Twombly and Iqbal Redux; Form 18 Is the Pleading Standard for Direct Infringement

Overturning the district court’s dismissal of an amended complaint for induced infringement with prejudice, the U.S. Court of Appeals for the Federal Circuit explained that compliance with the form pleading associated with F.R. Civ. Pro. 8(a) (2) is sufficient to sustain a pleading of direct infringement, Twombly notwithstanding.  In Re Bill of Lading Transmission & Processing System Patent Litigation, Case Nos. 10-1493; -1494; -1495; 11-1101; -1102 (Fed. Cir., June 7, 2012) (O’Malley, J.) (Newman, J., dissenting in part).

The patent in suit owned by R+L covers a freight shipping and management system for automating process of using received transportation documentation to produce loading manifests.  In a series of complaints and counterclaims, R+L alleged Qualcomm, DriverTech, Affiliated Computer Services, PeopleNet Communications and Intermec Technologies operate by use of its patented method in connection with their customers (the alleged direct infringers).  In each complaint R+L plead contributory infringement and active inducement to infringe against the named defendants.  In each case the defendant moved to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim, arguing that the complaint failed to plausibly allege either the predicate direct infringement or indirect infringement. 

After the district court dismissed R+L’s first filed set of complaints (without prejudice), R+L filed amended complaints against Qualcomm, DriverTech, ACS, PeopleNet and Intermec Technologies, again asserting both contributory infringement and active inducement.  The district court again dismissed the amended complaint, concluding that R+L had not adequately pled direct infringement (by naming specific customers of the respective defendants), which the district court concluded was a necessary predicate before it could to establish indirect infringement.  R+L appealed. 

On the issue of whether R+L adequately pled direct infringement, the Federal Circuit reversed, noting that Rule 8(a)(2) only requires a plausible short plain statement of plaintiffs’ claims and that the district court erred in fining R+L’s pleading of direct infringement to be “deficient.” 

The Federal Circuit agreed that while the “plausibility argument” has been defined by the Supreme Court in Twombly, it noted for pleading direct infringement “there is a form that governs at least some aspects of R+L’s amended complaints” and that under Fed. R. Civ. P. 84 and the Advisory Committee Notes, compliance with the form (Form 18) is “sufficient to withstand attack under the rules under which they are drawn.”  The Court concluded that “to the extent the parties argue that Twombly and its progeny conflict with the Forms and create differing pleading requirements, the Forms control.” 

Comparing R+L’s pleading to the Form, the Court concluded that the accused infringers direct infringement pleading argument “is premised on a pleading standard that is too stringent.”  In a footnote, the Court noted that while the Form may be open to criticism, “it is not within our power to rewrite it; only an act of Congress can revise the Federal Rules.”  Having determined that direct infringement was sufficiently pled, the Court turned to contributory infringement and inducement.

Contributory Infringement

In order 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,” meaning uses that are “not unusual, far-fetched, illusory, impractical, occasional, aberrant or experimental.”  R+L argued that because the defendant’s products, as customized for their trucking customers, have no substantial non-infringing uses, it adequately pled contributory infringement.  The Court explained that the contributory infringement inquiry focuses elsewhere, “on whether the accused products can be used for purposes other than infringement.”  Since the attachment to the pleadings did show non-infringing uses for the accused products, the pleadings supply “the very facts which defeat a claim of contributory infringement.”

Induced Infringement

Per DSU Medical (IP Update, Vol. 9, No. 12), induced infringement requires “that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement.”  On this issue, the Court explained that while R+L must plead sufficient facts to plausibly show intent, it need not “prove its case at the pleading stage.”

Although the district court found R+L’s claims “implausible and unreasonable,” the Federal Circuit disagreed, noting that the flaw in the district court’s assessment was based on a “failure to draw all reasonable inferences in favor of [R+L]” and that the district court erred in dismissing R+L’s complaint as to inducement.

Although Judge Newman concurred in the result as to the specific facts in this case, in her dissent she took the majority to task for a decision that in her opinion “establishes a new pleading standard for patent infringement actions” and discards “the general national standard for civil complaints.”  In Judge Newman’s view, Form 18 notwithstanding, Twombly and Iqbal require that the plaintiff must “at the very least, in all cases ‘give the defendant fair notice of what the … claim is and the grounds on which it rests.’”