Federal Circuit Finds District Court’s Element-By-Element Infringement Pleading Standard Overly Demanding
On July 13, 2021, the United States Court of Appeals for the Federal Circuit (“CAFC”) affirmed in part, reversed in part, and remanded appellant Bot M8 LLC’s (“Bot M8”) appeal of several underlying orders related to the dismissal of its patent infringement action against Sony Corporation of America (“Sony”). Bot M8 LLC v. Sony Corporation of America, ___ F.3d ___ (Fed. Cir. July 13, 2021). The CAFC clarified that while a plaintiff need not plead infringement on an element-by-element basis, reciting claim elements and merely concluding that the accused products have those elements is insufficient.
Bot M8 originally filed suit against Sony in the United States District Court for the Southern District of New York alleging infringement of six of its patents related to gaming machines and platforms. When the case was transferred to the Northern District of California, the court directed Bot M8 to file an amended complaint more specifically identifying “every element of every claim that was infringed.” After Bot M8 timely filed the first amended complaint (“FAC”), Sony moved to dismiss as to four of the patents under Fed. R. Civ. P. 12 for failing to state a claim under which relief could be granted. The court granted the motion, ruling that the pleadings were insufficient under the element-by-element standard that it previously articulated.
The court initially granted Bot M8’s request to file a second amended complaint, but after it learned that Bot M8 did not attempt to reverse engineer the accused products before filing the FAC—which Bot M8 had agreed to do—denied Bot M8’s motion for leave to file the amended complaint. The court also granted Sony’s motion for summary judgment of non-infringement and patent ineligibility as to one of the asserted patents. Bot M8 appealed each of the court’s rulings.
The CAFC held that the district court required too much when it asked Bot M8 to plead in the FAC “every element of every claim that you say is infringed and/or explain why it can’t be done.” Rather, the CAFC adopted a broader pleading standard consistent with Iqbal and Twombly under which a plaintiff need not prove its case at the pleading stage. Instead, a sufficiently pleaded complaint must put the infringer on notice of the accused activity “with sufficient factual content.”
Under this standard, the CAFC affirmed the dismissal of two patents and reversed the dismissal of two patents.
First, the court considered U.S. Patent No. 8,078,540 (“the ’540 patent”), which required in claim 1 “a board including a memory in which a game program . . . and an authentication program . . . are stored” separately from “a motherboard.” Bot M8 mapped this claim in the FAC to a location in the accused products where the authentication program is located on the motherboard. Though the pleadings provided sufficient factual content, the CAFC ruled that dismissal of the ’540 patent was proper because Bot M8’s pleadings were “inconsistent with and contradict[ed] infringement” given the location of the authentication program in the accused products, and that Bot M8 “pleaded itself out of court.”
Next, the court considered U.S. Patent No. 8,095,990 (“the ’990 patent”), which requires storing “gaming information including a mutual authentication program” on the same memory as the “removable storage medium.” The CAFC affirmed the dismissal of the ’990 patent, ruling that “[w]hile Bot M8 points to different storage components in the allegedly infringing devices, it never says which one or ones satisfy the mutual authentication limitation.” Identifying where in the accused products the claim limitations could allegedly be found was not enough to “plausibly allege that the gaming information and a mutual authentication program are stored together on the same memory.”
On the other hand, the CAFC reversed the district court’s dismissal as to U.S. Patent Nos. 7,664,988 and 8,112,670 which require a control device that executes a “fault inspection program” and “completes the execution of the fault inspection program before the game is started.” In the FAC, Bot M8 identified 12 different error codes that the accused products display upon boot-up and prior to a game starting. One such error code states “[c]annot start the PS4. Cannot access the system storage.” The CAFC disagreed with the district court that such pleadings were insufficient, stating that that the district court “demand[ed] too much at the stage of proceedings” in requiring Bot M8 to affirmatively demonstrate that the inspection is completed before the game starts, when such an inference was reasonable based on the pleadings.
The CAFC separately ruled that the district court did not err in asking Bot M8 to amend its complaint once the case was transferred because the court did not force Bot M8 to do so, and under Ninth Circuit precedent, the court had the discretion to note the inadequacy of the complaint and dismiss the complaint if it gives notice of its intention to dismiss and allows plaintiffs to respond. Additionally, the district court did not err in denying Bot M8’s motion for leave to file its second amended complaint because under Fed. R. Civ. P. 16 there must be “good cause” to amend a complaint, and the requesting party must have been “diligent in seeking the amendment.” Though the CAFC noted that it would have come to a different conclusion had it been “in the district court’s role,” it ruled that the district court did not abuse its discretion in denying the amendment because Bot M8 did not reverse engineer the accused products before filing the FAC, which it had previously agreed to do.
Finally, the CAFC affirmed the district court’s grant of summary judgment of patent ineligibility as to U.S. Patent No. 7,338,363, which was directed towards the “abstract idea of increasing or decreasing the risk-to-reward ratio, or more broadly, the difficulty of a multiplayer game . . . [without disclosing] how to accomplish this . . ..”