ContentGuard Holdings, Inc. v. Amazon.com Inc. et al

Filing 469

MEMORANDUM OPINION AND ORDER. Signed by Judge Rodney Gilstrap on 03/29/2015. (nkl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
CONTENT GUARD HOLDINGS, INC.,
Plaintiff,
v.
AMAZON.COM, INC., et al.,
Defendants.

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Case No. 2:13-CV-1112-JRG

MEMORANDUM OPINION AND ORDER
Before the Court are Amazon.com, Inc., HTC Corporation, HTC America, Inc., Huawei
Technologies Co., LTD., Huawei Device USA, Inc., Motorola Mobility LLC, Samsung
Electronics Co., LTD., Samsung Electronics America, Inc. and Samsung Telecommunications
America, LLC’s (collectively “Movants”) Motion to Dismiss Amended Complaint Pursuant to
Federal Rule of Civil Procedure 12(b)(6) (hereinafter “MTD”) (Dkt. No. 104)1 and
Amazon.com’s Motion to Dismiss Second Amended Complaint (Dkt. No. 298) (“Renewed
Motion”) and their respective briefing. The Court held a hearing on the initial motion on
November 18, 2014.
APPLICABLE LAW
The Federal Circuit “review[s] a district court’s dismissal for failure to state a claim
under the law of the regional circuit. Content Extraction & Transmission LLC v. Wells Fargo
Bank, Nat. Ass'n, 776 F.3d 1343, 1346 (Fed. Cir. 2014) (citing In re Bill of Lading Transmission
& Processing Sys. Patent Litig., 681 F.3d 1323, 1331 (Fed. Cir. 2012)).

1

An identical motion was also separately filed by Motorola as Dkt. No. 103 fifteen
minutes before the MTD. As Motorola is also a signatory on the MTD, the Court consolidated
the identical motions and therefore proceeds only on Dkt. No. 104.

Federal Rule of Civil Procedure (“F.R.C.P.”) 12(b)(6) is a defense that a pleading “fail[s]
to state a claim upon which relief can be granted.” When considering a motion to dismiss under
F.R.C.P. 12(b)(6), a court must assume that all well-pleaded facts are true, and view those facts
in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 218 (5th
Cir. 2012). 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 court must then decide whether those facts state a claim for relief that is
plausible on its face. Bowlby, 681 F.3d at 217. “A claim is plausible if ‘the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged. The plausibility standard is not akin to a ‘probability requirement,’
but it asks for more than a sheer possibility that a defendant has acted unlawfully.” United States
v. Bollinger Shipyards, Inc., 775 F.3d 255, 260 (5th Cir. 2014) (citing Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009)). “The plausibility standard ‘does not give district courts license to look behind
[a complaint's] allegations and independently assess the likelihood that the plaintiff will be able
to prove them at trial.’” Id. (citing Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F.3d 787,
803 n. 44 (5th Cir. 2011)). The question resolved on a motion to dismiss for a failure to state a
claim is not whether the plaintiff will ultimately prevail, “but whether [the] complaint was
sufficient to cross the federal court's threshold.” Skinner v. Switzer, 562 U.S. 521, 131 S. Ct.
1289, 1296, 179 L. Ed. 2d 233 (2011). “Rule 8(a)(2) of the Federal Rules of Civil Procedure
generally requires only a plausible ‘short and plain’ statement of the plaintiff's claim, not an
exposition of [the plaintiff’s] legal argument.” Id.
“Form 18 sets forth a sample complaint for direct patent infringement and requires:

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(1) an allegation of jurisdiction; (2) a statement that the plaintiff
owns the patent; (3) a statement that defendant has been infringing
the patent ‘by making, selling, and using [the device] embodying
the patent’; (4) a statement that the plaintiff has given the
defendant notice of its infringement; and (5) a demand for an
injunction and damages.”
K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1283 (Fed.
Cir. 2013) cert. denied sub nom. DIRECTV v. K-Tech Telecommunications, Inc., 134 S. Ct. 1026,
188 L. Ed. 2d 139 (2014).

