Arunachalam v. International Business Machines Corporation et al

Filing 89

MEMORANDUM regarding motions to dismiss (D.I. 17 , 21 , 28 ). Signed by Judge Richard G. Andrews on 3/21/2017. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
DR. LAKSHMI ARUNACHALAM,
Plaintiff,

v.

Civil Action No. 16-281-RGA

INTERNATIONAL BUSINESS
MACHINES CORPORATION, et al.,
Defendants.

MEMORANDUM
Plaintiff filed a complaint against IBM for patent infringement and racketeering on April
20, 2016. (D.I. 1). Shortly thereafter, Plaintiff filed a first amended complaint (D.I. 6), naming
as defendants, IBM, SAP, J.P. MorganChase, myself, and 100 Does. I was dismissed as a
defendant on September 26, 2016. (D.I. 72). The other three named defendants have filed
motions to dismiss (D.I. 17 (SAP); 21 (J.P. MorganChase); 28 (IBM)). The motions have been
fully briefed. I now address those motions.
The first amended complaint alleges four counts: Count 1, infringement by IBM of U.S.
Patent No. 7,340,506 ("the '506 patent"); Count 2, civil racketeering by IBM, SAP, and J.P.
MorganChase in violation of 18 U.S.C. § 1962(b); Count 3, civil racketeering by IBM, SAP, and
J.P. MorganChase in violation of 18 U.S.C. § 1962(c); and Count 4, conspiracy to engage in
racketeering by IBM, SAP, and J.P. MorganChase, in violation of 18 U.S.C. § 1962(d).
All three motions move to dismiss the racketeering-related charges of Counts 2 through

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4.1
Plaintiff proceeds pro se and, therefore, her pleadings are liberally construed and her
complaint, "however inartfully pleaded, must be held to less stringent standards than formal
pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 94 (2007). Under Rule
12(b)(6), a motion to dismiss may be granted only if, accepting the well-pleaded allegations in
the complaint as true and viewing them in the light most favorable to the plaintiff, a court
concludes that those allegations "could not raise a claim of entitlement to relief." Bell At!. Corp.
v. Twombly, 550 U.S. 544, 558 (2007). "Though 'detailed factual allegations' are not required, a
complaint must do more than simply provide 'labels and conclusions' or 'a formulaic recitation
of the elements of a cause of action."' Davis v. Abington Mem 'l Hosp., 765 F.3d 236, 241 (3d
Cir. 2014) (quoting Twombly, 550 U.S. at 555). In addition, a plaintiff must plead facts sufficient
to show that a claim has substantive plausibility. See Johnson v. City ofShelby, _U.S._, 135
S.Ct. 346, 347 (2014). A complaint may not dismissed, however, for imperfect statements of the
legal theory supporting the claim asserted. See id. at 346.
When reviewing the sufficiency of a complaint, a court should follow a three-step
process: (1) consider the elements necessary to state a claim; (2) identify allegations that are
merely conclusions and therefore are not well-pleaded factual allegations; and (3) accept any
well-pleaded factual allegations as true and determine whether they plausibly state a claim. See
Connelly v. Lane Constr. Corp., 809 F.3d 780, 787 (3d Cir. 2016); Williams v. BASF Catalysts
LLC, 765 F.3d 306, 315 (3d Cir. 2014). Deciding whether a claim is plausible will be a "contextspecific task that requires the reviewing court to draw on its judicial experience and common

1

IBM has not moved to dismiss the patent infringement claim. (DJ. 29, p.l n.l).
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sense." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
When alleging fraud, Federal Rule of Civil Procedure 9(b) requires that the "party must
state with particularity the circumstances constituting fraud or mistake. Malice, intent,
knowledge, and other conditions of a person's mind may be alleged generally." Fed. R. Civ. P.
9(b). On a motion to dismiss under Rule 9(b) "focusing exclusively on [the rule's] particularity
language is too narrow an approach and fails to take account of the general simplicity and
flexibility contemplated by the rules." Seville Indus. Mach. Corp. v. Southmost Mach. Corp.,
742 F.2d 786, 791 (3d Cir. 1984) (internal quotation marks omitted). The Third Circuit has held
that:

