ORDER DENYING MOTION TO DISMISS ALLSCRIPTS’S SECOND AMENDED COMPLAINT [59]
I.INTRODUCTION
Mоving again to dismiss Plaintiff MyM-edicalRecords, Inc.’s (“MMR”) Second Amended Complaint, Defendant Allscripts Healthcare Solutions, Inc. raises several unsettled, patent-law pleading issues. Specifically, Allscripts contends that in light of current Central District of California case law, a plaintiff may not rely on a previous complaint in the same lawsuit to establish a defendant’s knowledge of the patents-in-suit. A plaintiff must plead this knowledge to establish any indirect-infringement claim. But MMR asks the Court to adopt a rule that assesses the defendant’s knowledge at the time the plaintiff added it to the action- — irrespective of how it might have gained that knowledge.
After considering arguments on both side of the legal rift, the Court finds that a plaintiff may establish a defendant’s knowledge of the patents-in-suit based on the filing of a previous complaint. But the Court also finds that a plaintiff may not “bootstrap” this postfiling knowledge onto prefiling conduct; rather, the knowledge only applies to the defendant’s potentially infringing conduct after the plaintiff files suit. The Court therefore DENIES Alls-cripts’s Motion to Dismiss.
II.FACTUAL BACKGROUND
This is the second dismissal motion that Allscripts filed in this case. In the interest of judicial efficiency, the Court therefore incorporates the factual background from its previous Order. (ECF No. 54.)
After thе Court granted Allscripts’s last dismissal motion, MMR filed its Second Amended Complaint against Jardogs and Allscripts. (ECF Nos. 54, 55.) On January 22, 2014, Allscripts again moved to dismiss the Second Amended Complaint. (ECF No. 59.) MMR timely opposed. (ECF No. 64.) That Motion is now before the Court for decision.
III.LEGAL STANDARD
A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't,
The determination whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679,
IV. DISCUSSION
Allscripts and MMR occupy divergent camps on the presuit-knowledge issue, arguing whether a plaintiff may establish a defendant's knowledge of the patents-in-suit based on the filing of a previous complaint. The Court decides that it may-but only with respect to potеntially infringing, postfihing conduct.
A. Presuit knowledge
As in its last Motion, Allscripts argues that MMR failed to allege that Ails-cripts had any presuit knowledge of the `466 or `883 Patents sufficient to establish any of MMR's indirect- or willful-infringement claims. Allscripts contends that under Central District of California law, MMR may not rely on previous complaints filed in the same lawsuit to establish the requisite presuit knowledge.
1. Indirect infringement
For both induced infringement under 35 U.S.C. § 271(b) and contributory infringement under 35 U.S.C. § 271(c), liability hinges on whether thе defendant has knowledge of the patents-in-suit. See Global-Tech Appliances, Inc. v. SEB S.A., - U.S. -,
Allscripts asserts that MMR cannot prove Allscripts's presuit knowledge of either the `466 or `883 Patents based on either MMR filing the original Jardogs Complaint or MMR's previously dismissed Allscripts Complaint. Allscripts points out that MMR did not name Ailscripts in the first Jardogs Complaint. Allscripts also contends that MMR does not allege any specific facts supporting an inference that A]Jscripts was made aware of the original complaint or any specific infringement allegations as a result of the Jardogs Complaint. Citing to Proxpconn Inc. v. Microsoft Corp., No. SACV 11-1681-DOC(ANx),
But MMR proposes a different rule, arguing that the relevant time for determining Allscripts's knоwledge is when it was
This Motion presents a murky, unsettled issue in patent law: whether the filing of a complaint may establish the requisite knowledge of the patents-in-suit for induced and contributory infringement. Courts across the country are sharply divided on either side of the question. Compare Secured Mail Solutions,
But this case takes the legal divide a step further, requiring the Court to define exactly what “presuit” knowledge means— that is, whether a plaintiff may rely on a previous complaint against a subsidiary entity or a previously dismissed complaint against the same defendant to prove knowledge of the patent-in-suit.
As to the first issue, Allscripts correctly notes that in Proxyconn, another Central District of California court adopted a rule stating that “a complaint fails to state a claim for indirect patent infringement where the only allegation that purports to estаblish the knowledge element is the allegation that the complaint itself or previous complaints in the same lawsuit establish the defendant’s knowledge of the patent.” Proxyconn,
But spearheaded by Walker Digital, other courts have allowed a plaintiff to partition potential liability when it can only plead the defendant’s knowledge of thе patent-in-suit based on filing the complaint. See, e.g.,
Here, MMR originally filed suit against Jardogs and Allscripts separately. But the Court then issued an Order to Show Cause re. Failure to Join Necessary Party, noting that under Federal Rule of Civil Procedure 19, MMR should join the two
After extensive consideration of the relevant case law on both sides of the district split, the Court adopts the Walker Digital approach. A defendant should not be able to escape liability for postfiling infringement when the complaint manifestly places the defendant on notice that it allegedly infringes the patents-in-suit. Holding otherwise would give a defendant carte blanche to continue to indirectly infringe a patent-now with full knowledge of the patents-in-suit-so long as it was ignorant of the patents prior to being served itself with the complaint. This strange reward would quickly erode the foundation upon which Congress constructed § 271(b) and (c)'s liability structure. See 5-17 Chisum on Patents § 17.02 (noting that indirect infringement targets defendants who "appropriate{e] another man's patented invention" (quoting H.R.Rep. No. 82-1923, at 9, 28 (1952); Sen. Rep. No. 82-4979, at 8, 28 (1952))).
