Plaintiffs Defendants - Finnegan · 2017-04-01 · , No. 1:15-CV-188 (LJA), 2016 WL 6561566, at *2...

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

MARSHALL DIVISION

PANOPTIS PATENT MANAGEMENT,

LLC, OPTIS CELLULAR TECHNOLOGY,

LLC,

Plaintiffs,

v.

BLACKBERRY CORPORATION,

BLACKBERRY LIMITED,

Defendants.

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Case No. 2:16-CV-00059-JRG-RSP

(Lead Case)

Case No. 2:16-CV-00060-JRG-RSP

(Consolidated Case)

REPORT AND RECOMMENDATION ON

BLACKBERRY’S MOTION TO DISMISS (DKT. NO. 43)

PanOptis Patent Management, LLC, and Optis Cellular Technology, LLC (“PanOptis,”

collectively) allege that BlackBerry Corporation and BlackBerry Limited (“BlackBerry,”

collectively) infringe four patents: United States Patent Nos. 8,019,332, 8,102,833, 8,437,293,

and 8,174,506. BlackBerry moves to dismiss the complaint, contending that PanOptis’s

allegations fail to meet the pleading requirement. Because PanOptis’s complaint contains

sufficient detail, BlackBerry’s motion (Dkt. No. 43) should be DENIED.

DISCUSSION

Under Federal Rule of Civil Procedure 12(b)(6), the Court must dismiss a complaint that

does not state a claim for relief that is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To state a plausible

claim, PanOptis must plead facts to allow a court to draw a reasonable inference that BlackBerry

is liable for the alleged patent infringement. See id. (citing Twombly, 550 U.S. at 556). At this

Case 2:16-cv-00059-JRG-RSP Document 110 Filed 02/10/17 Page 1 of 12 PageID #: 2358

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stage, a court accepts all well-pleaded facts as true, and views those facts in the light most

favorable to the plaintiff. Bustos v. Martini Club, Inc., 599 F.3d 458, 461 (5th Cir. 2010).

On December 2, 2015, the authority governing the pleading standard for certain types of

patent infringement claims changed. See Lyda v. CBS Corp., 838 F.3d 1331, 1337, 1337 n.2

(Fed. Cir. 2016). While Federal Rule of Civil Procedure 84 and the Appendix of Forms

(specifically, Form 18) controlled pleadings for direct patent infringement claims alleged in

cases filed on or before December 1, 2015, the Iqbal/Twombly standard governs patent

infringement pleadings filed thereafter. See id. at 1337 n.2; Disc Disease Sols., Inc. v. VGH Sols.,

Inc., No. 1:15-CV-188 (LJA), 2016 WL 6561566, at *2 (M.D. Ga. Nov. 2, 2016) (collecting

cases). PanOptis filed its complaint on January 17, 2016, and there is no dispute that the

Iqbal/Twombly standard applies (though PanOptis does not appear to take clear a position on the

issue). See Dkt. No. 63 at 10.

A. PanOptis’s Direct Infringement Allegations

1) Infringement of the LTE Standard Patents

PanOptis alleges that the ’833, ’332, and ’293 patents are essential to practice the Long

Term Evolution (LTE) Standard set by the European Telecommunications Standards Institute

(ETSI). Complaint (Dkt. No. 1) ¶¶ 23-24. By complying with this standard, PanOptis claims that

at least eleven BlackBerry products are necessarily covered by the LTE patents. See, e.g., id.

¶ 37. For each of the three patents, PanOptis identifies a specific claim that is infringed and

alleges that the accused products comply with specific Sections of the LTE Standard document.

See, e.g., id. ¶ 44. BlackBerry argues that PanOptis’s allegations should include more detail. Dkt.

No. 43 at 6. The Court disagrees.


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For a standard essential infringement claim, PanOptis’s allegations are sufficient.

BlackBerry does not cite a case dismissing a complaint for inadequately alleging infringement

based on compliance with an industry standard, and the Court has found none. In fact, a party

asserting a standard essential patent will often rely on compliance with the standard as the sole

basis for infringement at trial. However unwise that practice might be, the point is that alleging

infringement of a standard essential patent is different than alleging ordinary infringement

because standard essential patent infringement rests on compliance with a universal industry

standard. See, e.g., Research In Motion Ltd. v. Motorola, Inc., 644 F. Supp. 2d 788, 793 (N.D.

Tex. 2008) (“A standard, . . . by definition, eliminates alternative technologies.”).

