“Heightened pleading standards in patent litigation reform — Requiring identification from the start”
Inside Counsel 02/27/14 By Josephine K. Benkers
This is the second of three articles addressing proposed legislation to curb abusive patent litigation. The previous article addressed a proposed change to the language allowing for shifting attorneys fees to prevailing parties, while the remaining article will address proposed discovery rules. This article addresses changes to the pleading standards, again with a particular focus on H.R. 3309 (the “Innovation Act,” originally introduced by Representative Goodlatte).
Under the current notice pleading standards, a short, plain, plausible statement of the plaintiff’s claim is necessary to meet the requirements of Federal Rule of Civil Procedure 8(a). The Supreme Court decisions of Bell Atl. Corp. v. Twombly and Ashcroft v. Iqbal, and their progeny, raised the bar with respect to what is required to plead a case and open the door to discovery. After these decisions, however, there was disagreement about what is required in patent cases, because Form 18 from the Appendix of Forms to the Federal Rules of Civil Procedure provides an exemplar of how to plead a patent case. The pleading standard articulated by the Court appeared to require more detail than Form 18, so the question was, could a plaintiff still use Form 18, which merely requires “a statement that defendant has been infringing the patent ‘by making, selling, and using [the device] embodying the patent?’” Or, to state a plausible claim, must a plaintiff now plead facts to support a conclusion that every element of every asserted patent claim is met, for each accused product or process?
The Federal Circuit decided the issue in 2012, holding that plaintiffs only had to meet the requirements of Form 18 to plead direct infringement. In In re Bill of Lading Transmission & Processing Sys. Patent Litigation, the court noted that Rule 84 of the Federal Rules provides that “the forms in the Appendix suffice under these rules and illustrate the simplicity and brevity that these rules contemplate.” Although the Supreme Court has authority to change the Rules of Civil Procedure, the Court had held previously that those rules may only be changed by the process of formal amendment, and not by judicial interpretation. Accordingly, the Federal Circuit held that “to the extent the parties argue that Twombly and its progeny conflict with the Forms and create pleadings requirements, the Forms control.” (Emphasis added.)
The loose pleading standard of Form 18 is particularly helpful to non-practicing, non-academic entities — sometimes referred to as “patent trolls” — which can use that form to make vague allegations that a defendant is somehow infringing some unidentified set of patent claims, and on such pleading open the door to discovery without the defendant or the court really knowing what is at issue, or whether there is any basis for it. It is then not uncommon for such plaintiffs to change their infringement contentions during litigation, adding or dropping claims and accused products, leaving defendants to guess for some time what the case is really about.
Many district courts have attempted to address this problem by local rule, requiring an early disclosure of a plaintiff’s infringement contentions. These rules generally require a more detailed identification of exactly what patent claims and products or processes are at issue, and may also require a detailed identification of where and how each accused product meets each element of each asserted patent claim. However, the problem remains that a “Form 18” pleading is enough to survive what might otherwise be a successful motion to dismiss.
Moreover, since the In Re Bill of Lading decision, courts have remained divided as to the pleading standard for counterclaims for non-infringement and invalidity. Fairness issues aside, Form 18 on its face shows only how to plead patent infringement, and some courts had held that higher pleading standards apply to such counterclaims.
H.R. 3309 would amend 35 U.S.C. § 281 to require that a complaint for patent infringement contain an identification of each patent claim allegedly infringed, an identification of each accused product and (if known) the model number, and a detailed identification of where and how each and every element of each asserted patent claim is met by each accused product or process. The proposed legislation recognizes that there will be circumstances under which certain information will not be reasonably accessible for a plaintiff to plead with the requisite specificity. In such cases, a plaintiff would be required to include a description of the missing information, why such information is not readily accessible, and the efforts made by the plaintiff to access it. The amendments would also require a plaintiff to identify the facts supporting its right to allege infringement and to identify its principal business.
If passed, H.R. 3309 would specifically direct the Supreme Court to eliminate Form 18 in its current form. However, the Advisory Committee of the Judicial Conference is already on top of the issue, with a pending proposal to abolish Rule 84 and the forms for pleading civil cases, which would include Form 18.
The adoption of heightened pleading standards would let defendants know immediately what patent claims, products, and processes are at issue in a case, as well as a plaintiff’s initial infringement theories. This goes a long way toward helping defendants determine a proper course of action. A rule requiring more detail in a complaint may also deter some unmeritorious patent cases altogether, but it is unlikely to have a large effect. The district courts’ early infringement contentions requirements have not made a discernible dent in the number of cases filed. Moreover, these heightened requirements will apply to everyone and, again, may also make it harder for patent holders that are not trolls to assert their rights.
Originally published on Inside Counsel, February 27, 2014