NASDAQ, INC. et al v. IEX GROUP, INC. et al
Filing
52
OPINION filed. Signed by Judge Brian R. Martinotti on 1/4/2019. (km)
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________________
:
NASDAQ, INC. and NASDAQ
:
TECHNOLOGY AB,
:
:
Civil Action No. 18-3014-BRM-DEA
Plaintiffs,
:
:
v.
:
OPINION
:
IEX GROUP, INC. and INVESTORS
:
EXCHANGE, LLC,
:
:
Defendants.
:
____________________________________:
MARTINOTTI, DISTRICT JUDGE
Before this Court is Defendants IEX Group, Inc. and Investors Exchange, LLC’s
(collectively “IEX”) Motion to Dismiss. (ECF No. 23.) Plaintiffs Nasdaq, Inc. and Nasdaq
Technology AB (collectively “Nasdaq”) oppose the Motion. (ECF No. 27.) Having reviewed the
parties’ submissions filed in connection with the Motion and having heard oral argument pursuant
to Federal Rule of Civil Procedure 78(a) on December 19, 2018, for the reasons set forth below,
and for good cause shown, the Motion is GRANTED in part and DENIED in part.
I.
BACKGROUND
For the purpose of the Motion to Dismiss, the Court accepts the factual allegations in the
Complaint as true and draws all inferences in the light most favorable to Nasdaq. See Phillips v.
Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). Further, the Court also considers any
“document integral to or explicitly relied upon in the complaint.” In re Burlington Coat Factory
Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).
1
This matter arises from alleged patent infringements relating to electronic trading
technologies. Nasdaq was the first electronic stock market. (ECF No. 1 ¶ 2.) Over the years, it has
“evolved into a company that not only operates its own markets (e.g., the Nasdaq Stock Market),
but also provides technology to other market operators.” (Id.) Now, “Nasdaq provides missioncritical technology solutions that power more than a hundred market infrastructure organizations
across the globe.” (Id. ¶ 3.) Nasdaq and its subsidiaries hold more than 250 patents in this area,
seven of which are at issue in this case. (Id.) “IEX was founded in 2012, quickly developed the
initial version of its electronic trading platform, and began operating the platform in 2013.” (Id. ¶
4.)
Nasdaq is the assignee of U.S. Patent Nos. 7,647,264; 7,895,112; 7,933,827; 8,117,609;
8,244,622; 8,280,797; and 8,386,362 (collectively the “Patents-in-Suit”). (Id. ¶ 13.) Nasdaq alleges
its technology played a central role in IEX’s electronic trading platform launch and operation
because “at least four key technology employees left Nasdaq for IEX” in 2012 and 2013. (Id. ¶ 5.)
All the former employees who left Nasdaq for IEX “were likely familiar with the four patented
Nasdaq technologies at issue in this case: (1) closing auction processes, (2) multi-parallel order
processing, (3) matching engine performance, and (4) data feed optimizations.” (Id. ¶ 6.) These
former Nasdaq employees allegedly helped construct “the earliest version of IEX’s trading
platform and continued to work on modifications thereafter.” (Id. ¶ 5.)
An example of IEX’s “unauthorized borrowing can be seen with respect to closing auction
technology.” (Id. ¶ 7.) In 2004, Nasdaq launched its first fully-electronic closing auction, and
obtained multiple patents protecting this innovation. (Id. ¶ 8.) The closing auction process
“facilitates trading during some of the busiest trading periods in the markets.” (Id. ¶ 9.) IEX has
also launched a closing auction process, which was allegedly “‘designed based on extensive review
2
of’ Nasdaq’s patented process.” (Id. ¶ 10.) IEX has also allegedly stated “that the information to
be disseminated to the market during IEX closing auctions is ‘substantially similar’ to the ‘Nasdaq
Net Imbalance Order Indicator,’ a key feature of certain of the patents asserted here.” (Id.) IEX
never obtained or sought a license to make, use, sell, or offer to sell Nasdaq’s patented inventions.
(Id. ¶ 11.)
As such, on March 1, 2018, Nasdaq filed this infringement action as to all Patents-in Suit
“to stop, and obtain fair compensation for, IEX’s unauthorized reliance on Nasdaq’s technology.”
(Id. ¶ 11.) Nasdaq also seeks “enhanced damages for willful infringement” because “at least one
former Nasdaq employee involved in building IEX’s trading system likely knew about the asserted
patents or underlying applications, and because IEX has publicly acknowledged its reliance on
Nasdaq technologies.” (Id. ¶ 12.) On May 30, 2018, IEX filed a Motion to Dismiss the Complaint,
alleging: (1) the ’609 Patent is “directed to the patent-ineligible abstract idea of comparing first
and second data sets for the purpose of updating the first data set using nothing but conventional
computers”; (2) that the Complaint fails to plead IEX infringed on the Patents-in-Suit; and (3) that
Nasdaq fails to allege facts supporting its induced infringement claims and willful infringement.
(ECF No. 23-1 at 3-4.) Nasdaq opposed the Motion on July 10, 2018. (ECF No. 27.) On November
30, 2018, IEX filed a supplemental brief. (ECF No. 42.) As such, the Court provided Nasdaq with
an opportunity to respond. Nasdaq responded on December 5, 2018. (ECF No. 44.)
II.
LEGAL STANDARD
In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a
district court is “required to accept as true all factual allegations in the complaint and draw all
inferences in the facts alleged in the light most favorable to the [plaintiff].” Phillips, 515 F.3d at
228. “[A] complaint attacked by a . . . motion to dismiss does not need detailed factual allegations.”
3
Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007). However, the plaintiff’s “obligation to provide the
‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Id. (citing Papasan v. Allain, 478 U.S.
265, 286 (1986)). A court is “not bound to accept as true a legal conclusion couched as a factual
allegation.” Papasan, 478 U.S. at 286. Instead, assuming the factual allegations in the complaint
are true, those “[f]actual allegations must be enough to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555.
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the
pleaded factual content allows the court to draw the reasonable inference that the defendant is
liable for misconduct alleged.” Id. This “plausibility standard” requires the complaint allege “more
than a sheer possibility that a defendant has acted unlawfully,” but it “is not akin to a ‘probability
requirement.’” Id. (citing Twombly, 550 U.S. at 556). “Detailed factual allegations” are not
required, but “more than an unadorned, the defendant-harmed-me accusation” must be pled; it
must include “factual enhancements” and not just conclusory statements or a recitation of the
elements of a cause of action. Id. (citing Twombly, 550 U.S. at 555, 557).
