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Articles

A Broken Spoke?

May 31, 2010

Articles

A Broken Spoke?

May 31, 2010

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David Healey article

The National Law Journal
David Healey
May 31, 2010

There is now a “broken spoke” in pleading practice in patent cases. Patent cases typically contain distinct claims for direct infringement (strict liability), indirect infringement (intentional tort), willfulness (unreasonable conduct) and joint infringement (“conspiracy light”). The laws on indirect, joint and willful infringement have been made stricter by the U.S. Court of Appeals for the Federal Circuit in a series of cases since the end of 2006 (sort of a pre-emptive judicial patent reform), while at the same time the U.S. Supreme Court has raised the bar for pleadings under Federal Rule of Civil Procedure 8. Most recently, the Supreme Court held in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), that the plaintiff must “plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”

However, for years, patent litigators have relied on the terse Form 18 in the Appendix of the Federal Rules of Civil Procedure as a safe form for pleading direct infringement and used the same conclusory style to plead inducement, contributory, joint and willful infringement, devoid of detail. Nothing in Form 18 permits this for even direct infringement, let alone other claims, but the terse style of Form 18 has made this type of pleading seem acceptable.

There are significant differences between a pleading for direct infringement and separate claims for indirect, joint or willful infringement even of the same patent. Direct infringement does not require intent, and it is a strict liability tort. By naming the patent and the infringing instrument, a defendant has at least some facts to support notice. This is all Form 18 and Rule 84 — which addresses all forms listed in the appendix — require in a complaint. While most defendants want more detail, Form 18 protects a plaintiff who provides at least the patent number and the accused method, process or machine in pleading direct infringement. Like it or not, from here most defendants can at least get the type of notice that Rule 8(a)(2) contemplates even under Iqbal.

But for intentional torts, requiring knowledge of the patent or some act of deliberately infringing or encouraging another to commit direct infringement of the patent itself, Form 18 and the usual boilerplate give no notice to the defendant. Moreover, assuming any kind of Fed. R. Civ. P. 11 investigation has been done prior to filing, a plaintiff should be able to give notice of enough facts to meet the Iqbal standard. For example, to plead inducement or willfulness, at some point the defendant had to know about the patent. At a minimum, the plaintiff should plead what fact or facts it can allege in good faith to support the proposition that the defendant knew about the patent at the time of the alleged infringement — and if not, then by what date the defendant had such knowledge.

For inducement, the defendant had to know the content of the patent and that it was actively encouraging someone else to directly act in a way that infringed the language of the patent’s claims. What facts are there to show the accused infringer encouraged others to use the patent? Who (or at least what class of people or entities) are the direct infringers? Of which claims? Again, these are basic facts from the Rule 11 investigation, and to the extent a claim has been developed, these facts can and should be pleaded.

Joint infringement requires that control exists such that different acts by different actors taken in combination that infringe a claim of a patent nonetheless can be considered joint action — and together create liability for each actor. The pleading should state the relationship among the joint infringers and at least some factual basis for it: What type of agency, contract or relationship is in issue?

LOCAL PATENT RULES

Effective Dec. 1, 2009, the Northern District of California updated its local patent rules to deal with the changes in the substantive and procedural law by adding a new Rule 3-1(d): “For each claim which is alleged to have been indirectly infringed, an identification of any direct infringement and a description of the acts of the alleged indirect infringer that contribute to or are inducing that direct infringement. Insofar as alleged direct infringement is based on joint acts of multiple parties, the role of each such party in the direct infringement must be described.”

That court also adopted a new Rule 3(h) that requires disclosure of detail on willful infringement “[i]f a party claiming patent infringement alleges willful infringement, the basis for such an allegation.”

Recently, Judge Leonard Davis of the Eastern District of Texas granted a motion to dismiss indirect infringement claims, applying the higher Iqbal pleading standard, in Clear with Computers v. Bergdorf Goodman Inc., No. 6-09-cv-00481 (E.D. Texas): “Taken as whole, [the plaintiff’s] indirect infringement allegations — which fail to identify which claims are indirectly infringed, fail to identify which methods or systems indirectly infringe, and fail to identify a direct infringer in reference to its indirect infringement claims — does not state a claim for indirect infringement that is plausible on its face. The complaint simply fails to inform Defendants as to what they must defend.”

Davis did, however, deny a similar motion brought in a companion case by a defendant that, under the circumstances, could not claim failure of notice even though the pleading lacked the required specificity. Clear With Computers, LLC v. Hyundai Motor America Inc., No. 6-09-cv-00479 (E.D. Texas).

Davis treated this as a practical problem as much as a legal problem. And most judges seem to approach this issue the same way — considering whether, from the circumstances, a defendant does in fact have notice. Other judges simply leave it to discovery to develop the facts. But basic or essential facts that justify the signing and filing of the claim under Rule 11 can easily be included in the pleading to avoid this problem entirely.

Motions on the adequacy of pleadings in patent cases simply cause delay and waste, which is troublesome since most patent cases are already bogged down with too much delay and waste for most clients. Assuming a plaintiff has done its Rule 11 investigation, it should be able to plead all of its claims under the slightly elevated standard required by Iqbal. If the plaintiff can plead the elements of these other claims, it should do so; if not, it should take discovery and plead them as it can. Iqbal acts as a loose screen on frivolous pleadings, and there is no reason judges should fail to implement that screen in patent cases.

Fighting over the adequacy of a pleading is not a good use of anyone’s resources. Let’s fix this “broken spoke” by either enforcing Iqbal to require basic detail in each pleading of each claim, or at least by putting a local rule in place to give the defendant notice of these facts at the beginning of the case. Then we might be able to get moving on down the road.

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