North Texas Patent Group, Inc v. Blackboard, Inc.

Filing 33

MEMORANDUM Opinion and Order (Corrected) Signed by the Honorable Matthew F. Kennelly on 5/9/2011:(mb, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

NORTH TEXAS PATENT GROUP, INC.,

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Plaintiff,
vs.
BLACKBOARD, INC.,
Defendant.

Case No. 10 C 6161

CORRECTED
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Qui tam relator North Texas Patent Group, Inc. (NTPG) has sued Blackboard,
Inc. for falsely marking course management software in violation of the patent false
marking statute, 35 U.S.C. § 292. Blackboard has moved to dismiss NTPG’s complaint
for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). For the
reasons stated below, the Court grants the motion.
Facts
The Court takes the following facts from the allegations in NTPG’s first amended
complaint. The Court accepts the allegations in the first amended complaint as true for
purposes of the motion to dismiss. See Hallinan v. Fraternal Order of Police of Chicago
Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). The Court also takes judicial notice of
the Federal Circuit’s decision in a related case, Blackboard, Inc. v. Desire2Learn Inc.,
574 F.3d 1371, 1373 (Fed. Cir. 2009). See Palay v. United States, 349 F.3d 418, 425
n. 5 (7th Cir. 2003) (“[I]n resolving a motion to dismiss, [a] district court is entitled to

take judicial notice of matters in the public record.”).
NTPG’s claims concern United States patent number 6,988,138 (the ‘138
patent), which contains forty-four claims relating to course management software.
Claims 1-35 are system claims, and claims 36-44 are method claims. NTPG alleges
that the United States Patent and Trademark Office (PTO) issued the patent on
January 17, 2006. The patent listed Blackboard as the patent’s assignee. See Am.
Compl., Ex. A. NTPG alleges that Blackboard subsequently falsely marked software
product lines including Blackboard AttendancePro, Blackboard Learn and Blackboard
Mobile with the patent with the intent to deceive the public.
In July 2006, Blackboard sued Desire2Learn Inc., alleging infringement of the
‘138 patent. See Pl.’s Resp. to Def.’s Mot. to Dismiss, Ex. A. The trial court found
claims 1-35 of the patent invalid for indefiniteness. At a trial held in February 2008,
however, a jury found that claims 36-38 were infringed by Desire2Learn and were not
invalid.
In December 2006, while the infringement suit was pending, Desire2Learn
instituted an inter partes reexamination proceeding before the PTO. In an office action
dated March 25, 2008 – after the jury trial on the infringement suit – an examiner found
all forty-four claims of the ‘138 patent invalid as anticipated or obvious in light of the
prior art. See id., Ex. C.
In May 2008, the trial court in the infringement suit entered final judgment,
confirming the jury’s infringement and validity determinations regarding claims 36-38.
After Desire2Learn appealed, Blackboard petitioned the Director of the PTO to
terminate the inter partes reexamination proceeding, relying on a statute that prohibits
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the PTO from maintaining an inter partes reexamination if a court has entered a final
decision affirming validity against a party seeking reexamination on invalidity grounds.
See 35 U.S.C. § 317(b). In November 2008, after the Director denied Blackboard’s
petition, Blackboard filed suit seeking to enjoin the maintenance of the reexamination
proceeding. See Pl.’s Resp to Def.’s Mot. to Dismiss, Ex. B. Blackboard voluntarily
dismissed the suit in late December 2008.
In the interim, after Desire2Learn appealed the trial court’s judgment in the
infringement suit, it sought a stay of the injunction, based in part on the PTO’s office
action. The Federal Circuit declined to stay the case. See Def.’s Reply Mem. at 6-7
(citing docket entries).
When, however, the Federal Circuit considered the case on its merits, it affirmed
the trial court’s invalidity decision regarding claims 1-35 but reversed the finding in
Blackboard’s favor on claims 36-38. Blackboard, Inc. v. Desire2Learn Inc., 574 F.3d
1381, 1379 (Fed. Cir. 2009). The court held those claims invalid as anticipated by the
manuals of two software systems, CourseInfo 1.5 and Serf. Id. at 1379-82. The
Federal Circuit did not address the validity of the ‘138 patent’s remaining claims (claims
39-44).
In its response to the motion to dismiss, NTPG states that in November 2010
(after this suit was filed), the PTO cancelled all claims of the ‘138 patent. See Pl.’s
Resp. to Def.’s Mot. to Dismiss at 2. It appears that this represented the conclusion of
the reexamination proceeding. Cf. Def.’s Reply Mem. at 8 (referring to the PTO’s
“November 9, 2010 issuance of the reexamination certificate”). NTPG contends that