“Determining whether a complaint states a plausible claim for relief [is] . . . a contextspecific task that requires the reviewing court to draw on its judicial experience and common
sense.” Iqbal, 556 U.S. at 679. “[W]here the well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct, the complaint has alleged—but it has not
‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
4
While as a general rule, a court many not consider anything beyond the four corners of the
complaint on a motion to dismiss pursuant to 12(b)(6), the Third Circuit has held “a court may
consider certain narrowly defined types of material without converting the motion to dismiss [to
one for summary judgment pursuant under Rule 56].” In re Rockefeller Ctr. Props. Sec. Litig., 184
F.3d 280, 287 (3d Cir. 1999). Specifically, courts may consider any “‘document integral to or
explicitly relied upon in the complaint.” In re Burlington Coat Factory Sec. Litig., 114 F.3d at
1426.
III.
DECISION
A. ’609 Patent
IEX argues Nasdaq’s ’609 Patent claims are unpatentable abstract ideas and are therefore
invalid under 35 U.S.C. § 101. (ECF No. 23-1 at 5.) Nasdaq argues the asserted claims of the ’609
Patent are patent eligible because they are directed to resolve a technological problem and focus
on the specific means or methods to improve technology instead of being directed at a result. (See
ECF No. 27 at 5-23.)
Section 101 of the Patent Act defines the subject matter eligible for patent protection.
“Whoever invents or discovers any new and useful process, machine, manufacture, or composition
of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the
conditions and requirements of this title.” 35 U.S.C. § 101. However, § 101 is limited by three
judicially created exceptions: “Laws of nature, natural phenomena, and abstract ideas are not
patentable.” Alice Corp. Pty. v. CLS Bank Int’l, 134 S. Ct. 2347, 2354 (2014). “Phenomena of
nature, though just discovered, mental processes, and abstract intellectual concepts are not
patentable, as they are the basic tools of scientific and technological work.” Gottschalk v. Benson,
409 U.S. 63, 67 (1972). Nevertheless, courts should “tread carefully in construing this exclusionary
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principle.” Alice Corp. Pty., 134 S. Ct. at 2354. “[T]oo broad an interpretation of this exclusionary
principle could eviscerate patent law.” Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566
U.S. 66, 71 (2012). “For all inventions at some level embody, use, reflect, rest upon, or apply laws
of nature, natural phenomena, or abstract ideas.” Id. Therefore, an invention cannot be rendered
ineligible for patent just because it involves an abstract concept. See Diamond v. Diehr, 450 U.S.
175, 187 (1981). “[A] process is not unpatentable simply because it contains a law of nature or a
mathematical algorithm.” Id. (citation omitted).
The Supreme Court has established a two-step “framework for distinguishing patents that
claim laws of nature, natural phenomena, and abstract ides from those that claim patent-eligible
applications of those concepts.” Alice Corp. Pty., 134 S. Ct. at 2355. First, a court must “determine
whether the claims at issue are directed to one of those patent-ineligible concepts.” Id. If the answer
is no, the inquiry ends because the claims are patent-eligible. Mortg. Grader, Inc. v. First Choice
Loan Servs. Inc., 811 F.3d 1314, 1324 (Fed. Cir. 2016). If the answer is yes, the court must proceed
to Step Two. At Step Two the court must “consider the elements of each claim both individually
and as an ordered combination to determine whether the additional elements transform the nature
of the claim into a patent-eligible application.” Alice Corp. Pty., 134 S. Ct. at 2355 (citation
omitted). This is a search for an “inventive concept,” which is defined as “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. (citation omitted and
modification in original). “[C]laim elements are considered in combination for evaluation under
Alice Step 1, and then individually when Alice Step 2 is reached.” Trading Techs. Int’l, Inc. v.
CQG, Inc., 675 F. App’x 1001, 1005 (Fed. Cir. 2017).
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Whether a patent claims patent-eligible subject matter is a question of law. Arrhythmia
Research Tech., Inc. v. Corazonix Corp., 958 F.2d 1053, 1055–56 (Fed. Cir. 1992). Therefore, a
court must first determine whether the claims at issue are directed to a patent-ineligible concept.
Not “all improvements in computer-related technology are inherently abstract and, therefore, must
be considered at step two.” Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016).
“Indeed, some improvements in computer-related technology when appropriately claimed are
undoubtedly not abstract, such as a chip architecture, an LED display, and the like.” Id. Moreover,
not are “claims directed to software, as opposed to hardware, are inherently abstract and therefore
only properly analyzed at the second step of the Alice analysis.” Id. As such, at this step a court
must ask “whether the claims are directed to an improvement to computer functionality versus
being directed to an abstract idea, even at the first step of the Alice analysis.” Id. For that reason,
in cases where the claims are related to computer-technology, the court must first ask “whether the
focus of the claims is on the specific asserted improvement in computer capabilities (i.e., the selfreferential table for a computer database) or, instead, on a process that qualifies as an ‘abstract
idea’ for which computers are invoked merely as a tool.” Id. In McRO, Inc. v. Bandai Namco
Games Am., Inc., the Federal Circuit defined the key inquiry as “whether the claims in these patents
focus on a specific means or method that improves the relevant technology or are instead directed
to a result or effect that itself is the abstract idea and merely invoke generic processes and
machinery.” 837 F.3d 1299, 1314 (Fed. Cir. 2016).
As a preliminary matter, courts have found that claims focused on “collecting information,
analyzing it, and displaying certain results of the collection and analysis are directed to an abstract
idea.” SAP Am., Inc. v. Investpic, LLC, 898 F.3d 1161, 1167 (Fed. Cir. 2018) (citation omitted).
“Information as such is an intangible, hence abstract, and collecting information, including when
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limited to particular content (which does not change its character as information), [i]s within the
realm of abstract ideas.” Id. (citations omitted and alteration in original). Further, “analyzing
information . . . by mathematical algorithms, without more” is also abstract. Id. (citations omitted).
Lastly, “merely presenting the results of abstract processes of collecting and analyzing
information, without more (such as identifying a particular tool for presentation), is abstract as an
ancillary part of such collection and analysis.” Id. (citations omitted).
