Carson Optical, Inc. v. eBay Inc.

Filing 19

ORDER. For the reasons provided in the annexed memorandum and order, defendant's motion to dismiss is GRANTED in part and DENIED in part. Plaintiff has plausibly alleged that defendant induced infringement of the '729 patent and the '601 patent. Plaintiff has not, however, plausibly alleged an unfair competition claim. Plaintiff's unfair competition claim is therefore dismissed with prejudice. Ordered by Judge Kiyo A. Matsumoto on 8/17/2016. (Jacobson, Jonathan)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
CARSON OPTICAL INC.,
Plaintiff,
MEMORANDUM & ORDER
15-CV-3793 (KAM)(SIL)

-againstEBAY INC.,
Defendant.
----------------------------------X

MATSUMOTO, United States District Judge:
Plaintiff Carson Optical Inc. (“plaintiff”) brought this
patent infringement action against online marketplace eBay Inc.
(“defendant”), claiming that defendant has induced infringement by
permitting items that allegedly infringe plaintiff’s patents to be
sold on defendant’s website. Plaintiff also asserts an unfair
competition claim under New York state law. Defendant has moved to
dismiss the operative Amended Complaint for failure to state a
claim. For the reasons that follow, defendant’s motion is GRANTED
in part and DENIED in part.
BACKGROUND
The following facts derive from the Amended Complaint.
(ECF

No.

15,

Amended

Complaint

(“Compl.”).)

All

well-pleaded

allegations are taken as true, and all reasonable inferences are
drawn in favor of the plaintiff, for purposes of deciding the
1

instant motion to dismiss. See Roth v. Jennings, 489 F.3d 499, 501
(2d Cir. 2007).
I.

The Parties
Plaintiff markets and sells optical products, and owns,

by assignment, the two patents at issue in this action. (Compl. at
1-2. 1) The first of plaintiff’s patents, U.S. Patent No. 6,116,729
(the “‘729 patent”), is directed to a “head magnifying glass.”
(Id. at 2, 8, 10-11; see also id., Exs. A, C.) The second patent,
U.S. Patent No. 6,215,601 (the “‘601 patent”), “is directed to a
head belt for a head magnifying glass.” (Id. at 2, 16, 18-20; see
also id., Exs. B-C.) The inventions claimed by the patents are
embodied in plaintiff’s “MagniVisor Deluxe” product, which is
essentially a head visor with an attached magnifying lens and a
light. (Id. at 2-3; see also id., Exs. A-C.) Plaintiff alleges
that the MagniVisor Deluxe “has been well received by the consuming
public, and it has become a commercial success, leading to rampant
illegal

copying

by

Chinese

manufacture[r]s

of

the

claimed

inventions.” (Id. at 3.)
Defendant is an e-commerce company that runs one of the
“world’s largest online marketplaces.” (Id.) Plaintiff does not

1

Because plaintiff has mistakenly repeated some of the paragraph numbers in
the complaint, the court refers to the page numbers in the complaint rather
than to individual paragraphs.

2

allege that defendant ever takes possession of or sells the items
offered for sale on its website. Instead, defendant’s website
provides a medium to connect individual buyers and sellers, and
defendant provides a wide range of service that facilitate the
sale and purchase of items on its website (Id. at 3-6.) For
example,

defendant

offers

vendors

a

service

called

“eBay

University,” which furnishes vendors with tips on how to improve
sales. (Id. at 4.) Additionally, defendant “provides vendors with
techniques and means to ensure that vendors receive payment” for
items sold on its website. (Id. at 6.) Defendant generates revenue
with a “complex system of fees for services, listing product
features, and a Final Value Fee for sales proceeds received by
sellers.” (Id. at 3.) At any given time, 800 million items are
listed

on

defendant’s

website,

which

has

an

annual

revenue

exceeding $17.9 billion. (Id.)
Defendant

also

maintains

the

Verified

Rights

Owner

Program (“VeRO”), which permits “intellectual property owners [to]
easily report listings that infringe their rights.” (Id. at 6-7.)
VeRO procedures allow aggrieved intellectual property owners to
file online complaint forms, referred to as Notice of Claimed
Infringement (or “NOCI”) forms. (Id.)

3

II.

The Instant Dispute
Plaintiff alleges that at least as early as February 7,

2014,

after

discovering

that

numerous

items

available

on

defendant’s website infringed one or more claims of the ‘729 and
‘601

patents,

plaintiff

followed

defendant’s

VeRO

program

procedures by submitting NOCI forms. 2 (Id. at 7-8, 16.) Plaintiff
learned, however, that defendant would not remove a listing on its
website without a determination, either by a court or by the United
States

International

Trade

Commission,

that

the

listed

item

infringes one of plaintiff’s patents. (Id. at 7.) Because plaintiff
had not obtained such an order, defendant refused to remove the
allegedly

infringing

listings.

(Id.)

Plaintiff

contends

that

defendant, besides refusing to “remove or cancel listings of
infringing products,” further refused “to even evaluate whether
the listings of infringing products are inappropriate under its
own published policies.” (Id. at 15, 23-24.)
On

June

29,

2015,

plaintiff

commenced

this

action

against defendant, asserting three claims. (ECF No. 1.) Plaintiff
subsequently

amended

its

complaint.

(Compl.)

First,

plaintiff

alleges that defendant induced infringement of the ‘729 patent.

2

In support of its motion to dismiss, defendant attached NOCI letters referred
to by plaintiff in its complaint. They are dated December 30, 2013 and May 19,
2015. (ECF No. 17, Exs. 2-3.)

4

(Id. at 8-16.) Second, plaintiff alleges that defendant induced
infringement of the ‘601 patent. (Id. at 16-24.) Third, plaintiff
alleges that defendant’s actions constitute unfair competition
under New York law. (Id. at 25-26.)
Defendant subsequently moved to dismiss the complaint
and filed a memorandum in support of its motion. (ECF No. 17, Ex.
9, Defendant’s Memorandum in Support of Defendant’s Motion to
Dismiss (“Def. Mem.”).) Plaintiff filed a memorandum in opposition
to defendant’s motion, to which defendant replied. (ECF No. 17,
Ex. 10, Plaintiff’s Memorandum in Opposition to Defendant’s Motion
to Dismiss (“Pl. Opp’n”); ECF No. 17, Ex. 11, Defendant’s Reply in
Support of Defendant’s Motion to Dismiss (“Def. Reply”).)
LEGAL STANDARD
As noted earlier, on a motion to dismiss all well-pleaded
factual allegations in the complaint are taken as true and all
inferences are drawn in the plaintiff’s favor. See Mills v. Polar
Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). A complaint
must contain “a short and plain statement of the claim showing
that the pleader is entitled to relief, in order to give the
defendant fair notice of what the . . . claim is and the grounds
upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007) (internal quotation marks and citation omitted). The
5

complaint must provide “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) (internal quotation
marks

and

citation

omitted).

“[A]

well-pleaded

complaint

may

proceed even if it strikes a savvy judge that actual proof of those
facts is improbable, and that a recovery is very remote and
unlikely.” Twombly, 550 U.S. at 556 (internal quotation marks and
citation omitted).
Although
action,

the

Federal

Federal

Circuit

Circuit

law

applies

governs

regional

much
circuit

of

this

law

in

evaluating whether a complaint states a claim upon which relief
can be granted. See In re Bill of Lading Transmission & Processing
Sys. Patent Litig., 681 F.3d 1323, 1331 (Fed. Cir. 2012) (“Because
it raises a purely procedural issue, an appeal from an order
granting a motion to dismiss for failure to state a claim upon
which relief can be granted is reviewed under the applicable law
of the regional circuit.” (citation omitted)).
DISCUSSION
I.

Inducement
The Federal Patent Act, as relevant in this action,

provides for two forms of liability: direct infringement and
inducement to infringe. See 35 U.S.C. § 271 (“§ 271”). Plaintiff
6

does not allege that defendant is liable for direct infringement,
which is governed by § 271(a). 3 Instead, plaintiff alleges that
defendant induced infringement within the meaning of § 271(b),
which

provides

infringement
§ 271(b).

of

in
a

Induced

relevant
patent

part:

shall

infringement,

be

“Whoever
liable

unlike

actively
as

an

direct

induces

infringer.”

infringement,

requires a particular mental state. See Commil USA, LLC v. Cisco
Sys., Inc., 135 S. Ct. 1920, 1926 (2015).
To state a claim for induced infringement, a plaintiff
must plausibly allege that the defendant: (1) had knowledge of the
patent-in-suit; (2) knew the induced acts were infringing; and (3)
specifically intended to encourage another’s infringement. See id.
(“[I]nduced infringement . . . requires knowledge of the patent in
suit

and

knowledge

of

patent

infringement.”);

Global-Tech

Appliances, Inc. v. SEB S.A., 563 U.S. 754, 766 (2011) (“[I]nduced
infringement under § 271(b) requires knowledge that the induced
acts constitute patent infringement.”); Bill of Lading, 681 F.3d
at

1339

(“[I]nducement

requires

that

the

alleged

infringer

3 Section 271(a) provides: “Except as otherwise provided in this title, 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.” Direct
infringement is a strict-liability offense, and therefore has no mental state
requirement. See Commil USA, LLC v. Cisco Sys., Inc., 135 S. Ct. 1920, 1926
(2015).

