The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
Order Granting Defendants' Motions to Dismiss for Failure to State a Claim*fn1 [Doc. Nos. 90, 91, 92, 94, 96, 102, 103, 105, 107, 111, 114]; Denying Defendant Roche Diagnostics GmbH's Motion to Dismiss for Insufficient Service of Process [Doc. 92]; Granting Defendant Qiagen NV's Motion to Dismiss for Lack of Personal Jurisdiction [Doc. 111]; Granting Defendant Chemical Inc.'s Motion to Dismiss [Doc. 114]
Defendants have moved to dismiss Plaintiff's First Amended Complaint ("FAC") for failure to state a claim under Fed. R. Civ. P. 12(b)(6), arguing that the FAC fails to plead with sufficient particularity either (i) the conduct constituting false marking in violation of 35 U.S.C. § 292 or (ii) that defendant acted with intent to deceive.*fn2 Several Defendants have also filed motions for dismissal on other grounds. Defendant Roche Diagnostics GmbH moves to dismiss under Fed. R. Civ. P. 12(b)(5) for insufficient service of process. Defendant Qiagen NV moves to quash service of process under Fed. R. Civ. P. 12(b)(5), and to dismiss under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. Defendant EMD Chemicals, Inc. moves to dismiss for lack of standing, arguing a previous qui tam relator settled and released claims against it based upon the same conduct alleged in the FAC.
The Court held oral argument on Defendants' motions on August 12, 2011. Based upon all the parties' arguments, for the reasons explained herein, the Court GRANTS IN PART AND DENIES IN PART the Defendants' motions.
Troll Busters LLC provides a "freedom to operate service to invalidate patent claims that are likely not valid, and is active in invalidating molecular diagnostic patents that artificially drive up health care costs." [FAC, ¶ 9.] Plaintiff alleges each of the Defendants "has and continues (and/or have and continue to require others) to mark upon, affix to, and/or use expired patents in advertising, sales and promotion through online sales channels and in providing their products through Internet websites." [FAC, ¶ 45.] Plaintiff alleges such conduct violates the false marking provisions of 35 U.S.C. § 292.
Plaintiff identifies 22 expired U.S. Patents allegedly used by Defendants to mark various products. [Id.; FAC, ¶¶ 46-70.] Plaintiff alleges that Defendants' respective Internet catalogs contain statements or other patent marking language that (a) certain products are marked with one or more of the Expired Patents and/or (b) product categories are either allegedly protected by an Expired Patent or require the customer to obtain a license to practice the invention of an Expired Patent from one or more of the defendants.
[FAC, ¶ 70.] As to each Defendant, Plaintiff identifies particular products and particular expired patents. [See, e.g., FAC ¶ 71.] Plaintiff alleges "[u]pon information and belief" that each Defendant "has advertised on its online catalog" at least those products identified in the tables, and "either marked these products with, or required that the customers obtain licenses for" such expired patents.*fn3 [See, e.g., FAC ¶ 71.]
In attempting to demonstrate intent as required by the statute, Plaintiff alleges Defendants "did not have, and could not have had, a reasonable belief their products were properly marked, particularly in light of Defendants Roche and Life requiring its licensees to mark its products or requiring its licensees to advise its customers of the need for each customer to obtain a license to an expired patent from either or both of Roche and Life." [FAC, ¶ 96.] Defendants "are large, sophisticated companies" which "have, or regularly retain, legal counsel, who are experienced in patent matters." [FAC, ¶¶ 97-98.] Further, "Defendants know that a patent expires and that an expired patent cannot protect any product." [FAC, ¶ 100.] All Defendants "are licensors and/or licensees of the Expired Patents" and based thereon "defendants were acutely aware of when the patents expired as that would stop the payment of royalties." [FAC, ¶ 101.] Plaintiff alleges it was common knowledge in the industry, based upon published articles, that several of the patents expired in 2005 and 2006, and Defendants, as businesses in the industry, were aware of the expiration of the patents. [FAC, ¶ 105.] Finally, Plaintiff alleges, "[u]pon information and belief," that most of the Defendants*fn4 have not changed their website since being served with the original complaint, "indicating a continuing intent to deceive the public and chill competition from potential competitor companies." [See, e.g., FAC, ¶ 72, 103, 104.]