Likewise, claims directed to the “process of gathering and analyzing information of a
specified content, then displaying the results,” without “any particular assertedly inventive
technology for performing those functions,” were held ineligible in Electric Power Grp., LLC v.
Alstom S.A., 830 F.3d 1350, 1354 (Fed. Cir. 2016). In addition, claims directed to the “idea of
generating a second menu from a first menu and sending the second menu to another location”
were held patent-ineligible in Apple, Inc. v. Ameranth, Inc., 842 F.3d 1229 (Fed. Cir. 2016).
Similarly, in FairWarning IP, LLC v. Iatric Sys., Inc., 839 F.3d 1089 (Fed. Cir. 2016), the
Federal Circuit found computer-implemented claims for collecting and analyzing data to find
specific events to be patent-ineligible abstract ideas. Specifically, the court found the method was
directed to a “combination” of two “abstract-idea categories”: (1) “collecting information,
including when limited to particular content”; and (2) “analyzing information by steps people go
through in their minds, or by mathematical algorithms, without more, as essentially mental
processes.” Id. at 1093–94 (citations omitted). In determining that the patent was an ineligible
abstract idea, the court emphasized that “the ‘realm of abstract ideas’ includes ‘collecting
information, including when limited to particular content,’” and that “analyzing information by
steps people go through in their minds, or by mathematical algorithms, without more, [are]
essentially mental processes within the abstract-idea category.” Id. (quoting Elec. Power Grp.,
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LLC, 830 F.3d at 1353). The court further noted that “merely presenting the results of abstract
processes of collecting and analyzing information, without more (such as identifying a particular
tool for presentation), is abstract as an ancillary part of such collection and analysis.” Id. (quoting
Elec. Power, 830 F.3d at 1353). Therefore, the court concluded that, because the claims at issue
were “directed to collecting and analyzing information to detect misuse and notifying a user when
misuse is detected,” the claims were patent ineligible. Id. at 1094; see GoDaddy.com LLC v. RPost
Commc’ns Ltd., No. 14-00126, 2016 WL 3165536, at *8–13 (D. Ariz. June 7, 2016), aff’d, 685 F.
App’x 992 (Fed. Cir. 2017) (invalidating a patent “directed to the abstract idea of collecting and
providing information” that used an “authenticator” applying a “mathematical association method”
to enhance message delivery and correspondence); Collarity, Inc. v. Google Inc., No. 11-1103,
2015 WL 7597413, at *4–8 (D. Del. Nov. 25, 2015) (invalidating a patent to enhance online
searching that recited methods to generate, refine, and suggest keywords based partly on a user’s
past queries); OpenTV, Inc. v. Netflix Inc., 76 F. Supp. 3d 886, 892–93 (N.D. Cal. 2014)
(invalidating as abstract a patent that claimed methods to gather data and create custom advertising
based on that data).
However, not all improvements in computer-related technology are inherently abstract. In
McRO, Inc., the Federal Circuit held a method for automating the animation of lip movement and
facial expressions, which replaced an animator’s subjective evaluation with automated rules, was
patent eligible. 837 F.3d at 1313–16. The Federal Circuit determined that because the method
involved “a specific asserted improvement in computer animation, i.e., the automatic use of rules
of a particular type,” it did not just use a computer “as a tool to automate conventional activity”
but instead constituted an improvement to an existing technological process itself. Id. at 1314.
Therefore, the Federal Circuit defined the key inquiry as “whether the claims in these patents focus
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on a specific means or method that improves the relevant technology or are instead directed to a
result or effect that itself is the abstract idea and merely invoke generic processes and machinery.”
Id.
In Enfish, the Federal Circuit found claims related to a database structure were not abstract
because their focus included a new “self-referential table [that] functions differently than
conventional database structures.” 822 F.3d at 1337. Specifically, the self-referential table allowed
programmers to construct databases in new ways that required less modeling and configuring of
various tables prior to launch. Id. at 1333. This was distinguished from the performance of
“economic or other tasks for which a computer is used in its ordinary capacity.” Id. at 1336.
Similarly, in Visual Memory LLC v. NVIDIA Corp., 867 F.3d 1253 (Fed. Cir. 2017), the
court found that the claims at issue were patent-eligible because they were directed at an “improved
memory system” that configured operational characteristics of a computer’s cache memory based
on the type of processor connected to the memory system. Id. at 1261. Depending on the processor
type, the invention’s memory caches could adjust their function, which allowed the claimed
invention to accommodate different types of processors without compromising performance. Id.
at 1256–57, 1259.
Likewise, in Trading Technologies International, Inc., a trading software invention was
found to be patent-eligible. 675 F. App’x at 1006. The Federal Circuit upheld the validity of patents
because they “improve[d] the accuracy of trader transactions, utilizing a software-implemented
programmatic met.” Id. The court found “the claimed subject matter [was] directed to a specific
improvement to the way computers operate, for the claimed graphical user interface method
imparts a specific functionality to a trading system directed to a specific implementation of a
solution to a problem in the software arts.” Id. (citations omitted). The problems the patent solved
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were those that arose when a trader attempted “to enter an order at a particular price, but misse[d]
the price because the market moved before the order was entered and executed” or “sometimes . .
. trades were executed at different prices than intended, due to rapid market movement.” Id. at
1002-03.
In Amdocs (Israel) Ltd. v. Openet Telecom, Inc., the Federal Circuit held that the patent
provided an inventive concept because the components described in the patent were arranged in
such a way to “achieve a technological solution to a technological problem specific to compute
networks.” 841 F.3d 1288, 1300-01 (Fed. Cir. 2016), cert. denied, 138 S.Ct. 469 (2017). And more
recently, in Finjan, Inc. v. Blue Coat Systems, Inc., the Federal Circuit held claims directed to a
behavior-based virus scanning method constituted an improvement in computer functionality over
the “traditional, ‘code-matching’ virus scans.” 879 F.3d 1299, 1304 (Fed. Cir. 2018). The claimed
behavior-based scans, in contrast to other systems which searched for matching codes, enabled
more “nuanced virus filtering” in analyzing whether “a downloadable’s code . . . performs
potentially dangerous or unwanted operations.” Id. at 1304. As such, the court determined the
claims were “directed to a non-abstract improvement in computer functionality, rather than the
abstract idea of computer security writ large.” Id. at 1305.
