Neology Inc. v. Confidex Inc.

Filing 35

REPORT AND RECOMMENDATIONS recommending granting D.I. 28 MOTION to Dismiss for Failure to State a Claim filed by Star Systems International Ltd. and D.I. 16 MOTION to Dismiss for Failure to State a Claim - filed by Kapsch TrafficCom Holding Corp., Kapsch TrafficCom IVHS Holding Corp., Kapsch TrafficCom IVHS Inc., Kapsch TrafficCom IVHS Technologies Holding Corp., Kapsch TrafficCom U.S. Corp. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72 (b)(2), briefing consists solely of the Objections (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 10/6/2014. Signed by Judge Christopher J. Burke on 9/19/2014. (dlk) Modified on 9/19/2014 (dlk).

IN TI-lE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
NEOLOGY, INC.,
Plaintiff,
v.
KAPSCH TRAFFICCOM IVHS, INC.;
KAPSCH TRAFFICCOM IVHS
HOLDING CORP.; KAPSCH
TRAFFICCOM IVHS TECHNOLOGIES
HOLDING CORP.; KAPSCH
TRAFFICCOM U.S. CORP.; KAPSCH
TRAFFICCOM HOLDING CORP.; and
STAR SYSTEMS INTERNATIONAL,
LTD.,
Defendants.

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Civil Action No. 13-2052-LPS

REPORT AND RECOMMENDATION
Presently pending in this patent infringement case are: (1) Defendants Kapsch
Trafficcom IVHS, Inc., Kapsch Trafficcom IVHS Holding Corp., Kapsch Trafficcom IVHS
Technologies Holding Corp., Kapsch Trafficcom U.S. Corp. and Kapsch Trafficcom Holding
Corp.'s (collectively "Kapsch" or the "Kapsch Defendants") motion to dismiss Plaintiff Neology,
Inc.'s ("Plaintiff' or "Neology") induced, contributory and willful infringement claims against
them, pursuant to Federal Rule of Civil Procedure 12(b)(6); and (2) Defendant Star Systems
International Ltd.'s ("SSI" and, collectively with Kapsch, "Defendants") motion to dismiss
Plaintiffs induced, contributory and willful infringement claims against it, also filed pursuant to
Rule 12(b)(6) (collectively with Kapsch's motion to dismiss, the "Motions"). (D.I. 16; D.I. 28)
For the reasons set forth below, the Court recommends that Defendants' Motions be GRANTED
without prejudice.

I.

BACKGROUND
Plaintiff commenced this action on December 19, 2013, alleging direct, indirect and

willful infringement claims against one Defendant, Confidex, Inc. ("Confidex"), concerning U.S.
Patent Nos. 6,229,443, 6,690,264, 8,237,568, 8,325,044, 8,587,436 and 7,119,664 (collectively,
the "Asserted Patents"). (D.I. 1) Before Confidex responded, Plaintiff filed the First Amended
Complaint ("FAC") on February 27, 2014, adding Kapsch and SSI as Defendants. (D.I. 4) The
FAC now accused all Defendants (that is, Confidex, Kapsch and SSI), respectively, of
infringement of each of the six Asserted Patents. (!d.) 1 In the FAC, Plaintiff alleges that the
infringing products at issue (the "Accused Products") are Radio Frequency Identification
("RFID") transponders and/or readers, which "comprise at least the following products: (1)
Confidex License Plate Tag product[;] (2) Confidex Windshield Label product[;] (3) SSI's Venus
Windshield Decal (collectively, the 'Accused Transponder Products')[;] (4) Kapsch JANUS
Multiprotocol Reader[;] and (5) SSI's Vela High Performance USB RFID Desktop Reader
(collectively, the 'Accused Reader Products')." (!d.

at~

19)

Kapsch filed its instant motion to dismiss, in lieu of an Answer, on April 21, 2014. (D.I.
16) On May 20, 2014, that motion was referred to the Court for resolution by Chief Judge

The six Counts of the FAC, which in turn contain infringement allegations as to
each of the six Asserted Patents, contain relatively similar language. Four of the six Counts (all
but Counts III and V) allege direct infringement by all Defendants of the respective patents listed
in those counts; Count III (relating to the '568 patent) does not allege direct infringement of that
patent against any Defendant and Count V (relating to the '436 patent) alleges direct infringement
of that patent against only Kapsch. (D.I. 4) All six counts allege induced, contributory and
willful infringement by all Defendants as to all six Asserted Patents. (!d.) As to the indirect and
willful infringement allegations, at issue here, the Counts differ mainly in listing the identifying
information for each Asserted Patent, and in describing the alleged dates and nature of
Defendants' pre-suit knowledge. (Compare id. at~~ 15-33, with id. at~~ 34-48) To the extent
the Court cites below only to the allegations as to one of the six Asserted Patents, it does so in an
effort to address Plaintiffs allegations regarding the same type of claim against that particular
Defendant relating to each of the other Asserted Patents.

