North Star Innovations Inc. v. Toshiba Corporation et al

Filing 36

REPORT AND RECOMMENDATION recommending GRANTING D.I. 14 MOTION to Dismiss for Failure to State a Claim Motion to Dismiss the First Amended Complaint for Failure to State a Claim filed by Toshiba Corporation, Toshiba America Electronic Components, Inc.. 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 12/23/2016. Signed by Judge Christopher J. Burke on 12/6/2016. (mlc)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
NORTH STAR INNOVATIONS, INC.,
Plaintiff,
V.

TOSHIBA CORPORATION and TOSHIBA
AMERICA ELECTRONIC COMPONENTS,
INC.,
Defendants.

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Civil Action No. 16-115-LPS-CJB

REPORT AND RECOMMENDATION
1.

Presently pending before the Court in this patent infringement action is

Defendants Toshiba Corporation ("Toshiba Corp.") and Toshiba America Electronic
Components, Inc.'s ("TAEC," and collectively with Toshiba Corp., "Defendants") motion to
dismiss Plaintiff North Star Innovations, Inc.' s ("Plaintiff') First Amended Complaint ("F AC")
pursuant to Federal Rule of Civil Procedure 12(b)(6) (the "Motion"). (D.I. 14) As things stand
now, the Motion addresses only one discrete asserted basis for dismissal: Defendants' claim that
the FAC inappropriately treats three distinct Toshiba entities (the two current Defendants and a
former Defendant, Toshiba America, Inc.) as one corporate person, and that Plaintiffs
infringement allegations thus do not provide Defendants with fair notice of Plaintiffs claims. 1

Originally, Defendants had also asserted that they were entitled to a second type of
relief via the Motion: that the FAC should be dismissed as to any indirect infringement claims,
or that, in the alternative, certain references to "inducement and contributory infringement" in the
FAC's request for relief should be stricken pursuant to Federal Rule of Civil Procedure 12(f).
(D.I. 15 at 4-6 & n.3; see also D.I. 6 at 23) After Plaintiff acknowledged that it did not intend to
accuse Defendants of indirect infringement at this time, the parties subsequently agreed that the
relevant language in the prayer for relief should be stricken. (D.I. 32) The Court will therefore
DENY as MOOT that aspect of the Motion. To the extent an amended pleading is forthcoming,
the Court understands that it will not include such language (unless Plaintiff therein pleads facts
sufficient to allege indirect infringement claims).

2.

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 reliefl]" 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.
UPMC 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." Id. at 210-11. Second, the court determines "whether the
facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for
relief."' Id. 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 Atl. 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)). 2
3.

Defendants allege that Plaintiffs FAC does not adequately plead direct

infringement because Plaintiff failed to identify which entity is responsible for any particular
alleged infringing activity, and instead simply refers to all three Toshiba entities as "Defendants"

2

The parties agree (as does the Court) that the Twombly/Iqbal standard applies to
the direct infringement claims at issue here, as the FAC was filed after December 1, 2015. See,
e.g., e.Digital Corp. v. iBaby Labs, Inc., Case No. 15-cv-05790-JST, 2016 WL 4427209, at *3
(N.D. Cal. Aug. 22, 2016); (D.I. 15 at 4; D.I. 22 at 1).
2

in each of the counts of infringement. (D.I. 15 at 6-9; D.I. 24 at 4-6) Defendants are correct.
The FAC' s four counts say nothing particular about either of the two current Defendants; instead,
the counts simply state that "Defendants have infringed [certain claims of the patents-in-suit]
through, among other activities, making, using ... offering to sell, and/or selling [certain
accused products]." (D.I. 6 at iii! 10, 23, 36 & 51 (emphasis added)) Though most3 of the counts
do incorporate earlier paragraphs of the FAC by reference, those earlier paragraphs only state that
(1) Toshiba Corp. is a Japanese company; (2) TAEC is owned by Toshiba America, Inc. and has