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Blackboard has nonetheless continued to mark its products with the patent. Id.
NTPG’s complaint, however, makes no reference to either the cancellation or the
alleged subsequent false marking. The Court thus does not consider in this decision
any claim that NTPG might bring based on the November 2010 cancellation of the
patent. The Court also notes that NTPG does not appear to contend that the PTO’s
March 2008 office action in the reexamination proceeding constituted any sort of final
action that invalidated the patent in its entirety.
In its amended complaint in the present false marking case, NTPG alleges that
NTPG alleges that “[c]laims 39-44 cannot cover any product, including Defendant’s
products, as they are method claims.” First Am. Compl. ¶ 36. NTPG also asserts that
claims 39-44 are invalid due to anticipation, obviousness, and indefiniteness, and that
several of the claims do not cover the allegedly marked products because they require
the performance of tasks by an instructor. Blackboard disputes these contentions.
Discussion
I.

Motion to dismiss
Blackboard has moved to dismiss the first amended complaint for failure to state

a claim. “A pleading that states a claim for relief must contain: . . . a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. Proc.
8(a). Rule 8(a) imposes three requirements:
First, a plaintiff must provide notice to defendants of her claims. Second, courts
must accept a plaintiff’s factual allegations as true, but some factual allegations
will be so sketchy or implausible that they fail to provide sufficient notice to
defendants of the plaintiff’s claim. Third, in considering the plaintiff’s factual
allegations, courts should not accept as adequate abstract recitations of the
elements of a cause of action or conclusory legal statements.
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Brooks v. Ross, 578 F.3d 574, 581 (7th Cir. 2009). Claims under the false marking
statute are also subject to the particularized pleading requirements of Federal Rule of
Civil Procedure 9(b). In re BP Lubricants USA Inc., --- F.3d ---, 2011 WL 873147, at *2
(Fed. Cir. Mar. 15, 2011). The Federal Circuit has held that Rule 9(b) requires a plaintiff
in a false marking case to “‘allege sufficient underlying facts from which a court may
reasonably infer that [the defendant] acted with the requisite state of mind.’” Id. at *3
(quoting Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009)).
The false marking statute provides, in relevant part:
Whoever marks upon, or affixes to, or uses in advertising in connection
with any unpatented article, the word “patent” or any word or number
importing that the same is patented for the purpose of deceiving the
public; . . . [s]hall be fined not more than $500 for every such offense.
35 U.S.C. § 292(a). “The two elements of a § 292 false marking claim are (1) marking
an unpatented article and (2) intent to deceive the public.” Forest Group, Inc. v. Bon
Tool Co., 590 F.3d 1295, 1300 (Fed. Cir. 2009) (citing Clontech Labs. Inc. v. Invitrogen
Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005)). “When the statute refers to an
‘unpatented article’ the statute means that the article in question is not covered by at
least one claim of each patent with which the article is marked.” Juniper Networks, Inc.
v. Shipley, --- F.3d ---, 2011 WL 1601995, at *4 (Fed. Cir. Apr. 29, 2011) (quoting
Clontech Labs. Inc., 406 F.3d at 1352) (internal quotation marks omitted).
Blackboard concedes that claims 1-38 of the patent have been ruled invalid but
contends that NTPG has failed to adequately allege that the patent’s remaining claims
are invalid or do not cover the marked products. NTPG counters with two arguments.
First, NTPG asserts that, as a matter of law, “[c]laims 39-44 cannot cover any product .
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. . as they are method claims.” First Am. Compl. ¶ 36. Second, NTPG asserts that
claims 39-44 are invalid due to anticipation, obviousness, and indefiniteness, and that
several of the claims do not cover the allegedly marked products because they require
the performance of tasks by an instructor.
The Court begins with NTPG’s contention that, as a matter of law, method claims
cannot cover any product. The Supreme Court addressed a related issue in Quanta
Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008). In that case, the Supreme
Court considered the application of the patent exhaustion doctrine to the sale of a set of
computer components that had to be combined with additional components in order to
practice the patented methods. Id. at 621. The Court held that the sale of the
component parts exhausted the method patents. Id. at 628-29. It reasoned: “It is true
that a patented method may not be sold in the same way as an article or device, but
methods nonetheless may be ‘embodied’ in a product, the sale of which exhausts
patent rights.” Id. at 629.
At least one district court has applied the holding in Quanta Computers to the
patent false marketing statute. See Harrington v. CIBA Vision Corp., No. 08 C 0251,
2010 WL 2889584 (W.D.N.C. July 21, 2010). In Harrington, a district court held that a
plaintiff had failed to prove that a disinfecting solution marked with a method patent
relating to the disinfection of soft contact lenses constituted an “unpatented item” for
purposes of section 292(a). Id. at *4-5. The court reasoned that the marked item
“embodied” the patented method, and that “[a]n item cannot be a ‘patented item’ for
purposes of the patent exhaustion doctrine and an ‘unpatented article’ for purposes of §

