-
Trial Court Determination That A Complaint Allegation Is Conclusory Is Subject To De Novo Review
10/22/2024On October 8, 2024, the U.S. Court of Appeals for the Federal Circuit vacated a decision by the District of Connecticut that had dismissed AlexSam, Inc.’s patent infringement claims against Aetna, Inc. AlexSam had alleged that Aetna’s Mastercard-branded and VISA-branded products infringed claims of AlexSam’s U.S. Patent No. 6,000,608 (“’608 patent”).
The ’608 patent, entitled “Multifunction Card System,” covers a debit/credit card capable of performing multiple functions through a central processing hub. The patent expired in 2017. A key issue in the case was a 2005 license agreement between AlexSam and Mastercard, which granted Mastercard a license to process transactions covered by the ’608 patent.
After Aetna filed a motion to dismiss for failure to state a claim, the district court dismissed AlexSam’s claims in its Second Amended Complaint, concluding, inter alia, that AlexSam failed to state a plausible claim of direct patent infringement regarding the VISA products and that Aetna’s Mastercard products were licensed under the 2005 agreement. The court also found deficiencies in AlexSam’s claims of indirect infringement and denied AlexSam’s request to amend its complaint.
The Federal Circuit reviewed the district court’s grant of Aetna’s motion according to Second Circuit law, which requires de novo review “to determine whether the claim is plausible on its face, accepting the material factual allegations in the complaint and drawing all reasonable inferences in favor of the plaintiff.” The Federal Circuit applied its own law to the specific question of whether the complaint states a claim for patent infringement. Notably, the Federal Circuit—for the first time—made clear that trial court determinations as to whether a particular allegation in a complaint is merely conclusory—as opposed to “well-pled and factual,” and thus given a presumption of truth—are subject to de novo review.
In its de novo review, the Federal Circuit found that AlexSam’s Second Amended Complaint adequately alleged a plausible claim that Aetna directly infringed the ’608 patent with respect to the VISA products. The complaint included detailed claim charts and an expert declaration mapping each claim limitation to the accused products, although the court recognized that element-by-element pleading is not required to satisfy the notice standard.
The court also found that AlexSam sufficiently pled its claims of induced and contributory infringement. AlexSam alleged that Aetna knew and intended that its customers would infringe the ’608 patent by using the VISA products. The complaint referenced promotional materials and a notice letter sent to Aetna, which supported a plausible inference of Aetna’s knowledge and intent.
In addition, in analyzing the Mastercard license agreement, the Federal Circuit disagreed with the district court’s interpretation that all transactions associated with Mastercard products were licensed. The court clarified that the license extended only to transactions involving the activation of, or adding value to, an account, and not to all transactions associated with Mastercard. As the court explained in rejecting the district court’s conclusion, “[i]t remains possible—and, as alleged in the Second Amended Complaint, plausible—that transactions involving Aetna’s Mastercard products are both within the scope of AlexSam’s asserted claims and outside the scope of the license.”
Ultimately, the Federal Circuit vacated the district court’s dismissal of AlexSam’s claims and remanded the case for further proceedings, which may include analysis of additional issues the district court did not previously decide. The opinion provides new guidance concerning the sufficiency of well-pled factual allegations in patent infringement cases and appears likely to be cited by plaintiffs defending patent infringement complaints against early motions to dismiss.
