IP Law Daily, TOP STORY—FedCir: Dismissal of Patent Infringement Claims Under Incorrect Pleading Standard Reversed, (Apr 19, 2013)

By William Zale, J.D.

To state a direct patent infringement claim, a patent holder need not preemptively identify and rebut potential non-infringing alternatives to practicing the claims of the asserted patent, the U.S. Court of Appeals for the Federal Circuit has ruled (K-Tech Telecommunications, Inc. v. Time Warner Cable, Inc., April 18, 2013, O’Malley, K.). Because K-Tech Telecommunications’ direct infringement claims satisfied the pleading standard of Form 18 of the Federal Rules of Civil Procedure, the court reversed dismissal of K-Tech’s suits against Time Warner Cable (TWC) and DirecTV and remanded the cases for further consideration.

K-Tech asserted infringement of four patents relating to digital television, U.S. Patent Nos. 6,785,903, 7,487,533, 7,761,893 and 7,984,469. K-Tech alleged that TWC and DirecTV infringe the patents by making, selling, and offering to sell systems and methods for modifying a major channel number, a minor channel number, and/or a carrier frequency to identify a television program.

K-Tech contended on appeal that its amended complaints complied with Rule 18 and that the district court applied the incorrect standard in analyzing the sufficiency of each complaint. DirecTV and TWC argued that the sufficiency of a complaint with respect to Form 18 must be interpreted consistently with the Supreme Court’s decisions in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009)., as well as Ninth Circuit law. The defendants also maintained that the amended complaints failed to meet either the plain language of Form 18 or the form interpreted through the lens of Twombly and Iqbal.

Federal Rule of Civil Procedure 84 states that “the forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate.” The court noted that, in R+L Carriers, Inc. v. DriverTech LLC (In re Bill of Lading Transmission & Processing System Patent Litigation), 681 F.3d 1323, 1334 (Fed. Cir. 2012), it had it made it clear that, to the extent any conflict exists between Twombly (and its progeny) and the Forms regarding pleadings requirements, the Forms control. A complaint containing just enough information to satisfy a governing form may well be sufficient under Twombly and Iqbal, the court added.

The court found that the district court applied the wrong standard to K-Tech’s complaints in requiring that a plaintiff preemptively identify and rebut potential non-infringing alternatives to practicing the claims of an asserted patent. Form 18 includes no indication that a patent holder must prospectively anticipate such noninfringement arguments, the court said.

DirecTV and TWC argued that K-Tech failed in its obligations under Form 18 by not identifying an infringing device or adequately connecting any alleged activity to the asserted patents. The court did not read Form 18—or R+L Carriers—to require that a plaintiff identify an accused device by name. That K-Tech cannot point to the specific device or product within TWC’s or DirecTV’s systems that translates the digital television signals each receives—especially when the operation of those systems is not ascertainable without discovery—should not bar K-Tech’s filing of a complaint, in the court’s view. A defendant cannot shield itself from a complaint for direct infringement by operating in such secrecy that the filing of a complaint itself is impossible. Nor is a defendant immune from a direct infringement claim because he does not make a “device” but, rather, infringes through a system or method, according to the court.

The touchstones of an appropriate analysis under Form 18 are notice and facial plausibility, the court said. K-Tech’s amended complaints in both actions satisfy these standards, the court determined. DirecTV and TWC know what K-Tech’s patents claim, and they know what K-Tech asserts their systems do, and why. K-Tech alleged that DirecTV and TWC must and do modify or “translate” digital signals they receive, and it has alleged that they do so using K-Tech’s patented methods and systems. The court held these allegations adequate to satisfy Form 18 and, thus, to satisfy the governing pleading standards.

In a concurring opinion, Circuit Judge Wallach agreed with the outcome reached by the majority, and with its context-driven analysis of Form 18 compliance. Judge Wallach disagreed with the “dictum” that “the Forms control” over the Supreme Court’s plausibility standard set forth in Iqbal and Twombly.

The case numbers are 2012-1425 and 2012-1446.

Attorneys: Patrick F. Bright (Wagner, Anderson & Bright, PC) for K-Tech Telecommunications, Inc. David S. Benyacar (Kaye Scholer, LLP) for Time Warner Cable, Inc. Darin W. Snyder (O’Melveny & Myers, LLP) for DirecTV.

Companies: K-Tech Telecommunications, Inc.; Time Warner Cable, Inc.; DirecTV

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