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292.” Id. The Court finds Harrington persuasive and concludes that NTPG cannot
state a claim against Blackboard merely by asserting that claims 39-44 of the ‘138
patent are method claims.
NTPG cites no convincing authority to the contrary. It relies on Clontech
Laboratories, Inc. v. Invitrogen Corp., 406 F.3d 1347 (2005), but points to no language
in Clontech that contradicts the analysis in Harrington. Clontech is inapposite. Indeed,
the defendant in that case conceded that its marked products fell outside the scope of
any valid patent claim. Id. at 1355-57. Blackboard also cites a law review article that
predates Quanta Computer and provides little analysis on the matter at issue. See
Elizabeth I. Winston, The Flawed Nature of the False Marking Statute, 112 Tenn. L.
Rev. 111, 128 (2010). These citations do not persuade this Court that the analysis in
Harrington is flawed.
The Court turns next to NTPG’s contention that Blackboard engaged in false
marking because claims 39-44 are invalid and also because several of the claims do
not cover the products in question. Specifically, NTPG contends that claims 39-44 of
the patent are invalid as anticipated or obvious by CourseInfo 1.5, First Am. Compl. ¶¶
30, 39, 41; claims 43-44 of the ‘138 patent are invalid as indefinite, id. ¶ 38; and
Blackboard’s marked products “do not and cannot practice claims 39-42" because
those claims “require that an ‘instructor’ take action to perform the step of the claimed
method,” id. ¶ 37. NTPG acknowledges that the Federal Circuit did not address the
validity of claims 39-44 but argues that the court’s reasoning invalidating claims 1-38
also applied to those claims. Id. ¶¶ 40-41.

