Creagri, Inc. v. Pinnaclife Inc

Filing 46

ORDER by Judge Lucy H. Koh granting in part and denying in part 27 Motion to Dismiss (lhklc2, COURT STAFF) (Filed on 1/1/2013)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
For the Northern District of California

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CREAGRI, INC., a California Corporation,

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Plaintiff,
v.
PINNACLIFE INC., a Nevada Corporation,

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Defendant.

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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND
GRANTING IN PART DEFENDANT’S
MOTION TO DISMISS

Plaintiff CreAgri, Inc. (“CreAgri”) filed this action against Pinnaclife, Inc. (“Pinnaclife”)

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on December 23, 2011, alleging infringement of U.S. Patent No. 6,416,808 (“the ’808 Patent”).

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ECF No. 1. On July 30, 2012, CreAgri filed an amended complaint, which included the addition of

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claims for direct and indirect infringement of U.S. Patent No. 8,216,599 (“the ’599 Patent”). ECF

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No. 23. Now before the Court is Pinnaclife’s motion to dismiss Count II of the Amended

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Complaint (“AC”). ECF No. 27 (“Mot.”). CreAgri filed an opposition, ECF No. 30, and

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Pinnaclife filed a reply. ECF No. 33. Having reviewed the parties’ pleadings and the relevant law,

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the Court finds this matter appropriate for resolution without oral argument pursuant to Civil Local

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Rule 7-1(b). Accordingly, the hearing on these motions set for January 3, 2012 is VACATED.

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However, the Case Management Conference remains as set on January 3, 2013 at 1:30 p.m. For

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the reasons discussed below, the Court DENIES in part and GRANTS in part Pinnaclife’s motion

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to dismiss with leave to amend.

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I. Background
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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS

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CreAgri makes and sells products containing olive derived polyphenols intended to promote
health. AC at ¶¶ 7-9. On July 9, 2002, the ’808 Patent, entitled “Method Of Obtaining A

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Hydroxytyrosol-rich Composition From Vegetation Water,” was issued to CreAgri. AC at ¶ 11 &

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Exh. A. Pinnaclife makes a range of dietary supplement products also relating to olives, including

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miracle Olivamine10 Essential, miracle Olivamine10 Full Spectrum, miracle Olivamine 10 Omega-3,

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miracle Olivamine 10 Mineral Boost, and miracle Olivamine 10 Cleanse. Id. at ¶ 19. On December

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23, 2011, CreAgri filed this suit against Pinnaclife, alleging that Pinnaclife infringes the ’808

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Patent by making, using, selling, offering for sale, and/or importing these and other products.

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Pinnaclife filed an Answer on February 13, 2012, ECF No. 8, denying that Pinnaclife infringes the

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United States District Court
For the Northern District of California

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’808 Patent, and raising several affirmative defenses and counterclaims. CreAgri filed an answer

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to the counterclaims on March 5, 2012. ECF No. 11.

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Subsequently, on July 10, 2012, the ’599 Patent, entitled “Method For Treatment of

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Inflammation,” was issued to CreAgri. Id. at ¶ 15 & Exh. B. CreAgri then filed the AC to add a

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second count for direct and indirect infringement of this new patent (“Count II”). Pinnaclife moves

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to dismiss Count II for failure to meet the pleading requirements for direct and indirect patent

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infringement.

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II. Legal Standard
A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim upon which relief

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can be granted “tests the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th

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Cir. 2001). Under Federal Rule of Civil Procedure 8, a Complaint must “give the defendant fair

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notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly,

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550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While “‘detailed

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factual allegations’” are not required, a complaint must include sufficient facts to “‘state a claim to

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relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,

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550 U.S. at 555, 570). “A claim has facial plausibility when the plaintiff pleads factual content that

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allows the court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Id.

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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS

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The sufficiency of a complaint for direct patent infringement, however, is governed by a

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different standard. Such a complaint “is to be measured by the specificity required by Form 18” in

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the Appendix of Forms to the Federal Rules of Civil Procedure. In re Bill of Lading Transmission

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and Processing System Patent Litigation, 681 F.3d 1323, 1334 (Fed. Cir. 2012). In this context,

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the Twombly and Iqbal standard is “too stringent.” Id. at 1335. This exception to the specificity

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requirements of Twombly and Iqbal applies only to claims of direct patent infringement, not to

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claims of indirect infringement. Id. at 1336-37 (“Form 18 should be strictly construed as

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measuring only the sufficiency of allegations of direct infringement, and not indirect

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infringement.”). A claim for indirect infringement must instead satisfy the specific requirements

United States District Court
For the Northern District of California

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articulated in Twombly and Iqbal. Id. For purposes of ruling on a Rule 12(b)(6) motion to dismiss,

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the Court accepts all allegations of material fact as true and construes the pleadings in the light

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most favorable to the plaintiff. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031

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(9th Cir. 2008).

