The Software IP Report

Claims for Vicarious Liability for Direct Patent Infringement Dismissed (But Claims for Direct Infringement Were Adequately Pled)

By Charles Bieneman

Categories: Miscellaneous, The Software IP Report

Allegations that the popular Slingbox device directly infringes two patents satisfied Form 18 of the Federal Rules of Civil Procedure, and thus survived a motion to dismiss.  Joao Control and Monitoring Systems of California LLC v. Sling Media Inc., No. C-11-6277 EMC (N.D. Cal. Aug. 7, 2012).  However, the plaintiff’s allegations that Sling Media was liable for vicariously directly infringing the patents did not establish that Sling directed and controlled its customers’ alleged infringement.  Therefore, the plaintiff’s claims of Sling’s vicarious liability were dismissed.

In addressing claims of direct infringement, the court cited the recent Federal Circuit decision in In re Bill of Lading Transmission Processing and System Patent Litigation, which held that a complaint alleging direct patent infringement was sufficiently pled where it included the elements in Form 18 attached to the Federal Rules.  Although noting that technically it did not need to follow Bill of Lading because that case applied Sixth Circuit law, the court acknowledged that, as a practical matter, Bill of Lading was controlling.

Sling argued that the plaintiff’s allegations of direct infringement were insufficient because each of the patent claims required a personal computer, a device that Sling did not make, use, or sell.  The court dismissed this argument because it could not be evaluated without claim construction, and thus would have required the court to venture beyond the pleadings where the court was considering a motion to dismiss.  The complaint here stated a claim of direct infringement that included each of the elements required by Form 18, and therefore Sling’s motion to dismiss the complaint was denied with respect to allegations of direct infringement.

Allegations of vicarious liability were another story.  The court here followed Centillion Data Sys., LLC v. Qwest Communications Int’l, Inc., 631 F.3d 1279 (Fed. Cir. 2011), in which the Federal Circuit agreed that a defendant was not liable for vicarious direct patent infringement where claims required a personal computer, and installing software on it, elements that the defendant did not “use.”  The Federal Circuit also noted in Centillion that the defendant neither directed its customers’ actions, nor was there any agency relationship with its customers.

Applying these principles to the present case, and citing BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373 (Fed. Cir. 2007), the court reasoned that “an allegation that Defendant provides the software and that customers install the software when they use the Sling system does not allege that customers are contractually obligated to use the software, nor does it allege that Defendant otherwise maintains control over the software’s operation.”  Even if there was a contractual relationship between Sling and its customers, there was no contract obligating use of allegedly infringing software.  The customers are not Sling’s agents.  As the Federal Circuit stated in Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318 (Fed. Cir. 2008), “mere ‘arms-length cooperation’ will not give rise to direct infringement by any party.”  Vicarious liability for direct patent infringement cannot be predicated on a mere customer relationship.

The plaintiff’s vicarious liability allegations more properly fell into the field of indirect infringement.  Unfortunately for the plaintiff, its complaint did not contain any allegations to support a claim of indirect infringement, and, at least according to Sling, the plaintiff had previously agreed to drop its indirect infringement claims.  Because the plaintiff had already filed three amended complaints, and the court was considering a second round of motions to dismiss, Sling’s motion to dismiss claims of indirect infringement, as well as claims of vicarious liability, were granted without leave for the plaintiff to further amend its complaint.