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Defenshield Inc v. First Choice Armor

March 29, 2012


The opinion of the court was delivered by: Hon. Glenn T. Suddaby, United States District Judge


Currently before the Court in this patent infringement action filed by Defenshield, Inc. ("Plaintiff") against First Choice Armor & Equipment, Inc., and D-Back Acquisition Co. ("Defendants"), is Defendants' motions to dismiss for failure to state a claim and to transfer venue to the Western District of North Carolina. (Dkt. No. 11.) For the reasons set forth below, Defendants' motions are denied.


A. Plaintiff's Claims

Plaintiff filed its Amended Complaint in this action on September 22, 2010. (Dkt. No. 5.) Generally, liberally construed, Plaintiff's Amended Complaint alleges as follows. On June 21, 2005, Plaintiff was awarded United States Patent No. 6,907,811 ("'811 patent") describing its Mobile Defensive Fighting Position ("MDFP"), a portable ballistics shield used to protect both government and private security personnel. (Id.) Defendants make, sell, offer to sell, use and/or import a similar ballistics shield referred to as the "Rolling Bunker," which contains each and every element of at least one claim of the '811 patent. (Id.) Defendants sell and/or offer to sell the Rolling Bunker to the public and governmental entities, including Fort Drum in Jefferson County, New York. (Id.)

Based on these factual allegations, Plaintiff's Amended Complaint claims that Defendants' manufacture and sale of the Rolling Bunker to government and public customers infringes on Plaintiff's rights as the holder of the '811 patent and constitutes patent infringement under 35 U.S.C. § 271. (Id.) Familiarity with the factual allegations supporting these claims in Plaintiff's Amended Complaint is assumed in this Decision and Order, which is intended primarily for review by the parties. (Id.)

B. Defendants' Motion

On October 25, 2010, Defendants filed a motion to dismiss, pursuant to Fed. R. Civ. P. 12(b)(6), and a motion to transfer venue, pursuant to 28 U.S.C. § 1404(a). (Dkt. No. 11.) Generally, in support of its motions, Defendants argue as follows: (1) pursuant to 28 U.S.C. § 1498, a claim for patent infringement can not be sustained against a government contractor when the patented invention is used or manufactured by or for the United States; (2) because 28 U.S.C. § 1498 relieves the Defendants of liability, the portion of the Plaintiff's infringement claim that is based on the sales offer of the "Rolling Bunker" to Fort Drum must be dismissed with prejudice because the Plaintiff failed to state a claim on which relief can be granted; and (3) without the conduct involving Fort Drum as a basis for Plaintiff's Amended Complaint, there is little, if any, connection to the Northern District of New York, and this action should be transferred to the Western District of North Carolina, which is the center of gravity of this litigation. (Dkt. No. 11, at 1-5 [Defs.' Memo. of Law].)

Generally, in its response, Plaintiff argues as follows: (1) Defendants cannot meet the burden of proof required by 28 U.S.C. § 1498, which is an affirmative defense, in a Fed. R. Civ. P. 12(b)(6) motion; (2) Defendants cannot point to anything in the Amended Complaint that demonstrates that Defendants acted with the authorization or consent of the government as required to prevail under 28 U.S.C. § 1498; (3) a single non-governmental sale can be sufficient to render inapplicable the de minimis exception of 28 U.S.C. § 1498, and give the Court jurisdiction over the entire claim; (4) the Court has no authority to split Plaintiff's infringement claim into two whereby Plaintiff would be forced to maintain an action for infringement against the government pursuant to 28 U.S.C. § 1498 and another action against Defendants pursuant to 35 U.S.C. § 271; and (5) this action should not be transferred because the Court should give Plaintiff's choice of forum deference. (Dkt. No. 17.)