Leonard P. Stark. (D.I. 24) On May 30, 2014, SSI filed its instant motion to dismiss, in lieu of
an Answer, (D.I.

28)~

Chief Judge Stark referred that motion to the Court for resolution on June

27, 2014, (D.I. 34).
On June 5, 2014, Plaintiff dismissed its claims against Confidex, leaving Kapsch and SSI
as the remaining Defendants in the case. (D.I. 31)

II.

STANDARD OF REVIEW
The sufficiency of pleadings for non-fraud cases is governed by Federal Rule of Civil

Procedure 8, which requires "a short and plain statement of the claim showing that the pleader is
entitled to relief." Fed. R. Civ. P. 8(a)(2). When presented with a Rule 12(b)(6) motion to
dismiss for failure to state a claim, a court conducts a two-part analysis. Fowler v. UP MC
Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the court separates the factual and legal

elements of a claim, accepting "all of the complaint's well-pleaded facts as true, but
[disregarding] any legal conclusions." !d. at 21 0-11. Second, the court determines "whether the
facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for
relief."' !d. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). "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." Iqbal, 556 U.S. at 678 (citing
Bell At/. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). In assessing the plausibility of a claim,

the court must '"construe the complaint in the light most favorable to the plaintiff, and determine
whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief."'
Fowler, 578 F.3d at 210 (quoting Phillips v. Cnty. ofAllegheny, 515 F.3d 224, 233 (3d Cir.

2008)).
3

III.

DISCUSSION
As noted above, the Motions allege that Plaintiff has insufficiently pleaded claims of

induced, contributory and willful infringement. The Court will consider these arguments in tum. 2

A.

Induced Infringement

Pursuant to 35 U.S.C. § 271(b), "[w]hoever actively induces infringement of a patent
shall be liable as an infringer." In order to prove induced infringement, the patentee "must show
direct infringement, and that the alleged infringer knowingly induced infringement and possessed
specific intent to encourage another's infringement." Toshiba Corp. v. Imation Corp., 681 F.3d
1358, 1363 (Fed. Cir. 2012) (internal quotation marks and citations omitted). To survive a Rule
12(b)(6) motion, a patentee must plead facts "plausibly showing that [the alleged infringer]
specifically intended [a third party] to infringe the [patents-in-suit] and knew that the [third
[party's] acts constituted infringement." In re Bill of Lading Transmission & Processing Sys.

Patent Litig., 681 F.3d 1323, 1339 (Fed. Cir. 2012); see also Versata Software, Inc. v. Cloud9
Analytics, Inc., Civil Action No. 12-925-LPS, 2014 WL 631517, at *2 (D. Del. Feb. 18, 2014),
report and recommendation adopted, 2014 WL 1091751 (D. Del. Mar. 14, 2014).

1.

Knowledge that direct infringer's acts constituted infringement

Defendants first claim that the FAC fails to adequately plead induced infringement
because it fails to allege facts plausibly showing that Defendants had knowledge that the alleged

2

As was also previously noted, the FAC alleges direct infringement by Defendants
as to certain of the Asserted Patents. (D.I. 4 at~~ 19, 38, 67, 82, 97) In their Motions,
Defendants do not directly challenge the sufficiency of the direct infringement allegations. (See,
e.g., D.l. 21 at 1; D.I. 32 at 1) Thus, the Court's decision here addresses only the claims of
induced, contributory and willful infringement.
4

direct infringer's acts constituted infringement. 3 See Pragmatus A V, LLC v. Yahoo! Inc., C.A.
No. 11-902-LPS-CJB, 2013 WL 2295344, at *1 (D. Del. May 24, 2013) (citing In re Bill of

Lading, 681 F.3d at 1339). While a plaintiff need not "prove its case at the pleading stage[,]"
what is required is that the facts pleaded, "when considered in their entirety and in context, lead
to the common sense conclusion that a patented method is being practiced." In re Bill ofLading,
681 F.3d at 1339, 1343. The Court will assess this charge as to the respective Defendants below.

a.

