The Software IP Report

Meeting the Notice Pleading Standard for Patent Infringement

The court in Gradient Enterprises, Inc. v. Skype Technologies S.A, No. 10-CV-6712L (W.D.N.Y. March 13, 2012), addressed the confusion concerning pleading standards in patent infringement actions following the Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal, as well as the Federal Circuit’s McZeal v. Sprint Nextel Corp. decision.  In dismissing the plaintiff’s complaint, the court explained that, regardless of whether a plaintiff must simply model its complaint on Form 18 attached to the Federal Rules of Civil Procedure, or whether Twombly and Iqbal impose a heightened standard, bringing suit for patent infringement requires meeting a minimum pleading threshold.  Further, the court said that pleading indirect or willful infringement requires particular additional allegations.  Because Gradient had not pled sufficient facts under any standard, the court granted Skype’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), but gave Gradient leave to amend its complaint.

Background

Gradient’s complaint made bare-bones allegations

on information and belief, that “the defendants manufacture, make, use, sell and/or offer to sell methods and/or systems that infringe at least one or more of the claims of the ‘207 patent.” Complaint ¶ 12. “More particularly,” the complaint goes on, “the defendants infringe the ‘207 patent through their peer-to-peer methods and systems for Voice over Internet Protocol (‘VoIP’) communications.” Complaint ¶ 14. Gradient alleges both that defendants directly infringe the ‘207 patent, and that they induce or contribute to others’ infringement. Complaint ¶¶ 12, 13.

Based on these allegations, Gradient asserted claims for damages, an injunction, and a declaratory judgment.

Federal Rule of Civil Procedure 84 states that “The forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate.”  Form 18, a model complaint for patent infringement actions, “requires only: (1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that the defendant has been infringing the patent by making, selling, and using the device embodying the patent; (4) a statement that the plaintiff has given the defendant notice of its infringement; and (5) a demand for an injunction and damages.”

Reasoning

The Federal Circuit in McZeal stated that a plaintiff following Form 18 would plead sufficient facts to survive a motion to dismiss.  However, McZeal was decided between Twombley, which explicitly applied to complaints in antitrust actions, and Iqbal, which made clear that the pleading requirements articulated by Twombley applied to all civil actions.  Following these three cases, and in light of FRCP 84 and Form 18, courts have come to “differing conclusions” concerning “whether a complaint that complies with the minimum requirements of Form 18 suffices to state a claim for direct patent infringement.”  Some courts have held that adherence to Form 18 remains sufficient, because the Supreme Court has not clearly repudiated it.  Other courts have held that a complaint modeled after Form 18 will now not suffice.

Here, Gradient did not meet even the standard of Form 18, because it pled only that Skype had infringed its patent, not that Skype had ever been given notice of the alleged infringement.

Moreover, Form 18 is silent with respect to pleading indirect infringement, i.e., contributory infringement and infringement by inducement.  Gradient had pled no more than “that defendants make or sell ‘methods or systems that induce or contribute to the infringement’ of” Gradient’s patent.  However, claims of indirect infringement “require more than the bare minimum embodied by Form 18.”  Inducement requires allegations that there was direct infringement, and that the defendants knowingly and with intent induced another to infringe.  Contributory infringement likewise requires an allegation of direct infringement, as well as allegations that the defendant knew of the patent, and that the accused instrumentality had no substantial non-infringing use and was a material part of the accused invention.  Gradient’s “threadbare recitals of the elements of a cause of action” were inadequate.

Further, Gradient did not adequately plead willful infringement.  The court stated that a pleading required allegations that the defendant had actual knowledge of the patent(s)-in-suit, and that there was direct infringement.  Gradient had not pled such allegations.

The court granted Skype’s motion to dismiss the complaint, but gave Gradient leave to amend and refile its complaint.

Comment

The pleading standard for patent infringement cases, and the continued vitality of McZeal, badly need clarification by the Federal Circuit.  In software cases, vague pleadings can leave defendants genuinely in the dark as to what products, or combination of products, are alleged to infringe.  (Which is not to suggest that software cases are in any way unique in this regard.)  On the other hand, sometimes a simple allegation that “Defendant infringes the ‘123 patent by various software programs, including Program A and Web Site B,” is more than enough to provide the defendant with notice of the basis for the alleged infringement.  Thus, there is a balance to be struck, but above all clarity would be a good first step.  Both sides in litigation would benefit, and could be saved needless motions practice, by a clear identification of the bar that patent infringement plaintiffs must meet to survive a Rule 12(b)(6) motion.

 

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