INFERNAL TECHNOLOGY, LLC, аnd TERMINAL REALITY, INC. v. UBISOFT, INC., and UBISOFT ENTERTAINMENT SA.
No. 5:20-CV-223-D
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION
September 3, 2021
JAMES C. DEVER III, United States District Judge
ORDER
On May 27, 2020, Infernal Technology, LLC (“Infernal“) and Terminal Reality, Inc. (“Terminal“) (collectively, “plaintiffs“) filed a complaint against Ubisoft, Inc. and Ubisoft Entertainment SA (collectively, “defendants“) alleging infringement of two patents [D.E. 1]. On November 12, 2020, defendants moved to dismiss for failure to state a claim under
I.
Terminal is a limited liability company based in Texas that develops video games and graphics engines used to make video games. See Compl. [D.E. 1] ¶ 2. This case concerns two patents Terminal owns and licenses to other video game developers for use in making video games. See id. The first patent is U.S. Patent No. 6,362,822 (the “‘822 patent“). See Ex. 1 [D.E. 1-1]. The
Infernal is a limited liability company based in Texas. See Compl. ¶ 1. In June 2014, June 2015, and May 2020, Terminal and Infernal entered into a series of agreements granting Infernal an exclusive right to use and enforce numerous patents owned by Terminal, including the ‘822 and ‘488 patents. See id. ¶ 2.
Ubisoft, Inc. is a corporation organized under California law with a principal place of business in San Francisco, California. Seе id. ¶ 3. Ubisoft Entertainment SA is a company organized under French law, and its principal place of business is in France. See id. ¶ 4. Defendants create, market, and sell video games throughout the United States, including in North Carolina. See id. ¶¶ 8-10, 19-47.
Defendants’ video games run on software called game engines. See id. ¶ 48. Plaintiffs allege that at least 13 of defendants’ video games use at least one game engine that violates the ‘822 and ‘488 patents. See id. ¶¶ 48-49; Ex. 3 [D.E. 1-3] (‘822 claim sheet); Ex. 4 [D.E. 1-4] (‘488 claim sheet).2 Specifically, plaintiffs allege that defendants use their infringing game engines to render
On May 27, 2020, plaintiffs filed this patent infringement action against defendants. See Compl. On November 12, 2020, defendants filed a motion to dismiss for failure to state a claim under
II.
A motion to dismiss under
The parties’ arguments center on the marking statute in
Under the marking statute, a party may give actual or constructive notice, but it must give
The duty of pleading “and the burden of proving either [actual or constructive notice] is upon the plaintiff.” Dunlap, 152 U.S. at 248; see Arctic Cat Inc. v. Bombardier Recreational Prods., Inc., 876 F.3d 1350, 1366 (Fed. Cir. 2017); Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111 (Fed. Cir. 1996). However, “an alleged infringer who challenges the patentee‘s compliance ... bears an initial burden of production to articulate the products it believes are unmarked” articles subject to the marking statute. Arctic Cat, 876 F.3d at 1368. Even so, “[t]he burden of proving compliance with marking is and at all times remains on thе patentee.” Id. at 1367.
The marking requirement does not apply to all patents, including “where the patent is directed to a process or method.” ActiveVideo Networks, Inc. v. Verizon Commc‘ns., Inc., 694 F.3d 1312, 1334 (Fed. Cir. 2012); Crown Packaging, 559 F.3d at 1316; Bandag, Inc. v. Gerrard Tire Co., 704 F.2d 1578, 1581 (Fed. Cir. 1983). The marking statute‘s applicability also depends on what the plaintiff asserts in the complaint. When a patent contains both process or method claims and some other kind of claim (such as аn apparatus claim), the marking statute applies differently when the patentee asserts infringement of the process or method as opposed to infringement of all the patent‘s
III.
The court analyzes each asserted patent separately. See State Contracting & Eng‘g, 346 F.3d at 1074 (“[W]e look to the asserted patents independently.“).