7

knowingly induced infringement and possessed specific intent to
encourage another’s infringement.” (internal quotation marks and
citation omitted)); see also Addiction & Detoxification Inst.
L.L.C. v. Carpenter, 620 F. App’x 934, 938 (Fed. Cir. 2015)
(applying Commil and Global-Tech — both post-trial decisions — at
the pleading stage). Further, “inducement liability may arise if,
but only if, [there is] . . . direct infringement” by another
party. Limelight Networks, Inc. v. Akamai Techs., Inc., 134 S. Ct.
2111, 2117 (2014) (citation omitted); see also Philippi-Hagenbuch,
Inc. v. W. Tech. Servs. Int’l, Inc., No. 12-CV-1099, 2015 WL
5785574, at *2 (C.D. Ill. Oct. 2, 2015) (“[T]here can be no
inducing

infringement

without

direct

infringement

by

another

party.” (citing Limelight, 134 S. Ct. at 2115-17)).
The

Global-Tech

Court

held

that

the

knowledge

requirement for liability under § 271(b) could be met by a finding
of willful blindness. See 563 U.S. at 766-71. Willful blindness
has “two basic requirements: (1) the defendant must subjectively
believe that there is a high probability that a fact exists and
(2) the defendant must take deliberate actions to avoid learning
of that fact.” Id. at 769 (citations omitted). The Court contrasted
the

willfully

reckless

blind

defendant,

(and
who

therefore
“merely
8

liable)

knows

of

defendant
a

with

substantial

a

and

unjustified risk” of wrongdoing, and the negligent defendant, who
“should have known of a similar risk but, in fact, did not.” Id.
at 769-70. Neither recklessness nor negligence would satisfy the
knowledge requirement for liability under § 271(b). Id.
In evaluating intent, “direct evidence is not required;
rather,

circumstantial

evidence

may

suffice.”

MEMC

Elec.

Materials, Inc. v. Mitsubishi Materials Silicon Corp., 420 F.3d
1369, 1378 (Fed. Cir. 2005) (internal quotation marks and citation
omitted); Water Techs. Corp. v. Calco, Ltd., 850 F.2d 660, 669
(Fed. Cir. 1988) (“The requisite intent to induce infringement may
be inferred from all of the circumstances.”).
Because

plaintiff’s

claims

regarding

inducing

infringement are functionally identical for both the ‘729 and ‘601
patents (compare Compl. at 8-16, with id. at 16-24), the court
does not distinguish between the two patents for purposes of this
analysis unless otherwise noted.
A.

Allegations of Defendant’s Knowledge of the Patents-inSuit
Defendant

does

not

appear

to

dispute

that

it

had

knowledge of the patents-in-suit at least as early as February 7,
2014, the date defendant claims it received plaintiff’s first NOCI
pursuant to defendant’s VeRO program. (See id. at 8 (“Since at
least February 7, 2014, eBay has been on notice that . . . Carson
9

was the owner of the 729 patent . . . .”); id. at 16 (“Since at
least February 7, 2014, eBay has been on notice that . . . Carson
was the owner of the 601 patent.”); Def. Mem. at 5-6 & n.3.)
Moreover, even absent defendant’s NOCI procedures, the filing of
a federal complaint identifying the patents-in-suit satisfies the
requirement that a plaintiff plead a defendant’s knowledge of the
patents-in-suit. See Smartwater, Ltd. v. Applied DNA Scis., Inc.,
No. 12-CV-5731, 2013 WL 5440599, at *8 (E.D.N.Y. Sept. 27, 2013)
(recognizing that a defendant’s knowledge of the patents prior to
the filing of a federal complaint is “not essential to a claim of
induced infringement”); see also SoftView L.L.C. v. Apple Inc.,
No. 10-CV-389, 2012 WL 3061027, at *7 (D. Del. July 26, 2012)
(“[T]he 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.”); MyMedicalRecords,
Inc. v. Jardogs, LLC, 1 F. Supp. 3d 1020, 1022 (C.D. Cal. 2014)
(“[A] plaintiff may establish a defendant’s knowledge of the
patents-in-suit based on the filing of a previous complaint.”).
B.

Allegations of Underlying Direct Infringement
Neither

does

defendant

dispute

that

plaintiff

has

adequately alleged underlying direct infringement by non-party
eBay merchants of the two relevant patents, as required to state
10

a claim for inducing infringement. See Bill of Lading, 681 F.3d at
1336 (“To state a claim for indirect infringement . . . a plaintiff
need not identify a specific direct infringer if it pleads facts
sufficient to allow an inference that at least one direct infringer
exists.” (emphasis in original)); Paone v. Broadcom Corp., No. 15CV-596, 2015 WL 4988279, at *13 (E.D.N.Y. Aug. 19, 2015) (“As an
initial matter, plaintiff’s indirect infringement claims require
an allegation that an underlying act of direct infringement took
place. Plaintiff’s allegations that the ‘end users’ of defendants’
accused products infringe the ′789 patent are sufficient.”). Here,
plaintiff’s
allegedly

provision

infringing

in

the

items

Amended

available

Complaint
for

sale

of
on

a

list

of

defendant’s

website is sufficient to establish the direct infringement by eBay
merchants necessary for plaintiff’s induced infringement claims
against defendant to survive a motion to dismiss. (Compl. at 813, 17-21.)
Defendant

primarily

argues

that

plaintiff

has

insufficiently pled: (1) that defendant knew the induced acts were
infringing and (2) that defendant possessed specific intent to
encourage

another’s

infringement.

arguments in turn.

11

The

court

addresses

these

C.

Allegations of Defendant’s Knowledge That the Induced
Acts Constituted Infringement
To state a claim for inducing infringement, plaintiff

must plausibly allege that the defendant knew that the induced
acts were infringing. See Commil, 135 S. Ct. at 1928. The knowledge
requirement can be met by either (1) actual knowledge or (2)
willful blindness. See Global-Tech, 563 U.S. at 766. Plaintiff
alleges that defendant actually knew that the induced acts were
infringing or, alternatively, that defendant was willfully blind.
(Compl. at 7.) Defendant contends that plaintiff’s complaint is
inadequate

under

plaintiff’s
allegedly

either

allegation
infringing

theory.
of

acts

The

court

defendant’s
by

merchants

first

actual
and

addresses

knowledge
then

turns

of
to

plaintiff’s alternative allegation regarding defendant’s willful
blindness.
i.

Actual Knowledge

Defendant first argues insufficient facts were pled to
state a claim that defendant had actual knowledge that the induced
acts constituted infringement. The court agrees.
Plaintiff’s

generalized

allegation

that

defendant

actually knew that the induced acts constituted infringement is
fundamentally flawed because it is inconsistent with the specific
factual

allegations

supporting
12

plaintiff’s

contention

that

defendant was willfully blind. Plaintiff alleges that defendant
had actual knowledge (e.g., id.) but simultaneously alleges with
a notable degree of specificity that defendant “explicitly refused
to

evaluate

the

issues

of

patent

infringement

presented”

by

plaintiff. (Id. (emphasis added); see also id. at 15 (allegation
that defendant “[k]knowingly refus[ed] to even evaluate whether
the listings or infringing products are inappropriate under its
own

published

policies”);

id.

at

23-24

(same).)

