Karl Storz Endoscopy-America Inc v. Integrated Medical Systems International Inc
Filing
77
MEMORANDUM OPINION. Signed by Chief Judge Karon O Bowdre on 7/11/2019. (JLC)
FILED
2019 Jul-11 AM 09:08
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
NORTHERN DIVISION
KARL STORZ ENDOSCOPY-AMERICA
INC.,
Plaintiff,
v.
INTEGRATED MEDICAL SYSTEMS
INTERNATIONAL, INC.,
Defendant.
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Case No. 2:12-CV-2716-KOB
MEMORANDUM OPINION
This matter comes before the court on “Defendant’s Motion to Dismiss First Amended
Complaint and Initial Memorandum in Support of Motion.” (Doc. 64). For the reasons stated
below, this court WILL GRANT IN PART and DENY IN PART Defendant’s motion to dismiss
this case.
Plaintiff Karl Storz Endoscopy-America Inc., a medical device manufacturer, filed its
original complaint against Defendant Integrated Medical Systems International, Inc., a direct
competitor, in August 2012. (Doc. 1). In October 2012, the parties jointly moved to stay the
proceedings until resolution of the United States Patent and Trademark Office’s inter partes
reexamination of the patents at issue in this case. (Doc. 12).
The USPTO concluded its reexamination and reissue proceedings in October 2018 by
confirming all the claims in one of KSEA’s patents and reissuing KSEA’s other patent, though
with several amendments and eighteen additional claims. (Doc. 55). Plaintiff KSEA
subsequently moved for leave to amend its original complaint. (Doc. 58). This court granted
Plaintiff’s motion, and Plaintiff filed its amended complaint on November 20, 2018, alleging
1
additional and continuing violations between its original and amended complaints. Defendant
filed a motion to dismiss Plaintiff’s amended complaint, (doc. 64), and a motion to stay all
discovery until this court ruled on the motion to dismiss, (doc. 65). The court granted
Defendant’s motion to stay and now addresses Defendant’s motion to dismiss. (Doc. 73).
For the reasons stated below, the court WILL GRANT IN PART and WILL DENY IN
PART Defendant’s motion to dismiss and WILL LIFT the stay in this case.
I. Factual Background
Plaintiff Karl Storz Endoscopy-America, Inc. manufacturers and sells medical products,
including endoscopes. Defendant Integrated Medical Systems International, Inc. repairs and
resells medical products, including endoscopes. As an endoscope reseller, Defendant IMS
directly competes with Plaintiff KSEA’s endoscope business.
KSEA filed a method 1 patent application for assembling endoscopes with the United
States Patent and Trademark Office on August 18, 2005. (Doc. 63-1 at 2).
Sometime in 2007, KSEA obtained an allegedly IMS-repaired endoscope that it believed
violated its then-pending patent application. (Doc. 63 at ¶ 11). KSEA contacted IMS regarding
its alleged infringement on March 12, 2009; IMS denied any violation but refused to certify in
writing that it did not perform the steps of KSEA’s then-pending method patent.
KSEA filed a machine 2 patent application for an endoscope with the USPTO on March
30, 2009. (Doc. 63-1 at 11).
Pursuant to KSEA’s 2005 patent application, the USPTO issued KSEA U.S. Patent No.
7,530,945 (the ‘945 patent) on May 12, 2009. (Doc. 63 at ¶ 7). The ‘945 patent constitutes a
1
A method, also called a “process,” is “a mode of treatment of certain materials to produce a certain result.” 60 Am.
Jur. 2d Patents § 70 (2019).
2
A machine “is a concrete thing, consisting of parts, or of certain devices and combination of devices. A machine
includes every mechanical device or combination of mechanical powers and devices to perform some function and
produce a certain result or effect. 60 Am. Jur. 2d Patents § 71 (2019).
2
method patent, with claim 1 providing a “method for assembling an endoscope having a tubular
shaft [containing] an optical system having several components . . . at least partially surrounded
by a tube made of both a transparent and a shrunk material.” (Doc. 63-1 at 9).
In December 2010, KSEA filed a prior lawsuit in this court alleging infringement of the
‘945 claim against IMS. See Complaint, Karl Storz GMBH & Co. KG v. Integrated Med. Sys.
