Baker Hostetler Patent Watch: In re Bill of Lading Transmission & Processing Sys. Patent. Litig.

Alerts / June 8, 2012

To state a claim for indirect infringement, therefore, 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.

On June 7, 2012, in In re Bill of Lading Transmission & Processing Sys. Patent. Litig., the U.S. Court of Appeals for the Federal Circuit (Newman, Prost, O'Malley*) affirmed-in-part, reversed-in-part and remanded the district court's dismissal with prejudice of the amended complaints and counterclaims of R+L Carriers, Inc. against DriverTech LLC, Affiliated Computer Services, Inc., PeopleNet Communications Corp., Intermec Technologies Corp., Microdea, Inc., and Qualcomm, Inc., that alleged indirect infringement of U.S. Patent No. 6,401,078, which related to less-than-a-load trucking. The Federal Circuit stated:

Federal Rule of Civil Procedure 8(a)(2), "generally requires only a plausible 'short plain' statement of the plaintiff's claim," showing that the plaintiff is entitled to relief. . . . To survive Appellees' motion to dismiss, R+L's complaint must plead "enough factual matter" that, when taken as true, "state[s] a claim to relief that is plausible on its face." This plausibility standard is met when "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Although the standard "asks for more than a sheer possibility that a defendant has acted unlawfully," it is not "akin to a probability requirement." A complaint that merely pleads facts that are consistent with a defendant's liability "stops short of the line between possibility and plausibility . . . ." "Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense."

It is axiomatic that "[t]here can be no inducement or contributory infringement without an underlying act of direct infringement." . . . Because liability for indirect infringement of a patent requires direct infringement, R+L's amended complaints must plausibly allege that the '078 patent was directly infringed to survive Appellees' motion to dismiss. . . . Recent Supreme Court precedent has defined the contours of the plausibility requirement. These cases address the civil pleading standards in a variety of civil contexts. None address the sufficiency of a complaint alleging patent infringement or causes of action for which there is a sample complaint in the Appendix of Forms to the Federal Rules of Civil Procedure, however. Here, there is a form that governs at least some aspects of R+L's amended complaints. Specifically, Form 18 sets forth a sample complaint for direct patent infringement. [W]hether R+L's amended complaints adequately plead direct infringement is to be measured by the specificity required by Form 18.

Appellees' arguments all focus on whether the amended complaints' allegations of direct infringement contain sufficient factual detail to withstand attack under Twombly and Iqbal. For example, Qualcomm argues that "R+L does not identify a single loading manifest prepared by any of Appellees' customers, let alone one that includes wirelessly-transmitted data, and was prepared prior to removing the package from the first truck, and for the claimed purpose." In essence, the Appellees argue that the amended complaints are deficient because they do not describe precisely how each element of the asserted claims are practiced by their customers. When compared to the requirements of Form 18, this argument is premised on a pleading standard that is too stringent. . . . Form 18 and the Federal Rules of Civil Procedure do not require a plaintiff to plead facts establishing that each element of an asserted claim is met. Indeed, a plaintiff need not even identify which claims it asserts are being infringed.

As it relates to direct infringement, the Qualcomm, Microdea, PeopleNet, DriverTech, and ACS Amended Complaints are sufficient when measured against this standard. These amended complaints each assert that a specific customer or customers are infringing the '078 patent by using the patented method. For example, the Qualcomm Amended Complaint alleges that, in light of the facts pled, it is reasonable to infer that Cargo Transporters uses "In-Cab Scanning, the Mobile Computer Platform, and other services and devices to scan and wirelessly transmit bills-of-lading from inside the truck cab to the back office where advance loading manifests are prepared. Those actions constitute direct infringement of the '078 Patent." This allegation goes beyond what is required by Form 18. The Qualcomm Amended Complaint states that the patent is being infringed by use of the patented method by specific Qualcomm customers, and it references specific claim elements that R+L asserts are being practiced. As such, the complaint provides Qualcomm with information about which R+L claims of the patent R+L asserts are being infringed, and by whom, and about the activities R+L believes constitute infringement. The Microdea, PeopleNet, DriverTech, and ACS Amended Complaints contain similar allegations.

Turning to the Intermec Amended Complaint, [w]e must determine whether a plaintiff alleging indirect infringement must name a specific customer to adequately plead the predicate direct infringement. This court has upheld claims of indirect infringement premised on circumstantial evidence of direct infringement by unknown parties. Given that a plaintiff's indirect infringement claims can succeed at trial absent direct evidence of a specific direct infringer, we cannot establish a pleading standard that requires something more. To state a claim for indirect infringement, therefore, 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. As long as the complaint in question contains sufficient factual allegations to meet the requirements of Form 18, the complaint has sufficiently pled direct infringement. The allegations in the Intermec Amended Complaint satisfy those requirements.

[W]e are convinced that all of R+L's amended complaints contain sufficient factual allegations to enable this court to reasonably conclude that each of the Appellees is liable for inducing infringement of the '078 patent. This is all that is required to state a claim for relief that is plausible on its face. Here we are not presented with a case in which R+L's complaints merely contain "a formulaic recitation of a cause of action's elements." Instead, R+L's amended complaints contain detailed factual allegations and reasonable inferences drawn therefrom that plausibly establish that Appellees are inducing their customers to infringe the '078 patent. Accordingly, we reverse the district court's judgment dismissing R+L's claims for induced infringement against the Appellees.
[W]e conclude that the district court committed error by dismissing the amended complaints because they failed to adequately plead direct infringement. The district court, moreover, erred when it concluded that, in the alternative, the amended complaints failed to state a claim for induced infringement against the Appellees. In light of this determination, the district court must proceed with these actions and revisit its decision not to exercise jurisdiction over R+L's claims for declaratory judgment. With respect to the district court's conclusion that the amended complaints failed to state a claim for contributory infringement against the Appellees, however, we agree.

If you have questions about the material presented above, please contact Dr. Lawrence M. Sung (lsung@bakerlaw.com or 202.861.1537) or any member of our Intellectual Property Team.

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