In this patent infringement suit, defendants seek threshold dismissal, arguing (i) that there is no indirect or willful infringement, as defendants lacked the requisite pre-suit knowledge of the patents in issue, and (ii) that because of the nature of the '362 patent’s claimed system, only the end computer user — here the consumer — can directly infringe this system claim. Plaintiff opposes this motion, arguing (i) that defendants had the requisite pre-suit knowledge of the patents in issue and, even if they did not, post-suit knowledge satisfies the knowledge requirement for willful and indirect infringement of the patents, and (ii) that defendants directly infringe the system claim by controlling each step of the system, including the first step. Accordingly, the motion to dismiss presents the following questions:
(i) Whether the pre-suit knowledge required for indirect and willful infringement is satisfied as a pleading matter, where, as here, (a) the patentee and the putative infringer used the same law firm, (b) the putative infringer was sued on a patent that cited the patent in issue as prior art, and (c) the putative infringer purchased a patent that cited the patent in issue as prior art;
(ii) Whether knowledge of the patents derived from the service or filing of the lawsuit provides the knowledge of the patents required for either indirect or willful patent infringement claims; and,
(iii) Whether the facts pled in the complaint are sufficient, if proved, to establish direct infringement of the system claim in issue.
For the reasons that follow, the motion to dismiss must be granted in part and denied in part, as follows:
(i) The complaint fails to allege sufficient facts concerning pre-suit knowledge to state a claim for indirect infringement that is plausible on its face;
(ii) The complaint adequately alleges sufficient facts concerning post-filing knowledge to state a claim for indirect infringement, as the service or filing of a law suit provides the knowledge of the patents required for indirect infringement with damages limited to the post-filing period;
(iii) The complaint fails to allege sufficient facts concerning pre-suit knowledge of the patents to state a claim for willful infringement that is plausible on its face, and willful infringement cannot be based solely on knowledge that arises from the service or filing of the lawsuit; and,
(iv) The complaint adequately alleges sufficient facts to establish that defendants directly infringe the system claim in the '362 patent.
I.
A.
Plaintiff Rembrandt Social Media. LP (“Rembrandt”), a Virginia limited partnership with a principal place of business in Bala Cynwyd, Pennsylvania, brings this patent infringement suit against defendants Facebook. Inc. (“Facebook”) and AddThis, Inc. (“AddThis”). Facebook is a Delaware Corporation with a principal place of business in Menlo Park, California and AddThis is a Delaware Corporation
Rembrandt is the owner of the two patents in issue. U.S. Patent No. '6,415,316 (the '316 Patent), entitled “Method and Apparatus for Implementing a Web Page Diary,” describes an invention that allows persons to create a personal diary on the World Wide Web wherein users are able to create a collection of personal information and third party content that is displayed on a personal webpage that can be shared with an authorized group of people. U.S. Patent No. 6,289,362 (the '362 Patent), entitled “System and Method for Generation. Transferring, and Using an Annotated Universal Address.” describes a system that permits users to transfer third party content automatically from a third party content provider’s website to the user’s personal diary.
The claim at issue in this motion to dismiss is claim 7 of the '362 patent. Claim 7 is a “system” claim,
A computer system comprising:
third party memory storing a transfer script that generates a request for a transfer applet from server memory;
server memory storing an AUA [annotated universal address] database from which personalized web pages are construed and a transfer applet for establishing a communications link between a client browser and the server memory; and
a client browser coupled to the third party memory and to the server memory for executing the transfer script and the transfer applet to transfer an AUA to an AUA database stored in the server memory, the AUA identifying a location of a content object and including an annotation authored by a content provider for controlling an aspect of a presentation of the object.
'362 Patent, Claim 7.
The '316 patent issued on July 2, 2002 and the '362 patent issued on September 11, 2001 to inventor Joannes Jozef Everardus Van Der Meer (“Van Der Meer”). Van Der Meer assigned his patents to his company, Administrator Nederland B.V. (“Aduna”), and following Van Der Meer’s death in June 2004, his family assigned the patents to Rembrandt, a non-practicing entity.