Int’l, Inc., 2:10-CV-3547-AKK (N.D. Ala. Dec. 21, 2010), ECF No. 1. Judge Kallon dismissed
that lawsuit on June 30, 2011, reasoning that “the allegations [] permit the court to infer only the
mere possibility of infringement.” Karl Storz Gmbh & Co. KG v. Integrated Med. Sys. Int’l, Inc.,
No. 2:10-CV-3547-AKK, 2011 WL 13134015, at *3 (N.D. Ala. June 30, 2011).
The USPTO issued KSEA’s second patent, U.S. Patent No. 8,029,437 (the ‘437 patent),
on October 4, 2011. (Doc. 63-1 at 11). The ‘437 patent constitutes a machine patent, with claim 1
describing an endoscope comprising “a tubular shaft [containing] an optical system having
several components . . . directly surrounded by a support piece made of a shrunk material,
wherein said shrunk material is a transparent material.” (Doc. 1-2 at 9).
In December 2011, KSEA obtained two IMS-repaired endoscopes it believed infringed or
evidenced infringement of the ‘945 method patent and the ‘437 machine patent. (Doc. 63 at
¶¶ 12–13).
KSEA filed the original complaint in this action on August 15, 2012, alleging patent
infringement against IMS. (Doc. 1). The complaint incorporated photographs of all three IMSrepaired endoscopes to support its infringement claims. IMS responded by requesting inter
partes patent reexamination by the USPTO in September 2012. (Doc. 7). Pending resolution of
the reexamination proceedings, the court stayed this case. (Doc. 13).
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The USPTO denied reexamination for all claims of the ‘945 patent and for claims 1–7 of
the ‘437 patent, but it ordered reexamination for claims 8–14 of the ‘437 patent. (Doc. 63 at
¶ 22). After amendments during reexamination, the USPTO ultimately confirmed the
patentability of claims 8–14 of the ‘437 patent. (Doc. 63 at ¶ 23).
Pursuant to KSEA’s reissue application filed in June 2013, the USPTO reissued the ‘437
patent as U.S. Patent No. RE47,044 (the ‘044 patent) on September 28, 2018, adding claims 15–
32. (Doc. 63-1 at 2).
The court subsequently lifted the stay and gave KSEA leave to file an amended
complaint. (Doc. 62). In its amended complaint, KSEA alleges that it discovered two more IMSrepaired endoscopes that infringed KSEA’s patents, one in 2013 and one in 2016. (Doc. 63 at
¶¶ 14–15).
IMS now moves to dismiss KSEA’s amended complaint under Federal Rule of Civil
Procedure 12(b)(6). (Doc. 64). The court stayed discovery in this matter pending the resolution
of IMS’s motion to dismiss. (Doc. 73).
II. Standard of Review
A Rule 12(b)(6) motion to dismiss attacks the legal sufficiency of the complaint.
Generally, the Federal Rules of Civil Procedure require only that the complaint provide a “‘short
and plain statement of the claim’ that will give the defendant fair notice of what the plaintiff’s
claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting
Fed. R. Civ. P. 8(a)). The Supreme Court explained that “[t]o survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to 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, 555 (2007)). A complaint states a facially plausible claim for relief
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“when the plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Id. (citation omitted).
The court accepts all factual allegations as true on a motion to dismiss under Rule
12(b)(6). See, e.g., Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000).
However, legal conclusions unsupported by factual allegations are not entitled to that assumption
of truth. Iqbal, 556 U.S. at 678.
III. Discussion
Defendant IMS’s motion to dismiss presents several arguments for dismissing Plaintiff
KSEA’s infringement claims. The motion presents arguments for dismissing (1) KSEA’s claims
related to the ‘945 patent and claims 1–14 of the ‘044 patent; (2) KSEA’s claims related to
claims 15–32 of the ‘044 patent; (3) KSEA’s claims under the doctrine of equivalents as to both
patents; and (4) KSEA’s claims of induced and willful infringement. This Memorandum Opinion
addresses each in turn.
A. ‘945 Patent and Claims 1–14 of the ‘044 Patent
IMS makes three distinct arguments for the dismissal of KSEA’s claims related to the
‘945 patent and claims 1–14 of the ‘044 patent.