Although

a

defendant is permitted to plead alternative theories of liability,
“[w]here plaintiff’s own pleadings are internally inconsistent, a
court

is

neither

obligated

to

reconcile

nor

accept

the

contradictory allegations in the pleadings as true in deciding a
motion to dismiss.” See U.S. Bank Nat’l Ass’n v. Bank of Am., N.A.,
No. 12–CV–4873, 2012 WL 6136017, at *7 (S.D.N.Y. Dec. 11, 2012)
(internal quotation marks and citation omitted); Spiteri v. Russo,
No. 12-CV-2780, 2013 WL 4806960, at *8 (E.D.N.Y. Sept. 7, 2013)
(“Where

an

allegation

allegations,

or

contradicted

by

where
other

in

the
the

complaint
plaintiff’s

matters

asserted

conflicts
own
or

with

other

pleadings
relied

upon

are
or

incorporated by reference by a plaintiff in drafting the complaint,
the court is neither obligated to reconcile the pleadings with the
other matter nor accept the allegation in the pleadings as true in
13

deciding a motion to dismiss.” (internal quotation marks and
citation omitted)), aff’d sub nom. Spiteri v. Camacho, 622 F. App’x
9 (2d Cir. 2015). Further, specific allegations that directly
contradict general allegations will generally control. See Hirsch
v. Arthur Andersen & Co., 72 F.3d 1085, 1095 (2d Cir. 1995)
(affirming dismissal of a complaint where “attenuated allegations”
supporting

claim

were

“contradicted . . .

by

more

specific

allegations in the complaint”).
Any generalized allegation that defendant had actual
knowledge
undercut

that
by

the

induced

plaintiff’s

acts

far

constituted

more

specific

infringement
allegation

is

that

defendant explicitly refused to evaluate plaintiff’s claims of
patent

infringement

by

merchants

selling

products

on

eBay.

Accordingly, plaintiff has inadequately pled that defendant had
actual knowledge that the induced acts constituted infringement.
ii.
On

Willful Blindness
the

other

hand,

plaintiff’s

induced

infringement

claims may still survive if plaintiff can adequately plead that
defendant was willfully blind. See Global-Tech, 563 U.S. at 768
(“Given

the

long

history

of

willful

blindness

and

its

wide

acceptance in the Federal Judiciary, we can see no reason why the
doctrine should not apply in civil lawsuits for induced patent
14

infringement under 35 U.S.C. § 271(b).”). As noted above, willful
blindness requires that the “alleged inducer (1) subjectively
believe that there is a high probability that a fact exists and
(2) take deliberate actions to avoid learning of that fact.” InfoHold, Inc. v. Muzak LLC, 783 F.3d 1365, 1373 (Fed. Cir. 2015)
(citing

Global-Tech,

563

U.S.

at

769).

Here,

plaintiff

has

adequately pled that defendant was willfully blind.
(a)

Subjective Belief of a High Probability a Fact
Exists

As to the first requirement, accepting the allegations
in the complaint as true, plaintiff has sufficiently alleged that
defendant subjectively believed there was a high probability of
infringement, at least by the time the complaint in this action
was

filed.

The

complaint

attached

as

exhibits

the

patents

themselves (Compl., Exs. A-B) and provided detailed illustrations
and

photographs

of

both

the

patented

inventions

and

certain

allegedly infringing items. (Id., Exs. A-C; see also id. at 9-10,
12, 18-19, 21.) The complaint also provided thorough descriptions
of both patents (id. at 2-3, 8, 11, 16, 19-20) and a long list of
the allegedly infringing products. (Id. at 8-10, 17-18). The
complaint

also

alleged

that,

before

filing

the

complaint,

plaintiff followed defendant’s procedures for providing notice of
allegedly

infringing

products

and
15

engaged

in

more

informal

communication with defendant regarding the allegedly infringing
products. (Id. at 7-8, 16.)
At the pleading stage, the court concludes that the
above-described allegations regarding subjective knowledge of a
high probability of infringement are sufficient. In Alibaba.com
Hong Kong L.T.D. v. P.S. Products, Inc., No. 10-CV-4457, 2012 WL
1668896, at *3-4 (N.D. Cal. May 11, 2012), the court denied summary
judgment to an online marketplace similar to defendant called
Alibaba 4 on induced infringement claims where disputed issues of
fact existed. In Alibaba, the plaintiff was the inventor and owner
of design patents related to stun guns. Id. at *1. The plaintiff
discovered allegedly infringing stun guns for sale on Alibaba’s
website. Id. at *2. The plaintiff sent Alibaba a letter advising
that the stun guns on Alibaba’s website infringed its patents and
included copies of the patents in the letter. Id. at *2. The record
did not reveal when the allegedly infringing products were removed
from Alibaba’s website. Id. The plaintiff subsequently noticed 29
additional infringing products on the website, but did not give

4 See Michael L. Rustad et. al., Destined to Collide? Social Media Contracts in
the U.S. and China, 37 U. Pa. J. Int’l L. 647, 671 (2015) (referring to Alibaba
as “China’s eBay equivalent”); see also Esther A. Zuccaro, Gucci v. Alibaba: A
Balanced Approach to Secondary Liability for E-Commerce Platforms, 17 N.C.J.L.
& Tech. On. 144, 149 (2016) (“Alibaba offers services on its platforms
conceptualized as a mix of eBay’s user-generated listings and Amazon’s wide
product availability . . . .” (citations omitted)).

16

Alibaba notice of those products until filing suit. Id. Alibaba
took down the additional 29 products two days after the action was
filed. Id.
The plaintiff brought direct infringement and induced
infringement claims against Alibaba. Id. at *1, 3-4. The court
held

that

the

plaintiff’s

induced

infringement

claims

could

survive summary judgment because
[t]here is a genuine factual dispute as to whether
Alibaba took deliberate actions to avoid learning of
infringement. The record shows that [plaintiff] sent
Alibaba a notice of infringement in January 2010. It is
unclear
when
Alibaba
took
down
those
allegedly
infringing items. Construing the facts in a light
favorable to [plaintiff], a reasonable jury could find
that Alibaba induced infringement by deliberately
maintaining the allegedly infringing item on its website
for an unduly long period.
Id. at *3. 5
The facts alleged in the complaint here are similar to
the facts in Alibaba. Like the Alibaba plaintiff, the plaintiff
here

notified

the

online

marketplace

defendant

eBay

in

its

complaint in this action that its website offered specific items
that infringed its patents. (Compare Alibaba, 2012 WL 1668896, at
*2, with Compl. at 7-8, 16.) In Alibaba, as here, the plaintiff

5

The Alibaba court also refused to grant summary judgment against the
plaintiff’s direct inducement claims because there was “a factual dispute as to
whether a reasonable buyer” on defendant’s website would have believe that the
defendant itself “was making an offer to sell the allegedly infringing
products.” 2012 WL 1668896, at *3.

17

provided copies of the patent to the defendant. (Compare Alibaba,
2012 WL 1668896, at *2, with Compl., Exs. A-B and Def. Mem. at 910 & n.6.) Finally, whereas in Alibaba there was a factual dispute
regarding when certain allegedly infringing items were removed
from the website by Alibaba (see Alibaba, 2012 WL 1668896, at *3),
the defendant here appears to admit that it did not remove the
allegedly infringing items. (See Compl. at 15, 23 (alleging that
defendant refused to remove infringing products); see also Def.
Mem. at 7 (“eBay was not in a position . . . to remove th[e]
listings.”).) 6
Defendant

first

argues

that

because

it

never

takes

possession of any of the approximately 800 million items offered
on eBay, including the accused items, and because defendant is not
skilled in the relevant art, defendant “has no basis to form a
subjective

belief

of

any

sort

about

the

likelihood

of

the

infringing nature of the accused products.” (Def. Mem. at 18-19.)
If accepted, defendant’s argument that possession of an allegedly
infringing item is necessary for indirect infringement liability
to attach would effectively render defendant immune from liability

6

The Alibaba court did not explicitly address whether the online marketplace
defendant subjectively believed that there was a high probability of
infringement based solely on allegations that the plaintiff sent the defendant
a letter alleging infringement and included copies of the patent in the letter.
Id. at *2-3. Instead, the Alibaba court found a genuine factual dispute as to
whether Alibaba took deliberate acts to avoid learning of infringement. Id.

18

for induced infringement merely because it never takes possession
of any of the products available on its website. The court is
reluctant to adopt such an application of § 271(b). See 5–17 Donald
S. Chisum, Chisum On Patents § 17.04[4] (2016) (“The Section 271(b)
prohibition on active inducement of infringement covers a wide
variety of acts.”); Metro-Goldwyn-Mayer Studios Inc. v. Grokster,
Ltd., 545 U.S. 913, 936 (2005) (collecting cases demonstrating the
very broad range of activities that can lead to liability for
inducing patent infringement).
Defendant next contends that it is not a person of
ordinary skill in the relevant art. The court recognizes that in
certain circumstances, where the “technology is simple and easily
understandable, the level of ordinary skill in the art [can be]
that of an ordinary layman of average intelligence.” Ball Aerosol
& Specialty Container, Inc. v. Ltd. Brands, Inc., 555 F.3d 984,
992

(Fed.

Cir.

