United States: Enhanced Pleading Standards For Patent Infringement Actions In The United States

Keywords: patent, infringement,

Amendments to the US Federal Rules of Civil Procedure that will abolish its appendix of form pleadings become effective on December 1, 2015. The amendments, which were approved by the Supreme Court in April, may have the effect of creating stricter pleading standards for complaints of direct patent infringement.

Parties alleging patent infringement will now need to adhere to the requirements set forward in Bell Atlantic Corp. v. Twombly,550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Under the Twombly and Iqbal standards, a complaint must set forward "sufficient factual matter, accepted as true, to state a claim that is plausible on its face" and that "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."

Background

The appendix to the Federal Rules of Civil Procedure includes about three dozen exemplary form pleadings for specific causes of action. The Form 18 pleading for patent infringement only requires a plaintiff to (i) plead that the court in which the complaint is filed has jurisdiction; (ii) plead that it is the sole owner of an issued US patent; (iii) plead that a class of products made, sold or used by the defendant infringes the issued patent; and (iv) state a demand for damages and/or injunctive relief. Form 18 has been criticized for not providing infringement defendants with sufficient notice and for enabling mass-filing of form complaints without adequate factual support.

The form pleadings in the Federal Rules were consistent with the earlier pleading standards articulated in Conley v. Gibson, 355 U.S. 41 (1957). In Conley the Supreme Court noted that "The Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he bases his claim. To the contrary, all the Rules require is 'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests."

The Conley pleading standard was revised in 2007 in Twombly, where the Supreme Court held that "allegations must be enough to raise a right to relief above the speculative level" and rejected a "a formulaic recitation of the elements of a cause" as insufficient. This standard was further clarified in Iqbal, which held that to "survive a motion to dismiss a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" The Supreme Court explained that plausibility "is not akin to a 'probability requirement' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of 'entitlement to relief.'"

Shortly after these rulings, defendants at the district court level began to challenge the sufficiency of Form 18 pleadings under the Twombly/Iqbal standard. The tension between the requirements of Twombly/Iqbal and Form 18 was addressed by the Federal Circuit in In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1335 (Fed. Cir. 2012).

In Bill of Lading, the district court initially dismissed an infringement complaint for failing to state a claim in compliance with the Twombly/Iqbal standard. In a split decision, the Federal Circuit reversed the district court, citing Twombly for the proposition that the Federal Rules could not be amended by judicial interpretation and thus direct infringement complaints complying with Form 18 could not be challenged for failing to state a claim. In doing so, the Federal Circuit upheld that claims of contributory and induced infringement were still subject to the standards set forward in Twombly and Iqbal.

The adequacy of Form 18 pleadings was upheld again in 2013 in K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., though the Federal Circuit noted that the "adequacy of the facts pled depends on the breadth and complexity of both the asserted patent and the accused product or system and on the nature of the defendant's business activities." 714 F.3d 1277 (Fed. Cir. 2013).

However, in 2014, the 26-member Judicial Conference eliminated the form complaint appendix altogether from the Federal Rules, along with Rule 84, which enables plaintiffs to rely on the form complaints. The advisory committee report recommending the change noted that the forms were rarely used and that revising them was an unduly time-consuming and burdensome process. The report also noted that the form complaints included an excessive simplicity of pleading that was not consistent with existing practices and more complicated causes of action. In April 2015, the Supreme Court approved the proposed changes. Absent congressional action, these changes will go into effect on December 1, 2015.

Practice Changes

The requirements under the new standard will have to be litigated before the rules are fully established, and they will likely vary by district and even by judge (as has become the case for claims of indirect infringement, which are governed by the Twombly/Iqbal standard). However, additional details that will likely need to be pled include:

  • Identification of specific claims that are alleged to be infringed. Currently, a plaintiff need only identify that the patent is infringed, courts may begin to require identification of infringed claims.
  • Identification of specific accused products that are allegedly infringed, rather than the classes of products permitted by Form 18.
  • Some manner of infringement analysis explaining how the asserted claims are infringed by the accused products.

The new standards may potentially provide defendants greater leverage against entities that file large numbers of suits in order to obtain settlements driven by the defendants' desire to avoid litigation costs. These plaintiffs will be forced to more fully articulate their infringement theories and defendants will not have to wait for discovery to assess the merits of infringement claims.

Defendants named in vague complaints should consider a motion to dismiss as a mechanism for disposing of the suit, or at least obtaining earlier disclosure of the plaintiff's infringement theories. Parties bringing complaints of patent infringement may now wish to inculcate themselves against motions to dismiss by providing more detailed complaints, including at least identification of exemplary infringed claims and products.

Originally published 5 November 2015

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