BlackBerry does not have a convincing argument to the contrary. BlackBerry contends

that PanOptis carefully worded its complaint to state that LG and Ericsson, the original assignees

of the LTE patents, merely “declared” the patents essential to practicing the ETSI LTE Standard,

which is not a sufficient allegation. Dkt. No. 43 at 7. It is nonetheless more than a “bare

assertion,” contrary to BlackBerry’s characterization, because it alleges a fact that if true

plausibly gives rise to an inference that the LTE patents are essential to the ETSI Standard, and

that the LTE patents remain essential to that standard today.

BlackBerry insists that the complaint is not detailed enough because “although the

complaint recites entire sections from standards documents, it fails to cite specific portions of

those standards documents or explain how any such portions allegedly infringe the claims of the

asserted patents.” Dkt. No. 43 at 7. No court has appeared to require the level of detail demanded

by BlackBerry, even after the abrogation of Rule 84 and Form 18. See, e.g., SIPCO, LLC v.

Streetline, Inc., No. CV 16-830-RGA, 2017 WL 277398, at *3 (D. Del. Jan. 20, 2017).

PanOptis’s LTE Standard patent allegations are therefore sufficient.


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2) Infringement of the ’506 Patent

The ’506 patent is not a standard essential patent. See Dkt. No. 1 ¶ 83. Thus, rather than

rely on a standard, PanOptis accuses nine BlackBerry products of infringing the ’506 patent. The

devices, according to the complaint,

incorporate object-oriented functionalities and associated software

and hardware interfaces, touchscreen hardware and related software,

and other hardware and software that BlackBerry configures,

installs, and includes in the BlackBerry Mobile Communication

Devices for the function of displaying and allowing movement of

objects on a touchscreen device, infringe one or more claims of the

’506 Patent, including but not limited to claim 8.10

Id. ¶ 89. In other words, PanOptis alleges that BlackBerry has products that include a

touchscreen device, and those products allow objects to move across the touchscreen. In footnote

10, PanOptis attempts to provide more detail by “incorporat[ing] by reference its Disclosure of

Asserted Claims and Infringement Contentions pursuant to Local Patent Rule 3-1.” Id. n.10.

These Contentions, however, were not provided to BlackBerry until three months after PanOptis

filed the complaint, see Dkt. No. 43 at 9, and they are not part of the complaint unless the

complaint is properly amended, see Lodsys Grp., LLC v. Brother Int’l Corp., No. 2:11-CV-

00090-JRG, 2013 WL 5353004, at *2 (E.D. Tex. Sept. 24, 2013) (complaint—not motions,

expert reports, or infringement contentions—governs scope of litigant’s claim).

As one court explained after Form 18 and Rule 84 were eliminated, “[c]learly, Plaintiff

could allege a lot more than it has, as no ethical lawyer would bring this lawsuit if the plaintiff

could not allege more.” SIPCO, 2017 WL 277398, at *3. PanOptis cannot credibly contend that

the ’506 patent covers any touchscreen device that allows objects to be moved across the screen.

Yet that is about all the detail PanOptis’s complaint alleges.

PanOptis’s allegations would nevertheless meet the requirements of Form 18, which

required only five statements, one of which was an allegation, similar to PanOptis’s, “that


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defendant has been infringing the patent ‘by making, selling, and using [the device] embodying

the patent.’” See In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d

1323, 1334 (Fed. Cir. 2012).

But Form 18 no longer applies. The question is what difference there is, if any, between

Form 18 and the Iqbal/Twombly standard. The latest guidance from the Federal Circuit comes

from Lyda v. CBS Corporation. See 838 F.3d at 1339. Although the Court was evaluating a

complaint filed before the abrogation of the Forms and Rule 84, the Court addressed joint

infringement claims that were not governed by Form 18 because those claims required additional

elements not contemplated by the Form. Id. A claim for joint infringement, according to the

Court, “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.” Id. (quoting Akamai Techs.,

Inc. v. Limelight Networks, Inc., 797 F.3d 1020, 1022 (Fed. Cir. 2015)).

On one hand, Lyda’s assessment of joint infringement claims seems consistent with Form

18. The reason Form 18 did not apply to joint infringement claims was because Form 18 did not

include a statement of all the elements of the joint claim, not because Form 18 lacked sufficient

detail for the direct infringement part of a joint claim. See id. The allegation exemplified by

Form 18—that a party is “making, selling, and using” a specific device “embodying the patent”

is a factual allegation that, if true, plausibly gives rise to a claim for infringement. See In re Bill

of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1334 (Fed. Cir. 2012).

