Motion to Dismiss Granted with Leave to Amend, Delphix Corp. v. Actifo, Inc., Case No. C-13-4613 RS (Judge Seeborg)
Pleading facts "on information and belief" is a common practice, especially for subjective facts like a defendant's pre-suit knowledge of the asserted patent. But when the phrase is used selectively to qualify critical facts, those allegations may not be sufficient to support claims of willful infringement and indirect infringement, according to Judge Seeborg's March 19, 2014 order granting a motion to dismiss.
Plaintiff Delphix alleged that defendant Actifo had knowledge of the patents before the suit was filed because, inter alia, Actifo's founder was previously a Delphix board member and had continued to track the development of Delphix's patent portfolio after resigning from the board. In particular, Delphix relied on the alleged post-resignation conduct to distinguish an earlier decision by Judge Seeborg that rejected conclusory averments of actual knowledge or willful blindness. However, Judge Seeborg found that Delphix's allegations, too, were insufficient because Delphix "chose[] to cabin that particular allegation as being made 'on information and belief.'"
Judge Seeborg noted that "[d]espite the common appearance of that phrase in practice, it is not a recognized pleading device under the rules." He pointed to Rule 11(b), under which the signatory is always certifying that an allegation is made to the best of the person's knowledge, information, and belief, formed after a reasonable inquiry. Thus, Judge Seeborg found, the phrase is at best surplusage that can be ignored. Because Delphix had chosen to qualify only some allegations and not others, however, Judge Seeborg found he could infer that Delphix likely lacked knowledge of the underlying facts supporting the allegation and was "engaging in speculation to an undue degree."
Because Delphix relied so heavily on the allegation about Actifo's founder, Judge Seeborg concluded, Delphix "must be willing to make those averments without caveat and/or with additional detail explaining the basis of its beliefs." Judge Seeborg granted the motion to dismiss the complaint with leave to amend, noting that Rule 11 permits a party to plead facts, if specifically so identified, that "will likely have evidentiary support after a reasonable opportunity for further investigation or discovery."
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