Tierra Intelectual Borinquen, Inc. v. Asustek Computer, Inc. et al
Filing
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MEMORANDUM AND OPINION. Signed by Judge Rodney Gilstrap on 03/03/2014. (nkl, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
TIERRA INTELECTUAL BORINQUEN,
INC.,
Plaintiff,
v.
ASUS COMPUTER INTERNATIONAL,
Inc. and OFFICEMAX, INC.,
Defendants.
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Case No. 2:13-CV-38-JRG
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant OfficeMax, Inc.’s (“OfficeMax” or “Defendant”) Motion
to Dismiss Plaintiff’s Induced Infringement Claims (Dkt. No. 16), filed May 7, 2013. OfficeMax
argues that Plaintiff Tierra Intelectual Borinquen, Inc. (“TIB”) does not, in certain respects, state
a claim for which relief may be granted and moves to dismiss portions of Plaintiff’s claim under
Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, the Court finds that the
Motion should be and hereby is GRANTED.
I. BACKGROUND
This is a suit for patent infringement under 35 U.S.C. § 271. Plaintiff TIB owns three
United States patents relating to user-selected login systems and signatures. These patents are
numbered 7,350,078 (“the ‘078 Patent”), and 7,725,725 (“the ‘725 Patent”), and 8,429,415 (“the
‘415 Patent”). Each patent claims a method, process, or device for creating, storing, and/or
authenticating user created signatures—for instance, the passcodes used to unlock mobile
devices. Defendant ASUS Computer International, Inc. (“ASUS”) sells, among other products,
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the ASUS TF700 Transformer Pad Infinity, a device which allegedly infringes each of the
patents-in-suit. OfficeMax also sells the ASUS TF700 to customers.
Plaintiff’s Complaint alleges both direct and indirect infringement. TIB alleges indirect
infringement on both contributory and induced infringement theories. TIB argues that
OfficeMax, with knowledge that the patents-in-suit are infringed by users of the TF700, actively
induces infringement by its customers who purchase the TF700. In support of this allegation,
TIB alleges simply that “the ASUS TF700 Transformer Pad Infinity User Guide instructs, among
others, its customers, users, and licensees to perform certain acts by virtue of their use of the
ASUS TF700 Transformer Pad Infinity. Defendants’ customers, users, and/or licensees perform
those acts when they use the ASUS TF700 Transformer Pad Infinity” (Dkt. No. 24, at 14; see id.
at 16). Reading this allegation in the light most favorable to the Plaintiff, the Complaint alleges
that the TF700 User Guide instructs users to perform acts which infringe the ‘078, ‘725, and ‘415
Patents. No other specific mechanism of inducement has been pled.
No specific relationship between OfficeMax and the TF700 User Guide is alleged. That is
to say, OfficeMax is not alleged to have written the User Guide, to provide it specially to
customers, to make it available on its website, or to otherwise furnish it to customers through any
of its own actions. The TF700 User Guide is included in the box with the device as produced and
delivered to OfficeMax by ASUS for retail sale. This is the sole means by which OfficeMax can
be inferred to have provided the TF700 User Guide to its customers.
OfficeMax argues that TIB fails to state a claim for induced infringement. First, it argues
that the User Guide Plaintiff references in the Complaint does not plausibly instruct users to
perform the patented methods and processes or use the infringing features of the device; and
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second, that because OfficeMax is not alleged to be responsible in any way for the User Guide, it
cannot be liable for any inducement caused by the guide’s instructions.
II. LEGAL STANDARDS
To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a). Detailed factual allegations are not required, but the facts pled must, when accepted as true,
state a claim for relief that is “plausible on its face,” i.e., the facts pled must allow the Court to
draw the reasonable inference that the defendant is liable for the misconduct alleged. Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). In deciding a motion under Rule 12(b)(6), the Court “accepts all well-pleaded facts
as true, viewing them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches
Litigation, 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin K. Eby Constr. Co. v. Dallas Area
Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)).