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If a court grants a motion to dismiss, leave to amend should be granted unless the pleading

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could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 F.3d 1122, 1130

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(9th Cir. 2000). A court “may exercise its discretion to deny leave to amend due to ‘undue delay,

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bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by

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amendments previously allowed, undue prejudice to the opposing party . . . [and] futility of

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amendment.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892-93 (9th Cir. 2010)

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(quoting Foman v. Davis, 371 U.S. 178, 182 (1962)); see also Abagninin v. AMVAC Chem. Corp.,

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545 F.3d 733, 742 (9th Cir. 2008) (repeated failure to cure deficiencies by previous amendment

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sufficient to deny leave to amend).

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III. Discussion

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A. Direct Infringement

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The ’599 Patent consists of method claims. It is well established that a patent claiming a

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method is not infringed “unless all steps or stages of the claimed process are utilized.” NTP, Inc. v.

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Research in Motion, Ltd.,418 F.3d 1282, 1317 (Fed. Cir. 2005). However, a claim for direct

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infringement of a method patent is still a claim for direct infringement, and is therefore governed
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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS

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by the Form 18 pleading standard. Nothing in Form 18 suggests that its applicability is limited to

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device patents, nor did the Federal Circuit, in confirming that pleading requirements for direct

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infringement claims are governed by Form 18, suggest that this holding should be limited to device

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patents. Indeed, Pinnaclife appears to agree that CreAgri need only meet Form 18’s pleading

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requirements to state a claim for direct infringement. See Mot. at 3.

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Instead, Pinnaclife argues that CreAgri’s factual allegations are insufficient to meet even

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this low standard. CreAgri has alleged that Pinnaclife infringed the ’599 Patent “literally or under

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the doctrine of equivalents, by making, using, importing, offering to sell and/or selling products

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which infringe the ’599 Patent, including but not limited to, miracle Olivamine10 Essential.” AC at

United States District Court
For the Northern District of California

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¶ 32. Pinnaclife argues that CreAgri has not alleged the actual performance of the steps of the

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patented method. Mot. at 4. But using a product, which CreAgri has alleged, could certainly entail

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the performance of a patented method. See, e.g., Lucent Technologies, Inc. v. Gateway, Inc., 580

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F.3d 1301, 1318 (Fed. Cir. 2009) (affirming jury’s finding of infringement of method patent by use

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of products). Moreover, CreAgri’s allegation precisely tracks the language of Form 18. Form 18

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does not require a plaintiff to identify all of the claim limitations and how they are infringed for a

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device patent, nor does it require a plaintiff to list all of the steps for a method patent. Instead,

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Form 18 requires a simple allegation that the defendant has infringed “by making, selling, and

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using” the patented article. That is precisely what CreAgri has provided here. Pinnaclife has

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presented no other reason why CreAgri’s claim for direct infringement is insufficient.

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Accordingly, Pinnaclife’s motion to dismiss CreAgri’s claim for direct infringement of the ’599

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Patent is DENIED.

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B. Indirect Infringement
Count II also alleges indirect infringement, both by inducement and by contributory

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infringement of the ’599 Patent. Indirect patent infringement, either by inducement or by

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contributory infringement, requires an allegation of direct infringement by another. Dynacore

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Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1274 (Fed. Cir. 2004). The direct

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infringement requirement can be satisfied in the inducement context by proving that the

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defendant’s products necessarily infringe. See Lucent Technologies, 580 F.3d at 1322 (“[A]
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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS

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finding of inducement requires a threshold finding of direct infringement-either a finding of

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specific instances of direct infringement or a finding that the accused products necessarily

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infringe.”) (internal citations and quotation marks omitted).

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Regarding inducement, 35 U.S.C. § 271(b) provides that “Whoever actively induces

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infringement of a patent shall be liable as an infringer.” Inducement requires proof not only of

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infringement by another, but that the defendant “possessed the requisite knowledge or intent to be

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held vicariously liable.” Dynacore Holdings, 363 F.3d at 1273 (internal citations omitted). To

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survive a motion to dismiss, a plaintiff must plead “facts plausibly showing that the [defendant]

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specifically intended their customers to infringe the [patent].” Bill of Lading, 681 F.3d at 1339.