Plaintiff sues on its own behalf and on behalf of the United States, seeking an award of monetary damages of not more than $500 for each instance of Defendants' violations of § 292(a), one half of which is to be paid to the United States. [FAC, ¶ 95.]
1. Defendants' Motion to Dismiss for Failure to State a Claim Defendants argue Plaintiff's FAC should be dismissed under Fed. R. Civ. P. 12(b)(6) because it fails to plead with particularity the facts demonstrating Defendants violated § 292 as required by Fed. R. Civ. P. 9(b). "'To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). "Determining whether a complaint states a plausible claim for relief [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950. "[W]hile the court assumes that the facts in a complaint are true, it is not required to indulge in unwarranted inferences in order to save a complaint from dismissal." Metzler Inv. GmbH v. Corinthian Colls., Inc., 540 F.3d 1049, 1064-65 (9th Cir.2008).
Although § 292 provides for a civil fine, it is a criminal statute. Pequiqnot v. Solo Cup Co., 608 F.3d 1356, 1363 (Fed. Cir. 2010). A false marking claim under 35 U.S.C. § 292 requires an intent to deceive the public, and sounds in fraud. Juniper Networks, Inc. v. Shipley, 643 F.3d 1346, 1350 (Fed. Cir. 2011). Thus, "false marking claims must satisfy the heightened pleading standard of Fed. R. Civ. P. 9(b), which provides that 'a party must state with particularity the circumstances constituting fraud or mistake'." Id. "Rule 9(b) requires a plaintiff alleging violation of § 292 to plead in detail 'the specific who, what, when, where, and how' of the alleged fraud." In re BP Lubricants USA, Inc., 637 F.3d 1307, 1309 (Fed. Cir. 2011). In order to survive dismissal, Plaintiff must "set forth more than the neutral facts necessary to identify the transaction" and instead must set forth the particularized factual bases demonstrating Defendants violated § 292. Juniper Networks, Inc., 643 F.3d at 1350 (quoting Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009)). "The Rule acts as a safety valve to assure that only viable claims alleging fraud or mistake are allowed to proceed to discovery. By eliminating insufficient pleadings at the initial stage of litigation, Rule 9(b) prevents relators from using discovery as a fishing expedition." Id. at 1310. Where a complaint is grounded in fraud, and its allegations fail to satisfy the heightened pleading standard of Rule 9(b), the court properly dismisses such complaint under Fed. R. Civ. P. 12(b)(6). Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1107 (9th Cir. 2003).
In relevant part, the false marking statute provides:
Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word "patent" or any word or number importing that the same is patented for the purpose of deceiving the public; ... [s]hall be fined not more than $500 for every such offense.
35 U.S.C. § 292(a). The "two elements of a § 292 false marking claim are (1) marking an unpatented article and (2) intent to deceive the public." Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295, 1300 (Fed. Cir. 2009). An article covered by an expired patent is "unpatented" within the meaning of § 292. Pequiqnot, 608 F.3d at 1361. Conduct violating the "marks upon, or affixes to" portions of the statute is relatively easy to identify -- use of the word "patent" or any word or number directly marked on or affixed to a product, conveying that an article is patented, is prohibited. See Oakley, Inc. v. Bugaboos Eye Wear Corp., 757 F. Supp. 2d 1050, 1054 (S.D. Cal. 2010); Hollander v. Timex Group USA, Inc., 2011 WL 1399806, *5 (E.D. Pa., Apr. 13, 2011). In order to fall under the "uses in advertising" portion of § 292, the offending conduct "must have occurred in a medium or through a channel designed to promote the unpatented product to consumers." Presidio Components, Inc. v. Am. Tech. Ceramics Corp., 723 F. Supp. 2d 1284, 1334 n.41 (S.D. Cal. 2010); see also Timex Group, 2011 WL 1399806 at*5 ("the term 'advertising' implies an act soliciting the general public regarding the product.").