Under 35 U.S.C. § 271(b), “[w]hoever actively induces infringement of a patent shall be
liable as an infringer.” In order to state a claim for induced infringement, the plaintiff must
plausibly allege (1) that a third party, or the defendant in combination with a third party, has
performed acts sufficient to constitute infringement; (2) that the defendant knew of the patent
and that the acts in question would infringe; and (3) that the defendant had specific intent to
encourage the third party’s infringement. See Akamai Techs., Inc. v. Limelight Networks, Inc.,
692 F.3d 1301, 1306 (Fed. Cir. 2012); DSU Medical Corp. v. JMS Co., 471 F.3d 1293, 1304-06
(Fed. Cir. 2006); MEMC Elec. Materials, Inc. v. Mitsubishi Material Silicon Corp, 420 F.3d
1369, 1378 (Fed. Cir. 2005).
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III. ANALYSIS
A. Sufficiency of the User Guide
OfficeMax first argues that the text of the TF700 User Guide could not plausibly support
an inference of induced infringement. The patents-in-suit each pertain to user-selected signatures
and identification; as such, they require (to take one example from Claim 1 of the ‘078 Patent)
“recording user input signals by type from at least one user-selected device among a plurality of
selectable user input devices.” Users of the TF700 are alleged to infringe by selecting from a
menu of several methods for unlocking the product—for example, a user may choose to unlock
the product using face recognition, a password, or by drawing a pattern. But the TF700 User
Guide does not instruct readers on how to choose a method for unlocking the device; rather, it
instructs users only to “[t]ap and drag the lock out from the circle to the lock icon to unlock your
ASUS Transformer Pad” (Dkt. No. 16-1, at 14). 1 The User Guide gives no further instruction in
choosing methods for unlocking the TF700. OfficeMax thus argues that the User Guide does not
instruct users to perform the steps claimed by the patents-in-suit.
In response, Plaintiff essentially argues, first, that it need not plead as specifically as
Defendant suggests, and second, that the User Guide does plausibly instruct users to infringe the
patents-in-suit.
Plaintiff is correct that it need not allege that the User Guide instruct users on how to
infringe each step of the claimed method with specificity. See, e.g., In re Bill of Lading
Transmission and Processing System Patent Litigation, 681 F.3d 1323, 1342-43. The Federal
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Plaintiff argues that the Court may not consider materials outside of the pleadings on a 12(b)(6) motion (Dkt. No.
18, at 4). This is incorrect. In disposing of a motion under Rule 12(b)(6), the Court may consider “the complaint, any
documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the
claim and referenced by the complaint.” Lone Star Fund V (U.S.) L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th
Cir. 2010). The User Guide is referenced in the Complaint and, being the sole allegation supporting Plaintiff’s claim
of induced infringement, is clearly central to Plaintiff’s claim.
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Circuit has cautioned that “there is no requirement that the facts alleged mimic the precise
language used in a claim; what is necessary is that the facts, when considered in their entirety
and in context, lead to the common sense conclusion that a patented method is being practiced.”
Id. However, vague allegations that the User Guide instructs infringement are not sufficient by
themselves; the Court must be willing to examine the plausibility of the Complaint in light of the
relevant documents themselves. See id. at 1342 (“In some circumstances, failure to allege facts
that plausibly suggest a specific element or elements of a claim have been practiced may be fatal
in the context of a motion to dismiss”). If the User Guide teaches an “undisputedly noninfringing use,” no inference of intent to induce infringement may be drawn. See Vita-Mix Corp.
v. Basic Holding, Inc., 581 F.3d 1317 (Fed. Cir. 2009).