2009)

(internal

quotation

marks

and

citation

omitted); see also Union Carbide Corp. v. Am. Can Co., 724 F.2d
1567, 1573 (Fed. Cir. 1984) (“[A]ppellant’s invention [is] easily
understandable
testimony.”). 7

without
Defendant’s

the

need

for

contentions

7

expert

regarding

explanatory
its

lack

of

In the distinct design patent context, the Federal Circuit has permitted
courts evaluating infringement allegations to employ a side-by-side analysis
between a plaintiff’s patent and photographs of the defendant’s allegedly

19

ordinary skill and its own inability to compare the plaintiff’s
protected patents against the allegedly infringing items on its
eBay website raise issues beyond the scope of the pleadings.
Here,

plaintiff

initially

notified

defendant

of

its

patents and its “belief” that vendors in the eBay marketplace
offered infringing products when it submitted NOCI forms under
eBay’s VeRO program. The letters are dated December 30, 2013 and
May 19, 2015. (ECF No. 17, Exs. 2-3.) Plaintiff also notified
defendant of the alleged infringement (and provided copies of the
patents) by serving its complaints in this action. Thus, the court
finds

that

plaintiff

subjectively
plaintiff’s

has

believed
patents

sufficiently

there

were

was

infringed

a

alleged
high

by

that

defendant

probability

the

items

that

listed

on

defendant’s online marketplace. See Ill. Tool Works, Inc. v. MOC
Prods. Co., 856 F. Supp. 2d 1156, 1168 (S.D. Cal. 2012) (“Had
[plaintiff] indicated to [defendant] at any point that it believed
[defendant’s]

product

infringed

the

′638

Patent,

this

would

suggest that [defendant] — at a minimum — ‘subjectively believe[d]

infringing design. See Anderson v. Kimberly-Clark Corp., 570 F. App’x 927, 932
(Fed. Cir. 2014) (“We also find no error in the court’s consideration of the
photographs of the accused . . . products. . . . Determining infringement of a
design patent requires comparing the drawings of the patented design to the
appearance of the accused products, and the photographs are visual
representations of those products.”).

20

that

there

[wa]s

a

high

probability’

that

its

product

was

infringing.” (quoting Global-Tech, 563 U.S. at 769)).
(b)

Deliberate Actions to Avoid Learning of a Fact

As to the second requirement for willful blindness —
deliberate actions taken to avoid learning of a fact — plaintiff
has alleged that defendant actively refused (despite plaintiff’s
requests) adequately to evaluate plaintiff’s complaints of patent
infringement.

According

to

the

complaint,

defendant

publicly

proclaims that it does not “allow replicas, counterfeit items, or
unauthorized copies to be listed” and ensures through its VeRO
program

that

“intellectual

property

owners

can

easily

report

listings that infringe their rights.” (Compl. at 6.) Plaintiff
alleges, however, that defendant:
•

“has explicitly stated that it will not even evaluate the
issues of patent infringement presented by [plaintiff]”
(Compl. at 7);

•

“[k]knowingly refus[ed] to even evaluate whether the listings
of infringing products are inappropriate under its own
published policies . . .” (id. at 15, 23-24); and

•

“[k]knowingly refus[ed] to even evaluate [plaintiff’s]
notices and complaints of patent infringement.” (Id. at 15,
23-24.)

Ignoring accusations of patent infringement after affirmatively
vowing

to

look

into

such

allegations

can

suggest

willful

infringement. See Info-Hold, 783 F.3d at 1373 (finding allegation
21

that defendant’s unfulfilled promise to “look again” at a patent
after

plaintiff

infringement

raised

sufficient

questions
to

raise

about
an

the

issue

of

possibility
material

of
fact

regarding willful blindness); see also Script Sec. Sols. L.L.C. v.
Amazon.com, Inc., No. 15-CV-1030, 2016 WL 1055827, at *7 (E.D.
Tex. Mar. 17, 2016) (“Taking all inferences in [plaintiff’s] favor,
it has pleaded that the defendant took an affirmative action to
avoid gaining knowledge of the patents in suit — ignoring all
patents as a matter of policy.”). Here, plaintiff complains not
that

defendant

promised

to

investigate

allegations

of

patent

infringement, but, instead, that defendant has refused to evaluate
reports of infringement under defendant’s VeRO program.
Further, plaintiff alleges that even after notifying
defendant that infringing products were available for sale on its
website, defendant “[k]nowingly refus[ed] to remove or cancel
listings of infringing products . . . thereby . . . encouraging,
aiding, abetting and/or inducing infringing sales.” (Compl. at 15;
see also id. (alleging that defendant refused to “suspend” or
“remove” the infringing vendors’ “selling privileges”).) In a
nearly factually analogous setting, the Alibaba court determined
that

notices

of

infringement

sent

to

an

online

marketplace

defendant, coupled with a lack of clarity about when the online
22

marketplace “took down th[e] allegedly infringing items,” could
lead

a

reasonable

jury

to

find

that

the

defendant

induced

infringement by “deliberately maintaining the allegedly infringing
item on its website for an unduly long period.” 2012 WL 1668896,
at *3. Here, plaintiff appears to allege, and defendant does not
dispute, that defendant never took down the allegedly infringing
listings. (Compl. at 15, 23.) Accordingly, the court finds that
plaintiff has plausibly pled that defendant was willfully blind.
Before

turning

to

the

adequacy

of

plaintiff’s

allegations regarding specific intent, however, the court must
resolve a significant question raised by the parties: whether
defendant’s failure to obtain the advice of counsel is relevant to
whether defendant had the requisite knowledge for liability under
§ 271(b).
iii. Advice of Counsel
The parties dispute the applicability of 35 U.S.C. § 298
to the instant proceedings. Section 298 provides that
[t]he failure of an infringer to obtain the advice of
counsel with respect to any allegedly infringed patent,
or the failure of the infringer to present such advice
to the court or jury, may not be used to prove that the
accused infringer willfully infringed the patent or that
the infringer intended to induce infringement of the
patent.

23

The provision, if applicable, would therefore preclude plaintiff
from arguing that defendant’s failure to obtain the advice of
counsel is germane to whether defendant induced infringement. The
parties’ dispute is not about the substantive language of § 298,
but instead concerns whether the recently enacted provision is
even applicable to the instant action. A brief legislative history
regarding the passage and subsequent amendment of § 298 resolves
the dispute.
Before

§ 298

was

enacted,

evidence

regarding

a

defendant’s failure to obtain counsel regarding asserted patents
was admissible at trial. See Broadcom Corp. v. Qualcomm Inc., 543
F.3d

683,

699

(Fed.

Cir.

2008)

(“Because

opinion-of-counsel

evidence, along with other factors, may reflect whether the accused
infringer ‘knew or should have known’ that its actions would cause
another to directly infringe, we hold that such evidence remains
relevant to the second prong of the intent analysis [for inducing
infringement].”). When the Leahy-Smith America Invents Act, Pub.
L. No. 112-29, 125 Stat. 284 (2011) (the “AIA”), was passed,
however, one of its provisions (Section 17, which became § 298),
legislatively abrogated the Federal Circuit’s Broadcom decision in
order “to protect attorney-client privilege and to reduce pressure
on accused infringers to obtain opinions of counsel for litigation
24

purposes.” H.R. Rep. No. 112-98, at 53 (2011) (“Section 298 applies
to findings of both willfulness and intent to induce infringement
– and thus legislatively abrogates the Federal Circuit’s decision
in Broadcom Corp. v. Qualcomm Inc.”). 8
When Congress passed the AIA, § 298 lacked a specific
effective date. Its effective date was therefore governed by the
AIA’s default effective date, which specified that provisions in
the AIA without explicit effective dates would “take effect upon
the expiration of the 1-year period beginning on the date of the
enactment of this Act and shall apply to any patent issued on or
after that effective date.” See AIA, § 35. Because the AIA passed
on September 16, 2011 (and became effective one year later, on
September 16, 2012), § 298 applied on a patent-by-patent (rather
than action-by-action) basis only to patents issued on or after
September 16, 2012.
Courts accordingly refused to apply § 298 where the
patents-in-suit

were

issued

before

September

16,

2012.

See

Suprema, Inc. v. Int’l Trade Comm’n, 626 F. App’x 273, 282 (Fed.
Cir. 2015) (“Because the AIA only applies to patents issued on or

8

Then-Senator John Kyl stated during a hearing that permitting “adverse
inferences from a failure to procure an opinion or waive privilege . . . feeds
the cottage industry of providing such opinions – an industry that is founded
on an unhealthy relationship between clients and counsel and which amounts to
a deadweight loss to the patent system.” 157 Cong. Rec. S1374 (daily ed. Mar.
8, 2011) (statement of Sen. Kyl).

