Lyda v. CBS Interactive, Inc.

Filing 27

ORDER GRANTING 16 Motion to Dismiss, With Prejudice, and Denying Request for Attorneys' Fees and Sanctions Without Prejudice. Signed by Judge Jeffrey S. White on March 1, 2017. (jswlc3S, COURT STAFF) (Filed on 3/1/2017)

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1 2 3 NOT FOR CITATION 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 EDWIN LYDA, Plaintiff, 8 9 10 United States District Court Northern District of California 11 v. CBS INTERACTIVE, INC., Defendant. Case No. 16-cv-06592-JSW ORDER GRANTING MOTION TO DISMISS, WITH PREJUDICE, AND DENYING REQUEST FOR ATTORNEYS’ FEES AND SANCTIONS WITHOUT PREJUDICE Re: Dkt. No. 16 12 13 Now before the Court for consideration is the motion to dismiss filed by CBS Interactive, 14 Inc. (“Defendant”). The Court has considered the parties’ papers, relevant legal authority, the 15 record in this case, and it found the motion suitable for disposition without oral argument. See 16 N.D. Civ. L.R. 7-1(b). For the reasons set forth herein, the Court GRANTS Defendant’s motion to 17 dismiss, with prejudice. 18 19 BACKGROUND In 2014, Plaintiff filed a complaint, which he subsequently amended, against Defendant 20 and CBS Corporation (“CBS”) in the United States District Court for the Southern District of New 21 York. In that case, Plaintiff alleged Defendant and CBS infringed United States Patent No. 22 7,434,243, Response Apparatus Method and System (the “’243 Patent”) and United States Patent 23 No. 7,730,506, Method and Apparatus for Response System (the “’506 Patent”) (“Lyda I”). (See 24 Dkt. No. 1, Compl. ¶ 9; Dkt. No. 16-1, Declaration of Ehsun Forghany (“Forghany Decl.”), ¶¶ 2-3, 25 Ex. 1 (Lyda I Complaint), Ex. 2 (Lyda I Amended Complaint).) 26 On July 16, 2015, the Lyda I court dismissed the amended complaint for failure to state a 27 claim, and it denied Plaintiff leave to file a second amended complaint. (Forghany Decl., ¶ 4, Ex. 28 3 (Opinion and Order at 6-9).) The United States Court of Appeals for the Federal Circuit 1 affirmed. See Lyda v. CBS Corporation, 838 F.3d 1331 (Fed. Cir. 2016) (“Lyda I”).1 On November 14, 2016, Plaintiff filed his Complaint in this action, in which he asserts 2 3 four claims for relief against Defendant based on alleged infringement of the ’243 Patent and the 4 ’506 Patent. Plaintiff’s allegations of infringement in this case, as in Lyda I, are premised on 5 voting by the viewing audience of the television show “Big Brother.” 6 According to the patents, audience members of game shows or reality programs often use input devices to electronically vote in response to cues during the shows. In particular, the ’243 and ’506 patents cover methods and systems for obtaining real time responses to remote programming’ by allowing persons viewing or listening to a broadcast to respond to the broadcast in real time without requiring a personal computer. 7 8 9 10 Lyda I, 838 F.3d at 1334. Plaintiff alleges that Lyda I put Defendant on notice of claim 8 of the ‘243 Patent and United States District Court Northern District of California 11 12 claim 1 of the ‘506 Patent. Plaintiff alleges that, notwithstanding that notice, Defendant continued 13 to broadcast Big Brother, including permitting voting by the audience, and thereby induced 14 infringement “of the aforementioned patents by conducting most of the steps of method claims 15 and inducing the television audience to become direct infringers.” (Compl. ¶¶ 9-10, 15-16, 19- 16 20.) ANALYSIS 17 18 A. Applicable Legal Standard. Defendant moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Under 19 20 21 22 23 24 25 26 27 28 1 The issues presented to the Federal Circuit were whether Plaintiff’s complaint satisfied the pleading requirements set forth in Form 18 of the Appendix of Forms, which accompanied, now abrogated, Federal Rule of Civil Procedure 84. The Federal Circuit also considered whether claims of joint infringement should be measured by the pleading requirements set forth in Form 18 or whether they should be judged by the pleading standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2006) and Ashcroft v. Iqbal, 556 U.S. 662 (2009). Lyda I, 838 F.3d at 1338-39. The court held that, as with claims for induced or contributory infringement, claims of joint infringement should be governed by the Twombly and Iqbal standards. Id. at 1339. Plaintiff agreed at oral argument that he was proceeding against CBS and Defendant on a “joint infringement theory of direct infringement,” and the Federal Circuit also concluded that each of Plaintiff’s claims “implicates joint infringement.” It then found that Plaintiffs’ allegations were not sufficient under Twombly and Iqbal and affirmed the district court’s decision to dismiss the case with prejudice. Id. at 1339-41. 