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Gradient Enterprises, Inc v. Skype Technologies S.A.

March 13, 2012

GRADIENT ENTERPRISES, INC., PLAINTIFF,
v.
SKYPE TECHNOLOGIES S.A., SKYPE, INC., DEFENDANTS.



The opinion of the court was delivered by: David G. Larimer United States District Judge

DECISION AND ORDER

INTRODUCTION

On December 21, 2010, plaintiff Gradient Enterprises, Inc. ("Gradient") filed this patent infringement action against Skype, Inc. and Skype Technologies S.A. ("Skype, S.A."). Defendants (who are both represented by the same counsel) have separately moved to dismiss the complaint for failure to state a claim upon which relief can be granted, under Rule 12(b)(6) of the Federal Rules of Civil Procedure.*fn1 For the reasons that follow, defendants' motions to dismiss are granted, and the complaint is dismissed, without prejudice to plaintiff's filing of an amended complaint.

BACKGROUND

The complaint alleges that Gradient is a New York corporation that owns United States Patent No. 7,669,207 ("the '207 patent"). It further alleges that Skype, Inc. is a Delaware corporation with its principal place of business in California. Skype, S.A. is a foreign corporation based in Luxembourg.

The '207 patent was issued in 2010, for a "Method for Detecting, Reporting and Responding to Network Node-Level Events and a System Thereof." Complaint Ex. I. Gradient alleges, on information and belief, that "the defendants manufacture, make, use, sell and/or offer to sell methods and/or systems that infringe at least one or more of the claims of the '207 patent." Complaint ¶ 12. "More particularly," the complaint goes on, "the defendants infringe the '207 patent through their peer-to-peer methods and systems for Voice over Internet Protocol ('VoIP') communications." Complaint ¶ 14. Gradient alleges both that defendants directly infringe the '207 patent, and that they induce or contribute to others' infringement. Complaint ¶¶ 12, 13.

Based on those allegations, Gradient pleads three causes of action. The first asserts a claim for damages, alleging that "defendants have infringed, and continue to infringe, one or more of the claims of the '207 patent by making, using, selling and/or offering for sale systems and methods for detecting, reporting and/or responding to network node-level events," in violation of 35 U.S.C. § 271. The second cause of action seeks injunctive relied, based on the allegation that "defendants have made, used, sold and/or offered to sell systems and methods which infringe the '207 patent and continue to do so in violation of Gradient's rights ... ." The third cause of action seeks a declaratory judgment.

DISCUSSION

On a motion to dismiss under Rule 12(b)(6), the court's task is to determine whether, "accept[ing] the allegations contained in the complaint as true, and draw[ing] all reasonable inferences in favor of the non-movant," the plaintiff has stated a facially valid claim. Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir. 1994). In making that determination, the court must keep in mind that "a plaintiff's obligation ... requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, where a plaintiff "ha[s] not nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Id. at 570.

Although the Twombly standard applies to "all civil actions," Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S.Ct. 1937, 1953 (2009), its applicability to patent cases, particularly those involving claims of direct infringement, is an issue that has divided the courts. The primary reason for that lies with Form 18, which is part of the Appendix of the Federal Rules of Civil Procedure. Titled, "Complaint for Patent Infringement," Form 18 provides a template for asserting a claim of direct patent infringement. That form requires only: (1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that the defendant has been infringing the patent by making, selling, and using the device embodying 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 addition, Rule 84 provides that "[t]he forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate," and that "the practitioner using them may rely on them to that extent." The Supreme Court had no occasion to, and did not, address Form 18 or Rule 84 in Twombly or Iqbal.

The Federal Circuit upheld the validity of a complaint modeled on Form 18 (which was then denominated Form 16) in McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 2007).

The court in McZeal held that "a patentee need only plead facts sufficient to place the alleged infringer on notice as to what he must defend," and that "a plaintiff in a patent infringement suit is not required to specifically include each element of the claims of the asserted patent." Id. at 1357. McZeal was decided after Twombly--which was expressly limited to antitrust actions--but before Iqbal, which made clear that the Twombly pleading standard applies to all federal civil actions. The court in McZeal noted, however, that the plaintiff in that case had appeared pro se, and stated that "the pleadings of pro se litigants should be held to a lesser standard than those drafted by lawyers when determining whether the complaint should be dismissed for failure to state a claim ... ." It is not clear, then, whether the Federal Circuit would, post-Iqbal, hold that a complaint for patent infringement that tracks Form 18 is necessarily sufficient to withstand a motion to dismiss.

Not surprisingly, then, the combination of Twombly, Iqbal, McZeal, Form 18, and Rule 84, has led to differing conclusions among the lower courts about whether a complaint that complies with the minimum requirements of Form 18 suffices to state a claim for direct patent infringement. A number of courts have held that absent a clear repudiation of Form 18 by the Supreme Court, the Federal Circuit, or the applicable regional circuit, see Juniper Networks, Inc. v. Shipley, 643 F.3d 1346, 1350 (Fed. Cir. 2011) ("This court reviews dismissal for failure to state a claim upon which relief can be granted under the law of the regional circuit") (citing McZeal, 501 F.3d at 1355-56), a complaint that conforms to Form 18 suffices to state a claim for direct patent infringement. See, e.g., Discflo Corp. v. American Process Equipment, Inc., No. 11cv00476, 2011 WL 6888542, at *1, *2 (S.D.Cal. Dec. 29, 2011); Wright Mfg. Inc. v. Toro Co., No. MJG--11--1373, 2011 WL 6211172, at *1 (D.Md. Dec. 13, 2011); W.L. Gore & Assocs., Inc. v. Medtronic, Inc., 778 F.Supp.2d 667, 675 (E.D.Va. 2011)); Comfort Inn Oceanside v. Hertz Corp., No. 11--CV--1534, 2011 WL 5238658, at *8 n.11 (E.D.N.Y. Nov. 1, 2011); Automated Transactions, LLC v. First Niagara Fin. Group, No. 10-CV-407, 2010 WL 5819060 (W.D.N.Y. Aug. 31, 2010), Report and Recommendation adopted, 2011 WL 601559 (W.D.N.Y. Feb. 11, 2011).

Other courts, however, have held that because the Twombly/Iqbal pleading standard applies to all civil cases, a patent infringement complaint must do more than simply assert the bare elements of a claim, and that a Form 18-style complaint will not suffice, in the aftermath of Twombly and Iqbal. See, e.g., Bovi Corp. v. Hulu, LLC, No. 11-665, 2012 WL 261982, at *2 (D.Del. Jan. 27, 2012); Illinois Tool Works Inc. v. Elektromanufaktur Zangenstein Hanauer GmbH & Co. KgaA, No. 11-CV-262, 2011 WL 6002967, at *2-*3 ...


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