Prism Technologies v. AT&T et al

Filing 39

MEMORANDUM AND ORDER - AT&T's motion to dismiss (Filing No. 27 ) is granted, as follows: Prism will file an amended complaint with the Court setting forth adequate infringement allegations on or before September 21, 2012. Should Prism fail to file a timely amended complaint, this action will be dismissed. AT&T's request for oral argument is denied as moot. (Amended Complaint due by 9/21/2012.) Ordered by Senior Judge Lyle E. Strom. (TEL)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
PRISM TECHNOLOGIES, LLC,

)
)
Plaintiff,
)
)
v.
)
)
AT&T MOBILITY, LLC,
)
)
Defendant.
)
______________________________)

8:12CV122

MEMORANDUM AND ORDER

This matter is before the Court on the motion of
defendant AT&T Mobility, LLC (“AT&T”) to dismiss the complaint of
plaintiff Prism Technologies, LLC (“Prism”), filed pursuant to
Federal Rule of Civil Procedure 12(b)(6) (Filing No. 27, with
brief, Filing No. 28, and index of evidence, Filing No. 29).
Prism filed a brief in opposition to the motion (Filing No. 35),
to which AT&T replied (Filing No. 36).

After reviewing the

motion, briefs, and relevant law, the Court finds that the motion
to dismiss will be granted with leave for Prism to amend.
I.

Factual and Procedural Background.
In its complaint, Prism alleges infringement by AT&T of

two patents, U.S. Patent No. 7,290,288 (“‘288 patent”; Ex. 1,
Filing No. 1) and U.S. Patent No. 8,127,345 (“‘345 patent”; Ex.
6, Filing No. 1).

The ‘288 Patent is entitled, “METHOD AND

SYSTEM FOR CONTROLLING ACCESS, BY AN AUTHENTICATION SERVER, TO
PROTECTED COMPUTER RESOURCES PROVIDED VIA AN INTERNET PROTOCOL
NETWORK” (Ex. 1, Filing No. 1, at 1).

The ‘345 Patent is

entitled “METHOD AND SYSTEM FOR MANAGING ACCESS TO PROTECTED
COMPUTER RESOURCES PROVIDED VIA AN INTERNET PROTOCOL NETWORK”
(Ex. 6, Filing No. 1, at 1).
For each patent, Prism substantiates its allegation of
AT&T’s infringement in only one paragraph:
AT&T has been and now is directly,
indirectly, and/or jointly
infringing the [‘288 or ‘345]
patent in the State of Nebraska, in
this judicial district, and
elsewhere in the United States, by
making, using, offering to sell,
and/or selling various wireless
products and data services that
implement authentication systems
and methods for controlling access
to protected computer resources as
claimed in the [‘288 or ‘345]
patent. For example, and without
limitation, AT&T sells DataConnect
Plans and DataPro Plans that
implement systems and methods for
controlling access to AT&T’s
protected network resources.
(Filing No. 1, at ¶¶ 12, 16).

AT&T filed its motion to dismiss

pursuant to Rule 12(b)(6) asserting Prism’s “failure to state a
claim upon which relief may be granted” in its complaint (Filing
No. 27, at 1).
II.

Standard of Review.
A complaint filed in federal court must contain “a

short and plain statement of the claim showing that the pleader
is entitled to relief.”

Fed. R. Civ. P. 8(a)(2).

Consequently,

a motion to dismiss may be granted when the plaintiff has failed

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“to state a claim upon which relief can be granted."
Civ. P. 12(b)(6).

Fed. R.

“To survive a motion to dismiss, a complaint

must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

“While a complaint

attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, a plaintiff’s obligation to provide
the grounds of his entitlement to relief requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do . . . .”

Twombly, 550

U.S. at 555 (internal quotations omitted).
“Twombly and Iqbal did not abrogate the notice pleading
standard of Rule 8(a)(2).

Rather, those decisions confirmed that

Rule 8(a)(2) is satisfied ‘when the plaintiff pleads factual
content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.’”
Hamilton v. Palm, 621 F.3d 816, 817 (8th Cir. 2010) (quoting
Iqbal, 556 U.S. at 678; citing Erickson v. Pardus, 551 U.S. 89,
93 (2007)).

“The complaint must ‘provide a defendant with some

indication of the loss and the causal connection that the
plaintiff has in mind.’

