Maryland Intellectual Property Law Blog : Maryland Intellectual Property Lawyer & Attorney : Brian Wm. Higgins : Serving Baltimore, Columbia, Frederick

          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.

          A cloture motion cannot be voted until two days after it is proposed, and must be by way of a petition signed by 16 senators.  In the Reid motion, the following Democratic senators signed the motion:  Harry Reid (D-NV), Patrick J. Leahy (D-VT), Thomas R. Carper (D-DE), Joseph I. Lieberman (I-CT), Richard Blumenthal (D-CT), Charles E. Schumer (D-NY), Amy Klobuchar (D-MN), Robert Menendez (D-NJ), Jeanne Shaheen (D-NH), John F. Kerry (D-MA), Mark Udall (D-CO), Mark R. Warner (D-VA), Ben Nelson (D-NE), Jeff Bingaman (D-NM), Max Baucus (D-MT), Mark Begich (D-AK), Robert P. Casey, Jr. (D-PA). 

          Until H.R. 1249 is calendared, floor debate cannot occur on the merits of the patent reform bill previously passed by the House on June 23, 2011, by a vote of 304 Ayes, 117 Nays.  Patent reform legislation had previously received overwhelming support in the Senate, when Senators passed their own patent reform bill, S. 23, on March 8, 2011.  But that was before the acrimony surrounding the debt ceiling debate engulfed Congress the last few weeks. 

"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.
  

Standard for Awarding Enhanced Damages in Patent Cases

     The Federal Circuit concluded that the duty of care it announced in Underwater Devices was akin to negligence, which was a lower threshold compared to other comparable civil statutory frameworks. Such a low standard, the court said, “does not comport with the general understanding of willfulness in the civil context…, and it allows for punitive damages in a manner inconsistent with Supreme Court precedent.”  Accordingly, the court overruled the Underwater Devices standard and held that proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness, a higher standard than negligence. “Because we abandon the affirmative duty of due care,” the court wrote, “we also reemphasize that there is no affirmative obligation to obtain opinion of counsel.”

Scope of Attorney-Client Waiver

     Noting that district courts have reached varying results with respect to whether communications with trial counsel are waived when a client relies upon opinion of counsel as a defense to a charge of willfulness, the Federal Circuit said:

“[W]e conclude that the significantly different functions of trial counsel and opinion counsel advise against extending waiver to trial counsel. Whereas opinion counsel serves to provide an objective assessment for making informed business decisions, trial counsel focuses on litigation strategy and evaluates the most successful manner of presenting a case to a judicial decision maker. And trial counsel is engaged in an adversarial process. * * * Because of the fundamental difference between these types of legal advice, this situation does not present the classic “sword and shield” concerns typically mandating broad subject matter waiver. Therefore, fairness counsels against disclosing trial counsel’s communications on an entire subject matter in response to an accused infringer’s reliance on opinion counsel’s opinion to refute a willfulness allegation. “

     The court supported its position with several additional reasons, but it also noted that in reaching its decision, “[w]e do not purport to set out an absolute rule.”  Trial courts should continue, the court said, to exercise their discretion in unique circumstances to extend waiver to trial counsel, such as if a party or counsel engages in “chicanery” (def'n: trick, trickery, subterfuge).

Scope of Work Product Waiver

     Relying upon the same rationale limiting waiver of the attorney-client privilege with regard to trial counsel, the Federal Circuit concluded that a party relying upon opinion counsel’s work product does not waive work product immunity with respect to trial counsel.   This general limitation is necessary because of the nature of the work product doctrine, the court said, and because protecting lawyers from broad subject matter disclosure “strengthens the adversary process, and . . . may ultimately and ideally further the search for the truth.” However, the Federal Circuit also stated “we leave open the possibility that situations may arise in which waiver may be extended to trial counsel, such as if a patentee or his counsel engages in chicanery.”

Held: Seagate’s petition for a writ of mandamus was granted; the district court was ordered to reconsider its discovery orders in light of the Seagate opinion.

Comments:

• This case may strengthen the long held belief by patent attorneys that patent litigation trial counsel should be different than opinion counsel. See William L. LaFuze, Matthew R. Rodgers & Michael A. Valek, Exculpatory Patent Opinions and Special Problems Regarding Waiver of Privilege, 6 J. MARSHALL REV. INTELL. PROP. L. 313 (2007) (available here)
  
  
• In the Seagate opinion, the Federal Circuit noted that a willfulness claim asserted in the original complaint must necessarily be grounded exclusively in the accused infringer’s pre-filing conduct. By contrast, when an accused infringer’s post-filing conduct is reckless, a patentee can move for a preliminary injunction, which generally provides an adequate remedy for combating post-filing willful infringement. A patentee who does not attempt to stop an accused infringer’s activities in this manner should not be allowed to accrue enhanced damages based solely on the infringer’s post-filing conduct. Similarly, if a patentee attempts to secure injunctive relief but fails, it is likely the infringement did not rise to the level of recklessness.   What does this say about the use of injunctions in patent cases in the future?