A. Does Plaintiff's FAC sufficiently allege conduct violating § 292?
Upon review, the Court concludes the FAC sufficiently alleges the "who" of Plaintiff's claim under § 292. Although Defendants argue Plaintiff must identify the specific individual responsible for the conduct constituting false marking, the Federal Circuit has rejected such a requirement. In re BP Lubricants, 637 F.3d at 1312 ("the naming of specific individuals is not the only way to set forth facts upon which intent to deceive can be reasonably inferred"); see also Luka v. Procter & Gamble Co., __ F. Supp. 2d __, 2011 WL 1118689, *4 (N.D. Ill. Mar. 28, 2011) ("imposition of a requirement that a plaintiff identify in his complaint particular individuals responsible for false marking effectively would make it impossible to plead a violation of section 292, except perhaps in a case involving an internal whistleblower.")*fn5
However, the FAC does not sufficiently alleges "when" the false marking occurred. Plaintiff alleges Defendants' false marking is ongoing [FAC, ¶ 45.] Plaintiff identifies each of the patents and their expiration dates. [FAC, ¶ 69 (identifying 22 patents and their dates of expiration).] However, the FAC gives Defendants no notice of when, within that time period, Plaintiff alleges they engaged in false marking in violation of § 292. Plaintiff pleads much of its complaint "on information and belief" and based upon its "knowledge through searching the Internet web sites of the foregoing Defendants." [FAC, ¶ 1.] Plaintiff does not identify when this search occurred, and therefore states no factual basis for the conclusion the false marking is ongoing. In addition, neither the Court nor the Defendants may assume the alleged false marking occurred from the date the patent expired, as Plaintiff has alleged no facts to support such a claim.*fn6
Similarly, the FAC does not sufficiently identify "where" the false marking occurred. All of the allegations as to each Defendant are made "on information and belief" and in the alternative (i.e. Defendant "either marked these products with, or required that the customers obtain licenses for" such expired patents). At the time of the hearing, Plaintiff conceded it is unaware of any place that the expired patents are actually marked upon or affixed to any product, and also that requiring customers to obtain licenses for expired patents does not violate § 292. Therefore, the conduct at issue is "patent number markings in online product catalogs denoting that the advertised products are protected by one of more expired patents." [See, e.g., Plaintiff's Response in Opposition to Motion to Dismiss by Defendants Roche Molecular Systems and Roche Diagnostics Corp., Doc. No. 123, p. 6.] Nonetheless, Plaintiff identifies not a single website it viewed.
Most troubling, however, is Plaintiff's failure to allege with particularity "what" statements by Defendants constitute false marking and "how." Plaintiff argues the offending conduct is the use of the expired patents "in advertising in connection with any unpatented article." It is ordinarily insufficient to allege claims sounding in fraud "on information and belief." Shroyer v. New Cingular Wireless Services, Inc., 622 F.3d 1035, 1042 (9th Cir. 2010). Pleading "on information and belief" suffices under Rule 9(b) only where such allegations are accompanied by a statement of the facts on which the belief is founded. Id. Here, however, the only factual basis supporting Plaintiff's allegation that Defendants "marked these products with" expired patents is that Plaintiff "search[ed] the Internet web sites of the foregoing Defendants." [FAC, ¶ 1.] Plaintiff's FAC identifies no particular website (or location on a website) where the false marking may be found, and no particular statement from the Defendants' online catalog constituting false marking.
Plaintiff argues, in opposition to the motions to dismiss, that the use of an expired patent in connection with a product in a catalog on a website may constitute advertising in violation of § 292. See Presidio Components, Inc., 723 F. Supp. 2d at 1334 (S.D. Cal. 2010) (liability may be imposed under § 292 for using an expired patent in advertising); Timex Group, 2011 WL 1399806 at*5 ("the term 'advertising' implies an act soliciting the general public regarding the product."). However, a defendant does not violate § 292 merely by using an expired patent somewhere on the internet or in a product manual or catalog. Bugaboos Eye Wear Corp., 757 F. Supp. 2d at 1057 (advertising under § 292 requires that the patent be used in such a manner as to call attention to it before the product is purchased); Presidio Components, Inc., 723 F. Supp. 2d at 1334 n.41 ("[t]o be used 'in advertising' the false marking must have occurred in a medium or through a channel designed to promote the unpatented product to consumers."). However, Plaintiff has failed to identify any particular language from any of the Defendants' online catalogs or websites that constitute "advertising." Plaintiff does not identify any particular publication or website where the allegedly offending statements may be found, and does not plead any facts showing Defendants used the expired patents in a manner "importing" or suggesting the products were covered by those patents. Plaintiff's FAC merely identifies the neutral facts necessary to identify the allegedly offending marks ...