1. Judge Kallon’s 2011 Order of Dismissal
IMS’s first argument is that this court’s dismissal of a prior action between the parties
supports dismissal of this case. In KSEA’s first lawsuit against IMS, with Judge Kallon
presiding, IMS similarly moved to dismiss for failure to state a claim. Judge Kallon granted
IMS’s motion to dismiss, concluding KSEA’s allegations “permit[ted] the court to infer only the
mere possibility of infringement,” because the only allegedly infringing incident occurred in
2007, two years before the issuance of KSEA’s patent. Karl Storz Gmbh & Co. KG v. Integrated
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Med. Sys. Int’l, Inc., No. 2:10-CV-3547-AKK, 2011 WL 13134015, at *3 (N.D. Ala. June 30,
2011). With evidence of only one allegedly infringing endoscope, discovered before KSEA had
obtained its patent, Judge Kallon declined to infer infringing activity after KSEA obtained its
patent. Id.
KSEA filed its second lawsuit against IMS in this court on August 15, 2012. This
complaint included the same allegations, as well as two additional alleged infringements, both
discovered in December 2011. (Doc. 1 at ¶¶ 13–14). After inter partes reexamination by the
USPTO, KSEA amended the complaint to include two more alleged infringements, which KSEA
alleges it discovered in 2013 and 2016. (Doc. 63 at ¶ 15–16).
Despite these additional factual allegations, IMS asks the court to apply Judge Kallon’s
analysis to KSEA’s amended complaint. But as this court understands Judge Kallon’s
Memorandum Opinion, Judge Kallon dismissed KSEA’s first lawsuit because its single
allegation of infringement happened before the patent office issued KSEA’s patent. While this
one incident of alleged infringement stated a possible claim of continued infringement, Judge
Kallon concluded that it did not state a plausible one.
But the same deficiency does not plague KSEA’s amended complaint now before this
court because KSEA alleges it discovered four different infringing endoscopes since the USPTO
first issued the patent claims at issue. If KSEA proves that even one of these four endoscopes
violated its patents, then it would have a viable claim for relief. So unlike the complaint before
Judge Kallon, this complaint does not require the court make any inferences to conclude that
KSEA has plausibly stated a claim of infringement of the ‘945 patent and claims 1–14 of the
‘044 patent.
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So the court WILL DENY Defendant’s motion to dismiss based on the argument that
Judge Kallon’s prior ruling mandates dismissal of this action.
2. KSEA’s Method Patent Infringement Claims
IMS next argues that KSEA’s complaint relies too heavily on conclusory allegations to
have plausibly pled its method patent infringement claim. (Doc. 64 at 19–20). KSEA’s complaint
alleges “on information and belief” that IMS performed every step of the ‘945 patent, its method
patent. (Doc. 63 at ¶ 28). IMS argues the court should disregard KSEA’s conclusory allegations
as insufficient to support a reasonable inference of infringement.
In response, KSEA argues that its allegations and photographs sufficiently allege its
method claim and cites 35 U.S.C. § 295 for the proposition that the court can “presume” from its
allegations and photographs that IMS used KSEA’s method claims when it repaired the
endoscopes at issue. (Doc. 74 at 10 n. 4).
But § 295, which allows a court to shift “the burden of establishing that the product was
not made by the [patented] process,” requires the court to make factual findings in the plaintiff’s
favor. See 35 U.S.C. § 295(1)–(2). Because the court makes no factual determinations when
testing the sufficiency of a complaint, it questions the appropriateness of applying that
presumption at this stage of litigation. See Dr. Greens, Inc. v. Stephens, No. 3:11-cv-638-JAH,
2012 WL 12846976, at *10 (S.D. Cal. Mar. 21, 2012) (“[T]he Court agrees with Plaintiff that the
presumption does not apply when deciding a motion to dismiss for failure to state a claim . . . .”).
Operating without the presumption, the court must decide if KSEA’s allegations “on
information and belief,” combined with photographs of the repaired endoscopes, plausibly allege
that IMS performed every step of KSEA’s patented method. As IMS argues, the court is not
required to accept conclusory allegations made “on information and belief.” Mann v. Palmer,
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713 F.3d 1306, 1315 (11th Cir. 2013). But the court may draw reasonable inferences for the
plaintiff when it pleads factual content sufficient for the court to do so. See Ashcroft v. Iqbal, 556
U.S. at 678.