25

after September 16, 2012, and the ′344 and ′562 patents issued in
2007, [§ 298] does not control here.”). Because a single action
might

involve

commentators

multiple
recognized

patents,
that

as

§ 298

the

instant

could

action

generate

does,

complex

litigation problems. See Joe Matal, A Guide to the Legislative
History of the America Invents Act: Part II of II, 21 Fed. Cir. B.
J. 539, 590 (2012) (“[U]nless this matter is remedied in subsequent
legislation, the applicability of § 298 of title 35 will depend
not on when the lawsuit in which § 298 is sought to be applied was
filed, but rather on when the patent in suit was issued.”); Edward
D. Manzo, America Invents Act: A Guide to Patent Litigation and
Patent Procedure § 10:4 (2015) (“As originally enacted, AIA § 35
made AIA § 17 applicable to all patents granted on or after
September 16, 2012 (and inapplicable to patents granted before
then). It makes more sense for § 17 to apply to all civil actions
filed on or after September 16, 2012. Placing restrictions on the
failure to obtain or present the advice of counsel on a per patent
basis introduces new complexities in patent litigation, where a
number of patents are often alleged to be infringed in any given
case.” (emphasis in original)).
In response to various concerns about the AIA including
the apprehensions discussed above regarding the effective date of
26

§ 298, see Novartis AG v. Lee, 740 F.3d 593, 599-600 (Fed. Cir.
2014) (discussing an unrelated drafting error in the AIA), Congress
ultimately

passed

a

technical

corrections

bill:

Leahy-Smith

America Invents Technical Corrections, Pub. L. No. 112-274, 126
Stat. 2456 (2013). The new law, enacted on January 14, 2013,
explicitly addressed the application of § 298: “[n]otwithstanding
section 35 of the [AIA], section 298 of title 35, United States
Code, shall apply to any civil action commenced on or after the
date of the enactment of this Act.” Pub. L. No. 112-274, § 1(a)
(emphasis

added);

see

also

id.

§ 1(n)

(“Except

as

otherwise

provided in this Act, the amendments made by this Act shall take
effect on the date of enactment of this Act, and shall apply to
proceedings commenced on or after such date of enactment.”). The
technical corrections explicitly overrode the prior effective date
of § 298 under the AIA, and require that § 298 be applied to all
civil actions commenced on or after January 14, 2013 regardless of
when the patents-in-suit were issued. 9 See Carnegie Mellon Univ.

9

The view that the amendments overrode the prior effective date of § 298 is
further underscored by the very limited legislative history regarding § 298.
For example, Representative John Conyers explained that H.R. 6621, 112th Cong.
(2011-2012), which in relevant part mirrors the final Leahy-Smith America
Invents Technical Corrections, “clarifies that the Advice of Counsel section
applies to civil actions commenced on or after the date of this legislation’s
enactment.” 158 Cong. Rec. H6843 (daily ed. Dec. 18, 2012) (statement of Rep.
Conyers). Rep. Conyers noted that the amendment addressing § 298 was intended
to simplify problems that arose regarding the provision’s effective date in the
AIA. Id. Further, the Congressional Research Service summary of the bill
explained that it “[a]pplies, to any civil action commenced on or after

27

v. Marvell Tech. Grp., Ltd., No. 09-CV-290, 2013 WL 4511293, at *5
n.13 (W.D. Pa. Aug. 23, 2013) (holding that § 298 “applies to any
law suit commenced on or after January 14, 2013 without regard to
the issue date of the asserted patent”).
Accordingly, because this is a “civil action[] commenced
on or after” January 14, 2013, § 298 is applicable and plaintiff
may not rely on defendant’s failure to obtain a legal opinion
regarding infringement to establish inducement, notwithstanding
that the patents-in-suit were issued in 2000 (the ‘729 patent) and
2001 (the ‘601 patent). (Compl., Exs. A-B.) Plaintiff’s reliance
on Suprema (Pl. Opp’n at 13-14 & n.2) for the proposition that
§ 298 is inapplicable here is misplaced. As noted above, Suprema
declined to apply § 298 to patents issued in 2007 because “the AIA
only applies to patents issued on or after September 16, 2012.”
626 F. App’x at 282 n.2. First, although Suprema post-dated the
amendments to the AIA, Suprema addressed an International Trade
Commission proceeding that was commenced before January 14, 2013.
See id. at 276; see also Certain Biometric Scanning Devices,
Components Thereof, Associated Software, & Products Containing the

enactment of this Act, the AIA’s bar on using an accused infringer’s failure to
obtain the advice of counsel to prove that any infringement was willful or
induced. (Currently, the bar would not take effect until one year after the
AIA’s enactment.).” Congressional Research Service, Summary of Public Law 112274 (2013).

28

Same, Inv. No. 337-TA-730, USITC Pub. No. 4366 (June 17, 2011),
2011

WL

8883645,

at

*1

(“The

Commission

instituted

this

investigation on June 17, 2010 . . . .”)).
Second, an International Trade Commission proceeding is
not a “civil action” within the meaning of Pub. L. No. 112-274,
§ 1(a). See SSIH Equip. S.A. v. U.S. Int’l Trade Comm’n, 718 F.2d
365,

371

(Fed.

action’ . . .

Cir.

does

1983)

not

(“We

embrace

believe
the

[the

term]

proceedings

‘civil

before

the

[International Trade] Commission.”); see also 28 U.S.C. § 1659
(distinguishing between civil actions and proceedings before the
International
action

in

Trade

favor

of

Commission,
overlapping

and

permitting

ITC

stay

proceedings

in

of

civil

certain

circumstances). 10 Finally, Suprema was unpublished and therefore
non-precedential. See Symbol Techs., Inc. v. Lemelson Med., 277
F.3d 1361, 1366-68 (Fed. Cir. 2002) (declining even to consider
two prior unpublished, nonprecedential Federal Circuit opinions
over argument that the two opinions were binding authority); Fed.

10

It is not clear whether § 298 applies to ITC proceedings. For example, § 298
describes the consequences of a failure to present advice of counsel to “the
court or jury” (there are no juries in ITC proceedings) and Pub. L. No. 112274’s provision that § 298 “shall apply to any civil action commenced on or
after the date of the enactment of this Act” could be read to indicate that
§ 298 only applies to civil actions (and therefore not to ITC proceedings, see
SSIH Equip., 718 F.2d at 371).

29

Cir. R. 32.1(d) (“The court . . . will not give one of its own
nonprecedential dispositions the effect of binding precedent.”).
Accordingly, the court finds that § 298 applies to the
instant action and plaintiff may not rely on defendant’s failure
to seek the advice of counsel to establish infringement. 11
D.

Allegations of Specific Intent
The court turns next to the final pleading requirement

under

§ 271(b),

a

plausible

allegation

that

the

defendant

specifically intended to encourage another’s infringement. See DSU
Med. Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (en
banc in relevant part) (recognizing that intent can be established
by circumstantial evidence); Merck & Co. v. Danbury Pharmacal,
Inc., 873 F.2d 1418, 1422 (Fed. Cir. 1989) (“Intent need not, and
rarely can, be proven by direct evidence.”) “Evidence of active
steps . . .

taken

to

encourage

direct

infringement,

such

as

advertising an infringing use or instructing how to engage in an
infringing use, show an affirmative intent that the product be
used to infringe, and a showing that infringement was encouraged

11

To the extent, however, that defendant may rely on the advice of counsel to
establish that it did not induce infringement, at least one court has held that
§ 298’s protections would not apply. See Ultratec, Inc. v. Sorenson Commc’ns,
Inc., No. 13-CV-346, 2014 WL 4976596, at *2 (W.D. Wis. Oct. 3, 2014) (finding
that § 298’s protection “dissolves in the event defendant[] ‘open[s] the door’
by attempting to refute a claim of willful infringement by implying that they
relied on the advice of counsel”).