Infringement is, after all, a question of fact. Eli Lilly & Co., v. Teva Parenteral Medicines, Inc.,

No. 2015-2067, 2017 WL 117164, at *3 (Fed. Cir. Jan. 12, 2017).


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Form 18 appears consistent with the Iqbal/Twombly standard inasmuch it required

something in between “labels and conclusions” or “a formulaic recitation of the elements of a

cause of action,” see Iqbal, 556 U.S. at 678, and detailed infringement contentions. Identifying

facts such as “making, selling, or using” a specific device is more than an “unadorned, the

defendant-unlawfully-harmed-me accusation.” See Iqbal, 556 U.S. at 678 (2009). By stating a

specific act of infringement and a specific device, Form 18 did more than conclude that “this

defendant infringed my patent.” Finally, Form 18 was consistent with the purpose of the

complaint—to provide notice of what the claim is, the grounds upon which it rests, and to limit

the scope of the action going forward. Twombly, 550 U.S., at 555; Lodsys Grp., LLC v. Brother

Int’l Corp., No. 2:11-CV-00090-JRG, 2013 WL 5353004, at *2 (E.D. Tex. Sept. 24, 2013).

On the other hand, Lyda suggests that slightly more detail than what was specified in

Form 18 is required, at least for a joint infringement claim. And there is no good reason why

more detail should be provided for the direct infringement element of a joint infringement claim

than is required for an ordinary direct infringement claim. For the direct infringement element of

a joint infringement claim, Lyda specified that the facts alleged should be sufficient to “allow a

reasonable inference that all steps of the claimed method are performed.” 838 F.3d at 1339

(emphasis added). Thus, while Form 18 requires factual allegations that a device embodies “the

patent,” Lyda appears to require factual allegations sufficient to give rise to a plausible inference

that a device meets all elements of a specific claim. See id.

It is not necessary, however, to announce a floor for the direct infringement pleading

standard in this case because PanOptis’s allegations satisfy the Lyda and Iqbal/Twombly

standards. PanOptis identifies nine specific devices that allegedly infringe the ’506 patent. Dkt.

No. 1 ¶ 89. Those devices, according to PanOptis, infringe a specific claim—claim 8—because


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the devices include “hardware and related software . . . for the function of displaying and

allowing movement of objects on a touchscreen device.” Id. If that is true, it is plausible that the

elements of claim 8 are embodied by the accused devices. The allegations do not perfectly match

the claim elements, but they are detailed enough to satisfy the pleading standard:

Claim 8 Elements Corresponding Allegation. Dkt. No. 1 ¶ 89

8. A mobile terminal comprising: a touch

screen configured to display at least one

object and to sense first and second touching

actions on the at least one object; and,

“displaying and allowing movement of

objects on a touchscreen device”

a control unit configured to display the at

least one object as being fixed and not

moveable, to release the at least one object

according to the second touching action such

that the at least one object can be moved, to

move the at least one object from a first

position to a second position on the touch

screen corresponding to the first touching

action on the at least one object, and to fix the

moved object to the second position on the

touch screen based on a manipulation of a

position fixing button that is separate from the

first and second touching actions

Plausibly embodied by “hardware and related

software . . . on a touchscreen device”

wherein the first touching action is a dragging

and dropping touching action on the touch

screen, and

“movement of objects on a touchscreen

device”

wherein the second touching action includes

touching the at least one object for a

predetermined time period.

“movement of objects on a touchscreen

device”

As this case illustrates, the pleading standard for patent cases appears uncertain after the

elimination of Form 18 and Rule 84. But the practical consequence of having not satisfied the

pleading requirement in a patent case is limited. There are very few Federal Circuit cases

addressing the pleading standard for an obvious reason—most district courts do not deny leave to

file an amended complaint that conforms to the pleading standard even after the sufficiency of

the pleading has been tested. Lyda involved the rare instance in which leave to amend was not

given. That decision was incidentally found to be within the district court’s discretion, and thus a


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plaintiff assumes a risk when making the choice to oppose a motion to dismiss rather than simply

amend the complaint. See 838 F.3d at 1341.; see also Fed. R. Civ. P. 15(a)(1)(B).

