After a series of “Dead on Arrivals” from the Northern District of Illinois, the Federal Circuit on Tuesday resuscitated a patent infringement suit filed by Nalco Company against Chem-Mod, LLC, and others in the Northern District of Illinois when it reversed the district court’s dismissal of Nalco’s complaint. In a precedential opinion, the Federal Circuit found that Nalco’s complaint not only “clearly exceeds the minimum [pleading] requirements” with respect to direct infringement, but it also adequately pled divided infringement, infringement under the doctrine of equivalents, and willful infringement.
The patent at issue is related to a method for the removal of elemental mercury from the flue gas created by combustion in coal-fired power plants. While removing such a toxic pollutant is certainly important, the technology claimed in the asserted patent was far less important to the Federal Circuit in this appeal than in other patent infringement cases because the case had not ever progressed past the pleading stage. The tortured path that eventually led to the Federal Circuit included three rounds at the district court level in which Nalco pled its infringement case in a level of detail that one would typically expect to see at a much later stage in a patent infringement case. In Round 1, Nalco alleged in its first amended complaint that the defendants directly and indirectly infringed the asserted patent with reference to Chem-Mod’s dual injection of two additives (“Chem-Mod Solution”). The district court granted the defendants’ motion to dismiss the first amended complaint concluding that it could not support a finding of direct infringement because the asserted patent “differs from the Chem-Mod™ Solution in both when it is applied . . . and how it is applied . . . .” Nalco’s indirect infringement claim was also dismissed based on failure to state a claim for direct infringement.
In Round 2, Nalco attempted to revive the suit through filing a second amended complaint alleging infringement of the asserted patent through the use of the Chem-Mod Solution and further explaining that the claims of the asserted patent do not restrict when, where, or how the injecting step is performed. Nalco even went so far in its second amended complaint to incorporate infringement contentions in its pleading. The defendants again moved to dismiss. Nalco filed a third amended complaint to replace certain named defendants in an attempt to address the defendants’ arguments, but did not alter its allegations with regard to the infringing activity or the relationships between the defendants. Once again, the district court granted defendants’ motion to dismiss concluding that a) Nalco failed to sufficiently plead facts supporting its allegations that the Chem-Mod Solution is injected as required by the claims of the asserted patent, and b) Nalco failed to allege that defendants direct and control the infringement. Nalco’s indirect infringement and willful infringement claims were also dismissed based on failure to state a claim for direct infringement.
In Round 3, Nalco bolstered its allegations in a fourth amended complaint by submitting more evidence, outlining more detailed theories of direct infringement, adding a theory of infringement under the doctrine of equivalents, and providing more detail about the direct and control of the infringing activity by the defendants. Yet again, the district court granted the defendants’ motion to dismiss finding that the Chem-Mod Solution differs from the asserted patent in both the location and method of application. The district court further explained that its dismissal prior to claim construction was not premature because the facts as pled did not support an undivided claim of direct infringement. Nalco’s indirect infringement and willful infringement claims were also dismissed based on failure to state a claim for direct infringement.
Nalco’s argument on appeal with respect to its direct infringement claim focused on what it considered to be premature claim construction by the lower court. The Federal Circuit agreed and further provided that “[t]he ‘purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits.’” After finding that Nalco had plausibly alleged direct infringement in its complaint, the court also found that Nalco plausibly stated its claims that the defendants direct or control use of the Chem-Mod Solution, infringe under the doctrine of equivalents, indirectly infringe, and willfully infringe.
Unfortunately for Nalco, this “win” at the Federal Circuit only means that Nalco has another chance to begin its case at the district court level (almost four years after filing its initial complaint). While the level of detail in Nalco’s amended complaints was probably unavoidable based on the district court’s repeated dismissals, it is certainly not typical or required. As the Federal Circuit reminded us in its opinion, a plaintiff is not required to prove its direct, indirect, and/or willful infringement case at the pleading stage. Indeed, “[t]he plausibility standard ‘does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence’ to support the plaintiff’s allegations.”
Wondering why it took three dismissals before Nalco appealed the district court’s dismissal orders? Unfortunately for Nalco, the first two times the district court dismissed Nalco’s case were without prejudice, which provided Nalco an opportunity to cure what the court viewed as pleading deficiencies by amending the complaint. Thus, the earlier dismissal orders were not final, appealable orders under 28 U.S.C. § 1291. In fact, it was not until the lower court finally dismissed the case with prejudice (on the third go-around) that the dismissal order became a final, appealable order such that Nalco could take the issue to the Federal Circuit.
Now that Nalco is able to get its suit off the ground, it will be interesting to see what new challenges it might face. Perhaps the defendants will try to argue that as an exclusive licensee Nalco does not have all substantial rights to bring the suit on its own and that the patent owner must be a named plaintiff. Stay tuned.