Rembrandt now brings this suit against Facebook and AddThis, alleging that (i) Facebook has willfully directly and indirectly infringed the '316 patent, (ii) Face-book and AddThis have jointly and willfully, directly and indirectly infringed the '362 patent, and (iii) Facebook has willfully directly and -indirectly infringed the -'362 patent. More specifically, Rembrandt alleges that Facebook directly infringes the '316 patent by operating the www. facebook.com website, and indirectly infringes the '316 patent by inducing and contributing to infringement of the '316 patent by encouraging Facebook members to use what Rembrandt alleges is the ‘web-based diary feature’ of the wwwiacebook. com website. In addition, Rembrandt alleges that AddThis directly infringes the '362 patent by both making and using the system described in claim 7. Likewise, Rembrandt alleges that Facebook directly infringes the '362 patent by using the system described in claim 7.
In support of its indirect and willful infringement claims, Rembrandt alleges
Defendants now seek threshold dismissal, claiming that the indirect infringement claims must be dismissed as Rembrandt has not adequately pled pre-suit knowledge and that post-suit knowledge is insufficient to satisfy the knowledge requirement for an indirect infringement claim. Defendants also argue that for the same reasons, Rembrandt’s claim for willful infringement must fail. Finally, defendants argue that the claim for direct infringement of claim 7 of the '362 patent must be dismissed as the only possible direct infringer is the consumer of defendants’ services.
II.
It is axiomatic that dismissal pursuant to Rule 12(b)(6), Fed.R.Civ.P., is required where the complaint does not “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal,
III.
A party may indirectly infringe a patent either (i) by inducing direct infringement, in violation of 35 U.S.C. § 271(b), or (ii) by contributing to direct infringement, in violation of 35 U.S.C. § 271(c). Section 271(b) provides that “[w]hoever actively induces infringement of a patent shall be liable as an infringer,” and § 271(c) provides, in pertinent part, that:
Whoever offers to sell or sells within the United States ... a component of a patented ... apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.
The Supreme Court has made clear that “§ 271(c) requires knowledge of the existence of the patent that is infringed” and “that the same knowledge is needed for induced infringement under § 271(b).” Global-Tech Appliances, Inc. v. SEB S.A., — U.S. -,
Although the knowledge requirement for indirect infringement is now settled law under § 271(b) and (c), there is disagreement among the district courts as to whether post-suit knowledge may satisfy this knowledge requirement. On the one hand, a majority of district courts considering this issue have held that post-suit knowledge (i.e., knowledge provided by the filing of the lawsuit) satisfies the knowledge element for indirect infringement;
It is clear that the majority view is the sounder view. There is simply no substantive difference between (i) a putative infringer learning of a patent from a plaintiffs letter a day, or hours or even minutes before an infringement suit is filed or served, and (ii) a putative infringer learning of the patent from the filing or service of a complaint. In both instances, the putative infringer learns of the existence of the patent and for purposes of satisfying the knowledge required to establish indirect infringement, it is immaterial how the putative infringer gains this knowledge. What matters is not how the putative infringer learned of the patents — by a letter from plaintiff prior to the filing of suit, by service of the complaint, or indeed from any source — but simply that the putative infringer has knowledge of the allegedly infringed patent and its claims; it is this knowledge of the patent and its claims by a putative infringer — however obtained-— that is essential to a claim for indirect infringement. The filing and service of an infringement suit is merely one way of establishing this essential element of the indirect infringement claim.
But there is an important consequence of relying on the filing and service of the infringement suit to satisfy the knowledge requirement to establish indirect infringement: Plaintiff may only recover damages for indirect infringement for the period of time that commences once the putative infringer learns of the patent.
Defendants argue that the pleading of post-filing knowledge fails to satisfy Rule 8, Fed.R.Civ.P. In essence, defendants argue that plaintiff cannot adequately allege the knowledge element of an indirect infringement claim if knowledge of the patent only arises post-suit. See, e.g., Brandywine Comms.,
This argument is not persuasive. First, it is clear that if a putative infringer continues to engage in indirect infringement of a patent after the filing of the suit, then a plaintiff may recover damages for that continued indirect infringement. Second, even if such an initial complaint fails to plead knowledge adequately, the appropriate relief would be dismissal without prejudice. The patentee could then file, as here, an amended complaint that alleges indirect infringement with notice of the patent in issue based on the filing of the original complaint.
IV.