The more typical case, however, is illustrated by SIPCO, LLC v. Streetline, Inc., 2017

WL 277398, at *3 (D. Del. Jan. 20, 2017). The plaintiff’s allegations, according to the court, fell

significantly below the pleading standard, alleging only the following: “One, here are ten patents

we own. Two, you sell some products, which we have identified.” Id. As the Court viewed it,

“Plaintiff makes a legal conclusion, to wit, the sales of your products infringe out patents. This is

insufficient to plausibly allege patent infringement.” Id. The result was at best a minor

inconvenience: “Plaintiff has twenty-one days to file an amended complaint.” Id.

Given the typical result, it is not clear why BlackBerry filed this motion to dismiss to test

the sufficiency of PanOptis’s direct infringement claims. It cannot be because BlackBerry does

not have sufficient notice of PanOptis’s claims because BlackBerry filed the motion to dismiss at

least a month after BlackBerry received PanOptis’s more detailed infringement contentions. See

Dkt. No. 43 at 9. And BlackBerry must be aware that Rule 15(a)(2) gives a court discretion to

freely grant leave to amend anytime “justice so requires.” PanOptis’s complaint contains more

than adequate detail to avoid the risk that PanOptis’s case will surprisingly balloon, and

infringement contentions provide further safeguards against this risk. In reality, BlackBerry’s

motion could accomplish very little. The motion nevertheless consumed almost 90 pages of

briefing from both sides.

In sum, because infringement contentions are provided early in a patent infringement

case, parties should seriously question whether it is worth expending resources challenging the

sufficiency of a complaint as detailed as PanOptis’s. There may be cases in which real prejudice

has resulted from a defendant’s lack of notice (beyond the reality that in every case, the plaintiff


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has a head-start). But in most cases, the result will be a command to the Plaintiff to amend. If

that command comes after the plaintiff has served infringement contentions, a defendant gains

nothing beyond whatever nuisance the motion creates for the plaintiff. With this reality in mind,

the Court turns to the many additional reasons why, according to BlackBerry, PanOptis’s

complaint is inadequate.

B. “Without Limitation”

Because PanOptis labels certain allegations as “without limitation,” BlackBerry contends

the complaint fails to meet the pleading standard. Dkt. No. 43 at 9-10. Most courts ignore such

language when other allegations provide sufficient detail, and the Court will not divert from that

practice here. See Infineon Techs. AG v. Volterra Semiconductor Corp., No. C-11-6239 MMC,

2012 WL 5988461, at *2 (N.D. Cal. Nov. 29, 2012) (denying motion to dismiss complaint that

included “without limitation” language); Core Wireless Licensing S.A.R.L. v. LG Elecs, Inc., No.

2:14-cv-911-RSP-RSP, 2015 WL 5786501, at *3 (E.D. Tex. Sept. 30, 2015 (regardless of

“without limitation” language, identification of a category of direct infringers along with other

allegations was sufficient).

C. PanOptis’s Indirect Infringement Allegations

According to BlackBerry, PanOptis failed to adequately plead indirect infringement first

because PanOptis failed to adequately plead direct infringement. Dkt. No. 43 at 11. That

argument is no different than the one already addressed.

Second, BlackBerry contends that PanOptis failed to adequately plead that BlackBerry

had knowledge of third-party direct infringement. Dkt. No. 43 at 11-12. To the contrary,

PanOptis alleges that the accused “software and hardware components installed and configured

by [BlackBerry] . . . are especially made for the infringing manufacture, sale and use of


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BlackBerry Mobile Communication Devices, and have no substantial non-infringing uses.” Dkt.

No. 1 ¶¶ 46, 63, 80, 98. In addition, PanOptis alleges that BlackBerry knew about the asserted

patents. Dkt. No. 1 ¶¶ 29, 35, 52, 69, 87. These facts, if true, plausibly show that BlackBerry

had the requisite knowledge. See, e.g., Chrimar Sys., Inc. v. Adtran, Inc., No. 6:15-cv-618-JRG-

JDL, 2015 WL 8488485, at *3 (E.D. Tex. Nov. 18, 2015).

Third, BlackBerry contends that PanOptis has not adequately alleged the intent required

for an induced infringement claim. Dkt. No. 43 at 13-14. Yet PanOptis alleges that BlackBerry

“provide[d] manuals and support to resellers and end-use customers regarding the use and

operation of [the accused] products,” including “through its website . . . by telephone, and

through other means of communication.” Dkt. No. 1 ¶¶ 40, 57, 74, 92. Given that BlackBerry

allegedly had knowledge of the patents, PanOptis’s allegations are sufficient. See ZiiLabs Inc.,

Ltd. v. Samsung Elecs. Co., No. 2:14-cv-203-JRG-RSP, 2015 WL 1456448, at *3 (E.D. Tex.

