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finding assertions that defendants' infringing activities included "making, using, selling, and/or offering to sell products" were too broad to even meet the lower pleading standard under Form 18
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Case No.: 15-CV-1058 JLS (DHB)
02-08-2016
FOOTBALANCE SYSTEM INC. and FOOTBALANCE SYSTEM OY, Plaintiffs, v. ZERO GRAVITY INSIDE, INC.; ROADRUNNER SPORTS, INC.; ZENA IOVINA/IOVINO; PATRIK LOUKO; SASHA HANNON; and EERO KAAKKOLA, Defendants.
ORDER GRANTING THE INDIVIDUAL DEFENDANTS' MOTION TO DISMISS
(ECF No. 20)
Presently before the Court is Defendants Zena Iovino, Patrik Louko, Sasha Hannon, and Eero Kaakkola's (the "Individual Defendants") Motion to Dismiss First Amended Complaint Against the Individual Defendants. ("MTD," ECF No. 20.) Also before the Court are Plaintiffs FootBalance System Inc. ("FSI") and FootBalance System Oy's ("FSO") Opposition to (ECF No. 23) and the Individual Defendants' Reply in Support of (ECF No. 24) the MTD. The Court vacated the hearing and took the matter under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). (ECF No. 25.) Having considered the parties' arguments and the law, the Court GRANTS the Individual Defendant's MTD.
BACKGROUND
FSI and FSO are California and Finnish corporations, respectively, which provide individually formed footwear to customers. (First Am. Compl. ("FAC") ¶¶ 1-2, 20, ECF No. 6.) The United States Patent and Trademark Office issued U.S. Patent No. 7,793,433 (the "'433 Patent") to FSO on September 14, 2010 (id. at ¶ 21; see also FAC Ex. A, ECF No. 6 at 13-24) and U.S. Patent No. 8,171,589 (the "'589 Patent") (collectively, the "Patents in Suit") on May 8, 2012 (FAC ¶ 23, ECF No. 6; see also FAC Ex. B, ECF No. 6 at 25-36). FSO is the owner, by assignment, of the entire right, title, and interest in and to the Patents in Suit. (FAC ¶ 24, ECF No. 6.) FSI is a wholly-owned subsidiary of FSO and is the exclusive licensee of the Patents in Suit. (Id.)
All citations to docketed materials refer to the CM/ECF page number stamped at the top of the page.
Zero Gravity Inside, Inc. ("ZGI") is a Delaware corporation that also creates custom insoles. (Id. at ¶¶ 3, 39, 50.) Ms. Iovino is the CEO, CFO, and Secretary of ZGI. (Id. at ¶ 4.) She is also the wife of Mr. Louko, a former executive of Plaintiffs. (Id.) Mr. Louko "helped or directed his wife, Ms. . . . Iovino, to found ZGI." (Id. at ¶ 15.) He is also "directly or indirectly responsible for ZGI's establishment and infringement." (Id.) Ms. Hannon is another former employee of Plaintiffs and the current COO of ZGI (id. at ¶ 6), while Mr. Kaakkola is employed by, an officer of, or a consultant to ZGI (id. at ¶ 16), who was also a former deputy board member of Zero Gravity Inside Oy, an entity related to ZGI (id. at ¶ 7).
In 2010, Plaintiffs and Mr. Kaakkola entered into a research and development project to develop a new heater for Plaintiffs' custom insoles. (Id. at ¶ 26.) Mr. Louko introduced Mr. Kaakkola to Plaintiffs. (Id.) Due to their connections to Plaintiffs, Mr. Louko, Ms. Iovino, and Ms. Hannon had pre-suit knowledge of the Patents in Suit. (Id.)
On November 30, 2010, Mr. Kaakkola published Patent Application No. 12/956,511 (the "'511 Application"). (Id. at ¶ 27; see also FAC Ex. C, ECF No. 6 at 37-48.) On September 28, 2011, Mr. Kaakkola assigned the '511 Application to FSO (the "Assignment"). (FAC ¶ 28, ECF No. 6; see also FAC Ex. D, ECF No. 6 at 49-54.) The Assignment provides that "any changes, modifications, adaptations or improvements made to the Invention or to the customized insoles shall remain with [FSO] for . . . five (5) years." (FAC Ex. D at 51, ECF No. 6.) Through his dealings with Plaintiffs, Mr. Kaakkola had knowledge of the Patents in Suit. (FAC ¶ 29, ECF No. 6.)
Despite its knowledge of the Patents in Suit (id. at ¶ 32), "ZGI began making, using, offering for sale and selling insoles similar to [Plaintiffs'] insoles in a manner that infringes the '433 and '589 Patents" (id. at ¶ 30). ZGI sold these insoles to a number of United States retailers, including Road Runner Sports, Inc. ("RRS"). (Id. at ¶ 31.)
RRS was a longtime customer of Plaintiffs in the area of products and methods covered by the Patents in Suit. (Id. at ¶ 35.) ZGI personnel, including Ms. Iovino, Mr. Louko, Ms. Hannon, and Mr. Kaakkola, knew of the relationship between RRS and Plaintiffs. (Id.) ZGI intended to disrupt that relationship by offering and delivering infringing goods to RRS. (Id.)
