BearBox LLC and Austin Storms v. Lancium LLC et al., C.A. No. 21-534-MN-CJB, report and recommendation on the motion for judgment on the pleadings (inventorship dispute over US 10,608,433)

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2022-01-18

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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.

IN THE UNITED STATES DISTRICT COURT
                          FOR THE DISTRICT OF DELAWARE

BEAR BOX LLC and AUSTIN STORMS, )
                                )
     Plaintiffs,                )
                                )
     v.                         )                     Civil Action No. 21-534-MN-CJB
                                )
LANCIUM LLC, MICHAEL T.         )
MCNAMARA and RAYMOND E.         )
CLINE, JR.,                     )
                                )
     Defendants.                )

                            REPORT AND RECOMMENDATION

       Pending before the Court in this inventorship dispute filed by BearBox LLC (“BearBox”)

and Austin Storms (“Mr. Storms” and collectively with BearBox, “Plaintiffs”) is Defendants

Lancium LLC (“Lancium”), Michael T. McNamara (“Mr. McNamara”) and Raymond E. Cline,

Jr.’s (“Mr. Cline” and collectively with Lancium and Mr. McNamara, “Defendants”) “Motion for

Judgment on the Pleadings[,]” filed pursuant to Federal Rule of Civil Procedure 12(c) (the

“Motion”). (D.I. 32) For the reasons set forth below, the Court recommends that Defendants’

Motion be GRANTED. 1

I.     BACKGROUND

       A.      Factual Background

       Plaintiffs allege that Mr. Storms, through his company BearBox, developed proprietary

technology for energy-efficient cryptocurrency mining systems (the “BearBox Technology”).

(D.I. 19 at ¶¶ 2, 27-28) In May 2019, Mr. Storms attended an industry conference to promote the

       1
                On September 10, 2021, United States District Judge Maryellen Noreika referred
this case to the Court to resolve all pre-trial matters up to and including expert discovery matters,
pursuant to 28 U.S.C. § 636(b). (D.I. 57)
BearBox Technology. (Id. at ¶ 31) Mr. Storms and Mr. McNamara met at the conference, and

Mr. McNamara expressed interest in the BearBox Technology. (Id. at ¶ 32) Mr. Storms

provided details regarding the BearBox Technology to Mr. McNamara over dinner and through

other conversations, e-mails and text messages during the conference. (Id.) Conversations

between Mr. Storms and Mr. McNamara at times occurred in front of other conference attendees.

(D.I. 28 at 27 at ¶ 43; D.I. 41 at ¶ 43) Mr. Storms told Mr. McNamara that the BearBox

Technology was confidential and Mr. McNamara assured him that he would keep the disclosures

confidential. (D.I. 19 at ¶ 32) Following the conference, Mr. Storms provided annotated system

diagrams, component specifications and modeled data sets to Mr. McNamara in reliance on Mr.

McNamara’s assurances of confidentiality. (Id. at ¶ 33) Mr. McNamara then ended

communications with Mr. Storms. (Id. at ¶ 34)

       In October and December 2019, Defendants filed U.S. patent applications, which

Plaintiffs allege wrongfully claim the BearBox Technology. (Id. at ¶¶ 37-39) The applications

name Mr. McNamara and Mr. Cline as the sole joint inventors. (Id. at ¶¶ 37, 39) On March 31,

2020, United States Patent No. 10,608,433 (the “'433 patent”) issued, claiming inventions that

allegedly fall within the scope of the BearBox Technology and naming Mr. McNamara and Mr.

Cline as the sole inventors. (Id. at ¶¶ 40-41) Mr. McNamara and Mr. Cline assigned their rights

in the '433 patent to Lancium. (Id. at ¶ 42)

       On August 14, 2020, Lancium filed a patent infringement lawsuit against Layer1

Technologies (“Layer1”) asserting the '433 patent. (Id. at ¶ 44) The lawsuit settled a few

months later, with Layer1 taking a license to the '433 patent. (Id. at ¶¶ 49-50)

       Any further relevant facts will be set out as needed in Section III.

