WAG ACQUISITION, L.L.C. v. DATA CONVERSIONS, INC. et al
OPINION AND ORDER that the Clerk of the Court shall terminate Defendants motion to dismiss in each of the consolidated cases, the Clerk shall terminate WebPowers motion to dismiss in Civil Action No. 15-3581, D.E. No. 9, and the parties shall engage in limited jurisdictional discovery regarding the Courts personal jurisdiction over Defendant Coolvision.. Signed by Judge Esther Salas on 9/10/15. (sr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
WAG ACQUISTION, LLC,
Civil Action No. 14-2340 (ES) (JAD)
OPINION & ORDER
MULTI-MEDIA, LLC, et al.,
WAG ACQUISTION, LLC,
Civil Action No. 14-1661 (ES) (JAD)
OPINION & ORDER
SOBONITO INVESTMENTS, LTD., et al.,
WAG ACQUISTION, LLC,
Civil Action No. 14-2345 (ES) (JAD)
OPINION & ORDER
DATA CONVERSIONS, INC., et al.,
WAG ACQUISTION, LLC,
Civil Action No. 14-2674 (ES) (JAD)
OPINION & ORDER
FLYING CROCODILE, INC., et al.,
WAG ACQUISTION, LLC,
Civil Action No. 14-2832 (ES) (JAD)
OPINION & ORDER
GATTYÁN GROUP S.a r.l., et al.,
WAG ACQUISTION, LLC,
Civil Action No. 14-3456 (ES) (JAD)
OPINION & ORDER
FRIENDFINDER NETWORKS, INC., et al.,
WAG ACQUISTION, LLC,
Civil Action No. 14-4531 (ES) (JAD)
OPINION & ORDER
VUBEOLOGY, INC., et al.,
WAG ACQUISTION, LLC,
Civil Action No. 15-3581 (ES) (JAD)
OPINION & ORDER
WEBPOWER, INC., et al.,
SALAS, DISTRICT JUDGE
Before the Court are motions to dismiss in eight patent infringement actions filed by
Plaintiff WAG Acquisition, LLC (“WAG”). Seven of these cases were consolidated into Civil
Action No. 14-2340 for purposes of discovery on October 6, 2014. 1 (D.E. No. 45, Consolidation
Order). 2 In addition to the consolidated cases, WAG filed a Complaint involving the patents-insuit against WebPower, Inc. (“WebPower”) on May 27, 2015. (Civil Action No. 15-3581, D.E.
No. 1, WebPower Complaint).
Defendants in the seven consolidated cases have jointly moved to dismiss Plaintiff’s
Complaints. (D.E. No. 48). WebPower moved separately to dismiss in its action, (Civil Action
No. 15-3581, D.E. No. 9), and the parties have requested that the Court consider WebPower’s
WAG Acquisition, LLC v. Sobonito Investments, Ltd., et al., Civil Action No. 14-1661 (“Sobonito”); WAG
Acquisition, LLC v. Multi Media LLC, et al., Civil Action No. 14-2340 (“Multi Media”); WAG Acquisition,
LLC v. Data Conversions, Inc. et al., Civil Action No. 14-2345 (“Data Conversions”); WAG Acquisition,
LLC v. Flying Crocodile, Inc., et al., Civil Action No. 14-2674 (“Flying Crocodile”); WAG Acquisition,
LLC v. Gattyan Group S.a.r.l., et al., Civil Action No. 14-2832 (“Gattyan”); WAG Acquisition LLC v.
FriendFinder Networks Inc., et al., Civil Action No. 14-3456 (“FriendFinder”); and WAG Acquisition, LLC
v. Vubeology, Inc., et al., Civil Action No. 14-4531 (“Vubeology”). There was originally an eighth
consolidated case, WAG Acquisition, LLC v. MFCXY, Inc., et al. (“MFCXY”), but it was voluntarily
dismissed on May 8, 2015. (See Civil Action No. 14-3196, D.E. No. 48).
Unless otherwise specified, docket entry numbers refer to the consolidated action, Civil Action No. 142340.
motion to dismiss in conjunction with the consolidated motion. (Civil Action No. 15-3581, D.E.
No. 13, June 29, 2015 Letter).
Defendants argue that the Court should dismiss WAG’s Complaints because the claims of
the patents-in-suit are invalid and/or unenforceable and because WAG has failed to sufficiently
allege direct infringement, induced infringement, contributory infringement, and willful
Defendant Coolvision in the Sobonito matter also moves to dismiss for lack of
personal jurisdiction. The Court has considered the parties submissions in connection with their
motions, as well as the oral arguments presented to the Court on July 29, 2015. For the reasons
below, the Court denies Defendants’ motions to dismiss and orders limited discovery regarding
the Court’s personal jurisdiction over Defendant Coolvision.
WAG is a “New Jersey business that provides Internet streaming services to proprietors of
traditional radio stations—retransmitting (“streaming”) the radio station’s live programming over
the Internet.” (D.E. No. 49, Plaintiff’s Brief in Opposition to Defendants’ Joint Motion to Dismiss
(“Pl. Opp. Br.”) at 2). Defendants “primarily operate paid live ‘web cam’ sites on the Internet.”
(Id. at 3).
WAG contends that, during the course of its business, it developed patents to improve the
experience of streaming over the Internet. (Id. at 2). WAG has asserted four of these patents in
this litigation: U.S. Patent No. 8,122,141 (“the ‘141 patent”), U.S. Patent No. 8,327,011 (“the ‘011
patent”), U.S. Patent No. 8,185,611 (“the ‘611 patent”), and U.S. Patent No. 8,364,839 (“the ‘839
patent”). 3 WAG currently practices the ‘611 and ‘839 patents. (Id. at 3).