“Form 18 includes no indication that a patent holder must

prospectively anticipate [] noninfringement arguments.” Id. at 1284. “The touchstones of an
appropriate analysis under Form 18 are notice and facial plausibility,” and “[w]hile these
requirements serve as a bar against frivolous pleading, it is not an extraordinarily high one.” Id.
at 1286. The Federal Circuit does not read “Form 18 [] to require that a plaintiff identify an
accused device by name.” Id. “The adequacy of the facts pled depends on the breadth and
complexity of both the asserted patent and the accused product or system and on the nature of the
defendant's business activities.” Id.
A claim for willful patent infringement requires proof that (1) “the infringer acted despite
an objectively high likelihood that its actions constituted infringement of a valid patent,” and (2)
“this objectively-defined risk (determined by the record developed in the infringement
proceeding) was either known or so obvious that it should have been known to the accused
infringer.” In re Seagate Tech., LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). “Willfulness does
not equate to fraud, and thus, the pleading requirement for willful infringement does not rise to
the stringent standard required by Rule 9(b).” Ferguson Beauregard/Logic Controls, Division of
Dover Res., Inc. v. Mega Sys., LLC, 350 F.3d 1327, 1343 (Fed. Cir. 2003).
A complaint properly pleads a claim of contributory infringement if it contains sufficient
facts from which Court may conclude that the claim is plausible.

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In re Bill of Lading

Transmission & Processing System Patent Lit., 681 F.3d 1323, 1337 (Fed. Cir. 2012).
“Determining whether a complaint states a plausible claim for relief will ... be a context-specific
task that requires the reviewing court to draw on its judicial experience and common sense.” Id.
at 1332 (citing Iqbal, 556 U.S. at 679). A plaintiff claiming contributory patent infringement
under 35 U.S.C. § 271(c) must prove (1) an act of direct infringement, (2) that the defendant
“knew that the combination for which its components were especially made was both patented
and infringing,” and (3) that the components have “no substantial non-infringing uses.” Cross
Med. Prods., Inc. v. Medtronic Sofamore Danek, Inc., 424 F.3d 1293, 1312 (Fed. Cir. 2005).
A claim for induced infringement under 35 U.S.C. § 271(b) requires proof (1) of an act of
direct infringement by another, and (2) that the defendant knowingly induced the infringement
with the specific intent to encourage the other’s infringement. MEMC Elec. Materials, Inc. v.
Mitsubishi Materials Silicon Corp., 420 F.3d 1369, 1378 (Fed. Cir. 2005). The intent element
requires that the defendant “[know] that the induced acts constitute patent infringement.”
Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060, 2068 (2011); see also DSU Med.
Corp. v. JMS Co., 471 F.3d 1293, 1306 (Fed. Cir. 2006) (“[I]nducement requires that the alleged
infringer knowingly induced infringement and possessed specific intent to encourage another’s
infringement.’’).

Thus, in order to survive a motion to dismiss, the complaint must (1)

adequately plead direct infringement by a defendant’s customers, (2) contain facts plausibly
showing that the defendant specifically intended for its customers to infringe the asserted patents,
and (3) contain facts plausibly showing that the defendant knew that the customer’s acts
constituted infringement. See In re Bill of Lading, 681 F.3d at 1339. Global-Tech requires only
that the defendant “[know] that the induced acts constitute patent infringement,” and contains no