                                                 2
        B.     Procedural History

        Plaintiffs filed this action on April 14, 2021. (D.I. 1) On May 24, 2021, Plaintiffs filed

the operative Amended Complaint, (D.I. 19), and on June 25, 2021, Defendants filed the

operative Amended Answer to Amended Complaint and Counterclaims, (D.I. 28). On June 28,

2021, Defendants filed the instant Motion, (D.I. 32), which was fully briefed as of July 30, 2021,

(D.I. 46).

II.     LEGAL STANDARD

        In evaluating a motion for judgment on the pleadings brought pursuant to Rule 12(c), the

Court uses the same standard that applies to a motion to dismiss brought pursuant to Federal

Rule of Civil Procedure 12(b)(6). See Wolfington v. Reconstructive Orthopaedic Assocs. II PC,

935 F.3d 187, 195 (3d Cir. 2019). It must view all factual allegations in a complaint in the light

most favorable to the non-moving party, and it may not grant the motion “unless the movant

clearly establishes that no material issue of fact remains to be resolved and that he is entitled to

judgment as a matter of law.” Id. (internal quotation marks and citation omitted). In deciding

such a motion, the Court may consider only the pleadings, the exhibits attached thereto, matters

of public record and undisputedly authentic documents integral to the pleadings. Id.

III.    DISCUSSION

        Plaintiffs’ Amended Complaint alleges five Counts: Count I’s claim for “Correction of

Inventorship for the '433 Patent: Austin Storms as Sole Inventor[,]” (D.I. 19 at ¶¶ 51-54); Count

II’s claim for “In the Alternative, Correction of Inventorship for the '433 Patent: Austin Storms

as Joint Inventor with the Currently Named Inventors[,]” (id. at ¶¶ 55-58); Count III’s claim for

“Conversion by Lancium, McNamara, and Cline[,]” (id. at ¶¶ 59-62); Count IV’s claim for

                                                  3
“Unjust Enrichment by Lancium, McNamara, and Cline[,]” (id. at ¶¶ 63-69); and Count V’s

claim for “Negligent Misrepresentation by Lancium and McNamara[,]” (id. at ¶¶ 70-73).

       Defendants move to dismiss Count III, Count IV and Count V (the “state law claims”).

(D.I. 33 at 1) 2 Defendants first argue that Plaintiffs’ state law claims are preempted by federal

patent law. 3 (Id. at 1-2) Additionally, they assert that, to the extent any of the claims are not

preempted, they otherwise suffer from fatal flaws that warrant their dismissal as a matter of law.

(Id.) The Court will assess each state law claim in turn.

       A.      Conversion (Count III)

       2
               Counts I and II are not at issue in Defendants’ Motion. (D.I. 33 at 1)
       3
                 Federal law can preempt state law in three ways—explicit, field or conflict
preemption. Ultra-Precision Mfg., Ltd. v. Ford Motor Co., 411 F.3d 1369, 1377 (Fed. Cir.
2005). This case implicates conflict preemption, (see D.I. 42 at 6; D.I. 46 at 3), which “involves
a consideration of whether [a state] law stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress[,]” Aronson v. Quick Point Pencil Co.,
440 U.S. 257, 262 (1979) (internal quotation marks and citations omitted); see also Ultra-
Precision Mfg., 411 F.3d at 1377. The law of the United States Court of Appeals for the Federal
Circuit applies to the issue of whether federal patent law preempts a state law claim. Ultra-
Precision Mfg., 411 F.3d at 1376. The Federal Circuit has explained that “[i]f a plaintiff bases
its [state law] tort action on conduct that is protected or governed by federal patent law, then the
plaintiff may not invoke the state law remedy, which must be preempted for conflict with federal
patent law.” Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1335 (Fed. Cir.
1998), overruled on other grounds by Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d
1356 (Fed. Cir. 1999). Patent laws will not preempt state law claims if such claims include
additional elements not found in the federal patent law cause of action, as long as the claims are
not “an impermissible attempt to offer patent-like protection to subject matter addressed by
federal law.” Rodime PLC v. Seagate Tech., Inc., 174 F.3d 1294, 1306 (Fed. Cir. 1999). The
Federal Circuit has held that “‘the field of federal patent law preempts any state law that purports
to define rights based on inventorship.’” HIF Bio, Inc. v. Yung Shin Pharms. Indus. Co., 600
F.3d 1347, 1352-53 (Fed. Cir. 2010) (quoting Univ. of Colo. Found. v. Am. Cyanamid Co., 196
F.3d 1366, 1372 (Fed. Cir. 1999)); see also, e.g., Speedfit LLC v. Woodway USA, Inc., 226 F.
Supp. 3d 149, 160 (E.D.N.Y. 2016) (explaining that “according to controlling precedent, a state
law claim that either seeks ‘patent-like’ protections not provided by federal patent law, or turns
on a determination of inventorship, is preempted by federal patent law”).
                                                  4
       Courts have found that claims for conversion 4 that are dependent on a determination of

