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The Unleashing Of Twombly

July 10th, 2016 Alexander No comments

In light of the abrogation of Rule 84 and Form 18 as of Dec. 1, 2015, several district courts have been presented with a novel issue as to the proper application of the plausibility requirement of Federal Rule of Civil Procedure 8(a).

Accordingly, patent prosecution counsel are encouraged to take certain steps in drafting their complaints, in order to avoid potential dismissal of their complaints on a motions to dismiss under Federal Rule of Civil Procedure 12(b)(6), alleging improper pleading of plausibility under Rule 8 and according to Twombly and Iqbal.

Similarly, defense counsel are encourage to familiarize themselves with these developments in the law, in order to mount an effective defense against implausible claims and leverage a better settlement for their clients, in cases where the complaint does not adequately comply with the requirements of plausibility as explained in Twombly and Iqbal.

The Specific Requirements the Application of Twombly Pleading Standard Imposes in the Context of a Patent Case

In deciding on the sufficiency of a complaint, in light of a Rule 12(b)(6) 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.” 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.” “Nor does a complaint suffice if it tenders ‘naked assertion[s]‘ devoid of ‘further factual enhancement.’”

“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.’” 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.” 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.” “[F]acts that are ‘merely consistent with’ a defendant’s liability” fall short of a plausible entitlement to relief. Further, the court need not accept as true “legal conclusions” contained in the complaint. This review requires “context-specific” analysis involving the court’s “judicial experience and common sense.” “[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.’”

In Atlas IP LLC v. Pac. Gas & Elec. Co.,[21] the Northern District of California applied the Twombly standard of plausibility. Since Atlas involved only one asserted claim, it provided the court with a good opportunity to explain the post-December 2015 standard of pleading for patent infringement cases in a relatively simple context. The asserted claim in Atlas was an “apparatus” (or “device” or “system”) claim.

In Atlas, the court concluded that “the complaint fails to state a plausible claim for direct infringement[]” because “the complaint recites only some of the elements of the sole asserted claim, and provides only a threadbare description of the alleged abilities of the accused device. In reaching this conclusion, the court made use of Elan Microelectronics Corp. v. Apple Inc. to demonstrate the point that “simply reciting some of the elements of a representative claim and then describing generally how an accused product operates, without specifically tying the operation to any asserted claim or addressing all of the claim requirements, is insufficient.” In Elan, the court held that “a bare assertion, made ‘on information and belief’” that defendant “has been and is currently, directly and/or indirectly infringing” the specified patents “through its design, marketing, manufacture and/or sale of touch sensitive input devices or touchpads, including but not limited to the Smart-Pad” was an insufficient recital of elements supported only by conclusory statements.

Furthermore, the Twombly decision and its progeny provide ample language suggesting that a stricter standard of pleading was imposed by Twombly. In Twombly itself, the court retired the lower standard of sufficiency under Rule 8, that it had previously set. As one eminent scholar of federal civil procedure has said of Twombly: “Notice pleading is dead. Say hello to plausibility pleading.” That is because the “liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2) has been decidedly tightened (if not discarded) in favor of a stricter standard requiring the pleading of facts painting a ‘plausible’ picture of liability.” Twombly then made quite clear that:

While, for most types of cases, the Federal Rules eliminated the cumbersome requirement that a claimant “set out in detail the facts upon which he bases his claim,” Rule 8(a)(2) still requires a “showing,” rather than a blanket assertion of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a complainant could satisfy the requirement of providing not only “fair notice” of the nature of the claim, but also “grounds” upon which the claim rests.Bell Atlantic v. Twombly.

Explaining the relationship between Rule 12(b)(6) and Rule 8(a)(2), the court said that:

The need at the pleadings stage for allegations plausibly suggesting (not merely consistent with) agreement [an element of an antitrust claim] reflects the threshold requirement of Rule 8(a)(2) that the “plain statement” possess enough heft to “show that the pleader is entitled to relief.” Only then, will a complaint be sufficient to withstand attack under Rule 12(b)(6).

The Twombly standard was further underscored two years later when the Supreme Court decided Iqbal, wherein the Supreme Court explained that Rule 8:

[D]oes not require “detailed factual allegations,” but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation… . A pleading that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Nor does a complaint suffice if it tenders  ”naked assertion[s]” devoid of “further actual enhancement.”

To explain what plausibility means, the court said, as to claims asserted under Rule 8, that “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” In other words, plausibility requires a complaint to place the legal conclusions it makes in context of facts that render the asserted claim plausible. Now, as professor A. Benjamin Spencer has aptly put it: “Only those complaints that plead facts suggestive of liability satisfy the Rule 8(a) obligation to state a claim that shows entitlement to relief.” The legal sufficiency of a complaint presented under Rule 8(a) is tested by a motion made under Rule 12(b)(6). “The question of whether a Rule 12(b)(6) mot[33]ion was properly granted is purely a procedural question not pertaining to patent law to which [courts apply] the rule of the regional … circuit.”

Accordingly, in cases post-Dec. 1, 2015, prosecution counsel are encouraged to allege sufficient facts, specifically tying the operation to any asserted claim or addressing all of the claim requirements. This may require patentees in certain cases to undertake more burdensome presuit investigations to learn sufficient facts to allege sufficient plausibility, as required by Twombly. This requires counsel to know exactly which limitations of the asserted claims of the patent(s)-in-suit are being infringed and how the accused products infringes on these limitations of the asserted claims of the patent(s)-in-suit.

For more information, see Law360.



Patent Cases Spike Ahead Of End To Bare-Bones Complaints

December 4th, 2015 Alexander No comments

The number of federal patent lawsuits filed across the U.S. has spiked dramatically recently, in order to overcome federal rules that raises the pleading standards for patent cases.

In the past two weeks, more than 570 new patent cases were filed in district courts. That is more than three times the number filed in the same period last year.

Just over 210 of those cases were filed the day before the elimination of a rule that allowed plaintiffs to rely on a bare-bones model complaint for patent suits.

Form 18 has long been criticized by patent defendants and judges because it permits vague, bare-bones complaints by nonpracticing entities and others, while requiring alleged infringers to incur discovery costs just to find out what they have been accused of.

With the new rules, complaints alleging direct patent infringement will be subject to the pleading standards established by the U.S. Supreme Court’s landmark decisions in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal, which require plaintiffs to demonstrate that their claims are plausible.

The revision to the pleading standards are part of a broader set of changes approved last year by the Judicial Conference of the U.S. Hoping to modernize the Federal Rules of Civil Procedure, the policymaking body for the federal court system also streamlined the discovery process, among other things.

But attorneys said it might be several months before litigants have a firm grasp on how much detail must be included in complaints after the elimination of Form 18, as there is no specific checklist for what is required under the new rules.

For more information, see Law360.