Otherwise, a plaintiff with no hope of

showing proximate causation could require inefficient expenditure
of resources and potentially induce a defendant to settle a

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meritless claim.”

Schaaf v. Residential Funding Corp., 517 F.3d

544, 549 (8th Cir. 2008) (quoting Dura Pharmaceuticals, Inc. v.
Broudo, 544 U.S. 336, 347 (2005)).
“When ruling on a motion to dismiss, the court must
accept the allegations contained in the complaint as true and
draw all reasonable inferences in favor of the nonmoving party.”
Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005).

“The

plausibility standard requires a plaintiff to show at the
pleading stage that success on the merits is more than a ‘sheer
possibility.’”

Braden v. Wal-Mart Stores, Inc., 588 F.3d 585,

594 (8th Cir. 2009) (quoting Iqbal, 556 U.S. at 678.)
not, however, a ‘probability requirement.’”
III.

“It is

Id.

Direct Infringement.
In In re Bill of Lading Transmission & Processing

System Patent Litigation, 681 F.3d 1323 (Fed. Cir. 2012), the
Federal Circuit expressly addresses the issue of the amount of
detail required in a complaint in a patent case.1

There, the

Federal Circuit started its analysis with regard to direct

1

The Federal Circuit has stated that a ruling on a motion
to dismiss is a procedural issue to be decided by the law of the
circuit in which the trial court sits: “A motion to dismiss for
failure to state a claim upon which relief can be granted is a
purely procedural question not pertaining to patent law. Thus,
on review we apply the law of the regional circuit.” McZeal v.
Sprint Nextel Corp., 501 F.3d 1354, 1355-56 (Fed. Cir. 2007).
This Court reads Bill of Lading as highly persuasive but not
mandatory authority for the Eighth Circuit.
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infringement with Form 18 of the Federal Rules of Civil
Procedure, “Complaint for Patent Infringement.”

Form 18 reads,

in its entirety,
(Caption--See Form 1.)
1. (Statement of Jurisdiction--See
Form 7.)
2. On date, United States Letters
Patent No. _______ were issued to
the plaintiff for an invention in
an electric motor. The plaintiff
owned the patent throughout the
period of the defendant’s
infringing acts and still owns the
patent.
3. The defendant has infringed and
is still infringing the Letters
Patent by making, selling, and
using electric motors that embody
the patented invention, and the
defendant will continue to do so
unless enjoined by this court.
4. The plaintiff has complied with
the statutory requirement of
placing a notice of the Letters
Patent on all electric motors it
manufactures and sells and has
given the defendant written notice
of the infringement.
Therefore, the plaintiff demands:
(a) a preliminary and final
injunction against the continuing
infringement;
(b) an accounting for damages; and
(c) interest and costs.
(Date and sign--See Form 2.)

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FRCP Form 18.

In Bill of Lading, the Federal Circuit concluded,

“[T]o the extent the parties argue that Twombly and its progeny
conflict with the Forms and create differing pleadings
requirements, the Forms control.”
1334.

Bill of Lading, 681 F.3d at

“Thus, whether [a] complaint[] adequately plead[s] direct

infringement is to be measured by the specificity required by
Form 18.”

Id.
Specifically, the Federal Circuit wrote, “Appellees’

arguments all focus on whether the amended complaints’
allegations of direct infringement contain sufficient factual
detail to withstand attack under Twombly and Iqbal.”
1335.

Id. at

“In essence, the Appellees argue that the amended

complaints are deficient because they do not describe precisely
how each element of the asserted claims are practiced by their
customers.

When compared to the requirements of Form 18, this

argument is premised on a pleading standard that is too
stringent.”

Id.

“As we held in McZeal, Form 18 and the Federal

Rules of Civil Procedure do not require a plaintiff to plead
facts establishing that each element of an asserted claim is met.
Indeed, a plaintiff need not even identify which claims it
asserts are being infringed.”

Id. (citing McZeal v. Sprint

Nextel Corp., 501 F.3d 1354, 1355–56 (Fed. Cir. 2007)).
Here, AT&T claims that Prism’s complaint is inadequate
because Prism does not state which of the claims of each patent
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are allegedly being infringed upon by AT&T (Filing No. 28, at 3).
However, this argument fails because Form 18 does not require
Prism to identify specific patent claims in its complaint.

