Court Dismisses Patent Complaint: No Plausible Claim of Indirect Infringement

Posted on December 17, 2011 by Brian Wm. Higgins

Wright Mfg., Inc. v. The Toro Co., et al., slip op. (11:-cv-1373) (Md D. Ct., Dec, 13, 2011), J. Garbis

          In Wright Mfg., Inc. v. The Toro Co., the U.S. District Court for the District of Maryland dismissed in part a complaint by Wright Manufacturing against competing lawn tractor companies, Toro and Exmark Manufacturing, saying that Frederick, Maryland-based Wright had not met the plausibility standard for pleading induced and contributory patent infringement.  The court instructed Wright to follow the court's Local Rule 103.6, should it decide to submit an amended complaint against the Defendants. 

          Wright filed its complaint on May 20, 2011, alleging Defendants Toro and Exmark were engaged in the manufacture of lawn mowers and other equipment that infringes U.S. Patents 6,438,931 and 6,935,093.  Defendants moved to dismiss under rule 12(b)(6) of the Federal Rule of Civil Procedure.

Pleading Standard in Maryland Federal Court

          A 12(b)(6) motion to dismiss tests the legal sufficiency of a complaint, the Court said. A complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” While allegations need not be exactingly specific, the Court noted, they “must be enough to raise a right to relief above the speculative level.”

          In reviewing a 12(b)(6) motion, a court must assume that the facts presented by the plaintiff are true. This assumption, however, excludes “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements.” Consequently, in order to “survive a motion to dismiss, a complaint must contain sufficient factual matter” as to provide the court with enough plausible evidence to “draw the reasonable inference that the defendant is liable for the misconduct alleged.”

         The U.S. Court of Appeals for the Fourth Circuit has held that a complaint will survive a
12(b)(6) motion when it states a plausible claim for relief. However, this determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.”

Pleading Standard for Direct Patent Infringement in Maryland Federal District Court

          The Maryland Federal District Court looks at a complaint for compliance with Form 18 of the Federal Rules of Civil Procedure, which provides a guide for pleading, with sufficient plausibility, a claim for direct, literal patent infringement.  Complaints that mirror the Form 18 format in patent cases are sufficient to survive a 12(b)(6) motion to dismiss.  A Form 18 claim for direct patent infringement comprises five elements, but the plaintiff is not required to explicitly identify each element in its complaint. Nor is the plaintiff required to provide “notice” of infringement, and intent or knowledge of the infringement is not required to be plead. 

          In the instant case, the Court found that Wright's complaint specifically alleged all of the required Form 18 elements: jurisdiction, patent ownership, direct infringement, and a demand for injunction and/or damages. Although not particularly specific, the Court also found the allegations clearly identify the lawnmower models that allegedly directly infringed, all of which is adequate to establish a plausible basis for a claim for direct, literal infringement under § 271(a), the Court said.

          With regard to the Doctrine of Equivalents, the Court noted an absence of either Federal Circuit precedent and "a fair preponderance of federal district court decisions," and so found Wright's complaint, following Form 18, sufficient to state a plausible claim for infringement by the doctrine of equivalents.

Pleading Standard for Indirect Infringement Patent Infringement in Maryland Federal District Court

          To prove induced infringement, a plaintiff must prove direct infringement and that the infringer had knowledge of the existence of the infringed patent and acts of infringement. Global-Tech Appliances, Inc. v. SEB S.A., -- U.S. --, 131 S. Ct. 2060, 2068 (2011) (“We now hold that induced infringement under § 271(b) requires knowledge that the induced acts constitute patent infringement.”). Thus, inducement requires proof that "an inducer persuade[d] another to engage in conduct that the inducer knows is infringement.”  The Court, therefore, concluded that a plaintiff must include factual allegations sufficient to create a plausible claim of intent and knowledge.

          Wright’s intent and knowledge allegations, the Court said, were merely conclusory. It found that Wright alleged knowledge only through a broad statement that “Toro has known of [been aware of] [the patent] since at least 2008.” "More is required," said the Court.  Wright merely provides “[t]hreadbare recitals of the elements of a cause of action” that are inadequate.

          To prove contributory infringement, a plaintiff must prove that the defendant knew that the combination for which his component was especially designed was both patented and infringing. Thus, contributory infringement requires proof that the defendants (1) offered to sell within the United States or imported into the United States a component of the patented
machine; (2) for use in practicing a patented process, constituting a material part of the invention; (3) with knowledge that the invention was patented and that such use was
infringing.

          Comparing those requirements against Wright's complaint, the Court found the complaint inadequate, noting that, while “the pleading standard [of the Federal Rules] do not require ‘detailed factual allegations,’ . . . it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”  Wright's complaint must include, the Court said, at least some factually-supported allegations of knowledge in claims of contributory infringement. Wright provided highly generalized statements concluding that Toro and Exmark are “aiding and causing distributors and/or
dealers to sell and offer to sell mowers, including Grandstand [and Vantage] mowers, within the United States.” This recitation, the Court said, parrots the required elements of the statute without providing any factual setting.