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requirement that the knowledge arise before the filing of the suit. Global-Tech Appliances, Inc.
v. SEB S.A., 131 S. Ct. 2060 (2011).
BACKGROUND
This suit is a suit concerning the infringement and validity of certain U.S. patents.
Plaintiff ContentGuard was originally formed as a partnership between Xerox Corporation and
Microsoft Corporation2 to pursue digital rights management (“DRM”) technology.3 As part of
its business, ContentGuard filed and obtained various patents, including the nine patents that it
asserts in this action. The Defendants in this action—Amazon, Apple, Huawei, Motorola, HTC,
and Samsung—are well-known technology companies that, among their varied businesses,
provide electronic hardware and software products. Generally in this suit, ContentGuard accuses
DRM aspects of certain of Defendants’ software applications (“apps”) (e.g. iTunes, Amazon
Kindle, Amazon Instant Video) and hardware and software components of infringing its patent
claims.
ANALYSIS
Separate from the defendants in the MTD, Amazon filed its separate Renewed Motion.
Amazon’s Renewed Motion focuses almost entirely on issues under 35 U.S.C. § 101 and only
briefly addresses the complaint’s alleged failure to sufficiently plead induced, contributory, and
willful infringement. ContentGuard’s response adopts its earlier briefing on those issues. (Dkt.
No. 332 at n.1.) Amazon’s Renewed Motion Reply focuses entirely on § 101 issues. The Court
2

ContentGuard is now owned by Pendrell Technologies, LLC. (Dkt. No. 2.)
ContentGuard’s website suggests that may also be owned by Time Warner.
See
http://contentguard.com/company/ (“ContentGuard is owned by Pendrell Corporation and Time
Warner”) (last visited January 30, 2015).
3

Broadly, DRM technology, which might also be thought of as “copy protection,” seeks
to control access (e.g. viewing, copying) to digital information, including media, such as music,
movies, and software.

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therefore finds the portions of Amazon’s Renewed Motion that focus on an alleged failure to
sufficiently plead induced, contributory, and willful infringement under Rule 12(b)(6) to be
duplicative with the MTD.
Movants assert that ContentGuard’s complaint only properly pleads direct infringement
for “certain accused devices [identified] by name.” (MTD at 1.) Movants assert that “[t]he
Court should [] dismiss ContentGuard’s claims for direct infringement to the extent they purport
to go beyond the specific devices named in the Amended Complaint, and should dismiss
ContentGuard’s claims for induced infringement, contributory infringement, and willful
infringement for failure to state upon which relief can be granted, pursuant to Federal Rule of
Civil Procedure 12(b)(6).” (Id.)
Movants asserts that ContentGuard does not name their products containing DRM
technology with sufficient particularity. ContentGuard asserts that it adequately pleads direct
infringement by identifying that certain categories of DRM-protected devices infringe and by
providing exemplary devices and apps that infringe.

(MTD Resp., Dkt. No. 122 at 1.)

ContentGuard asserts that “[t]he Amended Complaint identifies the categories of products
accused of infringement, i.e., “devices such as smartphones, tablets, e-readers, smart televisions,
or set top boxes . . . capable . . . to download, play, and display digital content” (collectively,
“DRM-protected devices”).” (MTD Resp. at 1.) ContentGuard asserts that “[t]he Amended
Complaint then goes even further and identifies specific names of exemplary devices and
particular DRM-enabling software “apps” (e.g., Amazon Kindle, Google Play, and Apple
iTunes) that, when added to the devices, give rise to direct infringement.” (Id.) ContentGuard
asserts that “[t]he direct infringement alleged by ContentGuard includes Defendants’ making,
using, and selling such DRM-protected devices, as well as the use of DRM-protected devices by