Generally, in its reply, Defendants argue as follows: (1) Plaintiff alleged facts in its Amended Complaint that plausibly suggest the existence of all elements of 28 U.S.C. § 1498, including that the United States Army authorized Defendants' actions when the Army specifically described Plaintiff's device in its Request for Quote ("RFQ"); (2) the de minimis exception applies only when a defendant seeks to dismiss a plaintiff's complaint in its entirety, and therefore it does not apply in this case because Defendants seek to dismiss only the portion of the Amended Complaint relating to the Fort Drum sale; and (3) Plaintiff's choice of forum should not be given deference beacause venue is not proper in the Northern District of New York because the Court lacks personal jurisdiction. (Dkt. No. 19.)


A. Legal Standard Governing a Motion to Dismiss for Failure to State a Claim Pursuant to Fed. R. Civ. P. 12(b)(6) It has long been understood that a defendant may base a motion to dismiss for failure to state a claim upon which relief can be granted on either or both of two grounds: (1) a challenge to the "sufficiency of the pleading" under Fed. R. Civ. P. 8(a)(2); or (2) a challenge to the legal cognizability of the claim. Jackson v. Onondaga Cnty., 549 F. Supp.2d 204, 211, nn. 15-16 (N.D.N.Y. 2008) (McAvoy, J., adopting Report-Recommendation on de novo review).

Because such motions are often based on the first ground, a few words on that ground are appropriate. Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2) [emphasis added]. In the Court's view, this tension between permitting a "short and plain statement" and requiring that the statement "show[]" an entitlement to relief is often at the heart of misunderstandings that occur regarding the pleading standard established by Fed. R. Civ. P. 8(a)(2).

On the one hand, the Supreme Court has long characterized the "short and plain" pleading standard under Fed. R. Civ. P. 8(a)(2) as "simplified" and "liberal." Jackson, 549 F. Supp.2d at 212, n.20 (citing Supreme Court case). On the other hand, the Supreme Court has held that, by requiring the above-described "showing," the pleading standard under Fed. R. Civ. P. 8(a)(2) requires that the pleading contain a statement that "give[s] the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Jackson, 549 F. Supp.2d at 212, n.17 (citing Supreme Court cases) (emphasis added).

The Supreme Court has explained that such fair notice has the important purpose of "enabl[ing] the adverse party to answer and prepare for trial" and "facilitat[ing] a proper decision on the merits" by the court. Jackson, 549 F. Supp.2d at 212, n.18 (citing Supreme Court cases); Rusyniak v. Gensini, 629 F. Supp.2d 203, 213 & n.32 (N.D.N.Y. 2009) (Suddaby, J.) (citing Second Circuit cases). For this reason, as one commentator has correctly observed, the "liberal" notice pleading standard "has its limits." 2 Moore's Federal Practice § 12.34[1][b] at 12-61 (3d ed. 2003). For example, numerous Supreme Court and Second Circuit decisions exist holding that a pleading has failed to meet the "liberal" notice pleading standard. Rusyniak, 629 F. Supp.2d at 213, n.22 (citing Supreme Court and Second Circuit cases); see also Ashcroft v. Iqbal, 129 S.Ct. 1937');">129 S. Ct. 1937, 1949-52 (2009).

Most notably, in Bell Atl. Corp. v. Twombly, the Supreme Court reversed an appellate decision holding that a complaint had stated an actionable antitrust claim under 15 U.S.C. § 1. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955 (2007). In doing so, the Court "retire[d]" the famous statement by the Court in Conley v. Gibson, 355 U.S. 41, 45-46 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Twombly, 127 S. Ct. at 1968-69. Rather than turning on the conceivability of an actionable claim, the Court clarified, the "fair notice" standard turns on the plausibility of an actionable claim. Id. at 1965-74. The Court explained that, while this does not mean that a pleading need "set out in detail the facts upon which [the claim is based]," it does mean that the pleading must contain at least "some factual allegation[s]." Id. at 1965. More specifically, the "[f]actual allegations must be enough to raise a right to relief above the speculative level [to a plausible level]," assuming (of course) that all the allegations in the complaint are true. Id.*fn1

As for the nature of what is "plausible," the Supreme Court explained that "[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "[D]etermining whether a complaint states a plausible claim for relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. . . . [W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged--but it has not show[n]--that the pleader is entitled to relief." Iqbal, 129 S.Ct. at 1950 [internal quotation marks and citations omitted]. However, while the plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully," id., it "does not impose a probability requirement." Twombly, 550 U.S. at 556.