In Data Engine Technologies LLC v. Google LLC, the Federal Circuit found “a specific
method for navigating through three-dimensional electronic spreadsheets” was “not directed to an
abstract idea.” 906 F.3d 999, 1007 (Fed. Cir. 2018). The court reasoned that the method provided
“a specific solution to then-existing technological problems in computers and prior art electronic
spreadsheets.” Id. at 1008. The navigation difficulties of prior-art spreadsheets were addressed “in
a particular way—by providing a highly intuitive, user-friendly interface with familiar notebook
tabs for navigating the three-dimensional worksheet environment.” Id. The court distinguished
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other cases that held claims to be “simply directed to displaying a graphical user interface or
collecting, manipulating, or organizing information.” Id. at 1010. Instead, the claims in Data
Engine recited “a specific structure (i.e., notebook tabs) within a particular spreadsheet display
that performs a specific function (i.e., navigating within a three-dimensional spreadsheet).” Id. at
1010–11.
Recently, in Ancora Techs., Inc. v. HTC Am., Inc., No. 2018-1404, 2018 WL 6005021, at
*4 (Fed. Cir. Nov. 16, 2018), the Federal Circuit found claims directed to a method and system of
preventing unauthorized use of software by checking whether a software program was licensed
and stopping the program or takin other action were patent eligible. The court reasoned that
“[i]mproving security—here, against a computer’s unauthorized use of a program—can be a nonabstract computer-functionality improvement if done by a specific technique that departs from
earlier approaches to solve a specific computer problem.” Id. (citation omitted). The claimed
method in Ancora specifically identified how the functionality improvement was effectuated by
stating “a structure containing a license record is stored in a particular, modifiable, non-volatile
portion of the computer’s BIOS, and the structure in that memory location is used for verification
by interacting with the distinct computer memory that contains the program to be verified.” Id.
Therefore, the court determined the claim addressed “a technological problem with computers:
vulnerability of license-authorization software to hacking.” Id. Moreover, the court noted the
prosecution history reinforced “what the patent itself indicates about the change in previous
verification techniques for computer security.” Id. (citations omitted). In short, the court concluded
the patent was “directed to a solution to a computer-functionality problem: an improvement in
computer functionality that has ‘the specificity required to transform a claim from one claiming
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only a result to one claiming a way of achieving it.’” Id. (quoting SAP America, Inc., 898 F.3d at
1167).
Under the backdrop of the cited cases, the ’609 Patent is a close question of eligibility. At
this stage, however, the Court finds the ’609 Patent claims patent eligible because they are directed
at resolving an existing technological problem in “extracting and selecting operators in an efficient
way . . . in order to reduce the load on a processor and to reduce data dissemination such as
bandwidth in a computer system” for electronic trading of securities, derivates, commodities, and
other financial instruments. ’609 Patent 1:53-57. The Court concludes this case is analogous to
Trading Technologies, Amdocs, and Data Engine because the ’609 Patent was designed to
“achieve a technological solution to a technological problem specific to computer networks,”
solving bottleneck and other latency issues associated with transmission of large data sets. Amdocs
(Israel) Ltd., 841 F.3d at 1300-01; Data Engine Techs. LLC, 906 F.3d at 1008 (holding a specific
method for navigating through an electronic spreadsheet was not an abstract idea and therefore
patent-eligible because the method provided “a specific solution to then-existing technological
problems in computers and prior art electronic spreadsheets”); Trading Techs. Int’l, Inc., 675 F.
App’x at 1006 (finding the patent eligible because “the claimed subject matter was directed to a
specific improvement to the way computers operation, for the claimed graphical user interface
method imparts a specific functionality to a trading system directed to a specific implementation
of a solution to a problem in the software arts”). Indeed, the specifications of the ’609 Patent
discusses the inherit difficulty in distributing a “large amount of data . . . for making trade
decisions” in the electronic securities trading context. ’609 Patent 1:21-24. It notes that simply
“updating the hardware” alone “may not [] be enough to boost the performance in the central
system” for data dissemination. Id. 1:32-34.
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The Court further finds the claims of the ’609 Patent are not directed to the abstract idea of
comparing first and second data sets for the purpose of updating the first data set, but instead are
claims regarding a “computer system” which allows for more “efficient[]” “dissemination” of
updated purchase/sales price information, which constitutes an improvement to an existing
technological process. Id. 1:5-9, 1:62-64, 10:13-36. Specifically, claim 1 describes a “computer
system for generating an update data set to be sent to remote terminals,” comprised of certain
features. Id. 10:13-17. Such features of the computer system consist of: (1) “a memory”; (2) “a
comparator connectable to the memory”; and (3) a “selector . . . connectable to the memory.” Id.
10:13-35. The “computer system . . . [is] further compris[ed of] a communicator associated with
the selector for generating and sending an update message comprising the update data set.” Id.
10:37-40.
Much like in McRO and Ancora, the claims in the ’609 Patent focus on specific means or
methods to improve the relevant technology instead of being directed at a result or effect. Ancora
Techs., Inc., 2018 WL 6005021, at *4 (finding the patent was “directed to a solution to a computerfunctionality problem: an improvement in computer functionality that has ‘the specificity required
to transform a claim from one claiming only a result to one claiming a way of achieving it’”);
McRO, Inc., 837 F.3d at 1314 (defining the key inquiry as “whether the claims in these patents
focus on a specific means or method that improves the relevant technology or are instead directed
to a result or effect that itself is the abstract idea and merely invoke generic processes and
machinery”). Specifically, the claims describe how the “comparator” component of the computer
system operates, i.e., by:
sequentially comparing the data elements in the first data set, the
result of a first comparison controls which data element in the first
data set and which data element in the second data set that will be
compared in a second comparison updating a parameter in the
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memory after each second comparison, and initiating a selector
upon detection of a data element in the second data set being
identical to a data element in the first data set[.]
’609 Patent 10:12-36. The claims also detail the means for which the steps in the “data set” are
stored and analyzed in the “computer system”: (1) “updating a parameter in the memory after each
second comparison;” (2) “initiating a selector upon detection of a data element in the second data
set being identical to a data element in the first data set”; and (3) “storing the determined operators
in the memory.” Id. Claim 12 also describes the process after detection of data in the second data
set that is identical to data in the first data set, “initiating a selection process determining operators
based on the change parameter stored in the memory.” Id. 11:18-21. Because the Court finds the
claims of the ’609 Patent are not directed to a patent-ineligible concept, and not abstract ideas, but
instead are patent eligible, the inquiry ends, and the Court need not proceed to Step Two of the
Alice analysis. 1 Mortg. Grader, Inc., 811 F.3d at 1324. Accordingly, IEX’s Motion to Dismiss
Nasdaq’s infringement claims based on the ’609 Patent is DENIED.