2 1 Rule 12(b)(6), the Court’s “inquiry is limited to the allegations in the complaint, which are 2 accepted as true and construed in the light most favorable to the plaintiff.” Lazy Y Ranch LTD v. 3 Behrens, 546 F.3d 580, 588 (9th Cir. 2008). Even under the liberal pleadings standard of Federal 4 Rule of Civil Procedure 8(a)(2), “a plaintiff’s obligation to provide the ‘grounds’ of his 5 ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the 6 elements of a claim for relief will not do.” Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 7 478 U.S. 265, 286 (1986)). Pursuant to Twombly, a plaintiff must not allege conduct that is 8 conceivable but must allege “enough facts to state a claim to relief that is plausible on its face.” 9 Id. at 570. “A claim has facial plausibility when the Plaintiff pleads factual content that allows the court to draw the reasonable inference that the Defendant is liable for the misconduct alleged.” 11 United States District Court Northern District of California 10 Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). “Ordinarily affirmative defenses may 12 not be raised by motion to dismiss, … but this is not true when, as here, the defense raises no 13 disputed issues of fact.” Scott v. Kuhlmann, 746 F.2d 1377, 1378 (9th Cir. 1984) (citations 14 omitted). As a general rule, “a district court may not consider any material beyond the pleadings in 15 16 ruling on a Rule 12(b)(6) motion.” Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994), overruled 17 on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002) (citation 18 omitted). However, the Court may consider documents attached to the complaint, documents 19 relied upon but not attached to the complaint, when the authenticity of those documents is not 20 questioned, and other matters of which the Court can take judicial notice, without converting a 21 motion to dismiss into a motion for summary judgment. Zucco Partners LLC v. Digimarc Corp., 22 552 F.3d 981, 990 (9th Cir. 2009).2 If the allegations are insufficient to state a claim, a court should grant leave to amend, 23 24 unless amendment would be futile. See, e.g. Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th 25 Cir. 1990); Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 246-47 (9th 26 2 27 28 Defendant requests that the Court take judicial notice of the pleadings and orders filed in connection with Lyda I. Plaintiff has not objected to Defendant’s request. Because the Court may take judicial notice of the existence of those documents, it grants Defendant’s request. See, e.g., Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001); Fed. R. Evid. 201. 3 1 Cir. 1990). 2 B. Plaintiff’s Claims Are Barred by the Doctrine of Res Judicata. Defendant argues Plaintiff’s claims are barred by res judicata, because they could have 3 4 been raised in Lyda I. “Res judicata, also known as claim preclusion, bars litigation in a 5 subsequent action of any claims that were raised or could have been raised in the prior action.” 6 Owens v. Kaiser Foundation Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001) (citation 7 omitted). The doctrine of res judicata and collateral estoppel “is a rule of fundamental and 8 substantial justice, of policy and of private peace, which should be cordially regarded and enforced 9 by courts.” Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394, 401 (1981). The Ninth Circuit’s test to determine whether the doctrine of res judicata applies is “well- 10 United States District Court Northern District of California 11 established.” Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985, 987 (9th Cir. 2005); see also 12 Accumed v. Stryker Corp., 525 F.3d 1319, 1323 (Fed. Cir. 2008) (“To the extent that a case turns 13 on general principles of claim preclusion, as opposed to a rule of law having special application to 14 patent cases, this court applies the law of the regional circuit in which the district court sits[.]”). 15 The Court considers whether “‘the earlier suit ... (1) involved the same ‘claim’ or cause of action 16 as the later suit, (2) reached a final judgment on the merits, and (3) involved identical parties or 17 privies.’” Mpoyo, 430 F.3d at 987 (quoting Sidhu v. Flecto Co., 279 F.3d 896, 900 (9th Cir. 18 2002)). 19 Plaintiff does not dispute that Lyda I reached a final judgment on the merits or that it 20 involved identical parties. Thus, the only issue is whether Plaintiff raised or could have raised 21 these claims in Lyda I. The Court analyzes this issue under Federal Circuit law. See Accumed, 22 525 F.3d at 1323. The Federal Circuit is guided by the approach set forth in the Restatement 23 (Second) of Judgments, by which “a claim is defined by the transactional facts from which it 24 arises.” Id. It is undisputed that Lyda I involved the same patents and Plaintiff alleged Defendant 25 infringed at least some of the same patent claims at issue in this case. In addition, Plaintiff’s 26 claims of infringement in Lyda I also are based on the voting procedures used in connection with 27 Big Brother. (See, e.g., Lyda I Amended Complaint ¶¶ 6-8.) Plaintiff’s current theory of liability 28 is that Defendant induced infringement of the ’243 and ’506 Patents. See 35 U.S.C. § 271(b) 4 1 (“Whoever actively induces infringement of a patent shall be liable as an infringer.”). 2 In order “[t]o establish liability under section 271(b), a patent holder must prove that once 3 the defendants knew of the patent, they actively and knowingly aided and abetted another’s direct 4 infringement.” DSU Medical Corp. v. JMS Co. Ltd., 471 F.3d 1293, 1305 (Fed. Cir. 2006) 5 (internal quotations and brackets omitted). Plaintiff argues he could not have asserted these claims 6 in Lyda I, because Defendant “was unaware of the patents-in-suit, and [Defendant] was incapable 7 of knowingly inducing infringement without such knowledge.” (Opp. Br. at 6:11-13.) Plaintiff has not provided the Court with any authority to suggest that he was legally 8 9 precluded from asserting Defendant induced infringement in Lyda I. The Federal Circuit has not directly addressed this issue.3 However, courts have permitted claims based on induced 11 United States District Court Northern District of California 10 infringement to go forward without pre-suit knowledge of a patent and have limited recovery to 12 post-suit conduct. See, e.g., Windy City Innovations LLC v. Microsoft Corp., 193 F. Supp. 3d 13 1109, 1115-16 (N.D. Cal. 2016); CAP Co., Ltd. v. McAfee, Inc., Nos. 14-cv-05068-JD, 14-cv- 14 05071-JD, 2015 WL 3945875, at *4-5 (N.D. Cal. June 26, 2015); Bascom Research LLC v. 15 Facebook, Inc., Nos. 12-cv-6293-SI through 12-cv-6297-SI, 2013 WL 968210, at *3-4 (N.D. Cal. 16 Mar. 12, 2013); cf. Script Security Solutions, LLC v., Inc., 170 F. Supp. 3d 928, 937 17 (E.D. Tex. 2015) (citing cases and noting majority view permits claims for induced infringement 18 based on filing of lawsuit to establish knowledge); Rembrandt Social Media LP v. Facebook, Inc., 19 950 F. Supp. 2d 876, 882 (E.D. Va. 2013) (noting split in district courts, but that majority view 20 finds that “post-suit knowledge (i.e., knowledge provided by the filing of the lawsuit) satisfies the 21 knowledge element for indirect infringement,” and that consequence is a patent holder “may only 22 recover damages for indirect infringement for the period of time that commences once the putative 23 infringer learns of the patent”). In light of the lack of guidance from the Federal Circuit and the 24 split in authority, Plaintiff had at least a colorable basis to allege the knowledge element of a claim 25 3 26 27 28 In In re Bill of Lading Transmission and Processing System Patent Litigation, on which Defendant relies, the Federal Circuit found that the plaintiff sufficiently alleged claims for induced infringement. 