Because of the requirement of factual allegations plausibly suggesting an entitlement to relief, "the tenet that a court must accept as true all of the allegations contained in the complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by merely conclusory statements, do not suffice." Iqbal, 129 S. Ct. at 1949. Similarly, a pleading that only "tenders naked assertions devoid of further factual enhancement" will not suffice. Iqbal, 129 S.Ct. at 1949 (internal citations and alterations omitted). Rule 8 "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Id.

Finally, a few words are appropriate regarding what documents are considered on a motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Fed. R. Civ. P. 12(b)(6). For purposes of Fed. R. Civ. P. 12(b)(6), "[t]he complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2009) (internal quotation marks and citations omitted); see also Fed. R. Civ. P. 10(c) ("A copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes."). Moreover, "when a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint," the court may nevertheless take the document into consideration in deciding the defendant's motion to dismiss, without converting the proceeding to one for summary judgment." Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (per curiam) (internal quotation marks and citation omitted).

B. Legal Standard Governing the Consideration of Documents Outside the Pleadings Pursuant to Fed. R. Civ. P. 12(d) Rule 12(d) of the Federal Rules of Civil Procedure provides that "[i]f, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56[, and] [a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion." Fed. R. Civ. P. 12(d). However, such conversion is not necessary if the "matters" in question consist of (1) documents attached to the complaint or answer, (2) documents incorporated by reference in the complaint (and provided by the parties), (3) documents that, although not incorporated by reference, are "integral" to the complaint, or (4) any matter of which the court can take judicial notice for the factual background of the case. L-7 Designs, Inc. v. Old Navy, LLC, No. 10-CV-0573, 2011 WL 2135734, at *1 (2d Cir. June 1, 2011)."Where a document is not incorporated by reference, the court may nevertheless consider it where the complaint relies heavily upon its terms and effect, thereby rendering the document 'integral' to the complaint . . . . However, even if a document is 'integral' to the complaint, it must be clear on the record that no dispute exists regarding the authenticity or accuracy of the document. It must also be clear that there exist no material disputed issues of fact regarding the relevance of the document." DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (internal quotation marks omitted).

C. Legal Standard Governing a Defendants Pursuant to 28 U.S.C. § 1498(a) Section 1498(a) of Title 28 of the United States Code provides as follows:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner . . . the owner's remedy shall be by action against the United States in the United States Court of Federal Claims. For the purposes of this section, the use or manufacture of an invention described in and covered by a patent of the United States by a contractor, a subcontractor, or an person, firm, or corporation for the Government and with the authorization or consent of the Government, shall be construed as use or manufacture for the United States.

28 U.S.C. § 1498(a). In passing this statute, Congress erected safeguards protecting the government's procurement process by insulating contractors from infringement actions that may otherwise disrupt the supply chain. Coakwell v. U.S., 372 F.2d 508, 511 (Ct. Cl. 1967)(citing Richmond Screw Anchor Co. v. United States, 275 U.S. 331, 343 [1928] [addressing the predecessor to 28 U.S.C. § 1498, the Naval Appropriations Act of 1918]). Under this statute, the United States waives sovereign immunity and assumes liability for certain claims against its contractors. See Zoltek Corp. v. U.S., 51 Fed. Cl. 829, 835 (Fed. Cl. 2002) ("[P]atent infringement by the government constitutes a taking under the eminent domain theory . . ., [and t]he Supreme Court has repeatedly held that the Constitution requires that the government provide a remedy for all . . . takings."); see also Windsurfing Int'l, Inc. v. Ostermann, 534 F. Supp. 581, 588 (S.D.N.Y. 1982). In doing so, 28 U.S.C. § 1498(a) creates a cause of action lying exclusively against the United States for the specific activities described therein. TDM Am., LLC v. U.S., 85 Fed. Cl. 774, 781 (Fed. Cl. 2009); Crater Corp. v. Lucent Techs. Inc., 255 F.3d 1361, 1364 (Fed. Cir. 2001). However, when a patent holder files an infringement action against a private government contractor, 28 U.S.C. § 1498(a) acts as an affirmative defense rather than a jurisdictional bar. Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379, 1381 (Fed. Cir. 2002) (citing Manville Sales Corp. v. Paramount Sys., Inc., 917 F.2d 544, 554 [Fed. Cir. 1990]); see also Crater Corp. 255 F.3d at 1364; Sperry Gyroscope Co. v. Arma Eng'g Co., 271 U.S. 232, 235-36 (1926) (explaining that the Naval Appropriations Act of 1918, the predecessor to 28 U.S.C. § 1498, created an affirmative defense rather than a jurisdictional bar).

