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Motion to Dismiss Granted Where Patent Infringement Complaint Alleged Joint Infringement But Failed to Allege Direction and Control

Plaintiff Nu Flow Technologies (2000) Inc. (“Nu Flow) filed a patent infringement action against Defendant A.O. Reed & Company (“A.O. Reed”) and ten Doe defendants based on two patents U.S. Patent No. 7,849,883 B2 (the ‘883 patent) and U.S. Patent No. 6,691,741 132 (the ‘741 patent). The ‘883 patent, entitled “Liner Assembly for Pipeline Repair and Methods of Installing Same,” claims a liner assembly used to repair a pipeline. The ‘741 patent, entitled “Installation Assemblies for Pipeline Liners, Pipeline Liners and Methods for Installing the Same,” claims an installation assembly and a method for installing a liner in a pipeline.

A.O. Reed moved to dismiss the complaint, arguing that the Complaint should be dismissed because Nu Flow’s allegations of joint infringement fail to meet the pleading standard of Twombly and Iqbal. Joint infringement exists only “if one party exercises control or direction over the entire process such that every step is attributable to the controlling party, i.e., the mastermind.” Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1329 (Fed. Cir. 2008) (internal quotation marks omitted).

The district court first determined whether the complaint alleged independent or joint infringement. “The Complaint does not explicitly state whether the defendants infringed the patents independently or jointly. However, the Complaint alleges that Defendants ‘acted in concert and participation with each other concerning the claim in this Complaint,’ each Defendant ‘was employed to act as the agent, servant, and/or employees of each other,’ and ‘the acts alleged to have been done by each of [the Defendants] were authorized, approved, and/or ratified by each of them.’ (Compl. ¶¶ 4-6.) There are no allegations that A.O. Reed or the Doe defendants acted independently or alone in allegedly infringing the patents at issue. Accordingly, the Court will construe the Complaint as alleging joint infringement.”

The district court then addressed whether Nu Flow’s allegations met the pleading standard of Twombly and lqbal and concluded they did not. “First, Nu Flow fails to adequately allege that one defendant exerted control and direction over the other defendants. Specifically, Nu Flow does not identify which defendant acted as the ‘mastermind’ of the operation, directing or controlling the acts of the other defendants. Second, Nu Flow does not set forth any factual allegations in support of its assertions that A.O. Reed and the Doe defendants ‘acted in concert’ or as ‘agent[s], servant[s], and/or employees of each other,’ or that ‘the acts alleged to have been done by each of them were authorized, approved, and/or ratified by each of them.’ (Compl. ¶11 5-6.) The Complaint contains only conclusory allegations. It is devoid of any factual allegations relating to the relationship between A.O. Reed and the Doe defendants, how any one of the defendants asserted control or direction over the others, or what obligations each defendant allegedly had to the other defendants.”

Accordingly, the district court granted the motion to dismiss, but did permit Nu Flow leave to amend.

Nu Flow Technologies (2000) Inc. v. A.O. Reed & Company, Case No. 13-CV-1818 BEN (JMA) (S.D. Cal.)

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