patent inventorship are generally preempted by federal patent law. See Gerawan Farming, Inc.

v. Rehrig Pac. Co., No. 1:11-cv-01273-LJO BAM, 2012 WL 691758, at *7 (E.D. Cal. Mar. 2,

2012) (citing cases). 5 Defendants assert that Plaintiffs’ conversion claim requires a

determination of inventorship and is therefore preempted. (D.I. 33 at 7-9; D.I. 46 at 2) The

Court agrees.

       Plaintiffs’ Amended Complaint begins by alleging that the case “is about the Defendants’

theft of inventions that rightfully belong to Plaintiffs[,]” and Plaintiffs’ conversion claim begins

by incorporating by reference the allegations from Plaintiffs’ correction of inventorship claims.

(D.I. 19 at ¶¶ 1, 59 (emphasis added)) From there, the conversion claim alleges that “Defendants

assumed dominion and control over the BearBox Technology by claiming it as their own in the

'433 patent” and that “[t]hrough their wrongful conduct in obtaining the '433 [p]atent and

claiming the BearBox Technology as their own, [] Defendants have wrongfully obtained the

purported ability to exclude Plaintiffs and others from using the BearBox Technology.” (Id. at ¶

61 (emphasis added)) The harm that Plaintiffs allege as a result of the conversion is the loss of

“valuable intellectual property[.]” (Id. at ¶ 62) This is clearly a claim that, by its wording, is

       4
                At least for purposes of this Motion, both parties agree that Louisiana law applies
to the state law claims at issue here. (D.I. 33 at 13; D.I. 42 at 10) Under Louisiana law, a claim
for conversion requires proof of: (1) the plaintiff’s right to possess; (2) that the defendant’s use
was inconsistent with the plaintiff’s right of ownership; and (3) that the defendant’s use
constituted a wrongful taking. Mabile v. BP, P.L.C., CIVIL ACTION NO. 11-1783, 2016 WL
5231839, at *21 (E.D. La. Sept. 22, 2016).
       5
              On the other hand, conversion claims that are based on a non-patent-ownership
theory of conversion are generally not preempted by federal patent law. Gerawan Farming, Inc.,
2012 WL 691758, at *7.

                                                  5
dependent on a determination of patent inventorship. It is thus preempted by federal patent law. 6

See, e.g., Speedfit LLC v. Woodway USA, Inc., 226 F. Supp. 3d 149, 160 (E.D.N.Y. 2016)

(concluding that the plaintiffs’ conversion claim was preempted by federal patent law, where

plaintiffs’ “assertion of ownership over the subject matter of the Woodway Patents, which

underlies their claim of conversion, clearly turns on a determination of inventorship”); Gerawan

Farming, Inc., 2012 WL 691758, at *7 (concluding that the plaintiff’s conversion claim was

preempted by federal patent law, where the claim alleged that the defendant “substantially

interfered with [the plaintiff’s] rightful property by omitting [the plaintiff] as an inventor” and

accordingly “wrongfully exercised control over [the plaintiff’s] rights in the . . . '293 Patent”)