30

overcomes the law’s reluctance to find liability when a defendant
merely

sells

a

commercial

product

suitable

for

some

lawful

use . . . .” Grokster, 545 U.S. at 936 (internal quotation marks
and citations omitted).
Here,
plaintiff’s

assuming

complaint,

the

the

truth

complaint

of

the

has

allegations

adequately

in

alleged

defendant’s specific intent to infringe. As discussed above, the
complaint provides defendant with highly detailed descriptions and
depictions

of

the

patents-in-suit

and

also

the

allegedly

infringing items. (Compl. at 2-3, 8-12, 16, 18-21; see also id.,
Exs. A-C.) Further, the complaint alleges that defendant, despite
receiving notice of the alleged infringement (id. at 7-8, 16),
nevertheless

continued

(and

apparently

continues)

to

sell

infringing items. (Id. at 8, 15-16, 23.) At this early stage of
the litigation, the above-described allegations are sufficient to
sustain plaintiff’s claims. See Alibaba, 2012 WL 1668896, at *3
(denying motion for summary judgment on induced infringement claim
where online marketplace defendant merely received letter from
plaintiff alleging infringement (along with copies of the patents)
and

fact

issues

remained

regarding

when

defendant

removed

allegedly infringing listings); see also Paone, 2015 WL 4988279,
at *13 (“Plaintiff’s allegations that defendants knew of the
31

existence of the ′789 patent and continued to sell a product that
infringed it are sufficient to meet the intent requirement at the
pleading stage.” (citing Conair Corp. v. Jarden Corp., No. 13-CV6702, 2014 WL 3955172, at *3 (S.D.N.Y. Aug. 12, 2014)); see also
Conair, 2014 WL 3955172, at *3 (finding sufficient to survive
motion to dismiss plaintiff’s allegation that defendant “did not
stop manufacturing, importing, offering to sell, [or] selling” its
machines after plaintiff notified defendant of its patent and
indicated the specific infringing model numbers).
Defendant does not discuss Alibaba, but argues that
Paone and Conair are inapplicable for two reasons. First, defendant
argues that Paone and Conair improperly rely on Global-Tech rather
than

Commil.

(Def.

Reply

at

3-4.)

The

standard

for

inducing

infringement articulated by both cases, however, is the same.
Indeed, the Commil Court explicitly confirmed that it was merely
“reaffirm[ing] what the Court held in Global-Tech.” Commil, 135 S.
Ct. at 1926-28 (“[T]he Global–Tech rationale is sound.”). Both
cases

hold

that

liability

for

inducing

infringement

requires

knowledge of the patent and knowledge that the induced acts amount
to

patent

infringement.

Compare

Commil,

135

S.

Ct.

at

1926

(“[L]iability for induced infringement can only attach if the
defendant knew of the patent and knew as well that the induced
32

acts constitute patent infringement.” (internal quotation marks
and citation omitted)), with Global-Tech, 563 U.S. at 766 (holding
that “induced infringement under § 271(b) requires knowledge that
the induced acts constitute patent infringement”).
Second, defendant argues that the defendants in Paone
and Conair (and similar cases cited by plaintiff) “all made and
sold products that were allegedly used or combined in a directly
infringing manner” and therefore “had knowledge of how their
accused products, systems, or methods worked and were made.” (Def.
Reply at 4.) By contrast, defendant “does not make, use, sell, or
even take possession of the accused products.” (Id.) Defendant
cites no precedent holding that making, using, or selling products
accused

of

infringement

is

a

requirement

for

indirect

infringement. Making, using, or selling infringing products, in
fact, would lead to liability for direct infringement. See § 271(a)
(“[W]hoever 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.” (emphasis added)). As for
defendant’s
authority

argument
(and

the

regarding
court

possession,

can

33

find

none)

defendant

cites

establishing

no

that

possession of an allegedly infringing product is a prerequisite to
liability for inducing infringement.
E.

Defendant’s Further Objections
Defendant objects that it is practically impossible for

it to police patent infringement, given the 800 million items
available on its website at any given time. (Def. Reply at 7.)
Defendant argues that “[p]roof of judicially-ordered injunctive
relief or adjudication of patent infringement against a listed
product is necessary because, otherwise, eBay would be forced into
the untenable position of having to adjudicate patent infringement
claims in the abstract against countless products.” (Def. Mem. at
5.) Defendant further points to the Second Circuit’s decision in
Tiffany (NJ) Inc. v. eBay Inc., 600 F.3d 93, 103, 109, 112 (2d
Cir. 2010) (inter alia, upholding bench trial verdict in favor of
eBay on claims of direct trademark infringement, contributory
trademark infringement, and trademark dilution), as an “example of
a court’s seal of approval on eBay’s good faith efforts to combat
intellectual property infringement of all types.” (Def. Mem. at
24.)
The court recognizes defendant’s legitimate concerns. At
this stage of the proceedings, however, and granting all reasonable
inferences in plaintiff’s favor, the court is satisfied that
34

plaintiff has pled sufficient facts to survive a motion to dismiss.
See Bill of Lading, 681 F.3d at 1339 (“To survive Appellees’ motion
to

dismiss,

therefore,

[the

plaintiff-appellant’s]

amended

complaints must contain facts plausibly showing that Appellees
specifically intended their customers to infringe the ′078 patent
and knew that the customer’s acts constituted infringement. This
does not mean, however, that [the plaintiff-appellant] must prove
its case at the pleading stage.”); see also Twombly, 550 U.S. at
556 (“[A] well-pleaded complaint may proceed even if it strikes a
savvy judge that actual proof of those facts is improbable, and
that a recovery is very remote and unlikely.” (internal quotation
marks

and

citation

omitted)).

Although

the

Second

Circuit

validated defendant’s anti-fraud procedures in the context of
trademark infringement in Tiffany, the court did so only after a
week-long bench trial in which the parties presented evidence of
the nature of the trademark infringement allegations as well as
defendant’s anti-counterfeiting measures. See Tiffany, 600 F.3d at
96-101.
Further, in the only factually analogous case — which,
inexplicably, neither party cites or discusses — the Alibaba court
refused to grant summary judgment to online marketplace Alibaba on
either the plaintiff-patentee’s direct or induced infringement
35

allegations. See Alibaba, 2012 WL 1668896, at *3-4. The court
concludes

that

plaintiff’s

induced

infringement

allegations

regarding the ‘729 patent and the ‘601 patent are sufficient to
survive defendant’s motion to dismiss.
II.

Unfair Competition Claim
Plaintiff

additionally

brings

an

unfair

competition

claim 12 premised on “two separate sets of factual allegations.”
(Pl. Opp’n at 18; see also Compl. at 25-26.) First, plaintiff
alleges that defendant is “liable for unfair competition due to
their bad faith infringement in competition with [plaintiff’s]
competing product.” (Pl. Opp’n at 18.) Second, plaintiff alleges
that defendant is “liable for unfair competition because of their
unfair promulgation and non-adherence to the VeRO program.” (Id.)
Defendant argues that all of “the alleged conduct is tied to
alleged patent infringement, and is thus preempted by the Federal
Patent Act.” (Def. Mem. at 24-28; Def. Reply at 8-9.) Plaintiff
responds that
elements

because

above

and

unfair
beyond

competition
that

12

requires

required

to

“additional
show

patent

In the Amended Complaint, plaintiff styles the relevant count “UNFAIR AND
DECEPTIVE TRADE PRACTICES.” (Compl. at 25.) To the extent the Amended Complaint
could have been read to allege a violation of N.Y. Gen. Bus. Law § 349, which
governs deceptive trade practice claims in New York, plaintiff has abandoned
that claim. In its opposition brief, plaintiff explains that it brings only an
unfair competition claim under New York common law. (See Pl. Opp’n at 20
(characterizing claim as one for “unfair competition under the common law of
New York”).)

36

infringement, [the unfair competition claim] is not preempted.”
(Pl.

Opp’n

at

competition

20.)

claim

Plaintiff

is

about

also

argues

“commercial

that

immorality

its

unfair

and

unfair

misappropriation of the good will of those who respect intellectual
property, not patent infringement.” (Id. at 23.)
Under

the

Supremacy

Clause

of

the

United

States

Constitution, U.S. Const. art. VI, cl. 2, “state law that conflicts
with federal law is without effect.” Ultra-Precision Mfg., Ltd. v.
Ford Motor Co., 411 F.3d 1369, 1377 (Fed. Cir. 2005). The only
type of preemption at issue here is conflict preemption, which
occurs when state law “stands as an obstacle to the accomplishment
and execution of the full purposes and objectives of Congress.”
Aronson v. Quick Point Pencil Co., 440 U.S. 257, 262 (1979)
(internal quotation marks and citation omitted). In the patent
context, “[f]ederal patent law preempts a state law claim that
‘offer[s]

patent-like

protection

to

intellectual

property

inconsistent with the federal scheme.’” Carson Optical, Inc. v.
Prym Consumer USA, Inc., 11 F. Supp. 3d 317, 328 (E.D.N.Y. 2014)
(quoting Dow Chem. Co. v. Exxon Corp., 139 F.3d 1470, 1475 (Fed.
Cir. 1998)).
“Federal Circuit law governs whether federal patent law
preempts a state law claim.” Sorias v. Nat’l Cellular USA, Inc.,
37