Kapsch

The Court concludes that the FAC does not allege enough facts to state a claim for presuit induced infringement against Kapsch. The FAC fails to sufficiently allege that before the

Kapsch actually leads with an additional argument as to why the induced
infringement claims are wanting, asserting that Plaintiff has failed to "'plead[] facts sufficient to
allow an inference that at least one direct infringer exists."' (D.I. 17 at 7 (quoting In re Bill of
Lading, 681 F.3d at 1336)) Kapsch's argument is, in essence, that: (1) because the indirect
infringement claims at issue involve generic assertions that "Defendants" have induced
infringement and that "their customers" are the direct infringers; and (2) the Defendants
referenced in the FAC are at "different levels of the supply chain[,]" engage in different business
activities and sell different products; then (3) Kapsch cannot determine "whether the allegations
refer to ... Confidex's customers, SSI's customers, Kapsch's customers, or some combination
thereof[.]" (Id. at 8) Identification of a specific third-party direct infringer is not required to
survive a motion to dismiss, so long as the allegations are sufficient to allow the inference that
there is at least one such direct infringer. In re Bill of Lading, 681 F.3d at 1336; Telecomm
Innovations, LLC v. Ricoh Co., Ltd., 966 F. Supp. 2d 390, 394 (D. Del. 2013). The FAC's
lumping together of "Defendants" is surely problematic, as will be addressed further in this
Report and Recommendation. But this type of conflation is of greater concern when it comes to
parsing what each Defendant is said to have done regarding the other elements of an inducement
claim. As to identification of a direct infringer, here, the allegations can be fairly read to assert
that customers of both Kapsch and SSI (that is, persons or entities that have purchased certain of
the Accused Products from those Defendants) are said to be the direct infringers. (D.I. 4 at~ 29;
see also id. at~~ 14, 19-21 (describing how, inter alia, SSI and Kapsch are alleged to sell certain
accused products to their customers)) Since Plaintiff pleaded that Defendants indirectly infringe
by "such customers making, using, offering to sell, and/or selling at least the Accused Products,"
the requirement for pleading facts that allow an inference that at least one direct infringer exists
would be met here. (Id. at~ 29)

5

Kapsch Defendants received the initial Complaint, they had knowledge that the Accused
Products infringed the Asserted Patents or of how they did so.
The Court acknowledges that the FAC does allege that, as to each of the Asserted Patents,
since at least November 2013, "Neology provided to Kapsch, or Kapsch's agents and
representatives, numerous memoranda and presentations detailing Neology's analysis and/or
description of its intellectual property (including issued patents and pending patent applications
[specifically including each of the Asserted Patents]), and how Neology's intellectual property
covered the RFID technology accused of infringement in this case."4 (D.I. 4 at~ 25) These
allegations do at least plausibly assert that Kapsch had pre-suit knowledge of the Asserted
Patents, and indicate that there were some detailed discussions between Neology and Kapsch as
to the general subject of alleged infringement of the Asserted Patents.
However, the allegations otherwise contain no factual specificity as to how it was said
that Kapsch's technology infringed the Asserted Patents, or could be used by customers to
infringe Neology's intellectual property. Nor do they contain any specific facts articulating how
or why Kapsch would have or should have understood that the "RFID technology" discussed in
those communications included the types of Kapsch products that are accused of infringement
here.
In its briefing, Plaintiff claims that the FAC "describes the substance of the notice it gave
to Kapsch" and provides "detailed allegations regarding ... how [the patents-in-suit] covered the
RFID technology accused of infringement." (D.I. 21 at 9, 16) If that were true-if the FAC had

4

The FAC references communications occurring between June 2010 and
November 2013. (See, e.g., D.I. 4 at~~ 25-27)
6

provided any real factual specificity ("detailed" or otherwise) about the substance of this notice
of infringement-the result here might well be different. But instead, in these paragraphs, the
FAC simply refers to the notice at issue in conclusory, "take my word for it" terms: that these
pre-suit communications referenced "how Neology's intellectual property covered the RFID
technology accused ofinfringement[.]" 5 (See, e.g., D.I. 4 at~ 25); cf Pragmatus AV, LLC v.

