June 11, 2013
LES Insights
Authored by D. Brian Kacedon, John C. Paul, and Guang-Yu Zhu
In today's service-based economy, corporations often provide services far removed from the underlying systems carrying those services, such as the Internet, wireless broadcasts, or cable television. This separation can make it difficult for a patent owner to identify a particular infringing device when pleading patent infringement in a complaint. The Federal Circuit recently addressed the pleading standards in this situation, holding that a plaintiff need not rule out possible noninfringing alternatives the defendant may have been using rather than the patented system or method. Significantly, the Federal Circuit made clear that identification of a specific infringing device is not required.
K-Tech owns a number of patents for modifying major and minor channel numbers and/or carrier frequencies to identify a television program. In 2011, KTech filed two complaints in California, which were consolidated for appeal1, against DirecTV and Time Warner Cable ("TWC") for direct patent infringement of four of its patents. DirecTV and TWC are, respectively, satellite and cable broadcast companies in the business of transmitting television shows to their subscribers. In its complaints, K-Tech alleged that TWC and DirecTV infringe the K-Tech patents because the Federal Communications Commission requires that all digital television signals in the United States follow the Advanced Television Systems Committee specifications, which in turn require compliance with Program and System Information Protocol specifications defining the information included in a digital television signal. These specifications transmit channel information through major channel numbers, minor channel numbers, and carrier frequencies. As a result, because TWC and DirecTV both use a channel number to identify programs broadcast over their systems, K-Tech contended that they both utilize the methods and systems covered by K-Tech's patents. Neither of K-Tech's complaints alleged a particular infringing device used by TWC or DirecTV.
The district court dismissed both complaints under Rules 12(b)(6) and 8 for failing to allege facts sufficient to state a plausible claim for patent infringement under the standards enunciated by the Supreme Court in Twombly2 and Iqbal.3 Specifically, the district court regarded as fatal K-Tech's failure to explain why the defendants were utilizing its patents since K-Tech had not alleged any particular infringing products. On appeal, K-Tech argued that its complaints complied with Form 184 of the Federal Rules of Civil Procedure—a sample patent-infringement complaint—and that the dismissal was therefore improper.
Relying on its decision in R+L Carriers, the Federal Circuit reversed and held that the complaints satisfied both Form 18 and the pleading standards of Rule 8, as interpreted by Twombly and Iqbal. As the court explained, Rule 84 establishes that the sample Forms in the Federal Rules of Civil Procedure suffice to satisfy the pleading requirements and their sufficiency cannot be altered through judicial interpretation. Consequently, the court had to resolve any conflict between Form 18 and Rule 8 in favor of the Form. As a result, it evaluated the sufficiency of K-Tech's pleadings against Form 18.
Form 18 provides a sample complaint for direct patent infringement that requires (1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that defendant has been infringing the patent by making, using, or selling a device; (4) a statement that the plaintiff has given defendant notice of its infringement; and (5) a demand for an injunction and damages. According to DirecTV and TWC, by failing to identify a particular infringing device, K-Tech did not satisfy Form 18. Disagreeing, the Federal Circuit held that Form 18 does not require identification of a particular device and that a "defendant cannot shield itself from a complaint for direct infringement by operating in such secrecy that the filing of a complaint itself is impossible."
The court went on to identify "notice and facial plausibility" as the requirements of an appropriate analysis under Form 18. The adequacy of the facts pleaded, the court explained, depends on the facts and circumstances of each case, and the technology at issue. Accordingly, because K-Tech's complaints satisfied these requirements by asserting infringement and indicating a plausible reason for their belief of infringement—in this case DirecTV and TWC's use of channel numbers in compliance with FCC standards—the Federal Circuit reversed the district court's dismissal.
K-Tech makes it clear that pleading in compliance with Form 18 will withstand a motion to dismiss for failure to state a claim. Thus, from a practical standpoint, practitioners should take care to include all the elements contained in Form 18 to minimize the risk of dismissal.
Additionally, where a particular element of Form 18 cannot be pleaded, as in K-Tech where a device could not be identified, plaintiffs should plead sufficient facts to make the claim of infringement facially plausible. Depending on the circumstances of the technology, this may require only a statement of reasons for the plaintiff's infringement belief.
Endnotes
1 The K-Tech opinion can be found at http://www.finnegan.com/files/Publication/b7258d7f-c5e0-454b-aa48-19cd0be094d8/Presentation/PublicationAttachment/26c81efa-c9c5-4c23-a60d-1f4cb55c50dc/12-1425%204-18-13.pdf.
2 The Twombly opinion can be found at http://scholar.google.com/scholar_case?case=18057384228100022643.
3 The Iqbal opinion can be found at http://scholar.google.com/scholar_case?case=10490065676294220138.
4 Form 18 can be found at
http://www.uscourts.gov/uscourts/RulesAndPolicies/Rules/Usable_Rules_Forms_Civil/CIV18-Complaint_for_Patent_Infringement.rtf. (Page last checked June 11, 2013.)
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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