In a patent case pending before Judge Selna in the Central
District of California, Defendant Nestlé USA, Inc.
("Nestlé") moved pursuant to Rule 12(b)(6) to
dismiss Plaintiff Network Signatures, Inc.'s ("NSI")
infringement claims under Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007) and Ashcroft v. Iqbal, 129 S.Ct.
1937, 1949 (2009). The Court denied Nestlé's motion
finding that NSI's complaint alleged enough facts to plausibly
state a claim for direct, indirect and willful infringement.
The Court recited the well established legal standard for
attacking a complaint under Twombly and Iqbal:
In resolving a Rule 12(b)(6) motion
under Twombly, the Court must follow a two-pronged approach. First,
the Court must accept all well-pleaded factual allegations as true,
but "[t]hread-bare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice." Id. Most succinctly stated, a pleading must set
forth allegations that have "factual content that allows the
court to draw the reasonable inference that the defendant is liable
for the misconduct alleged." Id. at 1940. Courts
"'are not bound to accept as true a legal conclusion
couched as a factual allegation.'" Id. at 1950 (quoting
Twombly, 550 U.S. at 555). "In keeping with these
principles[,] a court considering a motion to dismiss can choose to
begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth."
Iqbal, 129 S.Ct. at 1950.
Second, assuming the veracity of
well-pleaded factual allegations, the Court must "determine
whether they plausibly give rise to an entitlement to relief."
Id. at 1950. This determination is context-specific, requiring the
Court to draw on its experience and common sense; there is no
plausibility "where the well-pleaded facts do not permit the
court to infer more than the mere possibility of misconduct."
Nestlé argued that NSI had not alleged that Nestlé
performed all of the steps in the patents-in-suit nor did NSI
sufficiently allege that Nestlé controlled or directed third
parties who may have performed the remaining steps. Nonetheless,
the Court rejected this argument and found that the following
allegations sufficiently stated a claim for direct
On information and belief, Defendant
uses digital certificates and digital signatures implemented
through the use of public key infrastructure to facilitate
communication with its employees, business partners, affiliates,
and customers. For example, Defendant enables a computer of a
Defendant customer, affiliate, business partner, or employee
("sending computer") to send a secure communication over
the Internet to another computer ("receiving computer")
by using a confidential private key, and a public key, to digitally
sign the message being sent. When the computer receives the signed
message, it uses the sending computer's public key, and its
private key, to decrypt the signature (collectively referred to as
"Defendant Authentication Activities").
By making, using, selling, and
offering for sale Defendant Authentication Activities, Defendant
has directly infringed and continues to directly infringe the
'122 Patent, including infringement under 35 U.S.C. §
271(a) and (f).
In terms of inducing infringement, the Court concluded that NSI
alleged the two additional elements of knowledge and intent to
induce infringement. Specifically, the Court relied on NSI's
allegations that Nestlé "enables [another's]
computer...to send a secure communication...by using a confidential
private key, and a public key, to digitally sign the message"
in a manner that infringes the '122 Patent" and that
"Defendant had knowledge of the '122 Patent and knew or
should have known that their actions would induce direct
infringement by others and intended that their actions would induce
direct infringement by others." According to the Court, this
was sufficient to state a claim for inducing infringement.
Notably, the Court was not troubled, at least at the pleading
stage, by the fact that NSI did not allege the exact manner in
which Nestlé allegedly enabled the infringing activities of
others. The Court concluded that "[b]y describing in the
Complaint the manner in which the '122 Patent is allegedly
infringed, NSI meets its Twombly/Iqbal burden."
Similarly, the Court found as sufficient to state a claim for
contributory infringement the allegations of direct infringement
(above) coupled with the allegation that "Defendant has also
indirectly infringed and continues to indirectly infringe the
'122 Patent by contributory infringement by providing
non-staple articles of commerce to others for use in an infringing
system or method with knowledge of the '122 Patent and
knowledge that these non-staple articles of commerce are used as a
material part of the claimed invention of the '122
Finally, in terms of alleging willful infringement, the Court
found that allegations of direct infringement and
Nestlé's knowledge of the '122 Patent were
sufficient to allege a claim for willful infringement even though
the complaint did not specifically allege that Nestlé acted
despite an objectively high likelihood that its actions constituted
infringement of a valid patent.
This case illustrates the difficulty of attacking claims of
indirect and willful infringement at the pleading stage, even with
a complaint having only minimal, general allegations supporting
such claims. It is also reinforces that defendants should be
careful not to conflate the requirements of pleading a claim with
proving a claim when attacking claims at the pleading stage.
Network Signatures, Inc. v. Nestlé USA, Inc.,
Case No. SACV 11-1614 JVS (RNBx), Docket No. 25 (C.D. California
April 16, 2012).
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