(internal quotation marks and citation omitted); Gen. Elec. Co. v. Wilkins, No. 1:10-cv-00674-

OWW-JLT, 2011 WL 3163348, at *9 (E.D. Cal. July 26, 2011) (finding that the defendant’s

conversion claim was preempted, where it sought “compensation for [p]laintiff’s purported

interference with [d]efendant’s inventorship interests in the intellectual property embodied in the

'565 and '985 patents; in other words, [d]efendant seeks patent-like protection under the guise of

the tort of conversion”). 7

        6
               In their briefing, Plaintiffs try to recast the conversion claim as one “based on acts
of misappropriating documents and information[.]” (D.I. 42 at 7) But, as shown above, that is
not accurate. The actual allegations in Count III make clear that Plaintiffs’ conversion claim is
“based on the alleged right to ownership of the '433 patent due to Storms’ alleged inventorship.”
(D.I. 46 at 4)
        7
                Moreover, the fact that Plaintiffs’ conversion claim seeks damages amounting to
the loss of “valuable intellectual property from which Plaintiffs would have derived substantial
revenue via licensing and/or selling patented products[,]” (D.I. 19 at ¶ 62), demonstrates that it is
patent-like in nature, see Speedfit LLC, 226 F. Supp. 3d at 160. That is another reason why the
claim is preempted. (D.I. 46 at 4)

                                                  6
       Because the Court finds that Plaintiffs’ conversion claim is preempted, it need not now

further evaluate Defendants’ additional arguments for dismissal of the claim.

       B.      Unjust Enrichment (Count IV)

       The next claim, in Count IV, is a claim for unjust enrichment. 8 As with conversion

claims, unjust enrichment claims that are based on a determination of patent inventorship are

generally preempted by federal patent law. See, e.g., Tavory v. NTP, Inc., 297 F. App’x 976,

983-84 (Fed. Cir. 2008) (finding that an unjust enrichment claim was preempted by federal

patent law where the “dispositive issue [was plaintiff’s] alleged co-inventorship”); Heat Techs.,

Inc. v. Papierfabrik Aug. Koehler SE, Civil Action No. 1:18-cv-01229-SDG, 2020 WL

12309512, at *4 (N.D. Ga. June 5, 2020) (citing cases); James v. J2 Cloud Servs. Inc., Case No.

2:16-cv-05769-CAS(PJWx), 2018 WL 6092461, at *5 (C.D. Cal. Nov. 19, 2018). 9 Defendants

       8
                The elements of an unjust enrichment claim in Louisiana are: (1) an enrichment
of the defendant; (2) an impoverishment of the plaintiff; (3) a connection between the enrichment
and the resulting impoverishment; (4) an absence of justification or cause for the enrichment and
impoverishment; and (5) there must be no other remedy at law available to plaintiff. Garber v.
Badon & Ranier, 981 So. 2d 92, 100 (La. Ct. App. 2008).
       9
                On the other hand, there are some circumstances where federal courts have
concluded that an unjust enrichment claim having some connection to patent rights was not
preempted, such as where it was alleged that defendants wrongfully obtained a patent based on
confidential information received from a plaintiff, and claimed ownership of it in violation of a
contract. See, e.g., Spears v. SHK Consulting & Dev., Inc., 338 F. Supp. 3d 1272, 1277 (M.D.
Fla. 2018); see also Univ. of Colo. Found., Inc. v. Am. Cyanamid Co., 342 F.3d 1298, 1306-07
(Fed. Cir. 2003) (finding that an unjust enrichment claim was not preempted, where it amounted
to “a legal claim to remedy the breach of a contract implied in law for disclosure of [plaintiffs’]
confidential manuscript in exchange for a promise not to disseminate the idea without the
[plaintiffs’] consent”); cf. Ki Beom Kim v. Dyna Flex, Ltd., 525 F. Supp. 3d 999, 1007-08 (E.D.
Mo. 2021) (denying a motion to remand, where plaintiff’s unjust enrichment claim raises a
substantial federal question regarding inventorship, as it was not “a dispute strictly concerning
ownership, typically involving an underlying contract” but instead one where “Plaintiff is
unquestionably arguing that he is the true inventor of the Invention and should have been
included on the patents. If [Defendant] is the true inventor and owner of the patents, there is no
reasonable claim that it has been unjustly enriched by continuing to sell products based on the
Patents”) (emphasis added).
                                                 7
assert that Plaintiffs’ unjust enrichment claim, like its conversion claim, is focused on the