KSEA includes photographic evidence of allegedly IMS-repaired endoscopes and asserts
that the photographs support its allegations that IMS repaired the endoscopes using KSEA’s
patented method. IMS’s motion specifically identifies two steps of KSEA’s method it believes
the photographs do not plausibly establish:
[I]t cannot be determined from the photographs whether the tube was transparent before
it was shrunken, as step a) of claim 1 of the ‘945 patent requires . . . [and] one cannot
determine from the photographs whether IMS performs step c) of claim 1, which requires
“checking a position of said components relative to one another through said transparent
shrunk material.”
(Doc. 64 at 19).
The court agrees that it cannot “determine” such details about IMS’s process from the
pictures alone, but it disagrees that this inability warrants dismissal. At this stage, KSEA must
only plausibly allege the elements of its claim and provide factual content sufficient for the court
to draw reasonable inferences in its favor, when necessary. Here, KSEA’s pictures show
endoscopes with sections clear enough for someone to check the position of components relative
to one another. (Doc. 63 at ¶¶ 12–13, 15, 17; Doc. 63-1 at 26–30, 33–34). 3 IMS would apparently
have this court adopt the alternative explanation that, when it repaired the endoscopes at issue, it
used an opaque material that becomes see-through upon being shrunken, or that after shrinking
the see-through material it declined to check the position of the components relative to one
another. But the court does not find either alternative explanation “obvious.” The Eleventh
Circuit has noted that “courts may infer from the factual allegations in the complaint ‘obvious
3
The parties dispute the meaning and importance of the word “transparent,” as used in KSEA’s patent. As discussed
in more detail below, the court declines to resolve that dispute at the motion for dismissal stage.
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alternative explanation[s],’ which suggest lawful conduct rather than the unlawful conduct the
plaintiff would ask the court to infer.” Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1290
(11th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 682 (2009)). This court instead draws
the reasonable inference that the material looked the same both before and after IMS shrunk it,
and that IMS capitalized on the obvious advantage of being able to visually inspect the
components through the material after shrinking it.
IMS does not identify any other steps of KSEA’s method patent as insufficiently pled, so
the court WILL DENY Defendant’s motion to dismiss based on the argument that Plaintiff failed
to sufficiently plead infringement of its method patent claims.
3. Scope of KSEA’s Patents
IMS alternatively argues that this court should dismiss KSEA’s claims because its patent
does not plausibly cover IMS’s allegedly infringing endoscopes. (Doc. 64 at 18–19). The root of
IMS’s argument is that KSEA’s patents require transparent material to be shrunk around an
endoscope’s internal components, but the allegedly infringing endoscopes use black material,
through which one cannot visually inspect the internal components.
The court does not agree with IMS’s contention that the material used to repair the
endoscopes is black and opaque. KSEA’s complaint includes pictures that, at a minimum,
establish the ability of light to pass through the material such that one could at least plausibly
inspect the positions of internal components. (Doc. 63-1 at 26–30, 33–34). But IMS correctly
asserts that KSEA’s patent claims at issue require a transparent tube. (Doc. 63-1 at 9, 18–19).
So, if the IMS-repaired endoscopes do not include tubes that are “transparent,” as KSEA’s
patents use the term, then the endoscopes would not constitute infringement.
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The court concludes that making a determination of whether the IMS-repaired
endoscopes include “transparent” material, as described in KSEA’s patents, would require this
court to engage in claim construction, which would be premature without a Markman hearing or
more evidentiary material. Nalco Co. v. Chem–Mod, LLC, 883 F.3d 1337, 1349 (Fed. Cir. 2018)
(“But Defendant’s arguments boil down to objections to [Plaintiff’s] proposed claim construction
. . . , a dispute not suitable for resolution on a motion to dismiss.”). As KSEA argues, its patents
could conceivably use the word transparent to mean only that one can “perform a visual check”
of the internal components. (Doc. 74 at 14). The court by no means commits itself to such a
claim construction, but it similarly cannot commit itself to the claim construction IMS offers,
which would exclude the allegedly infringing endoscopes.
