T5 Labs (Delaware) LLC v. Gaikai Inc.
Filing
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REPORT AND RECOMMENDATIONS re 14 DENYING MOTION to Dismiss for Failure to State a Claim filed by Gaikai Inc.. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Object ions (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 4/22/2013. Signed by Judge Mary Pat Thynge on 4/5/13. (kjk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
T5 LABS (DELAWARE) LLC,
Plaintiff,
v.
GAIKAIINC.,
Defendant.
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) C.A. No.: 12-1281 (SLR) (MPT)
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REPORT AND RECOMMENDATION
I.
Introduction
Plaintiff, T5 Labs (Delaware) LLC ("T5") brought this action against Gaikai Inc.
("Gaikai"), alleging Gaikai infringed its U.S. Patent No. 8,203,568 ("the '568 patent")
directly, by inducing others to infringe, and by contributory infringement. T5 seeks
monetary damages, attorney's fees, any available equitable or legal remedies, and to
permanently enjoin Gaikai from continued infringement. 1
Presently before the court is Gaikai's motion to dismiss 2 T5's complaint, pursuant
to Federal Rule of Civil Procedure ("FED. R. C1v. P.") 12(b)(6) for failing to state a claim
upon which relief can be granted.
II.
Jurisdiction and Venue
Pursuant to 28 U.S.C. § 1338(a}, this court has original jurisdiction as this matter
1
D.l. 1 at 3-4.
2
0.1. 14.
relates to patents.
Pursuant to 28 U.S.C. §§ 1391(d) and 1400(b), venue properly exists in this
court because T5 and Gaikai are companies organized under the laws of Delaware.
Ill.
Parties' Positions
A.
Gaikai's Position
Gaikai argues T5's complaint fails to state a claim for direct and indirect
infringement. As to direct infringement, Gaikai maintains T5 failed to provide
"meaningful notice of which products or services are actually accused of infringement"
and failed "to specify, at a minimum, a general class of products or a general
identification of the alleged infringing methods. 3 Gaikai further contends T5 provided
"no notice to Gaikai of the alleged infringement" and failed to satisfy Rule 8(a)(2) of the
FED.
R.
CIV.
P. 4
In regard to indirect infringement, Gaikai argues T5 failed to provide any factual
support for the inducement allegations, and the complaint is improper under Twombly
because it only provides "a formulaic recitation of the elements of a cause of action." 5
Gaikai also states T5's indirect infringement claims fail to specify which products or
services are infringing, thereby failing to state a claim for inducement of infringement. 6
Gaikai maintains T5 similarly failed to allege any facts in support of a claim for
contributory infringement,? Therefore, Gaikai seeks dismissal of T5's complaint for
3
Eidos Comms., LLC v. Skype Technologies SA, 686 F. Supp. 2d 465, 467 (D. Del. 2010); D.l. 15
4
D.I.15at6.
Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 555 (2007); D.l. 15 at 7.
D.l. 15 at 8.
at 4-5.
5
6
7
/d.
2
direct infringement, inducement of infringement, and contributory infringement. 8
B.
T5's Position
T5 counters it properly pled direct infringement by complying with Rule 8(a)(2)
and Form 18 of FED. R. CIV. P., and maintains its complaint properly identified the
accused product or service. 9
T5 further maintains it pled sufficient facts for inducement of infringement for at
°
least post-complaint acts of inducement by Gaikai. 1 Furthermore, T5 argues it pled
sufficient facts for contributory infringement for at least post-complaint acts of
contributory infringement. 11 T5 requests Gaikai's motion be denied. 12
IV.
Legal Standard
A.
Motion to Dismiss
In analyzing a motion to dismiss under Rule 12(b)(6), a review of FED. R. C1v. P.
8(a)(2) is necessary. Rule 8(a)(2) requires a pleading to contain a "short and plain
statement of the claim showing that the pleader is entitled to relief." That standard
"does not require 'detailed factual allegations,' but ... demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation." 13 Thus, to survive a
motion to dismiss under Rule 12(b)(6), a complaint "must contain sufficient factual
matter, accepted as true, to 'state a claim for relief that is plausible on its face."' 14 The
8
/d. at 6, 8-10.
D.l. 17 at 2-3.
10
/d. at 4.
11
/d. at 6.
12
/d. at 4, 6-7.
13
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atlantic Corporation v. Twombly, 550
U.S. 544, 555 (2007)).
