Rembrandt Social Media, LP v. Facebook, Inc. et al

Filing 141

MEMORANDUM OPINION Re: 80 Joint MOTION to Dismiss Pursuant to FRCP 12(b)(6) by AddThis, Inc., Facebook, Inc. Signed by District Judge T. S. Ellis, III on 6/12/2013. (stas)

IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF VIRGINIA ,p f
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REMBRANDT SOCIAL MEDIA, LP,
Plaintiff,

v.

Case No. I:13cvl58

FACEBOOK, INC., et al.,
Defendants.

MEMORANDUM OPINION

In this patent infringement suit, defendants seek threshold dismissal, arguing (i) that there
is no indirect or willful infringement, as defendants lacked the requisite pre-suit knowledge of
the patents in issue, and (ii) that because of the nature of the '362 patent's claimed system, only

the end computer user—here the consumer—can directly infringe this system claim. Plaintiff
opposes this motion, arguing (i) that defendants had the requisite pre-suit knowledge of the
patents in issue and, even if they did not, post-suit knowledge satisfies the knowledge
requirement for willful and indirect infringement of the patents, and (ii) that defendants directly

infringe the system claim by controlling each step of the system, including the first step.
Accordingly, the motion to dismiss presents the following questions:

(i)

(ii)

Whether the pre-suit knowledge required for indirect and willful infringement
is satisfied as a pleading matter, where, as here, (a) the patentee and the
putative infringer used the same law firm, (b) the putative infringer was sued
on a patent that cited the patent in issue as prior art, and (c) the putative
infringer purchased a patent that cited the patent in issue as prior art;

Whether knowledge of the patents derived from the service or filing of the
lawsuit provides the knowledge of the patents required for either indirect or
willful patent infringement claims; and,

(iii)

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Whether the facts pled in the complaint are sufficient, if proved, to establish
direct infringement of the system claim in issue.

Forthe reasons that follow, the motion to dismiss must be granted in part and denied in
part, as follows:

(i)

The complaint fails to allege sufficient facts concerning pre-suit knowledge to
state a claim for indirect infringement that is plausible on its face;

(ii)

The complaint adequately alleges sufficient facts concerning post-filing
knowledge to state a claim for indirect infringement, as the service or filing of
a law suit provides the knowledge of the patents required for indirect
infringement with damages limited to the post-filing period;

(iii)

The complaint fails to allege sufficient facts concerning pre-suit knowledge of
the patents to state a claim for willful infringement that is plausible on its face,
and willful infringement cannot be based solely on knowledge that arises from
the service or filing of the lawsuit; and,

(iv)

The complaint adequately alleges sufficient facts to establish that defendants
directly infringe the system claim in the '362 patent.
I.'
A.

Plaintiff Rembrandt Social Media. LP ('"Rembrandt"), a Virginia limited partnership with

a principal place of business in Bala Cynwyd, Pennsylvania, brings this patent infringement suit
against defendants Facebook. Inc. ("Facebook") and AddThis, Inc. ("AddThis"). Facebook is a
Delaware Corporation with a principal place of business in Menlo Park, California and AddThis
is a Delaware Corporation with a principal place of business in Vienna, Virginia.
Rembrandt is the owner of the two patents in issue. U.S. Patent No. 6,415,316 (the '316
Patent), entitled "Method and Apparatus for Implementing a Web Page Diary," describes an
invention that allows persons to create a personal diary on the World Wide Web wherein users
are able to create a collection of personal information and third party content that is displayed on

a personal webpage that can be shared with an authorized group of people. U.S. PatentNo.

1The facts recited here are derived from the second amended complaint, the patents in issue, and
the parties' pleadings.
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6,289,362 (the '362 Patent), entitled "System and Method for Generation. Transferring, and

Using an Annotated Universal Address." describes a system that permits users to transfer third
party content automatically from a third party content provider's website to the user's personal
diary.

