facts are arguably cognizable under the UTSA, any common law claim that might have been available on those facts in the past now no longer exists." Convolve, 2006 U.S. Dist. LEXIS 13848, *25. The complaint shows that each of Applied's three alternate causes of action is preempted under this standard. The intentional interference claim alleges that Defendants "intentionally sought and did obtain confidential Applied information from the AMEC Employees," and induced them to assign patent applications to AMEC containing this confidential information. (FAC ¶¶ 57-58, 39-42.) The conversion claim alleges that defendants "have wrongfully taken for themselves inventions, and resulting patent applications." (Id. ¶ 63.) The unfair competition claim is that defendants have "misused Applied's trade secrets, confidential information and proprietary technology to unfairly compete with Applied." (Id. ¶ 68.) Applied argues for a different standard, suggesting that the UTSA does not preempt claims that are "based on additional or independent factual allegations." (Opp. at 19.) The case law is clear, however, that simply alleging "additional" factual allegations is not enough. See Convolve, 2006 U.S. Dist. LEXIS 13848, *24-25. Each of Applied's common law claims is "arguably cognizable" as a UTSA claim, and is therefore preempted. Id. at *25. Directly on point is Callaway Golf Co. v. Dunlop Slazenger Group Ams., Inc., 318 F. Supp. 2d 216 (D. Del. 2004). In Callaway Golf, the plaintiff argued that its negligence claim was not preempted under California's UTSA because it "plainly spells out additional elements of a
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claim, including a breach of duty, which concerns additional facts and different injuries." Id. at 220. The court rejected the argument and found the negligence claim was preempted, because, despite additional allegations and requirements for a negligence claim, the allegations of trade secret misappropriation alone comprised the underlying wrong. The negligence claim was preempted because "if Dunlop loses its misappropriation claim with respect to the Felipe binder, it could not recover on its negligence claim." Id. at 220-21 (citation omitted). That is exactly the case here--if Defendants did not wrongfully take Applied's confidential information, then there would be no intentional interference, conversion, or unfair competition. AirDefense, Inc. v. AirTight Networks, Inc., No. C 05-04615 JF, 2006 WL 2092053, *4-6 (N. D. Cal. July 26, 2006), is entirely in accord with Callaway, contrary to Applied's argument. In AirDefense, the court found plaintiffs' claims for common law and statutory unfair competition, interference with contract, conversion and unjust enrichment were all preempted by the UTSA. The plaintiff in AirDefense argued that its claim for unfair competition should not be preempted because it was "based not only on the information that was misappropriated but also on what AirTight did with the information." Id. at *4. The court rejected that argument, holding that "if the information was not misappropriated, AirTight has the right to use it. Thus, the claim for common law unfair competition is based on the underlying allegation of trade secret misappropriation and is preempted by the CUTSA." Id. at *4. The only claim not preempted in AirDefense was interference with prospective economic advantage, because that claim alleged the defendant made "false representations" to the plaintiffs' customers concerning the parties' "products and capabilities"--an allegation that did not depend on the trade secret claim. Id. at *5. The only additional allegation that Applied points to here is its claim that its former employees improperly assigned to AMEC China and AMEC Asia patent applications that were purportedly based on confidential information that they learned at Applied. This assignment is described by Applied as a "breach" of employment agreements, a conversion of "contractual rights" and an "unlawful business practices." (Opp. at 19.) Just as in Callaway and AirDefense, however, this claim is based upon misappropriation of trade secrets because, if the information contained in the patent application was not misappropriated from Applied, then there was nothing
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improper about the assignment. While Applied argues that the facts relating to the assignment of the patent applications "are independent of those underlying the misappropriation claim" (Opp. at 19), the complaint shows that this is not true. The patent applications are virtually synonymous with the allegedly misappropriated trade secrets. (See, e.g., FAC ¶¶ 40-43, 46, 50.) Having made these allegations, Applied can hardly contend now that the two claims are independent. The two other cases cited by Applied have very different facts and do not support its argument. In Eldorado Stone, LLC v. Renaissance Stone, Inc., the court found that the plaintiff had presented sufficient evidence of the independent "wrongful conduct," apart from trade secret misappropriation, that is needed to support an interference with prospective economic advantage claim. No. 04cv2562 JM (CAB), 2007 US Dist. LEXIS 60885, *14-15 (S.D. Cal. Aug. 20, 2007). This included, among other things, infringement of trade dress, selling of counterfeit goods, and predatory pricing practices. Id. at *15. PostX Corp. v. Secure Data in Motion, Inc. presented a unique "procedural posture," where the court had previously granted summary judgment of plaintiffs' trade secret claim on procedural grounds, but allowed an amended complaint alleging unfair competition to go forward based on new facts that had not been brought to the court's attention before summary judgment.7 No. C02-04483 SI, 2004 U.S. Dist. LEXIS 24260, *11-13 (N.D. Cal. Nov. 20, 2004). Neither case saves Applied's claims from preemption. IV. THE CASE SHOULD BE DISMISSED ON FORUM NON CONVENIENS GROUNDS

AMEC China joins AMEC Inc.'s motion to dismiss for forum non conveniens. The arguments made by AMEC Inc. apply with equal force to AMEC China. The Court should 21 dismiss the action and order Applied to refile its claims in China. 22 23 24 25 26 27 28
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Dated: February 11, 2008

HAROLD J. MCELHINNY KENNETH A. KUWAYTI MARC DAVID PETERS By: /s/ Marc David Peters Marc David Peters

Digital Envoy , Inc. v. Google, Inc., 370 F. Supp. 2d 1025, 1034-35 (N. D. Cal. 2005) found PostX "not particularly persuasive" because of this procedural posture and because the decision failed to take into account relevant authority. 15

AMEC Defendants Timeline
20 months: more than one year
Aug 5, 2005
AMEC China files CVD application in China (Chen and Todaka, inventors)

Jan 4, 2003

Todaka laid off by Applied

Nov 24, 2003
Chen leaves Applied

Dec 4, 2007
AMEC announces debut of Etch and CVD tools at SEMICON Japan

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Jan 20, 2004 Yin certifies return of all confidential Applied documents, retires 11 days later Aug 5, 2005
AMEC China files Etch application in China (Yaomin Xia, inventor)

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Mar 2, 2004
AMEC Inc. formed

Filed 02/11/2008

May 31, 2004
AMEC China formed

Jan 13, 2006
Luo leaves Applied

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AMEC China Reply Brief Exhibit A
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Jan 2006

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Jan 2008