Requirement for Amending Complaints in Maryland Federal District Court: Local Rule 103.6

          In Maryland, amending a complaint is not as simple as in other federal districts.  Rule 103.6 states that a party must:

(1) File a motion requesting leave to file an amended pleading (assuming the time period for amending has expired). 

          With the motion, the original of the proposed amended pleading must accompany the motion. The Court will review the sufficiency of the amended complaint before granting the motion. Generally, only newly added exhibits are to be attached to an amended pleading, however, a new party may be added. The party filing an amended pleading shall file and serve (1) a clean copy of the amended pleading and (2) a copy of the amended pleading in which stricken material has been lined through or enclosed in brackets and new material has been underlined or set forth in bold-faced type.

(2)    Attempt to obtain consent from other counsel before filing the motion requesting leave to file an amended pleading. Counsel shall state in the motion for leave whether the consent of other counsel has been obtained.

 
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Alleging Infringement by Corporate Officers Requires More Than Just Bare Allegations

Posted on June 21, 2008 by Brian Wm. Higgins
  • Nacre AS v. Silynx Communications, Inc., No. 07-cv-02676, filed Oct. 2, 2007; assigned to J. Williams.

     Plaintiff Nacre AS is a Norwegian company that alleges ownership of U.S. registered trademark QUIETPRO, as well as U.S. Patent No. 7,039,195 (“Ear Terminal”) and U.S. Patent No. 6,567,524 (“Noise Protection Verification Device”). In September 2007, Nacre filed a trademark opposition proceeding against Rockville, MD-based Silynx Communications' QUIETOPS mark before the U.S. Trademark Trial and Appeal Board. That proceeding was stayed when, in October 2007, Nacre filed the above lawsuit against Silynx and its CEO, Gil Limonchik, alleging trademark and patent infringement. On June 12, 2008, the infringement allegations against Limonchik were dismissed without prejudice. Memorandum and Opinion (June 12, 2008). Limonchik, who according to court papers was a former Nacre consultant, had filed a motion to dismiss with prejudice under Rule 12(b)(6) (failure to state a claim).

     In granting the motion as to Count I (trademark infringement), Judge Williams stated that in order for a trademark claim against a corporate officer to survive a Rule 12(b)(6) motion, a plaintiff must allege, in addition to a corporation's infringing activity, that the individual corporate officer played an active role in the infringing activity. In this case, Judge Williams found Nacre's complaint failed to state factual allegations to indicate what actions Limonchik had taken in an individual capacity to infringe upon the QUIETPRO (R) mark. The only relevant allegations in Nacre's complaint, Judge Williams said, were "Defendant have and are infringing the rights of Nacre in QUIETPRO (R) under 15 U.S.C. 1125 and the common law" and "Defendants' infringement of Nacre's rights in QUIETPRO (R) is and has been willful."  Neither of those statements mentioned what specific role Limonchik played in the infringement, Williams found.      

     In granting the motion as to Counts II and III (patent infringement), Judge Williams found Nacre's complaint failed to allege facts sufficient to preclude dismissal of these counts. No part of the complaint, he wrote, offered facts to justify piercing the corporate veil, to demonstrate Limonchik's specific intent or action to induce infringement or facts to support contributory infringement liability.

     Nacre's case is not completely lost, however. Judge Williams' dismissal was made, as noted above, without prejudice as to Nacre's right to amend its complaint to add more factual allegations:

"Plaintiff has walked a fine line in drafting the complaint. It is possible to conjecture facts which would support Defendant Limonchik's liability in this case. However, the law requires a plaintiff to allege enough facts to put the defendant on notice of the claims and the grounds for those claims. Here, Plaintiff has not stated clear grounds for the claims alleged in the complaint."

     Judge Williams noted that "[Limonchik] has not offered any evidence that he would be prejudiced by an amendment [of the complaint], that an amendment would be futile, or that Plaintiff engaged in undue delay. * * * Defendant asks for dismissal with prejudice solely on the grounds that Plaintiff has failed to allege sufficient facts."

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Wyeth v. Lupin: Maryland District Court Denies Motion to Dismiss

Posted on September 21, 2007 by Brian Wm. Higgins

     In Wyeth v. Lupin, Ltd. and Lupin Pharmaceuticals, Inc., No. 07, Civ. 0632 (D. Md Sep. 11, 2007), the District Court for the District of Maryland denied Baltimore-based Lupin Pharmaceuticals, Inc.'s (LPI) motion to dismiss an action against it and its parent, Mumbai, India-based Lupin Ltd. (Lupin), brought by pharmaceutical giant Wyeth. In reaching its decision, the District Court concluded that "when a wholly-owned U.S. subsidiary of a foreign corporation exists to distribute foreign-produced generic drugs in the U.S. and is actively involved in the ANDA process, the subsidiary also 'submits' an ANDA application" making it subject to the Hatch-Waxman Act like its parent.