The claim at issue in this motion to dismiss is claim 7 of the '362 patent. Claim 7 is a

"system" claim,2 which provides as follows:
A computer system comprising:

third party memory storing a transfer script that generates a request for a transfer
applet from server memory;

server memory storing an AUA [annotated universal address] database from
which personalized web pages are construed and a transfer applet for establishing
a communications link between a client browser and the server memory; and

a client browser coupled to the third party memory and to the server memory for
executing the transfer script and the transfer applet to transfer an AUA to an AUA
database stored in the server memory, the AUA identifying a location of a content

object and including an annotation authored by a content provider for controlling
an aspect of a presentation of the object.
'362 Patent, Claim 7.

The '316 patent issued on July 2, 2002 and the '362 patent issued on September 11, 2001
to inventor Joannes Jozef Everardus Van Der Meer ("Van Der Meer"). Van Der Meer assigned

his patents to his company, Aldministrator Nederland B.V. ("Aduna"), and following Van Der
Meer's death in June 2004, his family assigned the patents to Rembrandt, a non-practicing entity.
Rembrandt now brings this suit against Facebook and AddThis, alleging that (i)

Facebook has willfully directly and indirectly infringed the '316 patent, (ii) Facebook and

2 A system claim is a species of apparatus claims.

See Arris Group, Inc. v. British

Telecommunications PLC, 639 F.3d 1368. 1376 n.8 (Fed. Cir. 2011) ("Claims which recite a

'system,' 'apparatus,* 'combination,' or the like are all analytically similar in the sense that their
claim limitations include elements rather than method steps."); see also Patent Claim
Construction in the Federal Circuit § 1:23, at 122 (Edward D. Manzo ed., 2012).
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AddThis have jointly and willfully, directly and indirectly infringed the "362 patent, and (iii)
Facebook has willfully directly and indirectly infringed the '362 patent. More specifically,
Rembrandt alleges that Facebook directly infringes the '316 patent by operating the
www.facebook.com website, and indirectly infringes the '316 patent by inducing and
contributing to infringement of the '316 patent by encouraging Facebook members to use what

Rembrandt alleges is the 'web-based diary feature' of the www.facebook.com website. In
addition, Rembrandt alleges that AddThis directly infringes the '362 patent by both making and

using the system described in claim 7. Likewise, Rembrandt alleges that Facebook directly
infringes the '362 patent by using the system described in claim 7.
In support of its indirect and willful infringement claims, Rembrandt alleges that

Facebook had prior knowledge of the '316 and '362 patents from four separate sources. First,
Rembrandt alleges that Aduna hired the law firm Fenwick & West to prosecute and maintain the
'316 and '362 patents. Aduna maintained this relationship through July 2012. From 2008 until
2012, Fenwick & West also represented Facebook in patent prosecutions. Thus, Rembrandt

alleges that it is plausible that a Fenwick & West attorney informed Facebook about the '316 and
'362 patents. Second, Rembrandt alleges that on May 20. 2011, Facebook was served with a
complaint alleging infringement of U.S. Patent No. 7,933,893, which cited the '362 patent as

prior art. Third, Rembrandt alleges that in June 2012. Facebook acquired two patents that listed
the '362 patent as prior art. Finally, Rembrandt argues that the original complaint in the instant

case provides defendants with the requisite knowledge of the '316 and v362 patents for both
indirect and willful infringement.
Defendants now seek threshold dismissal, claiming that the indirect infringement claims
must be dismissed as Rembrandt has not adequately pled pre-suit knowledge and that post-suit

knowledge is insufficient to satisfy the knowledge requirement for an indirect infringement
claim. Defendants also argue that for the same reasons, Rembrandt's claim for willful
infringement must fail. Finally, defendants argue that the claim for direct infringement of claim

7 of the '362 patent must be dismissed as the only possible direct infringer is the consumerof
defendants' services.
II.