question of inventorship (and necessarily requires a determination of inventorship in order to

know whether a legal violation can be found). (D.I. 33 at 9-11; D.I. 46 at 2-3) The Court again

agrees with Defendants.

       Plaintiffs’ unjust enrichment claim begins by incorporating the previous allegations of

Plaintiffs’ inventorship and conversion claims. (D.I. 19 at ¶ 63) It then alleges that “Plaintiffs

conferred a benefit on Defendants by providing them valuable intellectual property about

cryptocurrency mining systems and related confidential information and materials” and that

“Defendants have been and continue to be unjustly enriched by profiting from their wrongful

conduct[,] [i]n particular, Defendants have unlawfully used Plaintiffs’ property by asserting

inventorship over the BearBox Technology, and deriving an unjust benefit from exploiting

Storms’ cryptocurrency mining inventions.” (Id. at ¶¶ 64, 67 (emphasis added)) As for

damages, Plaintiffs allege a “loss of money and property as a result of Defendants’ wrongful use

of Plaintiffs’ intellectual property, including the right to any patent based on their own

intellectual property.” (Id. at ¶ 68 (emphasis added)) Thus, in light of the way Plaintiffs have

pleaded the claim, the claim’s gravamen is that Defendants have been enriched because they

have declared that they are the inventors of the '433 patent—and that this enrichment is unjust

because Mr. Storms is actually the true inventor. This claim, as pleaded, is also preempted by

federal patent law. See James, 2018 WL 6092461, at *4-5 (finding that the plaintiff’s unjust

enrichment claim was preempted because it was “fundamentally based on plaintiff’s assertion

that he should have been named on the '638 patent”); OptoLum, Inc. v. Cree, Inc., 244 F. Supp.

3d 1005, 1014 (D. Ariz. 2017) (“Because OptoLum’s unjust enrichment claim depends on the

                                                  8
determination that OptoLum, not Cree, invented the LED technology at issue here, the claim is

preempted by federal patent law.”).

       Here again, because the Court finds that this claim is preempted, it declines to evaluate

Defendants’ remaining arguments for dismissal.

       C.      Negligent Misrepresentation (Count V)

       The Court turns lastly to Plaintiffs’ negligent misrepresentation claim in Count V. Under

Louisiana law, the tort of negligent misrepresentation has three elements: (1) there must be a

legal duty on the part of the defendant to supply correct information to the plaintiff; (2) there

must be a breach of that duty; and (3) the breach must have caused damages to the plaintiff.

Schaumburg v. State Farm Mut. Auto. Ins. Co., 421 F. App’x 434, 439-40 (5th Cir. 2011); Cook

v. Am. Gateway Bank, 49 So. 3d 23, 32 (La. Ct. App. 2010).

       Defendants first assert that Count V is preempted because it is “dependent upon

[Plaintiffs’] assertion that [Mr.] Storms is an inventor of the '433 patent[.]” (D.I. 33 at 11-12; see

also D.I. 46 at 2-3) In the Court’s view, however, the argument for preemption here is not as

strong as it was regarding Counts III and IV.

       While Plaintiffs’ conversion and unjust enrichment claims clearly turned on whether Mr.