WAG has asserted the ‘141 and ‘011 patents against all Defendants. It has asserted the ‘611 patent and
‘839 patent only in the Sonbonito, Flying Crocodile, Gattyan, FriendFinder, and WebPower cases.
According to WAG, its patents “provide two separate and distinct types of solutions to the
problem of reliable and timely Internet media transport.” (Id. at 5). The ‘839 and ‘611 patents are
directed to a “buffering” solution, which employs a user buffer and server buffer, and in which the
control of data flow for streaming is mediated by the server. (Id.). The ‘141 and ‘011 patents
provide a “pull implementation” solution “in which the server regulates the flow of data based on
receiving requests from the client.” (Id.). WAG argues that the technology that “Defendants use
to stream their video is WAG’s technology, covered by the patents-in-suit.” (Id. at 4).
For a complaint to survive dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6),
it “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)). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).
In evaluating the sufficiency of a complaint, a court must “accept all well-pleaded
allegations in the complaint as true and . . . draw all reasonable inferences in favor of the nonmoving party.” See Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). However,
“the tenet that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions,” and “[a] pleading that offers ‘labels and conclusions’ or ‘a
formulaic recitation of the elements of a cause of action will not do.’” Iqbal, 556 U.S. at 678
(quoting Twombly, 550 U.S. at 555).
a. Unenforceability of ‘141 Patent Claims
Defendants argue that claims 1-18 and 23-28 of the ‘141 patent are unenforceable as a
matter of law because they erroneously include the phrase “such as the Internet” even though that
phrase was deleted as part of an Examiner’s Amendment during the patent’s prosecution. (D.E.
No. 48, Joint Motion to Dismiss Plaintiff’s Complaints (“Def. Mov. Br.”) at 6-8). Specifically,
Defendants argue that the “Federal Circuit’s Overstock decision explains that claims in an issued
patent that are not the allowed claims—e.g., do not reflect the claim language allowed by the
PTO—are not enforceable as a matter of law.” (Id. at 8 (citing H-W Tech. LC v. Overstock.com,
Inc., 758 F.3d 1329, 1335 (Fed. Cir. 2014))). They argue that, to decide this issue, the Court must
consider the following inquiries: (1) Did the ‘141 patent issue with erroneous claims? (2) Does
the Court have the authority to correct the errors in such claims? (3) Can WAG assert the claims
prior to correction? (D.E. No. 50, Joint Reply Brief in Support of Motion to Dismiss Plaintiff’s
Complaints (“Def. Rep. Br.”) at 1). Defendants make clear that they are not asking the Court to
analyze the validity of the claims as asserted—but rather to find that WAG cannot even assert the
claims to begin with. (Id.). The Court will consider each question in turn.
First, there is no dispute that the ‘141 patent issued with claim language that was deleted
during an Examiner’s Amendment. On September 29, 2011, the Patent Examiner conducted a
telephone interview in which he “informed applicant’s representative of the potential 112 issues
in the independent claims and suggested an examiner’s amendment to address the issues.
Applicant’s attorney agreed to allow the examiner to amend claims 1, 10, and 24 by removing the
phrase ‘such as the internet.’” (D.E. No. 48-9, 9/29/2011 Examiner-Initiated Interview Summary).
Accordingly, an Examiner’s Amendment issued on the same date deleting the phrase “such as the
Internet” from the agreed-upon claims. (D.E. No. 48-9, 9/29/2011 Examiner’s Amendment).
Despite the Examiner’s Amendment, the ‘141 patent issued with the phrase “such as the Internet”
in claims 1, 10, and 24. (‘141 patent at 13:24, 13:64, 15:9). Though WAG stated at oral argument
that the inclusion of the phrase is not technically “erroneous” because it is accurate and appears in
other patents, it does not dispute that the ‘141 patent issued with language different from what was
agreed to during prosecution. (7/29/2015 Oral Argument Transcript (“Tr.”) at 48:21-49:7; 51:1315). Thus, the Court is satisfied that the inclusion of the phrase “such as the Internet” in claims 1,
10, and 24 of the ‘141 patent constitutes an error.
Second, accepting that there is an error, there is also no dispute that the Court does not have
authority to correct the claims. The Federal Circuit has held that “the district court can correct an
error only if the error is evident from the face of the patent.” Grp. One, Ltd. v. Hallmark Cards,
Inc., 407 F.3d 1297, 1303 (Fed. Cir. 2005) (citing Novo Indus., L.P. v. Micro Molds Corp., 350
F.3d 1348, 1357 (Fed. Cir. 2003)). If, however, “a reader of the patent at issue . . . could not
ascertain the error from the face of the patent,” then the district court is without authority to correct
it. Id. Here, the alleged error is not evident from the face of the patent. A reader of the ‘141 patent
would not be able to discern that the phrase “such as the Internet” should not be included in certain
claims. The claim language reads coherently as printed. Accordingly, the Court is without
authority to make the correction.
The heart of the dispute, therefore, is whether WAG may assert the ‘141 patent claims prior
to correction. Defendants argue that WAG may not assert the uncorrected claims because “claims
in an issued patent that are not the allowed claims—e.g., do not reflect the claim language as
allowed by the PTO—are not enforceable as a matter of law.” (Def. Mov. Br. at 8). Defendants
rely on H-W Tech., L.C. v. Overstock.com, Inc., 758 F.3d 1329, 1335 (Fed. Cir. 2014), which states
that when “a claim issues that omits a material limitation, and such omission is not evident on the
face of the patent, the patentee cannot assert that claim until it has been corrected by the PTO.”