It is axiomatic that dismissal pursuant to Rule 12(b)(6), Fcd.R.Civ.P., is required where

the complaint does not "contain sufficient factual matter, accepted as true, to 'state a claim to
relief that is plausible on its face.'" Ashcrqfl v. IqbaL 556 U.S. 662, 678 (2009) (quoting Bell
All. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Thus, the complaint must allege facts that, if

true, plausibly satisfy each element of the claims for which relief is sought. If the complaint
does not allege a sufficient factual basis to create a plausible inference that plaintiff is entitled to
relief, then the motion to dismiss must be granted.
III.

A party may indirectly infringe a patent either (i) by inducing direct infringement, in

violation of 35 U.S.C. § 271(b), or (ii) by contributing to direct infringement, in violation of 35
U.S.C. § 271(c). Section 271(b) provides that "[wjhoever actively induces infringement of a
patent shall be liable as an infringer," and § 271(c) provides, in pertinent part, that:
Whoever offers to sell or sells within the United Stales ... a component of a
patented . . . apparatus for use in practicing a patented process, constituting a
material part of the invention, knowing the same to be especially made or
especially adapted for use in an infringement of such patent, and not a staple
article or commodity of commerce suitable for substantial noninfringing use, shall
be liable as a contributory infringer.
The Supreme Court has made clear that "§ 271(c) requires knowledge of the existence of the
patent that is infringed" and "that the same knowledge is needed for induced infringement under

§ 271(b)." Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060,2068 (2011). In GlobalTech, the Supreme Court explained that the knowledge requirement under § 271(c), as elucidated
inAro Manufacturing Co. v. Convertible Top Replacement Co., Ill U.S. 476 (1964), "has
become a fixture in the law of contributory infringement[.]" Global-Tech, 131 S.Ct. at 2068

(quoting 5 R. Moy, Walker on Patents § 15:20, p. 15-131 (4th ed. 2009)). Accordingly, because
§ 271(b) shares a common origin "in the pre-1952 understanding of contributory infringement,
... [i]t would thus be strange to hold that knowledge of the relevant patent is needed under §
271(c)but not under § 271(b)." Id Thus, both forms of indirect infringement—contributory

infringement and inducement of infringement—require the putative infringer to know "of the
existence of the patent that is infringed." Id.

Although the knowledge requirement for indirect infringement is now settled lawunder §
271(b) and (c), there is disagreement among the district courts as to whether post-suit knowledge
may satisfy this knowledge requirement. On the one hand, a majority of districtcourts

considering this issue have held that post-suit knowledge (i.e., knowledge provided by the filing

ofthe lawsuit) satisfies the knowledge element for indirect infringement;3 while on the other

3See, e.g., Apeldyn Corp. v. Sony Corp., 852 F.Supp.2d 568, 573 (D. Del. 2012) (holding that
"there is no legal impediment to having an indirect infringement cause of action limited to postlitigation conduct"): Walker Digital, LLC v. Facebook, Inc., 852 F.Supp.2d 559, 565 (D. Del.
2012) (same); Achates Reference Pub., Inc. v. Symantec Corp., No. 2:llcv294, 2013 WL
693955, *2 (E.D. Tex. Jan. 10, 2013) ("there is no requirement to allege pre-suit knowledge of
the patent to state a claim for contributory infringement"); Intellect Wireless Inc. v. Sharp Corp.,
No. 10cv6763, 2012 WL 787051 , *11 (N.D. 111. Mar. 9, 2012) ("[defendants' knowledge of the
patent as of the time of the suit's commencement can satisfy the knowledge requirement for
conduct that post-dates the date of the complaint"); Trading Techs. Int 7, Inc. v. BCG Partners,
Inc., 2011 WL 3946581, 4 (N.D. 111. Sept. 2, 2011) (holding that post-filing knowledge is
sufficient for Rule 8, Fed.R.Civ.P.); Symantec Corp. v. Veeam Software Corp., No. C12-00700,
2012 WL 1965832, *4 (N.D. Cal. May 31. 2013) ("The Court, however, will construe the
complaints as covering contributory infringement for post-filing conduct, where the defendant's
knowledge has been adequately alleged."); Pacing Techs., LLC v. Garmin Int'I, Inc., No.
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hand, a minority of district courts have held that post-suit knowledge does not satisfy the

