Split Decisions: Can a Complaint Serve as Knowledge of Indirect Infringement?
Friday, July 21, 2023

A frequent issue seen within patent litigation is whether serving a complaint satisfies the knowledge requirement for post-complaint indirect infringement. This issue affects the amount of, if any, damages a patent owner can obtain. Coupled with potential IPRs, it also complicates pre-litigation licensing strategies. Courts that require pre-suit knowledge for post-suit infringement potentially punish patent owners coming and going: on the one hand such a requirement limits damages (or eliminates damages entirely if all infringement is indirect), yet if a patent owner accounts for this by providing pre-litigation notice such notice exposes a patent owner to declaratory judgments and IPRs.

To date, despite a district court split, the Federal Circuit has not provided guidance on whether a complaint can provide notice for post-suit infringement liability. The Federal Circuit may have to weigh in on this issue sooner rather than later because the split continues. For example, recently in K9 Sport Sack v. Little Chonk Co., K9 Sport Sack (“K9”) sued Little Chonk Co. (“Little Chonk”) for direct and indirect patent infringement in the District of New Jersey. Little Chonk moved to dismiss K9’s indirect infringement claims on two grounds: (1) K9’s amended complaint lacked any factual allegations that Little Chonk had knowledge of K9’s patent before service of the original complaint, and (2) K9’s filing of its original complaint was insufficient to allege that Little Chonk had knowledge of K9’s patent.

The Court granted Little Chonk’s motion to dismiss K9’s indirect infringement claim based on pre-suit knowledge, but denied dismissal based on post-suit knowledge, which was predicated on knowledge provided by the filing of the complaint. In its motion to dismiss, Little Chonk asked the Court to follow the holding in ZapFraud, Inc. v. Barracuda Networks, Inc., 528 F. Supp. 3d 247 (D. Del. 2021). The ZapFraud court held that pre-suit knowledge is required to state a claim for indirect infringement. K9 rebutted this holding by arguing that post-suit knowledge is sufficient for purposes of stating a claim for indirect infringement, and that district courts in the Third Circuit have routinely found that post-suit knowledge is sufficient for purposes of stating a claim for indirect infringement occurring after the filing date of the complaint.

The Court agreed with K9 and highlighted that district courts across the country are divided over whether a defendant must have the knowledge necessary to sustain claims of indirect infringement before filing a lawsuit. Some district courts have held that pre-suit knowledge is an absolute requirement, reasoning that the purpose of a complaint is to obtain relief from an existing claim and not to create a claim. Other district courts have held that the filing of a complaint is sufficient to provide knowledge of the patents-in-suit for purposes of stating a claim for indirect infringement occurring after the filing date.

The Court emphasized that, in the absence of binding authority from the Federal Circuit or Supreme Court, it maintains its belief that post-suit knowledge is sufficient for purposes of alleging indirect infringement. The District Court of New Jersey has previously held that the filing of a complaint can be used to plead knowledge for indirect infringement allegations, and the judge in this case reaffirmed that holding.

Although Little Chonk requested that the Court consider the policy considerations that were made in ZapFraud, the Court noted that there were competing concerns that outweighed the concerns raised in ZapFraud. ZapFraud noted that if patent infringement plaintiffs were allowed to use court dockets as notice boards for future legal claims for indirect infringement, this would strain the limited authority vested in the courts by the Constitution and the limited resources made available to the courts by Congress. However, other district courts have pointed out that there are no substantive differences between a putative infringer learning of a patent from a plaintiff’s letter a day before an infringement suit is filed or served, and a putative infringer learning of the patent from the filing or service of a complaint. Furthermore, courts have noted that a defendant should not avoid liability for induced infringement simply because it happened to learn of the patent in connection with a lawsuit especially if it promotes infringement of the patent-in-suit after obtaining knowledge of its existence.

While the Court found that the policy concerns raised by other district courts regarding this issue were far more persuasive than the concerns raised in ZapFraud, and held that K9 adequately alleged that Little Chonk had knowledge of the asserted patent due to the lawsuit and service of the original complaint, the Court reiterated the lack of binding authority from the Federal Circuit and the Supreme Court. Until either court provides guidance on whether the filing of a complaint can be used to plead knowledge for indirect infringement allegations, district courts will continue to decide this matter differently based on previous holdings of their respective courts and circuits, and various policy considerations.

The lack of appellate guidance leaves patent owners in a precarious position when filing a complaint that alleges indirect infringement. Given that the threshold to satisfy the knowledge requirement of indirect infringement is district dependent, patent owners should ensure that their patent claims are drafted to limit reliance on indirect infringement, if possible. In doing so, patent owners can avoid this issue altogether. However, it is not always possible to draft such claims and in many situations indirect infringement must be pursued. Until this question is resolved, patent owners may need to continue providing infringers advance warnings about potential patent liability to ensure damages are available and that such infringers can be held to account.  As district courts continue to come out differently on what is necessary to satisfy the knowledge requirement of indirect infringement, we will continue to monitor whether the Federal Circuit provides guidance on this issue.

 

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