Proofpoint, Inc. v. Vade Secure, Incorporated

Background

Proofpoint, Inc. and Cloudmark LLC moved to dismiss six counterclaims brought by Vade Secure, Incorporated and Vade Secure SASU. The counterclaims were based on allegations that Cloudmark made false statements about the Vade Defendants to one customer and that Proofpoint made false statements to another customer.

The six counterclaims were for defamation, commercial disparagement, intentional interference with prospective economic advantage, unfair competition under California Business and Professions Code section 17200, monopolization under section 2 of the Sherman Act, and attempted monopolization under section 2 of the Sherman Act.

Court's Analysis

The first group of challenged statements concerned alleged trade-secret misappropriation. Vade alleged that Cloudmark said it had uncovered evidence that the Vade Defendants had misappropriated Proofpoint's and Cloudmark's alleged trade secrets and used them in all of Vade's products. Vade also alleged that Proofpoint said all of Vade's products had been developed using those trade secrets.

The court held that Vade had not alleged enough facts to support its assertion that these statements were false. In particular, Vade had not alleged facts showing that Proofpoint and Cloudmark had not uncovered such evidence, or that Vade's products were not developed using the alleged trade secrets.

The second group of statements concerned Vade's financial condition and ability to defend the lawsuit. Vade alleged that Cloudmark said Vade could not withstand the lawsuit and would soon become bankrupt, and that Proofpoint said Vade was not financially stable and that defending the lawsuit would easily bankrupt it. The court found that Vade had not identified the particular assertions it claimed were false or alleged facts supporting falsity.

Proofpoint and Cloudmark also argued that the financial statements were opinions rather than actionable factual statements. The court explained that the statements might be predictions, expectations, or rhetorical exaggeration about what would happen because of the lawsuit. But because Vade had provided only a general description of the context and had not identified the particular allegedly false factual assertions, the court was not prepared to decide whether the statements were opinions or factual assertions. The court stated that, even assuming they were factual assertions, Vade had still not alleged enough facts to plead a claim based on them.

For the Sherman Act counterclaims, the court stated that a valid claim requires allegations that the defendant has power in a relevant product market. Vade defined the alleged market as e-mail filtering products for Tier 1 business-to-consumer internet service providers capable of monitoring and filtering at least one million email accounts at the same time. The court noted that this definition referred to a type of customer, even though markets are defined by products or producers rather than consumers. The court stated that, if the proposed market was not dependent on the reference to Tier 1 business-to-consumer internet service providers, that reference should be removed.

Disposition

The court granted the plaintiffs' motion to dismiss the Vade Defendants' counterclaims and dismissed the counterclaims. The court allowed the Vade Defendants to file amended counterclaims to cure the identified deficiencies no later than December 4, 2020. The opinion did not state that the dismissal was with or without prejudice.