Storms is a proper inventor of the '433 patent, the premise of Plaintiffs’ negligent

misrepresentation claim is a bit different. In Count V, Plaintiffs first allege that Mr. Storms “told

[Mr.] McNamara that the cryptocurrency mining systems and related methods were proprietary

to Plaintiffs and not to be used or shared outside of Lancium” and that “[Mr.] McNamara gave

his word that he would abide by this confidentiality.” (D.I. 19 at ¶ 71) The claim then asserts

that Plaintiffs relied on Mr. McNamara’s assurances that he would “keep the BearBox

Technology confidential” and that Plaintiffs would not have continued to share information with

                                                  9
Mr. McNamara had they known that Defendants would violate that promise and incorporate the

BearBox Technology into patent applications. (Id. at ¶¶ 71-72) As for damages suffered as a

result of Defendants’ alleged misrepresentation, Plaintiffs allege the loss of potential patent

rights as well as the “costs of Plaintiffs’ know-how converted under the guise of a potential

business relationship.” (Id. at ¶ 73 (emphasis added))

       Thus, here the claim as pleaded seems to turn in significant part on whether Mr.

McNamara made a representation about confidentiality to Plaintiffs and whether that

representation was false; in resolving those questions, whether Mr. Storms was a true inventor is

not necessarily a relevant consideration. And Plaintiffs’ request for relief is directed, at least in

part, to damages for something other than the loss of the ability to license the patent at issue. In

light of this, and in light of the lack of caselaw finding negligent misrepresentation claims to be

preempted by federal patent law, 10 the Court concludes that Plaintiffs’ negligent

misrepresentation claim is not preempted. Cf. HIF Bio, Inc. v. Yung Shin Pharms. Indus. Co.,

600 F.3d 1347, 1356 (Fed. Cir. 2010) (finding that plaintiffs’ causes of action for, inter alia,

fraud and intentional and negligent interference with contractual relations claims were not

preempted, where the inventorship issue was not essential to the resolution of such claims).

       However, the Court agrees with Defendants that Count V should nevertheless be

dismissed. In this regard, Defendants rightly contend that the claim is fatally flawed because

Plaintiffs fail to plead a legal duty on the part of Lancium/Mr. McNamara. (D.I. 33 at 18-20;

D.I. 46 at 10)

       10
               Indeed, Defendants acknowledge that they are not aware of any case that
specifically addresses preemption of a claim for negligent misrepresentation by federal patent
law. (D.I. 33 at 13 & n.2)
                                                  10
       Whether these Defendants owed a duty to Plaintiffs is a question of law. Barrie v. V.P.

Exterminators, Inc., 625 So. 2d 1007, 1015 (La. 1993). “[T]he initial inquiry is whether, as a

matter of law, a duty is owed to this particular plaintiff to protect him from this particular

harm[,]” and “[a] negative answer . . . results in a determination of no liability.” Miller v. Lowe,

Civil Action No. 08-1624, 2009 WL 4730201, at *4 (W.D. La. Dec. 4, 2009) (internal quotation

marks and citations omitted).

       Plaintiffs, for their part, argue that the Amended Complaint sufficiently pleads “the

existence of a duty stemming from the confidential relationship established between the parties.”

(D.I. 42 at 15) In this regard, the Supreme Court of Louisiana has explained that a confidential

or fiduciary relationship giving rise to the requisite duty can exist between “generally all persons

who are associated by any relation of trust and confidence” such as, for example, “trustee and

beneficiary, attorney and client, parent and child, or husband and wife . . . [and] partners and co-

partners, principal and agent, master and servant, physician and patient[.]” Bunge Corp. v.

GATX Corp., 557 So. 2d 1376, 1384 n.4 (La. 1990).

       None of these types of relationships (or something close to them) are at issue here.

