District Court Rules That Plaintiff Must Plead Facts Beyond Mere Knowledge In Complaint For Willful Infringement
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  • District Court Rules That Plaintiff Must Plead Facts Beyond Mere Knowledge In Complaint For Willful Infringement

    On July 13, 2020, the United States District Court for the Eastern District of Michigan issued a ruling on a motion to dismiss claims relating to willfulness, induced, and contributory infringement.  Michigan Motor Techs. LLC v. Volkswagen Aktiengesellschaft, Case No. 19-10485 (E.D. Mich. July 13, 2020).  The Court granted the motion after finding that plaintiff had not met the pleading requirements from Fed. R. Civ. P. 8(a)(2), and specifically ruled that an allegation of willful infringement for enhanced damages requires a pleading of egregious conduct.

    On January 6, 2020, plaintiff filed a second amended complaint alleging that defendants’ “electronic throttle control system,” which links an accelerator to a car engine electronically to ensure that the engine responds to the driver’s commands, infringes four of its patents.  Plaintiffs alleged direct, willful, induced, and contributory infringement.  Defendants moved to dismiss the willful, induced, and contributory infringement claims under Fed. R. Civ. P. 12(b)(6), arguing that the “facts pleaded in the second amended complaint are woefully insufficient to support those theories of recovery or enhanced damages under 35 U.S.C. § 284.”

    The Court initially noted that the sufficiency of plaintiff’s complaint is governed by Fed. R. Civ. P. 8(a)(2), which is a “purely procedural issue.”  Accordingly, the complaint must be analyzed under the “applicable law of the regional circuit.”

    Turning to plaintiff’s willful infringement claim for enhanced damages, the Court noted that a finding of willful infringement “is committed to the trial court’s discretion.”  The Court walked through the Supreme Court’s ruling in Halo Elecs., Inc. v. Pulse Elecs., Inc., --- U.S. ---, 136 S. Ct. 1923, 1932 (2016), which abrogated the prior Seagate test for determining whether willful infringement had occurred.  Importantly, the Court noted that in the aftermath of Halo, district courts have been split as to whether an allegation of willful infringement, without evidence of egregiousness (i.e., an allegation of knowledge of the patent alone), is futile.

    In the present case, the Court noted that “numerous district courts” have embraced Justice Breyer’s concurrence in Halo, which “suggests that [mere knowledge] is not sufficient,” while a “minority view” has held that “simply alleging that a defendant was aware of a patent before infringing it is enough to survive a motion to dismiss a willful infringement claim.”  The Michigan Court adopted the view that knowledge alone is insufficient, ruling that the minority view runs counter to Justice Breyer’s concurrence and “undermines the Court’s prescription that enhanced damages can only be supported by conduct that is egregious.  Prior knowledge, therefore, is a necessary but not a sufficient condition for an award of enhanced damages.”

    Plaintiff’s pleadings relating to willful infringement were limited to the following:

    37.  Defendants were made aware of the patents-in-suit at least as early as March 4, 2015, when [they were] provided notice of the patents via letter [; and]
    42.  On information and belief, since Defendants received notice of the patents, Defendants’ infringement has been and continues to be willful.
    The Court ruled that these allegations “come up short” under its willfulness framework.  First, plaintiff’s assertion that defendants were made aware of the patents in suit through a letter, without any proof of the contents of the letter or that it was actually sent to defendants was “purely conclusory.”  Second, even if knowledge were properly pled, such knowledge “is not enough to sustain a willful infringement claim for enhanced damages,” as “plaintiff never alleged facts that could support a conclusion that defendants’ conduct rose to the level of egregiousness that might support an award of enhanced damages.”  Accordingly, the Court ruled that “[t]he allegations in the second amended complaint are not sufficient to alleged willful infringement.  They do not support enhanced damages.”

    The Court further ruled that plaintiff failed to plead induced infringement, which requires facts plausibly showing that the accused infringer specifically intended for another party to infringe and knew that the other party’s acts constituted infringement.  Plaintiff’s statement that the infringing conduct “include[d] distributing the Accused Instrumentalities and providing materials and/or services related to the Accused Instrumentalities” was not sufficient to plead specific intent or knowledge.  Similarly, plaintiff failed to plead contributory infringement, which requires a pleading of “facts that allow an inference that the components sold or offered for sale have no substantial non-infringing uses.”  The Court ruled that the complaint did not identify any specific component that allegedly contributorily infringed the patent, or that defendants knew that any products lacked non-infringing uses.

    Accordingly, the Court granted defendant’s motion to dismiss the complaint with regards to willful, induced, and contributory infringement.

    This case highlights the split amongst district courts as to whether pleading knowledge alone is sufficient to allege willful infringement and suggests that a growing number of courts require more.

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