IMS contends that KSEA’s own arguments in front of the patent trial and appeal board,
as well as the board’s decision, militate against adopting the definition of transparent KSEA now
proffers. But the Federal Circuit Court has indicated that district courts should not attempt to
interpret statements made during reexamination proceedings at the dismissal stage. Nalco, 883
F.3d at 1349 (“Resolution of that dispute, even if part of the [reexamination] record [] can be
considered, is particularly inappropriate in the Rule 12(b)(6) context.”).
Because the court declines to resolve at this juncture the parties’ dispute about the
meaning of “transparent,” it WILL DENY IMS’s motion to dismiss the parts of Counts I and II
that include KSEA’s direct infringement claims related to the ’945 patent and claims 1–14 of the
‘044 patent.
B. Claims 15–32 of the ‘044 Patent
Defendant IMS separately argues for the dismissal of KSEA’s infringement claims as to
claims 15–32 of the ‘044 patent. IMS raises two independent grounds for dismissal: (1) claims
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15–32 issued in September 2018, two years after KSEA last discovered an allegedly infringing
endoscope; and (2) the patent trial and appeal board’s decision forecloses the possibility that
claims 15–32 cover the IMS-repaired endoscopes. (Doc. 64 at 21–22). Because the court finds
IMS’s first ground persuasive, it declines to discuss the second ground for dismissal.
IMS argues that KSEA fails to plausibly allege infringement of claims 15–32 because
KSEA discovered the IMS-repaired endoscopes on which its infringement claims rely between
2007 and 2016—before the USPTO issued those patent claims.
KSEA construes IMS’s motion as arguing for the existence of intervening rights. 4 KSEA
argues that because intervening rights constitute affirmative defenses, which IMS failed to plead,
the court should disregard the argument altogether. (Doc. 74 at 11 n. 7).
But IMS’s motion does not rely on its potential intervening rights. Instead, liability for
infringing claims 15–32 of patent ‘044 could not attach to any actions taken before the USPTO
issued those claims. GAF Bldg. Materials Corp. v. Elk Corp. of Dallas, 90 F.3d 479, 483 (Fed.
Cir. 1996) (“Patent rights are created only upon the formal issuance of the patent . . . .”). So, to
survive dismissal, KSEA’s complaint must plausibly allege that IMS has infringed claims 15–32
since September 2018. KSEA argues that the “only reasonable inference is that IMS continues to
use the same process it has used since 2007, as evidence [sic] by IMS’ endoscopes from 2007,
2011, 2013, and 2016.” (Doc. 74 at 11 n. 7).
The court disagrees. The court need not make every inference in a plaintiff’s favor when
“obvious alternative explanations” exist. See Am. Dental Ass’n, 605 F.3d at 1290. Considering
these parties have been litigating this issue since 2009, the court notes that at least one obvious
alternative explanation exists: IMS could have adjusted its processes and products to avoid future
4
Intervening rights under 35 U.S.C. § 252 protect potential infringers from patent liability for actions made “prior to
the grant of a reissue.”
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infringement of KSEA’s patent (or to avoid future litigation for behavior and products KSEA
believes infringes its patents). Without the inference that KSEA’s processes remain unchanged
since 2016 and that it continues to produce infringing endoscopes, KSEA’s complaint establishes
that IMS has possibly infringed claims 15–32 of the ‘044 patent, but it fails to clear the threshold
of establishing IMS plausibly infringed those claims.
So the court WILL GRANT IMS’s motion to dismiss Count II only as it relates to claims
15–32 of the ‘044 patent and WILL DISMISS WITHOUT PREJUDICE KSEA’s claims of
literal infringement as they relate to claims 15–32 of the ‘044 patent.
C. Doctrine of Equivalents
In addition to its claims for literal infringement, KSEA’s complaint also alleges that
“Defendant at least infringes on [Plaintiff’s patents] under the doctrine of equivalents.” (Doc. 63
at ¶¶ 27, 35). “Under the doctrine of equivalents, a product or process that does not literally
infringe the express terms of a patent claim nonetheless may be found to infringe if there is
equivalence between the elements of the accused product or process and the claimed elements of
the patented invention.” 60 Am. Jur. 2d Doctrine of equivalents § 709 (2019).