758 F.3d at 1335. According to Defendants, WAG is therefore required to obtain a PTO correction
of the erroneous ‘141 claims pursuant to 35 U.S.C. § 254 before asserting them in litigation. (Tr.
at 47:1-4). In response, WAG argues that H-W only applies when a claim is erroneous because it
omits a material limitation. (Pl. Opp. Br. at 11). WAG argues that H-W does not bar the assertion
of claims like those in the ‘141 patent because (1) the error is not an omission; and (2) the error is
immaterial. (Id. at 10-14).
The Court agrees with Plaintiff that H-W does not bar the assertion of the disputed
claims in the ‘141 patent. In H-W, the claim at issue was “[a] method for performing contextual
searches on an Internet Phone (IP) phone comprising the following steps . . . .” H-W, 758 F.3d at
3333. The claim approved by the PTO included the step “wherein said user completes a transaction
with at least one of said merchants listed without the need to generate a voice call,” but the patent
issued without that limitation. Id. The Federal Circuit agreed that the district court could not
correct the claim, and held that the claim could not be asserted uncorrected because it “omits a
material limitation, and such omission is not evident on the face of the patent.” The Federal Circuit
reasoned that permitting the patentee to assert the claim “would be inequitable and undermine the
notice function of patents.” Id. at 1335.
Here, by contrast, there was no omission of a material limitation. In describing his basis
for deleting the phrase, the Patent Examiner states that he “[i]nformed applicant’s representative
of the potential 112 issues in the independent claims and suggested an examiner’s amendment to
address the issues. Applicant’s attorney agreed to allow the examiner to amend claims 1, 10 and
24 by removing the phrase ‘such as the internet.’” (D.E. No. 48-9, 9/29/2011 Examiner’s
Amendment). The Patent Examiner did not suggest—and neither party has asserted—that the
phrase “such as the Internet” alters the scope of the claims. As WAG points out, the phrase “such
as the Internet” “only serves to qualify, i.e., limit the scope of, the phrase that it modifies (‘data
communications medium’).” (Pl. Opp. Br. at 14). This error is therefore distinguishable from the
error in H-W, where the error broadened the scope of the patent claim.
Defendants have cited no case suggesting that any claim with an uncorrected error is
unenforceable as a matter of law. In fact, the cases that Defendants rely on are inapposite, and
they reveal that courts have not held patent claims unenforceable simply because they contain
uncorrected errors. For example, in Group One, as here, the plaintiff did not seek a certificate of
correction to address an error that was “correctable by the PTO” under § 254. 407 F.3d at 1302.
The Federal Circuit upheld the district court’s determination that (1) it was without authority to
make the correction, and (2) the patent was invalid because “the missing language [was] essential
to the validity of [the claim], and Group One has made no claim that the omitted language is not
essential to validity.” Id. at 1303. Notably, the Federal Circuit did not hold that the uncorrected
claim was unenforceable as a matter of law; it merely held that the asserted, uncorrected claim was
invalid on the merits. Id. Similarly, in Novo Industries, the Federal Circuit upheld the District
Court’s decision not to correct an error that added a full claim element, and determined that the
uncorrected claim was “invalid for indefiniteness in its present form.” 350 F.3d at 1356. Again,
the Federal Circuit’s holding was based on invalidity. Id. There is nothing to suggest that the
plaintiff was barred from asserting the claims, or that the error rendered the uncorrected claims
unenforceable as a matter of law. Id.
In this case, Defendants have explicitly stated that they are not arguing that the inclusion
of the phrase “such as the Internet” renders the ‘141 claims invalid as indefinite or otherwise. (Def.
Rep. Br. at 1). Instead, they argue that it is strictly unenforceable as a matter of law. (Def. Mov.
Br. at 8). Because the Court does not agree that the inclusion of the phrase “such as the Internet”
renders the ‘141 claims unenforceable as a matter of law, Defendants’ motion to dismiss these
claims is denied.
b. § 101 Subject Matter
Next, Defendants argue that the patents should be dismissed because they are directed to
ineligible subject matter pursuant to 35 U.S.C. § 101. Section 101 of the Patent Act defines the
scope of eligible subject matter as “any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof.” 35 U.S.C. § 101. However,
the Supreme Court has “long held that this provision contains an important implicit exception:
Laws of nature, natural phenomena, and abstract ideas are not patentable.” Alice Corp. Pty. Ltd.
v. CLS Bank Int’l, 134 S. Ct. 2347, 2354 (2014) (quoting Assoc. for Molecular Pathology v. Myriad
Genetics, Inc., 133 S. Ct. 2107, 2116 (2013)). Defendants argue that the patents cover the “abstract
idea” of “maintaining streaming media data over the Internet.” (WebPower Mov. Br. at 6). WAG
argues that it is premature for the Court to determine § 101 eligibility at this stage of the litigation,
prior to claim construction. (Pl. Opp. Br. at 21). Alternatively, it argues that the patents are not
invalid under § 101. (Id. at 22-43).
The Supreme Court has set forth a two-part framework for distinguishing patent-eligible
and patent-ineligible subject matter. Alice, 134 S. Ct. at 2355. First, the Court must “determine
whether the claims at issue are directed to one of those patent-ineligible concepts.” Id. (citing
Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1296-97 (2012)). If yes,
the court must then “consider the elements of each claim both individually and as an ‘ordered
combination’ to determine whether the additional steps ‘transform the nature of the claim’ into a
patent-eligible application.” Id. (citing Mayo, 132 S. Ct. at 1298, 1297). Step two of the analysis
is known as search for the “inventive concept,” which is “an element or combination of elements
that is sufficient ‘to ensure that the patent in practice amounts to significantly more than a patent
upon the [ineligible concept] itself.” Id. (citing Mayo, 132 S. Ct. at 1294).
