The United States Court of Appeals for the Federal Circuit (“Federal Circuit”) addressed the pleading standards for direct infringement, doctrine of equivalents infringement, indirect infringement and willful infringement in the recent case of Nalco Co. v. Chem-Mod, LLC, 2018 WL 1055851 (Feb. 27, 2018). The district court had dismissed Nalco’s fourth amended complaint with prejudice for failure to state a claim under Fed. R. Civ. P. 12(b)(6) because, in the district court’s view, the infringing process differed from the patented process in terms of the location and method of infringement. The Federal Circuit reversed, finding that the two infringement theories alleged by Nalco were plausible and that it was improper to determine disputed claim constructions or make factual determinations on the motion to dismiss.
The Federal Circuit reiterated that the Federal Rules of Civil Procedure generally require “only a plausible ‘short and plain’ statement of the claim showing that the plaintiff is entitled to relief.” Id. at *5. Arguments that prematurely address the merits—such as claim construction or how the accused method operates—are inappropriate because a motion to dismiss tests the sufficiency of the complaint, not the merits of the claim. The Federal Circuit also noted that its 2015 decision in Akamai Technologies., Inc. v. Limelight Networks, Inc., broadened the circumstances under which the acts of others may be attributable to a single defendant to support a direct infringement theory. Alleging divided infringement simply requires plausible allegations that one party can obtain a desired benefit only if it performs steps of the claimed method under terms prescribed by the defendant.
The take-away from this decision is that, to plead patent infringement, the plaintiff should allege facts sufficient to show that each element of the claim is satisfied by defendant’s product or performance of the claimed process. Bare allegations of infringement are insufficient. When evaluating infringement of a method by multiple actors, the plaintiff should determine whether contractual or other arrangements demonstrate sufficient facts to allege joint infringement. Further, unless a complaint is completely bare bones or implausible, defendants should refrain from a motion to dismiss the infringement claim on the merits and instead obtain the plaintiff’s infringement contentions through local patent rules or other means of discovery, and try to schedule an early claim construction hearing to resolve infringement allegations that lack merit.
Background
The patent at issue described a method for the removal of elemental mercury from the flue gas created by combustion in coal-fired power plants. Previous methods of removing mercury from coal combustion flue gas were not commercially viable. The patented method reacted halogens (such as bromine) with elemental mercury in the flue gas to form mercuric halides (such as HgBr2) that precipitate into solid particles that are more easily filtered from flue gas. Because the molecular halogens cannot be injected directly into the flue gas due to their corrosive properties, the patent instead claims the injection of a thermolabile halogen precursor that reacts in the heat of the flue gas to form a molecular halogen. The patent discloses that the preferred location to inject the precursor is in the combustion zone of the furnace. Independent claim 1 provides that the thermolabile halogen precursor is injected into the flue gas.
Nalco’s complaints accused defendants’ Chem-ModTM Solution, a process which involved the dual injection of two additives (bromine precursors) on the coal feed belts of coal-burning power generation stations before the coal is fed into a coal combustion process. The district court dismissed the fourth amended complaint. In that complaint, Nalco alleged that the Chem-ModTM Solution involved the step of “injecting a bromide compound” into the flue gas as required by claim 1, explaining that the additive is mixed with coal and then the resulting Chem-ModTM Solution mixture is injected into coal combustion flue gas to effect oxidation of elemental mercury into a mercuric bromide. Nalco alleged in the alternative that when a coal combustion furnace is operating, gases and other materials injected via coal injectors flow under pressure into areas of the furnace beyond the areas of the furnace in which the coal component of the Chem-ModTM Solution combusts and into additional areas of the furnace in which the coal combustion flue gas exists—in other words, the bromide compound is injected into the flue gas by an additional mechanism. The fourth amended complaint also pled “various ways in which Defendants control or direct the performance of the steps claimed” in the patent.
The District Court’s Decision
The district court dismissed the fourth amended complaint on the basis that the Chem-ModTM Solution differs from the patented method in the location and method of application of the precursor, including dismissing the claim of infringement under the doctrine of equivalents. The district court also dismissed the divided infringement claim, determining that the allegations that the defendants controlled or directed the performance of the steps of the patented method were insufficient. Nalco’s induced, contributory and willful infringement claims were dismissed for failing to plead direct infringement sufficiently.
