Refining the Pleading Requirements for Patent Infringement

Background

R + L Carriers, Inc. (“R + L”) is the assignee of U.S. Patent No. 6,401,078 (“the '078 patent”) which is directed to methods for transferring shipping documentation data for a package from a transporting vehicle to a remote processing center. In a consolidated case in the Southern District of Ohio, a number of defendants filed a joint motion to dismiss claims alleging indirect infringement of the '078 patent. Judge Sandra S. Beckwith of the district court granted the motion, finding that R + L had failed to plausibly allege either direct or indirect infringement in its amended complaint. R + L appealed to the CAFC.

Direct Infringement

The district court found that R + L failed to adequately plead direct infringement. On appeal, R + L argued that its amended complaints “adequately plead the existence of a direct infringer to support its indirect infringement claims” against the Appellees. In response, the Appellees argued that R + L failed to plead direct infringement sufficiently because R + L did not describe precisely how each element of the asserted claims is practiced. In addition, one of the Appellees, Intermec Technologies Corp. (“Intermec”) argued that the amended complaint regarding Intermec (“Intermec Amended Complaint”) was deficient because it failed to identify one of its customers as a direct infringer. Addressing each argument in turn, the CAFC found that the district court erred in finding R + L's allegations of direct infringement deficient.

The CAFC began by addressing whether Supreme Court case law or Form 18 of the FRCP governs the requirements for pleading direct infringement. The CAFC noted that while Supreme Court cases such as Twombly and Iqbal address the civil pleading standards in a variety of civil contexts, none address the sufficiency of a complaint alleging patent infringement or causes of action for which there is a sample complaint in the Appendix of Forms to the FRCP. In recognizing that Rule 84 of the FRCP and the Advisory Committee Notes make clear that a pleading, motion, or other paper that follows one of the Official Forms cannot be successfully attacked under the rules under which it is drawn, the CAFC held that Form 18 should be used to identify the specificity required to adequately plead direct infringement.

The court went on to respond to the Appellee's arguments. In response to the argument that R + L did not describe precisely how each element of the asserted claims is practiced, the court looked to Form 18. According to the CAFC, Form 18 does not require a plaintiff to plead facts establishing that each element of an asserted claim is met. Indeed, the court found that a plaintiff need not even identify which claims it asserts are being infringed. Since the amended complaints each asserted specific claims of the patent that are allegedly being infringed, and by whom, and about the activities R + L believed to constitute infringement, the CAFC found that they satisfied the requirements of Form 18.

In response to Intermec's argument that R + L failed to identify one of Intermec's customers as a direct infringer, the CAFC looked to the requirements for proving a claim of indirect infringement at trial. In the Intermec Amended Complaint, R + L did not allege that a specific Intermec customer was infringing the '078 patent. Instead, R + L generally alleged that “Intermec's trucking customers” performed actions that directly infringed the '078 patent. In siding with R + L, the court held that a plaintiff need not identify a specific direct infringer if it pleads facts sufficient to allow an inference that at least one direct infringer exists since a plaintiff's indirect infringement claims can even succeed at trial absent direct evidence of a specific direct infringer.

Indirect Infringement

The district court held that the amended complaints also failed to st-ate a claim for indirect infringement. On appeal, R + L argued that the court erred. In first determining the source of the standard to apply, the CAFC found that Form 18 does not control. Thus, the principles of Supreme Court decisions must be applied to indirect infringement claims.

Contributory Infringement

To state a claim for contributory infringement, a plaintiff must, among other things, plead facts that allow an inference that the components sold or offered for sale have no substantial non-infringing uses. In focusing on this “no substantial non-infringing uses” prong, the district court held that the amended complaints failed to state a claim for contributory infringement because the facts alleged demonstrated that the Appellees' products do have substantial non-infringing uses. R + L disagreed, arguing that its contributory infringement claims were adequate because all of the amended complaints state that, as customized by the relevant Appellee “for their trucking customers, the process for scanning and wirelessly transmitting bills-of-lading from the truck cab to the back office for the preparation of loading manifests has no other substantial non-infringing use.”

In siding with the Appellees, the CAFC opined that R + L's allegations say nothing more than “if you use this device to perform the patented method, the device will infringe and has no non-infringing uses,” which is not the relevant inquiry. Rather, the correct inquiry focuses on whether the accused products can be used for purposes other than infringement. Further, the court noted that materials attached to the amended complaints contained repeated descriptions of non-infringing uses. R + L thus, according to the court, supplied the very facts which defeated its claims of contributory infringement.