The Court recognizes that “claim construction is not an inviolable prerequisite to a validity
determination under 101.” Content Extraction and Transmission LLC v. Wells Fargo Bank, 776
F.3d 1343, 1349 (Fed. Cir. 2014). Nevertheless, the Federal Circuit has instructed that “it will
ordinarily be desirable—and often necessary—to resolve claim construction disputes prior to a
§ 101 analysis, for the determination of patent eligibility requires a full understanding of the basic
character of the claimed subject matter.” BanCorp Servs., LLC v. Sun Life Assurance Co. of
Canada, 687 F.3d 1266, 1273-74 (Fed. Cir. 2012). Indeed, “[i]f the Court is going to invalidate
[the patent-in-suit] on subject matter eligibility grounds before claim construction, then
Defendants must establish that the only plausible construction [i]s one that . . . renders the subject
matter ineligible (with no factual inquiries).” Data Distribution Technologies, LLC v. Brer
Affiliates, Inc., No. 12-4878, 2014 WL 4162765, at *6 (D.N.J. Aug. 19, 2014). Accordingly, “it
will be rare that a patent infringement suit can be dismissed at the pleading stage for lack of
patentable subject matter.” Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335, 1338 (Fed. Cir. 2013)
(cert. granted, judgment vacated sub nom. WildTangent, Inc. v. Ultramerical, LLC, 134 S. Ct.
Defendants argue that the Court can—and should—address § 101 eligibility at this stage,
and they direct the Court to several cases taking that approach. (Def. Mov. Br. at 11-12 (citing,
inter alia, Content Extraction & Transmission LLC v. Wells Fargo Bank, 2013 WL 3964909
(D.N.J. Jul. 31, 2013); Glory Licensing LLC v. Toys R US, Inc., 2011 U.S. Dist. LEXIS 51888
(D.N.J. May 16, 2011)). 4 WAG contends that the Court should defer ruling on § 101 eligibility
until after claim construction, and directs the Court to cases that in which a § 101 ruling was
“deferred in order to further develop the record.” (D.E. No. 16, Plaintiff’s Brief in Opposition to
Defendant WebPower Inc.’s Motion to Dismiss (“WebPower Opp. Br.”) at 34-35 n.8 (collecting
cases)). There is no dispute that courts have taken both approaches.
The Court agrees with WAG that claim construction is necessary in this case before it can
determine whether WAG’s patents are invalid under § 101. It is clear to the Court from the parties’
submissions and oral argument that the parties vigorously dispute the basic character and meaning
of the claims. Indeed, WAG has stated that “the parties disagree on key areas of interpretation,
including the fundamental question of what WAG’s patents are about.” (Pl. Opp. Br. at 22).
Despite this, the parties have not set forth stipulated representative claims or proposed
constructions for the Court to review. As such, the Court cannot “fairly apply Alice, particularly
at step two, by attempting to conjure up all plausible claim constructions at this pleadings stage in
the absence of stipulated constructions or at least Plaintiff’s proposed constructions of its own
patent.” See Data Distribution, 2014 WL 4162765, at *11. Because resolving the parties’ disputes
about the basic character and meaning of the claims requires claim construction, Defendants’
motion to dismiss under § 101 is denied. See Nomadix, Inc. v. Hospitality Core Servs. LLC, No.
14-08256, 2015 WL 1525537, at *2 (C.D. Cal. Apr. 3, 2015) (denying § 101 argument on motion
Though not raised in their moving brief, Defendants also relied heavily on Wireless Media Innovations,
LLC v. Maher Terminals, LLC, No. 14-7004, 2015 WL 1810378 (D.N.J. Apr. 20, 2015), in the WebPower
brief and at oral argument. (See WebPower Mov. Br. at 4-5; Tr. at 67:3-68:11; 86:8-15). In Wireless
Media, the court determined that patents were directed to the abstract idea of “monitoring locations,
movement, and load status of shipping containers within a container-receiving yard, and storing, reporting
and communicating this information in various forms through generic computer functions.” Wireless
Media Innovations, 2015 WL 1810378, at *8. Significantly, however, it first determined that “even if the
Court construes all claim terms in a manner most favorable to Plaintiff, it would still find that none of the
claims survive § 101.” Id. at *5. That is not the case here.
to dismiss because “[a]though the [c]ourt has the patents in question before it right now . . . the
exact functioning of the patented systems has not yet been fully briefed.”); StoneEagle Servs., Inc.
v. Pay-Plus Solutions, Inc., No. 13-2240, 2015 WL 518852, at *4 (M.D. Fl. Feb. 9, 2015) (denying
motion to dismiss on § 101 grounds as “premature” where “the parties dispute the basic character
of the claimed subject matter”).
c. Direct Infringement
Defendants next argue that WAG’s Complaints must be dismissed for failure to adequately
plead direct infringement. (Def. Mov. Br. at 23). Pursuant to 35 U.S.C. § 271(a), “whoever
without authority makes, uses, offers to sell, or sells any patented invention, within the United
States or imports into the United States any patented invention during the term of the patent
therefor, infringes the patent.” 35 U.S.C. § 271(a).
Defendants first argue that WAG’s direct infringement allegations fail because they refer
generally to “Defendants.” (Def. Mov. Br. at 23-35). Specifically, they argue that WAG “must
separately plead direct infringement as to each separate defendant.” (Id. at 24). They rely on
Richmond v. Lumisol Electrical Ltd., No. 13-1944, 2014 WL 1405159, at *3 (D.N.J. Apr. 10,
2014), in which the court held that the plaintiff’s complaint was deficient and that “[p]laintiff’s
allegations should be broken into separate counts linking each individual Defendant with a
violation of a single patent.” 2014 WL 1405159, at *3. However, a closer review of Richmond
reveals that the complaint at issue in that case is easily distinguishable from WAG’s Complaints
here. The court in Richmond noted that the complaint was a “shot-gun, one-count Complaint” in
which the plaintiff “lumps his direct infringement and indirect infringement claims into one
lengthy and rambling count.” Id. The court’s instructions were directed to the plaintiff in that case
“[i]f [p]laintiff seeks to amend his Complaint.” Id. The court did not state that the instruction
reflects a pleading requirement applicable to all patent cases. In fact, it specifically noted that it
“writes only for the parties.” Id. at *1.