14
/d. (citing Twombly, 550 U.S. 544, 570 (2007)); see FED. R. CIV. P. 12(b)(6).
9
3
purpose of a Rule 12(b)(6) motion to dismiss is to test the sufficiency of a complaint, not
to resolve disputed facts or decide the merits of the case. 15 Evaluating a motion to
dismiss requires the court to accept as true all material allegations of the complaint. 16
"The issue is not whether a plaintiff will ultimately prevail, but whether the claimant is
entitled to offer evidence to support the claims." 17 A motion to dismiss may be granted
only if, after, "accepting all well-pleaded allegations in the complaint as true, and
viewing them in the light most favorable to the plaintiff, plaintiff is not entitled to relief." 18
To survive a motion to dismiss under Rule 12(b)(6), however, the factual
allegations must be sufficient to "raise a right to relief above the speculative level, on
the assumption that all the allegations in the complaint are true (even if doubtful in
fact)." 19 A plaintiff is obliged "to provide the 'grounds' of his 'entitle[ment] to relief"
beyond "labels and conclusions." 20 Heightened fact pleading is not required: rather
"enough facts to state a claim to relief that is plausible on its face" must be alleged. 21
The plausibility standard does not rise to a "probability requirement," but requires
"more than a sheer possibility that a defendant has acted unlawfully." 22 Rejected are
unsupported allegations, "bald assertions," or "legal conclusions." 23 Further, "the tenet
15
Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993).
Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004).
17
In re Burlington Coat Factory Sec. Litig., 114 F .3d 141 0, 1420 (3d Cir. 1997) (internal quotation
marks and citation omitted).
18
Maio v. Aetna, Inc., 221 F.3d 472, 481-82 (3d Cir. 2000) (internal quotation marks and citations
omitted).
19
Twombly, 550 U.S. at 555; See also Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007).
16
/d.
/d. at 570.
22
Iqbal, 129 S. Ct. at 1949.
23
/d. ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice."); See also Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997)
(citations omitted); Schuylkill Energy Res., Inc. v. Pennsylvania Power & Light Co., 113 F.3d 405, 417 (3d
Cir. 1997) ("unsupported conclusions and unwarranted inferences" are insufficient); Nami v. Fauver, 82
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21
4
that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions." 24 Moreover, "only a complaint that states a plausible
claim for relief survives a motion to dismiss," which is a "context-specific task that
requires the reviewing court to draw on its judicial experience and common sense." 25
Thus, well-pled facts which only infer the "mere possibility of misconduct," do not show
that '"the pleader is entitled to relief,"' under Rule 8(a)(2). 26 "When there are wellpleaded factual allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement of relief."
B.
Direct Infringement
In McZeal v. Sprint Nextel, Corp., 27 the Federal Circuit held that compliance with
FED. R. CIV. P. Form 1828 is sufficient to state a claim of direct infringement. This finding
was reiterated in In re Bill of Lading Trans. & Proc. Sys. Patent Litig., 29 where the court
stated "to the extent ... that Twombly and its progeny conflict with the Forms and
create different pleading requirements, the Forms control." 30 Thus, in order to
adequately plead direct infringement the complaint need only recite:
(1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the
patent; (3) a statement that the defendant has been infringing the patent
'by making, selling and using [the device] embodying the patent'; (4) a
statement that the plaintiff has given notice of its infringement; and (5) a
F. 3d 63, 69 (3d Cir. 1996) (allegations that are "self-evidently false" are not accepted).
24
Iqbal, 129 S. Ct. at 1949; See a/so Twombly, 550 U.S. at 555 (a court is "not bound to accept as
true a legal conclusion couched as a factual allegation").
25
/d. at 1950.
26
/d.
27
501 F .3d 1354, 1356 (Fed. Cir. 2007).
28
Form 18 is the descendant of Form 16 discussed in McZeal. Form 18 became effective
December 1, 2007.
29
681 F .3d 1323, 1334-35 (Fed. Cir. 2012).
30
/d. at 1334.
5
demand for an injunction and damages. 31
C.
Indirect Infringement
As a precursor to stating a claim for indirect infringement under inducement or
contributory infringement, a plaintiff must "plead facts sufficient to allow an inference
that at least one direct infringer exist." 32 A plaintiff "need not identify a specific direct
infringer." 33 Once there are facts sufficient to allow an inference of direct infringement,
the court will then look at the individual requirements necessary to plead inducement
and contributory infringement.
1.