IMS’s motion does not extensively address KSEA’s claims under the doctrine of
equivalents; its motion mentions KSEA’s doctrine of equivalents claims twice and calls KSEA’s
allegations conclusory. (See Doc. 64 at 13, 17). In response, KSEA argues that its doctrine of
equivalents claims alone “preclude[] dismissal at the pleading stage,” because the doctrine
“presents an issue of fact that cannot be resolved at the pleading stage.” (Doc. 74 at 18). IMS’s
reply brief elaborates on its motion and construes KSEA’s doctrine of equivalents claims as
formulaic recitations of the claims’ elements, with “no factual allegations showing how the
elements of these tests are met.” (Doc. 76 at 22–23).
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As an initial matter, the court does not need to address KSEA’s doctrine of equivalents
claims related to the ‘945 patent or claims 1–14 of the ‘044 patent, because the court determined
KSEA’s claims for direct infringement plausibly pled infringement. See Auburn Univ. v. Int’l
Bus. Machs., Corp, 864 F. Supp. 2d 1222, 1225 (M.D. Ala. 2012) (noting “that a claim under the
doctrine of equivalents can be brought through an allegation of direct infringement”).
As to claims 15–32 of the ‘044 patent, KSEA’s doctrine of equivalents claims suffer from
the same pitfalls as its literal infringement claims. That is, even if each IMS-repaired endoscope
would have violated claims 15–32 under a doctrine of equivalents theory, those patent rights did
not exist until after the USPTO reissued the patent and thus after IMS repaired the endoscopes.
As discussed above, the court declines to infer that IMS continues to produce allegedly
equivalent products, even if IMS did so previously. So the court WILL GRANT IMS’s motion to
dismiss Count II as it relates to KSEA’s doctrine of equivalents claims on claims 15–32 of the
‘044 patent and WILL DISMISS WITHOUT PREJUDICE KSEA’s doctrine of equivalents
claims on claims 15–32 of the ‘044 patent.
D. KSEA’s Claims of Induced and Willful Infringement
Finally, IMS moves to dismiss KSEA’s claims of induced infringement in Count II and
willful infringement in Counts I and II, arguing KSEA’s complaint fails to adequately plead
either claim.
1. Induced infringement of the ‘044 patent
IMS’s first argument for dismissing KSEA’s claim that IMS induced infringement of the
‘044 patent is that such a claim cannot exist in the absence of direct infringement. (Doc. 64 at 23)
(citing Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1272 (Fed. Cir. 2004)).
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Because the court will deny IMS’s motion to dismiss KSEA’s direct infringement claim as to
claims 1–14 of the ‘044 patent, it declines to apply that argument to claims 1–14.
As to claims 15–32 of the ‘044 patent, the court agrees that an induced infringement
claim cannot survive dismissal in the absence of plausible allegations that IMS or anyone else
directly infringed those patent claims. See Limelight Networks, Inc. v. Akamai Tech., Inc., 572
U.S. 915, 925 (2014) (“[T]he nature of the rights created by the Patent Act defeats the notion that
Congress could have intended to permit inducement liability where there is no underlying direct
infringement.”). The court already concluded that KSEA’s complaint fails to plausibly allege that
IMS or anyone else directly infringed claims 15–32 of the ‘044 patent, so the court WILL
GRANT IMS’s motion to dismiss KSEA’s induced infringement claim as to claims 15–32 of the
‘044 patent in Count II.
IMS’s second argument for dismissing KSEA’s claim of induced infringement of claims
1–14 of the ‘044 patent is that KSEA failed to allege “that IMS specifically intended that a third
party should infringe and that IMS knew that such third-party’s acts constituted direct
infringement.” (Doc. 64 at 24).
Induced infringement claims require a plaintiff to show “that the alleged inducer knew of
the patent, knowingly induced the infringing acts, and possessed a specific intent to encourage
another’s infringement of the patent.” Vita-Mix Corp. v. Basic Holding, Inc., 581 F.3d 1317,
1328 (Fed. Cir. 2009). IMS does not dispute its knowledge of KSEA’s patents but argues
KSEA’s complaint fails to plead that IMS knowingly induced third parties to commit acts it
specifically intended to violate KSEA’s patent.