1
Although the Court need not and does not reach Step Two of the Alice analysis, it notes,
nevertheless, Step Two would be “more appropriately addressed after discovery in the context of
a motion for summary judgment.” Device Enhancement LLC. v. Amazon.com, Inc., 189 F. Supp.
3d 392, 401 (D. Del. 2016). “The question of whether a claim element or combination of elements
is well-understood, routine and conventional to a skilled artisan in the relevant field is a question
of fact.” Berkheimer v. HP Inc., 881 F.3d 1360, 1368 (Fed. Cir. 2018). “Any fact . . . that is
pertinent to the invalidity conclusion must be proven by clear and convincing evidence.” Id.
Further, “[w]hether the claim elements or the claimed combination are well understood, routine,
conventional is a question of fact.” Aatrix Software, Inc. v. Green Shades Software, Inc., 882 F.3d
1121, 1125 (Fed. Cir. 2018) And here, “that question cannot be answered adversely to the patentee
based on the sources properly considered on a motion to dismiss, such as the complaint, the patent,
and materials subject to judicial notice.” Id.
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B. Direct Infringement
IEX argues Nasdaq’s direct infringement claims fail because the Complaint does not allege
“specific facts supporting a reasonable inference of direct infringement.” (ECF No. 23-1 at 20-21.)
Nasdaq asserts its Complaint contains robust infringement allegations to surpass the
Iqbal/Twombly standard. (ECF No. 27 at 23.)
“Although the Iqbal/Twombly standard applies to ‘all civil actions,’ its applicability to
patent cases has been interpreted differently among federal courts.” Robern, Inc. v. Glasscrafters,
Inc., 206 F. Supp. 3d 1005, 1008 (D.N.J. 2016). This discrepancy is due to then Rule 84 of the
Federal Rules of Civil Procedure, which provided guidance on how to sufficiently plead a claim.
Id. Rule 84 stated: “The Forms in the Appendix . . . illustrate the simplicity and brevity that these
rules contemplate.” Fed. R. Civ. P. 84. Form 18 in the Appendix of Forms, entitled “Complaint
for Patent Infringement,” provided an example for pleading a claim of direct patent infringement.
However, in December 2015, Rule 84 was abrogated. Robern, Inc., 206 F. Supp. 3d at 1008. As
such, Form 18 was likewise abrogated. Id.
Before Rule 84’s abrogation, courts took different views as to whether Iqbal/Twombly’s
higher pleading standard or Form 18’s standard applied. Id. Form 18 required a plaintiff to merely
plead the following:
(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., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1283 (Fed. Cir. 2013)
(quoting McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1357 (Fed. Cir. 2007)). In In re Bill of
Lading Transmission & Processing Sys. Patent Litigation., 681 F.3d 1323, 1334 (Fed. Cir. 2012),
16
the Federal Circuit made clear that the “Forms are controlling only for causes of action for which
there are sample pleadings.” 681 F.3d at 1336. There, the court found that a claim for direct
infringement was properly pled if consistent with Form 18. Id. at 1334. However, if the allegation
was one of indirect infringement, the Federal Circuit looked to the Iqbal/Twombly standard. Id. at
1337–39.
Unlike the Federal Circuit, “‘[o]ther courts . . . held that because the Twombly/Iqbal
pleading standard applies to all civil cases, a patent infringement complaint must do more than
simply assert the bare elements of a claim, and that a Form 18-style complaint will not suffice, in
the aftermath of Twombly and Iqbal.’” Robern, Inc., 206 F. Supp. 3d at 1009-10 (quoting Gradient
Enters., Inc. v. Skype Techs. S.A., 848 F. Supp. 2d 404, 407 (W.D.N.Y. 2012) and citing Medsquire
LLC v. Spring Med. Sys. Inc., No. 11–4504, 2011 WL 4101093, at *2 (C.D. Cal. Aug. 31, 2011)
(requiring Iqbal/Twombly plausibility pleading in cases of direct patent infringement); Bender v.
LG Elecs. U.S.A., Inc., No. 09–02114, 2010 WL 889541, at *6 (N.D. Cal. Mar. 11, 2010) (same)).
This discrepancy remains even after the abrogation of Rule 84. Some courts in this district
have “determined that the Iqbal/Twombly plausibility standard applies,” Robern, Inc., 206 F. Supp.
3d at 1010, while others continue to use Form 18. Endo Pharm., Inc. v. Impax Labs., Inc., No. 162526, 2016 WL 6246773, at *5 (D.N.J. Oct. 25, 2016). Irrespective of what standard should or
does apply, the Court finds Nasdaq’s Complaint satisfies the higher standard of Iqbal/Twombly.
Under Iqbal/Twombly, a plaintiff is required to plead “factual content that allows the court
to draw the reasonable inference that the defendant is liable of the misconduct alleged.” Disc
Disease Sols. Inc. v. VGH Sols., Inc., 888 F.3d 1256, 1260 (Fed. Cir. 2018) (quoting Iqbal, 556
U.S. at 678 (citing Twombly, 550 U.S. at 556)). “Specific facts are not necessary; the statement
17
need only give the defendant fair notice of what the . . . claim is and the ground upon which it
rests.” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citations omitted).
The direct infringement of a patent occurs when a party, without authority, “makes, uses,
offers to sell, or sells any patented invention, within the United States.” 35 U.S.C. § 271(a). “A
patentee may prove direct infringement under § 271(a) either by (1) demonstrating specific
instances of direct infringement; or (2) showing that an accused device necessarily infringes on
the patent.” ACCO Brands, Inc. v. ABA Locks Mfrs. Co., 501 F.3d 1307, 1313 (Fed. Cir. 2007). To
state a claim for direct infringement, a plaintiff must list the defendant’s products which allegedly
infringe, describe the alleged infringement, and relate “factual assertions to the pertinent claims”
in its patent. Robern, Inc., 206 F. Supp. 3d at 1011. The complaint must allege that the accused
product infringes on “each and every element of at least one claim” of the plaintiff’s patents “either
literally or equivalently.” Disc Disease Sols. Inc., 888 F.3d at 1260.