Having examined the documents, the Court finds that Plaintiff has pled sufficient facts to
support a plausible claim for relief. Notably, the Court has not yet held a Markman hearing to
determine how the claims of the patents-in-suit should be interpreted. As such, the Court
evaluates Plaintiff’s allegations in light of patent language that remains ambiguous and
unresolved. Thus, the Court has not yet determined the boundaries of, for example, the
“recording” step of Claim 1 of the ‘078 Patent. It is not prepared, at this early stage of the case,
to hold that the claimed methods could not plausibly be infringed by users following the
instructions in the User Guide, namely, by sliding the TF700’s lock icon across the screen to
unlock the device. The Court cannot yet say that such a process does not involve “receiving user
indication of signature input recording; recording user input signals by type,” and so on. (‘078
Patent at 10:49-50).
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B. Retailer’s Induced Infringement
The next question is whether OfficeMax, a retailer alleged to have no particular
involvement in the preparation or distribution of the TF700 User Guide, may be held liable for
induced infringement based solely upon its alleged knowledge that the Guide, in combination
with the TF700 itself, induces infringement of the patents in suit. The question, in essence, is
whether a third party’s mens rea of specific intent may be imputed to a defendant with
knowledge of that intent, in the absence of further steps by the defendant to induce infringement.
For the reasons stated below, the Court finds that such a result would be inconsistent with the
induced infringement statute, the case law interpreting it, and the policy rationales of our patent
system.
Direct patent infringement is a strict liability cause of action and requires neither
knowledge nor specific intent on the part of an infringing defendant. Akamai, 692 F.3d at 1307.
In order to be liable for direct infringement, though, a single party, either personally or
vicariously, must commit all the acts necessary to infringe the patent. Id. A person who does not
infringe each limitation of a claimed patent is thus not liable for infringement. This simple rule
serves most cases well, but, were it the only rule, potential infringers could avoid liability simply
by dividing their infringement among multiple parties. From this circumstance evolved the
doctrine of indirect infringement, which attaches liability to parties who deliberately enable
infringement without committing all of the infringing acts themselves. See 35 U.S.C. § 271(b),
(c).
Because an indirect infringer does not directly replicate each of the steps or limitations of
the patented invention, some further element is required to support liability. Induced
infringement effectively substitutes a party’s mens rea—his or her “specific intent” that the
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patent be infringed—for the specific steps or components of the claimed invention that the party
does not personally or vicariously infringe. Akamai, 692 F.3d at 1308; see also Global-Tech
Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2065 (“Although the text of § 271(b) makes no
mention of intent, we infer that at least some intent is required.”). A mens rea of specific intent
traditionally requires an “intent to accomplish the precise . . . act that one is later charged with.”
BLACK’S LAW DICTIONARY (9th ed. 2009).
However, profit-seeking corporations are often indifferent to how their products are used
after they have been sold. For example, if Company X makes a product that customers use to
infringe patent Y, then Company X may profit from its customers’ desire to infringe, but it does
not specifically intend that its customers actually use its product for infringement—it only
desires that its customers buy the product from Company X, regardless of whether they
ultimately carry out the infringing acts.
Instead of requiring strict specific intent, then, courts typically allow juries to construct
the required intentionality out of evidence that the defendant deliberately exploits the potential
for the product to be used in infringement. Such evidence ordinarily consists of knowledge that
the accused product may be and is used to infringe the patent-in-suit plus some other factor
indicating the defendant’s desire to “attract users of a mind to infringe.” 2 Metro-Goldwyn-Mayer
Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 926 (2005) (discussing copyright infringement but
explicitly treating copyright and patent regimes in parallel). For instance, a party may be held
liable for induced infringement on the basis of evidence that the defendant advertised the
infringing feature of the product or tied its revenue to infringing uses. Id. at 931-37.
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In this case, OfficeMax’s knowledge of the alleged inducement is hypothesized, so the Court need not analyze the
willful blindness standard recently addressed by the Supreme court in Global-Tech. The issue is whether knowledge
of inducement is sufficient to find intent to induce infringement, not whether knowledge may be imputed to
Defendant on the basis of its deliberate avoidance of information.