It is also important to note that "the purpose of the award of damages for patent infringement is to compensate the claimant for the losses incurred." Rite-Hite Corp. v. Kelley Co., Inc.,
This approach also pays heed to the Supreme Court's indirect-infringement knowledge decisions in Global~-Tech and Aro Ma'n'ufaсturing in that a plaintiff still may not "bootstrap" a defendant's postfil-ing knowledge onto the defendant's prefil-ing conduct. Rather, a plaintiff like MMR may only use the filing of the complaint to trigger prospective liability for postfihing conduct.
Allscripts therefore bears potential liability for indirect infringement of both the `466 and `883 Patents beginning on September 23, 2013, when MMR filed suit against it. The Court thus DENIES Ails-cripts's Motion on this ground.
MMR has also pleaded that "it is rеasonable to infer" that Allscripts was aware of the `466 Patent since MMR originally filed the Jardogs Complaint on May 17, 2013. (SAC ¶ 17.) MMR contends that Allscripts acquired all or substantially all of Jardogs's assets in March 2013, including Jardogs's accused FollowMy-Health product. (Id.) MMR alleges that Allscripts subsequently integrated its accused Patient Portal product with Follow-MyHealth-thereby bolstering the inference that Allscripts was aware of the `466 Patent since May 2013. (Id.)
There is no principled reason to preclude MMR from pleading this inference at this stage. The allegation that Allscripts acquired Jardogs complete with the accused FollowMyHealth product and then integrated both companies' products supports the inference that Allscripts knew of the initial Jardogs Complaint in May 2013. And by that argument, Allscripts therefore knew of the `466 Patent as well.
Like any оther claim, this allegation must still walk the evidentiary gauntlet. Allscripts's pre-September 2013 indirect-infringement liability for the `466 Patent is thus only potential at this point. But the Court finds that Allscripts bears possible indirect-infringement liability for conduct relating to the `466 Patent beginning on
2. Willful infringement
Echoing its arguments with respect to indirect infringement, Allscripts argues that since MMR cannot establish Allscripts’s presuit knowledge of thе '466 Patent, MMR likewise cannot establish its willfol-infringement claim.
As the Court previously noted, to establish willful infringement, “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent.” In re Seagate Tech., LLC,
MMR argues that the Federal Circuit in Seagate precluded a plaintiff from establishing a willful-infringement claim based solely on postfiling conduct if the plaintiff does not move for a preliminary injunction.
In Seagate, the Federal Circuit noted that since a plaintiff must comply with Federal Rule of Civil Procedure 11(b) when filing a complaint, it cannot have a good-faith basis for alleging willful infringement if the only evidence establishing willfulness begins once the plaintiff files the complаint.
Since knowledge is required to subject a defendant to potential willful-infringement liability, see Seoul Laser Dieboard Sys. Co., Ltd. v. Serviform, S.r.l.,
The Court finds that MMR has adequately pleaded willful infringement by Allscripts of the '466 Patent beginning on May 17, 2013, and of the '883 Patent as of September 23, 2013. The Court therefore DENIES Allscripts’s Motion on this ground.
B. Specific intent to induce infringement
Allscripts next argues that MMR fаiled to adequately plead that Allscripts specifically intended that its customers infringe the patents-in-suit or that
In its Second Amended Complaint, MMR alleges,
Allscripts has provided instructions directing other entities specifically to use the FollowMyHealth and Patient Portal products in a manner known to be infringing. For example, Allscripts maintains a website at www.followmyhealth. com, which includes instructions specifically directing users to access and eol- ' lect their health records a secure and private manner, in a manner that infringes one or more claims of the '466 Patent. Allscripts provides those instructions on its websites, including at www.followmyhealth.com and support.followmyhealth.сom. Allscripts knows its actions induce infringement of the '466 Patent, because, for example, it knows that use of the FollowMyHealth and Patient Portal products infringe the '466 Patent.
(SAC ¶ 18; see also ¶ 32 (alleging virtually identical arguments regarding the '883 Patent).)