Inducement

To state a claim for inducement a plaintiff must plead facts plausibly showing that the defendants specifically intended their customers to infringe and knew that the customers' acts constituted infringement. The district court held that R + L's amended complaints failed to state claims for induced infringement because its claims relied upon ultimate inferences that the district court found “implausible and unreasonable.” R + L disagreed, debating what is “plausible.”

As an initial matter, the CAFC noted a flaw that pervaded the district court's assessment of R + L's allegations of induced infringement ' its failure to draw all reasonable inferences in favor of the non-moving party. The court noted that neither Twombly nor its progeny altered this basic premise or allowed a court to choose among competing inferences.

Many of R + L's complaints stated that the Appellees advertised their products as performing some ' but not all ' elements of the claimed invention. The Appellees argued that the complaints were deficient since they did not allege advertisements that the products performed all elements of the claimed invention. In siding with R + L, the CAFC noted a plaintiff need not allege facts that prove all aspects of its claims. The plausibility requirement, according to the court, is not akin to a probability requirement; rather, it simply calls for enough facts to raise a reasonable expectation that discovery will reveal that the defendant is liable for the misconduct alleged.

Conclusions

The CAFC has arguably lowered the requirements for pleading direct and indirect patent infringement. In clarifying that Form 18 of the FRCP governs the specificity required to plead direct infringement, plaintiffs need no longer satisfy the more stringent requirements set out by the Supreme Court. This case is also a good example of how a plaintiff's supporting documentation can be detrimental to its claims and should thus be carefully scrutinized prior to submission to determine whether it is even necessary to satisfy the pleading requirements.

Brad Riel is an associate in the Silicon Valley office of Kilpatrick, Townsend and Stockton LLP.

In a much anticipated decision, the Court of Appeals for the Federal Circuit (“CAFC”) in In Re Bill of Lading Transmission and Processing System Patent Litigation, No. 2010-1493, – 1494, -1495, -1496, 2011-1101, – 1102 (Fed. Cir. June 7, 2012) (O'Malley J.) has clarified the pleading requirements for alleging patent infringement. The court held that Form 18 of the Federal Rules of Civil Procedure (“FRCP”) governs the required specificity when pleading direct infringement. Thus, a plaintiff need not plead facts establishing that each element of an asserted claim is met, need not identify which claims it asserts are being infringed, and need not identify a specific direct infringer if it pleads facts sufficient to allow an inference that at least one direct infringer exists.

In contrast, Supreme Court decisions such as Bell Atlantic Corp. v. Twombly , 550 U.S. 544 (2007) and Ashcroft v. Iqbal , 556 U.S. 662 (2009) ' not Form 18 ' rule when pleading indirect infringement. To state a claim for contributory infringement, a plaintiff must, among other things, plead facts that allow an inference that the components sold or offered for sale have no substantial non-infringing uses. Affirmatively pled facts that indicate substantial non-infringing uses may defeat a claim for contributory infringement.

To state a claim for inducement, a plaintiff must plead facts plausibly showing that the accused infringers specifically intended their customers to infringe and knew that the customers' acts constituted infringement. To satisfy the plausibility requirement, the plaintiff need only plead enough facts to raise a reasonable expectation that discovery will reveal that the defendant is liable for the misconduct alleged. A plaintiff need not allege facts that plausibly suggest every element of a claim has been practiced.

Background

R + L Carriers, Inc. (“R + L”) is the assignee of U.S. Patent No. 6,401,078 (“the '078 patent”) which is directed to methods for transferring shipping documentation data for a package from a transporting vehicle to a remote processing center. In a consolidated case in the Southern District of Ohio, a number of defendants filed a joint motion to dismiss claims alleging indirect infringement of the '078 patent. Judge Sandra S. Beckwith of the district court granted the motion, finding that R + L had failed to plausibly allege either direct or indirect infringement in its amended complaint. R + L appealed to the CAFC.

Direct Infringement

The district court found that R + L failed to adequately plead direct infringement. On appeal, R + L argued that its amended complaints “adequately plead the existence of a direct infringer to support its indirect infringement claims” against the Appellees. In response, the Appellees argued that R + L failed to plead direct infringement sufficiently because R + L did not describe precisely how each element of the asserted claims is practiced. In addition, one of the Appellees, Intermec Technologies Corp. (“Intermec”) argued that the amended complaint regarding Intermec (“Intermec Amended Complaint”) was deficient because it failed to identify one of its customers as a direct infringer. Addressing each argument in turn, the CAFC found that the district court erred in finding R + L's allegations of direct infringement deficient.