On May 11, 2015, Plaintiffs filed a complaint alleging infringement of the Patents in Suit against ZGI. (ECF No. 1.) Plaintiffs filed the FAC on May 27, 2015, adding as defendants RRS and the Individual Defendants. (ECF No. 6.) The Individual Defendants filed the instant MTD on August 18, 2015. (ECF No. 20.)
After the Individual Defendants filed their MTD, Plaintiffs and RRS reached a confidential settlement and filed a Joint Motion to Dismiss Defendant RRS Without Prejudice. (ECF No. 26.) On November 24, 2015, the Court granted the joint motion and dismissed without prejudice all claims against RRS. (ECF No. 27.)
LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require 'detailed factual allegations,' . . . it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Twombly, 550 U.S. at 555 (alteration in original). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Iqbal, 556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 557).
"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.'" Id. (quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be "more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 556). "[F]acts that are 'merely consistent with' a defendant's liability" fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true "legal conclusions" contained in the complaint. Id. at 678-79 (citing Twombly, 550 U.S. at 555). This review requires "context-specific" analysis involving the Court's "judicial experience and common sense." Id. at 679. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Id. (quoting Fed. R. Civ. P. 8(a)(2)).
In patent cases, purely procedural issues of law are governed by the law of the regional circuit. K-Tech Telecomms., Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1282 (Fed. Cir. 2013). In the Ninth Circuit, to be entitled to the presumption of truth, a complaint's allegations "must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011), cert. denied 132 S. Ct. 2101 (2012). The Court will grant leave to amend unless it determines that no modified contention "consistent with the challenged pleading . . . [will] cure the deficiency." DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schriber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)).
ANALYSIS
Plaintiffs assert two causes of action for patent infringement: (1) infringement of the '433 Patent (FAC ¶¶ 38-48, ECF No. 6), and (2) infringement of the '589 Patent (id. at ¶¶ 49-59). The Individual Defendants argue that the FAC should be dismissed with prejudice as to them because "Plaintiffs do not . . . state in the FAC any facts that the Individual Defendants infringed, induced infringement, or contributed to infringement of the . . . Patents" in Suit. (MTD Mem. 2, ECF No. 20-1; see also id. at 10.)
To state a claim for direct patent infringement, a plaintiff must allege that the defendant, "without authority[,] makes, uses, offers to sell, or sells any patented invention." 35 U.S.C. § 271(a); see also Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 773 (Fed. Cir. 1993) (citing Hewlett-Packard Co. v. Bausch & Lomb Inc., 909 F.2d 1464, 1469 (Fed. Cir.), cert. denied 493 U.S. 1076 (1990)). To state a claim for inducement pursuant to 35 U.S.C. § 271(b), "the patentee must show, first that there has been direct infringement, and second that the alleged infringer knowingly induced infringement and possessed specific intent to encourage another's infringement." Kyocera Wireless Corp. v. Int'l Trade Comm'n, 545 F.3d 1340, 1354 (Fed. Cir. 2008) (quoting Minn. Mining & Mfg. Co. v. Chemque, Inc., 303 F.3d 1294, 1304-05 (Fed. Cir. 2002)) (internal quotation marks omitted). Finally, to establish contributory infringement under 35 U.S.C. § 271(c), a plaintiff must show: "1) that there is direct infringement, 2) that the accused infringer had knowledge of the patent, 3) that the component has no substantial noninfringing uses, and 4) that the component is a material part of the invention." Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1326 (Fed. Cir. 2010) (citing 35 U.S.C. § 271(c)).
The Individual Defendants argue that Plaintiffs' conclusory allegations are insufficient to state a claim for direct or indirect infringement against them. (See MTD Mem. 4-10, ECF No. 20-1.) Plaintiffs counter that "[a] complaint satisfies the pleading standard with respect to a claim for direct infringement if it meets the specificity required by Form 18." (Opp'n 9, ECF No. 23 (citing In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1334 (Fed Cir. 2012)).) Consequently, they argue, dismissal is unwarranted because "the FAC satisfies Form 18 with respect to each of the Individual Defendants." (Id. at 13.) With respect to their indirect infringement claims, Plaintiffs do not contest that Twombly and Iqbal govern (see, e.g., id. at 10, 15), but rather claim that they have alleged sufficient facts to meet that standard (see id. at 14-15, 16).
Regarding Plaintiffs' contention that Form 18 applies to their direct infringement allegations, the Court preliminarily
On December 1, 2015, the amended Federal Rules of Civil Procedure took effect. The amended Rules apply to pending cases "insofar as just and practicable." H.R. Doc. No. 114-33, at 2 (2015). The changes included the deletion of Rule 84, which provided, "[t]he forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate." The Appendix referenced in Rule 84 included Form 18, an example complaint for patent infringement. Form 18 merely included an allegation that the defendant infringed the asserted patent by making, using, or selling "electric motors" without specifying the model of the accused motors. The Federal Circuit held that, pursuant to Rule 84, the pleading standard set forth in Form 18, not the pleading standard in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), controls. In re Bill of Lading, 681 F.3d 1323, 1334 (Fed. Cir. 2012). Rule 84 has been abrogated, so In re Bill of Lading no longer applies.Rembrandt Patent Innovations LLC v. Apple Inc., Nos. C 14-05094 (WHA), C 14-05093 WHA, 2015 WL 8607390, at *2 (N.D. Cal. Dec. 13, 2015).
