IP Law Bulletin

In the recent case of Lyda v. CBS Corp., also filed prior to the rule change, the patentee sued CBS and its subsidiary, alleging infringement of method and system claims of two patents, U.S. Patent No. 7,434,243 (the '243 patent) and U.S. Patent No. 7,730,506 (the '506 patent). After being notified of deficiencies in its original complaint, the patentee amended the complaint to allege that CBS’s operation of the television show “Big Brother” infringed the patents in question by allowing the television audience to use text messages from their cell phones to influence aspects of the show.  Specifically, the amended complaint alleged that infringement occurred due to “the participation of people under the control or direction of an independent contractor engaged by the Defendant CBS Interactive [the subsidiary] to send votes using text messages.” The district court found that the amended complaint’s allegations of the use of an independent contractor implicated a theory of joint infringement. While there is not clear guidance about the applicability of Form 18 to claims of joint infringement, the general consensus among district courts is that Form 18 does not apply to joint infringement. Moreover, the district court found that the allegations in the complaint made it impossible to discern what actions, activities, services, or products infringe the patents, even if the generous pleading standard under Form 18 was applied. The pleadings were therefore found to be too vague and not sufficient to articulate a claim for relief.

On appeal, the Federal Circuit also considered the applicability of Form 18 in view of the December 2015 amendments to the Federal Rules of Civil Procedure. Unlike the district court in Rembrandt, the Federal Circuit found that the amendments did not apply to this case because at the time of enactment the Supreme Court instructed that they “shall govern in all proceedings in civil cases thereafter commenced and, insofar as just and predictable, all proceedings then pending.” The Amended Complaint, however, was filed in 2014 and the case was terminated when the complaint was dismissed in July 2015, so the case commenced prior to enactment of the amendments and was not pending thereafter. This led the Federal Circuit to conclude that the amendments were not in effect and Form 18 controlled.

After determining the applicability of Form 18, the Federal Circuit considered whether claims of joint infringement are appropriately measured under the Form 18 standard that typically applies to direct infringement claims. While noting that this issue has not been expressly addressed, the Federal Circuit largely agreed with the holding of the lower court. In particular, the Federal Circuit reasoned that joint infringement, like inducement and contributory infringement, has additional elements that are not found in direct infringement claims. For example, joint infringement requires showing that the acts of one party must be attributable to a second party to such a degree that a single entity is responsible for the infringement. Therefore, the Federal Circuit found that allegations of joint infringement are not sufficed by Form 18 and must be measured according to the Twombly/Iqbal standard.

Citing to its decision in Akamai Technologies, Inc. v. Limelight Networks, Inc., the Federal Circuit in Lyda stated that the patentee must plead “facts sufficient to allow a reasonable inference that all steps of the claimed method are performed and either (1) one party exercises the requisite “direction or control” over the others’ performance or (2) the actors form a joint enterprise such that performance of every step is attributable to the controlling party.” In light of this standard, the Federal Circuit found that the complaint fell short because it lacked factual support with regard to CBS’s alleged direction and control of the independent contractors, as well as the independent contractors’ direction and control of the third parties. The absence of facts showing (1) CBS’s control of the independent contractors, (2) how the third parties were directed or controlled, or (3) a relationship between CBS and the third parties such that behavior of the third parties should be attributed to CBS, illustrated that the patentee’s complaint did not meet the Twombly/Iqbal standard.

While the holding in Lyda provides guidance on the standard to be applied when pleading joint infringement, the Federal Circuit’s decision in this case is notable for two additional reasons. First, the Federal Circuit held that the Form 18 and its counterparts control “to the extent any conflict exists between Twombly (and its progeny) and the Forms regarding pleadings requirements…” This position may be the Federal Circuit’s attempt to put the brakes on decisions like Rembrandt that broaden the reach of Twombly/Iqbal.  Second, and perhaps more importantly, in highlighting the difference between direct infringement and inducement or contributory infringement, and now joint infringement, the Federal Circuit seems to suggest that assessment of pleadings of direct infringement may be more lenient than the Twombly/Iqbal standard. Direct infringement does not “require more,” as does indirect infringement, and the Federal Circuit in this case seems to be content that the “minimal requirements” of Form 18, i.e., (1) an allegation of jurisdiction; (2) a statement of ownership of the patent; (3) a statement of infringement “by making, selling, and using [the device] embodying the patent;” (4) a statement that notice of infringement was provided; and (5) a demand for an injunction and damages, are sufficient to plead direct infringement. Going forward, it will be important to monitor the prevalence of the requirements of Form 18 in direct infringement cases, as well as the standard of pleading that courts maintain with respect to direct infringement. Regardless, a prudent plaintiff would be well advised to plead facts sufficient to state a plausible claim for relief under Twombly/Iqbal.