Here, as to each asserted patent, Nasdaq’s Complaint provides sufficient detail to state a
claim under Iqbal/Twombly. Indeed, Nasdaq names IEX’s product as the Accused Platform, which
allegedly infringed each of the Nasdaq patents and claims, “the Accused Platform and any other
IEX platforms.” (ECF No. 1 ¶¶ 41, 108, 138, 164, 210, 255, and 300.) In each Count of the
Complaint, Nasdaq also describes the alleged infringement and identifies how IEX’s product
infringes on every element of at least one claim in each of Nasdaq’s patents. For example, as to
the ’264 Patent and ’797 Patent, the Complaint alleges:
with regard to claim 1, upon information and belief, IEX’s Accused
Platform is, or includes, an electronic system for trading of
securities, the system comprising: a processor device; a memory
storing a queue, the queue storing closing orders along with other
orders for a traded security; a computer readable medium storing a
computer program product, the computer program product
comprising instructions to cause the server computer system to:
receive the closing orders and the other orders for the security;
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disseminate an order imbalance indicator indicative of predicted
trading characteristics of the security at close of trading, the
predicted trading characteristics based upon a price at which those
closing orders would execute at the time that the order imbalance
indicator is disseminated; receive additional closing orders that
maximize the number of shares executed at a predicted final closing
price; determine a final closing price for the security based on
marketable closing orders and other orders; and execute at least
some of the closing orders at the determined final closing price.
(Id. ¶¶ 42, 109.) Regarding the ’264 Patent, the Complaint also identifies “IEX Auction
Information”—a term drawn from IEX’s documents—as including information that is
“substantially similar . . . to the Nasdaq Net Imbalance Order Indicator.” (Id. ¶ 48-49.) The
Complaint further specifies that “Auction Information to be disseminated by IEX includes
information ‘indicat[ing] potential clearing prices for the auction.’” Id. ¶ 48. This is sufficient to
provide IEX with reasonable notice of the specific way it is allegedly infringing on this patent.
Regarding the ’797 Patent, the Complaint asserts the “IEX Auction Information” is similar
to the Nasdaq Net Imbalance Order Indicator and that IEX’s disseminated “Reference Price” is the
“price inside the Reference Price Range at which orders from the Auction Book would match.”
(Id. ¶¶ 114, 124.) This, in combination with the above, is sufficient to provide IEX with reasonable
notice of the specific way it is allegedly infringing on this patent.
As to the ’827 Patent, the Complaint states:
As an example, with regard to claim 1, upon information and belief,
IEX’s Accused Platform is, or includes, a system for securities
trading, the system comprising: a plurality of securities processors
for processing attributable security interest messages generated by
market participants, the attributable security interest messages relate
to securities traded on the securities trading system, each security is
assigned to one or more of the securities processors based on a
unique security identifier associated with the security; and an order
routing system for routing each attributable security interest
message to one of the securities processors according to the
assignment.
19
(Id. ¶ 139.) The Complaint also contends that “‘[a]t the core of [IEX’s] System are several
matching engines’ used to process[] ‘incoming orders’ from ‘Users.’” (Id. ¶ 141.) Paragraphs 146
and 147 of the Complaint detail IEX’s use of multiple matching engines, all of which also “handles
a set of symbols” and are routed via “order entry gateways.” (Id. ¶¶ 146-47.) This is sufficient to
provide IEX with reasonable notice of the specific way it is allegedly infringing on this patent.
As to the ’112 Patent, the Complaint states:
As an example, with regard to claim 1, upon information and belief,
IEX’s Accused Platform is, or includes, a computer system for
execution of transactions involving execution of orders for
securities, the computer system comprises: a central processor
device; a sequential access storage device that provides a persistent
store of recorded information; a main memory coupled to the central
processor and the main memory storing: an order book that includes
order and/or quotes for a particular security, the orders and/or quotes
having various prices, sizes and time priorities; executable code that
causes the processor device to match the orders and/or quotes in the
order book for the security to a received order for the security, with
the order book only accessible by the executable code that matches
orders and/or quotes; and the executable code that matches further
comprising: order management executable code that sends a
message to report matching of the received order, or a portion of the
received order, to orders and/or quotes in the order book to an order
activity log file located in the sequential access storage device.
(Id. ¶ 165.) Paragraphs 169 through 172 also describe an IEX patent application and allege how
IEX’s technology depicted in the application is the same as that in Nasdaq’s ’112 Patent. (Id. ¶¶
169-72.) This is sufficient to provide IEX reasonable notice of the specific way it is allegedly
infringing on this patent.
As to the ’622 Patent, the Complaint states:
As an example, with regard to claim 1, upon information and belief,
IEX’s Accused Platform is, or includes, a computer system for
trading securities in an electronic trading venue, the computer
system comprises: a processor; a main memory that stores: an order
book, the order book comprising a plurality of unfulfilled orders to
trade a particular security that trades on the electronic trading venue,
20
with the orders sent for execution against contra side interest; and a
first portion of a computer system product that accesses the order
book comprising instructions to: find the orders in the order book
that can be matched to a received order sent to the electronic trading
venue; match a portion of a received order for a security against one
or more orders stored in the order book that resides in the main
memory, with the first portion of the computer program having
exclusive access to the order book; and a remaining portion of a
computer program product to access a log stored in a persistent
storage device and to process activities related to the processing of
securities other than to match the received order to orders in the
order book, with the remaining portion having access to the order
book in the main memory only through the first portion of the
computer program product; one or more persistent, computer
readable storage device that store the computer program product and
the log to store results of related to processing of securities other
than to match the received order to orders stored in the order book.
(Id. ¶ 211.) The Complaint also claims that the “matching engine” identified in IEX’s patent
application is the only “portion of . . . code” that can access the order book. (Id. ¶ 216.) This is
sufficient to provide IEX with reasonable notice of the specific way it is allegedly infringing on
this patent.
Regarding the ’362 Patent, the Complaint states:
As an example, with regard to claim 1, upon information and belief,
IEX’s Accused Platform is, or includes, a computer system
comprising: a processor configured to receive electronic trading
orders and operatively coupled to; a main non-transitory memory
that holds an order book containing unexecuted trading orders
received by the processor, the main non-transitory memory holding
the entire order book that stores unexecuted orders for at least one
security trading on an electronic trading venue; and an executable
computer program executed on the processor and residing in the
main non-transitory memory, with execution of the computer
program causing the processor to: match, by the processor, a
received, new, trading order against the unexecuted trading orders
pending in the order book, during matching, the processor accessing
the order book for matching wherein other processes are restricted
by said processor from accessing the order book; insert, in a log file
that resides in a non-transitory storage medium, information
representing an activity relating to a security interest stored in the
order book that resides in the main non-transitory memory; and
21
receive a user query relating to the security interest stored in the log
file that resides in the non-transitory storage medium.
