Eaton Veterinary Pharmaceutical Incorporated v. Diamondback Drugs of Delaware LLC et al

Filing 36

ORDER granting 26 Defendants' Motion to Dismiss. Plaintiff's complaint is dismissed. Plaintiff is however given leave to amend. Plaintiff's amended complaint, should plaintiff elect to file one, shall be filed on or before December 9, 2014. Signed by Judge H Russel Holland on 11/18/14.(LSP)

WO

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA

EATON VETERINARY PHARMACEUTICAL )
INC., an Arizona corporation,
)
)
Plaintiff,
)
)
vs.
)
)
DIAMONDBACK DRUGS OF DELAWARE
)
LLC, a Delaware limited liability company,
)
et al.,
)
)
Defendants.
)
__________________________________________)

No. 2:14-cv-1208-HRH

ORDER
Motion to Dismiss
Defendants move to dismiss plaintiff’s complaint.1 This motion is opposed.2 Oral
argument was requested and has been heard.
Background
Plaintiff is Eaton Veterinary Pharmaceutical, Inc. Defendants are Diamondback Drugs
of Delaware, LLC; Diamondback Drugs, LLC; Michael R. Blaire; and Rory J. Albert. Blaire and

1

Docket No. 26.

2

Docket No. 31.
-1-

Albert are alleged to have founded the two corporate defendants, which are alleged to “own
and operate a veterinary pharmacy.”3
Plaintiff is the owner of U.S. Patent No. 6,930,127.4 The invention that is patented
“comprises the administration of a non-aqueous substance to an animal’s affected eye to treat
ophthalmic disease, wherein the non-aqueous substance contains a chemical called
tacrolimus.”5 Patent ‘127 contains three method claims.6 Claim 1 is an independent claim and
claims 2 and 3 depend on Claim 1.7 Claim 1 is
[a] method of treating pannus in canines having said disease and
comprising the steps of:
a)

providing a quantity of a composition consisting
essentially of an effective amount of tacrolimus in a
pharmaceutically acceptable non-aqueous lubricant
vehicle; and

b)

administering a quantity of said composition to the
third eyelid of an affected canine.[8]

3

Complaint at 3, ¶¶ 10-11, Docket No. 1.

4

Id. at 2, ¶¶ 2-3.

5

Id. at ¶ 4.

6

U.S. Patent No. 6,930,127 at col. 4, ll. 44-65, Exhibit A, Complaint, Docket No. 1.

7

Id.

8

Id. at ll. 46-58.
-2-

Plaintiff alleges that defendants have infringed Patent ‘127 “under 35 U.S.C. § 271 (b),
(c) by inducing [their] customers to use a method that infringes one or more of the claims of
the Patent, and by contributing to [their] customers’ use of a method that infringes one or
more claims of the Patent.”9 Plaintiff alleges that defendants’ infringement is “deliberate and
willful.”10 Plaintiff alleges that “[o]n July 30, 2013, a cease and desist letter along with a copy
of the Patent was sent to Michael R. Blaire, CEO of Diamondback Drugs of Delaware, and
Diamondback Drugs.”11 Plaintiff alleges that despite being put on notice on July 30, 2013, that
they were infringing Patent ‘127, defendants “continued to infringe the Patent....”12
On June 2, 2014, plaintiff commenced this action in which it asserts a claim for patent
infringement and a claim for willful patent infringement.
Pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure, defendants now move to
dismiss plaintiff’s complaint.
Discussion
“Rule 12(b)(6) authorizes courts to dismiss a complaint for ‘failure to state a claim upon
which relief can be granted.’” In re Rigel Pharmaceuticals, Inc. Securities Litig., 697 F.3d 869,
875 (9th Cir. 2012) (quoting Fed. R. Civ. P. 12(b)(6)). “To avoid dismissal, the complaint must

9

Complaint at 4, ¶ 17, Docket No. 1.

10

Id. at ¶ 21.

11

Id. at 2, ¶ 5.

