Two recent Supreme Court cases have ratcheted up the level of specificity most federal plaintiffs must include in their complaints to survive a defendant’s motion to dismiss the case prior to discovery, but some peculiarities of patent cases may limit the effect of those decisions to them. Federal Rule of Civil Procedure 8 requires the complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Until recently, the Courts of Appeals, following language in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), had generally held that the defendant could not prevail on a motion to dismiss unless it was “beyond doubt” that there were “no set of facts” consistent with the complaint’s allegations that would entitle the plaintiff to relief.
Bell Atlantic v. Twombly, 550 U.S. 544 (2007) began a shift in this regime. The complaint alleged the defendants, regional Bell telephone companies, violated Section 1 of the Sherman Act, which prohibits an unreasonable “contract, combination…or conspiracy, in restraint of trade or commerce.” It alleged the defendants each took similar action to stifle the ability of new providers to enter their local markets while taking care not to enter one another’s markets. The Court deemed the complaint insufficient because it did not allege facts suggesting an agreement between the defendants, as opposed to identical, independent action by each of them. The opinion distinguished between the possible, plausible, and probable. According to the Court, although the defendants’ conduct was “consistent with” an agreement to exclude others, that did not make it “plausible” to believe such an agreement was formed. As the Court stated, there was no “reasonable expectation that discovery will reveal evidence of illegal agreement.” The plaintiff’s ultimate allegation that an agreement existed was not enough to satisfy Rule 8’s requirement that the plaintiff show the “grounds” of his “entitlement to relief” because doing so “requires more than labels and conclusions, and a formulaic recitation of a cause of action’s elements will not do.”
Ashcroft v. Iqbal, 127 S. Ct. 1937 (2009) continued the shift, confirming that Twombly’s requirements apply to any case subject to Rule 8. It dismissed a complaint alleging constitutional violations by federal officials related to terrorism policies adopted after September 11. One element of the claim required showing the policies were intentionally adopted to classify individuals on account of race, religion or national origin. The Court found the complaint failed to state a claim because it did not allege facts demonstrating it was “plausible” the policies were adopted for that purpose, despite its bare allegation of intentional discrimination. The Court reiterated that “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” In addition, while acknowledging that Rule 9(b) allows intent to be alleged “generally,” the Court held this does not excuse the plaintiff from satisfying the Rule 8’s pleading standard.
One might think these decisions directly apply to patent cases. But unlike the causes of action in Twombly and Iqbal, the Federal Rules include a form complaint for patent cases (Form 18), and Rule 84 says the form “suffice[s] under these rules and illustrate[s] the simplicity and brevity that these rules contemplate.” The form uses an exemplary patent on an electric motor and simply requires the plaintiff allege that it owns the patent and the “defendant has infringed and is still infringing the Letters Patent by making, selling, and using electric motors that embody the patented invention.” This seems like a bare “legal conclusion,” which the Supreme Court has deemed insufficient to survive a motion to dismiss, for the complaint does not recite any facts about the defendant’s electric motors or compare them to the patent. It does not even specify a particular model of electric motor or particular patent claims that are allegedly infringed. And yet Rule 84 says it suffices, as the post-Twombly decision in McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007) confirmed.
Two district courts, acting after Iqbal, have suggested that generic descriptions of the type of product accused of infringement, e.g. “cell phones” or “touchpads,” are insufficient. Bender v. LG Elecs., 2010 WL 889541 (N.D. Cal.); Elan Microelectronics v. Apple, 2009 WL 2972374 (N.D. Cal.) (Seeborg, M.J.). They avoid McZeal by suggesting it was superseded by Iqbal, but they would still seem to conflict with the form patent complaint. As a matter of policy, they are understandable because the form’s drafters might not have imagined the now common situation where a defendant sells hundreds or thousands of different products, the patent is highly technical, and it is not immediately clear what products are accused of infringement. Nonetheless, plenty of other decisions have found such general pleading adequate after Iqbal.
What about the pleading requirements for issues in patent cases on which Form 18 is silent? Form 18 only addresses pleading “direct” infringement – that is, infringement where the defendant is itself making, using, selling, or importing the claimed invention. It does not speak to pleading induced or contributory infringement, where the plaintiff is accusing the defendant of abetting another’s direct infringement and some showing of knowledge or intent is required, or joint infringement, where the defendant outsources the performance of one step of a claimed process to another it “directs or controls.” Nor does it elaborate upon what is required to plead “willful infringement,” which sometimes warrants treble damages.
It would seem the Twombly/Iqbal plausibility standard applies to these issues. The only reason it does not apply to direct infringement is because Form 18 explicitly says otherwise. Indeed, as the Elan court recently put it: “Both types of indirect infringement include additional elements, none of which Form 18 even purports to address. In the absence of any other form that addresses indirect infringement and is made binding on the courts through Rule 84, the Court must apply the teachings of Twombly and Iqbal.” Willfulness and indirect infringement, which require proof of ill intent, seem particular vulnerable after Iqbal. And, sure enough, a number of district courts have begun dismissing claims for indirect and joint infringement as being insufficiently pled under these cases. Elan is one example, as are Koninklijke Philips Electronics v. ADS Group, 2010 WL 938216 (S.D.N.Y.), Bender v. Motorola, 2010 WL 726739 (N.D. Cal.) and Friday Group v. Ticketmaster, 2008 WL 5233078 (E.D. Mo.). But other opinions have been forgiving, such as Bender v. National Semiconductor, 2009 WL 4730896 (N.D. Cal.) and Mallinckrodt v. E-Z-EM, 671 F. Supp. 2d 563 (D. Del. 2009).
Defendants should consider filing more Rule 12(b)(6) motions under the new pleading standards. Although obtaining dismissal with prejudice, rather than simply a more specific amended complaint, may be difficult, such motions can help defendants narrow the products at issue, close off theories on indirect or joint infringement, and potentially limit discovery. Meanwhile, plaintiff should consider adding more detail to their complaints to avoid costly motion practice, although without giving away too much detail. Some districts have patent local rules that require early, detailed infringement contentions, which may render motion practice superfluous. Indeed, one judge expressed frustration in that circumstance, and “strongly encourage[d] the parties to try the case on the merits and not unnecessarily burden the Court with technical issues that lack practical substance.” Bedrock Computer v. Softlayer, Case No. 09-cv-269-LED (E.D. Tex.) (Mar. 29, 2010). So defendants should assess whether a motion will yield a real benefit.
The apparent conflict between Form 18 and Twombly and Iqbal suggests the Supreme Court’s new pleading requirements exceed those contemplated by the Rules. Those decisions are unlikely to be revisited anytime soon, however, so the drafters of the Federal Rules may want to consider revising Form 18 to eliminate the conflict. Such a revision could also provide examples of sufficient pleading for other patent issues not currently addressed.
Posted with the permission of the Daily Journal Corp.(2010)
Craig E. Countryman is an associate in the Southern California office of Fish & Richardson. His practice emphasizes patent litigation in the area of chemistry.