Claims for Inducing Infringement and Willful Infringement Dismissed Based on Failure to Plead Sufficient Facts

May 28, 2012

Defendant TIBCO Software Inc. ("TIBCO") moved to dismiss plaintiff's claims for inducing infringement and willful infringement. Plaintiff's complaint alleged that "TIBCO is 'inducing its customers to directly infringe the '864 Patent by providing its customers and others with detailed explanations, instructions, and information as to arrangements, applications, and use of its TIBCO Spotfire Platform products that promote and demonstrate how to use those products in an infringing manner. VSi avers it "demonstrated its patented software MIDaS to Spotfire in 2005 and notified Spotfire MIDaS was covered by U.S. Patent No. 6,877,006 ('the '006 Patent').'"

The complaint also alleged that "[i]n 'early 2006,' according to the FAC, VSi made a 'similar presentation' of its MIDaS software to TIBCO. Id. During that presentation, VSi allegedly notified TIBCO that MIDaS was covered by the '006 patent and another pending continuation patent application that later issued as that '864 patent. Id. Finally, VSi pleads that TIBCO had actual knowledge of the '864 patent at least by December 23, 2011, the date this suit was filed."

In terms of willful infringement, the district court stated "[a]s a general matter, '[i]n order to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objective likelihood that its actions constituted infringement of a valid patent.' In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). This definition of the claim consists of two prongs. First, '[i]nfingement is willful when the infringer was aware of the asserted patent, but nonetheless, 'acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.' Id. At 860 (quoting Seagate, 497 F.3d at 1371). Second, '[a]fter satisfying this objective prong, the patentee must also show that the infringer knew or should have known of this objectively high risk.' Id."

Based on the case law, the district court found that knowledge of the patent application was not sufficient. The district court then addressed knowledge of the issued patent based on the filing of the lawsuit: "A somewhat closer question is presented by the FAC's pleading that TIBCO possessed actual knowledge at least by December 23, 2011, the date on which this action was filed. FAC ¶11 ('TIBCO had actual knowledge of the '864 patent by at least December 23, 2011, when VSi filed its initial complaint'). It is unclear whether or not this averment rests solely on the presentations VSi allegedly made in 2006 or 2006, because there are simply no other supporting facts to be found in the FAC. TIBCO thus argues this allegation is too conclusory to state a claim."

The district court also found that an allegation of willfulness could not be based on the filing of the suit alone. "Of course, the claim might still be viable if willfulness could be inferred based on the filing of this suit alone. As TIBCo emphasizes, however, 'in ordinary circumstances, willfulness will depend on an infringer's prelitigation conduct,' because, while willfulness is an 'ongoing offense that can continue after litigation has commenced.' A patentee must have a good faith basis for alleging willful infringement in the original complaint. In re Seagate Tech., LLC, 497 F. 3d at 1374 (citing Fed. R. Civ. P. 8, 11(b)). Thus, under Seagate, a patentee may move for a preliminary injunction based on a showing of post-filing reckless conduct. Id. Here, VSi's original complaint alleged that TIBCO and its subsidiary 'continue to infringe,' Compl. ¶ 12, whereas the FAC alleges 'TIBCO's continued infringement' is 'willful and deliberate.' FAC ¶ 12. Given the foregoing discussion, it is clear that at least up until now, VSi has failed to allege facts to support a claim for willfulness based on TIBCO's pre-litigation conduct. Other than the mere suggestion that infringement continues, there are no facts in the FAC concerning TIBCO's post-filing conduct at all, and certainly none that would support a claim of recklessness. To permit VSi to proceed in this fashion would invite claims of willfulness in every patent suit, as a matter of course, and regardless of the facts. Given the uncertainties that surround patent validity, and the challenges of predicting litigation outcomes generally, such a rule would not comport with reality. Gusafson, 897 F.2d at 511 ('Nor is there a universal rule that to avoid willfulness one must cease manufacture of a product immediately...upon the filing of a suit'). To the extent VSi invokes case law from the Northern District of Illinois to suggest a contrary conclusion, those decisions are, of course, not binding and ultimately unpersuasive. Accordingly, the FAC, at least as it is currently constituted and to the extent it relies on an unsupported allegation of actual knowledge, fails to state a claim for willful infringement."

With respect to inducing infringement, the district court found: 'Section 2719b) of Title 35 states, '[w]hoever actively induces infringement of a patent shall be liable as an infringer.' Under Global-Tech, to state a claim for inducement, the patentee must show that the alleged infringer had 'knowledge of the existence of the patent that is infringed.' 131 S. Ct. at 2068. DSU Med. Corp. v. JMS Co., Ltd. 471 F.3d 1293, 1304 (Fed. Cir. 2006) (en banc) ('The requirement that the alleged infringer knew or should have known his actions would induce actual infringement necessarily includes the requirement that he or she knew of the patent.') To proceed on such a claim, plaintiff must plead specific, supporting facts. Nazomi Commc'sns, Inc. v. Nokia Corp., No. C10=4686, 2011 WL 2837401, at *3 (N.D. Cal. July 14, 2011). VSi predicts its claim for inducement of the inadequate factual averments already discussed in the context of its willfulness claim. Because there are no factual averments to support plaintiff's allegation that TIBCO was actually aware of the '864 patent, let alone willfully blinded itself to the existence of the patent, the motion to dismiss must be granted as to this claim, as well. Similarly, leave to amend is appropriate for the reasons stated above."

Vasudevan Software, Inc. v. Tibco Software Inc., Case No. C 11-06638 RS (N.D. Cal. May 18, 2012)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.