Yahoo! Inc., Civil Action No. 11-902-LPS-CJB, 2012 WL 6044793, at *15 (D. Del. Nov. 13,
20 12) (concluding that there were insufficient facts alleged to support the plausible inference that
defendant had pre-suit knowledge that its users' actions constituted infringement of the asserted
patents, where plaintiff generally asserted that it provided defendant with "written notice of its
infringement" but alleged "no facts ... regarding the substance of that notice[,]" leaving the
court "to speculate as to what it was about that notice that could have plausibly provided
[defendant] with the requisite knowledge of its users' infringement") (internal quotation marks
and citation omitted) (citing cases), report and recommendation adopted, 2013 WL 2295344 (D.
Del. May 24, 2013).
If the FAC itself contained any further indication as to how it is that Kapsch's customers'
use of the Accused Products (or of Kapsch technology similar to the Accused Products) was said
to infringe the Asserted Patents, there might be enough for the Court to infer that this particular
subject matter was what was discussed in these pre-November 2013 memoranda and

On this point, the Kapsch Defendants assert in their briefing: "It is noteworthy
and not inadvertent that Neology's complaint never alleges that any of the Accused Products in
this case were discussed or disclosed in Neology's presentations and memoranda nor otherwise
accused of infringement prior to this suit being filed. Accordingly, Neology provides no
allegation that Kapsch would have knowledge that its alleged actions of selling or re-selling
Confidex or SSI products or selling Kapsch products would induce infringement by customers."
(D.I. 17 at 10; see also D.I. 23 at 4-5)
7

presentations. But there is not. And not only does the FAC include nothing more on those
fronts, but when it gets to further discussion of the alleged indirect infringement at issue, it
makes blanket reference to all "Defendants" generically as having "indirectly infringed the
[Asserted Patents] by actively and intentionally inducing their customers to infringe the [Asserted
Patents.]" (D.I. 4 at ,-r 29) These kinds of allegations, specific to no Defendant and generic as to
all, are unhelpful in further flushing out a facially plausible claim ofKapsch's pre-suit
knowledge. Cf Atuahene v. City of Hartford, 10 F. App'x 33,34 (2d Cir. 2001) ("By lumping
all the defendants together in each claim and providing no factual basis to distinguish their
conduct, [the plaintiffs] complaint failed to satisfy [the] minimum standard" that "a complaint
give each defendant fair notice of what the plaintiffs claim is and the ground upon which it
rests.") (internal quotation marks and citations omitted).
For all of these reasons, the Court cannot plausibly infer that Kapsch had enough
information prior to suit to know that its customers' acts constituted infringement of the Asserted
Patents. See Bonutti Skeletal Innovations LLC v. Smith & Nephew, Inc., Civil Action No. 121111-GMS, 2013 WL 6058472, at *1 n.5 (D. Del. Nov. 18, 2013) ("Allegations that [defendant]
knew of [plaintiffs] patents and of its customers' use of [defendant's] products do not suffice to
establish that [defendant] also knew that its customers' use of [defendant's] own products would
amount to infringement of [plaintiffs] patents.").
As to post-suit knowledge, the result is no different. Although the Accused Products
were identified in the Complaint and in the FAC, neither document sets out factual allegations
regarding how these products are said to infringe the Asserted Patents when utilized by the
respective alleged direct infringers. If there are insufficient allegations in the FAC of pre-suit

8

knowledge of infringement, nothing in the pleadings gave Kapsch any additional post-suit notice
as to this element. See Versata Software, Inc., 2014 WL 631517, at *3-4 (recommending
dismissal of induced infringement claims where complaint did not "plausibly assert[]
[d]efendant's [post-suit] knowledge that the end users' acts constituted infringement of the
patents-in-suit[,]" as though a plaintiff need not "provide a detailed, step-by-step description of
the alleged infringement in the complaint, this Court has required some identification of how it is
that use of the accused product infringes the patent, in order to plausibly assert that the indirect
infringer knew that the downstream use of its products constitutes patent infringement").
Lastly, Plaintiff also does not adequately allege facts sufficient to show that Kapsch was
willfully blind to the possibility that its actions induced infringement. To plead willful blindness,
a plaintiff must identify affirmative actions taken by the defendant to avoid gaining knowledge of
the patents-in-suit or of acts that constituted patent infringement. See MONEC Holding AG v.

Motorola Mobility, Inc., 897 F. Supp. 2d 225, 230 (D. Del. 2012). The FAC makes only passing
references to willful blindness, (see, e.g., D.I. 4 at~ 29), and the nature of what is alleged therein
does not really seem intended to track this type of a theory, (see, e.g., id.

at~~

25-28; see also

D.l. 23 at 6-7).

b.