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In order to be sufficient for a finding of specific intent, however, the evidence must prove
something more than the defendant’s knowledge that its products may be used for infringement.
See DSU Medical Corp. v. JMS Co., 471 F.3d 1293 (2006). The intent prong of induced
infringement requires that “the inducement must involve the taking of affirmative steps to bring
about the desired result.” Global-Tech, 131 S.Ct. at 2065; accord DSU, 471 F.3d at 1306. Such
affirmative steps establish the defendant’s “purposeful, culpable expression and conduct.” Id.
(quoting Grokster, 545 U.S. at 937). In the absence of such evidence, a defendant is not liable for
induced infringement. It is this requirement for affirmative evidence that separates an intent or
purposefulness standard of mens rea from one of mere knowledge.
Though the distinction between simply knowing the consequences of one’s voluntary
actions and intending them may be conceptually murky, the law clearly sets a purposefulness
standard for induced infringement. See DSU, 471 F.3d at 1305-06; cf. Grokster 545 U.S. at 93137 (outlining an intent standard for copyright infringement, explicitly drawn from parallel patent
law, and distinguishing when knowledge is sufficient mens rea—when a device has no
“commercially significant noninfringing uses,” thus validating an inference of intentional
inducement).
The Grokster court explains why the distinction between knowledge and purpose has
persisted in patent law as in other contexts 3: a doctrine that “absolves the equivocal conduct of
selling an item with substantial lawful as well as unlawful uses, and limits liability to instances
of more acute fault than the mere understanding that some of one’s products will be misused
. . . . leaves breathing room for innovation and a vigorous commerce.” 545 U.S. at 932-33.
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See, e.g., Invensense v. STMicroelectronics, Case No. 2:13-cv-405-JRG, Dkt. No. 104, at 4-9 (E.D. Tex., Jan. 10,
2014) (discussing the distinction in the context of personal jurisdiction).
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Evidence of intentional infringement, however, “overcomes the law’s reluctance to find liability
when a defendant merely sells a commercial product suitable for some lawful use.” Id. at 933.
A heightened standard of purposeful inducement, then, is beneficial because it establishes
a safe harbor in which market participants may trade in even potentially infringing goods so long
as they do not cross the line into active encouragement of infringement. This safe harbor serves
two purposes: first, it ensures the availability of useful devices that can nonetheless be misused
for nefarious purposes. A similar accommodation has been reached in tort law concerning
products such as bullets that are useful but predictably dangerous. See, e.g., McCarthy v. Olin,
119 F.3d 148 (2d Cir. 1997) (holding that a manufacturer of “cop killer” bullets was not liable
under a products liability theory, since its products worked as intended). Holding purveyors of
such potentially useful devices liable for indirect infringement would prevent those devices from
reaching the market in spite of their potential benefits. By allowing a market participant to sell a
product knowing, but not actually intending, that the product will be used to infringe allows
society to reap important benefits.
The second reason a safe harbor is useful is that it promotes fluid and efficient trade in a
market economy that often divides the tasks of production and distribution. The typical chain of
commerce for an average consumer product today includes at least a manufacturer, a wholesaler,
a retailer, and a consumer. Manufacturers specialize in the production of goods; retailers
efficiently purchase existing products and market them to customers; wholesalers keep the
stream of commerce flowing smoothly by aggregating demand and managing sales to retailers.
The availability of low-cost, arms-length transactions in goods among merchants allows the
market participants to sort themselves efficiently, ultimately resulting in low prices for the
consumer. Knowledge-based liability for patent infringement would add friction to this system
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by forcing market participants to assess potential liability before purchasing potentially
infringing devices and selling them to the next potential buyer.
