IP Law Daily, PATENT—NDCal: Sling Media May Have Infringed Patents for Controlling and Monitoring Devices, (Aug 9, 2012)

By Mark Engstrom, J.D.

Joao Control & Monitoring Systems of California, LLC, a company that owned patents for controlling and monitoring devices, could pursue patent infringement claims against Sling Media, Inc., which sold devices that allowed customers to use their computers to transfer television and other video signals to remote locations using the Internet, the federal district court in San Francisco has ruled (Joao Control & Monitoring Systems of California, LLC v. Sling Media, Inc., August 7, 2012, Chen, E.). Sling Media’s motion to dismiss Joao’s direct infringement claims was denied.

Direct Infringement

Direct infringement required a defendant to perform or use each and every step or element of a claimed method or product. In order to plead a direct infringement claim, a plaintiff was required to include in its complaint: (1) an allegation of jurisdiction; (2) a statement that the plaintiff owned the patent; (3) a statement that the defendant had been infringing the patent by making, selling, and using the device that embodied 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. In this case, Joao pled all five requirements.

The court could not address Sling Media’s assertion that each claim of Joao’s patents required a device (the customer’s personal computer) that Sling Media did not make, use, or sell. Addressing that assertion would push the court outside of the pleading requirements established by Form 18 of the Federal Rules of Civil Procedure.

With respect to the allegations of direct infringement, the Court could not conclude that Joao failed to state a viable claim. Because resolution of the parties’ dispute required a construction of Joao’s patent claims, Sling Media’s motion to dismiss the direct infringement claim was denied.

Vicarious Liability

Joao failed to allege a plausible theory of vicarious liability. The company alleged that Sling Media was vicariously liable because it directed and controlled the infringement activities of its customers. More specifically, Joao alleged that Sling Media entered into contracts with its customers by requiring them to: (1) create Sling accounts and (2) install SlingPlayer software before availing themselves of Sling Media’s services. However, asserting that Sling Media provided software that its customers installed was insufficient to allege that the customers were contractually obligated to use the software; nor was it sufficient to allege that Sling Media maintained control over the software’s operation.

To prove patent infringement when more than one party has performed the steps of a method claim, a plaintiff had to show the existence of an agency relationship or other contractual obligation to perform those steps. Vicarious liability attached, the court explained, when a manufacturer contracted the steps of a patented process to another entity. A defendant thus could not avoid liability for direct infringement by having someone else carry out one or more of the claimed steps on its behalf.

In this case, any contract that existed between Sling Media and its customers, whereby the customers would create an account and download software as a prerequisite for the use of Sling Media products, did not obligate those customers to do anything under Sling Media’s control. Nor did it require any action by the customers on behalf of Sling Media. The customers simply did not act as Sling Media’s agent under traditional agency theory.

Unlike indirect infringement, which required a showing of intent, direct infringement was a strict liability offense. It was therefore important for courts to distinguish the circumstances in which an alleged infringer gave a third party the tools to infringe (indirect infringement) from the circumstances in which an alleged infringer engaged in infringement activities by itself and through its agents (direct infringement). Under Joao’s proposed approach, a patentee would rarely, if ever, need to bring a claim for indirect infringement.

Because Joao’s allegations fell “more properly within an indirect infringement theory,” Sling Media’s motion to dismiss Joao’s direct infringement claims was granted to the extent that the claims were based on vicarious liability for the infringement activities of Sling Media’s customers.

Indirect Infringement

Joao expressly removed its indirect infringement claims in a prior round of amendments. Because it failed to allege indirect infringement in two rounds of complaints, Joao was not allowed to amend its complaint to re-allege those allegations. Joao proffered nothing to show that its decision to re-assert the abandoned claim was justified by newly discovered facts or changes in the law. Nor did it show any other good cause for reneging on its earlier decision to waive the claim for indirect infringement.

The case number is C-11-6277 EMC

Dara Jeffries (Henninger Garrison Davis LLP) for Joao Control & Monitoring Systems of California, LLC). Scott Casey Moore (Morrison & Foerster LLP) for Sling Media, Inc.

Cases: Patent CaliforniaNews