A.
Defendants recognize that “[p]laintiffs chose not to assert apparatus claims [under the ‘822 patent] in the [c]omplaint,” but rather plaintiffs only asserted method claims. [D.E. 23] 6; see Compl. ¶ 61 (alleging that “[t]he duty to mark under
The court rejects defendants’ arguments. Plaintiffs have only alleged that defendants infringed method claims under the ‘822 patent. See Compl. ¶ 61. When a patentee has only asserted method claims, the marking statute does not apply. See Crown Packaging, 559 F.3d at 1317; State Contracting & Eng‘g, 346 F.3d at 1074; Devices for Med., 822 F.2d at 1066; Hanson, 718 F.2d at 1082-83. Indeed, plaintiffs allege in their complaint that the marking statute does not apply to their method claims for the ‘822 patent. See Compl. ¶ 61. Although a plaintiff-patentee must plead compliance with the marking statute, see Dunlap, 152 U.S. at 248; Arctic Cat, 876 F.3d at 1366, a plaintiff-patentee need not plead compliance with an inapplicable statute. See Tex. Digit., 308 F.3d at 1120. Thus, based on the facts pleaded in plaintiffs’ complaint concerning the ‘822 patent and the inapplicability of the marking statute to those claims, plaintiffs validly state claims under the ‘822 patent.
Defendants also argue that applying Crown Packaging to this case would “entirely undercut” the “policies behind the marking statute.” [D.E. 23] 7. According to defendants, if a party can avoid complying with the marking statute but still enforce a patent in litigation, the party arguably defeats the marking statute‘s purposes of “1) helping to avoid innocent infringement; 2) encouraging patentees to give notice to the public that the article is pаtented; and 3) aiding the public to identify whether an article is patented.” Rembrandt Wireless Techs., LP v. Samsung Elecs. Co., 853 F.3d 1370, 1383 (Fed. Cir. 2017) (quotation omitted); see Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443 (Fed. Cir. 1998). The marking statute, however, is permissive, not mandatory. See
Finally, the Federal Circuit has distinguished “bеtween cases in which only method claims are asserted to have been infringed and cases ... where [the patentee] alleged infringement of all its apparatus and method claims.” Devices for Med., 822 F.2d at 1066. This court follows that distinction here. See, e.g., Power Integrations, Inc. v. ON Semiconductor Corp., 396 F. Supp. 3d 851, 861 (N.D. Cal. 2019); Intell. Ventures II LLC v. Sprint Spectrum, L.P., No. 2:17-CV-00662-JRG-RSP, 2019 WL 2959568, at *2 (E.D. Tex. Apr. 18, 2019) (unpublished), report and recommendation adopted, 2019 WL 1987204 (E.D. Tex. May 6, 2019) (unpublished); Unwired Planet, LLC v. Apple Inc., No. 13-cv-04134-VC, 2017 WL 1175379, at *4 (N.D. Cal. Feb. 14, 2017) (unpublished); ContentGuard Holdings, Inc. v. Amazon.com, Inc., No: 2:13-CV-1112-JRG, 2015 WL 11089750, at *2 (E.D. Tex. Aug. 10, 2015) (unpublished). Accordingly, the court denies defendants’ motion to dismiss plaintiffs’ claims concerning the ‘822 patent.
B.
Defendants note that plaintiffs allege infringement of both apparatus and method claims under the ‘488 patent via the incorporation of the claims sheet in Exhibit 4 accompanying the complaint. See [D.E. 23] 6. Defendants then argue that plaintiffs had to comply with the marking statute for both the apparatus and method claims in the ‘488 patent. See id. Plaintiffs respond that their allegation in the complaint that the marking statute is inapplicable to the ‘488 patent suffices. See [D.E. 27] 16; cf. Compl. ¶ 76 (alleging that “[t]he duty to mark under
The court rejects plaintiffs’ arguments and holds that plaintiffs had to plead compliance with the marking statute concerning its claims under the ‘488 patent. Unlike its claims that defendants infringed the ‘822 pаtent, plaintiffs do not limit their allegations only to infringements of the method claims in the ‘488 patent but instead assert both method and apparatus claims. See Ex. 4 [D.E. 1-4]; compare Compl. ¶ 61 (noting the marking statute “is inapplicable to the asserted method claims of the ‘822 Patent” (emphasis added)) with id. ¶ 76 (noting the marking statute “is inapplicable to the asserted claims of the ‘488 Patent” (emphasis added)).
