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Novitaz, Inc. v. InMarket Media, LLC

United States District Court, N.D. California, San Jose Division

May 26, 2017

NOVITAZ, INC., Plaintiff,
v.
INMARKET MEDIA, LLC, Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND RE: DKT. NO. 19

          EDWARD J. DAVILA, UNITED STATES DISTRICT JUDGE

         Plaintiff Novitaz, Inc. (“Novitaz”) brings the instant patent infringement suit against Defendant inMarket Media, LLC (“inMarket”). Presently before the Court is inMarket's motion to dismiss the complaint for failure to state a claim. Pursuant to Civil Local Rule 7-1(b), the Court finds the instant motion suitable for decision without oral argument and hereby VACATES the hearing set for August 10, 2017 at 09:00 A.M. For the reasons set forth below, the motion is GRANTED IN PART and DENIED IN PART with leave to amend.

         I. BACKGROUND

         On March 7, 2016, Notivaz filed a complaint against inMarket in the District of Connecticut, alleging direct, indirect, and willful infringement of U.S. Patent No. 8, 229, 787 (the “'787 patent”). Dkt. No. 1. It amended its complaint on March 14, 2016. Dkt. No. 13 (“Amended Complaint”).

         On June 7, 2016, inMarket responded by filing the instant motion to dismiss. Dkt. No. 19 (“Mot.”). The next day, inMarket moved to transfer the case. Dkt. No. 21. On November 18, 2016, the District of Connecticut court granted inMarket's motion to transfer, and the case was transferred to this district. Dkt. No. 33. The motion to dismiss is still pending.

         II. LEGAL STANDARD

         On a Rule 12(b)(6) motion to dismiss for failure to state a claim, the complaint must be construed in the light most favorable to the non-moving party, and all material allegations in the complaint are taken as true. Sanders v. Kennedy, 794 F.2d 478, 481 (9th Cir. 1986). This rule does not apply to legal conclusions: “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to state a claim. Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). While a complaint does not need detailed factual allegations to survive a 12(b)(6) motion, the plaintiff must provide grounds demonstrating its entitlement to relief. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Thus, the plaintiff must allege sufficient factual allegations “to raise a right to relief above the speculative level.” Id. Under the Supreme Court's decisions in Twombly and Iqbal, this threshold requires that the complaint contains “sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).

         Until December 1, 2015, the Federal Circuit recognized that, for allegations of direct patent infringement, it was sufficient to comply with the standard set by Form 18 of the Appendix of Forms to the Federal Rules of Civil Procedure, rather than that articulated in Twombly and Iqbal. See In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1333-35 (Fed. Cir. 2012). Form 18 only required: “(1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that defendant has been infringing the patent 'by making, selling, and using [the device] embodying the patent'; (4) a statement that the plaintiff has given the defendant notice of its infringement; and (5) a demand for an injunction and damages.” Id. The Form 18 standard “d[id] not require a plaintiff to plead facts establishing that each element of an asserted claim is met” nor “even identify which claims it asserts are being infringed.” Id.

         However, effective December 1, 2015, the Federal Rules of Civil Procedure were amended to abrogate Rule 84, which provided that “[t]he forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate.” This abrogated the Appendix of Forms, including Form 18. Since this change, the majority of district courts have assessed the sufficiency of claims for direct patent infringement under the standard set forth in Twombly and Iqbal. See, e.g., e.Digital Corp. v. iBaby Labs, Inc., No. 15-CV-05790-JST, 2016 WL 4427209, at *3 (N.D. Cal. Aug. 22, 2016) (“the Court concludes that former Form 18 no longer controls and that allegations of direct infringement are now subject to the pleading standards established by Twombly and Iqbal . . . .”) (internal citation and quotation marks omitted); Atlas IP LLC v. Pac. Gas & Elec. Co., No. 15-CV-05469-EDL, 2016 WL 1719545, at *2 (N.D. Cal. Mar. 9, 2016) (“Under the amended rules, allegations of direct infringement are now subject to the pleading standards established by Twombly and Iqbal . . . .”); Rembrandt Patent Innovations LLC v. Apple Inc., No. 14-cv-05094-WHA, 2015 WL 8607390, at *2 (N.D. Cal. Dec. 13, 2015) (“Form 18, however, no longer applies.”); Incom Corp. v. The Walt Disney Company, No. 15-cv-3011-PSG, ECF No. 39, at *3 (C.D. Cal. Feb. 4, 2016) (“Form 18 no longer provides a safe harbor for pleading direct infringement.”). At least one court, however, has continued to apply the Form 18 standard after the amendments took effect. See Hologram USA, Inc. v. Pulse Evolution Corp., No. 14-cv-0772-GMN-NJK, 2016 WL 199417, at *2 (D. Nev. Jan. 15, 2016).

         III. DISCUSSION

         inMarket challenges the sufficiency of Novitaz's allegations with respect to direct infringement, indirect infringement, and willful infringement. The Court addresses each in turn.

         A. Direct Infringement

         i. Pleading Standard After the Abrogation of Form 18

         Before turning to the complaint at issue, the Court must address the initial question of what pleading standard governs Novitaz's allegations of direct infringement. As discussed above, the December 1, 2015 amendments to the Federal Rules of Civil Procedure abrogated the Appendix of Forms, including Rule 18. In light of this change, most district courts have found that Form 18 no longer sets the standard for allegations of direct patent infringement, and have instead judged the sufficiency of such pleadings under the standards set forth by Twombly and Iqbal. See, e.g., e.Digital, No. ...


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