District Court Sua Sponte Orders Claims for Indirect Infringement and Willfulness Dismissed for Failure to Plead Pre-Suit Knowledge of Patent

October 16, 2013

Eclipse IP LLC ("Eclipse") filed several patent infringement actions against a number of defendants, in which it alleged indirect infringement (both inducing and contributory) as well as willfulness. The district court sua sponte issued an order regarding the indirect infringement claims as well as the willfulness allegations.

The district court analyzed the recent Federal Circuit decision that addressed the knowledge requirements for indirect infringement claims. "As discussed in length in the recent decision in Labyrinth Optical Technologies, LLC v. Fujitsu America, Inc., the Federal Circuit has recently resolved whether a defendant must have this knowledge before litigation begins. 8:13-cv-00030-AG-MLG (C.D. Cal. Aug. 21, 2013), ECF No. 33. In In re Bill of Lading Transmission & Processing System Patent Litigation, the Federal Circuit held that the plaintiff had met the knowledge requirement to bring an indirect infringement claim when it provided notice of the patent via service of the original complaint. 681 F.3d 1323, 1345 (Fed. Cir. 2012); accord Labyrinth, 8:13-cv-00030-AG-MLG, slip op. at 8-9 (analyzing Bill of Lading's treatment of this issue in detail and holding patent-holder sufficiently alleged defendant's knowledge in amended complaint based on service of original complaint); Eon Corp. IP Holdings, LLC v. Sensus USA, Inc., No. C-12-1011 EMC, 2012 WL 4514138, at *1 (N.D. Cal. Oct. 1, 2012) (holding that in Bill of Lading, post-complaint knowledge is sufficient). Thus, to meet this knowledge requirement in pleading indirect infringement, Plaintiff need not necessarily allege Defendants' pre-suit knowledge of the patents. However, what knowledge Plaintiff does allege must still be plausible."

The district court then addressed the specific allegations in the complaint. "Plaintiff's allegations about Defendants' knowledge are not sufficiently concrete and factual for the Court to infer that Plaintiff's claims are plausible. Plaintiff comes closest by pleading that Defendants had knowledge of the patents when the Complaint was filed. For example, Plaintiff states that Flywheel "has had knowledge of the '681 patent at least as early as the filing of this Complaint. Additionally, at least as early as the filing of this Complaint, Flywheel knew or should have known that its continued [use of the '681 patent] would induce direct infringement of the '681 patent." (Flywheel Compl. ¶ 28; see also Flywheel Compl. ¶¶ 37, 46, 55, 64; Groundlink Compl. ¶¶ 28, 37, 46, 55, 64; Lyft Compl. ¶¶ 28, 37, 46, 55; Ridecharge Compl. ¶¶ 28, 37; Uber Compl. 37, 46, 55; Sidecar Compl. ¶¶ 28, 37, 46, 55.) However, this is still insufficient. Instead of merely pleading that the Complaint was filed, Plaintiff must also plead facts showing the Defendants had knowledge of this filing--for example, that Defendants were served with the complaint or acknowledged it by responding to the filing in some way. Cf. Bill of Lading, 681 F.3d at 1345 ("[Plaintiff's] Amended Complaint alleges that [the defendant] became aware of the [patent], at the latest . . . when it was served with the complaint."). Plaintiff's Complaints do not plead these facts. For Plaintiff's claims of indirect infringement to survive, Plaintiff must include factual allegations that plausibly support Defendants' receipt of actual notice of Plaintiff's filings.

The district court then turned to the willfulness allegations. "As with indirect infringement, 'a party cannot be found to have 'willfully' infringed a patent of which the party had no knowledge.' Gustafson, Inc. v. Intersystems Indus. Prods., Inc., 897 F.2d 508, 511 (Fed. Cir. 1990). However, the Federal Circuit has held that the notice requirement for willful infringement operates more stringently than it does for indirect infringement. In the absence of a defendant's pre-litigation knowledge of the asserted patents, the Federal Circuit only allows plaintiffs to bring claims for willful infringement if the plaintiff seeks a preliminary injunction. In re Seagate Tech., LLC, 497 F.3d 1360, 1374 (Fed. Cir. 2007); see also McRO, Inc. v. Namco Bandai Games Am., Inc., 2:12-cv-10322-GW-FFM, slip op. at 3-4 (C.D. Cal. July 11, 2013), ECF No. 153."

The district court then noted that "Plaintiff has not sought a preliminary injunction, nor has Plaintiff alleged pre-suit knowledge of the Eclipse Patents in any of its Complaints against Defendants, despite every incentive to do so in order to support both its willful and indirect infringement claims. For Plaintiff's allegations of willful infringement to survive, Plaintiff must either seek a preliminary injunction or plead facts plausibly supporting that Defendants had pre-litigation knowledge of the Eclipse Patents."

Accordingly, the district court dismissed both the indirect infringement claims and the willfulness allegations. The district court permitted leave to amend but warned the plaintiff that the claims would be dismissed if the deficient allegations were not fixed.


Eclipse IP LLC v. Flywheel Software, Inc., Case No. CV 13-06371 SJO (JCx) (C. D. Cal. Oct. 8, 2013)

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.