Patent law is a specifically market-based discipline: patents “promote the Progress of
Science and useful Arts, by securing for limited times to . . . Inventors the exclusive Right to
their . . . Discoveries.” U.S. CONST. art. I. § 8; see also Bilski v. Kappos, 130 S.Ct. 3218, 3252-55
(2010) (discussing the utilitarian values of the patent system). Patents explicitly balance the
market incentive of a temporary monopoly against the costs of that monopoly in the hopes of
securing more benefits than are paid in market costs. The careful utilitarian balance of this
system is undermined if the monopoly granted so restricts the free market that retailers must hire
patent lawyers just to sell products. Accordingly, the heightened “specific intent” standard for
induced infringement, which protects market participants who merely know that their products
are used for infringement, is consistent with the broader market-based rationale for the patent
system as a whole.
The discussion above reveals two key principles for the Court’s analysis of whether
OfficeMax can be held liable for induced infringement on the basis of the facts pled: First, it is
clear that induced infringement requires specific intent, as distinguished from mere knowledge.
Such intent must be proven by evidence of affirmative acts undertaken by the defendant to
encourage or otherwise promote infringement. Second, the purpose of this distinction is to
protect market participants who know that their products infringe but who are more or less
indifferent to this fact. This protection ensures the availability of potentially infringing products
with substantial noninfringing uses and preserves commercial fluidity by limiting liability to
those market participants who take an active role in promoting infringement.
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The cases cited above establish unambiguously that OfficeMax would not be liable if it
merely knew that the ASUS TF700 were capable of infringing TIB’s patents and sold the
product anyway. Plaintiff alleges, however, that OfficeMax not only knew of the potential for
infringement, but also knew that another party to the case was actively inducing infringement by
including instructions on infringing TIB’s patents in the TF700 User Guide. 4 Knowing this to be
the case, OfficeMax nonetheless continued to sell the TF700 tablets in combination with the
infringing User Guide. TIB argues, essentially, that OfficeMax’s knowing participation in this
causal chain between manufacturer and consumer supports a finding that OfficeMax specifically
intended to induce infringement. Having considered the question carefully, the Court holds that
OfficeMax’s pled knowledge of the instructions in the ASUS User Guide is insufficient to
support a claim of induced infringement.
First, the language of the statute and the case law interpreting it make clear that “active”
inducement consisting of “affirmative steps to bring about the desired result” is a baseline
requirement for a defendant’s inducement liability. 35 U.S.C. § 271(b); Global-Tech, 131 S.Ct.
at 2065. ASUS may be liable for induced infringement, since it prepared the TF700 User Guide
and packaged it with the TF700 tablet. OfficeMax has taken no affirmative steps to induce
infringement. Having learned of ASUS’s infringing behavior, it simply continued its business as
usual. It did not highlight the instruction in the User Guide to customers or advertise the TF700’s
infringing features; in fact, literally no change in OfficeMax’s behavior is alleged. It is clear to
the Court that the failure to change behavior in light of a new fact cannot be characterized as an
affirmative step evincing desire on the part of OfficeMax that users infringe TIB’s patents.
4
Of course, the Court assumes such infringement only for the purposes of this Motion.
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Even if the act of continuing to sell a product after gaining knowledge of induced
infringement could be recharacterized as an “affirmative step[] to bring about the desired result”
of infringement, however, such verbal acrobatics would defeat the purpose of the law’s
distinction between knowledge and intent. As discussed above, the law requires evidence of
affirmative steps, not because there is a clear difference between knowing the consequences of
one’s behavior and intending them, but because such an evidentiary hurdle ensures the
availability of useful products and protects neutral market participants who are indifferent to the
possibility of infringement.
OfficeMax, as portrayed in TIB’s Complaint, is the classic neutral reseller. Its business
consists of purchasing office products in bulk and reselling them at retail to its customers. No
special relationship between OfficeMax and ASUS is alleged. OfficeMax does not advertise the
infringing features of the TF700; nor does it instruct users on the infringing functionalities of the
device. As portrayed in the Complaint, OfficeMax is purely an engine of pure commerce,
arbitraging the price gap between wholesale and retail and efficiently distributing office products
to consumers.
