Pleading Indirect Patent Infringement Post-Twombly
With Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court raised the pleading requirements under the Federal Rules of Civil Procedure. In the aftermath, numerous accused patent infringers moved to dismiss suits pursuant to Rule 12(b)(6). The Federal Circuit was quick to address the issue – limiting the impact of Twombly with respect to allegations of direct patent infringement in McNeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007). Today, simply following straightforward Form 18 of the Federal Rules as a guideline in preparing a complaint is likely sufficient to properly plead claims of direct infringement.
However, often a patentee’s best theory of infringement is one of indirect infringement, i.e., based upon induced and/or contributory infringement. Unlike with direct infringement, Form 18 does not specifically apply to indirect infringement. Thus, there is no established guideline as to what would constitute a plausible claim for induced or contributory infringement pursuant to Twombly and its progeny.
As a result, complaints alleging indirect infringement currently remain open to various attacks under Twombly’s heightened pleading standards. This may become even more of an issue under the Court’s recent Global-Tech Appliances, Inc. v. SEB S.A. decision that now requires a showing of at least “willful blindness” to create liability for induced infringement. How the lower courts treat the Global-Tech decision remains to be seen. In any event, what we currently know is that there is a correlation between the level of factual specificity of the allegations of indirect infringement and the overall chances of the corresponding complaint surviving a motion to dismiss.
Several recent motions to dismiss claims for indirect infringement have been granted in certain courts because, inter alia, the plaintiff patentee neglected to allege direct infringement by a third party. Conversely, other courts follow the proposition that a plaintiff need not plead that a particular third party directly infringes the patent-in-suit. Their rationale is either that circumstantial evidence may be relied upon to establish direct infringement, or that identifying infringing third parties is more of a proper question for discovery.
However, on the whole, when drafting the complaint, it may be prudent to tie facts related to direct infringement, such as disclosing the identity of any third party infringers, to the allegations of indirect infringement. Also, if applicable, patentees may find it beneficial to allege a second set of facts that the defendant, even if not selling or making the whole invention as claimed, “used” the invention during testing as part of the product development process. Relying upon two mutually exclusive fact patterns, i.e., two theories of direct infringement, may have strategic advantages in certain situations.
Some plaintiff patentees are inclined to only identify general categories of accused products in the complaint. However, the better approach in view of Twombly, and an approach that certain district courts require, is to identify the accused products by product name and/or model number. Moreover, identifying where the accused product is manufactured, if within the U.S., may be desirable.
In order to demonstrate inducement, the patentee must establish that there has been direct infringement, and that the alleged infringer knowingly induced that infringement and possessed the specific intent to encourage another’s infringement. Yet, in any complaint, a mere recitation of the elements of indirect infringement may be found insufficient. The purpose of course being to provide an accused infringer sufficient notice of the specific conduct alleged to form the basis of the claim.
Of note, recent decisions from plaintiff-friendly forums that have denied motions to dismiss have noted that neither Federal Circuit precedent nor the Federal Rules pleading forms explicitly require the pleading of each individual element of a claim for indirect infringement. Still, it should be remembered that complaints short on specifics remain subject to dismissal under Twombly. In particular, complaints that have neglected to plead facts from which it could be inferred that the accused infringer knowingly induced infringement or possessed the requisite specific intent have been dismissed.
On the other hand, allegations of designing the accused products with intimate knowledge of the patent have been found to be sufficient to make the claims of induced infringement plausible. However, those factual patterns may be few and far between. Rather, in most situations, it may be advisable to detail particulars of the accused infringer’s actual knowledge of the patent, such as evidenced by a cease and desist letter. This may be doubly true in view of the Court’s recent Global-Tech decision noted above. Additionally, of import, damages for a claim of indirect infringement may be limited to the date that the accused infringer had actual, as compared to constructive, notice of the patent-in-suit.
Regarding “actively” inducing infringement, if the facts support such allegations, preferably the complaint should plead that the accused infringer is advertising an infringing use, and/or instructing customers on how to use the accused products in an infringing manner. Literature from the accused infringer that may reasonably be said to actively induce customers to infringe is often compelling evidence of inducement.
For contributory infringement, an infringer must sell, offer to sell or import into the United States a component of an infringing product knowing that the component is to be especially made or adapted for use in an infringing manner. Facts should be pled that indicate that the accused products are not suitable for substantialnon-infringing uses. If appropriate, it may also be desirable to plead that the combination for which an accused component was specifically designed for infringes the patent-in-suit.
Not surprisingly, what constitutes a “substantial” non-infringing use often remains a matter of debate. One effective manner of evidencing that the accused product is not suitable for substantial non-infringing uses is to draw comparisons between the patent’s written description with the accused infringer’s instructions and/or advertising materials, assuming that they align.
In sum, under Twombly, claims alleging indirect infringement remain susceptible to motions to dismiss, and thus should be pled with as much factual specificity as possible. Knowledge and intent should be pled with reasonable particularity. While knowledge can be generated with a notice of alleged infringement letter, intent may be more difficult to establish absent literature from the accused infringer suggesting an infringing use. Finally, with contributory infringement, developing and pleading a “not suitable for substantial non-infringing uses” theory may be outcome determinative.