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end users and/or content providers.” (Id. at 2.) Movants do not dispute that ContentGuard’s
pleadings identify at least one specific device and/or application provided by Movants. (MTD
Reply, Dkt. No. 126 at 8.) The Court observes, having considered the Amended Complaint, that
Movants also neglect to mention the considerable additional detail available in the complaint if
its paragraphs are read in combination rather than in isolation. The Court finds that, taken
together, the allegations of ContentGuard’s complaint do, additionally, identify types or
categories of products that infringe. Movants also ask the Court to read K-Tech4 as requiring that
a plaintiff must specifically identify each and every accused product if such information is nonconfidential and regardless of the sufficiency of other well-pled facts, but the Court does not find
such an exacting requirement in K-Tech or under the Federal Rules of Procedure. Having
considered the pleadings, the briefing, and the relevant attachments, and taking all well-pleaded
facts as true and viewing those facts in the light most favorable to the plaintiff, the Court finds
that ContentGuard’s pleadings are sufficiently plausible to plead a claim of direct infringement.
Movants assert that ContentGuard’s pleadings are insufficient as to ContentGuard’s claim
of induced infringement. ContentGuard asserts that its Amended Complaint adequately pleads
the elements of induced infringement: “(1) sufficiently pleads knowledge of the patents-in-suit;
(2) adequately identifies the direct infringers whom Defendants are alleged to cause to directly
infringe (end users and/or content providers); and (3) particularizes instances of conduct that
support an inference of specific intent to induce infringement.” (MTD Resp. at 2.) According to
ContentGuard, “[t]he type of conduct that is expressly identified includes Defendants’ provision
of instructions to access and use DRM-enabling software “apps” on Defendants’ devices to

4

Supra pp. 2-3.

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“DRM-protect” the devices so that the devices can be used for downloading, playing, and
displaying content.” (Id.)
Movants assert that “Amended Complaint fails sufficiently to allege that any third party
directly infringes the patents-in-suit” and so fails to support a claim of induced infringement.
(MTD Reply, Dkt. No. 126 at 4.) The Court does not find Movants’ conclusory statements on
this point to be supported: the Amended Complaint appears to identify such direct infringers in
relation to Movants.

Movants assert that “[t]he Amended Complaint provides only the

conclusory assertion that each defendant ‘has notice of the [] Patent,’ with no factual allegations
to support this assertion.” (MTD 6 (emphasis in original).) Movants then acknowledge that
ContentGuard, in fact, does allege that pre-suit license negotiations occurred between Movants
and ContentGuard. (MTD Reply at 1.) The Court observes that Movants do not appear to
dispute ContentGuard’s allegation that Movants had knowledge of ContentGuard’s patents
through, at least, negotiations with ContentGuard that occurred before the suit was filed.
Movants then shift their assertion to a claim that the notice alleged is insufficient. (Id.) Movants
also acknowledge that even if Movants did not have pre-suit notice, that the complaint would be
sufficient to create notice for post-suit conduct. (Id. at 2.) Movants also assert that the amended
complaint does not provide sufficient allegations “suggesting how ‘end users and content
providers’ might be found to be direct infringers.” (MTD Reply at 11.) ContentGuard asserts
that it is not required to provide such precise detail at the pleading stage. (MTD Sur-reply, Dkt.
No. 143 at 6-7.) The parties’ briefing also vigorously disputes—primarily with conclusory
statements—whether or not the pleadings contain facts sufficient to make intent plausible. For
example, Movants assert that ContentGuard’s pleadings “fail[] to allege any facts to support an
inference that Defendants had the specific intent to induce third parties to infringe the patents-in-

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suit,” and ContentGuard asserts that “the instructions ContentGuard identifies in the Amended
Complaint are not instructions on how to power up the accused devices—they are instructions on
how to access, download, and play DRM-protected content.” (MTD Reply at 2; MTD Sur-reply
at 6.) Having considered the pleadings, the briefing, and the relevant attachments, and taking all
well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiff, the
Court finds that ContentGuard’s pleadings are sufficiently plausible to plead a claim of induced
infringement.
Movants assert that ContentGuard’s contributory infringement allegations fail to provide
plausible facts: 1) are “unclear as to what the accused ‘component’ is for purposes of
contributory infringement”; 2) that explain why such components are a material part of the
infringing combination; and 3) that explain why such components lack any substantial noninfringing use. (MTD at 5-7.) ContentGuard asserts that it sufficiently alleges the underlying
direct infringement; identifies the infringing combination; alleges facts supporting materiality;
and alleges the lack of substantial non-infringing uses.

(MTD Sur-reply at 7-9.)