681 F.3d 1323, 1345-45 (Fed. Cir. 2012). In at least two of the complaints, the plaintiff relied on the complaint to allege the defendant knew of the patent. Id. The court did not, however, directly hold that a complaint is sufficient to show a defendant has the requisite knowledge of a patent for purposes of induced infringement. 5 1 for induced infringement based on the filing of the complaint. The Court’s conclusion that Plaintiff’s claims are barred is further supported by the fact 2 3 Plaintiff’s argument that Defendant was not aware of the patents-in-suit before he filed Lyda I is 4 not supported by the record. In Lyda I, in order to support an allegation of willful infringement, 5 Plaintiff alleged that “[o]n or about July 7, 2011, Defendant CBS Interactive was provided with 6 the notice sent to Defendant CBS pointing out the patents-in-suit and informed that its activities 7 were infringing the ‘243 and ‘506 Patents.” Plaintiff also alleged that Defendant was a willful 8 infringer because “it continued its infringing activities after being informed that those activities 9 were infringing the patents-in-suit.” (Lyda I Complaint ¶ 69.) Plaintiff reasserted those 10 allegations in his amended complaint. (Lyda I Amended Complaint ¶ 71.) Defendant also has submitted the letter referenced in the Lyda I Complaint as an exhibit. United States District Court Northern District of California 11 12 (Dkt. No. 22-2, Supplemental Declaration of Ehsun Forghany, ¶ 2, Ex. 7 (letter dated July 11, 13 2011.) Although the letter is sparse on details, Plaintiff stated that “at least claims 1 and 9 of the 14 ‘243 patent and at least claims 1 and 7 of the ‘506 patent are being infringed by the texting of 15 selections offered to the [Big Brother] audience.” (Id.) Defendant acknowledged that it received 16 the letter on July 28, 2011, and stated that it had “obtained copies of the patents and reviewed each 17 of the claims of both” patents-in-suit. (Id., ¶ 3, Ex. 8.) The Court finds that the facts alleged in this case arise from the same set of transactional 18 19 facts that gave rise to Lyda I. In addition, Plaintiff has not demonstrated that he was precluded 20 from asserting claims of induced infringement, and the facts show he could have raised such 21 claims in Lyda I. Accordingly, the Court finds Plaintiff’s claims are barred by the doctrine of res judicata.4 22 23 C. 24 Defendant has moved the Court for an award of attorneys’ fees, on the basis that the case 25 26 The Court Denies, Without Prejudice, Defendant’s Request for Attorney’s Fees and Sanctions. qualifies as an “exceptional” case under 35 U.S.C. section 285. In the alternative, Defendant seeks 27 4 28 In light of this ruling, the Court does not reach Defendant’s alternative argument regarding the sufficiency of the pleadings. 6 1 san nctions under 28 U.S.C. section 1927 The Cour denies those requests, without prej 7. rt judice. The 2 Court’s ruling is without pr rejudice to Defendant fil D ling a proper noticed m rly motion for fe and/or ees 3 san nctions, with fourteen days after en of judgm hin d ntry ment. See Fe R. Civ. P 54(d); N.D L.R. 7ed. P. D. 4 8(d If Defend moves for fees and costs under both Section 285 and Se d). dant f n ection 1972, it shall , 5 add dress the leg authority and standard supportin a request f fees and costs under both gal ds ng for 6 statutes. In add dition, Defen ndant shall support any s s such motion with declar n rations and d documentary y 7 evi idence that sets forth the fees and costs it seeks t recover. s e to CONCLU USION 8 9 For the foregoing re easons, the Court GRAN Defend C NTS dant’s motion to dismiss. Because n lea to amend would be futile, the Co dismisse this case w prejudic The Cou shall issue ave d fu ourt es with ce. urt e 11 United States District Court Northern District of California 10 a separate judg gment, and th Clerk sha close this file. he all 12 13 14 15 IT IS SO ORDER S RED. Da ated: March 1, 2017 1 ___ __________ ___________ __________ ________ JEF FFREY S. W WHITE Un nited States D District Judg ge 16 17 18 19 20 21 22 23 24 25 26 27 28 7

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