e-Watch Inc. v. Avigilon Corporation

Filing 40

MEMORANDUM AND ORDER granting 30 Motion to Dismiss claim for pre-suit damages and denying Motion to Dismiss indirect infringement and willful infringement claims.(Signed by Judge Nancy F. Atlas) Parties notified.(TDR, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
e-WATCH INC.,
Plaintiff,
v.
AVIGILON CORPORATION,
Defendant.

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CIVIL ACTION NO. H-13-0347

MEMORANDUM AND ORDER
This patent case is before the Court on the Motion to Dismiss [Doc. # 30] filed
by Defendant Avigilon Corporation (“Avigilon”), to which Plaintiff e-Watch, Inc. (“eWatch”) filed a Response [Doc. # 34], and Avigilon filed a Reply [Doc. # 35]. Having
reviewed the full record and applied governing legal authorities, the Court denies the
Motion to Dismiss the indirect infringement and willful infringement claims, and
grants the Motion to Dismiss the claim for pre-suit damages.
I.

BACKGROUND
E-Watch develops and markets security surveillance systems and associated

cameras. In connection with that business, e-Watch owns three United States Patents,
specifically United States Patent No. 6,970,183 (“the ’183 Patent”), No. 7,228,429
(“the ’429 Patent”), and No. 7,023,913 (“the ’913 Patent”). The ’183 Patent describes

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a system, the ’429 Patent describes an apparatus, and the ’913 Patent describes
technology for a digital security multimedia sensor.
Avigilon also markets surveillance systems. On February 11, 2013, e-Watch
sued Avigilon for direct patent infringement, indirect patent infringement, and willful
patent infringement. Plaintiff later filed a First Amended Complaint in which it
deleted the claim for indirect infringement. On July 15, 2013, Plaintiff filed a Second
Amended Complaint [Doc. # 27], reasserting a claim for indirect patent infringement.1
Avigilon filed a Motion to Dismiss, seeking dismissal of the indirect
infringement and willful infringement claims, and the claim for pre-suit damages. The
Motion to Dismiss has been fully briefed and is now ripe for decision.
II.

STANDARD FOR MOTION TO DISMISS
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil

Procedure is viewed with disfavor and is rarely granted. Turner v. Pleasant, 663 F.3d
770, 775 (5th Cir. 2011) (citing Harrington v. State Farm Fire & Cas. Co., 563 F.3d
141, 147 (5th Cir. 2009)). The complaint must be liberally construed in favor of the

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Defendant argues that post-suit conduct must be set forth in a “supplemental
pleading” rather than an amended complaint, noting a court may “permit a party to
serve a supplemental pleading setting out any transaction, occurrence, or event that
happened after the date of the pleading to be supplemented.” FED. R. CIV. P. 15(d).
To the extent that Plaintiff’s Second Amended Complaint is more properly treated as
a “supplemental pleading” under Rule 15(d), the Court grants leave to file it as a
supplemental pleading.

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plaintiff, and all facts pleaded in the complaint must be taken as true. Harrington, 563
F.3d at 147. The complaint must, however, contain sufficient factual allegations, as
opposed to legal conclusions, to state a claim for relief that is “plausible on its face.”
See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Patrick v. Wal-Mart, Inc., 681 F.3d
614, 617 (5th Cir. 2012). “[T]he plausibility requirement is not akin to a ‘probability
requirement at the pleading stage; it simply calls for enough fact[s] to raise a
reasonable expectation that discovery will reveal’ that the defendant is liable for the
misconduct alleged.” In re Bill of Lading Transmission and Processing Sys. Patent
Litig., 681 F.3d 1323, 1341 (Fed. Cir. 2012) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 556 (2007)).
The Court is not permitted “to choose among competing inferences as long as
there are sufficient facts alleged to render the non-movant’s asserted inferences
plausible.” Id. at 1340. When there are well-pleaded factual allegations, a court
should presume they are true, even if doubtful, and then determine whether they
plausibly give rise to an entitlement to relief. Iqbal, 556 U.S. at 679.
III.

ANALYSIS
A.