Here, by contrast, WAG breaks out its claims by patent and infringement type, and it simply
alleges that “Defendants” are responsible in each count. (See, e.g., Sobonito Compl. ¶¶ 61-76
(alleging direct infringement of ‘141 patent claims against “Defendants”)). Courts have held that
complaints with similar allegations are sufficient to withstand a motion to dismiss. See, e.g.,
WesternGeco LLC v. Ion Geophysical Corp., 776 F. Supp. 2d 342, 363 (S.D. Tex. 2011) (“The
Federal Circuit has approved the use of a collective term within a complaint to refer to acts of all
defendants without distinction among the exact infringing acts performed by each one” (citing
McZeal v. Sprint Nextel Corp., 501 F. 3d 1354, 1357 (Fed. Cir. 2007)). The Court is satisfied that
WAG’s reference to “Defendants” in WAG’s Complaints means each individual Defendant, and
that the Complaint is sufficient to put Defendants on notice of the alleged infringement.
Next, Defendants argue that WAG’s Complaints must be dismissed because WAG does
not specifically show how Defendants make or use the claimed inventions. (Def. Mov. Br. at 2744).
Specifically, Defendants contend that end-users—not Defendants—“use” the patented
inventions because “use” occurs “where control of the system is exercised and beneficial use of
the system obtained.” (Id. at 30 (citing NTP, Inc. v. Research In Motion, Ltd., 418 F.3d 1282 (Fed.
The Court declines to dismiss Plaintiff’s direct infringement claims on this ground. As
recently as July 21, 2015, the Federal Circuit has held that “[a] motion to dismiss a claim of direct
infringement . . . will not be granted if the complaint follows Form 18.”
Detoxification Inst. LLC v. Carpenter, 2015 WL 4430128, at *2 (Fed. Cir. July 21, 2015) (citing
In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1331 (Fed. Cir.
2012)). 5 “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” or “even identify which claims it
asserts are being infringed.” In re Bill of Lading, 681 F.3d at 1331 (internal citation omitted).
Rather, a complaint complies with Form 18 if it includes “(1) an allegation of jurisdiction; (2) a
statement that the plaintiff owns the patent; (3) a statement that defendant has been infringing the
patent ‘by making, selling, and using [the device] embodying the patent’; (4) a statement that the
plaintiff has given the defendant notice of its infringement; and (5) a demand for an injunction and
damages.” K–Tech Telecomm’n, Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1283 (Fed. Cir.
2013) (internal citation omitted). In addition, “to the extent any conflict exists between Twombly
(and its progeny) and the Forms regarding pleadings requirements, the Forms control.” Id.
Here, WAG’s complaints not only satisfy the basic requirements of Form 18, but also the
heightened the pleading standard of Twombly. With respect to Form 18, WAG’s Complaints each
allege subject matter and personal jurisdiction. (See, e.g., Sobonito Compl. ¶¶ 6-7). WAG’s
complaints further allege that WAG owns the patents-in-suit. (See, e.g., id. ¶¶ 13). They allege
that Defendants have been infringing the patents-in-suit “by making, selling, and using [the device]
embodying the patent.” (See, e.g., id. ¶¶ 63, 98-99, 124, 129). They allege that Plaintiff has given
Defendants notice of its infringement. (See, e.g., id. ¶¶ 59-60). Finally, they demand an injunction
and damages. (See, e.g., id. at 40, Prayer for Relief).
Moreover, WAG’s complaints meet the standard of Twombly and Iqbal because they
“contain sufficient factual allegations such that a reasonable court could, assuming the allegations
As Defendants pointed out at oral argument, the Judicial Conference of the United States recently
recommended the elimination of the Model Forms in the Federal Rules of Civil Procedure. However, the
recent use of Form 18’s pleading standard by the Federal Circuit suggests its continued relevancy. See
Addiction and Detoxification, 2015 WL 4430128, at *2. In any event, the Court’s determination that
WAG’s direct infringement claims are sufficient is based both on its compliance with Form 18, as well as
its compliance with the pleading standards of Iqbal and Twombly.
were true, conclude that the defendant infringed.” See Addiction and Detoxification, 2015 WL
4430128, at *2. In each of its Complaints, WAG includes detailed allegations of why Defendants
infringe specific claims in each of the patents asserted. (See, e.g., Sobonito Compl. ¶¶ 66-76; 99102; 124-25; 129-30). For example, in its Sobonito Complaint, WAG alleges that Defendants
infringe claims 1-8 and 28 of the ‘141 patent, which are directed to providing a server and software
to run media players. (Id. ¶ 67). WAG includes, inter alia, the following specific allegations:
“Defendants provide servers that meet the first set of requirements recited in these claims. Through
such servers, Defendants direct and control users’ Players (as further alleged below) to provide
Player Software in accordance with the second set of requirements recited in these claims. By
performing these steps (which together comprise all of the steps of the claims), Defendants thereby
directly infringe claims 1-8 and 28 of the ‘141 patent.” (Id.). This type of detailed pleading is
found throughout WAG’s Complaints, and it is more than sufficient for purposes of pleading direct
infringement. See, e.g., Bel Fuse Inc. v. Molex Inc., 27 F. Supp. 3d 557, 562 (D.N.J. 2014);
Demodulation, Inc. v. Applied DNA Sciences, Inc., No. 11-296, 2012 WL 6204172, at *12 (D.N.J.