The CAFC began by addressing whether Supreme Court case law or Form 18 of the FRCP governs the requirements for pleading direct infringement. The CAFC noted that while Supreme Court cases such as Twombly and Iqbal address the civil pleading standards in a variety of civil contexts, none address the sufficiency of a complaint alleging patent infringement or causes of action for which there is a sample complaint in the Appendix of Forms to the FRCP. In recognizing that Rule 84 of the FRCP and the Advisory Committee Notes make clear that a pleading, motion, or other paper that follows one of the Official Forms cannot be successfully attacked under the rules under which it is drawn, the CAFC held that Form 18 should be used to identify the specificity required to adequately plead direct infringement.

The court went on to respond to the Appellee's arguments. In response to the argument that R + L did not describe precisely how each element of the asserted claims is practiced, the court looked to Form 18. According to the CAFC, Form 18 does not require a plaintiff to plead facts establishing that each element of an asserted claim is met. Indeed, the court found that a plaintiff need not even identify which claims it asserts are being infringed. Since the amended complaints each asserted specific claims of the patent that are allegedly being infringed, and by whom, and about the activities R + L believed to constitute infringement, the CAFC found that they satisfied the requirements of Form 18.

In response to Intermec's argument that R + L failed to identify one of Intermec's customers as a direct infringer, the CAFC looked to the requirements for proving a claim of indirect infringement at trial. In the Intermec Amended Complaint, R + L did not allege that a specific Intermec customer was infringing the '078 patent. Instead, R + L generally alleged that “Intermec's trucking customers” performed actions that directly infringed the '078 patent. In siding with R + L, the court held that a plaintiff need not identify a specific direct infringer if it pleads facts sufficient to allow an inference that at least one direct infringer exists since a plaintiff's indirect infringement claims can even succeed at trial absent direct evidence of a specific direct infringer.

Indirect Infringement

The district court held that the amended complaints also failed to st-ate a claim for indirect infringement. On appeal, R + L argued that the court erred. In first determining the source of the standard to apply, the CAFC found that Form 18 does not control. Thus, the principles of Supreme Court decisions must be applied to indirect infringement claims.

Contributory Infringement

To state a claim for contributory infringement, a plaintiff must, among other things, plead facts that allow an inference that the components sold or offered for sale have no substantial non-infringing uses. In focusing on this “no substantial non-infringing uses” prong, the district court held that the amended complaints failed to state a claim for contributory infringement because the facts alleged demonstrated that the Appellees' products do have substantial non-infringing uses. R + L disagreed, arguing that its contributory infringement claims were adequate because all of the amended complaints state that, as customized by the relevant Appellee “for their trucking customers, the process for scanning and wirelessly transmitting bills-of-lading from the truck cab to the back office for the preparation of loading manifests has no other substantial non-infringing use.”

In siding with the Appellees, the CAFC opined that R + L's allegations say nothing more than “if you use this device to perform the patented method, the device will infringe and has no non-infringing uses,” which is not the relevant inquiry. Rather, the correct inquiry focuses on whether the accused products can be used for purposes other than infringement. Further, the court noted that materials attached to the amended complaints contained repeated descriptions of non-infringing uses. R + L thus, according to the court, supplied the very facts which defeated its claims of contributory infringement.

Inducement

To state a claim for inducement a plaintiff must plead facts plausibly showing that the defendants specifically intended their customers to infringe and knew that the customers' acts constituted infringement. The district court held that R + L's amended complaints failed to state claims for induced infringement because its claims relied upon ultimate inferences that the district court found “implausible and unreasonable.” R + L disagreed, debating what is “plausible.”

As an initial matter, the CAFC noted a flaw that pervaded the district court's assessment of R + L's allegations of induced infringement ' its failure to draw all reasonable inferences in favor of the non-moving party. The court noted that neither Twombly nor its progeny altered this basic premise or allowed a court to choose among competing inferences.

Many of R + L's complaints stated that the Appellees advertised their products as performing some ' but not all ' elements of the claimed invention. The Appellees argued that the complaints were deficient since they did not allege advertisements that the products performed all elements of the claimed invention. In siding with R + L, the CAFC noted a plaintiff need not allege facts that prove all aspects of its claims. The plausibility requirement, according to the court, is not akin to a probability requirement; rather, it simply calls for enough facts to raise a reasonable expectation that discovery will reveal that the defendant is liable for the misconduct alleged.

Conclusions

The CAFC has arguably lowered the requirements for pleading direct and indirect patent infringement. In clarifying that Form 18 of the FRCP governs the specificity required to plead direct infringement, plaintiffs need no longer satisfy the more stringent requirements set out by the Supreme Court. This case is also a good example of how a plaintiff's supporting documentation can be detrimental to its claims and should thus be carefully scrutinized prior to submission to determine whether it is even necessary to satisfy the pleading requirements.

Brad Riel is an associate in the Silicon Valley office of Kilpatrick, Townsend and Stockton LLP.