Inducement
Under 35 U.S.C. § 271(b), "[w]ho ever actively induces infringement of a patent
shall be liable as an infringer."
"Inducement requires 'that the alleged infringer knowingly induced infringement
and possessed specific intent to encourage another's infringement."'34 A plaintiff must
aver "the alleged infringer had 'knowledge that the induced acts constitute patent
infringement. "' 35 This element inherently requires the alleged infringer have knowledge
of the patent, and "knew or should have know [its] actions would induce actual
infringement." 36 For inducement, a plaintiff must assert "culpable conduct, directed to
31
32
33
34
In re Bill of Lading, 681 F.3d at 1334 (citing McZeal, 501 F.3d at 1357).
/d. at 1336.
/d.
DSU Medical Corp. v. JMS Co., Ltd, 471 F.3d 1293, 1306 (Fed. Cir. 2006) (quoting MEMC
Electronic Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1378 (Fed. Cir. 2005)
(quoting Minn. Mining & Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1304-05 (Fed. Cir. 2002) (citations
omitted))).
35
Pragmatus AV, LLC v. Yahoo!, Inc., No. 11-902-LPS-CJB, 2012 WL 6044793, at *13 (D. Del.
Nov. 13, 2012) (quoting Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2068 (2011 }).
36
DSU Medical Corp, 471 F.3d at 1306.
6
encourage another's infringement, not merely that the inducer had knowledge of the
direct infringer's activities.'137 The culpable conduct may be plead circumstantially. 38
A court must apply Twombly and Iqbal in determining whether the requisite
knowledge and specific intent have been properly pled. 39 The "complaint must contain
facts 'plausibly showing that [the alleged indirect infringer] specifically intended [the
direct infringer] to infringe [the patent] and knew that the [direct infringer's] acts
constituted infringement. "' 40
2.
Contributory Infringement
Under 35 U.S.C. § 271(c):
Whoever offers to sell or sells within the United States or imports into the
United States a component of a patented machine, manufacture,
combination or composition, or a material or apparatus for use in
practicing a patented process, constituting a material part of the invention,
knowing the same to be especially made or especially adapted for use in
an infringement of such patent, and not a staple article or commodity of
commerce suitable for substantial noninfringing use, shall be liable as a
contributory infringer.
A plaintiff, therefore, must aver an alleged infringer (1) offered to sell, sells, or
imports, (2) a material part of an patented invention, (3) knew of the patented invention,
(4) knew the part was made for, or adapted to use, in a patented invention, and (5) the
part has no substantial noninfringing use. 41 Similarly with inducement, the court must
apply Twombly and Iqbal to determine whether sufficient facts have been alleged to
make a plausible claim for contributory infringement.
37
38
39
40
41
/d.
/d. (quoting Water Tech. Corp. v. Ca/co, Ltd., 850 F.2d 660, 668 (Fed. Cir. 1988)).
In re Bill of Lading, 681 F.3d at 1336-37 (internal citations and footnotes omitted).
Pragmatus A V, 2012 WL 6044 793, at *14 (citing In re Bill of Lading, 681 F .3d at 1339).
See Walker Digital, LLC v. Facebook, Inc., 852. F.Supp. 2d 559, 566 (D. Del. 2012).
7
With respect to elements (3) and (4), the pleading may use the same knowledge
for contributory infringement as under inducement, because the knowledge for
inducement is the same knowledge for contributory infringement. 42 Therefore, when a
plaintiff has plead sufficient facts to show knowledge of inducement, sufficient facts to
show knowledge of contributory infringement have also been pled. For element (5), a
plaintiff must assert "facts that allow an inference that the [parts] ... have no
substantial non-infringing uses." 43 A substantial non-infringing use is one that is "not
unusual, far-fetched, illusory, impractical, occasional, aberrant, or experimental." 44
V.
Adequacy of TS's Complaint
A.
Direct Infringement
T5 adequately pleads direct infringement against Gaikai. T5 has shown the first
two requirements for direct infringement by providing sufficient facts for jurisdiction
alleging: this matter involves a patent; Gaikai is a company organized under the laws of
the State of Delaware; and the alleged infringing activity occurred and is occurring in
this jurisdiction. 45 For the second element, T5 has represented it is "the exclusive
licensee of the '568 patent and is the assignee of all causes of action and enforcement
rights of any kind, including without limitation, the right to collect damages for past and
future infringement and to seek injunctive relief." 46
As to the third element, T5 asserts Gaikai infringed the '568 patent by "providing
a system and methods of sharing a graphics processing unit (GPU) between a plurality
42
43
44
45
46
See Global-Tech Appliances, 131 S.Ct. at 2068.
