Failure to Meet Indirect Patent Infringement Pleading Standard (and Possible Rule 11 Question)

Judge Gilstrap in the Eastern District of Texas has granted defendants’ motion to dismiss a complaint of indirect patent infringement where the plaintiff failed to meet the applicable pleading standards.  Babbage Holdings, LLC v. Activision Blizzard, Inc., No. 2:13-CV-750 (E.D. Tex. May 15, 2014 (and seven related cases).  Further, because Babbage’s original, first amended, and second amended complaints repeatedly failed to address the defendants’ knowledge of the patent-in-suit, Judge Gilstrap questioned whether Babbage had violated FRCP 11.

In September 2013, Babbage sued a slew of defendants alleging infringement of U.S. Patent No. 5,561,811.  The ’811 patent expired on October 1, 2013.  Summons to each of the defendants were only issued on October 9, 2013.  Babbage’s complaint against each defendant alleged that the defendant “knew of the ’811 Patent at least as early as the filing of the Complaint.”  This allegation was contained in the original complaint, and repeated in the first and second amended complaints.

Under Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal, “the facts plead must allow the Court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”  It was “undisputed” that Babbage’s allegations of contributory infringement and infringement by inducement required “a Defendant to have knowledge of the asserted patent during the time the ’811 Patent was in force.”  It was also undisputed “that the ’811 Patent expired only a matter of a few days after the complaints were filed, and clearly before summons were issued or any Defendant was officially served.”

The court rejected Babbage’s argument “that the filing of the original complaints a few days before the expiration date of the ’811 Patent, in and of itself, was sufficient to establish knowledge.”  Further, notice letters allegedly “sent between September 24, 2013 and September 27, 2013,” would have asked the “Court to sustain a claim of damages for alleged indirect infringement which lasted three to six days at the maximum.” (Emphasis in the court’s opinion.)  Such de minimis damages could not justify using the court’s resources on this case.

Accordingly, the case was dismissed.  Further, the court thought that circumstances of this motion raised Rule 11 questions.  Babbage filed its second complaint “after Defendants had urged the dismissal of Babbage’s indirect infringement allegations but which continued to assert the same claim of indirect infringement as included in its earlier complaints.”  Therefore, Judge Gilstrap scheduled a hearing for Babbage to show cause why sanctions should not be imposed.

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