On March 10, 2014, in Macronix v. Spansion, Civil Action No. 3:13cv679 (E.D. Va. 2014), Judge Robert E. Payne of the Eastern District of Virginia (Richmond Division) granted defendants’ 12(b)(6) motion to dismiss plaintiff’s direct infringement claims, finding that plaintiff’s direct infringement allegations did not meet the pleading requirements set forth by the Supreme Court in Twombly and Iqbal. In those decisions, the Supreme Court held that “factual allegations must be enough to raise a right to relief above the speculative level,” and “labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.”
We believe this is one of the first district court decisions holding that compliance with Form 18 to plead direct infringement is no longer sufficient to overcome a motion to dismiss for failure to state a claim. This decision also comes on the heels of Congressional patent reform legislation seeking to require plaintiffs to provide more particularized theories of infringement at the outset of the case, all as part of ongoing efforts to curb abusive patent litigation tactics.
Plaintiffs in patent cases have generally relied on Form 18 from the Federal Rules of Civil Procedure, which simply requires a plaintiff to recite a basis for jurisdiction, the patent number alleged to be infringed, an identification of the accused product, whether plaintiff has complied with the statutory patent marking requirements, and a basic statement for relief. Fed. R. Civ. P. 84 states that “the forms in the Appendix [including Form 18] suffice under these rules…” Indeed, the Federal Circuit Court of Appeals, in In re Bill of Lading, 681, F.3d 1323, 1337 (Fed. Cir. 2012), has held that compliance with Form 18 is sufficient to plead direct infringement.
In his detailed opinion reaching the opposite conclusion, Judge Payne analyzes the Federal Circuit’s decision in Bill of Lading and explains why it did not properly account for Twombly andIqbal, which set a higher standard for notice pleading, applicable to all cases, regardless of Form 18. According to Judge Payne’s decision, patent plaintiffs in his court must: (1) identify which claims from the asserted patents are alleged to be infringed; (2) demonstrate how the claims are infringed; and (3) distinguish between literal infringement and infringement under the doctrine of equivalents. Perhaps in response to the mounting criticism by the defense bar about the high cost of defending patent cases, Judge Payne opined, “it is high time that counsel in patent cases do all of that work before filing a complaint… [t]hat, of course, will serve to winnow out weak (or even baseless) claims and will protect defendant from the need to prepare defenses for many claims that inevitably fall by the way side in patent cases.”
This decision has the potential to have immediate ramifications for patent plaintiffs seeking to file complaints in the Eastern District of Virginia, historically considered a plaintiff-friendly “rocket docket” venue. If Judge Payne’s decision in Macronix is followed by other judges within the Eastern District, plaintiffs seeking to enforce their patents may turn to other districts if they do not care to comply with the heightened pleading standards set forth in this decision.
While many jurisdictions have patent local rules requiring patent plaintiffs to identify the specific claims alleged to be infringed and how they are infringed by reference to the accused products, these disclosures typically come later in the case after a Scheduling Order is in place. Having to identify this information at the pleading stage could strategically alter how plaintiffs and their counsel approach patent cases and will no doubt require additional due diligence up front — in fact, Judge Payne’s opinion strongly intimates that plaintiffs may be expected to engage expert assistance in crafting the allegations in a complaint if they expect to satisfy the Twombly/Iqbalpleading requirements. Moreover, if defendants have early notice as to exactly which claims plaintiffs intend to assert, they will be better equipped to file reexaminations or IPRs and attack only those claims which plaintiff has asserted in its complaint.