United States District Court
For the Northern District of California

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Contributory infringement refers to the “core notion that one who sells a component

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especially designed for use in a patented invention may be liable as a contributory infringer,

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provided that the component is not a staple article of commerce suitable for substantial

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noninfringing use.” Ricoh Co., Ltd. v. Quanta Computer Inc., 550 F.3d 1325, 1337 (Fed. Cir.

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2008). “In order to succeed on a claim of contributory infringement, in addition to proving an act

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of direct infringement, plaintiff must show that defendant knew that the combination for which its

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components were especially made was both patented and infringing’ and that defendant’s

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components have no substantial non-infringing uses.” Lucent Technologies, 580 F.3d at 1320

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(internal citations and quotation marks omitted).

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Here, CreAgri has not alleged that anyone other than Pinnaclife has directly infringed the

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’599 Patent, nor has CreAgri alleged that any Pinnaclife product necessarily infringes the ’599

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Patent. CreAgri does allege that “Pinnaclife publishes and provides documents intending that

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persons including the manufacturers, sellers, resellers, distributors, users and customers engage in

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direct infringement by their use of Pinnaclife’s ‘miracle Olivamine10 Essential,’” FAC at ¶ 33, but

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there is no allegation that any of these third parties has actually directly infringed, nor that use of

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any Pinnaclife product necessarily infringes. Rule 8 requires that a complaint, including one

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alleging claims for indirect infringement, “must contain sufficient factual matter, accepted as true,

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to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly,

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550 U.S. at 570). Thus, to satisfy Rule 8 in the context of a claim for indirect infringement, a
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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS

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plaintiff would, at a minimum, have to identify who allegedly directly infringed and how, or would

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have to allege that use of some particular product necessarily infringed. If CreAgri had made such

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allegations, the Court would accept them as true at this stage. But without such allegations,

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CreAgri has not alleged facts sufficient to establish that Pinnaclife has induced, or contributed to,

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any infringement. Accordingly, CreAgri has failed to state a claim for indirect infringement on

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which relief can be granted.

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Moreover, CreAgri must provide more specificity regarding the documents alleged to have

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induced infringement. The AC says only that Pinnaclife “publishes and provides documents

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intending that persons including the manufacturers, sellers, resellers, distributors, users, and

United States District Court
For the Northern District of California

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customers engage in direct infringement by their use of Pinnaclife’s ‘miracle Olivamine10

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Essential.” AC at ¶ 34. Although CreAgri need not provide a detailed description of the

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documents, CreAgri must provide enough information to give Pinnaclife “fair notice of what the ...

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claim is and the grounds upon which it rests.” Iqbal, 556 U.S. at 698-99, quoting Twombly, 550

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U.S., at 555 (omission in original). The claim for indirect infringement, as currently pleaded, does

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not provide the required notice. Further, CreAgri has not alleged any facts supporting an inference

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of intent to induce infringement. “In assessing whether it is reasonable to infer intent from

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statements or conduct . . . the Supreme Court recently made clear that a court must assess the facts

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in the context in which they occurred and from the standpoint of the speakers and listeners within

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that context.” Bill of Lading, 681 F.3dat 1340 (citing Matrixx Initiatives, Inc. v. Siracusano, 131

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S.Ct. 1309, 1324 (2011). Here, however, the conclusory statement that that Pinnaclife publishes

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documents “intending” that persons infringe, AC at ¶ 35, does not provide any facts at all from

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which such an inference could be drawn. Thus, CreAgri has not sufficiently pleaded its claim for

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induced infringement.

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C. Leave to Amend

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The dismissal of the indirect infringement claim of Count II of the AC is due to a

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deficiency in pleading, not necessarily a deficiency in legal theory. CreAgri may be able to cure

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this deficiency by the allegation of additional facts. Accordingly, the Court grants CreAgri leave to

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amend its complaint.
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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS

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IV. Conclusion
For the foregoing reasons, CreAgri’s motion to dismiss Count II of the AC is DENIED in

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part and GRANTED in part with leave to amend. An amended complaint, if any, must be filed

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within 21 days of the date of this Order. CreAgri may not add new claims or parties without

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seeking the opposing party’s consent or leave of the Court pursuant to Federal Rule of Civil

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Procedure 15. Failure to cure the deficiencies identified herein or to timely file an amended

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complaint will result in dismissal of the indirect infringement claim in Count II with prejudice.

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IT IS SO ORDERED.

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Dated: January 1, 2013

United States District Court
For the Northern District of California

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_________________________________
LUCY H. KOH
United States District Judge

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Case No.: 5:11-CV-06635-LHK
ORDER DENYING IN PART AND GRANTING IN PART DEFENDANT’S MOTION TO DISMISS