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Blackboard counters that the presumption of validity that attaches to patents
prior to their invalidation by a court defeats NTPG’s claims as a matter of law. This
Court agrees. “By direction of 35 U.S.C. § 282, an issued patent is presumed valid.”
KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398, 412 (2007). Section 282 states:
Each claim of a patent (whether in independent, dependent, or multiple
dependent form) shall be presumed valid independently of the validity of other
claims; dependent or multiple dependent claims shall be presumed valid even
though dependent upon an invalid claim.
35 U.S.C. § 282; see also Apple Computer, Inc. v. Articulate Systems, Inc., 234 F.3d
14, 24 (Fed. Cir. 2000); Lannom Mfg. Co., Inc. v. U.S. Intern. Trade Comm’n, 799 F.2d
1572, 1578-79 (Fed. Cir. 1986) (recognizing that “a patent is ‘born valid’ when it is
granted by the Patent and Trademark Office”) (citations omitted). NTPG does not
allege that any court had held claims 39-44 invalid at the time Blackboard marked the
products.
NTPG replies that the presumption of validity that attaches to a patent issued by
the PTO may be overcome. See, e.g., Connell v. Sears, Roebuck & Co., 722 F.2d
1542, 1549 (Fed. Cir. 1983) (recognizing that “[t]he patent challenger may indeed prove
facts capable of overcoming the presumption[.]”). It also contends that the validity of a
patent is ultimately a question of fact inappropriate for decision at the motion to dismiss
stage. The validity of a patent “need not be re-established,” however, unless its validity
is challenged in a patent infringement litigation. See Lannom Mfg. Co., 799 F.2d at
1579. Instead, a patent “remains valid until a challenger proves it [is invalid], or it is no
longer viable as an enforceable right.” Roper Corp. v. Litton Sys., Inc., 757 F.2d 1266,
1270 (Fed. Cir. 1985).
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At the time of the false marking currently alleged by NTPG, several claims of the
‘138 patent had not been invalidated. And, as the Court has ruled, the products on
which Blackboard marked the patent embodied those claims. It follows that the
products were not “unpatented” within the meaning of section 292(a). Neither the fact
that the validity of remaining claims had been questioned, nor the fact that those claims
later were invalidated or cancelled, changes this. Nothing in section 292(a) requires a
patent holder to anticipate a potential invalidation of its patent that has not yet occurred;
no authority suggests otherwise.
For those reasons, the Court concludes that NTPG has failed to state a claim
against Blackboard.
II.

NTPG’s request for leave to amend
NTPG asserts, and Blackboard does not dispute, that five days after NTPG filed

its first amended complaint on November 4, 2010, the PTO issued a certificate
cancelling all forty-four claims of the ‘138 patent. In its filing in opposition to the motion
to dismiss, NTPG asserts that Blackboard continued to falsely mark its product lines,
including on its website, after the PTO’s November 9, 2010 decision. NTPG contends
that the Court should construe the first amended complaint to encompass this conduct
or, in the alternative, grant NTPG leave to amend its complaint. Blackboard opposes
both requests.
The Court rejects NTPG’s suggestion that the first amended complaint
encompasses any conduct by Blackboard following the PTO’s November 9, 2010
action. NTPG points to its allegation that, “[d]espite the fact that NTPG has filed suit
against Blackboard for false marking, Blackboard continued and continues to mark its
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products and advertise with the ‘138 patent following the date of NTPG’s original
complaint.” First Am. Compl. ¶ 45. That allegation, however, does not encompass
conduct that postdates the filing of the first amended complaint. The Court defers
ruling on NTPG’s request for leave to amend its complaint pending the filing of a motion
for leave to amend. If NTPG seeks to amend its complaint to allege false marking after
November 9, 2010, it goes without saying that the requirements of Federal Rule of Civil
Procedure 11(b) apply to any such allegation.
Conclusion
For the reasons stated above, the Court grants Blackboard’s motion to dismiss
plaintiff’s first amended complaint [docket no. 18]. The Court will convert the dismissal
to a final judgment on the merits unless NTPG presents for hearing, on or before May
24, 2011, a motion for leave to amend including a proposed second amended
complaint that states at least one legally viable claim. The case is set for a status
hearing on May 24, 2011 at 9:30 a.m.

_______________________________
MATTHEW F. KENNELLY
United States District Judge
Date: May 9, 2011
(corrected version
issued May 10, 2011)

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