It is well-settled “that enhancement of damages must be premised on willful infringement.]” Beatrice Foods Co. v. New England Printing & Lithographing Co.,
A close examination of the amended complaint at issue makes clear that Rembrandt has not adequately pled presuit knowledge for willful infringement. As noted above, Rembrandt has failed to allege any facts that would support a plausible inference that defendants had presuit knowledge of the patents in issue. At most, Rembrandt has pled various facts that make it conceivable that Facebook might have learned about the patents in issue, but Rembrandt has not pled sufficient facts to invite the plausible inference that Facebook had the requisite pre-suit knowledge of either patent. Accordingly, the claims for willful infringement must be dismissed.
V.
Analysis next proceeds to defendants’ argument that plaintiffs allegation of direct infringement of claim 7 — the system claim — fails because the system is used and made by the end user — the consumer — not defendants.
The Federal Circuit recently made clear that “to ‘use’ a system for purposes of infringement [of a system claim], a party must put the invention into service, i.e., control the system as a whole and obtain benefit from it.” Centillion Data Systems, LLC v. Qwest Comms. Int’l, Inc.,
Centillion is the latest circuit pronouncement concerning infringement of a
The customer controls the system by creating a query and transmitting it to Qwest’s back-end. The customer controls the system on a one request/one response basis. This query causes the back-end processing to act for its intended purpose to run a query and return a result. The user may then download the result and perform additional processing as required by the claim. If the user did not make the request, then the back-end processing would not be put into service.
Id. Thus, by “causing the system as a whole to perform this processing and obtaining the benefit of the result, the customer has ‘used’ the system under § 271(a).” Id. The Federal Circuit further explained that “it makes no difference that the back-end processing is physically possessed by Qwest.” Id. Likewise, the Federal Circuit also noted that the customers used the system when they subscribed to the service because in both modes of operation “it is the customer initiated demand for the service [that] causes the back-end system to generate the requisite reports.” Id. Accordingly, the Federal Circuit concluded that but for the customer’s actions, “the entire system would never have been put into service.” Id. The Federal Circuit further concluded that unlike the customers, Qwest did not, as a matter of law, “use” the system in issue. Although Qwest made the
back-end processing elements, it never ‘uses’ the entire claimed system because it never puts into service the personal computer data processing means. Supplying the software for the customer to use is not the same as using the system.
Id. In other words, Centillion’s use infringement claim failed because Qwest only used three of the four elements of the system claim: only the customer used the fourth element.
Similarly, the Federal Circuit held that Qwest did not “make” the system as a matter of law, because Qwest does not combine all of the claim elements; instead, the “customer, not Qwest, completes the system by providing the ‘personal computer data processing means’ and installing the client software.” Id. at 1288. Distilled to its essence, then, Centillion teaches that an infringer may use a system (i) by causing the system to perform the whole process and obtaining a benefit, or (ii) by placing into use each element of the claimed system. See id.
Given this, it follows that a result different from Centillion must obtain here because the complaint alleges that defendants (i) place into use each element of the system or (ii) combine to use each element of the system. More specifically, Rem
(i) “Third-party content-provider Web-server memory that stores the Face-book Transfer Applet that transfers data that has been ‘like’ or ‘shared’ by a Facebook member from the member’s Internet browser to a Facebook server, where it is stored in a Facebook database”;
(ii) “Facebook memory for storing a database containing liked or shared content with associated links and the above-mentioned transfer applet”; and,
(iii) “An Internet browser on the Face-book member’s computer that is coupled to both the third-party eon-tent-provider Webserver memory and the Facebook memory and which executes the Facebook Transfer Script and the Facebook Transfer Applet in order to transfer annotated data that has been ‘liked’ or shared’ by a Facebook member from the member’s Internet Browser to a Facebook server, where it is stored in a Facebook database.”
Second Amended Complaint. ¶ 82. Put simply, Rembrandt alleges that (i) Face-book’s Facebook Transfer System uses all three elements of the claim 7 system, and (ii) Facebook derives a benefit from its use of this system because it “uses this collected information to provide content for the Facebook social network, and to generate targeted advertising to Facebook members.” Second Amended Complaint, ¶ 83. Thus, unlike the Centillion defendant, Facebook itself is alleged to use every element of the claimed system, and accordingly, Rembrandt has adequately alleged direct infringement of the claim 7 system.
