Pleading Joint Patent Infringement

Pleading joint patent infringement of a method claim requires alleging that one defendant controlled the action of a third party or that two parties were engaged in a joint venture. In Sonrai System, LLC v. AMCS Group Inc., No. 16 C 9404 (N.D. Ill. E. Div., Sept. 27, 2017), the District Court dismissed Plaintiffs’ claim of direct infringement for failing to plead sufficient facts to support joint patent infringement.

Sonrai owns US Patents 8,146,798 and8,714,440, which are directed toward a method that uses RFID tags to check for various permits associated with waste receptacles.

ACMS sold RFID technology for allegedly practicing the patented method to Lakeshore Recycling Systems, LLC, a co-defendant in the case.

Sonrai accused ACMS and Lakeshore of patent infringement, alleging that the combined actions of ACMS and Lakeshore constituted direct patent infringement. Lakeshore was dismissed from the case by agreement of the parties. ACMS moved to dismiss the claims against it, alleging insufficient pleadings by Sonrai.

Joint patent infringement of a method claim requires “either (1) the alleged infringer directs or controls others’ performance of the necessary steps, or (2) the alleged infringer is engaged in a ‘joint enterprise’ with others to perform the steps.” Lyda v. CBS Corp., 838 F.3d 1331, 1339 (Fed. Cir. 2016).

With regard to the direction or control, to survive a motion to dismiss a plaintiff must set forth factual allegations, not simply legal conclusions, that the alleged infringer controls the third party. See id. at 1340.

With regard to a joint enterprise, to survive a motion to dismiss the plaintiff must set forth facts that show “(1) an agreement, express or implied, among the members of the group; (2) a common purpose to be carried out by the group; (3) a community of pecuniary interest in that purpose, among the members; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control.” Akamai Techs., Inc. v. Limelight Networks, Inc., 797 F.3d 1020, 1203 (Fed. Cir. 2015).

Although not applicable or discussed in this case, it should be noted that a system claim may be considered a joint patent infringement when a party “put[s] the invention into service, i.e., control[s] the system as a whole and obtain[s] benefit from it." Centillion Data Systems LLC v. Qwest Communications International Inc., 631 F.3d 1279, 1284 (Fed. Cir. 2010). Control of the system may include contracting a third party to operate a portion of the system. 

Sonrai did not allege either direction or control, or a joint enterprise, between ACMS and Lakeshore. It merely alleged that AMCS provided RFID technology to Lakeshore, and instructed Lakeshore how to use such technology. Sonrai did not allege that ACMS controlled Lakeshore, or than ACSM and Lakeshore exercised an equal right to a voice in the direction of a joint enterprise.

Based on the deficiencies of the allegations, the Court granted ACMS’s motion to dismiss. The Court did speculate that the allegations might have been sufficient to maintain an action against Lakeshore, e.g., under a theory that ACMS was controlled by Lakeshore, as courts have recognized that simply purchasing services from a third party provides the necessary control element for joint patent infringement.

Lesson For Practice

When relying on combined actions of more than one party to fulfill the necessary elements of a patent claim, provide factually based allegations in your complaint detailing the relationship among the parties. For example, factual allocations showing how one party exercises control over the other, how the parties jointly have a say in the direction of a joint enterprise, etc.