required knowledge element for indirect infringement.4 The majority view bases the adequacy of
post-suit knowledge on there being no sound reason that a defendant should avoid liability for an

indirect infringement claim when it continues "to promote infringing uses of their products after
learning about the patents," simply "because it happened to learn of the patent in connection with

a lawsuit." Intellect Wireless Inc.. 2012 WL 787051. *11. The minority view courts take the

position that permitting plaintiffs to plead post-suit knowledge requires courts "to bootstrap the
knowledge Defendants now have based on Plaintiffs filing of the Complaint onto defendant's
acts before [the filing of the complaint.J" Proxyconn Inc., 2012 WL 1835680, *5. Further, those
courts also suggest that requiring plaintiffs to plead pre-suit knowledge "furthers judicial
economy and preserves parties' resources by encouraging resolution prior to filing a lawsuit."
Id.

It is clear that the majority view is the sounderview. There is simply no substantive

difference between (i) a putative infringer learning of a patent from a plaintiffs letter a day, or
hours or even minutes before an infringement suit is filed or served, and (ii) a putative infringer
learning of the patent from the filing or service of a complaint. In both instances, the putative

infringer learns of the existence of the patent and for purposes of satisfying the knowledge

12cvl067, 2013 WL 444642, *2 (S.D. Cal. Feb. 5, 2013) ("For inducement occurring after the
filing date, such allegations of knowledge suffice.").

4See, e.g., Proxyconn Inc. v. Microsoft Corp., No. SACV 11-1681 DOC (ANx), 2012 WL
1835680, at *5 (CD. Cal. May 16, 2012) ("a complaint fails to state a claim for indirect patent
infringement where the only allegation that purports to establish the knowledge element is the
allegation that the complaint itself or previous complaints in the same lawsuit establish the
defendant's knowledge of the patent"); Brandywine Communications Techs., LLC v. T-Mobile

USA, Inc., No. 6:12cv272, 2012 WL 5266049, at *6 (M.D. Fla. Oct. 24, 2012) ("weight of
authority addressing the knowledge required for indirect infringement. . . requires a plaintiff to
allege that defendant had pre-suit knowledge of the patents-in-suit").

required to establish indirect infringement, it is immaterial how the putative infringer gains this
knowledge. What matters is not how the putative infringer learned of the patents—by a letter
from plaintiff prior to the filing of suit, by service of the complaint, or indeed from any source—

but simply that the putative infringer has knowledge of the allegedly infringed patent and its
claims; it is this knowledge of the patent and its claims by a putative infringer—however

obtained—that is essential to a claim for indirect infringement. The filing and service of an
infringement suit is merely one way of establishing this essential element of the indirect
infringement claim.

But there is an important consequence of relying on the filing and service of the

infringement suit to satisfy the knowledge requirement to establish indirect infringement:
Plaintiffmay only recover damages for indirect infringement for the period of time that

commences once the putative infringer learns of the patent/ Thus, however the putative
infringer learns of the allegedly infringed patent, infringement damages accrue only once the
putative infringer learns of the patent.

Defendants argue that the pleading of post-filing knowledge fails to satisfy Rule 8,

Fed.R.Civ.P. In essence, defendants argue that plaintiff cannot adequately allege the knowledge
element of an indirect infringement claim if knowledge of the patent only arises post-suit. See,
e.g., Brandywine Comms., 2012 WL 5266049, at *6 ("finding that a complaint provides

sufficient knowledge for induced infringement would vitiate the Supreme Court's holding...

5See, e.g.,Apeldyn Corp., 852 F.Supp.2d at 573-74 (The fact that plaintiff would be prohibited
from collecting damages related to indirect infringement for any pre-knowledge (e.g., pre-filing)
conduct is the only substantive consequence of allowing allegations such as those at barto go
forward.").

that an allegation of knowledge of the patent is required to state a claim for induced
infringement").