Having

considered the pleadings, the briefing, and the relevant attachments, and taking all well-pleaded
facts as true and viewing those facts in the light most favorable to the plaintiff, the Court finds
that ContentGuard’s pleadings are sufficiently plausible to plead a claim of contributory
infringement.
Movants assert that “[t]he Amended Complaint fails to allege any facts in support of its
wholly conclusory claim of willful infringement” and that ContentGuard’s pleadings “fail to
support an inference that any of the Defendants acted with objective recklessness as to their risk
of infringement of any of the asserted Patents.” (MTD Reply at 9, 10.) ContentGuard asserts
that it adequately pleads facts that support its willful infringement claims:

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(1) the inventions disclosed in the patents-insuit represent the
“prevailing paradigm for distributing digital content over the
Internet”; (2) market commentators have recognized that
ContentGuard’s innovations represent “the technological building
blocks necessary to make the digital delivery of music, movies and
other files secure,” without which content creators would not
permit their content to be distributed to users of Defendants’
devices; (3) the strength of ContentGuard’s patents-in-suit is
underscored by the numerous patent license agreements
ContentGuard has executed without any threat of litigation; (4)
Defendants had knowledge of ContentGuard’s patents-in-suit; and
(5) ContentGuard has made numerous attempts to negotiate a
license agreement with Defendants.
(MTD Sur-reply at 10.) Movants are correct that ContentGuard only directly refers to willful
infringement in one paragraph of its Amended Complaint.5 (See MTD at 17.) Were this
paragraph the entirety of ContentGuard’s complaint, the Court would agree with Movants.
However, there is significantly more to the allegations of ContentGuard’s complaint than this
one paragraph. Here, like many other parts of its MTD, Movants are, in effect, asking the Court
to go significantly beyond the plausibility of the well-plead allegations and into the merits. The
Court cannot agree with Movants that ContentGuard fails “to allege any facts” supporting its
theory. Having considered the pleadings, the briefing, and the relevant attachments, and taking
all well-pleaded facts as true and viewing those facts in the light most favorable to the plaintiff,
the Court finds that ContentGuard’s pleadings are sufficiently plausible to plead a claim of
willful infringement.
CONCLUSION
Rule 12(b)(6) is a defense to pleading where there is a “failure to state a claim upon
which relief can be granted.” As described above, a “failure to state a claim upon which relief
can be granted” is, generally speaking, an initial threshold test in which a court evaluates the
5

If the allegation of knowledge was not true at the time ContentGuard filed its original
complaint, the burden is on ContentGuard to amend its complaint to comply with Rule 11.

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facial plausibility of claims set forth in a pleading, considering the well-pleaded facts in the
complaint as true, construing the complaint in a light most favorable to the plaintiff, and drawing
reasonable inferences in favor of the plaintiff. Having passed this initial threshold, a case can go
forward—under the due process of law—and additional rules of procedure and, in some cases,
local rules, such as those employed by this Court, come into play that allow both plaintiffs and

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defendants to have insight into the details of the other’s case.6
For the reasons set forth above, having found that ContentGuard has pled a case upon
which relief can be granted, the court DENIES Movants’ Motion to Dismiss Amended
Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6) (Dkt. No. 104)7 and the portions
of Amazon.com’s Motion to Dismiss Second Amended Complaint (Dkt. No. 298) other than
those under 35 U.S.C. § 101.

SIGNED this 19th day of December, 2011.
So ORDERED and SIGNED this 29th day of March, 2015.

____________________________________
RODNEY GILSTRAP
UNITED STATES DISTRICT JUDGE

6

For example, this Court’s local rules require a plaintiff in a patent infringement case to
serve, on each defendant, a specifically defined “Disclosure of Asserted Claims and Infringement
Contentions” in advance of the Court’s initial case management conference. See P. R. 3-1.
7

An identical motion was also separately filed by Motorola as Dkt. No. 103 fifteen
minutes before the MTD. As Motorola is also a signatory on the MTD, the Court consolidated
the identical motions and therefore proceeds only on Dkt. No. 104.

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