A private government contractor invoking 28 U.S.C. § 1498(a) as an affirmative defense in an infringement suit is required to show that (1) the device was manufactured for the government, and (2) the government authorized, or consented to, the manufacture of the device. Sevenson Envt'l., Inc. v. Shaw Envt'l., Inc., 477 F.3d 1361, 1365 (Fed. Cir. 2007) (citing Hughes Aircraft Co. v. U.S., 534 F.2d. 889, 897-98 [Ct. Cl. 1976]). The first prong is satisfied when the patented device is manufactured pursuant to a government contract and for the benefit of the government. Sevenson, 477 F.3d at 1366. When the patented device is offered for sale in response to a government bid solicitation, the infringement is considered to be for the government. TVI Energy Corp. v. Blane, 806 F.2d 1057, 1060 (Fed. Cir. 1986) (holding that where the purpose of the infringement was to comply with the government's bidding requirements, such action satisfies the requirements of 28 U.S.C. § 1498[a]).

At the bidding stage of the procurement process, the government's consent or authorization of the manufacture or use of a patented device (the second prong of 28 U.S.C. § 1498) can be either explicit or implicit. The government explicitly authorizes, or consents to, infringement by including a clause permitting the use of a device described in a United States patent in a bid solicitation. See Crater Corp. v. Lucent Tech., Inc., 255 F.3d 1361, 1368 (Fed. Cir. 1976) (holding that use of form authorization and consent language in a government contract established the second element of the affirmative defense); see also 48 C.F.R. § 27.201-2(a)(1) (stating that the form "Authorization and Consent" clause at 48 C.F.R. § 52.227--1 should be used in bid solicitations). Where the 48 C.F.R. § 52.227-1 "Authorization and Consent" clause (or equivalent language) is not present in the solicitation, the government gives explicit authorization by including specifications that absolutely require the bidder to infringe a government patent. TVI, 806 F.2d at 1060 (finding that although not necessary, such specifications are sufficient to establish explicit authorization). The purpose of 28 U.S.C. § 1498 is to protect the government's procurement process by expanding the pool of eligible bidders beyond a single patent holder. TVI, 806 F.2d at 1060. In the context of a bid solicitation, 28 U.S.C. § 1498 is broadly applied so that it does not cut the government off from bidders and potential suppliers. Id.

D. Legal Standard Governing a Motion to Transfer Venue

A district court may decide to transfer an action to another district in the interest of justice and for the convenience of the parties and witnesses. 28 U.S.C. § 1404(a) ("For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."); see also Ferens v. John Deere Co., 494 U.S. 516, 530 (1990); Lead Indus. Ass'n v. Occupational Safety & Health Admin., 610 F.2d 70, 79 n.17 (2d Cir. 1979) (citing cases); Kelly v. Kelly, 911 F. Supp. 70, 71 (N.D.N.Y. 1996) (Hurd, J.). "The purpose of section 1404(a) is to prevent the waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense." Flaherty v. All Hampton Limousine, Inc., 01-CV-9939, 2002 WL 1891212, at *1 (S.D.N.Y. Aug. 16, 2002) (internal quotation marks omitted). When considering whether to transfer a case, a district court must conduct "a two-part test: (1) whether the action to ...

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