This argument is not persuasive. First, it is clear that if a putative infringercontinues to
engage in indirect infringement of a patent after the filing of the suit, then a plaintiff may recover
damages for that continued indirect infringement. Second, even if such an initial complaint fails
to plead knowledge adequately, the appropriate relief would be dismissal without prejudice. The
patentee could then file, as here, an amended complaint that alleges indirect infringement with

notice of the patent in issue based on the filing of the original complaint.6 Thus, there is no
sound basis for precluding a plaintiff from alleging the requisite knowledge for indirect
infringement on the basis of the filing of the lawsuit. But in that instance, of course, damages
would be limited to the post-filing period.
Although the amended complaint adequately alleges indirect infringement beginning with
the service of the complaint, plaintiff here claims much more. Specifically, plaintiff claims that
defendants' knowledge of the '362 patent may be appropriately inferred from three sources: (i)
Facebook and the predecessor-in-interest of the '362 patent shared the same law firm, (ii)
Facebook purchased a patent that cited the '362 patent as prior art, and (iii) Facebook was served
with a lawsuit over a patent that cited the '362 patent as prior art. Yet, none of these facts gives

rise to anything more than a conceivable possibility of knowledge of the '362 patent, rather than
a plausible inference that Facebook possessed such knowledge. To begin with, the fact that
Facebook and the '362 patent's predecessor-in-interest shared the same law firm is not, without
more, sufficient for pleading knowledge under Iqbal I Twombly. Rembrandt has not even alleged
that the same lawyers in that law firm worked on matters for both patents, and moreover, the

6Notably, some of the minority view courts acknowledge that "Federal Rule of Civil Procedure
15(d) provides a procedure for pleading post-suit facts." Proxyconn Inc., 2012 WL 1835680, *6.
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prosecution of the '362 patent was completed years before Facebook allegedly hired that law

firm. Thus, without more, the fact that the two parties shared a law firm at some point in the past
falls far short of raising a plausible inference of pre-suit knowledge of the '362 patent, or indeed
either patent. Similarly, the fact that a patent purchased by Facebook cites the '362 patent as
prior art is not enough, by itself, to establish that Facebook had the requisite pre-suit knowledge
of the '362 patent. Significantly, Facebook did not even prosecute the application for the patent
that cites the '362 patent as prior art; instead, Facebook purchased that patent from America

Online, Inc. Thus, the mere allegation that a patent purchased by Facebook cites the '362 patent
as prior art makes it, at best, only conceivable, not plausible, that Facebook might have learned
of the '362 patent in the course of purchasing a patent. Finally, the fact that Facebook was sued
on a patent that cited the '362 patent falls far short of warranting a plausible inference of pre-suit

knowledge of the '362 patent; indeed, it appears that the lawsuit referred to was voluntarily

dismissed prior to Facebook filing an answer. In sum, Rembrandt has failed to plead any facts

that make it plausible, rather than merely conceivable, that Facebook had knowledge ofeither
patent in issue prior to the filing of this suit. Accordingly, the claims for indirect infringement
based upon pre-suit knowledge must be dismissed.
IV.

It is well-settled "that enhancement of damages must be premised on willful

infringementf.]" Beatrice Foods Co. v. New England Printing &Lithographing Co., 923 F.2d

1576, 1578 (Fed. Cir. 1991). Because "increased damages are punitive, the requisite conduct for
imposing them must include some degree of culpability" and an "act of willful infringement
satisfies this culpability requirement[.]" Jurgens v. CBK, Ltd.. 80 F.3d 1566, 1570 (Fed. Cir.
1996). Thus, a plaintiff alleging willful infringement must therefore establish (i) that "by clear

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and convincing evidence ... the infringer acted despite an objectively high likelihood that its

actions constituted infringement of a valid patent," and (ii) that "this objectively-defined risk ...

