E-Alert Case Updates

U.S. District Court Examines Pleading Standard for Willful Patent Infringement Claims

Spherix Incorporated and NNPT, LLC v. Juniper Networks, Inc.
No. 14-578 (United States District Court for the District of Delaware, March 30, 2015)
by Richard J. Medoff, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ded.uscourts.gov/sites/default/files/opinions/slr/2015/march/14-578.pdf

In Spherix Incorporated and NNPT, LLC v. Juniper Networks, Inc., a case involving a motion to dismiss claims of willful patent infringement pursuant to Federal Rule of Civil Procedure 12(b)(6), the United States District Court for the District of Delaware concluded that the plaintiffs’ amended complaint did not contain sufficient facts to satisfy the two-pronged standard for establishing willful infringement set forth by the Federal Circuit. Thus, Judge Sue L. Robinson granted the defendant’s motion to dismiss.

By way of factual background, on May 2, 2014, plaintiff Spherix Incorporated ("Spherix") filed suit against defendant Juniper Networks, Inc. ("defendant") alleging willful infringement of United States Patent Nos. RE40,467 ("the 467 patent"); 6,578,086 ("the 086 patent"); 6,130,877 ("the 877 patent"); 7,664,123 ("the 123 patent"); and 8,607,323 ("the 323 patent''). On July 8, 2014, plaintiff filed an amended complaint adding co-plaintiff NNPT, LLC (collectively with Spherix, "plaintiffs").

The court began its Rule 12(b)(6) analysis by noting that the Federal Circuit has set forth a two-pronged standard for establishing willful patent infringement that includes an objective and a subjective prong. Regarding the objective prong, the court explained that “a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent,” and that the “state of mind of the accused infringer is not relevant to this objective inquiry.” In re Seagate Technology LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007). At the pleading stage, the court explicated, a plaintiff alleging a cause of action for willful infringement must "plead facts giving rise to at least a showing of objective recklessness of the infringement risk." St. Clair Intellectual Prop. Consultants, Inc. v. HewlettPackard Co., 2012 WL 1134318, at *2-3 (D. Del. Mar. 28, 2012).

If the objective prong is satisfied, the court then considers the subjective prong of the analysis. To satisfy the subjective prong, the court explained, “a patentee must establish that [the] objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer." Id. The court noted that the subjective prong “hinges on the fact finder's assessments of the credibility of witnesses.” LG Elecs. U.S.A., Inc. v. Whirlpool Corp., 798 F. Supp. 2d 541, 557 (D. Del. 2011); Liquid Dynamics Corp. v. Vaughan Co., 449 F.3d 1209, 1225 (Fed. Cir. 2006). The court further explained that "actual knowledge of infringement or the infringement risk need not be pled,” however, the complaint "must adequately allege 'factual circumstances in which the patents-in-suit [are] called to the attention' of the defendants." MONEC Holding AG v. Motorola Mobility, Inc., 897 F. Supp. 2d 225, 236 (D. Del. 2012).

The court then turned to the facts of the case. First, the court noted that the amended complaint stated that defendant had knowledge of the RE467 patent, the 323 patent, the 086 patent, and the 877 patent because the defendant participated in a patent auction in 2011, and each of those patents were part of the patent portfolio for sale. Plaintiffs argued that defendant would certainly have "carefully reviewed the patents it sought to acquire" and, "[a]t a minimum, ... would have almost certainly analyzed those patents that were 'relevan[t] to Juniper's products and services' and those which [defendant] likely infringed, during its participation in the auction." The court, however, disagreed. Citing LG Display Co. v. AU Optronics Corp., and noting that the portfolio contained more than 6,000 patents, the court declined to infer knowledge of the four specific patents from defendant’s participation in a bidding process on the patent portfolio. See 722 F. Supp. 2d 466, 471 (D. Del. 2010) (Following a bench trial, the court found that "LGD was not the purchaser of these patents, and the evidence is unclear as to the extent of LGD's interest and involvement in the potential purchase.").

Next, regarding the 123 patent, plaintiffs alleged that defendant had knowledge as of July 19, 2012, when an examiner at the U.S. Patent & Trademark Office (“PTO”) applied the 123 patent as prior art against defendant’s then-pending Patent Application No. 12/710,164 (now U.S. Patent No. 8,687,629). Plaintiffs further alleged that in 2013, defendant had cited the 123 patent as potentially relevant to a PTO examiner responsible for examining another one of defendant’s patents, U.S. Patent No. 8,560,660. The court, however, was not persuaded. To the court, the fact that the 123 patent was “referenced during prosecution” of two of defendant’s patents was “not compelling evidence of knowledge, i.e., that the patent was ‘called to the attention’ of defendant.” In support of that position, the court noted that the defendant owned over 1,700 patents, and that the 123 patent was one of thirty-one references cited by the PTO examiner during the prosecution of defendant’s 8,687,629 patent.

Under those circumstances, the court concluded that the facts pled in plaintiffs’ amended complaint were insufficient to satisfy the two-pronged standard for establishing a cause of action for willful patent infringement set forth by the Federal Circuit. Accordingly, the court granted defendant’s motion to dismiss plaintiffs’ allegations of willful infringement.