SSI

The FAC's induced infringement allegations regarding knowledge are deficient as to SSI
first for a reason not applicable to the claims against Kapsch-the FAC does not sufficiently
allege that SSI had pre-suit knowledge of the patents-in-suit. 6 To that end, Plaintiff alleges that
6

Were Plaintiff to file a further Amended Complaint asserting indirect
infringement against SSI, SSI obviously would have had knowledge of the patents-in-suit as of
the date of the filing of the FAC.
9

1

1

SSI had pre-suit knowledge as to three of the six patents (the 568 patent, the 044 patent, and the
1

436 patent) because: (1) in July 2011, Plaintiff filed a patent infringement suit in this Court

against Sirit Corp. ("Sirit") and Federal Signal Technologies, LLC ("FSTech"); (2) that suit
1

1

involved allegations of infringement of patents that share a specification with the 568, 044 and
1

436 patents; (3) SSI was formed by former Sirit and FSTech employees (who are unnamed in the

FAC); and (4) thus, "[a]ll of Sirit' s and FSTech' s employees [including those who now work for
1

1

1

SSI] were put on notice" of the 568, 044 and 436 patents, due to the fact of the prior
Sirit/FSTech suit. (D.I. 4

at~~

1

1

28, 57, 87) As to the 443 patent and the 264 patent, the FAC

states that Plaintiff asserted these particular patents against Sirit and FSTech in the July 2011
1

suit, and states that Plaintiff asserted the remaining 664 patent against those entities in a May
2012 action in the United States District Court for the Central District of California. (!d.

at~~

43, 72, 102) Since SSI was thereafter created by (unnamed) "former Sirit and FSTech
employees[,]" Plaintiff alleges that all of SSI's employees must have had pre-suit knowledge of
these three patents as well. (!d.

at~~

43, 72, 102)

The Court finds these allegations insufficient to make out a plausible claim that SSI had
pre-suit knowledge of the six Asserted Patents. The FAC contains no allegation as to any
particular SSI employee who formerly worked at Sirit or FSTech, nor about whether any such
person was involved with or knowledgeable about the infringement allegations at issue in the
Sirit and FSTech cases. Nor are there allegations, for example, about the size of Sirit or FSTech
on the one hand and SSI on the other-i.e., allegations that might allow the plausible inference
that any former (even unnamed) Sirit or FSTech employee who later created SSI would
necessarily have had to be aware of the patents at issue in the prior Sirit/FSTech cases. Cf
10

ReejEdge Networks, LLC v. Juniper Networks, Inc.,- F. Supp. 2d-, C.A. No. 13-412-LPS,
2014 WL 1217263, at *2-3 (D. Del. Mar. 21, 2014) (finding as to willful infringement claim that
the plaintiff had "not pled sufficient facts to successfully allege [defendant's] pre-suit knowledge
of the patents-in-suit[,]" despite its allegation that defendant's in-house intellectual property
counsel previously worked for a third party company that then owned the patents-in-suit, and was
responsible for marketing that third party's patents to the plaintiff).
Additionally, Plaintiff has not sufficiently pleaded SSI's knowledge that its customers'
acts constituted infringement. On this issue, there are even fewer facts pleaded in the FAC as to
SSI than there were regarding Kapsch. Here, in the relevant paragraphs of the FAC, Plaintiff
appears to assert that because it had previously accused two different companies (Sirit and
FSTech) of infringing certain Asserted Patents (or patents related to the Asserted Patents) via the
use of different, non-SSI products (i.e., Sirit or FSTech products)-this provided SSJ with
sufficient knowledge as to how SSI 's customers would later infringe the patents-in-suit via the
use of SSJ's products. (D.I. 4 at~~ 28, 43, 57, 72, 87, 102; see also D.I. 32 at 9-11) There are no
further factual allegations in the FAC relating to SSI's knowledge of its customers' alleged
infringing conduct. Instead, all that remains in the FAC is the bald statement that "Defendants"
induced their customers to infringe "with knowledge that the inducted acts constituted
infringement." (See, e.g., D.I. 4 at~ 29) The Court cannot conclude that such exceedingly broad
allegations set out a plausible claim as to this element of induced infringement. See ReejEdge
Networks, LLC, 2014 WL 1217263, at *2-3 (finding that plaintiff had failed to plead facts
demonstrating that defendant's in-house intellectual property counsel, whose prior knowledge of
the patents was said to be imputed to defendant, had any knowledge that defendant was
11

infringing the patents-in-suit, where there were no allegations that the in-house counsel was
aware of defendant's allegedly infringing products).

2.

