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Neology, Inc. v. Kapsch Trafficcom IVHS, Inc.

United States District Court, D. Delaware

September 19, 2014

NEOLOGY, INC., Plaintiff,
v.
KAPSCH TRAFFICCOM IVHS, INC.; KAPSCH TRAFFICCOM IVHS HOLDING CORP.; KAPSCH TRAFFICCOM IVHS TECHNOLOGIES HOLDING CORP.; KAPSCH TRAFFICCOM U.S. CORP.; KAPSCH TRAFFICCOM HOLDING CORP.; and STAR SYSTEMS INTERNATIONAL, LTD., Defendants.

REPORT AND RECOMMENDATION

CHRISTOPHER J. BURKE, Magistrate Judge.

Presently pending in this patent infringement case are: (1) Defendants Kapsch Trafficcom IVHS, Inc., Kapsch Trafficcom IVHS Holding Corp., Kapsch Trafficcom IVHS Technologies Holding Corp., Kapsch Trafficcom U.S. Corp. and Kapsch Trafficcom Holding Corp.'s (collectively "Kapsch" or the "Kapsch Defendants") motion to dismiss Plaintiff Neology, Inc.'s ("Plaintiff' or "Neology") induced, contributory and willful infringement claims against them, pursuant to Federal Rule of Civil Procedure 12(b)(6); and (2) Defendant Star Systems International Ltd.'s ("SSI" and, collectively with Kapsch, "Defendants") motion to dismiss Plaintiffs induced, contributory and willful infringement claims against it, also filed pursuant to Rule 12(b)(6) (collectively with Kapsch's motion to dismiss, the "Motions"). (D.I. 16; D.I. 28) For the reasons set forth below, the Court recommends that Defendants' Motions be GRANTED without prejudice.

I. BACKGROUND

Plaintiff commenced this action on December 19, 2013, alleging direct, indirect and willful infringement claims against one Defendant, Confidex, Inc. ("Confidex"), concerning U.S. Patent Nos. 6, 229, 443, 6, 690, 264, 8, 237, 568, 8, 325, 044, 8, 587, 436 and 7, 119, 664 (collectively, the "Asserted Patents"). (D.I. 1) Before Confidex responded, Plaintiff filed the First Amended Complaint ("FAC") on February 27, 2014, adding Kapsch and SSI as Defendants. (D.I. 4) The FAC now accused all Defendants (that is, Confidex, Kapsch and SSI), respectively, of infringement of each of the six Asserted Patents. ( Id. )[1] In the FAC, Plaintiff alleges that the infringing products at issue (the "Accused Products") are Radio Frequency Identification ("RFID") transponders and/or readers, which "comprise at least the following products: (1) Confidex License Plate Tag product[;] (2) Confidex Windshield Label product[;] (3) SSI's Venus Windshield Decal (collectively, the Accused Transponder Products')[;] (4) Kapsch JANUS Multiprotocol Reader[;] and (5) SSI's Vela High Performance USB RFID Desktop Reader (collectively, the Accused Reader Products')." ( Id. at ¶ 19)

Kapsch filed its instant motion to dismiss, in lieu of an Answer, on April 21, 2014. (D.I. 16) On May 20, 2014, that motion was referred to the Court for resolution by Chief Judge Leonard P. Stark. (D.I. 24) On May 30, 2014, SSI filed its instant motion to dismiss, in lieu of an Answer, (D.I. 28); Chief Judge Stark referred that motion to the Court for resolution on June 27, 2014, (D.I. 34).

On June 5, 2014, Plaintiff dismissed its claims against Confidex, leaving Kapsch and SSI as the remaining Defendants in the case. (D.I. 31)

II. STANDARD OF REVIEW

The sufficiency of pleadings for non-fraud cases is governed by Federal Rule of Civil Procedure 8, which requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). When presented with a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court conducts a two-part analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the court separates the factual and legal elements of a claim, accepting "all of the complaint's well-pleaded facts as true, but [disregarding] any legal conclusions." Id. at 210-11. Second, the court determines "whether the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief.'" Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). In assessing the plausibility of a claim, the court must "construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.'" Fowler, 578 F.3d at 210 (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).

III. DISCUSSION

As noted above, the Motions allege that Plaintiff has insufficiently pleaded claims of induced, contributory and willful infringement. The Court will consider these arguments in turn.[2]

A. Induced Infringement

Pursuant to 35 U.S.C. § 271(b), "[w]hoever actively induces infringement of a patent shall be liable as an infringer." In order to prove induced infringement, the patentee "must show direct infringement, and that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement." Toshiba Corp. v. Imation Corp., 681 F.3d 1358, 1363 (Fed. Cir. 2012) (internal quotation marks and citations omitted). To survive a Rule 12(b)(6) motion, a patentee must plead facts "plausibly showing that [the alleged infringer] specifically intended [a third party] to infringe the [patents-in-suit] and knew that the [third [party's] acts constituted infringement." In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1339 (Fed. Cir. 2012); see also Versata Software, Inc. v. Cloud9 Analytics, Inc., Civil Action No. 12-925-LPS, 2014 WL 631517, at *2 (D. Del. Feb. 18, 2014), report and recommendation adopted, 2014 WL 1091751 (D. Del. Mar. 14, 2014).

1. Knowledge that direct infringer's acts constituted infringement

Defendants first claim that the FAC fails to adequately plead induced infringement because it fails to allege facts plausibly showing that Defendants had knowledge that the alleged direct infringer's acts constituted infringement.[3] See Pragmatus AV, LLC v. Yahoo! Inc., C.A. No. 11-902-LPS-CJB, 2013 WL 2295344, at *1 (D. Del. May 24, 2013) (citing In re Bill of Lading, 681 F.3d at 1339). While a plaintiff need not "prove its case at the pleading stage[, ]" what is required is that the facts pleaded, "when considered in their entirety and in context, lead to the common sense conclusion that a ...


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