12

Id. at 4, ¶ 20.
-3-

provide ‘more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.’” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). “‘[A] plaintiff must ‘allege sufficient factual matter ... to state a claim to relief that is
plausible on its face.’” OSU Student Alliance v. Ray, 699 F.3d 1053, 1061 (9th Cir. 2012)
(quoting Pinnacle Armor, Inc. v. United States, 648 F.3d 708, 721 (9th Cir. 2011)). “In
evaluating a Rule 12(b)(6) motion, the court accepts the complaint’s well-pleaded factual
allegations as true and draws all reasonable inferences in the light most favorable to the
plaintiff.” Adams v. U.S. Forest Srvc., 671 F.3d 1138, 1142-43 (9th Cir. 2012).
Defendants first argue that plaintiff has failed to state a plausible claim for infringement
under 35 U.S.C. § 271 because plaintiff has not alleged that a single entity could perform both
steps of Claim 1. Section 271(a) “relates to claims of direct infringement, whereas sections (b)
and (c) articulate two varieties of indirect infringement: infringement by inducement and
contributory infringement, respectively.” Nielsen Co. (US), LLC v. comScore, Inc., 819 F.
Supp. 2d 589, 593 (E.D. Va. 2011). Plaintiff does not allege that defendants were directly
infringing Patent ‘127. Rather, plaintiff alleges that defendants were inducing their customers
to infringe Patent ‘127 and that defendants were contributing to the infringement of Patent
‘127 by defendants’ customers. “It is axiomatic that ‘[t]here can be no inducement or
contributory infringement without an underlying act of direct infringement.’” In re Bill of
Lading Transmission and Processing System Patent Litig., 681 F.3d 1323, 1333 (Fed. Cir. 2012)
(quoting Linear Tech. Corp. v. Impala Linear Corp., 379 F.3d 1311, 1326 (Fed. Cir. 2004)). It
-4-

is also “axiomatic that a method claim is directly infringed only if each step of the claimed
method is performed.” Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1328 (Fed. Cir.
2008). Moreover, in order for there to be direct infringement, each step of the method claim
must be carried out by “a single person.”13 Limelight Networks, Inc. v. Akamai Technologies,
Inc., 134 S. Ct. 2111, 2118 (2014). If “performance of all the claimed steps cannot be attributed
to a single person, ... direct infringement never occur[s].” Id.
Defendants argue that plaintiff cannot state plausible infringement by inducement and
contributory infringement claims because the steps of Claim 1 of Patent ‘127 cannot be carried
out by the same person or entity, in this case defendants’ customers who are veterinarians.
Defendants argue that Claim 1 consists of a “providing” step and an “administering” step.
But, defendants argue that it is not plausible that their customers would both provide the
composition that is to be administered and administer the composition. Rather, defendants
contend that they “provide” the composition and their customers “administer” the
composition. If both steps cannot be carried out by a single person, then there can be no direct
infringement and if there is no direct infringement, there can be no infringement by

13

There is an exception to this rule. Under some circumstances, direct infringement
may be found where the actions of multiple parties combine to perform every step of a
claimed method. But, “where the actions of multiple parties combine to perform every step
of a claimed method, the claim is directly infringed only if one party exercises control or
direction over the entire process such that every step is attributable to the controlling party,
i.e., the mastermind.” Muniauction, 532 F.3d at 1329 (citation omitted). Plaintiff has not
alleged that defendants were controlling their customers.
-5-

inducement or contributory infringement. Thus, defendants argue that plaintiff has failed to
state plausible claims for infringement by inducement and contributory infringement.
This argument fails because contrary to defendants’ contention, it is plausible that
defendants’ customers, who are veterinarians, could perform both the “providing” step and
the “administering” step. In Meyer Intellectual Properties Ltd. v. Bodum, Inc., 690 F.3d 1354,
1385 (Fed. Cir. 2012), Meyer alleged “that Bodum infringed two of Meyer’s patents, both of
which are directed to a method for frothing milk[.]” “Generally speaking, the claims disclose
four steps: (1) providing a container that has a height to diameter aspect ratio of 2:1; (2)
pouring liquid ( e.g., milk) into the container; (3) introducing a plunger that includes at least
a rod and plunger body with a screen; and (4) pumping the plunger to aerate the liquid.” Id.
at 1359-60. “Bodum argued that it could not be liable for infringement because Meyer did not
offer evidence that Bodum itself performed each step of the method and Meyer offered no
evidence that its customers did so.” Id. at 1363. More specifically, Bodum argued “that it
could not be a direct infringer because it only practices the first step of the claim—‘providing
a container’—and its customers could not be direct infringers because, while they practice
each of the other steps, they do not practice the ‘providing’ step.” Id. at 1365. The court
construed the term “providing” and concluded
that nothing in the claim language or the patent specification
limits the “providing” step to a specific party. Under Bodum’s
proffered dictionary definition, it is clear that Bodum “furnishes”
or “supplies” the container by manufacturing and selling its milk
frothers. It is also clear under that same definition, however, that
-6-

