Claims for Inducing Infringement and Contributory Infringement Dismissed for Failure to Allege Knowledge of Patent-in-Suit

by Jeffer Mangels Butler & Mitchell LLP

Unisone Strategic IP, Inc. ("Unisone") filed a patent infringement action against Tracelink, Inc. ("Tracelink"). Tracelink filed a motion to dismiss the claims for indirect (induced and contributory) infringement because Unisone had alleged no facts demonstrating Tracelink "had the intent to cause infringement . . . or that [Defendant] willfully infringed the patent." Tracelink further asserted that Unisone "does not even allege that [Defendant] had knowledge of the '538 patent." In addition, Tracelink argued that Unisone's contributory infringement claim failed because Plaintiff had not alleged the necessary facts detailing how the accused product is made or adapted for use in an infringement of the patent-in-suit.

The district court began its analysis of the inducing claim by quoting the relevant statutory language and the standard set out by the Federal Circuit. "Whoever actively induces infringement of a patent shall be liable as an infringer." 35 U.S.C. § 271(b). To state a claim for induced infringement, a plaintiff must allege facts showing the alleged infringer (1) knew of the patent, (2) knowingly induced the infringing acts, and (3) possessed a specific intent to encourage another's infringement of the patent. DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1304 (Fed. Cir. 2006); Pacing Techs., LLC v. Garmin Int'l, Inc., 2013 WL 444642, at *2 (S.D. Cal. Feb. 5, 2013).

The district court then noted that "decisions vary as to whether knowledge of a patent based on the filing of a complaint is sufficient to meet the knowledge requirement for an induced infringement claim. See Pacing Techs., 2013 WL 444642, at *2 (concluding that post-filing knowledge of a patent suffices to state a claim for induced infringement); see also EON Corp. IP Holdings, LLC v. Sensus USA, Inc., 2012 WL 4514138, at *1(N.D. Cal. Oct.1, 2012) (concluding that " post-filing knowledge is sufficient to meet this requirement"); but see Mallinckrodt Inc. v. E-Z-EM Inc., 670 F. Supp. 2d 349, 354 (D. Del. 2009) (finding the plaintiffs' contention that knowledge can be established by the filing of a complaint unpersuasive)."

The district court adopted the view that post-filing knowledge is sufficient to meet the knowledge requirement as to any infringement occurring after the filing of a complaint because there is "no reason why a defendant who is directly infringing on a product should avoid liability for an indirect infringement claim when it continues to sell the allegedly infringing product and encourages others to infringe, simply because it happened to learn of the patent in connection with a lawsuit." Pacing Techs., 2013 WL 444642, at *2 (quoting Trading Tech. Int'l., Inc. v. BCG Partners, Inc., 2011 WL 3946581, at *4 (N.D. Ill. Sept. 2, 2011)).

Nonetheless, even though the district court adopted the post-filing rule, "Plaintiff still fails to allege sufficient facts establishing Defendant had knowledge of the patent. No where in the Complaint does Plaintiff allege that the filing of the Complaint satisfied the knowledge requirement for induced infringement. In fact, Plaintiff does not allege Defendant had knowledge of the '538 patent at all. In opposition to Defendant's Motion to Dismiss, Plaintiff nevertheless argues its "indirect infringement claims are presently limited to [Defendant's] post-filing conduct" and that Defendant gained knowledge of the patent from the filing of the Complaint. (ECF No. 19.) While alleging necessary facts in an opposition brief may suffice to acquire leave to amend a deficient complaint, such new facts do not save a deficient complaint from dismissal."

The district court also found that the complaint failed to sufficiently allege that "Defendant had the specific intent to induce others to infringe. Plaintiff does not allege facts showing Defendant took affirmative steps to induce others to infringe. Plaintiff alleges Defendant "has the specific intent to encourage its customers and suppliers to infringe the '538 patent directly by (among other things) intentionally encouraging and/or aiding its customers and suppliers to use [Defendant's] SCMS software." This allegation fails because Plaintiff must allege "more than just an intent to cause the acts that produce direct infringement." See Kyocera, 545 F.3d at 1354."

Turning to the contributory infringement claim, "Defendant moves to dismiss Plaintiff's claim for contributory infringement because Plaintiff failed to allege Defendant had knowledge of the '538 patent or the specific intent to cause infringement. Defendant also asserts that Plaintiff failed to allege Defendant's software is 'especially made or especially adapted for use in an infringement.'"

The district court agreed with the "Plaintiff that, unlike a claim for induced infringement, a claim for contributory infringement does not require a showing of specific intent to cause infringement. See e.g., INVISTA North America S.a.r.l. v. M & G USA Corp., 2013 WL 3196817, at *13 n.12 (D. Del. June 25, 2013) ("Intent to cause infringement is not a requirement of contributory infringement under 35 U.S.C. § 271(c).")."

However, the district court still found that the complaint failed to adequately allege a claim for contributory infringement. "As discussed above, Plaintiff has failed to allege Defendant's knowledge of the '538 patent. Plaintiff also fails to allege facts showing how any component of Defendant's SCMS software is especially made or especially adapted for use in an infringing "material or apparatus."

Indeed, the district court found that "Plaintiff merely recites the statutory language of § 271(c) but does not allege any facts regarding which component of Defendant's SCMS software is made or adapted for use in an infringement. Because Plaintiff has not alleged facts as to Defendant's knowledge of the '538 patent and did not identify which component of Defendant's SCMS software is made or adapted for use in an infringement, Plaintiff fails to allege facts to support a claim for contributory infringement." Accordingly, the district court dismissed the claims for inducing and contributory infringement with leave to amend.

Unisone Strategic IP, Inc. v. Tracelink, Inc., Case No. 3-13-cv-1743-GPC-JMA (S.D. Cal. Dec. 16, 2013)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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