124 F. Supp. 3d 244, 261 (E.D.N.Y. 2015) (internal quotation marks
and citation omitted). The preemption analysis focuses on the
allegedly tortious conduct of the defendant. See Hunter Douglas,
Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1335 (Fed. Cir.
1998), overruled in part on other grounds by Midwest Ind. Inc. v.
Karavan Trailers, Inc., 175 F.3d 1356, 1358-59 (Fed. Cir. 1999).
Under Hunter,
[i]f a plaintiff bases its tort action on conduct that
is protected or governed by federal patent law, then the
plaintiff may not invoke the state law remedy, which
must be preempted for conflict with federal patent
law. Conversely, if the conduct is not so protected or
governed, then the remedy is not preempted. This
approach, which considers whether a state law tort, ‘asapplied,’ conflicts with federal patent law, is
consistent with that employed by the Supreme Court in
cases involving preemption of state unfair competition
law.
Id. at 1336. The federal patent law will not preempt a state law
cause of action such as unfair competition if the state law claims:
(1) “include additional elements not found in the federal patent
law cause of action” and (2) “are not an impermissible attempt to
offer

patent-like

protection

to

subject

matter

addressed

by

federal law.” Rodime PLC v. Seagate Tech., Inc., 174 F.3d 1294,
1306 (Fed. Cir. 1999).
Two recent patent cases in this district illustrate
preemption principles in the context of New York unfair competition
38

and

patent

claims.

In

Sorias,

124

F.

Supp.

3d

at

262,

the

plaintiffs brought an unfair competition claim under New York law
that certain defendants argued was preempted by federal patent
law. Id. at 261-62. The plaintiffs in Sorias alleged, inter alia,
that: defendants were aware of the plaintiffs’ patent, defendants’
purportedly infringing product was “exactly like” the plaintiffs’
product, and defendants had willfully infringed the plaintiffs’
product. See id. at 262. The court concluded that the plaintiffs’
“claim of unfair competition is purely based on allegations of
patent infringement or copying of an unpatented product” and was
therefore “necessarily preempted by federal patent law.” Id.
Similarly,

in

a

case

involving

the

same

plaintiff

litigating this action, a court found that federal patent law
preempted a New York unfair competition law claim. See Carson, 11
F. Supp. 3d at 334-35. In Carson, the plaintiffs alleged that the
defendants – a manufacturer and a retailer – had copied and
distributed

products

infringing

on

their

patents

and

other

intellectual property. Id. at 324-26. The plaintiff alleged, inter
alia, that the manufacturer and retailer had acted “in bad faith
to

misappropriate the skill, expenditures, and labor” of the

plaintiff by “stealing [the plaintiff’s] patented design features
and distinctive trade dress and creating knock-off replicas of
39

[the plaintiff’s] products”; that the manufacturer had “showed its
customers samples of [the plaintiff’s products] and simply used a
computer to edit out the [plaintiff’s] logo on the photos”; that
the manufacturer would not have secured business for the retailer
defendant “had it not misappropriated [the plaintiff’s] skills,
investments, and efforts in bad faith”; and that the retailer had
encouraged such misappropriation in order to earn a higher profit
on the goods it retailed for the manufacturer. Id. at 330. The
court

concluded

that

the

allegations

“fail[ed]

to

identify

specifically the alleged wrongful conduct undertaken by defendants
apart from patent infringement” and accordingly held that the
unfair competition claims were preempted by federal patent law.
Id.
A.

Plaintiff’s Allegation Regarding Defendant’s “Bad Faith
and Willful Inducement of Infringement”
Here,

competition

is

plaintiff’s
that

first

defendant’s

allegation
“acts

of

regarding

unfair

unfair

methods

of

competition and/or unfair or deceptive trade practices include the
bad faith and willful inducement of infringement of the 729 and
601 Patents in such a manner as to directly and unfairly compete
with [plaintiff’s] business.” (Compl. at 25.) As an initial matter,
plaintiff’s allegation is far less detailed than the comparatively
fulsome allegations regarding unfair competition in Carson, which
40

were nevertheless held to be preempted by federal patent law. See
11 F. Supp. 3d. at 330. More fundamentally, plaintiff essentially
contends that the alleged unfair method of competition is the
inducement of infringement. (See Compl. at 25 (alleging that the
“acts of unfair methods of competition . . . include the bad faith
and willful inducement of infringement”).) Plaintiff’s allegations
would equate proof of inducement of infringement with establishing
that defendant is also liable for unfair competition. The unfair
competition claim premised on “bad faith and willful inducement of
infringement” is necessarily preempted by federal patent law.
Plaintiff

appears

to

contend

that

its

conclusory

allegations regarding bad faith remove its claim from the reach of
federal preemption. (Pl. Opp’n at 18, 20; see also Compl. at 25.)
An identical argument was rejected in Carson. See 11 F. Supp. 3d
at 331 (“Moreover, plaintiffs’ allegations of defendants’ bad
faith premised on the unlawful copying, misappropriating, knocking
off, and stealing of Carson’s patented designs are insufficient to
transform the nature of these claims from patent infringement to
an independent common law claim of unfair competition.”). This
court, for the same reasons articulated by the court in Carson,
finds

plaintiff’s

conclusory

allegation

regarding

bad

faith

insufficient to state an independent, sustainable claim of unfair
41

competition. See id.; see also Matthews Int’l Corp. v. Biosafe
Eng’g, LLC, 695 F.3d 1322, 1332 n.5 (Fed. Cir. 2012) (affirming
dismissal
grounds

of

unfair

where

competition

declaratory

claim

judgment

on

federal

plaintiff

made

preemption
only

“bald

assertions that [defendant] acted in ‘bad faith’”).
Finally, plaintiff’s reliance on Rodime, 174 F.3d at
1306, is misplaced. In Rodime, the plaintiff brought, inter alia,
an unfair competition claim based on the defendant’s “alleged
efforts to dissuade other disk drive companies from taking a
license from [plaintiff].” Id. The defendant argued that the claim
was preempted because it “implicate[d] the patent law cause of
action of inducement to infringe.” Id. The court rejected the
defendant’s argument, and held that, to prove the defendant was
liable

for

unfair

competition

(under

California

law),

the

plaintiff needed to show that the defendant “engaged in an unfair
business practice, that is, a business practice that is immoral,
unethical, oppressive, unscrupulous, or substantially injurious,”
while inducement “required no such proof.” Id. The allegations in
Rodime concerned conduct materially different from the conduct at
issue in the instant case. There, the plaintiff’s allegation (that
defendant had pressured other companies not to take a license from
plaintiff) was not dependent — as are the claims here — on the
42

purported infringement. See id. (holding that federal patent law
will

not

preempt

unfair

competition

if

a

plaintiff’s

claims

“include additional elements not found in the federal patent law
cause of action” and if they are not “an impermissible attempt to
offer

patent-like

protection

to

subject

matter

addressed

by

federal law” (emphasis added)). Accordingly, plaintiff’s first
theory of unfair competition liability fails to state a claim.
B.

Plaintiff’s
Program
The

thrust

Allegation

of

Regarding

plaintiff’s

second

Defendant’s

argument

VeRO

regarding

unfair competition is that defendant misrepresented the reach of
its intellectual property protection program VeRO. According to
plaintiff,
protecting

defendant’s
the

website

intellectual

states:

“We’re

property

committed

rights

of

to

third

parties . . . . We created [VeRO] so that intellectual property
owners can easily report listings that infringe their rights.”
(Compl. 6; see also id. (allegation that defendant’s website
states:

“[w]e

don’t

allow

replicas,

counterfeit

items,

or

unauthorized copies to be listed”).) 13 According to the Amended

13 Plaintiff also cites in its opposition brief statements from defendant’s
website that were not included in the Amended Complaint, including, for example,
the statement: “If you have a good faith belief that an item or listing infringes
on your intellectual property rights, you can report the alleged infringement
to [defendant] by submitting a Notice of Claimed Infringement (NOCI) to eBay’s
VeRO program.” (Pl. Opp’n at 21.) The court declines to consider any purported
statements on defendant’s website that were not described in the Amended

43

Complaint, defendant represents to the public that it “respects
the intellectual property rights of others as long as such rights
holders give [defendant] notice of the specific listings that
infringe on their rights.” (Compl. 25 (emphasis added).) Plaintiff
argues, however, that a patentee seeking to file a VeRO report
does not discover until a few clicks into the online reporting
process that defendant “will not remove patent infringing listings
without a court order.” (Pl. Opp’n at 22; see also Am. Compl. at
25 (“In reality, [defendant] does not follow its own VeRO program,
and instead claims that it does not have time to review the notices
provided by intellectual property rights holders to determine
whether [] listings infringe on such rights.”).)
Even if plaintiff’s claim arising out of defendant’s
non-adherence to its VeRO policy were not preempted, the court
concludes that the complaint fails to state a claim for unfair
competition under New York law. See Khan ex rel. Haque v. Am.
Airlines, Inc., No. 08-CV-5246, 2008 WL 5110852, at *6 (S.D.N.Y.
Nov. 26, 2008) (“[E]ven if plaintiffs’ claim of emotional distress
due to breach of policy was not preempted by the [Americans with

Complaint on this motion to dismiss. See In re UBS Auction Rate Sec. Litig.,
No. 08–CV–2967, 2010 WL 2541166, at *15 (S.D.N.Y. June 10, 2010) (“[T]he Court
finds that it is inappropriate to take judicial notice of [a copy of an
investment
guide
that
was
allegedly
available
on
the
defendants’
website] . . . .”).