Specific intent to infringe

A plaintiff must also allege facts to allow for the plausible inference that the indirect
infringer had the specific intent to induce infringement by the direct infringer (that is, that the
indirect infringer encouraged the direct infringement). See Pragmatus A V, LLC, 2013 WL
2295344, at *1; see also Symantec Corp. v. Computer Assocs. Int '!, Inc., 522 F.3d 1279, 1292-93
(Fed. Cir. 2008) ("Thus, 'inducement requires evidence of culpable conduct, directed to
encouraging another's infringement, not merely that the inducer had knowledge of the direct

infringer's activities."') (emphasis added) (citation omitted).
Neology does not adequately plead specific intent as to its claims against all Defendants.
First, absent sufficient factual allegations as to how the Accused Products are said to infringe the
patents-in-suit, assertions that a defendant provided unspecified "training and instructions to [its]
customers concerning the use of the Accused Products" are not specific enough to allege the
requisite encouragement. (See, e.g., D.I. 4 at~ 29) In such a circumstance, this type of allegation
simply begs the question: "Provided 'training and instructions' as to what?" See McRo, Inc. v.
Rockstar Games, Inc., Civil Action Nos. 12-1513-LPS-CJB, 12-1517-LPS-CJB, 12-1519-LPS-

CJB, 2014 WL 1051527, at *6 (D. Del. Mar. 17, 2014) (recommending grant of motion to
dismiss for failure to properly alleged induced infringement, on the grounds that without further
allegations about how the alleged direct infringer's action amounted to infringement, the
complaint's generic reference to the alleged indirect infringer's '"dissemination of instructional
materials"' failed to sufficiently articulate how patent infringement was being encouraged by
12

these means) (internal citation omitted), report and recommendation

adopted~

2014 WL 1677366

(D. Del. Apr. 24, 2014); MONEC Holding AG, 897 F. Supp. 2d at 234 (finding that allegations
that defendants engaged in "selling, advertising, supplying and instructing its respective
customers on the use of the infringing product" were insufficient to establish that defendants
"knew such activities were infringing or that [they] possessed the specific intent to encourage
another's infringement").
Second, Plaintiffs decision to lump all Defendants together when articulating certain of
its inducement allegations becomes particularly problematic here. The FAC fails to identify what
"training and instructions" are being referred to in the Counts, or even which particular
Defendant or Defendants are said to have disseminated the training or instructional materials at
issue. Kapsch, SSI and former Defendant Confidex all conduct different business activities, sell
different products and presumably utilize different types of "training and instructions" in the
course of their business. Treating these Defendants as one big group for purposes of articulating
how each has encouraged the induced infringement at issue says nothing plausible as to what any
particular one of them might have done.

B.

Contributory Infringement

Under 35 U.S.C. § 271(c), a patentee must demonstrate that an alleged contributory
infringer has sold, offered to sell or imported into the United States a material or apparatus for
use in practicing a patented process "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." See also Lucent Techs., Inc. v. Gateway,

Inc., 580 F.3d 1301, 1320 (Fed. Cir. 2009). Therefore, similar to inducement, Section 271(c)
13

requires a showing that an "'alleged contributory infringer knew that the combination for which
[its] component was especially designed was both patented and infringing."' Walker Digital,

LLC v. Facebook, Inc., 852 F. Supp. 2d 559, 566 (D. Del. 2012) (quoting Aro Mfg. Co. v.
Convertible Top Replacement Co., 377 U.S. 476, 488 (1964)).
Plaintiff cannot state a claim for contributory infringement without sufficiently alleging
that Defendants had knowledge that their customers' actions constituted infringement of the
patents-in-suit. See Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068 (2011);

Walker Digital, 852 F. Supp. 2d at 566-67. 7 For at least the reasons set forth above-namely that
Plaintiff did not adequately allege Defendants' knowledge of how the Accused Products are used
by their customers to infringe the patents-in-suit-Plaintiff fails to state a claim as to
contributory infringement of the patents-in-suit. 8