Rule 9(b) requires plaintiffs to plead with particularity the "circumstances" of the alleged
fraud in order to place the defendants on notice of the precise misconduct with which they
are charged, and to safeguard defendants against spurious charges of immoral and
fraudulent behavior. It is certainly true that allegations of"date, place or time" fulfill
these functions, but nothing in the rule requires them. Plaintiffs are free to use alternative
means of injecting precision and some measure of substantiation into their allegations of fraud.
Id.
An overview of the well-pled factual allegations in the amended complaint shows that it

alleges that: (1) Plaintiff invented the '506 patent, and Defendant IBM infringes it; and (2) the
'506 patent underwent inter-partes reexamination, and emerged unscathed in 2014. That is it.
The amended complaint does state that it attached various exhibits (described as Exhibits A2,
Cl, DI, D2 and L) which constitute predicate acts for the racketeering claims. Exhibit A2 (D.1.
6 at 30-40) reads like a brief arguing for the validity of the '506 patent. It does not allege
anything resembling a factual statement of a racketeering predicate act. Exhibit C 1 (id. at 41-58)
mostly reads like a brief on a number of topics. There are some factual statements contained

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within it. E.g., SAP and J.P. MorganChase are members of the IBM Eclipse Foundation, which
distributes Eclipse code. Plaintiff and others provided the underlying code. IBM signed nondisclosure agreements with IBM in 1995, 2001, and 2003; negotiated with Plaintiff on a joint
venture in 1994, 2001, and 2011; provided Plaintiff office space in 1994 and 2003; offered to buy
her patent portfolio in 2006; and copied her source code. Other allegations tend to recast her
court defeats as a massive conspiracy among district judges, courts of appeals judges, Supreme
Court Justices, lawyers and law firms, and PTAB judges. Exhibit D 1 (id. at 59) incorporates
Exhibits A2, Cl, D2 and D3. Exhibit D2 (id. at 60) refers to three documents that can be found
on the eclipse.org website, which are from 2002 and 2004.2 Exhibit D3 (id. at 61-80) describes
various of my rulings and occasionally intersperses snippets of information about the rulings of
other judges and about the Eclipse Foundation. There does not appear to be an Exhibit L.
As a preliminary note, and even recognizing that Plaintiff proceeds pro se, the only
factual allegations in the twenty-seven pages of the amended complaint against SAP and J.P.
MorganChase concern why the Court has personal jurisdiction over them (D.I. 6 at mf 5, 6, 14,
16), that they "are using Plaintiff's patented Web applications on a Web browser[, which] is
mission critical to how [they] conduct their business and operations today on the Web," (id.
8), and that they have not licensed the '506 patent. (Id.

at~

at~

21). This would be insufficient if

they were accused of patent infringement. It surely makes out no other cognizable violation of
the law. I do not think Plaintiff can make out racketeering claims simply by appending about 60
pages of exhibits containing mostly irrelevant information and providing a citation to where other

2

The website states that, "Eclipse has over 250 different open source projects. Many
know our Java IDE but we also have modeling tools, runtimes, reporting tools and much more."
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materials can be found and purporting to incorporate them all by reference. (See id. at if 91 ). The
complaint is supposed to contain "a short and plain statement of the claim showing that the
pleader is entitled to relief" Fed. R. Civ. P. 8(a)(2). Plaintiff's complaint is not short, it is not
plain, and it provides no basis for seeking relief against SAP and J.P. MorganChase. Thus, for
that reason alone, Defendants SAP and J.P. MorganChase will be dismissed. Needless to say, the
reasons that follow relating to IBM do also apply to SAP and J.P. MorganChase.
I will review the relevant elements of the claims for Counts 2, 3, and 4.
The elements of a § 1962(b) violation are: (1) Defendant is a person who through a
pattern of racketeering activity acquired or maintained any interest or control of an enterprise; (2)
Defendant's interest or control in the enterprise was associated with or connected to the pattern
ofracketeering activity; (3) the enterprise was engaged in, or the activities of the enterprise
affected, interstate or foreign commerce; and (4) Plaintiff's business or property was injured by
reason of defendant's acquisition or maintenance of the interest in, or control over, the enterprise.
O'Malley, Federal Jury Practice and Instructions,§ 161.21 (6 1h ed. 2013). The elements ofa §
1962(c) violation are: (1) The existence of an enterprise affecting interstate commerce; (2)
Defendant was employed by or associated with the enterprise; (3) Defendant conducted or
participated in the conduct of the enterprise's affairs; (4) Defendant's participation was through a
pattern of racketeering activity; and (5) Plaintiff's business or property was injured by reason of
defendant's conducting or participating in the conduct of the enterprise's affairs. Id.,§ 161.22.
The elements of a § 1962(d) violation are: ( 1) Defendant is a person who conspired to violate §§
1962(b) or (c); (2) Defendant understood the nature or unlawful character of the conspiratorial
plan; (3) Defendant agreed to join with others to achieve the objective of the conspiracy during
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the relevant period; (4) Defendant agreed that the enterprise would be conducted through a
pattern of racketeering activity. This means that the commission of at least two predicate crimes
by the conspiracy was contemplated. Id., § 161.23.
Patent infringement is not a crime. Patent infringement thus is not on the extensive list of
crimes that can be a racketeering act. See 18 U.S.C. § 1961(1). Plaintiff's brief (D.I. 50, p. 10)
has a laundry list of federal crimes in which "Defendants engaged egregiously," but Plaintiff's
amended complaint makes no plausible factual allegations to support any of them. The closest
Plaintiff comes, so far as I can see, is the brief reference that "[t]he IBM Eclipse Foundation
installed the Eclipse code at JPMorgan ... using Eclipse code that includes [Plaintiff's] patented
inventions and technology." (D.I. 6 at 48). Elsewhere, Plaintiff alleges that "IBM copied
[Plaintiff's] inventions." Copying patented inventions is not a federal crime. It is also not the
same thing as theft of trade secrets, which is one of the federal crimes Plaintiff's amended
complaint mentions.
Patent infringement suits are the proper remedy for patent infringement. That is what
Plaintiff has filed in Count 1. She describes the pattern of racketeering activity as "cluster[ing]
around patent infringement, trafficking in certain goods bearing counterfeit marks, tampering
with a Federal Witness, interstate transportation of stolen property and obstruction of justice."
(Id. at 2). Plaintiff alleges no facts about goods bearing counterfeit marks. There is a reference