(Id. ¶ 256.) The Complaint further specifies that: (1) “IEX’s User Manual states that IEX offers an
electronic ‘trading platform’ that processes ‘incoming orders’ from ‘Users’” (id. ¶ 257); (2) “IEX’s
User Manual states that IEX’s system has a ‘continuous, automatic matching function’” (id. ¶ 259);
and (3) describes order book isolation like Nasdaq’s (id. ¶¶ 260-62). This is also sufficient to
provide IEX with reasonable notice of the specific way it is allegedly infringing on this patent.
Lastly, as to the ’609 Patent, the Complaint alleges:
As an example, with regard to claim 1, upon information and belief,
IEX’s Accused Platform is, or includes, a computer system for
generating an update data set to be sent to remote terminals, the
update data set comprising operators describing differences between
a first data set comprising sorted data elements and a second data set
comprising sorted data elements, the computer system comprising:
a memory comprising the first and the second data set, a comparator
connectable to the memory for sequentially comparing the data
elements in the second data set with the data elements in the first
data set, the result of a first comparison controls which data element
in the first data set and which data element in the second data set
that will be compared in a second comparison updating a parameter
in the memory after each second comparison, and initiating a
selector upon detection of a data element in the second data set being
identical to a data element in the first data set, the selector being
connectable to the memory and to the comparator, the selector being
adapted to determine operators based on the parameter stored in the
memory, and storing the determined operators in the memory,
wherein the computer system is configured to generate an update
data set, including the determined operators describing differences
between the second data set and the first data set, to be sent to the
remote terminals.
(Id. ¶ 301.) The Complaint further declares IEX’s system performs a comparison of order book
versions, identifies how the order book has changed, and disseminates an updated data set based
on the comparison. (Id. ¶¶ 302-308.) This is sufficient to provide IEX with reasonable notice of
the specific way it is allegedly infringing on this patent.
22
To the extent IEX argues the Complaint does not specify the precise methods IEX use in
its infringing device, at this stage of the litigation, all Nasdaq has access to is IEX’s public
statements, which it used to fashion the Complaint. The specifics of how IEX’s purportedly
infringing device works is something to be establish through discovery. McZeal v. Sprint Nextel
Corp., 501 F.3d 1354, 1358 (Fed. Cir. 2007). The Court finds Nasdaq’s 80-page, 321-paragraph
Complaint pleads “factual content that allows the court to draw the reasonable inference that the
defendant is liable of the misconduct alleged.” Disc Disease Sols. Inc., 888 F.3d at 1260 (citation
omitted). Accordingly, IEX’s Motion to Dismiss Nasdaq’s direct infringement claims is DENIED.
C. Induced Infringement
IEX argues Nasdaq fails to adequately plead induced infringement because it failed to plead
direct infringement, specific intent to induce infringement, and that IEX had pre-suit knowledge
of the Patents-in-Suit. (See ECF No. 23-1 at 29-35.) Nasdaq argues it has sufficiently plead induced
infringement because it asserts the third parties involved and how they infringed. (ECF No. 27 at
39-40.)
Title 35 of the United States Code section 271(b) states, “Whoever actively induces
infringement of a patent shall be liable as an infringer.” “Inducement requires a showing that the
alleged inducer knew of the patent, knowingly induced the infringing acts, and possessed a specific
intent to encourage another’s infringement of the patent.” Vita–Mix Corp. v. Basic Holding, Inc.,
581 F.3d 1317, 1328 (Fed. Cir. 2009). Therefore, to state a claim for induced infringement, a
plaintiff must plead facts raising a plausible inference that: “(1) Defendants knowingly induced a
third party to perform specific acts; (2) Defendants specifically intended for the induced acts to
infringe the [a]sserted [p]atents; and (3) as a result of the inducement, the third party directly
infringed the [a]sserted [p]atents.” Straight Path IP Grp., Inc. v. Vonage Holdings Corp., No. 14-
23
502, 2014 WL 3345618, at *2 (D.N.J. July 7, 2014); see Hoffman–La Roche Inc. v. Apotex Inc.,
No. 07–4417, 2010 WL 3522786, at *2 (D.N.J. Sept. 2, 2010).
“[I]nducement requires evidence of culpable conduct, directed to encouraging another’s
infringement, not merely that the inducer had knowledge of the direct infringer’s activities.” DSU
Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006). The Supreme Court explained 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). Therefore,
to “sufficiently plead induced infringement, [the complaints] must contain facts plausibly showing
that [the defendants] specifically intended their customers to infringe the . . . patent[s] and knew
that the customer’s acts constituted infringement.” In re Bill of Lading Transmission & Processing
Sys. Patent Litig., 681 F.3d at 1339.
Here, Nasdaq has not adequately alleged IEX’s specific intent to encourage others to
infringe. Nasdaq alleges that IEX induced infringement
by actively and knowingly inducing, directing, causing, and
encouraging others, including by not limited to, their consultants,
software developers, engineers, customers, repair providers, and end
users (such as primary market makers, competitive market makers,
and broker-dealers) to make, use, sell, offer to sell, and/or import
within the United States, an automated platform made in accordance
with the [Patents-in-Suit], including, but not limited to, the Accused
Platform, by, among other things, providing access, instructions,
and technical assistance relating to the Accused Platform on IEX
websites.
(ECF No. 1 ¶¶ 98, 127, 153, 198, 243, 290, 316.) Nasdaq has set forth facts demonstrating that
IEX was aware of the Patents-in-Suit. (Id. ¶¶ 29-36.) It has also alleged that IEX induced its
consultants, software developers, engineers, customers, repair providers, and end users to make,
use, sell, offer to sell, and/or import within the United States, an automated platform by providing
access, instructions, and technical assistance relating to the Accused Platform on IEX. However,
24
much like in Straight Path, “while these allegations may be sufficient to establish elements one
and three of induced infringement,” Nasdaq “has not shown that [IEX] specifically intended for
the induced acts to infringe the [Patents-in-Suit].” Straight Path IP Grp., Inc., 2014 WL 3345618,
at *2. Therefore, Nasdaq has failed to establish element two. Accordingly, IEX’s Motion to
Dismiss Nasdaq’s induced infringement claims is GRANTED.