Dec. 12, 2012).
Though Defendants argue that end-users “use” the patented system and not
Defendants, WAG’s Complaints plausibly allege otherwise.
Accordingly, the Court denies
Defendants’ motions to dismiss WAG’s direct infringement claims.
Defendants’ argue that WAG’s claims for inducement must be dismissed because WAG
does not sufficiently allege knowledge or specific intent. (Def. Mov. Br. at 44). Under 35 U.S.C.
§ 271(b), “[w]hoever actively induces infringement of a patent shall be liable as an infringer.” 35
U.S.C. § 271(b). The Supreme Court has held that “knowledge is needed for induced infringement
under § 271(b).” Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068 (2011).
Recently, the Supreme Court clarified that the “knowledge” required for inducement includes both
knowledge of the patent and knowledge of infringement. Commil USA, LLC v. Cisco Sys., Inc.,
135 S. Ct. 1920, 1926 (2015). Thus, to “sufficiently plead induced infringement, [the Complaints]
must contain facts plausibly showing that [Defendants] specifically intended their customers to
infringe the . . . patent[s] and knew that the customer’s acts constituted infringement.” In re Bill
of Lading, 681 F.3d at 1339. 6 “This does not mean, however, that [WAG] must prove its case at
the pleading stage.” Id.
Defendants argue that WAG has not adequately alleged Defendants’ specific intent to
encourage others to infringe, nor its knowledge that users’ actions constituted infringement. (Def.
Mov. Br. at 51). The Court disagrees. The induced infringement counts involve patent claims to
a users’ player and player software. (See, e.g., Sobonito Compl. ¶¶ 77-86, 105-113). WAG alleges
that Defendants know that users employ the infringing media players and player software, and that
they intend this consequence or are willfully blind to it. (See, e.g., Gattyan Compl. ¶ 77; see also
Sobonito Compl. ¶ 85 (“Defendants have engaged in such inducement with knowledge of the ‘141
patent; with knowledge that users’ Players use Player Software meeting the limitations of [the
claims]; with knowledge that the users directly infringe [the claims] when they use Player
WAG alleges that Defendants had pre-suit knowledge of infringement in two of the cases: WebPower
and Vubeology. For the remainder of cases, WAG relies on post-suit knowledge. In their brief, Defendants
argue that post-suit knowledge is not sufficient for purposes of alleging inducement, however they did not
raise this argument at oral argument before the Court, and district courts in this Circuit have routinely
determined that post-suit knowledge is sufficient. See, e.g., Softview LLC v. Apple Inc., No. 10-389, 2012
WL 3061027, at *7 (D. Del. July 6, 2013) (“the filing of a complaint is sufficient to provide knowledge of
the patents-in-suit for purposes of stating a claim for indirect infringement occurring after the filing date.”);
Walker Digital v. Facebook, Inc., 852 F. Supp. 2d 559, 565-566 (D. Del. 2012) (same). The Court finds
these cases persuasive. As the court in Softview held, “an accused infringer is on notice of the patents(s)in-suit once an initial pleading identifies the patents-in-suit, and a patentee that successfully proves the
remaining legal elements of indirect infringement is entitled to recover for any post-filing indirect
infringement of those patents.” Softview, 2012 WL 3061027, at *7. Accordingly, the Court determines
that WAG’s allegations of pre-suit and post-suit knowledge could both be sufficient and focuses on
Defendants’ arguments that such knowledge is not pled with adequate specificity.
Software; with knowledge of how Defendants’ conduct actively induces users to infringe the ‘141
patent by Player Software; and with the specific intent to cause such infringement, knowing that
the users’ acts constitute direct infringement of the ‘141 patent.”)). These facts plausibly give rise
to the conclusion that Defendants induced infringement of WAG’s patents. See Walker Digital,
852 F. Supp. 2d at 556. As a result, the Court denies Defendants’ motions to dismiss WAG’s
claims for inducement.
e. Contributory infringement
Defendants argue that WAG’s contributory infringement claims should be dismissed
because WAG has not alleged knowledge and because WAG has not sufficiently alleged that
Defendants provided a component with substantial non-infringing use. Under 35 U.S.C. § 271(c),
[w]hoever 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).
As an initial matter, the Court concluded with respect to WAG’s inducement claims that
WAG had sufficiently alleged knowledge for the purposes of indirect infringement. (See, supra,
Section III.d). That determination applies to WAG’s claim for contributory infringement as well.
Thus, the Court only addresses Defendants’ argument that WAG has not sufficiently alleged that
Defendants provided a component with a substantial non-infringing use.
Defendants argue that WAG has not pled contributory infringement because, as a matter
of law, the Downloaded Software that WAG alleges is a “component” of the claimed invention
cannot constitute a “component.” (Def. Mov. Br. at 56). In support of this proposition, Defendants
rely on Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746 (2007), which held that software did not
constitute a component under 35 U.S.C. 271(f) unless it was embodied in a tangible copy. 7
WAG appears to agree with Defendants’ characterization of Microsoft, and argues that
“WAG’s complaints allege that Defendants create such a copy by including this software along
with their web pages, which creates a tangible copy when received by the user’s player or
browser.” (Pl. Opp. Br. at 70). It alleges that “[p]roviding the software on the user’s player or
browser is sufficient under § 271(c).” (Id.). In reply, Defendants point out that WAG is only
arguing that a tangible copy is created when received by the user’s player or browser—but there
is still no allegation that Defendants have offered for sale, sold, or imported a physical component.
