Prism Technologies v. Cellco Partnership et al

Filing 38

MEMORANDUM AND ORDER - Verizon Wireless' 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. (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.
)
)
CELLCO PARTNERSHIP d/b/a
)
VERIZON WIRELESS,
)
)
Defendant.
)
______________________________)

8:12CV126

MEMORANDUM AND ORDER

This matter is before the Court on the motion of
defendant Cellco Partnership d/b/a Verizon Wireless (“Verizon
Wireless”) 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).1

Prism filed a brief in opposition to the motion (Filing

No. 33), to which Verizon Wireless replied (Filing No. 37).
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 Verizon

Wireless of two patents, U.S. Patent No. 7,290,288 (“‘288

1

Prism’s complaint was originally filed against both
Verizon Wireless and Verizon Communications Inc. (“VCI”).
Verizon Wireless’ present motion was also filed on behalf of VCI.
The Court has already ordered the dismissal of VCI pursuant to
the joint stipulation of the parties (Filing No. 34).

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
Verizon Wireless’ infringement in only one paragraph:
Verizon Wireless 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,
Verizon Wireless sells Single-Line
Plans and Family SharePlans that
implement systems and methods for
controlling access to Verizon
Wireless’ protected network
resources.
(Filing No. 1, at ¶¶ 12, 16).

Verizon Wireless filed its motion

to dismiss pursuant to Rule 12(b)(6), asserting Prism’s “failure

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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
“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.’”

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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
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.2

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

2

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, Verizon Wireless states that Prism’s recitation
of Verizon Wireless’ offending products and/or methods is too
broad, citing the enumeration found in the complaint at ¶¶ 12 and
16.

Verizon Wireless cites several cases that decry a

complaint’s description of a “broad categories of products”
rather than specifically identified products (Filing No. 28, at
12).

Verizon Wireless states, “Bald accusations of selling

‘various wireless products and services’ including two named
service plans (Compl. ¶¶ 12, 16), are insufficient to put Verizon
on notice of what is at issue in this case” (Id., at 14).
“Indeed, accusing a wireless telecommunications company of
selling wireless telecommunications services and then purporting
to give one example of such a service offering is no better than
saying that an accused infringer’s ‘products’ infringe” (Id., at
15).

“Verizon is entitled to know ‘which of its products are at

issue in this suit, and which are not’ before responding to the
Complaint” (Id., quoting Trading Techs. Int’l, Inc. v. BCG
Partners, Inc., No. 10 C 715, 2011 WL 1706136, *3 (N.D. Ill. May
5, 2011)).

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Verizon Wireless claims that this lack of detail
creates difficulties in framing a defense, because Prism’s
complaint “provides no criteria by which Verizon can determine
which of its products it needs to defend, and inhibits Verizon’s
ability to defend itself in this case including drafting an
informed answer to the Complaint” (Id., at 14).

Verizon Wireless

states, “Even assuming that mere compliance with Form 18 were
sufficient to state a claim for direct literal infringement . . .
Prism’s Complaint is deficiently pled and should be dismissed”
(Filing No. 37, at 4, footnotes omitted).
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
Verizon’s network access control which is central to Verizon’s
ability to control access to (and thereby monetize) its network”
(Filing No. 33, at 13).

For example, in Bender v. Broadcom

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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. 33, 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
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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 Verizon Wireless’ “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
“Single-Line Plan” and the “Family SharePlans.”

Nevertheless,

the Court agrees with Verizon Wireless that “Prism’s direct
infringement allegations track the types of generic allegations
that have been found deficient even under Form 18” (Filing No.
37, at 4, footnote omitted).

The Court finds that Prism’s

accusations do not meet Form 18 standards.

The Court will not

require Prism to “prove its entire case at the pleading stage”
(Filing No. 33, at 7), but Prism must plead “factual content that
allows the court to draw the reasonable inference that the

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defendant is liable for the misconduct alleged.”

Hamilton, 621

F.3d at 817.
IV.

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.”
F.3d at 1339.

Bill of Lading, 681

Verizon Wireless argues that “Prism’s Complaint

does not allege facts to support either of these required
elements.”

(Filing No. 37, at 5, footnote omitted).

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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

Verizon Wireless 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.
Finally, Prism alleges that Verizon Wireless 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

that would support the allegation that Verizon Wireless is the
“mastermind” behind joint infringement of Prism’s patents.
Prism adds details about Verizon Wireless’ alleged
operations to its brief that are not included in the complaint.
For example, Prism alleges that “Verizon knows, and common sense
dictates, that through [its] data plans Verizon enters into
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agreements with its customers for access to Verizon’s network
which necessarily requires use of the infringing authentication
systems and methods for controlling access to Verizon’s network.
This satisfies the requirement for pleading joint infringement”
(Filing No. 33, at 14).

However, factual allegations to this

effect are not, in fact, pled in Prism’s complaint.

In rebuttal,

Verizon Wireless states that “Prism’s Complaint simply does not
allege direction and control. . . . .

Prism’s new theories of

direction and control -- which appear for the first time in its
opposition brief -- cannot salvage its defective pleading”
(Filing No. 37, at 9-10).

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.’”

Iqbal, 556 U.S. at 678 (quoting

Twombly, 550 U.S. at 570).
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 Verizon Wireless’ motion to dismiss
(Filing No. 27) is granted, as follows:

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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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