Second, Rembrandt has adequately alleged that defendants jointly ‘use’ all three elements of the claim 7 system. Specifically, Rembrandt alleges that the Faeebook-AddThis Transfer System consists of:
(i) “AddThis memory that stores the AddThis-Facebook widget that, when executed, requests that Face-book Transfer Applet that transfers data that has been ‘liked’ or ‘shared’ by a Facebook member from the member’s browser to a Facebook server, where it is stored in a Face-book database”;
(ii) “Facebook memory for storing a database containing liked or shared content with associated links and the Facebook Transfer Applet”; and,
(iii) “A browser on the Facebook member’s computer that is coupled to both the AddThis memory and the Facebook memory and which executes the AddThis-Facebook widget and the Facebook Transfer applet in order to transfer annotated data that has been ‘liked’ or ‘shared’ by a Facebook memory from the member’s browser to a Facebook server, where it is stored in a Facebook database.”
Second Amended Complaint, ¶ 51. In other words, Rembrandt alleges that the defendants jointly place into use each element of the claim 7 system. Unlike the Centillion defendant, the defendants, not the consumers or customers, are alleged to have, themselves, placed into use each element of the claim 7 system. Accordingly, Rembrandt has adequately alleged that defendants jointly infringe Claim 7 by ‘using’ the system.
Defendants argue that the direct infringement claims relating to the claim 7 system fail because the transfer script and transfer applet are only transferred to, and executed by, the client browser in response to the Facebook user pressing the ‘Like’ or ‘Share’ button. Thus, defendants argue that the direct infringement claims at issue here are indistinguishable from those in Centillion. This argument is not persuasive. To begin with, the pressing of the ‘like’ or ‘share’ button is not alleged to be an element of the Claim 7 system; instead, it is merely an action that precedes the operation of the system. Although defendants’ use of the system may be preceded by a Facebook user pressing the ‘like’ or ‘share’ button, Rembrandt has adequately alleged that defendants place into use each element of the claimed system. In other words, even though defendants’ use of the system may be put in motion by the Facebook user, defendants themselves directly infringe the system because they place into use each element of the claimed system. In Centillion, by contrast, the putative infringer only placed three of the four elements into use, with the fourth element being placed into use by the consumer. Importantly, this does not mean that the Facebook user does not infringe the claimed system when the user clicks on the ‘like’ or ‘share’ button; to the contrary, the users may also infringe the claimed system by making use of each element. As the Federal Circuit’s analysis in Centillion makes clear, a consumer’s direct infringement does not preclude the producer’s direct infringement. See Centillion,
VI.
For the reasons stated, defendants’ motion to dismiss must be granted in part and denied in part. Defendants’ motion to dismiss the claim for willful infringement must be granted, and that claim must be dismissed. Defendants’ motion to dismiss the indirect infringement claim must be granted in part, and denied in part; it must be granted insofar as the claim seeks pre-filing damages and any claims for damages from indirect infringement must be limited to the period of time commencing with the service of the complaint. Defendants’ motion to dismiss must be denied in all other respects.
An appropriate order will issue.
Notes
. The facts recited here are derived from the second amended complaint, the patents in issue, and the parties’ pleadings.
. A system claim is a species of apparatus claims. See Arris Group, Inc. v. British Telecommunications PLC,
. See, e.g., Apeldyn Corp. v. Sony Corp.,
. See, e.g., Proxyconn Inc. v. Microsoft Corp., No. SACV 11-1681 DOC (ANx),
. See, e.g., Apeldyn Corp.,
. Notably, some of the minority view courts acknowledge that "Federal Rule of Civil Procedure 15(d) provides a procedure for pleading post-suit facts.” Proxyconn Inc.,
. See also State Indus., Inc. v. A.O. Smith Corp.,
. A plaintiff's proper remedy for reckless post filing conduct is to seek a preliminary injunction, and "a decision to grant or deny a preliminary injunction is based on the district court’s consideration of four factors: '(1) the likelihood of the patentee’s success on the merits; (2) irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties; and (4) the public interest.” Erico Int’l v. Vutec Corp.,
. See, e.g., LML Holdings, Inc. v. Pacific Coast Distributing, Inc., No. 11cv06173,
