United States: Knowledge Is Key To These Pleadings

Last Updated: July 7 2015
Article by Johanna Jacob

Order Regarding Motions to Dismiss, CAP Co., Ltd.  v. McAfee, Inc., Case No. 14-cv-05068, CAP Co., Ltd. v. Symantec Corp., 14-cv-05071 (Judge James Donato)

Further highlighting the inconsistent treatment of Seagate recently noted on this blog, Judge Donato granted MacAfee's and Symantec's motions to dismiss CAP's willful, induced and contributory infringement allegations, holding that failure to plead pre-suit knowledge of the patents-in-suit precludes recovery. The court held, among other things, that Seagate created a per se requirement that a Patentee move for a preliminary injunction in order to collect post-filing enhanced damages. Judge Donato also held that a complaint is sufficient notice to plead induced and contributory infringement based on post-filing knowledge.

Before turning to the complaint, Judge Donato noted that, although the Federal Circuit has confirmed that Iqbal and Twombly pleading standards apply to indirect infringement, it has not determined applicability to claims of willful infringement. Judge Donato found other decisions in the Northern District persuasive, and applied the Iqbal and Twombly standards to both.

Turning to CAP's willful infringement allegations, Judge Donato found that Seagate mandates dismissal. The court was persuaded that Seagate requires "[a] willfulness claim asserted in the original complaint [to] be grounded exclusively in the accused infringer's pre-filing conduct." In re Seagate Tech., LLC, 497 F.3d 1360, 1374 (Fed. Cir. 2007) (en banc). CAP failed to allege the defendants knew about the patents prior to the filing of the lawsuit, and it therefore followed, reasoned Judge Donato, that defendants could not willfully infringe patents of which they did not know. CAP also failed to move for a preliminary injunction, "and Seagate is crystal clear," wrote Judge Donato, that a Patentee cannot receive enhanced damages pursuant to a willful infringement allegation if the Patentee does not move for a preliminary injunction. In a footnote, Judge Donato expressly disagreed with decisions (which include those out of the same district) suggesting that Seagate did not result is such a bright line rule.

Judge Donato also rejected CAP's argument that it should be allowed to amend its complaint, because "the limitations on willfulness imposed by Seagate would be turned to dust by allowing a patentee to amend a complaint to assert willfulness on the basis of notice of the patents provided for the first time by the original complaint itself." Judge Donato thus dismissed CAP's willfulness claims with prejudice, subject only to a future motion to amend if discovery uncovered a good-faith basis for the requested relief.

Finally, Judge Donato turned to CAP's indirect infringement allegations and recognized a split of authority in the district courts on the sufficiency of relying on post-suit knowledge in support of induced or contributory infringement claims. Ultimately, Judge Donato "decline[d] to apply [an] all-or-nothing approach to the knowledge element of indirect infringement" because he believed it would discourage settlements and motivate "tactical maneuvers" such as filing an immediate Rule 15(a) amended complaint, a Rule 15(d) supplemental pleading, or a pro forma notice letter from the patentee followed by an immediate lawsuit. Judge Donato instead held that a complaint can adequately provide notice to defendants for indirect and contributory infringement claims directed to post-filing conduct.

As CAP failed to allege pre-suit knowledge, it could only proceed on a theory of post-filing knowledge in support of its induced and contributory infringement claims, but only if all other pleading requirements were met.

The induced infringement claims failed, because CAP did not adequately plead specific intent. Although CAP had made passing references to user manual guides and support articles, Judge Donato found this to be inadequate to plausibly support an inference that defendants specifically intended to induce others to infringe. The induced infringement claims also failed because the complaint contained no facts describing the acts defendants induced, or what the defendants knew about the induced acts.

The contributory infringement claims also failed, because CAP "did not come close to adequate[ly]" pleading sufficient facts in support of its conclusion that the accused products "have no use other than infringing one or more claims of the Patents-in-Suit."

In the end, the court dismissed CAP's induced and contributory infringement claims without prejudice, but granted CAP leave to amend its complaint within 14 days.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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