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New Patent Pleading Standard May Be Barrier for Plaintiffs

The Federal Rules of Civil Procedure were updated Dec. 1, modifying the standard for pleading direct patent infringement. Namely, Rule 84 and its appendix of forms were eliminated, which included Form 18, the model pleading for patent infringement. Many courts viewed the pleading in this short form as presumptively adequate. For those courts, Form 18 allowed a plaintiff to adequately plead a claim for patent infringement without alleging the specifics of any infringement theory. This allowed a plaintiff to initiate a case against a defendant with minimal specificity of the supposed infringement, open up the broad and costly scope of discovery under the federal rules (and any mandatory disclosures under local rules) and only later have to specify (or perhaps develop) its theories of infringement. This practice was widely criticized, including by United for Patent Reform, a coalition of companies that sought to change it by lobbying Congress.

Under the old rules, one could adequately plead direct patent infringement by following the bare bones example in Form 18, providing only "1) an allegation of jurisdiction; 2) a statement that the plaintiff owns the patent; 3) a statement that the defendant has been infringing the patent 'by making, selling, and using [the device] embodying the patent'; 4) a statement that the plaintiff has given the defendant notice of its infringement; and 5) a demand for an injunction and damages." McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1357 (Fed. Cir. 2007).

But with Form 18 eliminated, the "plausibility" standard outlined in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), is the touchstone for determining the adequacy of a plaintiffs' pleading. This standard requires pleading facts that could lead to a plausible inference of infringement by the defendant. But what will that mean in practice? Although no opinions have been issued since the rule change, some predictions can be made based on decisions that applied the standard from Twombly and Iqbal to related infringement claims.

For example, the pleading standard for induced and contributory patent infringement (which Form 18 did not plead) has developed based on Twombly and Iqbal, so decisions in these areas provide guidance about what to expect for direct infringement under the new standard. Looking to the Eastern District of Texas, that perennially popular venue for patent plaintiffs, the court in Realtime Data LLC v. Morgan Stanley, 721 F. Supp. 2d 538, 544 (E.D. Tex. 2010), dismissed claims of indirect infringement where the "plaintiff's complaint fail[ed] to identify any asserted claims or any accused products or services for each of the patents-in-suit." This suggests courts may require plaintiffs to identify the asserted claims and the accused products when pleading direct infringement.

Other courts in the 5th Circuit have followed a similar approach. For example, in Affinity Labs of Texas LLC v. Toyota Motor North America Inc., 2014 U.S. Dist. LEXIS 90379 (W.D. Tex. May 12, 2014), the plaintiff's "generalized allegations that [defendant] induced others to infringe the Asserted Patents through its marketing and sales tactics" were insufficient because they failed to specify how customers would "use the vehicle in a manner that would violate the asserted patents." This suggests that some explanation of how the accused products infringe the asserted claims may also be required.

A few courts applied the Twombly/Iqbal standard to direct infringement even before the elimination of Form 18. In Macronix Int'l Co. v. Spansion Inc., 4 F. Supp. 3d 797 (E.D. Va. 2014), the court dismissed a complaint that "simply alleges that each element of a cited claim is infringed and then parroted the claim language for each element." The court came to a similar conclusion in Bender v. LG Elecs. U.S.A. Inc., 2010 U.S. Dist. LEXIS 33075 (N.D. Cal. Mar. 11, 2010), where the plaintiff identified categories of products, but no specific products by name and did not identify any asserted claims.

One fact pattern where the "plausibility" standard may be problematic for a plaintiff is where it seeks to assert a method claim against a believed-infringer that operates its process away from public view. For example, software processes like database manipulation or manufacturing methods for pharmaceuticals are often performed in secret, with their specific steps not readily detectable by inspecting the final product or service. It remains to be seen how a plaintiff can allege facts that plausibly suggest the patented method is being infringed in these circumstances. Indeed, even in Twombly the Supreme Court found that merely alleging parallel conduct among competing companies was not sufficient to infer collusion where equally plausible explanations existed for their behavior. If this rationale is applied to the infringement of method patents, where alternative processes exist could produce the same product or service, it's unclear how a plaintiff can gather enough facts to survive a motion to dismiss.

Even the pre-filing investigation requirements of Rule 11 were not an insurmountable barrier to plaintiffs asserting method patents in the past. For example, in Hoffmann-La Roche Inc. v. Invamed Inc., 213 F.3d 1359 (Fed. Cir. 2000), Roche obtained samples of a product on but was unable to determine if the product was made using its patented process. Although Roche asked the manufacturer for more information before filing suit, those details were (perhaps unsurprisingly) not provided. But after post-suit discovery demonstrated the patented method was not being practiced and the suit was voluntarily dismissed, the court declined to award Rule 11 sanctions because it was "difficult to imagine what else [Roche] could have done to obtain facts related to Torpharm's alleged infringement of the process patents." This suggests that, while in certain circumstances, a plaintiff may meet its Rule 11 obligations with a good faith, but unsuccessful, effort to obtain facts that lead to a plausible inference of infringement, that plaintiff may still be unable to meet the requirements of Twombly and Iqbal.

Thus, the new pleading standard for direct infringement may be a significant barrier for some plaintiffs. Indeed, when Congress considered eliminating Form 18 through the proposed Innovation Act, they included carve-out that would allow plaintiffs to assert method patents against infringers operating behind closed doors. See H.R. 9, 114th Cong. Section 3(b) (2015) ("Information Not Readily Accessible. - If information required to be disclosed under subsection (a) is not readily accessible to a party, that information may instead be generally described, along with an explanation of why such undisclosed information was not readily accessible, and of any efforts made by such party to access such information.") What remains to be seen is whether the courts will take a similar approach and create an exception for plaintiffs pleading infringement of a method patent where not all of the steps are performed in public view.

Originally published in the Daily Journal on December 16, 2015.​