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).7
Importantly, the Federal Circuit has made clear that "in ordinary circumstances,

willfulness will depend on an infringer's prelitigation conduct." Id. at 1374. Accordingly, "a
patentee must have a good faith basis for alleging willful infringement..., [s]o a willfulness

claim asserted in the original complaint must necessarily be grounded exclusively in the accused

infringer's pre-filing conduct." Id. Thus, Federal Circuit authority makes clear that an allegation
of willful infringement must depend upon pre-suit knowledge of the patent in issue. To conclude
otherwise would lead to the anomalous result that every lawsuit alleging infringement could

include a willful infringement claim based on simply the filing or the serving of the complaint.
This anomalous result is neither sensible nor intended by the statutory patent damages provision,

35 U.S.C. §284.8 Not surprisingly, the parties cite no case, and none has been found, in which
post-suit knowledge was held sufficient to support a claim for willful infringement.9

7See also State Indus., Inc. v. A.O. Smith Corp., 751 F.2d 1226. 1236 (Fed. Cir. 1985) ("To
willfully infringe a patent, the patent must exist and one must have knowledge of it.").
Q

A plaintiffs proper remedy for reckless post filing conduct is to seek a preliminary injunction,
and "a decision to grant or deny a preliminary injunction is based on the district court's

consideration of four factors: '(1) the likelihood of the patentee's success on the merits; (2)
irreparable harm if the injunction is not granted; (3) the balance of hardships between the parties;
and (4) the public interest." Erico Int 7 v. Vutec Corp., 516 F.3d 1350, 1353-54 (Fed. Cir. 2008)
(quoting PHG Techs., LLC v. St. John Cos., Inc., 469 F.3d 1361, 1365 (Fed. Cir. 2006)) (internal
quotation marks omitted).

9See, e.g., LML Holdings, Inc. v. Pacific Coast Distributing, Inc., No. Ilcv06173, 2012 WL
1965878, *5 (N.D. Cal. May 30, 2012) (noting that plaintiff there could not "cite a single case in
which the fact that a suit was filed was grounds for a finding that an infringer's post-filing
conduct... [was] willful[]").
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A close examination of the amended complaint at issue makes clear that Rembrandt has
not adequately pled pre-suit knowledge for willful infringement. As noted above, Rembrandt

has failed to allege any facts that would support a plausible inference that defendants had pre-suit
knowledge of the patents in issue. At most, Rembrandt has pled various facts that make it

conceivable that Facebook might have learned about the patents in issue, but Rembrandt has not
pled sufficient facts to invite the plausible inference that Facebook had the requisite pre-suit

knowledge of either patent. Accordingly, the claims for willful infringement must be dismissed.
V.

Analysis next proceeds to defendants' argument that plaintiffs allegation of direct

infringement of claim 7—the system claim—fails because the system is used and made by the
end user—the consumer—not defendants.

The Federal Circuit recently made clear that "to 'use' a system for purposes of
infringement [of a system claim], a party must put the invention into service, i.e., control the

system as a whole and obtain benefit from it." Centillion Data Systems, LLC v. Qwest Comms.

Int'I, Inc., 631 F.3d 1279, 1284 (Fed. Cir. 2011). Importantly, this does not mean that a party
must exercise direct control over each individual element of the system; instead, "direct

infringement by 'use' of a system claim "requires a party ... to use each and every ... element
of a claimed [system].'" Id. (quoting NTP, Inc. v. Research in Motion, Ltd., 418 F.3d 1282, 1317

(Fed. Cir. 2005)) (alterations in original). Similarly, in order to "make" a system under § 271(a),
a putative infringer must "combine all of the claim elements[.]" Id. at 1288.
Centillion is the latest circuit pronouncement concerning infringement of a system claim,

and carefully read, this decision points persuasively to the correct result here. In Centillion, the

claim in issue was a system claim consisting of the following four elements: (1) "storage means

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for storing transaction records," (2) "data processing means for generating summary reports as
specified by a user from the transaction records," (3) "transferring means for transferring the
transaction records and summary reports to a user," and (4) "personal computer data processing
meansadapted to perform additional processing on the transaction records." Centillion, 631 F.3d

at 1281. The first three elements, termed the 'back end' system, were maintained by the service
provider, while the last element, termed the 'front end' system, was maintained by the end user.
Id. On these facts, the Federal Circuit on summary judgment held that Qwest's customers
"used" the system in issue by engaging the "on-demand function where a customer 'seeks

particular and specified information' by creating a query thatthe Qwest back-end system
processes and provides a result for download[.]" Id. at 1285. In the Federal Circuit's words,
The customer controls the system by creating a query and transmitting it to
Qwest's back-end. The customer controls the system on a one request/one
response basis. This query causes the back-end processing to act for its intended
purpose to run a query and return a result. The user may then download the result
and perform additional processing as required by the claim. If the user did not

make the request, then the back-end processing would not be put into service.