D. Willful Infringement
IEX argues Nasdaq fails to adequately plead willful infringement because it has not pled
facts that support egregious misconduct or pre-suit knowledge. (ECF No. 23-1 at 35-37.) Nasdaq
argues the Complaint adequately pleads willful infringement because it pleads the former Nasdaq
employees were involved in the filing and construction of the Patents-in-Suit. (ECF No. 27 at 3438.)
Pursuant to section 284 of the Patent Act, once infringement has been established, the court
has discretion to award enhanced damages against those guilty of patent infringement up to three
times the amount found or assessed. Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1935
(2016). In 2016, the Supreme Court abrogated the Federal Circuit’s previous two-part test for
establishing willful infringement. Id. “In so doing, the [Halo] Court invited district courts to
exercise discretion in evaluating whether to award enhanced damages under 35 U.S.C. § 284.”
Progme Corp. v. Comcast Cable Commc’n LLC, No. 17-1488, 2017 WL 5070723, at *12 (E.D.
Pa. Nov. 3, 2017); see Halo Elecs., Inc., 136 S. Ct. at 1935. In other words, Halo emphasized that
this Court should “exercise its discretion as provided in 35 U.S.C. § 284 in order to determine
whether to award enhanced damages, and that the focus should be on whether the patentee has
shown that this is an ‘egregious case[] of misconduct beyond typical infringement.’” Varian Med.
Sys., Inc. v. Elekta AB, No. 15-871, 2016 WL 3748772, at *7 (D. Del. July 12, 2016); see also
25
Halo Elecs., Inc., 136 S. Ct. at 1936 (Breyer, J., concurring) (“[T]he Court’s references to ‘willful
misconduct’ do not mean that a court may award enhanced damages simply because the evidence
shows that the infringer knew about the patent and nothing more.”).
“A patent infringer’s subjective willfulness, whether intentional or knowing, ‘may warrant
enhanced damages, without regard to whether his infringement was objectively reckless.’” Progme
Corp., 2017 WL 5070723, at *12 (quoting Halo Elecs., Inc., 136 S. Ct. at 1933). However, a
“[m]ere formulaic pleading of willful infringement will not survive a Rule 12(b)(6) motion.” Id.
Nevertheless, subsequent to Halo, broad allegations of willfulness without a specific showing of
egregiousness have been enough to withstand a motion to dismiss. See Bio-Rad Labs Inc. v.
Thermo Fisher Scientific Inc., 267 F. Supp. 3d 499, 501 (D. Del. 2017) (“At the pleading stage, it
is not necessary to show that the case is egregious.”); DermaFocus LLC v. Ulthera, Inc., 201 F.
Supp. 3d 465, 473 (D. Del. 2016) (finding that general allegations of willful infringement were
sufficient under Halo to surpass a motion to dismiss). Therefore, “where a complaint permits an
inference that the defendant was on notice of the potential infringement and still continued its
infringement, the plaintiff has pled a plausible claim of willful infringement.” Kyowa Hakka Bio,
Co. v. Ajinomoto Co., No. 17-313, 2018 WL 834583, at *13 (D. Del. Feb. 12, 2018) (citing
Telebrands Corp. & Prometheus Brands, LLC v. Everstar Merchandise Co., Ltd., No. 17-2878,
2018 WL 585765, at *8 (D.N.J. Jan. 29, 2018) (allegations that defendants had notice of the patentin-suit since their receipt of the complaint and yet still created and sold the allegedly infringing
product are sufficient to establish a plausible entitlement to enhanced damages)).
Taking the allegations in the Complaint as true, Nasdaq has created a sufficient inference
of egregiousness to allow its willful infringement claims to proceed past the pleading stage. The
Complaint alleges IEX knew of the Patents-in-Suit “years before this Complaint was filed”
26
because “IEX hired at least four former Nasdaq technology employees familiar with the inventions
described in the Patents-in-Suit.” (ECF No. 1 ¶¶ 29-30.) The former employees allegedly
participated in the filing and contributed in the development of the Patents-in-Suit. (Id. ¶¶ 31-36.)
Such allegations are sufficient under Twombly and Iqbal, as they are more than a formulaic
pleading. Accordingly, IEX’s Motion to Dismiss Nasdaq’s willful infringement claims is
DENIED.
E. Whether the Complaint Pleads Infringement by both IEX Defendants
IEX argues Nasdaq’s Complaint fails to distinguish between IEX Group, Inc. and Investors
Exchange, LLC even though they are distinct entities. (ECF No. 23-1 at 37.) Nasdaq argues the
Complaint “does refer to both Defendants as ‘IEX’ for convenience, but it also specifically
describes the relationship between the two entities, and specifically accuses both entities of
infringing acts.” (ECF No. 27 at 24.) Nasdaq argues the “need to sue both entities arose from the
fact that IEX Defendants’ shared website and other publicly-available materials are not
forthcoming about which entity does what.” (Id. at 25.)
“[T]he consistency of the subject of the pleading . . . , despite its group format, means that
it can be reasonably inferred that each and every allegation is made against each individual
defendant.” Zond, Inc. v. Fujitsu Semiconductor Ltd., 990 F. Supp. 2d 50, 53 (D. Mass. 2014); see
Bilecki v. Mather Inv’rs, LLC, No. 08-1, 2008 WL 4376372, at *2 (W.D. Mich. Sept. 22, 2008)
(“The Federal Rules of Civil Procedure do not require a plaintiff to make separate statements
against each individual defendant.”); see also Thomas v. Luzerne Cty. Corr. Facility, 310 F. Supp.
2d 718, 721 (M.D. Pa. 2004). The pervasiveness of this practice is enough to convince the Court
that this procedure is proper. Accordingly, IEX’s Motion to Dismiss on this account is DENIED.
27
If discovery establishes only one defendant committed the infringing acts, the other defendant can
seek summary judgment on that ground.
IV.
CONCLUSION
For the reasons set forth above, IEX’s Motion to Dismiss is GRANTED without
prejudice as to Nasdaq’s induced infringement claims but DENIED as to all other claims.
Date: January 4, 2019
/s/ Brian R. Martinotti___________
HON. BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE
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