Mar. 30, 2015); Script Sec. Sols. LLC v. Amazon.com, Inc., No. 2:15-cv-1030-WCB, 2016 WL

1055827, at *6 (E.D. Tex. Mar. 17, 2016) (Bryson, J., sitting by designation).

Fourth, BlackBerry argues that PanOptis inadequately alleges that there are no substantial

noninfringing uses, which is a required element of a contributory infringement claim. Dkt. No.

43 at 14-15. If products are allegedly “designed for the sole purpose of performing the claimed

functionality,” a plausible inference can be made that there are no substantial noninfringing uses.

See Core Wireless, 2015 WL 5786501, at *3. According to PanOptis, “[t]he software and

hardware components installed and configured by BlackBerry to practice the patented operations

and structures, do not constitute a staple article or commodity of commerce. Moreover, use of the

same is required for the operation of a BlackBerry Mobile Communication Device.” See, e.g.,


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Dkt. No. 1 ¶ 97-99 (representative allegations for ’506 patent). The lack of noninfringing uses is

therefore plausible from the face of the complaint.

D. Willful Infringement

BlackBerry contends that PanOptis’s willful infringement allegations are insufficient,

albeit under the then-existing Seagate standard, which required knowledge of the patents and

action in the face of an objectively high likelihood that the action would constitute infringement.

See Dkt. No. 43 at 15. PanOptis alleges actual notice of the patents, Dkt. No. 1 ¶ 103, and

infringement thereafter, id. ¶ 104-05. In the absence of any updated authority from BlackBerry

suggesting otherwise (no such authority was filed), the Court considers the allegations sufficient

to plausibly infer that BlackBerry engaged in the type of culpable behavior described in Halo

Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016).

E. Declaratory Judgment Claim

Finally, BlackBerry contends that PanOptis’s declaratory judgment claim should be

dismissed. See Dkt. No. 43 at 17-19. The Complaint alleges that the Plaintiffs “have in good faith

presented BlackBerry with FRAND terms for a worldwide license under Plaintiffs’ entire

portfolio of Essential Patents. BlackBerry, however, has rebuffed and continues to rebuff

Plaintiffs’ good faith efforts to negotiate a license with BlackBerry.” Dkt. No. 1 ¶ 110. The

Plaintiffs therefore seek a declaration that “they have complied with their obligations arising

from their licensing declarations to ETSI . . . and any applicable laws during their negotiations

with BlackBerry concerning a worldwide license under [their] Essential Patents.” Dkt. No. 1

¶ 111. BlackBerry contends that it has not threatened PanOptis with a claim for breach of a

FRAND obligation, and thus there is no case or controversy sufficient to establish subject-matter

jurisdiction. Dkt. No. 43 at 17.


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PanOptis’s declaratory judgment claim, however, is similar to claims permitted by other

courts in standard essential patent cases. See, e.g., Microsoft Corp. v. Motorola, Inc., No. C10-

1823JLR, 2012 WL 395734, at *5 (W.D. Wash. Feb. 6, 2012). PanOptis’s requested declaratory

relief is different than the declaratory claim dismissed by this Court in Core Wireless, in which

the plaintiff sought a declaration that the defendant was an “unwilling” FRAND licensee. See

2015 WL 5786501, at *7. PanOptis, by contrast, requests a declaration that it has complied with

FRAND obligations. Given PanOptis’s alleged offer and BlackBerry’s alleged refusal to take a

FRAND license to the LTE patents, a sufficient controversy exists to confer subject matter

jurisdiction. See Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 937 (Fed. Cir. 1993) (“When

there is an actual controversy and a declaratory judgment would settle the legal relations in

dispute and afford relief from uncertainty or insecurity, in the usual circumstance the declaratory

action is not subject to dismissal.”).

CONCLUSION

BlackBerry’s motion to dismiss (Dkt. No. 43) should be DENIED. A party’s failure to

file written objections to the findings, conclusions, and recommendations contained in this report

within fourteen days after being served with a copy shall bar that party from de novo review by

the district judge of those findings, conclusions, and recommendations and, except on grounds of

plain error, from appellate review of unobjected-to factual findings, and legal conclusions

accepted and adopted by the district court. Fed. R. Civ. P. 72(b)(2); see Douglass v. United

Servs. Auto. Ass’n., 79 F.3d 1415, 1430 (5th Cir. 1996) (en banc).


payner

Judge Roy S. Payne

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