Instead, the Amended Complaint pleads that Mr. Storms and Mr. McNamara were simply two

men with no previous relationship who met each other at a conference, had dinner and went on to

discuss a “potential business relationship”—and that in those conversations, Mr. Storms shared

what he considered to be confidential information with Mr. McNamara. (D.I. 19 at ¶¶ 32, 72-73)

Plaintiffs cite to no cases suggesting that this type of “business relationship” gives rise to the

requisite duty under Louisiana law. And courts applying Louisiana law to circumstances

involving similar types of business relationships have found the opposite. See, e.g., House of

Raeford Farms of La. LLC v. Poole, CIVIL ACTION NO. 19-271, 2021 WL 1081837, at *4-6

                                                  11
(W.D. La. Mar. 18, 2021) (dismissing a fraudulent misrepresentation claim, which similarly

requires that a special relationship exist between a plaintiff and defendant establishing a duty to

disclose omitted information, where the parties were in a seller-buyer relationship, since

fiduciary duties do not arise from “ordinary supplier-customer contracts”) (internal quotation

marks and citation omitted); S. Serv. Corp. v. Tidy Bldg. Servs., Inc., No. Civ.A. 04-1362, 2004

WL 2784909, at *6 (E.D. La. Dec. 1, 2004) (finding that the plaintiff’s complaint failed to state a

claim for negligent misrepresentation, where “[t]he relationships between Tidy and its customers

and Tidy and [plaintiff] do not fall within the class of special relationships of trust and

confidence; they are ordinary commercial relationships”). Plaintiffs’ negligent misrepresentation

claim therefore fails as a matter of law.

        D.      Conclusion

        In sum, the Court agrees with Defendants that Plaintiffs’ conversion and unjust

enrichment claims are preempted by federal patent law, and that Plaintiffs’ negligent

misrepresentation claim is wanting as a matter of law due to the failure to sufficiently allege the

requisite duty. Plaintiffs have requested leave to amend the Amended Complaint if Defendants’

Motion is granted. (D.I. 42 at 18) The Court believes that this request should be granted as to

Counts III and IV because: (1) it is not clear that allowing the opportunity to amend would be a

futile act; 11 (2) this is the first time the Court has found Plaintiffs’ claims to be deficiently

pleaded; and (3) leave to amend should be given freely “when justice so requires.” Fed. R. Civ.

P. 15(a)(2). As to Count V, however, the Court does not see how Plaintiffs can plead a plausible

        11
               If Plaintiffs are given the opportunity to replead, they should be mindful of
Defendants’ other arguments for dismissal of these Counts, (D.I. 33 at 14-18), and should
address those arguments in the new pleading to the extent they need to, as it is not likely that
Plaintiffs would be given a further chance to replead thereafter.
                                                   12
claim (i.e. how Plaintiffs can possibly allege the requisite duty). Thus, the Court also

recommends that dismissal of Counts III and IV be without prejudice and that dismissal of Count

V be with prejudice. The Court suggests that, to the extent the District Court affirms the Court’s

recommendation, Plaintiffs be given leave to file one further amended complaint within 14 days.

TriDiNetworks Ltd. v. Signify N. Am. Corp., Civil Action No. 19-1063-CFC-CJB, 2020 WL

2839224, at *5 (D. Del. June 1, 2020).

IV.    CONCLUSION

       For the foregoing reasons, the Court recommends that Defendants’ Motion be

GRANTED. 12

       This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1)(B), Fed. R.

Civ. P. 72(b)(1), and D. Del. LR 72.1. The parties may serve and file specific written objections

within fourteen (14) days after being served with a copy of this Report and Recommendation.

Fed. R. Civ. P. 72(b)(2). The failure of a party to object to legal conclusions may result in the

loss of the right to de novo review in the district court. See Sincavage v. Barnhart, 171 F. App’x

924, 925 n.1 (3d Cir. 2006); Henderson v. Carlson, 812 F.2d 874, 878-79 (3d Cir. 1987).

       The parties are directed to the Court’s Standing Order for Objections Filed Under Fed. R.

Civ. P. 72, dated October 9, 2013, a copy of which is available on the District Court’s website,

located at http://www.ded.uscourts.gov.

Dated: January 18, 2022
                                                      Christopher J. Burke
                                                      UNITED STATES MAGISTRATE JUDGE

       12
               Defendants’ request for oral argument, (D.I. 47), is DENIED.

                                                 13