7

Plaintiffs allegations of contributory infringement are muddied a bit by the fact
that the FAC asserts that it is alleging induced infringement, willful infringement "and/or [that
Defendants] contributed to infringement by one or more [of] their customers[.]" (See, e.g., D.l. 4
at~ 29) This Court generally disfavors the use of the phrase "and/or" in pleading indirect
infringement because it detracts from providing "a clear indication as to whether a plaintiff
intends to plead induced infringement, contributory infringement or both." Pragmatus A V, LLC,
2012 WL 6044793, at *13 n.5.
Plaintiff additionally fails to plead facts, inter alia, indicating that Defendants'
products were "not a staple article or commodity of commerce suitable for substantial noninfringing use." See E.! DuPont de Nemours & Co. v. Heraeus Holding GmbH, Civ. Action
No. 11-773-SLR-CJB, 2012 WL 4511258, at *8-9 (D. Del. Sept. 28, 2012). Here, the FAC
simply recites this element and does no more, (see, e.g., D.l. 4 at~ 30), and in its briefing,
Plaintiff does not explain how any facts are pleaded that relate to the element, (D.I. 32 at 13-14).
See In re Bill of Lading, 681 F.3d at 1337-38 (disagreeing with plaintiffs argument that it
sufficiently pleaded contributory infringement when it alleged that "as customized" the
defendants' products had no substantial non-infringing use); 3D Sys., Inc. v. Formlabs, Inc., No.
13 Civ. 7973,2014 WL 1904365, at *6 (S.D.N.Y. May 12, 2014) (finding that "no facts or
allegations are pled that plausibly support an inference that there are no substantial noninfringing
uses of the [accused product] especially since the [c]omplaint does not provide any allegations as
to how the [accused product] infringes the patents-in-suit").
14

C.

Willful Infringement

To prove a case of willful infringement, a patent owner must demonstrate by clear and
convincing evidence that the infringer acted despite an "objectively high likelihood that its
actions constituted infringement" and that this "objectively-defined risk ... was either known or
so obvious that it should have been known to the accused infringer." In re Seagate Tech., LLC,
497 F.3d 1360, 1371 (Fed. Cir. 2007). At the pleading stage, a plaintiff must plead facts giving
rise to at least a showing of objective recklessness regarding the infringement risk. See, e.g.,

IpVenture Inc. v. Lenovo Grp. Ltd., Civil Action No. 11-588-RGA, 2013 WL 126276, at *2 (D.
Del. Jan. 8, 2013); MONEC Holding AG, 897 F. Supp. 2d at 236; St. Clair Intellectual Prop.

Consultants, Inc. v. Hewlett-Packard Co., C.A. No. 10-425-LPS, 2012 WL 1134318, at *2 (D.
Del. Mar. 28, 2012). 9 It is not necessary to plead actual knowledge of infringement or the
infringement risk, but the complaint must adequately allege factual circumstances in which the
patents-in-suit are called to the attention of the defendant. MONEC Holding AG, 897 F. Supp.
2d at 236; Hewlett-Packard Co., 2012 WL 1134318, at *2-3. And ultimately, the "complaint
must 'demonstrate[] a link between the various allegations of knowledge of the patents-in-suit
and the allegations that the risks of infringement' were either known or were so obvious that they
should have been known." MONEC Holding AG, 897 F. Supp. 2d at 236 (quoting Hewlett-

9

See also Cloud Farm Assocs., L.P. v. Volkswagen Grp. ofAm., Inc., C.A. No. 10502-LPS, 2012 WL 3069390, at *3 (D. Del. July 27, 2012) (noting that in order to plead a claim
of willful infringement, a plaintiff must meet the requirements of Rule 8 and Rule 11 (b) of the
Federal Rules of Civil Procedure, and must provide a "pleading equivalent to 'with a knowledge
of the patent and of his infringement"') (internal quotation marks and citation omitted);
Chalumeau Power Sys. LLC v. Alcatel-Lucent, Civil Action No. 11-1175-RGA, 2012 WL
6968938, at *2 (D. Del. July 18, 20 12) (facts alleged regarding willfulness claim must meet
Iqbal plausibility standard).
15

Packard Co., 2012 WL 1134318, at *3). 10
In St. Clair Intellectual Prop. Consultants, Inc. v. Hewlett-Packard Co., C.A. No. 10425-LPS, 2012 WL 1134318, at *2 (D. Del. Mar. 28, 2012), this Court found that a complaint
alleging willful infringement sufficiently set out this requisite link by "listing explicit instances
where [the defendant] was aware of both the patents-in-suit and that it was either practicing or
contemplating practicing technologies related to the patents-in-suit." Hewlett-Packard Co., 2012
WL 1134318, at *3. In other cases in this Court where willful infringement has been deemed
sufficiently pleaded, similarly robust factual allegations were made. See, e.g., Fairchild
Semiconductor Corp. v. Power Integrations, Inc., 935 F. Supp. 2d 772, 778-79 (D. Del. 2013)
(finding willful infringement sufficiently pleaded where the complaint at issue contained facts
indicating how the defendant's customers use of the accused products would infringe the relevant
patent-in-suit, alleged that the defendant had knowledge of the patent, and alleged that the
defendant had knowledge of the aforementioned infringing uses by its customers); Hand Held
Prods., Inc. v. Amazon.com, Inc., C.A. No. 12-CV-00768-RGA-MPT, 2013 WL 507149, at *7
(D. Del. Feb. 6, 2013) (finding willful infringement allegations sufficiently pleaded where the
plaintiff pleaded facts demonstrating not only that defendants had prior knowledge of the patentin-suit, but also facts indicating why defendants' mobile applications infringe, and thus why
"once aware [of the patent], it was obvious their mobile applications risked infringement because
those applications use a smartphone to capture, read, and decode barcodes").

