Lyda v. CBS Corp., (Fed. Cir. Sept. 30, 2016) (Before Reyna, Hughes, and Stoll, J.) (Opinion for the court, Stoll, J.)
The Federal Circuit affirmed a district court’s dismissal under Rule 12(b)(6) for failure to meet the pleading standards for joint patent infringement, holding that Form 18, from the Appendix to the Federal Rules of Civil Procedure, does not apply to a claim of joint infringement.
Lyda’s patents-in-suit cover methods and systems for “obtaining real time responses to remote programming” by “allow[ing] persons viewing or listening to a broadcast to respond to the broadcast in real time without requiring a personal computer.”
Lyda alleged that the CBS defendants infringed his patents by producing and operating the television show “Big Brother,” in which “audience members influence aspects of the show by voting via text message on their cellular phones.” Testing of this system was conducted by independent contractors, who were “[a]pparently under the control” of CBS. The contractors in turn “directed and controlled unnamed third parties to test the voting operations using ‘well known cell phones’ that they either owned or borrowed from some unidentified source,” according to Lyda.
The Court treated Lyda’s asserted system claims as method claims because they require the performance of particular method steps, and because Lyda’s Amended Complaint pleads these claims like method claims, “alleging direction or control over the independent contractors, who in turn direct or control the unnamed third parties.”
When used properly, Form 18—entitled “Complaint for Patent Infringement” and found in the Appendix to the Federal Rules of Civil Procedure—“‘effectively immunizes a claimant from attack regarding the sufficiency of the pleading.’ K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1283 (Fed. Cir. 2013) (internal citations omitted).” The Court has additionally held that Form 18 controls in the event that its requirements conflicts with pleading requirements per Twombly and its progeny. Notwithstanding these holdings, the Court has “also held that allegations of induced or contributory infringement, which have additional elements not found in direct infringement claims, are not governed by Form 18.”
Here, the Court held that “[b]ecause joint infringement requires additional elements not addressed in Form 18, . . . allegations of joint infringement must be measured by the Iqbal and Twombly standard without reference to Form 18.” Under Akamai and the Iqbal/Twombly pleading standard:
[a] claim of joint infringement . . . requires pleading 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.
While complying with Form 18, Lyda’s Amended Complaint “fail[ed] to plausibly plead sufficient facts to ground a joint infringement claim” and was properly dismissed by the lower court.
The Court additionally found that the district court did not abuse its discretion in denying Lyda leave to amend his complaint after the court found the pleadings insufficient. The Court saw no reason to disrupt application of “[t]he district court’s rules of practice [which] freely allow a plaintiff to amend its complaint in the face of a motion to dismiss, but curtails leave to amend where the plaintiff declines to do so until after the court finds the pleadings insufficient.”
The Appendix of Forms and Federal Rule of Civil Procedure 84, which stated that the forms “suffice under these rules” were eliminated from the Federal Rules of Civil Procedure. The Supreme Court stated that this rule change “shall govern in all proceedings in civil cases thereafter commenced [after December 1, 2015] and, insofar as just and practicable, all proceedings then pending.” Thus, Form 18 is not sufficient per se, and pleadings must adhere to the Twombly/Iqbal pleading standard, and must do so for each element of the allegedly infringed patent claim. This is particularly true for pleading joint infringement.