44

Disabilities Act], we find that it fails because it is not a
cognizable claim under New York law.”). “Under New York law, the
essence of an unfair competition claim is that ‘the defendant has
misappropriated the labors and expenditures of another’ and has
done so in bad faith.” Coca-Cola N. Am. v. Crawley Juice, Inc.,
No. 09-CV-3259, 2011 WL 1882845, at *6 (E.D.N.Y. May 17, 2011)
(quoting Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044
(2d Cir. 1980)). Although the “law of unfair competition in New
York encompasses a broad range of unfair practices,” CA, Inc. v.
Simple.com, Inc., 621 F. Supp. 2d 45, 52 (E.D.N.Y. 2009); Roy
Export Co. Establishment v. Columbia Broad. Sys. Inc., 672 F.2d
1095,

1105

incalculable

(2d

Cir.

variety

1982)
of

(“New

illegal

York

courts

practices

have

falling

noted

the

within

the

unfair competition rubric, . . . calling it a ‘broad and flexible
doctrine’ that depends ‘more upon the facts set forth . . . than
in most causes of action.’” (internal quotation marks and citations
omitted)), the tort “is not all-encompassing.” Nationwide CATV
Auditing Servs., Inc. v. Cablevision Sys. Corp., No. 12-CV-3648,
2013 WL 1911434, at *10 (E.D.N.Y. May 7, 2013) (internal quotation
marks and citation omitted); see also Carson, 11 F. Supp. 3d at
329 (internal quotation marks and citation omitted) (same).

45

Recently, the New York Court of Appeals explained that
it

has

“long

competition:

recognized

palming

off

two
and

theories

of

common-law

misappropriation.”

ITC

unfair
Ltd.

v.

Punchgini, Inc., 880 N.E.2d 852, 858 (N.Y. 2007); see also Sidney
Frank Importing Co. v. Beam Inc., 998 F. Supp. 2d 193, 208
(S.D.N.Y. 2014) (same); Johnson & Johnson v. Am. Nat’l Red Cross,
552 F. Supp. 2d 434, 446 (S.D.N.Y. 2008) (same). Palming off, the
Punchgini court explained, is the “sale of the goods of one
manufacturer

as

those

circumstances

where

competition.”

880

of

the
N.E.2d

another”
relevant
at

and

has

parties

858;

see

been

extended

to

“are

not

even

in

also

id.

at

858

& n.2 (providing, as archetypal example of palming off, a situation
in which “defendant . . . substituted its product for plaintiff’s
when customers specifically asked for plaintiff’s product”). The
second

theory,

misappropriation,

prevents

individuals

from

“misappropriate[ing] the results of the skill, expenditures and
labors of a competitor.” Id. at 858 (internal quotation marks and
citation omitted); see also Maison Prunier v. Prunier’s Rest. &
Cafe, Inc., 288 N.Y.S. 529, 531 (N.Y. Sup. Ct. 1936) (finding
defendant, a New York restaurant, liable under misappropriation
theory for using a name associated with plaintiff’s high-end
European restaurants “because of plaintiff’s well-known reputation
46

and good will which ha[d] been built up as the result of decades
of honest business effort”).
Plaintiff’s theory that defendant is liable for unfair
competition because of defendant’s purported non-adherence to its
own VeRO program (as advertised on one part of defendant’s website)
cannot be shoehorned into either of the two broad theories of
unfair competition recognized by the New York Court of Appeals in
Punchgini. First, the VeRO-related allegations do not state a claim
for palming off. “Essentially, palming off occurs when A promotes
A’s products under B’s name and its corollary, reverse palming
off, occurs when A promotes B’s products under A’s name. Marvullo
v. Gruner & Jahr AG & Co., No. 98-CV-5000, 2001 WL 40772, at *7
(S.D.N.Y. Jan. 17, 2001) (internal quotation marks and citation
omitted).

Here,

plaintiff

does

not

allege

that

defendant

is

promoting defendant’s products under plaintiff’s name or that
defendant

is

promoting

plaintiff’s

products

under

defendant’s

name. Accordingly, the palming off theory is inapplicable to
plaintiff’s

unfair

competition

claim.

See

id.

(dismissing

plaintiff photographer’s palming off allegation on a motion to
dismiss

where

the

defendant

magazine

that

published

his

photographs did not (1) represent its own photographs as the

47

plaintiff’s or (2) represent itself as the creator or owner of the
plaintiff’s photographs).
Neither does plaintiff adequately plead that defendant
“misappropriated the plaintiff’s labors, skills, expenditures, or
good will,” Barbagallo v. Marcum LLP, 820 F. Supp. 2d 429, 446
(E.D.N.Y.

2011)

(internal

quotation

marks,

citation,

and

alteration omitted), as would be necessary to state a claim under
the misappropriation theory. In a traditional misappropriation
case, a defendant explicitly misleads the public in some way about
the identity of a product or service. See Shaw v. Time-Life
Records, 341 N.E.2d 817, 820 (N.Y. 1975) (“The essence of an unfair
competition claim is that the defendant assembled a product which
bears so striking a resemblance to the plaintiff’s product that
the public will be confused as to the identity of the products.”).
Even assuming, as the court must, that defendant, in
advertising its VeRO program, “buried” the fact that it would only
remove items from its website with a court or ITC order of
infringement, such an allegation does not state a claim for unfair
competition under the misappropriation theory. See Simple.com,
Inc., 621 F. Supp. 2d at 53 (“Not every act, even if taken in bad
faith,

constitutes

unfair

competition.”).

48

The

alleged

non-

adherence to the VeRO program does not involve any misappropriation
of plaintiff’s labors, skills, expenditures, or good will.
The

inadequacy

of

plaintiff’s

claim

is

further

underscored by the fact that plaintiff cites only a single case to
support its theory, Roy Export Co., 672 F.2d at 1105, which is
plainly distinguishable. In Roy, the plaintiffs owned exclusive
rights to certain Charlie Chaplin films. Id. at 1097 & n.3. The
plaintiffs alleged, inter alia, that CBS was liable for unfair
competition under the misappropriation theory after it aired, with
only “minor editing,” a compilation of Chaplin footage that the
plaintiffs had created using their own protected films. Id. at
1098-99. CBS aired the footage despite repeated rebuffed attempts
to license the material from plaintiffs, who intended to use the
material to create their own retrospective on Chaplin. Id. at 1098.
The Second Circuit upheld a verdict in favor of the plaintiffs on
the

unfair

competition

claim,

concluding

that

CBS

had

“unquestionably appropriated the ‘skill, expenditures and labor’
of the plaintiffs to its own commercial advantage” and that CBS’s
actions, “in apparent violation of its own and the industry’s
guidelines, were arguably a form of ‘commercial immorality.’” Id.
at 1105. By contrast, there is no analogous misappropriation of
skill, expenditures, or labor alleged in the Amended Complaint.
49

Plaintiff merely alleges that defendant does not abide by its own
stated policy regarding intellectual property protection, which
does not in any way involve siphoning off plaintiff’s skill,
expenditures,

or

labor.

As

already

explained

above,

such

an

allegation does not state a claim for unfair competition.
Accordingly, the court concludes that plaintiff’s unfair
competition claims are preempted and, even if not preempted, fail
to state a claim.
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss
is GRANTED in part and DENIED in part. Plaintiff has plausibly
alleged that defendant induced infringement of the ‘729 patent and
the ‘601 patent. Plaintiff has not, however, plausibly alleged an
unfair competition claim. Plaintiff’s unfair competition claim is
therefore dismissed with prejudice.
SO ORDERED.

Dated:

August 17, 2016
Brooklyn, New York
_________/s/_________________
KIYO A. MATSUMOTO
United States District Judge
Eastern District of New York

50