10

Where, as here, a plaintiff has not sought a preliminary injunction, its willfulness
claim must at least be based in part on the accused infringer's pre-filing conduct and cannot be
based solely on post-filing conduct. See Softview LLC v. Apple Inc., Civ. No. 10-389-LPS, 2012
WL 3061027, at *8 (D. Del. July 26, 2012) (citing In re Seagate, 497 F.3d at 1374).
16

Here, Plaintiffs assertions that Defendants engaged in willful infringement comes in a
series of one-sentence paragraphs with little elaboration. (See, e.g., D.I. 4

at~

32) But in each

case, the claims of willfulness appear meant to refer back for support to the substance of the
FAC's allegations regarding Defendants' asserted pre-Complaint (i.e. June 2010 through
November 20 13) knowledge of the patents-in-suit. (See, e.g., id

at~~

25-28; see also D.I. 21 at

16-17)
As to Kapsch, these allegations sufficiently assert that the patents-in-suit were called to
Kapsch's attention prior to the filing of the Complaint. However, the Court agrees with
Defendants that the FAC fails to "detnonstrate a link between the allegations of knowledge and
the allegations that the risks [of infringement] were known or obvious." (D.I. 17 at 14) Unlike
the more factually robust allegations at issue in Hewlett-Packard Co., see id, 2012 WL 1134318,
at *3 (citing to the content of paragraphs 22-23 of the complaint-at-issue there), here the FAC
pleads insufficient factualtnatter regarding the nature of the prior communications between
Plaintiff and Kapsch, particularly as to how the "RFID technology" referenced in those
communications is or was said to infringe the patents-in-suit. Thus, these allegations do not do
the job of plausibly demonstrating why Kapsch thereafter was being objectively reckless as to the
risk of infringement when it, inter alia, subsequently sold the Accused Products to its customers.
As to SSI, the allegations are even more wanting. As was set out with regard to the
induced infringement claims above, the FAC's allegations: (1) do not make out a sufficiently
plausible claim as to SSI' s pre-suit knowledge of the Asserted Patents necessary for a willful
infringement claim here; (2) do not otherwise plausibly demonstrate how any particular SSI
employee might have had knowledge that SSI's products (as opposed to Sirit and FSTech's
17

products) were infringing the patents-in-suit.

IV.

Conclusion
For the foregoing reasons, the Court recommends that Defendants' Motions be

GRANTED. It is within the Court's discretion to grant leave to amend. See Foman v. Davis,
371 U.S. 178, 182 (1962). Because amendment should be allowed "when justice so requires[,]"
Fed. R. Civ. P. 15(a)(2), and because it is not clear that amendment would cause undue prejudice
or would be futile (indeed, Defendants do not specifically argue that it would), the Court
recommends that Plaintiff be given leave to file a further amended complaint addressing the
deficiencies outlined above. See, e.g., Pragmatus A V, LLC, 2013 WL 2295344, at *2.
This Report and Recommendation is filed pursuant to 28 U.S. C. § 636(b)(1)(B), Fed. R.
Civ. P. 72(b)(1), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen (14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b ). The failure of a party to object to legal conclusions may result in the loss
of the right to de novo review in the district court. See Henderson v. Carlson, 812 F.2d 874, 87879 (3d Cir. 1987); Sincavage v. Barnhart, 171 F. App'x 924, 925 n.l (3d Cir. 2006).
The parties are directed to the Court's Standing Order for Objections Filed Under Fed. R.
Civ. P. 72, dated October 9, 2013, a copy of which is available on the District Court's website,
located at http://www.ded.uscourts.gov.

Dated: September 19, 2014
Christopher J. Burke
UNITED STATES MAGISTRATE JUDGE

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