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Direct Infringement Can Be Sufficiently Pleaded with Form 18 of the Federal Rules; Indirect Infringement Must Meet the Iqbal and Twombly Standard

10-1493
June 07, 2012

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Last Month at the Federal Circuit - July 2012

Judges: Newman (dissenting-in-part and concurring-in-part), Prost, O'Malley (author)

[Appealed from: S.D. Ohio, Senior Judge Beckwith]

In In re Bill of Lading Transmission & Processing System Patent Litigation, Nos. 10-1493, -1494, -1495, -1496, 11-1101, -1102 (Fed. Cir. June 7, 2012), the Federal Circuit affirmed-in-part, reversed-in-part, and remanded the district court’s dismissal with prejudice of R+L Carriers, Inc.’s (“R+L”) amended complaints of indirect infringement against six Appellees, finding that R+L failed to state a claim of contributory infringement but adequately stated a claim of induced infringement.

R+L owns U.S. Patent No. 6,401,078 (“the ’078 patent”), directed to a method of efficiently enabling the delivery of freight in the less-than-a-load trucking industry. In 2008, R+L sent cease-and-desist letters to two of the Appellees, and the Appellees filed DJ actions for judgments of invalidity and noninfringement. R+L sued the remaining Appellees and several alleged direct infringers, and the lawsuits were consolidated. Ten of the alleged indirect infringers filed motions to dismiss or motions for judgment on the pleadings, and all of the motions were granted by the district court. R+L filed amended complaints against each of the six Appellees.

The Appellees filed a joint motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The district court found that the amended complaints failed to state a claim of indirect infringement, finding that R+L failed to plausibly plead specific intent to induce infringement and failed to plausibly plead that the accused products were not capable of substantial noninfringing uses. The district court also concluded that any justiciable controversies giving rise to R+L’s DJ claims were moot, and dismissed those claims as well.

On appeal, R+L argued that the district court erred by holding that “offer to sell” liability does not exist under 35 U.S.C. § 271(c) for a method patent. The Federal Circuit held that contributory infringement can be based on an offer to sell a product for use in practicing a patented method, and that direct infringement is a prerequisite for contributory infringement. The Court stated it need not decide whether a method patent can be directly infringed by offering to sell a patented method.

R+L also argued that the district court erred by holding that a complaint must identify a specific direct infringer to assert a claim for indirect infringement. The Federal Circuit concluded that the district court erred in finding R+L’s allegations of direct infringement deficient. The Federal Circuit reasoned that Form 18 of the Federal Rules of Civil Procedure, which sets forth a sample complaint for direct patent infringement, applied and that the Twombly and Iqbal pleading standard is “too stringent” in this context. Slip op. at 16. “To state a claim for indirect infringement, . . . 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.” Id. at 19. The Court held that as long as a complaint meets the requirements of Form 18, it sufficiently pleads direct infringement.

R+L also argued that the district court erred by concluding that its claims for contributory and induced infringement failed to plausibly state a claim for relief. The Court held that Form 18 does not apply to allegations of indirect infringement, and that they must look to Supreme Court precedent for guidance regarding such claims. Regarding contributory infringement, the Federal Circuit held that R+L did not adequately plead that the Appellees’ products had no substantial noninfringing uses. “Where the product is equally capable of, and interchangeably capable of both infringing and substantial non-infringing uses, a claim for contributory infringement does not lie.” Id. at 23. The Court held that the product quotes provided by R+L contained repeated descriptions of noninfringing uses, and that formal claim construction was not required to conclude that the Appellees’ products could be used for noninfringing purposes. The Court affirmed the dismissal of R+L’s contributory infringement claims.

Regarding induced infringement, the Court noted that the district court failed to draw all reasonable inferences in favor of the nonmoving party. “Nothing in Twombly or its progeny allows a court to choose among competing inferences as long as there are sufficient facts alleged to render the non-movant’s asserted inferences plausible.” Id. at 26. “[W]hen the allegations of R+L’s lengthy and detailed amended complaints are considered as a whole, and the facts are considered in the context of the technology disclosed in the ’078 patent and the industry to which Appellees sell and tout their products, it is clear that the inferences R+L asks to be drawn are both reasonable and plausible.” Id. at 28. The Court reversed the dismissal of R+L’s induced infringement claims.

Finally, R+L argued that the district court erred by refusing to exercise jurisdiction over R+L’s claims for DJ. The Federal Circuit held that because the district court erred by dismissing the amended complaints in their entirety, the district court must reconsider this issue.

Judge Newman dissented-in-part and concurred-in-part, stating that the majority opinion establishes a new pleading standard for patent infringement actions and discards the general national standard for civil complaints. Judge Newman disagreed with the majority’s opinion that the Forms of the Federal Rules of Civil Procedure override the Supreme Court’s guidance in Iqbal and Twombly.

Summary authored by Lillian M. Robinson, Esq.