Id. Thus, by "causing the system as a whole to perform this processing and obtaining the benefit
of the result, the customer has 'used' the system under § 271(a)." Id. The Federal Circuit further

explained that "it makes no difference that the back-end processing is physically possessed by
Qwest." Id. Likewise, the Federal Circuit also noted that the customers used the system when
they subscribed to the service because in both modes of operation "it is the customer initiated

demand for the service [that] causes the back-end system to generate the requisite reports." Id.

Accordingly, the Federal Circuit concluded that but for the customer's actions, "the entire system
would never have been put into service." Id. The Federal Circuit further concluded that unlike

the customers, Qwest did not, as a matter of law, "use" the system in issue. Although Qwest
made the

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back-end processing elements, it never 'uses' the entire claimed system because it
never puts into service the personal computer data processing means. Supplying
the software for the customer to use is not the same as using the system.

Id. In other words, Centillion's use infringement claim failed because Qwest only used three of
the four elements of the system claim: only the customer used the fourth element.

Similarly, the Federal Circuit held that Qwest did not "make" the system as a matter of
law, because Qwest does not combine all of the claim elements; instead, the "customer, not

Qwest, completes the system by providing the 'personal computer data processing means' and
installing the client software." Id. at 1288. Distilled to its essence, then, Centillion teaches that
an infringer may use a system (i) by causing the system to perform the whole process and
obtaining a benefit, or (ii) by placing into use each element of the claimed system. See id.
Given this, it follows that a result different from Centillion must obtain here because the

complaint alleges that defendants (i) place into use each element of the system or (ii) combine to
use each element of the system. More specifically, Rembrandt alleges that Facebook uses the

claim 7 system through its Facebook Transfer System, wherein Facebook transfers content

specified by Facebook members to Facebook's servers. Rembrandt alleges that the Facebook
Transfer System places into use all three elements of the claim 7 system. In particular,
Rembrandt alleges that the Facebook Transfer System consists of

(i)

"Third-party content-provider webserver memory that stores the Facebook
Transfer Applet that transfers data that has been 'like' or 'shared' by a
Facebook member from the member's Internet browser to a Facebook server,
where it is stored in a Facebook database";

(ii)

"Facebook memory for storing a database containing liked or shared content
with associated links and the above-mentioned transfer applet"; and,

(iii)

"An Internet browser on the Facebook member's computer that is coupled to
both the third-party content-provider webserver memory and the Facebook
memory and which executes the Facebook Transfer Script and the Facebook
Transfer Applet in order to transfer annotated data that has been 'liked' or

14

shared' by a Facebook member from the member's Internet Browser to a
Facebook server, where it is stored in a Facebook database."

Second Amended Complaint. U82. Put simply, Rembrandt alleges that (i) Facebook's Facebook
Transfer System uses all three elements of the claim 7 system, and (ii) Facebook derives a

benefit from its use of this system because it "uses this collected information to provide content
forthe Facebook social network, and to generate targeted advertising to Facebook members."
Second Amended Complaint, ^ 83. Thus, unlike the Centillion defendant, Facebook itself is

alleged to use every element of the claimed system, and accordingly, Rembrandt has adequately
alleged direct infringement of the claim 7 system.
Second, Rembrandt has adequately alleged that defendantsjointly 'use' all three elements

of the claim 7 system. Specifically, Rembrandt alleges that the Facebook-AddThis Transfer
System consists of:

(i)