An inducement claim requires infringing conduct by at least one third party, but “a
plaintiff need not identify a specific direct infringer if it pleads facts sufficient to allow an
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inference that at least one direct infringer exists.” In re Bill of Lading Transmission &
Processing Sys. Patent Litig., 681 F.3d 1323, 1336 (Fed. Cir. 2012) (emphasis in original).
KSEA’s complaint alleges that IMS “re-introduced [KSEA’s endoscopes] into the stream of
commerce,” thereby plausibly alleging that at least one third party acquired and directly
infringed KSEA’s patent. Further, because IMS knew that claims 1–14 of the ‘044 patent existed
and would have also known that introducing infringing products into the stream of commerce
would lead to third-party infringement, the court disagrees that KSEA’s complaint fails to
plausibly allege intent.
So the court WILL DENY IMS’s motion to dismiss KSEA’s induced infringement claim
as to claims 1–14 of the ‘044 patent but WILL GRANT IMS’s motion to dismiss the induced
infringement claim as to claims 15–32 of the ‘044 patent in Count II.
2. Willful infringement
IMS similarly argues KSEA’s claims of willful infringement fail for lack of factual
allegations establishing willfulness. When a defendant willfully infringes a patent, a plaintiff
may be entitled to recover enhanced damages. 35 U.S.C. § 284. The United States Supreme
Court has “limit[ed] the award of enhanced damages to egregious cases of misconduct beyond
typical infringement.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1935 (2016). The
Court provided that such a determination of egregiousness requires courts “to take into account
the particular circumstances of each case.” Id. at 1933.
Though not mandatory, trial courts may use the so-called Read factors to consider
whether a defendant’s infringement is egregious. Georgetown Rail Equip. Co. v. Holland L.P.,
867 F.3d 1229, 1244 (Fed. Cir. 2017) (describing the Read factors as “non-exclusive”); see also
Read Corp. v. Portec, Inc., 970 F.2d 816, 827 (Fed. Cir. 1992). The non-exclusive Read factors
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include, among others, (1) whether the infringer deliberately copied the patent; (2) the duration
of defendant’s misconduct; and (3) any remedial action by the defendant. Read, 970 F.2d at 827.
The court can hardly make a determination of the egregiousness of IMS’s conduct at the
dismissal stage, so it instead merely looks to KSEA’s complaint for factual allegations sufficient
to plausibly demonstrate subjective willfulness.
Here, after discovering an IMS-repaired endoscope it believed would violate its patent,
KSEA alleges it notified IMS of its then-pending patent application on March 12, 2009. KSEA
alleges to have discovered two more infringing IMS-repaired endoscopes in December 2011, and
it filed this lawsuit on April 15, 2012. Since then, while the USPTO reexamined and reissued
KSEA’s patents, IMS allegedly infringed KSEA’s patent at least two more times, once in 2013
and once in 2016. If proven, such repeated infringements over a seven-year period in the midst of
ongoing litigation and patent reexamination proceedings would evidence deliberateness,
duration, and a total lack of remedial behavior. So the court concludes that KSEA’s complaint at
least plausibly alleges conduct that could give rise to enhanced damages for willful infringement.
The court WILL DENY IMS’s motion to dismiss KSEA’s willful infringement claims in
Counts I and II of its amended complaint.
IV. Conclusion
For the reasons stated above, the court WILL GRANT IN PART and DENY IN PART
Defendant’s motion to dismiss. The court WILL GRANT Defendant’s motion to dismiss
Plaintiff’s claims related to claims 15–32 of the ‘044 patent and WILL DISMISS WITHOUT
PREJUDICE Count II of the amended complaint as it relates to those patent claims. The court
WILL DENY Defendant’s motion to dismiss all other claims in Plaintiff’s complaint. Having
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resolved the motion to dismiss such that some claims survive, the court WILL LIFT the stay in
this case.
DONE and ORDERED this 11th day of July, 2019.
____________________________________
KARON OWEN BOWDRE
CHIEF UNITED STATES DISTRICT JUDGE
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