This Court should not impose liability on the very resellers for whom the protection of
the knowledge/purpose distinction is designed. OfficeMax would then be forced to either stop
selling the product completely or to somehow mitigate the alleged inducement—perhaps by
negotiating with ASUS to reword its User Guide. Such a result, obviously, would interfere with
the natural operations of the market, and would be inconsistent with “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 933.
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The other possibility—that, on notice of induced infringement, OfficeMax would simply
stop selling the TF700 tablet—is equally invidious. If the TF700 may be used to infringe TIB’s
patents, but need not be so used—in other words, if the TF700 has “substantial noninfringing
use[s]”—then OfficeMax is entitled to sell it as a staple article of commerce so long as it does
not take affirmative steps to induce infringement. 5 35 U.S.C. § 271(b), (c). If an unrelated third
party’s inducement can be imputed to a neutral retailer, then the retailer’s ability to sell useful
articles is contingent on the behavior of that third party. This is a particularly troubling result if
the third party is not the manufacturer, as here, but merely an independent actor delivering
instructions on infringing uses. To use a tort illustration, imagine holding a gun merchant liable
for gun violence because the merchant knew that some third parties advocate the use of guns for
violence.
When a device has substantial noninfringing uses, liability for inducement is limited to
those actors who advocate infringement with “purposeful, culpable expression and conduct”
because other actors are presumed to be encouraging only legitimate uses. Knowledge of
someone else’s culpable behavior does not itself imply culpability; a rule attaching liability to a
neutral reseller would interfere with the provision of legitimate articles of commerce to the
public, and would undermine the utility of the patent system.
The Court thus concludes that the facts as pled do not support an inference that
OfficeMax is liable for induced infringement. Though the User Guide may plausibly instruct
consumers to infringe on TIB’s patents, OfficeMax’s sale of the TF700 does not support an
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Plaintiff has alleged that OfficeMax is also liable for contributory infringement of TIB’s patents, and has thus
necessarily alleged that the accused features of the TF700 do not have substantial noninfringing uses. In analyzing
the policy implications of Plaintiff’s proposed rule, as opposed to the legal sufficiency of the pleadings, the Court
need not assume the facts as pled. In reality, the accused product will often have substantial noninfringing uses even
when contributory infringement is alleged, and OfficeMax is used here as an illustration of the impact of Plaintiff’s
proposed rule on a defendant who is not liable on a contributory infringement basis.
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inference of specific intent to induce infringement, even assuming that OfficeMax knew that
ASUS deliberately induced infringement in its User Guide. None of the facts as pled allege the
affirmative steps to induce infringement that are necessary to survive a motion to dismiss under
Rule 12(b)(6).
Of course, additional allegations that OfficeMax took affirmative steps to encourage
infringement would support the opposite result. Resellers cannot avoid liability by carefully
structuring their transactions so as to externalize inducing behavior; rather, they may avoid
liability only by taking no inducing actions at all. Cf. Global-Tech, 131 S.Ct. at 2068-71 (holding
that “deliberate actions to avoid learning” of a patent will nonetheless trigger liability, but that
deliberate indifference to a known risk will not).
Such allegations are not present in Plaintiff’s Complaint, and thus dismissal is
appropriate.
IV. CONCLUSION
In accordance with the reasoning above, Defendant OfficeMax’s Motion to Dismiss (Dkt.
No. 16) is GRANTED and Plaintiff’s claims with respect to induced infringement are hereby
DISMISSED WITHOUT PREJUDICE. Furthermore, the Court hereby sua sponte GRANTS
leave for Plaintiff to file an Amended Complaint within ten days of the date of this Memorandum
Opinion and Order.
So Ordered and Signed on this
Mar 3, 2014
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