The Court agrees with WAG that it has sufficiently pled contributory infringement under
§ 271(c). WAG specifically alleges that Defendants “have offered to sell or sold within the United
States or imported into the United States the ImLive Downloaded Software” and that the
“Downloaded Software constitutes a component of a patented machine, manufacture, combination
or composition, or a material apparatus for use in practicing a patented process, constituting a
material part of the invention.” (See, e.g., Sobonito Compl. ¶¶ 117-18). Defendants’ argument
that the Downloaded Software is not in a tangible form, (see Def. Rep. Br. at 22-23), requires the
The Court notes that the Microsoft decision considered the meaning of the term “component” in the
context of 35 U.S.C. § 271(f), which provides that “[w]hoever without authority supplies or causes to be
supplied in or from the United States all or a substantial portion of the components of a patented invention,
where such components are uncombined in whole or in part, in such manner as to actively induce the
combination of such components outside of the United States in a manner that would infringe the patent if
such combination occurred within the United States, shall be liable as an infringer.” 35 U.S.C. § 271(f).
At oral argument, WAG argued (and Defendants conceded) that Defendants had not directed the Court to
any cases applying the Microsoft holding in the context of § 271(c). However, the Court does not need to
reach whether Microsoft’s holding applies to § 271(c), as it determines that WAG’s pleadings are
sufficiently specific for purposes of a motion to dismiss.
Court to look outside the scope of the pleadings. It would be overly stringent to require WAG to,
at this stage, explain precisely how the Downloaded Software constitutes a component.
Accordingly, WAG’s contributory infringement claims are permitted to proceed.
Next, Defendants argue that WAG should not be permitted to assert claims of willful
infringement because (1) it has not alleged any pre-filing willful activity and (2) cannot rely on
post-filing activity because it did not seek a preliminary injunction. (Def. Mov. Br. at 56-57).
WAG does not dispute that it relies solely on post-filing conduct, but it asserts that the fact that it
did not seek a preliminary injunction does not bar it from asserting willfulness claims. (Pl. Opp.
Br. at 72-73).
The parties’ disagreement arises from their conflicting interpretations of In re Seagate, 497
F.3d 1360 (Fed. Cir. 2007). Defendants argue that Seagate prohibits plaintiffs from alleging
willful infringement based solely on post-filing conduct unless they also seek a preliminary
injunction. (Def. Mov. Br. at 57). WAG argues that Seagate does not establish a per se rule, and
it further argues that the fact that it did not move for a preliminary injunction does not make the
allegation of willful infringement any less plausible in this case. (Pl. Opp. Br. at 73).
District courts that have considered this issue have reached diverging conclusions. Several
courts have barred plaintiffs from asserting willfulness claims based on post-filing conduct absent
a preliminary injunction. See, e.g., McRo, Inc. v. Namco Bandai Games Am., Inc., 23 F. Supp. 3d
113, 1123-24 (C.D. Cal. July 11, 2013); Execware, LLC v. Staples, Inc., No. 11-836, 2012 WL
6138340, at *6 (D. Del. Dec. 10, 2012). Other courts have permitted such claims to proceed. See,
e.g., Englishtown, Inc. v. Rosetta Stone Inc., 962 F. Supp. 2d 355, 359 (D. Mass. 2013); DataQuill
Ltd. V. High Tech Computer Corp. 887 F. Supp. 2d 999, 1015-16 (S.D. Cal. 2011).
The Court begins its analysis with the language of In re Seagate. There, the Federal Circuit
[A] willfulness claim asserted in the original complaint must
necessarily be grounded exclusively in the accused infringer’s prefiling conduct. By contrast, when an accused infringer’s post-filing
conduct is reckless, a patentee can move for a preliminary
injunction, which generally provides an adequate remedy for
combating post-filing willful infringement. . . . A patentee who does
not attempt to stop an accused infringer’s activities in this manner
should not be allowed to accrue enhanced damages based solely on
the infringer’s post-filing conduct.
In re Seagate, 497 F.3d at 1374. The Federal Circuit Court goes on to state, however, that “in
some cases a patentee may be denied a preliminary injunction despite establishing a likelihood of
success on the merits, such as when the remaining factors are considered and balanced. In that
event, whether a willfulness claim based on conduct occurring solely after litigation is sustainable
will depend on the facts of each case.” Id.
Courts that have permitted willfulness claims to proceed absent a preliminary injunction
have relied on the language in Seagate to recognize that “certain plaintiffs would not be eligible
for preliminary injunctive relief, not for want of demonstrating a likelihood of success on the
merits, but rather because they could not demonstrate that they would suffer irreparable harm
absent injunctive relief.” Englishtown, 962 F. Supp. 2d 355 at 359. For example, there are
circumstances, such as those alleged by WAG, where because the parties are not competitors, the
Plaintiff’s injury is monetary. See id; (see also Pl. Opp. Br. at 71). In such cases, where injunctive
relief is not appropriate, courts have held that it would make “little sense to implement a per se
rule.” See Affinity Labs of Tex., LLC v. Alpine Elecs. of Am., Inc., No. 08-171, 2009 WL 0901275,
at *4 (E.D. Tex. Sept. 2, 2009).
The Court is persuaded by the logic of the cases holding that there is no per se bar to
alleging post-filing willfulness without seeking a preliminary injunction. Here, WAG has asserted
that it does not compete with Defendants and that its damages are strictly monetary. (Pl. Opp. Br.
at 71). It has further asserted that it could not meet the requirement of irreparable harm necessary
to succeed on a preliminary injunction. (Id.). “The Court agrees that seeking preliminary
injunctive relief would have been futile where there is no allegation of direct competition.” Zond,
LLC v. Renesas Elecs. Corp., No. 13-11625, 2014 WL 4161348, at *5 (D. Mass. Aug. 15, 2014).
