Prism Technologies v. Sprint Spectrum L.P.

Filing 35

MEMORANDUM AND ORDER - Sprint's motion to dismiss (Filing No. 23 ) 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; 2) Should Prism fail to file a timely amended complaint, this action will be dismissed. Ordered by Senior Judge Lyle E. Strom. (GJG)

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

)
)
Plaintiff,
)
)
v.
)
)
SPRINT SPECTRUM L.P.,
)
d/b/a SPRINT PCS,
)
)
Defendant.
)
______________________________)

8:12CV123

MEMORANDUM AND ORDER

This matter is before the Court on the motion of
defendant Sprint Spectrum L.P. d/b/a Sprint PCS (“Sprint”) to
dismiss the complaint of plaintiff Prism Technologies, LLC
(“Prism”), filed pursuant to Federal Rule of Civil Procedure
12(b)(6) (Filing No. 23, with brief, Filing No. 24).

Prism filed

a brief in opposition to the motion (Filing No. 31), to which
Sprint replied (Filing No. 34).

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 Sprint

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
Sprint’s infringement in only one paragraph:
Sprint 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,
Sprint sells Simply Everything Plan
and Everything Data Plan that
implement systems and methods for
controlling access to Sprint’s
protected network resources.
(Filing No. 1, at ¶¶ 12, 16).

Sprint filed its motion to dismiss

pursuant to Rule 12(b)(6), asserting Prism’s “failure to state a
plausible claim for relief” in its complaint (Filing No. 23, 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, Sprint claims that Prism’s complaint is
inadequate with regard to direct infringement for two reasons.
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First, Prism does not state which of the claims of each patent
are allegedly being infringed upon by Sprint (Filing No. 24, at
1).

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, Sprint states that Prism’s recitation of

Sprint’s offending products and/or methods is too broad, citing
the enumeration, “various wireless products and data services
. . . .

For example, and without limitation, Sprint sells Simply

Everything Plan and Everything Data Plan . . .” (Filing No. 1, at
¶¶ 12, 16).

Sprint cites several cases that decry a complaint’s

description of a “broad categories of products” rather than
specifically identified products (Filing No. 24, at 5).

Sprint

states,
Sprint is left to speculate which
of its numerous “wireless products
and data services” are accused and
how or why Prism believes the
Simply Everything Plan and the
Everything Data Plan is at issue.
Without knowing which exact
products Prism is accusing of
infringement and why Prism believes
they are at issue, Prism invites
Sprint to evaluate Sprint’s entire
product portfolio relative to each
of the 279 claims of the asserted
patents to guess which, if any, of
its products might be at issue.
(Id., at 6).

Sprint claims that this lack of detail creates

difficulties in framing a defense:

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For example, a vague complaint
makes it difficult, if not
impossible, to know which
additional parties might
appropriately be joined or
implicated. And it is difficult
for Sprint to begin collecting and
processing documents, to identify
witnesses necessary to satisfy Rule
26 initial-disclosure obligations,
to issue[] appropriately-tailored
document preservation notices, to
consult experts, or to otherwise
prepare [its] defense.
(Id., at 7).

“And because Prism presumably knows what is truly

at issue, such a broad, vague complaint disproportionately drives
litigation costs up for Sprint without substantially affecting
Prism” (Id.).

Sprint claims that “Prism’s allegations fail to

provide reasonable notice of Prism’s claims, even under the more
lenient Form 18 standard” (Filing No. 34, at 11).
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
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Sprint’s network access control, which is central to Sprint’s
ability to control access to (and thereby monetize) its network”
(Filing No. 31, 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.”
Broadcom,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. 31, 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
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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
allegedly infringing products. [See
2003 WL 23884794, at *1.]”
LG Electronics, 2010 WL 889541, at *5.
Prism accuses Sprint’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 “Simply Everything
Plan” and the “Everything Data Plan.”

Nevertheless, the Court

agrees with Sprint that “Plaintiff appears to be accusing
Sprint’s entire wireless service without providing any
explanation in the Complaint as to what specific portions of
those services allegedly constitute patent infringement.

The

Complaint does not put Sprint on notice as to what it needs to

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defend” (Filing No. 34, at 13).

Therefore, the Court agrees that

the accusation is too broad, such that it “is insufficient and
subject to dismissal, even under Form 18 standards” (Filing No.
34, at 13, citing Oakley, Inc. v. 5.11, Inc., Case No.
3:11cv2173, 2012 U.S. Dist. LEXIS 54087 (S.D. Cal. Apr. 17,
2012)).

The Court will not require Prism to “prove its entire

case at the pleading stage” (Filing No. 31, 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,
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., 131 S.Ct. 2060, 2068 (2011)).
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“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.
Sprint argues that Prism does not include any “factual
allegations in the Complaint related to an underlying direct
infringer that could support indirect liability against Sprint”
(Filing No. 34, at 7).

Moreover, “there are no factual

allegations that, if true, would plausibly suggest that Sprint
knew of the patents, much less that Sprint intended to induce
another to infringe the asserted patents” (Id.).

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.

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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

Sprint 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.
V.

Joint Infringement.
Finally, Prism alleges that Sprint jointly infringes

Prism’s patents.

The Federal Circuit has described the

requirements for joint infringement of a method claim as follows:
“The law of this circuit is axiomatic that a method claim is
directly infringed only if each step of the claimed method is
performed.”

Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318,

1329 (Fed. Cir. 2008) (citing BMC Resources, Inc. v. Paymentech,
L.P., 498 F.3d 1373, 1378-79 (Fed. Cir. 2007)).

“In BMC

Resources, this court clarified the proper standard for whether a
method claim is directly infringed by the combined actions of
multiple parties.”

Muniauction, 532 F.3d at 1329.

“[W]here the

actions of multiple parties combine to perform every step of a
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claimed method, the claim is directly infringed only if one party
exercises ‘control or direction’ over the entire process such
that every step is attributable to the controlling party, i.e.,
the ‘mastermind.’” Id. (quoting BMC Resources, 498 F.3d at 138081).

Thus, the question becomes whether Prism has pled any facts

that would support the allegation that Sprint is the “mastermind”
behind joint infringement of Prism’s patents.
Prism adds details about Sprint’s alleged operations to
its brief that are not included in the complaint.

For example,

Prism alleges that “Sprint knows, and common sense dictates, that
through [its] data plans Sprint enters into agreements with its
customers for access to Sprint’s network which necessarily
requires use of the infringing authentication systems and methods
for controlling access to Sprint’s network.

This satisfies the

requirement for pleading joint infringement” (Filing No. 31, at
15).

However, factual allegations to this effect are not, in

fact, pled in Prism’s complaint.

In rebuttal, Sprint states that

“Prism has set forth absolutely no facts that it directs or
controls anyone to perform any limitations of the asserted
patents” (Filing No. 34, at 10).

Again, the Court agrees that

with regard to joint infringement, Prism’s complaint lacks
“sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’”
678 (quoting Twombly, 550 U.S. at 570).

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Iqbal, 556 U.S. at

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 Sprint’s motion to dismiss (Filing
No. 23) 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;
2) Should Prism fail to file a timely amended
complaint, this action will be dismissed.
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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