Bill

of Lading, 681 F.3d at 1335.
However, AT&T also states that Prism’s recitation of
AT&T’s offending products and/or methods is too broad, citing
paragraphs 12 and 16 of the complaint.

AT&T cites several cases

that decry a complaint’s description of a “whole host of AT&T
products and methods that fall under the broad umbrella of
‘wireless products and data services,’” rather than specifically
identified products (Filing No. 28, at 6).

AT&T states,

“Without knowing which products Prism is accusing of
infringement, AT&T has to evaluate its entire product portfolio
relative to each of the 279 claims of the Patents-in-Suit to
guess which, if any, of its products might be accused of
infringement.”

(Id., at 7).

AT&T claims that this lack of

detail creates difficulties in framing a defense:
Had Prism performed any pre-suit
investigation, it certainly would
have information concerning which
of AT&T’s products it believes
infringe upon which of its 279
claims. Prism’s vacuous Complaint
has left AT&T without any
meaningful guidance about what is
at issue. It also prevents AT&T
from intelligently responding to
Prism’s pleading, issuing
appropriately-tailored document
preservation notices, beginning to
collect pertinent discovery
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materials for production, and
otherwise preparing its defense.
(Filing No. 28, at 8).
In response, Prism cites Judge Gerrard’s opinion
denying a motion to dismiss the patent infringement claim in
VoiceFill, LLC v. W. Interactive Corp., 8:11-CV-421, 2012 WL
1949378 (D. Neb. May 29, 2012).

Prism claims that VoiceFill

supports its contention that Prism’s complaint satisfies the
requirements of Form 18.

However, the Court notes that the

complaint in VoiceFill includes over five pages of detailed
allegations, so VoiceFill is distinguishable on the facts.
In addition, Prism cites several cases that it claims
support the contention that “[a] plaintiff is allowed to broadly
plead infringement, especially where it is pervasive as is AT&T’s
network access control, which is central to AT&T’s ability to
control access to (and thereby monetize) its network” (Filing No.
35, at 13).

For example, in Bender v. Broadcom Corp., C 09-1147

MHP, 2009 WL 3571286 (N.D. Cal. Oct. 30, 2009), the court
accepted a complaint that specifically named “most or all of the
defendant’s products,” such that the court commented that “there
is nothing inherently implausible about an allegation that a
large number of a defendant’s various product lines infringe the
patent when those product lines may be expected to have certain
basic components, i.e., computer chips, in common and the patent
claims technology relating to those components.”
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Bender, 2009 WL

3571286, at *4.

However, here, Prism has not named any of the

“various wireless products” at all.
Prism also cites Bender v. LG Electronics U.S.A., Inc.,
C 09-02114 JF (PVT), 2010 WL 889541 (N.D. Cal. Mar. 11, 2010),
for the proposition that “allegations of patent infringement
based on product lines have been held sufficient to state a
claim” (Filing No. 35, at 13).

However, Prism neglects the

remainder of the opinion, in which the court granted the motion
to dismiss with leave to amend, stating,
“While the Court recognizes the
lack of complete uniformity in
recent district court authority it
finds persuasive those decisions
requiring enough specificity to
give the defendant notice of what
products or aspects of products
allegedly infringe . . . . As
several courts have noted, it is
difficult to reconcile the
guidelines set forth in Twombly and
Iqbal with Form 18. The court in
[Elan Microelectronics Corp. v.
Apple, Inc., C 09-01531 RS, 2009 WL
2972374 (N.D. Cal. Sept. 14, 2009)]
reasoned that Form 18 is not
intended to cover all manners of
patent infringement, in that it
“only provides an example of how
direct patent infringement may be
alleged . . . .” 2009 WL 2972374,
at *2. Similarly in [HewlettPackard Co. v. Intergraph Corp.,
2003 WL 23884794 (N.D. Cal. Sept.
6, 2003)], the court explained that
the example in Form 18 is “limited
to a single ‘type’ of product” and
“simply does not address a factual
scenario” involving a multitude of

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allegedly infringing products. [See
2003 WL 23884794, at *1.]”
LG Electronics, 2010 WL 889541, at *5.
Prism accuses AT&T’s “various wireless products and
data services” of infringement.

The Court finds that the term

“wireless products” is considerably more generic than the term
“electric motor” as identified in Form 18.

With regard to “data

services,” Prism does name two exemplars, the “DataConnect Plans”
and the “DataPro Plans.”