The Federal Circuit’s Reinstatement of the Complaint
As noted above, the Federal Circuit reiterated that the Federal Rules of Civil Procedure, Rule 8(a)(2) “generally requires only a plausible ‘short and plain’ statement of the claim showing that the plaintiff is entitled to relief.” Id. at *5. The court must assume that well-pled allegations are true and draw all reasonable inferences in the plaintiff’s favor. Under Supreme Court precedent in Iqbal and Twombly, the complaint must simply contain sufficient factual matter “to state a claim to relief that is plausible on its face.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007))). Here, Nalco met the notice requirement of Rule 8 and the pleading standards required under Iqbal and Twombly. Nalco plausibly alleged two separate direct infringement theories: (1) that injection of the precursor occurs when treated coal is fed into the furnace for combustion, where it encounters coal combustion flue gas; and (2) that injection of the precursors occurs when the precursor flows under pressure through the furnace until it reaches the flue gas. Defendants’ objections to plaintiff’s pleadings were in effect claim construction arguments—i.e., that claim terms such as “flue gas” could not be construed consistent with plaintiff’s theory of infringement. Such arguments, including whether admissions made during the inter partes reexamination of the patent limited the construction of the claim, are inappropriate on a motion to dismiss. Further, defendants’ argument that the infringement theory was implausible because the precursor would decompose in the extreme heat of the combustion areas of the furnace was a factual determination also inappropriate to make on a motion to dismiss, particularly where the plaintiff has pled facts to the contrary. A motion to dismiss tests the sufficiency of the complaint—it does not determine the merits of the case. “The plausibility standard ‘does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence’ to support the plaintiff’s allegations.” Id. at *8 (quoting Twombly, 550 U.S. at 556).
The Federal Circuit also ruled that the doctrine of equivalents infringement claim was improperly dismissed because Nalco explicitly incorporated in the fourth amended complaint infringement contentions explaining its doctrine of equivalents claim, including how defendants’ use of the Chem-ModTM Solution satisfied the “injecting” claim element by achieving the same function of the claim in substantially the same manner as the literal claim element. The induced and contributory infringement claims were also wrongly dismissed because they were based on the finding that Nalco failed to adequately plead direct infringement. Further, Nalco alleged facts from which it could be proven that: (1) defendants specifically intended that third parties infringe the patent and knew that the third parties’ acts constituted infringement; and (2) defendant sold a material for use in practicing a patented process constituting a material part of the invention, knowing that it was especially made or adopted for infringement.
Nalco’s divided infringement claim was likewise improperly dismissed. Nalco alleged that defendants (1) controlled and directed operation of a test facility; and (2) conducted full-scale testing of the solution. In Akamai, the Federal Circuit “explained that an entity would be held responsible for the performance of method steps by others ‘where that entity directs or controls others’ performance,’ or ‘where the actors form a joint enterprise.’” Nalco at *9 (citing 797 F.3d at 1022). Akamai “broaden[ed] the circumstances in which others’ acts may be attributed to an accused infringer to support direct-infringement liability for divided infringement, relaxing the tighter constraints on such attribution reflected in our earlier precedents.” Nalco at *9 (citing Travel Sentry, Inc. v. Troff, 877 F.3d 1370, 1381 (Fed. Cir. 2017)). Joint infringement emphasizes correctly identifying the activity or benefit that is being conditioned on the performance of or one or more of the claim steps. The Federal Circuit “look[s] for ‘evidence that a third party hoping to obtain access to certain benefits can only do so if it performs certain steps identified by the defendant, and does so under the terms prescribed by the defendant.” Nalco at *9 (citing Travel Sentry, 877 F.3d at 1381). Here, Nalco alleged that defendants performed pilot scale tests using the Chem-ModTM Solution at a testing facility where all of the steps of the patented method were performed, all under defendants’ express control. Nalco also alleged that defendants directly performed full-scale testing at coal-fired power plants, where they controlled all aspects of the testing. The Federal Circuit found that each of these allegations adequately pled attribution of the testing activities to the defendants—the facility conducting the testing in each case performed each step of the claimed method and Nalco alleged sufficient facts to attribute the testing to defendants’ actions because defendants conditioned monetary benefits on the performance of the testing.
Clients would do well to keep in mind that plaintiffs pleading patent infringement should allege facts sufficient to show that each element of the claim is satisfied by the defendant’s product or performance of the claimed process.