To the extent that Form 18 still governs Plaintiffs' pleadings, however, the Court finds that Plaintiffs' FAC falls short of meeting that minimal hurdle. The Federal Circuit itself has recognized that "Form 18 in no way relaxes the clear principle of Rule 8, that a potential infringer be placed on notice of what activity or device is being accused of infringement." K-Tech Telecomms., 714 F.3d at 1284. Consequently, "most courts have, in the wake of Twombly and Iqbal, required some level of specificity regarding the accused product, i.e., beyond the generic descriptions such as those employed by [counterclaimant] ('computer chips, motherboards, computers'). Indeed, many courts have even required an exact identification." Wistron Corp. v. Phillip M. Adams & Assocs., LLC, No. C-10-4458 EMC, 2011 WL 4079231, at *4 (N.D. Cal. Sept. 12, 2011) (citing Bender v. LG Elecs., U.S.A., Inc., No. C 09-02114 JF (PVT), 2010 WL 889541, at *4 (N.D. Cal. Mar. 11, 2010)).
Here, Plaintiffs assert that "[t]he Defendants' infringing activities . . . include . . . making, using, selling and/or offering to sell products . . . including, but not limited to [,] ZGI's custom insoles." (FAC ¶¶ 39, 50, ECF No. 6.) Elsewhere, Plaintiffs allege that "ZGI began making, using, offering for sale and selling insoles similar to [Plaintiffs'] insoles in a manner that infringes the . . . Patents" in Suit. (Id. at ¶ 30.) These allegations are "too broad, such that [they] do[] not satisfy Form 18 standards," as they "encompass[] essentially [ZGI]'s entire business, leaving [Defendants] with no notice as to how [they] allegedly infringe[]." Prism Techs., LLC v. AT&T Mobility, LLC, No. 8:12CV122, 2012 WL 3867971, at *5 (D. Neb. Sept. 6, 2012) (internal quotation marks omitted). Consequently, to the extent Plaintiffs' first and second causes of action are predicated upon the Individual Defendants' direct infringement, those causes of action must be dismissed.
"Turning to [Plaintiffs]' indirect claims, to prevail on an indirect patent infringement claim, the patentee must establish first that there has been direct infringement." Ziptronix, Inc. v. Omnivision Techs., Inc., No. C 10-5525 SBA, 2011 WL 5416187, at *4 (N.D. Cal. Nov. 8, 2011) (citing Bender v. Motorola, Inc., No. C 09-1245 SBA, 2010 WL 726739, at *4 (N.D. Cal. Feb. 26, 2010); DSU Med. Corp. v. JMS Co., 471 F.3d 1293, 1303 (2006); Joy Techs, 6 F.3d at 774). "As [Plaintiffs] have failed to establish direct infringement, their indirect infringement claims are insufficient," necessitating dismissal. Id. (citing Bender, 2010 WL 726739, at *4). / / /
Moreover and as Plaintiffs recognize (see Opp'n 10, 15, ECF No. 23), with respect to indirect patent infringement, Form 18 is not controlling and Twombly and Iqbal apply, see, e.g., In re Bill of Lading, 681 F.3d at 1336-37. The Court must also dismiss Plaintiff's indirect patent infringement causes of action because they "fail to do more than provide [t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements" and "naked assertions devoid of further factual enhancement." Medsquire LLC v. Spring Med. Sys. Inc., No. 2:11-CV-04504-JHN, 2011 WL 4101093, at *4 (C.D. Cal. Aug. 31, 2011) (alteration in original) (quoting Twombly, 550 U.S. at 555; Iqbal, 556 U.S. at 1949) (internal quotation marks omitted).
The Individual Defendants ask the Court to dismiss all causes of action against them with prejudice. (See, e.g., MTD Mem. 10, ECF No. 20-1; Reply 8, 9, ECF No. 24.) The Court is not convinced, however, that the deficiencies identified cannot be cured through amendment. See DeSoto, 957 F.2d at 658. The Court therefore GRANTS the Individual Defendants' MTD (ECF No. 20) and DISMISSES WITHOUT PREJUDICE Plaintiffs' causes of action against the Individual Defendants (ECF No. 6).
CONCLUSION
In light of the foregoing, the Court GRANTS the Individual Defendants' MTD (ECF No. 20) and DISMISSES WITHOUT PREJUDICE Plaintiffs' FAC as to the Individual Defendants (ECF No. 6). Plaintiffs MAY FILE a second amended complaint ("SAC") within fourteen days of the date on which this Order is electronically docketed. Failure to file an amended complaint by this date may result in dismissal at to the Individual Defendants.
IT IS SO ORDERED. Dated: February 8, 2016
/s/_________
Hon. Janis L. Sammartino
United States District Judge