Quicklogic Corporation v. Konda Technologies, Inc.

Background

QuickLogic filed a declaratory-judgment action seeking to resolve whether it was infringing patents owned or asserted by Konda Technologies and Dr. Venkat Konda. The defendants filed counterclaims asserting patent infringement and state-law claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and breach of a confidential relationship.

The dispute involved agreements from 2010. The Licensing and Consulting Agreement gave QuickLogic a nonexclusive, royalty-free, irrevocable, worldwide license to use the defined “Konda Intellectual Property,” which the court said was limited to patent applications listed in the agreement. The agreement also contained an informal dispute-resolution clause and limits on damages. A separate mutual nondisclosure agreement expired on September 3, 2017.

Dr. Konda also sought to disqualify Baker Botts LLP, QuickLogic’s counsel. He said that in 2018 he spoke with Hopkins Guy, a Baker Botts attorney, about Konda’s patent portfolio and possible patent-infringement claims against Flex Logix. The court noted that Baker Botts had informed the defendants in May 2021 that it represented QuickLogic, that Guy appeared as QuickLogic’s counsel when the complaint was filed, and that the defendants waited nearly seven months into the litigation before raising the alleged conflict.

Disqualification motion

The court denied the defendants’ motion to disqualify Baker Botts. It held that, even if a conflict existed, the defendants waived the right to pursue it by delaying their motion. The court found the delay unreasonable, noted that Baker Botts had already invested time defending QuickLogic, and concluded that disqualification would prejudice QuickLogic. The court also expressed serious doubts that Dr. Konda qualified as a prospective client under California professional-conduct rules and noted that the information he allegedly disclosed appeared to be publicly available.

Motion to dismiss

QuickLogic moved under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a claim does not contain enough factual allegations to make relief plausible. The court applied that standard to the defendants’ counterclaims.

The court granted QuickLogic’s motion to dismiss counterclaims four through seventeen, which asserted patent infringement. The defendants had repeated patent-claim language and made conclusory statements that QuickLogic’s products met the claim requirements, without alleging facts connecting particular claim limitations to the accused products. The court found amendment futile and dismissed these counterclaims without leave to amend. The court also stated that the induced-infringement and willful-infringement theories failed because the defendants had not adequately pleaded direct infringement.

For counterclaim one, alleging breach of the 2010 Licensing and Consulting Agreement, the court found deficiencies in the theory based on QuickLogic’s alleged use or disclosure of patents, work product, and technical information. The court said the agreement’s license was limited to the listed patents, which were public, and that the defendants had not adequately alleged harm or a connection between QuickLogic’s conduct and lost licensing opportunities. The agreement also barred claims for lost profits and lost revenue. However, the court allowed the defendants to amend the portion of the counterclaim alleging violation of the informal dispute-resolution clause, directing them to provide more detail about the clause, the alleged violation, and the resulting harm.

The court dismissed counterclaim two, alleging breach of the implied covenant of good faith and fair dealing, without allowing amendment. The alleged promise to expand the patent license was not contained in the 2010 agreement, so the court held that the claim failed as a matter of law.

The court dismissed counterclaim three, alleging breach of a confidential relationship, with prejudice. The defendants had not alleged facts showing the vulnerability required for that type of relationship; instead, their allegations described arms-length business negotiations. The court also stated that the defendants’ confidentiality theory was otherwise deficient because they had not adequately alleged use or disclosure of confidential information, and the mutual nondisclosure agreement had expired before the alleged later disclosure.

Disposition

The court denied the defendants’ motion to disqualify QuickLogic’s counsel. It granted in part and denied in part QuickLogic’s motion to dismiss the defendants’ counterclaims. The defendants could amend only the breach-of-contract counterclaim concerning the informal dispute-resolution clause, by September 1, 2022. The order stated that failure to amend, or failure to cure the identified deficiencies, would result in dismissal of the remaining counterclaim with prejudice. Judge Edward Davila signed the order.