"AddThis memory that stores the AddThis-Facebook widget that, when
executed, requests that Facebook Transfer Applet that transfers data that has
been 'liked' or 'shared' by a Facebook member from the member's browser to
a Facebook server, where it is stored in a Facebook database";

(ii)

"Facebook memory for storing a database containing liked or shared content
with associated links and the Facebook TransferApplet"; and,

(iii)

"A browser on the Facebook member's computer that is coupled to both the
AddThis memory and the Facebook memory and which executes the
AddThis-Facebook widget and the Facebook Transfer applet in order to
transfer annotated data that has been 'liked' or 'shared' by a Facebook
memory from the member's browser to a Facebook server, where it is stored
in a Facebook database."

Second Amended Complaint, TJ 51. In other words, Rembrandt alleges that the defendants jointly
place into use each element of the claim 7 system. Unlike the Centillion defendant, the

defendants, not the consumers or customers, are alleged to have, themselves, placed into use

each element of the claim 7 system. Accordingly, Rembrandt has adequately alleged that
defendants jointly infringe Claim 7 by 'using' the system.
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Further, Rembrandt has adequately alleged that AddThis directly infringes claim 7 by
'making' the system. In this regard. Rembrandt alleges that AddThis makes the claim 7 system
by making the entire Facebook-Add This Transfer System. Thus, because it is alleged that
AddThis 'makes' the claim 7 system by combining all of the claim elements, it is clear that
Rembrandt has adequately alleged that AddThis directly infringes claim 7.

Defendants argue that the direct infringement claims relating to the claim 7 system fail
because the transfer script and transfer applet are only transferred to, and executed by, the client

browser in response to the Facebook user pressing the 'Like' or 'Share' button. Thus,
defendants argue that the direct infringement claims at issue here are indistinguishable from

those in Centillion. This argument is not persuasive. To begin with, the pressing of the 'like' or
'share' button is not alleged to be an element of the Claim 7 system; instead, it is merely an
action that precedes the operation of the system. Although defendants' use of the system may be
preceded by a Facebook user pressing the 'like' or 'share' button, Rembrandt has adequately
alleged that defendants place into use each element of the claimed system. In other words, even

though defendants' use of the system may be put in motion by the Facebook user, defendants
themselves directly infringe the system because they place into use each element of the claimed
system. In Centillion, by contrast, the putative infringer only placed three of the four elements

into use, with the fourth element being placed into use by the consumer. Importantly, this does
not mean that the Facebook user does not infringe the claimed system when the user clicks on

the 'like' or 'share' button; to the contrary, the users may also infringe the claimed system by
making use of each element. As the Federal Circuit's analysis in Centillion makes clear, a

consumer's direct infringement does not preclude the producer's direct infringement. See
Centillion, 631 F.3d at 1285-86. In other words, direct infringement by a consumer's use of a

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system (here, the pressing of the like' button), does not preclude the direct infringement by the
producers (here, placing into use each clement of the claimed system). Accordingly, the motion
10 dismiss the direct infringement ofclaim 7of the '362 patent must be denied. Ofcourse, the
result reached here in no way decides the ultimate direct infringement question, as the facts may

ultimately develop such that this case will prove to be indistinguishable from Centillion and

require the same result. Yet, it is clear that dismissal is not appropriate at the pleading Stage in
this case because plaintiff has adequately pled the direct infringement of claim 7of the '362
patent.
VI.

For the reasons slated, defendants' motion to dismiss must be granted in part and denied

in part. Defendants' motion to dismiss the claim Tor willful infringement must be granted, and
that claim must be dismissed. Defendants' motion to dismiss the indirect infringement claim

must be granted in part, and denied in part; it must be granted insofar as the claim seeks pre-

filing damages and any claims for damages from indirect infringement must be limited to the

period oftime commencing with the service ofthe complaint. Defendants' motion to dismiss
must be denied in all oilier respects.

An appropriate orderwill issue.
Alexandria, VA
June 12. 2013

T. S. Ellis, HI

United States District Judge

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