By asserting both method and apparatus claims under the ‘488 patent, plaintiffs had to comply with the marking requirement as to both claims, unless there was no tangible item to mark. See ActiveVideo, 694 F.3d at 1334; Crown Packaging, 559 F.3d at 1317; Am. Med. Sys., 6 F.3d at 1539. Plaintiffs did not do so. Instead, plaintiffs alleged that the marking statute did not apply to their claims under the ‘488 patent. See Compl. ¶ 76. That allegation is а legal conclusion. At the motion to dismiss stage, this court need not accept a plaintiff‘s legal conclusions as true. See Iqbal, 556 U.S. at 678-79; Giarrantano, 521 F.3d at 302. Moreover, plaintiffs’ legal conclusion that the marking statute does not apply to their claims under the ‘488 patent is incorrect, and plaintiffs have failed to allege any facts suggesting they complied with the marking statute or that no tangible item exists to mark.
In opposition, plaintiffs contend it is uncertain they “cannot prove any set of facts in support of their claim.” [D.E. 27] 16. To be sure, because plaintiffs’ patents involve software, maybe there is some set of facts showing there is no tangible item to mark, thus removing plaintiffs from the holding in American Medical and ActiveVideo. See Am. Med. Sys., 6 F.3d at 1538-39;
The court also rejects plaintiffs’ argument that defendants bear a burden of persuasion that they have failed to meet. “[A]n alleged infringer who challenges the patentee‘s compliance with § 287 bears an individual burden of production tо articulate the products it believes are unmarked ‘patented articles’ subject to § 287.” Arctic Cat, 876 F.3d at 1368. An alleged infringer can satisfy this “low bar” by putting “the patentee on notice that he or his authorized licensees sold specific unmarked products which the alleged infringer believes practice the patent.” Id. Defendants cleared this low bar by arguing that plaintiffs’ video games listed in the plaintiffs’ complaint were unmarked products. See [D.E. 23] 5 n.2; cf. 31A C.J.S. Evidence § 189 (Aug. 2021) (“The burden of proof is satisfied by actual proof of the facts of which proof is necessary, regardless of which party introduces the evidence.“).
But even if defendants did not meet their burden, the outcome does not change. Defendants’ burden does not obviate plaintiffs’ burden of pleading facts demonstrating compliance with the marking statute to show plaintiffs will be entitled to damages should they prevail at trial. See Dunlap, 152 U.S. at 248; Crown Packaging, 559 F.3d at 1316; Am. Med. Sys., 6 F.3d at 1537. Without meeting their own burden, plaintiffs have failed to state a claim upon which this court can
Plaintiffs have requested leave to file an amended complaint, should the court grant all or part of defendants’ motion to dismiss. See [D.E. 27] 19 n.6. Dismissal under
IV.
In sum, the court GRANTS defendants’ motion to dismiss [D.E. 22] claims alleging infringement of the ‘488 patent, DENIES defеndants’ motion to dismiss claims alleging infringement of the ‘822 patent, and DISMISSES WITHOUT PREJUDICE the portion of plaintiffs’ complaint pertaining to the claims under the ‘488 patent [D.E. 1]. Plaintiffs may file an amended complaint not later than September 30, 2021. The court DENIES WITHOUT PREJUDICE the joint motion
SO ORDERED. This 3 day of September, 2021.
JAMES C. DEVER III
United States District Judge