     This case began when Lupin filed an Abbreviated New Drug Application (“ANDA”) with the FDA seeking approval to market a generic version of EFFEXOR® in the U.S. Under the Hatch-Waxman Act, the filing of an ANDA is an act of infringement. Accordingly, Wyeth, which owns U.S. Patents 6,274,171; 6,403,120; and 6,419,958 for venlafaxine hydrochloride (marketed by Wyeth as EFFEXOR® XR capsules), sued LPI and Lupin within the statutory 45-day period after receiving Lupin's "Paragraph IV" Notice Letter on January 30, 2007.

LPI's Motion to Dismiss

     LPI moved, under F.R.C.P. Rule 12(b)(6), to dismiss the complaint against it, arguing that under the Hatch-Waxman Act, the only act of direct infringement under 35 U.S.C. § 271(e)(2)(A) was Lupin's filing of the ANDA with the FDA. Wyeth sought to maintain LPI in the lawsuit, arguing that there is no “one-defendant-per-ANDA” rule under the Hatch-Waxman Act. LPI, Wyeth said, acted in concert with Lupin to violate Wyeth’s patents.

     The District Court began its analysis by noting that Lupin had made the same arguments, unsuccessfully, in Aventis Pharma Deutschland GMBH v. Lupin Ltd., 403 F. Supp. 2d 484, 494 (E.D. Va. 2005). In that case, the district court found:

"LPI’s relationship with Lupin was that of a subsidiary of the applicant and that subsidiary
submitted the ANDA application to the FDA as agent on the foreign company’s behalf."

     The Maryland District Court also noted that in the Aventis case, LPI had countersigned Lupin's ANDA, which provided further indication that LPI was more than a “mailbox” for Lupin’s U.S. business interests. The District Court then distinguished the present case from SmithKline Beecham Corp. v. Geneva Pharms., Inc., 287 F. Supp. 2d 576 (E.D. Pa. 2002), where an innovator sought to amend it complaint by adding a third-party manufacturer that was supplying an active ingredient for the generic drugs at issue in the disputed ANDA. Concluding that LPI had not met its burden, the Maryland District Court then found:

"LPI is actively involved with filing Lupin’s ANDAs with the FDA, and marketing and distributing the approved generic drugs in the United States. LPI’s role in filing the ANDA is distinct from the future promises of support made by the third-party manufacturers in the SmithKline cases. The Court does not read § 271(e)(2) as broadly as the Aventis court, which placed significance on LPI’s countersignature as part of its agent-principal relationship with Lupin. But when a wholly-owned U.S. subsidiary of a foreign corporation exists to distribute foreign-produced generic drugs in the U.S. and is actively involved in the ANDA process, the subsidiary also 'submits' an ANDA application."

     LPI also moved, unsuccessfully, to dismiss the induced infringement claims against it. In its analysis of LPI's arguments, the District Court noted that the Federal Circuit has recognized a cause of action for induced infringement under § 271(e)(2), Allergan, Inc. v. Alcon Labs., Inc., 324 F.3d 1322, 1331 (Fed. Cir. 2003) (per curiam), and also acknowledged that other district courts before and after Allergan have disagreed about whether inducement liability exists for entities that were not the named ANDA filers (citing S.D. New York., D. of Delaware, N.D. West Virginia, E.D. Pennsylvania, N.D. Illinois). Based on the pleadings in this case, the Court sided with Wyeth: 

"Wyeth has sufficiently alleged that LPI actively induced infringement under § 271(e)(2). Wyeth alleges that LPI was actively involved in the ANDA submission process, aided and
abetted the inducement of the patents-in-suit, and upon FDA approval, will infringe the patents-in-suit 'by making, using, offering to sell, selling and/or importing' Lupin’s proposed generic capsules. As Wyeth’s claim is not foreclosed by § 271(e)(2) and has adequately alleged an inducement claim against LPI, Wyeth has satisfied the notice pleading requirements."

Held:  LPI's motion to dismiss was denied.

Comments:

  • Had the Maryland District Court decided this matter differently, Wyeth would be left suing a foreign entity in a U.S. forum (Maryland) where personal jurisdiction would be based on Lupin's filing of its ANDA with the FDA (which just happens to be located in Rockville, MD), and based on whatever other contacts Lupin has in the forum through its subsidiary, LPI.  See Personal Jurisdiction and the Foreign Defendant, by Lisa Savitt and Melissa Pierre for a good summary of personal jurisdiction issues related to foreign defendants.

  • It's unclear from this case whether a U.S. subsidiary that exists simply to distribute foreign-produced generic drugs in the U.S. and is not actively involved in the ANDA process would prevail on a motion to dismiss in Maryland.
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