In re Bill of Landing, 681 F .3d at 1338.
/d. (quoting Vita-Mix Corp. V. Basic Holdings, Inc., 581 F.3d 1317, 1327-29 (Fed. Cir. 2009)).
D.l. at 1.
/d. at 2.
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of programs, e.g., virtualizing multiple instances of game programs on a server with one
or more shared GPUs through Gaikai's 'cloud'-based gaming applications and service
(also referred to by Gaikai as a 'GPU cloud')." 47 Contrary to Gaikai's assertion that T5
failed to reference a single infringing product or method, T5 adequately alleges
"Gaikai's 'cloud'-based gaming applications and service" or GPU cloud as the infringing
method or product. 48
Though Gaikai insists its "cloud"-based gaming applications or GPU cloud is a
"large technology area" not encompassed by the requirements of Rule 8(a)(2) or Form
18, 49 further examination reveals the GPU cloud closely resembles the electric motors
example in Form 18 than the amorphous, indeterminate description in Eidos Comms.,
LLC v. Skype Technologies, SA. 5° T5's description exceeds the very vague description .
offered only in the background description of the Eidos complaint ("'the technology at
issue generally involves a communication system that employs products and/or
methodologies ... "'),and surpasses the complaint language of Eidos identifying the
infringing product or method as "communication system products and/or methodologies
that infringe one or more claims," 51 by identifying Gaikai's GPU cloud as the infringing
method, both in the background section and in the language of the complaint. 52
A cursory examination of the '568 patent, attached to the complaint, also clearly
indicates Gaikai's GPU cloud as an infringing method, as only method claims are
47
48
49
50
51
52
/d.
D.l. 1 at 2.
Eidos Comms., LLC
v. Skype Technologies SA, 686 F. Supp. 2d 465, 468 (D. Del. 2010).
/d.
ld. at 466.
D. I. 1 at 2.
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present within the '568 patent. 5 3 T5's complaint also refers to a system and method, 54
while Eidos referred to the more general and indeterminable "products and/or
methodologies."55 The combination of these facts further refutes Gaikai's assertion that
T5 failed, to "'target either a product or method' or to 'specify, at a minimum, a general
class of products or a general identification of the alleged infringing methods."'56 T5 has
therefore provided adequate notice of the allegedly infringing method to Gaikai.
The fourth and fifth elements of direct infringement are also met. T5 represents
it provided Gaikai written notice of infringement. 57 Lastly, T5 demands both injunctrive
relief and damages. 58 As a result, T5 has sufficiently pled direct infringement, and
Gaikai's motion on direct infringement is denied.
B.
Inducement
Factual support has been pled by T5 for inducement of infringement against
Gaikai. As stated previously, Gaikai had knowledge of the '568 patent on or before
October 5, 2012. 59 To determine whether inducement was properly pled, the court
must analyze whether T5 has made a plausible showing Gaikai specifically intended to
encourage others to infringe, knowing their conduct to be infringement. T5 maintains it
pled sufficient facts to support its claims of indirect infringement by inducement for at
53
54
55
56
57
58
59
/d., Ex. A.
/d. at 2.
Eidos, 686 F. Supp. 2d at 467 (emphasis added).
/d.; 0.1. 15 at 4.
0.1. 1 at 3.
ld. at 3-4.
/d. at 3.
10
least post-complaint acts of inducement of the '568 patent. 60
As discussed herein, T5 avers Gaikai provides for use of a GPU cloud. 61 T5
further alleges Gaikai offers for sale and sells "the use of Gaikai's GPU cloud with the
knowledge that its customers and end users will use the Gaikai GPU cloud and with the
knowledge and the specific intent to encourage and facilitate the infringing sales and
uses of Gaikai's GPU cloud through the creation and dissemination of promotional and
marketing materials, instructional materials, product manuals, and technical
materials." 62 Unlike the mere "recitation of bare legal elements of the [inducement]
claim, devoid of factual content to support those elements" as alleged by Gaikai in its
opening brief, 63 T5's claim points to conduct by Gaikai that infers specific intent to
induce infringement of the '568 patent. T5 notes Gaikai's post-complaint dissemination
of marketing and instructional materials as factual evidence of intent to induce
infringement. 64
The facts as alleged present a reasonable inference of Gaikai knowingly and
intentionally encouraging others to infringe, namely its customers and end users.