Indirect Infringement Claim

E-Watch asserts that Avigilon indirectly infringed its patents, inter alia, by
inducing its customers to infringe. “Whoever actively induces infringement of a

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patent shall be liable as an infringer.” 35 U.S.C. § 271(b). “Liability under § 271(b)
‘requires knowledge that the induced acts constitute patent infringement.’” In re Bill
of Lading, 681 F.3d at 1339 (quoting Global-Tech Appliances, Inc. v. SEB S.A., ___
U.S. ___, 131 S. Ct. 2060, 2068 (2011); DSU Med. Corp. v. JMS Co., 471 F.3d 1293,
1306 (Fed. Cir. 2006)). E-Watch must allege facts plausibly showing that Avigilon
specifically intended its customers to infringe e-Watch’s patents and knew that
Avigilon’s customers’ conduct constituted infringement. Id. “This does not mean,
however, that [e-Watch] must prove its case at the pleading stage.” Id.
In this case, Plaintiff alleges that, after receiving notice of its patents and the
alleged infringement, Avigilon continued to sell “products which can only be used to
create infringing systems.” See Second Amended Complaint, ¶ 45. Plaintiff alleges
that Avigilon gave its customers specific detailed instructions, including diagrams that
depicted an infringing system, that encourage the use of Avigilon products to create
infringing systems. See id., ¶¶ 46-47. Plaintiff alleges specifically that “Avigilon
sales people demonstrate to customers how they can create infringing systems using
Avigilon products.” Id., ¶ 48. The allegations in the Second Amended Complaint
give Avigilon fair notice of e-Watch’s indirect infringement claim and the facts on
which it is based. As a result, dismissal is inappropriate. See In re Bill of Lading, 681
F.3d at 1342.

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B.

Willful Infringement Claim

Avigilon argues that e-Watch has failed to allege an adequate factual basis for
its willful infringement claim. To assert a claim of willful infringement, the patent
holder must allege facts indicating “(1) that the accused infringer ‘acted despite an
objectively high likelihood that its actions constituted infringement of a valid patent’;
and (2) that this objectively defined risk was either known or so obvious that the
accused infringer should have known about it.” K-TEC, Inc. v. Vita-Mix Corp., 696
F.3d 1364, 1378 (Fed. Cir. 2012) (quoting In re Seagate Tech., LLC, 497 F.3d 1360,
1371 (Fed. Cir. 2007) (en banc)).
E-Watch alleges that it provided Avigilon with actual notice of the patents and
the alleged infringement on February 15, 2013. E-Watch alleges that Avigilon “has
continued its infringing activities . . . with no abatement.” See Second Amended
Complaint, ¶ 12. Indeed, Plaintiff alleges that Avigilon “with actual knowledge of the
patents and the allegations of infringement, . . . poised itself to increase its infringing
activities” by acquiring another access control security company. Id., ¶ 13. These
allegations give Avigilon adequate notice of the factual basis for the willful
infringement claim and, therefore, satisfy e-Watch’s burden at this pleading stage.
The Court denies Avigilon’s Motion to Dismiss the willful infringement claim.

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C.

Claim for Pre-Suit Damages

A patent holder is required to provide either actual or constructive notice before
damages begin to accrue. See 35 U.S.C. § 287(a); Gart v. Logitech, Inc., 254 F.3d
1334, 1345 (Fed. Cir. 2001). Avigilon argues that e-Watch did not mark its products
with the patent number for purposes of constructive notice, and did not give actual
notice until it served the summons and complaint on Avigilon on February 15, 2013.
As a result, Avigilon argues that e-Watch is not entitled to damages for conduct prior
to that date.
E-Watch does not contest that it did not provide notice to Avigilon prior to
February 15, 2013. Instead, e-Watch argues that a request for pre-suit damages is not
a “claim” and, therefore, cannot be the subject of a motion to dismiss. The Federal
Circuit, however, specifically allows addressing the § 287(a) issue through a motion
to dismiss. See Lans v. Digital Equip. Corp., 252 F.3d 1320, 1328 (Fed. Cir. 2001).
Defendant’s Motion to Dismiss e-Watch’s claim for damages prior to February 15,
2013, is granted.
IV.

CONCLUSION AND ORDER
Based on the foregoing, the Court concludes that Plaintiff has adequately pled

a factual basis for its indirect infringement and willful infringement claims. Having

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failed to provide notice to Avigilon prior to filing and serving the Complaint in this
case, Plaintiff is not entitled to recover pre-suit damages. Accordingly, it is hereby
ORDERED that Defendant’s Motion to Dismiss [Doc. # 30] is GRANTED as
to the claim for pre-suit damages and DENIED as to the indirect infringement and
willful infringement claims. All deadlines remain in effect.
SIGNED at Houston, Texas, this 16th day of September, 2013.

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