to a witness in a federal case, but no factual allegation that suggests tampering. A product that
infringes a patent is not "stolen property" within the meaning of any federal criminal statute.
Plaintiff's allegations of obstruction of justice are not plausible. The facts alleged in support of
the obstruction of justice consist of various judicial rulings. Pleading that judicial rulings were
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erroneous, even egregiously erroneous, does not make them a plausible basis for alleging
obstruction of justice.
There are no allegations of any racketeering activity, either actual or contemplated by
agreement. Thus, I need not consider Defendants' numerous other arguments for dismissal.
Counts 2 through 4 of the First Amended Complaint will be dismissed against all defendants. 3
Rule 15(a)(2) requires that the Court "freely give leave [to amend] when justice so
requires." Fed. R. Civ. P. 15(a)(2). The Third Circuit has adopted a liberal approach to the
amendment of pleadings to ensure that "a particular claim will be decided on the merits rather
than on technicalities." Dole v. Arco Chem. Co., 921 F.2d 484, 486-87 (3d Cir. 1990).
Amendment, however, is not automatic. See Dover Steel Co., Inc. v. Hartford Accident &

Indem., 151 F.R.D. 570, 574 (E.D. Pa. 1993). Leave to amend should be granted absent a
showing of"undue delay, bad faith or dilatory motive on the part of the movant, repeated failure
to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by
virtue of the allowance of the amendment, futility of amendment, etc." Farnan v. Davis, 371
U.S. 178, 182 (1962). Futility of amendment occurs when the complaint, as amended, does not
state a claim upon which relief can be granted. See In re Burlington Coat Factory Sec. Litig.,
114 F.3d 1410, 1434 (3d Cir. 1997). If the proposed amendment "is frivolous or advances a
claim or defense that is legally insufficient on its face, the court may deny leave to amend."

Harrison Beverage Co. v. Dribeckimporters, Inc., 133 F.R.D. 463, 468 (D.N.J. 1990).
However, "the pleading philosophy of the Rules counsels in favor of liberally permitting
amendments to a complaint." CMR D.N Corp. v. City ofPhi/a., 703 F.3d 612, 629 (3d Cir.
3

There are no allegations that implicate any of the Doe Defendants in any racketeering.
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2013).
Normally, the Court permits a pro se litigant to amend a complaint for pleading
deficiencies. I tend to believe that permitting amendment, in this case, would be futile. I
strongly doubt that Plaintiff can plead any set of facts resembling what she has filed in the First
Amended Complaint so as to state a viable claim of racketeering. But I think the better course is
to allow Plaintiff a suitable amount of time to file a motion in compliance with D .Del. LR 15 .1
seeking leave to amend, which amended complaint should address not only the deficiencies
identified in this Memorandum but also those raised in the various Defendants' briefs. If such a
motion is filed, Defendant(s) need not respond to the motion to amend unless and until the Court
so orders. If such a motion is not filed, the case will be limited to Count 1.
Two of the three Defendants have requested sanctions. (D.I. 18, p. 14; D.I. 28, pp. 1516). I think the better course is to defer any consideration of those requests. Defendants are free
to renew the requests by separate motion after consideration of any motion to amend.

March-;}), 2017

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