its principal place of business in Irvine, California; and (3) both companies have previously and
are now asserted to be "making, using, selling, offering for sale, and/or importing into the United
States memory controller products" that infringe the patents-in-suit. (Id. at iii! 5, 7 (emphasis
added); see also id. at ii 9) Thus, nowhere in any part of the FAC is it clearly alleged that either
Defendant takes part in any specific infringing act-instead, it is vaguely alleged that they may
commit one "or" another "or" some "or" all of the relevant possible acts that would amount to
direct infringement. This leaves the reader confused about which, if any, of these acts are
actually being attributed to each Defendant. And if the Court wished to assure itself that there is
a plausible claim that each Defendant has committed at least one such wrongful act in the United
States (e.g., that each Defendant has either made, used, sold, or offered for sale an accused
product in this country, or imported into this country such a product), it could not do so, since
there are no other factual allegations about the nature of Defendants' business, nor their activities

3

Count I does not incorporate any of the earlier background paragraphs in the FAC
by reference. (D.I. 6 at iii! 10-21)
3

in the United States. 4 Cf M2M Sols. LLC v. Telit Commc 'ns PLC, Civil Action No. 14-1103RGA, 2015 WL 4640400, at *1-3 & n.1 (D. Del. Aug. 5, 2015) (finding that a plaintiff had not
adequately alleged infringement against defendants where the first few allegations of the
complaint simply introduced the defendants, provided the addresses of their principal places of
business, and stated that one defendant was a wholly owned subsidiary of the other, and where
the complaint did not further link each individual defendant to any specific type of infringing
conduct but instead simply "refer[ red] to the two [d]efendants as 'Telit,' as if both [d]efendants
were one entity" in the remainder of its allegations).
4.

Despite Plaintiffs argument to the contrary, (D.I. 22 at 6-7), the circumstances

here are not like those in Mayne Pharma International Pty Ltd. v. Merck & Co., Inc., Civil
Action No. 15-438-LPS-CJB, 2015 WL 7833206 (D. Del. Dec. 3, 2015). In Mayne Pharma, the
plaintiff had alleged infringement in Count I against three different defendants, and in doing so,
had simply referred to "Defendants" collectively. 2015 WL 7833206, at *3. However, the Court
nevertheless found that as to two of the defendants (Merck & Co., Inc. and Merck Sharp &
Dohme Corp.), the complaint passed muster under Rule 12(b)(6). Id. This was because Count I
had incorporated each of the preceding paragraphs of the complaint by reference, and in one of
those preceding paragraphs, the complaint clearly alleged that each of the two above-referenced
U.S.-based defendants had individually '"regularly transact[ed] ... sales of the infringing
product"' in the United States, including in Delaware. Id. (citation omitted). In other words, the
complaint had clearly (and plausibly) asserted that each defendant had committed at least one

4

Indeed, without more, the fact that Toshiba Corp. is not a U.S.-based entity might
well affirmatively suggest that it has not done any of these things.
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particular type of infringing act. That is not the case here.
5.

For the foregoing reasons, the Court recommends that Defendants' Motion be

GRANTED because the FAC fails to provide Defendants with adequate notice of the direct
infringement allegations against them. However, it is within the Court's discretion to allow leave
to amend, see Foman v. Davis, 371U.S.178, 182 (1962), and such leave should be allowed
"whenjustice so requires[,]" Fed. R. Civ. P. 15(a)(2). Because Plaintiff has requested the ability
to amend the FAC if its allegations were deemed wanting, (D.I. 22 at 9), and because Defendants
have not suggested that amendment would cause undue prejudice or would be futile, the Court
recommends that Plaintiff be given leave to file a Second Amended Complaint to attempt to
correct the deficiencies outlined above. See, e.g., Mayne Pharma, 2015 WL 7833206, at *6;
Pragmatus AV, LLC v. Yahoo! Inc., C.A. No. 11-902-LPS-CJB, 2013 WL 2295344, at *2 (D.
Del. May 24, 2013).
6.

This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B),

Fed. R. Civ. P. 72(b)(l), 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, 878-79 (3d Cir. 1987); Sincavage v. Barnhart, 171 F. App'x 924, 925
n.1 (3d Cir. 2006).
7.

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.
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Dated: December 6, 2016
Christopher J. Burke

UNITED STATES MAGISTRATE JUDGE

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