Allscripts asserts that the websites that MMR cites in its Second Amended Complaint demonstrate the multitude of non-infringing uses for Allscripts’s products, including communicating privately with physicians via secure message, schеduling or changing appointments, and viewing and paying bills. Allscripts also argues that its products do not allow users to access and manage their health records in a “secure and private manner” as claimed in the patents-in-suit. Allscripts therefore contends that MMR’s allegations at best establish that Allscripts was aware that its users managed and accessed their health records in an allegedly infringing manner.
But MMR asserts thаt Allscripts does not dispute that intent to induce infringement can be established by instructions directing users to specifically use the accused products in a manner Allscripts knows to be infringing. MMR also faults Allscripts for asking the Court to engage in premature, summary-judgment-style, noninfringement analysis.
MMR correctly notes that a plaintiff may establish a defendant’s specific intent to induce infringement based on the defendant’s instructions that teаch users to practice the accused product in a manner the defendant knows is infringing. See i4i Ltd. P’ship v. Microsoft Corp.,
But since MMR must plead that Alls-cripts knew that the acts that it induced cоnstituted infringement, the same knowledge problem discussed above limits MMR’s potential recovery. MMR has only alleged Allscripts’s knowledge of the '466 Patent based on filing the initial Jar-dogs Complaint and of the '883 Patent based on the Allscripts Complaint. MMR can thus only properly allege specific intent to induce infringement based on those dates.
The court accordingly finds that MMR has properly pleaded Allscripts’s specific intent to induce infringement and knowledge that the induced acts constitute in
C. Contributory infringement: substantial non-infringing uses
Allscripts lastly argues that MMR again failed to plead that Allscripts’s products lack any substantial noninfring-ing uses as required for contributory infringement. A plaintiff must “plead facts that allow an inference that the components sold or offered for sale have no substantial non-infringing uses” in order to state a contributory-infringement claim. In re Bill of Lading,
MMR alleges in its Second Amended Complaint,
Since FollowMyHealth and Patient Portal are specifically designed to empower patients to manage their care by providing access to their personal health records, Allscripts knows that Follow-MyHealth and Patient Portal have no substantial uses other than in providing users with the ability to access and collect their health records a secure and private manner, in a manner that infringes one or more claims the '466 Patent. Allscripts also knows that Fol-lowMyHealth and Patient Portal are made and adapted for use in in providing users with the ability to access and collect their health records (including drug prescriptions) in a secure and private manner, in a manner that infringes one or more claims of the '466 Patent, and therefore that they are especially made or adapted for use in infringement of the '466 Patent.
(SAC ¶ 19; see also ¶ 33 (alleging almost identical arguments with respect to the '883 Patent)).
Allscripts contends that MMR’s own allegations demonstrate that the use of its products with respect to “health records” but not “drug prescriptions” would fall outside the scope of the '883 Patent, thereby constituting a substantial noninfringing use — and vice versa vis-a-vis the '466 Patent. Allscripts also asserts that none of the claims of either patent-in-suit could conceivably cover all methods for providing a user with the ability to collect and manage health records and drug prescriptions in a safe and private manner, so there necessarily must be some substantial noninfringing uses for Allscripts’s products. Finally, Allscripts heavily emphasizes that material located on an Allscripts website referenced in MMR’s Secоnd Amended Complaint demonstrates substantial, noninfringing uses for the products.
But MMR argues that Allscripts specifically designed FollowMyHealth and Patient Portal to empower patients to manage their care by providing access to their personal health records, and that these products have no substantial uses other than in providing users with the ability to access and collect their health records in a secure and private manner — thereby constituting infringement of the '466 and '883 Patents.
MMR competently alleges that Alls-cripts specifically adapted its products to provide users with the ability to collect and manage health and drug-prescription records in a secure and private manner. This is exactly what MMR claims in the '466 and '883 Patents. The Federal Circuit has also already rejected Allscripts’s argument that each рroduct is a noninfringing use of the other patent. Lucent Techs., Inc. v. Gateway, Inc.,
Neither can the Court assess the merits of MMR’s allegations at this stage. Rather, the Court must accept them as true. Adscripts mаy well be able to demonstrate that its products have substantial nonin-fringing uses at a later stage. But the Court finds that MMR has complied with In re Bill of Lading’s, pleading standard for contributory infringement and consequently DENIES Allseripts’s Motion on this ground.
Y. CONCLUSION
For the reasons discussed above, the Court DENIES Allscripts’s Motion to Dismiss in its entirety. (ECF No. 59.) Alls-cripts shall file its answer to the Second Amended Complaint within 14 days.
IT IS SO ORDERED.
Notes
. After carefully considering the papers filed with respect to this Motion, the Court deems the matter appropriate for decision without oral argument. Fed.R.Civ.P. 78; L.R. 7-15.