Therefore, T5 has a sufficiently pled an inducement claim against Gaikai.
60
D.l. 17 at 2-3; Execware, LLC v. Staples, Inc., No. 11-836-LPS-SRF, 2012 WL 6138340, at *5
(D. Del. Dec. 10, 2012} (holding post-filing date knowledge of the patent alleged to be infringed is
sufficient to state a claim for indirect infringement occurring after service of the complaint).
61
D.l. 1 at 2.
62
/d. at 2-3.
63
D.l. 15 at 7; E./. duPont de Nemours and Co. v. Heraeus Holding GmbH, No.11-773-SLR-CJB,
2012 WL 4511258, at *7 (D. Del. Sep. 28, 2012) (indicating the information provided no factual allegations
about the nature of the relationship between defendants and their customers or their alleged specific intent
to induce); MONEC Holding AG v. Motorola Mobility, Inc., No. 11-798-LPS-SRF, 2012 WL 4340653, at *8
(D. Del. Sep. 20, 2012}.
64
D.l. 17 at 4-5;Tarkus Imaging, Inc. v. Adobe Sys., Inc., No.10-63-LPS, 2012 WL 2175788, at *4
(D. Del. June 14, 2012} (finding actual knowledge of patent-in-suit in combination with evidence that
defendant advertised use of accused features and provided users with instructions on infringing uses was
sufficient to preclude summary judgment regarding intent to induce infringement).
11
C.
Contributory Infringement
Regarding factual support for its claim of contributory infringement, T5 contends
Gaikai offers to sell, sells, or imports its GPU cloud, which it knew or should have know
as of the filing of the complaint was material to the '568 patent, 65 because Gaikai uses
the GPU cloud to "virtualiz[e] multiple instances of game programs on a server with one
or more shared GPUs." 66
T5 further alleges the GPU cloud was specially made or adapted for use in the
infringement of the '568 patent, and it has no substantial non-infringing uses. 67 The
invention of the '568 patent is to "shar[e] a graphics processing unit (GPU) between a
plurality of programs," which is met by the GPU cloud virtualizing "multiple instances of
game programs on a server with one or more shared GPUs. 68
T5 provides facially plausible claims and adequate notice to Gaikai, 69 which
includes identifying the method or system at issue, Gaikai's GPU cloud, and satifying
the pleading requirements of Twombly and /qba/, 70 and thereby has properly pled
contributory infringement.
VI.
Conclusion
T5's factual allegations in support of its claims of direct infringement, inducement
65
D.l. 17 at 6; In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323 at
1336-37 (Fed. Cir. 2012}; Execware, LLC v. Staples, Inc., No. 11-836-LPS-SRF, 2012 WL 6138340, at *5
(D. Del. Dec. 10, 2012).
66
D.l. 1 at 2-3.
67
/d. at 3; D.l. 17 at 6.
68
D.l. 1 at 2-3.
69
35 U.S.C. § 271(c); Walker Digital, LLC v. Facebook, Inc., 852 F. Supp. 2d 559, 566 (D. Del.
2012).
70
Aeritas, LLC v. Alaska Air Group, Inc., No. 11-967-SLR, 2012 WL 4470386, at *2 (D. Del. Sept.
28, 2012) (finding an identification of an allegedly infringing product, in conjunction with allegations of each
element of contributory infringement using that product, is sufficient to satisfy Twombly and Iqbal).
12
to infringe, and contributory infringement satisfy Twombly, Iqbal, and the requirements
of Form 18. Therefore, Gaikai's motion to dismiss for failure to state a claim should be
denied.
VII.
Order and Recommended Disposition
For the reasons contained herein, this court recommends that:
Gaikai's motion to dismiss pursuant to FED. R. CIV. P. 12(b)(6) for failure to state
a claim upon which relief can be granted (D.I.14) be DENIED.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(1 )(B),
FED. R. C1v. P. 72(b)(1 ), and D. Del. LR 72.1. The parties may serve and file specific
written objections within fourteen days after being served with a copy of this Report and
Recommendation? 1 The objections and response to the objections are limited to ten
pages each.
The parties are directed to the Court's standing Order in Non Pro Se matters for
Objections Filed under FED. R. C1v. P. 72, dated November 16,2009, a copy of which is
available on the Court's website, www.ded.uscourts.gov.
Date: April 5, 2012
71
/s/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE
FED. R. CIV. P. 72(b)(2).
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