Beth Z. Shaw, Brake Hughes Bellermann LLP
Last week, the Federal Circuit reversed a district court’s judgment dismissing two patent lawsuits. K-Tech Telecommunications, Inc. (“K-Tech”) sued Time Warner Cable, Inc. (“TWC”) and DirecTV for patent infringement. TWC and DirecTV moved to dismiss the lawsuits because they argued the original complaints lacked factual specifics—including any identification of specific devices. The district court agreed and dismissed the cases for “failure to state a claim,” under the standards articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). On appeal, however, the Federal Circuit reversed, holding that the complaints contained enough specificity and plausibility for the lawsuits to continue. The Federal Circuit repeated that, to the extent any conflict exists between Twombly and the Federal Rules of Civil Procedure’s Forms regarding pleadings requirements, “the Forms control.”
K-Tech describes its patents as systems for modifying channel numbers or carrier frequencies to identify a television program. According to K-Tech, the Federal Communications Commission requires that all digital television signals in the U.S. follow certain specifications that define information included in a digital television signal (such as channel numbers and carrier frequencies). K-Tech contends that because TWC and DirecTV identify programs broadcast over their cable or satellite systems with a channel number, TWC and DirecTV use the methods and systems protected by the K-Tech patents to update the digital signals they receive.
Form 18 in the Federal Rules of Civil Procedure sets forth a sample complaint for direct patent infringement. The Federal Circuit stated that “any criticism we may have regarding the sufficiency of the forms themselves is strictly proscribed by Supreme Court precedent.” In other words, the Supreme Court has held what pleading requirements are enough to bring a case of patent infringement. The main requirements are a plausible short and plain statement of the plaintiff’s claim.
Quoting previous cases, the court held that “a patentee need only plead facts sufficient to place the alleged infringer on notice as to what he must defend.” In this case, the district court erred when it required “that a plaintiff preemptively identify and rebut potential non-infringing alternatives to practicing the claims of an asserted patent.” The Federal Circuit noted, however, that “we think it clear that an implausible claim for patent infringement rightly should be dismissed.”
The defendants also argued that K-Tech’s complaint failed to identify an infringing device (by name, model number, or otherwise) and that it failed to connect any alleged activity to the patents. K-Tech claims that, “to broadcast programs in a cable or satellite system, companies, such as [DirecTV and TWC], must identify television programs with a channel number so that users can select the programs.” K-Tech argued on appeal that both DirecTV and TWC operate in secrecy and that K-Tech is unable to ascertain exactly where the infringement is occurring or what devices are used to infringe. The court agreed with K-Tech that the law does not require that a plaintiff identify an accused device by name in its complaint. “A defendant cannot shield itself from a complaint for direct infringement by operating in such secrecy that the filing of a complaint itself is impossible,” wrote the court.
Judge Wallach concurred, disagreeing that “the Forms control” over the Supreme Court’s plausibility standard set forth in Iqbal and Twombly. He also wrote that such a statement was pure “dictum” anyway because this case did not present a conflict between Form 18 and plausibility. Judge Wallach wrote that the framework for analysis in a case like this should be that “plausible allegations conforming to Form 18 are adequate to satisfy the requisite Iqbal and Twombly standard.”
It therefore remains relatively easy for a plaintiff to bring a lawsuit for patent infringement. As long as the complaint is plausible and specific enough to satisfy the requirements of Form 18, it can survive a motion to dismiss. Yet, the Federal Circuit rightfully noted – though buried in a footnote – that a case can still be subject to “Rule 11”, which provides sanctions and other deterrents for frivolous lawsuits, or for cases where a plaintiff fails to identify easily gathered evidence of noninfringement through a pre-suit investigation.
The potential conflict between the Twombly and Iqbal “plausibility” standard, and the “simplicity” of Form 18, has caused trouble for the courts, as evidenced by this latest reversal. The Civil Rules Advisory Committee is considering revising Form 18. As many have suggested, it would make great sense for Form 18 to be modified to require more strict pleading standards, or perhaps, for Form 18 to be eliminated.
Additional WLF Resources on Conflict Between Rule 18 and U.S. S. Ct. Precedent:
- Patent Suit Pleading Standards Must Be Conformed To Supreme Court Precedents,WLF Legal Backgrounder
- Impact Of The Supreme Court’s Twombly & Iqbal Rulings On Patent Litigation,WLF Legal Backgrounder