At oral argument, Defendants pointed out that WAG seeks a permanent injunction in each
of Complaints, and argued that this is inconsistent with WAG’s statement that it could not have
obtained a preliminary injunction. (Tr. at 180:7-23). This argument is premature. Defendants
may highlight WAG’s inconsistency if and when its entitlement to a permanent injunction is at
issue. At this stage, the Court only needs to consider whether it would have been futile for WAG
to seek a preliminary injunction. Because the Court accepts WAG’s contention that it would have
been futile to seek a preliminary injunction because it could not prove irreparable harm, WAG’s
claims for willful infringement may proceed.
g. Personal Jurisdiction
Defendant Coolvision 8 argues that it should be dismissed as a Defendant in this action for
lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). (Def. Mov. Br.
at 60). To determine whether jurisdiction exists over an out-of-state Defendant, the Court must
consider two inquiries. IMO Indus. Inc. v. Kiekert AG, 155 F.3d 254, 259 (3d Cir. 1998). “First,
the court must apply the relevant state long-arm statute to see if it permits the exercise of personal
jurisdiction; then, the court must apply the precepts of the Due Process Clause of the Constitution.”
Coolvision is a Defendant in the Sobonito case, Civil Action No. 14-1661.
Id. However, because New Jersey’s long-arm statute is co-extensive with the limits of due process,
“the two inquiries collapse into a single inquiry: whether jurisdiction comports with due process.”
The Court may exercise either general or specific jurisdiction over a defendant. Provident
Nat’l Bank v. Cal. Fed. Sav. & Loan Ass’n, 819 F.2d 434 (3d Cir. 1987). It may exercise general
personal jurisdiction over a defendant who exhibits “continuous and systematic” contacts with the
forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-416 (1984).
It may exercise specific personal jurisdiction where “the plaintiff’s cause of action is related to or
arises out of the defendant’s contacts with the forum” state. IMO, 155 F.3d at 259 (citing
Helicopteros, 466 U.S. at 408). More specifically, a Court evaluating specific jurisdiction must
consider whether (1) the defendant purposefully directed its activities at residents of the forum, (2)
the claim arises out of or relates to those activities, and (3) the assertion of personal jurisdiction is
reasonable and fair. Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1018 (Fed.
Cir. 2009). In addition, where, as here, “the parties have not conducted discovery, [the plaintiff]
need[s] only to make a prima facie showing that [the defendant] is subject to personal jurisdiction.”
Id. at 1017. “As such, the pleadings and affidavits are to be construed in the light most favorable
to [the plaintiff].” Id. (internal citation omitted).
WAG concedes that it is only arguing that the Court may exercise specific—and not
general—jurisdiction over Defendant Coolvision. (Pl. Opp. Br. at 77). Coolvision argues that
specific jurisdiction does not exist because Coolvision does not direct activities to New Jersey
residents and WAG’s claims do not arise out of Coolvision’s activities. (Def. Mov. Br. at 60-68).
Coolvision primarily relies on a declaration submitted by Coolvision’s Chief Executive Officer,
Noam Fogel, (D.E. No. 48-3) to argue that “Coolvision simply performs some elementary tasks
for [www.imlive.com],” but does not “own any of the accused websites or equipment” or “perform
any activities in New Jersey (or elsewhere) that give rise to WAG’s infringement claim.” (Def.
Mov. Br. at 64). Coolvision argues that WAG is erroneous in asserting that Coolvision “owns and
controls” imlive.com and its associated server infrastructure.
WAG argues that, even accepting Fogel’s declaration as true, there are still uncontroverted
allegations that demonstrate Coolvision’s infringement-related activities. (Pl. Opp. Br. at 79-80).
For example, WAG points to the fact that imlive.com is transmitted over an infringing server
located in or around Newark, NJ, (Sobonito Compl. ¶ 36), that imlive.com has numerous
performers in New Jersey, who perform online over Defendants’ infringing services, from New
Jersey, (id. ¶ 47), and that Defendants’ highly interactive websites have a high volume of users in
this district which provide Defendants with substantial revenues, (id. ¶ 50). WAG also references
that Fogel’s statement that Coolvision performs “maintenance,” “technical support,”
“monitoring,” and “technical administration duties” for imlive.com as further support for finding
personal jurisdiction. (Pl. Opp. Br. at 80).
The Court determines that WAG is entitled to take jurisdictional discovery because it has
presented “factual allegations that suggest ‘with reasonable particularity’ the possible existence of
the requisite ‘contacts between [the party] and the forum state.” Toys “R” Us v. Step Two, S.A.,
318 F.3d 446, 456 (3d Cir. 2003); see also Autogenomics, 556 F.3d 1012 at 1022. WAG has
included numerous allegations that suggest that the Court has personal jurisdiction over
Coolvision. Fogel’s declaration controverts some, but not all, of WAG’s allegations. Though the
remaining allegations do not establish a prima facie case of personal jurisdiction, they do suggest
with reasonable particularity that personal jurisdiction exists. As a result, the Court determines
that limited jurisdictional discovery is proper in this case.
For the foregoing reasons, Defendants’ motion to dismiss the Complaint, (D.E. No. 48),
and WebPower’s motion to dismiss the Complaint, (Civil Action No. 15-3581, D.E. No. 9), are
Accordingly, it is on this 10th day of September 2015 hereby
ORDERED that the Clerk of the Court shall terminate Defendants’ motion to dismiss in
each of the consolidated cases; and it is further
ORDERED that the Clerk of the Court shall terminate WebPower’s motion to dismiss in
Civil Action No. 15-3581, D.E. No. 9.
ORDERED that the parties shall engage in limited jurisdictional discovery regarding the
Court’s personal jurisdiction over Defendant Coolvision.
s/ Esther Salas
Esther Salas, U.S.D.J.
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