Nevertheless, the Court notes AT&T’s

contention that “Prism makes vague allegations that ‘various
wireless products and data services’ infringe the patents.

This

allegation is so vague that it encompasses essentially AT&T’s
entire business, leaving AT&T with no notice as to how it
allegedly infringes” (Filing No. 36, at 7).

The Court agrees

that Prism’s accusation is too broad, such that it does not
satisfy Form 18 standards.

The Court will not require Prism to

“prove its entire case at the pleading stage” (Filing No. 35, at
7), but Prism must plead “factual content that allows the court
to draw the reasonable inference that the defendant is liable for
the misconduct alleged.”
IV.

Hamilton, 621 F.3d at 817.

Indirect Infringement.
“Form 18 should be strictly construed as measuring only

the sufficiency of allegations of direct infringement, and not
indirect infringement.”

Bill of Lading, 681 F.3d at 1336.

“In

other words, because Form 18 addresses only direct infringement,
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we must look to Supreme Court precedent [Twombly and Iqbal] for
guidance regarding the pleading requirements for claims of
indirect infringement.”
A.

Id. at 1337.

Induced Infringement.

“Whoever actively induces

infringement of a patent shall be liable as an infringer.”
35 U.S.C. § 271(b).

“Liability under § 271(b) ‘requires

knowledge that the induced acts constitute patent infringement.’”
Bill of Lading, 681 F.3d at 1339 (quoting Global-Tech Appliances,
Inc. v. SEB S.A., 135 S.Ct. 2060, 2068 (2011)).

“To survive [a]

motion to dismiss, therefore, [the] complaint[] must contain
facts plausibly showing that [defendants] specifically intended
their customers to infringe the . . . patent and knew that the
customer’s acts constituted infringement.”

Bill of Lading, 681

F.3d at 1339.
AT&T argues that “Prism’s Complaint does not identify
anyone other than AT&T as practicing any claim of either patent,
and so both the Court and AT&T are left to make inferences and
speculate as to whose direct infringement AT&T has allegedly
induced” (Filing No. 36, at 8).

Moreover, “Prism’s Response

suggests that the filing of the Complaint itself shows that AT&T
had knowledge of the patent and intent to infringe, at least from
that point onward. . . .

Prism should be required to explicitly

include that allegation in its Complaint” (Id. at 9).

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The Court

agrees that Prism’s complaint is deficient as to pleading induced
infringement.
B.

Contributory Infringement.
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.

35 U.S.C. § 271(c).

“To state a claim for contributory

infringement, therefore, a plaintiff must, among other things,
plead facts that allow an inference that the components sold or
offered for sale have no substantial non-infringing uses.”
Bill of Lading, 681 F.3d at 1337.

Again, the Court agrees with

AT&T that Prism has, at best, merely hinted at factual
allegations of contributory infringement and that this cannot
satisfy the plausibility standard required in a complaint.

The

bare factual allegations in Prism’s complaint as to contributory
infringement, such as they are, do not meet the standards set
down by Twombly and Iqbal.

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V.

Joint Infringement.
In its opening brief supporting its motion to dismiss,

AT&T does not make any argument specifically regarding Prism’s
allegations of joint infringement in the complaint (Filing No.
28).

Prism briefly refers to the adequacy of its joint

infringement allegations in its brief in opposition, but does not
address the issue directly (Filing No. 35, at 5, 11, and 12).
However, AT&T makes new arguments in its reply brief as to
Prism’s joint infringement allegations (Filing No. 36, at 8).
Because AT&T did not address joint infringement in its
opening brief, thus giving notice to Prism to respond, the Court
does not reach any decision as to the adequacy of Prism’s joint
infringement allegations.
VI.

Conclusion.
Prism requests that in the event the Court finds the

complaint to be inadequately pled, the Court grant Prism leave to
amend the complaint.

The Court will grant Prism’s request.

Accordingly,
IT IS ORDERED that AT&T’s motion to dismiss (Filing No.
27) is granted, as follows:
1) Prism will file an amended complaint with the Court
setting forth adequate infringement allegations on or before
September 21, 2012;

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2) Should Prism fail to file a timely amended
complaint, this action will be dismissed; and
3) AT&T’s request for oral argument is denied as moot.
DATED this 6th day of September, 2012.
BY THE COURT:
/s/ Lyle E. Strom
____________________________
LYLE E. STROM, Senior Judge
United States District Court

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