anyone who takes a Bodum frother from the kitchen cabinet and
places it on the counter before filling it with milk can satisfy the
“providing” step. That person has undoubtedly made the
container available for use and prepared it for frothing. Accordingly, we construe the term “providing” to mean “furnishing,
supplying, making available, or preparing” and find that
anyone—Bodum or the end user of its products—can satisfy the
providing step.
Id. at 1369.
Similarly here, it is plausible that the end-user (the veterinarian) could satisfy the step
of “providing” the composition to be administered to a canine if “providing” is given its
ordinary meaning of “furnishing” or “supplying.” Defendant’s argument that only a
veterinary pharmacy can “provide” the composition because the “providing” step requires
that the composition contain a “pharmaceutically acceptable non-aqueous lubricant vehicle”
is unavailing. As plaintiff suggests, it is plausible that this language does not limit the claim.
In their reply brief, defendants offer a new argument as to why plaintiff’s complaint
should be dismissed. Although “[t]he district court need not consider arguments raised for
the first time in a reply brief[,]” Zamani v. Carnes, 491 F.3d 990, 997 (9th Cir. 2007), it may,
in its discretion, “consider the [new] issue even if it was raised in a reply brief.” Glenn K.
Jackson, Inc. v. Roe, 273 F.3d 1192, 1202 (9th Cir. 2001). In order for the court to consider an
argument raised for the first time in a reply brief, the opposing party must be given an
opportunity to respond to the new argument. Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir.
1996). In response to an inquiry by the court at oral argument, counsel for plaintiff stated that

-7-

he was prepared to address defendant’s new contention and did so. Thus, the court will
consider defendant’s new argument.
Defendants’ new argument is that plaintiff has failed to plead adequate factual support
for its claims that defendants are inducing infringement and contributing to infringement.
Plaintiff’s only “factual” allegation as to infringement is that
[o]n information and belief, Diamondback has committed and/or
is continuing to commit acts of infringement of the Patent under
35 U.S.C. § 271(b), (c) by inducing its customers to use a method
that infringes one or more claims of the Patent, and by contributing to its customers’ use of a method that infringes one or more
claims of the Patent.[14]
“Liability for induced or contributory infringement under § 271(b) or (c) requires
‘knowledge that the induced acts constitute patent infringement.’” SynQor, Inc. v. Artesyn
Technologies, Inc., 709 F.3d 1365, 1379 (Fed. Cir. 2013) (quoting Global–Tech Appliances, Inc.
v. SEB S.A., 131 S. Ct. 2060, 2068 (2011)). “This includes, in part, actual ‘knowledge of the
existence of the patent that is infringed.’” Id. (quoting Global-Tech Appliances, 131 S. Ct. at
2068). “[T]he patentee must show that the accused inducer took an affirmative act to
encourage infringement with the knowledge that the induced acts constitute patent
infringement.” Microsoft Corp. v. DataTern, Inc., 755 F.3d 899, 904 (Fed. Cir. 2014) (quoting
Global-Tech Appliances, 131 S. Ct. at 2068). “Absent the knowledge and affirmative act of
encouragement, no party could be charged with inducement.” Id.

14

Complaint at 4, ¶ 17, Docket No. 1.
-8-

Here, although plaintiff has alleged that defendants continued to infringe Patent ‘127
after being made aware of the patent,15 plaintiff has not alleged that defendants took any
affirmative acts to encourage their customers to infringe Patent ‘127. Plaintiff has done
nothing more than make a conclusory allegation that defendants induced infringement and
contributed to their customers’ infringement. Plaintiff has alleged no factual support for this
conclusory allegation.16 Plaintiff has not alleged how defendants induced or contributed to
the alleged infringement by their customers. Plaintiff has not alleged sufficient factual matter
to state plausible claims for relief, and plaintiff’s claims are dismissed.
Conclusion
Defendants’ motion to dismiss17 is granted. Plaintiff’s complaint is dismissed. Plaintiff
is however given leave to amend. Plaintiff’s amended complaint, should plaintiff elect to file
one, shall be filed on or before December 9, 2014.
DATED at Anchorage, Alaska, this 18th day of November, 2014.
/s/ H. Russel Holland
United States District Judge

15

Complaint at 4, ¶ 20, Docket No. 1.

16

Plaintiff’s counsel pointed to defendants’ advertising during oral argument, but
plaintiff’s complaint contains no allegations that defendants’ advertising instructed
defendants’ customers on how to infringe plaintiff’s patent.
17

Docket No. 26.
-9-