by Dennis Crouch
Lyda v. CBS (Fed. Cir. 2016)
Although at first glance, Lyda appears as a narrow decision against an individual-inventor plaintiff, the decision is important because it establishes that a patent infringement complaint must provide factual allegations at the claim-element-by-claim-element level in order to avoid a dismissal on the pleadings.
In a civ-pro focused decision, the court has affirmed the dismissal of Lyda’s infringement case for failure to state a claim – finding that Lyda’s complaint fails to satisfy the Twiqbal pleading standards. Rule 8 of the Federal Rules of Civil Procedure require a “ a short and plain statement of the claim showing that the pleader is entitled to relief.” Failure to state a claim is grounds for dismissal under R. 12(b)(6). The Supreme Court gloss requires allegations of sufficient facts to state a plausible claim for relief. Although statements in the complaint are taken as true, “threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”
Until recently, Twiqbal was not directly applied to patent complaints because the existence of a bare-bones form infringement complaint (Form 18) that the rules deemed to be sufficient. Form 18 was eliminated in the December 1, 2015 changes to the rules. In the present case, the amended complaint was filed prior to the change, but the court held that Form 18 does not apply in this case because Lyda implicitly alleged a claim of joint infringement rather than the standard direct infringement that is the focus of Form 18.
Applying Twiqbal is not easy – although the general rule is that the pleadings must include enough plausible facts that – if taken as true – would lead to a verdict for the plaintiff. In discussing its application, the Supreme Court noted that it will be “context-specific” requiring both “judicial experience and common sense.” Applying that approach to patent infringement cases, the court here took the fairly bold stance of requiring that the facts plausibly pled be “sufficient to allow a reasonable inference that all steps of the claimed method are performed.”
Lyda’s case was particularly dismissed because the patentee failed to plead the elements of joint infringement required by Akamai. The Lyda court writes:
[Under the plaintiffs theory of infringement, the] Amended Complaint must plausibly allege that Defendants exercise the requisite “direction or control” over the performance of the claim steps, such that performance of every step is attributable to Defendants. The Amended Complaint alleges that CBS Interactive controls certain independent contractors who in turn direct and control the “participation” of unnamed third persons to send votes on either their own or borrowed cell phones. Mr. Lyda does not set forth any factual allegations in support of his assertion that CBS Interactive directed or controlled the independent contractors. Nor does the Amended Complaint contain factual allegations relating to how the independent contractors directed or controlled the unnamed third parties. Most importantly, the Amended Complaint does not allege any relationship between the Defendants and the unnamed third parties, who own or borrow cell phones, in a way that the actions of these unnamed third parties should be attributed to Defendants. Rather, the Amended Complaint alleges conclusively and without factual support that CBS directed or controlled the independent contractors who then directed or controlled the unnamed third parties. There are thus no allegations in the Amended Complaint that can form the basis of a reasonable inference that each claim step was performed by or should be attributed to Defendants. The Amended Complaint fails to plausibly plead sufficient facts to ground a joint infringement claim under this court’s Akamai decision and does not satisfy the Iqbal/Twombly pleading standard.
The district court also denied Lyda leave to amend the complaint a second time. On appeal, the Federal Circuit affirmed that determination – finding that the district court has “broad power to control its own docket.” With the case dismissed, I expect that Lyda can refile and just potentially lose some of the back damages.
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 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009).
 Fed. R. Civ. Pro. R. 8.
 Fed. R. Civ. Pro. R. 12(b)(6) (“a party may assert . . . (6) failure to state a claim upon which relief can be granted”).
 See Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020 (Fed. Cir. 2015) (en banc) (requiring that “(1) one party exercises the requisite ‘direction or control’ over the others’ performance or (2) the actors form a joint enterprise such that performance of every step is attributable to the controlling party).