Prism Technologies v. United States Cellular Corporation

Filing 33

MEMORANDUM AND ORDER - U.S. Cellular'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; 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.
)
)
UNITED STATES CELLULAR
)
CORPORATION, d/b/a U.S.
)
CELLULAR,
)
)
Defendant.
)
______________________________)

8:12CV125

MEMORANDUM AND ORDER

This matter is before the Court on the motion of
defendant United States Cellular Corporation d/b/a U.S. Cellular
(“U.S. Cellular”) 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).

Prism filed a brief in opposition to the motion (Filing No.

29), to which U.S. Cellular replied (Filing No. 32).

After

reviewing the motion, briefs, and relevant law, the Court will
grant the motion to dismiss, with leave for Prism to amend.
I.

Factual and Procedural Background.
In its complaint, Prism alleges infringement by U.S.

Cellular 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) (collectively, the
“Patents-in-Suit”).

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
U.S. Cellular’s infringement in only one paragraph:
U.S. Cellular 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,
U.S. Cellular sells Primary Plus
Plan and Premium Plus Belief Plan
that implement systems and methods
for controlling access to U.S.
Cellular’s protected network
resources.
(Filing No. 1, at ¶¶ 12, 16). U.S. Cellular filed its motion to
dismiss pursuant to Rule 12(b)(6), asserting Prism’s “failure to
state a claim for relief” 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

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is entitled to relief.”

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

Consequently,

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

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

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detail required in a complaint in a patent case.1

There, the

Federal Circuit started its analysis with regard to direct
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

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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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.)
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
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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, U.S. Cellular states that Prism’s recitation of
U.S. Cellular’s offending products and/or methods is too broad,
citing the enumeration found in the complaint at ¶¶ 12 and 16.
U.S. Cellular cites several cases that decry a complaint’s
description of a “broad categories of products” rather than
specifically identified products (Filing No. 28, at 4).

U.S.

Cellular claims that “Prism provides no details concerning which
of U.S. Cellular’s ‘wireless products and data services’ or which
aspects of U.S. Cellular’s ‘Primary Plus Plan and Premium Plus
Belief Plan’ allegedly infringe Prism’s claims” (Id., at 5).
U.S. Cellular states that it “is left to speculate which of its
numerous ‘wireless products and data services’ are accused.

This

situation is the antithesis of Rule 8’s notice pleading
requirements”

(Id.).

In addition, U.S. Cellular claims that this lack of
detail results in a “lack of notice [that] prevents U.S. Cellular
from intelligently responding to Prism’s pleading, issuing
appropriately-tailored document preservation notices, beginning
to collect pertinent discovery materials for production, and

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otherwise preparing its defense” (Id.).

U.S. Cellular states,

“Form 18 requires that ‘the pleader identify the accused device
with some semblance of specificity to alert the alleged infringer
which device is at issue.

It does not contemplate that the

accused device . . . be described in terms of a multiplicity of
generically-described product lines,’ as Prism has done here”
(Filing No. 32, at 3 (quoting Bender v. Motorola, Inc., C09-1245
SBA, 2010 WL 726739, at *3 (N.D. Cal. Feb. 26, 2010)).
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 infringement 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 U.S.
Cellular’s network access control, which is central to U.S.
Cellular’s ability to control access to (and thereby monetize)
its network” (Filing No. 29, 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
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“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. 29, 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
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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 U.S. Cellular’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
“Primary Plus Plan” and the “Premium Plus Belief Plan.”
Nevertheless, the Court agrees that “U.S. Cellular and the Court
cannot be expected to analyze Prism’s vague and conclusory
Complaint to then guess precisely which products and services
Prism believes infringes the Patents-in-Suit.” (Filing No. 32, at
4).

The Court finds that Prism’s accusations do not meet Form 18

standards.

While the Court will not require Prism to “prove its

entire case at the pleading stage” (Filing No. 29, at 7), Prism
must plead “factual content that allows the court to draw the

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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)).

“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.
U.S. Cellular argues that “Prism’s induced infringement
claims are totally devoid of the necessary allegations that U.S.
Cellular had knowledge of and specific intent to encourage others
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to infringe the Patents-in-Suit” (Filing No. 32, at 7).
Moreover, “Prism points to no facts, either in its Complaint or
Opposition, that make plausible that U.S. Cellular had pre-suit
knowledge of the Patents-in-Suit or their alleged infringement”
(Id.).

In addition, “Prism’s Complaint and Opposition are

completely silent on whether it believes U.S. Cellular had
specific intent to encourage others to infringe” (Id. at 9).

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

U.S. Cellular that Prism has, at best, merely hinted at factual
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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 U.S. Cellular 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 1298,

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
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

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that would support the allegation that U.S. Cellular is the
“mastermind” behind joint infringement of Prism’s patents.
Prism adds details about U.S. Cellular’s alleged
operations to its brief that are not included in the complaint.
For example, Prism alleges that “U.S. Cellular knows, and common
sense dictates, that through [its] data plans U.S. Cellular
enters into agreements with its customers for access to U.S.
Cellular’s network which necessarily requires use of the
infringing authentication systems and methods for controlling
access to U.S. Cellular’s network.

This satisfies the

requirement for pleading joint infringement” (Filing No. 29, at
14).

However, factual allegations to this effect are not, in

fact, pled in Prism’s complaint.

In rebuttal, U.S. Cellular

states that “Prism’s Complaint simply does not identify anyone
that U.S. Cellular is supposedly directing or controlling for the
purpose of joint infringement, or even state that multiple
entities are collectively engaged in performing the alleged acts
of infringement” (Filing No. 32, at 5).

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 U.S. Cellular’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;
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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